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TMI Tax Updates - e-Newsletter
December 2, 2023
Case Laws in this Newsletter:
Income Tax
Customs
Securities / SEBI
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Credit of TDS if deductor not deposited TDS - Act does not seem to cast a burden on the deductee/payee with regard to the deposit of money, which is retained as tax, by the payer i.e., the deductor. Therefore, insofar as the deductee/payee is concerned, once the payer/deductor, who acts as an agent of the Central Government, has retained money towards tax, credit for the same cannot be denied, having regard to the consequences and the modes available for recovering the said amount from the payer/deductor. - HC
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Validity of order passed by the Tribunal (ITAT) - Non issuance or service of notice to the appellant for hearing - Mere dispatch of a notice is not sufficient. To hold that notice came to the knowledge of the petitioner, the notice should also have been received by the person/assessee to whom it was addressed. There are no records to show the notice of intimation was received by the petitioner. - HC
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Addition u/s 68 - capital introduced by the partners - disallowed the interest paid to the partners - if at all, if the respondent-Department was not satisfied with the explanation, it was for them to have got it verified from the partners. Rather than still pursuing the matter before the appellant’s partnership firm, which is otherwise impermissible. - Order of ITAT against the assessee quashed - HC
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Addition for no TDS on Deemed dividend u/s 2(22)(e) - whether the amounts given the directors are for the business purpose? - the ledger account of the said directors does not reflect any transactions or details where from it can be perceived that the transactions are in the nature of normal business transactions, much less the said transactions were not substantiated with any documentary evidence substantiating that these pertains to or have any nexus with the business of the assessee company - However, no additions can be made u/s 40(a)(ia) on deemed dividend for no TDS - AT
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Addition u/s. 69A in the light of cash seized - application of higher rate of tax u/s 115BBE - Once the AO has accepted the returned income calculated on the basis of total turnover for the year, the same turnover cannot be treated as unexplained money u/s. 69A . - AT
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Disallowance of 1/5th of vehicle expenses - when the vehicles were used by the directors 'even if they were personally used by the directors', the vehicles were personally used by the company, because a limited company by its very nature cannot have any 'personal use'. The limited company is an inanimate person and there cannot be anything personal about such an entity. - Additions deleted - AT
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Re-determinination of value of opening stock - Addition of excess stock found during the course of survey - Once additions is made towards excess stock found during the course of survey as income of the assessee, the said excess stock should be considered as part of closing stock of the assessee for the impugned assessment year and should be carry forward as opening stock for subsequent assessment years. - AT
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Addition of non-genuine and merely accommodation entries - There could be several reasons for arranging bogus accommodation entries towards bogus purchases, which could be to suppress profits and evade taxes, or to arrange for the invoices at higher value to reflect purchases in the books of accounts etc. so on and so forth. - It will be fair that profit element embedded in the aforesaid purchase @12.5% be brought to tax - AT
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Penalty u/s. 271A and 271B - non-maintenance of books of account and not getting the books of accounts audited u/s. 44AB recpectivily - once the penalty is levied for non-maintenance of book of accounts, there cannot be further default for not getting the same audited as required u/s 44AB of the Act and therefore, the penalty levied u/s 271B is not justified and thus vacated. - AT
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Bogus LTCG - addition u/s 68 - income arising from sale of shares - Facts as emanating from material on record demonstrate that the conduct of the Assessee in the present case does not fit into the ‘modus operandi’ as stated in the report of Investigation Wing, Kolkata. - addition made by AO u/s 68 of the Act cannot be sustained. - AT
Customs
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Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver - Notification
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Practice of assessment of imports of Petroleum products under CTH 2710-Reg - Trade Notice
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Classification of imported goods - Canned Pineapple Slices - the classification of the canned pineapple slices would have to be decided as per the HSN explanatory notes and would therefore be appropriately classifiable under CTH 0804 only. - Demand confirmed for the normal period only - AT
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Classification of imported goods - G-24 PL 001 GSM Chipset Wavecom (modem) - Since programmable controllers are specifically covered under Chapter Heading 8537, they are rightly classifiable under this Heading and not under Chapter Heading 8517 as part of modem - AT
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Valuation of imported goods - Aluminium Scrap - rejection of transaction value - procedure contemplated under Rule 12 of the valuation rules not followed - Commissioner of Customs (Appeals), while allowing the appeal of the importer, set aside the re-assessment of goods at enhanced value and restored the self-assessment at the declared value - when the importer has voluntarily accepted the enhanced value without any protest then in that case it is not incumbent upon the department to pass a speaking order. - AT
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Undervaluation of the imported goods - Rejection of transaction value - Having rejected the declared assessable value under Rule 12, the department sought to re-determine it under Rule 5 based on the contemporaneous value of similar goods imported into the country. - To determine the value of the contemporaneous imports, the relevant data was extracted from the NIDB. - Importer has also accepted the same - Demand confirmed - AT
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Levy of penalty on the Valuer and other persons - While imposing the penalties in this manner adjudicating authority has even failed to examine the legal provisions and the case law on the subject. Not a single word is recorded in the impugned order as to why penalty is imposable under Section 112 (a) and/ or section 112 (b) in the impugned order. This clearly shows that the impugned order has been passed in haste - Matter restored back for re-consideration - AT
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Confiscation of goods - capital goods imported as per EPCG licenses - non-fulfilment of Export obligation - When there is no specific mention of such event in the decision of EPCG Committee, the extension has to be construed as intended in the decision itself, which is nothing but extension of time by two years to fulfil their export obligation. - - AT
SEBI
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Extension of timeline for implementation of provisions of circular SEBI/HO/OIAE/IGRD/CIR/P/2023/156 dated September 20, 2023 on Redressal of investor grievances through the SEBI Complaint Redressal (SCORES) Platform and linking it to Online Dispute Resolution platform - Circular
Service Tax
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Classification of service - Activity of chartering of its Aircraft and is charging the customers for the same on hourly basis referred to as flying hours - The services in question are held to be ‘Supply of Tangible Goods Services’. However Show Cause Notice is held as time barred. Entire demand gets hit by limitation. - AT
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Demand of Service tax on unbilled revenue - Unbilled revenue represents amounts attributable to services already performed, which have accrued but which have not fallen due for payment or invoicing in terms of the agreement between the parties. - Such amount has not yet become recoverable from the customer of the appellant. - Unbilled revenue cannot be brought to tax - AT
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Refund of excess payment of service tax - Period of limitation - the refund claims filed beyond statutory period of limitation as prescribed by the statute (Section 11B of Central Excise Act, 1944 or Section 27 of the Customs Act, 1962) are barred by limitation. - AT
Central Excise
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Refund of excess amount of Excise Duty paid - transaction value - the debit notes have been raised subsequent to sale. Therefore, the higher revision of price not agreed by the buyer cannot form part of transaction value. The debit notes do not form part of transaction value. The excise duty paid is therefore excess. - Refund of excess amount allowed - AT
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Input Tax Credit - commission paid to the foreign agent - High Court has observed some discrepancy in the order of tribunal - The High Court ought to have then remanded the matter(s) to CESTAT for a fresh consideration by giving an opportunity to the appellant to place on record the necessary documents including the agreement entered into by the assessee with the concerned agents, the relevant invoices etc. - matters are remanded to CESTAT for a fresh consideration. - SC
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Entitlement to interest for the period starting from the date of deposit till its realization - The impugned order violates principle of judicial discipline and is liable to be set-aside on this ground - the Assistant Commissioner rightly sanctioned the interest by following order dated 03.01.2019 of this Tribunal - AT
Case Laws:
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Income Tax
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2023 (12) TMI 37
Substantial questions of law sought to be raised were not formulated by the High Court - Interest disallowance on account of interest bearing funds diverted to associate companies and addition of difference between stock as per the books of account and as per the stock statements submitted to the Bank - Additions were deleted by the ITAT - HELD THAT:- High Court to consider the submissions to be made by the respective parties and to raise the above substantial questions of law if they so arise. It is needless to observe that on hearing the learned counsel for the respective parties, the High Court is also empowered to raise any other substantial question of law which may arise in the matter(s). The aforesaid questions are stated to be substantial questions of law by learned counsel for the appellant(s). It is needless to observe that the respondent(s) is at liberty to contend that the aforesaid questions are not substantial questions of law and therefore do not require to be entertained in this appeal.
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2023 (12) TMI 36
Revision u/s 263 - No enquiry v/s inadequate enquiry - As per CIT AO had failed to enquire about the unexplained cash deposit found credited in the respondent s/assessee s bank account - HELD THAT:- PCIT, in the instant case, while concluding that the cash sale transactions, according to him, had not been duly verified, chose not to carry out any enquiry on his own before cancelling the original assessment order and directing a fresh assessment to be made in the matter. The PCIT, in our view, wrongly equated a case of no enquiry with what he construed as inadequate enquiry . Assessee had offered an explanation with regard to cash deposits. In the course of the assessment proceedings, the AO had accepted the explanation given by the respondent/assessee that the source of the cash deposits was cash sales. Assessee had also explained why several invoices were issued on the same date bearing the same amount. It was the respondent/assessee's submission that since it was in the business of selling gold, the quantity sold often did not vary, and therefore, the amounts shown in the invoice were also similar. This was a plausible explanation which found favour with the AO. The respondent/assessee, in support of the plea that the cash sales were the source of the deposits found credited in the subject bank account, had concededly submitted relevant material, which the AO examined in the course of the assessment proceedings. AO, having been satisfied with the explanation given, chose not to make any addition with regard to the cash deposit. PCIT on the other hand, without making any enquiry at his end, chose to cancel the assessment order with a direction to pass a fresh assessment order. PCIT had to reach a conclusion in the fact situation obtaining in the instant case, that the assessment order was erroneous by conducting an enquiry before passing an order u/s 263. PCIT, in our opinion, took the easy route by cancelling the impugned order and remanding the matter for a fresh assessment to the AO. While exercising powers under Section 263 of the Act, the concerned officer is entitled to examine the entire record, which includes not only the assessment order but also the notices issued, queries raised, responses received, and the material/evidence placed on record by the assessee. In a nutshell, the record should disclose whether the AO had applied his mind to various facets that cropped up during the assessment proceedings. In other words, furnishing reasons in the assessment order is not the sine qua non of a sustainable assessment order. Courts have repeatedly stated that the AO is not required to give detailed reasons for accepting or not accepting a particular transaction. The record should reflect whether the AO applied his mind to the transaction in issue [See CIT v. Ashish Rajpal [ 2009 (5) TMI 18 - DELHI HIGH COURT ] Tribunal set aside the PCIT s order correctly - Decided in favour of assessee.
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2023 (12) TMI 35
Disallowance u/s 14A r.w.r. 8D - administrative expenses that would possibly have been incurred to earn exempt income - Tribunal ruled in favour of the respondent/assessee, and thus, deleted the entire addition made by the AO as assessee had sufficient interest-free funds available with it to make investments in the AY in issue - HELD THAT:- Reasons given by the Tribunal in deleting the disallowance are unimpeachable. The facts, as noted above, are not in dispute. Concededly, the interest-free funds available to the respondent/assessee were more than the investments made in the AY in issue. Furthermore, as noted by the Tribunal, the AO had not recorded his dissatisfaction [having regard the accounts of the respondent/assessee] before discarding the suo motu disallowance made by the respondent/assessee and triggering disallowance qua the respondent/assessee. This issue is no longer res integra insofar as this court is concerned. [See Coforge Ltd. case [ 2021 (7) TMI 346 - DELHI HIGH COURT] ] Deletion of Non-refundable golf club membership fee - Before concluding, we may also note that the record shows that a coordinate bench of this court [ 2019 (1) TMI 602 - DELHI HIGH COURT] , had ruled that insofar as the deletion on account of non-refundable golf club membership fee, was concerned, the said issue was covered against the appellant/revenue by the decision [ 2012 (3) TMI 617 - DELHI HIGH COURT] , in the case concerning DLF Commercial Ltd. The court also noted that the Special Leave Petition (SLP) [ 2013 (3) TMI 792 - SC ORDER] filed against the said decision had been dismissed.
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2023 (12) TMI 34
Credit of TDS if deductor failed to deposit the TDS - whether the assessee is entitled to credit concerning the tax which had been deducted with respect to the transaction entered into by him with Koutons Group? - Bar against direct demand on assessee u/s 205 - as per revenue credit for the said amount, sought by assessee, could not be given since the deductor, i.e., Koutons Group had not deposited the said amount with the appellant/revenue - HELD THAT:- As SANJAY SUDAN VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX ANR. [ 2023 (2) TMI 1079 - DELHI HIGH COURT] Section 205 read with instruction dated 01.06.2015, clearly point in the direction that the deductee/assessee cannot be called upon to pay tax, which has been deducted at source from his income. The plain language of Section 205 of the Act points in this direction The adjustment of demand against future refund amounts to an indirect recovery of tax, which is barred under Section 205 of the Act.The fact that the instruction merely provides that no coercive measure will be taken against the assessee, in our view, falls short of what is put in place by the legislature via Section 205 of the Act. Therefore, in our view, the petitioner is right inasmuch as neither can the demand qua the tax withheld by the deductor/employer be recovered from him, nor can the same amount be adjusted against the future refund, if any, payable to him. Act does not seem to cast a burden on the deductee/payee with regard to the deposit of money, which is retained as tax, by the payer i.e., the deductor. Therefore, insofar as the deductee/payee is concerned, once the payer/deductor, who acts as an agent of the Central Government, has retained money towards tax, credit for the same cannot be denied, having regard to the consequences and the modes available for recovering the said amount from the payer/deductor. Deductors are individuals who, concededly, after retaining the tax deducted at source did not fully deposit the same, as noted above, with the Central Government. Upon the respondent/assessee becoming aware of this fact, a police complaint was lodged, which was brought to the notice of the appellant/revenue. Despite this aspect being brought to the notice of the appellant/revenue, no steps were taken either under the provisions of the Act or under the common law for recovery or even under the extant statute(s) for bringing deductors to book in accordance with the law. In our opinion, the argument advanced by revenue that the amount deducted towards tax at source will not be given credit because the deductor has chosen not to deposit the amount with the Central Government is erroneous for another reason, which is that the nature of the amount retained by the deductor continues to remain as tax . Act has, thus, provided a regime as to how tax is required to be collected against certain payments. Once the deductee adheres to the statutory regime and allows the deductor to retain money towards tax, the nature of the amount cannot change and, therefore, the deductee, in our view, would be entitled to the credit of the amount retained by the deductor towards tax. Any other view would result in a situation where even though the assessee would have grossed up his income [by including the tax deducted at source] and offered the same for taxation, he would be denied the benefit of having the resultant tax demand adjusted against tax deducted at source by the payer. This handicap the assessee/deductee would suffer only because the deductor, who acts as the agent of the Central Government, chooses not to deposit the amount retained towards tax. Appeal dismissed - no substantial question of law arises.
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2023 (12) TMI 33
Validity of order passed by the Tribunal (ITAT) - Non issuance or service of notice to the appellant for hearing - Date and Place for hearing of appeal to be notified - as argued procedure under Rule 19 of ITAT Rules, 1963 regarding listing of the Miscellaneous Petition in the cause list had gone un-noticed and therefore, the petitioner was unaware of the listing of the miscellaneous petition - HELD THAT:- Communication of information is deemed to be made by any act or omission of the party by which he intends to communicate such proposal, which has the effect of communicating it. Therefore, communication/intimation is complete when it comes to the knowledge of the person to whom it is made. Mere posting of the date of hearing of the Miscellaneous Petition in the Cause List is not sufficient. A proper communication has to be sent to the parties regarding the date of hearing of the Miscellaneous Petition, once an appeal is disposed of. As per Sub-Clause 2 to Rule 34A of the Income Tax (Appellate Tribunal) Rules, 1963, procedure for filing appeal under the Rules will apply mutatis mutandis to application u/s 254(2) of the Income Tax Act, 1961. Sub- Clause 3 to Rule 34A of the Income Tax (Appellate Tribunal) Rules, 1963 states that the Tribunal shall dispose the application after giving both the parties to the application a reasonable opportunity of being heard. Rule 19(1) of the Income Tax (Appellate Tribunal) Rules, 1963, contemplates serving of a copy of the Miscellaneous Petition on the Assessee or on the counsel or authorized persons respectively. Tribunal has to notify to the parties specifying the date and place of hearing of the appeal and send a copy of the memorandum of appeal to the respondent. Thus, application under Section 254(2) of the Income Tax Act, 1961, has to be communicated to the petitioner. In this case, it appears that the copy of the petition has not been sent to the petitioner. Thus, mere dispatch of a notice is not sufficient. To hold that notice came to the knowledge of the petitioner, the notice should also have been received by the person/assessee to whom it was addressed. There are no records to show the notice of intimation was received by the petitioner. The impugned Order passed by the Income Tax Appellate Tribunal is set aside and the case is remitted back to the Income Tax Appellate Tribunal, to pass a fresh order after hearing the petitioner.
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2023 (12) TMI 32
Addition u/s 68 - capital introduced by the partners - AO subsequently disallowed the interest paid to the partners on the capital introduced by them - burden of proof - assessment in hands of partners or firm? - As argued by appellant, the Hon ble ITAT has erroneously mis-interpreted the provisions of Section 68 and have also held taxing the credits by the partners in the hands of the assessee firm - Hon ble ITAT had reversed the order of the CIT (Appeals) holding that the appellant has not been able to provide sufficient material to establish the source of income of the partners who had invested in the appellant s partnership firm - HELD THAT:- If in a proceeding u/s 68 of the Act, the assessee has been able to explain the sources of income, which in the instant case, the appellant had been stating that the capital investment made by the partners of the said firm is sufficient to meet the requirement under Section 68 of the Act. Thereafter, if at all, if the respondent-Department was not satisfied with the explanation, it was for them to have got it verified from the partners. Rather than still pursuing the matter before the appellant s partnership firm, which is otherwise impermissible. In the instant appellant having said that the capital investment is that made by the partners. Applying the aforesaid judicial precedents of M. Venkateshwar Rao [ 2015 (3) TMI 153 - ANDHRA PRADESH HIGH COURT] , M/s. Nova Medicare [ 2023 (3) TMI 218 - TELANGANA HIGH COURT] and Lovely Exports (P) LTD [ 2008 (1) TMI 575 - SC ORDER] the burden now shifts upon the respondent-Department to get it counter verified from the partners from their books of accounts ascertaining whether such investments have been made or not. In the absence of such an enquiry/verification from the partners by the respondent-Department, the order of the Assessing Officer, as also the stand taken by the Hon ble ITAT would not be sustainable and the same deserves to be and is accordingly set aside/quashed. The order passed by the CIT (Appeals) stands affirmed. Decided in favour of assessee.
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2023 (12) TMI 31
Addition on account of provision for constructions expenses - addition made by the AO by disallowing the provision made under the head construction expenses on account of renovation job work - HELD THAT:- Admittedly, the fact that the provision for construction expenses was made in the succeeding year i.e., in FY 2014-15, on 31/03/2015, whereas the same was misread by the Ld. AO that the provision was made on 31/03/2014. This fact is evident from the ledger account of provision for construction expenses, which the Ld. CIT(A) has rightly read into and, therefore, has deleted the addition made by the AO against the actual facts on record. Under such facts and circumstances, we do not observe any infirmity in the order of Ld. CIT(A), consequently ground no. 1 of the revenue dismissed. Non-deduction of tax on deemed dividend u/s 2(22)(e) - HELD THAT:- Contentions of the assessee w.r.t. applicability of section 2(22)(e) on the amounts advanced or loans given to the directors of the company holding more than 10% of share capital in the company being the person who is beneficial owner of shares holding not less than 10% of the voting power, that in the present case the amounts given the directors are for the business purpose under the current account, therefore, the same cannot be categorized as loan moreover, the account in case of director which has been squared up in the year under consideration therefore provisions of sec. 2(22)(e) are not applicable, cannot be amicably subscribed to, since the ledger account of the said directors does not reflect any transactions or details where from it can be perceived that the transactions are in the nature of normal business transactions, much less the said transactions were not substantiated with any documentary evidence substantiating that these pertains to or have any nexus with the business of the assessee company, therefore, we are unable to accept such contentions of the assessee, which has been approved by the Ld. CIT(A). Whether provisions of Sec. 40(ai)(a) cannot be invoked in absence of any expenditure ? - As decided in Dedicated Healthcare Services (TPA) India ltd. [ 2018 (10) TMI 191 - BOMBAY HIGH COURT] , has held that if there is no claim of expenses by the assessee which is covered by the provisions of sec. 194J, disallowances u/s 40(a)(ia) is not attracted. Similarly, in the case of CIT Vs. Health India TPA services Pvt. Ltd. [ 2014 (2) TMI 1153 - ITAT MUMBAI] held that disallowance u/s 40(a)(ia) would not arise where assessee was only facilitating the payments and did not claim such expenditure in its P L account. Such contention raised by the assessee is worth consideration in the present case, having support of the judgments referred to supra, though the same has been dealt with in the context of sec. 194J, but the analogy drawn therein shall prevail and can be adopted for sec. 194 also, therefore, disallowance u/s 40(a)(ia) would not arise where assessee has not claim such expenditure in its P L account, thus, addition made by the AO exercising the provisions of section 40(a)(ia) was beyond the mandate of the law and is liable to be deleted. Consequently, ground no. 2 of the revenue is dismissed. Applicability of provisions of section 40(a)(ia) on deemed dividend u/s 2(22)(e) is applicable w.e.f. 01/04/2015 i.e., from AY 2015-16, which is evident from the amendment in section 40(a)(ia) wherein word any sum , has been substituted by removing words any interest, commission or brokerage, rent, royalty, fee for professional services or fee for technical services , accordingly, applicability of sec 40(a)(ia) on deemed dividend u/s 2(22)(e) which was not in the list of expenditure incurred and claimed by the assessee, but included by widening the scope of section by placing word any sum , shall be applicable under the amended provision effective from 01/04/2015. On the basis of literal interpretation of the aforesaid amendment, it can be inferred that the provisions of section 40(a)(ia) cannot be invoked on deemed dividend u/s 2(22)(e) for the period before 01/04/2015. On this argument also the disallowance made u/s 40(a)(ia) in the AY 2014-15, cannot sustain. Resultantly ground 2 of the revenue s appeal stands rejected. Nature of loss - transactions of F O carried - Whether commodity transactions claimed being speculative loss and not loss from business activity of the assessee? - HELD THAT:- According to the provisions of sec 43(5)(e), an eligible transaction in respect of trading in commodity derivatives carried out in a [recognized stock exchange] [which is chargeable to commodity transaction tax under chapter 7 of the Finance Act, 2013 (17 of 2013),]] shall not be deemed to be speculative transaction. On perusal of copies of contract note issued by Kayan Securities Pvt Ltd, furnished before us, it is apparent that the transactions carried out are through recognized stock exchange, tax on transaction charges are also charged, therefore, the same, as rightly observed by the Ld. CIT(A) are in the nature of business transactions which shall not deemed to be speculative transactions as per provisions of section 43(5)(e). Our observations are duly supported with the various decisions relied upon by the AR, referred to supra. Respectfully following the settled position of law, we are of the considered opinion that the decision of Ld. CIT(A) holding the transaction as business transaction is on right appreciation of facts and the law, which in absence of any adverse finding against the assessee by the AO or any cogent material or contrary decision to dislodge the claim of the assessee, are qualities to be concurred with, and we do so. Consequently, ground of the revenue is rejected. Method of accounting - Addition adopting AS-7 i.e., Percentage Completion Method - HELD THAT:- There was no deviation in method of accounting of the assessee company since the inception of the project and that the revenue had also accepted Project Completion Method and Profits shown by the assessee for the earlier AY 2015-16. It is held that the Project Completion Method followed by the appellant company cannot be termed as erroneous, since over the period of project life both the methods will yield same result and, therefore, revenue neutral. Reliance was placed in the case of Varun Developers [ 2021 (2) TMI 997 - KARNATAKA HIGH COURT] Based on such observations Ld. CIT(A) has concluded that contention of the assessee company qua adopting the Project Completion Method is valid as per AS-7 of the ICAI. In backdrop of aforesaid observations in consonance with the verdict granted under jurisprudence accorded by the Hon ble Apex Court in the case of Bilahari Investment P. Ltd. [ 2008 (2) TMI 23 - SUPREME COURT] , Ld. CIT(A) has rightly decided the issue in favour of assessee, which in our considered opinion is not subject to any interference, consequently the same is approved. - Decided against revenue. Addition u/s 68 - AO did not find the behaviour of loan provider as creditworthy - HELD THAT:- The assessee has submitted all the required information also has requested the AO to summon the loan creditor so as to examine the facts for satisfaction of the Ld. AO that the impugned transactions are genuine and not liable to be disallowed under the provisions of section 68. Ld. AO reached to a premature opinion, without pursuing the inquiries, on the basis of certain case laws which are distinguishable on the facts with the case of the assessee. We observed that the assessee has discharged the obligation lay upon it when the preliminary documents were submitted before the Assessing Officer. In backdrop of such observations respectfully following the judgments referred to supra the addition made by invoking provisions of section 68 based on assumptions and presumptions by the Ld. AO is liable to be deleted and the decision of Ld. CIT(A) found be maintained. Ground of the revenue is dismissed.
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2023 (12) TMI 30
Addition u/s. 69A in the light of cash seized - estimation of sales of the assessee - assessee is trading in gold and silver from of jewellery, ornaments, utensils, bullion, etc. - application of section 115BBE - AO has computed the turnover incorporating the cash found and seized - HELD THAT:- We note that cash was seized by the Police Officer and statements were recorded by the ADIT(Inv.), Gulbarga in which the assessee stated that cash found was out of his own savings, family savings and loans. AO has extracted some of the sales bills and noted that in some of the bills name of purchaser is not noted, except the credit sales and in some bills, the date has not been mentioned. The AO has not pointed out any defect in the books of accounts of assessee except in some sales bills. AO has computed the turnover incorporating the cash found and seized AO has accepted the business income reported by the assessee on entire sales and on the other hand, out of sales reported by the assessee, the AO has considered sales as trading sales only on the basis of estimation made by him and the rest of the amount has been considered as unexplained money u/s. 69A of the Act, without rejecting the books of account of the assessee, which is not correct. Once the AO has accepted the returned income calculated on the basis of total turnover for the year, the same turnover cannot be treated as unexplained money u/s. 69A . It is interesting to note that the AO has also not applied section 145(3) of the Act. Accordingly, we hold that the entire sales reported by the assessee is the business sales of the assessee relying on the decision of Mahesh Kumar Gupta [ 2023 (3) TMI 1148 - ITAT JAIPUR] Therefore, section 69A will not apply in this case. Since we have held that entire sales is business sales of the assessee, therefore the other grounds raised in appeal and CO are not required to be adjudicated.
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2023 (12) TMI 29
Addition by disallowing sundry creditor - despite giving various show cause notices, no detail is furnished - CIT(A) granted relief to the assessee on considering the additional evidence - HELD THAT:- AO in his remand report has not disputed about the transaction rather accepted that seller and purchaser party both responded. Assessing Officer in second remand report clearly submitted that they have submitted bank statement (shown some payment in subsequent year) . We also find that neither the sale of assessee was disputed nor the purchase transaction was disputed, the Assessing Officer merely disputed the outstanding balance of sundry creditors. AO has not brought any adverse material to show that the assessee was having wrong credit when the assessee categorically contended that they started business activity in the end of January, 2015. We find that the ld. CIT(A) admitted the additional evidence by considering its nature and veracity and other circumstances. In the present case, the assessee right from the beginning clearly and categorically took their stand that no notice during the assessment was received thus they have no opportunity to file such evidence before the AO. However in the case of CIT Vs Ranjit Kumar Choudhary [ 2006 (11) TMI 144 - GAUHATI HIGH COURT ] and N.B. Surti Family Trust [ 2005 (10) TMI 27 - GUJARAT HIGH COURT ] the evidences were filed for the first time without disclosing any reason, therefore, in our considered view, the ratio of those decisions are not applicable in the facts of the present case. Pas per our direction, at the time of conclusion of hearing assessee filed confirmation of creditors and the part payment received by them in subsequent assessment year. Such fact is otherwise was accepted by assessing officer in his remand report. Appeal of revenue is dismissed.
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2023 (12) TMI 28
Validity of Penalty proceeding u/s. 271(1)(c) - Non specification of clear charge - non striking of the irrelevant limb - validity of the notice issued u/s. 274 r.w.s. 271 challenged on the ground that non striking of the irrelevant limb in the notice would vitiate the penalty proceedings - HELD THAT:- The jurisdictional ground raised by the assessee is supported by the decision of Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] which has held that non striking on the irrelevant limb would vitiate the penalty proceedings in toto . As it is a settled proposition of law that the ld. A.O. ought to have struck off the irrelevant limb while issuing the penalty notice, we are of the considered view that the penalty levied by the ld. A.O. and partly confirmed by the ld. CIT(A) has to be deleted. Thus non striking of the irrelevant limb has been held to be violation of the mandatory condition, which in turn violates the principle of natural justice. Assessee should be aware of the exact charge for which the penalty proceeding has been initiated in order to entitle him to contend on the said charges. The non striking of the irrelevant limb amounts to vagueness and ambiguity in the notice which tantamount to non application of mind by the ld. A.O. It also does not give the assessee a proper opportunity of hearing manifested in the provision of section 274 - Thus penalty deleted - Decided in favour of assessee.
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2023 (12) TMI 27
Disallowance of 1/5th of vehicle expenses - expenditure attributable to the car registered in the name of director - AO and CIT(A) held that the possibility of the personal use of the car by the director cannot be ruled out - HELD THAT:- We find that the facts of the present case are identical to the facts in the case of Sayaji Iron Engg. Co.[ 2001 (7) TMI 70 - GUJARAT HIGH COURT] the expenditure incurred by the assessee-company on maintenance of vehicles which were available to the directors for their personal use would fall within the meaning of 'remuneration' as defined in the Explanation to section 198 of the Companies Act and once such remuneration was fixed as provided in section 309 of the Companies Act it was not possible to state that the assessee-company incurred an expenditure for personal use of the directors. The same was as per the terms and conditions of service and insofar as the assessee-company was concerned, it was a business expenditure and not disallowable as such. The assessee, which was a private limited company, was a distinct assessable entity as per the definition of 'person' under section 2(31) of the Act. Therefore, it could not be stated that when the vehicles were used by the directors 'even if they were personally used by the directors', the vehicles were personally used by the company, because a limited company by its very nature cannot have any 'personal use'. The limited company is an inanimate person and there cannot be anything personal about such an entity. The view was supported by the provision of section 40(c) and section 40A(5) of the Act. Once the expenditure in question was in terms as provided in sections 309 and 198 of the Companies Act, there could not be any 'non-business' purpose insofar as the assessee-company was concerned. Thus we find that the case of the present assessee company is squarely covered by the judgment of the Hon ble Jurisdictional High court in the above-mentioned case. Appeal of the assessee is hereby allowed. Disallowance u/s 14A r.w.r.8D - disallowance of the interest expense - sufficiency of own funds - HELD THAT:- It is the settled position of law by virtue of the findings of several competent courts that if there are mixed funds, then the power of presumption would be that the investment has been made from interest free funds. In holding so, we draw support and guidance from the judgment of Torrent Power Ltd [ 2014 (6) TMI 185 - GUJARAT HIGH COURT] wherein it was held as under: It was noted from records that the assessee was having share holding funds to the extent of 2607.18 crores and the investment made by it was to the extent of Rs. 195.10 crores. Assessee had sufficient funds for making the investments and it had not used the borrowed funds for such purpose. This aspect of huge surplus funds is not disputed by the revenue which earned it the interest on bonds and dividend income. In the case on hand, the present assessee before the learned CIT(A) has contended that that it was having own fund being share capital and reserve surplus of Rs. 54,15,95,087/- against the average investment of Rs. 20,27,82,965/- only, which is more than the amount of investment. Thus, in the light of the above discussion, it should be presumed that the investment yielding exempted income was made from interest free own fund of the assessee only. Hence, in our considered view, no amount of interest expenditure u/s 14A r.w. rule 8D of Income Tax Rule can be disallowed in the given facts of the case. Disallowance of administrative expenses - contention of the assessee cannot be accepted that no expenditure in relation to the investment was incurred. Therefore, the disallowance of administrative expenses as per rule 8D of the Income Tax Rule needs to be made but such disallowance cannot exceed the amount of exempted income. In other words, the amount required to be disallowed must be lower than the amount calculated in accordance with rule 8D of income tax rule or the amount of exempted income. In the case of the present assessee, the amount of exempted income is Rs. 10,85,354/- whereas the amount of disallowable administrative expenses worked out under rule 8D of income tax rule is of Rs. 10,13,915/- only. Therefore, we direct the AO to restrict the disallowance of administrative expenses as per rule 8D of income Tax Rules to the extent of Rs. 10,13,915/- only. Hence, the ground appeal of the assessee is partly allowed.
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2023 (12) TMI 26
Variation in the stock found during the course of survey - unexplained expenditure being inflation of purchases - Difference between the book stock and physical stock - variation in the method of valuation adopted while ascertaining the variation - Assessee argued all the stocks of assessee were properly taken and valued, which was also accepted as correct by the Director during the course of survey also valuation of the physical stock was done as per bar coded tags, and the book value of the goods were also as per bar codes - HELD THAT:- Except statement recorded from the Director of the appellant company, there is no other corroborative evidence with the AO to justify his findings that the assessee has restored to inflation of purchases. Although, the AO has considered purchases from group firm as inflation of purchases, but the total purchases from appellant sister concerns during the financial year relevant to assessment year 2014-15 is much lower than the amount of deficit stock quantified by the survey team. Therefore, from the above it is difficult to accept the reasons given by the AO to treat deficit quantified during the course of survey is on account of inflation of purchases. The assessee has explained the difference and according to the assessee, physical stock was taken at cost price, whereas the value of stock in Vahini software was at selling price. We find that, there is a force in the arguments of the assessee for the simple reason that, if you go by the nature of business carried out by the appellant, the arguments advanced by the Ld. Counsel for the assessee appears to be bonafide and acceptable. Each item of goods are created with a tag price which includes purchase price plus mark-up of the appellant. Otherwise, at the time of sales, it is difficult for the sales people to ascertain cost price of each product. If you go by the general practice of the trade, the arguments of the assessee that the value as per Vahini software was at selling price is acceptable. If you accept the arguments of the assessee that the difference is on account of comparison of cost price with selling price, then in our considered view, the AO has committed a fundamental error in ascertaining deficit stock in trade and further, assessment of said deficit as inflation of purchases. Since, the AO has not quantified any difference in quantity of stock in trade found during the course of survey and stock in trade as per books of accounts, in our considered view, reconciliation submitted by the assessee explaining difference in stock in trade appears to be bonafied and acceptable - Decided against revenue. Additions made towards unproved purchases - during the course of survey, certain loose sheets were found in the premises of the appellant pertains to purchases from certain group/sister concerns. The loose sheets were confronted to the Director of the appellant company, in a statement recorded on oath and in response to specific question, the Director of the appellant company admitted that the appellant has indulged in bogus purchases from certain group companies/firm for inflation of purchases. Since, the Director has confirmed inflation of purchases through group companies, the confirmation filed by the assessee during assessment proceedings cannot negate the findings of the survey team regarding bogus nature of purchases. Therefore, we are of the considered view that there is no error in the reasons given by the ld. CIT(A) to sustain additions made towards unproved purchases - Decided against assessee. Addition of excess stock found during the course of survey for the impugned assessment year as closing stock - HELD THAT:- Assessee could not explain difference in stock in trade found during the course of survey with necessary evidences. The reasons given by the assessee to reconcile excess stock found during the course of survey is not bonafied and unacceptable. CIT(A), without appreciating relevant facts simply deleted additions made by the AO - Therefore, Additions made by the AO towards excess stock found during the course of survey needs to be sustained. Thus, we set aside the order passed by the ld. CIT(A) on this issue and upheld additions made by the Assessing Officer towards excess stock found during the course of survey. Once additions is made towards excess stock found during the course of survey as income of the assessee, the said excess stock should be considered as part of closing stock of the assessee for the impugned assessment year and should be carry forward as opening stock for subsequent assessment years. Therefore, we direct the AO to consider additions made towards excess stock found during the course of survey for the impugned assessment year as closing stock and also carry forward to subsequent year as opening stock in trade of the assessee. Addition made towards inflation of purchases - only on the basis of sworn statement without there being any corroborative evidence - HELD THAT:- It is well settled principle of law by the decision of CIT vs S. khader Khan Son [ 2007 (7) TMI 182 - MADRAS HIGH COURT ] that additions cannot be made solely on the basis of confession statement recorded during the course of survey, unless said statement is supported by corroborative evidence. In the present case, except statement from partner, no evidence with the Assessing Officer to prove that purchases from group/sister concern are bogus in nature. CIT(A), after considering relevant facts has rightly deleted additions except additions towards purchase from made from M/s. Balaji Textiles - The findings of the facts recorded by the ld. CIT(A) are uncontroverted. Therefore, we are of the considered view that, there is no error in the reasons given by the ld. CIT(A) to delete additions made towards purchases. Unexplained cash credits taxable u/s. 68 - additions towards unsecured loans received bogus accommodation entries - HELD THAT:- Additions cannot be made solely on the basis of statement recorded during the course of survey, unless said statement is supported by corroborative evidence. In the present case, except statement recorded from managing partner of the appellant company, there is no evidence with the Assessing Officer to suggest that loan taken from above concerns are bogus in nature. The ld. CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer and thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue.
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2023 (12) TMI 25
Reopening of assessment u/s 147 - Addition of non-genuine and merely accommodation entries - assessment was reopened within 4 years from the end of the assessment year - assessee was named as beneficiary of the accommodation entries towards bogus purchases from said company namely Sampada Chemicals Limited - HELD THAT:- We do not find any merit in the contention of the assessee that reopening of the assessment was not validly made nor it could be said that there is no application of mind by the AO before reopening of the concluded assessment in the case of the assessee, as the AO after receipt of information from DDIT, Inv. , Mumbai made its own enquiries before reopening of the assessment u/s 147 in the case of the assessee . There was a live nexus between the incriminating material available with the AO and reasons to believe that income of the assessee has escaped assessment, as at the time of reopening , the sufficiency of material to conclusively prove that income has escaped assessment is not required but a prima-facie view is required based on material on record having live nexus with formation of reasons to believe that income has escaped assessment. Thus, it is not a case of borrowed satisfaction , but there was application of mind by the AO also as he made enquiries after receipt of material from DDIT, Inv., Mumbai , and then arrived at the decision that income of the assessee has escaped assessment based on incriminating material available with the AO and it is a fit case which warrant invocation of Section 147. Denial of natural justice - There is a breach of principles of natural justice as copies of statements as well other relied upon incriminating material ought to have been provided by AO to the assessee, before condemning assessee and saddling with tax liabilities. Further, before prejudicing assessee and saddling with tax liability , the said Mr. Vipul Vidur Bhatt ought to have been offered by Revenue for cross examination by the assessee. If the AO did not do so, it was incumbent on ld. CIT(A) to have provided the copies of relied upon documents including statement of Mr. Vipul Vidur Bhatt as well offered said Mr. Vipul Vidur Bhatt for cross examination by the assessee. Right of cross examination is a valuable right but at the same time the said right is not absolute. It will depends upon the factual matrix of the case. Fair hearing as well adherence to principles of natural justice are the two important pillars in robust judicial delivery system. The Revenue has also not brought on record as to the manner in which assessments were framed in the case of Mr. Vipul Vidur Bhatt as well in the case of M/s Sampada Chemicals Limited, and whether finality was achieved in the tax-proceedings against them under the 1961 Act. The fresh confirmation letters post search, affidavits from the said company, production of the responsible functionaries of the said company Sampada Chemicals Limited before authorities, the Audited Accounts of Sampada Chemicals Limited for the relevant period etc. could have been produced by the assessee to prove that purchases were genuine, as discovery of the incriminating material during search and post search enquiries have cast serious doubt on the purchases made by the assessee from said company. There could be several reasons for arranging bogus accommodation entries towards bogus purchases, which could be to suppress profits and evade taxes, or to arrange for the invoices at higher value to reflect purchases in the books of accounts etc. so on and so forth. Estimation of income on bogus purchases - It will be fair that profit element embedded in the aforesaid purchase @12.5% be brought to tax instead of bringing to tax the entire purchase price as the assessee had produced purchase register, consumption register but no defect per-se in consumption of Sodium Alginate(Textile Grade) was pointed out by the AO or by ld. CIT(A), which lead to the conclusion that the purchases of Sodium Alginate(Textile Grade) were made by the assessee from some other suppliers but the bogus invoices were taken from Sampada Chemicals Limited to suppress the profits , and end of justice will be met if profit embedded in these purchases are estimated @12.5% which shall be brought to tax. Thus, the assessee gets part relief, wherein additions to the tune of Rs. 5,21,347/- are sustained. The estimation requires some guess work, but the same has to be reasonable, fair and honest, which we hold that 12.5% estimated profit embedded in purchases as held by us to be added to the income of the assessee is fair, reasonable and honest. The reference is drawn to the decision of Hon ble Supreme Court in the case of Kachwala Gems v. JCIT, Jaipur [ 2006 (12) TMI 83 - SUPREME COURT ] Decided partly in favour of assessee.
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2023 (12) TMI 24
Assessment of trust - Allowance of expenditure incurred for earning the income of the assessee - net income v/s gross income - taxation of gross receipts without allowing the revenue expenses incurred - assessee did not upload any order granting registration under section 12AA of the Act nor under section 10(23C) - HELD THAT:- Assessee does not have registration under section 12AA nor under section 10(23C) of the Act. In the absence of the registration under the aforesaid sections, there cannot be any application of income. However, the gross receipts cannot be taxed in the hands of the assessee trust. The income earned by the assessee and expenditure relatable to the earning of such income is to be allowed as a deduction. The Bangalore Bench of the Tribunal in the case of H M V Educational Cultural and Social Trust Vs. ITO [ 2023 (3) TMI 1151 - ITAT BANGALORE ] restored the matter to the AO with a direction to assess only the net income and not the gross. Thus restore the matter to the AO. The AO is directed to examine the financials of the assessee and allow the expenditure which have been incurred for earning the income of the assessee. We make it clear that since in the absence of registration under section 12AA of the Act, there is no question of any application of income.
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2023 (12) TMI 23
Penalty u/s. 271A and 271B - non-maintenance of books of account and not getting the books of accounts audited u/s. 44AB recpectivily - HELD THAT:- The bench noted that in the case of the assessee there has been a levy of penalty for non-maintenance of books of accounts u/s. 271A of the Act and the ld. DR did not controvert the fact and finding of the lower authorities. So, once it has been categorically held that the assessee failed to maintained the books of account and consequent there upon the penalty has also been levied the separate penalty for not getting the books of account audited cannot be fastened. The penalty u/s. 271B can be levied when the assessee maintains the books and does not get them audited but once it is been held and not disputed that the assessee has not maintained the books of accounts how the penalty for not getting the books audited be levied. Thus once the penalty is levied for non-maintenance of book of accounts, there cannot be further default for not getting the same audited as required u/s 44AB of the Act and therefore, the penalty levied u/s 271B is not justified and thus vacated. Penalty u/s 271A - Inspite of seven opportunities were given the assessee neither appeared nor filed any written submission so as to controvert the finding of the lower authorities. Therefore, in view of the matter we not find any infirmity in the order of the ld. CIT(A) and the thus, the levy of penalty u/s 271A stands confirmed.
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2023 (12) TMI 22
Addition u/s 68/69 when the income was estimated u/s 44AD - AO has not accepted this income offered by the assessee from business and considered the income of the assessee u/s 44AD oat 8% of total turnover and determined the same - AO picked up the credit entries with regard to deposit of SBN notes at Rs. 1 Crore to his bank account and made addition on this count - HELD THAT:- Once the ld. AO rejected the books of accounts and estimated the income of the assessee, thereafter he is precluded from considering any other entries in the books of accounts, so as to make addition u/s 68 or 69 of the Act. Being so, the judgement of Shri Thomas Eapen [ 2019 (11) TMI 1240 - ITAT COCHIN ] is directly on the issue under dispute. Accordingly, the addition is deleted. AO made addition u/s 68 of the Act on account of cash deposit by the assessee into his bank account during demonetization period and the said cash deposit was emanated from the sale proceeds, which is already included in the total turnover disclosed by the assessee and the revenue accepted that as a revenue receipt, once again invoking the provisions of section 68 of the Act towards the said cash deposit into bank account would result in double taxation, which cannot be permitted. Accordingly, the addition is deleted. This view of ours is supported by case of Anantpur Kalpana [ 2021 (12) TMI 599 - ITAT BANGALORE ] On this count also, addition cannot be sustained. Accordingly, we allow the grounds taken by the assessee.
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2023 (12) TMI 21
Bogus LTCG - addition u/s 68 - income arising from sale of shares which was claimed to be exempt by the Assessee denied - addition made on the basis of the report of the Investigation Wing, Kolkata and analysis of price and volume movement - AO had concluded that the investment made in purchase of shares of the Company by the Assessee was substantial and therefore, it cannot be accepted that it was a regular transaction - HELD THAT:- As nothing has been brought on record by the Assessing Officer to support the conclusion in respect of the transaction undertaken by the Assessee. The addition has been made on the basis of conjecture and surmises. AO has failed to point out any defect or infirmity in the documents/explanation given by the Assessee. The Assessment Order is silent about the brokers and exit providers involved. There is no reference to any inquiry having been conducted by the AO. There is no direct evidence or circumstantial evidence to support the conclusions drawn by the AO. There is not even any allegation that the Assessee had any unaccounted income or any undisclosed source of income. Facts as emanating from material on record demonstrate that the conduct of the Assessee in the present case does not fit into the modus operandi as stated in the report of Investigation Wing, Kolkata. Assessee has offered to tax Short Term Capital Gains and speculative profit earned on 25/07/2007 earned on sale of Share of the Company in the return for the Assessment Year 2008-09. The aforesaid gains/profits were accepted without questioning the genuineness of the transactions. During the course of hearing that the Learned Authorised Representative stated that 34,401 shares of the Company are lying unsold till date. This was not disputed by the Revenue. As pointed out by the Learned Authorised Representative, in case the cost of the shares held is written off, then the short terms capital gains offered to tax would be more than overall profits made from purchase/sale of shares of the Company by the Assessee. Thus we hold that addition made by AO u/s 68 of the Act cannot be sustained. A number of judicial precedents have been referred to by the AO and the CIT(A). However, in absence of the factual support/basis, the same cannot be invoked to draw any adverse conclusion against the Assessee. As observed in the case of Krishna Devi [ 2021 (1) TMI 1008 - DELHI HIGH COURT] the theory of human behaviour and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by an Assessee. Decided in favour of assessee.
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2023 (12) TMI 20
TP Adjustment - comparable selection - ALP for provision of software support, development and related services - HELD THAT:- Infosys Technology Wipro Limited comparables were excluded by the CIT(A) in appeal for the immediately preceding assessment year has also not been controverted. Therefore, in view of the aforesaid, we direct the Assessing Officer to exclude Infosys Technologies and Wipro Limited from the final set of comparables as functionally different. Persistent Systems Limited earned revenues from licensing of the products and royalty which are in the nature of research and development services. Segmental results were not available. Therefore, Persistent Systems Limited should be excluded from the list of comparables. We note that similar objections were raised by the Appellant before CIT(A). Therefore, taking a view consistent with the view taken in the above decision by the Tribunal, we conclude that the reasons stated hereinabove, Persistent Systems Limited cannot be taken as a comparable and therefore, the same is excluded from the final set of comparables. iGate Global Solutions Ltd., Tata Elxsi Ltd, and LGS Global Limited - CIT(A) has not dealt with the objections raised by the Appellant while the Assessing Officer had included the same given the reasoning that the primary source of income is from software development. Therefore, we deem it appropriate to remand the issue of exclusion of the aforesaid comparable back to the file of the AO. Mindtree Limited, R Systems Ltd., Sasken Technologies Ltd., Sonata Software Limited Aricent Technology excluded on account of high turnover - CIT(A) had observed that Sonata Software Limited was a giant company having turnover of INR 1,380 Crores. Before the Tribunal, the Appellant had contended that 11 companies having high turnover be excluded from the list of comparables. As already directed exclusion of 3 companies (i.e. Infosys Technology, Wipro Limited and Persistent Systems Limited), though for different reasons. Out of the balance 8 companies, the issue related to exclusion of 3 companies (namely iGate Global Solutions Ltd., Tata Elxsi Ltd, LGS Global Limited) has been remanded back to the file of the Assessing Officer in paragraph 4.7 above. Therefore, we permit the Appellant to also raise contention of high turnover for seeking exclusion of the aforesaid 3 comparables before the Assessing Officer. As regards the balance 5 comparables (i.e.Mindtree Limited, R Systems Ltd., Sasken Technologies Ltd., Sonata Software Limited Aricent Technology), we grant the Appellant an opportunity to establish before the Assessing Officer that the aforesaid 5 comparables should be excluded on account of high turnover as the high turnover would result in a material difference which cannot be eliminated and direct the Assessing Officer to decide the issue keeping in view the ratio of the said judgments of the Hon ble High Courts. Accordingly, the issue of inclusion/exclusion of the aforesaid 5 comparables is also remanded to the file of the Assessing Officer. Kals Information Technology Systems was not only engaged in providing software development services but was also dealing in software products under the relevant segment. Since the company was engaged in selling software products which was different from the activity undertaken by the Appellant in that case, namely, rendering of software service to its holding company, the company was excluded from the list of comparables. Bodhtree Consulting Ltd. - As there is no change in the segmental reporting made by this company for the relevant previous year the company is stated to be operational in only one segment namely software development, which involves providing open and end-to-end web solutions, Off-shore Data Management, Data Warehousing, software consultancy, design and development of solutions, using the latest technologies. Concurring with the reasoning given by the Tribunal for excluding this company as a comparable in the case of the Appellant for the Assessment Year 2009-10, we direct the Assessing Officer to exclude Bodhtree Consulting Ltd. from the list of final set of comparable. Acropetal Technologies Limited be excluded as it continues to show inventories under the head Current Assets Loans and Advances suggesting that this company is engaged in manufacturing. Further, during the course of hearing, the Learned Authorised Representative had relied upon the decision of the Tribunal in the case of M/s John Deere India Pvt. Ltd. [ 2019 (5) TMI 97 - ITAT PUNE ] pertaining to the Assessment Year 2010-11 wherein it was held that even if the segmental accounts are taken into consideration this company would still not qualify as a comparable. Softsol India Limited - As entire income has been recorded under the head software exports and no bifurcation or details of the same have been provided. It is stated therein that the company does not have separate reportable segments - we find merit in the contention advanced on behalf of the Appellant that Softsol India Ltd. cannot be selected as a comparable on account of functional dissimilarly and lack of segmental data. Working Capital Adjustment - We grant the Appellant an opportunity to establish before the Assessing Officer that the Appellant is entitled to working capital adjustment in respect of the comparables finally selected. The Assessing Officer is directed to decide the claim for working capital adjustment, if any made by the Appellant before the Assessing Officer as per law. Thus, in accordance with the above, the Assessing Officer is directed to determine the final set of comparables; re-compute arm s length price; and transfer pricing adjustment, if any, after giving the Appellant a reasonable opportunity of being heard.
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Customs
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2023 (12) TMI 19
Seeking a direction to Respondent No. 1 to permit the Petitioner to apply for incentives under the Transport and Marketing Assistance for Specified Agriculture Products Scheme dated 09th September, 2021, which was foreclosed vide gazette notification dated 25th March, 2022 - HELD THAT:- Though the lack of functionality of DGFT portal has been averred, yet keeping in view the fact that the Petitioner has directly approached this Court without filing any documents to show non-functionality of the portal and without making any written representation to DGFT, this Court directs the present writ petition to be treated as a representation and to be decided by the competent authority in the Office of DGFT by way of a reasoned order within twelve weeks. The Petitioner is given liberty to file additional documents with the DGFT within three weeks. The present writ petition stands disposed of.
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2023 (12) TMI 18
Maintainability of Public Interest Litigation - seizure of jewellery / ornaments worth Rs. 50,000/- Constitutional validity of Circular instruction No. 22/2022-Customs dated 06th September, 2022 and Circular instruction No. 27/2021-Customs dated 03rd December, 2021 - mandating compulsory disposal and sale to RBI of all gold ornaments/ jewellery within three months from the date of seizure - ultra vires Section 150, 125 and 110(2) of the Customs Act, 1962 and violative of Articles 14, 21, 31 and 300A of the Constitution of India. HELD THAT:- This Court is of the view that the present petition is not maintainable as it is a settled principle of law that an aggrieved person must approach the Court. The standing doctrine characteristic is that a potential litigant must be injured by the action it is challenging. In the opinion of this Court, the petitioner is a stranger, who has not been adversely affected by either of the impugned Circular Instructions as none of his ornaments or articles or jewellery items have been seized. Undoubtedly, the rule of locus standi is relaxed in case of public interest litigation, but that is to be done only to ensure that the poor or socially and economically backward or persons with disability are not denied their rights. In a public interest case, there need be no litigant, if a problem is deemed by the Court as worthy of attention. The concept of public interest litigation, as stated hereinabove, is linked to the enforcement of the social and economical rights in India. At this stage, learned counsel for the petitioner states that the petitioner has filed the present Public Interest Litigation as jewellery / ornaments worth as low as Rs. 50,000 can be seized at the airport and sold immediately - This Court is of the view that any individual who owns gold jewellery/ ornaments and who travels by air is not economically or socially backward and can approach the Courts directly. The present petition which has been filed as Public Interest Litigation is held to be non-maintainable and the same is dismissed alongwith pending application.
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2023 (12) TMI 17
Classification of imported goods - Canned Pineapple Slices - classifiable under Customs Tariff Heading No. 0804 3000 or under CTH 08119010? - reliance placed upon the statement of the appellant - demand of differential duty alongwith interest and penalty - extended period of limitation. HELD THAT:- As per the explanatory notes, it is noted that for any product to be classified under CTH 0804, they have to be fresh or dried. For fruits to be classified under CTH 0811, the said product has to be Frozen , as elaborated above. In the instant case, the product being imported by the appellant is not frozen. This is amply clear from the statement of the Director of the appellant, wherein he submitted that the fresh fruits (Pineapple) are received, graded, washed, peeled, cut, core, sliced and then put in sterile cans (sterilized by passing under steam); boiling Hot Sugar syrup is added to balance the natural sugar content of the fruit and prevent it from draining out; sugar is added to maintain taste and palatability of the fruit and it is not a preservative; the Hot syrup (water+ sugar pre mixed) is heated till boiling point to kill any ambient bacteria that may be present and to create vacuum in the cans thus completing the preservation process due to the isolation from atmospheric contact and vacuum. Thereafter, such cans are cooled and released to market. In the instant case, the fresh pineapple slices are sterilized by passing under steam which is followed by adding boiling Hot Sugar syrup to balance the natural sugar content of the fruit and prevent it from draining out. This Hot syrup (water+ sugar pre mixed) is heated till boiling point to kill any ambient bacteria and to create vacuum in the cans thus completing the preservation process. Thereafter, such cans are merely cooled, and not frozen to enable them to be released for sale. Thus, it is very clear from the facts of this case, the canned pineapple slices are akin to fresh pineapples and are liable to be classified under CTH 0804, and not under CTH 0811, as claimed by the appellant. In the instant case, the classification of the canned pineapple slices would have to be decided as per the HSN explanatory notes and would therefore be appropriately classifiable under CTH 0804 only. It is also noted that in the impugned order, it is recorded that the appellant had themselves quoted that it was their CHA who filed their Bills of Entry under the wrong CTH 20082000 without taking instructions from the regarding the correct classification, which would be CTH 08119010 - it is already opined that the appropriate classification would have to be arrived at by going through the tariff headings, the chapter notes, the HSN explanatory notes therein. The material incriminates the petitioner in the contravention of the provisions of the Customs Act. Such material can certainly be used to connect the petitioner to the contravention. Therefore, there are no infirmity in the impugned order which has relied on the statement of the appellant. Extended period of limitation - HELD THAT:- It has been brought on record by the learned counsel for the appellant that there was confusion in the Department itself regarding the classification of canned sliced pineapples - there are merit in the contention that the Department themselves have classified the said goods under different headings. In view of the prevailing circumstances, the extended period cannot be invoked in the instant case. The classification of the canned pineapple slices would be CTH 0804. However, the demand for differential duty is limited to the normal period only. The interest would accordingly be reduced proportionately. The penalty under section 114A is set aside - Appeal allowed in part.
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2023 (12) TMI 16
Classification of imported goods - G-24 PL 001 GSM Chipset Wavecom (modem) - to be classified under chapter Heading 8517 6230 or under Chapter Heading 8537 1000? - HELD THAT:- There is no dispute that the items imported are a programmable processor mounted on a printed circuit board. The Commissioner (Appeals) s classification under Chapter Heading 8517 is misplaced in as much as this Chapter includes Telephone sets, smartphones and other telephones for cellular networks or for other wireless networks; other apparatus or for the transmission or reception of voice, Images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of Heading 8443, 8525, 8527 or 8528 - It is a settled fact that the principles of classification endorses that any classification should be based on the description and function of an item as it is imported and not based on its end-use as held by the Supreme Court in number of cases. The HSN Explanatory Notes to Chapter Heading 8537 states that this heading covers programmable controllers which are digital apparatus using a programmable memory for the storage of instructions for implementing specific function such as logic sequencing, timing, counting and arithmetic to control through digital or analogue input/output modules, various types of machines . It is also a fact that the appellant are manufacturers of electric metre and their products are classifiable under chapter heading 90283010 and it is also an admitted fact that these impugned goods are used in automatic metering system. Therefore, Commissioner (Appeals) justification for classification under Chapter Heading 8517 as part of modem is inappropriate. Since programmable controllers are specifically covered under Chapter Heading 8537, they are rightly classifiable under this Heading and not under Chapter Heading 8517 as part of modem - the imported item viz., G-24 PL 001 GSM Chipset Wavecom (modem) are rightly classifiable under Chapter Heading 8537. The impugned order is set aside - the appeal filed by the Revenue is allowed.
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2023 (12) TMI 15
Valuation of imported goods - Aluminium Scrap - rejection of transaction value - procedure contemplated under Rule 12 of the valuation rules not followed - Commissioner of Customs (Appeals), while allowing the appeal of the importer, set aside the re-assessment of goods at enhanced value and restored the self-assessment at the declared value - HELD THAT:- On identical facts, this Tribunal in the case of COMMISSIONER OF CUSTOMS DELHI VERSUS M/S HANUMAN PRASAD SONS [ 2020 (12) TMI 1092 - CESTAT NEW DELHI] has examined the provisions relating to valuation as prescribed in the Customs Act, 1962 and the Customs Valuation Rules, 2007 and after examining the same, the Tribunal has come to the conclusion that when the importer has voluntarily accepted the enhanced value without any protest then in that case it is not incumbent upon the department to pass a speaking order. In the case of CC (IMPORT) , ICD, TKD, NEW DELHI VERSUS M/S SODAGAR KNITWEAR [ 2018 (5) TMI 686 - CESTAT NEW DELHI] where the Tribunal has held that once the importer voluntary accepted the enhancement then he is precluded from challenging the same. This judgement of the Tribunal has been upheld by the Hon ble Apex Court in SODAGAR KNITWEAR VERSUS COMMISSIONER [ 2018 (8) TMI 1777 - SC ORDER] wherein the Hon ble Apex Court has held that we do not find any infirmity in the order passed by the CESTAT, the appeal is dismissed. The impugned order is not sustainable in law - Appeal allowed.
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2023 (12) TMI 14
Condonation of delay in filing appeal - whether the appeal filed by the appellant was filed within the prescribed period of limitation specified under Section 128 of the Customs Act, 1962 or not? - HELD THAT:- The period of limitation provided under the said Section 128 is sixty days from the date of communication of decision or order . On one hand the appellant claims that the Order-in-Original dated 06.07.2018 was communicated to him for the very first time only on 05.05.2022 when copy of the said order was made available to him on request being made whereas on the other hand the impugned order records that the said order was dispatched by speed post vide letter dated 06.07.2018. In the present case, since it was the specific case of the appellant before the Commissioner (Appeals) that the speed post was not delivered to him, hence it was incumbent upon the revenue to bring on record the date of speed post and the acknowledgement of such speed post. However, despite such an specific assertion being made, the impugned order neither records the date on which the speed post was sent/dispatched nor the date of acknowledgment of the speed post. In absence of the date of dispatch by speed post and date of acknowledgement, the revenue has clearly failed to discharge the initial onus and therefore it cannot be said that the order dated 06.07.2018 was communicated to the appellant at any time on or around 06.07.2018. Further, in the facts and circumstances of the present case, when the appellant changed its address on account of closure of business, he had no means to be aware of the order and has nothing to gain by not filing the appeal timely - the date of communication of the order is to be considered as 05.05.2022, when the copy of order dated 06.07.2018 was provided on the request made by the appellant. As the revenue failed to comply with Section 153 and has not brought on record any other date prior to 05.05.2022, when the order was served in any of the modes specified under Section 153. The matter is remanded back to the Commissioner (Appeals) to decide the matter on merits after giving personal hearing to the appellant - the appeal is allowed by way of remand to the Commissioner (Appeals) for decision on merits.
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2023 (12) TMI 13
Undervaluation of the imported goods - Rejection of transaction value - redetermination of value based on contemporaneous imports of similar goods available in the NIDB database - HELD THAT:- Once the appellant accepted the enhanced value in writing, it was binding on both sides as per section 147. In fact, there was not even a need to issue any speaking order as per section 17(5) of the Act - There was no forced acceptance of the valuation based on the NIDB data. If the appellant did not agree to the re-determination of value, it did not have to accept the proposed value or it could have paid duty under protest. If the appellant wanted to get the goods cleared while not accepting the values proposed by the department, it could have also got the goods provisionally assessed pending finalization of assessment. If it wanted to avoid demurrages, it could have got the goods shifted to a Customs bonded warehouse under section 49. The appellant s contention that the rejection of the transaction value under Rule 12 was not correct holds no water. The values declared in the Bills of Entry were doubted because they were far lower than the values of the contemporaneous imports available in the NIDB. When these were shown, the appellant accepted valuation on the basis of the NIDB data. Therefore, rejection of the transaction value as per Rule 12 is absolutely correct - The appellant s contention that valuation should have been done as per Rule 3 is not correct because, Rule 3 is subject to Rule 12 under which the transaction value can be rejected as has been done in this case. Having rejected the declared assessable value under Rule 12, the department sought to re-determine it under Rule 5 based on the contemporaneous value of similar goods imported into the country. It needs to be noted that since the imported goods were miscellaneous motors of various specifications there cannot be identical goods to determine duty as per Rule 4 and hence determining duty on the basis of values of similar goods under Rule 5 is fair and proper. To determine the value of the contemporaneous imports, the relevant data was extracted from the NIDB. The department also referred the matter to a Chartered Engineer to determine the value of the imported goods. In this case, since the fact that the goods were undervalued and the correct assessable value for the goods imported under the two Bills of Entry dated 9.2.2009 and 17.2.2009 are as per the charts prepared by the officers as per the NIDB data was not only not disputed but positively accepted, in writing, by the appellant, these facts were not in dispute and neither side needed to produce any evidence - there is no force the submissions of the learned counsel for the appellants that the department failed to provide evidence in support. Revenue need not produce any evidence. In fact, it did not have to even issue the SCN or hold a personal hearing insofar as the re-assessment of these two Bills of Entry is concerned because the appellant had waived them in writing. Re-determination of value and confirmation of demand in respect of the five past Bills of Entry - HELD THAT:- At the time of recording the statement, the appellant could not remember the exact number of Bills of Entry filed before and also did not have the details. All that is stated is that he is ready to pay Customs Duty for the same, if any. Neither were the details of the Bills of Entry nor the goods imported under them, their declared values, corresponding values of goods in the NIDB and why it became necessary to re-open the assessment which were already finalized shown to the appellant nor were they agreed to. This statement does not support the case of the Revenue in any sense. Confiscation of the goods imported in the two Bills of Entry and their release on payment of redemption fine - HELD THAT:- Once the goods are confiscated, section 125 requires that, unless the goods are prohibited goods, the owner should be given an option to redeem the goods on payment of fine. If they are prohibited goods, the adjudicating authority has the discretion of allowing redemption or not. This section further restricts the quantum of penalty to the market value of the goods. It is not the case of either side that the motors imported by the appellant were prohibited goods. Therefore, they were released on redemption fine. The seized goods imported under Bill of Entry dated 9.2.2009 were valued at Rs. 48,36,860/- and the redemption fine imposed was Rs. 10,00,000/-. The seized goods imported under Bill of Entry dated 17.2.2009 were valued at Rs. 63,09,086/- and the redemption fine imposed was Rs. 12,50,000/. In the factual matrix of this case, the fines imposed are fair. Order holding the goods imported under the five past Bills of Entry liable to confiscation and imposition of redemption fine since they were not available - HELD THAT:- If the goods are not available neither can the government take over the goods nor can it return them to the owner or payment of fine. The case of the goods imported under the above two Bills of Entry was different as they were seized and were provisionally released on execution of a bond and bank guarantee. The bond and bank guarantee are meant to cover the redemption fine, if any, imposed if the goods are confiscated and released. Penalty on the importer under section 114A - HELD THAT:- As it is found that the demand of differential duty under section 28 in respect of the past Bills of Entry cannot be sustained, the penalty under section114A as well is set aside. As far as the duty on the two current Bills of Entry are concerned, they are a matter of re-assessment under section 17 and not a case of duty not levied or short levied under section 28. Penalty on Shri Qasim under section 112(a) - HELD THAT:- As it is already found that the confiscation of the goods imported under the two current Bills of Entry and their release on payment of redemption fine need to be upheld and the confiscation and imposition of redemption fine in respect of the five past Bills of Entry is set aside - Shri Qasim is the person most directly connected with the filing of the two Bills of Entry and the values of the goods in these did not match the imported goods which rendered the goods liable to confiscation under section 111(m). Therefore, Shri Qasim squarely falls under Section 112(a) and is liable to penalty under it. The penalty under section 112(a) has been imposed considering the differential duty confirmed in respect of the two current and five past Bills of Entry. As it is already found that the demand in respect of the five past Bills of Entry cannot be sustained - it is found proper to reduce the penalty on Shri Qasim also from Rs. 15,00,000/- to Rs. 3,00,000/-. Appeal allowed in part.
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2023 (12) TMI 12
Levy of penalty on the appellant since goods were found in his name - Levy of penalty on the Valuer and other persons - Absolute Confiscation - seized gold bars - denial of cross-examination - relevance of statements - HELD THAT:- From the facts as recorded in the impugned order it is evident that the two persons namely Shri Rajat gupta and Shri Rajesh Kumar Gupta, valuer are neither co-accused in the matter nor are they the panch witnesses. The persons whose cross examination has been asked by the appellant were the person whose statement revenue intends to rely for proceedings against the appellant. In the present case it is interesting to note that the Commissioner has by the impugned order imposed penalties under Section 112 (a) and 112 (b) on the appellant and others in respect of the same offense. This only goes to show total lack of understanding of the legal provisions by the adjudicating authority. While imposing the penalties in this manner adjudicating authority has even failed to examine the legal provisions and the case law on the subject. Not a single word is recorded in the impugned order as to why penalty is imposable under Section 112 (a) and/ or section 112 (b) in the impugned order. This clearly shows that the impugned order has been passed in haste without even recording a finding on the basic issues and the legal provisions. The matter needs to be reconsidered by the Original Authority after permitting the cross-examination of the referred two persons before deciding the matter - Matter is remanded to the Original Adjudicating Authority for allowing the cross examination request of the appellant - Appeal allowed by way of remand.
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2023 (12) TMI 8
Confiscation of goods - capital goods imported as per EPCG licenses - levy of redemption fine, penalty and interest - non-fulfilment of Export obligation - scope of extension granted by the committee - denial of exemption availed under notification 102/2009-Cus. dt. 11.09.2009 - HELD THAT:- The SCN has been issued in 2016 alleging the non-fulfilment of 50% EO, and diversion of capital goods. The appellants were informing the adjudicating authority about the steps taken for getting extensions of time. Further on 25.03.2019, they submitted letter to the adjudicating authority informing that they are in the process of complying with the conditions of the EPCG Committee s decision. This being so, it was incumbent upon the adjudicating authority to give the appellants reasonable time to comply with the conditions and should not have passed the order in a hurried manner even without grant of personal hearing. The EPCG Committee had not prescribed any time limit for compliance of the conditions. The assessee is then supposed to comply within a reasonable time. The assessee has been diligent to comply within a time period of about three months - The DGFT and Customs have to act hand in hand to give effect to the object of issuing such beneficial schemes. It should not be a tug of war so as to drive the assessee from pillar to post and getting their resources tied up in litigations. We therefore find that the changed circumstances as to the extension of period and compliance has to be taken into consideration. The EPCG Committee has not stated any time period to comply with the conditions. There is no mention in the order of EPCG Committee that the extension of two years is to be applied retrospectively. When there is no specific mention of such event in the decision of EPCG Committee, the extension has to be construed as intended in the decision itself, which is nothing but extension of time by two years to fulfil their export obligation. The order passed by adjudicating authority without considering the relaxations, compliance and fulfilment of export obligations so as to confirm the duty demand, confiscation and imposition of penalties on M/s.Ashok Leyland, the main appellant, requires reconsideration - the matter requires to be remanded to the adjudicating authority who is directed to consider the decisions passed by the Committees, the compliances made by the appellants and the fulfilment of export obligations and pass fresh order preferably within 3 months from the date of receipt of this order. Appeal allowed by way of remand.
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Securities / SEBI
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2023 (12) TMI 38
Default of appointment of additional director in the category of non-executive independent director by way of a board resolution - person above the age of 75 years as appointed by the board of directors - non-compliance of Regulation 17(1A) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ( LODR Regulations for short) - whether approval is required to be taken from the shareholders of the Company through a special resolution before a person who has attained the age of 75 years can be appointed? - HELD THAT:- The board of directors can appoint any person as an additional director who shall hold office up to the date of the next Annual General Meeting. A reading of Section 152(2) and 161(1) of the Companies Act makes it clear that a director can only be appointed by the shareholders of the Company in an Annual General Meeting. However, the board of directors can appoint any person as an additional director who will hold office up to the date of the next Annual General Meeting. In the instant case, the board of directors appointed Mr. Swaminathan Sivaram as an additional director till the date of the next Annual General Meeting and subject to the approval given by the members of the Company through a special resolution. From a conjoint reading of Section 149, 152(2), 161(1) of the Companies Act 2013 read with Regulation 17(1A) and 17(1C) of the LODR Regulations makes it apparently clear that the director is required to be appointed by the members of the Company. If a person is appointed as an additional director by the board of directors then his appointment is till the next annual general meeting. Regulation 17(1A) provides that if a person who has attained the age of 75 years then his appointment has to be made by a special resolution passed by the members and Regulation 17(1C) provides that appointment must be approved in the next general meeting or within three months from the date of the appointment whichever is earlier. In the instant case, the appointment was made on May 16, 2023 by the board of directors which was approved in the next annual general meeting by the member of the Company through a special resolution and that this special resolution was passed on August 10, 2023 within three months from the date of appointment. Thus, from a conjoint reading of Regulation 17(1A) and 17(1C) of the LODR Regulations appointment of an additional director can be made by the board of directors which is required to be approved by the members of the Company through a special resolution and such approval is required to be made within three months. In Nectar Life Sciences Ltd. vs. SEBI Ors [ 2023 (5) TMI 447 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] Tribunal considered the provisions of Regulations 17(1A) with other provisions and held that the word unless as depicted in Regulation 17(1A) does not mean prior approval nor the requirement of passing a special resolution was a qualificatory condition for appointment as a director. Thus the contention of the respondent that no person can be appointed as a non-executive independent director unless prior approval of the shareholders was made by a special resolution is erroneous. Thus Regulation 17(1A) and 17(1C) has to be read harmoniously with the provisions of Section 152(2) and 161(1) of the Companies Act which will make it clear that a person above the age of 75 years can be appointed by the board of directors. Such appointment is required to be approved subsequently within the prescribed period by a special resolution in the next general meeting by the members of the Company which in the instant case was done within the prescribed period. No penalty could have been imposed by the BSE and NSE for violation of Regulation 17(1A) of the LODR Regulations.
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Service Tax
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2023 (12) TMI 11
Refund of excess payment of service tax - refund claim has been rejected primarily on the ground of being much beyond the period of one year as prescribed by Section 83 of the Finance Act, 1994 read with Section 11B of the Central Excise Act - HELD THAT:- The law of limitation does not extinguish the right which may have a arisen, but only for the reason of passage of time restricts the enforcement of that right - Admittedly, in the present case the refund claim has been filed much beyond the period of one year as prescribed in law, the same is necessarily time barred as having filed beyond the statutory period of limitation as prescribed in law. Section 83 of Finance Act, 1994 read with Section 11B of Central Excise Act, 1944 prescribes that refund claim should have been filed within one year from the relevant date. This decision of the Hon'ble Supreme Court has been followed constantly by the various courts and tribunal holding that the refund claims filed beyond statutory period of limitation as prescribed by the statute (Section 11B of Central Excise Act, 1944 or Section 27 of the Customs Act, 1962) are barred by limitation. There are no merits in the appeal - appeal dismissed.
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2023 (12) TMI 10
Levy of service tax - customer of the assessee was to make an advance payment of 25% of the contract price - unbilled revenue - entitlement to make payment of tax in respect of the amounts out of the CENVAT Credit standing to its credit? Service tax on advance amount - HELD THAT:- There is no doubt that Service Tax was payable upon receipt of the consideration. No other factor such as the time of accrual of the consideration was relevant. Hence, the advance of Rs.37,55,76,899/- having already been received, would become taxable in the month in which the same was received by the appellant. This is of course subject to the qualification that if the appellant is able to establish that any portion of the advance so received was either refunded to its customer or no services were rendered in respect of any portion of the advance, then such portion would not be taxable. The advances, to the extent they have been received in the tax period under consideration (i.e., 2008-09), would be taxable. The adjudicating authority is directed, accordingly, to bring so much of the advance to tax as has been received in this tax period, provided that there is nothing on the record to show that the advances so received were subsequently refunded. The appellant has also contended that these amounts have already suffered tax in the subsequent / final tax period. If this is the case, then it would not be open to the Revenue to levy tax once again. Hence, the adjudicating authority is directed to examine whether the above contention of the appellant is correct so that there is no double taxation. Service tax on unbilled revenue - HELD THAT:- Unbilled revenue represents amounts attributable to services already performed, which have accrued but which have not fallen due for payment or invoicing in terms of the agreement between the parties. It therefore represents revenue which has not yet become recoverable from the customer of the appellant. The fact that these amounts continued at the end of the relevant tax period to appear as unbilled revenue demonstrates that no receipts had been made in that respect. Therefore, there is no question that the unbilled revenue did not represent consideration though which has been received by the appellant for services rendered, they would be taxable only at the time of receipt in accordance with the provisions of Rule 6 ibid. - the unbilled revenue of Rs.23,75,85,656/- cannot be brought to tax. Entitlement to make payment of tax in respect of the amounts out of the CENVAT Credit standing to its credit - HELD THAT:- The appellant would no doubt be entitled to make good the taxes that are due by means of utilization of credit available to it. Much emphasis has been laid on the position that the appellant and its customer are related i.e., associated enterprises within the meaning of the above Explanation. The reason this is of no relevance is that Section 67(3) read with the aforesaid Explanation operates to define what falls within consideration or gross amount charged . In the facts of the case at hand, it is nobody s case that the unbilled revenue does not constitute consideration for services rendered or that it does not form a part of the gross amount charged . The limited scope of the dispute is whether that sum, although forming a part of gross amount charged , can be taxable in this tax period as contended by the Revenue, or in a subsequent period as contended by the appellant. This question is already answered and hence, Section 67 or the Explanation thereunder would not disturb reasoning. Appeal allowed in part and part matter on remand.
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2023 (12) TMI 9
Classification of service - transportation of passengers by air service or supply of tangible goods service - appellant is engaged in chartering of its Aircraft and is charging the customers for the same on hourly basis referred to as flying hours - extended period of limitation - HELD THAT:- The issue has acknowledged to be no more res-integra and to have been decided in the terms that the services in the given circumstances are classifiable, as Supply of Tangible Goods Services which are in tax net since 16.05.2008. Admittedly, the appellant was not discharging its liability since 16.05.2008. However, w.e.f. 01.07.2010 the tax liability has regularly been discharged however considering the impugned services as that of transportation of passengers by air. Simultaneously, it is observed that in the light of the EIH LIMITED VERSUS C.C.E., DELHI-I [ 2018 (9) TMI 921 - CESTAT NEW DELHI] , the appellant was liable to pay the service tax w.e.f. 16.05.2008 but the said demand has been raised vide the Show Cause Notice dated 18.06.2013 i.e. by invoking the extended period of limitation. It is the case of the appellant that they were under the bonafide belief that the services rendered by them are transportation of passengers by air service which was not taxable prior to 01.07.2010. It is also very much apparent that beyond this date the appellants are regularly discharging their service tax liability. Hence, there are no reason to reject the stand taken by the appellants of having a bonafide belief. Nothing is produced by the Department to prove the malafide intent on part of the appellant to evade the tax liability. The mere allegation will not be sufficient for the Department to invoke the extended period of limitation - Extended period is, therefore, held to have been wrongly invoked. Once there was no malafide intent, the question of imposition of penalty does not at all arise. The appellant rather is held entitled to the benefit of Section 80 of the Act. The services in question are held to be Supply of Tangible Goods Services . However Show Cause Notice is held as time barred. Entire demand gets hit by limitation. Hence the order under challenge is hereby set aside - Appeal allowed.
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2023 (12) TMI 7
Exemption under entry no. 1 of Mega Exemption Notification No. 25/2012-ST dated 20.06.2012 in respect of services provided to UNICEF - Appellant entered into Long Term Agreements with UNICEF for providing technical assistance towards financial human resource management and logistics management for various programs of UNICEF in different states of India - HELD THAT:- The appellant was providing certain services to UNICEF and was not paying service tax in respect of said services in view of the understanding that services provided to UNICEF are covered by exemption Notification No.16/2002-ST dated 02/08/2002 and Notification No.25/2012-ST dated 20/06/2012 for the period with effect from 01/07/2012. Therefore, proceedings were initiated against the Appellant through show cause notice dated 19/09/2016 for recovery of service tax for the period from 01/04/2011 to 30/09/2015. The Original Authority has taken Central Excise Customs Notification into consideration to decide the matter related to service tax and held that since UNICEF is not mentioned in Notification No.16/2002-ST dated 02/08/2002. Thus exemption for the services provided to UNICEF is not covered by said service tax Notification. On the contrary Tribunal has held in various cases that UNICEF is covered by exemption Notification No.16/2002-ST. The Appellant is entitled for exemption under Notification No.16/2002-ST dated 02/08/2002 for services provided to UNICEF. Exemption under Notification No.25/2012-ST dated 20/06/2012 for period subsequent to 01/07/2012 which is pari-materia with the Notification No 16/2002-ST will be admissible - the impugned order set aside - appeal allowed.
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Central Excise
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2023 (12) TMI 6
Input Tax Credit - commission paid to the foreign agent - challenge to the decision passed by the Division Bench of the High Court of Gujarat in Tax Appeal Nos.353/2010 and 204/2011 [ 2013 (1) TMI 304 - GUJARAT HIGH COURT] - HELD THAT:- The High Court found that the Tribunal had reversed the findings of the adjudicating authority without giving any reason in support thereof and had merely sought to compare the payments made for services rendered by a foreign agent as analogues to a clearing and forwarding agent who actually effects sales. It was contended that the sales promotion is a terms of art and an agent can be appointed only for that purpose and therefore, the nature of the agreement between the assessee and the agent; the invoices indicating the payments made to the agent would all be relevant factors to be considered while arriving at a finding as to whether the appellant-assessee is entitled to claim input tax credit - there are substance in the contention of learned senior counsel appearing for the appellant particularly having regard to the doubt expressed by the High Court with regard to the manner in which the CESTAT had reversed what had been stated by adjudicating authority. The High Court ought to have then remanded the matter(s) to CESTAT for a fresh consideration by giving an opportunity to the appellant to place on record the necessary documents including the agreement entered into by the assessee with the concerned agents, the relevant invoices etc. - matters are remanded to CESTAT for a fresh consideration.
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2023 (12) TMI 5
CENVAT Credit availed in respect of CVD and SAD - duty paying documents - non-eligible in terms of provisions of Rule 9(1)(b) of the CENVAT Credit Rules, 2004 - misclassification of goods imported by the appellant with an intention to evade payment of duty - HELD THAT:- On perusal of the Show Cause Notice issued by DRI, it is seen that the main allegation is that of classification of the imported goods. The Show Cause Notice is issued under Section 28(1) and not under 28(4). There is no allegation of fraud, collusion, wilful mis-statement or suppression of facts for the Show Cause Notice issued by DRI. The Ld. counsel for the appellant has also submitted that the said Show Cause Notice has culminated in passing of the adjudication order. The said order dated 22.07.2019 shows that there is no finding with regard to fraud, collusion, wilful mis-statement or suppression of facts. The issue in the DRI Show Cause Notice is purely that of classification of the imported inputs. The appellant has paid the duty on the inputs under protest. It is brought out from the facts that the appellant has captively consumed the imported goods. The situation of issuing a supplementary invoice would arise only if the manufacturer sells the goods from his factory. In the present case, the appellant has captively consumed the goods. The credit has been availed of the duty paid on the TR-6 Challans - there is no reason to apply Rule 9(1)(b) of the CENVAT Credit Rules, 2004. The Tribunal Bangalore while analysing the similar issue in respect of the erstwhile Rule 7(1)(b) of the CENVAT Credit Rules, 2004 which is pari materia has held that the bar for availment of credit on supplementary invoices would operate only when the additional amount of duty becomes recoverable from the manufacturer on account of non-levy or short levy by reason of fraud, collusion or wilful mis-statement or suppression of facts, etc. Thus, the demand cannot sustain. The impugned order is set aside - appeal allowed.
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2023 (12) TMI 4
Recovery of credit taken wrongly and utilized alongwith interest and penalty - capital goods or not - welding electrodes falling under Chapter Sub Heading 831100 - period from October 2006 to February 2007 - HELD THAT:- The use of welding electrodes are integrally connected to capital goods and thereby with the process of manufacture. They are used for the maintenance of capital goods installed in the appellant s plant. Without the use of welding electrodes, during maintenance of capital goods whenever necessary, the machine may not function and manufacture would be impossible or commercially inexpedient. Welding electrodes which are hence used in relation to the manufacture of final products come under the definition of inputs as per Rule 2 of CENVAT Credit Rules, 2004. Therefore, the eligibility of the said inputs for CENVAT credit cannot be denied. Reliance can be placed in the case of M/S. TAMILNADU NEWSPRINTS PAPER LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE [ 2017 (6) TMI 574 - MADRAS HIGH COURT] where it was held that the said issue is covered by the judgment of the Division Bench of this Court in the matter of THE NATIONAL CO-OPERATIVE SUGAR MILLS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2016 (7) TMI 1073 - MADRAS HIGH COURT] , where it was held that Judicial pronouncements makes it abundantly clear that welding electrodes used for repair and maintenance of machineries, in relation to manufacture of the final product, namely sugar, is eligible for CENVAT credit. The impugned order dated 04/02/2015 passed by the Commissioner of Central Excise (Appeals), Coimbatore is set aside - Appeal allowed.
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2023 (12) TMI 3
Refund of Excise Duty - transaction value - amount raised through Debit notes (cost difference) can form part of transaction value under Section 4 of the Central Excise Act or not, so as to make the excise duty paid to be correct in regard to transaction value of the goods cleared? - HELD THAT:- The transaction value means, the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay. This has two parts. Firstly, the price actually paid or payable when the goods are sold. Secondly, it includes in addition to the amount as price, any amount that the buyer is liable to pay. It is an admitted fact that debit notes have been raised after the clearances of the goods i.e. after sale of the goods. Further, the repeated communications by M/s.Mando India shows that they have never accepted to honour the increased price or the cost difference. If M/s.Mando India had agreed to pay the higher revised price it would definitely form part of the transaction value. As per the purchase orders or as per the communications between the parties there is no evidence to show that M/s.Mando India has agreed or is liable to pay the cost difference. The loan advance to the appellant by M/s.Mando India cannot be considered as an additional consideration or a consideration that has influenced the price agreed between the parties. The loan has been completely repaid by the appellant by adjusting in the invoices while making clearances of the products to M/s.Mando India. Further the debit notes have been raised subsequent to sale. Therefore, the higher revision of price not agreed by the buyer cannot form part of transaction value. The debit notes do not form part of transaction value. The excise duty paid is therefore excess. In the case of PETROFAB VERSUS COMMISSIONER OF C. EX. CUS., VADODARA [ 2007 (11) TMI 118 - CESTAT AHMEDABAD ] a similar issue came up for consideration - The Tribunal held in favour of the assesee holding that the supplementary invoices have been issued after the goods have been sold and cannot form part of transaction value. The Commissioner (Appeals) has relied upon the decision in the case of FIAT India Pvt. Ltd. [ 2012 (8) TMI 791 - SUPREME COURT] . The facts of the said case do not apply to the situation here for the reason that in the said case the assessee was consciously clearing the goods for a lesser price to make way into the market. The Commissioner (Appeals) has erred in allowing the appeal filed by the department and in upholding the order of recovery of erroneous refund passed by the adjudicating authority - the appellant is eligible for refund. The impugned orders passed by Commissioner (Appeals) are set aside - Appeal allowed.
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2023 (12) TMI 2
Principles of judicial discipline - principle of res-judicata - entitlement to interest for the period starting from the date of deposit till its realization - HELD THAT:- Both the parties agreed that in earlier round of litigation, this Tribunal vide order dated 03.01.2019 decided the appellant s entitlement to interest for the period starting from the date of deposit till its realization. Both the parties are also ad-idem to the fact that the said order dated 03.01.2019 was not challenged further. Once this is so, the said order dated 03.01.2019 attained finality between the parties and the Assistant Commissioner was bound by the said order. The impugned order of the Commissioner (Appeals) taking a contra view on the issue of entitlement and period of interest, is therefore contrary to the principle of judicial discipline as enunciated by the Hon'ble Supreme Court in UUNION OF INDIA VERSUS KAMLAKSHI FINANCE CORPORATION LTD. [ 1991 (9) TMI 72 - SUPREME COURT ] held that It is clear that the observations of the High Court, seemingly vehement, and apparently unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if allowed to become widespread, could result in considerable harassment to the assessee-public without any benefit to the Revenue. Further, it is a settled law that once an order has not been challenged before the appropriate authority, it cannot be reopened and challenged in collateral proceedings subsequently by the same authority - The finding recorded in the impugned order that the order dated 03.01.2019 was accepted by the revenue purely on monetary grounds, appears to be incorrect, as the quantum of interest i.e. Rs 69,44,200/- is higher than the prevailing monetary limit i.e. Rs 50,00,000/-. The applicability of sub-section (4) of Section 35R is restricted to the same authority i.e. the Commissioner (Appeals), Appellate Tribunal or the Court, whose order was not challenged by the revenue because of monetary limit and it is the same authority i.e. the Commissioner (Appeals), Appellate Tribunal or the Court, which shall have regard to the circumstances in which such appeal, application, revision or reference was not filed. Any interpretation other than this would result in chaos in administration of justice, as a well-reasoned order of a higher court would not be followed by a lower court, merely because the decision was accepted on monetary grounds. Thus, sub-section (4) of Section 35R can be invoked only by the same authority/court or the superior authority/court and not by the inferior authority/court - when revenue is alleging non-filing of appeal against order dated 03.01.2019 passed by this Tribunal purely on monetary grounds, it is this Tribunal alone, which can consider the circumstances in which the appeal was not filed by the revenue and may take appropriate decision on the issue. However, sub-section (4) of Section 35R cannot be applied by the lower authority i.e. the Commissioner (Appeals) in the present case, to take a view from that taken by this Tribunal. The impugned order violates principle of judicial discipline and is liable to be set-aside on this ground - the Assistant Commissioner rightly sanctioned the interest by following order dated 03.01.2019 of this Tribunal - Appeal allowed.
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Indian Laws
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2023 (12) TMI 1
Cancellation of sale deed on dishonor of cheque - Dismissal of suit filed by the appellant/plaintiff - suit was filed for cancellation of the sale deed and to restrain the defendants from interfering the possession of the plaintiff - contradiction in sales amount as per two agreements - HELD THAT:- In the case of non payment of sale consideration, the issue came up for consideration before the Supreme Court in the matter of Dahiben Versus Arvindbhai Kalyanji Bhanusali (Gajra) [ 2020 (7) TMI 786 - SUPREME COURT] wherein the Supreme Court at paras 29.7 held that if the sale consideration has not been paid, it could not be a ground for cancellation of sale deed. Following the judgment of Madhya Pradesh High Court in the matter of J.B.O. Association vs. State of M.P. [ 2002 (12) TMI 652 - MADHYA PRADESH HIGH COURT] wherein the High Court held that in case of conflict between two decisions of the Apex Court Benches comprising of equal number of judges, decision of earlier bench is binding unless explained by the latter bench of equal strength in which case the later decision is binding. Therefore, it was held that the decision of the earlier Division Bench unless distinguished by the decision of latter Division Bench, would be binding on the High Court and the subordinate courts. Therefore, in the instant case if the plaint averments are accepted that the sale having been made, the only recourse left to the appellant was to file a suit for recovery and evidence would show that for dishonour of the cheque proceeding has already been drawn and the complaint was filed under Section 138 of the Negotiable Instrument Act. As such the agreement Ex.P/3 cannot be given over riding effect over registered document of sale whereby the property has been transferred to the defendant. Consequently, the document Ex.P/3 wherein the plaintiff relied that in case non payment the agreement deemed to be cancelled cannot be given a legal precedent. There are no merit in the appeal, warranting interference in the impugned judgment and decree passed by the Court below, which is just and proper - appeal dismissed.
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