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2024 (12) TMI 32
Penalty proceedings u/s. 270A - Denial of Exemption u/s. 54F - assessee had shown income from house property from two properties, thus, he inferred that once the assessee owns two residential properties and the income of both the properties have been offered by the assessee in the return - HELD THAT:- In this case it is neither a case of misrepresentation or suppression of fact because assessee has duly placed all the facts before the AO as well as in the return of income. Other clauses from ‘b’ to ‘f’ are also not applicable to show that it is a case of misreporting of income.
If ld. AO is levying the penalty by invoking Section 270A (9), then it is incumbent upon the AO to specify under which limb of Section 270A (9) he is initiating or is levying the penalty for misreporting of income.
Penalty u/s 270 A is not automatic or adjunct to any addition made by the AO. Misreporting has to be established and onus is on the AO to give finding as how it amounts to misreporting under the clauses of sub section (9) of section 270A.
As assessee had duly stated all the facts and stated that he was under a bonafide belief that the only property which he has purchased in his name (alongwith his father) on transfer of capital asset was the only property which was owned by him, and therefore on purchasing this property he can claim exemption u/s 54F. The other property which was bequeathed to him after demise of his mother and came as inheritance belonged to his mother and not him. On such bonafide belief and when this fact has been duly stated and reported, then where is the question of misrepresentation or suppression of fact.
At best it is an inference of AO on interpretation of statute and not something he has found out any suppression of facts on his own or by any inquiry. Appeal of the assessee is allowed.
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2024 (12) TMI 31
Revision u/s 263 - as per CIT assessee was one of the beneficiary in the scam of NSEL through its brokers in which case the ld. AO is said to have not made proper inquiry with respect to the impugned commodity transactions - assessee has entered into bogus commodity trading on NSEL by Client Code Modification (CCM) for which the AO has reopened the assessment but has not verified the information available in the Insight Portal/Investigation wing, thereby the information received has been unverified and unexplained which holds the assessment order to be erroneous in so far as it is prejudicial to the interest of the revenue
HELD THAT:- AO has not verified the CCM data related to the assessee neither from the assessee nor from its brokers pertaining to the transactions made in July, 2013 which is when the assessee has booked loss in respect of investment made. The ld. AO has also not made any inquiry as to whether the assessee was involved in regular trading in the earlier occasion. It is also observed that the ld. AO has not looked into the fact whether the assessee has raised any complaint against the scam carried out by NSEL which the assessee claims to be the reason for the loss.
AO has not inquired into the issue for which the reopening of assessment was initiated and has merely accepted the returned loss filed by the assessee without substantiating as to why he has arrived at the said conclusion. The assessee was also unable to explain whether it had filed the complete details along with the documentary evidence to establish the fact that it had not entered into any bogus trade transaction and whether or not it was one of the beneficiary to the NSEL scam.
The assessment order is silent in respect of all these issues and more precisely the issue for which the reassessment was initiated. In the absence of the same, we find no infirmity in the order of the ld. PCIT in holding the assessment order to be erroneous in so far as it is prejudicial to the interest of the revenue.
It is a case were the ld. AO has not dealt with or inquired into the issue which was the subject matter of the reassessment. We therefore are inclined to dismiss the grounds of appeal raised by the assessee and hereby uphold the order of the ld. PCIT. Decided against assessee.
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2024 (12) TMI 30
Levy of interest u/s 201(1A) - late deduction of tax at source on salaries paid to floating staff members - bonafied reasons in deducting lower tax in the earlier months of financial year - as per AO the assessee has not followed the approach envisaged in sub-section (1) of section 192 of the Income Tax Act which mandates an employer to estimate salary income of the employee for the entire year and deduct monthly TDS on prorate basis
HELD THAT:- If there are bonafide reasons in deducting a lower tax in earlier months of financial year and the same is made get immediately after noticing such shortfall, then in the eventuality section 192 sub-section (3) would save the employer from the liability of making payment of interest. Thus, to meet such eventualities sub-section (3) provides for adjustment of excess or deficiency arising out of the any previous months or failure to deduct in the financial year.
Any other interpretation would render Sec. 192(3) nugatory and an employer would be put to undue burden of payment of interest for no fault of him. From this analysis, it is apparent that on mere short deduction of tax at source from the salaries paid to the employees, Sec. 201(1A) cannot be invoked, unless the total tax deducted by the end of the year is less than the tax deductable from the salary paid to the employee in that year.
Since, in the instance case the assessee has reasonably estimated the income and in view of the above circumstances there was a short deduction of tax at the beginning of financial year which is adjusted in the later months. Therefore in our considered view interest is not chargeable for mere short deduction in the initial months. Thus these grounds raised by the assessee are allowed.
Confirming the levy of interest u/s 220 sub-clause (2) of the Act - After having gone through the provisions of Sec. 220 subclause (2) of the Act, we are of the considered view that the same is applicable only where the amounts specified in the notice of demand issued u/s 156 of the Act is not paid within the stipulated period. But in the present case the provisions of Sec. 220 sub-clause (2) of the Act are not applicable as no order or notice of demand was ever issued in respect of the aforesaid assessment year. Therefore, the assessee would not have any liability with regard to levy of interest u/s 220(2) of the Act and therefore the levy of interest u/s 220(2) of the Act stands deleted and this ground raised by the assessee stands allowed.
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2024 (12) TMI 29
Transfer pricing adjustment - UDS and CM are two distinct segments and cannot be combined for any TP adjustments and further that its overseas AEs being least complex are to be taken as its tested parties - TPO treated the UDS and CM as one composite segments and also proceeded to reject overseas AEs of assessee as tested parties and replace them with domestic entities to benchmark assessee international transactions.
HELD THAT:- Action of revenue in combining the UDS and CM sector as one integral activities for determination of ALP we find sufficient force in the arguments of lower authorities. Absence of separate manufacturing facilities, prior contracts for purchase of vehicles, disproportionate allocation of expenses etc goes on to allude that the arguments of the two being separate activities cannot be taken. On its part the assessee has not been able to convincingly place on records any evidences in support of its claims. Consequently, we are inclined to concur with the findings of the Ld. TPO duly supported by DRP. The order of Ld. DRP is therefore sustained. Accordingly, the ground by the assessee towards rejection of segmentation of UDS and CM segment is dismissed.
Rejection of overseas AEs as tested parties - TPO is directed to rea-judicate the matter afresh on merits and in accordance with law after obtaining all necessary details required for his TP study, and after giving due opportunities of being heard to the assessee.TPO shall pass a speaking order on the subject. The assessee is directed to comply with all the notices issued by the revenue on this subject matter. Accordingly, the ground of appeal no.6 raised by the assessee qua rejection of overseas AEs is allowed for statistical purposes only.
Upward adjustments towards brand development fees done by the Ld. TPO - As noted that the Hon’ble coordinate Benches of this tribunal in the case of M/s. Nippon paint India Pvt Ltd [2017 (3) TMI 1162 - ITAT CHENNAI] Hyundai Motor India Pvt Ltd [2017 (4) TMI 1193 - ITAT CHENNAI] and others including assessee’s own case for 2007-08 [2013 (6) TMI 458 - ITAT CHENNAI] have held that AMP spending’s are not international transactions and deleted the impugned additions in respective cases. It has accordingly been concluded in decision in assessee’s own case for 2007-08 Supra that any addition on this account would be unjustified. No change in facts qua those of AY-2007-08 has been brought to our notice. Accordingly in respectful compliance to the decision of the coordinate bench of this tribunal in assessee’s own case for 2007-08, we set aside the order of lower authorities and direct the Ld. AO to delete the impugned addition. Accordingly ground of appeal no.8 is allowed.
Selection of comparable companies for business processing service segment - Infosys Technologies Ltd, cannot be compared with the respondent assessee in [2015 (4) TMI 949 - DELHI HIGH COURT] as seen from the financial data and it should be excluded from the list of comparables for the reason that it was a giant Company in the area of development of software.
M/s HSCC India Ltd we find sufficient force in the argument that the company is bereft of any meritorious comparable given the same being a government company as well as one engaged in a totally different line of business. Accordingly we are of the view that the requested two companies cannot be included in the TP study by the TPO. We therefore deem it fit to restore the matter to the file of the Ld. TPO for recalculation of his adjustments after excluding M/s.Infosys BPO Ltd & M/s HSCC India Ltd from his TP study.
Advances received from customers towards extended warranty - HELD THAT:- As per terms of contract, the extended warranty contract comes to force only after the completion of base warranty agreement. Naturally the extended warranty receipts taken during the year of sales would become income of the assessee, if any in the year when such warranty agreements becomes enforceable. At this stage it is also pertinent to point out that not all receipts received on account of extended warranty contracts would become income of the assessee even in the year when such warranty agreements becomes enforceable. Simply because only those components of extended warranty receipts would be income of the assessee which have not been claimed by the customers. The amounts received qua extended warranty contracts are akin to prepaid expenses for repairs of cars. Naturally assessee will deem only those amounts as its income in respect of which no claims arose by the customers. Wherever warranty claims were made by customers pointing out some defect in the car, the assessee would not be showing the same as its income.
The amounts received on account of extended warranty by the assessee therefore would become its income only in the year in which such extended warranty contracts mature. Now as the assessee has already been offering the said amounts in the year of maturity of such contracts, there taxation in the year of sale of car would certainly tantamount to a case of double taxation. Accordingly, we are of the view that the amounts received by the assessee as advance from customers towards extended warranty and added by the Ld. AO was not required. Accordingly, Ld. AO is directed to delete the addition. The ground of appeal raised by the assessee is therefore allowed.
Disallowance of provision for expenses reversed - HELD THAT:- Admittedly, the assessee has not deducted TDS on certain receipts. We have also noted the observations of DRP regarding no claim having been made by the assessee qua some expenses in the return of income. We have also noted that the assessee has not provided details of TDS to the Ld. AO.
As been noted that the Ld. AO also not clearly brought out in his order detailed bifurcation of the expenses as to viz expenses involving TDS deduction, those pertaining to last year and which were not claimed during the year etc. Be that as it may be we are of the view that ends of justice would be met if the matter is restored to the file of the AO for read judication after doing necessary verification. We set aside the order of lower authorities on this account and direct the Ld. AO to obtain all necessary details from the assessee and read judicate the matter by way of an speaking order after giving due opportunity of being heard. The assessee shall comply with all the notices of AO. Accordingly, ground is allowed for statistical purposes.
Eligibility for claim of its unobserved depreciation allowed - AO is therefore directed to allow the same to the assessee.
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2024 (12) TMI 28
Assessment order and the demand notice has been issued without any DIN mentioned - non- issue of separate DIN in separate communication - HELD THAT:-We find that the assessment order and the demand notice has been issued without any DIN mentioned in the order and similarly, no DIN has been mentioned in the demand notice issued u/s 156 either, which is not as per provisions of the CBDT circular no 19 dated 14/08/2019, and there is nothing on record to show that there were any exceptional circumstances which would sustain communication of final assessment order manually without DIN and the failure to allocate DIN is an error which could not be rectified by invoking the provisions of section 292B of the Act 61 .
Moreover, even if we consider the common DIN generated on 25/11/2019, even then also we find, that in case of the demand notice issued u/s 156 of the Act 61, the same is dated 26th November, 2019, which means that on the date of generation of the common DIN, there was no demand notice u/s 156 in legal existence.
There are identical judgments of various benches on this issue, that the basic requirement is the quoting of the DIN number on the body of the assessment order and on the demand notice. Subsequent generation of DIN either on the same day or next day and intimated to the assessee by way of separate communication does not satisfy the conditions of para 3 and 4 of the said circular.
Thus, we hold that the assessment order u/s 144/ 147 dated 25/11/2019 and the demand notice u/s 156 dated 26/11/2019, (in Form - 7), cannot be legally sustained and it has to be treated that both has never been issued and will cease to have effect in the eyes of law.
Legality of notice issued u/s 148 - As pertaining to the recorded reasons (undated) and the corresponding approval granted by the Ld. PCIT, Jammu, dated 26/07/2018, and we are in agreement with the assessee that there has not been any proper application of mind resulting in an objective satisfaction of the higher authority, and according approval to an incorrect figure of quantum of income which had escaped assessment, which are at great variance with each other, as mentioned in approval and recorded reasons, cannot be legally sustained.
As such respectfully following the observation in the case of Teleperformance Global Service (P) Ltd, [2024 (3) TMI 1082 - BOMBAY HIGH COURT] we hold that the notice issued u/s 148 of the Act 61, was to be quashed and set aside.
Assessee appeal allowed.
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2024 (12) TMI 27
Validity of order of CIT(A)(NFAC)’s order u/s 250 emanating from the Assessment Order u/s 144 - Assessee's request for personal hearing before the CIT(A) rejected - HELD THAT:- We deem it fit and proper to remit the matter to the first appellate authority after giving an opportunity for a personal hearing, in terms of rule 12 of the Faceless Appeals Rules 2021, for adjudication de novo in accordance with the law and by way of a speaking order.
Thus faceless Appeal Scheme 2021 has made it mandatory to provide Virtual Hearing if asked by the Assessee. In this case the assessee had asked for personal hearing which has not been provided by the CIT(A)(NFAC). In these facts and circumstances of the case, respectfully following the decision BANK OF INDIA [2022 (6) TMI 1450 - ITAT MUMBAI] we set aside the order of the Ld.CIT(A)(NFAC) to the Ld.CIT(A) for de-novo adjudication after granting opportunity of virtual hearing as asked by the assessee.
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2024 (12) TMI 26
Rejection of registration u/s 80G - assessee’s application was filed beyond the statutory time limit - Cancellation of provisional registration - HELD THAT:- When we read the Budget Speech of Hon’ble Finance Minister 2020 and the Memorandum of Finance Bill 2020 together, it becomes clear that the concept of Provisional registration was mainly to facilitate the registration of newly formed Trust/Institutions which have not yet begun the activities.
In continuation of this when we read the "sub clause iii of Proviso" of section 80G(5) , which we have already reproduced above, it is clear that the intention of parliament in putting the word “or within six months of commencement of its activities, whichever is earlier” is in the context of the newly formed Trust/institutions. For the existing Trust/Institution, the time limit for applying for Regular Registration is within six months of expiry of Provisional registration if they are applying under subclause (iii) of the Proviso to Section 80G(5) of the Act.
If we agree with the interpretation of the CIT(E), then say a trust which was formed in the year 2000, performed charitable activities since 2000, but did not apply for registration u/s 80G, the said trust will never be able to apply for registration now. This in our opinion is not the intention of the legislation.
Even otherwise, the Provisional Approval is upto AY 2024-25, and it can be cancelled by the CIT(E) only on the specific violations by the assessee.
In this case there is gross non application of mind by the CIT(E), as he has not considered the reply filed by the assessee in response to show cause notice and not followed the binding decision of ITAT Pune in the case of T.B.Lulla Charitable foundation [2024 (6) TMI 798 - ITAT PUNE]. Hon’ble Supreme Court in the case of Union Of India And Others vs Kamlakshi Finance Corporation [1991 (9) TMI 72 - SUPREME COURT] has held that the Collector has to follow the binding precedence of jurisdictional Tribunal.
CIT(E) has not discussed whether the Assessee fulfils all other conditions mentioned in the section as he rejected it on technical ground. Therefore, in these facts and circumstances we hold that the Assessee had made the application in form 10AB within the prescribed time limit and hence it is valid application. Therefore, we direct the CIT(E) to treat the application as filed within statutory time and verify assessee’s eligibility as per the Act. CIT(E) shall grant opportunity to the assessee. Assessee shall be at liberty to file all the necessary documents before the CIT(E). Appeal of the assessee is allowed for statistical purpose.
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2024 (12) TMI 25
Rejecting the application for registration u/s 12AB and cancelling provisional registration granted u/s 12AB - undertakings of the assessee are not fall within the ambit of charitable activities - zero income and expenditure during the relevant year in assessee’s books which has been taken up as the cause for rejection of the assessee’s request - HELD THAT:- It was essential for the CIT(E) to look into the activities and objectives of the trust, that the subject trust is established for public charitable activities and such activities are genuine in nature.
CIT(E), eventually have powers to examine, inquire and verify the records of the assessee, so as to record his specific finding / satisfaction qua the assessee’s eligibility for grant of registration.
In present case, we note that the ld. CIT(E) had not come up with any clarity in his order as to how the activities of the assessee trust does not fall within the scope of charitable purpose.
Allegation that assessee could not prove any charitable activity or the source of funds are not verifiable was not confronted to the assessee, whereas the assessee should have been afforded with the opportunity to place its submissions / evidence / contentions to rebut to such perceptions. Such action was against the principle of natural justice.
As following case of Chhattisgarh Urology Society [2018 (2) TMI 1156 - CHHATTISGARH HIGH COURT] we observe that the Ld. CIT(E) was under the abounded duty to look into, for his satisfaction about the Objects of the trust, the genuineness of the activities and compliances under any other law and to pass an appropriate speaking order.
Appeals assailing the issue therein has to be restored back to the file of the CIT(E) to reconsidering the applications of the assessee in form 10AB for grant of registration u/s 12AB and 80G(5) of the Act. Appeals of the assessee are allowed for statistical purpose.
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2024 (12) TMI 24
Gain on land sold - LTCG or STCG - sale of land at Tiruvottiyur High Road received on liquidation of company - distribution of assets of the company on account of liquidation - AO by going through the provisions of section 2(47) noted that the property received by assessee on liquidation of company is transferred within the provisions of section 2(47) and the provisions of section 46(2) of the Act and treated this holding period by the assessee from 10.12.2012 i.e., the date of release deed by the company to the assessee and sold within one year - HELD THAT:- The assessee i.e., 360 equity shares were held by assessee for last so many years in company which got liquidated and company gave land it was holding .
The assessee along with other shareholders sold his share of property at Thiruvottiyur High Road and received sale consideration on various dates.
We are of the view that the provisions of section 2(42A), Explanation 1 is very clear which explains that when a person received property consequent to liquidation of the company, the period of holding of asset has to be taken from the date of previous owner i.e., company held it. We agree with the contention of the assessee as the Explanation to Section 2(42A) of the Act is very clear and hence, we confirm the order of CIT(A). This issue of Revenue’s appeal is dismissed.
Applicability of provisions of Section 50C - A look at the provisions of section 50C of the Act shows that the same applies to a consideration received or accruing as a result of the transfer by an assessee of a capital asset. In the present case, the appellant has not received any consideration as a result of the transfer by him ie. the appellant has not transferred any capital asset. Rather, the appellant has received an assets of a company are distributed to its shareholders on its liquidation in the form of land at Seevaram which is not be a transfer by the company for the purposes of section 45 as per the provisions of section 46(1) of the Act - Thus provisions of section 50C of the Act are not applicable in the case of the appellant for the Seevaram land received on distribution of asset on liquidation of company. Therefore, the issue is decided in favour of the appellant.
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2024 (12) TMI 23
TDS u/s 195 - disallowance u/s 40(a)(i) - commission paid to non-resident parties for services rendered outside India - as argued non resident has no permanent resident or business in India, and they had given services outside India and they have not person in any action in India
HELD THAT:- The recipients were resident outside India and they have no place of resident or business place in India. The services were rendered outside India by way of sales services for which the commission was paid and income to them also accrued outside India. In view of that no TDS was liable to be made and therefore section 40(a)(i) did not apply. In the present case both the persons to whom the commission has been paid are certainly non-residents. The commission has been paid to them for the services they gave outside India for selling the goods of the appellant outside India. The appellant has made the payment to them by making remittance through regular banking channel from India to overseas in their bank accounts. In view of that recipients of the payments are not liable to tax in India under any provisions of the Income Tax Act, 1961, and therefore, the assessee is not liable to make TDS and Section 195(1) of the Act does not apply. See Nova Techno cast Pvt. Ltd [2018 (5) TMI 1182 - GUJARAT HIGH COURT]
Both the brokers are non-residents and the assessing officer has not disputed this fact. The non-residents recipient of commission, have no permanent resident or business establishment, in India or any business connection in India and they had given their services outside India, nor they have in any manner whatsoever presence of any kind in India. - Assessee appeal allowed.
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2024 (12) TMI 22
Capital gains computation - “possession rights” over the said property - assessee submitted that “possession rights” in the said piece of land were clearly with the assessee which constituted a “capital asset” and transfer of such “right of possession” constituted transfer of capital asset and such gain was liable to be taxed as “capital gains” tax - as alleged right was acquired purely by way of a family arrangement without incurring any cost
HELD THAT:- We observe that the Counsel for the assessee submitted before us during the course of hearing that the assessee had entered into a family settlement agreement in the year 2004 on a Rs.100/- stamp paper by way of which the assessee and four other family members had been granted the “right of possession/right of tilling” over such property. However, we observe that this fact was submitted before us for the first time and during the course of assessment proceedings/appellate proceedings such family agreement/arrangements by which the possession of such property was given to the assessee, was never brought to the notice of the assessing officer/Ld. CIT(A) for their consideration.
Assessee, in our view has not given this important document which establishes that he was in possession of such “possession rights” in respect of the above property since 2004. Though assessee has made reference to extracts of the assessment/appellate orders of the co-owners of such property to establish that he was having “right to possession” over such property, but that in our view, would not qualify as substantive evidence to prove that the assessee was having “possession rights” over such property. This is especially in the light of the fact that the possession agreement dated 2004 was not brought to the notice of the assessing officer/Ld. CIT(A) for their consideration.
Computing the “cost of acquisition” of such “possession rights” in the return of income filed by the assessee in response to notice issued by AO u/s.148 of the Act, the assessee has taken cost of acquisition of such “right of possession” by taking the value of land as per value computed by registered Valuer Report as on 01.04.1981.
It is not clear that why the assessee has taken the cost of acquisition of “right of possession” on the basis of registered value of such land/property as per report of registered valuer as on 01.04.1981 and thereafter indexing the same to compute the cost of acquisition as on the date of transfer of such capital asset, when as per the assessee’s own submission, the assessee was not having ownership rights in the said property.
Therefore, it is not clear as to why the assessee has computed the cost of acquisition with reference to the “ownership rights” in the said piece of land and that too by taking reference of the value of land as per registered Valuer Report as on 01.04.1981, when in fact, the assessee was not the owner of the said property and further the assessee, as per the ld. Counsel’s submission before us, got “possession right” over such property by way of a family arrangement entered in the year 2004.
Therefore, it is not clear as to on what basis against the transfer consideration of Rs. 53 lakhs, the assessee has computed cost of acquisition of such property at Rs. 43,73,026/-.
Therefore, while in our view, the “right of possession” in respect of such property would qualify as a capital asset, however, the assessee has failed to furnish certain important documents with respect to the date of acquisition of such capital asset (family arrangement in the year 2004) and further, it is also not clear as to how the assessee has taken the cost of acquisition of such “right to possession” at Rs. 43,73,026/- when admittedly the said right was acquired purely by way of a family arrangement without incurring any cost and such cost of acquisition has been computed by the assessee with reference to the registered value of such property as on 01.04.1981 and thereafter indexing the cost of value of such property when the assessee was admitted to having no ownership right in the property.
Appeal of the assessee is allowed for statistical purposes.
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2024 (12) TMI 21
Penalty u/s 271(1)(c) - penalty qua the relief already granted by ITAT in quantum-proceeding - HELD THAT:- We agree that the penalty u/s 271(1)(c) is not sustainable qua the relief already granted by ITAT in quantum-proceeding because the very basis of imposition of penalty has collapsed to that extent. Therefore, the AO is directed to delete penalty to that extent. This deletion is, however, subject to the rider that if the revenue is in further appeal before High Court against the quantum deleted by ITAT and the ITAT’s order is reversed, the revenue shall have power to revive the penalty in accordance with law.
Penalty qua the long-term capital gain - The addition is a result of a fair view taken by ITAT in the matter of estimation and hence to that extent, it should not be considered as concealment. Being so, we hereby come to the conclusion that penalty is sustainable for first component of Rs. 3,85,258/- but not for other component of Rs. 2,40,998/-. We hold accordingly.
Penalty qua the undisclosed interest income - It is culled out from assessment-order that the assessee received sale-proceeds of immovable properties through cheques in his bank account (Para 2.5 of assessment-order) and the impugned interest income is also from bank accounts.
Therefore, it can be discerned that when the AO, vide order-sheet entry dated 12.09.2012, questioned the assessee to explain the transactions of sale of immovable properties, the assessee had to declare not only capital gain but also interest from banks in the revised return. Therefore, the plea of AR that the declaration of interest income was voluntary is not acceptable and the same is rejected. Consequently, the imposition of penalty qua the interest income is hereby upheld.
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2024 (12) TMI 20
Recognition of revenue from surrogacy cases - advance from surrogacy clients as income of the year - addition on the ground that the assessee has received these amounts from the surrogacy patients which are lying in the books of account for a long time and such outstanding advances represent the income of the assessee - assessee itself has recognized these receipts as revenue from surrogacy clients in the books of accounts maintained by it as seized from the assessee's premises during the search operation and it is only on a subsequent date that the assessee has reversed these entries - addition by estimating the income @ 15% under ICDS
HELD THAT:- A perusal of the order of the CIT (A) shows that he granted relief to the assessee on the ground that the matter is subjudice before the Hon'ble Supreme Court where the Rule notified by the Central Government was under challenge. We find the learned CIT (A) decided the appeal assuming the pendency of the writ petition.
The record shows that the Hon'ble Supreme Court had already dismissed the writ petition before passing of the appellate order. Therefore, the order of the learned CIT (A) which is based on wrong fact is liable to be set aside. At the same the time, it is an admitted fact that the advances were received in the past years and do not pertain to the impugned AY It is on account of the circular issued by the Govt. of India debarring the foreign nationals from commission of surrogacy in India, that the procedures could not take place and further the assessee had shown the amounts as advance outstanding in its books of account.
We find merit in the argument of assessee that when the advances are received in the books of account mostly from 2013 onwards and such advances received are from the foreign nationals, hence the liability to pay the amount subsists, it continues to be a liability and does not become the income of the assessee.
When the assessee after doing certain procedures has recognized part of the income received from those foreign nationals as income of the assessee, the accounts of the assessee cannot be said to be true and correct.
Since it is the submission of assessee that it has recognized most of the amounts due to the foreign nationals as well as the persons of Indian origins as income in subsequent A.Ys, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction that (a) the assessee has refunded the amounts to the foreign nationals where a request has been made and (b) whenever certain procedures have been conducted, the assessee has recognized part of such income as his income in the concerned assessment year and (c) the assessee has recognized such advances as income due to cessation of liability in any of the later years.
AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the Revenue are accordingly allowed for statistical purposes.
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2024 (12) TMI 19
Import of Baggage - Personal Effects - Detention and confiscation of gold ornaments by Customs authorities - petitioner had travelled from Bengaluru to Dubai and and opted for the green channel. She was intercepted by a Customs Officer after she had crossed the green channel. On her search, one plastic box containing 3 gold bangles, weighing 130 grams, 15 gold beads (parts of bracelets) weighing 89 grams were recovered - According to the respondents, all jewellery and ornaments, personal or otherwise, is liable to be viewed as prohibited goods in addition to being subject to the restrictions contained in the 2016 Rules - as argued phrase ‘bringing into’ cannot possibly be construed as being applicable to “personal effects”.
HELD THAT:- As per Circular No. 72/98-Customs dated 24 September 1998 the competent authority clarified that the phrase “personal effects” would include “personal jewellery”. The respondents thus consciously sought to introduce a distinction between “personal jewellery” and the word ‘jewellery’ per se as it appears in the Appendices. The clear intent of that Circular appears to have been to include personal items of jewellery or ornaments within the meaning of the expression “personal effects”.
When the aforesaid 1998 Rules came to be amended in 2006, by virtue of the Baggage (Amendment) Rules, 2006 [2006 Amendment], the stipulation with respect to articles allowed entry free of duty remained the same except for the increased monetary limits of INR 35,000/-, 15,000/- and 3,000/- which came to be incorporated.
Rule 2(vi) of the 2016 Rules essentially adopts the same concept of ‘used personal effects’ as was intended under the 1998 Rules, and by way of abundant caution, a definition now stands placed in the 2016 Rules and which purports to define the expression “personal effects” with sufficient clarity. However, the same would not detract from the distinction which the respondents themselves acknowledged in the Circular and intended customs officers to bear in mind the distinction which must be recognised to exist when construing and identifying ‘personal jewellery’ as opposed to ‘jewellery’ per se.
The expression ‘jewellery’ as it appears in Rule 2(vi) would thus have to be construed as inclusive of articles newly acquired as opposed to used personal articles of jewellery which may have been borne on the person while exiting the country or carried in its baggage. Thus, personal jewellery which is not found to have been acquired on an overseas trip and was always a used personal effect of the passenger would not be subject to the monetary prescriptions incorporated in Rules 3 and 4 of the 2016 Rules.
This clearly appeals to reason bearing in mind the understanding of the respondents themselves and which was explained and highlighted in the clarificatory Circular referred to above. That Circular had come to be issued at a time when the Appendices to the 1998 Rules had employed the phrase “used personal effects, excluding jewellery”. The clarification is thus liable to be appreciated in the aforesaid light and the statutory position as enunciated by the respondents themselves requiring the customs officers to bear a distinction between “personal jewellery” and the word “jewellery” when used on its own and as it appears in the Appendices. This position, in our considered opinion, would continue to endure and remain unimpacted by the provisions contained in the 2016 Rules.
Thus Joint Commissioner of Customs has clearly misconstrued the scheme as well as the objectives of the 2016 Rules. In the absence of the case of the petitioner having been tried or evaluated on the basis of the postulates that we have enunciated hereinabove, we find ourselves unable to sustain the order impugned.
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2024 (12) TMI 18
Demand of interest - Recovery of wrongly availed amount against duty credit scrip as rewards formulated for Service Exports from India Scheme - Foreign Trade Policy authoring the levy of interest u/s 28AA of the Customs Act, 1962 - HELD THAT:- No provision of the 1992 Act under which Foreign Trade Policy has been framed has been pointed out to show that the provisions of Section 28AA of the 1962 Act have been made applicable for levying interest on any person who is found ineligible for any benefit received under the terms of any Scheme under the Foreign Trade Policy.
It is true that Chapter 3 of the Foreign Trade Policy which was in operation for the period from 01-04-2015 to 31-03-2020 contemplates that if any person is found to be ineligible for the benefit under any Scheme the amount will have to be refunded along with interest u/s 28AA of the 1962 Act.
We must hold that the provisions of the Foreign Trade Policy cannot by itself authorise the levy of interest u/s 28AA of the 1962 Act as such levy must be supported by plenary legislation.
Petitioner is entitled to succeed. Therefore, this writ petition is allowed.
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2024 (12) TMI 17
Duty Drawback - Mis-declaration of export goods - adjudicating authority confiscated the said exported goods for their mis-declaration and gave option to redeem the same on payment of redemption fine u/s 125 of Customs Act, 1962 and imposed penalty u/s 114(iii) of the Customs Act, 1962 - HELD THAT:- This is a case of drawback where the allegation is that the goods exported merited classification under CTH 6200 2000 and 6005 2000 as against CTH 6205 9090 and 62059090 as declared by the appellant, which meant that the appellant was actually entitled to drawback of Rs1,19,224/- as against Rs.1,39,618.79 claimed by them, thus resulting in an excess claim of Rs 20,394/-.
The order is totally non-speaking while it imposes severe fine and penalties for an excess drawback claim of Rs 20,394/. The least the Authority could do is to disclose his mind on the severity of the matter.
Circular issued a little before the OIO was passed totally missed the attention of the Ld. Original Authority. The order after accepting that the error was typographical in nature, gives a miss to the principle of “proportionality” while evoking the penal provisions. Moreso in a case where no SCN was issued or hearing granted as per the request of the appellant.
Such waiver of rights is not uncommon where the exporter finds speed of essence and does not want to lose time and money on demurrage etc, in the delay that a formal adjudication process involves. Hence the decision is shocking to the conscience, being wholly out of proportion to the misconduct caused by a typographical error and merits to be set aside for lacking both fairness and transparency.
Commissioner Appeals who could have remedied the defect, only recorded that the goods were available for confiscation at the time of passing the OIO and hence the confiscation of goods and imposition was sustainable.
The amount of excess drawback involved was only Rs 20,394/- and that the order of the Original Authority was issued where in manifest non application of mind is evident, the order merits to be set aside. Justice will not be served by remanding this low tax matter back to the Ld. Original Authority, for a decision afresh, after a decade.
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2024 (12) TMI 16
Classification of imported goods - Import of ‘prepared additives for cements, mortars or concretes’ - classification defect owing to which differential duty was ordered for recovery - General Rules for Interpretation of Import Tariff - HELD THAT:- Though the first appellate authority had affirmed the classification against tariff item 3505 1090 of First Schedule to Customs Tariff Act, 1975, it would again appear that the finding therein was devoid of any support to indicate that the goods are ‘other modified starches’ or other than ‘dextrins’ with the sub-heading. On the other hand, the claim of the appellant herein that the product is exclusively used as additives to cement and mortar and, therefore, appropriately classifiable within heading 3824 of First Schedule to Customs Tariff Act, 1975 has not been examined at all
A plain understanding of the enumeration in the said heading makes it abundantly clear that it is not intended as a residuary but also one in which the specific description outweigh any other less specific description in terms of rule 3 of General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975. There is no doubt that the show cause notice had proposed to alter the classification but only at sub-heading level.
Notwithstanding that, it was obligatory, and indeed acceptable, to isolate the relevant tariff item within such classification with appropriate justification. Neither is there any such justification nor indeed, as pointed out supra, has the Commissioner of Customs narrowed down the classification at the tariff item level. In view of this, assessment under section 17, and recovery under section 28, of Customs Act, 1962 required to be re-determined. Needless to say such determination should be comprehensive and not by mere reliance on a few isolated expressions deployed in the test report or technical literature or information at the public domain. In order to this may be carried out, we set aside the impugned orders and restore the notices back to the respective original authorities for fresh adjudication.
Appeals are, thus, allowed by way of remand.
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2024 (12) TMI 15
Anti dumping duty (ADD) - Color coated aluminum coils imported as coated with Styrene/ Butyl Methacrylate Copolymer other than PE/ PVDF liable to anti dumping duty or not? - HELD THAT:- We find that on the basis of these directions, TRU vide Circular No.45/2017- Customs (ADD) dated 22.11.2017,clarified that- “color coated aluminum foil with either PE (Polyester) coating of PVDF (Fluorine- carbon), coating falling under CTH 7607” is excluded from the scope of PUC.”
We also observe that although the Tribunal has in para 9 of their order in the matter of G. M. Alloys [2017 (11) TMI 491 - CESTAT NEW DELHI] specifically directed to exclude color coated aluminum foil from the scope of anti dumping duty, but while issuing the circular the TRU added the words- “with either PE (Polyester) coating of PVDF (Fluorine- carbon), coating falling under CTH 7607”. This is the reason why the revenue is restricting the exclusion.
We also observe that the Principal Bench of this Tribunal had noted that “the product is not being manufactured in India. The DI had specifically supported in the submissions before us that product under consideration can exclude color coated aluminum foil as the same is not manufactured in India.”
We find force in the contention of the counsel for the Appellant that the purpose of imposition of anti dumping duty is to safeguard the interest of domestic industry engaged in the manufacture of similar goods.
We also observe that the Appellant is a member of ACP Manufacturer Association and the Principal Bench of this Tribunal in the case of ACP Manufacture Association vs. Union of India [2023 (11) TMI 570 - CESTAT NEW DELHI-LB] has again excluded color coated coil from imposition of anti dumping duty though in different Notification dated 06.12.2021. It is, therefore, our considered view that anti dumping duty is not attracted on color coated aluminum coil imported by the Appellant.
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2024 (12) TMI 14
Service Tax on “Technical Testing and Analysis Service” has been paid by the service recipient under Reverse Charge Mechanism-RCM - as alleged such demand is not tenable because testing of mint samples has not been considered under RCM u/s 68 (2) of the Finance Act, 1994 and in Rule 2 (1) (d) of Service Tax Rules, 1994 or in the relevant Notification issued by the Government from time to time and the statutory liability of service provider cannot be shifted on service recipient by mutual agreement until and unless the provisions of law allow doing so -
HELD THAT:- It is not disputed that the service recipient namely, M/s. MCX Sohan Lal Commodity Management Pvt. Ltd., New Delhi have in fact paid the Service Tax on "Technical testing & Analysis Service" received by them from the Appellants. The Challans evidencing payment of such tax were submitted before the Adjudicating Authority below and again annexed with this Appeal. We find force in the contention of the Appellant that once the Service Tax has been discharged by the recipient of service, demand of Service Tax from the Appellant again will amount to double taxation which is not permissible under law. The case laws relied upon by the Appellant and the CBEC Circular dated 17.12.2004 are applicable in the facts and circumstances of the case.
We also observe that the Appellants have been filing regular ST-3 Returns and maintaining the statutory records relating to payment of Service Tax wherein all the transactions were duly recorded. There is no allegation that any transaction was found beyond the mandatory records maintained by the Appellant. It is also an admitted fact that the Appellants are an autonomous body under Government of India, Ministry of MSME. We considered view that the extended period of limitation is not applicable in the instant case.
My opinion on limitation also gets support from the decision of Continental Foundation Jt. Venture Vs. CCE, Chandigarh-1 [2007 (8) TMI 11 - SUPREME COURT] there is no question of payment of interest and the same are set aside. The penalty imposed is also set aside.
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2024 (12) TMI 13
Demand of service tax - Manpower Recruitment or Supply (MRS) - Amounts reimbursable from DT towards ESI & PF/Uniform /Tea expenses - HELD THAT:- We find that the Appellant is getting several expenses reimbursed which are in the nature of ESI/PF Charges, Uniform expenses, tea expenses and the said reimbursements are akin to the issues decided in the Apex Court’s judgement Intercontinental Consultant & Technocrats [2018 (3) TMI 357 - SUPREME COURT] since the Appellants had collected ESI and PF charges which are indicated separately in the invoices as reimbursements from customer (DT) no abatement on statutory levy like ESI/PF could be extended as per extant Board circular and so the department has entertained the view that the amount was taxable.
As per the Apex Court’s decision, such reimbursements are taxable only w.e.f. 14th May 2015, the date on which the amendment to Section 67 came into force. Hence in view of the above discussions and judicial precedents pointed above, we are inclined to hold that reimbursements in the nature of ESI/PF charges/ Uniform charges, tea expenses and insurance does not fall within the ambit of levy of service tax during the material period (2003-04-2007-08 in the present case) and hence the demand is not legally sustainable. As the demand itself is unsustainable, question of imposition of penalty does not arise.
Period involved in respect of Manpower Recruitment and Supply Service is between 29.06.2005 to 31.03.2008 for MRC and 26.05.2005 to 27.12.2005 for Nursing Assistants provided to Delphi- TVS - whether the conditions precedent for invocation of the extended period of limitation existed or not? - We find that no specific reasons have been mentioned for invoking the extended period of time in paragraph 9 of the Show Cause Notice.
Appellant has been regularly filing periodical returns and discharging applicable service tax. The department was aware of the facts and the issue was detected only upon audit conducted by the department. It is to mention that the ST 3 returns filed by the Appellant periodically are subject to examination and scrutiny by proper officers before whom the returns are filed.
Appellants were under bona fide belief that no service tax was liable to be paid and hence the appellant also did not charge any service tax. Only after departments stand, the Appellant has raised debit notes on MRC towards service tax. We find that the adjudicating authority in his findings has pointed out to audit findings and non-disclosure by the Appellant, when it was pleaded specifically by the Appellant that they were not aware of the lapses which were unintentional.
We are inclined to hold that invocation of extended period in respect of MRS is not legally sustainable in this case. As per Rule 7 of Service Tax Rules,1994 every assessee shall submit the half yearly return by the 25th of the month following the particular half-year. Hence demand of service tax for the period from October 2007- March 2008 is only sustainable and the interest payment u/s 75 automatically flows from such duty demand. We find that the lower authority has imposed penalty only u/s 78 for the total demand. As the demand for extended period is unsustainable. The penalty imposed under Section 78 is set aside. The Appellant has pleaded sufficient cause for non-imposition of penalty and hence penalty for the normal period is also set aside.
Disallowance of Cenvat credit - assessee had failed to provide valid documents for availing of such Cenvat Credit and hence the recovery of Cenvat Credit along with interest is sustained. The Appellant has not disputed payment of interest towards belated payment of service tax.
Demand on reimbursements of PF/ESI/Uniform /Tea expenses is not legally sustainable and demand on MRS service is upheld only for the normal period. The appeal is partly allowed, with consequential benefits, if any on the above terms.
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