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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter November 18, 2021 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws PMLA Service Tax Indian Laws Articles COVID LIMITATION, PRE-SCN CONSULTATION AND CESTAT PHYSICAL HEARINGS Are Integrated Ombudsman and Internal Ombudsman mechanisms adequate to redress the concerns of consumers of RBI regulated entities? A critical analysis News We can look at more than $10 billion leather exports target by 2025 - Shri Goyal Income Tax Department conducts searches in Delhi and Haryana Income Tax Department conducts searches in Pune Income Tax Department conducts searches in Andhra Pradesh and Telangana Notifications GST - States 5/2021– State Tax (Rate) - dated 16-11-2021 - Delhi SGST Seeks to provide the concessional rate of CGST on Covid-19 relief supplies, up to and inclusive of 30th September 2021 3/2021– State Tax (Rate) - dated 16-11-2021 - Delhi SGST Amendment in Notification No. 06/2019- State Tax (Rate), dated the 31st October, 2019 1/2021– State Tax (Rate) - dated 16-11-2021 - Delhi SGST Amendment in Notification No. 01/2017-State Tax (Rate), dated the 30th June, 2017 02/2021– State Tax (Rate) - dated 16-11-2021 - Delhi SGST Seeks to amend Notification No. 11/2017- State Tax (Rate), dated the 30th June, 2017 31/2021-State Tax - dated 28-10-2021 - Himachal Pradesh SGST Seeks to exempt taxpayers having AATO upto ₹ 2 crores from the requirement of furnishing annual return for FY 2020-21 29/2021-State Tax - dated 28-10-2021 - Himachal Pradesh SGST Seeks to bring in force sections 4 and 5 of Himachal Pradesh Goods and Services Tax (Amendment) Act, 2021 6/2021-State Tax (Rate) - dated 22-10-2021 - Himachal Pradesh SGST Amendment in Notification No. 11/2017- State Tax (Rate), dated the 30th June, 2017 36/2021-State Tax - dated 22-10-2021 - Himachal Pradesh SGST Amendment in Notification No. 03/2021-State Tax, dated the 27th April, 2021 35/2021-State Tax - dated 22-10-2021 - Himachal Pradesh SGST Himachal Pradesh Goods and Services Tax (Eight Amendment) Rules, 2021 SEBI SEBI/LAD-NRO/GN/2021/59 - dated 17-11-2021 - SEBI Securities and Exchange Board of India (Intermediaries) (Third Amendment) Regulations, 2021 Circulars / Instructions / Orders IBC IBBI/LIQ/45/2021 - dated 15-11-2021 Clarification regarding requirement of seeking No Objection Certificate or No Dues Certificate from the Income Tax Department during Voluntary Liquidation Process under the Insolvency and Bankruptcy Code, 2016 (Code) Highlights / Catch Notes GST Non-payment of GST - recovery of tax alongwith interest and penalty - Jurisdiction - Even if we accept the contention of learned counsel for the petitioner that respondent No.1 ought to have proceeded under Section 62 and not under Section 73, it is at best a case of invoking a wrong legal provision instead of another, but certainly that will not make it a case of no jurisdiction, or lack of jurisdiction. Acting without jurisdiction is one thing and invoking a wrong provision while acting within jurisdiction is another thing - HC Visit to Get Source Service of notice for initiation of recovery proceedings of tax - Section 73 (1) of GST Act, 2017 - Considering the entirety of the facts and circumstances of the case, submission made by learned senior counsel for the petitioner that no order was served upon the petitioner as required u/s 78 of the act of 2017, as an interim measure, it is directed that effect and operation of order /notice shall remain stayed till the next date of hearing subject to petitioner depositing 50% of the total payable tax amount - HC Visit to Get Source Cancellation of registration of petitioner - petitioner firm remained ignorant of the order of the cancellation - The knowledge, which the petitioner attributes, that he could not obtain the knowledge, for a period of 477 days, in fact smacks a sense of irresponsibility for an assessee, who is facing an order of cancellation of its registration rendered on 21.09.2019, and particularly when the assessee i.e. the petitioner was, attributing its responsibility on the Advocate, without there being any pleading to the said effect - Since the appeal itself has been dismissed on the ground of limitation, the writ remedy would not be available to the petitioner. - HC Visit to Get Source Income Tax Deduction u/s 36 (1) (vii) - ITAT allowing pure loan as Bad debt - bad debts or part thereof taken into account in computing income of the assessee for an earlier Assessment Year before such debt or part thereof is written off is satisfied. - Tribunal has not committed any perversity or applied incorrect principles to the given facts - HC Visit to Get Source TDS u/s 194A - TDS Laibility in respect of hypothetical interest income - Entitlement of interest accruing on the FDs to the petitioner would be dependant on the result of the pending Court/CBI proceedings and consequently, till conclusion of the said Court proceedings, the interest accruing on the FD cannot be construed or treated as income for the purpose of deduction of TDS under Section 194A - HC Visit to Get Source Exemption u/s 10(26B) - The assessee is a body viz., incorporated under the Companies Act and formed to achieve or promote the interests of the members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them, receives full financial assistance from the Government, hence is entitled to exemption. - Tribunal is right in granting exemption to the assessee u/s 10(26B) - HC Visit to Get Source Levy of penalty u/s 271 (1) (c) on "estimated income” by the assessing authority - The discussion is concluded by holding that the penalty is determined on the amount of tax sought to be evaded, by the concealment of income etc.., but not on the total tax chargeable on the assessee. - HC Visit to Get Source Attachment orders - Fixed deposit attached - Section 281-B(1) - Before the order of provisional attachment, the Commissioner must form an opinion on the basis of the tangible material available for attachment that the assessee is not likely to fulfill the demand payment of tax and it is therefore necessary to do so for the purpose of protecting the interest of the Government revenue. In addition to the aforesaid mandatory requirements, before passing the provisional attachment order, it is also incumbent upon the authorities to come to a conclusion based on the tangible material that without attaching the provisional attachment, it is not possible in the facts of the given case to protect the revenue and that the provisional attachment order is completely warranted for the purpose of protecting the Government revenue. - HC Visit to Get Source Deduction in respect of ex-gratia payment made to employees - there being no restriction or prohibition under Section 37 of the Income Tax Act, 1961 on the claim for deduction on the ex-gratia payment given in the form of an incentive to the workman out of business expediency and the payment being a business expenditure, the Revenue's case deserves to be dismissed at the admission stage itself. - HC Visit to Get Source Reopening of assessment u/s 147 - eligible reasons to believe - In the instant case, as stated by the respondent in the affidavit-in- reply, the petitioner had not deducted the TDS as detailed in Annexure 6 to form 3CD and therefore, the same was not taken into consideration by the Assessing Officer while passing the order under Section 143(3) of the Act. When the said material was not considered at the time of original assessment on 30.12.2016, the consideration of the same by the respondent could not be said to be a change of opinion or review of earlier order. - HC Visit to Get Source Assessment u/s 153A - addition on account of interest paid by the assessee on unsecured loans - The only reason for making and upholding the disallowance of the interest is the statement recorded by the officers of the Department and that too not by the Assessing Officer himself and that too which were not made available to the assessee for cross examination and therefore, these statements cannot be utilized against the assessee. If we ignore these statements, the rest of documentary evidences well support the claim of the assessee. - AT Visit to Get Source Addition on account of share premium received u/s 56(2)(viib) - AO has not examined the DCF method of valuation submitted by the assessee and the value of shares determined by the AO under NAV also suffers from major defects. The reasoning given by the AO for rejecting DCF method of valuation would fall on the ground, since the NAV method adopted by the AO suffers from major defects. We notice that the AO has not appreciated the necessity of preparing two valuation reports and the AO has also omitted to consider the correct provisions of Rule 11UA. Hence, various faults found by the AO with regard to the valuation reports are liable to be rejected. - AT Visit to Get Source Condonation of delay - 353 days in filing the appeal before the Tribunal - The sufficient cause within the contemplation of the limitation provision must be a cause which is beyond the control of the party invoking the aid of the provisions. The cause for the delay in filing the appeal which by due care and attention could have been avoided cannot be a sufficient cause within the meaning of the limitation provision.. In the present case, the reasons for delay in filing the appeal is not sufficiently explained by the assessee and it shows that the delay was due to negligence and inaction on the part of assessee which cannot be condoned. - AT Visit to Get Source Assessment u/s 153C r.w.s. 143(3) of the Act OR u/s 143(3) - AO made addition to the total income of the assessee on account of undisclosed investment in construction of project solely on the basis of valuation report of the DVO which in itself is unsustainable in light of the fact that no incriminating material was found during the course of search thereby warranting such addition to the total income of the assessee. - AT Visit to Get Source Customs Jurisdiction - power of Additional Director General, Directorate of Revenue Intelligence(DRI) to issue SCN - The Additional Director General, DRI, Lucknow is not a proper Officer to issue Show Cause Notice under Section 28(4) read with Section 124 of Customs Act, 1962, the impugned proceedings are set aside - AT Visit to Get Source IBC Clarification regarding requirement of seeking No Objection Certificate or No Dues Certificate from the Income Tax Department during Voluntary Liquidation Process under the Insolvency and Bankruptcy Code, 2016 (Code) - Circular Visit to Get Source Service Tax SVLDRS - Non-payment of service tax - Sabka Viswas (Legacy Dispute Resolution Scheme, 2019) - There is no provision in the scheme for extending the time limit for making the payment. In fact, the scheme clearly envisages that upon termination of the said period, the scheme would come to an end. That being the position, on the grounds stated by the petitioner, an order for extension of the scheme cannot be granted. - HC Visit to Get Source Delayed/Non-service of SCN - Time Limitation - facts remains are that the SCN was never served upon the appellant. Question of receiving the same does not at all arises. The said non-service is the sufficient violation of the statutory mandate. In the given circumstances, the order of remanding the matter to pass an order after verification that too for a period only of 3 months, as passed by Commissioner (Appeals) is opined to not to be sustainable in the eyes of law, for the reason of violation of basic principle of natural justice that the opportunity of being heard was never been provided to the appellant. - AT Visit to Get Source Refund of accumulated cenvat credit - rejection of refund claim on the ground that the services did not quantify as an essential input service - Most of the services are held to be eligible/essential input services, following the ratio laid down in various orders the denial of cenvat credit on all the input services except Real Estate Agent and Consultant Service is held to be bad in law - AT Visit to Get Source Case Laws: GST 2021 (11) TMI 584 Refund of GST - Section 54 of Goods and Services Tax Act, 2017 - Appealable order or not - availability of alternative remedy - Section 107 (1) of Goods and Services Tax Act, 2017 - HELD THAT:- Section 107 (1) of Goods and Services Tax Act, 2017 makes every order passed by an adjudicating authority appealable. The writ petition is dismissed on the ground of alternative remedy with liberty to the petitioner to approach the appropriate Appellate Authority. 2021 (11) TMI 583 Seeking grant of regular bail - availment of irregular credit - creation of non-existent firm - bogus sale of goods without any proper purchase - HELD THAT:- This petition is allowed and the petitioner is directed to be released on regular bail subject to furnishing his bail/surety bonds to the satisfaction of the trial Court/Illaqa Magistrate/Duty Magistrate, concerned. Petition disposed off. 2021 (11) TMI 582 Recovery of tax alongwith interest and penalty - Jurisdiction - invoking wrong provisions of GST - Non-payment of GST - petitioner had failed to file Goods and Service Tax (GST) returns since October, 2017 to December, 2018 - HELD THAT:- Against an order passed under Section 73 of the Act, the person aggrieved has a remedy of filing appeal to the appellate authority under Section 107 of the Act. As per sub-section (1) thereof, such appeal may be filed within three months from the date of communication of the order or decision. As per subsection (4), if the appellate authority is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of three months, it shall allow the appellant to present the same within a further period of one month. In the instant case, the order under Section 73 was passed on 28.03.2019 and communicated since petitioner has deposited the tax in terms of the said order. Period of three months and the extended period of further one month have expired long back. It is settled law that when the statute does not provide for further extension of limitation beyond the extended period, the limitation for filing appeal would end on the expiry of the extended period of limitation provided by the statute. To circumvent the situation recourse to a proceeding under Article 226 of the Constitution of India is not permissible. Respondent No.1 had the jurisdiction to assess the petitioner, whether it is under Section 62 or under Section 73 of the Act. Even if we accept the contention of learned counsel for the petitioner that respondent No.1 ought to have proceeded under Section 62 and not under Section 73, it is at best a case of invoking a wrong legal provision instead of another, but certainly that will not make it a case of no jurisdiction, or lack of jurisdiction. Acting without jurisdiction is one thing and invoking a wrong provision while acting within jurisdiction is another thing - the petitioner has partly complied with the Order-in-Original by paying the tax dues. If that be the position, then there is acceptance of the Order-in-Original. Thereafter, part challenge to the Order-in-Original may not be maintainable. The writ petition is dismissed. 2021 (11) TMI 581 Service of notice for initiation of recovery proceedings of tax - Section 73 (1) of GST Act, 2017 - HELD THAT:- Perusal of Notice (Annexure P-10) would show that in two of the notices i.e. Recovery No.34 of 2021 and 35 of 2021, order date is mentioned as 18.8.2021. Under Section 78 of the Act of 2017, the period of three months is provided for making payment of the tax assessed/ascertained by the Proper Officer but the letter/notice Annexure P-10 to third party under Section 79 (1) (c) of the Act of 2017 was issued on 1.10.2021 which is less than three months period from the date of the recovery order No.34 of 2021 and 35 of 2021. It is not disputed by learned counsel for the respondents that no specific reasons have been assigned for issuing notice under Section 79 (1) (c) of the Act of 2017 for initiating proceedings under Section 78 of the Act before lapse of three months period. Considering the entirety of the facts and circumstances of the case, submission made by learned senior counsel for the petitioner that no order was served upon the petitioner as required under Section 78 of the act of 2017, as an interim measure, it is directed that effect and operation of order /notice dated 01.10.2021 (Annexure P-10) shall remain stayed till the next date of hearing subject to petitioner depositing 50% of the total payable tax amount within a period of three weeks from today, adjusting amount which is already paid by the petitioner, pursuance to the notice. List this case in the week commencing 6th December 2021. 2021 (11) TMI 580 Seeking direction to respondent to release the detenue - commission of offence under Section 132 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- From the material on the record, it is evident that the petitioner has been arrested on 18.06.2021 under Section 69 (1) of CGST Act and a complaint for offence punishable under Section 132 of the CGST Act has been filed before a Judicial Magistrate and the petitioner is in judicial custody. Vide order dated 18.08.2021, Annexure P-6, application filed under Section 167 (2) Cr.P.C by the detenue - Sahil Garg seeking grant of default bail has been dismissed and a revision challenging the said order has been withdrawn from the Court of learned Additional Sessions Judge, Chandigarh on 08.09.2021. It cannot be said that the son of the petitioner is in illegal confinement nor can the impugned order, Annexure P-6, dismissing the application seeking release on default bail be set aside in the present proceedings. Petition dismissed. 2021 (11) TMI 579 Cancellation of registration of petitioner - petitioner firm remained ignorant of the order of the cancellation, for a long time, after the lapse of about 477 days - HELD THAT:- The provisions of Section 29 (2) (c), which empowers the Competent Authority, (registering authority), to cancel the registration is a self contained provision, where the power of cancellation, could be exercised by the Assessing Authority for cancellation of the registration, subject to satisfying the condition of non fulfillment of the conditions, which otherwise an assessee was required to adhere to, for the purposes of submissions of the returns for the period, as it has been detailed therein under Section 29 (2) (c) of the Act. Its not only that, this Court cannot be oblivions of the fact, that even prior to providing the recourse of an appeal under Section 107 of the Act, the legislature under the Act, had itself provided an inbuilt mechanism, which was available to the Assessee, while the petitioner could have invoked Section 30 (1) of the Act, for the purposes of revocation of an order of cancellation of the registration, provided it satisfies the condition provided under Section 30 of the Act. The knowledge, which the petitioner attributes, that he could not obtain the knowledge, for a period of 477 days, in fact smacks a sense of irresponsibility for an assessee, who is facing an order of cancellation of its registration rendered on 21.09.2019, and particularly when the assessee i.e. the petitioner was, attributing its responsibility on the Advocate, without there being any pleading to the said effect, that in case he was misguided or mislead by the Counsel; as to what action he has taken against the Counsel, who had misinformed him or had not informed him about the order of the cancellation of his registration on 21.09.2019. Hence, the plea of inability to prefer an appeal within the specified period of limitation being on account of the Covid 19 pandemic, is not sustainable, and is not accepted by this Court, as period of preferring an appeal, expired much prior to declaration of Lockdown by the Government of India. Since the appeal itself has been dismissed on the ground of limitation, the writ remedy would not be available to the petitioner. Petition dismissed. Income Tax 2021 (11) TMI 588 Disallowance of estimated expenses - assessee's case was that, it did not incur any collection charges and the amounts were invested out of circulating capital - CIT(A) directed the Assessing Officer to restrict the disallowance to 2% only on tax free bond, which in the opinion of the CIT(A), was a reasonable disallowance also confirmed by ITAT - HELD THAT:- Though the assessee specifically took a stand that they did not incur any expense to get the tax free income and assessee Bank has got more interest free funds for investing in the tax free income, the CIT(A) did not examine the said aspect, but merely directed the Assessing Officer to restrict the disallowance in this regard to 2% only on tax free bonds, finding the same to be reasonable. Had the CIT(A) adjudicated the correctness of the stand taken by the assessee and rendered a finding, the Tribunal could have tested the correctness of the same. Further, there has been development in law. We do not propose to deny the benefit of the assessee to place reliance on those decisions and put forth their submissions and for such purpose alone, we are inclined to remand the matter back to the Tribunal for fresh consideration. The substantial question of law No.1 is left open for fresh consideration by the Tribunal. Disallowance of software expenses as being relatable to capital filed - HELD THAT:- This issue has been squarely covered by the decision of the Division Bench of this Court in the case of Commissioner of Income Tax v. Southern Railways Ltd [ 2006 (1) TMI 64 - MADRAS HIGH COURT] wherein, the question was answered in favour of the assessee, which was also taken note of in the case of Commissioner of Income Tax, Trichy v. The Lakshmi Vilas Bank Ltd. [ 2018 (9) TMI 1094 - MADRAS HIGH COURT] . Thus, the substantial question of law No.2 is answered in favour of the appellant/assessee. Disallowing the payment made to Registrar of Companies for increasing the authorised capital - HELD THAT:- Tribunal followed the decision of the Hon'ble Supreme Court in the case of Punjab State Industrial Development Corporation Ltd. v. Commissioner of Income Tax [ 1996 (12) TMI 6 - SUPREME COURT] . We find no error in the said decision of the Tribunal. Hence, the 3rd substantial question of law is answered against the appellant/assessee. Disallowance being arrears of wages on account of upward pay decision as per MOU signed on 11.03.1999 - HELD THAT:- The said question is covered by the decision of the Division Bench of this Court in the case of Commissioner of Income Tax, Chennai-I v. M/s.Kasturi and Sons Ltd. [ 2018 (9) TMI 1411 - MADRAS HIGH COURT] was answered in favour of the assessee. Following the same, the substantial question of law No.4 is answered in favour of the appellant/assessee. Disallowance being ex-gratia paid to employees - HELD THAT:- Issue decided in favour of the assessee in the assessee's own case in Commissioner of Income Tax, Chennai v. The Karur Vysya Bank Ltd., Karur [ 2015 (5) TMI 72 - ITAT CHENNAI] Following the same, the 5th substantial question of law is answered in favour of the appellant/assessee. 2021 (11) TMI 587 Validity of reopening of assessment u/s 147 - whether the assessee was liable to deduct Tax at Source in respect of the Computer Software which was dealt with by them, procured from a Non-Resident and sold in the Indian Market? - HELD THAT:- Since the Tribunal has upheld the validity of the reopening proceedings, we have to necessarily decide this case against the Revenue and in favour of the assessee, or else, the reopening proceedings may continue to remain valid, though the basis for reopening was held to be unsustainable, as the question of law has been answered in favour of the assessee in the case of Engineering Analysis Centre of Excellence Private Limited [ 2021 (3) TMI 138 - SUPREME COURT ] Therefore, for such reasons, this Tax Case Appeal is allowed and the reopening is held to be unsustainable in law in the light of the decision rendered by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited 2021 (11) TMI 585 Income accrued in India - attribution of profit - PE in India - HELD THAT:- Considering the facts emanating from the orders of the first appellate authority, we are of the considered opinion that they are not at all distinguishable on the facts of Assessment Years 1997-98 and 1998-99 and since on those facts the Special Bench of this Tribunal has decided the appeal in favour of the assessee, which order has been upheld by the Hon'ble High Court of Delhi [ 2011 (12) TMI 91 - DELHI HIGH COURT ] we are of the considered view that the property in goods have been passed outside India alongwith risks and reward. No doubt the contract in question was signed in India and the acceptance test had to be performed in India would not justify the findings of the ld. CIT(A) in light of the judgment of the Hon'ble Andhra Pradesh High Court in the case of Additional CIT Vs. Skoda Export [ 1986 (10) TMI 9 - ANDHRA PRADESH HIGH COURT ] The ratio laid down by the Hon'ble Supreme Court in the case of Ishibkawajima-Harima Heavy Industries Ltd [ 2007 (1) TMI 91 - SUPREME COURT ] squarely apply on the facts of the case wherein the Hon'ble Supreme Court has held that the fact that the contract was signed in India is of no material consequence since all the activities in connection with off shore supplies were carried outside India. We are therefore, of the view that the decision in the case of Ishibkawajima-Harima Heavy Industries Ltd [supra] covers the issue as to whether any part of the profit arising from supply of equipment by the assessee is chargeable to tax. We do not find any merits in the findings of the ld. CIT(A) in respect of addition sustained by him. We are of the considered view that the appellant has no business connection in India in respect of supply of GSM System by the appellant to cellular operators in India and further, there is no PE in any form in India in the captioned Assessment Years and therefore, the question of attribution of profit does not arise at all. DR has placed strong reliance on the decision of this Tribunal in the case of Huawei Technologies Co. [ 2020 (12) TMI 857 - ITAT DELHI ] and others for Assessment Years 2009-10 to 2016-17. However, we are of the considered view that the facts of the case in hand are clearly distinguishable from the facts of that case in as much as in that case wherein at Article 6.3 it has been mentioned Risk of loss of goods shall pass from seller to owner upon acceptance of the goods. Whereas the facts of the case in hand show that risk and reward pass over at the Port of Sweden at the time of delivery of goods. Charging of interest u/s 234B - HELD THAT:- This issue is now no more res integra in light of the judgment of the Hon'ble Supreme Court in the case of Mitsubishi Corporation [ 2021 (9) TMI 875 - SUPREME COURT ] as held that prior to Assessment Year 2013-14, interest cannot be charged u/s 234B of the Act.We, accordingly, direct the Assessing Officer to charge interest as per provisions of law keeping in mind the ratio laid down by the Hon'ble Supreme Court in the case of Mitsubhishi Corporation [supra]. TDS u/s 195 - payment in respect of supply of software was in nature of business income and cannot be characterized as Royalty either under the Income Tax Act or under the Indo-Sweden DTAA - HELD THAT:- This issue in now no more res integra by the judgment of the Hon'ble Supreme Court in the case of Enginering Analysis Centre of Excellence Pvt Ltd [ 2021 (3) TMI 138 - SUPREME COURT ] The amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 of the Income Tax Act. The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment. - Decided against revenue. 2021 (11) TMI 578 Deduction u/s 36 (1) (vii) - ITAT allowing pure loan as Bad debt - respondent could not be said to be in the business of banking or money lending and therefore the principle amount of deposit/advances to MCCL could not be claimed as deduction u/s 36 (1) (vii) on account of condition placed in condition 36 (2) - whether amount written off consisted of capital loan and interest in an integral manner and thus condition prescribed in Section 36(2) got fulfilled? - HELD THAT:- Advances of deposit is to be understood as having been done in the ordinary course of business. Therefore, one of the condition required under Section 36 (2) (i) of the Act, i.e., bad debts or part thereof taken into account in computing income of the assessee for an earlier Assessment Year before such debt or part thereof is written off is satisfied. Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. The appeal is devoid of merits and it is dismissed with no order as to costs. We have not opined on the second part, i.e., whether or not the assessee is engaged in the business of money lending or banking since we have confirmed that respondent is entitled to deduction on bad debts in view of first part of Section 36 (2) (i) of the Act. 2021 (11) TMI 577 TDS u/s 194A - TDS Laibility in respect of hypothetical interest income arising on fixed deposits with the respondents 3 to 5 banks during the pendency of 6th respondent (CBI) attachment/freeze order on these banks - HELD THAT:- As it is not in dispute that FD s lying with the respondent Nos.3 to 5/Banks have been frozen/attached pursuant to an order dated 11.09.2009 passed by the CBI and the said proceedings initiated against the petitioner are still pending adjudication. Tax deduction at source is permissible only if the income is credited to the account of the petitioner ; in the instant case, in view of the freezing/attachment of the said FDs of the petitioner, it cannot be said that the petitioner is receiving income by way of interest from the said FDs for the present and entitlement or otherwise of the petitioner qua the said FDs or interest will have to be decided only after conclusion of the proceedings initiated by the CBI against the petitioner. In otherwords, for the present, the interest on the FDs which is credited to the account of the petitioner is not income for the petitioner so as to attract the TDS under Section 194A of the IT Act, so as to enable deduction of TDS on the interest accruing on the FDs. Entitlement of interest accruing on the FDs to the petitioner would be dependant on the result of the pending Court/CBI proceedings and consequently, till conclusion of the said Court proceedings, the interest accruing on the FD cannot be construed or treated as income for the purpose of deduction of TDS under Section 194A - the necessary directions in this regard are to be issued against the respondent Nos.3 to 5; it is needless to state that the directions to be issued to the respondent Nos.3 to 5-Bank not to deduct TDS on the interest on the FDs, cannot be treated as absolving petitioner of its liability to pay tax on the interest accruing on the FD if the petitioner becomes entitled to the same after conclusion of the Court proceedings. ORDER: - The respondent Nos.3 to 5/Banks are directed not to deduct the TDS in respect of the interest arising/accruing on FDs of the petitioner lying with the respondent Nos.3 to 5/Banks till conclusion of the proceedings initiated by the 6th respondent-CBI against the petitioner. As however made clear that the alleged liability of the petitioner, if any, to pay taxes in respect of the interest accruing on the said FDs shall arise after conclusion of the said proceedings. The present order passed will not affect any TDS already deducted by the respondent Nos.3 to 5/Banks prior to interim order dated 09.09.2019 passed by this Court. 2021 (11) TMI 576 Exemption u/s 10(26B) - claim for exemption was rejected by firstly by noting that the assessee is not a Corporation constituted/established under an Act of the Centre, State or Provincial Act, but a Company formed under the Companies Act AND assessee never claimed the status under Section 10(26B) of the Act in any of the previous assessment years - Whether the Tribunal is right in granting exemption to the assessee under Section 10(26B)? - HELD THAT:- The incorporation of assessee under the Companies Act gives the assessee the status of a body corporate and the objects, indisputably, of the assessee are promoting the interests of the members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them of Lakshadweep Union Territory. The argument of learned Senior Counsel that Corporation established by Provincial Act does not fit into the literal or plain reading of Section 10(26B). The argument that the Corporation is established by the Centre/State by an enactment is unavailable from the expression used in Section 10(26B) of the Act. This Court is construing Section 10(26B), both by keeping in mind the golden rule of construction and also Noscitur a Sociis, a nd the inescapable conclusion is that the assessee though incorporated under the Companies Act falls within the ambit of exemption envisaged by Section 10(26B) and is entitled to benefit of exemption. Centre/State Governments, as the case may be, bring into existence what is known as Government Companies. All these companies are not immediately entitled to be bracketed within the ambit of Section 10(26B) because the existence of that Company is relatable to the primary aim of promoting the interests of the members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them. The assessee is a body viz., incorporated under the Companies Act and formed to achieve or promote the interests of the members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them, receives full financial assistance from the Government, hence is entitled to exemption. We are in agreement with the reasoning and the conclusion recorded by the Tribunal and for the above reasons as well, substantial question no.1 is answered in favour of the assessee and against the Revenue/ 2021 (11) TMI 575 Levy of penalty u/s 271 (1) (c) on estimated income by the assessing authority - HELD THAT:- Section 271(1)(c) deals with levy of penalty in case where any person has concealed the particulars of his income or furnished inaccurate particulars of such income resulting in evasion of tax - what is the penalty payable - whether on total tax assessed or on the tax evaded by the assessee. The Tribunal treated the penalty amount - The plain meaning of the section leads to the conclusion that the criteria for determination of penalty is the tax sought to be evaded but not the total tax payable by the assessee. As already noticed from the computation statement in Annexure-A the total tax payable by the assessee - The difference of tax is lesser than that which was found to have been evaded by the assessee - the penalty shall be quantified or qualified by such figures. For the said purpose, we are persuaded not to remit the matter to any of the authorities. From the details available in the record, we have heard the counsel on the quantum of penalty, it has been stated that penalty of 100% works out to ₹ 5,62,918/-. As noted at the beginning of our discussion, the questions of law involve consideration of Section 271(1)(c) of the Act and the error of fact in appreciating what is the actual tax sought to be evaded by the assessee. The discussion is concluded by holding that the penalty is determined on the amount of tax sought to be evaded, by the concealment of income etc.., but not on the total tax chargeable on the assessee. - Decided in favour of assessee. 2021 (11) TMI 574 Validity of assessment - violation of the principles of natural justice as the assessee did not have adequate opportunity to explain to the Assessing Officer voluminous documents, which were presented by the assessee at the time of assessment - HELD THAT:- Admittedly, the Income Tax Act is a Code by itself and it provides for hierarchy of remedies. The contention both before the learned Single Judge as well as before us is that the assessee did not have adequate opportunity to explain the voluminous documents. On the other hand, the Assessing Officer would submit that adequate opportunity was granted and the assessee represented by their authorized representative was heard. Whether appreciation of the documents was done or not and whether there was sufficient opportunity granted to the assessee or not are all issues, which can be canvassed before the First Appellate Authority and we find that there is no valid reason for the assessee to bypass a statutory appeal remedy. Therefore, we are not inclined to interfere with the impugned order before us. The above writ appeal is dismissed. The liberty granted to the assessee by the learned Single Judge in paragraph 24 of the order impugned is sustained. 2021 (11) TMI 573 Attachment orders - Fixed deposit attached by passing provisional order of attachment invoking Section 281-B(1) - HELD THAT:- Having regard to the fact that the provisional attachment order of a property of a taxable person including the bank account of such person is draconian in nature and the conditions which are prescribed by the statute for the valid exercise of power must be strictly fulfilled, the exercise of power for order of provisional attachment must necessarily be preceded by formation of an opinion by the authorities that it is necessary to do so for the purpose of protecting the interest of Government revenue. Before the order of provisional attachment, the Commissioner must form an opinion on the basis of the tangible material available for attachment that the assessee is not likely to fulfill the demand payment of tax and it is therefore necessary to do so for the purpose of protecting the interest of the Government revenue. In addition to the aforesaid mandatory requirements, before passing the provisional attachment order, it is also incumbent upon the authorities to come to a conclusion based on the tangible material that without attaching the provisional attachment, it is not possible in the facts of the given case to protect the revenue and that the provisional attachment order is completely warranted for the purpose of protecting the Government revenue. Applying the principles laid down in Radha Krishan s case [ 2021 (4) TMI 837 - SUPREME COURT] to the facts of the instant case, a perusal of the impugned provisional attachment order will clearly indicate that except for merely stating that since there is a likelihood of huge tax payments to be raised on completion of assessment and that for the purpose of protecting the revenue, it is necessary to provisionally attach the fixed deposit of the petitioners, the other mandatory requirements and pre-condition as laid down by the Apex Court have neither been complied with nor fulfilled or followed prior to passing the impugned order. It is apparent that the impugned provisional attachment orders at Annexures-D, D1, D2 and D3 do not satisfy the legal requirements as laid down in Radha Krishan s case [ 2021 (4) TMI 837 - SUPREME COURT] and consequently, in view of the fact that the impugned provisional orders are cryptic, unreasoned, non-speaking and laconic, the same deserve to be quashed. In so far as the apprehension of the respondents that in the event huge tax payments are to be raised as against the petitioners-assessee, the assessee may not make payment of the same causing loss to the revenue is concerned, in the light of the undisputed fact that the proceedings under Section 153-A of the said Act of 1961 have already been initiated coupled with the fact that Section 281 of the said Act of 1961, contemplates that any alienation of any property belonging to the petitioners would be null and void, in addition to the specific assertion made by the petitioner that they own and possess immovable property to the tune of more than ₹ 300 crores, the said apprehension of the respondents is clearly unfounded and without any basis and consequently the said apprehension of the respondents cannot be accepted. Order: - The petition is allowed. The impugned orders dated 26.03.2021 at Annexures-D, D1, D2 and D3 passed by respondent No.1 are hereby quashed. 2021 (11) TMI 572 Deduction in respect of ex-gratia payment made to employees when such payments cannot be treated as business expediency or legal requirement allowable u/s 37(1) - HELD THAT:- Identical substantial question of law was considered by a Division Bench of this Court in Lakshmi Vilas Bank Ltd. [ 2014 (4) TMI 826 - MADRAS HIGH COURT] held that there being no restriction or prohibition under Section 37 of the Income Tax Act, 1961 on the claim for deduction on the ex-gratia payment given in the form of an incentive to the workman out of business expediency and the payment being a business expenditure, the Revenue's case deserves to be dismissed at the admission stage itself. Division Bench referred to the decision of the Calcutta High Court in CIT vs. National Engineering Industries Ltd [ 1993 (7) TMI 40 - CALCUTTA HIGH COURT] which decision was followed by the Tribunal in the impugned order. Therefore, we find that the substantial question of law, raised in this appeal, has to be answered against the Revenue 2021 (11) TMI 571 Reopening of assessment u/s 147 - eligible reasons to believe - maintainability of the petition on the ground of existence of an alternative remedy - HELD THAT:- A complete machinery having been provided under the Act for reassessment and for obtaining relief in respect of impugned order passed by the respondent, the petitioner Assessee could not be permitted to abandon the said remedy and to invoke the jurisdiction of this Court under Article 226 of the Constitution of India. Though it is sought to be pointed out by Mr. Patel that the adjournment application submitted by him was not considered by the respondent before passing the impugned order of reassessment, the same cannot be accepted at this juncture, in view of the contention raised by the respondent in the affidavit-in-reply that the said request for adjournment was received by the office of the respondent on 14.10.2019 when the impugned order was already passed. Even if the said request was not considered by the respondent, the same could be treated at the most as an irregularity which would not warrant interference of this Court for setting aside the assessment order, more particularly, when an efficacious and alternative statutory remedy is provided under the Act. Since we are not inclined to entertain the petition on the ground of existence of alternative remedy, as such we need not go into the merits of the petition. Eligible reasons to believe - AO has power to reopen if there is tangible material to believe that there was an escapement of income from assessment and that when such material has a live link with the formation of the belief. In the instant case, as stated by the respondent in the affidavit-in- reply, the petitioner had not deducted the TDS as detailed in Annexure 6 to form 3CD and therefore, the same was not taken into consideration by the Assessing Officer while passing the order under Section 143(3) of the Act. When the said material was not considered at the time of original assessment on 30.12.2016, the consideration of the same by the respondent could not be said to be a change of opinion or review of earlier order. - Decided against assessee. 2021 (11) TMI 570 TP Adjustment - payment of export commission on payment of royalty on export to associated enterprises - HELD THAT:- As respectfully following the decision of the coordinate bench in assessee s own case for assessment year 2015 16 [ 2021 (5) TMI 949 - ITAT DELHI ] we allow ground number 5 of the appeal and thereby direct the learned transfer pricing officer/learned assessing officer to delete the adjustment on account of the arm s-length price of the export commission payment Disallowance of expenditure of signage - HELD THAT:- As respectfully following the decision of the coordinate bench in assessee s own case [ 2021 (5) TMI 949 - ITAT DELHI ] we also hold that signage expenditure is revenue in nature. Accordingly the disallowance is deleted and ground number 7 of the appeal of the assessee is allowed. Disallowance of the sales tool expenses - HELD THAT:- As respectfully following the decision of the coordinate bench in assessee s own case for assessment year 2015 16 [ 2021 (5) TMI 949 - ITAT DELHI ] we also hold that sales tool expenditure are revenue expenditure in nature and therefore the disallowance made by the learned assessing officer is directed to be deleted. Accordingly, ground number 8 of the appeal is allowed Sales tool expenditure are revenue expenditure in nature and therefore the disallowance is directed to be deleted. Accordingly, ground number 8 of the appeal is allowed. Capitalization of the royalty expenses - HELD THAT:- Assessee was already engaged in the manufacturing of motorcycle and Scooter and payment of royalty expenses was not with respect to setting up of manufacturing facility. Therefore we also allow ground of the appeal of the assessee and direct the learned AO to delete the addition on account of capitalisation of royalty expenses holding it to be revenue in nature. Deduction/expenditure in respect of primary educational cess and higher and secondary education cess paid - HELD THAT:- All the arguments has allowed the claim of the assessee - we direct the ld AO to allow assessee the deduction of cess u/s 37 (1) of the act. Accordingly, additional ground of appeal is allowed. 2021 (11) TMI 569 Non furnishing of return within time allotted - benefit u/s. 139(5) - whether the assessee's claim can be admitted by the revenue authorities without filing revised return or whether additional ground can be raised or not? - HELD THAT:- The decision in the case of CIT vs. Pruthvi Brokers and shareholders [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] mandates that assessee's claim should be considered and the decision should be taken as per law. We further note that Hon'ble Supreme Court in the case of Goetze (India) Limited [ 2006 (3) TMI 75 - SUPREME COURT] has expounded that the decision in that case would not impinge upon the powers upon the ITAT to consider assessee's claim otherwise than by revised return - we remit the issue to the file of the AO and AO is directed to considered the claim of the assessee and pass an order as per law, after giving the assessee proper opportunity of being heard. Assessee appeal is allowed for statistical purpose. 2021 (11) TMI 568 Disallowance of stale drafts - money received while issuing demand drafts / pay order to various customers - HELD THAT:- The assessee is in the banking business, has received money while issuing demand drafts / pay order to various customers. The said money was held by the bank on behalf of the drawee till he/she made claim. Assessee bank had no right over the amount which is standing unclaimed - assessee banks had to remit the amount outstanding for more than 10 years to Depositors Education Awareness Fund Scheme maintained by Reserve Bank of India. As and when the drawee makes a claim, the assessee shall issue demand draft / pay order in case the amount lying with the assessee and further, if the amount is transferred to RBI account after 10 years, then the Reserve Bank settles the claim of the drawee. Therefore, under these facts and circumstances amount lying in stale draft account cannot be treated as income of the assessee. ITAT after considering relevant facts has rightly held that amount lying in stale draft account under the head outstanding liabilities cannot be treated as income of the assessee. A similar view has been taken in the case of City Union Bank Ltd. [ 2020 (3) TMI 475 - MADRAS HIGH COURT] . We are of the considered view that there is no error in the reasons given by the CIT(A) to delete addition made by the AO towards Stale Draft Account. Hence, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the Revenue. Disallowance of ex-gratia payment - AO had disallowed ex-gratia payment made by the assessee to its staff who are not covered under payment of bonus Act, on the ground that the assessee has circumvented the provisions of Bonus Act and has given bonus to employees who are not eligible for payment of bonus and thus, whatever cannot be done directly has been done indirectly by changing the nomenclature of the nature of payment - HELD THAT:- An identical issue had been considered by the Tribunal in assessee s own case for assessment year 2012-13 [ 2020 (3) TMI 713 - ITAT CHENNAI] where the Tribunal after considering relevant facts held that exgratia payment to staff is deductible u/s.37(1) - there is no error in the reasons given by the ld.CIT(A) to delete additions made towards disallowance of ex-gratia payment and thus, we are inclined to uphold the findings of the ld.CIT(A) and reject ground taken by the Revenue. Deduction u/s.36(1)(vii) - AO has disallowed bad debts claim of the assessee bank on the ground that the assessee did not give details like full address of the borrower and PAN number - HELD THAT:- We find that an identical issue has been considered by the Tribunal in assessee s own case for assessment year 2007-08 [ 2019 (3) TMI 1002 - ITAT CHENNAI] and by following the decision of Catholic Syrian Bank Ltd., [ 2012 (2) TMI 262 - SUPREME COURT] held that the assessee was entitled to deduction under clause (vii) of Section 36(1) irrespective of the difference between the credit balance in the provision account made under clause (viia) and the bad debts written off in the books of accounts in respect of bad debts relating to urban or non-rural advances - no error in the reasons given by the ld.CIT (A) to delete additions made towards disallowance of deduction claimed u/s.36(1)(vii) - Decided against revenue. Addition made towards interest on non-performing assets - AO has made addition towards interest on non-performing assets (NPAs) by holding that interest on loans needs to be offered to tax on accrual basis in respect of NPAs, which are more than 90 days old but less than 180 days - HELD THAT:- We find that an identical issue has been considered by the Tribunal in assessee s own case for assessment year 2012-13 [ 2020 (3) TMI 713 - ITAT CHENNAI] where under identical set of facts and by following the decision in the case of Vasisth Chary Vyapar Ltd. [ 2018 (3) TMI 56 - SUPREME COURT] held that interest income cannot be said to have been accrued to the assessee on NPAs account - there is no error in the reasons given by the ld.CIT(A) to delete additions made towards interest on NPAs - Decided against revenue. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Tribunal by following certain judicial precedents including the decision in the case of Pr.CIT vs. State Bank of Patiala,[ 2017 (2) TMI 125 - PUNJAB AND HARYANA HIGH COURT] held that no disallowance u/s.14A is permissible in terms of Rule 8D, where the assessee is engaged in banking business. In the case of South Indian Bank Ltd [ 2021 (9) TMI 566 - SUPREME COURT] , and held that shares and securities held by a bank are stock-in-trade and income received on such shares and securities must be considered to be business income. That is why, Section 14A of the Act would not be attracted to such income - Thus we direct the AO to delete addition made towards disallowance u/s.14A r.w.rule 8D - Decided in favour of assessee. Disallowance of deduction claimed u/s.36(1)(viia) of the Act, in respect of rural advances of appellant bank - HELD THAT:- We are of the considered view that for limited purpose of ascertaining correct facts with regard to date when provisional and final census data of 2011 is published, the matter is set aside to the file of the AO and we direct the AO to examine when village/panchyat level provisional census data of 2011 was released for public. In case, as claimed by the assessee, provisional and final census data is made available to public on 30-04-2013, then the AO is directed to accept classification made by the assessee for above three branches as per 2001 census for the purpose of section 36(1)(viia) of the Act. In case, provisional census data is officially published on 31-03-2011 or even before 1-4-2012, as claimed by the AO, then the case of the assessee is covered by Hon ble Karnataka High Court in case of State Bank of Mysore [ 2015 (1) TMI 1328 - KARNATAKA HIGH COURT] And thus, the AO is directed classify those three branches as per 2011 census for the purpose of provision for bad debt u/s 36(1)(viia) of the Act. Computation of deduction u/s.36(1)(viii) - manner in which such deduction should be computed - HELD THAT:- A similar issue had been considered by the Tribunal right from assessment years 2010-11 to 2012-13, where the Tribunal has set aside the issue to the file of the AO and directed him to reconsider the issue in accordance with provisions of section 36(1)(viii) - We further noted that the AO had passed an order dated 04.11.2019 to give effect to the orders of the Tribunal. AO has examined computation submitted by the assessee and allowed deduction as per the computation of the assessee. AO had already accepted computation methodology adopted by the assessee-bank for assessment years 2010-11 2011-12, based on directions of ITAT, we are of the considered view that this year also the issue needs to go back to the file of the AO to consider the issue in light of directions of the Tribunal for earlier years. Hence, we set aside the issue to the file of the AO and direct him to follow the directions given by the Tribunal for earlier assessment years. Deductibility of Education Cess and Secondary Higher Education Cess - HELD THAT:- We find that a similar issue has been considered by the Hon ble Bombay High Court in the case of Sesa Goa Ltd., vs. JCIT, [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] , where the Hon ble Bombay High Court held that Education Cess and Secondary Higher Education Cess is deductible u/s.37 - Therefore we are of the considered view that Education Cess and Secondary Higher Education Cess is deductible u/s.37(1) - But, facts remains that the assessee has taken this issue for the first time by filing additional ground and fact with regard to said claim was not before the AO at the time of assessment proceedings. Rectification u/s 154 - whether application of 2001 census or 2011 census for classification of a particular branch as rural branch for the purpose of making provision u/s.36(1)(viia) of the Act ? - HELD THAT:- We of the considered view that issue of application of census data of 2001 or 2011 is highly a debatable issue which cannot be considered as glaring mistake apparent from record, which can be rectified u/s.154 of the Act. Therefore, we set aside order passed by the ld.CIT(A) u/s.154 of the Act and allow appeal filed by the assessee. 2021 (11) TMI 567 Assessment u/s 153A - addition on account of interest paid by the assessee on unsecured loans from Neil Industries Pvt. Ltd. - disallowing the interest is that the authorities below have held the loan creditor to be bogus and being engaged in the business of providing accommodation entries - HELD THAT:- Though the Assessing Officer did issue summons to the witnesses to provide the assessee opportunity to cross examine the witnesses but witnesses did not appear whereas the counsel of the assessee was present for cross examination. The Assessing Officer without making further efforts and without ensuring the presence of witnesses, proceeded to disallow the interest ignoring all documentary evidences filed by assessee as well as by loan creditor directly. When this issue was taken before learned CIT(A), he held that there was no need to provide opportunity to the assessee for cross examination In the present case, all documentary evidences, for the claim made by the assessee, are available with the authorities for which they have not made any adverse comments. The only reason for making and upholding the disallowance of the interest is the statement recorded by the officers of the Department and that too not by the Assessing Officer himself and that too which were not made available to the assessee for cross examination and therefore, these statements cannot be utilized against the assessee. If we ignore these statements, the rest of documentary evidences well support the claim of the assessee. 2021 (11) TMI 566 Addition u/s 69 - unexplained investment - HELD THAT:- Assessee has carried out the construction in two years namely in the years relevant to assessment year 2006-07 2007-08. Assessee has spent aggregate amount of ₹ 14.10 lakhs in two years namely ₹ 10.25 lakhs in assessment year 2006-07 ₹ 3.85 lakhs in assessment year 2007-08. We notice that the Ld. CIT(A) has accepted the claim of salary savings to the extent of ₹ 10.25 lakhs in assessment year 2006-07. Hence, what is required to be explained during the year under consideration is the balance amount of ₹ 3.85 lakhs (₹ 14.10 lakhs (minus) ₹ 10.25 lakhs). It is also an undisputed fact that the assessee has declared salary income of around ₹ 20 lakhs during the year under consideration. Accordingly, we are of the view that there is no reason to disbelieve the claim of the assessee that the above said sum of ₹ 3.85 lakhs was spent out of salary savings. In view of the foregoing discussions, we are of the view that the claim of own funds of ₹ 14.10 lakhs deserves to be accepted. Accordingly, we modify the order passed by Ld. CIT(A) and direct the A.O. to delete the addition of ₹ 14.10 lakhs. 2021 (11) TMI 565 Disallowance u/s 14A - Voluntary disallowance made by assessee - HELD THAT:- It is settled position of law that disallowance cannot exceed the amount of dividend income earned during the relevant assessment year. In view of the above judgment of M/s.Marg Limited [ 2020 (10) TMI 102 - MADRAS HIGH COURT] it is clear that the disallowance u/s 14A of the I.T.Act cannot exceed the exempt income earned during the relevant assessment year irrespective whether larger amount was disallowed by the assessee u/s 14A of the I.T.Act while filing the return of income. Therefore, the AO is directed to restrict the disallowance u/s 14A to the amount of exempted income was earned on investment. Addition on account of share premium received u/s 56(2)(viib) - AO has expressed the view that the assessee has adopted market value for one asset and book value for remaining assets - According to AO, this kind of differential method is not permissible - HELD THAT:- AO has omitted to consider the provisions applicable for quoted shares. Further, we notice that the AO has not referred to the date of Balance Sheet considered by him for determining the NAV, i.e., the date of Balance sheet is not discernible from the AO. We noticed that the valuer has considered the nearest available quarterly Balance Sheet for determining NAV. In effect, the AO has ignored the methodology prescribed in Rule 11UA for valuing quoted shares, which accounts for major difference in the valuation. Thus, the AO has misguided himself in determining the value under NAV method. Further, it is not discernible as to which Balance Sheet, the AO has referred for determining NAV. This is also lacunae in the computation made by the AO. We notice that the Ld DRP has also confirmed the draft assessment order passed by AO on this point without appreciating the above stated factual aspects. AO has not examined the DCF method of valuation submitted by the assessee and the value of shares determined by the AO under NAV also suffers from major defects. The reasoning given by the AO for rejecting DCF method of valuation would fall on the ground, since the NAV method adopted by the AO suffers from major defects. We notice that the AO has not appreciated the necessity of preparing two valuation reports and the AO has also omitted to consider the correct provisions of Rule 11UA. Hence, various faults found by the AO with regard to the valuation reports are liable to be rejected. This issue requires fresh examination at the end of AO. Accordingly, we restore this issue to the file of the AO for examining it afresh with the direction to examine the valuation reports furnished by the assessee in order to find out whether they have been prepared in accordance with Rule 11UA. If the AO could find fault in the methodology, he may put it across to the assessee and seek explanation. After considering the explanations and information that may be furnished by the assessee, the AO may take appropriate decision in accordance with law. 2021 (11) TMI 564 Addition u/s 68 - discharge of onus - CIT-A deleted the addition - investor companies which information was already available in the record - HELD THAT:- As find from a perusal of the assessing authority's remand report's conclusion that he had held the assessee to have discharged its onus of proving identity, genuineness and creditworthiness of the share application/premium amount of ₹ 49.18 Crs which ultimately led to the CIT(A) passing the impugned order granting relief. We deem it appropriate at this stage to quote the case law Smt. B. Jayalakshmi [ 2018 (8) TMI 208 - MADRAS HIGH COURT] and CIT vs. D.M. Purnesh [ 2020 (9) TMI 731 - KARNATAKA HIGH COURT] that the Revenue cannot be held as an aggrieved party once the Assessing Officer files a favourable remand report in appropriate proceedings. We therefore decline the Revenue's foregoing solely substantive ground raised in the instant appeal in very terms. - Decided against revenue. 2021 (11) TMI 563 Condonation of delay - 353 days in filing the appeal before the Tribunal - proof of eligible reasons for delay - Revision u/s 263 by CIT on Treatment to income derived from the sale of timbers - HELD THAT:- Assessee did not explain the reason for delay in filing the appeal before this Tribunal on account of medical reason as there is no supporting document to say that the assessee fell sick. Secondly, the assessee submitted that it failed to bring to the notice of the Auditor who had been attending the tax matters of assessee also did not inform the assessee of the need to file appeal before the Tribunal. Even here, the assessee has not mentioned the name of the auditor who attended before the Pr. CIT during the course of proceedings u/s. 263 of the Act. Also as stated there was a marriage in the family during the time when it received the impugned order of Pr. CIT. Even here, the assessee has not mentioned which family member's marriage was held during this period. Each and every information is not disclosed by the assessee - In our opinion, the assessee has not explained the reason for delay in filing the appeal before this Tribunal sufficiently and there was inordinate delay in filing the appeal. Law assists those who are vigilant, not those who sleep over their rights. The delay cannot be condoned simply because the assessee's case is hard and calls for sympathy or merely out of benevolence to the party seeking relief. In granting the indulgence and condoning the delay it must be proved beyond the shadow of doubt that the appellant was diligent and was not guilty of negligence whatsoever. The sufficient cause within the contemplation of the limitation provision must be a cause which is beyond the control of the party invoking the aid of the provisions. The cause for the delay in filing the appeal which by due care and attention could have been avoided cannot be a sufficient cause within the meaning of the limitation provision.. In the present case, the reasons for delay in filing the appeal is not sufficiently explained by the assessee and it shows that the delay was due to negligence and inaction on the part of assessee which cannot be condoned. - Decided against assessee. 2021 (11) TMI 562 Correct head of income - gain from listed securities - capital gain or business income - HELD THAT:- In view of the consistent finding of the Tribunal since assessment year 2008-09[ 2018 (8) TMI 1961 - ITAT DELHI], respectfully following the finding of the Tribunal for assessment year 2008-09 to 2012-13, we set aside the order of the lower authorities and hold the activity of purchase and sale of shares in question as investment activity to be assessed under the head capital gain. - Decided in favour of assessee. Disallowance u/s 14A read with Rule 8D - Assessee stated that no expenses have been incurred in relation to the dividend income earned from Dabur India Ltd. - HELD THAT:- In the year under consideration also, the assessee himself has computed the disallowance in terms of Rule 8D and thereafter reduced the disallowance corresponding to the dividend income earned from the shares of Dabur India Ltd. The issue in dispute is squarely covered against the assessee with the decision of the Tribunal in [ 2020 (6) TMI 75 - ITAT DELHI]. Whether investment in Dabur India Ltd. being a strategic investment would not form part of the total income under the Act? - As in view of the decision of the Hon ble Supreme Court in the case Maxopp Investment Ltd [ 2018 (3) TMI 805 - SUPREME COURT] the issue is covered against the assessee and, therefore, this grounds of appeal is dismissed. Disallowance of business expenses - assessee failed to justify the expenditure by way supporting evidences - HELD THAT:- During the assessment proceedings, the Assessing Officer pointed out various instances of expenditure which were not incurred for the purposes of business and the assessee offered 10% of the total expenditure for taxation. CIT(A) also upheld the disallowance on the ground that the learned Authorized Representation admitted that it was not possible to filter out expenditure which may have been incurred for non-business promotion expenses as disallowance and the said disallowance was made on the agreed basis. Tribunal for assessment year 2013-14 has upheld the disallowance of 10% of the expenses as incurred for non-business purpose, we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute and accordingly uphold the same - Decided in favour of revenue. 2021 (11) TMI 561 Assessment u/s 153C r.w.s. 143(3) of the Act OR u/s 143(3) - HELD THAT:- As AY 2016-17 fell within the purview of provisions of section 153C of the Act in light of first proviso read with sub-section (2) of section 153C of the Act and accordingly, assessment order for AY 2016-17 ought to be treated as framed u/s 153C r.w.s. 143(3) of the Act and not u/s 143(3) of the Act AY 2016-17. Accordingly, Ground Nos. 1 2 of the assessee s appeal are allowed. Validity of assessment even when no incriminating documents related to the assessee were found and seized from the possession of the person in whose case search was executed and more so when no addition was made in respect of the so-called incriminating documents referred to by the Ld. Assessing Office - HELD THAT:- As relying on KABUL CHAWLA [ 2015 (9) TMI 80 - DELHI HIGH COURT] and MEETA GUTGUTIA PROP. M/S. FERNS N PETALS [ 2017 (5) TMI 1224 - DELHI HIGH COURT] proceedings initiated u/s 153C of the Act for the AY 2013-14 to 2015-16 being non-abated and completed assessments (considering the date of search for proceedings u/s 153C of the Act as 15.11.2016) deserves to be quashed, since no incriminating material was found during the course of search thereby warranting initiation of proceedings u/s 153C of the Act for these years. Moreover, no addition was made by the Ld. Assessing Officer himself while passing the assessment order on the basis of the so-called incriminating material which formed the very basis for initiation of proceedings u/s 153C of the Act. We, therefore, set aside the findings of Ld. CIT(A) on this ground and conclude that proceedings initiated in the case of the assessee for AY 2013-14 to 2016-17 are without jurisdiction and consequently, assessments framed for these years are quashed and set aside. Accordingly, Ground No. 3 of the assessee s appeal is allowed. Undisclosed investment in construction of project - addition to the total income of the assessee on account of undisclosed investment in construction of project solely on the basis of valuation report of the DVO - HELD THAT:- We find that there were various discrepancies in the valuation report submitted by the DVO which have also been discussed supra. Further, the adoption of CPWD rates by DVO for valuing the cost of construction of project of the assessee at Village Pipariya of Madhya Pradesh also seems to be very unreasonable and far from realities. We find strong force in the arguments of the Ld. Counsel that valuation adopted by the DVO was way too exorbitant and could not have been considered as the basis for making addition to the total income of the assessee since the cost of construction estimated by the DVO was even higher than the sale price as per guideline issued by the sub-registrar. It is also evident that the DVO undertook the valuation exercise considering the CPWD rates for residential bungalows completely ignoring the fact that the assessee was engaged in construction of duplex row houses for sale and not in construction of residential bungalows. AO made addition to the total income of the assessee on account of undisclosed investment in construction of project solely on the basis of valuation report of the DVO which in itself is unsustainable in light of the fact that no incriminating material was found during the course of search thereby warranting such addition to the total income of the assessee. Addition made to the total income of the assessee during the course of proceedings u/s 153C of the Act solely on the basis of valuation report of the DVO and that too in absence of any incriminating material found during the course of search was not justifiable and deserves to be deleted. Even on merits of the case, our attention was drawn to the deduction given by the Ld. CIT(A) towards CPWD/PWD rates adopted for valuation - assessee referring to various judgments of the Tribunal submitted that deduction up to 30% had been provided in similar type of cases whereas the Ld. CIT(A) had given only 25% deduction. Similarly, as regards self- supervision charges, it was contended that deduction upto 10- 12.5% had been provided in similar type of cases whereas the Ld. CIT(A) had given only 5% deduction. Valuation report prepared by the Government approved registered Valuer as well as by the DVO clearly depict that the valuation of investment in construction of the project has been overstated and looking to the fact that the impugned row houses are situated in Village Pipariya, rates taken for the purpose of valuation are quite excessive. No addition was justified to the total income of the assessee on account of undisclosed investment in construction of project. We, thus, value the cost of construction at the actual cost of ₹ 23,69,68,970/- shown by the assessee. Accordingly, we set aside the findings of Ld. CIT(A) to the extent the Ld. CIT(A) confirmed the addition on account of undisclosed investment in construction of project. Hence, the assessee gets further relief in AYs 2013-14 to 2016-17 which is over and above the relief already allowed by the Ld. CIT(A) - Decided in favour of assessee. Unexplained cash received from Smt. Sunita Rai - CIT(A) in treating the additional income admitted by the assessee during the course of survey under the head income from other sources as against taxability of such income by invoking of the provisions of section 69B - HELD THAT: Assessing Officer also did not specifically comment whether the additional income declared was a part of regular books of accounts or not more so when section 69B of the Act can be invoked only for income which is not fully disclosed in books of accounts and not in respect of income which is already incorporated in the books of accounts. In view of the detailed findings of the Ld. CIT(A) and reliance placed on the decision of the Hon ble Jurisdictional Bench in the case of Mukesh Sangla HUF [ 2016 (2) TMI 1320 - ITAT INDORE] we do not find any infirmity in the finding of Ld. CIT(A) and the same needs to be confirmed. - Decided against revenue. Customs 2021 (11) TMI 560 Jurisdiction - power of Additional Director General, Directorate of Revenue Intelligence(DRI) to issue SCN - Competent Authority to issue Show Cause Notice or not - jurisdictional error or not - Section 28(4) read with Section 124 of Customs Act, 1962 - HELD THAT:- Hon ble Supreme Court in the matter of M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [ 2021 (3) TMI 384 - SUPREME COURT] while following its own decision in the matter of COMMISSIONER OF CUSTOMS VERSUS SAYED ALI [ 2011 (2) TMI 5 - SUPREME COURT] has laid down that Additional Director General, DRI cannot be said to be a proper officer under Section 2(34) of Customs Act, 1962 and held that the entire proceedings initiated by ADG, DRI by issuing various Show Cause Notices are invalid without any authority of law and liable to be set aside. In the instant case also the Show Cause Notice was issued by the Additional Director General, DRI under Section 28 ibid, which as per the aforesaid decision of the Supreme Court is without any authority of law. Although Review Petition filed by the Revenue is pending before the Supreme Court in the above said case but thereafter in the case of COMMISSIONER OF CUSTOMS, KANDLA VERSUS M/S. AGARWAL METALS AND ALLOYS [ 2021 (9) TMI 316 - SUPREME COURT] held that the Additional Director General, (DRI) is not a proper Officer within the meaning of Section 28(4) read with Section 124 of Customs Act, 1962. The Additional Director General, DRI, Lucknow is not a proper Officer to issue Show Cause Notice under Section 28(4) read with Section 124 of Customs Act, 1962, the impugned proceedings are set aside - appeal allowed. Corporate Laws 2021 (11) TMI 559 Seeking restoration of name of the Company in the Register of Companies - Section 252 of the Companies Act, 2013 - HELD THAT:- The Applicant is the Director of the Company. It is submitted by the Applicant that the Company is in operation and is carrying on its business. The failure of the Company in filing the statutory returns and statements was due to inadvertence. Report of the RoC has been received. Applicant has filed clarificatory memo with regard to the observation made by the respondent that Applicant is neither a director nor shareholder of the Company. Admittedly, the relevant documents which are to be filed, are ready with the Company and the Company is willing to file the same, if so permitted. The Company has not deposited heavy cash in its Bank Account during the period of demonetization. Copy of Bank statement along with demonetization affidavit is enclosed to the Application - By exercising the powers conferred on this Tribunal under Section 252 of the Companies Act, 2013, and Rule 87A of NCLT (Amendment) rules 2017, R/w NCLT Rules, 2016 and basing on the assurance given by the Learned representative for Applicant that Company would be making good all pending statutory compliances on restoration of the Company, it is deemed to be a fit case to order restoration of the Company by RoC (H) in the interest of the Company, its shareholders and the Creditors. The Registrar of Companies, the respondent herein, is ordered to restore the original status of the Company as if the name of the company has not been struck off from the Register of Companies and to take all consequential actions like change of company's status from 'struck off to Active (for e-filing), to restore and activate the DINs if applicable, to intimate the bankers about restoration of the name of the company so as to defreeze its accounts - appeal allowed. 2021 (11) TMI 558 Seeking restoration of name of appellant company in the name of register of member - section 252 of the Companies Act, 2013 read with NCLT Rules, 2016 - HELD THAT:- The Appellants are seeking restoration of the name of Company in the register as maintained by RoC relying on the ground that the Company as of date is in active business and has been preparing all its financial statements and in the circumstances, it is just that the name of the Company should be restored on the register of RoC as maintained by the Respondent No. 1. A perusal of the documents, reflects that the Company has business operations which necessitate restoration of its name in the Register of Companies. The assumption of RoC that the company was not in operation was merely on grounds of non-filing of the Statutory Returns by the appellant company. The Act itself provides for redressal of these defaults. A step as stringent as what has been taken at least requires an opportunity to the appellant to take remedial measures. Merely to disallow restoration on grounds of its failure to file financial statements would neither be just nor equitable. The appeal is allowed subject to payment of cost of ₹ 20,000/- (Rupees Twenty Thousands Only) to the ROC, with which the appellant is registered for incurring the expenses for the restoration of the Appellant. The restoration of the Appellant Company's name in the Register will be subject to their filing all outstanding documents for the defaulting years as required by law and completion of all formalities, including payment of any late fee or other charges which are leviable by the Respondent for the late filing of statutory returns - Appeal allowed. PMLA 2021 (11) TMI 557 Seeking grant of Anticipatory Bail - commission of a serious economic offence of money laundering - offence punishable under Section 3 read with Section 4 of the Prevention of Money Laundering Act, 2002 - HELD THAT:- Looking to the facts and circumstances of the case; specially, to the fact that the petitioner had not challenged the order dated 17.09.2021 passed by the trial court. Petitioner is involved in serious economic offence, the principle of law enunciated by Hon ble Apex Court in P. CHIDAMBARAM VERSUS DIRECTORATE OF ENFORCEMENT [ 2019 (9) TMI 286 - SUPREME COURT] , but without expressing any opinion on the merits of the case, it is not considered to be a fit case to enlarge the petitioner on anticipatory bail. The anticipatory bail application filed by the petitioner is dismissed. 2021 (11) TMI 556 Stay against Attachment/Freezing of Bank Account of petitioner - stay against the criminal investigation and prosecution - HELD THAT:- If we revert back to the operative portion of the impugned order of learned Single Judge which is reproduced in the earlier portion of this order, what it says is that the respondents (that is the present appellant) are restrained from taking any coercive steps against the petitioner as directed by the Supreme Court. Firstly, this direction preventing the department from taking coercive action against the petitioner nowhere includes stay against the order of attachment imposed by the Department. In any case the order of attachment has not been challenged and could not have been stayed. Question of stay against the criminal investigation and prosecution - HELD THAT:- In view of the clarification and modification by the Supreme Court in its own order in the case of Anil Kumar Gadodia, it is provided that the direction for not taking coercive action against the petitioner is given by the learned Single Judge in the impugned order, would not cover any criminal prosecution against him. In other words, it would be open for the department to continue the investigation and prosecution in relation to the alleged actions of the petitioner in accordance with law. Appeal disposed off. 2021 (11) TMI 555 Constitutional validity of Section 50(2), (3) and (4) of the Prevention of Money Laundering Act, 2002 (PMLA) read with Section 24, 63 and 66 of the PMLA 2002 - Seeking for a direction to restrain the respondent no. 2 from issuing any further summons under Section 50(2) of PMLA 2002 against the petitioner - HELD THAT:- This Court while considering the prayer as made on behalf of the petitioner finds that petitioner has challenged the constitutional validity of the provisions of the PMLA, 2002 as void and inoperative or being violative of Article 14, 20(3), 21 of the Constitution of India. The petitioner has also sought for an order of interim stay of the operation of the impugned summons dated 24.9.2021 and 25.10.2021 to restrain the respondent no. 2 from issuing any further summons under Section 50 (2) of the PMLA, 2002. It is rightly pointed out that the summon dated 24.9.2021 has already been dealt with by virtue of the reply given by the petitioner on 7.10.2021 enclosing the copies of the documents required by the respondent authority. So, there is no question of challenging the summon dated 24.9.2021. It appears that the second summon dated 25.10.2021 issued by respondent no. 2 received by the petitioner is on similar terms as in the first summon in response to which the petitioner had replied and sought for accommodation of time for his attendance and to appear before the respondent no. 2 through video conferencing or by physical appearance before the office of the respondent no. 2 in Kolkata. Thus, the petitioner is not avoiding to co-operate the respondent no. 2 into the investigation but the prayer as made on behalf of the petitioner alternatively is for ad interim order of protection which has been sought for against the respondent no. 2 from taking any coercive action against the petitioner in connection with the said case and further to allow him to be examined or to allow him to cooperate into the investigation before the respondent no. 2 vide video conferencing or at the office of the respondent no. 2 at Kolkata. This Court is convinced that the petitioner is required by the respondent authority only for cooperating into the investigation as he is not an FIR named accused in connection with the case - Let the matter appear six weeks hence with the direction upon the respondents to file affidavit-in-opposition and reply thereto within the period of six weeks. List the matter accordingly. Service Tax 2021 (11) TMI 554 SVLDRS - Non-payment of service tax - Sabka Viswas (Legacy Dispute Resolution Scheme, 2019) - payment not made duly - case of the petitioner is that on account of his personal ill health in the last few days of June 2020, he was totally indisposed and therefore could not make any payment - HELD THAT:- As per the admitted facts, the payment had to be made latest by 30.06.2020. The petitioner has not raised any dispute about the computation of the sum payable calculated by the department and conveyed to him. There is no provision in the scheme for extending the time limit for making the payment. In fact, the scheme clearly envisages that upon termination of the said period, the scheme would come to an end. That being the position, on the grounds stated by the petitioner, an order for extension of the scheme cannot be granted. Petition dismissed. 2021 (11) TMI 553 Delayed/Non-service of SCN - Time Limitation - present adjudication has to be rejected for preliminary reason that the show cause notice was never served upon the appellant within the maximum period as provided under the statute i.e. within the period of 5 years - HELD THAT:- The non-service of SCN during the period of 5 years, as pleaded by the appellant, is very much apparent from the documents. A letter sent by the appellant to Dy. Commissioner concerned as received by the Department on 15th October, 2018 appears to be the reply to the impugned SCN given by the appellant with the clear mention that the said SCN was never received by them. The perusal thereof reflects that appellant has specifically mentioned about the SCN dated 25.4.2018 to have been received only on 17.9.2018 due to the same being earlier served on the wrong addresses. Facts remains are that the SCN was never served upon the appellant. Question of receiving the same does not at all arises. The said non-service is the sufficient violation of the statutory mandate. In the given circumstances, the order of remanding the matter to pass an order after verification that too for a period only of 3 months, as passed by Commissioner (Appeals) is opined to not to be sustainable in the eyes of law, for the reason of violation of basic principle of natural justice that the opportunity of being heard was never been provided to the appellant. Since there was no valid service of SCN same cannot sustain and accordingly is to be set aside - the proposal of demand therein cannot be confirmed - Appeal allowed - decided in favor of appellant. 2021 (11) TMI 552 Refund of accumulated cenvat credit - rejection of refund claim on the ground that the services did not quantify as an essential input service - Advertising Agency Services - Business Auxiliary Services - Convention Services - Design Services - Event Management Services - Pandal or Shamiana Services - Public Relations Management Service - Real Estate Agent and Consultant Services - HELD THAT:- The issue has already been gone into and decided by various fora and hence, the same is no more res integra. This Bench has considered the relevance of most of the above services including the issue of nexus in various decisions including the cases of the same appellant, for different periods in 24/7 CUSTOMER PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX, BENGALURU EAST [ 2021 (3) TMI 414 - CESTAT BANGALORE] where this Bench takes care of the nexus test and thus holds good for all the input services involved, except Advertising Agency Services, Pandal or Shamiana Services and Real Estate Agent and Consultant Services. In view these orders, the denial of refund in respect of the input services except Advertising Agency Services, Pandal or Shamiana Services and Real Estate Agent and Consultant Services appears to be bad. Advertising Agency Services - HELD THAT:- This issue has been held to be an essential input service in the case of EARTLAND BANGALORE TRANSCRIPTION SER. (P) LTD. VERSUS CST., BANGALORE [ 2010 (10) TMI 428 - CESTAT, BANGALORE] where it was held that the refund on the same is allowed - the denial of input service credit in the impugned order appears to be bad. Pandal or Shamiana Service - HELD THAT:- The appellant has only explained that the same are availed for staff events - the very ratio in the case of IDEA CELLULAR LTD. VERSUS COMMISSIONER OF C. EX., MEERUT-I [ 2011 (1) TMI 811 - CESTAT, NEW DELHI] would equally apply here as well, and hence this service is also held to be ineligible service - denial is held to be bad in law. Real Estate Agent and Consultant Service - HELD THAT:- The appellant has claimed that the said service was availed for renting of office space but however, no explanation is made available as to the nature or spaces that are rented out during the period under challenge and hence, no interference is called for. Most of the services are held to be eligible/essential input services, following the ratio laid down in various orders the denial of cenvat credit on all the input services except Real Estate Agent and Consultant Service is held to be bad in law. Indian Laws 2021 (11) TMI 586 Dishonor of Cheque - service of statutory notice u/s 138B of NI Act - acquittal of accused u/s 255(1) of Cr.P.C. - rebuttal of statutory presumption - HELD THAT:- The documents produced are very relevant to prove the case of the complainant. When the cheque is issued, there is a presumption under Sections 118 and 139 of the Act that it was drawn for consideration. It is settled that when the accused admits the signature in the cheque and takes a plea that it was issued as security, the burden is upon him to establish the same. The Apex Court in Kalamani Textiles (M/s.) Another v. P. Balasubramanian [ 2021 (2) TMI 505 - SUPREME COURT ] has held that once signature is established, it is to be presumed that the cheque was issued in consideration for a legally enforceable debt. At any rate, the complainant has chosen to produce the statement of accounts showing the transaction between the complainant and the accused as well as the resolution authorising PW1 to represent the company - this is a fit case where an opportunity has to be granted to the complainant to prove the said documents in order to prove its case. Hence, the impugned judgment is liable to be set aside and the matter is to be remanded to the court below for fresh disposal. Appeal allowed by way of remand.
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