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2018-TIOL-302-SC-CUS-CB + Case Story
CC Vs DILIP KUMAR AND COMPANY: SUPREME COURT OF INDIA (Dated: July 30, 2018)
In case of ambiguity in a charging provision benefit must necessarily go in favour of assessee but the same is not true for an exemption notification - 3-Judge judgment in Sun Export Corporation over-ruled: SC Constitution Bench
Reference answered
2018-TIOL-1494-HC-MAD-IT
CHAMPA DEVI Vs TAX RECOVERY OFFICER: MADRAS HIGH COURT (Dated: July 12, 2018)
Income Tax - Writ - Section 281(1) & 2nd Schedule - Rule 11.
Keywords: Attachment of immovable property - Proper remedy & Writ jurisdiction.
The assessee, an individual was aggrieved by the intimation given by the Tax Recovery Officer, where an immovable property, which was sold by one M/s.NEPC India Ltd. to the assessee was attached and assessee was prohibited from dealing with the property in any manner. The contention of the Tax Recovery Officer was that such property was attached because the transfer in the name of the assessee was null and void in view of Section 281(1) and Rule-16 of the 2nd Schedule to the Income Tax Act, 1961.
However, it was contended by the assessee that she was a bona fide purchaser of the said property for a valuable consideration and as on the date of purchase, there were no encumbrances or charge on the property.
In writ , the High Court held that
Whether if an immovable property of the assessee is attached by the Tax Recovery Officer and the assessee claims that such a property is not liable to attachment, the remedy lies in writ jurisdiction of the court - NO: HC
++ section 281 of the Income Tax Act deals with certain transfers, which are held to be void. Sub-Section (1) of Section 281 states that Where, during the pendency of any proceeding under the Act or after the completion thereof, but before the service of notice under Rule 2 of the Second Schedule, any assessee creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of, any of his assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceeding or otherwise;
++ the Tax Recovery Officer has issued the notice and the assessee has straightaway approached this Court and filed this writ petition. This writ petition is not the proper remedy, which the assessee should have availed. In this regard, it is relevant to point out that the 2nd Schedule to the Income Tax Act contains the procedure for recovery of tax. Under the said Schedule, there is a power conferred on the Tax Recovery Officer for investigation under Rule 11;
++ if any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection. The procedure for such investigation and the manner in which the proceedings to be conducted are enumerated under Rule 11 of the said Rules. Therefore, if the assessee claim is that the property is not liable for such attachment, then the assessee has to make a claim before the Tax Recovery Officer and for such reason, the assessee could not have approached this Court invoking the jurisdiction under Article 226 of the Constitution of India. Therefore, the Court holds that the writ petition is not maintainable. However, considering the fact that the Income Tax Act and Rules framed, especially Rule 11 under the 2nd Schedule, provides for a remedy to the assessee, the assessee is at liberty to avail such a remedy.
Assessee's writ petition dismissed
2018-TIOL-1493-HC-KERALA-IT
CIT Vs ARCHANA TRADING COMPANY: KERALA HIGH COURT (Dated: July 10, 2018)
Income tax - additional income - incriminating materials - sales suppression
The assessee under present case is a Bar attached hotel. During the relevant year, a survey was conducted in its premises and some incriminating materials were recovered. Based on the same, it was found that the assessee had sold Indian Made Forein Liquor in excess of the price shown in its books of accounts and I-T returns. Accordingly, an estimate was made from the documents recovered and the books of accounts, and resultantly turnover suppression was determined on which the tax was directed to be paid.
On appeal, both the FAA as well as the Tribunal relied on a decision of Gujarat High Court in CIT v President Industries - 2002 258 ITR 654, to conclude that when there was no detection of any purchase suppression, there could be no income suppression alleged from sales.
On appeal, the HC held that,
Whether entire sales suppression not recorded in books and unearthed only during the course of search are to be treated as additional income - YES: HC
Whether it is open to a taxpayer to claim further deduction on profits of suppressed sales turnover detected during survey, once return has been filed claiming deduction for entire expenditure - NO: HC
++ the survey found the sales between April 2005 to September 2006 and November 2005 to March 2006 at Rs.2,18,87,352/-. Based on the materials recovered, it was found that the sales for October was very low. This led to an estimation of Rs.19,89,760/-. The figure disclosed on survey was based on loose sheets kept in a file recovered at the time of survey, showing the Bar receipts and night sales of IMFL. Here the purchase being of IMFL in whole-sale, the sale carried out is in retail. More clearly put, the bottles purchased in bulk are opened and liquor served in pegs; the price of which is at the discretion of the Bar hotel. The allegation was that sales were made at a price far more than that disclosed in the books of accounts. Hence on the very same purchase, one sale price was reflected in the accounts while a far higher price was disclosed from the material recovered on survey. This does not require any further investment on purchase and is essentially an allegation of more gross profit having been obtained than that returned;
++ accordingly, the sales turnover of IMFL was estimated at Rs.2,38,77,112/-, in addition to that disclosed in the return which was only Rs.1,94,47,035/-. The difference being Rs.44,30,077/- was taken as income. This is the additional income received as profit on sales, over and above as seen from the accounts. The mere fact that there was no investment made outside the books of accounts would not help the assessee in the present case. As was noticed, the purchase turnover does not alter at all since the purchases can only be made from a State owned Corporation. There is no restriction with respect to the price for which liquor has to be sold by a person holding licence to run Bars under the Abkari Act. The price being variable and the suppression being the actual price for which the liquor was sold; the entire suppression is income. The assessee having filed its return claiming deduction for the entire expenditure incurred, there is no warrant for making further deduction for expenditure or computing the profit for the suppressed sales turnover detected on survey. What was detected on survey was added on as income and the assessment was completed, which cannot be faulted.
Revenue's appeal allowed
2018-TIOL-1492-HC-DEL-IT
SEEMA JAIN Vs ACIT: DELHI HIGH COURT (Dated: July 11, 2018)
Income Tax - Sections 68 & 131.
Keywords: Accommodation entry & Bogus transaction.
The assessee, an individual, filed her return from salary, income from house property and income from other sources for the relevant AY. The assessee, as per his books of accounts, had taken loan from one M/s PTPL and further, had repaid the same without interest after one year. However, in assessment proceeding, the AO invoked the sec 68, to make addition on the ground that the same was a facade and bogus transaction. On assessee's appeal, the CIT(A) upheld the decision of the AO. On further appeal, the Tribunal affirmed the addition.
On appeal, the High Court held that,
Whether a suspected loan transaction of the assessee against which enough material is available to render it as accommodation entry, can be ignored on mere ground that the same was squared up in the next FY - NO: HC
++ the matter could not be decided in favour of the assessee for this reason alone as there was enough material to implicate and hold that the assessee had obtained accommodation entry from M/s. PTPL. Further, the AO had carried out investigation by issuing summons to director of M/s. PTPL to appear in person, but there was non compliance and failure. Also, the AO had recorded statement of the assessee u/s 131 which was ambiguous and had corroborated and affirmed clandestine nature of the transaction. Further, the Tribunal was right and hence, justified in relying on the judgments of the SC in Durga Prasad More and Sumati Dayal, to reject mere paper work and look at the reality behind a facade created to hoodwink and deceive. Merely because the transaction was squared in the next financial year would not establish that the transaction was genuine and not bogus.
Assessee's appeal dismissed
2018-TIOL-1491-HC-MAD-IT
SUJATHA VENKATESHWARAN Vs ACIT: MADRAS HIGH COURT (Dated: July 13, 2018)
Income Tax - Section 277 - Criminal Code of Procedure - Section 245.
Keywords: Congnizant of complaint - Framing of charge & Prosecution under IPC.
The assessee, a deceased person, was the Director of a company in the name and style of M/s Aruna International. During the relevant AY, a return was filed on behalf of the company declaring a loss. The company's P&L account and the balance sheet was duly signed by the assessee and his wife, who is a petitioner here. Thereafter, again a revised return was filed showing a reduced loss. During the assessment proceeding, the AO noted that the company had claimed a payment of brokerage and sub-agency commission in its P&L account with a view to evade tax by reducing its income. The assessee had also claimed a loss from out of the films purchased from M/s. Sujatha Films Private Limited wherein, the assessee and his wife were also shareholders as well as Directors. However, while examining the assessee's clain, the AO found that the said items of expenses and loss were false and bogus. Accordingly, based on the findings made by the AO, the Asst. CIT filed a complaint against the company, its Managing Director and two other Directors. Nevertheless, during the pendency of the said complaint, the assessee died thus, the Asst. CIT proceeded to prosecute the complaint. towards other accused persons. Subsequently, the petitioner had filed an application for discharge u/s 245 of the Cr.P.C. But, the Additional Chief Metropolitan Magistrate dismissed the discharge petition.
Having heard the parties, the High Court held that,
Whether in case of offences committed in relation to Income Tax, if an assessee is prosecuted both under the provisions of Income Tax Act and IPC, the same cannot be said to be a 'case of double jeopardy' - YES: HC
++ the petitioner in this case has subscribed her signature in the P&L account and balance sheet for the relevant AY. This was filed along with the returns and this by itself is a prima facie material at the stage of framing charges and no more material is required at this stage to exonerate the petitioner for the offence u/s 277 of the Income Tax Act. The reason why she signed it and whether at the time of signing the P&L account and balance sheet, she had the requisite knowledge are all matters to be considered at the time of Trial. Including the Indian Penal Code offence along with the offence under the Income Tax Act has also been questioned by the Counsel appearing for the petitioner. For an offence committed in relation to I-T proceedings, the assessee can be prosecuted and tried both under the provisions of the Income Tax Act and Indian Penal Code and there is no bar for the same;
++ taking cognizance of the complaint requires application of mind and the same must also get reflected in the order taking cognizance. In the present case, this Court finds sufficient materials in the complaint as well as the documents filed along with the complaint and also the evidence given by the witnesses and therefore, this Court does not want to interfere with the cognizance taken by the Additional Chief Metropolitan Magistrate on the irregularity pointed out by the Counsel. In the considered opinion of this Court, the irregularity pointed out by the Counsel does not vitiate the entire proceedings. At the time of framing charges, the Additional Chief Metropolitan Magistrate must only see whether there are prima facie materials against the accused persons. Even strong suspicion is a ground for framing charges and the Court need not be satisfied, whether ultimately the case will end up in acquittal;
++ the Additional Chief Metropolitan Magistrate has carefully considered each and every issue that was raised by the petitioner in the discharge petition and has come to a conclusion that there are no grounds to discharge the petitioner. This Court does not find any ground to interfere with the order passed by the Additional Chief Metropolitan Magistrate. Accordingly, this Court confirms the said order passed by dismissing the discharge petition;
++ it is made clear that the findings that have been given both by the Additional Chief Metropolitan Magistrate and this Court, are only based on prima facie materials. None of these findings will have any bearing while the Additional Chief Metropolitan Magistrate decides the case finally and the decision will be made only based on the evidence on record and on the merits of the case without being influenced by any of the findings given while dismissing the discharge petition. The complaint is of the year 1991. It is therefore necessary for this Court to fix a time limit for the completion of the proceedings. The Additional Chief Metropolitan Magistrate is directed to complete the proceedings strictly within a period of four months from the date of receipt of copy of this order.
Case disposed of
2018-TIOL-1490-HC-KOL-IT
PR CIT Vs TONGANI TEA COMPANY LTD: CALCUTTA HIGH COURT (Dated: June 29, 2018)
Income Tax - Plant & machinery - Sale of tea estate - Slump sale
THE assessee company sold a tea estate during the relevant AY. On assessment, the AO noted that in course of such sale, the land & the agricultural part of the business had been given a particular value and that all other assets of the tea estate had been given another combined value. Hence the AO treated such sale to be a slump sale where the entire undertaking was perceived to have been sold without any itemization. On appeal, the CIT(A) considered relevant material & concluded that such sale was not a slump sale and such findings were later upheld by the Tribunal.
On appeal, the High Court held that,
Whether the Revenue can assail factual findings of the CIT(A) before the Writ Court considering such findings were later upheld by the Tribunal - NO: HC
++ on the Commissioner’s detailed inquiry as to the manner in which the sale was conducted, the CIT(A) was satisfied that it was not a slump sale. The CIT(A) referred to several judgments; but at the end of the day, it was a pure consideration on facts and it is such factual finding which has been endorsed by the Appellate Tribunal in the judgment and order dated November 6, 2015. Even though the AO found that a certain value had been attributed to the land and plantation and another value attributed to the plant, machinery, buildings and non-agricultural assets, the CIT(A) found the break-up backed by valuation reports and the like;
++ considering such inquiry of facts conducted by the CIT(A) and that such findings were upheld by the Tribunal, no real question of law arises.
Revenue's appeal dismissed
2018-TIOL-1169-ITAT-MUM + Case Story
RUNWAL PROJECTS PVT LTD Vs DCIT: MUMBAI ITAT (Dated: July 27, 2018)
Income Tax - Section 132 & (4)
Keywords - Project completion method - On-money - Sale of flats - Search & seizure operations.
The assessee company, engaged as a builder as well running shopping malls, filed returns for the relevant AY, declaring its income. It was subjected to search & seizure operations in such AY, upon which applications for booking of flats were found. It was revealed that the assessee sold flats in its projects at rates of upto Rs 38000/- per sq. ft. while a lesser amount had been shown in its books. The assessee later admitted receipt of on-money from customers for sale of flats. Statements of various employees of the company were taken, including those of the managing director, who admitted receipt of on-money over and above registered value of properties. Hence the assessee admitted additional income of Rs 38.06 crores for such AY, which included about Rs 18.82 crores as on-money. On assessment, the AO made addition of such amount on account of undisclosed income. On appeal, the CIT(A) considered the statements recorded during search and other evidences to conclude that the assessee accepted on-money on sale of flats. The CIT(A) also noted that the assessee's employees admitted receipt of such amount outside regular books of account & did not intend to disclose the same. The CIT(A) also held that the assessee failed to admit such income in its returns without any valid retraction. Hence the assessee's claims that income was admitted under coercion, were rejected, as was its claims that such undisclosed income was taxable in year of completing the project. Hence the present appeal.
On appeal, the Tribunal held that,
Whether addition made of on-money received from sale of flats can be quantified by applying average rate for all flats sold in the project without there being any evidence unearthed during search operations - NO: ITAT
Whether addition of on-money received has to be determined based on evidence found during search & seizure operations - YES: ITAT
++ there is no dispute with regard to the fact of receipt of on-money from sale of flats. This fact has been admitted by the assessee including its director in the statement recorded during the course of search. This fact is also supported by incriminating material found as a result of search. During the course of search, the Department has found application form, booking form of certain flats as per which the rate charged for sales is higher than the amount recorded in the books of account. Accordingly, undisclosed income of Rs 18,82,59,020/- has been quantified from sale of 21 flats in project Runwal Elegante. The assessee has filed paper book containing copies of application for booking found during search. On perusal of documents filed by the assessee, we find that in 4 cases, the rate charged by the assessee and recorded in the books of account is much higher than or equal to the amount recorded in the incriminating material found in the form of application for booking. We further observe that the AO has arrived at average rate of Rs.21,400 per sq.ft. and then applied such rate to 21 flats and compared the rate as per books of account of the assessee recorded in ERP system to arrive at a difference of Rs.18,82,59,020. While doing so, the AO has determined average rate as per books of account by dividing total sale consideration from the saleable area of the flat to arrive at average rate per sq.ft., whereas while determining undisclosed income average rate has been arrived at on the basis of total carpet area of the flat. There is a lacunae in the quantification of undisclosed income inasmuch as that by adopting average rate of Rs.21,400 per sq.ft. and applying such rate uniformly to all flats without any evidence found as a result of search. In fact it is the case of the assessee also. The assessee never disputed the fact of receipt of on money; however, disputed the manner in which the undisclosed income has been quantified. Therefore, we are of the considered view that the AO was incorrect in quantifying undisclosed income by adopting average rate and then applying such rate to all flats sold in the project without any evidence found as a result of search. This finding of ours is supported by the decision of ITAT, Mumbai Bench "D" in assessee's group company, M/s Runwal Homes Pvt Ltd, wherein under similar set of facts, where the assessee is also a party to the search proceedings, after considering relevant materials, the co-ordinate bench held that on-money receipt should be worked out on the basis of evidence found as a result of search;
Whether addition of on-money arising from sale of flats & received in a particular AY can be made in the same AY, where assessee follows the project completion method for recognition of revenue - NO: ITAT
++ in this view of the matter and respectfully following co-ordinate bench decision in the case of Runwal Homes Pvt Ltd, we are of the considered view that the AO was erred in quantifying undisclosed income by taking average rate of Rs.21,400 per sq.ft. and applying such rate to 21 flats without any evidence found as a result of search. Hence, direct the AO to restrict the quantification of undisclosed income to the extent of incriminating material found as a result of search. We further direct the AO to delete addition made towards on-money received from sale of flats in the assessment year and make addition in the year in which the project has been completed, since the assessee is following project completion method for recognition of revenue. Hence, we set aside the issue for the limited purpose of quantification of undisclosed income on the basis of incriminating material found as a result of search and to make addition in the year in which project is complete.
Assessee's appeal partly allowed
2018-TIOL-2352-CESTAT-MUM
GENERAL MOTORS INDIA LTD Vs CCE & ST: MUMBAI CESTAT (Dated: March 13, 2018)
CX - Appellant is a manufacturer of automobiles and imports numerous parts - on physical verification of inventory, it was noticed that there was shortage of parts on which CENVAT credit was availed - appellant informed the department about the same and also pointed out that the shortages noticed were 0.28% of the total CENVAT credit availed inputs and that there was no removal of inputs as such from factory premises - Demand notice was issued for recovery of the alleged CENVAT credit wrong availed - appeal against confirmation of demand.
Held: Apex Court has in the case of Maruti Udyog Ltd. - 2015-TIOL-326-SC-CX held that any demand on shortages of inputs would not arise if there was no allegation of clandestine removal of inputs - in the case in hand, the ratio will apply in full force as there is no allegation in the SCN that the inputs which was reported as ‘found short' in the factory premises were removed clandestinely - following the said law as settled by the Supreme Court, impugned order set aside and appeal allowed: CESTAT [para 4]
Appeal allowed
2018-TIOL-2351-CESTAT-MAD
SIEMENS BUILDING TECHNOLOGIES PVT LTD Vs CCE: CHENNAI CESTAT (Dated: February 21, 2018)
ST - Assessee is engaged in manufacture of Electronic Safety System and Accessories - During audit, it was noticed that assessee received composite order for supply and installation and commissioning of electronic security and safety systems from their customers - The assessee had two patterns of billing depending upon the order placed by customers - They manufacture electronic safety system and install the same for customers wherein charges are raised compositely and the assessee discharges central excise duty on the whole amount raised in invoices - In certain instances, based upon purchase orders, assessee purchases the electronic safety system and install them for the customers - In this pattern the value of electronic safety system being a bought out item is shown separately and the installation charges are also shown separately - The assessee discharges service tax on installation charges collected separately under 'Erection, Commissioning and Installation' services - Department views that assessee is also liable to pay service tax on erection, commissioning and installation services provided on composite charges collected in instances where assessee has manufactured and installed the electronic safety system - The dispute is in instances where the invoices show composite charges for the sale of manufactured goods and the installation of the same - Undisputedly, assessee has discharged central excise duty on the whole amount thus including it in the transaction value though not segregated in the invoices - It is assessee's case that when the goods are manufactured and thereafter installed in the customers' premises, the predominant activity is manufacture and installation is only incidental to the activity of manufacture - The department has confirmed the demand of service tax on the whole composite amount raised in the invoices - This cannot be as it ignores the manufacturing activity, a taxable event, completely - The assessee has discharged central excise duty on the whole amount - This being so, the differential demand of service tax confirmed on the basis that for a short period of three months i.e., from 8.12.2008 to 28.2.2009, the rate of service tax being higher than excise duty appears to be totally unsound application of fiscal statutory provisions - It does not find sustenance either under Central Excise Law or the FA, 1994 - In assessee's own case, for the different period the Tribunal has set aside the demand - Impugned order cannot sustain, same is set aside: CESTAT
Appeal allowed
