ITR Volume 202 Part 6

ITR Volume 202 Part 6

AX REPORTS (ITR)--PRINT AND ONLINE EDITION

Appeal to Appellate Tribunal --Procedure--Additional evidence--Additional evidence on affidavit by assessee--Tribunal cannot consider such additional evidence--Income-tax (Appellate Tribunal) Rules, 1963, r. 29-- CIT v. Canara Housing Development Company(Karn) . . . 309

Business expenditure --Agreement to sell cement factory on 25-8-1999--Actual transfer in subsequent year--Agreement stipulating that title to assets should be perfected and lease agreement renewed--Expenditure in relation to transfer of plant and machinery deductible in assessment year 2002-03--Amount spent on maintenance of corporate office--Deductible--No evidence of payment of royalty--Royalty not deductible--Income-tax Act, 1961--Karnataka Instrade Corporation Ltd. v. Asst. CIT (Karn) . . . 295

Disallowance--Payments liable to deduction of tax at source--Non-resident--Commission paid to foreign agents--Non-resident agents procuring orders and following up payments with buyers for assessee--No contribution of any technical knowledge--Commission payments not for technical services--No deduction of tax at source required and disallowance not attracted--Income-tax Act, 1961, ss. 9(1)(vii), 40(a)(i)-- CIT v. Farida Leather Company(Mad) . . . 328

Co-operative society --Co-operative bank--Special deduction under section 80P--Special deduction not available for interest on income-tax refund--Income-tax Act, 1961, s. 80P--Rajkot Nagarik Sahakari Bank Ltd. v. Asst. CIT (Guj) . . . 337

Depreciation --Unabsorbed depreciation--Amounts written back in accounts and assessed as business income under section 41--Unabsorbed depreciation can be set off against such income--Income-tax Act, 1961, ss. 32, 41-- Karnataka Instrade Corporation Ltd. v. Asst. CIT(Karn) . . . 295

Interest --Deduction--Hundred per cent. export oriented undertaking--Interest accrued on temporarily surplus business funds deposited for short-term with bank--To be treated as profits of business of undertaking--Entitled to deduction--Income-tax Act, 1961, s. 10B--CIT v. Hindustan Gum and Chemicals Ltd. (Cal) . . . 323

Loss --Carry forward and set off--Amounts treated as business income under section 41--Losses carried forward can be set off against such income--Income-tax Act, 1961, s. 41--Karnataka Instrade Corporation Ltd. v. Asst. CIT (Karn) . . . 295

Penalty --Repayment of loan or deposit in excess of specified amount otherwise than by account payee cheque or account payee bank draft--Exemption from penalty in case of reasonable explanation for such payment--Repayments in excess of Rs. one crore--Finding that there were banking facilities available and there was no reasonable explanation for so many payments--Penalty can be levied--Income-tax Act, 1961, ss. 269T, 271B, 271E-- CITv. Canara Housing Development Company (Karn) . . . 309

Precedent --Binding nature of-- Yashovardhan Birla v. Deputy CIT (Bom) . . . 284

High Court--Decision binding on all authorities within State including Settlement Commission-- Yashovardhan Birla v. Deputy CIT (Bom) . . . 284

Settlement of cases --Condition precedent for application--Pendency of assessment proceedings--Assessment would be considered pending till service of assessment order upon assessee--Provisions of Chapter XIX-A can be invoked--Income-tax Act, 1961, s. 245D(1)-- Yashovardhan Birla v. Deputy CIT (Bom) . . . 284

Limitation--Abatement of proceedings--Period specified in section 245D for passing order mandatory--Order passed after expiry of period--Proceedings abate--Income-tax Act, 1961, ss. 245D, 245HA-- RNS Infrastructure Ltd. v. ITSC (Karn) . . . 262

Transfer of case --Scope of section 127--Transfer for purposes of centralisation of cases--Reasons for transfer recorded--Objection of assessee considered--Order of transfer valid--Income-tax Act, 1961, s. 127-- Dr. Monu Pattanayak v. Principal Chief CIT (Orissa) . . . 273

PRINT EDITIONITR Volume 394 : Part 4 (Issue dated : 12-6-2017)SUBJECT INDEX TO CASES REPORTED IN

THIS PARTSUPREME COURT

Heads of income --Income from house property or business income--Letting of property--Whether business activity--To be determined on facts--Clause in objects of assessee not conclusive --Assessee must show that its entire income or a substantial part thereof was from letting of property which was its principal business activity--Objects clause in partnership deed to take premises on rent and to sub-let them--Assessee “deemed ownerâ€--Finding of Tribunal that assessee had not established that it was engaged in systematic or organised activity of providing service to occupiers of shops--Receipts from sub-licensees not business income but to be treated as income from house property--Income-tax Act, 1961, ss. 14, 22, 27(iiib), 269UA(f)-- Raj Dadarkar and Associates v. Asst. CIT . . . 592

HIGH COURTS

Appeal to Appellate Tribunal --Appeal to Commissioner (Appeals)--Powers of Tribunal--Condition precedent for appealing to Commissioner (Appeals)--Payment of taxes due--Tax not paid on date of appeal--Appeal dismissed--Subsequent payment of tax--Tribunal directing Commissioner (Appeals) to hear appeal--Justified--Income-tax Act, 1961, s. 254-- Principal CIT v. Abdul Zahid M. (Karn) . . . 727

Powers of Tribunal--Tribunal can grant refund--Income-tax Act, 1961, s. 254-- Kalindee Rail Nirman (Engineers) Ltd. v. CIT (Raj) . . . 684

Search and seizure--Proceedings pursuant to search conducted during pendency of appeal not brought to notice of Appellate Tribunal--Order of Appellate Tribunal without considering developments to be set aside--Matter remitted to Appellate Tribunal--Income-tax Act, 1961, ss. 132, 133A, 143(3), 153A-- Skyline Builders v. CIT (Ker) . . . 768

Business --Business income--Remission or cessation of trading liability--Burden on Department to prove such cessation--Finding by Tribunal that burden had not been discharged--Addition to income under section 41(1) not justified--Income-tax Act, 1961, s. 41-- Principal CIT v. Ramgopal Minerals (Karn) . . . 696

Capital gains --Exemption--Investment of gains in residential house--Assessee getting more than one residential house in several blocks--All flats product of one development agreement of same piece of land--Flats located in same address--Assessee entitled to benefit under section 54F--Income-tax Act, 1961, s. 54F-- CIT v. Gumanmal Jain (Mad) . . . 666

Transfer--Relinquishment of life interest in property--Not gift in absence of transfer by releaser to assessee--No acquisition of capital assets by way of gift--Income-tax Act, 1961, s. 49(1)(ii)--Gift-tax Act, 1958, s. 4(1)(c), (d), (e)-- Nusli N. Wadia v. CIT (Bom) . . . 638

Cash credits --Issue of shares at premium--Three essential tests--Genuineness of transactions, identity, and capacity of investors--Tests satisfied--Amendment requiring share applicant to explain source of moneys--Not to be given retrospective effect--Income-tax Act, 1961, s. 68-- CIT v. Gagandeep Infrastructure Pvt. Ltd. (Bom) . . . 680

Charitable purposes --Depreciation--Application of income in acquisition of capital asset--Provision barring allowance of depreciation on such asset prospective--Depreciation on assets allowable for earlier period--Income-tax Act, 1961, s. 11(1), (6)-- CIT (Exemption) v. Seth Anandram Jaipuria Education Society (All) . . . 712

Expenditure incurred on payment of scholarship--Payment of scholarship for advancement of higher technical education to deserving students--Expenditure allowable--Income-tax Act, 1961-- CIT (Exemption) v. Seth Anandram Jaipuria Education Society (All) . . . 712

Hotel business --Special deduction--Condition precedent--Claim must be made in return--Assessee’s claim to deduction under section 80-IB(7)(a) denied for want of approval by prescribed authority but deduction allowed of lower sum under clause (b)--Not a case where no claim made in return to deduction under section 80-IB(7)--Assessee cannot be denied deduction--Income-tax Act, 1961, ss. 80A, 80-IB(7)-- Shrikar Hotels Pvt. Ltd. v. CIT (All) . . . 657

Special deduction--Grant of approval--Application by assessee for approval pending decision with Director General (Exemptions)--Benefit cannot be denied for inaction of prescribed authority--Denial of deduction erroneous--Income-tax Act, 1961, s. 80-IB(7)(a)--Shrikar Hotels Pvt. Ltd. v. CIT (All) . . . 657

Income --Business income--Remission or cessation of trading liability--Conditions precedent for application of section 41--Cessation of liability and benefit to assessee--Mere inability to prove credit not sufficient--Section 41 not applicable--Income-tax Act, 1961, s. 41-- CIT v. Alvares and Thomas (Karn) . . . 647

Income-tax --General Principles--Taxation only in accordance with law-- Kalindee Rail Nirman (Engineers) Ltd. v. CIT (Raj) . . . 684

Income from other sources --Cash credits--Exemption in respect of remittances received from abroad from relative--Burden of proof--Failure to establish genuineness and creditworthiness of donor--Receipts taxable as income--Income-tax Act, 1961, ss. 56(2), 68-- Sunil Thomas v. ITO (Ker) . . . 619

Legislative powers --Parliament--Discrimination--Provisions mandating claim to deductions with respect to profits of export oriented unit to be made in return within time stipulated under section 139(1)--Not arbitrary, discriminatory, unreasonable or violative of article 14--Claim to deduction under section 10B(1) made in return filed belatedly--Relief cannot be granted--Income-tax Act, 1961, ss. 10B(1), 80A(5), 139(1), 139(4)--Constitution of India, arts. 14, 226-- Nath Brothers Exim International Ltd. v. Union of India (Delhi) . . . 577

Offences and prosecution --Compounding of offences--No limitation period for application for compounding--Application cannot be rejected on ground that application not accompanied by compounding fee or that compounding fee not paid prior to application being considered on merits--Chief Commissioner directed to consider afresh assessee’s application for compounding of offence--Income-tax Act, 1961, s. 279-- Vikram Singh v. Union of India(Delhi) . . . 746

Reassessment --Condition precedent--New material--Income-tax Act, 1961, ss. 147, 148--Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

Income escaping assessment--Undisclosed investment--Addition on account of unexplained investment in building--Assessee not establishing creditworthiness of creditors but only identity of creditors--Findings of fact by Appellate Tribunal based on appraisal of evidence--No infirmity--Income-tax Act, 1961, s. 69-- Dr. Chhangur Rai v. CIT (All) . . . 611

Income escaping assessment--Undisclosed investment--Assessee’s failure to file returns for years during which investments made showing corresponding income--Additions made by Assessing Officer based on District Valuation Officer’s report--Reassessment proceedings valid and proper--Income-tax Act, 1961, ss. 69, 147, 148-- Dr. Chhangur Rai v. CIT (All) . . . 611

Notice--Validity--Assessing Officer passing reassessment order without disposing objection raised by assessee against notice--Reassessment order not valid--Income-tax Act, 1961, ss. 147, 148-- Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

Scope of--Power of Assessing Officer to consider other income not mentioned in reasons recorded--Only if income mentioned in reasons forms part of reassessed income--Income-tax Act, 1961, ss. 147, 148-- Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

Recovery of tax --Writ--Locus standi--Assessment of earlier year, initiation of proceedings and conclusion in name of non-resident assessee--State Government with which non-resident entered into contract not party to earlier proceedings--Not entitled to seek rectification of order of Tribunal or file writ petition--For consistency of law parties should be continuously joined all throughout proceedings--Income-tax Act, 1961-- Chief Engineer I D and R Irrigation Department v. Asst. CIT (Raj) . . . 720

Search and seizure --Assessment in search cases--Assessment of third party--Condition precedent--Recording of satisfaction by Assessing Officer that seized material or cash belonged to third party--Search in premises of director of assessee-company and seizure of cash--Statement made by director in course of search that part of seized cash belonged to assessee--Constitutes material under section 132(4)--Satisfaction sufficient under section 153C--Income-tax Act, 1961, ss. 132, 132(4), 153A, 153C-- Principal CIT v. Nau Nidh Overseas Pvt. Ltd. (Delhi) . . . 753

Assessment in search cases--Assessment of third party--Document seized whether belonging to third party assessee--Person in respect of whom search conducted denying that document pertained to assessee--Finding of fact--No material to contradict brought by Department--Pre-condition not fulfilled--Provisions of section 153C not attracted--Income-tax Act, 1961, ss. 132, 153A, 153C-- Principal CIT v. Vinita Chaurasia (Delhi) . . . 758

Assessment of third party--Burden of proof--Source of seized document--Person in respect of whom search conducted stating that document was proposal given by broker--Duty of Department to ascertain truth of document investigating further--Additions made to assessee’s income based on conjectures--Unsustainable--Income-tax Act, 1961, ss. 132, 153A, 153C-- Principal CIT v. Vinita Chaurasia (Delhi) . . . 758

Settlement of cases --Abatement of proceedings--Effect--Proceedings before Assessing Officer revive on date of abatement of assessee’s application--Assessing Officer bound to pass fresh orders disposing of assessment proceedings in accordance with law--Assessing Officer not right in treating earlier assessment order as valid and serving demand notice--Earlier assessment order and proceedings for recovery of demand to be set aside--Income-tax Act, 1961, s. 245HA(2)-- Chain Roop Bhansali v. Union of India (Delhi) . . . 703

Transfer of case --Transfer of cases due to re-structuring of Department--Administrative convenience for equitable distribution of work--Order communicated to assessees--Assessees given option to be heard at camp court--No prejudice caused to interest of assessees--Income-tax Act, 1961, s. 127(2)-- Swayamstuti Pattanayak v. Principal Chief CIT (Orissa) . . . 627

Words and phrases --â€Relativeâ€--Term as explained in Explanation to proviso of section 56(2) of 1961 Act-- Sunil Thomas v. ITO (Ker) . . . 619

Writ --Existence of alternative remedy--Does not exclude power of court to entertain writ petition when challenge raised on ground of absence of jurisdiction or breach of principles of natural justice--Constitution of India, art. 226--Income-tax Act, 1961, ss. 147, 148-- Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :Art. 14 --Legislative powers--Parliament--Discrimination--Provisions mandating claim to deductions with respect to profits of export oriented unit to be made in return within time stipulated under section 139(1)--Not arbitrary, discriminatory, unreasonable or violative of article 14--Claim to deduction under section 10B(1) made in return filed belatedly--Relief cannot be granted-- Nath Brothers Exim International Ltd. v. Union of India (Delhi) . . . 577

Art. 226 --Legislative powers--Parliament--Discrimination--Provisions mandating claim to deductions with respect to profits of export oriented unit to be made in return within time stipulated under section 139(1)--Not arbitrary, discriminatory, unreasonable or violative of article 14--Claim to deduction under section 10B(1) made in return filed belatedly--Relief cannot be granted-- Nath Brothers Exim International Ltd. v. Union of India (Delhi) . . . 577

Writ--Existence of alternative remedy--Does not exclude power of court to entertain writ petition when challenge raised on ground of absence of jurisdiction or breach of principles of natural justice-- Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

Gift-tax Act, 1958 :S. 4(1)(c), (d), (e) --Capital gains--Transfer--Relinquishment of life interest in property--Not gift in absence of transfer by releaser to assessee--No acquisition of capital assets by way of gift-- Nusli N. Wadia v. CIT (Bom) . . . 638

Income-tax Act, 1961 :S. 10B(1) --Legislative powers--Parliament--Discrimination--Provisions mandating claim to deductions with respect to profits of export oriented unit to be made in return within time stipulated under section 139(1)--Not arbitrary, discriminatory, unreasonable or violative of article 14--Claim to deduction under section 10B(1) made in return filed belatedly--Relief cannot be granted-- Nath Brothers Exim International Ltd. v. Union of India (Delhi) . . . 577

S. 11(1), (6) --Charitable purposes--Depreciation--Application of income in acquisition of capital asset--Provision barring allowance of depreciation on such asset prospective--Depreciation on assets allowable for earlier period-- CIT (Exemption) v. Seth Anandram Jaipuria Education Society (All) . . . 712

S. 14 --Heads of income--Income from house property or business income--Letting of property--Whether business activity--To be determined on facts--Clause in objects of assessee not conclusive --Assessee must show that its entire income or a substantial part thereof was from letting of property which was its principal business activity--Objects clause in partnership deed to take premises on rent and to sub-let them--Assessee “deemed ownerâ€--Finding of Tribunal that assessee had not established that it was engaged in systematic or organised activity of providing service to occupiers of shops--Receipts from sub-licensees not business income but to be treated as income from house property-- Raj Dadarkar and Associates v. Asst. CIT (SC) . . . 592

S. 22 --Heads of income--Income from house property or business income--Letting of property--Whether business activity--To be determined on facts--Clause in objects of assessee not conclusive --Assessee must show that its entire income or a substantial part thereof was from letting of property which was its principal business activity--Objects clause in partnership deed to take premises on rent and to sub-let them--Assessee “deemed ownerâ€--Finding of Tribunal that assessee had not established that it was engaged in systematic or organised activity of providing service to occupiers of shops--Receipts from sub-licensees not business income but to be treated as income from house property-- Raj Dadarkar and Associates v. Asst. CIT (SC) . . . 592

S. 27(iiib) --Heads of income--Income from house property or business income--Letting of property--Whether business activity--To be determined on facts--Clause in objects of assessee not conclusive --Assessee must show that its entire income or a substantial part thereof was from letting of property which was its principal business activity--Objects clause in partnership deed to take premises on rent and to sub-let them--Assessee “deemed ownerâ€--Finding of Tribunal that assessee had not established that it was engaged in systematic or organised activity of providing service to occupiers of shops--Receipts from sub-licensees not business income but to be treated as income from house property-- Raj Dadarkar and Associates v. Asst. CIT (SC) . . . 592

S. 41 --Business--Business income--Remission or cessation of trading liability--Burden on Department to prove such cessation--Finding by Tribunal that burden had not been discharged--Addition to income under section 41(1) not justified-- Principal CIT v. Ramgopal Minerals (Karn) . . . 696

Income--Business income--Remission or cessation of trading liability--Conditions precedent for application of section 41--Cessation of liability and benefit to assessee--Mere inability to prove credit not sufficient--Section 41 not applicable-- CIT v. Alvares and Thomas(Karn) . . . 647

S. 49(1)(ii) --Capital gains--Transfer--Relinquishment of life interest in property--Not gift in absence of transfer by releaser to assessee--No acquisition of capital assets by way of gift--Nusli N. Wadia v. CIT (Bom) . . . 638

S. 54F --Capital gains--Exemption--Investment of gains in residential house--Assessee getting more than one residential house in several blocks--All flats product of one development agreement of same piece of land--Flats located in same address--Assessee entitled to benefit under section 54F-- CIT v. Gumanmal Jain (Mad) . . . 666

S. 56(2) --Income from other sources--Cash credits--Exemption in respect of remittances received from abroad from relative--Burden of proof--Failure to establish genuineness and creditworthiness of donor--Receipts taxable as income-- Sunil Thomas v. ITO (Ker) . . . 619

S. 68 --Cash credits--Issue of shares at premium--Three essential tests--Genuineness of transactions, identity, and capacity of investors--Tests satisfied--Amendment requiring share applicant to explain source of moneys--Not to be given retrospective effect-- CIT v. Gagandeep Infrastructure Pvt. Ltd. (Bom) . . . 680

Income from other sources--Cash credits--Exemption in respect of remittances received from abroad from relative--Burden of proof--Failure to establish genuineness and creditworthiness of donor--Receipts taxable as income-- Sunil Thomas v. ITO (Ker) . . . 619

S. 69 --Reassessment--Income escaping assessment--Undisclosed investment--Addition on account of unexplained investment in building--Assessee not establishing creditworthiness of creditors but only identity of creditors--Findings of fact by Appellate Tribunal based on appraisal of evidence--No infirmity-- Dr. Chhangur Rai v. CIT (All) . . . 611

Reassessment--Income escaping assessment--Undisclosed investment--Assessee’s failure to file returns for years during which investments made showing corresponding income--Additions made by Assessing Officer based on District Valuation Officer’s report--Reassessment proceedings valid and proper-- Dr. Chhangur Rai v. CIT(All) . . . 611

S. 80A --Hotel business--Special deduction--Condition precedent--Claim must be made in return--Assessee’s claim to deduction under section 80-IB(7)(a) denied for want of approval by prescribed authority but deduction allowed of lower sum under clause (b)--Not a case where no claim made in return to deduction under section 80-IB(7)--Assessee cannot be denied deduction-- Shrikar Hotels Pvt. Ltd. v. CIT (All) . . . 657

S. 80A(5) --Legislative powers--Parliament--Discrimination--Provisions mandating claim to deductions with respect to profits of export oriented unit to be made in return within time stipulated under section 139(1)--Not arbitrary, discriminatory, unreasonable or violative of article 14--Claim to deduction under section 10B(1) made in return filed belatedly--Relief cannot be granted-- Nath Brothers Exim International Ltd. v. Union of India (Delhi) . . . 577

S. 80-IB(7) --Hotel business--Special deduction--Condition precedent--Claim must be made in return--Assessee’s claim to deduction under section 80-IB(7)(a) denied for want of approval by prescribed authority but deduction allowed of lower sum under clause (b)--Not a case where no claim made in return to deduction under section 80-IB(7)--Assessee cannot be denied deduction-- Shrikar Hotels Pvt. Ltd. v. CIT (All) . . . 657

S. 80-IB(7)(a) --Hotel business--Special deduction--Grant of approval--Application by assessee for approval pending decision with Director General (Exemptions)--Benefit cannot be denied for inaction of prescribed authority--Denial of deduction erroneous-- Shrikar Hotels Pvt. Ltd. v. CIT (All) . . . 657

S. 127(2) --Transfer of case--Transfer of cases due to re-structuring of Department--Administrative convenience for equitable distribution of work--Order communicated to assessees--Assessees given option to be heard at camp court--No prejudice caused to interest of assessees-- Swayamstuti Pattanayak v. Principal Chief CIT (Orissa) . . . 627

S. 132 --Appeal to Appellate Tribunal--Search and seizure--Proceedings pursuant to search conducted during pendency of appeal not brought to notice of Appellate Tribunal--Order of Appellate Tribunal without considering developments to be set aside--Matter remitted to Appellate Tribunal-- Skyline Builders v. CIT (Ker) . . . 768

Search and seizure--Assessment in search cases--Assessment of third party--Condition precedent--Recording of satisfaction by Assessing Officer that seized material or cash belonged to third party--Search in premises of director of assessee-company and seizure of cash--Statement made by director in course of search that part of seized cash belonged to assessee--Constitutes material under section 132(4)--Satisfaction sufficient under section 153C-- Principal CIT v. Nau Nidh Overseas Pvt. Ltd. (Delhi) . . . 753

Search and seizure--Assessment in search cases--Assessment of third party--Document seized whether belonging to third party assessee--Person in respect of whom search conducted denying that document pertained to assessee--Finding of fact--No material to contradict brought by Department--Pre-condition not fulfilled--Provisions of section 153C not attracted-- Principal CIT v. Vinita Chaurasia (Delhi) . . . 758

Search and seizure--Assessment of third party--Burden of proof--Source of seized document--Person in respect of whom search conducted stating that document was proposal given by broker--Duty of Department to ascertain truth of document investigating further--Additions made to assessee’s income based on conjectures--Unsustainable--Principal CIT v. Vinita Chaurasia (Delhi) . . . 758

S. 132(4) --Search and seizure--Assessment in search cases--Assessment of third party--Condition precedent--Recording of satisfaction by Assessing Officer that seized material or cash belonged to third party--Search in premises of director of assessee-company and seizure of cash--Statement made by director in course of search that part of seized cash belonged to assessee--Constitutes material under section 132(4)--Satisfaction sufficient under section 153C-- Principal CIT v. Nau Nidh Overseas Pvt. Ltd. (Delhi) . . . 753

S. 133A --Appeal to Appellate Tribunal--Search and seizure--Proceedings pursuant to search conducted during pendency of appeal not brought to notice of Appellate Tribunal--Order of Appellate Tribunal without considering developments to be set aside--Matter remitted to Appellate Tribunal-- Skyline Builders v. CIT (Ker) . . . 768

S. 139(1) --Legislative powers--Parliament--Discrimination--Provisions mandating claim to deductions with respect to profits of export oriented unit to be made in return within time stipulated under section 139(1)--Not arbitrary, discriminatory, unreasonable or violative of article 14--Claim to deduction under section 10B(1) made in return filed belatedly--Relief cannot be granted-- Nath Brothers Exim International Ltd. v. Union of India (Delhi) . . . 577

S. 139(4) --Legislative powers--Parliament--Discrimination--Provisions mandating claim to deductions with respect to profits of export oriented unit to be made in return within time stipulated under section 139(1)--Not arbitrary, discriminatory, unreasonable or violative of article 14--Claim to deduction under section 10B(1) made in return filed belatedly--Relief cannot be granted-- Nath Brothers Exim International Ltd. v. Union of India (Delhi) . . . 577

S. 143(3) --Appeal to Appellate Tribunal--Search and seizure--Proceedings pursuant to search conducted during pendency of appeal not brought to notice of Appellate Tribunal--Order of Appellate Tribunal without considering developments to be set aside--Matter remitted to Appellate Tribunal-- Skyline Builders v. CIT (Ker) . . . 768

S. 147 --Reassessment--Condition precedent--New material-- Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

Reassessment--Income escaping assessment--Undisclosed investment--Assessee’s failure to file returns for years during which investments made showing corresponding income--Additions made by Assessing Officer based on District Valuation Officer’s report--Reassessment proceedings valid and proper-- Dr. Chhangur Rai v. CIT(All) . . . 611

Reassessment--Notice--Validity--Assessing Officer passing reassessment order without disposing objection raised by assessee against notice--Reassessment order not valid--Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

Reassessment--Scope of--Power of Assessing Officer to consider other income not mentioned in reasons recorded--Only if income mentioned in reasons forms part of reassessed income-- Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

Writ--Existence of alternative remedy--Does not exclude power of court to entertain writ petition when challenge raised on ground of absence of jurisdiction or breach of principles of natural justice-- Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

S. 148 --Reassessment--Condition precedent--New material-- Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

Reassessment--Income escaping assessment--Undisclosed investment--Assessee’s failure to file returns for years during which investments made showing corresponding income--Additions made by Assessing Officer based on District Valuation Officer’s report--Reassessment proceedings valid and proper-- Dr. Chhangur Rai v. CIT(All) . . . 611

Reassessment--Notice--Validity--Assessing Officer passing reassessment order without disposing objection raised by assessee against notice--Reassessment order not valid--Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

Reassessment--Scope of--Power of Assessing Officer to consider other income not mentioned in reasons recorded--Only if income mentioned in reasons forms part of reassessed income-- Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

Writ--Existence of alternative remedy--Does not exclude power of court to entertain writ petition when challenge raised on ground of absence of jurisdiction or breach of principles of natural justice-- Martech Peripherals P. Ltd. v. Deputy CIT (Mad) . . . 733

S. 153A --Appeal to Appellate Tribunal--Search and seizure--Proceedings pursuant to search conducted during pendency of appeal not brought to notice of Appellate Tribunal--Order of Appellate Tribunal without considering developments to be set aside--Matter remitted to Appellate Tribunal-- Skyline Builders v. CIT (Ker) . . . 768

Search and seizure--Assessment in search cases--Assessment of third party--Condition precedent--Recording of satisfaction by Assessing Officer that seized material or cash belonged to third party--Search in premises of director of assessee-company and seizure of cash--Statement made by director in course of search that part of seized cash belonged to assessee--Constitutes material under section 132(4)--Satisfaction sufficient under section 153C-- Principal CIT v. Nau Nidh Overseas Pvt. Ltd. (Delhi) . . . 753

Search and seizure--Assessment in search cases--Assessment of third party--Document seized whether belonging to third party assessee--Person in respect of whom search conducted denying that document pertained to assessee--Finding of fact--No material to contradict brought by Department--Pre-condition not fulfilled--Provisions of section 153C not attracted-- Principal CIT v. Vinita Chaurasia (Delhi) . . . 758

Search and seizure--Assessment of third party--Burden of proof--Source of seized document--Person in respect of whom search conducted stating that document was proposal given by broker--Duty of Department to ascertain truth of document investigating further--Additions made to assessee’s income based on conjectures--Unsustainable--Principal CIT v. Vinita Chaurasia (Delhi) . . . 758

S. 153C --Search and seizure--Assessment in search cases--Assessment of third party--Condition precedent--Recording of satisfaction by Assessing Officer that seized material or cash belonged to third party--Search in premises of director of assessee-company and seizure of cash--Statement made by director in course of search that part of seized cash belonged to assessee--Constitutes material under section 132(4)--Satisfaction sufficient under section 153C-- Principal CIT v. Nau Nidh Overseas Pvt. Ltd. (Delhi) . . . 753

Search and seizure--Assessment in search cases--Assessment of third party--Document seized whether belonging to third party assessee--Person in respect of whom search conducted denying that document pertained to assessee--Finding of fact--No material to contradict brought by Department--Pre-condition not fulfilled--Provisions of section 153C not attracted-- Principal CIT v. Vinita Chaurasia (Delhi) . . . 758

Search and seizure--Assessment of third party--Burden of proof--Source of seized document--Person in respect of whom search conducted stating that document was proposal given by broker--Duty of Department to ascertain truth of document investigating further--Additions made to assessee’s income based on conjectures--Unsustainable--Principal CIT v. Vinita Chaurasia (Delhi) . . . 758

S. 245HA(2) --Settlement of cases--Abatement of proceedings--Effect--Proceedings before Assessing Officer revive on date of abatement of assessee’s application--Assessing Officer bound to pass fresh orders disposing of assessment proceedings in accordance with law--Assessing Officer not right in treating earlier assessment order as valid and serving demand notice--Earlier assessment order and proceedings for recovery of demand to be set aside-- Chain Roop Bhansali v. Union of India (Delhi) . . . 703

S. 254 --Appeal to Appellate Tribunal--Appeal to Commissioner (Appeals)--Powers of Tribunal--Condition precedent for appeal to Commissioner (Appeals)--Payment of taxes due--Tax not paid on date of appeal--Appeal dismissed--Subsequent payment of tax--Tribunal directing Commissioner (Appeals) to hear appeal--Justified-- Principal CIT v. Abdul Zahid M.(Karn) . . . 727

Appeal to Appellate Tribunal--Powers of Tribunal--Tribunal can grant refund-- Kalindee Rail Nirman (Engineers) Ltd. v. CIT (Raj) . . . 684

S. 269UA(f) --Heads of income--Income from house property or business income--Letting of property--Whether business activity--To be determined on facts--Clause in objects of assessee not conclusive --Assessee must show that its entire income or a substantial part thereof was from letting of property which was its principal business activity--Objects clause in partnership deed to take premises on rent and to sub-let them--Assessee “deemed ownerâ€--Finding of Tribunal that assessee had not established that it was engaged in systematic or organised activity of providing service to occupiers of shops--Receipts from sub-licensees not business income but to be treated as income from house property-- Raj Dadarkar and Associates v. Asst. CIT (SC) . . . 592

S. 279 --Offences and prosecution--Compounding of offences--No limitation period for application for compounding--Application cannot be rejected on ground that application not accompanied by compounding fee or that compounding fee not paid prior to application being considered on merits--Chief Commissioner directed to consider afresh assessee’s application for compounding of offence-- Vikram Singh v. Union of India (Delhi) . . . 746

TAXABILITY OF RECOVERY AGENT'S SERVICES

 

TAXABILITY OF RECOVERY AGENT'S SERVICES

Service tax had been imposed on recovery agent's services by the Finance Act, 2006 with effect from 1st May, 2006 vide Notification No. 15/2006-ST dated 25.4.2006. The gross amount charged by recovery agent to a person in relation to recovery services is chargeable to service tax.

Meaning of Recovery Agent

Recovery agent has not been defined but it would cover recovery agents or enforcement agencies under Securities and Reconstruction of Financial Assets and Enforcement of Security Act, 2002. Under this Act, and rules made thereunder, banks and other financial institutions appoint recovery agents.

For the purpose of service tax, recovery shall be of any sums due to the service receiver and nothing else (asset or other property).

To recover means to find or regain possession of, regain control of, regain or secure by any of a legal process, to get again. Recovery means the action of regaining or securing money lost or spent by means of a legal process or subsequent profits, debts recovery. Recovery means a thing secured by a process of law, the actual possession of any thing, or its value, by judgment of a legal tribunal, the obtaining of a thing as a result of an action brought for the purpose.

Taxable Service

Section 65(105)(zzzl) defines taxable service as under —

Taxable service means services provided to a banking company or a financial institution including a non-banking financial company or any other body corporate or a firm, by any person, in relation to recovery of any sums due to such banking company or financial institution, including a non-banking financial company, or any other body corporate or a firm, in any manner.

The services provided for recovery of any sums due to a commercial or business entity are covered as taxable service.

The taxable services could be provided to any of the following –

(a) a banking company

(b) a financial institution

(c) a non-banking financial company (NBFC)

(d) any body corporate, or

(e) a firm

To be a taxable service, following ingredients should be satisfied —

(a) the activity should result in provision of service.

(b) service provider i.e., recovery agent can be any person.

(c) the service should be provided to specified persons only i.e., bank, financial institution, NBFC, body corporate or firms.

(d) service provided or to be provided should be in relation to recovery of any sums due to such persons.

(e) service may be provided in any manner by recovery agent.

The services provided to an individual or person or HUF are not taxable services. The services of recovery agent should be for recovery of any sums due to such service receiver and it appears that recovery of assets or property or goods is not covered but such assets if offered as security against any sums due shall be covered under taxable services. For example, recovery of a vehicle or machinery which has been financed by way of a loan or hire purchase would be a taxable service but recovery of a stolen vehicle or machinery does not fall under the definition. The taxable service can be provided in any manner.

CBEC has vide Circular No. 334/4/2006-TRU, dated 28-2-2006 clarified as under —

"Services provided for recovery of any sums due to a commercial or business entity are covered under this category. Under Securities and Reconstruction of Financial Assets and Enforcement of Security Act, 2002 and the relevant rules made there under, banks and other financial institutions appoint recovery agents."

Person Liable

Recovery agency providing recovery agent's services shall be person liable and treated as an assessee for service tax purposes.

= = = = = = = = =

By: Dr. Sanjiv Agarwal
Dated: - December 20, 2011

143[2] :- Issue of notice is equivalent to its service

 

V.R.A. Cotton Mills (P) Ltd vs. UOI (P&H High Court)

March, 02nd 2012
S. 143(2): Issue of notice is equivalent to its service

In respect of AY 2009-10, the assessee filed a ROI on 29.09.2009. The last date for service of the s. 143(2) notice was 30.09.2010. A notice u/s 143 (2) was served by affixation at 11.20 pm on 30.09.2010. The assessee filed a Writ Petition claiming that u/s 282 (1), a notice or requisition had to be served either by post or as if it was a summons issued by a Court under the CPC and that service by affixture was invalid. The assessee relied on CIT vs. AVI-OIL India 323 ITR 242 (P&H) where it was held that a notice u/s 143(2) had not only to be issued, but had to be served before the expiry of 12 months (now 6M) from the end of the month in which the return was furnished. Hotel Blue Moon 321 ITR 362 (SC) was relied upon to contend that in the absence of a s. 143(2) notice, the assessment was invalid. HELD dismissing the Petition:

S. 143(2) (ii) provides that no notice shall be served on the assessee after the expiry of six months. The question is that what is the meaning of expression served? Is it used literally, so as to mean actual physical receipt of notice by the addressee or the expression served is inter changeable with the word issue. We are of the opinion that the expressions serve and issue are interchangeable. In view of the law laid down in several judgments, the date of receipt of notice by the addressee is not relevant to determine, as to whether the notice has been issued within the prescribed period of limitation. The expression serve means the date of issue of notice. The date of receipt of notice cannot be left to be undetermined dependent upon the will of the addressee. Therefore, to bring certainly and to avoid attempts of the addressee to evade the process of receipt of notice, the purpose of the statute will be better served, if the date of issue of notice is considered as compliance of the requirement of proviso to s. 143(2) of the Act. In fact that is the only conclusion that can be arrived at to the expression serve in s. 143(2). In AVI-OIL India 323 ITR 242 (P&H), a literal meaning of the term service was taken in ignorance of the binding precedents. It does not lay down any binding principle and is per incuriam.

LEGAL WORDS AND PHRASES part I

 

LEGAL WORDS AND PHRASES part I

A fortiori:

With stronger reason"-" The Latin phrase argumentum a fortiori denotes "argument `from stronger reason." For example, if it has been established that a person is deceased, then one can, with equal or greater certainty, argue that the person is not alive and he is not breathing.

Ab initio

From the beginning or commencement. We use this term when any process is claimed to be or found to be invalid since commencement of proceeding for example initiation of reassessment proceedings is invalid and void ab initio..

Accord and satisfaction

Agreement for release from an obligation contracted earlier, for some valuable consideration, without the performance of the original contract or discharge of original obligation itself. For example, receiving damages in lieu of performance of an agreement or accepting some alternate satisfaction.

Act of God

An event arising from totally natural causes where there is no contribution (or hardly any indirect contribution) of human being.

Ad hoc

"For this purpose" or "for that". It generally signifies a solution designed for a specific problem or task, non-generalizable, and not intended to be able to be adapted to other purposes. Some ad hoc arrangements.

The term is also used for estimated/ provisional allowances or grants and disallowances etc.,

Ad hoc is also used to mean makeshift solutions, shifting contexts to create new meanings, inadequate planning, or improvised events.

Ad idem

Of the same mind.

meeting of the minds. When two parties to an agreement (contract) both have the same understanding of the terms of the agreement. Such mutual understanding.

Ad valorem

According to the value.

Adverse possession

Occupation of land contrary to the rights of the legal owner.

Affidavit

A written statement of facts by a person who has sworn to, or affirmed, the truth of those facts.

Alibi

"Elsewhere": a defence by an accused person to the effect that he was elsewhere when the offence was committed.

An alibi is a type of defense found in legal proceedings by demonstrating that the defendant was not in the place where an alleged offense was committed.

All fours

When a pleader claims that his case is "on all fours" with another case referred to or relied on by him, he means that his case is wholly analogous or similar to the other case. Indicating that the facts and legal position is similar to other judgment relied on.

Allocatur

"Cost is allowed" or it is granted. The certificate of the court of the amount of costs which one party is allowed to recover from another. An allocatur is usually issued after the fixation of the successful party's costs, or after the parties have agreed the amount of the costs or when the court allows costs.

Amicus curiae

A friend of the court": someone, not a party to the proceedings, who appears before the court to assist the court in some way.

An advocate appointed by the court to assist the court in relation to any case.

Animus revocandi

"Intention of revoking", e.g. intention to revoke guarantee or agreement.

Animus testandi

"Intention of making a will".

Approbate and reprobate

Leal or other attempt to claim the benefit of an agreement on one hand and also attempt to avoid the obligations imposed by that agreement or obligations which can be inferred under the agreement.

arguendo in the course of argument, for the sake of argument.

Arms length

Parties not in close relationship or not in a relationship which is likely to affect the terms and conditions more favorably in comparison to market terms and conditions applicable to unrelated aprteis.

Parties are at arms length when they have no relationship to each other which would give rise to any special duty or obligation to each other, or grant special concession or impose extra duties on nay of party other than the normal legal arrangement to which they are parties.

Attest

To witness any act or event, for example, the signature of a will or to attest contents of any document with original or to be true.

Attestation:

An act of attesting signature or content of any document etc.

Autrefois acquit

Formerly acquitted: a defence in criminal proceedings, to the effect that the accused has previously been tried for the same offence and acquitted.

Autrefois convict

"Formerly convicted": a defence in criminal proceedings, to the effect that the accused has previously been tried for the same offence and convicted.

By: C.A. DEV KUMAR KOTHARI
Dated: - January 5, 2012

SC : RE-OPENED ON AUDIT OBJECTION, ACCEPTED BY DEPARTMENT IS VALID RE-OPENING.

CST & VAT: 'Audit Objections' raised by an audit team of Auditor General can be construed as 'information'. If information was given by the audit team to the Assessing Authority that a part of turnover has escaped assessment and the authority was satisfied that reasonable ground exists to believe that a part of the turnover of the appellant-Company has escaped assessment, in that case it can re-open the assessment. However, if there was direction issued by Audit Team to re-open assessment and assessing authority was not satisfied from that information, then the re-assessment order was invalid and without jurisdiction

■■■

[2017] 79 taxman 267 (SC)

SUPREME COURT OF INDIA

Larsen & Toubro Ltd.

v.

State of Jharkhand
MADAN B. LOKUR AND R.K. AGRAWAL, JJ.

CIVIL APPEAL NO. 5390 OF 2007

MARCH  21, 2017

P.H. Parekh, Sr. Adv., Sumit Goel, Ms. Rukhmini Bobde and Ms. Ritika Sethi, Advs. for the Appellant. Anil K. Jha and Priyanka Tyagi, Advs. for the Respondent.

JUDGMENT



R.K. Agrawal, J. - The present appeal has been filed against the final judgment and order dated 17.11.2006 passed by the Division Bench of the High Court of Jharkhand at Ranchi in W.P. (T) No. 2630 of 2006 whereby the High Court dismissed the petition filed by M/s Larsen & Toubro Ltd.-the appellant –Company while upholding the order dated 27.02.2006 passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur.

2. Brief facts:
(a)         The appellant-Company, having its registered office at Mumbai, is a public limited company and is involved in manufacturing, trading, leasing and construction business throughout the country. At the relevant time, the appellant-Company was involved in the execution of civil work contracts for its client, viz., Tata Iron & Steel Company Ltd. (TISCO) and had been filing its returns under the Bihar Finance Act, 1981 (hereinafter referred to as 'the State Act') and also under the Central Sales Tax Act, 1956 (hereinafter referred to as 'the Central Act') in the Commercial Taxes Department, Urban Circle, Jamshedpur.
(b)         For the Assessment Year (AY) 1991-92, the appellant-Company filed returns under the State Act. However, the assessment proceedings in relation to the above period, i.e., AY 1991-92 was completed in the year 1996 and an assessment order dated 24.01.1996 was passed by the assessing authority.
(c)         After the assessment proceedings, an audit team of the Auditor General, Bihar, audited the assessment order dated 24.01.1996 and found that the dealer was allowed exemption of Rs. 3,12,47,916/-, being the amount of goods consumed by the appellant-Company during the course of execution of works contract. The appellant-Company claimed that such goods were purchased on payment of tax but no declaration in Form IX-C along with other evidence was submitted whereas the production or declaration of Form IX-C was mandatory, hence, the claim was not allowable and the said fact was conveyed to the assessing authority.
(d)         On 28.09.2000, the office of Commissioner of Commercial Tax, Urban Circle, Jamshedpur, served a show cause notice to the appellant-Company to state as to why tax should not be levied on it for the amount of Rs. 3,12,47,916/- which was wrongly exempted from being taxed under the provision of the State Act.
(e)         After affording an opportunity of hearing to the appellant-Company, a re-assessment order dated 27.02.2006 was passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur whereby an additional demand of Rs. 35,72,475/- was created against the appellant-Company.
(f)         Being aggrieved by the re-assessment order dated 27.02.2006, the appellant-Company preferred a writ petition being W.P. (T) No. 2630 of 2006 before the High Court. A Division Bench of the High Court, vide order dated 17.11.2006, dismissed the petition filed by the appellant –Company while upholding the order dated 27.02.2006 passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur.
(g)         Aggrieved by the order dated 17.11.2006, the appellant-Company has preferred this appeal by way of special leave.

3. Heard the arguments advanced by Mr. Pravin H. Parekh, learned senior counsel for the appellant-Company and Mr. Amarendra Saran and Mr. Ajit Kumar Sinha, learned senior counsel for the respondent-State and perused the records.

Point for consideration:

4. The only point for consideration before this Court is whether on the information given by the audit team of the Auditor General, Bihar, the Assessing Authority was satisfied that reasonable ground exists to believe that a part of the turnover of the appellant-Company has escaped assessment within the meaning of Section 19 of the State Act based on which the assessing officer can re-open the assessment?

Rival contentions:

5. Learned senior counsel for the appellant-Company contended that an 'audit objection' cannot be construed as 'information' within the meaning of Section 19 of the State Act, based on which the assessing officer can change his opinion and re-open the assessment. The 'audit objection' relates to tax levied on turnover relating to 'consumables' wherein there is no sale/deemed sale involved. Consumables by its very nature are goods used for own consumption. The assessment order dated 24.01.1996 rightly records the said fact.

6. Learned senior counsel further contended that the original assessment order specifically considered whether purchase tax is to be paid under the State Act on the disputed items and the same was decided in negative and hence taxing the items later on is a mere change of opinion by the Assessing Authority on the very same set of facts that were available on the date of passing the assessment order dated 24.01.1996.

7. Learned senior counsel further contended that non-filing of Form IX-C under Section 11 of the State Act read with Rule 12 of the Bihar Sales Tax Rules, 1983 (hereinafter referred to as 'the Rules') does not attract the levy in the facts of the present case as the goods are used for 'own consumption' and there is no sale or 'deemed sale' of the said goods involving a transfer of property in the said goods to anybody.

8. It was further contended that Section 19 of the State Act read with Rule 20 and Form XIV of the Rules specifically requires the satisfaction of the Prescribed Authority regarding requirement of re-assessment before the issuance of the notice in this regard. The initiation of the re-assessment proceedings and the subsequent re-assessment order dated 27.02.2006 are illegal as there was no satisfaction on the part of the Prescribed Authority about existence of reasonable grounds to believe that turnover has escaped assessment. Hence, the same are liable to be set aside.

9. Learned senior counsel further contended that it is relevant to note the circumstances under which the appellant-Company was unable to produce the relevant records. The assessment year (AY) in question is 1991-92. The assessment order in relation to the same was passed on 24.01.1996. The show cause notice proposing to re-open the assessment was served on the appellant-Company on 28.09.2000 which was replied in detail by the appellant-Company vide letter dated 13.11.2000. Thereafter, for a period of five years, there was no communication from the side of the respondents and the appellant-Company, under the bonafide belief that the letter dated 13.11.2000 had satisfied the requirements of show cause notice, forwarded all the records to their dumping yards at Chennai. Learned senior counsel contended that owing to the above circumstances the failure of the appellant-Company to produce the aforesaid records was not at all willful.

10. Learned senior counsel finally contended that the order of re-assessment dated 27.02.2006 is illegal and the assessment proceedings cannot be re-opened on the basis of audit objection, as the same does not amount to 'information' as contemplated under Section 19 of the State Act. The impugned order amounts to change of opinion on the same set of facts and law which were available even at the time of passing the order of assessment.

11. In support of the above contentions, learned senior counsel has relied upon the following decisions, viz., M/s Indian & Eastern Newspaper Society, New Delhi v. Commissioner of Income Tax, New Delhi [1979] 4 SCC 248, Bhimraj Madanlal v. State of Bihar and Another [1984] 56 STC 273, Usha Sales (Pvt.) Ltd. v. The State of Bihar [1985] 58 STC 217 and Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. M/s Thomas Stephen & Co. Ltd. Quilon [1988] 2 SCC 264.

12. Per contra, learned senior counsel for the respondent-State submitted that the assessing authority has not revised the assessment on the basis of the audit report only rather it had satisfied itself before revising and the same can be seen from the fact that it had rejected part of the audit opinion and applied its mind before passing the order impugned.

13. Learned senior counsel for the respondent-State further submitted that the 'audit objection' in the present case is an 'information' within the meaning of Section 19 of the State Act and the competent authority has rightly re-assessed the turnover and demanded legally payable valid tax which was escaped. He further submitted that the word 'information' used in the Section is of the widest amplitude and comprehends variety of factors including information from external sources of any kind including discovery of new facts or information available in the record of assessment not previously noticed or investigated.

14. Learned senior counsel for the respondent-State submitted that if there is obvious mistake apparent on the face of the record of assessment, that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment. He finally submitted that there is no illegality in the re-assessment order dated 27.02.2006 as well as in the order dated 17.11.2006 passed by the High Court and the claim of the appellant-Company is liable to be rejected.

15. In support of his submissions, learned senior counsel has relied upon the following decisions, viz., Commissioner of Income Tax v. P.V.S. Beedies Pvt. Ltd. [1998] 9 SCC 272, Anandji Haridas and Co. (P) Ltd. v. S.P. Kasture and Others AIR 1968 SC 565, Commissioner of Customs, Mumbai v. Virgo Steels, Bombay and Another [2002] 4 SCC 316, Supreme Paper Mills Limited v. Assistant Commissioner, Commercial Taxes, Calcutta and Others [2010] 11 SCC 593 and Chatturam & Ors. v. CIT, Bihar AIR 1947 FC 32.

Discussion:

16. In the instant case, an audit team of the Auditor General, audited assessment order dated 24.01.1996 and found that the dealer was allowed an exemption of Rs. 3,12,47,916/- being the amount for goods consumed by the appellant-Company during the course of execution of works contract. It is the claim of the appellant-Company that those goods were purchased on payment of tax but no declaration in Form IX-C along with other evidence was submitted. The same fact was brought to the notice of the assessing authority which in furtherance thereof issued a show cause notice to the appellant-Company. The production of Form IX-C was held to be mandatory and the claim of the appellant-Company was disallowed and an order of re-assessment dated 27.02.2006 was passed by the competent authority for an additional amount of tax of Rs. 35,72,475/- after following the due procedure of law.

17. The point arises for consideration is as to whether an 'audit objection' can be construed as 'information' within the meaning of Section 19 of the State Act based on which the assessing officer was satisfied that reasonable grounds exist to believe that any part of the turnover of the appellant-Company had escaped assessment under Section 19 of the State Act.

18. Learned senior counsel for the appellant-Company argued that it is mere a change of opinion which resulted in re-assessment order and is not information as contemplated under Section 19 of the State Act. Learned senior counsel for the respondent-State submitted that 'audit objection' in the present case is definitely 'information' within the meaning of Section 19 and the High Court has rightly uphold the re-assessment order dated 27.02.2006.

19. In view of the above, it is relevant to quote Section 19 of the Bihar Finance Act, 1981 which is as under:-

"19. Turnover of registered dealer escaping assessment – (1) If upon information which has come into his possession, the prescribed authority is satisfied that reasonable grounds exist to believe that any turnover of a registered dealer or a dealer to whom grant of registration certificate has been refused under the third proviso to sub-section (2) of Section 14, in respect of any period has, for any reason, escaped assessment or any turnover of any such dealer or a dealer assessed under sub-section (5) of Section 17 has been under-assessed or assed at a rate lower than that which was correctly applicable or any deductions therefrom has been wrongly made, the prescribed authority may, subject to such rules may, be made by the State Government under this part, and –
(a)         Within eight years from the date of the order of the assessment or reassessment where the said authority has reasons to believe that the dealer has concealed, omitted or failed to disclose willfully the particulars of such turnover or has furnished incorrect particulars of such turnover and thereby returned figures below the reason amount,
(b)         Within eight years' from the date of the order of the assessment or reassessment in any other case.

Serve on the dealer a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of Section 17 and proceed to assess or reassess the amount of tax due from the dealer in respect of such turnover, and the provisions of this part shall, so far as may be, apply accordingly as if the notice under this sub-section was a notice under sub-section (2) of Section 17:

Provided that the amount of tax shall be assessed or re-assessed after allowing such deductions as were permissible during the said period and at rates at which it would have been assessed had the turnover not escaped assessment or full assessment, as the case may be.

Explanation: - Production before the prescribed authority of accounts, registers or documents from which material facts could, with due diligence, have been discovered by the said authority, will not necessarily amount to full disclosure within the meaning of this section.

(2) (a) The prescribed authority shall, in a case falling under clause (a) of sub-section (1), direct that the dealer shall pay by way of penalty a sum not exceeding three times but not less than an amount equivalent to the amount of tax which is or may be assessed on the escaped turnover.

(b) The penalty imposed under clause (a) shall be in addition to the amount of tax which is or may be assessed on the escaped turnover, and the order imposing penalty may precede the assessment of escaped turnover.

(c) For determining the amount of penalty under clause (a), where the penalty precedes assessment under clause (b) the prescribed authority shall quantify the amount of suppression and tax thereon provisionally in the prescribed manner.

(d) No order shall be passed under this sub-section without giving the dealer an opportunity of being heard in the prescribed manner.

(3) Any assessment or reassessment made and any penalty imposed under this section shall be without prejudice to any action which is or may be taken under section 49."

Sub-Section (1) of Section 19 very clearly prescribes that the competent authority, upon information, if satisfied that reasonable ground exists to believe that any turnover of a registered dealer or a dealer to whom grant of registration certificate has been refused in respect of any period has, for any reason, escaped assessment or any turnover of any such dealer assessed under sub-Section (5) of Section 17 has been under-assessed or assessed at a rate lower than that which was correctly applicable, may, within eight years from the date of order of assessment, proceed to assess or reassess the amount of tax in respect of such turnover.

20. For ready reference, the relevant portion of the assessment order dated 24.01.1996 is also extracted hereunder:-

"The Company has used the following work under its Tender work on its level and if we separate the both, then it is like this.
     Camp equipments    Rs. 227301.00
     Electric goods for work site    Rs. 773223.00
     Electrode Welding Cable and Accessories    Rs. 871294.00
     Fuel & Lubricants    Rs. 3189205.00
     General Consumables    Rs. 2945086.00
     (Handgloves) contenvest   
     Oxygen & D.A. Gas    Rs. 21223.00
     Plywood for Shuttering    Rs. 2826674.00
     Safety Appliances    Rs. 408392.00
     Spares    Rs. 8232442.00
     Staging Materials    Rs. 3888798.00
     Shuttering & Walk-way (For Timber)    Rs. 4191982.00
     Tools and Tackles    Rs. 3672296.00
     Total    Rs. 3,12,47,916.00"

21. It is also pertinent to understand the meaning of the word 'information' in its true sense. According to the Oxford Dictionary, 'information' means facts told, heard or discovered about somebody/something. The Law Lexicon describes the term 'information' as the act or process of informing, communication or reception of knowledge. The expression 'information' means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or having a bearing on the assessment. We agree that a mere change of opinion or having second thought about it by the competent authority on the same set of facts and materials on the record does not constitute 'information' for the purposes of the State Act. But the word "information" used in the aforesaid Section is of the widest amplitude and should not be construed narrowly. It comprehends not only variety of factors including information from external sources of any kind but also the discovery of new facts or information available in the record of assessment not previously noticed or investigated. Suppose a mistake in the original order of assessment is not discovered by the Assessing Officer, on further scrutiny, if it came to the notice of another assessor or even by a subordinate or a superior officer, it would be considered as information disclosed to the incumbent officer. If the mistake itself is not extraneous to the record and the informant gathered the information from the record, the immediate source of information to the Officer in such circumstances is in one sense extraneous to the record. It will be information in his possession within the meaning of Section 19 of the State Act. In such cases of obvious mistakes apparent on the face of the record of assessment, that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment or under-assessment or wrong assessment.

22. There are a catena of judgments of this Court holding that assessment proceedings can be reopened if the audit objection points out the factual information already available in the records and that it was overlooked or not taken into consideration. Similarly, if audit points out some information or facts available outside the record or any arithmetical mistake, assessment can be re-opened.

23. In P.V.S. Beedies (supra), this Court has held as under:-

"3. We are of the view that both the Tribunal and the High Court were in error in holding that the information given by internal audit party could not be treated as information within the meaning of Section 147(b) of the Income Tax Act. The audit party has merely pointed out a fact which has been overlooked by the Income Tax Officer in the assessment. The fact that the recognition granted to this charitable trust had expired on 22-9-1992 was not noticed by the Income Tax Officer. This is not a case of information on a question of law. The dispute as to whether reopening is permissible after audit party expresses an opinion on a question of law is now being considered by a larger Bench of this Court. There can be no dispute that the audit party is entitled to point out a factual error or omission in the assessment. Reopening of the case on the basis of a factual error pointed out by the audit party is permissible under law. In view of that we hold that reopening of the case under Section 147(b) in the facts of this case was on the basis of factual information given by the internal audit party and was valid in law. The judgment under appeal is set aside to this extent."

(emphasis supplied)

24. Similarly, in Commissioner of Income Tax, U.P., Lucknow v. M/s Gurbux Rai Harbux Rai [1971] 3 SCC 654, this Court has held as under:-

"6. Section 15 of the Act provides that if in consequence of definite information which has come into the possession of the Excess Profits Tax Officer he discovers that profits of any chargeable accounting period have escaped assessment, etc., he may at any time serve a notice containing all or any of the requirements which may be included in a notice under Section 13 and may proceed to assess or reassess the amount of such profits liable to excess profits tax. The power so conferred can be exercised in the course of the original assessment or reassessment. It is essential, according to the law laid down by this Court, that before any action can be taken or an order made under Section 10-A there should be a proceeding which should be pending for assessment or reassessment of excess profits tax….."

"7. On the first question the submission of Mr M.C. Chagla for the assessee is that there was no definite information which had come into possession of the Tax Officer from which it could be said that he had discovered that profits of the relevant chargeable accounting period had escaped assessment. We are unable to agree. The Appellate Assistant Commissioner had made an order on October 10, 1947, in the proceedings relating to the assessment of income tax of the assessee that there had been only a partial partition in respect of the movable property business of Gurbux Rai. That was certainly an information which came into the possession of the Excess Profits Tax Officer not because of any change of opinion by himself but because of the decision of the Appellate Assistant Commissioner in the income tax proceedings. This Court has consistently held that the Income Tax Officer would have jurisdiction to initiate proceedings under Section 34(1) (b ) of the Income Tax Act, 1922, which is in pari materia with Section 15 of the Act if he acted on information received from the decision of the superior authorities or the court even in the assessment proceedings. (See R.B. Bansilal A birchand Firm v. CIT 1 and Assistant Controller of Estate Duty , Hyderabad v. Nawab Sir Osman Ali Khan Bahadur , H.E.H. The Nizam of Hyderabad and others . It has next been urged that the alleged object of having a partial partition, namely, of reducing the liability to excess profits tax had never been examined by the Appellate Assistant Commissioner in the income tax proceedings and therefore it could not be said that there had been escapement of income as a result of information derived from his order. The Appellate Assistant Commissioner apparently did not go into that question because the proceedings before him related to assessment of income tax. Section 10-A of the Act is a special provision which deals with the transactions designed to avoid or reduce liability to excess profits tax. The information which came into possession of the Excess Profits Tax Officer of partial partition having been effected was relevant for the purpose of Section 15 and once he had initiated proceedings under that section he was perfectly competent and had jurisdiction to examine for the purpose of Section 10-A whether partial partition had been effected for avoidance or reduction of liability to excess profits tax. The first question, therefore, should have been answered against the assessee and in favour of the Revenue."

(emphasis supplied)

25. In M/s Phool Chand Bajrang Lal and Another v. Income Tax Officer & Another [1993] 4 SCC 77 this Court has held as under:-

"25….. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information….."

26. The contention whether finding the information from the very facts that were already available on record amounts to information for the purpose of Section 19 of the State Act, it would be sufficient to refer to a judgment of this Court in Anandjiharidas & Co. v. S.P. Kasture AIR 1968 SC 565 wherein it was held that a fact which was already there in records doesn't by its mere availability becomes an item of "information" till the time it has been brought to the notice of assessing authority. Hence, the audit objections were well within the parameters of being construed as 'information' for the purpose of section 19 of the State Act.

27. The expression 'information' means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or after bearing on the assessment. We are of the clear view that on the basis of information received and if the assessing officer is satisfied that reasonable ground exists to believe, then in that case the power of the assessing authority extends to re-opening of assessment, if for any reason, the whole or any part of the turnover of the business of the dealer has escaped assessment or has been under assessed and the assessment in such a case would be valid even if the materials, on the basis of which the earlier assessing authority passed the order and the successor assessing authority proceeded, were same. The question still is as to whether in the present case, the assessing authority was satisfied or not.

28. At this stage, we deem it appropriate to reproduce the matter dealt with between the audit team and the assessing authority which led to the initiation of re-assessment proceedings under Section 19 of the State Act which is as under:-

"Part – II

Section – 'A'
     Para 1. Non levy of purchase tax    Rs. 24,19,385.31
     Name of the dealer    M/s Larsen & Toubro Ltd., ECC Construction Group, Jamshedpur
     Registration No.    JU 848 ®
     Nature of Business    Works Contract
     Asstt. Year    1991-92
     Date of Order    24.01.1996
     G.T.O. Determined    Rs. 17,57,01,372.00
     Less: Sale of tax paid goods    Rs. 1,31,75,779.63
          Rs. 16,25,25,592.37
     Less: Works done by sub-contractor    Rs. 27,17,304.00
         Rs. 15,98,08,208.37
     Less: Labour charges and overhead charges    Rs. 11,91,66,742.38
         Rs. 4,06,41,465.99
     Tax was levied   
     @ 4% on Rs. 17,48,096.90    Rs. 69,923.00
     @ 8% on Rs. 1,96,71,099.14    Rs. 15,73,678.93
     @ 9% on Rs. 1,45,34,488.10    Rs. 13,08,103.92
     @ 10% on Rs. 2,048.00    Rs. 204.80
     @ 11% on Rs. 4,82,125.70    Rs. 53,033.86
     @ 12% on Rs. 42,03,608.15    Rs. 5,04,432.97
         Rs. 35,09,387.36
     Add: Tax @ 1% on Rs. 5,55,08,612.25    Rs. 5,55,086.12
         Rs. 40,64,473.48
     Surcharge @ 10% on Rs. 39,94,549.60    Rs. 3,99,454.00
         Rs. 44,63,928.44
     Penalty U/S 16 (8)    Rs. 920.00
         Rs. 44,64,848.44

The Scrutiny of assessment order revealed that the dealer was allowed exemption of Rs. 11,91,66,742.38 on account of labour charges and overhead charges claimed as detailed below:
     Labour Charges    Rs. 7,02,77,549.00
     Overhead charges    Rs. 1,87,15,545.00
     Goods consumed in course of execution of work    Rs. 3,12,47,916.00
         Rs. 12,02,41,010.00

Out of the above claim, a sum of Rs. 10,74,267.62 to us disallowed as below:
     Tax paid claim disallowed    Rs. 3,50,698.37
     Recovery of cement taxable    Rs. 2,20,972.50
     Amount of plant hire charges    Rs. 5,02,596.75
         Rs.10,74,267.62

The dealer had furnished the statement of material utilized in the contract work and goods consumed for own use. Scrutiny of assessment order revealed that the dealer was allowed exemption on Rs. 3,12,47,916.00 being the amount of goods consumed or used itself in course of execution of work, details of which were discussed in the assessment order. It had been stated by the assessing authority that such goods were purchased on payment of tax, but no declaration in form IX C along with other evidences were kept on record. Production of declaration form in IX C was mandatory one and hence the claim was not allowable.

The entire materials received from outside the State or purchased within the State without payment of tax was normally leviable to tax at specified rates under section 12 of B.F. Act 1981. Under section 4 of the Act ibid, every dealer liable to pay under section 3 of the Act, if otherwise disposes the goods in any manner other than by way of sale in the State was also liable to purchase tax. In this connection a reference to the judgement of Hon'ble Karnataka High Court and duly confirmed by the Hon'ble Supreme Court in the case of Chevvabbo v. State of Karnataka [1986] 62 STG 194 Se) is invited ……. Disposal of goods in this section (Similar to those Karnataka) was clarified as transfer of title over the goods otherwise than sale, included gifts, own use or consumption section 4 of the Act (B.F. Act) is similar to section 7 A of Tamil Nadu General Court in the case of the State of Tamil Nadu v. M.K. Kandaswami (1975 36 STC 191) where it was held that (1) this Section is a separate charging provision in the Act and is not subject to section 3 and (ii) brings to tax goods, the sale of which would normally have been taxed at the same point or other in the State but could not be taxed even due to destroying them or other reasons. Thus the purchase tax was leviable on goods consumed for own use. Since cost price/purchase price was reflected as value of goods consumed for own use of the dealer, the tax at the rate specified in section 12 of the Act ibid was leviable. In this case, even if same charges like Electrodes, Welding Cables, welding appliances, fuel and lubricants, oxygen and P.A. Gas safety, safety appliances valued at Rs. 44,90,114.00 was not considered as taxable, the consumable goods worth Rs. 2,67,57,802.00 attracted levying of tax at specified rates.

The case may please be re-examined in the light of above observation and levying of purchase tax amounting to Rs.24,19,385.31 (including additional tax and surcharge) as calculated below may be considered under intimation to audit.
     S. No.    Name of Goods    Purchase value of goods    Rate applicable    Non-levy of purchase tax
     1.    Camp Equipment, general consumable, plywood for shuttering spares and staying material    Rs. 1,81,20,301.00    8%    Rs. 14,49,624.08
     2.    Electrical Goods and Timber    Rs. 49,65,205.00    12%    Rs. 5,95,824.60
     3.    Tools & Tackles    Rs. 36,72,296.00    4%    Rs. 1,46,891.84
                     Rs.21,92,340.52
                     Rs. 20,454.48
                     Rs.22,12,795.00
         Addl. Tax @ 1% on 20,45,448.68            Rs. 2,06,590.31
                     Rs.24,19,385.31
          Surcharge @ 10% on 20,65,903.16             

The use of fuel and lubricants may please be bifurcated and value of lubricants only may be levied to tax.

On being pointed out in audit, it was stated that since the goods had not been transferred to contractee co-under the provisions of works contract, but it had been consumed and so it does not come under the purview of taxation. The reply is not tanable in view of the above judgements and hence the case needed to be reviewed."

(emphasis supplied)

29. From a perusal of the last paragraph of the aforementioned report of the audit party, it is clear that the Assessing Officer was of the opinion that as the goods had not been transferred to appellant-Company but had been consumed, so it does not come under the purview of taxation. In other words, the Assessing Officer was not satisfied on the basis of information given by the audit party that any of the turnover of the appellant-Company had escaped assessment so as to invoke Section 19 of the State Act. From the above, it also appears that the assessing officer had to issue notice on the ground of direction issued by the audit party and not on his personal satisfaction which is not permissible under law.

30. In view of the above discussion, we are of the considered view that the order dated 27.02.2006 passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur is without jurisdiction and the High Court was not right in dismissing the petition filed by the appellant-Company. We, therefore, allow the appeal and set aside the order dated 27.02.2006 passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur as well as the order dated 17.11.2006 passed by the Division Bench of the High Court of Jharkhand. However, the parties shall bear their own costs.

Hon'ble Mr. Justice R.K.Agrawal pronounced the Reportable judgment of the Bench comprising Hon'ble Mr. Justice Madan B.Lokur and His Lordship.

The appeal is allowed in terms of the signed Reportable judgment.

Pending application, if any, stands disposed of.