NOTIFICATION

it16not94

Tax on distributed income to shareholders - CBDT notifies special provisions for buy back of shares U/s 40BB

MIXED BUZZ

India, US trade ministers to meet to resolve trade concerns

CASE LAWS

2016-TIOL-2728-CESTAT-AHM

VFC INDUSTRIES PVT LTD Vs CCE & ST: AHMEDABAD CESTAT (Dated: August 31, 2016)

CX - Assessee engaged in manufacture of printed/un-printed cartoons and corrugated boxes (CFC) - A demand notice was issued for recovery of CENVAT Credit on the returned goods cleared as scrap with a proposal for imposition of penalty - Certain quantity of defective goods were remade/reconditioned and cleared on payment of appropriate duty - However, major portion of returned goods was scrapped and cleared from factory after payment of duty on transaction value of scrap - It cannot be said that process by which defective goods are converted into scrap, should be considered as manufacture within definition of manufacture as laid down under Section 2(l) of CEA, 1944 - Therefore, on merit, assessee has no case - However, on issue of limitation, assessee has meticulously filed all relevant information with the Department - Where facts are known to both the parties, it cannot be held that there was suppression of facts - No merit found in impugned order on aspect of limitation, accordingly, same is set aside: CESTAT

Appeal allowed

2016-TIOL-2727-CESTAT-MUM + Story

INGRAM MICRO INDIA PVT LTD Vs CC: MUMBAI CESTAT (Dated: October 4, 2016)

Cus - External Hard Disks are classifiable under Heading 8471 7030 & not under 8471 7020 as Hard disc drives - qualification ‘removable' in the description relating to heading 8471 7030 of the Schedule to the CETA, 1985 is applicable to external storage device - benefit of notification 6/2006-CE, 12/2012-CE not available - Appeals dismissed: CESTAT [para 7, 9, 13, 15, 16, 17]

Appeals dismissed

2016-TIOL-2518-HC-KOL-IT

REMAHAY STORES PVT LTD Vs ITO: CALCUTTA HIGH COURT (Dated: October 4, 2016)

Income Tax – Section 148.

Keywords: reopening of assessment, notice of reassessment & principles of natural justice.

Whether re-assessment proceeding or an order passed in such proceeding without duly serving notice under Sec. 148 of the IT Act on the assessee, is void ab initio and a nullity in the eye of law – YES: HC

The Income Tax Officer issued a notice u/s 148 to the assessee company in respect of assessment year 2007-08. Assessee contends that the impugned notice was sought to be served on the assessee at its earlier address in spite of the Department being aware of the current address of the assessee. As such, the assessee did not receive the notice till a copy of the same was handed over to the assessee after institution of the instant writ petition. The assessee prays for quashing of the notice and for a writ of prohibition restraining the respondents from taking any action on the basis of the impugned notice.

Having heard the parties, the Court held that,

+ the specific case of the assessee is that its registered office was shifted from Biplabi Anukul Chandra Street address to Sunny Park address with effect from 3 December, 2008. The assessee has disclosed Form 18 filed under Sec. 146 of the Companies Act, 1956 to corroborate the aforesaid fact. This fact is also not denied by the respondents even in course of making submission. (para 21)

++ the assessee has also disclosed copies of IT Return acknowledgement forms for the assessment years 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14 issued by the Department which mention the Sunny Park address of the assessee. The assessee has also brought on record copies of notices issued by the Department to the assessee under Sec. 143(1) of the IT Act pertaining to various assessment years starting from 2009-10, all of which were sent to the Sunny Park address of the assessee. Hence, it is beyond any doubt that the Department was well-aware of the current address of the assessee. (para 22)

++ inspector attempted to contact the assessee at its erstwhile address at Biplabi Anukul Chandra Street and not having found the assessee there, affixed a copy of the notice under Sec. 148 of the IT Act at the said address. This report is dated 31 March, 2014. Although this report mentions that the said address was last known address of the assessee, such statement is obviously incorrect. Starting from 2009-10 the Department has sent all correspondences and notices to the assessee at its Sunny Park address. Further, the Department has disclosed no document to show that Sec. 148 notice was even sought to be served at the assessee's Sunny Park address nor any such point was urged in the course of making oral submission by Counsel for the respondents. Hence, it appears to be absolutely clear that the notice under Sec. 148 of the IT Act was never served on the assessee at its Sunny Park address. (para 23)

++ notice under Sec. 148 of the IT Act was not duly served on the assessee. (para 25)

++ a re-assessment proceeding or an order passed in such proceeding without duly serving notice under Sec. 148 of the IT Act on the assessee, is void ab initio and a nullity in the eye of law. (para 27)

++ any proceeding initiated by the Department pursuant to the notice dated 31 March, 2014 issued under Sec. 148 of the IT Act or any order passed in such proceeding is bad in law and of no effect. Such proceeding and order passed therein, if any, are hereby quashed. (para 28)

++ the assessing officer was well within his jurisdiction in issuing the notice. On the request of the assessee the assessing officer also furnished to the assessee the reasons for issuing such notice. It is not for this court to adjudge whether such reasons are good or bad so long as they are not perverse. The notice is really in the nature of a show-cause notice and the Writ Court normally does not interfere with such a notice. It is open to the noticee to respond to such notice and urge as to why the action proposed in such notice should not be taken. In the present case, the assessee is at liberty to give its reply to the notice under Sec. 148 and also to participate in the reassessment proceedings if its Return for the relevant year is reopened. (para 30)

++ any reassessment proceeding initiated by the Department pursuant to the notice dated 31 March, 2014 which is impugned in this application or any order passed in such proceeding is bad in law and of no effect. The same are quashed. (para 32)

Assessee's writ petition allowed

2016-TIOL-2517-HC-AHM-IT

PR CIT Vs LALBHAI REALTY FINANCE PVT LTD: GUJARAT HIGH COURT (Dated: September 26, 2016)

Income Tax Act 1961 - Interest free loans - Loan - Sister Concern

Whether interest paid on loan warrants disallowance merely because the assessee has diverted its interest-bearing funds for the purpose of its business - NO: HC

The assessee company had borrowed funds from HDFC Bank out of which, certain sum was given to the sister concern M/s. SSKI which carried no interest. The Revenue was of the opinion that the interest paid to the asessee on such borrowings which was diverted for interest free loans should be disallowed. This was the second round of litigation. In the first round, the Tribunal accepted that there was diversion of interest bearing funds for advancing interest free loans. However, the question was, was it done due to business expediency. On this short ground, the matter was remanded to the AO. The AO, however, discarded such defence and taxed the income by disallowing a claim of expenditure on the interest paid on such borrowed funds. The assesse carried the matter, in appeal before the CIT(A) and upon the CIT (A) dismissing the appeal, before the Tribunal. The Tribunal, by the impugned judgement, allowed the assessee's appeal and deleted the disallowance. Revenue filed appeal before the High Court.

HC held that,

++ the Tribunal noted different clauses of Memorandum of Association of the assessee-company which included the purpose of carrying on business of financing and leasing, as also for purchase of property and financing similar business undertakings. For the purpose of such objects, the company could acquire machineries, plants, stock in trade, trademarks and such other movable and immovable properties of all description. The Tribunal held that the advance was for business expediency. The Tribunal made following observations:

"........Our aforementioned factual observations clearly show that the revenue authorities have grossly erred in not accepting assessee's contention that is one of the businesses in a real estate. The Tribunal in the first round of litigation has directed the assessee to establish direct nexus between the advancing of money to SSKI and its commercial expediency. In our understanding of the fact, as mentioned elsewhere the assessee has succesfully discharged its onus and has complied with the directions of the Tribunal. We set aside the findings of the ld. CIT(A) and direct the A.O. to delete the additions of Rs. 77,35,960/ in A.Y. 2002-03 and Rs. 1,16,40,385/- in A.Y. 2003-04."

++ it can thus be seen that the assessee had diverted its interest bearing funds for the purpose of its business. It was not mere lending without interest but involved engagement of the assesseee in a business of developing real estate. No question of law arises. Tax appeals are, therefore, dismissed.

Revenue's appeal dismissed

2016-TIOL-2516-HC-MAD-IT

R ANANDAKUMAR Vs CCIT: MADRAS HIGH COURT (Dated: September 7, 2016)

Income Tax - Sections 234A, 234B & 234C

Keywords - Delay in filing the Return - Waiver of interest

Whether reasons accepted for waiver of interest u/s 234A can be accepted for waiver of interest u/s 234B and 234C as well - YES: HC

The assessee was an Individual, who challenged the order passed by the Revenue by filing writ petition in so far as it denies the waiver of interest.The application submitted by the assessee for waiver of interest u/s 234A was favourably considered by the Revenue and the Revenue found that the assessee was a student till 1990 and only after he finished his studies, he involved himself in the business activities of the firms, in which he was a partner and came to know of the fact that due to the delay in getting the share income particulars from the firms, there was a delay in filing his individual return of income for the relevant AYs. As soon as he received share income particulars, he filed returns voluntarily. The said explanation given by the assessee was found acceptable and reasonable cause for delay in filing the Return of Income and therefore, the Revenue waived the interest charged under section 234A of the Act. However, for the interest under sections 234B and 234C of the Act, the authority did not refer to the reasons given by the assessee nor his objections for waiver, but, stated that the circumstances mentioned in the Notification dated 23.05.1996, were not satisfied.

HC held that,

++ after noting the factual circumstances in the said case, it was pointed out that if the circumstances have been considered to be unavoidable circumstances for the purpose of waiver of interest under section 234A, in the facts of the case, the same would have to be considered as unavoidable circumstances for the purpose of reduction/waiver of interest under sections 234B and 234C as well. Accordingly, whatever waiver granted under section 234A, shall also be extended with regard to waiver of interest under sections 234B and 234C of the Act. As noticed above, the respondent was satisfied with the fact that the assessee has made out a case for waiver of interest under section 234A of the Act and the respondent recorded that it is a reasonable cause for delay in filing the return of income. Applying the reasons assigned by the Division Bench of the Gujarat High Court, this Court is of the view that the same reasoning should be adopted while considering the claim of waiver of interest under sections 234B and 234C of the Act. In the light of the above, the Writ Petition is allowed, the impugned order is set aside and the respondent is directed to grant waiver of interest under sections 234B and 234C of the Act for the assessment year 1989-90. No costs.

Assessee's writ petition allowed

2016-TIOL-2515-HC-MAD-VAT

RENGA ENGINEERING WORKS INDIA PVT LTD Vs ASSISTANT COMMISSIONER CT: MADRAS HIGH COURT (Dated: September 15, 2016)

TNVAT Act - Sections 19 & 27(4)(a)

Keywords - penalty - revised return by selling dealer - reversal of ITC - wrong availment of credit

Whether mere non-filing of inaccurate particulars by the selling dealer, can be a reason to reverse the ITC availed by the purchasing dealer - NO: HC

Whether the AO of a purchasing dealer and who is not the AO of the selling dealer, has any jurisdiction to reject the revised return filed by the selling dealer as an after-thought - NO: HC

The assessee dealer for the A.Y 2013-14, was issued with a notice alleging that there was a wrong availment of Input Tax Credit. The reason was that on verification of the website of the dealer, viz., it was revealed that they purchased goods from M/s.AMI Enterprises for the months from January 2014 to March 2014 and claimed ITC. However, in the Annexure-II of the said Selling Dealer, viz., M/s.AMI Enterprises, it was noticed that they have availed NIL Returns, thereby reporting that they had not made any sales to the assessee. On that ground, the ITC claim of the assessee was sought to be recovered, apart from imposing penalty u/s.27[4][a] of the TNVAT Act. The assessee was given 15 days time to submit his objection and also an opportunity of being heard in person. Although the assessee had submitted detailed objections, the AO proceeded to reject the reply on the ground that the revised return filed by the Selling Dealer, viz., M/s.AMI Enterprises, was an after-thought.

Having heard the parties, the High Court held that,

++ the first mistake done by the Asst CCT is not affording an opportunity of personal hearing, though he had stated that such opportunity will be given in the notice. This Court is of the view that the wordings mentioned in the notice is not proper since after the objection is received, there may be cases where the AO will be fully convinced with the objections and he may even drop the proposal. Therefore, the proper thing for the officer would be to specifically fix the date for personal hearing after receipt of the objections and after going through the same. The second mistake committed by the Asst CCT is that by proposing to reverse the entire ITC availed by the assessee solely for the reason that the Selling Dealer had filed NIL Return, this Court in several decisions had held that if the Selling Dealer has not collected tax, that liability has to be fastened on the Selling Dealer. That apart, merely because the Selling Dealer had filed incorrect particulars, will not be a reason to reverse the ITC availed by the Purchasing Dealer. The third mistake committed by the Asst CCT is in disbelieving the revised return or rather, summarily rejecting the revised return filed by the Selling Dealer before his AO. Admittedly, the Asst CCT is not the AO of the Selling Dealer. Therefore, he has no jurisdiction to reject the revised return filed by the Selling Dealer as an after-thought. If at all it can be done only by the AO of the Selling Dealer. In the light of the above mentioned inherent differences in the impugned order, the same calls for interference. Accordingly, the matter is remanded to the Asst CCT for fresh consideration who shall ascertain full particulars from the AO of the Selling Dealer.

Case remanded

2016-TIOL-2514-HC-MAD-VAT

STEEL SHOPPE Vs ASSISTANT COMMISSIONER : MADRAS HIGH COURT (Dated: September 19, 2016)

Tamil Nadu Value Added Tax Act, 2006 - Section 27(1)(a)

Keywords: turnover - unregistered dealers - inspection reports - pre revision notices - consignor - consignee movement - transportation of goods

Whether when the assessee has produced relevant documents at the time of personal hearing but, the Revenue has stated that the records produced were insufficient to establish the genuineness of transactions, in that case the Revenue is duty bound to discuss about the reasons of such disbelieve - YES: HC

The assessee is a registered dealer in steel sheets. Its place of business, located at Hosur, was inspected by the officials of the Enforcement Wing on various dates and based on which, inspection reports were drawn which paved way for the issuance of pre-revision notices. In respect of the same, the assessee had given statements before the Enforcement Wing on various dates raising various contentions and pointing out about the genuineness of the transactions especially, when they dealing with Public Limited Companies such as Essar Steel, Jinda Steel Authority of India, etc. Along with the statements, to support their contentions before the Enforcement officials, assessee had enclosed the CST Assessment Order copy 2008-2009; Letter of "C" Form submission 2012-13; HC order & Letter and Kuber Entp. And Habeeeba Steel Traders Relevant VAT Returns; Copies of Invoices; Copies of VAT Returns and buyers and sellers; Annexure - 5 Form Nov, 2013 to Oct-2014, with monthly returns and the audited balance sheet March, 2014 and trading A/c of Current year. In the show cause notice, the respondent proposed to revise the assessment on the following grounds viz., (1) Incorrect claim of ITC; (2) Sales Suppression; (3) Stock variation; (4) Tax suppression on consignor & consignee movement and (5) Penalty. Assessee submitted its objections furnishing the details and stating that every purchase invoice was accounted by seller and buyer and same transactions were reflecting in both parties VAT returns, then, where was the question of "not paying tax on purchase" arises ? And if there was enough credit available to take care of output tax payment then there was no question of tax liabilities. Further, assessee had stated that the purchases made from the dealer in question had been accounted properly, i.e., invoice number, vehicle number (private vehicle) through which the goods were transported to the assessee's premises in the computerised outward stock register maintained by them and the assessee have also entered the receipt of stock in our computerized inward register and the stock register maintained by assessee had been verified by the Enforcement Wing Officials and as such the allegation that the purchases of goods without actual handling was unfounded allegation.

Held that,

++ the respondent while completing the assessment, in an arbitrary and cryptic manner pointed out that the petitioner has not established the movement of goods by producing documents. In fact, the other issues are also correlatable to the said issue and therefore, if the finding rendered by the authority on the first issue is not correct then, automatically, it will have a cascading effect on the other issues as well. It is not a case where the petitioner is not able to furnish details. But, the petitioner has furnished the details which have been brushed aside by the respondent while completing the assessment. Thus, from the above, it is crystal clear that the petitioner has produced the relevant documents at the time of personal hearing but, the respondent has stated that the records produced by the petitioner are insufficient to establish the genuineness of the transactions. If that is the stand taken by the respondent, then, there was a duty cast upon the respondent to discuss about the nature of the documents produced by the petitioner and how he proposes to disbelieve those documents as to whether all the documents are liable to be rejected, etc. Part of the transactions have been recognised by Department. The transaction made by the petitioner to a company at Sriperumbudur is not disbelieved at the hands of the purchasing dealer. In such circumstances, the respondent appears to have not conducted a thorough enquiry in to the matter, as it appears that the documents are voluminous and in a summary manner, the assessment was done for the 7 AYs. It is further pointed out by Senior Counsel that with regard to the turnover omission, which appears for all the assessment years, the petitioner has stated before the Enforcement Wing Officials themselves that they are unable to cull out the details from bare perusal of the figures. Therefore, even after the issuance of show cause notice, while submitting their reply they sought for details such as Bill number etc. Even this request has been rejected by the Assessment officer, as an after thought. Since, the respondent has already initiated action, he is bound to conduct a thorough and complete enquiry into the matter and any slipshot or cursory perusal of the documents cannot be appreciated since, the proceedings are under a taxation statue. Thus, for all the above reasons, this Court is fully convinced that the impugned assessment has to be done in a proper manner after considering all the documents to be submitted by the petitioner. The petitioner shall be furnished the documents sought for and the petitioner is also entitled to produce the books of accounts, etc. In the result, the writ petitions are allowed and the impugned orders are set aside and the matters are remanded back to the respondent for fresh consideration who shall afford an opportunity of personal hearing to the representative of the petitioner and the petitioner shall be permitted to furnish relevant documents, if any, and re-do the assessment in accordance with law.

Case remanded