TMI Tax Updates - e-Newsletter
November 15, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Presence of Lawyer during examination/interrogation by the GST officers is not required since the officers are not Police Officers

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• Applicability of Consumer Protection Act in case of REP License issued under Exim policy - Whether the Govt. is a service provider - Held No

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Articles

1. Analysis of CBIC Circular no 123/42/2019-GST issued to clarify the restriction in availment of input tax credit in terms of sub-rule (4) of rule 36 of CGST Rules, 2017

   By: Chitresh Gupta

2. COURTS REVIVE CREDIT ON GST TRANSITION

   By: Dr. Sanjiv Agarwal

News

1. GSTR-9 & GSTR -9C more simplified & last dates of submission extended

2. Tobacco Board Receives 2019 Golden Leaf Award

3. Norms of Aadhaar KYC are eased, not of the Change of Address in Aadhaar

4. MMTC Revenue from exports increased by 384%

Notifications

DGFT

1. 32/2015-2020 - dated 13-11-2019 - FTP

Amendment in import policy of Iron & Steel and incorporation of policy condition in Chapter 72, 73 and 86 of ITC (HS), 2017, Schedule - I (Import Policy)

Income Tax

2. 97/2019 - dated 13-11-2019 - IT

Corrigendum - Notification No. 40/2009 dated 28 April 2009

Money Laundering

3. G.S.R. 840(E) - dated 13-11-2019 - PMLA

Prevention of Money-laundering (Maintenance of Records) Fifth Amendment Rules, 2019

Circulars / Instructions / Orders

GST - States

1. 2866/GST-2 - dated 7-11-2019

Eligibility to file a refund application in FORM GST RFD-01 for a period and category under which a NIL refund application has already been filed.

2. 2874/GST-2 - dated 7-11-2019

Procedure to claim refund in FORM GST RFD-01 subsequent to favorable order in appeal or any other forum.

3. 2871/GST-2 - dated 7-11-2019

Withdrawal of Circular issued vide memo no. 1778/GST-2, dated 22.07.2019.

4. 2877/GST-2 - dated 7-11-2019

Clarification regarding GST rates & classification (goods).

DGFT

5. 43/2015-2020 - dated 13-11-2019

Enlistment as designated port in Para 2.54 (d) (iv) Handbook of Procedure, (2015-20)

Highlights / Catch Notes

GST

• GST Officers Can Summon Without a Lawyer Present; Not Classified as Police Officers Under GST Act.

  Case-Laws - HC : Presence of Lawyer during examination/interrogation by the GST officers - The petitioner in the present case has been summoned by the Officers under GST Act who are not Police Officers - The presence of the lawyer is not required during the examination of the petitioner.
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Income Tax

• Disallowing damages u/s 37 of the Income Tax Act applies only to legal infringements, not applicable here.

  Case-Laws - AT : Disallowance of damages u/s 37 - only those payments which have been made for infringement of law shall not be allowed as revenue expenditure. Since, the said payment/deduction was not towards any offence or infringement of law therefore the disallowing the same is not tenable on part of the AO.
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• Is Section 271AAB Penalty Mandatory? Debate on Surrendered Income Without Land Acquisition or Asset.

  Case-Laws - AT : Penalty u/s 271AAB - whether it is mandatory or discretionary - income surrender on account of advance for land - When there is no acquisition of land then in the absence of the corresponding asset acquired by the assessee the mere noting of the advance which is out flow of the funds cannot be held as undisclosed income.
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• Tax Authorities Must Assist Taxpayers in Claiming Legal Benefits u/s 54B to Prevent Unjust Coercion.

  Case-Laws - AT : Allowing deduction not claimed by the assessee in its return of income u/s.54B - the Income Tax laws are welfare in nature and the very purpose of welfare legislation is that there should not be any cohesive action by the quasi-judicial Authority. It is the duty of the quasi-judicial authority, the AO or the Ld. CIT(A) to guide the assessee to enable him to get benefit whether or not claimed by him for which he is legally eligible.
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• Revenue Authorities' Rejection of Valuer's FMV Report on Land Sale u/s 55(2)(b) Deemed Unjustifiable and Arbitrary.

  Case-Laws - AT : Calculation of the fair market value (FMV) for the land sold by the assessee u/s.55(2)(b) - the rejection by the Revenue Authorities of the registered valuer’s report submitted by the assessee is not justifiable, rather, arbitrary, un-judicious, such action is required to be discarded.
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• TDS Not Applicable on Harvesting Charges for Cane Growers u/s 194C; Considered Part of Sugarcane Purchase Price.

  Case-Laws - AT : TDS u/s 194C - harvesting charges paid to labourers by the assessee on behalf of the cane growers - the payments made by the assessee towards harvesting and transportation charges have to be regarded as payment made for purchase of sugarcane and consequently the provisions of section 194C of the Act do not get attracted.
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• Assessee Challenges Alleged Bogus Purchases; Asserts Finished Goods Must Have Raw Materials, Provides Stock Proof to Authorities.

  Case-Laws - AT : Additions towards bogus purchases without raw material there cannot be any finished products. The assessee has filed stock details before the authorities which show that purchases for the disputed quantity were, in fact, made. - even if we accept the contention of the Revenue that the purchases were bogus, still the entire amount of purchases cannot be added
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• Taxpayer Penalty Unjust Under Income Tax Act Section 271AAB Due to Revenue Authorities' Failures.

  Case-Laws - AT : Penalty u/s. 271AAB - 10% OR 30% of undisclosed income - the department having taken the huge amount in their custody, cannot take unjust enrichment of it, when on one hand the department says it is assessees undisclosed income and then, not doing what he [assessee] directs to do with his money and thereafter finding fault with him and penalizing him for their [revenue] own omission cannot be accepted.
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• Section 80IB Deduction Confirmed: Appellant's Activities in AY 2002-03 Qualify as Manufacturing, Not Just Testing.

  Case-Laws - HC : Deduction u/s 80IB - manufacturing process or not - there was manufacture involved and the process undertaken by the Appellant during the Assessment Year 2002-03 was not restricted to mere testing or trial run. The findings of fact in this regard are amply borne out from the material on record and consequently are not vitiated by any perversity or absurdity.
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• Income Tax Appellate Tribunal Grants Section 80G Registration, Overturns CIT(E)'s Strict Rejection Approach.

  Case-Laws - HC : Registration u/s 80G - CIT(E) rejected the application u/s 80G - ITAT allowed the registration - CIT(E) had taken an unduly harsh and pedantic view of the matter and once it is not disputed that the stringent conditions u/s 12AA have been satisfied, the further action can only be taken at the end of the financial year to determine whether any donation etc or other the conditions of Section 80G have or have not been fulfilled.
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• Penalty Upheld for False Claim of Cash Gift from Relative Due to Lack of Evidence u/s 271(1)(c.

  Case-Laws - AT : Penalty u/s 271(1)(c) - wrong claim of having received a cash gift from relative - assessee had failed to place on record any documentary evidence which would substantiate the genuineness of the gift transaction - Levy of penalty confirmed.
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• Gross Total Income for Section 80IB Deduction Requires Deductions u/ss 30-43D, Including Section 32 Depreciation.

  Case-Laws - HC : Deduction of depreciation while determining the deduction u/s 80IB - for the purposes of deduction under Chapter VIA, the gross total income has to be computed inter alia by deducting the deductions allowable u/s 30 to 43D, including depreciation allowable u/s 32.
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Customs

• Court Rules Capital Goods Under EPCG Scheme Not Confiscable; Bond Ensures Export Obligations and Duty Payment.

  Case-Laws - AT : Confiscation of the goods already cleared - Import of certain capital goods under EPCG Scheme - The bond executed by the AMW is not for production of goods but for fulfillment of export obligation and to pay duty in case of failure to fulfill export obligation - The goods cannot be confiscated, even if, the same are liable for confiscation.
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• Customs House Agent License Safe if Importer's Employee Provides Verified Documents; No Violations Found.

  Case-Laws - AT : Revocation of CHA License - not obtaining authorization from the importer - not advising his client properly. - Once the Customs Broker has been approached by the employee of the importer and he has verified the necessary documents, then there cannot be any allegation of violations against the CHA
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• Consumer Protection Act, 1986 Excludes REP License Cases; Government Not a Service Provider in Incentive Grants.

  Case-Laws - SC : Applicability of Consumer Protection Act, 1986 in case of REP License in terms of the import and export policy - Whether Government is a service provider - Held No - The grant of these incentives does not constitute the State as a service provider.
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IBC

• Lease Rent Non-Payment Not "Operational Debt" u/s 5(21) of Insolvency and Bankruptcy Code 2016.

  Case-Laws - Tri : Maintainability of application - initiation of CIRP - scope of the term goods or services under the code - The debt arising out of non-payment of lease rent does not fall under the definition of “operational debt” as defined u/s 5(21) of the Code of 2016 (even though it may otherwise be a debt).
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Service Tax

• Service Tax Benefits Shouldn't Be Denied Over Minor Errors, Says Case Law on Voluntary Compliance Scheme.

  Case-Laws - AT : Voluntary Compliance Encouragement Scheme - the substantial benefit should not be disallowed for venial mistake of clerical nature.
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• Tribunal Rejects Revenue's 67-Day Appeal Delay; Insufficient Justification for Extension Underlines Strict Compliance.

  Case-Laws - HC : Condonation of 67 days delay in filing the appeal before the CESTAT by the Revenue - The occasion to adopt a liberal approach in matters of condonation of delay would only arise if some cause is made out for the delay - Therefore, the view taken by the Tribunal in the present facts cannot be said to be perverse
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Central Excise

• Revenue's Claim Lacks Foundation: 2008 Statement Didn't Affect Show Cause Notice Order in Later Adjudication.

  Case-Laws - HC : Reliability of statements - the statement of 2008 of the Production Manager has not resulted in any adverse order on the SCN which culminated immediately thereafter. The present adjudication proceeding is the result of a subsequent SCN as a result of later inspection - The Revenue’s claim, therefore, has no basis on this aspect.
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Case Laws:

• GST

• 2019 (11) TMI 661
  Presence of Lawyer during examination/interrogation of GST officers - fraudulent availment of Input Tax Credit of GST - HELD THAT:- The POOLPANDI VERSUS SUPERINTENDENT, CENTRAL EXCISE [ 1992 (5) TMI 147 - SUPREME COURT] , has categorically stated that presence of a lawyer cannot be allowed during examination/ interrogation by a Customs Officer. It was held that relevant provisions of the Constitution in this regard have to be construed in the spirit in which they were made and benefit thereunder should not be extended to exploiters engaged in Tax Evasion at the cost of public exchequer. High Court of Delhi in SUDHIR GULATI VERSUS UNION OF INDIA [ 1998 (2) TMI 126 - HIGH COURT OF JUDICATURE AT DELHI] has also categorically held that assistance of lawyer cannot be allowed while examination of a person in the Customs Office. The petitioner in the present case has been summoned by the Officers under GST Act who are not Police Officers and who have been conferred with the power to summon any person whose attendance they consider necessary to give evidence or to produce a document. The presence of the lawyer, therefore, is not required during the examination of the petitioner. Application disposed off.

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• 2019 (11) TMI 660
  Release of seized goods alongwith vehicle - petitioner states that the petitioner is ready and willing to pay the amount of tax and penalty in terms of the impugned notice issued under section 130 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Under the circumstances, the respondents are directed to forthwith release the Truck number GJ-02-Y-6566 together with the goods contained therein upon the petitioner paying the tax and penalty as reflected in the column number 4(1) (2)of the impugned notice issued under section 130 of the CGST Act.

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• 2019 (11) TMI 659
  Maintainability of appeal - Compliance with the pre-deposit - non-prosecution of the case - HELD THAT:- Issue notice on condition that the petitioner shall deposit Rs. 2,00,00,000/- to the credit of C.No. IV/16/27/201HPU on the file of the Commissioner of GST Central Excise, Salem, Tamil Nadu and produce receipt in that behalf in the Registry of this Court within ten days from today, failing which the special leave petition shall stand dismissed for non-prosecution without further reference to the Court. For a period of one week, no coercive action be taken against the petitioner in connection with the alleged offence and the interim protection will continue upon production of receipt in the Registry about the deposit made with the Department within one week from today, until the disposal of this Special Leave Petition. List the matter on 12.09.2019.

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• Income Tax

• 2019 (11) TMI 657
  Income earned by the club from deposits made in banks - claimed to be exempt, applying the principal of mutuality - HELD THAT:- The taxability of income earned by similarly placed clubs was the subject matter of challenge before the Supreme Court in the case of Bangalore Club V. Commissioner of Income Tax and others [ 2013 (1) TMI 343 - SUPREME COURT] and the Supreme Court held that interest earned by clubs from banks would not fall within the ambit of the principles of mutuality and would thus be liable to tax in the hands of the clubs. Even in this case, the exemption is sought on identical facts, that is, on income that has been earned by the petitioner club from its investments made with banks. Thus the judgment and the ratio thereof as extracted above will cover the facts and circumstances of the present case on all fours. These Writ Petitions are thus dismissed.

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• 2019 (11) TMI 656
  Reopening of assessment u/s 148 - Assistant Commissioner of Income Tax, Circle-I (2), New Delhi, rejecting the Petitioner s objections to the reopening of the case - HELD THAT:- Having heard the learned counsel for the Petitioner at some length, the Court is not persuaded that at this stage the impugned notice and the order rejecting the objections require to be interfered with. However, it is clarified that all the points urged by the Petitioner in the present writ petition are left open to be urged before the Assessing Officer ( AO ) in the reassessment proceedings. Any request by the Petitioner for inspection of the file or copies of documents will be considered by the AO in accordance with law. It is made clear that no observation in this order should be construed as an expression on the merits of the contentions of the parties.

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• 2019 (11) TMI 655
  Addition on account of interest paid and disallowance of rent expenses - HELD THAT:- It is pertinent to note that the payment made to the parties was verified by the CIT(A) and the funds received from these parties were received by way of cheques and same were utilized by the assessee for its business purposes for completing the project. The payments of assured return in the form of interest to Dinesh Nandini Ram Krishna Dalmia Foundation and assured rental to Sh. Arun Khanna and Kailash Khanna have been made after deducting TDS, therefore, there is no dispute about incurring of expenditure. Since, the funds received from these parties were on the basis of valid MOUs against booking of space and on the basis of fixed return plans offered by the assessee, hence the expenditure incurred was for commercial expediency and is a requirement of the business. Thus the CIT(A) has given a detailed finding and there is no need to interfere with the same. Hence, Ground No. 1(i) of the revenue s appeal is dismissed. Disallowance of compensation expenses - HELD THAT:- CIT(A) has given a detailed finding in respect of each unit which was doubted by the Assessing Officer. In fact, the expenditure incurred was wholly and exclusively for the business purposes, which was not refuted by the Assessing Officer during the assessment proceeding as well. Therefore, the Ground No. 1(ii) is dismissed Addition on account of not disclosing maintenance income - HELD THAT:- The CIT(A) has given a detailed reasons and despite not admitting additional evidences has taken cognizance that when the mistake was detected by the assessee relating to income in respect of maintenance the same was offered to tax in A.Y. 2011-12 by showing previous year item. Therefore, Ground No. 1(iii) of the revenue is dismissed.

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• 2019 (11) TMI 654
  Penalty levied u/s 272A(l)(c) - deliberate default on the part of the appellant in making compliance to the requirements of summon u/s 131 - HELD THAT:- It is not in dispute that the assessee had submitted only partial details in the form of printouts in response to summons dated 12.10.2007 whereas no details were submitted (in the CD or in the form of printouts) in response to summons dated 12.09.2007. Thus, it is not in dispute that the assessee had failed to submit the full details required by the AO vide aforesaid summons dated 12.09.2007 and 12.10.2007 either in the form of CD or in the form of printouts. The perusal of the orders of the Addl. CIT and the CIT shows that the assessee had been provided several opportunities and despite that these required details were not submitted in entirety. Even if it is the case of the assessee, that there was no requirement to submit details in CD, and that submission in form of printout was sufficient; even then, the fact remains that there was absence of full compliance even in the form of printouts, and only partial compliance by way of submission in the form of printouts, has been made. Considering that aforesaid order dated 23.03.2008 of Co-ordinate Bench of ITAT, Delhi is distinguishable, as mentioned in foregoing paragraph (E) of this order; we have find that the aforesaid penalty levied by Ld. Addl. CIT, and confirmed by the Ld. CIT(A); was just and proper in the facts and circumstances of the appeals before us. Accordingly, penalties levied by the Addl. CIT and confirmed by the Ld. CIT(A) are hereby upheld. Appeal filed by assessee is dismissed.

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• 2019 (11) TMI 653
  Bogus purchases - Addition as assessee had failed to produce bills, vouchers and other documentary evidences in support of his claim - CIT-A deleted the addition partly - HELD THAT:- We have gone through the impugned order and herd both the parties Ld. CIT(A) has mentioned several orders of the High Court and Co-ordinate Benches wherein similar facts and circumstances Tribunal as estimated the gross profit addition in the hands of the purchaser on account of such bogus purchases @ 12.5%. As decided in SHRI ASHWIN PURSHOTAM BAJAJ [ 2016 (12) TMI 879 - ITAT MUMBAI] conclusion of the Id. CIT(A) that the assessee has purchased material from some other dealers but quantitative reconciliation of the stock was duly done by the assessee of the sale and purchase and hence the profit element in this accommodation entries are to be added to the income cannot be faulted. The Id. CIT(A) restricted the addition by estimating GP ratio of 12.5% of Rs. 1,13,44,778/- being purchases from these alleged four accommodation entry providers. We do not find any infirmity in the well reasoned order of the Id. CIT(A) whereby net profit was estimated which was a reasonable estimation made by learned CIT(A) and we sustain/ affirm the order of learned CIT(A) - Decided against revenue

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• 2019 (11) TMI 652
  Disallowance on ad-hoc basis on account of various expenses incurred during the year - HELD THAT:- It is pertinent to note that the books of accounts produced by the assessee during the course of assessment proceeding were never doubted and were not rejected. The addition is only on the basis of presumption and assumption that decrease in sales amounts to decrease in expenses. The ledger accounts were very much produced before the Assessing Officer and the same was before the CIT(A). Merely on the basis of conjecture, the ad-hoc addition cannot be made without any tangible reason to do so. Addition on account of advances from the customers - HELD THAT:- The assessee has produced relevant documents before the Assessing Officer but the Assessing Officer has not taken any cognizance of these documents. In fact, the assessee duly filed the details of advances received from customers alongwith the details of current liabilities and also the sales invoices raised in the subsequent years and the record shows that these advances have been cleared in the subsequent years. Thus, the genuineness, creditworthiness and identity of the customers in fact was proved by the assessee. Therefore, this disallowance was not proper on part of the Assessing Officer as well as the CIT(A). Disallowance on the account of excess interest paid on loan - HELD THAT:- The expenses were recorded in the books of accounts of the assessee and were offered to tax as income as interest received by M/s. KLJ Resources Ltd. and Prayag Polymers Pvt. Ltd. The assessee does not appear in the list of related party disclosure of M/s. KLJ Resources Ltd. and Prayag Polymers Pvt. Ltd. It is interesting to note that the AO neither questioned genuineness of loan nor alleged that the expenses are not incurred for business purpose. In fact, from the perusal of documents it can be seen that these expenses were incurred for business purpose only. Therefore, Ground No.4 is allowed. Disallowance on the account of Diwali expenses - HELD THAT:- It is pertinent to note that these expenses were documentarily proved before the Assessing Officer, which was not questioned at the time of assessment proceedings by the Revenue authorities. Thus, these expenses are genuine and were properly claimed by the assessee. The Assessing Officer as well as the CIT(A) has not taken the cognizance of the documents. Hence, Ground No.5 is allowed.

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• 2019 (11) TMI 651
  Income accrued in India - dividend received from Brazilian subsidiary - HELD THAT:- We find from the combined reading of Article 23(3) and Article 10(2) supra that if the dividend is paid by Brazilian company to Indian Company, the same may be taxed in Brazil as per their local laws which shall not exceed 15% of gross dividend and the said dividend shall be treated as exempt in India. We find that assessee had also enclosed certificate dated 04/04/2017 from Dorfketal BrasilItda stating clearly that the dividends paid in the FY 2005-06 were related to the year 2004 and that it had paid taxes from its net profits after taxes at more than 15% and that there is no separate taxes on dividend in Brazil. The assessee had also submitted the financials of Dorfketal BrasilItda for the A.Y.2005-06 together with the respective computation of total income to evidence the fact that the rate of taxes applied is more than 15% in both the years in which the actual distribution of dividend had taken place. The assessee had also furnished the financials of F.Y.2005-06 of Dorfketal BrasilItda alongwith schedule of retained earnings evidencing the fact that only net profit after taxes is transferred to retained earnings and that dividends are distributed from that, which means that dividends are declared and distributed after paying due taxes in Brazil. Accordingly, we hold that the dividend received by the assessee is to be treated as exempt in India The assessee had also submitted before the ld. CIT(A) that similar claim of exemption in respect of dividend received from Brazilian Subsidiary had been allowed by the ld. AO for A.Y.2007-08, 2008-09 and 2009-10 and in support of this copy of the orders were also furnished thereon. In view of the aforesaid observations, applying principle of consistency and respectfully following the aforesaid decision of Kolkata Tribunal, we hold that dividend received from Brazilian subsidiary is exempt from tax . Accordingly, the grounds raised by the assessee are allowed.

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• 2019 (11) TMI 650
  Deduction u/s 10AA - business activity of manufacture and export - HELD THAT:- In the instant case, it is not in dispute that the assessee is eligible for claim of deduction u/s 10AA of the Act. It is also not in dispute that the assessee has only one business undertaking which is engaged in the business of manufacturing and export of gold, silver and base material jewellery plain studded with precious semi precious stones situated at Sitapura Industrial Area, Jaipur and the total turnover of the business is equivalent to the total turnover of the undertaking as well as the export turnover. The expenditure to the extent of 25% of purchases where are held as non-genuine and disallowed by the Assessing officer relates to the same business activity of manufacture and export in respect of which assessee is held eligible for deduction under section 10AA of the Act. The deduction under section 10AA therefore needs to be allowed on the enhanced profits after taking into consideration the disallowance of Rs. 2,80,500 in light of accepted legal position by the CBDT and following the consistent position taken by the Co-ordinate Benches. Assessing Officer is therefore directed to recompute the deduction u/s 10AA taking into consideration the addition of Rs. 2,80,500/. In the result, the Ground of the assessee s appeal is allowed. Disallowance of employees contribution to PF by invoking provisions of section 2(24)(x) r.w.s 36(1)(va) - HELD THAT:- It is not disputed that the assessee has deposited the employee s contributions towards PF before the due date of filing of the return of income. Hence, the matter is squarely covered by the decision of Hon ble Rajasthan High Court in case of CIT vs. State Bank of Bikaner and Jaipur [ 2014 (12) TMI 65 - RAJASTHAN HIGH COURT] and the ground of appeal no. 1 is thus allowed Disallowance of deduction u/s 10AA - considering the receipt on account of freight, clearing insurance charges as income from other sources as against business income - HELD THAT:- In the instant case, the assessee has incurred freight, clearing and insurance expenses in respect of export of goods and has recovered an amount from its customers, thus there is an excess recovery towards such expenses and such recovery has been reflected in the profit/loss account. In its computation of income for claiming deduction under section 10AA, the assessee has excluded such recovery of expenses from the export turnover as well as total turnover. Whether such excess recovery of freight and other expense in respect of export of goods is derived from business and the eligible for deduction under section 10AA is squarely covered by the decision of the Hon ble Rajasthan High Court in case of Pr. CIT, Jaipur vs. Vedansh Jewels (P.) Ltd. [ 2018 (8) TMI 117 - SC ORDER] held that surplus amount in the freight export account and in the insurance export is derived from export activities and on those accounts deduction under section 10AA is allowable.

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• 2019 (11) TMI 649
  Reopening of assessment u/s 147 - denying the exemption u/s 10(37) on the ground that land was not used for agricultural purpose - confirming the addition on account of long term capital gain on compulsory acquisition of agricultural land - HELD THAT:- The return of income was processed u/s 143(1) and thereafter, taking into consideration the directions of the Coordinate Bench where it was directed to assess the capital gains in AY 2010-11 and not in AY 2009-10, the AO has issued the notice u/s 148 of the Act. It is therefore a case where there was no disclosure of such transaction in the return of income and secondly, the return of income so filed was processed u/s 143(1) and no regular assessment was made, hence, there is no question of forming of an opinion by the AO prior to issuance of notice u/s 148 of the Act. The contention of the ld AR regarding change of opinion therefore cannot be accepted. The second contention of the ld AR that only where the AO has reason to belief that income has escaped assessment, notice u/s 148 can be issued. Another related contention raised by the ld AR that only where the AO decided the issue of exemption u/s 10(37), it can be said to be a case of escapement of income. As we have stated above, the assessee has received the compensation on compulsory acquisition of land during the year and in absence of disclosure of such transaction in the return of income or any claim of exemption u/s 10(37) in the return of income, it is a clear case where the capital gains on such compulsory acquisition of land in respect of which the compensation has been received during the year has escaped assessment. The matter relating to assessee s eligibility for exemption u/s 10(37) is a matter of detailed examination and so long as prima facie, the AO has formed an opinion that the income received during the year has escaped assessment and such formation of belief is based on tangible and undisputed facts, there is no infirmity in the action of the AO in acquiring jurisdiction u/s 147 of the Act. Assessee in his appeal for AY 2009-10, the assessee has challenged the year of taxability of the compensation and has contended that the same falls in AY 2010-11 and again in AY 2010-11, the assessee is challenging the taxability of the compensation so received inspite of the specific directions of the Coordinate Bench wherein it was specifically directed to assess the capital gains in AY 2010-11 and not in AY 2009-10. In the result, we donot see any infirmity in the action of the AO in acquiring the jurisdiction by issuance of notice u/s 148 and the ground so taken by the assessee is dismissed. Exemption u/s 10(37) - essential and fundamental condition for availing exemption u/s 10(37) has to be construed strictly and in that sense, the phrase such land means the whole of the land being used for agricultural purposes. The same cannot be read and understood as such land or a part thereof where even a part of land is used for agricultural purposes, it may still qualify for exemption. Had that been the intention of the legislature, the same would have been provided appropriately. Therefore, on account of the said reasoning as well, the contention of the ld AR cannot be accepted. We are unable to accede to the contentions so advanced by the ld AR that the assessee qualifies for exemption under section 10(37) of the Act. - Decided against assessee

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• 2019 (11) TMI 648
  Exemption u/s 11 - violation of section 13(1)(b) - royalty income earned by the assessee pursuant to an agreement entered into between the assessee and HLI for the use of the brand names/patent rights (owned by HNF) for its medical preparations - AO recorded that the assessee paid a major portion of the scholarship amount to the students of a particular religious community and therefore there is violation of section 13(1)(b) - HELD THAT:- Material collected by the learned Assessing Officer from the Internet as well as the estate agents cannot be termed as the collaborative piece of evidence to any facts which is established substantively first; that the actual rent received by the assessee from HLI far exceeds the valuation adopted by the MCD for the purpose of levying house tax as could be seen from the information furnished by the assessee and also that unless and until the AO brings on record some credible information, the burden to rebut does not shift to the assessee. As convinced with the reasoning given by the Ld. CIT(A) in his order for the Assessment Year 2008-09 wherein while dealing with this issue in detail, the Ld. CIT(A) reached a conclusion that on the date of the observations of the learned Assessing Officer that there is no mechanism with the Department to determine valuation of rents imperative the adjudicatory authorities to look further corroborative evidence in the absence of which it is not desirable to disturb the consistent view taken over a period of more than two decades. We are in agreement with the CIT(A) that not only on the basis of the rule of consistency but also on the basis of the facts relating to the rent received by the assessee from HLI vis- -vis the rent under the Delhi Rent Control Act. Without vouchsafing the correctness of the information received from the website and without correlating the information furnished by the property dealers without realities on ground with a specific reference to the property in dispute, it is not open for the AO to proceed to make addition, that disturbing the accepted position for about more than two decades. No change of facts and circumstances are brought on record and no independent evidence with a specific relation to the property in dispute is available on record. Merely because the other charitable trust guilty property for accommodation of the person covered under section 13(3) of the Act, such a fact ipso facto does not lead to the addition in the hands of the assessee without first clinching the issue with corroborative piece of evidence. We therefore, hold that there is no justification for addition made by the learned Assessing Officer by invoking the provisions under section 13(2)(b) of the Act read with section 13(3) of the Act and we direct him to delete the same. Denial of exemption to the assessee based on the withdrawal of notification of exemption under section 10(23C)(iv) of the Act for Hamdard Dawakhana (Wakf) - HELD THAT:- CIT(A) dealt with this aspect stating that the withdrawal was on 22/02/2012 whereas the assessment order was passed on 26/11/2010 and the order of withdrawal of notification under section 10(23C))iv) of the Act in the case of Hamdard (Wakf) does not impact the case of the assessee inasmuch as one has to examine on facts of the case as to whether there is a violation of the provisions of section 13(2)(b) of the Act read with the provisions of section 13(3) of the Act. As brought to our notice on behalf of the assessee that the Hon ble Delhi High Court [ 2015 (9) TMI 915 - DELHI HIGH COURT] had restored the notification granting the benefit of section 10(23C))iv) of the Act to HLI and a copy of the order is produced before us. We have perused the same. Since we reached a conclusion on ground No. 1 that the exemption under section 11 cannot be denied to the assessee by invoking the provisions of section 13(2)(b) of the Act read with section 13(3) of the Act and also in the light of the order of the Hon ble High Court, would not find any merits and the contentions of the Revenue Denial of the exemption under section 11 of the Act to the assessee by invoking the provisions under section 13(2)(b) - Addition being the corpus donations received by the assessee from HLI - HELD THAT:- In the absence of any allegation or proof as to the assessee undertaking any activities in the nature of trade, commerce or business, donations received by the assessee forms part of the corpus of trust and thus capital receipt are not liable to tax. The objects of the assessee as discussed above clearly established that they are in the nature of providing education, medical relief and relief to the poor and no evidence is available on record to say that the assessee has been providing services in the nature of business. We, therefore, are of the considered opinion that the corpus donation is a capital receipt irrespective of whether the institution enjoys the benefit of Section 11 or not, but particularly in this case, it is consistently held in the preceding paragraphs that the assessee is entitled to exemption under section 11 of the Act and, therefore, the question of subjecting the corpus donations to tax does not arise. Section 2(15) of the Act has no application to the facts of the case, so also in view of our factual finding that the scholarship benefit is extended to all the eligible persons irrespective of a particular community, section 13(1)(b) of the Act also cannot be invoked.

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• 2019 (11) TMI 647
  Addition on account of excise duty payable to Excise department u/s 43B - no excise duty is payable and outstanding in balance sheet and all the excise duty has been paid as claimed - HELD THAT:- In the reading of the provisions of the Act, the deduction on account of Excise duty is allowable only on the basis of actual payment. From the records, it can be gauged that the assessee has paid an amount of Rs. 74,32,10,400/- and claimed the same in the P L account. This fact of payment of Rs. 74,32,10,400/- has been confirmed by the Excise authorities vide letter dated 11.05.2010. The balance sheet does not reflect any outstanding payments by the assessee. Hence, the entirety of the fact, we hereby allow the payment made by the assessee on account of Excise duty as confirmed by the Excise authorities. The appeal of the assessee on this ground is allowed. Addition as per the provisions of section 40A(3) on account of cash payments - HELD THAT:- Even though there is an amendment in Rule 6DD of I.T. Rules as is noted by the CIT(A), but in Section 40A(3) itself, an exception is provided on account of nature and extent of banking facilities available, consideration of business expediency and other relevant factors. It is not in dispute that assessee-company was engaged in the business of liquor trading and obtain supplies from the breweries. The amounts in question have been tabulated above showing the extent of amounts paid in cash. These payments are made to the distillers and breweries. The nature of business of assessed shown the expediency of payment of cash to meet the requirements of the suppliers for payment of Excise duty and clearing of cheques by the suppliers. The authorities below have not doubted the identity of the payee and the genuineness of the transaction in the matter. The source of payment is also not been doubted by the authorities below. Hence, we accordingly, set aside the orders of the authorities below and delete the addition made u/s 40A(3). Disallowance of Depreciation - Motor Lorry - HELD THAT:- We find that the Assessing Officer and the ld. CIT (A) have disallowed the claim as the assessee could not produce any bills for allowance of such expenditure. Even before us, the assessee did not produce any evidence in support of their claim. Hence, we decline to interfere with the orders of the revenue on this ground. Appeal of the assessee on this ground is dismissed.

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• 2019 (11) TMI 646
  Addition on account of commission income - miscellaneous income - HELD THAT:- Sale/ purchase/ investment/ loans made from bogus parties i.e. outside parties is to the extent of Rs. 97,42,41,410/- and addition on balance turnover of Rs. 56,47,72,218/- which is made from outside parties is already estimated at the rate of 1%. We also noted that foreign exchange fluctuation, interest income, sundry debtors written off and profit on sale of unquoted shares, the assessee company had credited miscellaneous income of Rs. 4,07,18,363 to its profit and loss account and since all loans and advances given and share held by the assessee company are not genuine, the income derived there from is also not genuine and represented the commission income accrued to the assessee. Apart from foreign exchange fluctuation other components of other income aggregating to Rs. 3,66,32,003/- credited to profit and loss account represented commission income and CIT(A) computed the assessable commission income being 1% of the aggregate of new investments and sales to outside parties and held that since the assessee company has already offered income which is more than the commission income, no further addition can be made in the hands of the company. Hence, we find no infirmity in the order of the CIT(A). Adhoc disallowance being 10% of salary expenses incurred by the appellant company on the pretext that the profit of 0.375% on HR Services rendered by the appellant company is very low - HELD THAT:- We noted that AO as well as CIT(A) has just on the basis of presumption made disallowance just on adhoc basis. No reason whatsoever is cited, hence, we are of the view that this disallowance confirmed by CIT(A) on adhoc basis of Rs. 26,23,800/- is without basis. Hence, we delete the disallowance and allow the appeal of the assessee. Disallowance of expenses being ROC fee paid on further public issue of bogus shares - HELD THAT:- Total expenses for issue of bonus share capital is amounting to Rs. 56,52,580/- out of the total expenses incurred for increase in authorized share capital at Rs. 86,80,163/-. It means that this amount of Rs. 56,52,580/- cannot be allowed being expenses incurred for issue of bonus share capital being capitalization of reserve merely by reallocation of companies funds and there was no inflow of fresh funds or increase in capital employed. Therefore, we are of the view it could not be said that the assessee company has acquired a benefit or advantage of enduring nature and the total funds available with the company would remain the same and issue of bonus share would not result in expansion of capital base of the assessee company. Therefore, we are of the view that the expenditure incurred on issue of bonus share would be revenue expenditure allowable. For balance sum of Rs. 30,27,583/-, we are of the view that this is increase in share capital and will not be allowed. This issue of the assessee s appeal is partly allowed.

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• 2019 (11) TMI 645
  Employee s Contribution payments towards ESIC before due date specified under section 36(1)(va) - HELD THAT:- Hon ble Jurisdictional High Court in the case of CIT-vs-Gujarat State Road Transport Corporation [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] wherein it has been held that the assessee shall not be entitled to deduction of payments of Employee s Contribution to ESIC account if it is paid to the concerned account after the due date as specified u/s 36(1)(va), though he deposits the same before the due date prescribed u/s 43B i.e., prior to filing of return u/s 139(1) of the Act which according to us is just and proper, without any infirmity. Hence, we find no merit in this ground of appeal preferred by the assessee. The same is thus, dismissed. Disallowance of expenditure which was incurred for the purpose of distributing gifts, providing hospitality to the doctors and/or medical practitioners - HELD THAT:- Assessee duly admitted the disallowance of Rs. 5 lacs made by the AO on an ad-hoc basis during the assessment proceedings. The AO made the addition by observing that the assessee failed to furnish the details of the actual recipient of these gift articles. The assessee has also incurred traveling expenses which were claimed by the assessee for the traveling of the medical representatives. But the assessee failed to file the requisite documents evidencing that there was no benefit extended to the doctors /medical practitioners out of such traveling expenses. Therefore the addition was made by the AO on an ad-hoc basis. In this regard, we also note that the assessee has also not produced any evidence before us to prove that the doctors were not the actual recipient of these gift articles. Thus in the absence of necessary documentary evidence the AO had no alternative except to make the disallowance on an ad-hoc basis. Thus we are inclined not to disturb the finding of the lower authorities. Accordingly, we dismiss the ground of appeal of the assessee.

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• 2019 (11) TMI 644
  Exemption u/s 11 - whether the assessee corporation is entitled for exemption u/s 11 for the year under consideration in view of amended provisions of section 2(15) ? - HELD THAT:- The assessee corporation is registered under section 12A(a). The assessee corporation is engaged in providing transportation services in the state of Rajasthan. Provision of transportation services through running of buses is clearly an activity of general public utility as the said services are meant and availed by the public at large and therefore, it would fall in the last limb of definition of charitable purpose as so defined in section 2(15). The argument of assessee corporation provides various concessions and relief in fare to poor, students, senior citizens, women, etc doesn t take away the inherent and fundamental aspect of providing a public utility service of running of buses for the public at large. The services are not limited to particular section of the society but open to all including the poor, marginalized and needy section of our society namely senior citizens, women etc. Therefore, the last limb general public utility clearly defined in section 2(15) and being more specific will be applicable in the instant case and has been rightly invoked by the Assessing officer. Whether the activities of the assessee corporation involves carrying on of activities in the nature of trade, commerce or business or any activity of rendering of services in relation to any trade, commerce or business for a cess, fee or any other consideration and the proviso to section 2(15) - As per the Assessing officer, the activities of the assessee corporation are commercial in nature for the reason that it is running buses and charging fare from the passengers and it is not providing free services to the public. CIT(A) referred to the decision of India Trade Promotion Corporation vs UOI [ 2015 (1) TMI 928 - DELHI HIGH COURT] wherein it was held that the dominant and prime objective of the Institution has to be seen. Where the dominant and prime objective is profit making, it would not be entitled to claim its objects to be charitable purposes and where the institution is not driven primarly by a desire or motive to earn profit but to do charity through the advancement of an object of general public utility, it can be regarded as an institution established for charitable purposes. AR has further referred to the decision of the Hon ble Rajasthan High Court in case of Jodhpur Development Authority and Urban improvement Trust, Bikaner [ 2016 (7) TMI 1277 - RAJASTHAN HIGH COURT] wherein similar legal proposition has bee laid down. However, when it comes to finding on facts in the instant case, the CIT(A) merely held that since its receipts from activities which are commercial in nature exceeds the prescribed threshold, the assessee corporation will be not a charitable corporation. There is no finding by the AO or the ld CIT(A) as to the dominant intent and purposes for which the assessee corporation was set up and whether the dominant purposes was to earn profit or provide public utility services to the public at large. The ld AR in her submissions has referred to various provision of Rajasthan State Road Transportation Corporation Act 1950 and has argued that the object was to provide efficient transport services to the public and not to earn profits. We find that the provision of Rajasthan State Road Transportation Corporation Act 1950 need to be examined in detail to determine the dominant intent and purpose of setting up of the assessee corporation and in the absence of findings of the lower authorities, we are constrained to remand the matter back to the file of the CIT(A) to examine the same afresh.

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• 2019 (11) TMI 643
  Addition of amortization of premium paid on investment - amortization expenditure on government securities held as HTM - HELD THAT:- Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortized over the period remaining to maturity. This was explained by the CBDT vide Instruction No. 17 of 2008 dated 26.11.2008 according which investment of banks clarified under HTM category need not be marked to market and are carried at cost unless these are more than face value, in which case, the premium should be amortized over the period remaining to maturity. The Tribunal in the case of State Bank of Saurashtra Bhavnagar v. DCIT [ 2004 (12) TMI 285 - ITAT AHMEDABAD-A] , Catholic Syrian Bank Ltd. v. ACIT [ 2009 (8) TMI 858 - ITAT COCHIN] held that in view of Instruction dated 26.11.2008, deduction of amortized expenditure on premium on Government Securities is allowable as expenditure. In the case of CIT-Rajkot-2 v. Rajkot District Co-Operative bank Ltd. . [ 2014 (3) TMI 110 - GUJARAT HIGH COURT] wherein it was held that in terms of Circular No. 17 dated 26.11.2008, where Co-operative Bank Ltd. purchases certain Government Securities in order to maintain statutory liquidity ratio (SLR) at a price higher than their face value, premium so paid has to be amortized for remaining period of maturity. In the light of above facts and circumstances, we are of the considered opinion, the amortization expenditure on government securities held as HTM are allowable as deduction. - Decided in favour of assessee Unexplained investment in Multi/National Stock Exchange - CIT-A deleted the addition - HELD THAT:- Addition is made without providing information to the assessee for rebuttal and details of transactions nature and company in which investment is made. Therefore, we do not find any error in the order of ld.CIT(A), accordingly same is upheld. Therefore, these grounds of appeal is therefore dismissed.

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• 2019 (11) TMI 642
  Interest income on deposit of margin money with Bank - assessee reduced the interest income from capital work-in-progress (CWIP) - Treatment of income so earned was not accepted by Assessing Officer - AO treated the same as Income from Other Sources - HELD THAT:- We are of the view that the interest income earned by assessee from margin money deposit with Bank for availing Bang Guarantee, letter of credit facilities for the purpose of procurement of equipment and other material for setting up of power plant will not partake the character of income from other sources. The interest receipt is inextricably linked to business partakes the character of capital receipt and so rightly allowed to be reduced from WCIP by CIT(A), which we affirmed. Hence, the ground of appeal raised by revenue is dismissed.

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• 2019 (11) TMI 641
  Bogus purchases u/s 69C - HELD THAT:- AO has found that parties from whom the assessee has made purchases were not existed at the given addresses and the assessee also could not produce those parties for verification and also could not provide their current location and addresses. Even the notices issued u/s. 133(6) by the assessing officer could not be served on the addresses given as per the bills produced by the assessee. CIT(A) has given a substantial relief to the assessee on the ground that sale of gold jewelry items were reflected in the P L account and the addition of entire purchases cannot be made. CIT(A) s decision to restrict the disallowance to 10% of such purchases on the reasoning that assessee has earned extra profit from the purchases made from un-registered parties is justified. Therefore, we do not find any merit in the appeal of the assessee and the same is dismissed. Disallowance out of interest - HELD THAT:- As counsel has contended that during the course of assessment proceedings vide letter dated 22-04-2010 the details of interest free fund along with copies of ledger account placed in the paper book from serial no. 76 to 90 were submitted and the same were not considered by the assessing officer and CIT(A) before deciding this issue. We have observed that the assessee has submitted such details of interest free funds from Aryavati Impax Pvt. Ltd., Aravati Commodity Pvt. Ltd. and other parties with complete detail of bank account and date of transactions. These undisputed facts were not contradicted by the assessing officer and ld. CIT(A), therefore, the decision of ld. CIT(A) is not justified. Disallowance u/s.14A - HELD THAT:- During the course of appellate proceedings, the ld. counsel has placed reliance on the decision of Hon ble Jurisdictional High Court of Gujarat in the case of Corrtech Energy Pvt. Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] wherein it is held if no exempt income is earned then no disallowance can be made u/s. 14A of the act. Respectfully following the decision of Hon ble Gujarat High Court, we consider that the decision of ld. CIT(A) in sustaining the addition in respect of fact that no exempt income was earned is not justified , therefore, the appeal of the assessee is allowed on this issue. Addition to closing stock u/s. 145A - HELD THAT:- We consider that assessee has consistently followed the exclusive method and VAT was not debited as expenses in the P L account and these facts were not contradicted by the lower authorities. Therefore, the appeal of the assessee on this issue is allowed.

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• 2019 (11) TMI 640
  Addition u/s 14A - interest expenditure disallowable u/s.36(1)(iii) or u/s.57(iii) - CIT(A) deleted the addition - whether the funds borrowed by the assessee were utilized for the purpose of investment and as such the disallowance of interest on funds used for investments was merited as per the provision of section 14A? - HELD THAT:- Assessing Officer has finally made the addition u/s.14A read with Rule 8D. It is an admitted fact that no dividend income has been earned by the assessee neither in this year nor in the subsequent years. Thus, in view of the judgment of Hon ble Jurisdictional High Court in the case of Cheminvest Ltd. vs. CIT [ 2015 (9) TMI 238 - DELHI HIGH COURT] no disallowance u/s.14A can be made. Moreover, the Tribunal in assessee s own case has held that the interest income and interest expenditure were directly linked to the business of the assessee Thus, when there is a direct nexus between the direct earning and direct investment, no disallowance u/s.36(1)(iii) can be made. In so far as Section 57(iii) is concerned, admittedly it is not in dispute that the interest expenditure has been assessed as business income , therefore, no disallowance u/s.57(iii) can be made.

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• 2019 (11) TMI 639
  Revision u/s 263 - assessee s claim of deduction u/s. 35(2AB) - view of CIT that while computing deduction u/s. 35(2AB) of the act, assessee should have reduced the contract Research Development income instead of contract Research Development expenditure - HELD THAT:- While replying to this particular aspect raised by CIT in the show cause notice, assessee had specifically submitted that provision of section 35(2AB) speaks of Research Development expenditure and not income. To support such contention, the assessee has also cited the decision of the Tribunal in the case of ACIT vs. Wockhardt Ltd [ 2012 (5) TMI 823 - ITAT MUMBAI] CIT has not countered the specific submissions of the assessee on this issue. Even, she has not denied the fact that as per the decision of the Tribunal in the case of ACIT vs. Wockhardt Ltd [ 2012 (5) TMI 823 - ITAT MUMBAI] , only Research Development expenditure has to be reduced and not the income. By merely stating that the department has contested the decision of the Tribunal in the case of ACIT vs. Wockhardt Ltd (supra) by filing a reference in the Hon ble Bombay High Court, she has directed the Assessing Officer to net off the contract Research Development income in place of Research Development expenditure. In the aforestated premises, in our view, assessment order passed cannot be held to be erroneous and prejudicial to the interest of the Revenue when the deduction claimed u/s. 35(2AB) of the Act is not only in conformity with the statutory provisions but also in consonance with the decision of the Tribunal on the issue. In view of the aforesaid, we hold that the exercise of power u/s. 263 of the Act in the instant case is invalid hence, unsustainable. Accordingly, we set aside the impugned order of learned CIT passed u/s. 263 of the Act and restore the assessment order. The grounds are allowed.

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• 2019 (11) TMI 638
  Addition of discrepancy in stock - assessee himself has accepted the discrepancy in stock during the course of survey and surrender the excess stock. Surrender was made when confronted with the documentary evidence and discrepancy - HELD THAT:- No physical discrepancy was found/ detected by the survey team and excess value of stock was merely because of difference in valuation of closing stock. Survey team took the valuation applying MRP- GP% whereas as per assessee, since as per normal trade practice sales are generally made after giving discounts @ 30% to 60%, stock was valued at MRP-Discounts-GP%. This discrepancy in valuation method was duly elucidated before the Assessing Officer vide submission dated 25.02.2013 by the Assessee. The statement showing valuation of closing stock at actual sale price supported by relevant invoices to prove assessee s claim of overvaluation of stock by the survey team. It is undisputed fact that per unit consumption of inputs say, raw material, electricity, diesel etc. is directly proportional to the no. of cores in the wire i.e. as the no. of cores increases per unit consumption of input increases. A six core cable is nearly equal to six single core cables. The assessee demonstrated the conversion of 5 variety of multiple core wire, which constitute 91% of total production by the assessee, into single core wires which shows that production in meters per unit of electricity consumed has increased in the subject year through a table before the AO. The assessee also showed the comparative chart in respect of production of multiple core cable has increased in the subject year as compared to previous years and also demonstrated total production of wires in meters, if the same is converted to single core wires further substantiating assessee s claim that per unit production has increased in subject year to the Assessing Officer. Thus, there is no need to interfere with the findings of the CIT(A). Ground No. 1 of the Revenue s appeal is dismissed. Interest free advance to two sister concern without charging any interest - HELD THAT:- Advance of Rs. 77 lakhs considered by the Assessing Officer for making the disallowance, was not from interest bearing borrowed funds, but was made out of own funds built up from the interest free funds i.e. capital and Interest free sundry deposits available with the assessee amounting to Rs. 2.64 crores (1.34+1.30). This emerges from the records produced before the Assessing Officer. Therefore, when there is no expenditure of interest in respect of interest free funds of Rs. 2.64 crores which are more than the amount advanced, there is no justification for charging interest and that too @ 12% on the sum of Rs. 77 lakh. These factual aspects were ignored by the AO. Thus, the CIT(A) rightly deleted this addition. There is no need to interfere with the findings of the CIT(A). Ground No. 2 of the Revenue s appeal is dismissed. Disallowance of damages u/s 37 - HELD THAT:- From the perusal of the records it can be seen that due to some unfavorable market conditions specifically shortage of material, unreasonable prices of inputs, delayed payment by railways etc. the assessee could not make the supplies on time to Railways that is the only reason that railways deducted liquidated damages out of payment due to the assessee. Thus, the breach of contract is squarely within the meaning of expression commercial expediency when, seen from the perspective of the assessee s business. Thus it is settled law that only those payments which have been made for infringement of law shall not be allowed as revenue expenditure. Since, the said payment/deduction was not towards any offence or infringement of law therefore the disallowing the same is not tenable on part of the AO. CIT(A) rightly deleted this addition. Ground No. 3 of the Revenue s appeal is dismissed.

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• 2019 (11) TMI 637
  Penalty u/s 271AAB - whether it is mandatory or discretionary - income surrender on account of advance for land - HELD THAT:- Levy of penalty U/s 271AAB is not mandatory but the AO has to take a decision on the basis of relevant facts of the case and after considering the reply of the assessee whether the surrender made by the assessee falls in the definition of undisclosed income as defined in the explanation to Section 271AAB(1) of the Act. Accordingly, following the earlier decision of this Tribunal we hold that the penalty U/s 271AAB of the Act is discretionary and not mandatory. It is not an automatic as a consequence of surrender of income by the assessee but the conditions precedent as provided U/s 271AAB are to be satisfied for levy of the penalty. Therefore, the finding of the ld. CIT(A) that the penalty is mandatory in nature is not sustainable and the same is set aside Without going into the controversy whether these entries are artificial or actual payment made by the assessee when there was no asset actually acquired by the assessee or possessed by the assessee then the mere notings of payment being advanced for land cannot be held as undisclosed income of the assessee. The Revenue has not made any efforts to ascertain the correct and proper particulars of the land and the person to whom the alleged payment was made by the assessee. Nothing has been brought on record to show that the assessee has finally acquired these lands by executing some documents or title deeds. When there is no acquisition of land then in the absence of the corresponding asset acquired by the assessee the mere noting of the advance which is out flow of the funds cannot be held as undisclosed income. In SHRI RAJA RAM MAHESHWARI VERSUS THE DCIT, CENTRAL CIRCLE-3, JAIPUR. [ 2019 (1) TMI 1546 - ITAT JAIPUR] Tribunal has consistently held that mere entries of advance for land cannot be treated as undisclosed income. Accordingly, following the decision of the Coordinate Bench and maintaining the rule of consistency we hold that the penalty U/s 271AAB is not sustainable in respect of the income surrender on account of advance for land because of alleged transactions do not fall in the ambit of undisclosed income as defined in explanation to Section 271AAB(1) of the Act. Accordingly the penalty levied U/s 271AAB is in the case of the assessee is deleted. - Appeal filed by the assessee is allowed.

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• 2019 (11) TMI 636
  Deduction u/s 80P - amount invested in Cooperative and other Banks - HELD THAT:- Definition of member given in section 2(19) of the Maharashtra Co-operative Societies Act takes within its sweep even a nominal member, associate member and sympathizer member and there is no distinction made between duly registered member and nominal, associate and sympathizer member. Therefore, following the decision of Co-ordinate Bench of the Tribunal in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd. [ 2012 (9) TMI 288 - ITAT, PUNE] and following the same hold that the assessee is eligible for deduction u/s 80P(2)(d) of the Act in respect of the amount invested in PDCC i.e., Cooperative Banks and other Banks. I am further of the view that in the present case, the ratio of decision of the High Court in the case of M/s. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd. [ 2019 (1) TMI 116 - MADRAS HIGH COURT] would be applicable. Therefore following the ratio of the decisions cited herein above and the decision of Hon ble Bombay High Court hold that assessee is eligible for deduction u/s 80P - Decided in favour of the assessee

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• 2019 (11) TMI 635
  TP Adjustment - comparable selection - Functionally similarity - HELD THAT:- Assessee a wholly owned Indian subsidiary of FIL Capital Management (Mauritius) Ltd. (FIL, Mauritius), engaged in providing non binding investment advisory services to its overseas Associate Enterprises (A.E). The assessee also provides non-binding investment advisory services to its A.E., therefore, it is a risk mitigated entity. For the assessment year under consideration, the assessee entered into international transaction of non binding investment advisory services with its A.E. and earned revenue of Rs. 26.58 crore The assessee while filing return of income for the year under consideration reported international transaction with its AE. The assessee also furnished its transfer pricing report as required under the Income tax Act. For bench marking the transaction, the assessee undertook a study by adopting Transaction Net Margin Method (TNMM) as most appropriate method with OP/OC as the Profit level indicator ( PLI). By considering itself as the tested party, the assessee undertook a search process in the data bases and identified following four comparables with average arithmetic mean of 8.82% on the basis of three year data. AO referred the matter to the TPO for determination of ALP of International Transaction. For benchmarking the International Transaction, the assessee adopted TNM as most appropriate method, operating profit/operating cost was considered as profit level indicator and assessee company has taken tested party. Thus companies functionally dissimilar with that of assessee to be deselected from final list.

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• 2019 (11) TMI 634
  Set off of long term capital loss on sale of shares with long term capital gain - HELD THAT:- Co-ordinate Bench of Kolkata Tribunal in the case of United Investments vs. ACIT [ 2019 (9) TMI 366 - ITAT KOLKATA] had also endorsed the same view. We find that the provisions of Section 70-80 of the Act does not speak about payment of STT at all. There is no mention of STT even in Section 74 of the Act which talks about set off of carry forward of losses under the head capital gains . Respectfully following the aforesaid decision, we are inclined to accept the argument of the ld. AR that the source of income remains income derived from transfer of shares and that STT paid long term capital loss and non-STT paid long term capital gains are only segments of such source and cannot be construed as a separate source altogether. We hold that assessee is entitled for set off of STT paid long term capital loss with non-STT paid long term capital gains in the facts of the instant case. Accordingly, the grounds raised by the assessee are allowed.

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• 2019 (11) TMI 633
  Credit of tax deducted at source denied - HELD THAT:- In this case the only issue is with regard to non granting of TDS credit qua which the TDS certificate could not be furnished by the assessee as the same were not given to the assessee, however, the assessee has filed the details of the of the deductors such as PAN numbers, TAN numbers who have deducted the TDS. We also observe that in the first round, the CIT(A) after following the order of Hon ble Bombay High Court in the case of Yashpal Sahni vs. Rekha Hajarnavis, ACIT Ors. [ 2007 (7) TMI 7 - HIGH COURT , BOMBAY] has directed the AO not to recover the said TDS credit or to allow the TDS credit to the assessee, however, in the second round the CIT(A) denied the credit citing the reasons that the assessee has not furnished the TDS certificates before the AO. In the present case before us this is not the case of the Department that TDS has not been deducted at source on behalf of the assessee but the only contention of the Department is that the certificate was not filed before the AO. The assessee has already filed the details of deduction of TDS along with PAN, TAN and details of deductors. We are not in agreement with the conclusion drawn by the CIT(A) that TDS certificate has not been filed before the AO and therefore no credit could be granted. The case of the assessee is squarely covered by the decision in the case of Yashpal Sahni vs. Rekha Hajarnavis, ACIT Ors. (supra) wherein it has been held that it is sufficient that tax has been deducted at source and then Revenue can not recover the TDS amount with interest from the petitioner once again. We, therefore, respectfully following the decision of the Hon ble Bombay High Court set aside the order of Ld. CIT(A) and direct the AO to allow the credit to the assessee. Not granting the interest u/s 244A on TDS for the period from May 2007 to June 2014 - HELD THAT:- As relying on LARSEN AND TOUBRO LTD. [ 2010 (6) TMI 414 - BOMBAY HIGH COURT] we are of the considered view that the interest is to be allowed to the assessee from 1st May, 2007 to 20th June 2014 as the funds were with the department. Accordingly the order of CIT(A) is set aside and AO is directed to recompute the interest as stated above. Accordingly, the appeal is allowed.

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• 2019 (11) TMI 632
  Exemption u/s.11 - activities of the assessee trust was not charitable in nature as it is rendering services to the business organizations - HELD THAT:- Assessee before us is a society formed by Government of Tamil Nadu with an object of promoting industrial growth and exports in the state of Tamil Nadu. It process the application submitted by the industrial organization and verify whether the applications are in conformity with the rules relating to environment, local authority, fire protection, water, forest, police etc. Fees were charged for rendering this services as prescribed by the Tamil Nadu Government from the industrial organization. Assessee is duly registered u/s.12A. It is not the case of the assessee that it falls within the preview of first three limbs i.e. relief for poor, education and health but under public general utility. Therefore the provisions of Section 2(15) of the Act are squarely applicable. According to AO, proviso to Section 2(15) of the Act are applicable as it charges fees from the business organizations for the services rendered by it. CIT(A) confirmed the findings of the AO following the decision of the Co-ordinate Bench of the Tribunal in assessee s own case for earlier years. No argument were advanced as to how the proviso to Section 2(15) of the Act is not applicable to the case of the assessee. The whole case of the assessee is premised on the argument that it is instrumentality of the State coming within the meaning of Article 12 of the constitution and therefore it is not an assessable entity. Submissions made by the ld. Counsel cannot be accepted even the State Corporation Societies cannot be equated with State Government though it is instrumentality of the State as held in the case of Arun Kumar and Others vs. Union of India and Others [ 2006 (9) TMI 115 - SUPREME COURT] - Appeal of the assessee stands dismissed.

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• 2019 (11) TMI 631
  Addition on account of sundry creditors u/s 68 - HELD THAT:- As noticed from the assessment order that the AO has not rejected the book results and thereby has accepted the purchases made from the said parties and the sales have also been accepted. As to be seen as to whether the addition is called for merely because some of the letters issued u/s 133(6) were returned back unserved or in some other cases there was no compliance from the said creditors. The coordinate Bench of the Tribunal in the case of Sudha Loyalka [ 2018 (7) TMI 1892 - ITAT DELHI] has held that addition cannot be made u/s 69C in respect of amount payable to creditors towards purchases when such purchases were duly recorded in books of account and sales made against those purchases was not disputed. The Lucknow Bench of the Tribunal in the case of Zazsons Exports Ltd. [ 2015 (4) TMI 747 - ITAT LUCKNOW] has held that when the AO has accepted the purchases and trading results has not been disturbed, addition cannot be made u/s 68 of the Act merely on account of non-verifiability of sundry creditors. The Hon ble Delhi High Court in the case of Ritu Anurag Agarwal [ 2009 (7) TMI 1247 - DELHI HIGH COURT] has held that when there was no disallowance for corresponding purchases and the trade results were accepted by the Assessing Officer, no addition can be made u/s 68 in respect of the outstanding sundry creditors related to purchases. The various other decisions relied on by the ld. counsel in his paper book also support his case. CIT(A) is not justified in sustaining the addition made by the Assessing Officer on account of the sundry creditors in whose cases the letters issued u/s 133(6) were either returned unserved or were not complied with and the assessee failed to produce them. Accordingly, the order of the CIT(A) is set aside and the grounds raised by the assessee are allowed. Lumpsum disallowance on account of unverifiable freight expenses - HELD THAT:- When the Assessing Officer had not rejected the books of account and no specific amount has been doubted and the accounts are audited and the auditors have also not pointed out any defects, the addition made by the Assessing Officer and sustained by the CIT(A) is not justified. I find some merit in the above arguments of the ld. counsel. Admittedly, the accounts of the assessee are audited u/s 44AB by the auditors and they have not given any adverse remarks. AO has not pointed out any specific defect and has merely made the disallowance on ad hoc basis on the ground that the assessee failed to produce bills and vouchers. He has also not given any comparable case which he has mentioned in the order other than stating that the claim is higher in comparison to other similar assessees. In this view of the matter, set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. Disallowance on account of low household withdrawal - HELD THAT:- Assessee has shown only Rs. 32,434/- as withdrawal for household expenses. The argument of the assessee that his wife has also contributed an amount of Rs. 42,159/- was rejected by the Assessing Officer. I find the ld.CIT(A) upheld the action of the Assessing Officer in making the addition of Rs. 60,000/- on account of low household expenses. It is the submission of the ld. counsel for the assessee that the total amount of 74,593/- is sufficient to maintain the family. However, on a pointed query by the Bench, the ld. counsel was unable to explain the size of the family for which an amount of Rs. 74,593/- will be sufficient. However, AO has also not given any plausible reason as to on what basis he has made this addition of Rs. 60,000/-. Disallowance on ad hoc basis appears to be on higher side, modify the order of the CIT(A) and direct the Assessing Officer to restrict the same to Rs. 30,000/-.

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• 2019 (11) TMI 630
  Income earned from sale of development rights in respect of a partially constructed project - Correct head of income - Capital Gain or Business Income - HELD THAT:- Undisputedly, the assessee is engaged in the business of developing real estate. It is also the claim of the assessee that it is developing or has developed various other housing projects and the development rights of the subject property was also acquired for development purpose. Commissioner (Appeals) himself has stated that in respect of some other housing projects developed by the assessee, the receipts and expenses have been routed through Profit Loss account and the income has been offered subsequently as business income. Assessee s claim that development rights acquired were for the purpose of business requires consideration. While concluding that the income from sale of development rights is capital gain, since, neither Commissioner (Appeals) nor the AO have properly appreciated the submissions of the assessee and examined all the attending facts and materials relating to the issue and have merely harped upon the accounting treatment given by the assessee at the time of purchase of the development right, we are inclined to restore the issue to the file of the Assessing Officer for denovo adjudication after due opportunity of being heard to the assessee. Since, the applicability of section 50C and claim of indexation on cost of improvement is dependent upon the ultimate outcome of the nature and character of the income received by the assessee, whether business income or capital gain, we also restore these issues to the AO for denovo adjudication depending upon his decision on the nature and character of the income received from sale of development right. Consequently, grounds raised are allowed for statistical purposes.

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• 2019 (11) TMI 629
  Gain from sale and purchase of shares and mutual funds - STCG on sale of shares / mutual fund - HELD THAT:- As decided in own case [ 2018 (3) TMI 210 - ITAT MUMBAI] AR fairly conceded that the amount of STCG earned by the assessee included certain intra-day gains / losses which were in the nature of speculation and hence were required to be excluded while arriving at figures of STCG. Therefore, at the outset, we direct Ld. AO to exclude the same from the figures of STCG and treat the same as speculation in nature. We concur with the stand of Ld. AR that the short term capital gains earned by the assessee was assessable under the head Capital Gains only subject to adjustment as envisaged above. Disallowance of foreclosure expenses - AO held that the assessee failed to prove that applicable TDS has been deducted and paid for, therefore, even if the above expenditure are allowable u/s 37 (1), still the same needs to be disallowed u/s 40(a)(ia) - HELD THAT:- We note that it is settled law that res judicata does not apply to tax matter. Hence learned counsel s reference to earlier and subsequent proceedings are not at all relevant here. We note that the aforesaid sum of Rs. 57,42,28,508/- inter alia represents the balance in the loan accounts which have been closed pursuant to realisation of assets secured from the borrower after incurring the various expenditure. We note that no detail was submitted before the assessing officer. Assessing officer had no occasion to examine the details including the various entries subsequent to which this amount has been arrived at. Learned CIT-A has in summary manner allowed the assessee s appeal. He has never referred to any detail submitted by the assessee. It is also accepted by the learned counsel of the assessee that the details as claimed by him to be submitted before the learned CIT-A were not filed as additional evidence nor the same were remanded to the assessing officer. In these facts in our considered opinion the interest of justice demands that this issue be remitted to the file of assessing officer.

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• 2019 (11) TMI 628
  Assessment u/s 153A - CIT(A) not holding the income on account of surrender of tenancy rights as income from other sources as held by the AO instead of income from long term capital gain, as shown by the assessee - CIT(A) allowing deduction u/s 54F - HELD THAT:- CIT (A) has rightly deleted the addition made in the assessment order framed u/s 153A on the ground that when assessment is not abated and no incriminating evidences were found in search and seizure operation conducted u/s 132 of the Act, no addition can be made. So, finding no illegality or perversity in the impugned order passed by the ld. CIT (A), present appeal filed by the Revenue is hereby dismissed.

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• 2019 (11) TMI 627
  Unexplained investment in jewellery found during the course of the search - violation of principles of natural Justice - HELD THAT:- We have deliberated at length on the issue under consideration and, are of the considered view that the unsubstantiated valuation report of the government approved valuer, the authenticity of which had never been scrutinised and, therein verified by the department, can in no way support the claim of the A.R, that the jewellery found during the course of the search proceedings was acquired by the assessee from his explained sources. A.R could not draw our attention to any such document/records, which would lend credence and justify the veracity of the said valuation report. It is not the case of the ld. A.R, that the assessee and his family members were being assessed to wealth tax and, the aforesaid valuation report containing the details as regards the gold/diamond jewellery held by the assessee and his family members was furnished with the department in the course of any such proceedings. In our considered view, the stand alone and unsubstantiated valuation report of the government approved valuer, would in no way assist the assessee for characterising the jewellery found from his residential premises/lockers, as an investment made by him from explained sources. We thus not being able to persuade ourselves to accept the contention advanced by the ld. A.R, that the lower authorities had erred in treating the jewellery found from his premises/lockers during the course of the search proceedings, as an unexplained investment in the hands of the assessee, thus reject the same. Accordingly, finding no infirmity in the order of the CIT(A) - Decided against assessee

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• 2019 (11) TMI 606
  Deduction u/s 80IB(10) - assessee has not completed the project due to failure attributable to assessee itself within stipulated time prescribed u/S. 80IB(10) - AO denied the benefit on the premise that the housing project was not completed within the time permitted - CIT(A) and the Tribunal accepted two different dates of completion taking into account the respective dates of approval of the housing project. The entire issue is one of the facts. No question of law arises - HELD THAT:- Special leave petitions are dismissed.

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• 2019 (11) TMI 605
  Registration u/s 80G - CIT(E) rejected the application u/s 80G stating it can not be ascertained as to whether the society is applying its funds or not on its proposed activities - ITAT allowed the registration - HELD THAT:- Tribunal noticed that during the pendency of the application under Section 12AA of the Act, detailed investigation was conducted by the Income Tax Officer (Exemptions) into all factors as are required to be considered under Section 12AA and it was only after the assessee had satisfied all the conditions that the application under Section 12AA allowed. It is also not in dispute that the conditions numerated under Section 12AA are in parimeteria with the conditions as enumerated under Section 80G. The Tribunal rightly relied upon CIT Vs. Thangadagi Trust [ 2016 (3) TMI 595 - KARNATAKA HIGH COURT] and Vinayaka Vidyaniketan, Indiranaga Vs. CIT (Exemption) [ 2016 (2) TMI 746 - ITAT BANGALORE] and held that the CIT(E) had erred in not allowing the application under Section 80G. In our opinion the reasoning of the Tribunal is apt. We find that the Commissioner had taken an unduly harsh and pedantic view of the matter and once it is not disputed that the stringent conditions under Section 12AA have been satisfied, the further action can only be taken at the end of the financial year to determine whether any donation etc or other the conditions of Section 80G have or have not been fulfilled.

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• 2019 (11) TMI 604
  Mandatory for depreciation to be granted while determining the deduction u/s 80IB - Appellant had not claimed such depreciation - HELD THAT:- There is really no conflict as such in the decisions of this Court in the cases of Grasim Industries Limited [ 2000 (4) TMI 28 - BOMBAY HIGH COURT] and Indian Rayon Corporation Ltd. vs. CIT [ 2003 (1) TMI 58 - BOMBAY HIGH COURT] which is in fact the decision followed in Scoop Industries Pvt. Ltd. [ 2006 (10) TMI 75 - HIGH COURT, BOMBAY] . The Full Bench has held that the ratio laid down in both the cases, is in consonance with the ratio laid down by the Hon ble Apex Court in the case of Distributors (Baroda) P. Ltd. vs. Union of India [ 1985 (7) TMI 1 - SUPREME COURT] . Upon analysis of the legal position, the Full Bench concluded that for the purposes of deduction under Chapter VIA, the gross total income has to be computed inter alia by deducting the deductions allowable under Section 30 to 43D of the Act, including depreciation allowable under Section 32 of the Income Tax Act, even though the Assessee may have computed the total income under Chapter IV by disclaiming the current depreciation. This, according to us, affords a full answer to the substantial question of law, now pressed in this Appeal. - Decided in favour of revenue

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• 2019 (11) TMI 603
  Deduction u/s 80IB - Whether process undertaken by its industrial undertakings during the Assessment Year 2002-03 was not manufacturing process but only a process of testing optical fiber cable or trial production? - HELD THAT:- ITAT upon appreciation of entire material on record has noted that the finished products manufactured and sold by the Appellant during the AY 2002-03 were in fact manufactured on the basis of purchase orders already received. Admittedly, the price at which the Appellant procured the material and the price at which the Appellant sold the material after value additions to the purchasers on the basis of purchase orders is almost double. ITAT has also noted that absolutely there is no evidence was produced on record that the processes undertaken in AY 2002-03 were in the nature of testing or trial production. No contemporaneous report of such trial production or testing were produced by the Appellant. No reports of production staff for testing were ever produced. According to us, all this material is more than sufficient to sustain the findings of fact recorded by the Assessing Officer and ITAT. It is not possible for us to say that the finding of fact recorded by the two authorities is vitiated by perversity or that the inferences drawn by the two authorities are not legal inferences that could have been drawn in the matter of this nature. In fact, the material on record suggests that prior to the amendment by Finance Act, 2002 in Section 80IB(4), the Appellant had declared the date that the Appellant s industrial undertakings began manufacture was 26th March, 2002. After the amendment of extended date for beginning of manufacture upto 31st March, 2004, the Appellant sought to contend that the manufacture began for the first time at its industrial undertakings only on 1st February, 2003. The ITAT has rightly observed that the Appellant has been shifting the stances. Such shifting of stances clearly amounts to approbation and reprobation. Even if the returns filed by the Appellant or declarations made by the Appellant are to be excluded from consideration, rest of the material on record also does not support the Appellant s contention that the processes undertaken during the Assessment Year 2002- 03 were in the nature of testing or trial run is only involvement, there is no element of manufacture. Accordingly, the first substantial question of law is required to be answered against the Appellant and in favour of the Revenue. Taking into consideration the findings of fact recorded by the AO and the ITAT that the manufacturing in the present case actually commenced in the AY 2002-03 and not in the Assessment Year 2003-04. Even this substantial question of law will have to be decided against the Appellant and in favour of the Revenue. It is pertinent to note that the findings of fact is not at all vitiated by any perversity and therefore, it cannot be said that the ITAT was not justified in holding that the Assessment Year 2002-03 is the final Assessment Year as contemplated under clause (c) of sub-section 14 of Section 80IB of IT Act. Third substantial question of law is again required to be answered against the Appellant and in favour of the Revenue because the substantial question of law seems to proceed on the basis that there was no dispute that the process of purchasing the material by the Appellant from open market was only for the purpose of testing optical fiber cable. The material on record as noted earlier establishes that there was manufacture involved and the process undertaken by the Appellant during the Assessment Year 2002-03 was not restricted to mere testing or trial run. The findings of fact in this regard are amply borne out from the material on record and consequently are not vitiated by any perversity or absurdity.

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• 2019 (11) TMI 602
  Notice u/s 179(1) - there were no steps taken for recovery of the dues from the Company - HELD THAT:- The petitioner did not ask for the details of the steps taken to recover the dues from the Company. The only defence was that the petitioner was not the director of the Company at the relevant time and it was also not the defence raised that the non recovery can not be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the Company. All these points were vaguely raised in the appeal before Commissioner, which the Commissioner has turned down. - Writ petition dismissed.

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• 2019 (11) TMI 601
  Income Tax Settlement Commission (ITSC) power to invoke Section 154 dealing with rectification of mistakes - HELD THAT:- In the light of the categoric pronouncement of the Supreme Court in Brij Lal [ 2010 (10) TMI 8 - SUPREME COURT] , the question of applicability of section 154 to proceedings before the Settlement Commission except if it had been resorted to in the original proceedings, stands settled against the Revenue.

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• 2019 (11) TMI 600
  Penalty u/s 271(1)(c) - wrong claim of having received a cash gift of Rs. 11 lac from own sister - HELD THAT:- In the course of penalty proceedings also the assessee could not place on record any documentary evidence which could have substantiated his explanation of having received a genuine gift of Rs. 11 lac from his sister. In our considered view, the assessee had not only failed to substantiate his explanation that he had received a cash gift of Rs. 11 lac from his sister, but he had also failed to substantiate the bonafides of his aforesaid explanation. We find that the claim of the assessee that the amount of Rs. 11 lac received as cash gift from his sister, was sourced from the gifts which she had received from her siblings and her personal savings is in fact a concocted story that was hatched in order to justify the availability of funds with her. In our considered view, the A.O had rightly observed that as the assessee had deliberately raised a wrong claim of having received a cash gift of Rs. 11 lac from his sister, therefore, the same tantamounts to concealment of income on his part. We are in agreement with the view taken by the CIT(A) that the assessee had concealed his income as per the provisions of Explanation 1(B) to Sec. 271(1)(c) of the Act. Even in the course of the proceedings before us the assessee had failed to place on record any documentary evidence which would substantiate the genuineness of the gift transaction. Accordingly, finding no infirmity in upholding of the penalty imposed by the A.O under Sec. 271(1)(c) by the CIT(A), we find no reason to dislodge the well reasoned view taken by him. - Decided against assessee

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• 2019 (11) TMI 599
  Scope of Limited Scrutiny - Converting the Limited Scrutiny to a Complete Scrutiny - Chargeability of capital gain u/s 54EC - large deduction u/s 5B, 54C, 54D etc. and large cash deposits in savings bank account - HELD THAT:- As is evident from the assessment order, in the present case, we find that the same is beyond the intent purpose and scope of the jurisdiction of the Assessing Officer, as the assessment has been made, exceeding his jurisdiction, because the case has been selected for limited scrutiny only on two issues, i.e. (i) Large deduction under section 54B, 54C, 54D etc., and (ii) Large cash deposits in savings account of the assessee; whereas the additions have been made on the indexed cost of acquisition at Rs. 17,59,545/- and indexed cost of improvement at Rs. 20,90,319/-, which is covered under section 48 of the Act, and is outside the scope and purview of the reasons of limited scrutiny. Moreover, the approval of the PCIT is mandatorily required for converting the Limited Scrutiny to a Complete Scrutiny. So, the proper course for the AO before making these additional enquiries would have been to take approval from the administrative Commissioner to widen the scrutiny. This, however, was not done and therefore, the action of the AO is violative of the CBDT Instruction. Thus, the addition so made by the Assessing Officer, in gross violation of the CBDT Instruction, is liable to be deleted. Finding merit in the grievance sought to be raised by the assessee by way of additional Ground No. 7, the same is accepted, resultant to which ground Nos. 1 to 3 originally raised by the assessee become infructuous, requiring no specific adjudication. Deduction under section 54EC - objection of the Assessing Officer that investment in excess of Rs. 50 lakhs is not permitted in a year was introduced in the statute by the Finance (No. 2) Act, 2014 w.e.f. 1/4/2015 i.e. relevant to assessment year 2015-16 - The case under consideration relates to assessment year 2014- 15, hence the same is not applicable to the facts of the present case. Secondly, the objection that the investment in bulk is not required and piecemeal is not permitted also does not hold good, as the assesse purchased Bonds of Rs. 50 lakhs on a particular date and claimed deduction of Rs. 16.80 lakhs in assessment year 2013-14 and Rs. 33.20 lakhs in ay 2014-15. There is no bar in the act that the Bonds for two different assessment years cannot be purchased en masse and that they should be purchased separately. The restriction is only to the extent that the bonds in excess of Rs. 50 lakhs cannot be purchased in one single financial year. Since the assessee has not exceeded the limit of Rs. 50 lakhs, this ground taken by the Assessing Officer is not a valid ground. Objection of the Assessing Officer that the plots were sold after the investment made in specified Bonds is not correct, as all the sale deeds (APB:620 to 195) were duly filed before the Assessing Officer by the assessee along with a chart (APB:51) depicting the sale of plots for the year under consideration. The assessee has also filed the calculation of capital gains accrued prior to the date of investment in REC Capital Gain Bonds on 31/5/2013 (APB:61), which shows long term capital gain upto 31/5/2013 at Rs. 60,03,311/- thus, deduction of Rs. 33,20,000/- was rightly available to the assessee. Findings of the Ld. CIT (Appeals) too is vitiated, as he has held that the Assessing Officer has further given a finding that the plots were sold after 31/05/2013 and that this fact has not been denied by the assessee. The assessee had written a letter (APB:44-46), dated 10/8/2017, to the Ld. CIT (A), categorically stating therein that the plots to the extent of Rs. 77,83,000/- have been sold upto 22/04/2013, whereas the investment in REC Bond was made on 31/05/2013 and also furnished the chart depicting the sale of plots for the year under consideration along with copies of sale deeds. Therefore, in our opinion, the disallowance of claim made by the assessee under section 54EC is not justifiable. We, therefore, set aside the order of the ld. CIT(A) on this issue and accept ground Nos.4 5 raised by the assessee. Deduction under section 54F - we find that the assessee had claimed deduction of Rs. 28,54,707/- against the investment of Rs. 41,76,800/- made in construction of house. The Assessing Officer, however, allowed deduction under section 54F of the Act at Rs. 36,37,346/-, which has been confirmed by the ld. CIT(A). Since we have set aside the orders of the authorities below relating to the claim under section 54EC of the Act, we set aside the orders of the authorities below on the issue relating to allowability of claim under section 54F of the Act and restore the same to the file of the Assessing Officer for final computation of the capital gains. Appeal of the assessee is partly allowed.

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• 2019 (11) TMI 598
  Rectification of mistake u/s 154 - deduction u/s 80IB disallowed - HELD THAT:- An identical issue has come up before the Tribunal in the assessee s own case for assessment year 2011-12 wherein also the Assessing Officer had withdrawn the deduction allowed under section 80IB of the Act, which has been upheld by the ld. CIT(A) and the Tribunal vide its order dated 30/10/2018, relying on various case laws, cancelled the rectification order passed under section 154 of the Act and allowed the appeal of the assessee, holding that the Assessing Officer had no jurisdiction to pass order under section 154 of the Act. Main grievance of the ld. D.R. with regard to the allowability of deduction u/s 80IB subject to filing of return within the time prescribed under section 139(1) of the Act, has been considered by the Hon ble Kerala High Court in the case of Chirakkal Services Co-operative Bank vs. CIT [ 2016 (4) TMI 826 - KERALA HIGH COURT] and allowed deduction claimed by the assessee, albeit under section 80P of the Act, on which judgment reliance has been placed by the Lucknow Bench of the Tribunal while allowing the deduction under section 80IB of the Act to the assessee in the assessee s own case for assessment year 2011-12. Since the allowability of deduction under section 80IB of the Act has been considered by the Tribunal in the assessee s own case, on facts exactly similar, mutatis mutandis, to those present for the year under consideration, for assessment year 2011-12 and the Tribunal has decided the issue in favour of the assessee, vide order dated 30/10/2018, following the view taken by the Lucknow Bench of the Tribunal in the assessee s own case (supra), we confirm the order of the ld. CIT(A), cancelling the rectification order passed by the Assessing Officer under section 154 of the Act. Accordingly, all the grounds taken by the Department in its appeal are rejected.

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• 2019 (11) TMI 597
  Penalty u/s. 271AAB - 10% OR 30% of undisclosed income - HELD THAT:- The fact remains that the seized cash of Rs. 65.50 lacs was in the Department s custody since 20-03-2015 and the assessee in his statement dated 05-05- 2015 as also at the time of filing of the return had made requests in writing for adjustment of seized cash. For deciding the date of payment , it is wholly immaterial whether or not such payment is regarded as advance tax . Material fact is that the Department itself treated the seized cash to be the payment made towards discharge of assessee s tax liability. In the foregoing circumstances the only conclusion which one may draw is that the date of cash seizure was the date of tax payment and therefore no interest u/s 234B could be levied once the date of payment is held to be 20.03.2015. Grounds raised before us by the Revenue s appeal that the Revenue per se has not objected to the ld. CIT(A) specific finding of fact that the assessee in his statement u/s. 132(4) dt. 05-05-2015 had requested the AO to adjust the seized amount of Rs. 65.50 lakhs against the tax payable on the undisclosed income. This finding of fact by the ld. CIT(A) has been not challenged before us, which finding thus crystallizes and becomes final. We therefore hold that the ld. DR s contention that assessee made the plea of adjustment of seized cash against tax on undisclosed income much after the completion of assessment is per-se wrong. CIT(A) has rightly held that the assessee did not commit the default of non-payment of tax before filing of return and therefore penalty could not be levied at 30% of the undisclosed income. And moreover, the department having taken the amount of Rs. 65.50 lakhs in their custody, cannot take unjust enrichment of it, when on one hand the department says it is assessees undisclosed income and then, not doing what he [assessee] directs to do with his money and thereafter finding fault with him and penalizing him for their [revenue] own omission cannot be accepted. We accordingly uphold the ld. CIT(A) s order restricting the penalty levied at 10% of the undisclosed income in the facts circumstances of the case. So, we confirm the action of Ld CIT(A) and dismiss the Ground Nos. 1and 2 of the Revenue. Benefit of Section 271AAB(1)(a) to the assessee just on the basis of payment of his tax liability on undisclosed income by way of adjustment of seized cash against the advance tax as held by him - The only ground for which the penalty was levied under Section 271AAB(1)(c) was that the assessee had failed to pay tax along with interest before filing of the return for the specified year. Except this lone reason, the AO did not cite any other reason or ground justifying the levy of penalty. We also note that the ld. CIT(A) adjudicated the assessee s appeal with reference to correctness of such sole ground on which the AO had levied the penalty. We therefore find that Ground No. 3 taken by the Revenue does not emanate from the orders of the lower authorities. We also find merit in the ld. AR s submission that the penalty proceedings being quasi criminal in nature, the AO was bound to spell out the precise reasons at the time of passing of the penalty order and he cannot be permitted to make out new grounds before the Tribunal justifying his action of levying penalty and thus enlarge the scope of the appeal, which is not permissible. We therefore hold that since. Ground No. 3 raised by the Revenue does not arise from the orders of lower authorities, this ground is dismissed in limine.

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• 2019 (11) TMI 596
  Income surrendered in the return of income filed u/s.153A - survey u/s.133A - bogus purchases - statement of the assessee made u/s 132(4) - HELD THAT:- Assessee cannot run away from his statement of recording bogus purchase bills, but can prove legally that the entire amount of bills should not be legally added. Therefore, the contention of the DR that once the assessee had admitted in his statement u/s 132(4) to the effect that there was no proper evidence of the genuineness of the bills of purchase of steel and offered the equal amount for taxation, then he cannot take a contrary stand in the assessment proceedings, is countenanced only to the extent of non-genuineness of the bills of purchase of steel but not to the extent of offering equal amount for taxation, which would be separately examined as per the provisions of law. DR has raised one more preliminary issue to the effect that income once included by the assessee in his return of income binds him and hence the assessee cannot claim for its exclusion. This contention has no legal legs to stand on and is liable to be rejected - even if the assessee wrongly includes certain income in his return, which is otherwise not chargeable to tax, he has a right to lodge a claim before the AO in this regard during the course of assessment proceedings. As the assessee in the instant case has challenged the suo motu inclusion of such an income before the AO, we do not find any fetters on the powers of the AO in not examining if the same is actually liable to be fully or partly included in the total income. The contention raised by the DR in this regard is, therefore, jettisoned. Coming to the merits of the case, it is seen that the assessee recorded the alleged tainted purchases of steel amounting to Rs. 99,41,075/- in his books of account for the year under consideration. The assessee is engaged in the business of manufacture of sugar machinery. Steel is a raw material for the manufacturing of the machinery. It is obvious that without raw material there cannot be any finished products. The assessee has filed stock details before the authorities which show that purchases for the disputed quantity were, in fact, made. The fact that the assessee made genuine sales, has not been disputed by the Revenue. In such a scenario, even if we accept the contention of the Revenue that the purchases were bogus, still the entire amount of purchases cannot be added in view of the fact that some purchases must have, in fact, been made which got eventually consumed in the process of manufacturing. This evidences that the assessee made some cheaper purchases of steel, but obtained bogus purchase bills of higher value so as to inflate the expenses and reduce the profit. In such circumstances, only the profit (excessive cost element) embedded in such bogus purchases can be included in the total income of the assessee, which, in the peculiar facts and circumstances of the instant case, is estimated at 10% of the bill amounts. Our view in estimating the net profit rate @10% of bogus purchases is fortified by the judgment of the hon ble jurisdictional High Court in Pr. CIT Vs. Paramshakti Distributors Pvt. Ltd. [ 2019 (7) TMI 838 - BOMBAY HIGH COURT] in which addition at the rate of 10% of bogus purchases has been held to be sustainable in similar circumstances. To sum up, the assessee gets relief by means of deletion of addition of 90% - Decided partly in favour of assessee.

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• 2019 (11) TMI 595
  Deduction u/s. 80IA - HELD THAT:- Deduction u/s.80IA of the Act has to be allowed as per Sec.80IA(1) of the Act, but the deduction so arrived at cannot exceed the gross total income of the Assessee. In the present case, the deduction u/s. 80IA of the Act, considering the business on which deduction u/s.80IA was claimed by the Assessee as the only income of the Assessee, was Rs. 24,36,83,037/-. The gross total income of the Assessee was Rs. 29,75,89,300/- (as per the return of income of the Assessee). Income under the head Income from Business or profession was Rs. 20,01,80,662/-. The ceiling of deduction u/s.80IA read with Sec.80AB or 80B(5) or 80A(2) is that it cannot exceed the gross total income, not the income determined under the head income from Business or profession . This aspect has not been noticed by the AO or the CIT(A). Conclusions of the CIT(A) that the Assessee should be allowed deduction u/s.80IA at Rs. 24,39,83,037/- as allowing the said deduction would not violate the mandate of law as laid down in the decision of the Hon ble Supreme Court in the case of Synco Industries Ltd. [ 2008 (3) TMI 13 - SUPREME COURT] . For the reasons given above, we sustain the order of CIT(A). TDS u/s 194C - harvesting charges paid to labourers by the assessee on behalf of the cane growers - whether it is part and parcel of the cost price of sugarcane and the payment of which cannot be covered within the expression work contract - when as per assessee, the Alland unit cane price was fixed under two different heads? - HELD THAT:- If the contract to supply sugarcane is ex field (cost of harvesting and transportation to be borne by the Sugar manufacturer), then it is the responsibility of the assessee to lift the sugarcane from the field to its factory i.e., the assessee has to bear the harvesting and transportation charges for the sugarcane. There is no such material brought on record to come to the conclusion that the harvesting transportation charges paid by the assessee is on ex- field basis. In such circumstances, we are of the view that, on the basis of probability, the plea of assessee has to be accepted and it has to be held that the payments made by the assessee towards harvesting and transportation charges have to be regarded as payment made for purchase of sugarcane and consequently the provisions of section 194C of the Act do not get attracted. - Decided in favor of assessee.

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• 2019 (11) TMI 594
  Calculation of the fair market value for the land sold by the assessee u/s.55(2) (b) - assessee has challenged the value adopted by the CIT(A) @ Rs. 20/- per sq.ft. as fair market value as against Rs. 50/- per sq.ft claimed by the assessee on the basis of report of approved valuer - HELD THAT:- In the instant case before us, it is admitted and undisputed fact that there was no reference made either by the Assessing Officer or by the CIT(A) to DVO for determination of the fair market value of the land. In absence of the DVO s report, the rejection by the Revenue Authorities of the registered valuer s report submitted by the assessee is not justifiable, rather, arbitrary, un-judicious, such action is required to be discarded. We set aside the order of the CIT(A) and direct the AO to take fair market value @Rs. 50/- per square feet as provided in the registered valuer s report submitted by the assessee. Thus, ground No.1 raised in appeal by the Revenue is dismissed. Allowing deduction u/s. 50 when there was no construction on the said land - HELD THAT:- main basis of addition on this ground was that existence of poultry farm building was not emerging from the sale deed, however, the other vital evidences submitted by the assessee in support of existence of poultry farm building were not considered by the AO. But those were taken into consideration by the CIT(A). That further in the record, it is stated that the assessee had availed bank loan from Central Bank of India for construction of the poultry farm building and in support thereof the assessee has placed before the CIT(A), the copies of certificates issued by the Central Bank of India, civil Lines Branch, Raipur. CIT(A) had adjudicated the issue regarding existence of building constructed right from the time when survey took place, a declaration by the assessee was made before the survey team regarding the construction of the poultry farm building and the bank loan was taken by the assessee for construction of the said poultry farm building. All these were analyzed by the Ld.CIT(A) and therefore, existence of poultry farm building cannot be doubted. Thus, relief provided to the assessee in view of provisions of Section 50 of the Act is thereby sustained and there is no need for any interference to the findings of the CIT(A). Thus, ground No.2 raised in appeal by the Revenue is dismissed. Addition on account of brokerage/commission paid for sale of land - grievance of the Revenue is that the CIT(A) has granted relief to the assessee relying on all these evidences but these evidences were not confronted before the AO for his comments - HELD THAT:- Notwithstanding anything contained in this particular Rule, the Commissioner (Appeals) shall have power to direct the production of any document or examination of any witness to enable him to dispose of the appeal. Therefore, it was well within the jurisdiction of the Ld. CIT(A) to admit those evidences produced before him and provide relief to the assessee. That mostly, Rule 46(A)(3) pertains to a when any doubt arises in the mind of the CIT(A) regarding additional evidences furnished before him then he can call for a remand report from the AO - It is not in all cases and not for all additional evidences, the Ld. CIT(A) has to call for remand report from the AO. This is absolutely clear from Rule 46(A) (4) of the Income Tax Rule, 1962 - relief provided to the assessee by the CIT(A) is sustained. Thus, ground No.3 raised in appeal by the Revenue is dismissed. Allowing deduction not claimed by the assessee in its return of income u/s.54B - HELD THAT:- Revenue Authorities have not contradicted the facts and circumstances in this case regarding claim of exemption u/s.54B of the Act by the assessee. Meaning thereby ingredients required for the exemption u/s.54B of the Act have been duly complied with by the assessee. Even in the paper book filed before us, evidences are included in the form of purchase deed wherein the land is recorded as agricultural land. Similarly, when the land was repurchased, it was also recorded as agricultural land. There are also copies of Land Revenue records filed in the paper book where it is shown that crops were grown on the said land. Therefore, ingredients and the facts and circumstances for getting exemption u/s.54B of the Act were duly complied with by the assessee. The only omission, the assessee made was that he did not include the same in the return of income claiming exemption u/s.54B and as we have already taken that the Income Tax laws are welfare in nature and the very purpose of welfare legislation is that there should not be any cohesive action by the quasi-judicial Authority. It is the duty of the quasi-judicial authority, the AO or the Ld. CIT(A) to guide the assessee to enable him to get benefit whether or not claimed by him for which he is legally eligible. We do not find any infirmity with the findings of the Ld. CIT(A) and relief provided to the assessee is hereby sustained.

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• Customs

• 2019 (11) TMI 626
  Jurisdiction to issue SCN - Discretionary Jurisdiction - applicability of Circular No. 83/2003-Cus., dated 18-9-2003 - HELD THAT:- It is a rule of discretion and it is not a rule of compulsion, but it should be applied with utmost rigour when it comes to matters pertaining to taxes, cess, fees etc., In other words, when it comes to matters pertains to fiscal law. As it is nobody s case that this case falls under any one of the rare exceptions set out supra, this Court refrains from interfering with the impugned SCN. The impugned SCN is not quashed, but kept in abeyance for period of eight weeks from the date of receipt of a copy of this order - petition disposed off.

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• 2019 (11) TMI 625
  Rejection of request to re-export the goods - imposition of ADD - HELD THAT:- In terms of sub-section (25) of Section 2 of the Customs Act, once the goods are cleared for home consumption, they no longer retain the identity of the imported goods. Under the circumstances, once the goods have been cleared, such goods no longer remain to be imported goods and hence, there is no question of re-exporting the goods as has been stated in the affidavit-in-reply filed on behalf of the respondents. It is true that prior to the provisional release of the goods and payment of the relevant duties, the petitioner had sought re-export of such goods, which request came to be turned down. However, now, what the petitioner seeks is to export of goods after the same have been cleared for home consumption. The impugned communication, dated 29-11-2018 of the third respondent - Assistant Commissioner of Customs, Valvada informing the petitioner that its request for re-export of goods has been rejected by the Principal Commissioner, Customs, Ahmedabad, is hereby quashed and set aside - Petition allowed.

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• 2019 (11) TMI 624
  Bail application - recovery of gold in the possession of accused-applicant or not - case of accused is that no gold as shown by the prosecution has been recovered from the possession of the accused-applicant and the prosecution story is false and concocted - HELD THAT:- Perusal of record reveals that allegation of recovery of 24 pieces of gold weighting 3983.24 grams of the value of Rs. 1,027,07,110/- as assessed by the evaluator has been alleged to have been recovered from the possession of the accused-applicant. There is sufficient material on record substantiating the allegation against the accused-applicant. The statement of the accused-applicant recorded under Section 108 of the Customs Act is admissible in evidence and from the perusal of whole record no fact has been highlighted, which may reflect that power has been exercised by the Custom Officers/Officials on whims. The accused-applicant was produced before the Magistrate without any delay after arrest and keeping in view the facts and circumstances of the case as well as the magnitude of the recovery of the gold from the possession of the accused-applicant as well the non-preferring any reasonable explanation of such possession, does not incline this Court to grant bail to the accused-applicant. There are no good ground to release the accused-applicant on bail - Under Section 104 of the Customs Act, 1962 an offence punishable under Section 135(c), wherein value of any goods not declared exceeds one crore rupees has been declared as non-bailable. Section 135 (1)(a)(i) (A) is punishable with an imprisonment which may extend to 7 years or with fine. The applicant for bail of accused-applicant is, accordingly, rejected.

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• 2019 (11) TMI 623
  100% EOU - utilisation of input imported for manufacture of finished goods within jurisdiction - demand of anti-dumping duty - Polypropylene (PP) Bags and Twisting Yarn - Section 28(10) of the Customs Act - demand raised on the ground that the Appellant had made DTA sales of its finished goods during the said period - whether the Appellant had utilised the inputs imported from ADD jurisdiction in the manufacture of its finished goods cleared in the DTA? HELD THAT:- The charging section for imposition of ADD is Section 9A(1) of the Customs Tariff Act and the notifications issued thereunder. However, Section 9A(2A) of the Customs Tariff Act which specifically deals with an EOU starts with a non obstante clause and over-rides the charging section 9A(1). The entire demand is based on the laws of averages/proportionate consumption basis and no other tangible or appreciable evidence has been adduced in support of the charge/levy. The adjudicating authority records that an issue register for Polypropylene procured from ADD jurisdictions was maintained by the Appellant but denies the contention of the Appellant of having maintained separate records, which is not well founded. Payment of excise duty on the finished goods under S. No. 2 of Notification No. 23 as opposed to S.No. 3, which would have otherwise conferred greater benefit to the Appellant, is a prerogative of the Appellant and cannot be faulted with as it is a conditional exemption. The ratio of the decision of the Hon ble High Court in the COMMR. OF C. EX., LUDHIANA VERSUS MALWA COTTON SPINNING MILLS LTD. [ 2010 (2) TMI 260 - PUNJAB HARYANA HIGH COURT] extracted is rendered specifically in the context of an EOU only, covers the case at hand for want of any appreciable proof or evidence to support the levy of ADD as the entire demand is based on assumptions and presumptions. Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 622
  Import of certain capital goods under EPCG Scheme - concessional rate of duty - N/N. 97/2004- Customs - Inclusion of freight charges - extended period of limitation - HELD THAT:- The AMW paid the Freight forwarder an amount of Rs. 4,32,98,915/- where as in the 15 Bills of entries they included freight amounting to Rs. 1,60,69,376/- only. As a result an amount of Rs. 2,92,35,480/- escaped inclusion in the assessable value. The reason given by AMW is that at the time of filing bill of entry in first 10 cases they were aware of the actual freight charged by the freight forwarder whereas in last 5 Bills of entries they were not aware of the actual freight payable to the freight forwarder. The reason cited was that the variable cost based on CAF/BAF was not known. The method of calculating freight agreed by AMW with PLIL was very clear. It can be seen that the only variable in the cost is the currency adjustments which simply converts all cost payable in US Dollar terms into Rupees. Thus it won t be correct for AMW to say that the cost of transport was not immediately available to them. The currency price are available directly on minute to minute basis every day. More over it is seen that out of total cost of Rs. 4.32 Crores paid to the freight forwarder. The appellant had included only Rs. 1.6 crores, in 15 consignments. Even if the actual freight of first 10 consignments was known on actual basis it could not have been its 40% of the total freight for 66% of the total consignments. The documents on the basis of which they had included freight on actual basis were however not available with AMW. Benefit of EPCG Scheme denied on the enhanced value of the imports - HELD THAT:- The impugned order denies the benefit of the EPCG scheme on the ground that the Chapter 5 of the Foreign Trade Policy requires the importer to produce license for debit by the proper officer of customs at the time of clearance. It has been argued in the impugned order that since the said amount was not declared at the time of import the benefit of scheme cannot be extended to the appellant. We do not find any merit in this argument -It is a fact that the appellant have EPCG License containing a specific amount. Therefore, if the value is enhanced then AMW is entitled for benefit to the extent the enhanced value is covered in the EPCG License. It has been argued by the Ld. Counsel for AMW that since the assessment has not been challenged, demand under section 28 cannot be raised - HELD THAT:- The demand can be raised under section 28 even if challenging assessment. Consequently this argument of Ld. Counsel for AMW is rejected. Extended period of limitation - HELD THAT:- The appellant have paid significantly higher amount to the freight forwarder as freight. However, in 15 Bills of entry filed by AMW only 40% of the freight has been included in the assessable value. When the agreement and terms of payment are crystal clear the actions of importer are clearly intended to evade taxes. When documents on actual freight paid were demanded, Ld. Counsel failed to produce the same. In these circumstances, we find that it was a specific modus operandi devised by AMW to defraud the Government and therefore, extended period of limitation is rightly invoked in the instant case. Confiscation of the goods already cleared by the AMW - HELD THAT:- The bond executed by the AMW is not for production of goods but for fulfillment of export obligation and to pay duty in case of failure to fulfill export obligation - The goods cannot be confiscated, even if, the same are liable for confiscation. Appeal allowed in part.

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• 2019 (11) TMI 621
  Revocation of CHA License - forfeiture of security deposit - not obtaining authorization from the importer - violation of Regulation 10(a) of the CBLR, 2018 - not advising the client - violation of Regulation 10(d) of the CBLR, 2018 - non-compliance with due diligence - Regulation 10(e) of the CBLR - non-verification of Regulation 10(n) of the CBLR - HELD THAT:- Out of the 4 violations alleged against the appellant, the Inquiry Officer has exonerated the appellant under Regulation 10(e) and 10(n) and has only found the appellant violating Regulations 10(a) and 10(d) which pertains to not obtaining authorization from the importer and not advising his client properly. As far as verification of the documents are concerned, the appellant has been exonerated and we find that the appellant was approached by one Mr. Alexander Nathan who is alleged to be the employee of the importer as per his own statement which remained unrebutted till today shows that the appellant has been properly authorized by Mr. Alexander Nathan by handing over the necessary authorization and KYC documents which were properly verified by the appellant. Further in view of the various decisions relied upon by the appellant, it is not necessary that the Customs Broker should personally verify the premises of the importer. Once the Customs Broker has been approached by the employee of the importer and he has verified the necessary documents, then there cannot be any allegation of violations against the CHA - Further the impugned order says that the appellant has not advised the importer without specifying as to what advice was required to be given by the appellant and the same was not given by the appellant to the importer. The impugned order is not sustainable in law - Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 608
  Applicability of Consumer Protection Act, 1986 in case of REP License in terms of the import and export policy - Whether Government is a service provider - principal issue that was canvassed before the SCDRC and in revision was that the consumer fora had no jurisdiction to entertain a consumer complaint on the ground that no service is rendered by the Union Government when it provides incentives under the Exim policy - whether a person who has made a claim under an REP licence issued in terms of the import and export policy - in this case, the policy for April 1988 to March 1991 - is a consumer within the meaning of Section 2(1)(d) of the Consumer Protection Act, 1986? HELD THAT:- The objects of the policy are essentially to stimulate industrial growth by providing easy access to imported capital goods, raw materials and components, to substitute imports and promote self-reliance and to provide an impetus to exports by improving the quality of incentives. The Exim policy is an incident of the fiscal policy of the State and of its overall control over foreign trade. As an incident of its policy, the State may provide a regime of incentives. The provision of those incentives does not render the State a service provider or the person who avails of the incentives as a potential user of any service. The State, in exercise of its authority to utilise and collect revenue, puts in place diverse regulatory regimes under the law. The regime may provide for modalities for compliance, penalties for breach and incentives to achieve the purpose of the policy. The grant of these incentives does not constitute the State as a service provider. In BIHAR SCHOOL EXAMINATION BOARD VERSUS SURESH PRASAD SINHA [ 2009 (9) TMI 930 - SUPREME COURT] which was decided by a Bench of two judges, the issue was whether the Board of Examinations governed by state law is amenable to the jurisdiction of the District Forum under the Consumer Protection Act, 1986 - Answering the question in the negative, this Court held that the Board is not a service provider and a student who takes an examination is not a consumer. There was an absence of jurisdiction in the District Forum to entertain a complaint under the Act in regard to a claim arising out of and founded on an REP licence governed by the Exim policy - Appeal allowed.

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• Insolvency & Bankruptcy

• 2019 (11) TMI 620
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment - loan due and payable to the FC - Section 7 of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In view of the legislative mandate to dispose of the matters within a period of 14 days, which fact the Petitioner should have been well aware and further all the more, the shareholders/Directors of the Petitioner company are before this Tribunal in relation to inter se disputes and Petitions filed under Sections 241 and 242 of the Companies Act, 2013, this Tribunal is constrained to dismiss this Petition as the Petitioner has not been able to demonstrate on its own the existence of a financial debt of which it is alleged to have been defaulted by the CD to the satisfaction of this Tribunal. There are no prima facie case and we are constrained to dismiss the Petition with a cost of Rs. 1.00 lakh imposed upon the Petitioner to be remitted to the Prime Minister s National Relief Fund within a period of 3 weeks from the date of this order as the Petition has been filed frivolously based on conjectures and surmises without proper documents being furnished consuming the valuable judicial time of this tribunal - petition dismissed.

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• 2019 (11) TMI 619
  Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of outstanding amount - scope of Operational Debt - HELD THAT:- The definition of the term operational debt has four components, namely: (1) goods; (ii) services; (iii) employment; and (iv) government dues - On the facts of our case, we would be concerned with the first two, that is provision of goods or services. We are of the view that supply of goods or services would mean such supply as is the input for either manufacturing or trading, in a business context, and that there should be a direct nexus between such input and output, for example and illustratively speaking, supply of raw material for manufacturing or goods for trading; or such services as are inextricably linked to the business as in supply of labour or maintenance services. The debt arising out of non-payment of lease rent does not fall under the definition of operational debt as defined u/s 5(21) of the Code of 2016 (even though it may otherwise be a debt), and the petitioner cannot be termed as an Operational creditor within the meaning of section 5(20) and for the purpose of the Code of 2016. The matter does not require interference - petition dismissed.

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• 2019 (11) TMI 618
  Liquidation order of the Corporate Debtor - Section 33 (2) of the Insolvency and Bankruptcy Code, 2015 - Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1)? HELD THAT:- In the present case, the application is filed by the Resolution Professional on 25.07.2019 during the CIRP process and before confirmation of the resolution plan. The decision of the CoC to liquidate the Corporate Debtor is approved by the CoC with 99.87% of the voting share and therefore, the requirement of approval of not less than 66% of the voting share is satisfied. In view of the satisfaction of the conditions of Section 33 (2) of the Code, the liquidation order as referred to in sub clauses (i), (ii) and (iii) of clause (b) of Section 33 (1) of the Code is being passed - In view of the satisfaction of the conditions provided under Section 33(2) of the Code, the corporate debtor Gian Chand Sons Pvt.Ltd is directed to be liquidated in the manner as laid down in Chapter III of the Code.

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• 2019 (11) TMI 617
  Maintainability of application - initiation of CIRP - Appellants submitted that the Appellants are willing to settle the matter and in view of statement that the Committee of Creditors have not been constituted - HELD THAT:- Taking into consideration that the parties have reached settlement on 13th May, 2019, prior to the constitution of Committee of Creditors , in exercise of powers conferred under Rule 11 of the NCLAT Rules, 2016, we allow the prayer and set aside the impugned order dated 21st February, 2019. Application under Section 7 filed by the Respondents is disposed of as withdrawn. The parties will be bound by the terms of settlement. The application preferred by the Respondent under Section 7 of the I B Code is disposed of as withdrawn.

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• 2019 (11) TMI 593
  Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in making repayment of loan amount - existence of debt and dispute or not - Appellant submits that the Corporate Debtor deducted TDS on the interest paid by the Corporate Debtor while returning the loan which is sufficient to show that there was financial debt - HELD THAT:- Merely pointing out that TDS was deducted would not be sufficient to conclude that there was financial debt. TDS can be deducted for various reasons. As regard relying on Section 10 of the Contract Act, 1872, in our view IBC is a complete code in itself. Section 238 of IBC has overriding effect on provisions inconsistent with IBC. The Financial contract is defined in Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 Rule 3(1)(d) requires setting out the terms of the financial debt including tenure etc. - It is found that Appellant has failed to show any record showing financial debt to be there. As such, there are no fault in the impugned order while rejecting Section 7 application. The part of impugned order of the Adjudicating Authority as regards the imposing of a fine of Rs. 1 lakh relying on Section 75 of IBC is set aside - Rest part of the impugned order does not call for interference - appeal allowed in part.

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• Service Tax

• 2019 (11) TMI 616
  Refund of service tax - Rule 5 of CCR 2004 - export of services - service of the appellant are classifiable under BAS and being ineligible service, duly exported, the appellant filed refund claim for the period 2008-09 - HELD THAT:- Except as provided in the agreement, the appellant have not raised any invoices for after sale service. They have raised invoices for the marketing services rendered, classifiable under BAS and have received commission from the manufacturer located in Japan - Accordingly in terms of the export of service rules, 2005 rule 3 (2) (a) read with Rule 3(2)(b)(ibid), the appellant have satisfied both the conditions, as the receiver of the services is located outside India and have received remittance for the services in convertible foreign exchange. The appellant have exported their services outside India. Accordingly they are entitled to refund under Rule 5 of CCR 2004 - appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 615
  Denial of abatement claim - GTA Service - reverse charge mechanism - N/N. 32/2004-ST dated 3.12.2004 - Department proceeded to deny such abatement claim for the reason that the appellant was unable to submit declaration in respect of all the consignment notes from the Goods Transport Agencies to the effect that they have not availed the benefit of CENVAT credit - HELD THAT:- The issue in dispute is the claim of abatement by the appellant to the extent of 75% in terms of N/N. 32/2004 dated 3.12.2004. The issue is no more res integra and stands settled in favour of the appellant in the case of LYKES LINE LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI-I [ 2016 (11) TMI 192 - CESTAT MUMBAI] in which the Tribunal has taken the view that the condition if any imposed on the GTA cannot be practically complied by the recipient of service - As such, the Tribunal held that the benefit of abatement cannot be denied to the recipient of service. Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 614
  Voluntary Compliance Encouragement Scheme - the condition of payment of 50% of the declared tax dues under the scheme not fulfilled - section 107 (3) of the Finance Act, 2013 - whether the VCS- 1 application filed by the appellant have been rightly refused observing that they have declared tax dues for the period October, 2007 to December, 2012, for not satisfying/ fulfilling the condition of payment of 50% of the declared tax dues under the scheme, on or before 31st December, 2013 as stipulated under section 107 (3) of the Finance Act, 2013? HELD THAT:- There have been a clerical error on the part of the appellant in filling up the form VCES-1 properly, as already aforementioned. Accordingly, I hold that the substantial benefit should not be disallowed for venial mistake of clerical nature. Moreover, in the calculation sheet annexed to form VCES-1, the amount of tax dues under the scheme is evident at Rs. 9,93,480/-. The appellant had paid 50% of tax dues correctly. In this view of the matter the rejection their Form VCES-1 is set aside - Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 613
  Condonation of 67 days delay in filing the appeal before the CESTAT by the Revenue - Section 86(2) of the Finance Act, 1994 - HELD THAT:- In the absence of any acceptable/believable reason for not filing an appeal, no fault can be found with the impugned order of the Tribunal, in holding that the reason given for the delay as sufficient cause, namely, the introduction of GST is on the face of it is unacceptable as the orders in question were all passed much after the introduction of GST. The occasion to adopt a liberal approach in matters of condonation of delay would only arise if some cause is made out for the delay - Therefore, the view taken by the Tribunal in the present facts cannot be said to be perverse. The proposed question of law does not give rise to any substantial question of law. Thus, not entertained - Appeal dismissed.

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• Central Excise

• 2019 (11) TMI 658
  Rejection of part refund claim - refund claim in respect of two different periods - While in one case, the second respondent has chosen to partly accept and partly reject the claim, in the other case, he totally rejected the claim - opportunity of personal hearing - principles of Natural Justice - HELD THAT:- It is an admitted fact that in both the cases, the second respondent, before passing the impugned orders, not heard the petitioner. As rightly pointed out by the learned counsel for the petitioner, if the authority chooses to reject the refund claim either in part or whole, he should put the petitioner on notice and seek for explanation and decide the matter thereafter on providing an opportunity of personal hearing as well. The scope of affording an opportunity of personal hearing was considered in similar refund claim matter in the case of M/S. SRI GAYATHRI CASHEWS VERSUS THE ASSISTANT COMMISSIONER OF GST AND CENTRAL EXCISE, [ 2019 (1) TMI 610 - MADRAS HIGH COURT] and directed the respondent therein to afford an opportunity of personal hearing to the petitioner therein. The parties are directed to treat the impugned orders as show cause notices issued on the petitioner - the second respondent shall pass fresh orders on merits and in accordance with law, after affording an opportunity of personal hearing to the petitioner - petition allowed by way of remand.

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• 2019 (11) TMI 612
  Time Limitation - It is the specific case of the appellant/assessee that the entire demand is barred by limitation and therefore, the demand is not sustainable in law - Whether in the facts and circumstances of the case, the Tribunal is right in confirming the demand when the demand itself is barred by limitation? - HELD THAT:- The Tribunal did not make any such observation with regard to the limitation point while confirming the order passed by the Commissioner (Appeals). In fact, the assessee is to be partially blamed because, none appeared for the assessee before the Tribunal, when the case was heard - the point relating to limitation being a mixed question of law and fact, should also to be allowed to be agitated by the assessee before the original authority. Whether the Tribunal is right in holding that there was no such submission put forth in the appeal especially when the plea of limitation and correct availment of Cenvat credit on machinery parts pleaded in the appeal grounds? - HELD THAT:- There appears to be a dispute between the assessee and the Department. This has been remanded to the original authority for fresh consideration and we confirm such order of remand. Whether the Tribunal is right in holding that there was no dispute about the liability but quantum alone is disputed whereas it was raised in the grounds that the entire demand is barred by limitation and the value adopted on job work yarn clearance is as per the decision of the Supreme Court in UJAGAR PRINTS, ETC. ETC. VERSUS UNION OF INDIA AND OTHERS [ 1988 (11) TMI 106 - SUPREME COURT] ? - HELD THAT:- It goes without saying that credit cannot be denied to the appellant/assessee - With regard to the other issues, the order passed by the Commissioner (Appeals), as confirmed by the Tribunal, is just and proper. The impugned order of remand passed by the Tribunal is confirmed and the appellant/assessee is granted liberty to raise the points relating to limitation before the original authority which shall be adjudicated on merits and in accordance with law - the appeal filed by the appellant/assessee is partly allowed.

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• 2019 (11) TMI 611
  Reliability of statements - it was contended that the reliance placed upon Production Manager s statement was unwarranted because firstly, the statement was a subject matter of a previous SCN which had not culminated in final adjudication as such and secondly, the statement was subsequently retracted and lastly, the latter statement was in fact relied upon in the SCN which resulted in an adjudication - HELD THAT:- The statement made by Sh. Shivji Gupta, this Court is of the opinion that the CESTAT s appreciation of facts on this score are sound and do not call for interference. What is most important and was correctly noticed by the CESTAT is that the statement of 2008 has not resulted in any adverse order on the SCN which culminated immediately thereafter. The present adjudication proceeding is the result of a subsequent SCN as a result of later inspection - The Revenue s claim, therefore, has no basis on this aspect. Feasibility of the nature of equipment that the assessee possessed at site - HELD THAT:- This Court is of the opinion that the analysis of the CESTAT - i.e. the Judicial Member s decision which was agreed by the third member to whom the question was referred, is sound and is a plausible one. The Revenue s disagreement with these findings ipso facto cannot result in substantial question of law. Appeal dismissed.

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• 2019 (11) TMI 610
  Reversal of CENVAT Credit - writing off the value of inputs - Rule 3(5B) of Cenvat Credit Rules - HELD THAT:- Rule 3(5B) of CCR observe that the said Rule has come into existence vide Notification No. 16/2009 dated 07.07.2009 which stands substituted w.e.f. 01.03.2011 by virtue of N/N. 3/11. This perusal makes it clear that the inputs/capital goods as were produced in or before the year 2002 when the production activity of the appellant came to an end there was no provision to writing off the value of such inputs and capital goods or the reversal of cenvat credit could not be taken on such goods prior 01.03.2011. Apparently and admittedly the written off qua stores and spares was made in the year 2012 with the reversal of cenvat credit, thereof, i.e. prior the aforesaid Notification of March, 2013. Hence, it becomes clear that Department vide this show cause notice proposing recovery under Rule 14 of Cenvat Credit Rules has given retrospective effect to the said Notification. Notification is clear enough to be effective w.e.f. 1 March, 2013 only. Any legislation can have prospective effect only unless and until expressly given the retrospective effect. The same is not true for the said Notification - the Department was not entitled to invoke Rule 14 while proposing the recovery of reversed cenvat credit alleging it to be short. In M/S BCH ELECTRIC LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, FARIDABAD-I [ 2016 (6) TMI 469 - CESTAT CHANDIGARH] it is also held that there has been no statutory provision for seeking reversal of credit on written off finished goods at the most duty could have been demanded on such goods credit was rather held to not have been reversible in view of Rule 3(5B) of Cenvat Credit Rules, 2004. The order under challenge is definitely not based upon any of the documents - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (11) TMI 609
  Demand of penalty u/s 10-A of the Central Sales Tax Act, 1956 - Form-C - allegation against assessee of false declaration by making use of statutory Form-C issued under the Act to import packing material which item was first recorded in the registration certificate of the assessee on 09.07.2001 - Whether applicant is entitled to make purchase of packing material against Form-C in view of the provisions of Section 8(3)(d) of the Central Sales Tax Act? - HELD THAT:- Though it may not be denied that there existed an entitlement in law for the assessee to obtain registration with respect to packing material as the assessee was engaged in manufacture of beedi - However, it is a fact that the assessee was granted inclusion of packing material in its registration certificate w.e.f. 09.07.2001. No penalty may have been levied for the period from 09.07.2001 to 31.03.2002 inasmuch as the assessee had been authorised to make purchase of packing material by virtue of its specific inclusion in its registration certificate - However, for the period prior to 09.07.2001, merely because there existed an entitlement in law to apply for inclusion of such packing material in the registration certificate, there cannot follow any inference that therefore, there was false declaration made by the assessee. Whether in view of the fact that the assessee had been similarly using Form-C in the earlier assessment years to import packing material which fact was in the knowledge of the assessing officer, there could ever arise a case of false declaration? - HELD THAT:- n the first place, allegation of false declaration involves an element of mens rea. It is wholly different from a mere wrong declaration. If the assessee uses Form-C to import packing material that were not recorded in its registration certificate, it may give rise to penalty proceedings, if that fact is noted in the first few instances of utilisation of Form-C. However, if such utilisation of Form-C is, as a fact found to be a business practice adopted over a long period of ten years, as has been claimed by the assessee, the conduct of the revenue authorities for such long period would become relevant. The revenue authorities having thus contributed to the bona fide belief that would be found existing in such case would not be permitted to unilaterally alter their stand and impose penalty on the charge of false declaration as no element of mens rea can ever found existing in such cases. The matter is remitted to the Tribunal that may summon the record of assessments of the assessee for the period 1991 onwards, to examine whether the register of utilisation of Form-C had been examined by the assessing officer over different years and whether it disclosed utilisation of Form-C by the assessee in different years to import packing material - If such utilisation is found to be recorded then, the Tribunal may further examine whether any penalty had been imposed on the assessee in any of the earlier years for utilisation of Form-C to import packing material. Revision allowed in part.

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• Indian Laws

• 2019 (11) TMI 607
  Smuggling - Contraband item - Pseudoephedrine - Heroin - scope of commercial quantity - Section 37 of the NDPS Act - cognizable and non-bailable offences - HELD THAT:- There is no dispute that in this matter, the quantity involved is a commercial one and the rigours of Section 37 of the NDPS Act are applicable. Generally, the conspiracy is hatched in secrecy and it may be difficult, if not impossible, to obtain direct evidence to establish the same. The acts of various parties to the conspiracy will infer that they were done with reference to common intention, hence, it is held, time and again, that the conspiracy can be proved by indirect circumstantial evidence, which is of an impeccable nature. It is also not necessary that all the conspirators should know each other and also every detail of the plot, so long as they are co-participators in the main object thereof and it is also not necessary that all of them should participate from the inception of the stratagem till the end, the determinative factor, being unity of object or purpose and their participation at different stages. As per the provision of Section 37 of the NDPS Act, it is mandatory that before the petitioner is entitled to be released on bail, the Court has to be satisfied that there are reasonable grounds for believing that the petitioner is not guilty of such an offence and that he is not likely to commit the same again while on bail. There is nothing on record to satisfy this Court that there are grounds or more to say reasonable grounds believing that the petitioner is not likely to commit such an offence again and is also not likely to commit the same while on bail, hence, this Court does not find any merit in the bail application of the petitioner and the same is, accordingly, dismissed - petition dismissed.

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