Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 5, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
PMLA
Service Tax
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Delegation of powers by the commissioner - Provisional attachment - Proceedings initiated u/s 83 - when a statutory form is created by law for redressal of grievance, a writ petition should not be entertained ignoring the statutory dispensation. - the writ petitioner has not only efficacious remedy, rather alternative remedy under the GST Act, and therefore, the present petition is not maintainable. - HC
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Grant of Bail - availment/utilisation of bogus input tax credit (ITC) - It may also be noted that the present proceedings are still at a teething stage and may, if the parties choose, be subject to the rigours of law as prescribed under the Statute i.e. assessment, appeal and revision etc. Till such time the guilt of the accused person would not have crystallized and it would difficult to pre-judge at the stage of hearing an application for bail what the ultimate punishment imposed would be. In such circumstances, keeping an accused in custody, might not ultimately achieve the ends of justice. - Bail granted - HC
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Service of Demand Notice - Detention/Confiscation of goods - opportunity of being heard is to be given to both the owner of the goods as also the owner of the conveyance. In the present case, we do not find any notice affording opportunity of hearing to the owner of the conveyance. As such the impugned order of confiscation would be in violation of Section 130(4) of the GST Act. The order of confiscation would be without affording due opportunity of hearing. - Matter restored back - HC
Income Tax
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Refund claim of excess deposit of advance tax - while preparing challan mistake occurred and in place of ₹ 4,50,000/- - application filed by the petitioner under Section 119 (2) (b) for refund has been rejected - application rejected on the ground that the claim of the petitioner pertains to Assessment Year 2021- 22 which can be claimed in normal course of time - No Relief to assessee - HC
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Reopening of assessment u/s 147 - Reasons were supplied to the assessee only on 21.11.2017 and assessee on the same day filed the objections to the reopening of the assessment which have been disposed of vide Order Dated 05.12.2017 - A.O. within 23 days after disposing of the objections of the assessee passed the impugned re-assessment order Dated 28.12.2017. Thus, no time of four weeks have been granted to the assessee to take remedial action - Thus re-assessment order framed u/s 147/143(3) is bad in Law and deserves to be quashed. - AT
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Validity of assessment under section 153A - addition u/s 68 - By simply referring to General findings of investigations wing at Kolkata entry operators providing bogus loans the revenue authorities cannot fasten liability of undisclosed income upon the assessee, unless the assessing officer makes enquiry of his own and rebuts the documentary evidences submitted by the assessee. The assessee has duly discharged its onus by submitting the loan confirmation, income tax details and bank statements and financial statement of the loan creditors. Without making enquiry of his own the Assessing Officer has rejected them which is totally unsustainable. - AT
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Excess premium charged on issue of shares u/s.56(2)(viib) - The value adopted by the Assessing Officer under net asset value method even though a prescribed method does not give correct value of shares in the given facts and circumstances of the case, because amended provisions of Rule 11UA by the Finance Act, 2017 w.e.f 01.04.2018 has permitted valuation of immovable property as per guidance value for the purpose of valuation of shares. - value of shares arrived at by Assessing Officer under net asset value method cannot be accepted - AT
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Disallowance of foreign exchange fluctuation under the head finance cost - in absence of applicability of section 43A of the Act, loss claimed by the assessee on account of exchange fluctuation loss on ECB loan availed for acquisition of indigenous assets revenue in nature deductible u/s.37(1) of the Act cannot be considered as capital in nature and added back to the cost of assets. - AT
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Disallowance of various expenditures - CIT(A) considering the fact that assessee need to pay salary expenditure to employees, even though there is no business operations for the year has allowed 50% salary debited into profit and loss account . The assessee has failed to file any evidences to counter finding of fact recorded by the learned CIT(A) - AT
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TP Adjustment - when TNMM method has been applied as most appropriate method it could take care of all notional interest costs wherever it could be applied and there could be no separate upward adjustments on export receivables for belated realization of export bills. Hence, we direct the Assessing Officer to delete upward adjustment made towards overdue receivables from Associated Enterprises. - AT
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Unexplained investment - Addition u/s 69/69B - An agreement even itself will not be enforceable in the eyes of law unless character of the land is changed viz. it is being converted into new tenure and such conversion is depended upon the payment of premium to the Government, and sanction from the Government. In these situations, it is difficult to infer that the assessee would pay on-money before such incident of conversion happen. This was the positive evidence produced by the assessees for rebutting the belief formed by the AO - CIT(A) rightly deleted the additions - AT
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Validity of initiation of proceedings u/s.147 - Unexplained investment u/s. 69B - Even though there was a tangible material or information coming from the investigation wing, but Assessing Officer on the said material/ information received has to apply his mind after verifying the assessment records and after due application of mind, he has to satisfy himself and reached to reason to believe that income chargeable to tax has escaped assessment - AT
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Rectification u/s 254 - One of the reasoning given by the Tribunal to uphold the cancellation order was that, assessee had suppressed vital and material facts regarding acquisition of shares of AJL and the purpose for which it was acquired at the time of seeking the registration. Thus, there is no substance in this contention that, merely because later on this fact was mentioned in the notes to the account of the balance-sheet filed subsequently along with the return of income amounts to furnishing of information at the time of registration. Accordingly, such contention raised in miscellaneous application is rejected. - AT
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Income accrued in India - taxability of receipt towards Infrastructure and Hosting Data Centre (IDC) charges by treating it as royalty - India–Singapore DTAA - the amount received by the assessee from provision of IDC services cannot be treated as royalty or FTS - No tax liability - AT
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Capital gain on sale of buildings - depreciable assets - LTCG or STCG - fiction created in sub-section (1) & (2) of Section 50 has limited application only in the context of mode of computation of capital gains contained in Sections 48 and 49 and would have nothing to do with the exemption that is provided in a totally different provision i.e. Section 54E - AT
Customs
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Benefit of concessional rate of duty - Scope of expression "for use in specified Plantation sector" as "actual use in specified Plantation sector" - multi utility / general purpose goods - Import of hi-tech appliances i.e., sprayers, power weeders, Tea Pruners and Mist Blowers - The Notification does not stipulate a condition of proof for end use in order to claim exemption. - there is ample material on record to show that the goods were used in tea, coffee and rubber plantation sector - The tribunal therefore, erred in law in holding that the appellant is not entitled to the benefit of exemption Notification - HC
Indian Laws
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Dishonor of Cheque - A proprietorship firm is neither a Company, nor a partnership firm. It is merely a business name. Although even a partnership firm is not a juristic person, but in view of Order 30 Rule 1 CPC, the partners can sue or be sued in the name of firm. A suit by a proprietorship firm is only by its proprietor. Therefore, Section 141 of Negotiable Instruments Act, would not apply. Thus, the respondent alone can be prosecuted being the proprietor of the proprietorship firm. Accordingly, it is held, that the Trial Court, committed mistake by holding that since, the proprietorship firm was not arraigned as an accused, therefore, the complaint is not maintainable. - HC
Service Tax
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Sabka Vishwas (Legacy) Dispute Resolution Scheme, 2019 - SVLDRS - delay in payment due to adjustment of amounts paid by the insurance company against the payment under the scheme - The stand of the Respondents in this regard is clearly hyper technical and arbitrary. The further stand of the Respondents that the last date for payment has expired on 30.09.2020 is also not acceptable. The delay in receiving payment is on account of the refusal of the Respondent No.3 to adjust the compensation amount payable by the 6th Respondent against the crystallised due under the scheme. The 6th Respondent had also issued the discharge voucher on 29.9.2020 and as such it cannot be said that the offer to pay had not been made before the last date. - HC
VAT
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Violation of principles of Natural Justice - validity of assessment orders - , the second respondent has mechanically accepted the audit report without any independent assessment and without affording sufficient opportunity to the petitioner to place their objections in the revision of assessment proceedings under Section 27 of the Tamil Nadu Value Added Tax Act, 2006 - Matter remanded back - HC
Case Laws:
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GST
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2021 (1) TMI 101
Maintainability of petition - availability of alternative remedy - Delegation of powers by the commissioner - Provisional attachment - Proceedings initiated u/s 83 - petitioner admits that there is alternate remedy available, but contend that the rule of exclusion of jurisdiction due to availability of alternative remedy is a rule of discretion and not one of the compulsions - HELD THAT:- It is not in dispute that respondent No.3 and the Divisional Commissioner, who has been appointed as Commissioner (Appeals) under the GST Act, are constituted under the Act and therefore, it is assumed that there is no illegal or irregular exercise of jurisdiction and the same would not result in the order being without jurisdiction. Even if there is some defect in the procedure followed during the hearing of the case, it does not follow that the authority acted without jurisdiction. It may make the order irregular or defective but the order cannot be a nullity so long it has been passed by the authority, which is competent to pass the order. There is a basic difference in between want of jurisdiction or irregular exercise of jurisdiction and if there is non-compliance of procedure, the same cannot be a ground for granting one of the writs prayed for. The defect, if any, can according to the procedure established by law, be corrected only by a court of appeal or revision. The Hon ble Supreme Court has in one of its latest judgments in ASSISTANT COMMISSIONER (CT) LTU, KAKINADA ORS. VERSUS M/S. GLAXO SMITH KLINE CONSUMER HEALTH CARE LIMITED [ 2020 (5) TMI 149 - SUPREME COURT] held that even though the High Court can entertain writ petition against any order or direction passed or action taken by State under Article 226 of the Constitution of India, but it has not to do so as a matter of course when aggrieved person could have availed the effective alternative remedy in the manner prescribed by law. Thus, what can be deduced from the aforesaid exposition of law is that the Hon ble Supreme Court has recognized some exception to the rule of alternative remedy, i.e. where the statutory authority has not acted in accordance with the provisions of the Act or in defiance the fundamental principles of judicial procedure or has resorted to invoke the provisions, which are repealed or where an order has been passed in total violation of the principle of natural justice, but the High Court will not entertain a petition under Article 226 of the Constitution of India, if efficacious remedy is available to the aggrieved person or where the statute under which the action complained of has been taken in mechanism for redressal of grievance still holds the field. Meaning thereby, that when a statutory form is created by law for redressal of grievance, a writ petition should not be entertained ignoring the statutory dispensation. Thus, the writ petitioner has not only efficacious remedy, rather alternative remedy under the GST Act, and therefore, the present petition is not maintainable. Lastly and importantly, we find that the writ petition filed by M/S GM POWERTECH AND OTHERS VERSUS STATE OF H.P. OTHERS [ 2020 (12) TMI 482 - HIMACHAL PRADESH HIGH COURT] , the company against whom same and similar allegations, as have been levelled against the petitioner herein, being CWP No. 5462 of 2020, has not been entertained and the company has been relegated to avail of the alternative remedy. The present petition is dismissed.
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2021 (1) TMI 100
Grant of Bail - availment/utilisation of bogus input tax credit (ITC) of ₹ 2.48 crores on the strength of fake purchase invoices issued in the name of 21 fictitious entities - guilt of the accused person have not crystallized yet - HELD THAT:- This Court while dealing with the contention of the counsels for the parties has taken note of the fact that in such matters the evidence is largely based on documentary evidence. Once the charge-sheet has been filed unless antecedents to the contrary can be demonstrated, the presence of the accused may not be required to take the prosecution to its logical conclusion. The object of the law in question is to act as a deterrent in blocking loopholes in an otherwise nascent law which concerns itself with the collection of revenue for the State. Section 132(1) (i)of the Act provides that in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken, exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine. Similarly, Section 132(ii) of the Act provides a punishment with imprisonment for a term which may extend to three years and with fine when the amount in question is greater than ₹ 2 crores but does not exceed ₹ 5 crores. Likewise, the punishment prescribed under Section 132 (1)(iii) for amount between one crore to two crores, the maximum imprisonment can be for a maximum period of one year. In cases where the amount is less than one crore of rupees, the same has been made compoundable. It may also be noted that the present proceedings are still at a teething stage and may, if the parties choose, be subject to the rigours of law as prescribed under the Statute i.e. assessment, appeal and revision etc. Till such time the guilt of the accused person would not have crystallized and it would difficult to pre-judge at the stage of hearing an application for bail what the ultimate punishment imposed would be. In such circumstances, keeping an accused in custody, might not ultimately achieve the ends of justice. Reliance may be placed in the case of M/S. JAYACHANDRAN ALLOYS (P) LTD. VERSUS THE SUPERINTENDENT OF GST AND CENTRAL EXCISE, THE DEPUTY COMMISSIONER OF GST AND CENTRAL EXCISE HEAD QUARTERS PREVENTIVE UNIT, THE ADDITIONAL COMMISSIONER OF GST AND CENTRAL EXCISE, THE COMMISSIONER OF GST AND CENTRAL EXCISE [ 2019 (5) TMI 895 - MADRAS HIGH COURT] , where on similar issue it was held that When recovery is made subject to determination in an assessment, the argument of the department that punishment for the offence alleged can be imposed even prior to such assessment, is clearly incorrect and amounts to putting the cart before the horse. It is directed that the petitioner be released on bail on furnishing a bail bond with one surety for the like amount to the satisfaction of the learned trial court with the conditions imposed.
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2021 (1) TMI 99
Principles of Natural Justice - Service of Demand Notice - Detention/Confiscation of goods - case of petitioner is to the effect that the petitioner M/s. Lakshay Logistics was never served with any notice before the order of confiscation was passed on 16.03.2020 in Form MOV-11 - whether the transporter or the owner of the conveyance has been served with the notice or not, if not, whether it was mandatory or not? - HELD THAT:- Section 130 of the GST Act, provides for confiscation of goods or conveyance under given circumstances. Subsection (4) of Section 130 of the GST Act specifically provides that no order for confiscation of goods or conveyance or for imposition of penalty would be issued without giving the person an opportunity of being heard. The person in the said context would be the person interested in the goods as also the conveyance - Therefore, opportunity of being heard is to be given to both the owner of the goods as also the owner of the conveyance. In the present case, we do not find any notice affording opportunity of hearing to the owner of the conveyance. As such the impugned order of confiscation would be in violation of Section 130(4) of the GST Act. The order of confiscation would be without affording due opportunity of hearing. The impugned order as such cannot be sustained as the same has serious civil and financial consequences. The matter is remanded to the competent authority to pass a fresh order strictly in accordance with law after affording opportunity of hearing to the parties concerned - Petition allowed by way of remand.
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Income Tax
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2021 (1) TMI 98
Refund claim of excess deposit of advance tax - while preparing challan mistake occurred and in place of ₹ 4,50,000/- - application filed by the petitioner under Section 119 (2) (b) for refund has been rejected - application rejected on the ground that the claim of the petitioner pertains to Assessment Year 2021- 22 which can be claimed in normal course of time as prescribed under the provisions of the Act of 1961 - HELD THAT:- The petitioner is an assessee. It is also not in dispute that income earned by the petitioner is assessable to income tax and is under an obligation under Section 139 of 1961 Act to furnish a return of income during the previous year which in the present case would be 2020-21. Provisions contained under Section 239 of 1961 Act read with Rule 41 (2) of 1962 Rules that the claim for refund can be only on completion of previous year which in the present case would be after 31.3.2021. We are not commended to any independent provision conferring jurisdiction in the PCCIT to order for refund before the completion of previous years, i.e., 2020-21 (31.3.2021). It is not the case of the petitioner that the excess amount deposited by the petitioner towards advance tax is illegally collected by the department as would entitle her for the refund of the same without following the due procedure prescribed under Chapter XIX of the Act of 1961 read with Rule 41 of the Rules of 1962.
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2021 (1) TMI 97
Rectification u/s 254 - maintainability of appeal of low tax effect - application u/s 254(2) filed by the Revenue for recalling the order dated 23.08.2019 and for restoration of Appeal on the sole ground that the Appeal in question qualified exceptional condition specified in para 10(c) of the Board's Circular - HELD THAT:- As the appellant press in service following substantial question of law: - Under the garb of rectification under Section 254(2), whether Tribunal was justified in recalling the appeal, when appeal was heard in the presence of the appellant and the respondent and when the Tribunal is not vested with power to recall the appeal. However, in the given facts of present case, the substantial question as proposed does not arise for consideration. It being the fundamental principle for administration of justice that an act of the Court shall prejudice no man (actus curiae neminem gravabit). In the case at hand, as there was no occasion for Tribunal to have considered the merit and the same could not have been dismissed as withdrawn being covered by the exceptional conditions contained in para 10(c) of the Board's Circular, we do not perceive any jurisdictional or legal error in the order as would attract the proposed substantial question of law.
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2021 (1) TMI 96
Addition u/s 68 - unexplained credit - CIT-A deleted addition admitting additional evidence - as argued AO has not been provided adequate opportunity to go through the additional evidences - HELD THAT:- In the additional evidence noted by the ld. CIT(A), which was said to have been remanded to the A.O. for comments, there is only mention of bank statement, annual report of KMC and confirmation from it. In his order, the ld. CIT(A) has also referred and relied that the copy of share subscription agreement between KMC Constructions Ltd. B. Seenaiah Coo., Kanwaldeep Investment Co. P. Ltd. and appellant company and promoters dated 14.2.2008 has been filed. From this, he opined that this sets out the plans of the Appellant company, the milestones for allotment of shares, the plan to go for an IPO at a later stage, and conversion schedule in various scenarios. This agreement was not remanded to the A.O. as evident from the order of ld. CIT(A). Hence, clearly the ld. CIT(A) has erred in admitting that said document in violation of Rule 46A. It is settled law that rule of natural justice are applicable equally to both the parties. CIT appeals had committed an error in not giving the assessing officer proper opportunity to go through the additional evidences and offer his comments. After accepting the additional evidences, the CIT appeals has summarily held that from the examination thereof he finds that the share applicant company has sufficient profit and there is confirmation on record. In this regard, there is no reference to the detailed financials of the company in the order of the learned CIT appeals. It is not at all clear that the CIT appeal has examined the sources of fund of the assessee company properly. There is nothing on record to rule out that the amount of share premium granted to the company having a very poor financial record was not out of circuitous route of rotation of share capital with premium. It is also not the case that the CIT appeals had himself examined the issue that assessing officer is doubting the very identity of the company when there was no service of notice u/s.133(6) at the given address. There is no detail as to what was the authorized capital. Whether the assessee company was authorized to raise the said amount of share capital. In this view of the matter since the assessing officer has not been provided adequate opportunity to go through the additional evidences, the examination of the ld. CIT(A) is wholly inadequate. Accordingly, in the interest of justice, we remit the issue to the file of assessing officer. Assessing officer is directed to examine the veracity of the additional documents being submitted by the assessee before the learned CIT appeals. AO shall also keep our observations hereinabove in mind. The assessing officer shall also examine as to how the share premium account of the assessee in this regard has been dealt with. As the Hon'ble Supreme Court in the case of Bharat Fire General Insurance Co. vs. CI T [1964 (4) TMI 44 - SUPREME COURT] has observed that but for section 78 of the Companies Income Tax Act, 1961 share premium was profits available. The Hon'ble Apex Court in CIT vs. Allahabad Bank Ltd. [1969 (2) TMI 5 - SUPREME COURT] has held that after Companies Income Tax Act, 1961, 1956 share premium cannot be used for purpose other than 78(2). As regards the various propositions and the case laws canvassed by the learned counsel of the assessee, the same shall be applicable after the factual verification of the documents claimed to have been submitted before the learned CIT appeals. The assessing officer shall consider the same after giving proper opportunity to the assessee of being heard. Appeal by the revenue stands allowed for statistical purposes.
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2021 (1) TMI 95
Reopening of assessment u/s 147 - no time of four weeks have been granted to the assessee to take remedial action against notice - whether there is delay on the part of the assessee asking for copy of the reasons recorded HELD THAT:- Assessee requested for supply of the reasons recorded for re-assessment proceedings which were provided to the assessee on 21.11.2017. The assessee has filed copy of the letter Dated 25.04.2017 which was filed to the A.O. asking for copies of the reasons recorded for reopening of the assessment. It bears the stamp of the Revenue Department also. Thus, it is clear that assessee immediately asked for copy of the reasons for reopening of the assessment on 25.04.2017 after filing earlier letter Dated 20.04.2017 - there is no delay on the part of the assessee asking for copy of the reasons recorded for reassessment proceedings. Reasons were supplied to the assessee only on 21.11.2017 and assessee on the same day filed the objections to the reopening of the assessment which have been disposed of vide Order Dated 05.12.2017 - A.O. within 23 days after disposing of the objections of the assessee passed the impugned re-assessment order Dated 28.12.2017. Thus, no time of four weeks have been granted to the assessee to take remedial action in the matter. See SMT. KAMLESH GOEL VERSUS THE I.T.O, WARD 59 (3) , NEW DELHI [ 2018 (9) TMI 102 - ITAT DELHI] Thus re-assessment order Dated 28.12.2017 framed under section 147/143(3) of the I.T. Act, 1961, is bad in Law and deserves to be quashed. - Decided in favour of assessee.
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2021 (1) TMI 94
Assessment u/s 153A - Addition u/s 68 - HELD THAT:- Addition in the present case has been made under section 153A on the basis of statements of various parties obtained under survey and search. The addition of unsecured loan has been made on the basis of entries in the regular books of accounts duly reflected in the assessee s financial accounts. There is no reference to material found in search with reference to the addition made. It is also undisputed that these assessments are unabated. The law for assessment under section 153A in case of unabated assessment has been duly laid down by the Hon ble Bombay High Court in the case of continental warehousing [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] . The jurisprudence regarding jurisdictional defect in assessment under section 153A /153C without reference to incriminating seized material has also been expounded by Hon'ble Supreme Court in the case of CIT v/s Singhad technical education Society [ 2017 (8) TMI 1298 - SUPREME COURT] . The addition made in these assessment orders passed by the assessing officer under section 153A without reference to any incriminating material found search is not sustainable. Hence we set aside the orders of authorities below and direct that the additions made are not sustainable due to the jurisdictional defect. Since we have already held that addition of loan itself is not sustainable the addition of commission is also directed to be deleted as the same is also without reference to any material foundering search. These additions are not sustainable due to jurisdictional defect in as much as they are without reference to any incriminating material found upon search - Decided in favour of assessee.
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2021 (1) TMI 93
Validity of assessment under section 153A - addition u/s 68 of long term capital gains as undisclosed income by treating the same as bogus - addition of commission on capital gain, addition under section 68 of loans, addition of interest on loans - HELD THAT:- We note that the co-ordinate bench of ITAT in the case of Shri Vijayrattan Balkrishan Mittal [ 2019 (10) TMI 439 - ITAT MUMBAI] in similar situation held that, dehorse incriminating Material assessment u/s.153A is not sustainable in the case of unabated assessment. Addition of long term capital gain as bogus is not sustainable. The case laws relied by the revenue is duly dealt with in the order of the tribunal referred above. Accordingly we set aside the orders of authorities below and delete the addition on merits in this regard. It may not be out of place to mention here that the ITAT in assessee s own case for A.Y. 2007-08 2008-09 has decided the issue of treatment as bogus of the long term capital gain of shares in favour of the assessee. The same has not been reversed yet. Despite that learned CIT(A) erroneously distinguished the same. We have already held that the long-term capital gain cannot be treated as undisclosed income under section 68 the addition of commission on capital gain done in these cases is consequently not sustainable. Hence we delete the same also. Addition of unsecured loan - we note that assessing officer has accepted that assessee has submitted the confirmation, ITR, bank statement of the parties. However he rejected by simply observing that investigation wing at Kolkata has reported that some of the entry operators are providing bogus loans at Kolkata. The assessing officer did not make any enquiry of his own the only referred to the date of confirmation of the unsecured loan and drew adverse inference. The learned CIT appeals also has confirmed the assessing officer s action by simply making general observations that the loan creditors are bogus in as much as they don t have much income, that the entire TDS have been claimed as refund by them, that they have same IP address of filing return and same corresponding address. By simply referring to General findings of investigations wing at Kolkata entry operators providing bogus loans the revenue authorities cannot fasten liability of undisclosed income upon the assessee, unless the assessing officer makes enquiry of his own and rebuts the documentary evidences submitted by the assessee. The assessee has duly discharged its onus by submitting the loan confirmation, income tax details and bank statements and financial statement of the loan creditors. Without making enquiry of his own the Assessing Officer has rejected them which is totally unsustainable. In the present case assessee has also refunded the loan amount to the loan creditor. This aspect further supports the assessee s plea that these laws cannot be treated as undisclosed income of the assessee. Authorities below have totally ignored this aspect. In this regard case law from Hon'ble Bombay High Court referred by learned counsel of the assessee above supports the proposition that when loan amount is duly repaid the same cannot be treated as undisclosed income under section 68. Accordingly in the background of aforesaid discussion and precedents in our considered opinion the addition of unsecured loans as undisclosed income of the assessee is not sustainable. Hence, we set aside the orders of authorities below and delete the addition. Since we have already deleted the addition of unsecured loan as undisclosed income the addition of interest thereon is consequently also not sustainable. Hence, the same is also deleted.
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2021 (1) TMI 92
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Interest paid is less than interest earned for the year. Therefore, we direct the Assessing Officer to delete the additions made towards interest expenses under Rule 8D(2)(ii) of IT Rules, 1962. As regards disallowance of other expenses under Rule 8D(2)(iii) @ 0.5% of average value of investments, law is very clear inasmuch as there is no scope for Assessing Officer to go for ad-hoc disallowance, when assessee has not maintained separate books of account for investments activity and business. When there is no separate books of account for both activities common expenditure relatable to investment activity and business activity has to be allocated on a systematic basis for which a separate method is prescribed under Rule 8D of IT Rules, 1962. In this case, the Assessing Officer has applied method provided under Rue 8D(2) (iii) @ 0.5% of average value of investments to compute disallowance of other expenses. We do not find any error in the findings recorded by the authorities below, which is in accordance with law and hence, we are inclined to uphold the order of the learned CIT(A) and reject the grounds taken by the assessee in respect of disallowance of other expenses under Rule 8D(2)(iii) of IT Rules, 1962. Appeal filed by the assessee is partly allowed.
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2021 (1) TMI 91
Excess premium charged on issue of shares u/s.56(2)(viib) - value adopted by the Assessing Officer under net asset value method - HELD THAT:- Fair market value of shares considered by the assessee under DCF method is one of the accepted method of valuation of shares under Rule 11UA and such value of shares is supported by necessary supporting evidences including valuation report as on the date of issue of shares. The value adopted by the Assessing Officer under net asset value method even though a prescribed method does not give correct value of shares in the given facts and circumstances of the case, because amended provisions of Rule 11UA by the Finance Act, 2017 w.e.f 01.04.2018 has permitted valuation of immovable property as per guidance value for the purpose of valuation of shares. In this case, if stock in trade held by the assessee in the form of immovable property has been valued as per guidance value, then value of one equity share works out to ₹ 1,00,380/-, which is almost equal or nearer to value arrived at by the assessee under DCF method. Therefore, value of shares arrived at by Assessing Officer under net asset value method cannot be accepted. Therefore, we are of the considered view that the learned CIT(A), after considering the relevant facts has rightly deleted the additions made by the Assessing Officer towards excess premium charged on issue of shares u/s.56(2)(viib) of the Act. Hence, we are inclined to uphold the findings of the learned CIT(A) and dismiss the appeal filed by the Revenue.
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2021 (1) TMI 90
Assessment u/s 153A - enhancement of assessment towards cash credit and interest income - HELD THAT:- No doubt, it is well settled principle of law by the decision of various High Courts and Hon ble Supreme Court that in absence of any incriminating material, no addition can be made in the assessment framed u/s.153C /153A, if such assessments are unabated as on the date of search. But, fact remains that in the present case facts with regard to abatement and unabatement of assessments was not forthcoming from the records as well as additions made towards enhancement of assessment and cash credit and interest income was on the basis of bank account which was the basis for making additions on peak credit and hence, arguments of the assessee that enhancement made by the learned CIT(A) is not on the basis of any incriminating material found during the course of search is unfounded. Therefore, we reject the ground taken by the assessee. Addition to cash deposits - Where the AO during the remand proceedings has recorded categorical finding that although assessee claimed that source for cash deposits is out of cash received from M/s.Saravana Global Holdings Ltd., but account statement of assessee does not vouch the same, whereas the assessee claims that source for three cash deposits was from M/s. Saravana Global Holdings Ltd., for which account statement of the party has been furnished before the AO. Facts are not clear insofar as source of income for cash deposits. Therefore issue needs to be re-examined by the Assessing Officer in light of account statement furnished by the assessee to explain source for three cash credits found on three dates . Interest on fixed deposits - Assessing Officer during the remand proceedings observed that the assessee has received interest income on fixed deposits and credited in the same bank account . However, on perusal of return of income filed for the year, the same was not offered for taxation. Therefore, we are of the considered view that this issue also needs verification by the Assessing Officer.
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2021 (1) TMI 89
Disallowance of foreign exchange fluctuation under the head finance cost - CIT-A held that in the absence of applicability of section 43A to the foreign exchange loss arising out of foreign currency loans for acquisition of indigenous assets, the claim of exchange fluctuation loss in revenue account by assessee is in accordance with generally accepted accounting practices and mandatory accounting standards notified by ICAI and also in conformity with CBDT notification cannot be faulted - HELD THAT:- Tribunal in the case of M/s.Hyundai Motor Company Ltd. Vs. DCIT [ 2017 (4) TMI 1193 - ITAT CHENNAI] where the Tribunal considering ratio laid down by the Supreme Court in the cases of CIT vs. Tata Iron Steel Co.Ltd. [ 1997 (12) TMI 5 - SUPREME COURT] and M/S WOODWARD GOVERNOR INDIA P. LTD [ 2009 (4) TMI 4 - SUPREME COURT] held that in absence of applicability of section 43A and in the absence of any other provision of the Income Tax Act dealing with the issue of forex loss, the claim of exchange fluctuation loss taken by the assessee cannot be treated as capital in nature and added back to cost of assets. Thus we are of the considered view that there is no error in the findings recorded by the learned CIT(A) that in absence of applicability of section 43A of the Act, loss claimed by the assessee on account of exchange fluctuation loss on ECB loan availed for acquisition of indigenous assets revenue in nature deductible u/s.37(1) of the Act cannot be considered as capital in nature and added back to the cost of assets. Hence, we are inclined to uphold the findings of the learned CIT(A) and reject the grounds taken by the Revenue for both the assessment years. Admission of additional claim made by the assessee - Disallowance of deduction against interest expenses which was voluntarily added in the statement of total income - HELD THAT:- The failure to advert to claim in original return or revised return cannot denude the appellate authorities of their power to consider their claim, if the relevant materials available on record and the claim is otherwise tenable in law. The learned CIT(A) after considering case of M/s. Goetz (India) Ltd Vs. CIT [ 2006 (3) TMI 75 - SUPREME COURT] and the decision of CIT vs Abhinitha Foundation Pvt Ltd [ 2017 (6) TMI 604 - MADRAS HIGH COURT] has rightly admitted the additional claim made by the assessee regarding deduction for interest expenditure on forex loan and remitted the issue back to the file of the Assessing Officer for verification of facts to decide in accordance with law. We do not find any error or infirmity in the findings recorded by the learned CIT(A) and hence, we are inclined to uphold the findings of the learned CIT(A) and reject the grounds taken by the Revenue.
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2021 (1) TMI 88
Disallowance of various expenditure debited into profit and loss account including depreciation on asset, interest on vehicle loan, miscellaneous expenses, repairs maintenance- others - non business expenses - HELD THAT:- In order to allow deduction for expenditure the onus is on the assessee to prove that expenditure debited into profit and loss account is having nexus with income earned for the year. In this case, on perusal of disallowances made by Assessing Officer for various expenditure including salary, depreciation on car and air-conditioner , repairs and maintenanceothers and miscellaneous expenses, we find that none of the expenditure is having direct nexus with income earned for the year under consideration being interest income , rental income and dividend income. Unless, assessee proves nexus between expenditure debited into profit and loss account and income earned for the year, the question of allowance of expenditure does not arise. Moreover, assessee fails to file any evidence to prove that it was in the business activity but due to temporary lull in the business, business operations was not carried on for impugned assessment year . AO as well as learned CIT(A) have brought out clear facts that assessee has leased out factory premises to outside party and derived rental income as there is no manufacturing activity in the assessment year under consideration. Assessee has failed to file any evidence to prove that depreciation claimed on air-conditioner and motor car is having nexus with income earned for the year . Likewise, assessee has failed to file any evidence to prove that there is nexus between miscellaneous expenditure, interest on vehicle loan and repairs maintenance-others to income being rental income, interest income and dividend income earned for the year. As regards salary, learned CIT(A) considering the fact that assessee need to pay salary expenditure to employees, even though there is no business operations for the year has allowed 50% salary debited into profit and loss account . The assessee has failed to file any evidences to counter finding of fact recorded by the learned CIT(A) . We are, therefore, of the considered view that there is no error in the findings recorded by learned CIT(A) to confirm additions made by the Assessing Officer towards various expenditure debited into profit and loss account. Appeal filed by assessee is dismissed.
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2021 (1) TMI 87
Revision u/s 263 - disallowance of expenditure u/s.14A - HELD THAT:- AO has considered disallowance of expenditure u/s.14A of the Act and has computed total disallowance of ₹ 29,37,148/- under Rule 8D(2)(iii) at the rate of 0.5% on average investments. It is also an admitted fact that the assessee has challenged the additions made by the AO towards disallowance of expenditure u/s.14A of the Act before the first appellate authority and was unsuccessful because the ld.CIT(A) has upheld the disallowance computed by the ld.AO. The assessee has preferred further appeal before the ITAT on the same issue which was pending for disposal. Thus the issue of disallowance of expenditure u/s.14A of the Act is a subject matter of appeal before the appellate authority and further once an issue is before the appellate authority then the assessment order merged with the appellate order and the appellate authority shall have all powers including enhancement of income. Therefore, when the Appellate Commissioner is having power to examine the issue, then the PCIT cannot have parallel jurisdiction to examine the same issue u/s. 263 proceedings, because if we allow the PCIT to have jurisdiction on said issue then it leads to multiple proceedings which is not the intention of the Legislature. In this view of the matter and respectfully following the decision in the case of CIT vs. Sera Sera Productions Limited [ 2015 (5) TMI 937 - BOMBAY HIGH COURT] we are of the considered view that the powers exercised by the PCIT u/s.263 of the Act on the issue of disallowance of expenditure u/s.14A of the Act is contrary to the provisions of Clause (c) to Explanation (1) of Section 263 of the Act and hence we are of the considered view that the PCIT has erred in revising the assessment order u/s.263 - Decided in favour of assessee.
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2021 (1) TMI 86
TP Adjustment - upward adjustment made towards overdue receivables from Associated Enterprises - adjustments on export receivables for belated realization of export billsnotional interest on receivable from AE for belated realization of export bills - TNMM method application - HELD THAT:- Receivables is included under the definition of international transactions by amending section 92B by the Finance Act, 2012 w.e.f. 01.04.2002. Therefore, we are of the considered view that there is no merit in the arguments advanced by the assessee that receivables is not international transactions. As regards benchmarking international transactions, once the assessee has adopted TNMM as most appropriate method , whether separate adjustment is required to be made in respect of receivables or not has been the subject matter of deliberations by the co-ordinate Bench of the Tribunal in assessee s own case for the assessment year 2014-15 [ 2019 (4) TMI 1934 - ITAT CHENNAI] where the Tribunal after considering relevant facts has held that once TNMM method is considered as the most appropriate method, the net margin worked out thereunder could take care of all such notional interest cost, wherever it could be imputed and there could be no arm s length price adjustment for any overdue receivables. The Bench has also observed that once there is complete uniformity in not charging any interest from any party, whether Associated Enterprises or non- Associated Enterprises, there could not be any selective imputing of notional interest on receivable from AE for belated realization of export bills. We are of the considered view that when TNMM method has been applied as most appropriate method it could take care of all notional interest costs wherever it could be applied and there could be no separate upward adjustments on export receivables for belated realization of export bills. Hence, we direct the Assessing Officer to delete upward adjustment made towards overdue receivables from Associated Enterprises. Appeal filed by the assessee is allowed.
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2021 (1) TMI 85
Reopening of assessment u/s 147 - invalidate sanction under section 151 - Addition u/s 68 - information was received from the office of the Director of Income-tax (Investigation-II), New Delhi that a search operation was carried out in the case of S.K. Jain group of cases wherein found that the said group has been providing accommodation entries to various persons and the assessee-company was also figured in the same list - HELD THAT:- As decided in VRC TOWNSHIP PVT. LTD.[ 2020 (10) TMI 1223 - ITAT DELHI] wrong Section have been mentioned in the reasons and some of the Columns material for re-assessment are left Blank and that Addl. CIT did not record how he was satisfied on wrong facts and wrong reasons would clearly show that reopening have been done in the matter without application of mind based on wrong facts and as such the reopening of the assessment cannot be justified. It may also be noted here that the Learned Addl. CIT, Range-12, Delhi while granting sanction under section 151 of the I.T. Act has mentioned in the reasons that Yes, I am satisfied that this is a fit case for reopening under section 147. Such a satisfaction was not found valid by ITAT, Delhi Benches in the cases of Shree Balkishan Agarwal Glass Industries Ltd., Delhi [ 2020 (9) TMI 1153 - ITAT DELHI] and M/s. Behat Holdings Ltd., Delhi vs., ITO, Ward-4(3), New Delhi [ 2020 (1) TMI 1358 - ITAT DELHI] based on several decisions of the Hon ble High Courts. Thus, the issue is covered against the Revenue by the above decisions of the Tribunal as well. The A.O. has thus no justification to assume jurisdiction under section 147 in a Lawful manner and as such the same are liable to be quashed. In view of the above discussion, we set aside the Orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted. Since we have quashed the reopening of the assessment, therefore, there is nothing to decide the issue of addition on merits. Appeal of the Assessee allowed.
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2021 (1) TMI 84
Unexplained investment - Addition u/s 69/69B - search u/s 132 carried out on 21.7.2011 at the premises of both the assessee, and certain other persons of the group - Notices under section 153A were issued upon both the assessee, and they have filed their returns of income - HELD THAT:- Respondents in order to rebut belief of the AO that these assessees have given on-money over and above consideration stated in the agreement to sale, they have submitted that two types of transactions at the most could be alleged as done by these assessees viz. (a) purchase of non-agriculture land/agriculture land, (b) purchase of old tenure land/new tenure land. Respondents have compiled details in tabular form. They have put the rates on which they have entered into agreement for purchase viz. banakhat. Thereafter they have appraised the AO circle rate/jantri available for similarly situated land in these years. The assessees thereafter compiled details of other sale deeds which has taken place in these years during that very period, and demonstrated that the rates at which they entered into an agreement are higher than the jantri rate as well as the rates at which transactions have taken place. Similarly, with regard to new tenure land is concerned, they have demonstrated that unless Government gives permission for change of character of the land i.e. unless the land is made freehold, it cannot be transacted. For getting the land freehold i.e. new tenure land, the land owners are required to pay premium amount to the Government of Gujarat. Once the alleged premium/fee is paid only then this land could be transacted. At the time of hearing, it was brought to our notice that the land at Vastral had not been purchased even till today; because it has not been converted into new tenure land. Thus, the transaction in this land was subject to clearance from the Government i.e. conversion of old tenure land to new tenure land. If that be so, how an assessee could be presumed to pay cash over and above the amounts stated in the alleged agreement. An agreement even itself will not be enforceable in the eyes of law unless character of the land is changed viz. it is being converted into new tenure and such conversion is depended upon the payment of premium to the Government, and sanction from the Government. In these situations, it is difficult to infer that the assessee would pay on-money before such incident of conversion happen. This was the positive evidence produced by the assessees for rebutting the belief formed by the AO on the basis of Annexure A/2 and A/89 and the alleged disclosure of the MRK. If we have a glance on all these factors in their totality, then it can safely be concluded that the ld.CIT(A) has rightly deleted the additions. We do not find any error in the order of the ld.CIT(A) on this point in all these appeals, and accordingly, all the appeals of the Revenue are dismissed. Unexplained cash credit - estimated the expenses at the rate of 1% for arranging this accommodation entry - HELD THAT:- The assessee has submitted bank statement, copy of PAN, balance sheet, copy of confirmation from M/s.Sarang Chemicals Ltd. Only evidence possessed by the AO to doubt this transaction is alleged disclosure made by the director of M/s.Sarang Chemicals Ltd. Director, Shri Lalit Kantilal Rathod has nowhere taken name of the assessee. He took time of 2-3 hours to peruse the record, but thereafter, the ld.AO neither asked any question nor conducted further inquiry. There is an abrupt end to the recording of the statement. This is one factor to disbelieve the version of the AO. The other fact is that the assessee has been emphasizing for providing an opportunity to cross-examine the alleged director Shri Lalit Kantilal Rathod, but the AO did not allow cross-examination of this person. Therefore, before appreciating reliability and veracity of this piece of evidence, i.e. statement of Shri Lalit K. Rathod, we would like to make reference to the decision of Hon ble Supreme Court the case of Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] as categorically observed that if some statement was taken from the back of an assessee without confronting the assessee or giving opportunity to cross-examine, then such statement is to be excluded from the evidence. If this statement is excluded then there is nothing with the AO. On the basis of which, he can doubt evidence submitted by the assessee in the shape of confirmation, bank statement, PAN etc. Though the AO has created a suspicion by recording half-statement, thereafter inferring that director has deposed that he has received money from the assessee in cash which was deposited in the bank account, and cheques were issued to the assessee, there is no such disclosure by the Lalit k. Rathod qua the assessee. Therefore, taking into consideration all the material facts and circumstances, there is no justification to add this amount as unexplained cash credit in the hands of the assessee. - Decided in favour of assessee.
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2021 (1) TMI 83
Addition on account of reversal of bad debts provision - assessee had made a provision for bad and doubtful debts and then added back the same amount while computing its total income - HELD THAT:- Assessee eventually did not claim any deduction at the time of creation of provision for bad and doubtful debts. This mode of debiting the Profit and loss account and then adding back the same amount in computation of total income is tax-neutral. Once the creation of provision did not render reduction in the income, its later reversal, equally, cannot also lead to generation of taxable income notwithstanding the manner of depiction in the accounts. CIT(A) has categorically recorded this fact that in earlier years the assessee had made a provision for bad and doubtful debts and had added back the same while computing the total income. No material has been placed on record by the ld. DR to controvert this finding. In view of above discussion, we are satisfied that the ld. CIT(A) was justified in deleting the addition. - Decided in favour of assessee.
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2021 (1) TMI 82
Refusing registration u/s 12AA - assessee was registered under the Bombay Public Trust Act, 1950 on 04-08-1997 - assessee was granted exemption u/s 80G earlier after accepting the documents and details of the trust - CIT(E) for refusing registration was that the assessee did not furnish details of compliance of Right to Education norms - HELD THAT:- This point was answered by stating: Right to education: No admission request has been received under the Right to education norms of state Government till date and hence this is not applicable. Thus, it is discernable that the assessee did respond to the requirement of the ld. CIT(E) about compliance to Right to Education norms. Simply ignoring the same, the ld. CIT(E) refused registration vide his order dated 29-09-2020, which was obviously passed after taking note of the assessee s online submission of reply dated 18-09-2020. Since the sole basis for denial of registration by the ld. CIT(E) is non-existent, in our considered opinion, the assessee is entitled to registration. Overturning the impugned order, we direct the grant of registration u/s 12AA of the Act. - Decided in favour of assessee.
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2021 (1) TMI 81
Penalty levied u/s 271B, 271(1)(b), 272B and 271(1)(b) - HELD THAT:- The deposits are made in the joint account and when the PAN of Smt. Chandana Mai is quoted, in our considered opinion, we do not approve the action of this amount being added as turnover of the assessee only. In all such cases peak balances has to be taken. It cannot be said that the deposits in question are the turnover of the assessee. Consequently it is not clear as to whether the assessee was required to maintain books of account under the Act or not. Penalty levied u/s 271B - AO states that the assessee does not maintain books of account. Where the conclusion of the AO is that the assessee does not maintain books of account, no penalty u/s 271B of the Act can be levied for not getting one s books audited u/s 44A of the Act. Hence the same is cancelled. Penalty levied u/s 272B - In the assessment order it is stated that the PAN of Smt. Chandana Mai has been quoted while depositing cash in the bank account. While so to levy penalty for not quoting PAN while making cash deposits is bad in law. Hence we cancel this penalty. Penalty levied u/s 271(1)(b) - assessee has given a certificate from the Medical Officer, Government of West Bengal on his health. We are convinced that the assessee was prevented by sufficient cause from appearing before the AO on a particular date. Otherwise he did appear before the AO on two dates and hence the penalty is cancelled as the assessee was prevented from sufficient cause from appearing before the AO. Penalty levied u/s 271(1)(b) in the case of Smt. Chandana Mai is also cancelled as she was prevented by sufficient cause from appearing before the AO on a particular date. She did appear before the AO on 15.07.2014, as recorded in the assessment order. Hence, we allow this appeal.
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2021 (1) TMI 80
Penalty levied u/s 271(1)(c) - case selected for scrutiny under CASS with the reason suspicious Long Term Capital Gain - assessee suo moto surrendered an amount before any of the authorities of the Income Tax pointed out any undisclosed income of the assessee - furnishing of inaccurate particulars of income - HELD THAT:- As decided in assessee's Sister in law Smt. Neelu Garg [ 2019 (4) TMI 1666 - ITAT CHANDIGARH ] the assessee suo moto surrendered an amount and paid the due tax alongwith interest thereon much before the Investigation Wing or the A.O. pointed out any discrepancy about the undisclosed or concealed income of the assessee. Considering all the impugned penalty levied by the A.O. u/s 271(1)(c) of the Act and sustained by the CIT(A) was not justified. Accordingly, the same is deleted. This finding has been given by considering the peculiar facts of the present case, therefore, it is made clear that it may not be considered as a precedent in the other cases. - Appeal of the assessee is allowed.
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2021 (1) TMI 79
Validity of initiation of proceedings u/s.147 - Unexplained investment u/s. 69B - No return of income filed for current AY - Addition based on presumption - HELD THAT:- In the reasons has categorically mentioned that no return of income was filed for Assessment Year 2010- 11. It is from the perusal of return of income for Assessment Year 2009-10 and 2011-12, he has drawn a presumption that since authorized share capital has been increased from ₹ 1 lac in Assessment Year 2009-10 to ₹ 30 lac in Assessment Year 2011-12. He has no information or record regarding Assessment Year 2010-11, whether assessee had received any share capital or not or any return of income was filed or not. Even at the time of seeking approval u/s.151, it has been categorically mention that in item no.8 that ITR has not been filed. Based on this recommendation and Assessing Officer s satisfaction, approval has been granted that it is a fit case for issuing notice u/s.148, whereas the fact of the matter is that income tax return for Assessment Year 2010-11 was duly filed in time on 12.08.2010 u/s. 139 (1) and same was available on ITD system which is also evident from the comments of the Assessing Officer filed before the Ld. CIT (A) as incorporated above. Thus, the very premise for reopening was that the assessee has not filed the return of income which has been found to be factually incorrect. Even though there was a tangible material or information coming from the investigation wing, but Assessing Officer on the said material/ information received has to apply his mind after verifying the assessment records and after due application of mind, he has to satisfy himself and reached to reason to believe that income chargeable to tax has escaped assessment. Reasons recorded is based on complete non application of mind by the Assessing Officer, therefore, same are bad in law and does not confer any jurisdiction upon the Assessing Officer to reopen the case u/s.147 - Decided in favour of assessee.
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2021 (1) TMI 78
Revision u/s 263 - Interest on capital of partners remuneration to partners - HELD THAT:- There is no change in the rate of interest clause in the supplementary deed dated 30th March 2012 and such interest has been allowed in the past on that basis and also in the immediately preceding assessment year i.e. 2013-14 where the order was passed u/s 143(3). Further, the salary paid to the partners is within the limit prescribed u/s 40(b)(v) which is as per the original deed dated 4th February, 2008. Even otherwise also on the basis of supplementary partnership deed dated 30th March, 2012 effective from 1.4.2012 i.e relevant to assessment year 2013-14 the salary to partners has been allowed at ₹ 13,20,000/- in the order passed u/s 143(3). We find no reason as to why the AO shall again go through the same when the salary paid to the partners is in consonance with the salary paid in assessment year 2013-14. Correctness of computation of capital gain - Cost of improvement and the cost of properties for computation of LTCG is concerned, we find these are already shown in the balance sheet since assessment year 2001-02 which is not in dispute. Therefore, once the assessee sells these properties during impugned assessment year there was no necessity for the AO to again re-examine the cost of purchase and cost of improvement once those were accepted in the past years u/s 143(3) proceedings. So far as the Deposits and withdrawals in the capital account of the partners are concerned, we find these are already recorded in the books of accounts which were produced before the AO who has examined the same on test check basis and has passed the order u/s 143(3). Therefore it cannot be said that the order passed by the AO is erroneous and prejudicial to the interest of the revenue on this issue. It is the settled proposition of law that for invoking jurisdiction u/s 263 of the Act the twin condition namely that a) the order is erroneous and (b) the order is prejudicial to the interest of the revenue must be satisfied. In the instant case the order may be prejudicial to the interest of revenue but certainly cannot be called as erroneous. We, therefore, find force in the arguments of the Ld. Counsel for the assessee that the Ld. PCIT(A) has exceeded his jurisdiction by invoking the provision of section 263 of the Act for the impugned assessment year. We, therefore, set aside the order of the Ld. PCIT and the grounds raised by the assessee are allowed.
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2021 (1) TMI 77
Rectification u/s 254 - order passed by the Id, CIT(E) u/s. 12AA(3) in bad in law in absence of a proper show cause notice issued to the Applicant for cancellation of registration u/s. 12AA - HELD THAT:- The case of the Revenue as well as one of the main reasoning given by the tribunal in the captioned order was that this material fact was neither disclosed nor brought on record by the assessee at the time of seeking registration. This may have been disclosed in the notes to the account at the time of filing of return post grant of registration, but certainly it was not disclosed at the time of seeking registration that, what was the purpose and objective of acquiring the AGL on a paltry sum of ₹ 50 lakhs to INC. The tribunal has noted that acquisition of shares in such a manner cannot be held to be in furtherance of the objects of the assessee company. One of the conditions put forth by then Ld. DIT(E) at the time of granting registration was that, if later on it was found that registration has been granted by misrepresentation or suppression of any facts then registration so granted is liable to be cancelled as per the provision of section 12 AA(3) . This term and condition given in the registration has been reiterated by the CIT (E) in the cancellation order. One of the reasoning given by the Tribunal to uphold the cancellation order was that, assessee had suppressed vital and material facts regarding acquisition of shares of AJL and the purpose for which it was acquired at the time of seeking the registration. Thus, there is no substance in this contention that, merely because later on this fact was mentioned in the notes to the account of the balance-sheet filed subsequently along with the return of income amounts to furnishing of information at the time of registration. Accordingly, such contention raised in miscellaneous application is rejected. Erroneous finding that the applicant did not undertake any activity in furtherance of its object prior to cancellation of registration - The finding of the Tribunal and the conclusion drawn besides other facts and material on record was also based on the binding precedent of the finding and the judgment of the Hon ble Delhi High Court, which was rendered almost on the same facts wherein there is a clear-cut observation that all these transactions were hidden from the Income Tax Department. In fact this vital fact was also hidden from the DIT(E) while seeking the registration under section 12AA; and not only that, post granting of registration also no such genuine activities was carried out from the period of granting of registration till the period assessee has surrendered for registration. In this regard observation and conclusion of the Tribunal in paragraph 122 is reiterated. Tribunal has noted that it has noted down various arguments placed by the parties as well as judgment relied upon and also dealt with all the core arguments, but same are not being dealt with, because the findings have been reached on the reasoning and the conclusion given in the foregoing paragraphs and the order of CIT (E) cancelling the registration was upheld. In the impugned miscellaneous application no such mistake has been pointed out which can be said to be a mistake apparent from record which can be held to be rectifiable within the scope and ambit of section 254(2). In any case, the assessee had preferred the appeal on the following two grounds only. On the aforesaid grounds the detail reasoning and finding has been given. Nowhere in the miscellaneous application has the assessee pointed out that, either the grounds have not been adjudicated or has been omitted to be considered by the Tribunal. Thus even otherwise the miscellaneous application filed by the assessee does not stand scope and ambit of section 254(2) of the Act. Accordingly, the miscellaneous application filed by the assessee is dismissed
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2021 (1) TMI 76
Income accrued in India - taxability of receipt towards Infrastructure and Hosting Data Centre (IDC) charges by treating it as royalty - India Singapore DTAA - assessee is a company incorporated in Singapore and is engaged in provision of services relating to developing, marketing and implementing incentive based strategies and technologies to build loyalty and to reward long-term relationships through the utilization of the internet, wireless technology and offline solutions to its clients - During the previous year relevant to the assessment year under dispute, the assessee provided three different categories of services to its three Indian group companies on payment basis - HELD THAT:- As decided in assessee's own case for 2010 11 [ 2020 (7) TMI 644 - ITAT MUMBAI ] we hold that the amount received by the assessee from provision of IDC services cannot be treated as royalty either under the provisions of the Act or under India Singapore DTAA, hence, cannot be taxed at the hands of the assessee. Taxability receipt towards management services fee by treating it as fees for technical services (FTS) - HELD THAT:- As relying on assessee own case [ 2020 (7) TMI 644 - ITAT MUMBAI ] management fee received by the assessee cannot be treated as FTS under Article 12(4) of the India Singapore Tax Treaty. Therefore, we hold that the amount received by the assessee towards management fee is not taxable at the hands of the assessee. This ground is allowed. Taxability of receipt referral fee by treating it as royalty and FTS - HELD THAT:- As decided in own case [ 2020 (7) TMI 644 - ITAT MUMBAI ] revenues under the referral agreement is not taxable in the hands of the appellant as royalty under the Act and/or India-Singapore DTAA or FTS under the India-Singapore DTAA - we hold that the amount received by the assessee not being in the nature of royalty or FTS either under the Act or under the tax treaty, is not taxable at the hands of the assessee. This ground is allowed.
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2021 (1) TMI 75
Correct head of income - profit on sale of Securities (HTM Category) - taxable under the head of Business or Long Term Capital Gains - revised return of income filed - as per AO assessee is a bank and one of the business activities undertaken by it was purchase and sale on various kinds of securities - HELD THAT:- We find that identical issue arose in the assessee s own case in A.Y. 2006-07 [ 2019 (1) TMI 689 - ITAT DELHI] and the Co-ordinate Bench of Tribunal decided the issue against the assessee and also observed that the assessee has treated these securities as stock-in-trade and claimed deduction of loss arising out of the valuation of securities at the year end on the basis of cost or market price whichever is lower basis from the business income. Thus profit earn on sale of securities which are held to be HTM Category to be on business account. Income from infrastructure project as exempt u/s 10(23G) - HELD THAT:- As decided in own case [ 2019 (1) TMI 689 - ITAT DELHI] CIT -A rightly directed the granting of exemption under Section 10(23G) of the Act in respect of interest on such bonds whose certificate of exemption was filed before him. new certificates have also been received after the disposal of the appeal by the CIT(A) and he has sought for rectification of the above in the light of these certificates - after having gone through these submissions and material placed on record, think it fit in the interest of justice to set aside this issue to the file of the Assessing Officer with a direction to consider the assessee's claim for exemption under Section 10(23G) on its merits on the basis of the certificates that it may now produce in respect of the addition that was sustained by the learned CIT(A). If the assessee, for any reason, is not able to produce such certificates when the Assessing Officer is giving effect to, the Assessing Officer is free to confirm the addition to that extent. Disallowance of expenses u/s 14A - Assessee has suo moto made addition - We find that CIT(A) by following the orders of first appellate authorities had restricted the disallowance to the extent of 10% of the exempt income - HELD THAT:- Revenue has also not placed any material on record to demonstrate that the order of the Tribunal in Assessee s own case cited hereinabove has been set aside/ over ruled or stayed by higher judicial forum. We therefore following the decision of the Co-ordinate bench in assessee s own case [ 2019 (1) TMI 689 - ITAT DELHI] and for similar reasons hold that no disallowance u/s 14A is called for in the present case. We therefore direct the deletion of addition made u/s 14A. Thus the ground of appeal of the assessee is allowed. Depreciation/ loss on investments by holding it to be notional in nature - HELD THAT:- As decided in own case DR could not point out any specific error in the order of the learned CIT(A). He also could not bring any material on record to show that the order of the Tribunal for AY 2005-06 [ 2012 (5) TMI 437 - ITAT, NEW DELHI] was varied in appeal before any higher authorities. Hence, we find that no good reasons to interfere with the orders of learned CIT(A) which is confirmed. Disallowance on account of penalty - HELD THAT:- It is on inter alia on account of fine by consumer forum, penalty by District Consumer, Payment on account of deposit of cheque pertaining to saving account treated as NRI account etc. Before us, apart from general submissions, no material has been placed by the Learned AR to demonstrate that the payments are on account of technical aberration and are not in the nature of fines. Further, no fallacy in the finding of CIT(A) has been pointed before us. Considering the totality of the aforesaid facts, we find no reason to interfere in the order of CIT(A) and thus the ground of appeal of the assessee is dismissed. Disallowance under section 40A(3) - AO noted that tax auditor in the tax audit report has pointed to a sum of ₹ 21,657/- being paid in contravention of Section 40A(3) and therefore only 20% of payment needs to be disallowed - HELD THAT:- Amount of expenditure which has been incurred in contravention of the provisions of s. 40A(3) is very small as compared to the total expenses of the Assessee. The expenditure has not been found to be bogus or not genuine. We find that Hon ble Apex Court in the case of Attar Singh Gurmukh Singh [ 1991 (8) TMI 5 - SUPREME COURT] has observed that the payment by crossed cheque or crossed bank draft is insisted upon to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of income from undisclosed sources. The terms of section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. Considering the totality of the facts cited herein above and following the aforesaid decision of Hon ble Apex Court, we are of the view that no disallowance of the expenses is called for. Thus the ground of appeal of the assessee is allowed. Levy of penalty u/s 271(1)(c) - denial of claim for exemption u/s 10(23G) and payment of penalty - HELD THAT:- AO has not recorded any satisfaction in the assessment order but had levied penalty for concealment of income. Considering the aforesaid facts in the light of the decision of Hon'ble Bombay High Court in the case of Samson Perinchery [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT] we are of the view that in the present case the basic condition for levy of penalty has not been fulfilled and that the penalty order suffers from non-exercising of jurisdiction power of AO and therefore penalty order cannot be upheld. We accordingly set aside the penalty order passed by AO. Thus, the grounds of assessee are allowed.
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2021 (1) TMI 74
Disallowance u/s 14A - assessee has contended that learned CIT(A) has disallowed 0.5% of average investment excluding investment which did not earn taxable income - HELD THAT:- ITAT in assessee's own case for assessment year 2010-11 2011-12 has noted that in the earlier order Tribunal has directed the Assessing Officer to examine the sufficiency or correctness of allowance made by the assessee having regard to assessee's accounts and explanations. The Tribunal had further noted that to maintain the consistency, the matter was being remitted to the file of Assessing Officer with same direction. The Tribunal also directed to take into account the order of Tribunal Special Bench in the case of ACIT vs. Vireet Investments (P) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] - Here we also make it clear that we are not acceding to the request of learned Counsel of the assessee to delete the entire disallowance for lack of satisfaction by the Assessing Officer. The Assessing Officer has dealt with the issue with reasonable details and only for the sake of consistency we are following the earlier Tribunal direction. TP Adjustment - interest charged on the share application money given by the assessee to the Associated Enterprise by the Transfer Pricing Officer (TPO) - HELD THAT:- As decided in own case , Tribunal had held that the undisputed position that emerges is the fact that assessee has advanced share application money to one of its Associated Enterprise to acquire further stake in that entity. That the Associated Enterprise has become whollyowned subsidiary of the assessee-company during the month of January, 2009. That the financial health of the Associated Enterprise was not good and the money was advanced in view to infuse further capital in the Associated Enterprise with a view to acquire controlling stake. The money was utilised by the Associated Enterprise for the purpose of business and to meet working capital requirement. The Tribunal further noted that ultimately the shares have been allotted to the assessee during December, 2015 after getting the desired regulatory approvals. The Tribunal accepted that the delay was genuine and was substantiated. In these facts, ITAT agreed with the view that the amount cannot be treated as loan transaction. In this regard, the Tribunal also referred to the decisions of Hon'ble Bombay High Court in the case of Pr. CIT vs Aegis Ltd. [ 2019 (4) TMI 858 - BOMBAY HIGH COURT] - Accordingly, transfer pricing adjustment in this regard, proposed by the TPO, was to be deleted. Transfer pricing adjustment on commission on corporate guarantee - Since the assessee had not charged any fees in this regard the Assessing Officer proceed to refer to the normal guarantee fees charged by the bankers and adopted rate of 1.5% - HELD THAT:- Transfer pricing adjustment for corporate guarantee fees is no more an issue which is res integra. Adjustment for corporate guarantee fees has been upheld by Hon'ble Bombay High Court. We find that the view taken by learned CIT(A) is in consonance with the decision of Hon'ble Bombay High Court in the case of Everest Kento Cylinders [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] - The same has been followed by ITAT in several decisions. Hence we direct that guarantee fees should 0.5%. Disallowance u/s. 43B - assessee had deposited employees contribution to ESIC within the permissible grace period and before the due date of filing of return for the present assessment year - HELD THAT:- CIT(A) had correctly deleted this addition holding that as the payments get covered u/s. 43B of the Act as they were deposited within stipulated time. See M/S. ALOM EXTRUSIONS LIMITED [ 2009 (11) TMI 27 - SUPREME COURT] and GHATGE PATIL TRANSPORTS LTD. [ 2014 (10) TMI 402 - BOMBAY HIGH COURT] . Disallowance of education cess and secondary and higher education cess u/s. 40(a)(ii) - HELD THAT:- As relying on case SESA GOA LIMITED [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] we allow additional ground raised by the assessee in this regard and direct that disallowance of education cess and secondary and higher education cess is to be deleted. Capital gain on sale of buildings - Special provision for computation of capital gains in case of depreciable assets u/s 50 - assessee s plea is that the same should be taxed @ 21.63%u/s. 112 of the I.T. Act instead of 32.45% as the said buildings were held for more than three years - On the said capital gains the assessee had also claimed that it was entitled for exemption under Section 54E - HELD THAT:- As decided in ACE BUILDERS (P.) LTD. [ 2005 (3) TMI 36 - BOMBAY HIGH COURT] Section 50 of the Income Tax Act which is a special provision for computing the capital gains in the case of depreciable assets is not only restricted for the purposes of Section 48 or Section 49 of the Act as specifically stated therein and the said fiction created in sub-section (1) (2) of Section 50 has limited application only in the context of mode of computation of capital gains contained in Sections 48 and 49 and would have nothing to do with the exemption that is provided in a totally different provision i.e. Section 54E of the Act. Section 48 deals with the mode of computation and Section 49 relates to cost with reference to certain mode of acquisition As relying on M/S. MANALI INVESTMENT [ 2013 (12) TMI 333 - BOMBAY HIGH COURT] deeming fiction of section 50 is limited and cannot be extended beyond method of computation of the gain. That the distinction between short term and long term capital gain is not obliterated by this section. Hence, we respectfully follow the same and reject this submission of learned Departmental Representative. This additional ground is allowed and the Assessing Officer is directed to reexamine the detailed facts and allow as per the ratio of above said decisions as discussed above.
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2021 (1) TMI 73
Rectification of Mistake - Rejection of comparable - assessee seeks inclusion of I2T2 India Limited as a comparable company - HELD THAT:- This company is functionally comparable and passes all filters applied by TPO. Treated to be a good comparable for a captive software development service company. AO has not granted credit of correct amount of advance tax, self assessment tax and TDS amounts - grievance of the assessee is that the AO has not granted credit of correct amount of Minimum Alternative Tax (MAT) u/s. 115JAA - HELD THAT:- We notice that the above said claims of the assessee require verification at the end of AO. Accordingly, we restore both the issues to the file of AO for examining the claim of the assessee and give credit of correct amount of claim by way of advance tax, self assessment tax, TDS amounts and MAT credit.
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2021 (1) TMI 72
TP Adjustment - comparable selection - HELD THAT:- On perusal of DRP's order and the ITAT, Bangalore's order in the case of Advice America Software Development Center Pvt. Ltd., [ 2018 (5) TMI 1536 - ITAT BANGALORE] it is found that segmental details are available in the financials of Persistent Systems Ltd. and the company is engaged in the software development services and, therefore, this company is comparable. Since the details are available as per the order of the ITAT, Bangalore in the case of Advice America Software Development Centre Pvt. Ltd. and in the order of DRP, we are of the view that this issue needs verification by AO/TPO to decide whether the company is comparable or not with the segmental details. Therefore, we deem it fit to remit the matter back to the file of TPO/AO to examine financials of the Persistent Systems Ltd., and decide the issue afresh on merits. Infobeans Technologies Ltd exclusion on the ground that the company is found to be functionally similar - DR submitted that the company Infobeans is functionally similar, no material was placed before us to substantiate the contention of the DRP/TPO. AR also except stating that the company engaged in providing high end software services no other information was provided. As observed from the order of the DRP, we find that the company Infobeans satisfies all the filters and engaged in software services. Since, both the parties failed to substantiate their claim for inclusion or exclusion, we remit this issue back to the file of the AO/TPO to examine the contention of the ld. AR and DR with regard to functions/financials for exclusion/inclusion of comparable in the final list and decide the issue on merits after giving opportunity of being heard to the assessee. This issue is allowed for statistical purposes. Larsen Toubro Infotech Ltd - As decided in M/S. EPAM SYSTEMS VERSUS ACIT, INDIA PVT LTD., CIRCLE-17 (1) , HYDERABAD. [ 2018 (11) TMI 1710 - ITAT HYDERABAD ] L T Infotech Ltd. is functionally dissimilar. Inclusion of CAT Technologies Ltd - whether income from software services is 75% and more for inclusion in the final list of comparables - Out of total receipts of ₹ 7.44 crores, as seen from the order of ITAT, software development receipts amounts to ₹ 5.5 crores and the remaining receipts were consultancy fee receipts and medical transcription receipts etc. Ld. DR objected for inclusion of consultancy receipts, medical transcription receipts as software development receipts and the Ld. AR did not place any material to support it's claim. Therefore, this issue needs verification at the end of the AO/TPO whether the same constitutes SDS or not. Therefore, we remit the issue back to the file of AO/TPO to examine whether the receipts from software development services are more than 75% or not in the case of CAT Technologies Ltd. and in case, the revenue from software development services are more than 75%, the assessee succeeds in the filter and CAT technologies is required to be included in the final list of comparables. This issue is allowed for statistical purposes. Adjustment of international transaction to the value of international transaction as against adjustment made by the AO at the entity level - HELD THAT:- Both the parties have agreed to remit this issue to the file of AO to examine the issue and to make adjustment of transfer pricing to the value of international transaction. Accordingly, we remit this issue back to the file of AO/TPO to make appropriate adjustments. This ground is allowed for statistical purposes.
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2021 (1) TMI 71
Allowability of product development expenses - as per AO even though said development expenditure was capitalised in books, the same was claimed as admissible deduction while computation of income - Assessee submitted by assessee that, expenditure on product development is revenue expenditure. Alternatively, assessee also contended that, even if the expenditure is otherwise treated as capital in nature, assessee is still eligible to claim in terms of section 35(1)(iv) because, these expenditures are incurred by assessee on scientific research and related to business, within the meaning of section 43(4) - HELD THAT:- We note that facts and issue considered by this Tribunal in assessment year 2005-06 . [ 2016 (6) TMI 1407 - ITAT BANGALORE ] are same with the year under consideration. Therefore, respectfully following the view taken by this Tribunal in assessment year 2005-06 in assessee's own case, we remand this issue to Ld. CIT(A). Ld. CIT(A) is directed verify whether, assessee acquires any copyright/ownership in respect of products sold developed. Ld. CIT(A) is directed to decide the issue based on documents/evidences filed by assessee in light of decision in case of Talisma Corporation Pvt. Ltd. [ 2013 (12) TMI 1419 - KARNATAKA HIGH COURT ] . Grounds raised by revenue stands allowed for statistical purposes.
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2021 (1) TMI 70
Unexplained cash deposits in his IDBI and SBI Account - HELD THAT:- From the facts of the case it is apparent that the assessee has not properly cooperated before the Ld. Revenue Authorities in their proceedings. Further, though the assessee had submitted certain bank statements before us, the entire transaction remains to be properly explained. Revenue Authorities have also not made any finding with respect to the bank statements produced before them. The affidavit furnished by the assessee also remains unverified. It is also apparent that the Ld. CIT(A) has made a detailed finding in his order with respect to the non-cooperation of the assessee during the appellate proceedings and non-furnishing of any cogent evidence to establish the transactions to be genuine. From the facts of the case it is further apparent that the assessee was not able to explain the source for the cash deposit before the Ld. Revenue Authorities by drawing proper accounts. Moreover, we find that the assessee was taking different stand before the Ld. AO and the Ld. CIT(A) during the course of the proceedings before them. In this situation we do not find much merit in the submission of the Ld. AR. Considering the financial position of the assessee and the nature of his business, in the interest of justice, we find it appropriate to remit the entire matter back to the file of the ld. AO for fresh consideration - Appeal of the assessee is allowed for statistical purposes.
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Customs
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2021 (1) TMI 102
Benefit of concessional rate of duty - Scope of expression for use in specified Plantation sector as actual use in specified Plantation sector - Import of hi-tech appliances i.e., sprayers, power weeders, Tea Pruners and Mist Blowers - multi utility / general purpose goods which are capable of use in the specified plantation sector by importing the condition of actual use in the specified plantation sector - benefit of S.No.252A of the Notification No.21/2002 cus dated 01.03.2002 - decision of the Supreme Court in the case of State of Haryana vs. Dalmia Dadri Cement Ltd. [ 1987 (11) TMI 94 - SUPREME COURT ] Wherein for use has been interpreted to mean capable of use, complied with or not - HELD THAT:- The Supreme Court in Dalmia Dadri Cement Ltd. [ 1987 (11) TMI 94 - SUPREME COURT ] while considering the expression 'for use' in Section 5(2)(a)(v) of the Punjab General Sales Tax Act held that the aforesaid expression means intended for use. It was further held that inability to prove the actual use or the fact that use was some purpose in addition to that stated in the certificate of the use is irrelevant. It was further held that if the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in generation and distribution of electrical energy, the phraseology used in exemption clause would have been different such as 'goods actually' used or 'goods used'. It is well settled in law that exemption Notification has to be interpreted strictly and the burden of proving applicability is on the assessee to show that his case comes within the parameters of exemption clause or exemption Notification. It is equally well settled legal proposition that if ambiguity in exemption Notification is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the assessee and it must be interpreted in favour of the revenue. The Notification does not stipulate a condition of proof for end use in order to claim exemption. It is pertinent to mention here that wherever the benefit of a Notification is granted subject to condition of actual use, in such a case, the Notification has used the words 'only, exclusively or entirely'. In this connection, Entry 250 in the Notification dated 01.03.2002, is referred, which grants exemption subject to actual use and adherence to concessional rate of duty as a condition in the Notification. In view of the Circular issued by the Finance Department, dated 11.01.2005, it is evident that the Entry in question does not suffer from any ambiguity and does not impose any condition of actual use. The tribunal therefore, erred in law in holding that the appellant is not entitled to the benefit of exemption Notification - Even otherwise, there is ample material on record to show that the goods were used in tea, coffee and rubber plantation sector viz., the communication dated 04.08.2007 and 12.09.2007 issued by Joint Agricultural Director and the Government of Karnataka, Department of Agriculture, communication dated 20.07.2007 issued by Andhra Pradesh State Agro Industries Development Corporation Limited and the statements given by the dealers that the goods are meant to be used in tea, coffee and rubber plantation. Thus, the substantial questions of law framed by this court are answered in favour of the appellant and against the revenue - appeal allowed - decided in favor of appellant.
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2021 (1) TMI 69
Maintainability of petition - seizure of goods - order has been passed u/s 110A and the petitioner is required to file an appeal u/s 129A of the Customs Act, 1962 - contention of the petitioner is that as his goods are deteriorating and he is paying demurrages rent, he does have a remedy of provisional release of goods on account of Circular dated 16-08-2017 - HELD THAT:- This court has carefully gone through the Circular issued on the subject and Mr Prasana Prasad has also stated in Open Court that there is no statutory provisions which requires for a report from the Directorate or Revenue Intelligence. Mr Prasana Prasad was also not able to state out any statutory provision which provides for a report from Directorate of Revenue Intelligence. He has stated that its a Departmental Protocol - In the considered opinion of this court, in case there is no statutory provision for obtaining a report from Directorate of Revenue Intelligence, then there is no justification in not deciding the application submitted by the petitioner for provisional release of the goods. Otherwise also, the Directorate of Revenue Intelligence as informed by learned counsel for Directorate of Revenue Intelligence has already submitted a report to respondents No. 2 and 5. The respondents No. 2 and 5 are directed to decide the petitioner's application for provisional release of goods, within a period of ten days, from today, in accordance with law, on merits - Petition allowed - decided in favor of petitioner.
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PMLA
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2021 (1) TMI 68
Money laundering - seeking release of provisionally attached mortgaged properties (flats) - proceeds of crime - assignment of debts due and payable by borrowers including the loan in favour of the appellant - case of appellant is that the mortgaged properties were purchased by the borrowers when no such alleged scheduled offence were in the picture and that the title deeds have duly been registered and stamped which makes it further clear that the properties were not acquired from the proceed of crime - HELD THAT:- As per the submission of appellant it appears that no order on appellant s application for substitution has been passed nor the contention raised in the reply, oral arguments advanced and the written submissions filed by the appellant is found placed in the impugned order. The Adjudicating Authority in the internal page 306 to 311 of the impugned order has reflected only the reply/written submissions filed on behalf of Defendant No. 58 i.e. (M/s. Bajaj Finance Limited) wherein it is specifically mentioned in internal page no. 311 para (ix) that the present appellant has been assigned with the loan account and Bajaj Finance Co. Ltd. no longer has any rights, title interest in the Mumbai properties - the Adjudicating Authority neither passed any order of substitution of substituting the present appellant in place of Defendant No. 58. There appears to be non-compliance of the provisions of Sections 8(1) and 8(2)(b) of PMLA, 2002 read with proviso to Section 8(2) of the PMLA, 2002 and also there is violation of principle of natural justice. It appears that the Adjudicating Authority ought to have substituted the present appellant in place of M/s. Bajaj Finance Ltd. and should have considered the submissions made by the present appellant and should have dealt with the same in accordance with law. Having not done so the impugned order, qua the appellant and qua the properties involved herein, is illegal and, therefore, liable to be set aside. The case is remanded to the Adjudicating Authority for re-adjudication of the case qua the appellants and qua the properties involved herein - Appeal allowed y way of remand.
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Service Tax
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2021 (1) TMI 67
Sabka Vishwas (Legacy) Dispute Resolution Scheme, 2019 - delay in payment due to adjustment of amounts paid by the insurance company against the payment under the scheme - stance of the respondents that on a technicality of payment under a separate head, the compensation payable by the insurance company would not be adjusted against the dues under the scheme, is not in accordance with the purpose and intent of the scheme - HELD THAT:- The dues payable by the Petitioner has now been crystallised at ₹ 2,56,91,472/-. On payment of this amount, under the scheme, the Petitioner would have cleared its entire liability to the central excise authorities. The compensation being paid by the 6th Respondent is ₹ 4,60,73,182/-. This would mean that the entire due of the Department is being cleared and a surplus of ₹ 2,03,81,710/- would remain. The stand of the Respondents appears to be that the Petitioner should raise a further sum of ₹ 2,56,91,472/- to be paid under the correct head and then seek refund of the compensation amount of ₹ 4,60,73,182/-. The stance of the respondents that on a technicality of payment under a separate head, the compensation payable by the insurance company would not be adjusted against the dues under the scheme, is not in accordance with the purpose and intent of the scheme. As pointed out by the Hon ble High Court of Delhi, in Seventh Plane Networks Private Limited v. Union of India and ors., [ 2020 (8) TMI 343 - DELHI HIGH COURT ] , a liberal interpretation has to be given to the SVLDRS, 2019 as its intent is to unload the baggage relating to legacy disputes under the Central Excise and Service Tax and to allow the businesses to make a fresh beginning. The stand of the Respondents in this regard is clearly hyper technical and arbitrary. The further stand of the Respondents that the last date for payment has expired on 30.09.2020 is also not acceptable. The delay in receiving payment is on account of the refusal of the Respondent No.3 to adjust the compensation amount payable by the 6th Respondent against the crystallised due under the scheme. The 6th Respondent had also issued the discharge voucher on 29.9.2020 and as such it cannot be said that the offer to pay had not been made before the last date. The Petitioner and the 3rd Respondent or such authorised officer on behalf of the central excise department shall sign and submit the Joint discharge voucher to the 6th Respondent within a period of 2 weeks from the date of receipt of this order - Petition disposed off.
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CST, VAT & Sales Tax
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2021 (1) TMI 66
Classification of goods - point of levy of tax - tax to be levied as they exist at the time of sale or based upon how the goods are used or to what purpose the goods are put to use by the buyers after purchase? - steel structural handles, mineral fiber ceiling tiles / boards, PVC floorings, metal ceilings and axioms - respondent declared the turnovers relating to sales of iron and steel tees, angles and channels in monthly returns in Forms VAT-100 as sales of declared goods of iron and steel covered by Sl.No.30 of third schedule to the Act and paid tax at the rate of 4%. The other goods were treated as unscheduled goods and turnovers relating to sale of other goods was declared as liable to output tax at 12.5% - case of respondent is that iron and steel tees, angles and channels dealt in by the respondent were manufactured out of galvanized steel and they were different from structural steel and the goods therefore, cannot be regarded as iron and steel declared goods specified in Section 14(iv) of the Central Sales Tax Act, 1956 for levy of tax at 4% in terms of Sl.No.30 of third schedule to the Act. HELD THAT:- The levy of tax is permissible under the Act is on the goods as they exist at the time of sale and it is immaterial how the goods are used or to what purpose the goods are put to use by the buyers after purchase - In the instant case, the respondent had sold steel structure of tees, angles and channels in the same form in which goods were purchased and that goods sold by the respondent were not grid systems in any assembled form. This fact was noticed by the prescribed authority itself in paragraph 8 of the order of re-assessment. A bench of this court has already taken a view in Steel Tech Industries [ 2013 (12) TMI 1496 - KARNATAKA HIGH COURT ] that if good acquired are declared goods and it continue to be declared goods even at the time of sale, may be in a different form, the levy of tax should only be as declared goods and not as residuary in nature - From close scrutiny of the judgment passed by the Karnataka Appellate Tribunal, it is found that the tribunal has neither decided any question of law erroneously nor has failed to decide any question of law. Petition dismissed.
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2021 (1) TMI 64
Revision of assessment order - time limitation - challenge on the ground that the revision of assessment proceedings has been initiated by the respondent beyond the period of five years from the date of original assessment and therefore, under Section 16(1)(a) of the Tamil Nadu General Sales Tax Act, 1959 r/w Section 9 of Central Sales Tax Act, 1956 - HELD THAT:- As seen from the impugned revision of assessment order, the second respondent himself has admitted that the original assessment order was passed against the petitioner as early as on 12.06.2009 - Admittedly, the revision of assessment notice was also issued on the petitioner by the respondent only on 09.04.2018 as reflected in Reference No.2 in the impugned revision of assessment order ie., beyond the period of five years from the date of the original assessment order. As seen from Section 16(1)(a) of the Tamil Nadu General Sales Tax Act, 1959, it is clear that any revision of assessment can be made only within a period of five years from the date of original assessment order - In the case on hand, the revision of assessment proceedings was initiated against the petitioner on 09.04.2018 as seen from the revision of assessment notice issued by the respondent, which is beyond the period of five years from the date of original assessment. Therefore, Section 16(1)(a) of the Tamil Nadu General Sales Tax Act, 1959, gets attracted and the revision of assessment proceedings initiated by the respondent against the petitioner is barred by the Law of Limitation. The decision of the Honourable Supreme Court of India in the case of STATE OF PUNJAB VERSUS BHATINDA DISTRICT CO-OP. MILK P. UNION LTD. [ 2007 (10) TMI 300 - SUPREME COURT] as well as the decision of the Honourable Division Bench of this Court in the case of MUA. ARMUGAPERUMAL AND SONS VERSUS ADDITIONAL COMMERCIAL TAX OFFICER (FAC), SRIVILLIPUTTUR [ 2008 (4) TMI 682 - MADRAS HIGH COURT] relied upon by the learned counsel for the petitioner for the proposition that the writ petition is maintainable when the order lacks jurisdiction or it is barred by the limitation, is squarely applicable to the facts of the instant case. Admittedly, the revision of assessment proceedings initiated by the respondent against the petitioner is barred by the Law of Limitation as per Section 16(1)(a) of the Tamil Nadu General Sales Tax Act, 1959 - Therefore, the contention of the respondent that the petitioner will have to file a statutory appeal and the writ petition is not maintainable is rejected by this Court. The impugned revision of assessment order passed by the respondent for the assessment year 2006-2007, is hereby quashed - the writ petition is allowed.
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2021 (1) TMI 63
Violation of principles of Natural Justice - validity of assessment orders passed under Section 27(2) of the Tamil Nadu Value Added Tax Act, 2006 - it is the case of the petitioner that despite the reply and without furnishing the documents sought for in their reply, the impugned assessment orders have been passed in violation of the principles of natural justice - HELD THAT:- The petitioner on receipt of the notice issued under Section 27 (2) of the Tamil Nadu Value Added Tax Act, 2006, has sent a reply on 23.03.2020, wherein, they have requested the respondents to provide the bill and date wise details for unreported purchases which the second respondent claims that the petitioner had suppressed - As seen from the assessment orders dated 16.11.2020, no explanation has been given by the second respondent as to why they are unable to provide the bill and date wise details for the alleged un -reported purchases made by the petitioner from the Spices Board, Cochin. The second respondent has mechanically accepted the audit report of the Accountant General and has come to the conclusion that there is suppression of purchases made from the Spices Board, Cochin, by the petitioner. When the petitioner has categorically denied any suppression of purchases, the second respondent ought to have furnished details of the alleged purchases made from the Spices Board, Cochin, to the petitioner As seen from the impugned assessment orders, the second respondent has mechanically accepted the audit report without any independent assessment and without affording sufficient opportunity to the petitioner to place their objections in the revision of assessment proceedings under Section 27 of the Tamil Nadu Value Added Tax Act, 2006 - Matter is remanded back to the second respondent for fresh consideration and the second respondent shall pass final orders on merits and in accordance with law after giving adequate opportunity to the petitioner - petition allowed by way of remand.
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2021 (1) TMI 62
Issuance of 'C' declaration forms - purchases of HSD oil from the suppliers of other States - validity of circular dated 31.05.2018 - HELD THAT:- Since the subject matter in issue has already been decided by the Division Bench of this Court and the impugned circular has also been quashed, vide judgement THE COMMISSIONER OF COMMERCIAL TAXES, CHEPAUK, CHENNAI, THE ADDITIONAL COMMISSIONER (CT) VERSUS THE RAMCO CEMENTS LTD. AND THE STATE TAX OFFICER, THE JOINT COMMISSIONER (CS) (SYSTEMS) VERSUS SUNDARAM FASTENERS LIMITED [ 2020 (3) TMI 450 - MADRAS HIGH COURT] , there is nothing to quash again. Hence, this Court directs the respondents to consider the claim of the petitioner and pass appropriate orders, in the light of the said Division Bench decision, within a period of four weeks from the date of uploading the copy of this order in the web site. Petition disposed off.
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2021 (1) TMI 61
Classification of goods - inter-State sales of mobile phones - C-Forms - whether unclassified goods in terms of sub-item 15 of Item 39 of IV Schedule of the Telangana VAT Act, 2005 read with Section 9(2) of the Central Sales Tax Act - HELD THAT:- Respondents could not explain how the 1st respondent omitted to deal with the contention about the appropriate rate of tax to be collected under CST Act, 1956 for mobile phones being sold by the petitioner in inter-State sales not covered by C-Forms though it was specifically raised in the objections dt.28.11.2019 filed by the petitioner to the show-cause notice dt.04.06.2019 - He fairly stated that it is desirable that the matter be remitted back to the 1st respondent to consider this point since he had omitted to consider the same while passing the impugned Assessment Order. Petitioner also requested that the matter be remitted back to the 1st respondent for fresh consideration and that the petitioner be permitted to raise not only the issue about the rate of tax but also the issue of time bar of assessment for the period July, 2015 to January, 2016. The matter is remitted back to the 1st respondent for fresh consideration - Petition allowed by way of remand.
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Indian Laws
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2021 (1) TMI 65
Dishonor of Cheque - insufficiency of funds - legally enforceable debt or not - validity of cheque issued by a proprietorship firm or by respondent - neither any statutory notice was issued to the proprietorship firm nor the said firm has been arraigned as an accused - rejection of application for amendment of complaint on the ground that not only the application has been filed belatedly, but it would also change the nature of the complaint - HELD THAT:- The application for amendment was filed prior to cross-examination of complainant, although charge was already framed. Further, in the statutory notice Ex. P3, it was the stand of the appellant, that an amount of ₹ 3 lac was due as the respondent had got the advertisement of his shop. Thus, this Court is of the considered opinion, that the Trial Court, committed material illegality by rejecting the application filed by the appellant for amendment of the complaint and accordingly, the order dated 8-10-2012 passed by the Trial Court is hereby set aside, and the amendment in the complaint is allowed. Whether the cheque was issued by a proprietorship firm or by respondent, and whether the complaint filed against the respondent is maintainable or not? - HELD THAT:- It is the case of the appellant, that the advertisement of the shop was got done through the appellant, therefore, a cheque of ₹ 3 lac was given. It is clear from disputed cheque Ex. P.1, that the cheque was issued by the respondent in the capacity of proprietor of Prapti Collection - Undisputedly, the cheque was issued by the proprietorship firm, however, neither the statutory notice was sent to the proprietorship firm nor has been arraigned as an accused. Whether the complaint filed by the appellant against the respondent alone was maintainable, because undisputedly, neither any statutory notice was issued to the proprietorship firm nor the said firm has been arraigned as an accused? - HELD THAT:- A proprietorship firm is neither a Company, nor a partnership firm. It is merely a business name. Although even a partnership firm is not a juristic person, but in view of Order 30 Rule 1 CPC, the partners can sue or be sued in the name of firm. A suit by a proprietorship firm is only by its proprietor. Therefore, Section 141 of Negotiable Instruments Act, would not apply. Thus, the respondent alone can be prosecuted being the proprietor of the proprietorship firm. Accordingly, it is held, that the Trial Court, committed mistake by holding that since, the proprietorship firm was not arraigned as an accused, therefore, the complaint is not maintainable. W hether the complaint filed by the proprietorship firm is maintainable or not? - HELD THAT:- The disputed cheque, Ex. P.1 was issued in favor of the appellant. Thus, the complainant is the payee - Thus, it is held that the complaint filed by the appellant against the respondent is maintainable. Legally enforceable debt or not - HELD THAT:- It is the case of the appellant, that the respondent had given a contract for advertisment of his shop and accordingly, hoardings and pamphlets on the body as well as seats of a bus were affixed. The photographs Ex P8 and P.9 have been filed by the appellant. The respondent has also admitted that the photographs contain his number and photo of the shop. He also admitted that he never made any complaint with regard to the advertisement. The bills Ex. P.10 and P.11 have also been produced by the appellant. Further, the respondent has taken a false stand that the cheques were stolen from his drawer. Under these circumstances, it is held that the respondent had issued the cheque in discharge of legally enforceable debt. Insufficiency of funds - HELD THAT:- It is not the case of the respondent that he had sufficient funds in his account. So far as the drawer's signature incomplete is concerned, it is not the case of the respondent that the disputed cheque Ex.P1 does not bear his signature. So far as the stand of the respondent that since the return memo Ex.P2 issued by ICICI Bank does not bear the seal of the Bank and, therefore, the same cannot be relied upon is concerned, the said submission of the counsel for the respondent cannot be accepted. The return memo Ex. P2 bears signature of an officer of ICICI Bank. The respondent has examined Ajay Jadaon (DW2), an employee of ICICI Bank, who did not try to prove that the return memo Ex.P2 was never issued by the Bank. Thus, this Court is of the considered opinion, that the appellant has successfully established that the disputed cheque, Ex. P.1 was issued by the respondent in discharge of his legally enforceable debt, which stood bounced due to in-sufficient funds. Accordingly, the judgment dated 13/10/2017 passed by Additional Chief Judicial Magistrate, Gwalior in Criminal Case No.14094/2010 is hereby set aside and the respondent is hereby convicted under Section 138 of Negotiable Instruments Act. Question of sentence - HELD THAT:- As per Section 138 of Negotiable Instruments Act, the imprisonment for a term which may extend to 2 years and fine which may extend twice the amount of the cheque can be imposed. However, as this Court is not intending to impose jail sentence of more than 1 year, therefore, in the light of Section 143 of Negotiable Instruments Act, it is not necessary to hear the respondent on the question of sentence. Considering the totality of the facts and circumstances of the case, the respondent is awarded jail sentence of rigorous imprisonment of 1 year and is also directed to pay compensation of ₹ 5 lacs which shall be payable to the appellant - tcompensation amount be deposited within a period of one month from today, failing which the respondent shall undergo the jail sentence of 3 months - respondent is directed to surrender before the Trial Court, on or before 31st of December 2020. Appeal allowed.
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