2013-TIOL-1032-ITAT-AHM
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'B' AHMEDABAD
BENCH 'B' AHMEDABAD
ITA No.683 /AHD/2013
Assessment Year: 2008-2009
Assessment Year: 2008-2009
INCOME TAX OFFICER, WARD-9 (4) AHMEDABAD
Vs
SHRI RAJENDRA MADHUBHAI GOHIL
1/3, AYOJAN NAGAR, NAVA SHAARDA MANDIR ROAD,
PALDI, AHMEDABAD-3800076
PAN NO: ABTPG6187G
1/3, AYOJAN NAGAR, NAVA SHAARDA MANDIR ROAD,
PALDI, AHMEDABAD-3800076
PAN NO: ABTPG6187G
D K Tyagi, JM And Anil Chaturvedi, AM
Dated: October 31, 2013
Appellant Rep by: Shri P L Kureel, Sr DR
Respondents Rep by: U S Bhati
Respondents Rep by: U S Bhati
Income Tax - Sections 40(a)(ia), 194C & 194A - Whether provisions of section 194C(2) are applicable when the CIT(A) has given a finding that the risk and responsibility of fulfilling of various terms and conditions of the contract remained with the Assessee - Whether disallowance made by AO is justified when the A.O. has not pointed out any deficiency in the books of accounts.
The Assessee is engaged in the business of hiring motor car. The A.O considered the hire charges of Rs. 28,35,053/- on which the Assessee had not deducted TDS u/s 194C as not allowable under the provisions of Section 40(a)(ia), and accordingly disallowed and added back the aforesaid sum to the income. The CIT(A) decided the issue in favour of the Assessee.
The A.O. noticed that Assessee had paid interest to various Private Finance Companies to the tune of Rs. 10,10,258/-. The A.O. concluded that Assessee has failed to deduct TDS u/s 194A before making payment of finance charges and accordingly disallowed the same u/s 40(a)(ia).The CIT(A) deleted the addition.
On Appeal before the Tribunal the D.R. submitted but the Assessee failed to submit the details and therefore the A.O. was justified in disallowing the expenditure by invoking the provisions of section 40(a)(ia). The A.R. submitted that Assessee had entered into contract with PSU's for supply of vehicles. The risk and responsibility to fulfill such work contract of PSU's was on the Assessee. The vehicles were hired by the Assessee only when required and there were no fixed hiring charges. It was further submitted that the Assessee never passed its responsibility as a contractor to the taxi owner/operator and in case of any breach of terms and conditions, the Assessee was only responsible.
Having heard the parties, the Tribunal held that,
++ the CIT(A) while deciding the issue in favour of the Assessee has given a finding that the risk and responsibility of fulfilling of various terms and conditions of the contract remained with the Assessee, where the Assessee had taken on hire the vehicles and it cannot be attributed as contract of service and thereby a sub-contract and therefore the provisions of section 194C(2) are not applicable. He had further held that provisions of Section 194C were not applicable to the payments made by Assessee for hiring of vehicles. The Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record. No reason to interfere with the order of CIT(A);
++ on the issue of AO making disallowance u/s 40(a)(ia) in respect of failure of the Assessee to deduct TDS u/s 194A,the Assessee had paid interest of Rs. 10,10,258/- to Private Finance Companies including banks. The amount paid as interest to banks and finance companies was not submitted by the Assessee before A.O. nor the details are available .The matter remanded to the AO for a afresh adjudication in view of the judgment of Gujarat High in Sikandar Khan N. Tunvur;
++ on the issue of disallowance 20% of balance of Rs. 53,99,445/-made by AO but deleted by the CIT(A),the CIT(A) while deleting the addition has noted that in the Remand Report, the Assessee had produced the bills and vouchers and A.O. had failed to identify any single discrepancy. He has further noted that Assessee has shown increased gross profit and net profit as compared to the immediate preceding year. The A.O. has also not pointed out any deficiency in the books of accounts. The Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record. No reason to interfere with the order of CIT(A).
The Assessee is engaged in the business of hiring motor car. The A.O considered the hire charges of Rs. 28,35,053/- on which the Assessee had not deducted TDS u/s 194C as not allowable under the provisions of Section 40(a)(ia), and accordingly disallowed and added back the aforesaid sum to the income. The CIT(A) decided the issue in favour of the Assessee.
The A.O. noticed that Assessee had paid interest to various Private Finance Companies to the tune of Rs. 10,10,258/-. The A.O. concluded that Assessee has failed to deduct TDS u/s 194A before making payment of finance charges and accordingly disallowed the same u/s 40(a)(ia).The CIT(A) deleted the addition.
On Appeal before the Tribunal the D.R. submitted but the Assessee failed to submit the details and therefore the A.O. was justified in disallowing the expenditure by invoking the provisions of section 40(a)(ia). The A.R. submitted that Assessee had entered into contract with PSU's for supply of vehicles. The risk and responsibility to fulfill such work contract of PSU's was on the Assessee. The vehicles were hired by the Assessee only when required and there were no fixed hiring charges. It was further submitted that the Assessee never passed its responsibility as a contractor to the taxi owner/operator and in case of any breach of terms and conditions, the Assessee was only responsible.
Having heard the parties, the Tribunal held that,
++ the CIT(A) while deciding the issue in favour of the Assessee has given a finding that the risk and responsibility of fulfilling of various terms and conditions of the contract remained with the Assessee, where the Assessee had taken on hire the vehicles and it cannot be attributed as contract of service and thereby a sub-contract and therefore the provisions of section 194C(2) are not applicable. He had further held that provisions of Section 194C were not applicable to the payments made by Assessee for hiring of vehicles. The Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record. No reason to interfere with the order of CIT(A);
++ on the issue of AO making disallowance u/s 40(a)(ia) in respect of failure of the Assessee to deduct TDS u/s 194A,the Assessee had paid interest of Rs. 10,10,258/- to Private Finance Companies including banks. The amount paid as interest to banks and finance companies was not submitted by the Assessee before A.O. nor the details are available .The matter remanded to the AO for a afresh adjudication in view of the judgment of Gujarat High in Sikandar Khan N. Tunvur;
++ on the issue of disallowance 20% of balance of Rs. 53,99,445/-made by AO but deleted by the CIT(A),the CIT(A) while deleting the addition has noted that in the Remand Report, the Assessee had produced the bills and vouchers and A.O. had failed to identify any single discrepancy. He has further noted that Assessee has shown increased gross profit and net profit as compared to the immediate preceding year. The A.O. has also not pointed out any deficiency in the books of accounts. The Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record. No reason to interfere with the order of CIT(A).
Revenue's appeal partly allowed
Cases followed:
Sikandar Khan N. Tunvar (2013) 33 Taxman. Com 133 (Guj.).
Sikandar Khan N. Tunvar (2013) 33 Taxman. Com 133 (Guj.).
ORDER
Per: Anil Chaturvedi:
1. This appeal is filed by the Revenue against the order of CIT(A)-XV, Ahmedabad dated 04.12.2012 for A.Y. 2008-09.
2. The facts as culled out from the material on record are as under.
3. Assessee is an individual engaged in the business of hiring motor car in the name of Sai Travels. Assessee filed its return of income for A.Y. 08- 09 on 30.09.2008 declaring total income of Rs. 3,64,140/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 30.12.2010 and the total income was determined at Rs. 53,53,480/-. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) vide order dated 4th December 2012 granted partial relief to the Assessee. Aggrieved by the aforesaid order of CIT(A) Revenue is now in appeal before us and has raised the following grounds.
1. The ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 28,35,053/- made on account of hiring charges u/s. 40(a)(ia) of the Act.2. The ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs. 10,10,258/- made on account of interest payment to private finance Company.3. The ld. Commissioner of Income-Tax(Appeals)-XV, Ahmedabad has erred in law and on facts in holding that the addition under provisions of Section 40(a)(ia) of the Act, would be attracted only in respect of the payable amount of expenditure as on 31st March of the relevant previous year.4. The ld. Commissioner of Income-Tax(Appeals)-XV, Ahmedabad has erred in law on facts deleting the disallowance made on account of expenses not proved during the Remand proceeding such as Office expenses of Rs. 21,640, Service Tax of Rs. 66,873/- and Telephone expenses of Rs. 32,360/- without any specific finding for such allowance.Ground no. 1 is with respect to addition of Rs. 28,35,053/- on account of hiring charges
4. During the course of assessment proceedings, on verification of the details furnished by the Assessee, A.O. noticed that Assessee had shown payment of motor hire charges to various sub-contractors and car owners amounting to Rs. 28,35,053/-. He also noted that the payments were made exceeding Rs. 20,000/- in single trip and exceeding Rs. 50,000/- in aggregate during the year. He further noticed that Assessee has not deducted TDS before making the payment. The Assessee was therefore asked to show as to why the amount paid be not disallowed under section 40(a)(ia). In the absence of any response of the Assessee, A.O. considered the hire charges of Rs. 28,35,053/- on which the Assessee had not deducted TDS u/s 194C as not allowable under the provisions of Section 40(a)(ia), and accordingly disallowed and added back the aforesaid sum to the income. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the Assessee decided the issue in favour of Assessee by holding as under:-
5.4 Ground No.3 is in respect of disallowance u/s.40(a)(ia) of the Act for an amount of Rs.28,35,053, since appellant did not comply the provisions of deduction of TDS in respect of payments made for motor hire charges to various sub-contractors. The A.O. made the addition since appellant has not given any explanation or reply in this regard during asstt. proceedings.The appellant during appeal proceedings submitted that he is having business of motor hire mainly for state govt. PSU(i.e.Gujarat State Petroleum Corporation Ltd., Gandhinagar (GSPL), Gujarat State Petronet Ltd. Gandhinagar and GSPC Gas Co. Ltd. The appellant has to deploy the vehicles like Toyoto Qualis, Scorpio, Safari etc. for its staff. Copies of 'work order' received were also attached by appellant which have various terms and conditions. It was conveyed that appellant has his own vehicles (26 vehicles, as per details submitted before A.O. vide written submission dated 13.9.2010) to complete the work contract. It is only on few occasion, when he has to hire vehicles to complete the said work contract as per terms & conditions. It is therefore, there is no sub-contract or subletting of work but appellant fulfill all the terms and conditions of the work contract. The risk and responsibility to fulfill such work contract as well as terms and conditions are on appellant. There is no assignment of such work contract to any of such taxi/motor owner. It is only as and when in the case of eventuality of break-down of any appellant's vehicles, non-availability of extra vehicle, the appellant hire the vehicle from open market as per the suitability of his work contract. The appellant hire such vehicles in a discrete manner and not on a regular basis. The type of vehicle, period etc. differ from time to time as per the need of appellant on an urgent situation and accordingly payment for such hiring is made. There is no fixed hire charge. The appellant on these facts relied on various case laws as already discussed where it has been held that in such type of casual and non-recurring hiring of vehicle to complete a contract cannot be taken as sub-contract.I am inclined to accept the contention of the appellant that in the facts and circumstances of his case, payment of hiring charges to various motor car /vehicle owners or parties for occasional engagement in pursuant to complete his contract cannot be held as sub-contract and therefore the provisions for deduction of tax u/s.194C(2) is not applicable. The crucial aspect which emerges out from the facts of the appellant is the risk and responsibility of fulfilling various terms and conditions of the contract remained with appellant in the case of such occasional, and non-recurring hiring of vehicles. This cannot be attributed as contract of services and thereby a sub-contract. It is in this regard, since the provisions of section 194C(2) are not applicable, there is no question of applicability of section 40(a)(ia) of the Act. Appellant's other contention that out of such charges nothing remained payable at the end of previous year is also having force considering the ratio of various case laws. The appellant relied on the decision of Hon'ble ITAT Vishakhapattnam Special Bench in the case of Merilyn Shipping & Transports vs. ACIT and submitted audited balance sheet and details to evidence that nothing out of such hire charges remained payable as on 31.7.2008. The appellant succeed therefore for the ground related to disallowance u/s.40(a)(ia) of the Act following the ratio of decision of this case.It is therefore, the A.O. is directed to allow hire charges of Rs.28,35,053/- and delete the addition so made u/s.40(a)(ia) of the Act. The appellant gets relief accordingly
5. Aggrieved by the order of CIT(A), Revenue is now in appeal before us.
6. Before us, the ld. D.R. submitted but the Assessee failed to submit the details called for by the A.O. and therefore the A.O. was justified in disallowing the expenditure by invoking the provisions of section 40(a)(ia) of the Act. He further submitted that CIT(A) has granted relief to the Assessee by following the decision of Special Bench in the case of Merlyn Shipping and Transport vs. ACIT = (2012-TIOL-184-ITAT-VIZAG-SB) . He further submitted that Hon. Gujarat High Court in the case of Sikandar Khan N. Tunvar (2013) 33 Taxman. Com 133 (Guj.) has held that the decision of special bench in the case of Merlyn Shipping and Transport vs. A.C.I.T does not lay down correct law. He therefore submitted that in view of the decision of Hon. Gujarat High Court, the matter may be sent back to the file of A.O. to decide the issue in the light of the aforesaid decision of Gujarat High Court.
7. The ld. A.R. on the other hand submitted that Assessee had entered into contract with PSU's for supply of vehicles. The Assessee used to supply its own vehicles but only on few occasions when it had to complete the work contract as per the terms and conditions and his own vehicles were not available, it had hired the vehicles. It was further submitted that the risk and responsibility to fulfill such work contract of PSU's was on the Assessee. The vehicles were hired by the Assessee only when required and there was no fixed hiring charges. He further submitted that rates paid to the taxi operators/owners varied depending upon the prevailing market conditions and Assessee had not entered into any contract either written or oral with the persons from whom the vehicles were taken by Assessee. It was further submitted that the Assessee never passed its responsibility as a contractor to the taxi owner/operator and in case of any breach of terms and conditions, the Assessee was only responsible--- He further placed reliance on the decision in the case of Kavita Chug vs. ITO (2011) 44 SOT 95 (Kolkata), decision of Bombay Tribunal in the case of Bhail Bulk Carriers vs. ITO ITA No. 3536/Mum/2011 and the decision of Ahmedabad Tribunal in the case of Shree Dhain Auto Transport Corporation IT(SS) No. 124/Ahd/2013 order dated 19.07.2013. He thus supported the order of CIT(A).
8. We have heard the rival submissions and perused the material on record. We find that A.O. made disallowance under section 40(a)(ia) for the reason that no details were submitted before him with respect to car hiring charges and therefore he was of the view that the Assessee ought to have deducted TDS under section 194C which Assessee had not deducted and therefore disallowed the payment under section 40(a)(ia). We find that CIT(A) while deciding the issue in favour of the Assessee has given a finding that the risk and responsibility of fulfilling of various terms and conditions of the contract remained with the Assessee, where the Assessee had taken on hire the vehicles and it cannot be attributed as contract of service and thereby a sub-contract and therefore the provisions of section 194C(2) are not applicable. He had further held that provisions of Section 194C were not applicable to the payments made by Assessee for hiring of vehicles. Before us, the Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record. In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. Ground No. 2 and 3 are interconnected and therefore we considered together. It is with respect to disallowance of interest payment of Rs. 10,10,258/-.
9. On verification of the details, A.O. noticed that Assessee had paid interest to various Private Finance Companies to the tune of Rs. 10,10,258/-. A.O. was of the view that Assessee should have deducted TDS under Section 194A but had failed to deduct TDS. The Assessee was therefore asked to show cause as to why the interest payment not be disallowed under section 40(a)(ia). In the absence of response from the Assessee, A.O. concluded that Assessee has failed to deduct TDS under section 194A before making payment of finance charges of Rs. 10,10,258/- and accordingly disallowed the same under section 40(a)(ia) of the Act. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the Assessee decided the issue in favour of the Assessee by holding as under:-
5.5 Ground no. 4 is in respect of disallowance u/s. 40(a)(ia) of the Act and addition of Rs. 10,10,258/- for the interest payment made to Tata Finance for the infringement of TDS provisions. The A.O. contended that appellant paid interest of Rs. 10,10,258/- to private finance companies without deduction of TDS u/s. 194A of the Act. The appellant contended that it is true that no deduction of TDS was made from such interest payment to Pvt. Companies like Kotak Mahindra Prime Ltd., G MAC Financial Services, TML Financial Services Ltd. and to two banks i.e. ICICI Bank and HDFC Bank because the appellant was in need of fund and the terms and conditions of such finance dictated the appellant. It was further contended that due to following of post dated cheque procedure by all these companies, nothing out of such interest payment remained payable as on 31.3.2008. It was also contended that interest payment to bank i.e. ICICI Bank as well as HDFC bank does not require the deduction of TDS as per the provisions. The appellant submitted detail in the form or repayment schedule from HDFC bank (For Scorpio GJ-1-AZ-9256) and ICICI bank (For vehicle No.3488).I am inclined to accept the contention of the appellant that as far as interest payment to Bank viz. ICICI bank and HDFC bank are concerned, provisions of section 194A of the Act are not applicable hence the interest paid to such bank is allowable and out of the purview of section 40(a)(ia) of the Act ln respect of balance payment, irrespective of the fact. that appellant's need of fund is stronger and there were terms and conditions dictated by such Non-banking finance Co.(NBFC) or Pvt.finance Co. to repay the loan/finance with interest through post dated cheques (PDC), provisions of section 194A of the Act as well as section 40(a)(ia) of the Act are applicable. The appellant admitted the same also. However, considering the ratio of Hon'ble ITAT Vishakhapattnam Special Bench decision in the case of Merilyn Shipping & Transports vs. ACIT, and considering the fact that no interest out of such payment remained payable as on 31.3.2008, there cannot be any disallowances u/s.40(a)(ia) of the Act. It is therefore, the A.O. is directed to allow such interest payment and delete the addition made. The appellant gets relief accordingly.
10. Aggrieved by the order of CIT(A), the Revenue is now in appeal before us.
11. Before us, the ld. D.R. submitted that Assessee was liable to deduct TDS under section 194A before making payment of interest which the Assessee has failed to do and therefore the A.O. was justified in making the disallowance. He further submitted that CIT(A) has granted relief to the Assessee by following the decision of Special Bench in the case of Merilyn Shipping and Transport (supra). He further submitted that Hon. Guj. High Court in the case of Sikandar Khan N. Tunvar (supra) has held that the Special Bench decision in the case of Merilyn Shipping (supra) does not lay down correct law. In view of the aforesaid decision of Hon. Gujarat High Court he submitted that the order of A.O. be upheld.
12. The ld. A.R. fairly agreed that the matter may be sent back to the A.O. to ascertain the payments of interest made to banks and others and thereafter decide the issue.
13. We have heard the rival submissions and perused the material on record. We find that Assessee had paid interest of Rs. 10,10,258/- to Private Finance Companies including banks. The amount paid as interest to banks and finance companies was not submitted by the Assessee before A.O. nor the details are available before us. We further find that CIT(A) has granted relief to the Assessee by following the decision of Special Bench in the case of Merlyn Shipping(supra) The Hon. Gujarat High Court in the case of Sikandar Khan N. Tunvur (supra) has held that the decision of Special Bench in the case of Merilyn shipping (supra) does not lay down correct law. We therefore are of the view that the matter should go back to the file of A.O. so that matter can be decided afresh by him in the light of the aforesaid decision of Hon. Gujarat High Court. We therefore direct accordingly and remit the issue to the file of A.O. We also direct the Assessee to furnish all the required details called for by the A.O. promptly so as to enable the A.O. to decide the issue. In the result, this ground of Revenue is allowed for statistical purposes. Ground No. 4 is with respect to disallowance of various expenses.
14. On verification of the Profit and Loss account, A.O. noticed that Assessee has claimed various expenses aggregating to Rs. 96,76,944/-. The Assessee was asked to produce the supporting evidence in support of the expenses claimed. Due to the non compliance by the Assessee, A.O. disallowed 20% of balance of Rs. 53,99,445/- (96,76,944 less disallowance of car hire charges of Rs. 28,35,053/- and interest disallowance of Rs. 10,10,258/-) and added to the income. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) decided the issue in favour of the Assessee by holding as under:-
5.5 Ground No.5 is related to disallowance of Rs. 10,79,889/- out of Diesel & Petrol expenses. The A.O. in the asstt. Order contended that as against the total expenses of Rs. 96,76,944/- for Diesel & Petrol and other expenses as debited and claimed in P&L account by appellant, no single evidence in the form of bill or voucher was produced despite being asked and therefore he disallowed 20% of the balance expenses of Rs.53,99,445(96,76,944 - 28,35,053 - 10,10,258) since the disallowance for motor hire charges of Rs.28,35,053 and interest payment of Rs. 10,10,258 were separately made by A.O. out of total expenses. The appellant contended that his books of accounts are audited and no-adverse comment is given by tax auditor in his report in form 3CD & 3CB. All the bills and vouchers were produced before A.O. and better result in the form of G.P. & N.P. were accepted by A.O. Further no single defect/deficiency in the books of accounts was mentioned by A.O. and therefore there is no reasoning or logic for such disallowance. As discussed in earlier paras, the details in this regard was subjected to remand proceedings on the request of appellant and the A.O. in the remand report after test checking the details viz. ledger, bills, vouchers made a general comment that some of the expenditure are not supported by evidences. The appellant in rejoinder objected such general remarks and shown readiness to produce the supporting evidences for payment of service tax of Rs.66,873 and telephone bill of Rs.32,360. In respect of office expenses of Rs.21,640, it is contended that some tea, coffee expenditure may not be supported by bill due to nature of such expenses but in the absence of A.O. specifying the amount, appellant's better results and audited books of accounts does not warrant any disallowances out of it on estimation basis.I am inclined to accept the contention of the appellant. The A.O. in the asstt. order estimated the disallowance without any reasoning or logic If no evidences to support such expenses were submitted by appellant then entire expenditure should have been disallowed. Otherwise the logic and reasoning for disallowance of 20% of such expenses be given by A.O. In the remand report, appellant once again produced all details, bills and vouchers and A.O. failed to identify any single mistake or discrepancy and he made a general remark. It is therefore considering the fact that appellant's books of accounts are audited, the appellant has shownbetter result i.e. gross profit of 49.90% and 23.30% Net profit during previous year against the G.P. of 28.10% and N.P. of 11.61% in immediately preceding previous year, and failure on the part of A.O. to identity any single deficiency or discrepancy, such disallowance at the rate of 20% is not justified. The A.O. is directed to delete the disallowance and addition so made. The appellant gets relief accordingly.
15. Aggrieved by the order of CIT(A), the Revenue is now in appeal before us.
16. Before us, the ld. D.R. submitted that the Assessee was asked to produce the evidence in support of the expenditure and since the Assessee did not produce the same, the A.O. was fully justified was estimating the disallowance. The ld. A.R. on the other hand reiterated the submissions made before CIT(A) and thus supported the order of CIT(A).
17. We have heard the rival submissions and perused the material on record. We find that CIT(A) while deleting the addition has noted that in the Remand Report, the Assessee had produced the bills and vouchers and A.O. had failed to identify any single discrepancy. He has further noted that Assessee has shown increased gross profit and net profit as compared to the immediate preceding year. The A.O. has also not pointed out any deficiency in the books of accounts. Before us, the Revenue could not controvert the findings of CIT(A) by bringing any contrary material on record. In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed.
18. In the result, the appeal of the Revenue is partly allowed for statistical purposes.
(Order pronounced in Open Court on 31.10. 2013.)
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2013-TIOL-1025-ITAT-COCHIN
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH, COCHIN
BENCH, COCHIN
ITA No.423/Coch/2010 - A.Y. 2001-02
ITA No.424/Coch/2010 - A.Y. 2003-04
ITA No.370/Coch/2011 - A.Y. 2004-05
ITA No.371/Coch/2011 - A.Y. 2005-06
ITA No.425/Coch/2010 - A.Y. 2006-07
ITA No.426/Coch/2010 - A.Y. 2007-08
ITA No.424/Coch/2010 - A.Y. 2003-04
ITA No.370/Coch/2011 - A.Y. 2004-05
ITA No.371/Coch/2011 - A.Y. 2005-06
ITA No.425/Coch/2010 - A.Y. 2006-07
ITA No.426/Coch/2010 - A.Y. 2007-08
MR PROMY KURIAKOSE
PADAYATTIL HOUSE
KIDANGOOR PO VENGOOR ANGAMALY
PAN NO:ADHPK7546F
PADAYATTIL HOUSE
KIDANGOOR PO VENGOOR ANGAMALY
PAN NO:ADHPK7546F
Vs
ASSTT COMMISSIONER OF INCOME TAX
CENTRAL, CIRCLE-1, ERNAKULAM
CENTRAL, CIRCLE-1, ERNAKULAM
ITA Nos.345 & 346/coch/2011
Assessment Years: 2004-05 & 2005-06
Assessment Years: 2004-05 & 2005-06
DEPUTY COMMISSIONER OF INCOME TAX
CENTRAL CIRCLE-1, ERNAKULAM
CENTRAL CIRCLE-1, ERNAKULAM
Vs
MR PROMY KURIAKOSE
VENGOOR ANGAMALY
VENGOOR ANGAMALY
N R S Ganesan, JM and B R Baskaran, AM
Dated: 29.5.2013
Appellant Rep by: Shri K P Paulose
Respondent Rep by: Smt Susan George Varghese
Respondent Rep by: Smt Susan George Varghese
Income tax – Sections 132, 143(2), 153C – Whether when no document is found against the assessee to whom notice is issued u/s 153C in the course of search proceedings, the initiation of proceedings u/s 153C is invalid – Whether when the assessee executed the registered sale deed disclosing the sale consideration, it is justified on part of the Revenue to hold that the sale price of his brother's land was very high and therefore the same price has to be adopted in the case of assessee.
A) A search took place on the group of the assessee. Large scale suppression of sale was found. Notice u/s 153C was issued to assessee. Assessee contended that no material pertaining to it was found from the person searched u/s 132. Assessee contended that except a reference about loan and credit in the name of family members, no other material was found in the course of search proceedings. Therefore, initiation of proceedings u/s 153C was not justified. Assessee further submitted that no addition was made with regard to loan or credit given to the partnership firm. The respective family members had already filed returns of income disclosing the loan before the date of search. Therefore, it cannot be treated as undisclosed income u/s 153C of the Act. Since no document was found against the present assessee in the course of search proceedings, the initiation of proceedings u/s 153C was invalid. The document seized must be of such characters so as to persuade the assessing officer to come to a conclusion that the income disclosed therein belongs to the person other than searched.
Further the assessee raised the point that the time limit for issue of notice u/s 143(2) came to an end before the date of search. Therefore, the assessment proceedings were terminated or have come to an end or completed by operation of law on expiry of time limit for issue of notice u/s 143(2) of the Act. Therefore, the completed / concluded assessments cannot be reopened u/s 153C of the Act. Since the assessment proceedings were not admittedly pending, it cannot be reopened.
Revenue contended that legality of the search proceedings cannot be challenged before this Tribunal. The warrant of search was not issued in the name of the assessee. The assessee cannot challenge the validity of the search proceedings initiated in the premises of other person. On the basis of the material found during the course of search operation, proceedings were initiated u/s 153C of the Act against the present assessee. Once paper relating to the present assessee in the form of balance-sheet and registered sale deed was found irrespective of whether income could be deduced from it, the assessing officer has no other alternative but to take action u/s 153C.
B) AO made addition on account of on money said to be received on sale of land. Revenue contended that the assessee disclosed the value of the land at Rs. 17516 per cent for sale of 34.61 cent. However, his brother had disclosed the sale price at Rs. 48,724/- per cent. Both sold the land by a single registered sale deed. Therefore, all the lands in the single document have to be treated as having the same price. Therefore, it was stated by revenue that CIT (A) was not justified in deleting the addition.
Assessee contended that no doubt the land was sold by a single document, the lands were not adjacent to each other. The assessee's land was situated in the interior side. Therefore, it fetched only Rs. 17516 per cent. Merely because a single registered sale deed was executed for sale of land of the assessee and his brother, the contents of the sale deed cannot be ignored by the taxing authorities. In the absence of any other material to show that the assessee has received on money, the sale consideration disclosed in the registered sale deed has to be accepted.
After hearing both the parties, the ITAT held that,
A) ++ wherever the proceedings was initiated u/s 153C, there should be assessment year specific documents seized in the course of the search proceedings available on record. In the present case, there are two material documents, one is registered sale deed which relates to assessment year 2001-02 and the other the balance-sheet as on 31-03-2005 disclosing the investment of Rs.41,71,199 in the partnership firm. Apart from these two documents, no material is available on record. For the assessment year 2001-02, AO made addition disbelieving the claim of the assessee towards agricultural income and another addition towards opening balance. No addition was made with regard to the sale deed found in the course of search operation. Therefore, the proceedings u/s 153C was not initiated on the basis fo the search material. There is no reference in the assessment order about the material found during the course of search operation. However for the assessment year 2005-06, an addition was made on the basis of the seized material. Assessee explained before the AO that the computer print out taken during the course of search operation was erroneous. However, the assessing officer rejected the explanation. Therefore, for the assessment year 2005-06 there was search material which discloses the undisclosed investment for the assessment year 2005-06;
++ the assessing officer has to satisfy himself that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. Section 153C makes it very clear that the proceedings under that section has to be initiated only in case the material found during the course of search operation relates to the person other than searched person. Therefore, for initiation of the proceedings, the material found during the course of search operation is relevant for initiation of proceedings u/s 153C of the Act;
++ the report of the relevant assessment year has to be taken into consideration and not the anterior or subsequent period. In the case of the assessee, the inspector visited the field in December, 2008. The assessment years under consideration are 2006-07 and 2007-08. However, except the land holding, no other material is available on record to suggest that the assessee was cultivating the land. It is also a fact that the assessee is filing return regularly disclosing the agricultural income for earlier assessment years and department allowed the returns of income to attain finality. Therefore, rejection of the entire claim of the assessee towards agricultural income may not be justified. Estimation of agricultural income at Rs.40,000 would meet the ends of justice for each of these assessment years;
B) ++ when the assesses executed the registered sale deed disclosing the sale consideration, it may not be justified on the part of the taxing authorities to hold that the sale price of his brother's land was very high and therefore the same price has to be adopted in the case of assessee. In the absence of any other material to show that the assessee has received on money over and above that disclosed in the sale deed, there cannot be any presumption that the assessee has received any on money. Therefore, in the absence of any further material found during the course of search operation, no proceedings could be initiated u/s 153C of the I.T. Act and CIT (A) has rightly deleted the addition.
A) A search took place on the group of the assessee. Large scale suppression of sale was found. Notice u/s 153C was issued to assessee. Assessee contended that no material pertaining to it was found from the person searched u/s 132. Assessee contended that except a reference about loan and credit in the name of family members, no other material was found in the course of search proceedings. Therefore, initiation of proceedings u/s 153C was not justified. Assessee further submitted that no addition was made with regard to loan or credit given to the partnership firm. The respective family members had already filed returns of income disclosing the loan before the date of search. Therefore, it cannot be treated as undisclosed income u/s 153C of the Act. Since no document was found against the present assessee in the course of search proceedings, the initiation of proceedings u/s 153C was invalid. The document seized must be of such characters so as to persuade the assessing officer to come to a conclusion that the income disclosed therein belongs to the person other than searched.
Further the assessee raised the point that the time limit for issue of notice u/s 143(2) came to an end before the date of search. Therefore, the assessment proceedings were terminated or have come to an end or completed by operation of law on expiry of time limit for issue of notice u/s 143(2) of the Act. Therefore, the completed / concluded assessments cannot be reopened u/s 153C of the Act. Since the assessment proceedings were not admittedly pending, it cannot be reopened.
Revenue contended that legality of the search proceedings cannot be challenged before this Tribunal. The warrant of search was not issued in the name of the assessee. The assessee cannot challenge the validity of the search proceedings initiated in the premises of other person. On the basis of the material found during the course of search operation, proceedings were initiated u/s 153C of the Act against the present assessee. Once paper relating to the present assessee in the form of balance-sheet and registered sale deed was found irrespective of whether income could be deduced from it, the assessing officer has no other alternative but to take action u/s 153C.
B) AO made addition on account of on money said to be received on sale of land. Revenue contended that the assessee disclosed the value of the land at Rs. 17516 per cent for sale of 34.61 cent. However, his brother had disclosed the sale price at Rs. 48,724/- per cent. Both sold the land by a single registered sale deed. Therefore, all the lands in the single document have to be treated as having the same price. Therefore, it was stated by revenue that CIT (A) was not justified in deleting the addition.
Assessee contended that no doubt the land was sold by a single document, the lands were not adjacent to each other. The assessee's land was situated in the interior side. Therefore, it fetched only Rs. 17516 per cent. Merely because a single registered sale deed was executed for sale of land of the assessee and his brother, the contents of the sale deed cannot be ignored by the taxing authorities. In the absence of any other material to show that the assessee has received on money, the sale consideration disclosed in the registered sale deed has to be accepted.
After hearing both the parties, the ITAT held that,
A) ++ wherever the proceedings was initiated u/s 153C, there should be assessment year specific documents seized in the course of the search proceedings available on record. In the present case, there are two material documents, one is registered sale deed which relates to assessment year 2001-02 and the other the balance-sheet as on 31-03-2005 disclosing the investment of Rs.41,71,199 in the partnership firm. Apart from these two documents, no material is available on record. For the assessment year 2001-02, AO made addition disbelieving the claim of the assessee towards agricultural income and another addition towards opening balance. No addition was made with regard to the sale deed found in the course of search operation. Therefore, the proceedings u/s 153C was not initiated on the basis fo the search material. There is no reference in the assessment order about the material found during the course of search operation. However for the assessment year 2005-06, an addition was made on the basis of the seized material. Assessee explained before the AO that the computer print out taken during the course of search operation was erroneous. However, the assessing officer rejected the explanation. Therefore, for the assessment year 2005-06 there was search material which discloses the undisclosed investment for the assessment year 2005-06;
++ the assessing officer has to satisfy himself that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. Section 153C makes it very clear that the proceedings under that section has to be initiated only in case the material found during the course of search operation relates to the person other than searched person. Therefore, for initiation of the proceedings, the material found during the course of search operation is relevant for initiation of proceedings u/s 153C of the Act;
++ the report of the relevant assessment year has to be taken into consideration and not the anterior or subsequent period. In the case of the assessee, the inspector visited the field in December, 2008. The assessment years under consideration are 2006-07 and 2007-08. However, except the land holding, no other material is available on record to suggest that the assessee was cultivating the land. It is also a fact that the assessee is filing return regularly disclosing the agricultural income for earlier assessment years and department allowed the returns of income to attain finality. Therefore, rejection of the entire claim of the assessee towards agricultural income may not be justified. Estimation of agricultural income at Rs.40,000 would meet the ends of justice for each of these assessment years;
B) ++ when the assesses executed the registered sale deed disclosing the sale consideration, it may not be justified on the part of the taxing authorities to hold that the sale price of his brother's land was very high and therefore the same price has to be adopted in the case of assessee. In the absence of any other material to show that the assessee has received on money over and above that disclosed in the sale deed, there cannot be any presumption that the assessee has received any on money. Therefore, in the absence of any further material found during the course of search operation, no proceedings could be initiated u/s 153C of the I.T. Act and CIT (A) has rightly deleted the addition.
Assessee's appeal allowed
ORDER
Per: N R S Ganesan:
The assessee has filed the appeals for the assessment years 2001-02, 2003-04, 2004-05, 2005-06, 2006-07 & 2007-08. The revenue has filed the appeals for the assessment years 2004-05 and 2005-06. Since common issues arise for consideration in all the appeals, they were heard together and are disposed of by this common order.
2. Let us first take the assessee's appeals. Shri K.P. Paulose, the ld.representative for the assessee submitted that there was a search u/s 132 of the Act on 13-02-2007 in the case of P.A. Kuriakose and Paulson P Varkey group. According to the ld.representative, P.A. Kuriakose and Paulson P Varkey group is mainly engaged in hotel (bar) and jewellery business. Shri Paulson P Varkey has a proprietory crushing unit at Manjapra in the name and style "Popular Industries". The said Paulson P Varkey has also interest in Royal Cartoons Pvt Ltd, Angamali and Swagat Enterprises, Angamali. According to the ld.representative, in the course of search in M/s Matha Enterprises, a group concern of Shri P.A. Kuriakose and P.A. Kuriakose Jewellers large scale suppression of sale was found. M/s P.A. Kuriakose Jewellers and Matha Enterprises appear to have introduced loans and credits in the name of family members. The returns were also filed by respective family members disclosing the loan advanced to Matha Enterprises and P.A. Kuriakose Jewellers before the date of search. According to the ld.representative, the present assessee, Shri Promy Kuriakose is one of the family members of Shri P.A. Kuriakose and Shri Paulson P Varkey. The ld.representative for the assessee further submitted that in the course of search proceedings no material pertaining to the present assessee, Shri Promy Kuriakose was obtained.
3. Referring to section 153C of the Act, the ld.representative submitted that proceedings u/s 153C could be initiated in case the assessing officer satisfied that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. In this case, admittedly, the searched person is group concern of Shri P.A. Kuriakose and Paulson P Varkey. Shri Promy Kuriakose was not subjected to search u/s 132 of the Act. Therefore, the assessing officer has to initiate proceedings u/s 153C in case the material found during the course of search operation in the case of Matha Enterprises or P.A. Kuriakose Jewellers relates to the present assessee. Admittedly, there is no such material found against the present assessee, Shri Promy Kuriakose. Referring to the assessment order, the ld.representative submitted that except a reference about loan and credit in the name of family members, no other material was found in the course of search proceedings. Therefore, according to the ld.representative, initiation of proceedings u/s 153C is not justified.
4. The ld.representative further submitted that no addition was made with regard to loan or credit given to the partnership firm. In fact, according to the ld.representative, the respective family members have already filed returns of income disclosing the loan before the date of search. Therefore, it cannot be treated as undisclosed income u/s 153C of the Act. The ld.representative placed his reliance on the decision of the Bangalore Bench of this Tribunal in P Srinivas Naik vs ACIT 114 TTJ 856 (Bang) = (2008-TIOL-28-ITAT-BANG), copy of which is available at page 28 of the paper book and submitted that in the absence of any material found during the course of search operation, proceedings u/s 153C cannot be initiated. Since, admittedly, no document was found against the present assessee in the course of search proceedings, the initiation of proceedings u/s 153C is invalid. The ld.representative further submitted that mere act of seizure of some document does not by itself lay foundation for reasonable belief that there is some undisclosed income. According to the ld.representative, the document seized must be of such characters so as to persuade the assessing officer to come to a conclusion that the income disclosed therein belongs to the person other than searched.
5. The ld.representative has also placed reliance on the decision of the Pune Bench of this Tribunal in Sinhgad Technical Education Society vs A.C.I.T. (2011) 57 DTR 241 (Pune) and submitted that for initiating proceedings u/s 153C, the document seized must be speaking one and also prima facie incriminating one. According to the ld.representative, in case, the assessing officer was satisfied that the document found during the course of search operation belongs to the person other than the searched person which discloses generation of any income prima facie, there may be justification for initiating proceedings u/s 153C of the Act. Therefore, according to the ld.representative, only such documents which are incriminating in nature could be a basis for initiating proceedings u/s 153C of the Act. Since no incriminating material was found for the assessment years 2001-02 to 2007-08, the proceedings initiated u/s 153C are not valid. The ld.representative has also placed reliance on the decision of the Cochin Bench of this Tribunal in Mrs Kunjamma Varkey vs ACIT in ITA Nos 624 to 629/Coch/2010 order dated 26-08-2011, copy of which is available at page 31 of the paper book. The ld.representative has also placed reliance on the decision of this bench of this Tribunal in the case of Smt. Beena Thomas vs Dy.CIT I.T.(SS)A. No.43/Coch/97 dated 23-09-2009. The ld.representative further submitted that the return of income was filed for the assessment years 2001-02, 2003-04, 2004-05 and 2005-06 in the regular course before the date of search. The time limit for issue of notice u/s 143(2) came to an end before the date of search. Therefore, the assessment proceedings were terminated or have come to an end or completed by operation of law on expiry of time limit for issue of notice u/s 143(2) of the Act. Therefore, the completed / concluded assessments cannot be reopened u/s 153C of the Act. According to the ld.AR, only the pending proceedings would abate. Since the assessment proceedings were not admittedly pending, it cannot be reopened.
6. On the contrary, Smt. Susan George Varghese, the ld.DR submitted that the legality of the search proceedings cannot be challenged before this Tribunal. The ld.representative has placed reliance on the judgment of the Chattisgarh High Court in Trilok Singh Dhillon vs CIT (2011) 332 ITR 185 (Chat). The ld.DR further submitted that the warrant of search was not issued in the name of the assessee. In fact it was issued in the name of Shri P.A. Kuriakose. Therefore, according to the ld.representative, the assessee cannot challenge the validity of the search proceedings initiated in the premises of other person. During the course of search operation in the case of Shri P.A. Kuriakose, certain papers relating to the assessee were found and seized. On the basis of the material found during the course of search operation, proceedings were initiated u/s 153C of the Act against the present assessee. According to the ld.DR, document marked as "SSA- 18" is the original document of registered sale deed in the name of the present assessee which was found among bunch of other documents in the name of Shri P.A. Kuriakose. Loose papers in which a balance-sheet as on 31-03-2005 showing the capital of Shri Promy Kuriakose at Rs.41,71,199 was also found. According to the ld.DR, once paper relating to the present assessee in the form of balance-sheet and registered sale deed was found irrespective of whether income could be deduced from it, the assessing officer has no other alternative but to take action u/s 153C of the Act for six assessment years preceding the assessment year in which the search took place. According to the ld.DR, there is no question of picking and choosing the assessment year. The ld.DR further submitted that it is mandatory for the assessing officer to initiate proceedings u/s 153C for all the six assessment years. The ld.DR placed her reliance on the judgement of the Chattisgarh High Court in Trilok Singh Dhollon (supra).
7. We have considered the rival submissions on either side and also perused the material available on record. The assessee is challenging the proceedings initiated u/s 153C of the Act on the ground that no document was found and seized relating to him. The assessee is not challenging the validity of the search. The specific contention of the assessee is that in the absence of any material relating to other persons found during the course of search operation, the proceedings cannot be initiated against persons other than the searched person u/s 153C of the Act. Therefore, this Tribunal is of the considered opinion that the judgment of the Chhattisgarh High Court in the case of Trilok Singh Dhillon (supra) may not be applicable to the facts of the case.
8. Apart from that the Special Bench of this Tribunal at Bangalore in the case of Ramaiah & others considered this issue and found that the Tribunal cannot go into the validity of the search. However, the Karnataka High Court reversed the decision of the Special Bench of this Tribunal and found that the Tribunal can go into the validity of the search proceedings. As observed earlier in this case, the validity of the search proceedings is not subject matter before this Tribunal. Only the initiation of the proceedings u/s 153C is challenged on the ground that no search material is available on record. This Tribunal is of the considered opinion that initiation of proceedings u/s 153C could be gone into in the appellate proceedings. The contention of the ld.representative for the assessee is that no material was found against the present assessee in the course of search proceedings. However, the ld.DR submitted that a registered sale deed in the name of the present assessee was found during the course of search operation and a balance-sheet was also found which shows the capital investment of the assessee at Rs.41,71,199 in the partnership firm. Therefore, it is obvious that sale deed dated 27-10-2000 relates to assessment year 2001-02 and the balance-sheet as on 31-03-2005 relates to assessment year 2005-06 was found.
9. We have carefully gone through the judgment of the Pune Bench of this Tribunal in the case of Sinhagad Technical Education Society (supra). In the case before the Pune Bench, the assessee is an educational society. In the course of search operation u/s 132 of the Act, in the residential premises of the president of the educational society certain loose papers were found and seized. Simultaneously a survey was conducted on the institute also. On the basis of the loose papers found and seized from the residential premises of the president of the educational society, proceedings u/s 153C was initiated. The contention of the assessee before the Mumbai Bench of this Tribunal was that mere act of seizure of document by itself does not lay foundation for prima facie belief that there was some undisclosed income. The seizure must be of such character so as to persuade the assessing officer to reopen the completed assessment. The Tribunal found that where assessment year specific incriminating material / documents were found there cannot be any assessment u/s 153C of the Act. A similar view was taken by Bangalore Bench of this Tribunal in the case of P Srinivas Naik (supra).
10. We have also carefully gone through the decision of the Cochin Bench of this Tribunal in M/s Kunjamma Varkey (supra). The case before this bench of this Tribunal was that no incriminating material belonged to the assessee was found. This Tribunal, after considering the provisions of section 153C of the Act found that in the absence of any relevant material belonging to the assessee, the assessing officer lacks his jurisdiction to initiate proceedings u/s 153C of the Act. This Tribunal placed its reliance on the decision of the Bangalore Bench of this Tribunal in the case of P Srinivas Naik (supra) and Bombay Tribunal in the case of Sinhagad Technical Education Society (supra). In view of the above, it is obvious that wherever the proceedings was initiated u/s 153C, there should be assessment year specific documents seized in the course of the search proceedings available on record. In the case before us, as found earlier, there are two material documents, one is registered sale deed which relates to assessment year 2001-02 and the other the balance-sheet as on 31-03-2005 disclosing the investment of Rs.41,71,199 in the partnership firm. Apart from these two documents, no material is available on record.
11. Let us now examine whether these two documents would be sufficient to initiate the proceedings u/s 153C of the Act. For the assessment year 2001-02 the assessing officer made addition of Rs.20,000 disbelieving the claim of the assessee towards agricultural income and another addition of Rs.2,80,000 towards opening balance. No addition was made with regard to the sale deed found in the course of search operation and the balance-sheet as on 31-03-2005. Therefore, it is obvious that for the assessment year 2001-02, the proceedings u/s 153C was not initiated on the basis of the search material. In fact, there is no reference in the assessment order about the material found during the course of search operation. However, for the assessment year 2005-06, an addition of Rs. 22,87,818 was made on the basis of the seized material SSA-29, i.e. the balance-sheet as on 31-03-2005. The balance-sheet discloses the investment of Rs.41,71,199 in the partnership firm. However, the balancesheet filed along with the return of income shows the capital investment of Rs.18,83,381. The assessee explained before the assessing officer that the computer print out taken during the course of search operation was erroneous. However, the assessing officer rejected the explanation of the assessee and the difference between Rs.41,71,199 being the amount shown in the balance-sheet which was found during the course of search operation and Rs.18,83,381 being the amount shown in the balance-sheet filed along with the return of income was added as unexplained investment in the partnership firm. Therefore, for the assessment year 2005-06 there was search material which discloses the undisclosed investment for the assessment year 2005-06. In respect of other assessment years there was no material found during the course of search operation. The addition was made only in respect of agricultural income and gift on the basis of cash flow statement filed by the assessee during the course of assessment proceedings. In fact, the assessee filed the returns of income for the assessment years 2001-02, 2003-04, 2004-05 and 2005-06 in the regular course before the date of search and the assessment proceedings of terminated / concluded assessments cannot be disturbed in the absence of any material found during the course of search operation.
12. The question now arises for consideration is - can there be an addition in the proceedings u/s 153C in the absence of search material? As discussed earlier, this was examined by the Mumbai Bench of this Tribunal in the case of Sinhagad Technical Education Society (supra). After considering the provisions of section 153C of the Act the Mumbai Bench found that when there was no search material found during the course of search operation there is no question of initiation of proceedings u/s 153C of the Act. We have also carefully gone through the provisions of section 153C of the Act which reads as follows:
"153C.(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A:Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person.(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year -(a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or(b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or© assessment or reassessment, if any, has been made,Before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A."
13. A bare reading of section 153C makes manifestly clear that the assessing officer has to satisfy himself that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. Section 153C makes it very clear that the proceedings under that section has to be initiated only in case the material found during the course of search operation relates to the person other than searched person. Therefore, for initiation of the proceedings, the material found during the course of search operation is relevant for initiation of proceedings u/s 153C of the Act. In the case before us, only for the assessment year 2005-06 a balance as on 31-03-2005 was found which relates to the present assessee. Apart from this, a sale deed was also found. However, no addition was made on the basis of the sale deed. Therefore, the only document available on record is the balance-sheet as on 31-03-2005 which relates to assessment year 2005-06. This bench of this Tribunal in Dr Sasikumar ITA Nos 251 to 259/Coch/2011 had an occasion to examine an identical issue and found that the addition can be made only on the basis of the material available on record. In respect of other years, there cannot be any addition in the absence of any material.
14. This bench of this Tribunal in the case of Kunjamma Varkey (supra) has considered this issue elaborately and found that the initiation of proceedings u/s 153C is without jurisdiction and hence it is bad. In fact, the case in Kunjamma Varkey (supra) relates to this very same group. In the case of Kunjamma Varkey (supra) this Tribunal has observed as follows at paras 4.2 and 4.3 of its order as follows:
"4.2 We have carefully perused the assessment order for each of the relevant years, including for A.Y. 2007-08 (copy on record), during the previous year relevant to which the relevant search took place, and find complete absence of any reference to any materials, much less those specified in s.153C, belonging to the assessee among that seized in search. The same constitutes a prerequisite inasmuch as it is only on the basis thereof that the AO derives sanction in law to issue notice u/s 153A. In the instant case, the AO of the person searched, i.e., the Group cases of P.A. Kuriakose and Paulson Varkey Group, and the assessee – the cases being centralized – is the same, so that there would be no occasion or necessity for being handed over the same by the AO of the person searched, i.e., the assessee's AO. Yet, the existence of such materials, among those seized (and/or requisitioned), belonging to the assessee, is a basic condition for initiating proceedings and issue of notice u/s 153A r/w.s. 153C. As afore-mentioned, surprisingly though, there is no mention anywhere in any of the assessment orders for each of the seven years, i.e., 2001-02 to 2007-08, that for A.Y. 2007-08 having been specifically called for by the Bench. Likewise, in the appellate orders. The terms of s.153C are clear and explicit, and it is only where any of the specified materials belonging to the assessee are subject to seizure and/or requisition that the assessment proceedings u/s 153A r/w.s. 153C can be initiated by issue of notice u/s 153A, the relevant part of which reads as under:-"Assessment of Income of any other person153C.(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A:Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person."4.3 The nature of the additions made for each of the years, and the material/s on which the same are based, again, leaves us in no manner of any doubt that no seized books of accounts or documents or assets belonging to the assessee were available with the AO; the assessment orders being de hors any reference there to, enabling the initiation of legally valid proceedings. We may clarify that it is not the want of explicit expression of satisfaction (in the assessment orders), which is to be firstly, prima facie and, secondly, is liable to have some element of subjectivity, that inflicts the present proceedings. The hon'ble jurisdictional high court in CIT vs. Panjanyam Management Agencies and Services (2011) 239 CTR 424 (Ker) has explained that there is no requirement of recording the satisfaction, which is principally for the transfer of the relevant materials by the AO of the person searched to that of the assessee – which is not applicable in the instant case – in writing. But, we may reiterate, the absence of relevant materials belonging to the assessee and, consequently, is a case of lack of jurisdiction. We, accordingly, upholding the assessee's claim, hold the assessments as without jurisdiction and, thus, bad in law, rather, void ab initio. The decisions cited by the assessee, i.e., P. Srinivas Naik vs. ACIT (2008) 117 ITD 201 (Bang.) = (2008-TIOL-28-ITAT-BANG) and Sinhgad Technical Education Society vs ACIT (in ITA Nos.114 to 117/PN/2010 dated 28.1.2011/copy on record) are relevant in this regard. We decide accordingly."
As seen from the assessment order, the assessee filed the returns of income for assessment year 2001-02 on 30-07-2011 for the assessment year 2003-04 on 28-11-2003. Similarly for assessment year 2004-05, the original return was filed on 27-07-2004 and for the assessment year 2005- 06 the return was filed on 0`1-02-2006. Proviso to section 143(2) as it stood at the relevant point of time till it was amended by Finance Act, 2008 with effect from 01-04-2008 read as follows:
"Provided that no notice under clause (ii) shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished."
15. In view of the above express provision of section 143(2), the assessment proceedings shall be terminated / concluded by operation of law on expiry of twelve months period from the end of the month in which the returns of income were furnished. Admittedly, the search was made on 13-02-2007. Twelve months' period expired from the date of regular returns for assessment years 2001-02, 2003-04, 2004-05 much before the date of search. Even for assessment year 2005-06, the twelve months' period expired on 31-03-2007. Therefore, for assessment year 2001-02, 2003-04, 2004-05 and 2005-06, the assessment proceedings are terminated / concluded by operation of law and, therefore, it is not pending. Therefore, for these assessment years the income disclosed in the regular returns before the date of search cannot be reassessed under section 153C of the Act after the search.
16. For the assessment year 2005-06, apart from agricultural income of Rs.60,000, the assessee has also disclosed marriage gift in the return filed in response to notice issued u/s 153C of the Act. The agricultural income was disclosed in the regular return, the assessment proceedings were concluded by operation of law. Therefore, what remains is only the marriage gift.
17. The ld.representative for the assessee submitted that no material was found during the course operation with regard to gift. The gift was disclosed in the cash flow statement filed during the course of assessment proceedings. The assessee has also disclosed the marriage expenses of Rs.1,50,000 in the cash flow statement. According to the ld.representative, the assessing officer disbelieved the explanation of the assessee and added the entire amount of Rs.5 lakhs as income from unexplained sources. According to the ld.representative, the gift was received from close relatives and it is customary practice among the family members to give and receive gift during the marriage. According to the ld.representative the assessing officer disallowed the claim of the assessee on the ground that the assessee's wife claimed a gift of Rs.4,05,000 which was disallowed. According to the ld.representative, in fact, the assessee's wife Mrs. Nita Promy is not an assessee. Therefore, the question of disallowance of any gift in her hand does not arise for consideration. Therefore, the disallowance of Rs.5 lakhs towards gift is not justified.
18. On the contrary, Smt. Susan Varghese George, the ld.DR submitted that the assessee claimed that the marriage gift of Rs.5 lakhs in the absence of any evidence to show that the gift was received, the assessing officer disallowed the claim of the assessee. The ld.DR submitted that the assessee has produced only the list of donors and not other ingredients such as the creditworthiness of the donor, the identity of the donor and the genuineness of the gift and the gift was not proved. Therefore, according to the ld.DR, the CIT(A) has rightly confirmed the addition.
19. We have considered the rival submissions on either side and also perused the material available on record. The fact that there was a marriage in the family is not in dispute. The assessee has furnished the list of donors. The CIT(A) confirmed the addition on the ground that the gifts were not received through banking channel. When the assessee claims that it is a gift received during the occasion of marriage, it is not known how such kind of gift will come through banking channels? At the time of marriage it is usual practice in this part of the country to give gifts to the married couples. At the best, the assessee can produce the list of the donors and the amount received from respective donors. Expecting other details from the guests, who attended the marriage may not be justified. If the assessing officer has any doubt, he may further investigate the matter on the basis of the list of donors furnished by the assessee. In the absence of any such investigation initiated by the assessing officer on the basis of the list of donors furnished by the assessee, this Tribunal is of the considered opinion that disallowing the entire claim may not be justified. The assessee has also disclosed an expenditure of Rs.1,50,000 in the marriage. Ignoring these particulars, the assessing officer has made addition of entire amount of Rs.5 lakhs. This Tribunal is of the considered opinion that when there is a customary practice in this part of the country to give and receive gifts on the occasion of marriage, in the absence of any other investigation carried out by the department on the basis of the list of donors filed by the assessee, disallowing any part of the gift may not be justified. Accordingly, the orders of the lower authorities are set aside and the addition of Rs.5 lakhs is deleted. In the result, the appeals of the assessee for the assessment years 2001-02, 2003-04, 2004-05 and 2005-06 are allowed.
20. Now coming to assessment years 2006-07 and 2007-08, admittedly, the assessee has not filed the regular return of income. The only return of income available on record is one filed with reference to notice issued u/s 153C of the Act. The common addition made by the assessing officer is with respect to disclosed agricultural income of Rs.70,000 for the assessment year 2006-07 and Rs.80,000 for assessment year 2007-08.
21. According to the ld.representative, the assessee filed all the relevant material to prove the land holdings. The assessee was cultivating the land, however, the assessing officer disallowed the entire claim of the assessee on the basis of the report said to be filed by the Inspector of Income-tax. The ld.representative further submitted that the assessee was holding 17.34 cents of land. According to the ld.representative, the assessing officer ought to have accepted the estimation of agricultural income. Referring to the judgment of the Madras High Court in CIT vs D Venkatesh (2009) 310 ITR 303 (Mad), the ld.representative submitted that when the entire agricultural income was disclosed to the department through regular returns for respective assessment years before the search, in the absence of any material to prove anything contrary, the estimated agricultural income which was disclosed in the return of income prior to search cannot be treated as undisclosed income. The ld.representative has also placed his reliance on the judgment of the Kerala High Court in E.K. Jose vs Addl Agricultural Income Tax Officer & Ors (1996) 217 ITR 89 (Ker) and submitted that inspection report relating to relevant assessment year alone needs to be considered and inspection report relevant to an anterior period for estimating the agricultural income cannot be accepted. According to the ld.representative, the Inspector's report in this case does not relate to assessment year 2005-06, therefore, it cannot be acted upon.
22. On the contrary, Smt. Susan George Varghese, the ld.DR submitted that the Inspector visited the field and found that no agricultural activity was carried out. Accordingly, he reported that agricultural income from said property was nil for the assessment years 2001-02 to 2007-08. Therefore, the assessing officer disallowed the claim of the assessee.
23. We have considered the rival submissions on either side and also perused the material available on record. From the materials available on record it appears that the Inspector visited the field in December, 2008. We have carefully gone through the judgment of the Kerala High Court in E.K. Jose (supra). In the case before the Kerala High Court, the Inspector visited the field on 28-04-1988. The assessment year under consideration before the Kerala High Court was 1987-88. The Kerala High Court found that it is difficult to adopt the report relating to an anterior period, that is to say, that the report belonged to 1982-83. In fact, the Kerala High Court had observed at page 91 of the ITR as below:
" Learned counsel for the appellant mainly focused his attach on the estimate of yield from rubber during the year 1987-88. The argument is that there was a sudden increase of annual yield from 23 quintals (for the years 1984-85 to 1986- 87) to 26 quintals (for the year 1987-88) and that, therefore, the income is estimated for the year 1987-88 cannot be said to be reasonable or fair. In order to substantiate this point, the appellant wants us to rely on the inspection report dated December 28, 1982, obviously discarding exhibit P-1 inspector report dated April 28, 1988. This approach as it appears to us, is basically deceptive. When the assessment order in dispute admittedly relates to the year 1987-88, it is difficult for this court to adopt a report relating to an anterior period, that is to say, a report relating to the year 1982-83. What we can legitimately adopt here is the inspection report dated April, 1988, which relates to the relevant accounting year even though serious attempt was made to belittle the said report by the appellant. The inspection report made available by an officer not below the rank of an Agricultural Income-tax Officer is a material piece of evidence inasmuch as the officer has the statutory power to enter into any land belonging to an assessee and inspect any accounts, registers and other documents, which such officer considers to be relevant for the purpose of any proceeding under the Act. The evidentiary value of the inspection report cannot be minimized according to the convenience of the assessee. The report is ordinarily prepared after inspection of the land as authorized by the provisions of the Act and after obtaining the adequate date for fixing the yield from the properties."
24. In view of the above, it is obvious that the report of the relevant assessment year has to be taken into consideration and not the anterior or subsequent period. In the case before us, admittedly, the inspector visited the field in December, 2008. The assessment years under consideration are 2006-07 and 2007-08. However, except the land holding, no other material is available on record to suggest that the assessee was cultivating the land. It is also a fact that the assessee is filing return regularly disclosing the agricultural income for earlier assessment years and department allowed the returns of income to attain finality. Therefore, this Tribunal is of the considered opinion that rejection of the entire claim of the assessee towards agricultural income also may not be justified. By taking into consideration all the relevant materials and the land holding, this Tribunal is of the considered opinion that estimation of agricultural income at Rs.40,000 would meet the ends of justice for each of these assessment years. Accordingly, the orders of the lower authorities are modified and the assessing officer is directed to disallow only Rs.30,000 for assessment year 2006-07 and Rs. 40,000 for assessment year 2007-08.
25. Now we move to dispose of the appeals of the department for the assessment years 2004-05 and 2005-06.
26. The only ground raised for the assessment year 2004-05 is with regard to addition on account of on-money said to be received on sale of land. The ld.DR submitted that the assessee disclosed the value of the land at Rs.17,516 per cent for sale of 34.61 cents of land. However, his brother Benny Kuriakose had disclosed the sale price at Rs.48,724 per cent. According to the ld.DR, the assessee and his brother sold the land by a single registered sale deed. Therefore, all the lands mentioned in the single document have to be treated as having the same price. According to the ld.DR, there is no material to show that the assessee's land was situated on the interior side. According to the ld.dR, when the property was sold by a single sale deed uniform rate should be adopted irrespective of the location of the property. Therefore, CIT(A) is not justified in deleting the addition of Rs.10,80,390.
27. On the contrary, the ld.representative for the assessee submitted that no doubt the land was sold by a single document. However, the lands are not adjacent to each other. The assessee's land was situated in the interior side. Therefore, it fetched only Rs.17,516 per cent. In fact, this fact was disclosed in the registered sale deed, the copy of which is filed at page 7 of the paper book. According to the ld.representative, the registered sale deed clearly discloses the sale price for sale of the assessee's land at Rs.17,516 per cent. Therefore, merely because a single registered sale deed was executed for sale of land of the assessee and his brother, the contents of the sale deed cannot be ignored by the taxing authorities. In the absence of any other material to show that the assessee has received on money, accounting to the ld.representative, the sale consideration disclosed in the registered sale deed has to be accepted. The ld.representative further submitted that the sale of land was disclosed in the regular return filed on 27-07-2004, i.e. before the date of search and the assessment proceedings were not pending. Therefore, the concluded assessment cannot be reopened by issuing notice u/s 153C of the Act in the absence of any further material on record. In this case, according to the ld.representative, admittedly, there is no material to show that the assessee has received on money. Therefore, the CIT(A) has rightly deleted the addition.
28. We have considered the rival submissions on either side and also perused the material available on record. It is not in dispute that the assessee has sold his land by a single registered sale deed alongwith his brother. However, the sale consideration of each land is mentioned in the sale deed, more particularly, on page No.13 of the sale deed, the copy of which is available in the paper book. When the assessees executed the registered sale deed disclosing the sale consideration, it may not be justified on the part of the taxing authorities to hold that the sale price of his brother's land was very high and therefore the same price has to be adopted in the case of the assessee. As rightly submitted by the ld.representative for the assessee, the sale consideration was clearly disclosed in the sale deed in respect of the assessee's land. Therefore, in the absence of any other material to show that the assessee has received on money over and above that disclosed in the sale deed, this Tribunal is of the considered opinion that there cannot be any presumption that the assessee has received any on money. Moreover, the sale of land was disclosed in the regular return of income filed on 27-04-2004 and the assessment proceedings were not pending. Therefore, in the absence of any further material found during the course of search operation, no proceedings could be initiated u/s 153C of the I.T. Act. Therefore, the CIT(A) has rightly deleted the addition. Accordingly, the same confirmed.
29. Now coming to appeal for assessment year 2005-06 in ITA No.346/Coch/2011, the only issue is with regard to telescoping of investment of Rs. 22,87,818 in the unaccounted profit of the firm. The ld.DR submitted that the taxability of the firm was considered after allowing all deductions in the hands of the firm as per the Income-tax Act. The unaccounted profit so computed may or may not have received by the partners. Therefore, according to the ld.DR, the benefit received by the partner over and above declared profit from the partnership business is taxable in the hands of the partners and, therefore, the benefit received by the partners cannot be telescoped. According to the ld.DR, the unexplained investment may or may not have nexus with surplus turnover. Therefore, the CIT(A) is not correct in telescoping the investment made to the extent of Rs.22,87,818 with profit of the firm. The ld.DR placed reliance on the judgment of the Punjab & Haryana High Court in Grover Fabrics (India) (P) Ltd vs CIT (2011) 332 ITR 312 (P&H).
30. On the contrary, the ld.representative for the assessee submitted that on the basis of the material found during the course of search operation substantial additions were made in the case of the partnership firm P.A. Kuriakose Jewellers. Therefore, accrual in the capital of the partners of the above firm has a consequence of the unaccounted income so determined in the hands of the firm which needs to be considered. According to the ld.representative, admittedly, the seized document SSA- 29, i.e. the balance-sheet discloses the investment made by the assessee in the partnership firm. The investment may be accretion to the income of the partnership firm which was given to the respective partners in their profit sharing ratio. Therefore, according to the ld.representative, the CIT(A) has rightly set off the addition made by the assessing officer with unaccounted profit of the firm. According to the ld.representative, there is a direct nexus between the unaccounted earning of the firm and consequential accretion of unaccounted capital contribution of the partners. Referring to the judgment of Punjab & Haryana High Court in Grover Fabrics (India) (P) Ltd (supra), the ld.DR found that the Punjab & Haryana High Court found that unexplained credit entries may or may not have nexus with trading results. The High Court itself found that it is a question of fact and in each case the addition on account of unexplained entries are justified in spite of addition made to the declared trading results has to be examined. In this case, there is a direct nexus with regard to the amount shown in the balance-sheet of the very same firm. Therefore, according to the ld.representative, the CIT(A) has rightly telescoped the addition made by the assessing officer.
31. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the document SSA- 29 discloses capital contribution by the assessee to the firm M/s P.A. Kuriakose Jewelleries. It is also an admitted fact that unaccounted income was determined in the hands of Ms P.A. Kuriakose Jewellers on the basis of material found during the course of search operation. Therefore, there is an obvious nexus between the investment shown in the balance-sheet found during the course of search operation and the unaccounted income determined in the hands of M/s P.A. Kuriakose Jewellers. This is what exactly held by Punjab & Haryana High Court in Grover Fabrics (India) (P) Ltd (supra). Therefore, this Tribunal is of the considered opinion that the CIT(A) has rightly telescoped the addition made by the assessing officer. This Tribunal do not find any infirmity in the order of the lower authority. Accordingly, the order of the CIT(A) is confirmed.
32. In the result, the assessee's appeals for assessment years 2001-02, 2003-04, 2004-05, 2005-06 are allowed and appeals for assessment years 2006-07 and 2007-08 are partly allowed whereas the appeals of the revenue are dismissed.
(Order pronounced in the open court on this 29.5.2013.)
2013-TIOL-970-HC-DEL-IT
IN THE HIGH COURT OF DELHI
ITA No.485/2013
COMMISSIONER OF INCOME TAX CENTRAL-II
Vs
AKME PROJECTS LTD
Sanjiv Khanna And Sanjeev Sachdeva, JJ
Dated: November 6, 2013
Appellate Rep by: Mr Sanjeev Sabharwal, Sr. Standing Counsel
Respondent Rep by: Mr Piyush Kaushik, Adv.
Respondent Rep by: Mr Piyush Kaushik, Adv.
Income tax - Survey - search - Whether an addition made on the basis of unsigned draft agreement relating to a land deal can be sustained when the AO has not made any further investigation in the case.
Revenue conducted search of the assessee's premises and found a draft agreement for sale of land. Relying upon the unsigned agreement the AO made additions. The CIT(A) and the Tribunal held that the draft agreement was not signed and implemented.
On appeal, the HC held that,
++ there were separate transactions with third parties and the transaction between the assessee and United Special Ispat Limited was only in respect of 5.431 acres of land and not for 75 acres of land subject matter of the draft agreement. We also notice that the Assessing Officer did not make addition of Rs. 3 crores, the amount mentioned in the "draft agreement to sell" but addition of Rs.1.15 crores was made. The draft agreement to sell could have been the starting point of investigation and further detailed verification, which has not been carried out. In the absence of the said investigation and evidence, it is not possible to hold that the orders passed by the first appellate authority and the tribunal are perverse. We also note that the stand of the assessee has been consistent. The appeal is accordingly dismissed.
Revenue's appeal dismissed
JUDGEMENT
The findings of the tribunal are factual. The Assessing Officer had relied upon an unsigned agreement, which was found during the course of survey and did not proceed further by examining the person, who had drafted the agreement or the witness. The first appellate authority and the tribunal, on the other hand, have relied upon several factors to hold that the draft agreement was not executed/signed and implemented. There were separate transactions with third parties and the transaction between the assessee and United Special Ispat Limited was only in respect of 5.431 acres of land and not for 75 acres of land subject matter of the draft agreement. We also notice that the Assessing Officer did not make addition of Rs. 3 crores, the amount mentioned in the "draft agreement to sell" but addition of Rs.1.15 crores was made. The draft agreement to sell could have been the starting point of investigation and further detailed verification, which has not been carried out. In the absence of the said investigation and evidence, it is not possible to hold that the orders passed by the first appellate authority and the tribunal are perverse. We also note that the stand of the respondent-assessee has been consistent. The appeal is accordingly dismissed.
2013-TIOL-960-HC-AHM-IT
IN THE HIGH COURT OF GUJARAT
AT AHMEDABAD
Tax Appeal No. 36 of 2008
THE COMMISSIONER OF INCOME TAX, VALSAD
Vs
AMOLI ORGANICS (P) LTD
M R Shah And R P Dholaria, JJ
Dated : November 11, 2013
Appellant Rep. by : Mr Sudhir M Mehta, Adv
Respondent Rep. by : Mr S N Soparkar, Sr Adv, Mr B S Soparkar, Sr, Adv
Respondent Rep. by : Mr S N Soparkar, Sr Adv, Mr B S Soparkar, Sr, Adv
Income Tax - Section 43B - Provident Fund - ESIC - grace period - employers' contribution - Whether disallowance in respect of amount paid for Provident Fund and ESIC can be warranted in case, dues were paid after the due date mentioned in the respective statutes.
Assessee concern had deposited their employee's contribution with the PF Authority within the grace period permissible under the relevant PF Act with respect to substantial amount and, therefore, it can be said that actually the amount had been deposited with the concerned PF Authority within the stipulated time under the relevant PF Act. However, in alternative, it was submitted that in view of second amendment in section 43B brought into force by the Finance Act, 2003 which was made applicable from 01.04.2004, as the employer's contribution was deposited with the Provident Fund Authority on behalf of the assessee before the due date of filing the return, they were entitled to deduction u/s 43B. The AO did not accept the above and held that as the amendment in section 43B which was brought into effect by Finance Act, 2003 was made applicable with effect from 01.04.2004, assessee shall not be entitled to benefit of the same and the said provisions cannot be made applicable retrospectively. Consequently, AO did not allowed the deduction and added the amount of assessee – employers' contribution into the income of the assessee. On appeal, CIT(A) had deleted the addition made by AO and held that the assessee shall be entitled to claim benefit u/s 43B. On further appeal, Tribunal had partly allowed the said appeal. However, it was held that assessee was entitled to the exemption as the amount was paid during grace period permissible / available under the PF Act and, therefore, the asseessee shall be entitled to exemption / deduction u/s 43 to the extent payment was made within the grace period.
Held that,
++ at the outset it is required to be noted that as such, the assessee shall be entitled to the benefits of the amendment u/s 43B amended by the Financial (sic) Act, 2003. Even with respect to the amount of provident fund deposited with the appropriate authority prior to date of filing of the return, in view of the decision of the SC in the case of CIT Vs. Alom Extrusions Ltd, (2009-TIOL-125-SC-IT). However, as the assessee has not preferred any appeal, we are not concerned with the amount which the assessee deposited with the provident fund authority prior to filing of the return and we are concerned with whether the Tribunal is justified in holding that as the assessee has deposited the amount of provident fund within the extended grace period, the assessee would be entitled to deduction u/s 43. Considering the fact that Tribunal has granted relief to the assessee with respect to the amount of provident fund which the assessee deposited with the department within extended grace period under the PF Act, it cannot be said that the Tribunal has committed any error in granting the reliefs, which calls for interference by this Court. Under particular Act or law, in the present case PF Act, if the assessee was entitled to make payment within the grace period and if within that grace period, its employer contributions have been deposited by the assessee, it cannot be said that the assessee has not deposited the amount with the department within the due date as prescribed under the PF Act. Under such circumstances, as such no error and/or illegality has been committed by the Tribunal in granting deduction to the assessee with respect to the amount deposited with the provident fund department within the extended period / grace period. Under the circumstances, no other issues are required to be considered. No question of law muchless any substantial question of law arises in the present Appeal. In view of the above, the present appeal deserves to be dismissed and accordingly, the same is dismissed. There shall be no order as to costs. Notice is discharged.
Revenue's appeal dismissed
Case followed:
CIT Vs. Alom Extrusions Ltd, (2009-TIOL-125-SC-IT)
JUDGEMENT
Per : M R Shah, J :
[1] Feeling aggrieved and dissatisfied with the order dated 12.01.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad (hereinafter be referred to as "the ITAT") in ITA No.2230/Ahd/2006 for AY 2003-2004, the revenue has preferred the present appeal with the following substantial question of law.
Whether on the facts and circumstances of the case and in law, was the Appellate Tribunal is right in deleting the disallowance of belated payment of PF and ESIC, even though the specific provision in the form of Proviso to Section 43B of the I.T. Act existed in this regard?
[2] Heard Mr.Sudhir Mehta, learned counsel appearing on behalf of the appellant and Mr.S. N. Soparkar, learned senior counsel appearing for the assessee.
[3] At the outset, it is required to be noted that the dispute is whether the amendment brought into force in the FY 2004 in section 43B of the Income Tax Act (hereinafter be referred to as "the Act"), which came into force with effect from 01.04.2004, would be made applicable retrospectively w.e.f. 01.04.1988 or not.
[4] It is required to be noted at this stage that as such it was the case on behalf of assessee that as such their employee's contribution was in fact deposited with the Provident Fund Authority within the grace period permissible under the relevant Provident Fund Act with respect to substantial amount and, therefore, it can be said that the actually the amount has been deposited with the concerned Provident Fund Authority within the stipulated time under the relevant Provident Fund Act. However, in the alternatively, it was submitted that in view of second amendment in section 43B of the Act brought into force by the Financial Act, 2003 which was made applicable from 01.04.2004, as the employer's contribution was deposited with the Provident Fund Authority on behalf of the assessee before the due date of filing the return, they were entitled to deduction under section 43B of the Act. The Assessing Officer did not accept the above and held that as the amendment in section 43B of the Act which is brought into effect by Financial Act, 2003 is made applicable with effect from 01.04.2004, assessee shall not be entitled to benefit of the same and the said provisions cannot be made applicable retrospectively. Consequently, the Assessing Officer did not allow the deduction and added the amount of assessee – employers' contribution into the income of the assessee in particular assessment year. Being aggrieved by the said order, the assessee preferred appeal before the CIT(A) and the learned CIT(A) deleted the addition made by the Assessing Officer and held that the assessee shall be entitled to claim benefit under section 43B of the Act.
[5] Feeling aggrieved and dissatisfied with the order passed by the CIT(A), the revenue preferred the appeal being ITA No.2230 of 2006 before the ITA and by impugned order, learned ITAT has partly allowed the said appeal. However, the learned ITAT has held that the assessee was entitled to the exemption as the amount was paid during grace period permissible / available under the Provident Fund Act and, therefore, the asseessee shall be entitled to exemption / deduction under section 43 to the extent payment was made within the grace period.
[6] Being aggrieved and dissatisfied with the impugned judgment and order passed by the ITAT, the revenue has preferred the present appeal.
[7] At the outset it is required to be noted that as such, the assessee shall be entitled to the benefits of the amendment under section 43B amended by the Financial Act, 2003. Even with respect to the amount of provident fund deposited with the appropriate authority prior to date of filing of the return, in view of the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Alom Extrusions Ltd, reported in [2009] 319 ITR 306 (SC)= (2009-TIOL-125-SC-IT). However, as the assessee has not preferred any appeal, we are not concerned with the amount which the assessee deposited with the provident fund authority prior to filing of the return and we are concerned with whether the learned Tribunal is justified in holding that as the assessee has deposited the amount of provident fund within the extended grace period, the assessee would be entitled to deduction under section 43 or not?
[8] Considering the fact that the learned Tribunal has granted relief to the assessee with respect to the amount of provident fund which the assessee deposited with the department within extended grace period under the Provident Fund Act, it cannot be said that the learned Tribunal has committed any error in granting the reliefs, which calls for interference by this Court. Under particular Act or law, in the present case Provident Fund Act, if the assessee was entitled to make payment within the grace period and if within that grace period, its employer contributions have been deposited by the assessee, it cannot be said that the assessee has not deposited the amount with the department within the due date as prescribed under the Provident Fund Act. Under such circumstances, as such no error and/or illegality has been committed by the learned Tribunal in granting deduction to the assessee with respect to the amount deposited with the provident fund department within the extended period / grace period. Under the circumstances, no other issues are required to be considered. No question of law muchless any substantial question of law arises in the present Appeal.
[9] In view of the above, the present appeal deserves to be dismissed and accordingly, the same is dismissed. There shall be no order as to costs. Notice is discharged.
2013-TIOL-961-HC-AHM-IT
IN THE HIGH COURT OF GUJARAT
AT AHMEDABAD
Tax Appeal No. 427 of 2013
RAJENDRA J PATEL
Vs
ASSTT COMMISSIONER OF INCOME TAX (OSD)
M R Shah And R P Dholaria, JJ
Dated : November 11, 2013
Appellant Rep. by : Mr S N Divatla, Adv
Respondent Rep. by : Mrs Mauna M Bhatt, Adv
Respondent Rep. by : Mrs Mauna M Bhatt, Adv
Income Tax - Sections 143(3), 271(1)(c) - Whether penalty for concealment can be initiated merely on the basis that a certificate or affidavit from the Tax Consultant was not placed on record - Whether the same can be considered as filing of inaccurate particulars of income.
Assessee, an individual, has filed return of income for the AY 2008-09. During assessment, disallowance of set off of carry forward business loss of Rs.11,50,459/- was made and the penalty proceedings were also initiated. Thereafter, penalty proceedings u/s 271(1)(c) came to be initiated. It was contended by the assessee that due to mistake by the Tax Consultant of assessee, the claim of set off of carry forward business loss was made against the income from other source during the year under consideration, which was not admissible. It was submitted that mistake was due to oversight of the Tax Consultant and subsequently a revised working of total income was also furnished. Therefore, it was requested not to levy penalty u/s 271(1)(c). The AO did not accept the above submission in absence of any supporting Affidavit of the Tax Consultant. The AO imposed penalty of Rs.3,91,041/- on account of filing of inaccurate particular of income. On appeal, CIT(A) dismissed the said appeal. On further appeal, Tribunal had dismissed the said appeal confirming penalty u/s 271(1)(c) mainly on the ground that the assessee had not produced any supporting evidence / document / Affidavit of the Tax Consultant, to substantiate his case that there was bonafide mistake on the part of the Tax Consultant.
Before High Court, assessee had placed on record Affidavit of a practicing CA submitting that it was his bonafide mistake of claiming the set off of carry forward business loss made against the income from other source during the year under consideration. In view of the aforesaid, it was requested to allow the present appeal and quash and set aside the order of penalty passed u/s 271(1)(c). On the other hand, the Revenue's counsel had submitted that the Affidavit of CA, which was relied upon by the assessee, was not placed before the ITAT for its consideration and therefore, it was submitted that the same may not be considered at this stage. In the alternative it was submitted that if the aforesaid Affidavit was to be considered, in that case, the matter may be remitted to ITAT to consider the appeal afresh in accordance with law and on merits.
Held that,
++ it appears that from the very beginning it was the case on behalf of the assessee that due to bonafide mistake of the Tax Consultant of the assessee, the claim of set off of carry forward business loss was made against the income from other source during the year under consideration, which was not admissible and therefore, immediately when it was brought to the notice of the assessee, a revised working of the total income was furnished. However, in absence of any supporting Affidavit of the Chartered Accountant that it was his bonafide mistake, both the CIT(A) as well as ITAT have not considered the aforesaid submission. Now, the assessee has placed on record Affidavit of the Chartered Accountant submitting that it was his bonafide mistake. It is true that the Affidavit of the Chartered Accountant, which is now relied upon, was never before the ITAT. Under the circumstances, counsel appearing on behalf of the revenue is justified in making alternative submission that in that case the matter may be remitted to the ITAT, to which counsel appearing on behalf of the appellant has no objection;
++ in view of the above, present Tax Appeal succeeds. The impugned Judgement and Order dtd. 4/1/2013 passed by the Tribunal in ITA No.2308/Ahd/2012 is hereby quashed and set aside and the matter is remitted to the ITAT to consider the appeal afresh in accordance with law and on merits, after permitting the appellant to place on record affidavit of Mr.Vinod H. Desai, Chartered Accountant, which is placed on record in the present Tax Appeal and thereafter to pass appropriate order in the appeal afresh in accordance with law and on merits. However, it is made clear that this Court has not expressed anything on merits in favour of either of the parties and it is ultimately for the ITAT to pass appropriate order afresh in accordance with law and on merits. Present Tax Appeal is allowed to the aforesaid extent.
Case remanded
JUDGEMENT
Per : M R Shah, J :
1.00. Being aggrieved by and dissatisfied with the impugned Judgement and Order dtd. 4/1/2013 passed by the Income Tax Appellate Tribunal (hereinafter referred to as "the ITAT) in ITA No.2308/Ahd/2012 with respect to AY 2008-09, the assessee has preferred the present Tax Appeal with the following proposed question of law :
(A) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in confirming the penalty of Rs.3,91,041/- levied u/s. 271(1)(c) of the Income Tax Act?(B) Whether on the facts and in the circumstances of the case, Income Tax Appellate Tribunal could have reached to the conclusion that the appellant had furnished inaccurate particulars of income merely because any certificate or affidavit from the Tax Consultant was not placed on record?
2.00. That the assessee filed return of income for the AY 2008-09. Subsequently, assessment under section 143(3) of the Income Tax Act was made, thereby disallowance of set off of carry forward business loss of Rs.11,50,459/- was made by the AO and the penalty proceedings were also initiated. That thereafter, penalty proceedings under section 271(1)(c) of the Income Tax Act came to be initiated. It was the case on behalf of the assessee that due to mistake by the Tax Consultant of the assessee, the claim of set off of carry forward business loss was made against the income from other source during the year under consideration, which was not admissible. It was submitted that mistake was due to oversight of the Tax Consultant and subsequently a revised working of total income was also furnished. Therefore, it was requested not to levy penalty under section 271(1)(c) of the Income Tax Act. The AO did not accept the above submission in absence of any supporting Affidavit of the Tax Consultant. The AO imposed penalty of Rs.3,91,041/- on account of filing of inaccurate particular of income. The assessee, being aggrieved by and dissatisfied with the same, preferred an appeal before the CIT(A) and the CIT(A) dismissed the said appeal preferred by the assessee. Being aggrieved by and dissatisfied with the order passed by the CIT(A) in confirming the penalty under section 271(1)(c) of the Income Tax Act, the assessee preferred appeal before the ITAT and by the impugned Judgement and Order the learned tribunal has dismissed the said appeal confirming penalty under section 271(1)(c) of the Income Tax Act mainly on the ground that the assessee has not produced any supporting evidence / document / Affidavit of the Tax Consultant, to substantiate his case that there was bonafide mistake on the part of the Tax Consultant. Being aggrieved by and dissatisfied with the Judgement and Order passed by the ITAT, the assessee has preferred the present Tax Appeal with the aforesaid proposed substantial question of law.
3.00. Heard Mr.Divatia, learned counsel appearing on behalf of the appellant and Mr.Manish Bhatt, learned counsel appearing on behalf of the respondent – revenue.
4.00. Before us, the assessee has placed on record Affidavit of one Mr.Vinod H. Desai, practicing Chartered Accountant submitting that it was his bonafide mistake of claiming the set off of carry forward business loss made against the income from other source during the year under consideration. In view of the aforesaid, it is requested to allow the present appeal and quash and set aside the order of penalty passed under section 271(1)(c) of the Income Tax Act.
5.00. Mr.Manish Bhatt, learned counsel appearing on behalf of the respondent – revenue has submitted that the Affidavit of the Chartered Accountant, which is now relied upon by the assessee, was not placed before the ITAT for its consideration and therefore, it is submitted that the same may not be considered at this stage. In the alternative it is submitted that if the aforesaid Affidavit is to be considered, in that case, the matter may be remitted to the ITAT to consider the appeal afresh in accordance with law and on merits.
6.00. Mr.Divatia, learned counsel appearing on behalf of the appellant has stated at the bar that he has no objection if the matter is remitted to the ITAT and granting permission to the appellant here to place on record of the ITAT Affidavit of the Chartered Accountant, which is placed on record before this Court.
7.00. Having heard Mr.Divatia, learned counsel appearing on behalf of the appellant and Mr.Manish Bhatt, learned counsel appearing on behalf of the revenue and considering the impugned orders passed by the CIT(A) as well as learned ITAT, it appears that from the very beginning it was the case on behalf of the assessee that due to bonafide mistake of the Tax Consultant of the assessee, the claim of set off of carry forward business loss was made against the income from other source during the year under consideration, which was not admissible and therefore, immediately when it was brought to the notice of the assessee, a revised working of the total income was furnished. However, in absence of any supporting Affidavit of the Chartered Accountant that it was his bonafide mistake, both the learned CIT(A) as well as ITAT have not considered the aforesaid submission.
8.00. Now, the assessee has placed on record Affidavit of the Chartered Accountant submitting that it was his bonafide mistake. It is true that the Affidavit of the Chartered Accountant, which is now relied upon, was never before the learned ITAT. Under the circumstances, Mr.Bhatt, learned counsel appearing on behalf of the revenue is justified in making alternative submission that in that case the matter may be remitted to the ITAT, to which Mr.Divatia, learned counsel appearing on behalf of the appellant has no objection.
9.00. In view of the above, present Tax Appeal succeeds. The impugned Judgement and Order dtd. 4/1/2013 passed by the Income Tax Appellate Tribunal in ITA No.2308/Ahd/2012 is hereby quashed and set aside and the matter is remitted to the learned ITAT to consider the appeal afresh in accordance with law and on merits, after permitting the appellant to place on record affidavit of Mr.Vinod H. Desai, Chartered Accountant, which is placed on record in the present Tax Appeal and thereafter to pass appropriate order in the appeal afresh in accordance with law and on merits. However, it is made clear that this Court has not expressed anything on merits in favour of either of the parties and it is ultimately for the ITAT to pass appropriate order afresh in accordance with law and on merits. Present Tax Appeal is allowed to the aforesaid extent.
2013-TIOL-1025-ITAT-COCHIN
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH, COCHIN
BENCH, COCHIN
ITA No.423/Coch/2010 - A.Y. 2001-02
ITA No.424/Coch/2010 - A.Y. 2003-04
ITA No.370/Coch/2011 - A.Y. 2004-05
ITA No.371/Coch/2011 - A.Y. 2005-06
ITA No.425/Coch/2010 - A.Y. 2006-07
ITA No.426/Coch/2010 - A.Y. 2007-08
ITA No.424/Coch/2010 - A.Y. 2003-04
ITA No.370/Coch/2011 - A.Y. 2004-05
ITA No.371/Coch/2011 - A.Y. 2005-06
ITA No.425/Coch/2010 - A.Y. 2006-07
ITA No.426/Coch/2010 - A.Y. 2007-08
MR PROMY KURIAKOSE
PADAYATTIL HOUSE
KIDANGOOR PO VENGOOR ANGAMALY
PAN NO:ADHPK7546F
PADAYATTIL HOUSE
KIDANGOOR PO VENGOOR ANGAMALY
PAN NO:ADHPK7546F
Vs
ASSTT COMMISSIONER OF INCOME TAX
CENTRAL, CIRCLE-1, ERNAKULAM
CENTRAL, CIRCLE-1, ERNAKULAM
ITA Nos.345 & 346/coch/2011
Assessment Years: 2004-05 & 2005-06
Assessment Years: 2004-05 & 2005-06
DEPUTY COMMISSIONER OF INCOME TAX
CENTRAL CIRCLE-1, ERNAKULAM
CENTRAL CIRCLE-1, ERNAKULAM
Vs
MR PROMY KURIAKOSE
VENGOOR ANGAMALY
VENGOOR ANGAMALY
N R S Ganesan, JM and B R Baskaran, AM
Dated: 29.5.2013
Appellant Rep by: Shri K P Paulose
Respondent Rep by: Smt Susan George Varghese
Respondent Rep by: Smt Susan George Varghese
Income tax – Sections 132, 143(2), 153C – Whether when no document is found against the assessee to whom notice is issued u/s 153C in the course of search proceedings, the initiation of proceedings u/s 153C is invalid – Whether when the assessee executed the registered sale deed disclosing the sale consideration, it is justified on part of the Revenue to hold that the sale price of his brother's land was very high and therefore the same price has to be adopted in the case of assessee.
A) A search took place on the group of the assessee. Large scale suppression of sale was found. Notice u/s 153C was issued to assessee. Assessee contended that no material pertaining to it was found from the person searched u/s 132. Assessee contended that except a reference about loan and credit in the name of family members, no other material was found in the course of search proceedings. Therefore, initiation of proceedings u/s 153C was not justified. Assessee further submitted that no addition was made with regard to loan or credit given to the partnership firm. The respective family members had already filed returns of income disclosing the loan before the date of search. Therefore, it cannot be treated as undisclosed income u/s 153C of the Act. Since no document was found against the present assessee in the course of search proceedings, the initiation of proceedings u/s 153C was invalid. The document seized must be of such characters so as to persuade the assessing officer to come to a conclusion that the income disclosed therein belongs to the person other than searched.
Further the assessee raised the point that the time limit for issue of notice u/s 143(2) came to an end before the date of search. Therefore, the assessment proceedings were terminated or have come to an end or completed by operation of law on expiry of time limit for issue of notice u/s 143(2) of the Act. Therefore, the completed / concluded assessments cannot be reopened u/s 153C of the Act. Since the assessment proceedings were not admittedly pending, it cannot be reopened.
Revenue contended that legality of the search proceedings cannot be challenged before this Tribunal. The warrant of search was not issued in the name of the assessee. The assessee cannot challenge the validity of the search proceedings initiated in the premises of other person. On the basis of the material found during the course of search operation, proceedings were initiated u/s 153C of the Act against the present assessee. Once paper relating to the present assessee in the form of balance-sheet and registered sale deed was found irrespective of whether income could be deduced from it, the assessing officer has no other alternative but to take action u/s 153C.
B) AO made addition on account of on money said to be received on sale of land. Revenue contended that the assessee disclosed the value of the land at Rs. 17516 per cent for sale of 34.61 cent. However, his brother had disclosed the sale price at Rs. 48,724/- per cent. Both sold the land by a single registered sale deed. Therefore, all the lands in the single document have to be treated as having the same price. Therefore, it was stated by revenue that CIT (A) was not justified in deleting the addition.
Assessee contended that no doubt the land was sold by a single document, the lands were not adjacent to each other. The assessee's land was situated in the interior side. Therefore, it fetched only Rs. 17516 per cent. Merely because a single registered sale deed was executed for sale of land of the assessee and his brother, the contents of the sale deed cannot be ignored by the taxing authorities. In the absence of any other material to show that the assessee has received on money, the sale consideration disclosed in the registered sale deed has to be accepted.
After hearing both the parties, the ITAT held that,
A) ++ wherever the proceedings was initiated u/s 153C, there should be assessment year specific documents seized in the course of the search proceedings available on record. In the present case, there are two material documents, one is registered sale deed which relates to assessment year 2001-02 and the other the balance-sheet as on 31-03-2005 disclosing the investment of Rs.41,71,199 in the partnership firm. Apart from these two documents, no material is available on record. For the assessment year 2001-02, AO made addition disbelieving the claim of the assessee towards agricultural income and another addition towards opening balance. No addition was made with regard to the sale deed found in the course of search operation. Therefore, the proceedings u/s 153C was not initiated on the basis fo the search material. There is no reference in the assessment order about the material found during the course of search operation. However for the assessment year 2005-06, an addition was made on the basis of the seized material. Assessee explained before the AO that the computer print out taken during the course of search operation was erroneous. However, the assessing officer rejected the explanation. Therefore, for the assessment year 2005-06 there was search material which discloses the undisclosed investment for the assessment year 2005-06;
++ the assessing officer has to satisfy himself that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. Section 153C makes it very clear that the proceedings under that section has to be initiated only in case the material found during the course of search operation relates to the person other than searched person. Therefore, for initiation of the proceedings, the material found during the course of search operation is relevant for initiation of proceedings u/s 153C of the Act;
++ the report of the relevant assessment year has to be taken into consideration and not the anterior or subsequent period. In the case of the assessee, the inspector visited the field in December, 2008. The assessment years under consideration are 2006-07 and 2007-08. However, except the land holding, no other material is available on record to suggest that the assessee was cultivating the land. It is also a fact that the assessee is filing return regularly disclosing the agricultural income for earlier assessment years and department allowed the returns of income to attain finality. Therefore, rejection of the entire claim of the assessee towards agricultural income may not be justified. Estimation of agricultural income at Rs.40,000 would meet the ends of justice for each of these assessment years;
B) ++ when the assesses executed the registered sale deed disclosing the sale consideration, it may not be justified on the part of the taxing authorities to hold that the sale price of his brother's land was very high and therefore the same price has to be adopted in the case of assessee. In the absence of any other material to show that the assessee has received on money over and above that disclosed in the sale deed, there cannot be any presumption that the assessee has received any on money. Therefore, in the absence of any further material found during the course of search operation, no proceedings could be initiated u/s 153C of the I.T. Act and CIT (A) has rightly deleted the addition.
A) A search took place on the group of the assessee. Large scale suppression of sale was found. Notice u/s 153C was issued to assessee. Assessee contended that no material pertaining to it was found from the person searched u/s 132. Assessee contended that except a reference about loan and credit in the name of family members, no other material was found in the course of search proceedings. Therefore, initiation of proceedings u/s 153C was not justified. Assessee further submitted that no addition was made with regard to loan or credit given to the partnership firm. The respective family members had already filed returns of income disclosing the loan before the date of search. Therefore, it cannot be treated as undisclosed income u/s 153C of the Act. Since no document was found against the present assessee in the course of search proceedings, the initiation of proceedings u/s 153C was invalid. The document seized must be of such characters so as to persuade the assessing officer to come to a conclusion that the income disclosed therein belongs to the person other than searched.
Further the assessee raised the point that the time limit for issue of notice u/s 143(2) came to an end before the date of search. Therefore, the assessment proceedings were terminated or have come to an end or completed by operation of law on expiry of time limit for issue of notice u/s 143(2) of the Act. Therefore, the completed / concluded assessments cannot be reopened u/s 153C of the Act. Since the assessment proceedings were not admittedly pending, it cannot be reopened.
Revenue contended that legality of the search proceedings cannot be challenged before this Tribunal. The warrant of search was not issued in the name of the assessee. The assessee cannot challenge the validity of the search proceedings initiated in the premises of other person. On the basis of the material found during the course of search operation, proceedings were initiated u/s 153C of the Act against the present assessee. Once paper relating to the present assessee in the form of balance-sheet and registered sale deed was found irrespective of whether income could be deduced from it, the assessing officer has no other alternative but to take action u/s 153C.
B) AO made addition on account of on money said to be received on sale of land. Revenue contended that the assessee disclosed the value of the land at Rs. 17516 per cent for sale of 34.61 cent. However, his brother had disclosed the sale price at Rs. 48,724/- per cent. Both sold the land by a single registered sale deed. Therefore, all the lands in the single document have to be treated as having the same price. Therefore, it was stated by revenue that CIT (A) was not justified in deleting the addition.
Assessee contended that no doubt the land was sold by a single document, the lands were not adjacent to each other. The assessee's land was situated in the interior side. Therefore, it fetched only Rs. 17516 per cent. Merely because a single registered sale deed was executed for sale of land of the assessee and his brother, the contents of the sale deed cannot be ignored by the taxing authorities. In the absence of any other material to show that the assessee has received on money, the sale consideration disclosed in the registered sale deed has to be accepted.
After hearing both the parties, the ITAT held that,
A) ++ wherever the proceedings was initiated u/s 153C, there should be assessment year specific documents seized in the course of the search proceedings available on record. In the present case, there are two material documents, one is registered sale deed which relates to assessment year 2001-02 and the other the balance-sheet as on 31-03-2005 disclosing the investment of Rs.41,71,199 in the partnership firm. Apart from these two documents, no material is available on record. For the assessment year 2001-02, AO made addition disbelieving the claim of the assessee towards agricultural income and another addition towards opening balance. No addition was made with regard to the sale deed found in the course of search operation. Therefore, the proceedings u/s 153C was not initiated on the basis fo the search material. There is no reference in the assessment order about the material found during the course of search operation. However for the assessment year 2005-06, an addition was made on the basis of the seized material. Assessee explained before the AO that the computer print out taken during the course of search operation was erroneous. However, the assessing officer rejected the explanation. Therefore, for the assessment year 2005-06 there was search material which discloses the undisclosed investment for the assessment year 2005-06;
++ the assessing officer has to satisfy himself that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. Section 153C makes it very clear that the proceedings under that section has to be initiated only in case the material found during the course of search operation relates to the person other than searched person. Therefore, for initiation of the proceedings, the material found during the course of search operation is relevant for initiation of proceedings u/s 153C of the Act;
++ the report of the relevant assessment year has to be taken into consideration and not the anterior or subsequent period. In the case of the assessee, the inspector visited the field in December, 2008. The assessment years under consideration are 2006-07 and 2007-08. However, except the land holding, no other material is available on record to suggest that the assessee was cultivating the land. It is also a fact that the assessee is filing return regularly disclosing the agricultural income for earlier assessment years and department allowed the returns of income to attain finality. Therefore, rejection of the entire claim of the assessee towards agricultural income may not be justified. Estimation of agricultural income at Rs.40,000 would meet the ends of justice for each of these assessment years;
B) ++ when the assesses executed the registered sale deed disclosing the sale consideration, it may not be justified on the part of the taxing authorities to hold that the sale price of his brother's land was very high and therefore the same price has to be adopted in the case of assessee. In the absence of any other material to show that the assessee has received on money over and above that disclosed in the sale deed, there cannot be any presumption that the assessee has received any on money. Therefore, in the absence of any further material found during the course of search operation, no proceedings could be initiated u/s 153C of the I.T. Act and CIT (A) has rightly deleted the addition.
Assessee's appeal allowed
ORDER
Per: N R S Ganesan:
The assessee has filed the appeals for the assessment years 2001-02, 2003-04, 2004-05, 2005-06, 2006-07 & 2007-08. The revenue has filed the appeals for the assessment years 2004-05 and 2005-06. Since common issues arise for consideration in all the appeals, they were heard together and are disposed of by this common order.
2. Let us first take the assessee's appeals. Shri K.P. Paulose, the ld.representative for the assessee submitted that there was a search u/s 132 of the Act on 13-02-2007 in the case of P.A. Kuriakose and Paulson P Varkey group. According to the ld.representative, P.A. Kuriakose and Paulson P Varkey group is mainly engaged in hotel (bar) and jewellery business. Shri Paulson P Varkey has a proprietory crushing unit at Manjapra in the name and style "Popular Industries". The said Paulson P Varkey has also interest in Royal Cartoons Pvt Ltd, Angamali and Swagat Enterprises, Angamali. According to the ld.representative, in the course of search in M/s Matha Enterprises, a group concern of Shri P.A. Kuriakose and P.A. Kuriakose Jewellers large scale suppression of sale was found. M/s P.A. Kuriakose Jewellers and Matha Enterprises appear to have introduced loans and credits in the name of family members. The returns were also filed by respective family members disclosing the loan advanced to Matha Enterprises and P.A. Kuriakose Jewellers before the date of search. According to the ld.representative, the present assessee, Shri Promy Kuriakose is one of the family members of Shri P.A. Kuriakose and Shri Paulson P Varkey. The ld.representative for the assessee further submitted that in the course of search proceedings no material pertaining to the present assessee, Shri Promy Kuriakose was obtained.
3. Referring to section 153C of the Act, the ld.representative submitted that proceedings u/s 153C could be initiated in case the assessing officer satisfied that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. In this case, admittedly, the searched person is group concern of Shri P.A. Kuriakose and Paulson P Varkey. Shri Promy Kuriakose was not subjected to search u/s 132 of the Act. Therefore, the assessing officer has to initiate proceedings u/s 153C in case the material found during the course of search operation in the case of Matha Enterprises or P.A. Kuriakose Jewellers relates to the present assessee. Admittedly, there is no such material found against the present assessee, Shri Promy Kuriakose. Referring to the assessment order, the ld.representative submitted that except a reference about loan and credit in the name of family members, no other material was found in the course of search proceedings. Therefore, according to the ld.representative, initiation of proceedings u/s 153C is not justified.
4. The ld.representative further submitted that no addition was made with regard to loan or credit given to the partnership firm. In fact, according to the ld.representative, the respective family members have already filed returns of income disclosing the loan before the date of search. Therefore, it cannot be treated as undisclosed income u/s 153C of the Act. The ld.representative placed his reliance on the decision of the Bangalore Bench of this Tribunal in P Srinivas Naik vs ACIT 114 TTJ 856 (Bang) = (2008-TIOL-28-ITAT-BANG), copy of which is available at page 28 of the paper book and submitted that in the absence of any material found during the course of search operation, proceedings u/s 153C cannot be initiated. Since, admittedly, no document was found against the present assessee in the course of search proceedings, the initiation of proceedings u/s 153C is invalid. The ld.representative further submitted that mere act of seizure of some document does not by itself lay foundation for reasonable belief that there is some undisclosed income. According to the ld.representative, the document seized must be of such characters so as to persuade the assessing officer to come to a conclusion that the income disclosed therein belongs to the person other than searched.
5. The ld.representative has also placed reliance on the decision of the Pune Bench of this Tribunal in Sinhgad Technical Education Society vs A.C.I.T. (2011) 57 DTR 241 (Pune) and submitted that for initiating proceedings u/s 153C, the document seized must be speaking one and also prima facie incriminating one. According to the ld.representative, in case, the assessing officer was satisfied that the document found during the course of search operation belongs to the person other than the searched person which discloses generation of any income prima facie, there may be justification for initiating proceedings u/s 153C of the Act. Therefore, according to the ld.representative, only such documents which are incriminating in nature could be a basis for initiating proceedings u/s 153C of the Act. Since no incriminating material was found for the assessment years 2001-02 to 2007-08, the proceedings initiated u/s 153C are not valid. The ld.representative has also placed reliance on the decision of the Cochin Bench of this Tribunal in Mrs Kunjamma Varkey vs ACIT in ITA Nos 624 to 629/Coch/2010 order dated 26-08-2011, copy of which is available at page 31 of the paper book. The ld.representative has also placed reliance on the decision of this bench of this Tribunal in the case of Smt. Beena Thomas vs Dy.CIT I.T.(SS)A. No.43/Coch/97 dated 23-09-2009. The ld.representative further submitted that the return of income was filed for the assessment years 2001-02, 2003-04, 2004-05 and 2005-06 in the regular course before the date of search. The time limit for issue of notice u/s 143(2) came to an end before the date of search. Therefore, the assessment proceedings were terminated or have come to an end or completed by operation of law on expiry of time limit for issue of notice u/s 143(2) of the Act. Therefore, the completed / concluded assessments cannot be reopened u/s 153C of the Act. According to the ld.AR, only the pending proceedings would abate. Since the assessment proceedings were not admittedly pending, it cannot be reopened.
6. On the contrary, Smt. Susan George Varghese, the ld.DR submitted that the legality of the search proceedings cannot be challenged before this Tribunal. The ld.representative has placed reliance on the judgment of the Chattisgarh High Court in Trilok Singh Dhillon vs CIT (2011) 332 ITR 185 (Chat). The ld.DR further submitted that the warrant of search was not issued in the name of the assessee. In fact it was issued in the name of Shri P.A. Kuriakose. Therefore, according to the ld.representative, the assessee cannot challenge the validity of the search proceedings initiated in the premises of other person. During the course of search operation in the case of Shri P.A. Kuriakose, certain papers relating to the assessee were found and seized. On the basis of the material found during the course of search operation, proceedings were initiated u/s 153C of the Act against the present assessee. According to the ld.DR, document marked as "SSA- 18" is the original document of registered sale deed in the name of the present assessee which was found among bunch of other documents in the name of Shri P.A. Kuriakose. Loose papers in which a balance-sheet as on 31-03-2005 showing the capital of Shri Promy Kuriakose at Rs.41,71,199 was also found. According to the ld.DR, once paper relating to the present assessee in the form of balance-sheet and registered sale deed was found irrespective of whether income could be deduced from it, the assessing officer has no other alternative but to take action u/s 153C of the Act for six assessment years preceding the assessment year in which the search took place. According to the ld.DR, there is no question of picking and choosing the assessment year. The ld.DR further submitted that it is mandatory for the assessing officer to initiate proceedings u/s 153C for all the six assessment years. The ld.DR placed her reliance on the judgement of the Chattisgarh High Court in Trilok Singh Dhollon (supra).
7. We have considered the rival submissions on either side and also perused the material available on record. The assessee is challenging the proceedings initiated u/s 153C of the Act on the ground that no document was found and seized relating to him. The assessee is not challenging the validity of the search. The specific contention of the assessee is that in the absence of any material relating to other persons found during the course of search operation, the proceedings cannot be initiated against persons other than the searched person u/s 153C of the Act. Therefore, this Tribunal is of the considered opinion that the judgment of the Chhattisgarh High Court in the case of Trilok Singh Dhillon (supra) may not be applicable to the facts of the case.
8. Apart from that the Special Bench of this Tribunal at Bangalore in the case of Ramaiah & others considered this issue and found that the Tribunal cannot go into the validity of the search. However, the Karnataka High Court reversed the decision of the Special Bench of this Tribunal and found that the Tribunal can go into the validity of the search proceedings. As observed earlier in this case, the validity of the search proceedings is not subject matter before this Tribunal. Only the initiation of the proceedings u/s 153C is challenged on the ground that no search material is available on record. This Tribunal is of the considered opinion that initiation of proceedings u/s 153C could be gone into in the appellate proceedings. The contention of the ld.representative for the assessee is that no material was found against the present assessee in the course of search proceedings. However, the ld.DR submitted that a registered sale deed in the name of the present assessee was found during the course of search operation and a balance-sheet was also found which shows the capital investment of the assessee at Rs.41,71,199 in the partnership firm. Therefore, it is obvious that sale deed dated 27-10-2000 relates to assessment year 2001-02 and the balance-sheet as on 31-03-2005 relates to assessment year 2005-06 was found.
9. We have carefully gone through the judgment of the Pune Bench of this Tribunal in the case of Sinhagad Technical Education Society (supra). In the case before the Pune Bench, the assessee is an educational society. In the course of search operation u/s 132 of the Act, in the residential premises of the president of the educational society certain loose papers were found and seized. Simultaneously a survey was conducted on the institute also. On the basis of the loose papers found and seized from the residential premises of the president of the educational society, proceedings u/s 153C was initiated. The contention of the assessee before the Mumbai Bench of this Tribunal was that mere act of seizure of document by itself does not lay foundation for prima facie belief that there was some undisclosed income. The seizure must be of such character so as to persuade the assessing officer to reopen the completed assessment. The Tribunal found that where assessment year specific incriminating material / documents were found there cannot be any assessment u/s 153C of the Act. A similar view was taken by Bangalore Bench of this Tribunal in the case of P Srinivas Naik (supra).
10. We have also carefully gone through the decision of the Cochin Bench of this Tribunal in M/s Kunjamma Varkey (supra). The case before this bench of this Tribunal was that no incriminating material belonged to the assessee was found. This Tribunal, after considering the provisions of section 153C of the Act found that in the absence of any relevant material belonging to the assessee, the assessing officer lacks his jurisdiction to initiate proceedings u/s 153C of the Act. This Tribunal placed its reliance on the decision of the Bangalore Bench of this Tribunal in the case of P Srinivas Naik (supra) and Bombay Tribunal in the case of Sinhagad Technical Education Society (supra). In view of the above, it is obvious that wherever the proceedings was initiated u/s 153C, there should be assessment year specific documents seized in the course of the search proceedings available on record. In the case before us, as found earlier, there are two material documents, one is registered sale deed which relates to assessment year 2001-02 and the other the balance-sheet as on 31-03-2005 disclosing the investment of Rs.41,71,199 in the partnership firm. Apart from these two documents, no material is available on record.
11. Let us now examine whether these two documents would be sufficient to initiate the proceedings u/s 153C of the Act. For the assessment year 2001-02 the assessing officer made addition of Rs.20,000 disbelieving the claim of the assessee towards agricultural income and another addition of Rs.2,80,000 towards opening balance. No addition was made with regard to the sale deed found in the course of search operation and the balance-sheet as on 31-03-2005. Therefore, it is obvious that for the assessment year 2001-02, the proceedings u/s 153C was not initiated on the basis of the search material. In fact, there is no reference in the assessment order about the material found during the course of search operation. However, for the assessment year 2005-06, an addition of Rs. 22,87,818 was made on the basis of the seized material SSA-29, i.e. the balance-sheet as on 31-03-2005. The balance-sheet discloses the investment of Rs.41,71,199 in the partnership firm. However, the balancesheet filed along with the return of income shows the capital investment of Rs.18,83,381. The assessee explained before the assessing officer that the computer print out taken during the course of search operation was erroneous. However, the assessing officer rejected the explanation of the assessee and the difference between Rs.41,71,199 being the amount shown in the balance-sheet which was found during the course of search operation and Rs.18,83,381 being the amount shown in the balance-sheet filed along with the return of income was added as unexplained investment in the partnership firm. Therefore, for the assessment year 2005-06 there was search material which discloses the undisclosed investment for the assessment year 2005-06. In respect of other assessment years there was no material found during the course of search operation. The addition was made only in respect of agricultural income and gift on the basis of cash flow statement filed by the assessee during the course of assessment proceedings. In fact, the assessee filed the returns of income for the assessment years 2001-02, 2003-04, 2004-05 and 2005-06 in the regular course before the date of search and the assessment proceedings of terminated / concluded assessments cannot be disturbed in the absence of any material found during the course of search operation.
12. The question now arises for consideration is - can there be an addition in the proceedings u/s 153C in the absence of search material? As discussed earlier, this was examined by the Mumbai Bench of this Tribunal in the case of Sinhagad Technical Education Society (supra). After considering the provisions of section 153C of the Act the Mumbai Bench found that when there was no search material found during the course of search operation there is no question of initiation of proceedings u/s 153C of the Act. We have also carefully gone through the provisions of section 153C of the Act which reads as follows:
"153C.(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A:Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person.(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year -(a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or(b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or© assessment or reassessment, if any, has been made,Before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A."
13. A bare reading of section 153C makes manifestly clear that the assessing officer has to satisfy himself that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. Section 153C makes it very clear that the proceedings under that section has to be initiated only in case the material found during the course of search operation relates to the person other than searched person. Therefore, for initiation of the proceedings, the material found during the course of search operation is relevant for initiation of proceedings u/s 153C of the Act. In the case before us, only for the assessment year 2005-06 a balance as on 31-03-2005 was found which relates to the present assessee. Apart from this, a sale deed was also found. However, no addition was made on the basis of the sale deed. Therefore, the only document available on record is the balance-sheet as on 31-03-2005 which relates to assessment year 2005-06. This bench of this Tribunal in Dr Sasikumar ITA Nos 251 to 259/Coch/2011 had an occasion to examine an identical issue and found that the addition can be made only on the basis of the material available on record. In respect of other years, there cannot be any addition in the absence of any material.
14. This bench of this Tribunal in the case of Kunjamma Varkey (supra) has considered this issue elaborately and found that the initiation of proceedings u/s 153C is without jurisdiction and hence it is bad. In fact, the case in Kunjamma Varkey (supra) relates to this very same group. In the case of Kunjamma Varkey (supra) this Tribunal has observed as follows at paras 4.2 and 4.3 of its order as follows:
"4.2 We have carefully perused the assessment order for each of the relevant years, including for A.Y. 2007-08 (copy on record), during the previous year relevant to which the relevant search took place, and find complete absence of any reference to any materials, much less those specified in s.153C, belonging to the assessee among that seized in search. The same constitutes a prerequisite inasmuch as it is only on the basis thereof that the AO derives sanction in law to issue notice u/s 153A. In the instant case, the AO of the person searched, i.e., the Group cases of P.A. Kuriakose and Paulson Varkey Group, and the assessee – the cases being centralized – is the same, so that there would be no occasion or necessity for being handed over the same by the AO of the person searched, i.e., the assessee's AO. Yet, the existence of such materials, among those seized (and/or requisitioned), belonging to the assessee, is a basic condition for initiating proceedings and issue of notice u/s 153A r/w.s. 153C. As afore-mentioned, surprisingly though, there is no mention anywhere in any of the assessment orders for each of the seven years, i.e., 2001-02 to 2007-08, that for A.Y. 2007-08 having been specifically called for by the Bench. Likewise, in the appellate orders. The terms of s.153C are clear and explicit, and it is only where any of the specified materials belonging to the assessee are subject to seizure and/or requisition that the assessment proceedings u/s 153A r/w.s. 153C can be initiated by issue of notice u/s 153A, the relevant part of which reads as under:-"Assessment of Income of any other person153C.(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A:Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person."4.3 The nature of the additions made for each of the years, and the material/s on which the same are based, again, leaves us in no manner of any doubt that no seized books of accounts or documents or assets belonging to the assessee were available with the AO; the assessment orders being de hors any reference there to, enabling the initiation of legally valid proceedings. We may clarify that it is not the want of explicit expression of satisfaction (in the assessment orders), which is to be firstly, prima facie and, secondly, is liable to have some element of subjectivity, that inflicts the present proceedings. The hon'ble jurisdictional high court in CIT vs. Panjanyam Management Agencies and Services (2011) 239 CTR 424 (Ker) has explained that there is no requirement of recording the satisfaction, which is principally for the transfer of the relevant materials by the AO of the person searched to that of the assessee – which is not applicable in the instant case – in writing. But, we may reiterate, the absence of relevant materials belonging to the assessee and, consequently, is a case of lack of jurisdiction. We, accordingly, upholding the assessee's claim, hold the assessments as without jurisdiction and, thus, bad in law, rather, void ab initio. The decisions cited by the assessee, i.e., P. Srinivas Naik vs. ACIT (2008) 117 ITD 201 (Bang.) = (2008-TIOL-28-ITAT-BANG) and Sinhgad Technical Education Society vs ACIT (in ITA Nos.114 to 117/PN/2010 dated 28.1.2011/copy on record) are relevant in this regard. We decide accordingly."
As seen from the assessment order, the assessee filed the returns of income for assessment year 2001-02 on 30-07-2011 for the assessment year 2003-04 on 28-11-2003. Similarly for assessment year 2004-05, the original return was filed on 27-07-2004 and for the assessment year 2005- 06 the return was filed on 0`1-02-2006. Proviso to section 143(2) as it stood at the relevant point of time till it was amended by Finance Act, 2008 with effect from 01-04-2008 read as follows:
"Provided that no notice under clause (ii) shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished."
15. In view of the above express provision of section 143(2), the assessment proceedings shall be terminated / concluded by operation of law on expiry of twelve months period from the end of the month in which the returns of income were furnished. Admittedly, the search was made on 13-02-2007. Twelve months' period expired from the date of regular returns for assessment years 2001-02, 2003-04, 2004-05 much before the date of search. Even for assessment year 2005-06, the twelve months' period expired on 31-03-2007. Therefore, for assessment year 2001-02, 2003-04, 2004-05 and 2005-06, the assessment proceedings are terminated / concluded by operation of law and, therefore, it is not pending. Therefore, for these assessment years the income disclosed in the regular returns before the date of search cannot be reassessed under section 153C of the Act after the search.
16. For the assessment year 2005-06, apart from agricultural income of Rs.60,000, the assessee has also disclosed marriage gift in the return filed in response to notice issued u/s 153C of the Act. The agricultural income was disclosed in the regular return, the assessment proceedings were concluded by operation of law. Therefore, what remains is only the marriage gift.
17. The ld.representative for the assessee submitted that no material was found during the course operation with regard to gift. The gift was disclosed in the cash flow statement filed during the course of assessment proceedings. The assessee has also disclosed the marriage expenses of Rs.1,50,000 in the cash flow statement. According to the ld.representative, the assessing officer disbelieved the explanation of the assessee and added the entire amount of Rs.5 lakhs as income from unexplained sources. According to the ld.representative, the gift was received from close relatives and it is customary practice among the family members to give and receive gift during the marriage. According to the ld.representative the assessing officer disallowed the claim of the assessee on the ground that the assessee's wife claimed a gift of Rs.4,05,000 which was disallowed. According to the ld.representative, in fact, the assessee's wife Mrs. Nita Promy is not an assessee. Therefore, the question of disallowance of any gift in her hand does not arise for consideration. Therefore, the disallowance of Rs.5 lakhs towards gift is not justified.
18. On the contrary, Smt. Susan Varghese George, the ld.DR submitted that the assessee claimed that the marriage gift of Rs.5 lakhs in the absence of any evidence to show that the gift was received, the assessing officer disallowed the claim of the assessee. The ld.DR submitted that the assessee has produced only the list of donors and not other ingredients such as the creditworthiness of the donor, the identity of the donor and the genuineness of the gift and the gift was not proved. Therefore, according to the ld.DR, the CIT(A) has rightly confirmed the addition.
19. We have considered the rival submissions on either side and also perused the material available on record. The fact that there was a marriage in the family is not in dispute. The assessee has furnished the list of donors. The CIT(A) confirmed the addition on the ground that the gifts were not received through banking channel. When the assessee claims that it is a gift received during the occasion of marriage, it is not known how such kind of gift will come through banking channels? At the time of marriage it is usual practice in this part of the country to give gifts to the married couples. At the best, the assessee can produce the list of the donors and the amount received from respective donors. Expecting other details from the guests, who attended the marriage may not be justified. If the assessing officer has any doubt, he may further investigate the matter on the basis of the list of donors furnished by the assessee. In the absence of any such investigation initiated by the assessing officer on the basis of the list of donors furnished by the assessee, this Tribunal is of the considered opinion that disallowing the entire claim may not be justified. The assessee has also disclosed an expenditure of Rs.1,50,000 in the marriage. Ignoring these particulars, the assessing officer has made addition of entire amount of Rs.5 lakhs. This Tribunal is of the considered opinion that when there is a customary practice in this part of the country to give and receive gifts on the occasion of marriage, in the absence of any other investigation carried out by the department on the basis of the list of donors filed by the assessee, disallowing any part of the gift may not be justified. Accordingly, the orders of the lower authorities are set aside and the addition of Rs.5 lakhs is deleted. In the result, the appeals of the assessee for the assessment years 2001-02, 2003-04, 2004-05 and 2005-06 are allowed.
20. Now coming to assessment years 2006-07 and 2007-08, admittedly, the assessee has not filed the regular return of income. The only return of income available on record is one filed with reference to notice issued u/s 153C of the Act. The common addition made by the assessing officer is with respect to disclosed agricultural income of Rs.70,000 for the assessment year 2006-07 and Rs.80,000 for assessment year 2007-08.
21. According to the ld.representative, the assessee filed all the relevant material to prove the land holdings. The assessee was cultivating the land, however, the assessing officer disallowed the entire claim of the assessee on the basis of the report said to be filed by the Inspector of Income-tax. The ld.representative further submitted that the assessee was holding 17.34 cents of land. According to the ld.representative, the assessing officer ought to have accepted the estimation of agricultural income. Referring to the judgment of the Madras High Court in CIT vs D Venkatesh (2009) 310 ITR 303 (Mad), the ld.representative submitted that when the entire agricultural income was disclosed to the department through regular returns for respective assessment years before the search, in the absence of any material to prove anything contrary, the estimated agricultural income which was disclosed in the return of income prior to search cannot be treated as undisclosed income. The ld.representative has also placed his reliance on the judgment of the Kerala High Court in E.K. Jose vs Addl Agricultural Income Tax Officer & Ors (1996) 217 ITR 89 (Ker) and submitted that inspection report relating to relevant assessment year alone needs to be considered and inspection report relevant to an anterior period for estimating the agricultural income cannot be accepted. According to the ld.representative, the Inspector's report in this case does not relate to assessment year 2005-06, therefore, it cannot be acted upon.
22. On the contrary, Smt. Susan George Varghese, the ld.DR submitted that the Inspector visited the field and found that no agricultural activity was carried out. Accordingly, he reported that agricultural income from said property was nil for the assessment years 2001-02 to 2007-08. Therefore, the assessing officer disallowed the claim of the assessee.
23. We have considered the rival submissions on either side and also perused the material available on record. From the materials available on record it appears that the Inspector visited the field in December, 2008. We have carefully gone through the judgment of the Kerala High Court in E.K. Jose (supra). In the case before the Kerala High Court, the Inspector visited the field on 28-04-1988. The assessment year under consideration before the Kerala High Court was 1987-88. The Kerala High Court found that it is difficult to adopt the report relating to an anterior period, that is to say, that the report belonged to 1982-83. In fact, the Kerala High Court had observed at page 91 of the ITR as below:
" Learned counsel for the appellant mainly focused his attach on the estimate of yield from rubber during the year 1987-88. The argument is that there was a sudden increase of annual yield from 23 quintals (for the years 1984-85 to 1986- 87) to 26 quintals (for the year 1987-88) and that, therefore, the income is estimated for the year 1987-88 cannot be said to be reasonable or fair. In order to substantiate this point, the appellant wants us to rely on the inspection report dated December 28, 1982, obviously discarding exhibit P-1 inspector report dated April 28, 1988. This approach as it appears to us, is basically deceptive. When the assessment order in dispute admittedly relates to the year 1987-88, it is difficult for this court to adopt a report relating to an anterior period, that is to say, a report relating to the year 1982-83. What we can legitimately adopt here is the inspection report dated April, 1988, which relates to the relevant accounting year even though serious attempt was made to belittle the said report by the appellant. The inspection report made available by an officer not below the rank of an Agricultural Income-tax Officer is a material piece of evidence inasmuch as the officer has the statutory power to enter into any land belonging to an assessee and inspect any accounts, registers and other documents, which such officer considers to be relevant for the purpose of any proceeding under the Act. The evidentiary value of the inspection report cannot be minimized according to the convenience of the assessee. The report is ordinarily prepared after inspection of the land as authorized by the provisions of the Act and after obtaining the adequate date for fixing the yield from the properties."
24. In view of the above, it is obvious that the report of the relevant assessment year has to be taken into consideration and not the anterior or subsequent period. In the case before us, admittedly, the inspector visited the field in December, 2008. The assessment years under consideration are 2006-07 and 2007-08. However, except the land holding, no other material is available on record to suggest that the assessee was cultivating the land. It is also a fact that the assessee is filing return regularly disclosing the agricultural income for earlier assessment years and department allowed the returns of income to attain finality. Therefore, this Tribunal is of the considered opinion that rejection of the entire claim of the assessee towards agricultural income also may not be justified. By taking into consideration all the relevant materials and the land holding, this Tribunal is of the considered opinion that estimation of agricultural income at Rs.40,000 would meet the ends of justice for each of these assessment years. Accordingly, the orders of the lower authorities are modified and the assessing officer is directed to disallow only Rs.30,000 for assessment year 2006-07 and Rs. 40,000 for assessment year 2007-08.
25. Now we move to dispose of the appeals of the department for the assessment years 2004-05 and 2005-06.
26. The only ground raised for the assessment year 2004-05 is with regard to addition on account of on-money said to be received on sale of land. The ld.DR submitted that the assessee disclosed the value of the land at Rs.17,516 per cent for sale of 34.61 cents of land. However, his brother Benny Kuriakose had disclosed the sale price at Rs.48,724 per cent. According to the ld.DR, the assessee and his brother sold the land by a single registered sale deed. Therefore, all the lands mentioned in the single document have to be treated as having the same price. According to the ld.DR, there is no material to show that the assessee's land was situated on the interior side. According to the ld.dR, when the property was sold by a single sale deed uniform rate should be adopted irrespective of the location of the property. Therefore, CIT(A) is not justified in deleting the addition of Rs.10,80,390.
27. On the contrary, the ld.representative for the assessee submitted that no doubt the land was sold by a single document. However, the lands are not adjacent to each other. The assessee's land was situated in the interior side. Therefore, it fetched only Rs.17,516 per cent. In fact, this fact was disclosed in the registered sale deed, the copy of which is filed at page 7 of the paper book. According to the ld.representative, the registered sale deed clearly discloses the sale price for sale of the assessee's land at Rs.17,516 per cent. Therefore, merely because a single registered sale deed was executed for sale of land of the assessee and his brother, the contents of the sale deed cannot be ignored by the taxing authorities. In the absence of any other material to show that the assessee has received on money, accounting to the ld.representative, the sale consideration disclosed in the registered sale deed has to be accepted. The ld.representative further submitted that the sale of land was disclosed in the regular return filed on 27-07-2004, i.e. before the date of search and the assessment proceedings were not pending. Therefore, the concluded assessment cannot be reopened by issuing notice u/s 153C of the Act in the absence of any further material on record. In this case, according to the ld.representative, admittedly, there is no material to show that the assessee has received on money. Therefore, the CIT(A) has rightly deleted the addition.
28. We have considered the rival submissions on either side and also perused the material available on record. It is not in dispute that the assessee has sold his land by a single registered sale deed alongwith his brother. However, the sale consideration of each land is mentioned in the sale deed, more particularly, on page No.13 of the sale deed, the copy of which is available in the paper book. When the assessees executed the registered sale deed disclosing the sale consideration, it may not be justified on the part of the taxing authorities to hold that the sale price of his brother's land was very high and therefore the same price has to be adopted in the case of the assessee. As rightly submitted by the ld.representative for the assessee, the sale consideration was clearly disclosed in the sale deed in respect of the assessee's land. Therefore, in the absence of any other material to show that the assessee has received on money over and above that disclosed in the sale deed, this Tribunal is of the considered opinion that there cannot be any presumption that the assessee has received any on money. Moreover, the sale of land was disclosed in the regular return of income filed on 27-04-2004 and the assessment proceedings were not pending. Therefore, in the absence of any further material found during the course of search operation, no proceedings could be initiated u/s 153C of the I.T. Act. Therefore, the CIT(A) has rightly deleted the addition. Accordingly, the same confirmed.
29. Now coming to appeal for assessment year 2005-06 in ITA No.346/Coch/2011, the only issue is with regard to telescoping of investment of Rs. 22,87,818 in the unaccounted profit of the firm. The ld.DR submitted that the taxability of the firm was considered after allowing all deductions in the hands of the firm as per the Income-tax Act. The unaccounted profit so computed may or may not have received by the partners. Therefore, according to the ld.DR, the benefit received by the partner over and above declared profit from the partnership business is taxable in the hands of the partners and, therefore, the benefit received by the partners cannot be telescoped. According to the ld.DR, the unexplained investment may or may not have nexus with surplus turnover. Therefore, the CIT(A) is not correct in telescoping the investment made to the extent of Rs.22,87,818 with profit of the firm. The ld.DR placed reliance on the judgment of the Punjab & Haryana High Court in Grover Fabrics (India) (P) Ltd vs CIT (2011) 332 ITR 312 (P&H).
30. On the contrary, the ld.representative for the assessee submitted that on the basis of the material found during the course of search operation substantial additions were made in the case of the partnership firm P.A. Kuriakose Jewellers. Therefore, accrual in the capital of the partners of the above firm has a consequence of the unaccounted income so determined in the hands of the firm which needs to be considered. According to the ld.representative, admittedly, the seized document SSA- 29, i.e. the balance-sheet discloses the investment made by the assessee in the partnership firm. The investment may be accretion to the income of the partnership firm which was given to the respective partners in their profit sharing ratio. Therefore, according to the ld.representative, the CIT(A) has rightly set off the addition made by the assessing officer with unaccounted profit of the firm. According to the ld.representative, there is a direct nexus between the unaccounted earning of the firm and consequential accretion of unaccounted capital contribution of the partners. Referring to the judgment of Punjab & Haryana High Court in Grover Fabrics (India) (P) Ltd (supra), the ld.DR found that the Punjab & Haryana High Court found that unexplained credit entries may or may not have nexus with trading results. The High Court itself found that it is a question of fact and in each case the addition on account of unexplained entries are justified in spite of addition made to the declared trading results has to be examined. In this case, there is a direct nexus with regard to the amount shown in the balance-sheet of the very same firm. Therefore, according to the ld.representative, the CIT(A) has rightly telescoped the addition made by the assessing officer.
31. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the document SSA- 29 discloses capital contribution by the assessee to the firm M/s P.A. Kuriakose Jewelleries. It is also an admitted fact that unaccounted income was determined in the hands of Ms P.A. Kuriakose Jewellers on the basis of material found during the course of search operation. Therefore, there is an obvious nexus between the investment shown in the balance-sheet found during the course of search operation and the unaccounted income determined in the hands of M/s P.A. Kuriakose Jewellers. This is what exactly held by Punjab & Haryana High Court in Grover Fabrics (India) (P) Ltd (supra). Therefore, this Tribunal is of the considered opinion that the CIT(A) has rightly telescoped the addition made by the assessing officer. This Tribunal do not find any infirmity in the order of the lower authority. Accordingly, the order of the CIT(A) is confirmed.
32. In the result, the assessee's appeals for assessment years 2001-02, 2003-04, 2004-05, 2005-06 are allowed and appeals for assessment years 2006-07 and 2007-08 are partly allowed whereas the appeals of the revenue are dismissed.
(Order pronounced in the open court on this 29.5.2013.)
2013-TIOL-948-HC-P&H-IT
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
AT CHANDIGARH
ITA No.73 of 1999
INCOME TAX OFFICER, NARNAUL
Vs
M/s SHIV NARAIN RAM KUMAR
NAI MANDI, NARNAUL
NAI MANDI, NARNAUL
Rajive Bhalla And Bharat Bhushan Parsoon, JJ
Dated : October 29, 2013
Appellant Rep by: Mr Inderpreet Singh, Adv.
Respondent Rep by: Mr Alok Mittal, Adv.
Respondent Rep by: Mr Alok Mittal, Adv.
Income Tax - Section 133A - survey, diary, investment in business, trading account - Whether an addition can be made on the basis of the diary which was found during the survey but the diary did not belong to the assessee.
The assesee is an individual. During assessment, the AO conducted a survey proceedings and came across a diary, which according to him was allegedly maintained by the assessee. The AO made certain additions in the income of the assessee on the basis of the diary. The CIT(A), also affirmed to the additions made by the AO. On further appeal the tribunal, observed that various entries made in the diary related to the period from 9th May 1987 to 31st March, 1988 were in respect to the purchases and sales of empty bags, seeds, grease and diesel. The assessee gave detailed explanation about the entries recorded in the diary. The tribunal found the explanation given by the assessee to be satisfactory. It was further observed by the Tribunal that the assessee maintained trading account for each commodity dealt and also made certain investment in the business which was claimed to be of Sandeep Kumar, but no explanation nor any evidence was produced by the assessee about such source of such investment in the business. The assessee claimed the amount to be a personal savings of Sandeep Kumar but had no evidence to establish that certain sum in possession was out of its saving. The tribunal partly allowed the appeal of the assessee and granted relief of Rs. 1,96,107/-.
Before the HC, the Revenue's Counsel submitted that the Tribunal had wrongly held that the entries in the diary could not be considered as the explanation offered by the assessee and were not rebutted. It is further submitted that deletion made by the Tribunal of additions made by the AO, duly affirmed by the CIT(A) are legally flawed as it was for the assessee to offer a satisfactory explanation as to the source of its finance for purchase of items referred to in the diary. The counsel for the assessee also contented that the Tribunal had recorded a clear finding that the revenue was unable to controvert entries in the diary.
Held that,
++ we find no error in the impugned order as it was for the Revenue to controvert the explanation. The AO as well as the CIT(A) apparently ignored the explanation offered by the assessee. The findings of the fact recorded by the Tribunal do not give rise to a question of law much less a substantial question of law particularly when the Tribunal had decided the matter after appraising contents of the diary, the explanation offered and by recording pure findings of fact.
Before the HC, the Revenue's Counsel submitted that the Tribunal had wrongly held that the entries in the diary could not be considered as the explanation offered by the assessee and were not rebutted. It is further submitted that deletion made by the Tribunal of additions made by the AO, duly affirmed by the CIT(A) are legally flawed as it was for the assessee to offer a satisfactory explanation as to the source of its finance for purchase of items referred to in the diary. The counsel for the assessee also contented that the Tribunal had recorded a clear finding that the revenue was unable to controvert entries in the diary.
Held that,
++ we find no error in the impugned order as it was for the Revenue to controvert the explanation. The AO as well as the CIT(A) apparently ignored the explanation offered by the assessee. The findings of the fact recorded by the Tribunal do not give rise to a question of law much less a substantial question of law particularly when the Tribunal had decided the matter after appraising contents of the diary, the explanation offered and by recording pure findings of fact.
Revenue's appeal dismissed
JUDGEMENT
Per: Rajive Bhalla:
The revenue is before us challenging order dated 30.11.1998, passed by the Income Tax Appellate Tribunal, Delhi Bench 'B', New Delhi (hereinafter referred to as the 'Tribunal'). The following question of law was framed while admitting the appeal: -
"Whether in the facts and circumstances of the case, the deletion made by the Income-tax Appellate Tribunal from the additions made by the Assessing Authority can be legally sustained despite the fact that the Tribunal has not considered the various entries made in the diary maintained by Shri Sandeep Kumar in the light of the findings recorded by the Commissioner of Income-tax (Appeals)?"
Counsel for the revenue submits that the Tribunal has wrongly held that entries in the diary could not be considered as the explanation offered by the assessee has not been rebutted. It is further submitted that deletion made by the Tribunal of additions made by the Assessing Officer, duly affirmed by the Commissioner of Income Tax (Appeals), Faridabad (hereinafter referred to as the 'CIT(A)') are legally flawed as it was for the assessee to offer a satisfactory explanation as to the source of its finance for purchase of items referred to in the diary.
Counsel for the assessee submits that as question framed by the revenue is based upon a factual appreciation of entries in the diary, no question of law much less a substantial question of law arises for adjudication. It is further submitted that the Tribunal has recorded a clear finding that revenue was unable to controvert entries in the diary, the Tribunal has rightly accepted entries which were explained by the assessee.
We have heard counsel for the parties, perused the impugned order as well as the orders passed by the CIT(A) and the Assessing Officer.
During survey proceedings, the revenue came across a diary allegedly maintained by the assessee. The Assessing Officer as well as the CIT(A) relied upon entries in the diary to make additions to the income of the assessee. The Tribunal has modified these
orders and granted relief to the assessee of Rs.1,96,107/-, by holding as follows: -
"22. The question of computing the income based on the entries made in the diary would now arise. We have perused the photo-copies of certain pages of the diary produced before us during the course of hearing. We find that the various entries recorded in the diary relates to the period from 9th May 1987 to 31st March, 1988 in respect of purchases and sales of empty bags, seeds, grease and diesel. The assessee has given detailed explanation about the entries recorded on each page of the diary in its letter dated 25th October 1993 placed at page 132 to 145 of the paper book and having gone through the explanation given about each entry recorded in the diary, we are satisfied that the said entries pertain to purchase and sale of empty gunny bags, seeds, grease, and diesel. The details of such entries are given at pages 152 to 161 of the paper book. The department has not disputed or controverted the details given and explanation offered about each entry. As per the details there are sales shown of empty gunny bags of Rs.48,458/-, sale of seeds of Rs.26,563/-, sale of grease at Rs.1,256/-, sale of diesel at Rs.10,810/-. The assessee has prepared the trading accounts of each commodity dealt in and as per trading accounts the gross profit from such transaction recorded in the diary works out to Rs.10,632.50 as per details below: -Grease account : 211Diesel account : 215Seed account : 1148Empty bag account : 9058We also find from the explanation given at page 130 to 145, that the investment made in the business claimed to be of Sandeep Kumar has been shown at Rs.15,101/-. There is however, neither any explanation offered nor any evidence produced about the source of such investment in the business. It is rather claimed that this amount was personal savings of Sandeep Kumar but there is no evidence led to establish that he had in his possession Rs.15,101/- out of savings. Having regard to all the facts and circumstances discussed, it would be fair and reasonable if an addition to the extent of Rs.26,000/- is made in the case of the assessee firm on account of transactions recorded in the diary comprising both of profit and investment made therein. The assessee firm would, thus, get a relief of Rs.1,96,107/-In the result, assessee's appeal stands partly allowed."
A perusal of the aforesaid extract would reveal that the assessee gave a written explanation about entries recorded on each page of the diary. After appraisal of the explanation, dated 25.10.1993, the Tribunal has recorded a finding of fact that the department has not disputed or controverted the explanation offered for each entry. The Tribunal, therefore, proceeded to delete additions made with respect to entries that were duly explained by the assessee but rejected additions relating to entries that were not explained. We find no error in the impugned order as it was for the revenue to controvert the explanation. The Assessing Officer as well as the CIT (A) apparently ignored the explanation offered by the assessee. The findings of the fact recorded by the Tribunal do not give rise to a question of law much less a substantial question of law particularly when the Tribunal has decided the matter after appraising contents of the diary, the explanation offered and by recording pure findings of fact.
Dismissed.
2013-TIOL-1806-CESTAT-MUM
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO
WEST ZONAL BENCH AT MUMBAI
COURT NO
| Case Tracker |
| KUMAR BEHERAY RATHI Vs CCE [CESTAT] |
Appeal no. ST/137, 138, 139 & 140/08-Mum
(Arising out of Order-in-Original no. 30 to 33/P-III/STC/COMMR/2008 dated 31.03.2008
passed by the Commissioner of Central Excise, Pune III)
passed by the Commissioner of Central Excise, Pune III)
Date of Hearing: 23.10.2013
Date of Decision: 18.11.2013
Date of Decision: 18.11.2013
KUMAR BEHERAY RATHI
K K ERECTORS
KUMAR BUILDER
KUMAR BUILDERS
K K ERECTORS
KUMAR BUILDER
KUMAR BUILDERS
Vs
CCE, PUNE-III
Appellant Rep by: Shri Sagar Shah, CA
Respondent Rep by: Shri V.K.Agarwal, Addl. Commissioner (AR)
Respondent Rep by: Shri V.K.Agarwal, Addl. Commissioner (AR)
CORAM: S S Kang, Vice President
P K Jain Member (T)
P K Jain Member (T)
ST - Builders/Developersare not liable to pay Service Tax under the category 'Maintenance or Repair services' on the 'One-time maintenance charges'collected from flat buyers: CESTAT
Appellants are not in the business of maintenance or repair service or management of immovable property – they are collecting one-time maintenance charges from their buyers to whom they have sold flats - they are only paying on behalf of various buyers of flats to various authorities (Municipal Corporation, Revenue authorities etc.) and various service providers (such as security agency, cleaning service providers etc.) and they are not charging anything on their own -the payments are made on cost basis and the same is debited from the deposit account - They act only as trustee or as pure agent - When the co-operative society is formed even the deposit account is shifted to Flat Owner's Co-operative Society - this is a statutory obligation on the appellants in terms of sections 5 & 6 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, sale, management and transfer) Act, 1963 – Appellants cannot be held as provider of maintenance or repair service – Order set aside and appeals allowed: CESTAT [paras 6.2 & 6.4]
Appeal allowed
Cases cited:
Nahar Industrial Enterprises v. CCE 2008(10)STR 13(Del-CESTAT)…para 3.1…differed
CCE v. Ankit Consultancy Ltd. [ 2006-TIOL-1793-CESTAT-DEL ]…para 3.1…differed
CCE v. CMC Ltd. [2007-TIOL-803-CESTAT-BANG]…para 3.1…differed
Electrical Inspectorate, Govt. of Karnataka v. CST [ 2007-TIOL-2175-CESTAT-BANG ]…para 3.1…differed
ORDER NO: A/2250-2253/13/CSTB/C-I
Per: P.K.Jain
Common issue is involved in all the four appeals and therefore these are being taken up together.
2. The appellants are builder/developer of residential flats and various commercial complexes. They sell the residential flats to various customers over a period of time. After sale of all the flats, a Co-operative Housing Society is formed by the owners of the flats, thereafter the title of land etc. is passed on to the Flat Owners Co-operative Housing Society. The appellants are recovering a one-time maintenance deposit from each of the customers to whom they have sold the flats. The said amount is kept in a separate bank account as fixed deposit. From the interest earned on the said deposit, the appellants are expected to pay for various charges such as common electricity bill, water charges, security charges etc. After the flat owners co-operative housing society is formed, whatever balance is left in the said bank account the same is handed over to the Flat Owners Co-operative Housing Society. In the impugned order Service Tax has been demanded on the deposits made by various purchasers of the flats on the ground that the appellants are providing "Maintenance and Repair" service falling under Section 65(64) and Section 65(105)(zzg) of the Finance Act, 1994.
3. The learned CA's who appeared on behalf of the four appellants, main contention was that the appellants are only working as an agent/trustee of the funds of the flat owners. They themselves are not providing any service but only paying for various outgoings/services till the flat owners co-operative housing society is formed. The learned CA also submitted that the builder has no right to claim the amounts and rather is responsible to carry out such functions and has also accountability for the purpose of this fund. This is a statutory obligation as per the provisions of Maharashtra Ownership Flats (Regulation of the Promotion of construction, sale, management and transfer) Act, 1963. The learned CA explained that as per the Section 3(2)(j) of the said Act, appellants have to make a full and true disclosure of all outgoings (including ground rent if any, municipal taxes, taxes on income, water and electricity charges, revenue assessments, interest etc.). As per section 5 of the Act, the appellants are required to maintain a separate account of sums taken as "advance" or "deposit" and to be trustee therefor and disburse them for purpose for which such amount is taken. The learned CA further contended that Section 6 put responsibility for payment of outgoings till property is transferred on the promoter/appellants. Section 12 of the said Act provides flat taker to pay proportionate share of municipal taxes, water and electricity, ground rent and other public charges at the proper time and place to the promoter. The learned CA further stated that as per Section 12A of the said Act, Manager cannot cut off, with-hold, curtail or reduce essential supply or service. Further section 13 provides for punishment to promoters which can be even imprisonment for a term of upto 3 years or fine for contravention of Sections 3, 4, 5, 10 and 11 of the said Act. The learned CA further argued that from the said Act it is clear that the appellants are not taking any activity relating to maintenance, management or repair of the immovable property but are only paying the outgoings in accordance with the said Act till the flat owners co-operative housing society is formed. The learned CA also stated that they are paying municipal taxes, levies water charges, electricity charges and deposits in respect of common electrical and water pumps and other installations. He also argued that in respect of the security services such as watchmen etc. service tax would be paid by the relevant security agencies. Similarly, maintenance and repair of common area and facilities are required to be carried out and appropriate service tax will be paid by the service provider. In view of the above position, the learned CA stated that no tax is chargeable as the appellants are not providing any service. In support of his contentions, he quoted the following Circulars of the Board:-
(a) F.No. B 1/6/2005-TRU dated 27.07.2005 (para 10.6) (Merely carrying out any statutory provision, no service can be said to be provided)(b) No. 89/7/2006-ST dated 18.12.2006 which has been reiterated in Master Circular dtd 23.8.2007 (Activity purely in the nature of public interest and undertaken as mandatory and statutory function are not in the nature of service…)(c) No. 1/1/2002-ST dtd 26.2.2002 (issuance of certificates under a statute is not consultancy or advice or technical assistance) under a statute is not consultancy or advice or technical assistance.
3.1 The learned CA also quoted the following case laws in support of his contention that since they were doing the statutory duty no service tax is leviable on the same.
(a) Nahar Industrial Enterprises v. CCE 2008(10)STR 13(Del-CESTAT)(b) CCE v. Ankit Consultancy Ltd. 2007(6) STR 101 (Del-CESTAT) [ 2006-TIOL-1793-CESTAT-DEL ](c) CCE v. CMC Ltd. 2007(7)STR 702 (Bang. CESTAT) [2007-TIOL-803-CESTAT-BANG](d) Electrical Inspectorate, Govt. of Karnataka v. CST 2008(9)STR 494 (CESTAT-Bang.) [ 2007-TIOL-2175-CESTAT-BANG ]
3.2 The learned CA further argued that even if for the sake of argument it is assumed that the service tax is payable even then service tax cannot be demanded based upon the deposited amount (even prior to 16.6.2005) and interest thereon but on the gross outgoings relating to maintenance and repairs alone.
4. The AR reiterated various findings of the Commissioner in the impugned order. The learned AR stated that outgoings are two types, one relating to various utilities & maintenance and the second one are relating to taxes, electricity and water charges. He further stated that the definition of maintenance or repair service at the relevant time meant any service provided by any person under a contract or an agreement for maintenance or management of immovable property and as per the Section 67 of the Act, the value of any taxable service shall be gross amount charged by the service provider of the service. In view of the above, the activities of the appellants are covered within the definition. The learned AR further stated that case law relied upon by the appellants are not relevant. The case laws are with reference to technical testing and services or other services which have to be necessarily provided by the Government agencies. Here the services are being provided by the appellants to the flat buyers and, therefore, the appellants are required to pay the tax.
5. We have considered the rival submissions.
6. At the outset, we note that Circular and case laws quoted are not relevant to the present issue as services and situations context discussed are totally different. We find that as per the agreement submitted by the appellants, certain amounts were collected from the buyers of the flats as one time deposit on account of the following services:-
(a) Towards maintenance and repairs of common areas and facilities;(b) Wages of watchmen, sweepers etc.(c) Insurance(d) Revenue assessment(e) All other taxes, levies, charges and cess.(f) Electricity and water charges and deposits in respect of common electrical and water pumps and other installations.(g) Expenses of and incidental to the management and maintenance of the said Housing societies.
6.1 From the various activities we find that the appellants are required to make payment relating to Revenue assessment, insurance, all other taxes, levies, electricity and water charges and deposits in respect of common electrical and water pumps and other installations. In addition they are paying for the maintenance and repair of common areas and facilities, wages or watchmen, sweepers etc. and some expenses relating to maintenance of the housing blocks.
6.2 We have also gone through the relevant provisions of the Maharashtra Ownership Flats (Regulation of the Promotion of construction, sale, management and transfer) Act, 1963. We find that the Section 5 and 6 provides as under:-
SECTION 05: PROMOTER TO MAINTAIN SEPARATE ACCOUNT OF SUMS TAKEN AS ADVANCE OR DEPOSIT AND TO BE TRUSTEE THEREFOR; AND DISBURSE THEM FOR PURPOSES FOR WHICH GIVEN
The promoter shall maintain a separate account in any bank of sums taken, by him, from persons intending to take or who have taken flats, as advance or deposit including any sums so taken towards the share capital for the formation of co-operative society or a company, or towards the outgoings (including ground rent, if any, municipal or other local taxes, taxes on income, water charges, electricity charges, revenue assessment, interest on any mortgage or other encumbrances, if any); and he shall hold the said moneys for the purposes for which they were given and shall disburse the moneys for those purposes and shall on demand in writing by an officer appointed…
SECTION 06: RESPONSIBILITY FOR PAYMENT OF OUTGOINGS TILL PROPERTY IS TRANSFERRED.
A promoter shall, while he is in possession and where he collects from persons who have taken over flats or are to take over flats sums for the payment of outgoings ever thereafter, pay all outgoings (including ground rent, municipal or other local taxes, taxes on income, water charges, electricity charges, revenue assessment, interest on any mortgage or other encumbrances, if any), until he transfers the property to the persons taking over the flats, or to the organization of any such persons. Where any promoter fails to pay all or any of the outgoings collected by him from the persons who have taken over flats or are to take over flats, before transferring the property to the persons taking over the flats or to the organization of any such persons, the promoter shall continue to be liable, even after the transfer of the property, to pay such outgoings and penal charges (if any) to the authority or person to whom they are payable and to be responsible for any legal proceedings which may be taken therefor by such authority or person.
From the above sections, it is clear that under the Act the appellants are obliged to maintain a separate account in any bank of the deposits taken and use the same amount towards the outgoings. Further section 6 puts responsibility for payment of outgoings on the appellants till the property is transferred.
6.3 We also note that at the relevant time the provisions of Finance Act are as under:-
"Maintenance or repair" means any service provided by –(a) Any person under a contract or an agreement; or(b) A manufacturer or any person authorized by him in relation to –(i) Maintenance or repair including reconditioning or restoration, or servicing of any goods or equipment, excluding motor vehicle; or(ii) Maintenance or management of immovable property.
6.4 We also note that the appellants are not in the business of maintenance or repair service or management of immovable property. The appellants cannot be held as provider of maintenance or repair service as they are only paying on behalf of various buyers of flats to various authorities (Municipal Corporation, Revenue authorities etc.) and various service providers (such as security agency, cleaning service providers etc.) and they are not charging anything on their own. The payments are made cost on cost basis and the same is debited from the deposit account. They act only as trustee or as pure agent. When the co-operative society is formed even the deposit account is shifted to Flat Owner's Co-operative Society. We also note that this is a statutory obligation on the appellants in terms of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, sale, management and transfer) Act, 1963.
7. Under these circumstances, we hold that the appellants are not providing the maintenance or repair service to the buyers of the flats. In view of this position, the impugned order is set aside and the appeals are allowed.
(Pronounced in Court on 18.11.2013)
2013-TIOL-1805-CESTAT-DEL
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST BLOCK NO.2, R K PURAM, NEW DELHI-110066
WEST BLOCK NO.2, R K PURAM, NEW DELHI-110066
No.ST/4030/2012-SM
Arising out of Order-in-Appeal No.200(RDN)ST/JPR-I/2012 Dated: 18/21.9.2012
Passed by the Commissioner (Appeals), Central Excise, Jaipur
Passed by the Commissioner (Appeals), Central Excise, Jaipur
Date of Hearing: 13.9.2013
Date of Decision: 13.9.2013
Date of Decision: 13.9.2013
M/s BANSAL CLASSES
Vs
COMMISSIONER OF CUSTOM AND EXCISE, JAIPUR
Appellant Rep by: Ms Rashi, Adv.
Respondent Rep by: Shri P K Sharma, DR
Respondent Rep by: Shri P K Sharma, DR
CORAM: Sahab Singh, Member (T)
Service Tax - Commercial coaching or Training service - CENVAT Credit - Credit on catering and photography services used to encourage students who succeeded in coaching - Since the activities take place after the students passed the commercial coaching or training session, these services cannot be said to be used to provide output service - credit is not admissible.
Credit is admissible on service tax paid on renting of the examination hall.
Appeal partly allowed
FINAL ORDER NO.57675/2013
Per: Sahab Singh:
This appeal has been filed by M/s Bansal Classes (appellants) against Order-in-Appeal No.200/2012 dated 21.9.2012.
2. The brief fact of the case are that the appellants are providing commercial training or coaching services and also availing the Cenvat credit in respect of service tax paid on various input services. During the course of scrutiny of records, it was observed that the appellants have availed Cenvat credit of service tax paid on catering , photography, tent (mandap keeper), maintenance & repairs (motor vehicles), rent for hiring examination hall and travelling expenses amounting to Rs. 1,04,035/- during the period 1.8.2005 to 30.9.2008. According to the department, Cenvat credit is not admissible to them as it is not covered under the definition of input services under Rule 2(I) of Cenvat Credit Rules, as these services are not used in or in relation to providing of output services. Accordingly, a Show Cause Notice was issued to the appellants demanding service tax along with interest and also proposing penalties. Show Cause notice was adjudicated against the appellants and Order-in-Original were challenged before the Commissioner (Appeals) by the appellants who vide the impugned order has rejected their appeal after modifying the penalty amount.
3. The ld Advocate appearing for the appellant submits that these services are used by them for providing output services. Catering services and photographic services were used by them to organize the orientation programme for the new students. She further submits that with regard to conducting of examination by the institute they are hiring examination hall on rent basis for the purpose of conducting their examination for students under the coaching and without examination commercial or training cannot be completed. As regards maintenance and repair service, she submits that these vehicles are used by them for the purpose of transporting the students from one place to another and therefore it was essential for commercial training or coaching. Similarly, she submits that service tax paid on travelling expenses is also admissible to the assessee. She also relies on the case laws in support of her contention.
4. Ld. DR appearing for the Revenue submits that these services have no nexus with the output service of commercial coaching or training inasmuch as in the defence reply the appellants admitted that facility of catering, photography and tent has been done by them after passing of an exam by the student. To encourage the students who succeed in the competitive exam, celebrations are arranged and these activities are in respect of these celebrations. He submits that these activities take place after the output service provided and therefore Cenvat credit is not admissible in respect of these services. He further submits that motor vehicles are used by them for their official work. Similarly, the assessee is also not entitled to Cenvat credit in respect of travelling expenses incurred by them which is not connected to a commercial or training coaching.
5. After hearing both the sides, I find that as regards catering and photography service, tents these services are used by the appellants to encourage the students who succeeded in coaching. This is an admitted case that these services have been used after commercial training or coaching is over. The celebrations are organized by the appellants during the academic sessions to encourage the existing students and to motivate the new students. During these celebrations students who have done exceptionally well are awarded so that they set an example for the other students. In these celebrations that service of catering and photography, tents are used by the appellants. I find that these activities takes place after the students passed the commercial training or coaching session conducted by the appellants. The appellants are paying service tax under the output service of commercial coaching or training. Once the student passed their coaching classes these activities of catering and photography and tent services cannot be said to have been used to provide output service. Accordingly, I hold that the Cenvat credit in respect of catering and photography and tents facility used by them during these celebrations is not admissible to the appellants.
6. Similarly, the maintenance and repair of the motor vehicles is also an activity which is used by the appellants during the course of their business and there is nothing on record to say that these maintenance and repairs have any nexus to commercial training or coaching. Therefore, the Cenvat credit in respect of this service has rightly been denied by the Commissioner (Appeals). Similarly the travelling expenses incurred by the appellants for the business tours cannot be related to provision of commercial coaching or training and lower authorities have rightly held that Cenvat credit in respect of these services is also not admissible.
7. I find that the appellants are conducting examination of students under coaching to enhance their performance. For this purpose i.e. conducting of examination of the students, examination hall is hired by them and since renting of immovable property is a taxable service, service tax paid on renting of the examination hall will be admissible to the assessee as the Cenvat credit, as commercial coaching or training. Accordingly, I hold that the appellants are eligible for the Cenvat credit in respect of service tax paid on hiring of examination hall on rent. In view of the above, I hold that appellants are eligible for Cenvat credit in respect of hiring of hall and in respect of other activities the Cenvat credit is not admissible to the appellants. The appeal is disposed of in the above terms. Appeal is partly allowed.
(Dictated & pronounced in Court)
2013-TIOL-1789-CESTAT-KOL
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EAST REGIONAL BENCH, KOLKATA
EAST REGIONAL BENCH, KOLKATA
Stay Application No.63/2011
Service Tax Appeal No.25/2011
Service Tax Appeal No.25/2011
Arising out of the Order-In-Original No.02/COMM/ST/SLG/10-11 Dated: 26.10.2010
Passed by Commissioner of Central Excise, Customs & Service Tax, Silliguri
Passed by Commissioner of Central Excise, Customs & Service Tax, Silliguri
Date of Hearing: 26.9.2013
Date of Decision: 26.9.2013
Date of Decision: 26.9.2013
M/s GANGADHAR DEVELOPERS PVT LTD
Vs
COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, SILLIGURI
Appellant Rep by: Sri Vikash Dhannia, CA
Respondent Rep by: Sri S Chakraborty, AC (AR)
Respondent Rep by: Sri S Chakraborty, AC (AR)
CORAM: G Raghuram, President
I P Lal, Member (T)
I P Lal, Member (T)
Service Tax – Stay/Dispensation of pre-deposit – 'Renting of immovable property service – In light of legal provisions and retrospective amendment, no infirmity in impugned demands - no justification or warrant for exercising discretion to waive the pre-deposit requirement - Discretion conferred on Tribunal is the discretion of law and not the subjective discretion of incumbents of the Tribunal – Pre-deposit of adjudicated liability ordered and Stay Petition rejected.
Pre-deposit ordered
Case law referred:
1. Home Solution Retails (India) Ltd. Vs. Union of India (2011-TIOL-610-HC-DEL-ST-LB), overruling Home Solution Retails India Ltd, Vs. Union of India reported in (2009-TIOL-196-HC-DEL-ST)….Referred (Para 2)
2. Retailers Association of India vs. UOI & Ors. (2011-TIOL-523-HC-MUM-ST) ….Referred (Para 3)
3. Apex Court interim order reported in 2011-TIOL-104-SC-ST….Referred (Para 3)
ORDER NO.SO/71222/2013
Per: G Raghuram:
The application for waiver of pre-deposit and stay for further proceedings for realization of the adjudicated liability is filed alongwith the appeal preferred by the assessee on 31/1/11 against the adjudication order dated 26/10/2010 confirming service tax demand of Rs.1,99,44,459/- besides interest and penalty of an equivalent amount, under Section 78 of the Finance Act, 1994 (the Act). Service Tax, interest and penalty are assessed for the petitioner having provided the taxable "renting of immoveable property" service during 18/1/2008 to 30/9/2009; failing to file Returns or remit the service tax due, of Rs. 1,99,44,459/-. Proceedings were initiated by the show cause notice dated 26/2/2010 and after due process, the proceedings culminated in the impugned adjudication order.
2. The issue of the constitutional validity of Section 65(105)(zzzz) of the Finance Act, 1994 (the Act), which specifies the taxable service of renting of immoveable property stands concluded, in so far as we are concerned at the present stage of the proceedings, by the judgment of the full Bench of the Delhi High Court in Home Solution Retails (India) Ltd. Vs. Union of India reported in 2011 (24) S.T.R. 129 (Del.) = (2011-TIOL-610-HC-DEL-ST-LB). In para 17 of the judgment, the Delhi full Bench specifically declared that its earlier Division Bench judgment in Home Solution Retails India Ltd, Vs. Union of India reported in 2009 (237) ELT 209 (Delhi) = (2009-TIOL-196-HC-DEL-ST) was incorrect and this decision is overruled. Retrospective operation of amendment to the relevant statutory provision was also upheld. Similar view is taken by other High Courts, following judgment of the full Bench of the Delhi High, Reference may also be made to the judgments reported in 2001 (13) STR 561 (Bom.); 2012 (25) STR 231 (MP); and 2013 (30) STR 29 (Ker.). In the light of the law so declared, the scope of the provisions of Section 65 (105) (zzzz) cannot be disputed before us. In the circumstances, the adjudication order impugned the substantive appeal is impeccable. We therefore find no justification for waiver of pre-deposit, exercising discretion under Section 35 (F) of the Central Excise Act, 1944.
3. Ld. Consultant appearing for the Petitioner/Appellant has brought to our notice an Interim Order passed by the Hon'ble Supreme Court on 14.10.2011, in a batch of civil appeals. This Order is reported in 2011-TIOL-104-SC-ST. These appeals are preferred against the judgment; of the Bombay High Court in Retailers Association of India vs. UOI & Ors.-2011 (23) STR-561 (Bom.) = (2011-TIOL-523-HC-MUM-ST). The Bombay High Court rejected the challenge to the constitutional validity of imposition of service tax under Section 65(105)(zzzz) of the Act and further held that the retrospective amendment to the said provision, by provisions of Finance Act, 2010 with effect from 01.06.2007 is also valid.
4. Ld. Consultant has stated before us that the Writ Petitions before the Bombay High Court and the appeals against the judgment of that court to the Supreme Court were by recipients of the taxable service of "renting of immovable property/association of such recipients and not by the providers of such taxable service"; and that the Petitioner/Appellant herein is not a party to the judgment of the Bombay High Court nor is an appellant before the Supreme Court.
5. Under the provisions of the Act, the liability to remit service tax on the provision of the taxable service of "renting of immovable property" is on the service provider and not on the service recipient. Though it is contended on behalf of the Petitioner that as a result of the pending litigation before the Supreme Court, the recipient of the taxable service provided by the Petitioner has not reimbursed the Petitioner, the service tax component, this contention does not eclipse the statutory liability of the petitioner to remit the service tax due.
6. In this Application, the only issue before us is whether the obligation of the Petitioner to predeposit the liability to service tax, interest and penalty, as assessed in the impugned Adjudication Order, under the provisions of Section 35F of the Central Excise Act, 1944, ought to be waived, exercising discretion under that provision. Since in the light of the declared law as at present, and in particular, the retrospectively amended provisions of Section 65(105)(zzzz) of the Act, the Adjudication Order and the liability of the Petitioner determined thereunder, suffer from no infirmity whatsoever, we find no justification or warrant for exercising discretion to waive the pre-deposit requirement. The discretion conferred on this Tribunal is the discretion of law and not the subjective discretion of incumbents of the Tribunal.
7. On the above analysis, we find no justification for grant of waiver of predeposit of the adjudicated liability. We consequently direct the Petitioner to remit the adjudicated liability to the credit of Revenue within six weeks from today and report compliance by 11.11.2013. In default of deposit or in reporting compliance by the stipulated date, the Appeal shall stand rejected for failure of predeposit. Ld. Consultant for the Petitioner is present in the court, has noted this Order and this constitutes sufficient intimation to the Petitioner of its obligation to this Tribunal.
8. The Application for waiver and stay is disposed of in the above terms.
(Dictated and pronounced in the open court)
2013-TIOL-64-SC-IT-LB
IN THE SUPREME COURT OF INDIA
Civil Appeal No. 10601 of 2013
[Arising out of SLP (C) No. 20381 of 2012]
[Arising out of SLP (C) No. 20381 of 2012]
CHIRONJILAL SHARMA HUF
Vs
UNION OF INDIA AND OTHERS
R M Lodha, Madan B Lokur And Kurian Joseph,JJ
Dated : November 26, 2013
Appellant Rep. by : Mr R V Yogeswaran
Respondent Rep. by : Mr Bhargava V Desai
Respondent Rep. by : Mr Bhargava V Desai
Income tax - Sections 132B(4)(b) & (5), 240, 244A - refund - simple interest - Whether in case of refund of excess amount the provisions of Sec 132(4)(b) have any application to decide the interest liability for the pre-assessment period - Whether provisions of Sec 132(4)(b) deal with pre-assessment period and provisions of Ss 240 and 244A deal with post-assessment period.
The Revenue conducted a Search & Seizure on the premises of the assessee, an HUF, and seized cash of Rs. 2,35,000/-. On 31.5.1990, an order under Section 132(5) of the Income Tax Act, 1961 came to be passed. The Assessing Officer calculated the tax liability and the cash seized in the search from the assessee's house was appropriated. However, the order of the Assessing Officer was finally set-aside by the Income Tax Appellate Tribunal on 20.2.2004. The Revenue accepted the order of the Tribunal. Consequently, the appellant was refunded the amount of Rs. 2,35,000/- along with interest from 4.3.1994 (date of last of the regular assessments by the Assessing Officer) until the date of refund.
The assessee claimed that he was entitled to interest under Section 132B(4)(b) of the Act which was holding the field at the relevant time for the period from expiry of period of six month's from the date of order under Section 132(5) to the date of regular assessment order. In other words, the order under Section 132(5) of the Act having been passed on 31.5.1990, six months expired on 30.11.1990 and the last of the regular assessments was done on 4.3.1994, the assessee claimed interest under Section 132B(4)(b) of the Act from 1.12.1990 to 4.3.1994.
Having heard the parties, the Apex Court held that,
++ a close look at the provisions and, particularly, clause (b) of Section 132B(4) of the Act clearly shows that where the aggregate of the amounts retained under Section 132 of the Act exceeds the amounts required to meet the liability under Section 132B(1)(i), the Department is liable to pay simple interest at the rate of fifteen percent on expiry of six months from the date of the order under Section 132(5) of the Act to the date of the regular assessment or re-assessment or the last of such assessments or reassessments, as the case may be. It is true that in the regular assessment done by the Assessing Officer, the tax liability for the relevant period was found to be higher and, accordingly, the seized cash under Section 132 of the Act was appropriated against the assessee's tax liability but the fact of the matter is that the order of the Assessing Officer was over-turned by the Tribunal finally on 20.2.2004. As a matter of fact, the interest for the post assessment period i.e. from 4.3.1994 until refund on the excess amount has already been paid by the department to the assessee. The department denied the payment of interest to the assessee under Section 132B(4)(b), according to Mr. Arijit Prasad, the counsel for the revenue on the ground that the refund of excess amount is governed by Section 240 of the Act and Section 132B(4)(b) of the Act has no application;
++ but, in our view, Section 132B(4)(b) deals with pre-assessment period and there is no conflict between this provision and Section 240 or for that matter 244(A). The former deals with pre-assessment period in the matters of search and seizure and the later deals with post assessment period as per the order in appeal;
++ the view of the department is not right on the plain reading of Section 132B(4)(b) of the Act. We, accordingly, allow the appeal and set-aside the impugned order and hold that the appellant is entitled to the simple interest at the rate of fifteen percent per annum under Section 132B(4)(b) of the Act from 1.12.1990 to 4.3.1994.
++ the revenue shall calculate the interest payable to the assessee as above and pay the same to the assessee within two months from today. No costs.
Assessee's appeal allowed
JUDGEMENT
Per : R M Lodha :
Leave granted.
2. The brief facts necessary for consideration of the issue raised in the appeal are these: In the search conducted in the house of the appellant on 31.1.1990, a cash amount of Rs. 2,35,000/- was recovered. On 31.5.1990, an order under Section 132(5) of the Income Tax Act, 1961 (for short "the Act") came to be passed. The Assessing Officer calculated the tax liability and the cash seized in the search from the appellant's house was appropriated. However, the order of the Assessing Officer was finally set-aside by the Income Tax Appellate Tribunal (for short "the Tribunal") on 20.2.2004. The revenue accepted the order of the Tribunal. Consequently, the appellant has been refunded the amount of Rs. 2,35,000/- along with interest from 4.3.1994 (date of last of the regular assessments by the Assessing Officer) until the date of refund.
3. The appellant (assessee) claims that he is entitled to interest under Section 132B(4)(b) of the Act which was holding the field at the relevant time for the period from expiry of period of six month's from the date of order under Section 132(5) to the date of regular assessment order. In other words, the order under Section 132(5) of the Act having been passed on 31.5.1990, six months expired on 30.11.1990 and the last of the regular assessments was done on 4.3.1994, the assessee claims interest under Section 132B(4)(b) of the Act from 1.12.1990 to 4.3.1994.
4. Section 132 of the Act deals with search and seizure. Sub-section (5) thereof, which is relevant for the purposes of the present appeal, reads as under:
(5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132A and 132B referred to as the assets) is seized under sub-section (1) or sub-section (1A), as a result of a search initiated or requisition made before the Ist day of July, 1995, the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Joint Commissioner)-(i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him;(ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Income Income-Tax Act, 1922 (11 of 1922), or this Act;(iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian Income-Tax Act, 1922 (11 of 1922), or this Act, as if the order had been the order of regular assessment;(iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in clause (a) of sub-section (1) of section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets/or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized:Provided that if, after taking into account the materials available with him, the Income Tax Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total amount chargeable to tax at the rates in force in the financial year in which the assets were seized and may also determine the interest or penalty, if any, payable or imposable accordingly:Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in clauses (ii), (iia) and (iii) or any part thereof, the Income-Tax Officer may, with the previous approval of the Chief Commissioner or Commissioner, release the assets or such part thereof as he may deem fit in the circumstances of the case."
5. Section 132B deals with the payment of interest on delayed assessment. Omitting the unnecessary part, the relevant provisions of Section 132B(4)(a) and(b) of the Act read as under:
132B: Application of retained assets........(4)(a) The Central Government shall pay simple interest at the rate of fifteen per cent per annum on the amount by which the aggregate of money retained under Section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause 3 of sub-section (5) of that section exceeds the aggregate of the amounts
required to meet the liability referred to in clause (i) of sub--section (1) of this section.(b) Such interest shall run from the date immediately following the expiry of the period of six months from the date of the order under sub-section 5 of section 132 to the date of the regular assessment or reassessment referred to in clause (i) of sub-section (1) or, as the case may be, to the date of last of such assessments or re-assessments.
6. A close look at the above provisions and, particularly, clause (b) of Section 132B(4) of the Act clearly shows that where the aggregate of the amounts retained under Section 132 of the Act exceeds the amounts required to meet the liability under Section 132B(1)(i), the department is liable to pay simple interest at the rate of fifteen percent on expiry of six months from the date of the order under Section 132(5) of the Act to the date of the regular assessment or re-assessment or the last of such assessments or reassessments, as the case may be. It is true that in the regular assessment done by the Assessing Officer, the tax liability for the relevant period was found to be higher and, accordingly, the seized cash under Section 132 of the Act was appropriated against the assessee's tax liability but the fact of the matter is that the order of the Assessing Officer was over-turned by the Tribunal finally on 20.2.2004. As a matter of fact, the interest for the post assessment period i.e. from 4.3.1994 until refund on the excess amount has already been paid by the department to the assessee. The department denied the payment of interest to the assessee under Section 132B(4)(b), according to Mr. Arijit Prasad, learned counsel for the revenue on the ground that the refund of excess amount is governed by Section 240 of the Act and Section 132B(4)(b) of the Act has no application. But, in our view, Section 132B(4)(b) deals with pre-assessment period and there is no conflict between this provision and Section 240 or for that matter 244(A). The former deals with pre-assessment period in the matters of search and seizure and the later deals with post assessment period as per the order in appeal.
7. The view of the department is not right on the plain reading of Section 132B(4)(b) of the Act as indicated above.
8. We, accordingly, allow the appeal and set-aside the impugned order and hold that the appellant is entitled to the simple interest at the rate of fifteen percent per annum under Section 132B(4)(b) of the Act from 1.12.1990 to 4.3.1994.
9. The revenue shall calculate the interest payable to the assessee as above and pay the same to the appellant (assessee) within two months from today. No costs.
2013-TIOL-1784-CESTAT-MAD
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
SOUTH ZONAL BENCH, CHENNAI
Application No.E/S/40662/13
E/40958/13
E/40958/13
ARUPPUKOTTAI SRI JAYAVILAS LTD
Vs
COMMISSIONER OF CENTRAL EXCISE, MADURAI
Date of Hearing: 12.9.2013
Date of Decision: 12.9.2013
Date of Decision: 12.9.2013
Appellant Rep by: Shri M Kannan, Adv.
Respondent Rep by: Shri K P Muralidharan, Supdt. (AR)
Respondent Rep by: Shri K P Muralidharan, Supdt. (AR)
CORAM: Mathew John, Member (T)
Central Excise-Stay/Dispensation of pre-deposit - Cenvat Credit-Admissibility of credit on Furnace Oil used in the manufacture of electricity further used in the manufacture of exempted goods - Conflicting rulings by Apex Court referred to Larger Bench - Issue involves legal interpretation - Pre deposit of dues arising from impugned order waived and Stay granted during pendency of appeal.
Stay granted
Cases cited:
1. CCE vs. Gujarat Narmada Fertilizers Co. Ltd. - (2008-TIOL-252-SC-CX)….Referred (Para 2)
2. CCE Vs. Gujarat Narmada Fertilizers Co. Ltd. - (2009-TIOL-96-SC-CX)….Referred (Para 2)
3. CCE Vs. Gujarat Narmada Valley Fertilizers Co. Ltd. - (2012-TIOL-117-SC-CX)….Referred (Para 2)
MISC ORDER NO.42221/2013
Per: Mathew John:
1. The applicant is a manufacturer of dutiable and exempted products. They were using furnace oil for generation of electricity which was utilized in further manufacture of exempted goods as also dutiable goods. They were taking full Cenvat credit of duty paid on furnace oil. Revenue was of the view that such credit should be taken only in respect of furnace oil going into the production of dutiable products. This has been a matter under dispute between the Revenue and assessees for a long period because of the provisions in Rule 6(2) of Cenvat Credit Rules 2001 and Cenvat Credit Rules 2002 gave room for doubt. The said sub-rule is reproduced below:-
"(2) where a manufacturer avails of CENVAT credit in respect of any inputs, except inputs intended to be used as fuel, and manufactures such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts of receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which intended for use in the manufacture of dutiable goods."
2. There have been conflicting decisions of the Hon. Apex Court on this issue. In the case ofCCE vs. Gujarat Narmada Fertilizers Co. Ltd. - 2008 (229) ELT 9 (SC) = (2008-TIOL-252-SC-CX), the Hon. Apex Court took the view that credit could be taken on fuels used in exempted goods. However, in another case of CCE Vs. Gujarat Narmada Fertilizers Co. Ltd. - 2009 (240) ELT 661 (SC) = (2009-TIOL-96-SC-CX), apex court took the view that cenvat credit could not be taken on quantity of fuel used in the manufacture of exempted goods. Further recently in the case of CCE Vs. Gujarat Narmada Valley Fertilizers Co. Ltd. - 2012 (286) ELT 481 (SC) = (2012-TIOL-117-SC-CX), the matter stands referred to a Larger Bench of the Hon. Apex Court in view of conflicting decisions of the Hon. Apex Court on the issue. The Ld. Advocate pleads that since there is doubt expressed by the Hon. Apex Court itself on the issue, his stay petition should be allowed.
3. Ld. AR for Revenue relies on the decisions of the Hon. Apex Court to the effect that assessee is not eligible for credit on fuel used for manufacture of exempted goods.
4. Considering the fact that there are conflicting decisions of the Hon. Apex Court on the same issue and the latest position is that the matter stands referred to Larger Bench of the Hon. Apex Court, I consider it proper to waive pre-deposit of dues arising from the impugned order for admission of appeal. It is so ordered. Further, there shall be stay on collection of such dues during pendency of the appeal.
(Dictated and pronounced in open court)
2013-TIOL-1774-CESTAT-AHM
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, AHMEDABAD
WEST ZONAL BENCH, AHMEDABAD
Appeal No.E/1372/2011-SM
Arising out of the Order-in-Appeal No.Commr.(A)/300/VDR-II/2011 Dated: 29.8.2011
Passed by the Commissioner of Central Excise & Customs (Appeals), Vadodara
Passed by the Commissioner of Central Excise & Customs (Appeals), Vadodara
Date of Hearing: 17.6.2013
Date of Decision: 17.6.2013
Date of Decision: 17.6.2013
M/s SUN PHARMACEUTICALS INDUSTRIES
Vs
COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, VADODARA
Appellant Rep by: None
Respondent Rep by: Sh P N Sarvaiya, AR
Respondent Rep by: Sh P N Sarvaiya, AR
CORAM: M V Ravindran, Member (J)
CENVAT - Ineligible credit reversed upon being pointed out by Audit - later SCN issued for imposition of penalty and interest - equivalent penalty imposed along with interest and order upheld by Commissioner(A) - even as per the provisions of section 11A(2B) of the CEA, 1944, interest liability needs to be discharged by an assessee when he reverses an amount on his own or being pointed out by an officer - Imposition of Interest upheld: CESTAT [ para 5]
Penalty u/r 15 of CCR, 2004 - On the perusal of the SCN, though there is allegation of suppression or fraud committed by the appellant for taking CENVAT credit, on deeper perusal of the SCN, it is found that the said SCN does not indicate any reasons for invoking the extended period of limitation - Appellate Authority cannot justify the imposition of penalty by recording reasoning which were not invoked in the show-cause notice - equivalent penalty imposed set aside - Appeal disposed of: CESTAT [para 6]
Appeal disposed of
Case cited:
Union of India vs. Rajasthan Spinning & Weaving Mills = (2009-TIOL-63-SC-CX) … para 6…followed
ORDER NO.A/11248/WZB/AHD/2013
Per: M V Ravindran:
This Appeal is directed against Order-in-Appeal No.Commr.(A)/300/VDR-II/2011 dated 29.08.11.
2. The brief facts that arises for considerations are appellant herein is manufacturer of P & P Medicines falling under chapter of the Central Excise Tariff Act, 1985; appellant availing cenvat credit of Central Excise duty paid on inputs and service tax paid on the services received. During the course of audit of the records of the appellant it was noticed that appellant had availed ineligible cenvat credit which are utilised for the manufacturer of exempted products. On being pointed out, appellant reversed the cenvat credit (which is noted in the order-in-original as well as by the first Appellate Authority). Subsequently, show-cause-notice was issued for demand of interest and imposition of penalty which culminated into confirmed demand of interest and imposition of penalty. First Appellate Authority also die not find any merits in the appeal filed by the appellant and upheld the order-in-original.
3. Heard both sides and perused the records.
4. On perusal of the records, it transpires that the appellant is in appeal only against the demand of the interest of an amount of Rs. 27,366/- on the credit wrongly availed but reversed; and penalty of Rs. 3,24,316/- imposed under Rule 15 of the Cenvat Credit Rules, 2003.
5. As regards the demand of interest of Rs. 27,366/- find that though the appellant has argued at length on non imposition of interest, in my view, as the appellant on being pointed out reversed the amount and is not contesting the issue on merits, the interest liability gets fastened; egen as per the provisions of section 11A(2B), interest liability needs to be discharged by an assessee when he reversed an amount on his own or being pointed out by an office. In the facts and circumstances of this case, I find that interest liability of Rs. 27,366/- for improper availment of cenvat credit needs to be upheld and I do so. To that extent appeal filed by the appellant is rejected.
6. As regards the penalty imposed by the Adjudicating Authority under the provision of Rule 15 of the Cenvat Credit Rules, 2004, I find that the said penalty is unwarranted. The Adjudicating Authority has not given any reason for imposing equivalent amount as penalty. The First Appellate Authority has recorded that the appellant herein has suppressed and indulged in committing fraud which is unsubstantiated. On the perusal of the show-cause-notice though there is allegation of suppression or fraud committed by the appellant herein for taking cenvat credit, on deeper perusal of the show-cause-notice, I find that the said show-cause-notice does not indicate any reasons for invoking the extended period of limitation. In my view, in the absence of any direct allegation in the show-cause-notices as to their being suppression of facts or committing fraud; I find that the judgment of the Hon'ble Supreme Court in the case of Union of India vs. Rajasthan Spinning & Weaving Mills [2009 (238) E.L.T. 3 (S.C.)] = (2009-TIOL-63-SC-CX) directly cover the issue in favour of the assessee. In my view first Appellate Authority cannot justify the imposition of penalty by recording reasoning which were not invoked in the show-cause notice. In view of this the equivalent penalty imposed on the appellant is improper and needs to be set aside. The appeal to the extend it challenges the upholding of imposition of equivalent of penalty is set aside and the impugned order to that extent is set aside.
7. In short, the liability to interest is upheld and penalty imposed on the appellant is set aside.
8. The appeal is disposed of as indicated hereinabove.
(Pronounced in the Court)
2013-TIOL-1773-CESTAT-MAD-LB
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
SOUTH ZONAL BENCH AT CHENNAI
| Case Tracker |
| CCE Vs NAVODHAYA PLASTIC INDUSTRIES LTD [CESTAT] |
Appeal No.E/392/2008
[Arising out of Order-in-Appeal No.01/2008(H-III) (D) (CE) dt. 14.02.2008
passed by the Commissioner of Customs, Excise & Service Tax (Appeals-III), Hyderabad]
passed by the Commissioner of Customs, Excise & Service Tax (Appeals-III), Hyderabad]
Date of Hearing: 18.11.2013
Date of Decision: 18.11.2013
Date of Decision: 18.11.2013
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD-III
Vs
NAVODHAYA PLASTIC INDUSTRIES LTD
Appellant Rep by : Shri Ganesha Haavanur, Additional Commissioner (AR)
Respondent Rep by : Shri G. Natarajan, Adv.
Respondent Rep by : Shri G. Natarajan, Adv.
CORAM: G Raghuram, President (J)
P K Das, Member (J)
Mathew John, Member (T)
P K Das, Member (J)
Mathew John, Member (T)
Central Excise - CENVAT Credit - Capital Goods cleared as such: The use of capital goods is to spread over many years. A decision to the effect that assessees can bring in capital goods, use it for a few days and then remove it without reversal of any Cenvat credit taken is not consistent with the overall scheme of Cenvat credit and can lead to abuse of the scheme. On a conjoint reading of Rule 3(4) with the provision added to Rule 3(5) with effect from 13.11.2007, the Board's Circular dated 01.07.2002 along with Board's letter dated 26.05.1993, it is quite clear that the inputs or capital goods when disposed of after putting it into some use over a period of time, then the assessee would be entitled to reverse whatever Cenvat credit availed on the value to be assessed on the date of such subsequent sale as capital goods.
Reference Answered
Cases cited:
1. Modernova Plastyles Pvt. Ltd. Vs. CCE- ((2008-TIOL-1771-CESTAT-MUM-LB) (para 2)
3. CCE Chandigarh Vs Raghav Alloys Ltd. (2010-TIOL-881-HC-P&H-CX) (para 3 (2)
4. CCE Salem Vs Rogini Mills Ltd. (2011-TIOL-05-HC-MAD-CX) (Para 3(3))
5. Harsh International (Khaini) Pvt. Ltd. Vs CCE (2012-TIOL-446-HC-DEL-CX) (Para 3(4))
MISC Order No.42706/2013
Per: Mathew John :
1. In this proceeding, a reference made by a Single Member Bench of the Tribunal at Bangalore to a Larger Bench for deciding an issue is being considered. The reference was made by MISC Order No.260/2010 dt. 30.4.2010 [ 2010-TIOL-1450-CESTAT-BANG ].
2. The relevant facts of the case that arise for consideration are that the respondents are manufacturers of PVC pipes falling under Chapter 39 of the Schedule of the Central Excise Tariff Act, 1985. They had taken cenvat credit on certain capital goods during 2004 and 2005 and they had removed such capital goods vide invoice dt. 26.6.2006 by paying duty on transaction value. Revenue was of the view that as per Rule 3 (5) of Cenvat Credit Rules 2004 when capital goods on which Cenvat credit had been taken were removed from the factory, the manufacturer of the final product shall pay an amount equal to the credit availed in respect of such capital goods. A show cause notice was issued in this regard demanding difference between credit taken and duty paid on transaction value at the time of clearance. The adjudicating authority dropped the demand. This order has been affirmed by Commissioner (Appeal) also. Against the order of the Commissioner (Appeal) Revenue filed appeal before the Tribunal. While hearing the appeal, Learned Member of the Tribunal noticed that there were two decisions of the Tribunal on the issue one of the Larger Bench of the Tribunal in Modernova Plastyles Pvt. Ltd. - CCE- 2008 (232) E.L.T. 29 (Tri. - LB) = (2008-TIOL-1771-CESTAT-MUM-LB) and another in the case of CCE Vs. Geeta Industries Pvt. Ltd. - 2008 (232) E.L.T. 350 (Tri. - Del.) of a Division Bench of the Tribunal. Apparently the decision of the Larger Bench had not decided some aspect of the dispute in question and therefore Learned Member has referred the following issues to be decided by this Larger Bench:
(i) Whether the decision of Larger Bench in the case of Modernova Plastyles Pvt. Ltd. is silent on the depreciation aspect to be granted on the capital goods removed after use and proportionate reversal of credit and whether the same needs to be addressed to by a further Larger Bench.
(ii) Whether the decision of the Division Bench in the case of Geeta Industries Pvt. Ltd. has correctly granted the benefit of depreciation and subsequent proportionate reversal of credit, in the absence of specific provisions.
3. After the Single Member Bench made this reference vide Misc. Order No.260/10 dt. 30-04-2010, the issue has been considered by different High Courts in the following cases:-
1. Commissioner v. Cummins India Ltd. - 2009 (234) E.L.T. A120 (Bom.)]2. CCE Chandigarh Vs Raghav Alloys Ltd. - 2011 (268) ELT 161 (P&H) = (2010-TIOL-881-HC-P&H-CX);3. CCE Salem Vs Rogini Mills Ltd. - 2011 (264) ELT 367 (Mad.) = (2011-TIOL-05-HC-MAD-CX) and4. Harsh International (Khaini) Pvt. Ltd. Vs CCE - 2012 (281) ELT 714 (Del.) = (2012-TIOL-446-HC-DEL-CX).
4. In all the above decisions, the view taken is that when capital goods are removed after use, it cannot be considered as a case of removal of goods "as such" for the purpose of reversing the entire credit taken at the time of receiving the capital goods as prescribed in Rule 3 (5) of CCR 2004.
5. However, on the question whether there is any need for reversal of any part of the credit that is taken has been answered differently in the above decisions. In the case of Cummins India credit reversed based on transaction value was approved by the Bombay High Court. This was a case where the capital goods were cleared as scrap. In the case of Raghav Alloys (supra) the Hon. Punjab and Haryana High Court ordered reversal of credit after allowing deduction at the rate of 2.5% of the credit for each quarter of use of the machine as prescribed under C.B.E. & C. Circular No. 643/34/2002-CX., dated 1-7-2002. In the case of Rogini Mills Ltd. (supra), the Madras High Court also upheld a decision of the Tribunal ordering reversal of Cenvat credit of 2.5% for each quarter of a year from the date of taking of Cenvat credit. However, the Hon'ble Delhi High Court in the case of Harsh International (Khaini) Pvt. Ltd. (supra) held that there was no provision in the Cenvat Credit Rules during the relevant period for reversal of any amount when used capital goods were removed and therefore no demand was sustainable. Thus, though there is agreement on the issue that the full credit taken at the time of receipt of the goods need not be reversed, the views of different High Courts has differed in the matter of quantum of credit to be reversed.
6. We have heard both sides and examined the legal provisions and the decisions cited above. The dispute is for the period June 2006. During the period 01-03-97 to 01-04-2000 Rules applicable for such situation was under:
57S. Manner of utilisation of the capital goods and the credit allowed in respect of duty paid thereon. - (1) The capital goods in respect of which credit of specified duty has been allowed under rule 57Q may be -
(i) used in the factory of the manufacturer of the final products; or(ii) removed, after intimating the Assistant Commissioner of Central Excise, having jurisdiction over the factory and after obtaining dated acknowledgement of the same, from the factory for home consumption or for export, on payment of appropriate duty of excise leviable thereon or for export under bond, as if such capital goods have been manufactured in the said factory.(2) In a case, -(a) where a capital goods are removed without being used from the factory for home consumption, on payment of duty, or for export on payment of duty of excise, such duty of excise shall in no case be less than the amount of credit that has been allowed in respect of such capital goods under rule 57Q:(b) where capital goods are removed after being used in the factory for home consumption on payment of duty of excise or for export under rebate on payment of duty of excise, such duty of excise shall be calculated by allowing deduction of 2.5 per cent of credit taken for each quarter of a year of use or fraction thereof, from the date of availing credit under rule 57Q;
7. During 01-09-2004 to 13-11-2007 the provision in force read as under:
With effect from 10.09.2004, when new Cenvat Credit Rules, 2004 were introduced, the relevant rule, i.e. Rule 3 (5), read as below:
When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9.
8. During the period when similar provision was in force CBEC had issued Circular No. 643/34/2002-CX., dated 1-7-2002 to the effect that credit amount to be reversed will be reduced by 2.5% per quarter of use of the machinery.
9. After 13-11-2007 the applicable provisions read as under:
With effect from 13.11.2007, the following provision has been introduced in Rule 3 (5) ibid.
Provided also that if the capital goods on which CENVAT credit has been taken are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT credit taken on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking the Cenvat Credit.
10. The use of capital goods is to spread over many years. A decision to the effect that assessees can bring in capital goods, use it for a few days and then remove it without reversal of any Cenvat credit taken is not consistent with the overall scheme of Cenvat credit and can lead to abuse of the scheme. Considering this aspect and the legislative history and the circular of CBEC, we are of the view that we should respectfully follow the decision of the Hon'ble Madras High Court in the case of Commissioner of Central Excise, Salem Vs Rogini Mills Ltd. (supra) and the reference made to this Larger Bench is answered accordingly.
11. The matter may be placed before Regular Bench of the Tribunal for disposal of appeal in accordance with our answer to the reference order, spelt out above.
(Operative part pronounced in open court on 18-11-2013)
2013-TIOL-44-SC-SERVICE
IN THE SUPREME COURT OF INDIA
CIVIL APPEAL No. 6770 OF 2013
(Arising out of Special Leave Petition (Civil) No. 1427 of 2009)
C.A. No. 6771/2013
(arising out of SLP(C) No. 1428 of 2009)
STATE OF JHARKHAND & ORS
Vs
JITENDRA KUMAR SRIVASTAVA & ANR
K S Radhakrishnan And A K Sikri, JJ
Dated: August 14, 2013
Appellant Rep by: Mr Anil K Jha
Respondents Rep by: Ms Sushma Suri
Respondents Rep by: Ms Sushma Suri
Government cannot withhold Gratuity and Pension during the pendency of the departmental proceeding or criminal proceeding: It is an accepted position that gratuity and pension are not the bounties. An employee earns these benefits by dint of his long, continuous, faithful and un-blemished service.
The antiquated notion of pension being a bounty a gratituous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through Court has been swept under the carpet by the decision of the Constitution Bench in Deoki Nandan Prasad v. State of Bihar and Ors. [1971] Su. S.C.R. 634 wherein this Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the rules and a Government servant coming within those rules is entitled to claim pension. It was further held that the grant of pension does not depend upon any one's discretion.
It is thus hard earned benefit which accrues to an employee and is in the nature of "property". This right to property cannot be taken away without the due process of law as per the provisions of Article 300 A of the Constitution of India.
JUDGEMENT
Per: A K Sikri:
1. Leave granted.
2. Crisp and short question which arises for consideration in these cases is as to whether, in the absence of any provision in the Pension Rules, the State Government can withhold a part of pension and/or gratuity during the pendency of departmental/ criminal proceedings? The High Court has - answered this question, vide the impugned judgment, in the negative and hence directed the appellant to release the withheld dues to the respondent. Not happy with this outcome, the State of Jharkhand has preferred this appeal.
3. For the sake of convenience we will gather the facts from Civil Appeal arising out of SLP(Civil) No. 1427 of 2009. Only facts which need to be noted, giving rise to the aforesaid questions of law, are the following:
The respondent was working in the Department of Animal Husbandry and Fisheries. He joined the said Department in the Government of Bihar on 2.11.1966. On 16.4.1996, two cases were registered against him under various Sections of the Indian Penal Code as well as Prevention of Corruption Act, alleging serious financial irregularities during the years 1990-1991, 1991-1992 when he was posted as Artificial Insemination Officer, Ranchi. On promulgation of the Bihar Reorganisation Act, 2000, State of Jharkhand (Appellant herein) came into existence and the Respondent became the employee of the appellant State. Prosecution, in respect of the aforesaid two criminal cases against the respondent is pending. On 30th January, 2002, the appellant also ordered initiation of disciplinary action against him. While these proceedings were still pending, on attaining - the age of superannuation, the respondent retired from the post of Artificial Insemination Officer, Ranchi on 31.08.2002. The appellant sanctioned the release and payment of General Provident Fund on 25.5.2003. Thereafter, on 18.3.2004, the Appellant sanctioned 90 percent provisional pension to the respondent. Remaining 10 percent pension and salary of his suspension period (30.1.2002 to 30.8.2002) was withheld pending outcome of the criminal cases/ departmental inquiry against him. He was also not paid leave encashment and gratuity.
4. Feeling aggrieved with this action of the withholding of his 10 percent of the pension and non-release of the other aforesaid dues, the respondent preferred the Writ Petition before the High Court of Jharkhand. This Writ Petition was disposed of by the High Court by remitting the case back to the Department to decide the claim of the petitioner for payment of provisional pension, gratuity etc. in terms of Resolution No. 3014 dated 31.7.1980. The appellant, thereafter, considered the representation of the respondent but rejected the same vide orders dated 16.3.2006. The respondent challenged the rejection by filing another Writ Petition before the High Court. The said petition was dismissed by the learned Single Judge. The respondent filed Intra Court Appeal which has been allowed by the Division Bench vide the -impugned orders dated 31.10.2007. The Division Bench has held that the question is squarely covered by the full Bench decision of that Court in the case of Dr. Dudh Nath Pandey vs. State of Jharkhand and Ors. 2007 (4) JCR 1. In the said full Bench Judgment dated 28.8.2007, after detailed discussions on the various nuances of the subject matter, the High Court has held:
"To sum up the answer for the two questions are as follows:(i) Under Rule 43(a) and 43(b) of Bihar Pension Rules, there is no power for the Government to withhold Gratuity and Pension during the pendency of the departmental proceeding or criminal proceeding. It does not give any power to withhold Leave Encashment at any stage either prior to the proceeding or after conclusion of the Proceeding.(ii) The circular, issued by the Finance Department, referring to the withholding of the leave encashment would not apply to the present facts of the case as it has no sanctity of law".
5. Mr. Amarendra Sharan, the learned Senior Counsel appearing for the petitioner accepted the fact that in so far as the Pension Rules are concerned, there is no provision for withholding a part of pension or gratuity. He, however, submitted that there are administrative instructions which permit withholding of a part of pension and gratuity. His submission was that when the rules are silent on a particular aspect, gap can be filled by the - administrative instructions which was well settled legal position, laid down way back in the year 1968 by the Constitution Bench Judgment of this Court in Sant Ram Sharma vs. Union of India 1968 (1) SCR 111. He, thus, argued that the High Court has committed an error in holding that there was no power with the Government to withhold the part of pension or gratuity, pending disciplinary/criminal proceedings.
6. The aforesaid arguments of the learned Senior Counsel based on the judgment in Sant Ram Sharma would not cut any ice in so far as present case is concerned, because of the reason this case has no applicability in the given case. Sant Ram judgment governs the field of administrative law wherein the Constitution Bench laid down the principle that the rules framed by the authority in exercise of powers contained in an enactment, would also have statutory force. Though the administration can issue administrative instructions for the smooth administrative function, such administrative instructions cannot supplant the rules. However, these administrative instructions can supplement the statutory rules by taking care of those situations where the statutory rules are silent. This ratio of that judgment is narrated in the following manner:
"It is true that there is no specific provision in the Rules laying down the principle of promotion of junior or senior grade officers to selection grade posts. But that does not mean that till statutory rules are framed in this behalf the Government cannot issue administrative instructions regarding the principle to be followed in promotions of the officers concerned to selection grade posts. It is true that Government cannot amend or supersede statutory rules by administrative instructions, but if the rules are silent on any particular point Government can fill up the gaps and supplement the rules and issue instructions and inconsistent with the rules already framed".
There cannot be any quarrel on this exposition of law which is well grounded in a series of judgments pronounced post Sant Ram Sharma case as well. However, the question which is posed in the present case is altogether different.
7. It is an accepted position that gratuity and pension are not the bounties. An employee earns these benefits by dint of his long, continuous, faithful and un-blemished service. Conceptually it is so lucidly described in D.S. Nakara and Ors. Vs. Union of India ; (1983) 1 SCC 305 by Justice D.A. Desai, who spoke for the Bench, in his inimitable style, in the following words:
"The approach of the respondents raises a vital and none too easy of answer, question as to why pension is paid. And why was it required to be liberalised? Is the employer, which expression will include even the State, bound to pay pension?Is there any obligation on the employer to provide for the erstwhile employee even after the contract of employment has come to an end and the employee has ceased to render service?
What is a pension? What are the goals of pension? What public interest or purpose, if any, it seeks to serve? If it does seek to serve some public purpose, is it thwarted by such artificial division of retirement pre and post a certain date? We need seek answer to these and incidental questions so as to render just justice between parties to this petition.
The antiquated notion of pension being a bounty a gratituous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through Court has been swept under the carpet by the decision of the Constitution Bench in Deoki Nandan Prasad v. State of Bihar and Ors. [1971] Su. S.C.R. 634 wherein this Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the rules and a Government servant coming within those rules is entitled to claim pension. It was further held that the grant of pension does not depend upon any one's discretion. It is only for the purpose of quantifying the amount having regard to service and other allied maters that it may be necessary for the authority to pass an order to that effect but the right to receive pension flows to the officer not because of any such order but by virtue of the rules. This view was reaffirmed in State of Punjab and Anr. V. Iqbal Singh (1976)IILLJ 377 SC".
8. It is thus hard earned benefit which accrues to an employee and is in the nature of "property". This right to property cannot be taken away without the due process of law as per the provisions of Article 300 A of the Constitution of India.
9. Having explained the legal position, let us first discuss the rules relating to release of Pension. The present case is admittedly governed by - Bihar Pension Rules, as applicable to the State of Jharkhand. Rule 43(b) of the said Pension Rules confers power on the State Government to withhold or withdraw a pension or part thereof under certain circumstances. This Rule 43(b) reads as under:
"43(b) The State Government further reserve to themselves the right of withholding or withdrawing a pension or any part of it, whether permanently or for specified period, and the right of ordering the recovery from a pension of the whole or part of any pecuniary loss caused to Government if the pensioner is found in departmental or judicial proceeding to have been guilty to grave misconduct, or to have caused pecuniary loss to Government misconduct, or to have caused pecuniary loss to Government by misconduct or negligence, during his service including service rendered on re-employment after retirement".
From the reading of the aforesaid Rule 43(b), following position emerges:-
(i) The State Government has the power to withhold or withdraw pension or any part of it when the pensioner is found to be guilty of grave misconduct either in a departmental proceeding or judicial proceeding.(ii) This provision does not empower the State to invoke the said power while the department proceeding or judicial proceeding are pending.(iii) The power of withholding leave encashment is not provided under this rule to the State irrespective of the result of the above proceedings.(iv) This power can be invoked only when the proceedings are concluded finding guilty and not before.
10. There is also a Proviso to Rule 43(b), which provides that:-
"A. Such departmental proceedings, if not instituted while the Government Servant was on duty either before retirement or during re-employment.i. Shall not be instituted save with the sanction of the State Government.ii. Shall be in respect of an event which took place not more than four years before the institution of such proceedings.iii. Shall be conducted by such authority and at such place or places as the State Government may direct and in accordance with the procedure applicable to proceedings on which an order of dismissal from service may be made:-B. Judicial proceedings, if not instituted while the Government Servant was on duty either before retirement or during re-employment shall have been instated in accordance with sub clause (ii) of clause (a) andC. The Bihar Public Service Commission, shall be consulted before final orders are passed.
It is apparent that the proviso speaks about the institution of proceedings. For initiating proceedings, Rule 43(b) puts some conditions, i.e, Department proceeding as indicated in Rule 43(b), if not instituted while the Government Servant was on duty, then it shall not be instituted except:-
(a) With the sanction of the Government,(b) It shall be in respect of an event which took place not more than four years before the institution of the proceedings.(c) Such proceedings shall be conducted by the enquiry officer in accordance with the proceedings by which dismissal of the services can be made.
Thus, in so far as the proviso is concerned that deals with condition for initiation of proceedings and the period of limitation within which such proceedings can be initiated.
11. Reading of Rule 43(b) makes it abundantly clear that even after the conclusion of the departmental inquiry, it is permissible for the Government to withhold pension etc. ONLY when a finding is recorded either in departmental inquiry or judicial proceedings that the employee had committed grave misconduct in the discharge of his duty while in his office. There is no provision in the rules for withholding of the pension/ gratuity when such departmental proceedings or judicial proceedings are still pending.
12. Right to receive pension was recognized as right to property by the Constitution Bench Judgment of this Court in Deokinandan Prasad vs. State of Bihar ; (1971) 2 SCC 330, as is apparent from the following discussion:
"29. The last question to be considered, is, whether the right to receive pension by a Government servant is property, so as to attract Articles 19(1)(f) and 31(1) of the Constitution. This question falls to be decided in order to consider whether the writ petition is maintainable under Article 32. To this aspect, we have already adverted to earlier and we now proceed to consider the same.30. According to the petitioner the right to receive pension is property and the respondents by an executive order dated June 12, 1968 have wrongfully withheld his pension. That order affects his fundamental rights under Articles 19(1)(f) and 31(1) of the Constitution. The respondents, as we have already indicated, do not dispute the right of the petitioner to get pension, but for the order passed on August 5, 1966. There is only a bald averment in the counter-affidavit that no question of any fundamental right arises for consideration. Mr. Jha, learned counsel for the respondents, was not prepared to take up the position that the right to receive pension cannot be considered to be property under any circumstances. According to him, in this case, no order has been passed by the State granting pension. We understood the learned counsel to urge that if the State had passed an order granting pension and later on resiles from that order, the latter order may be considered to affect the petitioner's right regarding property so as to attract Articles 19(1)(f) and 31(1) of the Constitution.31. We are not inclined to accept the contention of the learned counsel for the respondents. By a reference to the material provisions in the Pension Rules, we have already indicated that the grant of pension does not depend upon an order being passed by the authorities to that effect. It may be that for the purposes of quantifying the amount having regard to the period of service and other allied matters, it may be necessary for the authorities to pass an order to that effect, but the right to receive pension flows to an officer not because of the said order but by virtue of the Rules. The Rules, we have already pointed out, clearly recognise the right of persons like the petitioner to receive pension under the circumstances mentioned therein.32. The question whether the pension granted to a public servant is property attracting Article 31(1) came up for consideration before the Punjab High Court in Bhagwant Singh v. Union of India A.I.R. 1962 Pun 503. It was held that such a right constitutes "property" and any interference will be a breach of Article 31(1) of the Constitution. It was further held that the State cannot by an executive order curtail or abolish altogether the right of the public servant to receive pension. This decision was given by a learned Single Judge. This decision was taken up in Letters Patent Appeal by the Union of India.The Letters Patent Bench in its decision in Union of India v. Bhagwant Singh I.L.R. 1965 Pun 1 approved the decision of the learned Single Judge. The Letters Patent Bench held that the pension granted to a public servant on his retirement is "property" within the meaning of Article 31(1) of the Constitution and he could be deprived of the same only by an authority of law and that pension does not cease to be property on the mere denial or cancellation of it. It was further held that the character of pension as "property" cannot possibly undergo such mutation at the whim of a particular person or authority.33. The matter again came up before a Full Bench of the Punjab and Haryana High Court in K.R. Erry v. The State of Punjab I.L.R. 1967 P & H 278. The High Court had to consider the nature of the right of an officer to get pension. The majority quoted with approval the principles laid down in the two earlier decisions of the same High Court, referred to above, and held that the pension is not to be treated as a bounty payable on the sweet will and pleasure of the Government and that the right to superannuation pension including its amount is a valuable right vesting in a Government servant It was further held by the majority that even though an opportunity had already been afforded to the officer on an earlier occasion for showing cause against the imposition of penalty for lapse or misconduct on his part and he has been found guilty, nevertheless, when a cut is sought to be imposed in the quantum of pension payable to an officer on the basis of misconduct already proved against him, a further opportunity to show cause in that regard must be given to the officer. This view regarding the giving of further opportunity was expressed by the learned Judges on the basis of the relevant Punjab Civil Service Rules. But the learned Chief Justice in his dissenting judgment was not prepared to agree with the majority that under such circumstances a further opportunity should be given to an officer when a reduction in the amount of pension payable is made by the State. It is not necessary for us in the case on hand, to consider the question whether before taking action by way of reducing or denying the pension on the basis of disciplinary action already taken, a further notice to show cause should be given to an officer. That question does not arise for consideration before us. Nor are we concerned with the further question regarding the procedure, if any, to be adopted by the authorities before reducing or withholding the pension for the first time after the retirement of an officer. Hence we express no opinion regarding the views expressed by the majority and the minority Judges in the above Punjab High Court decision, on this aspect. But we agree with the view of the majority when it has approved its earlier decision that pension is not a bounty payable on the sweet will and pleasure of the Government and that, on the other hand, the right to pension is a valuable right vesting in a government servant.34. This Court in State of Madhya Pradesh v. Ranojirao Shinde and Anr. MANU/SC/0030/1968: [1968]3SCR489 had to consider the question whether a "cash grant" is "property" within the meaning of that expression in Articles 19(1)(f) and 31(1) of the Constitution. This Court held that it was property, observing "it is obvious that a right to sum of money is property".35. Having due regard to the above decisions, we are of the opinion that the right of the petitioner to receive pension is property under Article 31(1) and by a mere executive order the State had no power to withhold the same. Similarly, the said claim is also property under Article 19(1)(f) and it is not saved by Sub-article (5) of Article 19.Therefore, it follows that the order dated June 12, 1968 denying the petitioner right to receive pension affects the fundamental right of the petitioner under Articles 19(1)(f) and 31(1)of the Constitution, and as such the writ petition under Article 32 is maintainable. It may be that under the Pension Act (Act 23 of 1871) there is a bar against a civil court entertaining any suit relating to the matters mentioned therein. That does not stand in the way of a Writ of Mandamus being issued to the State to properly consider the claim of the petitioner for payment of pension according to law".
13. In State of West Bengal Vs. Haresh C. Banerjee and Ors. (2006) 7 SCC 651, this Court recognized that even when, after the repeal of Article 19(1)(f) and Article 31 (1) of the Constitution vide Constitution (Forty-Fourth Amendment) Act, 1978 w.e.f. 20 th June, 1979, the right to property was no longer remained a fundamental right, it was still a Constitutional right, as provided in Article 300A of the Constitution. Right to receive pension was treated as right to property. Otherwise, challenge in that case was to the vires of Rule 10(1) of the West Bengal Services (Death-cum--Retirement Benefit) Rules, 1971 which conferred the right upon the Governor to withhold or withdraw a pension or any part thereof under certain circumstances and the said challenge was repelled by this Court. Fact remains that there is an imprimatur to the legal principle that the right to receive pension is recognized as a right in "property".
14. Article 300 A of the Constitution of India reads as under:
"300A Persons not to be deprived of property save by authority of law. - No person shall be deprived of his property save by authority of law."
Once we proceed on that premise, the answer to the question posed by us in the beginning of this judgment becomes too obvious. A person cannot be deprived of this pension without the authority of law, which is the Constitutional mandate enshrined in Article 300 A of the Constitution. It follows that attempt of the appellant to take away a part of pension or gratuity or even leave encashment without any statutory provision and under the umbrage of administrative instruction cannot be countenanced.
15. It hardly needs to be emphasized that the executive instructions are not having statutory character and, therefore, cannot be termed as "law" within the meaning of aforesaid Article 300A. On the basis of such a circular, which is not having force of law, the appellant cannot withhold - even a part of pension or gratuity. As we noticed above, so far as statutory rules are concerned, there is no provision for withholding pension or gratuity in the given situation. Had there been any such provision in these rules, the position would have been different.
16. We, accordingly, find that there is no merit in the instant appeals as the impugned order of the High Court is without blemish. Accordingly, these appeals are dismissed with costs quantified at Rs. 10,000/- each.
Regards,
Pawan Singla
BA (Hon's), LLB
Audit Officer
Onus Shifts on A.O. after assessee discharges onus cast on him by a cogent explanation
In a recent decision of the Hon'ble Supreme Court in Civil Appeal No.9772 of 2013, dated 30.10.2013 (Mak Data P. Ltd., vs. Commissioner of Income Tax-II), the Hon'ble Supreme Court while considering the Explanation to Section 271(1), held that the question would be whether the assessee had offered an explanation for concealment of particulars of income or furnishing inaccurate particulars of income and the Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer between the reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence and when the initial onus placed by the explanation, has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constituted their income and not otherwise. Factually, we find that the onus cast upon the assessee has been discharged by giving a cogent and reliable explanation. Therefore, if the department did not agree with the explanation, then the onus was on the department to prove that there was concealment of particulars of income or furnishing inaccurate particulars of income. In the instant case, such onus which shifted on the department has not been discharged. In the circumstances, we do not find that there is any ground for this Court to substitute our interfere with the finding of the Tribunal on the aspect of the bonafides of the conduct of the assessee.In the circumstances, following the decision of the Hon'ble Supreme Court, we uphold the order of the Tribunal and the Tax Case Appeal stands dismissed.
HIGH COURT OF JUDICATURE AT MADRAS
Dated : 12.11.2013
Coram
Dated : 12.11.2013
Coram
The Honourable Mrs.Justice CHITRA VENKATARAMAN
and
The Honourable Mr.Justice T.S.SIVAGNANAM
and
The Honourable Mr.Justice T.S.SIVAGNANAM
Tax Case (Appeal) No.504 of 2009
Commissioner of Income Tax,
Commissioner of Income Tax,
-vs‑
M/s.Gem Granites (Karnataka)
Tax Case (Appeal) filed under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal Chennai 'A' Bench, dated 11.11.2008, ITA No.715/Mds/2007.
ORDER
(The Order of the Court was made by
T.S.SIVAGNANAM, J.)
T.S.SIVAGNANAM, J.)
This Tax Case (Appeal) by the Revenue is directed against the order passed by the Income Tax Appellate Tribunal Chennai 'A' Bench, dated 11.11.2008 in I.T.A.No.715/Mds/2007, for the assessment year 1996-97.
2. The assessment in respect of the respondent/assessee for the assessment year 1996-97 was completed under Section 143(3) of the Income Tax Act (Act) on 30.03.1999, on a total income of Rs.26,12,140/-. The assessee owns quarries and is also a dealer in granite. There was a search conducted under Section 132 of the Act, and in which it was revealed that in a real estate dealings, there were "on-money" transactions and cash of Rs.27,00,000/- was seized. The assessee offered to admit the "on-money", but claimed that they will do so on completion of the projects under the 'completed contract method' and therefore, no income was offered by the assessee in the said year, namely, 1996-97. The assessee took a stand that the cash found at the time of search represented "on-money" and the notings and workings made in the slips of paper, were not of relevance, since such notings related to one purchaser. The Assessing Officer found the explanation given by the assessee as not credible. Accordingly, the Assessing Officer based on the evidence included "on-money" component and completed the assessment. Penalty proceedings were also initiated under Section 271(1)(c) of the Act. As against the quantum assessment, the matter ultimately came before this Court in T.C.(A).Nos.1150 to 1152 of 2006, for the assessment years 1995-96 and 1996-97 respectively and this Court by order dated 03.08.2012, dismissed the appeals filed by the assessee holding that at no point of time, the assessee has taken steps to examine their Accountant nor produce any evidence to substantiate what could be the correct value per sq.ft, if the property was sold to J.P.,Exports. In respect of the penalty proceedings initiated under Section 271(1)(c) of the Act, the Assessing Officer passed a penalty order dated 26.04.2006. Aggrieved by the same, the assessee preferred an appeal to the Commissioner of Income of Tax (Appeals) contending that the Assessing Officer did not record his satisfaction about the concealment while initiating penalty proceedings and unless the said satisfaction is recorded, the penalty is not automatically leviable. In this regard, reliance was placed on decisions of various High Courts. The first Appellate Authority after analysing the contentions raised, held that the seized documents clearly evidenced the fact that the assessee was in the habit of receiving "on-money" in respect of sale of each and every flat at the rate of 50% of the sale consideration. Further, it held that this fact was borne out by various entries in the seized documents. Further, the first Appellate Authority observed that the entries relating to "on-money" received from J.B.Exports are clearly recorded in the seized documents and there is no escape from inevitable and infallible conclusion that the assessee had received "on-money" of Rs.86,50,250/. Taking note of the findings recorded by the Tribunal in its order in the quantum appeal, the first Appellate Authority held that there is no reason for deviating from the view and there is no infirmity in the imposition of the penalty under Section 271(1)(c) of the Act. Aggrieved by such order, the assessee preferred an appeal to the Tribunal.
3. Before the Tribunal, the assessee contended that there was a mistake in the entries regarding the sale of flats to J.B.Exports and the assesee also filed copies of the entry register in respect of two flats and also in respect of other similar flats, which were sold to other parties. Therefore, it was contended that even J.B.Exports produced the documents before the Assessing Officer, which were examined by the department wherein, it was stated that no "on-money" was paid to the assessee. Therefore, it was contended that the onus is on the department to prove that the non-disclosure of the said income was deliberate and intentional on the part of the assessee.4. The Revenue resisted the appeal by contending that in view of the decision of the Hon'ble Supreme Court in the case of Union of India vs. Dharmendra Textile Processors reported in [2008] 306 ITR 277 (SC), wherein it was held that the penalty provision is a civil liability and willful concealment was not essential. Thus, the Revenue sought to sustain the order passed by the first Appellate Authority. The Tribunal after considering the contention raised on both sides, allowed the appeal. As against which, the present Tax Case (Appeal) has been preferred by the Revenue and admitted on the following substantial question of law:-
Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the penalty of Rs.24,25,700/- levied under Section 271 (1)(c) of the Income Tax Act made on the basis of evidence relating to 'on money' receipts on sale of flats found during the search without properly applying the ratio of the Supreme Court in the case of Union of India vs. Dharmendra Textile Processors (306 ITR 277).
5. The short question which falls for consideration is whether the order of penalty under Section 271(1)(c) of the Act passed by the Assessing Officer and confirmed by the first Appellate Authority, is just and proper.
6. The case of the Revenue is that the quantum appeal had attained finality as the assessee's appeals in T.C.(A) Nos.1150 to 1152 of 2006, were dismissed by this Court, by order dated 03.08.2012, that itself would be sufficient to sustain the order of penalty under Section 271(1)(c) of the Act. The learned counsel for the Revenue relied upon the observations made by the first Appellate Authority in its order dated 31.01.2007 and submitted that the Tribunal erroneously reversed the said order.
7. Per contra, the learned counsel appearing for the assessee by relying upon the reasons assigned by the Tribunal sought to sustain the order of the Tribunal.
8. The Tribunal while allowing the assessee's appeal pointed out that onus to prove that there was a concealment of income with a view to avoid the tax, is on the department and penalty is not automatic and merely because the addition is confirmed does not ipso facto attract the penalty proceedings. While considering the facts of the case, the Tribunal observed that there is a huge difference in the rate of sale of the flat recorded in other cases and in the case of J.B.Exports and the document that has been relied on in its entirety cannot be considered a part of the document and in the seized material, 15 entries of sale of flats reveal the rate of flats between Rs.1300/- and Rs.3700/-. Moreover, the rate of flats in 'G' block and very next flat of G8 and G9 has been recorded in the seized material at the rate of Rs.3600/- and Rs.3700/-, whereas the rate of flats G6 and G7 has been recorded at Rs.7500/-. Taking note of these factual details, the Tribunal pointed out that this prima facie supports the contention of the assessee that there may be a mistake in recording the rate and there may be a possibility that the rate of two flats are merged and recorded. Considering the facts and circumstances, the Tribunal observed that the possibility of wrong entry cannot be ruled out and the department having failed to prove concealment without any doubt, by relying upon the decision of the Hon'ble Supreme Court in the case of Dharmendra Textile Processors,(supra), allowed the assessee's appeal.9. Firstly, it is to be stated that the findings recorded by the Tribunal is a finding of fact. Therefore, unless it is shown that such finding is perverse, the same cannot be interfered, while considering an appeal which can be entertained only on a question of law. Further, it has to be pointed out that merely because the assessment proceedings namely, the quantum assessment having been confirmed by this Court in T.C.(A).Nos.1150 to 1152 of 2006, dated 03.08.2006, cannot automatically lead to the conclusion that the penalty proceedings are justified. Infact, the Tribunal rightly made an observations to the said effect that the quantum assessment cannot have a direct impact automatically leading to inference of concealment and consequent imposition of penalty.
10. The Hon'ble Supreme Court in the case of Union of India vs. Rajasthan Spinning and Weaving Mills reported in (2009) 13 SCC 448, considered the earlier decision of the Hon'ble Supreme Court in the case of Union of India and Ors vs. Dharmendra Textiles Processors & Ors., reported in [2008] 306 ITR 277 (SC) and held that it goes without saying that for applicability of Section 271(1)(c) of the Act, condition stated therein must exist. The above said decision came up for consideration in the case of Commissioner of Income Tax vs. Reliance Petroproducts Pvt., Ltd., reported in [2010] 322 ITR 158 (SC). On reading of Section 27(1)(c), the Hon'ble Supreme Court pointed out that in order to bring the case under Section 271(1)(c), there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision could not be invoked. Thus, the Hon'ble Supreme Court pointed out that a mere making of a claim, which is not sustainable in law, by itself, would not amount to furnishing of inaccurate particulars regarding the income of the assessee. The reading of the decision of the Hon'ble Supreme Court referred to above, thus points out that for sustaining penalty, the bonafide explanation of the assessee must be looked at, so that the contumacious conduct of the assessee for the purpose of sustaining the penalty would be taken as condition that is the main requirement under Section 271(1)(c) of the Act. Referring to the decision in the case of Dharmendra Textile Processors, (supra), the Hon'ble Supreme Court pointed out that in the background of Section 271(1)(c) of the Act, there is no necessity of mens rea being shown by the Revenue, however referring to the Explanation to Section 271(1)(c) penalty being a multiple liability, the bonafide of the conduct of the assessee necessarily assumes significant, even though willfulness of the assessee may not be a criteria, the conduct is to be considered. Thus, a mere fact that the addition in this case has been sustained by this Court by itself would not lead to the automatic application to Section 271(1), the Tribunal went into the explanation offered by the assessee as regards the charging of a higher amount in the case of J.B.Exports. Although, the Tribunal rejected the explanation for the purpose of assessment of goods, it considered it as a good ground for cancellation of penalty, when the explanation on the differential amount was given by the assessee that the entries were made in the account and the Accountant had not made the correct entry.
11. In a recent decision of the Hon'ble Supreme Court in Civil Appeal No.9772 of 2013, dated 30.10.2013 (Mak Data P. Ltd., vs. Commissioner of Income Tax-II), the Hon'ble Supreme Court while considering the Explanation to Section 271(1), held that the question would be whether the assessee had offered an explanation for concealment of particulars of income or furnishing inaccurate particulars of income and the Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer between the reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence and when the initial onus placed by the explanation, has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constituted their income and not otherwise. Factually, we find that the onus cast upon the assessee has been discharged by giving a cogent and reliable explanation. Therefore, if the department did not agree with the explanation, then the onus was on the department to prove that there was concealment of particulars of income or furnishing inaccurate particulars of income. In the instant case, such onus which shifted on the department has not been discharged. In the circumstances, we do not find that there is any ground for this Court to substitute our interfere with the finding of the Tribunal on the aspect of the bonafides of the conduct of the assessee.
12. In the circumstances, following the decision of the Hon'ble Supreme Court, we uphold the order of the Tribunal and the Tax Case Appeal stands dismissed. No costs.
Service tax exemption for factory canteen Needs Immediate further clarification
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Notification No.14/2013 Dated 22/10/2013: Service tax exemption for factory canteen Needs Immediate further clarification:
INTRODUCTION:
CBEC issued a notification No.14/2013 dated 22 October 2013 in which exemption given from service tax for Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year." By this notification inserting a new entry 19A in the mega exemption Notification No.25/2012-Service Tax, dated the 20th June, 2012. This notification creates a lot of confusion/anomaly in the mind of assessee which needs immediate clarification from CBEC.
RELEVANT EXRACTS OF NOTIFICATION/DRAFT CIRCULARS ISSUED ON SUBJECT MATTER:
"19 Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having (i) the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and (ii) a licence to serve alcoholic beverages;"
Draft circular of CBE& C Para 11 of draft circular F. No 354/127/2012-TRU dated 27-7-2012
'Moreover, it would need to be seen whether the services provided by the employer are otherwise covered by the Negative List or exempt. For example, the services of food and catering provided by the employer in a canteen would normally fall outside the tax net unless such canteen has both the facility of air-conditioning as well as license to serve liquor (S. No. 19 of the Mega exemption)'.
Notification No. 03/2013-ST dated March 1, 2013 (Amendment of Notification 25/2012)
"19. Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year;"
"19A. Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year.".
Ways for providing services at canteen:
1) Services provided by canteen contractor to employees:
If the canteen contractor did not provide service to the person owning the factory, the provision of service tax was not apply. if the canteen contractor provides food to employees, it is falls under sales not under service and Vat should apply, if State law so provides.
2) Services provided by canteen contractor to employers:
In case of canteens at factory and this place is given on hire or free to the canteen contractor, In this situation the canteen contractor provides service to the employer. In this case service would be subject to service tax.
3) Services provided by Manufacturer directly to employees at factory canteen:
A Canteen at factory is maintained by a Manufacturer himself, with his own Staff, are not liable for any Service Tax, because it is operated in terms of the Contract of employment between the Employer and Employee with requirement of factories act. the service was not taxable it is falls under sales not under service and Vat should apply, if State law so provides.
CLARIFICATION REQUIRED FOR FOLLOWING DOUBT/CONFUSION/ANAMOLY:
1)New Entry 19A of notification 14/2013 provides exemption to Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year. It means that Non Air conditioning canteen was already exempted under entry 19 in Notification 25/2012 dated 20.06.2012. In this notification, canteen word was not mentioned. "Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year;" here clarification required that Canteen is eating joint or mess or not. if this was not so then question arises that in new entry 19A exemption given only A.C. canteens and no exemption was for Non A.C. canteen in entry 19.Clarification essential in this regards due to non accepted this view by audit teams during the course of audit that eating joints/mess means canteen and exemption is available in absence of clear wordings.
2) Another important clarification required that "Whether Exemption given in New entry 19A to Services provided in places (factory Canteen) having the facility of air-conditioning or central air-heating at any time during the year. if it is so then outdoor caterer and manufacturer both are provided service at canteen are exempt to pay service tax due to exemption is for place (canteen).
Another view taken in this respect that since Canteen Contractor provides Outdoor catering service which chargeable to service tax under direct charge @12.36% on 60%of gross amount as per Rule 2 C of Service tax (Determination of Value) Rules, 2006, so canteen maintained by employer is only exempt from service tax and services provided by canteen outside contractor continue chargeable for service tax.
3) Another anomaly we can see in New entry 19A which provides exemption to Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948. Now Exemption given only for manufacturer who registered under factory act and not for service provider for example a large trading house or corporate office of multinational company/banks maintaining canteen in their premises are liable for service tax. this creates difference between manufacturer and service providers.
Conclusion:
Dilemma of assessee increased substantially after coming this Notification No.14/2013.Immediate clarification required for doubt/confusion/anomalies discussed above. In my personal view if canteen have a A.C or Non A.C maintained by manufacturer registered under factory act or services provided by outdoor caterer(Canteen Contractor) to manufacturer who is registered under factories act is outside the preview of service tax. If we think logically very few employers/manufacturer maintained a canteen at their own. Here question arises that Is this was Intention of Notification to exempt only those manufacturer who operate canteen them self or given exemption to services provided in places (canteen) with air conditioning/central air-heating system and registered under factories act 1948. Transparent clarification required immediate for assessee as well as the field formation officer/Audit team so litigation will not arises on this issue.
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CA. Shailendra saxena
B.COM, C.S, FCMA,FCA,DISA(ICAI)
E-mail: saxena20535@yahoo.com
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