2018-TIOL-1518-HC-MAD-ST
UF MEDIA PVT LTD Vs ACGST & CE: MADRAS HIGH COURT (Dated: July 19, 2018)
ST - The Department raised demand for Swachh Bharat Cess and Krishi Kalyan Cess u/s 73(2) of the Finance Act 1994 - Besides, demand for interest u/s 75 was raised with imposition of penalty on grounds that the assessee had erroneously availed Cenvat credit under Rule 14 of CCR 2004 r/w Section 73(2) of the Act - The assessee filed the present writ claiming to have produced the original documents at the time of personal hearing and that copies of such documents had been submitted as well.
Held - An assessee will not benefit from not producing original documents only to suffer an adverse order - Hence the assessee deserves one more opportunity to produce before the adjudicating authority, the original copies of invoice, payment details & proof of payment or any other valid documents for availment of Cenvat credit: HC
Case remanded
2018-TIOL-1517-HC-MUM-IT
PR CIT Vs FARDEEN KHAN: BOMBAY HIGH COURT (Dated: July 25, 2018)
Income Tax - Sections 2(47)(v) & (vi) & 45(2) & Transfer of Property Act, 1887 – Section 53A.
Keywords: Agricultural land - Capital gains - Conversion to non-agricultural land - Development agreement - Stock in trade - Transfer of land.
The assessee along with his father had during the relevant financial year entered into property development agreement with GPL for development of land and construction of 287 villas therein. The said land was owned by assessee and his father in the ratio of 75% and 25% respectively. A.O. observed that as per the said development agreement, an amount was paid by the GPL to the land owners as non-refundable advance/deposit by the developer. In turn, an irrevocable power of attorney was given by the assessee to GPL giving all the powers of obtaining various permissions, commencement of construction, and construction of all infrastructures, leveling of property to construct villas and to sell the villas. The AO stated that the assessee had not offered any capital gains on the above transfer of land to GPL. AO held that pursuant to the DA and power of attorney, assessee transferred land to GPL and hence, provisions of section 2(47)(v) and section 2(47)(vi) were attracted. AO considered Rs.55 crores stated in DA as full value of consideration for transfer of the land to GPL. The Assessing Officer noted that date of conversion of land into stock in trade was 01.04.2007 as claimed by assessee and held that if the conversion and sale or transfer is in the same financial year, the tax liability will arise in that year. Thus, addition was made by AO on account of capital gains earned by assesse.
CIT(A) upheld the addition made by AO. However, CIT(A) allowed deduction on account of cost of acquisition and cost of improvement from the alleged sale consideration of Rs. 55 crores. CIT(A) observed that assessee had shown the land in Wealth Tax returns u/s.2(ea) (v) of Wealth Tax Act, 1957. This establishes that land was not converted into 'stock-in-trade' initially and contention of conversion was an afterthought. CIT(A) also confirmed the action of A.O. holding that there was transfer of right within the meaning of section 2(47). On further appeal by the assessee, the Tribunal allowed the appeal and ser aside the decision of the CIT(A).
On hearing the matter, the High Court held that,
Whether when date of conversion of capital assets into stock-in-trade was not properly considered by the Tribunal, then matter merits referral to relevant authorities to determine the date of such conversion independently - YES: HC
++ so far as Questions (d), (e), (f) and (g) are concerned, there is no occasion in the present proceedings to examine the correctness of the date and value of conversion of capital assets into stock-in-trade as taken by the Tribunal. This, in view of our upholding the finding of the Tribunal that no transfer had taken place in the previous year relevant to the Assessment Year 2008-09. It is, therefore, made clear that the year in which the authorities hold transfer of land as stock-in-trade has taken place, the date of conversion of capital assets into stock-in-trade and also its value at that point of time would be examined by the Authority, independently of the finding on this issue by the Tribunal. Not entertaining this Appeal, should not be deemed to be taken as approving the order of the Tribunal with regard to the date and valuation of the conversion of the capital assets into stock-in-trade;
++ the Assessment Year, when the authority hold that the transfer/ sale of the land has taken place, the authorities in that year would determine independently of the order of the Tribunal as well as our order, the date of conversion of capital assets into stock-in-trade and its value. This particularly so, as Questions (d), (e), (f) and (g) have not been entertained in the present facts, as they are academic. However, they could arise in some subsequent years and, if they do arise, while assessing the assessee for AY in which it holds transfer has taken place, the authorities will determine the date and value of conversion of capital assets into stock-in-trade, after considering the assessee's submission.
Case remanded
2018-TIOL-1516-HC-KAR-CX + Case Story
CCE, C & ST Vs MAHINDRA REVA ELECTRIC VEHICLE PVT LTD: KARNATAKA HIGH COURT (Dated: July 18, 2018)
CX - A manufacturer, who exports the final products which are exempt from duty, under bond and letter of undertaking, in terms of rule 19 of CER, 2002, can claim refund of accumulated CENVAT credit in terms of rule 5 of CCR, 2004 - Revenue appeals dismissed: High Court [para 10 to 15]
Appeals dismissed
2018-TIOL-1515-HC-AHM-CX
COMMISSIONER Vs HINDALCO INDUSTRIES LTD: GUJARAT HIGH COURT (Dated: July 26, 2018)
CX - Revenue is in appeal against impugned order by which Tribunal has reduced the penalty imposed upon Director from Rs.5,00,000/- to Rs.2,00,000/- - Considering the fact that Tribunal has reduced the penalty, while exercising discretion and even considering the recent Circular issued by Central Board of Indirect Taxes and Customs dated 11.07.2018, by which it has been decided that the pending Appeals below tax limit i.e. Rs.50,00,000/- before the High Court may be withdrawn, appeal dismissed on the aforesaid ground alone: HC
Appeal dismissed
2018-TIOL-1514-HC-MAD-CX
VIJAY AQUA PIPES PVT LTD Vs ACCE: MADRAS HIGH COURT (Dated: July 24, 2018)
CX - A private complaint was filed under Section 200 of Code of Criminal Procedure against the petitioners/accused - The officer during surveillance, inspected a truck carrying PVC Pipes - On interrogation, it was found that the driver of the vehicle had an instruction to unload the same at the first accused company - The officer after recording the statement of driver of truck, proceeded to M/s Mathura Polymers (pvt) Limited, Gummidipoondi and verified the physical stock of finished goods i.e. PVC pipes and also recovered some incriminating documents namely chits showing clearance of PVC pipes made to the first accused company - The officers undertook a thorough search in registered office of the first accused company and recovered two files containing invoices for supply of PVC pipes to the first accused - According to respondent, they had identical numbers and all the invoices were in respect of dispatch of PVC pipes to consignees and that the PVC pipes mentioned in invoices were clandestinely manufactured and supplied to the consignee, without accounting the same in statutory records - The complaint was launched with approval / sanction and said sanction/approval order given by Chief Commissioner has been filed along with the complaint - Therefore, the argument advanced by petitioners that the prosecution has been launched without any approval/sanction from the concerned authority cannot be accepted - Whether the said sanction/approval is in accordance with Central Excise Act and Rules is a matter for trial, which cannot be decided in instant petition filed under Section 482 of Code of Criminal Procedure.
Another contention of petitioners is that the complaint has been filed before Additional Chief Metropolitan Magistrate, Egmore, Chennai, when the factory of the first respondent is located at Gummidipoondi - This contention of petitioners cannot be accepted for the simple reason that the respondent/complainant had visited the registered office of the first accused company situated at New No.1, Old No.62, First Link Street, Raghavan Colony, Jaffarkhanpet, Chennai-83 and conducted a search on 24.02.1999 and also recovered certain incriminating documents, leading to issue of summons to the accused and also to launch a criminal complaint against them - Therefore, it cannot be said that the Additional Chief Metropolitan Magistrate, Egmore, Chennai does not have any jurisdiction to entertain the complaint: HC
Petition dismissed
2018-TIOL-1196-ITAT-AMRITSAR
HPCL MITTAL ENERGY LTD Vs ADDL CIT: AMRITSAR ITAT (Dated: May 7, 2018)
Income Tax - Sections 255(4) & 271(1)(c)
Keywords - Carry forward of business loss - Concealment of income - Inaccurate particulars
The assessee-company filed return for the relevant AY. It later filed revised returns. On assessment, the AO disallowed business losses of Rs 5.68 crores claimed by the assessee. The AO also alleged non-declaration of interest income of Rs 23.61 crores from deposits with banks and with a related company, namely M/s HCPL. The AO also alleged non-declaration of interest income of Rs 73 lakhs on FDRs given as security to the trial court. The AO also imposed penalty u/s 271(1)(c) for such discrepancies found. On appeal, the CIT(A) confirmed such additions and disallowances and later also by the Tribunal. The assessee was served penalty notice u/s 274 for concealment of particulars of income & furnishing inaccurate particulars of income. Further, penalty proceedings were also initiated against the related entity on grounds of similar additions and disallowances being made for the relevant AYs. All the penalty orders against both the assessees were confirmed.
Subsequently, the members of the Tribunal had a difference of opinion on whether penalty could be levied if the satisfaction of the AO while initiating penalty proceedings u/s 271(1)(c) is with regard to alleged concealment of income by the assessee but such penalty was imposed for concealment of income & furnishing inaccurate particulars of income.
On reference, the Tribunal held that,
Whether carry forward of business losses during the relevant AY is to be construed as concealment of particulars of income - NO: ITAT
Whether the disallowance of such carry forward of losses comes within the purview of furnishing inaccurate particulars of income - YES: ITAT
++ admittedly, the two expressions 'concealed/furnished inaccurate particulars of income' have neither been defined under the Act nor the General Clauses Act. In such a scenario, their popular meanings have to be seen and understood. In common parlance, the word 'conceal' means 'to hide' and the word 'particulars' is understood as 'details'. Accordingly, the expression 'concealment of particulars of income' means 'hiding the details of income'. Concealing the particulars of income or hiding details of income, ergo, pre-supposes the existence of some income, which has been hidden or not been shown by the assessee. It may include not reporting transaction of sale of property and consequently hiding capital gain. It may also include making sales outside the books of account and, resultantly, hiding profit earned from such sales. It may also include earning of some interest income but hiding it by not declaring it. The second expression is 'furnishing of inaccurate particulars of such income.' 'Inaccurate' means not accurate or correct. 'Inaccurate particulars' of income means the 'details of income which are not correct'. This would embrace situations where the total income goes under-reported because of the assessee furnishing wrong details. It may include claiming certain deductions of expenses which are not legitimately due to the assessee. It may also include claiming certain exemptions of income which are otherwise not available as per law. Both the expressions, viz., 'concealment of particulars of income' and 'furnishing of inaccurate particulars of such income' ultimately lead to under-reporting of income. Whereas the former connotes under-declaration by directly hiding the details of some items of income, the latter encompasses under-declaration of income indirectly, that is, by furnishing details in such a way which ultimately results in not reporting correct income, but such under-reporting is otherwise than by means of direct hiding. The nitty-gritty of the matter is that whereas 'concealment of particulars of income' implies not at all declaring a particular income, which eventually results in under-declaration of income, 'furnishing of inaccurate particulars of income' implies giving details of some items of income/expenses, but, claiming them exempt/deductible, fully or partly, which is actually not the case and such action of the assessee results in under-declaration of total income;
++ regarding disallowance of business loss, it is apparent that the assessee computed business loss at Rs 5.68 crore by incurring certain expenses. Instead of capitalizing such expenses because of the business not having been set up during the year, the assessee sought to carry it forward for set off in subsequent years. It is manifest that in this disallowance of business loss, there is no income which was sought to be directly hidden by the assessee by not offering its particulars. In fact, it represents certain expenses which the assessee sought to carry forward in the shape of business loss for set off against the income of the succeeding year. By no standard, the action of the assessee in such carry forward of business loss can be characterized as 'concealment of particulars of income'. Rather, this disallowance of business loss falls within the purview of the expression 'furnishing of inaccurate particulars of income.' Facts of HPCL Mittal Pipeline Ltd. are similar for the A.Y. 2008-09;
Whether the reduction in amount of interest from the expenditure incurred during construction can be categorized as concealment of particulars of income - NO: ITAT
++ it is vivid that interest earned on term deposits with banks and HPCL and also on deposits in banks as security given to the Trial court falls in the category of 'furnishing of inaccurate particulars of income.' The facts concerning such interest income in other three appeals are mutatis mutandis similar inasmuch as the assessee reduced the amount of similar interest from the 'Expenditure during construction period' by specifically reducing it from the costs incurred and showing such treatment on the face of the balance sheets. The action of the assesses in reducing the amount of interest from the expenditure during construction period can't be characterized as 'concealment of particulars of income'. Rather, it falls within the purview of the expression 'furnishing of inaccurate particulars of income';
Whether making additions to an assessee's income is grounds enough to impose penalty u/s 271(1)(c) - NO: ITAT
Whether the opinion of the AO as to concealment of particulars of income or furnishing inaccurate particulars of such income must be seen with reference to the day on which penalty is imposed & later events like confirmation or deletion of additions & disallowances are immaterial - YES: ITAT
++ at this juncture, it is pertinent to note that penalty proceedings are distinct from the assessment proceedings. Merely because an addition has been made or confirmed in the assessment, does not, per se, lead to imposition of penalty u/s 271(1)(c). Penalty proceedings are separately initiated on conclusion of the assessment, in which the assessee is given an opportunity to explain his position qua the imposition of penalty on the additions/disallowances made in the assessment. The AO considers the explanation of the assessee and then decides if the penalty is imposable or not. Further, the opinion of the AO as to concealment of particulars of income or furnishing of inaccurate particulars of such income has to be seen with reference to the day on which he initiates/imposes penalty. Later events, like confirmation or deletion of additions/disallowances in quantum appeals, are irrelevant in this context;
++ coming back to the factual position obtaining in these cases, it is seen that the penalty orders have been vitiated on two counts. First, the AO initiated penalty with a specific and clear-cut charge of 'concealment of particulars of income' in all the penalty notices, however, the assessees have been found guilty in all the penalty orders on the uncertain and vague default of 'concealment /furnishing of inaccurate particulars of income'. Second, the clear-cut or certain charge of 'concealment of particulars of income' levied in all the penalty notices is wrong. The actual default is 'furnishing of inaccurate particular of such income', which also renders the penalty orders invalid. Hence the penalty was wrongly imposed and confirmed in all the four appeals under consideration.
Assessee's appeals allowed
2018-TIOL-1195-ITAT-AHM
AADINATH ORNAMENTS PVT LTD Vs ITO: AHMEDABAD ITAT (Dated: May 11, 2018)
Income Tax - Section 41(1).
Keywords: Cessation of liability - Concession in loan & Undue benefit of deduction.
The assessee-company filed return for the relevant AY. During the assessment proceedings, the AO noticed that the assessee had taken a loan from the OBC Bank and the total outstanding amount including principal amount and interest was around Rs.12.41 Cr. The Bank had settled the outstanding arrears for Rs.9.22 Cr and the assessee was given a concession of around Rs 3.19 Cr. Such concession amount comprised of interest of around Rs 1.08 Cr and principal amount of around Rs 2.12 Cr. The assessee has shown the waiver of interest as interest income and the waiver of principal amount had directly being credited in the balance-sheet as reserve and surplus.
During the assessment proceeding, the AO observed that though the concession on account of interest received by the assessee had shown as interest income but the concession received in principal amount had been directly taken to capital reserve account not offered for taxation purposes. The AO further added that the loan taken by the assessee was a liability and the same had ceased to be a liability when the bank had agreed for settlement by reducing the actual amount of loan and thereby the assessee got the benefit of cessation of liability under the provision of section 41(1). Therefore the AO made addition of the said amount to the income of the assessee. On assessee's appeal, the CIT(A) confirmed the order passed by the AO and dismissed the appeal preferred by the assessee.
On appeal, the Tribunal held that,
Whether any cessation of liability can be brought under tax net even when such liability was not debited to the Profit & Loss account in any previous year - NO: ITAT
++ for the purpose of taxing any income the assessee should have claimed the expenditure which would be in the nature of reduction or allowance. Obtaining loan does not amount to any claim of reduction or expenditure on the part of the assessee. The interest accruing on such loan would constitute expenditure as claimed by the assessee by way of deduction and offered to tax. The assessee in this particular case has been given a concession amount of Rs.3,19,86,740/- comprises of interest of Rs.1,07,72,299/- and principal amount of Rs.2,12,14,441/-. The interest amount of Rs.1,07,72,299/- was debited to Profit & Loss account and the principal amount of Rs.2,12,14,441/- was shown as outstanding liabilities and therefore not debited to the Profit & Loss account which is now being written back and for which no benefit had been taken and has shown as revenue and surplus and therefore not liable to tax;
++ the ratio laid down in the case of Jt.CIT vs. Bisani Zinc Ltd. is squarely applicable to the instant case, where it was held that ".....It is a sine qua non, for bringing a remission or cessation of liability to tax under section 41(1), that "an allowance or deduction has been made in the assessment for any year" for loss, expenditure or trading liability in respect of which such remission or cessation has been made. A fortiorari, if an expenditure, for whatever reasons, has not been allowed as a deduction in any previous year and the liability in respect of such expenditure ceases in the current previous year, such a cessation of liability, in our considered view, cannot be brought to tax in the current previous year. We are further of the considered view that the reason of such an expenditure not being allowed as a deduction is not material. Clearly, section 41(1) seeks to reverse the undue benefit of deduction given to the assessee in respect of a liability which eventually turns out to be non-existent but when no such benefit of deduction is anyway made available to the assessee, there cannot be any question of reversal of such a non-existent or undue benefit of deduction. We are, therefore, of the considered view that deduction in respect of disputed amount of Rs.58,80,502 never having been allowed by the Assessing Officer, cessation of liability of this amount cannot result in any tax liability in the hands of the assessee....." Taking into consideration the entire aspect of the matter and the ratio of the judgement discussed, we hold that the order passed by the CIT(A) cannot sustain and we therefore set aside the same and allow the appeal preferred by the assessee.
Assessee's appeal allowed
2018-TIOL-93-HC-CHHATTISGARH-GST
DHAMTARI KRISHI KENDRA Vs UoI: CHHATTISGARH HIGH COURT (Dated: May 14, 2018)
GST - The petitioner, a dealer, was unable to upload the Form GST TRAN-1 within the stipulated time frame, on account of some system 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 petitioner is directed to approach the jurisdictional Nodal Officer and make representations - The Nodal Officer would look into the matter and facilitate uploading of Form GST TRAN-1 - Also, if the petitioner is found to be unable to upload Form GST TRAN-1 for no fault of its own, then the Nodal Officer may also enable the petitioner to take credit of input tax available on migration to GST: HC (Para 1,2,3,7)
Writ petition disposed of
2018-TIOL-92-HC-MAD-GST
CALIBRE INDUSTRIES Vs PR CGST & CE: MADRAS HIGH COURT (Dated: July 24, 2018)
GST - The petitioner, a dealer, was unable to upload the Form GST TRAN-1 within the stipulated time frame, on account of some system 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 jurisdictional GST Commissionerate is directed to appoint a Nodal Officer if not appointed already - The petitioner is directed to approach the jurisdictional Nodal Officer and make representations - The Nodal Officer would look into the matter and facilitate uploading of Form GST TRAN-1 - Also, if the petitioner is found to be unable to upload Form GST TRAN-1 for no fault of its own, then the Nodal Officer may also enable the petitioner to take credit of input tax available on migration to GST: HC (Para 2,3,12)
Writ petition disposed of
2018-TIOL-91-HC-KERALA-GST
SMARTUFF GLASS LTD Vs UoI: KERALA HIGH COURT (Dated: July 24, 2018)
GST - The petitioner, a dealer, was unable to upload the Form GST TRAN-1 within the stipulated time frame, on account of some system 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 petitioner is directed to approach the jurisdictional Nodal Officer and make representations - The Nodal Officer would look into the matter and facilitate uploading of Form GST TRAN-1 - Also, if the petitioner is found to be unable to upload Form GST TRAN-1 for no fault of its own, then the Nodal Officer may also enable the petitioner to take credit of input tax available on migration to GST: HC (Para 1,5,6)
Writ petition disposed of
