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2024 (11) TMI 1378
Addition representing agricultural income - material evidence filed for the sale of the casuarina trees - ITAT sustaining the entire amount of agricultural income as unexplained income - addition based on the sworn statement - HELD THAT:-. The facts of the case of the appellant in this Appeal being almost identical to the facts of the case the appellant's husband [2024 (9) TMI 1455 - MADRAS HIGH COURT] evidence which department has gathered is long after the felling of trees and sale by the appellant by placing reliance on the statement of the Village Headman. The statement of the Village Headman can at best only corroborate the stand which department based on evidence, if there were other compelling evidence.
It was incumbent on the part of the Income Tax Department to have summoned the said Mr.Thangasamy of Alangudi Taluk, Pudukottai District and verified and confirmed whether the said person had indeed given the statement which was produced by the Appellant and if so whether the statement given by the said person was true or not.
Although the department is governed by preponderance of probability and not by strict rules of evidence, yet it was incumbent to have secured the presence of the said person. They should have cross examined him before disbelieving the statement. Therefore, an issuance of summon to Mr.Thangasamy who had given statement by the Income Tax department is not sufficient.
Income Tax department should have secured the presence of Mr.Thangasamy to answer to the summons and should have confronted him and contradicted the content of the statement of Mr.Thangasamy produced by the appellant by way of cross examination.
Therefore, without cross examination, the statement of Mr.Thangasamy can neither be disbelieved nor disregarded. The statement of Mr.Thangasamy cannot be therefore discredited. If Mr.Thangasamy had refused to co-operate, the Income Tax Department was not without remedy under the provisions of the Income Tax Act, 1961 to secure his presence. Since this exercise was not done, the demand confirmed u/s 144(A) are liable to be interfered as unsustainable. Addition u/s 69A of the Income Tax Act, 1961 as unexplained credit/unexplained money of the appellant are incorrect and are liable to the set aside. Decided in favour of assessee.
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2024 (11) TMI 1377
Credit of TDS - no credit of the TDS had been given in the order u/s 154 r.w.s. 143(1) - HELD THAT:- In the instant case, the assessee has declared capital gain in FY.2017-18 (AY.2018-19). Though the payments were received in three years, but credit for the TDS u/s 194IA deducted by the purchaser, M/s Happy Home Infra Tech, can be allowed only in AY.2018-19. Therefore, claim to allow credit of TDS of Rs. 4,50,000/- in AY.2016-17 is not in accordance with the clear provisions of the Act.
CIT(A) has rightly rejected the ground of the assessee for AY.2016-17. However, he has directed AO to allow credit of such TDS amount in AY.2018-19, which is correct. We direct the AO to withdraw credit of TDS from AY.2016-17, if the same has been allowed, after due verification by AO. AO is further directed to allow credit of TDS in AY.2018-19. This ground is allowed for statistical purpose.
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2024 (11) TMI 1376
Addition u/s 153A - whether no incriminating document/material found during the course of search? - addition u/s 56(2)(viii)(c) - HELD THAT:- We find that the factual matrix of the instant case shows that the only seized document referred to in the assessment order by the AO at Para 3 of the assessment order is the list of shareholders of M/s Confident Distributors Pvt. Ltd, which included the assessee. CIT(A) correctly held that the document is available in public domain and hence cannot be categorized as incriminating document.
Addition is made u/s 56(2)(viii)(c) on account of difference in the face value of fresh issue of shares by the company and book value of shares. We find that there is no whisper, in the assessment order, of any incriminating documents/records or any other evidence found or seized during the course of search proceedings which prompted such addition made in the case of the assessee.
Section 56(2)(viii) of the Act is a deeming provision and the issue in this case under consideration is the pricing of the shares without any reference to any incriminating material found during the search. Further, the existence, identity and genuineness of the transaction has not been doubted by the AO.
We also note that the assessee had filed return of income originally u/s 139 of the Act on 29.09.2012 which was processed u/s 143(1) of the Act. At the time of search action on 29.12.2015, no assessment/reassessment proceedings were pending in the case of assessee. The impugned AY is thus an unabated assessment AY and, therefore, the ratio laid down in the case of Abhisar Buildwell [2023 (4) TMI 1056 - SUPREME COURT] squarely apply wherein it has been held that assessment u/s 153A of the Act can be framed only on the basis of incriminating material found at the time of search.
The issue of addition in an unabated assessment year and the role of incriminating material has been finally settled by the decision of case of Abhisar Buildwell [supra] wherein held once during search undisclosed income is found on unearthing the incriminating material during the search, the AO would assume jurisdiction to assess or reassess the total income even in case of completed/unabated assessments.
As the addition made in the case of the assessee in the instant year is devoid of any incriminating materials, we direct the AO to delete the impugned addition. Decided in favour of assessee.
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2024 (11) TMI 1375
Maintainability of Appeals on lifting of the moratorium period ordered by the Hon’ble Supreme Court - HELD THAT:- Hon’ble Supreme Court ordered for moratorium period on the Assessees companies, thus consequent to the said Judgment of the Hon’ble Supreme Court the present appeals filed by the Assessees are not maintainable and liable to be dismissed. Accordingly, we dismiss the appeals filed by the Assessees with the liberty to Assessees/department to seek for restoration of the above Appeals on lifting of the moratorium period ordered by the Hon’ble Supreme Court or any other change of circumstances.
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2024 (11) TMI 1374
Disallowance u/s 36(1)(iii) - interest free advance by assessee - assessee has paid interest on various parties and has not charged any interest on the money landed by assessee - HELD THAT:- Neither the assessee has paid interest on short borrowings nor charged any interest on the advances given for short periods. Rather the assessee was having running account with both the parties, therefore, there was no justification for making disallowance of interest expenses. In the result, first part of ground No. 1 of appeal is allowed.
Addition on account of low household expenses - AO made addition by taking view that total household expenses withdrawal or assessee and his family which is not sufficient for four members in the family in Y category of city - assessee vehemently argued that the assessee has shown sufficient withdrawals for his household expenses, the assessee has withdrawn Rs. 78,400/-. The wife of assessee has also shown withdrawal of Rs. 60,000/-. The family of assessee consists himself, his wife, two minor children – one children is school going and assessee resides in the house owned by his father. Assessee’s withdrawal shown by assessee are sufficient to meet day-to-day expenses - HELD THAT:- As no benefit of withdrawal of Rs. 78,400/- is allowed by Assessing Officer. The assessee is living in the house owned by his father. Thus, considering the overall facts and circumstances of the case, in my view, the total household expenses of four members of a family is not less than Rs. 30,000/- per month in City Light, Surat. Thus, the assessee is allowed benefit of Rs. 1.20 lacs plus (+) his own withdrawal of Rs. 78,400/- and rest of the addition to the extent of Rs. 2,81,600/- is sustained. In the result, second part of ground No. 1 is partly allowed.
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2024 (11) TMI 1373
Non grant of full TDS credit claimed in the return of income - CPC granted credit for TDS in proportion to the capital gain income declared by the assessee and disallowed the claim for the balance TDS.
HELD THAT:- Undisputedly, the entire TDS on the sale consideration was remitted to the Government account in the name of the assessee. This fact is clearly evident from Form No. 26AS and the corresponding TDS certificate. Accordingly, the assessee claimed credit of entire TDS. Whereas, in the return of income of assessee’s wife, no TDS was claimed.
The aforesaid factual position remains uncontroverted before us. Merely because the property was jointly owned by the assessee and his wife and the capital gain arising on sale of property was equally shared by the joint owners, that cannot be the sole reason for disallowing assessee’s claim in respect of TDS credit. More so, when it is the assertion of the assessee that his wife has not claimed credit for TDS.
We direct the AO to factually verify, whether assessee’s wife has claimed any part of the TDS and in case, assessee’s claim that his wife has not claimed any part of the TDS is found to be correct, entire TDS credit should be allowed to the assessee.
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2024 (11) TMI 1372
Rejection of applications u/s 12AB and 80G(5) - objects are charitable in nature and restricted to the members of the Trust and not for the benefit of public at large and as such does not fall under the category of charitable object as per the provision of section 2(15) - HELD THAT:- We find that Hon’ble Jurisdictional High Court in CIT Vs. Jamiatul Banaat Tankaria [2024 (10) TMI 712 - GUJARAT HIGH COURT] held that where CIT(E) rejected assessee’s trust application for registration under Section 12A on the ground that its objects were for benefit of a particular religious community or caste and accordingly assessee was not entitled for exemption in terms of Section 13(1)(b), since Section 13(1)(b) was not relevant at the stage of registration under Section 12A but rather comes into play at the time of assessment when determining exemption u/s 11, impugned rejection of application was unjustified.
CIT(E) has not examined the objects and activities of the assessee trust which are the twin conditions for granting registration u/s 12A/12AB.
We also find merit in the submission of assessee that the ld. CIT(E) while rejecting the application of assessee has referred Clause- H to O only and has not considered the other clauses. Entire memorandum of association has to be considered and not by selecting a particular clause of the memorandum of association. Considering the fact that the ld. CIT(E) has not given his finding on the objects and activities of the assessee, therefore, we deem it appropriate to restore the issue back to the file of ld. CIT(E) reconsider the registration of assessee u/s 12AB of the Act afresh Appeal of assessee is allowed for statistical purposes.
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2024 (11) TMI 1371
Determination of quantum of peak credits appearing in books of accounts/bank accounts of various assessees - HELD THAT:- As exclusively for restricting the addition u/s 68 to only the peak unexplained credit after elimination of circular transaction(s), if any, within the Group concerns. The one and only one inference that emerged from the Tribunal order [2013 (10) TMI 1522 - ITAT DELHI] is that the entire credits appearing in the books of account/bank account(s) for providing accommodation entries to beneficiaries have to be assessed in the hands of the appellants/assessees if the same was not taxed elsewhere in the hands of other business concerns of this Group involved in providing accommodation entries to beneficiaries.
We find merit in the arguments of the CIT-DR. We are of the considered view that the Ld. Counsel’s argument that the peak of the bank credits has to be assesseed as per the direction of the Tribunal order dated 18.10.2013 is devoid of any merit on the simple reasoning that the bank credits are not assessable as unexplained credits u/s 68 of the Act and each accommodation entry is independent and separate transaction.
Tribunal as directed the appellant/assessee to produce the evidence and demonstrate the chain of transactions before the AO during the course of remitted proceedings. Tribunal has clarified that the burden of proof to produce the evidence and demonstrate the chain of transactions, layering indulged by him in the calculation of peak credits and to prove each credit in the books of each assessee is on the appellants/assessees. However, we have noticed that the appellants/assessees, during the second round of assessment proceedings, failed to follow the directions of the Tribunal vide order dated 18.10.2013. Therefore, the AO was constraint to assess the entire credits u/s 68.
Without offering any comment on merit of the case, we deem it fit to set aside the impugned orders and remit the matter back to the file of the AO for deciding the issue of peak credit in light of the above observations/ discussions/findings.
In view of the decision and Tribunal order in the cases of Ordinary Financial Services Pvt. Ltd. we direct the AO to work out the commission income @ 0.50% of accommodation entries provided by the concerned assessees and to allow the consequential relief.
We have taken note of the fact that the investment documents were seized from the possession of the appellant/assessee and it has to be explained by the appellant/assessee. The appellant/assessee failed to bring any material on the record to contradict the finding of the lower authorities. We therefore, do not find any fault in the finding of the Ld. CIT(A) on this score.
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2024 (11) TMI 1370
Assessment u/s 56(2)(X) - stamp duty value of the property was much higher -purchase of immovable property by the appellant in the previous year relevant to the assessment year 2017- 18 and not in the previous year relevant to assessment year 2018-19 - HELD THAT:- Sale consideration was settled on the date of the agreement i.e. 30th December, 2016 and that all the amount was paid on the said date. He therefore, has contended that the collector rate/ circle rate as on the date of execution of the agreement should be taken for the purpose of making any addition u/s 56(vi)(2).
Though, this ground has been taken by assessee as an additional ground, however, we find force in the same in view of the provisions of Section 56(2)(X) read with First proviso and Second proviso.
As per first and second Proviso to Section 56(2)(X) of the Act, where, the date of agreement, fixing the amount of consideration, is prior to the date of the registration deed and the amount of consideration or part thereto as per the said agreement has been paid by the purchaser though banking channel, then the stamp duty value/ circle date as mentioned on the date of agreement is to be taken for the purpose of Section 56(2)(x).
Since, in this case the entire payment of ₹86 lacs was transferred by the assessee through banking channel on 30th December, 2016, therefore, AO is directed to calculate the amount as per the circle rate as applicable on 30th December, 2016. AO shall call upon for information in this regard from the circle officer/ collector and thereafter, apply the said rates for the purpose of computing the income of the assessee while invoking the provisions of Section 56(2)(x).
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2024 (11) TMI 1369
Principle of Mutuality - Assessment of Club - whether case of the assessee is covered by the principle of mutuality ? - HELD THAT:- As assessee club was established for non-profit motive and the club and its members were distinct/ distinguishable and they do not have right in any surplus, if generated by the assessee club and none of the activities of the club could be tainted with commerciality. Any reserve held by the club are also used for the purpose of furtherance of the activities of the club and cannot be used by any member for its own benefit.
It is clear that activities of the Assessee are covered by principle of mutuality. Accordingly, the appeal of the department is hereby dismissed.
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2024 (11) TMI 1368
Validity of order in the name of non-existent person - CIT(A) has passed ex parte order - HELD THAT:- We quash the assessment order since the AO issued notice u/s. 143(2) and passed order u/s 144 in the name of deceased and non-existent assessee whereas the AO had information about the death of the assessee before passing order u/s 144 of the Act. Accordingly the assessment order passed in the name of deceased and non-existent assessee is not a valid order passed in the eyes of law. Accordingly we quash the assessment order. Appeal by the assessee is allowed.
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2024 (11) TMI 1367
Assessment u/s 153A - Addition of long-term capital gains - transfer of capital asset owned by the firm during the previous year while converting the partnership firm into a company - HELD THAT:- As alleged incriminating documents seized at the time of search and we found that at no stretch of imagination, the above said documents could be treated as incriminating records because they are only the documents maintained by the assessee during the normal course of business like Board Resolution, note prepared by the Advocate and the valuation report prepared by the advocate and the indenture of retirement-cum-release of partnership firm dated 06.07.2015 and financial statements for the assessment year 2015-16.
From the above said documents we are not able to find any incriminating evidence for the suppression of income. We therefore, does not accept the reasoning of the AO that these are all incriminating records recovered at the time of search from the assessee. Further, there is no suppression or escaped income made out by the AO, based on the seizure of the above said incriminating documents and therefore we are of the view that no assessment proceedings could be initiated u/s 153A of the Act when the assessment was completed. To arrive such a conclusion we relied on the judgement of the Hon’ble Supreme Court in the case of Abhisar Buildwell P Ltd. [2023 (4) TMI 1056 - SUPREME COURT]
Whether the assessee had committed any violation of the provisos to Section 47 (xiii) of the Act as alleged by the AO? - There is no evidence available with the AO to show that the partners had received consideration at the time of succession and the AO also not brought out any specific instances of receiving any consideration at the time of effecting the succession. As seen from the various records, and the balance sheet, it is clear that before the transfer of the firm into a company, the partners have withdrawn their surplus share capitals and therefore, there is no evidence or any materials available with the AO to show that the partners have received consideration for the purpose of transferring the assets and liabilities of the firm to the assessee company.
The partners have withdrawn their surplus capital amount after the reorganization of the firm and not immediately before the succession and therefore, it cannot be treated as consideration received for the transfer of the assets and liabilities of the firm to the company. Therefore, we are not agreeing with the reasons adduced by the AO in order to attract proviso (c) to section 47(xiii) of the Act.
In the present case, there are no violation of the conditions laid down in section 47(xiii) proviso (a) or (c) of the Act and therefore, the order of the AO treating the value of the assets and liabilities of the firm, as capital gain obtained by way of transfer of capital asset liable to be taxed under the head long term capital gains u/s 45(4) of the Act is not sustainable. In coming to the above conclusion, we derive assistance from the judgement of M/S CADD Centre [2016 (5) TMI 422 - MADRAS HIGH COURT].
CIT(A) also in his order simply extracted the findings of the AO and confirmed the order passed by the AO and therefore we are setting aside both the orders of the CIT(A) and the AO and held that the addition made under the head long term capital gains is not sustainable and hence the assessee is entitled for exemption u/s 47 (xiii) of the Act. Assessee appeal allowed.
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2024 (11) TMI 1366
Unexplained deposits in bank a/c - HELD THAT:- On perusal of bank statement, we find that the assessee has made frequent deposits in bank a/c and it is not a case of one time sudden deposit. Further, the assessee has also made frequent cash withdrawals from the very same bank a/c. Therefore, looking at the pattern of deposits and withdrawals, the assessee should not be denied the benefit of peak credit. That means, only peak-shortage can be considered as unexplained income. This is in consonance with the view taken by various judicial forums.
We find that there is a peak shortage of Rs. 1,05,000/- on 01.06.2010 which can only be treated as unexplained. Consequently, the addition made by AO is restricted to the extent of Rs. 1,05,000/- and the rest of the addition is deleted. The assessee gets relief accordingly.
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2024 (11) TMI 1365
Denial of exemption claimed u/s 11(2) - Assessee had failed to file Form 10 electronically before the due date of filing of return of income as mandated by Rule 17 of the Income Tax Rules 1962 but filled in physically - HELD THAT:- It is not the case of the Revenue that there was difference between Form 10 filed by the Appellant physically and electronically. Revenue has placed nothing on record to controvert the finding returned by the CIT(A) that the funds were not accumulated casually by the Assessee and were utilize for the purpose of the Assessee–Trust. We note that Assessment Year 2016-2017 was also the first year of applicability of amended Rule 17 of IT Rules requiring electronic filing of Form 10 since the said Rule came into effect from 01/04/2016 relevant to the Assessment Year 2016-17. The Assessee has also placed on record Form 10B for the Assessment Year 2016-17 filed electronically on 21/09/2016 wherein it has been clearly stated that INR 7.34 Crores has been accumulated in terms of Section 11(2).
Thus, we hold that the benefit of exemption claimed by the Appellant under Section 11(2) cannot be denied to the Appellant.
As decided in Parle Hindu Devalaya Mandal [2020 (3) TMI 1353 - ITAT MUMBAI] and Navodaya Education Trust [2021 (7) TMI 769 - ITAT BANGALORE] Tribunal has taken a view that in case where the Form 10 has been filed physically before the due date the benefit of Section 11(2) of the Act cannot be denied merely for non-filing of Form 10 electronically. Decided against revenue.
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2024 (11) TMI 1364
Ex-parte order of the CIT(Appeals) - CIT(Appeals) had disposed off the appeal for non-prosecution - HELD THAT:- Assessee despite having been afforded six opportunities had except for seeking adjournments on three occasions had failed to participate in the proceedings before the CIT(Appeals), therefore, the latter holding a firm conviction that the assessee was not interested in prosecuting the matter, disposed of the appeal vide an ex-parte order. On a careful perusal of the order of the CIT(Appeals), we find that he had summarily referred to the observation of the A.O and approved the same without deliberating upon the specific issues, based on which, the additions/disallowances were assailed by the assessee before him.
As observed by us hereinabove, the CIT(Appeals) had disposed off the appeal for non-prosecution and had failed to apply his mind to the issues which did arise from the impugned order and was assailed by the assessee before him. We are unable to persuade ourselves to accept the manner in which the appeal of the assessee had been disposed off by the CIT(Appeals).
Once an appeal is preferred before the CIT(Appeals), it becomes obligatory on his part to dispose off the same on merit and it is not open for him to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. In fact, a perusal of Sec.251(1)(a) and (b), as well as the “Explanation” to Sec.251(2) of the Act reveals that the CIT(A) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. As per mandate of law the CIT(Appeals) is not vested with any power to summarily dismiss the appeal for non-prosecution.
We, thus, not being able to persuade ourselves to subscribe to the dismissal of the appeal by the CIT(Appeals) for non-prosecution, therefore, set-aside his order with a direction to re-adjudicate the same afresh. Needless to say, the CIT(Appeals) in the course of the set-aside proceedings shall afford a reasonable opportunity of being heard to the assessee, and shall adjudicate the grounds of appeal/additional grounds of appeal as have been raised by the assessee before us. Appeal filed by the assessee is allowed for statistical purposes.
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2024 (11) TMI 1363
Disallowance of costs and expenses related to the Kaledonia project while computing the loss incurred by it upon sale of units - HELD THAT:- As the observations of the Assessing Officer that the assessee has not filed any details to substantiate its cost of construction is not acceptable, since the AO himself has assessed the Work-in-Progress as mentioned hereinabove. Since the business activities in Kaledonia Project is common from A.Y. 2008-09, therefore, it becomes imperative to determine the cost of construction shown by the assessee in its books of accounts. Therefore, in the interest of justice, we deem it fit to send the matter back to the file of the AO.
Since there is no dispute that the assessee is engaged in the business, therefore, the Assessing Officer is directed to decide the impugned quarrel afresh in the light of the fact that the assessee is engaged in business activities. The assessee is directed to justify its claim of cost of construction / Work-in-Progress by submitting necessary documentary evidences and the Assessing Officer is directed to examine / verify the same and decide the issue afresh after affording reasonable and adequate opportunity of being heard to the assessee.
The contention that some of the sales are illegal and since no sale consideration has been received the same should be excluded from the business receipts of the assessee need to be verified in the light of the decision of this Tribunal in the case of M/s. Sagar Developer [2014 (8) TMI 1253 - ITAT MUMBAI].The assessee has filed copies of FIR filed with Enforcement Department, CBI etc., as additional evidences, which are admitted and the Assessing Officer is expected to consider the same while deciding the issue afresh.
Disallowance of business loss - this essentially comprises of certain expenses debited to the profit and loss account and the major expenses was on account of building maintenance charges - HELD THAT:- CIT(A) has erred in as much as it relied upon the provisions brought into statute by Finance Act, 2017 and we are in A.Y.2012-13 and section 23(5) has not been held to have a retrospective effect. Assessing Officer has erred in drawing the support from the decision of the Hon’ble Delhi High Court (supra) in as much as the decision of the Hon’ble Delhi High Court is for the provisions prior to the year 2001 and after introduction of section 23(1)(c) of the Act the assessee is eligible for vacancy allowance. Therefore, if the rental income has been taxed then the assessee is equally eligible for the vacancy allowance as per section 23(1)(c) of the Act for the vacant commercial units in Kaledonia Project. Considering the facts in the light of the relevant provisions of Act, we direct the Assessing Officer to delete the addition.
Addition based upon mismatch of Form 26AS - As we find that the bone of contention is the income inclusive of service tax and the income shown in the TDS Form 26AS is exclusive of service tax. Assessee is directed to file a reconciliation statement and the Assessing Officer is directed to examine and verify the same and give credit to taxes paid as per the provisions of the law.
Disallowance of interest under section 36(1)(iii) - The undisputed fact is that the sister concern M/s. Sapphire Land Development Pvt Ltd., is also engaged in the business of real-estate development and has utilized this amount towards development of the real estate business. Therefore, it cannot be said that the assessee has failed to justify the business necessity of these advances. Considering the fact that the assessee has suo-moto disallowed the interest we are of the opinion that this should suffice any necessity for the disallowance. Therefore, the Assessing Officer is directed to delete the addition of the balance amount. This ground is allowed.
Disallowance of prior period expenses - It is true that these expenses pertain to period prior to the year under consideration. But it is equally true that these expenses were capitalised in value of capital Work-in-Progress of Kaledonia Project and were never debited to the profit and loss account of earlier assessment years. It appears that the Assessing Officer has never called any documentary evidences to corroborate this claim. Therefore, in the interest of justice and fair play, we set-aside this issue to the file of the Assessing Officer.
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2024 (11) TMI 1362
Classification of imported goods - Binding Material, Parts for Brake, disc brake pads, tool for mould, etc. - to be classified under CTH 38249090 / 38247900 or CTH 68138900? - benefit of N/N. 152/2009-Cus. dated 31.12.2009 and also N/N. 50/2017-Cus. dated 30.06.2017 - invocation of Extended Period of limitation.
As decided by CESTAT [2024 (10) TMI 17 - CESTAT CHENNAI] Respondent’s classification of the impugned goods under Chapter Heading 3824 9090/3824 7900 is rejected and the department’s classification under CTH 6813 8900 is upheld. Consequently, the appellant is not eligible for the benefit of the Notification No. 50/2017-Cus. dated 30.06.2017 and Notification no.152/2009-Cus dated 31.12.2009. However, the demand for the normal period along with interest is only upheld and the demand for the extended period is decided in favour of the Respondent importer - Appeal of Revenue is partly allowed.
HELD THAT:- After having perused the impugned judgment of the Customs, Excise and Service Tax Appellate Tribunal, we concur with the findings recorded by the Tribunal.
The Appeal is, accordingly, dismissed.
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2024 (11) TMI 1361
Challenge to the decision rendered by CESTAT - appellants right to question the enhancement made concerning the valuation of the imported goods, once the appellants had given up their right to seek issuance of a show cause notice and/or speaking order under Section 17 of the Customs Act, 1962 -
Decision to enhance the declared values relied exclusively on data from the NIDB - Declared values and the power of reappraisal - HELD THAT:- Section 17 (5) then proceeds further and constitutes the next fundamental step which the statute constructs in respect of reassessment. Shorn of unnecessary details, it prescribes that where the reassessment done under Section 17 (4) is at variance with the self-assessment of the importer, the proper officer would proceed to pass a speaking order in support of such reassessment. A combined reading of sub-sections (4) and (5) of Section 17 thus leads one to the irresistible conclusion that a reassessment, provisional or preliminary, would already exist and would have been formulated prior to sub-section (5) getting triggered.
It is also important to bear in mind that Rule 12 (2) is essentially concerned with the first limb of the reassessment exercise and is connected with Section 17 (4). This would clearly appeal to reason since the information or documentation that may be elicited from the importer would have to be concerned with the reasonable doubt which the proper officer harbours and thus obliged to communicate to the importer upon request the grounds on the basis of which it doubts the truthfulness or accuracy of the value declared. It is also pertinent to note that sub-section (4) of Section 17 is prefaced by the use of the expression “Where it is found on verification, examination or testing”. It is this verification exercise which would necessarily entail the importer being provided a reasonable opportunity to be heard before a final decision is taken. It is perhaps in the aforesaid light that Century Metal Recycling observed that neither the opportunity of questioning an opinion with respect to reassessment as formed nor an opportunity of hearing can be waived. In fact, it held that the aforesaid procedure would clearly be mandatory.
Exploring the concepts of abandonment and waiver - Whether that right itself can be said to have been abandoned? - As it becomes more than apparent that the assertion of abandonment and waiver of a right is clearly misconceived. The tone and tenor of the communications which were addressed by the appellants cannot possibly be interpreted or construed as amounting to a conscious waiver of a right to question the reassessment further. Not only do those documents appear to be the submission of a “without prejudice” request tendered in order to facilitate expeditious clearance of goods, the same cannot possibly be viewed or interpreted as amounting to an abandonment of the right to institute an appeal itself.
When we revert to the view expressed by the CESTAT in CUSAA 126/2022, we find that there is a clear absence of consideration of the various communications which had been addressed by the appellant to the customs authorities and which had preceded the finalization of re-evaluation of declared value. The CESTAT thus appears to have proceeded on the premise that the importer had all along agreed to the enhancement of the declared value and raised no protest. The CESTAT thus appears to have incorrectly proceeded on the basis that the communications addressed itself implied that the importers had willingly accepted the value as suggested by the customs authorities and consequently, the respondents being relieved of undertaking any adjudication as contemplated under Section 17 of the Act in light of the abandonment and waiver of the appellant’s right to challenge the reassessment.
The appellants had registered their protest on more than one occasion and had also sought expeditious clearance of goods subject to an exercise of provisional reassessment being undertaken. These facts and circumstances clearly detract from the argument of a conscious abandonment of the right to question the reassessment or to accept the re-evaluation exercise undertaken without reservation of a right to challenge.
Rejection of declared values: Assessing its validity - The proper officer could not be said to have been relieved of its obligation to pass a speaking order in terms of Section 17 (5). The process of rejecting the declared value and reassessing the transaction value is statutorily required to be preceded by the proper officer having drawn an opinion of why the declared value was not liable to be accepted before consequently proceeding to reassess the value. While the said reassessment may not be framed in elaborate terms, it would necessarily have to be reflective of the reasons which weighed upon the respondent to form the opinion that the declared value was not liable to be accepted.
Value enhancement on the basis of NIDB data - whether the enhancement or re-evaluation of the 'declared value' can be based solely on the data available in the NIDB, in Agarwal Foundries, the Hyderabad Bench of the CESTAT had held that the customs authorities would be unjustified in enhancing the declared import values solely on the basis of NIDB data? - Rule 10A of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 [1988 Rules], as analysed by the CESTAT in this decision, was similar to Rule 12 of the 2007 Rules. The CESTAT ruled in favour of the appellant, holding that NIDB data alone would be insufficient for value reassessment without corroborative evidence or contemporaneous import comparisons. This decision underscored the importance of comprehensive evidence and procedural compliance in customs disputes, cautioning against arbitrary reliance on NIDB data
Tribunal has consistently found that a valuation addition based solely on NIDB data would wholly unwarranted and that any such reassessment would have to be shored by independent and cogent evidence. The legal position so articulated would ensure fairness and transparency in the determination of import values. The body of precedent noticed above have in unison held that mere reliance on external data without corroborative evidence or clear justification would fail to meet the tests and principles underlying the provisions enshrined in the 1988 Rules and 2007 Rules. They correctly lay emphasis on the imperatives of a reasoned approach to customs valuation and a deviation from declared values being founded on tangible and justiciable material. A reassessment or rejection of declared value would thus have to necessarily be established as being compliant with the aforenoted requirements of pre-eminence. Relieving the respondents of this obligation would clearly lead to pernicious consequences.
We would answer the question framed in the affirmative and in favour of the importers. The appeals are consequently allowed and the impugned orders of the CESTAT set aside. The order of the Commissioner (Appeals) shall in consequence stand restored.
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2024 (11) TMI 1360
Partial rejection of benefit under Merchandise Exports from India Scheme (MEIS) - mismatch between the description of the goods in the shipping bills and the description in ITC (HS) 87085000 - HELD THAT:- No reasons are indicated why the Respondent’s case was accepted or why the Petitioner’s case was rejected. There is no discussion on the RA report or comments from PC-3 Divisions.
On perusing the minutes, it is impossible to understand whether there was any application of mind. This is an additional reason to interfere with the impugned decision.
In the reply filed on behalf of the Respondents, significantly, neither is the copy of the RA’s report, nor the copies of the comments received from PC-3 Divisions annexed. Based of the affidavit or, for that matter, other averments in the affidavit, we cannot uphold the impugned decision considering the serious defects in the decision-making process.
Therefore, we clarify that we are not addressing the merits of the decision but propose to interfere with it because the decision-making process was grossly defective. In this case, the principles of natural justice have been breached, and a case is made to set aside the impugned decision.
Accordingly, we quash and set aside the PRCs impugned decision in Meeting No. 22/AM22 held on 22.03.2022 and 29.03.2022. We direct the PRC to reconsider the Petitioner’s claim for benefits under MEIS as expeditiously as possible and in any event within two months from today. Before such a decision is taken, a copy of RA’s report and comments received from PC-3 Divisions must be furnished to the Petitioner.
This may be done within 15 days from today. If the PRC wishes to consider any other material, then copies of such material must be furnished to the Petitioner within two weeks from today. If the Petitioner wishes to file any response to this material, the Petitioner should file such response within a week of receipt of this material. The PRC must hear the Petitioner or its representative and pass a reasoned order.
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2024 (11) TMI 1359
Appeal filed against order of Commissioner (Appeals) remanding the matter to the original adjudicating authority - Sole ground mentioned in the impugned order for rejection of the request made by the appellant is delay of more than three months from the date of let export order - HELD THAT:- We find that the impugned order though signed by Deputy Commissioner (Exports), Customs House, Mundra has been rejected by the competent authority. In the instant case the competent authority was the Principal Commissioner of Customs, consequently the appeal has been filed before the Tribunal.
The said limitation of three months was introduced by the Circular 36/2010 dated 23.09.2010.
The Hon’ble High Court of Gujarat in the case of Messrs Mahalaxmi Rub Tech Limited [2021 (3) TMI 240 - GUJARAT HIGH COURT] has set aside the said requirement of filing the application for conversion within a period of three months as ultravirus, Article 14 and 19(1)(g) of Constitution of India as well as ultravirus section 149 of the Customs Act, 1962.
The special leave petition filed by the Revenue against the said order before Hon’ble Apex Court has been rejected as reported under [2023 (4) TMI 1272 - SC ORDER]. In the impugned order, the sole ground for rejection is the delay of more than three months in filing the application in terms of Circular No. 36/2010-Cus dated 23.09.2010. Since the said Circular itself has been set aside by Hon’ble High Court of Gujarat, reliance on the said Circular cannot be sustained. The impugned order, is therefore, set aside and appeal allowed.
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