Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 8, 2024
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
Highlights / Catch Notes
GST
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Resolving jurisdiction of GST Intelligence, Audit officers to issue show cause notices.
Jurisdiction and powers of officers issuing show cause notices (SCNs) under the Goods and Services Tax (GST) Act, 2017. It clarifies that the Additional Director General, Goods and Services Tax Intelligence, Additional Director General, Goods and Services Tax, Additional Director General, Audit, and their subordinate officers have been notified by the Board to exercise powers of the Commissioner and Deputy/Assistant Commissioner, respectively, u/s 5 of the Act. This confers jurisdiction upon them to issue SCNs. The Court distinguishes the definition of 'Proper Officer' under the GST Act from the Customs Act, highlighting the specific conferment of assessment functions required under the Customs Act. It concludes that the petitioners challenging the SCNs on jurisdictional grounds are incorrect, and they must respond to the notices as per law. The High Court disposed of the petitions accordingly.
Income Tax
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Revised tax return filed late? Assessing officer can't consider it. High Court agrees, overrules Tribunal.
The issue pertained to the validity of filing a revised return after the prescribed time limit. The High Court set aside the Tribunal's order, stating that after the revised return was time-barred, there was no provision to consider the appellant's claim. The Supreme Court held that the assessing officer cannot entertain any claim made by the assessee other than by following the provisions of the Income Tax Act. When a revised return was filed beyond the limitation period u/s 139(5), the assessing officer had no jurisdiction to consider the claim made therein. The Tribunal erred in directing the assessing officer to consider the appellant's claim in the time-barred revised return, as it should have exercised its power u/s 254 to consider the claim itself. The assessing officer's power is limited to considering claims made through valid revised returns filed within the prescribed time limit.
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Tax assessment reopening approval flawed for lack of reasoning and independent application of mind.
The court held that the approval granted u/s 151 for reopening the assessment u/s 147 was invalid. The satisfaction arrived at by the concerned officer should be discernible from the sanction order, but the approval order lacked any reasoning or material that weighed for granting approval. Mere appending the expression "Yes I am satisfied" without any indication of examining the material or thought process is insufficient. The exercise appeared ritualistic and formal rather than meaningful. Reasons are the link between material and conclusion, but no such material was present to conclude that the approving authority considered the reasons assigned by the Assessing Officer. Mere repetition of statutory words or rubber-stamping the letter seeking sanction does not satisfy the legal requirement. The approving authority failed to record concurrence satisfactorily, and the use of "Yes, I am satisfied" cannot be considered a valid approval as it does not reflect an independent application of mind. The grant of approval in such a manner is flawed in law. Consequently, the approval granted by the Principal Commissioner of Income Tax for issuing notice u/s 148 was held invalid, and the assessee's appeal was allowed.
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Contractor's profits estimated at 6% after books rejection; TDS disallowance deleted.
The Income Tax Appellate Tribunal examined the determination of net profits from contract business, rejection of books of accounts, and addition u/s 40(a)(ia) for non-deduction of TDS. The Tribunal held that when books of accounts are rejected, it is rejected as a whole, and there cannot be part rejection or part acceptance. The Assessing Officer was justified in estimating business profits at a flat percentage of gross contract receipts in the absence of regular books. In such cases, the profit percentage declared by the assessee in earlier years is the best guide. Considering the assessee's earlier years' profit percentages, the Tribunal estimated the contract business profits at 6% on the reduced contract figure after deducting demurrage for non-completion of work. Regarding the addition u/s 40(a)(ia), the Tribunal held that when books are rejected, the revenue cannot make additions or disallowances based on the same rejected books. Hence, the addition u/s 40(a)(ia) was deleted in favor of the assessee.
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Approved Gratuity Fund Contribution Deductible; Transfer Pricing Adjustment on Interest from AEs Rejected due to Higher Margins.
The assessee's contribution to the Employees Group Gratuity Scheme was disallowed solely due to it being paid to an unapproved Gratuity Fund. However, it was held that the approval granted to the erstwhile company's Gratuity Fund automatically vested with the assessee upon the change of name. Therefore, the assessee was entitled to deduct the expenditure towards the contribution made to the Employees Gratuity Fund. Regarding the transfer pricing adjustment on interest on outstanding receivables from Associated Enterprises (AEs), it was held that the ratio laid down in the Delhi Tribunal case applied. The assessee's margin being significantly higher than the comparables, the adjustment had no basis. The argument that interest on outstanding receivables cannot be considered an international transaction was dismissed due to the amendment in Explanation 1(c) of Section 92B. Consequently, the ground raised by the assessee was allowed.
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Contractor's presumptive tax, unexplained cash deposits, agricultural income, capital gains scrutinized.
The assessee offered presumptive tax u/s 44AD on contract receipts, declaring net profit at 15% except for one year. The Assessing Officer (AO) made additions for unexplained cash deposits u/s 69A, treating the entire amount as income. However, the Tribunal held that only the profit element, estimated at 8% of cash deposits, should be added, as the nexus between contract receipts and cash deposits was not established. Regarding agricultural income, consistently disclosed by the assessee, the Tribunal directed partial allowance in the absence of complete details. The addition for short-term capital gain u/s 50C, due to the difference between sale consideration and stamp duty value, was upheld. However, the Tribunal allowed 75% of the cost of improvement claimed by the assessee for compound wall and development expenses. The Tribunal's decision strikes a balance, partially allowing the assessee's claims based on the facts and legal provisions.
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Cooperative Bank Eligible for Interest Income Tax Deduction unless Operating as Commercial Bank /s80P.
The assessee claimed deduction u/s 80P(2)(d) of the Income Tax Act for interest income earned on deposits with a Cooperative Bank. The Assessing Officer and CIT(A) disallowed the deduction, contending that the Cooperative Bank does not qualify as a 'Cooperative Society'. However, the Tribunal observed that the Supreme Court in The Mavilayi Service Co-op. Bank Ltd. case has categorically ruled that Cooperative Banks are eligible for deduction u/s 80P(2)(d), unless they hold an RBI license and operate as commercial banks. Since the lower authorities did not examine the eligibility criteria as per the Supreme Court's decision, and the Tribunal had granted the deduction in earlier years without any change in facts, the Tribunal directed the Assessing Officer to allow the deduction claimed by the assessee u/s 80P(2)(d) in light of the Supreme Court's ruling.
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Tax benefit disallowed for investing in new property despite joint ownership if owner already has house.
Deduction u/s 54F is not available to an assessee who owns more than one house property at the time of purchasing a new property. The assessee, despite jointly registering the new property with his wife and daughter, made the entire investment himself. Merely registering in joint names with close relatives does not circumvent the restriction u/s 54F. The assessee claimed full deduction for the new property's investment, although jointly owned with his wife. Even for the subsequent sale of the new property, the assessee is likely to argue that Section 54/54F restrictions do not apply due to joint ownership, citing judicial precedents. Accepting this contention would create a loophole for tax evasion. The assessee's argument cannot be accepted if the entire investment is made solely by the assessee. The assessee's farm property at Vishubaug, with a bungalow and residential amenities, was rightly considered a residential house by the authorities. The ITAT upheld the CIT(A)'s findings and dismissed the assessee's appeal.
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Jurisdiction Transfer Flaw Quashes Income Tax Reassessment on Unexplained Cash Deposits.
The Appellate Tribunal examined the reopening of assessment u/s 147 beyond the limitation period, involving the addition of cash deposits in the assessee's savings bank account as unexplained investment u/s 69. The Tribunal held that the Assessing Officer had attempted to serve the notice within the stipulated six-year time frame from the end of the assessment year, indicating escapement of income. However, the Tribunal found force in the contention that the jurisdiction vested with the ITO, W-1(3) could not be validly transferred to ACIT-1(1) without a proper order u/s 127. Furthermore, no valid reopening notice was issued by the ACIT-1(1) within the stipulated time. Consequently, the ACIT-1(1) lacked valid jurisdiction to frame the assessment u/s 144 read with Section 147. The Tribunal quashed the assessment framed by the ACIT-1(1) for want of valid assumption of jurisdiction and refrained from addressing the other grounds of appeal challenging the additions/disallowances made by the Assessing Officer and sustained by the CIT(A), leaving them open.
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Deduction claim in return filed after notice valid for co-op societies.
Section 80P deduction claim filed in a return submitted in response to notice u/s 142(1) is valid. The Income Tax Act does not mandate that the return must be filed u/ss 139(1), 139(4), or 139(5) for Section 80P deduction eligibility. Section 80A(5) only requires the claim to be made in a valid return of income filed by the assessee. A return filed in response to Section 142(1) notice is a valid return. The Kerala High Court in Chirakkal Service Co-operative Bank Ltd. case held that a return filed u/s 142(1) is valid for Section 80P deduction claim u/s 80A(5). Denying Section 80P deduction to the assessee who filed the return in response to Section 142(1) notice is incorrect.
Customs
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Parts/components used for manufacturing power banks classified as Lithium-Ion Batteries; exemption benefit allowed.
Benefit of exemption under S. No. 512 of Notification No. 50/2017-Customs for parts/components imported for manufacturing Lithium Ion Batteries. The department denied the exemption on the grounds that the appellant manufactured power banks instead of Lithium Ion Batteries. The Tribunal held that the appellant utilized all imported parts/components to manufacture its product, complying with the notification's conditions. The controversy centered on whether the manufactured product was a Lithium Ion Battery or a power bank. The Tribunal stated that the exemption benefit should not be extended to circumvent or stretch beyond its intended scope. The term "manufacture" in the notification must be interpreted considering the IGCR Rules, 2017. The Tribunal noted that lithium-ion cells were initially covered under S. No. 512 but were later moved to a separate entry with a 5% duty rate, indicating that the subject goods were initially exempted. The Tribunal concluded that the power bank is essentially a Lithium Ion Battery connected to a printed circuit board for voltage conversion, and the appellant rightly claimed the exemption by utilizing the imported raw materials to manufacture Lithium Ion Batteries, which were then used to make power banks. Regarding the extended period of limitation, the Tribunal held that since the appellant complied with the notification's conditions, the demand for duty not paid from January to June.
DGFT
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Simplified import/re-import of exhibits and samples for fairs, demos without permits - just bond/ATA Carnet.
This trade notice clarifies the procedure for import/re-import of "Exhibits and Samples" for demo, display, exhibition, and participation in fairs or events in India or abroad. As per Para 2.60 of the Handbook of Procedures 2023, import/export of such goods on re-export/re-import basis shall be allowed without an authorization, subject to conditions and submission of a bond/security to Customs or ATA Carnet. Import/re-import of "Exhibits and Samples" for the stated purposes shall be regulated under Para 2.60 and not require import authorization or registration under Import Monitoring Systems, provided other compliance requirements are met.
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Expanded intra-company transfer policy for SCOMET items like composites, radar absorbers, anti-IED gear, hydrophones, submarines & ramjet engines.
Amendment expands coverage of items under Global Authorization for Intra-Company Transfer (GAICT) Policy for export/re-export of SCOMET items, software and technology to listed countries. New items added under SCOMET Categories 8A, 8B, 8C, 8D, 8E relating to composite structures, electromagnetic radiation absorbing materials, counter-IED equipment, hydrophone arrays, submersible vehicles, noise reduction systems, ramjet/scramjet engines, and associated software/technology. Facilitates intra-company transfers of these items to approved destinations.
FEMA
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Overseas investment scrutiny: Tribunal remands order on lack of clarity over "bona fide activity.
The appellants challenged the order contravening FEMA for unauthorized direct investment outside India in an overseas JV not engaged in bona fide business activity. They argued the investment was through purchase of existing shares, a valid mode under FEMA not requiring RBI permission. The term "bona fide business activity" was undefined, and the JV's purpose of exploring global opportunities in steel and textile sectors was legitimate. The Tribunal found the order lacked reasoned decision on relevant aspects like investment mode, need for permission, and bona fide activity, necessitating remand for fresh adjudication. Consequently, the Tribunal set aside the order and remanded the matter for fresh adjudication with a reasoned order.
Corporate Law
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Defunct company with Rs. 3cr assets gets name restored after years of non-compliance due to director's illness.
The company failed to file financial statements and annual returns for five financial years from 2014 to 2018. Despite having assets worth Rs. 3 crores as of 2008, the company could not recover the amount from another entity if its name was not restored. Considering the medical history of one director and lack of operations during 2014-2019, the NCLAT set aside the NCLT order and restored the company's name in the Register of Companies, subject to compliance fulfillment. No prejudice would be caused to anyone by restoring the company's name.
Benami Property
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Benami property case - chits, assets in others' name, unexplained cash deposits, lack of income proof.
Benami transaction case involving appellant's purchase of assets including chit funds in name of Rajesh. Sworn statements u/s 132(4) of Income Tax Act accepted as evidence despite appellant's objections. Appellant failed to substantiate income sources like poultry or agriculture. Village Executive Officer's certificate based on inquiry, not revenue records. Bank account deposits linked to Rajesh's firm. Maturity amounts from chits transferred to Rajesh's firm without explanation. Discrepancies in agricultural land details. Adjudicating Authority's critical analysis upheld, finding benami transactions based on evidence like statements, fund transfers, and lack of proper income proof.
IBC
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EPF dues take priority: Liquidator to clear PF claims first before other assets.
The NCLAT held that the claims of all eight EPFOs (Employees' Provident Fund Organizations) u/ss 7A, 7Q, and 14B of the EPF Act must be treated equally. The entire amount claimed by the EPFOs should be paid from the attached bank accounts of the Corporate Debtor (CD). If the funds are insufficient, the remaining amount should be met by disposing of other assets of the CD. After settling the EPFO claims, the remaining funds will form part of the liquidation estate. The attachment orders on the CD's bank accounts by the respondents were removed. The liquidator, along with respondents 3 and 4, must ensure payment of PF dues to the respective PF authorities, after which the liquidator can proceed with the CD's liquidation process. The appeal was disposed of accordingly.
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Creditors' claim rejected; no proof of loan agreement, time value consideration.
The Appellate Tribunal dismissed the appeal filed by the Petitioners seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor/Respondent. The key findings were: There was no loan agreement specifying the tenure, interest rate, or payment frequency. The only evidence was the Petitioners' ledger accounts maintained by the Corporate Debtor. The Petitioners did not submit any agreement obligating the Corporate Debtor to pay interest on the alleged loan. For a debt to qualify as a "financial debt," the amount advanced must be in consideration of the time value of money, which was absent in this case. The Adjudicating Authority rightly concluded that the Petitioners did not qualify as financial creditors since no money was disbursed with consideration for the time value. The Corporate Debtor claimed to have paid the entire principal and interest for which TDS was deducted, and the Petitioners did not dispute this. The dispute was only about recovering the claimed balance interest, which the Appellate Tribunal is not a forum for debt recovery. The Petitioners are free to raise the dispute before the appropriate forum for recovery of the balance claim, if any.
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Unsuccessful Bidders' Appeal Against Approval of Sarda's Resolution Plan Dismissed.
The appeals challenged the approval of Sarda Energy and Minerals Ltd.'s Resolution Plan, alleging material irregularities by the Resolution Professional (RP) and Committee of Creditors (CoC). The key issues were the alleged modification of key commercial terms by the Successful Resolution Applicant (SRA) under the guise of clarifications sought by the RP, and the resulting perversity and discrimination. The NCLAT held that the CoC and RP did not grant any opportunity to the appellant to modify or amend the Resolution Plan's terms. While the Supreme Court in Ajay Gupta's case allowed modification, in the present case, the clarifications sought on 08.05.2023 did not permit any Resolution Applicant to modify their plans; only clarifications were requested. The appellant's contention that Sarda was permitted to modify its financial proposals under the guise of clarifications was rejected. No sufficient grounds were established u/s 61(3)(ii) of the IBC to interfere with the Adjudicating Authority's approval of Sarda's Resolution Plan. Consequently, the appeals by the Unsuccessful Resolution Applicants were dismissed.
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Settlement vs. Resolution Plan - Creditors to Consider Both Options.
Corporate Insolvency Resolution Process (CIRP) - Settlement proposal initially rejected by Committee of Creditors (CoC), revised proposal submitted and pending consideration. CoC can consider resolution plan and settlement proposal simultaneously. No requirement for CoC to hear respondent unless CoC decides for negotiations. Revised settlement proposal submitted, no need for further evidence unless required by CoC or Insolvency Resolution Professional (IRP). CIRP not stayed by Supreme Court. Application dismissed by Appellate Tribunal.
SEBI
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SEBI Extends Social Stock Exchange Annual Disclosure Timelines for FY 2023-24.
The circular extends the outer timeline for annual disclosures under Regulation 91C(1) and annual impact report under Regulation 91E(1) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 by Social Enterprises on Social Stock Exchange for FY 2023-24 until January 31, 2025. It partially modifies the earlier circular SEBI/HO/CFD/PoD-1/P/CIR/2024/0059 dated May 27, 2024, which had prescribed the initial outer timelines for these disclosures.
Central Excise
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Manufacturer Held Liable for Unpaid Excise Duty on Clandestinely Removed Goods Despite WIP Shortage Claims.
The appellant's contention regarding shortage of work-in-progress (WIP) due to dust generated during manufacturing was rejected. The logical conclusion was that final goods were manufactured but lesser quantity was recorded in the final products register, and duty was paid on the recorded quantity, while the remaining quantity was removed clandestinely. The shortage was substantial, and the impugned order correctly held the appellant liable for excise duty u/s 11A, invoking extended period of limitation along with interest and penalty u/s 11AC of the Central Excise Act, 1944. However, the imposition of personal penalty on Shri Tekriwal u/r 26 was set aside as confiscation of goods, a prerequisite for invoking Rule 26, was not undertaken by the Commissioner. The appeal was disposed of accordingly.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (10) TMI 314
Jurisdiction of officers issuing SCN - composite/mixed supply - lack of jurisdiction - Maintainability of writ petitions challenging SCN - HELD THAT:- It is evident from the definition of Commissioner as defined under Section 2(24) of the Act, 2017 which means the Commissioner of central tax and includes the Principal Commissioner of central tax appointed under section 3 and the Commissioner of integrated tax appointed under the Integrated Goods and Services Tax Act. While the Commissioner in the Board which has been defined under Section 2(25) which means the Commissioner referred to in Section 168. The power of officers has been defined under Section 5 thereof wherein it has been provided that subject to such conditions and limitations as the Board may impose, an officer of central tax may exercise the powers and discharge the duties conferred or imposed on him under this Act. An officer of central tax may exercise the powers and discharge the duties conferred or imposed under this Act on any other officer of central tax who is subordinate to him. The Commissioner may, subject to such conditions and limitations as may be specified in this behalf by him, delegate his powers to any other officer who is subordinate to him. Notwithstanding anything contained in this section, an Appellate Authority shall not exercise the powers and discharge the duties conferred or imposed on any other officer of central tax. This Court, therefore, is of the view that since the notification dated 01st July, 2017 has been issued in exercise of power conferred under Section 3 read with Section 5 under which the Board has been conferred with the power, in addition to appointment to be made by the Government, to impose the power upon the officer under the act and hence, the Additional Director General, Goods and Services Tax Intelligence or Additional Director General, Goods and Services Tax or Additional Director General, Audit has been notified to exercise the power of Commissioner and the Deputy/Assistant Director, Goods and Services Tax Intelligence or Deputy/Assistant Director, Goods and Services Tax or Deputy/Assistant Director, Audit has been authorized to exercise the power of Deputy Commissioner/Assistant Commissioner. From conjoint reading of Sections 2(34) and 28 of the Act, it has been found that only such a Customs Officer who has been assigned the specific functions of assessment and reassessment of duty in the jurisdictional area where the import concerned has been affected, by either the Board or the Commissioner of Customs, in terms of Section 2(34) of the Act is competent to issue notice under Section 28 of the Act. Any other reading of Section 28 would render the provisions of Section 2(34) of the Act otiose inasmuch as the test contemplated under Section 2(34) of the Act is that of specific conferment of such functions. The Proper Officer which has been defined under Section 2(34) of the Act, 1962 and comparing it with the provision of Section 2(91) of the Act, 2017, it would be evident that there is material difference since under Section 2(34), the Proper Officer means the officer of Customs who is assigned those functions by the Board or the Commissioner of Customs while the Proper Officer as defined under Section 2(91) of the Act, 2017 means the proper officer in relation to any function to be performed under this Act, means the Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the Board. This Court is of the view that by virtue of the power exercised by the Board under Section 5 of the Act, 2017, a notification has been issued conferring power upon the Additional Director General, Goods and Services Tax Intelligence or Additional Director General, Goods and Services Tax or Additional Director General, Audit to act as a Commissioner and the Deputy/Assistant Director, Goods and Services Tax Intelligence or Deputy/Assistant Director, Goods and Services Tax or Deputy/Assistant Director, Audit to act as Deputy Commissioner/Assistant Commissioner and as such, it is incorrect on the part of the writ petitioners to take the ground that the Additional Director General, Goods and Services Tax Intelligence or Additional Director General, Goods and Services Tax or Additional Director General, Audit and the Deputy/Assistant Director, Goods and Services Tax Intelligence or Deputy/Assistant Director, Goods and Services Tax or Deputy/Assistant Director, Audit are having no power to initiate a proceeding under the Act, 2017. This Court is of the view that the Additional Director General, Goods and Services Tax Intelligence or Additional Director General, Goods and Services Tax or Additional Director General, Audit and the Deputy/Assistant Director, Goods and Services Tax Intelligence or Deputy/Assistant Director, Goods and Services Tax or Deputy/Assistant Director, Audit are having jurisdiction to issue show cause notices. This Court, therefore, is of the view that the writ petitioners are required to response to the said show cause notices for its consideration by the authority concerned, in accordance with law - Petition disposed off.
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Income Tax
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2024 (10) TMI 313
Non cognizance of the revised return filled beyond period of limitation - Validity of filing a revised return after the time prescribed by law - High Court proceeded to set aside the order of the Tribunal on the ground that after the revised return was barred by time, there was no provision to consider the claim made by the appellant - HELD THAT:- We have carefully perused the judgment of this Court in the case of Wipro Finance Ltd [ 2022 (4) TMI 694 - SUPREME COURT] - The issue which arose before this Court was not regarding the power of the assessing officer to consider the claim after the revised return was barred by time. This Court considered the appellate power of the Appellate Tribunal under Section 254 of the IT Act. In this case, the Court did not consider the question of the power of the assessing officer to consider a claim made after a revised return was barred by time. This Court considered the appellate powers of the Tribunal u/s 254. Moreover, this was a case where the department gave no objection for enabling the assessee to set up a fresh claim. In the case of Goetzge (India) Ltd [ 2006 (3) TMI 75 - SUPREME COURT] this Court held that the assessing officer cannot entertain any claim made by the assessee otherwise than by following the provisions of the IT Act. In this case, there is no dispute that when a revised return dated 29th October 1991 was filed, it was barred by limitation in terms of section 139(5) of the IT Act. Tribunal has not exercised its power u/s 254 of the IT Act to consider the claim. Instead, the Tribunal directed the assessing officer to consider the appellant's claim. The assessing officer had no jurisdiction to consider the claim made by the assessee in the revised return filed after the time prescribed by Section 139(5) for filing a revised return had already expired.
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2024 (10) TMI 312
ITA order suffers from delay and laches - order impugned has been passed in 2020, whereas the ITA has been filed in 2023, and as such, there is delay of more than three years in filing the ITA - as decided by HC [ 2024 (10) TMI 209 - ORISSA HIGH COURT] this Court is not inclined to entertain this ITA at this belated stage, as the ITA suffers from delay and laches HELD THAT- Having regard to the basis of the order passed by the Income Tax Appellate Tribunal 2020 (9) TMI 765 - ITAT CUTTACK] and the consent of the assessee towards the assessment of profit, we see no reason to interfere. It is also relevant to notice that the challenge before the High Court was delayed by three years. The Special Leave Petition is accordingly dismissed. Pending application(s), if any, stand closed.
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2024 (10) TMI 311
Validity of reopening assessment u/s 147 - legality of sanction granted u/s 151 - HELD THAT:- The satisfaction arrived at by the concerned Officer should be discernible from the sanction order passed u/s 151. However, as may be seen, the approval order is bereft of any reason. There is no whisper of any material that may have weighed for the grant of approval. Even the bare minimum requirement of the approving authority having to indicate what the thought process was, is missing in the aforementioned approval order. While elaborate reasons may not have been given, at least there has to be some indication that the approving authority has examined the material prior to granting approval. Mere appending the expression Yes I am satisfied says nothing. The entire exercise appears to have been ritualistic and formal rather than meaningful, which should be the rationale for the safeguard of an approval by a high ranking official. Reasons are the link between material placed on record and the conclusion reached by the authority in respect of an issue, since they help in discerning the manner in which the conclusion is reached by the concerned authority. In the present case, there is no such material to come to the conclusion that PCIT granted approval after considering the reasons assigned by the Assessing Officer. The decision rendered in Meenakshi Overseas Pvt. Ltd. [ 2015 (12) TMI 1905 - DELHI HIGH COURT] is therefore not applicable to the facts and circumstances of the present case. Mere repeating of the words of the statute, mere rubber stamping of the letter seeking sanction or using similar words like Yes, I am satisfied will not satisfy the requirement of law. Hence, we are of the firm view that PCIT has failed to satisfactorily record his concurrence. The mere use of expression Yes, I am satisfied cannot be considered to be a valid approval as the same does not reflect an independent application of mind. The grant of approval in such manner is thus flawed in law. Approval granted by the PCIT for issuance of notice u/s 148 of the Act is not valid. Assessee appeal allowed.
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2024 (10) TMI 310
Revision u/s 263 - disallowances u/s 14A as per Rule 8D was pending before Ld CIT(A) - PCIT has held the order passed by A.O making disallowance u/s. 14A is erroneous and prejudicial to the interest of revenue as the AO has taken cost of investment rather than fair value of investment in the computation as per Rule 8D(2). HELD THAT:- The assessee has filed appeal before Ld. CIT(A) against the disallowance made as per Rule 8D by the AO. As per clause (c) of Explanation-1 to Section 263 of the Act, if any order passed by the A.O has been the subject matter of appeal the power of Ld. PCIT is limited only to such matter as had not been considered and decided in such appeal. In the above case, the computation of disallowance u/s. 14A of the Act as per Rule 8D of the Rules is subject matter of appeal before Ld. CIT(A) and the Ld CIT(A) appeal has all power to correct the computation as per Rule 8D . As in the case of Smt. Renuka Philip [ 2018 (12) TMI 129 - MADRAS HIGH COURT ] has held that when larger issue is pending before the Commissioner of Appeal , the PCIT could not exercise power u/s 263 to revise the assessment order. We therefore, held that revision order u/s. 263 of the Act passed by Ld PCIT is bad in law and therefore, liable to be quashed. Appeal filed by the assessee is allowed.
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2024 (10) TMI 309
Determination of net profits from contract business - Rejection of books of accounts - basic argument and claim of the assessee is that the deduction on account of deductions from bills on account of non-fulfillment of work in time is to be further allowed from the estimated business profit of the assessee and the claim of royalty of course is already debited in profit and loss account, filed by the assessee - HELD THAT:- In the instant case, the assessee without producing any documentary evidences relating to claims of direct expenses made in trading account specially on account of materials and labour, wants to claim deductions on estimate based on past records and further wants to claim, head-wise deductions, on account of upkar, royalty, demurrage, compound tax, etc. as per statement certified by the contractee, which is legally and technically unacceptable arguments, because when book results are rejected, it is rejected as a whole and there cannot be any part rejection and part acceptably of book results, and there cannot be any head wise bifurcation of any claims under direct or indirect expenses, separately, because once books are rejected, it is rejected for the assessee and for the revenue, both, and in the instant case the statement of the Ld AR before the AO, on 05/08/2011 proves beyond doubt, that books of account never ever existed at all. AO under the factual circumstances stated above, and in absence of any regular books of accounts, was fully justified in estimating the business profits at a flat percentage of gross contract receipts. Now in cases of absence of any books of accounts, when the question of estimation of profits arises, it is a fair rate of percentage that is to be applied on actual receipts of the assessee, and in such cases there are plethora of judgments which prescribes that percentage declared by the assessee in earlier years in the assessees own case are the best guide, even though the principles of res judicata does not apply in income tax proceedings. In the instant case, based on earlier years records, in the case of the assessee himself, and after considering the profit percentage declared in Asst years 2007-08 and 2008-09, at 6.6% and 6.32%, respectively took a view to estimate the contract business profits @ 6.30%, on Gross Receipts, after considering all claims referred to in sections 29 of the Act, in accordance with provisions contained in sections 30 to 43D of the Act 61, and we also are of the same opinion and there are no reasons to take a different view in the matter. Regarding the qualms of the assessee that the demurrage, for non completion of the work in time for the year under appeal, has neither been received till date nor receivable in future, we are under the opinion that since we are estimating the contract income at a flat percentage, this amount should be reduced from the gross contract figure because under the circumstances this amount has been taken away by the contractee never to be paid ( which is different from royalty, which goes to the credit of the State Government), and as such in the interest of justice, and for all practical purpose, and also considering the fact that there are no new expenditures as claimed except royalty, only (because other expenditures relating to upkar, bank interest and other finance charges, depreciation were also existing in earlier years as per submitted accounts) and to take a very judicious view in the matter the contract profits is hereby estimated at a flat rate of 6 % ( six percentage ) on the reduced contract figure and we order accordingly. The assessee gets consequential relief and this ground is partly allowed. Addition u/s 40(a)(ia) - not deduction of TDS - HELD THAT:- When books of accounts are rejected, it is rejected both for the assessee and the revenue, and the revenue cannot proceed to make any additions or disallowances, based on the same rejected books. See Bahubali Neminath Muttin [ 2017 (1) TMI 1375 - KARNATAKA HIGH COURT ] and Dulla Ram [ 2013 (12) TMI 253 - PUNJAB HARYANA HIGH COURT ] Thus, once the books are not existing and profits are determined on a flat rate of total receipts, no further addition for trade creditors or for disallowance u/s 40(a)(ia) can be made separately, because estimation of income has been done taking into consideration the provisions contained in sections 30 to 43D of the Act 61. Addition u/s 40(a)(ia) are deleted - Decided in favour of assessee.
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2024 (10) TMI 308
Disallowance of contribution made by the assessee to Employees Group Gratuity Scheme - only reason for disallowance of premium paid to Employees Group Gratuity Fund was that the same was paid to an unapproved Gratuity Fund - HELD THAT:- It is not in dispute that assessee s name has been changed from GKN Driveshafts (India) Ltd. to GKN Driveline (India) Ltd. w.e.f 26.06.2003. The Certificate issued for change of name of the company by the Registrar of Companies. The approval granted for the Employees Gratuity Fund Scheme by the CIT - Delhi -4, New Delhi dated 16.12.2003 in the name of GKN Driveshafts India Ltd. Employees Group Gratuity Scheme. Hence, we find that the reason given by the learned AO in the final assessment order has got no basis at all in the eyes of law. We find that just the name of the company is changed and all other activities continue to remain the same. Hence, the statutory approvals granted to the erstwhile assessee stands automatically vested to the assessee before us as only the name of the company being changed. We hold that the assessee would be entitled for deduction of expenditure in respect of contribution made to Employees Gratuity Fund. TP Adjustment - international transaction of interest on outstanding receivables from the Associated Enterprises (AEs) - HELD THAT:- We find that the ratio laid down by the Delhi Tribunal in the aforesaid case squarely applies to the facts of the instant case before us. Tribunal in the case of Bechtel India Pvt. Ltd. [ 2015 (12) TMI 1560 - ITAT DELHI ] it was pleaded that assessee is a debt free company and hence, there is no question of charging interest on outstanding receivables from AEs. But on perusal of the orders of the lower authorities, we find that no such finding is given in the orders to this effect. No submission was even made by the assessee before the lower authorities to this effect. Hence, we refrain to consider this argument in this order. Assessee s margin is much much higher than the comparables margin, the transfer pricing adjustment on interest on outstanding receivables would have no legs to stand in the peculiar facts and circumstances of the instant case. The other legal arguments advanced by the AR that interest on outstanding receivables cannot be considered as an international transaction per se is dismissed in view of the amendment brought in the statute in Explanation 1(c) of Section 92B of the Act. In view of the aforesaid observations and judicial precedents relied upon hereinabove, the ground no.2 raised by the assessee is allowed.
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2024 (10) TMI 307
Revision u/s 263 - AO had passed an erroneous order by not waiting for the Transfer Pricing order u/s 92CA(3) of the Act for determination of Arm s Length price of the international transactions undertaken by the assessee - PCIT observed that reference u/s 92CA(3) of the Act was already made by the ld DCIT Central Circle 6 to TPO - Also TPO had proposed a transfer pricing adjustment to Arm s length price in respect of international transaction of purchase of agriculture commodities which had escaped assessment in the hands of the assessee u/s 153C thereby the order of the AO became prejudicial to the interest of revenue. HELD THAT:- PCIT does not invoke revision jurisdiction u/s 263 of the Act on the ground that no fresh reference was made by AO to TPO u/s 92CA(1) of the Act, instead, the PCIT says that the AO ought to have waited for the order of ld TPO based on the old reference made by the AO to TPO. As stated earlier, when the original assessment and TPO proceedings gets abated pursuant to initiation of proceedings u/s 153C of the Act and the AO in the search assessment proceedings u/s 143(3) read with Section 153C of the Act had chosen in his wisdom not to make fresh reference to ld TPO u/s 92CA(1) of the Act, how any error could be attributed in his order. Hence, the order of the ld PCIT by invoking revision jurisdiction u/s 263 of the Act fails on this. We find that the search assessment proceedings u/s 143(3) read with section 153C of the Act was framed on 26.03.2013 by DCIT, Central Circle, New Delhi after obtaining prior approval u/s 153D of the Act from Additional Commissioner of Income Tax, Central Range-2, New Delhi. On perusal of the order of the ld PCIT u/s 263 of the Act, we find nowhere in his order, the ld PCIT even whispers about the approval granted by the Additional CIT u/s 153D of the Act to be erroneous and prejudicial to the interest of the revenue. Without doing so, PCIT could not assume revision jurisdiction u/s 263 of the Act. Reliance in this regard is placed on the decision of Prakhar Developers Pvt. Ltd [ 2024 (4) TMI 498 - MADHYA PRADESH HIGH COURT] The very same view was also taken by the coordinate bench of this tribunal in the case of Devender Kumar Gupta [ 2024 (9) TMI 210 - ITAT DELHI] In view of the aforesaid decision the revision jurisdiction assumed by the PCIT u/s 263 of the Act fails on this count also. Thus, revision order passed u/s 263 of the Act by the ld PCIT deserves to be quashed for more than one reason as detailed supra.
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2024 (10) TMI 306
Reopening of assessment u/s 147 - Addition of unexplained cash deposits u/s 69A - AO based on the information available with the Department re-opened the case after recording the reasons and getting approval of the appropriate authority - HELD THAT:- In this case the assessee has offered presumptive tax u/s 44AD of the Act in respect of the contract receipt during the year under consideration and also for subsequent assessment years upto AY. 2015-16 for its gross receipts from sale of shops. We find that he has gross net profit @ 15% on gross receipt from AY.2010-11 to 2015-16 except AY 2012-13, where net profit is declared @ 12.07%. The net profit declared is reasonable having regard to the nature of business carried on by the assessee. Though the income of the project, M/s Shrijee Infraproject has been offered for taxation u/s 44AD in subsequent assessment years, the assessee has shown cash receipts from the customers in this year. The appellant has also offered income u/s 44AD in receipt of contract receipts. The nexus between the gross receipt offered of presumptive tax u/s 44AD and the cash deposits has not been fully explained and established. On the other hand, no new source of income has been found by the AO. Therefore, as submitted by appellant, only the profit element and not the entire amount can be added as income of the assessee. Since, the assessee has offered net profit @ 15% u/s 44AD, it would be fair and reasonable if the profit on the cash deposit is estimated @ 8% of the cash deposits. Accordingly, addition being 8% is upheld which shall be over and above the income shown by the assessee in his return of income. AO is directed to delete the remaining addition. Treatment of agricultural income as income from other sources - We find that the assessee has been consistently showing agricultural income in his returns of income from AY.2008-09 to 2015-16. There was scrutiny assessment for AY.2008-09 and AY.2011-12 wherein the agricultural income of assessee was accepted. The CIT(A) has also accepted agricultural income of assessee for AY.2011-12. Reason for not accepting agricultural income in the immediately preceding year is not very clear. As the appellant has consistently disclosed agricultural income, such claim cannot be brushed aside for the impugned assessment year. In absence of complete details as pointed out by the lower authorities, it would not be proper to allow the entire agricultural income disclosed by the assessee. Addition on account of unexplained cash deposit - CIT(A) directed AO to reduce a sum declared as profit and gain on account of business income reported by the assessee. Similar facts were there in the appeal of the assessee for AY.2010-11 where after detailed discussion, we have directed the AO to add 8% of the cash deposit and delete the remaining addition. We direct AO to add and delete the remaining addition. The ground is partly allowed. Addition towards short-term capital gain - The reasons for not making the addition in respect of one property for which details are not given cannot be a ground to delete the addition made by the AO for the other property due to operation of a specific provisions u/s 50C. As per section 50C, where the sale consideration due to transfer of a capital asset is less than value adopted or assessed or assessable by the Stamp Valuation Authority, the value so adopted or assessed or assessable shall be the full value of consideration for the purpose of capital gain. As observed by CIT(A), appellant has not objected to full value of consideration adopted by AO u/s 50C. AO has rightly applied the provision and made the addition. Hence, no interference is necessary in respect of the addition made u/s 50C of the Act due to difference in market value and the amount mentioned in the sale deed by the sub-Registrar. Regarding the cost of improvement, the assessee has submitted photographs appearing in the sale deed which evidences a compound wall. Therefore, the claim of the assessee that it had incurred expenses for compound wall and develop cost cannot be rejected in full. Normally, the land is filled up and levelled before a wall is raised. We are of the view that 75% of the expenses would be reasonable expenses in absence complete details by the assessee. Therefore, assessee gets a relief and the balance addition is upheld. In the result, the ground is partly allowed.
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2024 (10) TMI 305
Deduction u/s. 80P(2)(d) - interest income earned on deposits with Co-operative Bank - CIT(A) upheld the order of the AO / CPC on the disallowance made u/s. 80P(2)(d) on the ground that the Cooperative Bank does not fall under the category of Co-operative Society and on other findings - HELD THAT:- As observed that the assessee has claimed deduction u/s. 80P(2)(d) of the Act in its return of income, towards the interest received out of the deposits made in the Co-operative Societies. The finding of the ld. CIT(A) that the assessee had not made any claim is factually incorrect. AR brought our attention where in the return of income, the said claim has been made by the assessee. With regard to whether the assessee is eligible to claim deduction u/s. 80P(2)(d) of the Act towards the interest received from the Co-operative Bank, it is the settled proposition of law where the Hon'ble Apex Court in The Mavilayi Service Co-op. Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] has given a categorical finding as to the eligibility of the Co-operative Banks which are akin to that of the Co-operative Society unless the said co-operative bank holds a license issued by the RBI and whether its activities are as that of commercial banks. We do not find any such arguments in the order of the lower authorities as to the eligibility of the Co-operative Banks, in which the assessee has made deposits. We are also conscious of the fact that the co-ordinate benches of the Tribunal have in earlier years given the benefit of deduction u/s. 80P(2)(d) and the Revenue has also not brought anything on record as to any change in facts and circumstances for the year under consideration. We, therefore, direct the A.O. to grant the deduction claimed by the assessee u/s. 80P(2)(d) of the Act in the light of the decision of The Mavilayi Service Co-op. Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] Hence, we allow ground raised by the assessee.
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2024 (10) TMI 304
Penalty u/s. 271(1)(c) - Bogus purchases - proceedings were initiated as per the information received from DGIT(Inv) relating to bogus purchase/ hawala transactions - addition was made by disallowing @25% of the depreciation claimed by the assessee - HELD THAT:- The issue is squarely covered by the order of M/s Litura Electrical Technologies Pvt Ltd. [ 2024 (7) TMI 1534 - ITAT MUMBAI] where the penalty levied on addition made on estimate basis was deleted. The co-ordinate bench of ITAT-Mumbai relied on the order of T. Ashok Pai [ 2007 (5) TMI 199 - SUPREME COURT ] and CIT vs Reliance Petroproducts Pvt Ltd [ 2010 (3) TMI 80 - SUPREME COURT ] has clearly laid down the dictum that merely making an incorrect claim does not tantamount to furnishing of inaccurate particulars of income. Hence, the penalty levied by the AO on estimated addition which is not sustainable. Bogus purchase has never been added back in impugned assessment year. Only part of depreciation @35% is duly allowed which confirmed there is no dispute on impugned purchases of the assessee and the disallowance only @25% of depreciation on estimation basis. Therefore, no merit in the order of the CIT(A). We respectfully distinguish the orders of the Hon ble Apex Court and orders of the co-ordinate bench of Jaipur Tribunal relied on by the revenue. We fully relied on the order of the co-ordinate bench, Mumbai in the case of T. Ashok Pai [ 2007 (5) TMI 199 - SUPREME COURT ] and Reliance Petroproducts (P) Ltd. [ 2010 (3) TMI 80 - SUPREME COURT ] Accordingly, the appeal of the assessee succeeds. The penalty levied under section 271(1)(c) is deleted. Assessee appeal allowed.
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2024 (10) TMI 303
Deduction u/s. 54F - assessee owner of more than one house property - joint ownership for claiming deduction - owner of more than one immovable property at the time of purchase of new property - as argued jointly registered in the name of his wife and his daughter entire investment in the property at Vishubaug was made by the assessee himself and only for the purposes of registration that the property had been jointly registered in the name of his wife and his daughter - HELD THAT:- The case laws cited by the assessee would not come to the rescue of the assessee for the simple reason that if the entire investment is made by the assessee, then simply by putting the name of other co-owners being the close relatives say wife, daughter, son, etc., would not take away the case from the purview of the restrictions imposed under the provisions of Section 54F being that the assessee should not be owner of more than one immovable property at the time of purchase of new property. The assessee has made investment in the aforesaid property with his own funds, then simply because the assessee has registered the property jointly with his wife, son or any other close relative, should not, in our view take away the case of the assessee from the restrictions/conditions imposed u/s. 54F of the Act. If this view were to be accepted as correct then the assessees would conveniently register the property in joint names and take the case outside the purview of the restrictions imposed u/s. 54F, which is to the effect that the assessee should not be owning more than one residential property at the time of investment in new immovable property. Another notable is fact that the assessee purchased new property at Colaba, Mumbai for which deduction u/s. 54F of the Act was claimed, which was also jointly registered by the assessee along- with with his wife. However, the assessee has taken complete deduction of the entire amount of investment despite the fact that the assessee is only 50% of the owner of such property (since the new investment is jointly held by the assessee and his wife). Therefore, evidently even in event of subsequent sale of property of Colaba, Mumbai, the assessee is likely to again take a view that since the property purchased at Colaba, Mumbai is held by the assessee in joint ownership, the restrictions imposed by Section 54/54F of the Act would not apply to assessee s set of facts, in light of judicial precedents, which have held that for such restrictions to apply, the assessee should be the exclusive owner of the property. If this view were to be accepted in each case, then the assessees would this lacunae as a convenient tool for tax evasion. In our view, this contention of the assessee cannot be accepted if on facts it is found that the entire investment in the immovable property has been made by the assessee exclusively with his own funds and such argument can be accepted only if assessee is able to establish joint and separate investment by co-owners in the property. Accordingly, this argument of the assessee is also rejected. The third argument of assessee that the assessee does not use the Farm for the purpose of his residence. However, this aspect was discussed in detail by CIT(A) and on facts, it was observed that the assessee was clearly using the Farm of Vishubaug for residential purposes as well. The assessing officer while framing the assessment order has given a categorical finding that the immovable property situated at Vishubaug had a separately built bungalow, surrounded with verandah and covered boundary and all the furniture/furnishings of a house. Accordingly, on facts, the Department has clearly established that the property situated at Vishubaug was capable of being used and was also used by the assessee for his residential purposes. Accordingly, CIT(A) has correctly observed that the property at Vishubaug was a residential house of the assessee. Accordingly, in the instant facts, we are of the view that the property situated at Vishubaug is a residential house and not a commercial property. Accordingly, looking into the instant facts, we find no infirmity in the findings of the Ld. CIT(A) so as to call for any interference. Appeal filed by the Assessee is dismissed.
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2024 (10) TMI 302
Reopening of assessment u/s 147 beyond period of limitation - Addition of cash deposit in savings bank account of assessee as unexplained investment u/s 69 - HELD THAT:- On perusal of report and supporting documents submitted by the Ld. AO in the present case which are extracted hereinabove, it is apparent that the Ld. AO had attempted to serve the notice of the assessee dated 26.03.2018 though registered post at the address of the appellant, available on the record of the department i.e., Pankojani Walter, Adarsh Chowk, Kusumkasa, Durg, Chhattisgarh, however, the post sent was returned back to the AO with a remark that the assessee has refused to take the same on 05.04.2018, it shows that the notice was issued within the stipulated time frame of Six years from the end of the assessment year having information about escapement of income, for which assessment was to be reopened. Therefore, the first legal contention raised by the assessee is not found to be tenable in light of the evidences submitted by the department. Order of transfer u/s 127 was not issued for change of incumbent by the Ld. PCIT - We find force in the contentions of the Ld. AR that the jurisdiction vested with ITO,W-1(3) could not be validly transferred to ACIT-1(1) by way of a proper order of transfer us 127. Also, nothing is brought to our notice that a valid reopening notice was issued by the Ld. ACIT-1(1) within stipulated time as mandated by the Law, therefore, he was devoid of valid assumption of jurisdiction to frame the assessment in the present case u/s 144 r.w.s. 147 thus, in terms of aforesaid observations, the assessment framed by ACIT, Circle- 1(1), dehors valid assumption of jurisdiction is liable to be quashed, thus, we direct to do so. As we have quashed the assessment framed by the ACIT, Circle-1(1) framed u/s 144 r.w.s. 147 dated 10.12.2018 for want of valid assumption of jurisdiction, therefore, we refrain from adverting to and to dealing with the other grounds of appeal raised before us by the assessee, challenging the additions / disallowances made by Ld. AO and to the extent sustained by the Ld. CIT(A), which therefore are left open.
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2024 (10) TMI 301
Denial of approval u/s 80G - application being filed beyond allowed time limit after commencement of activities/ not filed within six months of commencement of activities - HELD THAT:- When we read the sub clause iii of Proviso of section 80G(5), which we have already reproduced above, it is clear that the intention of parliament in putting the word or within six months of commencement of its activities, whichever is earlier is in the context of the newly formed Trust/institutions. For the existing Trust/Institution, the time limit for applying for Regular Registration is within six months of expiry of Provisional registration if they are applying under sub clause (iii) of the Proviso to Section 80G(5) of the Act. This will be the harmonious interpretation. Hon ble Supreme Court in the case of K P Varghase [ 1981 (9) TMI 1 - SUPREME COURT] observed that the statutory provision shall be interpreted in such a way to avoid absurdity. In this case to avoid the absurdity as discussed by us in earlier paragraph, we are of the opinion that the words, within six months of commencement of its activities has to be interpreted that it applies for those trusts/institutions which have not started charitable activities at the time of obtaining Provisional registration, and not for those trust/institutions which have already started charitable activities before obtaining Provisional Registration. We derive the strength from the Speech of the Hon ble Finance Minister and the Memorandum of Finance Bill. 2020. Therefore, we hold that the Assessee Trust had applied for registration within the time allowed under the Act. Hence, the application of the assessee is valid and maintainable. Thus, we set-aside the order under 80G to ld.CIT(E) for denovo adjudication. CIT(E) shall give opportunity to the assessee of being heard. Accordingly, grounds of appeal are allowed for statistical purpose.
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2024 (10) TMI 300
Deduction u/s 80P - AO finding no return of income having been filed by the assessee - validity of return filed in response to notice u/s 142(1) - HELD THAT:- As rigor of claim being made in a return of income filed by the due date prescribed under the Act is not applicable for claims made u/s 80P of the Act as in the case of the assessee. It is only the mandatory condition prescribed by Section 80A(5) of the Act of the claim to have been made in a return of income to be allowable, which is applicable. At the cost of repetition, may state that what Section 80A(5) only stipulates is that, for the claim to be allowable, it has to be made in the return of income filed by the assessee. It does not specify that the return of income has to be filed u/s 139(1) or 139(4) or 139(5) of the Act. The only condition is that the claim has to be made in a return of income filed which means a valid return of income filed. In the facts of the present case, the assessee has filed return of income, admittedly in response to notice u/s 142(1) of the Act. This is a valid return of income, since in terms of the provisions of Section 142(1) of the Act, the assessee can be directed to file a return of income where he has not otherwise made a return. Therefore, the fact of the matter is that the assessee had made a claim of deduction u/s 80P of the Act in a valid return filed u/s 142(1) of the Act. In terms of provisions of Section 80A(5) of the Act, as interpreted above by us, the assessee s claim having been made in a return of income, it is allowable. The above findings are supported by the decision of the Hon ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Ltd., Kannur [ 2016 (4) TMI 826 - KERALA HIGH COURT ] where in the Hon ble High Court categorically noted that, for the purposes of Section 80A(5) of the Act, even a return filed in response to notice u/s 142(1) of the Act was a valid return and any claim made therein, therefore, was allowable. Assessee has been wrongly denied claim of deduction u/s 80P - Decided against revenue.
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2024 (10) TMI 299
Disallowance u/s 36(1)(va)/43B qua late payment ESIC/PF - HELD THAT:- This issue of addition made on account of belated payment of employees contribution to P. F. and ESIC is now covered by the decision of Checkmate Services P. Ltd. [ 2022 (10) TMI 617 - SUPREME COURT] held the non-obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction. Jurisdiction of CPC while processing the return of income u/s 143(1) for making the disallowance/adjustment on account of belated payment to P. F ESIC - This issue is very much subject matter of the assessment framed u/s 143(3) of the Act and hence, no issue arises qua the jurisdiction of CPC while processing the return of income u/s 143(1) for making such adjustment, when the case of the assessee was taken up for complete scrutiny and the assessment was framed u/s 143(3) read with sections 143(3A) and 143(3B) of the Income-tax Act, 1961. Even otherwise once scrutiny assessment was completed subsequent to processing of return u/s 143(1), the order of CPC merges with the assessment order passed u/s 143(3) and only in case when the assessment order is quashed being invalid or void ab initio, the order of CPC u/s 143(1) would revive and assessee would be at liberty to take the remedial steps under the law. Therefore, we do not find any merit or substance in the ground no. 3. The same is dismissed. Validity of the assessment order on the ground that the AO has not issued a draft order mandatory as per the e-Assessment Scheme, 2019 - Since this is a very serious objection raised by the assessee which ought to have been decided by the Ld. CIT(A), instead of dismissing on the ground of general in nature and not pressed. CIT(A) ought to have decided this issue by considering the fact regarding issuance of draft assessment and procedure as per e-Assessment Scheme, 2019. The assessee is seeking quashing of the assessment order being invalid on the strength of judgement of Chander Arjan Das vs. NFAC and Others [ 2021 (9) TMI 1108 - BOMBAY HIGH COURT ] However, it is pertinent to note that the said decision of Hon'ble Bombay High Court has been set- aside by the Hon'ble Supreme Court in the case of National Faceless Assessment Centre vs. Mantra Industries Limited [ 2023 (5) TMI 498 - SC ORDER ] wherein matter is remitted back to the High Court to consider the same afresh in accordance with law and on merits and the High Court to consider the effect of the omission of section 144B(9) of the Act, which has been omitted w.e.f. 01-4-2021 and the effect of such omission on para 3 of the CBDT Circular dated 13-8-2020 which, as such, prima facie seems to be pari materia to section 144B(9) of the Act - Thus this issue is remanded to the record of the AO to pass a fresh assessment order after following due process in accordance with law. Appeal of the assessee is partly allowed for statistical purposes.
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Benami Property
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2024 (10) TMI 298
Benami transaction - Statements were recorded u/s 132(4) of the Income Tax Act during search, wherein appellant had accepted purchase of the assets which includes the chit funds by Rajesh in his name - Whether the properties and assets in question were acquired through benami transactions? - HELD THAT:- There are catena of judgment of the Hon ble Apex Court to deny reliance on a sworn statement recorded u/s 108 of Custom Act or it may be Section 132(4) of the Income Tax Act for conviction of a person. Those judgments of the Hon ble Apex Court operate on the prosecution case against the accused but would not apply to the proceedings, which does not involve conviction of the person rather is taken up on revenue side. The marked difference between two types of proceedings has to recognized. For conviction of a person there would be necessity to apply the process given under CrPC and even under Evidence Act which is not mandated for the proceedings by the Revenue for attachment or for imposition of penalty. In the light of the aforesaid, we are unable to accept first argument raised by the appellant. Since we have decided the first issue against the appellant and thereby sworn statement u/s 132(4) of Income Tax Act can be relied even in the proceedings under the Act of 1988. The respondents were not under obligation to record separate statement by holding enquiry. In fact, the Initiating Officer had taken up issues while passing the order and appeal before the Adjudicating Authority, all the issues raised by the Appellants were threshold decided. The argument of Appellant is that even the chits in the name of the Appellant were out of the sources disclosed by him while it is a fact that in the statement recorded u/s 132(4) of the Income Tax Act it was admitted that chit fund was operated at the instance of Rajesh of M.R. Traders. The arguments have been raised against the sworn statement of the Appellant and others to prove the case. It is apart from the fact that the appellant failed to produce a document to prove income from poultry or agriculture while the certificate of VEO was submitted. It is said to be based on the enquiry and not in reference to revenue record. VEO is custodian of revenue record and could have certified the agricultural activities on the land, but the certificate issued by him was based on the information and not the revenue record. Thus, the Adjudicating Authority rightly clarified the position aforesaid to hold it to be case of benami transaction. Statement of Rajesh and other were relevant to substantiate the fact that chits were out of benami transaction. The appellant, however, referred to the Bank Account in South Indian Bank to fortify his income and source for putting money in chits. The aforesaid was also analysed and found that it was out of cheque and were from Fortune Wheat Products, which is a business concern of Mr. Rajesh. It is necessary to indicate that other than the certificate and few documents, the appellants failed to produce any material to substantiate his plea of earning of money out of poultry or agriculture. At this stage, it would further be necessary to indicate that the maturity amount out of the chit has also been taken note of by the Adjudicating Authority. No explanation for transfer of the said amount to the firm belonging to Mr. Rajesh has been given. The aforesaid was also taken as clinching evidence to prove a case of benami transaction. It is also a fact that total area of the land is shown to be 0.5160 acres, but nothing has been mentioned about other land of Survey No.325/6 in his certificate. The appellant has shown income out of agriculture land, which was otherwise deposited through cash and source could not be proved. The critical analysis of it has also been made by the Adjudicating Authority and it has not been questioned. No explanation for transfer of the said amount to the firm belonging to Mr. Rajesh has been given. The aforesaid was also taken as clinching evidence to prove a case of benami transaction. It is also a fact that total area of the land is shown to be 0.5160 acres, but nothing has been mentioned about other land of Survey No.325/6 in his certificate. The appellant has shown income out of agriculture land, which was otherwise deposited through cash and source could not be proved. The critical analysis of it has also been made by the Adjudicating Authority and it has not been questioned.
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Customs
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2024 (10) TMI 297
Benefit of S. No. 512 of the N/N. 50/2017-Customs dated 30.06.2017, as amended - parts/components for the manufacture of Lithium Ion Battery - denial of exemption on the ground that the appellant has actually manufactured power bank as different from Lithium Ion Battery from the imported parts and components - extended period of limitation - HELD THAT:- There is no denial about use and utilisation of all the imported parts and components by the appellant for manufacturing its product that too in compliance of the condition no. 9 of the notification, the benefit where under, appellant has claimed. The controversy is about what is being manufactured; the Lithium Ion Battery as claimed by appellants or the powerbank as alleged by the department. The benefit of exemption notification should not be extended to circumvent any good and should also not be elastically stretched to cover such goods which may not come under its periphery - the benefit of exemption to components, parts and accessories to be imported at concessional rate of duty since is based on observance and compliance of IGCR Rules, 2017, therefore the term manufacture appearing in Notification No. 50/2017 dated 30.06.2017 in its entry at S.No. 512 has to be interpreted by taking into consideration the provision of Rule 3 (e) of IGCR Rules, 2017. It is evident that w.e.f. 29.01.2019, lithium-ion cells were taken out of the scope of Serial No. 512 of Notification No. 50/2017-Cus and placed in a separate entry 17B of Notification No. 02/2019 where those were made chargeable to duty at the rate of 5%. Conversely, Lithiym-ion cells were squarely covered within the ambit of Sr. No. 512 prior to 29.01.2019 and were eligible for exemption. Hence, the amendment made vide Notification Nos. 02/2019-Cus and 03/2019Cus both dated 29.01.2019 clearly manifest that before the amendment, subject goods were exempted vide Notification No. 50/2017-Cus. Post the above amendment, the subject goods have been withdrawn from exemption notification and have been placed under the duty rate of 5%. The power bank performs the same function of storing and transfering electrical energy, it being a Lithium Ion Battery that is a combination of Lithium Ion Cells, however, connected to a printed circuit board which is meant for converting the 3.7 volt stored energy to 5 volt energy as is required by the gadget to be charged through the said power bank working on Lithium Ion Battery. It also stands established that it is only the printed circuit board(PCBA) which distinguishes a generic Lithium Ion Battery from power bank. Appellant is admittedly paying Customs Duty on the import of said PCBA - from the raw material imported by the appellant at concessional/ exempted rate of customs Duty in terms of Notification No. 50/2017 dated 30.06.2017 has been utilised by them to manufacture Lithium Ion Battery (Accumulator) which has been captively used by them to manufacture Power Bank . Hence it is held that appellants have rightly claimed the exemption. Invocation of extended period of limitation - HELD THAT:- The appellant since has duly complied with the condition no. 9 of the notification, the appellant is liable for the benefit of exemption of Notification No. 50/2017 dated 30.06.2017. Though in terms of Notification No. 02/2019 dated 29.01.2019 distinguished Lithium ion Battery or Power Bank for the first time and based thereupon the demand of duty not paid by the appellant on the imported raw material/parts and components for the period January 2019 to June 2019 could have been demanded. The impugned show cause notice is held being barred by limitation. Appeal allowed.
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Corporate Laws
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2024 (10) TMI 296
Seeking to restore the name of the company in the Register of Companies maintained by the Registrar of Companies, Mumbai - company had failed to file its Financial Statements and Annual Returns for the Financial Years w.e.f. 31.03.2014 to 31.03.2018, i.e. for five years - HELD THAT:- In the present case, the company was incorporated in the year 2007 and admittedly, they had filed Audited returns/Accounts till 2013 and has an asset of Rs. 3 Crores, as on 20.04.2008 viz. 30,000 Convertible Preference Shares of Rs. 1000/- each as on 20.04.2008 and that the Appellant company would not be able to recover such amount from M/s Victoria Enterprises Limited in case the name of the Appellant company is not restored. The medical history of one of the Directors of the company showing the reason for not filing of the returns and for nil also gone through. operation of the company during the period from 2014 till 2019. Thus no prejudice shall be caused to anyone if the name of the company is restored. The impugned order dated 14.10.2019 passed by the Ld. NCLT in CP No. 1437/2019 is thus set aside and the name of the said company M/s Aster Venture Pvt. Ltd. is restored in the Register of Companies as maintained by Registrar of Companies subject to fulfilment of compliances fulfilled - appeal allowed.
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Insolvency & Bankruptcy
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2024 (10) TMI 295
Approval of the Resolution Plan submitted by Sarda Energy and Minerals Ltd. - material irregularity in the process by the Resolution Professional and CoC - modification in the key commercial terms of the resolution plan by the SRA (allegedly) in the garb of clarification sought by RP from the Resolution Applicants and the perversity and discrimination emanating from the same - HELD THAT:- The present is the case where CoC and RP did not grant any opportunity to Sarda to modify or amend the terms of the Resolution Plan. Hon ble Supreme Court in Ajay Gupta Vs. `Pramod Kumar Sharma [ 2022 (6) TMI 387 - SUPREME COURT ] noticed that the above was a case where question of modification of the Resolution Plan was involved hence liberty was granted to other Resolution Applicant to modify its Plan which Order was maintained. In Paragraph 13 as noted above, observation of the Hon ble Supreme Court is this much is clear that certain key features/stipulations of the Resolution Plan were sought to be amended by the Appellant . Thus, the Judgment of the `Ajay Gupta (Supra) was in the background when Appellant sought to amend the Resolution Plan hence the liberty was granted to other Resolution Applicants also to modify its Plan in Paragraph 10. In the present case by email dated 08.05.2023 sent by the RP clarifications was sought from Sarda. It is also noticed that clarifications were also sought form Torrent, Jindal and Vantage seeking clarification of different Clauses of their respective Resolution Plan, which clarifications were sought after the decision of the CoC taken in the CoC Meeting dated 06.05.2023. The clarification asked for by the RP which is already extracted, in no manner permitted the Sarda or any other Resolution Applicant to modify the Resolution Plan. Only clarifications were sought for and no Resolution Applicant was permitted to modify its Resolution Plan. The submission of the Appellant that under the guise of clarification dated 08.05.2024, the Sarda was permitted to modify its financial proposals which was given on 19.04.2024, is rejected. No sufficient grounds have been made out within meaning of Section 61(3)(ii) of the IBC to interfere with the decision of the Adjudicating Authority approving the Resolution Plan of Sarda, in these Appeals filed by Unsuccessful Resolution Applicant. Appeal dismissed.
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2024 (10) TMI 294
Seeking directions challenging the decision of CoC rejecting the proposal for settlement - Consideration of settlement proposal in Corporate Insolvency Resolution Process (CIRP) - HELD THAT:- Settlement proposal was initially rejected but revised proposal have been submitted and pending which needs to be considered by CoC in accordance with law. It will be open for the CoC to consider the resolution plan as well as the settlement proposal simultaneously - it is not necessary for CoC to either hear the respondent no.1 unless CoC itself decides to call the respondent no.1 for necessary negotiations and deliberations. The revised settlement proposal having been submitted by respondent no.1 there is no occasion to submit any evidence or any further material unless required by the CoC or the IRP. CIRP has neither been stayed by the Supreme Court which is clearly from the order dated 03.05.2024. Application dismissed.
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2024 (10) TMI 293
Legality of attachment orders issued by EPFO prior to the initiation of CIRP - Preferential treatment given to claims of two EPFOs - appellant has sought quashing of impugned order of AA on the grounds that similarly placed provident funds are being treated differentially - HELD THAT:- The claims of all the eight EPFO s are to be treated on par and the entire amount of claim under Section 7A, 7Q and 14B of the EPF Act must be paid to respective PF authority from the funds available in the attached bank accounts of CD. In case the amount available is not sufficient the same shall be met from disposal of other assets of the CD. Balance left after meeting the claims of the EPFO Authorities shall form part of the liquidation estate. The attachment on the bank accounts of the CD by the respondents is hereby removed and the liquidator along with Respondent 3 4 shall ensure payment of PF dues to respective PF authorities. The liquidator goes ahead with the liquidation process of CD thereafter. Appeal disposed off.
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2024 (10) TMI 292
Rejection of prayer of the Petitioners to initiate the CIRP against the Corporate Debtor/ Respondent - financial debt or not - default has occurred as per the provisions of the code or not - HELD THAT:- In the present case, there is no loan agreement between the appellants and the CD. There is no document which provides the tenure of the loan, rate of interest prescribed and frequency of payment of interest i.e. whether monthly, yearly or any other interval. The only document in this regard relied by appellants are the ledger accounts of the appellants maintained by the CD. Regarding payment of interest by the CD to the appellants the only document in this regard is TDS certificates for the financial year 2021-2022 - It is also observed that no interest has ever been demanded by appellants from the respondent before the demand notice under Section 7. The appellant has not submitted any agreement showing that the respondent, or corporate debtor, was obligated to pay interest on the alleged loan. Additionally, the AA correctly determined that, for a debt to qualify as a financial debt, the amount advanced to the corporate debtor must be in consideration of the time value of money, which is clearly absent in this case. It was also rightly concluded that the appellant does not qualify as a financial creditor, since no money was disbursed with consideration for time value. Further, the CD s claim to have paid the entire amount of principal and interest for which TDS has been deducted, has not been disputed by the appellant. Now the dispute is only about recovery of balance amount of claimed interest. As already held this Appellate Tribunal is not a debt recovery forum. The appellant is free to raise such dispute before appropriate forum for recovery of balance claim, if any. There are no grounds to interfere with the order passed by the AA. The appeal is dismissed.
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FEMA
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2024 (10) TMI 291
Contravention of FEMA - unauthorized direct investment outside India - direct investment in an overseas JV which was not engaged in a bona fide business activity - Contravention of the provisions of Section 6(3) (a) of FEMA read with Regulation 6(2)(ii) of the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 - as submitted that in the instant case, the appellants adopted the third accepted mode of investment, namely purchase of existing shares of a foreign entity, although on deferred payment basis HELD THAT:- The appellants have raised several pertinent issues during their arguments that the learned adjudicating authority has not at all considered the third mode of Direct investment outside India as defined under Regulation 2(e) of FEMA 120/2004, namely, investment by way of purchase of existing shares of a foreign entity. Secondly, as submitted on behalf of the appellants that since the above-mentioned mode of investment was a valid mode under the Regulation, no specific permission from the RBI was necessitated as the investment was covered under automatic route. It is contended that neither the host country laws nor even the laws in India prohibit subscription to shares on deferred-payment basis - also submitted that the term bona fide business activity not having been defined either under the FEMA, 1999 or the relevant Regulations framed thereunder, it could not be said that credit facilities amounting to USD 52 million from ICICI Bank UK PLC to RLL Cyprus was not for any bona fide business activity‟, especially in view of the fact that the very purpose of setting up the JV, RLL Cyprus was to explore global opportunities in steel and textile sectors and M/s Welspun Power Steel Ltd. was an established company with a presence in the steel sector both in India and abroad. Thus we find the impugned order does not throw clear light on the above aspects which were relevant to arriving at a reasoned decision as regards contravention, if any, of FEMA, 1999 and the relevant Regulations framed thereunder and the culpability of the appellants herein, thus in the interest of justice the matters deserve to be remanded back for fresh adjudication. Accordingly, the impugned order is hereby set a side, and the matters are remanded back to the learned adjudicating authority for fresh adjudication and passing of a reasoned order.
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Service Tax
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2024 (10) TMI 290
Maintainability of appeal - appropriate forum - Appellant is a juridical person or not - Appellant can be treated as a trust or not - it was held by High Court that 'The CESTAT has recorded in the impugned order that, since the trust is treated as juridical person under SEBI, there is no reason why it should not be treated as a juridical person for taxation.' - HELD THAT:- There are no merit in these Special Leave Petitions. SLP dismissed.
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2024 (10) TMI 289
Nature of activity - service or not - appellant had collected some consideration in lieu of providing certain activities carried out for their customers - income from commissions - demand raised by the department based on the information available in the Income Tax Return - HELD THAT:- The demand in the present case is based on Income Tax Return ITR Which stands on different platform than Form 26AS ITR is appellant s own document self-submitted by the appellant whereas Form 26AS has information about tax deducted/collected and deposited with the government. ITR is the consolidated statement of the assesse about his income, expenses tax payable during a financial year. Hence, the argument that demand is liable to be set aside as it is based on 26AS, is not correct. Otherwise also, The SCN is based not merely on ITR but also on Profit and loss account filed by the Appellant declaring their income and nature of receipt i.e Commission. Based on those documents it is held that there is no ambiguity with respect to the alleged income of appellant as commission which otherwise is not disputed by the appellant. The ITR figures are duly audited and declared by them to the Income Tax department. It is found that during the financial year 2014-15, the Appellant s income from Agriculture has duly been considered and has not been included in the amount of demand confirmed - there are no infirmity in the order under challenge - appeal dismissed.
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Central Excise
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2024 (10) TMI 288
Clandestine removal - Confirmation of duty along with interest and imposition of penalty under section 11AC of the Central Excise Act, 1944 - imposition of personal penalty under Rule 26 - invocation of Extended period of limitation - HELD THAT:- There is no dispute about the authenticity of the records and who had maintained them. The only dispute is regarding how the shortage of WIP is interpreted. The appellant s explanation is that it is due to dust of about 5% generated during the manufactured which it claims to have not accounted for and dumped on the roads because its sale value is low but this loss has already been taken into account in the WIP register and the shortage is after accounting for these losses. Since the raw material were already put through the process of manufacture the logical conclusion would be that the final goods were manufactured but lesser quantity was recorded in the final products register and duty was paid. The remaining quantity was not found in the factory. The shortage is also not of small quantity in the case of OUDH SUGAR MILLS LTD. VERSUS UNION OF INDIA [ 1962 (3) TMI 75 - SUPREME COURT] but in this case, of the 933 MT only 70 MT was found in stock. There are no hesitation in upholding the decision of the impugned order that the appellant had removed the goods found short clandestinely and is liable to pay excise duty under section 11A invoking extended period of limitation along with interest and penalty under section 11AC. Penalty on Shri Tekriwal - HELD THAT:- Rule 26 shows that the pre-requisite for imposing penalty under Rule 26 is confiscation of the goods and the person being concerned in any manner with such goods. In this case, the Commissioner dropped the proposal to confiscate the goods. Therefore, Rule 26 cannot apply. Appeal disposed off.
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2024 (10) TMI 287
Wrongful availment of Cenvat Credit on various input services - C F agents services - Rent of Bangalow - Rent of Office/Godown - Brokerage Charges and Maintenance Repairs of Computers and Air Conditioners - extended period of limitation - Imposition of penalties, including Penalty under Rule 26(1) of the Central Excise Rules, 2002 imposed on Shri R.K. Gupta, appellant no.2. Wrongful availment of Cenvat Credit on various input services - HELD THAT:- It is not in dispute that for the subsequent periods, two show cause notices dated 07.05.2015 and 08.06.2016 for the period 2014-15 and 2015-16 respectively on the basis of same audit objections, were decided by the ld. Commissioner on 27.07.2016 and Cenvat Credit of service tax paid on all the impugned services involved in the present case, was allowed. It is also found that the department has accepted the said order of the ld. Commissioner and has not filed any appeal against the said order, which is evident from the RTI reply provided by CPIO in respect of the status of the said order. Once the department has accepted the order of the ld. Commissioner for the subsequent period, then, in that case, the department cannot take contrary stands in proceedings on the same issue for the same assessee. C F agents services - HELD THAT:- The Commissioner for the subsequent periods, has discussed all the clauses of the Agreement between the appellant and C F agents and has come to the conclusion that the services provided by the C F agents to the appellant are input services used in relation to the manufacture of the finished goods. This issue is decided in favour of the assessee. Rent of Bangalow - HELD THAT:- This has been held as an input service as held in various cases. Rent of Office/Godown - HELD THAT:- This has held to be input service in various decisions as well. Brokerage Charges and Maintenance Repairs of Computers and Air Conditioners - HELD THAT:- These services have also been held to be input services in various decisions. Extended period of limitation - HELD THAT:- The demand is barred by time as the show cause notice was issued on 07.01.2011 for the period December 2005 to August 2010 without establishing the mala fide and suppression of facts on the part of the appellant as the appellant has been regularly filing the returns with full disclosure of the Cenvat Credit amount availed on the input services. Therefore, the invocation of extended period is bad in law as held in the case of GD Goenka Pvt Ltd [ 2023 (8) TMI 995 - CESTAT NEW DELHI ]. Penalty under Rule 26(1) of the Central Excise Rules, 2002 imposed on Shri R.K. Gupta, appellant no.2 - HELD THAT:- The said penalty is not sustainable because the appellant no.2 was not dealing with the excisable goods. The impugned order is not sustainable in law and is liable to be set aside - Appeal allowed.
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