PUBLIC NOTICE
55
Permission for export of Finished Leather, Wet Blue and EI Tanned Leather through ICDs
CASE LAWS
2016-TIOL-01-SC-CX
CCE Vs HERO HONDA MOTORS LTD : SUPREME COURT OF INDIA (Dated: November 3, 2015)
CX - Assessee is in business of manufacturing motorcycles since 1985 and was taking a deposit of Rs. 500 per motorcycle at time of booking of motorcycle - It is alleged that said deposit was an additional consideration - Tribunal after re-examining entire material that was produced before it by assessee, observed that overall effect of deposit on financial position of company or its profitability had no direct relevance to dispute - Price of motorcycle manufactured by it were market driven and it did not follow a cost of production plus reasonable profit pricing policy - Impugned order does not call for any interference: SC
Revenue's appeal dismissed
2016-TIOL-46-HC-DEL-CUS + Story
FAIRDEAL POLYCHEM LLP Vs UoI : DELHI HIGH COURT (Dated : January 6, 2016)
Customs - Anti-dumping duty - Rule 17(1), 23(2), 23(3) of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 - Central Government has the power to grant an extension of 6 months for concluding a review - Petitions dismissed: High Court [para 14, 15, 21, 23, 24, 27, 28]
Petitions dismissed
Observations of High Court -
++ While rule 17 deals with ‘final findings' of the designated authority on the conclusion of the investigation initiated under rule 5, rule 23 is concerned with the ‘review' of the need for the continued imposition of any anti-dumping duty. By virtue of rule 23(3), many of the provisions relatable to the initial investigation and its aftermath have been specifically made applicable mutatis mutandis to a review also.
++ Not all the provisions applicable in the case of an investigation have been made applicable in the case of a review because those provisions are not relevant in the case of a review.
++ So, only those provisions pertaining to investigation, final findings and levy of duty etc., which are relevant to a case of review have been made applicable mutatis mutandis . Rule 17, which includes the first proviso to rule 17(1), is one such provision.
++ Rule 23 and sub-rule (3) thereof, in particular, does not manifest an intention to give primacy to rule 23(2) over the first proviso to rule 17(1). On the contrary, from rule 23(3), which immediately follows rule 23(2), the clear intention appears to be to make all the provisions of, inter alia, rule 17, which are applicable in the case of an investigation, to also apply with adaptation (with necessary changes) to the case of a review under rule 23. The scheme of review is substantially similar to the scheme of investigation.
++ Rule 17 of the said rules would apply to a case of review under rule 23 "as it is with certain changes in points of detail". Consequently, the extension by six months permissible under the first proviso to rule 17(1) would also apply to the case of a review as it does to an investigation. And, that is the discernible intention behind rule 23(3).
++ Article 11.4 of the said Agreement inter alia stipulates that the review contemplated under Article 11 shall be carried out expeditiously and shall "normally" be concluded within 12 months of the date of initiation of the review. Rule 23(2) of the said rules is modelled on Article 11.4 of the said Agreement. Thus, while construing rule 23(2) if any ambiguity is noticed, the same can be resolved by having recourse to Article 11.4.
++ The use of the word "normally" in Article 11.4 is of great significance. It means that the review under Article 11 is to be completed expeditiously and "normally" within 12 months but that is not an inflexible period. Considered in this light, and to bring the provisions of rule 23(2) in harmony with Article 11.4, rule 23(2) would have to be read as - any review initiated under sub-rule (1) shall "normally" be concluded within a period not exceeding twelve months from the date of initiation of such review. And, when the first proviso of rule 17(1) is applied (with necessary changes) to the case of a review it becomes immediately clear that the period of 12 months can be further extended by the Central Government in its discretion by 6 months but only if special circumstances exist.
2016-TIOL-45-HC-DEL-IT
ASGON GLOBAL PVT LTD Vs INCOME TAX SETTLEMENT COMMISSION : DELHI HIGH COURT (Dated: January 6, 2016)
Income tax - Whether the income tax settlement commission has the power to direct a special audit u/s 142(2A) in the course of settlement proceedings - NO: HC
Whether where an application has been made u/s 245C on or after 1st June, 2007, the Settlement Commission shall have exclusive jurisdiction from the date on which the application was made - YES: HC
Whether where an application made on or after 1st June, 2007 is rejected u/s 245D(1) or is declared invalid u/s 245D(2C), the Settlement Commission would have exclusive jurisdiction upto the date on which the application is rejected or declared invalid as the case may be - YES: HC
Whether disclosure of "full and true" particulars of undisclosed income and "the manner" in which such income had been derived are the prerequisites for a valid application u/s 245C(1) - YES: HC
Whether Section 245C(1) mandates "full and true" disclosure of the particulars of undisclosed income and "the manner" in which such income was derived and, therefore, unless the Settlement Commission records its satisfaction on this aspect, it will not have the jurisdiction to pass any order on the matter covered by the application - YES: HC
Whether the order that the settlement commission makes u/s 245D(4) is in the nature of an assessment - NO: HC
Whether once an application for settlement is made before the settlement commission, no income tax authority would have jurisdiction to deal with such case - YES: HC
Whether the powers and functions of an income tax authority which are to be exclusively exercised by the settlement commission must be in the context of and have a nexus with the settlement proceedings - YES: HC
Whether the settlement commission would have the jurisdiction to direct a special audit u/s 142(2A) - NO: HC
Whether an order of settlement u/s 245D(4), is similar to an order of regular assessment or an order passed u/s 143(1)/143(3)/144 - NO: HC
Having heard the parties, the High Court held that,
++ upon examining the provisions of section 142, it is evident that it is part of Chapter XIV which specifically details the procedure for assessment. The said provision relates to the enquiry before assessment. It is specifically for the purpose of making an assessment under the said act. Sub-section (2A) stipulates that if at any stage of the proceedings before him, the AO, having regard to the nature and complexity of the accounts of the assessee and the interest of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief CIT, direct the assessee to get the accounts audited by an accountant as prescribed under the said act and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the AO may require. It is obvious that the expression "at any stage of the proceedings before him" has clear reference to the assessment proceedings. Thus, the AO, subject to the pre-conditions set out in the said provision, could require a special audit to be conducted but this is with the sole and ultimate object of making an assessment under the said act. This court shall now examine provisions pertaining to settlement of cases. These provisions have been examined in detail in Commissioner of Income Tax v. Income Tax Settlement Commission & Ors, wherein it was held that:
["....the settlement application passes through several stages before the final order providing for the terms of settlement is passed by the Settlement Commission. The first stage is u/s 245D(1). This is followed by the next step u/s 245D(2C) and finally by the order passed u/s 245D(4)....Section 245F(2) stipulates that where an application u/s 245C has been allowed to be proceeded with u/s 245D, the Settlement Commission shall, until an order is passed u/s 245D(4), have, subject to the provisions of sub-section (3) of that section, exclusive jurisdiction to exercise the powers and perform the functions of an income tax authority under the said Act in relation to the case. We must also notice the proviso to Section 245F(2) which makes it clear that where an application has been made u/s 245C on or after 1st June, 2007, the Settlement Commission shall have exclusive jurisdiction from the date on which the application was made. Further, where an application which has been made on or after 1st June, 2007 is rejected u/s 245D(1) or is declared invalid u/s 245D(2C), the Settlement Commission, inspite of such an application, would have exclusive jurisdiction upto the date on which the application is rejected or declared invalid as the case may be....It is clear that disclosure of "full and true" particulars of undisclosed income and "the manner" in which such income had been derived are the prerequisites for a valid application u/s 245C(1). Additionally, the amount of income tax payable on such undisclosed income is to be computed and mentioned in the application. It needs little emphasis that Section 245C(1) mandates "full and true" disclosure of the particulars of undisclosed income and "the manner" in which such income was derived and, therefore, unless the Settlement Commission records its satisfaction on this aspect, it will not have the jurisdiction to pass any order on the matter covered by the application...."]
++ it is noted that section 245F calls for closer scrutiny as that is the provision which has been invoked by the settlement commission as also the counsel for the revenue for supporting the order with regard to the conducting of a special audit. It does not entail that the powers of regular assessment which are vested in an income tax authority can be exercised by the settlement commission. What we mean to say is that the settlement commission does not engage itself in the process of assessment and cannot make an assessment order. The order that the settlement commission makes u/s 245D(4) is not in the nature of an assessment but by way of a settlement and contains the terms of settlement. Thus, we reiterate that the powers which are vested in an income tax authority and could be exercised by the settlement commission are such which have a nexus with the settlement proceedings which does not include, in our view, the making of an assessment under the said act. In our view, the exclusivity of jurisdiction which is contemplated by the said provision is that once an application for settlement is made before the settlement commission, no income tax authority would have jurisdiction to deal with the case. It does not mean that the settlement commission from that date steps into the shoes of the income tax authority who was hitherto dealing with the case. It is also noted that the exclusive jurisdiction of the settlement commission in terms of section 245F(2) is subject to the provisions of section 245D(3). That provision entails that the settlement commission, in respect of an application which has not been declared invalid u/s 245D(2C), may call for the records from the Commissioner and after examination of such records, if the settlement commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case;
++ it is, therefore, clear that the powers and functions of an income tax authority which are to be exclusively exercised by the settlement commission must be in the context of and have a nexus with the settlement proceedings. That being the case, since the requirement of a special audit falls under the procedure for assessment which is distinct and different from settlement proceedings, the settlement commission would not, in our view, have jurisdiction to direct a special audit as it does not have any nexus with the settlement proceedings. All that the settlement commission is required to do in the course of the settlement proceedings is to ensure that the assessee who has made the application for settlement of his case has inter-alia made a full and true declaration of his hitherto undisclosed income and the manner in which it was derived. If the settlement commission is of the view that an assessee has not made a full and true declaration of the undisclosed income then the application is liable to be rejected. It was held by the Apex Court that an order of settlement u/s 245D(4) is not an order of regular assessment nor is it an order u/s 143(1)/143(3)/144. What is of importance is that the Supreme Court held that the making of an order of assessment is an integral part of the process of assessment. Meaning thereby that if the proceedings do not culminate in an assessment order the same cannot be regarded as assessment proceedings. The exclusive jurisdiction of the settlement commission to exercise the powers and perform the functions of an income tax authority, in terms of section 245F(2), is to be exercised and performed for the purpose of settlement of the case under Chapter XIX-A and not for assessment under Chapter XIV. That being the case, the powers and functions which are in the exclusive jurisdiction of the settlement commission are circumscribed by the object and role which has been ascribed to the settlement commission, which is to settle the case in terms of the procedure stipulated in Chapter XIX-A. Since assessment of the type contemplated u/s 143(3) is outside the purview of settlement proceedings, a special audit u/s 142(2A), which is in aid of assessment, would also be beyond the scope of settlement proceedings. Consequently, the impugned order to the extent it directs the conduct of a special audit, is quashed.
Assessee's appeal partly allowed
