Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 24, 2019
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Assessment of dividend income - hostile discrimination between a resident assessee and a non-resident assessee - Non-residents can be treated differently for the reason that they are residents of foreign states and not residents of India.
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Since the employer having shown the amount in the salary slip of the employee and retained the same with the employer; it becomes an income includable u/s 2(24)(x) - However, deduction u/s 36(1)(va) is permissible.
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Condonation of delay of 37 days in filing the return (ITR) - difference of opinion between the auditor and the auditee - genuine hardship - delay of 37 days in filing the Return of Income along with the Audit Report is condonable.
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Tribunal has statutory power to recall its order if it is satisfied that the respondent has failed to appear before it for sufficient cause, at the time of hearing and to restore the appeal - ITAT is not justified in rejecting the applications of the appellant-assessee
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Interest income - Addition u/s 56 - The action of the CIT(A) confirmed, in upholding the action of AO to reduce interest income arising from deposits placed with SBI out of project development expenditure and in reversing the action of the AO in treating the same as revenue income de hors the projects development in progress.
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Ad-hoc disallowance made @20% under the heads of i) Travelling Expenses ii) Vehicle Expenses and iii) Repair and Maintenance Expenses - In following the rule of consistency and status quo, the additions confirmed @ 10% on each of these heads.
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Registration u/s.12AA - the assessee Trust has objects which are both charitable and religious in nature - assessee Trust is a composite Trust and not purely for charitable purposes - CIT(E) directed to grant registration.
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Depreciation on intangible asset representing acquisition of business contract - assessee has also acquired contractual rights which, no doubt, is a valuable commercial right - claim of depreciation allowed.
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Deduction u/s 10A - setting–off losses relating to other non–eligible units - the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI.
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Allowability of sales promotion expenses - abnormal increase in expenditure - expenses were incurred on travel and hospitality of the Doctors and medical professionals - violation of MCI guidelines - CBDT Circular which creates a tax burden or tax liability on an assessee cannot be reckoned with retrospective effect.
Customs
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Condonation of delay - there was a deliberate attempt to mislead the Tribunal by blatant statements of falsehood. The appellant had also sought to file an appeal from the order of the Tribunal again asserting the averments as stated in the affidavit. - The exemplary cost has to be imposed on the appellant
Corporate Law
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Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019
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Companies (Prospectus and Allotment of Securities) Amendment Rules, 2019
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Companies (Acceptance of Deposits) Amendment Rules, 2019
SEBI
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Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2019
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Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2018
Service Tax
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CENVAT Credit - the furniture purchased by the appellant for its business purpose, though is not confirming to the definition of capital goods, but the same should be considered as input, in absence of any restrictions provided in the statute - credit allowed
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Business Auxiliary Services - Commercial concern or not - the activity undertaken by the appellants are certainly not on a small scale to be held to be a proprietorship concern in the understanding of a common man - the service rendered by the assessee is as a commercial concern.
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Refund of unutilized CENVAT Credit - the services like outdoor catering or rent-a-cab to pick-up and dropping of the employees, would be eligible for credit - refund cannot be denied holding that there is no nexus between those services and the output service exported by the appellant.
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Collection of service tax when activity was not liable to tax - the appellant has to deposit the amount collected from its clients u/s 73A(2) and cannot use CENVAT credit for the purpose. The amount already collected in cash gets adjusted against this amount and the appellant is liable to deposit the rest.
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Valuation - inclusion of ‘written off dues’ in assessable value - Debit notes imply the intent to withhold the value therein from the monetary consideration and the issue of materials in lieu for subsuming in an asset that will vest with the issuer cannot, by any stretch, be deemed to be consideration
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Reverse charge mechanism - import of services - the exchange rate at which the payment was remitted to the overseas entity alone could be applied. The demand of tax on the differential rate of exchange does not sustain and is set aside.
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Reverse Charge Mechanism - Intellectual property services - import of service - The tax liability on the value of ‘intellectual property services’ is required to be adjusted to the extent of cess paid under the appropriate legislation.
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Classification of services - Construction of Residential Complex Service or not - Revenue failed to establish that there were common facilities such as Park, Lift, Community Hall, etc., the demand set aside.
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Valuation - Consulting Engineering Services - deduction of reimbursement and accommodation charges - inclusion of Withholding tax / TDS - the entire show-cause notice is barred by limitation.
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Unless such testing including stability tests and validation tests are conducted the product cannot be marketed at all. Therefore, no service tax can be leviable separately on this component of the processing charges which they received. - Activity is part of manufacturing process.
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Refund claim - once the duty is paid under protest then as per the proviso to Section 11B, the limitation of one year will not apply - the impugned order rejecting the appeal on time bar is not sustainable
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Quantum of penalty u/s 78 of FA - the facts of the case have not fully convinced us to waive the entire penalty, as there has been chronic default committed by the assessee in regular intervals by failing to pay the service tax within the time permitted under the Statute - penalty reduced to 10%
Central Excise
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Demand of duty - That is a clear articulation of the intent. The lure of revenue maximization that may have motivated the initiation of proceedings cannot support the stated intent.
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100% EOU - Failure to comply with the conditions is to be visited with the recovery of duty as undertaken in the bond. The provisions of section 11A of Central Excise Act, 1944 are not the sole source of recovery.
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Clandestine manufacture and removal - Mere doubts or allegations made on the frivolous grounds and on the unfounded basis of belief by the officer, cannot be adopted to establish the same.
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SSI Exemption - use of brand name of others - Revenue have adduced no evidence to Show that the said brands had acquired such reputation so as to be identified with the persons who applied for registration - benefit of SSI Exemption was available to the appellant company
VAT
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Best Judgement Assessment - The assessee would not keep the entire details of suppression available for detection. - There is a definite pattern of suppression established from the recovered documents and best judgment is permissible to cover up the probable omissions and suppressions.
Case Laws:
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GST
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2019 (1) TMI 1154
Opening the official web portal so as to upload FORM GST REG-26 Part B - revival of provisional registration certificate issued to the petitioner firm earlier - Held that:- Now both the counsel agree that GSTN is active and that the petitioner was granted a new registration number - the learned Standing Counsel for the 4th respondent informs the Court that the authorities will look into the petitioner's claim for validation - petition closed.
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2019 (1) TMI 1153
Unable to upload FORM GST TRAN-1 - input tax credit - KVAT Act - CST Act - Held that:- There is a circular issued by the Government of India for setting up an IT Grievance Redressal Mechanism to address the grievances of taxpayers due to technical glitches on GST Portal. - the petitioner may apply to the Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner s uploading FORM GST TRAN-1, without reference to the time-frame - petition disposed off.
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2019 (1) TMI 1152
Detention of goods - person in registered in other state not in the state of detention - Method suggested for interim custody - Review of earlier order [2019 (1) TMI 23 - KERALA HIGH COURT] - Held that:- As to the first objection, I reckon it is, perhaps, an eminent ground of appeal; not that of review. About the second, at this length of time, I could not recollect whether the petitioner's counsel had agreed to the arrangement recorded in the Writ Petition. At any rate, to that extent, the judgment stands modified and the last paragraph reads as follows: “Recording the arrangement as suggested by the Government Pleader, I dispose of the Writ Petition.” The Review Petition is disposed of.
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Income Tax
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2019 (1) TMI 1150
Reopening of assessment - Delay in issuing a notice under Section 143(2) - fatal effect to reassessment proceedings - Held that:- SLP dismissed.
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2019 (1) TMI 1149
Deemed dividend u/s 2(22)(e) - beneficial shareholder - protective assessment - assessee was holding more than 10% shareholding in M/s MLPL (the lender company) and also having a substantial interest in M/s OFPL (the borrowing company) - ITAT divided the deemed dividend proportionally also confirmed bu HC - Held that:- Application seeking exemption from filing certified copy of the impugned order is allowed. Issue Notice. In the meanwhile, there shall be stay on the interest component only.
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2019 (1) TMI 1148
Entitlement to deduction u/s.10B -‘Deemed Export’ of goods made during the period in question through a third party - Held that:- SLP dismissed.
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2019 (1) TMI 1146
Reopening of assessment - petitioner's claim for expenses in respect of Colour Idea Store as a part of its advertisement and sales promotion expenses - validity of reasons to believe - Held that:- During the regular assessment proceedings under Section 143(3) of the Act, the Assessing Officer had occasion to examine the petitioner's claim for expenses in respect of Colour Idea Store as a part of its advertisement and sales promotion expenses. Thus, there was a complete disclosure of all primary material facts on the part of the petitioner. (See Calcutta Discount Co. Vs. ITO - 1960 (11) TMI 8 - SUPREME COURT). Therefore, no failure to disclose all fully and truly material facts necessary for assessment. Thus, on the above ground itself the impugned notice is hit by the proviso to Section 147 of the Act and is without jurisdiction. The application of mind to these facts on the part of the AO can be inferred from the fact that the statement constituting the breakup of the total expenditure incurred on sales and promotions was considered in the assessment order as some of the expenses forming part of the breakup of sales and promotions expenses had been disallowed in the assessment order dated 18th March, 2015 passed under Section 143(3). This would clearly indicate that the impugned notice has been issued on account of change of opinion and it is an attempt to review the Assessment Order dated 18th March, 2015 passed under Section 143(3). AO is entitled to rely upon the order passed in assessment proceedings for the subsequent year, as tangible material to initiate reassessment proceedings. The tangible material so obtained must be processed i.e. its applicability to the assessee for the subject assessment year is to be examined so as to form a reasonable belief that income chargeable to tax has escaped assessment. The tangible material in the assessment order for A.Y. 2015 -16 was the agreement dated 6th March, 2014. This is an agreement post the period with which the impugned notice is concerned. This, by itself could not form the basis for the AO to have come to a reasonable belief that income chargeable to tax has escaped assessment for the subject assessment year 2011- 12. AO has not himself come to the reasonable belief that income chargeable to tax has escaped assessment Therefore, on this ground also the impugned notice is unsustainable. As the asset is not owned by the petitioner, the expenditure cannot be on capital account, is not examined in the context of the present facts. This as it is not necessary, as earlier submissions are sufficient to dispose of the petitioner's challenge to the impugned notice dated 28th March, 2018 seeking to reopen the assessment proceedings for Assessment Year 2011 -12 - the impugned notice is quashed as being without jurisdiction. - Decided in favour of assessee.
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2019 (1) TMI 1145
Stay petition - Penalty u/s 271(1)(c) - Held that:- When the very question of levying tax from the petitioner is before the Tribunal, where the Tribunal has required that the Assessing Officer not to pass the order of penalty and that the appeals would be heard out of turn, in order to avoid multiplicity of legal proceedings, we would adopt a formula under which the interest of the petitioner as well as department are taken care of. As noted, the Tribunal has desired that the Assessing Officer may continue with the penalty proceedings but final order thereon may not be passed till disposal of the appeals. In connection with the present assessment order, the Assessing Officer himself has imposed a condition of depositing a portion of tax demand subject to fulfillment of which the remaining recovery would be stayed. Considering such facts, we would require that the Assessing Officer in the present case also not to pass the final order of penalty till the petitioner's appeals before the Tribunal against assessment for assessment years 2016-17 and 2017-18 are disposed of.
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2019 (1) TMI 1144
Assessment of dividend income - Proviso to Section 10(34) read and along-with with the provisions of Section 115BBDA - hostile discrimination between a resident assessee and a non-resident assessee - Held that:- Government has the right to identify the persons who have to be taxed. Legislature and executive enjoy greater latitude in the field of tax and economic legislation because of the complexities involved as compared to laws touching civil rights such as freedom of speech, religion etc. Taxation invariably is a matter of policy and the court is not to examine and comment on the wisdom of such decisions. Further, there is a presumption in favour of constitutional validity of law made by the Parliament or State Legislature. Taxation statutes are normally not struck down on the ground of under-classification Companies have to pay dividend tax whenever they pay dividend to the shareholders. This would explain and justify the reason why companies have been left out from the purview of Section 115BBDA. If companies were liable to pay tax under this section, it would have led to cascading effect when dividend is finally paid to the shareholders, be it, an individual, HUF or a firm i.e. the ‘specified assessee’ who are liable to pay tax under Clause (a) to Section 115BBDA of the Act. Similarly, the argument that non-residents have been left-out is an argument of under-classification. Non-residents who invest in India contribute and help in growth of industrialization, job creation and economic progress. Non-residents have options to invest in different countries. Consequently, the Legislature/Executive as a matter of policy decide how and in what manner non-residents should be taxed. Non-residents can be treated differently for the reason that they are residents of foreign states and not residents of India. Taxation at source principle may not be applied to non-residents. Non-residents are liable to pay tax in the country of their residence. Taxation regime applicable to non-residents need not identical to that applicable to residents.
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2019 (1) TMI 1143
Allowability of business loss - loss arising out of sale of mutual fund units - applicability of provision of Section 94(7) - record date of purchase - Held that:- Two securities of KGILT were purchased on the record date coming on 21.09.2003. The computation has to be made from 22.09.2003 and the sale made on 22.12.2003 is removed by one day from the expiry of the three month period. Likewise, the unit purchased of Sundaram Bond Annual Plan on the record date, 07.11.2003 was sold on 09.02.2004. The three month period expires on 7.2.2004, two days before the sale was effected. Hence in these three items the sale was made after the period provided under Section 94(7)(1)(b). As to the other three purchases made of Sundaram Bond Half Yearly; it was on the record date 26.12.2003. Computing the three months period from 27.12.2013 it expires on 26.03.2004 when the sale was made. The said sale has to be found as having been made within the three months period. Hence with respect to the units purchased and sold of Sundaram Bond Half Yearly Section 94 squarely applies. We answer the question partly in favour of the revenue and partly in favour of the assessee. Addition u/s 14A - Held that:- No substantial question of law since the Tribunal has made a remand. We also notice that as of now the issue stands covered in favour of the assessee in Commissioner of Income Tax v. Essar Teleholdings Ltd. [2018 (2) TMI 115 - SUPREME COURT OF INDIA] as found that the machinery provisions having been brought under the Rules only from the assessment year 2007-08; the disallowance under Section 14A could be only from that year. We hence decline to answer the question of law. Staff Welfare Scheme - whether amount credited to the Staff Welfare Scheme as akin to the sundry creditors and hence a permissible deduction? - Held that:- since the employer having shown the amount in the salary slip of the employee and retained the same with the employer; it becomes an income includable under Section 2(24)(x). When the amount is included as income of the employee, then retention of the same by the employer, makes it the income of the employer, makes otherwise exempted or permitted deduction under the Act. Deduction under Section 36(1)(va) permeability - We find from the order of the First Appellate Authority that the amounts retained with the employer and the interest accrued in the name of a particular employee, was taxed in the hands of that employee. Hence though there is a common fund and accrual of interest, the same has to be treated as having been credited separately on the employees account in the relevant fund; the principal and interest accrued, being eventually payable to the employee on his superannuation. We hence find that the deduction under Section 36(1)(va) is permissible. We find that the assessee had claimed it as expenditure under Section 37 which however, is not permissible. The Tribunal’s finding as to treating it as Sundry Credit also cannot be sustained, but we answer the question of law in favour of the assessee and against the revenue in so far as the deduction being permissible under Section 36(1)(va).
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2019 (1) TMI 1142
Deduction u/s 80IA - entitled to the notional carry forward - Initial assessment year - loss incurred by the assessee on installation of wind mill and absorbed by the other businesses of the assessee - Held that:- The question stands covered in favour of the assessee by virtue of Circular No.1/2016 dated 15.02.2016 issued by the Central Board of Direct Taxes (CBDT). Hence the question of law has to be answered in favour of the assessee and against the Department. The initial year for the purpose of Section 80IA, is the initial assessment year from which the claim of deduction is commenced and the assessee is entitled to the notional carry forward from that particular year. The order of the Tribunal is reversed to that extent. Claim under Section 41(1) - sales tax liability refunded to assessee in the subject assessment year by virtue of a decision of the jurisdictional High Court - assessee claimed that it has to be kept as a contingent liability since an appeal is pending before the Hon'ble Supreme Court - Held that:- Tribunal found that as and when and if the Supreme Court decides against the assessee, the assessee would be able to claim the amount again as expenditure. We find that sufficient safeguards have been made by the Tribunal to that end and we find no reason to interfere with the directions of the Tribunal. The question stands answered against the assessee. Nature of expenditure - expenditure incurred insofar as carrying out repairs of the office of the assessee should be a revenue expenditure or a capital expenditure - Held that:- The expenditure incurred was insofar as making repairs of the office building itself, by using Plaster of Paris. The same having an enduring benefit to the business of the assessee has to be treated as capital expenditure and hence we find no reason to interfere with the order of the Tribunal. The question of law raised is answered in favour of the Revenue and against the assessee.
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2019 (1) TMI 1141
Claim of revenue expenditure - spreading over of the amounts, paid as license fees for the purpose of managing a berth in the Port - deferred liability for the twenty years, fully paid in that assessment year - Held that:- The spreading over of the amounts, paid as license fees for the purpose of managing a berth in the Port, was perfectly justified, especially looking at the fact that the liability incurred was for the purpose of retaining such rights over a period of 20 years. In the subject year, the assessee had a reasonable expectation of continuing the right obtained for a period of 20 years and hence the spreading over of the liability incurred in that year, to the 20 years in which the right would have been retained by the assessee was proper and is a revenue expenditure. Herein though there was an extinguishment of right there was no such extinguishment of a right created in a capital asset. In fact, the earlier year also when the assessee had acquired rights for 20 years and the liability for the entire years was met by the assessee in that particular year, we found the assessee entitled to claim the same as revenue expenditure. There was no acquisition of a capital asset or a right of a permanent character. There was found justification in the spreading over of the liability in the 20 years in which the right to operate in favour of the assessee was available. Having found that there was no acquisition of capital asset there would also be no transfer or extinguishment of such right created in a capital asset. We hence uphold the order of the Tribunal for the assessment year 2001-02 answering the question of law in favour of the assessee and against the Revenue.
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2019 (1) TMI 1140
Condonation of delay of 37 days in filing the return - reasons assigned by the respondent for belatedly filing the return - difference of opinion between the auditor and the auditee - genuine hardship - assessee's case is that the auditors appointed by them initially were delaying the process of audit completion without proper reasons inspite of providing expert valuation report from other professional firm to satisfy their concerns Held that:- The respondent cannot appoint a new auditor without getting a No Objection Certificate from the existing auditor and therefore, the respondent after getting No Objection Certificate from the erstwhile auditor had uploaded the Return of Income along with the Tax Audit Report on 07.01.2015 and by then, there was a delay of 37 days. Further, the learned Writ Court rightly pointed out that by the delayed submission of Return of Income, the respondent does not stand to benefit in any manner whatsoever. Thus, the learned Writ Court was satisfied that the explanation given by the respondent was sufficient for condonation of delay of 37 days in filing the Return of Income and such a delay should not defeat the claim of the respondent. We have also seen the reasons assigned by the respondent for belatedly filing the return. As rightly pointed out by the learned Writ Court, no assessee would stand to benefit by filing the return belatedly. Writ Court on facts, rightly held that the delay of 37 days in filing the Return of Income along with the Audit Report is condonable. The observations made by the first appellant in the order dated 01.06.2016 largely pertained to the respondent's eligibility to carry forward the loss claimed by them in the return of income. Further, the first appellant in the order dated 01.06.2016 has made an observation that if the reasons given by the assessee is accepted as a valid ground it may encourage other tax payers to follow suit. The appellants need not have any apprehension in that regard because exercise of discretion for the purpose of condonation of delay can be only based on the facts and circumstances of each case and therefore, there can be no set precedent on such issues. Delay condoned - Decided against revenue
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2019 (1) TMI 1139
Assessment of sundry creditors'/trade creditors' balances as deemed income - Scope of Section 41(1) on the mis-construction of Explanation (1) below the said Section - Held that:- It is important to note that during the pendency of the proceedings before the Tribunal, the assessment for the year 2010-11 was taken up by the AO and the very same issue was taken up for consideration. The assessee produced the names of those creditors and an enquiry was conducted. The officers of the Department were directed to investigate into the matter after bringing on record the list of all the sundry creditors, the statements given and the no due certificates produced. Yet, the Assessing Officer made a protective assessment vide order dated 27.3.2013. This order is now the subject matter of appeal before the CIT(A). The mistake committed by the assessee is not placing the order dated 27.3.2013 before the Tribunal when the appeal was heard for the assessment year 2009-10. Had it been done, the Tribunal might have remanded the matter for a fresh consideration to the CIT(A), since, by then, the appeal as against the assessment order dated 27.3.2013 for the assessment year 2010-11 was pending. While passing the order dated 09.11.2012 the CIT(A) did not decide the legal issue as to whether the statement given during the survey was admissible and as to whether was the Assessing Officer justified in making the addition based on the statement, but proceeded to rely upon the statement to dismiss the appeal. Tribunal also proceeded in a different direction than what was argued before it. Thus, in our considered view, the matter requires re-consideration, for which purpose, we propose to remand the matter to the CIT(A) to be heard along with the appeal filed challenging the assessment order dated 27.3.2013 for the assessment year 2010-11. - Decided in favour of assessee.
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2019 (1) TMI 1138
Entitlement to deduction u/s 80P - amplitude to the words attributable to the business - specific business activities of the societies - interest derived from a credit facility extended to one of its employees and the employee of one of its members - whether the interest earned by the assessee to be out of credit facilities extended from the surplus funds of the business of the assessee - Held that:- What has to be specifically looked at is whether the activity from which the income earned fell within any of the clauses under subsection (1). The interest income herein was received from credit facilities extended to the employee and the employee of a member, for personal purposes. This would not fall within sub-clause (i) of Clause (a) of Section 80P of the Act. Further contention raised on the basis of the decision of Income Tax v. Gulshan Mercantile Urban Co-operative Bank Ltd. [2013 (1) TMI 85 - ALLAHABAD HIGH COURT]. Therein the interest derived was from the Fixed Deposits maintained out of surplus funds. The decision cannot have application in the present case especially by reason of the dictum in Kerala State Co-operative Marketing Federation Ltd. - Decided in favour of the Revenue and against the assessee
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2019 (1) TMI 1137
Tribunal power to recall an order passed by it in violation of the principles of natural justice if so established - application of the assessee for recall of an order by which the appeal was decided exparte - Hearing of appeal ex parte for default by the respondent - Held that:- The power of procedural review to recall an order is inherent in every authority which exercises quasi judicial jurisdiction. Therefore, even if there is no specific power of review vested in the Tribunal, it has inherent power to consider the application for recall of an order passed by it if it is established that it has been passed in violation of the principles of natural justice or by playing fraud upon it. Rule 25 of the Income Tax (Appellate Tribunal) Rules, 1963 provides for the hearing of the appeal exparte for default of the respondents. It lays down that in an appeal where the appellant appears and the respondents does not appear when the appeal is taken up for hearing, the Tribunal may dispose of the appeal on merits after hearing the appellants. It further provides that where the appeal has been disposed of in the above manner and the respondents appears afterwards and satisfies the Tribunal that there was sufficient cause for his non appearance, the Tribunal shall set aside the order and restore the appeal for hearing on merits. Thus it is implicit that the Tribunal has statutory power to recall its order if it is satisfied that the respondent has failed to appear before it for sufficient cause, at the time of hearing and to restore the appeal. It cannot be said that the Tribunal has no authority of law to consider the application of the assessee for recall of an order by which the appeal was decided exparte. Tribunal is not justified in rejecting the applications of the appellant-assessee on the ground that it has no power to review the order already passed by it. Accordingly, we answer the above question in favour of the appellant-assessee.
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2019 (1) TMI 1136
TPA - comparable selection criteria - functional similarity - Held that:- Held that:- Assessee is engaged in the business of Software Development and product support services, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
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2019 (1) TMI 1135
Addition on account of long term capital gains - statements of purchaser u/s 131 in order to bring the truth on record - Held that:- In the present case, the department is heavily relied upon the receipt in question with regard to taking sale consideration of the property in question at ₹ 2.25 crores which fact is contradicted by the sale agreement found during the course of search and the sale deed executed by the parties. Since the receipt in question is not signed by the seller and the purchaser, therefore, it was duty of the A.O. to record the statement of Shri L.C. Madan, Shri Pawan Khurana and Shri Vikram Sharma u/s 131 in order to adjudicate upon the issue between the parties. In this view of the matter, we are of the view that the matter requires reconsideration at the level of the A.O. The decisions relied upon by the D.R. in the written submissions would not support the case of the Revenue because of the findings above. We, accordingly, set aside the Orders of the authorities below and restore the matter in issue to the file of A.O. with a direction to make proper enquiry into the matter by recording statements of Shri L.C. Madan, Shri Vikram Sharma and Shri Pawan Khurana under section 131 of the I.T. Act with regard to sale consideration mentioned in the receipt in question - Appeal of Assessee is allowed for statistical purposes.
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2019 (1) TMI 1134
Deduction claimed u/s. 54 - Profit on sale of property used for residence - assessee has not opened any capital gain account within due date of filing the return of income - deposit of balance capital gain amount in capital gain account scheme upto the date of filing of return u/s. 139(4) - Held that:- The assessee is eligible for getting deduction u/s. 54(1) if (i) he has purchased a property within one year prior to the date of sale of property and (ii) if the assessee purchased a new property within two years from the date of sale of original asset or if the assessee has constructed the house within three years from the date of sale of original asset. If the assessee is unable to invest entire capital gain before furnishing of return of income u/s. 139, he has to deposit the unutilized amount of capital gain by opening an account in any nationalized bank under the Capital Gain Scheme. From the perusal of the order of the authorities below, we find that the assessee has furnished his return of income on 31.03.2010 u/s. 139(4) and he has spent money to the extent of ₹ 61,33,234/- upto the filing of its return. CIT(A) has followed the decision in the case of CIT v. Rajesh Kumar Jalan [2006 (8) TMI 126 - GAUHATI HIGH COURT]. The assessee can deposit the balance capital gain amount in capital gain account scheme upto the date of filing of return u/s. 139(4) of the Act. The Assessing Officer has allowed the exemption on the amount spent upto the due date of filing of return only as contemplated u/s. 139(1) of the IT Act. As far as the appropriation of capital gain towards repayment of bank loan is concerned, it is notable that the loan was raised in 2004 and property was also purchased on 27.09.2004. As per provisions of section 54, the amount of capital gain which is appropriated towards purchase of a residential property prior to one year from the date of transfer of asset, is eligible for exemption. In the instant case, the assessee had been the owner of the said property in the year 2004 which does not fall within one year prior to the transfer of asset. Therefore, the amount of capital gain spent by the assessee towards repayment of loan in the instant case is outside the provisions of section 54 and the assessee, thus, would not be eligible for exemption on the balance amount of capital gains used for repayment of loans to the extent of ₹ 1,22,68,857/-. The decisions relied by the ld. CIT(A) in the impugned order, in these peculiar circumstances, are not found applicable on this score, having been based on different footings. Accordingly, the appeal of the Revenue deserves to be allowed.
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2019 (1) TMI 1133
Levy of penalty u/s 271AAA, u/s 271(1)(c) and u/s 271(1)(c) - Assessment completed u/s 153B(1)(b) r.w.s. 143(3) of the Act in pursuance to search and seizure operation u/s 132(1) - Held that:- Since it is an admitted fact that additions on which penalty had been levied in the present case on account of bogus labour charges and on account of unaccounted sale transactions have been restored back to the A.O. by the I.T.A.T. the additions no longer survive and, therefore, the basis for levy of penalty u/s 271AAA of the Act also does not survive. Penalty levied u/s 271(1)(c) - unaccounted receipts of the assessee from running of the resort - Held that:- I.T.A.T. in the quantum proceedings held that it is a neutral preposition to confirm the addition and allow expenditure and the depreciation - in view of the peculiar facts and circumstances of the case the addition made by the Assessing Officer is liable to be deleted. Thus we find no reason to uphold the levy of penalty levied in the present case u/s 271(1)(c) of the Act. - Assessee appeal allowed.
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2019 (1) TMI 1132
Accrual of income - Addition u/s 56 - interest received from SBI - Income earned before commencement of the business - reduce interest income arising from deposits placed with SBI out of project development expenditure - Held that:- CIT(A) has observed on facts that assessee kept fixed deposit as margin money with SBI for obtaining bank guarantee to avail term loan facility for the project related works. The margin money kept is 10% of the bank guarantee of ₹ 150 Crores obtained from SBI. The CIT(A) thus found that deposits were integrally connected with the setting up of power plant. Thus, we find ourselves in complete agreement with the action of the CIT(A) in upholding the action of AO to reduce interest income arising from deposits placed with SBI out of project development expenditure and in reversing the action of the AO in treating the same as revenue income de hors the projects development in progress. The grievance of the Revenue thus is bereft of any merits. - decided against revenue Interest income on funds kept as fixed deposits - Treated to be revenue income and consequently not liable to be set off against project development costs - Held that:- The action of the assessee merely reduces the interest costs on borrowed funds to some extent. Therefore, interest on borrowed funds and interest earned on fixed deposits cannot be given varied treatment where the interest costs have been capitalized to the power project. We do not visualize any justifiable reason for holding the interest income on fixed deposits out of borrowed funds and utilized for furtherance of the project to be of revenue character. The conclusion drawn by the CIT(A) is thus manifestly mis-conceived and thus deserves to be set aside and reversed. The action of the CIT(A) in upholding the interest income received from IDBI Bank as taxable revenue income under s.56 of the Act is thus wholly untenable and consequently, the treatment adopted by the assessee in this regard requires to be restored. In this view of the matter, we set aside the action of the CIT(A) and direct the AO to delete the addition made on this score. - decided in favour of assessee.
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2019 (1) TMI 1131
Disallowance made of commission on sales paid to HUF - transactions were not proved to have been done and there was no explanation as to how the HUF can carry out the profession of commission - Held that:- In assessment years 2008-09 and 2009-10, no addition has been made and in the present year under consideration, in the similar facts and circumstances, any disallowance in the present year is unwarranted, unjustified and arbitrary. Once the Revenue has accepted the payment of commission in the case of the assessee in past years and there has been neither any bifurcation of the functions of the assessee nor the Revenue has brought out any material on record or evidence to prove that there have been new development in the transactions of the assessee. In absence of these, addition on this issue cannot be sustained. Further, we observe that there has been no enquiry conducted by the Revenue Authority. AO should conduct further about the matter through proper verification which he has not done. - Decided in favour of assessee Ad-hoc disallowance made @20% under the heads of i) Travelling Expenses ii) Vehicle Expenses and iii) Repair and Maintenance Expenses - Held that:- On perusal of the order of the CIT(Appeals) on this issue, we find that he is simply accepted the version of the Ao and has not come out with specific findings as to why this disallowance should be sustained. AO has not conducted any specific enquiry or given any specific findings as to why this amount should be disallowed and added to the total income of the assessee. Revenue Authorities have stated that certain bills and vouchers were unverifiable and therefore, these disallowances have been made to check possible leakage of Revenue. At the same time we also note that the AO has not resorted to section 145(3) of the Act. Meaning thereby, he has not rejected the books of account. The assessment was completed u/s.143(3) of the Act relying on the books of account of the assessee whereas these disallowances were made by stating that from those books of accounts certain amounts were not matched. Therefore, in totality, on examination of the facts, we are of the opinion that the Revenue Authority has not come out with any cogent reason for these disallowances. We had put a question to the Ld. AR of the assessee, what is the position in the earlier year’s regarding additions under these heads, it is stated that 10% disallowance has been made. In following the rule of consistency and status quo as decided in the cases laws herein above mentioned, we set aside the order of the Ld. CIT(Appeals) and confirm the additions @ 10% on each of these heads. - Decided partly in favour of assessee.
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2019 (1) TMI 1130
Entitlement to exemption u/s 54F - long term capital gain arising from sale of shares invested in purchase of residential flat - AO disallowed assessee’s claim of exemption on the pretext that the flat was purchased by the assessee more than one year prior to the date of transfer of capital asset - whether date of signing of the agreement cannot be said to be the date of purchase of residential house? - contention of the assessee is that since final consideration was paid and the possession of flat was received within a period of one year prior to the date of transfer of capital asset, the same should be considered as the date of purchase Held that:- In the instant case, full consideration has been paid by the assessee for purchase of residential flat within a period of one year before the date of transfer of capital asset. Thereafter, actual possession of the flat was delivered to assessee on 17.09.2010 i.e., within a period of one year prior to the date of transfer of capital asset. It is an un-rebutted fact that at the time of execution of agreement, the residential property was not in existence. Therefore, taking into consideration facts of the case, the date of possession of flat is the date of actual purchase for the purpose of claiming exemption u/s 54F of the Act. Thus in view of undisputed facts of the case and the decision rendered in the case of CIT Vs. Smt. Beena K. Jain (1993 (11) TMI 7 - BOMBAY HIGH COURT), we hold that the assessee is eligible for claiming exemption u/s 54F on the entire amount of capital gain utilized for purchase of residential property. Consequently, the appeal of the assessee is allowed
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2019 (1) TMI 1129
Rejection of application for granting registration u/s.12AA - objects of the Trust are only for benefit of Jain community and therefore, section 13(1)(b) of the Act is attracted - membership of the Trust is limited to the people who are Jain Swetamber - Donations, including corpus donations received in cash with no details of donors are mentioned in the receipt book - Held that:- We take guidance from the decision of the Rajasthan High Court in the case of CIT Vs. Vijay Vargiya Vani Charitable Trust (2015 (2) TMI 671 - RAJASTHAN HIGH COURT) wherein it has been held that at the time of granting registration u/s.12AA of the Act, the Ld. CIT(Exemption) should only look into the objects of the Trust. The issue regarding satisfaction of genuineness of the activities of the Trust is not a matter to be looked into at the time of granting registration u/s.12AA of the Act. That may be considered and decided accordingly at the time of assessment proceedings. As perused the objects of the Trust placed in the paper book. We find that the assessee Trust has objects which are both charitable and religious in nature. Therefore, it can safely be said that assessee Trust is a composite Trust and not purely for charitable purposes. It is the Trust for both charitable and religious purposes. In such circumstances by applying the decision of Commissioner of Income Tax Vs. Barkate Saifiyah Society (1993 (11) TMI 13 - GUJARAT HIGH COURT), section 13(1)(b) is also not applicable in the case of the assessee Trust herein. In examination of facts on records, analyzing the judicial pronouncements placed before us, we, therefore, set aside the order of the Ld. CIT(Exemption) and direct the grant of registration u/s.12AA of the Act to the assessee. - decided in favour of assessee.
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2019 (1) TMI 1128
TPA - assessee to be treated as tested party and all international transactions have to be aggregated for bench marking purpose - Held that:- Transfer Pricing Officer himself in the orders passed in assessee’s own case for assessment years 2011–12 to 2014–15, has not only accepted the AEs as the tested party but also accepted the foreign comparables proposed by the assessee. Even, in the advance pricing agreement dated 3rd August 2015, the Department has accepted the AEs as the tested parties insofar as it relates to fees paid towards management and marketing services rendered by them - As regards the contention of the learned Departmental Representative that the learned Commissioner (Appeals) has not properly considered the comparability of the foreign comparables on account of different financial years, it is relevant to observe, the Transfer Pricing Officer never rejected the foreign comparables proposed by the assessee on the issue of different financial year ending. In fact, the Transfer Pricing Officer has not at all gone into far analysis of the foreign comparables proposed by the assessee since he treated the assessee as the tested party and, therefore selected separate sets of comparables. Therefore, we are unable to accept the submissions of the learned Departmental Representative for restoring the issue to the Assessing Officer / Transfer Pricing Officer for reconsideration. In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) on these issues by dismissing the grounds raised. Contract migration cost not be considered for calculating the operating margin - CIT-A held that the migration cost relating to Travelocity contract being an exceptional and onetime cost, should not be treated as part of operating cost for computing the profitability of the assessee - Held that:- Notably, identical issue came up for consideration before the Tribunal in assessee’s own case for assessment year 2004–05 and Tribunal while deciding the issue has held that the cost incurred by the assessee is purely in the nature of reimbursement without any mark–up. Hence, cannot be treated as part of operating cost. Thus, the Tribunal ultimately upheld the decision of the learned Commissioner (Appeals) on the issue. There being no difference in fact brought to our notice by the learned Departmental Representative in the impugned assessment year we uphold the decision of the learned Commissioner (Appeals) on the issue. Arm's length price of guarantee fee to 0.5% of the guarantee value - Held that:- The facts and material on record clearly reveal that the loan from Travelocity was availed by WNS (Holding) Ltd., one of the AEs of the assessee. It is also not disputed that the assessee has provided guarantee for such loan. Thus, it cannot be denied that some amount of benefit / service was provided by the assessee to its AE towards guarantee for loan which may not have been provided to an unrelated party. In these circumstances, in our view, determination of arm's length price @ 0.5%, is reasonable. It is necessary to observe, though, there is a cleavage in the opinion of different benches of the Tribunal whether provision of corporate guarantee comes within the purview of international transaction or not, however, the Hon’ble Jurisdictional High Court in case of Everest Kanto Cylinder ltd. vs. DCIT (2015 (5) TMI 395 - BOMBAY HIGH COURT) has upheld determination of ALP of guarantee commission @0.5%. Addition on account of determination of arm's length price of interest for extended credit period - delayed payment to AEs towards marketing support services rendered by them - Held that:- The assessee has explained such delay to be on account of late receipt of payment by the AEs from the overseas customers. It is also evident, the assessee has also made delayed payment to AEs towards marketing support services rendered by them. Therefore, there is delay in making payments from both sides. As observed by the learned Commissioner (Appeals), after factually verifying the outstanding creditor and debtor position on account of payment / receipts relating to the AEs there is no loss to the assessee in real terms. As could be seen, the Transfer Pricing Officer while charging notional interest on the extended credit facility to the AEs has completely ignored the delayed payment made by the assessee to the AEs. Thus, as could be seen, no extra benefit has been provided to the AEs on account of extended credit facility. Further, it is the contention of the assessee before us that as a matter of policy, the assessee does not charge any interest either from the AEs or from the third parties towards extended credit period. Allowance of assessee’s claim of deduction u/s 10A - scope of omission in act - Held that:- The omission of section 10A(9) of the Act will operate retrospectively as if the said sub–section never existed in the statute. It is relevant to observe, when identical issue came up for consideration before the Tribunal in assessee’s own case in assessment year 2003–04, the Tribunal in the order passed [2016 (3) TMI 24 - ITAT MUMBAI] has held that the omission of sub–section (9) of section 10A of the Act, would effectively mean that the said provision never existed in the statute and accordingly allowed assessee’s claim under section 10A - Tribunal in its order passed in [2012 (8) TMI 432 - ITAT MUMBAI] upheld the decision of the Assessing Officer in allowing assessee’s claim of deduction under section 10A of the Act by holding that omission of sub–section (9) of section 10A of the Act by Finance Act, 2003, would effectively mean that the provision never existed in the statute. Facts being identical, respectfully following the decisions of the Co–ordinate Bench in assessee’s own case, we uphold the decision of the learned Commissioner (Appeals) on the issue Depreciation on intangible asset representing acquisition of business contract - Held that:- AO while completing assessment under section 143(3) of the Act also allowed assessee’s claim of depreciation. However, learned Commissioner of Income Tax revised the assessment order under section 263 of the Act. Subsequently, while deciding assessee’s appeal against the said order the Tribunal quashed the order passed under section 263 and restored the assessment order. Thus, in effect, assessee’s claim of depreciation in respect of intangible asset became final. In any case of the matter, there is no dispute that by acquiring M/s. Town and Country Assistance Ltd. the assessee has also acquired contractual rights which, no doubt, is a valuable commercial right. Therefore, it comes within the meaning of intangible asset as per section 32(1)(ii) r/w Explanation 3(b) of the Act. Hence, depreciation claimed by the assessee is allowable. TDS u/s 195 - disallowance made under section 40(a)(i) on account of payment of marketing and management fees to WNS N.A. and WNS U.K. without deducting tds - India- UK DTAA - Held that:- Payments made by the assessee are not for making available any technical services by the AEs. Thus, it was held by the Tribunal that the payment made cannot be treated as fees for technical services under the relevant tax treaties. It is also relevant to observe, while deciding appeals relating to WNS N.A. and WNS U.K. concerning taxability of marketing and management fees paid by the assessee, the Tribunal [2012 (3) TMI 630 - ITAT MUMBAI] has held that such payment not being in the nature of fees for technical services is not taxable. The aforesaid decision of the Tribunal was also upheld by the Hon'ble Jurisdictional High Court -Assessing Officer himself while completing the assessment in assessee’s own case for assessment year 2006–07 and 2007–08 in pursuance to the directions of the DRP has not made any disallowance under section 40(a)(i) of the Act for non–deduction of tax at source on account of payment of marketing and management fees. In view of the aforesaid, we hold that the order passed by the learned Commissioner (Appeals) requires no interference. Deduction u/s 10A in respect of the profits of eligible units without setting–off losses relating to other non–eligible units - Held that:- The issue does not required deliberation at length in view of the ratio laid down by the Hon'ble Supreme Court in Yokogawa India Ltd. [2016 (12) TMI 881 - SUPREME COURT]. In fact, the DRP following the aforesaid decision of the Hon'ble Supreme Court has decided the issue in favour of the assessee stating that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. Ad–hoc disallowance made out of administrative expenses - Held that:- Disallowance to 10% of the total expenditure claimed by the assessee under the head “Others” to be confirmed. Disallowance of set–off and carry forward of unabsorbed loss and depreciation of earlier years - Held that:- The aforesaid dispute arose for the in assessee’s own case in assessment years 2001–02 2002–03 and 2003–04. The Tribunal, while deciding the issue held that the provisions of section 10A(6)(ii) of the Act are applicable only after the holiday period is over and directed the Assessing Officer to allow the claim of the assessee. Accordingly, we direct the Assessing Officer to factually verify and allow assessee’s claim as per the directions of the Tribunal in the earlier assessment years, as referred to above. TPA - selection / rejection of certain comparables by the Transfer Pricing Officer - Held that:- Referring to ITES segment of assessee thus companies functionally dissimilar with that of assessee need to be deselected from final list.
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2019 (1) TMI 1127
Denial of exemption u/s 54F - non adherence to condition for availing exemption u/s 54F - non constructing the new house within three years from the date of transfer of the original land - proof of amount been deposited in an account in substantial compliance - Held that:- The subject bank account of the assessee was attached by the Department from 1.12.2010 and remain attached atleast till 30.06.2012, therefore, there is no way the assessee could have met the deadline of 16.7.2011 for constructing the new house, being three years from the date of transfer of the original land and the period during which the bank account remain attached has to be excluded as no fault lies with the assessee. In the interim, the assessment order was passed by the Assessing officer on 5.12.2011. In such a situation, firstly, when the bank account of the assessee was attached, how can he be expected to have utilized the amount so deposited in the said account within the prescribed period and secondly, there is no way, the Assessing officer could have verified such utilization by the time he passed the assessment order. Hence, the utilization or non-utilization and any related non-compliance or failure on part of the assessee is an event subsequent to the year under consideration and the same cannot be made the basis for denial of exemption for the impunged assessment year once it has been demonstrated that the amount has been deposited in an account in substantial compliance with the provisions of sub-section (4) to section 54F. Thus in the entirety of facts and circumstances of the case, the assessee is held eligible for exemption under section 54F for the impugned assessment year and the Assessing officer is directed to allow the same. See ACIT vs Dr S. Sankaralingam [2018 (12) TMI 397 - ITAT CHENNAI] - decided in favour of assessee
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2019 (1) TMI 1126
Application of Explanation 1 to Sec. 37(1) - allowability of sales promotion expenses - abnormal increase in expenditure - expenses were incurred on travel and hospitality of the Doctors and medical professionals - violation of MCI guidelines - Held that:- We hold that it is trite law that CBDT Circular which creates a tax burden or tax liability on an assessee cannot be reckoned with retrospective effect. The CBDT Circular could be made applicable only from assessment year 2013-14 onwards. Reliance in this regard is made on the decision of Hon’ble Supreme Court in the case of DCIT Vs. S.R.M.B Dairy Farming (2017 (11) TMI 1494 - SUPREME COURT). We also find that the lower authorities had not doubted the fact that the sales promotion expenditure were incurred wholly and exclusively for the purpose of business of the assessee. The only grievance of the Revenue seems to be that the said expenditure is hit by the provisions of Explanation 1 to 37(1) of the Act, which in our considered opinion, is not applicable in view of aforesaid discussions. In view of series of decisions relied upon hereinabove on the impugned issue, we hold that the sales promotion expenses incurred by the assessee in the total sum deserves to be allowed.
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2019 (1) TMI 1125
Rejection of books of accounts - lack of submissions of the details and books by the assessee - books of account rejected in absence of assessee’s cooperation and his observation that the proper details were not submitted - Held that:- CIT(A) has passed a very contradictory order without any reference to the examination of the actual books of account. He has upheld the A.O.’s order for lack of appearance and co-operation by the assessee and the validity of assessment framed u/s. 144. Then he has taken a divergent stand that the rejection of the books was not proper and the additions made were liable to be deleted without any actual verification of books. We note that the assessee had submitted that the assessee had not received the last notice, hence, it was pleaded that the proper opportunity was not given to the assessee. CIT(A) without referring to the examination of the books of account, despite his coterminous power has deleted all the disallowance. Neither the assessment can be framed de hors the facts and figures nor the same can be deleted by only theoretical explanation by the assessee and the ld. CIT(A). In our considered opinion, on the facts and circumstances of the case, in the interest of justice, the issue in this appeal needs to be remitted to the file of the A.O
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2019 (1) TMI 1093
Validity of Notice issued u/s 142(1) - Anonymous Donations - 'Charity Box' (Gollak box) being the donations made by various followers and devotees visiting the Gurudwara - Exemption u/s 11 and exemption granted u/s 80G - charitable trust - recourse to statutory remedies - Held that:- The challenge in the writ petition is to notice issued under Section 142(1) and at present, no order adverse to the petitioner has been passed. In such circumstances, we find that the recourse to writ petition is not proper. Accordingly, no permission is granted to file writ petition with better/improved facts as prayed. As clarified that in case any order adverse to the petitioner is passed by the AO in pursuance to notice issued under Section Section 142(1) of the Act, it shall be open to the petitioner to take recourse to statutory remedies in accordance with law.
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Benami Property
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2019 (1) TMI 1147
Prohibition of benami transactions - vested right in favour of the respondents/defendants by the repealed provisions of Section 4(3) of the unamended Act when it used the expressions fiduciary capacity and trustee - Held that:- There did not exist any vested right that a particular transaction was specified as an exempted transaction as not being a barred benami transaction under the expressions fiduciary capacity and trustee under the repealed provision of Section 4(3) of the unamended Act, and by Section 2(9) of the Amended Act a benami transaction is defined and the exceptions have been specifically defined which are the exceptions to the prohibited benami transaction. No vested right is thus taken away, and therefore, the trial court has erred in holding that there existed a vested right in favour of the respondents/defendants by the repealed provisions of Section 4(3) of the unamended Act when it used the expressions fiduciary capacity and trustee . Thus definitions of the exempted transactions to the prohibited benami property transactions, and now contained in the four exceptions in Section 2(9) of the Act are always deemed to have been included in the exceptions to the prohibited benami transactions, and in the facts of the present case, the suit of the appellant/plaintiff would be maintainable by the third exception contained in Section 2(9) of the Amended Act, and that whether or not on facts, the appellant/plaintiff is able to make out a case under the third exception, the same is a disputed question of fact requiring trial, and can only be decided after evidence is led by the parties, and the suit plaint thus could not have been rejected under Order VII Rule 11 CPC without trial. This appeal is therefore allowed. The impugned Judgment of the trial court dated 08.05.2018 is set aside. Suit is remanded back to the trial court for decision in accordance with law.
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Customs
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2019 (1) TMI 1151
Validity of assessment order - case of petitioner is that when an identical issue is pending in appeal concerning other assessment years, the authorities should not insist on the petitioner's facing one more proceeding - Held that:- This Court cannot use its power of mandamus to stultify the statutory provision. True, on an identical issue, compelling the tax payer to make pre-deposit and then contest the case may workout some hardship. But that is how the Statute has contemplated the proceedings. So long as those procedural parameters have not been called in question as illegal, this Court will not interfere - petition disposed off holding that the second respondent will dispose of the Exts.P2 and P3 appeals expeditiously in two months.
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2019 (1) TMI 1124
Condonation of delay of 1662 days in filing appeal - seizure of 59 bars of gold - improper filing of the affidavit and the technical defects noticed - Held that:- There was a clear abuse of process of law in so far as the appellant's Power of Attorney having sworn to an affidavit, which has been shown to be false on the basis of the conflicting statements made in that affidavit itself. The accompanying circumstances also indicate that there was a deliberate attempt to mislead the Tribunal by blatant statements of falsehood. The appellant had also sought to file an appeal from the order of the Tribunal again asserting the averments as stated in the affidavit. The exemplary cost has to be imposed on the appellant - the cost to be paid by the appellant is quantified at Rupees One lakh, which shall also be recovered from the appellant with interest at the rate as provided in the statute, from the date of filing of the second affidavit, ie. from 15.02.2007.
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2019 (1) TMI 1123
Valuation of imported goods - goods have been mis-sent by the overseas shipper or there was mis-declaration of goods? - rejection of declared value - Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - confiscation - redemption fine - penalty - Held that:- The goods actually imported are not the same as those declared in the Bill of Entry, but are entirely different set of goods. This clearly shows that the appellants have misdeclared the goods on the Bill of Entry and have sought clearance of undeclared and misdeclared goods in this manner. Appellants do not dispute that the goods found on examination were not the same goods as declared by them on the Bill of Entry. However appellants have submitted that since the goods were mis-sent by the shipper they were not aware of the goods that were shipped and hence they should not be held responsible for the misdeclaration - From the statement of Shri Sunil Jain, Director of Appellant, it can be reasonably concluded that the goods in the consignment under importation are not the goods as declared by the appellants. By mis-declaring the goods, appellants have sought to clear certain goods which were old and used. The clearance of such old and used goods for home consumption in India is not permitted under Export Import policy 2015-20 (Para 2.31 read with Notification No 35 (RE-2012)/2009-14 dated 28.02.2013), without proper authorization from Director General Foreign Trade - the charge of mis declaration of the consignment in terms of description, quantity and value is well founded. There is no merit in the submission of the appellants that the goods were wrongly shipped by the shipper. In fact, these goods were sought to be imported into India contrary to the EXIM Policy restriction and also by grossly undervaluing the same. There is no merit in the submission of the appellants with regards to bonafides, which in any case is not established in this case. Penalty u/s 112 of FA on Appellant Company and its Director - Held that:- Since the Appellant Company and its Director have by their acts of omission and commission have rendered the goods liable for confiscation penalty imposed on them under Section 112 is justified - taking into account the re-determined value of the consignment and the fact that some of the goods sought to be imported were old and used thus restricted under the EXIM Policy the quantum of penalty to is quite reasonable. Appeal dismissed - decided against appellant.
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Service Tax
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2019 (1) TMI 1122
Repeated summons - grievance of the petitioner before this Court is that the petitioner is repeatedly called upon to appear before the respondent for one reason or other without there being a necessity - Held that:- The prayer sought for as such, cannot be entertained, since the power to issue summons by the respondent cannot be curtailed when the matter is pending at the stage of investigation - However, as it is expressed by the petitioner that she made several appearance before the respondent, this Court is of the view that the respondent has to complete the examination of the petitioner by next hearing date - petition disposed off.
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2019 (1) TMI 1121
Quantum of penalty u/s 78 of FA - failure to pay service tax within the due dates - the entire service tax along with interest were paid before filing of reply to the SCN - suppression of facts or not? - Whether the Tribunal was right in not waiving the entire penalty imposed on the appellant vide the Order-in-Original dated 19.12.2008, but granting only partial relief of reducing penalty to 25% of the amount as imposed in the said Order-in-Original dated 19.12.2008. Held that:- The crucial words in Section 78(1) of the Finance Act, 1994 are 'by reason of fraud or collusion' or 'willful misstatement' or 'suppression of facts'. These words should be read in conjunction with 'the intent to evade payment of service tax'. However, there is no finding rendered by the Adjudicating Authority stating that there was either fraud or collusion or willful misstatement or suppression of facts or contravention of the provisions of Chapter V with an intent to evade payment of service tax. Therefore, in the strict sense of the matter, without a finding rendered by the Adjudicating Authority that there was an intention to evade payment of service tax, under normal circumstances, penalty could not be imposed. However, the facts of the case have not fully convinced us to waive the entire penalty, as there has been chronic default committed by the assessee in regular intervals by failing to pay the service tax within the time permitted under the Statute. Hence, this can be taken as a mitigating factor to reduce penalty, but not to waive the entire penalty. The order passed by the Tribunal is modified to the extent of reducing penalty to 10% of the penalty imposed under Section 78 of the Finance Act, 1994 vide the Order-in-Original dated 19.12.2008 - appeal allowed in part.
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2019 (1) TMI 1120
Refund claim - time limitation - Section 11B of the Central Excise Act - rejection of refund on the ground that the refund claim filed on 17.01.2017 for the period July 2012 to August 2014 is barred by limitation as the same has been filed beyond the period of one year from the relevant date - Held that:- The appellants have filed the refund application on 17.01.2017 after the vacation of the protest - Further, it is found that it is only on 09.01.2017 that the Order-in-Original was passed wherein the Adjudicating Authority has vacated the protest and appropriated the amount towards the demand and therefore, the protest was valid till the order was passed and from the date of passing the Order-in-Original dated 09.01.2017 the refund is within the limitation of one year. Further, once the duty is paid under protest then as per the proviso to Section 11B, the limitation of one year will not apply - the impugned order rejecting the appeal on time bar is not sustainable - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1119
Demand of service tax - job work - change of the valuation under Central Excise to MRP based valuation - manufacture of pharmaceuticals - inclusion of testing charges in assessable value - extended period of limitation - Held that:- As long as the pharmaceuticals were not under MRP based valuation, the excise duty was paid by the appellant reckoning the processing charges including the testing and analysis charges. Since, the pharmaceuticals are now under MRP based valuation, the amounts which they received under the two heads is irrelevant. The question is whether because of change of the valuation under Central Excise to MRP based valuation, the activity of testing and analysis which was hitherto considered by the appellant as a part of their manufacturing costs and which has not been disputed by the department becomes a distinct service rendered to their principals. We find it difficult to hold such a view - The testing and analysis is not a distinct separate service being offered by the appellant to their principals but it is a part and parcel of the manufacturing process. Unless such testing including stability tests and validation tests are conducted the product cannot be marketed at all. Therefore, no service tax can be leviable separately on this component of the processing charges which they received. On identical facts in the case of Midas Care Pharmaceuticals Pvt Ltd [2014 (8) TMI 743 - CESTAT MUMBAI], the Tribunal-Mumbai held that no service tax can be levied under testing and analysis charges where the pharmaceuticals are tested by the appellant after being manufactured as a job work. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1118
Time Limitation - Valuation - Consulting Engineering Services - deduction of reimbursement and accommodation charges - Held that:- A show-cause notice has already been issued to the appellants on 15.10.2004 on the issue of admissibility of deduction of reimbursement and accommodation charges. The department is well aware of the working model of the appellants. The appellants have also been submitting returns from time-to-time along with challans and bills. Therefore, invoking extended period is not justifiable in this case. On perusal of para 7 of the show-cause notice, it is seen that the show-cause notice states that the earlier show-cause notice was on the actual expenses incurred and reimbursed and not the once raised in the present show-cause notice. However, para 6 of the show-cause notice states that the word ‘gross amount’ has been used to emphasize the fact that no deductions will be allowed in respect of any expenditure incurred by the consulting engineer. Therefore, it cannot be stated that the two show-cause notices are different and a new and emergent situation has arisen for invoking the extended period. Therefore, the contentions in the impugned show-cause notice and the orders as far as it relates to accommodation and other charges reimbursed, the department is not correct in extending the period of limitation. Valuation - inclusion of Withholding tax / TDS - appellants claim that the same were not collected by the appellant and it was merely added and deducted in the invoice for accounting purposes in the invoice. Therefore, it cannot be considered as part of taxable value - Held that:- The Order-in-Original also did not give any findings on the same specifically. One more issue which is agitated in the impugned order is about whether the exemption contained in the Notification No.2/1999 dated 28.2.1999 is applicable to the appellants. The Ld. Commissioner (A) has contended that it is seen that as per the agreement is entered into between NHAI and he appellants in joint ventures with Consulting Engineers Group Ltd. Jaipur, the appellants are main party to the agreement and by no stretch of imagination they can claim themselves as sub consultants. Therefore, no abatement can be available. Receipt of remuneration in freely convertible foreign currency - Held that:- It is not understood as to how Commissioner (A) has come to a conclusion that the same has been repatriated as no clear findings have been given on this issue. However, as per discussion above, a show-cause notice on the same issue being already issued to the appellants and the appellants submitting the returns along with bills and challans regularly, we find that department has not made a case for invoking the extended period. We are not looking into the above issue of includability of TDS and withholding tax and the exemption claimed by the appellants on freely convertible foreign exchange. However, while holding that accommodation and other reimburse charges are not includable in the assessable value of taxable service, we find that the entire show-cause notice is barred by limitation. The impugned order is set aside partly on merits and totally on limitation.
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2019 (1) TMI 1117
Classification of services - Construction of Residential Complex Service or not - contention of appellant is that the issue raised was defended by them on the basis of definition of Residential Complex Service and in respect of Bapu Dham Complex, there were no common facilities and therefore, the activity was not covered by the definition of Construction of Residential Complex Service - Held that:- An identical issue was decided by this Tribunal in the case of Rajeshwar Builders Versus Commissioner of Central Excise, Ghaziabad [2018 (8) TMI 821 - CESTAT ALLAHABAD], where it was held that To qualify to be a residential complex the building or buildings should have a common area and one or more facilities of services such as park, lift, parking space, community hall, water supply or effluent treatment system, located within a premises. Since there is no positive evidence provided by Revenue to establish that there were common facilities such as – Park, Lift, Community Hall, etc., the impugned order is set aside - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1116
Manpower recruitment and supply agency service - non-payment/short payment of service tax - appellant have been paying service tax on service charges/commission and not on the total amount received by them from the service recipient - extended period of limitation - Held that:- The appellant is showing service charges and payment of salary & wages separately in the bills raised to the service recipient. If that be so, then the salary and wages does not form part of ‘gross amount charged’ and no service tax can be charged on the said amount being in the nature of pure agent - the appellant is required to pay service tax on service charges, which has been paid in the present case. Extended period of limitation - Held that:- The extended period of limitation is not available to Revenue in as much as the appellant is regularly filing ST-3 returns and all material facts are available on the records of the appellant i.e. balance sheet & Bills - also, issue being one of interpretation of law, hence, the extended period cannot be invoked in the present case. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1115
Construction of residential complex Service - Sai Sharnam Project - Laboni Project - In respect of Sai Sharnam Project at Sirdi in Maharashtra, he has refused the contention of service provider that the project was completed before 01.07.2010 - In respect of Laboni Project the contention of service provider was that the architect had issued certificate on 05.05.2010 that the said project was completed and such certificate issued by architect was submitted to Ghaziabad Development Authority - whether service tax was leviable in respect of Sai Sharnam Project and Laboni Project? Held that:- In respect of Sai Sharnam Project the original authority has refused to accept date of completion as 31.03.2010 in the absence of mention of name of the said project in the certificate issued by architect - However, we note that during the proceedings it was not establish through positive evidences by revenue that any activity of construction in respect of Sai Sharnam Project was continued after 01.07.2010 - the levy of service tax introduced w.e.f. 01.07.2010 is not applicable to Sai Sharnam Project. In respect of Laboni Project the Original Authority has stated that though service provider has referred to certificate issued by architect on 05.05.2010 he will go by the certificate issued by Ghaziabad Development Authority on 13.07.2011. The learned Counsel for service provider has submitted a copy of certificate dated 05.05.2010 issued by architect in respect of Laboni Project stating that the project was complete in all respect. We note that Central Board of Excise & Customs through Circular dated 01.07.2010 had clarified that certificate issued by architect serves the purpose to establish that the project is complete. We, therefore, hold that Laboni Project was also completed before 01.07.2010 - the service tax was not liable to be paid in respect of Laboni Project. The demand of ₹ 34,79,175/- in respect of Sai Sharnam Project and demand of ₹ 1,88,94,825/- in respect of Laboni Project is set aside - demand of ₹ 1,68,37,388/- in respect of Technocity Project and imposition of penalty of ₹ 1,39,200/- under Section 70 of Finance Act, 1994 for late filing of ST-3 returns also set aside - the Original Authority had allowed refund of amount excess paid by the appellant. The said refund now needs to be worked out taken into consideration the service tax of around ₹ 4.17 crores paid and ₹ 1.68 crores service tax confirmed and ₹ 1.39 lakhs penalty imposed - appeal disposed off.
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2019 (1) TMI 1114
Reverse Charge Mechanism - Intellectual property services - payments made in connection with receipt of ‘know-how’ under contract with their parent organisation outside India - Held that:- The tax liability devolves on the appellant, notwithstanding being the recipient of the service, not as ‘person liable to tax’ in Service Tax Rules, 1994 but as deemed provider; this coalescing of the provider and the recipient in the same person fictionally obliterates the existence of the overseas provider. Accordingly, it would be incorrect to read the provisions of Explanation in section 67 of Finance Act, 1994, effective from 10th May 2008, to apply in such instances of import of services to that which is relevant only for the valuation of the service. Accordingly, the discharge of tax liability on the billing raised by the de facto provider of service cannot be faulted - The tax liability on the value of ‘intellectual property services’ is required to be adjusted to the extent of cess paid under the appropriate legislation. Penalty u/s 78 of FA - Held that:- The discharge of tax liability by the appellant on the appropriate and proper determination of liability would suffice to exclude the scope for imposition of penalty under section 78 of Finance Act, 1994 - Moreover, the appellant had no reason to attempt to evade this tax in view of the eligibility for CENVAT credit of the tax paid. The imposition of penalty under section 78 is thus not grounded in law. The demand in the impugned order to the extent that the tax liability had been discharged at regular intervals by the appellant before issue of show cause notice is set aside - the liability to interest, if any, arising from delayed payment in accordance with the law as espoused, may be computed and informed to the appellant for due discharge - matter is remanded back to the original authority for the decision only on the correctness of the short payment of ₹ 8,08,864 and applicability of interest - appeal allowed by way of remand.
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2019 (1) TMI 1113
Reverse charge mechanism - intellectual property right services - business auxiliary service - demand of tax on differential rate of tax - penalty - Held that:- The empowerment of the Central Government to notify the rate of exchange for the purpose of computation of assessable value in relation to chargeability of tax under section 66 A of Finance Act, 1994 came into effect much after the period of dispute. Consequently, in the absence of a legal mechanism for alternate computation, the exchange rate at which the payment was remitted to the overseas entity alone could be applied. The demand of tax on the differential rate of exchange does not sustain and is set aside. Furthermore, it is apparent from the scheme of ‘deemed provider of service’ in section 66A of Finance Act, 1994 and Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 that the entitlement to CENVAT credit of tax so paid eliminates the attribution of motive or conduct that are the ingredients for imposition of penalty under section 78 of Finance Act, 1994. The residuary provision for imposing the figment of import on transactions enumerated in section 65(105) of Finance Act, 1994 does not extend to ‘intellectual property rights’, unique as they are and not amenable, by comparison with procurement of such property from within the country, to countervailing. The said Rules have an inbuilt provision for exemption of all services that do not fall within the ambit of import of service by reference to section 93 of Finance Act, 1994 excluding this particular activity thereby from the ambit of tax. Penalties set aside - appeal allowed to the limited extent of the differential tax arising from the application of alternate rate of exchange.
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2019 (1) TMI 1112
Valuation - commercial or industrial construction service - inclusion of ‘written off dues’ in assessable value - Held that:- It is surprising that the adjudicating authority has deemed these debit notes, relating to supply of materials by the customers, to be documents that substitution of monetary consideration by nonmonetary consideration. Consideration, in common understanding, is the recompense for providing anything to a provider and is, consequently, subsumed within the property of the provider. Debit notes imply the intent to withhold the value therein from the monetary consideration and the issue of materials in lieu for subsuming in an asset that will vest with the issuer cannot, by any stretch, be deemed to be consideration - It is, therefore, not the ‘non-monetary consideration’ referred to in section 67 of Finance Act, 1994 and the relevant Rules. Penalty u/s 78 of FA - Held that:- The appellant is a provider of services against contract that also involves supply of goods which would take the activity beyond the ambit of tax under the provisions that have been held to be service simplicitor. In these circumstances, and the due discharge of tax liability on the undisputed portion of the demand, imposition of penalties under section 78 of Finance Act, 1994 is not appropriate. The recovery of tax of ₹ 10,07,854 and penalty imposed under section 78 of Finance Act, 1994 is set aside - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1111
Construction services - works contract service - appellant was not rendering any service to their clients but they had collected the amount representing as service tax - Section 73A of the Finance Act, 1994 - demand of interest on short deposit of amounts under Sec.73A in terms of Section 73B of the Act - penalty u/s 77 of FA. Whether or not the appellant is liable to pay service tax on works contract service as per the Construction Agreement which they entered into to complete the incomplete houses of their clients? - Held that:- The appellant has undertaken to complete semi-built houses as per the copies of Construction Agreement produced by them before us. They are neither residential complexes nor new buildings or civil structures for commerce or industry. Therefore, they are clearly, not covered under the definition of Works Contract Service - since construction/ completion of incomplete houses is not squarely covered by the Works Contract Service , the appellant is not liable to pay service tax. Therefore, the appellant was not liable to pay service tax. An argument of the learned counsel for the appellant is that if it is held that they are not liable to pay service tax and the amount which they have collected is held to be liable to be deposited under Sec.73A, the amount which they debited in their CENVAT account should be considered as deposit under Sec.73A - Held that:- There is also nothing in the CCR, 2004 which entitle such a person to use the CENVAT credit so wrongly availed to discharge their liability to make a deposit u/s 73A - the appellant has to deposit the amount collected from its clients under Sec.73A(2) and cannot use CENVAT credit for the purpose. The amount already collected in cash gets adjusted against this amount and the appellant is liable to deposit the rest. As the appellant is not entitled to take CENVAT credit, the same needs to be recovered from them. Demand of interest u/s 73B of FA - Held that:- Section 73B applies to cases where an amount has been collected in excess of tax assessed or determined referred to Sec.73A(1). There does not appear to be a corresponding provision for collection of interest under Sec.73B where any amount has been collected as tax which is not required to be collected [Sec.73A(2)]. In the absence of any statutory provision, the demand of interest is not sustainable. Penalties - Held that:- As appellant have disclosed their operations to the department and also expressed their doubts if they were liable to pay service tax at all, penalty is set aside by invoking section 80. Appeal disposed off.
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2019 (1) TMI 1110
Refund of unutilized CENVAT Credit - refund rejected on the ground that the input services have not gone for consumption and have no nexus with the output service; that invoices are greater than one year old; that address was not matching as per ST 2 returns; that invoices were not submitted and Cenvat credit availed on the basis of credit notes - Rule 5 of the Cenvat Credit Rules, 2004 - Held that:- In order to ascertain, whether a particular service has nexus with the output service, the test to be applied is that in absence of use/utilization of such service, what will be the effect on ultimate exportation of service. In absence of use of such input service, if it adversely impacts the quality and efficiency of the exported output service, then such input service should qualify for the benefit of refund envisaged under Rule 5 of the rules - In this case, the nature of use of the disputed services for the purpose of exportation of output service, as explained by the appellant, clearly shows that those services have nexus with the output service and that such services were in fact, required for smooth business transactions of exportation of service. Further, it has also been clarified that since those offices run on 24x7 basis, it is the necessary pre-requisite that the employer should provide certain facilitates in the form of services to its employees to ensure that the output service is provided efficiently; and accordingly, it was clarified that the services like outdoor catering or rent-a-cab to pick-up and dropping of the employees, would be eligible for credit - refund cannot be denied holding that there is no nexus between those services and the output service exported by the appellant. Time limitation - rejection on the ground that issuance of let export order/date of shipment should be considered as the relevant date for the purpose of computation of limitation period under Section 11B of the Central Excise Act, 1994 and not date of receipt of FIRC, as claimed by the appellant - Held that:- The issue arising out of the present dispute is no more res integra, in view of the decision of this Tribunal in the case of Bechtel India Pvt. Ltd. vs. Commissioner of Central Excise, Delhi, [2013 (7) TMI 490 - CESTAT NEW DELHI], wherein it has been held that in case of export of services, export is complete only when foreign exchange is received in India; and such date should be considered as relevant date for the purpose of computation of limitation period - In this case, though the export invoices were issued by the appellant on 30.06.2007, but the hard copy of FIRC was received on 18.07.2007 and thereafter, the refund claims were lodged on 30.06.2008. Since the refund applications were filed with one year from the date of receipt of FIRC, the same is within time and cannot be rejected on the ground of barred by limitation of time - the impugned order rejecting the refund applications on time bar aspect is not sustainable. Refund claim - availment of Cenvat credit on the basis of credit notes - Held that:- The he appellant has agreed that such credit is not permissible and the credit amount has already been reversed by the appellant from the Cenvat account - Since the appellant concedes that it is not entitled for such credit, no opinion is expressed on entitlement for such credit - refund rightly denied. Rejection of refund benefit on the ground of non-submission of relevant invoices - Held that:- The appellant stated that the relevant documents/invoices are available with it and can be produced before the original authority for necessary verification. Since the appellant concedes that the invoices are available with it, the matter can be remanded to the original authority for verification of the disputed invoices. Appeal allowed in part and part matter on remand.
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2019 (1) TMI 1109
Renting of immovable property - Co-ownership - Association of persons - inherited property - SSI Exemption - clubbing of clearances - Held that:- The demand on co-owners jointly cannot be sustained. This Bench itself in the case of Shri. S. V. Janardhanam Vs. Commissioner of G.S.T. & Central Excise Salem [2018 (10) TMI 476 - CESTAT CHENNAI] relied upon another Tribunal decision in the case of Sarojben Khusalchand [2017 (5) TMI 240 - CESTAT AHMEDABAD] and held that such co-owners are receiving rents separately in proportion to their share and are also being assessed separately under income tax law. The service tax liability will require to be quantified individually for the co-owners provided they exceed the threshold limit for taxability under service tax. Penalty u/s 77 and 78 of FA - Held that:- Since the very edifice of the demand made jointly on the co-owners has crumbled, there will not be any penalty imposable on these appellants. Hence, the penalties imposed under Sections 77 and 78 of the Finance Act, 1994 are set aside. The matter is remanded to the Original Authority who will re-work the service tax liability after taking into account the value of taxable service relative to each of the co-owners and after giving the benefit of threshold limit for taxation to each of them - appeal allowed by way of remand.
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2019 (1) TMI 1108
Penalty u/s 77 and 78 of the Finance Act, 1994 - short payment of service tax - Manpower Recruitment and Supply Agency Services - appellant has paid up the tax demand along with interest before the issuance of Show Cause Notice - Held that:- It is seen that the Show Cause Notice is dated 03.09.2009 whereas the appellant has paid up the demand on 26.02.2009 and 31.03.2009 and interest on 31.03.2009. It is evident that the appellant has indeed paid the demand along with interest much before the issuance of the Show Cause Notice - Sub-Section 3 of Section 73 of the Finance Act, 1994 would come into application and the penalty imposed, therefore, cannot sustain - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1107
Business Auxiliary Services - Commercial concern or not - services to clients in respect of supply of IMFL to CSD canteens - N/N. 14/2004. - basic contentions of the appellant were on the issue that they being a proprietorship concern cannot be equated to a commercial concern for the purpose of Business Auxiliary Service - time limitation - Held that:- It is seen from the records of the case that the appellants have entered into contract with two companies and have engaged 34 people for helping them in the discharge of their functions vis-à-vis their customers; they have received commission to the tune of crores of rupees. The concern being reasonably big, the appellants claim that they are proprietorship concern and not a commercial concern, does not find favour with us - the activity undertaken by the appellants are certainly not on a small scale to be held to be a proprietorship concern in the understanding of a common man - the Ld. Commissioner has rightly observed that the service rendered by the assessee is as a commercial concern. Appellant also claims themselves to be a commission agent of their customers - Held that:- Sub-clause (vii) under Business Auxiliary Service includes a service incidental or auxiliary to any activity specified in clauses (i) to (vi) and includes activities such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision and includes services as a commission agent, but does not include any information technology service and any activity that amounts to “manufacture” within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944 - the services rendered by the appellants are within the ambit of Business Auxiliary Service. Time Limitation - Held that:- The appellants were under bona fide belief that the services by them are not taxable to service tax - extended period cannot be invoked - demand needs to be limited to the normal period. For the computation of duty payable during the normal period, the issue needs to go back to the original authority. Simultaneous Penalty u/s 76, 77 and 78 of FA - Held that:- Ld. Commissioner has imposed penalty under Section 76 and Section 78 simultaneously, which is not permissible during the relevant period. Moreover, we find that Ld. Commissioner has imposed penalty under Section 78 equivalent to twice the duty demanded - this is very harsh - penalty u/s 78 set aside - However, penalty under Section 77 and Section 76 would continue. The appeal is remanded with a direction to the Original Authority for computation of demand to the normal period and penalty under Section 77 and Section 76 would continue - appeal allowed by way of remand.
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2019 (1) TMI 1106
Classification of services - Commission Agent or a Clearing and Forwarding Agent or not - cenvat credit availed and utilized in excess of 20% - cenvat credit on the service tax paid on Mobile Phone Charges under Section 73(2) of the Finance Act 1994 read with Rule 14 of Cenvat Credit Rules, 2004? Whether the appellant is a Commission Agent or a Clearing and Forwarding Agent during the period 01.04.2001 to 09.07.2004? - Held that:- The products of the principal are supplied to the appellant on consignment basis and the appellant sells the products to customers. On going through the agreement between the appellant and M/s. Fine Organic Industries, it is seen that the appellants are appointed as consignment agents. Similarly the agreement with M/s. Baerlocher India Additives (P) Ltd. and DCW Ltd. mention the appellants to be consignment agents - learned Commissioner (Appeals) has found that the appellants have not contested the payment of service tax for the previous period. Therefore, there was no reason to change the existing classification as Clearing and Forwarding Agents - the lower authority and the Commissioner (Appeals) have rightly upheld the classification under Clearing and Forwarding Agents - appeal dismissed. Whether the appellants are liable to pay cenvat credit availed and utilized in excess of 20% and as to whether the appellants are eligible to avail a cenvat credit on the service tax paid on Mobile Phone Charges under Section 73(2) of the Finance Act 1994 read with Rule 14 of Cenvat Credit Rules, 2004? - Held that:- The service on which no service tax is leviable under Section 66 can be termed as ‘exempted service’. We find that this is very curious and extended argument. To be an exempted service, the activity should be a service. Without any statute categorizing the trading as a service, it cannot be held that it is an ‘exempted service’. We do not find any infirmity with the order of the original authority. Accordingly, we find that the impugned Order-in-Revision as far as this demand is concerned is not sustainable. Cenvat credit on Mobile Phone Bills availed by the appellant during 04/2004 to 12/2005 - Held that:- Commissioner in the Revision order has upheld this demand only on the ground that the said decision of CESTAT was appealed against in High Court of Gujarat. However, the learned Commissioner has not found if the same was stayed. Under these circumstances, the contentions in the Order-in-Appeal are not valid and upholding of demand is incorrect. In view of the case-law that as long as the input services are utilized for the purpose of providing the output services, credit is admissible. Therefore, the order on this ground is also liable to be set aside. Appeal disposed off.
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2019 (1) TMI 1105
CENVAT Credit - capital goods or not - Furniture - Cenvat benefit was denied by the department on the ground that ‘furniture’ classifiable under Chapter 94 of the Central Excise Tariff Act, 1985 has not been specified as capital goods - Held that:- In this case, the furniture purchased by the appellant for its business purpose, though is not confirming to the definition of capital goods, but the same should be considered as input, in absence of any restrictions provided in the statute - credit allowed - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1104
Refund of unutilized CENVAT Credit - refund denied on the ground that various services were used primarily for the personal purpose and not for accomplishing the purpose of business of the appellant - Held that:- On perusal of adjudication order dated 31.10.2017, it is found that CENVAT Credit of ₹ 15,68,635/- disallowed by the Commissioner (Appeals) was part and parcel of the refund claim of ₹ 8,92,23,680/-, which was sanctioned by the refund sanctioning authority. Thus, there was no scope or occasion on the part of appellant to agitate such matter before the Commissioner (Appeals). In fact, the appellant had never raised this point at the time of filing the appeal before the Commissioner (Appeals). Thus, it transpires that the Commissioner (Appeals) has travelled beyond the scope of the original records in arriving at a conclusion that the appellant should not be eligible for refund benefit of ₹ 15,68,635/-. There is no material available on record to show that Revenue has contested the case of allowing the refund benefit by the original authority to the tune of ₹ 15,68,635/-. Thus, at this juncture, Revenue cannot contest such refund benefit allowed by the original authority - appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (1) TMI 1103
SSI Exemption - use of brand name of others - PVC soles for footwear - manufacture of PVC granules from old and used PVC footwear - benefit of exemption denied on the ground that the soles were bearing ‘AIM’ and ‘JUMP’ brand owned by someone else - Held that:- The department have adduced no credible evidence to show that the soles cleared by the appellant co. were bearing ‘AIM’ and “JUMP’ brand only. As regarding claim that the said brands were owned by the family, it is found that three buyers of the appellant company, Sh. Pawan Kumar Bhatia, Sh. Sandeep Kamra and Sh. Anil Kumar Bhatia in their statements, on which heavy reliance is placed in the Show Cause Notice, had stated that they were placing orders on Sh. Rajesh Kumar Garg which was executed sometimes on the invoice of M/s. Rajesh Plastics Pvt. Ltd and sometime on invoices of M/s. J. N. Footwear Pvt Ltd. Revenue have adduced no evidence to Show that the said brands had acquired such reputation so as to be identified with the persons who applied for registration - benefit of SSI Exemption was available to the appellant company - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1102
Scope of remand - remand order limited to determination of the utilisation of advance received from the customer, which had been exceeded by the adjudicating authority - Held that:- As the adjudicating authority was unable to come to a conclusion based on the limited documentation furnished by the appellant and has rendered a finding that the remand order of the Tribunal could not be interpreted in such a narrow manner as to deny Revenue of its authority, and its obligation, to ascertain the elements that should comprise the assessable value, it is the appropriateness of that finding which concerns us. The adjudicating authority is within his powers to accept or reject the contention of the certificate of the Chartered Accountant on the basis of available, or requisitioned, material. That would have been the conclusion of the adjudicating authority on applying his own mind. Borrowing from an erased order cannot be construed as proper application of mind. Matter to be considered afresh by the adjudicating authority - appeal allowed by way of remand.
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2019 (1) TMI 1101
Clandestine manufacture and removal - manufacture of Colour TVs as also in sub-assemblies of Colour TVs - appellant claims that the entire case of the Revenue is based upon assumptions and presumptions and without any evidence to establish the actual manufacture of the goods in the appellant’s factory and clearance of the same - Held that:- The Revenue’s entire case is based upon the retracted statements of Bhatia deposing that the said components, after clearance, were sent to the factory of M/s.Viera Electronics. There is no evidence produced by the Revenue showing transportation of the said components to the factory premises of M/s.Viera Electronics. The Revenue’s allegation relate only to the alleged diversion of unaccounted PCBs imported by Bhatias to their factory. There is no whisper of procurement of other raw materials required to be used in the manufacture of CTVs. In the absence of any allegation/evidences of procurement of other requisite raw materials, the allegations of clandestine manufacture of around one and a half lakh CTVs cannot be upheld. It is well settled law and does not require the support of the precedent decisions that the allegations of clandestine activities are required to be established beyond doubt, being quasi-judicial proceedings,s by production of positive and tangible evidences. Mere doubts or allegations made on the frivolous grounds and on the unfounded basis of belief by the officer, cannot be adopted to establish the same. Revenue itself is doubting the divergence of goods to the appellant’s factory when the adjudicating authority is using the expressions that the appellants “might have” used the same in the manufacture of Colour TVs. The distance between “might have” and “must have” is required to be covered by production of positive evidences. The demand cannot be upheld on the basis of surmises and conjectures. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1100
Clandestine manufacture and removal - manufacture of Gutkha out of short found raw materials and clandestine clearance of the same - validity of statements recorded during the investigation - the entire case is based on presumption that alleged shortage of one raw material, was the evidence to establish clandestine removal and evasion of duty - Held that:- The revenue’s case is based on statements and revenue’s grounds are an attempt to establish as to how such statements are reliable for setting aside the impugned order. However, as recorded by the Original Adjudicating Authority many statements have been retracted and transporters have stated that they have never transported the goods manufactured by respondent - Further, revenue could not establish as to from where other raw materials were procured. Further, revenue could not establish actual manufacturer of Gutkha alleged to have been clandestinely removed - appeal dismissed - decided against Revenue.
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2019 (1) TMI 1099
100% EOU - entitlement of the appellant to exemption from duty in the procurement of material for manufacture of goods - penalty u/s 11AC of CEA - chapter 9 of EXIM Policy 1997-2002 notified by Director General of Foreign Trade under the Foreign Trade (Development Regulation) Act, 1992 for the period from 24th June 2002 to 1st January 2004 - the relevant notification, issued under section 5A of Central Excise Act, 1944, was amended to deprive duty exemption to trading units. Held that:- The liability to make good the duty foregone, in the event of ineligibility for procurement without payment of duty, is conclusive. The appellant also has bound itself, through the letter of undertaking, to observe the conditions of the exemption notification. Failure to comply is to be visited with the recovery of duty as undertaken in the bond. The provisions of section 11A of Central Excise Act, 1944 are not the sole source of recovery. The contract in the bond is sufficient to do so - Even if it is conceded that central excise officials were aware of the ineligibility of the appellant and recourse to section 11A of Central Excise Act, 1944 is not available, considering the circumstances of ineligibility and the commitment under the bond, demand of duty of ₹ 18,47,929 must be upheld. Considering that there is no demonstrated mala fide in the actions of the appellant continuing to avail the benefit of exemption despite lack of coverage in the relevant notification, and probably under the impression of continuity of the privileges attached to Letter of Permission that was not invalidated, the invoking of section 11AC of Central Excise Act, 1944 does not appear to be appropriate. Penalty set aside while demand of duty upheld - appeal allowed in part.
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2019 (1) TMI 1098
Valuation - transportation of manufactured pipes to the site of the customer for assembly - inclusion of transportation costs incurred for such movement in assessable value - Held that:- It is amply clear from the decision in the case of COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. [2015 (10) TMI 613 - SUPREME COURT] that the inclusion of transport cost beyond the factory of manufacture is allowed only upon establishing that the manufacturer continues to be the owner of the goods even at the site of assembly. Reliance placed upon the provisions of Sale of Goods Act, 1930 will not suffice when it is on record that the goods are supplied in accordance with a contract entered into with government agencies and accepted at the factory after prescribed tests - It is also found from the records that the contract requires the appellant to assemble the goods in accordance with the pre-arranged design in a separate transaction in which the goods supplied cannot be rejected by the procurement agency. In the circumstances, there is no reason to accept the contention of Revenue that the sale has occurred at the premises of the buyer. The transportation costs are not liable to be included in the assessable value of the accessible goods - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1097
Valuation - Assessment of duty on ‘un-manufactured tobacco’ - valuation based on capacity based production - deployment of machinery - Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Held that:- No evidence has been produced for us to entertain a conclusion that trade parlance has a connotation which could be adopted for determination. The focus on portions of the show cause notice in the impugned orders, as well as the submission of Learned Special Counsel, would make it appear that a technical opinion from experts in engineering seem to be the only source of enlightenment. That, however, would not be in consonance with the principles that govern levy and collection of tax - also, though the number of pouches produced from machine did increase substantially, the circumstances specified in rule 6(1) for determination does not appear to apply. Providing for multiplication of capacity when ‘multiple track/multiple line’ machines are deployed, implies the acknowledgement of simultaneous emergence of the pouches. That does not appear to be so. The absence of parallel processing of pouches inclines us to discard the contention of Learned Special Counsel for Revenue that the machines installed by the assessee are ‘multiple track/multiple line’. Despite the elimination of lead time in collecting the ‘unmanufactured tobacco’ for each pouch, it is yet only one pouch that can be filled at any single point in time. That is a clear articulation of the intent. The lure of revenue maximization that may have motivated the initiation of proceedings cannot support the stated intent. In the absence of any evidence that the higher capacity was not merely a consequence of enhancing efficiency of existing machines, the grounds of appeal cannot sustain - appeal dismissed - decided against Revenue.
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2019 (1) TMI 1096
Valuation - Discrepancies in the figures shown in the Profit & Loss account and ERI returns - the total value of both the traded goods and the manufactured goods as shown in the worksheet was found to be less than the value as shown in the profit and loss accounts for each of the three financial years - demand of differential duty - Held that:- Commissioner has said that though the proprietor of the assessee has given statement that they are doing some modification on the goods, there is nothing to show that a new product emerges from such modification. The goods received and the goods sold are one and the same and there is no change in CETH or description of the goods. The Commissioner has therefore categorically held that the activity if any of modifying the goods does not amount to manufacture. It is for the department to show as to what are the inputs used for doing such modification and what is the activity actually involved for doing the modifications. The activity cannot be held to be manufacture on a mere presumption that there is an increase in the price value. Whenever there was no increase in the price, it is taken by the department to be traded goods. Thus, the allegation of manufacture is on mere assumption of increase in the value of goods sold. There is actually nothing brought forth in the show cause notice to show that the activity undertaken by the respondent amounts to manufacture. The Commissioner has rightly dropped the demand with respect to ₹ 34,94,737/- - appeal dismissed - decided against Revenue.
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2019 (1) TMI 1095
Valuation - inclusion of charges for installation, erection, commissioning, supervising at site and training of customers’ employees in assessable value of finished goods - Held that:- The CESTAT, New Delhi in ROCKWELL AUTOMATION INDIA PVT. LTD. VERSUS COMMR. OF C. EX., GHAZIABAD [2008 (5) TMI 62 - CESTAT NEW DELHI] allowed the appeal of the appellant by holding that the impugned charges on account of installation etc. are clearly post removal expenses, having no nexus with manufacturing/marketing of the goods and hence not includible in A.V. - demand set aside - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (1) TMI 1094
Best Judgement Assessment - power of estimation conferred on the Assessing Officer - sub-Sections (9) and (10) of Section 22 - when a suppression is detected and the same is permitted to be regularised by filing of a return as provided under sub-Section (10) of Section 22, could there be a best judgment assessment estimating turnover, to cover up the probable omissions and suppressions? - Held that:- In the KVAT Act the completion of assessment as contemplated in Section 21 is on the filing of a return; a self assessment. The deeming fiction of regularisation of assessment and completion, under sub-section (10) only saves the assessee from an assessment under Section 22 for reason of the return originally filed being defective. Section 22 (10) is also subject to Sections 24 and 25 of the Act; ie: an assessment completed under Section 21 is capable of being re-opened under Section 25 for assessment of escaped turnover wherein the Assessing Officer is conferred with the power to carry out assessment to the best of his judgment. In the present case, three diaries were recovered from the premises of the assessee. There can be no presumption that there were no other suppressions. The assessee would not keep the entire details of suppression available for detection. The three diaries also found 72 instances of suppression over nine months of the subject year. There is a definite pattern of suppression established from the recovered documents and best judgment is permissible to cover up the probable omissions and suppressions. Review petition dismissed.
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