CASE LAWS

2018-TIOL-1468-HC-AHM-IT + Case Story

KHODAJI MAFATJI THAKOR Vs SECRETARY: GUJARAT HIGH COURT (Dated: July 20, 2018)

Income Tax - Writ - Sections 132(4), 245C & 245D

Keywords - Judicial Review - Sale of land - Settlement Commission

THE assessees are members of the same business group. They were subjected to search & seizure operations and certain amount of cash was recovered from each of the assessees. Apart from that, goods and other valuable articles were also seized. Some quantity of gold was also seized from one of the assessees. The Revenue then recorded their statements u/s 132(4). The assessees were found to be owning some agricultural land. Such land was subsequently converted into non-agricultural land.

During the search, the Department also found copies of two MoUs which the assessees had signed with some entity for sale of the land. In this regard, the assessee claimed that as the land could not be transferred in terms of the MoU as those terms were not acted upon, beyond limitation therein had expired, the assessees sold the land at the fair market price to the willing buyer. Hence they claimed that the price quoted in the MoUs did not reflect the market price. On assessment, the AO disallowed the exemption claimed by the assessees u/s 54F and added the same to the assessee's income. Thereafter, the assessees approached the Income tax Settlement Commission and declared the value of the lands. However, the Commission determined the value at which the assessees sold the land. As such value was considerably higher than that declared by the assessees and the capital gains were calculated accordingly.

In writ, the High Court held that,

Whether when the SETCOM has done due diligence to determine the quantum of capital gains and has passed its order based on proper appreciation of facts, statements of assessees and sale agreements, such order tends to go beyond the scope of judicial review - YES: HC

++ the findings recorded by the Settlement Commission are on appreciation of evidence and material on record, more particularly, two MoUs executed at the behest of the assessee of the same date but with different parties having different sale consideration mentioned. The Settlement Commission also considered the statements of Ms Sakariben Thakor, Ms. Gajaraben Thakor, Mr Yogesh Thakor and Mr Ashwin D Patel and even the statement of Mr Manshukhbhai Patel and valuation report of Mr Alpesh Patel. The MoUs and the valuation report of Mr Alpesh Patel. The MoUs and the statements of the various parties which are on oath and recorded during the course of search are required to be considered conjointly and as a whole and if they are considered conjointly and as a whole, it cannot be said that the Commission has committed any error in determining the sale consideration at Rs.80000 per sq yard. At this stage, it is required to be noted that in the sale deed sale consideration is mentioned at Rs. 30000 per sq yard in the two MoUs the sale consideration is mentioned at Rs. 52001/- per sq yard and Rs.77001/- per sq yard respectively;

++ it is not in dispute that there is any procedural lapse on the part of the Settlement Commission while passing the order. There is no violation of principles of natural justice while passing the order. The disclosure made by the assessee while submitting the application for settlement, the report of Commissioner, applicant's rejoinder, oral argument from both the sides and the documents submitted along with SOF and statements recorded during the search & post search proceedings have been dealt with and considered in detail and thereafter, the order has been passed;

++ on considering two MoUs it can be safely be observed that two MoU's were by and at the behest of the land owners, of which, the assessee was the head. Each and every aspect and materials relied upon have been minutely considered by the Settlement Commission. In such facts and circumstances and findings recorded by the Settlement Commission and the scope of judicial review of the order passed by the Settlement Commission recorded, we are of the opinion that no interference of this Court is called for in exercise of powers under Article 226 of the Constitution of India;

++ from the record, we found that the application submitted by the assessee has been dealt with during the schedule prescribed by the provisions of law. A detailed procedure has been observed while exercising the powers under Section 244D so much so that a report has also been examined thoroughly by the Commission. As observed, during the course of hearing proper opportunity has been given to the respective parties and therefore, amount which have been determined by the Settlement Commission (by majority) are just and proper. It is required to be noted that issue before the Commission was with respect to the determination of the capital gain on sale of the two lands;

++ hence no interference of this Court is called for under Article 226 of the Constitution of India and that too with the limited scope of judicial review of the order passed by the Settlement Commission, while exercising the powers under Article 226 of the Constitution of India.

Assessee's Writ Petition Dismissed

2018-TIOL-1467-HC-AHM-IT + Case Story

UMANG HIRALAL THAKKAR Vs ITSC: GUJARAT HIGH COURT (Dated: July 20, 2018)

Income Tax - Writ - Sections 132, 245 C, 245D(1), (2B) & (2C).

Keywords: Full and true disclosure & Search.

The assessee, an individual, is a Director of Dharmadev Infrastructure Ltd, which is engaged in the business of the Construction and Land Development. A search was carried out at the residential premises of the assessee as well as premises of the group concerns of "Dharmadev Group". The assessee surrendered about Rs 9,24 Cr. The same was done by the company which surrendered Rs 22.37 Crore. The assessee quickly moved to the Settlement Commission which admitted the application but the assessee preferred to revised the disclosure. However, the CIT objected to it and submitted that there was no explanation regarding seized or impounded papers, source of fund and seized jewellery and also the source of cash deposits in Benami accounts. The Revenue further argued that even the application for AY 2015-16 might not be entertained since no proceedings were pending in both the cases. Accordingly, by the common order the Settlement Commission rejected the application on the ground that there was no true and full disclosure on the part of the assessee.

In writ, the High Court held that,

Whether the expression "full and true disclosure" in Sec 245C mandates not only the disclosure of income but also the manner in which such income is arrived at - YES: HC

Whether the plea of the assessee that the SETCOM has no powers to reject the application as invalid after examining the Revenue's report and giving opportunities to the assessee, would render provisions of Ss 245D(2B) & (1) redundant - YES: HC

++ considering the order passed by the Settlement Commission passed under Section 245D(1) allowing the applications to be proceeded with further it can be seen that the Settlement Commission has specifically observed that "as regards the issue of true and full disclosure of income, we are of the opinion that, at present there is no material in our possession which warrants the conclusion that true and full disclosure of income have not been made by the applicants." While considering the application at the stage of 245D(1), Settlement Commission is required to hold a limited inquiry whether applications fulfilled statutory requirement or not and at that stage inquiry would be summary in nature;

++ once the order is passed under Section 245D(1), the stage of Section 245D(2B) calling the report from the Principal Commissioner of Income Tax shall comes and after considering the report and also giving an opportunity to the assessee, it will be open for the Settlement Commission to declare the application invalid. Therefore, if the submission on behalf of the assessee is accepted that once the order is passed under Section 245D(1) of the Act thereafter it will not be open for the Settlement Commission to reject the application or declare the same as invalid, in that case, the provisions of Section 245D(2B) and (2C) would be otiose and become nugatory. Therefore, the order passed under Section 245D(2C) declaring the application as invalid is absolutely in consonance with the scheme and provision of Section 245D of the Act;

++ so far as submission on behalf of the assessee that Settlement Commission could have called for further explanation and could have held the inquiry while exercising the powers under Section 245D(3) is concerned, the same has also no substance. There is no question of further inquiry contemplated. Only in a case where the application is declared invalid under Section 245D(2C) only thereafter further proceedings are required to be taken place and inquiry is required to be conducted as provided under Section 243D(3) and thereafter final order under Section 245D(4) is required to be passed;

++ so far as submission on behalf of the assessee on merit is concerned, at the outset, it is required to be noted that the order is passed by the Settlement Commission after considering the report submitted by the Principal Commissioner of Income Tax and thereafter after giving an opportunity to the assessee. The cogent reasons have been given by the Settlement Commission and considering the material on record, a specific finding is given that there is no true and full disclosure by the assessee. The statutory mandate of Section 245 of the Act is that the application shall "contain a full and true disclosure" of the income which has not been derived. Fundamental requirement of the application under Section 245C is that full and true disclosure of the income has to be made along with manner in which such income is derived;

++ the order passed by the Settlement Commission under Section 245D(2C) declaring the application invalid is not required to be interfered with by this Court in exercise of powers under Article 226 of the Constitution of India. Neither there is any procedural lapse nor any allegation of violation of principles of natural justice. As observed in catena of decisions, against the decision of the Settlement Commission, the High Court will not be sitting as an appellate authority like the assessment order.

Assessee's writ petition dismissed

2018-TIOL-1466-HC-AHM-IT

PR CIT Vs GK PATEL AND COMPANY: GUJARAT HIGH COURT (Dated: July 10, 2018)

Income Tax - Section 40(a)(ia).

Keywords: Finance Act, 2010 & Retrospective operation.

The Revenue had preferred an appeal challenging the order passed by the Tribunal wherein, the CIT(A)'s order in deleting a disallowance made u/s 40(a)(ia) was confirmed. While adjudicating the matter, the ITAT had placed a reliance upon the decision of Calcutta High Court in the case of Virgin Creation.

On appeal, the High Court held that,

Whether the amended provisions of Sec. 40(a)(ia) vide Finance Act, 2010 is curative in nature and thus, holds a retrospective effect so as to ensure tax compliance and not to punish any taxpayer - YES: HC

++ it is not in dispute that the issue involved in the present appeal is squarely covered against the Revenue in view of the decision of this Court in the case of CIT Vs. L.G. Chaudhary. It is required to be noted that in the present case, the issue is for the AY 2005-06 i.e. amendment pre 01/04/2010. Apart from the fact that there is a direct decision of this Court against the Revenue in the case of L.G. Chaudhary's case, even there is a subsequent decision of the Supreme Court in the case of CIT, Kolkata Vs. Calcutta Export Company by which it is held that the amendment made by the Finance Act, 2010, to the provisions of Sec. 40(a)(ia) is curative in nature and it should be given retrospective operation from date of insertion of said provision i.e. w.e.f. AY 2005- 06. Thus, in view of the said direct decision of the Supreme Court on the point, no substantial question of law arises in the present tax appeal.

Revenue's appeal dismissed

2018-TIOL-1465-HC-KERALA-CUS

INTEGRAL TRADERS Vs CC: KERALA HIGH COURT (Dated: July 13, 2018)

Cus - The assessee is seeking interference to the judgment of Single Judge which directed deposit of an amount of Rs.30,00,000/- as against the deposit directed of Rs.50,00,000/- by the Tribunal - There has been an amendment brought out in which the assessee is liable to pay only 7.5% of total demand for the purpose of maintaining an appeal - Said amendment does not apply to the assessee since appeal itself was filed before amendment came into force - The valuation as stated by assessee does not tally with the valuation available in official web site of the department - However, if the market value is said to be as projected by assessee then necessarily they could obtain loan on the basis of such security - There being no provision for providing security for purpose of maintaining the appeal on basis of waiver granted by Tribunal and later modified by Court - Court is not inclined to direct the respondent to accept the security in lieu of cash deposit - However, assessee could be granted a further time of three months to raise the amounts and comply with judgment of Single Judge: HC

Writ appeal partly allowed

2018-TIOL-1464-HC-MAD-CUS

HLG TRADING Vs CC: MADRAS HIGH COURT (Dated: July 13, 2018)

Cus - The petitioner filed writ petitions seeking a direction to respondents to implement the orders passed by Commissioner (A) and to release the imported goods by assessing Bills of Entry on the basis of declared value and issuance of detention certificates for waiver of detention charges from date of Bills of Entry till the date of clearance of goods - Court is not inclined to dwell into it, as the Court is convinced that the goods can be directed to be released and the detention certificates can be issued subject to condition that the interests of Revenue are safeguarded - The Assistant Commissioner (Legal-II), Chennai Customs has given written instructions wherein it has been stated that adequate security i.e by executing necessary bond and bank guarantee may be directed to be done for the differential amount of duty involved in these cases - Question of directing the petitioner to furnish a bank guarantee does not arise since the petitioner succeeded before Commissioner of Customs (Appeals-II) - However, with regard to execution of bond, it appears that the petitioner does not resist such a requirement as long as consignments are released in terms of orders passed by the Commissioner of Customs (Appeals-II): HC

Writ petition disposed of

2018-TIOL-1463-HC-DEL-CUS

G AND G ENTERPRISES Vs CC: DELHI HIGH COURT (Dated: July 24, 2018)

Cus - The assessee's grievance is that copy of O-I-O was never received by him and when he approached the CESTAT in appeal; his belated appeal was rejected on the ground that the reasons adduced for seeking condonation of delay were unsubstantial -There was some considerable laxity on the part of respondents, who appears to have used different addresses - There is no clear material on record to show that the assessee was communicated with O-I-O and at the same time, Court notes some laxity on the part of assessee as well - Nevertheless, the fact remains that the assessee was denied an opportunity to have the order on merits in original adjudication - Subject to assessee depositing Rs.25 lakhs, within a period of three weeks, the appeal before CESTAT shall stand revived - Tribunal shall proceed to hear the merits of appeal after adequate notice to assessee and render its decision on all the aspects so urged and pleaded before it, in accordance with law: HC

Appeal allowed

2018-TIOL-1462-HC-DEL-ST

N AND N CHOPRA CONSLTANTS PVT LTD Vs PR CGST & CE: DELHI HIGH COURT (Dated: July 24, 2018)

Penalty - The assessee is engaged in providing commercial coaching and training services - It was registered as a service tax assessee and it appears to have not paid up his liability, however, he filed its returns stating that there was no service tax liability - The assessee was aware about its service tax liability; despite this knowledge, it filed its returns claiming that no liabilities were attracted - When it smelt investigation and adverse orders, it apparently approached the service tax authorities and deposited the amounts which they were admittedly liable to pay - Such being the case of foreknowledge, itself is an important factor that ought to have been and was taken into account by lower revenue authorities - Hence, foreknowledge lead to imposition of recovery of dues assessed as well as imposition of penalty under Section 78 - The invocation of Section 78 cannot be faulted - Depositing the amount due, by assessee, before issuance of SCN per se does not absolve the assessee of its responsibility to file the returns, since the option of imposing other penalty under Section 76 was exercised - Exercise of such discretion reserving imposition of Section 76 does not call for interference - The assessee's contention with respect to retrospective effect of amendment of Section 78 are unsubstantial as this court in M/s. Bajaj Travels Limited 2011-TIOL-896-HC-DEL-ST held that the amendments are prospective in nature and cannot come to the aid of an assessee for past period: HC

Appeal dismissed

2018-TIOL-1461-HC-KERALA-CX

BHARAT PETROLEUM CORPORATION LTD Vs CCE: KERALA HIGH COURT (Dated: July 16, 2018)

CX - The issue arises in context of pipeline transfers of petroleum products by Refinery, who is the assessee, to various oil marketing companies - On the transfer being effected, at times there is a loss due to various causes occurring on transmission and at other times there is a gain for reason of what remains in pipeline also being received by oil marketing companies - The Refinery was paying the amounts as per the despatch from its refinery - Later, taking note of excess or deficiency as received by oil marketing companies, assessee voluntarily paid up any additional amounts of duty - As far as deficiency is concerned, assessee sought for refund - While accepting the excess amounts paid as duty, the refund was rejected finding no provision to net the quantity transferred on a monthly basis - On the basis of an audit report by Comptroller and Auditor General, the Ministry has taken a decision to permit monthly netting, which permission was granted only after the impugned orders in appeals by Tribunal; which confirmed the orders of first appellate authority - Court was also apprised of fact that the subsequent appeals were remanded by CESTAT itself to the original authority resting on decision taken by concerned Ministry - The questions raised herein be left open and matter remanded back to original authority for re-working the issue as per the permission granted in clarification issued by Ministry: HC

Matter remanded

2018-TIOL-1460-HC-MAD-ST

POWERLOOM WEAVERS CO-OPERATIVE PRODUCTION AND SALE SOCIETY LTD Vs ACC & CE: MADRAS HIGH COURT (Dated: July 12, 2018)

ST - The petitioner is a co-operative society registered under provisions of Tamil Nadu Co-operative Societies Act, 1983 and the challenge in this writ petition is to an order passed by second respondent where the appeal of petitioner has been dismissed on the ground of limitation - Though the Commissioner of Central Excise (A) has no jurisdiction to condone the delay beyond a particular limit, yet considering the fact that petitioner is a cooperative society and an identical issue has been decided in favour of other cooperative societies, petitioner should not be non-suited and the interest of the Society should not be prejudiced on a technical ground - However, the Court makes it clear that this order should not be treated as a precedent by any other person - Delay in filing the appeal petition is condoned and second respondent is requested to take the appeal petition and decide the same on merits: HC

Writ petition allowed

2018-TIOL-1459-HC-ALL-IT

FATEHPUR KSHETRIYA GRAMIN BANK FATEHPUR Vs ADDL CIT: ALLAHABAD HIGH COURT (Dated: July 23, 2018)

Income tax - Sections 37(2), 43B, 80P & 143(1A)

Keywords - additional tax - co operative society - entertainment expenses - gratuity payment

The appellant is a co-operative society, incorporated under the Regional Rural Bank Act. It was carrying out business of banking as per Banking Regulations Act, and hence claimed entitlement to deduction of whole business profit attributable to the banking activity within the meaning of Section 80P(2)(i). During the relevant year, the assessee had filed its return declaring loss of Rs.2,77,10,970/-. The AO while processing the return, made certain adjustments to the total income and charged additional tax of Rs.65,378/-. He noticed that provisions for payment for gratuity amount of Rs.6,34,486/- was made by the assessee, and therefore held that the provisions for gratuity were not admissible deduction u/s 43B. Similarly, the AO also made adjustments of entertainment expenses not admissible u/s 37(2) and charged additional tax u/s 143(1A). The assessee thereafter filed an application u/s 154 requesting the AO to delete the adjustments made u/s 143(1A). However, as there was no mistake apparent on the face of record, the application u/s 154 stood rejected. On appeal, the FAA confirmed the order of AO.

On appeal, the HC held that,

Whether failure to establish payment of statutory dues calls for adjustment in the form of additional income tax - YES: HC

++ it was admitted by the assessee's counsel before the Tribunal that no evidence was furnished by the assessee regarding payment of gratuity and bonus to its employees. Further, from the perusal of provisions of Section 143(1A), it is clear that the additional income tax is chargeable if the loss declared by assessee is reduced as a result of adjustments. Whether assessee is entitled for reduction u/s 80P or not is not a relevant factor for the purposes of charging additional tax u/s 143(1A). When the assessee did not produce any evidence that it had made payment of gratuity and bonus which are statutory dues, the AO was justified in making adjustment of such amounts not paid. Therefore, there is no error in the order passed by ITAT in this regard.

Assessee's appeal dismissed

2018-TIOL-1458-HC-AHM-IT

PR CIT Vs JYOTIBEN G VAGHELA: GUJARAT HIGH COURT (Dated: July 04, 2018)

Income tax - Sections 69A & 153B(1)

Keywords - additional cash payment - short term capital gain - sale of agricultural land - undisclosed profit

The assessee is an individual. Consequent to filing of her return, the case was selected for scrutiny, wherein the AO observed that the sale consideration for agricultural land sold during the period relevant to AY 2011-12 was wrongly shown by assessee at Rs.5,70,000/-, on the basis of statement of the purchaser of land and additional cash payment of Rs.1,30,00,000/-. Therefore, the AO taxed the disclosed profit by way of short term capital gain tax and added the undisclosed sum u/s 69A. Consequently, the assessment order u/s 143(3) r/w/s 153B(1)(b) was passed making the addition of Rs.1,36,69,900/- on account of Section 69A and STCG. On appeal, the FAA deleted both the additions made by AO.

On appeal, the HC held that,

Whether additions u/s 69A can be made in the hands of the seller by simply relying on the statement of the purchaser, that too without offering the seller to cross examine the purchaser - NO: HC

Whether consideration received from sale of agricultural land situated beyond eight km from any Urban Agglomeration, is not taxable as short term capital gains - YES: HC

++ so far as the addition made by AO of Rs.1,30,99,900/- added as undisclosed sum u/s 69A is concerned, it is required to be noted that the same was solely based on the statement of purchaser which was not binding on the assessee, more particularly, when he was not offered for cross examination. The same is not disputed by the counsel for the Revenue. Under the circumstances, both the CIT(A) as well as learned ITAT have rightly deleted the addition made u/s 69A;

++ so far as the deletion of addition made by AO on account of STCG is concerned, it is required to be noted that the land was situated beyond 8 km from any Urban Agglomeration. The assessee produced certificate of Talati cum Mantri of the village in support of his contention. The same had gone uncontroverted and therefore, CIT(A) as well as ITAT deleted the addition made on account of STCG. In respect of the same, it was submitted that earlier also before this Court, the said contention was raised for the first time before CIT(A) who accepted the same without any verification, and accordingly, the Division Bench of this Court while adjourning the matter observed that AO should verify the facts in the context of the Certificate of Talaticummantri produced by the assessee. When the appeal is taken up for further hearing, the Revenue's counsel confirmed the earlier certificate issued by the Talati cum Mantri that the land in question was situated beyond 8 km from any Urban Agglomeration. Therefore, once it was found that the agricultural land was situated beyond 8 km from any Urban Agglomeration, the addition made on account of STCG was not permissible.

Revenue's appeal dismissed

2018-TIOL-86-HC-MAD-GST

EVERSHINE WOOD PACKAGING PVT LTD Vs GST COUNCIL: : MADRAS HIGH COURT (Dated: July 17, 2018)

GST - the petitioner company was unable to upload Form GST TRAN - 1 within the stipulated time frame owing to technical glitches - Consequently, the petitioner was unable to take credit of input tax available to it upon migration to GST - Hence the present writ, seeking appropriate directions in this regard.

Held - The CBIC directed appointment of Nodal Officers to address such grievances faced on account of technical glitches - Hence the commissionerate concerned is directed to appoint Nodal Officers in the State of Tamil Nadu, if not appointed already - Thereafter, the petitioner may approach the jurisdictional Nodal Officer & make representation - The Nodal Officer will take an appropriate decision in this regard within three weeks from making application: HC (Para 2,3,12)

Writ Petition Disposed Of

2018-TIOL-85-HC-MAD-GST

POTHYS Vs PR CCGST: MADRAS HIGH COURT (Dated: July 18, 2018)

GST - the petitoner company was unable to upload Form GST TRAN-1 within the stipulated time frame, on account of some technical error - Consequently, the petitioner was unable to take credit of input tax available to it upon migration to GST - Hence the present writ seeking appropriate directions.

Held - The CBIC directed appointment of Nodal Officers to address such grievances faced on account of technical glitches - Hence the commissionerate concerned is directed to appoint Nodal Officers in the State of Tamil Nadu, if not appointed already - Thereafter, the petitioner may approach the jurisdictional Nodal Officer & make representation - The Nodal Officer will take an appropriate decision in this regard within three weeks from making application: HC (Para 2,3,12)

Writ Petition Disposed Of

2018-TIOL-110-AAR-GST

ULTRATECH CEMENT LTD: AAR (Dated: June 27, 2018)

GST - the applicant company manufactured some goods which were then supplied to authorised dealers & stockists both in and outside Maharashtra - Goods received from other states are also supplied - The applicant enters into agreements on principal-to-principal basis with such dealers - The prices are fixed by the applicant - The applicant also provides discounts to the dealers at rates fixed by itself - Thereby, the applicant seeks to know whether amount paid to dealers & stockists as 'rate difference' after supplying goods to them can be considered when arriving at transaction value u/s 15 of CGST Act - Also whether such amount paid would be allowed u/s 15(1) r/w Section 34(1) of the CGST Act or u/s 15(3) r/w Section 34(1).

Held - the amount paid to authorised dealers on account of rate difference after supplying goods to authorised dealers & stockists cannot be considered when determining transaction value u/s 15 of CGST Act - Further, such amount cannot be allowed u/s 15(1) r/w Section 34(1) of the CGST Act or u/s 15(3) r/w Section 34(1): AAR

Application Disposed Of

2018-TIOL-109-AAR-GST

DINESH KUMAR AGRAWAL: AAR (Dated: June 4, 2018)

GST - the applicant, an individual, is proposing to undertake certain kinds of project-related service contracts - The contracts involve - i) Standalone contract of transportation; ii) composite supply of transportation & insurance; iii) composite supply of loading goods are supplier's premises, transportation in own & hired trucks to project site, unloading & handling of goods at project site & in-transit insurance; iv) supply of such services under Service contract (under split contract )& v) supply of such services under EPC contracts - Hence the applicant seeks to know whether these are classifiable under Service code 9965 & whether is it exempt under Sr No 18 of Notfn No 12/2017-CT(R).

Held - considering the nature of such services, the transportation charges received by the applicant will attract GST even though the applicant is not a Goods Transport Agency - Such services are taxable as works contract u/s 2(119) of the GST Act: AAR

Application Disposed Of