Addition referable to previous year's loans in subsequent year not justifiedFriday, January 6, 2012Mumbai ITAT has in the following case deleted the additions made on account of opening balances of unsecured loans and the notional interest on such loans. The Tribunal held that only fresh loans or additions to the loans during the year in question can be considered for the purpose of addition. Previous years loans cannot be added to subsequent year's income by claiming them to be unexplained. This is one case law which I will suggest everyone to go through. The AO has made arbitrary additions during assessment proceedings, which the Tribunal has deleted by taking strict note of the same and the appeal has been dismissed with costs to the revenue. The AO in this case has made additions on irrelevant grounds. Undisclosed contract receipts are not income but gross receiptsKolkata ITAT has held in the following case namely ITO Vs. M/s St. Joseph Construction that where contract receipts are not disclosed in the return of income, the whole receipt cannot be added to the income of assessee as its a part of gross receipts only, It is the net profit arising or estimated from it, should be added to the income. In this case ITO added the whole of undisclosed contract receipts to the income of the assessee but CIT(A) deleted the addition and added only 8% of such receipts to the income of the assesee, which was upheld by the Tribunal on subsequent appeal. The facts of the case are not complicated and it can be simply understood even by a student studying income tax that contract receipts are always the gross receipts wherefrom the expenses are borne by the assessee and net profit is arrived at thereby. But how the assessing officer fails to understand the same? The assessee had to go for appeal to get the justice. It is generally seen that AO decides the case prima facie only and whenever the question of interpretation of law or fact comes before the AO, they tend to interpret the same in the favour of revenue as if they are representatives of the revenue only. One basic thing should be understood that the assessment proceedings are quasi judicial in nature and the assessee should be met with justice while concluding the proceedings. The AO should not favour either revenue or the assessee, but the case in hand should be decided on the merits. INCOME TAX APPELLATE TRIBUNAL , KOLKATA I.T.A No. 1057/Kol/2011- Assessment Year: 2008-2009 Income Tax Officer Vs M/s. St. Joseph Construction Date of Pronouncement: 26.12.2011 ORDER Per Shri S.V. Mehrotra, Accountant Member This appeal filed by the Revenue is against the order of ld. Commissioner of Income- Tax (Appeals)-XXXVI, Kolkata dated 18.05.2011 for the assessment year 2008-09. 2. Brief facts of the case are that in the relevant assessment year, the assessee-firm derived income from business of civil construction. The assessee had filed its return of income declaring total income of Rs. 68,970/-. The Assessing Officer noticed from the audited Balance sheet and Profit & Loss A/c. the total receipt shown by the firm was at Rs. 57,73,804/-. In support of its receipts, the assessee-firm had filed TDS certificates received from Missionaries of Charity, which certified making a total payment of Rs. 57,73,804/- during the financial year 2007-08. The Assessing Officer observed that while examining the 26AS of the assessee-firm generated from the Departmental data base, it was found that the assessee-firm received the following amounts during the financial year 2007-08 from different organizations and TDS had been deducted accordingly as per chart below :-
From these information’s, the Assessing Officer concluded that the assessee had not disclosed receipts totaling to Rs. 54,55,543/- in its accounts. The Assessing Officer issued summons under section 131 to the Accountant of The Roman Catholic Diocese of Krishnanagar, Nadia, who produced following documents before the Assessing Officer :- (1) Work order of The Roman Catholic Diocese of Krishnanagar given to assessee vide Memo No. CM(K) 2006 dated 20.02.2006, (2) Photocopy of TDS certificate; (3) Photocopy of payment certificate for the financial year 2007-08; (4) Provisional receipt copy of submission of TDS return in Form No. 26Q. From these documents, the Assessing Officer concluded that the assessee-firm had received an amount of Rs. 50,00,000/- from The Roman Catholic Diocese of Krishnanagar during the financial year 2007-08, but the assessee-firm did not disclose this gross receipt as well as income to the revenue. The Assessing Officer has also examined the date of issue of cheque by The Roman Catholic Diocese of Krishnanagar, and also deposit in the assessee’s Bank a/c., the details of which are given at pages 5-6 of assessment order and from these details, he pointed out that the partners of the assessee-firm admitted that an additional amount was received besides the amount specified earlier in the return filed for the assessment year 2008-09. He has reproduced the details from the written submissions of the partners. The Assessing Officer also examined the purchases made by the assessee and from all the details after considering the assessee’s explanation concluded that the assessee concealed the receipts from different organizations amounting to Rs. 54,55,53/- and made an addition of Rs. 54,55,543/-. He also observed that the details of purchases furnished by the assessee from Hindustan Hardware, Krishnanagar, Nadia amounting to Rs. 17,56,021/- were genuine and, therefore, no action was called for on this account. 3. Ld. CIT(Appeals) after considering the assessee’s submissions directed the Assessing Officer to reject the books of accounts of the assessee-firm since the assessee had concealed huge contractual receipts to the tune of Rs. 54,55,543/-. He also directed the Assessing Officer to estimate the profit @ 8% on the entire receipts of Rs. 1,12,29,347/- equivalent to Rs. 8,98,348/-, net of all expenses including salary and interest payments to partners. 4. At the time of hearing, none appeared on behalf of the assessee. Learned Departmental Representative relied on the order of Assessing Officer. 5. We have considered the submissions of ld. D.R. By considering the totality of the facts and circumstances of the case, in our opinion, no interference is called for in the order of ld. CIT(Appeals) as he has directed the Assessing Officer to compute net profit at 8% on the entire receipts including the receipts found to have been concealed by the assessee. In any case, the entire receipts, as added by the Assessing Officer, could not be added because it is not disputed that the impugned amount had been received from the contract work carried on by the assessee. It is not the case of Assessing officer that the source of impugned sum of Rs. 54,55,543/- was other than the business. Therefore, we confirm the order of ld. CIT(Appeals) and reject the ground of appeal taken by the Revenue. 6. In the result, the appeal filed by the Revenue is dismissed. Download new VAT-2 form under PVAT Act, in excel formatMonday, January 2, 2012
Excise & Taxation Department, Punjab has notified new VAT 2 challan form for tax deposits under Punjab VAT Act, 2005. Earlier there were three challan forms namely VAT-2, VAT-2A and VAT-2B, which the dealers had to fill up for depositing tax under PVAT Act, 2005.
This new form replaces all the earlier three forms, now only one form is required to be filled up. This new form is applicable w.e.f 01-01-2012. The new form in excel format can be downloaded herebelow: Due date for efiling of service tax returns for the period April-Sept 2011 further extended to 6.01.2012Thursday, December 29, 2011F. No. 137/99/2011 – Service Tax Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs, ********** New Delhi, the 29th December 2011 Import of Milk and Milk products from China further prohibitedTuesday, December 27, 2011Central Government has extended the prohibtion date till 24.06.2012 for importing Milk and Milk Products (including chocolates and chocolate products and candies/ confectionary/ food preparations with milk or milk solids as an ingredient) from China. Warlier such prohibtion was imposed by a notification dated 03.01.2011.
I think the govt has taken the right step. we all know the quality of products imported into India from China. Such eatable products, if their quality is doubtable, must be barred. The step taken is in the right direction. No penalty u/s 76 or 78, if there is bonafide mistake in calculation of service tax-Delhi HCSaturday, December 24, 2011Delhi High court has held in an important following case that if the assessee makes a bonafide mistake in calculation of service tax then no penalty u/s 76 or 78 can be levied, as it constitutes a reasonable cause for the faliure to deposit due tax. In this case the defence was that it was paying service tax as per its bona fide understanding that the service tax was to be paid on the commission retained by the appellant. It was pleaded that the matter of calculation was not clear to it. Therefore, it had been filing its service tax returns on the basis of the commission retained by it and the correct method of computing the service tax was pointed out by the visiting team of the department. Therefore, the allegation of suppression, mis-statement were wrongly attributed to it. ITR not to be treated invalid, merely because ITR-V is not received at CPC, if no faliure on the part of assessee-Bombay HCFriday, December 23, 2011Bombay High Court has given an important decision in Crawford Bayley & Company Vs. Union of India & Others wherein it has been held that where the assessee has bonafidely sent ITR-V form to CPC by ordinary post, but it has not been received there with CPC, the return of Income cannot become invalid on this ground. The assessing officer can allow the assessee to file ITR-V u/s 139(9) of Income Tax Act, 1961, if assessment has not been completed as yet. CBEC's order regarding documents required for service tax registrationFriday, December 16, 2011CBEC has issued an order under Rule 4(1A) of Service Tax Rules, 1994 stating certain documents whioch are rtequired to be produced along with the service tax registration. These documents are: Copy of PAN Proof of residence Constitution of the applicant Power of attorney in respect of authorised person(s) Stay of disputed income tax demands-some important pointsSunday, December 4, 2011In scrutiny assessments it is sometimes seen that huge demands are created against the assessee by framing high pitched assessments due to difference in opinion on interpretation of law or interpretation of facts or due to the fact that AO is not satisfied with the explanations offered by the assessee in regard to loan creditors or cash credits or gifts etc. Sales to sez unit exempted as zero rated sale and rate of tax deduction on works contractors enhanced to 5% in PunjabFriday, December 2, 2011Section 17 of PVAT Act, 2005 which defines export sales within the scope of section 5 of CST Act i.e export sales as zero rated sales, has been amended so as to add sub-section 2 of section 17 which provides that sale to a unit or developer in special economic zone and inter-unit transaction of goods within SEZ as also a zero rated sales. No output tax is payable on such zero rated sales.
No reversal of ITC on sale lower than purchase price in pursuance of administered prices of oil companies-Rule 21 of PVAT Rules amendedRule 21 of Punjab VAT Rules 2005 has been amended so as to provide a new proviso to Rule 21(2-A) which provides that input tax credit will not be reversed by the taxable person where the sale is effected at lower price than the purchase price in pursuance of the administered prices of oil companies, that is to say Indian Oil Corporation, BPCL, HPCL and HPCL Mittal Energy limited.
Entry Tax Act in Punjab amended-an attempt to remove defects?Sunday, November 20, 2011Punjab Government has promuglated a new ordinance so as to amend the Punjab Tax on Entry of Goods into Local Areas Act, 2000. By this ordinance word "Goods" in the said Act has been defined, section 3-A and section 4 of the said Act has also been amended.
Amendments in entry tax: Collection of tax under section 3-A of the said Act was stayed by Punjab & Haryana High Court in Bhushan Steel case recently.One of the grounds for the grant of such stay was that charging section in the Entry Tax Act was section 3 whereas tax was levied u/s 3-A, which did not even prescribe the taxable event i.e the words "tax on the entry of goods into local areas" was nowhere mentioned u/s 3-A. Section 3-A simply stated that tax may be levied by State Government on such goods at such rates as may be prescribed. Another ground for stay of entry tax was that entry tax was leviable on goods mentioned in the schedule appended to the Act. But no goods were being mentioned in the schedule. By the newly promuglated ordinance the Government has seemed to remove these defects in the Act. Section 3-A has been amended which now runs as under: "3-A Notwithstanding anything contained in sub-sections (1),(2) and (3) of section 3, there shall be levied a tax on under this act on entry of goods into local areas at such rates, as may be specified from time to time by the State Government by notification in the Official Gazette, even if the tax is payable on those goods under the Punjab Value Added Tax Act,2005 or the Central Sales Tax Act, 1956 and in respect of those goods, the provisions of sub-section (5) of section 3, shall not apply. Such tax shall be payable and paid by the dealer in the manner as may be prescribed: The definition of Goods have been incorporated now in the section 2(2)(dd) which defines Goods as "the goods notified for the purpose of entry tax under this Act;" The question now is whether by the above amendments, deferments from entry tax which have been earlier taken by many persons on the behalf of stay granted by Punjab & Haryana High Court have come to an end? Advance tax under VAT justified?: Newly added sub-sections 6(7) & 6(8) under the Punjab VAT Act provide for levy of advance tax on certain goods which are to be notified and also state that entry tax under the said Entry tax Act will be treated as advance tax of VAT. It should be noted that tax levied under Entry Tax Act is being levied under entry 52 of State list of Seventh Schedule to the Constitution of India, whereas Punjab VAT Act has been enacted under entry 54 of the State list. Where entry tax is a tax on the entry of goods into local areas of a State and should be a compensatory tax in nature, VAT is a tax on the sale and purchase of goods within the jurisdiction of the State. The question is whether levy of a single tax under one entry in the State list can be treated as tax levied in the other entry also, when the sphere of both the entries is different altogether? First proviso to newly added section 6(7) provides that advance tax shall be leviable only if such goods are meant for sale or use in manufacturing or processing of any goods for sale. It means that if goods are being imported in the State otherwise than as sale then no advance tax will be payable on such import of goods. One more point is notable here that if goods are imported and used in the manufacturing of tax free goods even then advance tax will be payable as the words used u/s 6(7) is any goods. However second proviso to section 6(7) provides that such tax collected in advance shall be calculated towards the final liability of the taxable person at the end of each tax period. Thus it means that if a person imports some goods on which advance VAT is leviable and thereafter manufacture tax free goods out of it then his final liability will be nil as a result of which if advance tax paid by him has to be counted towards his final liability then such advance tax should be refunded to him at the end of such tax period. It is settled law that collection of tax on some transaction on which otherwise no levy of tax can be made, will not be justified even if there is a provision for refund of such tax afterwards. In CWP No. 19355 of 2010 -KRBL Limited v State of Punjab and others, decided on 14.1.2011, it was held by P&H HC that recovery can be effected only if it is within the competence of the State Legislature. It cannot be recovered initially providing the remedy of refund later on. Thus the above observation also raises a question mark on the levy of advance tax on goods imported iof such goods are being used in manufacture of tax free goods. All the above questions require due consideration and discussion from the legal fraternity as well as the judiciary. The full Ordinances relating to entry tax amendment and relating to advance tax can be downloaded herebelow: Entry Tax ordinance Act of 2011  Addition u/s 68 for unexplained creditors not sustainable when trading results are acceptedWednesday, November 16, 2011Delhi ITAT has held in the following case that where trading results are accepted no addition u/s 68 for unexplained sundry creditors can be made. In this case the assessee could not give the address of creditors nor was able to get the creditors standing in his balance sheet verified, due to the fact that his books of accounts were destroyed in fire and also because of the fact that the creditors were small time karigars who were unregistered with sales tax department and have not filed their return of income due to their income being below the exempted limit. The Tribunal held that when trading results i.e sale and purchases have been accepted then there is no reason why addition for corresponding creditors should be made. Quantification of remuneration in partnership deed is must-Delhi HC takes divergent view than H.P. HCMonday, November 14, 2011Delhi High Court has taken a strict view on quantification of remuneration in a partnership deed for the purpose of deduction u/s 40(b)(v) of Income Tax Act, 1961. High Court has held that quantification of remuneration in partnership deed is a must before deduction u/s 40(b)(v) is allowed. It should be noted that Himachal Pardesh High Court had taken a contrary view in an earlier judgment namely Commissioner of Income tax vs. Anil Hardware Store, [2010] 323 ITR 368 (HP) wherein it was held that quantification of remuneration in a partnership deed is not mandatory so as to claim deduction u/s 40(b)(v).
WCT on works contractors enhanced to 5% under PVAT Act-Public NoticeWednesday, November 9, 2011A public notice has been issued by Excise and Taxation Department, Punjab stating that rate of VAT TDS on payments made to works contractors u/s 27(1) of PVAT Act, 2005, has been enhanced to 5%. Earlier such rate was 4%. However no notification to this effect is publically available as yet on the official website of Department. The public notice also doesnot state from which date the said amendment is effective, it just states at the end that it is effective immidiately. The said Public Notice has been published on 09/11/2011 in a daily newspaper. Registration Process under Punjab VAT Act, 2005 needs to be changed?Sunday, November 6, 2011Section 21 of Punjab VAT Act, 2005 read with Rules 3,4,5,6 of Punjab VAT Rules provides the process for registration. Second proviso to section 21(3) of Punjab Vat Act, 2005 provides that during the pendency of an application for registration the applicant shall file return and pay the due amount of tax, in the prescribed manner. Section 21(3) of PVAT Act is being produced herebelow: “If the designated officer is satisfied that the application for registration is in order, he shall, in accordance with such manner and on payment of such fee, as may be prescribed, register the applicant and grant him a registration certificate in the prescribed form: Section 68-Assessee's AO cannot question his creditor's return of income-Calcutta HCSaturday, November 5, 2011Calcutta High Court in an important case has held that AO of an assessee cannot himself examine the return of income of his creditor instead he should ask creditor's AO and if creditor's AO has accepted claim of assessee in creditor's return of income then he is bound to accept the same.
Brought forward losses can be set off even if subsequent year's returns not filed within time u/s 139(1)-Mumbai ITATMumbai ITAT has held that assessee can set off brought forward loss in the subsequent years even if subsequent year's return of income is not filed within time as prescribed u/s 139(1). It is being held that Once loss is determined in the return file u/s.139(3), the assessee becomes eligible for set off against the income of the subsequent years irrespective of the fact whether the returns of such later years are filed u/s.139(1) or not. Sec. 80 read with sec. 139(3) requires the submission of return for loss before the due date. There is no such requirement that the subsequent years, in which the set off is claimed, must also fulfill the requirement of furnishing the returns within the time required u/s.139(1). Service Tax- Penalty u/s 76 and 78 mutually exclusive, cannot be imposed simultaneouslyPunjab & Haryana High Court in CCE vs Cool Tech Corporation has upheld that penalty u/s 76 and 76 of Finance Act, 1994 cannot be imposed simultaneously after the amendment of 16-05-2008 whereby both the sections became mutually exclusive. In this case the matter was of before the said amendment. The appellate authority deleted the penalty u/s 76.
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