2016-TIOL-2546-HC-KAR-VAT

STATE OF KARNATAKA Vs COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT LTD : KARNATAKA HIGH COURT (Dated: September 21, 2016)

KVAT Act - Sections 38, 50 - KVAT rules 2005 - rule 38, 128 & 130A

Keywords: claim of refund - purchase of inputs - verification - maintenance - SEZ units - development activity -incidental activity - principal object & assembling.

Whether items of electronic gadgets or mobile or drinking water required for the incidental activity of the principle object of manufacture or trading or production or processing or assembling or repairing or reconditioning or reengineering or packing, would fall in the category of availability of input tax credit under Rule 130-A of the Rules - YES: HC

The assessee is a company. The present petitions were directed against the common order passed by the Tribunal in Sale Tax Appeal Nos.624-654/2012 whereby the Tribunal has found that the assessee unit was eligible for refund of tax paid on the purchase of inputs and for the purpose of verification of the items of which the refund was to be granted, the matter was remanded to the AO. The contention raised on behalf of the Revenue's counsel was that as per Rule 130-A of the Karnataka VAT Rules, 2005, the assessee would be entitled to input tax credit or refund of tax paid only on items which were required for the establishment of the plant and for its incidental purpose. As per the submission of counsel when the items as that of mobile, drinking water and other electronic gadgets were purchased, the assessee would not be entitled to input tax credit. He further submitted that these electronic gadgets or drinking water had nothing to do with the development activity of the unit concerned and submitted that Tribunal has erroneously considered the said aspect and this Court may consider the same in the present petitions.

Held that,

++ the clause (c) of Rule 130-A (1) is wide enough for all activity of manufacture or trading or production or processing or assembling or repairing or packing and all such incidental purchases for the principal object of manufacture or trading or production or processing or assembling or repairing or reconditioning or reengineering or packing would get included for the purpose of input tax credit or refund of tax, as the case may be. When the rule itself is clear, coupled with the observations made by the Tribunal under the impugned order, we do not find any question of law would arise for consideration as sought to be canvassed. Apart from the above, those items of the electronic gadgets or mobile or drinking water are required for the incidental activity of the principle object of manufacture or trading or production or processing or assembling or repairing or reconditioning or reengineering or packing. Hence, such would fall in the category of availability of input tax credit under Rule 130-A of the Rules. In any case, for the purpose of verification of respective items, the Tribunal has remanded the matter to the assessing authority and it is only after the satisfaction arrived at by the assessing authority that the items are required for any principle object, as stated in Rule 130-A(1), the input tax credit is to be made available. In view of the above, even on merits also we do not find that any case is made out for interference. Under the circumstances, all petitions are meritless and therefore dismissed.

Revenue's appeal dismissed

2016-TIOL-2545-HC-AHM-MISC

ONGC LTD Vs PALAVASANA GRAM PANCHAYAT AND 3: GUJARAT HIGH COURT (Dated: October 10, 2016)

Oil and Natural Gas Commission Act, 1959 - Section 3 - The Oil and Natural Gas Commission (Transfer of Undertaking and Repeal) Act,1993 - Section 4(1) & (2)

Keywords: levy of property tax - business purpose - profit earning objective - land or building - gram panchayat - local body tax - commission - liabilities & geophysical survey

Whether the property passed on from the Commission to the Corporation, ceases to be a building or land belonging to a statutory corporation, as it no longer satisfies the requirement of same being used or intended to be used solely for the public purpose and not for profit - YES: HC

Whether any property tax on building or land could be levied by the Gram Panchayats till such properties were held by the Commission - NO: HC

The assessee is a company registered under the Companies Act and is a successor of erstwhile Oil and Natural Gas Commission (ONGC). The Commission was constituted under the Oil and Natural Gas Commission Act, 1959. The statement of objects and reasons for enactment of the said Act of 1959 would suggest that ONGC was established in August,1956 to carry out geological and geophysical surveys for discovering petroleum resources in the country and developing them in the public sector. A bill was presented for enactment of the said Act of 1959 which had, besides others, adequate provisions for exercise of suitable control by Government over such Commission. Previous approval of the Government would have to be obtained before exercising its powers in respect of certain specific matters. The Commission would also be subject to the directions of the Government in the discharge of its functions. With these objects in mind, the said Act of 1959 was enacted. Under Section 3 of the said Act of 1959, the Commission was established.

The Oil and Natural Gas Commission (Transfer of Undertaking and Repeal) Act,1993 was enacted to provide for the transfer and vesting of the undertaking by the Oil and Natural Gas Commission in the Oil and Natural Gas Corporation Ltd., a company incorporated under the Companies Act. The statement of objects and reasons for enactment of the Act of 1993 would suggest that the Central Government appointed a Committee to examine all aspects of the Commission's existing organization with a view to examine the need for its restructuring. Its recommendations were considered by the Government & accepted. It was felt that conversion of the Commission into a Public Limited Company would enable the ONGC to function more efficiently and with greater flexibility in raising resources from the capital market and easier structural adjustments. This would eventually enable the company to perform better to meet its production targets. With these objects in mind, the Act of 1993 was enacted. Section 3 of the Act of 1993 provided that on such date that the Central Government may, by notification in the Official Gazette appoint, the undertaking of the Commission to the would stand transferred to and vest in the Corporation. Such appointed date happens to be 1.4.1994.

Palavasna Gram Panchayat was authorized to levy property tax on the various properties situated within the limits of the said Gram Panchayat. The Mehsana branch of the Commission had acquired certain properties within the limits of said Gram Panchayat somewhere in the year 1984-85. Such properties were put to residential use by the Commission for its employees. In the month of November,2012, the Panchayat issued a bill of Rs.4,11,472/- towards the house tax concerning the period between 1975-76 to 1991-92. On 4.5.2004, the Panchayat once again asked the Corporation to make the payment of amount of Rs.24,46,870/- towards the house property for the period between 1975-76 to 2004-05. The Corporation thereafter wrote a letter to the District Development Officer requesting for exemption from payment of tax. On 11/16.3.2005, the District Development Officer, Mehsana conveyed to assessee that earlier application for exemption was rejected and that therefore, the Corporation should pay up the said tax amount. On 8.4.2005, the Corporation again requested the District Development Officer to consider the request for exemption of the tax in view of Rule 7(2) of the Gujarat Gram and Panchayats Taxes and Fees Rules,1964. On 2.7.2005, the Gram Panchayat raised yet another bill for a sum of Rs.26,29,614/- for the period from 1975-76 to 2005-06. The Panchayat also demanded a penalty of Rs.6,57,404/- for non-payment of the earlier bills.

Held that,

++ the fact that the Commission was a statutory Corporation is beyond cavil. The property held by such Commission was undisputably for public purpose. That being the position, the said provision would apply to such property and in the hands of the Commission could not have been taxed. The expressions used in the said provision of a property being used or intended to be used solely for public purpose and not used or intended to be used for purposes of profit, seem to have been used not as mutually exclusive manner but for greater emphasis. In other words, a property used or intended to be used solely for a public purpose, would automatically satisfy the later requirement of not being used or intended to be used for purposes of profit. Once therefore, when we hold that the Commission as a statutory corporation used or intended to use such property solely for the public purpose, it would thereafter be not necessary to digress any further before recognizing the exemption flowing from the exemption provision of sub-rule (2) of Rule 7 of the Rules of 1964. The property in question, thus, till it continued to be of the ownership of the Commission, the Gram Panchayat could not have levied the property tax from the Commission;

++ this would bring us to the second issue, namely, whether after the incorporation of the Corporation as a company, would such exemption continue to apply to the properties in hands of the Corporation. In plain terms, subclause (2) of clause (b) of sub-rule (2) of Rule 7 would not apply in such a situation. With the establishment of the Corporation, the requirement of the building belonging to a statutory corporation itself would fail. The subsequent expression of the same being used or intended to be used solely for public purpose would also no longer be satisfied. Being a company registered under the Companies Act, as held and discussed by SC in case of Electronics Corporation of India Limited, it would enjoy a distinct legal character. The fact that majority of the shareholders is the Government of India and the beneficiary also would therefore, be the Government agencies, notwithstanding. The case does not rest here. In sub-section (2) of Section 4 itself, the Corporation would inherit all rights, liabilities and privileges of the Commission which would include all rights and interests arising out of the properties held by the Commission immediately before the appointed date. An exemption from payment of the property tax, however, did not arise out of the property, but arose out of the fact that the building or land belonged to a statutory Corporation and was used or intended to be used solely for public purpose and not for profit making. For the application of this exemption therefore, two things had to be satisfied; first that the building or the land belonged to a statutory corporation and second, that it was used or intended to be used solely for a public purpose and not for profit. When the property, thus, passed on from the Commission to the Corporation by virtue of Section 4(1) of the Act of 1993, it ceased to be a building or land belonging to a statutory corporation. It also no longer satisfied the requirement of same being used or intended to be used solely for the public purpose and not for profit. The Corporation being a company registered under the Companies Act, of course subject to the directives that may flow from the policy makers would be free to manage its affairs in such manner as it may fulfill the objects for which the same is incorporated. If the land or building is not used or intended to be used for public purpose, in plain terms the exemption provision contained in sub-clause (2) of clause (b) of sub-rule (2) of Rule 7 would not apply. Nothing stated in sub-section (2) of Section 4 of the Act of 1993 would override this situation. What the said provision provided is for transfer of rights, liabilities and privileges from the Commission to the Corporation. We are unable to accept the contention of the counsel for the Corporation that whatever the changes in the Constitution of the Corporation and the purpose for which the property is held and used, the earlier exemption of payment of property tax would continue unabated;

++ we have noticed that provision of sub-rule (2) of Rule 7 grants exemption from payment of property only in case of the Gram Panchayats. No similar provision is made in case of Nagarpalikas. In the result, petitions are disposed of with following declarations that no property tax on building or land could be levied by the Gram Panchayats from the Commission till such properties were held by the Commission. Once the Corporation was incorporated and the properties were transferred to such Corporation, the Panchayats could levy the tax under sub-rule (1) of Rule 7 of the Rules of 1964 from the Gram Panchayats. All Nagarpalikas were in any case authorized to levy such tax from both Commission as well as Corporation since no such exemption provision was made in the statute concerning such property tax. All these petitions are disposed of with the directions that property tax for a period during which the property was owned by the Commission, the same shall be deleted. The Gram Panchayat shall issue a revised bill concerning the later period. Bills are issued by the Gram Panchayat for the period starting from 1994-95 therefore, concerning the Corporation, the petition is dismissed. Property tax bill is raised by the Nagarpalika. The petition is therefore dismissed. There is nothing to suggest that the demand is for a period when the property was held by the Commission. The bill was issued on 30.6.2010. The petition is therefore, dismissed. There is nothing to suggest that the demand is for a period when the property was held by the Commission. The bill was issued on 6.3.2012. The petition is therefore, dismissed. In SCA No.13153 of 2012, the property tax bill is raised by the Nagarpalika. The petition is therefore dismissed.

Assessee's appeal dismissed

CC Vs P SINNASAMY: MADRAS HIGH COURT (Dated:August 23, 2016)

Confiscation of smuggled gold - Gold is a prohibited item and Adjudicating Authority can order absolute confiscation by exercising discretionary power under Sec 125 – Order of CESTAT directing to release the gold on payment of fine is against law and is set aside.

When it is the case of the appellant that 2548.3 grams of gold were concealed and not declared, in contravention of Section 77 of the Customs Act, 1962 and that there was a violation of Section 111(d)(i)(l) and (m) of the Customs Act, 1962, r/w. Section 3(3) of the Foreign Trade (Development and Regulations) Act, 1992 and when reference has been made to the Custom Notification No.117/92-Cus., dated 01.03.1992, as amended from time to time and when there was a categorical finding of the adjudicating authority that the respondent had deliberately attempted to smuggle 2548.3 grams of gold, by concealing and without declaration of Customs, for monetary consideration and that gold bits seized were liable for confiscation, under Section 111(d)(i)(l) and (m) of the Customs Act, 1962, r/w. Section 3(3) of the Foreign Trade (Development & Regulation) Act, 1992 and when the 1st respondent was also detained under the COFEPOSA Act, for six months and when the Commissioner of Customs (AIRPORT), had imposed a penalty of Rs.50,000/- (Rupees fifty thousand only), with Section 112(a) of the Customs Act, 1962, it is unfortunate that without due consideration to the above facts and statutory provisions and the categorical finding of the adjudicating authority, the Tribunal has observed that there is no need for absolute confiscation of the goods. (para 23)

One of the contentions raised in the instant case, is that gold is not a prohibited item and therefore, there can be an order to release the same, on payment of redemption fine. While adverting to the substantial question of law, "Whether gold is a prohibited item within the meaning of the provisions of the Customs Act, 1962?" and after considering the statutory provisions under the Customs Act, 1962 and Foreign Trade (Development and Regulations) Act, 1992 and public notices in No.51, dated 27.10.1997 and No.54, dated 04.09.1997, the Hon'ble Division Bench of Calcutta High Court has categorically held that gold is a prohibited item, which comes within the first part of Section 2(33) of the Customs Act. (para 26)

When exercise of discretion is conferred on the adjudicating authority to decide, as to whether, such discretion should be exercised in favour of the importer or any other person, falling under Section 112(b) of the Customs Act, 1962 and when in the case of smuggling or attempted smuggling, goods have been imported, in contravention of the provisions of the Customs Act, 1962 or any other law, for the time being in force, and when a prima facie case of attempt to smuggle the goods, is made out, it is not open to the Tribunal to issue any positive directions to the adjudicating authority, to exercise option in favour of the 1st respondent.(para 30)

In the case on hand, when discretion is conferred on the adjudicating authority, under Section 125 of the Customs Act, 1962, as to whether, gold and other goods seized, should be confiscated absolutely or be permitted to be redeemed on payment of fine, on the facts and circumstances of the case, and considering the statutory provisions and notification, he has ordered absolute confiscation of gold and other goods, used for import and released certain goods on payment of fine and duty. Exercise of discretion has been interfered with by the Tribunal, with a specific direction to give option for redemption, in which event, there is no choice left to the adjudicating authority to act. He has no freedom or liberty to act, according to own will and that he has been compelled to exercise discretion and his power, without control, other than his own judgment. (para 41)

At the time, when discretion is exercised under Section 125 and if any challenge is made under Article 226 of the Constitution of India, the twin test, to be satisfied is "relevance and reason". In the light of the judgments of the Hon'ble Apex Court and applying the same to the facts of this case and testing the discretion exercised by the authority, on both subjective and objective satisfaction, as to why, the goods seized, cannot be released, when smuggling is alleged and on the materials on record, it is held that the discretion exercised by the competent authority, to deny release, is in accordance with law. Interference by the Tribunal is against law and unjustified. (para 56)

Appeal allowed

2016-TIOL-2543-HC-MAD-CX

DAYS INN DECCAN PLAZA Vs CST: MADRAS HIGH COURT (Dated: September 30, 2016)

Central Excise - Resurrection of stale claim - Writ maintainability - Appeal against Order-in-original confirming demand of Cenvat Credit was dismissed for being filed beyond condonable limit and stood merged with the order of Appellate Authority - Said order was confirmed by the Writ Court as well as by the Division Bench - Petitioner thus cannot have a second round of litigation challenging the very same orders questioning the merits of the assessment - Principles of promissory estoppel applicable. (Para 12-16)

Central Excise - Show Cause Notices issued pertain to different assessment periods - Invocation of extended limitation period on ground of suppression, not unjustified. (Para 11)

Writ dismissed

2016-TIOL-2542-HC-AHM-IT

GUJARAT STATE BOARD OF SCHOOL TEXTBOOKS Vs ACIT: GUJARAT HIGH COURT (Dated: September 30, 2016 )

Income tax - Sections 10(22), 10(23C)(vi), 11, 12AA, 143(3), 147 & 148

Keywords - exemption u/s 10(23C) - filing of return - providing textbooks - registraion u/s 12AA - reasons for reopening & reassessment

Whether where an issue as to simultaneous exemption u/s 11 vis-a-vis registration u/s 12AA granted to a trust has already been thoroughly examined by the I-T Authority, it would not be proper on the part of the Authority to reopen the said issue when there is no remote indication that assessee has not truly and fully disclosed all material facts - YES: HC

The assessee is a Board of School Textbooks formed by the State Government for the purpose of promoting the advancement of education in general. Initially, the Board was exempted from levy of income tax u/s 10(22) of I-T Act of the delivery period upto 1st April, 1999. On later period, the amendment had taken place from A.Y 1999-2000 and section 10(22) came to be omitted and substituted by section 10(23C)(vi). Accordingly, the Board was exempted u/s 10(23C)(vi) for the A.Y 1999-2000 till the A.Y 2002-03. The Board also got registration u/s 12AA w.e.f. 01.04.1999 and by virtue of the later amendment, compulsory filing of return was required. Resultantly, in 2003-04, for the first time the return came to be submitted by the assessee and for that period, the exemption was granted after scrutiny assessment u/s 143(3) and no reopening for that year had taken place. For the subsequent year 2004-05 again, the exemption was granted in view of section 11 and the said exemption was also scrutinized under the assessment executed u/s 143(3) and the reopening was initiated for that year but later on, upon explanation of the assessee, the said reopening process came to be dropped by the AO. For the another next year 2005-06 again, the exemption was granted after scrutiny assessment u/s 143(3) by observing that nature of business of the assessee was to provide quality textbook at reasonable price. The said year assessment came to be reopened by giving notice u/s 148 by the very same officer, who executed the scrutiny assessment and granted exemption. Later on, the very same officer dropped the reopening proceedings which were initiated. However, subsequently, once again the very same officer initiated the proceedings for reopening of the assessment on the ground that if the institution was registered u/s 12AA, exemption available to the trust u/s 11(1)(a) would not be available to an institution. The reasons for reopening also stated that the property of the assessee was not held under a trust as trust deed appears to have not been executed and therefore, the benefit of exemption u/s 11(1)(a) was not amenable.

Having heard the parties, the High Court held that,

++ it is transpired that for the year under consideration for which the reopening is inclined, on earlier occasion, the scrutiny assessment has taken place wherein the issue has been gone into thoroughly as has been canvassed before this court. It is also prevailing on record that in the earlier year, the very same issue with respect to A.Y 2004-05 has arisen wherein also as per the record, the reopening proceedings were dropped and thereafter it is noticed that there is no material change in activity of the Board which is also indicative of the fact that whether the reopening in the present form is permissible or not. The counsel appears to have rightly submitted that with respect to year under consideration when the scrutiny assessment has taken place the issue related to this exemption has been gone into and only thereafter the assessment proceedings have been finalized and therefore, if any reopening at this stage is permitted, it would tantamount to be based upon a change of opinion which is not permissible. There is no other distinguishable material which may allow the authority to take the different view. In view of the aforesaid set of circumstances referring to some of the decisions cited by the counsel for the assesseee, the Court is required to deal with the same and therefore, the first judgement which has been relied upon by the counsel for the assessee is taken up for consideration wherein in case of Radhasoami Satsang Saomi Bagh v. Commissioner of Income Tax, the Apex Court has propounded that strictly speaking res judicata does not apply to the income tax proceedings but at the same time, in absence of any material change contrary opinion may not be generated. From the aforesaid situation it appears that in the present proceedings, the exemption issue generated by the authority has already been thoroughly examined and therefore, it would not be proper on the part of the authority to reopen the said issue and further there is not remote indication that assessee has not truly and fully disclosed all material facts;

++ now dealing with the contention of the counsel for the Revenue who has relied upon the decision in case of Ideal Publications Trust delivered by the High Court of Kerala and submitted that almost in similar issue, the High Court has permitted the reopening issue after considering the effect of the amendment which took place on 01.04.1992 but referring to the said decision it transpires that in the said case, the trust was dealing with the publication of the news paper and in the said decision admitted position was that the said trust has not spent any money towards charitable purpose for the objects which are set up and therefore the facts are quite distinct from the facts of the case on hand and in that case, it was also an admitted position that the amount to the extent of 25% which was to be set apart had not been set apart and utilized for the object for which the trust was set up. It was also reflected from the said decision that the beneficiaries of the appellant who were the subscribers of the news paper were not engaged in the business related to the object for which the trust was set up and therefore after considering the effect of Section 11, the background of that fact led the High Court of Kerela to take a decision and therefore, the facts of the case on hand are quite distinct from that of the decision in case of Ideal Publications Trust. The said decision is of no avail to the opponent and therefore not applicable in the background of present petition. In addition to this the circumstance prevailing on record which indicates that there is no distinguishable material or there is no substantial change of circumstance of any nature after scrutiny of assessment which has taken place and thorough examination is undertaken with respect to the issue of exemption it is not proper on the part of the respondent authority to proceed further with the reopening of assessment. If that be allowed it would be clearly in contrast to the ratio laid down by the Apex Court which has analyze the concept of change of opinion. Therefore, the aforesaid circumstances would clearly indicate that the action on part of the respondent authority to reopen the assessment is not in consonance with proposition of law on the issue and therefore we are of the opinion that impugned action is not just and proper and we deem it proper to set aside the same.

Assessee's petition allowed

2016-TIOL-2541-HC-MUM-IT

GROUP M MEDIA INDIA PVT LTD Vs UoI: BOMBAY HIGH COURT (Dated: October 15, 2016 )

Income Tax - Sections 119, 139, 143(1), 143(2) & 143 (1D) .

Keywords: grant of delay - refunds payable - demand payable - affidavit in reply - written submissions & CBDT direction

Whether when there is a clear direction by the CBDT to process return of assessees whose return contains refunds payable, however in spite of the same, no reason why the AO has not processed the refund and taken a decision to grant refund u/s 143(1D), can such attitude of AO be considered genuine as per law - NO: HC

The assessee is a media company. The present petition under Article 226 of the Constitution of India challenges the inaction / failure on the part of AO in processing the return of income u/s 143(1) and granting refund consequent thereto in accordance with Section 143 (1D). On 29th November, 2015, assessee filed its return of income for AY 2015-16 u/s 139. In its return, it had declared an income of Rs.144.48 crores and claimed a refund of Rs.27.24 crores. On 12th April, 2016, AO issued a notice u/s 143(2) to assessee relating to the subject AY. On 27th April, 2016, assessee requested AO to process its return of income for the subject AY in terms of Section 143(1) and grant the consequent refund due. Assessee had annexed a form claiming a refund of Rs.27.24 crores. In the absence of any positive response, assessee filed further representations requesting AO to process the return of income u/s 143(1) and grant a consequent refund. This also failed to elicit any response from AO. Thereafter, assessee met AO on 6th June, 2016 for expediting the process of the refund claim. At that time, assessee was informed of CBDT Instruction No.1 of 2015, which seemed to fetter the exercise of his discretion u/s 143(1D). The assessee by its letter dated 6th and 24th June, 2016 pointed out to AO that the Delhi HC, in an order dated 11th May, 2016, had quashed Instruction No.1 of 2015 in the case of Tata Teleservices Ltd. Vs. Central Board of Direct Taxes & Anr. 2016-TIOL-960-HC-DEL-IT. Thereafter, on 12th August, 2016, the assessee made a further representation to AO as well as to the Principal Commissioner of Income Tax, City12, inter alia seeking the processing of its return in terms of Section 143(1) and consequent refund in respect of its return filed for A.Y. 2015-16. AO yet did not responded to assessee's demand for refunds. The Revenue had responded to the petition by filing an affidavit in reply dated 7th September, 2016 of Mr. Rishi Kumar, ACIT. In the affidavit in reply, it was pointed out that the reason for not processing the assessee's return of income u/s 143(1) and considering the refund due consequent thereto u/s 143(1D) was CBDT Instruction No.1 of 2015 dated 13th January, 2015. In this case, notice u/s 143(2) has been issued on 12th April, 2016. Therefore, in terms of the above Instruction, the return of income cannot be processed.

Held that,

++ the action of the officer on the ground urged seems to be in complete variance with the higher echelons of administration of the tax administration being an assessee friendly regime. In fact, the CBDT has itself issued Instruction No.7/2012, dated 1st August, 2002 wherein they have specifically directed the officers of the Revenue to process all returns in which refunds are payable expeditiously. Similarly, as late as in 2014 in the Citizen's Charter issued by Department in its vision statement states that the Department aspires to issue refunds along with interest under Section 143(1) within 6 months from date of electronically filing the returns. In this case, the return was filed on 29th November, 2015, yet there is no reason why the AO has not processed the refund and taken a decision to grant or not grant a refund u/s 143(1D). This attitude on the part of the AO eaves us with a feeling (not based on any evidence) that the Officers of the Revenue seem to believe that it is not enough for the assessee to please the deity (IT Act) but the assessee must also please the priest (ITO) before getting what is due to him under the Act. The officers of the State must ensure that their conduct does not give rise to the above feeling even remotely. Lastly, we must for the benefit of the Revenue reiterate that our powers under Article 226 of the Constitution are very wide for the purpose of doing justice. The powers of a Court under Article 226 of the Constitution of India are not limited only to prerogative writs but also to issue any direction or order for doing justice. Therefore, Article 226(1) of the Constitution empowers the Court to issue directions, orders or writs, including writs in the nature of habeas corpus, mandamus, certiorari or any of them. Therefore, in view of the conduct of AO, we are compelled to direct AO to consider and process the petitioner's representation dated 12th August, 2016 and dispose of the same as expeditiously as possible within a period of 8 weeks from today. The Petition is allowed in above terms.

Assessee's appeal allowed

2016-TIOL-2540-HC-MUM-IT

TIGRANIA STEEL CORPORATION Vs CIT: BOMBAY HIGH COURT (Dated: September 30, 2016)

Income tax - Sections 271(1)(c), 273A(1) & 273A(4) and IPC - Sections 191, 191 & 193

Keywords - concealment - discharge from prosecution - date of filing declaration - samadahan scheme & waiver of penalty

Whether a mere initiation of criminal proceedings would by itself be not a bar for seeking settlement under Kar Vivad Samadhan Scheme, if the assessee concerned has been discharged from the prosecution - YES: HC

Whether where an assessee has been discharged from the prosecution before the filing of declaration under Samadhan scheme, then, he cannot be denied the benefits of the Scheme - YES: HC

Whether the Designated Authority in terms of Section 96 of the Finance (No.2) Act, 1988 is bound to accept the application made for settlement under the Samadhan Scheme, if so directed by the CBDT Circular - YES: HC

The assessee during the subject year, was assessed to an income of Rs.20.95 lakhs, on account of an addition made to the assessee's income of Rs.16.25 lakhs. In addition, penalty proceedings were also simultaneously initiated u/s 271(1)(c) and a penalty of Rs.8.53 lakhs was imposed. Thereafter, the assessee made application to CIT for waiver of penalty imposed u/s 273A(1) as well as 273A(4). Although the CIT rejected the application for waiver, however, the Chief CIT granted his approval to 50% waiver of penalty. Consequent to the above, the AO passed an order waiving 50% of the penalty. In the meantime, the Revenue had already launched a prosecution case u/s 276(1) and 277 r/w 278-BB r/w Sections 191, 192 and 193 of IPC for concealment of income, filing a false return and making a false statement of income to the extent of Rs.16.25 lakhs before the Additional Chief Metropolitan Magistrate. However, as the penalty imposed u/s 271(1)(c) had been reduced by 50%, the assessee filed an application before the Additional Chief Metropolitan Magistrate, who passed an order discharging the assessee and its partners from prosecution launched by I-T Department. Consequently, the assessee filed a declaration under the Samadhan Scheme, seeking to settle the outstanding penalty and interest payable aggregating to Rs.2.12 lakhs. The Designated Authority however rejected assessee's declaration on the ground that the prosecution for concealment had already been instituted before the date of filing of the declaration, therefore, the benefit of the Samadhan Scheme could not be extended in view of the clear mandate of Section 95(i)(a) of the Finance No.2 Act, 1988. The Designated Authority had also clarified that the order of the Additional Chief Metropolitan Magistrate discharging the assessee was not final, for the reason that a Criminal Revision Petition had been filed by the Revenue before the High Court.

Having heard the parties, the High Court held that,

++ as clarified by the CBDT Circular issued u/s 96 of Samadhan Scheme, a mere initiation of criminal proceedings would by itself not be a bar, if the assessee concerned has been discharged. The only exclusion is of pending proceedings for conviction or conviction prior to filing of the declaration. The Circular clarifies that where an assessee has been discharged before the filing of the declaration, then, he is entitled to avail of the Samadhan Scheme. The Designated Authority in terms of Section 96 of the Finance (No.2) Act, 1988 is obliged to follow the Circular. In this case, the assessee has been discharged before it filed its application of settlement. Thus, the Designated Authority was bound to accept the application made for settlement under the Samadhan Scheme. In any case, it may be mentioned that basis of ignoring the discharge by the Criminal Court was because the Revenue could prefer a Criminal Revision Petition before a superior forum. This in the present facts becomes academic, for the reason that the Criminal Revision Petition filed by the Income Tax Department has been rejected for non-removal of office objection as for back as on 25th November, 1998 and the Revenue has taken no steps till date to have the matter restored. In the above view, without considering the other contentions raised by the assessee, the order passed by the designated Authority under the Samadhan Scheme was set aside and restored for fresh consideration, to include satisfaction of all other requirements.

Case remanded