FINANCE & LAW TODAY: Claim cannot be denied for mere non-reply to notic...

FINANCE & LAW TODAY: Claim cannot be denied for mere non-reply to notic...: Claim  cannot be denied if sufficient documents are in hand of AO even though the party does not reply to notice issued u/s 133(6); (even...

Claim cannot be denied for mere non-reply to notice u/s 133(6) if AO have other sufficient evidences

Claim cannot be denied if sufficient documents are in hand of AO even though the party does not reply to notice issued u/s 133(6); (even though the party confirmation is not available against notice issued u/s 133(6))

The issue which was never raised by the AO or remained the subject matter of setting aside order of the ITAT, the same cannot be raised while passing fresh order.

Citation of the case:

Cheil India Pvt .Ltd Vs ITO Ward 3(3), (ITAT Delhi), Income Tax Appeal No.6183/Del/2014, Date of decision-16-07-2015

Brief of the case:

AO had issued a notice u/s 133(6) to one of the party of the assessee for gaining some information but that party had responded late to the notice from the time frame mentioned in the notice so the AO had Not considered the reply and made addition to the income of the assessee. The AO was having sufficient documents related with that party to whom notice was issued u/s 133(6) which can solve the purpose of AO but he had not considered the same and made addition. Assessee aggrieved by the decision filed an appeal with CIT(A) who also confirmed the decision of AO against which appeal was filed then assessee filed the appeal with ITAT who remanded back the order to AO to consider the documents he was having and pass a fresh order.

When the order was remanded back to the AO to make the fresh assessment then CIT(A) directed AO to made addition for non deduction of TDS also on the payment made by the assessee to that party. Assessee challenged the same with ITAT and it was decided that the CIT(A) had exceeded its jurisdiction because the same matter was not considered before by the AO and also the same was not the matter which was set aside and remanded back for fresh order.

Contention of the assessee:

The assessee was of the view that although the documents which AO demanded was received by the AO after passing of his order but AO was having all the relevant documents like ledger account, bank statements etc which he required to test the genuineness of the party but the AO had not referred the same and again issued a notice u/s 133(6) to the third party to seek confirmation again.

The assessee was of the view that the CIT(A) had exceeded his jurisdiction by directing the AO to disallow the amount paid u/s 40(a)(ia) because the appeal was preferred against the order passed by the AO u/s 254 read with 143(3) of the act and the same matter was never raised before the ITAT and the ITAT had not asked the AO to make the fresh order on the TDS issue.

Contention of the revenue:

Revenue was of the view that the assessee had failed to discharge its onus to prove the genuineness of the claim and moreover the third party failed to respond to the notice of AO issued u/s 133(6). So the party did not seem to be genuine so the addition was to be made u/s 68.

Revenue was of the view that if the question of taxability of new income is concerned which was not dealt earlier then the same could be dealt by the first appellate authority i.e CIT(A).

Held by ITAT:

ITAT held that as the supporting documents were already there in the hands of the AO from whom he can judge the genuineness of the third party, So the disallowance made by the AO is not tenable in spite of the fact that the third party had not replied to the notice issued u/s 133(6).

ITAT held that when the question of taxability of new source of income is concerned which was never raised in the appeal or considered before by the AO in his order then the same cannot be raised by the first appellate authority i.e CIT(A)

Regards
K.K Singh

FINANCE & LAW TODAY: Bogus sales / purchases- Addition based on mere st...

FINANCE & LAW TODAY: Bogus sales / purchases- Addition based on mere st...: Case Law Citation:   ACIT vs. Tristar Jewellery Exports Pvt. Ltd (ITAT Mumbai), I.T.A. No. 7593/Mum/2011, I.T.A. No. 6435/Mum/2013 & I...

Bogus sales / purchases- Addition based on mere statement of supplier not justified

Case Law Citation:  ACIT vs. Tristar Jewellery Exports Pvt. Ltd (ITAT Mumbai), I.T.A. No. 7593/Mum/2011, I.T.A. No. 6435/Mum/2013 & I.T.A. No. 8292/Mum/2011, Date of decision – 31^st July 2015, Assessment year: 2006-07

Brief of the case- ITAT Mumbai has held in the case of ACIT vs. Tristar Jewellery Exports Pvt. Ltd. That Reliance on statement of supplier who confesses to providing accommodation entries without giving assessee right of cross-examination violates principles of natural justice. . A statement recorded at the back of a party cannot be used against such party without confronting such statement to the party. So addition base on such statement are not justified.

Brief Facts of the Case and Grounds of Appeal

Brief Facts of the case:

The Assessee is in the business of purchase and sale of jewellery in the export promotion zone. During the year under consideration, the assessee has purchased diamonds worth Rs. 4,09,12,718/- from M/s Zalak Impex.

As per the record, the completed assessment of the assessee for the year under consideration, i.e. A.Y. 2006-07 was reopened on the basis that information was received from the ITO -25(20(1), Mumbai, that during the survey proceedings conducted at the premises of M/s Zalak Impex. The proprietor of the said entity has confessed in the statement recorded u/s 131 of the Income Tax Act 1961, to have provided accommodation entries in the form of sales and purchases to various parties, including the assessee, who had allegedly obtained bogus bills for non existing purchases of Rs. 4,09,12,718/- during the year. The A.O. added 25% of such alleged bogus purchases to the income of the assessee. The ld. CIT(A) reduced the addition to 7%, amounting to Rs. 35 lacs.

ITA No. 7593/Mum/2011 has been filed by the Department whereas ITA No. 8292/Mum/2011, stands filed by the assessee, against the action of the ld. CIT(A) in restricting the disallowance of 25% of purchases made by the A.O. to 7%. The Department’s contention is that the disallowance had to be confirmed in toto, whereas according to the assessee, the disallowance requires to be deleted in full.

ITA No. 6435/Mum/2013, for A.Y. 2006-07 is Department’s appeal against the ld. CIT(A)’s action of deletion of concealment penalty of Rs. 11,94,545/- imposed on the assessee in the aforesaid matter.

Grounds of Appeal:

The Revenue failed to appreciate that appellant has not given the opportunity to cross-examine Shri Hiten Rawal, proprietor of M/s Zalak Impex even after specifically asking for the same.

Contention of the Revenue:

The Revenue contended that as per the assessment order, the A.O. had asked the assessee to produce Shri Hiten L. Rawal, which the assessee did not do; and that therefore, the addition made by the A.O. was perfectly justified and it ought to have been confirmed in its entirety.

Contention of the Assessee:

It has been submitted that the statement of Shri Hiten L. Rawal, proprietor of Zalak Impex was never provided to the assessee and no opportunity of cross examination of Shri Rawal was afforded to the assessee, thereby leading to the illegal addition, which was wrongly sustained in part by the ld. CIT(A), though it ought to have been deleted in full.

Held by the Tribunal:

It remains undisputed that the assessee was never provided any opportunity to cross examine Shri Hiten L. Rawal, though he specifically asked for such cross examination. On the other hand, the burden was sought to be shifted on the assessee by the A.O., by asking him to produce Shri Rawal, even though it was the A.O. who had relied on the statement of Shri Rawal, without either confronting this statement to the assessee, or providing opportunity to the assessee to cross examine Shri Rawal. Therefore, the reassessment order is as a result of violation of the natural principle of audi alteram partem. A statement recorded at the back of a party cannot be used against such party without confronting such statement to the party.

Also, as the Assessee is in Export Promotion zone, the movement of its goods is controlled and customs approved. The assessee had also submitted customs certified invoices, therefore there was no question of their being bogus purchases. It was noted that the payments made by the assessee to Zalak Impex were through account payee cheques only. Also nothing was brought by Revenue on record to prove that the invoices were fabricated. In the result, ITA Nos. 7593/Mum/2011 and 6435/Mum/2013 filed by the Department are dismissed.

The addition made by Revenue is not sustainable as it did not stand confirmed that the assessee had willfully submitted in-accurate particulars to conceal its income. Therefore the basis of the levy of penalty in question no longer survives. Hence ITA No. 8292/Mum/2011 filed by the assessee is allowed.

Best Regards
K.K Singh

FINANCE & LAW TODAY: Supreme Court Stays Imposition of Service Tax on L...

FINANCE & LAW TODAY: Supreme Court Stays Imposition of Service Tax on L...: Supreme Court  Supreme Court bench comprising Chief Justice H.L. Dattu, Justice A.K. Mishra and Justice Amitava Roy   has  stayed   the...

FINANCE & LAW TODAY: FINANCE & LAW TODAY: Input Tax Credit and Inter GS...

FINANCE & LAW TODAY: FINANCE & LAW TODAY: Input Tax Credit and Inter GS...: FINANCE & LAW TODAY: Input Tax Credit and Inter GST Credit : Input tax credit is the amount of tax paid by  the dealer  on  purchases  f...

Supreme Court Stays Imposition of Service Tax on Lawyers

Supreme Court 

Supreme Court bench comprising Chief Justice H.L. Dattu, Justice A.K. Mishra and Justice Amitava Roy has stayed the Bombay High Court’s order, dated 15.12.2014 in the case of P.C. Joshi Vs. Union of India of dismissing the petition challenging levy of service tax on lawyers.

The Bombay Bar Association has challenged aforesaid order as well as the provision of Sub-clause (zzzzm) of clause (105) to Section 65 of the Finance Act, 1994, which was inserted by the Finance Act, 2011.

Few of the  prominent questions of law, amongst others,  as framed before SC are as below:

Whether the relationship between an advocate and a litigant is that of a provider and a service recipient or whether the relationship is that of  a representative and a litigant ?

Whether the impugned judgment is correct and legal in as much as levy of service tax on the provision of assistance to the court would hit the provision of justice either by the individual or a business entity as both are indisputably guaranteed under right to justice in terms of Article 21 read with Article 39A of the Constitution ?

Bombay High Court 

It is pertinent to note that Bombay High Court while dismissing the petition held that

“the   taxable   service   means   any   service provided or to be provided   to   any   person,   by   a   business entity, in relation to advice, consultancy and assistance in any branch of law, in any manner.”

“legislature by inserting such provision has neither interfered with the role and function of an advocate nor has it made any inroad and interference in the constitutional guarantee of justice to all.  The services provided to an individual client by an individual advocate continues to be exempted from the purview of the Finance Act and consequently Service Tax but when an individual advocate provides service or agrees to provide services to any business entity located in the taxable territory, then, he is included and liable to pay Service Tax.’ The judgment also notes, ‘The Advocates and legal practitioners are known to pay professional taxes   and   taxes   on   their   income.     They   are   also   brought   within   the purview of service tax because their activities in legal field are expanding in the age of globalization, liberalization and privatization. They are not only catering to individuals but business entities.”

Best Regards
K.K Singh