OFFICE ORDER
Audited Accounts - CBDT extends due date for filing returns to October 17 as it clashes with due date for filing declarations under IDS, 2016
CASE LAWS
2016-TIOL-158-SC-IT
CIT Vs BOMMIDALA ENTERPRISES PVT LTD: SUPREME COURT OF INDIA (Dated: September 02, 2016)
Income Tax - Section 10AA - trading activity - definition of service - SEZ.
Whether trading activity constitutes 'service' within the ambit of provisions of Sec 10AA is a question of law and not fact - YES: SC
Revenue is in appeal before the Apex Court against the HC decision. The HC had held that the Tribunal's decision to treat trading activity carried on by SEZ unit as eligible 'service' u/s 10AA is a question of fact. The Revenue had argued that when there is no definition of service in Section 10AA, the Tribunal cannot rely on SEZ Rules to treat such an activitiy as service.
Held that,
++ no doubt, insofar as activity carried on by the assessee is concerned, factual aspects are not in dispute. However, whether that would constitute 'service' within the meaning of Section 10AA of the Act would be a question of law and not a question of fact. The High Court is, therefore, in error in not entertaining the said plea and dismissing the appeal of the Revenue by labelling it as a question of fact;
++ we, accordingly, set aside the order of the High Court and remand the case to the High Court to decide the aforesaid question of law.
Revenue's appeal allowed
2016-TIOL-2057-HC-MUM-CUS
SARLA PERFORMANCE FIBERS LTD Vs UoI: BOMBAY HIGH COURT (Dated: August 29, 2016)
Cus - Drawback - All that the department continues to do is to engage the Petitioner in some correspondence but at no stage, the Petitioners were given a proper opportunity of being heard nor the impugned order is passed based on their written representations and points raised during oral hearing - request of the Petitioner is denied only by addressing some letters and which outlines the stand of the Respondents emanating from the Development Commissioner SEEPZ, Special Economic Zone. Held: It was expected from the Development Commissioner that he would apply his mind to the whole case and after a oral hearing to the Petitioner pass a reasoned order in accordance with law based on an undertaking given by counsel for Revenue that the Development Commissioner SEEPZ, Special Economic Zone, Mumbai himself will now grant a personal hearing to the Petitioner and on perusal of all the records pass a proper reasoned order on the draw back application within three months from the date of receipt of a copy of this order, petitions are disposed of: High Court [para 3, 8]
Petitions disposed of
2016-TIOL-2056-HC-DEL-CUS
CUSTOMS Vs SURENDER KUMAR JAIN: DELHI HIGH COURT (Dated: September 7, 2016)
Cus - Smuggling of gold in silver bricks which had not been declared. Additional Sessions Judge held that even if the statements of the accused persons were accepted in totality no prima-facie case of an offence under Section 135(1)(a) of the Customs Act, 1962 could be made out against Surender Kumar Jain since it was evident from the statements of the accused that Surender Jain was to deal with the smuggled gold only after it had been imported revision filed by Department. Held: - Counsel for the petitioner department has not been able to show as to on what account the impugned order suffers from an infirmity - view taken by the Additional Sessions Judge agreed with. Petition dismissed: High Court [para 11, 12]
Petition dismissed
2016-TIOL-2055-HC-DEL-CUS
HIM LOGISTICS PVT LTD Vs PR CC : DELHI HIGH COURT (Dated: September 07, 2016)
Cus - seeking of cross-examination "department informed that efforts at securing the presence of Shyam Lal has so far been unsuccessful" clarification sought. - Held: Since the depositions/statements of the said witnesses were ostensibly recorded and relied upon at a previous stage, the respondent/applicant should make all efforts to trace them, and permit their cross-examination before making the order - respondent directed to dispose of the matter expeditiously after exhausting all reasonable efforts to secure the presence of the witness (Shyam Lal) - application disposed of: High Court [para 3, 4]
Application disposed of
2016-TIOL-2054-HC-KOL-CUS
ROHIT FERRO TECH LTD Vs UoI: CALCUTTA HIGH COURT (Dated: September 01, 2016)
Cus - On the basis that the exported goods were of Indian origin the petitioner had obtained 54 DEPB licenses which allowed the petitioner to import goods free of import duty. SCN issued alleging that since the goods that the petitioner had exported were not of Indian origin but of Bhutanese origin, the petitioner was not entitled to the benefit of DEPB licenses and accordingly, the petitioner must pay the import duty which the petitioner did not pay on the strength of the DEPB licenses - petitioner deposited the entire sum of Rs.3,20,46,327/- and approached the Settlement Commission seeking immunity from imposition of penalty & prosecution - Settlement Commission held that demand was made from such other importers who had purchased DEPB license from the petitioner but they had not come forward to settle the case and, therefore, the Settlement Commission is unable to settle the case of the petitioner. Petition before High Court. - Held: Department is concerned with the recovery of the import duty which was not paid by the importers concerned on the strength of the DEPB licenses - Since it is now admitted that the petitioner was not entitled to the benefit of the DEPB licenses, all that the department should look forward to is recovery of the amount of Rs.3,12,60,465/- - Who pays the money should not matter to the department - One cannot lose sight of the fact that the importers purchased the DEPB license from the petitioner for valuable consideration - Hence it is only fair that the petitioner pays the entire import duty to the extent aforestated - Settlement Commission erred in fact and in law in rejecting the application of the petitioner on the ground mentioned in the order under challenge - matter is remanded back to the Settlement Commission for consideration afresh within four months. Writ application disposed of: High Court [para 6, 7]
Petition disposed of
2016-TIOL-2053-HC-AHM-VAT
SK INDUSTRIES Vs STATE OF GUJARAT: GUJARAT HIGH COURT (Dated: September 02, 2016)
Gujarat VAT Act - Section 15B, 41(3) & 67.
Keywords - notice for revision - period of limitation & revisionary powers.
Whether the Commissioner in his revisional jurisdiction u/s 67 of the Gujarat Sales tax Act, can delay issuance of notice for revision for an indefinite period of time, after calling for and obtaining the records from the dealer - NO: HC
THE assessee is a dealer engaged in the business of manufacturing and resale of oil, oil cakes and deoil cakes and such goods are sold within and outside the State. For the AY 1991-92, sales tax officer passed an order of assessment concerning the assessee u/s 41(3). The assessee thereafter received a notice by Asst. Commissioner of Sales Tax calling for information relating to purchases made by assessee during period concerning the said A.Y. Consequent to the same, one more notice was issued to the assessee proposing to levy purchase tax u/s 15B of the Act on purchase of various raw materials in exercise of revisional powers. Upon receipt of such notice, the assessee raised a preliminary objection that the proceedings initiated by the Asst Commissioner were beyond the limitation prescribed u/s 67. The assessee also opposed the levy on merits. The Asst Commissioner observed that it had come to its notice that the AO had not levied purchase tax from the assessee upon calling for the record of the case. Noticing this error on the part of AO, the revisional powers were exercised within the period of limitation prescribed u/s 67 of the Act. On further appeal, the Tribunal observed that the exercise of revisional power commences when the Commissioner calls for the record and examines the same.
Having heard the parties, the High Court held that,
++ with the amendments under clause-(a) of section 67(1), Commissioner on his own motion may exercise revisional powers within three years from the date of the order passed by a subordinate officer by calling for and examining the record of such order and can pass such order as he thinks fit and proper within 12 months from the date of service of notice for revision. This additional requirement of passing such order as he thinks proper within 12 months from the date of service of notice of revision has been inserted by virtue of Amending Gujarat Act 10 of 1992. Period of limitation of three years therefore must be seen in light of such important statutory change. It is true that the earlier portion of clause(a) of section 67(1) even after amendment by virtue of the Act 10 of 1992 remained the same, however, statutory interpretation cannot remain static when the provision itself has undergone a material change. If we attach the same meaning to the amended provision as was given to the unamended provision, we would be failing in discerning the legislature intent in carrying out the amendment itself.
++ in the opinion of this Court, the amendment was made in order to ensure exercise of suomotu revisional powers by the Commissioner, does not remain open ended and there is finality of a pending issue. In order to bring about an early end to uncertainty, therefore, clause(a) of section 67(1) now prescribes the period of 12 months from the date of service of notice for revision within which the Commissioner must pass his final order. We may compare this provision with clause(b) of section 67(1) which pertains to the revisional powers of the Tribunal which does not make any such provision requiring the Tribunal to pass any final order within a time frame. The legislature in its wisdom would have realized that the Tribunal being a quasi judicial authority, cannot be compelled to pass orders within a time frame. Admittedly, the Commissioner had not exercised the revisional powers u/s 67(1) within the period of limitation prescribed as interpreted by us in this judgment. In fact, till the period of three years were over, it is doubtful whether the Commissioner could have said to have called for and examine the record of the case since the Commissioner issued the notice to the assessee calling for the information from the assessee in this respect after the period of three years.
Assessee's petition allowed
Income tax - Sections 132(4), 153A, 271AAA.
Keywords - disclosure statement - penalty - sworn statement & undisclosed income.
Whether a retrospective amendment u/s 271(1)(c) of the I-T Act can burden the assessee with a penal liability, when the assessee's case is falling under the erstwhile provisions of Explanation 5A to Section 271(1)(c) which calls for no penalty in case of voluntary disclosure on the date of search - NO: ITAT
Whether an assessee can be held liable for delayed filing of returns u/s 153A, when such delay was caused on account of the fault of the I-T Department in issuance of notices u/s 153A thereon - NO: ITAT
Whether the failure of the AO to struck off the irrelevant portion u/s 274 as to whether the charge against the assessee is "concealing particulars of income or furnishing of inaccurate particulars of income", would make such penalty notice defective - YES: ITAT
The assessee, a part of Sribir Group, is engaged in the manufacturing activities of sponge iron, TMT bars, wires, nail etc besides running petrol pumps and owning agencies of Bajaj Auto & Mahindra Auto, operating from Giridih and Kolkata. During the subject year, a search and seizure operation was carried out at the residence of assessee at Sarawgi Sadan, Jharkhand besides conducting search in various factory and residential premises of the group. During search, the assessee was found to be in possession of undisclosed income and accordingly the assessee gave disclosure statement u/s 132(4) of the Act offering total substantial income from A.Y 2002-03 to A.Y 2008-09 of Rs.15,00,01,986/-. The head of the group S.K. Sarawgi gave a sworn statement on the date of search offering Rs 15 crores as undisclosed income of the entire group with a request not to initiate any penalty u/s 271AAA. Subsequently, a disclosure statement u/s 132(4) was made by S. K Sarawgi on behalf of the entire group relating to possession of assessee. It was also stated that tax of Rs. 1.40 crores was already paid in the name of assessee and the balance tax was undertaken to be paid at the time of filing the block return u/s 153A. In respect of the remaining undisclosed income of Rs. 5 crores, it was stated that the seized papers were under examination and after completion of the same, another statement u/s 132(4) would be given very shortly.
Consequent to the inspection of the seized records, the balance sum of Rs. 5 crores was also offered in the hands of assessee as undisclosed income. In addition, the assessee as well as his brother S.K Sarawgi was informed, that if disclosure was made for undisclosed income, manner of deriving the same was explained and taxes due thereon were paid, then the assessee would be eligible for immunity from levy of penalty. In pursuance of the same, the assessee came forward to disclose a sum of Rs 15 crores as undisclosed income which was later followed by the disclosure statement u/s 132(4) and in the return filed u/s 153A. The assessments were therefore, ultimately completed u/s 153A without making further additions to the returned income. The AO however levied penalty u/s 271(1)(c) at the rate of 300% by invoking Explanation 5A thereon for A.Ys 2003-04 to 2007-08 on the premise that but for the search, the assessee would not have come forward to disclose the undisclosed income. On appeal, the CIT(A) reduced the penalty to 100% of tax.
Having heard the parties, the Tribunal held that,
++ the instant is not a case where the assessee had made false disclosures in the return or failed to cooperate during the assessment proceedings. Further, it is also not a case where no explanations were furnished or the explanation furnished were found to be false. It would be pertinent to note that the AO was unable to identify any further undisclosed income other than the income offered by the assessee. He stated that ultimately the penalty has been levied on the ground that but for the search, the assessee would not have come forward for disclosure of his undisclosed income and pay taxes thereon. In the instant case, the assessee had been searched on 24th Jan, 2008 which was prior to the amendment brought in by Finance Act 2009, wherein, even the persons who had regularly filed their returns prior to the date of search also would get covered by the Explanation 5A to section 271(1)(c). In this regard, we hold that the assessee was made to understand the penalty provisions as it stood on the date of search and disclosure was made accordingly with a bona fide belief that no penalty would be levied. Just because the law is changed retrospectively, the assessee cannot be invited with a penal liability when his case was falling under the erstwhile provisions of Explanation 5A to Section 271(1)(c) on the date of search. In the instant case, the notice u/s 153A was issued on the assessee only on 3rd Aug, 2009 and the return in response to such notice was filed on 31st Aug, 2009 and by that time the amended provisions of Explanation 5A to Section 271(1)(c) would become applicable, but still the circumstances leading to delayed issuance of notice u/s 153A and filing of return thereon could not be ignored in the facts and circumstances of the case. As stated earlier, there was lot of correspondences between the assessee and the revenue with regard to centralization of cases to Ranchi and Patna and ultimately that dispute got settled vide order of CBDT, wherein it was decided to centralize the cases at Kolkata. Only after the said CBDT order was served on the officials of Kolkata jurisdiction, thereafter DGIT(Inv) Kolkata vide his order assigned the jurisdiction of the case to DCIT, Kolkata. After the issue of jurisdiction over the group was settled, notice u/s 153A was issued by the Kolkata jurisdictional officer and the returns were filed by the assessee;
++ it is found that on the date of giving sworn statement u/s 132(4) on the date of search, the amended provisions of Explanation 5A to section 271(1)(c) was not in force. It is quite evident from the statement recorded u/s 132(4) that there is a reference to waiver of penalty proceedings by the group head in his statement. These special facts cannot be brushed aside in order not to give effect and weightage to the decision of the Hyderabad Tribunal to the facts of the instant case. Infact we find that these facts are clearly brought on record and taken cognizance by the order passed by the Ld DGIT (Inv) while granting waiver of interest u/s 234A in full, interest u/s 234 B and 234 C in part vide order u/s 119 for the A.Ys 2002-03 to 2008-09. It could be understood that the assessee was prevented from reasonable cause from filing the return u/s 153A before the amendment was proposed in Explanation 5A to Section 271(1)(c). It cannot be ignored that returns u/s 153A could be filed only after issuance of notice u/s 153A thereon which was admittedly issued delayed and assessee had immediately filed the returns in response thereto. It is not in dispute that the assessee had filed regular returns u/s 139(1) prior to the date of search for all the years under appeal. Hence the ratio laid down by the Co-ordinate Bench of Hyderabad Tribunal would be squarely applicable to the facts of the instant case wherein it was held that penalty u/s 271(1)(c) by application of Explanation 5A (amended provisions) could not be made applicable to the assessee. Another argument advanced by the AR is that the show cause notice issued u/s 274 r/w/s 271(1)(c) is defective in as much as the AO had not struck off the relevant portion in the show cause notice as to whether the assessee had concealed his income or furnished inaccurate particulars of income. We find that the AO had merely made a tick mark in the show cause notice for the A.Y 2003-04 without striking off the specific charge which the assessee has to meet while replying to the penalty notice. Therefore, we hold that the penalty imposed on the Assessee u/s.271(1)(c) cannot be sustained and the same is directed to be cancelled.
Assessee's appeal allowed
2016-TIOL-1628-ITAT-AMRITSAR
JYOTI LTD Vs ACIT: AMRITSAR ITAT (Dated: August 26, 2016)
Income tax - Sections 22, 23, 143(1) & (3), 147, 263.
Keywords - ALV, business income, rental income, reason to believe, right to use.
Whether when the assessee had originally returned its income as business income but later amended the same as income from house property after re-assessment proceedings were initiated, there is no estopple against law if the assessee revises its return to resile from its position to go back to its original position after a ruling by the Apex Court against the Revenue - YES: ITAT
Whether while deciding the nature of such income the objects of the company are required to be kept in mind - YES: ITAT
The assessee is into lettingout property and earning rental income. Initially, it had claimed the income earned from letting out the subject property, i.e., Gulab Bhawan Palace, as business income. This position was accepted u/s 143(1) of the Act. However, on the reopening of the completed assessment, in the revised return, the income was offered as income from property, in accordance with the provisions of section 22 read with section 23 of the Act. This was consistent with the assessment completed u/s 143(3) of the Act. In the reassessment, the income was assessed as income from house property.
Later the Apex Court ruling in the case of Chennai Properties & Investment Ltd in 2015 prompted the assessee to seek to revert to its original stand of contending that income was to be treated as business income and not as income from house property.
After heading parties, the Tribunal held that,
++ in the present case, the main object of the assessee company is to acquire land and building in the State of J & K and to let out the same. It was in pursuance of this object that the land measuring 222 kanals and 19 marlas under and adjoining Gulab Bhawan Palace was taken on lease. It was further let out for a period of 99 years. The assessee retained the right to use, upgrade, renovate and reconstruct Gulab Bhawan Palace and other adjoining structures for the purposes of commissioning. The 5-Star Hotel, had an annual licence fee/rent of Rs.5 lacs. The assessee offered the said receipt as business income;
++ an argument might be raised that since the assessee had itself earlier offer the income from letting out the property as income from house property, the assessee cannot now be turned around to resile from this self-avowed and accepted position. To this, it is trite that there is no estopple against the law. An assessee can well resile from a wrong position originally taken;
++ now, as to whether the position originally taken by the assessee is wrong or right stands well answered by our discussion, wherein we have respectfully followed the decision of the Supreme Court in the case of 'Chennai Properties And Investment Limited', to hold that income earned by the assessee from letting out the properties acquired by it, is taxable as business income and not income from house property. This, as considered, is entirely in line with the ratio laid down in 'Chennai Properties And Investment Limited';
++ now, the issue as to whether the said income is to be treated as business income of the assessee or income from house property. 'Chennai Properties And Investment Limited', is directly and squarely applicable on this point. It holds that since the main object of the assessee was to acquire and let out properties, from which letting out, income was earned, such income is to be treated as business income. The ratio laid down by the Apex Court is that the nature of the activity of the assessee and the nature of the operation in relation to the leasing out of land, which is the deciding factor as to under which head the profits and gains earned from leasing out are to be assigned. The Apex Court has held that so as to interpret such activities, the objects of the company must also be kept in view;
++ now, as observed, in the present case, undisputedly, the main object of the assessee happened to be acquiring land and buildings in the State of J & K and letting out the same. This is exactly the same object as was that of the assessee in 'Chennai Properties And Investment Limited'. Therefore, in accordance with 'Chennai Properties And Investment Limited', we hold that the assessee is correct in contending by way of the additional ground taken that the rental/licence fee received by the assessee in respect of the subject property given on lease to BHL is liable to be assessed as business income and not as income from house property, as assessed by the Taxing Authorities. The additional ground taken by the assessee is thus, accepted.
Assessee's appeal allowed
