Concealment Penalty (section 271(1)(c)) not possible for deeming additions like section 50C circle rate additions; section 68 possible loan deemed as income; Loose documents corroboration (third party place found in search); TDS certificate 197 effective period; Contractor taxation (VAT law allowable labour charges); CIT-A power to direct AO for limited verification & nature of section 201 proceedings

[Kapil Goel]

Included in this updates:

 

a)      Ahd bench & Gujarat high court on NO concealment penalty on basis of deeming provision addition (section 50C circle rate addition no concealment possible; section 68 loans addition etc)

b)      Bang bench ITAT CIT-A power to direct AO to compute the disallowance/addition (section 251 held available) & TDS u/s 201 proceedings not akin to assessment proceedings (set aside possible by CIT-A section 251)

c)      Bang bench ITAT Value added tax contractor taxation scheme : deemed labour expense : allowable u/s 37 of Income Tax Act (automatic)

d)      Bang bench ITAT contractor case outstanding liability additions : leading to super normal profits BAD

e)      Bang bench ITAT tds CERTIFICATE u/s 197 operative & effective effect/date

f)        MP High court non raided party : inference of undisclosed on third party records : bad

 

IN THE INCOME TAX APPELLATE TRIBUNAL

“ D ” BENCH, AHMEDABAD Dr.Bela Shailesh Shah 17/5/13 So, this is a case where an explanation was offered by the assessee but it was disbelieved by the Revenue and a different opinion was formed. But this is not the case where the loan transaction entry was found to be bogus or untrue in nature. It is also not in dispute that by invoking the deeming provisions of section 68 of the Act the impugned amount was taxed as deemed income in the hands of the assessee. Almost on an identical situation, the Hon’ble Gujarat High Court in the case of Baroda Tin Works 221 ITR 661 has held that the deeming fiction is to be restricted only to the assessments and not to be invoked for the purpose of levying the penalty. We have also come across an another order of the Hon’ble Jurisdictional High Court pronounced in the case of National Textiles vs. CIT (2001)249 ITR 125 (Guj.), wherein the observation is that it is not enough that the income assessed in the hands of the assessee in the assessment proceeding, but there must be animus concealment. In that precedent also, the addition pertained to section 68 of IT Act. We therefore conclude that this is not a fit case for levy of concealment penalty, hence reverse the findings of the authorities below and direct to delete the penalty.

 

IN THE HIGH COURT AT CALCUTTA MADAN TEATRES LTD. Date : 14th May, 2013. The Court : The assessee sold the property at a sum of Rs.2,51,50,000/-

For the purpose of stamp duty, however, the value was estimated at a sum of

Rs.5,19,77,000/- and on that basis the stamp duty was realized. During the

assessment, it was found that the assessee had disclosed the sale price at a sum of

Rs.2,51,50,000/-. The Assessing Officer fixed the sale price at a sum of

Rs.5,19,77,000/- and started proceedings under Section 271(1)(C). Penalty for a sum

of Rs.30,09,989/-was imposed. Mr. Niaumuddin, learned Advocate appearing for the Revenue, contended

that the assessee had a choice to dispute the valuation on the basis of the deemed

value, but the assessee did not take that opportunity. The assessee had a choice or

he could have litigated. The fact remains that the actual amount received was offered

for taxation. It is only on the basis of the deemed consideration that the proceedings

under Section 271(C) started. The revenue has failed to produce any iota of evidence

that the assessee actually received one paise more than the amount shown to have

been received by him We are, as such, of the opinion that there is no scope to admit the appeal

since the same does raise any question of law, substantial or otherwise.

The appeal is, therefore, rejected. (The assessee preferred an appeal. The Appellate Authority allowed the appeal and set aside the order imposing penalty indicated above which order on department appeal was confirmed)

 

 

IN THE HIGH COURT OF PUNJAB & HARYANA AT

CHANDIGARH M/s PKF Finance Ltd. Date of decision: 13.05.2013 The aforesaid questions of law in the present appeal arise out of

the fact that the assessee has filed its return of income from the business of hire purchase & financing of vehicles etc. The assessee claimed that the vehicles i.e trucks were given on lease, therefore, the same are assets for the business of the assessee and, thus, the assessee is entitled to depreciation In view of the aforesaid judgment (I.C.D.S Ltd. vs. Commissioner of Income Tax, (2013) 3 SCC 541, the Hon'ble Supreme Court)  the vehicles leased by the

assessee are the assets of the assessee used during the course of its business and thus, entitled to depreciation under Section 32 of the Act. Accordingly, the first question of law is answered in favour of the assessee and against the Revenue.

 

IN THE INCOME TAX APPELLATE TRIBUNAL

“C” BENCH : BANGALOREITA No.565 to 568/Bang/2011

Assessment years : 2004-05, 2005-06, 2007-08 & 2008Shri S. Venkatesh, The CIT(A) further analysed the other circumstances and

consequences if the addition made by the AO was to be sustained:

1. If the unproved liability is worked out on that basis in different years works out as under as a % of the total outstanding liability, the resultant profit and G.P. percentage of the Assessee for various assessment years would be as high as 80% of the outstanding liability being treated as non- genuine in some years.

2. Likewise the CIT(A) also found that the resultant income that would be brought to tax, if the disallowance is made as above as a % of the turnover would give inconsistent income for same and similar business carried on by the Assessee.

3. The CIT(A) found that the expenditure vouchers had been seized from the Assessee’s office in the course of search. The genuineness of the expenses as evidenced by the seized vouchers were not doubted or verified by the AO. 4. The CIT(A) also found that the outstanding liabilities had been disclosed by the Assessee in the statement of accounts filed along with the return of income prior to the search and that there was no incriminating material found in the search to suggest that these liabilities were bogus 5. The CIT(A) also found that in respect of various assets

acquired by the Assessee the AO has made separate addition and there was no need to make separate addition. 6. The CIT(A) also found that the Assessee was carrying out construction contracts for almost the same parties who were unrelated and that there was no reason to believe that these parties would have allowed the assessee to make supernormal profits from the contracts given to the Assessee.

7. The CIT(A) also found that in the search findings and the assessments completed for all the 7 years involved, the main finding of the search was detection of unaccounted investments by the assessee. These investments, the assets

found during the search — cash, jewellery etc and the unaccounted expenses have all been considered and brought to tax in the relevant years and therefore making addition on account of unproved trade debts would be taxing same income twice. 30. We are of the view that the above basis given by the CIT(A) for deleting the addition made by the AO and substituting estimation of income of Assessee for all the Assessment years and also giving credit for income already taxed and available for telescoping, is just and proper and calls for no interference. Consequently the grievance projected by the revenue in all its appeals is without merit and are dismissed.

 

vTHE INCOME TAX APPELLATE TRIBUNAL

“A” BENCH : BANGALORE ITA No.592/Bang/2012

Assessment year : 2005-06 Success Apparels Pvt. Ltd We have heard the submissions of

the ld. DR who relied on the order of the AO. It is clear from the order of

CIT(A) that there was an order u/s. 197 of the Act permitting payments

without deduction of tax at source. That certificate was issued on

12.08.2004. The total contractual payments made by the assessee to NEL

was Rs.539 lakhs during the previous year. The AO held that payments

made till 12.08.2004 which is a sum of Rs.1,14,37,755 had to be disallowed

because during that period the assessee did not have a certificate u/s. 197

of the Act and that the certificate operates only prospectively. The CIT(A),

however, found that the certificate for non-deduction of tax was for the

whole financial year and therefore no disallowance could be made by the

AO. The AO himself admits that the certificate u/s.197(1) of the Act was

valid for payments during the previous year. There is no basis on which he

could hold that in respect of payments made during the previous year

which were prior to the date of the certificate u/s.197(1) of the Act, TDS

ought to have been made by the Assessee. The stand taken by the

Assessing Officer is contrary to the certificate issued u/s.197(1) of the Act.

We are therefore of the view that the order of the CIT(A) on this issue s

just and appropriate and calls for no interference.

 

IN THE INCOME TAX APPELLATE TRIBUNAL

“C” BENCH : BANGALORE ITA Nos.1266 to 1271/Bang/2011

& 1475 TO 1486/Bang/2012

Assessment years : 2003-04 to 2008-09 Chief Electrical Inspector to

Government, The sum and substance of the grievance of the revenue is that the

CIT(Appeals) does not have the power to set aside the assessment and

refer the case back to the AO for making a fresh assessment. A question

may arise as to whether the order u/s. 201(1) of the Act can be said to be

an order of assessment so as to attract the provisions of section 251(1)(a)

of the Act. To As already stated, we are of the view that proceedings u/s.201(1) of

the Act cannot be said to be akin to proceedings for assessment in the

context of Sec.251(1)(a) of the Act. We also notice that Sec.246-A of the

Act which provides for what orders are appealable draws a distinction

between an order of assessment and an order u/s.201(1) of the Act. We

are of the view that the applicable provisions will be section 251(1)(c) of the

Act. In that view of the matter, we are of the opinion that the order of the

CIT(A) cannot be found fault with. The CIT(A) has also laid down the basis on which

the quantum of money in respect of which the Assessee should be treated

as an “Assessee in default”. What the AO has to do in the set aside

proceedings is merely calculation of the tax for which the respondent can

be treated as an “Assessee in default”. We are therefore of the view that

the provisions of section 251(1)(a) of the Act are not attracted and in any

event, the directions given by the CIT(A) cannot be equated with an order

setting aside the assessment and referring the case back to the AO for

making fresh assessment.

 

IN THE INCOME TAX APPELLATE TRIBUNAL,

BANGALORE BENCH ‘A’ ITA No.638/Bang/2012

(Asst. year 2008-2009) M/s Technoart Constructions

Pvt. Ltd17.05.2013Further, Rule 3(2)(m) of Karnataka Value Added Tax Rules permits

allowance of 30% towards labour and like charges in case of Works Contract as

permissible deduction even in a case where books of accounts are not maintained

or not reliable in arriving the taxable turnover under the said Act. In the instant case, the total expenditure claimed towards

labour/wages is Rs.4,27,42,817/- on a gross contract turnover of

Rs.19,00,15,348/-, which is below 30% of the labour and like charges permitted

as allowable in absence of books of accounts and supporting documents. The

assessee’s books of account were audited u/s 44AB of the I T Act. The

estimation of 10% for the purposes of disallowance is not made on any materials

or comparative cases or there is any evidence that expenditure is not genuine,

on the other hand, disallowance is made on adhoc basis. In the light of the

above reasoning, we hold that the Assessing Officer is not justified in

disallowing on an adhoc basis 10% of the total wages and the CIT(A) in

sustaining the same. Therefore, we reverse the orders of the Income Tax

authorities and direct that disallowance of 10% of total wages is uncalled for.

It is ordered accordingly.

 

HIGH COURT OF MADHYA PRADESH : JABALPURM/s Dolphin Builders (P) Ltd., M.A.I.T.No.13/2002 We have perused the the record, orders of the

Assessing Officer, Income Tax Commissioner, the ITAT

and we are in full agreement with the arguments

advanced on behalf of respondent assessee that no

prima facie evidence of passing any money from Goyal

Builders to assessee was proved and for the papers

seized from any other place i.e. Goyal Builders, assessee

cannot be held liable, so, the tribunal has committed no

erro 13. We have also perused the material in the matter

and find that there was no evidence in the matter that

the excess amount, if any, was collected by M/s Goyal

Builders or even if it was collected then it was passed on

to the respondent. There was no search, survey or

seizure of the premises of the assessee. Apart from this, the department had not examined any purchaser or flat

owner to verify the correctness of the aforesaid noting

that some higher amount was paid by the said

purchaser to M/s Goyal Builders or the fact that actual

price was much higher to the price which was recorded

in the account books. The Tribunal have also found that

if any amount was collected in excess to the agreed

price then M/s Goyal Builders could have been liable for

that and not the assessee. We find the aforesaid

reasoning of the Tribunal to be reasonable. Though

there may be some doubt about the price of the flats but

until and unless it could have been proved by some

evidence, aforesaid doubt cannot take place of proof.

Until and unless such noting is corroborated by some

material evidence, the Assessing Officer erred in making

addition in the income. In the present case audited accounts books

were maintained and there was no question of

disbelieving them in absence of any cogent eviden