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CBEC explains the amendments made to the Customs Valuation Rules, 2007 necessitated by the Apex Court decision in Wipro Ltd. - 2015-TIOL-79-SC-CUS

CASE LAWS

2017-TIOL-364-SC-IT

N K JEWELLERS Vs CIT : SUPREME COURT OF INDIA (Dated: September 13, 2017)

Income Tax - Sections 132 & 158BD.

Keywords - Block assessment - Concealed income - FA, 2017 & reason to suspect.

Whether, in case of proceedings u/s 132A, the 'reason to suspect' cannot be disclosed in view of the amendment made vide FA 2017 - YES: SC

Whether when the explanation given by the assessee about the cash seizure has been disbelieved by the lower authorities and courts as income was not recorded in the books, there is any merit in its peition for the Apex Court to intervene - NO: SC

One of the assessee's employees (while returning by train) was found in possession of Rs.30 lacs cash. Pursuant to search carried by Railway Police (‘GRP'), the amount was requisitioned and seized u/s 132A. Consequently block assessment proceeding was initiated against assessee u/s. 158BD treating the same as assessee's concealed income. On appeal, the High Court dismissed the petition.

Having heard the parties, the Apex court held that,

++ we find that in view of the amendment made in Section 132A of the Income Tax Act, 1961 by Finance Act of 2017, the 'reason to believe' or 'reason to suspect', as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal as recorded by Income Tax Authority under Section 132 or Section 132A. We, therefore, cannot go into that question at all;

++ even otherwise, we find that the explanation given by the appellant regarding the amount of cash of Rs.30 lacs found by the GRP and seized by the authorities has been disbelieved and has been treated as income not recorded in the Books of Account maintained by it.

++ we do not find infirmity in the order passed by the High Court.

Assessee's appeal dismissed

2017-TIOL-2039-HC-MUM-IT

VEDANTA LTD Vs ACIT : BOMBAY HIGH COURT (Dated: September 19, 2017)

Income tax - Writ - Section 281 - Circular No.4/2011 dated 19th July 2011

Keywords: Application for prior permission - Charge & Predicated on imponderables.

The Assessee-company filed an application u/s 281 of the Act to creat a charge on one of his assets which was rejected by the ACIT.

In writ, the High Court held that,

Whether application u/s 281 for prior permission to create a charge or effect a transfer or assets has to be asset-specific to be allowed - YES: HC

++ it is clear that this is a section that is meant to protect the interest of the Revenue, and, specifically to guard against fraudulent transfers designed to defeat recovery by the revenue. There are almost exactly parallel provisions in the Companies Act. This section is asset-specific and transfer- or charge-specific. This section demands, above all, precision. An application is for prior permission to create a charge or effect a transfer in respect of a defined asset. Such an application cannot be disposed of by resorting to generalities ("likelihood", "huge demands", "might be revoked", etc). There is no room in considering an application under Section 281 for a response that is speculative, predicated on imponderables and unknowns such as litigation outcomes, or on suppositions that all stay orders obtained by an Assessee are bound to be vacated and an Assessee's appeals lost. Nothing in our experience suggests this to be remotely true.

Assessee's writ disposed of

2017-TIOL-2037-HC-DEL-IT

N K JEWELLAR Vs CIT : DELHI HIGH COURT (Dated: February 23, 2017)

Income Tax - Sections 132A & 158BD.

Keywords: Block assessment proceeding & Sales of gold.

The Assessee-company was engaged in the business of self-designed and handmade jewellery. A search and seizure was carried by Railway Police (GRP) u/s 132A, where, one of the Assessee-company's employees was found in possession of Rs. 30,00,000/- cash while returning by train from Amritsar, which was requisitioned and seized. Consequently, the block assessment proceeding was initiated, treating the seized amount as its concealed income.

On appeal, the High Court held that,

Whether any substantial question of law arises when the views taken by all the authorities, arising from the evidence on record, is plausible in nature - NO: HC

++ the AO was of the view that the amount represented sales of gold made by the employee of the Assessee on earlier occasions and that the sale proceeds were being carried back to Delhi;

++ the Revenue have considered the statements of some persons such as Arun Kumar, Neeraj Kumar and Kimti Lal, who were examined by the Department as well as some other material that has been placed on record. The view taken by all the authorities is plausible and is not perverse in any manner. The Assessee's employee was disbelieved for adequate reasons. We do not think that any substantial question of law arises for our consideration. It is merely a matter decided on the evidence on record.

Assessee's appeal dismissed

2017-TIOL-2031-HC-MAD-CUS + Story

L AND T METRO RAIL (HYDERABAD) LTD Vs CC : MADRAS HIGH COURT (Dated: September 14, 2017)

Cus - Section 130 of the Customs Act, 1962 - If the appellate jurisdiction of the High Court has been specifically excluded, when the issue pertains to the  determination of any question having a relation to the rate of duty of customs, Court is not  justified in testing the correctness of the impugned order by exercising jurisdiction under Article 226 of the Constitution - Petition not maintainable, hence dismissed - petitioners should seek appellate remedy provided under Section 129A(1) of the Customs Act - in the event an appeal is presented before the Tribunal, the CESTAT shall exclude the period during which these Writ Petitions were pending i.e., from 14.12.2015, till the date of receipt of certified copy of this order while computing limitation - Miscellaneous petitions closed: High Court [para 16, 17, 18, 20, 28]

Petitions dismissed

2017-TIOL-2030-HC-MEGHALAYA-IT + Story

MEGHALAYA COOPERATIVE APEX BANK LTD Vs CHAIRMAN CENTRAL BOARD OF DIRECT TAXES : MEGHALAYA HIGH COURT (Dated: May 31, 2017)

Income Tax - Writ - Section 244A.

Keywords: Condolence petition - Delay - Estoppel - Interest income - Interest on refund - TDS refund & Wanton or intentional inaction.

The Assessee-company is a Co-operative Bank engaged in the business of banking and claim to be exempted from the payment of income tax on the income derived from the interest on securities as per the provisions contained in Section 80 P (2)(a)(i) of the Act. During the FYs 1999-2000 to 2002-2003, the Assessee made huge investments in the Central, State and Trustee Securities and earned income through interest over such deposits. The case of the Assessee had been that the concerned organizations with whom the investments were made for the said AYs, deducted TDS on the interest income under Section 193 of the Act to the tune of Rs.2,24,07,941/- and deposited this deducted amount with the Revenue and hence, it was not liable for any such tax over the income derived from the interest on securities. The Assessee filed its return and claim refund of TDS after adjustment of tax liability to the tune of Rs.2,22,78,250/-.

However, it was noticed by the AO that the PAN of Assessee was not correct as per the status of the Assessee as a Co-operative Bank and hence, a new PAN was obtained in order to correct the status of Assessee and revised returns for the relevant AYs were filed. By effect of that, the return of the Assessee became belated. On the request of Assessee for refund, it was contended by the Asst. CIT that the belated refund claim exceeded a sum of Rs.1 lakh and by virtue of CBDT"s Circular, such a claim was not admissible in his office. The Assessee had further made a request before the CCIT, but looking to the quantum of the amount involved, the prayer had to be made to the CBDT and accordingly, the Assessee filed a petition under Section 119(2)(b) of the Act before the CBDT for admitting the claim for refund of excess tax paid by way of TDS along with interest.

The CBDT, in its order found it to be a case of genuine hardship and on the facts and in the circumstances of the case, while condoning the delay in filing the returns to claim refund for the aforesaid AYs, directed the AO to allow the refund claims subject to verification but also directed that “no interest should be paid on these refund claims".

In Writ, the High Court held that,

Whether where a delay in filing the condolence petition before CBDT is attributable to the Assessee, interest on refund of TDS amount can be denied altogether by the Revenue, though, there was a delay on part of Revenue also in ordering and making refund - NO: HC

Whether therefore, right of receiving interest is available to the Assessee as per the statute and nothing of any estoppel could be considered operating against the Assessee over the statutory provisions contained in Section 244-A of the Act - YES: HC

++ there had, of course, been an initial delay on the part of the Assessee inasmuch as the claim for refund of TDS deducted and deposited in the Assessment Years 2000-2001, 2001-2002, 2002-2003 and 2003-2004 was for the first time made only on 05.10.2006 by filing the returns and that too with an incorrect PA Number. The revised returns with freshly obtained correct PA Number for the said Assessment Years were filed only on 08.03.2007. Even then, the Assessee did not take requisite steps for filing appropriate petition before the concerned authority i.e., the Central Board of Direct Taxes for condonation of delay. Such a petition was filed before the CBDT only on 26.02.2008. The delay in claiming refund, from the date it should have been claimed for the relevant Assessment Years and until 26.02.2008 for each of the four aforesaid Assessment Years, is squarely attributable to the Assessees alone; and the Assessees cannot be held entitled to interest until 26.02.2008, the date of making the petition before the CBDT. However, the manner of dealing with the matter after filing of the petition by the Assessee before the CBDT has left several things to be desired on the part of the Revenue.

++ the petition dated 26.02.2008 for condoning the delay and entertaining the refund claims was decided by the CBDT only on 19.10.2011 i.e., after nearly two years and eight months of filing. There is no explanation whatsoever on the part of the Revenue as to why the said petition was decided after such a delay of more than two and a half years. Even thereafter, the Assigning Officer took further extra time in finally concluding on the assessments by the order dated 30.12.2013. Even if the verification process was to be carried out, it remains explicable that such a process took more than two and half years to complete. Yet further, it is noticed that even after 30.12.2013, the information about part acceptance of the claim for refund was sent to the Assessee only on 20.05.2014; and then, wrong cheques were sent and which were corrected after about a week.

++ The submissions of the Assessee that once CBDT condoned the delay, interest could not have been denied at all remains unsustainable for the reason that the CBDT, while passing the order under Section 119 (2)(b) of the Act considered it expedient to direct the Assessing Officer to admit the claim of refund after accepting it to be a case of genuine hardship but, such directions by the Board cannot by themselves override the operation of sub-section (2) of Section 244-A whereby, the interest is denied for the period of delay attributable to the Assessee.

++ the delay up to the date of filing the petition before CBDT i.e., 26.02.2008 is attributable to the Assessee and they are not entitled to claim interest on refund until this date but the delay thereafter had essentially been on the part of the Revenue; and it had been squarely against the plain statutory provisions as also against the spirit of law that the Revenue chose to deny interest altogether to the Assessee. The contentions of the Revenue that the Assessee had accepted the CBDT orders and hence, are not entitled to claim interest has only been noted to be rejected. As observed, the right of receiving interest is available to the Assessee as per the statute and nothing of any estoppel could be considered operating against the Assessee over the statutory provisions contained in Section 244-A of the Act.

Whether in view of considerable delay on the part of the Assessee themselves in making the claim for refund, there was no case of wanton or intentional inaction on the part of Revenue and therefore, there is no reason to award any further interest over the statutory interest to the Assessee - YES: HC

++ there had been a considerable delay on the part of the Assessee themselves in making the claim for refund and then, in making the petition for condonation of delay. The CBDT yet took it to be a matter of genuine hardship and condoned the delay. Altogether denial of interest by the CBDT has already been disapproved hereinabove, but the question is as to whether the present one had been a case of wanton or intentional inaction on the part of the Revenue to the extent that further compensation in the form of interest over interest be allowed? In view of the court, the answer is in the negative.

++ the initial long delay is attributable to the Assessee themselves. The other part of delay in ordering and making refund is adequately taken care of by the amount of interest, which the Assessee are held entitled to w.e.f. 26.02.2008. Though accepting the claim for refund in the assessment orders dated 30.12.2013 but issuing refund cheques in the month of May, 2014 cannot be appreciated but, in the overall circumstances of this case, there is no reason to award any further interest over the statutory interest to the Assessee. This part of the claim of the Assessee is, therefore, declined.

Assessee's writ partly allowed

2017-TIOL-2029-HC-MAD-IT

JAYANTHI NATARAJAN Vs ACIT : MADRAS HIGH COURT (Dated: September 14, 2017)

Income Tax - Writ - Sections 143(3), 147, 148 & 153(2).

Keywords: Disposition of objections - Reopening of assessment & Speaking order.

The Assessee-an individual, had filed its return admitting a taxable income of Rs.35,17,267/- and subsequently, revised and thereby, admitted an enhanced income of Rs.36,92,211/-. The Assessee's return was accepted and an assessment order was passed u/s 143(3). However, a notice u/s 148 was issued to reopen the Assessee's assessment for the AY 2009-10, on the ground that income had escaped assessment within the meaning of Section 147. A request was made to the Revenue to furnish reasons for such reopening. Nevertheless, before the Assessee could receive the reasons, again a notice was issued asking to submit the revised computation to substantiate that disputed capital gain were offered to tax. Later, the reasons were furnished, wherein, apart from furnishing various factual details, the Assessee pointed out the proviso to Section 147 was clear in that, when more than four years had lapsed from the end of the relevant AY, where a scrutiny assessment had already been made u/s 143(3), it was necessary for the I-T Department to show that the Assessee had failed to truly and fully disclose all material facts in order to invoke jurisdiction u/s 147.

Notwithstanding, the Revenue passed an assessment order without disposing Assessee's objections and held that the transfer of immovable property occurred during AY 2007-08, was incorrect and that the actual conveyance was undertaken only through the registered sale deed. Furthermore, the Revenue completely disregarded the fact that the CIT(A) had expressly held in the case of one of the co-owners of the property, that capital gains had not arisen in the AY 2009-10, but in the AY 2007-08.

In Writ, the High Court held that,

Whether the Revenue can pass a speaking order without taking a view on the objections raised by the Assessee pursuant to reopening of the assessment - NO: HC

++ the Apex Court in the case of GKN Driveshafts (India) Ltd, held that when a notice u/s 148 is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order. This procedure has been carved out by the Supreme Court in GKN Driveshafts, which binds not only the Assessee, but the Revenue as well. It has been pointed out that on receipt of the reasons, the noticee is entitled to file objections to issuance of notice for reopening and if he files such objections, the AO is bound to dispose of the same by passing a speaking order. Thus, the procedure, which was required to be followed by the Revenue is to dispose of the Assessee's objections by passing a speaking order;

++ in the instant case, this has not been done by the Revenue, but the Revenue seeks to sustain the assessment order stating that in the first few paragraphs of the order, he has dealt with objections and disposed of accordingly. Unfortunately, the manner in which the Revenue has decided the issue is wholly unsustainable in law. The purpose for passing a separate speaking order on the objections is with a view to afford an opportunity to the Assessee to question such an order, if he is aggrieved. The Revenue by passing the order has taken away such valuable right from the Assessee inasmuch as the proceedings is an order of assessment u/s 143(3). Therefore, if an order of assessment has to be challenged, necessarily an appeal has to be preferred and only in rarest of rare case, Courts would entertain challenge to assessment orders in writ proceedings. Thus, the procedure adopted by the Revenue is completely flawed, which goes to the root of the matter, thereby, vitiates the entire proceedings.

++ the Division Bench of the Bombay High Court in KSS Petron Private Ltd., held that the AO was not justified in finalizing the assessment without having first disposed of the objections of the Assessee. While testing the correctness of the decision of the CIT(A), which quashed the order of the AO restored the assessment to the AO to pass fresh orders after disposing of the objections to reopening notice in accordance with law, the Division Bench held that once the impugned order finds the assessment order is without jurisdiction, as the law laid down by the Apex Court in the case of GKN Driveshafts (India) Ltd., has not been followed, then there is no reason to restore the issue to the AO to pass fresh/further orders and if this is permitted, it would give license to the AO to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure). Further it was pointed out that to ensure that the reopening notices are disposed of expeditiously, the Parliament itself has provided in Section 153(2), the period within which the AO must pass orders on notice of reopening i.e., within one year from the end of the financial year, in which the notice was issued. Thus, on facts having found that the procedure required to be followed had not been adhered to, it has to be held that the entire proceedings are vitiated.

++ in the case of Sona Builders, the Writ Petitions were filed by the appellant therein and the transferer the order of compulsory purchases. It was contended that no reasonable opportunity had been given to them to meet the case in the notice with reference to the sale. The writ petition was dismissed and confirmed by the Division Bench. On appeal, the Supreme Court found that there has been a gross breach of principles of natural justice because adequate opportunity to meet the case made out in the notice was not given to the appellant therein and having regard to the statutory limit within which the appropriate authority has to act and it is failure to act in conformity with the principles of natural justice, the Supreme Court refused to remand the matter to the appropriate authority and set aside the order.

++ the law declared by the Supreme Court is of binding character and is a source of law and to itself, which will bind all authorities. Thus, the proceedings are held to be unsustainable in law and accordingly, this writ petition is allowed, the Revenue's order is quashed. No costs. Consequently, the connected miscellaneous petition is closed.

Assessee's Writ allowed

2017-TIOL-2028-HC-DEL-ST + Story

SWADESHI CONSTRUCTION COMPANY Vs CST : DELHI HIGH COURT (Dated: September 22, 2017)

ST – Construction of Dilli Haat - what was undertaken by the Appellant was a composite contract of construction which involved labour and service elements - no service tax could be charged on composite works contract prior to 1st June, 2007 in view of the decision of the Supreme Court in  Larsen & Toubro Ltd. - 2015-TIOL-187-SC-ST - it was never disputed by the Department that what was undertaken by the Appellant was a composite contract of construction which involved labour and service elements - grant of rebate to the Assessee as noted in the SCN was itself an acknowledgment of this - If that was never in issue, the question of remanding the matter to the Adjudicating Authority for verifying that fact did not arise – Order of CESTAT set aside and appeal allowed: High Court [para 12, 15]

Appeal allowed

2017-TIOL-2027-HC-AHM-ST

SHIVA INDUSTRIAL SECURITY AGENCY Vs UoI : GUJARAT HIGH COURT (Dated: September 21, 2017)

ST - The assessees herein are a proprietary concern and an incorporated company, whose control & management is common - The revenue alleged failure to pay service tax & two SCNs were issued from the Surat & Hyderabad commissionerates, one covering the period 2005-06 to 2010-11 and the other covering 2006-07 to 2010-11, respectively - The assessee claim to have suffered double demand for the same period - Pursuant to the Tribunal's directions, both the company & the agency separately pre-deposited some amounts w.r.t. the SCN issued by the Surat commissionerate - Subsequently, the Surat commissionerate also adjudicated upon the SCN issued by the Hyderabad commissionerate & passed orders - By the time appeals were filed against such orders, the CEA was amended, requiring a certain amount of pre-deposit & the so the assessees were directed to make pre-deposit - The Tribunal, finding no pre-deposit made, dismissed the appeals of the agency and the company - The Tribunal also noted that the issue of the overlapping demands in two different SCNs and two O-i-Os against the agency and the company, was not raised before the authorities - It then remanded the matter to the revenue for de novo adjudication.

Held - Although the assessees claimed there to be an overlapping of demands due to two SCNs being issued, however, once the Tribunal set aside the orders passed by the adjudicating authority and remanded the proceedings for fresh consideration and disposal, no demand survived against the agency or the Company - Thereby, the revenue cannot hold onto the amounts already deposited - The pre-deposit amount could be appropriated towards the final demand that may be confirmed, but if the appeal is allowed, may be with an order of remand and the order of the adjudicating authority is set aside, the amount of pre-deposit must be returned to the assessees unless there is any counter indication in the Tribunal order - Hence, the amounts already deposited would have to be given credit to the assessees for fulfillment of the pre-deposit requirement - Therefore, impugned order set aside and assessee's appeals restored: High Court (Para 2,3,4,5,6)

Appeal allowed

2017-TIOL-2026-HC-DEL-ST

L R SHARMA Vs CST : DELHI HIGH COURT (Dated: September 22, 2017)

ST -The assessee is a partnership firm, and upon whom duty demand was imposed, and then dropped by the adjudicating authority - Such order was challenged by the revenue as being incorrect, as the assessee's name was mentioned as "L R Sharma" instead of the full title "M/s L R Sharma & Co." - The Tribunal disagreed with the revenue and held that the assessee's appeal could not be deemed as non-maintainable on this ground alone - Besides other details such as address, were correct - Thus the Tribunal allowed the assessee's application and allowed the assessee's appeal to be listed for early hearing.

Held - The name of the assessee in the appeal before the Tribunal, be mentioned as " M/s. L. R. Sharma & Co. ... Respondent" - Tribunal directed to dispose off appeal at the earliest - Delay in filing present application condoned: High Court (Para 1-5)

Application allowed

2017-TIOL-2025-HC-KAR-CX

SRI CHAMUNDESWARI SUGARS LTD Vs UoI : KARNATAKA HIGH COURT (Dated: September 18, 2017)

CX - The assessee was engaged in the manufacture of Sugar, and the manufacturing process produced a by-product called 'Press Mud' - The revenue opined that such 'Press Mud' was taxable and issued SCN to the assessee - On appeal to the High Court by the assessee, the revenue was asked to explain why the SCN was issued when it had been settled by the Apex Court, that no duty was leviable on 'Press Mud' - The High court also refused permission to withdraw this appeal till it heard from the revenue.

Held - The assessee filed reply to SCN and was later informed that an adjudication order had already been passed, which the assessee could challenge before the Appellate authority - Thus the present petition was infructuous and could be withdrawn, with the assessee being free to approach the Appellate authority: High Court (Para 2,3,4)

Writ Petition disposed off

2017-TIOL-2024-HC-DEL-CUS

DEV ANAND AGGARWAL CC : DELHI HIGH COURT (Dated: September 22, 2017)

Cus - The assessee imported artificial flowers, in 17 consignments - The revenue suspected the goods to be undervalued, which was confirmed in a statement given by the assessee, admitting 25% under-valuation - The DRI investigated similar imports of imported flowers by other firms, revealing that such firms were jointly run by three persons - When confronted with corroborative evidence in the form of invoices, they admitted in their statements, to having undervalued the imports by upto 70% of actual value - Hence, duty demand with interest & penalty was imposed - Also, the goods were seized and redemption fine imposed - Later the Tribunal passed an ex parte order, rejecting the assessee's application to recall the order, and held that the assessee was not vigilant in pursuing its remedies - The assessee's appeal was partly allowed, when the Tribunal reduced the quantum of the redemption fine.

Held - The fact that the assessee had received the notice of listing of its application, on the evening of the day the matter had been listed, was not considered by the Tribunal - Thereby, the absence of the assessee in the hearing was condonable - Besides, w.r.t. the DRI being the 'proper officer' for issuing SCN under the Customs Act, was settled by the decision in Mangli Impex Limited v. Union of India in favor of the assessee, prior to the Tribunal dismissing the assessee's application - Thereby the Tribunal had to decide the issue on merits - The Tribunal unjustifiably rejected the assessee's application - Hence Tribunal order set aside and assessee's application seeking restoration of appeal allowed - Such appeal listed for hearing before the Tribunal: High Court (Para 2,3,4,5,6,7,8,9)

Assessee appeal allowed