TMI Tax Updates - e-Newsletter
December 12, 2022

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws PMLA Central Excise

Articles

1. GST registration restored which was cancelled without due service of Show Cause Notice

   By: Bimal jain

2. MERE POSSESSION OF SENSITIVE INFORMATION NOT ENOUGH FOR INSIDER TRADING – ACTUAL PROFIT MOTIVE ESSENTIAL

   By: DR.MARIAPPAN GOVINDARAJAN

3. Notice is mandatory for physical verification of place of business under Rule 25 of the CGST Rules, 2017

   By: Bimal jain

Notifications

SEBI

1. SEBI/LAD-NRO/GN/2022/110 - dated 9-12-2022 - SEBI

Securities and Exchange Board of India (Procedure for Board Meetings) (Amendment) Regulations, 2022.

2. S.O. 5770 (E) - dated 9-12-2022 - SEBI

Appointment of member of SEBI - Amendment in Notification No. S.O. 195(E) dated 09.03.1992

Highlights / Catch Notes

Income Tax

• Cash Gifts at Wedding Validated, Income Tax Additions Deleted u/s 69A and 115BBE.

  Case-Laws - AT : Addition u/s 69A r.w.s 115BBE - Unexplained cash found - the money has been found in the wrapped cover wherein the assessee has contended that the money has been received at the time of various rituals ceremony conducted at the time of his marriage. The denomination of cash found also support the contention of the assessee. - CIT(A) rightly deleted the additions - AT
  Visit to Get Source

  ---

• Court Rules Non-Scheduled Banks Must Tax Interest on NPAs on Receipt Basis, Aligns with Section 43D Guidelines.

  Case-Laws - HC : Interest accrued on non performing assets - Applicability of sec 43D - It serves no purpose that the assessee, which is a non-scheduled bank, should include the NPAs/sticky loans in the relevant assessment year and then claim it as a bad debt in the next assessment year. - the view taken by the Tribunal that the assessee was required to tax the interest on the sticky loans/NPAs on receipt basis, is liable to be upheld - HC
  Visit to Get Source

  ---

• Court Rules Partial Denial of Section 80JJAA Deduction for Additional Wages Unjustified; Entire Deduction Should be Reassessed.

  Case-Laws - AT : Claim of deduction u/s. 80JJAA - additional wages paid during the year - In case the AO has denied the total deduction u/s. 80JJAA of the Act for incorrect report furnished by the assessee then situation may have been different but in the instant case on the basis of the said report part of the claim has been allowed and part of the claim has been denied which in our considered opinion was not correct on the part of lower authorities. - AT
  Visit to Get Source

  ---

• Assessing Officer's Unexplained Cash Credit Addition u/s 68 Rejected; Books of Account Accepted.

  Case-Laws - AT : Addition u/s.68 - unexplained cash deposit into bank - demonetization period - Books of account not rejected - As the treating of the cash deposits an unexplained cash credit u/s.68 of the Act by the A.O in itself militates against the acceptance of the book results of the assessee by him, therefore, there can be no justification in upholding the addition so made by him. - AT
  Visit to Get Source

  ---

• Taxpayer Can Offset Business Losses Against Foreign Dividends u/s 115BBD, Plus Deduction Eligible u/s 80G.

  Case-Laws - AT : Set off of current year business loss against foreign dividend income - levy of tax u/s 115BBD on gross foreign dividend income - assessee would be entitled for set off of current year loss with the foreign dividend income, assessee would be entitled for set off of brought forward business losses and unabsorbed depreciation of earlier years with the foreign dividend income and assessee would be eligible for deduction u/s 80G of the Act from the Gross Total Income subject to the restrictions provided in that relevant section. - AT
  Visit to Get Source

  ---

• Pr.CIT Supports Revision of Hospital Construction Cost Valuation u/s 263 Due to AO's Inadequate Investigation and Adjudication.

  Case-Laws - AT : Revision u/s 263 - valuation of the cost of construction for hospital building - as per explanation u/s 263, the AO did not discharge his liability fully. First the AO is an investigating officer thereafter he is an adjudicating officer. Considering the entire facts on the order passed by the AO, which is erroneous and prejudicial to the interest of the revenue, we uphold the action of the ld. Pr.CIT - AT
  Visit to Get Source

  ---

• Court Rules Share Transactions Void: Deceptive Scheme u/s 68 to Hide Income, Key Information Withheld from Tax Authorities.

  Case-Laws - AT : Addition u/s 68 - genuineness of transactions of purchase of shares - appellant deliberately withheld the information from the AO as well as the CIT(A) which is within exclusive knowledge of appellant - the transaction of purchase and sale of shares of SRK Industries under consideration before us is void ab-initio, this is nothing but sham, make believe and colourful device adopted with excellent paper work with intention bringing the undisclosed income into books of account. - AT
  Visit to Get Source

  ---

• Assessee's Foreign Loss Claim u/s 263 Reviewed; AO Failed to Inquire Despite Retrospective Section 43AA Amendment.

  Case-Laws - AT : Revision u/s 263 - ssessee has claimed foreign fluctuation loss with respect to foreign currency loan which was converted into the shares of the company - AO has not conducted inquiry with respect to loss claimed by the assessee in the revised return of income by virtue of amended provision of section 43AA of the Act which was made applicable retrospectively. - AT
  Visit to Get Source

  ---

• Reassessment u/s 147 invalidated; Assessing Officer failed to secure mandatory Section 151 approval, voiding notice and order.

  Case-Laws - AT : Reopening of assessment u/s 147 - AO failed to get the approval u/s 151 - this omission vitiates the reassessment proceedings, notice u/s 148 of the Act and consequent reassessment order dated 05.12.2016 being bad in law and without assuming valid jurisdiction by the AO as per the mandate of section 151 of the Act. - AT
  Visit to Get Source

  ---

• Foreign Tax Credits Denied: Assessee Must Submit Required Documents to AO u/s 128(8) for Verification.

  Case-Laws - AT : Disallowance of foreign tax credits - failure to the requisite documents as specified u/s 128(8) - Considering the fact that the assessee is stated to be in possession of documentary evidence, as required under rule 128(8) and (9), we direct the assessee to furnish them before AO for examination. AO is directed to verify the documentary evidences filed or to be filed by the assessee and allow foreign tax credit in accordance with the extant rules read with section 90 of the Act. - AT
  Visit to Get Source

  ---

• Revenue's Transfer Pricing Adjustment on Seafarer Expenses Reversed Due to Misinterpretation of Reimbursement Transaction with Associated Enterprise.

  Case-Laws - AT : TP adjustment on account of reimbursement of seafarer expenses - Revenue has only doubted the genuineness of the alleged reimbursement of expenses made by the assessee to its A.E. As noted above, the transaction is not reimbursement of expenses by the assessee to its A.E. and rather, is reimbursement of expenses by the A.E. to the assessee. - The adjustment made in respect of international transactions of reimbursement of the sea farers expenses is based on incorrect appreciation of facts. - Directed to be deleted - AT
  Visit to Get Source

  ---

• Section 194IA: No TDS Needed on Property Purchase Below Rs. 50 Lakhs; Assessee Not in Default for Rs. 40 Lakh Deal.

  Case-Laws - AT : TDS u/s 194IA - payment for purchase of property - the assessee in the instant case has admittedly paid Rs. 40 lakhs which is below threshold limit provided to trigger the obligation provided in Section 194IA - Hence, Section 194IA has no application where a transferee in question has neither credited nor paid consideration for transfer of immovable proper ty in excess of threshold limit of Rs. 50 lakhs. - assessee not an assessee in default - AT
  Visit to Get Source

  ---

• Court Rules Interest on Loan for Subsidiary Investment Is Allowable Business Expense for Parent Company.

  Case-Laws - AT : Disallowance of interest on unsecured loan taken which is 100% subsidiary of the assessee - addition on the ground as it is not incurred for the purpose of assessee’s business though the said borrowings were utilised for investments in subsidiaries which is part of business purpose of the assessee company - the interest on unsecured loan taken is an allowable expenditure. - AT
  Visit to Get Source

  ---

• Invalid TPO Order Leads to Nullification of Additions by Assessing Officer; Additions Deemed Illegal and Deleted.

  Case-Laws - AT : TP Adjustment - order of reference to the TPO in the present case is invalid, therefore the addition made based on the basis an order passed by the TPO on an invalid reference by the AO is a nullity and the addition made consequent to such illegal order is liable to be deleted in this short ground. - AT
  Visit to Get Source

  ---

Customs

• Customs Authority Halts Bank Guarantee Invocation Over EPCG Authorization; Awaiting Court Decision on DGFT Representation Timeline.

  Case-Laws - HC : Invocation of bank guarantee - non-redemption of Export Promotion Capital Goods (EPCG) authorisations which was availed of earlier - it is the case of the petitioner that two weeks’ advance notice, in terms of the order extracted above, has not been given to invoke the bank guarantee - the enforcement of the invocation has been kept in abeyance by the Customs Authority. Mr. Vineet Malhotra, ld. Counsel appearing for DGFT submits that the representation is still pending and if a time bound schedule is fixed by this Court, the representation would be decided within the said period. - HC
  Visit to Get Source

  ---

Corporate Law

• Company's Name Restored on Register After Legal Battle Over Rs. 18,12,500 Debt Recovery Case.

  Case-Laws - AT : Restoration of name of the Company - the ‘Appellant’ / ‘Company’ has initiated various proceedings before the Criminal Courts (8 in number) against its ‘Debtors’, and is to recover approximately Rs.18,12,500/- from its ‘Debtors’ and bearing in mind of the prime fact, ‘Right’ to seek the ‘name’ of the Company’ (to be entered, in the ‘Register of Companies’), is not ‘Lost’ or ‘Extinguished’, as long as 20 years had not expired - Request allowed - AT
  Visit to Get Source

  ---

• Tribunal Confirms NCLT's Call for Forensic Probe into Alleged Company Mismanagement; Consent Letters Found Backdated.

  Case-Laws - AT : Validity of order of NCLT for forensic investigation - Oppression and Mismanagement - Validity of Board Meeting - This Tribunal is of the earnest view that NCLT had rightly referred to the consent letters of the third Appellant and the fourth Respondent both being backdated as the DIN Nos. were allotted by the Ministry of Corporate Affairs only on 26.12.2012 and 21.12.2012 respectively, together with all Reports of Truth Labs and Andhra Pradesh Foresnic Science Laboratories and also the evidence that the fourth Respondent was not even in India as on the date and has passed the Impugned Order, allowing the Company Petition. - AT
  Visit to Get Source

  ---

Central Excise

• Court Rules Excise Duty Only, No Interest or Penalties for Valuation Confusion in Central Excise Case.

  Case-Laws - SC : Valuation - Levy of interest and penalty - since the Revenue itself appeared to be unclear on the correct method of valuation of the goods, it is not appropriate to saddle the Respondent with additional liability, namely, other than the excise duty. - The demand made by the Appellant is confirmed, we do not approve the levy of interest and penalties upon the Respondent, and direct that these amounts be reduced from the total recoverable amount from the Assessee. - SC
  Visit to Get Source

  ---

• Debate on Extended Limitation in Central Excise: Officer's Duty to Scrutinize and Issue SCN u/s 11A.

  Case-Laws - AT : Extended period of limitation - Suppression of facts or not - Needless to say that the assessee may make mistakes in self-assessment and the check against this has been provided in the form of scrutiny of the returns by the officers and the officer scrutinising the returns can call for any documents and records from the assessee which it is bound to provide - the officer is mandated under the Rules to do what the audit has done much later. Had the officer scrutinised the returns as was mandated and called for any records, the alleged mistakes which were pointed out by the audit would have come to light and a SCN could have been issued under section 11A within the normal period of limitation.- AT
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2022 (12) TMI 459
  Reopening of assessment u/s 147 - reasons to believe - reopening after four years - HELD THAT:- In Titanor Components Ltd. [ 2011 (6) TMI 138 - BOMBAY HIGH COURT ] the Division Bench of this Court pointed out that there is a notable difference between a wrong claim by an Assessee after disclosing the true and material facts and the wrong claim made by the Assessee by withholding material facts fully and truly. Only in the latter case would the AO be entitled to re-open the assessment after four years. As contended that since only the issue of the year of taxability/deductibility was involved and the tax rate was the same or lower, the Revenue ought not to agitate such an issue and that too by seeking to re-open the assessment after four years. He relied upon several decisions in support of this contention - As in our judgment, this issue need not be decided because the impugned notice will have to be set aside for the other reasons discussed above. For all such reasons, we are satisfied that the impugned notice is liable to be quashed and set aside. The rule is accordingly made absolute without costs in terms of prayer which read as Hon ble Court may be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, Order or direction under Article 226 of the Constitution of India calling for the records of the Petitioner s case, and after examining the legality and validity thereof, quash and set aside the notice dated 29th March 2019 (EXHIBIT A) issued by the Respondent No. 1 u/s 148 of the Act, seeking to re-open the assessment for the Assessment Year 2012-13; and the Order rejecting objections (EXHIBIT AAN) dated 2nd November 2019. Hon ble Court may be pleased to issue a Writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, Order or direction under Article 226 of the Constitution of India ordering and directing the Respondents to forthwith withdraw and cancel the notice issued by the Respondent No. 1 under section 148.

  ---

• 2022 (12) TMI 458
  Rectification of mistake u/s 154 - nature of receipt - subsidy receipt - subsidy received by it as industrial promotion assistance from the State Government of West Bengal was capital in nature but was wrongly included in the income offered to tax - HELD THAT:- As in the case of Ritum Jain [ 2022 (4) TMI 577 - ITAT KOLKATA ] wherein we find that a similar issue has been adjudicated by this Tribunal deciding in favour of the assessee as allowed the appeal and direct the Assessing Officer to exclude the income from sales tax subsidy received from Govt. of West Bengal which has been inadvertently offered by the assessee for taxation and grant the appropriate relief / refund of the assessee.- Appeal of the assessee is allowed.

  ---

• 2022 (12) TMI 457
  TP Adjustment - Comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected. Expenditure incurred towards management service fee and trade mark license fee - HELD THAT:- Considering the similarity of the issue and view taken in the earlier assessment year by a Co-ordinate Bench in assessee s own case, we are of the considered opinion that the interest of justice would be met by restoring this issue to the file of the AO for fresh factual verification as per law by directing the assessee to submit all the relevant material before the learned AO. Ground is accordingly allowed for statistical purposes. Allow depreciation on software license fee at 60% instead of capitalizing the same and allowing 25% as depreciation - HELD THAT:- On a perusal of the orders in assessee s own case from assessment year 2008-09, we find that the Co-ordinate Benches allowed the depreciation at 60% on the software purchased by the assessee for their business purpose and it is evident from order [ 2015 (5) TMI 45 - ITAT HYDERABAD ] Even in the order for the assessment year 2011-12 (supra), this issue was dealt with and decided in favour of the assessee. Hence, while following the consistent view, we allow this ground of appeal.

  ---

• 2022 (12) TMI 456
  Addition u/s 56 (2) (viia) - difference in the consideration paid towards receipt of the shares by the assessee and Fair Market Value of the equity shares of such investee companies as per Rule 11Ua of the I.T. Rules ,1962 - HELD THAT:- As fairly evident that under the head liabilities, there was a clear cut liability disclosed in the balance sheet in the form of redemption of preference shares. Section 11UA provides that the book value of the liability shown in the balance sheet has to be reduced for the purpose of valuation and determination of FMV of unquoted equity shares AO has erroneously taken the balance sheet as on 31st March 2010 without taking note of the fact that the balance sheet as on the date of valuation date, i.e,. the date on which shares were transferred or received by the assessee. The liability was reflected in the balance sheet post dated 31st March 2010. If the liability as on the date of allotment is taken into consideration, then the valuation submitted by the assessee is correct and therefore, the AO has completely erred in law and on facts not taking into consideration. The liability disclosed in the balance sheet as noted above while valuing the FMV of the shares of both the companies has to be reduced and accordingly, CIT (A) has rightly deleted the additions made by the AO. Therefore, the order of Ld. CIT(A) is confirmed and the addition is directed to be deleted. Appeal filed by the revenue stands dismissed.

  ---

• 2022 (12) TMI 449
  Interest accrued on non performing assets - Applicability of sec 43D - whether the assessee was liable to pay tax on interest accrued on loans categorized as non-performing assets (NPA)/sticky loans on receipt basis as claimed by the assessee or on accrual basis as calculated by the revenue? - HELD THAT:- A perusal of the objects of amending the existing provisions of Section 43D vide Finance Bill 2017, reveals that the benefit of the existing provision was available to scheduled bank or a public financial institution etc. With a view to provide level playing field to cooperative banks vis- -vis scheduled banks and to rationalize the scope of Section 43D, it was proposed to introduce the amendment to Section 43D so as to include co-operative banks other then a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The omission was sought to be corrected by bringing at par the scheduled banks and non-scheduled banks. Thus, it is evident that the amendment was brought in force with a view to cure the omission in Section 43D. Although, the amendment was sought to be made effective w.e.f. 1st April, 2018, but it was liable to be treated as retrospective in nature. In order to arrive at this view, reliance is made on the decision of Hon ble Supreme Court in Allied Motors case [ 1997 (3) TMI 9 - SUPREME COURT] It serves no purpose that the assessee, which is a non-scheduled bank, should include the NPAs/sticky loans in the relevant assessment year and then claim it as a bad debt in the next assessment year. There is no quarrel with the preposition of law settled by the judgments relied upon by the learned counsel for the appellant, but in view of the decision given in Allied Motors [ 1997 (3) TMI 9 - SUPREME COURT] we are of the opinion that the view taken by the Tribunal that the assessee was required to tax the interest on the sticky loans/NPAs on receipt basis, is liable to be upheld. Appeal dismissed.

  ---

• 2022 (12) TMI 448
  Addition u/s 69 r.w.s 115BBE - unexplained investment - addition based on the seized material unearthed during the search conducted at the premises of the assessee - HELD THAT:- As memoranda cash book has already accepted by the Revenue and the income arising and recorded in the memoranda cash book has already been considered and thus when the assessee claimed set of these income disclosed in the form of assets again the same cannot be taxed in the absence of the contrary finding recorded by the Revenue. The assessee has also contended that the possession of the flat has also not received by the assessee and the investments thus recorded is met with the income disclosed by the father of the assessee and father of the assessee has also not taken any set of disclosed by the assessee since the Revenue did not controvert this fact which is evidently clear and the contention of the assessee is supported by memoranda cash book wherein the relevant entries in support of the arguments of ld. AR of the assessee, In the light of these facts and circumstances, we do not find any infirmity in the detailed finding of ld. CIT(A) and therefore, the Ground raised by the Revenue is dismissed. Addition u/s 69A r.w.s 115BBE - Unexplained cash found from the bedroom of the assessee - no evidence has been furnished by the assessee about the source of money found during the search proceedings - HELD THAT:- As not disputed that the money has been found in the wrapped cover wherein the assessee has contended that the money has been received at the time of various rituals ceremony conducted at the time of his marriage. The denomination of cash found also support the contention of the assessee. The ld. AR argued from the memoranda cash book. CIT(A) though has not considered the first argument of the assessee but has very well taken into consideration alternative plea before him that his father is having sufficient cash to cover up the cash found from his bedroom. CIT(A) has given his factual finding and the deleted the addition and we do not find any infirmity in granting credit of the cash available in the memoranda cash book submitted during the course of search assessment by the father of the assessee and the income which also been taxed the cash available in the form of these memoranda of cash book again cannot be taxed. In light of these observations, we do not see any merit in the ground raised by the Revenue and therefore, the Ground No. 3 of the Revenue is dismissed.

  ---

• 2022 (12) TMI 447
  Disallowance u/s 14A - assessee earned exempt income in the form of dividend income and share in the profit of the partnership firm - AO disallowed proportionate interest on account of interest expenses and on account of administrative cost being 0.5% of average value of investment - HELD THAT:- Since the assessee is having substantial interest free funds in the form of its own share capital available with it, accordingly, there is no reason for disallowance on account of interest expenditure incurred for earning exempt income. In the case of Gujarat Narmada Valley Fertilizers Co. Ltd [ 2014 (3) TMI 847 - GUJARAT HIGH COURT] held that where assessee-company received dividend on UTI and shares and investment in same was made in earlier years and interest free funds available with assessee were much larger as compared to investment, disallowance of assessee s claim for interest expenditure by applying section 14A was incorrect. In case of Gujarat Fluoro chemicals Ltd. [ 2020 (10) TMI 252 - GUJARAT HIGH COURT] again reiterated that where interest free funds available with assessee were far more than gross investment, it could safely be harboured that interest bearing funds was not invested by assessee and, thus, no disallowance under section 14A to be made. In view of the above, there is no reason for disallowance so far as proportionate interest expenditure is concerned. So far as administrative expenses is concerned, we observe that the assessee has itself disallowed a sum of Rs. 1.78 lakhs in its return of income, which as per the counsel is adequate to cover disallowance of administrative expenses. The Ahmedabad Tribunal in the case of Axis Bank Ltd. [ 2017 (3) TMI 1335 - ITAT AHMEDABAD] held that administrative expenses need to be disallowed under section 14A of the Act. The law is unanimous on the point that administrative expenses need to be disallowed as per Rule 8D.However, since in the instant facts, the assessee has suo moto disallowed a sum in its return of income while making disallowance under section 14A read with Rule 8D, no further disallowance is called for on account of administrative expenditure. Disallowance u/s 14A while computing income u/s 115 JB - The Karnataka High Court in the case of J.J. Glastronics (P.) Ltd [ 2022 (4) TMI 1187 - KARNATAKA HIGH COURT] held that amounts disallowed under section 14A could not be added to net profit while computing book profit under section 115JB - As in the case of Vishal Export Overseas Ltd [ 2022 (8) TMI 88 - ITAT AHMEDABAD] held that disallowances made under section 14A read with rule 8D could not be applied to provision of section 115JB - ITAT in the case of Vireet Investment (P.) Ltd [ 2022 (8) TMI 88 - ITAT AHMEDABAD] held that computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D. In view of the consistent position of law on this issue, we are hereby allowing assessee s appeal with respect to ground number 2. Disallowance in respect of closing balance of M/s Jay Metal Industries - HELD THAT:- The matter is being set aside to the file of AO for fresh adjudication after allowing due opportunity of hearing to the assessee to produce the necessary documents in support of the reconciliation for this difference.

  ---

• 2022 (12) TMI 446
  Disallowance u/s. 14A - earning of exempt income - HELD THAT:- Uncontroverted facts at the end of both the parties are that during both the years assessee has not earned any exempt income. Respectfully following the settled judicial precedents as consistently held in the case of Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] , Reliance Chemotex Industries Ltd. [ 2022 (2) TMI 1309 - CALCUTTA HIGH COURT] and recent judgment Era Infrastructure India Ltd.[ 2022 (7) TMI 1093 - DELHI HIGH COURT] hold that in case there no exempt income is earned during the year, provisions of section 14A of the Act cannot be invoked and, therefore, the disallowance made u/s. 14A of the Act are deleted - Decided in favour of assessee. Disallowance of additional depreciation claimed u/s. 32 - assets purchased and put to use for a period less than 180 days in the preceding previous year - HELD THAT:- We find that similar issue came up for adjudication before this Tribunal in the case of National Engineering Industrial Ltd. [ 2021 (12) TMI 1130 - ITAT KOLKATA] and the issue was decided in favour of the assessee - Thus we allow the remaining 50% claim of additional depreciation at Rs.57,84,200/- made by the assessee. Thus, finding of the Ld. CIT(A) is reversed. Ground No. 4 raised by the assessee is allowed. Disallowance of employees contribution towards PF ESI - HELD THAT:- We find that recently in Chekmate Services Pvt. Ltd.[ 2022 (10) TMI 617 - SUPREME COURT] has settled the issue holding that if the employees contribution towards PF ESI is not deposited by the employer before the due date as prescribed under the relevant Act governing PF ESI then strict compliance has to be made with regard to sec. 36(1)(va) of the Act read with section 2(24) of the Act and such sum shall be treated as income of the employer and Hon ble Court further held that for such employees contribution provision of section 43B of the Act cannot be applied. Since in the instant case the alleged sum has been deposited after the due date prescribed under the PF Act, we fail to find any merit in the ground raised by the assessee and confirm the finding of Ld. CIT(A) disallowing the sum - Ground raised by the assessee is dismissed. Claim of deduction u/s. 80JJAA - AO only allowed the claim for 30% of the additional wages paid during the year but did not allow the claim of eligible deduction for previous assessment years - HELD THAT:- We fail to find any merit in the said findings of the Ld. AO because he has partly accepted the claim of deduction but the deduction which has been claimed for AY 2011-12 and 2012-13 and stands allowed by the revenue in the past and the assessee was eligible for such deduction for subsequent two assessment years as per the provisions section 80JJAA - In case the AO has denied the total deduction u/s. 80JJAA of the Act for incorrect report furnished by the assessee then situation may have been different but in the instant case on the basis of the said report part of the claim has been allowed and part of the claim has been denied which in our considered opinion was not correct on the part of lower authorities. We are of the considered view that for such minor technical defect, which in real sense is not defect since the said audit report has given more clarity to the year wise deduction claimed u/s. 80JJAA of the Act since it constitutes the figure of 30% of additional wages for current year and if eligible than for preceding two years also. Thus, we hold that assessee is eligible for deduction u/s. 80JJAA - Decided in favour of assessee.

  ---

• 2022 (12) TMI 445
  Denial of exemption u/s 11 - Form 10B was filed by the assessee after filing the return of income for the year under consideration - HELD THAT:- The assessee trust is holding a valid certificate of registration u/s 12AA of the Act since 24/09/1982. In its return of income filed u/s 139(4) of the Act, the assessee claimed exemption in respect of revenue expenditure and capital expenses u/s 11 of the Act. While processing the return filed by the assessee u/s 143 (1) CPC Bangalore denied the exemption claimed u/s 11 and raised a demand - It is the plea of the assessee that Form 10B was obtained from the auditor on 15/09/2016, and due to the first year of e-filing Form 10B assessee faced some technical issues causing a delay in uploading the said Form. In the present case, it is undisputed that the assessee trust is registered u/s 12AA of the Act for the past 40 years and the said registration is still in existence. It is also not the case of the Revenue that the assessee has ceased to be a religious or charitable institution. It is also not the case of the Revenue that the accounts of the assessee have not been audited by an accountant, and an audit report in Form 10B has not been obtained. Only on the technical aspect that Form 10B was not filed along with the return of income for the relevant assessment year, the exemption claimed u/s 11 of the Act has been denied to the assessee without going into the merits. Further, no relief was granted to the assessee even when the assessee filed the application u/s 154. As in the present case also the assessee has complied with the procedural requirement of obtaining and filing Form 10B, therefore, respectfully following the aforesaid decision of the Co-ordinate Bench of the Tribunal, the AO is directed to decide the claim of the assessee u/s 11 on merits, after accepting the Form 10B filed by the assessee. Accordingly, grounds raised by the assessee are allowed for statistical purposes.

  ---

• 2022 (12) TMI 444
  Exemption u/s 11 - assessee trust as formed with the object of the establishment and maintenance of hospital in India for the benefit of public in general - trust has been registered u/s. 12A of the Act and has been granted certificate u/s. 80G - assessee trust procured an unsecured loan from one Oscar Pharmaceuticals (P) Ltd. and out of such unsecured loan gave donation amount to another associated entity - HELD THAT:- Since the coordinate Bench has accepted taking loan and donating the same to the sister concern being the donation from one charitable trust to another charitable trust as not prohibited under law. We do not find any merit in the action of the AO and the finding of the CIT(A) cannot be faulted with, therefore, considering the peculiar facts of the case in light of the decision of [ 2021 (6) TMI 621 - ITAT DELHI] we decline to interfere. The appeal of the revenue is dismissed.

  ---

• 2022 (12) TMI 443
  Addition u/s 69 - bogus transactions of purchase of shares - HELD THAT:- We find that assessee had made the purchase of share of Sacheta Metals Ltd only in A.Y. 2006-07 in accordance with settlement rules of Bombay Stock Exchange. Though the contract note was issued by the broker for purchase of shares on 30/03/2005, the assessee had time to make the payment within 2 days from the date of transaction. Accordingly, the assessee had made the payment by account payee cheque on 01/04/2005 and accounted for the said purchase of shares in his books in A.Y. 2006-07. It could be safely concluded that there was absolutely no purchase of shares that had happened in respect of Sacheta Metals Ltd in A.Y. 2005-06. There is absolutely no case made out by the Revenue to make an addition under section 69 in respect of purchase of shares as the entire transactions of purchase of shares of Sacheta Metals Ltd have been duly reflected in the accounts of share trading business of the assessee and explained by proper sources. The payments have been made by the assessee by account payee cheques from the sources drawn from the bank statements. The immediate source of credit was also explained by the assessee by way of confirmation from third party. These facts are not disputed by he Revenue before us and the same are staring on us. Hence, we have no hesitation in directing the AO to delete the addition made under section 69 of the Act in respect of purchase of shares in respect of Sacheta Metals Ltd. Assessee had also made purchase of shares of Sundaram Finance Ltd. Since the said purchase of 10,000 shares of Sundaram Finance Ltd was made by the assessee from a broker entity belonging to Shri Mukesh Chokshi group, the AO concluded that the said transaction of purchase is bogus and accordingly made addition u/s 69 in A.Y. 2006-07. Assessee had made purchase by making payment by account payee cheques out of sources drawn from his bank statement. The shares have been duly dematerialised as is evident from the DEMAT statement. These shares were subsequently sold in 2 tranches by the assessee through the registered stock broker, Bonanza Stock Brokers Ltd and gains arising thereon were offered to tax by the assessee as business income. In our considered opinion, both the purchase and sale of shares stood properly explained in the instant case and our observations made in respect of Sacheta Metals Ltd for A.Y. 2006-07 would hold good for this scrip also. No hesitation in directing the AO to delete the addition made on account of purchase of shares for both the assessment years under consideration. Accordingly, ground raised by the assessee for both the years are allowed.

  ---

• 2022 (12) TMI 442
  Reopening of assessment u/s 147 - Unexplained cash deposits - HELD THAT:- As in the present case if you go through reasons for re-opening of assessment, there is a reasonable belief of escapement of income on the basis of fresh materials which suggest escapement of income. At the stage for issuance of notice, what is to be seen is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. In this case, there is a new material with the AO to form a reasonable belief of escapement of income. There is no merit in arguments taken by assessee on legality of re-opening of assessment, and thus, we reject ground taken by the assessee on re-opening of assessment. Addition on cash deposits - When the assessee has claimed source of Rs. 8,50,000/- out of his retirement benefit, the AO ought to have verified the claim of the assessee in light of confirmation letter filed by his brother-in-law to ascertain the version of the assessee. Since, the AO has failed to carry out necessary enquiries to ascertain the transaction between the assessee and his brother-in-law, we are of the considered view that a benefit of doubt should be given to the assessee to the extent of sum of Rs. 8,50,000/- that the assessee had given loan to his brother-in-law and the same has been returned back by his brother-in-law in the year 2008 - We are of the considered view that the assessee could able to explain source for cash deposits to the extent of Rs. 8,50,000/-. In so far as, balance amount of Rs. 5,69,000/-, no proper explanation was furnished by the assessee which can be considered as acceptable. Although, assessee claims that he had given loan to his brother-in-law out of his past savings amounting to Rs. 3,50,000/-, no credible evidence was with the assessee to justify his case. Assessee could not be able to explain source for cash deposits of Rs. 5,69,000/- and thus, we are of the considered view that there is no error in the reasons given by the Assessing Officer to make addition towards cash deposit to the tune of Rs. 5,69,000/-. To sum up, out of cash deposits of Rs. 14,19,000/-, the assessee could able to explain source to the extent of Rs. 8,50,000/-, out of his retirement benefits. Therefore, we direct the AO to delete addition to the extent of Rs. 8,50,000/- towards cash deposit and for balance amount of Rs. 5,69,000/-, no proper explanation was furnished and thus, addition made by the AO is sustained to the extent of Rs. 5,69,000/- only. Appeal filed by the assessee is partly allowed.

  ---

• 2022 (12) TMI 441
  Revision u/s 263 - As per CIT, AO has failed to examine and verify the brought forwarded loss - HELD THAT:- From the papers on record, it is clear that AO had conducted enquiries with the assessee in respect of alleged brought forward loss. PCIT cannot substitute his opinion for that of the AO. It is also seen that ld. PCIT has not conducted any re-verification or prima facie investigation on his own to come to a conclusion that the order passed by the AO is erroneous to the interest of revenue. He also failed to notice that enquiries were made by the AO. The law on this issue is clear. See M/S. ANINDITA STEELS LTD. [ 2022 (2) TMI 397 - CALCUTTA HIGH COURT] We hold that the order passed u/s 263 is bad in law. Therefore, we quash the order passed by the ld. PCIT u/s 263 of the Act as bad in law and allow the appeal of the assessee.

  ---

• 2022 (12) TMI 440
  Revision u/s 263 - Deduction u/s 10A - HELD THAT:- CIT by exercising the power conferred under section 263 of the Act, directed the AO to disallow the claim of deduction u/s 10A - Now the CBDT by order u/s 119(2)(b) for the assessment year 2010- 11 condoned the delay and also clarified that the condonation of delay in filing the return of income will not amount to acceptance of claims made in the concerned ROI of the assessee and the AO shall deal with it on merits. We are of the considered opinion that the AO has to examine the claim of the assessee under section 10A of the Act in accordance with law - we set aside the order passed by the ld. CIT(A) and remit the matter back to the file of the AO to decide the claim of the assessee under section 10A of the Act. Accordingly, the appeal in is allowed for statistical purposes. Deduction u/s 10A - There was delay in filing the return of income - HELD THAT:- As gone through the decision in the case of Saffire Garments [ 2012 (12) TMI 193 - ITAT RAJKOT] wherein, the Special Bench has held that to claim a benefit under section 10A of the Act, the return of income has to be filed under section 139 of the Act and it is a mandatory and not directory. Respectfully following the decision of the Rajkot Special Bench, we reject the arguments of the ld. Counsel for the assessee and the appeals filed by the assessee for the assessment years 2011- 12 and 2012-13 are dismissed. So far as appeal for the assessment year 2009-10 is concerned, the assessee has not filed petition for condonation of delay before the CBDT. In view of our decision hereinabove, the return of income has to be filed as per section 139 of the Act and it is mandatory. Therefore, the claim of the assessee cannot be entertained. Accordingly, the appeal filed for the assessment year 2009-10 is dismissed.

  ---

• 2022 (12) TMI 439
  Revision u/s 263 - exemption u/s 80P(2)(a)(i) - HELD THAT:- Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] and in the case of CIT vs. Max India Ltd. [ 2007 (11) TMI 12 - SUPREME COURT] - The error in the assessment order should be one that it is not debatable or plausible view. In a case where the AO examined the claim took one of the plausible views, the assessment order cannot be termed as an erroneous . In the present case, we find that admittedly the interest income was earned from the cooperative banks, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s 80(P)(2)(d) - Such interest also qualifies for exemption u/s 80P(2)(a)(i) as held by the Co-ordinate Bench of Pune Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited [ 2021 (12) TMI 1259 - ITAT PUNE] Thus, we find that the issue which is subject matter of revision is covered in favour of the assessee by judicial precedents. Therefore, it cannot be said that the assessment order is erroneous or prejudicial to the interests of the revenue. Therefore, we are of the considered opinion that the order of revision passed by the ld. PCIT u/s 263 of the Act cannot be sustained in the eyes of law. Hence, the grounds of appeal raised by the assessee stand allowed.

  ---

• 2022 (12) TMI 438
  Deduction u/s 35(1)(ii) - deduction u/s 35(1)(ii) equivalent to 175% of donation given - HELD THAT:- We observe that facts in the present appeal are exactly similar to the facts in the other Assessment Years in which the Coordinate Bench has allowed the claim of the assessee [ 2022 (3) TMI 1451 - ITAT MUMBAI] Since the issue involved in this appeal is also exactly similar to those Assessment Years. DR relied in the case of Krupa Trading Co. [ 2020 (4) TMI 722 - MADRAS HIGH COURT] in which has observed that the Founder/Director of organization had made a sworn statement during the survey u/s. 133A of the Act that donation made to organization was returned back to assessee after deducting 5% commission. Relying on the above sworn statement the ITAT has decided the issue in favour of the revenue and the same was confirmed by the Hon ble High Court. In the given case no such findings were recorded by the lower authorities. Therefore, this case is distinguishable to the facts of the present case. Respectfully relying on the decision of the Coordinate Bench in assessee s own case we are inclined to allow the appeal filed by the assessee.

  ---

• 2022 (12) TMI 437
  Addition u/s.68 - unexplained cash deposit into bank - assessee had during the demonetization period deposited an amount in old demonetized currency notes of Rs.500/- and Rs.1000/-, respectively, in its bank accounts with Axis Bank and Bank of Baroda - HELD THAT:- If the assessee s claim that the cash deposits in question were made out of its duly disclosed cold storage rent receipts was not to be accepted, then, the A.O was obligated to have rejected the books of account of the assessee, for the reason, that by not doing so he had on the one hand held the cash deposits to have been sourced out of an unexplained source, while for at the same time by accepting its books of account had accepted its claim that the cash deposits in duly accounted bank accounts were sourced out of the duly disclosed source of the assessee firm. It may be observed that the fact that the bank accounts in question in which the cash deposits were made by the assessee during the demonetization period formed part of its books of account can safely be gathered from a perusal of the assessee s balance sheet Thus we have a strong conviction that now when the bank accounts in question, had both duly been accounted for by the assessee in its books of account for the year under consideration, therefore, the A.O by not rejecting the said books of account had clearly accepted that the cash deposited by the assessee firm during the year under consideration in the said bank accounts was out of its disclosed sources. As the treating of the cash deposits an unexplained cash credit u/s.68 of the Act by the A.O in itself militates against the acceptance of the book results of the assessee by him, therefore, there can be no justification in upholding the addition so made by him. We vacate the addition made by the A.O u/s.68 - Decided in favour of assessee.

  ---

• 2022 (12) TMI 436
  Set off of current year business loss against foreign dividend income and upholding the levy of tax u/s 115BBD on gross foreign dividend income - whether the assessee would be entitled for deduction u/s 80G of the Act from the foreign dividend income forming part of Gross Total Income? - HELD THAT:- We find that the non-obstante clause is provided in section 115BBD(1) of the Act itself. Hence it would be cover both current year loss as well as brought forward business loss. We hold that the assessee would be entitled for set off of brought forward business losses against foreign dividend income. Hence the assessee would also be eligible for set off of current year loss against foreign dividend income. We hold that assessee would be entitled for set off of current year loss with the foreign dividend income, assessee would be entitled for set off of brought forward business losses and unabsorbed depreciation of earlier years with the foreign dividend income and assessee would be eligible for deduction u/s 80G of the Act from the Gross Total Income subject to the restrictions provided in that relevant section. Disallowance u/s 14A both under normal provisions of the Act as well as in the computation of book profits u/s 115JB - HELD THAT:- We find that the investments made in subsidiary companies for the purpose of holding dominant control over the same or for the purpose of strategic investments would also have to be considered for the purpose of working out the disallowance u/s 14A of the Act in the light of decisionin the case of Maxopp Investments [ 2018 (3) TMI 805 - SUPREME COURT] The same could be considered only in respect of those investments which had actually yielded exempt income to the assessee company during the year under consideration. Obviously, the foreign dividend income which is chargeable to tax would be outside the purview of application of provisions of section 14A. CIT(A) had merely directed the ld. AO to exclude the investments which had yielded taxable income and to include only those investments which had actually yielded exempt income. This issue is now very well settled by the decision of Hon ble Supreme Court in the case of Maxopp referred to supra. Hence we do not find any infirmity in the order of the ld. CIT(A) giving directions to ld. AO to recompute the disallowance under normal provisions of the Act. Computation of book profits u/s 115JB - computation mechanism provided in Rule 8D(2) of the Rules cannot be imputed in clause f of Explanation 1 to section 115JB(2) of the Act as has been held by the Special Bench of Delhi Tribunal in the case of Vireet Investments [ 2017 (6) TMI 1124 - ITAT DELHI] However, the actual expenses incurred by the assessee thereon would have to be considered in clause f which has already been done by the assessee in the instant case, while computing book profits u/s 115JB of the Act. Hence the directions of the ld. CIT(A) are modified accordingly.

  ---

• 2022 (12) TMI 435
  Revision u/s 263 - As per CIT error occurred in the rectification order passed by the ld. Assessing Officer u/s 154 - value of the property and unabsorbed depreciation - Debatable issue - HELD THAT:- A perusal of the show-cause notice issued by the ld. PCIT under section 263 reveals that ld. PCIT has sought to revise the rectification order passed by the AO u/s 154 in respect of the value of the property and unabsorbed depreciation. The issue relating to the buy-back shares and application of the provisions of section 115QA was not under consideration before AO in the rectification proceedings carried out under section 154 - It is pertinent to mention here that the order can be rectified under section 154 if there is an error apparent on record as occurred in the said order. The assessee vide his application had submitted to AO regarding the applicable rate @ 20% of long-term capital gains and set off of unabsorbed depreciation, whereupon the AO passed the rectification order. AO was not supposed to re-visit the entire assessment order or to re-assess the income in a rectification order passed under section 154 - It was beyond the jurisdiction and scope of the powers of the ld. Assessing Officer under section 154 to make an addition by way of revisiting the entire assessment order and thereby reassess the income of an assessee on a debatable issue. Therefore, it cannot be said that there was any error occurred in the rectification order passed by the ld. Assessing Officer under section 154 of the Income Tax Act. Assessee had also demonstrated during the assessment proceedings that the provisions of section 115QA were not applicable in its case as per the relevant provisions as were in force for the assessment year under consideration. That in the Explanation to Section 115QA(1), as applicable prior to 01.06.2016, buy-back means that purchase by a Company of its own shares in accordance with the provisions of section 77 of the Companies Act. That as per the said provisions in force during the relevant assessment year, the buyback pursuant to the order of the Company Law Board Bench under section 402 of the Companies Act was not included. Therefore, even otherwise, the ld. PCIT was not justified in invoking the provisions of section 263 of the Income Tax Act in this respect. Even otherwise, this issue being a debatable issue, it cannot be said that either the assessment order dated 28.12.2017 or the rectification order passed under section 154 of the Act was erroneous. Therefore, the order passed by the ld. PCIT under section 263 of the Act is not sustainable and the same is hereby quashed. Appeal of the assessee stands allowed.

  ---

• 2022 (12) TMI 434
  Reopening of assessment u/s 147 - Reason to believe - reason to suspect - HELD THAT:- Reasons to believe postulates foundation based on information and belief based on reason. Even if there is foundation based on information, there still must be some reason warrant holding a belief that income chargeable to tax has escaped assessment. Further, it is settled that adverse information may trigger reason to suspect , then the AO to make reasonable inquiry and collect material which would make him believe that there is in fact escapement of income. The fine distinction between right to suspect and right to believe has to be kept in mind while examining the condition precedent for reopening an assessment as stipulated u/s 147 of the Act for the relevant year under consideration (AY. 2009-10). Here in this case, the DGIT (Inv.) had passed on an information regarding the assessee s claim of expenses to be bogus, which assessee has supposed to have incurred while purchasing goods from certain parties. Having received such an information from the DGIT(Inv.), it should have at best triggered reason to suspect , then AO should have made reasonable inquiry and collected material which would make him form a belief that there was in fact escapement of income; but in this case, we note that the reason recorded by the AO before re-opening the assessment does not satisfy the requisite requirement as necessary u/s 147 of the Act to validly reopen the assessment. Therefore, we are inclined to quash the reopening based on the reasons recorded by the AO - And therefore we quash the notice u/s 148 - Therefore, further proceedings stand void in eyes of law. Therefore, the assessee succeeds on the legal issue. Appeal of the assessee is allowed.

  ---

• 2022 (12) TMI 433
  Reopening of assessment u/s 147 - Addition u/s 68 - beneficiary of accommodation entries - loans and advances credited in the books of the appellant company - genuineness of transactions of purchase of shares - appellant deliberately withheld the information from the AO as well as the CIT(A) which is within exclusive knowledge of appellant - HELD THAT:- the appellant had failed to discharge the onus casts upon him to prove the genuineness of the transactions, identity of the creditors and creditworthiness of the creditors/investors who should have financial capacity to make the advance in question to the satisfaction of the Assessing Officer. Therefore, the ratio of the decision of the Hon ble Supreme Court in the case of NRA Iron Steel (P.) Ltd. [ 2019 (3) TMI 323 - SUPREME COURT] is squarely applicable to the facts of the present case. The appellant deliberately withheld the information from the Assessing Officer as well as the ld. CIT(A) which is within exclusive knowledge of appellant to establish the genuineness of transactions of purchase of shares of that company. Following the decision in the case of Hon ble Supreme Court in the case of Friends Trading Co. [ 2022 (9) TMI 1076 - SUPREME COURT] with other several decisions, additions confirmed

  ---

• 2022 (12) TMI 432
  Revision u/s 263 - PCIT held assessment framed u/s 143(3) as erroneous in so far prejudicial to the interest of Revenue - assessee has claimed foreign fluctuation loss with respect to foreign currency loan which was converted into the shares of the company - assessee in the revised return of income has claimed such loss as revenue in nature by virtue of the provision of section 43AA which was brought by Finance Act, 2018 with retrospective effect from the Assessment Year 2017-18 i.e. the year under consideration - HELD THAT:- We note that all the necessary details with respect to the deduction claimed by the assessee under the provisions of section 43AA of the Act were available before the AO during the assessment proceedings. The revised return wherein the deduction was claimed was filed before the AO which was duly accepted by the AO in the assessment proceedings after raising the questions to the assessee. This fact can be verified from the question raised in the notice issued u/s 142(1). There was no question raised by the AO to the assessee for the deduction claimed by the assessee in the revised return of income. Thus, in the absence of any inquiry by the AO, we are of the view that it is a case of nonapplication of mind. At the time of hearing, a query was also raised to the AR to justify whether any inquiry has been made by the AO with respect to the claim made by the assessee. AR failed to make any satisfactory reply. Thus it can be safely concluded that there was no enquiry made by the AO during the assessment proceedings despite the fact that all the necessary details were available before the AO. PCIT has made reference to the explanation 2 of section 263 of the Act in holding the assessment order as erroneous in so far prejudicial to the interest of revenue. In this regard we find that the PCIT has not made any reference to the explanation 2 of section 263 of the Act in the notice issued u/s 263 of the Act, thus we are of the view that no reference to the explanation 2 of section 263 of the Act cannot be made while holding the order of the assessment as erroneous in so far prejudicial to the interest of the Revenue. See M/S. SHREEJI PRINTS PVT. LTD. [ 2021 (9) TMI 108 - SUPREME COURT] Hon ble Court in the series of cases held that the order is erroneous in so far prejudicial to the interest of revenue if the inquiry has not been conducted during the assessment proceeding - Thus AO has not conducted inquiry with respect to loss claimed by the assessee in the revised return of income by virtue of amended provision of section 43AA of the Act which was made applicable retrospectively. Thus, the ground of appeal of the assessee is not allowed.

  ---

• 2022 (12) TMI 431
  Validity of reopening of assessment u/s 147 - specific information from the Investigation Wing that through client code modification - HELD THAT:- AO had no occasion to verify various claims made by the assessee in the return of income, including the profit/loss shown from share transaction. Subsequently AO received specific information from the Investigation Wing indicating that through client code modification, the assessee had artificially reduced its profit by converting it to loss. On a careful reading of the assessment order, it is observed that Investigation Wing of the department has carried out thorough investigation and found that through some unscrupulous brokers, various entities are fictitiously increasing or reducing their profit or loss from share transaction by availing client code modification. The investigation report clearly reveals that the assessee is one of the beneficiary of client code modification. Since, the details relating to assessee s share transaction was not examined due to processing of return u/s 143(1) of the Act, the report of the Investigation Wing, which was subsequently received by the AO, clearly constitutes a tangible material based on which the AO certainly can form a belief of escapement of income. In my view the decision of the Hon ble Bombay High Court in case of M/s. Coronation Agro Industries Ltd. [ 2017 (1) TMI 904 - BOMBAY HIGH COURT] would not apply to the facts of the assessee s case, as, in that case there was already assessment made under section 143(3) of the Act. In view of the aforesaid, I do not find any merit in these grounds. Accordingly, ground nos. 1 and 2 are dismissed. Additions made on account of client code modification - HELD THAT:- There is no dispute that the assessee has availed the facility of client code modification through a broker. Both the Assessing Officer and learned Commissioner (Appeals), after thoroughly examining the facts have given a concurrent finding that by availing the facility of fictitious client code modification the assessee has shifted out profit from share transaction and converted it to loss. Except the confirmation obtained from the broker, the assessee has been unable to furnish any other conclusive evidence, either before the departmental authorities or before me to dispel the adverse materials brought on record. In the aforesaid view of the matter, any reason to interfere with the decision of learned Commissioner (Appeals) on the issue. Therefore, the additions made on account of client code modification including the commission paid are upheld. Ground nos. 3, 4 and 6 are dismissed. Disallowance made u/s 94(7) - HELD THAT:- On a reading of section 94(7) of the Act, it is quite clear that long term capital loss on purchase and sale of shares, securities etc. not exceeding the amount of dividend or income received or receivable of securities units etc. shall be ignored. However, the conditions enumerated in clause (a), (b) and (c) have to be fulfilled. Since, due to lack of proper compliance by the assessee, the factors enumerated in clause (a) and (b) could not be examined, I deem it appropriate to grant one more opportunity to the assessee to establish through proper documents its claim that disallowance made under section 94(7) of the Act is either unjustified or excessive. Accordingly, the issue is restored back to the Assessing Officer for fresh adjudication after due opportunity of being heard to the assessee. This ground is allowed for statistical purposes.

  ---

• 2022 (12) TMI 430
  Valuation of shares in terms of Sec.56(2)(viib) - method of valuation - assessee has furnished valuation report wherein valuation has been done on the basis of DCF valuation - HELD THAT:- AR has submitted that the shares have been converted pursuant to investor agreement dated 23.02.2012 and at that point of time, the provisions of Sec.56(2)(viib) were not in force and therefore, no such addition could have been made. Another submission is that actual money has been received in earlier years and in this year, there is mere conversion of shares. However, both the arguments are not acceptable. CCPF issued earlier has been discharged in this year and new equity shares have been issued in this year. There is constructive payment and the money is constructively received by the assessee in this year and the provisions of Sec.56(2)(viib) are very much applicable and the assessee would be obligated to justify the valuation of the shares. AR has also submitted that the right to choose a particular method of valuation has been vested with the assessee and DCF method of valuation is one of the prescribed methods. The said argument could be accepted only if the assessee discharges the onus of furnishing an acceptable valuation report. The valuation report is not mere empty formality rather the same should be based on valid assumptions and supported by empirical data which would justify adoption of projections. In the present case, the valuation lacks all these features. The actual financials of the assessee are nowhere near to the projections made in the valuation report. Accordingly, the case laws being relied upon by assessee and placed on record would have no application. We deem it fit to provide another opportunity to the assessee to justify the valuation of shares in terms of Sec.56(2)(viib). Accordingly, the matter stand restored back to the file of Ld. AO to provide another opportunity to the assessee to justify valuation of the share and re-adjudicate the issue after affording reasonable opportunity of hearing to the assessee.

  ---

• 2022 (12) TMI 429
  Reopening of assessment u/s 147 - Necessity of obtaining of approval u/s 151 of the Act from the competent authority - AO proceeded on the basis of AIR information and issued a verification letter - HELD THAT:- As concluded that the AO has not obtained mandatory approval under sub-section (1) of section 151 of the Act before issuing notice u/s 148 of the Act from the competent authority, therefore, this omission vitiates the reassessment proceedings, notice u/s 148 of the Act and consequent reassessment order dated 05.12.2016 being bad in law and without assuming valid jurisdiction by the AO as per the mandate of section 151 of the Act. Therefore, on this count, legal ground of the assessee is allowed and reassessment proceedings, notice u/s 148 of the Act and consequent impugned assessment order are quashed. - Decided in favour of assessee.

  ---

• 2022 (12) TMI 428
  Long term capital gain - year of assessment - As argued that the impugned capital gains ought not to have been assessed in the year when the assessee had converted his capital asset(s) to stock-in-trade - HELD THAT:- Assessee s argument fails to inspire any acceptance as section 45(2) is a specific provision wherein capital gains arising from such a conversion are assessed in the year of actual transfer of the stock-in- trade. We thus uphold the learned lower authorities action; more, particularly the CIT(A) s action assessing the impugned long term capital gains in assessee s hand to the tune of Rs.8,64,068/- than the entire sale consideration amounting to Rs.74,55,088/- (supra). CIT(A) s jurisdiction in arriving at the correct computation of an assessee s taxable income - Bifurcation of long term capital gains computation to business income to the extent of business profits - We find no merit in the Revenue s instant arguments in light of CIT vs. Shapoorji Pallonji Mistry [ 1962 (2) TMI 12 - SUPREME COURT] , CIT vs. Union Tyers [ 1999 (9) TMI 81 - DELHI HIGH COURT] and CIT vs. M/s. Sardari Lal Company [ 2001 (9) TMI 1130 - DELHI HIGH COURT] that the CIT(A) s jurisdiction does not extend to introducing an altogether new source of income as it has been done in the facts of the instant case. Faced with this situation, we accept the assessee s vehement arguments challenging business profits addition.

  ---

• 2022 (12) TMI 427
  Revision u/s 263 - assessment completed - reopening of assessment u/s 147 - CIT-A enlarging the scope of reopening u/s 147 - HELD THAT:- Once the return income stands concluded either by way of intimation or later on by way scrutiny proceedings u/s 143(3), then it is said to be that assessment has been completed. If the return income has been accepted and no scrutiny has been done, then also it is treated as assessment has been completed and has attained finality. Such assessment can be reopened u/s 147, if AO has reason to believe based on any material or information coming on record that income chargeable to tax has escaped assessment. It is only on such reasons to believe and the issues raised in reasons recorded, AO can pass assessment order or re-assessment and it cannot travel beyond the reasons unless something tangible material comes on record during such assessment /reassessment proceedings. Here in this case, it is not a case that AO has reopened assessment on account of any set off of long term capital loss or determination of ALV u/s 22 for the inventory unsold flats. Ld. PCIT in his revisionary jurisdiction u/s 263 cannot enlarge the scope of reopening u/s 147 and go beyond the reasons recorded. Here, the present order of the Ld. PCIT is on the issues which are beyond the scope of section 147 and therefore, he could not have roped in some other issues based on the figures given in the balance sheet or profit and loss account which already stood concluded and assessed way back in the year 2013. As in CIT vrs. Lark Chemical Ltd. [ 2013 (9) TMI 959 - BOMBAY HIGH COURT] on a similar situation and circumstances has held that notice u/s 263 cannot be issued beyond the period of 2 years from the date when order sought to be revised is passed and jurisdiction u/s 263 cannot be exercise with reference to the issue which were not subject matter of reopening of assessment and the period of limitation provided u/s 263(2) would commence from the date of order and not from the date of order of reassessment has been passed. PCIT has travelled beyond the scope of issues which were not subject matter of consideration in the re-assessment order which he cannot go beyond the reasons recorded and therefore the order of PCIT is barred by limitation. Thus, on this ground, we quashed the impugned order.

  ---

• 2022 (12) TMI 426
  Disallowance of foreign tax credits - assessee had not furnished all the requisite documents as specified under Rule 128(8) - assessee is a resident individual stated to be deriving income by way of pension and annuity received from United States of America wherein assessee received pension and annuity - HED THAT:- There is no dispute that assessee has furnished its return of income for the impugned assessment year on 15.03.2020. Whereas, Form No.67 claiming foreign tax credits was furnished on 11.03.2020. Learned Commissioner (Appeals) has disallowed foreign tax credits, primarily, for non-fulfillment of conditions prescribed under sub-Rule (8) and(9) of Rule 128. Non-furnishing of Form No. 67 within the due date of furnishing of return of income as specified under Section 139(1) of the Act, we have noted in case of M/s. 42 Hertz Software India (P) Ltd. [ 2022 (3) TMI 834 - ITAT BANGALORE] has held that the rule prescribed under Rule 128(9) of the Act cannot be treated as mandatory but is directory in nature as the said Rule does not provide for disallowance of foreign tax credits in case of delay in filing Form No.67. That being the legal position, we hold that assessee s claim of foreign tax credits cannot be disallowed merely on the reasoning that Form No. 67 was filed beyond the due date of furnishing of return under Section 139(1) of the Act. This view also get fortified by the subsequent amendment brought to Rule 128(9) of the Act by providing that Form No. 67 can be furnished within the time specified under sub-Section (1) and sub-Section (4) of section 139 of the Act. Allegations of the Commissioner (Appeals) that assessee has not furnished the other requisite documents as provided under Rule 128(8) though, learned counsel appearing for the assessee has submitted before us that all those documents were filed before the assessing officer, however, on the face of the allegations made by Commissioner (Appeals) we cannot give a clean chit to the assessee at this stage. Considering the fact that the assessee is stated to be in possession of documentary evidence, as required under rule 128(8) and (9), we direct the assessee to furnish them before AO for examination. AO is directed to verify the documentary evidences filed or to be filed by the assessee and allow foreign tax credit in accordance with the extant rules read with section 90 of the Act. Grounds are allowed for statistical purposes.

  ---

• 2022 (12) TMI 425
  Revision u/s 263 - valuation of the cost of construction for hospital building - survey u/s 133A - assessee had admitted additional income on account of unexplained investment in construction of hospital building - Pr.CIT has pointed out that the AO has ignored the issue which was the subject matter of the survey carried out u/s 133A of the Act and the AO should have examined in detail with regard to the valuation of the cost of construction carried out by the assessee for hospital building - HELD THAT:- We found substance on the observation of the ld.Pr.CIT as per his order dated 22/03/2017 and the ld.DR also argued the case very well and we found substance in the argument of the ld.DR also. All the facts were available before the AO, he should have referred to the cost of the construction of the building, which was the subject matter of the survey u/s 133A - AO completely brushed aside the survey statements/documents and merely accepted the submissions of the assessee. Therefore, as per explanation u/s 263, the AO did not discharge his liability fully. First the AO is an investigating officer thereafter he is an adjudicating officer. Considering the entire facts on the order passed by the AO, which is erroneous and prejudicial to the interest of the revenue, we uphold the action of the ld.Pr.CIT and dismissed the appeal of the assessee. Revision u/s 263 as AO has not referred the matter to DVO in the original proceedings us/ 143(3) of the Act - We do not find any substance on the order of the ld.Pr.CIT that the AO passed order in a hurry without waiting for the DVO report. DVO submitted report on 25/04/2018 u/s 142A of the Act after 6 months from the receipt of reference, therefore, the DVO report has no value in the eye of law as per sec. 142A(6) of the Act. In support of our view, we rely on the decision Narula Educational Trust [ 2021 (2) TMI 459 - ITAT KOLKATA] . Therefore, the AO will not get any benefit of extended period of 60 days as per sec. 153 of the Act. The ld.Pr.CIT is also not justified for reckoning the period for completion of assessment by the AO as per the limitation is also wrong. We set aside the order passed by the ld.Pr.CIT for exercising his power u/s 263 of the Act. Hence, the order passed by the AO cannot be revised us/ 263 of the Act. Therefore, the order passed by the AO is neither erroneous nor prejudicial to the interest of revenue. Appeal of the assessee is allowed.

  ---

• 2022 (12) TMI 424
  TP adjustment - international transactions pertaining to payments made to Associated Enterprises for receipt of Headquarter services on the ground that same were not at arm s length price - AO as well as DRP disallowed management fees paid to AE on the ground that the assessee could not prove rendering of services and benefit derived from service rendered by AE to justify payment of management fees - HELD THAT:- We find that except certain flow chart showing various corporate services of enterprises, the assessee could not file any evidence to justify rendering of services to justify management fee paid to sister concern. Although, the assessee has filed certain e-mail communication between the assessee and sister concern, but nothing is available from such e-mail correspondence to ascertain whether AE has rendered certain services. It is well settled principle of law by the decisions of various courts that the onus is on the assessee to bring all material facts on record to substantiate its claim, when the claim is made towards any expenditure. Further, mere production of vouchers in support of claim for deduction of expenditure would not prove claim made by the assessee is allowable. In this case, except routine flow chart explaining certain services of corporate entity, no other evidence has been placed on record to justify claim of payment of management fee. Therefore, we are of the considered view that that there is no error in the reasons given by the AO as well as DRP to sustain disallowance of management fee paid to sister concern. Hence, we are inclined to uphold findings of the DRP and reject ground taken by the assesse. Appeal filed by the assessee is partly allowed for statistical purposes. Additions made towards provision for warranty - As argued assessee is claiming deduction for warranty expenses only on the basis of provision created in books of account, but whatever deduction claimed in the statement of total income is over and above provision made in the books of account - HELD THAT:- We find that arguments of the learned counsel for the assessee is fallacious, because as per details filed by the assessee towards historical amounts of provision created for warranty expenses and actual utilization, which is available as filed by the assessee for the financial year 2010-11, the assessee has unutilized provision for warranty, including opening balance brought forward from earlier financial year is about 9.55 crores, whereas actual utilization for warranty expenses for the financial year 2010-11 is Rs.3.20 crores, leaving behind closing balance of provision for warranty expenses - From the above, it is very clear that the assessee has claimed excessive deduction of provision for warranty expenses, although, it has incurred less amount for providing warranty to its customers. We are of the considered view that there is no error in reasons given by the Assessing Officer to disallow provision for warranty expenses by allowing actual expenditure incurred towards warranty expenses. The learned DRP deleted additions made by the AO on different grounds without appreciating reasons given by the Assessing Officer to disallow excess provision made for warranty expenses. Hence, we reverse findings of the DRP and uphold additions made by the Assessing Officer towards disallowance of provision for warranty expenses - Appeal filed by the Revenue is allowed.

  ---

• 2022 (12) TMI 423
  TP Adjustment - comparable selection - HELD THAT:- All the Revenue s arguments failed to evoke our concurrence. This is for the reason that not only the learned coordinate bench s findings stand upheld in decision PCIT v. Barclays Technology Centre India Pvt. Ltd. [ 2018 (8) TMI 574 - BOMBAY HIGH COURT] but also the corresponding financials referred at it s behest hardly prove M/s. Bodhtree Consulting Ltd. and M/s. Kals Information Systems Ltd. as engaged in the very segment of provision for software development services. Faced with this situation, we adopt judicial consistency to confirm the CIT (A) s findings under challenge regarding exclusion of these twin entities from the array of comparables. As assessee s computation that it s PLI of 11.86% (supra) falls within 5% tolerance mark of the arithmetic mean coming to 13.57% u/s 92C(2) of the Act 2nd proviso in light of our adjudication on the foregoing issue. This clinching plea has gone unrebutted from the Revenue side. We thus conclude that Revenue s twin substantive grounds involving M/s. Quintegra Solutions Pvt. Ltd. and M/s. CG-VAK Software Exports Ltd. as well taxpayer s cross objection seeking inclusion of M/s. Thirdware Solutions Ltd. (supra) stand rendered academic.

  ---

• 2022 (12) TMI 422
  TP adjustment on account of reimbursement of seafarer expenses - transaction between the assessee and its A.E - doubt on genuineness of the alleged reimbursement of expenses - HELD THAT:- We find that the DRP also did not correctly appreciate the transaction between the assessee and its A.E. and upheld the adjustment made by the TPO by treating the arm s length price of international transaction to be Nil. From the perusal of the record, it is evident that it is not the case of the Revenue that the mark up charged by the assessee for the services rendered to the A.E. under the aforesaid agreement is not at arm s length price. Revenue has only doubted the genuineness of the alleged reimbursement of expenses made by the assessee to its A.E. As noted above, the transaction is not reimbursement of expenses by the assessee to its A.E. and rather, is reimbursement of expenses by the A.E. to the assessee. We are of the considered opinion that the impugned adjustment made by the TPO and upheld by the learned DRP in respect of international transactions of reimbursement of the sea farers expenses is based on incorrect appreciation of facts. Therefore, we direct the TPO / A.O. to delete the said adjustment. Assessee appeal allowed.

  ---

• 2022 (12) TMI 421
  Delay in making the payment towards the employees contribution for the provident fund, under section 36(1)(va) r.w.s. 2(24)(x) - intimation under section 143(1) - HELD THAT:- As decided in KALPESH SYNTHETICS PVT LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CPC BENGALURU. [ 2022 (5) TMI 461 - ITAT MUMBAI] when the due date under Explanation to Section 36(1)(va) is judicially held to be not decisive for determining the disallowance in the computation of total income, there is no good reason to proceed on the basis that the payments having been made after this due date is indicative of the disallowance of expenditure in question. While preparing the tax audit report, the auditor is expected to report the information as per the provisions of the Act, and the tax auditor has done that, but that information ceases to be relevant because, in terms of the law laid down by Hon ble Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law, and we must delete the same for this short reason as well. In view of the detailed discussions above, we are of the considered view that the impugned adjustment in the course of processing of return under section 143(1) is vitiated in law, and we delete the same. Assessee appeal allowed.

  ---

• 2022 (12) TMI 420
  TP Adjustment - processing fees received on account of guarantees issued to Indian beneficiaries (based on the corresponding back-to-back guarantee provided by the overseas associated enterprises) - HELD THAT:- As respectfully following the order passed by the Co ordinate Bench of the Tribunal in assessee s own case cited [ 2022 (4) TMI 1438 - ITAT MUMBAI ] we uphold the plea of the assessee and delete the impugned transfer pricing adjustment. Accordingly grounds no. 1 and 2 raised in assessee s appeal are allowed.

  ---

• 2022 (12) TMI 419
  TDS u/s 194IA - non deduction of tax while making payment for purchase of property - liability under Section 201(1) r.w. Section 201(1A) - whether the obligation provided u/s 194IA is qua the proper ty or qua the transferee? - HELD THAT:- Relates to the obligation of the transferee and the second factor fixes obligation to deduct tax at the time of credit or payment. When read combinedly; while the first limb of Section 194IA refers to a singular expression, i.e., transferee (in distinction to transferee(s) combined), second limb provides for time of discharge of obligation which in turn, depends on the action of each transferee (in exclusion to other transferee) i.e., either credit in its accounts or actual payment. When the provision is read as a whole, it gives an infallible impression that obligation cast u/s 194IA is qua each transferee and not qua the aggregate consideration. The reasons are not far to seek. It will not be practicable to achieve the requirement of second limb if the case of the Revenue is accepted that it is qua total consideration involved and not each transferee. Obligation cast u/s 194IA arises to a particular transferee at the time of payment of consideration or at the time of credit in its own accounts. Law cannot be read to expect one transferee to deduct TDS on behalf of other transferee at the time action taken by him towards payment or credit. If the contentions of the Revenue are accepted that vicarious liability imposed u/s 194IA is linked to the value of the property, an anomalous and unintended situation will arise for deduction of TDS. The contention of the assessee that Section 194IA operates qua each transferee and not qua total consideration is in absolute congruence with the schematic interpretation of Section 194IA of the Act. On facts, the assessee in the instant case has admittedly paid Rs. 40 lakhs which is below threshold limit provided to trigger the obligation provided in Section 194IA - Hence, Section 194IA has no application where a transferee in question has neither credited nor paid consideration for transfer of immovable proper ty in excess of threshold limit of Rs. 50 lakhs. We thus find merit in the plea raised on behalf of the assessee for holding the assessee to be not an assessee in default for the purposes of Section 201/201(1A). Hence, we reverse and cancel the liability demand raised under Section 201(1) r.w. Section 201(1A) in the absence of any default committed with reference to Section 194IA of the Act - Appeal of the assessee is allowed.

  ---

• 2022 (12) TMI 418
  TP Adjustment - exclusion of the comparable - HELD THAT:- Companies functionally dissimilar with that of assessee company engaged in the business of export of Information Technology enabled Services (ITeS) need to be deselected from final list. Acquisition of a new type of business during the year is an exceptional event and renders the comparability of this entity which the assessee, who has no such event. So also the comparability depends upon the segment which forms the predominant activities of the entity and on this score, compnaies does not pass the test of comparability. Foreign exchange loss - treatment as operating in nature for transfer pricing purpose - HELD THAT:- In DHL Express (India) (P) Ltd. [ 2011 (4) TMI 856 - ITAT MUMBAI] and Hanil Tube India (P) Ltd. [ 2017 (2) TMI 1449 - ITAT CHENNAI] it is held that foreign exchange fluctuations and profit on sale of assets do not form part of the operational income because these items have nothing to do with the main operations of the assessee. In these circumstances, we are of the considered opinion that the foreign exchange loss should not have been treated as operational expense and we direct the learned AO/Ld. TPO to treat the foreign exchange fluctuation loss as non-operating in nature for calculation of margins. Disallowance of interest on unsecured loan taken which is 100% subsidiary of the assessee - addition on the ground as it is not incurred for the purpose of assessee s business though the said borrowings were utilised for investments in subsidiaries which is part of business purpose of the assessee company - HELD THAT:- As in assessee s own case for the assessment year 2011-12 wherein it is clearly held that the interest on unsecured loan taken from M/s. Social Media India Ltd., is an allowable expenditure. Respectfully following the view taken by a coordinate Bench of this Tribunal in assessee s own case, we allow this ground and direct the learned Assessing Officer to delete this addition.

  ---

• 2022 (12) TMI 417
  TP Adjustment - treatment of foreign exchange fluctuation gain as operating income - Safe Harbour Rules - TPO while rejecting the foreign exchange gain from operating income has relied upon the Safe Harbour Rules - HELD THAT:- As decided in B.C. MANAGEMENT SERVICES PVT. LTD. [ 2017 (12) TMI 255 - DELHI HIGH COURT] the issue is covered in favour of the assessee and the Safe Harbour Rule referred by the TPO are not applicable in the current assessment year. Hence we uphold the order of ld. CIT (A). Rejecting the comparable, Infosys BPO Ltd. - Infosys BPO Ltd. on similar grounds has been excluded in other decisions in BT e-Serv (India) (P.) Ltd. [ 2018 (6) TMI 1639 - ITAT DELHI] and Baxter India (P.) Ltd. [ 2017 (8) TMI 1557 - ITAT DELHI] - Upon hearing both the parties and perused the record, we find that in view of the aforesaid decision of the ITAT, the issue stands covered in favour of the assessee. Companies functionally dissimilar with that of assessee a business process outsourcing company that provides call center services including customer care, customer retention, first-party receivables management, third-party collections and revenue recovery services to large and mid-sized companies need to be deleted as comparable.

  ---

• 2022 (12) TMI 416
  TP Adjustment - validity of the reference made by the AO to the TPO u/s 92CA - HELD THAT:- Parameters laid down in para 3.3(b) was the basis on which the AO made reference to the TPO viz., where there has been a transfer pricing adjustment of Rs.10 Crore or more in an earlier assessment year and such adjustment has been upheld by the judicial authorities or is pending in appeal . Admittedly, the parameter laid down therein has not been satisfied in the present case and consequently, the reference by the AO to the TPO u/s.92CA of the Act is invalid. On the validity of an order u/s.92CA and invalidity and sustainability of the consequent addition made to the total income on the basis of such invalid order u/s.92CA we are of the view that order of reference to the TPO in the present case is invalid, therefore the addition made based on the basis an order passed by the TPO on an invalid reference by the AO is a nullity and the addition made consequent to such illegal order is liable to be deleted in this short ground. Accordingly, we allow ground No.2 raised by the assessee.

  ---

• 2022 (12) TMI 415
  Reopening of assessment u/s 147 - reason to believe - new or tangible material which came to the possession of the AO - HELD THAT:- Reassessment proceedings initiated by the AO u/s 147 of the Act are bad in law, as there was no new or tangible material which came to the possession of the AO subsequent to the issue of the intimation u/s 143 (1) of the Act and therefore, the jurisdictional condition i.e. existence of reason to believe is not satisfied in the present case. As regards learned DR s submission that arguments now raised in present appeal were not taken by the assessee before the learned CIT(A) and the same are also not covered in any of the grounds raised by the assessee, we are of the view that when the proceedings under 147 of the Act are challenged all the aspects pertaining to same gets covered and more particularly the aspect of existence of reason to believe , which is a precondition for initiation of any proceeding under section 147 of the Act. Accordingly, ground no. 1 raised in assessee s appeal is allowed.

  ---

• 2022 (12) TMI 414
  Validity of Rectification order passed by the TPO u/s 154 as per the direction of DRP - Validity of direction issued by the DRP (Dispute Resolution Panel) for rectification - HELD THAT:- We uphold the plea of the assessee to the extent that the impugned rectification order is quashed, as the directions passed by the DRP and the resultant TPO s order giving effect to these directions, stand quashed. The observations made in the case of Shapoorji Pallonji Bumi Armada Pvt Ltd [ 2022 (12) TMI 241 - ITAT MUMBAI] will apply mutatis mutandis here as well We may only add that we may add that apart from the grievance against the impugned the arm s length price adjustment including, of course, against the issuance of directions dated 22nd April 2021 by the Dispute Resolution Panel, the assessee has also raised a grievance against (i) incorrect levy of education cess, including secondary and higher education cess; and (ii) inadvertent error not adjusting the MAT credit, but as this addition was made in the original assessment order dated 30th March 2021, and the order impugned in the present appeal is the rectification order dated 31st May 2021, we are not in a position to deal with the said grievance of the assessee. It is for the assessee to pursue the grievances against any additions or disallowances made in the original assessment proceedings in appeals against the original assessment order, and in the case, for whatever reasons, the said appeal has been inadvertently missed out, it is for the assessee to file the appeal at least now, along with the condonation petition, and the bench dealing with such an appeal and the condonation petition, if any, will take a call on whether or not such a delay can be condoned, and, if necessary, on the merits of the grievance of the assessee. As also bearing in mind the entirety of the case, we vacate the impugned rectification order dated 31st March 2021 passed by the AO u/s 154 r.w.s. 143(3) and 144C(13), as also the related orders passed by the Dispute Resolution Panel and the Transfer Pricing Officer. The original assessment order dated 30th March 2021 stands restored, accordingly. The assessee gets relief to this limited extent.

  ---

• Customs

• 2022 (12) TMI 455
  Invocation of bank guarantee - non-redemption of Export Promotion Capital Goods (EPCG) authorisations which was availed of earlier - HELD THAT:- The Petitioner had originally obtained 58 EPCG Authorisations out of which 33 were redeemed by it. The Petitioner had further surrendered 3 authorisations. At the time when the said writ was considered, 22 authorisations were remaining. The Court after considering the fact that foreign tourism was almost at a nil position during the pandemic had directed the Petitioner to approach the Director General of Foreign Trade (DGFT) by way of a representation. The invocation of the bank guarantee for non-redemption of the EPCG was also stayed by this Court - The representation filed by the Petitioner is still pending and has not been decided. Mr. Rao, ld. Sr. Counsel for the Petitioner submits that thereafter, five more EPCG have been redeemed and there are only 17 which are remaining. In the present writ petition, it is the grievance of the Petitioner that recently, letters have been issued by the Department of Revenue, Office of the Commissioner of Customs- Import, in violation of this Court s orders, invoking the bank guarantee submitted by the Petitioner without considering the Petitioner s representation. Further, it is the case of the petitioner that two weeks advance notice, in terms of the order extracted above, has not been given to invoke the bank guarantee - the enforcement of the invocation has been kept in abeyance by the Customs Authority. Mr. Vineet Malhotra, ld. Counsel appearing for DGFT submits that the representation is still pending and if a time bound schedule is fixed by this Court, the representation would be decided within the said period. The writ petition is disposed off.

  ---

• Corporate Laws

• 2022 (12) TMI 413
  Restoration of name of the Company - Seeking permission from this Tribunal, to file the Income Tax Returns, for the Assessment Years 2017-18, 2018-19, 2019-20 and 2020-21 - the documents were not filed before the Tribunal - HELD THAT:- In the instant case, according to the Appellant, because of slow down in the Real Estate market after completing its Real Estate Projects in 2014-15, the Appellant / Company, continued to do its incidental works and continue to generate Revenue and to look after the proper Real Estate Project, but lot of money was stuck in the hands of Appellant s Debtors , for which, the Appellant/ Company, initiated proceedings and eight criminal cases (under Section 138 of the N I Act, 1881) are pending (before the various Metropolitan Magistrate Courts), against its Debtors, (ranging from Rs.1,00,000/-, Rs.15,000/-, Rs.3,00,000/-, Rs.1,15,000/-, Rs.9,00,000/-, Rs.3,00,000/-, Rs.60,000/- and Rs.22,500/- respectively), and that apart, is to recover approximately Rs.18,12,500/- from its Debtors, in respect of sums. The Appellant / Company in the instant Appeal has come out with a plea that in the event of Revival of the Company and the Restoration of name of the Company, in the Register, maintained by the Respondent, it shall file all Outstanding Statutory Documents, Viz. the Financial Statements for the Financial Years from 2016-17, 2017-18 and the Financial Statement and Annual Return 2018-19, along with the Filing Fees and the Additional Fee, as applicable on the Date of Actual Filing, and the Certified copy of the Order of Tribunal, for the Restoration of name of the Company, to the Register, maintained by the Respondent. On a careful consideration of the contentions advanced on side of the Appellant / Company, this Tribunal, taking out of the fact that the Appellant / Company has initiated various proceedings before the Criminal Courts (8 in number) against its Debtors, and is to recover approximately Rs.18,12,500/- from its Debtors and bearing in mind of the prime fact, Right to seek the name of the Company (to be entered, in the Register of Companies), is not Lost or Extinguished, as long as 20 years had not expired and apart from these, the Appellant / Company, in the instant Appeal, had unequivocally averred that in the event of Revival of the Company and Restoration of the Company s name in the Register, maintained by the Respondent, it shall file all Statutory Documents Viz. Financial Statements from 2016-17, 2017-18 and Financial Statement and Annual Return for 2018-19 along with Filing Fees and the Additional Fees, etc., in all Justness, Fairness, Equitableness and Reasonableness, by exercise of sound discretion, deems it Prudent, Just and Proper, to Restore the name of the Appellant / Company, and that Laches / Omissions / Lapses (Failures), on the part of the Appellant / Company s management, in not submitting the filing of Annual Returns and Financial Statements, in time, can be saddled with a Levy of Costs, to prevent an Aberration of Justice, and to promote Substantial Cause of Justice, otherwise, it will cause Irreparable Harm / Hardship, Inconvenience and serious Prejudice to the Appellant / Company, as opined by this Tribunal. The impugned order is set aside - appeal allowed.

  ---

• 2022 (12) TMI 412
  Oppression and Mismanagement - Validity of Board Meeting - appointment of Respondents 2 to 5 as Additional Directors - legality of allotment of shares made on 04.03.2013, 22.04.2013 to the second, third, sixth seventh Respondents - cancellation of said allotment and rectification in the register of Members in order to restore the original Shareholding pattern - legality of removal of the Petitioners from the directorship of the Company under Section 284 of the Companies Act 1956 in the AGM - Section 421 of the Companies Act, 2013. HELD THAT:- This Tribunal having gone through the issues framed by the NCLT are of the view that they relate to the acts of Oppression and Mismanagement affecting the functioning of the Company and therefore have the jurisdiction to entertain and adjudicate these acts of Oppression and Mismanagement alleged to have been committed by the Appellants under Sections 397 398 of the Companies Act, 1956, (Sections 241 242 of the Companies Act, 2013). The issues raised by the Respondents are reflected in para 7 of the Company Petition 93/2019 and therefore it cannot be said that these issues were never pleaded or that these issues do not form part of the acts falling within the ambit of the definition of Oppression and Mismanagement as defined under Sections 241 242 of the Companies Act 2013. The pendency of the Criminal Case has no relevance to the adjudication by the NCLT regarding acts of Oppression and Mismanagement . NCLT has only based its observations that the Meeting had never taken place on the findings given by Truth Labs and the Government Forensic Laboratory, apart from other material on record . It appears from the record that Respondent No. 4 disputes his presence at the Board Meeting dated 01.10.2012. It is significant to mention that the letter dated 11.05.2015 addressed by the Bureau of Immigration, Ministry of Home Affairs, Government of India shows that the fourth Respondent had never attended any Board Meeting on 01.10.2012 as he was travelling abroad as on 01.10.2012. The NCLT has not based its opinion about the disputed Meeting on 01/10/2012, solely on the reports of Truth Labs filed before NCLT or that of Government Forensic Laboratory which is part of the record at the Criminal Court but rather on the other documents as well, including the relevant dates which substantiate the stand of the Respondents that the disputed Meeting never took place on 01.10.2012. Therefore, the contention of the Learned Counsel for the Appellant that the statements made under Section 164 is inadmissible and that the Criminal Case is still pending, is of no relevance here keeping in view the facts of the attendant case on hand This Tribunal is of the earnest view that NCLT had rightly referred to the consent letters of the third Appellant and the fourth Respondent both being backdated as the DIN Nos. were allotted by the Ministry of Corporate Affairs only on 26.12.2012 and 21.12.2012 respectively, together with all Reports of Truth Labs and Andhra Pradesh Foresnic Science Laboratories and also the evidence that the fourth Respondent was not even in India as on the date and has passed the Impugned Order, allowing the Company Petition. Appeal dismissed.

  ---

• PMLA

• 2022 (12) TMI 454
  Seeking enlargement on regular bail - Bribery - scheduled offences - conspiracy with other accused illegally intercepted MTNL lines at National Stock Exchange - right to privacy - HELD THAT:- ISEC is primarily involved in the business of cyber security consulting, which includes conducting audits, preparing policy design and evaluation of cyber security systems and processes - tapping phone lines or recording calls without consent is a breach of privacy. The right to privacy enshrined under Article 21 of the Constitution demands that phone calls not be recorded. Only with consent of the individuals concerned, can such activity be carried out otherwise it will amount to breach of the fundamental right to privacy. The Apex Court in K.S. Puttaswamy v. Union Of India [ 2017 (8) TMI 938 - SUPREME COURT ] holds right to privacy inheres in every individual as a natural right. It is inalienable and attached to every individual as a pre-condition for being able to exercise their freedom. In the present case, recording or tapping of phone lines by ISEC was not an action of the State. The facets of privacy include right of non-interference with the individual body, protection of personal information and autonomy over personal choices. Consent is essential when it comes to recording phone lines which aspect was disregarded by both NSE and ISEC. However, this aspect need not detain me any further as in the present application, I am only dealing with the bail application of the applicant and not the quashing petition - In the given case, NSE mandates to record conversations since SEBI has mandated brokers to execute trades only after maintaining inter alia telephonic recordings. The same is duly found in the SEBI circulars dated 26.09.2017 and 30.11.2017 which are detailed above. Hence, on one hand, the circulars mandate calls be recorded for the purposes of adjudication of disputes while on the other hand, it prosecutes for complying with the circulars. The act of tapping and recording phone calls without consent of the concerned person can be penalised under various sections of the Indian Telegraph Act and Indian Wireless Telegraphy Act but the offences under the said statutes are not scheduled offences. On the other hand, invocation of sec. 72 of the IT Act is only limited to breach of confidentiality and privacy, which offence has not been made out - prima facie the ingredients of the alleged offences are not made out in the present case. The offence under section 120-B IPC (which is also a PMLA scheduled offence) is also not made out in so far as the criminal intent i.e., agreement to do an illegal act as defined under sec.120-A IPC is not established. NSE has been involved in call-recording since 1997 through other vendors such as M/s Comtel, prior to ISEC being brought into the picture to analyse recorded calls. Since call recording was being done prior to the arrival of ISEC, there is no criminal conspiracy entered into between ISEC and NSE with the intention of committing an illegal act, namely, call recording. Thus, the element of criminal intent is not made out in the present case and no offence under section 120 B read with 409 and 420 IPC is established. Since none of the ingredients of the scheduled offences viz., Section 72 IT Act, Section 120B r/w 409 and 420 IPC, Section 13(2) read with 13(1)(d) PC Act are made out, there is no occasion to allege acquisition or retention of proceeds of crime , which under Section 2(u) of PMLA is defined to mean proceeds arising out of scheduled offences. - the Applicant cannot be held to have derived or obtained property as a result of criminal activity relating to or in relation to a scheduled offence. On the basis of the material collected and referenced by the ED, the ED has not substantiated that the Applicant has derived or obtained any property as a result of a scheduled offence or indulged in any activity or process relating to that property - according to section 45 PMLA, prima facie, there are reasonable grounds to believe that the Applicant is not guilty of the offence and he is not likely to commit any offence while on bail. the application is allowed and the applicant is granted bail subject to conditions imposed.

  ---

• Central Excise

• 2022 (12) TMI 453
  Valuation - sale made partly to related party and partly to independent party - incorrect method of valuing related party transactions or not - SCN issued by the Revenue noted that the CEVR did not contain any guidelines on the methodology to be adopted for discovering the assessable value of goods, when sales are made partially to both independent parties and related parties - extended period of limitation. HELD THAT:- The CBEC Circular of 01.07.2002 is binding on the Revenue. If the show cause notice issued by the Revenue is found to be contrary to the Circular, it would prima facie result in abrogation of the uniformity and consistency which is strongly emphasized upon in RANADEY MICRONUTRIENTS VERSUS COLLECTOR OF CENTRAL EXCISE [ 1996 (9) TMI 124 - SUPREME COURT] . It goes without saying that the Revenue s stance against its own circular can potentially lead to a chaotic situation where, with one hand, the Revenue would lay down instructions on how to interpret the relevant statutes and rules, and with the other hand, it would promptly disobey those very directions. Maintaining predictability in taxation law is of utmost importance and, for this reason, the Court should not accept an argument by the Revenue that waters down its own Circular as this would fall squarely within the contours of the prohibition outlined in PAPER PRODUCTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [ 1999 (8) TMI 70 - SUPREME COURT] . The presumption under Section 4(1)(a) is that the sale from an Assessee to an independent party is the proper valuation to be used for determining excise duty. Conversely, a rebuttable presumption can be drawn regarding related party transactions and the value at which goods are sold in such situations. Rule 9 would be sufficient to resolve this issue when sales are made only to related entities, but where both independent and related parties are involved, we must refer to other means. In this context, Rule 11 obliges the Revenue to use reasonable means consistent with the principles under Section 4(1) of the CEA to arrive at the appropriate value - the show cause notice and the order of the Commissioner proceed along the basis that Section 4(1)(b) is applicable as the Assessee and MIL and MSL are related parties. Section 4(1)(a) was deemed to be inapplicable as it addresses situations where the parties are not related. Extended period of limitation - HELD THAT:- The justification of extending the period of limitation depends upon whether the Respondent-Assessee has suppressed facts and failed to provide accurate information regarding its sales to the Revenue. To this extent, there is a finding of fact against the Assessee Levy of interest and penalty - HELD THAT:- since the Revenue itself appeared to be unclear on the correct method of valuation of the goods, it is not appropriate to saddle the Respondent with additional liability, namely, other than the excise duty. The demand made by the Appellant is confirmed, we do not approve the levy of interest and penalties upon the Respondent, and direct that these amounts be reduced from the total recoverable amount from the Assessee. Appeal disposed off.

  ---

• 2022 (12) TMI 452
  Clandestine manufacture and or removal - Goa brand gutkha - third party statements and evidences - admissible evidences or not - gross violation of principles of natural justice - HELD THAT:- The whole case of Revenue is made on the basis of the third party statements and some records and a note book recovered from the premises of M/s. G.M. Carriers, Bhiwandi. The entries in the said note book (private documents) are purported to have been made by one Mr. Javed Gamir Sheikh, an employee of M/s.G.M. Carriers, Bhiwandi, as stated by Mr. Javed Gamir Sheikh in his statement. He had deposed that these contain details of goods received from Jodhpur, both accounted and unaccounted. Mr. Javed Gamir Sheikh was not produced for cross examination by the Revenue, statement of whom was relied upon, who was the person, who claimed to have made the entries in abovementioned resumed note book and such entries were the basis for quantifying and raising the demand against the appellant. The partner of M/s. G.M. Carriers, Bhiwandi, Mr. A.A. Patni, in his cross examination has denied the maintenance of any such note book by them and has further contradicted the statement of Mr. Javed Gamir Sheikh, their employee. Thus, the said note book is not a reliable piece of evidence and further, the statement of Mr. Javed Gamir Sheikh is not an admissible evidence, as he was not produced for cross examination in violation of Section 9 D of the Act. There are no evidence of clandestine manufacture and removal of Goa brand gutkha has been found. The transporters of the appellant, M/s. KGN Transporter has not been investigated, at any stage. Further, admittedly, only minor /negligible variations have been found in the stock of the raw materials and finished goods in the course of inspection at the factory at Jodhpur. Admittedly, the documents resumed from Mr. Suresh B. Jajra are not related to this appellant but are related to other manufacturer like M/s. Royal Marwad, Ahmedabad, M/s. Meenakshi Foods Pvt. Ltd. and others. Such documents have been erroneously relied upon by the Revenue in demanding the duty under dispute. Mr. Suresh Jhajra has not supported the allegation of the Revenue during cross examination. The statements of the witnesses, which were relied upon by the Revenue have not stood the test of cross examination. Thus, the whole demand has been made on assumptions and presumptions. Appeal allowed - decided in favor of appellant.

  ---

• 2022 (12) TMI 451
  Area based exemption - benefit of cum-duty value - whether the appellant is entitled to Area based exemption under exemption Notification No. 49/2003-CE dated 10.06.2003 r/w subsequent Notification No. 50/2003-CE (as amended)? - penalty u/s 11AC of CEA - HELD THAT:- The appellant is entitled to the benefit of recalculation of demand on cum-duty basis in accordance with explanation to Section 4(1)(b) of the Central Excise Act. Admittedly appellant have not collected Central Excise duty in addition to the sale price, in view of their claim of Area based exemption. Thus, the appellant shall be entitled to benefit of calculation of duty on cum-duty-price. The appellant shall be entitled to the benefit of Cenvat credit on inputs and input services and the demand payable shall be re-calculated accordingly, in view of the clear mandate of the Central Excise Act r/w Cenvat Credit Rules - the appellant shall be entitled to SSI benefit for the period April, 2015 to December 2015, subject to compliance of other conditions under the said notification, if any. Penalty under Section 11AC - HELD THAT:- There is no case of mis-representation, misstatement, suppression or fraud on the part of the appellant. The appellant were under bona fide belief in claiming the Area based exemption from Central Excise duty, as several other manufacturers located in the same locality, where also extended the benefit of Area based exemption. Under such undisputed facts, the penalty imposed under Section 11AC both on the appellant-company and its Managing Director Mr. Akhilesh Pratap Singh is set aside. The appeals are partly allowed and the impugned orders are modified to the extent of allowing cum-duty benefit and exemption available to Small Scale Industries to the extent admissible. CENVAT Credit will be admissible subject to verification by the officers. Penalties imposed on the appellant manufacturer and personal penalty imposed on Shri Akhilesh Pratap, Managing Director are set aside.

  ---

• 2022 (12) TMI 450
  Valuation - department took a view that the appellant was selling sponge iron, M.S. billets and silicon manganese to its related parties at prices lower than the prices at which it sold them to independent buyers - Suppression of facts or not - extended period of limitation - HELD THAT:- Revenue s submission that since the appellant is working under self assessment, any deficiency in payment of duty would amount to suppression of facts and extended period of limitation can be invoked is not correct because as per Excise Rules, all assessees work under self assessment but Section 11A still provides for normal period of limitation and extended period of limitation. If the argument of the learned authorised representative is accepted, there cannot be any normal period of limitation in any case because everyone is operating under self assessment and the provision for normal period of limitation would be rendered otiose. The period of dispute in the present case is October 2010 to July 2015 (i.e., before and after 2013 amendment to the Valuation Rules) but only the pre-2013 Valuation Rules were invoked in the SCN, in the order-in-original and in the impugned order. The case of the Revenue is that the appellant sold goods partly to Vandana and Shivali and partly to other independent buyers and therefore, Valuation Rules 9 and 10 do not apply and hence the residual provision - Valuation Rule 11 applies. The Valuation Rules as applicable for the period post-2013 were neither invoked nor discussed. Valuation Rule 4 deals with cases where goods are sold but not the time of removal. Valuation Rule 7 deals with cases where the goods are sold but not at the place of removal. It is neither alleged nor established that the goods were not sold at the time of removal or at the place of removal in this case. We are at a loss to understand as to why these Rules were invoked in the SCN because there is no dispute regarding the place of removal or time of removal - the SCN has not only NOT invoked the Valuation Rules relevant to the period post 2013, but does not also explain why Valuation Rules 11 read with Rules 4 7 were invoked even for the period pre-2013. The scheme under the law is that although the duty is levied on manufacture of goods, it becomes payable only when they are removed and it must be paid based on self-assessment by the fifth or sixth of the following month. The assessee also has to file returns. Needless to say that the assessee may make mistakes in self-assessment and the check against this has been provided in the form of scrutiny of the returns by the officers and the officer scrutinising the returns can call for any documents and records from the assessee which it is bound to provide - the officer is mandated under the Rules to do what the audit has done much later. Had the officer scrutinised the returns as was mandated and called for any records, the alleged mistakes which were pointed out by the audit would have come to light and a SCN could have been issued under section 11A within the normal period of limitation. While the assessee was required to self assess duty and file ER-1 return, a check against such self-assessment was the scrutiny which the officers were mandated to do by Rules. Audit is the next level of check against the scrutiny. If the audit points out some wrong assessment which was not pointed out by the officer scrutinising the ER-1 return, the fault lies at the doorstep of the officer. It does not, by itself, establish that the assessee had suppressed any facts. The impugned order cannot be sustained - Appeal allowed.

  ---