Payment of Wages (Amendment) Act, 2017
CASE LAWS
2017-TIOL-77-SC-IT
PR CIT Vs MULTIPLEX CAPITAL LTD: SUPREME COURT OF INDIA (Dated: February 13, 2017)
Income Tax - Sections 88E, 115JB & 271(1)(c).
Keywords: concealment of income - penalty - revenue loss & satisfaction opinion.
The assessee company had claimed deduction u/s 88E. AO held that deductions claimed were inadmissible. However, the AO accepted the assessment on the basis of Section 115JB returns. This led to the deposit of higher tax by the assessee in terms of Section 115JB(1). Both CIT(A) and ITAT added back further amounts to the normal income which led to higher tax liability on the part of assessee. In the meanwhile, AO had initiated penalty proceedings u/s 271(1)(c). The ITAT's adverse orders on the assessment/quantum proceedings were taken note of in the penalty proceedings. The AO thereafter issued SCN on the basis of an earlier satisfaction opinion recorded by him with respect to concealment of income. This led to penalty order. The CIT(A) deleted the penalty order, an on further appeal, ITAT affirmed CIT(A)'s order.
On further appeal, High Court held that what is of importance is that at the time when jurisdiction is assumed by the AO – i.e. upon completion of proceedings or within the time stipulated by forming an opinion that there is no concealment of income, there should be objective material to reach the conclusion that such concealment is material having regard to the nature and circumstances of the case, especially where two computations are involved. At the stage when the AO sought to assume jurisdiction and form an opinion, the assessment was completed u/s 115JB. Concededly, there was no concealment of any material particulars in respect of that part of the return. The concealment found was in respect of normal computation. That the normal computation involved certain disallowances at later and higher stages of the proceedings at the first appellate and the ITAT's proceedings reflect the unfortunate circumstances of the litigating parties.
On a petition filed by the Revenue, the Apex Court confirmed the HC's view where it has been held that penalty u/s 271(1)(c) is not imposable if at the stage when AO assumed jurisdiction, the assessment was completed and there was no concealment of any particulars.
Revenue's SLP dismissed
2017-TIOL-334-HC-MUM-IT
PR CIT Vs LODHA DEVELOPERS PVT LTD: BOMBAY HIGH COURT (Dated: February 14, 2017)
Income Tax - Sections 37, 40A(3), 245C(1), 245D(4), 245H, 271D & 271E
Keywords: concealment of income - application for settlement - SETCOM - estimated expense & true and fair disclosure.
The assessee group is primarily into construction and building infrastructure. The SETCOM had allowed an application in assessee's favour. The present petition had been filed on behalf of Revenue arguing that the impugned order ignored the fact that assessee had not made a full and true disclosure of its income, while filing its application for settlement; and it had also ignored the statutory provisions viz: Section 37 and Section 40 (A) (3) while allowing the estimated expenditure, to determine the income.
On appeal, the High Court held that,
Whether mere settlement of an income at a figure higher than the one declared by the asssesee, would ipso facto mean a failure to make a full and true disclosure of income -NO: HC
++ each of the above requirements have to be independently satisfied. Not disclosing the manner in which such income has been derived, is a condition to be satisfied independent of full and true disclosure of income which has not been disclosed. In case, the manner in which such disclosed income has been derived has not been set out in the application, then the application is to be rejected on that ground alone. In this case, the Petitioner contends that the necessary evidence of the manner in which income has been derived, was not contained in the application. Therefore, failure to make full and true disclosure. It is submitted that in the absence of any explanation or the lack of evidence in support of the application would make the application bad for failure to make a full and true disclosure. We asked Mr. Setalvad – whether such a contention was raised by Petitioner before the Commission. In response, he points out although such an objection was not specifically raised, the onus to disclose the same is on the Applicant. Therefore, not having submitted the necessary evidence in support of the manner in which income which is subject to tax has been derived, would mean failure to make a true and full disclosure in its application for settlement. In fact, when no evidence is available in support of the expenditure incurred while disclosing the manner in which the income is derived and it is so stated in the application, how can the allegation of failure to make full and true disclosure of income, of the manner of deriving income can be made, much less sustained. In the above view, we do not find any merit in the submissions on part of the Petitioner, that in the present facts, there was failure on the part of Respondent-Assesssee to make a true and full disclosure of the manner in which income was derived;
Whether mere non-acceptance of a claim made by the assessee will make the application for settlement incomplete in terms of full and true disclosure - NO: HC
++ in respect of failure to make full and true disclosure of the amount recovered on account of car parking charges and 'on money' received, mere nonacceptance of the claim made will not make the application lacking in full and true disclosure. This full and true disclosure should be of primary facts. The allowance or disallowance, of a claim made thereon, by the Commission, will not determine the issue of full and true disclosure. So far as the failure to make full and true disclosure of parking charges is concerned, we find that Applicants in its applications for settlement had very clearly stated that the car parking charges are received in cheque by the Applicants though not in their names. These cheques are, thereafter discounted and the cash so obtained after discounting, is used for business purposes. The Applicants also point out that there are certain classes of sale on which no car parking charges are recoverable. However, the Applicants declared in its application that it is seeking a deduction of 10% from the amount of Rs.258 Crores received on account of car parking charges as attributable to car parking charges not recoverable. The Revenue filed its report under Rule 9 of the Settlement Commission Rules (Commission Rules) – wherein it was submitted that the Applicants have continued to receive car parking charges even after 10th January, 2011 and the same has not been disclosed as car parking charges recovered. If the same is taken into account, according to the Revenue, the car parking charges recovered should be quantified as Rs.332 Crores. However, it is to be noted that the Commission records that the Petitioner had not been able to point out a single instance of the assessees having received any car parking charges post 10th January, 2011 either in its Rule 9 Report or even in his report filed thereafter. Therefore, the Commission on consideration of the record before it, noted that the Revenue has not submitted any evidence before it in support of its case that the Respondent-Assessees continued to receive car parking charges in the name of third parties post search i.e. 10th January, 2011;
Whether merely because the claim of the assessee, made on estimated basis, is rejected, it would follow that there has been a failure to fully and truly disclose its income - NO: HC
++ it is true that the Commission had not accepted the Petitioner's claim that 10% of deduction on the car parking charges should be allowed and brought to tax the entire amount of Rs.256 Crores as income received for settlement of the dispute. This declaration of 10% was claimed by the Petitioner on an adhoc estimated basis. The same was so disclosed in its application for settlement. This adhoc/ estimated claim of deduction was not found by the Commission to be false. Nor does the Petitioner in his report before the Commission offer any evidence of the claim for deductions being false. Therefore, merely because the claim of the Respondent for 10% deduction from the parking charges receivable, admittedly made on estimated basis, is rejected, it would not follow that there has been a failure to fully and truly disclose its income in the applications for settlement. It must be borne in mind that normally a statement made in an application for settlement that it is based full and true disclosure is to be accepted, unless there is evidence found contrary to the disclosure made. The statement made on oath by the Applicant, cannot be disbelieved on mere whim and fancy. As the Petitioner has not been able to show that the finding of the Commission on the impugned issue is perverse, no occasion to interfere arises, as it is a possible view;
Whether deduction allowable u/s 37 under the head general business expenses is not person specific but expenditure specific i.e. the expenditure must be prohibited by law or must be an offence for attraction of disallowance provision - YES: HC
++ we also note that the entire expenditure of 92% claimed by the RespondentRevenue has not been allowed, but only 78% expenditure was allowed to arrive at its income. Therefore, it is safe to assume that during the settlement, the Commission would have factored in all payments allegedly made to mafia while adding to the income of the Respondent-Assessees. Moreover, what has to be seen is not the person to whom the amount has been paid but the reasons for making the payment. If the payment is made for illegal purposes, then the payment is to be disallowed. The disallowance is on account of the purpose for which the payment is made and not upon the person to whom the payment is made. Therefore even if the payment is made to an alleged criminal, to do legal work,it is allowable. The disallowance is not person specific but expenditure specific i.e. the expenditure must be prohibited by law or must be an offence. Moreover, the scope of enquiry is as pointed out above, is very limited from the orders of the Settlement Commission. If the view taken is a possible view, we would not interfere. Therefore, no interference on this account, is warranted. Further, the payment made to mafia by itself is not shown to be an offence under any law or is prohibited by law;
Whether the mere fact that Tribunal mistakenly records that assessee is not entitled to grant immunity from levy of penalty u/s 271D and 271E, could make the order passed u/s 245H vulnerable on this ground - NO: HC
++ we find that the impugned order dated 28th November, 2014 records the fact that partial immunity was granted u/s 245H. The Commission was satisfied that the Respondent-Assessee had fully cooperated in the proceedings before it and, therefore, are entitled to grant an immunity. It is only after recording the fact that penalty is imposable under Section 271D and 271E of the Act, that partial immunity from penalty, was granted. We asked Mr. Setalvad, Senior Counsel for the Petitioner whether Section 245H excludes Sections 271D and 271E of the Act from the benefit of immunity by the Commission. In the above view, the mere fact that the Tribunal mistakenly records that the Respondent-Assessee is not entitled to grant immunity from levy of penalty under Sections 271D and 271E of the Act will not make the impugned order vulnerable on the above ground. This is a mistake on the face of it, as there is no such exclusion from Section 245H of the Act of Sections 271D and 271E of the Act, for grant of immunity. It is possibly for this reason that the Petitioner had not filed any rectification application on the above account, seeking withdrawal of immunity from penalty, in view of the above recording by the Commission. In fact, if the entire paragraph 39 of the impugned order which deals with the issue of waiver of penalty is read, it is very clear that the Commission sought to grant partial immunity in respect of penalty imposed under Sections 271D and 271E. Therefore, the exercise of restoring the issue to the Commission to freshly determine the issue of penalty, would in the present facts be an academic exercise. In the above view, the aforesaid objections on the part of the Petitioner also does not warrant any interference. For the aforesaid reasons, Petition is dismissed.
Revenue's appeal dismissed
2017-TIOL-499-CESTAT-MUM + Story
Ghodawat Foods International Pvt Ltd Vs CCE: MUMBAI CESTAT (Dated: January 30, 2017)
CX – Manufacture - Section 2(f) of CEA, 1944 - Chapter note 4 to Chapter 15 of CETA, 1985 - Tanker is not a bulk pack, therefore, activity of unloading the edible oil and converting into retail pack and labeling is not manufacture – one limb of the chapter note is not satisfied – impugned order set aside and appeals allowed: CESTAT [para 4, 5]
Appeals allowed
2017-TIOL-487-CESTAT-HYD
NOVUS AVENUES AND PROPERTIES PVT LTD Vs CC, CE & ST: HYDERABAD CESTAT (Dated: November 3, 2016)
Service Tax - Renting of immovable property - Penalty - No penalty in the light of Section 80(2) of the Finance Act, 1994 as the Service Tax amount was paid along with interest.
Appeal partly allowed
2017-TIOL-486-CESTAT-HYD
INTERNATIONAL SEAPORT DREDGING LTD Vs CC & ST: HYDERABAD CESTAT (Dated: September 02, 2016)
Customs - EXIM Policy - Appellant had imported a consignment containing 6 Dumper Caterpillar - 730 classifying them under the Customs tariff Heading 87041090 as 'motor vehicles for the transport of goods other dumpers designed for off-highway use' - The question that arose is whether the said dumpers imported by Appellant will have to conform to the conditions set out in the Import Licensing Notes to Chapter 87 prescribed under Import-Export policy 2004-2009 for new 'motor vehicles' - Adjudicating authority held that the Appellant is required to fulfil the conditions set out in Motor Vehicles Rules, 1989 and the conditions as prescribed in Para 2 II of the Licensing Notes to Chapter 87; that they did not submit any evidence to claim that the dumpers had fulfilled all the conditions; that Visakhapatnam port is not included in the list of notified ports for the import of new vehicles; demanded customs duty, ordered confiscation with RF option and imposed penalty under Section 125 and Section 112(a) of the customs Act, 1962, agitated herein.
Held: There is no prohibition in force against import of the vehicles; the only restriction in Import Licensing Notes of Chapter 87 of import export policy 2004-2009, is that importation of new vehicles shall be permitted only through specified Customs Port at Nhava Sheva, Kolkatta, Chennai, ICD-Tuglakhabad, Delhi Air Cargo and Mumbai Port - 'restriction' cannot be equated or read as 'prohibition', hence invocation of 111(d) is not in order and by implication the invocation of 112(a) and Section 125 are also not sustainable - the impugned order is set aside to the extent of confiscation of the goods under Section 111(d), imposition of redemption fine under Section 125 and imposition of penalty under Section 112 (a) of the Act (ibid). [Para 6]
Appeal allowed
