2019-TIOL-118-HC-MUM-IT
PR.CIT Vs GOLDFILLED MERCANTILE COMPANY : BOMBAY HIGH COURT (Dated: January 08, 2019)
Income tax - Section 271(1)(c)
Keywords - bonafide claim - capital gains - levy of penalty
The assessee, a partnership firm, had sold certain immovable property during the relevant assessment year giving rise to capital gain. The case of assessee was that under a will of one of the partners of the firm, a portion of such sale proceeds was to be given to three sisters in equal proportion of Rs. 4.5 Crores each. The firm actually paid such amount inclusive of tax payable on such receipt to the sisters. The assessee therefore claimed deduction of such payments while offering the receipts by way of capital gain in the return filed for the said assessment year. The AO did not accept the assessee's contention and insisted that the entire capital gain should have been offered by the firm itself. The assessee in such circumstance argued that in such case the tax paid on the amounts offered to the sisters may be given to the credit of. The AO accepted such requests. It was in this background that the AO initiated penalty proceeded for their declaration of capital gain by the assessee. On appeal, the Tribunal deleted the penalty.
On appeal, the HC held that,
Whether rejection of a bonafide claim of taxpayer does not automatically pave the way for levy of penalty u/s 271(1)(c) - YES: HC
++ the Tribunal has deleted the penalty on the ground that assessee had putforth a bonafide claim making full disclosures and no question of penalty would therefore be arise. This Court is in agreement with the view of the Tribunal. The Assessee had raised a claim giving full particulars thereof. Even if such claim was found to be not sustainable, the penalty in any case could not have been levied since the assessee had raised a bona fide claim.
Revenue's appeal dismissed
2019-TIOL-117-HC-KERALA-VAT
TALASH PLASTOPACKS Vs STATE OF KERALA : KERALA HIGH COURT (Dated: August 30, 2018)
Kerala Value Added Tax Act, 2003- Sections 6(1)(a) & 94
Keywords- HSN number- residuary entry
The assessee company engaged in the business of manufacturing containers, trays, bowls and other plastic materials, returned the turnover of cups @ 20% & the containers @ 5%. The Clarificatory Authority also concurred with the stand of the assessee. However, in the Local Audit Report, the Accountant General pointed out that all packing materials of the assessee need to be taxed @ 20% as they belonged to HSN Code 3923.90.90, in consonance with an amendment in the KVAT Act. Consequently, the Commissioner initiated suo motu proceedings against the assessee u/s 94(7) & an order was passed against the assessee. So aggrieved, the assessee challenged the order and raised preliminary objections on the ground of jurisdiction, wherein it claimed that the Commissioner of Commercial Taxes & not Commissioner of State Taxes had authority to pass orders under the KVAT Act. Also, tax rate was challenged.
On hearing the appeal, the HC held that,
Whether mere change in nomenclature of Commissioner can deprive him of already existing jurisdiction to deal with cases under the KVAT Act- NO: HC
Whether Commissioner can invoke suo motu power & take cognizance on being informed about an irregularity in taxation- YES: HC
Whether tax applicable to the products which are not assigned any specific HSN number in Entry 174 of the Act & also are not mentioned in SI No. 3 or 3A of Sec 6(1) are to be taxed under the residuary entry- YES: HC
++ The HC first dealt with the preliminary objections, since if it found favour with them, the merits need not be looked into. The order impugned is styled as one passed by the Commissioner of State Taxes under the Department of State Goods and Services Taxes which is only a bonafide mistake, according to the HC. By the time the Commissioner invoked the power under Section 94(7) of the KVAT Act there was a change in the name of the department itself for reason of the Goods and Services Tax Act having come into force. It was an admitted fact that the very same officer who was notified under the GST Act as Commissioner of State Taxes was the person notified as Commissioner of Commercial Taxes under the KVAT Act. In fact the order had been signed in his capacity as Commissioner, without any reference to the nomenclature by which the taxes department is known; The HC also noticed that the appellant had not raised any preliminary objection before the authority in so far as the lack of jurisdiction and the appellant themselves accepted that though the notice was issued by the Commissioner of State Taxes, the authority was acting under the provisions of the KVAT Act which is enabled by a proper notification issued under the KVAT Act. The HC said this, not to confer a non existent authority, on the Commissioner and were quite conscious that; power, if not specifically conferred cannot be assumed merely by acquiescence, as argued by the Counsel. The power existed as found by HC, sourced from Section 174 of the K.G&S.T Act, 2017 and acquiescence was only in so far as not objecting to the Commissioner of State Taxes, of the new regime, having been shown in the notice as invoking the powers under the old regime. The HC hence rejected the preliminary objection raised by the appellant on the question of jurisdiction.
++ The HC did not think that the Commissioner was at all influenced by the LAR. However, there was nothing wrong in the Commissioner having invoked the powers on the basis of the irregularity noticed in the LAR. The Commissioner had also considered the issue independently and had not adopted the view of the audit party. In fact, the audit party was of the opinion that the tax should be levied at the rate of 20% as levied on items coming under Serial No.3 of the Table appended to Section 6(1)(a) of the KVAT Act. The Commissioner had found that the items, which were the subject matter of clarification, would not be covered under the said entry and would be taxable at the rate applicable for residuary items. The HC did not think that any contention raised on the Commissioner having acted on the dictates of the audit party, could be sustained. It was perfectly in order for the Commissioner to have noticed the objection raised by the audit party and invoked the suo motu powers and after hearing the parties found the taxation to be permissible under the residuary entry. It was trite that the suo motu powers could be invoked by oneself or on an intimation of an irregularity, brought to the notice of the Authority, conferred with such powers, by any person concerned with the subject matter of the issue.
++ As against this, in Entry 174 of the Third Schedule-List A of the KVAT Act, the main Heading is not accompanied or aligned with an HSN number. It had also to be observed that the specific goods which are placed before us for consideration being containers, trays and bowls made of plastic were not included either under Sl.No.3 or 3A of the table under Section 6(1) of the KVAT Act. The specific articles dealt with here, ie: containers, trays and bowls as also cups; the latter of which are taxable at rates seen from the Table under Section 6(1)(a) of the KVAT Act could be included only under the eight digit heading: 3923.90.90: "Other" going by the above extracted Table under the Customs Tariff Act. It was hence relevant that the eight digit HSN Code of 3923.90.90 as found in the Customs Tariff Act was not specifically aligned or shown as against any of the subentries under Entry 174. Hence Entry 174 by its heading could not be understood to have included all packing materials as had been included under heading 3923 of Customs Tariff Act for the simple reason that the heading was not aligned to the HSN Code in the KVAT Act; The HC also found that the Commissioner had correctly found that the said goods did not come under either Sl.No.3 or 3A. The HC had extracted those goods which come under Sl.No.3 or 3A, which did not include either of the goods now arising for HC's consideration in the appeal; being containers, trays and bowls. The said commodities did not also fall under Entry 174 packing materials and hence necessarily the same had to be taxed under the residuary entry of SRO 82/2006.
Assessee's appeal dismissed
2019-TIOL-110-HC-MUM-IT
DR NITIN LAXMIKANT LAD Vs ACIT: BOMBAY HIGH COURT (Dated: January 9, 2019)
Income tax - Sections 153A & 271(1)(c) Explanation 5
Keywords - additional income - incriminating material - levy of penalty
THE assessee, an individual, was subjected to search & seizure operation during the relevant year and certain documents were seized. In his statement recorded during search, the assessee declared certain additional income not previously declared in the return filed. In response to notice u/s 153A also, the assessee filed his return declaring additional income. The assessment was therefore carried out by the AO u/s 153A accepting the declared income, and it gave rise to penalty proceedings u/s 271(1)(c).
On appeal, the CIT(A) reversed the penalty orders primarily on the ground that during search, no incriminating material or documents were found giving rise to the escaped income and under such circumstances, according to the CIT(A), penalty could not have been imposed. On further appeal, the Tribunal restored the penalty imposed by AO by referring to the Explanation 5A below Section 271(1).
On appeal, the HC held that,
Whether additional income found during search which was accepted by the assessee to be representing his previous year's income, will necessarily lead to penal consequences - YES: HC
++ by virtue of Explanation 5 to Section 271(1)(c), where any income based on any entry in books of account or other documents or transactions is found and the assessee claimed that such entry in the books of account or transactions represents his income from any previous year, then notwithstanding that the income declared in the return filed for a period under consideration is accepted, the assessee would still be liable to penalty u/s 271(1)(c). In the present case, going by the order of the Tribunal, this is precisely what has happened. By virtue of this explanation, therefore, penalty could be levied and the fact that in the assessment order, no additional income is assessed in assessment in response to the notice u/s 153A, would be of no consequence. The contention that there was no incriminating material found during such search which related to the income so declared, cannot be accepted in view of the clear findings of facts from the Tribunal.
Assessee's appeal dismissed
2019-TIOL-109-HC-MUM-IT
SAMSON MARITIME LTD Vs DCIT: BOMBAY HIGH COURT (Dated: January 3, 2019)
Income Tax - Sections 147 & Chapter XIIG.
Keywords - Core business activity - Income escaped assessment - Reassessment proceedings - Tonnage Tax Scheme.
THE assessee a limited company, engaged in providing offshore support services, filed its return for the AY under consideration. The AO accepted the declared income of the assessee during the scrutiny assessment. Subsequently, the AO received information from the DDIT, that during the search conducted on assessee, it was observed that the assessee-company was claiming benefit of Tonnage Tax Scheme without being eligible for it. Further, the DDIT submitted that the assessee was not handling the cargo shipping business or movement of cargo. Therefore, all the activities carried out by the assessee were incidental activities in the absence of core business activity, thus it disentitles the assessee-company from their claim of Tonnage Tax Scheme and the assessee- company should be taxed as per normal provisions of the Act. However, if the benefits of Tonnage Tax Scheme are denied to the assessee then the book profit for MAT calculation will be Rs.45,31,89,258/- against the MAT profit of Rs.8,75,59,796/- declared by the assessee for the AY under consideration. Therefore, the AO observed that, the amount of Rs.36,56,29,462 as per MAT provisions chargeable to tax had escaped assessment, as the assessee failed to disclose truly all material facts necessary for its correct assessment. The assessee raised objections to the notice of reopening the assessment, which was rejected by the AO. Hence, the assessee filed petition before the High court.
On hearing the parties, the High court held that,
Whether when AO accepted the assessee to be eligible for claiming benefit under Tonnage Tax Scheme initially, then due to mere change of opinion he cannot reopen the case - YES: HC.
++ the notice issued by the AO was beyond the period of four years from the end of relevant AY. Admittedly, it is a well settled law, that in case of the scrutiny assessment, the AO will not be permitted to reopen assessment which is based on mere change of opinion. Admittedly, during the original assessment proceedings the assessee had placed on record before the AO a comprehensive note on business activities carried out during the AY under consideration. Thus, the High court from this note observed that the assessee-company had given full details of its activities, pointing out that the company owns and operates various types of offshore supply vessels, Tugs and Anchor Handling vessels. Accordingly, in the final order of assessment the AO did not make any disallowance, but rather accepted assessee's declared income. Therefore, there was clear disclosure on the part of the assessee, and the reopening of assessment beyond the period of four years from the end of relevant assessment year could not have been done. Admittedly, the AO had already scrutinized the issue of assessee being qualified for the benefits under Chapter XIIG of the Act. Thus, the High court was of the opinion that, without there being any additional material, any attempt on the part of the AO to reopen the assessment would be based on mere change of opinion. Hence, petition allowed.
Assessee's petition allowed
2019-TIOL-108-HC-MUM-IT
PR CIT Vs STATE BANK OF INDIA: BOMBAY HIGH COURT (Dated: January 4, 2019)
Income Tax - Section 244A.
Keywords - Delay in return - Interest income - Refunding excess tax.
THE assessee-bank had filed return of income for the AY under consideration. During the course of assessment proceedings, the assessee contended that a portion of interest income which he had offered in the return to tax, on the basis of accrual had not become due. Therefore, such interest income should not be taxed for the AY under consideration. Thus, the assessee inserted a note to this effect in the return of income. However, the AO did not accept assessee's contention. On appeal the CIT(A) allowed assessee's appeal, and deleted tax on the disputed component of interest income. Subsequently, the question of refunding the excess tax with interest income came up for consideration before the AO, which he granted only from the date of the order of CIT(A). Therefore, the assessee appealed before the Tribunal, which held stand of AO was incorrect, thus, deleting the order of AO. Hence, Revenue appealed before the High court.
In Writ, the High court held that,
Whether the AO has the jurisdiction and the discretionary power to grant interest depending upon the delay attributable to the assessee, while refunding the excess return filed.- NO: HC.
++ the AO was wholly incorrect in invoking sub-section (2) of section 244A, since there was no reason attributable to the assessee which delayed his return. Thus, during the assessment proceedings itself, the assessee had contended that certain interest income had not accrued being not chargeable to tax, through the note to the return filed before the AO. The assessee correctly pointed out certain decisions of this Court and other Courts elaborating this aspect of the matter, such as in a Division Bench judgment of Gujrat High Court in the case of Ajanta Manufacturing Ltd Vs. Deputy CIT, in which it was observed that, the act of the assessee revising the return or the fact that the claim was allowed by the Commissioner in Appeal would not be a ground for holding that it was for the reasons attributable to the assessee that the refund was delayed. Further, the assessee also relied upon the decision of the Kerala High Court in case of CIT Vs. South Indian Bank Ltd;
++ in the case of Chetan N. Shah Vs. M.K. Moghe, also had occasion to interpret sub-section (2) of Section 244A. The relevant part of the judgement was that,.."The Assessing Officer has been given no discretion in the matter of granting interest. The amount of interest has to be paid to an assessee in terms of Section 244A of the Act. The only limitation provided therein under Section 244A of the Act is under sub-section 2 thereof which mandates that where any refund results to an assessee, while computing the interest payable thereon, the delay which is attributable to the assessee, in obtaining the refund would be excluded. The Act itself does not provide for rejecting the claim for interest on account of a mistake committed by an assessee..." Accordingly, the High court rejected Revenue's appeal.
Revenue's appeal dismissed
2019-TIOL-107-HC-MUM-IT
PR CIT Vs VIJAY S POOJARI: BOMBAY HIGH COURT (Dated: January 8, 2019)
Income Tax - Sections 40(a)(ia), 44AB, 143(3), 147 & 194(c)
Keywords - Compulsory audit - Non-deduction of TDS
THE assessee, an individual, filed returns for the relevant AY. On assessment, the AO made disallowance u/s 40(a)(ia) of for his failure to deduct TDS u/s 194C. The assessee contended that the payments were actually reimbursement of expenditure, which did not require deduction of TDS. The assessee also contended that his turnover did not exceed the threshold limit so as to attract compulsory statutory audit u/s 44AB. On appeal, the Tribunal deleted the additions made to the assessee's income.
On appeal, High Court held that,
Whether disallowance can be made for non-deduction of TDS, if the provisions u/s 194C during the relevant period, did not require deduction of TDS if turnover in prevous year is such which does not warrant audit - NO: HC
++ the Tribunal however focused only on one of them namely that no requirement of statutory audit in case of the assessee. It noted that the statutory provisions contained sub-Section 1 and 2 of Section 194 (c) of the Act prevailing at the relevant time excluded the individuals and Hindu Undivided Families from the requirement of deducting tax at source as long as their turnover did not exceed the limit for statutory audit. On facts, it has been held that assessee would have been qualified for exclusion clause and therefore the requirement of deducting tax at source could not be applied. Hence no error is found in the Tribunal's findings;
++ the finding of the Tribunal that the Assessee's turn over for the previous year did not exceed the statutory threshold is a finding of fact, not shown to be erroneous. The statutory provisions u/s 194 (c) of the Act applicable at the relevant time specifically excluded the requirement of deducting tax at source by the individual or HUF payees if during the previous year their turnover did not exceed the limit requiring them to be subjected to compulsory audit. Hence no question of law arises.
Revenue's appeal dismissed
2019-TIOL-106-HC-DEL-IT
PR CIT Vs ELOFIC INDUSTRIES LTD: DELHI HIGH COURT (Dated: December 19, 2018)
Income Tax - Sections 133(6), 148, 260A, 271(1)(C) & Rule 46.
Keywords - Inaccurate details - Reassessment proceedings - Royalty.
THE assessee-company had filed its return for the AY under consideration declaring an income of Rs. 2,02,01,290/-. After the scrutiny assessment, the AO determined income at Rs.2,34,27,852/-. Subsequently, reassessment notice was issued and reassessment order was passed. During the reassessment proceedings, the AO made two additions related to royalty and disallowance of expenditure of Rs.5,87,50,440/-. The AO had submitted that the assessee had furnished inaccurate details of income, related to the purchases from foreign suppliers, thus disallowed expenditure incurred. However, the CIT(A) and the ITAT both quashed the assessment order of teh AO. Hence, the Revenue preferred an appeal before the High court, along with application for condonation of delay.
On hearing the parties, the High court held that,
Whether while adjudicating the nature of royalty payments, the AO can pass assessment order merely following a case law - NO: HC
++ the CIT(A) and the Tribunal had rightly deleted the disallowance done by the AO related to royalty. Further, the CIT(A) had submitted that, royalty was paid for the use of trademarks and names belonging to a third party. Thus, either party could opt out of the said arrangement at anytime. Moreover, payments had enabled the assessee to carry on business more efficiently. Lastly, royalty payment had directly contributed to increased turnover, business and profits. Therefore, the AO after merely referring to case law relating to capital and revenue expenditure, without any discussion on the nature and character of royalty payments made the disallowance in the reassessment order. Thus, the court was of the opinion that, the Revenue did not act properly and appropriately while preferring this appeal in the absence of any discussion and factual findings.
Whether when AO denies the assessee to prove the legality of the unverified amount in the balance sheet, then the disallowance of expenses made is bad in law - YES: HC
++ the AO had disallowed the expenditure amount on the ground that the amount had remained unverified and thus, added the amount back to the income of the assessee. However, the assessee before the CIT(A) had submitted an application under Rule 46A, for taking on record confirmation letters with the PAN numbers, copy of assessee's account statement, copy of the balance sheet of the supplier, and specific confirmation from suppliers were filed by the assessee. The assessee had submitted that the AO had acted without giving any opportunity to the assessee to file reconciliation statement in case of difference in amount and get confirmation directly from the parties. Accordingly, the CIT(A) had held that that the action of the AO was wrong and unjustified, by which the Tribunal also sided. Therefore, the High court was of the opinion that, the Revenue failed to file evidence and material examined and considered by the appellate authorities for the relevance of the present appeal. Accordingly, the Revenue's appeal and issuance of notice on the applications for condonation of delay was denied by the High court.
Revenue's appeal dismissed
2019-TIOL-105-HC-AHM-IT
DAXESHKUMAR NATWERLAL PATEL Vs ITO: GUJARAT HIGH COURT (Dated: December 11, 2018)
Income Tax - Sections 143(3), 147 & Constitution of India - Article 226
Keywords - Capital gain - Income escaped assessment - Sale deed.
THE assessee an individual engaged in the business of construction activities, had filed his return for the relevant AY declaring total income of Rs.26,14,610/-. During the assessment proceedings, the AO imposed addition on account of disallowance of salary expenses, while determining total income at Rs.26,50,610/-. Subsequently, the AO received information from the ITS details that the assessee had sold immovable property for a consideration, and had not offered the consideration amount for income tax. Thus, the notice issued to the assessee for verification of the financial transaction, assessee replied that the capital gain rising from the transaction of sale of building had been included in the income. The assessee submitted the computation of income and a copy of the sale deed. Therefore, on these grounds the AO wanted to reopen the assessment of the assessee. Further, the AO rejected the objections of the assessee. Hence, the assessee appealed before the High court.
On hearing the parties, the High court held that,
Whether when AO reopens assessee's case, merely relying on the information received from authorities, without applying his own mind and enquiring the same, then reassessment proceedings are invalid.- YES: HC.
++ the AO had proceeded on a factually incorrect premise to the effect that the assessee had not offered the long term capital gain for taxation, as the assessee had placed on record computation of income and copy of the sale deed. Moreover, the consideration received on account of sale of the immovable property as reflected in the reasons recorded, was also incorrect as the correct figure was Rs.6,48,000/- and not Rs.6,07,000/-. Therefore, it's evident that the AO had not applied his mind to the facts of the case, and that the formation of belief on the part of the AO that income chargeable to tax had escaped assessment was also based on an incorrect premise, and also that assessee had not offered capital gain arising from the sale of immoveable property in the return of income. Therefore, the prerequisite condition for reopening the assessment was not satisfied in the present case. However, the assessment was sought to be reopened beyond a period of four years from the end of relevant AY. Therefore, unless failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the AY under consideration was proved, the assumption of jurisdiction u/s 147 on the part of the AO was without any authority of law. Hence, assessee's appeal allowed.
Assessee's appeal allowed
2019-TIOL-104-HC-AHM-IT
ERIS LIFE SCIENCES LTD Vs ACIT: GUJARAT HIGH COURT (Dated: December 10, 2018)
Income tax - Writ - Sections 143(3), 147 & 148
Keywords - reasons for reopening - voluntary disclosure
THE assessee company is engaged in the business of manufacturing of pharmaceutical products. For the A.Y 2011-12, the assessee filed the original return declaring total income of Rs.31,18,79,250/-. Later on, survey proceedings u/s 133(A) were carried out at the business premises of assessee during which, the assessee offered income of Rs.3.10 crore as a disclosure to buy peace of mind. The assessee therefore filed revised return of Rs.34,28,79,250/-, which was processed u/s 143(1). Subsequently, the case was selected for scrutiny, which culminated into an assessment u/s 143(3). Thereafter, the assessment of assessee for the year under consideration was sought to be reopened. Although the assessee raised detailed objections, they were however rejected.
On Writ, the HC held that,
Whether reopening notice can be enforced, if AO is unable to show specific failure on the part of assessee to disclose fully & truly all material facts necessary for his assessment - NO: HC
++ in the facts of the present case, a perusal of the reasons recorded reveals that the AO has not been able to pin-point any specific failure on the part of assessee to disclose fully and truly all material facts necessary for its assessment for the year under consideration, and has merely made a general statement that though the assessee has filed a copy of annual report and audited profit and loss account and balance-sheet along with return of income, where various information/material were disclosed, the requisite material facts for reopening the assessment were embodied in such a manner that the material evidence could not be discovered by the AO and could be discovered with due diligence attracting the explanation to the provisions of section 141;
++ from the reasons recorded, it is evident that no fresh material has been found by AO on the basis of which the assessment is sought to be reopened, and that upon verification of the very record that the assessee has produced during the course of scrutiny assessment, the assessment is sought to be reopened. Nothing specific has been pointed out by the counsel for Revenue to show as to what was the failure on the part of assessee to disclose fully & truly all materials facts. Under the circumstances, in the absence of any failure on the part of assessee to disclose fully & truly all material facts necessary for its assessment for the assessment year under consideration, the first proviso to section 147 would be attracted and consequently, the assumption of jurisdiction on the part of AO u/s 147 by issuing the notice u/s 148 is without authority of law.
Assessee's petition allowed
2019-TIOL-103-HC-HP-IT
E-GOVERNANCE SOCIETY Vs CIT: HIMACHAL PRADESH HIGH COURT (Dated: January 8, 2019)
Income tax - Section 10(23C)(vi)
Keywords - failure to discharge onus - availment of benefit clause - condonation of delay - bonafide impression
THE assessee is a society, formed by the Government of Himachal Pradesh with an object of assisting the Department of Food, Civil Supplies and Consumer Affairs of the Government of Himachal Pradesh in formulating and implementing policies, procedures and guidelines for the adoption of Information Technology and governance for improvement of citizen services. For the relevant A.Y, the assessee filed an application seeking approval u/s 10(23C)(vi). When the application was taken up for hearing, neither any one attended on behalf of the assessee society nor any reply to certain queries was filed. The CIT(E) therefore noticed that the assessee had not put forth its view despite sufficient opportunities having been afforded. The application was thus, declined, observing that the assessee had failed to discharge its onus to avail the benefit of beneficial clause.
Challenging the denial of beneficial clause, the assessee preferred an appeal before the Tribunal, which was found to be prima faice time barred. Accordingly, the assessee filed an application seeking condonation of delay. The solitary plea taken by assessee was that the Management of the Society was under the impression that an appeal before the ITAT had been filed but subsequently on receipt of notice of demand from the I-T Department during the month of July 2017, it was realized that no appeal had been filed in the case. Thereafter new arrangement to file the appeal was made. The Tribunal however viewed that from the contents of the application, it was evident that the assessee was negligent in filing the appeal. The appeal was accordingly dismissed being time barred.
On appeal, the HC held that,
Whether the fact that application for condonation of delay was moved after receiving show cause notice from the Registry of Tribunal, gives credence to plea that applicant was under bona fide impression that appeal had been filed - YES: HC
++ though there was some negligence on the part of Management of the Society in not pursuing the filing of appeal after entrustment of the documents to its counsel through mail but the negligence was not such of a degree that the Tribunal ought to have dismissed the appeal being barred by limitation. It has been noticed by the Tribunal that the application was duly supported by an affidavit. The necessity to disclose the name of counsel alone would have embarrassed the Advocate concerned and amounted to casting aspersion on a Member of Bar. The fact that the application for condonation of delay was moved after receiving show cause notice from the Registry of the Tribunal gives credence to the assessee's plea that it was under a bonafide impression that the appeal had been filed and it was only when the show cause notice was received that the assessee came to know that the counsel to whom documents were mailed had taken no steps to file the appeal. The said fact was suggestive of the bonafide on the part of assessee in not filing the application for condonation of delay alongwith appeal;
++ it is true, that in catena of judgments, some of which have been relied upon by the Tribunal also, it has been authoritatively ruled that Bureaucratic Methodology in making the decision is no longer acceptable as sufficient cause for condonation of delay, nonetheless it is equally true that when a counsel is engaged and the brief is entrusted to him, the litigant would legitimately expect such counsel to take timely steps. As noticed earlier, the only negligence on the part of assessee society was that it failed to pursue the matter with the counsel to whom the documents were mailed. In the case of such type of negligence, equities can be well balanced by imposing costs on the party negligent. This Court is thus of the view that the Tribunal’s endeavour ought to have been to decide the appeal on merits instead of rejecting the same on technical ground of being barred by limitation. For such reasons, the order passed by the Tribunal is set aside and the delay in filing the appeal is condoned, subject to payment of costs of Rs.25,000/- to be paid by the assessee society to the High Court Legal Services Committee.
Assessee's appeal partly allowed
2019-TIOL-102-HC-ALL-IT
CIT Vs SAHARNAPUR DEVELOPMENT AUTHORITY: ALLAHABAD HIGH COURT (Dated: January 7, 2019)
Income tax - Section 12A
Keywords - local authority - registration u/s 12A
THE Revenue Department preferred the present appeal challenging the action of ITAT in directing the CIT(E) to grant Registration to the assessee Development Authority, by completely overlooking the fact that the assessee was a mere 'Local Authority' created by the Uttar Pradesh Urban Planning & Development Act, 1973 and neither a Trust nor an Institution as contemplated u/s 12A of Income tax Act.
On appeal, the HC held that,
Whether once essential criteria for grant of registration u/s 12A of Income tax Act stands fulfilled by the City Development Authority, then it cannot be denied such registration - YES: HC
++ it is seen that the Tribunal has followed its earlier decisions with regard to two another development authorities whereby the registration was granted u/s 12-AA of Income Tax Act. The said decisions have also been upheld by this Court in its decision in Income Tax Appeal No.657 of 2007, by coming to the conclusion that the assessee authority had fulfilled the criteria for grant of registration u/s 12-A of the I-T Act. The questions of law are, therefore, answered against in favour of the assessee.
Revenue's appeal dismissed
2019-TIOL-101-HC-MAD-IT
NATESAN KRISHNAMURTHY Vs ITO: MADRAS HIGH COURT (Dated: January 4, 2019)
Income Tax - Section 40A(3) & Rule 6DD
Keywords - Cash purchases - Purchase of old jewellery
THE assessee, an individual, filed returns for the relevant AY, declaring income of about Rs 9.2 lakhs. He later filed revised returns. On assessment, the assessee submitted copies of returns, financial statements, books of accounts & other records as sought for by the AO. Later, the AO noted that the assessee purchased jewellery worth about Rs 34.68 crores using cash, in an auction. It was also noted that the original returns reflected sales of about Rs 6.6 lakhs while the revised returns showed income of about Rs 34.7 crores. The AO sought clarification on how such huge purchases were made when the value of the assessee's capital & sundry creditors was relatively lesser. The AO noted that the assessee had purchased old jewellery using cash & so applied the provisions u/s 40A(3). Considering the assessee's explanations, the AO noted that the provisions of Rule 6DD of the I-T Rules were inapplicable onto the assessee & disallowed such purchase. Hence the assessee was found liable to pay about Rs 16.1 lakhs. Such findings were sustained by the CIT(A) & then by the Tribunal afterwards.
On appeal, the High Court held that,
Whether the writ court can be called upon to become a third appellate authority & re-visit factual findings of the appellate authorities, which are already based on consideration of facts & circumstances - NO: HC
++ the dispute in the instant case revolves entirely on facts. The nature of transaction as propounded by the assessee before the Assessing Officer is that several persons joined together and formed a syndicate and on behalf of the syndicate, the assessee bids in the auction conducted by the Finance Company which sells the old gold ornaments. It is the further case of the assessee that as soon as the auction is confirmed, the highest bidder has to remit part of the amount in cash and the amount which has to be paid is not known to the assessee earlier and therefore, the payments cannot be made through banking channel. In our considered view, the Assessing Officer rightly examined the nature of transaction done by the assessee and on facts was not convinced that the assessee would fall under any one of the exceptional clauses under Rule 6DD of the Rules. The assessee reiterated the same stand before the CITA. The CITA examined the nature of transaction considered, various decisions cited by the assessee and found that Section 40A(3) of the Act applies with full force to the facts of the assessee's case. Once again before the Tribunal, the facts were re-examined and the Tribunal pointed out that the assessee failed to demonstrate that the conditions of the bid required the assessee to effect payments in cash then and there and payments could not have been made by cheque or Demand Draft or any other mode. The Tribunal pointed out that there is no explanation as to what stopped the assessee from effecting payments through banking channel. Further, the Tribunal found that the agreement with syndicate members, if any, was not produced by the assessee before the lower authorities or before the Tribunal. Further the Tribunal held that the assessee could not demonstrate that he was representing any syndicate nor he could demonstrate that he was collecting cash from such syndicate members for making payments to the Finance Company. The decisions of the Tribunal cited by the assessee were distinguished by analysing the facts of those cases. The Tribunal held that the assessee was unable to demonstrate a situation which compelled him to make payment in cash which would have exempted him from application of recourse of Section 40A(3) of the Act. The the authorities and the Tribunal appreciated and re-appreciated the factual position and took a decision against the assessee. In this appeal, this court cannot be called upon to once again re-appreciate the facts as if it is the third appellate authority over the decision of the Tribunal.
Assessee's appeal dismissed
2019-TIOL-100-HC-MAD-VAT
STANLEY WOOD WORKS Vs DCTO: MADRAS HIGH COURT (Dated: January 1, 2019)
TNVAT - Writ - levy of penalty - notices of proposal - opportunity of hearing
THE assessee company preferred the present petition challenging the assessment orders, claiming that the same were passed in violation of principles of natural justice, since the AO, apart from not considering the reply submitted by the assessee to the notices of proposal, had also failed to give an opportunity of personal hearing, when he had chosen to impose penalty.
On Writ, the HC held that,
Whether grant of an opportunity of personal hearing to the assessee, is mandated, before Department chooses to impose any penalty upon him - YES: HC
++ a perusal of the materials placed before this Court would show that the assessee has not slept over the matter for a long time and on the other hand, it is seen that the replies were sent by speed post. The said replies are said to have delivered to the AO. But, in the meantime, the AO immediately after expiry of 15 days, has passed the assessment orders. In any event, as the AO has chosen to impose penalty, the assessee should have been given an opportunity of personal hearing. The notices previously issued to the assessee has only indicated that assessee can appear before the AO within 15 days from the date of receipt of the said notices. This Court has already found that such course of providing an opportunity of personal hearing is not an effective personal hearing, since such hearing should be done only after receipt of the reply. Therefore, the AO has failed to provide opportunity of personal hearing, and on that account, the orders are liable to be set aside.
Case remanded
2019-TIOL-99-HC-MUM-IT
PR CIT Vs ASHOKA EDUCATION FOUNDATION: BOMBAY HIGH COURT (Dated: January 7, 2019)
Income Tax - Sections 12AA(3), 13(1)(c) & 13(2)
Keywords - Cancellation of registration of trust - Construction of school
THE assessee is a charitable trust. During the relevant AY, its registration had been cancelled by the Commissioner, u/s 12AA of the Act. The Commissioner noted that the trust gave part of some immovable property held by it, to a company, but without obtaining requisite permission from the Revenue. The Commissioner observed that the trust deed did not permit trustees to deal with trsut land in such a manner as had been done by them in the present case. It was further noted that the agreement for transfer of land was not registered. Subsequently, the Tribunal quashed the order passed by the Commissioner & held that upon breach of the provisions of Section 13(1), the AO can examine its effect when passing the assessment order. Hence the Tribunal opined that the Commissioner was obliged to enquire into whether or not the provisions of Section 13(1) had been breached & as to whether or not the trust activities were genuine, before proceeding to cancel registration of trust.
On appeal, the High Court held that,
Whether registration of trust can be cancelled, if part of trust land land is temporarily given out to supplier of cement, so as to ensure ready supply of material, for construction of school - NO: HC
++ in the present case, the Tribunal found that the assessee trust had entered into an agreement with M/s Ashoka Buildcon Ltd. under which the assessee handed over the possession of land to the concern for putting up a plant for manufacturing of Ready Mix Concrete. M/s Ashoka Buildcon Ltd. would supply Ready Mix Concrete required by the assessee for the construction of its school building on priority and at concessional rates. It was found that at the relevant time in the nearby area no such plant was there from which the assessee could have procured the material to carry out its construction activities unhindered. It was noticed that the Ready Mix concrete was supplied with concessional rate;
++ hence on law as well as on facts, this court does not find that the Tribunal committed any error. The decision of the Kerala High Court in the case of Commissioner of Income Tax, Kottayam Vs Annadan Trust was rendered in somewhat different facts. The case in which the assessee trust was engaged in implementing welfare schemes of various State Governments such as supplying food to poor school children in the disbursed areas. The registration was cancelled by the Commissioner on the ground that the assessee failed to substantiate that the same was done on charitable basis. Hence no question of law arises in this case.
Revenue's appeals dismissed
2019-TIOL-98-HC-MAD-VAT
D SURESH KUMAR Vs CTO: MADRAS HIGH COURT (Dated: January 7, 2019)
TNVAT - Writ - notice of proposal - revisional assessment - territorial jurisdiction
THE assessee had preferred the present petition challenging the proceedings, which was nothing but a notice proposing to revise the assessment. It was the contention of assessee that the CTO, Group I Enforcement having issued a notice and when the assessee had made the payment of tax as determined by the CTO, MMDA Colony was not having jurisdiction to frame an assessment.
On Writ, the HC held that,
Whether it is appropriate for the dealer to approach Appellate authority in case he is aggrieved by the decision of the Commercial tax officer, rather then prefer writ petition - YES: HC
++ it is admitted that the CTO, Group I is an Enforcement official, whereas the CTO, MMDA Colony is the AO. Now, the notice is issued by the CTO, MMDA Colony making certain proposals for revision of the assessment. Needless to state that the assessee can raise all his objection before the CTO, MMDA Colony by way of filing a reply to the notice of proposal. Without doing so, the assessee has filed the present petition by challenging the proceedings at the notice stage itself. This Court is, thus, not inclined to entertain the writ petition, at this stage, as any expression made by this Court on the contention raised by the assessee would prejudice further proceedings before the CTO, MMDA Colony;
++ the counsel for assessee apprehends that the CTO, MMDA Colony may get influenced by the directions of the higher officials while making the order of assessment. Needless to say that the CTO MMDA Colony, being the quasi judicial authority is bound to consider the issue on merits and in accordance with law uninfluenced by any of the directions, if any, issued by the higher officials or the report filed by Enforcement officials. Therefore, without expressing any view on the merits of the matter, the assessee is directed to give reply to the notice of proposal by raising all the contentions.
Case disposed of
2019-TIOL-97-HC-MAD-VAT
N RAJENDRAN Vs CTO: MADRAS HIGH COURT (Dated: January 7, 2019)
TNVAT - Writ - auction notice - delayed filing of writ - realization of tax dues
THE assessee company preferred the present petitions challenging the orders of assessment passed in respect of A.Ys 2011-12 to 2013-14 and consequential auction notice. The assessee had earlier approached this Court challenging the order of assessment in respect of very same assessment years on the ground that no personal hearing was given to them. This Court accordingly, set aside the assessment orders with a direction to the AO to give an opportunity of personal hearing. Resultantly, the AO issued a personal hearing notice to the assessee and thereupon, orders of assessment were passed. The assessee did not question those orders immediately. However, when the other proceedings viz., auction notice was issued for auctioning the property belonging to the assessee to realise the tax dues, the assessee preferred the present petitions.
On Writ, the HC held that,
Whether once dealer has not questioned the assessment immediately after passing of orders and remained silent, then he cannot question other consequential proceedings initiated by Department for realization of tax dues - YES: HC
++ this Court does not think that the present challenge as against the orders of assessment can be entertained solely on the reason of delay and latches. If really the assessee is aggrieved against the said orders, he should have filed either statutory appeal before concerned Appellate Authority or approached this Court and challenge the same immediately after passing the said order. On the other hand, the assessee has slept over the matter for a long time and thereafter filed these writ petitions only when auction notice was issued against them. So long as the orders of assessment are passed and when the assessee has not questioned the same immediately, the AO cannot be found fault within issuing the other proceedings viz., the auction notice. Therefore, without expressing any view on the merits of the matter, these Writ Petitions are dismissed only on the ground of delay and latches;
++ however, as it is contended that the assessment orders were made only on the reason of belated filing of return and that cannot be the reason for denying the eligibility of the assessee to claim input tax credit, this Court is of the view that all these contentions can be raised before the next fact finding authority viz., the First Appellate Authority by way of filing an appeal.
Assessee's petition dismissed
2019-TIOL-182-CESTAT-MUM
SHRI AMBALIKA SUGARS PVT LTD Vs CCE & ST: MUMBAI CESTAT (Dated: January 3, 2019)
CX - Appellant had erroneously debited CENVAT credit of Rs.74,72,921/- along with interest of Rs.5,26,785/- in discharge of liability under rule 6 of the CCR, 2004 on clearance of ‘electrical energy’ and ‘boiler ash’ - consequent upon certain decisions that settled the dispute over the duty liability, appellant filed refund claim on 15th February 2014 and which was finally sanctioned on 24th March 2017 - appellant claiming interest in terms of s.11BB of the CEA, 1944 and which claim was rejected by the lower authorities - appeal to CESTAT.
Held: It appears that the appellant seeks to equate discharge of liability through CENVAT account with payment of levy through account current PLA - Though availment of CENVAT credit in accordance with the rules does not require any permission, the restoration of reversed credit cannot but be with the approval of the competent authority - procedure u/s 11B of the CEA, 1944 is brought into play for this limited purpose - mere reference in the provisions of law pertaining to refund will not enable such debit entries to be adorned with the mantle of duty - consequently, interest liability u/s 11BB will arise only on refund of duty paid by such debits in account current - provisions of the statute does not offer any room for ambiguity that restoration of credit in the CENVAT credit account must be compensated with interest even if such restoration is ordered beyond three months from the date of claim for such restoration - appeal is without merits, hence dismissed: CESTAT [para 5 to 8]
Appeal dismissed
2019-TIOL-181-CESTAT-MUM
CCE Vs CHEVROLET SALES INDIA PVT LTD: MUMBAI CESTAT (Dated: Janaury 11, 2019)
CX - Law is well settled that service tax paid on GTA service availed for transport of goods from place of removal to buyer's premises is not admissible for Cenvat benefit - Cenvat Credit of Service Tax paid on the taxable services namely, Courier Agency Service/Goods Transport Agency Service is inadmissible- Assessee appeal dismissed and Revenue appeal allowed: CESTAT [para 5, 6]
Assesee appeal dismissed/Revenue appeal allowed
2019-TIOL-180-CESTAT-MUM
CC Vs BHEL: MUMBAI CESTAT (Dated: January 2, 2019)
Cus - Project Imports Regulation, 1986 - CTH 9801 - Whether the project is to be considered as 'Water Supply Project' and benefit of notification 14/2004-Cus is to be extended - importer had submitted an essentiality certificate issued by the Sponsoring authority viz. District Collector, Mahbubnagar as required under the notification - adjudicating authority denied the exemption but Commissioner(A) allowed the same, therefore, Revenue is before CESTAT - contention of Revenue is that the present project is a Lift Irrigation Project which simply lifts/pumps/transports water from river to the irrigation area and is not a project which intends to make water fit for agricultural used and, therefore, not covered under the scope of Water Supply Project under sl. No. 26A of Notification 42/96-Cus and 14/2004-Cus.
Held: It is not disputed that the sponsoring authority' s revised certificate/letter dated 15.05.2007 had clarified that the project in question is a ' water supply project' and the said project goes through a process of making the water fit for agricultural use/ and thereby making them qualify as a 'process plant' which is within the inclusive clause of the definition - had the said letter dated 15.05.2007 not been there, yet the certificate of the year 2006 issued by the sponsoring authority is sufficient for availing the exemption - once the project has been approved as a ' water supply project' by the sponsoring authority, the Revenue cannot go beyond such certificate and deny the benefit of the notification as held by the apex court in the case of Zuari Industries Ltd. - 2007-TIOL-55-SC-CUS - Tribunal and lower authorities are bound by the law laid down by the Supreme Court because the law declared is the law of the land - no infirmity in the order of the Commissioner(A), hence Appeal filed by Revenue is dismissed: CESTAT [para 6, 8, 9]
Appeal dismissed
2019-TIOL-179-CESTAT-MUM
CURRENCY NOTE PRESS Vs CC: MUMBAI CESTAT (Dated: January 11, 2019)
Cus - Appellant imported goods and paid the duty assessed without claiming the benefit of exemption under Notification No 21/2002-Cus dated 01.03.2002, Sl No 155 - Later they filed a refund claim which was rejected by the lower authorities on the ground that they had not challenged the assessment order - appeal to CESTAT.
Held: Tribunal being the creation of statute does not have such extraordinary jurisdiction as can be exercised by the High Court - clear position which emerges from all the decisions of Supreme Court and High Court cited is that the refund claim under section 27 is not maintainable unless the order of assessment is modified in the appellate proceedings - no merits in appeal, hence dismissed: CESTAT [para 4.13, 5.1]
Appeal dismissed
2019-TIOL-178-CESTAT-MUM
CASA GRANDE CO-OPERATIVE HOUSING Vs CCGST: MUMBAI CESTAT (Dated: January 11, 2019)
ST - "Club or Association Service" - Refund - During the disputed period 2005-06 to 2014-15, the appellant had deposited the service tax amount in respect of such taxable service and later on 19.09.2016, they filed refund claim on the ground that the service provided by the club to its members cannot be considered as taxable service by one legal entity to another and hence, not liable to service tax, on the principle of mutuality - refund application was rejected by the original authority on the ground that the same was filed beyond the prescribed time limit provided under Section 11B of CEA, 1944 as applicable to service tax matters - order upheld by Commissioner(A), hence appellant before CESTAT.
Held: In this case, it is an admitted fact on record that the refund application was filed by the appellant beyond the statutory time limitation prescribed under the statute - Supreme Court in the case of Doaba Co-operative Sugar Mills - 2002-TIOL-426-SC-CX have held that if the proceedings have been initiated under the Central Excise Act by the department, the provisions of limitation prescribed in such Act alone will prevail with regard to applicability of the time limitation for filing the refund claim - in the case of Anam Electrical Manufacturing - 2002-TIOL-650-SC-CUS, apex court has also held that the period prescribed by the Central Excise Act/Customs Act for filing of refund application in the case of "illegal levy" cannot be extended by any authority or Court - in Miles India Ltd. - 2002-TIOL-501-SC-CUS it is held that Customs authorities acting under the Act were justified in disallowing the claim of refund, as they were bound by the period of limitation provided under Section 27(1) of the Customs Act, 1962 [pari materia with Section 11B] - In view of the settled principle of law and in view of the fact that the refund applications were filed and decided under Section 11B ibid, the time limit prescribed thereunder was strictly applicable for deciding such issue - no infirmity in the order of the lower authorities, therefore, appeal dismissed: CESTAT [para 6, 6.1, 7]
Appeal dismissed
