Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 12, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Validity of garnishee notice issued u/s 79 of CGST Act - the respondent no. 4 has frozen the bank account of the petitioners - Alternative remedy of appeal - this writ petition is disposed of with a liberty to the petitioners to move the authority who has issued the garnishee notice and pray for recall of the garnishee notice. It will also be open to the petitioners to approach the appellate authority for expeditious disposal of appeal. - HC
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Validity of summary order passed u/s 73 of GST Act - Personal hearing - Procedure to be followed as prescribed u/s 75 - As there is no disputation or disagreement, in cases of this nature, personal hearing is statutorily imperative qua sub-section (4) of Section 75 of TN-GST Act, both the writ petitions are disposed of with directions. - Matter restored back. - HC
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Anticipatory bail - GST fraud - custodial investigation is required or not - Validity of search (raid) under GST - considering the facts and circumstances, I find that the custodial interrogation of the petitioner is required to find out the modus operandi of the petitioner as well as involvement of other persons. - HC
Income Tax
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Disallowance of administrative expenses - At the end of the assessee, neither before the AO nor before the CIT(A) nor before the ITAT, it has been demonstrated that a particular amount of expenditure were incurred or sufficient for earning that tax free income. The assessee failed to submit details of investment and as to how those details/investments have been taken care of - Additions confirmed - AT
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Reopening of assessment u/s 147 - Unaccounted income - As seized document is a piece of evidence which play a vital role to determine the income of the assessee. But such document cannot give absolute power to the authorities below to work out undisclosed income of the assessee without bringing corroborative evidences. The seized document give the information to the AO to dig out the facts in more detail that too in a particular direction. The seized documents must be supported based on other materials indicating that cash received by the assessee was either available or it was utilized in some other manner. - AT
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Bogus deduction u/s. 35(1)(ii) - party to whom payment made has been made found to be bogus entity - The payee was duly approved when the payment was done. By no stretch of imagination it can be said that the assessee could have done the impossible and known that subsequently the approval will be withdrawn. Accordingly,we set aside the order of authorities below. The assessee is therefore held to be eligible for deduction under section 35(1)(ii) - AT
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Faceless Assessment - Whether it cannot be gainsaid that one day time given qua SCN is too short - The first point urged i.e., a mere one day time qua SCN under the normal circumstances would have certainly been a formidable argument, but not in this case qua writ petitioner as writ petitioner has a) chosen to reply on the very next day i.e., 22.09.2021 and has also not chosen to ask for a personal hearing vide sub-paragraph (c) of Paragraph 3 of SCN. This draws the curtains on the first point. - HC
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Unaccounted income over and above the regular income registered in the books of account - There is no dispute that assessee was engaged for development of project of Victoria Palms, Dumas Road, Surat. The assessee was not having any other source of income. There is no dispute that the assessee is not entitled for set off of losses of earlier year, which have been allowed to the assessee. - income declared in the survey falls under one of the head of income and current year losses be set off against such undisclosed income - AT
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Penalty u/s 271E - violation of the provisions of section 269T - amount of loan was reduced by way of passing the journal entry - Entries were duly reflected by the assessee in accounts of the parties involved in the impugned transaction of loan and purchase of the land. In our considered view, the genuineness of the transactions for the purchase of land cannot be proved without filing the necessary details. - Matter restored back - AT
Customs
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Pre-deposit - Making pre-deposit after rejection of application for Seeking extension of time to make a pre-deposit under Section 129E of the Customs Act, 1962 and remanding the matter to Commissioner (Appeals) - Matter restored before the Revisionary Authority. - HC
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Smuggling (illicit import) or goods of domestic origin - Betel Nuts - Seizure and confiscation of goods - The goods can be used, sold, re-sold etc. without any duty either on the importer or any subsequent buyer of such goods to keep or produce the import documents. Of course, if the goods have been smuggled into India, not through the designated Customs Ports, Airports or Land Customs Station, they will be liable for confiscation, but it must be established that the goods have been so imported - The Department has not proved in this case that the goods were smuggled goods. - Order set aside - AT
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Proper officer - jurisdiction to issue Show Cause Notice (SCN) - Power of Additional Director General, DRI - This power which has been conferred under section 28 of the Customs Act on the proper officer, must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods. Thus, the Additional Director General, DRI did not have the jurisdiction to issue the show cause notice. - AT
Service Tax
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Rejection of application for rectification of an alleged clerical error in SVLDRS 1 - Period of limitation - due to a clerical error the petitioner had left the “pre- deposit” column blank in the declaration and had not filled the amount of pre-deposit in the Declaration Form. - Writ petition dismissed. - HC
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Reversal of Cenvat Credit - When the audit wing had already verified the books of accounts of the Appellant and had sought reversal of Cenvat credit along with interest and penalty which was subsequently paid by the Appellant, then issuance of the instant SCN seeking reversal of Cenvat credit under Rule 6 of CCR 2004 [@6% on the value of trading activity] by invoking extended period of limitation cannot be sustained. - AT
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Refund claims of unutilized cenvat credit - Claim of refund rejected on the ground that the appellant had carried forward the same into its Tran-1 Form of GST. - It is now the case of the appellant that it has reversed the entire credit covering the appeal period in their GST Electronic Credit Ledger filed for March 2021. - Refund to be allowed, subject to verification. - AT
Central Excise
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Levy of penalty - Area based exemption - allegation of incorrect valuation of final products cleared to related parties - Admittedly, when there is no blanket refund in view of the amending Notification dated 27.03.2008, there is no case of complete revenue neutrality and hence, does not advance the case of the appellant assessee to plead for waiver of penalty in the given factual matrix of the case. - AT
Case Laws:
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GST
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2021 (11) TMI 355
Validity of garnishee notice issued u/s 79 of CGST Act - the respondent no. 4 has frozen the bank account of the petitioners - Alternative remedy of appeal - HELD THAT:- Considering the arguments advanced on behalf of the parties and the objection taken by the respondents, this Court is not inclined to entertain the writ petition as the petitioners have already filed an appeal and the petitioners have approached this Court without approaching the appellate authority or even the authority who has issued the impugned garnishee notice. Accordingly, this writ petition is disposed of with a liberty to the petitioners to move the authority who has issued the garnishee notice and pray for recall of the garnishee notice. It will also be open to the petitioners to approach the appellate authority for expeditious disposal of appeal.
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2021 (11) TMI 354
Validity of summary order passed u/s 73 of GST Act - Personal hearing - Procedure to be followed as prescribed u/s 75 - HELD THAT:- there is nothing to demonstrate from the records that personal hearing was either offered or held with regard to the aforementioned impugned orders qua writ petitioner. - As there is no disputation or disagreement, in cases of this nature, personal hearing is statutorily imperative qua sub-section (4) of Section 75 of TN-GST Act, both the writ petitions are disposed of with directions. Matter restored back.
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2021 (11) TMI 353
Anticipatory bail - GST fraud - custodial investigation is required or not - Validity of search (raid) under GST - it is contended that, since the petitioner was not present and his wife and son were present, the raid, which was conducted in the absence of the petitioner, was not in accordance with law. - a Panchnama was prepared on completion of investigation, however, no copy was given either to petitioner's wife or his son. - HELD THAT:- After hearing learned counsel for the parties, without making any comment on the merits of the case, considering the aforesaid facts and circumstances, I find that the custodial interrogation of the petitioner is required to find out the modus operandi of the petitioner as well as involvement of other persons. Accordingly, both the present petitions are dismissed.
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2021 (11) TMI 336
Levy of GST - grant of mining lease/royalty - HELD THAT:- Until further orders, payment of GST for grant of mining lease/royalty by the petitioner shall remain stayed.
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Income Tax
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2021 (11) TMI 362
Computation of deduction u/s 10AA - telecommunication charges - exclusion of amounts both from the export turnover and the total turnover - HELD THAT:- As decided in own case [ 2021 (10) TMI 1248 - ITAT PUNE] exclusion of telecommunication charges etc. both from the export turnover and total turnover in the computation of deduction u/s 10AA of the Act. The impugned order is, therefore, upheld and consequently the grounds raised by both the assessee as well as the Revenue are dismissed. Exclusion of providing technical services abroad from the export as well as total turnover in the computation of deduction u/s 10AA. Not granting deduction u/s 10AA of the Act on onsite/deputation of technical manpower (DTM) software services - HELD THAT:- Tribunal had an occasion to decide similar issue for the immediately preceding assessment year in favour of the assessee by directing that profit on onsite / DTM services should be considered as part of turnover for the purposes of granting the deduction. Respectfully following the precedent, we overturn the impugned order on this score and direct to include such amount in the profit for the purpose of deduction u/s 10AA. Allocation of common expenses (including interest on loan ) to the eligible undertakings for the purpose of computing deduction under section 10AA - HELD THAT:- AR could not point out that the amount of corporate expenses and the amount of interest cost was allocated to the eligible Hyderabad SEZ and Chennai SEZ units. Since these costs were incurred for and pertained to all the units of assessee including the SEZ units, it was necessary to consider them in computing the profit from the two SEZ units for the purpose of deduction u/s 10AA of the Act. It is found that the AO made allocation to these two SEZ units on the basis of turnover key, which was, in fact, computed by the assessee itself. Thus, on a totality, the amount of corporate expenses and interest cost allocated by the AO to the Hyderabad SEZ and Chennai SEZ is nothing but the amounts suo motu calculated by the assessee which were earlier not included in the cost base for computing profit from them. We, therefore, uphold the same. This ground is not allowed. Foreign exchange fluctuation gain on account of overseas branches which was taken by the assessee directly to the Reserve account - AO considered this amount as part of total income - HELD THAT:- It is seen that similar issue came to be decided by the Tribunal in the assessee s own case for the A.Y. 2011-12. The Tribunal, following its earlier order, held that the amount of foreign exchange fluctuation gain relatable to the revenue field should be considered as includible in the total income and the part relatable to the capital field should be excluded. This view has been taken on the basis of similar view taken for the earlier years. As the ld. CIT(A) s decision matches with the view approved by the Tribunal for the earlier years, respectfully following the precedent, we uphold the same. The ground taken by the assessee is therefore, dismissed. Set off of brought forward losses and unabsorbed depreciation of erstwhile subsidiary - HELD THAT:- CIT(A) restored the matter to the file of the AO giving directions through para 24 that the assessee s claim of set off of brought forward losses be verified and unabsorbed depreciation should be allowed as per law. Since the ld. CIT(A) has already issued necessary directions in this regard, the ground taken by the assessee becomes infructuous and is hence dismissed. Disallowance u/s 40(a)(ia) on account of short deduction of tax at source - assessee suo motu disallowed, inter-alia u/s 40(a)(ia) at the time of filing the return on the ground of short deduction of tax at source from the payments made to Unique Tourism Private Limited - HELD THAT:- The claim of assessee is that it deducted tax at source @ 0.70% from ₹ 46,36,714 paid to Unique Tourism Pvt. Ltd. and made suo motu disallowance u/s 40(a)(ia) of the Act on the wrong interpretation that tax should have been deducted at source at 2%. It was later on realized that Unique Tourism Pvt. Ltd. was issued certificate u/s 197 of the Act requiring the deduction of tax at source @ 0.70%. Under such circumstances, we are of the considered opinion that it would be in the fitness of things, if the AO is directed to examine and verify the assessee s facts in this regard and then decide as per law. We order accordingly. If the amount of deduction of tax at source from the payment is found to be made at the correct rate for which necessary certificate was issued by the Department u/s 197 to Unique Tourism Pvt. Ltd., then suo motu disallowance made by the assessee u/s 40(a)(ia) of the Act should be deleted. Needless to say, the assessee will be accorded a reasonable opportunity of hearing. Education cess on income-tax and Secondary and Higher Education cess on Income-tax paid during the year ought to be allowed as deduction while computing the taxable income for the year - HELD THAT:- Similar issue came up for consideration before the Hon ble Bombay High Court in the case of Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] in which it has been held that Education cess and Higher secondary education cess are not allowable as deduction in the year of payment and hence, the deduction is not linked with actual payment. Similar issue has been considered and decided by the Tribunal in the assessee s own case for the A.Y. 2011-12. Respectfully following the precedent, we set aside the impugned order and remit the matter to the file of the AO for making requisite verification in this regard and thereafter allow necessary deduction. Disallowance made u/s 14A read with 8D - HELD THAT:- Similar course of action was taken by the ld. CIT(A) in his order for the preceding year. When the matter came up for consideration, the Tribunal held that the AO recorded proper satisfaction. The ld. AR fairly admitted that the AO recorded satisfaction in the assessment order for the year under consideration in the same manner as was done for the preceding year. Following the same view, we vacate the order of the ld. CIT(A) on the issue of improper recording of satisfaction by the AO. This ground is allowed. Disallowance u/s 14A of the Act in the computation of income u/s 115JB - HELD THAT:- We find that the Special Bench of Tribunal in ACIT vs. Vireet Investment (P) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] has held that no disallowance u/s 14A can be made while computing book profit u/s 115JB. In reaching this conclusion, the Special Bench relied on Pr.CIT Anr. Vs. Bhushan Steels Ltd. Anr [ 2015 (9) TMI 1424 - DELHI HIGH COURT] . In view of the above legal position, we countenance the opinion of ld. CIT(A) on this score. This ground is not allowed. Depreciation on goodwill even though the same was acquired in the F.Y. 2003-04 and the assessee did not make any similar claim in earlier years - HELD THAT:- This issue came up for consideration before the Tribunal in the assessee s own case for the A.Y. 2011-12. Although in the preceding year, the ld. CIT(A) decided the issue against the assessee, but for the year under consideration a reverse view has been taken. As can be seen, the Tribunal discussed this issue on page 12 onwards of its order for the preceding year and eventually, accepted the grant of depreciation subject to certain verifications by the AO. Since the facts and circumstances for the instant year are mutatis mutandis similar, respectfully following the precedent, we direct the AO to decide this issue by following the decision of Tribunal for the aforesaid earlier year.
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2021 (11) TMI 361
Addition on profits of the project 'Ellora Castle' - the said project has been completed on 26.10.2010 i.e during the F.Y.2010-H relevant to A.Y.2011-12 and during the year under consideration, the assessee has not declared any profit on one unit sold for total consideration - CIT-A deleted the addition - HELD THAT:- AO cannot take up an arbitrary figure of undisclosed profit. Moreover, as rightly pointed out by Ld.CIT(A), AO is not mentioning as to under what method of project accounting he is computing the profit. Moreover when Ld.CIT(A) is giving a finding that AO has accepted the actual profit in respect of the project in AY 2013-14, there is no reason to make a further addition without any cogent basis for the year. Hence uphold the order of Ld.CIT(A) Addition u/s. 41(1) - CIT-A deleted the addition - HELD THAT:- AO has invoked the provision of section 41(1) without bringing on record any cogent material. For how long the account is outstanding and on what basis of his enquiry, AO has come to the conclusion that these accounts are not payable. Devoid of these details, the assessment is simply based upon conjecture surmise not sustainable in law. Hence, we do not find any infirmity with the order of Ld.CIT(A). Estimation of income - bogus purchases - CIT(A) directing the A.O, to restrict the addition of bogus purchases to 12.5% as against 100% addition made by the AO - HELD THAT:- Sales have not been doubted it is settled law that when sales are not doubted, 100% disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from Hon ble jurisdictional High Court decision in the case of Nikunj Eximp Enterprises [ 2014 (7) TMI 559 - BOMBAY HIGH COURT] In this case, the Hon ble High Court has upheld 100% disallowance for the purchases said to be bogus, when sales are not doubted. However, the facts of the present case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation, in our considered opinion on the facts and circumstances of the case the 12.5% disallowance out of the bogus purchases done by the Ld.CIT(A) meets the end of justice. Accordingly, we uphold the order of Ld.CIT(A). Assessee appeal allowed.
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2021 (11) TMI 360
Addition u/s 14A - computation of expenditure required to be disallowed for earning tax free income - HELD THAT:- Case of the assessee was that it has earned exempt income without incurring any expenditure, as the assessee has sufficient interest free funds available with it for making investment, and some of these investments are in the nature of strategic for the purpose of the business. CIT(A) in the impugned order has recorded a finding that investment in shares of ₹ 38.9 crores against which the assessee has share capital of ₹ 24.5 cores and reserves and surplus of ₹ 262.6 crores, and therefore, the assessee has sufficient interest free funds available with for making this much investment. Undisputedly, before us, the ld.DR could not show that the amount of investment made by the assessee in those investments, which earned tax-free income, is higher than the amount of share capital and free reserve available with the assessee, nor could show that borrowed funds were utilised so as to invoke the provisions of section 14A of the Act, therefore, we do not find any infirmity in the order of the ld.CIT(A) in deleting the disallowance on account on interest expenditure. Disallowance of administrative expenses - At the end of the assessee, neither before the AO nor before the CIT(A) nor before the ITAT, it has been demonstrated that a particular amount of expenditure were incurred or sufficient for earning that tax free income. The assessee failed to submit details of investment and as to how those details/investments have been taken care of; whether any employees are devoted towards keeping track of the investment or not. Investment of this much size, does require constant monitoring. It is quite impossible that a tax free income of ₹ 1,42,19,234/- generated to the assessee without incurrence of any energy from the work force. Therefore, we find that in the compelling circumstances, the ld.CIT(A) has taken a shelter by invoking Rule 8D of the Income Tax Rules. Assessee has relied upon the order of the Tribunal in earlier years, wherein according to it, under similar circumstances, disallowances have been deleted. It is pertinent to observe that in the written submissions, no parity of circumstances has been highlighted. The magnitude of exempt income, cost of employees in terms of tracking quantum of investment etc. have not been filed, nor is discernible from order of the Coordinate Bench cited by the assessee. In this view of the matter, we do not find any infirmity in the order of the ld.CIT(A) on this issue, which is upheld, and this ground of assessee is rejected. Confirmation of addition on account of deemed house property income - HELD THAT:- We find that the assessee has not filed evidence to prove its claim that the impugned flats were utilized for the purpose of business as guest house. The Revenue authorities have considered two flats out of four to be used for the business purpose, and in respect of remaining two flats notional income was calculated at the rate of ₹ 90,000/- per flat, and thus made addition of ₹ 1,80,000/- under the head income from house property . Before us also, there is no material putforth by the assessee to substantiate its claim. Similar claim of the assessee for the preceding two assessment years i.e. 2011-12 and 2012-13 was rejected upto the Tribunal by holding that there was any material produced by the assessee demonstrating that properties were utilized for the purpose as guest; so was the situation before us also. This being so, in the year under our consideration, we do not find any infirmity in order of the ld.CIT(A) confirming the addition made by the AO in respect of deemed rental income. Thus, order of the ld.CIT(A) on this issue confirmed. Deduction claimed under section 80IA - HELD THAT:- Assessee has claimed the impugned deduction from the assessment year 2009-10, and upto 2014-15 and such claim was allowed either at the end of the first appellate authority or at the end of the Tribunal. The submissions of the assessee were not disputed by the ld.DR, however, the Revenue is constantly challenging this issue year after year, despite clear cut stand taken by the Tribunal in favour of the assessee in this behalf. Admittedly, there is no change in the facts and circumstances, and therefore it is not appropriate for us to revisit eligibility of claim more so when, for the aforesaid reasons. Assessee has placed on record copies of orders of the Tribunal passed in favour of the assessee in the earlier years. Accordingly, we reject this ground of the Revenue. Disallowance made u/s.14A restricting calculation of book profit under section 115JB - HELD THAT:- We find that the issue is covered in favour of the assessee by the decision of Special Bench in the case of ACIT Vs. Vireet Investments P.Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] wherein it is held that no increase or decrease can be effected in the book profit calculated under section 115JB on account of certain disallowance made under section 14A.
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2021 (11) TMI 359
Reopening of assessment u/s 147 - Unaccounted income - Onus to prove - Addition based on seized loose papers - assessee obligation to explain the entries found in the seized documents - HELD THAT:- The assessee by furnishing the documentary evidence can rebut the presumption specified under section 292C We find that the assessee has furnished the necessary details such as ledgers, confirmation from the clients stating that the cash received from these parties were for certain expenses to be incurred on behalf of the clients - amount of fees received by the assessee in the form of cheque was only the income of the assessee. Now, the onus shifted upon the AO disprove the contention of the assessee. For this purpose, the AO has been given enough power under the provisions of law especially under section 133(6)/131(1) of the Act. But we find that no such power was exercised by the authorities below. We find in the case of CIT vs. Paeveen Juneja [ 2017 (7) TMI 1172 - DELHI HIGH COURT] . As seized document is a piece of evidence which play a vital role to determine the income of the assessee. But such document cannot give absolute power to the authorities below to work out undisclosed income of the assessee without bringing corroborative evidences. The seized document give the information to the AO to dig out the facts in more detail that too in a particular direction. The seized documents must be supported based on other materials indicating that cash received by the assessee was either available or it was utilized in some other manner. Thus, based on piece of lose paper, nothing adverse can be drawn against the assessee without verifying or bringing other corroborative evidences to support the case of the revenue. We are not inclined to confirm the order of the authorities below. Hence, we set aside the order of the learned CIT (A) and direct the AO to delete the addition made by him. - Decided in favour of assessee.
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2021 (11) TMI 358
Estimation of income of contract receipts - CIT-A estimating the profit @ 8% of the turnover - HELD THAT:- The project was undertaken, therefore, ld. CIT(A) is justified in holding that the Assessing Officer was to estimate a reasonable net profit on same as when the assessee had undertaken the project, the expenditure on same must have been incurred. Thus, if the entire amount is disallowed, it would result in a profit rate of 21.52%, which would be unjustified. Therefore, for tax purposes, as equitable considerations cannot override the provisions of Act, the ld. CIT(A) made a proper estimation of income on the ground that the actual document found during the course of search suggests that the assessee is a civil contractor for health department and the only thing objected by the AO was claim of higher expenses but the AO went on making addition largely on the basis of assumption and to some extent on the basis of deliberation of facts, gathered. CIT(A) was correct in observing that the assessee as well as AO were not justified in so far as the assessee offered income only at ₹ 29,26,994/- from the total contract receipt of ₹ 7,36,97,747/which is only 4% net profit and on the other hand, the Assessing Officer estimated a much higher net income from contract at ₹ 2,44,33,621/- which comes to an unreasonable net profit from contract. Considering both of the net profits as unjustified and incorrect, the ld. CIT(A) rightly estimated the net profit of the assessee at 8% of the contract receipt
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2021 (11) TMI 357
Income from other sources - treating the amount of share premium as income under the provisions of section 56(2)(viib) - assessee alternatively also contended that the provision of section 56(2)(viib) was brought in the Act with the specific objective as a measure to prevent generation and circulation of unaccounted money, however in its case all the shares were issued to the family members of group i.e. Parekh family and all of them are regularly assessed under the provision of the Act. Thus the question of generation and circulation of unaccounted money does not arises - whether the AO can disturb the valuation of shares determined by the qualified chartered accountant? - HELD THAT:- There are series of judgments which says that the valuation of shares is being a technical subject, the AO cannot reject the same. In holding so we draw support and guidance from the judgment in case of Vodafone M-Pesa Ltd [ 2018 (3) TMI 530 - BOMBAY HIGH COURT] . We find that it was the duty of the assessee to furnish the necessary details based on which the fair market value of the shares was prepared. But in the case before us we find that the assessee has not filed the project report based on which the valuation of shares was determined by the qualified chartered accountant. However, the same has been filed before us with the prayer to restore the issue to the file of the AO for fresh adjudication. To our mind, it is necessary for the authorities below to consider the impugned project report for determining the market value of the shares so that the amount of premium could be justified. We also note that the alternate contention raised by the assessee for determining the fair value of shares on the basis of the method as provided under clause (a)(ii) of explanation (a) to section 56(2)(viib) of the Act subject to the satisfaction of the AO, is a legal contention - we admit the same and restore the issue to the file of the AO for making the denovo assessment - Ground of appeal of the assessee is allowed for the statistical purposes.
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2021 (11) TMI 356
Bogus deduction u/s. 35(1)(ii) - party to whom payment made has been made found to be bogus entity - HELD THAT:- CIT(A) is passing a peculiar order, when he says that the party to whom payment has been made has been made found to be bogus entity, at the same time learned CIT(A) says that since assessee has not produced the party or obtained a confirmation, it cannot be said that the payment is made to the said party. It is further strange that the assessee's plea of cross examination opportunity the said party is being rejected by counter observation that the same party has not been produced by the assessee As decided in SOPARIWALA EXPORTS PVT. LTD. VERSUS DCIT, CC-8 (1) , MUMBAI [ 2021 (7) TMI 442 - ITAT MUMBAI] where any sum is paid to such association, university, college or other institution in a previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, the deduction under this clause shall be equal to the sum so paid. Hence the payee was duly approved when the payment was done. By no stretch of imagination it can be said that the assessee could have done the impossible and known that subsequently the approval will be withdrawn. Accordingly,we set aside the order of authorities below. The assessee is therefore held to be eligible for deduction under section 35(1)(ii) - Decided in favour of assessee.
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2021 (11) TMI 352
Faceless Assessment - Whether it cannot be gainsaid that one day time given qua SCN is too short as the writ petitioner has chosen to reply the very next day i.e., 22.09.2021 and it has also not chosen to ask for a personal hearing, though there is an option to ask for personal hearing vide sub-paragraph (c) of Paragraph 3 of SCN? - HELD THAT:- The first point urged i.e., a mere one day time qua SCN under the normal circumstances would have certainly been a formidable argument, but not in this case qua writ petitioner as writ petitioner has a) chosen to reply on the very next day i.e., 22.09.2021 and has also not chosen to ask for a personal hearing vide sub-paragraph (c) of Paragraph 3 of SCN. This draws the curtains on the first point. Availability of alternate remedy available to the writ petitioner vide a statutory appeal under Section 246A - A perusal of adumbration of the exceptions read in the context of narrative, discussion and dispositive reasoning supra brings to light that none of the exceptions set out by Hon'ble Supreme Court qua Commercial Steel case [ 2021 (9) TMI 480 - SUPREME COURT] law is attracted in the case on hand. The sequitur to the discussion and dispositive reasoning thus far is, this is a fit case to relegate the writ petitioner to alternate remedy of statutory appeal inter alia under Section 246 A of IT Act subject of course to pre-deposit condition, if any and limitation. If the writ petitioner chooses to take the alternate remedy rule and file a statutory appeal, the Appellate Authority shall consider all the arguments/ grounds of appeal of the writ petitioner (including those raised in the instant writ petition) uninfluenced / untrammelled by observations made in this writ petition order. In other words, the appeal shall be considered and decided on its own merits and in accordance with law untrammelled by this order. The campaign of the writ petitioner against the impugned order comes to a conclusion, it fails and the sequitur is captioned main writ petition is dismissed albeit preserving the rights of the writ petitioner to prefer a statutory appeal, if so advised and if so desired. Consequently, the aforementioned WMPs also are dismissed
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2021 (11) TMI 351
Deduction u/s 80IB[10] - denying the deduction u/s 80IB[10] on the ground that the assessee had withdrawn the claim of deduction under Section 80IB[10] vide its letter dated 29.12.2008 - HELD THAT:- Denial of the claim on hyper technicalities would cause injustice to the assessee. Further, the submission of the learned senior counsel that the scrutiny assessment order made under Section 143[3] relating to the same project for the assessment year 2007-08, where deduction under Section 80IB[10] of the Act has been extended by the Assessing Officer and the same has been reached finality also merits consideration - we are of the considered view that the entire exercise made by the Authorities in denying the deduction under Section 80IB[10] is based on the revision return said to have been filed by the assessee withdrawing the claim of deduction under 80IB but the document now placed before the Court said to be the revised return dated 24.12.2008, would indicate that the deductions under Chapter VI-A [Schedule 10] were claimed by the assessee. The proceedings of the Authorities and the Tribunal warrants interference so as to ascertain the genuineness of this return said to have been filed by the assessee, in the light of Section 80AC of the Act. Hence, without expressing any opinion on the substantial questions of law raised by the assessee, we deem it appropriate to restore the matter to the file of the Assessing Officer to re-examine the matter on the deduction claimed by the assessee under Section 80IB[10] with respect to return dated 24.12.2008 vis- -vis Section 80AC of the Act and the settled legal principles holding the field on the subject matter of Section 80IB[10] of the Act.
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2021 (11) TMI 350
Income declared in the survey Proceedings - Unaccounted income over and above the regular income registered in the books of account - survey proceedings - assessee has not offered the unaccounted income, admitted during the course of survey action while filing return of income - assessee claimed expenses on the income offered during the survey and as shown loss income comparative to admitted income - HELD THAT:- CIT(A) noted that assessee claimed that there no expenses is claimed against the undisclosed income. And that expenses incurred and claimed in the audited statement were actually incurred against the turnover and would have been incurred even without income admitted in survey. CIT(A) recorded that it was the contention of the assessee that expenses can only be disallowed after giving categorical finding on the basis of evidence that expenses are not allowable. CIT(A) recorded that Assessing Officer has not given any finding on allowability or otherwise of expenses and that there is no finding of Assessing Officer that expenses are bogus and non-genuine. CIT(A) examined the comparative chart of expenses for three earlier years as well as and post survey period and on perusal of such details held that it is not a case that inflation of expenses or excessive booking of expenses in post survey period or no case of booking of extra ordinary expenses comparative to earlier years. CIT(A) held that ad-hock proportionate disallowance is not permissible and directed the assessing officer to delete the disallowance made by assessing officer. There is no dispute that assessee was engaged for development of project of Victoria Palms, Dumas Road, Surat. The assessee was not having any other source of income. There is no dispute that the assessee is not entitled for set off of losses of earlier year, which have been allowed to the assessee. As in case Shilpa Dyeing Printing Mills (P) Ltd [ 2015 (7) TMI 691 - GUJARAT HIGH COURT ] also held that income declared in the survey falls under one of the head of income and current year losses be set off against such undisclosed income - Grounds of appeal raised by the revenue are dismissed.
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2021 (11) TMI 349
TP adjustment - TPO to arrive at Arm's length price as Nil - assessee submitted that they were unable to attend proceedings before the TPO and file necessary submissions with documentary evidences in support of the case on merits as was called for - HELD THAT:- It is correct that the assessee has not complied with the directions of the Revenue Authorities and has not filed necessary documentations but also it is correct that the Revenue Authorities on their own has not made necessary efforts to arrive at the correct conclusion in respect of the Arm's length price of the transaction related to purchase of raw materials. DR has not disputed that the Ld. DRP considered only one submission of the assessee and other one was ignored though it was on record, the assessee had filed both the submissions through e-mails. Even in a case of best judgment assessment u/s. 144 of the Act, in a case where the assessee does not appear or does not provide proper evidences before the Assessing Officer, the Assessing Officer provides reasons and completes the assessment u/s. 144 of the Act. In this case, while arriving at Arm's length price as Nil, the Assessing Officer has not given any specific findings. Furthermore, the Ld. DRP has come out with the same findings upholding the order of the Assessing Officer/TPO. Sub-ordinate Authorities in their respective orders, have given no findings as regards the merits of the case and one of the reason for this that the assessee has not furnished necessary documentary evidences before the Revenue Authorities. Before us, the assessee has prayed for one final opportunity to represent his case on merits. In the interest of justice, one final opportunity should be provided to the assessee. The assessee is specifically directed to provide necessary details/evidences/documentation before the TPO as and when called for to represent his case on merits. Accordingly, we set aside the directions of the Ld. DRP and remand the matter to the file of the Assessing Officer/TPO for re-adjudication - Appeal of the assessee is allowed for statistical purposes.
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2021 (11) TMI 348
Delayed employee's contribution to provident fund - Whether same has been paid before filing of the return? - HELD THAT:- This issue is squarely covered by the decision of M/s. Vijay Shree Limited [ 2011 (4) TMI 63 - ITAT KOLKATA] which has been further followed in the case of Harendra Nath Biswas [ 2021 (7) TMI 942 - ITAT KOLKATA] wherein as held since assessee had deposited the employees contribution before filing of Return of Income - Decided in favour of assessee.
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2021 (11) TMI 347
Exemption claimed u/s 54 denied - assessee has not filed any documentary evidence establishing the fact that he has purchased any property within the time prescribed under the provisions of section 54F of the Act except the agreement for purchase of the property - whether the assessee has purchased the property within a period of 2 years from the date of transfer? - HELD THAT:- As perused the bank statement of the assessee name of the builder was appearing showing the payment of ₹ 50,51,000/- within the financial year under consideration. Moving further, the flat was handed over to the assessee after the expiry of 2 years which contravenes the provisions of section 54 of the Act. However we find that the Mumbai tribunal in the case of Kishore H. Galaiya [ 2012 (9) TMI 40 - ITAT, MUMBAI] has held that once the assessee booked flat with builder and started making payment of instalment - builder was to handover the possession of the flat to assessee on completion of construction. Then such act of the assessee is to be considered as construction of new residential house not the purchase of property. Accordingly the time limit will extend to 3 years from the date of transfer of property to complete the construction. We hold that the assessee cannot be denied the benefit of exemption available to him under the provisions of section 54/54F of the Act on account of the delay on the part of the builder. Whether the assessee has deposited a sum of ₹ 14 lakhs in the capital gain account scheme? - AR, at the time of hearing has not brought anything on record establishing the fact that the impugned amount represents the money deposited under the capital gain account scheme. However, the revenue has also not conducted any enquiry to disprove the contention of the assessee based on the cogent materials. Nevertheless, in the interest of justice and fair play we are inclined to remit this issue to the file of the AO to verify whether the impugned amount represents the deposits made under the capital gain account scheme or not. Assessee was the co-owner in the property along with his brother. The claim of the assessee s brother by the same AO was accepted and the deduction/exemption was allowed for the investment made by the co-owner with M/s Sharnam builders for the purchase of the property. In such a situation, we are of the view that the AO was to maintain the consistency. AO cannot reject the claim of the assessee whereas in the case of the brother of the assessee in the identical facts and circumstances, the same was accepted. Accordingly on this count, we are not convinced with the finding of the authorities below. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made- Appeal of the assessee is partly allowed for the statistical purposes.
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2021 (11) TMI 346
Penalty u/s 271E - violation of the provisions of section 269T - amount of loan was reduced by way of passing the journal entry - immunity under provisions of section 273B - HELD THAT:- As there appears no dispute with respect to the accounting entries made by the assessee in the accounts which has reduced the loan liability by ₹25 lakhs stood in the name of Shri Milap Jadeja. However, we find that the genuineness of the transaction was not accepted by the learned CIT (A) - CIT (A) held that there was no documentary evidence filed by the assessee justifying that the assessee has purchased any piece of land. On the strength of the principles laid down in the case of CIT vs. Bombay Conductors Electricals Ltd [ 2008 (2) TMI 114 - GUJARAT HIGH COURT] the assessee cannot be given the immunity from the penalty provisions as specified under provisions of section 271E of the Act. It is for the reason that the genuineness of the transaction has not been proved by the assessee by filing the necessary details in establishing the fact that the adjustment entry was made by the assessee for the purchase of the land. In the absence of, the necessary details we are not able to persuade ourselves with the contention of the learned AR for the assessee. Entries were duly reflected by the assessee in accounts of the parties involved in the impugned transaction of loan and purchase of the land. In our considered view, the genuineness of the transactions for the purchase of land cannot be proved without filing the necessary details. However, in the interest of justice and fair play, we are inclined to give one more opportunity to the assessee to prove the genuineness of the transaction. If it is proved, there will not be any penalty under the provisions of section 271E of the Act. Accordingly, we are setting aside the issue on hand the file of the AO for fresh adjudication as per the provisions of law. Hence the ground of appeal of the assessee is allowed for the statistical purposes.
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Customs
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2021 (11) TMI 345
Pre-deposit - Making pre-deposit after rejection of application for Seeking extension of time to make a pre-deposit under Section 129E of the Customs Act, 1962 and remanding the matter to Commissioner (Appeals) - HELD THAT:- Since the mandatory pre-deposit has been made by the Petitioners, under the provision of Section 129E of the Customs Act, we hereby quash the impugned order dated 21.01.2021 (Annexure A to the memo of the petition) as well as order dated 16.02.2018 passed by Respondent No.2 (Annexure C herein). We also remand the matter back to Respondent No.2 for hearing the appeal on merits. Matter restored before the Revisionary Authority.
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2021 (11) TMI 344
Seeking stay of Look Out Circular (LOC) - it contended that the Respondent is fully aware not only of the whereabouts of the Petitioner but also of the address of the factory premises. Respondent is also aware of the residential address of the Petitioner at Delhi, from the date of initiation of investigation, as the Show Cause Notice has been issued mentioning the residential address in para 2 thereof. HELD THAT:- Perusal of the prayer clause in the writ petition reveals that the Petitioner has not laid a challenge to the Show Cause Notice or the Supplementary Show Cause Notices and has only assailed the LOC. Contents of the Show Cause Notice dated 29.11.2019 do indicate that Respondent is aware of the residential as well as official addresses of the Petitioner, both in India and abroad, as the same have been clearly referred to in the Show Cause Notice. Petitioner has categorically averred that no summons have been received by him from any Competent Court and there is no denial by the Respondent to the said averment. Mr. Gulati is also right in pointing out that there is no allegation against the Petitioner that he has not been co-operating in the investigation, as and when required. The LOC was issued on 08.07.2019. Applying para 8(i) of the O.M. dated 27.10.2010, clearly period of one year has expired long back and therefore by a deeming fiction, the name of the Petitioner is automatically removed from the LOC, unless it was renewed, which is not the pleaded case of the Respondent. We also cannot help but note that the Show Cause Notice was issued on 29.11.2019, followed by Supplementary Notices on 20.04.2020 and 18.09.2020, respectively, but till date the adjudication process is incomplete. Additionally, the Petitioner has categorically averred in the writ petition that the Petitioner suffers from several medical ailments and has annexed medical certificates as Annexure 5 (colly). For each of the aforesaid reasons, in our view, Petitioner has made out a prima facie case for grant of interim relief. In these circumstances, we hereby stay the operation, execution and implementation of the LOC issued against the Petitioner, till the next date of hearing. Directions issued. - to be listed on 24.12.2021
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2021 (11) TMI 343
Smuggling (illicit import) or goods of domestic origin - Betel Nuts - Seizure and confiscation of goods - Levy of penalty - The ground for seizure and subsequent confiscation is that the owners/occupants were not able to prove the licit import of Betel Nuts which DRI suspected to be of foreign origin. The GST Invoice, E-Way Bills etc. produced by the Appellant were found to be not satisfactory. HELD THAT:- Even if the goods are of foreign origin, if they have been imported and cleared for home consumption, they cease to be imported goods thereafter and the importer ceases to be the importer. Therefore, no duty can be assessed on such goods under Section 17 of the Customs Act, 1962. There is also no responsibility on the importer or to any other person from whom the goods are seized to keep or produce the import documents to establish their legal import once they have been cleared for home consumption. The goods can be used, sold, re-sold etc. without any duty either on the importer or any subsequent buyer of such goods to keep or produce the import documents. Of course, if the goods have been smuggled into India, not through the designated Customs Ports, Airports or Land Customs Station, they will be liable for confiscation, but it must be established that the goods have been so imported. In this case, the goods were clearly seized within India. The burden to prove shifts to the importer or the owner of the goods only when such goods are notified under Section 123 and Betel Nuts were not notified. The Department has not proved in this case that the goods were smuggled goods. - The impugned order is set aside and the Appeals are allowed with consequential relief to the Appellants, if any.
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2021 (11) TMI 342
Proper officer - jurisdiction to issue Show Cause Notice (SCN) - Power of Additional Director General, DRI - HELD THAT:- This precise issue was examined by the Supreme Court in Canon India. The Supreme Court observed that the nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import is a power that has been conferred to review the earlier decision for assessment. This power which has been conferred under section 28 of the Customs Act on the proper officer, must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods. Thus, the Additional Director General, DRI did not have the jurisdiction to issue the show cause notice. It would thus be seen that the Supreme Court in Canon India 2021 (3) TMI 384 - SUPREME COURT] held that the entire proceedings initiated by the Additional Director General, DRI by issuance of a show cause notice was without any authority of law and was, therefore, liable to be set aside. The aforesaid decision of the Supreme Court in Canon India was subsequently followed by the Supreme Court in Agarwal Metals and Alloys [ 2021 (9) TMI 316 - SUPREME COURT] . The show cause notice dated 30.01.2009 issued by the Additional Director General, DRI is, therefore, without jurisdiction as the said officer was not the proper officer and, therefore all proceedings undertaken by the Department on this show cause notice is, therefore, without jurisdiction. - The order passed by the Commissioner of Customs (Adjudication), therefore, cannot be sustained. Confiscation of the goods under section 111 and imposition of penalty under section 112 of the Customs Act - HELD THAT:- In Bakeman s Home Products [ 1997 (6) TMI 178 - CEGAT, NEW DELHI] , the Tribunal held that the proposal for confiscation and penalty cannot be segregated from duty demand and, therefore, the proceedings for confiscation and imposition of penalty cannot be sustained. Order set aside - Decided against the Revenue.
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2021 (11) TMI 341
Proper officer - jurisdiction to issue Show Cause Notice (SCN) - Power of Additional Director General, DRI - HELD THAT:- This precise issue was examined by the Supreme Court in Canon India. The Supreme Court observed that the nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import is a power that has been conferred to review the earlier decision for assessment. This power which has been conferred under section 28 of the Customs Act on the proper officer, must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods. Thus, the Additional Director General, DRI did not have the jurisdiction to issue the show cause notice. It would thus be seen that the Supreme Court in Canon India 2021 (3) TMI 384 - SUPREME COURT] held that the entire proceedings initiated by the Additional Director General, DRI by issuance of a show cause notice was without any authority of law and was, therefore, liable to be set aside. The aforesaid decision of the Supreme Court in Canon India was subsequently followed by the Supreme Court in Agarwal Metals and Alloys [ 2021 (9) TMI 316 - SUPREME COURT] . The show cause notice dated 30.01.2009 issued by the Additional Director General, DRI is, therefore, without jurisdiction as the said officer was not the proper officer and, therefore all proceedings undertaken by the Department on this show cause notice is, therefore, without jurisdiction. - The order passed by the Commissioner of Customs (Adjudication), therefore, cannot be sustained. Confiscation of the goods under section 111 and imposition of penalty under section 112 of the Customs Act - HELD THAT:- In Bakeman s Home Products [ 1997 (6) TMI 178 - CEGAT, NEW DELHI] , the Tribunal held that the proposal for confiscation and penalty cannot be segregated from duty demand and, therefore, the proceedings for confiscation and imposition of penalty cannot be sustained. Order set aside - Decided against the Revenue.
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Service Tax
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2021 (11) TMI 340
Rejection of application for rectification of an alleged clerical error in SVLDRS 1 - Period of limitation - due to a clerical error the petitioner had left the pre- deposit column blank in the declaration and had not filled the amount of pre-deposit in the Declaration Form. - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. - HELD THAT:- no rectification application was filed by the petitioner within the period of thirty days stipulated in the SVLDR Scheme. Though, learned counsel for the petitioner states that due to Covid-19 pandemic, he could not rectify the Declaration Form, yet this Court finds that as the said Form had been filed on 27th February, 2020, the petitioner had sufficient time before the onset of the second wave of Covid-19 pandemic to rectify its mistake. Allegedly, the same was done on 30th June, 2021 [date of the closure of the Scheme] i.e. much beyond the period of thirty days. The petitioner had also not deposited the balance amount till 30th June, 2021. Writ petition dismissed.
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2021 (11) TMI 339
Reversal of Cenvat Credit - provision of service as well as trading of goods which was an exempt service - show cause notice was issued demanding 6% of the trading turnover as ineligible Cenvat credit availed by the Appellant during the period under dispute - HELD THAT:- the Appellant has availed Cenvat credit of ₹ 41,17,269/- during the period under dispute while the confirmation of demand for recovery is ₹ 3,29,07,268/-. In this regard we are in agreement with the decision of the Tribunal in the case of Mercedes Benz [ 2015 (8) TMI 24 - CESTAT MUMBAI] . It is not disputed by the Revenue that the Appellant has availed Cenvat credit only to the extent of Rs. ₹ 41,17,269/- during the period under dispute. Hence, we are of the opinion that the demand as confirmed by the Adjudicating Authority cannot be sustained at all. Further, it is seen that the Department has mechanically applied 6% of the entire balance sheet turnover of the Appellant without detailing as to why the said turnover has been taken and why not the value of trading as provided in the Rules viz. the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or ten percent of the cost of goods sold, whichever is more. Thus, we find that the entire computation of demand in the instant case has been done without applying the legal provisions and hence the same cannot be sustained in our view. When the audit wing had already verified the books of accounts of the Appellant and had sought reversal of Cenvat credit of ₹ 1,82,114/- along with interest and penalty which was subsequently paid by the Appellant, then issuance of the instant SCN seeking reversal of Cenvat credit under Rule 6 of CCR 2004 by invoking extended period of limitation cannot be sustained. In view of the above discussions and the settled legal judicial precedence and provisions contained in statutes referred to above, the demand cannot be sustained and is therefore set aside.
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2021 (11) TMI 338
Refund claims of unutilized cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 - Notification 27/2012-CE (NT) - Claim of refund rejected on the ground that the appellant had carried forward the same into its Tran-1 Form of GST. - HELD THAT:- there are no disputes as to the facts. It is now the case of the appellant that it has reversed the entire credit covering the appeal period in their GST Electronic Credit Ledger filed for March 2021. They have also filed copy of the Form GSTR-3B in support, before this forum. It is the settled position of law that a substantial right of a tax payer cannot be denied on mere procedural lapse, which is reaffirmed by this very Bench in the case of JMT Consultant Detailing Pvt. Ltd. Vs. CCT, Bengaluru East [ 2019 (12) TMI 648 - CESTAT BANGALORE] . Refund to be allowed, subject to verification.
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Central Excise
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2021 (11) TMI 337
Levy of penalty - Area based exemption - allegation of incorrect valuation of final products cleared to related parties - duty amount alongwith interest was confirmed and penalty imposed for not valuing the final products under Rule 8 read with Rule 9 of the Central Excise Valuation Rules, i.e. cost plus 10%, as was relevant during the material period. - HELD THAT:- the assessee has not valued the goods in compliance with the Valuation Rules. The appellant has contended that they have cleared the goods on the basis of prevailing market prices. However, no evidence has been produced to substantiate their claim of having cleared the goods to the related parties on prevailing market prices. Moreover, in the adjudication proceedings, they have not disputed that manner of computation adopted by the Central Excise Department to arrive at the value as per the Rules, as appearing in page No. 26 to 40 of the appeal Paper Book which forms part of the SCN. No effort was ever made to show that the prices charged to the related party were closely approximate to the prices charged to independent parties. Further, there is a charge against the assessee that they deliberately over-valued the goods cleared to related parties in attempt to obtain higher refund which is the subject matter of recovery in the impugned demand order. At the same time, they also indulged in undervaluation as per their convenience, to short pay the duty amount which has not been rebutted by submitting the prices charged to independent parties. Admittedly, when there is no blanket refund in view of the amending Notification dated 27.03.2008, there is no case of complete revenue neutrality and hence, does not advance the case of the appellant assessee to plead for waiver of penalty in the given factual matrix of the case. Levy of penalty confirmed.
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