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2021-07-08
Issue No. 238 / July 8th, 2021
Dear Professionals,
We are glad to present to you the 238th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Key Takeaways from Handpicked Rulings
1) HC: Appeals with low tax-effect falling under exceptions to CBDT Circular, maintainable - HC upholds ITAT’s order dismissing the Miscellaneous Applications (MA) filed by the Assessee u/s 254(2) holding that the tax effect involved in all the said appeals did not exceed Rs. 50 lacs in view of the CBDT Circular dt. August 8, 2021; Pr. CIT-petitioner challenged ITAT’s order and contended that the ITAT had committed gross error by not entertaining the MAs in view of the subsequent CBDT Circular No. 23/2019 dt. September 06, 2019 as well as the Office Memorandum (OM) No. 279 dt. September 16, 2019 both being clarificatory in nature and thus, applicable retrospectively; Also, Pr. CIT highlighted that the Circular No. 23/2019 dt. September 06, 2019 provided the cases involving organized tax evasion scam through bogus long term capital gain/ short term capital loss on penny stocks were not made subject to the monetary limits prescribed for filing the appeals; HC analyses the provisions of Sec. 254(2) and the relevant Circulars and OM and observes that the said Circulars and OM were not in existence at the time of passing of the order by the ITAT, thus, states it to not be a mistake apparent from the record as contemplated u/s 254(2); Further, HC observes that notwithstanding anything contained in any Circular, appeals may be filed on merits as the exception to the said Circular, where the Board by way of special order may direct filing of appeals on merits in cases involving organized tax evasion activity, irrespective of the monetary limits fixed in earlier cases, further that there is nothing to suggest in the said Circular / OM that they shall have retrospective effect; Thus, HC holds that the ITAT is right in interpreting the Circular along with the OM where the tax effect may be low but the appeal could still be filed on merits.......................C
2) HC: Normal procedure of refund adjustment u/s 140A not applicable to KVS - HC allows Assessee’s petition directing Revenue to adjust the refund amount for the year 1996-97 to the tax arrears instead of penalty and accordingly re-determine the amount payable u/s 90(1) of the Finance (No.2) Act, 1998 (Act); Assessee-Company, engaged in export of tobacco, filed declaration under Karvivad Samadhan Scheme (KVS), 1998 to determine whether the tax refund be adjusted towards arrears of the tax and then interest and penalty or vice-versa; Also, the Assessee withdrew the pending litigation as required under the scheme so as to determine the tax amount at a flat rate; On failure of Revenue authorities to determine the amount within 60 days from the date of receipt of declaration, the Assessee filed a writ petition which was disposed of despatching the Certificate of Intimation and determining the tax payable amount after adjusting the refund amount towards penalty first; HC observes that the said action by the Revenue of adjusting the amount with the penalty and not with arrears of tax is legally impermissible; Holds “…any payment or part payment of taxes should first be adjusted towards tax and balance towards interest was correctly adopted while determined the tax payable under KVS scheme”; Refers to Karnataka HC ruling in Mangilal S. Jian where in it was observed “…normal procedure followed under Sec.140A of the Income Tax Act to apply the amount paid by the assessee first towards interest and the balance towards the tax payable is not applicable to the provisions of the Finance (No.2) Act, 1998 and the KVS scheme thereof.”; Thus, HC allows the writ and directs the Revenue to adjust tax refund against tax arrears instead of penalty and determine the amount payable under KVS............... Click here to read and download HC Judgment
3) HC: ‘Reasons to believe’ is prima facie material available with AO, not legal evidence - HC dismisses the writ petition filed by the Assessee-petitioner against Revenue’s reassessment proceedings pertaining to transfer of a rural agricultural land for AY 2014-15, being sans substratum; Assessee had purchased a rural agricultural land which was sold during the AY and transferred 50% of the sale consideration to another person, recording the transaction in a registered agreement; Revenue, however treated the same to be urban agricultural land in its assessment order and contended that the Assessee herself has disclosed capital gains it her return of income on sale of land; HC denies Assessee’s observation that the reassessment proceedings in the present case are of a clear case of “change of opinion”; Refers to judicial precedents in case of Kelvinator India Ltd. and Tech. Spam India (P) Ltd. where it was held “…the phrase “reasons to believe” does not mean that the Assessing Officer should have ascertained the facts by legal evidence. All that is required is that the Assessing Officer should prima facie have some material on the basis of which there should be “reasons to believe” of certain income chargeable to tax escaping assessment”; HC observes that in the present case re-assessment proceeding has been initiated on the basis of material having direct bearing over the case of the Assessee which is based on the “reason to believe” recorded by the AO; Thus, HC finds that re-opening of the assessment proceeding was conducted on the basis of legally valid sanction accorded by the authority under provisions of Section 151, dismisses Writ of Assessee........... Click here to read and download HC Judgment
4) HC dismisses petition u/s 154 on Assessee’s failure to fulfil requirements of VsV Act - HC dismisses the petitions filed by the Assessee- A Japanese company, being devoid of merits; Assessee, engaged in execution of worldwide social-infrastructure projects and supervisory services in relation to erection, installation, etc, was asked by the Revenue for reconciliation of TDS amounts with that in Form 26AS; However, Revenue granted lesser credit of taxes and raised a demand; Assessee contended that the Revenue did not give the credit of the TDS in the relevant A.Ys 2015-16, 2016-17 and 2017-18, and wrongly withheld the said amount, thus leading to filing of rectification application u/s 154 which was rejected twice; Assessee then opted for DTVSV for AY 2016-17; HC observes that the Assessee failed to comply with Section 5(2) of the DTVSV Act wherein the applicant needs to pay the amount determined by the designated authority u/s 5(1) within 15 days of the date of receipt of the certificate; HC notes that Sec. 5(3) provides that every order passed u/s 5(1) determining the amount payable shall be conclusive and cannot be reopened in any other proceeding; Also the Assessee was required to withdraw the appeal pending before the CIT(A) on the issuance of certificate u/s 5(1) of the DTVSV Act, which again the Assessee failed to do so; Thus, HC opines that the Assessee having failed to comply with the mandatory requirements of the DTVSV Act, the present petitions cannot be entertained........ Click here to read and download HC Judgment
5) HC: Upholds reopening of assessment, finds Assessee under-assessed on income - HC dismisses WP filed by Assessee, upholds Revenue’s action to initiate reassessment proceedings u/s 147; Assessee-petitionerfiled 3 WP challenging the reassessment proceedings initiated by the Revenue with respect to claim of deduction u/s 80-IA; Assessee-company was engaged in provision of telecommunication services, and upon being granted the Licence by Dept. of Telecommunications, Government of India, started claiming deduction u/s 80IA from AY 2005-06; Return originally filed for the year was revised and Assessee claimed a deduction of Rs. 87.29 Cr. u/s 80IA, the assessment for AY 2006-07 was finalised with a refund of Rs. 1.41 Cr.; Revenue subsequently initiated reassessment proceedings, challenged by the Assessee through the writ petitions; Assessee contended that re-opening is based on change of opinion on the part of the Revenue, and is without jurisdiction since there are no new facts leading to issuance of impugned notice; Revenue contended that there being concrete material on record, it was a fit case for reassessment, and stated that Assessee has made an erroneous claim u/s 80-IA resulting in under assessment; HC notes that Revenue has addressed Assessee’s objections to re-opening adequately, stating their reasons to believe for the reassessment proceedings, the writs are liable to be dismissed; HC notes that section 147 covers under-assessment of income, notes that “High Court in a writ proceedings, cannot adjudicate all such disputed facts and circumstances raised between the parties. Disputed facts are to be adjudicated with reference to the documents, evidences and materials available on record and such an exercise is impermissible in a proceedings under Article 226 of the Constitution of India”; HC dismisses the writ petitions filed by the Assessee, states “the petitioner is at liberty to defend the case by availing the opportunities to be provided by the respondents as contemplated under the provisions of the Income Tax Act”..............Click here to read and download HC Judgment
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