No Scope for Extrapolate and Estimate Undisclosed Income for Block Assessment Proceedings: ITAT

The Chennai bench of Income Tax Appellate Tribunal has held that no scope for extrapolate and estimate undisclosed income for block assessment proceedings.

During the course of assessment proceedings of assessee Mr. A. Sivashankar, document in the form of sale agreement with Mr. M. A. Salim was found and seized by AO, as per which, the assessee was entered into agreement to sale some of plots at Rs.1,458/- per sq. ft., whereas, the assessee has sold remaining plots to other persons @ Rs.400/- to Rs.800/- per sq. ft. The AO compared the rate between the assessee and Mr. M. A. Salim and opined that the assessee has understated the sale consideration of plots sold to other persons and thus, by considering the rate agreed to sell to Mr. M. A. Salim, has adopted for other Sale Deed executed to different persons and estimated undisclosed income on account of under reporting of sale price for all the three assessment years.

The assessee preferred appeal against the assessment order and the CIT (A) has opined that the AO is erred in extrapolating sale price of plots from Rs.400/- to Rs.1,458/- per sq.ft. and made additions towards differential sale consideration. Against which the revenue filed appeal before ITAT

The counsel for the assessee has submitted that there is no scope for the AO to estimate undisclosed income on the basis of incriminating material found for part of year to remaining part of year on the basis of one sole piece of evidence being sale agreement with one person by ignoring other evidences filed by the assessee. It is quite common in real estate segment; the rates are changing very rapidly within a short span of time.

Mr. V. Durga Rao, Hon’ble Judicial Member and Mr. G. Manjunatha, Hon’ble Accountant Member by relying the decision of Bombay High Court in the case of M/s.Harish Textile Engrs. Ltd v. DCIT has observed that there is no scope for the AO to extrapolate and estimate undisclosed income for block assessment proceedings.

The Authority has held that “in our considered view, the reasons given by the AO to estimate income on the basis of one evidence of agreement to sale to entire block period is not in consonance with settled legal principles and thus, on this basis alone, additions made by the AO, cannot be sustained”. The Authority further held that “we are of the considered view that the AO is completely erred in estimating sales Revenue from sale of plots for all the three assessment years. The CIT(A) after considering relevant facts has rightly deleted the additions made by the AO and thus, we are inclined to uphold the findings of the CIT(A) and accordingly, the appeals filed by the Revenue are dismissed for all the three assessment years”.

Support Services to Overseas Shipping lines/ Charterers attracts 18% GST: AAR

The Tamil Nadu Authority for Advance Ruling (AAR), presided by T G Venkatesh, Additional Commissioner, and K Lata, Joint Commissioner, has held that support services to overseas shipping lines/ charterers attract 18% GST.

The applicant, Translog Direct Private Limited, is engaged in providing support services to overseas shipping lines/ charterers in relation to operations of vessels of different shipping lines which are entering or exiting India. The Company offers its overseas customers a consolidated end-to-end solution by offering such services on its own account.

The applicant approached AAR to clarify whether the specific services would qualify as ‘support service’ under SAC 9985 as per Notification No. 11/2017.

The applicant submitted that; they offer support service to their customers located outside India on a Principal-to Principal basis (P2P).

The customers are in the business of chartering vessels for transportation of goods into India and moving goods outside India and for the provisions of aforesaid services, they propose to render services to vessels or shop owners to ensure smooth operations while the vessel or ship arrives in India.

The customers are in the business of chartering vessels for transportation of goods into India and moving goods outside India and for the provisions of aforesaid services, they propose to render services to vessels or shop owners to ensure smooth operations while the vessel or ship arrives in India.

The Authority observed that the applicant extends vessel-related services supporting the shipper to facilitate the entry or exit of the vessel in the Indian Ports. The services are more in the nature of support services for the transport of vessels and more aptly will be classifiable under SAC 9967. The proposed end-to-end service proposed by the applicant covers all the services specified in Group 99675, which also has an entry accommodating ‘other supporting services’ under 996759.

The Authority has held that the applicant’s business or proposed transaction is liable to be classified under SAC 9967 and attracts GST at the rate of 18% under Notification No. 11/2017.

Training and Awareness Programme on Fire Prevention and Emergency attracts 18% GST: AAR

The Karnataka Authority of Advance Ruling (AAR) presided by Dr. M. P. Ravi Prasad, Member (State) and Mr. T. Kiran Reddy, Member (Central) has held that Training and Awareness Programme on Fire Prevention and Emergency attracts 18% GST.

The applicant, M/s Fire Prevent Systems is a company in operation since 2011. In order to spreading awareness on Fire Safety and Security’ and for generating employment opportunities for the young aspirants the applicant have commenced an academy. The academy shall provide Diploma courses and quality training to the trainees on fire prevention. Hence, the applicant approached the AAR seeking the applicable rate of GST on (Training Academy) Fire Prevention and Emergency Training and Awareness Programmes.

The applicant submitted that the training will help the society for fire safety emergency response and life skills which will help Indian society at large and have positive social impact and hence, they are liable to GST at the rate of 5% under Notification 1/2017.

The Authority observed that as per the Notification 1/2017 the rate of GST for technical aids for education, vocational Training is 5% to be levied on intra state supplies of goods. The applicant is providing training to trainees on fire prevention which is not goods. Hence the Notification 1/2017 is not applicable to the applicant. The Authority further observed that since the applicant is providing training to the trainees on fire prevention the same is covered under SAC 999293 i.e. commercial training and coaching services.