ITAT: No penalty on alleged ‘kickbacks’ under Volcker report;
Highlights non-bindingness of UN resolution
Pune ITAT deletes
penalty levy u/s. 271(1)(c) with respect to Sec. 37(1) disallowance confirmed
in quantum appeal for payments made to Dubai and Jordan entities towards
transportation/aftersales services etc. during AYs 2002-03 & 2003-04 by
assessee in connection with its export sales; Relying on UN Council’s Volcker
Committee Report (VCR) (whereby assessee’s name was found in the list of
records of VCR), AO had alleged these payments as the kickbacks paid to the
Iraq Authorities and accordingly disallowed assessee’s claim u/s. 37, however,
ITAT had confirmed the disallowance in quantum appeal only on the ground of
failure to discharge of onus; Firstly, ITAT notes that “it is not the case that
the AO is in possession of some incriminating evidences to prove that the
services are not rendered by the said Dubai/Jordan entities or assessee paid
kickbacks to Iraqi Authorities”, also notes that similar disallowance stand
allowed in favour of the assessee except in this case of the assessee where
addition was confirmed mainly due to the failure in discharge of onus.”; Next,
ITAT holds that no international agreements/conventions/treaties/UN
Resolution-986 etc. are not binding on the citizens of India, thus rules that
the failure of the assessee in not complying with the UN Resolution-986 do not
constitute an “offence” for the purpose of Explanation 1 to section 37(1) of
the Act; Moreover, ITAT takes note of debatability of the issue, notes that the
allowability of the payments made to these entities u/s.37(1) had attracted
attention of the various benches of the Tribunal and Court
HC: Upholds CIT’s revision, disallows hawala purchases based on
VAT Dept info
Bombay HC upholds
CIT’s revisionary proceeding u/s 263 during AY 2011-12 since the AO had failed
to enquire about non-genuine purchases made by the assessee even though very
reliable and genuine information was received from the VAT and Sales Tax
authorities regarding 'hawala traders' and had erred in not disallowing entire
non-genuine purchases; On receipt of information from VAT and Sales Tax
Department, the AO called upon the assessee to prove the genuineness of the
purchases, even though the assessee failed to furnish information, the AO
accepted the assessee’s plea to tax gross profit on said purchases to buy peace
and to avoid unending litigation and held that 15% of the said purchases be
assessed as income; Takes note of CIT's contention that if the VAT Authorities
have declared certain parties or suppliers/dealers as 'hawala operators', then,
that is a good ground to initiate the investigation and once the assessee could
not produce any material nor he could ensure the presence of the supplier
before the AO, there was no reason for the AO to accommodate the assessee in
the manner done; HC upholds ITAT’s view that the AO did not make any inquiry
with regard to the purchases as to whether the items were actually acquired and
installed and whether the party providing the goods were dealing in it and
these were bogus purchases; Holds that “there was a clear failure to abide by
the statutory mandate and by making an estimate so also accepting a vague and
general explanation of the assessee, the assessment has been made, then, it
will undoubtedly be erroneous insofar it is prejudicial to the interest of the
Revenue ”
HC: Deletes penalty levy on infrastructure co. claiming
depreciation on highway project cost
Delhi HC upholds
ITAT order and deletes penalty u/s 271(1)(c) on assessee-company (engaged in
developing national highway) during AYs 2009-10 to AY 2013-14 for making
depreciation claim on highway project cost, though inadmissible by subsequent
CBDT circular; Takes note of the debatable issue as to whether depreciation
should be claimed on highway project or project expenditure should be amortized
over the toll concession period, which was only clarified by CBDT Circular of
April 2014; Further notes that subsequent to clarification by CBDT Circular of
April 2014 that write off of capitalized expenditure equally over the toll concession
period is allowed, assessee withdrew claim of depreciation and submitted
revised working, therefore holds assessee's conduct as bonafide ; Notes that
owing to highly debatable and contentious issues, CBDT had felt the need to
clarify the issue
ITAT: Denies exemption u/s 54/54F on 'two' non-adjacent
residential flats
Delhi ITAT restricts
Sec.54/54F benefit to individual - assessee during AY 2013-14 to one out of the
two residential flats purchased, rules that two flats can be construed as 'a
residential house' u/s 54/54F only if they have been purchased to be use as one
and are adjacent to each other with common facilities; Holds that assessee's
two different residential flats which are not adjacent and are on two different
storeys cannot constitute “a residential house” ; Relies on Delhi HC ruling in
Gita Duggal remarks that "exemption if at all which can be claimed by the
assessee in terms of Section 54F would be only with respect to one of the flat
only.", also relies on Punjab and Haryana HC in Pavan Arya ; However with
respect to denying exemption on the ground that tower in which the flats were
purchased, the lift was not installed and the project was still not completed,
ITAT holds that "...assessee has made the entire payment and flat has been
in complete possession of the assessee" and simply because certain finishing
work has not been done it cannot be held that exemption u/s.54F should be
denied.
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