Undisclosed investment in paintings - HELD THAT:- The assessee claimed to have received aforesaid paintings as gift. During the appellate proceedings, ld. CIT (A) while concurring with AO has not accepted the theory of gifting to the assessee in question put forth by the assessee. During the arguments before the Bench, the assessee has failed to bring on record plausible and sustainable reasons as to why such costly paintings in question have been gifted by the celebrated artists. Assessee has also not brought on record the fact that if he was related to aforesaid six artists or was having close family relations.
Moreover form the facts on record, it is proved that the assessee being partner of M/s. R & R Arts and Director of M/s. Cue Apparel Pvt. Ltd. had been transacting with aforesaid artists for sale and purchase of paintings. When a celebrated artist was having business interest with the assessee, the question of gifting paintings all of sudden by all of them is not acceptable. So, we concur with the findings of AO as well as CIT (A) to the extent that though the creditworthiness of the donors has been proved but occasion and relationship of the donor with the donee has not been proved beyond doubt.
Undisclosed investment in such paintings found at the residence cum business premises of the appellant - HELD THAT:- The value of the paintings of Shibu Natesan, Bhupen Kakkar, F.N. Souza, Manjit Bawa, Jogen Choudhary and Arpana Caur is to be assessed at Rs. 4,01,200/- Rs. 10,00,000/- Rs. 10,00,000/- Rs. 2,00,000/- Rs. 6,00,000/- and Rs. 2,66,700/- respectively. So far as value of the paintings of F.N. Souza and Bhupen Kakkar are concerned, no such bills for comparison have been brought on record by the assessee, so its value be determined at Rs. 10,00,000/- each. In these circumstances, addition of Rs. 58,00,100/- is ordered to be restricted to Rs. 34,67,900/-. Consequently, ground no. 2 of the appeal filed by the Revenue is decided against the Revenue and grounds no. 1 & 2 of the appeal filed by the assessee is partly determined in favour of the assessee.
Addition on account of household expenses incurred from undisclosed sources - CIT (A) while deleting the addition also taken into account the deletion made by ld. CIT (A) on account of household expenses in case of Shashi Gandhi, mother of the assessee for AY 2002-03, 2006-07 and 2007-08. So, in these circumstances, we find no scope to interfere into the findings returned by the ld. CIT (A), hence ground no. 1 of the Revenue’s appeal is also determined against the Revenue.
Unexplained investment in painting made by Anjolie Ela Menon on the ground that assessee has failed to explain the acquisition of this painting - When we examine receipt undisputedly it is issued by Anjolie Ela Menon in the name of M/s. R & R Arts owned by the assessee bearing cheque no. 880110. However, after rectification of mistake, another receipt dated 04.03.2007 has been brought on record, which is issued in the name of M/s. Vibhuti Investment Company Ltd. bearing same cheque number drawn on Bank of India, Prabha Devi, Mumbai.
When the payment is proved to have been made by way of cheque in the name of M/s. Vibhuti Investment Company Ltd. and this fact has been verified by the AO during assessment proceedings as well as during the remand proceedings and rectified receipt has been brought on record by the assessee and the assessee is not having got issued any cheque book bearing series of cheque no. 880110, we are of the considered view that the ld. CIT (A) has rightly deleted the addition.
Termination of the License Agreement - the Arbitrator's order to maintain the status quo was appropriate under Section 17 of the Arbitration and Conciliation Act, 1996 or not - HELD THAT:- The Arbitrator has held that the respondent has been able to make out a strong prima facie case in its favour based on Clause 22.4 of the License Agreement which restricted the right of the appellant to terminate the License Agreement only in the event of three consecutive defaults by the respondent to pay the license fee. Even before me, it is not contended by the counsel for the appellant that there was any default committed by the respondent in the payment of the license fee.
In the present case, the respondent has clearly made out a case which falls in the exception to the rule as provided in Section 14(1)(a) of the Specific Relief Act, 1963.
Conclusion - In the present case, prima facie it does not appear that the agreement has been terminated in accordance with Clause 22.4 of the License Agreement. The respondent, therefore, is entitled to a relief of injunction as granted by the Arbitrator.
Revision u/s 263 - as per CIT AO failed to examine whether the claim of the assessee towards provision for doubtful debts was correct or not - HELD THAT:- There is no whisper in the assessment order with regard to the claim of the assessee which refers to the provisions of bad and doubtful debts. Since there was no enquiry at the end of the AO on this issue, the CIT took up the case under section 263 and AO being a quasijudicial authority cannot take a view, either against or in favour of the assessee without making proper enquiries and without proper examination of the claim made by the assessee in the light of the applicable law.
Commissioner is empowered to initiate suo moto proceedings under section 263 where the AO takes a wrong decision without considering the material available on record or he takes a decision without making any enquiry into matters where such enquiry was prima facie warranted.
In the present case, the CIT was of the opinion that there is no proper enquiry by the AO and he accepted the claim of the assessee without making any enquiry with regard to the bad and doubtful debts. He has not gathered any information and evidence to suggest that the claim of the assessee was right.
AO absolutely closed his eyes and accepted the claim of the assessee toward the provision for bad and doubtful debts both under the normal computation of income as well as u/s 115JB.
AO is required to cause enquiries with regard to the claim of the assessee. As such, the CIT is justified in remitting the issue to the file of the AO for re-examination. All the grounds raised by the assessee are dismissed.
Disallowance of commission expenses claimed u/s 37(1) - HELD THAT:- There is no dispute that the assessee has filed the names, addresses of the persons to whom the commissions have been paid. The assessee has submitted the Permanent Account Number, commission paid and TDS deducted and there is no dispute to the same.
Assessee has produced the confirmations from all the parties for having received the commission. Assessee has produced few parties for examination by the AO which were examined. Most of the parties were served with the notice of the AO and who have replied and confirmed to have received the commission. The parties examined have also confirmed to have rendered services to the assessee for which they have earned the commission. If some parties have not been produced by the assessee, the assessee cannot be paralized for the same.
It is the duty of the AO to summon such parties u/s 131 of the Act, which power vest with the AO and not with the party. In such circumstances and facts of the case, no addition or any enhancement can be made by the AO or the CIT(A) and additions and enhancements so made are directed to be deleted. Thus ground no.1 of the assessee is allowed.
Disallowance of expenses not for business purpose - AO disallowed 10% of the amount claimed by the assessee which was confirmed by the ld. CIT(A) - HELD THAT:- Since the assessee has not placed on record any evidence to adduce the authenticity of expenses claimed for the purpose of business and therefore personal element cannot be ruled out. Therefore no infirmity in the order of ld. CIT(A) who has rightly confirmed the action of the AO.
Reopening of assessment - big mismatch between the returned income and cash transactions in the assessee's bank accounts - HELD THAT:- As noted, in reply to the notice dated 21.02.2017 issued by the Assessing Officer, the assessee had given a detailed reply on 06.03.2017. He had pointed out that he had received Rs. 25 lakhs in cash for sale of his Mango crop. Such amount was deposited in the bank account. Part of it was withdrawn and redeposited. That is how the total cash deposit in his account reached Rs. 30.75 lakhs during the relevant period. Along with his reply, the assessee had also furnished a copy of the agreement between the assessee and the purchaser of the Mango crop.
The bank statement was also produced. If the Assessing Officer was not still satisfied, it was always open for him to call for further details or even for valid reason to discard the assessee's reply and reopen the assessment recording the reasons.
Under no circumstances, he could have simply ignored the reply and proceeded to form a belief that income chargeable to tax has escaped assessment on the premise that his queries had remained un-replied. In plain terms, his reasons proceeded on wrong facts. His satisfaction was thus, tainted by wrong facts. His attempt to cover the issue through the order disposing of objections must fail. His assertion that such large amount of agricultural income required verification, would amount to improving the reasons and also seeking to carry out fishing inquiry through the process of reopening of the assessment. Decided in favour of assessee.
Whether conviction of an Indian by a foreign Court for the offence committed in that country can be taken notice of by the Courts or authorities in India? - whether such conviction would be binding on Courts and authorities in India while exercising judicial and quasi judicial powers?
HELD THAT:-It appears to be a settled principle of law laid down by English Court that, though the decrees of penal laws of foreign country cannot be enforced in United Kingdom, the laws of foreign countries and especially the countries with which the United Kingdom has friendly relations, cannot only be looked into but on the principle of comity are required to be given due recognition.
A valuable right is not only available to Indian citizen but any person if he has been either convicted or acquitted of such offence by the Court of competent jurisdiction. He cannot be tried again while such conviction or acquittal remains in force. Not only that, he cannot also be tried on the same facts for any other offence for which a different charge from the one made against him might have been made under sub-section (1) of section 221, or for which he might have been convicted under sub-section (2) thereof.
The provisions of IPC would also apply to any offence committed by any citizen of India in any place without and beyond India. It would also apply to any offence committed by any person on any ship or aircraft registered in India wherever it may be. It would also apply to any offence committed by any person in any place without and beyond India committing offence targeting a computer resource located in India. The Explanation (a) thereof provides that the word "offence" includes every act committed outside India which, if committed in India, would be punishable under the Code.
Conclusion - Foreign convictions can be noticed by Indian courts and authorities. The judgment and order of conviction of a foreign Court for the offence committed in India can be noticed/looked into and recognized by judicial and quasi judicial authorities in India, while exercising their judicial and quasi judicial powers, it cannot be said that the same will be ipso facto binding on such Courts and authorities. If we hold that such a judgment of a foreign Court for an offence committed in that country, is binding on the Courts and authorities in India while exercising their judicial and quasi judicial powers, it will amount to directly or indirectly enforcing the judgment of the foreign Court. The Courts and authorities, while exercising their judicial and quasi judicial powers will have to take a call on the facts and circumstances of each case and take a decision as to what is the effect of such judgment and order of conviction.
Bogus purchases - purchase of paintings by the assessee is unproved - HELD THAT:- The case made out is that the stated suppliers/sellers of paintings of the assessee received cheques and after clearance withdrew the cash and after deducting their commission, balance of cash was handed over to the person who came with the cheques. The suppliers also stated that they were in the business of bill discounting and adjustment transactions.
As stated suppliers/sellers are not in the business of paintings and therefore, the transaction of purchase as canvassed by the assessee is not proved. In this context, we find that there not enough material with the Revenue to establish that the purchase of paintings is per-se bogus, as our subsequent discussion would show. Pertinently, existence of the transaction between assessee and the stated suppliers/sellers cannot be doubted, inasmuch as, the consideration has flown from the assessee to such parties by account payee cheques, which stand cleared to the credit of the bank account of such suppliers. While we agree with the reasoning of the Ld. Departmental Representative that payment by account payee cheques by itself does not prove genuineness of the transaction but in the instant case more is required to prove that the transaction was bogus.
We say so for the reason that in the present case, the existence of paintings in the possession of the assessee, of-course, except one which has been sold, is not in dispute. The statement of the stated suppliers/sellers does not prove that the consideration going out of the assessee’s bank account has come back to the assessee in the form of cash. Quite clearly, even the statement given by the stated suppliers/sellers only say that cash was returned by them to the person who gave them the cheques; there is uniformity in the statements on the aforesaid aspect. At this point, we may like to emphasize that it was for the Revenue to establish the link, if any, between the person who is stated to have received back the cash from the stated suppliers/sellers and the assessee.
The only prudent inference that can be drawn is that the paintings in question have indeed been purchased, because they exist in the possession of the assessee; and, at best the purchases had been effected from some other parties and not the stated suppliers/sellers. In fact, as per the given state of verification, it can also be a probability that stated suppliers/sellers have acted for and on behalf of the actual sellers of paintings to the assessee and if that be so then no fault can be found with the transaction carried out by the assessee. Therefore, for all these reasons, we say that there is not enough material with the Revenue to treat the purchase transaction as bogus or not proved.
Be that as it may, in our considered opinion, we find no justifiable reason to depart from the conclusion drawn in the cases ACG Capsules Pvt. Ltd [2015 (2) TMI 1412 - ITAT MUMBAI] wherein also similar stand of the Revenue, qua purchase of paintings found in the search, has been found to be unsustainable.
In fact, with regard to one of the transaction, wherein one painting has been sold and profit thereof has been credited in the P&L Account, there is no doubt about the sale made. Assessee is quite justified in invoking the ratio laid down in the case of Nikunj Eximp Enterprises (P) Ltd [2013 (1) TMI 88 - BOMBAY HIGH COURT] in such a situation, to canvass that where sale of purchased goods is not doubted, the corresponding purchases could not be construed as bogus. - Decided in favour of assessee.
Addition on account of alleged interest income on the basis of a seized document which is dumb/ bald - addition by invoking section 292C in spite of the fact that the document was not found either in the possession or control of the appellant - HELD THAT:- Addition on account of alleged interest income is not sustainable in the eyes of law, because the document does not mention the name of the assessee, does not bear the signature of the assesee, not in the handwriting of the assessee, documents has imply jottings of certain figures and does not indicate whether it is an investment or deposit or loan, hence, the said seized document is dumb/bald and even otherwise, the same was never found either in the possession or control of the assessee. Therefore, on this basis, delete the addition in dispute and accordingly reverse the orders of the authorities below.
Appointment of arbitrator in a dispute arising out of execution of a 'works contract' - Section 11 of the Arbitration and Conciliation Act, 1996 - Appellants raised objection that the matter being covered by a special State Act, namely, M.P. Madhyastham Adhikaran Adhiniyam, 1983 (M.P. Act), the application Under Section 11 of the Arbitration and Conciliation Act, 1996 could not be entertained.
HELD THAT:- When the matter was considered by a Bench of this Court in Madhya Pradesh Rural Road Development Authority and Anr. v. L.G. Chaudhary Engineers and Contractors [2012 (1) TMI 431 - SUPREME COURT], this Court held that the judgment in Va Tech Escher Wyass Flovel Ltd. [2010 (1) TMI 1312 - SUPREME COURT] was per incuriam insofar as it held that the M.P. Act stands implied repealed by the Central Act. While Hon'ble Ganguly J., held that the State Act will cover a dispute even after termination of the 'works contract', Hon'ble Gyan Sudha Mishra J. took a different view - it is found from the definition Under Section 2(d) of the Arbitration and Conciliation Act, 1996 that even after a contract is terminated, the subject-matter of dispute is covered by the said definition. The said provision has not been even referred to in the judgment rendered by Hon'ble Gyan Sudha Mishra, J.
Thus, the view expressed by Hon'ble Ganguly J. is the correct interpretation and not the contra view of Hon'ble Gyan Sudha Mishra J. Reference stands answered accordingly.
Reopening of assessment - addition u/s 68 - Eight different companies who had between themselves advanced a sum during the year under consideration which on verification were found not to have necessary resources for making such large advances - HELD THAT:- Firstly, the AO himself has recorded that the advances made by the said eight companies were squared up on the same date on each occasion. There is nothing on the record to show that such amounts were later on converted from unsecured loans into share capital of the company with premium.
When the advances were squared up on the same date, nothing remained outstanding at the end of the day, much less at the end of the financial year. There was no question of such amounts being unsecured loans of the company which stood converted into share capital with premium.
In fact, accounts of the assessee company for the subsequent assessment year which have been produced on the record would show that the share premium shown to have been received was from one Vikas TV Alliance Private Limited and it is this Vikas TV Alliance Private Limited which had advanced unsecured loan during the said period. If the Assessing Officer had reason and therefore wanted to target this transaction, the issue would have been examined differently. However, apparently, the Assessing Officer seems to have linked the unsecured loans shown in the accounts book of the Company received from eight different companies to the action of the company of converting unsecured loans in the later year. There is absolutely no link between the two sets of transactions.
Assessing Officer seems to have proceeded completely on misapplication of facts. Counsel for the Revenue, however, vehemently contended that this was a simple case of unaccounted credit in the accounts of the company when it is found that the later on these companies did not have the creditworthiness, provisions of Section 68 of the Act could be invoked. Had this being the reasonings of the Assessing Officer, we would have surely examined the same in light of the legal parameters.
However, this is the reading by the counsel of the reasons recorded by the AO, that much we are unable to concur. AO has proceeded entirely on different footing, noted above. His case simply put is that this amount which was in the form of unsecured loan was in the later year converted into share capital with premium, a facet which he would be unable to support from the material on record. For such reasons, impugned notice is set-aside. Decided in favour of assessee.
Legality of interim arbitral award - Grant of unconditional stay on the execution of the impugned interim award rendered by the arbitral tribunal - HELD THAT:- A perusal of the impugned interim award would clearly show that there is no reference whatsoever inter alia of the above contention as urged on behalf of the respondent. The case of the respondent in the written statement undoubtedly was required to be considered by the arbitral tribunal in its entirety and due consideration of the pleas as asserted by the respondent in the written statement. There is no reasoning whatsoever in the impugned interim award in rejecting the respondent's case as made out in the reply opposing the interim award.
A bare perusal of the provisions of Section 36 shows that the jurisdiction so conferred on the Court is a discretionary jurisdiction. The proviso to Sub-section (3) further makes it implicit that the provisions of Order 41 Rule 1 Sub-Rule 3 and Rule 5 would become relevant. In exercising powers under Order 41 Rule 5 the Court exercises its discretion and may grant a stay to the execution of a decree if "sufficient cause" is made out and the party seeking stay satisfies the Court that it will sustain substantial loss and inter-alia satisfies the condition as stipulated in sub-Rule 3 of Rule 5. Thus, the under scheme of the provisions of Section 36 read with Order 41 Rules 1 and 5 of the C.P.C., the party opposing grant of a stay cannot assert a proposition that it would be mandatory for the Court to impose a condition for a stay to the execution proceedings.
Exclusion from export turnover for deduction u/s 10A - HELD THAT:- As it is noticed that the issue is squarely covered by the decision of M/s Sak Soft Ltd [2009 (3) TMI 243 - ITAT MADRAS-D] the AO is directed to reduce the help desk service charges and the travelling expenses from the export turnover as also from the total turnover for the purpose of computing the deduction u/s. 10A of the Act. Consequently, Ground of the assessee’s appeal is partly allowed.
Denial of deductions under section 10A of the Act in respect of voluntary disallowances u/s 43B - Whether such disallowance is penal in nature? - HELD THAT:- As it is noticed that the issue is now squarely covered by the decision of M/s. Gem Plus Jewellery India Ltd [2010 (6) TMI 65 - BOMBAY HIGH COURT] respectfully following the principles AO is directed to grant the assessee the benefit of deduction u/s. 10A by including voluntary disallowance made by the assessee u/s. 43B of the Act. Consequently, Ground Nos. 3 to 3.2 of the assessee’s appeal stands allowed.
Nature of expenses - Expenditure on purchase of Random Access Memory Cards for computer equipments - CIT (A) in upholding the action of the AO in treating the purchase of RAM in respect of the computers of the assessee as a capital expenditure - HELD THAT:- As respectfully following the decision of M/s. APL India (P) Ltd [2012 (7) TMI 492 - ITAT, MUMBAI] on this issue, the AO is directed to grant the assessee the benefit of the Revenue expenditure in respect of the cost incurred for the purchase of the RAM Memory Cards for the computer equipments. Consequently, Ground Nos. 4 to 4.3 of the assessee’s appeal stands allowed.
Interest paid on delayed remittance of taxes and provident fund - HELD THAT:- As it is noticed that the issue is squarely covered by the decision of M/s. Messee Dusseldorf India (P) Ltd [2009 (12) TMI 1034 - ITAT, DELHI] AO is directed to grant the assessee the benefit of deduction of the interest paid on the delayed payment of the service-tax as the same is compensatory in nature as Revenue expenditure. The disallowance made in respect of the PF Contribution stands upheld as the same has not been pressed by the assessee. Consequently, Ground Nos. 5 to 5.2 of the assessee’s appeal are partly allowed.
Disallowance of reimbursement of salary cost of seconded employees to GTE-OC - issue of withholding tax on the payments to GTE-OC was pending before the Authority for Advanced Rulings - HELD THAT:- Though, the assessee has submitted that it has deducted TDS u/s. 192 of the Act. The dispute would also centre on, whether the TDS liable to be made u/s. 195 of the Act. These issues are now pending before the Hon’ble Supreme Court on account of SLP filed both by the assessee and the AAR against the Writ Petition order of the Hon’ble Jurisdictional High Court of Madras. This being so, the issues in regard to this payment made to GTE-OC are restored to the file of the AO for re-adjudication after awaiting final decision in respect of the AAR in the case of the assessee on the issue. Consequently, Ground Nos. 6.1 & 6.2 are partly allowed for statistical purposes.
Penalty u/s 271(1)(c) - allegation of defective notice - non striking off the irrelevant charge in the notice - assessee in compliance to the notice issued u/s 148, voluntarily disallowed expenditure in the “Profit & loss account” and the returned loss was revised - HELD THAT:- The issue involved in the present case is squarely covered by the case of Meherjee Cassinath Holdings Private Limited [2017 (5) TMI 904 - ITAT MUMBAI] wherein the Tribunal after deliberating at length on the issue under consideration in the backdrop of various judicial pronouncements had concluded that the non striking off the irrelevant charge in the notice clearly reflects the non application of mind by the A.O and would resultantly render the order passed u/s 271(1)(c) in the backdrop of the said serious infirmity as invalid and void ab initio.
We thus in the backdrop of illegal assumption of jurisdiction on the part of the A.O as regards penalty imposed on the assessee u/s 271(1)(c), without putting it to notice as regards the default for which it was called upon to explain as to why no such penalty was liable to be imposed in its hands, therefore, on the said count itself quash the penalty imposed in the hands of the assessee.
Disallowance of expenses voluntarily - We may herein observe that as the genuineness and veracity of the expenses claimed by the assessee in respect of the payments made to Tuticorin Trexim Pvt. Ltd. had not been disproved by the revenue, therefore, simply on the basis of the unsubstantiated statement of Mr. Praveen Agarwal, which as observed by us hereinabove had not seen the light of the day and fructified into a concrete evidence on the basis of which the claim of the assessee as regards the veracity of the aforesaid expenses could safely be dislodged, no penalty under Sec. 271(1)(c) could have been validly imposed in the hands of the assessee
As the contention of the assessee that its claim of expense was in respect of genuine transactions with M/s Tuticorin Trexim Pvt. Ltd and had been disallowed only with the intent to avoid protracted litigation on the said issue, had not been disproved by the revenue on the basis of any concrete material made available on record, therefore, no penalty under Sec. 271(1)(c) on the said count also could not have been imposed in the hands of the assessee.
As persuaded with the view taken by the CIT (A) that as the assessee had already disallowed the expenses in the return of income filed in compliance to notice issued under Sec. 148 of the Act, which was accepted by the A.O, as such, therefore, in the absence of any addition or disallowance made in respect of the same by the A.O while framing the reassessment, no penalty under Sec. 271(1)(c) could have validly been made in the hands of the assessee.
A.O had erred both in law and facts of the case in imposing penalty under Sec. 271(1)(c) in the hands of the assessee. Decided against revenue.
TP adjustment - inclusion / exclusion of comparables while benchmarking the international transactions undertaken by the assessee - assessee had applied TNMM method to benchmark the international transactions and had declared its margins at 15.10% - transaction of provision of software services of the assessee - HELD THAT:- Pune Bench of Tribunal in DCIT Vs. Amber Point Technology India Pvt. Ltd [2018 (1) TMI 1318 - ITAT PUNE] held exclusion of concern which was engaged in providing both software services and was also selling its products. Accordingly, we hold that the concern Cybermate which is engaged in both sale of software products and providing software development services and where no segmental details are available for each of the segments, then the margins of said concern could not be applied to benchmark the arm's length price of international transactions of providing software development services to associated enterprises by the assessee.
Cybercom company, was engaged in providing consultancy and advisory services and was also carrying out the business of development, testing, marketing and manufacturing of information technology products and services. The annual report of the said concern declares the said facts and it is undisputed that the said concern is engaged in sale of software products. Cybercome is also to be excluded from final set of comparables.
Assessee here pointed out that once the two concerns are so excluded, then the margins of comparables would be within +/- 5% of assessee's margins. Accordingly, we hold so.
TP Adjustment is in respect of provision of back office support services by the assessee to its associated enterprises - Jindal excluded for benchmarking international transactionson the ground of being persistent loss making - HELD THAT:- The perusal of margins of said concern from year to year reflect that in the preceding two years, it had shown positive margins and only in the year under consideration, it had shown negative margin, such concern could not be termed as persistent loss making concern. We find support from the ratio laid down in CIT Vs. M/s. Welspun Zucchi Textiles Ltd [2017 (1) TMI 1037 - BOMBAY HIGH COURT] wherein it has been held that merely because the comparable had made losses in one year would not ipso facto result in its exclusion from comparable analysis. Following the said proposition, we hold that a concern which is not persistent loss making, cannot be excluded from final set of comparables.
Exclusion on the basis of different financial year - Comparable data should pertain to the same financial year. Accordingly, we hold that the margins of concern having different accounting period cannot be selected for benchmarking international transactions and the same is to be excluded from the final set of comparables. Accordingly, we direct the Assessing Officer to verify the status of concern Jindal and decide the issue in line with our directions.
Recovery of erroneous refund - availing benefit of exemption N/N. 33/99-CE dated 08.07.1999 as amended by submitting fabricated documents during the period from July 1999 to May 2002 - substantial expansion of 25% or more of the installed capacity - HELD THAT:- On perusal of the Grounds of Appeal, it is found that it appears from the Order of the CESTAT, that the Grounds of Appeal mentioned in the said Revision Appeal has not been considered by the Adjudicating Authority. But, the said CESTAT Order has been accepted and relied upon by the Adjudicating authority. The Learned Authorised Representative of the Revenue states that the Adjudicating authority should have considered the Grounds of Appeal of the Revision Order passed by the Board.
The contention of the Learned Authorised Representative cannot be accepted for the reasons that this Tribunal had decided the issue after considering the Revision Order.
There are no reason to interfere with the Order of the Adjudicating authority - appeal of Revenue dismissed.
Income surrendered in search proceedings - determination of profit on undisclosed turnover - Disallowance of expenses - assessee during the search & seizure operations had surrendered an amount as business income from trading of Pan Masala - AO applied gross profit rate of 3.7% which is based upon earlier years audited accounts whereas during the year under consideration the gross profit earned by the assessee only 1.91% - D. R. stated that in unaccounted turnover the assessee also saves heavy amount on account of non payment of taxes and therefore, the application of higher gross profit rate was necessary - as per DR assessee could not produce any evidence to substantiate his claim and moreover during search proceedings he had surrendered commission income and therefore, the claim as expenses is an afterthought and rightly not allowed the claim.
HELD THAT:- Application of gross profit rate of accounted turnover cannot be applied to unaccounted turnover as the assessee generally earns more profit on the unaccounted turnover and moreover to create a deterrent for assessee not to make unaccounted transactions in future and in view of justice to both parties, we deem it appropriate that average of gross profit rate of 3.7% and 1.91% should have been applied to the unaccounted turnover.
The average gross profit rate of these two years comes out at 2.8%. Therefore, AO is directed to apply gross profit rate of 2.8% on the unaccounted turnover as calculated by CIT(A) which after relief given by learned CIT(A) comes out at Rs. 1,08,87,67,854/-. Out of the gross profit thus arrived the assessee will be allowed deduction on account of expenses to the extent of Rs. 7,73,600/- which learned CIT(A) has also given and out of such net profit the profit declared by the assessee to the tune of Rs. 2.35 crore will be reduced and remaining amount is liable to be taxed in the hands of the assessee. In view of the above ground No. 1,2,3 & 4 of the appeal of the assessee are partly allowed.
Assessee had declared a commission income and now in the return of income it claimed expenses to earn that income which has not been substantiated - CIT(A) has already allowed relief to the extent of Rs. 5,00,000/- and we do not find any infirmity in that order and in view of the inability of the assessee to explain and support the claim of expenses, we dismiss ground No. 5 & 6.
Calculation of unaccounted turnover - While calculating the undisclosed turnover the Assessing Officer has reduced an amount of Rs. 27,33,82,332/- which is not correct as learned CIT(A) has held that the turnover of the assessee as per audited account and as per VAT returns worked out to be Rs. 37,15,41,587/- Learned CIT(A) has rightly allowed relief to the assessee by replacing the incorrect accounted figure of sales with the correct figure of accounted sales and therefore, there is no infirmity in the order of CIT(A). Therefore, ground No. 1 is dismissed.
Royalty income - principle of mutuality - taxability of ISM contributions received by the assessee - appellant before us is a foreign company, which is a tax resident of U.S.A. - as asserted that there was a complete identity between the contributors to the MHR Fund and the participants in the surplus, i.e. excess of amounts received in the fund over the expenditure incurred for undertaking the ISM activities and ISM contributions, being reimbursement of expenses was not in the nature of income at all.
HELD THAT:- The action of the CIT(A) in directing the Assessing Officer to apply the order of the Tribunal [2015 (1) TMI 659 - ITAT MUMBAI] is justified to the extent it deals with the nature of the payments received by the assessee from the two hotels stated aforesaid. So, however, the point which is sought to be raised is the non-consideration of the defence set-up by the assessee based on the principles of mutuality.
The order of the Tribunal (supra) has not addressed that issue and so far as the instant year is concerned, the same was very much raised by the assessee before the lower authorities, which has also remained to be addressed. Considering the entirety of circumstances, we, therefore, deem it fit and proper to affirm the ultimate decision of the CIT(A) to remand the matter back to the file of Assessing Officer, but with directions that apart from considering the order of the Tribunal the Assessing Officer shall also address the issue raised by the assessee of mutuality or any other issue which the assessee may seek to raise in defence of its return of income. AO shall allow the assessee due opportunity of being heard and only thereafter pass an order afresh, as per law.
Seizure of goods from the godown in pursuance of a notice under Section 129 (1) of the U.P.GST Act - petitioner prays for is granted one month's to file counter affidavit - HELD THAT:- List this matter on 13.04.2018.
In the meantime, subject to deposit of security other than cash or bank guarantee or in the alternative indemnity bond, equal to the value of tax and penalty, to the satisfaction of seizing authority, the goods of the petitioner may be released forthwith.
Bogus purchases - addition made on account of purchases made from five parties which were declared by Sales Tax Department as suspicion suppliers - AO made the addition of the purchases on the ground that VAT authorities have treated the sales as non-genuine since these suppliers had not paid VAT on the sales effected by them - CIT(A) deleted addition - HELD THAT:- CIT(A) observed that the assessee has requested the AO to give them copies of all the materials/ information/ evidences, on the basis of which AO has formed his opinion to make disallowance of such referred purchases. No such materials were supplied to the assessee before using the same against it. CIT(A) further observed that no infirmity has been pointed out in the documents submitted by the assessee.
CIT(A) observed that assessee has produced the proof of such payment through banking channel but the AO has failed to substantiate that the assessee received it back in cash. During the year the GP was higher as compared to the last three years which clearly indicates that the current year income is not understated. As per CIT(A) if the suppliers have not paid VAT charges to the Govt. but taken the same from the purchases, such differential amounts need to be added in the hands of dealer and they are liable for any action for their defaults.
CIT(A) also stated that the assessee on its part has submitted purchase invoice, stock movement records, VAT registration number, ledger account, bank statement reflecting entries made to the said parties against the purchases from it etc., however, no fault has been found in all these documents by the AO.
Thereafter CIT(A) recorded detailed finding which has not been controverted by learned DR by bringing any positive material on record. We also found that GP rate of the assessee during the year has doubled as compared to the earlier year. Accordingly, we do not find any reason to interfere in the finding so recorded by CIT(A) resulting into deletion of addition made on account of purchases made from suspicion parties. Decided against revenue.
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