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2024 (3) TMI 1094
Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the Petitioner and is a cryptic order - demand including penalty u/s 73 of CGST Act - HELD THAT:- The observation in the impugned order dated 30.12.2023 is not sustainable for the reasons that the reply filed by the Petitioner is a detailed reply. Proper Officer had to at least consider the reply on merits and then form an opinion whether the reply was incomplete. He merely held that the reply is incomplete and lacks supporting documents which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner - Further, if the Proper Officer was of the view that any further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details.
The order cannot be sustained, and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 30.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication.
Petition disposed off.
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2024 (3) TMI 1093
Challenged the order cancelling the registration - barred by limitation - non-application of mind - HELD THAT:- Admittedly from the perusal of the order dated 20.01.2022. it transpires that no reason has been assigned for cancellation of the registration of the petitioner. In absence of the same the order cannot be justified in the eye of law. Further since the appeal of the petitioner was dismissed on the ground of delay, this Court finds that the doctrine of merger will have no application considering the facts and circumstances of the present case.
Thus, the order dated 20.01.2022 passed by the Assistant Commissioner, respondent no.3 is hereby quashed - The writ petition succeeds and is allowed.
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2024 (3) TMI 1092
Cancellation of GST registration of petitioner - petitioner had no opportunity to even object to the retrospective cancellation of the registration - violation of principles of natural justice - HELD THAT:- The Show Cause Notice and the impugned order are also bereft of any details. Accordingly the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation.
In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria.
It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent’s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.
It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons - In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 29.11.2020 is modified to the limited extent that registration shall now be treated as cancelled with effect from 01.10.2019 i.e., the date when Petitioner applied for cancellation of GST registration. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.
Petition disposed off.
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2024 (3) TMI 1091
Retrospective cancellation of GST registration of the petitioner - petitioner had no opportunity to even object to the retrospective cancellation of the registration - violation of principles of natural justice - HELD THAT:- The Show Cause Notice and the impugned order are bereft of any details accordingly the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation.
In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria.
It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent’s contention is required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.
It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons - In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 01.12.2020 is modified to the limited extent that registration shall now be treated as cancelled with effect from 19.11.2020 i.e., the date when the Show Cause Notice was issued. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.
Petition disposed off.
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2024 (3) TMI 1090
Violation of principles of natural justice - impugned order does not take into consideration the replies submitted by the Petitioner and is a cryptic order - demand with penalty u/s 73 of CGST Act - HELD THAT:- The observation in the impugned order dated 30.12.2023 is not sustainable for the reasons that the reply filed by the Petitioner is a detailed reply. Proper Officer had to at least consider the reply on merits and then form an opinion whether the reply was devoid of merits. He merely held that the reply is devoid of merits which exfacie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner - Further, if the Proper Officer was of the view that further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details.
The order cannot be sustained, and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 29.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication.
Petition disposed off.
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2024 (3) TMI 1089
Cancellation of GST registration of petitioner - order for cancellation of registration has been passed without any application of mind whatsoever - violation of principles of natural justice - HELD THAT:- In the present case, the facts are similar to one in Surendra Bahadur Singh's case [2023 (8) TMI 1262 - ALLAHABAD HIGH COURT], wherein the appeal was barred by time under Section 107 of the Act. However, the Division Bench in Surendra Bahadur Singh's case took into consideration the original order and set aside the same being non-reasoned and allowed the petitioner therein to file reply to the show cause notice.
The orders impugned herein are liable to be set aside. Accordingly, the order in original dated March 25, 2023 and the appellate order dated December 29, 2023 are quashed and set aside - Petition allowed.
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2024 (3) TMI 1088
Maintainability of appeal - appeal dismissed on the ground of time limitation - HELD THAT:- There is no material on record to disbelieve the contention of the petitioner that the copy of the original order in appeal was annexed with the appeal paper book at the time of the online submissions.
The impugned order set aside - matter is remitted to the Appellate Authority to consider the appeal of the petitioner on merits in accordance with law - petition disposed off.
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2024 (3) TMI 1087
Seeking grant of bail - irregular availment of Input Tax Credit - creation and operation of fake GST firms and issuing fake GST invoices from these firms - involved in the passing of fake ITC from 102 non-existent firms to the tune of Rs. 274.89 Cr. by way of issuing invoices without any actual supply of goods - HELD THAT:- It reveals from the perusal of the record that by blaming Naveen Aggarwal the accused persons want to escape from liability whereas there is sufficient and ample evidence to the effect that they themselves were managing the affairs of illegal activities and fake ITC (Income Tax Credit) was availed by them and they were engaged in a number of illegal financial transactions and in such circumstances if they are granted bail, as rightly held by the learned Sessions Judge while rejecting their bail applications, there is a strong possibility of applicants fleeing from justice and also they may tamper with the crucial evidence or make influence to the witnesses. This Court is also of the view that the present matter relates to serious economic offence, which may affect the economy of the country. The applicants have committed gross violation of the provisions of the GST Act. Wrongful availment / utilization of input tax credit amounting to Rs. 315 Cr. has been made by them and this amount will increase a lot with the advancement of the investigation. The Court genuinely feels that at this stage there is no possibility of false implication of the applicants. The maximum period of imprisonment provided for such offence under the GST Act, which is five years, causes no hindrance in rejection of bail applications in such type of cases relating to economic offences.
Considering the entire facts and circumstances of the case and keeping in view the nature and gravity of offence, which is an economic offence in nature, complicity of accused, role of the applicants and without expressing any opinion on the merits of the case, the Court is of the view that the applicants have not made out a case for bail. The bail applications are liable to be rejected and the same are accordingly rejected.
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2024 (3) TMI 1086
Validity of summons issued u/s 70 - Proper officer - Whether issuance of summons u/s 70 of the CGST Act is hit by Section 6(2)(b) of the CGST Act ? - HELD THAT:- It is evident that against the issuance of notice by the State Authorities, petitioner had preferred writ petition before the High Court and had not put in appearance before the State Authorities. In the judgments referred to by counsel for the respondents, it is held that scope of Section 6(2)(b) and Section 70 of the CGST Act is different and distinct, as the former deals with any proceedings on subject matter, whereas the latter deals with power to issue summon in an inquiry and therefore, the words “proceedings” and “inquiry” cannot be mixed up to read as if there is a bar for the respondents to invoke the power u/s 70 of the CGST Act.
Madras High Court in "Kuppan Gounder P.G. Natarajan vs. Directorate General of GST Intelligence, [2021 (9) TMI 713 - MADRAS HIGH COURT], wherein, Court has also held that in issuance of summons for conducting an inquiry and to obtain a statement from the appellant cannot be construed to be bar u/s 6(2)(b) of the CGST Act.
Thus, we are of the considered view that issuance of summons u/s 70 of the CGST Act is not hit by Section 6(2)(b) of the CGST Act and the present Civil Writ petition being devoid of merits is accordingly dismissed. Stay application stands disposed.
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2024 (3) TMI 1085
Power of High Court to entertain writ petition - statutory remedy of appeal - barred by limitation including extended period of limitation - challenged the determination of tax under best judgment assessment - return filed belatedly u/s 39 in Form GSTR-3B - Prayer to de-attach the bank account - violation of principles of natural justice - HELD THAT:- Present is a case where the petitioner did not even file the appeal and allowed the order passed in assessment to become final and then filed writ petition seeking to challenge the determination through best judgment assessment, mainly on the basis of incorrect determination of tax liability in the light of return belatedly filed by the petitioner. Present is not a case where from the date of notice, return was either filed within the prescribed period, or even within the extended period under notice given to the petitioner.
Even best judgment assessment was not challenged by filing an appeal and period of filing of appeal was allowed to expire. It was only thereafter that the writ petition was filed. Having not preferred an appeal, the petition in the present case, in view of the decision of Hon'ble Supreme Court in the case of Glaxo Smith Kline Consumer Health Care Limited [2020 (5) TMI 149 - SUPREME COURT], is not maintainable. When the petitioner failed to file his return, even a notice was issued to him to file return within 15 days. When no return was filed and the petitioner remained persistent defaulter, the Assessing Authority was left with no other option but to proceed to make best judgment assessment u/s 62 of the RGST Act, 2017.
Therefore, the petitioner cannot complain of violation of principles of natural justice. The challenge to the determination under best judgment assessment, based mainly on factual aspects to the extent of tax liability, is not sustainable in view of the figure stated in the return which was filed by the assessee. All these grounds, though available to be raised by availing the remedy of appeal including extended period of limitation seeking condonation of delay, the petitioner, for reasons best known to him, did not avail the remedy.
Therefore, present petition is liable to be dismissed and is accordingly dismissed.
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2024 (3) TMI 1084
Seeking grant of Bail u/s 437 - tax evasion - Offence specified in clause (a) or clause (b) or clause (c) or clause (d) of subsection (1) of 132 of Central Goods and Service Tax 2017 (‘the act’) - HELD THAT:- The accused had given password of his official laptop to the prosecution. Thus, it reveals that investigation officer was permitted to record the statement of the accused into the Judicial custody and accordingly I.O. had recorded detailed statement of accused. Moreover, it is seen that accused has co-operated to the investigation officer, as there is no any whisper of non co-operation by I.O. during custody. Hence, the contention raised by the complainant regarding the non co-operation and abscondence of the accused is washed away. Further, it appeared that accused is taken into Judicial custody. No purpose will serve by detention of the accused behind the bar as accused is in custody since 02/03/2024.
It is also observed that, investigation officer has seized official laptop, bank data and phones by panchanama. Hence there are no chances of tampering the evidence. Therefore, in view of constitutional rights and directions given in Arnesh Kumar’s [2014 (7) TMI 1143 - SUPREME COURT]), it is needless to mention that, personal liberty of accused cannot be curtailed for recovery of tax or for securing presence of accused another accused. Hence, no prejudice will be caused to the complainant, if the accused is released on imposing certain strict conditions. Moreover, if the accused has not obey his undertakings, then in that case the complainant has right to move an application for cancellation of bail for disobeying the undertaking as well as conditions. Hence, no prejudice will be caused to the complainant, if the accused person is enlarged on imposing conditions. The apprehension raised by the prosecution can be safeguarded by imposing stringent conditions.
Thus, the gravity of offence leveled against the accused and other mitigating circumstances along with medical condition of present accused, the apprehension of prosecution in respect of absconding or tampering of evidence, imposing conditions will suffice purpose. Hence, accused Prateek Patel be released on bail on terms and conditions.
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2024 (3) TMI 1083
Validity of reopening of assessment - notice u/s 148 against petitioner company after the approval of the resolution plan for a period prior to closing - liability of previous management - as argued proceedings for assessment year 2013-14, being a period prior to the closing date are non-est and could not have been initiated by the Income-tax Department in view of the resolution plan approved by the NCLT - HELD THAT:- Section 148 read with Section 147 of the Act only deals with a situation where any income chargeable to tax has escaped assessment for any assessment year. We are unable to fathom as to how the provisions of Section 148 of the Act can be applied for collection of evidences of third party, ex-promoters etc., and we say this because there are separate provisions under Section 133(6) of the Act in which, such evidences can be collected. We are also unable to understand how the provisions of Section 148 of the Act can be used when the proceedings are not for recovery of tax.
During the course of submission, the Learned ASG stated that in view of the legal position as it stands under the Code, once resolution plan has attained finality, new management and company can get the benefit of clean slate principle. While the department does not dispute that such benefit has to go to new management, the Learned ASG further submitted that while department would not go to the new management, this cannot, however, result into direct benefit to the erstwhile Directors to make them go scot-free from their evasions and misdeeds. Therefore, some assessment and fact-finding process is required to be carried out, where erstwhile Directors’ role is given a closer scrutiny.
Even then, in our view, for reasons recorded above, Section 148 read with Section 147 of the Act cannot be applied against the company and the present management.
Thus issue of notice under section 148 of the Act to petitioner company after the approval of the resolution plan for a period prior to closing is invalid and bad in law, having been issued contrary to the provisions of the Code and the Resolution Plan. Section 31 of the Code provides that the resolution plan which is approved under the Code is binding on the Corporate Debtor, its employees, members, creditors including the Central Government, State Government and any local authority to whom a debt or a statutory due is owned. Decided in favour of assessee.
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2024 (3) TMI 1082
Validity of reopening of assessment u/s 147 - Default in sanction/approval u/s 151 as obtained and granted without application of mind - Petitioner claimed that despite certain transactions being booked under the PAN of erstwhile company (amalgamated company) due to an error, they had correctly considered all transactions in their return. - HELD THAT:- The draft of the order u/s 148A(d) states that income has escaped assessment within the meaning of provision of Section 147 of the Act and the same is required to be examined. If the AO who had sought the approval, the Additional/Joint CIT, who had recommended grant of approval and the PCIT, who granted the approval had only bothered to read the request for approval along with draft of the order under Section 148A(d) of the Act, they would have certainly noticed the discrepancies.
It is, therefore, clear that none of these officers have even bothered to read the request for approval or draft of the order. In the affidavit in reply, it is mentioned as a typographical error. We are not inclined to accept this explanation because a typographical error could have been committed by the AO, who was seeking the approval, but if only the Additional/Joint CIT or the PCIT had read the approval application and the draft of the order to be issued under Section 148A(d) of the Act, they would have certainly noticed the discrepancy and they should have either refused approval or sent the application back to the AO for filing correct form for approval.
We hereby quash and set aside the order under Clause (d) of Section 148A - Decided in favour of assessee.
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2024 (3) TMI 1081
Release of the Amount Seized along with interest u/s 132B(4) read with Rule 119A - Scope of the term 'shall release' - Application of seized or requisitioned assets u/s 132B - Seeking direction to quash the seizure effected u/s 132B(1)(i) - The petitioner contended that during the course of that investigation, petitioner had produced regular books of accounts and details of his income tax returns filed for the past Assessment Years to establish that the seized cash was duly accounted for/tax paid money - HELD TH AT:- The only consequence of non-compliance of Section 132 B (1) (i) of the Act is by way of payment of interest at the highest rate provided by the legislature i.e. @ of 18 % per annum. The period for which such interest may become payable has also been specified under that provision. By imposing the levy of interest on the revenue, a plain reading of sub section (4) of Section 132 B (1) (i) of the Act, the legislature itself contemplated cases where orders may remain to be passed by the Assessing Authority within the timeline provided u/s 132 B (1) (i) of the Act. Payability of interest may arise only in a case where the order may have remained to be passed within a time stipulation provided under the second proviso to Section 132 B (1) (i) of the Act.
If, the nature and source of acquisition of a seized asset is wholly explained and it may not be required for recovery of any outstanding demand or demand of tax that may arise under the assessment proposed to be made consequent to the search giving rise to the seizure itself, the same may be released. The provisions does not stipulate any consequence of automatic release. It would first have to be invoked by the assessee by filing a proper application. Then if conditions are fulfilled, an order recording that satisfaction may be passed. It is for that purpose a timeline of 120 days is contemplated on a non-imperative basis. In the event of delay in making the decision the revenue has been saddled with interest liability @ 18 % per annum.
On the contrary under Section 132 (8) of the Act [as considered in Cowasjee Nusserwanji Dinshaw [1987 (3) TMI 106 - GUJARAT HIGH COURT], a statutory duty was cast on the seizing authority to itself record reasons to detain seized documents beyond 180 days and the consequence of its nonadherence was also provided by way of release of the same. Therefore, in absence of statutory intent shown to exist, it may not be inferred through the process of legal reasoning-that if no order is passed within a time of 120 days, seized assets must be released notwithstanding its impact on the recovery of existing and likely demands.
As similar stipulations of time provided under different enactments have been interpreted to be directory and not mandatory. Therefore, we are unable to pursue ourselves to subscribe to the reasoning that has found its acceptance in the case of Mitaben R. Shah [2010 (2) TMI 684 - GUJARAT HIGH COURT], Ashish Jayantilal Sanghavi [2022 (4) TMI 1285 - GUJARAT HIGH COURT],Nadim Dilip Bhai Panjvani [2016 (1) TMI 811 - GUJARAT HIGH COURT] and Mul Chand Malu (HUF) [2016 (5) TMI 550 - GAUHATI HIGH COURT]
As petitioner has invoked the principle-if an Act is required to be done in a particular way, it may be done in that way or not at all, we find the same to be inapplicable to the present law. In our opinion, the provision in question [Section 132 B (1) (i)] being directory, the jurisdiction of the Assessing Authority to deal with the petitioner's application dated 15.09.2022 did not lapse or abate upon expiry of the period of 120 days. Since that stipulation of law is only directory, it survives to the Assessing Authority to deal with the application, even today.
We may also observe at this stage, if on due application of mind, the Assessing Authority reaches a conclusion that the nature and source of Rs. 36,12,000/- seized from Om Prakash Bind was duly explained and if assessing officer is adequately satisfied that that amount was neither required for satisfaction of any outstanding demand or satisfaction of demand that may arise pursuant to the assessment proposed to be made, such refundable amount would attract liability of interest under Section 132 B (4) of the Act read with Rule 119 A of the Rules.
We decline to issue the writ of Mandamus as prayed. Instead, we dispose of the writ petition with a direction on the Assessing Authority/respondent No.2 to proceed to deal with and decide the application of the petitioner dated 15.09.2022 within two weeks from today
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2024 (3) TMI 1080
Reopening of assessment u/s 147 consequent to revision proceedings u/s 263 pending - notice u/s 148 issued during the pendency of the assessment proceedings following the directions given by the PCIT - HELD THAT:- Such a reopening notice, in our view, could not have been issued, more particularly, because the notice involved matters which were the subject matter of revision u/s 263 - when the order of assessment u/s 143(3) of the Act has been remanded to the AO to enquire into and make a fresh assessment, the question of entertaining reasonable belief that the income chargeable to tax has escaped assessment does not arise, much less the assessment when the assessment proceedings are still pending.
The concept of reason to believe comes in picture if the income chargeable to tax has escaped assessment. So long as the assessment is pending, the assessing authority cannot have any such reason to believe that income chargeable to tax for the assessment year in question has escaped assessment. Income cannot be said to have escaped assessment within the meaning of this section if the assessment proceedings in respect of that income and/or issue are still pending and have not culminated into a final order.
The underlying principle is how can an escapement of income from an assessment be predicted before an assessment is complete. Thus, it was not open for the AO to invoke powers u/s 147 and 148 - In our view, so long as the assessment proceeding in respect of certain income subsists, income cannot be said to have escaped assessment. Such proceedings, if initiated, will have to be held as invalid, ab-initio, void and illegal. We find support for this view in Ador Technopack Ltd. v. Dr. Zakir Hussein, Deputy Commissioner [2004 (3) TMI 22 - BOMBAY HIGH COURT]
Also sanction granted u/s 151 as held by this Court in J M Financial and Investment Consultancy Services Private Limited [2022 (4) TMI 1446 - BOMBAY HIGH COURT] is invalid. Decided in favour of assessee.
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2024 (3) TMI 1079
Deduction u/s. 32AB - rental income earned by the Appellant and assessed under the head ‘Income from house property’ not qualify for deduction u/s. 32AB as per ITAT - whether appellant is entitled to deduction on the entire income which would include income from house property or it should be restricted only to the income chargeable to tax under the head “profits and gains of business or profession”? - HELD THAT:- The activity of income from house property has to be construed as forming part of the same business as there is one account for the printing business and for income from house property and the business is conducted under a common management. There is one profit and loss account and one balance sheet. It is the perception of the activities from the point of view of businessman that is material. As such perception that is recognised in Part II and Part III of the Sixth Schedule to the Companies Act, 1956. In Section 32AB(3) or Section 32AB (1)(ii) the expression “chargeable to profits and gains of business” is conspicuous by its absence. Hence, the dichotomy as between the income from printing and rental income from house property is not warranted in terms of Section 32AB(3) of the Act.
In our view, all eligible business or profession shall include every income except that which is excluded specifically in the definition of eligible business or profession. We find support for this view in Apollo Tyres Ltd. [1998 (8) TMI 68 - KERALA HIGH COURT] of Kerala High Court and [2002 (5) TMI 5 - SUPREME COURT] Hon’ble Apex Court. It is not the case of the Revenue or the findings of the ITAT that appellant has in its account not shown rental income as part of the business income. Infact as per the assessment order, these charges have been considered as part of business income but the AO has excluded it for the purpose of profits to arrive at the eligible business income for the purpose of Section 32AB of the Act.
Therefore, so long as the rental income is part of the business income, it will be included in the term of eligible business because the rental income is not excluded in the definition of eligible business. The question of law, as framed, is answered in negative. The rental income earned by appellant and assessed under the head “Income from house property” will qualify for deduction u/s 32AB of the Act.
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2024 (3) TMI 1078
Validity of reopening of assessment u/s 147 - Reason to believe - tangible material to initiate reassessment proceedings or not? - HELD THAT:- There was no failure on the part of Petitioner to disclose fully and truly the material facts, nor there was any tangible material with the AO, which could have otherwise justified the reopening of assessment by issuing the notice impugned.
In the present case, the notice to reopen assessment does not even remotely make any mention of any tangible material has come to the notice of the AO after passing original assessment order to conclude that there was an escapement of assessment. AO has failed to aver what material fact that Petitioner has failed to disclose fully and truly. It is clearly the very information which was before the AO as provided by Petitioner on the basis of which, a different view is being taken. In the present case, there is a full and true disclosure by Petitioner, and information on those transactions have been accepted under the heads claimed by Petitioner. Appeal allowed.
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2024 (3) TMI 1077
Estimation of profit - AO applying a profit rate of 20% on the contract receipt against the rate of profit declared by the appellant at 8.13% - CIT(A) directing the AO to apply a profit rate of 14.5% - HELD THAT:-Assessee fairly admitted instead of 14% estimated by the Ld. CIT(A) if the estimation of 11% be made so as to give justice to the assessee as against the 8 % disclosed by the assessee and the same is generally also considered by the provision of section 44AD @ 8 % but considering the overall fact he prayed in the open court that if the profit is estimated @ 11 % which will end the justice. We deem it fit to estimate the profit @ 11 % in the interest of justice to the parties. Based on this observations ground no. 2 raised by the assessee is partly allowed.
Addition of Unexplained creditors - HELD THAT:- Considering the facts of the case that when the books of account of the assessee are rejected and the profit is estimated a separate addition arising out of that books of account cannot be made in the hands of the assessee.
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2024 (3) TMI 1076
Penalty u/s 270A - misreporting of the income - disallowances of 40A(3) on account of interest income in the other sources and has also disallowed the claim of the assessee u/s 32 disputing the period use of the asset of the assessee - HELD THAT:- We find force in the arguments of assessee that the additions/disallowance made by the Assessing Officer are not in the nature of misreporting of the income of the assessee to drive home to this contention, the assessee relied upon the decision of the jurisdictional high court in the case of G. R. Infraprojects Ltd.[2024 (1) TMI 163 - RAJASTHAN HIGH COURT] wherein held that the case of levy penalty without specifying the limb of under reported or misreported the income the levy of penalty is not correct. Here in this case the claim of assessee denied though assessee did not challenge it on merits.
The bench noted that the CIT(A) has treated assessment and penalty proceedings at par. While it is settled that penalty proceeding are different from assessment proceeding and that mere addition in assessment could not automatically lead to concealment.
Addition made in assessment is not conclusive in the penalty proceeding in which the assessee is free to place further material to substantiate the claim that there was no concealment. Merely non-filing of appeal by the assessee against addition made in assessment cannot be a ground to conclude that assessee accepted the concealment. Therefore in these facts the CIT Appeal has wrongly upheld the penalty imposed by the Assessing Officer.
Immunity from imposition of penalty for underreporting of income if assessee has deposited the demand created by the Assessing Officer within 30 days from receipt of demand notice and intimated to him under rule 129 in Form No. 68 - In this case assessee duly deposited the demand created against her within 30 days but she failed to file Form No. 68 within the prescribed time before the Assessing Officer but while responding to the penalty proceeding subsequently the assessee filed Form No. 68 before the Assessing Officer but he did not consider it.
CIT(Appeal) has also did not consider the filing of Form No. 68 belatedly. The delay in filing the Form is only a procedural lapse on the part of the assessee not the substantive failure. In substance the assessee deposited the demand within 30 days, which is the part of substantive law and merely filing the Form No. 68 is only a technical or venial breach of procedural law. Therefore benefit of substantive law is required to be given to the assessee. CIT(Appeal) has also not considered this aspect.
Penalty @200% on account of misreporting of income on depreciation of fixed assets claimed by the assessee for full year as against half year since the asset was put to use for less than 180 days - Assessee due to inadvertence claimed the depreciation for full year this is certainly not the misreporting of income. The misreporting of income is something in which mensrea on the part of assessee is required to be present. The willful default constitutes misreporting of income which is not the case. The assessee has made inadvertent wrong claim but has disclosed the facts fully and truly therefore old law in this regard hold good and the penalty imposition is not warranted. Please refer to CIT vs. Reliance Petrol Products Private Limited (2010) [2010 (3) TMI 80 - SUPREME COURT] and Dilip Shroff [2007 (5) TMI 198 - SUPREME COURT] - Considering the fact that the nature of addition/disallowance are not in the nature of misreporting or misreporting income of the assessee and the assessee has paid the demand within 30 days and filed the required form no. 68 since that form being procedural nature we condone that aspect of the matter and direct the ld. AO to delete the penalty levied u/s. 270A - Decided in favour of assessee.
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2024 (3) TMI 1075
Reopening of assessment - reason to believe or reason to suspect - ex-parte ad interim order passed by the SEBI relied upon against director of assesee company - SEBI had restrained fifty four (54) persons/entities including the director of the assessee company from trading in security market/stock exchange stating that those persons/entities have misused the stock exchange system to generate fictitious profits/losses for the purpose of tax evasion/facilitating tax evasion - HELD THAT:- As rightly pointed out by the assessee the interim ex-parte order of the SEBI against director, which could have triggered “Reasons to Suspect” and not “Reasons to believe escapement of income” which doesn’t satisfy the requirement of law to successfully usurp the jurisdiction to re-open the assessment of the assessee-company, which is a separate legal entity.
Therefore, having carefully perused the material on the basis of which AO re-opened the assessment i.e, SEBI ex-parte interim order, we are of the considered opinion that at best it is an adverse information against director of assessee company [Shri Nikil Jalan]; and AO after receiving the same, ought to have conducted preliminary enquiry [since at that stage there was only “Reason to suspect” escapement of income in his hands and collected material and if it was found that it is not the director of assessee company who has misused the stock exchange, instead it was the assessee company which actually misused the stock exchange, in such an event, the AO should have recorded his own reason warrant holding the belief that income chargeable to tax has escaped assessment, which essential requirement of law has not been met in the “reasons recorded” by AO in the instant case to successfully re-open the assessment of assessee company - Decided in favour of assessee.
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