Penalty 271(1)(c) quashed-Assessee forget to declare interest income due to old age

In a recent judgment, ITAT Amritsar has quashed penalty imposed u/s 271(1)(c) for non declaration of bank fixed deposit interest when the assessee due to her old age, forgot to obtain the information and certificates from the bank on account of accrual of interest

Case Details:
ITA No.170(Asr)/2014 Assessment year:2008-09
Smt. Rajeshwar Kaur vs. Income Tax Officer
Date of Judgment/Order: 31/03/2016

Brief Facts of the Case:
The assessee was an old lady who filed her return of income for the assessment year 2008-09, declaring an income of Rs.3,77,620/-. The Assessing Officer (AO) however assessed her income at Rs.6,83,610/- by making the addition for bank FDR interest not declared in the return of income, amounting to Rs.2,93,187/- and an addition of the difference in rate of interest, amounting to Rs.17,800/-, was also made. Penalty proceedings u/s 271(1)(c) were also initiated.

During the penalty proceedings, the  the assessee stated that she was an old houselady and her source of income was only from rent and bank deposit interest. For the last 30 years, she had been filing her return of income and had been paying taxes. In past she used to file her return with the help of her husband. However, due to old age, she was losing physical capacity and memory. Also that her various savings accounts are used for redemption of insurance policies, mutual funds and for receiving rent payments. In March 2007 she was advised by the Bank Manager to transfer funds from savings account to fixed deposits account to get more interest.

She further contended that at the time of filing the return for the year ended 31.03.2009, she forgot to get a certificate from the bank on account of accrual of interest and neither the bank supply her any document/certificate for interest income . Therefore, the omission of non declaration of FDR interest was inadvertent on the part of the assessee and she had also not taken credit for the tax deducted at source in her return of income and that in the assessment proceedings, she immediately and voluntarily accepted the facts and deposited the balance tax.

The AO, however, did not accept the assessee’s arguments and levied the penalty of Rs.90,600/- which was confirmed by CIT(A).

Excerpts from ITAT Judgment:

The facts are not disputed. The ld. CIT(A) has erred in holding the factum of the assessee to have engaged a qualified counsel for filing the return of income as going against the assessee. It goes without gainsaying that the mistake committed by the assessee came about before filing of the return. The factum of the assessee having admitted the facts and having agreed to pay the tax immediately has also erroneously been taken by the ld. CIT(A) to be against the assessee. Rather, this situation goes to show that the assessee, immediately upon realizing her mistake, was willing to pay due tax. Reliance has wrongly been placed on ‘CIT vs. Zoom Communication (P) Ltd.’, 327 ITR 510 (Delhi) by the ld. CIT(A) is also inappropriate. This decision is not applicable to an inadvertent mistake, like the one committed by the assessee.

It is not disputed that the mistake committed by the assessee was the first and last mistake on her part. It has also not been shown that it was a deliberate action on the part of the assessee not to furnish bank certificate for interest income.

Moreover, it has also not been disputed that the income accrued in the shape of interest on a bank FDR cannot be concealed, since the information about the interest accrued and TDS made thereon is reported by the payer to the Income Tax Department and it is reflected in the Form 26AS available under the name of the payee on the website of the Department.

Then, as maintained, if the assessee’s intention was to deliberately avoid any tax, it was income on interest amounting to Rs.2,42,316/- accrued in her savings accounts, which would have been concealed, since thereon, there is no TDS and no reporting by the payer to the Income Tax Department.

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KSCAS petition challenging cost accountants appointment as auditor of co-operative societies dismissed by Karnataka HC

The Karnataka State Chartered Accountant Society (KSCAS) has lost its case against inclusion of Cost Accountants as auditor of State Cooperative Societies by Karanataka State Government.

Case Details:
Writ Petition No. : 2026-2031 of 2015
Karnataka State Chartered Accountant Society  and Ors vs. State of Karnataka, Department of Co-operation and Ors
Date of Judgment: 29/03/2016

Brief Facts of the Case:

97th Constitutional amendment introduced Article 243ZH to 243ZT requiring every State to make Law making audit of every cooperative society mandatory. Consequently, section 63 of KCS Act was amended making audit of the accounts of the co-operative society compulsory. Initially, the audit was to be assigned to departmental auditors or to chartered accountants.

KSCAS had filed a WP challenging the amendments made in section 63 of the Karnataka  Co-operative Socieites Act, 1959 (KCS Act) which allowed auditing of the accounts of state cooperative accounts of by cost accountants/firm of cost accountants. It was prayed to declare such amendment as null and void and ultra-virus the Constitution.

KSCAS had alleged that due to political pressure and lobbying by the members of the Cost Accountant fraternity, the State Legislature sought to bring a further amendment in said Section 63 to enlarge the scope of auditor to include a Cost Accountant within the meaning of Cost and Works Accountants Act, 1959.

KSCAS had contended that the State had overlooked the distinction between the two professional classes and depicted the distinction as under:

Chartered Accountants Cost Accountants
Through knowledge of every aspect of accounting, auditing and taxation. Knowledge of cost and financial management to ensure a fine balance between expenditures and available recourses
CAs are involved in core accounting work of an organization Cost accountants are involved in the costing part of financial transactions
CAs analyse risk and design efficient financial system Cost accountants assess the feasibility of projects vis-à-vis available funds

Taxation and  auditing are main duties of a Chartered Accountants

Cost management and designing cost controls methods are main duties of a Chartered Accountants

However the Court held as under:

“On a careful consideration of the rival contentions, it is not evident that by virtue of impugned amendment, a Cost Accountant has been enabled to carry out functions which can only be performed by a Chartered Accountant. This statutorily governed and there can be no entrenchment on such functions. It is not the case of the petitioners that auditing the accounts of a cooperative society is the exclusive domain of Chartered Accountants , If that be so, there is no ground for challenge made out.”

Copy of Judgment:

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Application for registration u/s 12A-No pre-requirement to show and establish having undertaken charitable activities before filing such application

In a recent judgment, ITAT Delhi has held that it is not pre-requirement for seeking registration u/s 12A of the Income tax Act, 1961 that the applicant must show and establish having undertaken charitable activities before filing such application for registration u/s 12A.

Case Details:
ITA No. 3766 & 3767/Del/2013
Saraswati Devi Educational & Charitable Trust Vs. The C.I.T.
Date of Order/Judgment: 31/03/2016

Brief Facts of the Case:

The applicant-trust was registered under the Indian Trusts Act established with the object of spreading education and providing medical and social relief to the poor. Earlier, the registration was refused by the CIT and the ITAT, New Delhi vide its order dated 11.6.2012 in ITA Nos. 4641 & 4642/Del/2011 restored both the issues to the file of CIT for fresh adjudication on merits. During the second round of proceedings, the CIT, Rohtak called for the remand report from the concerned AO as to whether the applicant fulfilled all the conditions required for grant of registration applied for. However, JCIT and AO did not clearly recommend the case for grant of registration u/s 12A and left the matter to be decided by the CIT on merits. The CIT, considering the information as insufficient passed the order rejecting registration u/s 12A and approval u/s 80G.

The main ground taken by CIT for rejection were as under:

(i) That the appellant trust has carried out one time activity of the distribution of sums & also the appellant society has not carried out any activity in the field of formal education which was not charitable activity in view of section 2(15).

(ii) That the appellant society is just like a private discretionary society controlled by the President, Secretary, First Vicepresident, Second Vice-President and Treasurer of the Society who are brother having close family relations with other members.

(iii) That the appellant society has amended the constitution without following the due procedure of the law.

(iv) The Joint CIT as well as Assessing Officer did not recommend the case under registration 12A and left the matter to be decided on merits.

(v) The properties of the society and the financial control are in the hand of members and also the crucial power to transfer the assets to any or many member of the office bearer.

Important Case Law considered:

Sanjeevamma Hanumath Gowda Charitable Trust vs DIT(E) reported as 285 ITR 327 (Karnataka HC)
CIT-I vs Baba Kartar Singh Dukki Educational Trust reported as 221 Taxman 493 (P&H HC)
PIT vs Garden City Educational Trust 191 Taxman 238 (Kar HC)

Excerpts from ITAT Judgment:

……….. we are of the view that at the time of grant of registration u/s 12A of the Act, the ld. CIT has to record his satisfaction about the charitable objects and genuineness of the proposed activities of the applicant. The clause 10 and 12 clearly mandates the charitable activities of the trust. It is not pre-requirement for seeking registration u/s 12A of the Act that the applicant must show and establish having undertaken charitable activities before filing such application for registration u/s 12A of the Act. The ld. CIT(A) has not brought out any allegation or fact on record to establish and allege that the receipts of application trust were not used for charitable purposes and nor it has been shown that receipts were misappropriated or misused by the trustees or office bearers of the trust. Hence this allegation has no legs to stand.

Next allegation made by the ld. CIT(A) is that the applicant trust has amended constitution without following the procedure and properties of the trust and financial control are in the hands of the members and crucial power to transfer the assets to any or many members of the office bearer but we are unable to see any such clause or provision in the trust deed which shows that the control of properties and finance is safely given to members to enjoy the fruits of the properties and financial resources and receipts of the trust.

Last allegation for rejection as noted by the ld. CIT(A) is also not correct that the JCIT and the AO did not recommend the case for registration u/s 12A of the Act. But we do not agree with this basis as the satisfaction has to be recorded by the ld. CIT himself who is considering the grant of registration and it is not the case of the Revenue that the JCIT or the AO did not recommend the grant of registration but at the same time from the copies of the remand report dated 18/2/2013 and 11.2.2013 [available at pages 26 to 28 of the assessee’s paper book] it is clear that it was reported that the amount of Rs. 93,000/- has been utilised for the benefit of brilliant and needy students. In those reports the JCIT & ACIT/AO has also stated that the trust is running on deed which was made on 27.12.2010 and the trust is an educational and charitable trust with the object to help in spreading of education in its widest connotation with special focus on education of poor and needy without any preference on the basis of religion, race, caste, sex or place of birth and operation of the trust shall be carried in accordance with the intention of earning profits will perform with service motive only. In such situation the basis and allegations labelled by the ACIT are not found to be sustainable.

From these provisions, it is amply clear that the scope and ambit of the inquiry revolves around the nature of objects being charitable or religious and the genuineness of the activities of the trust or institution.

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CENVAT Credit Rules Amendment 2016. Option of not maintaining separate accounts-6% of value of exempted goods 7% of value of exempted services accounts

CENVAT Credit Rules amendment regarding option to pay tax by the manufacturer of goods or the provider of output service, opting not to maintain separate accounts.

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
NOTIFICATION No. 23 /2016-
Central Excise (N.T.)

New Delhi, the 01st April, 2016

G.S.R. (E). – In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely.

1. (1) These rules may be called the CENVAT Credit (Fourth Amendment) Rules, 2016.
(2) They shall come into force from the date of their publication in the official Gazette.

2. In the CENVAT Credit Rules, 2004,-

(a) in rule 6, in sub-rule (3) for clause (i), the following clause shall be substituted , namely :-

“(i) pay an amount equal to six per cent. of value of the exempted goods and seven per cent. of value of the exempted services subject to a maximum of the sum total of opening balance of the credit of input and input services available at the beginning of the period to which the payment relates and the credit of input and input services taken during that period; or” ;

(b) in rule 7B, in sub-rule (1) for the words and figures “invoices, issued in terms of the provisions of the Central Excise Rules, 2002,” the words and figure “documents specified under rule 9,” shall be substituted.

[F. No.267/17/2016-CX.8]

(Shankar Prasad Sarma)
Under Secretary

Note.- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide notification No. 23/2004 – Central Excise (N.T.) dated the 10th September, 2004 vide number G.S.R. 600(E) dated the 10th September, 2004 and last amended vide notification No. 13/2016(N.T.)- Central Excise (N.T.) dated 1st March, 2016 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 244 (E) , dated the 1 st March, 2016.

Unregistered agreement to sell amounts to transfer u/s 2(47) for capital gain purpose

In a recent judgment, ITAT Delhi has held that land possession given and major sales consideration received through unregistered agreement to sell  amounts to transfer u/s 2(47) of the Income Tax Act, 1961, though it was claimed that possession was taken back for non receipt of balance sales consideration.

Case Details:
ITA No.5521/Del/2015 (Asstt. Year: 2012-13)
ITAT Delhi, Circuit Bench at Meerut
Ashwani Kumar & Sons (HUF) vs. ITO

Brief Facts of the Case:
The assessee was Hindu undivided family (HUF) During the relevant assessment year, it had sold agricultural land through unregistered agreement of sale dated 21st of February 2012 on consideration of Rs. 19681600/-. As per the assessee initially the possession of the property was given but the purchaser was not able to give balance consideration of Rs. 2681600/- and therefore the possession was taken back on 15.03.2012. Therefore, there was no transfer in view of provisions of section 2(47) of the Income Tax Act, 1961. However tax authorities noted that eventually the possession of the property was handed over to the buyer. Since the assessee had received substantial consideration and has also parted with the possession of the property the Assessing Officer (AO) was of the view that there was a transfer of an asset and capital gain is chargeable to tax. Also the assessee had claimed deduction under section 54B which was denied on the ground that the deduction u/s 54B at the relevant time was available only to the individual assessee and not to HUFs.

Assessee preferred an appeal before CIT appeals who also confirmed the action of the assessing officer on taxation of capital gains on sale of land and secondly on denial of deduction under section 54B.

Excerpts from ITAT Judgment:

It is undisputed fact that assessee has entered into an agreement to sell with the buyer for consideration of Rs 1,96,81,600/- and received part of the consideration of Rs 1,70,00,000/- and the possession of the property was given to the buyer. According to the provisions of section 2(47)(v) of the act transfer includes any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882.Therefore, in the transaction entered into by the assessee. All the ingredients of transfer are satisfied, and therefore we are of the view that though assessee might not have received the full consideration but transfer of property has occurred in view of handing over the possession of the property to the buyer. For repossession of property assessee produced a an undated notarised understanding on stamp paper of Rs 10/- .Merely because the possession of the property has been taken back by the seller on account of non payment of part of the consideration cannot save capital gain in the hands of the assessee when subsequently the same agreement was honoured. Furthermore for taking back the possession of the property assessee produced an undated notarised understanding on stamp paper of Rs 10/-. For repossession of the property assessee produced an undated notarised understanding on stamp paper of Rs 10/- between the buyer and seller However subsequently the transaction of sale has happened at the agreed price between the parties. Further it is difficult to appreciate that when assessee has received substantial consideration and only meagre consideration is outstanding how assessee has taken possession of the property back from the buyer without returning any payment to the buyer.

Hence we are of the view that the impugned assessement year is AY 2012-13 and assessee is HUF which is not entitled to deduction u/s 54 B of the act.

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