Month: March 2018

CBDT Instructions Reg Irregularities In CIT(A) Appellate Orders

Posted on March 9, 2018 by staff

MASTI

The CBDT has issued instructions on the issue of irregularities in appellate orders issued by Commissioners of Income-tax (Appeals).

Attention has been drawn to the earlier Instruction No. 20/2003 dated 23.12.2003 issued by the CBDT.

In the said instruction, the CBDT directed that appellate orders should be issued by the CIT(A) within 15 days of the last hearing.

The CBDT reiterated the instruction vide letter F. No. 279/Misc.53/2003-ITJ dated 19.06.2015 and directed that there should be strict compliance.

The instructions of the CBDT are also applicable to orders passed by the CIT (Administrative)/ CCIT as regards matters within their purview under different sections of the Income Tax Act.

The Directorate of Organisation and Management Services (DOMS) has also issued the Manual of Office Procedure.

The Manual prescribes that all appellate orders should be despatched either by registered post or through a notice server without waiting for the appellant to file an application in this regard.

The CBDT has stated that any delay in uploading of appeal orders on ITBA or violation of the instructions regarding dispatch of appeal orders gives rise to suspicions about backdating of orders and/ or malafide intent on the part of officer/ officials concerned.

Text of CBDT’s Instruction dated 8th March 2018 regarding Irregularities in Appellate Orders

F.No. DGIT(Vig.)/HQ/SI/Appeals/2017-18/9959
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

New Delhi-110001

Dated: 8th March, 2018

Subject: Irregularities in Appellate Orders — instructions — reg.

CBDT has issued Instruction No. 20/2003 dated 23.12.2003 directing for issue of appellate orders within 15 days of the last hearing. The Instruction was reiterated vide CBDT letter F. No. 279/Misc.53/2003-ITJ dated 19.06.2015 for strict compliance. The instructions are also applicable to orders passed by the CIT (Administrative)/ CCIT as regards matters within their purview under different sections of the Income Tax Act. The idea behind such stipulations was to alleviate undue hardship to the assessee and to have a smooth interface with the assessee.

2. Further, the Manual of Office Procedure issued by the Directorate of Organisation and Management Services mandates immediate dispatch of appeal order either by registered post or through a notice server without waiting for the appellant to file an application in this regard. Delay in uploading of appeal orders on ITBA or violation of the instructions regarding dispatch of appeal orders gives rise to suspicions about backdating of orders and/ or malafide intent on the part of officer/ officials concerned.

3. Even as the orders are dispatched by the office staff working in the office of CIT (Appeals), it is the responsibility of the CIT (Appeals) to ensure that the CBDT instructions are followed by his office staff in letter and spirit. Violation of CBDT instructions by office staff reflects adversely on the supervisory capabilities of the Officer for not being able to control/ motivate a handful of staff to follow CBDT instructions. Such supervisory failure is also violative of Rule 3(2)(i) of the CCS (Conduct) Rules, 1964.

4. Many technical and legal lapses have also been noticed during vigilance inspections of CIT (Appeals). For instance in some cases the Assessing Officers made additions towards unsecured loans and/ or share application money after detailed inquiries and bringing clear facts on record that either the creditor was not traceable or had no or meagre source of income or could not produce bank account details or could not explain the source of deposits just before advancing loan. The CsIT (Appeals) gave relief primarily on legal grounds without considering the facts on record and without making any further inquiry in the matter. In one case, the CIT (Appeals) accepted the explanation that cash deposits in bank account which were added by the Assessing Officer as unexplained, represented the business receipts of the assessee, despite the fact that no books of accounts were maintained by the assessee for this business activity. In some other cases, the additions were deleted in a summary manner solely on the ground that opportunity of cross examination was not given to the assessee. The CIT (Appeals) could have given the opportunity of cross examination to the assessee rather than summarily deleting the additions in such cases since it has been held by Hon’ble Apex Court in a number of cases that the scope of power of CIT (Appeals) is coterminous with that of the Assessing Officer.

5. In one case it was found during vigilance inspection that the CIT (Appeals) had not been passing the appellate orders but was showing disposal in statistical statements on a regular basis. This was not noticed by the Chief Commissioner of Income Tax who was supposed to inspect the work done by the CIT (Appeals). Such a situation would not have arisen if the Chief Commissioner of Income Tax concerned had conducted inspection of the CIT (Appeals) as mandated by CBDT Instruction No. 16/2008 dated 04.11.2008.

6. In view of discussion in the preceding paragraphs, it is once again reiterated that the CIT (Appeals) should abide by the instructions of CBDT regarding timely issue and dispatch of appellate orders in letter and spirit. It is also important to note that the Apex Court has held that CIT (Appeals) has plenary powers in disposing of an appeal. These powers must be used by CIT (Appeals) judiciously while passing appellate orders.

7. The Chief Commissioners of Income Tax should keep in mind that in the matters of corruption, unless otherwise evidenced, the vicarious liability of a supervisory officer can become absolute, if the supervisor who has the right, ability or duty to control the activities of a subordinate does not take steps to prevent the acts of misdemeanor by the subordinate. Failure of the Chief Commissioners of Income Tax to conduct regular inspections of the CIT (Appeals) working under them or failure to keep a watch on the quality and quantity of orders would be viewed adversely by the CBDT.

8. This issues with the approval of Chairman, CBDT.

(Rakesh Gupta)

ADG (V) HQ–I, CBDT

New Delhi

S. 147 Reopening Of Assessment In Audit Objection | Read Latest Bombay High Court Judgement

Posted on March 8, 2018 by staff

MASTI

The question whether an assessment can be reopened under section 147 of the Income-tax Act pursuant to an audit objection was considered in the Bombay High Court’s latest judgement.

In Commissioner of Income Tax – 17 Versus Rajan N. Aswani the Bombay High Court noted that in Hindustan Lever (Supra), the Assessee had challenged a reopening notice which was issued beyond a period of four years from the end of relevant Assessment Year. The reasons in support of notice therein did not indicate any failure on the part of the Assessee to fully and truly disclose all material facts.

the Court observed that it is not open to the Assessing
Officer to improve upon the reasons recorded at the time of
issuing the notice. In that case it is observed that the Assessing
Officer speaks through his reasons and these reasons cannot be
improved upon by the Assessing Officer.

The Bombay High Court has held in the latest judgement that when the reopening notice was issued, the Apex Court decision was not available and there was a divergence of views. This has to be read in the context of the Assessing Officer’s response to the audit objection on the above issue duly supported by case law.

The Court held that a reopening notice cannot be issued notice by the Assessing Officer on the very ground which he had opposed in response to the query from the Audit.

It was held that this issue stands concluded in favour of the
Assessee by the decisions of the Bombay High Court in IL & FS Investment Managers Ltd. V/s. Income Tax Officer 298 ITR 32 and The Commissioner of Income Tax Vs. M/s. Reliance Industries
Ltd Income Tax Appeal No.200 of 2013 decided on 1st February 2016 and the decisions of the Delhi High Court in AVETC Ltd. v. DCIT (2015) 370 ITR 611 (Delhi) and the Gujarat High Court in
the cases of Jagat Jayantilal Parikh v. Deputy Commissioner
of Income Tax (2013) 355 ITR 400 (Guj.) and Raajratna Metal Industries Ltd. v. Assistant Commissioner of Income Tax (2015) 371 ITR 222 (Guj.)

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

INCOME TAX APPEAL NO. 606 OF 2015

The Commissioner of Income Tax – 17, Mumbai … Appellant

Versus

Shri Rajan N. Aswani …Respondent

Mr. Prakash Chandra Chhotaray, for the Appellant.

Mr. Satish Mody, i/b. Aasifa K. Khan for the Respondent.

CORAM: M.S.SANKLECHA & RIYAZ I. CHAGLA, JJ.

DATED: 24TH FEBRUARY 2018

PC:-

1. This Appeal under Section 260A of the Income Tax Act, 1961 (“The Act” for short), challenges the order dated 6 August 2014 passed by the Income Tax Appellate Tribunal (“The Tribunal” for short). The impugned order dated 6 August 2014 is in respect of Assessment Year 2004-05.

2. Mr. Chhotaray, the learned Counsel for the Revenue, urges only the following question of law for our consideration:- Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in quashing the reopening of the assessment particularly when the assessment was reopened within a period of four years from the end of the assessment year?

3. Mr. Mody, the learned counsel appearing for the Respondent at the very outset point that the issue raised herein namely can a reopening be issued notice by the Assessing Officer on the very ground which he had opposed in response to the query from the Audit is no longer res integra. It is submitted that this issue stands concluded in favour of the Respondent – Assessee by the decisions of this Court in IL & FS Investment Managers Ltd. V/s. Income Tax Officer1 and The Commissioner of Income Tax Vs. M/s. Reliance Industries Ltd.2 To the same effect, he submits are the decisions of the Delhi High Court in AVETC Ltd. v. DCIT3 and the Gujarat High Court in the cases of Jagat Jayantilal Parikh v. Deputy Commissioner of Income Tax4 and Raajratna Metal Industries Ltd. v. Assistant Commissioner of Income Tax5. 1 298 ITR 32. 2 Income Tax Appeal No.200 of 2013 decided on 1st February 2016. 3 (2015) 370 ITR 611 (Delhi). 4 (2013) 355 ITR 400 (Guj.) 5 (2015) 371 ITR 222 (Guj.)

4. However, Mr. Chhotatry, the learned counsel for the Revenue submits that in the present case facts are completely distinguishable. Therefore, according to him, the aforesaid decisions will not govern this particular case. This primarily on the following grounds:-

a) The reasons recorded do not indicate that the same has been issued on the basis of audit objection. Therefore as held by this Court in Hindustan Lever Limited Vs. R.B. Wadkar 268 ITR 332, one cannot go behind the reasons recorded in support of the notice to infer that he has acted on the basis of audit objection.

b) The response of non-acceptance by the Assessing Officer to the audit objection was in October 2007. It was almost one and half years thereafter i.e. 19th March 2009 that the reopening notice was issued. Therefore, it is possible for the Assessing Officer to have changed his mind in the interregnum and come to the conclusion that his earlier opposition to the audit objection was not justified. In support he relies upon the decision of the Apex Court in A.L.M. Firm V. CIT(1991) 189 ITR 285.

c) The impugned order of the Tribunal is perverse in as much as without any basis it has come to the conclusion that the Assessing Officer had issued the notice on the basis of audit objection; and

d) The decision of the Apex Court in Liberty India v. CIT(2009) 317 ITR 218 (SC). decides the issue in favour of the Revenue with regards to the merits of the issue viz. not entitled to duty drawback incentive deduction under Section 80IB (4) of the Act.

5. The first grievance of the Revenue that in view of the decision of this Court in Hindustan Lever (Supra), it is not open to go behind the reasons recorded by the Assessing Officer. The reasons as recorded by the Assessing Officer it is submitted by the Revenue nowhere indicates that it was issued by the Assessing Officer on account of the audit objection.

We note that in Hindustan Lever (Supra), the Assessee had challenged a reopening notice which was issued beyond a period of four years from the end of relevant Assessment Year. The reasons in support of notice therein did not indicate any failure on the part of the Assessee to fully and truly disclose all material facts.

In that context the Court observed that it is not open to the Assessing Officer to improve upon the reasons recorded at the time of issuing the notice. In that case it is observed that the Assessing Officer speaks through his reasons and these reasons cannot be improved upon by the Assessing Officer. No substitution or deletion is permissible nor inferences therefrom are permitted.

This is completely different from the present facts where an Assessee points out that the reasons recorded by the Assessing Officer are not his own reasons and therefore, the reopening notice issued under Section 148 of the Act on the basis of such reasons are without jurisdiction. In such cases one would necessarily have to look at the surrounding circumstances which led to the issue of the reopening notice and recording of the reasons.

Thus it is not a case of adding to the reasons and / or varying the reasons recorded by the Assessing Officer but pointing out how the Assessing Officer having himself concluded that no income chargeable to tax has escaped assessment, on the very ground has now issued the reopening notice. Thus there is no merit in this objection of the Revenue.

6. The second grievance of the Revenue is that there is a time gap between the Assessing Officer’s response to the audit objection contesting that any income chargeable to tax has escaped audit and his issuing the reopening notice. This according to the Revenue would indicate that the Assessing Officer has possibly applied his mind, in the interregnum once again to the facts and has now come to the conclusion independently of the audit objection, that the income chargeable to tax has escaped assessment.

There is no evidence of the same on record. In any event in such a case the least that is expected of the Assessing Officer is to record in his reasons that he had earlier opposed the objection of the audit and the reason for the change of view on his part. It cannot be that passage of time would alone by itself indicate that there has been a fresh application of mind to the order passed under Section 143 (3) of the Act leading to his reason to believe that the income chargeable to tax has escaped assessment.

One more fact that must not be missed is that reasons recorded itself indicates that “it is noticed from the Assessment records that the Assessee….”. On being specifically asked, Mr. Chhotaray very fairly informed us that the audit objection would be a part of the assessment records. Therefore, there is evidence on record that the audit objection was considered while issuing the reopening notice and there is nothing on record to even remotely suggest that in view of the delay in issuing the notice, the Assessing Officer applied his mind afresh (without being influenced by audit objection) to come to the same view as indicated in the audit objection.

The reliance upon A.L.A. Firm (Supra) of the Apex Court is inappropriate as it was not rendered in the context of any audit objection or any issue of nonapplication of mind by the Assessing Officer to issue the reopening notice. Thus there is no merit in this objection.

7. The third grievance of the Revenue is that the impugned order is perverse in as much as it holds that the Assessing Officer did not apply his mind is without any basis. This we do not accept. The impugned order records the fact that it had examined the Assessing Officer’s letter to the audit objection in respect of grant of deduction under Section 80IB (4) of the Act.

The response of the Assessing Officer’s as contained in letter dated 29 October 2007 was before the Tribunal as a part of the paper book and in that letter, it has been mentioned at length on the basis of case law as existing in the relevant time that in his understanding of law the Respondent was entitled to the deduction under Section 80 IB (4) of the Act in respect of duty drawback incentive.

Further the impugned order of the Tribunal also reproduced the audit objections as well as the reasons recorded and on comparing the two comes to a view that in substance both of them are identical. In the above view, it cannot even be remotely suggested that the impugned order of the Tribunal is perverse. Thus there is no merit in this objection of the Revenue.

8. The last submission on behalf of the Revenue was that the decision of the Apex Court in LibertyIndia (Supra) has finally settled the issue of entitlement of deduction under Section 80 IB (4) of the Act viz. duty drawback claim in favour of the Revenue. Thus no fault can be found with the reopening notice as Apex Court order merely clarifies what the law always was and does not make the law.

There can be no quarrel with the above proposition that the Supreme Court only declares the law. However, the decision of the Apex Court in LibertyIndia (Supra) was rendered on 31st August 2009 and the notice seeking to reopen the Assessment year for Assessment Year 2004-05 was issued on 18th March 2009.

Therefore, at the time when the reasons for issue of reopening notice was recorded by the Assessing Officer, he could not have had any reasonable belief on the basis of Apex Court decision in Liberty India (Supra) to come to a prima facie view that income chargeable to tax has escaped assessment. In this appeal we are concerned with the issue of jurisdiction of the Assessing Officer to issue the reopening notice and not with the merits of the dispute.

Thus when the reopening notice was issued in March 2009, the Apex Court decision was not available and there was a divergence of views. This has to be read in the context of the Assessing Officer’s response to the audit objection on the above issue duly supported by case law. In the above view, we find no merit in this grievance of the Revenue also.

9. According to us, the issue is concluded by the decisions of this Court in Reliance India Ltd. (Supra) and IL &FS Investment (Supra) as well as the Gujarat and Delhi High Court Jagat Parikh (Supra) and Raajratna Metal (Supra) and AVTEC (Supra) in favour of the Respondent – Assessee. Therefore in the present facts the view taken by the Tribunal is a possible view and does not give rise to any substantial question of law.

10. Accordingly, the Appeal dismissed. No order as to costs.

(RIYAZ I. CHAGLA J. ) (M.S.SANKLECHA, J.)

Section 36(1)(viii) & 143(1)(a) Law Explained by Bombay High Court

Posted on March 8, 2018 by staff

MASTI

In this latest judgement of the Bombay High Court in Bajaj Auto Finance Ltd v/s. Commissioner of Income Tax, Pune the law on the applicability of Section 36(1)(viii) & 143(1)(a) of the Income-tax Act have been explained in detail.

M.S. SANKLECHA & RIYAZ I. CHAGLA J.J of the Bombay High Court have held in the latest judgement that mere making of provision for bad debts will not by itself (on application of amended law) entitle the party to deduction.

The Bombay High Court has held in the judgement that it would be a matter where the assessee should be given an opportunity to establish its claim by producing its evidence of the manner in which it treated the provision of bad debts written off in accounts as well as in its Balance Sheet.

The judgement of the Bombay High Court also holds that disallowance cannot be made by intimation under section 143(1)(a) of the Act, as it requires that a party be given an opportunity to establish its claim before disallowing it.

The Court observed that it would have been a completely different matter if the Apex Court had ruled that in no case can provision for bad debts be allowed as a bad debt under section 36(1)(vii) of the Act.

Ultimately, the latest judgement of the Bombay High Court holds that the allowance of the claim of provision for bad debt is entirely dependent upon how it is reflected in the Balance Sheet and its accounts. Therefore, for the above purpose it is necessary that the party to be given an opportunity to establish its claim. Therefore, in the present facts, adjustment by way of disallowing deduction by intimation under section 143(1)(a) of the Act is not proper.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION

INCOME TAX REFERENCE NO. 25 OF 2000

Bajaj Auto Finance Ltd. .. Applicant
v/s.
Commissioner of Income Tax, Pune .. Respondent
Ms. Vasanti Patel for the applicant Mr. Charanjeet Chanderpal a/w Ms. Namita Shirke for the respondent CORAM : M.S. SANKLECHA & RIYAZ I. CHAGLA J.J.

Judgment Reserved on : 12th February, 2018.

Judgment Pronounced on : 23rd February, 2018. ORAL JUDGMENT : (Per M.S. Sanklecha, J.)

1. This Reference under Section 256(1) of the Income Tax Act, 1961 (the Act) at the instance of the applicant assessee seeks our opinion on the following question of law:-

(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the Assessing Officer was justified in making an adjustment u/s 143(1)(a) relating to disallowance of the claim for bad debts under Section 36(1)(viii) in respect of a sum of Rs.1,69,37,818/- representing “provision for doubtful overdue installments under hire purchase finance agreements”?

2. This Reference relates to Assessment Year 1993-94. The facts Uday S. Jagtap 1 of 15 25-2000-ITR-Judgment=.doc leading tot he present Reference as set out in the Statement of Case are as under :-

“2. The assessee company had debited in its profit and loss account a sum of Rs.1,69,37,818/- representing “provision for doubtful overdue installments under Hire Purchase Finance Agreements”. In its return of income, the assessee claimed the said provision as bad debts u/s 36(1)(vii) of the Income Tax Act. In the Notes on computation of total income submitted with the return, it was clarified that the said amount was claimed as a deduction, relying on the decision of the Gujarat High Court in the case of Vithaldas H.Dhanjibhai Bardanwala (130 ITR 95). The Assessing Officer disallowed the claim u/s 141(1)(a) on the ground that the amount represented mere provision for doubtful debts and, as such, could not be treated as bad debts. The assessee filed an application u/s 154 for deletion of the adjustment. It was contended before the Assessing Officer that the adjustment could not be made in respect of a provision for doubtful installments, as its allowability was a debatable issue. The Assessing Officer rejected the application u/s 154.

3. It was contended before the learned C.I.T.(A) that since the “provision for doubtful overdue installments under Hire Purchase Agreement” had been debited to the profit and loss account, the assessee should be treated to have satisfied the conditions laid down u/s 36(1)(vii) read with Sec.36(2). In this regard, reliance was placed on the decision in the case of Vithaldas H. Dhanjibhai Bardanwala V. Commissioner of Uday S. Jagtap 2 of 15 25-2000-ITR-Judgment=.doc Income Tax, (130 ITR 95 – Guj.) and Industrial Credit & Investment Corporation of India Ltd. V. IAG (32 ITD 315 – Bom.Trib). It was further contended that since the courts have held that once the condition for ‘writing off’ is satisfied and the concerned amount has been debited to the profit and loss account and credited to Bad Debt Reserve account, it was not necessary to actually write off the concerned bad debt in the ledger account of the concerned parties. In view of this, the question whether “provision for overdue installments” was an allowable deduction or not was a debatable issue and accordingly could not be made the subject matter of adjustment u/s 143(1)(a) of the Act. According to the assessee, since the Assessing Officer was not competent to examine the claim of deduction of ‘provision’ without conducting further enquiries in the matter, which was permissible only after issuing a notice u/s 143(2), he was not competent to issue intimation of adjustment and reject the assessee’s prayer made for rectification u/s 154.

4. Before the Tribunal, the same pleas were reiterated as had been made in the first appeal. Further reliance was placed upon the decision of the Bombay High Court in the case of Khatau Junkar Ltd. V. K.S. Pathania (196 ITR 55), decision of the Delhi High Court in S.R.F. Charitable Trust Vs. Union of India (193 ITR 95) and the decision of the Bombay High Court in Bank of America N.T. & S.A. Vs. Dy.CIT (200 ITR 739)

5. As against the above, it was submitted by the learned departmental representative that the assessee’s claim of deduction in respect of “provision for doubtful overdue Uday S. Jagtap 3 of 15 25-2000-ITR-Judgment=.doc installments under Hire Purchase Finance Agreements” was prima facie inadmissible on the basis of the information available in the return, accounts and documents within the meaning of clause (iii) of first proviso to claim (a) of sub-sec. (1) of sec. 143 and, therefore, the Assessing Officer was fully justified in issuing an intimation of adjustment. The assessee in fact had made a separate claim of deduction for an amount of Rs.47,42,762/- in respect of ‘bad debts’. This claim of bad debts appeared separately immediately after the claim of ‘provision for doubtful overdue installments under Hire Purchase Finance Agreements” in Schedule 10 of the assessee’s accounts for the year. Thus, according to its own showing of the assessee, the claim of deduction of Rs.1,69,37,818/- on account of “provision for doubtful overdue installments under Hire Purchase Finance Agreements” was a distinct and separate item of deduction and was not treated as equivalent to a claim for bad debts. Elaborating his discussion, the learned departmental representative submitted that, firstly, the “provision for doubtful overdue installments” could not validly be held to be write off of irrevocable debts so as to be treated as bad debt. Secondly, this claim was not made with reference to any specific debts which were perceived to be bad debt. Rather, it was a provision of an ad-hoc nature and was part of the annual exercise which the assessee made in all the preceding years and the subsequent years. With a view to buttress his argument, the learned departmental representative referred to the annual reports and accounts of the assessee for the immediately preceding and subsequent years. In the Uday S. Jagtap 4 of 15 25-2000-ITR-Judgment=.doc accounts for all these years, the claim of deduction on account of “provision for doubtful overdue installments under Hire Purchase Finance Agreements” had been reversed in the immediately succeeding year to the last rupee. In all these years, a separate claim of deduction had always been made in respect of the debts which were perceived as ‘bad debts’. According to the learned departmental representative, debiting the profit and loss account with the total amount of overdue installments under Hire Purchase Agreements and treating them collectively as doubtful debts and making provision for them could not be held to be equivalent to write off irrevocable debts as bad debts. In this connection, the learned departmental representative referred to the following decisions:-

(1) Kantilal Chimanlal Shah V. CIT(26 ITR 303 Bom).
(2) Sidhramappa Andannappa Manvi V.CIT(21 ITR 333 Bom.) (3) Jethabhai Hirji & Jethabhai Ramdas V.CIT(120 ITR 792.Bom.) (4) Jadhavji Narsidas & Co. V. CIT(47 ITR 411-Bom.) (5) CIT V. Pranlal Kesurdas (49 ITR 931 – Bom.)

6. The Tribunal, after consideration of all the relevant facts and circumstances and the relevant provisions of law and the case law cited before it, came to be conclusion that on the basis of the return of income itself and the accounts and documents accompanying it, the claim of “provision for doubtful overdue installments under Hire Purchase Finance Agreements” was clearly distinct and separate from one of claim of bad debt and Uday S. Jagtap 5 of 15 25-2000-ITR-Judgment=.doc was prima facie inadmissible on its own tenor. The Assessing Officer was, therefore, justified in issuing an intimation of adjustment and rejecting the assessee’s application u/s 154. For the same reason, the learned CIT(A) was justified in dismissing the assessee’s appeal. The assessee’s appeal before the Tribunal was accordingly dismissed.”

6. Ms. Patel, learned Counsel appearing in support of the application submits as under :-

(a) relief / deduction of provision of bad debt claimed in the return of income cannot be disallowed by way of intimation under Section 143(1)(a) of the Act when the issue prima facie gives rise to a debatable issue;

(b) the claim for deduction of provision for bad debts under Section 36(1)(vii) of the Act was made on basis of the decision of Gujarat High Court in the case of Vithaldas H.Dhanjibhai Bardanwala Vs. Commissioner of Income Tax, 130 ITR 95 as is evident from note in the return. Therefore, disallowance of a claim which has been allowed by High Court, would at the very least be a debatable issue;

(c) the words “prima facie inadmissible” found in clause (iii) of Section 143(1)(a) of the Act, has been construed by this Court in Khatau Junkar Ltd. Vs. K.S. Pathania, 196 ITR 157 to mean not available on the face of it i.e. where no further inquiry is necessary to Uday S. Jagtap 6 of 15 25-2000-ITR-Judgment=.doc hold so. However, when there is a different interpretation accepted by Court, then, adjustment under Section 143(1)(a) of the Act is not permissible. It would at the very least require giving an opportunity to the assessee to support his claim before disallowing the same.

(d) Instruction No.1814 dated 4th April, 2009 issued by the Central Board of Direct Taxes (CBDT) explains the scope of the word “prima facie disallowance” under Section 143(1)(a) of the Act as being different from a debatable issue. It clarifies that a debatable issue is one where a claim made by an assessee on the basis of a decision of a Court / Tribunal. A debatable claim cannot be disallowed by an intimation under Section 143(1)(a) of the Act; and

(e) the decision of the Apex Court in Vijaya Bank Vs. Commissioner of Income Tax, 323 ITR 166, also supports the view that at the relevant time, the issue of allowing provision for bad debts as a deduction under Section 36(1)(vii) of the Act is an debatable issue. Therefore, could not be dis-allowed by way of intimation under Section 143(1)(a) of the Act.

7. On the other hand, Mr. Chanderpal, learned Counsel appearing for the Revenue tendered written submissions on behalf of the Revenue making the following submissions :-

(a) That out of 8 issues raised by the Tribunal, only 3 major issues

can be inferred from the said 8 questions which are as under :-

“(a) Allowance of a provision for bad and doubtful debts.
(b) With regard to the above, the provisioning for doubtful debts on account of irrecoverably of outstanding interest income on loans being doubtful of recovery.
(c) The writing back of amounts recovered later”; and

(b) There is no place for equity in fiscal laws. Therefore, mere provision would not make it bad debt as a provision lacks certainty. For the purposes of write off under Section 36(1)(vii) of the Act, there must be certainty of debt becoming irrecoverable. Thus, it is submitted that the view of the Tribunal is correct and the question as proposed should be answered in favour of the Revenue.

8. Before dealing with the rival contentions, it would be necessary to reproduce Section 143(1)(a) of the Act, at the relevant time which read as under :-

“143(1)(a) Where a return has been made under Section 139, or in response to a notice under sub-section (1) of section 142, –
(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be Uday S. Jagtap 8 of 15 25-2000-ITR-Judgment=.doc deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly ; and

(ii) if any refund is due on the basis of such return, it shall be granted to the assessee:

Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely :

(i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified;

(ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed:

(iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed ; ….

Provided further that where adjustments are made under the first proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustment.

Provided ……”

9. The written submission as filed by the Revenue ignores the fact that only one question has been referred to us for consideration. The issue referred to us is in respect of applicability of Section 143(1)(a) of the Act to disallow a claim for provision for bad debt by intimation i.e. without calling upon the assessee to explain its claim. On this issue, the written submission proceeds on the basis that a plain reading of Section 36(1)(vii) of the Act would only mean an assured and / or certain irrecoverability of debt. Therefore, it is submitted that the Uday S. Jagtap 9 of 15 25-2000-ITR-Judgment=.doc intimation under Section 143(1)(a) of the Act cannot in the present facts be faulted. In fact, the written submissions states, “Litera Leges, certainty concept and on the concept that there is no equity on fiscal law irrespective of any judgment of any Hon’ble Court or Tribunal a go-by cannot be given to the aforesaid interpretations given in this written submission”. The above submission that decision of the Court and / or Tribunal interpreting a provision is to be ignored by the Assessing Officer, if accepted will ring the death knell of Rule of law in the country. The Assessing Officer is bound by the views of the Court. The above submission ignores the hierarchal system of jurisprudence in our country.

10. The issue that arises for our consideration is whether an adjustment by intimation under Section 143(1)(a) of the Act can be made where the issue which arises for consideration is a debatable issue. In the present facts, the computation of total income submitted along with return indicates that claim for bad debts has been made by relying upon the decision of Gujarat High Court in the case of Vithaldas H.Dhanjibhai Bardanwala (supra)

11. However, the Assessing Officer completely ignored the note made Uday S. Jagtap 10 of 15 25-2000-ITR-Judgment=.doc by the applicant in its computation of return, indicating that the basis of claim for bad debts is the decision in Gujarat High Court in Vithaldas H.Dhanjibhai Bardanwala (surpa). In the above case, even a provision debited to the profit and loss account was allowed as bad debts, where corresponding credit entires are posted in the bad debts reserve account. It held that is was not necessary to post credit entries in the ledger account of the concerned parties. It was on the basis of the aforesaid decision of the Gujarat High Court that the claim in respect of the provision for bad debts was made by the applicant assessee. Once, reliance is placed upon a decision of a Court and / or Tribunal to make a claim, then even if the Assessing Officer has a different view and does not accept the view, yet the claim itself becomes debatable. This is so laid down in Instruction No.1814 dated 4 th April, 1989 issued by the CBDT in respect of the scope of prima facie disallowance under Section 143(1)(a) of the Act. In fact, paragraph no.9 thereof provides that where a claim for deduction has been made on the basis of a decision of a High Court / Tribunal, then, even if there is contrary view expressed by another High Court and / or Tribunal or an appellate Authority, the issue itself becomes debatable. In such cases, no adjustment under Section 143(1)(a) of the Act is permissible. Thus, disallowance of a claim can be made only after hearing the assessee who has made the Uday S. Jagtap 11 of 15 25-2000-ITR-Judgment=.doc claim.

12. Further, our Court in Khatau Junkar Ltd. (supra) had while dealing with the word “prima facie inadmissible” in clause (iii) of Section 143(1)(a) of the Act has held that the word “prima facie” means on the face of it the claim is not admissible. It means the claim does not require any further inquiry before disallowing the claim. The Court observed that where a claim has been made which requires further inquiry, it cannot be disallowed without hearing the parties and / or giving the party an opportunity to submit proof in support of its claim. In the absence of Section 143(1)(a) of the Act being read in the above manner i.e. debatable issues cannot be adjusted by way of intimation under Section 143(1)(a) of the Act, would lead to arbitrary and unreasonable intimations being issued leading to chaos.

13. In the present facts, it is undisputed that the decision of Gujarat High Court was referred to in the computation of income. Thus, the Assessing Officer could not have disallowed the claim on a prima facie view that the same is inadmissible. In fact, there can be no dispute that even according to the Assessing Officer, the issue was debatable. This is evident from the fact when the applicant assessee had filed an Uday S. Jagtap 12 of 15 25-2000-ITR-Judgment=.doc application under section 154 of the Act for deletion of the adjustment made of provision of bad debts by intimation under Section 143(1)(a) of the Act, it was disallowed on the ground that it is a debatable issue. This itself would indicate that whether the claim of a provision for bad debts is deductible under Section 36(1)(vii) of the Act or not is debatable. Further, the above claim for deductions as made by the applicant was by following the decision of the Gujarat High Court in Vithaldas H.Dhanjibhai Bardanwala (Supra). Thus, a debatable issue. Therefore, the same could not have been disallowed by way of an intimation under section 143(1)(a) of the Act.

14. We are conscious of the fact that Section 36(1)(vii) of the Act was amended by the Finance act, 2001 by insertion of Explanation to Section 36(1)(vii) of the Act w.e.f. 1 st April, 1989. We are also conscious of the fact that while disposing of a Reference under Section 256(1) of the Act, the question proposed for our opinion shall be answered taking into account the subsequent amendment to the law with retrospective effect, as they are clarificatory in nature.

15. In the aforesaid background, we find that the insertion done by Explanation to Section 36(1)(vii) of the Act (w.e.f. 1989) would arise Uday S. Jagtap 13 of 15 25-2000-ITR-Judgment=.doc for consideration while answering the proposed question in respect of Assessment Year 1993-94. The above amendment by addition of Explanation to Section 36(1)(vii) of the Act was a subject matter of consideration by the Supreme Court in Vijaya Bank (supra). In the above decision, the Court while applying the amended law, held that mere debit of a provision to the profit and loss account will not by itself be sufficient to constitute bad debts (write off). This must be accompanied by simultaneously also reducing the loans and advances from the asset side of the Balance Sheet. This would ensure that the amount shown as loans and advances (debtors) is net of the provisions made for bad debts.

16. Therefore, in the present facts, while mere making of provision for bad debts will not by itself (on application of amended law) entitle the party to deduction, yet it would be a matter where the assessee should be given an opportunity to establish its claim. This by producing its evidence of the manner in which it treated the provision of bad debts written off in accounts as well as in its Balance Sheet. Therefore, the disallowance cannot be made by intimation under section 143(1)(a) of the Act, as it requires that a party be given an opportunity to establish its claim before disallowing it. It would have Uday S. Jagtap 14 of 15 25-2000-ITR-Judgment=.doc been a completely different matter if the Apex Court had ruled that in no case can provision for bad debts be allowed as a bad debt under section 36(1)(vii) of the Act. The allowance of the claim of provision for bad debt is entirely dependent upon how it is reflected in the Balance Sheet and its accounts. Therefore, for the above purpose it is necessary that the party to be given an opportunity to establish its claim. Therefore, in the present facts, adjustment by way of disallowing deduction by intimation under section 143(1)(a) of the Act is not proper.

17. In the above view, the question as raised for our opinion is answered in the negative i.e. in favour of the applicant assessee and against the respondent Revenue.

18. The Reference is disposed of in the above terms. No order as to costs.

(RIYAZ I. CHAGLA, J.) (M.S. SANKLECHA, J.)

CBDT Chairman Sushil Chandra Sends International Women’s Day Message

Posted on March 8, 2018 by staff

MASTI

The CBDT Chairman Sushil Chandra has addressed a letter dated 8th March 2018 by which he has sent a message to the women staff in the Income-tax department on the occasion of International Women’s Day.

There are a large number of women staffers in the CBDT and also in the Income-tax department.

The Chairman appreciated the many roles that women staffers play in the CBDT and the income-tax department.

He also complimented them for the compassion & the dignity that the women bring in their manifold contribution to the Service & to the Organisation.

Sushil Chandra assured the women staffers that they can do almost anything that they put you’re their minds to as their potential is limitless!

CBDT Chairman Sushil Chandra

It may be noted that the CBDT Chairman is the senior-most IRS civil servant in the Government of India. He is also the ex officio Special Secretary to the Government of India and also cadre controlling authority of the Indian Revenue Service.

The office of the CBDT Chairman is under the control of the Revenue Secretary of India.

It is a high-ranking post. It is above the officers of the rank of Lieutenant-General, Vice-Admiral or Air Marshal, CBI Director and Deputy Comptroller and Auditor General in the Order of Precedence.

The office of the CBDT Chairman is not subject to a fixed tenure. The tenure of the office is around 2 years. It can be extended by the Government if the candidate is meritorious.

SUSHIL CHANDRA
Chairman, CBDT &
Special Secretary to the Government of India

GOVERNMENT OF INDIA
Ministry of Finance/Department of Revenue
Central Board of Direct Taxes
North Block, New Delhi-110001
E-mail : chairmancbdt@nic.in

Tele : 23092648 & Telefax : 23092544

8th March, 2018.

Chairman’s Message on International Women’s Day

It gives me immense pleasure to greet all the lady officers & staff members of the Income Tax Department on the occasion of Women’s Day today.

It is said that the best way to change society is to channelize the inherent strength & potential of women in every walk of life, for, there is no force more powerful than a woman determined to rise.

Often, we leave our appreciation unspoken. So, on this Women’s Day, I take this opportunity to appreciate the many roles that you play, the many hats that you wear & the difference that you make in so many lives. The compassion & the dignity that you bring in your contribution to the Service & to the Organisation is manifold.

You can do almost anything that you put your mind to as your potential is limitless! I hope that you will continue to contribute to the IT Department with as much fervour & sincerity as you have done in the past. I wish you the best in all your future endeavours.

Best Wishes,
(Sushil Chandra)

Supreme Court Clears Censor Board Certificate To “Aiyaary” Movie

Posted on March 6, 2018 by staff

MASTI

In the latest Supreme Court judgement in Adarsh Cooperative Housing Society Ltd Versus Union of India & Ors, the issue about the film “Aiyaary” being given the certificate by the Central Board of Film Certification (for short “CBFC”) under the Cinematograph Act, 1952 was challenged.

It was held by the Supreme Court in the said latest judgement that the doctrine of sub-judice should not be elevated to such an extent that some kind of reference or allusion to a member of a society would warrant the negation of the right to freedom of speech and expression which is an extremely cherished right enshrined under the Constitution.

The judgement of the Supreme Court explains that the moment the right to freedom of speech and expression is atrophied, not only the right but also the person having the right gets into a semi coma.

The Supreme Court explained that the said right is not absolute but any restriction imposed thereon has to be extremely narrow and within reasonable parameters.

It was held in the judgement that the grant of certificate by the CBFC, after consulting with the authorities of the Army, should dispel any apprehension of the members or the society

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION

WRIT PETITION (CIVIL) NO. 129 OF 2018

Adarsh Cooperative Housing Society Ltd. …Petitioner(s)

Versus

Union of India & Ors. …Respondent(s)

J U D G M E N T

Dipak Misra, CJI

The petitioner, a registered society, has preferred this petition under Article 32 of the Constitution of India seeking appropriate directions for prohibiting the respondent Nos. 4 to 7 from releasing/screening/publishing feature film, namely, “Aiyaary” with direct or indirect references to the petitioner society’s land/building/membership, for such an action is bound to affect the Right to Life under Articles 14 and 21 of the Constitution. It is also prayed that the said respondents should be commanded to delete all those parts in the ensuing feature film which has direct or indirect references to the society in question.

2. It is contended by Mr. Sanjay R. Hegde, learned senior counsel for the petitioner, that the film, which is going to be released, has projected the society in an unacceptable manner and that is likely to have some impact on the litigations which are pending apart from affecting the reputation of the members of the society. A newspaper article has been brought on record to highlight how the script has been written and how the dialogues have the innuendos to reflect on the image of the society as well as its members. Learned senior counsel has highlighted that the members of the society have built a reputation which is very dear to their life and if the film is allowed to be released, the same shall destroy the established reputation and the posterity will remember the image projected in the film but not the real image which the members have. According to Mr. Hegde, the “reel reflection” will garner the mindset of the people rather than the “real life lived”.

3. It is not in dispute that the film “Aiyaary” has already been given the requisite certificate by the Central Board of Film Certification (for short “CBFC”) under the Cinematograph Act, 1952 (for brevity, the Act”) and the said Board has also taken the suggestions from the competent authorities of the Army as a measure of caution. There can be no shadow of doubt that the Censor Board can grant a certificate and in the said decision making process, it can also consult the persons who can assist it to arrive at the condign conclusion. We do not intend to name the number of authorities which have been referred to in the pleadings.

4. Learned counsel had laid emphasis on R.K. Anand v. Registrar, Delhi High Court 1 (2009) 8 SCC 106 and the paragraph that has been commended to us is extracted below:- “The impact of television and newspaper coverage on a person”s reputation by creating a widespread perception of guilt regardless of any verdict in a court of law. During high publicity cases, the media are often accused of provoking an atmosphere of public hysteria akin to a lynch mob which not only makes a fair trial impossible but means that regardless of the result of the trial, in public perception the accused is already held guilty and would not be able to live the rest of their life without intense public scrutiny.”

5. A passage has also been referred to from the decision in State of Maharashtra v. Rajendra Jawanmal Gandhi (1997) 8 SCC 386 3 (2005) SCC Online Bom. 385 which states thus:- “There is procedure established by law governing the conduct of trial of a person accused of an offence. A trial by press, electronic media or public agitation is very antithesis of rule of law. It can well lead to miscarriage of justice.”

2 6. Our attention has been drawn to a few passages from the judgment of the Bombay High Court in Mushtaq Moosa Tarain v. Government of India3. As Mr. Hegde has laid immense stress on the paragraphs from the said judgment, we think it appropriate to reproduce the same:-

“56. The Censor Board has framed guidelines. These guidelines are framed under section 5b(2) of the cinematography act. One of the guiding factors is that visuals or words “involving defamation of an Individual or Body of Individual or contempt of court are not presented. These guidelines ensure that nothing should be permitted which amounts to interfering with the administration of justice. It is not as if the Censor Board has to be satisfied that visuals or scenes have in fact interfered with or obstructed the course of justice or have adverse effect thereon. In other words, it is not as if the matter has to be decided by the Censor Board on the touch stone of Law of Contempt. Similarly, “defamation” as contemplated by the guidelines should not be construed as committing of tort of defamation as understood in law. Broadly, these guidelines are for the purposes of giving effect to the well settled principle that every right has a corresponding duty or obligation.

xxx xxx xxx

64. In the case of Hutchison, Ex parte McMAHON, reported in (1936) ALL ENGLAND LAW REPORTS ANNOTATED (VOL. 2) 1514, the King’s Bench has observed thus:-

“Proprietors of cinemas and distributors of films must realise that, if they want to produce these sensational films, they must take care in describing them not to use any language likely to bring about any derangement in the carriage of justice.”

65. Grant of injunction or restraint order is not a gagging writ in the facts of this case. The Petitioner has made out a strong prima-facie case inasmuch as fair trial, which is part of Rule of Law and Administration of Justice, is an aspect which must prevail over individual’s right of free speech and expression. People’s right to know cannot be stretched to such an extent as would make mockery of Rule of Law. Petitioner’s right to fair and impartial trial must outweigh all such previleges and expectations. The balance of convenience is definitely in favour of an injunction inasmuch as the restraint against exhibition is for limited duration and the Petitioner’s right as above as well as public interest is in favour of such restraint. The Respondents have a commercial and business interest which is secondary. The loss to the Petitioner’s dignity and reputation is enormous. It would be irreparable as the viewers may form an opinion about his guilt.

66. Before we conclude, we cannot but observe that this trial is one of those important trials even in terms of history and in terms of reconciliation of people. If the people have to have a belief in truth and justice as abiding values having a primacy over force and violence, it is just and necessary that justice must not merely be done but must also appear to have been done. If a society wants to do justice and thereby have peace and stability, then the stream of justice has got to be maintained clean to the extent possible. It is equally essential that the dignity of any individual, even though he may be an accused, has to be maintained as far as it could be. Looking at it from this point of view as well, we cannot but hold that the release of the film will have a prejudicial effect on fair administration of justice as well as on the image of the accused. We, therefore, hold that the Petitioner has made out a case for the injunction that he has sought on the ground that the release of the film would constitute contempt of court and his defamation.”

7. Relying on the said judgment, it is contended by Mr. Hegde that as the matter is sub-judice, the release of the movie is likely to affect the stream of justice and order of stay of the release of the movie is called for. With all the humility at his command, Mr. Hegde has relied upon the decision of the Bombay High Court which we have referred to hereinabove. We do not intend to comment on the said decision of the Bombay High Court because we are not aware whether the lis travelled to this Court or not and in any case, the principle stated therein cannot always be a guiding factor. Suffice it to say, the said case has to rest on its own facts.

8. As it seems to us, a film with regard to a particular situation does not affect the trial or the exercise of “error jurisdiction” by the appellate court. The courts of law decide the lis on the basis of the materials brought on record and not on the basis of imagination as is projected in the language of the theatre or a script on the celluloid. In this regard, we may reproduce a paragraph from the order passed in Viacom 18 Media Private Limited & Ors. v. Union of India & Ors. 2018 (1) SCALE 382 which deals with the release of the film, namely, “Padmaavat”. It reads as follows:- “It has to be borne in mind, expression of an idea by any one through the medium of cinema which is a public medium has its own status under the Constitution and the Statute. There is a Censor Board under the Act which allows grant of certificate for screening of the movies. As we scan the language of the Act and the guidelines framed thereunder it prohibits use and presentation of visuals or words contemptuous of racial, religious or other groups. Be that as it may. As advised at present once the Certificate has been issued, there is prima facie a presumption that the concerned authority has taken into account all the guidelines including public order.”

9. In Nachiketa Walhekar v. Central Board of Film Certification & Anr. (2018) 1 SCC 778 , this Court stated that a film or a drama or a novel or a book is a creation of art and that an artist has his own freedom to express himself in a manner which is not prohibited in law. The Court also stated that prohibitions should not by implication crucify the rights of expressive minds. 10. The Court noted that in human history, there have been many authors who expressed their thoughts in their own words, phrases, expressions and also created whimsical characters which no ordinary man would conceive of. Further, the Court stated that a thought provoking film should never mean that it has to be didactic or in any way puritanical, rather it can be expressive and provoking the conscious or the subconscious thoughts of the viewer and if there has to be any limitation on it, such a limitation has to be as per the prescribed law.

11. Elaborating the same, we may add that there can be multitudinous modes, manners and methods to express a concept. One may choose the mode of silence to be visually 9
eloquent and another may use the method of semi-melodramatic approach that will have impact. It is the individual thought and approach which cannot be curbed. 12. Mr. Hegde, learned senior counsel, has also suggested that though the freedom of speech and expression should not be curtailed, yet this Court, on certain occasions, has protected the image and reputation of the individuals by giving priority to the image of the person in society.

13. In this regard, he has drawn inspiration from Devidas Ramachandra Tuljapurkar v. State of Maharashtra & Ors. (2015) 6 SCC 1. It is necessary to clarify here that in the said case, the question was with regard to poetic license wherein the Court observed that as far as the words “poetic license” are concerned, it can never remotely mean a license as understood in the language of law as there is no authority which gives a license to a poet; for the words of the poet come from the realm of literature. Further elaborating, the Court stated that the poet assumes his own freedom which is allowed to him by the fundamental concept of poetry and he is free to depart from the reality; hide ideas beyond myths which can be absolutely unrealistic or put serious ideas in satires, ifferisms, notorious repartees; take aid of analogies, metaphors, similes in his own style, compare life with sandwiches that is consumed everyday or convey life is like peeling of an onion, or society is like a stew define ideas that can balloon into the sky never to come down and cause violence to logic at his own fancy.

14. In this backdrop, the Court opined that a “poetic license” can have individual features, deviate from norms, or other collective characteristics or it may have a linguistic freedom wider than what a syntax sentence would encompass. We may note with profit that the controversy travelled to this Court as the trial court had framed charges under Section 292 IPC against the appellants and the High Court had declined to interfere. This Court observed that the language employed in the poem “I met Gandhi” was prima facie obscene because of the language employed relating to Mahatma Gandhi, the father of the Nation. Though the Court quoted some stanzas of the poem, yet it thought it wise not to reproduce the said stanzas in entirety because of the words used. The Court did not adjudicate upon the entire controversy as the author of the poem had not challenged the order. The concept of obscenity was judged in the background of “contemporary community standards test” and the Court ruled that when the name of Mahatma Gandhi is alluded or used as a symbol and obscene words are used, the concept of “degree test” in addition to contemporary community standards test is invokable. The Court further elaborated by stating that the “contemporary community standards test” becomes applicable with more vigour, in a greater degree and in an accentuated manner. The Court was of the view that what can otherwise pass the contemporary community standards test would not be able to do so if the name of Mahatma Gandhi is used as a symbol or allusion or surrealistic voice to put words or to show him doing such acts which are obscene.

15. While so stating, the Court concluded by leaving it to the poet to put his defense at the trial explaining the manner and the context in which he has used the words. In this context, 12
the Court further opined that the view of the High Court pertaining to the framing of charge under Section 292 IPC cannot be said to be flawed.

16. In our considered opinion, the reliance placed on the above-mentioned judgment by Mr. Hegde, learned senior counsel, does not render any assistance. The law laid down in the said case rests on the facts depicted therein.

17. At this juncture, we may also state that the doctrine of sub-judice may not be elevated to such an extent that some kind of reference or allusion to a member of a society would warrant the negation of the right to freedom of speech and expression which is an extremely cherished right enshrined under the Constitution. The moment the right to freedom of speech and expression is atrophied, not only the right but also the person having the right gets into a semi coma. We may hasten to add that the said right is not absolute but any restriction imposed thereon has to be extremely narrow and within reasonable parameters. In the case at hand, we are obligated to think that the grant of certificate by the CBFC, after consulting with the authorities of the Army, should dispel any apprehension of the members or the society.

18. In this context, we may appositely reflect on an eloquent passage from Kingsley International Pictures Corporation v. Regents of the University of the State of New York 360 U.S. 684, 688-89 (1959) wherein Potter Stewart stated:- “It is contended that the State”s action was justified because the motion picture attractively portrays a relationship which is contrary to the moral standards, the religious precepts, and the legal code of its citizenry. This argument misconceives what it is that the Constitution protects. Its guarantee is not confined to the expression of ideas that are conventional or shared by a majority. It protects advocacy of the opinion that adultery may sometimes be proper, no less than advocacy of socialism or the single tax. And in the realm of ideas it protects expression which is eloquent no less than that which is unconvincing.”

19. The nature of the present matter compels us to recapitulate that the human history is replete with struggles to get freedom, be it physical or mental or spiritual. The creativity of a person impels him not to be tied down or chained to the established ideals or get enslaved to the past virtues and choose to walk on the trodden path. He aspires to rejoice with the new ideas and exerts himself to achieve the complete fruition. That is the determination for moving from being to becoming, from existence to belonging and from ordinary assumption to sublime conception. The creative intelligence kicks his thinking process to live without a fixed target but toying with many a target.

20. We would be failing in our duty if we do not note the last plank of submission of Mr. Hegde. He would suggest that this Court may direct the producer and director of the film to add a disclaimer so that no member of the society would ultimately be affected by the film. The aforesaid submission on a first blush may seem quite attractive but on a slightly further scrutiny, if we allow ourselves to say so, has to melt into oblivion. Whether there is the necessity of “disclaimer” or not has to be decided by the Censor Board which is the statutory authority that grants the certificate. In fact, when a disclaimer is sought to be added, the principle of natural justice is also attracted. To elaborate, the producer or director is to be afforded an opportunity of hearing. The Court should not add any disclaimer for the asking. Addition of a disclaimer is a different concept altogether. It is within the domain of the authority to grant certificate and to ask the director to add a disclaimer in the beginning of the movie to avoid any kind of infraction of guidelines. Though the suggestion is made in right earnest by Mr. Sanjay Hegde, yet we are impelled not to accept the same.

21. Consequently, the writ petition, sans merit, stands dismissed.

……………………….….CJI.
[Dipak Misra]
……………………….…….J.
[Sanjay Kishan Kaul]
New Delhi;
February 16, 2018.

Bombay High Court Judgement On ‘Tareek Pe Tareek’ Adjournment | Heavy Costs Imposed

Posted on March 6, 2018 by staff

MASTI

In the latest judgement of the Bombay High Court in Ram Nagar Trust No.1 vs. Mehtab L Sheikh the Bombay High Court has come down heavily on the tendency of litigants to seek adjournments of hearings of their cases on frivolous grounds.

The Bombay High Court referred to this tendency of seeking adjournments as “Tareek pe Tareek’ as has been made famous in the blockbuster Bollywood movie ‘Damini’ in which Sunny Deol and Amrish Puri played the role of advocates.

The Court made it clear in the said latest judgement that there “No more adjournments”, and no more ‘tareek pe tareek’. Enough is enough.

That a Court will endlessly grant adjournments is not something that parties or advocates can take for granted. Nor should they assume that there will be no consequences to continued defaults and unexplained delay.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

SUIT NO. 2012 OF 2009

WITH

NOTICE OF MOTION NO. 1345 OF 2014

Ram Nagar Trust No.1 & Anr …Plaintiffs

Versus

Mehtab L Sheikh & Ors …Defendants

Mr KR Patel, with Prasad Shenoy, i/b Crawfor Bayley & Company, for the Plaintiffs.

Ms Gargi Bhagwat, i/b Divekar Bhagwat & Company, for Defendant No.1.

CORAM: G.S. PATEL, J

DATED: 27th February 2018

PC:-

1. Issues were framed on 26th September 2016 (KR Shriram J). The Plaintiffs were to file their list of witnesses, Evidence Affidavit and compilation by 24th October 2016. The 1st Defendant had already filed an affidavit of documents. The Plaintiffs state that their affidavit of documents was ready and would be filed in the registry. The matter was kept on 27th October 2016. On that date, the Plaintiffs applied for time to comply with these directions. The matter was stood over to 5th November 2016.

2. The Plaintiffs did nothing. Even today, they are in continued default. More than a year has passed. No application seems to have been made for an extension of time or for condonation of delay. Nothing at all has been filed.

3. Today, their advocate is instructed to ask for a week’s time to comply.

4. The application is opposed by Ms Bhagwat for the 1st Defendant, who submits this cannot be permitted for the asking, especially in a suit of 2009. There is no valid reason for noncompliance. At a minimum, the Plaintiffs should be put to terms.

5. I believe Ms Bhagwat is correct. There are only two options. If the Plaintiffs apply for extension of time, however brief, they must be put to terms or, alternatively, their case will be closed with everything that this implies, i.e., an immediate failure of the suit. The latter course is extreme. Therefore, the only question is what are reasonable terms to be imposed on the Plaintiffs.

6. I compute the delay from 25th November 2016 until today. This is a period of 450 days; possibly more, but not less. Costs must be imposed for each day’s delay. I do not think that, in this day and age, and especially in this city, costs of Rs.1000 per day are at all unreasonable. Anything less than that is illusory and meaningless and the time has gone when a Court could, would or should pick up some utterly random figure like Rs.5,000 or Rs.25,000, a number wholly without tether to the actual days of delay. Fixing ad hoc figures like this is counter-productive. Parties believe that even if the delay is inordinate, the costs of that delay will be negligible; and hence they continue to extend the delay. The costs must be real. They must be sufficient to convey the message that non-compliance with our orders brings consequences; that these consequences are inevitable and unavoidable; and the consequences are not some piffling trifle.

7. Computed at Rs.1000/- per day for each day’s delay for 450 days, the costs work out to Rs4,50,000/-. This amount of Rs.4,50,000/- will be paid to the 1st Defendant as costs by 7th March 2018 and time to complete the filing is, subject to payment of those costs, extended till that date. No filing is to be accepted in the registry unless there is proof of costs having been paid. It is made clear that if the costs are not paid or filings are not completed by that time, the Suit will stand dismissed without further reference to the Court.

8. At the request of the 1st Defendant, list the matter for compliance and directions on 8th March 2018 on the supplementary board.

9. At 3:00 pm, the matter is mentioned by the Plaintiffs again seeking a reduction in the order of costs. The application does not assist the Plaintiffs in any way. To the contrary. I am now told an Evidence Affidavit was ready earlier. It was never filed. It was not even served. No application was made to extend time or for leave to file beyond time.

10. Then I am told that the 1st Plaintiff is a public charitable trust and the suit is about land for an educational or charitable purpose. This is even more shocking. That a trust should be so utterly negligent about its own case is reason enough to warrant immediate action against the trustees and have every one of them removed. A public trust has a higher duty of care, not a lower one. Besides, this submission is utterly egregious: what am I being told? That because the 1st Plaintiff is a trust therefore a different standard applies? Before courts, all parties are exactly the same. We will make exceptions for the poor, the illiterate, the helpless. They will receive our protection. But educated trustees charged with a solemn fiduciary duty will not get a free pass only because they claim to espouse some worthy cause.

11. Worse yet: in November 2007, the 1st Defendant gave notice to the Plaintiffs’ Advocates pointing out non-compliance with Shriram J’s directions. The matter was listed before Dhanuka J. It did not reach. The Plaintiffs, despite this notice, and despite the matter being listed, did nothing. They even then did not serve any unaffirmed copies of their filings, nor did they seek leave to file them and have the delay condoned. They sat by. The delay is either deliberate or it is a result of gross negligence.

12. The Plaintiffs’ application now assumes that Court will continuously condone delays, that delays are par for the course. This is an assumption that we must be rid of immediately. For far too long we have been used to issuing directions without consequences for default, and for far too long Courts have assumed that condoning delay by saying this is a ‘final opportunity’ is sufficient. Clearly it is not. It is only when there is an order of the kind I have passed today that the defaulting party seems to get galvanized into compliance, and that we see, for the first time, some alertness. Parties and their Advocates will understand that what is issued with directions for filing is not a recommendation. It is an order of the Court. It does not give a party a choice. Compliance is mandatory, not optional. Shriram J’s orders cannot be treated with such contempt and disregard. It cannot be assumed that noncompliance with his, or any other, Court’s orders has no consequence. If there is a genuine reason to extend time, an application must be made to the Court and directions sought.

13. Let me put it plainly. No more adjournments. No more ‘tareek pe tareek’. Enough is enough. That a Court will endlessly grant adjournments is not something that parties or advocates can take for granted. Nor should they assume that there will be no consequences to continued defaults and unexplained delay.

14. This application at 3:00 pm is sufficient to warrant an increase in costs. For this once, I will not do so. I make it clear that in future cases, the daily delay cost rate will, on any such application for reduction, be doubled. As a matter of mathematical certainty, there is always near at hand the Fibonacci sequence of numbers. (G. S. PATEL, J)

CBDT Press Release On Transfer Pricing APA

Posted on March 5, 2018March 5, 2018 by staff

MASTI

CBDT PRESS RELEASE, DATED: 01-03-2018

Mar 1, 2018

CBDT ACHIEVES IMPORTANT MILESTONE OF 200 APAS!

The Central Board of Direct Taxes (CBDT) entered into seven more Advance Pricing Agreements (APAs) during the month of February, 2018. All the seven are Unilateral APAs. With the signing of these Agreements, the CBDT has crossed the important milestone of having signed 200 APAs.

The total number of APAs entered into by the CBDT till date has gone up to 203. This includes 185 Unilateral APAs and 18 Bilateral APAs. In the current financial year, the CBDT has entered into 51 APAs so far (44 Unilateral APAs and 7 Bilateral APAs).

The seven APAs signed in February pertain to the Pharmaceuticals, Automobiles, Financial and Food & Beverages sectors of the economy. The international transactions covered in these agreements include Manufacturing, Provision of Software Development Services, Provision of IT enabled Services, Payment of Royalty, Provision of Contract R&D Services, Provision of Marketing Support Services, Distribution, AMP Expenses, Provision of Engineering Design Support Services, Provision of Sourcing Support Services, Payment of Interest, etc.

The APA provisions were introduced in the Income-tax Act, 1961 in 2012 and the “Rollback” provisions were introduced in 2014. The APA scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance.

The progress of the APA scheme strengthens the Government’s resolve of fostering a non-adversarial tax regime. The Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner. It has contributed significantly towards improving the ease of doing business in India.

(Surabhi Ahluwalia)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT.

CBDT Obligation To Disclose RTI Information Explained

Posted on March 5, 2018 by staff

MASTI

The latest judgement of the Delhi High Court in CENTRAL BOARD OF DIRECT TAXES versus SATYA NARAIN SHUKLA explains the law on the obligation of the CBDT to disclose information relating to verification of the affidavits filed by the Members of Parliament (MPs) and Members of Legislative Assembly (MLAs) disclosing their assets to the Election Commission.

The CBDT claimed that it is not required to disclose information because of the exclusion in Section 24(1) of the Right to Information Act, 2005. The CBDT also claimed that the said information is exempt from disclosure under the provisions of Section 8(1)(h) of the RTI Act.

The Delhi High Court upheld the contention of the CBDT on the basis that the information sought did not pertain to allegations of corruption.

It noted that the respondent had merely highlighted that the net wealth of certain MLAs and MPs had increased fivefold and the respondent had sought verification of the same in order to bring about a higher level of transparency. No specific or general allegations of corruption were advanced by the respondent.

The Court clarified that in the event any citizen was to make an allegation of corruption, the information as sought from the CBDT under the RTI Act would not be excluded from the scope of the Act.

THE HIGH COURT OF DELHI AT NEW DELHI

Judgment delivered on: 19.02.2018

W.P.(C) 5547/2017 & CM No. 23333/2017

CENTRAL BOARD OF DIRECT TAXES ….. Petitioner

versus

SATYA NARAIN SHUKLA ….. Respondent

Advocates who appeared in this case: For the Petitioner : Mr Ruchir Bhatia, Senior Standing Counsel with Mr Gurpreet Shah Singh, Dy. CIT (O&D), CBDT.

For the Respondent: Respondent in person.

CORAM:- HON’BLE MR JUSTICE VIBHU BAKHRU

JUDGMENT VIBHU BAKHRU, J

1. The petitioner (hereafter “CBDT”) impugns an order dated 29.05.2017 (hereafter “the impugned order”) passed by the Central Information Commission (hereafter “the CIC”) in a second appeal preferred by the respondent under Section 19(3) of the Right to Information Act, 2005 (hereafter “the Act”).

2. By the impugned order, the CIC has, inter alia, directed disclosure of the information sought by the respondent and photocopies of responses received from Director Generals of Income Tax (DGs) to CBDT’s letter dated 11.08.2015. According to CBDT, the said information is excluded from the scope of the Act as it emanates from the Directorate General of Income Tax (Investigation). The said office is placed in the Second Schedule of the Act and, thus, any information received from the said office is excluded from the purview of the Act by virtue of Section 24(1) of the Act. CBDT also claims that the said information is exempt from disclosure under the provisions of Section 8(1)(h) of the Act.

3. Briefly stated, the relevant facts necessary to consider the aforesaid controversy are as under:-

4. The respondent filed an application dated 16.11.2015 seeking the following information under the Act:-

“(1) Photocopies of the letters no. F. No. 282/4/2012-IT(Inv) dated 1.10.2013 and No. 282/04/2012-IT(Inv. V)/140 dated 9.7.2015. (2) Photocopies of the responses received from the DGs to the letter No. 282/4/012-IV (Inv. V)/192 dated 11.08.2015 from Shri Rajat Mittal, Under Secretary (Inv. V) CBDT.”

5. The Central Public Information Officer (CPIO) of CBDT responded to the petitioner”s application by a letter dated 28.12.2015. He did not provide the photocopies of the letters as sought for at point no.1 but briefly indicated the contents of those letters. Insofar as the information sought at point no.2 is concerned, the CPIO responded as under:-

“Since, the matter is under investigation, hence under the provisions of Section 8(h) of RTI Act, 2005 (Information which would impede the process of investigation or apprehension or prosecution of offenders) information cannot be provided at this stage.”

6. Aggrieved by the response of the CPIO, the respondent preferred an appeal under Section 19(1) of the Act before the First Appellate Authority (hereafter “the FAA”). The said appeal was disposed of by an order dated 11.02.2016, whereby the FAA directed the CPIO to provide photocopies of the relevant letters as requested by the respondent as per point no.1 of his application. In respect of the respondent”s request for responses received from the DGs to the letter dated 11.08.2015 is concerned, the FAA upheld the CPIO”s decision that the said information was exempt under the provisions of Section 8(1)(h) of the Act and, therefore, could not be provided at that stage. However, the FAA directed the CPIO to convey the outcome of the investigations once the same are concluded.

7. Aggrieved by the decision of the FAA rejecting the request for furnishing the responses received from the DGs, the respondent preferred a second appeal before the CIC. The said appeal was allowed by the impugned order and the CPIO was directed to supply the information sought for by the respondent.

8. The controversy relates to the verification of the affidavits filed by the Members of Parliament (MPs) and Members of Legislative Assembly (MLAs) disclosing their assets to the Election Commission. The respondent had submitted a list of MPs and MLAs whose assets have allegedly increased more than fivefold after the previous election (that is, during the term of their office as elected representatives after the previous election).

9. The said list of MPs and MLAs were forwarded to the DGs for verification. By a letter dated 11.08.2015, the following instructions were issued to the DGs with regard to the list of MPs and MLAs provided by the respondent:-

“The undersigned is directed to convey that any such case, featuring in the list that is yet to be verified, should be got verified urgently. A comprehensive report of the verifications done as per guidelines fixed by the Board may also be provided, if not done earlier. The report may be submitted within a month from the date of this letter in the annexed proforma. It is requested that the “Brief outcome” column must sufficiently record the outcome and the suggested course of action.”

10. The learned counsel appearing for CBDT submitted that CBDT could not be compelled to provide the photocopies of responses received from the DGs because: (i) the information sought for is exempted from disclosure by virtue of Section 8(1)(h) of the Act; and (ii) that any information from Directorate General of Income Tax (Investigation) is excluded from the purview of the Act by virtue of Section 24(1) of the Act.
11. Section 8(1)(h) of the Act reads as under:-

“8. Exemption from disclosure of information.– (1) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen– xxxx xxxx xxxx xxxx (h) information which would impede the process of investigation or apprehension or prosecution of offenders.”

12. It is clear from the above that only such information which would (i) impede the process of investigation; (ii) impede the apprehension or prosecution of offenders, is exempted from disclosure by virtue of Section 8(1)(h) of the Act. In the present case, there is no material to indicate that any investigation is being conducted, which would be impeded by disclosure of the information sought for by the respondent. It is stated by CBDT that the Election Commission of India forwards the affidavits submitted by MPs and MLAs disclosing their assets for verification to CBDT. Such affidavits are forwarded by CBDT to the Directorate General of Income Tax (Investigation) for verification and the outcome of such verification is shared directly by the Directorate General of Income Tax (Investigation) with the Election Commission of India.

13. The petitioner further states that the verification exercise carried out by the Directorate General of Income Tax (Investigation) is only indicative in nature and any further action proposed under the Income Tax Act, 1961 has to be followed up by an assessment order, which is passed by the concerned assessing officers. The verification affidavits filed by the candidates cannot be equated with an investigation as referred to in Section 8(1)(h) of the Act. The process of investigation as contemplated under Section 8(1)(h) of the Act is one in the nature of a probe and an inquiry. Clearly, verification from records cannot be termed as an “investigation”.
14. Even if, it is assumed that the verification being conducted by the Directorate General of Income Tax (Investigation) is in the nature of an investigation, the same is no ground for denial of information. Only such information which impedes the process of investigation can be denied. Thus, it would be necessary for the CPIO to specify the CIC that: (a) the investigation was conducted or was proposed; and (b) the information sought would impede the process of investigation. It is apparent that in the present case, these conditions are not met. First of all, there is no assertion that any process of investigation is under way; and secondly, there is no material to indicate that disclosure of the information as sought would impede any such investigation.
15. The suggestion that the expression “process of investigation” includes within its ambit an assessment proceedings resulting in the assessment order is plainly unmerited. The assessment proceedings merely relate to scrutiny of the Income Tax Returns and an assessment income on tax payable by an assessee. Plainly, such proceedings do not take the colour of investigation.
16. The next question to be addressed is whether the information sought for by the respondent is excluded from the purview of the Act.
17. Section 24(1) of the Act reads as under:-

“24. Act not to apply to certain organizations.– (1) Nothing contained in this Act shall apply to the intelligence and security organisations specified in the Second Schedule, being organisations established by the Central Government or any information furnished by such organisations to that Government: Provided that the information pertaining to the allegations of corruption and human rights violations shall not be excluded under this sub-section: Provided further that in the case of information sought for is in respect of allegations of violation of human rights, the information shall only be provided after the approval of the Central Information Commission, and notwithstanding anything contained in Section 7, such information shall be provided within forty-five days from the date of the receipt of request.”

18. A plain reading of Section 24(1) of the Act indicates that the provisions of the Act would not be applicable to Intelligence and Security Organizations as specified in the Second Schedule. Further, any information received from such organizations falls under the exclusionary clause of Section 24(1) of the Act. CBDT is not one of the offices, public organizations which are specified under the Second Schedule; but, the Directorate General of Income Tax (Investigation) is. Thus, any information received from the Directorate General of Income Tax (Investigation) by any Public Authority would also fall within the exclusionary provisions of Section 24(1) of the Act. Indisputably, the information sought for by the respondent emanates from the Directorate General of Income Tax (Investigations) (various DGs who have called upon to submit a comprehensive report of verification). Thus, CBDT would be justified in denying such information to the respondent.

19. It was also contended by the respondent that since the information sought for by him related to allegations of corruption, the same falls within the exception to the exclusionary clause of Section 24(1) of the Act. The respondent is correct that by virtue of the first proviso to Section 24(1) of the Act, all information pertaining to allegations of corruption and human rights violations falls within the exception to Section 24(1) of the Act. In other words, notwithstanding that such information emanates from any of the organizations as specified under the Second Schedule of the Act, it is not excluded from the purview of the Act.
20. However, in the present case, it is difficult to accept that the information sought by the respondent pertains to allegations of corruption, as no such allegations have been made at any stage. The respondent had merely highlighted that the net wealth of certain MLAs and MPs had increased fivefold and the respondent had sought verification of the same in order to bring about a higher level of transparency. No specific or general allegations of corruption were advanced by the respondent.

21. Thus, it is not possible to accept that the information as sought for by the respondent falls within the purview of the Act even though it emanates from the organization which is placed in the Second Schedule.
22. In view of the above, the order passed by the CIC cannot be sustained and is, accordingly, set aside. However, it is clarified that in the event any citizen was to make an allegation of corruption, the information as sought by the respondent would not be excluded from the scope of the Act.

23. The petition and the pending application are disposed of. The parties are left to bear their own costs.

VIBHU BAKHRU, J FEBRUARY 19, 2018

CBDT Detects TDS scam Of Rs. 3,200 Crore | Launches Prosecution For TDS Deaults

Posted on March 5, 2018 by staff

MASTI

The CBDT has unearthed a TDS scam worth Rs 3,200 crore.

The modus operandi of the scam was that 447 companies deducted TDS from its employees but did not deposit the tax with the government.

Instead, the TDS was diverted to further business interests.

The CBDT has initiated prosecution against the TDS deductors for violation of the provisions of the Income-tax Act, 1961.

In addition, warrants have been issued by the Magistrates at the behest of the CBDT.

An official of the CBDT stated that under the Income-tax Act, TDS offences attract a minimum punishment of rigorous imprisonment of three months to a maximum of seven years with fine.

The CBDT is also empowered to initiate prosecution under Section 276 B.

There are also charges of cheating and criminal breach of trust which are punishable offenses under the Indian Penal Code.

The CBDT further stated that most of the offenders are builders.

The other offensers are from various sectors including movie production houses, infrastructure companies, start-ups and fly by night operators.

A high-ranking CBDT official revealed that pursuant to a survey, it was detected that in about 447 cases, Rs 3,200 crore was deducted by the companies but not deposited into the government account.

These defaults occurred in the period April 2017 to March 2018.

TDS deductors are under a legal obligation under the Income-tax Act to deduct TDS on behalf of the government and deposit it into the government account within a prescribed time frame.

The CBDT has already attached the bank accounts and other movable properties of the defaulters and initiated recovery action.

It requires to be remembered that the CBDT had issued a press release a few days ago in which it revealed that it has adopted a zero-tolerance approach towards any offenses committed by taxpayers.

The text of the press release issued by the CBDT is as follows:

Sharp increase in prosecutions of tax evaders by Income Tax Department

Posted On: 12 JAN 2018 2:09PM by PIB Delhi

The Income Tax Department has accorded the highest priority to tackle the menace of black money. With this objective in mind, the Department has initiated criminal prosecution proceedings in a large number of cases of tax offenders and evaders.

Prosecutions have been initiated for various offences including wilful attempt to evade tax or payment of any tax; wilful failure in filing returns of income; false statement in verification and failure to deposit the tax deducted/collected at source or inordinate delay in doing so, among other defaults.

During FY 2017-18 (upto the end of November, 2017), the Department filed Prosecution complaints for various offences in 2225 cases compared to 784 for the corresponding period in the immediately preceding year, marking an increase of 184%. The number of complaints compounded by the Department during the current FY (upto the end of November, 2017) stands at 1052 as against 575 in the corresponding period of the immediately preceding year, registering a rise of 83%. Compounding of offences is done when the defaulter admits to its offence and pays the compounding fee as per stipulated conditions.

Due to the decisive and focused action taken by the Department against tax evaders, the number of defaulters convicted by the courts has also registered a sharp increase during the current fiscal. 48 persons were convicted for various offences during the current year(upto the end of November, 2017) as compared to 13 convictions for the corresponding period in the immediately preceding year, marking an increase of 269%.

A few illustrative cases are highlighted.

A Dehradun Court convicted one defaulter for holding undisclosed foreign bank account and sentenced him to two years of imprisonment for wilful attempt to evade tax and to two years for false statement in verification alongwith monetary penalty for each default respectively.

The Court of CJM, Jalandhar convicted a cloth trader with 2 years rigorous imprisonment for trying to cheat the Department by fabricating affidavits and gift deeds, in connivance with his advocate and witness, with the motive of evading tax. The Court, while awarding the sentence to the trader, also simultaneously awarded one year’s imprisonment to the advocate notarizing the forged affidavit and also to the witness for aiding and abetting the serious offence.

In Bengaluru, the MD of a company engaged in infrastructure projects was found guilty of non-deposit of TDS of over Rs. 60 lakh(within the prescribed time), and was sentenced to rigorous imprisonment of three months alongwith imposition of fine. Similarly, a Mohali resident was held guilty of non-deposit of TDS within prescribed time and sentenced to one year jail alongwith fine.

In another case of Hyderabad, the Director of an infrastructure company was sentenced to rigorous imprisonment of six months and fine for wilful attempt to evade tax. She was simultaneously sentenced to rigorous imprisonment for six months alongwith fine for false statement in verification.

The Economic Offences Court at Ernakulam sentenced an individual to rigorous imprisonment of three months for selling property to evade payment of taxes of about Rs. 76 lakh despite issuance of the tax recovery certificate by the Tax Recovery Officer.

In yet another case reported from Agra, the Special CJM convicted one defaulter with imprisonment of one year & six months for wilful attempt to evade tax and for false statement in verification respectively alongwith fine.

The Income Tax Department is committed to carry forward the drive against tax evasion and action against tax evaders will continue in all earnest in the remaining part of the current Financial Year.

This was also revealed in a press report in the The Economic Times that Taxman is pressing ahead with prosecution.notices

CBDT For Stern Action Against Fake CA In Tax Refund Fraud

Posted on March 4, 2018 by staff

MASTI

The CBDT has initiated action against the fake CA and officials of Infosys for fraudulent processing of tax refunds.

According to the Times of India, the CBI is investigating a “revised tax returns” fraud involving several unknown employees of Infosys Technologies, officials from the I-T department and a fake CA from Bengaluru.

The CBDT has filed a complaint in the matter.

The scam was unearthed by the CBDT and the Income-tax department in January 2018.

The FIR has alleged that I-T officials and Infosys’ employees connived with the fake CA and filed 1,010 revised tax returns using forged documents in the names of 250 taxpayers of various private firms, during three assessment years and claimed refunds illegally.

The Institute of Chartered Accountants of India (ICAI) issued a press release stating that the culprit is not a CA.

The CBDT is also investigating whether the officials of the income-tax department circumvented the system and get the required approvals.

According to the CBDT, the loss suffered by the income-tax department is Rs 5 crore.

The FIR states that the processing of e-returns is outsourced to Infosys Technologies Limited, who validate the returns in bulk and generate list of cases where refunds have to be approved. The Assessing Officers of the I-T department posted in CPC give the approval for release of refunds to assessees through their bank accounts.

It was found by the CBI that the assessment system tags revised returns and gives pop-up messages to draw the attention of the person processing them and also to assessing officers who approve refunds.

It appears that unknown officials of Infosys Technologies who were entrusted with the work of processing the returns and the I-T officials at CPC, who were authorised to approve issue of refunds are suspected to have connived with the CA in processing these revised returns based on false information or documents knowingly and issued income-tax refunds.

The CA would file revised returns of income claiming refund, in cases of assessees whose original returns were already processed by the CPC.

All these revised returns are filed with inflated claims on account of payments towards housing loan.

In some cases, original returns reflected no income or loss under the head ‘income from house property’ but the revised ones did. And, in some cases, original returns reflected income or loss from self occupied house property and in the revised returns, higher loss was claimed.

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Month: March 2018

CBDT Instructions Reg Irregularities In CIT(A) Appellate Orders

Text of CBDT’s Instruction dated 8th March 2018 regarding Irregularities in Appellate Orders

S. 147 Reopening Of Assessment In Audit Objection | Read Latest Bombay High Court Judgement

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

Section 36(1)(viii) & 143(1)(a) Law Explained by Bombay High Court

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION

INCOME TAX REFERENCE NO. 25 OF 2000

CBDT Chairman Sushil Chandra Sends International Women’s Day Message

Supreme Court Clears Censor Board Certificate To “Aiyaary” Movie

Bombay High Court Judgement On ‘Tareek Pe Tareek’ Adjournment | Heavy Costs Imposed

CBDT Press Release On Transfer Pricing APA

CBDT PRESS RELEASE, DATED: 01-03-2018

CBDT Obligation To Disclose RTI Information Explained

THE HIGH COURT OF DELHI AT NEW DELHI

CBDT Detects TDS scam Of Rs. 3,200 Crore | Launches Prosecution For TDS Deaults

CBDT For Stern Action Against Fake CA In Tax Refund Fraud

Text of CBDT’s Instruction dated 8th March 2018 regarding Irregularities in Appellate Orders

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX REFERENCE NO. 25 OF 2000

CBDT PRESS RELEASE, DATED: 01-03-2018

THE HIGH COURT OF DELHI AT NEW DELHI

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION

INCOME TAX REFERENCE NO. 25 OF 2000