CASE LAWS
2018-TIOL-164-SC-CUS
CC Vs VARIETY LUMBERS PVT LTD: SUPREME COURT OF INDIA (Dated: April 24, 2018)
Customs - Notfn. 102/2007-Cus - Refund of Additional Duty - A mere conversion of imported logs in the Sawn Timber without loss of identity of the original product would not deprive the importer of the benefit of the exemption notification 102/2007-Cus - Revenue appeals dismissed: Supreme Court
Appeals dismissed
Background:
Customs - Refund of Additional duty of Customs under Notification No 102/2007 Cus dated 14.9.07 - Imported Timber logs were subjected to sawing and sold as sawn timber in different sizes and length - Refund was denied on the ground that the sawn timber and timber logs are different - CESTAT - 2010-TIOL-1378-CESTAT-AHM while setting aside the orders held that Department had not established that the sawn timber after the process undertaken by the appellants has become a new commodity with distinct, name, character and use; that Board Circular 15/2010-Cus gave an impression that when the goods sold are having a different classification, SAD refund would not be available; that it is settled law that judicial precedents would prevail over the circulars issued by the Board; that department has not proved or produced any evidence that goods have undergone manufacture and, therefore, SAD benefit is not available; that no evidence had been put forth to show that round logs/round squares are classified under Heading No.4403 and sawn timber is classifiable under CETH 4407 - Revenue appealed against this decision before Gujarat High Court, however, High Court - 2012-TIOL-821-HC-AHM-CUS upheld the Tribunal order by observing that identity of the article did not undergo any fundamental change so as to conclude that what was imported by the respondents-importers was different from the item which ultimately was sold by them in the local market.
Revenue filed appeals before Supreme Court against the High Court order - While admitting appeal 2012-TIOL-98-SC-CUS, Supreme Courtdirected that the claims of the respondents for refund of SAD shall be processed by the Assessing Officer and the amount so due to them shall be refunded within four weeks subject to the respondents furnishing bank guarantees for half of the amount to be refunded, to the satisfaction of the Assessing Officer and which guarantees to be kept alive till disposal of appeals.
Appeals heard by Supreme Court and held that the contention advanced on behalf of the appellant-Revenue is not supported by a plain reading of the exemption notification which even if construed in the strictest terms does not permit such a view to be taken; that the materials on record clearly shows that for purpose of transit of logs, the same necessarily had be reduced in size due to conditions imposed by the State for transport/ movement of timber and the said fact itself would belie the stand of the Revenue.
Conclusion: A mere conversion of imported logs in the Sawn Timber without loss of identity of the original product would not deprive the importer of the benefit of the exemption notification 102/2007-Cus.
The appeals of the Revenue, therefore, are dismissed. The orders of the Tribunal and the High Court are affirmed.
Bank guarantees deposited by the respondent(s) are directed to be returned to them along with interest thereon, if any.
2018-TIOL-163-SC-CX
ULTRA TECH CEMENT LTD Vs CCE & ST: SUPREME COURT OF INDIA (Dated: April 24, 2018)
CX - CENVAT Credit - GTA Service - While allowing Revenue appeal it was held that cenvat Credit on GTA service availed for transport of goods from place of removal to buyer's premises is not admissible w.e.f 01.04.2008; that if Board circular 96/7/2007 is made applicable even in respect of post amendment cases, it would be violative of Rule 2(l) of Rules, 2004 and such a situation cannot be countenanced - Review petition filed. Held: Supreme Court finds no error, much less apparent in the order impugned - Review Petition dismissed [para 2]
Petition dismissed
2018-TIOL-791-HC-DEL-IT + Case Story
CIT Vs MS AGGARWAL: DELHI HIGH COURT: (Dated: April 23, 2018)
Income Tax - Sections 132(4), 153(6), 158B(b) & 158BB(1).
Keywords: Block assessment - Benami business - Bogus gifts - Documentary evidence - Direct Tax Laws (Amendment) Act, 1987 - Evidence found - Genuineness of gift - Oral evidence - Undisclosed income - Undisclosed sale.
A search and seizure operations u/s 132 was carried on in the case of BSL Group and the assessee wherein, certain incriminating documents and material were found and seized. While referring to the assessee's books of accounts, the Revenue noted that the assessee was carrying on benami business in the name of M/s. Universal Enterprises, M/s. Vishal Vyapar, M/s. Kumar Traders, M/s. Nutan Enterprises, M/s. Krishna Traders and M/s. Evergreen Corporation. The Revenue found that based on the seized papers, the said benami entities had unaccounted for turn-over of over Rs.26,35,25,144/-. While recording statement u/s 132(4), the assessee had admitted that without having any reason, Mr. Kamlapati Singhania had given him and his HUF gifts of Rs. 50,00,000/- and Rs.10,00,000/-, respectively. The assessee himself had not given gift during the last 10 years. Subsequently u/s 131, the assessee had again accepted and admitted that the said gifts were bogus and had offered the same to be taxed. Pursuant to notice u/s 158BC, the assessee had filed block return for the block period accepting and declaring an undisclosed income.
During the block assessment proceedings, the assessee retracted his admission on bogus gifts, asserting that the gift given by Mr. Rama Pati Singhania was genuine and not procured. Mr. Singhania, a regular assessee with the Department, had sold his residential flat at Bombay for which he had obtained clearance. Mr. Singhania had duly disclosed the gift in his assessment proceedings. Since, the assessee had to attend a family function, admissions recorded and were dictated confession, extracted and feigned. However, the AO rejected the contention that the confession was extorted under coercion, pressure and duress observing that the retraction and explanation justifying the gift was given for the first time in March, 2002. Again, 40 days post the search, the assessee had confessed that the gifts were bogus and should be considered as 'undisclosed income' in the presence of his Counsel. Therefore, the AO made an addition treating the said gifts as bogus and undisclosed income. On appeal, the CIT(A) affirmed the additions made by the AO. On further appeal, the Tribunal had deleted the entire additions made on account of the gifts and the commission.
On appeal, the High Court held that,
Whether the expression 'evidence found' can be restricted only to a tangible document found during the search proceeding - NO: HC
Whether therefore, based on oral testimonies recorded on oath u/s 132(4) addition of 'undisclosed income' can be made - YES: HC
++ for the purpose of Chapter XIV-B, the expression 'undisclosed income' has been specifically defined. Sec. 132 relates to pre-search requirements and Chapter XIV-B incorporated a special procedure for post search assessment in respect of "undisclosed income". Definition ascribed to "undisclosed income" would guide and govern the applicability of Chapter XIV-B or the block assessment proceedings. Difference in clause Sec. 132(c) and expression undisclosed income defined u/s 158B(b) was highlighted in the case of Shailendra Mehto after referring to observations made in the case of N.R. Paper and Board Limited and Others.
++ evidence can be both - documentary or oral. Sec. 3 of the Evidence Act, 1872 states that evidence means and includes all statements which the Court permits or requires to be made before it by witnesses, in relation to matters of the fact under enquiry, and such statements are oral evidence. Documents, including electronic records, produced for the inspection of the Courts, are called documentary evidence. The decision made in the case of Harjeev Aggarwal, confounds the confusion and does not help us resolve conundrum and enigma of "undisclosed income". In the first portion of the decision, the oral testimonies recorded u/s 132(4) on a standalone basis without reference to other material discovered during search and seizure operations cannot be treated as evidence and form the basis of addition as undisclosed income in the block assessment. Mere admission during the search on oath cannot result in addition as undisclosed income. This was notwithstanding Explanation to Sec. 132(4) inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989;
++ in the context of Sec. 158BB(1) r/w Sec. 158B(b), it was observed that despite the explanation, oral statement would be relevant and used only if incriminating document or material was found during the search and seizure operation and not by itself as incriminating evidence and gathered during search. Noticeably contrary view has been taken by the Kerala High Court in the case of CIT vs. M/s Hotel Meriya.
++ the word 'found' is elastic and can be given varied meaning and need not be restricted to a physical object found. The expression 'evidence found' could in the context of the block assessment include an incriminating statement on oath. Statements on oath could be with reference to entries in the statement of accounts, including bank accounts or may well refer to acceptance or admission on utilization of unaccounted for money/income for which physical/material and documents have been destroyed and were not available/found, or were already in knowledge of the Revenue and, therefore, were not 'found' for the first time. "Evidence found" could well be oral evidence that would mandate addition as undisclosed income. The word 'found' is past and past participle of 'find', which means to discover by chance or deliberately. It is normally associated with discovery of information or a fact and in the context of investigation, detection of someone in a wrong, lie or a crime. The word 'found', therefore, in natural and normal context would in the context of 'evidence found' include oral evidence or a statement made on oath and is not confined and restricted to tangible material in form of documents or papers or an article. It is, in this context, the AO could refer to the facts or evidence as found as a result of search and further inquiries thereupon;
++ in the present case, Revenue would submit that papers and documents were found, which indicated that the assessee had not disclosed income from six benami concerns. Books of account would also include the pass-books or statement of bank accounts. It is in this context we would have to read and understand the questions and answers given by the assessee in his statements u/s 132(4). Oral statement was and should not be read in isolation, as assessee at the first and initial stage had accepted that the gift of Rs.50,00,000/- was not genuine, and was a subterfuge. Oral evidence and documentary material was collected during the course of search regarding the undisclosed income. It is relevant that the assessee in his block return had declared undisclosed income, i.e. unaccounted income, to the tune of Rs. 86.82 lacs;
++ having recorded our prima facie reservation on the view expressed on "books of accounts" and more particularly on "oral statement " not being evidence found, we are inclined to refer the question of interpretation of the term 'undisclosed income' for the purpose of block assessment to a larger bench to resolve and iron out differences and bestow and bring clarity. The view expressed in the case of Harjeev Aggarwal on the issue cannot be treated as evidence found during the course of search could be considered and re-appraised. Larger bench could so examine the issue and question whether it would be appropriate and proper, when addition made in block assessment is deleted and knock down for "technical" grounds, for the Tribunal and Court to direct that the addition should have been made in regular/normal assessment in terms of Sec. 153(6). The appeals would be accordingly placed before the Acting Chief Justice for being referred to a Larger Bench for deciding the issues and questions hereinbefore noticed.
Case deferred
2018-TIOL-790-HC-KERALA-IT + Case Story
SUN OUTSOURCING SOLUTIONS PVT LTD Vs CIT: KERALA HIGH COURT (Dated: December 27, 2017)
Income Tax - Sections 10(14), 17(2), 201(1A) & 221.
Keywords: Accommodation expenses - Boarding and lodging - Living allowance - Mens rea - Perquisite - Personal expenses - TDS & Wilful conduct.
The assessee company, engaged in the business of software development, had returned income. In the course of the assessment proceeding, the AO noted that while executing the software projects in U.K., the assessee had deputed some local persons of Hyderabad to work in its branch office at London, U.K. and it had also employed local personnel (NRIs) in U.K. The AO found that the assessee had deducted TDS towards the salaries paid to its employees in India and reimbursed the same. However, the assessee failed to deduct TDS with regard to the staff deputed to U.K. and the salary payments made to the local personnel engaged in U.K. Therefore, the AO charged tax towards the payment made to the staff deputed to U.K. and on the salaries paid to the personnel engaged in U.K. by invoking the provisions u/s 201(1). Finally, the AO passed the order after levying interest for the AYs 2000-01, 2001-02, 2002-03 and 2003-04.
On appeal, the CIT set aside the demand raised under Ss 201(1) and 201(1A) towards the tax charged and interest levied on the payments made to the non-resident consultants working abroad. However, upheld the AO's action with regard to the allowances paid to the residents of India deputed to work in U.K. On further appeal, the Tribunal dismissed all the appeals.
On appeal, the High Court held that,
Whether the provisions of Sec. 10 also includes income not forming a part of the assessee's total income - NO: HC
Whether an amount paid by the employer to its employees for certain allowances can be treated as incurred with respect of discharging company's duty within the meaning of Sec. 10(14) - NO: HC
Whether if the employer fails to provide any break-up of the payment made to its NRI employees towards boarding and lodging, such allowances will still fall within the exception of Sec. 10(14) - NO: HC
++ the assessee has produced consultant's agreement which stated that the allowances paid to the employees while working in U.K. are towards boarding and lodging is clear. Therefore, the issue that needs to be considered is whether the allowances paid towards boarding and lodging of an employee fall within the definition of 'perquisite' u/s 17(2) or the same are exempted u/s 10(14) r/w Rule 2BB. Sec. 15 deals with salaries and the income enumerated thereunder shall be chargeable to income tax under the head – 'salaries'. Sec. 17 defines 'salary' as including several things. Under this provision, apart from salary, various other things, including perquisites are chargeable to tax. 'Perquisite' is an inclusive definition, which takes within its sweep, various things, including any sum paid by the employer in respect of any obligation, which, but for such payment, would have been payable by the assessee. Sec. 10 excludes such incomes which do not form part of total income. Sec. 10(14) thereto, excludes certain allowances;
++ we have no doubt that the lump sum payment made to the employees is by way of conferring additional advantage in order to make them to meet the high cost towards accommodation and other personal expenditure. Such expenditure in our opinion cannot be treated as having been incurred in connection with discharge of their duties within the meaning of Sec. 10(14). Further, as found, neither any break-up of the amounts payable to the employees in U.K. has been given nor is it envisaged that the expenses so incurred are reimbursable. Hence, we are entirely in agreement with the findings rendered by the FAA. We have no hesitation to hold that the amounts in dispute attract the definition of perquisite in Sec. 17(2) and they do not fall within the exception of Sec. 10(14);
++ u/s 201, if an employer does not deduct or does not pay or after so deducting fails to pay the whole or any part of the tax, as required by or under the Act, such person shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax. Such person is liable to pay tax as required u/s 201(1A) apart from simple interest at the rate prescribed therein. We are unable to understand as to how this judgment of Rajasthan High Court in Munni Lal would help the assessee as the case decided thereunder pertains to imposition of penalty un/s 194C(2) for non deduction of TDS. Under the second proviso to the said provision, where assessee proves to the satisfaction of the AO that the default or non-payment of tax was for good and sufficient reasons, no penalty shall be levied. As rightly argued by the Counsel for the Revenue, unlike Sec. 221, Section 201(1A) is not hedged in by any requirement such as good faith, wilful default. Therefore, for levying interest, mens rea or wilful conduct is wholly irrelevant. In view of the fact that the assessee failed to deduct tax on the payments made, Section 201(1A) is automatically attracted and even if the assessee is bona fide in not making such deduction, it is nevertheless liable to pay interest.
Assessee's appeal dismised
2018-TIOL-789-HC-MAD-IT + Case Story
J STEPHEN Vs ITO: MADRAS HIGH COURT (Dated: March 06, 2018)
Income Tax - Section 260A
Keywords - Substantial question law - Unexplained cash deposit
THE assessee was the Managing Director in a company during the relevant AY. In his returns, the assessee declared his income at about Rs 4 lakhs. On assessment, the AO noted the assessee had deposited cash into his account and transferred the same to the company's account to avoid taxation. Since the source of such cash deposits was not proven, the AO treated the same as unexplained cash deposits. Hence the AO determined the assessee's income at around Rs 37 lakhs. On appeal, the CIT(A) confirmed such findings. Although the assessee claimed to have received such amount from his sister-in-law, the CIT(A) held there to be no congent evidence to substantiate such claim.
On hearing the matter, the High Court held that,
Whether in order to be 'substantial', a question of law has to be debatable & not governed by a binding precedent - YES: HC
Whether dismissal of appeal due to inability to explain source of cash deposits or provide supporting evidence, is substantial question of law - NO: HC
++ the CIT(A) found that the cash deposits were not explained and substantiated by cogent evidence. The entire loan amount had been advanced by cash and there were cash deposits even before the date of the alleged sale agreement executed by the assessee's sister-in-law. Needless to mention that receipt of money from customers for travellers cheques also could not remain unaccounted for. Moreover cogent evidence was necessary to prove the receipt of cash from customers. That seems to be lacking. An appeal lies u/s 260-A of the Income Tax Act, only when there is a substantial question of law. There is no question of law involved in this appeal, much less any substantial question of law;
++ to be "substantial" a question of law must be debatable, not previously settled by law of the land or a binding precedent, and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law "involving in the case" there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. It will, therefore, depend on the facts and circumstance of each case whether a question of law is a substantial one and involved in the case or not, the paramount overall consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and impelling necessity of avoiding prolongation in the life of any lis. Reference may be made to Santosh Hazari v. Purushottam Tiwari.
Assessee's Appeal Dismissed
2018-TIOL-616-ITAT-DEL
DCIT Vs MAD ENTERTAINMENT NETWORK LTD: DELHI ITAT (Dated: April 20, 2018)
Income Tax - Section 132 & 153C.
Keywords: Accommodation entries - Incriminating material - Investigation Wing - Search and seizure.
The Assessee-company, engaged as promoters, developers and dealing in trading of licensed land and real estate, filed its return for the relevant AY. However, a search and seizure operation u/s 132 was carried-out in M/s. Taneja Puri Group and during the course of those proceedings, certain documents belonging to the assessee were also found and seized. Accordingly, notice u/s 153C was issued to the assessee. In response to such notice, the assessee again filed its return. The case was selected for scrutiny and explanation of assessee were called for. Thereafter, the AO referred to satisfaction note for initiating proceeding against the assessee. The AO noted that survey was conducted u/s 133A by Investigation Wing at the business premises of Mr S.K. Gupta, C.A. who was controlling various companies. In his statement, he had accepted that various companies were controlled by him and he was providing accommodation entries in various forms and the list of the companies controlled by him were mentioned in the assessment order including M/s. Sino Credits and Leasing Limited (SCLL). According to his statement, the transactions between group were not genuine transaction and were mere accommodation entries and the developer SCLL did not suffer any actual loss.
Therefore, the AO noticed that assessee had declared an amount of Rs.2.75 crores paid to M/s. SCLL and further amount of Rs.3,44,60,000/- had been reflected as payable to the company. Such amount was claimed to have paid as per judicial order of the Arbitrator and claimed as business expenditure. However, the AO did not accepted the explanation of assessee and treated the amount of Rs.6,12,60,000/- as expenditure not genuine and accordingly, disallowed the same. On assessee's appeal, the CIT(A) deleted the additions made by the AO.
On appeal, the Tribunal held that,
Whether addition can be made to the income of assessee, where assessments already stood completed and no incriminating material was unearthed during the search - NO: ITAT
++ all the grounds raised in the departmental appeal in the instant appeal are similar as have been considered in the case of M/s. Puri Constructions Ltd.. The findings of the CIT(A) are similarly worded. It is agreed position that facts are identical in the case of Assessee as well as M/s. Puri Constructions Ltd.. Therefore, all the issues are covered in favour of the assessee by the Judgment of Tribunal in the case of M/s. Puri Constructions Ltd.. It may also be noted here that search was conducted in the case of M/s. Taneja-Puri Group of cases in which some alleged documents pertaining to assessee were found. On that basis, proceedings were initiated under section 153C of the I.T. Act, against the assessee. Further, in the case of M/s. Puri Constructions Ltd., the entire additions have been deleted by the Tribunal and no evidence was found admissible against the assessee. Therefore, nothing survive against the assessee so as to proceed under section 153C. Further, no admissible evidence have been brought on record against the assessee so as to make any addition. The additions were made merely on presumptions without bringing any concrete material against the assessee on record. All the evidences found during the course of search and found in post-search enquiry have been considered in the case of M/s. Puri Constructions Ltd. and entire additions have been deleted by the Tribunal. Therefore, on the basis of the same evidence and material, no additions could be made against the assessee. The CIT(A) on proper appreciation of evidence and material record, correctly deleted the additions;
++ the A.O. made the addition on the basis of the assessment order passed in the case of M/s. Puri Constructions Ltd. in which CIT(A) has deleted the addition by following the order of his predecessor in the case of M/s. Puri Constructions Ltd., which has now been confirmed by the ITAT. In this view of the matter, the Departmental Appeal is fully covered by the order of ITAT in the case of M/s. Puri Constructions Ltd.. By respectfully following the same, the appeal is dismissed.
Revenue's appeal dismissed
