TMI Tax Updates - e-Newsletter
November 21, 2020

Case Laws in this Newsletter:

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

Articles

1. Some important points on e-invoicing

   By: Ganeshan Kalyani

2. GST Annual Return for FY 2018-19 : Number of extensions and notifications

   By: Ganeshan Kalyani

3. VIRTUAL HEARING

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Gurugram DGGI arrests 2 for input tax credit fraud of ₹ 25 crore

2. Payment of ‘11.60% Government Stock 2020’

3. Repayment of ‘Government of India Floating Rate Bonds (FRB)2020’

4. India will play an important role in ensuring cost-effective and innovative healthcare solutions for future: Shri Piyush Goyal

5. Income Tax Department conducts searches at various locations in Uttar Pradesh

Notifications

GST - States

1. 63/2020– State Tax - dated 19-11-2020 - Delhi SGST

Appoints the 1st day of September, 2020, as the date on which the provisions of section 10 of the Delhi Goods and Services Tax (Amendment) Act, 2019, shall come into force

2. F. No. 3240/CTD/GST/2020/11 - dated 28-10-2020 - Puducherry SGST

Amendment in Notification No. F.No. 3240/CTD/GST/2020/6, dated the 6th May, 2020

3. F. No. 3240/CTD/GST/2020/10 - dated 28-10-2020 - Puducherry SGST

Seeks to prescribe return in FORM GSTR-3B of PGST Rules, 2017 along with due dates of furnishing the said form for October, 2020 to March, 2021.

4. 15/2020 - dated 13-11-2020 - Telangana SGST

Extending the time limit for furnishing the declaration in FORM GST ITC-04.

5. 9/2020 - dated 7-11-2020 - Telangana SGST

Extending the time limit for furnishing the details of outward supplies in FORM GSTR-1.

6. 12/2020 - dated 7-11-2020 - Telangana SGST

Extending the time limit for furnishing the of the annual return in FORM GSTR-9

7. 11/2020 - dated 7-11-2020 - Telangana SGST

Seeks to amend Notification No. 03/2017 – State Tax, Dt. 26-07-2017

8. 10/2020 - dated 7-11-2020 - Telangana SGST

Due dates of GSTR-3B for the months October-20 to March-21

Highlights / Catch Notes

GST

• Court Justifies Detention of Goods for Expired E-Way Bill; Petitioner Failed to Extend Validity and Update Authorities.

  Case-Laws - HC : Detention of goods - validity of e-way bill expired - The mere fact that the respondent had detained the goods did not, in any manner, prevent the petitioner from extending the validity period of the e-way bill, and producing a copy of the extended e-way bill before the authority for the purposes of seeking a clearance of the goods. - The detention of the goods and the vehicle in the instant case cannot be said to be unjustified - HC
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• Court Orders Amendment of GST Cancellation Reasons to Reflect Business Transfer; New Order Due in One Month.

  Case-Laws - HC : Cancellation of registration under the GST regime - The 1st respondent should take steps to change the reasons for cancellation of registration of the petitioner to 'transfer of business on account amalgamation, merger, demerger, sales,leased or otherwise' and issue a fresh order of cancellation of registration - the 1st respondent is directed to adopt a suitable procedure and issue the fresh order of cancellation of registration as indicated above to the petitioner within a period of one month from the date of receipt of a copy of this judgment. - HC
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Income Tax

• Legal and professional fees for improving existing business operations are deductible u/s 37 of the Income Tax Act.

  Case-Laws - HC : Nature of expenditure - expenses incurred on account of professional and legal fees - The expenses are not incurred for exploring the market for a new product and rather expenses is incurred for exploring the circumstances as to how Assessee should manage it s existing business more effectively - expenditure incurred by Appellant is business expenditure allowable under Section 37. - HC
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• Capital Gain Tax Calculation: No Evidence of Building, No Cost Improvement Benefits for Property Owner.

  Case-Laws - AT : Computation of capital gain tax - computing the inflation cost of the asset - Since the assessee has not furnished any revenue record to show that there is a building or evidence regarding power connections or water connections, in the absence of this evidence, it has to be noted that there is no building in the scheduled property and the assessee is not entitled for any benefit of cost of improvement. - AT
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• Insurance Company Challenges Taxation on Negative Reserves, Arguing They Are Not Guaranteed Income Under Existing Policies.

  Case-Laws - AT : Insurance company - Adjustment of Negative Reserves - The negative reserves would be nothing but premium receivable by the insurance company. However, there would always be a chance that policyholder might not continue with the insurance polity bought by him which would result in non-receipt of premium which was otherwise receivable by the insurance company. Therefore, the same could not be taxed. - AT
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• Tax Appeal: No Evidence Found Against Vendor's Location; Depreciation Claim on Machinery Allowed by Commissioner of Income Tax (Appeals).

  Case-Laws - AT : Bogus purchase of machinery - Machine was purchased during the financial year 2008-09 and Inspector visited the premises of the vendors in December, 2014. The possibility of vendors shifting the place of business in between cannot be ruled out. Further, we observe that no finding of fact has been recorded by AO that these parties never had their place of work at the given addresses. - No infirmity in the order of CIT(A) in deleting the addition qua alleged bogus purchase of machinery and allowing assessee’s claim of depreciation on the same. - AT
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Customs

• Customs Broker License Suspension Must Be Proportionate to Offense, Protecting Broker and Employees' Livelihoods.

  Case-Laws - AT : Continuation of Suspension of Customs Broker License - The punishment meted out to the Custom Broker should be commensurate with such omission. It is a settled law that penalty should be proportionate to the offence committed. It would be too harsh to revoke the license of the Customs Broker and to leave the right to livelihood of the Customs Broker as well as his employees to the wind. - AT
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• Customs Broker License Suspension Lifted During Regulation 17 Inquiry, Authorities Directed to Allow Operations to Continue.

  Case-Laws - AT : Continuation of suspension of the CB licence - the proceeding of inquiry under Regulation 17 ibid shall continue in the case of the present appellant in accordance with law, but the authorities should not continue with the suspension of their licence - AT
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• Customs Broker License Revocation Contested; No Evidence of Mala Fide Intent Found by SIIB Branch Investigation.

  Case-Laws - AT : Revocation of Customs Broker licence - forfeiture of security deposit - There is no material on record to attribute any mala fide on the part of the Customs Broker executive and there is no evidence which has come on record suggesting he acted with mala fide in order to gain any advantage - It is also found that in the investigation conducted by the SIIB Branch, nothing adverse has been recorded against the appellant. - AT
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Corporate Law

• Liquidation Proceedings: All Creditors Are Parties in Rem, Not Just Petitioners, u/s 434(1)(c) Proviso.

  Case-Laws - SC : Liquidation proceedings - Scope of the term "Party" - the proceedings for winding up of a company are actually proceedings in rem to which the entire body of creditors is a party. The proceeding might have been initiated by one or more creditors, but by a deeming fiction the petition is treated as a joint petition. The official liquidator acts for and on behalf of the entire body of creditors. Therefore, the word “party” appearing in the 5th proviso to Clause (c) of Subsection (1) of section 434 cannot be construed to mean only the single petitioning creditor or the company or the official liquidator. The words “party or parties” appearing in the 5th proviso to Clause (c) of Subsection (1) of Section 434 would take within its fold any creditor of the company in liquidation. - SC
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Service Tax

• Court Upholds Revenue's Appeal Validity Despite Petitioner's Prejudice Claim Post-Amnesty Scheme Expiration Under Finance Act, 1994.

  Case-Laws - HC : Validity of appeal preferred by the respondent (revenue) against an order of assessment under the Finance Act, 1994 - amnesty scheme in vogue - The petitioner cannot also be seen as prejudiced in any manner merely because the intimation of the revenue appeal was received by him after the expiry of the amnesty scheme. His option for the amnesty scheme was not dependent upon whether or not the revenue preferred an appeal against the order of the assessing authority. The petitioner has not made out a case for the reliefs sought for in the writ petition. - HC
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• Decision: VAT Applies to Glass Bottle and Crate Rentals, Possession and Control Transferred to Customer.

  Case-Laws - AT : Nature of services - applicability of service tax or VAT - glass bottles and crate rentals - the entire goods are handed over to the customer who gets the effective possession as well as control to use the goods. Hence, the observation of the Ld. Adjudicating authority that the control and possession has not been passed is not justified and hence is liable to be rejected. - AT
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VAT

• Quasi-judicial authority's decision challenged for lack of reasoning, violating natural justice principles in levy assessment.

  Case-Laws - HC : Validity of assessment order - The 1st respondent, being a quasi-judicial authority, is bound to assign reasons in support of its decision, and cannot simply reject the objections of petitioner to the levy proposed by him on these two items by merely saying that the explanation of petitioner is not ‘satisfactory’ - The 1st respondent is obligated to supply reasons for his conclusion and failure to do so amounts to violation of principles of natural justice. - HC
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Case Laws:

• GST

• 2020 (11) TMI 617
  Detention of goods - validity of e-way bill expired at time of detention - option for extension of period of e-way bill - Validity of notices issued under Section 129(3) of the CGST Act -- HELD THAT:- The classification in the table under R.138(10) is essentially between over dimensional cargo and other cargo . In both the categories of cases, the cargo can be transported either by road or through multimodal shipment in which at least one leg involves transport by ship. The number of days which would count towards the validity period of the e-way bill, for cargo other than over dimensional cargo, would vary depending upon whether the distance traversed is upto 100 km or more. While one day validity is given for distance traversed upto 100 km, an additional day is granted for every 100 kms or part thereof traversed thereafter. Similarly, in the case of over dimensional cargo, one day validity is granted for up to 20 km traversed, and an additional day for every 20 km or part thereof traversed thereafter. The mere fact that the respondent had detained the goods did not, in any manner, prevent the petitioner from extending the validity period of the e-way bill, and producing a copy of the extended e-way bill before the authority for the purposes of seeking a clearance of the goods. The detention of the goods and the vehicle in the instant case cannot be said to be unjustified - petitioner are permitted to clear the goods and the vehicle on furnishing a bank guarantee for the amount demanded in the impugned notices - petition allowed.

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• 2020 (11) TMI 616
  Cancellation of registration under the GST regime - closure of business or transfer of business - Section 30 of the CGST Act - HELD THAT:- It is apparent from the sequence of events narrated in the writ petition that the original cancellation of registration, on the ground that there was a closure/discontinuance of business, was an erroneous one, in that the petitioner had erroneously chosen the said reason instead of the actual reason, which was the transfer of business to an another entity. This is not a case where the petitioner changed his mind subsequently, and sought to insert a new reason in place of the old one, for the communication produced by the petitioner as Ext.P2 would clearly suggest that steps were taken by the petitioner almost immediately after the receipt of the order of cancellation of registration to make the correction as aforesaid. The 1st respondent should take steps to change the reasons for cancellation of registration of the petitioner to transfer of business on account amalgamation, merger, demerger, sales, leased or otherwise and issue a fresh order of cancellation of registration - the 1st respondent is directed to adopt a suitable procedure and issue the fresh order of cancellation of registration as indicated above to the petitioner within a period of one month from the date of receipt of a copy of this judgment. Petition disposed off.

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• 2020 (11) TMI 615
  Refund claim - Intermediary Services - Export of Services - vires of Section 168 of the CGST Act, 2017 - challenge primarily on the ground that no mandate can be provided for directing the lower quasi-judicial authority to treat the Circular / Instructions issued by the Board to be binding. HELD THAT:- Notice of motion for 08.09.2020.

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• Income Tax

• 2020 (11) TMI 614
  Stay of demand - recovery proceedings - HELD THAT:- As the disputed demand arises out of an issue which is covered in petitioner favour by a decision of a Coordinate Bench of this Court in DIT v. Ericsson A.B. [ 2011 (12) TMI 91 - DELHI HIGH COURT] this Court grants a stay of the demand of Rupees twenty-nine crores, ninety-three lakhs, six hundred and three arising out of the final assessment order dated 07th February, 2020 for the relevant assessment year 2017-2018 till the disposal of the appeal pending before the CIT (Appeal). The CIT (Appeal) is directed to decide the petitioner s appeal as expeditiously as possible preferably within a period of twelve weeks. Since the appeal has been directed to be disposed expeditiously, Mr. Kamal Sawhney, learned counsel for petitioner assures and undertakes to this Court that the petitioner shall not seek refund for the Assessment Year 2016-2017 till the disposal of the said appeal.

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• 2020 (11) TMI 613
  Disallowance u/s 14A r.w.r. 8D - Tribunal confirming the decision of CIT (A) restricting the disallowance to the extent of exempt income - HELD THAT:- Tribunal, while dismissing the appeal of the Revenue on the question of disallowance under Section 14A in conformity with the judicial precedents, find substantial merit in the conclusion drawn by the CIT(A) for limiting the disallowance to the extent of exempt income. Hence, we decline to interfere. - Decided against revenue. Nature of expenditure - expenses incurred on account of professional and legal fees - revenue or capital expenditure - HELD THAT:- Professional fees paid by Appellant are for existing business and not incurred for analyzing the market for new line of business or is not for diversification of its business. By incurring such expenditure, Appellant is constantly getting updates regarding market survey carried out for existing product line and same does not give any enduring benefit or is not in nature of capital expenditure. The expenses are not incur red for exploring the market for a new product and rather expenses is incurred for exploring the circumstances as to how Assessee should manage it s existing business more effectively hence relying upon the decision of Hon ble Delhi ITAT in the case of KJS India Pvt. Limited [ 2010 (7) TMI 797 - ITAT DELHI ] expenditure incur red by Appellant is business expenditure allowable under Section 37. Also in the case of Majestic Auto Limited [ 2009 (1) TMI 57 - PUNJAB AND HARYANA HIGH COURT ] on similar circumstances held that expenditure incurred for obtaining report on reorganization of its core business and for improving market share and profit ability is allowable as revenue expenditure. Expenditure incurred by Appellant is allowable as revenue expenditure. - Decided in favour of assessee.

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• 2020 (11) TMI 612
  Rectification of TDS mismatch - seeking refund along with interest for the delayed period from the date of deduction of TDS to the date of actual granting of refund - amount of Rs. 1,15,034/- was deducted by the Life Insurance Corporation of India from the payment made to the petitioner towards TDS, while tax payable by the petitioner for the assessment year 2007-08 was only Rs. 64,025/-. The petitioner was awaiting refund. - HELD THAT:- As seen that TDS has been deducted as per Ext.P3 Certificate issued by the Life Insurance Corporation of India. According to the petitioner, the petitioner produced original of Ext.P3 along with Ext.P1 ITR. The case of the respondents is that this remittance is of the year 2007-08 and its entry is not reflected in Database. When the petitioner asserts that original of Ext.P3 has already been submitted before the Income Tax Authorities, the petitioner cannot be called upon to produce the original again. Writ petition is disposed of directing the respondents to consider Ext.P6 rectification application with reference to Ext.P3. The first respondent will be at liberty to get necessary information from the Life Insurance Corporation to decide the issue. While deciding the issue the first respondent shall also consider whether necessary reduction is to be given towards interest dues, to the petitioner.

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• 2020 (11) TMI 611
  TP Adjustment - assessee challenging that Additional Commissioner is not empowered to pass an order for determining the arm s-length price - HELD THAT:- Assessee is not arguing that there is no authority from the board in favour of the learned transfer pricing officer i.e. the Additional Commissioner Of Income Tax who passed the order u/s 92CA (3) of the act. The challenge of the assessee is that that Additional Commissioner as a class of officers, are not included in the definition of the Transfer Pricing Officer u/s 92CA of the Act. The Joint Commissioner of Income Tax has been authorised to pass an order u/s 92CA of the Act. The Joint Commissioner has been defined u/s 2 (28C) of the Act wherein the Joint Commissioner means a person appointed to be a Joint Commissioner Of Income Tax Or An Additional Commissioner Of Income Tax Under subsection (1) of Section 117 of the Act. Therefore the definition of the Joint Commissioner includes the Additional Commissioner also. In view of this, additional ground raised by the assessee does not have any merit. Hence dismissed. Comparability analysis - selection of comparable - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected. Extraordinary events during the year in the comparable company s financial statements, which has impacted its profitability margins adversely need to be seen. When the comparable company is taken as good comparable, only requirement is to seen the functional operations of the standalone balance sheet. There are various issues which are mentioned in the management discussion and analysis of the consolidated accounts of the comparable company which are not at all relevant for the comparability analysis as it does not reflect in the annual accounts of the comparable company on standalone basis. Even otherwise, the revenue streams of the comparable also do not show that it earns any revenue from its LPO business or KPO business.- Accentia technologies Ltd, in absence of any other argument by the learned authorized representative, is held to be comparable and action of the learned transfer pricing officer and learned dispute resolution panel by including the above comparable company in the comparability analysis is upheld. Rejection of entities on account of huge turnover - exclude I gate global Ltd., Infosys BPO Ltd and TCS E Serve Limited from the comparability analysis. Comparable has different financial year - Though R Systems International Ltd follows calendar year as its accounting year, its financial for the financial year can be recast by considering its quarterly financial results. Several coordinate benches have taken this view therefore, we also direct the assessee to reconstruct the financial results of this comparable by producing credible information with respect to eliminating and includible quarter before the learned transfer-pricing officer.Ld TPO is directed to examine the same and if found in order, include this comparable in the comparability analysis.

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• 2020 (11) TMI 610
  Computation of capital gain tax - computing the inflation cost of the asset - Computing the cost of acquisition of property in terms of section 49 - HELD THAT:- In the case of Bhatkal Ramarao Prakash [ 2019 (2) TMI 1059 - ITAT BANGALORE] for computing the inflation cost of the asset, the date to be reckoned from the date of allotment of the property to the assessee and not the date on which possession certificate issued to the assessee. Further, a judgement relied by CIT in the case of CIT Vs. Balbir Singh Maini[ 2017 (10) TMI 323 - SUPREME COURT] have no application and it was delivered on different context with reference to section 2(47)(v) of the Act and the judgement of Hon ble High Court relied by the assessee s counsel in the case of A. Suresh Rao cited [ 2014 (1) TMI 1585 - KARNATAKA HIGH COURT] is a direct judgement applicable to the facts of the case. Being so, we have no hesitation in reversing the finding of the Ld. CIT(A) on this issue and direct the A.O. to consider the date of allotment of property i.e. 20.5.1986 for the purpose of determining the cost of inflation of the assets, while computing the cost of acquisition of property in terms of section 49 of the Act. This ground of the assessee is allowed. Non-granting cost of improvement, while computing the capital gain - HELD THAT:- There is no iota of evidence that there is an existing building in the impugned land. The only contention of the assessee is that assessee declared income from said property under the head income from house property in earlier assessment years. However, there was no evidence to show that there is a building therein - declaring income in the return of income from Siddharth Nagar Property does not suggest that there is a building in the impugned property. Since the assessee has not furnished any revenue record to show that there is a building or evidence regarding power connections or water connections, in the absence of this evidence, it has to be noted that there is no building in the scheduled property and the assessee is not entitled for any benefit of cost of improvement. This ground of appeal of assessee is allowed. Non giving due credit towards TCS as per 26AS - HELD THAT:- CIT(A) given a direction to the A.O. to give TCS credit to the assessee after due verification. Accordingly, the assessee shall produce the necessary evidence with regard to the TCS credit and the A.O. shall consider the same and give due credit as reflected in form 26AS. This ground of the assessee is allowed.

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• 2020 (11) TMI 609
  Reopening of assessment u/s 147 - unexplained cash credit u/s 68 - whether no recording in the reason for re-opening that there was failure on the part of the assessee truly and fully in disclosing material facts required for the assessment? - HELD THAT:- As relying on M/S. PREMIER VYAPAAR PVT. [ 2018 (11) TMI 479 - ITAT KOLKATA] and M/S. V2 RETAIL LTD. [ 2020 (1) TMI 685 - ITAT KOLKATA] we hold that the re-opening is bad in law, arbitrary, erroneous since no allegation of failure on the part of the assessee fully and truly in disclosing material facts as stipulated by the first provision of section 147 of the Act is present in the reasons recorded for such reopening. AO failed to satisfy the precondition of statutory provisions as discussed above for usurping the jurisdiction and therefore, the entire proceeding is void-ab-initio and liable to be quashed. We find no justification in such re-opening. The same has no legs to stand upon and hence the entire re-assessment proceeding is quashed. - Decided in favour of assessee.

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• 2020 (11) TMI 608
  Exemption u/s 10(38) denied - addition was made u/s 68 - Denial of an opportunity of fair hearing by providing copy of the statement and related details - HELD THAT:- As decided in case of SHRI. KIRTI K. BHANSALI [ 2019 (5) TMI 1754 - ITAT BANGALORE] as held that since the petitioner has been denied an opportunity of fair hearing by providing copy of the statement and related details, the matter is required to be reconsidered by the AO by providing fair and reasonable opportunity of hearing to the assessee after furnishing details / copy of the statement based on which the impugned assessment order has been passed. From the above it is seen that matter was restored back to the file of the AO for fresh decision - Assessee s appeal is allowed for statistical purposes.

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• 2020 (11) TMI 607
  Rectification u/s 154 - Addition invoking the provisions of section 40A(3) - HELD THAT:- In the instant case, the A.O. has not doubted the genuineness of the transaction. Therefore, taking proceedings u/s 154 of the I.T.Act only goes to show that it is only a mere change of opinion, which is outside the mandate of the said section. The Hon ble Supreme Court in the case of ITO v. Volkart Brothers [ 1971 (8) TMI 3 - SUPREME COURT] held that a mistake apparent on the record must be an obvious and patent mistake and not something which could be established by a long-drawn process of reasoning on points on which there might conceivably be two opinions. Since the assessee in the given facts, had proved that there is commercial / business expediency in making cash purchases, the mistake cannot be stated to be obvious and apparent from record in view of the judgment in the case of M/s.M.K.Agrotech Pvt. Ltd. [ 2019 (1) TMI 37 - KARNATAKA HIGH COURT] and the order of Jaipur ITAT in the case of M/s.A.Daga Royal Arts [ 2018 (6) TMI 1240 - ITAT JAIPUR] .For the aforesaid reasoning and the judicial pronouncements, I hold that the disallowance u/s 40A(3) in a 154 proceedings is uncalled for and I quash the same. - Decided in favour of assessee.

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• 2020 (11) TMI 606
  Addition u/s 68 - unexplained cash credit - where there is lack of enquiry on the part of the AO - HELD THAT:- As decided in GANGESHWARI METAL PVT LTD. [ 2013 (1) TMI 624 - DELHI HIGH COURT] to sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax assessments u/s 143(3) were placed on record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 Considering M/S. GOODPOINT COMMODEAL PVT. LTD. [ 2019 (6) TMI 600 - ITAT KOLKATA] case to the facts of this case and as M/s. Mahakal Shoppers (P) Ltd., has been assessed to income tax u/s 143(3) of the Act by the Income Tax Department and as the documents filed by the assessee as well as by M/s. Mahakal Shoppers (P) Ltd. directly with the AO in response to a direct enquiry, prove the identity and creditworthiness of the applicant for share and as similar applicant for share from this very share holder has been accepted as genuine by the AO in the immediately preceding assessment year, and the addition in question, in our view, cannot be sustained. Hence, we delete the same. Appeal of the assessee is allowed.

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• 2020 (11) TMI 605
  Rectification of mistake - Carry forward loss not shown - HELD THAT:- We find that the AO nor the CIT(A) did not look into the financial statements rectifying the mistake showing the opening stock on 01-04-2011. We note that the assessee raised the same before the CIT(A) but however he found that the assessee filed no such materials to demonstrate as to which caused such gross inadvertent mistake of not disclosing a huge amount of Rs. 70,00,000/-. As discussed above, the ld. AR prayed before this Tribunal to remand the matter to the file of AO for its proper verification of its account in determining the actual loss. DR agreed, reported no objection in remanding the matter to the file of AO. Taking into consideration the peculiar facts and circumstances of the case and in view of the discussion made here-in-above, we deem it proper to remand the matter to the file of AO for its fresh consideration to determine the actual loss for the year under consideration and subsequent assessment years. The assessee is liberty to file evidences, if any, in support of its claim. Thus, the order of CIT(A) is not justified and it is set aside. Accordingly, only ground raised by the assessee for A.Y. 2012-13 is allowed for statistical purpose.

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• 2020 (11) TMI 604
  Estimation of income - bogus purchases - GP rate estimation - assessee is a scrap dealer and GP during the year was 4.04% - HELD THAT:- We are in agreement with the finding of the Ld. CIT(A) that it is only the net profit which can be brought to tax and not the entire purchases, however, considering the nature of business of the assessee and the margin on the trading, we find the addition sustained by Ld. CIT(A) is on the higher side and is unreasonable. In such type of cases the normal presumption is that assessee might have purchased the goods from the grey market thereby saving incidental expenses thereby earning a higher profit than the normal profits - it would be fair and reasonable if a rate of 8 % is applied on the said alleged bogus purchases. Accordingly, we direct the AO to apply GP @ 8%. The order of ld CIT(A) is modified, accordingly.

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• 2020 (11) TMI 603
  Disallowance of deduction on account of interest paid on borrowed funds u/s. 36(1)(iii) - assessee brought to our notice that own funds available with the assessee were much more than the amounts borrowed - HELD THAT:- In light of the law as explained by in Chaitanya Properties Pvt.Ltd.[ 2018 (6) TMI 1237 - KARNATAKA HIGH COURT] and in the light of admitted factual position that own funds were much more than the borrowed funds, we are of the view that disallowance of interest expenditure cannot be sustained and the same is directed to be deleted. The first issue is accordingly decided in favour of the assessee. Unexplained fixed deposit with ICICI Bank - AO was in possession of the Annual Information Report [AIR] which mentioned that assessee had two Term Deposits in ICICI Bank - HELD THAT:- The fact that Term Deposits reflected in the AIR were in the M G Road Br., Bangalore does not mean that the deposits in M G Road Br. Bangalore is in the name of assessee. Perusal of the letter dated 22.12.2012 by ICICI Bank, Alwarthirunagar Branch, Chennai does not show that the Term Deposits is in the name of assessee - issue should be set aside to the AO for a fresh consideration to ascertain the correct facts with regard to Term Deposits in M G Road Br. Bangalore, as to whether the same is in the name of assessee. If so, then the assessee should explain the deposit in the parameters laid down u/s. 69 - we set aside the order of the CIT(Appeals) on this issue and remand it to the AO for fresh consideration in light of the observations made in this order.

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• 2020 (11) TMI 602
  Addition on account of bank interest on deposits not belonging to the assessee - HELD THAT:- AR fairly submitted that this issue is covered against the assessee by the Tribunal order passed in the case of the assessee for the immediately preceding assessment year. Referring to Tribunal order for the assessment year 2011-12, the ld. AR pointed out that this issue came to be decided against the assessee - we uphold the action of the ld. CIT(A) in sustaining the disallowance at this level. This ground is not allowed. Addition u/s.14A read with Rule 8D - assessee made suo moto disallowance - HELD THAT:- The difference emanated on account of the fact that the assessee did not consider share application money at the year-end as investment yielding exempt income, which the AO took it otherwise. It is found that similar issue came up for consideration before the Tribunal in case of the assessee for the assessment year 2009-10. A copy of such order has been placed on record. Tribunal has decided this issue in assessee s favour. Similar view has been reiterated by the Tribunal in its order for the assessment year 2010-11, whose copy has also been placed in the paper book. DR could not point out if the view of the Tribunal in such earlier years has been reversed or modified by the Hon ble High Court in any manner. Respectfully following the precedent, we set-aside the impugned order on this score and order to delete the disallowance sustained. Disallowance of interest - AO observed that the assessee diverted borrowed funds for non-business purpose. By applying interest rate at 12%, he computed the amount of disallowance - CIT(A) did not agree with the assessee and sustained the disallowance - HELD THAT:- It is evident that the amount of shareholders fund available with the assessee at the beginning of the year was not claimed to have been utilized doubly by the assessee once for the purpose of avoiding disallowance u/s.14A and secondly, for claiming allowance of deduction of interest u/s.36(1)(iii). The assessee claimed it only once, that is, for claiming deduction of interest u/s 36(1)(iii) - Had the assessee claimed the benefit of utilization of shareholders fund for avoiding disallowance under section 14A and simultaneously for claiming deduction of interest in the year under consideration, the view point of the ld. CIT(A) would have been correct. Having not done so, the utilization of shareholders fund by the assessee towards making investment with sister concerns cannot be ignored. As the assessee has taken benefit of the ratio of Reliance Utilities and Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] in respect of allowance of interest u/s.36(1)(iii) only, we hold that the addition cannot be sustained. We, therefore, order for the deletion of addition.

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• 2020 (11) TMI 601
  Exemption u/s 10(34) with respect to dividend income - disallowance u/s 14A to insurance company - HELD THAT:- CIT(A) has relied upon host of binding decisions to arrive at the conclusion that exemption u/s 10(34) with respect to dividend income would be available to the assessee and further, the provisions of Sec. 14A would not apply to insurance company. No contrary decision has been placed before us. See ICICI PRUDENTIAL LIFE INSURANCE CO. LTD. [ 2018 (7) TMI 2022 - BOMBAY HIGH COURT] Exemption u/s 10(34) could not be denied to the assessee. Further provisions of Sec.14A would not apply to insurance company. Ground, thus, raised, stands dismissed. Adjustment of Negative Reserves - CIT(A) observed that assessee s income was to be computed as per Sec. 44 of the Act and the assessee would be required to take Actuarial valuation Report in accordance with insurance Act, 1938 - HELD THAT:- Assessee s income was to be computed as per Sec. 44 of the Act and the assessee would be required to take Actuarial valuation Report in accordance with insurance Act, 1938. The negative reserves would be nothing but premium receivable by the insurance company. However, there would always be a chance that policyholder might not continue with the insurance polity bought by him which would result in non-receipt of premium which was otherwise receivable by the insurance company. Therefore, the same could not be taxed. See LIFE INSURANCE CORPN. OF INDIA VERSUS ADDL. CIT [ 2013 (6) TMI 377 - ITAT MUMBAI] - Decided against revenue.

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• 2020 (11) TMI 600
  Rejection of books of accounts - GP estimation - CIT(A) to disregard their disclosed GP rate of 2.31% and GP rate of 1.80% respectively on their respective turnover and confirm GP of 3% on both their respective turnovers - HELD THAT:- According to us, when the quantity of the paddy purchased and sold has not been disputed the AO could not have rejected the books of account only on the basis of surmises. We note that the assessee s accounts are audited and no discrepancies could be pointed out by the AO in both the cases. However, the assessee has not preferred any grounds of appeal. Estimation of profits in the first case the assessee has shown GP of 2.31% and in the second case the assessee has shown the GP of 1.8% in their respective accounts which are audited. Taking into consideration the contention of both the parties and since the revenue is not in appeal against the action of Ld. CIT(A), for the ends of justice, we direct the AO to compute the GP of both the assessee s at 2.5% of their respective turnovers. Thus, both the assessee s get partial relief.

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• 2020 (11) TMI 599
  Additions made by the AO while computing book profit u/s 115JB was not raised by the assessee-company in its appeal filed before the Ld. CIT(A) due to inadvertence - addition u/s 68 and disallowance u/s 40(a)(ia) - additional ground - HELD THAT:- DR has not raised any material objection for admitting the said additional ground. He however has contended that since this issue was not raised by the assessee before the Ld. CIT(A), an opportunity may be given to the Ld. CIT(A) to consider and decide the same on merit. We find merit in this contention of the Ld. DR. The additional ground is accordingly admitted and the issue raised therein is remitted to the Ld. CIT(A) for deciding the same in accordance with law after giving the assessee a proper and sufficient opportunity of being heard. Addition u/s 68 - addition made by the AO u/s 68 which is not only confirmed but enhanced by the Ld. CIT(A) - HELD THAT:- The notice of enhancement was issued by the Ld. CIT(A) on 24.09.2018 and since the impugned order enhancing income of the assessee was passed by the Ld. CIT(A) on 28.09.2018, the assessee did not get proper and sufficient opportunity to submit its reply to the enhancement notice issued by the Ld. CIT(A). He has contended that the Ld. CIT(A) thus has enhanced the income of the assessee without giving proper notice to the assessee and the enhancement made by the Ld. CIT(A) cannot be sustained. DR, on the other hand, has contended that if at all the assessee did not get sufficient opportunity to submit its reply to enhancement notice issued by the Ld. CIT(A) as alleged by the learned counsel for the assessee, the issue relating to enhancement of assessee s income may be sent back to the Ld. CIT(A) for deciding the same afresh after giving proper and sufficient opportunity of being heard to the assessee. We find merit in this contention of the Ld. DR. The impugned order of the Ld. CIT(A) on this entire issue relating to addition made by the AO u/s 68 and further enhanced by the Ld. CIT(A) is accordingly set aside and the matter is remitted back to the Ld. CIT(A) for deciding the same afresh.

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• 2020 (11) TMI 598
  Unexplained investment - income earned from the source not disclosed to the Department - no plausible explanation is filed to explain the source of investment made in purchase of immovable property amounting to Rs. 25 lakhs being her half share in the property + registration expenses - HELD THAT:- Sale deed as explained above and the receipt executed later on, on behalf of the mortgagee would clearly show that the agricultural land purchased by the assessee was for a consideration of Rs. 50 lakhs, however, at the time of execution of the sale deed, Rs. 30 lakhs was paid by assessee and other co-owner. The remaining consideration of Rs. 20 lakhs was to be paid by assessee and the co-owner to the mortgagee for redeeming the mortgage agricultural land under consideration. The amount of Rs. 20 lakhs is paid to the mortgagee on 20.11.2012. Thus the assessee and the co-owner have paid Rs. 30 lakhs only in assessment year under appeal. The share of the assessee comes to Rs. 15 lakhs only and if the stamp charges are also added, it would make a total of Rs. 15,67,500/- which is below the amount of Rs. 18 lakhs accepted as source of income from agricultural activity by the A.O. for the purpose of making the above investment. Thus, there were no justification by the A.O. to make any addition against the assessee. In view of the above, we set aside the Orders of the authorities below and delete the addition of Rs. 7,67,500/-. - Decided in favour of assessee.

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• 2020 (11) TMI 597
  Penalty u/s.271(1)(c) - grievance of the Revenue in this appeal is the deletion of penalty by CIT-A - HELD THAT:- CIT(Appeals) is fortified by the judgment of the Hon ble Supreme Court in the case of Mohd. Mohatram Farooqui [ 2010 (2) TMI 1122 - SUPREME COURT] in which it has been held that if addition is restored to the Assessing Officer, then penalty should also be restored. In Sanjay Gupta vs. CIT [ 2014 (5) TMI 860 - DELHI HIGH COURT] has also held that where the quantum has been remanded to the Assessing Officer, the question of penalty on account of the said amount being treated as undisclosed income, should also be remanded to the Assessing Officer. In the present case in hand, since the quantum appeal has been restored to the Ld. CIT(Appeals), the penalty levied u/s.271(1)(c) of the Act is also restored to the file of the Ld. CIT(Appeals) for fresh adjudication - Appeal of the Revenue is allowed for statistical purposes.

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• 2020 (11) TMI 596
  Addition u/s. 68 - Treating the Share Application Money as Unexplained Cash Credit - Addition relying upon third party statement - whether no incriminating documents/materials were found during the course of Search Action/Proceedings? - HELD THAT:- Despite the fact that share applicant have responded to the notice issue under section 133(6) of the Act and details filed along with relevant documents for establishing identity of the parties and genuineness of transaction. We also noted that the AO was excessively influenced by the information received from DDIT, Investigation Wing, Mumbai regarding search action conducted in the case of one Shri Praveen Kumar Jain and his group and the statement recorded of Shri Praveen Kumar Jain. The AO has not independently proved that the share application money is bogus and not travelled through bank account. It is a fact that these companies are duly registered under the Companies Act, 1956 and still active except one company i.e. Navlakha Agrex Pvt. Ltd., which is Amalgamated. As decided in sister concern case above [ 2019 (1) TMI 681 - ITAT MUMBAI] referring to details proved that the share applicant money received is genuine and explained in the absence of any contrary material brought in by Revenue. Hence, we are of the view that the CIT(A) has rightly quashed the reassessment and also deleted the addition on merits - Decided in favour of assessee.

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• 2020 (11) TMI 595
  Bogus purchase of machinery - AO merely on the basis of enquiries conducted at the alleged premises of the supplier formed an opinion that it is a case of bogus purchase - HELD THAT:- The assessee in order to prove the genuineness of the purchase has furnished invoice and the sanction letter of the bank. The assessee had financed the purchase and installation of the machine from Andhra Bank. The bank had certified that payments were made to. M/s. Span Enterprises, the vendor and M/s. Jupiter Graphics, who had installed the machine. This fact has not been rebutted by the Department. Machine was purchased during the financial year 2008-09 and Inspector visited the premises of the vendors in December, 2014. The possibility of vendors shifting the place of business in between cannot be ruled out. Further, we observe that no finding of fact has been recorded by AO that these parties never had their place of work at the given addresses. Thus, the right course to verify purchase and installation of machine was to visit the premises of the assessee, which the Inspector failed to do. Purchases alleged to be bogus is not a trading asset but a fixed asset. The purchase of fixed asset is not reflected in the P L Account, hence, the same was not claimed by the assessee as an expenditure. Once the expenditure has not been claimed, the same cannot be disallowed. No infirmity in the order of CIT(A) in deleting the addition qua alleged bogus purchase of machinery and allowing assessee s claim of depreciation on the same. - Decided against revenue. Validity of reopening of assessment - AO without disposing the objections by passing a reasoned order has proceeded to pass assessment order - HELD THAT:- Hon ble Supreme Court of India in the case of G.K.N. Drive Shafts India Ltd. [ 2002 (11) TMI 7 - SUPREME COURT] has laid down the procedure to be followed by the AO for disposal of the objections and also the time line for filing of objections by the assessee in the case of reopening of assessment. In the present case we find that after reasons were supplied to the assessee, the assessee had not filed any objections against aforesaid reasons for reopening. The objections as referred to at page 27 of the Paper Book are in fact not the objections. No specific ground has been taken by the assessee alleging deficiency in notice. Moreover, the so called objections by the assessee were prior in time to the furnishing of reasons by the Assessing Officer. No objections were filed by the assessee after receipt of reasons. A specific query was made to the ld. Authorized Representative for the assessee as to whether any objections were filed by the assessee after reasons for reopening were supplied by the Assessing Officer, to which the ld. Authorized Representative for the assessee replied in negative. - Decided against assessee.

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• 2020 (11) TMI 594
  Correct head of income - income arising from sale of equity shares - Income from business or income from short term capital gain - HELD THAT:- It is quite evident that the assessee has classified the equity shares purchased by it as investments and not as stock-in-trade as on 31/3/2006 and as on 31/3/2005 in the Balance Sheet. Therefore, the assessee is right in its rem to treat the gain resulting from the sale of its investment in equity shares under the head income from short term capital gains as per the provisions of the Act. Error committed by the Chartered Accountant in his audit report will not alter the intention of the assessee for holding the equity shares purchased by it as investment which is evident from the statement of accounts/Balance Sheet of the assessee. Thus direct the Ld. AO to treat the income earned by the assessee during the relevant assessment year as Short Term Capital Gain or Long Term Capital Gain as the case may be. - Decided in favour of assessee.

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• 2020 (11) TMI 575
  Claim the provision for leave encashment u/s.43B - Tribunal order holding that the Assessee was not eligible to claim the provision for leave encashment which has been determined scientifically and accurately based on actuarial valuation, and the incurring of expenditure is certain and has arisen in the previous year ended in 31st March 2004 - HELD THAT:- The above substantial questions of law have to be answered against the appellant/assessee in the light of the decision of the Hon ble Supreme Court in the case of Union of India and others vs. Exide Industries Limited [ 2020 (4) TMI 792 - SUPREME COURT ]. The High Court of Kerala in the case of South Indian Bank Ltd [ 2014 (2) TMI 1080 - KERALA HIGH COURT ] also held that deduction for leave encashment is allowable only on actual payment. Substantial Questions of Law framed for consideration has to be necessarily answered against the appellant/assessee

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• Customs

• 2020 (11) TMI 593
  Levy of Light Dues Charges and Port Charges - applicant has made a grievance that respondent No.1 is levying light dues charges for the entire one months period though the ship was delivered to the applicant on 11.11.2020 - HELD THAT:- All the contentions of the parties regarding the legality and justifiability of the quantum of charges claimed by the Port Trust can be considered while determining the entitlement of the parties to the amount to be deposited with the office of Sheriff of Mumbai. All the contentions are, thus, kept open for consideration. The applicant - M/s. NKD Maritime Limited shall deposit a sum of Rs. Rs. 1,58,59,737/- with the office of Sheriff of Mumbai by tomorrow, 19.11.2020 - matter be listed on 2nd December 2020.

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• 2020 (11) TMI 592
  Continuation of Suspension of Customs Broker License - Smuggling - foreign origin cigarettes - Regulation 19(2) of CBLR, 2013 - appellant has failed to verify the antecedent and functioning of the client by using reliable and independent sources - violation of provisions of Regulation 11(n) of CBLR, 2013 - cross-examination not allowed - Violation of principles of natural justice - HELD THAT:- The learned Commissioner has not allowed cross-examination at his level but depended on the enquiry report wherein the cross-examination of Mr. Maswood Ahmed but it was held that cross-examination of Shri Abid Ali could not be undertaken. We find that this is not the spirit of the order of this Bench. Instead of delegating the directions given by this Bench to the Enquiry Officer, the Commissioner should have himself allowed the cross-examination as directed by this Bench during the personal hearing. Moreover, we find that Commissioner has given cryptic findings on the alleged violation of Regulation 11 (n) of CBLR, 2013 by the Custom Broker. As submitted by the appellants, he has not given any reasoning or findings of his own. To this extent, learned Commissioner has again violated the principles of natural justice. Regulation 11(n) of the Customs Broker Regulations, 2013 - HELD THAT:- The said Regulation stipulates that: - A Customs Broker shall verify antecedent, correctness of Importer Exporter Code (IEC) number, identity of his client and functioning of his client at the declared address by using reliable independent, authentic documents, data or information. Though the Customs Broker has been maintaining that as the importer Shri Abid Ali was always present during the course of investigation and presented himself before the authorities a need for independent verification had not arisen. We find that such an argument is not acceptable. Looking into the circumstances of the case where it is not the case of the department that the importer is either absconding nor traceable, the omission on the part of the Customs Broker becomes a bit less serious. Shri Abid Ali has presented himself as the importer and signed all the documents. He has also submitted himself before the authorities for questioning, recording of statement and investigation. Under the circumstances, though there was lapse on the part of the Customs Broker, the same has not caused the commission of offence by the importer. Therefore, the Customs Broker erred inasmuch as non verifying the antecedents of the importer. The punishment meted out to the Custom Broker should be commensurate with such omission. It is a settled law that penalty should be proportionate to the offence committed. It would be too harsh to revoke the license of the Customs Broker and to leave the right to livelihood of the Customs Broker as well as his employees to the wind. The fact that the Customs Broker s license was suspended/revoked for a considerable period also needs to be taken on to account. The impugned order is modified by setting aside the revocation of Custom Broker License and upholding the forfeiture of security deposit - Appeal allowed in part.

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• 2020 (11) TMI 591
  Continuation of suspension of the CB licence - HELD THAT:- Shri Babul Dey joined the Customs Broker firm in July 2018, but the Customs Broker did not get him duly approved by the Deputy Commissioner of Customs or Assistant Commissioner of Customs. It is alleged that M/s.M.K.Saha Company has violated the provision of Regulation 10(B) of CBLR, 2018. In the present case, the licence of CB was suspended under CB Order No.12/2019 dated 18.2.19. However, prior to the suspension, a Customs Broker Circular No.08/2019 dated 8.2.19 was issued in connection with the issue under consideration. The suspension was ordered by the Customs Authority on the basis of investigation report dated 31.1.19 issued by the Directorate of Revenue Intelligence, Kolkata Zonal Unit with respect to one export consignment of M/s. Skivvies Textile wherein apparently, scrap leathers of very low value were attempted to be exported as Vegtan Leather Shoe Sole Components . The DRI Authority had intercepted the same and during the course of investigation allegedly it is found that the CB had failed to fulfil their obligations under Regulation 10(b), 10(d), 10(e) and 10(n) of CBLR, 2018 by not verifying the correctness of export consignment and not collecting the authorisation and KYC from the exporter directly. In the present order, the Commissioner has not applied his mind on the aspect as to whether immediate action was necessary and thus, on this ground alone the order of continuation of suspension of the CB licence of the appellant fails. Moreover, apparently, the authorities have failed to complete the Regulation 17 proceeding within the time limit stipulated therein. The Hon ble High Court, Calcutta has also found that the inquiry proceeding was completed without supplying relied upon documents to the CB and hence, the said inquiry report has been set aside by the Hon ble High Court, Calcutta - On query, it is learnt that afresh inquiry proceeding is yet to be concluded by the newly appointed Inquiry Officer. In such scenario, the suspension of licence of appellant cannot be allowed to continue since the same has irreversible civil consequences on the appellant/ CB. There is no necessity to continue with the suspension of the CB licence any further. Justice may subserve and balance of convenience may be maintained by withdrawing suspension of the CB licence of the appellant and directing them to co-operate in the inquiry proceeding under Regulation 17 of CBLR, 2018. Hence, the proceeding of inquiry under Regulation 17 ibid shall continue in the case of the present appellant in accordance with law, but the authorities should not continue with the suspension of their licence - Appeal allowed in part.

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• 2020 (11) TMI 590
  Smuggling - Smart Watches - Foreign origin goods - applicability of Section 123 of the Customs Act, 1962 - burden to prove - Confiscation of 5543 smart watches - levy of Redemption fine and penalty - HELD THAT:- Admittedly the items under seizure are having a watch module which is for displaying the time. In our view the essential character of the item under consideration is that of a watch and is bought and sold as a watch in the trade. Just because certain other functions are inscribed in the said device it will not essentially go beyond the meaning of word watch as used in section 123 - the burden to establish that the seized smart watches are covered by the expression watch used in the Section 123 of the Customs Act, 1962. Whether Appellants have discharged the necessary burden to establish that these smart watches have been licitly imported into India? - HELD THAT:- To establish the licit import appellants produced a Bill of Entry No.3140294 dated 7.09.2017, filed at Chennai for import of 20,000 smart watches, and have claimed that the smart watches under seizure are part of this consignment. However when asked to establish the correlation between the goods imported under said bill of entry and the seized goods, appellant failed to establish the same. Appellants have not shown at any time that these statements had been retracted by him at any time. The letter of Advocate to which the Appellant Counsel have referred is dated much before these two statements and cannot be said to be a retraction of the statements made subsequently. In absence of any retraction we find these statements as reliable pieces of evidence wherein the appellants have themselves been asked to establish correlation between the Bill of Entry produced by them and the goods seized have failed to establish any such correlation and have admitted that such correlation cannot be established - In the absence of any evidence to show that these smart watches have been licitly imported into India, and in view of the Section 123 of Customs Act, 1962, these 5543 smart watches have been illicitly imported and are liable for confiscation under Section 111 of the Customs Act, 1962 as has been held by the Commissioner. Appellants have contended that the assessable value determined by the Commissioner in the present order is not correct, as it is based on the value determined on the basis of internet price of the seized/ confiscated watches. He also states that these watches have been cleared by the Chennai Customs at much lower assessable as is evident from the Bill of Entry No 3140294 dated 07.09.2017. We are not in agreement with the arguments advanced by the Appellant Counsel, for the reason that it has been categorically admitted by the appellant in his statements referred above that there exists no correlation between the smart watches imported under the said bill of entry and those seized and confiscated. Further Appellant has not been able to produce any document in respect of legal acquisition of these smart watches. Order confiscating the 5543 smart watches is upheld. However the redemption fine of Rs. 45 Lakhs imposed is reduced to Rs. 25 Lakhs - Custom Duty amounting to Rs. 9,78,715/- shall be paid by any person coming forward to claim these 5543 confiscated smart watches, in terms of Section 125 (2) of Customs Act, 1962 - Penalty imposed under Section 114A is set aside - Penalty of Rs. 1 Crore imposed under Section 114AA is reduced to Rs. 11 Lakhs. Appeal allowed in part.

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• 2020 (11) TMI 589
  Revocation of Customs Broker licence - forfeiture of security deposit - imposition of penalty - allegation on the appellant is that their executive has broken the seal of the container without the permission of the proper officer and thereby violated various regulations of CBLR 2018 - HELD THAT:- The defense of the appellant from the very beginning is that they have submitted the explanation to the Assistant Commissioner of Import, SIIB, Nhava Sheva and as per that the Customs endorsed the Bill of Entry and thereafter job order was issued by the Custodian and the seal was cut by the Seal Cutter Shri Shantaaram after informing the Examining Officer. Further we find that the enquiry officer in spite of the fact that the appellant raised this objection, did not bother to examine the Seal Cutter Shri Shantaaram who allegedly cut the seal after seeing the job order issued by the Custodian. Further, the entire operation was done in the customs area and this is normal practice which is followed to facilitate physical examination by the Customs. There is no material on record to attribute any mala fide on the part of the Customs Broker executive and there is no evidence which has come on record suggesting he acted with mala fide in order to gain any advantage - It is also found that in the investigation conducted by the SIIB Branch, nothing adverse has been recorded against the appellant. In view of the facts and circumstances and the evidence on record, the impugned order revoking the licence and imposing fine and penalty on the appellant thereby depriving them of their livelihood, is not justified. Appeal allowed - decided in favor of appellant.

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• 2020 (11) TMI 588
  Early hearing of the appeal - Application sought on the ground that after suspension of the license, the employees of the appellants are jobless and causing undue hardship to the appellant and their employees - HELD THAT:- The miscellaneous application for early hearing of the appeal is allowed. Appeal will be heard on 03.12.2020.

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• Corporate Laws

• 2020 (11) TMI 587
  Liquidation proceedings - Scope of the term Party - Transfer the winding up petition pending to the National Company Law Tribunal - circumstances under which a winding up proceeding pending on the file of a High court could be transferred to the NCLT - at whose instance, such transfer could be ordered? - HELD THAT:- The transferability of a winding up proceeding, both under Rule 5 as well as under Rule 6, is directly linked to the service of the winding up petition on the respondent under Rule 26 of the Companies (Court) Rules, 1959. If the winding up petition has already been served on the respondent in terms of Rule 26 of the 1959 Rules, the proceedings are not liable to be transferred. But if service of the winding up petition on the respondent in terms of Rule 26 had not been completed, such winding up proceedings, whether they are under Clause (c) of Section 433 or under Clauses (a) and (f) of Section 433, shall peremptorily be transferred to the NCLT. Rules 5 and 6 of the Companies (Transfer of Pending Proceedings) Rules 2016, fix the stage of service of notice under Rule 26 of the Companies (Court) Rules, 1959, as the stage at which a winding up proceeding can be transferred. This is because the first proviso under Clause (c) of Subsection (1) of Section 434 enables the Central Government to prescribe the stage at which proceedings for winding up can be transferred and subsection (2) of section 434 confers rule making power on the Central Government. The right to invoke the 5th proviso is specifically conferred only upon the parties to the proceedings. Therefore, on a literal interpretation, such a right should be held to be confined only to the parties to the proceedings. Who are the parties to the winding up proceedings? - HELD THAT:- The Companies Act, 1956 does not define the expression party . The Companies (Court) Rules, 1959 also does not define the expression party . The Companies Act 2013 does not define the expression party . The Companies (Transfer of pending proceedings) Rules, 2016 also does not define the expression party . Even the IBC, 2016 does not define the expression party . Thus, the proceedings for winding up of a company are actually proceedings in rem to which the entire body of creditors is a party. The proceeding might have been initiated by one or more creditors, but by a deeming fiction the petition is treated as a joint petition. The official liquidator acts for and on behalf of the entire body of creditors. Therefore, the word party appearing in the 5th proviso to Clause (c) of Subsection (1) of section 434 cannot be construed to mean only the single petitioning creditor or the company or the official liquidator. The words party or parties appearing in the 5th proviso to Clause (c) of Subsection (1) of Section 434 would take within its fold any creditor of the company in liquidation. The petitioner herein will come within the definition of the expression party appearing in the 5th proviso to Clause (c) of Subsection (1) of Section 434 of the Companies Act, 2013 and that the petitioner is entitled to seek a transfer of the pending winding up proceedings against the first respondent, to the NCLT - the impugned order is set aside and the proceedings for winding up pending before the Company Court (Allahabad High Court) against the first respondent herein, is ordered to be transferred to the NCLT - Appeal allowed.

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• Insolvency & Bankruptcy

• 2020 (11) TMI 586
  Remuneration of Liquidator - Applicability of Regulation 4(2) and (3) of the Liquidation Process Regulations, 2016 or Regulation 39D? - HELD THAT:- The Adjudicating Authority (National Company Law Tribunal), Chandigarh Bench, Chandigarh was of the view that Regulation 39D provides for fixation of the fees separately by the Committee of Creditors for the three periods given in Section 39D and the fees in the instant case was not governed by Section 39D as the order of liquidation came to be passed under Section 33(1) (a) of the I B Code . Be that as it may, the order of liquidation has been passed and the Corporate Debtor is undergoing liquidation process. It is immaterial which provision of the I B Code squarely governs the passage of order of liquidation. The fact remains that the Committee of Creditors has taken a decision in regard to the liquidation costs, expenses and the remuneration payable to the liquidator which in the light of the recommendation of the Committee of Creditors with the requisite percentage brings it within the ambit of Regulation 39D. Therefore, it is not permissible to take resort to any other provision which would be attracted only if the action of the Committee of Creditors would fall beyond the purview of Regulation 39D. The remuneration of liquidator falling within the realm of the Committee of Creditors in terms of Regulation 39D, we find that the impugned order cannot be sustained. The impugned order is accordingly set aside to the limited extent of remuneration of the liquidator and it is directed that the liquidator s remuneration will be governed in accordance with the recommendation of the Committee of Creditors - Appeal disposed off.

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• 2020 (11) TMI 585
  Maintainability of application - sale of paratments - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor or not - provisional allotment of an under construction of apartments - Whether in view of the I B Code (Amendment)Ordinance 2019/Amendment Act, 2020, the Application under Section 7 of the I B Code by one allottee is not maintainable? - HELD THAT:- The provision of Section 7 of the I B Code, as is obtained prior to the date of Amendment occupies the field as of now. Thus, we hold that there is no effect of the I B Code, Amendment Ordinance 2019 which was replaced by the I B Code Amendment Act, 2020, on the present Application under Section 7 of the I B Code. Therefore, it is not required to be considered whether in the light of the aforesaid Amendment whether the Respondent No. 1 has modified the Application under Section 7 of the I B Code, or not. Whether MOU dated 06.04.2016 is an agreement for sale the apartments or an agreement for buyback the apartments? - HELD THAT:- It is apparent that MOU is an irrevocable contract and the Respondent No. 1 is duty bound for execution of buy back. There is a provision in the event of failure of the Respondent No. 2 to complete the buy back by the end of 12 month. On completion of all buy back of apartments by the Respondent No. 2, the Respondent No. 1 have no right, claim interest in the apartments. As per clause 8 of the MOU, the Respondent No. 2 ensures the Respondent No. 1 that in the event of dishonor of any cheques (one cheque of Rs. 65 lacs and another cheque of Rs. 35 lacs), the Respondent No. 1 shall take possession of the apartments on the basis of MOU and no possession letter or any further act or deed would be required. The Respondent No. 1 shall be free to sell/deal with the same in any manner and no demand shall be payable by the Respondent No. 1. Thus, we hold that the MOU is an agreement to buyback the apartments. Whether the Respondent No. 1 is a genuine allottee or a speculative investor? - HELD THAT:- The allottee has made attempt to get back the amount of Rs. 1,00,00,000/- by way of this coercive measure i.e. under Section 138 of the Negotiable Instrument Act - the Respondent No. 1 is a speculative investor and not a person who is genuinely interested in purchasing the apartments. Therefore, she cannot be termed as a allottee as per the explanation attached to clause (f) of Section 5(8) of the I B Code - The Respondent No. 1 is not a genuine allottee, therefore, the amount of Rs. 35 lacs paid to the Respondent No. 2 is not a Financial Debt and the Respondent No. 1 is not a Financial Creditor. The Application preferred by the Respondent No. 1 under Section 7 of the I B Code, is dismissed. The Respondent No. 2 is released from rigours of the moratorium and is allowed to function through its Board of Directors from immediate effect - Appeal allowed.

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• Service Tax

• 2020 (11) TMI 584
  Validity of appeal preferred by the respondent against an order of assessment under the Finance Act, 1994 - amnesty scheme in vogue - According to the petitioner, if he had been informed of the appeal having been preferred by the revenue, when the amnesty scheme was in vogue, he would have applied for the Amnesty scheme with a view to put the quietus to the matter and would not have had to contest the appeal preferred by the revenue - HELD THAT:- The petitioner has no statutory right to be informed of an appellate right exercised by the revenue, before a communication to that effect is sent to him by the appellate authority prior to the hearing of the appeal. The petitioner cannot also be seen as prejudiced in any manner merely because the intimation of the revenue appeal was received by him after the expiry of the amnesty scheme. His option for the amnesty scheme was not dependent upon whether or not the revenue preferred an appeal against the order of the assessing authority. The petitioner has not made out a case for the reliefs sought for in the writ petition. Petition dismissed.

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• 2020 (11) TMI 583
  Application for early hearing of the present appeal - recovery of portion of the service tax amounting to Rs. 50,00,000/-, which was already deposited by the appellant on 08/03/2013 itself - HELD THAT:- This is a fit case for granting early hearing and accordingly, the early hearing application is allowed - Registry is directed to list this case for final hearing on 09/11/2020.

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• 2020 (11) TMI 582
  CENVAT Credit - input services - service tax paid on the insurance premium paid to DICGC - service tax paid on the commission paid to the brokers for underwriting the government securities etc and for making investments in securities to maintain mandatory SLR as per the Banking Regulation Act, 1949 - levy of penalty. HELD THAT:- Matter referred to Hon ble President for referring the matter to larger bench, for resolving the issues as follows: a. Whether the interpretation of the legal provisions contained in Section 65 and 66 of the Finance Act, 1994 made in the decision of the CESTAT, in case of South India Bank, satisfy to the test laid down by the five member bench of Hon ble Supreme Court in case of Dilip Kumar and Co, referred above. b. Whether the CENVAT credit of the Service Tax paid on the services availed to fulfill a statutory obligation, should be admissible even if the services availed do not otherwise qualify to be input services as defined under rule 2(k) of the CENVAT Credit Rules, 2004 as amended. c. Whether Rule 6(3B), of the CENVAT Credit Rules, 2004, is an authority for the banks to claim the credit in respect of all the services without establishing that the services under consideration are the common input services for providing the exempted and taxable services.

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• 2020 (11) TMI 581
  Non-imposition of penalty u/s 76 of FA - Commercial or Industrial Construction Services - Department submits that Section 78 of Finance Act, 1984 was amended w.e.f. 10.05.2008 only to provide that penalty under Section 76 need not be imposed if penalty under Section 78 is imposed - Effect of amendment, retrospective or prospective? - Difference of Opinion. HELD THAT:- In view of the difference of opinion, the following questions arise for consideration by the learned 3rd Member:- (1) Whether penalty under Section 76 and 78 are prescribed for different type of violations and are mutually exclusive as held by Member (Judicial) OR that both the penalties can be imposed simultaneously as held by Member (Technical). (2) Whether the amendment brought in Section 78 by Finance Act, 2008 by addition of proviso (w.e.f. 10.5.2008) providing that where penalty is imposed under Section 78 no penalty is imposable under Section 76, is clarificatory in nature, have got retrospective effect, as held by Member (Judicial) or whether the aforementioned amendment is not retrospective but prospective and hence the simultaneous penalties can be imposed for the period prior to 10.5.2008 as held by Member (Technical). (3) As held by Member (Judicial) in view of Section 80 of the Finance Act, 1994, dropping of penalty under Section 76 by the adjudicating authority is not questionable or as held by Member (Technical), the penalty under Section 76 dropped by the adjudicating authority should have been imposed? (4) As held by Member (Judicial) that the ruling of Kerala High Court in the case of ACCE Vs. Krishna Poduwal [2005 (10) TMI 279 - KERALA HIGH COURT] is not applicable in the present case as that ruling is prior to the amendment dated 10.5.2008 in Section 78 or as held by Member (Technical) that the aforementioned ruling is applicable and simultaneous penalty under Section 76 and 78 are imposable? Registry is directed to put up the appeal record before Hon ble President for nomination of 3rd Member to consider the aforementioned questions and difference of opinion for his opinion.

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• 2020 (11) TMI 580
  Nature of services - applicability of service tax or VAT - glass bottles and crate rentals - Supply of tangible goods service or not - Appellant has contended that the supply of glass bottles and crates amounted to deemed sale, which was liable to VAT/sales tax as the effective control and possession of the goods were transferred by the Appellant - extended period of limitation - demand of interest and penalty - HELD THAT:- The issue is settled by the judgment of the Hon ble Andhra Pradesh High Court in the Writ Petitions No. 21115/2005, No. 856/2006 and No. 25588/2007 [ 2013 (1) TMI 1009 - ANDHRA PRADESH HIGH COURT ] , where it was held that such crate rentals would be liable to VAT/Sales tax on the ground that it amounted to deemed sale of crates inasmuch as there was transfer of right to use with effective control and possession of crates. It is trite that the transactions which are deemed sales cannot be liable to service tax. Also, it is seen from the order of the learned Adjudicating authority that he has not at all considered the submissions of the Appellant as regards payment of VAT on the said rentals. Further, when the aerated beverages are supplied by the Appellant to its customers, the possession as well as effective control of the said bottles along with crates in which they are supplied to keep them free from spillage and breakage, is also passed by the Appellant assessee as the Appellant cannot govern the action of its customers as to how the customers would deal with such crates and bottles once supplied. The definition of supply of tangible goods states that when there is supply of use of goods without transferring right of possession and effective control of the equipment, the same would fall within the category of supply of tangible goods service - However, in the instant case of the appellant, the entire goods are handed over to the customer who gets the effective possession as well as control to use the goods. Hence, the observation of the Ld. Adjudicating authority that the control and possession has not been passed is not justified and hence is liable to be rejected. Extended period of Limitation - HELD THAT:- The demand has been raised for the period 2011-12 in 2017 onwards whereas the spot memo was issued by the Department in 2014 itself. No explanation has been furthered by the Department in respect of such gross delay in proceeding with the matter. Therefore, we find that invocation of the extended period of limitation is not justified. Demand of interest and penalty - HELD THAT:- Since demand of service tax is set aside, penalty and interest are also not sustainable. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2020 (11) TMI 579
  Application for early hearing of the appeal - application has been filed on the ground that the amount involved in the matter is quite substantial and also recurring in nature - HELD THAT:- Since we do not find any NOC available on the file from the earlier counsel, i.e. Shri Lakshmikumaran Sridharan, filed uptil now, we are not in position to hold that this early hearing application has been properly constituted and hence should not be maintainable. The Registry is directed to consider listing the appeal after three weeks on or about 26.11.2020 for final hearing if all the NOCs and other documents are completed before that date - Matter to be listed on 26.11.2020 for completion of records and hearing.

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• CST, VAT & Sales Tax

• 2020 (11) TMI 578
  Validity of assessment order - petitioner contends that it had paid VAT on Mess charges received towards supply of food to students and staff in the school premises of the said society in terms of the Act and also paid service tax on rent received towards Infra Lease rented by it in terms of the Finance Act, 1994 - HELD THAT:- The 1st respondent, being a quasi-judicial authority, is bound to assign reasons in support of its decision, and cannot simply reject the objections of petitioner to the levy proposed by him on these two items by merely saying that the explanation of petitioner is not satisfactory - The 1st respondent is obligated to supply reasons for his conclusion and failure to do so amounts to violation of principles of natural justice. The impugned Assessment Order No.65175 dt.01.10.2020 passed by the 1st respondent under the Telangana VAT Act, 2005 for the period March, 2015 to June, 2017 in regard to the items Infra lease and Mess charges alone is set aside - matter on these two aspects alone is remitted to the 1st respondent for fresh consideration by him; the 1st respondent shall provide a personal hearing to the petitioner - Petition allowed by way of remand.

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• 2020 (11) TMI 577
  Principles of natural justice - Validity of Assessment Order - no personal hearing afforded to the petitioner prior to completion of assessment - HELD THAT:- The petitioner has not been afforded an opportunity of personal hearing prior to completion of assessment, the impugned order of assessment is set aside. The petitioner will appear before the respondent officer on Thursday, the 26th of November, 2020 at 10.30 a.m. without awaiting any further notice along with yet another copy of the documents relied upon by it in regard to its claim of ITC. Any material in relation to third party details obtained from the Departmental website and proposed to be relied upon by the authority shall be made available to the petitioner prior to completion of assessment. After consideration of the same and after hearing the petitioner in person, an order of assessment shall be passed de novo within a period of six (6) weeks thereafter. Petition disposed off.

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• 2020 (11) TMI 576
  Reversal of ITC - the assessment are sought to be re-opened and the ITC availed by the dealers are directed to be reversed, when a mismatch occurs - Demand of Differential amount alongwith interest and penalty - HELD THAT:- A batch of Writ Petitions filed by similarly placed persons on this aspect of the matter came up for consideration before this Court in M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER [ 2017 (3) TMI 536 - MADRAS HIGH COURT] where it was held that this Court is fully convinced that the procedure adopted by the respondent, Assessing Officers in all these cases are half baked attempts, which have not yielded results and these cases are before this Court or before the Appellate Authorities and all that the Assessing Officers can record is that they have issued show cause notices or passed orders reversing the Input Tax Credit with no appreciable impact on the revenue collection . The concerned assessing officer shall issue fresh show cause notice with all required details in respect of levy of tax for mismatch invoices and the Petitioner shall be entitled to submit its explanation within the prescribed time. It is made clear that the Petitioner shall not be entitled to raise any plea of limitation when the fresh show cause notice is issued - petition allowed.

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