Chartered Accountant Finance: [aaykarbhavan] Judgments , and Information [1 Attachment]

Re-appreciation of seized material in subsequent proceedings by the AO is unjustified

CA Prarthana Jalan

Hon'ble ITAT Agra in the case of ACIT V/s. Kalyani Chaturvedi held that Re-appreciation of seized material in subsequent proceedings by the AO is unjustified and quashed the Re-assessment Order. Hon'ble ITAT has held as under-

All facts were all along were within the knowledge of the AO at original assessment stage, therefore, reappreciation of evidence at subsequent re-assessment proceedings is not permitted on mere change of opinion by subsequent AO. The re-assessment proceedings have been initiated again on similar issue and totally on identical facts regarding investment in property which have already been considered in the original assessment proceedings. It is, therefore, a case of change of opinion and such a change of opinion for reopening of section 147 is not permitted under law. The AO in the re-assessment order himself has mentioned that addition is made on account of unexplained expenditure/investment in the properties in the original assessment order. Such facts recorded by the AO in the reassessment order clearly strengthen the stand of the assessee for quashing of reassessment proceedings. No new material or fresh information have been received at the re-assessment stage. Therefore, it is merely a fresh application of mind by the subsequent AO on the same set of facts. The contention of the ld. DR is, therefore, liable to be rejected that investment in property was not considered at the original assessment stage. Further, the same seized material, i.e., Annexure A1, which was the basis of making some additions at original assessment stage, is the document of the department found during the course of search and once the same has been appreciated and considered by the AO, there is no question on the part of the assessee not to disclose fully and truly all material facts necessary for his assessment. The re-appreciation of seized material in subsequent proceedings by the AO is, thus, wholly unjustified particularly when such a seized material was not considered worthy by the ld. CIT(A) in the original appellate proceedings deleting the addition on the same seized material. Therefore, there is no question of re-appreciating the same facts which have been duly considered by the first appellate authority prior to reopening of assessment. The ld. CIT(A), therefore, on proper appreciation of facts and material on record, rightly quashed the reassessment proceedings. We, therefore, do not find any infirmity in the order of the ld. CIT(A) in quashing and annulling the reassessment order. The departmental appeal thus fails and is accordingly dismissed.

Source- ACIT V/s. Kalyani Chaturvedi (ITAT Agra), ITA No. 154/Agra/2013, Date of pronouncement : 28.02.2014

Assessee entitled to adjustment of seized cash against advance tax liability

CA Prarthana Jalan

Hon,ble ITAT Agra has held in the case of ACIT Vs. Sunil C Gupta that Cash seized to be adjusted against advance tax liability. Explanation-2 to Section 132B of the Act enacted with effect from 1st June 2013. Hon'ble ITAT has upheld the observations of ld CIT(A) which are as under –

I have carefully considered the assessment order as well as the written submission of the appellant, Remand report and the rejoinder on this issue remand report and the rejoinder. In this case Search and Seizure Operation was carried out in the premises of Shri Sunil Chand Gupta on 10.03.2010 wherein cash amounting to Rs.4,31,36,000/- was seized from the residence and locker and was deposited by the department in the PD account on 10.03.2010 and 19.03.2010. During the course of search the assessee's statement was recorded u/s 134 of the I.T. Act wherein the assessee offered to pay tax on an income of Rs.10 crore for the F.Y. 2009-2010. The estimated tax liability on an income of Rs.10 crore worked out to about Rs.3 crore approx. Since the liability to pay tax had arisen and the cash being seized by the department, the appellant requested the department to adjust Rs.3 crore out of the Rs.4,31,36,000/- seized and deposited in the PD account. It is seen that the assessee made a written request on 29.03.2010 to the Chief Commissioner of Income Tax which was duly received and also to the Additional Director of Income Tax Investigation, Agra. It also seen that similar request for adjustment letters were written to the DCIT Circle-1, Agra on 29.03.2010 which was duly received in the office on the same day. Further, another letter was written to the CIT-1 on 21.03.2010. Letter dated 05/07/2010 was also written to the DCIT Central Circle stating that return of income for A.Y. 2010-11 had been filed on 30/6/10 with tax payable of Rs.2,92,25,240/- and therefore requesting the AO once again for adjustment of tax liability with the cash lying in the PD account. In the circumstances, the assessee had done all it could do so as to ensure that cash lying in the PD account would be adjusted towards the advance tax liability. However, it seen that no action was taken on the assessee's petition by any of the authorities before whom the assessee has filed the petition. To my mind, it is an apparent injustice to the appellant to hold on the cash belonging in the assessee in the Government Account and at the same time charge interest for non-payment of advance tax on the due dates. It is clear that the appellant's application for adjustment has been submitted before the various authorities, the seized cash should have been either been adjusted as requested by the assessee to meet the advance tax obligations or the Assessee should have been informed the reasons why the request made by the assessee cannot be acceded to. The Hon'ble Bombay High Court in the case of CIT Vs. Shri Jyotindra B. Modi in order dated 21.09.2011 has clearly held that once the assessee officers to tax the undisclosed income including the amount seized during search, than the liability to pay advance tax in respect of that amount arises even before completion of the assessment. The Hon'ble High Court further held that section 132B(1) of the Act, thus not prohibit the utilization of amount seized during the course of search towards the advance tax liability. The Hon'ble High Court of Punjab & Haryana in the case of CIT Vs. Ashok Kumar reported in 334 ITR 355 has also held on similar facts that the assessee was entitled to adjustment of seized cash against advance tax liability and therefore, no interest could be charged u/s 234A & 234B in the event of the department no responding to assessee's request for adjustment of cash seized against advance tax liability. In view of the following judgments, the action of the AO in charging interest under 234A, 234B & 234C is not justified and hence, directed to be deleted.

Source- ACIT Vs. Sunil C Gupta (ITAT Agra), ITA No.290/Agra/2013, Date of pronouncement : 28.02.2014

Quality & lavishness of construction is not incriminating material

Posted In Income Tax Case Laws | Judiciary | No Comments »

CA Prarthana Jalan

Agra ITAT in the case of ACIT Vs. Shri Yogendra Kumar Singhal has held that Quality & lavishness of construction is not incriminating material. Reference cannot be made to the Valuation Officer in the absence of incriminating material/document found during the course of search. Hon'ble ITAT has held as under :-

Having heard the rival contentions and having perused the material on record, we are of the considered view that on facts of the case it cannot be said that any incriminating material or evidence was found during the search & seizure operation. As for ld. Departmental Representative's submission about the quality and lavishness of the construction, even if that is so, such a construction cannot constitute incriminating material because unless there is something to suggest that expenditure incurred has not been shown in the books of account there is no warrant for the inference that expenses have been suppressed from an account. As the ld. CIT(A) has rightly noticed that in the absence of any such material the very reference to Valuation Officer is vitiated in law. We also notice for a matter of record that no defect or shortcomings were found in the details submitted by the assessee so as to justify the reference to the Valuation Officer. The objections made by the assessee to the valuation report were also summarily brushed aside by the A.O. and now that they have been considered in detail. The difference between the value as per valuation report and expenses as per the books of account is reduced to less than 15% which can also be justified on account of normal permissible estimation difference. In view of these discussions, as also bearing in mind the entirety of the case, we approve and affirm the ld. CIT(A)'s very well resound order and decline to interfere in the matter.

Source- ACIT Vs. Shri Yogendra Kumar Singhal, ITA No.281/Agra/2013, Date of pronouncement : 28.02.2014.

Appeal before Commissioner (Appeals) against composite order

DECEMBER 02, 2013

By Vinayak Y Thakur

RECENTLY, Mumbai Tribunal in the case of Geico Paint Shop India P. Ltd.& Others [2013-TIOL-1587-CESTAT-MUM] [order dated 27.5.2013] relying on the Larger Bench decision in the case ofEicher Motors Ltd . (2002-TIOL-326-CESTAT-DEL-LB) and referring to Rule 6A of the CESTAT (Procedure) Rules, 1982 gave a ruling that it shall be sufficient to file one Appeal against composite order.

However, another Bench of the Tribunalin an earliercase of Voith Paper Fabrics (I) Ltd. 2013-TIOL-749-CESTAT-MUM [order dated 14.2.2013] had held that when a common order is passed by the Commissioner (Appeals) but five separate numbers given, five separate appeals are required to be filed before CESTAT and that one composite appeal cannot suffice.

This issue has been always a contentious one. Moreover, the legal pronouncements on this issue read with the relevant Appeal Rules in respect of Appeal to the CESTAT and appeal to the Commissioner (Appeals) are also at variance and, therefore, Appeal Rules for both these forums need to be clearly spelt out so that there is clarity and no room is left for any confusion whatsoever.

CEGAT Public Notice No. 3 dated 30.5.1986

At para 5 of this notice it was stated – "It is the practice of the Tribunal that, where the order of the lower authority is a multiple order disposing of a number of appeals, an equal number of appeals, with appropriate fees where leviable, should be filed to the Tribunal. It is however clarified that in such cases it is open to the appellants to file a single paper book containing copies of all the documents required for disposing of the entire group of appeals ".

Rule 6Aof CESTAT (Procedure) Rules, 1982

Rule 6A was inserted by CEGAT Notification No. 1/CEGAT /99, dated 13.5.1999 in the CESTAT (Procedure) Rules, 1982 which reads as under:-

Notwithstanding the number of show cause notices, price lists, classification lists, bills of entry, shipping bills, refund claims/demands, letters of declarations dealt with in the decision or order appealed against, it shall suffice for purposes of these rules that the appellant files one memorandum of Appeal against the order or decision of the authority below, alongwith such number of copies thereof as provided in rule 9.

I am listing out few pro and contra judicial pronouncements on the subject issue as below -

Single appeal can be filed	Separate appeals need to be filed
Unique Pharma. Labs 1983(12) ELT 628 CEGAT	Kolsite Maschine fabric Ltd. 1998 (99) ELT 564 Mumbai Tribunal
Kanta International & Motilal Gupta 1990(48) ELT 549 Mumbai Tribunal	CCE vs. Taparia Tools Ltd. 2000(115) ELT 833 Delhi Tribunal
Universal Automobile & Ancillary Ltd. 1991 (56) ELT 346 Mumbai Tribunal	Cairn Energy India P. Ltd. 2007 (217) ELT 157 Bangalore Tribunal
Eicher Motors Ltd. (2002-TIOL-326-CESTAT-DEL-LB)	Ekantika Copiers(P) Ltd. 2002-TIOL-325-CESTAT-DEL-SB
SAIL 2007 (210) ELT 37 =2007 (5) STR 387
Escorts Ltd. 2007 (207) ELT 287=2008 (11) STR 532 Delhi Tribunal

Issue with respect to filing of Single appeal before CESTAT against composite orderis more or less settled in view of latest judgments read with Rule 6A of CESTAT (Procedure) Rules, 1982.

It is more practical and logical also to file a common appeal against a composite order disposing of multiple show cause notices when common question of law is involved in all the show cause notices and only the period involved is different.

Insistence to file as many appeals against a composite order on same point of law is too hyper-technical in the absence of positive indication in the Central Excise law prohibiting entertainment ofa composite appeal.

Condonation of delay

i. Single appeal was filed within limitation against a composite order of Collector (Appeals) disposing of several appeals. Later, supplementary appeals were filed with condonation applications. Delay was condoned in view of past practice of the Appellate Tribunal and applicant having acted bona fide. CCE vs. Raidang Tea & Samdang Teas Estates & Others. 1985 (21) ELT 863 Delhi Tribunal.

ii. Composite appeal against common order-in-appeal was filed by the Department in time but two supplementary appeals were filed late by 62 days. Delay was condoned since the very same impugned order was already under challenge on merits in composite appeal. CCE vs. Speedway Rubber Co. 1993 (66) ELT 425 Delhi Tribunal.

iii. Single appeal filed against O-I-A disposing off two appeals-second appeal was filed with application for condonation of delay. As first appeal was filed within the prescribed time limit, delay in filing second appeal was condoned. Modi Alkalies & Chemicals Ltd. 2004 (177) ELT 834 Delhi Tribunal.

From the discussions above, it can be noticed that there is way out with respect to filing a Single appeal against a composite order in the matter of appeals filed before the Appellate Tribunal u/s 35B of the CEA, 1944 but there is no similar provision or leverage available when a single appeal is to be filed against a composite order before the Commissioner (Appeals) u/s 35 of the CEA, 1944.

Therefore, this aspect is required to be addressed urgently by the Board and express provision needs to be made in the Central Excise (Appeals) Rules, 2001. Even Rule 6A of CESTAT (Procedure) Rules, 1982needs to be suitably amended to have clarity on this issue.

To conclude, looking at the number of appeals filed every day by the assessees as well as by the Department, insisting for a separate appeal in respect of composite orders passed by the lower authority will only result in multiplicity of appeals and heavily burden the appellate forums. This will also not serve any practical purpose.

--
Regards,

Pawan Singla

BA (Hon's), LLB

How to know if Agricultural land is situated in urban area or rural area?

Posted In Income Tax | Articles | No Comments »

Kaushal Agrawal

Finance Act 2013 has changed the meaning of urban area in relation to agricultural land.

The definition of urban area is reflected at 2 places in Income tax act.

1. Capital Asset. Where it says that agricultural land not situated in urban area is not a capital asset. Hence no capital gain can arise.

2. Meaning of agricultural income. Letting out of building for agricultural purpose which is not situated in urban area is agricultural income.

This video has made an attempt to analyse both the above situations.

Link for video presentation.

http://taxguru.in/income-tax/agricultural-land-situated-urban-area-rural-area.html

Types of credit facilities provided by banks

Posted In Finance | Articles | No Comments »

Credit Facility is an agreement with bank that enables a person or organization to be taken credit or borrow money when it is needed. All types of credit facilities may broadly be classified into two groups on the basis of Funding – 1. Fund Base Credit 2. Non Fund Base Credit

1. Fund Base Credit is the any credit facility which involves direct outflow of Bank's fund to the borrower. Various types of it are as follows :-

(i) Loan: - It refers to credit facility that is repayable in a definite period. (e.g. Term Loan , Demand Loan)

(ii) Cash Credit: - It refers to credit facility in which borrower can borrow any time with in the agreed limit for certain period for their working capital need. It secured by way of Hypothecation of Stock(goods) and Debtors and all other current Assets of the business generated during the course of business. Cash credit can also be secured by way of mortgage of immovable properties (as collateral security).

(iii) Over Draft: - An overdraft allows a current account holder to withdraw in excess of their credit balance up to a sanctioned limit. It secured by way of Mortgage of immovable properties and pledge of F.D., Bonds, Shares securities , Gold & silver and any physical asset and Hypothecation of Stock and Debtors and all other current Assets of the business generated during the course of business.

(iv) Packing Credit: - It is a credit facility which sanctioned to an exporter in the Pre-Shipment stage. Such credit facilitates the exporter to purchase raw materials at competitive rates and manufacture or produce goods according to the requirement of the buyer and organize to have it packed for onward export. It secured by way of Hypothecation of Stock of goods and Debtors and all other current Assets of the business generated during the course of business.

(v) Some other fund based credit facilities are Bill Discounted , Bill Purchased , Advance against hypothecation of Vehicles ( Transport Loan) , House Building Loan , Consumer Loan , Agriculture Loan -Farming -Non Farming , Consortium Loan , Lease Financing , Hire Purchase , Import Financing – Loan Against Imported Merchandise (LIM) – Payment Against Document (PAD) .

(2) Non Fund Base credit is a credit facility where there is no involvement of direct outflow of Bank's fund on account of borrower rather the outflow of Bank's fund on account of Third party on behalf of borrower. Types of it are as follow:

(i) Letter Of Credit: – When a buyer or importer wants to purchase goods from an unknown seller or exporter. He can take assistance of bank in such buying or importing transactions.

Bank issues a LETTER OF CREDIT in addressed to the supplier or exporter after it, supplier or exporter will supply the goods to such unknown buyer or importer. A signed Invoice with Letter Of Credit is presented to the bank of buyer/importer and the payment is made to the seller/exporter DIRECTLY by the bank.

(ii) Bank Guarantee: – It is a guarantee issued by a banker that, in case of an occurrence or non-occurrence of a particular event, the bank guarantees to fulfilled the loss of money as stipulated in the contact. It may of various types like Financial Guarantees, Performance Guarantees and Deferred Payment Guarantee.

(iii) Buyer Credit: - It is the credit availed by an Importer from overseas lenders (i.e. Banks & Financial Institutions) for payment against his imports. The overseas bank usually lends the Importer based on letter of credit, bank guarantee issued by the importer bank.

(iv) Suppliers Credit: – Under such credit facility an exporter extends credit to a foreign importer to finance his purchase. Usually the importer pays a portion of the contact value in cash and issues a Promissory note as evidence of his obligation to pay the balance over a period of time. The exporter thus accepts a deferred payment from the importer and may be able to obtain cash payment by discounting or selling such promissory note created with his bank.

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Rishi Goyal, Articled Assistant, +91-9716665748

CBDT Chairman emphasized on need for Transparency and humane approach

Posted In Income Tax | Notifications | No Comments »

CBDT Chairpersons Dr. Sudha Sharma's Farewell Message Dated 28.02.2014 to members of the Aayakar Family and Work Accomplished by the TPL and FT&TR Divisions of CBDT as well as DGIT(Logistics) up to February 2014.

SIGNING OFF

My Dear Members of the Aayakar Family,

Today as I demit office as Chairperson of CBDT after putting in more than 37 years of service in Income Tax Department, I take the opportunity to thank you all for all the support you extended to me during all these years. I feel proud of being a part of this great Department and feel beholden to you all for reposing faith in me and for cooperating whole heartedly in many ventures that we undertook together.

Serving the Dept. with all sincerity, it has always been my endeavour to foster highest standards of ethics and morality in public service and to guard against any tendencies which could bring a bad name to the Department. Upholding ethical values and human dignity always remained my guiding principle. Today I feel deeply satisfied that I have been able to live upto the standards that I had set for myself. Certain decisions taken responding to the call of duty might have appeared harsh at times, but trust me, welfare of this great family and service to the people of this great nation have been the only consideration with me while dealing with the official matters.

Dear friends, when I took over as the Chairperson of the Dept. in june,2013, one of the biggest challenges that faced the Dept. was to implement the new cadre restructuring whereby 20751 new posts at all levels were added to the department. With the support of you all, much of the task has already been accomplished: DPCs for promotions at all levels from ACTT to Pr. CCIT with the exception of CIT to Principal CIT have been completed. DPC for grant of NSFG to Officers of 2000 & 2001 batch has also been completed. The file for giving NFU grade to Officers of 1980 and 1981 Batches is already under process. It gives me pleasure to inform you that all the APARs from ITO to Apex Grade CCIT have been scanned and systematised. Briefly, the following has already been accomplished:

(i) DPC of AC to DC for 2008 and 2009 batches

(ii)DPC for Addl. CIT to CIT 1991 and 1992 batches

(iii)DPC of CIT to CCIT 1980 , 1981 and part of 1982

(iv)Proposal for DPC of ITO to ACIT has been submitted to UPSC

(v) DPC of CCIT to CCIT Apex Grade has been held and the approval of ACC is awaited.

(vi) Proposal for DPC of CIT to Principal CIT shall be submitted to the UP5C shortly.

(vii) Proposal for Empanelment in the grade of J5 for 1988 and 1989 batches is being sent to DoPT shortly.

As for the recruitment and promotion of staff, the process of new recruitment through 558 is already in process. For promotion, the matter has been thrashed out by sub committees, Core Committee and the Board. The Board has already approved the new Recruitment Rules and the Allocation of Posts to implement restructuring proposals. Allocation of posts for various functional units such as assessment, TDS, Exemption, International Taxation, Investigation, Central and Iacr etc. has been finalised by the Board and sent to the FM for approval. Allocations for all Regions and Directorates have also been finalised. The CsCIT(CCA) have already been asked to keep their records complete and ready. I will be handing over the baton to my successor now and I hope that the remaining process will also be completed soon by the Board.

As tax collectors of the country, we have a pivotal role to play in national development. The huge target of budget collection for the year 2013-14 was also riot an easy task. The revised target has been fixed at Rs.6,36,318 Crore. As on today we have made a gross collection of Rs. 5,44,891 Crore, which after adjustment of refunds gives a net collection of Rs. 4,65,998 Crore, with a growth rate of 14% and 73.23 % of the total Budget target. I am confident that with your efforts in the coming month and the last instalment of Advance Tax in the month of March, you will be able to achieve the target. Please keep it up, I am sure you can do it.

In the field of infrastructure, as many as 131 projects were sanctioned involving an amount of Rs.737.54 Crore. Details of these projects are being separately put up on the departmental website. For facilitating taxpayers' services, 55 ASK centres out of the proposed 58 during the year are already in place. The building projects at the NADT which were to be completed by 2012 were monitored on day to day basis and, as a result, the foreign trainees' hostel "Indshala" has been completed. The Mess building is in the process of completion and time lines have been fixed for the remaining structures as well.

The working of FT&TR, International Taxation and TPL divisions was streamlined. The work distribution within the FT&TR division was rationalised. The training of the officers posted in TP and International Taxation was worked out; more DRPs were set up; MAP negotiations and APAs were pursued in big way; DTAAs were negotiated. This resulted in signing/enforcing of 6 new DTAAs, 4 Tax Exchange Information Agreements(TIEAs) and resolution of 21 MAP cases. Processing of 117 cases under unilateral APAs and 32 cases under bilateral APAs has been done, out of which, 20 papers have been finalised and exchanged with other Competent Authorities. India's representation on International Fora was vigorously followed and process of posting 9 officers in overseas tax units has been accomplished. Also, Safe Harbour- rules were notified. Two Peer Reviews by Global Forums were done during this period and India was rated as 'Compliant' on all the ten essential elements. There are only 9 other jurisdictions who have been rated as 'Compliant' on all the ten parameters. The details of the work done have been put on the website separately.

In the area of Tax Policy and Legislation, as many as 17 notifications were issued up to 31st October 2013, the details of which have been separately put on the website. This process is being carried forward by the TPL division under the leadership of Member (L&C).

Another remarkable achievement of the Board has been to formulate the Guidelines for Media interaction which have been duly approved by the Hon'ble Finance Minister.

When I took over as Chairperson, I had emphasized transparency and humane approach as also the need for promoting voluntary compliance and a hassle-free service to the honest tax payers as part of our policy, I had also underlined the need to focus on non-filers and stop-filers with a view to achieving a tax regulation regimen in India which can match the best in the world. This gives me immense pleasure to share that this policy was strictly adhered to and taken forward_ During the current year, through NM5, we collected tax of more than Rs1900 cr; more than five lakh new returns were filed and about 150000 self¬asstt- tax defaulters were detected. We have also registered a great deal of progress in the use of technology- establishment of CPC(TDS); receiving all forms through e-mode; strengthening of e-filing portal and processing portal at CPC, Bangaluru. The process is also on for establishing CPC (Data-mining) and ITBA project. The new Technical Training Centre with a capacity to train 20000 officers per year, which is a part of the ITBA project, has been completed in January, 2014 within the stipulated time-frame. With the kind of technological advancements taking place in the Department, I am sure the day is not far when Indian Tax-System will be considered one among the best in the world.

Friends, our Department has a great future. It is full of talented, diligent and dedicated officers and members of staff, and that is its biggest strength. I am sure each one of you will use your talent for the progress of the Department and for the service of the nation. Every Indian should feel proud of your services.

Good Bye and all the Best to you all.

Jai Hind

DATED: 28.02,2014

Dr. Sudha Sharma, Chairperson

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Work Accomplished by the TPL and FT&TR Divisions of CBDT as well as DGIT(Logistics) up to February 2014

A. TPL DIVISION

During the period 01.04.2013 to 31 October 2013, as many as 17 Notifications were issued by the TPL Division which are enumerated hereunder:

ITR forms for the assessment year 2013-14 have been notified.
Section 35000 of the Income-tax Act provides for deduction in respect of expenditure incurred on agricultural extension project notified by the Board. Accordingly, Rules 6AAD, 6AAE and form 3C-0 have been inserted to prescribe the guidelines for approval of agricultural extension project.
TDS rules have been amended to prescribe a simplified procedure relating to tax deposit and furnishing of information for the deductor deducting tax under section 194-IA (in respect of payment on transfer of certain immovable property other than agricultural land) by introducing a single page challan cum statement – form no. 26(2B .

Commodities Transaction Tax was introduced vide Finance Act, 2013 to come into effect from the date of notification. Commodities Transaction Rules have been notified and 01.07.2013 has been notified as the date from which the Commodities Transaction Tax and Commodities Transaction Rules come into force.
Rules for transfer pricing in relation to "specified domestic transactions" defined under section 92BA of the Income-tax Act (introduced vide Finance Act, 2012) have been notified by amending the Rules.
Section 94A of the Income-tax Act provides for special measures in respect of transactions with persons located in notified jurisdictional area. Accordingly, Rule 21AC and Form `10FC' for furnishing of authorization and maintenance of documents etc. for the purpose of the said section has been notified.
Clause (e) of the proviso to section 43(5) provides that an eligible transaction in respect of trading in commodity derivatives carried out in a recognized association shall not be deemed to be a speculative transaction. Accordingly, rules 6DDC and 6DDD have been inserted in the Income-tax Rules in respect of requirement to be fulfilled by a recognized association to be notified as one for the purposes of the said section.

Section 35CCD of the Income-tax Act provides for deduction in respect of expenditure incurred on skill development project notified by the Board. Accordingly, Rule 6AAF has been inserted to prescribe guidelines for approval of skill development project under the said section.
Section 194LD of the Income –tax Act provides for tax deduction at source on income by way of interest on Government securities and rupee denominated bond of an Indian Company provided that the rate of interest in respect of the rupee denominated bond shall not exceed the rate as may be notified. Rates of interest for the purposes of the section have accordingly been notified.
Under the provisions of sections 90 and 90A, a non-resident is required to furnish a certificate of his being a resident in any country/specified territory outside India. Accordingly, Rule 21A.I3 has been amended to prescribe the format of the certificate to be obtained by the assessee and Form' OF' has been inserted for providing the information that is to be furnished under the said sections.
The procedure for remittances to non-residents has been revised by amending Rule 37BB of the Income-tax Rules.
Under the provisions of section 1 1 5U of the Income-tax Act, a statement in respect of income paid or credited by the Venture Capital Company or the Venture Capital Fund has to be furnished as prescribed. Rule 12C and form no. 64 prescribing the details in respect of the said statement have been amended.
Chapter XII-EA inserted by the Finance Act, 2013 provides for special provisions relating to tax on distributed income by Securitization Trusts. Section 10(23DA) exempts from tax any income of a securitization trust from the activity of securitization. Rule 12BA and form no.63AA have been inserted in the Income-tax Rules to prescribe the details and format of the statement to be furnished by the securitization trust.
Under the provisions of section 92CB of the Income-tax Act, the Board may make rules for Safe Harbour. Accordingly, rule IOTA prescribing Safe Harbour Rules has been inserted in the Income-tax Rules.
As per the provisions of General Anti-Avoidance Rule (GAAR) inserted in the Income-tax Act vide Finance Act, 2013, guidelines and conditions for application of GAAR would be as may be prescribed. Accordingly, Rule 10U and forms 3CEG, 3CEH and 3CEI prescribing the same have been inserted in the Income-tax Rules.
Under the provisions of section 245Q, an applicant desirous of obtaining an advance ruling may make an application in such form and in such manner as may be prescribed. Accordingly, Form. 34EA has been inserted in the Income-tax Rules.
Under the provisions of section 47(xvi), any transfer of a capital asset in a transaction of reverse mortgage under a scheme made and notified by the Central Government shall not be regarded as transfer. Accordingly, amended Reverse Mortgage Scheme has been notified.

B. FT&TR Division

FT&TR Division accomplished the following:

Three new Double Taxation Avoidance Agreements (DTAA) with Uruguay, Albania and Latvia were entered into force taking the total number of DTAAs to 88.
Further, three new DTAAs with Macedonia, Fiji and Croatia were signed.
In addition, protocols amending the existing DTAAs with Bangladesh, Sweden, Australia, Romania and United Kingdom entered into force during this period and Protocols amending the existing DTAA were signed with South Africa, Morocco, Denmark and Brazil.
Three new Tax Exchange Information Agreements (TIEAs) with Bahrain, Belize and Liechtenstein entered into force during this period taking total number of TIEAs to 15. Another new TLEA was signed with San Marino.
Discussions on MAP were held with Japan, United Kingdom, Switzerland, Finland and USA and, 11 cases with Japan, 6 cases with UK and 4 cases with USA were resolved, while significant progress was made in respect of many other cases.
During the year, the MAP process with USA was resumed after a gap of more than a year, and two rounds of discussions were held between the Competent Authorities, on arriving at a mutually acceptable framework under which the cases can be resolved expeditiously.
A total of 117 cases under unilateral APA and 32 cases under bilateral APA were processed and papers have now been finalized and exchanged with the other Competent Authority in 7 cases of bilateral APA. The Indian position is also finalized in respect of 13 of cases of Unilateral APA.
Safe Harbor Rules were notified on 18^th September, 2013 by SO 2810(E), with a view to reduce tax litigation and disputes in transfer pricing matters and provide greater certainty to the taxpayers.
Circular No. 6/2013 was issued on 29^th June, 2013 on conditions relevant to identify development centres engaged in contract R&D services with insignificant risk. A clarification on section 195 read with section 201 of the Act, as proposed by the CBDT was concurred by the Ld. Attorney General and the instruction is being issued.
Information has been requested in a number of cases under the provisions of DTAAs/TIEAs/Multilateral Conventions and the information received have been utilized by the officers of the tax department in assessment and investigation. Since Cyprus has not been providing the information requested by tax authorities, it was notified as a notified jurisdictional area under section 94A of the Income-tax Act, 1961
India as a vice-chair of the Peer Review Group (PRG) of the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) and has provided valuable inputs, both in written form and also during the meetings of the PRG, for the assessments and peer review of a number of jurisdictions. The Global Forum in its November, 2013 meeting in Jakarta, also approved the ratings for fifty jurisdictions whose Phase 2 reviews were completed. India was rated as "Compliant" on all the above ten essential elements and accordingly was allocated an overall rating of "Compliant". There are only nine other jurisdictions who have been rated as Compliant on all the ten essential elements.
Negotiations were held with US Treasury officials for entering into an Inter-Governmental Agreement (IGA) for exchanging tax related information on an automatic basis.
As a G20 country, India worked with OECD to develop a Common Reporting Standards (CRS), on a fully reciprocal basis, for automatic exchange of financial information, which when fully implemented will enable us to receive information of Indians having bank accounts in offshore jurisdictions. Roadmap for implementing the CRS in India including effectively using the information received from foreign jurisdictions while maintain confidentiality lay down.
To ensure that the profits are taxed where economic activities deriving the profits are performed and where value is created India joined the G20/OECD BEPS project on an equal footing. India was also elected by the non-OECD G20 countries to be part of the CFA Bureau Plus, which will be overseeing the implementation of the BEPS Project. During the year, India actively participated in the drafting of proposals regarding Preventing of Treaty Abuse, Artificial Avoidance of PE Status, Dispute Resolution, Transfer Pricing Issues, Taxation of Hybrid instruments, Addressing Harmful Tax Practices and Controlled Foreign Corporation rules, and it was ensured that concerns of India are included in the BEPS project.

India also actively participated in the drafting of the report on addressing challenges arising from Digital Economy, highlighting the need to change international tax rules requiring physical presence for taxation of business income in source country. The initiative taken by India to create a common stand of BRICS countries also resulted in greater acceptance of the concerns faced by emerging economies.
Tax issues were discussed extensively in the G20 meetings of the Finance Ministers and G2() Leaders, particularly on the issues of "Base Erosion and Profit Shifting", "Exchange of Information including on an Automatic basis" and "Assistance to developing countries for capacity building" and India's comments were taken on Board in the final communiqudideclarations.
Three areas of cooperation as mandated by the BRICS Leaders were finalized and are (a) Base Erosion and Profit Shifting (b) Common Approach on International Forum and (iii) I-T Inter Connectivity for Customs Co-operation. 8^thmeeting of IBSA Heads of Revenue Administrations Working Group (HRAWG) was held on 8^thNovember 2013 and the 11′^x' meeting of IBSA Revenue Administrations Steering Group (RASG) was held on 4-7 November, 2013 at Rio de Janeiro, Brazil. Cooperation in the areas of international taxation and transfer pricing, exchange of information, cooperation in multilateral fora, digital economy, aggressive tax planning and capacity building were identified and sub-groups have been constituted to work in these areas for enhanced cooperation.
A dedicated module on International Taxation, including Exchange of Information, and Transfer Pricing was added in the syllabus of the Induction Course of the IRS probationers, and training was imparted on these topics to ensure that IRS officers are properly equipped to handle international tax and transfer pricing topics.
A total of 34 officers of the Department were deputed to OECD training events at different centres outside India on tax issues as part of capacity building process. Two OECD training programmes on international taxation and transfer pricing were organized at NADT for officers of the Department.
Training sessions on international taxation and transfer pricing was organized for officers posted in Directorate of International Taxation and Transfer Pricing on 12-13 July, 2013 and 25-27 July, 2013.
A training programme was organized from 22-25 July, 2013 on Indian APA provisions for tax officers of South Africa Revenue Service, at New Delhi.
The National Academy of Direct Taxes (NADT) conducted an "Auditor Sensitization Seminar" in collaboration with Global Forum at Nagpur from 31^s` July to 2^ndAugust, 2013, which was inaugurated by the Chairperson, CBDT.
Training on Exchange of Information was also conducted at each of the eighteen cadre controlling regions and the officers were sensitized of the usefulness of Exchange of Information.

C. DGIT(Logistics)

The DGIT(Logistics) oversees the work of DsIT (Infrastructure), DIT(Expenditure Budget) as well as DIT(BPR) and DIT(O&MS). During the period under review, the following work was accomplished:

Till 25^th February 2014, 131 Infrastructure projects involving an amount of Rs.737.54 crores were sanctioned. Some significant sanctions are briefly as under:

a. Purchase of Land for Office Building and Residential Quarters at Mohali. (Rs.14.5 crores)

b. Purchase of land for construction of new office Building at Kochi(Rs.12.26 crores)

c. Construction of Type VI Residential Quarters at Nugambakkam, Chennai. (Rs.38.2 crores)

d. SFC proposal for construction of Office building & Residential Quarters in Belgaon, Panaji.(Rs.44.33 crores)

e. Purchase of land for construction of new office Building at Mysore.(Rs.3.84 crores)

f. CNE proposal for revision in cost of construction of Type-V Residential Quarters at Bandra Kuria Complex, Mumbai (16.80 crores additional cost.)

g. SFC Proposal for construction of Type-VI Residential Quarters and Community Hall/ Guest House at Hadapsar, Pune(Rs.37.78 crores)

h. Construction of Annexe to the Office Building at Rourkela.(Rs. 6.77 crores)

i. Construction of Office Building at Jharsuguda, Odisha. (Rs.3.65 crores)

j. Construction of Type V & VI Residential Quarters at Telibandha, Raipur. (Rs. 32.37 crores)

k. Purchase of land for construction of office building and residential quarters at Rajsamand (Rs.2.17 crores)

Out of total no. of 59 ASKS which were proposed to be set up during F.Y. 2013-14, the infrastructure for setting up 56 new ASKs across the country has been completed.
Internal Audit and Management Review has been completed by the Directorate of O& MS and final application for certification has been submitted to the Bureau of Indian Standards for BIS certification IS: 15700 for 21 ASKs across the country identified for such certification during 2013-14.
All ASK centers are having at least one stand alone dedicated PC with Internet connection. Earlier this was available only at the ASK kiosk. This facility will make all the services provided through e-portal available to the visiting taxpayers. These include:

i) PAN enquiry

ii) Viewing of 26AS

iii) Downloading of circulars and latest press releases for information of tax payers,

iv) Jurisdiction related enquires

v) Checking refund status for e filed returns

A list containing names and contact numbers of all TRPs is being prominently displayed in all ASK Centre for use of taxpayers.
All ASK centers are having a dedicated desk for receiving PAN/TAN application through representatives of NSDL/UTIISL.
The facility to receive appeal papers in respect of CsIT(Appeals) and RTI applications is to be provided at ASK Centers. The issue is currently under consideration of DIT(Systems).
A comprehensive guest house policy was piloted which was approved by the Full Board. This policy will serve as a guide to the field-formations for in administering the guest houses of the Income Tax Department within their jurisdiction with due observance of Rules and Procedures.
A self-contained manual on expenditure budget was compiled and circulated to the field-formations for their guidance and speedy action in expenditure budget matters.

S. 80-IB(10) – Limit on extent of commercial area applies only to projects approved after 01.04.2005

Posted In Income Tax Case Laws | Judiciary | No Comments »

CA Sandeep Kanoi

We observe that on similar facts in the assessee's own case for the same project, the Tribunal by its order dated 29.7.2011 relating to assessment years 2005-06 and 2006-07, the assessment years which also falls after the amendment made by insertion of Clause (d) to section 80IB(10) of the Act, applicable from 1.4.2005 has held that the assessee is eligible for deduction u/s 80IB(10) of the Act in respect of the housing project. As there is no change in facts and circumstances in the assessment years under consideration viz assessment years 2007-08 and 2008-09, the above decision of ITAT squarely apply to these assessment years as well. Not only this, the similar issue had also come before the Hon'ble Gujarat High Court in the case of Manan Corporation V/s ACIT reported in 214 Taxmann 373 (Guj) while considering the appeal for assessment year 2006-07 wherein it was held by Their Lordships that the condition of limiting commercial establishment/shops to 2000 sq.ft, which has come into force w.e.f. 1.4.2005 would be applicable for the project approved on or after 1.4.2005 and where the approval of the project was prior to 31.3.2005, the amended provision would have no application for those projects. We observe that the Hon'ble Gujarat High Court also placed heavily reliance on the decision of the Hon'ble Bombay High Court in the case of Brahma & Associates (supra). In view of above, the issue is covered not only in the assessee's own case for the assessment years 2005-06 and 2006-07 but also by the decision of the Hon'ble Gujarat High Court in the case of Manan Corporation (supra). Hence, we uphold the orders of ld. CIT(A) that the assessee is entitled for deduction u/s 80IB(10) of the Act for both the assessment years under consideration. Accordingly, the grounds of appeal taken by department for the assessment year 2007-08 and Grounds No.1 and 2 of the appeal for assessment year 2008-09 are rejected.

INCOME TAX APPELLATE TRIBUNAL, MUMBAI

BEFORE S/SHRI B.R.MITTAL,(JM) AND N.K.BILLAIYA (AM)

I.T.A.No.809/Mum/2011 – Assessment Year: 2007-08)

I.T.A.No.3644/Mum/2012 – Assessment Year: 2008-09)

Income Tax Officer Vs. M/s Yash Developers

Date of Pronouncement : 31.1.2014

ORDER

Per B.R.MittaI, JM

The department has filed these two appeals for assessment years 2007-08 and 2008-09 against orders of ld. CIT(A) dated 22.11.2010 and dated 16.3.2012 respectively on the following grounds :

I.T.A.No.809/ Mum/2011

Grounds of appeal taken by department in this appeal are as under:

"1. on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the deduction under section 80lB to the assessee, without appreciating the fact that the total commercial space of the assessee's project is 6.12% of the built up area whereas as per clause (d) of the section 80IB(10), inserted w.e.f. 1.4.2005, the maximum commercial space in a project is allowed up to 5% of the built up areas only;

2. on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the deduction under section 80lB to the assessee relying on the judgment of special bench in the case of Brahma & Associates reported in 119 ITD 255, ignoring that the facts of the said case will not be applicable here as fact of that case relates to AY 2003- 04 i.e. prior to insertion of clause (d) of section 80IB(10);

The appellant prays that the order of the ld. CIT(A) on the ground be set aside and matter may be decided according to law. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary"

I.T.A.No.3644/Mum/2012

Grounds of appeal taken by department in this appeal are as under:

"I. on the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was right in allowing the deduction u/s 80IB(10) though the assessee has not complied with all the conditions of section 80IB(10), as amended upto date;

II. on the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was right in allowing assessee's claim of deduction u/s 80IB(10) when the commercial area of the housing project exceeded 5% of total built up area in violation of section 80IB (10)(d).

III. on the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was right in allowing assessee's claim of deduction u/s 80IB(10) when the assessee has not filed return of income within the time limit u/s 139(1) and when section 80AC specifically provides that no deduction shall be allowed unless return is furnished within time limit of section 139(1).

IV. on the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was right in accepting the revised computation of income of the assessee without filing revised return of income in ignoring the decision of the Hon'ble Supreme Court in Goetz (India) Ltd V/s CIT (2006) 284 ITR 323 (SC) and accepting the revised computation filed by assessee.

The appellant prays that the order of the ld. CIT(A) on the grounds be set aside and matter may be decided according to law. The appellant craves leave to amend or alter any ground or add a new ground or to submit additional new ground which may be necessary"

2. At the time of hearing, it was pointed out that grounds in the appeal for assessment year 2007-08 are similar to that of ground Nos. 1 and 2 of the appeal for the assessment year 2008-09 and it relates to the same project on similar issue. In view of above, it was agreed that both the appeals be heard together and be dispose off by a common order. Therefore, we have heard these appeals together and dispose off them by this common order for the sake of convenience.

3. Grounds of appeal for the assessment year 2007-08 and Grounds of appeal for assessment year 2008-09, relates to eligibility of the assessee to claim deduction u/s 80IB of the Income Tax Act, 1961 (the Act).

4. The assessee is a partnership firm engaged in the business of developing and construction. The assessee filed return of income for assessment year 2007-08 declaring total income of Rs.Nil after claiming deduction u/s 80IB(10) of Rs.74,684/-. For the assessment year 2008-09, the assessee filed return of income on 30.9.2009 by declaring total income at Rs.Nil after claiming deduction/s 80IB of Rs.24,85,233/-. AO denied the deduction u/s 80IB of the Act for the assessment year 2007-08 on the ground that the assessee has constructed shops with the aggregate built up area of 3382 sq.ft which constitutes commercial area of 6.12% of the total built up area which should not exceed 5% of the aggregate built up area of the housing project or more than 2000 sq.ft whichever is less. Therefore, the assessee has not fulfilled one of the conditions as per clause (d) of section 80IB(10) of the Act which has been inserted with effect from 1.4.2005 by the Finance (No.2) Act,2004. It is relevant to state that in respect of assessment year 2008-09, the AO has also stated that the assessee did not file the return of income within the stipulated time prescribed u/s 139(1) of the Act and the provisions of Section 80AC are applicable. Accordingly the deduction claimed by assessee u/s 80IB of the Act of Rs.24,85,233/- is to be disallowed on that ground as well. Being aggrieved, assessee filed appeals for both the assessment years under consideration.

5. In respect of assessment year 2007-08, the ld. CIT(A) stated that the issue of claiming of deduction u/s 80IB on account of built up area of shops and commercial establishment was considered by ITAT in assessee's own case in ITA No.7297/Mum/2007 for assessment year 2004-05 vide order dated 2.6.2009 wherein the assessment order was set aside and following it, he has directed AO to examine the claim of the assessee as per directions of ITAT and give effect on the basis of the same in the assessment year 2007-08 as well.

5.1 However, in respect of assessment year 2008-09 the ld. CIT(A) has stated that ITAT in assessee's own case for Assessment years 2005-06 and 2006-07 decided the issue in favour of assessee by following the decision of the Hon'ble Bombay High Court in the case of CIT V/s Brahma Associates (2011) 333 ITR 289 (Bom) and accordingly vide para 14 held that if the approval is prior to assessment year 2005-06, the area restriction will not be applied. In the assessee's case, the project was approved and the same has commenced prior to 1.4.2005 and as per the Hon'ble High Court, the commercial use is permissible up to 10% of the total project area and whereas in the assessee's case the commercial area is only 6.12%. Hence, the AO's contention of 5% area restriction is not applicable to the facts of the assessee's case. The project of the assessee is predominantly a housing project and deduction u/s 80IB(10) cannot be denied and the same has to be allowed.

6. It is also relevant to state that in respect of delay in filing the return of income on the basis of which the AO also denied deduction u/s 80IB(10) of the Act in respect of assessment year 2008-09, which are Ground Nos.3 and 4 of the appeal taken by department, the ld. CIT(A) has stated that the assessee filed return within extended time prescribed u/s 139(4) of the Act and the said return be treated as the one filed within the time limit prescribed u/s 139(1) of the Act and referred the decision of the Hon'ble Apex Court in the case of Kulu Valley Transport Co. P. Ltd. V/s CIT [1970] 77 ITR 518. Ld. CIT(A) has stated that similar issue in the context of section 54F also came before the Hon'ble Punjab and Haryana High Court in the case of CIT V/s Jagruti Agarwal (339 ITR 610) (P&H) and it was held that sub-section (4) of section 139 has to be read along with sub-section (1) of section 139 and therefore due date for furnishing the return of income according to section 139 was subject to extended period provided u/s 139(4) of the Act. Ld. CIT(A) stated that similar issue was also considered by the Hon'ble Jurisdictional High Court in the case of Trustees of Tulsidas Gopalji Charitable & Chaleshwar Temple Trust V/s CIT [1994] 207 ITR 368 (BOM.) and the jurisdictional High Court held that sub-section (1) and (4) of section 139 have to be read together and in such a reading the return made within the specified time under sub-section (4) has to be considered as having been made within the time prescribed u/s 139(1) or (2) of the Act. The ld. CIT(A) also relied on the decisions of other High Courts, which we do not propose to refer to, particularly when the decision of the Hon'ble Bombay High Court has been considered hereinabove. However, it is relevant to state that the ITAT, Ahmedabad Bench also considered similar issue in the case of Parmeshwar Cold Storage P Ltd V/s ACIT (08 ITR (Trib) 172(Ahmd)) in the context of claim of deduction u/s 80IB wherein also the return was not filed within the time prescribed u/s 80AC of the Act but the Tribunal held that the claim of deduction/s 80IB of the Act should be adjudicated on merits and the matter was restored to CIT(A). The dl. CIT(A) has in para 9 also considered the decision of ITAT, Mumbai Bench in the case of Emerson Network Power India Pvt Ltd V/s ACIT reported in 122 TTJ 67(Mum) wherein it was held that the AO was obliged to give due relief to assessee or entertain its claims if admissible as per law even though the assessee had not filed revised return. Following the said decision, the ld. CIT(A) directed the AO to allow claim of the assessee made u/s 80IB(10) of the Act on merits even though the return of income was not filed within the time prescribed as per section 139(1) of the Act. In view of above, the department is in further appeals before the Tribunal.

7. At the time of hearing, ld. DR supported the orders of AO in denying the deduction u/s 80IB (10) of the Act in view of the amendment made by insertion of clause (d) of section 80IB (10) with effect from 1.4.2005 on the ground that aggregate area of shops and commercial area of the assessee is 3382 Sq.ft which is 6.12%. The ld. DR submitted that in view of amendment, the benefit is not available to the assessee in the assessment year falling after the amendment and also placed reliance on the decision of ITAT, Mumbai Bench in the case of ITO V/s M/s Everest Home Construction (India)Pvt. Ltd in ITA No.7021/Mum/2008(AY-2006-07) dated 12.9.2012. On the other hand, ld. AR submitted that the case of the assessee is covered in assessee's own case for the same project for assessment years 2005-06 and 2006-07 by a common order of Tribunal dated 29.7.2011 in ITA No.4615 and 4616/Mum/2010. The ld. AR also placed a copy of the said order of Tribunal to substantiate his submissions. The ld. AR submitted that during the assessment years under consideration there is no change in the facts and of business of the assessee from immediately preceding assessment years and the assessee continued to be engaged in the same housing project for which the Mira —Bhyander Municipal Parishad had granted approval as a housing project to the assessee and the assessee also commenced the construction on 1.2.2001 as per approval granted to it. The ld. DR did not controvert the above contention of the assessee but reiterated that in view of the amendment made with effect from 1.4.2005 the assessee is not entitled to deduction u/s 80IB(10) of the Act as it does not fulfill one of the requirements of clause (d) of said section.

8. We have carefully considered the submissions of the ld. Representatives of the parties and orders of authorities below. We have also considered the earlier orders of Tribunal dated 12.9.2012 (supra) as well as the order of Tribunal dated 29.7.2011(supra). We observe that on similar facts in the assessee's own case for the same project, the Tribunal by its order dated 29.7.2011 relating to assessment years 2005-06 and 2006-07, the assessment years which also falls after the amendment made by insertion of Clause (d) to section 80IB(10) of the Act, applicable from 1.4.2005 has held that the assessee is eligible for deduction u/s 80IB(10) of the Act in respect of the housing project. As there is no change in facts and circumstances in the assessment years under consideration viz assessment years 2007-08 and 2008-09, the above decision of ITAT squarely apply to these assessment years as well. Not only this, the similar issue had also come before the Hon'ble Gujarat High Court in the case of Manan Corporation V/s ACIT reported in 214 Taxmann 373 (Guj) while considering the appeal for assessment year 2006-07 wherein it was held by Their Lordships that the condition of limiting commercial establishment/shops to 2000 sq.ft, which has come into force w.e.f. 1.4.2005 would be applicable for the project approved on or after 1.4.2005 and where the approval of the project was prior to 31.3.2005, the amended provision would have no application for those projects. We observe that the Hon'ble Gujarat High Court also placed heavily reliance on the decision of the Hon'ble Bombay High Court in the case of Brahma & Associates (supra). In view of above, the issue is covered not only in the assessee's own case for the assessment years 2005-06 and 2006-07 but also by the decision of the Hon'ble Gujarat High Court in the case of Manan Corporation (supra). Hence, we uphold the orders of ld. CIT(A) that the assessee is entitled for deduction u/s 80IB(10) of the Act for both the assessment years under consideration. Accordingly, the grounds of appeal taken by department for the assessment year 2007-08 and Grounds No.1 and 2 of the appeal for assessment year 2008-09 are rejected.

9. In respect of grounds No.3 and 4, the relevant facts which we have already discussed hereinabove, we observe that the said issue is covered in favour of assessee by the decision of Hon'ble Bombay High Court in the case of Trustees of Tulsidas Gopalji Charitable & Chaleshwar Temple Trust (supra) which has been considered by the ld. CIT(A) while deciding the same in favour of assessee and respectfully following the same, we hold that there is no reason to interfere with the order of ld. CIT(A). Therefore, the Grounds No.3 and 4 of the appeal taken by department for assessment year 2008-09 are also rejected by confirming the order of ld. CIT(A).

10. In the result, both the appeals filed by the department for assessment years 2007-08 and 2008-09 are dismissed.

Order pronounced in the open court on 31st day of January, 2014.

INCOME TAX APPELLATE TRIBUNAL, MUMBAI

BEFORE S/SHRI B.R.MITTAL,(JM) AND N.K.BILLAIYA (AM)

I.T.A.No.809/Mum/2011 – Assessment Year: 2007-08)

I.T.A.No.3644/Mum/2012 – Assessment Year: 2008-09)

Income Tax Officer Vs. M/s Yash Developers,

Date of Pronouncement : 31.1.2014

ORDER

Per B.R.MittaI, JM

The department has filed these two appeals for assessment years 2007-08 and 2008-09 against orders of ld. CIT(A) dated 22.11.2010 and dated 16.3.2012 respectively on the following grounds :

I.T.A.No.809/ Mum/ 2011

Grounds of appeal taken by department in this appeal are as under:

I.T.A.No.3644! Mum! 2012

Grounds of appeal taken by department in this appeal are as under:

4. The assessee is a partnership firm engaged in the business of developing and

construction. The assessee filed return of income for assessment year 2007-08 declaring total income of Rs.Nil after claiming deduction u/s 80IB(10) of Rs.74,684/-. For the assessment year 2008-09, the assessee filed return of income on 30.9.2009 by declaring total income at Rs.Nil after claiming deduction/s 80IB of Rs.24,85,233/-. AO denied the deduction u/s 80IB of the Act for the assessment year 2007-08 on the ground that the assessee has constructed shops with the aggregate built up area of 3382 sq.ft which constitutes commercial area of 6.12% of the total built up area which should not exceed 5% of the aggregate built up area of the housing project or more

than 2000 sq.ft whichever is less. Therefore, the assessee has not fulfilled one of the conditions as per clause (d) of section 80IB(10) of the Act which has been inserted with effect from 1.4.2005 by the Finance (No.2) Act,2004. It is relevant to state that in respect of assessment year 2008-09, the AO has also stated that the assessee did not file the return of income within the stipulated time prescribed u/s 139(1) of the Act and the provisions of Section 80AC are applicable. Accordingly the deduction claimed by assessee u/s 80IB of the Act of Rs.24,85,233/- is to be disallowed on that ground as

well. Being aggrieved, assessee filed appeals for both the assessment years under
consideration.

5. In respect of assessment year 2007-08, the ld. CIT(A) stated that the issue of
claiming of deduction u/s 80IB on account of built up area of shops and commercial

establishment was considered by ITAT in assessee's own case in ITA No.7297/Mum/2007 for assessment year 2004-05 vide order dated 2.6.2009 wherein the assessment order was set aside and following it, he has directed AO to examine the claim of the assessee as per directions of ITAT and give effect on the basis of the same in the assessment year 2007-08 as well.

assessee's case the commercial area is only 6.12%. Hence, the AO's contention of 5% area restriction is not applicable to the facts of the assessee's case. The project of the assessee is predominantly a housing project and deduction u/s 80IB(10) cannot be denied and the same has to be allowed.

. It is also relevant to state that in respect of delay in filing the return of income on the basis of which the AO also denied deduction u/s 80IB(10) of the Act in respect of assessment year 2008-09, which are Ground Nos.3 and 4 of the appeal taken by department, the ld. CIT(A) has stated that the assessee filed return within extended time prescribed u/s 139(4) of the Act and the said return be treated as the one filed within the time limit prescribed u/s 139(1) of the Act and referred the decision of the Hon'ble Apex Court in the case of Kulu Valley Transport Co. P. Ltd. V/s CIT [1970] 77 ITR 518. Ld. CIT(A) has stated that similar issue in the context of section 54F also came before the Hon'ble Punjab and Haryana High Court in the case of CIT V/s Jagruti Agarwal (339 ITR 610) (P&H) and it was held that sub-section (4) of section 139 has to be read along with sub-section (1) of section 139 and therefore due date for furnishing the return of income according to section 139 was subject to extended period provided u/s 139(4) of the Act. Ld. CIT(A) stated that similar issue was also considered by the Hon'ble Jurisdictional High Court in the case of Trustees of Tulsidas Gopalji Charitable & Chaleshwar Temple Trust V/s CIT [1994] 207 ITR 368 (BOM.) and the jurisdictional High Court held that sub-section (1) and (4) of section 139 have to be read together

and in such a reading the return made within the specified time under sub-section (4) has to be considered as having been made within the time prescribed u/s 139(1) or (2) of the Act. The ld. CIT(A) also relied on the decisions of other High Courts, which we do not propose to refer to, particularly when the decision of the Hon'ble Bombay High Court has been considered hereinabove. However, it is relevant to state that the ITAT, Ahmedabad Bench also considered similar issue in the case of Parmeshwar Cold Storage P Ltd V/s ACIT (08 ITR (Trib) 172(Ahmd)) in the context of claim of deduction u/s 80IB wherein also the return was not filed within the time prescribed u/s 80AC of the Act but the Tribunal held that the claim of deduction/s 80IB of the Act should be adjudicated on merits and the matter was restored to CIT(A). The dl. CIT(A) has in para 9 also considered the decision of ITAT, Mumbai Bench in the case of Emerson Network Power India Pvt Ltd V/s ACIT reported in 122 TTJ 67(Mum) wherein it was held that the AO was obliged to give due relief to assessee or entertain its claims if admissible as per law even though the assessee had not filed revised return. Following the said decision, the ld. CIT(A) directed the AO to allow claim of the assessee made u/s 80IB(10) of the Act on merits even though the return of income was

not filed within the time prescribed as per section 139(1) of the Act. In view of above, the department is in further appeals before the Tribunal.

Manan Corporation V/s ACIT reported in 214 Taxmann 373 (Guj) while considering the appeal for assessment year 2006-07 wherein it was held by Their Lordships that the condition of limiting commercial establishment/shops to 2000 sq.ft, which has come into force w.e.f. 1.4.2005 would be applicable for the project approved on or after 1.4.2005 and where the approval of the project was prior to 31.3.2005, the amended provision would have no application for those projects. We observe that the Hon'ble Gujarat High Court also placed heavily reliance on the decision of the Hon'ble Bombay High Court in the case of Brahma & Associates (supra). In view of above, the issue is covered not only in the assessee's own case for the assessment years 2005-06 and 2006-07 but also by the decision of the Hon'ble Gujarat High Court in the case of Manan Corporation (supra). Hence, we uphold the orders of ld. CIT(A) that the assessee is entitled for deduction u/s 80IB(10) of the Act for both the assessment years under consideration. Accordingly, the grounds of appeal taken by department for the assessment year 2007-08 and Grounds No.1 and 2 of the appeal for assessment year 2008-09 are rejected.

10. In the result, both the appeals filed by the department for assessment years 2007-08 and 2008-09 are dismissed.

Order pronounced in the open court on 31^st day of January, 2014.

Addition u/s 68 can be made on account of share applicants' lack of resources

Posted In Income Tax Case Laws | Judiciary | No Comments »

CA Sandeep Kanoi

Lovely Exports Pvt. Ltd. (supra) is an authority for the proposition that the assessee is under an obligation to dispel any doubts regarding the genuineness of an investor and the genuineness of the transaction. Here, though the assessee furnished particulars relating to three share applicants, the further inquiry made by the AO raised more questions than answers. The share applicants' lack of resources, the assessee's position vis-à-vis share amounts received and its commercial condition all pointed to the amount received by it falling within the mischief of Section 68 as unexplained amounts. That the AO or ITAT chose to treat the amount, as bogus share capital, is a matter of inference which the Court would be loath to interfere with.

HIGH COURT OF DELHI AT NEW DELHI

Decided on: 13.02.2014

ITA31/2013

ONASSIS AXLES PRIVATE LIMITED

versus

COMMISSIONER OF INCOME TAX

ORDER

MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT)

C.M. APPL. 933/2013 (for exemption) Allowed, subject to all just exceptions. ITA 31/2013

1. This is an assessee's appeal, directed against an order of the Income Tax Appellate Tribunal (ITAT), of 18.05.2012 in I.T.A. No.1637/Del/201 1. The assessment year concerned is 2007-08. The following question of law arises for consideration:

"Did the Tribunal fall into error of law in setting aside the order of the CIT (A) accepting the assessee 's contention that share application amount, to the extent of 80 lakhs, received by it, had been properly explained and it could not be included under Section 68?"

2. The assessee, during the relevant period (A.Y. 2007-08) claimed that a sum of 1 .8 crore had been received by it towards shares, as application money. The amount in dispute is 80 lakhs. The Assessing Officer (AO) asked the assessee during the assessment to explain the amounts received from three applicants viz. M/s. Hub Services P. Ltd. ( 25,00,000/-); M/s. R.S. Associates P. Ltd. ( 30,00,000/-) & M/s. Transaction India P. Ltd. ( 25,00,000/-). The AO asked the learned AR of the assessee to file details regarding genuineness of the transactions, identity and creditworthiness with regard to share application money received. The assessee in response thereto filed photo copies of the following documents: (i) Share Applications containing the details of pay orders; (ii) Undated confirmations; (iii) Undated affidavits of the companies from whom share application money was received; (iv) Undated copy of Resolution; (v) Memorandum and Article of Association; (vi) Acknowledgement of return for Assessment Year 2005-06; (vii) PAN Cards in respect of Hub Services P. Ltd. and Transaction India P. Ltd.

3. The AO asked the assessee to furnish copies of bank accounts for the F.Y. 2006-07 of all three share applicants along with their balance-sheet, profit and loss account, income-tax returns, tax audit report and auditor's report for Assessment Year 2007-08. The AO issued summons under Section 131 of the Act to the said three parties, which came back unserved with the postal remarks, "No such person". The AO communicated this fact to the learned AR of the assessee by an order-sheet entry dated 16.12.2009 and he was asked to file either the latest address of these three companies or to produce the directors of those companies along with details already asked for by him. The case was thereafter adjourned to 21.11.2009 and again adjourned to 24.12.2009. The assessee's representative by a letter dated 24.12.2009 stated that all other details relating to share application monies were filed. All the three share applicants were existing entities and had filed their necessary returns with ROC. The assessee filed the necessary communication with the ROC for the Assessment Year 2007-08 by all the three companies. As all the three applicants were existing and assessed to income-tax, it was argued that the share applicants were genuine. The assessee, however, failed to provide bank statements for F.Y. 2006-07 of the aforesaid three companies.

4. Acting on the basis of the materials furnished by the assessee, the AO found that all the three pay orders were obtained from Mahamedha Urban Cooperative Bank Ltd., Noida. He issued summons to the said bank, requiring it to send the bank statements of the three companies from 01.04.2006 till the date of summons. From the information received from the bank, the AO found that M/s. Hub Services P. Ltd. opened bank account No.1002014026499 on 31st March, 2007 whereas the pay order was dated 29.09.2006. M/s. R.S. Accessories P. Ltd., also opened account No 1002014026502 on 31st March, 2007 whereas the pay order was dated 29.09.2006. The assessee's contention that the pay orders were made from the accounts on 29.09.2006 was, therefore, not accepted. M/s. Transaction India P. Ltd. had two accounts bearing No. 1002014026258 and No. 10020140025746. Both these accounts were opened during F.Y. 2006- 07. On considering account No. 1002014026258, the AO held that the pay order for 25,03,125/- was issued on 29.09.2006 and on the same date cash amounting to 25,04,000/- was deposited in the account raising doubts about the genuineness of transaction. The assessee was asked to show cause how the amount of 80,00,000/- claimed to have been received by it as share application money from the share applicants should not be treated as its income under Section 68 of the Act.

5. The AO considered the assessee's contentions and observed that the mere furnishing of particulars was not enough. The creditors were not only to be identified, but moreover, there should also be some evidence of their creditworthiness. There should also be proof of genuineness of transaction. Furnishing of the income-tax file number was not sufficient to prove the genuineness of cash credit. Since the assessee had failed to discharge its onus to prove the identity and creditworthiness of the creditors and genuineness of transaction, the AO came to the conclusion that the assessee had failed to discharge its onus. As regards affidavits filed of the three parties, the AO observed that the statements made in affidavits can be treated as unreliable if there is other material discrediting the deponents. The affidavit could also be rejected if the assessee failed to produce other supporting evidence when called upon to do so. The AO, therefore, rejected the affidavits as self-serving evidence. The AO consequently, made the addition of 80,00,000/-.

6. The assessee, in its appeal before the CIT(A), complained that the AO had not doubted the identity of the shareholders from whom share application money was received. The AO had not pointed out any discrepancy in the income-tax particulars of the shareholders filed by the assessee giving their PAN numbers, complete addresses, as also copies of their acknowledgements. The AO also did not point out any discrepancy in the facts that all the shareholders were assessed to income-tax in Delhi. In spite of these facts, he erred in holding that the three companies were not genuine share applicants who had invested in the share capital of the assessee. The assessee had filed confirmations from all the three companies. The assessee relied on several decisions including the decision of Supreme Court in CIT v. Lovely Exports Pvt. Ltd., 216 CTR 195 (SC). The CIT (A) deleted the addition relying on the decision of the Supreme court in Lovely Exports Pvt. Ltd. (supra) and other decisions on the issue.

7. The Tribunal, in its impugned order set aside the appellate Commissioner's findings, holding that:

"10. We have heard both the parties and gone through the material available on record. During the course of hearing the assessee filed photo copies of share applications containing Pay Order numbers, Photo copies of undated confirmations, photocopies of undated affidavits of the companies from whom share application money claimed to have been received, photo copy of undated resolution, photo copy of Memorandum & Article of Association and copies of acknowledgement of returns for Assessment Year 2005-0 6 in the cases of all the three parties. The assessee by filing these evidences has claimed that initial onus has been discharged. Since the identity of the share applicants has been established, the contention of the assessee is that no addition can be made in the hands of the assessee. The AO had conducted enquiry from Mahamedha Urban Cooperative Bank Ltd., Noida. We have gone through the information obtained from the bank. It is seen that the bank account in the case of M/s. Hub Services P. Ltd. having Account No.1002014026499 was opened on 31st March, 2007. The assessee received share application money of Rs.25,00,000/- by Pay order No.011784 dated 29.09.2006. Therefore, when A/c No.1002014026499 was opened on 31st March, 2007, the Pay Order could not be made from the bank account of M/s. Hub Services P. Ltd. with Mahameda Urban Cooperative Bank Ltd., Noida. Similarly the Bank account of M/s. R.S. Accessories P. Ltd. bearing No.1002014026502 was also opened on 31st March, 2007, whereas the amount of Rs.30,00,000/- was received by Pay Order No.011 785 dated 29th September, 2006. This Pay Order cannot be made from the account of M/s. R.S. Accessories P. Ltd. as on the date of Pay Order the said account was not in existence. As regards pay order of Rs.25, 00,000/- in the name of Transaction India P. Ltd., it was issued on 29.09.2006. As per the information received from the Bank A/c Nos. 2002014026258 & 10020140025746 were opened during the F. Y. 2006-0 7. The pay order was made from the A/c No.1002014026258 on 29.09.2006. On this date the amount of Rs.25, 04,000/- was deposited out of which pay order of Rs.25,03,125/- was made. From these facts it is evident that in first two cases the pay orders have not been made from the Bank Account of the said parties. In the case of third party i.e. M/s. Transaction India P. Ltd. the pay order was made after depositing cash in the bank. Thus it is not a case where the AO had not made any enquiry in the matter. The assessing officer brought this fact to the notice of the assessee and asked him to produce either the directors of the share applicants or give their new addresses as summons sent on the addresses given in the information supplied by it were received back as un-served. The assessee, however, did not comply with the said requirement of the assessing officer.

11. Another important and interesting feature of pay orders is that the pay orders have been made in same series on same date from the same Bank i.e. Pay Order No.011783 dated 29.09.2006 in the name of M/s. Transaction India P. Ltd.; Pay Order No.011784 dated 29.09.2006 in the name of M/s. Hub Services P. Ltd. and Pay Order No.011785 dated 29.09.2006 in the name of M/s. R.S. Accessories P. Ltd. M/s. Hub Services P. Ltd. is located at 204, Himalaya Complex, A-65, Laxmi Nagar, New Delhi. The offices of M/s. R.S. Accessories P. Ltd. and M/s. Transaction India P. Ltd. are located at 5/7B, Pusa Road, New Delhi. It is not mere co-incidence that all the three parties located at two different places in Delhi went to the same Bank on the same day at the same time and got the Pay Orders for requisite amounts in the same series. It will not be possible in the ordinary course of business that all the three persons would go to Noida for purchase of pay orders from the same bank at the same time and with the same running serial numbers. M/s. Hub Services P. Ltd. is located at Laxmi Nagar, New Delhi. There is no dearth of banks in Laxmi Nagar or Pusa Road Delhi. It has to be understood as to why anyone would go for purchase ofpay orders from a bank located at long distance in Noida. When the AO confronted the assessee vide order-sheet entry dated 24.12.2009 by issuing show cause notice as to why the amount of Rs. 80,00,000/- claimed to have been received by the assessee as share application money from three companies, should not be treated as income of the assessee u/s 68 of the Act, the assessee vide letter dated 29.12.2009 filed reply reiterating that the identity of all the three applicants was established, their PAN number and confirmations were filed. It was also contended that they were existing income-tax assessees and were filing returns with ROC.

12. It is also interesting to note that the assessee filed photo copies of undated photo copies of affidavits of the share applicants, undated copy of Resolution, and undated confirmations. On one hand the assessee files confirmations and affidavits and on the other hand the parties are not found at the addresses when the assessing officer issues summons to them. The logical conclusion is that the assessee do not wants to produce them before assessing officer for best reasons known to him. Thus it is a case where conduct of the assessee and human probabilities has to be taken into account while deciding the issue. The logical conclusion flowing out of above facts is that undated confirmations and affidavits must have been obtained by the assessee when pay orders were received from these entities. Therefore, the contention of the assessee that share application money was genuinely received by the assessee is not proved."

8. The assessee contends that the Tribunal fell into error in holding that the addition made was on account of accommodation entries. It was urged that neither the AO nor the CIT (Appeals) had drawn the correct inferences. It was submitted that the AO was adversely influenced by the fact that the bank account particulars given when the assessment was framed could not be complete. The Commissioner, it was urged, called for a remand report, which elaborately dealt with all relevant aspects. Counsel took exception to the adverse inference drawn against the assessee. It is submitted that the inference was drawn only on the basis of suspicion without bringing on record any material to show that the amount of 80 lakhs was either assessee's own money or that it was not received as share capital contribution from the three shareholder companies. It is urged that the impugned addition has been made by the learned AO arbitrarily by brushing aside the explanation of the assessee and by disregarding the evidence filed by the assessee to prove the identity and existence of the shareholder companies. Counsel also further submits that the complete income tax particulars of these shareholder companies were filed before the learned AO and it was explained that all the three shareholder companies are assessed to income tax at Delhi. The assessee also furnished the latest addresses of the shareholder/applicants, whose particulars could also be verified from the Registrar of Companies. Instead of proceeding to make any inquiry, the AO brushed aside these explanations and wrongly made the additions.

9. Relying on the judgment in Lovely Exports Pvt. Ltd. (supra), it was urged that the assessee's responsibility was to adduce acceptable evidence about the identity of the share applicant and the genuineness of the transaction. This duty did not extend to actually producing the share applicants. If the AO wished, he could easily summon them to attend the proceedings. Counsel highlighted that as against the share application money of 1 .8 crores received, the AO made an addition only of 80 lakhs, implying that the transactions in respect of the sum of 1 crore was accepted. Therefore, the addition was based purely on an unverified assumption. Learned counsel invited the attention of the Court to the remand report called for and considered by the CIT (Appeals) and underlined the fact that the impugned order entirely overlooked these circumstances.

10. It was argued that the Supreme Court, in CIT v. Stellar Investment Ltd., (2001) 251 ITR 263 (SC), has held that mere inability to ensure the presence of the share applicants/investors does not justify a conclusion of bogus investment. Likewise, the decision of the Madras High Court in the case of CIT v. Electropolychem Ltd., (2007) 294 (ITR) 661 (Mad) has been relied on.

11. In this case, the AO had sought for details of the bank accounts of the share applicants. The assessee's grievance is that he drew adverse inference from the details furnished to him, without giving an opportunity to it to rebut any queries which could have arisen. Particularly, the assessee sought to urge that the AO did not take into account the correct bank statements for the relevant period and took note of only a part of it. It was argued that in the remand report furnished to the CIT (A), full particulars were made available and he considered it proper to grant relief to the assessee, which was then overturned by the ITAT.

12. It is a fact that during the pendency of the first appeal before the Commissioner (Appeals), a remand report was called for by the latter. The remand report contains certain important facts and conclusions, which are extracted below:

"(f) Now, see the financial worth of the alleged three applicant companies from whom the assessee is alleged to have received the share application money. Despite repeatedly asked for, the assessee did not file copies of their audited balance sheet, P& L Account, Income-tax Return, Tax Audit Report and Auditors' report for the assessment year 200 7-08, though the assessee had filed copies of their undated confirmations, undated application for allotment of shares, undated affidavit and Memorandum And Articles ofAssociation of these companies and copies of acknowledgement of return for asst year 2005-06 of two of these companies during the course of assessment proceedings. Even during the course of remand proceedings, the assessee was apprised vide this office letter dated 27.10.2010 that it has not filed the copies of Balance-sheet, P & L account alongwith schedules of these so claimed share subscribers. But the assessee expressed its inability to file the same by stating in its letter dated 08. 11.2010 that "Since the said three applicants are in. no way related to the assessee company and the management of the said share applicant companies are also not under the control of the assessee company, therefore the assessee cannot obtain and file the copies of their Balance sheets, P & L accounts and its schedules as required by you in the said letter and also cannot produce the directors of the said three companies."

It is quite strange to note that on one hand the assessee has filed copies of the Bank Statements of all the three applicant companies and copies of acknowledgment of return of R.S. Accessories P Ltd. and ofM/s Transactions India P.Ltd. for the assessment year 200 7-08 vide its letter dated 2 7.9.2010 before the learned CIT(A) and on the other hand it is expressing its inability to file the same in its letter dated 08.11.2010 (reproduced above).

In the copies of acknowledgement of returns of these two companies (acknowledgment of return of the third not filed) the gross income for assessment year 200 7-08 has been shown as under:-

M/s R.S. Accessories Pvt.Ltd Rs. 40,194/-(Return filed on 31.3.09)

M/s Transaction India Pvt.Ltd Rs. 7,31,619/-(Return filed on 31.3.09)

As per ROC site, all these three companies have been shown as defaulters of filing DIN 3 and Form 32. The Authorised/ Issued paid up share capital of these companies as per ROC site is as under:

Name of Company	Authorized capital	Issued/ Paid up capital
M/s R.S. Accessories P. Ltd.	2,00,000/-	1,00,000/-
M/s Huba Services P. Ltd.	3,27,000/-	2,000/-
M/s Transaction India P. Ltd.	10,00,000/-	3,79,000/-

The assessee company claimed to have received the share applicationmoney from the above said three companies as under:.

1 . M/s Huba Services P. Ltd Rs.25, 00,000/-

2. M/s RS. Accessories P. Ltd. Rs.30,00,000/-

3. M/s Transaction India P. Ltd. : Rs.25, 00,000/-

From the above facts can it be said that the above said companies were of such a worth in investing substantial amount in the share capital of a Private Limited company and that too without any hope of receiving any dividends thereon. Even the assessee company (Onassis Axles Pvt. Ltd) is not showing enough profit. As per P L account, the Net profit for assessment year 2006-0 7 has been shown at Rs.1,97, 707/- and for 2007-08 at Rs.2,47, 734/-. No shrewd businessman will invest such a huge amount in the share capital of a private limited company. Can ¡t be accepted that after investing such a huge amount, the investor company will not contact the investee company? Thus the contention of the assessee as mentioned in its reply dated 08.11.2010 that "Since the said three applicants are in no way related to the assessee company and the management of the said share applicant companies are also not under the control of the assessee company, therefore the assessee cannot obtain and file the copies of their Balance sheets, P & L accounts and its schedules as required by you in the said letter and also cannot produce the directors of the said three companies'" has no force. Had these companies were of such a worth, they would have given the money as loans and advances to earn interest income and would certainly have been in contact of the assessee."

13. Previously, in the remand report, the Commissioner (Appeals) had been informed that the bank statements sought for were given in respect of a limited period. Thereafter, the bank statements of the three companies for the same period – over a year – were sought. These established a clear pattern. The accounts did not disclose large volume of transactions. In two cases, the amounts which were ultimately used to subscribe to the shares were deposited in cash on 29.06.2006. In the third case, the sum of over 24 lakhs was deposited in a span of a month. All these cash deposits were made into accounts the same day or on proximate days, and the pay orders given to apply to the shares were issued from a far-off bank branch in NOIDA. These, together with the share applicants' lack of resources and the woefully inadequate share capital, as well as the authorized and subscribed share capital of the assessee ( 50 lakh being the authorized capital, and the paid up capital being 70 lakh, as against it the reserves being over 2 crores, for reason of the premium received), showed that the transaction claimed to have resulted in receipt of share money was dubious.

14. Lovely Exports Pvt. Ltd. (supra) is an authority for the proposition that the assessee is under an obligation to dispel any doubts regarding the genuineness of an investor and the genuineness of the transaction. Here, though the assessee furnished particulars relating to three share applicants, the further inquiry made by the AO raised more questions than answers. The share applicants' lack of resources, the assessee's position vis-à-vis share amounts received and its commercial condition all pointed to the amount received by it falling within the mischief of Section 68 as unexplained amounts. That the AO or ITAT chose to treat the amount, as bogus share capital, is a matter of inference which the Court would be loath to interfere with.

15. For the above reasons, this Court answers the question framed, in favour of the revenue and affirms the view of the ITAT. The appeal is, therefore, dismissed, with no order as to costs.

AAR explains Entire law on what constitutes a Permanent Establishment and Business Connection

Posted In Income Tax Case Laws | Judiciary | No Comments »

CA Sandeep Kanoi

In Re Booz & Company (Australia) Pvt. Ltd (AAR)

AAR held that various factors have to be taken into account to decide a Fixed place PE which inter alia includes a right of disposal over the premises. No strait jacket formula applicable to all cases can be laid down. Generally the establishment must belong to the Employer and involve an element of ownership, management and authority over the establishment. In other words the taxpayer must have the element of ownership, management and authority over the establishment.

The essential features of "business connection" may be summed up as follows :

(a) a real and intimate relation must exist between the trading activities carried on outside India by a non-resident and the activities within India;

(b) such relation shall contribute, directly or indirectly, to the earning of income by the non-resident in his business;

(c) a course of dealing or continuity of relationship and not a mere isolated or stray nexus between the business of the non-resident outside India and the activity in India, would furnish a strong indication of 'business connection' in India.

Download Full Text of the AAR Ruling

Excessive delay in delivery of judgments may shaken the confidence of litigant in Judiciary

Posted In Income Tax Case Laws | Judiciary | No Comments »

Authorities under the Act are obliged to dispose of proceedings before them as expeditiously as possible after the conclusion of the hearing. This alone would ensure that all the submissions made by a party are considered in the order passed and ensure that the litigant also has a satisfaction of noting that all his submissions have been considered and an appropriate order has been passed. It is most important that the litigant must have complete confidence in the process of litigation and that this confidence would be shaken if there is excessive delay between the conclusion of the hearing and delivery of judgment.

HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION

WRIT PETITION NO.12124 OF 2013

Emco Limited

versus

The Union of India and others

DATE : 11 February 2014

ORDER

PC :

1. Rule. Returnable forthwith. By consent of counsel, the petition is taken up for final disposal.

2. By this petition under Article 226 of the Constitution, the Petitioner has challenged the order dated 31 July 2013 passed by the Additional Commissioner of Central Excise. By the impugned order dated 31 July 2013, a demand of duty of Rs.4,09,455/- has been confirmed under Section 11A(2) of the Central Excise Act, 1944 (`Act') and an equivalent penalty has also been imposed under Section 173Q(bb) of the Central Excise Rules, 1944 (`Rules').

3. The grievance of the Petitioner is that the impugned order was passed almost nine months after the conclusion of the hearing. This delay in passing the impugned order, the Petitioner submits, has led to serious prejudice to it. This is so as the impugned order does not discuss and/or consider the various submissions made by the Petitioner during the hearing leading to a demand which itself is not sustainable. Our attention was particularly drawn to an application for additional grounds made before the Tribunal on 18 January 2010, which was a part of the proceedings before the Adjudicating Authority. In this application, evidence is annexed of the fact that goods sent to job workers were received back within 180 days. However, the same was not taken into account while confirming the notice and imposing the penalty. The Petitioner submits that the Central Board of Central Excise and Customs has itself issued a circular dated 5 August 2003 directing the authorities under the Act to issue orders expeditiously after conclusion of hearing and not beyond a period of fifteen days. He also places reliance on the decision of this Court in Shivsagar Veg. Restaurant Vs. Assistant Commissioner of Income Tax, Mumbai {2009 (13)-S.T.R.-11 (Bom)} and the decision of Apex Court in the matter of Anil Rai Vs. State of Bihar {2009(13)-S.T.R.465 (SC)}. In the above view, the learned counsel for the Petitioner states that the impugned order dated 31 July 2013 be set aside and the Adjudicating Authority be directed to pass a fresh order after giving a personal hearing to the Petitioner.

4. As against this, the learned counsel for Revenue submits that the impugned order dated 31 July 2013 is well considered order and no prejudice has been caused to the Petitioner on account of delay in passing the impugned order by the Adjudicating Authority. Besides, it is submitted that the Petitioner has a remedy of preferring an appeal under the Act against the impugned order. Therefore, the petition be dismissed.

5. We have heard the learned counsel for the Parties. In the present case, the personal hearing was concluded on 17 September 2012 and the written submissions were filed by the Petitioner on 24 September 2012. The impugned order was passed on 31 July 2013 i.e. almost nine months after the hearing. This delay has resulted in the Petitioner's submissions of goods being returned within 180 days not being considered. This evidence was sought to be brought on record before the Tribunal but not allowed. However, this Court by its order dated 14 September 2010, while remanding the matter to the Adjudicating Authority, had left all issues open. Therefore, the above evidence, which was available before the Adjudicating Authority and also relied upon by the Petitioner at the time of hearing, was not considered in the impugned order, then the same can only be attributed to the delay in passing the order. This delay does appear to have causesd prejudice to the Petitioner. This Court in the matter of Shivsagar Veg. Restaurant (supra) has, after considering the various decisions of the Apex Court, laid down that undue delay (four months) in delivery of judgment by the ITAT after the hearing is in itself sufficient to set aside the impugned order without considering the merits of the order. The Apex Court in the matter of Anil Rai (supra) has reiterated the observations made by an earlier Bench of Apex Court in R.C.Sharma Vs. Union of India {(1976)3-SCC-574}, which reads as under :

" … … … Nevertheless an unreasonable delay between hearing of arguments and delivery of judgment, unless explained by exceptional or extraordinary circumstances, is highly undesirable even when written arguments are submitted. It is not unlikely that some points which the litigant considers important may have escaped notice. But, what is more important is that litigants must have complete confidence in the results of litigation. This confidence tends to be shaken if there is excessive delay between hearing of arguments and delivery of judgments." (emphasis supplied)

6. In view of the above, it is very clear that the authorities under the Act are obliged to dispose of proceedings before them as expeditiously as possible after the conclusion of the hearing. This alone would ensure that all the submissions made by a party are considered in the order passed and ensure that the litigant also has a satisfaction of noting that all his submissions have been considered and an appropriate order has been passed. It is most important that the litigant must have complete confidence in the process of litigation and that this confidence would be shaken if there is excessive delay between the conclusion of the hearing and delivery of judgment.

7. Therefore, in this case, we find that the delay by the Adjudicating Authority in rendering its order nine months after the conclusion of the hearing has caused prejudice to the Petitioner as it has not considered the evidence produced in respect of return of goods within 180 days.

8. We have not relegated the Petitioner to the alternate remedy of filing an appeal under the Act, as we find that the impugned order is against the parameters laid down by this Court in Shivsagar Veg. Restaurant (supra).

9. In the aforesaid circumstances, we set aside the impugned order dated 31 July 2013 and direct the Additional Commissioner of Central Excise and Customs to pass a fresh order after granting the Petitioner an opportunity of personal hearing. Needless to add that the resultant adjudication order would be passed within a reasonable time after the conclusion of the hearing granted to the Petitioner.

10. Petition is allowed in the above terms. No order as to costs.

__._,_.___

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Chartered Accountant Finance

Sunday, March 2, 2014

[aaykarbhavan] Judgments , and Information [1 Attachment]

Re-appreciation of seized material in subsequent proceedings by the AO is unjustified

Assessee entitled to adjustment of seized cash against advance tax liability

Quality & lavishness of construction is not incriminating material

How to know if Agricultural land is situated in urban area or rural area?

Types of credit facilities provided by banks

CBDT Chairman emphasized on need for Transparency and humane approach

S. 80-IB(10) – Limit on extent of commercial area applies only to projects approved after 01.04.2005

Addition u/s 68 can be made on account of share applicants' lack of resources

AAR explains Entire law on what constitutes a Permanent Establishment and Business Connection

Excessive delay in delivery of judgments may shaken the confidence of litigant in Judiciary

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