Strictures passed against the CBDT for seeking to take advantage of its own wrong and disregarding genuine hardship of taxpayers. Due date for filing ROI extended to 30.11.2014 subject to charge of s. 234A interest
(vi) The CBDT ought to have responded to the representation. Instead, it chose not to respond but later before this Court in no uncertain terms has termed such a request impermissible on the ground that the grievances are not sustainable. Therefore, considering the larger cause of public good and keeping in mind the requirement of promotion of justice, we chose to exercise the writ of mandamus directing the CBDT to extend the date of filing of return of income to 30.11.2014, which is due date for filing of the TAR as per the Notification dated 20.08.2014. Such extension is granted with the qualification that the same may not result into non-charging of interest u/s 234A
The NTT Act “crosses the boundary” & is unconstitutional. CAs/CSs are specialists on accounts & facts and are not capable of arguing/ deciding ‘Substantial Questions Of Law’
A perusal of the reported judgements shows that while deciding tax related disputes, provisions of different laws on diverse subjects had to be taken into consideration. The Members of the NTT would most definitely be confronted with the legal issues emerging out of Family Law, Hindu Law, Mohammedan Law, Company Law, Law of Partnership, Law related to Territoriality, Law related to Trusts and Societies, Contract Law, Law relating to Transfer of Property, Law relating to Intellectual Property, Interpretation of Statutes, and other Miscellaneous Provisions of Law, from time to time. The NTT besides the aforesaid statutes, will not only have to interpret the provisions of the three statutes, out of which appeals will be heard by it, but will also have to examine a challenge to the vires of statutory amendments made in the said provisions, from time to time. They will also have to determine in some cases, whether the provisions relied upon had a prospective or retrospective applicability. Keeping in mind the fact, that in terms of s. 15 of the NTT Act, the NTT would hear appeals from the Income Tax Appellate Tribunal and the CESTAT only on “substantial questions of law”, it is difficult for us to appreciate the propriety of representation, on behalf of a party to an appeal, through either Chartered Accountants or Company Secretaries, before the NTT. The determination at the hands of the NTT is shorn of factual disputes. It has to decide only “substantial questions of law”. In our understanding, Chartered Accountants and Company Secretaries would at best be specialists in understanding and explaining issues pertaining to accounts. These issues would, fall purely within the realm of facts. We find it difficult to accept the prayer made by the Company Secretaries to allow them, to represent a party to an appeal before the NTT. Even insofar as the Chartered Accountants are concerned, we are constrained to hold that allowing them to appear on behalf of a party before the NTT, would be unacceptable in law. We accordingly reject the claim of Company Secretaries, to represent a party before the NTT. We simultaneously hold s. 13(1), insofar as it allows Chartered Accountants to represent a party to an appeal before the NTT, as unconstitutional and unsustainable in law.
Non-Extension Of due date for filing ROI will cause “substantial hardship“. CBDT must look into practical difficulties & take “just and proper” decision before 30.09.2014
In view of the fact that the Madras High Court has already directed the CBDT to examine the representation of the assessees in general, before 30.09.2014, we feel it appropriate that the above representation of the Petitioners is also considered by the CBDT. Though we do not wish to express any view of the legalities of various issues involved, it does appear to us, from the arguments advanced, that there will be substantial hardship caused to the assessees, if the date of filing Return is not suitably extended. We hope and trust that CBDT will look into all these practical difficulties enumerated above and take a just and proper decision on the matter, before 30.09.2014, as already directed by the Madras High Court. In case the Petitioners are entitled to any further relief in view of the orders passed in various petitions filed in other High Courts, this order would not preclude the Petitioners from claiming the same.
S. 80-IB(10)(d): Limit on extent of commercial area of housing project inserted w.e.f. 1.4.2005 does not apply to projects approved before that date
(i) Clause (d) of s. 80-IB(10) is a condition that relates to and/or is linked with the approval and construction of the housing project and the Legislature did not intend to give any retrospectivity to it. At the time when the housing project is approved by the local authority, it decides, subject to its own rules and regulations, what quantum of commercial area is to be included in the said project. It is on this basis that building plans are approved by the local authority and construction is commenced and completed. It is very difficult, if not impossible to change the building plans and / or alter construction midway, in order to comply with clause (d) of s. 80-IB(10). It would be highly unfair to require an assessee to comply with s. 80-IB(10)(d) who has got his housing project approved by the local authority, before 31.03.2005 and has either completed the same before the said date or even shortly thereafter, merely because the assessee has offered its profits to tax in AY 2005-2006 or thereafter. It would be requiring the assessee to virtually do a humanly impossible task. This could never have been the intention of the Legislature and it would run counter to the very object for which these provisions were introduced, namely to tackle the shortage of housing in the country and encourage investment therein by private players. It is therefore clear that clause (d) of s. 80-IB (10) cannot have any application to housing projects that are approved before 31.03.2005.
S. 113 Proviso inserted by FA 2002 w.e.f. 01.06.2002 to impose surcharge in search assessments is not clarificatory or retrospective. Suresh Gupta 297 ITR 322 (SC) overruled
There cannot be imposition of any tax without the authority of law. Such a law has to be unambiguous and should prescribe the liability to pay taxes in clear terms. If the concerned provision of the taxing statute is ambiguous and vague and is susceptible to two interpretations, the interpretation which favours the subjects, as against there the revenue, has to be preferred. This very principle is based on the “fairness” doctrine as it lays down that if it is not very clear from the provisions of the Act as to whether the particular tax is to be levied to a particular class of persons or not, the subject should not be fastened with any liability to pay tax
S. 254(1): Unnecessary remand by the ITAT causes prejudice and amounts to a failure to exercise jurisdiction
The Tribunal should not have refused to consider and decide the issue relating to service charges, more so, when an identical view taken by it earlier has not found favour of this Court. This Court repeatedly reminded the Tribunal of its duty as a last fact finding authority of dealing with all factual and legal issues. The Tribunal failed to take any note of the caution which has been administered by this Court and particularly of not remanding cases unnecessarily and without any proper direction. A blanket remand causes serious prejudice to parties. None benefits by non-adjudication or non-consideration of an issue of fact and law by an Appellate Authority and by wholesale remand of the case back to the original authority. This is a clear failure of duty which has to be performed by the Appellate Authority in law. Once the Appellate Authority fails to perform such duty and is corrected on one occasion by this Court, and in relation to the same assessee, then, the least that was expected from the Tribunal was to follow the order and direction of this Court and abide by it even for this later assessment year. If the same claim and which was dealt with by the Court earlier and for which the note of caution was issued, then, the Tribunal was bound in law to take due note of the same and follow the course for the later assessment years. We are of the view that the refusal of the Tribunal to follow the order of this Court and equally to correct its obvious and apparent mistake is vitiated as above. It is vitiated by a serious error of law apparent on the face of the record. The Tribunal has misdirected itself completely and in law in refusing to decide and consider the claim in relation to service charges.
S. 253: Filing appeals in disregard & wilful disobedience to the law laid down constitutes gross abuse of power and deserves to be punished for contempt of court and by award of exemplary costs. Action not pursued in view of written apology of concerned officials
(i) This case is one of gross misuse of powers by the lower authorities. The AO in complete disregard and disobedience to the orders of the Tribunal as well as of the Hon’ble High Court again confirmed the disallowance while framing assessment u/s 153A without any incriminating material being found during the search. The act of negating the orders of the higher authorities in the very same case and thereby disallowing the claim of the assessee in the s. 153A proceedings without any new evidence or incriminating material being found amounts to the gross abuse of process of law in complete disregard and disobedience to the orders of the higher authorities and is an act which tends to lower down the authority of the higher courts. We may observe that if at all the issue will be decided by the Hon’ble Supreme Court in favour of the Revenue, then the orders of the lower authorities in that event would automatically merge in the order of the Supreme Court and implemented accordingly. However, the mere filing of appeal before the Hon’ble Supreme Court gives no authority to the AO to negate, disobey and disrespect to the orders of the higher authorities in the very same case. We may further notice that even after the decision of the CIT(A) in favour of assessee, the concerned CIT-Admin has given approval for filing the second round of appeal in the same case ignoring and in complete disregard and disobedience to the orders of the Tribunal as well as of the High Court vide which the issue in dispute has already been settled;
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.
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.
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)