C A Shah D J
USA
IT : While calling upon assessee to submit objection for transfer of its case to another State, principles of natural justice requires revenue to make available all relevant material particulars to assessee
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[2013] 33 taxmann.com 522 (Karnataka)
HIGH COURT OF KARNATAKA
Span Design & Development (P.) Ltd.
v.
Commissioner of Income-tax, Bangalore - III*
RAM MOHAN REDDY, J.
WRIT PETITION NO. 6452 OF 2010 (T-IT)
APRIL 17, 2013
Section 127 of the Income-tax Act, 1961 - Income-tax authorities - Power to transfer cases [Natural justice] - Petitioner's name appeared in case of search & seizure operations, carried out at Hyderabad - Income-tax Officer issued notice under section 127 calling upon petitioner to submit objection for transfer of its case from Bangalore to Hyderabad - Notice was not appended with any relevant material particulars - Whether principles of natural justice requires revenue to make available all relevant material particulars, while calling upon assessee to submit objection for transfer of its case to another State - Held, yes - Whether since petitioner, in absence of relevant material particulars, was handicapped to submit objection for transfer of its case, order transferring case of petitioner was to be quashed and assessment order passed by authority at Hyderabad was to be declared a nullity - Held, yes [Paras 4 & 7] [In favour of petitioner]
FACTS
| ■ | The petitioner's name was appeared in search & seizure operations carried out under section 132 at Hyderabad in case of another person SM. | |
| ■ | The Income-tax Officer issued notice under section 127 calling upon the petitioner-assessee to submit explanation/objection for transfer of its return for assessment from the jurisdiction of ITO in Bangalore, to Dy. CIT in Hyderabad. | |
| ■ | The notice was not appended with relevant material particulars and copies of document relating to search & seizure operation which was alleged to had been carried out at Hyderabad. |
On writ petition:
HELD
| ■ | The notice issued by Income-tax Officer proposing to transfer petitioner's case is not appended with all relevant material particulars and copies of documents relating to search and seizure, alleged to have been carried out at Hyderabad in the case of another person SM. There can be no dispute that the rule of audi alteram partem or principles of natural justice requires the authority to make available all and every relevant material, as also particulars, while calling upon the assessee to submit explanation/objection for transfer of his returns for assessment in another State. The petitioner assessee, in the absence of relevant material particulars obviously is handicapped to submit explanation/objection to the transfer of its case to Hyderabad. Notice bereft of material particulars does not subscribe to the requirement of principles of natural justice. [Para 4] | |
| ■ | It is elsewhere said that if there is a power to decide and determine to the prejudice of a person, duty to act judicially is implicit in the exercise of such power. If the essentials of justice be ignored and an order to the prejudice of a person is made, the order is a NULLITY. Natural justice is another name for commonsense justice. Rules of natural justice are not codified cannons. But they are principles ingrained into the conscience of man. [Para 5] | |
| ■ | Respondent, without furnishing relevant material along with the notice, which might throw light upon the matter in question, sought to obtain objection from the petitioner assessee for transfer of it's case to another State in the absence of material and information, which a properly informed decision requires, in short, passed the order for transferring the case of the petitioner for assessment to the State of Andhra Pradesh at Hyderabad by furnishing to the petitioner imperfect knowledge. The extreme impropriety of such a course could not be made too plain. [Para 6] | |
| ■ | On this ground alone, this petition deserves to be allowed and is, accordingly, allowed. The order transferring the case of the petitioner to Hyderabad, is quashed and the proceeding remitted for consideration afresh. [Para 7] |
S. Parthasarathi, Malhara Rao and Vijayakumar Punna for the Petitioner. K.V. Aravind for the Respondent.
ORDER
1. Having heard the learned counsel for the parties and examined the notice dated 19.06.2009 Annexure 'G' and the order dated 07.07.2009 Annexure 'H' impugned in this petition, suffice it to state that the notice Annexure `G` is in violation of the principles of natural justice. In these petitions, Rule was issued on 01.07.2010 and the interim order on 29.11.2010, which reads thus:
"Any order to be passed by the Assessing Authority shall be subject to the outcome of the writ petition."
2. Petitioner-assessee was issued with notice dated 19.06.2009 Annexure 'G' by the Income-tax Officer (Tech.) proposing to transfer the case from ITO Ward 12[2], Bangalore, to Dy. CIT, Central Circle-3, Hyderabad and reads thus:
"A search and seizure operations u/s 132 of the Income-tax Act, 1961 was carried in the case of Sri Syed M. Mehdi and others, Hyderabad on 07-02-2009. Your name appear in the above mentioned group of cases. You are being assessed with the ITO Ward 12[2] Bangalore. It is accordingly proposed to transfer the case from ITO Ward 12[2], Bangalore to Dy. CIT, Central Circle-3, Hyderabad.
If you have any objection to the proposed transfer, you may file your objection, if any so as to reach this office on or before 29th June 2009. You are also given an opportunity of personal hearing before the Commissioner of Income-tax, Bangalore-III, Bangalore at his office at lst Floor, C R Building, Queens` Road, Bangalore-560001 at 11 AM on 29-06-2009."
3. The proposed transfer according to the learned counsel for the respondent-Revenue is in exercise of jurisdiction under clause (a) of sub-section (2) of section 127 of the Income-tax Act, 1961, which reads thus:
"127. Power to transfer cases.
(1) The Director General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.
(2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner, -
| (a) | where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons-for doing so, pass the order;" |
4. The notice Annexure 'G' is not appended with all relevant material particulars and copies of documents relating to search and seizure, alleged to have been carried out at Hyderabad on 07.02.2009 in the case of Sri Syed Mehdi and others. There can be no dispute that the rule of audi alteram partemor principles of natural justice requires the authority to make available all and every relevant material, as also particulars, while calling upon the assessee to submit explanation/objection for transfer of his returns for assessment in another State. The petitioner assessee, in the absence of relevant material particulars obviously is handicapped to submit explanation/objection to the transfer of its case to Hyderabad. Annexure 'G' bereft of material particulars does not subscribe to the requirement of principles of natural justice.
5. It is elsewhere said that if there is a power to decide and determine to the prejudice of a person, duty to act judicially is implicit in the exercise of such power. If the essentials of justice be ignored and an order to the prejudice of a person is made, the order is a NULLITY. Natural justice is another name for commonsense justice. Rules of natural justice are not codified cannons. But they are principles ingrained into the conscience of man.
6. Respondent, without furnishing relevant material along with the notice Annexure 'G', which might throw light upon the matter in question, sought to obtain objection from the petitioner assessee in the absence of material and information, which a properly informed decision requires, in short, passed the order Annexure 'G' transferring the case of the petitioner for assessment to the State of Andhra Pradesh at Hyderabad by furnishing to the petitioner imperfect knowledge. The extreme impropriety of such a course could not be made too plain.
7. On this ground alone, this petition deserves to be allowed and is accordingly allowed. The order dated 19.06.2009 Annexure 'G' transferring the case of the petitioner to the Deputy Commissioner of Income- tax, Central Circle-3, Hyderabad, is quashed and the proceeding remitted for consideration afresh after furnishing all relevant material particulars, including copies of search and seizure mahazars and other such relevant material to the petitioner and thereafter, to pass an order strictly in accordance with law. Sequentially, the assessment order passed by the authority at Hyderabad, on transfer, of the petitioner's return is declared a nullity.
SB*In favour of Petitioner.
ST : Credit cannot be denied on ground that assessee was not registered during relevant time
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[2013] 33 taxmann.com 514 (Ahmedabad - CESTAT)
CESTAT, AHMEDABAD BENCH
Reliance Ports & Terminals Ltd.
v.
Commissioner of Central Excise, Rajkot*
B.S.V. MURTHY, TECHNICAL MEMBER
ORDER NOS.A/ 1671 - 1672 /WZB/AHD/2012
APPEAL NOS. ST/332 & 333 OF 2011
APPEAL NOS. ST/332 & 333 OF 2011
NOVEMBER 16, 2012
Rule 3 of the Cenvat Credit Rules, 2004 - CENVAT Credit - General - Commercial Construction services provided by assessee became taxable on 10-9-2004 - Assessee applied for registration and was granted registration on 11-10-2004 - Department denied credit of input services on invoices issued prior to date of registration viz. 11-10-2004 - HELD : Credit cannot be denied on ground that assessee was not registered during relevant time - Hence, assessee was eligible for input service credit availed by it [Paras 3 & 4] [In favour of assessee]
CASE REVIEW
Sutham Polyesters Ltd. v. CCE 2005 (188) ELT 26 (Tri. - Chennai) (para 4); Well Known Polyesters Ltd. v. CCE [2012] 36 STT 1 (Mag.)/22 taxmann.com 131 (Ahd. - Cestat) (para 4); Amar Remedies v. CCE 2010 (257) ELT 552 (Tri. - Ahd.) (para 4) and CCE v. Fine Care Biosystems2009 (244) ELT 372 (Tri - Ahd.) (para 4) followed.
CASES REFERRED TO
Sutham Polyesters Ltd. v. CCE 2005 (188) ELT 26 (Tri. - Chennai) (para 3), Well Known Polyesters Ltd. v. CCE [2012] 36 STT 1 (Mag.)/22 taxmann.com 131 (Ahd. - Cestat) (para 3), Amar Remedies v. CCE 2010 (257) ELT 552 (Tri. - Ahd.) (para 3) and CCE v. Fine Care Biosystems2009 (244) ELT 372 (Tri - Ahd.) (para 3).
J.C. Patel for the Appellant. Shiv Kumar for the Respondent.
ORDER
1. In both the appeals, the issue involved is whether Cenvat Credit of Service Tax paid on input service can be denied to the appellant on the ground that invoices on the basis of which credit was taken are issued prior to registration of the appellants on 11/10/2004.
2. The learned Counsel submits that the appellant is engaged in providing commercial construction services and the services become leviable to service tax with effect from 10/09/2004. The appellant applied for registration immediately and registration certificate was issued on 11/10/2004. The cenvat credit of service tax paid by him during the period from 10/09/2004 to 11/10/2004 has been denied on the ground that appellant was not registered during the relevant period. He relies on several decisions of the Tribunal to submit that credit cannot be denied on the ground that the assessee did not have registration certificate during the relevant period.
3. I have considered the submissions of the learned Counsel. The decisions in the following cases cited by him in respect of his submissions, squarely cover the issue and in all these cases a view has been taken that credit cannot be denied on the ground that the assessee was not registered during the relevant time.
| (a) | Sutham Polyesters Ltd. v. CCE 2005 (188) ELT 26 (Tri.-Chennai) | |
| (b) | Well known Polyesters Ltd v. CCE [2012] 36 STT 1[Mag.)/22 taxmann.com 131 (Ahd. - Cestat) | |
| (c) | Amar Remedies v. CCE 2010 (257) ELT 552 (Tri. - Ahd.) | |
| (d) | CCE v. Fine Care Biosystems 2009 (244) ELT 372 (Tri.-Ahd.) |
4. The learned AR fairly agrees that these decisions are on the same issue. Since the issue is covered in favour of the appellant by the precedent decisions of this Tribunal, respectfully following the same, the appeals are allowed with consequential relief, if any to the appellant.
IT : Where stay had been granted in respect of recovery of penalties till disposal of assessee's appeal, but appeal was still pending for no fault of assessee, stay was to be continued
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[2013] 33 taxmann.com 509 (Bombay)
HIGH COURT OF BOMBAY
Konkan Railway Corporation Ltd.
v.
Assistant Commissioner of Income-tax - 10(3), Mumbai*
DR. D.Y. CHANDRACHUD AND A.A. SAYED, JJ.
WRIT PETITION (L) NOS. 610, 612, 614 & 616 OF 2013
MARCH 21, 2013
Section 220, read with section 271(1)(c), of the Income-tax Act, 1961 - Collection and recovery of tax - When tax payable and when assessee deemed in default [Stay] - Assessment years 2004-05 to 2007-08 - Petitioner was a sick public sector undertaking - It filed appeal against imposition of penalty under section 271(1)(c) which was pending - Proceedings for recovery of penalty were stayed till specified date or until disposal of appeal - Despite petitioner being ready and willing to proceed with hearing, decision in appeal was still pending - Whether impugned order of Commissioner (Appeals) directing petitioner to deposit a portion of penalty was to be stayed - Held, yes [Para 6] [In favour of assessee]
FACTS
| ■ | The petitioner returned certain losses which were redetermined by the Assessing Officer. The Commissioner (Appeals) upheld the redetermination made in the orders of assessment. | |
| ■ | In the meantime, penalty proceedings were initiated under section 271(1)(c) and the penalties had been levied. The petitioner has filed appeals before the Commissioner (Appeals) which were pending. | |
| ■ | A stay was earlier granted to the petitioner till 15-12-2012 or until the disposal of appeal. A communication was issued to the petitioner stating that if no decision was rendered till December 15 then the petitioner would have to pay the instalments as agreed. The petitioner submitted that even being a sick company, no relief from payment of income tax was provided under the approved rehabilitation package. Subsequently, the petitioner was directed to pay 20 per cent of the total demand by February 2013 or until decision of the Commissioner (Appeals), whichever is earlier. | |
| ■ | The petitioner filed stay petition before the Commissioner, which was disposed of directing the petitioner to deposit 20 per cent by March 7, 2013. | |
| ■ | In the instant writ, the case of the petitioner was that the petitioner was not at fault since the failure was on the part of the Commissioner (Appeals) to dispose of the appeals by 15-12-2012. |
HELD
| ■ | There was no failure or inaction on the part of the petitioner in pursuing the first appeals which are pending. The petitioner is ready and willing to proceed with the hearing of the appeals immediately, with a view to establishing before the appellate authority that a case was not made out for imposition of penalty. Since the recovery of demand was initially stayed, though for a specified period, that itself indicates that the Commissioner was of the view that the issues which have been raised by the petitioner deserve serious consideration. The fact that the appeals have not been disposed of by the Commissioner (Appeals) is not a matter for which the Petitioner is responsible since there is nothing to indicate that there was negligence or inaction on the part of the Petitioner in pursuing the appeals. The Petitioner is a public sector enterprise promoted by the Union Government in consultation with four State Governments. The Petitioner has been constituted with a view to providing infrastructural facilities. The press note of the Government of India dated 4-12-2008 indicates that the Petitioner has been instrumental for social and economic development in the States of Maharashtra, Goa, Karnataka and Kerala by providing the shortest railway route from Mumbai to Mangalore. The notification of the Union Government in the Ministry of Railways dated 7-1-2009 also indicates that the financial restructuring package for the Petitioner was recommended initially by the BRPSE and was subsequently approved by the CCEA. [Para 5] | |
| ■ | On these facts, especially having regard to the fact that a stay has been sought in respect of the recovery of penalties under section 271(1)(c), an order of dispensation ought to have been granted. While issuing a direction in these terms the Commissioner (Appeals) before whom the appeals are pending is directed to take steps for expeditious hearing of the appeals. Accordingly, the petition was allowed by setting aside the impugned order dated 26-2-2013 of the Commissioner (Appeals), directing the Petitioner to deposit an amount of Rs. 8.85 crores towards the demand on account of penalty. [Para 6] |
K. Gopal, Jitendra Singh and Satendra Pandey for the Petitioner. Tejveer Singh for the Respondent.
ORDER
1. In the four Writ Petitions, which form the subject matter of the proceedings before the Court, the Petitioner has challenged an order of the Commissioner of Income Tax-10, Mumbai, dated 26 February 2013 on an application for stay of recovery of a demand on account of a penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. The Petitioner filed its returns of income for A.Ys. 2004-05 to 2007-08 and returned the following loss:
| Assessment year | Returned Income/Loss Rupees in crores. |
| 2004-05 | (-) Rs.545.69 |
| 2005-06 | (-) Rs.462.08 |
| 2006-07 | (-) Rs.327.75 |
| 2007-08 | (-) Rs. 293.51 |
The Assessing Officer passed orders of assessment for the aforesaid assessment years by which the loss was redetermined as follows:
| Assessment Year | Date of Order | Assessed Income/Loss Rupees in crores |
| 2004-05 | 27.08.2007 | (-) Rs.495.50 |
| 2005-06 | 31-12-2007 | (-) Rs.407.16 |
| 2006-07 | 06-11-2009 | (-) Rs.282.86 (-) |
| 2007-08 | 07-12-2009 | Rs.241.20 |
The assessee filed appeals before the CIT(A). The CIT(A) by an order dated 20 December 2010 upheld the additions and disallowances made in the orders of assessment. In the meantime, penalty proceedings were initiated under Section 271(1)(c) and the following penalties have been levied:
| Assessment Year | Date of Order | Concealment Penalty Rupees in crores |
| 2004-05 | 28-03-2012 | Rs.11.07 |
| 2005-06 | 28-03-2012 | Rs.16.64 |
| 2006-07 | 28-03-2012 | Rs. 6.44 |
| 2007-08 | 28-03-2012 | Rs.10.11 |
| Total | Rs.44.29 |
The Petitioner has filed appeals before the CIT(A) which are pending. The Petitioner applied for stay of recovery of demand.
3. On 24 January 2013, a communication was issued to the Petitioner drawing the attention to the order-sheet noting dated 28 September 2012 to the effect that the demand was stayed till 15 December 2012 or until the decision of the appeals before the CIT(A). There was a direction that if no decision was rendered till 15 December 2012, the Petitioner shall pay the demand on instalments as agreed upon. The Petitioner had submitted that it is a sick company. The Petitioner was informed that under the terms of the package approved for rehabilitation, no relief had been granted from the payment of income tax. Consequently, the Petitioner was directed to pay 20% of the total demand by 7 February 2013, while for the balance, a stay on recovery was granted until 31 July 2013 or until the decision of the CIT(A) whichever is earlier. The Petitioner filed a stay application before the CIT-10. The application has been disposed of by directing the Petitioner to deposit 20% of the demand amounting to Rs.8.85 crores by 7 March 2013.
4. The contentions of the Petitioner before the Court are the following:
(i) The Petitioner is a Public Sector Corporation formed by the Union Government together with the State Governments of Maharashtra, Goa, Kerala and Karnataka. In view of the financial difficulties faced by the Petitioner, the Board of Directors together with the Union Ministry of Railways had approached the Board for Reconstruction for Public Sector Enterprises (BRPSE) with a financial restructuring proposal. After the proposal was recommended by the BRPSE, a proposal was submitted to the Cabinet Committee on Economic Affairs (CCEA). The CCEA has approved a financial restructuring proposal on 7 January 2009;
(ii) The demand of which a stay of recovery is sought is on account of a penalty levied under Section 271(1)(c). The appeals are pending before the CIT(A). The petitioner has, in fact, moved the CIT(A) and has submitted a note on the basis of which an expeditious hearing has been sought since the Petitioner has more than a prima facie case;
(iii) In the present case, having due regard to the fact that the Petitioner has a strong prima facie case, and that it is fully held by the Union Government together with four State Governments, a dispensation of deposit ought to have been granted;
(iv) As a matter of fact, a stay was granted to the Petitioner till 15 December 2012 or until the decision of the first appeal. The Petitioner is not at fault since the failure was on the part of the CIT(A) to dispose of the appeals by 15 December 2012.
5. The material before the Court indicates that the demand is on account of the penalties levied under Section 271(1)(c) for A.Ys. 2004-05 to 2007-08. The Assessing Officer in the original orders of assessment had redetermined the loss as returned by making certain additions and disallowances. The orders under Section 271(1)(c) have been challenged in appeals before the CIT(A). On the application filed by the Petitioner for stay, a stay was, in fact, granted until 15 December 2012 or until the first appeal is disposed of whichever is earlier. The record before the Court indicates that there was no failure or inaction on the part of the Petitioner in pursuing the first appeals which are pending. As a matter of fact, Counsel appearing on behalf of the Petitioner states that the Petitioner is ready and willing to proceed with the hearing of the appeals immediately, with a view to establishing before the appellate authority that a case was not made out for imposition of penalty. Since the recovery of demand was initially stayed, though for a specified period, that itself indicates that the CIT was of the view that the issues which have been raised by the Petitioner deserve serious consideration. The fact that the appeals have not been disposed of by the CIT(A), is not a matter for which the Petitioner is responsible since there is nothing to indicate that there was negligence or inaction on the part of the Petitioner in pursuing the appeals. The Petitioner is a public sector enterprise promoted by the Union Government in consultation with four State Governments. The Petitioner has been constituted with a view to providing infrastructural facilities. The press note of the Government of India dated 4 December 2008, which is part of the record, indicates that the Petitioner has been instrumental for social and economic development in the States of Maharashtra, Goa, Karnataka and Kerala by providing the shortest railway route from Mumbai to Mangalore. The Petitioner also produced on the record, a notification of the Union Government in the Ministry of Railways dated 7 January 2009 which indicates that the financial restructuring package for the Petitioner was recommended initially by the BRPSE and was subsequently approved by the CCEA.
6. On these facts, especially having regard to the fact that a stay has been sought in respect of the recovery of penalties under Section 271(1)(c), we are of the view that an order of dispensation ought to have been granted. While issuing a direction in these terms, we also propose to direct the CIT(A) before whom the appeals are pending, to take steps for expeditious hearing of the appeals. Accordingly, we allow the petition by setting aside the impugned order dated 26 February 2013 of the CIT-10, Mumbai, directing the Petitioner to deposit an amount of Rs. 8.85 crores towards the demand on account of penalty. We also direct the CIT(A)-22 before whom the appeals are pending to expeditiously dispose of the appeals preferably within a period of two months from the date on which an authenticated copy of this order is produced on his record. The Petitioner shall appear before the CIT(A) together with an authenticated copy of this order on 1 April 2013 for expeditious disposal of the appeals.
7. Rule is made absolute to the aforesaid extent. We clarify that all the rights and contentions of the parties are kept open. There shall be no order as to costs.
SB IT : Where notice issued under section 131 did not give any indication about any material with department regarding concealment of income by assessee, merely because thereafter assessee filed revised return, before recording of statement under section 131, declaring additional income, no penalty was imposable upon assessee under section 271(1)(c)
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[2013] 33 taxmann.com 422 (Ahmedabad - Trib.)
IN THE ITAT AHMEDABAD BENCH 'A'
Jaysukh M. Parmar
v.
Assistant Commissioner of Income-tax*
A.K. GARODIA, ACCOUNTANT MEMBER
AND KUL BHARAT, JUDICIAL MEMBER
AND KUL BHARAT, JUDICIAL MEMBER
IT APPEAL NOS. 723 TO 725 (AHD.) 2012
[ASSESSMENT YEAR 2008-09]
[ASSESSMENT YEAR 2008-09]
OCTOBER 12, 2012
Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income [Revised return] - Assessment year 2008-09 - Assessing Officer, having received information regarding investment made by assessee in certain company, issued notice under section 131 on 20-11-2008 - On 24-11-2008, assessee filed revised return declaring amount of said investment as his income - In statement recorded under section 131 on 28-11-2008 also, assessee confessed regarding said investment out of additional income as declared in revised return - Assessing Officer completed assessment on basis of revised return and also levied penalty under section 271(1)(c) holding that declaration of additional income could not be regarded as voluntary compliance - Whether when there was no indication in notice under section 131 regarding any adverse material having brought out on record by department regarding any concealment of income by assessee and revised return was filed before recording of statement under section 131, penalty was not leviable upon assessee - Held, yes [Para 11] [In favour of assessee]
FACTS
Facts
| • | During assessment proceedings, the Assessing Officer received an information regarding suspicious transaction undertaken by the assessee having invested certain amount in certain company. He issued notice under section 131 to the assessee on 20-11-2008. | |
| • | During the inquiry proceedings, assessee confessed in his statement and declared additional income by furnishing the revised return of income. | |
| • | The Assessing Officer completed assessment accepting additional income and also imposed penalty under section 271(1)(c) holding that the declaration could not be regarded as voluntary compliance by furnishing the revised return of income. | |
| • | The Commissioner (Appeals) upheld the penalty levied by the Assessing Officer. |
Assessee's arguments
| • | Revised return was filed by the assessee in time and the disputed amount had been added by the assessee in the revised return of income filed by him and, therefore, penalty was not justified. |
Revenue's arguments
| • | The revised return of income was filed by the assessee after the issuance of the notice under section 131 and, therefore, penalty was justified. |
Issue involved
| • | Whether on facts, penalty under section 271(1)(c) was rightly levied upon the assessee? |
HELD
| • | The revised return of income was filed by the assessee on 24-11-2008 and notice under section 131 was issued by the Deputy Director of Income-tax on 20-11-2008. From this notice, it does not transpire that any material was available with the Deputy Director of Income-tax (Investigation) regarding unaccounted investment made by the assessee. After the receipt of notice under section 131, the assessee approached the chartered accountant for guidance and he advised the assessee that the impugned investment is not reflected in the personal balance-sheet and he advised the assessee to file revised return for the assessment year 2008-09 showing additional income of Rs. 5 lakhs. These facts show that the revised return of income was filed by the assessee before recording of the statement before the Deputy Director of Income-tax (Investigation) under section 131 but the same was filed after the receipt of notice under section 131 asking the assessee to produce the copies of return of income and enclosures along with books, etc. [Para 8] |
| • | So far notice under section 131 issued by the Deputy Director of Income-tax (Investigation) is concerned, the same only required the assessee to furnish copies of the return of income filed by the assessee for the assessment years 2007-08 and 2008-09 along with all the annexures thereto like the balance sheet, the profit and loss account, etc., and the assessee was also asked to produce list of bank account, bank book, cash book, etc., for the said period . Hence, in the said notice, there is no indication regarding any adverse material having brought out on record by the department regarding any concealment of income by the assessee. The assessee's explanation is that this investment was made out of past savings but on receipt of notice under section 131, the assessee consulted a chartered accountant who advised the assessee to file revised return of income and include additional income in the same to cover the investment since he was not in a position to substantiate his explanation that the investment was made out of past savings. It is not the case of the Assessing Officer that the revised return of income was not filed by the assessee or that the same is not valid. In fact, the Assessing Officer has noted in the assessment order that the assessee has filed his original return of income on 18-8-2008 and the revised return of income was filed on 24-11-2008 declaring additional income of Rs. 5 lakhs. Hence, it is not in dispute that the revised return was filed well in time as permitted in law and the same is valid. Therefore, the penalty in the instant case is to be deleted. [Para 11] |
CASE REVIEW
Dy. CIT v. Dr. Satish B. Gupta [2010] 42 SOT 48 (Ahd.) (para 11) followed.
F.C. Agarwal v. CIT [1976] 102 ITR 408 (Gau.) (para 12); CIT v. Haji P. Mohammed [1981]132 ITR 623/6 Taxman 374 (Ker.) (para 13); S.R. Arulprakasam v. Smt. Prema Malini Vasan, ITO [1987] 163 ITR 487/33 Taxman 387 (Mad.) (para 14) and Ravi & Co. v. Asstt. CIT [2004] 271 ITR 286/143 Taxman 287 (Mad.) (para 15) distinguished.
CASES REFERRED TO
BTX Chemical (P.) Ltd. v. CIT [2007] 288 ITR 196/[2006] 155 Taxman 644 (Guj.) (para 5), CIT v. Shankerlal Nebhumal Uttamchandani [2009] 311 ITR 327 (Guj.) (para 5), Dy. CIT v. Dr. Satish B. Gupta [2010] 42 SOT 48 (Ahd.) (para 9), F.C. Agarwal v. CIT [1976] 102 ITR 408 (Gau.)(para 12), G.C. Agarwal v. CIT [1990] 186 ITR 571 (SC) (para 12), CIT v. Haji P. Mohammed [1981] 132 ITR 623/6 Taxman 374 (Ker.) (para 13), S.R. Arulprakasam v. Smt. Prema Malini Vasan, ITO [1987] 163 ITR 487/33 Taxman 387 (Mad.) (para 14) and Ravi & Co. v. Asstt. CIT[2004] 271 ITR 286/143 Taxman 287 (Mad.) (para 15).
S.N. Divotia for the Appellant. Rahul Kumar for the Respondent.
ORDER
A.K. Garodia Accountant Member.-All these three appeals are filed by there different assessees for the same assessment year, i.e., assessment year 2008-09 which are directed against three separate orders of the learned Commissioner of Income-tax (Appeals), Valsad all dated December 3, 2011. Since the issue involved is the same in all these appeals were heard together and are being disposed of by this common order for the sake of convenience.
2. The grounds raised by the assessees in all these appeals are identical except difference in amounts and hence, we reproduce the grounds raised by the assessee in the case of Shri Jaysukh M. Parmar in I. T. A. No. 723/ Ahd/2012 :
"1.1 The order passed under section 250 on December 30, 2011 for the assessment year 2008-09 by the Commissioner of Income-tax (Appeals)-Valsad upholding the penalty levied under section 271(1)(c) in respect of the investment of Rs. 5 lakhs declared in the revised return levied by the Assessing Officer is wholly illegal, unlawful and against the principles of natural justice.
1.2 The learned Commissioner of Income-tax (Appeals) has grievously erred in law and /or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned penalty.
2.1 The learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming that the appellant had concealed income in respect of investment of Rs. 5 lakhs made with Kotak Mahendra Life Insurance Ltd. and that the revised return filed by him was not voluntary and as a result of enquiry made by the Additional Director of Income-tax (Investigation), Valsad.
2.2 That in the facts and circumstances of the case as well as in law, the learned Commissioner of Income-tax (Appeals) ought not to have upheld the penalty levied under section 271(1)(c) by the Assessing Officer in respect of investment of Rs. 5 lakhs declared in the revised return.
2.3 The learned Commissioner of Income-tax (Appeals) has failed to appreciate that the revised return was filed voluntarily by the appellant and as advised by his chartered accountant.
3.1 It is therefore prayed that the penalty upheld by the Commissioner of Income-tax (Appeals) in respect of investment of Rs. 5 lakhs may please be deleted."
3. It was agreed by both sides that the facts in all the three cases are identical and hence, all these three appeals may be decided on the basis of the facts of any one case. Hence, we reproduce the facts of the case from I. T. A. No. 723/Ahd/2012. The brief facts till the assessment stage are noted by the learned Commissioner of Income-tax (Appeals) in paragraph 5.1 of his order which is reproduced below for the sake of ready reference :
"5.1 Observation of the Assessing Officer : During the course of assessment proceedings, an information was received by the Additional Director of Income-tax (Headquarters) regarding the suspicious transaction undertaken by the assessee, having invested an amount of Rs. 5 lakhs in Kotak Mahindra Old Mutual Life Insurance Ltd. in the month of March, 2008 through cash and multiple demand drafts each denominated for Rs. 50,000. The inquiry was conducted by the Additional Director of Income-tax (Investigation), Valsad and statement under section 131 of the Act was recorded on November 28, 2008, in which the assessee confessed of having invested Rs. 5 lakhs in Kotak Mahindra Old Life Insurance Ltd. During the inquiry proceedings, he confessed in his statement and declared additional income of Rs. 5 lakhs by furnishing the revised return of income. The Assessing Officer was not satisfied with this and initiated penalty proceedings under section 271(1)(c) of the Act, as the declaration cannot be regarded as voluntary compliance by furnishing the revised return of income. Further, the assessee has not filed any appeal against the order passed under section 143(3) of the Act. Further, during the investigation proceedings, the appellant submitted that he withdrew Rs. 15,000 per month for household expenses ; however, from the details filed by the appellant, it was seen that the appellant had withdrawn Rs. 6,000 per month only. Hence, there is a short withdrawal of Rs. 9,000 per month. Therefore, the Assessing Officer made addition of Rs. 1,08,000, as the expenses incurred from the unknown source of income and imposed penalty on the same for filing inaccurate particulars of income.
Therefore, the Assessing Officer levied penalty under section 271(1)(c) of the Act aggregating to Rs. 1,82,600.
4. Being aggrieved, the assessee carried the matter in appeal before the learned Commissioner of Income-tax (Appeals) but without success and now, the assessee is in further appeal before us.
5. It was submitted by the learned authorised representative that revised return was filed by the assessee in time and the disputed amount has been added by the assessee in the revised return of income filed by him and, therefore, penalty is not justified in the facts of the present case. In the written submission filed by the learned authorised representative, reliance was placed on the judgment of the hon'ble Gujarat High Court rendered in the case of BTX Chemical (P.) Ltd. v. CIT [2007] 288 ITR 196/[2006] 155 Taxman 644 (Guj.). Reliance was also placed on another judgment of the hon'ble Gujarat High Court rendered in the case of CIT v. Shankerlal Nebhumal Uttamchandani [2009] 311 ITR 327 (Guj.).
6. As against this, it was submitted by the learned Departmental representative that the revised return of income was filed by the assessee after being cornered by the notice under section 131 of the Income tax Act, 1961 issued to all these three assessees on November 20, 2008 whereas the revised return of income was filed by the assessee on November 24, 2008, i.e., after the issuance of the notice under section 131 and, therefore, penalty imposed by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) is justified. He submitted a copy of the notices issued under section 131 on November 20, 2008 in all these three cases.
7. We have considered the rival submissions, perused the material on record and have gone though the orders of the authorities below. We find that the revised return of income was filed by the assessee on November 24, 2008 and notice under section 131 of the Income tax Act, 1961 was issued by the Deputy Director of Income-tax, Valsad on November 20, 2008 in which the assessee was asked to appear personally before him on November 24, 2008. The contents of this notice issued by the Deputy Director of Income-tax (Investigation) under section 131 is reproduced below :
"Summons to assessee/witness under section 131 of the Income-tax Act, 1961.
Dated : November 20, 2008
To
Shri Jaysukhlal Maganlal Parmar
White House Medical Centre
Beachar Road
Near Maonghabhai Hall
Valsad-396001
Whereas your attendance is required in connection with the proceedings under the Income-tax Act, 1961 in your case, you are hereby requested personally to attend my office at Room No. 525, Aayakar Bhavan, Majuragate, Surat on the 24th day of November 2008 at 12.30 P.M. to give evidence and/or to produce either personally or through an authorised representative the books of account or other documents specified below and not to depart until you receive my permission to do so. Without prejudice to the provision of any other law for the time being in force if you intentionally omit to so attend and give evidence or produce the books of account documents penalty up to Rs. 10,000 may be imposed upon you under section 272A(1)(c) of the Income tax Act, 1961.
(Sanjay V. Deshmukh)
Deputy Director of
Income-tax (Investigation),
Valsad.
documents/books of account to be produced :
1. Copy of return of income filed for the assessment years 2007-08 and 2008-09 along with all annexures thereto like balance-sheet, profit and loss account, etc.
2. List of bank accounts, bank book, cash book for the said period.
(Sanjay V. Deshmukh)
Deputy Director of Income-tax
(Investigation)
Valsad."
8. From the contents of the above notice, we find that in the said notice, the Deputy Director of Income-tax (Investigation) has asked the assessee to produce copies of the return of income filed by the assessee for assessment years 2007-08 and 2008-09 along with all the annexure like the balance-sheet and the profit and loss account, etc., along with list of bank accounts, bank book, cash book for the said period. From this notice, it does not transpire that any material was available with the Deputy Director of Income-tax (Investigation) regarding unaccounted investment made by the assessee. The relevant part of the statement recorded by the Deputy Director of Income-tax (Investigation) on November 24, 2008 being question No. 7 and the reply is reproduced by the Assessing Officer on page 2 of the assessment order in which it is stated by the assessee that after the receipt of notice under section 131, the assessee approached the chartered accountant for guidance and he advised the assessee that the investment in the Kotak Securities is not reflected in the personal balance-sheet and he advised the assessee to file revised return for the assessment year 2008-09 showing additional income of Rs. 5 lakhs. It is also stated by the assessee in the reply that the revised return of income was already filed by the assessee. These facts show that the revised return of income was filed by the assessee before recording of the statement before the Deputy Director of Income-tax (Investigation) under section 131 but the same was filed after the receipt of notice under section 131 asking the assessee to produce the copies of return of income and enclosures along with books, etc. In the light of these facts, we examine the applicability of various judgments cited by the learned authorised representative :
9. Reliance was placed by the learned authorised representative on the Tribunal decision rendered in the case of Dy. CIT v. Dr. Satish B. Gupta [2010] 42 SOT 48 (Ahd.). The facts of that case are that a survey under section 133A was carried out on September 22, 2006 at the premises of the assessee, who is a practicing doctor, and during the course of survey, the assessee disclosed unaccounted income of Rs. 32.85 lakhs and thereafter, the assessee filed the return of income declaring the total income of Rs.37.57 lakhs which included unaccounted income of Rs. 32 lakhs as declared by the assessee during the course of survey. The assessment was finally completed at a figure of Rs. 38,12,360 and the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act in respect of a sum of Rs. 32.85 lakhs declared by the assessee during the course of survey. Under these facts, penalty was deleted by the Tribunal by making following observations as per paragraph 7 of that Tribunal order :
"7. Thus the basis for levy of penalty is return of income. If any amount has been shown in the return of income then it cannot be said that the assessee has concealed any particular about that income or furnished inaccurate particulars in relation thereto. There cannot be any concealment prior to filing of return. Question of considering whether the assessee is liable for action under section 271(1)(c) would arise only when return of income is scrutinised by the Assessing Officer and he finds some more items of income or additional income over and above what is declared in the return. If it is so, the assessee would be liable for action under section 271(1)(c) in respect of such items only which are discovered by the Assessing Officer on the scrutiny of return of income or after carrying out investigation and discovering some more items of income not found declared or mentioned in the return of income. Prior to filing of return of income there is no concept of concealment or furnishing of inaccurate particulars.
8. The initial phrase used in section 271(1)(c) suggests that the Assessing Officer has to find in the course of any proceedings under this Act...that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. In fact the proceedings against the assessee would start only after return of income is filed by the assessee or after issuance of statutory notice against him such as under section 142(1) or under section 143(2). Carrying out survey under section 133A is not at all any proceedings. Proceedings as used in section 271(1)(c) are statutory proceedings initiated against the assessee either by issuance of statutory notice or after filing of return of income. Survey under section 133A or search under section 132 or issuance of notice under section 133(6), for example, are only means of collecting evidence against the assessee and are not equivalent to statutory proceedings. Another criteria of finding out as to whether particular action is a statutory proceedings or not it is to be seen whether it can be brought to a legal conclusion against the assessee by determining his right or liability. Merely carrying out survey under section 133A does not create any liability against the assessee which is created only through assessment proceedings or penalty proceedings. Therefore, the learned Departmental representative is incorrect in his submission that survey being a proceedings and the Assessing Officer has discovered concealment during survey, therefore, the assessee is liable for penalty under section 271(1)(c). In this regard we refer to some common definitions of word 'proceedings'.
Proceedings-proceedings have been defined in various ways. It includes any suit, appeal or application. It includes any procedural means for seeking redress from the Tribunal or court ; the business conducted by a court or other official body, the term 'proceedings' may include the institution of action against defendant, the submissions of defence and trial. It also means a legal action or process and act done by an authority of a court of law ; any step taken by either party in a legal proceeding, an action or course of action before a court. It is also a prescribed mode of action for carrying into effect a legal right. In its ordinary acceptance proceedings means form and manner of conducting judicial business by a quasi judicial authority, the form in which actions are to be brought and defended and the mode of deciding suits or of opposing judgments or of executing them. The word 'proceedings' also includes within its ambit all matters coming up for adjudication. It is also a prescribed course of action for the enforcement of legal right. It has been held in D.B.S. Financial Services P. Ltd. v. Smt. M. George, ITO (Second) [1994] 207 ITR 1077 (Bom)by the hon'ble Bombay High Court, in the context of action under section 133(6), that a proceeding under the Income-tax Act by its very nature must be specific and it must relate to specific individual or entity. The term 'proceedings' used in section 133(6) means a pending or existing proceedings. In other words calling for information in itself is not a proceeding. Since section 133A is an action for calling of information, in itself it is not a proceeding.
9. Further clause (c) to section 271(1) mentions 'as concealed or furnished'. They are past-tense words indicating that the assessee has committed certain act on which penalty is leviable. Thus the act of concealment or furnishing of inaccurate particulars should be viewed by the Assessing Officer as done with respect to return of income. The omission or commission or contumacious conduct has to be viewed from the return of income and if certain thing is not disclosed or not furnished therein only then it can be said that the assessee has concealed the particulars of income or furnished inaccurate particulars of income. Prior to this assessee has not done any contumacious conduct on which penalty can be levied. Merely because certain receipts are not recorded in the books of account or receipts are not issued to the patients, but income therefrom was finally declared in the return of income, then there is no contumacious conduct. For not maintaining books of account or not issuing receipts to the patients for the amount received by the assessee, the books, at the best, can be rejected by invoking provisions of section 145(3) and income can be estimated in accordance with section 144. But where the Assessing Officer accepts the income declared in the return of income then the assessee cannot be charged for any contumacious conduct. There are, in fact, several judgments according to which penalty is not leviable if addition is deleted. The hon'ble Punjab and Haryana High Court in CIT v. Parkash Industries Ltd. [2010] 322 ITR 622 (P&H) held that basis for levy of penalty is returned income. If additions are deleted in quantum proceedings penalty could not be imposed. The hon'ble High Court has held as under (headnote) :
'A search showed that the assessee had received amount of Rs.3.5 crores from the bank account of S, Faridabad. It was observed that the firm was a bogus firm and the claim of the assessee that the amount was received towards consideration for sale of material, was not accepted. Hence, addition was made to the declared income. Further additions were made by holding that lease rent shown to have been paid by the assessee had not in fact been paid and the claim for depreciation could not be allowed as the machinery was not in the possession of the assessee during physical verification. The Commissioner (Appeals) upheld the addition in respect of receipts shown to have been made from S but deleted the addition towards lease rent and depreciation allowance, taking into account additional evidence led by the assessee. On further appeal, the Tribunal upheld the plea of the assessee in respect of amount received from S but dismissed the appeal of the Revenue in respect of deletions in respect of lease rent and depreciation allowance. The Tribunal cancelled the penalty levied under section 271(1)(c) of the Income-tax Act, 1961. On appeal to the High Court :
Held, dismissing the appeal, that as regards the deletion by the Commissioner (Appeals) after referring to the additional evidence led before him, the Tribunal had examined the matter and recorded that a remand report was duly sought and thus no prejudice was caused by considering the additional evidence. With regard to the amount, received from S the matter was in the realm of appreciation of evidence. Even if it is held that two views are possible, the inference drawn by the Tribunal, being the final fact finding authority, could not be held to be perverse. The cancellation of penalty was valid.'
Similar view has been taken in the following judgments also :
| (i) | CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC) ; | |
| (ii) | CIT v. Badri Prasad Kashi Prasad [1993] 200 ITR 206 (All) ; | |
| (iii) | Prabhat Oil Traders v. ITO (No. 3) [1996] 218 ITR (AT) 39 (Ahd) ; | |
| (iv) | City Dry Fish Co. v. CIT [1999] 238 ITR 63 (AP) ; | |
| (v) | CIT v. Mohd. Bux Sokat Ali [2004] 265 ITR 326 (Raj) ; and | |
| (vi) | Asstt. CIT v. VIP Industries Ltd. [2009] 122 TTJ (Mum) 289 ; [2009] 30 SOT 254 (Mum). |
10. Our view that no penalty is leviable if impugned amount is disclosed in the return of income is supported by the decision of the hon'ble Allahabad High Court in the case of Smt. Govinda Devi v. CIT [2008] 304 ITR 340 (All). In that case the assessee received lottery prize money in January, 1992 and disclosed the same in the return filed for the assessment year 1992-93 and paid the taxes. The assessing authority passed an ex parte assessment order and ex parte penalty order in the assessment year 1991-92. It was held by the hon'ble court that once prize money has been disclosed in the return of income for the assessment year 1992-93 and also taxes were paid then assessing authority had apparently committed an error in levying the penalty. In K. C. Builders v. Asstt. CIT [2004] 265 ITR 562 (SC) it was held : the hon'ble apex court that where additions are made in the assessment are deleted, there remains no basis at all for levying penalty for concealment. No penalty would survive if addition did not survive. In CIT v. S. S. K. G. Arthanariswamy Chettiar [1982] 136 ITR 145 (Mad) the hon'ble Madras High Court held that penalty can be imposed with reference to the concealment done in the original return filed under section 139. In the case of Sulemanji Ganibhai v. CIT [1980] 121 ITR 373 (MP) it was held that an assessee incurs penalty under section 271(1)(c) if he files inaccurate particulars or his income in the return or conceals the particulars of income therein. There can be no concealment until there is a duty to disclose. The duty to disclose particulars of income arises at the time when the assessee furnishes return of income under section 139 and if in filing his return he conceals the particulars of income or furnishes inaccurate particulars he incurs penalty under section 271(1)(c). In the case of Patna Guinea House v. CIT [2000] 243 ITR 274 (Patna)it is held that there is no case for levy of penalty if income is disclosed in the return of income but the assessee has refused to disclose source of income."
10. In that case, the assessee declared additional income in the course of survey and thereafter, included the same in the return of income filed by the assessee and even under these facts, the Tribunal came to the conclusion that penalty under section 271(1)(c) is not leviable.
11. In the present case, revised return of income was filed by the assessee on November 24, 2008 in which additional income was declared by the assessee. The statement recorded by the Deputy Director of Income-tax (Investigation) is dated November 28, 2008 and in the same statement, the assessee confessed regarding this investment out of additional income as declared by the assessee in the revised return of income filed on November 24, 2008. Hence, the revised return of income was filed by the assessee before recording of statement by the Deputy Director of Income-tax (Investigation). So far notice under section 131 of the Income tax Act, 1961 issued by the Deputy Director of Income-tax (Investigation) is concerned, the same also only requires the assessee to furnish copies of the return of income filed by the assessee for the assessment years 2007-08 and 2008-09 along with all the annexures thereto like the balance-sheet, the profit and loss account, etc., and the assessee was also asked to produce list of bank account, bank book, cash book, etc., for the said period. Hence, in the said notice issued by the Deputy Director of Income-tax (Investigation) under section 131 of the Income-tax Act, 1961 on November 20, 2008, there is no indication regarding any adverse material having brought out on record by the Department regarding any concealment of income by the assessee. The assessee's explanation is this that this investment was made out of past savings but on receipt of this notice under section 131 of the Income-tax Act, 1961, the assessee consulted a chartered accountant who advised the assessee to file revised return of income and include additional income in the same to cover this investment since he was not in a position to substantiate his explanation that the investment was made out of past savings. It is not the case of the Assessing Officer that the revised return of income was not filed by the assessee or that the same is not valid. In fact, the Assessing Officer has noted in the assessment order that the assessee has filed his original return of income on August 18, 2008 and the revised return of income was filed on November 24, 2008 declaring additional income of Rs. 5 lakhs. Hence, it is not in dispute that the revised return was filed well in time as permitted in law and the same is valid. In our considered opinion, the facts of the present case are even better than the case cited by the learned authorised representative as noted above and therefore, by following this Tribunal decision, penalty in the present case is deleted.
12. Now, we consider the applicability of various judgment cited by the learned Departmental representative. The first judgment cited by the learned Departmental representative is the judgment of the hon'ble Gauhati High Court rendered in the case of F.C. Agarwal v. CIT [1976] 102 ITR 408 (Gau.), which is confirmed by the hon'ble apex court as per the judgment in G.C. Agarwal v. CIT 1990] 186 ITR 571 (SC). In that case also, the assessee filed revised return of income under section 139(5) of the Income-tax Act, 1961 and declared additional income as compared to the original return of income filed under section 139(1) of the Income-tax Act, 1961 and under these facts, the penalty was imposed by the Assessing Officer which was confirmed by the Tribunal as well as by the hon'ble High Court also. In that case, it is noted by the hon'ble Gauhati High Court that Central Board of Direct Taxes had issued instructions dated January 5, 1971 wherein the Board had stated clearly that if the original return filed by the assessee was false, he might file revised return to avail of the consequential discovery. In that case, it was held that since the said instructions were issued on January 5, 1971 and revised return was filed on March 20, 1968 and March 23, 1968 and penalty order was passed by the Inspecting Assistant Commissioner on March 21, 1970, the said revised return were not filed in pursuance to advertisement issued by the Central Board of Direct Taxes on January 5, 1971 and, therefore, the assessee is not entitled for the benefit of this advertisement/instruction. In the present case, the assessment year involved is 2008-09 and hence, the assessee is very much entitled to the benefit of this advertisement/instruction and, therefore, this judgment is not applicable in the present case.
13. The second decision cited by the learned Departmental representative is the judgment of the hon'ble Kerala High Court rendered in the case of CITv. Haji P. Mohammed [1981] 132 ITR 623/6 Taxman 374 (Ker). The facts of that case are that the assessee, individual, was a contractor executing works for PWD and for the assessment year 1971-72, he filed return of income declaring total income of Rs. 21,240 under the head "Income from business" being the 10 per cent. of the aggregate amount of Rs. 2,12,388 said to have been received by him from the Department. On the basis of information in his possession, the Income-tax Officer on December 10, 1971 enquired about the amount received by him from irrigation department and not included in the return. Thereafter, the assessee submitted the revised return on December 27, 1971 declaring an income of Rs. 33,020 worked out by addition of Rs. 1,17,796 to Rs. 2,12,388 and applying 10 per cent. as the profit rate to the total. Under these facts, the penalty was imposed by the Assessing Officer which was deleted by the Appellate Assistant Commissioner and the Tribunal but the hon'ble High Court has confirmed the penalty on this basis that it cannot be said that the assessee was unaware of the fact of having received the sum of Rs.1,17,633 in respect of his contract with the irrigation department. This fact was also noted by the hon'ble High Court that revised return was filed by the assessee after the Income-tax Officer had confronted with the information in his possession regarding the impugned receipt and therefore, it cannot be regarded as revised return filed under section 139(5) because there was no discovery by the assessee of any omission or wrong statement having been made by him by inadvertence in the original return. In the present case, the facts are different. In the present case, there is no definite information in the possession of the Department regarding any additional income of the assessee and on issuance of notice under section 131 of the Income-tax Act, 1961 by the Deputy Director of Income-tax (Investigation), the assessee noted that his investments were made out of past saving but since he could not substantiate this explanation, he was advised by his chartered accountant to file revised return of income by declaring additional income. In our considered opinion, the facts of the present case are different and, therefore, this judgment is also not applicable in the present case.
14. The third judgment cited by the learned Departmental representative is the judgment of the hon'ble Madras High Court rendered in the case of S.R. Arulprakasam v. Smt. Prema Malini Vasan, ITO [1987] 163 ITR 487/33 Taxman 387 (Mad). This judgment is regarding the proceedings under section 276C read with section 277 of the Income-tax Act, 1961 and various sections of the Indian Penal Code, 1860 for offences and prosecutions. In the present case, the issue involved is regarding penalty imposed by the Assessing Officer under section 271(1)(c) and, therefore, this judgment of the hon'ble Madras High Court has no relevance in the present case.
15. The next judgment cited by the learned Departmental representative is another judgment of the hon'ble Madras High Court rendered in the case ofRavi & Co. v. Asst. CIT [2004] 271 ITR 286/143 Taxman 287 (Mad). In that case, the revised return of income was filed by the assessee after issue of notice by the Assessing Officer under section 143(2) of the Income-tax Act, 1961 along with questionnaire calling for certain details. In that case, clear finding is given by the Tribunal that much before the revised return filed by the assessee, the questionnaire had been issued by the Assessing Officer calling for certain details and the assessee filed revised return only thereafter and hence, it was held by the Tribunal that the revised return has not been filed voluntarily in a bona fide manner. In the present case, the notice under section 131 of the Income-tax Act, 1961 was issued by the Deputy Director of Income-tax (Investigation) on November 20, 2008 and in the said notice also, the assessee was asked to furnish copies of return of income filed for the assessment years 2007-08 and 2008-09 along with all annexures like the balance-sheet and the profit and loss account and the assessee was asked to furnish list of bank accounts, bank book and cash book, etc. and hence, it is seen that no specific questionnaire was issued by the Deputy Director of Income-tax (Investigation) and revised return of income was filed by the assessee immediately on November 24, 2008 and it is explained that the assessee had explained regarding the investment in question which is made by the assessee out of his past saving but since the assessee was not in a position to substantiate this explanation, the assessee was advised by the chartered accountant to file the revised return of income and declare additional income in this regard and hence, the facts of the present case are different and, therefore, this judgment of the hon'ble Madras High Court is also not applicable in the present case.
16. As per the above discussion, we find that none of the judgments cited by the learned Departmental representative is applicable in the present case because the facts are different and the issue involved in the present case is squarely covered by the Tribunal decision cited by the learned authorised representative and hence, we delete the penalty in the present case by respectfully following this Tribunal decision cited by the learned authorised representative and as per the above discussion.
17. It was agreed by both sides that the remaining two appeals can be decided on similar lines because the facts and arguments are similar. Accordingly, in the remaining two appeals also, we decide the issue on similar lines and delete the penalty.
18. In the combined result, all the three appeals of the assessees are allowed.
IT : While calling upon assessee to submit objection for transfer of its case to another State, principles of natural justice requires revenue to make available all relevant material particulars to assessee
■■■
[2013] 33 taxmann.com 522 (Karnataka)
HIGH COURT OF KARNATAKA
Span Design & Development (P.) Ltd.
v.
Commissioner of Income-tax, Bangalore - III*
RAM MOHAN REDDY, J.
WRIT PETITION NO. 6452 OF 2010 (T-IT)
APRIL 17, 2013
Section 127 of the Income-tax Act, 1961 - Income-tax authorities - Power to transfer cases [Natural justice] - Petitioner's name appeared in case of search & seizure operations, carried out at Hyderabad - Income-tax Officer issued notice under section 127 calling upon petitioner to submit objection for transfer of its case from Bangalore to Hyderabad - Notice was not appended with any relevant material particulars - Whether principles of natural justice requires revenue to make available all relevant material particulars, while calling upon assessee to submit objection for transfer of its case to another State - Held, yes - Whether since petitioner, in absence of relevant material particulars, was handicapped to submit objection for transfer of its case, order transferring case of petitioner was to be quashed and assessment order passed by authority at Hyderabad was to be declared a nullity - Held, yes [Paras 4 & 7] [In favour of petitioner]
FACTS
| ■ | The petitioner's name was appeared in search & seizure operations carried out under section 132 at Hyderabad in case of another person SM. | |
| ■ | The Income-tax Officer issued notice under section 127 calling upon the petitioner-assessee to submit explanation/objection for transfer of its return for assessment from the jurisdiction of ITO in Bangalore, to Dy. CIT in Hyderabad. | |
| ■ | The notice was not appended with relevant material particulars and copies of document relating to search & seizure operation which was alleged to had been carried out at Hyderabad. |
On writ petition:
HELD
| ■ | The notice issued by Income-tax Officer proposing to transfer petitioner's case is not appended with all relevant material particulars and copies of documents relating to search and seizure, alleged to have been carried out at Hyderabad in the case of another person SM. There can be no dispute that the rule of audi alteram partem or principles of natural justice requires the authority to make available all and every relevant material, as also particulars, while calling upon the assessee to submit explanation/objection for transfer of his returns for assessment in another State. The petitioner assessee, in the absence of relevant material particulars obviously is handicapped to submit explanation/objection to the transfer of its case to Hyderabad. Notice bereft of material particulars does not subscribe to the requirement of principles of natural justice. [Para 4] | |
| ■ | It is elsewhere said that if there is a power to decide and determine to the prejudice of a person, duty to act judicially is implicit in the exercise of such power. If the essentials of justice be ignored and an order to the prejudice of a person is made, the order is a NULLITY. Natural justice is another name for commonsense justice. Rules of natural justice are not codified cannons. But they are principles ingrained into the conscience of man. [Para 5] | |
| ■ | Respondent, without furnishing relevant material along with the notice, which might throw light upon the matter in question, sought to obtain objection from the petitioner assessee for transfer of it's case to another State in the absence of material and information, which a properly informed decision requires, in short, passed the order for transferring the case of the petitioner for assessment to the State of Andhra Pradesh at Hyderabad by furnishing to the petitioner imperfect knowledge. The extreme impropriety of such a course could not be made too plain. [Para 6] | |
| ■ | On this ground alone, this petition deserves to be allowed and is, accordingly, allowed. The order transferring the case of the petitioner to Hyderabad, is quashed and the proceeding remitted for consideration afresh. [Para 7] |
S. Parthasarathi, Malhara Rao and Vijayakumar Punna for the Petitioner. K.V. Aravind for the Respondent.
ORDER
1. Having heard the learned counsel for the parties and examined the notice dated 19.06.2009 Annexure 'G' and the order dated 07.07.2009 Annexure 'H' impugned in this petition, suffice it to state that the notice Annexure `G` is in violation of the principles of natural justice. In these petitions, Rule was issued on 01.07.2010 and the interim order on 29.11.2010, which reads thus:
"Any order to be passed by the Assessing Authority shall be subject to the outcome of the writ petition."
2. Petitioner-assessee was issued with notice dated 19.06.2009 Annexure 'G' by the Income-tax Officer (Tech.) proposing to transfer the case from ITO Ward 12[2], Bangalore, to Dy. CIT, Central Circle-3, Hyderabad and reads thus:
"A search and seizure operations u/s 132 of the Income-tax Act, 1961 was carried in the case of Sri Syed M. Mehdi and others, Hyderabad on 07-02-2009. Your name appear in the above mentioned group of cases. You are being assessed with the ITO Ward 12[2] Bangalore. It is accordingly proposed to transfer the case from ITO Ward 12[2], Bangalore to Dy. CIT, Central Circle-3, Hyderabad.
If you have any objection to the proposed transfer, you may file your objection, if any so as to reach this office on or before 29th June 2009. You are also given an opportunity of personal hearing before the Commissioner of Income-tax, Bangalore-III, Bangalore at his office at lst Floor, C R Building, Queens` Road, Bangalore-560001 at 11 AM on 29-06-2009."
3. The proposed transfer according to the learned counsel for the respondent-Revenue is in exercise of jurisdiction under clause (a) of sub-section (2) of section 127 of the Income-tax Act, 1961, which reads thus:
"127. Power to transfer cases.
(1) The Director General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.
(2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner, -
| (a) | where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons-for doing so, pass the order;" |
4. The notice Annexure 'G' is not appended with all relevant material particulars and copies of documents relating to search and seizure, alleged to have been carried out at Hyderabad on 07.02.2009 in the case of Sri Syed Mehdi and others. There can be no dispute that the rule of audi alteram partemor principles of natural justice requires the authority to make available all and every relevant material, as also particulars, while calling upon the assessee to submit explanation/objection for transfer of his returns for assessment in another State. The petitioner assessee, in the absence of relevant material particulars obviously is handicapped to submit explanation/objection to the transfer of its case to Hyderabad. Annexure 'G' bereft of material particulars does not subscribe to the requirement of principles of natural justice.
5. It is elsewhere said that if there is a power to decide and determine to the prejudice of a person, duty to act judicially is implicit in the exercise of such power. If the essentials of justice be ignored and an order to the prejudice of a person is made, the order is a NULLITY. Natural justice is another name for commonsense justice. Rules of natural justice are not codified cannons. But they are principles ingrained into the conscience of man.
6. Respondent, without furnishing relevant material along with the notice Annexure 'G', which might throw light upon the matter in question, sought to obtain objection from the petitioner assessee in the absence of material and information, which a properly informed decision requires, in short, passed the order Annexure 'G' transferring the case of the petitioner for assessment to the State of Andhra Pradesh at Hyderabad by furnishing to the petitioner imperfect knowledge. The extreme impropriety of such a course could not be made too plain.
7. On this ground alone, this petition deserves to be allowed and is accordingly allowed. The order dated 19.06.2009 Annexure 'G' transferring the case of the petitioner to the Deputy Commissioner of Income- tax, Central Circle-3, Hyderabad, is quashed and the proceeding remitted for consideration afresh after furnishing all relevant material particulars, including copies of search and seizure mahazars and other such relevant material to the petitioner and thereafter, to pass an order strictly in accordance with law. Sequentially, the assessment order passed by the authority at Hyderabad, on transfer, of the petitioner's return is declared a nullity.
Regards,
Pawan Singla
BA (Hon's), LLB
Audit Officer
Voluntary Compliance Encouragement Scheme- Steps for Compliance and FAQ
The Service Tax Voluntary Compliance Encouragement Scheme (VCES) has come into effect upon enactment of the Finance Bill 2013 on the 10thMay, 2013. The said scheme provides an opportunity to any person whose service tax is due or has short paid and has not declared in his service tax return to pay only the service tax amount and get immunity from interest and penalty. The person availing the opportunity has to declare his service tax liability for the period 1st October, 2007 till 31st December, 2012. The declarant has to follow the said steps for compliance of the said scheme in order to get immunity from interest and penalties under the Finance Act, 1994, which are mentioned here under:
The procedures to be followed are as under:-
1. The person who wishes to make a declaration under the Scheme, shall, if not already registered, take registration with the Service Tax Department.
2. The declaration in respect of tax dues under the Scheme shall be made in Form VCES -1 before 31st December, 2013. The calculation of tax dues has to be submitted as per format of Sr. No. 3F(1) of the ST-3 returns.
3. The Assistant Commissioner on receipt of declaration shall issue an acknowledgement in FormVCES-2 within a period of seven working days from the date of receipt of the declaration.
4. The tax due has to be paid in the following manner:
| Percentage of tax to be paid….. | Due date by which taxhas to be paid…. | Interest payable if….. |
| 50 % of the Tax Dues | Before 31stDecember,2013 | – |
| Remaining 50% of theTax Dues | Before 30th June, 2014 | – |
| If remaining 50% was not paid before 30thJune,2014 | Before 31st December, 2014 | Along with interest at the rate 15 % or 18% as the case may be from 1st July, 2014 till the date of payment. |
5. The Assistant Commissioner shall issue an acknowledgement of discharge under in FormVCES- 3.The acknowledgement of discharge shall be issued within a period of seven working days from the date of furnishing of details of payment of tax dues in full along with interest, if any, by the declarant.
Some FAQ on the said Schemes:
Reference : Circular No. 169/4/2013 dated 13/05/2013.
1. Whether a person who has not obtained service tax registration so far can make a declaration under VCES?
Ans: Yes, any person who has tax dues can make a declaration in terms of the provisions of VCES; he will be required to take registration before making such declaration.
At the time of registration a form of declaration has to be filled up by every person. In case where a person is taking registration for VCES, kindly attach a covering letter to theservice tax unit Superintendent that the person is taking registration for declaration in VCES.
2. Whether a declarant shall get immunity from payment of late fee/penalty for having not takenregistration earlier or not filed the return or for delay in filing of return.
Ans: Yes. It has been provided in VCES that, beside interest and penalty, immunity would also be available from any other proceeding under the Finance Act, 1994 and Rules made there under.
3. Whether an assessee to whom show cause notice or order of determination has been issued can file declaration in respect of tax dues which are not covered by such SCN or order of determination?
Ans: The assessee to whom show cause notice is issued can declare his other tax dues under the Scheme which are not the subject matter of the SCN or Order or which is not covered under any SCN or order issued to him.
4. Whether CENVAT Credit can be availed for payment of service tax under this Scheme?
Ans: No, The CENVAT credit shall not be utilised for payment of tax dues under the Scheme.
5. Whether this Scheme can be availed in case a search or audit or an inquiry is initiated against the assessee.
Ans. No, the assessee cannot avail the benefit of the said scheme if any inquiry or investigation initiated against the assessee and is pending as on the 1st day of March, 2013.
6. Whether a communication from department seeking general information from the declarant would lead to rejection of declaration?
Ans: No merely receiving a letter seeking general information from the declarant would not lead to rejection of the application. Unless said letter is issued:
i. Under section 14 of the Central Excise Act as made applicable to service tax vide section 83 of the Finance Act,1994.
ii. Under section 72 of the Finance Act, 1994
iii. Under rule 5A of the Service Tax Rules, 1994
Other communication from the department would not lead to rejection of the declaration.
7. Whether there is any limit regarding the amount of declaration?
Ans: No, there is no monetary limit specified in the Act or rules made under in this behalf.
8. If the application made by the declarant is rejected, can an inquiry against the declarant be initiated by the department?
Ans: Yes, an inquiry can be initiated if the declaration is rejected as there is no restriction in this regard. The information furnish by the declarant can form the basis of initiation of inquiry against the same.
S.43B : Deduction on actual payment – Interest – Schedule bank – Co-operative bank – Interest payable to SMM Co-operative Bank Ltd. could not be disallowed under section 43B
The assessee claimed in respect of interest payable to Shree Mahalaxmi Mercantile Co-operative Bank Ltd. The Assessing Officer disallowed the interest under section 43B on the ground that the interest was not paid up to the date of filing of the return. On appeal the Commissioner (Appeals) confirmed the order of Assessing Officer. On appeal to the Tribunal the Tribunal held that section 43B would not apply in case of payment of interest to a co-operative bank for the reasons that section is applicable only in respect of interest payable to a loan taken from a schedule bank. Under terms of Explanation 4(aa) to section 43B of the Act , a schedule bank would have a meaning assigned to it in the Explanation to cl. (iii) of sub.s.(5) of section 11 of the Act. The Tribunal held that ShreeMahalaxmi Mercantile Co-operative bank is not covered within the definition of scheduled bank under section 43B, therefore the appeal of assessee was allowed. On appeal to High Court the High Court confirmed the view of Tribunal and the appeal of revenue was dismissed. (A.Y. 200-05)CIT v. Upendra T. Kapadia (2013) 81 DTR 279 / 256 CTR 201 (Bom.)(High Court)
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