2016-TIOL-2224-HC-AHM-IT
LM PATEL AND SONS Vs DCIT: GUJARAT HIGH COURT (Dated: July 13, 2016)
Income Tax - scrutiny assessment - returned income - prior period adjustments - Voluntary Disclosure Income Scheme, 1997.
Whether if a necessary entry in the trading account has been made to give effect to the undervaluation of stock pertaining to the earlier year which was declared under the VDIS Scheme, an addition in assessee's income on such basis is allowable - NO: HC
The assessee is a firm being regularly assessed to tax by the I.T.Office, Vadodara. For the A.Y 1998-99, return of income was filed which was thoroughly processed by the Income tax Department under scrutiny assessment and ultimately several additions/disallowances were made to the figure of returned income filed by the assessee. One of the additions/disallowances was in respect of debit of an amount of Rs. 9,44,771/- on account of prior period adjustments which was a consequential effect due to the declaration under the Voluntary Disclosure Income Scheme, 1997 on account of revised valuation of closing stock for the preceding assessment year 1997-98. On appeal, the CIT (A) allowed the same. On further appeal, Tribunal reversed the findings of CIT(A).
Held that,
++ we are of the view that the CIT(A) is justified in deleting the addition. The CIT(A) had observed that it is noticed that necessary entry in the trading account has since been made to give effect to the under valuation of stock pertaining to the earlier year which was declared under the VDIS Scheme. The reconstructed trading account as stated in the submission of the appellant clarifies the position in this regard. It is therefore held that necessary effect to the VDIS declaration has since been given in the case of the appellant and no further addition on this account during the assessment year under consideration is called for. Addition is therefore deleted. We are in complete agreement with the reasonings arrived at by the CIT(A). The order passed by the Tribunal is required to be quashed and set aside and the question raised in the present appeal is required to be answered in favour of the assessee. Accordingly, the question raised in the present appeal is answered in favour of assessee and against the revenue. The impugned order passed by the Tribunal is quashed and set aside. The order passed by CIT(A) is restored. Appeal is allowed accordingly.
Assessee's appeal allowed
2016-TIOL-2223-HC-P&H-IT
CIT Vs INTERNATIONAL INSTITUTE OF NEURO SCIENCES AND ONCOLOGY LTD: PUNJAB & HARYANA HIGH COURT (Dated: September 9, 2016)
Income Tax - Sections 40(a)(ia), 69C, 131 & 143(3).
Keywords: suo moto deposit - filing of TDS - issue of show cause notice - marketing personnel.
Whether when the AO himself adopted a balanced approach by taking into account 5% commission to doctors in place of 10% industry norm as some doctors do not prefer taking commission and some patients directly report to the assessee without any references, such a decision of the AO is legally sustainable - YES: HC
The assessee runs a hospital. It had filed a return of income declaring a business profit of Rs. 47,81,166/-. The profits were set off against the brought forward depreciation and the return income was shown as 'nil'. The assessment was completed u/s 143(3) at an income of Rs. 71,41,939/-. On appeal, CIT(A) confirmed the order of AO to a large extent. The Tribunal upheld certain additions and restored to the file of the AO certain issues for further verification/adjudication. Assessee contended that the main reason for delay in depositing the TDS was due to financial crisis and that the deposit was made suo-moto without any notice from the department. It was further contended that the Finance Act, 2008 made the amendment to section 40(a)(ia) w.e.f. the AY 2005-06. The Tribunal noted that the assessee had deposited the entire amount of TDS before the due date of filing of the return of income. The Tribunal held that the amended provisions were retrospective. The Tribunal, however, directed AO to verify the claims of the assessee as to the date of deposit and to recompute the disallowance, if any, in respect of such payments where the tax deducted at source had not been deposited before the due date of filing of return of income.
The statement of the assessee's accountant one Shri S.K.Sharma was recorded u/s 131. He admitted that the assessee had been paying commission to various Doctors for referring the patients to the hospital and that payments were not recorded in the regular books of account. He stated that the details of the Doctors who referred the patients were noted by the person at the counter preparing bills. These details were sent to the marketing personnel; the marketing personnel decided the amount to be paid to such Doctors; the details prepared by the marketing personnel were checked and signed by the Director who in turn sent the same to the accountant for payment. The accountant thereafter signed the details sheet and gave the same to the cashier for making payments. It was stated that the payments were in the range of Rs. 15,000/- to Rs. 20,000/- per month. The payments were collected by the marketing personnel to handover the same to the Doctors concerned. The payments to the Doctors were made in cash and separate accounts were maintained in respect thereof. Daily/weekly reports submitted by the cashier reflected the payments. It is of vital importance to note that admittedly the records in this regard were destroyed and were not produced for the examination of AO.
The assessment order records that there was no response furnished to the AO's query as to why additions should not be made to the assessee's income in view of the above facts. It is also important to note that the assessee was put to notice by the AO that if it failed to respond to the query the AO proposed estimating the payments at 5% of the total receipt. As rightly pointed out by Ms. Dugga, counsel appearing on behalf of the appellant, it was not contended on behalf of the assessee that the patients in the hospital were other than those referred by the Doctors. The statement of another employee of the assessee regarding these payments was also recorded. He was not cross examined on behalf of the assessee.
Held that,
++ we see no reason to interfere with this order of remand to this limited extent. The Tribunal could have as a fact finding body decided the issue itself. However, the Tribunal is not prevented from directing AO to verify such an aspect. Question No. (i) therefore, does not raise a substantial question of law. It does not even affect the appellant's rights. The appeal in this regard is, therefore, dismissed. AO dealt with the facts in considerable detail and rightly observed that the facts were within the knowledge of the assessee. The assessee, however, never disclosed the same. The AO further noted that so the said claim of the assessee cannot be accepted that the said cash received against bogus purchases may be assumed to have been paid to the Doctors. Another aspect which comes into picture is that by claiming the above aspect the assessee indirectly admits that the quantum of such payment of commission is covered by the quantum of such bogus purchases which is Rs. 28,10,500/- (Rs. 19,75,000/- relating to bogus purchases shown from M/s Kind Remedies, Rs. 15,07,500/- from M/s P.K.Enterprises and Rs. 3,28,400/- from M/s Amit Juneja & Co.) and thus it is not disputing the quantum of commission determined by applying rate of 5% on the hospital receipts. Considering all these aspects, the addition on account of commission payment is treated as from sources not disclosed by the assessee and no benefit, as claimed by the assessee is given;
++ the AO thereafter determined that an amount of Rs 4.35 crores was received by the asseseee and computed the commission at 5% of the same which amounted to Rs. 21,75,771/-. The AO infact took a balanced approach. He noted that the normal practice in the profession was to give a commission of 10% of the billed amount to the Doctor referring the patients but that it was possible that some patients came without reference and that some Doctors did not take such commission. Considering the same the AO computed the commission at 5% and not 10% of the total medical receipts. The approach adopted by AO was reasonable and fair and after considering all the relevant facts. It is important to note at the cost of repetition that the assessee had admittedly destroyed the documents relating to these payments. The Tribunal agreed with the finding on facts. Infact the Tribunal did so after furnishing detailed reasons itself. Having done so the Tribunal held that we restrict the said addition to Rs. 5 lacs for the year under consideration. The ground of appeal No.9 raised by the assessee is thus partly allowed. The Tribunal has furnished no reason whatsoever for differing with the order of the Assessing Officer in this regard which is confirmed by the CIT(A). There is no basis on which a sum of Rs. 5 lacs was computed. The order of the Tribunal is, therefore, perverse. In the circumstances, question No. (iii) is answered in favour of the department and against the assessee. The addition made by AO is confirmed.
Revenue's appeal partly allowed
2016-TIOL-2222-HC-KAR-CX
CONCEPT HYDRO PNEUMATIC PVT LTD Vs CCE: KARNATAKA HIGH COURT (Dated: August 24, 2016)
Dismissal of Appeal - Condonation of delay in preferring appeal by 117 days - Scope - Condonation of delay though is required to be sufficiently explained, if the Court finds that there is substantial merit in the case and rights of the parties have not substantially altered, delay can condoned by imposing costs - Substantial merit in appellant's case - Delay condonation apparently is not going to result in prejudice to the Revenue but is going to result in grave injustice to the appellant - In the circumstances, CESTAT dismissing application to condone delay, unjustified - Delay condoned on imposing cost.
It is by now well settled that the condonation of delay though is required to be sufficiently explained but at the same time, if the Court finds that there is substantial case to be considered in the appeal, the Court may also examine as to whether the delay could be condoned by imposing suitable costs or not. It is true that, the delay may operate as bar in pursuing the proceedings but, to what extent the discretion should be exercised would vary from facts to facts. Financial inability cannot be a ground which need not be considered at the time of condonation of delay. On the contrary, financial inability can be one of the valid grounds for accepting the contention that the appellant was prevented by sufficient reasons in not preferring the appeal. It may be that in a given case, Court may decline to exercise discretion for condoning the delay, if, during the period of delay, the rights of the parties are substantially altered and/or irreversible situation is created but we do not find any of the requirements are satisfied in the present case. In the circumstances of the case, the Tribunal ought to have exercised the discretion for condonation of delay. Further, declining the exercise of discretion for condonation of delay may result into grave injustice to the appellant and appellant would be deprived of the case to be considered on merits, more particularly, when no prejudice is going to be cause to the respondent-Department, since on the demand, the interest if ultimately is maintained, it is to follow. Under these circumstances, the appeal deserves to be allowed. Delay deserves to be condoned and the Tribunal should be directed to decide the appeal on merits. (Para 6-8)
Assessee appeal allowed
2016-TIOL-2221-HC-DEL-CX
PR CHEMICALS Vs UoI: DELHI HIGH COURT (Dated: August 23, 2016)
CX - Rebate - Export of Gutkha - Plastic Waste Management and Handling Rules, 2011 - Petitioner submits that ban on use of plastic sachet which was brought in force on 02.07.2011 by substituting the definition "carry bag" could not have defeated the rebate claim on account of admitted exports that occurred between 07.06.2011 and 01.07.2011.
Held: Central Government itself in almost identical facts and powers seems to have (in P.R.Chemicals's case) taken the view that (a) notifications is not retrospective and (b) that it cannot be applied for consignments that were cleared prior to 02.07.2011 - As far as the textual interpretation to "export" goes, the revisional authority in this case construed the meaning of the term based on its common grammatical connotation rather than on analysis of other parts of the statute i.e. the Custom Act - Section 51 of the Customs Act completely answers the issue at hand - as held by the apex court in Asian Food Industries - 2006-TIOL-147-SC-CUS, Section 51 of the Customs Act, 1962, does not say that until and unless shipment crosses the international boarder, the notification imposing prohibition shall be attracted - petitioners entitled to relief - impugned order cannot be sustained - Writ petition allowed - Rebate applications to be processed expeditiously preferably within four months: High Court [para 4, 5, 6]
Petition allowed
2016-TIOL-2220-HC-MAD-CX
PRABHA INDUSTRIES Vs ACCE: MADRAS HIGH COURT (Dated: August 29, 2016)
Writ - Maintainability - Ground of territorial jurisdiction - Original adjudication order and the appellate order were passed by the Appellate Commissioner Cochin - None of the orders issued were within the territorial jurisdiction of Chennai High Court - Appeal against said order before Chennai High Court not maintainable for want of territorial jurisdiction. (Para 5)
Writ dismissed
2016-TIOL-2219-HC-MAD-CX
BHORUKA STEEL LTD Vs CC: MADRAS HIGH COURT (Dated: August 17, 2016)
Central Excise - Delay condonation - Appeal before Appellate Authority was filed one day beyond the condonable limitation period of 30 days - Appeal held is barred by limitation and appeal was rightly rejected because Appellate Authority has no power to condone delay beyond statutory period of 30 days - However, High Court in exercise of its extraordinary jurisdiction in exceptional circumstances can condone appeal delay.
The Act does not confer power on the Appellate Authority to condone the delay beyond the period of thirty days. In fact, there are decisions of this Court as well as Hon'ble Supreme Court stating that this Court should not embark upon such exercise when outer time limit has been fixed in a statute. Though this has been the rule, there have been certain exceptions where this Court has exercised its extraordinary jurisdiction, considering the peculiar facts and circumstances of the case. It is manifestly clear in this case that the Order-in-Original which was passed on 10.11.2004, is yet to be given effect to and it has not attained finality, in spite of lapse of nearly one decade. The Writ Petition has been pending before High Court from the year 2005 and eleven long years has lapsed and nothing has happened. Therefore, this is a good and sufficient reason for this Court to exercise its extraordinary jurisdiction and condone the delay, with a direction to the first respondent to hear the appeal on merits.
Petition allowed
2016-TIOL-2218-HC-KAR-ST
EBLITZ INC Vs ADDL CST: KARNATAKA HIGH COURT (Dated: August 24, 2016)
Service Tax - Delay in preferring appeal - Condonation - Sufficient cause - Outer limit for entertaining appeal including condonation of delay is 6 months and runs from the date of receipt of decision of the order by the assessee - No evidence produced by Revenue to verify date of receipt of Original Order by petitioner - In the circumstances, delay condonation in preferring appeal by assessee beyond statutory period of 90 days has to be allowed. (Para 8, 9)
The limitation would begin from the date of receipt of decision of the order and though normal period of limitation of three months to prefer appeal from the date of receipt of the order, there is power with the appellate authority to condone the delay for further period of three months if he is satisfied that the appellant was prevented by sufficient cause for non-preferring the appeal within the period of three months. It is true that the outer limit is six months for entertaining of the appeal including condonation of delay. However, in order to find out that the limitation would begin from which date, it was obligatory on the part of the revenue to verify the record of the acknowledgement received, if any, or any other material for ascertaining the date on which the order was received by the appellant. When the appellant made statement on oath that it received the order only on 11.09.2012 to dislodge or for non-accepting the statement made, there should have been material on record for receipt of the order by the appellant on a particular date. If the material was not there, the respondent could not proceed on the basis that the order dispatched on 16.03.2012 ought to have been received within reasonable time. It is hardly required to be stated that when the statute provides express beginning of the limitation from the date of receipt of the order, unless the receipt is so verified and considered, the limitation cannot be said to have begun. In any case, even if the date of despatch is considered on 16.03.2012 then also within the outer limit of six months, the appeal was already presented on 13.09.2012. Under the circumstances, it is clear that the second respondent ought to have condoned the delay and ought to have examined the appeal on merits. It is apparent that the attention of the court below about the proviso to Section 85(3) of the Finance Act, was not brought. Further the sub-section (2) providing for beginning of the limitation from the date of receipt of the order was also not brought to the notice of the court. Under these circumstances, that in absence of any material considered the date from which the limitation period ought to have been taken, it is a fit case to condone the delay and to examine the matter on merits. The impugned order hence set aside and the delay in preferring the appeal is condoned.
Appeal allowed
2016-TIOL-2217-HC-MAD-ST
AQUA DESIGNS INDIA PVT LTD Vs PR CST: MADRAS HIGH COURT (Dated: August 29, 2016)
Service Tax - Alternative remedy - Question of facts - Writ maintainability - Writ challenging demand of duty liability on works contract involving several factual issues requiring thorough examination of documents/statements/invoices etc, held is not maintainable in view of efficacious alternative appellate statutory remedy.
For the relevant periods in question, the main issues to be decided by the court are whether the agreement entered into by the assessee with their clients for providing water/waste water treatment/management is composite in nature involving design, drawing, process Engineering, procurement, supply, fabrication, assembling, testing, erection, commissioning and handing over; and whether service tax is to be paid on the service portion of the gross amount in connection with execution of erection & commissioning, works contract and turnkey projects excluding the actual value of materials involved (suffered sales tax) alone or by adopting the value as per notification No.01/2006 or as per works contract (Composition) scheme in as much as the value adopted by the assessee is on notional basis, are all questions of facts and i t is beyond dispute that to test the correctness of the impugned order, a thorough probe into the documents, statements, invoices, bills, etc is required and the question would be can such an exercise be done in a Writ Petition especially when the provisions of the Act provide for a hierarchy of remedies.
Under the scheme of the Act, there is a hierarchy of authorities before which the petitioners can get adequate redress against the wrongful acts complained of. The Act thus provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under Article 226 of the Constitution of India. Thus there is no reason for the assessee to bypass the statutory remedy and come to the Court with a Writ Petition and the questions, basically of facts should be agitated before the statutory appellate authority. Thus, considering the complicated nature of the facts involved and to adjudicate the correctness of the impugned order, it would be necessary to re-examine the factual position, this Court is of the view that the petitioner should not be permitted to bypass the statutory appellate authority which is not only an effective remedy, but is the efficacious remedy. Writ petition is hence dismissed. (Para 7, 8, 9)
2016-TIOL-2216-HC-AHM-IT
GANESH HOUSING CORPORATION LTD Vs DCIT: GUJARAT HIGH COURT (Dated: September 12, 2016)
Income Tax Act - Sections 80IB & 147.
Keywords: reopening of assessment, failure to disclose full and true particulars of income & escapement of income.
Whether reopening of assessment is sustainable where Assessing Officer had occasion to examine the Assessee's claim for deduction and the assessee substantiated the claim alongwith necessary documentary evidence and after such scrutiny, the Assessing Officer in the order of assessment, made no disallowance on the assessee's claim of deduction - NO: HC
The Assessee is a company engaged in the business of construction and development of housing project. For the assessment year 2004-05, the Assessee filed the return declaring loss. Assessee had claimed deduction under section 80IB(10). The return was taken in scrutiny by the Assessing Officer, during which, he raised several queries and the Assessee replied to the same. The Assessing Officer passed order of assessment under section 143(3), determining the income of assessee. Assessing Officer considered and granted the deduction under section 80IB(10) as claimed. However, by applying the MAT provision of section 115JB of the Act, the said assessment was framed. Assessing Officer issued notice to reopen the assessment beyond the period of four years from the end of relevant assessment year on the ground that the assessee had constructed housing projects and claimed deduction of 100% u/s. 80IB(10). AO opined that in the Development Permission issued by AMC in respect of one of the projects, the assessee's name was not even mentioned as Developer. Further, the construction permission/Raja Chity issued by AMC in respect of that project also does not mention the name of the assessee as a developer. There was failure on the part of the assessee to disregard these facts in Form No.10CCB while claiming deduction u/s.80IB(1). Thus, he was of the opinion that the assessee is not eligible for claim u/s. 80IB(10). Thus, the income chargeable to tax had escaped assessment. Assessee’s objections against the notice for reopening of assessment were rejected by the Assessing Officer.
Having heard the parties, the court held that,
++ the Assessing Officer had occasion to examine the Assessee's claim for deduction under section 80IB(10). In fact, this was the principle claim of the assessee, since bulk of its income was derived from housing projects, with respect to which, the assessee had claimed deduction under section 80IB(10). The Assessing Officer raised multiple queries under a letter, one of them calling upon the assessee to substantiate the claim under section 80IB(10) alongwith necessary documentary evidence. In reply to such query, the assessee gave a detailed reply and produced number of documents. These documents contained the development permission and construction permission granted by the authorities and such other documents. It was only after such scrutiny, the Assessing Officer in the order of assessment, made no disallowance on the assessee's claim of deduction under section 80IB(10), except for limiting it to the extent of profit. (para 9)
++ thus, the entire claim of deduction came up for consideration at the hands of the Assessing Officer in the original assessment. The claim was minutely examined and only thereafter accepted. It would therefore not be permissible to the Assessing Officer to disturb such claim in exercise of powers under section 147 of the Act that by issuing the notice beyond the period of four years beyond the period of relevant assessment year. Here again, the Assessing Officer had not recorded, in what manner the assessee failed in its duty to disclose truly and fully all material facts. (para 10)
++ in case of Sadbhav Engineering Ltd. v. Deputy Commissioner of IncomeTax - 2010-TIOL-540-HC-AHM-IT, the Division Bench of this Court held that retrospective amendment cannot be a ground for reopening assessment beyond a period of four years from the end of relevant assessment year. (para 13)
++ impugned notice is set aside. Petition is allowed and disposed of. (para 14)
Assessee's petition allowed
