SHRIKANT MOHTA Vs CIT : CALCUTTA HIGH COURT (Dated: June 25, 2018)

Income Tax - Section 153A(1).

Keywords: Definitive final order - Non-obstante clause & Rectification order.

A search and seizure operations was carried out at the assessee's business premises wherein, documents were seized u/s 132. However, it was found that in view of Sec. 153A, no return was filed for AY 2004-05 within the statutory mandate. The assessee submitted that the notice u/s 153A(1)(a) was received on March 27, 2006 and the return was filed on or about April 26, 2006. Thereon, an assessment order was passed on December 21, 2006. When several of the assessees's books and records remained seized by the authorities pursuant to the search and seizure operations of September 2, 2004, the assessee claimed to file his return for AY 2004-05 on March 31, 2005. But, no cognizance was taken of such return.

For AY 2004-05, the assessee had claimed a loss which it intended to carry forward in a subsequent year. However, in the assessment order passed on the assessee's return filed pursuant to the receipt of the notice u/s 153A(1)(a), the AO failed to expressly record that the losses in the relevant year were to be carried forward in subsequent years. The same AO received the subsequent return for AY 2006-07 wherein, the carrying forward of the previous loss was allowed and also permitted an appropriate deductions from the income in such AY. The earlier order passed by the AO on December 21, 2006, the assessee was permitted to carry forward the losses incurred in AY 2004-05. Further, the same AO sought to suo motu rectify his order. While exercising the power u/s 263, the Commissioner found that the rectification which was carried out by the AO to an order of assessment passed earlier was not proper. Similarly, the Commissioner set aside the assessment order passed for the AY 2006-07 wherein the carried forward loss from the AY 2004-05 was permitted to be set off against the assessee's income in AY 2006-07. On appeal, the ITAT confirmed the view of the Commissioner with reagrd to both the orders passed u/s 263.

Having heard the parties, the High Court held that,

Whether the ITAT can pass a definitive final order even when the department is not sure of the date of issuance of the notice u/s 153A(1)(a) and the time afforded to the assessee by such notice to file its return - NO: HC

++ on the basis of the reasoning as indicated in the case of TSAI Tea Enterprises, the Commissioner dealing with the order of rectification passed by the AO observed that the rectification was redundant since the issue as to whether the carried forward loss could be availed of by way of any deduction had to be considered while considering the return for the relevant AY in which the carried forward loss is put up as a deduction and is not a matter that can be gone into at any other time;

++ the non obstante clause at the beginning of Sec. 153A(1) suspends, for the purpose and to the extent as indicated in such provision, the operation of several other provisions of the Act, including Ss 139 and 147 in course of any reassessment. In other words, when a search is initiated u/s 132, the assessee is not required to file its return till such time that the assessee receives a notice u/s 153A(1)(a) thereof. Once such notice is received the liability fastens on the assessee to file the return within the reasonable time specified in the relevant notice. To boot, the second proviso to Sec. 153A(1), insofar as it is material for the present purpose, mandates that any "assessment or reassessment ... relating to ... the relevant AY or years ... pending on the date of initiation of the search u/s 132. ... shall abate";

++ since the search operations in this case were initiated on September 2, 2004, it was no longer necessary for this assessee to file his regular return by October 31, 2004 notwithstanding the mandate of Sec. 139(1). The obligation to file the return remained suspended, in view of the clear opening words of Sec. 153A(1), till such time that a notice was issued to him under clause (a) of such sub-section. If such is the meaning of Sec. 153A(1), the operation of Sec. 139(3) qua the time available for filing a return in order to avail of the benefit of carrying forward any loss stands extended till a return is called for u/s 153A(1)(a) and such return is filed, provided the return is filed within the time indicated in the relevant notice u/s 153A(1)(a). There can be no dispute to such being the effect of Sec. 153A(1)(a);

++ unfortunately, the notice issued u/s 153A(1)(a) is not available in the records relied upon by the parties nor is there any reference to the date of such notice in any of the orders appended to the papers. Indeed, the time permitted by the relevant notice u/s 153A(1)(a) for the assessee to file the return is also not available. As recorded, it is the submission of the assessee that such notice was received by the assessee on March 27, 2006 and it afforded a month's time to the assessee to file the assessee's return and the assessee's return for the AY 2004-05 was filed on April 26, 2006. The date when the return was filed, however, is verifiable from the orders. Therefore, a definitive final order cannot be passed without being sure of the date of issuance of the notice u/s 153A(1)(a) and the time afforded by such notice for the assessee to file the return. For such purpose, the orders passed by the Appellate Tribunal require to be set aside and the matters remitted back to the Tribunal for the Tribunal to ascertain the details as to the date of the notice and the time afforded to file the return and pass an order in the light of the views expressed;

++ for the purpose of carrying forward the loss in terms of Sec. 72 r/w Sec. 80, in a case where search operations have been conducted u/s 132, the time to file the return within the meaning of Sec. 139(3) has to be regarded as the reasonable time afforded by the consequent notice u/s 153A(1)(a). When search operations are conducted u/s 132, the obligation of the assessee to file any return remains suspended till such time that a notice is issued for such purpose u/s 153A(1)(a). If the return is filed by the assessee within the reasonable time permitted by such notice u/s 153A(1)(a), such return would then be deemed to have been filed within the time permitted u/s 139(1) for the benefit u/s 139(3).

Case disposed of

2018-TIOL-1420-HC-MUM-ST

DINESH KUMAR AGRAWAL Vs UoI : BOMBAY HIGH COURT (Dated: July 16, 2018)

ST - The petitioner has joined the respondent no.4 as builder and developer - The petition says that this respondent is engaged in development and construction of residential and commercial complex - The petitioner has pursuant to certain discussions, booked a residential apartment in a building coming on a plot of land being developed by respondent no.4 - The allotment of flat/ residential apartment is governed by Maharashtra Ownership Flats Act, 1963 - The argument is that levy and collection of service tax on sale of apartment in under construction buildings is ultra vires the Constitution of India - Petitioner is called upon to produce an agreement under which the petitioner says a builder or a person authorized by builder had agreed to sell residential apartment for the price mentioned therein - The petitioner has, over and above, the application money under such a written agreement paid the amount as stipulated therein, but phase wise and each of the amounts which have been paid as per and in terms of the agreement includes the tax component, the burden of which has fallen on the petitioner: HC

Matter posted

2018-TIOL-1419-HC-AHM-ST

COMMISSION OF CENTRAL GST VS JAY CHEMICAL INDUSTRIES LTD: GUJARAT HIGH COURT (Dated: July 9, 2018)

ST - Revenue is in appeal against impugned order wherein Tribunal has disposed of the appeals without deciding on merits with liberty to approach the Tribunal after disposal of appeal pending before this Court in case of Essar Steel India Ltd. - Tribunal ought to have decided the appeals on merits in view of binding decisions of this Court in case of Cadila Healthcare Ltd. and Astik Dyestuff Pvt. Ltd. 2014-TIOL-237-HC-AHM-ST - However, if Tribunal was of the opinion that in view of subsequent notfn 2/16, by which explanation has been inserted to the definition of ‘input service’ and the question whether such notfn shall be applicable retrospectively or not is at large before this Court in case of Essar Steel India Ltd. and it is not appropriate to decide the appeals on merits, in that case, the Tribunal ought to have kept the appeals pending till decision of this Court in case of Essar Steel India Ltd. - Instead, Tribunal has disposed of the appeals even without deciding the appeals on merits - Such a procedure adopted by Tribunal disposing of the appeals without deciding the same on merits is neither correct not proper and the same is quashed and set aside - The appeals are restored to the file of Tribunal and to avoid any further multiplicity of proceedings /appeals before this Court, it is directed that the appeals on remand be kept pending till the decision of this Court in case of Essar Steel India Ltd: HC

Appeals partly allowed

2018-TIOL-1418-HC-AHM-ST

COMMISSIONER, CGST & CENTRAL EXCISE Vs NARESH F SHAH: GUJARAT HIGH COURT (Dated: July 12, 2018)

ST - Proceedings were initiated against the Company for recovery on account of wrong availment of CENVAT Credit duty on Linear Alkyl Benzene (LAB) - It was alleged that LAB was not at all utilized as input in final product, and therefore, the assessee wrongly availed the CENVAT Credit of duty paid on such input i.e. LAB - Department has submitted that as such on remand the chemical samples of final product were not available by efflux of time, and therefore, the adjudicating authority was not in a position to take the samples for chemical test - However, as such the matter was remanded to Commissioner (A) for the very purpose by specifically observing that the onus is on the Department to prove that the assessee wrongly availed CENVAT Credit on tax paid on LAB, which was used in input of final product and therefore, unless and until the Department was able to prove that in the final product the LAB was not used /utilized at all, the Department was not justified in holding that the assessee wrongly availed the CENVAT Credit on LAB - When the Department has failed to prove that the final product did not contain the LAB, which was alleged to have been used by assessee as input on which the tax was paid, it cannot be said that the adjudicating authority was justified in denying the CENVAT Credit - No error has been committed by Tribunal - No substantial question of law arises: HC

Appeals dismissed

2018-TIOL-1417-HC-DEL-CUS

PR.CC Vs M R REDDY : DELHI HIGH COURT (Dated: July 13, 2018)

Cus - Whether the Tribunal was justified in remanding the matter for adjudication to the concerned official to first decide the issue of jurisdiction after the appeal pending in Supreme Court against the reported judgment in case of Mangali Impex Limited 2016-TIOL-877-HC-DEL-CUS - In identical circumstances, where a similar issue was sought to be urged, Court had passed an order in a batch of appeals - Following the said decision, impugned order is set aside and the matter is remitted to Tribunal which shall proceed to examine and decide the merits of appeal without being influenced by decision of this Court in Mangli Impex - The Court, at the same time, like in other cases, expresses no opinion on the merits or procedure that the Tribunal should adopt and follow: HC

Appeal partly allowed

2018-TIOL-1122-ITAT-AHM

Income Tax - ITAT Rules 1963 - Rule 4(1)

Keywords - Jurisdiction of AO - Jurisdiction of Tribunal

The assessee company is a diversified natural resource majors, with operations across zinc-lead-silver, oil & gas, iron ore, copper, aluminium and commercial power. For certain AYs, assessment orders were passed raising duty demands for each AY. Hence the assessee sought stay on the recovery of tax dues amounting to Rs 187.30 crores with interest & filed the present stay applications in this regard. Initially, the applications were filed before the Surat bench of the Tribunal based on the reasoning that the assessee's office was located in the city. However, the applications were not accepted on grounds that the connected appeals had not yet been transferred to it. Hence the present applications were filed before the present bench as the related appeals were lying within the domain of the present bench. The assessee also sought extension of stay already granted.

On hearing the application, the Tribunal held that,

Whether there can be only one AO holding jurisdiction in one matter - YES: ITAT

Whether appeals for different AYs but involving common issues as well as cross-appeals should ideally be heard together - YES: ITAT

Whether therefore the jurisdiction to hear such appeals lies with the Bench under whose jurisdiction the AO concerned is located - YES: ITAT

++ in our considered view, therefore, it is the location of the Assessing Officer at the point of time when the Tribunal is to "hear and determine such appeals and applications" which is relevant for determination of the jurisdiction of the bench which is to hear and determine the appeals and applications under the Act. When the location of the Assessing Officer having jurisdiction over assessment of the assessee changes, the jurisdiction of the bench of the Tribunal, which is to take judicial call on the appeals and applications, automatically changes as a corollary to, and as an offshoot of, the change in the location of the change of the Assessing Officer. It is also important to bear in mind the fact that the assessment of each year is not entirely on standalone basis but in continuity, and that when the new Assessing Officer takes over from the earlier Assessing Officer, as a result of order under section 127, the earlier Assessing Officer becomes completely functus officio so far as the assessee is concerned. It is thus not only the power to assessee the income of the assessee in future but all powers and duties in relation to the assessments framed earlier that gets transferred to the new Assessing Officer. Once jurisdiction under section 127 is transferred, the officer earlier having the jurisdiction to assessee income of the assessee cannot at all be said to be Assessing Officer of the assessee.

++ if there can be only one Assessing Officer in a case, that Assessing Officer is essentially the holding jurisdiction at present. The transfer is not assessment year specific but in entirety. in any case, if we are to determine the jurisdiction of the bench to hear the cases based on the point of time when the assessment was framed or when appeal was filed, it may result in a situation in the case of one assessee, different benches of the Tribunal will have jurisdiction to hear its appeal for different years- and even cross appeals for one year in a case is which in between the point of time when cross appeals are filed, there is a change in the jurisdiction with respect to the Assessing Officer. That would clearly be an incongruity, and the cross appeals cannot anyway be heard at different places in the light of the law laid down by Supreme Court in the case of CST Vs Vijay International Udyog which requires cross appeals to be heard together. The appeals for different assessment years having common issues should ideally be heard together, but then when benches at different places have jurisdiction over hearing over these different assessment years, such consolidation is not possible at all;

++ hence the only way the reference to Assessing Officer can be treated in harmony with the scheme and purposes of the Act, is to treat the Assessing Officer having current jurisdiction over assessment of income of the assessee. Thus we were of the opinion that the jurisdiction to hear and determine these appeals, and the related applications, must vest with the bench having jurisdiction over the Assessing Officer concerned, and since there can only one Assessing Officer, as held by Delhi High Court in the case of Aar Bee Industries, that Assessing Officer is the present Assessing Officer located in the jurisdiction of Delhi benches;

++ in view of the undisputed factual position that the Assessing Officer having jurisdiction to assess the income of the assessee is located in New Delhi, which falls in jurisdiction of Delhi benches, we find that the jurisdiction for hearing of these applications, and hearing of the related appeals, vests in Delhi benches of this Tribunal. However, it is for the President to take a final call on the issue, as is the unambiguous thrust of Rule 4(1) of the ITAT Rules. Therefore we deem it fit and proper to direct the Registry to place all stay applications and related appeals, as indeed all other appeals of this assessee, before President for appropriate orders. In order to ensure, however, that these applications are not rendered infructuous or nugatory by recovery of the outstanding tax demands in the meantime, we also take on record the categorical assurance so graciously extended by the Departmental Representative, not to take any coercive measures for recovery or collection of the outstanding disputed demands till the time the present stay applications are disposed of by the Tribunal.

Assessee's Stay Application Disposed Of

2018-TIOL-1121-ITAT-JAIPUR

Income Tax - Section 132(4).

Keywords: Discreet enquiries - Email communication - Foreign remittances - Haed of the family - Identification of jewellery - Pre-search investigation - Unexplained foreign tour expense & Undisclosed sources of income.

A search & seizure operation u/s 132(1) was conducted at the various premises of NIMS Group and its trustees. Accordingly, the assessee, being one of the trustees was also subjected to such an operation wherein, gold weighing 2595.72 grams, diamond weighing 19.3 cts and 714 grams of silver was found from his residential premises. In his statement recorded u/s 132(4), the assessee submitted that the jewellery and the silver so found belonged to him, his wife, Smt. Shobha Tomar, son, Dr. Anurag Tomar, daughter-in-law, Dr. Swati Tomar and his HUF namely, B.S Tomar (HUF) which were reflected in the Wealth tax returns and the wealth tax was duly paid on such items. Again, during the assessment proceedings, the assessee was asked to provide the necessary explanation in respect of the jewellery so found during search operation. In reply, the assesseestated that the total jewelleries were weighted and valued by the valuer jointly for all the family members and such jewelleries were disclosed by him and his other family members. In respect of all the family members, the total explainable jewellery was weighing 2,212.04 grams whose value came to be more than the amount determined by the search team and thus, no part of the jewellery could be treated as unexplained. However, the gold jewellery weighing 383.68 grams, diamond 19.3 cts and silver worth Rs. 14,280/- remained unexplained and accordingly, SCN was issued to the assessee. In reply, the assessee submitted the quantity of jewellery as per the wealth tax returns of other family members anmely, Dr. Eshan Sharma, Dr. Surabhi Tomar and Ms. Pallavi Tomar. However, the assessee's reply was not found acceptable to the AO since, in the statement recorded during the search, the assessee did not mentioned that the jewellery belonging to Dr. Eshan Sharma, Dr. Surabhi Tomar and Ms Pallavi Tomar was lying at his premises. The AO held that 383.68 grams of Gold jewellery and 19.3 cts diamonds were found unexplained. Further, the AO concluded that the assessee was the head of family and thus, the AO proceeded to make addition on account of unexplained investment in gold jewellery and diamond in the assessee's hands.

Further, the AO observed that during pre-search investigation, some discreet enquiries had revealed that the assessee's family was making a lot of foreign investment, particularly in Madagascar and Mozambique. It was also found that while responding to the questions raised with regard to the foreign investment, the assessee was constantly denying that no investment was made. Thereafter, the AO referred to the seized material which revealed that the assessee had made certain investments during the FY 2014-15 for setting up of business of gold mines, infrastructure, medical hospital and college in the stated African countries. The AO found from the seized documents that Mr. Bitthal Maheshwari had made a payment from HSBC bank account in Hong Kong and thereby, e-mailed the receipt to the assessee for sending the payment receipt. It was also noted that the statement of Mr. Bitthal Maheshwari's real brother Mr. Goverdhan Maheshwari, had also escorted the assessee and his wife to Africa. Mr. Goverdhan Maheshwari submitted that he would ask about the said transactions from his brother, however, no details were furnished by him. Accordingly, the AO was of the opinion that on behalf of the assessee, the said amount was transferred from the HSBC bank account to the Dubai bank account by Mr. Bitthal Maheshwari or his brother who had a bank account in HSBC Hong Kong and treated the same as 'unexplained income' on part of the assessee. Accordingly, SCN was issued to the assessee. In reply, the assessee submitted that the said issue was already discussed in the Commissioner's Report under rule 9 of Settlement Commission Procedural Rules, in case of M/s. Indian Medical Trust. After considering all the details of commissioner's report, the AO held that to safeguard the interest of Revenue, a protective addition was made to the assessee's total income towards his undisclosed foreign investment. Again, the AO observed that the assessee and his wife had incurred an undiclosed expenses since, no proof was placed with regard to the source of the amount paid by the NIMS University during the search and post-search proceedings. Thus, the SCN was issued to which reply was submitted by the assessee, however, such response was not found acceptable to the AO. Therefore, the AO brought to tax half of the total unexplained foreign tour expenditure to tax in the hands of the assessee.

On appeal, the CIT(A) confirmed the action of the AO.

On appeal, the ITAT held that,

Whether in the absence of identification of the seized jewellery, AO is allowed to make full additions in the assessee's hands towards unexplained investment merely because he was the head of the family - NO: ITAT

++ the jewellery which has been found from the bedroom of Dr. Shobha Tomar, Dr. Anurag Tomar and Dr. Swati Tomar belongs to all the family members who were staying jointly with the assessee at the relevant point in time. The same is confirmed by the assessee in his statement recorded u/s 132(4) where the assessee has categorically stated that the jewellery so found belong to him, his wife, son, daughter in law and B.S.Tomar (HUF). Therefore, we find that the jewellery so found where remained unexplained, the addition has to be made equally in the hands of the each of the family members to whom the said jewellery belongs. Therefore, we found that the observation of the AO that since the assessee is the head of family, the whole of the addition shall be made in his hand is not emerging from the facts on record and therefore, the same cannot be accepted. In absence of any specific identification of the jewellery belonging to the assessee and to the other family members, it would be reasonable that if the addition has to be made, it should be made equally in hands of all the family members staying with him at the relevant point in time and the assessee’s HUF. Therefore, we confirm the findings of the AO to the extent that the jewellery worth Rs 55,65,762 remains unexplained. At the same time, the addition made towards the unexplained investment in the jewellery so found during the course of search, should be made equally in hands of all the family members staying with him at the relevant point in time. The proportionate addition in the hands of the assessee comes to Rs 245,422 (1/5 of Rs. 12,27,109/-). The balance addition of Rs 981,687 is therefore directed to be deleted;

Whether the AO can make additions merely based on the email communications which were addressed to the assessee in respect of foreign payments received by him from one of his NRI friends - NO: ITAT

++ the AO has referred to certain discreet enquiries during pre-search investigation that the assessee's family is making a lot of investment in countries outside India, particularly in Madagascar and Mozambique. However, we find that there is nothing available on record in terms of such inquiries which have been conducted by the Revenue and as to how the Revenue has come to such a finding. Therefore, in absence of any material on record in terms of the nature of such enquiries, the person from whom such inquiries have been made, any documentation which has been found and what is the exact findings arising out of such inquiries, we do not find there is any basic to hold that the so called discreet inquiries anyway establishes the fact that the assessee has made any investments in countries outside India and the remittances are in connection thereto;

++ pursuant to the statement of the assessee recorded during the course of search u/s 132(4), it is clear that the assessee has confirmed that he does not have any foreign bank account, no foreign exchange dealings have been made by him and he does not have any business activities outside the country. If Revenue were to disbelieve such statement which has been recorded on oath, the onus is on the Revenue to demonstrate through verifiable evidence that what the assessee has stated in his statement on oath is incorrect or there is falisity in such statement. Merely disbelieving such statement without bringing anything contrary on record cannot advance the cause of the Revenue;

++ it is an admitted position of the Revenue as emerging from the assessment order that the payment has been made by Shri Bitthal Maheshwari. However, given the fact that all the email communications have been addressed to assessee and not to Mr Bitthal Maheshwari, the AO has come to a conclusion that the payment has been made on behalf of the assessee from the HSBC bank account to the Dubai bank account by Shri Bitthal Maheshwari or his relative/associate who had a bank account in HSBC Hong Kong. In our view, these documents on first blush might create some suspicion or apprehension in mind of the AO that there is some involvement of assessee in these transactions. However, relying merely on these email communications and without bringing any further evidence on record as to the nature and extent of involvement of assessee, it is too premature to hold that the remittance of USD 1 lac has been made by Shri Bitthal Maheshwari on behalf of the assessee. There is nothing on record which prove that the HSBC bank account in Hong Kong is operated on behalf of the assessee, there is also nothing on record which anyway suggest that funds belonging to the assessee have been routed either directly/indirectly through the HSBC bank account in Hong Kong and which has been used for making the remittance to Oceanix International FZE, Dubai. There is no enquiry or investigation which has been carried out by the Revenue which demonstrate that the funds from Hong Kong are undisclosed income of the assessee. There has been no enquiry which has been carried out with either the HSBC bank in Hong Kong or the Mashreq Bank PSC in Dubai to determine the particulars of the account holders who have made the remittance and who has received the remittance. There is no enquiry or investigation done with Oceanix International FZE, which has received the remittance which demonstrate that the funds have been remitted in relation to certain business transactions undertaken or proposed to be undertaken by the assessee;

++ the mere fact that certain email communications have been addressed and forwarded to the assessee regarding the foreign remittances, to our mind, the same is not sufficient enough to hold that the remittance have been made either by the assessee or on his behalf from the undisclosed sources of income. The Settlement Commission has also reached at the same conclusion. The Revenue has admitted the fact that the remittance has been made by Shri Bitthal Maheswari and the assessee having denied making such remittances or any direct/indirect involvement in such remittances, what is apparent has to be treated as real unless the Revenue brings on record any evidence which establishes his linkages with remittance having being made on his behalf from his undisclosed sources. Thus, we do not find any basis for making the addition of Rs 1,84,35,000 in the hands of the assessee. The said addition is hereby directed to be deleted;

++ the AO has made an addition of Rs. 2,03,450/- on account of unexplained foreign tour expenses. The Counsel for the assessee has reiterated the contentions raised before the CIT(A) and submitted that the assessee's drawings during the year are sufficient enough to explain the source of such expenditure. In support, our reference was drawn to the assessee's capital account for the FY ended 31st March, 2015 which shows total drawings of Rs. 10,17,138/-. In absence of anything contrary on record, it would be reasonable to hold that the foreign tour expenses of Rs 203,450 are met out of such drawings. In the result, the addition made by the AO is hereby deleted.