NOTIFICATION

cgst_rule_53

CGST - Rule 96(10) - Notification retrospectively amended to allow IGST refund to exporters

CASE LAWS

2018-TIOL-380-SC-ST

CCE & ST Vs CANON INDIA PVT LTD: SUPREME COURT OF INDIA (Dated: October 5, 2018)

ST - The assessee is registered for providing taxable services under category of Management, Maintenance or Repair Services & Goods Transport Agency Services - It imported various Canon Products from M/s CSPL on a principal to principal basis & subsequent sale or leasing in domestic market - Duty demand was raised under Financial Leasing Service - Later, the Commr.(A) held that activity of assessee is squarely covered by Operating Lease instead of Financial lease - Since there is no transfer of ownership of goods at the end of lease, same does not fall in category of financial lease and falls in category of operating lease - Hence, the Commr.(A) set aside the duty demands - Later, the Tribunal noted that the assessee undertook certain promotional activities to promote its own sales in same market and due to high spending on such activities, they falls short of funds sometime and to cover the same, CSPL grant subsidy or discount to assessee in form of reimbursement of part such expenses towards such promotional activities - Moreover, for a previous period, the Department accepted that the assessee carried out sales and promotion on their own behalf & so such activities were not covered under BAS - Hence since such activity was export of service, no tax can be levied.

Held - Appeal admitted - To be heard with C.A. No. 6556/2015: Supreme Court

Appeal admitted

2018-TIOL-379-SC-VAT

DEPUTY COMMISSIONER OF SALEX TAX Vs GEETATEX : SUPREME COURT OF INDIA(Dated: October 5, 2018)

Gujarat Value Added Tax - Writ - Sections 41AA & 67

Keywords - DEPB scheme - Tax amnesty scheme

The assessee, a partnership firm in dealing in textile & other goods, also exported such goods, upon which the assessee received benefits under the DEPB scheme. Since the accrued DEPB was freely transferable, the assessee would often sell such DEPB to importers. The assessee filed returns for the relevant AY. Before assessment was completed, the State Govt inserted Section 41AA into the Act, to the effect that if an assessee paid additional tax & fulfiled other requirements, the tax declarations filed by such assessee would be accepted without scrutiny. Thereupon, the assessee claimed benefit u/s 41AA for them, and also submitted evidence of payment of additional tax.

However the AO did not pass a formal order either accepting or rejecting the declarations. The AO did not also proceed with the assessments for the five AYs. After about two years, the assessee was served an SCN raising duty demand with interest & imposition of penalty for the DEPB sales made during each of the five AYs. Later, the revisional authority noted that the despite the assessee's DEPB sales were under the Department's scanner, the assessee had yet made declaration u/s 41AA & obtained an order by misguiding the Department. On this account, duty demand was raised with interest & penalty was imposed for each of the five AYs. The assessee's revision petitions against such orders were subsequently dismissed by the Tribunal. On further appeal, the High Court held that an application seeking benefit under a tax amnesty scheme aimed at reducing litigation, cannot be rejected merely because the applicant could get away with alleged tax evasion, despite satisfying all requisite conditions. It was also held that rejection of declarations made under a tax amnesty scheme would not automatically entail tax liability.

In writ, the Apex Court condoned the delay and dismissed the SLP as the issue involved had become redundant.

Revenue's SLP dismissed

2018-TIOL-378-SC-WT

DIRECTOR OF WEALTH TAX Vs HERSH W CHADHA : SUPREME COURT OF INDIA (Dated: October 5, 2018)

Wealth Tax - Writ - Section 16(3)

Keywords - Intermediary tenant - Rent - Tenant

The assessee, an individual, filed wealth tax returns declaring net worth of about Rs 35,29,000/-. On assessment, his wealth was determined at about Rs 70 crores. On appeal, the CIT(A) set aside the assessment order & directed re-valuation. On remand, the AO noted that the assets had to be assessed at a higher rate & so determined the value of some property owned by the assessee at about Rs 52 lakhs. The WTO took into account the rent receivable at about Rs 62145/- and also added 15% of the deposits accepted by the tenant. Such valuation was upheld by the CIT(A). On further appeal, the Tribunal noted that the deposit upon which interest was generated had not been received by the assessee, but by its tenant. Later, the High Court held that the rent & deposits received by intermediary tenant from the occupier of the property, can be taken into account for computation of net wealth of an asset under the Wealth Tax Rules.

In writ, the Apex Court condoned the delay and proceeded to dismiss the Revenue's SLP while leaving the question of law open for adjudication.

Revenue's SLP dismissed

2018-TIOL-2115-HC-MAD-IT + Case Story

MBI KITS INTERNATIONAL Vs ITO : MADRAS HIGH COURT (Dated: October 04, 2018)

Income Tax - Writ - Section 10B.

Keywords: Change of opinion - Extended period of limitation - Holiday period - Incorrect particulars & Reassessment.

The assessee was carry on the business of manufacturing and testing chemicals and commenced its business of production on May 25, 2000. In its return of income, the assessee claimed deduction u/s 10B to the tune of around Rs 97.34 lakhs. After scrutiny, an order of assessment was passed accepting the claim of deduction, however by making minor additions. The assessee filed an appeal as against the additions and the Appellate Authority deleted the additions and allowed the appeal.

Thereafter, a notice u/s 148 was served on the assessee for reopening of the assessment, on the reason that some income for the AY 2010-11 had escaped assessment. According to the reasons stated by the AO , the assessee had extended its 10B holiday period to the eleventh year and hence, become ineligible for deduction. The assessee, through, objected to the reopening on the ground that the same was beyond four years of the end of the relevant AY and that it had commenced its business of manufacturing activity only after April 1, 2000 and consequently, the initial year, when the undertaking commenced manufacturing activity being the AY 2001-02, the claim of deduction was well on the tenth year itself. The assessee also contended that the reopening was made merely based on change of opinion without there being new tangible material to deny the claim. However, the AO rejected the objection filed by the assessee.

In Writ, the High Court held that,

Whether reasons for reassessment by the AO u/s 147 may also include his own omission or default - YES: HC

Whether however, such reassessment for the reason of omission or default on the part of the AO cannot be done after the expiry of period of limitation of 4 years by invoking first proviso to Section 147 - YES: HC

++ it cannot be stated that the assessee has availed the benefit under Section 10B by giving false details. If the date of manufacture as referred to in Form 56G is taken as the right date, the Assessing Officer ought not to have allowed the deduction. Likewise, if the number of consecutive year referred to in Form 56G as tenth year is taken as the true statement, the Assessing Officer was right in allowing the deduction. Therefore, it is evident that by furnishing the wrong date of manufacture as 28.03.2000, the assessee has not either deceived or suppressed any material fact before the Assessing Officer to claim deduction under Section 10B. If the exact date of manufacturing could be ascertained or gathered from the conjoined consideration of other material documents, such as relevant certificates of registration by the competent authority, mere wrong mentioning of the date in Column 7 cannot be construed as non disclosure of true and material facts, especially when column 8 of statement supports the claim. One can understand and appreciate the stand of the Revenue for reopening the assessment, if the assessee, by giving a false information regarding the date of commencement of manufacture as 28.03.2000 alone, had obtained deduction under Section 10B. Thus, it is seen that the Assessing Officer, who has originally chosen to allow the deduction based on the materials filed already, has now changed his opinion and has chosen to reopen the assessment, which in my considered view, cannot be done after a period of four years;

++ if, by furnishing incorrect particulars or facts, the assessee got benefited, then one can understand that there was no true and full disclosure by the assessee. On the other hand, if the benefit, in this case the deduction, was granted or allowed inspite of such furnishing of incorrect particulars or facts, then it could, at the best, be called only as the escapement of income from the consideration of the Assessing Officer for being assessed and not the escapement of income by any of the act or omission by the assessee. At this juncture, the admission made by the AO in the counter affidavit, more particularly, at paragraph No.10 is relevant to be quoted. He had admitted that while completing the original assessment, the Assessing Officer failed to take cognizance about the date of commencement of manufacture incorporated in Form No.56G. Thus, it is evident that it is by the mistake or fault of the Assessing Officer in not taking cognizance about the date of commencement of manufacture, according to the Revenue, the income escaped assessment. If that be the case, the Assessing Officer is entitled to reopen the assessment before the expiry of four years only and correct the mistake and make the addition;

++ the term "any income chargeable to tax has escaped assessment" referred to under Section 147 has to be understood to mean that such alleged escapement of assessment is based on the belief of the Assessing Officer with some reasons and that such reasons may include his own omission or default. On the other hand, the very same term "any income chargeable to tax has escaped assessment" referred to in the first proviso to Section 147, certainly not to be construed to mean that such belief of the Assessing Officer with reason will also fit into such proviso to invoke the extended period of limitation. On the other hand, such escapement of assessment can be brought into tax by way of reopen only when either of the two ingredients referred to in the proviso is satisfied. In other words, the Assessing Officer's omission or mistake does not have a role to play for invoking proviso to Section 147 and on the other hand, such invoking should stand or fall solely depending upon the satisfaction of those conditions;

++ every non disclosure of material facts will not or cannot be a justifiable reason for reopening sustainable under judicial scrutiny. On the other hand, such non disclosure of a material fact must be of such nature that, but for such non disclosure, the income, relatable to such material fact, would not have escaped assessment. In other words, it should lead to an irrebuttable conclusion that by the conduct of the assessee, either by providing wrong or incorrect particulars or by not providing the full and correct particulars, he should have made the Assessing Officer not to bring a particular income to tax, which is otherwise liable to be taxed. If this test is applied to the present case, I am of the view that the Revenue has to fail.

Assessee's writ petition allowed

2018-TIOL-2108-HC-MUM-CUS

SHAH NANJI NAGSI EXPORTS PVT LTD Vs UoI : BOMBAY HIGH COURT (Dated: September 21, 2018)

Cus - Respondents are clear that policy change on a particular item applies prospectively from the date of Notification unless it is otherwise provided for - Here, while imposing restriction on 30th August, 2018, no words providing otherwise are employed - There is nothing on record, therefore, to show that the Notfn 32/2015-20, dated 30th August, 2018 has to operate retrospectively - The documents filed by petitioner along with petition show that against two contracts, the balance 90 per cent amount was paid respectively on 23.05.2018 and 04.06.2018 - Yellow Peas forming subject matter of those two contracts were to be loaded at Ukraine and unloaded at Nhava Sheva Port - The shipments were accordingly loaded on 28.04.2018 and 10.05.2018 and have reached the port of discharge on 23.05.2018 and 31.05.2018 - These details, therefore, show that before 30th August, 2018, the contract was fully executed - In this situation, without observing anything more, respondents are directed to take necessary steps to permit petitioner to lift and use imported Yellow Peas in these two shipments without subjecting them to the restriction imposed vide Notfn. 32 dated 30th August, 2018: HC

Writ petition allowed

2018-TIOL-2107-HC-MUM-CUS

CC Vs ATLAS MERCANTILE PVT LTD : BOMBAY HIGH COURT (Dated: September 25, 2018)

Cus - Issue relates to appropriate classification of imported goods - At this stage, Revenue submits that the issue herein is arising on account of misdeclaration made by assessee in classifying the imported goods under Chapter 54 heading 5407.61 of the Customs Act - Thus, the issue of classification is the secondary issue and the primary issue is with regard to misdeclaration made by the assessee - If classification as filed by assessee is accepted, there could be no question of misdeclaration - The primary issue to be decided, is appropriate classification of the imported goods and only thereafter the issue of misdeclaration may arise for consideration - Thus, the issue regarding rate of duty is not within jurisdiction under Section 130 of the Act - The remedy, if any, is to file an appeal before Supreme Court from the impugned order: HC

Appeal disposed of

2018-TIOL-2106-HC-MUM-CUS

BANGALORE FOODS INTERNATIONAL Vs UoI : BOMBAY HIGH COURT (Dated: September 28, 2018)

Cus - This Petition filed under Article 226 of Constitution of India challenges an order dated 3rd August, 2018 passed by Joint Commissioner of Customs - By the impugned order, the goods which were declared by Petitioner as “Roasted Cashew Nuts Grade BB” were confiscated on account of mis-declaration as it was found to be broken Raw Cashews Nuts - However, the redemption of the above Raw Cashew Nuts was allowed on payment of redemption fine only for export of the same - After noticing the fact that there were two contradictory reports, the adjudicating authority obtained a third report from another authority - All this would require appreciation of impugned order in the context of the evidence before it - These are issues which are best agitated and resolved before the Appellate Authority under the Act - There is no reason to exercise extra ordinary jurisdiction under Article 226 of the Constitution of India as efficacious alternate remedy is available under the Act from the impugned order: HC

Petition dismissed

2018-TIOL-2105-HC-MUM-CUS

RAJESH POKHARKAR Vs CC : BOMBAY HIGH COURT (Dated: September 26, 2018)

Cus - The impugned order of Tribunal is a nonspeaking order - This for the reason that it does not record nor consider the submissions of parties, before concluding against assessee - An order passed in appeal must also indicate/disclose due consideration of the issue raised before it, even though it may not be very elaborate - However, before taking any final view on the issue raised in appeal, it would be appropriate that court hear the Revenue - Appeal is adjourned to 29th October 2018 at 3.00 p.m. for final disposal: HC

Appeal adjourned

2018-TIOL-2104-HC-MUM-CX

AMBEY VAISHNO STEELS PVT LTD Vs UoI : BOMBAY HIGH COURT (Dated: October 3, 2018)

CX - The grounds of challenge herein are identical to the grounds of challenge in M/s. Shree Siddhi Vinayak Ispat Pvt. Ltd. 2018-TIOL-2053-HC-MUM-CX - Writ Petitions are not entertained as there is an efficacious alternate remedy of challenging impugned order of the Commissioner of Central Excise before the Tribunal under the Act: HC

Petitions dismissed

2018-TIOL-2103-HC-MUM-CX

CST Vs INTERNATIONAL OVERSEAS SERVICES : BOMBAY HIGH COURT (Dated: October 3, 2018)

CX - The Revenue is unable to point out any distinction in the facts and in law in this case from that in the decision of this Court in SGS India Pvt.Ltd. 2014-TIOL-580-HC-MUM-ST - Thus, there is no reason to interfere in appeal - In view of the fact that the impugned order of Tribunal followed the binding decision of this Court in SGS India Pvt.Ltd., the question as proposed does not give rise to the substantial question of law - Thus, not entertained: HC

Appeal dismissed

2018-TIOL-2102-HC-MUM-CX

DEEPAK R SHAH Vs CCE : BOMBAY HIGH COURT (Dated: October 1, 2018)

CX - The assessee is a partner of one M/s. Gurunanak Metal Works - The duty demand has been confirmed and penalties have been imposed on M/s. Gurunank Metal Works and its partner the assessee - The assessee as well as the partnership firm filed appeals to the Tribunal - The impugned order of the Tribunal has disposed of both the appeals by common order and has only referred to the facts and law, applicable in respect of the partnership firm - This with regard to the demand of duty and imposition of penalty - Merely because penalty is imposed upon the partnership firm, it would not, ipso facto, follow that penalty on the partners, is to be upheld - The impugned order of Tribunal ought to have dealt with assessee's appeal separately, before coming to a conclusion that the orders of Commissioner (A) was correct - Accordingly, substantial question of law is answered in affirmative i.e. in favour of assessee and against the Revenue: HC

Appeal disposed of

2018-TIOL-2101-HC-KAR-ST

GLOBAL ASSOCIATES Vs ACCE : KARNATAKA HIGH COURT (Dated: September 27, 2018)

ST - A case was registered under Section 89(1)(a) of FA, 1994 and the petitioner accused No.2 has also not appeared before the Court below and as such the NBW has been issued since 24.04.2015 - No doubt by going through the records it indicates inspite of issuance of NBW by the Magistrate it was not possible to secure and has evaded the service of NBW - But, now the petitioner-accused No.2 has come forward before this Court that he is going to appear before the Court regularly and in the first instance, he is going to deposit Rs. 20,00,000/- out of the remaining dues and subsequently he will be regular in appearing before the Court and for payment - The petitioner-accused No.2 herein is released on anticipatory bail on the file of Principal Chief Judicial Magistrate, Mangaluru subject to conditions that petitioner shall execute a personal bond for a sum of Rs.2,00,000/- with two sureties for the likesum to the satisfaction of the trial Court and the petitioner shall deposit as per his undertaking Rs. 20,00,000/- to the concerned service tax authorities within two weeks: HC

Petition allowed

2018-TIOL-2095-HC-MUM-IT + Case Story

SAHIR SAMI KHATIB Vs ITO: BOMBAY HIGH COURT (Dated: October 3, 2018)

Income Tax - Section 2(22)(e).

Keywords - Deemed dividend - Substantial shareholder - Substantial beneficial interest - Loan.

THE assessee an Individual, was shareholder in a company known as M/s Medley Laboratories Pvt. Ltd. (MLPL) and M/s Oryx Fisheries Pvt. Ltd. (OFPL). The assessee held 15% equity shares in M/s MLPL and 45% equity shares in M/s OFPL. During the AY 2007-08, M/s MLPL (lender) had given a loan of Rs. 91,85,874/- to its sister concern M/s OFPL (borrower). The assessee had filed his return of income for relevant AY 2007-08. Considering that the assessee was a registered as well as a beneficial shareholder of both M/s MLPL and M/s OFPL, the AO treated this loan (along with interest) of Rs. 99,86,874/- as a deemed dividend u/s 2(22)(e) of Act, in the hands of the assessee on a protective basis. Aggrieved assessee preferred an appeal before the CIT(A) who deleted the addition made u/s 2(22)(e) of the Act. The revenue filed appeal before the Tribunal, which was allowed.

On appeal, the High Court held that,

Whether if the assessee is a substantial shareholder, holding more than 10% of the shares of the lending as well as borrowing companies, the advance involved can be treated as deemed dividend u/s 2(22)(e) in the hands of assessee - YES : HC

++ assessee is a 15% shareholder in M/s MLPL and a 45% shareholder in M/s OFPL. Similarly, it is also not in dispute that the appellant in Income Tax Appeal No. 724 of 2015 is a 15% shareholder in M/s MLPL and a 99% shareholder in M/s SHCPL. In both these appeals, it was found that M/s MLPL had given a loan and advances to M/s OFPL and M/s SHCPL respectively. The assessee in both the appeals, is not only holding more than 10% in M/s MLPL but also having a substantial interest in M/s OFPL as well as M/s SHCPL. It, therefore, can hardly be disputed that both the assessees have a substantial interest in the borrowing companies. It is, in these facts, that the ITAT, after examining the definition of the word 'dividend' in Section 2(22)(e) of the I. T. Act, 1961 as well as the ratio of Court in the case of Universal Medicare Pvt. Ltd came to a finding that since the assessees were shareholders holding more than 10% of the equity shares of the lending company (M/s. MLPL) and also having a substantial interest in the borrowing companies (45% in OFPL and 99% in SHCPL), the conditions as prescribed under Section 2(22)(e) of the I. T. Act, 1961 were satisfied to include the assessee within the ambit of deemed dividend to be taxed in the hands of the assessee. All that the ITAT has done is, come to a conclusion that the assessee who is the shareholder in both the lending company as well as borrowing company and having substantial interest therein, the deemed dividend would have to be taxed in the assessee's hand;

++ there is only one shareholder that has a shareholding in the lending company as well as in the borrowing company. This being the case and purely factual in nature, the ITAT was not in any event incorrect in rejecting this argument of the assessee. The impugned orders passed by the ITAT give rise to any substantial question of law. Both the appeals are accordingly dismissed.

Assessee's appeal dismissed

2018-TIOL-2094-HC-MUM-IT

SIEMENS LTD Vs ACIT: BOMBAY HIGH COURT (Dated: August 20, 2018)

Income Tax - Pending Application & Rectification of mistakes.

THE AO disallowed entertainment expenditure related to expenditure incurred on lunch, dinner etc by staff members outside office premises; expenditure on refreshments offered to the invitees at the Annual General Meeting and relates to welfare expenses. on appeal the CIT(A) also confirmed the same. On further appeal, the Tribunal remanded the matter bach to the file of CIT(A) on ground that there were certain rectifiable mistakes in the order which needs to be attended. However, the assessee filed an application seeking rectification of the mistakes in that order of the Tribunal has not been decided by the Tribunal till date.

Having heard the parties, the High Court held that,,

Whether rectification applications pending with the Tribunal needs to be dealt with on an urgent basis - YES: HC

Whether on further breach of the direction to dispose of such rectification applications, the members concerned of the Tribunal will be liable to notices - YES: HC

Whether matter should be brought to the notice of the President of the Income Tax Appellate Tribunal to ensure speedy redressal - YES: HC

++ it is unfortunate that an application seeking rectification of the mistakes in that order of the Tribunal has not been decided by the Tribunal till date. Therefore, the court is constrained to adjourn this matter repeatedly, though it is pending for consideration of this Court from 2nd May, 2015. The Court direct the Income Tax Appellate Tribunal, Bench at Mumbai, to whom the rectification application is assigned, to dispose it off as expeditiously as possible and, in any event, by 30th August, 2018. We list this matter under the same caption on 3rd September, 2018.

++ in the event the Tribunal commits a breach of this direction, we would take a very serious note of its conduct and then would be constrained to issue notices to the Members concerned. Let this order be brought to the notice of the President of the Income Tax Appellate Tribunal and he should ensure that all pending rectification applications should be disposed of by the Tribunal Members to whom they are assigned expeditiously. This will obviate and avoid unnecessary litigation. Further, if the mistakes are apparent, the Tribunal will get an opportunity to correct them at the earliest. If the applications are frivolous or vexatious only to prolong the litigation, then as well, it is the bounden duty of the Tribunal to deal with them so that the Revenue and larger public interest does not suffer. The consequences should be taken into consideration by the Tribunal and it must note that the higher Courts never keep such applications pending beyond a period of three to six months and deal with them on an urgent basis. If that can be done by the Courts where lakhs of cases are pending, it is unfortunate that the Tribunal has yet to inculcate a discipline and bring some order in its proceedings.

Notice issued

2018-TIOL-2093-HC-MAD-IT

PALGHAT PERMANENT FUND LTD Vs ACIT: MADRAS HIGH COURT (Dated: September 10, 2018)

Income Tax - Sections 2(7) & 2(28A)

Keywords - Chargeable interest - NBFC - Penalty

THE assessee, an NBFC engaged in operating chit funds, filed returns for the relevant AY. The assessee had reflected an amount of interest, which was penal in nature, as chargeable interest. On assessment, the AO proposed to disallow the same. The assessee claimed that such penal interest was received by the assessee when borrowers defaulted in making re-payment within the due dates, and so classified as interest on interest. It was also claimed that the default interest was a type of compensation received from borrowers who defaulted on repayments within the due dates and so was out of the purview of chargeable interest. The AO held that the compensation received by the lender from the borrower had the character of interest on loans and advances. Hence the AO held that the default interest was taxable u/s 2(1) & 2(5) of the Interest Tax Act. On appeal, the CIT(A) deleted such additions made by the AO. Such findings were upheld by the Tribunal.

On appeal, the High Court held that,

Whether interest collected by an NBFC from defaulters, is to be covered under the scope of the Interest Act 1974, considering that such interest is penal in nature - YES: HC

++ The case of the Revenue is pitched on the sole point that whatever that has been collected is on loans and advances extended by the assessee and in whatever name it might have been collected, it would fall within the definition of interest under Section 2(7) of the Interest Tax Act. A similar issue was resolved in the case of Commissioner of Income Tax vs. Cholamandalam Investment & Finance Co. Ltd. wherein, the substantial question of law, which was framed for consideration, was whether the Tribunal was right in excluding additional discount charges from the chargeable interest under the Interest Tax Act. The Division Bench, after referring to the decision in the case of Commissioner of Income-tax vs. State Bank of Travancore held that interest on loans and advances and the additional discount charges would not attract the provisions of the Interest Tax Act. In the case of Commissioner of Income-tax vs. Bank of Rajasthan Ltd., it was held that interest or penal interest charged by the assessee on the delayed payment of instalments by the depositors of the recurring deposit accounts, is not exigible to tax under the provisions of the Interest-tax Act, 1974;

++ Similar view was taken in the case of Commissioner of Income-tax vs. State Bank of Indore wherein the Court held that the Tribunal was not right in holding that the amounts charged by the assessee for delayed payment of bills of entry were in the nature of interest on advances and exigible to tax under the Act. The High Court of Karnataka, in the case of State Bank of Mysore vs. Commissioner of Income-tax, held that interest is the damages or compensation for delayed payment of money due and therefore, the expression 'compensation' in Section 32 of the Negotiable Instruments Act, will include interest paid by way of damages or compensation for delayed payments. It was further, held that any amount collected by the Bank cannot be anything but interest, whatever may be the nomenclature, and is chargeable interest for the purpose of Interest Tax Act;

++ in light of such precedents, the Tribunal's order is incorrect and warrants being set aside.

Assessee's appeal allowed

2018-TIOL-2092-HC-KOL-IT

BINANI INDUSTRIES LTD Vs DCIT: CALCUTTA HIGH COURT (Dated: September 27, 2018)

Income Tax - Writ - Sections 115JB, 147 & 148.

Keywords - Reopening of assessment - Escapement of income - Book Profits - MAT - Change of opinion.

THE assessee company had filed return for relevant AY. The AO passed assessment order u/s 143(3) computing total income as nil and calculating minimum alternate tax u/s 115JB at Rs.50,63,864/-. After allowing tax deducted at source and taxes paid by the assessee, a demand for Rs. 19,91,776/- was raised. Later on AO decided to reopen the assessment and issued notice u/s 148 of the Act on the ground that income had escaped assessment. The assessee objected to the reopening of assessment but AO rejected the same. Aggrieved assessee filed writ petition before the High Court. During the pendency of the writ petition, the AO completed the re-assessment. The assessee contended that, the AO had erred in invoking Sections 147 of Act as there were no tangible materials before the AO to come to the conclusion that there was escapement of income from assessment.

On appeal, the High Court held that,

Whether reopening of assessment is a tool in the hands of the AO to have a different opinion on same facts than already expressed in the scrutiny assessment - NO : HC

Whether in the absence of new materials, decision of AO to compute book profit in different way than a method used during original assessment, amounts to change of opinion for which reopening of assessment can not be allowed - YES : HC

++ the assessee underwent a scrutiny assessment where, the order passed by the AO dealt with the issue of book profits. He arrived at a figure after working on the materials provided to him. However, according to the AO in the proceeding under Section 147, the calculation of book profits is incorrect and that, the book profits claimed should be treated in a different way. According to the AO, the computation done in the order of assessment is incorrect, resulting in escapement of income for assessment. The same, will constitute change of opinion. He had all the materials at the time of scrutiny assessment to form an opinion. He had done so, as appearing in the order of assessment. There is no new material on record to suggest that, the assessee is guilty of suppression. Therefore, it cannot be said that, there are reasons for the AO to arrive at a finding that, income has escaped assessment. The AO is trying to review his order of scrutiny assessment. In the facts of the present case, he is seeking to have a different opinion than that expressed in the order of scrutiny assessment, on the basis of the same materials. The same is not permissible. In such circumstances, the invocation of Section 147 of the Act of 1961 by the AO is quashed.

Assessee's writ petition allowed

2018-TIOL-2091-HC-ALL-CT

GLAXOSMITHKLINE PHARMACEUTICALS LTD Vs CTT: ALLAHABAD HIGH COURT (Dated: August 2, 2018)

Central Sales Tax Act, 1956 - Sections 6 & 6A(2) - Central Sales-tax (Registration and Turnover) Rules, 1957 - Rule 12(4)

Keywords - Stock Transfer Vs Inter-State sale - Contract with Clearing and Forwarding Agents - Form-F.

THE assessee was a manufacturer of 'Ghee' and had its factory at Aligarh. The assessee transferred a Stock of Ghee to the tune of Rs. 1,48,71,415.86 from Aligarh to its 'Clearing and Forwarding Agents' at Jaipur in Rajasthan involving various transactions which was in dispute and had been treated as Inter-State sale. Form-F issued by the Principal Officer at Jaipur, was submitted before the AO in the State of U.P. However, the AO did not accept the particulars mentioned in Form-F, and treated the transaction as Inter-State Sale liable to tax u/s 6 of the Act. The AO imposed tax liability of Rs. 18,20,713.77. The FAA affirmed the order of AO. The Tribunal set aside the order and remanded the matter back to the AO. After remand, the AO reconsidered the matter and again took the same view on the ground that in order to examine the matter in the light of the order of the Tribunal it was necessary to look into the account books and other original records relating to the transactions but none of these were produced before him inspite of show cause notice having been issued in this regard. This assessment order was affirmed by the FAA and Tribunal. Aggrieved assessee filed trade tax revision before the High Court.

the High Court held that,

Whether filing of form F in pursuance to section 6A(2) of the Central Sales Tax Act is conclusive proof of Stock Transfer - NO : HC

Whether it is the duty of the assessee dealer to prove with necessary evidences that transaction is of transfer of goods otherwise than by way of Sale - YES : HC

Whether upon failure of dealer to produce relevant records, assessing authority is well within its jurisdiction in rejecting the form F and treating the stock transfer of goods as inter state sale and made dealer liable for trade tax - YES : HC

++ the submission of Form-F by itself does not raise any un-rebutable or conclusive presumption regarding the transaction(s) being Stock Transfers. The judgment of the Supreme Court in the case of II- nd Ashok Leyland case does not lay down any such proposition. What it says is that once an order accepting Form-F has been passed under Section 6-A(2) then the veracity of the transaction and validity of the said order cannot be questioned subsequently by reopening the case on this ground. Thus, the ratio of the judgment is that the order accepting Form-F is final and binding and not that mere submission of Form-F is conclusive proof of Stock Transfer or that the transaction was not a sale. In the present case Form-F was not accepted by the Assessing Authority while exercising his power under Section 6-A(2), albeit at the time of assessment, therefore, the principle of law laid down in II- nd Ashok Leyland case does not apply;

++ in the present case no plausible reason has been given by the Revisionist for non-production of the account books and other records as requisitioned by the Assessing Authority. Though, the scope of inquiry under Section 6-A(2) is limited to the veracity of the particulars mentioned in Form-F, the nature of the inquiry could encompass the requisitioning of relevant records. Under Section 6-A the burden is upon the dealer to prove that it is a Stock Transfer and if he submits Form-F the burden is upon him to prove the particulars mentioned therein and satisfy the Assessing Authority as to their truthfulness and in this process if the Assessing Authority demands certain records the dealer is bound to produce it to facilitate the inquiry referred in sub section (2) and a satisfaction being arrived at by the assessing authority as envisaged in the provision. If it does not, then the Assessing Authority is within his jurisdiction to reject form- F;

++ the Revisionist not having produced the records inspite of notice, it failed to discharge the burden under Section 6-A(2), therefore, the assessing and appellate authorities correctly treated the transaction as deemed Inter State Sale. The burden of proof, was upon the Revisionist dealer which failed to discharge it, therefore, the the transactions have rightly been deemed as Inter-State sale under Section 6A-2 of the Act, 1956;

++ in the case at hand the dealer did not discharge the burden as he did not produce the relevant records demanded by the officer to facilitate the exercise u/s 6A.The fact that tax on alleged sale of the goods in question by the Clearing and Forwarding Agents in Rajasthan has been paid in the State, assuming it to be so, it is inconsequential for determining the issue whether it was an Inter-State sale and liable to tax under Section 6 of the Act, 1956 by the authorities U.P. The Revision is accordingly dismissed.

Assessee's Revision dismissed