Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 14, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
Articles
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Refund of integrated tax (IGST) - rejection of application reiterating the deficiencies already pointed out in the deficiency memo, without consideration of the reply of the assesse - Revenue directed to reconsider the application on merit.
Income Tax
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Levu of Fee u/s 234E for late filing of TDS returns - the provisions of Section 234E of the Act imposing a fee for delayed filing of statement of tax deducted at source are not ultravires the provisions of the Constitution.
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Exemption u/s 10AA - The new unit was not formed by transferring any machinery or plant previously used. Fresh investment was made in the new unit. The revenue earning and profits generated were clearly attributable to the new unit - Benefit of exemption allowed.
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Assessment u/s 144C - Definition of ‘eligible assessee’ would equally apply to the proceedings remanded to the Assessing Officer for fresh adjudication when the variation in income or loss returned which is prejudicial to the interest of the assessee arises as a consequence of the order of the Transfer Pricing Officer.
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Rejection of trading results - The observation by the ld. CIT(A) that the brand ‘Reebok’ carries a high premium in the market and, therefore, could not possibly be disposed through street hawkers, merits acceptance.
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Scope of limited scrutiny assessment - the tax cannot be levied on ignorance of law - The correct income has to be assessed and there is no bar for not entertaining the claim/issue raised by the assessee in limited scrutiny proceedings, if the same has been raised by the assessee.
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Disallowance u/s 14A r.w.r. 8D - the amount of expenses represented on account of loss on sale of fixed assets and travelling expenses cannot be linked with the expenses incurred for the purpose of earning the exempted income. - To be excluded while computing disallowance u/s 14A
Customs
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Import of work boat - once the importer satisfies the condition namely, that the vessels have gone back within a period of three months from the date of their importation, then such importer would be eligible for 95% of the import duty as drawback.
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Demand of duty - non-fulfillment of export obligation - computation of period of limitation - the period of limitation for the purpose of section 28, accordingly shall have to be computed from the date of payment of duty. If that be so the demand has been made within the period of limitation from the relevant date.
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Imposition of ADD - Alpha Dane Salt - Advance License scheme - The contention of the appellant is not acceptable that the Bond/ LUT executed by them do not cover the anti dumping duty leviable on the imported material at the time of importation/ clearance of the imported material - Demand confirmed, invoking extended period of limitation.
DGFT
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Rationalization of procedures in handling EODC requests under Advance/EPCG Authorizations
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Mandatory recording of information on DGFT website about transfer of MEIS/SEIS Scrips issued from 14.1.2019 onwards (for EDI ports only)
Indian Laws
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Dishonor of Cheque - insufficient funds - involvement of the accused/Director of the company in the complaint - vicarious liability u/s 141 - The contentions therein will be the matter of evidence to be tested during trial.
IBC
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Without initiating any ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’, it is always open to the ‘Financial Creditor’ to initiate ‘Corporate Insolvency Resolution Process’ under Section 7 against the ‘Corporate Guarantors’, as the creditor is also the ‘Financial Creditor’ qua ‘Corporate Guarantor’.
Service Tax
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Classification of services - Business Auxiliary Service or not - the appellant had rendered services to the local exporters in the sale of the sea foods and received commission from them - Demand confirmed invoking extended period of limitation.
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Mere non-payment will not be a ground to invoke proviso to Section 73(1) of the Act - there was no material against the respondent for invoking the extended period.
Central Excise
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Valuation - the subsidy has been paid to assessee by the State Government. Only the mode of payment is by way of crediting the sales tax head under VAT challan in favour of the appellant. Thus, it could not be said that the amount is in the nature of additional consideration.
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Manufacture - Gold bars manufactured from the stage of dore bar - “gold mud” having very low percentage of gold “as any form of gold” - The activity is amounts to manufacture. - Demand confirmed invoking extended period of limitation for the period where no exemption was available.
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Valuation - nexus of Fixed Facility Charges with the value of the gases supplied by the appellants to M/s SAIL - the entire issue of costing has to be gone into afresh. The Fixed Facility Charges have to be apportioned properly between the production facilities in the appellant’s factory as well as in the customers’ premises.
VAT
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When a specific finding is rendered by the Assessing Officer on the genuineness of Form-F declaration submitted by the petitioner through online earlier or produced after passing the order of assessment, as bogus, this Court is not inclined to issue any mandamus as sought for in this writ petition.
Case Laws:
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GST
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2019 (1) TMI 610
Refund of integrated tax (IGST) - opportunity of personal hearing - principles of natural justice - Held that:- It is evident that the respondent has chosen to pass the impugned order not only by ignoring the reply submitted by the petitioner dated 13.07.2018, filed in response to the deficiency memo dated 04.07.2018 and also in violation of the principles of natural justice, as admittedly the petitioner was not afforded with the personal hearing, even though such request was specifically made by the petitioner through their reply dated 13.07.2018. Perusal of the impugned order would show that the respondent has chosen to reiterate the deficiencies already pointed out in the deficiency memo, as the reason for rejecting the refund application, without considering the explanation given by the petitioner, as to how such deficiencies pointed out by the respondent are either improper or not warranted - this Court is of the view that the respondent should consider the application already filed by the petitioner once again on merits based on the petitioner's reply dated 13.07.2018 and also after affording a personal hearing to the petitioner - petition allowed by way of remand.
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Income Tax
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2019 (1) TMI 609
Charitable activity - exemption u/s 11 - promoting technology or technology related activities - ITAT and HC held that the assessee’s activities are charitable and that it was not engaging in any business or commercial activity - Held that:- Delay condoned. Leave granted.
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2019 (1) TMI 608
Cancellation of registration u/s 12AA - Charitable activities u/s 2(15) - Held that:- Tribunal found that the assessee trust had entered into an agreement with said M/s Ashoka Buildcon Ltd. under which the assessee handed over the possession of land to the said concern for putting up a plant for manufacturing of Ready Mix Concrete. The said M/s Ashoka Buildcon Ltd. would supply Ready Mix Concrete required by the assessee for the construction of its school building on priority and at concessional rates. As found that at the relevant time in the nearby area no such plant was there from which the assessee could have procured the material to carry out its construction activities unhindered. It was noticed that the Ready Mix concrete was supplied with concessional rate. Tribunal has committed any error. The decision of the Kerala High Court in the case of Annadan Trust (2018 (8) TMI 518 - KERALA HIGH COURT) was rendered in somewhat different facts. The case in which the assessee trust was engaged in implementing welfare schemes of various State Governments such as supplying food to poor school children in the disbursed areas. The registration was cancelled by the Commissioner on the ground that the assessee failed to substantiate that the same was done on charitable basis. - Decided against revenue.
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2019 (1) TMI 607
Addition of cash transactions u/s 40A(3) - assessee had purchased gold jewellery worth ₹ 34.68 Crores by way of cash in the auction - Held that:- The nature of transaction as propounded by the assessee before the AO is that several persons joined together and formed a syndicate and on behalf of the syndicate, the assessee bids in the auction conducted by the Finance Company which sells the old gold ornaments. Case of the assessee that as soon as the auction is confirmed, the highest bidder has to remit part of the amount in cash and the amount which has to be paid is not known to the assessee earlier and therefore, the payments cannot be made through banking channel. In our considered view, the Assessing Officer rightly examined the nature of transaction done by the assessee and on facts was not convinced that the assessee would fall under any one of the exceptional clauses under Rule 6DD of the Rules. CIT-A examined the nature of transaction and found that Section 40A(3) applies with full force to the facts of the assessee's case. Once again before the Tribunal, the facts were re-examined and the Tribunal pointed out that the assessee failed to demonstrate that the conditions of the bid required the assessee to effect payments in cash then and there and payments could not have been made by cheque or Demand Draft or any other mode. The Tribunal pointed out that there is no explanation as to what stopped the assessee from effecting payments through banking channel. Tribunal found that the agreement with syndicate members, if any, was not produced by the assessee before the lower authorities or before the Tribunal. Further the Tribunal held that the assessee could not demonstrate that he was representing any syndicate nor he could demonstrate that he was collecting cash from such syndicate members for making payments to the Finance Company. The Tribunal correctly held that the assessee was unable to demonstrate a situation which compelled him to make payment in cash which would have exempted him from application of recourse of Section 40A(3) of the Act. - Decided against the assessee
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2019 (1) TMI 606
Rectification of mistake - distribution fee was not royalty was recorded and yet not dealt with in the order - Held that:- Tribunal ought to have decided the issue of the character of distribution fees is royalty or not, as all facts were available before it and submissions also made, rather than remanding the issue to TPO. Besides non-consideration of the above basic submission made at the hearing as recorded, is clearly a mistake apparent from the record. The Tribunal ought to have allowed the rectification application dated 5.10.2017 and recalled the order dated 26.7.2017 for fresh consideration of the appeal.
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2019 (1) TMI 605
Penalty u/s 271(1)(c) - difference between the stated loss and the assessed income - rectification application accepted by tribunal - Held that:- We are conscious of the decision of this court in case of Chem Amit Vs. Assistant Commissioner of Income-tax (2004 (11) TMI 24 - BOMBAY HIGH COURT) holding that if the order of rectification results in a fresh order passed in appeal, the same would give rise to an appellate order. However, in the present case after allowing the revenue's rectification application, recalling its order, the Tribunal did not proceed further to pass a fresh order in the appeal. Under the circumstances, we have entertained this petition. Coming to the merits of the petition, we may recall that while disposing of the assessee's appeal against the penalty order all that the Tribunal had by way of discussion on merits observed that the Tribunal had reduced the income of the assessee from ₹ 34.63 lakhs as Assessing Officer to Nil. The Tribunal noted that the company was defunct and had suffered loss in earlier years. Primarily on such grounds the Tribunal was of the opinion that the penalty could not have been imposed. While accepting the revenue's application for rectification the Tribunal recalled the order and posted the appeal for fresh hearing. We do not find that this order requires any interference. The previous order of the Tribunal on penalty appeal left much to be desired. It was not the disposal of the appeal on merits at all. The assessee's appeal was allowed and penalty as enhanced by the Commissioner was deleted on the grounds that the Tribunal had in quantum appeal reduced the income to Nil and that the assessee had suffered loss in earlier years. These grounds were not sufficient to delete the penalty without examination of relevant issues. It is true that the Tribunal referred to the decision of the Supreme Court in case of Virtual Soft Systems (2007 (2) TMI 147 - SUPREME COURT OF INDIA) which counsel for the assessee would be correct in pointing out may not apply to facts of the case and by virtue of the decision of the three bench judge in case of Commissioner of Income-Tax Vs. Gold Coin Health Food P. Ltd.(2008 (8) TMI 5 - SUPREME COURT) the decision in case of Virtual Soft Systems has been overruled. The view of the larger bench of Supreme Court is that penalty can be imposed even in the case of reduced loss. In the present case, therefore, we are not inclined to interfere with the order of the Tribunal. The petitioner would have full opportunity to pursue the appeal before the Tribunal on all grounds.
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2019 (1) TMI 604
Constitutional validity of Section 234E - imposing a fee for delayed filing of statement of tax deducted at source (TDS returns) - whether levy under Section 234E of the Act is incorrectly and illegally described as fee since it is levied mandatorily and automatically, without actually being in the nature of fee as understood in law? - Held that:- Fee imposed under Section 234E is levied towards regularisation of the delay in filing of a TDS return or statement, since the Income Tax Department has to expend extra effort and resources for processing delayed TDS returns or statements ; and possibly also incurs the additional burden of interest to be paid to the assessee on whose account tax deduction has been made. Describing the levy under Section 234E as a fee does not invalidate the imposition made. We may also point-out the overarching principle that the manner of description of a levy, in this case, calling the levy made under Section 234E of the Act a fee , cannot be the sole basis of judging the true nature or validity of the levy. Section 234E affords a person deducting tax at source the evident benefit of relaxation of timelines for furnishing a statement of the tax so deducted. The fee imposed under Section 234E of the Act is for all intents and purposes a late fee payable for accepting the TDS statement/return at a belated point in time. As a sequitur to the foregoing discussion, we hold that the provisions of Section 234E of the Act imposing a fee for delayed filing of statement of tax deducted at source are not ultravires the provisions of the Constitution. - Petition dismissed.
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2019 (1) TMI 603
Income from sale of shares - business income or capital gain Capital Gains - exemption u/s. 10(38) - majority of the shares were not purchased by the settler from the market and whether the shares received by way of Employee Stock Option Plan or purchased from the market, were held by the settler for a long period of time - Held that:- Whether sale of shares by Assessee would invite capital gain or would be business income, is mixed question of law and facts. Whether the Assessee is engaged in the business of buying and selling of shares or is a mere investor, would depend on range of factors. In the present case, the Tribunal has noted the relevant facts and analyzed such facts in proper perspective. To reiterate, the shares in question were not purchased by the Trust at all. They were settled by the settler of the Trust. The Settler himself had not purchased majority of these shares but had received by way of Employee Stock Option Plan. The shares so received as well as small numbers of shares purchased by the settler were held by himself for over two years before settling them in the Trust. No question of law arises. - decided against revenue
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2019 (1) TMI 602
Addition u/s 14A r.w.r 8D - Held that:- Rule 8D is in the nature of best judgment determination. This Rule would apply where the AO first records his satisfaction that disallowance, if any, made by the Assessee is not correct and is not in accordance with the mandate of Section 14A of the Act. In absence of formation of satisfaction, the AO cannot apply Rule 8D of the Rules. In the present case, the AO has treated Rule 8D as mandatory which would apply to all cases where exempt income is earned. An order passed by AO is, therefore, not in terms of the mandate of Section 14A(2) of the Act.
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2019 (1) TMI 601
Addition u/s 69C - Unexplained expenditure - Held that:- The wording of the section suggests that it concerns only facts. No element of law is involved here save and except finding of facts which would amount to perversity in the finding of facts. The assessee has given some explanation for the questioned expenditure. The explanation given by the assessee is a plausible one. If a better explanation from the assessee was expected but nonetheless the assessee has given one which is plausible, this Court under section 260A cannot overrule that finding of facts and substitute its own finding. For those reasons, once again appreciating the argument of Mr. Dudheria we dismiss the appeal.
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2019 (1) TMI 600
Levy of interest u/s 234D for the amount of refund - rectification application u/s 154 - whether the provisions of Section 234D introduced with effect from 01.6.2003 is applicable for the assessment years prior to assessment year 2004-05? - Held that:- An order passed under Section 154 cannot be taken to be framing of a regular assessment for such a year. Further, in our opinion, the regular assessment in the assessee's case is the assessment order passed under Section 143(3) of the Act on 30.3.2001. Admittedly, in the said order dated 30.3.2001, there was no levy of interest on the assessee. Furthermore, it is clear that Sub- Section (2) of Section 234D of the Act would be attracted only if reduction occurs and it cannot be made applicable when there is an increase. The Hon'ble Supreme Court, in the case of Reliance Energy Limited [2013 (10) TMI 280 - SUPREME COURT] has held that Explanation (2), which has been inserted by the Finance Act, 2012, in Section 234D of the Act, declared that the provisions of the said Section shall also apply to an assessment year commencing from 01.6.2003 if the proceedings in respect of such assessment year is completed after the said date. Having regard to the legal position, which has been clarified by the Parliament, by insertion of Explanation (2) to Section 234D of the Act, in the said case, where the assessment was completed prior to 01.6.2003, it was held that retrospectivity of Section 234D of the Act does not arise. The above decision would be squarely applicable to the case of the assessee, as, admittedly, the regular assessment was completed under Section 143(3) of the Act much prior to 01.6.2003 i.e. On 30.3.2001. For the above reasons, we are of the view that no interest can be charged under Section 234D of the Act for the assessment year in question. - Decided in favour of assessee
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2019 (1) TMI 599
Expenditure relating to setting up of new unit at Sriperumbudur - nature of expenditure - revenue expenditure OR capital expenditure - Held that:- Tribunal rightly followed the judgment of this Court in the case of CIT Vs. Rane (Madras) Limited [2007 (6) TMI 25 - HIGH COURT, MADRAS] and CIT Vs. Sakthi Sugars Limited [2010 (8) TMI 456 - MADRAS HIGH COURT] in concluding that the expenditure incurred by the assessee has to be treated as a revenue expenditure. Unabsorbed depreciation for the previous years - Revenue contends before us that the eight years limitation in respect of carry forward of the depreciation had expired and therefore, the assessee was not permitted to carry forward - Held that:- This issue relating to unabsorbed depreciation has to be reconsidered by the Tribunal after due opportunity to the Revenue and the assessee to enable them to place all the decisions on this point. Accordingly, the finding rendered by the Tribunal with regard to carry forward of the unabsorbed depreciation relating to the assessment year 1997-98 is set aside and the matters are remanded to the Tribunal for a fresh decision on merits and in accordance with law. Disallowance under Section 14A - Held that:- The disallowance under Section 14A has been a point of dispute in several cases. Therefore, we opine that the Tribunal shall reconsider the said issue factually taking note of the precedents relied upon by both the Revenue as well as the assessee and take a reasoned decision so that they could be applied in future cases as well. Considering the above, we are of the view that substantial question raised by the Revenue i.e. the issue pertaining to disallowance under Section 14A of the Act for all the assessment years requires to be redone.
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2019 (1) TMI 598
Exemption u/s 10AA - eligibility - satisfaction of conditions mentioned in clause (ii) to sub-section (4) to Section 10AA - 'splitting up’ or ‘reconstruction’ of the business already in existence - Held that:- Negative stipulation in Clause (ii) to sub-section (4) of Section 10AA mandates that to claim exemption the unit should not be formed by ‘splitting up’ or ‘reconstruction’ of a business already in existence. The words and terms ‘splitting up’ or ‘re-construction’ used in clause (ii) to sub-section (4) to Section 10AA reflect a deliberate forethought in the choice of words. The increase in revenue in the new unit was 1166% higher. Obviously the existing business was not transferred and the new unit had generated revenue almost equal to the revenue earned by the existing business. Assessee had also carried out the expansion of the non-exempt EOU unit by adding additional area of 21817 sq. feet. There has been increase of 33%, 47%, 38% and 13% in the revenue earned by the exempt unit during the period relevant to the assessment years 2013-14 to 2016-17 respectively. However, the revenue earned by the non-exempt unit/business has not deceased and has shown increase as noted above between the financial years 2012-13 to 2015-16. Tribunal had also examined technical manpower employed in the new unit and has noted that percentage of new employees in the SEZ unit was 83% and 64% during the period relevant to the assessment years 2011-12 and 2013-14. Clearly new employment opportunities and jobs were created. Business had grown and increased substantially on setting up of the new unit, which was a legitimate and wise business decision and not subterfuge and an illegal act. Tribunal has accepted that the new unit was a separate identity for its income to qualify for exemption under Section 10AA for it was not formed and created by ‘splitting up’ or ‘reconstructing’ the existing business. The new unit was also not formed by transferring any machinery or plant previously used. Fresh investment was made in the new unit. The revenue earning and profits generated were clearly attributable to the new unit. No substantial question of law arises for consideration - Decided against revenue
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2019 (1) TMI 597
Assessment u/s 144C - expression ‘eligible assessee’ - assessee had not filed objection within the limitation period prescribed even if assumed as correct is of no avail and relevance - Held that:- The expression ‘eligible assessee’ defined in sub-section (15) to Section 144C of the Act means a person in whose case the variation in taxable income in the draft assessment arises as a consequence of the order of the Transfer Pricing Officer. It is accepted by the Revenue that the variation in the assessment order dated 28.03.2014 was as a consequence of the report of Transfer Pricing Officer which was relied upon. The respondent-assessee would not cease to be an “eligible assessee” as no fresh order or report from the Transfer Pricing Officer was called post the remand. Definition of ‘eligible assessee’ would equally apply to the proceedings remanded to the Assessing Officer for fresh adjudication when the variation in income or loss returned which is prejudicial to the interest of the assessee arises as a consequence of the order of the Transfer Pricing Officer. No merit in the present appeal as the issue is covered by decision of this court in JCB India Ltd. [2017 (9) TMI 673 - DELHI HIGH COURT].
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2019 (1) TMI 596
Reopening of assessment u/s 148 - notice sent on wrong/old address - curable defect u/s 292B - Held that:- The AO appears to have completely and mechanically proceeded on the information supplied to him by the bank without caring to address himself to the correct position in law and deduced to ensure that the reassessment notice (which is a matter of moment as far as the assessee is concerned) was issued properly and served at the correct address in the manner known to law. The assessee has relied upon a screenshot of the PAN database at the stage when the petition was filed to say that the Revenue always had the wherewithal to access the correct address, PAN number and all other relevant details including the e-mail ID as well as the bank account. The omissions of the Assessing Officer deserves, therefore, to be not only adversely noticed but appropriately reflected in his or her confidential reports and appropriate proceedings initiated by the Revenue authorities, which is so directed. The concerned Commissioner, Principal Commissioner or other superior authorities, as the case may be, are directed to file a report in this regard within eight weeks from today. - reassessment notice as well as the order under section 144/147, and the consequential action, i. e., attachment of the assessee's accounts are hereby quashed. - Decided in favour of assessee.
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2019 (1) TMI 595
Levy of penalty u/s 271(1)(c) - addition has been made by estimating G.P and working out stock at a given date assuming that G.P% remains same throughout the year - defective notice - Held that:- It is an established position of law that the A.O at the time of issuing notice u/s 274 r.w.s. 271(1)(c) has to give positive and clear cut finding in the body of the show cause notice itself reflecting the charges against the assessee as to whether penalty proceeding are initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. We find that in the body of the notice issued u/s 274 r.w.s. 271(1)(c) of the Act the Ld.A.O failed to mention the limbs for which penalty proceedings have been initiated. It is the negligence of the Ld. A.O in not making proper specific charge in the notice u/s 274 about the addition for which penalty proceedings have been initiated. Ld. A.O should be clear as to whether the alleged addition goes under the limb of “concealment of particulars of income” or “furnishing inaccurate particulars of income”. Notice issued u/s 271(1)(c) dated 19.5.2014 is invalid, untenable and suffers from the infirmity of non application of mind by the Assessing Officer. - Decided in favour of assessee.
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2019 (1) TMI 594
Depreciation on CNC Drill Machine - A.O denied 80% depreciation charged by the assessee and only allowed the normal rate of 15% and additional depreciation @20% on the CNC drill machine purchased by the assessee - Held that:- The issue needs re-examination as to whether the impugned assets purchased by the assessee i.e. CNC Drilling machine is eligible for depreciation under which of the category of assets; (a) Being a machine in the nature of agricultural and municipal waste conversion device. (b) Being a machine used to manufacture machines in the form of agricultural and municipal waste conversion device. (c) The machine eligible for 15% depreciation along with 20% additional depreciation. Assessee has placed various documents and materials on record in support of its claim for 80% depreciation on the cost of CNC Drilling machine by submitting that the CNC Drilling machine are used to manufacture Pellet Mill die drills Pelletting dies which are further used for manufacturing agricultural and municipal waste conversion device. However it is not transcribing from the records whether the claim of the assessee is for the assets coming under Clause (xiii)(P) or Clause (xiii) (R) of the depreciation chart which refers to agricultural and municipal waste conversion device producing energy Clause (xiii) (P) or machinery and plant used in the manufacturing of agricultural and municipal waste conversion device Clause (xiii) (R) of the depreciation chart. Since the issue discussed above about the chargeability of depreciation on the cost price of CNC Drilling Machines goes to the root cause of the ground raised before us, the same needs to be examined afresh - Appeal of the assessee is allowed for statistical purpose
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2019 (1) TMI 593
Addition of agricultural income - agricultural land was in the name of the deceased father of the assessee at Dholpur and the assessee had not filed any proof regarding the agricultural activity carried out on the said land - Held that:- The assessee filed certain acknowledgements of income-tax returns and in all the years from 1996-97 to 2004-05, the assessee has been consistently declaring the agricultural income and it is not the case of the revenue that in any of the previous years, such an income was treated as the income from undisclosed sources. Learned CIT(A), therefore, rightly concluded that the khasrakhatauni indicating the annual lagan establishes that the land in dispute was put to agricultural use and the assessee has been consistently declaring the same in the return of income and the revenue has been accepting the same without raising any objection. Reliance of the learned CIT(A) on the decision in the case of Radhaswami Satsang vs CIT [1991 (11) TMI 2 - SUPREME COURT] in respect of the necessity of following the rule of consistency cannot be found fault with. On this aspect, the approach of the learned CIT(A) is perfect and needs to be confirmed. We accordingly decline to interfere with the same. Hence, ground No.1 of the appeal is dismissed. Addition u/s 68 - identity, creditworthiness and genuineness of transactions of all the partners -- Held that:- When the learned CIT(A) transmitted the documents submitted by the assessee to the learned AO calling for the report, record speaks that there was no response from the learned AO in spite of three reminders. No explanation is forthcoming from the revenue even before us as to what prevented the learned AO to verify the documents to submit report if there is a serious objection on the identity and creditworthiness of such partners. We are convinced that the reasoning of the learned CIT(A) that he addressed a letter to DIT (Systems) for the purpose of identity and creditworthiness of these partners and to proceed with the matter having analyzed the report and the documents submitted by the assessee. No other course was left open to the learned CIT(A) in view of the non response of the learned AO to the letter dated 22.5.2014 of the learned CIT(A). In these circumstances, we hold that the approach of the learned CIT(A) cannot be found fault with and the learned CIT(A) did the possible exercise that should have been done in the given circumstances. - Decided against revenue
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2019 (1) TMI 592
Levy of penalty u/s 271(1)(c) - penalty imposed upon the legal heirs of the original deceased assessee by the authorities - Held that:- Penalty cannot be imposed upon the legal heirs of the original deceased assessee by the authorities in the given situation. In that view of the matter the penalty levied by the authorities below is hereby deleted. - Decided in favour of assessee.
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2019 (1) TMI 591
Levy of interest under sections 234B/C/D - admissibility of GBU service charges in all these three years - Held that:- Faced with the above situation, and keeping in view the application filed for adducing additional evidence in other two years, we deem it appropriate to set aside orders of the CIT(A) in all these three years and remit this issue to the file of the AO for adjudication afresh. AO is required to examine organizational structure of the holding company vis-à-vis the assessee-company. The assessee has to demonstrate a nexus between consultancy and any other nature of services provided by the holding company at the global head with some demonstrative evidence. It is to be demonstrated that certain services have been provided by the HO to the subsidiary for which expenditure have been worked at global HO level. If it is established that nexus is available, showing services rendered by the HO to the assessee-company, then ld.AO would look into ALP of the value of such services vis-à-vis the expenditure claimed by the assessee. The assessee will be at liberty to submit necessary details in order to establish its case. Observation made by us will not impair or injure the case of the AO nor any prejudice will cause be to defence/explanation of the assessee. AO shall decide this issue afresh in accordance with law. With the above observation, we allow all these appeals for statistical purpose.
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2019 (1) TMI 590
Charging of interest u/s 234A and 234B - Held that:- The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon’ble Apex Court in the case of Anjum H. Ghaswala [2001 (10) TMI 4 - SUPREME COURT]. Thus uphold the action of the AO in charging the assessee the aforesaid interest u/s 234A and 234B - Decided against the assessee Capital gain computation - assessee along with his mother and siblings entered into a JDA - Transfer as per section 2(47)(v) - Held that:- As per the details that emanate from the record, the assessee along with his mother and siblings entered into a JDA on 03.12.2007 with M/s. Sai Deep Estates, which, find, is a registered document. in the case of Dr. T. K. Dayalu ( [2012 (6) TMI 405 - KARNATAKA HIGH COURT]) has held that on entering into a JDA, there is a ‘transfer’ as per the provisions of section 2(47) of the Act and consequently capital gains is attracted. In that view of the matter, this issue is covered in favour of the Revenue and against the assessee. Claim of Exemption u/s 54/54F - multiple units/ flats i.e., the 2 flats in the same apartment building received by him in lieu of entering into the JDA dated 03.12.2007 with M/s. Sai Deep Estates - Held that:- There was a structure/building on the said property before the JDA was entered into on 03.12.2007, it is of the considered opinion that the issue for consideration in this ground i.e., the assessee’s claim for exemption u/s 54/54F of the Act in respect of 2 flats in the same residential building complex; is squarely covered in favour of the assessee by the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Smt. K. G. Rukminiamma [2010 (8) TMI 482 - KARNATAKA HIGH COURT]. As decided in COMMISSIONER OF INCOME TAX VERSUS SMT. VR. KARPAGAM [2014 (8) TMI 899 - MADRAS HIGH COURT] Amendment to section 54F of the Act being para materia to section 54 of the Act with regard to substitution of “a” residential unit by Finance (No.2) Act, 2014 was operative only w.e.f. 01.04.2015, whereby exemption for more than one unit/flat (residential house) is to be withdrawn. However, prior to the aforesaid Amendment (supra), a residential house would include multiple flats/residential units in the same apartment building. - Decided in favour of assessee.
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2019 (1) TMI 589
Deemed dividend addition u/s 2(22)(e) - assessee obtained loan of ₹ 10 Lacs from one of its sister concern - both these entities had one common shareholder namely Mr. Dierdre Dcunha who held more than 20% shareholding in both these entities - Held that:- No dispute that there are common shareholders both in the assessee-company and sister concern - Therefore, quite correctly, though, the advance received by the assessee company may have been for the benefit of the aforementioned registered shareholders, it could only be assessed in the hands of those registered shareholders and not in the hands of the assessee-company. Section 2(22)(e) does not extend the meaning of the term ‘shareholders’ and that the loan so granted could not be taxed as dividend income in the hands of the recipient company who was not the shareholder of the lender company. On a plain reading of the provisions of Section 2 (22)(e) of the Act, no other conclusion can be reached to make the addition - decided in favour of assessee
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2019 (1) TMI 588
Rejection of trading results - invocation of section 145(3) qua the disposal through sale of its’ opening stock, resulting in a trading loss - Held that:- The stock with the assessee has been assessed to yield only 60% of the wholesale (cost) price, for the principal (RIC) to have in fact compensated the assessee for the anticipated loss of the balance 40% thereof. This compensation, duly accounted for by the assessee, though, would not alter our algorithm or the ‘loss’ under consideration (Rs. 39.33 lacs), as the same is being reckoned on gross loss basis, i.e., the difference between the cost of the unreturned goods lying with the assessee, i.e., as claimed, and their value as realized on sale, again, as claimed, both of which remain unchanged at ₹ 44.88 lacs and ₹ 5.55 lacs respectively. The aforesaid assessment, duly accepted by and between the parties, i.e., in settling their accounts on the closure of business relationship or termination of the franchise agreement, can only be regarded as a fair assessment of such loss and, thus, a proper basis for ascertaining the same for tax purposes. There is in fact no evidence with the Revenue which suggests or indicates the assessee to have realized the stock – to any extent, over cost price. Further, no doubt the MoU states the compensation to be out of stock with the assessee as on 31.08.2012. It is, however, apparent that the same only refers to the stock left with the assessee after return back, for which credit stands allowed to it by the principal in full, i.e., at cost. Rather, if not so, the assessee, on the contrary, stands to gain by being compensated for this stock, already sold by it and, thus, no longer with it as on 31.08.2012, which apparently is the relevant date for compensation. As it appears, the assessee has not reported the cash sales (up to 31.08.2012) to its’ principal. The loss, arise as it does in respect of the assessee’s opening stock, so that it has in fact arisen earlier to the current year, on account of factors that are normal incidences of the retail trade, i.e., represents business loss of the preceeding years, accounted for in the current year. Though, therefore, strictly speaking, not allowable for the current year, we yet consider it admissible as the said loss is in fact recoverable under the franchise agreement from the principal upon determination, as indeed compensated for by it. The observation by the ld. CIT(A) that the brand ‘Reebok’ carries a high premium in the market and, therefore, could not possibly be disposed through street hawkers, also merits acceptance, particularly when juxtaposed with the fact that no serious defects in stock have been pointed out, and coupled with the complete absence of any credible material to show that the said stock had indeed been sold, as claimed, to Thariwalas. The assessee’s accounts reflecting stock-in-trade at cost, at which it is allowed credit for by its’ principal on return, ₹ 44.88 lacs represents the value of the stock left with it at cost. The difference of ₹ 17.55 lacs; the principal determining the same at ₹ 27.33 lacs, remains unexplained. The realizable value of the stock is at 60%, i.e., ₹ 16.398 lacs, as against ₹ 5.553 lacs by the assessee, whose claim, thus, can be said to be proved to the extent of ₹ 10.932 lacs (Rs.27.33 lacs - ₹ 16.398 lacs), i.e., out of the total loss of ₹ 39.33 lacs claimed by the her. The assessee, accordingly, instead of being assessed at a profit of ₹ 4.99 lacs, as by the Revenue, would stand to be allowed a loss of ₹ 10.932 lacs and, accordingly, gets a relief for ₹ 15.922 lacs (i.e., ₹ 4.99 lacs + ₹ 10.932 lacs). Here it may also be relevant to mention, and even as observed by the Bench during hearing, that a proper adjustment to the assessee’s returned income in this respect would warrant an add back (disallowance) of the loss claimed, followed by reduction of the loss assessed (or a further add back of the profit sustained), and which also explains the aforesaid figure of ₹ 15.922 lacs. We refer to the ‘profit sustained’ even as we have accepted the assessee’s claim for loss, to whatever extent, only for completeness of the stated algorithm. An assessment at a profit of ₹ 50, for example, as against the claimed loss of ₹ 100, would warrant an addition for ₹ 150 to an assessee’s returned income. We state so as we observe that this has not been followed in computing the assessee’s income, resulting in a mismatch between the income as assessed and its’ computation; the Revenue failing to make disallowance for the loss not accepted by it, implicit in the rejection of accounts and assessment at a profit @ 10%. The ld. counsel for the assessee, Sh. Kalra, would, upon this being observed by the Bench during hearing, object, stating that the same can only be the subject matter of the Revenue’s appeal. We are afraid, we could not disagree more. The question is of giving effect to the income assessed, i.e., the income as determined in assessment (or, as further modified in appeal) – nothing less and nothing more, and has nothing to do with the Revenue’s non-existent appeal. The Revenue’s appeal, where so, could only be qua the acceptance of the purchase return by the ld. CIT(A), as against it as not by the AO, impacting the volume of the stock that could be regarded as available with the assessee, and has nothing to do with the computational flaw afore-referred. The mistake, which is in the nature of an arithmetical anomaly, could be rectified u/s. 154. How could we, however, be oblivious to or overlook a glaring mistake staring us in the face, and which therefore stands brought to the fore. In fact, we would be failing in our duty were we not to do so. How could, one may ask, the assessee be allowed relief of ₹ 15.922 lacs, i.e., pursuant to our order, where no disallowance of loss has been made by the Revenue in the first place; the afore-said figure including the claim of loss at ₹ 10.932 lacs. The assessment at a profit, firstly, itself implies absence of loss, so that there is no question of the loss claimed having been accepted (by the Revenue), a part of which in fact stands allowed by us, i.e., in deciding the issue discerned as arising for adjudication. The Tribunal is even otherwise not confined to the ground/s raised before it, though is bound to, as we have, hear the parties in the matter (rule 11 of the Appellate Tribunal (Income-tax) Rules, 1963). We could further dwell on the scope of a tax appeal as well as the powers of the tribunal; the law on which is well-settled, but do not consider it necessary to do so in-as-much as we have not traveled outside the issue arising for adjudication, and what stands highlighted here is a simple arithmetical mistake in computation. Addition being the difference in account with M/s. Goshies Apparels (P.) Ltd., one of the allies of RIC, through which, among others, the business was being transacted by it with the assessee - Held that:- While the assessee’s accounts reflect a debit balance of ₹ 66,97,987/- in the account of Goshies Apparels (P.) Ltd., that of the said creditor shows a balance of ₹ 63,23,980/- to the assessee’s credit. Addition was made on account of the difference (of ₹ 3.74 lacs) being unexplained. We agree with the ld. counsel, Sh. Kalra, that no addition could be made in the instant case even if the said difference is, as is admittedly the case, unexplained. The reason is the lower credit allowed to the assessee by the said creditor. The assessee’s accounts reflect a higher debit balance thereto, which only implies a corresponding credit (to, as we suppose, a nominal account) in the assessee’s accounts to that extent. There is as such no unexplained credit in the assessee’s accounts. No addition, accordingly, under the circumstances, is called for. We decide accordingly.
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2019 (1) TMI 587
Unexplained cash deposits - source of cash deposit is in controversy - additional evidence filed without following due procedure - Held that:- Except for the narrative made out towards deposit of ₹ 2,57,500/- out of old savings from 2001 to 2009, there is no cogent material to support the plea. Assessee has also not explained the reasons for holding such large cash in hand particularly when the assessee has already gone abroad (UK) for job purpose on 21.11.2009. Thus, we hardly find any semblance of bonafide in the plea of the assessee on the source of such cash deposits. The typical pattern of deposits below ₹ 50,000/- in multiple tranches only accentuates the lack of bonafides. Nevertheless, possibility of holding some cash at any point of time cannot be entirely ruled out. In the absence of any evidence, we resort to estimations for probable holding of cash by a person of ordinary prudence and assign the same to be ₹ 1 Lakh. Therefore, we deem cash deposit to the extent of ₹ 1 Lakh out of ₹ 2,57,500/- as explained. Accordingly, remaining addition to the extent of ₹ 1,57,500/- is sustained. As regards other deposit of ₹ 7,60,800/- out of cash withdrawals of ₹ 19 Lakhs claimed to have been withdrawn on 25.11.2011, the explanation from the assessee does not provide any satisfactory basis. The claim of the assessee that cash was withdrawn for proposed purchase of residential house property (which eventually did not take place) does not inspire confidence. A taxpayer would be expected to explain why such large amount of cash was needed for proposed purchase of residential house property. The entries in the bank statement also demonstrate that these sum were marked ‘chq. paid' which is unlike cash withdrawals. A bare and unverified confirmation from the HDFC bank (without any reference number) introduced before the Tribunal without following the procedure laid down in Rule 29 of the Income Tax (Appellate Tribunal) Rules is also curious. The circumstances for mentioning the ‘chq. paid’ where the cash was stated to be withdrawn is not explained in the impugned additional evidence. Simultaneously, it is also difficult to put blinkers on uncharacteristic pattern of re-deposits of small amounts allegedly having withdrawn such large amount of ₹ 19 Lakhs for the purpose which remained unserved. Therefore, we do not see any justifiable reasons to admit the additional evidence on record at this juncture attempted to be introduced without following the prescribed procedure. The assessee in the instant case has only made out a narrative which remains unexplained. In the light of above discussion, the additional evidence filed without following due procedure and without showing the bonafides cause for its belated admissions deserves to be rejected and the action of the Revenue requires to be upheld except to the extent of an estimated sum of ₹ 1 Lakh. - Decided partly in favour of assessee.
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2019 (1) TMI 586
Reopening of assessment - Held that:- Explanation 3, clearly, expounds that the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment and such other issue, that comes to his notice subsequently, albeit, in the course of proceedings held under section 147. If, notice for reopening of the assessment was issued on one aspect, and in the course of reassessment proceedings another aspect was discovered, the reassessment order would be valid, only if, the aspect, which led to the reopening of assessment, continues to form part of the reassessed income. Accordingly, we are of the opinion that reassessment done for the impugned assessment year cannot stand the test of the law. Such reassessment is set aside. - Decided in favour of assessee.
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2019 (1) TMI 585
12.5% disallowance on account of bogus purchase - purchase from grey market - Held that:- In the present case, the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of nonpayment of tax and others at the expense of the exchequer. In such situation, in our considered opinion, on the facts and circumstances of the case, 12.5 % disallowance out of the bogus purchases for the profit made thereupon meets the end of justice. Hence, the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase. This is to exclude double jeopardy to the assessee - Decided partly in favour of assessee.
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2019 (1) TMI 584
Assessment u/s 153A / 153C - Revenue claims that audited statement in the form of tally accounts was said to be found during the course of search operation - Held that:- It is not in dispute that the very same document was already available before the Assessing Officer along with the return of income. Therefore, at any stretch of imagination, it cannot be said that the audited statement in the form of tally accounts is an incriminating material found during search as claimed by the Revenue. In the absence of any incriminating material, this Tribunal is of the considered opinion that there cannot be any assessment under Section 153A / 153C of the Act as found by the CIT(Appeals). This view of ours is fortified by the judgment of Apex Court in Principal CIT v. Meeta Gutgutia [2018 (7) TMI 569 - SUPREME COURT OF INDIA. - Decided against revenue
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2019 (1) TMI 583
Disallowance of loss claimed on account of derivative trading - Held that:- We note that the assessee has carried out the derivative transactions through the USEI which has approval from the SEBI in the year 2010 onwards and this Exchange has been recognized by CBDT vide notification no. 12/2011 dated 25.02.2011. Assessee carried out currency derivative transaction in USEI which is a currency derivative arm of the Bombay Stock Exchange. The USEI is promoted by BSI and other 21 PSU banks and it deals only in currency derivative and interest swap options. AO erred in finding that the assessee was not regular trader in the derivative market because the AO himself during the course of search has found that assessee is actively engaged in derivative trading and ₹ 4,02,02,600/- was assessed to tax from the derivative trading for AY 2013-14 (previous assessment year) . When the assessee claimed the loss in this assessment year the AO has taken an about-turn and did not accept the same, which action of the AO cannot be countenanced. We note that the AO’s allegation that the SEBI has suspended the broker through whom the assessee had transacted the derivative business is not correct. AO has not given a copy of the broker’s statement/adverse material to the assessee, so the statement of the broker which is adverse against the assessee cannot be relied upon by the AO for drawing adverse inference against the assessee. Hon’ble Supreme Court in the case of Kishanchand Chellaram Vs. CIT (1980 (9) TMI 3 - SUPREME COURT) held that any information gathered by the AO without confronting the same to the assessee did not have any evidentiary value and cannot be used for the purpose of assessment or other proceedings. Assessee’s plea to the AO to cross examine the so called broker whose statement was recorded by the AO was also not done by the AO which omission also makes the order of AO bad in the eyes of law. AO’s action for taxing the derivative income for AY 2013-14 and not accepting the loss for AY 2014-15 cannot be countenanced and, therefore, we do not find any infirmity in the order of the Ld. CIT(A) directing deletion of the addition made on this count and, therefore, the revenue’s ground of appeal is dismissed. Addition made on account of section 14A read with Rule 8D - Held that:- Since the assessee has not received any exempt income the disallowance u/s. 14A read with Rule 8D of the Rules was not warranted as held in CIT Vs. Cheminvest Ltd. (2015 (9) TMI 238 - DELHI HIGH COURT), wherein it has held that sec. 14A envisages that there should be actual receipt of income which is not includible in total income and the said section will not apply where there is no exempt income received or receivable during the relevant year - decided against revenue
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2019 (1) TMI 582
Capital gain computation - adoption of correct cost of acquisition - this case being converted to the limited scrutiny case in the ITD/STT system - whether the Assessing Officer can over reach his jurisdiction in the case of limited scrutiny cases ? - Held that:- Assessing Officer has to make correct assessment as it is trite to say that the Assessing Officer has to make correct assessment under section 143(3) and he is obliged to entertain the claim made during the proceedings and the tax cannot be levied on ignorance of law but income has to be computed in accordance with the provisions of law. The correct income has to be assessed and there is no bar for not entertaining the claim/issue raised by the assessee in limited scrutiny proceedings, if the same has been raised by the assessee, we clarify that according to the CBDT Instruction No. 7 of 2017 certainly there is bar on the jurisdiction of the Assessing Officer to go beyond the subjected issue(s) under limited scrutiny cases, however, he is not restrained to adjudicate the issue(s) raised by the assessee. Hence, in view of the above, the case is remanded to the file of the Assessing Officer to adjudicate the claim of the assessee - Appeal filed by the assessee is allowed for statistical purpose.
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2019 (1) TMI 581
Bogus unsecured loan as cash credit u/s. 68 - relevant inquiries - Held that:- The assessing officer has not made any such concrete investigation/ examination as carried out in the case of the PavanKumar.M. Sanghvi [2017 (5) TMI 1159 - ITAT AHMEDABAD] to substantiate with relevant material that the loan transaction of the assessee were not genuine. It is clear from the above facts that the assessing officer has simply on the basis of self analysis concluded that loan transactions were not genuine. After considering the above facts and the finding of ld. CIT(A) we do not find any merit in the appeal of the revenue. - Decided in favour of assessee.
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2019 (1) TMI 580
Disallowance u/s 14A r.w.r. 8D - exclusion of expenses not related to exempt income - Held that:- The provision of Rule 8D requires to make the disallowance of the expenses even if the assessee claim that he has not incurred any expense in relation to such dividend income. But the AO before making the disallowance needs to refer the books of accounts. In the instant case, we note that the assessee has claimed total administrative expenses amounting to ₹ 8,73,482/- only. The detail of the same is placed out of such expenses, there were two major expenses of ₹ 2,45,000/- and 4,69,443/- under the head loss on sale of fixed assets and travelling expenses respectively. If we exclude these two major expenses the remaining expenses are of ₹ 1,59,039/- only which can only be considered for the purpose of disallowance u/s 14A r.w.r. 8D. It is because in our view the amount of expenses represented on account of loss on sale of fixed assets and travelling expenses cannot be linked with the expenses incurred for the purpose of earning the exempted income. We hold that the AO has made the disallowance u/s 14A r.w.r 8D without having regard to the books of accounts of the assessee as mandated under the provision of Section 14A r.w.r. 8D. We note that the assessee has claimed Demat charges amounting to ₹ 3,569/- which are directly connected with the dividend income as envisaged in the provision of Rule 8D (2)(i) of Income Tat Rule. Therefore, we sustained the addition of ₹ 3,569/- on account of Demat Charges. Thus, we set aside the order of CIT(A) and direct the AO to delete the addition of ₹ 5,70,349/- only. - Appeal of the assessee is partly allowed.
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Customs
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2019 (1) TMI 575
Imposition of ADD - Alpha Dane Salt - Advance License scheme - non-fulfillment of export obligation - Notification No 43/2002-Cus dated 19/04/2002 - Held that:- From the plain reading of the notification it is quite evident that the exemption has been granted from the payment of whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), and from the whole of the additional duty, safeguard duty and anti-dumping duty leviable thereon respectively under sections 3, 8 and 9A of the said Customs Tariff Act. For availing the said exemption importer is required to execute a bond binding himself to pay on demand an amount equal to the duty leviable, but for the exemption, on the imported materials in respect of which the conditions specified in this notification have not been complied with. The Bond that is thus executed, binds the importer to pay an amount equal to the duty leviable, but for exemption, on the imported material in respect which conditions as specified in the notification has not been complied with. The bond executed does not make any distinction between the duty leviable, but prescribes that what so ever duties that have been exempted in terms of this notification including the anti-dumping duty is required to be paid in case the conditions of notification are not fulfilled. We are not in position to agree with the contention of the appellant that the Bond/ LUT executed by them do not cover the anti dumping duty leviable on the imported material at the time of importation/ clearance of the imported material - The appellants have themselves admitted that they had not fulfilled the export obligation as specified in the Advance License issued to them by the Director General Foreign Trade. In fact they have themselves paid the duty in terms of the said bond due as per their determination on 23/10/2008. Demand is in respect of the duty short paid by the appellants on their own determination. We are not in position to agree with the submissions of the appellant. Section 28 of the Customs Act, 1962 - period of limitation - Held that:- In the present case no duty has been short levied or short paid at the time of clearance, of goods as the same have been cleared in terms of exemption notification after fulfillment of the conditions of exemption notification. Admittedly this case is also not a case of provisional assessment under Section 18 or case of demand of amount erroneously refunded. Thus the case shall not fall in any of the category (a), (b) or (c) in the definition of relevant date under section 28, but shall be case under (d) - Thus the period of limitation for the purpose of section 28, accordingly shall have to be computed from the date of payment of duty. If that be so the demand has been made within the period of limitation from the relevant date which in the present case is the date of payment of duty i.e. 23/10/2008. Section 143A of the Customs Act, 1962 - Held that:- Since we find that demand of anti dumping duty is sustainable in terms of the bond executed by the appellant, we are not considering the pleas raised under section 143A of the Customs Act, 1962. Appeal dismissed.
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2019 (1) TMI 574
Import of work boat - moveable capital good or not - classification under RITC 8400 - benefit of exemption under Notification No. 27/2008- claim of duty drawback on re-export - Held that:- The import of work boat which is termed as a tug boat is not disputed and therefore, Chapter 89 which is wide enough, covers ships, boats and also floating structures and without the fear of contradiction we can safely assume that the impugned goods are also covered under this Chapter - there are no reason to interfere with the findings of the lower authority on the classification and the denial of benefit of Notification No. 27/2008. The benefit available under Section 64 is a statutory one and once the importer satisfies the condition namely, that the vessels have gone back within a period of three months from the date of their importation, then such importer would be eligible for 95% of the import duty as drawback. Apparently, there is no finding or discussion in the impugned Order - this is required to be re-adjudicated by the Original Authority, who shall call for relevant details to ascertain whether the assessee satisfies the condition under Section 74(2) read with Notification No. 19/1965 and then extend the benefit if the re-export condition is satisfied. Appeal allowed in part by way of remand.
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2019 (1) TMI 573
Revocation of CHA License - forfeiture of security deposit - delay in issuance of inquiry report - time limitation - The Show Cause Notice was issued on 22.02.2017. However, the Inquiry Report which should have been issued within ninety days i.e., before 22.05.2017, has been issued only on 06.06.2017 - Imposition of penalty - Held that:- The starting point of the proceedings inter alia for imposition of penalty is issue of a Notice within a period of ninety days from the date of receipt of an offence report, which requires the Customs Broker to submit within thirty days a written statement of defence, etc., to the Deputy Commissioner or Assistant Commissioner nominated by the said Commissioner of Customs. In a number of decisions and judgements, higher appellate fora have consistently held that the limitation periods prescribed in the CBLR, 2013 are not just directory, but, on the other hand, are mandatory. In the present case, the ninety-day period prescribed for submission of the report by the Inquiry Officer has indeed been exceeded, possibly because of the first appointed Inquiry Officer going on medical leave for forty five days, necessitating the appointment of a second Inquiry Officer. Nonetheless, when the prescribed periods are to be considered as mandatory, the concerned Custom House/Commissioner, in such an eventuality, should have immediately taken corrective action and possibly not waited so long for appointment of another Inquiry Officer - the moot point is that the ninety-day limit prescribed in Regulation 20(5) ibid has been breached, which cannot be condoned as a curable defect. The entire proceedings have been vitiated by non-adherence to the time-limit for submission of Inquiry Report prescribed in Regulation 20(5) ibid - appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2019 (1) TMI 579
Initiation of ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’ - admission of an application under Section 7 - Held that:- Insolvency Resolution Process under Section 7 of the I&B Code can be initiated against the guarantor who is a ‘corporate person’ and who by operation of law ipso facto becomes a ‘corporate debtor’ by satisfying the ingredients of the terms as defined under Section 3(8) - In the present case as per clause 1.2 of the ‘Deed of Guarantee’ dated 22nd January, 2015, “on the failure of principal borrower to pay and/or discharge the obligations, the guarantor shall, forthwith upon demand, pay to Rural Electrification Corporation Limited (Financial Creditor) without demur or protest”, the amount stated in the demand made by Rural Electrification Corporation Limited to the guarantor thereby invoking the guarantee. Admittedly, the guarantee was invoked by ‘Rural Electrification Corporation Limited’ against ‘Ferro Alloys Corporation Ltd.’ and demand was raised on 27th October, 2015 calling upon ‘Ferro Alloys Corporation Ltd.’ to pay the amount due within 21 days. Since then, Ferro Alloys Corporation Ltd. (Corporate Guarantor) became a ‘corporate debtor’ of ‘Rural Electrification Corporation Limited’ (Financial Creditor) - In its Annual Report for the year ending 2016-17, ‘Ferro Alloys Corporation Ltd.’ has shown a sum of ₹ 517.90 crores payable to the ‘financial creditor’. Therefore, it is clear that ‘Ferro Alloys Corporation Ltd.’ admitted the ‘debt’ and in absence of payment, we hold that there is a ‘default’. The provision of the I&B Code do not bar a ‘financial creditor’ from initiating ‘corporate insolvency resolution process’ against the ‘guarantor’, who comes within the meaning of ‘corporate debtor’. It is not necessary to initiate ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’ before initiating ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Guarantors’. Without initiating any ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’, it is always open to the ‘Financial Creditor’ to initiate ‘Corporate Insolvency Resolution Process’ under Section 7 against the ‘Corporate Guarantors’, as the creditor is also the ‘Financial Creditor’ qua ‘Corporate Guarantor’. The first question is thus answered against the Appellant - appeal dismissed.
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2019 (1) TMI 578
Recovery of amount defaulted by the Corporate Debtor - dishonor of Cheque - Section 8 of Insolvency and Bankruptcy Code, 2016 - Held that:- In relation to the notice of the proceedings, it is evident that the Corporate Debtor is well aware of the proceedings pending before this Tribunal and despite the same has failed to defend its cause. Since a default as claimed by the petitioner arises out of the supply of materials/goods and also taking into consideration that no notice of dispute has been sent in relation to the Section 8, notice being the notice of default sent by the Operational Creditor to the Corporate Debtor, as well as no reply has been filled before this Tribunal and this tribunal having been satisfied with the claim made and as a default arises thereunder is constrained to initiate Corporate Insolvency Resolution Process (CIRP) as against the Corporate Debtor. Since the petitioner has not proposed any Insolvency Resolution Professional, Mr, Rajneesh Singhvi having IP registration No. IBBI/IPA- 001/IP-P0003712017-18110098 is appointed as IRP. The Operational Creditor to remit a sum of ₹ 2,00,0001- within two days from the date of receipt of this order to the IRP named as above. In view of the admission of this petition the moratoriurn as contemplated under Section 14 of IBC, 2016 be commenced. Application admitted.
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2019 (1) TMI 577
Initiation of Corporate Insolvency Resolution Process in respect of Respondent Corporate Debtor - section 9 of the Insolvency and Bankruptcy Code, 2016 - Held that:- The present application is complete and there has been default of payment of dues to the applicant on account of services rendered by them to the CD. Therefore, on fulfilment of the requirements of section 9 (5) (i) (a) to (d) of the Code, the present application is admitted. In pursuance of Section 13 (2) of the Code we direct that public announcement shall be made by the Interim Resolution Professional immediately (3 days as prescribed by Regulations) with regard to admission of this application under Section 9 of the Code - We also declare moratorium in terms of Section 14 of the Code.
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2019 (1) TMI 576
Initiation of insolvency resolution process against M/s Richa Industries Limited, the respondent-corporate debtor - Section 9 of the Insolvency & Bankruptcy Code, 2016 - Held that:- It is pertinent to mention that the respondent-corporate debtor has not placed on record its own ledger account to contradict the entries made in the ledger account relied upon by the petitioner. Even the respondent has not pleaded that it raised any dispute about the defect in the quality of the material at any time before the demand notice was sent to the corporate debtor - there was no pre-existing dispute between the parties in order to disentitle the operational creditor to an order of admission. The petitioner being the operational creditor is not obliged to propose the name of the Resolution Professional to be appointed as the Interim Resolution Professional, but the petitioner in Part-III of the application Form, proposed the name of Mr. Arvind Kumar registered with IBBI having registration No. IBBI/IPA-001/IP-P00178/2017-18/10357 to be appointed as the Interim Resolution Professional in case the petition is admitted. The petition is admitted - The matter be now listed on 21.12.2018 for passing formal order of declaring moratorium and for appointment of the Interim Resolution Professional.
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PMLA
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2019 (1) TMI 572
Maintainability of application filed under Section 17(4) - seizure of bank accounts - time limit for filing application - Held that:- It is well settled that if the statute require a thing to be done in a particular manner, it must be in that manner otherwise action is vitiated. After realized its mistake about freezing, the respondent has passed the order of fresh freezing on the fresh application filed under Section 17(4) for confirmation of retention. In the present case, it is admitted position is that the bank accounts were seized on 15.02.2017. The application under Section 17, sub-section (4) was filed on 3rd March, 2017 ( i.e. within 30 days) from the date of freezing of the bank account. Sub-section (1) of Section 20 stipulates the maximum period of one hundred and eighty days for the purpose of adjudication under Section 8 of the Act, however, proceedings under section-5 were not initiated within the period of 180 days. Admittedly, in the present case, the application filed by the respondent under section 17(4) was not allowed. The said order is become final between the parties as the respondent has not challenged the same in any court as admitted by the counsel. As far as the proceedings under section 5 of PMLA, which have been initiated against the appellant is concerned, the same would be considered by the Tribunal as per its own merit. Appeal allowed.
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Service Tax
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2019 (1) TMI 569
Commercial concern or not - demand of service tax - extended period of limitation - Held that:- No Substantial Question of Law arises for consideration in the instant case - The reliance placed on the larger Bench decision of the CESTAT in the case of Great Lakes Institute of Management Ltd. V. Commissioner of S.T., Chennai [2013 (10) TMI 433 - CESTAT NEW DELHI - LB] is wholly inapplicable to the facts and circumstances of this case. Invocation of proviso to Section 73(1) of Finance Act - Held that:- Sub-section (1) of Section 73 states that where any service tax has not been levied or paid or has been shortlevied or short-paid or erroneously refunded, the Central Excise Officer within one year from the relevant date, serve notice on the person chargeable with service tax. The period stipulated under Section 73(1) viz., "one year" was substituted by eighteen months by Finance Act, 2012 dated 28.05.2012. The period in dispute in the instant case falls prior to the amendment. Therefore, if the Department was of the view that service tax has not been levied or paid by the respondent, they could have invoked Section 73(1) within one year from the relevant date - Admittedly, this was not done and the Department seeks to invoke proviso to Section 73(1) of the Act. The proviso provides for an extended period, whereby, the word one year in Section 73(1) was substituted by the word "five years". The proviso will come into play only if the service tax has not been paid by the respondent by reason of fraud; or collusion; or willful mis-statement; or suppression of facts; or contravention of any of the provisions of Chapter 5 of the Finance Act or of the Rules made thereunder with intent to evade payment of service tax. Admittedly, there is no such allegation of fraud or collusion etc., which is not the only requirement, but there should be intention to evade payment of tax. Thus, mere non-payment will not be a ground to invoke proviso to Section 73(1) of the Act. That apart, the assessee had an explanation that they had produced Government records, approval from AICTE, Project Director of the Canada-India Institutional Cooperation Project, who had also given a statement clearly stating that they are Government aided Institution and Government directed such courses to be conducted - proviso to Section 73(1) of the Finance Act could not have been invoked, as there was no material against the respondent for invoking the extended period. The Substantial Questions of Law are answered against the Revenue - appeal dismissed.
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2019 (1) TMI 568
Penalty - Short payment of service tax - entire service tax liability alongwith interest was paid up before issuance of show cause notice - Held that:- The appellant has established that they had paid up the entire service tax along with interest even though belatedly - also, appellants have established reasonable cause for not paying the service tax - this is a fit case to invoke Section 80 of the Finance Act, 1994. - penalty cannot be imposed - appeal allowed.
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2019 (1) TMI 567
Construction of residential complexes Services - benefit of N/N. 26/2012 - benefit of notification denied on the ground that appellant originally availed the Cenvat Credit of duty paid on the inputs - appellant reversed the Cenvat credit along with interest - Held that:- The effect of reversal of the Cenvat credit leads to a situation as if no credit was ever availed - the reversal of credit by the appellant would lead to an inevitable conclusion that no credit stand availed by the assessee so as to fulfill the condition of the Notification in question. In such a scenario the benefit of the Notification has to be extended to the assessee - demand set aside. CENVAT Credit - capital goods - scaffoldings - Held that:- Admittedly the definition of capital goods provided under Cenvat Credit Rules excludes chapter 73 from its ambit - credit cannot be allowed. Extended period of limitation - Held that:- No mala fide suppression or mis-statement can be attributed to them so as to justifiably invoke the longer period of limitation - major part of the demand is barred by limitation. However, a part of the demand would fall within the limitation period which would be quantified by the original adjudicating authority and intimated to the assessee. Penalty - Held that:- In the absence of any findings of mala fide, the same is required to be set aside in toto. Appeal allowed in part and part matter on remand.
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2019 (1) TMI 566
Penalty u/s 78 - short payment of service tax - appellant had gone to its notice during finalisation of the financial accounts for which it could not revise the same in their return - intent to evade - Held that:- Such short payment was mainly due to the fact that it had failed to furnish proof during assessment that it had fulfilled the criteria of “pure agent” as laid down under Rule 5 and failed to discharge service tax liability under reverse charge mechanism on payment made to the Directors - Show-cause also indicated that appellant had failed to charge and pay the service tax on the value received as pure agent and value of director service for which it had contravened the provision of Section 68 of the Finance Act. There is nothing available in the show-cause that such contravention of the Act or Rule was made with an intent to evade payment of service tax. In the instant case when the nature of service provide by the appellant being marketing and research agency services, why those items like travel cost, local conveyance, interview etc. will not be considered as expenditure for a company engaged in marketing and research agency. Be that as it may, when appellant had not challenged the same those point needs no further discussion except for the purpose that availment of benefits as pure agent was asserted by the appellant and denied by the revenue authority in which case it cannot be said that such denial has attained finality and appellant had therefore contravened the provisions of the Act Rule as contemplated in Section 73(1) proviso. Also, it cannot be said that appellant had not followed the provisions contained in Chapter of Finance Act or in the Rule made thereunder since under erroneous interpretation of the provisions, it had not considered those duty and not discharged those duty liability. On the other hand, when it had met the duty demand without protest after the same has brought to its knowledge, Explanation – 2 to Section 73(3) of the Finance Act is more applicable to the appellant. Penalty u/s 78 set aside - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 565
Correctness of the credit availed - Verification of the records - the closing balance and the opening balance in March 2010 and April 2010 were said to be incorrect vis-à-vis the information submitted in their respective ST-3 returns - Held that:- On going through the photographs and other evidences, prima facie we are satisfied that the appellant had carried the documents for scrutiny, but the department failed to carry out the scrutiny and the order was passed - Matter remanded to the adjudicating authority to scrutinize the documents either on sample basis or following any other method to ascertain the correctness of the credit availed by the appellant - appeal allowed by way of remand.
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2019 (1) TMI 564
Classification of services - Business Auxiliary Service or not - activity of providing service of overseas sale of sea foods for Indian exporters - Held that:- In the present case, though the appellant had claimed that they were appointed by the overseas buyers for procurement/purchase of sea foods for and on behalf of the overseas buyers, however, statements of the local exporters reveal that for sale of their sea food products to overseas buyers, they have paid the appellant commission in Indian rupees - the appellant had rendered services to the local exporters in the sale of the sea foods and received commission from them. Extended period of limitation - penalty - Held that:- Since the appellant had not registered themselves with the central excise and service tax department for payment of appropriate service tax on the commission amount received from the Indian exporters and not disclosed the said facts, hence the authorities below have rightly confirmed the demand with interest invoking extended period of limitation - consequently imposition of penalties also justified. Appeal dismissed - decided against appellant.
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Central Excise
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2019 (1) TMI 563
100% EOU - clandestine removal - grey fabrics - non-re-warehousing of the goods - fake reware housing certificates - diversion of consignments - consignments were rejected by M/s Khan Garments and since another customer viz. M/s Asharani Garments Fabrics Pvt. Ltd. was ready to accept the consignments and the appellant was having valid CT-3 certificate the goods were diverted to said concern - Held that:- The revenue has to show from their own records or from the investigation at the consignee s end that the goods did not reach the consignee. Since the department has made the allegation of non re-warehousing of the goods at the consignee s factory, it has to prove the same by substantial evidence and it cannot be made on assumption. It has to be shown as if the goods were not warehoused then where were the same diverted. In present case there is no evidence of diversion of goods. The Appellant has submitted the lorry receipt and the payment details to support the contention of clearance of goods to M/s Asharani Garments. It is also not the allegation that the goods were not consigned by the Appellant. The non attending of summon by the owner as he was on Haj and the same was communicated by his son cannot lead to inference that the appellant deliberately did not appear to attend the summon - Therefore in the given set of facts and in absence of any adverse evidence, it cannot be said that the goods did not reach the consignee or were not warehoused. Demand set aside - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 562
Valuation - inclusion of value of scrap retained by the appellant arising out of job work in assessable value - Appellant’s contention is that the job work charge already includes the value of such scrap and hence duty cannot be demanded twice on scrap value - CENVAT Credit - inputs are being used in dutiable as well as exempted goods - non-maintenance of separate records - rule 6 of CCR, 2004. Held that:- The deduction of scrap value has been made by M/s Suzlon from job charges only after arriving at assessable value. It is only if the conversion charged gets reduced on account of retention of scrap that the value of scrap/ waste has to be included in assessable value which is not the case here. Apart from above, it is also a fact that the scrap retained by the Appellant was also cleared by them on payment of duty. If the value of scrap is deducted from the value of raw material and added to the job charges, the assessable value would remain same - as the Appellant has already included the scrap cost in job work charges and hence there is no reason to include the scrap value again in assessable value. The job work charges are not reduced by the value of scrap neither there is any evidence to allege so - duty demand not sustainable. Demand has also been made on the ground that cenvat of raw material is also to be added to the assessable value - Held that:- There is no reason to demand duty on value equal to cenvat amount of raw material. Valuation - Held that:- The quantum of scrap and value of same has been adopted in show cause notices on the basis of average of entire production of all products irrespective of fact that the products are of different design/ specification products/ towers etc. - as the scrap generation can vary as per the product, hence the valuation method adopted by the revenue is not sustainable. Hence no demand can be made on such basis. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 561
Clandestine removal - issuance of parallel invoices - cross examination of the witnesses and other persons whose statements were recorded, were not granted - principles of natural justice - Held that:- In the present case it is observed that the statements recorded of various persons are very vital evidence and once the same is retracted, the statement can be used only after cross examining the witnesses as provided under Section 9D of Central Excise Act, 1944. Passing an adjudication order without allowing cross examination is gross violation of principles of natural justice. The principle of natural justice is the foundation in any adjudication, if the principle of natural justice is not followed, the adjudication would become meaningless. It is also observed that the appellant have heavily contended that the alleged clandestine removal is trading activity of alleged clandestinely removed goods. It appears that no proper documents were produced in the earlier adjudication, however, an opportunity is given to the appellant to produce all the documents in support of their claim of trading activity. Penalty on Sh. Mahendra G Duggad, partner of the firm - Held that:- The partnership firm was already proposed the demand of duty and imposition of penalty under Section 11AC, therefore, separate penalty on the partner cannot be imposed. Appeal is disposed of by way of remand to the adjudicating authority for passing afresh order after observing the principle of natural justice.
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2019 (1) TMI 560
Requirement to declare Retail Sale Price (RSP) of the goods on the ceramic tiles cleared by the appellants - incorrect declaration of MRP - sole consideration for sale - Standards of Weights and Measures (Packaged Commodities) Rules, 1977 - Section 4A of the Central Excise Act - difference of opinion. Held that:- This matter may be placed before the Hon ble President for constitution of a larger bench to examine the following questions of law: 1) In the facts and circumstances of the case and in view of the contrary precedent decisions of tribunal in the cases of ACME (Supra) and in case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra), is it permissible to ascertain RSP for the purpose of assessment under Section 4A of CEA, 1944, in respect of clearances made prior to issue of notification 13/2008-CE(NT) dated 1-3-2008? 2) If yes, can it be done by using best judgment method, based upon material available and in a manner consistent with principles and provisions of Section 4A of the Central Excise Act, 1944, including the principles and provisions incorporated in the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008? Matter referred to Larger Bench.
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2019 (1) TMI 559
CENVAT Credit - input services - canteen services provided to employees - Held that:- Larger Bench of the Tribunal in the case of Wipro Ltd. Vs. Commissioner of Central Excise, Bangalore [2018 (4) TMI 149 - CESTAT BANGALORE] has held that outdoor catering services are excluded from the definition of input services with effect from 1.4.201 - credit cannot be allowed. Penalty - Held that:- The issue is interpretational one and that the appellant have disclosed the details of the credit availed in their ST-3 returns - penalty imposed cannot sustain and the same is set aside. The impugned order is modified to the extent of setting aside the penalty imposed without disturbing the demand or interest thereon under outdoor catering service - appeal allowed in part.
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2019 (1) TMI 558
Valuation - nexus of Fixed Facility Charges with the value of the gases supplied by the appellants to M/s SAIL - inclusion of Fixed Facility Charges in the Assessable Value of the Gases supplied by the appellants - Supply of Tangible Goods service - benefit of Notification No 67/95 - appellant’s main argument is on the ground that the Fixed Facility Charges are for the installations the appellants have made in the premises of SAIL-VISP and that as per the agreement, it is clear that Fixed Facility Charges are independent of the supply of Gases and in terms of the agreement, the price of Gases supplied is fixed separately. Held that:- In the instant case, the entire unit of the appellants is installed in the premises of SAIL-VSIL. The Pipelines and facilities are in continuous nature in the appellant’s unit as well as the customers’ premises. On going through the agreement, it is seen that the clause 15.6 stipulates that “the monthly payment for supply of gas shall be made in the form of reimbursement of the Fixed Facility Charge as per Article-13 and price for Gases supply as specified in Article-12. Clauses at 1.21; 1.35 and 15.6 of the Agreement make it amply clear that the consideration paid, including the Fixed facility charges, is towards the supply of gases. The agreement does not make it very categorical as to whether the Fixed Facility Charges are in respect of Pipelines, Flow Meters, Valves, etc. installed in the premises of SAIL-VISP and maintained by the appellants. Therefore, there is some element of doubt which exists as to whether the Fixed Facility Charges are also for the installations which are primarily in the premises of the appellants and for production of Gases. In case if a portion of the Fixed Facility Charges pertained to the production facilities installed in the premises of the appellants, it has to be understood to have some nexus with the production of Gases. No prudent customer would pay such charges for the production of the material in the appellant’s factory and to purchase the same at the market price. It is pertinent to note that the Ld. counsel for the appellants has submitted that the Fixed Facilities were partly inside the MSPL premises and substantially in the premises of SAIL-VISP. Further, as per clause 1.35, the Fixed facility charges being paid are for the production facility which is defined to be up to the battery limits. In that case, a portion of Fixed Facility Charges is for the production facility and therefore, the same is to be absorbed in the cost of production being incurred by the appellant. It is evident that if any of the Fixed Facility Charges are attributable to have a nexus with the production facility the charges thereof need to be apportioned towards the cost of the Gases on the lines of established methods of costing - the Authorities have not apportioned the charges separately to Oxygen and Argon Gases in the months in which both of them were supplied. While upholding in principle that Fixed Facility Charges attributable to production facilities within the factory of the appellants and having nexus with the costing of Gases supplied to M/s. SAIL-VISP are includable in the assessable value of the gases, we find that the entire issue of costing has to be gone into afresh. The Fixed Facility Charges have to be apportioned properly between the production facilities in the appellant’s factory as well as in the customers’ premises. Thereafter, if any such charges are attributable to the production of Gases supplied to the customers, the charges may be included in the value of the Gases supplied by the appellants. In the scenario of Supply of Tangible goods, the production/manufacture or service rendered by using the said goods will happen at the receiver’s end who is entitled to use the said goods. The supplier of the Tangible goods will have no ownership of the produce/ activity emanating from such goods. In the instant case the appellant retains total control over the production facility and the produce thereof. Benefit of Notification No. 67/95 - Captive consumption of goods - Held that:- The Ld. AR submitted that this is a fresh ground being taken now in appeal before CESTAT and has not been agitated before the adjudicating authority. The said notification would be inapplicable as the assessee being an independent manufacturer has not produced any interim inputs which go into a taxable final product cleared by themselves to avail exemption. Matter is remanded for afresh consideration and proper apportionment of the Fixed Facility Charges to the cost of the gases supplied by the appellants - Appeal allowed by way of remand.
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2019 (1) TMI 557
Manufacture - Gold bars manufactured from the stage of dore bar - benefit of exemption under Sl. No. 21 of Not. No. 05/2006 - process amounting to manufacture or not - manufacture of gold bars from the stage of ‘dore bar’ - primary gold “converted” from any form of gold so as to fall within the scope of Sl. No. 21 of Not. No. 5/2006 - whether ‘dore bars’ can be considered as ‘any form of gold’ within the scope of Sl. No. 21 of Not. No 5/2006? Whether the appellants are liable to pay Central Excise duty on gold/silver bars manufactured out of dore bars during the period 1.4.2008 to 16.1.2012? - Held that:- The Hon’ble Supreme Court in CCE, Vadodara vs. Hindalco Industries Ltd. [2015 (11) TMI 901 - SUPREME COURT] has laid down two conditions for the availability of the exemption Notification. Number (1) is to see whether the end product manufactured is primary gold and Number (2) is to see whether it is converted into any form of gold. When the Supreme Court has held “gold mud” having very low percentage of gold “as any form of gold” and the manufacture of the gold bars from the same to be conversion, there is no scope of any doubt to consider the dore bar, having high percentage of gold from 80-95%, procured by the appellants over the years from M/s. HGML as any form of gold and the process of manufacture of gold bars from “dore bars” is to be construed as conversion - the appellants are eligible for the exemption contained in the Notification No.5/2006-CE dated 1.3.2006 prior to 1.3.2011. The amendment brought by Notification No.25/2011 dated 24.3.2011 substitutes the words “from any form of gold” with the words “from any form of gold other than gold ore, concentrate or dore bar”. From this, it is clear that “dore bar” has been specifically excluded from the category of “any form of gold” with effect from 24.3.2011. The department sought to read this amendment to be retrospective. However, in view of the clear terms and words of the Notification, there is no mention of retrospective applicability. As far as there is no ambiguity in the wordings of the Notification, it requires to be construed very strictly and therefore, is to be held to be retrospective only - the appellants are liable to pay duty for the period 24.3.2011 to 16.1.2012. Extended period of limitation - penalty - Held that:- Even ignorance of law, which otherwise also is no excuse, cannot be considered. Therefore, it is to be inferred that non-payment of duty and non-disclosure is a positive act of suppression with intent to evade. Hence, we find that invoking of the extended period of limitation is fully justified. On the same grounds, recovery of interest and imposition of penalties is justified. Whether the appellants are liable to pay duty on unbranded gold/silver coins for the period 1.3.2011 to 16.3.2012? - Held that:- The Finance Act, 2014 vide clause 102, exempted the goods under Chapter 71, retrospectively for the period from 01.03.2011 to 16.03.2012. Therefore, we accept the contentions of the appellants in this regard and find that the demand of duty on this count is liable to be set aside - demand set aside. Whether the appellants are liable to pay Central Excise duty on the branded gold or silver coins during the period 1.1.2012 to 30.5.2013? - Held that:- For a certain period, there was no scope for the appellants to procure duty paid bars. In view of the difference of opinion on the basis of records maintained, we find that the issue needs to go back to the original authority to verify the records of the appellants vis a vis their claims for the period 1/1/2012 to 16/3/2012. Therefore, it will be in the interest of justice that the matter be remanded back to the adjudicating authority - Matter on remand. Whether the appellants are liable to pay Central Excise duty on gold jewelry during the period 17.3.2012 to 7.5.2012? - Held that:- The appellants submission that wherever they have availed Cenvat Credit, the same has been reversed in view of the clear findings of the commissioner. We also find that Ld. Commissioner has rightly not extended the benefit under Notification No.2/2011 dt.1.3.2011 as amended by Notification No.20/2012 as in terms of Sl. No.49 of Notification No.2/2011-CE as amended as the articles of goldsmiths and silversmiths classifiable under Chapter Heading 7114 of CETA, 1985 are excluded the gold coins of purity 99.5% above and silver coins of purity 99.9% above - the demand of ₹ 20,91,82,176 for the period 1.7.2012 to 30.05.2013 along with interest upheld - Penalty set aside. Whether the appellants are liable to pay duty at the rate of 6% on unbranded gold/silver coins and jewelry for the period 17.3.2012 to 30.6.2012? - Held that:- The demand hinges on the claims of the either parties which are subject matter of verification. It was not denied by the Revenue that the appellants were not submitting ER-1 returns. However, the claim was that it was not possible to decipher from the ER-1 records to verify the CENVAT credit taken by the appellants. There are counter claims regarding the availment of CENVAT and reversal thereof. Therefore, we find that it will be in the interest of justice to remand the matter back to the authority for verify the claim of the appellant including that of limitation - matter on remand. Whether there is short payment of duty on the manufacture and clearance of gold and silver bar during the period 17.1.2012 to 30.6.2012? - Held that:- Mutuality of interest is not proved and it is not alleged that all the clearance of the appellants are through M/s. Dhruv Jewellers only. In such a situation, we find that the demand does not sustain and is liable to be set aside along with penalty on M/s. Dhruv Jewellers. Penalties - Held that:- Sufficient cause has not been shown to levy penalty on each of the Directors, more so, when the individual role and liability has not been shown. We find that wherever the demands are sustained, penalty on the firm would suffice. There is no need to levy penalties additionally. Therefore, the penalties imposed on the Directors are set aside. Appeal disposed off.
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2019 (1) TMI 556
Valuation - includibility - amount of sales-tax collected from the buyers and retained by them to the extent of sales-tax liability being discharged through VAT 37-B Challans - Held that:- It is an admitted fact that the said subsidy is credited to the sales tax account of the appellant which he receives by way of VAT 37B Challans. It is also apparently an admitted fact that the appellant was paying total VAT charged at applicable rates on sale of goods to the State Exchequer and was filing the VAT returns. The VAT 37B Challans, the appellant was utilising to discharge the output VAT liability for the subsequent period. The appellant herein had opted for remission of tax scheme un4er which a portion of the VAT paid was remitted back to the appellant. It becomes clear that when the sales tax/ VAT is payable at the time of removal, in that case, in terms of Section 4D of Central Excise Act, the same is not includable in transaction value. Remission in the nature of subsidy - additional consideration or not? - Held that:- In the present case, the remission is in the nature of subsidy which the appellant was receiving from the State Government in the form of VAT 37B Challans and not from the buyers of the appellant. The said remission was not only as good as cash but can also not be considered as an additional consideration - In terms of the aforesaid definition, it is clear that the transaction value includes all the payments made by the buyer to the assessee. However, in the instant case, the subsidy has been paid to assessee by the State Government. Only the mode of payment is by way of crediting the sales tax head under VAT challan in favour of the appellant. Thus, it could not be said that the amount is in the nature of additional consideration. Extended period of limitation - Held that:- The evidence about any positive act except the allegation of using the VAT Challans for discharging the VAT liability for subsequent period could not be produced on record - discharge of liability by way of VAT 37b Challans has already been held as legally sustainable methodology of discharging tax liability for subsequent period. It is held that, in the given circumstances, Department was not entitled to invoke the extended period of limitation. Appeal allowed.
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CST, VAT & Sales Tax
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2019 (1) TMI 555
Validity of assessment order - filing of bogus Form F declarations - no opportunity of personal hearing granted - principles of natural justice - Held that:- When the original Form F declarations were submitted to the Assessing Officer on 09.7.2018, by then, the assessment was completed. Though the assessee stated that the assessment order dated 09.5.2018 was served on 09.7.2018 only in person, there is no proof to substantiate the same. Be that as it may, the purpose for issuing the Form F declarations is to avail concessional rate of tax. This is provided under the Statute and therefore, the Assessing Officer, on a technical plea, cannot refuse to accept the Form F declarations. In fact, the Commissioner of Commercial Taxes, Commercial Tax Department, Government of Tamil Nadu issued a circular stating that the Form F declarations can be accepted by the Assessing Officer even after completion of assessment - one opportunity can be granted to the appellant to go before the Assessing Officer to submit the Form F declarations and put forth their contentions, so that the assessment can be done in a proper manner. The assessee is directed to treat the assessment order dated 09.5.2018 as a show cause notice and submit their objections within 15 days from the date of receipt of a copy of this judgment - appeal allowed by way of remand.
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2019 (1) TMI 554
Mandamus directing the respondent to accept Form-F declaration - Held that:- The Assessing Officer has categorically observed that all the eight numbers of Form-F served by the dealer were bogus, after cross verification with the Tamil Nadu authority. Therefore, the Assessing Officer has chosen to determine the tax liability on the turnover - When a specific finding is rendered by the Assessing Officer on the genuineness of Form-F declaration submitted by the petitioner through online earlier or produced after passing the order of assessment, as bogus, this Court is not inclined to issue any mandamus as sought for in this writ petition, as it is for the petitioner to question such finding of the Assessing Officer by filing an appeal before the Appellate Authority - petition dismissed.
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Wealth tax
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2019 (1) TMI 553
Whether on the facts and in the circumstances of the case, the cash-in-hand as found on the last day of the accounting year as revealed from the books of account of the various assessees could be treated as an asset under section 2(ea) of the Act? Held that:- Admittedly, the cash-in-hand held by the appellants herein are with respect to business transactions, the accounts of which were regularly maintained and the income thereon proffered for assessment before the Income-tax authorities. The cash so held in their hand were also recorded in the books of account, with certain exceptions, as we see from the orders of the Assessing Officer. The exceptions are in so far as the Assessing Officer having taxed only such amounts, which were kept in hand and which were in excess of ₹ 50,000 on a reading of sub-clause (vi) of clause (ea). The levy made by the authorities of all such cash-in-hand, whether disclosed in the accounts or not was only of that in excess of ₹ 50,000 - sub-clause (vi) of section 2(ea) is in two limbs, one covering individuals and HUF's and the second "the other persons". As far as the former is concerned, only such cash-in-hand in excess of ₹ 50,000 would be brought to tax under the Act and as far as the second limb "the other persons" are concerned, any amount, even within the limit of ₹ 50,000 kept in hand and not recorded in the books of account will be brought to tax under the Act. The law, in this case the specific amendment seeking to tax the non-productive cash-in-hand as wealth, available in section 2(ea)(vi) is constitutionally valid. However, the officers have deviated from the policy and principle explicit from the enactment and hence such action taken under the Act for assessment of cash-in-hand of the assessees, disclosed in the books of account, but in excess of ₹ 50,000, has to be set aside. Petition disposed off declaring and holding that the "other persons" as coming in the second limb of section 2(ea)(vi) includes those persons who carry on a commercial activity and are statutorily required to maintain books of account under the Income-tax Act - The writ petitioner, a proprietary firm engaged in the business of jewellery, is declared to be entitled to be absolved from the liability to tax under the Wealth-tax Act, for any amounts held as cash-in-hand, recorded in the books of account. The is answered in favour of the assessees and against the Revenue.
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Indian Laws
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2019 (1) TMI 571
Dishonor of Cheque - insufficient funds - involvement of the accused/Director of the company in the complaint - vicarious liability u/s 141 of the Negotiable Instruments Act - Held that:- The documents relied upon by the petitioners are required to be tested in evidence. The complainant has made primafacie case against the petitioners. Apart from the avermentas made in the complaint, there is evidence to indicate the involvement of the petitioners in the transactions of the accused No.1 Company. In the circumstances, the submissions advanced by the petitioners cannot be accepted. Section 141 is a penal provision creating vicarious liability and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director is Incharge of and responsible to the Company for the conduct of the business of the Company without anything more as to the role of the Director. It can be seen that the complainant has made out a case for invoking vicarious liability under Section 141 of the Negotiable Instruments Act and the contentions of the accused can be agitated only at the time of trial. - The decisions relied upon by the learned Counsel for the petitioners can be distinguished on the basis of factual matrix of the present case. Petitions dismissed.
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2019 (1) TMI 570
Dishonor of Cheque - vicarious liability - Section 138 and 141 of the Negotiable Instruments Act - resignation of the petitioner as per Form 32 - Counsel for the complainant had contended that the complaint contains sufficient avernments as required under Section 141 of Negotiable Instruments Act and on the basis of that the process has been issued - Held that:- The accused had resigned before the cheques were issued and dishonoured. The acceptance of appellant’s resignation is reflected in the resolution as well as Form 32 of the company. It is not the case of the complainant that the dishonoured cheques were issued by the appellant. These facts leave no manner of doubt that on the date of the offence was committed by the company, the appellant was not the director and he had nothing to do with the affairs of the company. In this view of the matter, if the Criminal complaints are allowed to proceed against the appellant, it would result in gross injustice to the appellant and tantamount to an abuse of process of Court. In the present case, although the resolution is not produced, there is nothing on record to doubt the genuineness of Form 32 produced by the petitioneraccused. The Form 32 was filed on 30.08.2013 giving effect to resignation of petitioner from 01.07.2013. Thus, before date of issuance of cheque and its dishonour the petitioner had resigned and Form 32 was filed with ROC Karnataka. The verification clause of Form 32 mentions that accused No.1 Company has verified information and that the person tendering it has been authorised by Board of Directors resolution dated 17.07.2013 to sign and submit the Form. There is no material to doubt the genuineness of Form 32 produced by the petitioner. Merely an account entry in Form 32 as Additional Director/independent director Form 32 with regards to resignation cannot be discarded. It is not necessary to refer to the other issues raised by the petitioner as the proceedings are required to be quashed on this ground alone. It is also pertinent to note that the process was issued in the present case on 01.04.2015. The petitioner thereafter preferred revision application challenging the order of process before the Sessions Court which was rejected by order dated 20.01.2017. The plea was recorded on 07.06.2017. In the light of the observations made above merely because the plea was recorded on the aforesaid date, the petition cannot be dismissed on the ground that it is not maintainable. Petition allowed - decided in favor of petitioner.
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