INSRTUCTION

F.No.275/65/2013-CX.8A

Defence against Writ Petitions/PILs relating to GST - Regarding.

CASE LAWS

2017-TIOL-2054-HC-KERALA-VAT

CTO Vs SOBHA GOLD: KERALA HIGH COURT (Dated: August 17, 2017)

Kerala VAT - Writ - Disproportionate penalty - Revision of assessment - Request for revision of returns - Stock of gold & Strength of registration granted.

The Assessee-a proprietorship, obtained its registration under the KVAT Act in October, 2013 to commence business in gold jewellery. The Assessee had filed his return, where, the stock of gold was not declared. Consequently, the registration itself got cancelled. The Assessee wrote a letter declaring the discrepancy in his return caused on account of his omission to declare the stock. However, without permitting the Assessee to revise the return, the assessment was completed and penalty was also levied by the AO. In the meantime, w.e.f. 01.04.2014, the Assessee commenced business of gold in partnership and the stock of gold acquired in December, 2013 was brought in as his contribution to the capital of the firm. However, the firm omitted to indicate stock of gold in its return in April, 2014. Almost after one and half years, a notice was issued to produce books. Subsequently, the Assessee, disclosed the AO their omission to indicate the stock of gold in their return and requested to allow them to revise their returns, which was rejected and thereafter, assessment was completed and penalty of double the amount of tax was also levied.

Aggrieved Assessee had preferred two writ petitions in the year 2015 & 2016, whereby, for the year 2015, the single Judge allowed and quashed the proceedings and directed that the Assessee be permitted to revise his return and on that basis to complete the assessment, however, for the year 2016, the assessment order was upheld by the single Judge but, reduced the penalty to Rs. 1 lakh.

In Writ, the High Court held that,

Whether revision of assessment pertaining to the period of which the Assessee was carrying on the business on the strength of the registration granted to him, was permissible in law - YES: HC

++ as far as the permission given to the Assessee to revise its return for the month of December, 2013 in the judgment in W.P.(C) No.24958 of 2015 is concerned, as rightly found by the single Judge, long before the notice was issued by the AO, the Assessee himself had by its letter dated 16.05.2014 informed the AO of the discrepancy caused on account of his omission to include the stock of gold in the return of December, 2013. When such a request was made, as rightly found by the single Judge, the AO ought to have given him an opportunity. True, the request was made long after 31.03.2014 when the registration was got cancelled by the Assessee. But, however, as stated by the single Judge, even in such a case, revision of assessment pertaining to the period of which the Assessee was carrying on the business on the strength of the registration granted to him, was permissible in law and it was therefore, the single Judge has taken the view;

Whether the AO can impose a disproportionate penalty, if the Assessee confess his mistake and sought an opportunity to revise his return, at a belated stage, which could not have been allowed - NO: HC

++ coming to the complaint of the Government Pleader that in the judgment in W.P.(C) No.33522 of 2016, the single Judge has erroneously reduced the penalty imposed to Rs.1 lakh, is concerned, according to us, levy of penalty should always be proportionate to the gravity of the offence committed by the Assessee. Insofar as this case is concerned, though at a belated stage, the Assessee himself has confessed his mistake and sought an opportunity to revise his return, though such revision could not have been allowed, still taking into account such conduct of the Assessee, we feel that the single Judge was justified in taking the view that the penalty of double the amount of tax imposed, viz. Rs.23,61,076/- was too disproportionate. Therefore, we do not find any reason to interfere with that relief granted by the single Judge also;

Whether the AO has committed an illegality in completing the assessment where the request for revision of the returns made by the Assessee was rejected and assessment is completed - NO: HC

++ turning to W.A. No.1459 of 2017 filed by the Assessee, their grievance is to the extent that order of assessment challenged was sustained by the single Judge. The contention raised is that when they made a request for revision of the returns that ought to have been allowed. We cannot ignore the fact that the omission in question had occurred in April, 2014. The AO had issued notice calling upon the Assessee to produce the books of accounts. The date specified for appearance was 08.09.2015. It is still thereafter that on 14.10.2015, the Assessee made request for revision of their returns. In such a situation, when the request was rejected and assessment is completed, we cannot say that the AO has committed an illegality in completing the assessment. We, therefore, agree with the view taken by the single Judge in that regard also.

Revenue's appeal dismissed

2017-TIOL-2053-HC-MAD-IT

TAMILNADU NEWSPRINT AND PAPERS LTD Vs CCIT: MADRAS HIGH COURT (Dated: September 18, 2017)

Income Tax - Sections 143(3), 115JA & JB, 234(B) & (C).

Keywords: Application for waiver of interest - Fresh consideration - Subsequent developments & Supportive records.

The Assessee-a Government owned Company, had filed its return. On assessment, the matter subsequently reached the Chief Commissioner of Income Tax, where an Application for waiver of interest u/s 234(B) & (C) for the AY 2001-02 and 2002-03, on account of certain subsequent developments filed by the Assessee, was rejected without considering the contentions placed by the Assessee. Consequently, the assessment was completed u/s 143(3), and as against such orders, the Assessee had preferred Appeals before the Tribunal. The Tribunal had allowed the Appeals and remanded the matters to the AO for fresh consideration.

In Writ, the High Court held that,

Whether the Tribunal can take a stand upon a decision made by a non-territorial High Court, and thereby, making it applicable while either accepting or rejecting the application for waiver - NO: HC

++ in pure and simple terms, the Assessee's case is that, they were not in a position to anticipate whether they will be assessable u/s 115 -JA / 115 JB. An endeavour was required in this regard as a finding of fact had to be recorded while either accepting or rejecting the application for waiver. However, in the instant case, the Authority appears to have been solely guided by the decision, which was relied upon by the Assessee, and had taken a stand that the decision rendered by the Karnataka High Court, being a decision not by the territorial High Court, cannot be made applicable to the facts of the Assessee's case;

Whether in absence of AO's remand report in a matter which requires reconsideration, can the High Court propose any further order - NO: HC

++ the Revenue placed reliance on the decision of this Court, in the case of Holiday Travels Pvt. Ltd. It is pointed out by the counsel appearing for the Assessee that, this decision was rendered much after filing of the return of income for the relevant AYs. The counsel for the Assessee further pointed out that the decision rendered by the Karnataka High Court in the case of Kwality Biscuits Ltd. has been upheld by the Supreme Court. However, this Court does not propose of dwell any further on this aspect, as it is satisfied that the matter requires reconsideration, more particularly, on account of the subsequent developments;

++ for the above reasons, these Writ Petitions are allowed and the orders are set aside and the matters are remanded to the Revenue for fresh consideration. The Assessee is directed to file a fresh Application for waiver along with supportive records to bring on record the subsequent developments, which have taken place during the pendency of the Writ Petitions. On such Petition being filed, the Revenue shall afford an opportunity of personal hearing to the authorized representative of the Assessee and pass orders on merits and in accordance with law. No costs.

Assessee's Writ allowed

2017-TIOL-2052-HC-ALL-IT + Story

CIT Vs AR TRUST: ALLAHABAD HIGH COURT (Dated: September 4, 2017)

Income tax - Section 12AA.

Keywords: Charitable activities & Registration of Trust.

The Assessee-Trust applied for registration under Section 12AA of the Act but the same was refused by the CIT on the ground that the Assessee was not carrying out any charitable activities and the objects and activities of the Trust were not charitable in nature. On appeal, the Tribunal directed for registration straight away.

On appeal, the High Court held that,

Whether if the Registering Authority has recorded no satisfaction as per Sec 12AA, registration can still be granted - NO: HC

Whether ITAT has legal mandate or jurisdiction to order registration of a Trust u/s 12AA even if no satisfaction of the Revenue has been recorded - NO: HC

++ section 12 AA of the Act provides that the Registering Authority after satisfying himself about the objects of the Trust and genuineness of its activities shall pass an order in writing for registration of the Trust or to refuse the registration. Therefore, satisfaction of the Registering Authority is mandatory before any Trust is registered under Section 12AA of the Act. Such satisfaction has not to be recorded by any other authority. The registration was refused simply for the reason that the objects and activities of the Trust were not charitable in nature. The said order having been set aside by the tribunal leaves no material which could reflect that any satisfaction as required exists. Thus, in the absence of any satisfaction of the Registering Authority, the direction to register the Trust is without jurisdiction. The Tribunal could have ordered for setting aside the order of Registering Authority refusing registration but it could not have directed for registration straight away inasmuch as there has to be satisfaction recorded by the Registering Authority which was lacking. Accordingly, the question answered in favour of the Revenue and against the Assessee and it is held that the Tribunal has no jurisdiction in law to direct for registration of the Trust without there being satisfaction recorded by the Registering Authority as contemplated by Section 12 AA of the Act.

Revenue's appeal allowed

2017-TIOL-2051-HC-HP-IT

PR CIT Vs HP BUS STAND MANAGEMENT AND DEVELOPMENT AUTHORITY: HIMACHAL PRADESH HIGH COURT (Dated: September 11, 2017)

Income Tax - Section 194J.

Keywords: Arrangement - Professional services and fees for technical services - Sharing of resources - Stop gap arrangement & TDS.

The Assessee-authority was an entity established for development and management of bus stands within the State of Himachal Pradesh. Since the Assessee had no independent establishment and infrastructure of its own to carry out the objects, a decision was taken to had the same executed through the employees of HRTC. This arrangement was to continue till such time the Assessee developed its own infrastructure. Certain payments were released by the Assessee in favour of HRTC. The expenditure was to be shared by way of reimbursement. But the Assessee did not deduct any amount in terms of section 194J of the Act. Since the Assessee had not deducted the amount of TDS with respect to the amount paid to HRTC, assessment proceedings were initiated and the AO computed the income of the Assessee by adding the amount paid to HRTC, as a taxable income of the Assessee. On appeal, CIT(A) deleted the additions made by the AO. On further appeal by Revenue, the Tribunal upheld the decision of the CIT(A).

On appeal, the High Court held that,

Whether mere sharing of resources between two entities is just a stop gap arrangement and cannot be termed as an arrangement for technical services - YES: HC

Whether therefore, payment made by the assessee was only disbursement of the payment to the other party and therefore, no amount of TDS was required to be deducted u/s 194J - YES: HC

++ the arrangement inter se the Assessee and HRTC was clear and simple. It was by way of a stop gap arrangement. Till such time the authority developed its infrastructure and recruited the staff, the work of development and management was required to be carried out by HRTC. Hence, employees of HRTC were called upon to continue to discharge such duties. It is in this backdrop, two entities decided to share their resources by arriving at an arrangement, whereby salaries of certain staff and other expenditure incurred by HRTC was to be shared proportionately;

++ such an arrangement arrived at between two entities cannot be said to be that of rendering professional services. No legal, medical, engineering, architectural consultancy, technical consultancy, accountancy, nature of interior decoration or development was to be rendered by HRTC. Similarly, no service, which can be termed to be technical service, was provided by HRTC to the Assessee, so also no managerial, technical or consultancy services were provided. The arrangement was purely simple. The staff of HRTC was to carry out the work of development and management of the Assessee till such time, the said authority developed its infrastructure and the expenditure so incurred by HRTC was to be apportioned on the agreed terms. It is only pursuant to such arrangement, the Assessee disbursed the payment to HRTC and, as such, no amount of TDS was required to be deducted on the same. It is only a reimbursement of an expense so incurred by HRTC.

Revenue's appeal dismissed

2017-TIOL-2047-HC-AHM-IT + Story

CORRTECH INTERNATIONAL PVT LTD Vs DCIT : GUJARAT HIGH COURT (Dated: September 18, 2017)

Income Tax - Writ - Sections 143(1D) & (2) & 241.

Keywords: Expeditious disposal - Finance Act 2017 - Release of refund & Suspension of refund.

The Assessee-company was engaged in the business of undertaking turnkey projects for pipeline construction, HDD, and cathodic protection services. The Assessee filed its return declaring a total loss of Rs. 36.03 crores and a claimed refund of Rs. 1.39 crores for the AY 2015-16. The Assessee had deposited sizeable tax principally through suffering TDS during the FY. The AO did not pass any order u/s 143(1), but, a notice u/s 143(2) was issued. The assessment proceeding was pending before the AO. For the AY 2016-17, the Assessee filed its return declaring a loss of Rs. 21.28 crores and claimed a refund of tax already paid of Rs. 1.58 crores. Thereafter, a revised return was filed by the Assessee, in reponse to which, neither oder u/s 143(1) was passed nor any notice was issued u/s 143(2). Consequently, the Assessee wrote a letter to the DCIT and requested for refund and pointed out the tax and refund liabilities of the Assessee for the last few AYs. The Assessee did not receive any response from the DCIT, upon which, the Assessee made several further representations along the same line. Finally, the assessee opted for the writ route.

Having heard the parties, the High Court held that,

++ the case of the Assessee is that it is facing extreme financial hardship. On one hand, the Assessee suffers deduction of tax at source at the hands of the payees though due to the fact that the Assessee is making losses, there is no tax liability of the Assessee and on the other hand, the Assessee while making payments is required to deduct tax as per the statutory provisions and deposit the same with the Government. On account of the peculiar situation of the Assessee, the Assessee finds itself in liquidity crunch particularly for depositing such TDS with the Government;

++ if we analyze section 143 as it existed prior to the amendment of the Finance Act 2017, the return filed by the Assessee would be processed by the AO as provided u/s 143(1) permitting him to make adjustments and compute the tax or refund intimating to the Assessee the culmination of such exercise and granting the refund if due to him in terms section 143(1)(e). The first proviso to sub-section (1) also required the AO to send an intimation to the Assessee in case where the loss declared in the return by the Assessee is adjusted but no tax or interest is payable by or no refund is due to him. As per the further proviso to sub-section (1), no intimation under sub-section (1) would be sent after the expiry of one year from the end of the relevant AY in which the return is filed;

++ section 143(1D) which starts with a non-obstante clause provided that notwithstanding anything contained in sub-section (1), the processing of the return shall not be necessary before the expiry of the period specified in the second proviso where a notice has been issued to the Assessee u/s 143(2). Proviso to this sub-section (1D) provided that such return shall be processed before the issuance of an order under sub-section (3);

Whether mere issue of notice u/s 143(2) for extended period of return processing u/s 143(1) empowers the AO to sit tight over refund claims - NO: HC

++ the provisions which were applicable in case of the Assessee post deletion of section 241 and prior to insertion of section 241A would authorize the AO to withhold the refund arising out of a return filed by the Assessee if an intimation was sent u/s 143(1) after completing the processing of the return as envisaged therein. If notice u/s 143(2) was issued, such time limit for processing would get extended till the passing of the order of assessment. However, the Revenue cannot contend that even though no intimation under sub-section (1) of section 143 was issued within the time envisaged and no notice under sub-section (2) of section 143 was issued, the Assessing Officer can sit tight over the refund claimed by the assessee arising out of the return filed. Mere issuance of notice under section 143(2) of the Act claiming extended period for processing refund under section 143(1), would not be sufficient to withhold refund;

++ sofar as the assessment of the year 2015-16 is concerned, the return was filed on 29.09.2015 for which, the time limit under the normal provision of section 143(1) for processing the return is over long back. Even though, the AO having issued notice u/s 143(2), he would get an extended time for proceeding under sub-section (1) as highlighted by the Delhi High Court in case of Tata Teleservices Ltd. and by the Bombay High Court in case of Group M Media India Pvt. Ltd. Mumbai, it would be wholly inequitable for the AO to merely sit over the Assessee's request for refund citing the availability of time upto the last date of framing the assessment u/s 143(3);

++ once the time limit envisaged in the proviso to section 143(1) is over without the AO processing the return under sub-section (1) and even though notice u/s 143(2) may have been issued, the AO, by all reasonable interpretation of the statutory provisions would be expected to respond to the Assessee's request for either granting refund or indicating that in terms of the adjustments impermissible u/s 143(1), such refund or part thereof was not available to the Assessee;

Whether suspension of the refund arising out of the return filed is automatic on issuance of notice u/s 143(2), till the passing of order u/s 143(1) - NO: HC

++ we simply cannot accept the interpretation of the counsel for the Revenue that once a notice u/s 143(2) is issued, the suspension of the refund arising out of the return filed by the Assessee would be automatic and till the passing of the order of assessment u/s 143(2). The reasonable interpretation of the statute and the situation in such a case would be, to expect the AO to take up an expeditious disposal of the processing of return u/s 143(1) at least once the Assessee requests for release of the refund, and send as an intimation to the Assessee if he wishes to withhold the same;

++ the AO is directed to complete the process of the Assessee's return u/s 143(1) latest by 31.10.2017. If any refund arises out of said exercise, grant the same to the Assessee as per the statutory provisions. Insofar as the assessment of the year 2016-17 is concerned, the time for processing the return u/s 143(1) r.w. proviso is not yet over. We do not propose to issue any direction in this respect for curtailing the statutory time limit envisaged therein. With these directions, the petition is disposed of.

Assessee's Writ disposed of