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2024 (11) TMI 1042
CENVAT Credit - capital goods - mobile service providers (MSPs) can claim CENVAT Credit on excise duties paid on mobile towers and prefabricated buildings (PFBs) or not - whether the credit so claimed can be used to pay service tax for the output services rendered by the MSPs? - HELD THAT:- Rule 3(1) of the CENVAT Rules enables a provider of taxable service to claim CENVAT credit on duties paid on any “capital goods” or “input” received in the premises of the service provider. Thus, if the mobile towers and prefabricated buildings, which are the items in issue here, qualify as “capital goods” or “inputs” received in the premises of the mobile service provider, the mobile service provider will be entitled to claim CENVAT credit which can be further used for paying service tax for the output services rendered by the mobile service provider.
In the light of the provisions of the CENVAT Rules, if it is held that towers and/or parts thereof and prefabricated buildings (PFBs) are “capital goods” or “inputs” used for providing output service within the meaning of the aforesaid CENVAT Rules, then CENVAT credit can be claimed on these items.
It appears that the definition of “goods” under the Sales of Goods Act, 1930 seems to be the basis of the term “goods” in other Statutes. Hence, we would primarily rely on the definition given in the Sale of Goods Act - the items in consideration viz., towers and prefabricated buildings are neither actionable claim nor money, nor do they come within the inclusive clause of the definition, viz., stocks, shares, growing crops, grass, and things attached to forming part of the land which are agreed to be severed before sale or under contract of sale.
In order to determine whether any property is movable or immovable, this Court, in the light of the statutory provisions has applied certain principles. It has also been noted that such determination may be done not based on a single test but after applying several criteria on the facts of each case.
In TRIVENI ENGINEERING & INDUS. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [2000 (8) TMI 86 - SUPREME COURT], this Court applied the marketability test, in which it took the view that if the goods in question are capable of being taken into the market and sold, the same cannot be treated to be as immovable but movable property - This Court observed that “marketability” itself indicates movability of the property in issue.
In the case of Sirpur Paper Mills Ltd. [1997 (12) TMI 109 - SUPREME COURT], this Court again applied the test of marketability. The issue which arose for consideration in the said case was whether paper machines assembled at site were liable for duties under the Excise Act. It was the plea of the Assessee that since the machine was embedded in concrete base, it became an immovable property though embedding was for providing a wobble-free operation of the machine. This Court rejected the plea and held that merely because the machine was attached to the earth for efficient working and wobble- free operation, it did not per se render the said property immovable since the said machine can be sold in the market.
In the present case, while mobile tower cannot be shifted to another location without dismantling it, it is to be noted that mobile tower itself was bought and brought in a completely knocked-down (CKD) or semi-knocked-down (SKD) condition and it was erected and installed at the site after assembling the parts. If the said mobile tower is to be shifted to another location, it obviously has to be dismantled and restored to its SKD or CKD condition and thereafter re-erected, which however, would not entail any damage to it.
There can no dispute that if the newly set up BTS/BSC is relocated to another site it may entail certain damages. However, what is important to be noted is that the damage is qua the BTS/BSC or cables connecting the various components, but not the tower itself or PFB with which we are concerned. If the tower or the PFB can be dismantled and relocated in another site without causing any damage to either the tower or PFB, the mobility or the marketability of these items is retained. Thus, as far as the tower and PFBs are concerned, these exhibit the character of a movable property.
Thus, merely because certain articles are attached to the earth, it does not ipso facto render these immovable properties. If such attachment to earth is not intended to be permanent but for providing support to the goods concerned and make their functioning more effective, and if such items can still be dismantled without any damage or without bringing any change in the nature of the goods and can be moved to market and sold, such goods cannot be considered immovable.
The PFB houses other BTS equipment and alternative electricity source in the form of diesel generators and other equipment to provide alternative and uninterrupted power supply to the antenna so that in the event of failure of main power supply, the generator can instantly provide backup electricity supply to the antenna and BTS. The PFBs house electric cables, other equipment related to antenna, BTS and generator. Thus, PFBs enhance the efficacy and functioning of mobile antenna as well as BTS and accordingly, PFBs can also be considered as accessories to the antenna and BTS which are “capital goods” falling under Chapter 85 of the Schedule to the Central Excise Tariff.
Having held that the tower and pre-fabricated buildings (PFBs) are “goods” and not immovable property and since these goods are used for providing mobile telecommunication services, the inescapable conclusion is that they would also qualify as “inputs” under Rule 2(k) for the purpose of credit benefits under the CENVAT Rules - Appeal disposed off.
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2024 (11) TMI 1041
Eligibility of SSI exemption Notification No.08/2003-CE dated 01.03.2003 - clubbing of clearance value of two units - failure to consider various submission - violation of principles of natural justice - HELD THAT:- From the finding of this Tribunal, it can be seen that the Ld. Commissioner (Appeals) was directed to particularly, look into the financial transaction, day to day management etc. to arrive at conclusion of relationship between the two units.
It was also observed that the Commissioner (Appeals) is supposed to reassess the evidences as brought out on record and also referred to specifically in the grounds of appeal and thereafter, applying the principles of natural justice reconsider the eligibility of SSI exemption Notification No.08/2003-CE. From the perusal of the impugned order, we find that the appellant have made multiple submissions such as limitation, discrepancy in issuance of the show cause notice and various records showing that there is no financial flowback and both the units are working separately and particularly, after certain stage, one factory was shifted to the different location. However, the Ld. Commissioner (Appeals) has not considered all this aspects in the proper perspective and passed the order without considering the various submissions and evidences produced by the appellant.
The request of the Ld. Counsel on behalf of the appellant for remanding the matter is just and proper. Accordingly, the impugned order is set aside and the appeal is allowed by way of remand to Commissioner (Appeals) for passing a fresh order.
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2024 (11) TMI 1040
Liability to pay 6% duty on by product namely Ammonium Sulphate - contravention of condition of Notification No.01/2011- CE - availment of Cenvat Credit on the inputs used in the Ammonium Sulphate - HELD THAT:- It is found that in the present case the demand of differential duty of 5% i.e. as against the 1% duty paid by the appellant and 6% duty was demanded on the ground that appellant have availed the Cenvat Credit on the input and used in the Ammonium Sulphate, hence, the Ammonium Sulphateis liable to duty at the rate of 6% instead of 1%.
It is found that in the facts of the present case, Ammonium Sulphate is generated unavoidably as by product, in case of by product it cannot be said that any input stage credit was availed even if, the by product is cleared at nil rate of duty Cenvat credit cannot be demanded only on the pretext that the entire input on which the credit was taken has been used in the manufacture of the final product and not in manufacture of by product. Therefore, the exemption Notification No.01/2011which carries the condition of non availment of Cenvat Credit on input cannot be denied.
This issue is no longer res-integra, in the appellant’s own case, HINDUSTAN CHEMICALS COMPANY VERSUS COMMISSIONER OF C.E. & S.T. -SURAT-II [2024 (5) TMI 459 - CESTAT AHMEDABAD] it was held that 'since the issue has been settled that Ammonium Sulphate being a by-product arising in the course of manufacture of final product, the demand under Rule 6(3) is not applicable. Accordingly, In the present case also being a similar issue, demand is not sustainable.'
In view of the above decision in the appellant’s own case, it has been held that the reversal under Rule 6(3) of Cenvat Credit Rules in respect of Ammonium sulphate being by product is not required to be made. This has been held with a view that Cenvat Credit on the input cannot be said to have been availed when any by product is cleared. Therefore, in view of the above settled position, the demand of excise duty on the Ammonium Sulphate which was made on the basis that the Cenvat Credit was availed on the inputs is not sustainable.
The impugned order is set aside - the appeal is allowed.
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2024 (11) TMI 1039
Levy of purchase tax under Section 7-A of the Tamil Nadu General Sales Tax Act, 1959 during the Assessment Year 1994-1995 - defective parts that were collected from the customers by providing maintenance services to the customers / clients on behalf of the head office - HELD THAT:- A reading of sub-section (1) to Section 7-A of the Act makes it clear that the question of subjecting the respondent to purchase tax would arise only if there was a purchase of defective spare parts by the respondent from the customers / clients, question of involving Section 7-A of the TNGST Act, 1959 will apply.
In the present case, it cannot be said that the respondent was purchasing the defective spare parts from the customers / clients. All that, the respondent did was to replace the old defective parts with the new parts and gave a discounts on the replaced new parts to the customers.
Since there was no purchase of defective parts, question of levying purchase tax at the rate mentioned in Section 3 or Section 4 of TNGST Act, 1959 under Section 7-A of TNGST Act, 1959 does not arise - there are no merit in the challenge to the impugned order of the Tribunal - tax case dismissed.
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2024 (11) TMI 1038
Dismissal of appeal of the petitioner - dismissal mainly, on the ground that against the assessment order, the petitioner preferred online appeal without filing certified copy of assessment order in physical form, whereas, downloaded copy of assessment order was filed along with the appeal memo - HELD THAT:- The view taken by all the High Courts agreed upon, wherein it was held that amendment in Rule 108 with effect from 26.12.2022 is procedural in nature and being procedural, will have retrospective effect - reliance can be placed in Indian Potash Ltd. v. Deputy Commissioner [2024 (8) TMI 66 - MADRAS HIGH COURT] and Oaknorth (India) Pvt. Ltd. v. Union of India [2023 (9) TMI 781 - PUNJAB AND HARYANA HIGH COURT].
The view of the High Courts agreed upon that rejection of appeal on hyper technical ground cannot be countenanced, more so, when appeal was admittedly filed within time along with the downloaded copy from the portal.
Thus, the impugned appellate order dated 19.07.2024 is set aside. The appeal is restored in the file of learned appellate authority. The appellate authority shall decide the appeal, in accordance with law, on merits - petition disposed off.
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2024 (11) TMI 1037
Eligibility for GST exemption on hostel accommodation services - whether the hostel accommodation being provided by the Applicant to students and working women qualify to be a residential dwelling for use as residence as described in the above entry and thus eligible for exemption or not? - HELD THAT:- The term 'residential dwelling' has not been defined either under CGST Act or under Notification No. 12/2017. However, under the erstwhile service tax law, in paragraph 4.13.1 of the Taxation of Services: An Education Guide dated 20.06.2012', issued by the CBIC, the expression residential dwelling' has been interpreted in terms of the normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, inn, guest house, campsite, lodge, house boat, or like places meant for temporary stay.
It is clear that the purpose and objective of the notification is nothing but to avoid taxing residential properties taken on rent by family or individuals and the benefit of exemption is not extended to the premises which do not qualify as residential dwelling for use as residence. Further, unless the twin conditions of 'renting of residential dwelling' for 'use as residence,' being inter-twined and inseparable, are not met, the exemption is not available. As per settled position in taxation laws, especially when exemptions or concessions or benefits are to be availed, the interpretation is to be literally and strictly construed and not in liberal terms. In effect, the place rented out is neither a residential dwelling nor being rented out for use as residence.
It is clear that hostel accommodation is not equivalent to residential accommodation and hence the services supplied by the Applicant would not be eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 and under the identical Notification under the TNGST Act, 2017, and also under Entry 13 of Exemption Notification No.09/2017-IT(Rate) dated 28.06.2017, as amended.
Requirement for GST registration based on turnover - HELD THAT:- It is clear that the Applicant's service of providing hostel accommodation is not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 as amended, the Applicant is very much be required to take registration under the GST Enactments, as the arrangement between the Applicant and the hostel occupants is liable to be classified as transaction in the course of furtherance of business and hence, as per Section 7(1)(a) of CGST Act, 2017 read with Entry No. 2(b) of the Second Schedule to the CGST Act, the said transaction constitutes "supply" - the Applicant is required to get themselves registered in the state of Tamil Nadu, if their aggregate turnover in a financial year exceeds twenty lakh rupees.
Taxability and applicable GST rate for hostel accommodation services - HELD THAT:- It is observed that hotels are meant for a temporary stay (2-5 days) and have lot of facilities and staff, but hostels are used for a longer period and have basic facilities with minimal staff required by the inmates to stay at a reasonable rate. Therefore, hostel services cannot be equated to a hotel accommodation and hotel GST rates cannot be applied to a hostel. Therefore, the supply of hostel accommodation services (Tariff heading 9963) is taxable @ 9% CGST + 9% SGST under Sl. No. 7(vi) of the above Notification (Sl.No. 7 (ix) as per original notification).
Tax treatment of in-house food supply as part of hostel services - HELD THAT:- The natural bundle has the characteristic of where one service is the main service and the other services are ancillary services which help in better enjoyment of the main service. Further, there is a single price for the combined services. The principal activity of the Applicant is supply of accommodation Services. While providing such services, the charges are being realised in a consolidated manner for the value of food and other like services rendered. The Applicant has stated that they do not charge separately for the other services provided by them. Thus, the services provided by the Applicant are composite in nature - As per Section 8 of the CGST Act, 2017, for a Composite supply, the tax rate on the principal supply will be treated as the tax rate on the given composite supply. Since the Applicant provides a number of services in a composite manner, the hostel accommodation services provided by the Applicant, being the principal supply, which is taxable @18%, will be tax rate for the composite supply provided by them.
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2024 (11) TMI 1036
Reopening of assessment u/s 147 - procedure prescribed for reassessment - intra Court appeal by the Revenue against the order of this Court - Non furnishing of reasons - Without passing the preliminary order, AO has passed the final assessment order - As decided by HC [2023 (1) TMI 1261 - KARNATAKA HIGH COURT] after receipt of the letter A.O. has called the assessee for final hearing keeping in view the paucity of time. No explanation is forthcoming as to why the reasons were not furnished, though it is an admitted position that reasons were sought as back as in April 2018. The order sheet and assessment order clearly indicate that entire proceeding has been hurriedly completed between 18.12.2018 and 28.12.2018 in order to complete the same within the time limit i.e. 31.12.2018.
This is an intra-court appeal. There is no patent error to interfere with the view taken by the Hon’ble Single Judge more so, when a Division Bench of this Court following an authority of the Hon’ble Supreme Court of India has held that provision is mandatory in nature. Decided against revenue.
HELD THAT:- There is a delay of 380 days in filing the Special Leave Petition which has not been satisfactorily explained. Even otherwise, we have gone through the Special Leave Petition and do not find any merit in the same.
Special Leave Petition is, therefore, dismissed on the ground of delay as well as on merits.
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2024 (11) TMI 1035
Assessment u/s 144C - TP adjustments were not received in time and the AO has confirmed the draft assessment order and the same is in violation of Section 144C - Delay filling SLP - As decided by HC [2023 (9) TMI 1575 - KARNATAKA HIGH COURT] assessee is right in his submission that u/s 144C AO is bound by the directions issued by the DRP and required to pass the assessment order in conformity with the directions issued within one month from the end of month in which such directions are issued. ITAT has recorded that impugned order is not in conformity with the provisions of Section 144C of the IT Act and barred by time. Revenue appeal dismissed.
HELD THAT:- There is a gross and unexplained delay of 294 days in filing the Special Leave Petition.
We see no good reason to interfere with the impugned order passed by the High Court of Karnataka at Bengaluru.
Special Leave Petition is, accordingly, dismissed on the ground of delay as well as on merits.
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2024 (11) TMI 1034
Computation of undisclosed income of the block period - Scope of section 158-BB of the Income Tax Act for assessment of undisclosed income in search cases - HELD THAT:- We find that the words which have been added are rightly interpreted by the Tribunal to include two types of material which may be considered by the assessing officer. First, the material found during search and relatable to such evidence and the second part is such other materials or information as are available with the AO.
Thus, apart from the evidence which may be collected and noticed during search, if the assessing officer has any other information and such other material with him, which is relatable to such evidence, the same can also be looked into for the purpose. Therefore, an assessment u/s 158-BC of the Act is required to be made both on the basis of result of search as well as post search enquiry and other proceedings which are in the nature of consequences of the evidence found as a result of search.
Affidavit of the employees have not been considered - It is argued that the assessee was not provided sufficient opportunity and fair hearing has not been provided to him - Large number of documents relating to correspondence with Excise Department, police cases, court cases relating to the firms carrying out liquor business, which were not in the name of the assessee, have also been found from his premises.
Copies of number of maps of godowns and vends, which were operated by various companies were also recovered from his premises. There were 7+9+7 truck loads recovered from three different places. Stock position of various liquor vends was also found. During the courses of search, statements of number of persons were also recorded, who stated that they were salesmen working in those vends. The assessee was their employer and real owner of the vends. Merely because the license was issued by the Excise Department for various liquor vends, income from which the learned assessing officer has found to be undisclosed income of the assessee cannot absolve the concerned assessee. We agree with the Tribunal that the assessing officer is not flattered by the technical rule of evidence and if he reaches to the conclusion that the vends are all being owned and managed by the concerned person singularly through employees, merely because the licenses are not in the name of the concerned assessee, it would not make any difference to reach to the conclusion that there is undisclosed income.
There is cross-examination of almost all persons, whose statements were relied upon, was afforded to the assessee and after the cross-examination was conducted when nothing contrary to the earlier statements was emerged and in some cases the assessee did not even come forward to cross-examine, the inference could be drawn.
There was also a document of rent agreement for premises taken on record in the name of one M/s Chander Bhan Om Parkarsh and Company, which was signed by the assessee as a contractor. Thus, the Tribunal has found that there was undisclosed income of the assessee which he was earning through ghost and benami companies, which were running on the properties taken on rent by him. The assessment order was found to have been correctly re-assessed by the three Judges Bench of the Tribunal. Decided against assessee.
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2024 (11) TMI 1033
Deduction u/s. 80IA - initial assessment year for claiming deduction - Tribunal held that the unabsorbed depreciation and carried forward losses of the earlier years which had already been set off against the other income, could not be notionally carried forward and taken into consideration for the purpose of computation of deduction u/s. 80IA - HELD THAT:- The issue arising in the first two substantial questions of law are covered in favour of the assessee by a judgment of Supreme Court in the case of Velayudhaswamy Spinning Mills Ltd [2010 (3) TMI 860 - MADRAS HIGH COURT].
Disallowance of agency commission paid to non-resident without deducting tax at source, u/s. 40[a][i] - HELD THAT:- The facts are admitted to the effect that the commission agents are situated abroad. The factum of rendition of services abroad is also admitted. It is also not in question that no payments were made in India and that the commission was remitted through banking channels directly to the agents.
In the facts of the present case, Circular No.786 issued by the Central Board of Direct Taxes, is clear to the effect that export commission would not be liable to tax. There has admittedly been no determination of tax made by any other authority holding the recipients of the commission to be taxable in India. Hence, the determination of taxability made by the assessee, and the decision to remit without deduction, is, in this case, unimpeachable. Hence, we see no infirmity in the order of the Income Tax Appellate Authority having accepted the case of the assessee. The third substantial question of law is also answered in favour of the assessee.
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2024 (11) TMI 1032
Reopening of assessment u/s 147 - Income chargeable u/s 5(2) - assessment funds transferred from the NRE account of the petitioner's husband to the petitioner's domestic bank account - HELD THAT:- The question as to whether the petitioner's husband was a non resident Indian was found as not having been established by the petitioner with documentary evidence. Similarly with regard to the amount it is found that the petitioner failed to prove the genuineness of the sources with material evidence.
All these are essential questions of fact which are disputed. It is trite law that this Court under Article 226 of the Constitution, would be loathe in interfering with the orders of assessment when there is an effective alternative remedy available, more so, when there is a need to examine disputed questions of facts, for examination of disputed question of facts is normally alien to jurisdiction under Article 226 of the Constitution.
This Writ Petition challenging the impugned order is rejected. The petitioner is at liberty to file an appeal, if any appeal is filed within a period of 3 weeks from the date of receipt of copy of this order, the same shall be entertained without reference to limitation, subject to complying with other conditions relating to appeal including pre-deposit if any. It is made clear that have not examined the merits and the observation is only for the limited purpose of examining whether the writ petition ought to be entertained or otherwise.
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2024 (11) TMI 1031
Validity of assessment proceedings u/s 153A/153C - satisfaction note for initiation of proceedings u/s 153C - satisfaction note as drawn u/s 153C by the AO of the searched person that seized documents/digital data/information found in the course of search indicates that the other person namely, the assessee herein has purchased a property in which some cash component is involved and such information/document etc. has bearing on the determination of total income of other person namely, the assessee - HELD THAT:- While search in the instant case was carried on 06.01.2021 i.e. previous year relevant to AY 2021-22, the documents were handed over in the previous year relevant to AY 2022-23. Based on such matrix, the assessment upto Assessment Year 2021-22 stood covered within ambit of section 153C. This being so, domain for assessment qua undisclosed income for Assessment Year 2021-22 falls within sweep of section 153C of the Act.
AO has committed substantive error in proper appreciation of jurisdictional provisions of section 153C of the Act by excluding AY 2021-22 from the ambit of section 153C of the Act erroneously based on actual date of search rather than based on date of receipts of incriminating documents. In order to frame assessment based on the searched document, the notice ought to have been issued under section 153A r.w.s. 153C of the Act.
The regular assessment passed by issuance of notice u/s 143(2) of the Act without aid of section 153C of the Act despite ‘satisfaction note’ from AO of searched person thus, is not supportable in law. The impugned assessment framed under section 143(3) of the Act thus, is void ab-initio as rightly pleaded on behalf of the assessee. Hence, the assessment order passed is vitiated in law and requires to be quashed at the threshold. Assessee appeal allowed.
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2024 (11) TMI 1030
Addition u/s 69A - unexplained cash deposited in the current bank account of the assessee’s sole proprietorship concern - validity of invoking of Section 115BBE by AO - assessee is running a petrol pump allotted by BPCL - HELD THAT:-Monthly details of purchase sales have also been placed before us and there is no major increase in sales during the demonetization period and they have normally been consistent throughout the year. Therefore, we are of the considered view that the alleged cash deposit is from sale of petroleum products at the petrol pump allotted by BPCL (a public sector undertaking) which is run by the assessee in the name of M/s. Pappu Fuel Station.
Determination of Net profit earned during the year - Assessee has declared a net profit of Rs. 3,07,646/- and gross profit of Rs. 9,29,949/- on the gross sales of 3.23 Crore. Books of accounts have been audited by the Chartered Accountant Farm namely Sujit Mishra and Associates dated 30.09.2017. Quantitative records are duly maintained. Gross profit margine at the petrol pumps are normally ranging between Rs. 1.5 to Rs. 3 per litre for petrol and around Rs. 2 to Rs. 3 for diesel. Considering this aspect, we find that the assessee has disclosed the net profit in consonance with the generally accepted market practice and the same should be accepted as the net profit for the year.
We, accordingly sustain the addition of Rs. 3,07,646/- being the net profit from petrol pump and delete the remaining amount of addition of Rs. 2,59,70,084/- and partly allow the grounds of appeal raised on merits of the case.
Invocation of Section 115BBE - Since the alleged cash deposits are on account of business activity carried out by the assessee and has been duly explained and no addition has been sustained u/s 69A provisions of Section 115BBE of the Act will have no application.
Appeal filed by the assessee is partly allowed.
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2024 (11) TMI 1029
Validity of reassessment proceedings - as alleged notices were time barred by limitation - Withdrawal of approval u/s 10(23C) - lapses found during the course of survey conducted on the assessee as well as during search and seizure operation u/s 132 and survey u/s 133A on the founder of the society, wherein the assessee-Society Founder was found to have been indulging in syphoning off the money of the society - HELD THAT:- As relying on Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT]. Assessing Officer was required to issue the reassessment notice under section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. In this context, the assessee’s contentions is worth merit that the notices issued under section 148 of the Act under the new regime dated 21.07.2022 for A.Y. 2018-19, on 22.07.2022 for A.Y. 2019-20 and dated 26.07.2022 for A.Y. 2020-21 were clearly barred by limitation.
As on the date of reference, there was no valid proceeding pending before the ld. Assessing Officer, whereas for making any reference to the ld. PCIT by the ld. Assessing Officer during a pending proceeding is sine quo non, which were not there in the instant cases as these notices were clearly time barred by limitation. Therefore, on this count, we are inclined to quash the orders passed by the ld. PCIT withdrawing the approval under section 10(23C)(vi) of the Act.
Second proviso to section 143(3) of the Act was brought on the Statute Book w.e.f. 1st April, 2022 and is accordingly applicable for A.Y. 2022-23 onwards -We observe that the AO is vested with the power to make reference during the course of pending proceedings before him but in the instant case a reference was made by the ld. AO under 2nd proviso to section 143(3) of the Act, which was not applicable to the assessments under consideration and thus the reference is also invalid and, therefore, the consequent orders passed by the ld. PCIT under section 10(23C)(vi) of the Act withdrawing the approval for all these assessment years are invalid and accordingly quashed. The ld. Case of the assessee finds support from the decision of Lakhmi Chand Charitable Society [2024 (8) TMI 1297 - ITAT DELHI] wherein similar issue has been decided by the Coordinate Bench.
Reference was made in terms of 2nd proviso to section 143(3) to ld. PCIT (Central), Patna to whom the ld. Assessing Officer was subordinate - We are of the opinion that it is not permissible under the Act and is invalid. Rather it was the ld. Commissioner (Exemption) having territorial jurisdiction as specified in Column 4 of the Notifications Nos. 52/2014 and 53/2014 both dated 22nd October, 2014, who was the appropriate authority to approve or withdraw the approval. Even on this account, the ld. PCIT’s jurisdiction is invalid and not sustainable in the eyes of law.
Decided in favour of assessee.
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2024 (11) TMI 1028
Denial of benefit of extension to interest u/s 234A - assessee had opportunity to remit the self-assessment tax before 31st October 2021 but did not do so -interest u/s 234A is compensatory OR penal - HELD THAT:- We note that assessee deposited interest u/s 234A for one month i.e., (from the original due date i.e., 31st October 2021 till the deposition of taxes i.e., 29th November 2021). However, the CPC / Ld. AO computed interest till the date of filing return i.e. 7th March 2022 and Ld. CIT(A) upheld that action of CPC / Ld. AO on the contention that the assessee had opportunity to remit the self-assessment tax before 31st October 2021 but did not do so and CBDT Circulars do not grant the benefit of extension to interest u/s 234A.
We find considerable cogency in the contention of the Ld. AR that the decision of Dr. Prannoy Roy [2001 (12) TMI 68 - DELHI HIGH COURT] which was upheld by Hon’ble Supreme Court in the case of CIT vs Prannoy Roy [2008 (9) TMI 150 - SUPREME COURT], fully supports the case of the assessee, wherein, it has been held that the interest u/s 234A is compensatory and not penal in nature and interest is payable where tax has not been deposited prior to due date of filing the Income tax return.
Thus, irrespective of date of filing of ITR, interest u/s 234A of the Act, shall accrue on the balance of taxes outstanding from the first date immediately following the due date and shall cease to accrue on the date of payment by installment /when paid in parts) or on the date of full discharge of entire tax liability computed on the total income. See Milind Madhav Padhye [2023 (4) TMI 726 - ITAT PUNE] Decided in favour of assessee.
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2024 (11) TMI 1027
Best judgment assessment u/s 144 - Unexplained Investment u/s 69 (in Mutual Funds) - additional evidences were submitted by the assessee under rule 46A of the IT Rules - HELD THAT:- We observed that assessee is a non-resident and maintaining non-residential status for more than 15 years. The assessee is a regular filer of return of income declaring income sourced from India. We observed that AO has made the addition with the observation that no response was received from the assessee. Based on that, he proceeded to complete the assessment u/s 144 of the Act based on the information available on his record. We observed that there is no proper opportunity was extended to the assessee during the current assessment proceedings because of that assessee has submitted various information after draft assessment order.
However, the AO has not considered those informations. Even before ld. CIT (A), assessee has submitted additional informations under Rule 46A of the Rules. Ld. CIT (A) as per information available on record remanded the matter back to Assessing Officer. However, the Assessing Officer did not accept or verify the additional evidences forwarded by the ld. CIT(A).
CIT(A) deleted the additions made by the AO on investment in mutual fund during the current assessment year - We observed that the findings given by ld. CIT (A) are based on the information very much available on record and it is also fact on record that assessee is an NRI and all the source of income are from his salary income earned by the assessee outside India - No reason to disturb the findings of the ld. CIT (A) considering the fact that all the informations are traced from the bank statements submitted by the assessee. Therefore no reason to disturb the findings of the ld. CIT (A). Accordingly, ground raised by the Revenue is dismissed.
LTCG on sale of equity oriented mutual funds - Since the transaction falls u/s 10(38) accordingly ld. CIT (A) deleted the addition - CIT (A) has considered various informations submitted before Assessing Officer as well as in remand proceedings. Therefore, we are inclined to accept the findings of ld. CIT (A) that these transactions are covered by section 10(38) of the Act. Hence, we do not see any reason to disturb the findings of ld. CIT (A). Accordingly, ground no.(ii) raised by the Revenue is dismissed.
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2024 (11) TMI 1026
Scope of assessment framed u/s 153C - HELD THAT:- We noticed that the satisfaction recorded by the Assessing Officer of the assessee was only on 18.01.2021, therefore, the assessment proceedings initiated u/s 153C in AYs 2011-12, 2012-13 & 2013-14 are outside the jurisdiction. Accordingly, the assessment of these assessment years are set aside as void ab initio.
Addition of rental income based on valuation report for AYs 2014-15 to 2016-17 - We observed that a document was found during the search conducted in the case of Harvansh Chawla and valuation report was dated 08.04.2010 seized from the premises of Harvansh Chawla. Since the valuation report was 09.04.2010, the material found in the search pertains to AY 2011-12.
Since the valuation report was dated 08.04.2010, we are in agreement with the submission of the ld. AR that it was only a valuation per se and there is no record which shows that the above said property was rented out as per the valuation report found during the search. It is another matter whether the valuation report can be termed as incriminating material without corroborating with the assessee’s books of account or return of income.
It is settled law that incriminating material found during the course of search is year specific was that addition could be made in the case of unabated assessment. Since the material found/valuation report is dated 08.04.2010 it cannot be considered as an incriminating material. Even the Assessing Officer has not verified and recorded a satisfaction that this valuation report was actual or the same was acted upon by the assessee.
Merely because certain documents were found in the premises of third party, the same cannot be utilised to make the addition as incriminating material without there being corroboratory evidence to show that such income was not offered to tax.
In this case, we observed that merely based on the availability of valuation report, the Assessing Officer proceeded to make addition without properly giving explanation how it can be treated as incriminating material in the case of the assessee, as held in the case of CIT vs. Sinhgad Technical Education Society [2017 (8) TMI 1298 - SUPREME COURT].
Thus, we are inclined to delete the addition made by the AO and sustained by the ld. CIT (A) and the appeal for AY 2014-15.
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2024 (11) TMI 1025
Validity of reopening of assessment - Addition of alleged bogus purchases - reasons to believe - HELD THAT:- In assessment order there is no allegation that the assessee has taken any bogus accommodation entries from the bogus concerns of Deepak Sharma named in the reasons for reopening the assessment. It is a well settled law that if no addition is made on the basis of reasons recorded for reopening, no other addition can be made. The reasons for reopening should coincide with the addition made in the reassessment proceedings.
Further, third party statement recorded subsequent to the reasons recorded, cannot form basis of Assessing Officer’s “reasons to believe” to reopen the assessment. In the instant case, there is no coherence in the reasons recorded for reopening and the addition made in the assessment order. There is utter nonapplication of mind by the Assessing Officer while recording reasons for reopening. In facts of the case, we have no hesitation in holding that reopening of assessment lacks Assessing Officer’s, “reasons to believe” for reopening of assessment.
Reassessment proceedings are held invalid, hence, quashed. The assessee succeeds on ground no.1 of appeal.
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2024 (11) TMI 1024
Characterization of profit/receipts - profit on sale of land - business income or long-term capital gain - holding period of asset - HELD THAT:- Hon'ble Supreme Court in the case of CIT vs. Madan Gopal Radhey Lal [1968 (9) TMI 14 - SUPREME COURT] has held that a trader may acquire a commodity in which he is dealing for his own purposes and hold it apart from the stock in trade of his business. There is no presumption that every acquisition by a dealer in a particular commodity is acquisition for the purpose of his business; in each case the question is one of intention to be gathered from the evidence of conduct by the acquirer and his dealings with the commodity.
Since the assessee in the instant case has held the land for more than five years without carrying out any developmental activity on the same, the Revenue in the preceding and succeeding assessment years has accepted the treatment of the assessee in claiming the long term capital gain on account of sale of land even though she was also a director in various concerns at that time, therefore, in view of the above discussion and in view of the detailed reasoning given by the Ld. CIT(A) / NFAC on this issue, no infirmity in his order deleting the addition made by the AO. Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed.
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2024 (11) TMI 1023
Denial of deduction u/s 54B - land sold was barren land on which no agricultural activity is carried out - According to the AO as per the provisions of section 54B only agricultural land purchased after the date of transfer is allowed as deduction - HELD THAT:- The assessee has purchased the new agricultural land before the land in question was sold, the investment in the land was also made jointly i.e. in the name of the assessee as well as Mr. Santosh Vitthal Mhsurkar and the assessee did not offer any clarification to indicate his share in the said investment, if any.
It is the submission of assessee that he was running a dairy firm and the land sold was used for growing grass and therefore, it was an agricultural activity. It is also his submission that in the case of one of the co-owners i.e. Mr. Santosh Vitthal Mhsurkar, the AO in the order passed u/s 144/147, dated 13.03.2024 for assessment year 2016-17 has accepted the land as agricultural land, therefore, the assessee being a party to the same sale deed for the same land, the AO cannot take a different view. It is also his submission that the various documents filed before the Assessing Officer as well as the Ld. CIT(A) / NFAC evidencing the sale of milk to dairy, cattle food, farm pesticides and medicines, details of crop revenue, etc. were completely ignored by the lower authorities.
We find some force in the above arguments of assessee. A perusal of the assessment order of Mr. Santosh Vitthal Mhsurkar/coowner shows that the AO has accepted the land sold as ancestral agricultural land and is not a capital asset as per section 2(14) of the Income Tax Act, 1961.
This order was passed by the Assessing Officer after the order passed by the Ld. CIT(A) / NFAC and this was accepted as an additional evidence. In the instant case, the assessee is the consenting party No.2 to the sale of the said land and the same sale deed.
We further find that the various documents filed by the assessee in the paper book were not considered by the Ld. CIT(A) / NFAC. 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 Assessing Officer with a direction to adjudicate the issue afresh. Appeal filed by the assessee is allowed for statistical purposes.
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