Sunday, September 14, 2014

CBDT To AOs: Respect Taxpayer’s Time And Don’t Make Them Wait

 

Dear Subscriber,

 

CBDT To AOs: Respect Taxpayer's Time And Don't Make Them Wait

The CBDT has issued an Office Memorandum dated 22.08.2014 in which it has pointed out that some AO's issues notices to taxpayers/ witnesses/ representatives etc. indicating a standard time of appointment. Thus, many persons called for hearing etc on a day by an officer are given the same time for appearance and the persons are made to wait for their turn. It is pointed out that such actions, apart from causing avoidable inconvenience to the taxpayers/ witnesses/ representatives etc cause great embarrassment to the Government. All officers have been advised to strictly maintain the appointment schedule in spirit with the Citizen's Charter, 2014 of the Department which specifically provides that the Department shall endeavour "to adhere to the schedule of appointments with taxpayers". All Supervisory officers, i.e. the CCsIT, CsIT and the Addl. CsIT have been requested to ensure that officers reporting to them strictly comply with this instruction and avoid fixing multiple appointments at the same time. Instances of disregard to these instructions may be viewed seriously, it is added

 

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Editor,

 

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CBDT Sets Up High-Powered Panel To Decide Retro Tax Cases (Vodafone)



ITAT Laments Severe Fall In Standards Of CA Profession

 

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.


Vijay V Meghani vs. DCIT (ITAT Mumbai)

ITAT laments severe fall in standards of CA profession. Advices ICAI to take disciplinary proceedings against erring members & tackle issue on war footing

The assessee filed appeals for AY 1994-95 & 1996-97 which were delayed by 2984 days. In support of the application for condonation of delay, the assessee claimed that his CA, M/s Rajesh Rajeev Associates, had advised him that as he had already filed an appeal for AY 1993-94 on the same point, which was pending before the Tribunal, he need not file appeals for AYs 1994-95 & 1996-97 and, instead, he could, after adjudication of the appeal for AY 1993-94 by the Tribunal, move a rectification application before the AO to bring the assessment order in conformity with the decision of the Tribunal. The CA filed an affidavit in which he confirmed having given the said advice. In the condonation application, the assessee pleaded that he ought not to be made to suffer for the "incorrect" advice given by the CA. HELD by the Tribunal dismissing the application and the appeals:

(i) The advice given by the CA firm shows signs of deteriorating standards with some of the Chartered Accountants in profession, which needs to be stopped on war footing by the ICAI. The assessee is having connection with many tax professionals and, in all probabilities, the assessee might have had consultation with any one or more of them on the impugned problem. It is inconceivable that all the Chartered Accountants, whom the assessee might have had consultation or availed services, would have concurred with the view expressed by the above said C.A firm. If it is presumed for a moment that all the C.A.s have concurred with the said view, then it only shows that the C.A profession is losing its grip over the Income tax matters, which is another cause of concern for ICAI. The self study model coupled with 'on-site articled clerk training' embedded in the Chartered Accountancy course aims to achieve high quality education and training through undergoing practical training, inculcating the habit of thinking, self introspection, application of mind, analytical ability etc. and they enable the C.A students to have strong grip over the subjects and also to attain expertise in them… In the recent past, the methodology of self study is given a go-by by some C.A students and they have started depending more and more on the Commercial Coaching Centers, who undertake coaching of various subjects in the class room model. We notice that the ICAI does not appear to have taken steps to contain mushrooming growth of such coaching institutes, which indulge in manufacturing of Chartered Accountants through class room model, which may ultimately have undesirable effect on the quality of Chartered Accountants, since the habit of thinking, introspection, application of mind is replaced by spoon-feeding, which kind of teaching discourages independent thinking. There should not be any controversy on the fact that the Chartered Accountants, till date, have occupied pioneer position vis-à-vis their counterparts in other parts of the World. They also contribute a lot to the building, sustenance and growth of our National economy. Any compromise on the quality of Chartered Accountants would not only affect our Country very badly, but is also expected to endanger the pioneer position enjoyed by the Indian C.A fraternity vis-à-vis their counter parts in other parts of the world. In our view, the ICAI should seriously take note of these alarming practices slowly emerging in our Country and should take appropriate corrective steps, lest the confidence reposed in C.A.s by the public should get diluted;

(ii) In this back ground, in our view, the above said C.A. firm would have given the letter as well as the affidavit only to accommodate the assessee herein. We would like to mention here that we have come to such a conclusion, since a qualified C.A. firm would not commit such kind of silly mistakes while giving expert professional advice. If the C.A. firm has so accommodated the assessee, without even realising that it is detrimental to its reputation, then the conduct of the C.A. firm needs to be condemned strongly. In that case, we are of the view that the above said conduct of the C.A. firm not only denigrates its name/ reputation, but also badly affects the high standards, confidence, quality, prestige, reputation etc. enjoyed by the C.A. profession;

(iii) The advice claimed to have been given by M/s Rajesh Rajeev Associates, Chartered Accountants, if considered to have been really given, would create doubt about the efficacy of the CPE programmes, since such kind of advices is not expected from a Professional. Further these kind of advices claimed to have been given by a C.A firm clearly give signals that the CPE programmes might have failed to achieve the desired objectives with some of the Chartered Accountants. It is high time that the ICAI should take note of these practicalities and should take corrective steps in order to maintain/restore the high standards and quality expected from a C.A. professional. We have also expressed the view that the above said C.A firm might have given the affidavit only to accommodate the assessee, which conduct is also not expected from a Professional. If it is considered that the C.A firm has colluded with the assessee for giving such kind of affidavit, then it only warrants disciplinary action against them. Even, if it is considered that the said C.A. firm has really given such advices, then also it may require disciplinary action against them for giving such kind of advices, without proper verification of facts and without proper consideration of law. In our view, strict actions and fast disposal of disciplinary proceedings would not only instill discipline among the C.A fraternity, but also help curtail these kind of undesired practices adopted by some of the Chartered Accountants.


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Editor,

 

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Latest:

Transfers Of Hon'ble Members Of The ITAT (Sept 2014)

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CBDT Notifies Norms For Compulsory Scrutiny Of Cases In FY 2014-15

 

Dear Subscriber,

CBDT Notifies Norms For Compulsory Scrutiny Of Cases In FY 2014-15

The CBDT has issued Instruction No. 6 of 2014 dated 02.09.2014 and announced the procedure and criteria for compulsory manual selection of cases for scrutiny for FY 2014-15. The guidelines appear to have been issued pursuant to the direction of the Delhi High Court in Joginder Pal Gulati vs. OSD – CPIO


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Editor,

 

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Don't Junk The Collegium System Only Because Of A Few Dubious Judges


Thursday, September 11, 2014

The Entire Law On Taxation Of Purchases From Suspicious Dealers

Dear Subscriber,

The Entire Law On Taxation Of Purchases From Suspicious Dealers

The action of the Maharashtra VAT department of branding several dealers as "Hawala dealers" has led the Income-tax department to treat purchases worth several hundreds of crores as "bogus" and assess the same as undisclosed income u/s 68. The author, an eminent Senior Advocate, has carefully examined the legal provisions, put the entire issue in its proper perspective and offered practical suggestions on how assessees can safeguard their interests.

The article is a must-read for all taxpayers grappling with the problem.

A pdf copy of the article is also available for download.


Regards,

 

Editor,

 

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Latest

Transfers / Postings Of Assistant/ Deputy Commissioners of Income-tax

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ITAT Astonished At AO's "Assault On Rule Of Law" + HC Verdict On S. 263 Of Transfer Pricing Cases

 

Dear Subscriber,

 

The following important judgements are available for download at itatonline.org.


DCIT vs. SAP Labs India Pvt. Ltd (ITAT Bangalore)

AO's action of giving effect to a quashed s. 263 revision order termed "assault on rule of law" & "contempt of court"

By the by, we are very much astonished to observe that the AO has passed a revised assessment order even after knowing that the revision order passed by the CIT has been set aside by the Tribunal. The action of the AO could be treated as assault on the rule of law. His action amounts to contempt of court as well. The Revenue could have preferred to file an appeal before the High Court against the order of the Tribunal setting aside the revision order passed by the CIT. If such an appeal has been already filed, well and good. Otherwise, Revenue has no remedy when the Tribunal has set aside the revision order of the CIT. The said order no more exists and the AO has no substratum to build a second round of revised assessment. We do not think that all these matters are unknown to the Assessing Authority. But giving due consideration to the explanations offered by the learned senior officers appearing for the Revenue and also for the reason that the AO might have prompted to act in haste, only in public interest, we do not proceed further in this matter. But we wish that before jumping into such controversial games, the AO ought to have taken advice from his seniors.


CIT vs. SAP Labs Pvt. Ltd (Karnataka High Court)

S. 263: TPO's acceptance of ALP shows two views are possible & CIT has no jurisdiction to revise assessment

On the day the reference was made by the AO to the TPO, there was no return pending for consideration by him and therefore, the very reference was bad. Even otherwise, the said Transfer Pricing Authority did not find fault with the adjudication of determining arms length price by the Assessing Authority. In those circumstances, the CIT committed an error in exercising his power u/s 263 and the Tribunal was justified in interfering with the said order.


Regards,

 

Editor,

 

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Latest

The Entire Law On Taxation Of Purchases From Suspicious Dealers


Four Important Judgements On Recent Controversial Topics

Dear Subscriber,

 

The following important judgements are available for download at itatonline.org.


Maruti Securities Ltd vs. ACIT (ITAT Hyderabad)

S. 145: Even if assessee is following mercantile system, income cannot be assessed, on "real income" theory, if its collection/ receipt is not certain

(ii) The method of accounting, as followed by the assessee, does not create any income. The method of accounting only recognizes income. Income cannot be taxed on hypothetical basis, and it is only the real income that is to be brought to tax. When the principal itself is overdue and not collected, there is no basis for making out a case that interest income would be collectable with certainty. Even where an assessee is following the mercantile system of accounting, it is only accrual of real income which is chargeable to tax, that accrual is a matter to be decided on commercial belief having regard to the nature of business of the assessee and character of the transaction. Accordingly, for the purpose of determining whether there has been accrual of real income or not, recourse is to be made to ascertain the nature of business and character of the transaction and the realities and peculiarities of the situations (Godhra Electricity 225 ITR 746 (SC), Excel Industries Ltd 358 ITR 295 (SC) & UCO Bank 237 ITR 889 (SC) followed)


U.P. State Industrial Development Corp (UPSIDC) vs. DCIT (ITAT Lucknow)

S. 143(2)(ii): Fact that case is selected for scrutiny under CASS does not mean s. 143(2) notice & assessment order are void for non-application of mind by AO

The entire jurisprudence in respect of tax administration such as principle of natural justice etc. are with the sole object of ensuring that the tax payer is not unduly harassed by the tax department having almighty power of state. In order to make tax administration and collection friendly to tax payer, some steps have been taken by the tax administration/Government although much work is still to be done in this regard. Some of these steps are that it is made a rule that tax returns can be filed in a paper less manner in order to improve voluntary compliance by the tax payer and also to reduce the burden of filing voluminous documents along with the tax return. This is a big relief to the tax payer but this has to be ensured that there are some deterring measures so that no undue advantage is taken by any tax payer of this liberal policy of the Government. Even these deterring measures are to be such that they cause minimum harassment to the tax payer. Therefore, scheme had been devised that only very small percentage of total tax returns will be scrutinized by the department and generally it is about 2% to 3% of the total tax returns filed in a year. When it is seen that the return is to be filed by the assessee in paperless manner and still there has to be some deterring measure to prohibit the taxpayer from adopting the habit of tax evasion/avoidance, it was decided that there should be scrutiny in a small number of cases.


CIT vs. Nangalia Fabrics Pvt. Ltd (Gujarat High Court)

S. 68: Purchases cannot be treated as "bogus" only on the ground that the suppliers are not traceable

The Tribunal has found that the purchases are genuine because they are supported by bills, entries in the books of account, payment by cheque and quantitative details. The AO did not find any inflation in purchase price or inflation in consumption or suppression the production. The addition had been made only on the ground that the parties are not traceable. The assessee had made payment through crossed cheques and AO did not find that payment made came back to assessee. The ratio of creditors to purchases is normal considering the past records of the assessee. The creditors were outstanding owing to liquidity as assessee is also required to get credit in respect of sales also. Even otherwise, section 68 is not attracted to amounts representing purchases made on credit. This is a finding of fact which does not give rise to a question of law.


DCIT vs. Rajeev G. Kalathil (ITAT Mumbai)

S. 68: Fact that alleged supplier is not traceable and has been termed a "hawala dealer" by the VAT authorities is not sufficient to treat the purchases as "bogus"

The fact that the supplier is declared as a "Hawala dealer" by the VAT department is a good starting point for making further investigation and taking it to its logical end. However, suspicion of highest degree cannot take place of evidence. The AO ought to have called for details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. No such exercise was done. There is nothing in the order of the AO about the cash trail. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. Proof of movement of goods is not in doubt. In the absence of sufficient evidence, the purchases cannot be treated as bogus


Regards,

 

Editor,

 

itatonline.org

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Latest

Vijay V Meghani vs. DCIT (ITAT Mumbai)

ITAT laments severe fall in standards of CA profession. Advices ICAI to take disciplinary proceedings against erring members & tackle issue on war footing

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Saturday, September 6, 2014

ITR (TRIB) Volume 34 : Part 2 (Issue dated : 1-9-2014)


 

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))--PRINT AND ONLINE EDITION

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Export --Exemption--Communication expenses excluded from export turnover--To be excluded also from total turnover--Income-tax Act, 1961, s. 10A-- United Online Software Development (India) P. Ltd. v. ITO (Hyd) . . . 177

International transactions --Arm’s length price--Determination--Transactional net margin method--Software development services--Selection of comparables--Companies having turnover falling within particular range to be considered--Functionally different companies to be excluded from comparables--Matter remanded for decision afresh on giving assessee an opportunity of being heard--Income-tax Act, 1961, s. 92CA-- United Online Software Development (India) P. Ltd. v. ITO (Hyd) . . . 177

PRINT EDITION

Volume 34 : Part 2 (Issue dated : 1-9-2014)

SUBJECT INDEX TO CASES REPORTED

Advance-tax --Interest--No liability to pay interest for contracts where income taxable under section 44BB on presumptive basis--Assessee liable to pay interest in respect of contracts income from which arose in India--Income-tax Act, 1961, s. 234B-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

Charitable purpose --Registration of trust--Cancellation of registration--Commissioner discharging quasi-judicial duty--No mala fide intention--No award of costs warranted--Income-tax Act, 1961, s. 12AA-- Parkar Medical Foundation v. Deputy CIT (Pune) . . . 286

----Registration of trust--Cancellation of registration--Only on Commissioner’s satisfaction that activities of trust not genuine or not carried out in accordance with objects of trust--Income-tax Act, 1961, ss. 12A, 12AA-- Parkar Medical Foundation v. Deputy CIT (Pune) . . . 286

Income from undisclosed sources --Search and seizure--Bank pass-books and cheques of non-resident external account belonging to non-resident Indians found in assessee’s possession during search--Only foreign remittance permissible in non-resident external account--Additions in hands of resident assessee not valid--Income-tax Act, 1961-- Asst. CIT v. Mohammed Mohsin Rajabali Dosani (Ahd) . . . 271

----Seizure of loose sheet showing payment of amount to assessee--Payments not reflected in books of account--Assessee offering to adjust undisclosed income--No record to establish that payments were actually made to assessee--No addition can be made solely relying upon a single piece of paper unless there are enough corroborative evidence--Matter remanded--Income-tax Act, 1961-- Bhaskar Rao (B.) v. Deputy CIT (Hyd) . . . 277

Non-resident --Taxability in India--Income deemed to accrue or arise in India--Terms of contract revealing intention of party to appropriate goods in India--Parties intended for transfer of title in goods in India--Income accrued or arose in India--Matter remanded to Assessing Officer for attributing income out of contracts to extent of operations relating to sales carried out in India--Matter remanded--Income-tax Act, 1961, s. 5-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

----Taxability in India--Prospecting for, or extraction or production of, mineral oils--Section 44BB encompasses within its ambit all the services connected with oil exploration--Special provision prevails over all other provisions dealing with royalty or fees for technical services--Retrospective amendment not applicable as higher tax burden on assessee--Income to be assessed under section 44BB--Income-tax Act, 1961, s. 44BB-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

Penalty --Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable--Income-tax Act, 1961, ss. 269SS, 269T, 271D, 271E, 273B--Lodha Builders P. Ltd. v. Asst. CIT (Mumbai) . . . 157

----Limitation--Period starts from date of “action for imposition of penalty†--Meaning of “action for imposition of penalty†--Assessing Officer making reference to Additional Commissioner for initiation of penalty is date of “action for imposition of penalty†not date of show cause notice by Additional Commissioner--Income-tax Act, 1961, s. 275(1)(c)--Lodha Builders P. Ltd. v. Asst. CIT (Mumbai) . . . 157

Presumptive tax --Non-resident--No Double Taxation Avoidance Agreement with Cayman Islands--Provisions of Income-tax Act applicable--Consumables in connection with prospecting for, extraction or production of mineral oil supplied along with plant and machinery given on hire--Receipts taxable under section 44BB--Income-tax Act, 1961, s. 44BB-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 5 --Non-resident--Taxability in India--Income deemed to accrue or arise in India--Terms of contract revealing intention of party to appropriate goods in India--Parties intended for transfer of title in goods in India--Income accrued or arose in India--Matter remanded to Assessing Officer for attributing income out of contracts to extent of operations relating to sales carried out in India--Matter remanded-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT(International Taxation) (Delhi) . . . 192

S. 12A --Charitable purpose--Registration of trust--Cancellation of registration--Only on Commissioner’s satisfaction that activities of trust not genuine or not carried out in accordance with objects of trust-- Parkar Medical Foundation v. Deputy CIT (Pune) . . . 286

S. 12AA --Charitable purpose--Registration of trust--Cancellation of registration--Commissioner discharging quasi-judicial duty--No mala fide intention--No award of costs warranted-- Parkar Medical Foundation v. Deputy CIT (Pune) . . . 286

----Charitable purpose--Registration of trust--Cancellation of registration--Only on Commissioner’s satisfaction that activities of trust not genuine or not carried out in accordance with objects of trust-- Parkar Medical Foundation v. Deputy CIT (Pune) . . . 286

S. 44BB --Non-resident--Taxability in India--Prospecting for, or extraction or production of, mineral oils--Section 44BB encompasses within its ambit all the services connected with oil exploration--Special provision prevails over all other provisions dealing with royalty or fees for technical services--Retrospective amendment not applicable as higher tax burden on assessee--Income to be assessed under section 44BB-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

----Presumptive tax--Non-resident--No Double Taxation Avoidance Agreement with Cayman Islands--Provisions of Income-tax Act applicable--Consumables in connection with prospecting for, extraction or production of mineral oil supplied along with plant and machinery given on hire--Receipts taxable under section 44BB-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

S. 234B --Advance-tax--Interest--No liability to pay interest for contracts where income taxable under section 44BB on presumptive basis--Assessee liable to pay interest in respect of contracts income from which arose in India-- Baker Hughes Asia Pacific Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 192

S. 269SS --Penalty--Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable-- Lodha Builders P. Ltd. v. Asst. CIT(Mumbai) . . . 157

S. 269T --Penalty--Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable-- Lodha Builders P. Ltd. v. Asst. CIT(Mumbai) . . . 157

S. 271D --Penalty--Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable-- Lodha Builders P. Ltd. v. Asst. CIT(Mumbai) . . . 157

S. 271E --Penalty--Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable-- Lodha Builders P. Ltd. v. Asst. CIT(Mumbai) . . . 157

S. 273B --Penalty--Acceptance or repayment of deposits exceeding prescribed limit otherwise than by account payee cheque--Transactions between sister concerns by way of journal entries--Extinguishment of mutual liabilities between assessees and sister concerns--Reasonable cause--Penalty not sustainable-- Lodha Builders P. Ltd. v. Asst. CIT(Mumbai) . . . 157

S. 275(1)(c) --Penalty--Limitation--Period starts from date of "action for imposition of penalty"--Meaning of “action for imposition of penalty†--Assessing Officer making reference to Additional Commissioner for initiation of penalty is date of “action for imposition of penalty†not date of show cause notice by Additional Commissioner-- Lodha Builders P. Ltd. v. Asst. CIT (Mumbai) . . . 157

 

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