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2024 (3) TMI 894
Attachment of Bank Account - Orders passed u/s 83(1) of the CGST Act - Period of limitation - repeated issuance of provisionally attachment order - cash credit accounts - HELD THAT:- Learned counsel for the petitioners submits that repeated attachment of cash credit accounts in exercise of power u/s 83 of the CGST Act is in breach of the provisions of Section 83(2) and such exercise could not have been undertaken. He further submits that petitioners have not received copies of attachment order dated 13.12.2023.
Admittedly, subject matter of these proceedings has ceased to operate, the petition is disposed of reserving the right of the petitioner to impugn the fresh attachment order dated 13.12.2023 in accordance with law. The question of validity of repeated issuance of attachment orders u/s 83 of the CGST Act is left open.
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2024 (3) TMI 893
Cancellation of GST registration - rejection of appeal filled u/s 107 - barred by limitation and beyond the condonable statutory period - Andhra Pradesh Goods and Services Tax Act, 2017 (‘APGST Act’) - HELD THAT:- The impugned order in view of Section 107 of APGST Act does not suffer from any illegality, as the appellate authority cannot condone the delay beyond statutory condonable period but considering that there was sufficient cause for not preferring appeal in time, the interest of justice requires condonation of the delay and adjudication of the matter on merit by Appellate Authority. The appeal is a valuable statutory right. In exercise of the writ jurisdiction to do complete justice and provide opportunity of hearing on merits of the appeal, we condone the delay by imposing costs of Rs. 20,000/-. The appellate authority shall consider and decide the appeal on merits in accordance with law, expeditiously.
The Writ Petition is partly allowed in the aforesaid terms.
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2024 (3) TMI 892
Cancellation of registration certificates - Show cause notice issued - Non-furnishing of returns in compliance of the provisions of Section 29[2][c] of the GST Act, 2017 - works contracts - seeking revocation of cancellation of restoration of his GST registration - HELD THAT:- Having regard to the fact that the GST registration of the petitioner has been cancelled u/s 29[2][c] of the CGST Act, 2017 for the reason that the petitioner did not submit returns for a period of 6 [six] months and more; the provisions contained in the proviso to sub-rule [4] of Rule 22 of the CGST Rules, 2017 and the orders passed by the coordinate benches of this Court as well as by this Court in similar matters whereby the matters have been disposed of with a direction to the respondent authority to revoke the cancellation of registration upon due payment of all statutory dues payable by the petitioners, this Court is of the considered view that no purpose will be served by keeping this writ petition pending and the present writ petition can be disposed of in similar terms, as had been passed in similar writ petitions
Accordingly, the impugned order dated 15.12.2021 is hereby interfered with and set aside. The petitioner is directed to approach the concerned authority within a period of 1 [one] month from today, seeking revocation of cancellation of restoration of his GST registration. On such approach by the petitioner, the concerned authority will intimate the petitioner the total outstanding statutory dues, if any, standing in the name of the petitioner till the date of cancellation of registration and any other outstanding dues under the GST required to be paid by the petitioner. Upon such intimation, the same shall be deposited within the time limit mentioned by the concern authority and upon such payment of the statutory dues under the GST by the petitioner, the concerned authority will pass appropriate order and revoke the cancellation of registration, by restoring the GST registration of the petitioner.
Thus, the writ petition is disposed of.
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2024 (3) TMI 891
Challenged the Ruling pronounced by AAR - Support Services in the State of Rajasthan - Classification of Services - under heading 9986 Or 9954 - Rate GST - EPC Contract entered with M/s Vedanta Limited - Nature of activities as per the EPC Contract - whether the appeal has been filed within stipulated period prescribed u/s 100 (2) of CGST Act, 2017 or not - Whether the alternate suggestion of the Appellant seeking classification of the proposed supplies in question under Heading 9983 is acceptable in view of the nature of supplies proposed to be made by them?
HELD THAT:- We find that the Appellant have not filed the appeal within statutory period of 30 days of date of communication of the Order of the AAR. However, the Appellant vide letter dated 20.09.2023 submitted that the appeal has been filed within limitation period in pursuance of the Hon'ble Supreme Court Judgment dated 10.01.2022 in Suo Motu Writ Petition (C) No. 3 of 2020 [2022 (1) TMI 385 - SC ORDER].
Thus, the appellant were required to file the appeal within 30 days from 21.09.2021 in light of the judgment of Hon'ble Supreme Court [2022 (1) TMI 385 - SC ORDER] We note that the appellant has filed the appeal on 29.10.2021 that is within the prescribed time limit. We find that the appeal has been filed by the appellant within the prescribed time. Therefore, we proceed further to decide the appeal on merit.
We observe that according to the EPC Contract, the Appellant have been assigned the work of construction and installation of the entire facility and the proposed infrastructure being installed is aimed at capacity expansion as has been mentioned by the Appellant in the appeal that the with a view to augment the production from existing well pads at Mangala, the Appellant have entered into EPC contract with Vedanta Limited in March 2018 for constructing additional network of customized Intra-field pipelines MIPA project. The contract obliges the Appellant to handover the complete system including Non Process Buildings, road, drains, Pipeline, after completing the construction, erection, installation and commissioning work. Thus, we observe that the supplies proposed to be undertaken by the Appellant relate to the new facilities being awarded by M/s Vedanta Limited for enhancement of capacity and production. Therefore, the existing production from the existing facilities cannot be taken to be related to the expansion being undertaken under the instant EPC Contract.
As can be seen the contract in the instant case is an Engineering, Procurement and Construction (EPC) Contract awarded by Mls Vedanta Limited for provision of services for augmentation of pipelines along with Surface Facilities at MPT within RJ-ON-90/1 block and the Appellant have been assigned the responsibility to develop the infrastructure for surface facilities. The scope of the work described in details in the contract clearly established that the supplies relate to construction of new facilities/ infrastructure for oil gas extraction which are quite distinct from the support services to oil and gas extraction. What has been included in the support services under Heading 998621 by way of inclusion clause has to be viewed with reference to support services and cannot be so interpreted to relate it to construction services.
In that view of the matter, whether it be derrick erection or repair and dismantling services, well casing, cementing pumping, plugging and abandoning of well, all these activities have to be understood in the nature of support services only and none of them relates to creation of infrastructure or facilities for oil and gas extraction by way of construction, erection and commissioning of the new facility. The Appellant have not been assigned activity of type mentioned in Heading 998621 rather the contract is for enhancement of new facility and infrastructure for extraction of oil and gas. Hence, we do not find force in the arguments advanced by the Appellant.
Conclusion and findings: In view of these observations we hold that:-
(i) Based on the analysis of activities, the Appellant are required to carry out in pursuance of the EPC Contract and keeping in view the true nature of supplies proposed to be undertaken by the Appellant, the proposed supplies are appropriately classifiable under SAC Heading No. 9954 answering to description ‘Construction Services’ which are in the nature of composite supply defined as works contract.
(ii) The proposed supplies are specifically covered by SAC Heading No. 9954 and the claim that ‘Construction Services’ of SAC Heading No. 9954 is a general description of the supplies and ‘support services’ of SAC Heading No. 998621 is more specific to describe the proposed supplies is not supported by the EPC Contract as discussed.
(iii) The proposed supply is covered by the scope of ‘Construction Services’ of SAC Heading No. 9954 and neither the inclusions given under SAC Heading No. 998621 for Support Services nor the description of Heading 9983 covers the scope of the proposed supply, Hence, the claim for classification under SAC Heading No. 998621 or alternatively under Heading 9983 is not sustainable.
(iv) The proposed supplies, therefore, attract tax at the rate of 9% in terms of item (xii) of entry at SI. No. 3 of Notification No. 11/2017-CT (R), dated 28.06.2017 as amended and 9 % in terms of Notification issued under the RGST Act, 2017.
Thus, we hold that the Ruling dated 15.09.2021 of the AAR for Rajasthan in respect of the Appellant needs no interference up to the extent mentioned in item (i) to (iii) above and the same are hereby modified to the extent mentioned in item (iv) above of Part K of this order. The appeal is disposed of accordingly.
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2024 (3) TMI 890
Addition u/s 40A(3) - purchases made otherwise than by account payee cheque - As decided by HC [2023 (10) TMI 1285 - DELHI HIGH COURT] payments made by the assessee to the concerns violated Section 40A(3) as they were not made through an account payee cheque drawn on a bank, account payee bank draft or through the use of electronic clearing system through a bank account, and therefore, to fall within the ambit of the 1977 circular, the appellant/assessee was required to establish the genuineness of the transactions. The appellant/assessee having failed to do so, led to the deduction being rightly disallowed for the subject payments.
HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed. Decided against assessee.
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2024 (3) TMI 889
Validity of reopening of assessment - as alleged Petitioner has availed of hawala/accommodation entries from the Group [provider of provides accommodation entries] - AO states that just because payments were made through banking channel does not sanctify the transaction and submission of purchase and sales bills cannot legitimize the transactions, as the same evidence points to the issuing of accommodation bills as a part of this modus operandi - HELD THAT:- The condition precedent of reason to believe that income chargeable to tax has escaped assessment on correct facts must be satisfied by the AO, who has to have jurisdiction to issue the reopening notice. Even when Assessee has pointed out that her relationship with Karnawat Impex P. Ltd. was only as the jeweller and a customer, payments have been made by cheque and the jewellery bought have been disclosed in the wealth tax returns filed, the AO instead of making a bald statement that payment through cheques does not sanctify, should have brought evidence or confronted Petitioner with evidence to the contrary. Therefore, it would be safe to conclude that the AO, not having done that, did not dispute the facts stated by Petitioner.
Liquidated damages - Petitioner has in the computation of income, disclosed by way of a note that she has received a sum of Rs. 32.93 per share for 2,03,152 equity shares of Great Offshore Ltd. as liquidated damages, the amount has been reduced from the cost of the equity shares as per the provisions of Section 51 of the Act and the excess of liquidated damages received over the cost of the equity shares has been treated as ‘capital receipt’ and not offered to tax. Even during the assessment proceedings, as could be evidenced by a letter dated 30th November 2011, query was raised regarding these liquidated damages and Petitioner has given detailed response. Subsequently, an assessment order dated 14th December 2011 has been passed u/s 143(3) of the Act accepting the returned income. Therefore, on the facts as found, there could be no reason for AO to believe that income chargeable to tax has escaped assessment.
Assessee appeal allowed.
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2024 (3) TMI 888
Validity of reopening of assessment - Time limit for issuing notice - validity of sanction for issuing the orders under Section 148A(d) - HELD THAT:- As gleaned from the proviso to subsection (1) of Section 149: it applies to assessment years commencing prior to 01.04.2021, i.e. assessment years before the amendments came into effect; and the time limits under Section 149(1)(b), Section 153A or 153C, as the case may be, as it stood before the commencement of the Finance Act, 2021, apply to notices u/s 148 in respect of cases pertaining to assessment years beginning on or before 01.04.2021. Since the disputes pertain to assessment years 2016-2017 and 2017-2018, the proviso undoubtedly applies to these cases.
What are the implications of the application of the proviso? - In our view, as a consequence of the proviso, the time limit specified in the pre-amended Section 149 (1)(b) becomes applicable and the time limit prescribed therein was four years and not more than six years.
Whether the application of the proviso to Section 149 has the effect of incorporating by reference pre-amended Section 151? - In order to substantiate the contention that pre-amended Section 151 gets incorporated by reference, learned standing counsel relied on sub-section 2 to the pre-amended Section 149. It should be noticed that the proviso to sub-section (1) of the amended Section 149 does not even incorporate the whole of pre-amended Section 149. It merely makes the time limit prescribed therein applicable to the issuance of notices for reassessment in respect of any assessment year beginning before 01.04.2021. A fortiori the proviso certainly does not incorporate pre-amended Section 151 by reference and make it applicable.
Impact of the TOLA - Undoubtedly, TOLA extended the time limits under specified enactments, including the I-T Act. As per clause (a)(ii) of sub-section(1) of Section 3 thereof, time limits for grant of sanction or approval were also extended. Since the petitioner does not challenge the sanction with respect to the time limit, clause(a) of sub-section(1) of Section 3 is immaterial. Indeed, TOLA, which extends the time limits for completion of specified tasks up to 31.03.2021, itself becomes irrelevant because of the nature of the challenge in these writ petitions.
In Siemens Financial Services [2023 (9) TMI 552 - BOMBAY HIGH COURT] concluded, in substantially similar facts and circumstances, that the amended Section 151 and not the pre-amended Section 151 would apply.
For reasons set out above, we concur with the conclusion in Siemens Financial Services and Ganesh Das Khanna [2023 (9) TMI 552 - BOMBAY HIGH COURT] as subsequently followed in Twylight Infrastructure [2024 (1) TMI 759 - DELHI HIGH COURT]. Consequently, the validity of sanction for issuing the orders under Section 148A(d) and the notices under Section 148 should be tested with reference to amended Section 151. If so tested, it is evident that sanction was not granted by an authority specified under clause (ii) of Section 151. Hence, the orders u/s 148A(d) and the notices under Section 148 are quashed. As a corollary, the draft assessment orders u/s 144B/144C cannot survive and are also quashed.
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2024 (3) TMI 887
Validity of Reopening of assessment - objective satisfaction of the officer on the basis of tangible materials - petitioner had failed to deduct withholding tax on the assumption that the AAR would issue a favourable ruling - petitioner had filed AAR before the Authority for Advance Ruling (Income tax) seeking a ruling on whether payments received by Fives France would be subject to withholding tax u/s 195. which was declined to be answered - HELD THAT:- As principles laid down in the judgment of Rajiv Agarwal [2016 (3) TMI 972 - DELHI HIGH COURT] are clearly applicable to this case wherein as concluded therein that the assessing officer had ignored the objections of the assessee and failed to apply his mind to the material presented by the assessee.
Likewise, in Chhugamal Rajpal [1971 (1) TMI 9 - SUPREME COURT] the Supreme Court concluded that approval under Section 148 should be provided after examining the material on record and not in mechanical fashion. Both on account of the reasons for reopening being based on a grossly erroneous factual foundation and by also taking into account that the petitioner actually withheld and remitted taxes in respect of transactions with Fives France that formed the subject of the application before the AAR, the impugned order under Section 148A(d) of the I-T Act and the notice under Section 148 thereof are vitiated. All that remains is to briefly consider the other ground of challenge.
Plea of limitation - By referring to the letter of approval with regard to AYs 2016- 2017 and 2017-2018 petitioner pointed out that such approval was granted by the Chief Commissioner of Income Tax. In clauses (i) and (ii) of Section 151 of the I-T Act, the specified authorities for purposes of issuing notice under Section 148 are prescribed. The rank of the specified authority changes depending on the amount of time which has elapsed from the end of the relevant assessment year. If less than 3 years have elapsed, clause (i) is applicable; otherwise, clause (ii) applies. As regards each Relevant AY, even the first notice under Section 148 was issued in June 2021. Thus, more than 3 years had lapsed. For AYs 2014-2015 and 2015-2016, the approval was granted by the Principal Chief Commissioner of Income Tax, who is a specified authority under clause (ii), but the approval for AYs 2016-2017 and 2017-2018 was granted by the Chief Commissioner of Income Tax, who was not a specified authority under clause (ii) of Section 151 at the relevant time unless there was no Principal Chief Commissioner or Principal Director General. The admitted position is that there was a Principal Chief Commissioner. Therefore, the reassessment proceedings in respect of AY 2016-2017 and 2017-2018 are vitiated on this count too.
For reasons adverted to above, the impugned order under Section 148A(d) and the notice under Section 148 are quashed. Decided in favour of assessee.
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2024 (3) TMI 886
Validity of Reopening of assessment - proceedings drawn u/s 148A commenced by the local jurisdictional officer - non adherence to procedure of faceless regime for the purposes of governing the assessment under the Income Tax Act - HELD THAT:- As after introduction of the aforesaid two schemes, it is now mandatory for the Revenue to conduct / initiate proceedings pertaining to reassessment under Section 147, 148 & 148A of the Act in a faceless manner. In the present case, the proceedings under Section 148A of the IT Act, has been commenced by the local jurisdictional officer and not in the prescribed faceless manner.
What is provided under sub-section (1) which has a non obstante clause is that the faceless procedure for assessment, re-assessment, re-computation and not the proceedings interior to the said assessment, re-assessment, re-computation. Further, sub-section (2) provides that the faceless procedure for assessment, re-assessment and re-computation shall be in respect of the persons, class of persons, class of cases, as may be, specified by the Central Board of Direct Taxes. The petitioner has not brought on record to submit that his case is covered by the notification issued by the CBIC. Even otherwise, the assessment year is of 2019-2020 and the faceless procedure has been introduced with effect from 01.04.2021.
Thus we are of the considered view that even if the petitioner’s case is covered to be completed under the faceless assessment procedure, the proceedings interior to the reassessment proceedings are not illegal as those are not completed under the faceless procedure as prescribed under Section 144B of the IT Act and the scheme framed by the CBIC. Hence find no substance in this writ petition which is hereby dismissed.
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2024 (3) TMI 885
Validity of reopening notice u/s 148 and draft assessment order issued u/s 144C - Shares transferred to foreign company[Mauritius] - HELD THAT:- On examining the notice u/s 148, and the subsequent notices u/s 142(1), it is evident that the AO decided to re-open the assessment on the basis of information gathered while undertaking assessment in respect of Info-Drive India Ltd. The annexure to notice discloses that share transfers took place during the financial year 2015-16 and eventually 10,000 shares were transferred to Infodrive Mauritius. The said document appears to indicate that 5000 shares were transferred by the petitioner to Mr.V.N.Sesharigi Rao and those shares were eventually acquired by Infodrive Mauritius. Since this transaction was not disclosed by the petitioner in his return of income, it is possible that the capital gains arising therefrom escaped assessment. Thus, there is some basis for re-opening the assessment.
Petitioner has placed additional documents on record. These documents appear to indicate that the petitioner transferred the shares to Mr.V.N.Sesharigi Rao on 12.02.2015. If the said documents are found to be valid and genuine on verification, they indicate that the share transfer took place during the financial year 2014-15 and not 2015-16. This would have a material impact on the re-assessment proceedings initiated by the Assessing Officer. Consequently, the petitioner should be provided an opportunity to place these documents for consideration by the Assessing Officer before the Assessing Officer prepares the draft assessment order. In order to facilitate this process, the draft assessment order is liable to be set aside and the matter is required to be remanded to the AO.
Accordingly, the draft assessment order is set aside and the matter is remanded to the Assessing Officer. The petitioner is permitted to file fresh objections and annex all relevant documents within a maximum period of two weeks from the date of receipt of a copy of this order
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2024 (3) TMI 884
Allowable expenditure u/s 37(1) - addition relating to form fees which was deposited for obtaining the wine shop through government - non-accepting the theory of commercial expediency - argued that the assessee has made multiple applications for lottery to obtaining the wine shop licence and for that he has made 20 application of each 15,000/- the payment has been made by banking channel. As the state government has not put any restriction on making number of application the genuine business expenditure being in accordance with the law cannot be denied u/s. 37(1)
Whether the money paid for making 20 applications by the assessee by way of application fees paid for allotment of licence for liquor shop from his bank account as the same is allotted based on the lottery system and the fees paid is non-refundable? - HELD THAT:- Before us AO though ld. DR did not controvert the fact that the assessee has made 20 application and only one was accepted so the payment of application to increase the probability of the allotment is licence cannot be denied to the assessee when the assessee has demonstrated the payment from the bank statement, filed an affidavit confirming the fact and most important amongst all the allotment of licence is not disputed by the revenue.
Thus, the money paid for making 20 applications for the allotment of liquor licence cannot be disallowed as the same is in respect of the business of the assessee and he has been allotted liquor licence shop in Jaipur as clearly confirmed by the ld. AO in the order. Considering these specific fact and confirmation of the assessee by way of an affidavit that even the amount paid for applying licence in 20 numbers for his business and therefore denial of claim of expenditure u/s 37(1) of the Act is not correct and therefore, the same is directed to be allowed and addition made by the ld. AO confirmed by the ld. CIT(A) is directed to be deleted. In terms of these observations, the appeal of the assessee is allowed.
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2024 (3) TMI 883
Validity of Revision u/s 263 - Exercise of revision jurisdiction for second time on the same issue - As per CIT AO had passed the order without making enquiries or a claim has been allowed without enquiring into the claim or that the same is not in accordance with any order or direction or instruction issued by CBDT, that shall be deemed to be erroneous in so far as its prejudicial to the interest of Revenue - HELD THAT:- Merely because in the assessment carried out pursuant to the revision order passed u/s 263 of the Act has resulted into acceptance of the claim of the assessee, that cannot be, in our view, a ground for exercise of revision jurisdiction for second time on the same issue. In this case, the earlier assessment order was set aside for de novo assessment which means that all the issues were open before the Assessing Officer. The assessee, under the circumstances, was entitled to furnish explanations and evidences on each of the issue that was open before the Assessing Officer and in relation to which the details were called upon by the Assessing Officer. There was neither any statutory power nor otherwise any other law requiring the Assessing Officer to only enhance or assess the same income which was earlier assessed. Such a proposition would be against the spirit of the law.
Scope of deeming fiction created in section 263 by the amendment made by Finance Act, 2015 w.e.f. 01.06.15 - HELD THAT:- The said deeming provisions above in our view, are not applicable for the assessment year under consideration i.e., A.Y. 2012-13
Even otherwise, a perusal of the revision order passed by the PCIT shows that the ld. PCIT has not pointed out any error or discrepancy in the evidence furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the show-cause notice, the ld. PCIT, in our view, was not justified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the AO - As observed PCIT without examining the details of the share applicants and the evidence furnished by the assessee has passed a general order observing that in his view the order passed by the Assessing Officer was on an incorrect assumption of facts or incorrect application of law without mentioning as to what facts were incorrect what was the incorrect law, that was applied by the AO.
Simply because the ld. PCIT felt that the Assessing Officer should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order. If such an action is allowed by the ld. PCIT in revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment. The Explanation 2(c) to Section 263(1) of the Act does not give unbridled powers to the ld. PCIT to simply set aside the assessment order by saying that the AO was required to make further enquiries without pointing out as to what was lacking in the enquiries made by the Assessing Officer and why the ld. PCIT was not satisfied with the reply and evidence furnished by the assessee.
Thus as relying on Amritrashi Infra Private Ltd. [2020 (8) TMI 407 - ITAT KOLKATA], we do not find justification on the part of the ld. Pr. CIT in setting aside the impugned assessment order which was passed by the Assessing Officer on the directions of the ld. PCIT issued u/s 263 of the Act. Decided in favour of assessee.
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2024 (3) TMI 882
Accumulation of income u/s. 11(2) - Setting off of the earlier year excess utilization of funds - assessment of trust - set off of excess utilization of funds of earlier years against the surplus of the current year and accumulation of funds - HELD THAT:- As in assessee’s own case for AY 2016-17 passed [2022 (4) TMI 635 - ITAT DELHI] in the case of a charitable trust, there was no provision for carry forward of the excess of expenditure of earlier years to be adjusted against income of the subsequent years.
No merit in this argument of the Department. Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in the section 11 of the Act and that such adjustment will have to be excluded from the income of the trust u/s 11(1)(a) of the Act. Our view is also supported by the judgment of CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal [1993 (11) TMI 17 - GUJARAT HIGH COURT
Thus we hereby direct the AO to allow the claim of the assessee regarding set off of the excess utilization of funds and accumulation of income. Assessee appeal allowed.
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2024 (3) TMI 881
Addition u/s 68 - unexplained cash credit - A.O concluded that as the assessee company had failed to substantiate the identity and creditworthiness of the share applicant/subscriber company - whether or not the dual set of conditions contemplated u/s. 68 of the Act had been satisfied by the assessee company? - Onus to prove - HELD THAT:- The assessee company in discharge of the primary onus that was cast upon it had placed on record with the A.O supporting documentary evidence substantiating the authenticity of its claim of having received share application money from the share applicant/subscriber company, viz. confirmation of the share applicant/subscriber company, bank statement, copies of the return of income, financial statements of the investor company, copy of share application forms, copy of PAN, copy of memorandum and articles of association, copy of board resolution and return of allotment in Form No.2.
On a perusal of the confirmation of the share applicant/subscriber company, we find that the investor company had not merely confirmed the transaction of having invested Rs. 2.05 crore towards share application money with the assessee company but had categorically furnished the complete source from where the said investment was so made.
There is no word of whisper by the A.O. as to why the aforesaid confirmation of the investor company was not to be accepted. We are unable to comprehend that now when the investor company had provided the complete details about the source of source of the investment made with the assessee company, then, on what basis the A.O without dislodging or disproving the correctness of the said explanation of the assessee company could have proceeded with and summarily drawn adverse inferences as regards the genuineness of the transaction under consideration.
We are of the view that the assessee company had discharged the double facet onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share application money from the aforementioned investor company, viz. M/s. Modakpriya Merchandise P. Ltd., viz. (i). by substantiating based on documentary evidence the "nature" and "source" of the amount so credited in its books of account, i.e. receipt of the share application money from the aforementioned investor company; and (ii). by coming forth with a duly substantiated explanation about the "nature" and "source" of the sum so credited in the name of the investor company, viz. M/s. Modakpriya Merchandise P. Ltd. as per the mandate of the "1st proviso" to Section 68 - We find that the A.O had not uttered a word about the aforesaid documentary evidence which was filed by the assessee company in discharge of the primary onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share application money from the aforementioned share applicant/subscriber company.
Thus where the assessee had produced sufficient documents in the discharge of its initial onus of proving the identity and creditworthiness of the share applicant/subscriber company, then, it is incumbent on the part of the A.O to undertake some inquiry and investigation before concluding on the issue of creditworthiness, failing which, no addition could be made u/s. 68 of the Act. Decided in favour of assessee.
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2024 (3) TMI 880
Penalty u/s. 271(1)(c) - deduction u/s. 80GGC denied - second round of appeal - first round the disallowance made by the AO has been deleted by the ld. CIT (A) - quantum proceedings matter has been decided against assessee - assessee submitted invoices “Rashtravadi” which showed that money was paid for giving some advertisement in the news letter and cheque was drawn in the name of the editor - AO held that same is not allowable for deduction u/s. 80GGC which clearly states that deduction should be made to a political party registered u/s. 29A of The Representation of Peoples Act, 1951 or an electoral trust and newsletter “Rashtravadi” is neither a trust.
HELD THAT:- Though the deduction is not allowable for the reasons given by the ld. AO however, for the purpose of charging assessee for furnishing of inaccurate particulars of income, what has to be seen is, whether at the time of making the claim for deduction, there was any bonafide belief and explanation for making such a claim in the return of income. From the records, it appears that the claim was made on the basis of auditor”s note who had given the detailed reasoning for making such a claim that it is allowable u/s. 80GGC.
CIT (A) in the first round too has held to be a bonafide claim of deduction. Though in the quantum proceedings finally the matter has been decided against assessee, but that alone is not sufficient for the penalty proceedings u/s 271(1)(c). For the purpose of penalty proceedings one has to see, whether assessee has furnished any inaccurate particulars by making a false claim or it is a claim which has not been found to be admissible by the ld. AO.
Here the claim was made on the basis of an opinion of the auditor who has given his opinion which too has been found to be acceptable by the ld. CIT (A). Though such an order has been set aside subsequently and AO has made the disallowance after verification, but it cannot be held that the claim at the time of filing of return of income based on opinion of an auditor was not bonafide. Accordingly, following principles laid down in the case of Reliance Petro Products Ltd. [2010 (3) TMI 80 - SUPREME COURT] it cannot be held that the claim of deduction by the assessee tantamount to furnishing of inaccurate particulars of income. Accordingly, the penalty levied by the ld. AO and confirmed by the ld. CIT (A) is deleted.Appeal of the assessee is allowed.
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2024 (3) TMI 879
Penalty levied u/s 271D as well as section 271E - mandation to record satisfaction before initiating penalty under section 271D - case of the assessee was selected for scrutiny and the assessment was completed after making addition towards unexplained interest paid/unexplained cash expenses for which AO initiated penalty proceedings u/s 271(1) - allegation of receipts of loan by way of cash and payment of interest in cash - violation of section 269SS and section 269T - As per AO assessee had not explained the bonafide or genuineness of the cash transactions
HELD THAT:- In this case, the assessment order was passed on 30.12.2017 and reference was made by the Assessing Officer to the Addl. CIT on 14.03.2021 to initiate penalty proceedings. There is a time gap of more than three years In the assessment order dated 30.12.2017, the Assessing Officer has noted that penalty proceedings u/s 271(1)(c) of the Act has to be initiated separately. However, the AO has made a reference to the Addl. CIT to initiate the proceedings u/s 271D of the Act for violation of section 269SS of the Act. Once the AO decided to initiate penalty u/s 271(1)(c) of the Act, subsequently, reference was made to Addl. CIT to initiate penalty proceedings u/s 271D of the Act, the AO ought to have been recorded his satisfaction. However, Ld. AO has failed to do so.
The same is in violation of CBDT Circular no. 09/DV/2016 dated 26.04.2016 advising Assessing Officer to make a reference to the Range Head regarding violation of provisions of Sec.269SS and 269T during the course of assessment proceedings itself. Thus, the action of Ld. AO was in gross violation of departmental circular.
Thus as following case of CIT v. Jai Laxmi Rice Mills [2015 (11) TMI 1453 - SUPREME COURT], Srinivasa Reddy Reddeppagari [2022 (12) TMI 1446 - TELANGANA HIGH COURT], T. Shiju v. JCIT (2019 (6) TMI 603 - ITAT CHENNAI], Smt. S.B. Patil [2016 (2) TMI 1206 - ITAT BANGALORE] and Anglican India Consultancy Pvt. Ltd. [2017 (12) TMI 1518 - ITAT DELHI] the ground raised by the Department is liable to be dismissed.
Period of limitation - Penalty order has not been passed within the statutory time limit - CIT(A) has followed the judgement of Mahesh Wood Products P Ltd. [2017 (5) TMI 433 - DELHI HIGH COURT] and decided the additional legal ground in favour of the assessee.
CIT(A) has correctly deleted the penalty levied under section 271D of the Act for both the assessment years 2015-16 and 2016-17. Since the Hon’ble Supreme Court in the case of Jai Laxmi Rice Mills Ambala City (supra) wherein it was clarified that provisions of Section 271E are in pari materia with the provisions of Section 271D of the Act, no separate adjudication for levy of penalty under section 271E of the Act is warranted. Accordingly, all the appeals filed by the Revenue are dismissed.
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2024 (3) TMI 878
Disallowance of expenditure relatable to exempt income u/s. 14A of the Act r.w.r.8D - HELD THAT:- The assessee has not challenged the disallowance of other expenses @ 0.5% on average value of investment u/r.8D(iii) of the Income Tax Rules, 1962, amounting to Rs. 87,90,136/-, and thus, we are inclined to upheld the findings of the Ld.CIT(A).
Disallowance of interest on borrowings u/r.8D(ii) - Assessee has filed necessary details to prove availability of sufficient own funds in excess of investments made in shares and securities and mutual funds which yielded exempt income - assessee is having sufficient own funds in excess of investments made in shares and securities, and thus, in our considered view, the case of the assessee is squarely covered by the decision South Indian Bank Ltd. [2021 (9) TMI 566 - SUPREME COURT] wherein, as clearly held that if investments in securities is made out of common funds and the assessee has available non-interest bearing funds larger than the investment made in tax free securities, in such cases, disallowance u/s. 14A of the Act, cannot be made. AO directed to delete the additions made towards disallowance of expenditure u/s. 14A of the Act r.w.r.8D of the Income Tax Rules, 1962 on interest expenditure.
Computation of book profit u/s. 115JB resorting to the computation as contemplated u/s. 14A of the Act r.w.r.8D - As decided Vireet Investment (P.) Ltd [2017 (6) TMI 1124 - ITAT DELHI] computation under Clause (f) to Section 115JB of the Act, is to be made without resorting to the computation as contemplated u/s. 14A of the Act r.w.r.8D of the Income Tax Rules, 1962.
Thus CIT(A) is erred in upholding the reasons given by the AO to recompute book profit u/s. 115JB of the Act, by making additions towards disallowance of expenditure relatable to exempt income u/s. 14A of the Act, r.w.r.8D of the Income Tax Rules, 1962. Thus, direct the AO to delete additions made towards disallowance u/s. 14A of the Act r.w.r.8D of the Income Tax Rules, 1962, to book profit computed u/s. 115JB.
Assessment of interest income during pre-commencement period under the head ‘income from other sources' - HELD THAT:- As following the decision of Karnal Co-operative Sugar Mills Ltd. [1999 (4) TMI 7 - SC ORDER] we are of the considered view that the assessee has rightly reduced interest income from capital work-in-progress. CIT(A) without appreciating the relevant facts has upheld assessment of interest income under the head ‘income from other sources’. Thus, we set aside the order of the ld. CIT(A) on this issue, and also direct the AO to accept the method followed by the assessee for treatment of interest income in its books of accounts.
TP adjustment - downward adjustment towards international transactions with its AE in respect of import of capital goods and enhancement by the CIT(A) towards downward adjustment in respect of import of capital goods from AE - HELD THAT:- Unless there is change in facts in subsequent year, settled position or accepted position cannot be changed. In the present case, the revenue having accepted ‘other method’ followed by the assessee for benchmarking import of capital equipments from AE and further, accepted price paid by the assessee to be at ALP for Asst. years 2011-12 and 2012- 13, cannot dispute imports of capital equipment from AE and price paid by the assessee to AE under very same equipment supply agreement between the parties for the impugned assessment year. Therefore, we are of the considered view that, on this ground itself downward adjustment made by the ld. TPO and enhancement made by the ld. CIT(A) cannot be sustained.
Whether adopting ‘Other Method’ requires looking at the cost to the Appellant or costs or profits of AE? - TPO is totally erred in rejecting ‘other method’ as prescribed u/r.10AB of the IT Rules, 1962, by assigning improper and incorrect reasons. TPO also erred in adopting TNMM as most appropriate method, which is further fortified by the observation of the Ld.CIT(A), where the Ld.CIT(A) rightly rejected TNMM as most appropriate method for the detailed reasons given in their order and said findings of the Ld.CIT(A) is final and not challenged by the Revenue. Further, once it is accepted position in the given facts and circumstances of the case that only ‘other method‘ is suitable to bench mark import of capital goods from the AE, then the method followed by the assessee to compare per MW cost of power project with similar other power projects in India along with the valuation report from Chartered Engineer order of Central Electricity Regulation Commission and project appraisal report of project financiers, M/s Power Finance Corporation Limited and M/s Rural Electrification Corporation Limited and the balance loan from nationalised banks and financial institutions to be accepted as it is. If you go by logic adopted by the Ld.TPO and Ld.CIT(A) that the assessee has almost paid more than 50% excess consideration for import of capital equipment from AE, it appears that the project approved by the CERC and financed by various state Financial Institutions under power sector and their appraisal of project is flawed appears to be totally incorrect, absurd and illogical.
Therefore, we are of the considered view that the method followed by the assessee to bench mark import of capital goods from AE under any ‘other method‘ is perfectly in accordance with prescribed method for bench marking this kind of transactions between an assessee and its AE.
TPO is erred in making downward adjustment towards cost of equipment imported from AE, including enhancement of downward adjustment by the Ld.CIT(A). Hence, we approve the TP study conducted by the assessee including selection of ‘other method‘as per Rule 10 AB and thus, we are of the considered view that the transactions of the assessee with its AE for import of capital equipment in terms of equipment supply agreement are at arm’s length price and thus, no adjustment is required to the price paid for import of equipment to the AE. Thus, we set aside the order of the Ld.CIT(A) on this issue and direct the AO/TPO to delete downward adjustment made towards cost of capital equipment imported from AE and consequent reduction of downward adjustment to capital work in progress.
Enhancement of assessment in respect of disallowance of interest u/s. 36(1)(iii) - CIT(A) assumed that said downward adjustment is diversion of interest bearing funds to AE for non-business purpose and disallowed interest expenditure u/s. 36(1)(iii) - HELD THAT:- Downward adjustment made by the TPO and upheld by the Ld.CIT(A) including enhancement has been deleted by us. Since, the downward adjustment towards price paid for cost of equipment imported from AE, has been deleted and further, the amount paid by the assessee towards cost of equipment imported from AE is held to be at arm’s length price, in our considered view, additions made by the Ld.CIT(A) by way of enhancement towards interest disallowances u/s. 36(1)(iii) of the Act, cannot be sustained. Thus, we set aside the order of the Ld.CIT(A) on this issue and direct the Assessing Officer to delete additions towards disallowance of interest u/s. 36(1)(iii) from reduction of capital work in progress for the year ending 31.03.2014 relevant to AY 2014-15.
Appeal filed by the assessee is partly allowed.
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2024 (3) TMI 877
TP Adjustment - working capital adjustment - HELD THAT:- Since the view taken in the cases of Parexel International Clinical Research (P.) Ltd. [2023 (3) TMI 1429 - ITAT BANGALORE] and also Parexel International (India) Private Limited [2023 (12) TMI 633 - ITAT HYDERABAD] is directly and substantially on the issue of allowability of working capital adjustment under identical circumstances, while respectfully following the same, we set aside the issue to the file of the learned Assessing Officer/learned TPO to decide the issue afresh, after considering the information furnished by the assessee.
Benchmarking of the interest paid on ECBs - There is no denial of the fact that the term of the impugned ECB loan is not four years, but five years, and as observed by the learned DRP, such loan can have a spread of 300 bps. Also as perused the copies of the orders dated 29/01/2016 and 30/09/2016 under section 92CA(3) of the Act, evidencing the fact that the assessee paying interest on ECB loan at LIBOR+2.75% was accepted. We find that the payment of interest on ECB by the assessee at LIBOR+275 basis points need not be interfered with. Ground is accordingly allowed.
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2024 (3) TMI 876
Cancellation of registration granted u/s 12AB - Assessment of trust - during the course of search proceedings certain documents were seized which is suspected to contain details of the alleged cash collection for admissions of students to "Yenepoya Dental College" and "Yenepoya Ayurveda Medical College" - PCIT has cancelled the registration granted to the assessee u/s 12A/12AB of the Act w.e.f. previous year 2020-21 u/s 12A of the Act and for all subsequent previous years as per provision of section 12A(4) - as argued registration for the previous year 2020-21 relevant to assessment year 2021-22 was u/s 12A of the Act and not u/s 12AB (1), so the registration u/s 12A of the Act, which was granted to the assessee on 4.6.1992 cannot be cancelled u/s 12AB (4)
HELD THAT:- Since the assessee has secured the registration u/s 12A of the Act dated 4.6.1992, which was effective till the date of 23.9.2021 and this registration granted u/s 12A cannot be cancelled u/s 12AB(4)(ii) of the Act for the previous year 2020-21 covering the assessment year 2021-22.
On the other hand, he could cancel the registration from assessment year 2022-23 onwards u/s 12AB(4)(ii) of the Act. In our opinion, if there is any violation in the previous assessment year 2020-21 relating to the assessment year 2021-22, this cannot be reason to cancel the registration granted for the assessment year 2022-23 to 2026-27 as the assumption of jurisdiction u/s 12AB(4)(ii) of the Act is itself wrong on the reasons discussed herein above. The specific violation committed by the assessee in any of these assessment years is to be considered independently and not the violation committed in assessment year 2021-22 for cancelling the registration granted u/s 12AB of the Act for the assessment year 2022-23 to 2026-27. As such, we make it clear that the ld. PCIT at liberty to pass the fresh order of cancellation independently u/s 12AB(4)(ii) of the Act for these assessment years i.e. 2022-23 to 2026-27, if so advised. Accordingly, we allow this ground taken by the assessee. Even otherwise, we are of the opinion that this issue of cancellation of registration for the AY 2021-22 is covered by our earlier decision in the case of Amala Jyothi Vidya Kendra Trust [2024 (1) TMI 998 - ITAT BANGALORE] as held since the PCIT invoked the provisions of section 12AB(4)(ii) of the Act, which has been introduced by the Finance Act, 2022 w.e.f. 1.4.2022 so as to cancel the registration with retrospective effect from assessment year 2021-22, which is bad in law. Decided in favour of assessee.
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2024 (3) TMI 875
Misuse of Advance Authorisation for export of garments - Benefit of Customs Notification No. 99/2009 dated 11.09.2009 denied - confiscation of fabrics imported - imposition of penalties - denial of cross examination of all the witnesses - Diversion of imported goods into open market without using the same in export goods - HELD THAT:- The modus operandi adopted by the appellant, the active role of Shri Rakesh Goyal to defraud the Government have been brought out clearly by the statements of Shri Sunil Kumar, the broker and Shri Ajay Kumar Goyal, conoticee and other statements as discussed in the impugned order.
Denial of cross examination of all the witnesses - HELD THAT:- The Department had partly acceded to the request for cross examination, and four witnesses were cross examined. However, the appellant has sought cross examination of a greater number of people, which is not justified. It is noted that neither the appellant nor the Director cooperated with the Department during investigations. They did not voluntarily come forward to assist the investigations to negate the allegations of the Department.
It is brought on record that Shri Manish Suneja had actively connived with the appellant to divert the imported raw materials to the open market. We take note that the Revenue has investigated each consignment and has indicated as to how and where the said consignments were disposed off. This is corroborated by the statements recorded under section 108 of the Customs Act, 1962. Consequently, the findings in the impugned order that the impugned goods have not been delivered at the factory premises of the actual user as mentioned in the condition sheet of the Advance Authorization is upheld.
The benefit of Notification 99/2009-Cus dt 11.09.2009 cannot be extended to the appellant in view of the overwhelming evidence of diversion of imported raw material to the open market - The contention of the appellant that the export obligation against the Advance authorisation was completed stands negated by the letter dt 30.6.2015 issued by DGFT wherein it was stated that for the advance authorization no. 3010093690 dated 07.05.2013, the show cause notice was issued to the party on 29.06.2015. In addition, vide their letter dated 13.08.2015, it was confirmed that demand notice dated 18.11.2014 had been issued.
There are no reason to interfere with the impugned order. Accordingly, all the four appeals filed by the appellant are dismissed.
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