Income tax - Whether when assessee fails to declare salary income on which TDS was deducted, same is to be treated as 'undisclosed income' - YES: HC

AHMEDABAD, JUNE 27, 2014: THE issue before the Bench is - Whether non-disclosure of income by not filing return of income on which the TDS is deducted, can be treated as “undisclosed income” within the meaning thereof in Section 158B(b) under Chapter XIV-B. And the answer goes against the assessee.

Facts of the case

The assessee, an individual, is a salaried employee working as Works Manager with M/s. Khemani Distillery Private Limited, Daman from June, 1995 onwards. However, from 01.04.1987 to 31.03.1995 included in the block period the assessee was employed with Zandu Pharmaceutical Works Limited, Mumbai as Chief Engineer. The assessee had never filed his returns of income although he had income liable to tax during the block period. There was a search and seizure operation in the case of entire Khemani Group on 20.08.1997 and consequently the search was also conducted at the assessee’s residence on 20.08.1997. In the course of search, cash of Rs.84,500/and jewelery of Rs.2,29,804/- were found, out of which, cash of Rs.50,000/- was seized. In the course of search, the assessee was also found to have investment in fixed deposit and other securities regarding to Rs.12,25,400/-. After search, the assessee consulted CA and he was advised that as the assessee had made the investment in FDRs etc. from his salary income and interest income, which can be considered as known sources, the salary and income from other sources can not be treated as undisclosed income. Accordingly, the assessee filed regular return of income of AY 1996-97 and 1997-98 u/s.139(4) showing salary and income from other sources considering it as normal income. Then the AO, issued a notice u/s 158BC which was served on the assessee on 09.10.1997. In response to the said notice, the assessee filed the return showing undisclosed income at Rs.13,64,954/- for the block period and paid full tax at the rate of 60% on this income. The assessment was however, framed by AO at a total income of Rs.18,33,771/- making certain other additions to the income of salary and interest/dividend disclosed by the assessee in the return of undisclosed income. AO also treated the returns of income filed u/s.139(4) of AYs 1996-97 and 1997-98 as invalid as he assessed the whole income of these assessment years in the assessment of undisclosed income. The AO however allowed deduction under Chapter VIA rebate u/S. 88 and TDS from salary and self assessment tax paid u/s.140A for AYs 1996-97 and 1997-98 against the assessment of undisclosed income.

On appeal before CIT(A), assessee did not raise the ground relating to the assessment of salary income earned by the assessee which was declared in the return of undisclosed income by way of abundant caution the assessee was of the opinion that the salary income cannot be treated as undisclosed income because TDS was deducted by the employer from the salary and form No.24 was filed by the employer with the Department as required u/s 206. The assessee raised certain other grounds with regard to the addition made to the undisclosed income on account of seized cash as well as addition on account of alleged unexplained investment in FDRs as well as alleged low household expenses which were dismissed by the CIT(A).

On further appeal, Tribunal had allowed the said appeal by holding and directing that the income earned by way of salary by the assessee cannot be treated as “undisclosed income” within the meaning thereof in section 158B(b) under Chapter XIV-B of the Act and also reducing the addition on account of unexplained investment of Rs.1,88,884/- to Rs.35,000/-.

Before HC, the Revenue's counsel had submitted that the Tribunal had materially erred in not treating the non-disclosure of the income earned by way of salary by the assessee as “undisclosed income” within the meaning thereof in section 158B(b) under Chapter XIV-B of the Act on the ground that on the aforesaid amount of salary TDS was deducted. It was submitted that as such the aforesaid issue was not res integra in view of the decision of SC in the case of ACIT v. A.R. Enterprises 2013-TIOL-04-SC-IT-LB. In that case SC held that since the tax to be deducted at source was computed on the estimated income of an assessee for the relevant FY, such deduction cannot result into disclosure of the total income for the relevant AY and therefore, mere deduction of TDS, does not amount to disclosure of income, nor does it indicate the intention to disclose income most definitely when the same was not disclosed in the returns filed for the concerned assessment years. It was submitted that therefore non-disclosure of the income received by the assessee by way of salary was required to be treated as “undisclosed income” within the meaning thereof in Section 158B(b) under Chapter XIV-B liable to tax at 60%. It was further submitted that in the present case even after the search and seizure the assessee did not file the return and subsequently filed the return only after initiation of block assessment proceedings and declaring the said income as “undisclosed income”. It was submitted that therefore even considering the decision of SC in the case of A.R. Enterprises, non-disclosure of income earned by the assessee by way of salary was required to be treated as undisclosed income. with regard to reduction in the addition on account of unexplained investment of Rs.1,88,884/- to Rs.35,000/-, it was submitted that as such the aforesaid was without any evidence and no reasons had been signed by the Tribunal to reduce the addition on account of unexplained investment of Rs.1,88,884/- to Rs.35,000/-. Therefore, it was requested to allow the present appeal and answer the questions in favour of the revenue.

On the other hand, though served, nobody appeared on behalf of the assessee.

Held that,

++ present tax appeal is of the year 2000 and therefore, this Court is proceeding with hearing of the present tax appeal ex parte. At the outset it is required to be noted that after search and seizure it was found that the asssessee did not disclose the income received by him by way of salary and thereafter the block assessment proceeding was initiated treating the non-disclosure of the said income received by the assessee by way of salary as “undisclosed income”. Both, the AO as well as the CIT(A) held against the assessee. However, on an appeal, the Tribunal has held that as on the aforesaid income the TDS was deducted and therefore, it cannot be said that there was a non-disclosure of the income by way of salary;

++ the issue is not res integra in view of the decision of SC in the case of A.R. Enterprises. In this case SC considered the payment of advance tax and tax deducted at source. While dealing with the advance tax, it had observed and held that since the Advance Tax payable by an assessee is an estimate of his “current income” for the relevant financial year, it is not the actual total income, to be disclosed in the return of income. To repeat, the vital distinction being that the “current income” is an estimation or approximation, which may not be accurate or final; whereas the “total income” is the exact income disclosed in a valid return, assessable by the Revenue. The fact that the “current income” is an estimation implies that it is not final and is subject to further adjustments in the form of additions or reductions, as the case may be, and would have to be succeeded by the disclosure of final and total income in a valid return. It will be a misconstruction of the law to construe the undisclosed income for purposes of Chapter XIVB as an “estimate” of the total income, which is assessable and chargeable to tax. Therefore, we are unable to accept that payment of Advance Tax based on “current income” involves the disclosure of “total income”, as defined in Section 2(45) of the Act, which has to be stated in the return of income. The same is evidenced in the scheme of Chapter XIVB, in particular. In view of the above, Tribunal has committed a grave error in directing that the income earned by way of salary by the assessee cannot be treated as undisclosed income for levying tax at 60% on the salary income as undisclosed income;

++ in the aforesaid decision in the case of A.R. Enterprises, SC has also considered one another aspect with respect to the intention of the assessee to disclose the income. In the aforesaid decision the SC has observed and held that return was filed only when the block assessment proceedings are initiated by the Assessing Officer declaring the income in the said return. It indicates that there was no intention to disclose the income. In the present case the assessee filed return of income declaring the income received by him by way of salary only after the block assessment proceedings were initiated by the Assessing Officer. Under the circumstances also, the Tribunal has materially erred in not treating the income earned by way of salary by the assessee as “undisclosed income”. Under the circumstances, question (a) & (b) are answered in favour of the revenue and against the assessee;

++ so far as the question No.(c) is concerned, by impugned order the Tribunal has reduced the addition made by the AO on account of unexplained investment of Rs.1,88,884/-to Rs.35,000/-. It is required to be noted that at the time of search unexplained investment of Rs.1,88,884/-was found and even after the search the assessee did not file the return of income and declared the same at the time of filing the return after the block assessment proceedings were initiated. Considering the decision of SC in the case of A.R. Enterprises, when the return was filed by the assessee after the block assessment proceedings were initiated by AO as observed by SC in the aforesaid decision, the intention of the assessee is to be presumed that he was not to disclose the income and therefore, the same is required to be treated as undisclosed income within the meaning thereof in section 158B(b) under Chapter XIV-B of the Act. Even as such no specific reasons and/or evidence on record to reduce the addition on account of unexplained investment of Rs.1,88,884/-to Rs.35,000/-. Under the circumstances, the Tribunal has materially erred in reducing the addition on account of unexplained investment of Rs.1,88,884/- to Rs.35,000/-. Under the circumstances, the question No. (c) is also answered in favour of the revenue and against the assessee. In view of the above and for the reasons stated above, present tax appeal succeeds. Question Nos.(a), (b) & (c) are held in favour of the revenue and against the assessee. Consequently, the impugned judgment and award dated 04.07.2000 passed by the Tribunal is hereby quashed and set aside and the order passed by the Assessing Officer confirmed by the CIT(A) is hereby restored. No costs.

(See 2014-TIOL-1018-HC-AHM-IT)

Reopening of Assessments - guidelines

*S. 147: Strict guidelines laid down to streamline procedure for reopening

of assessments*

(i) In large number of cases pertaining to reopening of assessments, we

have noticed that different stages of the assessees demanding reasons

recorded by the AO, supplying of such reasons, the assessees raising

objections and the AO disposing of such objections, consume considerable

time. In many cases, the last stage of disposing of the objections raised
by the assessee is reached only a few weeks, and in some cases even days,

before the assessment would be time-barred. This situation is quite

unsatisfactory, both from the point of the assessee as well as the

department. In the last minute rush, the AO frames assessment in a most

hurried manner. In the process, important and valid grounds raised by the
assessee are often times lost sight of. Additions are thus made which could

have been avoided forcing the assessee to prefer appeal which could have

been avoided, further creating needless strain on the system. On the other

hand, some times additions were made without full and proper scrutiny. The

additions which should have otherwise stood the test of appellate scrutiny

fail the test.

(ii) It can thus be seen that there are four important stages once the AO

issues notice for reopening of the assessment. Such stages are: (i) the

assessee if he so wishes, may demand the reasons recorded by the AO after

filing return in response to notice u/s 148 of the Act, (ii) the AO

supplying such reasons to the assessee, (iii) the assessee raising

objections to the notice for reopening and (iv) the AO disposing of the

objections raised by the assessee. With a view to streamlining this

procedure, and to ensure, as far as possible, the AO is not faced with the

unenviable task of completing the assessment proceedings in a few days left

before the same became time barred, we would like to give certain

directions of general implication which, we would expect, are followed by

all concerned. While doing so, we are conscious that these stages are
provided by the Supreme Court in *GKN Driveshafts (India) Ltd* 259 ITR 19

and we would be giving directions only to the extent the said judgment

already does not provide for. We have noticed that considerably long time

is consumed sometimes by the assessee demanding the reasons recorded by the

Assessing Officer and sometimes the AO complying with such a request of the

assessee. It is an accepted proposition that the reasons recorded by the AO

are not confidential and the assessee whose assessment is being reopened

has a right to know such reasons. We therefore thought that these two
stages can be substantially eliminated by giving suitable directions. The

further stage is of the assessee raising objections which often times is

done after much delay and the last stage comes where the AO deals with such

objections. This is yet another problem area where unduly long time is

consumed by the AO. Under the circumstances, following directions are
issued:

(1) Once the AO serves to an assessee a notice of reopening of assessment

u/s 148 of the Income-tax Act, 1961, and within the time permitted in such

notice, the assessee files his return of income in response to such notice,

the AO shall supply the reasons recorded by him for issuing such notice

within 30 days of the filing of the return by the assessee without waiting

for the assessee to demand such reasons.

(2) Once the assessee receives such reasons, he would be expected to raise

his objections, if he so desires, within 60 days of receipt of such reasons.

(3) If objections are received by the AO from the assessee within the time

permitted hereinabove, the AO would dispose of the objections, as far as

possible, within four months of date of receipt of the objections filed by

the assessee.

(4) This is being done in order to ensure that sufficient time is available

with the AO to frame the assessment after carrying out proper scrutiny. The

requirement and the time-frame for supplying the reasons without being

demanded by the assessee would be applicable only if the assessee files his

return of income within the period permitted in the notice for reopening.
Likewise the time frame for the AO to dispose of the objections would apply

only if the assessee raises objections within the time provided

hereinabove. This, however, would not mean that if in either case, the

assessee misses the time limit, the procedure provided by the Supreme Court

in GKN Driveshafts (India) Ltd would not apply. It only means that the time
frame provided hereinabove would not apply in such cases.

(5) In the communication supplying the reasons recorded by the AO, he shall

intimate to the assessee that he is expected to raise the objections within

60 days of receipt of the reasons and shall reproduce the directions

contained in sub-para 1 to 4 hereinabove giving reference to this judgment

of the High Court.

(6) The Chief Commissioner of Income Tax and Cadre Controlling Authority of

the Gujarat State, shall issue a circular to all AOs for scrupulously

carrying out the directions contained in this judgment.

No TDS on Service Tax if shown separately

CIRCULAR NO. 1/2014 [, DATED 13-1-2014

Subject: TDS under Chapter XVII-B of the Income-tax Act, 1961 on service tax componentcomprised in the payments made to residents - clarification regarding

The Board had issued a Circular No.4/2008 dated 28-04-2008 wherein it was clarified that tax is to be deducted at source under section 194-I of the Income-tax Act, 1961 (hereafter referred to as 'the Act'), on the amount of rent paid/payable without including the service tax component. Representations/letters has been received seeking clarification whether such principle can be extended to other provisions of the Act also.

2. Attention of CBDT has also been drawn to the judgement of the Hon'ble Rajasthan High Court dated 1-7-2013, in the case of CIT (TDS) Jaipur v. Rajasthan Urban Infrastructure (Income-tax Appeal No.235, 222, 238 and 239/2011), holding that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service tax component u/s 194J of the Act.

3. The matter has been examined afresh. In exercise of the powers conferred under section 119 of the Act, the Board has decided that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.

4. This circular may be brought to the notice of all officer for compliance

F.NO.275/59/2012-IT(B)]

Getting a PAN made stricter source Business standard

VRISHTI BENIWAL New Delhi, 24 January It will not be easy to get a Permanent Account Number (PAN) now, as the Income Tax (I- T) department on Fridayput more conditions for applicants in a bid to crack down on fraudsters. “The procedure for PAN allotment will undergo a change from February 3. Every applicant will have to submit self- attested copies of proof of identity, address and date of birth documents and also produce original documents for verification,” the Central Board of Direct Taxes ( CBDT) said on Friday. It said the original documents would be returned after verifying the self- attested copies attached with the application form received at the PAN facilitation centre. An official said the decision was taken after the department noticed a lot of cases where people were giving false information in the application to get a duplicate PAN in some cases and to get the card even when they were not eligible for it in other cases. About 1.4 million new PAN cards are issued every year by the department, which is able to verify details of only 0.2 per cent applicants. Experts said the department’s intention behind the move was to check mala fide cases but it would cause problems for genuine applicants. “The department is asking for self attested as well as original documents ( for verification only), to be 100 per cent sure about their veracity. But this will make it more difficult to obtain PAN, particularly for foreigners. People might not be comfortable sharing original documents with consultants. There are practical challenges which might unfold in the coming days and we hope for more clarity,” said Amarpal Chadha, tax partner, EY. The official agreed it might cause discomfort to some people but the intention was to make the system foolproof. CBDT had found some foreign nationals were using PAN as proof of identity. In most of these cases, a fake certificate of identity and address signed by a Member of Parliament was issued. By I- T Rules, a depository account statement, bank account statement/ passbook, ration card, passport, voter identity card, driving licence, property tax assessment order and a certificate signed by a Member of Parliament or a Member of Legislative Assembly or municipal councillor or a gazetted officer are accepted as proof of identity as well as address. Currently, about 140 million people have a PAN card in India, while only 34 million of them file their income tax returns. Many people who don’t file returns, get a PAN as it works as an identity proof at many places. Of the total PAN allotment, 96 per cent are under the category of ‘ Individual’ applicants and the highest fake/ duplicates are also observed under this category. In March 2011, after finding ahuge mismatch between the number of PAN holders and the number of tax return filings, the Comptroller & Auditor General had asked the I- T department to ensure that asingle taxpayer was not issued multiple cards. I- T dept wants original ID proof; experts warn of practical challenges

Where returned income filed under section 153A is accepted by the AO, there will be no concealment of income and, consequently, penalty u/s. 271(1)(c) cannot be imposed - Tri

1. ITAT MUMBAI - Income Tax
   Shri Kiran Shah Versus The ACIT, Mumbai
   Penalty u/s 271(1)(c) - Held that:- As per section 271(1)(B) - When any amount is added or disallowed then only a direction would suffice for the levy of penalty u/s. 271(1)(c) of the Act - But in the instant case, in respect of the additional income neither any amount is added nor disallowed by the AO , whatever has been returned by the assessee is assessed to tax except an addition of Rs. 90,000/- which was subsequently deleted by the Ld. CIT(A) - Decided in favour of assessee.
   
   Penalty u/s 271(1)(c) for A.Y. 2000-01 to 2005-06 - Held that:- Following Prem Arora Vs DCIT - ITAT DELHI] - The concealment of income has to be seen with reference to additional income brought to tax over and above income returned by the assessee in response to notice issued u/s. 153A - For the purpose of imposition of penalty u/s. 271(1)(c) resulting as a result of search assessments made u/s. 153A, the original return of income filed u/s. 139 cannot be considered - in case of search initiated after 1.6.2003 a return of income is always filed on issue of notice u/s. 153A - The penalty u/s. 271(1)(c) is imposable when there is variation in assessed and return income. If there is no variation, there will be no concealment. When there is no concealment, question of levy of penalty u/s. 271(1)(c) will not arise. This is settled position of law - Where returned income filed under section 153A is accepted by the AO, there will be no concealment of income and, consequently, penalty u/s. 271(1)(c) cannot be imposed - Decided in favour of assessee.

   ---

IT tribunal can extend period of stay beyond 365 days

 IT : Tribunal can extend period of stay beyond 365 days

■■■

[2013] 39 taxmann.com 174 (Ahmedabad - Trib.)

IN THE ITAT AHMEDABAD BENCH 'A'

Vodafone West Ltd.

v.

Assistant Commissioner of Income-tax*

D.K. TYAGI, JUDICIAL MEMBER 
AND T.R. MEENA, ACCOUNTANT MEMBER

STAY APPLICATION NOS. 86 & 87 (AHD.) OF 2012
[ASSESSMENT YEARS 2008-09 & 2009-10]

JANUARY  11, 2013 

Section 254, read with section 201, of the Income-tax Act, 1961 - Appellate Tribunal - Powers of [Power to grant stay] - Assessment years 2008-09 and 2009-10 - Tribunal had granted stay against demand of tax for 180 days on two occasion - Assessee requested extension of stay beyond 365 days on ground that on similar facts matter was pending before Supreme Court in case of other telecom companies wherein ad interim order had been passed - Bombay High Court in case of CIT v. Ronuk Industries Ltd. [2011] 333 ITR 99/15 taxmann.com 369/203 Taxman 90 (Mag.) has held that Tribunal has power to extend period of stay beyond 365 days under third proviso to section 254(2A) - Whether in view of legal position on this issue, stay was to be granted for a period of 180 days or till disposal of appeal - Held, yes [Para 2] [In favour of assessee]

CASE REVIEW

Safe Harbour Rules

Press Information Bureau
Government of India
Ministry of Finance

18-September-2013 15:49 IST

Safe Harbour Rules Finalized after Considering Comments of Various Stake Holders ; Rules to be Applicable for 5 Assessment Years Beginning from Assessment Year 2013-14

            Section 92CB of the Income-tax Act provides for framing of safe harbour rules. The determination of arms length price u/s 92C or 92CA of the Act is subject to these safe harbour rules. The definition of safe harbour rule provided in section 92CB means circumstances in which the Income-tax Authority shall accept the transfer price declared by the assessee.

 

            The draft safe harbour rules were placed in public domain along with Central Board of Direct Taxes (CBDT) Press Release on 14.08.2013 seeking comments of various stake holders. The comments received from various stake holders have been considered and necessary modifications have been made to the draft rules. The finalized safe harbour rules are being notified separately. The salient feature of the modifications incorporated in the final safe harbour rules are:-

 

(i)                 The safe harbour rules shall be applicable for 5 assessment years beginning from assessment year 2013-14.

 

(ii)               An assessee can opt for the safe harbour regime for a period of his choice but not exceeding 5 assessment years. This option can be exercised by filing of Form 3CEFA which has been prescribed in the rules.

 

(iii)             In case of transactions in the nature of routine ITES and ITS activities  the  earlier ceiling of Rs 100 crore has been removed. Transactions upto Rs. 500 crore have been provided safe harbour margin of 20% and transaction above Rs.500 crore  have been provided safe harbour margin of 22% .Similarly, the ceiling of Rs. 100 crore provided for transactions in the nature of corporate guarantee has been removed. The Safe harbour would be available in case of transactions above Rs 100 crore only if the wholly owned subsidiary has been rated to be of adequate to highest safety by a rating agency registered with SEBI. The safe harbour margin for such transactions above Rs 100 crore has been reduced to 1.75% of the amount guaranteed.

 

(iv)             The definition of Knowledge process outsourcing (KPO) has been rationalized to provide reasonable distinction from routine business process outsourcing activity. The safe harbour operating margin has been reduced from 30% to 25%. Further the ceiling in respect of KPO transactions has been removed.

 

(v)               The safe harbour provisions would be available only if the assessee satisfies the eligibility conditions provided in the rules and in respect of such international transactions which are eligible for safe harbour as provided in the rules.

 

(vi)             The rules provide for a time bound procedure for determination of the eligibility of the assessee and the international transactions. Any rejection of the option exercised by the assessee shall be by way of a reasoned order passed after hearing the assessee. The assessee shall have a right to file an objection with the Commissioner against adverse finding regarding the eligibility. The Commissioner shall thereafter decide about the validity of the option exercised by the assessee.

 

(vii)           In case the action is not taken by any of the authorities within the following time lines  provided in the rules the option exercised by the assessee shall be treated as valid,:-

 

(a)    the reference by the Assessing Officer (AO) to the Transfer Pricing Officer (TPO) shall be made within a period of two months from the end of the month in which Form No.3CEFA is received by him;

(b)   the TPO shall pass an order determining the validity of the option exercised by the assessee within a period of two months from the end of the month in which reference from AO is received by him;

(c)    the Commissioner shall pass an order on the objection received from the assessee within a period of two months from the end of the month in which the objection has been received by him.

 

(viii)         Once the option exercise by the assessee is held to be valid it shall remain so for the period opted unless the assessee voluntarily opts out of safe harbour regime by furnishing a statement to this effect to the Assessing Officer.

 

(ix)             The assessee shall be required to submit a statement regarding the quantum of international transaction, its nature and the operating margins or rate of interest or commission for the relevant assessment years covered under the period for which safe harbour is option is exercised.

 

(x)               The option exercised by the assessee can be held invalid in an assessment year following the initial assessment year only if there is change in the facts and circumstances relating to the eligibility of the assessee or of the international transaction. However, such withdrawal shall be done only after providing opportunity of being heard to the assessee.  The assessee has a right to file his objection with the Commissioner, who shall after hearing the assessee determine the validity of the option.

 

*****

DSM/MJPS/ka

Applicability of SA 700

Clarification Regarding Applicability of SA 700 on Tax Audit Report under Section 44AB of The Income-Tax Act, 1961. - (05-07-2013)

As the members are aware that all audit reports in respect of audits of financial statements for period beginning on or after 1st April 2012 are to be issued in accordance with the requirements of SA 700(Revised) - Forming an Opinion and Reporting on Financial Statements. In this regard, ICAI has been receiving mails seeking clarification regarding applicability of SA 700 on tax audit reports, i.e. Form No. 3CA/3CB. Considering the fact that all tax audit reports are now mandatorily required to be filed online and that the format of tax audit report is prescribed by the Central Government, the Council in its 325th meeting held from 1st June to 3rd June, 2013 decided to defer the applicability of SA-700 (Revised) on the tax audit report under section 44AB of the Income-tax Act,1961 by one year i.e. the requirements of SA-700(Revised) are not applicable for tax audit reports filed up to 31st March, 2014. ICAI is further taking up the matter with the appropriate authorities so that suitable changes can be brought in the forms relating to tax audit.

Income tax case laws

Reassessment to tax so called accommodation entries not justified if reasons didn’t purport assessee’s failure to disclose

IT : Where notice under section 148 was issued beyond period of four years and reasons recorded for reopening assessment were that assessee had received sum from certain companies, which were in nature of accommodation entries

■■■

[2013] 33 taxmann.com 86 (Delhi)

HIGH COURT OF DELHI

Commissioner of Income-tax

v.

Viniyas Finance & Investment (P.) Ltd.*

BADAR DURREZ AHMED AND R.V. EASWAR, JJ.

IT Appeal NO. 271 OF 2012†

FEBRUARY 11, 2013

Section 147, read with section 68, of the Income-tax Act, 1961 - Income escaping assessment - Non-disclosure of primary facts [To tax cash credits] - Assessment year 2002-03 - A notice under section 148 was issued for reopening of assessment beyond period of four years - Purported reasons to believe that income had escaped assessment were that a special information had been received from Director (Investigation) that assessee-company had received a sum from certain companies - Entries were in nature of accommodation entries and in reality it was assessee's own unaccounted money which had been shown in books of account as a receipt from aforesaid companies - Whether there was no mention in purported reasons that assessee had not made a full and true disclosure of material facts necessary for assessment; on the contrary purported reasons indicated that amount mentioned therein had been shown in books of account as receipt from companies mentioned therein - Held, yes - Whether, therefore, issuance of notice under section 148 was bad in law and so, too, all proceedings pursuant thereto - Held, yes [Paras 7 and 8] [In favour of assessee]

FACTS



Facts

■ A notice under section 148 was issued by the Assessing Officer for reopening of the assessment beyond the period of four years.

■ The case of the assessee was that there was no mention of any failure to disclose the material facts in the reasons which had been recorded.

■ However, the Assessing Officer went ahead with the reassessment and completed the assessment making addition of Rs. 77 lakhs.

■ The Commissioner (Appeals) held that reopening of the assessment was valid. However, on merits he deleted the entire addition.

■ The Tribunal held that the issuance of notice under section 148 to be bad on account of the fact that there was no failure to disclose fully and truly all material facts for the purposes of assessment on part of the assessee.



Issue involved

■ Whether notice under section 148 issued beyond period of four years was valid?



HELD



■ On going through the purported reasons, it is found that there is no mention of the assessee not having made a full and true disclosure of the material facts necessary for assessment. On the contrary the purported reasons indicate that the amounts mentioned therein had been shown in the books of account as receipts from the companies mentioned therein.

■ Also, the list of companies from which amounts have been allegedly received, the name of the assessee has been shown. This means that the assessee received the money from itself, which can hardly be an allegation in this case. [Para 7]

■ For the foregoing reasons, the Tribunal has approached the matter in the correct perspective and has held the issuance of the notice under section 148 to be bad in law and so, too, all the proceedings pursuant thereto.

■ There is no reason to interfere with the impugned order. [Para 8]



CASES REFERRED TO



Wel Inter Trade (P.) Ltd. v. ITO[2009] 308 ITR 22/178 Taxman 27 (Delhi) (para 4) and Haryana Acrylic Mfg. Co. v. CIT[2009] 308 ITR 38/175 Taxman 262 (Delhi) (para 4).

Karan Khanna and Ms. Asmita Kumar for the Petitioner. S. Krishnan for the Respondent.

JUDGMENT



Badar Durrez Ahmed, J. - This appeal under Section 260A of the Income Tax Act, 1961 has been filed by the Revenue being aggrieved by the order dated 18.11.2011 in ITA No.4652/DEL/2009 pertaining to the assessment year 2002-03. These proceedings were initiated on the basis of a notice under Section 148 of the said Act issued by the Assessing Officer to the respondent-assessee for re-opening of the assessment pertaining to the said assessment year 2002-03. The said notice was issued on 30.07.2007 beyond the period of four years and, therefore, the respondent-assessee had raised the issue as to whether the Assessing Officer had jurisdiction at all to issue the said notice inasmuch as the provisions of Proviso to Section 147 would become applicable. One of the pre-conditions for invoking Proviso is that there must be failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment. It was the case of the respondent-assessee that this pre-condition had not been satisfied and, in fact, there was no mention of any failure to disclose the material facts in the reasons which have been recorded. However, the Assessing Officer went ahead with the re-assessment and completed the same on 30.12.2008 whereby he made an addition of Rs. 77 lakhs on account of said amount having allegedly escaped assessment in the first round when the assessment was originally framed under Section 143(3) of the said Act on 22.12.2004.

2. The respondent-assessee was aggrieved by the said addition, and, therefore, filed an appeal before the Commissioner of Income Tax (Appeals). The appeal was preferred both on the question of jurisdiction as well as on merits. Insofar as the plea of jurisdiction taken by the respondent-assessee was concerned, the Commissioner of Income-Tax (appeals) did not agree with the submissions of the respondent-assessee and held that re-opening of the assessment was valid under Section 147 of the said Act. However, on merits the Commissioner of Income Tax (Appeals) held in favour of the respondent-assessment and deleted the entire amount of Rs. 77 lakhs.

3. The Revenue, being aggrieved by the decision on merits by the Commissioner of Income Tax (Appeals) preferred the said appeal ITA No.4652 (Del) of 2009 before the Tribunal on the question of deletion of the addition of Rs. 77 lakhs. The respondent-assessee preferred cross-objection with regard to the jurisdictional issue. The cross-objection was numbered as COA 29/Del/2010. The Tribunal has disposed of the said appeal and the cross-objection by the common impugned order dated 18.11.2011. The Tribunal accepted the cross-objection of the respondent-assessee on the point of jurisdiction and held the issuance of notice under Section 148 of the said Act to be bad on account of the fact that there was no failure to disclose fully and truly all material facts for the purposes of assessment on the part of the respondent-assessee. Insofar as the question of merits was concerned, the Tribunal did not examine the same inasmuch as it had held the re-opening itself to be bad.

4. On going through the decision of the Tribunal we find that the Tribunal was impressed by the fact that in the reasons there should have been recorded that there was failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment. The Tribunal followed the decisions of this Court in Wel Inter Trade (P.) Ltd. v. ITO[2009] 308 ITR 22/178 Taxman 27 and Haryana Acrylic Mfg. Co. v. CIT[2009] 308 ITR 38/175 Taxman 262 wherein this Court held that in situations where the reasons did not even contain and allegations that the escapement of the income had been occasioned by failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, the assessing officer would be barred from re-opening of the assessment already done at an earlier stage. In Wel Inter Trade (P.) Ltd. (supra) this Court has observed as under:-

"A plain reading of the said proviso makes it more than clear that where the provisions of section 147 are being invoked after the period of four years from the end of the relevant assessment year, in addition to the Assessing Officer having reason to believe that any income chargeable to tax has escaped assessment, it must also be established as a fact that such escapement of assessment has been occasioned by either the assessee falling to make a return under section 139 etc., or by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In the present case, the question of making of a return is not in issue and the only question is with regard to the second portion of the proviso, which relates to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Insofar as this pre-condition is concerned, there is not a whisper of it in the reasons recorded by the Assessing Officer. In fact, as indicated above, the Assessing Officer could not have made this a ground because the Assessing Officer had required the petitioner to furnish details with regard to loss occasioned by foreign exchange fluctuation which the petitioner did not by virtue of the reply dated 5.2.2002. Since the petitioner had fully and truly disclosed all the material facts necessary for the assessment, the pre-condition for invoking the proviso to section 147 of the said Act had not been satisfied.

10. In this connection, it may be relevant to note one decision, although there are several others. The said decision is that of the Punjab and Haryana High Court in the case of Duli Chand Singhania v. Asstt. CIT [2004] 264 ITR 192. In the said decision, the High Court of Punjab and Haryana was faced with a similar situation. The court noted that there was not even a whisper of an allegation that the escapement in income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The court observed that absence of this find, which is the sine qua non for assuming jurisdiction under section 147 of the Act in a case falling under the proviso thereto, makes the action taken by the Assessing Officer wholly without jurisdiction. We agree with these observations of the Punjab and Haryana High Court and are of the view that in the present case also, the Assessing Officer has acted wholly without jurisdiction. The invocation of section 147, the issuance of the notice under section 148 and the subsequent order on the objections are all without jurisdiction. The impugned notice as well as the proceedings pursuant thereto are quashed...."

5. We have considered these submissions and we are inclined to agree with the learned counsel for the petitioner. The proviso to section 147 reads as under:

"Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessment to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for the assessment year."

6. In the present case the purported reasons to believe that income had escaped assessment were as under:-

"Reasons of the belief that income has escaped Assessment.

In this case the assessment for the asstt. Year 2002-03 was made u/s 14(3) on 22.12.2004. A special information has been received from Director of Income Tax (investigation)- I, New Delhi vide letter dated 05.02.2007 that the assessee company has received a sum of Rs. 77,00,000/- from the companies as detailed below:-



S. No. Name of the companies Amount Instrument No. & Dt. Name & Branch of Bank



1. Rabik Exports Ltd. Rs. 400000 2258 24.11.01 Ratnakar Bank, K.B.



2. -do- Rs. 300000 92420 21.02.02 Corpn. Bank, Pas.V.



3. Mestrol Mktg. & Adg. (P) Ltd. Rs. 500000 2156 28.11.01 Ratnakar Bank, K.B.



4. -do- Rs. 500000 2163 14.12.01 -do-



5. Vin Fin & Investment Rs.50000 841908 07.01.02 KVB, Karol Bagh



6. Fair "N" Square Exports (P) Ltd. Rs.200000 816168 08.01.02 Vijay Bank, R. Nagar



7. Pololeasing & Fin. (P) Ltd. Rs. 600000 162529 18.12.01 SB Mysore, KB



8. -do- Rs. 350000 812701 20.12.01 Vijay Bank, R. Nagar



9. -do- Rs.500000 812722 8.01.02 -do-



10. -do- Rs. 500000 812730 18.01.02 -do-



11. -do- Rs. 300000 812723 26.02.02 -do-



12. Satwant Singh Sodhi Const.(P) Ltd. Rs. 100000 816140 18.01.02 -do-



13. -do- Rs. 300000 816144 01.02.02 -do-



14. -do- Rs. 600000 816143 06.02.02 -do-



15. -do- Rs. 500000 826823 22.03.02 -do-



16. M.V. Mktg. (P) Ltd. Rs. 300000 816086 01.03.02 -do-



17. Ethnic Creation (P) Ltd. Rs. 650000 816235 08.01.02 -do-



18. -do- Rs. 300000 816238 08.01.02 -do-



19. SGC Publishing (P) Ltd. Rs. 150000 162524 08.01.02 State Bank, Mysore



20. Harpal Associates (P) Ltd. Rs. 300000 803279 20.12.01 Vijay Bank, R. Nagar



21. Arun Finvest (P) Ltd. Rs. 300000 811672 18.01.02 -do-







Rs. 7700000







According to the special information received, the entries are in the nature of accommodation entries and in the reality it is the assessee's own unaccounted money which has been shown in the books of accounts as a receipt from aforesaid companies.

In view of the above, I have reason to believe that income to the extent of Rs.77,00,000/- has escaped assessment."

7. On going through the purported reasons we find that there is no mention of the respondent-assessee not having made a full and true disclosure of the material facts necessary for assessment. On the contrary the purported reasons indicate that the amounts mentioned therein had been shown in the books of accounts as receipts from the companies mentioned therein. We also note that at serial No.5 of the list of companies from which amounts have been allegedly received, the name of the assessee has been shown. This means that the assessee received the received money from itself, which can hardly be an allegation in this case.

8. For the foregoing reasons we feel that the Tribunal has approached the matter in the correct perspective and has held the issuance of the notice under Section 148 dated 30.7.2007 to be bad in law and so, too, all the proceedings pursuant thereto. There is no reason for us to interfere with the impugned order inasmuch as no substantial question of law arises for our consideration.

9. The appeal is dismissed.

Lata



--------------------------------------------------------------------------------



*In favour of assessee.

†Arising out of order of Tribunal in IT Appeal No. 4652/Delhi/2009, dated 18-11-2011.

Tax amendments to file Income-Tax return for AY 2013-14- CA GAURAV GARG



It is well known fact that tax payers are now required to file their Income-tax Return for the Financial Year 2012-13 relevant to the Assessment Year 2013-14. These Income-tax Returns in most cases have to be filed by 31st July, 2013. However, for the Corporate Sector as well as for persons who are having the requirement of tax audit the last date of filing Income-tax Return happens to be 30th September 2013.



The Central Board of Direct Taxes recently has amended certain provisions of the Income-tax Rules concerning filing of the Income-tax Return. Some of the points mentioned in this new amendment are really very very important for practical filing of the Income-tax Return by the tax payers for the Assessment Year 2013-14. Hence, in this article an attempt is being made to highlight all those important points which are required to be kept in mind while filing the Income-tax Return for the Assessment Year 2013-14. The Income-tax (3rd Amendment) Rules, 2013 which have been issued vide Notification No. 34/2013 dated 1.5.2013 provides for amendments in Rule 12 of Income-tax Rules, 1962 and also through these rules certain Income-tax Return Forms have been substituted. The substituted Return Forms are SAHAJ ITR 1, ITR 2, ITR3, SUGAM ITR 4S, ITR 4 and ITR V. Please use the new Income tax Return forms while filing Income-tax Return for the A.Y. 2013-2014.

The following are some of the important amendments which have been made in the Income-tax Rules with reference to filing of Income-tax Return for the Assessment Year 2013-2014:-

1. Until last year the Income-tax Return in Form No. SAHAJ-ITR1 was permitted to be filled up by all individuals having salary income as also income from house property and income from other sources except income from lottery or from horse races. However, as a result of the new amendment the individual if he has got any loss under the head Income from Other Sources, then such person will not be able to file Income-tax Return in Form No. SAHAJ (ITR1). It is specifically mentioned in the new amendment that persons taking advantage of filing Income-tax Return in the SAHAJ Form should not have any loss under the head Income from Other Sources.

2. The new amendment makes it very clear that the provisions relating to filing of Income-tax Return by the individuals in Form SAHAJ (ITR1) shall not be applicable to a person who is resident, other than not ordinarily resident in India specially if such person has assets (including financial interest in any entity) located outside India or such person has signing authority in any account located outside India.

3. The SAHAJ Income-tax Return form also cannot be used by an individual claiming any double taxation tax relief under sections 90 or 90 A or 91 of the Income-tax Act, 1961.

4. It is provided in the new amendment that Income-tax Return for the A.Y. 2013-2014 also cannot be filed in form No. SAHAJ by all individuals having income not chargeable to tax exceeding Rs. 5,000/-.

5. It is well known fact that tax payers are not required to enclose any papers or documents with their Income-tax Return. However, the new amendment provides that where the assessee is required to furnish a report of Audit as per section 115AB or 92E or 115JB of the Income-tax Act, 1961, then such audit report shall be furnished electronically with the Income-tax Return.

6. Last year individuals and Hindu Undivided Families having total income in excess of Rs. 10 lakhs were required to furnish the Income-tax Return electronically under Digital Signature or transmitting the data in the Return electronically and thereafter submitting the verification of the Return in Form ITR V. Now as a result of the amendment not merely individuals or Hindu Undivided Families but all persons other than companies and persons filing Form No. 7 (like Educational Institutions, Trusts etc.) if their income exceeds Rs. 5 lakhs would be required to furnish the Return for the Assessment Year 2013-14 electronically under Digital Signature or transmitting the data in the Return electronically and thereafter submitting ITR V. This is really very very important new amendment whereby it is now compulsory for persons having income in excess of Rs. 5 lakhs for the Assessment Year 2013-14 to file their Income-tax Return in the Electronic Form. However, the charitable trusts and educational institutions etc. who are required to file their Income-tax Return in Form No 7 will not be compulsorily required to file the Return electronically irrespective of their income.

7. All those tax payers who are claiming relief of tax in terms of section 90 or 90A or 91 of the Income-tax Act and are filing their Income-tax Return for the AY 2013-14 and subsequent years will now be required to furnish their Income-tax Return electronically under Digital Signature or transmitting the data in the Return electronically and thereafter submitting the verification of the Return in Form ITR V. It may be clarified here that the impact of this new amendment will be with reference to all such persons who are taking benefit of relief in respect of income-tax paid or deducted in foreign country or specified territories. This means all those tax payers who are taking advantage of Double Taxation Avoidance Agreements or any other agreements which have been executed by the Central Government with specified associations for double taxation relief as well as persons who are taking advantage of Double Taxation Relief with countries where there is no agreement, all such persons will now be required to file their Income-tax Return electronically under Digital Signature and they can also submit the Return electronically and thereafter submit the verification of the Return in Form ITR V.



8. Tax payers are aware that since last year Form No. SUGAM (ITR 4S) was provided for filing Income-tax Return by the persons who are taking advantage of computing their income in terms of section 44AD or section 44AE of the Income-tax Act for computation of their business income based on a percentage of the profit. It may be noted that this return form be used only when the turnover of the business is less than Rs. 1 crore. The new amendment to Rule 12 of Income-tax Rules now provides that the provisions relating to filing of Income-tax Return in Form SUGAM (ITR 4S) will not apply to a person who is a resident, other than not ordinary resident in India and has any assets (including financial interest in any entity) located outside India or has a signing authority in any account located outside India. Likewise, the SUGAM (ITR 4 S) cannot be used by individual claiming Double Taxation Relief. Finally, the SUGAM (ITR 4 S) cannot be filed by persons having income not chargeable to tax exceeding Rs. 5,000 and such persons should file return in Form No. 4.



9. The most important amendment with reference to filing Income-tax Return is with reference to a new "Schedule AL" which is introduced in ITR 3 & ITR 4. This schedule contains details of Assets & liabilities of an individual or HUF. This schedule is to be filled up when the income of the individual or HUF exceeds Rs. 25 lakhs.



Conclusion: The tax payers in particular who are having income in excess of Rs. 5 lakhs for the Assessment Year 2013-14 in particular to carefully understand the new provisions relating to filing of the Income-tax Return Form whereby it has been now compulsory for them to file their Income-tax Return electronically. Likewise persons who are having tax audit should also not forget to submit the audit report with the Income-tax Return electronically. The Income tax Return forms which are required to be filled in for the AY 2013-14 are basically almost at par with the Income-tax Return Form as was being used in the previous years. All assets abroad and all incomes abroad are required to be mentioned in the Income-tax Return.

It may be noted that the impact of amendments in Rule 12 of the Income-tax Act would now mean that if an individual is having exempted income in excess of Rs. 5,000, in that situation such individual will not be able to file the Income-tax Return SAHAJ (ITR 1). For example let us say a salaried employee has got income from salary income and some bank interest income. But if he has got dividend income of Rs. 10,000, in that situation he will not be able to file the Income-tax Return in Form SAHAJ (ITR1) because the new amendment specifically mentions that the Return Form SAHAJ cannot be used by an individual having income not chargeable to tax exceeding Rs. 5,000. Such persons have to file the Return in Form No. 2. Similarly an individual or a Hindu Undivided Family carrying on business having turnover less than Rs. 1 crore and normally required to file the Return in Form SUGAM (ITR4S) will not be able to file the Return in the said SUGAM Form for the AY 2013-14 if he were to have exempted income say like dividend, interest income or income from Mutual Fund or income from Tax Free Bond exceeding the sum of Rs. 5,000. Hence, all individuals and Hindu Undivided Families in particular carrying on business and computing income on presumptive basis and also having income not chargeable to tax exceeding the sum of Rs. 5,000, cannot use the Income-tax Return Form SUGAM and will, therefore, be required to file the Return in Form No. 4. Persons filing ITR 3 & ITR 4 and having income in excess of Rs. 25 lakhs should carefully fill up "Schedule AL" to give details of assets& liabilities.



Please take care of the above mentioned important new amendments to the Income-tax Rules relating to filing of Income-tax Return and thereafter file your Income-tax Return correctly in the correct applicable form depending upon your facts and circumstances and also do not forget to file the Income-tax Return in the specific mode which is required in terms of the provisions contained in the Income-tax Law.





Capital gain invested within extended period for filing of return is also eligible for Sec. 54F deductions

IT : Where assessee paid substantial amount of sale consideration of a residential house for purchase of another residential property within extended period of limitation of filing of return under section 139, his claim for deduction under section 54F was to be allowed

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[2013] 33 taxmann.com 38 (Punjab & Haryana)

HIGH COURT OF PUNJAB AND HARYANA

Commissioner of Income-tax, Rohtak

v.

Jagtar Singh Chawla*

HEMANT GUPTA AND Ms. Ritu Bahri, JJ.

IT Appeal No. 71 of 2012 (O&M)†

MARCH 20, 2013

Section 54F, read with section 139, of the Income-tax Act, 1961 - Capital gains - Exemption of, in case of investment in residential house [Purchase of property] - Assessment year 2007-08 - Assessee sold his agricultural land and residential house vide sale deed dated 20-6-2006 - On same date, assessee claimed to have written a letter to Bank to deposit said amount in capital gain account, - However, amount earned by assessee was deposited in a 'Flexi General Account', which was saving as well as fixed deposit account - Subsequently, assessee purchased a residential house from sale proceed so received - Revenue authorities rejected assessee's claim for deduction under section 54F on ground that assessee failed to deposit sale proceeds of capital asset in capital gain account in terms of section 54F(4) within period of one year of sale or acquire a new asset within one year i.e., in terms of section 139(1) - Whether since assessee had proved payment of substantial amount of sale consideration for purchase of a residential property on or before 31-3-2008, that is within extended period of limitation of filing of return, he was not liable to pay any capital gain tax - Held, yes [Paras 12 and 13] [In favour of assessee]

CASES REFERRED TO



CIT v. Rajesh Kumar Jalan [2006] 286 ITR 274/157 Taxman 398 (Gau.) (para 9) and Fathima Bai v. ITO [IT Appeal No. 435 of 2004, dated 17-10-2008] (para 10).

Inderpreet Singh for the Appellant.

ORDER



Hemant Gupta, J. - The Revenue is in appeal under Section 260A of the Income Tax Act, 1961 (for short 'the Act') against an order dated 30.6.2011 passed by the Income Tax Appellate Tribunal, Delhi Bench 'D' New Delhi (for short 'the Tribunal') in ITA No. 4923/Del/2010 for the assessment year 2007-08.

2. The Revenue has sought the following substantial question of law:-

"Whether on the facts and circumstances of the case, the Hon'ble ITAT, New Delhi is justified in law in reversing the finding of CIT(A) in confirming the addition of Rs.76,85,829/- made by the Assessing Officer by disallowing the claim of exemption u/s 54F of the I.T. Act as the assessee failed to deposit the unutilized consideration of capital gains in the Capital Gains Accounts Scheme as per the limit prescribed under the Act?

3. As per facts on record, the assessee sold his agricultural land and residential house at Karnal for Rs.2,16,00,000/- and Rs.8,25,000/- respectively, vide sale deed dated 20.6.2006. On the same date, the assessee claims to have written a letter to the Bank to deposit the said amount in the capital gain account, but it appears that the said amount was not deposited in the capital gain account. However, the same was deposited in a "Flexi General Account", which is a saving as well as fixed deposit account. The assessee purchased a residential house from the sale proceeds so received.

4. The Revenue disallowed the claim of the assessee under Section 54F of the Act and added a sum of Rs.76,85,829/- under the head 'long term capital gains', vide order dated 24.12.2009 (Annexure A-1). The said order of the Assessing Officer was upheld by the Commissioner of Income Tax (Appeals) Rohtak, vide its order dated 20.9.2010 (Annexure A-II). However, in further Appeal, the Tribunal vide its order dated 30.06.2011 (Annexure A-III) set aside the order of the Commissioner of Income Tax (Appeals) Rohtak, on the ground that the assessee has purchased the residential house within the period prescribed under Section 139 of the Act and thus, the addition is not sustainable.

5. Feeling aggrieved against the order of the Tribunal, the Revenue preferred the present appeal.

6. Learned counsel for the appellant has vehemently contended that the assessee was required to deposit the sale proceeds of capital asset in the capital gain account in terms of Sections 54F(4) of the Act, within the period of one year of the sale or was required to acquire a new asset within one year i.e. in terms of Section 139(1) of the Act. Since, the assessee has not exercised any of the two options, the order of the Tribunal is not sustainable whereas the orders of the Assessing Officer as well as Commissioner of Income Tax (Appeals) Rohtak are legal.

7. Before we proceed further, the relevant provisions of the Act i.e. sub-section (4) of Section 54F and Section 139(1) & (4) of the Act, are required to be reproduced. The same are as under:-

"54F** ** **



(4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilized by him for the purchase or construction of the new asset before the date of furnishing the return of income under Section 139, shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of Section 139 in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purpose of sub-section (1), the amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset.

** ** **



139. (1) Every person -

(a) being a company (or a firm); or

(b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to the income tax, shall on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.

** ** **



(4) Any person who has not furnished a return within the time allowed to him under sub-section(1), or within the time allowed under a notice issued under sub section (1) of Section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year, whichever is earlier."

8. The provisions of Section 54F(4) of the Act are pari-materia with Section 54(2) of the Act. Section 54 deals with the profit on sale of a residential house, whereas Section 54F deals with the transfer of any long term capital assets not being a residential house.

9. A Division Bench of the Gauhati High Court in a case reported as CIT v. Rajesh Kumar Jalan [2006] 286 ITR 274/157 Taxman 398, held that only Section 139 of the Act is mentioned in Section 54(2) of the Act in the context that the unutilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the Income Tax under Section 139 of the Act and that it would include extended period to file return in terms of Sub Section 4 of Section 139 of the Act. It was held as under:-

"From a plain reading of sub-section (2) of Section 54 of the Income-tax Act, 1961, it is clear that only section 139 of the Income-tax Act, 1961, is mentioned in section 54(2) in the context that the unutilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the Income-tax under section 139 of the Income-tax Act. Section 139 of the Income-tax Act, 1961, cannot be meant only section 139(1), but it means all sub-sections of section 139 of the Income-tax Act, 1961. Under sub-section (4) of section 139 of the Income-tax Act any person who has not furnished a return within the time allowed to him under sub-section (1) of Section 142 may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year whichever is earlier."

10. The said judgment was relied upon by a Division Bench of the Karnataka High Court in Fathima Bai v. ITO, ITA No.435 of 2004 Decided on 17th October 2008, wherein it was held to the following effect:-

"11. The extended due date under section 139(4) would be 31.3.1990. The assessee did not file the return within the extended due date, but filed the return on 27.2.2000. However, the assessee had utilized the entire capital gains by purchase of a house property within the stipulated period of section 54(2) i.e., before the extended due date for return under section 139. the assessee technically may have defaulted in not filing the return under section 139(4). But, however, utilized the capital gains for purchase of property before the extended due date under section 139(4). The contention of the revenue that the deposit in the scheme should have been made before the initial due date and not the extended due date is an untenable contention."

11. A Division Bench of this Court in which one of us (Hemant Gupta, J.) was a member, had an occasion to consider the provisions of Section 54(2) of the Act, wherein it has been held that sub-section (4) of Section 139 of the Act is in fact a proviso to Section 139(1) of the Act. Therefore, since the assessee has invested the sale proceeds in a residential house within the extended period of limitation, the capital gain is not payable. The judgments in Rajesh Kumar Jalan's case (supra) and Fathima Bai's case (supra) were referred to. It has been held as under:-

"Having heard learned counsel for the parties, we are of the opinion that sub-section (4) of Section 139 of the Act is, in act, a proviso to sub-section (1) of Section 139 of the Act. Section 139 of the Act fixes the different dates for filing the returns for different assesses. In the case of assessee as the respondent, it is 31st day of July, of the Assessment Year in terms of clause (c) of the Explanation 2 to sub-section 1 of Section 139 of the Act, whereas sub-section (4) of Section 139 provides for extension in period of due date in certain circumstances. It reads as under:-

"(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of Section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier;

Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year."

A reading of the aforesaid sub-section would show that if a person has not furnished the return of the previous year within the time allowed under sub-section (1) i.e. before 31st day of July of the Assessment Year, the assessee can file return before the expiry of one year from the end of ever relevant Assessment Year."

12. In the present case, the assessee has proved the payment of substantial amount of sale consideration for purchase of a residential property on or before 31.3.2008, that is within extended period of limitation of filing of return. Only a sum of Rs.24 lacs was paid out of total sale consideration of Rs. Two Crores on 23.4.2008, though possession was delivered to the assessee on execution of the power of attorney on 30.3.2008. Since the assessee, has acquired a residential house before the end of the next Financial Year in which sale has taken place, therefore, the assessee is not liable to pay any capital gain. Such is the view taken by the Income Tax Appellate Tribunal.

13. In view of the above, we do not find any merit in the present appeal. Hence, the same is dismissed.

Sunil



--------------------------------------------------------------------------------



*In favour of assessee.

† Appeal arising from order of ITAT, Delhi in IT Appeal No. 4923/Delhi/2010, dated 30-6-2011.



IT : A representative appearing before ITAT had no right to claim mandamus for restraining an authority constituted under Act (i.e., Members of ITAT) from discharging functions entrusted to them by statute

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[2013] 33 taxmann.com 193 (Punjab & Haryana)

HIGH COURT OF PUNJAB AND HARYANA

Yoginder Kumar Sud

v.

President Income Tax Appellate Tribunal

HEMANT GUPTA AND MS. RITU BAHRI, JJ.

C.W.P. No. 9731 of 2013

MAY 8, 2013

Section 252 of the Income-tax Act, 1961, read with article 226, of the Constitution of India - Appellate Tribunal - General - Petitioner, Chartered Accountant was appearing as representative of parties before ITAT - He filed instant petition seeking writ of mardamus against Accountant and Judicial Member of ITAT on ground that he was facing lot of harassment at hands of those members as he had not been able to meet their expectation and illegal demands - However petitioner could not establish details as to when and how demands were raised - Whether not only writ petition was bereft of any material particulars but also petitioner had no right to claim mandamus for restraining an authority constituted under Act from discharging functions entrusted to it by statute - Held, yes [Para 4]

Akshay Bhan for the Petitioner.

ORDER



Hemant Gupta, J. - The petitioner has claimed a writ of mandamus for restraining respondents No.2 and 3, i.e., Judicial and Accountant Members of Income Tax Appellate Tribunal, Amritsar from discharging their functions and directing the President of Income Tax Appellate Tribunal to decide represention dated 18.3.2013 in the time bound manner.

2. The petitioner is a Chartered Accountant and has been appearing before the Income Tax Authorities as well as before various Benches of the Income Tax Appellate Tribunal. The grievance of the petitioner is that the petitioner is facing lot of harrassment at the hands of respondents No.2 and 3, who are Judicial and Accountant Member of the Tribunal at Amritsar as the petitioner has not been able to meet their expectations and illegal demands.

3. It is also pointed out that the Tribunal is delaying the matters of the petitioner or passing unreasoned orders or by totalling ignoring him. It is also pointed out that respondent No.2 was transferred out of Amritsar on a representation submitted by the petitioner but after one year respondent No.2 has been again posted as a Judicial Member of Amritsar Tribunal. The petitioner claims that the Members are totally prejudice against the petitioner on account of his having made a complaint against respondent No.2 to the President.

4. It appears that the present writ petition is to settle the scores which the petitioner might have raised during the course of his conduct as representative of the assessees. The petitioner has asserted that he is not able to meet the expectations and illegal demands raised by the Members but there is no details as to when and how the demands were raised. Not only the writ petition is bereft of any material particulars but also the petitioner has no right to claim mandamus for restraining an authority constituted under the Act from discharging the functions entrusted to it by the Statute. The present writ petition is gross abuse of process of law and, therefore, it is dismissed.

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Exemption u/s. 10(23C)(vi) can be claimed without applying for registration u/s. 12A

HIGH COURT OF ALLAHABAD

Commissioner of Income-tax

v.

Jeevan Deep Charitable Trust

IT Appeal No. 471 of 2011

Date of pronouncement – 29.10.2012

ORDER

1. The present appeal has been filed under Section 260-A of the Income-tax Act, 1961, hereinafter referred to as “the Act” against the order dated 08.12.2009 passed by the Income Tax Appellate Tribunal, Allahabad. The Revenue has proposed the following three substantial questions of law said to be arisen out of the order of the Tribunal.

“(1) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in coming to the conclusion that registration granted to the assessee has been cancelled u/s 12-AA(3) of the Act merely on the ground that approval u/s 10(23C) (vi) of the Act had been denied to the assessee by completely overlooking and ignoring the fact that the CIT had cancelled the registration after having satisfied himself that the activities of the assessee society were not charitable in nature?

(2) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the assessee is eligible for continued registration despite the fact that the assessee does not fulfill the requirement of being a charitable institution?

(3) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in not taking into consideration the decisions relied upon by the CIT in his order u/s 12-AA (3) of the Act while cancelling the registration of the assessee society?”

2. Briefly stated that the facts giving rise to the present appeal are as follows:

The respondent-assessee was granted registration under Section 12A of the Act being a charitable institution. It claimed exemption under Section 10(23C)(vi) of the Act on the ground that the income earned by it is relating to educational institution as the institution is solely for the educational purposes. The claim of exemption under Section 10(23C)(vi) of the Act was disallowed by the Chief Commissioner of Income Tax, Varanasi vide order dated 25th February, 2009 on the ground that in the objects of the institution there are certain other objects, which proves that the institution has not solely been established for educational purposes. Relying on the said order proceeding under Section 12AA(3) of the Act was initiated and vide order dated 12th October, 2009, the Commissioner of Income Tax, Varanasi cancelled the registration granted to the respondent-assessee under Section 12A of the Act. Feeling aggrieved by the order dated 12th October, 2009 cancelling the registration granted under Section 12A of the Act, the respondent-assessee preferred an appeal before the Income Tax Appellate Tribunal, Allahabad which was registered as I.T.A. No.252(Alld)09. The Tribunal vide impugned order dated 8th December, 2009 had allowed the appeal and set aside the order of the Commissioner of Income Tax dated 12th October, 2009 and the registration had been restored. The Tribunal had come to the conclusion that the proceeding under Section 10(23C) (vi) of the Act is an independent proceeding and cannot be made the sole ground for cancellation of the registration granted under Section 12A of the Act. It further found that the deduction under Section 11 of the Act has been allowed to the respondent-assessee herein for the Assessment Year 2006-07 and in the assessment order passed for the Assessment Year 2004-05 exemption under Section 11 of the Act was disallowed, which order was reversed in appeal by the Commissioner of Income Tax (Appeal), Varanasi, allowing the deduction under Section 11 of the Act vide order dated 3.10.2007, which order has been accepted by the Revenue as no second appeal was preferred against the said order.

3. We have heard Sri Dhananjay Awasthi, learned Standing Counsel for the Revenue and Sri Kunal Ravi Singh, learned counsel appearing for the respondent-assessee.

4. Sri Awasthi, learned counsel, submitted that as the institution has been established solely for the educational purposes and is a profit earning institution exemption under Section 10(23C) (vi) of the Act having been rightly denied to it as it ceased to be a charitable institution., therefore, the Tribunal has erred in restoring the registration. The submission is wholly misconceived. Admittedly, one of the objects of the trust was for running educational institutions and imparting education. The trust , however, has other objects also, which are reproduced below:

“(i) Development of Scientific Education amongst Indian Children.

(ii) Modern Education with moral duty and character building in accordance with Indian culture as well as development of educational atmosphere.

(iii) To provide as well as arrange commercial and practical education to children.

(iv) Development as well as publicize the Indian culture and arts.

(v) To establish the school and management thereof from Primary education to Intermediate Education.

(vi) To publicize as well as to educate and propagate the Cottage Industries as well as industries based on village amongst the youth so that they may lead their life independently and freely.”

5. In our considered opinion, exemption under Section 10(23C)(vi) of the Act can be claimed by an assessee without applying for registration under Section 12A of the Act as it is not required to fulfil the conditions mentioned under Section 11 of the Act while claiming exemption under Section 10(23C) (vi) of the Act. Further in the order passed by the Commissioner of Income Tax, there is no whisper that the assessee has not fulfilled any of the conditions of the Section 11 of the Act for claiming it to be a charitable institution. He had solely relied on the order of the Chief Commissioner of Income Tax passed under Section 10(23C) (vi) of the Act while denying the exemption under the aforesaid sub-section. We are, therefore, of the considered opinion that the Tribunal had rightly restored the registration on the ground that in the Assessment Years 2004-05 and 2006-07 benefit of exemption/deduction under Section 11 of the Act was allowed to the respondent-assessee.

6. In view of the foregoing discussion, we do not find any error in the impugned order passed by the Income Tax Appellant Tribunal, Allahabad. The appeal fails and is dismissed.