The Income Tax Appellate Tribunal bench of Agra recently said that to invoke Section 147 of the Income Tax Act, the burden is on the Assessing Officer to prove income escaping assessment.
In the instant case, information has been received from the Addl. D1T (Inv.), Agra that one Mr. Deepak Gupta has provided bogus entries of gift/sale proceeds of shares to the assessee. In view of the information received from the Investigation Wing and the adverse material in possession of the Department, the AO initiated re-assessment proceedings against the assessee by way of issuing notice u/s 147 read with section 148 of the Act and the CIT (A) confirmed the addition.
The assessee challenged the AO’s action in reopening the assessee’s case and raised the objection that he had not received any such alleged gift from Sri Deepak Gupta and further objected that the reasons recorded were false and the notice issued u/s 148 of the Act was illegal.
After hearing both the sides, A.D. Jain (JM) have a clear idea that A.O. had no specific information regarding the income escapement assessment identified by the investigation wing.
Finally, the Tribunal ordered that no new adverse information has been brought on record which could suggest any justification for satisfaction to initiate proceedings u/s 147/148, in spite of specific request of the appellant and also added that it is the burden of AO to prove that whether income escapement assessment or not.
Subscribe Taxscan Premium to view the JudgmentA division bench of the Rajasthan High Court held that the benefit of Section 54B of the Income Tax Act, 1961 cannot be denied to the assessee merely on the ground that the investment and document registered under spouse name.
Justice K.S. Jhaveri and Justice Vijay Kumar Vyas was hearing an appeal filed by the assessee against the ITAT order wherein the Tribunal upheld the order of the AO who enhanced the income of assessee under the head long term capital gain and denied a deduction under section 54B.
The court had an opinion that in view of the decision of the Delhi High Court in Sunbeam Auto Ltd. and other judgments of different High Courts, the word used was assessee has to invest it is not specified that it is to be in the name of assessee.
Analyzing the relevant provisions of the Act, the division bench further .observed that the legislature while using language has not used specific language.
Finally, the Court held that the contention raised by the assessee was required to be accepted with regard to Section 54B regarding investment in tubewell and others and in their considered opinion, for the purpose of carrying on the agricultural activity, tubewell and other expenses are for betterment of land and therefore, it will be considered a part of investment in the land and same need to be accepted.
Subscribe Taxscan Premium to view the JudgmentIn a set of Frequently Asked Questions (FAQs), the Central Board of Excise and Customs (CBEC) has clarified certain issues on applicability of the new Goods and Services Tax (GST) law on the Transport and Logistic sector.
The Board said that a single truck owner-operator plying mostly between States is not liable to take GST registration for carrying the goods booked for the truck by an agent, even if his turnover exceeds the threshold limit of Rs. Twenty lakhs.
However, a truck supplier/broker is liable to obtain registration under GST for the brokerage paid by the truck owners, when such brokerage exceeds Rs. 20 lakhs.
For a question, “Is the electronic ticket receipt acceptable as a tax invoice for the purpose of GST? Is there any requirement for the Airlines to issue a proper tax invoice?”, the Board answered that “Yes, the electronic ticket in the global standard format (and without further modifications) is acceptable as a tax compliant invoice for GST purposes, regardless of the value of the transaction. Rule 54 (4) of the CGST Rules, 2017 refers. However, for B2B supplies, a tax invoice may be provided to enable the registered business customer to claim input tax credits.”
It further said that a transporter is required to maintain any records of my services of transportation in terms of section 35(2) of the CGST Act, 2017. Further, in terms of rule 56 of the CGST Rules, 2017, a transporter is required to maintain records of goods transported, delivered and goods stored in transit by him along with the GSTIN of the registered consigner and consignee for each of your branches.
It also said that there shall be no GST on such tickets even though the travel date is on or after 1st July 2017 since service tax has already been collected and discharged by the Airlines on tickets issued prior to 1st July, 2017.
For a question regarding requirement for electronic ticket receipts issued to be signed or digitally signed for GST purposes, the Board answered in negative. “In terms of Rule 54 (4) of the CGST Rules, 2017 in the case of passenger transportation service, a tax invoice shall include ticket in any form, whether or not serially numbered, and whether or not containing the address of the recipient of service but containing other information as mentioned under Rule 46 of the Rules ibid. As the electronic tickets issued by the Airlines are in the global standard format, such electronic ticket receipts are not required to be signed or digitally signed,” it said.
Subscribe Taxscan Premium to view the JudgmentReportedly, the Government has turned down the request of some States to reduce the rate of tax on lotteries under the Goods and Services Tax (GST) regime.
Presently, the rate of tax applicable to lotteries run by State Government is 12 per cent. For lottery “authorised” by the state government, the tax rate is 28 per cent.
While the former is run within a state by state-owned agencies, the latter is run by private players and can be sold in states other than the organising states as well.
The States including Arunachal Pradesh, Goa, Mizoram, Nagaland and Sikkim had made a request to reduce the rates since higher rate of tax has adversely affected the lottery business in many States.
Lotteries are allowed in 14 states including West Bengal, Maharashtra, Arunachal Pradesh, Goa, Mizoram, Nagaland and Sikkim among others.
Under the old tax regime, the government used to impose service tax only on the agent’s commission, which was around 10-12 per cent of the ticket price. In the new indirect tax regime, the GST is levied on the face value of the lottery ticket at 12-28 per cent.
Sources said the new GST rates on lotteries were notified by the central government on recommendations of the GST Council and any change in these rates would require the backing of the Council. States including Kerala, Punjab has told the central government that it does not appear that GST has made any impact on the sale of lottery tickets.
A division bench of the Delhi High Court, last week held that the benefit of carry forward and set off of unabsorbed depreciation can be extended to a period more than eight years even before the amendment to Section 32(2) of the Income Tax Act, 1961.
The sole issue before the Court in the case was that whether the interpretation of Section 32(2) of the Income Tax Act, as amended by Finance Act, 2001, could be given effect to beyond the period of eight years, prior to its commencement?
In the instant case, the Assessing Officer (AO) disallowed the amounts claimed as depreciation on the ground that the amendment to Section 32(2) of the Act, which removed the cap, was prospective and effective only from 01.04.2002.
Prior to its amendment, the provision had limited the carry forward of depreciation to 8 years. This restriction was brought in, by Finance Act, 1996. Prior to that amendment, there was no restriction or cap in the carrying forward of depreciation.
On first and second appeals, the appellate authorities decided the issue in favour of the assessee by relying on the decision of the Gujarat High Court in the case of General Motors India Pvt. Ltd wherein the Court allowed a similar claim.
Upholding the Tribunal order, the bench comprising Justices S Ravindra Bhatt and A K Chawla held that “this Court is in agreement with the reasoning of the Gujarat High Court. The rationale for the amendment appears to be that the restriction against set off and carry forward limited to 8 years, beyond which the benefit could not be claimed under provisions of the Income Tax Act, was for the reasons deemed appropriate by the Parliament. The limit was imposed in 1996 through Finance Act No.2. As the Gujarat High Court observed, Had the intention of Parliament being really to restrict the benefit (of unlimited carry forward prospectively), there were more decisive ways of doing so-such as, an expressed provision or an exception or proviso etc. The absence of any such legislative devise meant that provisions had to be construed in its own term and not so as to restrict the benefit or advantage, it sought to confirm.”
Subscribe Taxscan Premium to view the JudgmentThe Delhi bench of the CESTAT, on Friday held that the Reebok India should include advertising and promotion expenses in the assessable value while importing goods from its parent Company, Reebok International Ltd.
In the case, the assessee-Company is regularly importing various sports goods such as shoes, cloths, bags etc from their parent. The Revenue took a stand that appellants, in terms with the Distribution Agreement entered with their parent Company incurred the advertising and promotion expenses, not on their own account, but as a condition for sale of goods by their principal RIL England. According to the Revenue, such amount has been incurred on behalf of the exporter and in addition to the price of the goods invoiced, such expenses will be includible in the transaction value in terms of Rule 10 (1) (e) of the Customs Valuation Rules, 2007.
The bench noted that the appellant and Reebok International Ltd, England (RIL) are related, within the meaning of Rule 2(2) of the Customs Valuation Rules, 2007.
The bench noted that the amount is not already included in the price actually paid or payable. The appellant is allowed to import goods from the principal in terms of the above agreement only subject to the terms of the entire agreement. In terms of this agreement the appellant will have to necessarily spent 6 per cent of the invoice value on advertisement and promotion. It is an obligation of the appellant to its principal for import of goods.
The bench further noted that the appellant is not only required to spent on advertising, but is required to submit marketing and business plan, advertising budget, and even is required to get vetted by Principal draft of any endorsement or promotion contract exceeding the value of US dollar 25 per cent year.
“These stipulations lead us to conclude that RIL UK is controlling every aspect of such promotion. RIL UK is the owner of the brand name ‘Reebok’ and it is obvious that such promotion, and advertising is towards promotion of their brand as a whole and not only in respect of goods being imported by the appellant. Therefore, from these agreements it is evident that the appellant is carrying out such brand promotion on behalf of RIL England and such expenses were made on behalf of RIL UK. Hence we conclude that advertising and promotion expanses have been incurred as a condition of sale and on behalf of seller and may be considered as satisfying the obligation of the seller,” the bench said.
Subscribe Taxscan Premium to view the JudgmentIndia and USA have signed the Inter-Governmental Agreement (IGA) under FATCA in 2015. To enhance the effectiveness of information exchange and transparency, both the sides committed to establish, by January 1, 2017, rules requiring their Reporting Financial Institutions (RFIs) to obtain the Tax Identity Number (TIN) of each reportable person having a reportable account as of June 30, 2014 (pre-existing account). The Income-tax Rules, accordingly, provide for reporting of U.S. TIN from the year 2017 onwards in respect of any pre-existing account.
The US-IRS has issued guidelines through Notice 2017-46dated 25.09.2017 providing relaxation to Foreign Financial Institutions (FFIs) with respect to reporting of U.S.TIN for calendar years 2017, 2018 and 2019. Now the Competent Authority of USA will not determine significant non-compliance with the obligations under the IGA solely because of a failure of a reporting FFI to obtain and report each required U.S.TIN, provided that the reporting FFI:
(i) obtains and reports the date of birth of each account holder and controlling person whose U.S. TIN is not reported;
(ii) requests annually from each account holder any missing required U.S. TIN; and
(iii) before reporting information that relates to calendar year 2017 to the partner jurisdiction, searches electronically searchable data maintained by the reporting FFI for any missing required U.S. TINs.
The Indian RFIs reporting pre-existing accounts should, therefore, ensure that the U.S. TIN is reported in respect of pre-existing accounts for the year 2017 onwards. However, in case the U.S.TIN is not available, to avoid determination by the USA Competent Authority of significant non-compliance to the obligations of the IGA, the RFIs are advised to insert nine capital letters e.g. (i.e. AAAAAAAA) in the TIN field (for the Account Holder or Controlling Person, as the case may be), for such accounts in their reports in Form 61B, provided that all the three conditions listed above are met.
Delhi bench of the Income Tax Appellate Tribunal (ITAT), while granting relief to Max New York Life Insurance Company Limited, held that the bonus declared by Insurance Company can be set off against the premium received while calculating taxable income.
Before the Tribunal, the appellant contended that the premiums received are embedded with the obligation to declare bonus to participating policyholders. In that view of the matter, on the matching principle, the amount declared as bonus is necessarily to be set off against the premium received. According to them, the amount of bonus declared is unconditionally made available to the policyholder and is paid at the time of maturity / death. In some cases, bonus is paid in cash after declaration, while in case of some policies, bonus amounts are adjusted with next due premium, as per product features. The contended that the amount of bonus declared, which the assessee is mandatorily bound to declare in terms of the contract of insurance in respect of participating policies, cannot be held back by the assessee and has to be transferred to the account of the policy holder. Therefore, such bonus is ascertained liability accrued to the assessee while determining the acturial surplus and such bonus has to be taken into account while determining the actuarial surplus, subject of taxation under section 44 of the Act read with the First Schedule.
The division bench accepted the above contention and held that the premium received by the assessee are embedded with the obligation to declare bonus to participating policy holders, therefore, it has to be set off against the premium received.
“Once the bonus is declared, which the assessee is bound to declare as per the terms of the contract of insurance for the participating policies, the assessee in our view cannot reverse the same and once bonus is declared it becomes ascertained liability. Since the bonus is being paid to the insured persons who are not the shareholder but customers of the assessee, therefore, when it is declared it becomes ascertained liability towards the customers. No doubt in form A-RA (Actuarial Report and Abstract) Regulations 2000, this forms part of the distribution of the surplus.”
Subscribe Taxscan Premium to view the JudgmentMumbai bench of Income Tax Appellate Tribunal has held that Section 14A of the Income Tax Act 1961 cannot be invoked when investment in the subsidiaries was shown in the balance sheet under the head non-current assets.
Assessee Company in the instant case, duly filed its return of income for the relevant assessment year. During the course of assessment proceedings the Assessing Officer (AO) has found that the assessee company had made certain investment in shares. He was of the view that ordinarily some expenditure would definitely have been incurred for making and maintaining such investments, that the assessee had not worked out any disallowance under section 14A of the act. Accordingly the AO confirmed the disallowance of Rs.1.62 lakhs under section 14A of the Act.
Aggrieved, the assessee approached the tribunal on appeal. Assessee contended that the assessee had not incurred any expenditure for earning tax-free income, that it had made strategic investment only, and during the year under consideration it had not earn any exempt income from the investment, that the investments were made with sole object of controlling group entities, that the administrative and interest expenses were incurred for carrying out its normal business activity, that the no part of expenses could be considered as eligible to earning of exempt income. Hence the AO invoked section 14A by mistake.
After considering the rival submissions of both the parties the tribunal bench comprising of Judicial Member Ravish Sood and Accountant Member Rajendra observed that during the year under consideration, the assessee had not claimed any exempt income and it had not claimed any expenditure for earning exempt income that the AO mentioned above and the AO also ignored the fact that investment in the subsidiaries was shown in the balance sheet under the head non-current assets.
The division bench further observed that for making any disallowance under section 14A read with 8D of the Rules, the AO has to prove two things that the assessee had earned exempt income and that it had claimed certain expenditure against such income which was not offered for taxation. But in the present case, the AO has failed to prove the aforesaid things and in such a situation it is impossible to invoke section 14A of the Act while the assessee has already shown the aforementioned investment in the balance sheet under the head non-current assets.
Subscribe Taxscan Premium to view the JudgmentWhile upholding the order pronounced by the DRP Delhi bench of Income Tax Appellate Tribunal (ITAT) proclaimed in its recent order that OECD methodology can be adopted to compute the working capital adjustment.
Assessee Company in the present case duly filed its return of income for the relevant assessment year declared a total income of Rs. 19,32,894. During the scrutiny period while considering the international transactions of the assesee the Assessing Officer (AO) determined the total income as 14,71,48,937 referred the matter to the Transfer Pricing Officer (TPO) for determining the arm’s length price of the international transactions as per the provisions of Section 92CA of the Income Tax Act.
The TPO, however, did not agree with the various filters used by the assessee in its TP study and by using certain more filters, he rejected 6 comparables from assessee’s set and selected 11 new comparables. After that the AO passed the draft assessment order to assess the assessee at an income of Rs.2,62,86,830.
Aggrieved by the order, the assessee filed an appeal before the DRP against the draft assessment order. The most confused issue submitted the assessee before DRP was related to the denial of adjustment on account of working capital while working out the average margins of the comparable.
After considering the submissions of the assessee DRP directed the TPO to give working capital adjustment using the OECD methodology and to apply SBI Prime Lending rate as the interest rate. DRP was of the view that the average of opening and closing balance of the inventories and of trade receivable/payable, trade debtors/creditors, for the relevant year may be adopted which may broadly give the representative level of working capital over the year.
After considering all these facts and circumstances the bench comprising of Judicial Member Kuldip Singh and Accountant Member N. K. Saini also upheld the order of the DRP.
Subscribe Taxscan Premium to view the JudgmentDelhi bench of Income Tax Appellate Tribunal (ITAT) recently held that late fee cannot be levied during processing of the Tax Deducted at Source (TDS) statement prior amendment in section 200A of the Income Tax Act 1961.
Assessee in the present case is an educational and welfare society. During the course of Assessment Proceedings the Assessing Officer (AO) has charged late fees under section 234E of the act. On appeal the CIT (A) also confirmed the levy of fees charged by the AO.
Aggrieved by the assessee was on appeal before the tribunal contending that Section 200A of the Act which deals with processing of statements of tax deducted at source had been subsequently amended by the Finance Act, 2015 and new clauses had been inserted in the said section. The clarification by processing of TDS statement, the fee, if any shall be computed in accordance with the provisions of section 234E of the act.
After considering the material facts and records the tribunal bench consists of Judicial Member Beena A. Pillai and Accountant Member N.K.Saini ruled that the amendment to section 200A(1) of the Act is procedural in nature and in view thereof, the Assessing Officer while processing the TDS returns for the period prior to the amendment of Finance Act 2015 was not empowered to charge fees under section 234E of the Income Tax Act. Hence the intimation issued by the Assessing Officer under section 200A of the act is not valid. The intimation issued by the Assessing Officer was beyond the scope of adjustment provided under section 200A of the Act and such adjustment could not stand in the eye of law, the bench said.
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While refusing the decision of Supreme Court Cochin bench of Income Tax Appellate Tribunal (ITAT) recently held that a co-operative society which is registered as a primary agricultural society is entitled to get deduction under section 80P of the Income Tax Act 1961.
Assessee in the present case is a co-operative society registered under the Kerala Co-operative Societies Act, 1969 has duly filed its return of income for the relevant assessment year and claimed deduction under section 80P of the act also.
While completing the assessment proceedings the Assessing Officer (AO) has disallowed the claim of deduction under the said section. He was opinioned that The provisions of section 80P(4) of the Income-tax Act applies only to a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank and the same will not apply to any co-operative bank. Further he observed that the assessee carrying banking business and according to him all the three conditions for becoming a primary co-operative bank stand complied with in the case of the assessee. Hence he declared that it will fall within the provisions of section 80P (4) and is not eligible for deduction under section 80P (2)(a)(i) of the Income Tax Act.
On appeal, the CIT (A) granted relief to the assessee and directed the AO to grant deduction under section 80P of the Income Tax Act to the Assessee-society.
Aggrieved, the revenue preferred an appeal before the tribunal contending that Supreme Court in the case of Citizens Co-operative Society Ltd has already decided the issue and rejected deduction under section 80P of the Act to the assessee by considering the activities of the assessee society.
After hearing the contentions of both the parties, the Tribunal bench including of Judicial Member George George K also upheld the decision of CIT(A). The bench observed that the assessee in the present case is a primary agricultural credit society and they are registered as such under the Kerala Cooperative Societies Act and when a primary agricultural credit Society is registered as such under the Kerala Co-operative Societies Act, 1969, such society is entitled to the benefit of deduction under section 80P(2) of the Income-tax Act.
The division bench while dismissing the revenue’s appeal, said that “In view of the aforesaid reasoning, I hold that the judgment of the Hon’ble Apex Court in Citizen Co-operative Society Ltd. is not applicable to the facts of the present case. According to me, the judgment of the Hon’ble jurisdictional High Court is identical to the facts of the present cases and is squarely applicable. Therefore, I hold that the CIT(A) has correctly allowed the claim of deduction in the above cases and I uphold the orders of the CIT(A).”
Subscribe Taxscan Premium to view the JudgmentIn a major relief to the consumers, the Central government may soon simplify the application form for the new anti-profiteering body, the watchdog for allegedly denying consumers the benefit of reduced tax burden under the new indirect tax regime.
The present profiteering complaint form, though a single page document, has about 44 columns seeking a number of details and half of these fields are mandatory. In the current form, the consumer has to specify the actual price or value charged per unit pre-GST and the same post GST. Also, the total tax per unit and the reduction in tax amount post GST has to be filled up by the complainant.
Reportedly, the new form will be more consumer- friendly and simpler.
It is learnt that the move to simplify the form comes after the standing committee received numerous representations red flagging the complicated nature of the form, an official said.
As many as 170 complaints have been filed before the standing committee and screening committee by consumers against businesses for not passing on benefits of tax rate reduction since the implementation of the Goods and Services Tax (GST) from July 1.
Earlier it was reported that with the increase in the complaints received against overcharging of tax under the new Goods and Services Tax (GST) regime, the Finance Ministry may soon come out with a Standard Operating Procedure (SOP) for Anti-Profiteering rules for properly handling such cases.
The Chhattisgarh High Court, recently quashed a notice and order under Section 148 only on account of non-fulfillment of the condition precedent as is envisaged under the of the provision to section 151(1) of the Income Tax Act.
Justice P. Sam Koshy was hearing a writ petition filed by assessee assailing the notice issued under Section 148 of the Income Tax Act, 1961 and also the order whereby the objections preferred by the petitioner questioning the issuance of notice dated was rejected.
The AO had already issued a notice under Section 143 (2) of the Act and completed assessment under Section 143 (3) of the Act. Later, after four years, the income tax department had issued a notice under Section 148 of the Act for reopening of the assessment proceeding for the year 2010-11.
Before the High Court, the petitioner contended that the present notice is illegal as the same was issued beyond the prescribed period of limitation under the Act and the reasons assigned are entirely baseless and that there was absolutely no tangible material available with the department for re-opening the assessment. On contrary revenue stated the issuance of notice under Section 148 of the Income Tax Act are proper, legal and justified and pressed the relevance of section 151 of Income Tax Act, wherein proper sanction from the higher Authorities has been taken by the Department.
The Court observed that there can be no dispute as regards the requirement of Act to be strictly complied with but the missing fact, Section 151(1) the proviso therein, specifically deals with the Commissioner to be satisfied on the reasons recorded by the Assessing officer for issuance of a notice after the expiry of 4 years from the end of the relevant assessment year.
In a recent decision of Apex court in the case of Jeans Knit (P) Ltd. Bangalore vs. Deputy Commissioner wherein held that the writ petitions are maintainable questioning the issuance of notice under Section 148 if prima facie it is established that initiation is contrary to the provisions of the Income Tax Act.
Finally, relying on various courts judgment the bench declared that this Court finds that issuance of notice under Section 148 at the first instance itself was without a proper sanction as is required under the proviso to Section 151(1) of the Income Tax Act and also added that the impugned notice under Section 148 stands set aside /quashed.
Subscribe Taxscan Premium to view the JudgmentRajkot bench of Income Tax Appellate Tribunal (ITAT) recently held that the notebooks and diaries found from assessee’s wife cannot be treated as Books of Accounts for the purpose of making addition under the Income Tax Act, 1961.
The assessee in the instant case is an individual engaged in the business of domestic and international air-tickets booking, incentive tours, hotel reservations and visa formalities etc.
During the course of assessment proceedings, the Assessing Officer (AO) has found that a sum of Rs. 13,56,500 was advanced by the assessee to various persons and the same were not recorded and accordingly, he made an addition to the said amount of unexplained investment.
On appeal, the assessee gets relief from the CIT (A). They were of the view that no addition can be made on the basis of rough noting without any corroborative evidence.
Aggrieved by the revenue was on appeal before the tribunal.
After considering the rival submissions of both the parties the tribunal bench comprising of Judicial Member Rajpal Yadav and Accountant Member Pramod Kumar observed that the AO made addition only on the basis of mere notebooks and diaries and not books of accounts of the assessee. Such notebooks and diaries found from assessee’s wife cannot be considered as valid books of accounts of the assessee.
The division bench further observed that there are no documents or material evidence with the Revenue to link flow of unrecorded transactions with the assessee. While dismissing the appeal filed by the revenue the bench further said that there is no contrary material brought by the revenue to convince that the assessee has tried to evade any tax liability.
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Kolkata bench of Income Tax Appellate Tribunal (ITAT) recently held that income earned by the assessee from sub-letting of property under leave and license agreement for a temporary period is taxable under the head income from other sources and not under the head business income since the sub-letting was not an object of the assessees’ business.
In the present case assessee is a company engaged in the business of trading of shares, deriving income from profit on the sale of shares, brokerage etc and profit on the sale of landed properties. During the assessment year, the assessee earned a rental income of Rs. 60,000. While filing the return of income for the relevant assessment year the assessee claimed net business loss out of the aforesaid transaction and the same was adjusted with the rental income which was shown under the head income from other sources at Rs. 60,000 and disclosed its total income at Rs. 42,083.
During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee had not owned any landed property, hence the income earned from the property under the leave and license agreement cannot be treated as income from house property and it is an admirable fact that the assessee has rightly treated the same as under the head income from business.
Thereafter, the CIT (A) observed that the assessee had merely derived this rental income out of sub-letting of the property and the said property was occupied by the assessee from some other person only for a temporary period on the basis of leave and license. The authority noted that the assessee was not the real owner of the property, accordingly income earned from such property cannot be termed under the head income from house property since the assessee was not engaged in the business of subletting, therefore the department directed to treat the said income under the head income from other sources.
After considering all the findings of the lower authorities tribunal bench consists of Judicial Member N.V. Vasudevan and Accountant Member M.Balaganesh also upheld the order pronounced by the CIT(A). “We find that the rental income derived by the assessee has been correctly held by the Ld. CIT(A) as income from other sources as admittedly the assessee is not the owner of the property and had merely sublet the property to another concern thereby deriving rental income of Rs. 60,000/-. Hence, the Ld. CIT(A) had rightly treated the same as income from other sources as has been reported by the assessee in its return of income.”
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A division bench of the Allahabad High Court has held that filling or leveling of the earth is also the part of development and construction of the project and therefore, denied the exemption claimed by the assessee under section 80IA of the Income Tax Act 1961 for the reason that the same had been commenced prior to 1/10/1998.
The assessee, in this case, is a company engaged in building and construction activities. During the relevant assessment year, it undertook the construction of two major complexes and each of the complexes were subdivided into small projects. For this, the assessee claimed deduction under section 80 IA(4F) read with Section 80 IA(5) and Section 80 IB (10) of the Income Tax Act.
While completing the assessment proceedings, the Assessing Officer (AO) denied the claim of the assessee under the aforesaid section by finding that the construction and development work had commenced by the assessee prior to 1.10.1998, therefore, the assessee company is ineligible to get the benefit of section 80IA of the Act.
Challenging the above order, the assessee contended that the assessee has entered into the agreement with the development authority on 12.12.1996 and the foundation was laid down was laid on 4.10.1998 and the construction of the projects started in October 1998.
After considering the submissions of both the parties, Justice Pankaj Mithal, and Justice Vinod Kumar Misra jointly rejected the contention of the assessee and observed that the evidence on record may prove that the foundation laying ceremony of the projects may have been performed on 30.9.1998 and actual construction may have started later on but the levelling of the earth in the project had started much earlier. Thus, with the leveling of the earth, the development and construction of the project had commenced which was prior to 1st October 1998.
The bench noted that the assessee has failed to satisfy the condition for grant of benefit under Section 80 IA (4F) read with Section 80 IA (5) and 80 IB (10) of the Act. It was said that development and construction of the housing project are integral to each other and as the filling or leveling of the earth of the projects which is also part of development had commenced prior to 1.10.1998.
Subscribe Taxscan Premium to view the JudgmentIn a major relief to National Informatics Centre Services Inc., a division bench of the Delhi High Court held that scrutiny assessment without a notice under Section 143(2) of the Income Tax Act within the prescribed time is not valid.
In the instant case, assessee filed its income tax return for the year 2009-10 through electronic form. But it could not file ITR Form V, i.e., the verification, since there was no facility to file the same electronically. Assessee expected to send a hard copy of the same by post to the Headquarters at Central Processing Centre (CPC), Bengaluru. Later, the due date for filing of ITR-V forms for parties, who did not have digital signatures, but, had filed their returns through electronic mode under Rule 12(3)(iii) of the Income Tax Rules was extended till 31.12.2010. The assesse’s returns, in the meanwhile, were not processed and Revenue treated the documents filed as “Nil” return. Consequently, the department made assessment under Section 143(3) and also imposed penalty on the assessee.
On appeal, both the first appellate authority and the Tribunal quashed the assessment by stating that in the absence of a notice under Section 143(2) of the Act within the time stipulated, scrutiny assessment under Section 143(3) of the Act could not have been completed.
Against the ITAT order, the Revenue approached the High Court contending that as per Rule 12(3) of the Income Tax Rules and a combined reading of Sections 139C and 139D leads to the conclusion that in the absence of an ITR-V Form, i.e. the verification, no return is deemed valid, and, till such time, a valid return comes on record, which, in the present case occurred after 01.12.2010, the question of issuing any notice under Section 143(3) of the Act did not arise.
Upholding the orders of the lower authorities, Justices Ravindra Bhatt and A K Chawla said that he con-joint reading of para 10 of Circular No.3 of 2009 and the circular dated 01.09.2010 makes it clear, beyond any manner of doubt, that, CBDT itself was alive to the difficulties faced in implementation of Section 139C, having regard to the phraseology in Section 295B.
“In the event of assessee choosing to file without digital signatures as per Rule 12(3) of the Income Tax Rules, there was a gap in the Statute – even a conflict. The Rule was, in essence, at war with the express provision of the Statute, which required assessees not to attach annexures or documents. Thus, the assessee could not attach the ITR-V form or provision or even send any scanned form. To mitigate the hardship, the CBDT felt that it was imperative to provide 30 days’ period as it did through Circular No.3 of 2009. It later, realised that more confusion arose on account of limited period and the procedure provided, and therefore, it extended the period on 01.09.2010 upto 31.12.2010 or 120 days from the filing of the return, whichever was later.”
“In the present case, the assessee had filed its return electronically on 30.09.2009. It says that it availed of the filing of the ITR-V forms through post. The Revenue is not in a position to verify either way. It is precisely to cater to this circumstance that the circular of 01.09.2010 (especially para 2) extended the period. The extension of this period necessarily meant that ITR-V forms received during such extended period validated the returns originally filed. The interpretation sought to be placed by the Revenue now that fresh returns were necessary, in the opinion of the Court, flies against the opinion of the CBDT and the circumstances, under which, both the circulars were framed and published. In other words, these circulars were necessitated on account of the legislative gap – even conflict between the Rules on the one hand, which mandated electronic filing and other provisions of the Statute, which prohibited the attachment of annexures along with returns, which resulted in ITR-V form, as were in the present case,” the bench said.
Subscribe Taxscan Premium to view the JudgmentIncome Tax Appellate Tribunal (ITAT), Kolkata bench has deleted penalty under section 273B of Income Tax Act 1961 and proclaimed that the cash transactions with sister-in-law and nephew does not fall in the definition of ‘loan’ for the purpose of section 269SS of the Act.
In the present case, the assessee is an individual engaged in the business of repairing and plying of trucks. While completing an assessment, the Assessing Officer (AO) has noticed that the assessee has not revealed the source of Rs. 11 lakhs deposited with the co-operative bank in cash. He also found that the assessee has obtained Rs. 11 lakhs as the loan from Raniganj Co-operative Bank. On inquiry, it was transpired that out of this, the assessee has repaid around Rs. 5 lakhs in cash. It was therefore, concluded that the acceptance and repayment of such loans was never brought to notice of the Department in an earlier stage of assessment and therefore, the assessee violated the provisions of section 269SS and Section 269T of the I.T. Act for which, penalty u/s 271D at Rs.5,00,000/- and u/s 271E at Rs.5,00,000/- is leviable.
The assessee has contended that all the lenders subjected to the loan were the elder brother (Rs. 50,000), nephew (Rs. 50,000) and sister-in-law (Rs. 4,00,000) of the assessee and further argued that transactions between family relatives are not covered by the provisions of section 269SS and 269T of the Act.
The first appellate authority partially accepted the contentions and found that the amount received from elder brother cannot be deemed as a loan. The CIT(A), however, sustained the penalty in respect of cash received from the sister-in-law. The CIT(A) was of the opinion that “Other than very close relatives like parents, siblings or spouse, it cannot be expected in any situation to deposit cash with a person technically not part of ‘family’.”
Aggrieved by the assessee was on appeal before the tribunal on the remaining penalty on the remaining sum.
After giving careful consideration to the rival submissions of both the parties the tribunal bench comprising of Judicial Member N.V.Vasudevan and Accountant Member Dr.A.L.Saini has objected the penalty proceedings of the lower authorities. The bench further observed that the transaction with sister-in-law and Nephew should also be considered as a part of family members and the definition of relatives include husband, wife, brother, sister, sister-in-law, Niece and Nephew etc.
The division bench also specified that the transactions between these family members are neither loans nor deposit and purely a family system and purely a family requirement to help each other in the needy hours. Therefore, the transaction between Sister-in-law and Nephew did not fall in the definition of the loan.
Subscribe Taxscan Premium to view the JudgmentThe Telangana Commercial Taxes Department, on Thursday issued show cause notices to 7000 traders on ground of failure to remit taxes with the department. The tax dues from these traders is around Rs. 708 crore.
While filing income tax returns for the period 2nd June 2014 to 1st June 2017, these traders claimed that they have to pay certain amount of VAT to the state government. But, as per their disclosure in the returns, they failed to pay VAT to the tune of 708 crore.
To check evasion, the commercial tax department prepared a list of 7000 defaulters and sent notices to such traders via online with the help of IIT-Hyderabad.
“We have prepared Return Balance Module to send the notices to the traders,” said Commercial Taxes department principal secretary Somesh Kumar.
The notice provided a time of seven days to the traders to pay the tax, on failure to do which, the department will proceed with strong action.
After the implementation of GST, VAT dealers registered with GST network but failed to pay the tax.
GST payers’ list was not available with the state government and hence the officials could not cross-check. “We have no information about GST payers. But, still we could prepare a list of defaulters with the help of previous VAT details on our own,” Somesh Kumar explained. Sources said the other reason for GST evasion is that there are no stringent penalties for defaulters.
While deleting penalty against M/S Raj Iron & Building Materials, a division bench of the Allahabad High Court held that delay in submitting e-way bill would amount to a mere ‘technical breach’ under the Goods and Services Tax (GST) law.
In the instant case, the petitioners imported goods from West Bengal under regular tax invoice. The goods were later seized by the department for want of e-way bill.
The petitioners contended that it had downloaded the E-Way Bill from the website of the department on 05.12.2017 and submitted the same to the authorities before the conclusion of the penalty proceedings.
The bench found merit in the contention of the petitioner and noted that there is no allegation of evasion of tax liability established either from the reading of the show cause notice or the seizure order or the penalty order the consequential penalty imposed appear to have been occasioned upon a mere technical breach and not on account of any intention to evade tax.
“It is also not disputed that being faced at present there are certain difficulties with regard to the downloading of the E-Way Bill and also certain doubts still remain with regard to the requirement and submission of E-Way Bill. In view of the above, the penalty order and the seizure order cannot be sustained and are hereby quashed,” the bench said.
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