Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 4, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Central Goods and Services Tax (Amendment) Act, 2018- Clarification regarding section 140(1) of the CGST Act, 2017
Income Tax
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Charitable activities - exemption under Section 11 denied - AO should have restricted the denial of exemption only to that portion of the investments, which were made by the assessee in violation of Section 11(5) of the Act.
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TDS u/s 195 - time-writing charges - The service provided by employees of BGIL are merely in the nature of routine support services and, therefore, cannot be termed as ‘FTS’ under Article 13 of the India UK DTAA.
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Valuation of shares - Restriction as per Rule 11U(a) on the auditor’s acceptance as Accountant for the purposes of Rule 11UA (2) is well founded. - There is no merit in this argument of the assessee that only because the certificate is given by the auditor, it should not be held that the value certified by him is not acceptable.
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Determination of total income - assessment of agricultural income - assessee has not produced any details or evidence regarding quantity of crops sold, date on which sold, the cost of expenditure incurred, the rate at which sold etc. - Additions confirmed.
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Additions on account of gold and cash found during the course of search proceeding - The material found from an unconnected person cannot be added in the assessee's hands when even the said person had not admitted that it relates to the assessee.
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Capital Loss - it is not in dispute that the flat has not been acquired under the settlement but by some other means for which the cost of acquisition of the flat needs to be determined. The price of acquisition under the facts and circumstances cannot be changed at all and accordingly the resultant computation of capital gain would result in Long Term Capital Loss which has rightly been allowed by the AO.
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Revision u/s 263 - AO having passed the assessment order in compliance to the directions of the DRP, the assessment order so passed cannot be held to be erroneous and prejudicial to the interests of Revenue.
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Charitable activity - assessee is entitled to exemption under section 11 and 12 of the act and is not carrying on the business activities when it receives the hostel fees and transportation facilities from the students of the educational Institution.
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Addition u/s 69A - biana (advance) against sale of his residential house - nothing to justify the assessee’s explanation of the cash with him as on account of an advance against sale of his residential house.
Customs
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IGST Export Refunds–resolution of errors
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Import Policy after GST - Even by not allowing exemption of IGST at the time of import, no benefit in the AA scheme is altered by the Government, though collateral costs get fastened on the petitioner and the likes by way of blockages in cash flow and attendant interest liabilities. And clearly, it is a matter of public policy.
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Advance authorization scheme - What is disallowed to the petitioner and allowed to others of the same class should be demonstrated by the petitioner. That is the test for arbitrariness. The petitioners had no occasion to demonstrate their case in the test of arbitrariness.
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Classification of imported goods - Low Aromatic White Spirit - the product imported by the appellant answers to specifications prescribed under sub heading note 4 and therefore, would fall under the description ‘light oils and preparations’ of sub heading 2710.12.
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Imposition of redemption fine - penalty - if the goods are held as liable to confiscation for whatever reason penalty under section 112 (a) can be imposed. Malafide/bonafide or the belief of the importer in all is of no relevance.
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Demand of anti dumping duty - Service of notice - the appellant has nowhere disputed the very liability to ADD makes it all the more clear that the assessee is making hue and cry unnecessarily.
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Classification of imported goods - Bonded Fabric - Rule 3(c) alone is applicable and has rightly been applied by the first appellate authority. - The impugned goods are rightly classified by the importer under RITC 60063200
SEBI
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Physical settlement of stock derivatives
Service Tax
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Extended period of limitation - The mere factum of filing a ‘nil’ return, followed by cancellation of the registration, speaks more of the premeditated acts of the petitioner academy and do not disclose any bonafides on its part.
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Commercial coaching services - when there was no separate receipt towards each head and what was collected was fees alone, the petitioner academy could not thereafter claim deductibles from such fees by showing such self-serving and unauthenticated expenditure. - Demand confirmed invoking Extended period of limitation.
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As there was no proof furnished by the department that suppression had taken place and finding reveals that appellant had started voluntarily paying the service tax, penalty of equivalent amount under Section 78 of the Act would be a travesty of justice.
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Penalty u/s 78 of FA - non-payment of service tax - it was alleged that the appellants have collected the Service Tax and not paid the same - The penalty restricted to 50% of the duty demand.
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Liability of Service tax - Construction of Complex Service - sale of undivided share of land (UDS) - appellant who is a builder/promoter is not liable for service tax upon his selling UDS.
Central Excise
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CENVAT Credit - common input/input service Credit - provisions of Rule 6(3A) of CCR, 2004 not exercised - failure to file declaration - substantive right given in the said Rule cannot be denied for such procedural lapse.
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Classification of goods - The belt conveyors and bucket elevators specifically manufactured as the part of rice milling machinery along with other machinery of rice mill merit classification under chapter heading No. 8437 of CETA, 1985
Case Laws:
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GST
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2019 (1) TMI 86
Seizure of goods - imposition of penalty under Section 129(3) of UPGST Act - details of the purchasers/buyers situated at different places in Kanpur are incomplete, as has been mentioned both in invoices as well as in goods receipt - maintainability of petition - Held that:- There are several disputed question of facts involved in the present writ petition and in our opinion the same can be appropriately adjudicated by the authorities including the appellate authority - the petitioner has not disputed that the impugned order is appealable. There are no hesitation to dismiss the writ petition at this stage with liberty to the petitioner to approach the appropriate forum/appellate authority in accordance with law - petition dismissed.
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Income Tax
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2019 (1) TMI 122
Validity of reopening of assessment - re assessment beyond the period of four years from the end of relevant assessment year - Held that:- Where the AO exercises power of re assessment beyond the period of four years from the end of relevant assessment year, an essential requirement is that the escapement of income chargeable to tax is due to the failure on the part of the assessee to disclose truly and fully all material facts. This is part of Section 147 of the Act itself and is on number of occasions by various judgments of High Court and Supreme Court held to be mandatory pre- requirement. In view of such settled law, it is not necessary to refer to any judgment. Revenue is unable to bring to our notice any aspect or element which did not form part of the record and on the basis of which from the reasons recorded, it can be culled out that the Assessing Officer had formed a belief that income chargeable to tax had escaped assessment. In clear terms therefore, there was no failure on the part of the assessee to disclose truly and fully all material facts. Revenue however submitted that one of the issues raised by the Assessing Officer is that the activity carried on by the assessee does not amount to manufacturing activity. In the present petition, it is not necessary for us to comment on this aspect of the matter. What is important however is such belief also the Assessing Officer has formed on the basis of material already on record. Looked from any angle, the AO cannot justify issuing the notice of re opening of assessment beyond the period of four years from the end of relevant assessment year.
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2019 (1) TMI 121
Monetary limit for maintaining appeal - demand raised from the order appealed against is lower than the mandatory limit as prescribed under the Litigation Policy for maintaining an appeal before the Tribunal - revised return filed declaring loss of ₹ 7,60,87,930/- as against the earlier loss declared of ₹ 3,50,00,000/- - no tax effect for the subject assessment year - Government of India (Taxes) submission that the mere fact that there was no tax effect for that year would not determine the monetory limit, especially since the assessee could have earned profits in the subsequent years and if that exceeded the limit, definitely there was a scope for consideration as to whether the revised return was proper or not Held that:- We directed the revenue to file a statement as to the details of the returns for the subsequent year. The Department has today filed a statement clearly indicating that in the next eight years the assessee has been declaring a loss. Since loss could be carried over only for eight years, we do not think that the consideration of the appeal is expedient especially since this would not create any tax liability on the assessee for the subsequent years also for reason of the declaration of loss in the subsequent 8 years during which period alone the loss could be carried over.
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2019 (1) TMI 120
Reopening of assessment - change of opinion - Held that:- Supreme Court in the case of Commissioner of Income Tax Vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] has held that even post the amendments in Section 147 w.e.f. 01.04.1989, the concept of change of opinion continues to apply. As long as certain claim made by the assessee was examined by the Assessing Officer, whether the Assessing Officer raised correct queries and came to the correct conclusion or not, in the context of reopening of assessment, would be of no consequence. There is a vital difference between a conclusion of the AO after scrutiny which may appear to the Revenue to be erroneous and a situation where the AO during the scrutiny assessment does not examine a particular claim of the assessee altogether. The later will follow within the purview of reopening of assessment, particularly when the notice is issued within a period of 4 years but the former may not. Since we uphold the Tribunal's decision on the invalidity of the reopening, the other issues on merits need not be gone into. No question of law arises.
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2019 (1) TMI 119
Unexplained credit u/s 68 - reopening of assessment - held that:- The listed equity shares have been credited to his demat account on the day of the purchase itself. It was submitted that, therefore, the Assessing Officer has sought to reopen the assessment on a completely wrong factual premise by solely and mechanically relying upon the information received from other sources without forming any independent opinion that income chargeable to tax has escaped assessment and, therefore, the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act by issuing the impugned notice is without authority of law. As further submitted that in the reasons recorded, the Assessing Officer has stated that in this case the assessee has not filed any return of income for the year under consideration, which is factually incorrect as the petitioner had duly filed the return of income, a copy whereof has been annexed as Annexure-A to the petition. Having regard to the submissions advanced by the learned advocate for the petitioner, Issue Notice returnable on 5th February, 2019. By way of ad-interim relief, the respondent is permitted to proceed further pursuant to the impugned notice; he, however, shall not pass the final order without the permission of this court
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2019 (1) TMI 118
Penalty u/s 271(1)(c) - Depreciation on IPRs - assessment u/S. 153A - Held that:- During the search operation, director of the assessee company reduced the claim of depreciation in his statement under Section 132(4) recorded by the Income Tax Authorities. As during such search, no incriminating material was found on the basis of which the assessment could have been framed in this respect - in the original return filed for the assessment year in question, when the claim was made by the assessee, the same was disallowed by AO but in the appeal, the CIT(A) accepted the same. Section 32 does cover certain intangible assets for depreciation. The Tribunal relied upon the decision of the Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt Ltd [2010 (3) TMI 80 - SUPREME COURT] for holding that being a plausible claim, mere fact that the same was withdrawn during the search would not give rise to the penalty. Tribunal has broadly proceeded on the basis that the claim was part of the original return and therefore, there was no concealment by the assessee and further that CIT(A) had allowed such a claim for regular assessment and Section 32 of the Act also gave rise to a debatable issue in this respect. - decided against revenue
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2019 (1) TMI 117
Garnishee orders - stay petitions - subject matter assessment years has not attained the finality - Held that:- Interest of the both parties will be protected, if the petitioner is directed to pay a sum of ₹ 15,00,000/- towards the assessment year 2008-09, without prejudice to their contention in the appeal before the First Appellate Authority for the purpose of lifting the impugned garnishee orders. Accordingly, these Writ Petitions are allowed and the impugned orders are set aside, subject to condition the petitioner pays a sum of ₹ 15,00,000/- (Rupees Fifteen Lakhs only) towards assessment year 2008-09 before the 4th respondent within a period of four weeks from the date of receipt of copy of this order. It is made clear that the said payment is without prejudice to the contentions of either parties in the above appeal pending before the Appellate Authority.
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2019 (1) TMI 116
Deduction u/s 80P(2)(a)(i) - whether activity of the appellant is that of finance business and cannot be termed as cooperative society? - assessee society is registered under the provisions of the TNCS Act - definition of the word 'members' - Held that:- Definitions of the expressions 'members' and 'associate member' under the TNCS Act held that an 'associate member' is also a 'member' in terms of Section 2(16) of the TNCS Act. Furthermore, the Assessing Officer himself found that the associate members are also admitted as members of the society. In such circumstances, the Assessing Officer fell into an error in not granting any relief to the assessee society, which was rightly granted by the CIT (A) as confirmed by the Tribunal. In addition to that, the Assessing Officer has not pointed out that loans have been disbursed to all and sundry in terms of the provisions of the TNCS Act and in terms of Clause (b) to Sub-Section (4) of Section 80P of the Act, the society has an area of operation, operates within the taluk and will provide long term credit for agricultural and rural development activities as well. The CIT (A) rightly granted the relief to the assessee as confirmed by the Tribunal. - Decided against the Revenue.
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2019 (1) TMI 115
Charitable activities - exemption under Section 11 denied - violation of Section 11(5) r.w.s. 13(1(d) - whether the Assessing Officer was right in totally rejecting the claim of exemption under Section 11 of the Act on the ground that the assessee had violated the provisions of Section 11(5) read with Section 13(1)(d)? - Held that:- The Tribunal ought to have applied the decision in the case of Working Women’s Forum [2014 (8) TMI 681 - MADRAS HIGH COURT] and accordingly should have restricted the denial of exemption only to that portion of the investments, which were made by the assessee in violation of Section 11(5) of the Act. For the above reasons, the appeal filed by the assessee is allowed, the orders passed by the Tribunal, the CIT (A) and the Assessing Officer are set aside and the substantial questions of law are answered in favour of the assessee.
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2019 (1) TMI 114
Dismissal of appeal by Tribunal by merely recording that it accepts the view of the (CIT) Appeals - Held that:- Tribunal has not given any independent reasons showing consideration of the submissions made on behalf of the assessee. We are conscious of the fact that an appellate order which affirms the order of the lower authority need not be a very detailed order, nevertheless, there should be some indication in the order passed by the appellate authority, of due application of mind to the contentions raised by the asseseee in the context of findings of the lower authority which were the subject matter of the challenge before it. The interest of justice would be served if the impugned order is quashed and set aside and the appeals are restored to the Tribunal for fresh consideration.
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2019 (1) TMI 113
AO's power to levy surcharge - Effective date of proviso appended to Section 113 of the Income Tax Act vide Finance Act, 2002 - Amendment retrospective or prospective - Held that:- Held that:- The issue has been decided by the Hon'ble Supreme Court in favour of the assessee and against the Revenue in the case of CIT (Central)-I Vs. Vatika Township Private Limited [2014 (9) TMI 576 - SUPREME COURT]. As considered by the Hon'ble Supreme Court, was as to whether levy of surcharge, which was introduced by insertion of Proviso to Section 113 of the Income Tax Act, 1961, could be made retrospective. If the Enactment is expressed in language, which is fairly capable of either interpretation, it ought to be construed as prospective only. Thus, following the above decision, the substantial questions of law, framed for consideration, are answered in favour of the assessee.
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2019 (1) TMI 112
Nature of income - income received on letting out - business income or house property - Held that:- In the present facts it is undisputed that the assessee is in the business of development of real estate projects and letting of property is not the business of the assessee. In both the decisions relied upon by Mr. Pinto i.e. Chennai Properties (2015 (5) TMI 46 - SUPREME COURT) and Rayala Corporation (2016 (8) TMI 522 - SUPREME COURT) found that the appellant was in the business of letting out its property on lease and earning rent therefrom. Clearly it is not so in this case. Further, Ms. Khan the learned counsel appearing for the respondent-assessee invites our attention to the decision of this Court in CIT v/s. Sane & Doshi Enterprises (2015 (4) TMI 882 - BOMBAY HIGH COURT) wherein on identical facts this Court has taken a view that rental income received from unsold portion of the property constructed by real estate developer is assessable to tax as income from house property. Disallowance under Section 80IB on common expenses relatable to Poiser Project and Saki Naka Project - Held that:- This issue stands concluded against the revenue and in favour of the assessee by virtue of the orders of this Court in respect of assessment years 2006-07 and 2007-08 decided in CIT v/s. M/s. Gundecha Builders [2013 (3) TMI 801 - BOMBAY HIGH COURT] and [2013 (3) TMI 800 - BOMBAY HIGH COURT] Appeal admitted on the substantial question of law at question no.(ii) - Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that receipts from the sale of stilt parking as part of the residential unit and therefore also eligible for a deduction under Section 80IB(10)?
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2019 (1) TMI 111
Penalty u/s. 271(1)(c) - non specification of charge - defective notice - Held that:- The charge on which penalty has been levied has not been specified in the assessment order, as to whether the penalty has been levied for concealment of income or furnishing of inaccurate particulars of income with regard to the addition made by the A.O. This is followed by a notice for the levy of penalty u/s.271(1)(c) in which the specific limb identifying the charge has not been identified - due to absence of satisfaction and identification of the specific charge for levy of penalty, the penalty in this case deserves to be deleted on this account also. See M/S SSA'S EMERALD MEADOWS [2016 (8) TMI 1145 - SUPREME COURT] - Decided in favour of assessee.
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2019 (1) TMI 110
Maintainability of appeal - tax effect - monetary limits - Held that:- The tax effect in this appeal filed by Revenue is undisputedly below ₹ 20 lacs and thus keeping in view CBDT circular no. 3/2018 dated 11-07-2018, we are inclined to dismiss this appeal filed by Revenue due to low tax effect involved in this appeal which is below ₹ 20 lacs . Moreover , it is not also brought to our notice by learned DR that this appeal is covered by any of the exceptions to said circular dated 11.07.2018 as notified by CBDT. Thus, since both the parties have concurred before the Bench that this appeal is covered by CBDT circular no. 3./2018 dated 11.07.2018, we are inclined to dismiss this appeal filed by Revenue on the grounds of tax effect being less than ₹ 20 lacs - Decided against revenue
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2019 (1) TMI 109
Addition u/s 68 - undisclosed share application money received by the assessee-company - Held that:- Investors who have been examined by the A.O. on oath were not subjected to cross-examination on behalf of the assessee, therefore, their statements cannot be read in evidence against the assessee. The only material left for consideration was the documentary evidences filed by the assessee on record which supports the explanation of assessee that assessee received share application money from large number of investors who have made very small investment in assessee-company in each case. No evidence has been brought on record if the investment made by the investors have actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. Therefore, considering the smallness of the issue and the fact that assessee was incorporated only in preceding assessment year, therefore, in the light of decision of Bharat Engineering & Construction Co. (1971 (9) TMI 14 - SUPREME COURT), there were no justification for the authorities below to sustain the addition. - Decided in favour of assessee Addition on account of difference in balance of one creditor - Held that:- ustification to interfere with the Orders of the authorities below. Learned Counsel for the Assessee submitted that no addition can be made under section 68 of the I.T. Act on account of difference in balance of the creditor. I do not agree with the submissions of the Learned Counsel for the Assessee. Section 68 would be applicable if assessee failed to explain sum of the amounts credited in the books of account of assessee to the satisfaction of the A.O. The party has however, denied of having outstanding balance with the assessee in response to notice under section 133(6) of the I.T. Act. Therefore, addition was correctly made against the assessee - decided against assessee Addition u/s 68 on account of loan received from one Director - Held that:- Creditworthiness of the creditor have been accepted by the authorities below and that the creditor is connected with the assessee-company, therefore, the matter requires reconsideration in the light of documentary evidence and statement of affairs of the creditor along with ITR filed on record. I, accordingly, set aside the Orders of the authorities below and restore the issue to the file of A.O. with a direction to re-decide this issue, by giving reasonable, sufficient opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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2019 (1) TMI 108
Addition u/s 68 - assessee has entered into a colourable device for avoiding the tax and receipt of sale proceeds by way of cheque is nothing but unexplained cash credit u/s 68 - Held that:- The lower authorities have proceeded to tax the profit arising out of sale of such shares in the hands of the assessee on the ground that the assessee may be one of such beneficiaries. However, the shares according to the AR were sold through D-mat account maintained with Kotak Mahindra Bank, there were contract notes for purchase of the shares and the sale proceed were received by cheque. It is the submission of the Dr that the shares were purchased off market and there is no proper justification for huge rise in the price of the shares when the company has not done any substantial business so as to command such huge premium. Considering all restore the matter back to the file of the Assessing Officer with the direction to provide the statements of the persons which are the basis for making the addition in the instant case. - decided in favour of assessee for statistical purpose. Depreciation on motor car - denial of claim as assessee has received only remuneration and interest from the partnership firm M/s. Jay Kay Enterprises and the vehicle is not used for the purpose of own business but for the purpose of the business of the firm - Held that:- Since the assessee did not give any submission before the CIT(A) on this issue either written or oral, the Ld. CIT(A) dismissed the ground raised by the assessee. Even before me also the assessee did not make any submission on this issue. Under these circumstances the ground raised by the assessee is dismissed.
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2019 (1) TMI 107
TPA - disallowance of payment of management services and unit charges [MSU charges] by the assessee to its AEs - MSU charges not accepted as international transactions the payments for these services are duplicative and when the assessee has already paid for support services and the payments for which have been accepted by the TPO - Held that:- Agreement has not been properly appreciated by the lower authorities. In the light of this agreement, we are of the considered opinion that there is no payment for duplicative services and the payment of ₹ 1,45,06,572/- is distinct as MSU charges and adjustment made by the TPO is uncalled for and deserves to be deleted It is pertinent to mention here that in the financial statement of the assessee, there is no expenditure relating to the employees cost and in the notes annexed and forming part of the financial statement at clause 10A it has been specifically mentioned that no provision for retirement benefits has been made in these accounts as there were no employees about the payroll of the company during the year. The sales of LNG could not have been achieved without the aid of support staff and the same was provided by BGEPIL. - Decided in favour of assessee. TDS u/s 195 - Disallowance of the expenditure on account of time-writing charges - assessee has not deducted tax at source - Held that:- ‘Make available’ means the person acquiring the services is enabled to apply technology contained therein on his own in future without recourse to the service provider which means that the knowledge must remain with the service recipient once service has ended and thereafter, service recipient is at liberty to use the technical knowledge, skill know-how and processes. The service provided by employees of BGIL are merely in the nature of routine support services and, therefore, cannot be termed as ‘FTS’ under Article 13 of the India UK DTAA. No requirement for the assessee to deduct taxes from such payments in India u/s 195 of the Act. We, accordingly, direct the Assessing Officer to delete the addition - Decided in favour of assessee.
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2019 (1) TMI 106
Denial of claim of deduction u/s 80P on account of interest income earned from Bank of Maharashtra and also interest income earned from MSEB - Held that:- The assessee is entitled to claim deduction under section 80P(2)(a)(i) of the Act in respect of FDR interest from Bank of Maharashtra. However, no such deduction is to be allowed in respect of Saving Fund interest. The ground of appeal No.1 raised by assessee is thus, allowed. See ITO VERSUS M/S. MAHARASHTRA BANK EMPLOYEES CO-OP. CREDIT SOCIETY LTD. VICE-VERSA [2018 (3) TMI 1562 - ITAT PUNE] Interest received from MSEB deposits, wherein the aforesaid deposits were made for carrying on its business activity and hence, the same is business income and is entitled to the claim of deduction under section 80P(2)(a)(i). The ground of appeal No.2 raised by assessee is thus, allowed.
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2019 (1) TMI 105
Addition on account of unsecured loan - Held that:- In the present case, it is not in dispute that the creditor was regularly filing the return of income. The creditor was having opening balance of ₹ 57,85,186/- in the books of the assessee’s account and an amount of ₹ 10,00,000/- was received by the assessee on 03.11.2009 through RTGS. The assessee has also paid interest of ₹ 3,10,684/- on the said loan which has been accepted by the department since no disallowance has been made for the said interest paid to the creditor by the assessee on which TDS of ₹ 31,069/- was deducted. Thus the amount of ₹ 10,00,000/- was received by the assessee through RTGS and interest paid on the outstanding balance in the name of the creditor was accepted by the department as genuine, so there was no question for doubting the genuineness of the transactions. No addition to be confirmed - decided in favour of assessee.
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2019 (1) TMI 104
Valuation of shares - Auditor’s acceptance as Accountant for the purposes of Rule 11UA (2) - valuation report given by a Chartered Accountant - FMV determination - Held that:- The second report dated 15.11.2013 is not acceptable because the same is not certified by a person who is accepted as Accountant as per Rule 11U(a) of IT Rules, 1962. The AO accepted the fair market value of ₹ 100/- per share as per certificate dated 02.12.2012 and accepted the receipt of ₹ 90/- per share and taxed only the excess receipt of ₹ 300/- per share out of total receipt of ₹ 400/- per share and hence, the order of AO is in line with the earlier valuation report given by a Chartered Accountant who can be accepted as accountant as per Rule 11U(a) because this valuer has not been appointed as auditor of the assessee company. Hence in Assessment Year 2014-15, find no reason to interfere in the order of CIT(A). In Assessment Year 2015-16, there is no report of any Chartered Accountant who can be considered as accountant as per Rule 11U(a) of IT Rules, 1962. AO in this year has worked out the fair market value of assessee company at ₹ 714.38/- on the basis of NAV in the absence of any valuation report of any valuer who can be accepted as an Accountant as per Rule 11U(a) and taxed the excess amount of premium received by assessee over and above the permissible amount at ₹ 714.38/- per share in respect of 36957 shares and taxed the excess amount received of ₹ 1,32,29,088/- u/s. 56(2)(viib) of IT Act. In the facts of the present case, find no reason to interfere in the order of CIT(A) on this issue in this year also. Restriction as per Rule 11U(a) on the auditor’s acceptance as Accountant for the purposes of Rule 11UA (2) is well founded. Hence, find no merit in this argument of the learned AR of the assessee that only because the certificate is given by the auditor, it should not be held that the value certified by him is not acceptable. - Decided against assessee.
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2019 (1) TMI 103
Determination of total income - assessment of agricultural income - Held that:- The assessee has not brought on record any detail or evidence about item produced, quantity produced, sale price and details of expenses incurred such as seeds, fertilizer, labour charges and cost of transportation of produce to the market etc. The assessee has declared income of ₹ 2.80 Lakhs and exempt income (agriculture) of ₹ 25 Lakhs which has been accepted by the AO to the extent of ₹ 17 Lakhs on the basis of the detailed report of the Horticulture Department regarding realistic income. Before CIT(A) also, the assessee has not produced any details or evidence regarding quantity of crops sold, date on which sold, the cost of expenditure incurred, the rate at which sold etc. Before the Tribunal also, no such details are brought on record along with details of expenses incurred. The assessee has simply stated in Schedule 4 of statement of income that there is gross receipt of agricultural income of ₹ 27.50 Lakhs, expenditure of ₹ 2.50 Lakhs and Net income of ₹ 25 Lakhs. Under this factual position, find no reason to interfere in the order of CIT(A) on this issue. - decided against assessee.
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2019 (1) TMI 102
TPA - ALP adjustment on corporate guarantee fee - Upward adjustment ignoring provisions of section 92CA(3) - Held that:- Respectfully following the order of the Co-ordinate Bench of this Tribunal in assessee’s own case, we set aside the order of the Ld. CIT(A) and direct that the guarantee commission be benchmarked by taking the rate of 1% of the outstanding guarantee amount be computed and adjustment should be made accordingly. Thus Ground No. 1 of the revenues appeal is partly allowed. Treatment to service charges - business income OR house property income - Held that:- As relying on MODEL MANUFACTURING CO. PVT. LIMITED [1986 (3) TMI 7 - CALCUTTA HIGH COURT] we confirm the order of the Ld. CIT(A) allowing the treatment of service charges as business income instead of income from house property. Claim of balance additional depreciation on the assets which were put to use in the earlier financial year - Held that:- this issue is no longer res integra and the Hon’ble Karnataka High Court in CIT vs Rittal (India) Ltd. [2016 (1) TMI 81 - KARNATAKA HIGH COURT] - Decided in favour of assessee
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2019 (1) TMI 101
Additions on account of gold and cash found during the course of search proceeding - rejecting books of accounts, holding that assessee is engaged in unaccounted sales and purchases of bullions - making addition by estimating gross profit ratio @ 1% on alleged business of unaccounted trading of bullion without any cogent basis, therefore we thought it fit to dispose of the same by this common order - Held that:- The material found from an unconnected person cannot be added in the assessee's hands when even the said person had not admitted that it relates to the assessee. Thus, no addition can be made on account of entries found from the premises of Gajmangal, merely on the basis of surmises and conjectures. Hence the additions made by AO and confirmed by CIT(A) are not sustainable and thus are ordered to be deleted. Resultantly, these grounds raised by the assessee stands allowed.
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2019 (1) TMI 100
Revision u/s 263 - computation of Long-Term Capital Loss shown by the assessee on the sale of flats is erroneous and prejudicial to the interest of revenue - Held that:- Here, it is not exchange of share with the flat rather the flats have been acquired for prefixed and agreed consideration between the transferor and the transferee and hence it is akin to sale under settlement with an agreed stipulation to withdrawal of suit and complaint. Thus purchase/acquisition mode and price cannot be disturbed and tinkered with some other value. Finding of the CIT to a logical conclusion that there are two transactions, that is, one of transfer of shares; and other of transfer of flat then consequentially there would be two computation of capital gains as on 01.11.2010; firstly, computation on sale of shares; and secondly, sale of flat. For the first transaction of transfer, the full market value of shares as determined by the Ld. CIT is ₹ 1,21,95,000/- and undisputedly the cost of acquisition would be ₹ 4,60,75,000/- which is the total amount of consideration agreed, then the resultant loss subject to indexation would be Rs.(-)3,38,80,000/-. For the second transfer (of flats), the computation of capital gain would be full value of consideration of the flat price in which it has been sold is ₹ 1,07,00,000/- and if the cost of acquisition as determined by the ld. CIT is ₹ 10,97,500/-, then the resultant capital gain would be ₹ 96,02,500/-. Thus, in this year there would be capital loss on sale of shares of ₹ 3,38,80,000/- and capital gain of ₹ 96,02,500/-, resultantly, there would be a Long- Term Capital Loss. Hence it cannot be held that it is prejudicial to the interest of revenue. Thus we hold that the order of the ld. CIT cannot be sustained, as the assessment order accepting the claim of Long-Term Capital Loss by the AO is not prejudicial to the interest of revenue as the assessee has rightly taken the cost of acquisition as per the actual consideration settled by the parties at the time of acquisition of flat. The reason being that it is not in dispute that the flat has not been acquired under the settlement but by some other means for which the cost of acquisition of the flat needs to be determined. The price of acquisition under the facts and circumstances cannot be changed at all and accordingly the resultant computation of capital gain would result in Long Term Capital Loss which has rightly been allowed by the AO. Disallowance u/s.14A, it has been admitted by both the parties that there was no dividend income earned by the assessee which has been claimed as exempt, and therefore, there would be no triggering factor of disallowance under section 14A in view of the judgment of Hon'ble Delhi High Court in the case of Cheminvest Ltd vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT]. Thus, on merits, we hold that assessment order may be termed as erroneous as he may not have conducted detailed inquiry on the points raised by him, but it cannot be held that such an assessment order is prejudicial to the interest of revenue and therefore in one of the condition is not satisfied, then the assessment order cannot be cancelled or set aside u/s.263 in view of the settled principle in the case of Malabar Industries Company Ltd. Vs. CIT [2000 (2) TMI 10 - SUPREME COURT]. - Decided in favour of assessee.
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2019 (1) TMI 99
Validity of proceedings u/s 153C - income in these appeals has been assessed to tax in the hands of FIIT JEE Ltd - Held that:- We set aside the orders of the lower authorities and remand the matter back to the file of the Assessing Officer for verification whether the income assessed in the hands of the assessee has been assessed in the hands of FIIT JEE Ltd. and due tax has been collected by the department. If the Assessing Officer finds on verification that the income has been assessed in the hands of FIIT JEE Ltd. and due tax has been collected then he should delete the income in the hands of the assessee. Thus, the grounds of appeal of the assessees in all the years are allowed for statistical purposes.
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2019 (1) TMI 98
Revision u/s 263 - set–off of brought forward loss of assessment year 2009–10 against the total income computed for the impugned assessment year u/s 144 r/w rule 2 of the First Schedule - AO has initiated action u/s 147 for the purpose of revising the income / loss determined in the said assessment order - Held that:- What the DRP has directed the AO to do is to consider the income of the assessee for the impugned assessment year at ₹ 212,34,56,000, before making any adjustment on account of dividend and section 14A. There is absolutely no direction by the DRP to re–adjust or re–work out the loss determined in the assessment order passed for the preceding assessment years. It is further evident from the final assessment order that the Assessing Officer has implemented the aforesaid direction of the DRP in letter and spirit and after computing the total income of the assessee as per the provisions of the Act the Assessing Officer has allowed set–off of brought forward loss of assessment year 2009–10. That being the case, it cannot be said that the assessment order passed is erroneous. On a perusal of the assessment order dated 25th March 2013, passed under section 143(3) of the Act r/w section 144C of the Act for assessment year 2009–10, it is very much clear that while completing the assessment the Assessing Officer has determined the loss for that year at ₹ 405,93,06,230 and has allowed carry forward of the same. It is an accepted factual position that the aforesaid assessment order passed for the assessment year 2009–10 still holds good as it has neither been subjected to any proceeding under section 263 of the Act nor it has been varied/disturbed by any other mode or manner. Though, AO has initiated action u/s 147 for the purpose of revising the income / loss determined in the said assessment order, however, it is a fact on record that such re–assessment proceeding has been stayed by the Hon'ble Jurisdictional High Court. Thus, as on date, the assessment order passed under section 143(3) of the Act for Assessment Year 2009–10 remains valid and so also the loss determined therein. It is equally true that at this stage learned PCIT could not have exercised jurisdiction under section 263 of the Act, to revise the assessment order passed for the assessment year 2009–10 insofar as it relates to computation of income / loss. Therefore, learned PCIT having no authority in law to initiate any action to rectify an error, if at all there is any, in the assessment order passed for assessment year 2009–10, has attempted to do so by invoking his revisional jurisdiction for assessment year 2011–12. AO having passed the assessment order in compliance to the directions of the DRP, the assessment order so passed cannot be held to be erroneous and prejudicial to the interests of Revenue. Therefore, the primary conditions of section 263 of the Act are not fulfilled in the present case - Decided in favour of assessee
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2019 (1) TMI 97
Addition made on account of Long Term Capital Gain as against the income from other sources held by the AO - Held that:- All the investments made out of assessee’s account and it was routed through the demat account of its Director. CIT(A) accepted the submissions of the assessee that in the earlier years, AO assessed the same as capital gain the fact of which not disputed by the DR. The fact of treating the assessee is the beneficial owner of the said investments and the Director allowed his demat account for assessee’s business transaction in purchase and sale of shares is not disputed by the assessee. - Decided against the revenue.
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2019 (1) TMI 96
Claim for bad and doubtful debts made by way of a provision - Claim denied by AO on the ground that the provision implies a contingent, and not an ascertained, liability, inadmissible in computing business income - quantum of claim - Held that:- The profile or the constitution of the rural advances recoverable admittedly changing with time, a provision in its’ respect would only be with reference to that outstanding at any given point of time. As such, this part of the provision, i.e., referable to the rural advances, could not exceed, at any given time, 10% of the advances computed in the manner provided in the Rules. In fact, this is the accepted position; the assessee’s reply dated 29/12/2014 in the assessment proceedings whereat it says that the provision qua rural advances, including that already made earlier, thus, does not exceed 10% of its’ rural branch advances. This was in fact also the unanimous view of the learned representatives before us. The other component of the provision u/s. 36(1)(viia) is with reference to a percentage of the income (prior to the provision for bad and doubtful debts). This, of course, would stand to be made, and accordingly claimed, on a year-to-year basis. The assessee, as observed by the tribunal in its’ order for AY 2008-09 maintained separate provision accounts for the two components. Subject, therefore, to the quantum limitation prescribed by law, as explained by us, the assessee’s claim for deduction toward provision for bad and doubtful debts is to be allowed under section 36(1)(viiia), and the assessee succeeds in principle. The AO shall, while confirming the same – the provision component linked to income being required to be revised on each revision in the assessee’s income in appeal, also clarify the exact amount of provision made by the assessee in its books; the ld. CIT(A) pointing to some difference therein, i.e., while giving appeal effect to this order, which is in conformity with the judicial rulings. Further, the write off of debts as bad and doubtful, i.e., in future, needless to add, would be by way of debit to the provision account, which is to be replenished, each year, on the basis of the parameters provided
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2019 (1) TMI 95
Revision u/s 263 - allowability of deduction u/s. 80IA - Held that:- No occasion for the ld. CIT to exercise jurisdiction u/s. 263. See CONTAINER CORPORATION OF INDIA LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [2012 (5) TMI 260 - DELHI HIGH COURT]. The communication issued on behalf of the Ministry of Commerce and Industry confirming that the ICDs are Inland Ports, fortifies the claim of the respondent herein. Though both the Notification and communication are not binding on CBDT to decide whether ICDs can be termed as Inland Ports within the meaning of Section 80-IA, the appellant herein is unable to put forward any reasonable explanation as to why these notifications and communication should not be relied to hold ICDs as Inland Ports. Unless shown otherwise, it cannot be held that the term 'Inland Ports' is used differently under Section 80-IA. All these facts taken together clear the position beyond any doubt that the ICDs are Inland Ports and subject to the provisions of the Section and deduction can be claimed for the income earned out of these Depots. However, the actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places. The issue on merits is now squarely covered in favour of the assessee in [2018 (5) TMI 359 - SUPREME COURT OF INDIA]. Accordingly, in view of the aforesaid precedent, we quash this order passed u/s. 263 by the ld. CIT. Assessee’s appeal stands allowed.
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2019 (1) TMI 94
Disallowance of interest on unsecured loans - AO found that the assessee has extended a sum on which no interest was charged and further found that sum of ₹ 32.30 lacs was shown as advance in supplier - proportionate interest disallowance seeked by AO - Held that:- As find from the balance sheet of 31.03.2013 advance to suppliers was of ₹ 29 lacs. The same is ₹ 32.30 lacs on 31.03.2014. In my considered opinion advances to suppliers are given in the normal course of business and therefore not to be considered interest free loans and advances. To this extent find no reason for disallowing proportionate interest. Further find that assessee own capital is ₹ 31.17 lacs therefore, loan of ₹ 2.03 lacs can be safely concluded to be coming out of interest free funds available with the assessee. Therefore, direct the Assessing Officer to delete the disallowance of ₹ 44,45346/- the ground is allowed. While making ad-hoc disallowance the AO has not pointed out any specific defect in any bills/ vouchers submitted by the assessee. In my considered opinion without pointing out any defect in the books of account, the Assessing Officer cannot make ad-hoc disallowance accordingly direct the Assessing Officer to delete the addition of ₹ 349600/- and ₹ 30827/- this ground is also allowed. - decided in favour of assessee.
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2019 (1) TMI 93
Admission of additional evidences - due opportunity of being heard - Held that:- In the present case, the assessee has filed a paper book containing more than 1900 pages and it is also an admitted fact that the Assessing Officer has not examined a single page out of the paper book so filed before us which was filed before the CIT(A). Since the order of the CIT(A) in the instant case is a cryptic one, without deliberating upon the provisions of the Act regarding the admissibility of the additional evidences where an assessee deliberately defied the statutory notices and considering the fact that non-submission of these details before the AO due to failure on the part of the counsel is a general one without any corroborative evidence we are of the considered opinion that the matter needs a thorough relook at the level of the Assessing Officer. We, therefore, deem it proper to restore the matter to the file of the Assessing Officer with a direction to go through all the details and decide the issue - Appeal allowed for statistical purposes.
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2019 (1) TMI 92
Charitable activity - Entitlement to exemption u/s 11 and 12 denied - transport and hostel facilities surplus considered as business income of the assessee society - Held that:- Respectfully following the decision of the coordinate bench in case of Krishna educational society vs. Additional Commissioner Of Income Tax [2017 (9) TMI 1030 - ITAT DELHI] as held transport and hostel facilities surplus cannot be considered as business income of the assessee society which is mainly engaged in business activities and these activities are subservient to the main object of education of the trust. We allow the appeal of the assessee and hold that assessee is entitled to exemption under section 11 and 12 of the income tax act with respect to the hostel and transport facilities provided to the students of the educational society. In the result, the appeal of the assessee is allowed as per ground number three raised before us. As we have already held that assessee is entitled to exemption under section 11 and 12 of the act and is not carrying on the business activities when it receives the hostel fees and transportation facilities from the students of the educational Inst, therefore, we reverse the order of the learned commissioner of income tax appeals. Further it is not required to adjudicate on the enhancement made by the learned commissioner of income tax appeals as the basis of the enhancement itself has been negated by us. - Decided in favour of assessee
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2019 (1) TMI 91
Penalty u/s 271(1)(c) - Excess amount received over and above the premium to be treated as income of the assessee - Held that:- There is no concealment of income or furnishing of inaccurate particulars of income. The question whether the excess amount received over and above ₹ 1,26,73,685/- was income of the assessee is a matter to be decided by the Assessing Officer. Therefore, this cannot be considered to be a concealment of income. The assessee apparently disclosed pension plus regular policy availed from AVIVA Life Insurance company and also the amount received on surrender of policy. Therefore, even in this case, there is no concealment of income. The entire particulars were available before the Assessing Officer. Business expenditure disallowance the Assessing Officer found that a sum of ₹ 2,05,220/- was paid for security services of residence of the assessee. The fact remains that the entire facts were placed before the Assessing Officer and the assessee claimed the same as deduction. Mere claim, as rightly pointed out by the Ld.counsel, cannot be construed as concealment of income or inaccurate particulars of income. Addition u/s 14A - the dividend income of ₹ 71,19,981/- was also disclosed by the assessee and the assessee claimed deduction as provided under Section 14A of the Act. The Assessing Officer by applying Rule 8D of Income-tax Rules, 1962 disallowed ₹ 5,24,393/- out of ₹ 71,19,981/-. When the entire facts were available before the Assessing Officer, it cannot be said that there is a concealment of income or furnishing of inaccurate particulars of income. Moreover, the interest on delayed payment of TDS was placed before the Assessing Officer and the assessee claimed deduction. It does not mean that the assessee has concealed particulars of income. Similarly, details of prepaid expenses of ₹ 1,98,990/- were also available before the Assessing Officer. Short term capital gain, the assessee retired from partnership firm with effect from 19.08.2008 and received a lump sum compensation from partnership firm over and above the capital contribution by way of immovable property. This was considered to be a short term capital gain. The fact remains that the assessee retired from partnership firm and received a lump sum compensation from the firm. This was disclosed before the Assessing Officer. Therefore, there is no question of any concealment of income or furnishing inaccurate particulars of income. In those circumstances, this Tribunal is of the considered opinion that the judgment of Apex Court in Reliance Petroproducts (P) Ltd. [2010 (3) TMI 80 - SUPREME COURT] is squarely applicable to the facts of the case. Therefore, the CIT(Appeals) has rightly deleted the disallowance made by the Assessing Officer. - Decided in favour of assessee. Penalty u/s 271(1)(c) - mere claim of expenditure would not amount to furnishing of inaccurate particulars of income or concealing any part of income. In view of the above, this Tribunal has no hesitation to confirm the order of the CIT(Appeals). Penalty levied u/s 271AAB - assessee offered an additional income under the head “Income from Other Sources" in search operations - Held that:- It is not the case of the Revenue that any incriminating or other material was found during the course of search operation which represents wholly or partly the undisclosed income of the assessee. It is a definite case of the Revenue that the assessee offered an additional income of ₹ 50 Crores. Therefore, offer made by the assessee is not admitted on the basis of any material or document, bullion, etc. Therefore, as rightly found by the CIT(Appeals), this cannot be construed as undisclosed income for the purpose of levy of penalty under Section 271AAB of the Act. Hence, the CIT(Appeals) has rightly deleted the penalty levied - Decided against revenue
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2019 (1) TMI 90
Rejection of approval of assessee u/s 80G - non specification of reasons for rejection of approval - denial of natural justice - Held that:- order of the ld. CIT(Exemptions) is not a speaking order, as the said impugned order does not deal with the merits of the assessee’s case. How and why the assessee’s case is not fit for approval u/s 80G of the Act, has not been dealt with by the Ld CIT (Exemptions). Therefore, we consider it a gross negligence on part of the CIT(Exemptions), as he did not bother to bring on record the cogent evidence and the material to prove that the assessee’s case is not fit for approval u/s 80G of the Act. Therefore, without bringing any cogent evidence on record and to reject the assessee’s application for approval u/s 80G of the Act is nothing but violation of principles of natural justice - Decided in favour of assessee.
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2019 (1) TMI 89
Addition u/s 69A - biana (advance) against sale of his residential house - Held that:- If the cash was maintained as he might, on a failure of the transaction, be required to repay the intending buyer, the same was not done. And neither could the assessee make use of the cash so generated, stated to be for his urgent needs, serving thus no purpose! The agreement stipulating the forfeiture of the advance in case of a default by the buyer, there was no imminent risk of repayment (of advance), which could in any case be repaid out of the sale proceeds of the sale of house. Why, again, the transaction failing, was the house not sold, i.e., to another, despite requiring, as stated, funds for meeting the financial crisis of his business and discharge the debts of his, since deceased, father. There is, thus, considered whichever way, nothing to justify the assessee’s explanation of the cash with him as on account of an advance against sale of his residential house. Even as no such offer was made, it makes one wonder as to why one, in the process of shifting abroad, as inferable from his having gone abroad before 10.04.2008, would consider investing in India and, further, in a residential house, even as his residential needs are being ostensibly met and, in any case, would abate on his proceeding abroad. Even if one would were to take into account a change of events, i.e., after 03.10.2007, the date of the last installment (of ₹ 2.50 lacs), he would rather complete the transaction and sell the house to another to avoid the loss, if not actually gain in-as-much as real estate generally tends to appreciate. That is, rather than incur a substantial loss (of ₹ 6.50 lacs), which makes the assessee’s case all the more improbable and make-believe. It may though be clarified that the assessee’s case fails not on that account, or for that reason, alone, but primarily in view of there being nothing on record to show of the intending buyer as having paid advance and, thus, suffered the said loss. In fact, the agreement being not registered, the validity of the said agreement, in view of Registration and Other Related Laws (Amendment) Act, 2001, is in serious doubt I have little hesitation in confirming the impugned assessment and, accordingly, decline interference. The assessee’s reliance on the decision in P.K. Noorjahan [1997 (1) TMI 6 - SUPREME COURT] is also misplaced. In the present case, the assessee is admittedly a businessman, whose business though may be experiencing a downturn, even as there is nothing on record to exhibit the same. He has, further, deposited ₹ 12.90 lacs in cash in his savings bank account, maintaining an average cash balance of ₹ 4 lacs during the year. - The assessee’s appeal is dismissed
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2019 (1) TMI 88
Allowable busniss expenses - expenses incurred by assessee for money lending activities - Held that:- On perusal of grounds raised by assessee before Ld. CIT (A), it is observed that assessee has not challenged the change of head by Ld.AO regarding interest income. Therefore in a way assessee has accepted interest income to be treated as income from other sources. On a query being put up by the Bench to Ld.AR, it has been submitted that consciously assessee has not disputed this issue before CIT(A) and also before this Tribunal. Therefore, in our considered opinion, the argument advanced by Ld.AR, of considering expenses incurred by assessee also for money lending activities stands rejected. Further even before CIT (A) assessee has neither filed any bills/vouchers nor provided sufficient evidences in order to prove the business exigency for incurring such expenses. Coming to expenses alleged to have been incurred in respect of sub-lease agreement set aside this issue back to AO for verification. Assessee is directed to produce lease Agreements before Ld.AO in connection with the demised premises therein, along with bills/vouchers in respect of expenditure incurred towards sub-lease premises which are alleged to have been incurred by assessee. The Ld.AO is then directed to verify the same as per law, and if found genuine as per sub lease agreement entered into by assessee with LIC, may allow the claim of assessee. Addition u/s 68 and section 69 - Held that:- Assessee has placed certain receipts in respect of payments made to some parties. AO has objected to these documents as these are not verified. Assessee has not established that all deposits made in bank accounts were in respect of cancellation of deals as has been alleged by assessee - assessee submitted regarding opening cash balance which was accepted by authorities below in immediately preceding year - direct assessee to produce all the parties with whom deals were cancelled and money has been deposited in bank accounts. AO is directed to take into consideration opening balance appearing in books of accounts of assessee, before verifying identity, creditworthiness and most importantly genuineness of transaction, that has been alleged to have been cancelled, in lieu of which, cash were deposited back into the accounts. Insofar as the withdrawals are concerned assessee is directed to reconcile the statement of withdrawals with deposits into bank accounts maintained by assessee. In the event the co- relation of withdrawals with the deposits is successfully made by assessee in terms of the deals that has been cancelled, no further enquiries need to be made by AO. On the contrary, if there are certain cash in hand/deposits in bank, for which there is no corresponding withdrawal, assessee is directed to establish source of such cash/deposits in the bank to the satisfaction of AO as per section 68 of the Act, which means assessee is directed to establish identity, creditworthiness and most importantly genuineness of cash deposited in bank as well as cash in hand. AO shall then verify the same as per law. Addition u/s 69 - CIT (A) has observed that a sum of ₹ 55,35,000/-was put on FDR on 07/05/07 which was renewed from time to time. During year under consideration the renewal was of ₹ 17,29,245/-and FDR was closed on 21/09/09. Under such circumstances we do not find it a fit case for an addition under section 69, as during relevant Assessment Year in which deposit was initially made, the authorities has accepted the same.
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2019 (1) TMI 87
Levy of penalty u/s 271(1)(c) - assessment competed U/s 143(3) r.w.s 153A - addition of interest income as difference between the interest income reflected in Form 26AS and what has been declared by the assessee in his return of income - defective notice - nonstriking off of the irrelevant clause in the notice - Held that:- in the absence of any specific charge against the assessee in the penalty notice, consequent penalty imposed by the AO is illegal and bad in law. See COMMISSIONER OF INCOME TAX & ANR. VERSUS M/S SSA'S EMERALD MEADOWS [2016 (8) TMI 1145 - SUPREME COURT]. In the facts of the present case, undisputedly, the notice issued under section 274 read with section 271(1)(c) doesn’t specify the exact charge against the assessee as to whether it relates to concealing the particulars of income or furnishing inaccurate particulars of income. Respectfully following the decisions referred supra, the factum of nonstriking off of the irrelevant clause in the notice issued under section 274 read with section 271(1)(c) is hereby held as reflective of non-application of mind by the AO, the penalty imposed U/s 271(1)(c) is deleted. - decided in favour of assessee.
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Customs
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2019 (1) TMI 85
Advance authorization scheme - Import Policy after GST - duty free import of inputs which are physically incorporated in the exported goods - exemptions in terms of Para 4.01 (a) (i) of Foreign Trade Policy, 2015-20 - Held that:- The import is actually a replenishment of inputs used in the already exported goods. As such, it was averred that complying with condition No. 1 cannot be fulfilled by the petitioner at the time of import of inputs - Similarly, the petitioner expresses difficulty in fulfilment of pre- import conditions in the absence of explicit definition for pre- import condition. What is disallowed to the petitioner and allowed to others of the same class should be demonstrated by the petitioner. That is the test for arbitrariness. The petitioners had no occasion to demonstrate their case in the test of arbitrariness. Needless to mention, GST laws are a self contained legislations. The laws were promulgated after necessary constitutional amendments. The preposition that the GST levy subsumes the erstwhile levies of CVD and SAD in lieu of Excise duty and VAT can be of no avail to the petitioner. More so, the petitioner is estopped from claiming relief in view of Para 4.02 of the FTP that AAs are issued in accordance with the policies and procedures in force as on the date of the issue of Advance Authorization - Even by not allowing exemption of IGST at the time of import, no benefit in the AA scheme is altered by the Government, though collateral costs get fastened on the petitioner and the likes by way of blockages in cash flow and attendant interest liabilities. And clearly, it is a matter of public policy. And rightly, the choice of policy is for the decision maker, in this case the Government, to make and not for the Court. Nor has been established before this court that the decision suffers from perversity, irrationality or arbitrariness. The petitioner's plea of vagueness in the definition of pre-import condition is hollow. The intend and purpose of pre-import condition can be made out from Para 4.03 of FTP and Annexure 4 J of the HBP. The multiple schemes available in the FTP is only to have a fine balance between the policy entitlements of the exporters and to safeguard the interests of revenue. Petition dismissed - decided against petitioner.
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2019 (1) TMI 82
Classification of imported goods - Low Aromatic White Spirit (ANYSOL-5) - ITC restrictions - goods confiscated by Revenue by changing the classification of the goods - whether classifiable under heading 2710 19 90 or under heading 2710 12 90? - Held that:- The goods falling under Chapter Heading 2710 12 90 are restricted as per Import Policy and allowed to be imported through State Trading Enterprises (STE) only, as per policy condition-5 of the Chapter 27 of ITC (HS) Schedule-1 - Thus, if the imports are in violation of aforesaid condition, then the same would be liable to action under the Customs Act - The said restriction is specifically applicable to CTH 2710 12 90, claimed by Revenue and not to 2710 19 90, claimed by the appellant. Consequently, depending on the correct classification of the product, the ITC restriction would apply to the imports. Thus, the product imported by the appellant answers to specifications prescribed under sub heading note 4 and therefore, would fall under the description light oils and preparations of sub heading 2710.12. Imposition of redemption fine - penalty - Held that:- The section is triggered when the prohibited or restricted goods are imported without due authorization. The bonafide or malafide intention of the importer is of no relevance so far as confiscation under section 111(d) of the Customs Act is concerned - Section 111 (m) relates to the description made by the importer at the time of import and, therefore, the bonafide or malafide of importer is of relevance. In case Section 111(d), the belief of importer is not relevant - as regards penalty, It is apparent that if the goods are held as liable to confiscation for whatever reason penalty under section 112 (a) can be imposed. Malafide/bonafide or the belief of the importer in all is of no relevance. There is no element of differential duty involved in this case - Keeping in view that the only element of violation involved was with reference to policy and that there was no element of duty involved the quantum of penalty and redemption fines are excessive - the penalty and redemption fines are reduced to ₹ 20 lakhs each. Appeal allowed in part.
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2019 (1) TMI 81
Valuation - rejection of declared value - Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - scope of SCN - case of appellant is that ideally the Customs should have adopted the Customs Valuation Rules sequentially and in that respect, the impugned order as well as Order-in-Original are beyond the scope of Show Cause Notice - Held that::- It is not in dispute that the goods imported by M/s Vimal Intertrade Pvt. Ltd. are part of the same original consignment and therefore identical in all physical specifications and in terms of country of origin to the goods imported by the appellant. Ld. Counsel has sought to argue that the imports made by the appellant are at a different commercial level. However, we notice that the quantities imported by the appellant and by M/s Vimal Intertrade Pvt. Ltd. are practically similar and in the some cases, the quantity imported by M/s. Vimal Intertrade Pvt. Ltd is higher than the quantity imported by the appellant. It is seen that the Show cause notice invoked Rule 5 of the Customs Valuation Rules 2007 whereas the impugned order invoked Rule 3(1) read with Rule 10 (1)(d) of the Customs Valuations Rules 2007. It is apparent that the impugned order has gone beyond the scope of Show Cause Notice. The impugned order is set aside and matter is remanded to Adjudicating Authority for fresh adjudication keeping in mind the charges made in the Show Cause Notice - Appeal allowed by way of remand.
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2019 (1) TMI 80
Reduction in quantum of redemption fine and penalty - confiscation could not take place - second charge of misdeclaration of value - Section 111(m) of the Customs Act, 1962 - Department could not bring any evidence which showed that the value declared in the subject bills of entry were misdeclared - Held that:- The redemption fine has been imposed on higher side. The imported goods were old and used garments and no proper market enquiry was conducted to ascertain the actual margin of profit (MOP), beside this, approximately 25% value was extra loaded without any reasonable justification and same was accepted by the importer who also incurred demurrage for more than one month. In these circumstances the redemption fine should have been of the lower amount. There is no mis-declaration of value and goods are not liable for confiscation under Section 111 (m) of the Act and appellant had accepted the enhanced value and duty was paid in excess on enhanced assessable value from declared value to USS 1.316 (when they only agreed up to USD 1.10) and the importer had paid the extra duty - enhanced assessed value is confirmed - confiscation under Section 111 (m) of the Act set aside but the confiscation under Section 111 (d) of the Act is upheld. Imposition of penalty - Held that:- Since the goods were liable to confiscation only under Section 111(d) and have been confiscated, therefore imposition of penalty is sustainable in law - However, while imposing personal penalty the adjudicating authority observed in its OIO that in past in identical cases penalty equivalent to 10% was imposed and he imposed penalty of 11% giving no justification for such variation. The penalty should not be imposed in such a fashion but circumstances of each case and role of importer should be examined case to case basis before imposing personal penalty. Appeal allowed in part.
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2019 (1) TMI 79
Demand of anti dumping duty - Service of notice - case of assessee is that demand not sustainable as Demand Notice having not been served within six months from the date of the Order and the address of the assessee mentioned in the Notice also being incomplete - Held that:- Except the Bill of Entry and the assessee s letter head, nowhere do we find a mention of Mutha Market and this is absent even in the appellant s Form of Appeal before the appellate authorities. It is not its case that there has been substantial change in the very address itself or that the Notice was sent to incorrect address. Nor is the assessee disputing the remarks of the postal authorities who have identified but could not deliver because of door lock - These facts coupled with the fact that the appellant has nowhere disputed the very liability to ADD makes it all the more clear that the assessee is making hue and cry unnecessarily. The reasons attributed for non-service by the appellant is not acceptable - appeal dismissed - decided against assessee.
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2019 (1) TMI 78
Classification of imported goods - Bonded Fabric - whether classified under RITC 60063200 or are classifiable under RITC 54074290? - Board Circular No. 02/2011-Cus. dated 04.01.2011 - Held that:- The undisputed fact is that the assessee imported Bonded Fabric and not textile or any other goods . The Section Note, heavily relied on by the Revenue (Section XI), applies to textiles and textile articles in general. Sub-section (2) and Sub-clauses thereunder refer to goods classifiable in Chapter 50 to 55, etc., consisting of mixture of two or more textile materials and the predominant test here is the weight of one textile material over another single textile material. This is of no help to the Revenue because, admittedly, what is imported is fabric per se. Circular No. 02/2011 specifically covers fabrics bonded fabrics classifiable depending on the type of textile material and nature of bonding. The textile industry differentiates between textile and fabric; normally a textile refers to an unfinished product which cannot be used specifically while a fabric is used specifically to mean a finished product - Hence, the applicability of Section Note is misplaced and the classification is therefore required to be done as per the interpretative Rules, more specifically, under Rule 3. Rule 3(c) alone is applicable and has rightly been applied by the first appellate authority. The impugned goods are rightly classified by the importer under RITC 60063200 - appeal dismissed - decided against Revenue.
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2019 (1) TMI 77
Absolute confiscation - imposition of penalty - Smuggling of Gold - restricted item or not? - Held that:- The appellants have failed to prove the source of procurement of Gold, therefore, Gold is smuggled one but on the same time, Revenue is also failed to prove that Gold is of third country origin and smuggled through Nepal. In fact, the Revenue has not adduced any evidence to that effect, whereas on the other side, Shri Sanjeeb Kumar, himself has categorically stated that he is not dealing with the purchase and sale of the Gold. Therefore, the Revenue has failed to prove that the Gold in question is of third country origin and have been imported/smuggled through Nepal. Without evidence, the benefit of presumption under Section 123 of the Customs Act, 1962 is not available to the Revenue - The Gold in question cannot be held as restricted goods and they can be released on payment of redemption fine and penalty as the goods are smuggled in nature. The redemption fine of ₹ 5 lakhs is imposed on the Gold in question which can be redeemed on payment of the said redemption fine - Considering the fact, that appellants are involved in the activity of smuggling of Gold, therefore, penalty of ₹ 1 lakh each is imposed on all the appellants - appeal allowed in part.
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Insolvency & Bankruptcy
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2019 (1) TMI 84
Corporate Insolvency Resolution Process - due unsecured loans - Held that:- The Respondents have taken plea that one Sri Bhagya Kalita or for the matter the ‘Corporate Debtor’ had no obligation whatsoever to repay the entire unsecured loans, obtained by the ‘Corporate Debtor’ prior to 15th December, 2014 due to change of management. The Adjudicating Authority has referred to an agreement dated 15th December, 2014, wherein one Sri Bhagya Kalita, who is the Managing Director of the ‘Corporate Debtor’ had agreed to purchase the entire shareholdings of Mr. Rajesh Himatsingka, his son Mr. Kanishka Himatsingka and his daughter-in-law Ms. Neha Himatsingka. Giving reference to their cases and the agreement dated 15th December, 2014, the Adjudicating Authority has exercised inherent power and refused to entertain the application. We are not going on the detailed reason given by the Adjudicating Authority for exercising inherent power as we have already held that the Adjudicating Authority has no jurisdiction to exercise inherent power for deciding any disputed question whether claim is bonafide or malafide. For the reasons aforesaid, we set aside the impugned order dated 15th April, 2018 passed by the Adjudicating Authority in the case of ‘Himatsingka Auto Enterprises’ and remit the matter to the Adjudicating Authority for deciding the matter fresh after notice to the parties.The parties are not given liberty to raise any question or dispute, all matters having already heard and decided in the present appeal. If there is debt and default, the Adjudicating Authority will admit the case. If the application under Section 7 filed by ‘Neha Himatsingka & Anr.’ is admitted in that case the question of admission of the Second application under Section 7 by ‘Himatsingka Auto Enterprises’ against the same ‘Corporate Debtor’ will not arise. ‘Himatsingka Auto Enterprises’ in such case may file claim before the ‘Interim Resolution Professional’ as may be appointed while dealing with the case of ‘Neha Himatsingka & Anr. Vs. Himatsingka Resorts Private Limited’.
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2019 (1) TMI 83
Interim Order to restrain IRP from demanding the custody of the Property - whether the provisions of “Moratorium” defined u/s.14 be applicable under the circumstances? - Held that:- The Ownership is a deemed Ownership and not the actual Ownership and in that capacity the Bank/ Financial Institution can exercise their right as if the Owner of the asset but not the actual Owner. The connotation used, ‘as if’, is highly significant giving an indication that the Ownership is a deemed Ownership. The outcome of this discussion is that the IRP is duty bound to invoke the jurisdiction prescribed u/s.18 to perform duty of taking over the control and custody of any asset over which the Corporate Debtor has Ownership right as recorded in the Balance Sheet of the Corporate Debtor. The action of the IRP demanding possession over the property is justifiable considering the said specific provision of the Insolvency Code. The Ownership is a deemed Ownership and not the actual Ownership and in that capacity the Bank/ Financial Institution can exercise their right as if the Owner of the asset but not the actual Owner. The connotation used, ‘as if’, is highly significant giving an indication that the Ownership is a deemed Ownership. The outcome of this discussion is that the IRP is duty bound to invoke the jurisdiction prescribed u/s.18 to perform duty of taking over the control and custody of any asset over which the Corporate Debtor has Ownership right as recorded in the Balance Sheet of the Corporate Debtor. The action of the IRP demanding possession over the property is justifiable considering the said specific provision of the Insolvency Code. On co-joined reading of Sec. 3(31) with Sec.14(1)(c) gives a clear indication that the transaction of enforcement of security interest has been created under SARFAESI Act in the past which is to be prohibited for further action of foreclosure or recovery. As a consequence, under the present circumstances, the taking over of the possession by Dena Bank is very much covered under the clauses of “Moratorium” prohibiting not to deal with the impugned asset. Facts of the case have also revealed that the Applicant (Dena Bank) has already been inducted in the Committee of Creditors. As a consequence, all the properties belonging to the Corporate Debtor should come within one basket for further consideration, either by a Resolution Applicant or for the purpose of “Liquidation”. All the members of the Committee of Creditors including Dena Bank shall have their respective share in the assets pooled together.
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Service Tax
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2019 (1) TMI 76
Deletion of Penalty u/s 77 and 78 - the issue on merits as well as the issue of limitation itself are remanded to the Adjudicating Authority for fresh decision - 'sufficient cause' for invoking Section 80 - Held that:- In the instant case, the Tribunal remanded the matter to the Adjudicating Authority. The Revenue is not aggrieved by such remand order, but is only aggrieved by that portion of the order deleting the penalty. It is not clear as to whether the assessee filed any appeal as against the direction issued by the Tribunal remanding the matter for de novo consideration. In any event, we are not adjudicating the correctness of such a direction and this order is confined only to the challenge only in respect of that portion of the order of the Tribunal deleting the penalty. The issue was an interpretational one and the services were taxable only for a limited period. The assessee also remitted the service tax collected from the insurance company - the Tribunal is right in deleting the penalty as being unwarranted. Appeal dismissed - decided against Revenue.
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2019 (1) TMI 75
Extended period of limitation - Commercial coaching services - sheet-anchor of the petitioner academy’s case is that the department could not have invoked the extended period of limitation as it obtained registration in the year 2012 and filed a ‘nil’ return claiming the benefit of exemption under the Notification No.33/2011 dated 25.04.2011 and therefore, the authorities are presumed to be aware of its activities and cannot claim ignorance or attribute suppression to it. Held that:- The mere factum of filing a ‘nil’ return, followed by cancellation of the registration, speaks more of the premeditated acts of the petitioner academy and do not disclose any bonafides on its part. The full facts were never presented to the department whereby the petitioner academy could claim such benefit in the context of the limitation period. The actual transaction between the petitioner academy and the society only came to light after investigation by the authorities and therefore, the authorities were justified in invoking the extended period of five years limitation. The convoluted scheme in the form of the MoU dated 01.04.2009 adopted by the petitioner academy and the society, two separate legal entities, manned by one single individual, A.Rajendra Prasad, essentially seems to have been directed at avoiding tax liability but in effect, it amounted to evasion of tax, which is per se illegal. The manner in which the petitioner academy and the society went about the transaction manifests in no uncertain terms that the intention was to evade tax - the desperate ploy of the petitioner academy in its reply affidavit to completely disown its coaching activity for entrance exams clearly highlights its lack of bonafides and its real intention. That being so, the question of giving it the benefit of the normal limitation period would not arise. In the case on hand, the mere factum of the petitioner academy obtaining registration and filing a ‘nil’ return followed by cancellation of the registration seems to be a self-serving act for the purpose of warding off extended period of limitation at a later point of time. This premeditated act on the part of the petitioner academy was only to present a fait accompli and there is no indication of the full facts, including the existence of the MoU, having been disclosed by the petitioner academy at that point of time. When the authorities did not have the complete facts before them, a presumption that they were aware of the core activity of the petitioner academy, i.e., coaching for entrance examinations, would not arise. Invocation of the extended period of limitation was therefore justified. Inclusion of non-includables in the taxable services - It was also contended by appellant that non-includable items were also brought within the ambit of taxable services - Held that:- Separate heads were not shown in the invoices under which fees were collected by the petitioner academy, whereby students were made aware of how much they were paying for the coaching and how much they were paying for other services, such as transportation, snacks, etc. These were straightaway shown as expenditure by the petitioner academy and claimed as such. The Commissioner opined that when there was no separate receipt towards each head and what was collected was fees alone, the petitioner academy could not thereafter claim deductibles from such fees by showing such self-serving and unauthenticated expenditure. The amounts claimed towards expenditure under various heads by the petitioner academy cannot be tested by this Court and, therefore, even if they are liable to be excluded from the amount received towards the taxable services, such an exercise would not fall within the realm of this writ petition. Thus, this Court finds that invocation of the extended period of limitation was justified on facts. The coaching services rendered by the petitioner academy were taxable under the service tax regime and were not covered by the exemptions, be it under the Notifications or the Act of 1994 - As regards the alleged inclusion of non-includables in the taxable services, the same is beyond the purview of a writ petition involving factual verification which this Court cannot undertake. Petition dismissed - decided against petitioner.
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2019 (1) TMI 74
Maintainability of appeal - non-compliance with pre-deposit - Held that:- Admittedly, out of the demand of ₹ 13,86,31,711/-, a sum of ₹ 6,79,35,479/- had been deposited by the petitioner by way of reversal of credit in his CENVAT credit account, hence, taking care of that amount, actual demand from the petitioner would be ₹ 7,06,96,232/-. Let the petitioner deposit 7.5% on ₹ 7,06,96,232/- within a period of six weeks. On doing the needful, the appeal filed by the petitioner be heard by the Tribunal on merits - petition disposed off.
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2019 (1) TMI 73
Refund claim - GTA service availed for transportation of goods fro the place of removal to the port of export - Held that:- Refund claim was filed after issuance of the notification no.3/2008 dated 19.2.2008, therefore, assessee is entitled for refund of ₹ 1,00,742/- paid on transportation charges for transport of goods from place of removal to the port of export. There is no error in the finding given by the learned CESTATE for refund of GTA services, therefore, no substantial question of law emerges for consideration in this appeal for the said amount - also, learned CESTAE has not committed any wrong to remand the matter with regard to remaining amount of refund of ₹ 15,46,270/- and therefore no substantial question of law emerges for consideration - appeal dismissed.
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2019 (1) TMI 72
Refund claim - exemption under Notification dated 06.10.2007 - duty drawback on service tax paid - Held that:- Admittedly, the appellant is claiming refund under the Notification No.41/2007-ST dated 06.10.2007, in which there is Condition No.1 (e), which provides that refund would not be admissible, if the goods have been exported under the chain of drawback. The said restriction was removed on 07.12.2008 vide Notification No.33/2008-ST dated 07.12.2008. Admittedly the refund claimed by the appellant pertains to the period from July, 2008 to September 2008, which is prior to removal of restriction. The appellant is not entitled for refund claim under the Notification No.41/2017-ST dated 06.10.2007 because restriction was removed on 07.12.2008 vide Notification No.33/2008-ST and the refund claim relates to the period from July, 2008 to September 2008, which is prior to the removal of restriction. Appeal dismissed.
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2019 (1) TMI 71
Liability of service tax - amount collected as entry fee - period June 2015 to July 2016 - benefit of Notification No. 25/2012 - Held that:- The entry fee levied to the above referred activities are exempt from payment of duty. It can be seen from clause (iii) that it contains an entry to any sporting event other than a recognised sporting event, which would include any sporting event conducted other than recognised sporting event. It may be seen that appellant is conducting various sporting activity within the area in his premises which would definitely fall out of the definition of recognised sporting event . Other clauses of notification only defines recognised sporting event and Sl No 47 also exempts sporting event other than recognised sporting event. Both the lower authorities have missed this point in the notification which has been claimed by the appellant right from the beginning. It is nobody s case that the activity undertaken in the premises is a sporting activity as has been recorded by the lower authorities - both the lower authorities have mis-construed Entry No. 47 to deny the appellant exemption from service tax liability on the amounts charges by him which are less than ₹ 500/- as required under Notification. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 70
Liability of service tax - washing and ironing services (Dhulai/Estri) - imposition of penalty under Section 77(2) and under Section 78 of the Finance Act, 1994 - Held that:- The Commissioner (Appeals) has given his finding that washing of clothes were done in washing machine with the help of water and washing powder/ liquid for which he held that service given by appellant before 01.07.2012 is not taxable but as negative list under Section 66D or mega exemption Notification no. 25/2012-ST have not contained the name of services provided by the appellant, the further period post negative list is taxable - there are no irregularity in his order on duty liability of the appellant applicable with effect from 01.07.2012, having regard to extension of cum tax benefit as provided under section 67(2) of the Act. Penalties under Section 77(2) - Held that:- While reducing penalty from ₹ 20,000 to ₹ 10,000 under Section 77(2) of the Act, the Commissioner (Appeals) has given his reasoning that ₹ 20,000 was maximum penalty prescribed and as appellant was yet to file the prescribed return for which he considered that it would be improper to invoke Rule 7C and Section 70 of the Act to impose maximum penalty by equating the delay in filing with non-filing of return. Since respondent department has not challenged the same reduction of penalty, such reduction of penalty under Section 77(2) appears to be reasonable. Penalty u/s 78 - Held that:- In the instant case the service provided by the appellant was not taxable before introduction of negative list. It was not filing returns on those scores though it was duly maintaining the record. Further if the contention of ld. Advocate is to be accepted, the rural folk of Indian society continue to follow the same procedure unless being appraised about change of any system, law, rule or regulation and to this extent, the observation of Hon'ble Supreme Court made in Uniworth Textile [2013 (1) TMI 616 - SUPREME COURT] that mere non-payment of duty is not equivalent to collusion or wilful mis-statement or suppression of fact is relevant - in the instant case as there was no proof furnished by the department that suppression had taken place and finding in the order-in-original reveals that appellant had started voluntarily paying the service tax, penalty of equivalent amount under Section 78 of the Act would be a travesty of justice. Service tax liability to be requantified with effect from 01.07.2012 by giving cum-tax benefit in terms of Section 67(2) of the Act - Applicable interest to be levied on requantified service tax liability penalty of ₹ 10000/- in terms of Section 77(2) of the Act is confirmed - Penalty under Section 78 of the Act is set aside - appeal allowed in part.
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2019 (1) TMI 69
Imposition of penalty - demand for the period for the period 2013-15 - liability for the period from 2007-12 was paid through VCES - Section 73(3) of the Finance Act - Held that:- It is a fact that the appellant has paid the Service Tax and interest before the issue of SCN and therefore the issuance of SCN itself, for demanding penalty under Section 78, is not warranted under law - further, the perusal of the works contract clearly shows that the contract value is not inclusive of Service Tax because nowhere in the works contract, it is stated that the contract value is inclusive of Service Tax. To this extent, the finding of the Original Authority and Appellate Authority is factually incorrect. Penalty not sustainable - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 68
Penalty u/s 78 of FA - non-payment of service tax - it was alleged that the appellants have collected the Service Tax and not paid the same in the Government treasury which itself tantamount to malafide on the part of appellant - suppression of facts - Held that:- The appellants have collected the Service Tax and not paid the same to the Government treasury and also filed late Return for the impugned period - when the audit was conducted and the Audit Party found that the appellants are liable to pay Service Tax, the appellant conceded his liability and paid a part of the amount and thereafter filed the Return on 13.07.2015. Also, subsequently before adjudication he paid the remaining amount but did not pay the interest which was paid subsequently. During the relevant period as per Section 78 the penalty shall be 50% of the Service Tax for the period beginning from 8th April, 2011 up to the date on which the Finance Act, 2015 receives the assent of the President. Further, as per the provision of Section 78 prevailing till March 2015 in respect of accounted transactions penalty imposable under Section 78 of the Act was 50% of the Service Tax. By following the said provision, the Commissioner of Central Tax has held that penalty imposable under Section 78 has been restricted to 50% of the Service Tax for the period till March 2015 and the said decisions have also been placed on record by the appellant. The penalty restricted to 50% of the duty demand - appeal allowed in part.
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2019 (1) TMI 67
Liability of Service tax - Construction of Complex Service - sale of undivided share of land (UDS) - case of appellant is that the appellant being a promoter is not rendering any of the services and that therefore there is no service tax liability - period from June 2005 to March 2009 and April 2009 to June 2010 - Held that:- The issue is more or less identical to the Order of this Bench in the case of M/s. Golden Ventures [2018 (7) TMI 434 - CESTAT CHENNAI] wherein this Bench after analyzing various Orders/decisions and Circulars, has held that the appellant who is a builder/promoter is not liable for service tax upon his selling UDS. There is no service tax liability on the appellant - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 66
Imposition of penalty - tax with interest paid on being pointed out - no suppression of facts - Held that:- The appellant assessee immediately paid the entire amount of service tax and intimated the same to the Range Officer by producing fresh documents - further, there is no material available on record to establish the allegation of suppression of facts, mis-declaration etc. with an intent to evade payment of service tax - it is a fit case for waiver of penalty - penalty set aside - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 65
Works Contract service or not - appellant herein was rendering Maintenance or Repair of ships to various clients - period involved is from 16.06.2005 to 31.12.2009 - principles of natural justice - Held that:- The Bench enquired with the Learned Chartered Accountant as to agreement or work orders is enclosed, he submits that they have not enclosed any agreements. The argument as to whether the services rendered by the appellant would fall under the category of works contract services or otherwise is a question that needs to be addressed by the lower authorities in light of the judgment of the Apex Court in the case of Larsen & Toubro Ltd., [2015 (8) TMI 749 - SUPREME COURT] by looking at the agreement or orders etc. - this specific point also not elaborated in the manner by the appellant’s counsel before the Adjudicating Authority. The impugned order is set aside and both the appeals are remitted to Adjudicating Authority to reconsider the issue afresh after following principles of natural justice - appeal allowed by way of remand.
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2019 (1) TMI 64
Refund of unutilized CENVAT credit - export of services - the refund has been rejected by the impugned order on the ground that the appellants have not submitted Foreign Inward Remittance Certificate for the said transaction and also on the ground of time limitation - Held that:- The Commissioner (Appeals) has observed that the appellant had not produced bank realization certificate as required. Further the Commissioner (Appeals) has relied upon the Suprasesh General Insurance Services & Brokers P. Ltd. [2015 (9) TMI 1219 - MADRAS HIGH COURT], where it was held that the receipt was in Indian currency and it was held to be receipt in convertible foreign exchange and the benefit of export of service was granted. Time limitation - Held that:- The Larger Bench of this Tribunal in the case of Span Infotech (India) Pvt. Ltd. [2018 (2) TMI 946 - CESTAT BANGALORE] has held that In respect of export of services, the relevant date for purposes of deciding the time limit for consideration of refund claims under Rule 5 of the CCR may be taken as the end of the quarter in which the FIRC is received, in cases where the refund claims are filed on a quarterly basis. The appellant has produced before me non-objection certificate for issuance of FIRC issued by Indus Inc Bank wherein remittance had been confirmed and all details regarding the remitter name, beneficiary name and purpose of remittance have been given. But these documents were not made available before both the authorities below. Therefore, both the authorities have held that appellants have not produced any credible evidence to establish that they have received the payment in convertible foreign exchange - these cases need to be remanded back to the original authority to examine the period of limitation in the light of the Larger Bench decision in the case of Span Infotech (India) Pvt. Ltd. as well as the receipt of foreign exchange in view of the certificates issued by Indus Inc Bank and ICICI Bank and also the fact that in subsequent decision, the Revenue has allowed refund considering the transaction as export. Appeal allowed by way of remand.
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Central Excise
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2019 (1) TMI 63
CENVAT Credit - bogus purchase of raw material - Lead Ingots - Held that:- The Excise Authorities and the Tribunal have concurrently come to the conclusion that the goods in question were never received by the assessee in its factory and therefore, the assessee's claim of having consumed the same was not genuine - These findings are pure findings of facts. No question of law arises. Appeal dismissed - decided against appellant.
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2019 (1) TMI 62
100% EOU - refund of differential duty paid - revision of assessable value by including the Basic Customs Duty of 10% in the value - Section 14 of the Customs Act, 1962 - scope of SCN - Held that:- The impugned order does not specifically states as to why the value of Basic Customs Duty needs to be included in the assessable value. It merely holds that the appellant has not included the element of Basic Customs Duty in the assessable value and therefore the same may be included. It is obvious that for the purpose of comparison in terms of said proviso to section 3 of CEA, the duty leviability on like goods produced or manufactured outside EOU should be considered. In these circumstances, Section 14 of Customs Act, 1962 or proviso to Section 3 of Central Excise Act, 1944 have no relevance whatsoever. Therefore, there is no need to include the element of Basic Customs Duty in the assessable value for the purpose of arriving at the value of similar goods manufactured outside EOU. The impugned order has not dealt with the other issues like unjust-enrichment etc., the impugned order is set-aside and the matter is remanded to the original adjudicating authority to examine the issue in terms of Section 11B - appeal allowed by way of remand.
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2019 (1) TMI 61
Principles of natural justice - impugned order passed without application of mind - it was argued that penalty and duty has been imposed under Customs as well as Central Excise Acts without specifying whether the penalty is under Customs Act or the Central Excise Act and how much is under Customs Act and how much is under Central Excise Act. Held that:- Board Circular 21/95-Cus dated 10.03.1995 clearly prescribes that action in such cases by Revenue should be taken after definite conclusion has been arrived at by the Development Commissioner. In the instant case, the Development Commissioner has issued notices, however, as per the details, no specific decision has been reached and the order is in clear violation of Circular No. 21/95-Cus dated 10.03.1995 - also, two different officers have passed the adjudication order. One has passed without considering the defense submission given by the appellant and the second order has been passed after considering the defense submissions made by the appellant. Under no circumstances, both the orders passed by different officer could have been same and it clearly shows non application of mind and failure to consider the grounds of defense raised by the appellant. Moreover, the issue of jurisdiction is a legal ground and can be invoked at any time. The order is passed without application of mind and therefore, the same is set-aside - matter is remanded back to the Adjudicating Authority for passing a fresh order after considering the grounds raised by the appellant and affording them a reasonable opportunity of hearing - appeal allowed by way of remand.
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2019 (1) TMI 60
Clandestine removal - manufacture of Calcined Petroleum Coke from Raw Petroleum Coke - period of dispute is from June 1991 to October 1993 - Held that:- It is admitted fact on record that weight recorded in weighment slips was gross weight, whereas the weight reflected in gate passes was net weight. The Central Excise duty is to be paid on net weight because the purchaser of the goods has paid for goods which are covered by net weight and the demand is not confirmed on the basis of net weight. The demand is confirmed on the basis of gross weight, therefore, the said confirmation is not sustainable - confirmation of demand of ₹ 64,000/- along with equal penalty is set aside. Demand of around ₹ 16 lakhs of Central Excise duty - discrepancies in the weight reflected in clearances shown in RG-1 Register and the clearances arrived at on the basis of packing material utilized as reflected in Bag Register - Held that:- During the relevant period there was one rule namely Rule 173E of Central Excise Rules, 1994 on statute which required to declared principal raw material required for manufacturing of unit quantity of final product. The provision of law was that through a notification CBEC would declared principal raw material used in respect of specified final product and on the basis of utilization of principal raw material, there was provision under said rule to estimate goods manufactured - demand which is around ₹ 16 lakh of Central Excise duty and equal penalty imposed are set aside. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 59
Valuation - At the beginning of the month October 2010 there was only one machine in the factory and from 16.10.2010, two new machines were installed under intimation to Revenue - demand of duty on all three machines - Rule 8 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Held that:- The issue is no more res integra in view of the issue being decided by this Tribunal in the case of Shree Shyam Pan Products Pvt.Ltd. v. Delhi-I [2018 (1) TMI 345 - CESTAT NEW DELHI], where it was held that collection of duty of Central Excise for the period for which machines were not in operation and goods were not being manufactured such collection of duty is unsustainable - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 58
Refund of un-utilized Cenvat Credit lying balance on closure of factory - Held that:- It was held in the case of Gauri Plasticulture [2006 (8) TMI 225 - CESTAT, MUMBAI] that whenever assessee was unable to utilize the credit on account of objection raised by the Department and paid duty in cash, they would be entitled to refund of credit in cash - decided in favour of assessee - appeal dismissed - decided against Revenue.
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2019 (1) TMI 57
Dutiability - sales tax deferment scheme - foreclosure of the scheme at a discounted rate of 6.5% of the NPV offered by the Government of Andhra Pradesh - whether the demand for Central Excise Duty on the appellant on the amount which has been extended as discount by the Government of Andhra Pradesh on foreclosure of sales tax deferment scheme is dutiable or otherwise? - Held that:- The demands which have been raised by the show cause notice dated 07.05.2010 for the period 2001-02 to 2004-05 is blatantly beyond the mandate given under first proviso to Section 11A(1) of the Central Excise Act, 1944. The said section mandates demand of duty from the assessee, in the case of misstatement or suppression or fraud or collusion even in evasion of Central Excise Duty for the period 5 years from show cause notice. In the case in hand, none of these ingredients appeared to have been brought out in the show cause notice. Be that as it may, since the mandate of first proviso of Section 11A(1) of Central Excise Act only contemplates for the demand up to 5 years from the date of show cause notice, the demands raised on the amount extended as discount by the Government of Andhra Pradesh for the period 2001-02 to 2004-05 is hit by limitation. Demand for the period 2005-06 - Held that:- There is nothing on record which indicates that the appellant herein had wilfully violated the provisions of Central Excise Act and Rules made there under with an intention to evade payment of duty, as it is on record that appellant had during the period filed periodical returns with the authorities - appellant could have entertained a bonafide belief that the discount which has been offered by the Government of Andhra Pradesh on foreclosure of the deferred sales tax scheme is not an additional consideration as during the relevant period - the impugned order is liable to be set aside only on the ground of being hit by limitation. Appeal allowed.
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2019 (1) TMI 56
CENVAT Credit - input service - outward freight for transporting finished goods from the factory to the buyer’s premises - place of removal - Department alleged that since the factory gate is the ‘place of removal’ for the goods cleared by the assessee and the outward freight which is used for clearance of final products beyond the factory gate did not fall within the purview of definition of ‘input service’ as per Rule 2(l) of CCR, 2004 - Held that:- In the present case as per the purchase orders, the appellant is supposed to supply the goods at the buyer’s premises and the price of the goods include outward freight - the various circular issued by the Board in the year 2007, 2014 clearly show that evidences of the parties is to be ascertained as to when the property in the goods passes along with the other documents i.e. purchase order, invoices etc. - there is no infirmity in the impugned order demanding the cenvat credit wrongly availed by the appellant. Extended period of limitation - penalty - Held that:- There were divergent views during the period in dispute on the issue, therefore the allegation of suppression with intent to evade payment of duty is not sustainable - the demand beyond the normal period of limitation is set aside as there was no intention to evade payment of duty - the penalties imposed on the appellant are also not sustainable and hence set aside. The impugned orders in respect of the demand for the normal period with interest is upheld and penalties are set aside - appeal allowed in part.
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2019 (1) TMI 55
Jurisdiction - power of Commissioner (Appeals) to remand the matter w.e.f.11.05.2001 - amendment of Section 35A (3) of the Central Excise Act, 1944, by the Finance Act, 2001 - interpretation of statute - Held that:- The similar issue on interpretation of the above provision, came up before the Hon’ble Supreme Court in the case of Union of India Vs. Umesh Dhaimode [1997 (2) TMI 140 - SUPREME COURT OF INDIA], wherein the Hon’ble Supreme Court after analyzing the provision, held that power to remand the matter to the authority below for fresh decision is inbuilt in the aforesaid provision. Thus, the Commissioner (Appeals) have power to remand the matter back to the original adjudicating authority even after the amendment of Section 35A(3) - appeal dismissed - decided against Revenue.
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2019 (1) TMI 54
CENVAT Credit - appellants have availed common input/input service Credit - provisions of Rule 6(3A) of CCR, 2004 not exercised - Held that:- they had voluntarily reversed the proportionate input/input service Credit alongwith interest - The issue is no more res-intgra as has already been discussed by this Bench in the case of Castrol India Ltd. [2018 (7) TMI 315 - CESTAT CHENNAI], where reliance placed in the case of DALMIA BHARAT SUGAR AND INDUSTRIES LTD., DALMIA CHINI MILLS VERSUS C.C.E. CUS. & S. TAX, NEW DELHI [2017 (1) TMI 231 - CESTAT NEW DELHI], where it was held that the Commissioner is not justified in insisting that appellant reverse cenvat credit in terms of Rule 6(3)(i) of Cenvat Credit Rules - the appeal is allowed on merits as well as on limitation with consequential benefits - decided in favor of appellant.
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2019 (1) TMI 53
Classification of goods - Rice Milling Machinery along with belt conveyors and Bucket Elevator - whether classifiable under Chapter Heading No.8428 of Central Excise Tariff Act, 1985 or are classified under Chapter Heading No.8437 of Central Excise Tariff Act, 1985 as machinery using in milling? - Held that:- The issue stands settled by this Tribunal in the case of Alpsco Graintech Pvt Ltd. [2018 (12) TMI 478 - CESTAT CHANDIGARH], where it was held that as per Section notes the entire machinery is classifiable under heading 8437 which is for machinery used in milling industry and it is not disputed that these elevators and conveyors being manufactured by the appellants were not used for milling industry. The belt conveyors and bucket elevators specifically manufactured as the part of rice milling machinery along with other machinery of rice mill by the appellants merit classification under chapter heading No. 8437 of CETA, 1985 - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (1) TMI 52
Maintainability of petition - case of Revenue is that against the decision of the Appellate Tribunal, a revision is maintainable before the High Court and, accordingly, as a statutory revision is provided, therefore, this writ petition does not lie - survival of proceeding initiated under the AVAT Act, 2003 - Section 174 (2)(f) of the Act - Held that:- It is the settled law that an appeal or a revision is generally considered to be a continuation of the original suit or proceeding. In the instant case as noticed, the proceeding against the petitioner was initiated by the show cause notice dated 07.04.2014, whereas, the later enactment being the AGST Act of 2017 came into effect on and from 01.01.2017 Therefore, it is to be concluded that on the date on which the AGST Act of 2017 came into effect, the proceeding initiated against the petitioner was in place and therefore, such proceeding is saved under Section 174(2)(f) of the later enactment being the AGST Act of 2017 - In view of the clear provision of Section 174 2(f), a proceeding that was initiated against the petitioner by the Superintendent of Taxes at Boxirhat Check post, continues to remain under the AVAT Act of 2003 up to the point where the Assam Board of Revenue being the Appellate Tribunal had given its final consideration. In the event, the petitioner desires the proceeding can be further continued by preferring a revision under Section 81 of the AVAT Act of 2003 or in the event, the petitioner does not desire to do so, the same comes to an end by attaining finality. The contention of petitioner that as the writ petitioner had not initiated any further proceeding, therefore, the proceeding came to an end and as such a revision is not maintainable, cannot be accepted - In the present case, the proceeding against the petitioner having been initiated under the AVAT Act of 2003, when the same was still in existence, therefore, the proceeding is saved and continues as if the AVAT Act of 2003 was not repealed. Petition dismissed - decided against petitioner.
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