Pune ITAT on section 40A(3) cash payment exceeding prescribed limits "for maintaining the constant suppliers if the assessee is compel to make the payment in cash then the harsh provisions like Sec. 40A(3) should not be evoked." Luck ITAT on reopening notice u/s 148 cannot be issued till time is available for filing return u/s 139(4) belated return; Luck ITAT rev fav orders: scrutiny selection on computer basis & tds u/s 195 applicable on advance payment "interest" labelled as discount (to foreign buyers) & Karnataka high court on section 54: house meaning & Section 148 notice service!

[Kapil Goel]

 

 

 

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE

 

ITA No. 376/PN/2013

Assessment Year : 2009-10

 

Date of hearing :	23-06-2014
Date of pronouncement :	25-08-2014

 

We have heard the rival submissions of the parties and perused the record. In this case, there is no dispute about the fact that the payments shown by the Assessing Officer in the assessment order are for the amounts more than Rs.20,000/- and covered under the provisions of Sec. 40A(3) r.w. Rule 6DD. If we consider the business model of the assessee, he is not getting credit facility from the bank and the suppliers are not giving the credit also. The assessee’s liquor shop is located in the small village Taluka Patan and his bank i.e. Karad Urban Co-op. Bank Ltd. is at the distance of 10- 20 Kms. from his shop. The plea of the assessee is that without taking the advance payment by bearer cheques, the suppliers are not giving the goods to the assessee.

The facts of the assessee’s case are somewhat similar to the cases of Anupam Tele Services (supra) and R.C. Goel (supra) as in those cases also the assessee was required to keep his constant supplier. We are aware of the facts that Clause-(j) to Rule 6DD has been deleted but in above both decisions, the Hon'ble High Courts have taken the liberal view considering the facts that for maintaining the constant suppliers if the assessee is compel to make the payment in cash then the harsh provisions like Sec. 40A(3) should not be evoked. In the present case, the assessee filed the confirmations from the suppliers that without getting the advance payment the order is not booked and hence, in our opinion the principles laid down in the above two decisions are applicable to the assessee’s case. We, therefore, allow the grounds taken by the assessee following the principles laid down in the above two decisions and delete the addition.

10. In the result, the assessee’s appeal is allowed.

Refer

 

(i). R.C. Goel Vs. CIT, 259 CTR (Del) 15.

(ii). Anupam Tele Services Vs. ITO, Tax Appeal No. 556 of 2013 judgment dated 22-01-2014 (Hon'ble High Court of Gujarat).

 

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IN THE INCOME TAX APPELLATE TRIBUNAL

LUCKNOW BENCH “A”, LUCKNOW ITA No.448/LKW/2012

Assessment year:2007-08

U.P. State Industrial Development

Corporation Ltd. (UPSIDC) Date of pronouncement 05/09/2014

 

It was submitted by Learned A.R. of the assessee that in the present

case, the case was selected for scrutiny as per computer selection and there

was no application of mind by the Assessing Officer as required u/s 143(2)(i)

of the Act and hence, the notice issued by the Assessing Officer u/s 143(2) is

wholly without jurisdiction. In support of this contention, reliance was placed

on the following judicial pronouncements:

(i) Commissioner of Income-tax Vs Rajeev Sharma [2011] 336

ITR 678 (All)

(ii) Commissioner of Income-tax Vs Sunderlal (Late) [1974] 96

ITR 310 (All)

(iii) Sirpur Paper Mill Ltd. Vs Commissioner of Wealth-tax [1970]

77 ITR 6 (SC)

(iv) Income-tax Officer Vs Eastern Scales (Pvt.) Ltd. [1978] 115

ITR 323 (Cal)

(v) Gordhandas Desai P. Ltd. Vs V.B. Kulkarni, ITO [1981] 129

ITR 495 (Bom)

(vi) Gujarat Gas Co. Ltd. Vs Joint Commissioner of Income-tax

(Assessment) [2000] 245 ITR 84 (Guj)

(vii) Orient Paper Mills Ltd. vs. Union of India [1969] AIR 48.

(viii) Union of India Vs Sheo Shanker Sitaram [1974] 95 ITR 523

(All)

 

We have considered the rival submissions. We do not find any force in

this contention of Learned A.R. of the assessee that if the case is selected for

scrutiny with the aid of computer then there is no application of mind by the Assessing Officer as required u/s 143(2)(i) of the Act.

Now we examine the issue from a different angle. This has to be

admitted that the entire juris prudence in respect of tax administration such

as principle of natural justice etc. are with the sole object of ensuring that the

tax payer is not unduly harassed by the tax department having almighty

power of state. In order to make tax administration and collection friendly to

tax payer, some steps have been taken by the tax administration/Government

although much work is still to be done in this regard. Some of these steps are

that it is made a rule that tax returns can be filed in a paper less manner in

order to improve voluntary compliance by the tax payer and also to reduce

the burden of filing voluminous documents along with the tax return. This is

a big relief to the tax payer but this has to be ensured that there are some

deterring measures so that no undue advantage is taken by any tax payer of

this liberal policy of the Government. Even these deterring measures are to

be such that they cause minimum harassment to the tax payer. Therefore,

scheme had been devised that only very small percentage of total tax returns will be scrutinized by the department and generally it is about 2% to 3% of

the total tax returns filed in a year. When it is seen that the return is to be

filed by the assessee in paperless manner and still there has to be some

deterring measure to prohibit the taxpayer from adopting the habit of tax

evasion/avoidance, it was decided that there should be scrutiny in a small

number of cases. Since the returns filed are paper less, some system has to

be devised for selecting the case for scrutiny. When the return is filed without

any paper, certain guidelines have to be formed for selecting some cases for

scrutiny as deterring measure. These guidelines may be such that the person

having income above a prescribed limit will be scrutinized in larger percentage

compared to small tax payers. It may be a policy that very small tax payers

will not be scrutinized at all. If such a system is devised by the Department in

a general manner without targeting a particular assessee, it cannot be said

that such system of selecting a case for scrutiny is interfering with the

independent decision of the Assessing Officer who is to select the case for

scrutiny. Inspite of such guidelines, the ultimate decision is of the Assessing

Officer that a particular case is falling in such guideline and in this process, if

the Assessing Officer is taking help of computer in analyzing data disclosed by

the tax payer in the return of income then it cannot be said that the decision

for selecting the case for scrutiny is not independent decision of the Assessing

Officer. This is not the case of the assessee that there is any specific direction

of any higher authority to select the case of this particular assessee for

scrutiny. The guideline may be this as to what should be percentage of the

cases to be selected for scrutiny in several different type of tax payers. The

guidelie may be that where search or survey has taken place, the number of

cases to be selected should be high in percentage. Similarly, the guideline

may be that if the assessee is claiming exemption/deduction of certain

amount then also the percentage may be higher compared to those assessees

who are  not claiming any exemption/deduction. Such guidelines formed by the Department as a whole in general manner for the assessees all over the

country, it cannot be said that such guideline is interfering with the

independent decision of the Assessing Officer for deciding the cases to be

selected for scrutiny. If this view is taken then the departmental

administration will be forced to adopt old system of selecting almost all cases

for scrutiny which was causing very undue harassment to all the tax payers

and wastage of the energy and efforts of the Department also. In the present

system, the thrust is on voluntary compliance of the tax payer and by

ensuring that some deterring measures are taken that too in a taxpayer

friendly manner of promoting the assessee to file returns without attaching

any paper and then selecting only very small number of cases for scrutiny

with the aid of computer and certain generally formed guidelines. In our

considered opinion, it cannot be said that the decision of the Assessing Officer

to select the case for scrutiny in this system is not an independent decision of

the Assessing Officer. From this angle also, we came to the same conclusion

that various contentions raised by the assessee are devoid of any merit.

Accordingly, these grounds are rejected.

 

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IN THE INCOME TAX APPELLATE TRIBUNAL

LUCKNOW BENCH “A”, LUCKNOW ITA No.92/LKW/2012

Assessment year:2008-09 M/s Kothari Food & FragrancesDate of pronouncement 05/09/2014

 

We have considered the rival submissions. We find that it is noted

by the Assessing Officer on page No. 3 of the assessment order that the

claim of the assessee is clearly incorrect that the assessee has received

sale price in advance under contractual obligation and it was pre decided

that pre payment discount will be allowed to the foreign buyers. The

Assessing Officer has noted that in the terms of contract entered into with

Bunge S.A., it is nowhere mentioned that it is the obligation of the

assessee to give any discount to the buyers. In the facts of the present case, we

find force in the contention of Learned D.R. of the Revenue that in the

facts of the present case, this benefit allowed by the assessee to its buyer

is in the nature of interest paid by the assessee to its buyer on advance

payment received from the buyer. In our considered opinion, under these

facts, this Tribunal decision is not applicable in the present case. As per the above discussion, we have seen that none of the

judgments cited by Learned A.R. of the assessee is rendering any help to

the assessee. We also find that in the present case, the benefit allowed by

the assessee to its buyers under the name of discount is in fact in the

nature of interest because the same is in consideration of receiving

advance payment. On receiving advance payment, one may compensate

the maker of advance payment by way of allowing interest or the same

benefit can be given the name of discount but merely because a different

nomenclature has been given, it does not change its character. Under

these facts, we are of the considered opinion that TDS was deductible u/s

195 of the Act and therefore, the disallowance made by the Assessing

Officer is justified. Hence, we reverse the order of CIT(A) and restore that

of the Assessing Officer.

============================================================

 

IN THE INCOME TAX APPELLATE TRIBUNAL

LUCKNOW BENCH “B”, LUCKNOW ITA No.229/LKW/2009

Assessment year:2004-05

UP Housing & Development Board, Date of pronouncement 05/09/2014

We have considered the rival submissions. We find that this is

undisputed fact that notice u/s 148 of the Act was issued by the Assessing

Officer on 30/03/2006 and the same was duly served on the assessee on30/03/2006 and the assessee has filed its return of income on 31/03/2006.

These facts are noted by the Assessing Officer himself in Para No. 1 of the

Assessing Officer. Now in the light of these facts, we examine as to

whether it can be said that an income has escaped assessment on the date

of issue of notice u/s 148 of the Act i.e. on 30/03/2006. The basis of the

decision of the authorities below is that since the assessee has not filed any

return of income by the due date u/s 139 (1), income has escaped

assessment. We do not find any force in this stand taken by the authorities

below. In our considered opinion, if the assessee does not file any return

of income on or before the due date as prescribed u/s 139(1) of the Act,

then the Assessing Officer may issue notice to the assessee for filing return

of income u/s 142(1) of the Act. Forfrom the above provisions of section 142(1)(i) of the Act, we find

that when an assessee does not file its return of income within the time

prescribed under sub section (1) of section 139 of the Act, the Assessing

Officer can ask the assessee to furnish the return of income. Similarly as

per the provisions of section 147, if the Assessing Officer has reason to

believe that the income chargeable to tax has escaped assessment, he can

assess or reassess such income. For this, the Assessing Officer has to

record his reasons for belief and then issue notice u/s 148 of the Act. In

our considered opinion, till the time available to the assessee for filing return u/s 139(4) has not expired, it cannot be said that any income has

escaped assessment. In the present case, such time has not expired on

30/03/2006 when the Assessing Officer issued notice to the assessee u/s

148 and therefore, the action of the Assessing Officer in issuing notice u/s

148 is not valid because no income has escaped assessment till that date in

the facts of the present case. Hence, we hold that in the present case, the

proceedings initiated by Assessing Officer by issuing notice u/s 148 is not

valid and as a consequence, the assessment framed u/s 143(3)/148 has no

legs to stand and therefore, the same is quashed