Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 21, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Validity of Circular issued by the CBIC - Jurisdiction - Form GSTR-3B is return or not - rectification of Form GSTR-3B - Learned counsel for the respondent was at pains to persuade us that the three-Judge Bench judgment can be distinguished, without realising that the three-Judge Bench judgment expressly overrules the impugned judgment. - Decided in favor of Revenue. - SC
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Input Tax Credit (ITC) - Constitutional validity of section 16(2)(c) of the CGST/WBGST Act - non-deposit of tax in the Government account by the suppliers which have been collected from the petitioners - If it is found upon considering the relevant documents that all the purchases and transactions in question are genuine and supported by valid documents and transactions in question were made before the cancellation of registration of those suppliers and after taking into consideration the judgments of the Supreme Court and various High Courts which have been referred in this order and in that event the petitioners shall be given the benefit of input tax credit in question. - HC
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Cancellation of GST registration - The two authorities of the State have acted only with a view to harass the petitioner which cannot be accepted at any cost. This attitude of the respondents in this petition cannot be tolerated as the officers are being State functionary has to act fairly and their action must be in consonance with the provisions of the Acts as well as Rules. - HC
Income Tax
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TDS u/s 194H or 192 - Non deduction of TDS on provision for commission for the Chairman and the Managing Director (CMD) of the Company - Section 192 of the said Act, unlike other TDS provisions require deduction of tax at source under the head “Salary only at the time of payment and not otherwise." - HC
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Validity of reopening of assessment u/s 147 - One wonders whether the sanctioning authority under Section 151 also would have even applied his mind because the reasons recorded as noted above itself displays non application of mind by the Assessing Officer. Therefore, either no sanction as contemplated under Section 151 of the Act has been obtained or the same was granted mechanically without application of mind to the facts because if only the Assessing Officer had placed the entire file before the sanctioning authority he would have pointed out the error in the reasons for re-opening - HC
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Reopening of assessment u/s 147 - Eligibility of reason to believe - “Reason to believe” or ‘Reasons to suspect” - According to us, when the AO receives information of such nature from investigation wing it certainly raises suspicion. Then the AO cannot and should not straight away issue notice u/s 148 of the Act and assume jurisdiction to reopen the assessment. Why because, there is subtle difference between ‘reason to suspect’ and ‘reason to believe’. Information adverse may trigger “reason to suspect” then the AO to make reasonable enquiry and collect material, which would make him believe that there is in fact an escapement of income - AT
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Nature of expenses - fees, taxes and other cost or any other charges on rented premises - impact fee levied by the municipal authority is penal in nature - the assessee was under obligation to bear the expenditure as per the tenancy agreement. Therefore, we are of the view that the ld. CIT(A) has erred in disallowing claim of the assessee - AT
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Addition u/s 68 - unsecured loans treated as unexplained credit - Onus to prove - AO merely issued show cause notice to the lenders and apparently stopped without making any further verification. He cannot merely reject all the detailed submissions and supporting documents which were submitted before him and further he has not pointed out any defect in the documentary evidences submitted by the assessee before him and made addition merely because none appeared before him for explanation. CIT(A) rightly deleted the addition - AT
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Addition of different amounts made towards amount received for sale of Transferable Developmental Rights (TDR) - Income or current liability - assessee’s income from TDR cannot be considered independently without taking the corresponding expenses, more so, when the TDR receipts are directly linked to the execution of the project. The Bench has held that since income from TDR is inextricably linked to the project and its cost, the cost of building has to be deducted against the income from sale of TDR. - AT
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Reopening of assessment u/s 147 - ‘reasons to believe’ and ‘reasons to suspect’ - Merely on the basis of suspicion observed that the aforesaid entry might be a bogus entry and that the assessee might have purchased the material from outside. A perusal of the reasons recorded by the Assessing Officer does not show that the Assessing Officer had any credible information or evidence to believe that the aforesaid transaction made by the assessee was bogus, rather, a reading of the whole of the contents of the document containing reasons for reopening of the assessment would reveal that the reopening of the assessment has been made merely on the basis of suspicion - Reopening of the assessment cannot be made - AT
Customs
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Levy of penalty u/s 114 and 114AA of the Customs Act, 1962 - Smuggling - The Revenue has not made any attempt to attribute the prior knowledge as to the involvement of the assessee-respondent right from the beginning in the alleged illegal import of red sanders. Further, the Revenue has also not established as to which act or omission on the part of the assessee-respondent herein that rendered the goods in question liable for confiscation, because such act or omission would have to be a deliberate act or omission. - AT
Indian Laws
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Dishonor of Cheque - the petitioner has been found guilty of the offence and was convicted and sentenced thereof - there are no illegality in the impugned judgment where a substantive sentence of three months of imprisonment as well as a compensation twice the cheque amount has been awarded in favour of the opposite party no.1, against the petitioner. - HC
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Dishonor of Cheque - rebuttal of presumption - A plausible case has been made out by the defence as regards the non-existence of any such legally enforceable debt or other liability, also because the said debt/liability is not reflected from the relevant balance-sheet which was produced as evidence. Thus, illegal share transactions, which were the premise of such alleged liability, could not be construed, even as per the prosecution case, to be “legally enforceable”. - HC
IBC
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Fresh consideration of resolution plan after a resolution approved by the CoC - Direction given by the NCLAT that Corporate Insolvency Resolution Process (CIRP) to be resumed from the stage of consideration of the Resolution Plans - The NCLAT has grossly erred in interfering with the decision of the CoC, which was duly approved by the NCLT - SC
Service Tax
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Refund of service tax - The order of the First Appellate Authority dated 22.10.2012 has become final since the appeal filed against this order was withdrawn by the Revenue thereby accepting the order passed by the Commissioner (Appeals), which indicates that the tax collected was without the authority of law. - AT
VAT
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Levy of penalty under Section 10-A of the CST Act - the Tribunal finds that the Petitioner in fact made a misrepresentation to the officials “knowing fully well” that he was not entitled to be issued with ‘C’ Forms on the strength of the R.C. He is further said to have managed to obtain ‘C’ Forms by such misguiding petition - although in so many words it has not been stated that the Petitioner has mens rea, the findings in fact indicate that he did - HC
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Exercise of jurisdiction erroneously - Erroneous application of provisions of the Tamil Nadu Value Added Tax Act, 2006 - Validity of assessment orders - Institutional respect is of paramount importance. Even the point of jurisdiction, limitation, error apparent on the face of the record, are on merits and all are to be adjudicated before the appellate authority and the appellate authority, more specifically, the Appellate Tribunal or the Commissioner (Appeals), as the case may be, is empowered to adjudicate all such legal grounds raised by the respective parties and make a finding on merits - HC
Case Laws:
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GST
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2021 (12) TMI 840
Validity of Circular issued by the CBIC - Jurisdiction - Form GSTR -3B is return or not - imposition on rectification of Form GSTR -3B in respect of the period in which the error had occurred - HELD THAT:- The judgement of the High Court has been expressly overruled by a three-Judge Bench decision of this Court in Civil Appeal [ 2021 (11) TMI 109 - SUPREME COURT] - Learned counsel for the respondent was at pains to persuade us that the three-Judge Bench judgment can be distinguished, without realising that the three-Judge Bench judgment expressly overrules the impugned judgment. - Decided in favor of Revenue.
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2021 (12) TMI 839
Seeking grant of anticipatory bail - event of arrest under Section 132(1)(a)(b)(c)(d) (i) Central Goods and Services Tax Act - HELD THAT:- Let the matter be listed on 12.1.2022 as fresh before the appropriate Bench. Since the applicant no. 2 has been granted interim protection vide order dated 07.12.2021, till the next date, in the event of arrest of the applicant no. 2 Vipin Kumar, in pursuance of summoning order dated 22.3.2021, under Section 132(1)(a)(b) (c)(d) (i) Central Goods and Services Tax Act, he shall be released on interim anticipatory bail on his furnishing a personal bond of ₹ 50,000/- with two sureties each in the like amount to the satisfaction of the concerned Officer of Central Goods and Services Tax Act, with the conditions imposed.
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2021 (12) TMI 838
Seeking direction against the respondent No. 3 to release the provisional attachment of the bank accounts, plant machinery, factory premises - provisional attachment made is dehors the provisions of Section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The objections have been filed by the petitioner well within time. The commissioner has also afforded opportunity of hearing. However, he needs to pass an order which since has not come, the petitioner is before this Court. Let such order be passed within 3 days. Any further actions on the part of the respondents if aggrieved by the outcome shall be permissible under the law. Application disposed off.
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2021 (12) TMI 837
Validity of direction declaring the continuance of blocking of petitioner s ITC beyond a period of one year - violation of express mandate of Rule 86A(3) of the CGST Rules, 2017 - HELD THAT:- Issue notice. Mr.Abhinav Kalia, Advocate accepts notice on behalf of the respondent. He states that he has no instructions in the present case. Keeping in view the fact that the petitioner s representations/letters dated 15th June 2021 and 17th September, 2021 have not been decided till date, the present writ petition is disposed of with a direction to the respondent to decide the aforesaid representations/letters by way of a reasoned order in accordance with law within four weeks.
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2021 (12) TMI 836
Seeking release of goods - expired E-way bill - Central Goods and Service Tax Act, 2017 and the Tamil Nadu Goods and Service Tax Act, 2017 - HELD THAT:- For the expiry of the E-Way Bill, the explanation of the petitioner in this Writ Petition is that there was torrential rain in Tamil Nadu, particularly, in Chennai District and therefore the vehicle could not move and that the journey was started later in time, by which time, the E-Way Bill generated on 27.11.2021 at about 06.23 p.m. had expired. Considering the fact that Chennai District and the neighbouring District were experiencing the torrential rain during the last week of November, 2021 and during the first week of December, 2021, the petitioner is directed to pay the tax determined on the consignment under both the Central Goods and Service Tax Act, 2017 and the Tamil Nadu Goods and Service Tax Act, 2017 and 25% of the penalty imposed in the impugned order. Petition disposed off.
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2021 (12) TMI 835
Prayer to file/upload GST TRAN-1 or to permit to file revised TRAN-1 form - HELD THAT:- It is clearly clearly brought out the difficulties faced by the assesses and also as to how the assesses having substantially complied with the requirement under law and having been entitled to credit on account of transition to the GST regime which is beyond the purview of the assessee and the assessee cannot be put to prejudice on account of technicalities. Thus, keeping the underlying principle in mind if the matter is examined then we are inclined to lean in favour of the writ petitioners and affirm the directions issued by the learned Single Judge. While pondering on the face of the issue, the decision of the Punjab and Haryana High Court in the case of HANS RAJ SONS VERSUS UNION OF INDIA AND OTHERS [ 2019 (12) TMI 997 - PUNJAB AND HARYANA HIGH COURT] . In the said decision the Court while allowing the writ petition had granted two options one by directing opening of the portal and in case of non-opening of portal the writ petitioner/assessee will be entitled to make unutilized credit in their GST 3B forms to be filed on the monthly basis. This will be a workable solution and the Assessing Officer will be entitled to examine the legality of the claim on such form being filed by the assessee. The substantial part of the order and the directions issued by the learned writ Court as well as reasoning given merits acceptance - the miscellaneous appeals and the connected applications are dismissed and the order and directions issued by the learned Single Judge is slightly modified by granting liberty to the writ petitioner/assessee to file individual tax credit in GSTR-3B Forms for the month of January 2022 to be filed in the month of February, 2022 and the concerned authority/Assessing Officer would be at liberty to verify the genuineness of the claim.
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2021 (12) TMI 834
Input Tax Credit (ITC) - Constitutional validity of section 16(2)(c) of the CGST/WBGST Act - non-deposit of tax in the Government account by the suppliers which have been collected from the petitioners - main contention of the petitioners in these writ petitions are that the transactions in question are genuine and valid by relying upon all the supporting relevant documents required under law - HELD THAT:- On perusal of records available, these writ petitions are disposed of by remanding these cases to the respondents concerned to consider afresh the cases of the petitioners on the issue of their entitlement of benefit of input tax credit in question by considering the documents which the petitioners want to rely in support of their claim of genuineness of the transactions in question and shall also consider as to whether payments on purchases in question along with GST were actually paid or not to the suppliers (RTP) and also to consider as to whether the transactions and purchases were made before or after the cancellation of registration of the suppliers and also consider as to compliance of statutory obligation by the petitioners in verification of identity of the suppliers (RTP). If it is found upon considering the relevant documents that all the purchases and transactions in question are genuine and supported by valid documents and transactions in question were made before the cancellation of registration of those suppliers and after taking into consideration the judgments of the Supreme Court and various High Courts which have been referred in this order and in that event the petitioners shall be given the benefit of input tax credit in question. Petition disposed off.
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2021 (12) TMI 833
Input Tax Credit - Deposit of half of the disputed amount with the GST Authorities subject to the final adjustment within a period of ten days - HELD THAT:- It is directed that the petitioner shall join the investigation and shall fully cooperate with the investigation process and on his doing so, the petitioner be released on interim bail subject to his furnishing personal bonds and surety to the satisfaction of Arresting/Investigating Officer. However, the petitioner shall continue to join the investigation as and when called upon to do so and shall abide by all the conditions as provided under Section 438(2) Cr.P.C. It is further directed that the petitioner shall forthwith deposit his passport, if any, with the SIT. Adjourned to 11.1.2022.
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2021 (12) TMI 832
Cancellation of GST registration - harassment of the assessee - allegation of non-submission of electricity bill - requisite documents for grant of such registration - HELD THAT:- Section 25 of CGST Act, provides detailed procedure to be followed by every person applying for registration. It further requires by the person to provide PAN and Aadhar details. Rule 8 and 9 provides how the application for registration has to be dealt with. Further Rule 9 suggests the manner in which verification has to be done. If on examination of the application accompanying the documents all found to be in order then approval should be granted within seven working days. In the event the officer is not satisfied with the documents annexed then inspection is provided and further clarification can be sought. In the case in hand PAN and Aadhar details as well as property receipts were provided as per the provisions of the Act and Rule. The petitioner has annexed the photocopy of the Form applied for registration as Annexure No. 1, whereas the details of PAN, Aadhar and property receipts have mentioned. PAN reference has come at page nos. 25, 28 and 29; Aadhar reference has come at page 29 and 33 as well as property reference has come at page 37 - It is clear from the records that all the documents as required under the Act and law as well as in compliance to the show cause notice were furnished by the petitioner and without pointing out any defect or short coming therein, the application should not have been rejected. The two authorities of the State have acted only with a view to harass the petitioner which cannot be accepted at any cost. This attitude of the respondents in this petition cannot be tolerated as the officers are being State functionary has to act fairly and their action must be in consonance with the provisions of the Acts as well as Rules. The writ petition is allowed with cost of ₹ 15,000/-, which shall be deposited before the High Court State Legal Services Committee, Allahabad within a period of 20 days from today.
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2021 (12) TMI 831
Duty drawback - refund of unutilized input tax credit - despite the verification exercise carried out in terms of Annexure 1, Circular No. 131/1/2020 GST dated 23.01.2020, the tag of risky exporter is not being removed - HELD THAT:- Matter be listed in the week of 17 th January, 2022.
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Income Tax
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2021 (12) TMI 830
TDS u/s 194H or 192 - Non deduction of TDS on provision for commission for the Chairman and the Managing Director (CMD) of the Company - disallowance under Section 40(a)(ia) - As per Section 192 of the said Act, TDS is deductible from salary payment only at the time of payment and not at the time of making provision and therefore no disallowance is called for in the given circumstances. CIT (A) accepted the contentions of Respondent and allowed this ground of appeal - Whether ITAT erred in holding that non-deduction of TDS under Section 194H by the Assessee company on commission payment to the directors is not liable for disallowance under Section 40(a)(ia) ? - HELD THAT:- We find that the commission paid to the CMD has been shown as part of salary in Form-16 for Assessment Year 2010-2011. Total salary paid for the Financial Year 2009-2010 as it appears from the impugned order is ₹ 1,72,15,959/- which includes commission for ₹ 1,08,00,000/- paid by assessee in the Assessment Year in question. Section 192 of the said Act, unlike other TDS provisions require deduction of tax at source under the head Salary only at the time of payment and not otherwise. We also find that the quantum of accrual of expenses is not disputed by Revenue and Shri Sharma also stated the same. Since Shri Sharma had in fairness stated that the quantum or accrual of expenses is not disputed, there cannot be any perversity in the order passed by CIT(A) or by ITAT in concurring with the findings of CIT (A). Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly - No substantial question of law.
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2021 (12) TMI 829
Addition based on documents found in search - Onus to prove - Whether the Respondent had failed to discharge its onus to prove the genuineness of the sale transaction with regard to the shop in the Cross River Mal? - HELD THAT:- This Court finds that the name of the assessee nowhere appears in the computer generated loose sheets found from the residence of Mr.Lalit Modi, the alleged broker. ITAT in its impugned order has concluded that there was no corroborative evidence or statement to prove that the payment had been received by the assessee other than cheque amount as entered in the sale agreement. The Tribunal had observed that on the bare perusal of the seized document it cannot be inferred or concluded that seized document belongs to or has any nexus with the assessee. Tribunal/ITAT has given cogent reasons for arriving at its decision.
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2021 (12) TMI 828
Refund of taxes paid/ deposited by the petitioner for the assessment years 1996-97 to 2016-17 along with applicable interest - Conclusions arrived at by the Tribunal as a result of which the Nil income returned by the Petitioner stood affirmed which in turn makes the petitioner entitled to refund of the entire taxes deposited/ paid, along with applicable interest - HELD THAT:- As by way of the present writ petition, the petitioner seeks refund of, as many as, twenty assessment years in one go - no cause of action has arisen in the recent past and therefore, the present writ petition is not maintainable. This Court finds that the petitioner prior to the filing of the present writ petition had made a request to respondent no.1 vide application dated 5th August, 2021 requesting thereby to respondent no.1 to grant refund of income tax due for the assessment years 1996-97 to 2016-17. However, the said application has not been decided till date despite various reminders. Consequently, this Court is of the view that the petitioner has the cause of action to maintain the present writ petition. This Court is also of the view that Section 240 of the Act embodies the salutary principle of right of the assessee to receive refund of tax which becomes due to the assessee as a result of any order passed in appeal. The present writ petition is disposed of with the directions that respondent No.1 shall process the case of the petitioner for refund of taxes paid/deposited by the petitioner for the assessment years 1996-97 to 2016-17 and refund the same along with applicable interest in accordance with law within three months.
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2021 (12) TMI 827
Validity of reopening of assessment u/s 147 - Notice in the name of company ceased to exist - HELD THAT:- As per MARUTI SUZUKI INDIA LIMITED [ 2019 (7) TMI 1449 - SUPREME COURT] case respondent has invoked jurisdiction of issuance of notice under Section 148 of the Act to an entity that had ceased to exist. This is notwithstanding the fact that Respondent No.1 was aware that Nirvan Holdings Pvt. Ltd., had ceased to exist. For reasons mentioned above, we state that Respondent No.1 was aware that Nirvan Holdings Pvt. Ltd. has ceased to exist. The stand now taken in the affidavit in reply is nothing but an after thought - the stand of Respondent No.1 today taken as afterthought that it was an error which could be corrected under Section 292B of the Act is not acceptable to this court. - Decided in favour of assessee.
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2021 (12) TMI 826
Validity of reopening of assessment u/s 147 - Eligible reasons to believe - no sanction as contemplated under Section 151 - HELD THAT:- On bare perusal of the reasons it is quite evident that the reasons are based on totally erroneous and in correct facts and without non application of mind. The fact is the return of income for A.Y. 2012-13 filed by petitioner on 24th September, 2012 has been assessed under Section 143(3) of the Act and the Assessment Order dated 31st March, 2015 has been passed - AO has proceeded on erroneous factual basis that the return of income was only processed under Section 143(1) - this displays total non application of mind. In fact, petitioner s allegations that Respondent No.1 has sought to re-open the assessment on incorrect factual position that the return of income was only processed under Section 143(1) of the Act has not even been denied in the affidavit in reply which is filed by the same Assessing Officer. In paragraph no.2 of the affidavit in reply which is in response to paragraph no.1 and 2 of the petition, Respondent No.1 simply says that these are factual in nature and the notice under Section 148 dated 26th March, 2019 and the order disposing the objections and the notice dated 22nd October, 2019 are issued in pursuance of the objective of completing reassessment in accordance with the procedures laid down. On this ground alone, the notice dated 26th March, 2019 has to be set aside. One wonders whether the sanctioning authority under Section 151 also would have even applied his mind because the reasons recorded as noted above itself displays non application of mind by the Assessing Officer. Therefore, either no sanction as contemplated under Section 151 of the Act has been obtained or the same was granted mechanically without application of mind to the facts because if only the Assessing Officer had placed the entire file before the sanctioning authority he would have pointed out the error in the reasons for re-opening. - Decided in favour of assessee.
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2021 (12) TMI 825
Validity of assessment u/s 144B - final notice along with the draft assessment order has not been served upon the petitioner - HELD THAT:- It is admitted that only draft assessment order was served upon the Assessee on 23.09.2021 without fixing any date for furnishing the reply and the final show cause notice availing the opportunity of hearing to the petitioner has not been served upon the Assessee. The Assessment Order was finalized and submitted for approval of Range Head on 24.09.2021. Thus, it is clear that as per the provision of Income Tax Act, 1961 under Section 144B(1) (xvi) and 114B(1)(xx)(ii), the final notice along with the draft assessment order has not been served upon the petitioner. As decided in GANDHI REALTY (INDIA) PRIVATE LIMITED VERSUS ASSISTANT/JOINT/DEPUTY/ASSITANT COMMISSIONER OF INCOME TAX/INCOME TAX OFFICER [ 2021 (12) TMI 313 - GUJARAT HIGH COURT] if there is any variation prejudicial to the assessee, final notice with the draft assessment order needs to be served necessarily as per the mandate of the statute and otherwise the order passed is non-est as provided under the said provisions itself. The present petition is allowed. The impugned order of assessment and consequent notice of demand is quashed and set aside. The respondent/revenue will be at liberty to proceed with the process of assessment under the provisions of Section 144B read with section 144C of the Income Tax Act, 1961 as permissible under the law obviously after issuance of the final notice-cum-draft assessment order and on availing an opportunity to the petitioner
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2021 (12) TMI 824
Cancellation of Assessment u/ 153C - HELD THAT:- Tribunal after taking note of the factual position which was available both before the Assessing Officer and the Commissioner of Income Tax (Appeals) [CIT (A)] held that there is nothing to indicate that the seized documents were disclaimed by NKG in whose case search was conducted. Furthermore, the Tribunal pointed out that the Assessing Officer has not referred to any material to indicate that the assessee is the owner of those seized documents. Thus, on facts, the Tribunal held that the Assessing Officer was not justified in exercising jurisdiction under section 153C of the Act. Thus, we find that there is no question of law much less substantial question of law arising for consideration on this issue. Additional depreciation under Section 32(1)(iia) on mining of coal - Tribunal had taken note of the decision of this Court in the case of CIT Vs. G. S. Atwal Company [ 2001 (2) TMI 32 - CALCUTTA HIGH COURT] for the proposition that mining of coal is production - HELD THAT:- Applying the said decision the Tribunal granted relief to the assessee. This issue has also been settled by the Hon ble Supreme Court in the case of CIT vs. Sesa Goa Ltd. [ 2004 (11) TMI 14 - SUPREME COURT] wherein it was held that extraction and processing of mineral ore amounts to production within the meaning of word under Section 32A(2)(b)(iii) of the Act . Thus, the finding rendered by the Tribunal does not call for any interference. Disallowance u/s 14A r.w.r. 8D - Whether investments made by the assessee in the group companies shall not be considered while applying the provisions of Section 14A read with rule 8D? - HELD THAT:- As assessee contended that when their own funds have been deployed for the investment, there is no income which is not included while computing the total income of the assessee and Section 14A would not apply. The assessee also challenged the finding of the Assessing Officer as being not a speaking order and criptic. Though such was the contention, the CIT(A) noted that the assessee has furnished the position of its own funds vis- -vis the total investment but declined relief to the assessee by observing that the assessee has not shown that the shares were acquired from its own fund without taking benefit of loan. When this finding was challenged before the Tribunal, we find that the Tribunal has proceeded on a different footing by making a reference that the investment is in the interest of a strategic investment. Though such a contention has been raised during the course of argument, the issue itself was whether this investment was from the own funds or borrowed funds. This exercise appears to have not been done by either the Assessing Officer or the CIT(A) or the Tribunal - thus issue requires to be remanded to the Assessing Officer for a fresh decision.
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2021 (12) TMI 823
Deduction under Section 80HHC - eligibility of profits and deductibility of profits arising under Section 115JB - HELD THAT:- Referring to reported judgments in Ajanta Pharma Ltd. v. Commissioner of Income-Tax [ 2010 (9) TMI 8 - SUPREME COURT] , order of the Supreme Court in Kerala Chemicals and Proteins Ltd v. Commissioner of Income Tax [ 2012 (9) TMI 1214 - SUPREME COURT] and Commissioner of Income-Tax v. Bhari Information Tech. System (P) Ltd. [ 2011 (10) TMI 19 - SUPREME COURT] the issue is concluded by these judgments in favour of assessee
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2021 (12) TMI 822
Reopening of assessment u/s 147 - Eligibility of reason to believe - Reason to believe or Reasons to suspect - accommodation entry transaction - transaction of assessee with M/s. Bridge Building Pvt. Ltd. to be accommodation entry availed by the assessee in the form of bogus billing - statement of Shri Ajit Kumar Jindal recorded by the Investigation Wing wherein he admitted to be an accommodation entry provider through his entities in lieu of commission And the AO notes that the bank account number of M/s. Bridge Building Pvt. Ltd. wherein the assessee had transferred the amount - HELD THAT:- It has to be kept in mind the assessee s scrutiny assessment u/s 143(3) was completed on 02.12.2016 and the information which the AO relies on is the statement of Shri Ajit Kumar Jindal was recorded as early as on 29.10.2014 (i.e. 2 years before). A reading of the reason recorded by the AO as discussed and analysed reveals that information from the Investigation Wing only says about the statement of Shri Ajit Kumar Jindal who on 29.10.2014 has admitted before them, that he is providing accommodation entry through his entities which includes M/s. Bridge Building Pvt. Ltd. The Investigation Wing on the strength of his admission has taken out the transaction made by Shri Ajit Kumar Jindal s entities viz. M/s. Bridge Building Pvt. Ltd. and found that assessee had transaction with M/s. Bridge Building Pvt. Ltd., so this information was passed on to the AO, who on receipt of it has jumped to the conclusion that since assessee had transacted with M/s. Bridge Building Pvt. Ltd. and then assessee is a beneficiary who availed for the bogus bills which was paid through bank to it and later got it back as cash as per the modus-operandi admitted by Shri Ajit According to us, when the AO receives information of such nature from investigation wing it certainly raises suspicion. Then the AO cannot and should not straight away issue notice u/s 148 of the Act and assume jurisdiction to reopen the assessment. Why because, there is subtle difference between reason to suspect and reason to believe . Information adverse may trigger reason to suspect then the AO to make reasonable enquiry and collect material, which would make him believe that there is in fact an escapement of income Simply because the assessee had transaction with M/s B B Pvt. Ltd., cannot be the basis to believe escapement of income, unless there is any material there to suggest that so called assessee s transaction was bogus the cheque given by assessee had been returned as cash to assessee. Thus in the facts discussed and based on the analysis of the reason recorded by the AO according to us, the AO could not have formed a belief that income chargeable to tax has escaped assessment. The information from Investigation Wing is only that Shri Ajit has admitted to be providing accommodation entry to Bathwal Group and to beneficiaries. However, when we examine the jurisdiction of AO, we have to look at the reasons recorded on a standalone basis. So in the absence of the list of beneficiaries attached to the reasons recorded on the statement of Shri Ajit, we do not find the name of assessee as beneficiary. Just because, the assessee had transaction with M/s B B Pvt. Ltd., cannot be a ground to believe that assessee s income has escaped assessment. - Decided in favour of assessee.
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2021 (12) TMI 821
Disallowance u/s.14A - whether no satisfaction has been recorded by the AO as per requirement of Rule 8D, no such disallowance is warranted ? - HELD THAT:- As disallowance made by the AO and confirmed by ld. CIT(A) u/s 14A of the Act read with rule 8D of the Rules which is similar to the one involved in assessee's appeal for A.Y. 2012-13, which has already been decided by us. Since all the material facts relating to the said issue as involved in A.Y. 2014-15[ 2020 (12) TMI 188 - ITAT PUNE] are similar to A.Y. 2012-13, we follow the conclusion drawn by us in A.Y.2012-13 and delete the disallowance made by the Assessing Officer and confirmed by the ld. CIT(A) u/s.14A of the Act read with rule 8D of the Rules.- Decided in favour of the assessee. Claim of the assessee u/s.80IB/80IC on sale of scrap - HELD THAT:- As relying on own [ 2017 (12) TMI 1826 - ITAT PUNE] in favour of the assessee by virtue of .Madras High Court judgment in the case of M/s Fenner India Ltd [ 1998 (4) TMI 67 - MADRAS HIGH COURT] for the proposition that the profit on sale of scrap material since had a direct link or nexus with the industrial undertaking and therefore, it is eligible for deduction u/s 80IB, considering the similarity in language used in sections 80HH and 80IB of the Act, we are of the considered opinion that the assessee should succeed in this regard also.
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2021 (12) TMI 820
Disallowance of rate difference and discount - HELD THAT:- Assessee was consistently making the claim of discount and rate difference on the sale of seeds to its customers. Such claims though disallowed at the end of the AO, but the same were allowed by the CIT(A) and thereafter in appeal by the Revenue, order of the ld. CIT(A) was upheld by the Tribunal. Though the fate of earlier claim of the assessee was very much on record, the ld. AO has ritually rejected claim of the assessee year after year without making any logical end. It has time and again stated by the assessee, recorded by the ld. CIT(A) and taken note by the Tribunal that the assessee is giving discount/rate deduction to customers as per its business policy, which are supported by circulars issued from time to time. The entire payment has been reflected in the ledger account of various dealers and supported by the evidences. The ratio of discount to the turnover is very consistent from year 2008-09, which has been demonstrated before the lower authorities, so was the ratio of gross profit. There was nothing on record before the ld. AO that claim of the assessee was not genuine or non-existent, he has mechanically followed his predecessor's order to reject, otherwise a justifiable claim of the assessee. Therefore, as observed earlier, since identical issue has been considered in favour of the assessee by the co-ordinate benches of the Tribunal from the Asstt. Year 2010-11 upto the Asstt. Year 2012-13, following the same, we reject this ground of appeal, and dismiss appeal of the Revenue.
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2021 (12) TMI 819
Direct expenses incurred on behalf of the client shown in the Contract Account - HELD THAT:- Issue is squarely covered by the order of this Bench of the Tribunal in the assessee s own case for assessment year 2010-11 [ 2019 (5) TMI 1669 - ITAT LUCKNOW ] held that it remains undisputed that the labour cess is part of the contract account; that this being so, the assessee is correct in contending that addition, if any, is maintainable only in the hands of the client of the assessee Corporation and not in the hands of the assessee; that the provisions made for labour cess, do not stand debited to the profit loss account and the profitability of the Corporation in the form of centage earned as gross profit, is not affected; and that the assessee Corporation is only a collecting agency for the purposes of the labour cess and deposit thereof in the Government account. The facts for the year under consideration are, mutatis mutandis, exactly similar. The issue is found to be covered squarely in favour of the assessee. We further notice that in assessment years 2011-12 [ 2019 (8) TMI 46 - ITAT LUCKNOW ] and 2012-13.[ 2021 (2) TMI 1229 - ITAT LUCKNOW] also, an identical issue had come up for consideration before the Lucknow Bench of the Tribunal, wherein also, the Tribunal decided the issue in favour of the assessee. Therefore, respectfully following the order of the Tribunal in the assessee s own case for the preceding years, i.e., assessment years 2010-11, 2011-12 and 2012-13, the grievance of the assessee is found to be justified and is accepted as such. Accordingly, the ground of appeal taken by the assessee is allowed and the addition is deleted.- Decided in favour of assessee. Addition on account of prior period expenses - HELD THAT:- The Tribunal, for assessment year 2010-11, held that the liability arose in the year under consideration, as is evident from the bill raised by the Electricity Department on 30/10/2019; that moreover, as claimed by the assessee, the amount pertains to the contract account and, therefore, in case the addition is made, an equivalent amount is to be reduced from the work-in-progress; and hence, no infirmity was found in the order of the ld. CIT(A) on this issue - grievance of the Revenue is not found to be justified and accordingly, ground of appeal taken by the Revenue is rejected. Accrual of income - Addition on account of interest on Client Interest Account - HELD THAT:- As decided in own case for the preceding assessment years, i.e., 2010-11, 2011-12 and 2012-13 CIT(A) has rightly observed that the interest earned by the assessee on unutilized fund is credited to the respective accounts and are the income of the concerned clients and not of the assessee. We do not find any infirmity in the well-reasoned order of the ld. CIT(A) on this issue. We accordingly confirm his order on this issue and reject ground - Decided against revenue.
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2021 (12) TMI 818
Exemption u/s 11 - Registration u/s.12AA rejected - corpus donation received - HELD THAT:- CIT(E) ought not to have rejected an application for grant of registration u/s. 12AA - In our considered opinion, CIT(E) ought to have seen and examine the aim and object of the trust whether same are consonance to the spirit of law or not. CIT(E) should have seen the genuineness of activities of the trust. In this present case, Ld. CIT(E) has not exercised the same before rejecting the registration. CIT(E) has neither pointed out any defect in aim and object of the society nor doubted the genuineness of the activity of the society. We direct Ld. CIT(E) to grant registration u/s.12AA of Income Tax Act to the applicant within 60 days from the receipt of this order. - Decided in favour of assessee.
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2021 (12) TMI 817
Ad-hoc addition towards personal and non-business use of various expenses (like telephone expenses, staff welfare expenses, vehicle repair and maintenance expenses and depreciation on vehicles etc) - HELD THAT:- There is no mention of any such specific bill/voucher qua the aforesaid expenses in question, as regards which the A.O had carried any doubts; or was of the view that the same pertained to an expenditure that was not incurred wholly and exclusively by the assessee for the purpose of its business. In fact, we find that the A.O had both in the course of the assessment proceedings as well as remand proceedings tried to justify the ad-hoc disallowance on the basis of generalized observations and not on the basis of any concrete material. As observed by the Tribunal in the assessee's own case for the immediately preceding year i.e. A.Y 2013-14, an ad-hoc disallowance without pointing out the specific expenditure the claim for deduction of which by the assessee is not found to be in order, cannot be sustained and is liable to be vacated. Even otherwise the expenses claimed by the assessee during the year under consideration had not witnessed any abnormal rise as in comparison to those of the last two preceding years, which would have otherwise justified drawing of adverse inferences qua the claim for deduction of such expenses during the year under consideration. In the backdrop of our aforesaid deliberations, we not being able to persuade ourselves to subscribe to the ad-hoc disallowance of expenses made by the A.O., thus, set-aside the order of the CIT(A) and vacate the ad-hoc disallowance - Decided in favour of assessee.
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2021 (12) TMI 816
Reopening of assessment - unexplained investment - Reopening on the basis of AIR information gathered from ITD System - addition being 12% of total sale turnover of assessee and income from other sources - HELD THAT:- We find that there is no discussion about the addition of income from other sources in the assessment order. Assessee vehemently submitted before us that the ld. AO has not made addition on the basis of reasons of reopening. The Hon'ble Jurisdictional High Court in CIT vs Mohmed Juned Dadani [ 2013 (2) TMI 292 - GUJARAT HIGH COURT] held that when on ground of which reopening of assessment was made by AO, he could not have made addition and some other grounds which did not form part of reasons recorded by him. Similar view that taken by the Hon'ble Bombay High Court in CIT vs Jet Airways [ 2010 (4) TMI 431 - HIGH COURT OF BOMBAY] and Hon'ble Delhi High Court in Ranbaxy Laboratories Ltd. vs CIT[ 2011 (6) TMI 4 - DELHI HIGH COURT] Therefore, in view of the aforesaid legal position, we find merit in the submission of ld. AR of the assessee that in absence of addition on the ground which did not form part of reasons recorded, the AO could not have make addition on some other ground, therefore, the plea of the ld. AR of the assessee is allowed and assessment order dated 11.08.2017 is set-aside. - Decided in favour of assessee.
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2021 (12) TMI 815
Employees' share of contribution to ESI to the extent not paid on or before the due date as mentioned in Sec 36(1)(va) - It was the case of the assessee that employees' share of ESI has been paid before the due date for filing of return u/s. 139(1) - HELD THAT:- The Hon'ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] has taken the view that employee's contribution under section 36(1)(va) of the Act would also be covered under section 43B of the Act and therefore if the share of the employee's share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act, then the assessee would be entitled to claim deduction. Therefore, the issue is covered by the decision of the Hon'ble Karnataka High Court. In this case there is no dispute that the assessee made payment of the Employees share of PF/ESI on or before the due date for filing return of income for AY 2017-18 u/s. 139(1) of the Act. Whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also ? - On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act, deserves to be deleted. Appeal of assessee allowed.
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2021 (12) TMI 814
Nature of expenses - fees, taxes and other cost or any other charges on rented premises - impact fee levied by the municipal authority is penal in nature - as per AO assessee was not owner of rental premises and impact fee being penal in nature levied by the municipal authority for regularizing illegal construction, and expenditure being capital in nature, the assessee has no locus to claim benefit of the same - explanation of the assessee is that in order to run business, it was a necessary expenditure linked with the tenancy agreement - HELD THAT:- In the present case, it is pertinent to note that though municipal authorities have imposed an impact fee of ₹ 5,19,051/-, and the assessee has made provision of this amount also, but ultimately, assessee has recovered ₹ 2,40,193/- from his owner and only claimed expenditure of ₹ 2,78,858/- whereas the AO has disallowed total amount of impact fee. The expenditure claimed by the assessee is only ₹ 2,78,858/-. This fact has duly been submitted by the assessee in his submission as discernible from the submissions noted above. Therefore, it is not justifiable at the end of the AO to make an addition of ₹ 5,19,051/- as against claim of ₹ 2,78,858/-. In the present case, the assessee was under obligation to bear the expenditure as per the tenancy agreement. Therefore, we are of the view that the ld. CIT(A) has erred in disallowing claim of the assessee. We allow this ground and delete the impugned addition - Decided in favour of assessee.
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2021 (12) TMI 813
Disallowance u/s 35(1)(iii) - assessee has given donation to one School of Human Genetics Population Health (SHG PH) - survey under section 133A - as per revenue information, the donation made by the assessee to the above Institution in the financial year 2013-14 relevant to Asstt. Year 2014-15 were bogus case of the assessee is that claim under section 35(1)(ii) of the Act for making donation to the institution notified by the Government of India in this behalf - HELD THAT:- When the assessee made the impugned donation, permission/approval granted by the Govt. of India with regard to provisions of sections 35(1)(ii) and 80G(5)(iv) was very much in force, and based on which, the assessee has made the donation to this institution. The assessee has provided sufficient evidence to prove its case before both the authorities below, and based on which, the ld. CIT(A) rightly allowed claim of the assessee. We find that recent judgment of Hon'ble Gujarat in the case of PCT Vs. Thakkar Ganpatlal HUF, [ 2020 (2) TMI 31 - GUJARAT HIGH COURT] as dealt with the similar issue, and while allowing claim of the assessee, referred to the decision of S.G. Vat Care P. Ltd. [ 2019 (1) TMI 1694 - ITAT AHMEDABAD] which was authored by one of us. The Hon'ble Gujarat High Court recorded observation and finding of the Tribunal on this issue in page no. 3 to 5 of the judgment, and thereafter came to the conclusion that the onus placed on the assessee has been discharged and no interference in the order of the ITAT is required. The Hon'ble Court, thus allowed claim of donation made to M/s. Herbicure Healthcare Bio-Herbal Research Foundation). Thus following principle of consistency, we find merit in the claim of the assessee and delete disallowance of deduction made of deduction under sections 35(1)(ii) of the Act.- Decided in favour of assessee.
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2021 (12) TMI 812
Reopening of assessment u/s 147 - AO initiated the reassessment proceedings by means of a notice u/s.148 opining that the assessee violated provisions of section 13(1)(c)(ii) and 13(2)(b) - HELD THAT:- Assessment in this case was originally completed u/s.143(3) of the Act on 31-12-2008. The initiation of re-assessment proceedings by means of a notice u/s.148 has taken place by virtue of a notice issued to the assessee on 31-03-2014. Proviso to section 147 states that where an assessment under sub-section (3) of section 143 has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year. The condition precedent for taking action u/s.147 after four years from the end of the relevant assessment year where the original assessment was completed u/s.143(3), is that there must be failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It is only when there is such a failure on the part of the assessee and further the reasons recorded by the AO for initiating the re-assessment proceedings refer to such fact of the failure that a valid initiation of re-assessment can take place. We are confronted with a situation in which the original assessment was completed u/s.143(3). Period of four years from the end of the relevant assessment year 2007-08 under consideration expires on 31-03-2012. Notice u/s.148 in this case was issued on 31-03-2014. As the proviso to section 147 is attracted in this case and the reasons recorded by the AO do not refer to any failure on the part of the assessee to disclose fully and truly all material facts necessary for reassessment, we are satisfied that the ld. CIT(A) committed no mistake in setting aside the reassessment on this preliminary legal score - Appeal of assessee allowed.
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2021 (12) TMI 811
Addition u/s 68 - unsecured loans treated as unexplained credit - Onus to prove - CIT- A deleted the addition - HELD THAT:- Assessee has taken unsecured loans and submitted all the relevant information in support of the sum credited in the books for which assessee has offered explanation in respect of the nature and source of the same and in the given case assessing officer is not satisfied due to the fact that none of the principal officers of the lender companies appeared before him. AO merely issued show cause notice to the lenders and apparently stopped without making any further verification. He cannot merely reject all the detailed submissions and supporting documents which were submitted before him and further he has not pointed out any defect in the documentary evidences submitted by the assessee before him and made addition merely because none appeared before him for explanation. After considering the detailed findings of Ld. CIT(A), we do not see any reason to interfere with his findings and in our view the assessing officer treated the unsecured loans as unexplained credit under section 68 even though all the documentary evidences were submitted before him. Therefore, we are inclined to dismiss the grounds raised by the revenue.
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2021 (12) TMI 810
Disallowing the deduction claimed u/s 80P(2)(a)(i) - income earned by the assessee on the money deposited with the bank - HELD THAT:- The provisions of section 80P(2)(a)(i) of the Act provides the deduction to a co-operative society engaged in the business of banking or providing credit facilities to its members. The provisions of the section are without any ambiguity - the income from the activity of financing from the members is only eligible for deduction under section 80P(2)(a)(i) - If there is any income arising to the co-operative society from the non-members that will not be subject to deduction under section 80P(2)(a)(i). It is only the interest derived from the credit provided to its members which is deductible under section 80P(2)(a)(i) of the Act and the interest derived by depositing surplus funds with the Banks other than cooperative bank is not being attributable to the business as envisaged under the provisions of the Act. Thus the same cannot be deducted under section 80P(2)(a)(i). No ambiguity that income earned by the assessee on the money deposited with the bank is not eligible for deduction under section 80P(2)(a)(i). As in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2021 (1) TMI 488 - SUPREME COURT ] by the Hon'ble Supreme Court of India wherein, the primary agricultural credit societies were held to be entitled to the benefit of the deduction contained in Section 80P(2)(a)(i) of the Act, notwithstanding the fact that the society may also be giving loans to its members which are not related to agriculture. However, if it is found that there are instances of loans being given to the non-members, profits attributable to such loans obviously were not liable to be deducted. The essence of this decision is that absolute denial of deduction under Section 80P(2)(a)(i) of the Act to the assessee's (cooperative societies) engaged in the providing credit facilities to the non-members along with its members is not warranted under the Act and only that part of profit and gains that is attributable and/or pertains to the non-members shall not be allowed as deduction under Section 80P(2)(a)(i). The profits and gains attributable to non-members arising as a result of advancement of loans was held to be not an allowable deduction under Section 80P(2)(a)(i) of the Act. In view of the above, we do not find any merits in the argument advanced by the learned counsel for the assessee. Thus, we hold that there is no infirmity in the order of the learned CIT (A), requiring any interference. Hence, we uphold the same. Hence, the ground of appeal of the assessee is dismissed.
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2021 (12) TMI 809
Capital gain computation - adoption the value determined by the DVO as sale consideration - HELD THAT:- The provisions of section 50C of the Act requires to adopt the value determined for the purpose of Stamp duty as the sale consideration on the transfer of capital asset being land and building if the consideration on the transfer of the capital asset is less than the value adopted or assessed or assessable for the purpose of stamp duty - the stamp value is deemed as the sale consideration under the provisions of section 50C - if the assessee disputes such stamp value than the matter can be referred to the DVO to determine the fair market value which shall be treated as sale consideration in pursuance to the provisions of subsection 2 of section 50C - in the present case the reference to the DVO has been made who determined the value at ₹70,54,000.00 in which the share of the assessee stands at ₹35,27,000.00 only - Accordingly, the learned CIT (A) has directed to the AO to adopt the sale consideration at ₹35,27,000.00 only for the purpose of computing the short-term capital gain. The provisions of section 50C of the Act was introduced in the Income tax Act, 1961 by the Finance Act, 2002 with effect from 1-4-2003 for substituting valuation done for Stamp Valuation purposes as full value of consideration in place of apparent consideration shown by the transferor of capital asset, being land or building and, accordingly, calculating capital gains under section 48 of the Act. On perusal of the above provisions, we note that there is no scope for making any adjustment for the gift while determining the full value of consideration under the deeming provisions of section 50C of the Act. Accordingly, we are not satisfied with the contention of the learned AR for the assessee. Thus, we have no alternative except to confirm the order of the authorities below. Hence the ground of appeal of the assessee is dismissed.
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2021 (12) TMI 808
Reopening of assessment u/s 147 - Bogus LTCG - HELD THAT:- AO had arrived at a bonafide belief that at least the LTCG which the assessee in his return of income had claimed to have earned from sale of shares of M/s JMD Telefilm Industries Ltd., had escaped assessment, by reason of the failure on his part to disclose fully and truly all material facts necessary for assessment. In the backdrop of the aforesaid factual position, we are unable to comprehend as to on what basis it is claimed by the ld. A.R that that A.O had reopened the case of the assessee on the basis of a borrowed satisfaction and/or on the basis of suspicion, conjectures and surmises, de hors any concrete material. A.O had before him sufficient material/information on the basis of which he had arrived at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment. We may herein observe that at the stage of reopening of a case u/s 147 of the Act, the A.O is only required to have a cause or justification to know or suppose that income of the assessee chargeable to tax had escaped assessment and, no obligation is cast upon him to have finally ascertained the said fact by legal evidence or conclusion. Our aforesaid view is as per the mandate of the judgment of the Hon ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd[ 2007 (5) TMI 197 - SUPREME COURT] AO had validly assumed jurisdiction u/s 147 of the Act and reopened the case of the assessee. We, thus, finding no infirmity in the validity of the jurisdiction assumed by the A.O for reopening the case of the assessee u/s 147 of the Act, uphold the same. The Ground of appeal No. 1 is dismissed. Addition u/s 68 - In the backdrop of our aforesaid deliberations are of the considered view that de hors any cogent material made available on record by the department which would prove to the hilt that the assessee had not carried out any genuine transaction of purchase/sale of shares of JMD Telefilms Industries Ltd. and, in the garb of bogus entry of a tax exempt LTCG u/s 10(38) of the Act, laundered his unaccounted money, the assessee s duly substantiated claim of having carried out genuine transaction of purchase/sale of shares of JMD Telefilms Industries Ltd. which is duly supported by him on the basis of documentary evidence, could not have been dislodged. Accordingly, for the reasons discussed at length by hereinabove, not finding favour with the view taken by the lower authorities, we herein set-aside the orders of the lower authorities qua treating the transaction of purchase/sale of shares of JMD Telefilms Industries Ltd. by the assessee as a bogus transaction and, consequently vacate the addition made by the A.O under Sec. 68 Addition u/s 69C - Transaction of purchase/sale of shares of JMD Telefilms Industries Ltd by the assessee as a genuine transaction, therefore, the addition made by the A.O u/s 69C towards alleged commission which the assessee as per him would have paid for facilitating the bogus transaction of purchase/sale of shares has to meet the same fate and, is resultantly vacated. Levy of interest u/s 234B - As the levy of interest as per the judgment of the Hon ble Supreme Court in the case of CIT vs. Anjum M.H Ghaswala [ 2001 (10) TMI 4 - SUPREME COURT] is mandatory, therefore, the A.O is directed to rework out the same while giving appellate effect to our order. The Ground of appeal No. 5 is allowed for statistical purposes in terms of our aforesaid observations. Assessee appeal is partly allowed.
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2021 (12) TMI 807
Reopening of assessment u/s 147 - legality of the re-assessment proceedings - Assessment against legal heir of Late assessee V.C. Mehta - HELD THAT:- As during the search operation information relating to the HSBC bank account was brought to the notice of Mr. Anoop Mehta, who is one of the legal heir of Late Vrajlal C. Mehta. Mr. Anoop acknowledges the information brought to his notice by the Department and he referred the same information to the executer of the estate of late Shri Vrajlal C. Mehta. This fact was disclosed to the revenue and the AO also acknowledges the same. The Revenue also initiated the proceedings in the name of executors of estate of Late V.C. Mehta in A.Ys. 2006-07 2007-08. For this AY in 2006-07, the AO completed the re-assessment in the name of Anoop Mehta as legal heir. This is clearly an initiation of proceedings with wrong jurisdiction similar to AY 2007-08. We observe that in AY 2007-08, the Co-ordinate Bench has quashed the order passed by AO and findings of Ld. CIT(A). We also observed from the record that in AY 2006-07, AO accepted the RoI filed by the executors of Late Vrajlal C. Mehta under the PAN of Late Shri Vrajlal C. Mehta. But the assessment order was passed in the name of Shri Anoop V. Mehta as a legal heir of Late Vrajlal C. Mehta. Since the issue was already decided by the Co-ordinate bench and the Executors of the Estate also declared the income and paid the relevant taxes on the same amount which is the subject matter in this appeal. Therefore, we do not see any reason to interfere with the findings of ld. CIT(A). Therefore, we are inclined to dismiss the grounds raised by the Department.
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2021 (12) TMI 806
Deduction claimed u/s 80P(2)(a)(i) - interest on the deposits from non-members - AO computed the proportionate amount of interest on the deposits from non-members which was not eligible for deduction under section 80P(2)(a)(i) - HELD THAT:- The provisions of section 80P(2)(a)(i) of the Act provides the deduction to a co-operative society engaged in the business of banking or providing credit facilities to its members. The provisions of the section are without any ambiguity. In other words, the income from the activity of financing from the members is only eligible for deduction under section 80P(2)(a)(i) of the Act. If there is any income arising to the co-operative society from the non-members that will not be subject to deduction under section 80P(2)(a)(i) of the Act As relying on STATE BANK OF INDIA (SBI) VERSUS COMMISSIONER OF INCOME TAX [ 2016 (7) TMI 516 - GUJARAT HIGH COURT] it is only the interest derived from the credit provided to its members which is deductible under section 80P(2)(a)(i) of the Act and the interest derived by depositing surplus funds with the State Bank of India is not being attributable to the business as envisaged under the provisions of the Act. Thus the same cannot be deducted under section 80P(2)(a)(i) of the Act. Thus there remains no ambiguity that income received by the assessee for ₹ 9,43,170.00 on the money deposited with the bank is not eligible for deduction under section 80P(2)(a)(i). As decided in THE MAVILAYI SERVICE COOPERATIVE BANK LTD. [ 2021 (1) TMI 488 - SUPREME COURT] absolute denial of deduction under Section 80P(2)(a)(i) of the Act to the assessee's (cooperative societies) engaged in the providing credit facilities to the non-members along with its members is not warranted under the Act and only that part of profit and gains that is attributable and/or pertains to the non-members shall not be allowed as deduction under Section 80P(2)(a)(i) of the Act Thus the profits and gains attributable to non-members arising as a result of advancement of loans was held to be not an allowable deduction under Section 80P(2)(a)(i) of the Act. Thus, we hold that there is no infirmity in the order of the learned CIT (A), requiring any interference. Hence, we uphold the same. Hence, the ground of appeal of the assessee is dismissed.
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2021 (12) TMI 805
Delayed employees contribution towards Provident Fund - addition u/s 2(24)(x) and section 36(1)(va) - HELD THAT:- As decided in PLANMAN HR (P) LTD., 48, COMMUNITY CENTRE, NARAINA INDUSTRIAL AREA, PHASE-I, NEW DELHI. [ 2021 (7) TMI 686 - ITAT DELHI] Delayed payments of employee s contribution to Provident Fund/ESIC is allowable if it is deposited before the return is filed u/s 139(1). In view of the legal position on the issue and the order of the Hon'ble ITAT, Delhi in the appellant s own case [ 2017 (1) TMI 1598 - ITAT DELHI] the company is eligible for deduction made by the AO by invoking provisions of Section 36(1)(va) read with 2(24)(x) and 43B of the Act. The AO is, therefore, directed to delete the addition. - Decided in favour of assessee.
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2021 (12) TMI 804
Revision u/s 263 by CIT - Income from other source in respect of profit and loss account under the caption profit and loss account in share trading of the assessee company was not properly verified by the AO - HELD THAT:- CIT has not commented on the nature of the business and the offer of the assessee of the rental income as the business income and totally ignored the assessee s submission before the Assessing officer at the time of assessment proceedings u/s 143(3). CIT cannot say that there was inadequate enquiry or no enquiry at all. The decision of the Hon ble Apex Court SHREE MANJUNATHESWARE PACKING PRODUCTS AND CAMPHOR WORKS [ 1997 (12) TMI 4 - SUPREME COURT] relied by the Pr. CIT is not applicable in the present case. CIT while passing the order under Section 263 of the Act has not shown any new material or has not come to the conclusion that there is escapement of income during the assessment proceedings. The order passed by the Pr. CIT in capacity of Section 263 is merely a second opinion and does not fall in the category of prejudicial to the interest of Revenue. In the present case the AO has taken cognizance of all the material provided by the Assessee during the Assessment Proceedings and after verifying the same has passed just and proper order. Thus, the Pr. CIT s observation that no inquiry/insufficient enquiry made by AO, is incorrect and does not sustain. Thus, merely having a different opinion upon the treatment of any receipt cannot be the reason of invocation of section 263. Thus the appeal of the assessee is allowed.
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2021 (12) TMI 803
Deduction u/s 10A - Proof of new unit to set up - AO was of the view that though the approval for software technology Park has been taken however, the requisite condition as stipulated u/s 10A for claiming exemption does not satisfy even after considering the facts and documentary evidences submitted during the flash assessment proceedings - assessee has converted an existing export unit to an STPI unit with the same office premises, computers, and staff and mere purchase of new equipment, computers, and employing more staff will not prove the contentions that the new unit was set up - HELD THAT:- On careful examination of the details furnished before us we find that the assessee has set up a new unit, which was in different premises, it has a different staff, different nature of business, different service line. The assessee has also shown the setting up of the new business by showing us the various detailed contained in the financial records of the assessee such as invoices, its remittances, the existence of domestic unit earlier et cetera. The assessee has also shown the approval of the STPI unit dated 28th of March 2000, which states that there is a specific reference to the unit located at the new premises - The assessee has also shown the investment in the fixed assets separately maintained for STPI unit. We find that the no infirmity is pointed out. The conditions laid down were also shown to have been fulfilled for claiming deduction u/s 10 A of the act by the assessee. In view of this, we do not find any merit in the solitary ground raised by the learned assessing officer. Accordingly we uphold the order of the learned CIT A and grant deduction u/s 10 A of the income tax act to the assessee. - Decided against revenue.
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2021 (12) TMI 802
Exemption u/s 11 - rejection of applications seeking registration u/s 12AA and approval u/s 80G - No appearance by assessee - HELD THAT:- We find that there is no dispute with regard to the fact that the impugned order was passed in the absence of the assessee. It is seen from the records that Ld.CIT(E) had given opportunity vide letters dated 20.01.2020, 19.06.2020 04.09.2020. In ordinary circumstances, these opportunities would have been sufficient for the assessee. However, looking to the fact that there has been wide spread of Covid-19 pandemic and on some occasions, the Government had also issued instructions for imposing lockdown. To sub-serve the interest of principle of natural justice and to provide meaningful opportunity for effective representation, the impugned order deserves to be set aside. We hereby, set aside the impugned order and restore the application u/s 12AA of the Act dated 09.12.2019 to the file of Ld. CIT(E) to decide it afresh - Grounds raised by the assessee are allowed for statistical purposes
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2021 (12) TMI 801
Penalty u/s 271(1)(c) - search action u/s 132 under the head income from other sources - introduction of share premium and the share capital in the company - income as disclosed during the search and seizure action u/s 132(1) to the tune since not found declared in the original return of income has been added to the total income of the assessee - HELD THAT:- As identical cases in deleting penalty imposed by the authorities below and the order passed in the case of PCIT (Central), Nagpur vs. Rajkumar Gulab Badgujjar [ 2019 (1) TMI 656 - BOMBAY HIGH COURT] we find no ambiguity in the order passed by the Ld. CIT(A) in deleting the penalty against the assessee. Hence, the appeal preferred by the Revenue is found to be devoid of any merit and, thus, dismissed.
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2021 (12) TMI 800
Exemption u/s 54F - investment made in the constructed area comprising of multiple residential flats (more than one in number), which was received by the assessee - AO restricted the exemption u/s. 54F claimed only to the extent of investment in one residential flat and denied on the other residential flats - HELD THAT:- Issue decided in KONDAL RAO VADDEPALLY, SUDARSHAN RAO INENI, VADDEPALLY DAMODAR RAO [ 2021 (12) TMI 730 - ITAT HYDERABAD] as held that assessee is eligible to claim deduction u/s 54F of the Act in more than one house. - Decided in favour of assessee.
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2021 (12) TMI 799
Addition of different amounts made towards amount received for sale of Transferable Developmental Rights (TDR) - Income or current liability - why the amount received from sale of TDR should not be treated as income of the assessee in the respective assessment years? - assessee submitted that since it is following percentage completion method for recognizing the revenue from the SRA project and since 25% of the total estimated project is not completed till date, TDR cannot be treated as income but has to be shown as a current liability - whether the amount received by the assessee from sale of TDR granted in respect of the SRA project is taxable in the year of receipt or the assessee s method of revenue recognition following percentage of completion method is acceptable? - HELD THAT:- Tribunal in [ 2019 (3) TMI 1942 - ITAT MUMBAI] held that the percentage completion method followed by the assessee is a well recognized method as per ICAI guidelines and judicial precedents - the sale of TDR cannot be considered in isolation of assessee s obligation under the SRA agreement to complete the SRA project. On analyzing the agreement with SRA, the Bench has observed that the assessee was under obligation to complete the project as per the agreement. The Bench has also observed that the TDR was granted to provide finance to the assessee to complete the project. Thus, assessee s income from TDR cannot be considered independently without taking the corresponding expenses, more so, when the TDR receipts are directly linked to the execution of the project. The Bench has held that since income from TDR is inextricably linked to the project and its cost, the cost of building has to be deducted against the income from sale of TDR. Though, the assessee has earned income from sale of TDR, however, no income from the SRA project, as yet, has been offered to tax. It is a fact that while deciding the appeals against the orders passed u/s 263 of the Act in assessment years 2012 13 and 2013 14 the Tribunal [ 2019 (3) TMI 1942 - ITAT MUMBAI] has recorded certain finding touching upon the merits of the issue, which, indeed, are favourable to the assessee. Admittedly, aforesaid order of the Tribunal was not available either before the Assessing Officer or learned Commissioner (Appeals). Therefore, applicability of the aforesaid order of the Tribunal to the facts of the present case needs to be examined. This is so because, the order passed by the Tribunal was in the context, whether the revisionary authority has correctly exercised jurisdiction under section 263 of the Act to revise the assessment orders. In view of the aforesaid, we set aside the impugned order of learned Commissioner (Appeals) and restore the issues back to the Assessing Officer for fresh adjudication - Assessee appeals are allowed for statistical purposes.
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2021 (12) TMI 798
Delayed payment of employees contribution to PF ESI - Addition on the ground that this was not paid within prescribed due date and deposited late in the light of provision of Section 2(24)(x) read with section 36(1)(va) relying upon the information given by the Auditor in Form 3CD - HELD THAT:- Since in the instant case the assessee admittedly has deposited the employees contribution to PF ESI before the due date of filing of the income tax return, therefore as relying on INSTA EXHIBITIONS PVT. LTD, C/O. CHACHAN LATH [ 2021 (8) TMI 1235 - ITAT DELHI] AND PRO INTERACTIVE SERVICE (INDIA) PVT. LTD. [ 2018 (9) TMI 2009 - DELHI HIGH COURT] CIT(A) is not justified in sustaining the adjustment made by the A.O-CPC on account of belated payment of employees contribution to PF ESI. - Decided in favour of assessee.
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2021 (12) TMI 797
Reopening of assessment u/s 147 - reasons to believe and reasons to suspect - violation of mandatory jurisdictional conditions stipulated under the Act - bogus purchases - HELD THAT:- AO had only an information that the assessee M/s. Dove Consultants Pvt. Ltd. has made a transaction with M/s. Bhola Trading Company. However, there was no reliable information that the said transaction was a sham transaction. The assessee admittedly is engaged in the business of Electric Contractor. The assessee purchased electric cables from the said M/s. Bhola Trading Company - AO however, doubted the said transaction - as been noted by the AO himself that during the investigation, ledger account of M/s. Bhola Trading Company in the books of assessee company was reflecting the aforesaid transaction. The purchase invoices were also produced before the investigation wing. Assessing Officer further mentioned about the gross turnover of the assessee and observed that the income of the assessee company has considerably increased from AY 2008-09 to AY 2009-10. The Ld. Counsel, in this respect has submitted that the assessment year under consideration is AY 2009-10 and the assessee s income as per the reasons recorded has considerably increased. The sales / consumption of the material by the assessee has also not been doubted by the Assessing Officer. There is no mention of any evidence available before the AO to show that the aforesaid transaction was a bogus transaction. Merely on the basis of suspicion observed that the aforesaid entry might be a bogus entry and that the assessee might have purchased the material from outside. A perusal of the reasons recorded by the Assessing Officer does not show that the Assessing Officer had any credible information or evidence to believe that the aforesaid transaction made by the assessee was bogus, rather, a reading of the whole of the contents of the document containing reasons for reopening of the assessment would reveal that the reopening of the assessment has been made merely on the basis of suspicion. Reopening of the assessment cannot be made on mere suspicion in the absence of any reliable information or evidence to form the belief that the income has escaped assessment. In this case, there is no mention of any such reliable document / evidence which may be sufficient to form the belief that the transaction in question was a bogus transaction or that the income of the assessee had escaped assessment. - Decided in favour of assessee.
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2021 (12) TMI 785
High Court jurisdiction u/s 260A - Application for condonation of delay - objection as raised on the ground that the order impugned in all these appeals have been passed by the Delhi Tribunal over which this Court would not have any jurisdiction - correctness of the orders impugned which were admittedly passed by the Tribunal located at Delhi - HELD THAT:- This issue is no longer res integra and has been answered by the Division Bench of this Court in A.B.C. India Limited [ 2002 (3) TMI 35 - CALCUTTA HIGH COURT ] revenue's reference application under Section 256(1) of the Act was rejected by the Tribunal at Guwahati. Subsequently, the assessments were transferred to the Commissioner under the jurisdiction of the High Court at Calcutta. The High Court at Calcutta passed order under Section 256(2) and the assessee prayed to recall of the said order contending that the said order was passed without jurisdiction. The said submission made by the assessee was sustained by the Division Bench holding that the question of cause of action would be irrelevant since the Court would be determining the question since determined by the Tribunal of another State which, according to law, is bound by the decision of the Supreme Court at the first place and then by the decision by the jurisdictional High Court. The decision in ABC India Ltd. [ 2002 (3) TMI 35 - CALCUTTA HIGH COURT] was followed in J.L. Morrison India [ 2004 (6) TMI 17 - CALCUTTA HIGH COURT] and it was pointed out that if the High Court of Calcutta was to exercise jurisdiction over the order passed by the Tribunal located outside the jurisdiction of this Court, which would create a judicial anomaly with regard to the precedence that the order passed by the Court, would be binding upon the Tribunal of another State and this would create an anomalous situation with regard to pure question of law. It was held assumption of jurisdiction of such a case would amount to judicial impropriety and irregularity. To the same effect is the decision of Akzo Nobel India[ 2014 (3) TMI 1191 - CALCUTTA HIGH COURT] which followed the decision in ABC India Ltd. and J.L. Morrison India Ltd. In the said decision, it was pointed out that Section 260A provides that appeal shall lie to the High Court from an order passed by the Appellate Tribunal. Appellate Tribunals are located in every State except these cases where an Appellate Tribunal may have been entrusted with the jurisdiction of more than one state. It was further pointed out that the word High Court used in Section 260A has to be understood in the light of Section 269 which provides that the High Court means in relation to any State, the High Court for that State. We hold these appeals are not maintainable before this Court as submitted by the learned Counsel appearing for the respondent/assessee in respect of an appeal filed in the assessee's group company's case [ 2020 (1) TMI 1541 - CALCUTTA HIGH COURT] - Similar objection was raised by the assessee and the same was sustained by order dated 28th January 2020 and the appeal was dismissed as not entertainable on the ground of lack of jurisdiction. In the light of the above, we hold that all these appeals are not maintainable and consequently, the applications for condonation of delay as well as the appeals are rejected as not maintainable. However, we grant liberty to the appellant/revenue to file the appeals before the appropriate High Court.
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2021 (12) TMI 784
Levy of late fee u/s. 234E prior to 01.06.2015 - scope of amendment - Conflicting views/decisions - HELD THAT:- We are inclined to follow the ratio decidendi of the Hon ble Karnataka High Court in the case of Fatehraj Singhvi [ 2016 (9) TMI 964 - KARNATAKA HIGH COURT] and Shri Ayappa Educational Charitable Trust [ 2018 (1) TMI 90 - KARNATAKA HIGH COURT] in the light of the Hon ble Supreme Court decision in Vegetable Products [ 1973 (1) TMI 1 - SUPREME COURT] that if there is no jurisdictional High Court s decision on an issue then the view taken in favour of the assessee can be followed. Therefore, we are inclined to hold that the demand raised by the Income Tax Authorities for levying late fee u/s. 234E of the Act for the period prior to 01.06.2015 cannot be sustained and we order accordingly. However, we hasten to add that Hon ble Karnataka High Court while passing the order had held the order to be prospective in operation and had clarified that if an assessee had made payment of fees u/s. 234E as per the demand/intimation u/s. 200A of the Act for the period prior to 01.06.2015 then it cannot claim the refund since the Hon ble Karnataka High Court has held its order to be prospective in operation. - Decided in favour of assessee.
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2021 (12) TMI 783
TP Adjustment - Foreign/AE selected by the assessee having been rejected as a tested party - HELD THAT:- It is seen that such issue also came up for consideration before the Tribunal in the assessee's appeals for the assessment years 2010-11 and 2011-12 [ 2019 (12) TMI 374 - ITAT PUNE] has directed that the transfer pricing addition should be restricted to the transactions with AEs and not unrelated or non-AEs. Respectfully following the precedent, we set-aside the impugned order on this score and remit the matter to the file of AO/TPO with a direction to confine the transfer pricing addition only qua the international transactions under the Manufacturing segment and not the entity level transactions of the segment. Disallowance of IT Support Service fee paid to N.V. Bekaert SA u/s. 40(a)(ia) - Sub-licensing/licensing of software having been treated as Royalty and Provision of support and maintenance services in relation to such sub-licensed/licensed software having been treated as Fees for technical services - one of the international transactions declared by the assessee was Reimbursement of SAP software cost to its Associated enterprise (AE), viz., N.V. Bekaert SA. - What for the payment was made? - HELD THAT:- AR tried to make out a case that the assessee did not use any IT infrastructure equipment but availed only IT services for which the payment was made. This contention runs contrary to the stand taken by the assessee before the authorities below as has been discussed above threadbare, which ardently proves that the assessee paid for the use of the IT Infrastructure facility set up by its AE and not for availing any separate IT services. Still, in order to provide an opportunity to substantiate his stand that the assessee paid for the IT services, the Bench directed the ld. AR to file details of the total costs incurred by NV Bekaert SA during the year on the IT Infrastructure facility and then the basis of charge to the assessee. Since such details were not readily available with him, the matter was adjourned for a later date. On the next date of hearing, again, the ld. AR failed to file any such details. In fact, our attention has not been drawn towards any specific IT service provided to the assessee by NV Bekaert, SA. Going with what the assessee stated before the authorities below, including the price mechanism as reproduced above, there remains no doubt whatsoever that it is a clear-cut case of allocation of total costs on the basis of extent of user of the IT equipment and not of paying for availing any IT service from the AE. Self user of an equipment by a person for an output and, simultaneously, another person also providing that very output through his services to the first person, is practically not possible. Presence of one ousts the other. As the extant is a case of user of the IT equipment by the assessee, it cannot be a case of provision of service by the AE. Is the payment Reimbursement? - The reimbursement issue has rightly not been pressed because the Transfer pricing study report of the assessee, at internal page no. 79, categorically states that: 'The cost sharing arrangement is pertaining to IT support services which are required for all Group companies and allocation of cost is in accordance with reasonable allocation keys that commensurate with the usage/benefit to the beneficiary group entities (including BIPL). Certain IT support services are charged to Group entities at cost plus 5% mark-up basis. However, while charging for the said services to BIPL, AE has merely recovered the proportionate costs from BIPL and has not charged any mark-up on the costs'. Albeit, it has been stated that the AE did not recover any mark-up from the assessee, but no evidence was placed on record to substantiate this argument before the TPO as well as the DRP. Position continues to remain the same before the Tribunal as well. Is the payment Royalty or Fees for technical services? - Tribunal observed that the software licenses were purchased for installation in the IT Infrastructure facility of the non-resident assessee and RIPL was given only access to that IT facility, similar to what has happened in the case under consideration. Vide its order dated 21.10.2021, which was duly confronted to both the sides during the course of hearing of the extant appeal, the Tribunal held ₹ 3.88 crore was not different from ₹ 20.04 crore and was hence chargeable to tax in India in the hands of the non-resident assessee. The facts of the instant case are on all fours with Rieter Machine Works Ltd. [ 2021 (11) TMI 37 - ITAT PUNE] insofar as the taxability of the amount received by foreign entity from the Indian entity for allowing access to its IT Infrastructure facility, is concerned. DRP was not justified in compartmentalizing the payment made by the assessee into three broad categories and then allowing the assessee's claim in respect of the (c) category, being consideration for other support services, while rejecting for (a) and (b) categories of sub-licensing/licensing of software and its support and maintenance services. Legally speaking, the amount paid by the assessee on this count is chargeable to tax in entirety in the hands of the non-resident. Failure of the assessee to deduct tax at source should have met its logical consequences. Since the part of the direction of the DRP, providing relief under category (c) has not been challenged by the Revenue, the same will remain intact and the consequences of non-deduction of tax at source would visit only the payment for categories (a) and (b), for which the disallowance has been made - We accord our imprimatur to the impugned order to this extent. Scope of powers of Tribunal in appeal - Tribunal can disallow a claim on a ground different from that of the AO, if it is rightly disallowable under the latter. As the subject matter of claim in both the cases remains the same, no fetters can be imposed on the power of the Tribunal to examine the subject matter in appeal from another point of view by applying another provision to the same issue, that was not applied by the AO. This view also gets fortified on reading the exception clause contained in rule 11 of the Income-tax Appellate Tribunal Rules, 1963, It can be seen from the discussion supra that the Tribunal did not decide the issue of royalty from a different standpoint on any non-existing legal or factual position but took cognizance of the correct legal position and the material already available on record from the orders of the authorities below qua the transaction under consideration. It is only on consideration of such material that the subject matter in appeal has been approached from a different perspective and decided on a legally tenable angle. AO was justified in making disallowance u/s. 40(a)(ia) on failure of the assessee to deduct tax at source from the payment to NV Bekaert SA, which is chargeable to tax in the hands of the foreign entity. Appeal is partly allowed for statistical purposes.
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2021 (12) TMI 782
Accrual of income - Receipt of conversion charges - addition as expenditure in the relevant assessment year and consequently confirming the inclusion of income in the hands of the Assessee - HELD THAT:- Under the Income-tax Act, liability to pay Income-tax arises on the accrual of income and it is not from the computation made by the assessee or AO. The section 4 of the Income-tax Act, is the charging provision in the Income-tax Act. The charge arises when the person earns income and computation of income there upon to be made To bring the receipt of conversion charges to be income as mentioned in sec.2(24) of the Income-tax Act, it is necessary that it should be computed in accordance with method of accounting regularly employed by the assessee In the present case, the assessee, admittedly following the mercantile system of accounting and in such a method, deduction for expenses allowed irrespective of fact where such an amount has been actually paid or remained unpaid at the end of the financial year. In the similar manner, the income, under such a method of accounting is required to be recognized on accrual basis - when the assessee following mercantile system of accounting and right to receive such an income is accrued, then it is chargeable to tax and receipt of such amount, whether before or after accrual is of no consequences. In the similar way, some amount has been received, which does not represent income accrued for the year, it shall not be charged to tax and will assume the nature of liability till the time of its accrual. Only when such amount accrues as income, the earlier liability will get converted into income. Till that time, it will continue as liability, despite the fact that it was received. Thus, receipts relevant to tax under mercantile system of accounting are the fact of accrual of income during the financial year and actual receipt of income is irrelevant. The explanation of assessee is that it has not received that income. The explanation offered by the assessee has been perused and found against the facts of the case. As per Clause-K, SMEORE is agreeable to pay to SMPPL a conversion fee to be determined in two parts, namely, fixed cost per month to meet manpower, administration, finance cost etc., and a variable cost per tonne of ferroalloy produced. Conversion costs payable as determined on the date of execution of this agreement is at ₹ 40 lakh per month towards fixed costs and ₹ 20,000 per tonne towards variable costs. From this, it is evident that the SMIORE has to pay fixed conversion fee of ₹ 40.00 lakh per month to the assessee to meet manpower, administration, finance cost etc. irrespective the ferroalloy produced. Receipt of fixed conversion fee of ₹ 40.00 lakh per month does not depends on production as explained by the assessee. Again, it is also evident from the statement of receipt that the assessee has done processing/production for the month of April-12 and Sept. 12 to March 2013 - in all 8 months. Under this circumstances, the assessee failed explain as to why fixed conversion fee at least for 8 months has not been recognized in the books. Similarly, revised conversion agreement entered into on 24/04/2013, after the end of relevant previous year, with retrospective effect from 01/10/2012, could be afterthought and hence cannot be relied upon. AO can, by applying s. 5 of the Income-tax Act, in the background of proviso to sub-s. (1) of s. 145 of the IT Act, compute income on accrual basis. The statute must be read as a whole and one provision thereof should be construed with reference to another provision, so as to make a consistent enactment of the whole statute. It is a rule now firmly established that intention of the legislature must be found by reading the statute as a whole. If the interpretation suggested by the counsel for the assessee is accepted, the very charging section would be rendered inoperative and ineffective, which is impossible to be done. The machinery provisions cannot be interpreted as to restrict the scope of the charging section. As a matter of fact, authorities are expected to construe the machinery provisions in such a manner that a charge to tax is not defeated. The CIT(A) was therefore correct in law in concluding that AO has rightly made computation of the income on accrual basis, rejecting the income of the assessee income of the assessee. It cannot be said that fixed income of ₹ 4 crores not accrued to the assessee. As per this agreement cited supra, the said income of ₹ 4 crores has accrued to the assessee. The assessee has the right to receive it, if it is not actually received, which cannot go out of the total income of the assessee to say that it is not accrued to the assessee. The said amount has been accrued to the assessee under the mercantile system of accounting as per the provisions of sec. 145(2) of the Income-tax Act and the same has to be brought to tax. The other contention of the assessee is that there was revised agreement dated 24/4/2013 with retrospective effect on 1/10/2012, which cannot be given any importance which is entered after the end of financial year 31/3/2013 and it is only self serving document so as to facilitate to tax payable by the assessee. - Decided against assessee.
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2021 (12) TMI 781
Assessment u/s 153A - Proof of incriminating material found in search - HELD THAT:- AO could not have made any addition in AY 2008-09 since no incriminating material relating to this addition was unearthed during the course of search. A perusal of the assessment order of AY 2008-09 would show that the assessing officer has found out this discrepancy only during the course of assessment proceedings upon comparing the Balance Sheets of the assessee and M/s DLC. We have held earlier that this addition could not be sustained, since it is not based upon any incriminating material. Accordingly, this addition was deleted on legal ground discussed above. We noticed earlier that the AO was fair enough to exclude this amount of ₹ 1,51,44,860/- in AY 2009- 10. Since this addition has been deleted in AY 2008-09, the corresponding reduction of income made by AO in AY 2009-10 is liable to removed. Addition of payments made to Shri Basavaraj Banni - HELD THAT:- It is an admitted fact that the assessing officer has disbelieved the payments made to M/s Banni Mines and Minerals Ltd. The fact remains that the purchases from the above said concern has been duly recorded and further the assessee has also sold them. The sale transactions have been accepted by the AO. It is also a fact that M/s Banni Mines and Minerals have filed VAT returns under Sales tax Act and it has reported the sales made by it to the assessee. Further Shri Basavaraj Banni has filed revised return of income disclosing the sales made to the assessee. His return of income has been accepted by the department in an order passed subsequent to the date of search. Shri Basavaraj Banni has later accepted that he has given wrong statement earlier and has given reasons for doing so. We notice that Shri Basavaraj Banni is changing his stands and is non-co-operative with the department. Hence we are of the view that his statements could not be relied upon. The fact remains that the materials available on record disproves his earlier statement. We do not find any reason to disbelieve the purchases as well as payments made to M/s Banni Mines and Minerals. Accordingly, we are of the view that the addition made in AY 2008-09 cannot be sustained. Payment made to M/s Banni Mines and Minerals - Since the assessee did not claim payment as expenditure, there is no question of disallowing any expenditure. Accordingly, the addition cannot be sustained. Transportation payment made to Shri Jagadish Devadiga - AO has placed full reliance on the statement given by Shri Jagadish Devadiga at the time of search, where as the assessee has provided evidences in the form of invoices raised by the above said person along with the trip details, income tax returns filed by above said person along with tax audit report. Shri Jagadish Devadiga has also subsequently furnished affidavit to the AO retracting from the statement given earlier. Thus, it is the witness who has retracted his statement. Since the AO did not accept the retraction statement, the assessee has asked for an opportunity to cross examine Shri Jagadish Devadiga, but the said opportunity was not given to the assessee by the AO, which has resulted in violation of Principles of natural justice. In any case, there was no material available with the AO to show that the transportation services were not provided to the assessee. On the contrary, various materials furnished by the assessee support the case of the assessee - addition deleted. Assessee appeal allowed.
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2021 (12) TMI 780
Disallowing deduction claimed u/s 80P(2)(a)(i) - interest was received on term deposit from SBI - HELD THAT:- On a perusal of the order of the Tribunal for the A.Y. 2012-13 [ 2018 (11) TMI 1883 - ITAT MUMBAI] it is observed that the issue in Ground No. 2 and 3 are already covered in favour of the assessee. The Tribunal while allowing the claim of the assessee u/s. 80P(2)(a)(i) of the Act in respect of interest income from SBI and also commission income from MSEB - Decided in favour of assessee.
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Customs
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2021 (12) TMI 796
100% EOU - private bonded warehouse license - appellant did not export and failed to fulfill the export obligation - HELD THAT:- It is an admitted fact that the appellant had challenged the show cause notice issued to it before the appellate authority but the same was filed not within the time prescribed under the Act. Therefore, the appellate authority did not go into the merits of the case and dismissed the same on the ground of limitation. Since the said order has attained finality before the apex court, the appellant cannot reopen the merits of the case again before this court. Though the learned Single Judge has not entertained the Writ Petition, he had granted instalment facility to the appellant to discharge the liability in 12 monthly instalments. The counsel for the appellant was not in a position to submit before this court whether the appellant has availed of the instalment facility granted. The learned Judge has rightly dismissed the Writ Petition without going into the merits as the same has become final at the hands of the appellate authority confirmed by the order of the apex court. Even though the learned Single Judge has not entertained the Writ Petition, the appellant was given instalment facility to wipe of the liability. Appeal dismissed.
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2021 (12) TMI 795
Levy of penalty u/s 114 and 114AA of the Customs Act, 1962 - Smuggling - export of red sanders illegally in the guise of Polished Granite Slab - HELD THAT:- The Revenue, even though has noted the above discrepancies, has never bothered to investigate further, but rather levied the impugned penalties on the assessee without there being any direct or even circumstantial evidence against the assessee. The Hon ble High Court of Delhi in the case of KUNAL TRAVELS (CARGO) VERSUS COMMISSIONER OF CUSTOMS (IMPORT GENERAL) NEW CUSTOMS HOUSE, IGI AIRPORT, NEW DELHI [ 2017 (3) TMI 1494 - DELHI HIGH COURT] had an occasion to consider a more or less identical issue, for violation of Customs Brokers Licensing Regulations and had inter alia ruled that the agent is not an inspector, but rather a processing agent of documents with respect to clearance of goods through Customs House; that the mentioning of IE Code of the exporter in the shipping bill would itself reflect that before the grant of such IE Code, a background check of the importer / exporter had been undertaken by the Customs Authorities and therefore, there could be no scope to doubt the identity of the exporter. The Revenue has not made any attempt to attribute the prior knowledge as to the involvement of the assessee-respondent right from the beginning in the alleged illegal import of red sanders. Further, the Revenue has also not established as to which act or omission on the part of the assessee-respondent herein that rendered the goods in question liable for confiscation, because such act or omission would have to be a deliberate act or omission. The Revenue has not established its case as regards penalty under Sections 114 and 114AA of the Customs Act, 1962 against the Customs Broker-respondent herein - Appeal dismissed - decided against Revenue.
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Corporate Laws
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2021 (12) TMI 794
Reduction of share capital of Company - Section 66 of the Companies Act, 2013 r/w National Company Law Tribunal (Procedure for reduction of share capital of Company) Rules, 2016 - HELD THAT:- The present position of law, while dealing with provisions of Section 66 is that if none of the shareholders are objecting for the proposed reduction, then after considering the merits of the case as also connected facts and circumstances such petition generally deserves to be admitted. It is hereby ordered to confirm the reduction of paid up share capital of the Petitioner Company by approving the minutes of AGM dated 25.09.2019 wherein the members of the Petitioner Company resolved for the proposed reduction of the Paid-up Share Capital of the Company by cancelling the extinguishing Paid-up Equity Share Capital of ₹ 9,20,00,000/- divided into 92,00,000 Equity Shares of ₹ 10/- each fully paid up, from ₹ 1,21,19,66,320/- divided into 12,11,86,482 Equity Shares of ₹ 10/- each to ₹ 1,11,99,66,320/- divided into 11,19,86,482 Equity Shares of ₹ 10/- each fully paid up. The necessary alteration shall be made in the Memorandum of Association by the Petitioner Company for reduction of the paid-up share capital - Application allowed.
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Insolvency & Bankruptcy
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2021 (12) TMI 793
Fresh consideration of resolution plan after a resolution approved by the CoC - Direction given by the NCLAT that Corporate Insolvency Resolution Process (CIRP) to be resumed from the stage of consideration of the Resolution Plans - HELD THAT:- The procedure adopted by the RP as well as the CoC was fair, transparent and equitable. The CoC was facing the timeline, which was to end on 24th February, 2020, before which it had to finalise its decision. In these circumstances, it cannot be said that the decision of the CoC, to not grant any further time to PPIPL for submission of its revised bid and to finalise the Resolution Plan on 12th February, 2020 itself, can be said to be falling in the category of the term material irregularity . It could be seen that the CoC, after due deliberations, evaluated all the proposed Resolution Plans submitted by all the prospective Resolution Applicants and after giving sufficient opportunity to all the prospective Resolution Applicants, arrived at a considerate decision of accepting the Resolution Plan of the appellant-Ngaitlang Dhar in its meeting held on 1112th February, 2020. It is trite law that commercial wisdom of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the processes within the timelines prescribed by the IBC. It has been consistently held that it is not open to the Adjudicating Authority (the NCLT) or the Appellate Authority (the NCLAT) to take into consideration any other factor other than the one specified in Section 30(2) or Section 61(3) of the IBC. It has been held that the opinion expressed by the CoC after due deliberations in the meetings through voting, as per voting shares, is the collective business decision and that the decision of the CoC s commercial wisdom is non-justiciable, except on limited grounds as are available for challenge under Section 30(2) or Section 61(3) of the IBC. In the present case, leave apart, there being any material irregularity , there has been no irregularity at all in the process adopted by the RP as well as the CoC. On the contrary, if the CoC would have permitted the PPIPL to participate in the process, despite it assuring the other three prospective Resolution Applicants in its meeting held on 1112th February, 2020, that the absentee prospective Resolution Applicant (PPIPL) would be excluded from participation, it could have been said to be an irregularity in the procedure followed. The NCLAT has grossly erred in interfering with the decision of the CoC, which was duly approved by the NCLT - appeal allowed - decided in favor of appellant.
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Service Tax
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2021 (12) TMI 792
Refund of service tax - Construction of Complex Service - tax paid under mistake under law - rejection on the ground of time limitation - Section 11B of the Central Excise Act, 1944 - HELD THAT:- There are contrary decisions of higher fora on this issue. I find that the decision of the Hon ble jurisdictional High Court of Judicature at Madras in the case of M/S. 3E INFOTECH VERSUS CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL, COMMISSIONER OF CENTRAL EXCISE (APPEALS-I) [ 2018 (7) TMI 276 - MADRAS HIGH COURT] is binding, where it was held that Since the provisions of section 11B of the Act are not applicable to the claim of refund made by the petitioner, the limitation prescribed under the said provision would also not be applicable and the general provisions under the Limitation Act, 1963 would be applicable. The order of the First Appellate Authority dated 22.10.2012 has become final since the appeal filed against this order was withdrawn by the Revenue thereby accepting the order passed by the Commissioner (Appeals), which indicates that the tax collected was without the authority of law. Moreover, the liability itself for the period covered herein was not there, as observed in the Order-in-Appeal dated 22.10.2012, which casts a serious doubt on the bona fides of the Revenue when Show Cause Notice dated 21.10.2010 was issued demanding the tax for the disputed period, when the tax on the service involved itself was introduced later, with effect from 01.07.2010. Therefore, the tax paid amounts to the one paid under mistake of law. The impugned order of the First Appellate Authority is set aside and that of the Adjudicating Authority is restored - Appeal allowed - decided in favor of appellant.
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2021 (12) TMI 791
Short payment of service tax or calculation error - bank receipt was shown which is different from the bank statement available with the appellant - HELD THAT:- The gross value received is shown in the ST-3 return, for example, in the month of April 2009, as per the ST-3 return, the gross receipt is ₹ 1,56,63,650/- and after deduction of value of exempted services, it comes to ₹ 62,31,716/-. Whereas in the statement showing the calculation of short payment of service tax, in the column of bank receipt, the figure shown is ₹ 70,13,066/- which is not tallying with the ST-3 return. For this discrepancy, the appellant have written letters dated 06.11.2015, 22.03.2016, 05.04.2016 and 23.04.2016 to the Adjudicating Authority for seeking clarification for this calculation. However, the Adjudicating Authority in Para 14 of adjudication order has not given any clarification on the ground that all the calculation and working was carried by CERA audit very much in the presence of the appellant and at this juncture, this is not relevant. As per the principles of natural justice, the Adjudicating Authority is duty bound to give clear clarification on the working of differential service tax with the support of necessary documents such as bank statement/ ledger and ST-3 return etc. The appeal is allowed by way of remand to the Adjudicating Authority for passing afresh order after providing clarification to the queries raised in letters referred above and also after granting personal hearing.
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Central Excise
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2021 (12) TMI 790
CENVAT Credit - input services - transportation of footwear from its Regional Distribution Centres (RDCs) / Corporate Office to their retail outlets - HELD THAT:- In the absence of specific examination of facts, I am unable to endorse the demand being re-confirmed in the impugned orders. When the Hon ble High Court required re-examination into the facts first, the priority of the Adjudicating Authority should have been to ascertain the facts along with supporting documents, hear the appellant and then arrive at a proper conclusion upon such examination. Further, though there is an observation in the impugned orders that the manufacturing activities would cease as soon as the goods were transported to the RDCs / Corporate Office after manufacturing, but however, there is no supporting evidence placed on this to establish that it is at these RDCs / Corporate Office that the clearance of goods in the form of sale took place. Rather, there is nothing placed on record to indicate the basis for such a conclusion. Matter remanded back to the file of the Adjudicating Authority, who shall examine the issue afresh - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2021 (12) TMI 789
Levy of penalty under Section 10-A of the CST Act - case of the Department was that the Petitioner had purchased offset printing machine, camera and lens, computer and fax machine on the strength of the declaration in Form C although he was not entitled to make such purchases - HELD THAT:- Although in the impugned orders of the STO and the Tribunal, the expression mens rea may not be used as such, it is present, perhaps not in so many words, in the various findings of the Tribunal as has been noticed \herein before. In more than one place the Tribunal has found that the Petitioner had an unscrupulous intention in making a petition for issuance of C Forms so as to lead the officials to begin to believe that he was entitled to procuring goods on the strength of the registration certificate . In another place the Tribunal finds that the Petitioner in fact made a misrepresentation to the officials knowing fully well that he was not entitled to be issued with C Forms on the strength of the R.C. He is further said to have managed to obtain C Forms by such misguiding petition. The Court is inclined to agree with the learned A.S.C. that although in so many words it has not been stated that the Petitioner has mens rea, the findings in fact indicate that he did - Revision Petitions are dismissed.
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2021 (12) TMI 788
Exercise of jurisdiction erroneously - Erroneous application of provisions of the Tamil Nadu Value Added Tax Act, 2006 - Validity of assessment orders - HELD THAT:- Power of judicial review of the High Court under Article 226 of the Constitution of India is to scrutinise the processes and the procedures adopted by the competent authorities for arriving a particular decision in accordance with law, but not the decision itself. Thus, the High Court cannot entertain an adjudicative process regarding the mixed question of fact and law with reference to the documents and evidences in original. High Court cannot resolve the disputed issues between the parties only based on the affidavits filed in the writ petitions. There is a possibility of omissions and commissions. Thus, adjudication before the appellate authority with reference to such disputed findings of the original authority would be of greater importance. Institutional respect is of paramount importance. Even the point of jurisdiction, limitation, error apparent on the face of the record, are on merits and all are to be adjudicated before the appellate authority and the appellate authority, more specifically, the Appellate Tribunal or the Commissioner (Appeals), as the case may be, is empowered to adjudicate all such legal grounds raised by the respective parties and make a finding on merits. Thus, usurping the powers of the appellate authorities by the High Court by invoking its powers under Article 226 of the Constitution of India is certainly unwarranted. The parties must be provided an opportunity to approach the appropriate authorities for redressal of their grievances in the manner known to law. In the event of entertaining all such writ petitions, the High Court will not only be overburdened, but usurping the powers of the appellate authority, which is certainly not desirable. Jurisdictional error should not result in exoneration of liability. Jurisdictional error, if any committed, is technical, and thus, rectifiable. In such circumstances, the Courts are expected to quash the order passed by an incompetent authority and remand the matter back for fresh adjudication. Contrarily, if an assessee is exonerated from liability, undoubtedly, the purpose and object of the Act is defeated. Large number of writ petitions are filed without exhausting the statutory appeal remedies and High Court is also entertaining such writ petitions in a routine manner. Keeping such writ petitions pending for long time would cause prejudice to the interest of the assessee also. Thus, such statutory provisions regarding the appeal are to be decided at the first instance, enabling the litigants to avail the remedy by following the procedures as contemplated under law. Such writ petitions are filed may be on the ground of jurisdiction or otherwise - In the absence of exhausting such remedies, High Court is losing the benefit of deciding the matter on merits, as the High Court cannot conduct a trial or examine the original records in the writ proceedings under Article 226 of the Constitution of India. Thus, the Courts shall not provide unnecessary opportunities to the assessee to escape from the liability merely on the ground of jurisdictional error, which is rectifiable. This Court has no hesitation in arriving a conclusion that the petitioners are bound to exhaust the statutory appellate remedy as contemplated under the provisions of the TNVAT Act. Thus, the petitioners are at liberty to approach the appellate authority by filing appeal/revision and by following the procedures contemplated - Petition dismissed.
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Indian Laws
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2021 (12) TMI 787
Dishonor of Cheque - insufficiency of funds - rebuttal of presumption - Section 139 of the Negotiable Instruments Act - HELD THAT:- The presumption raised against the petitioner/accused person under Section 139 of the Negotiable Instruments Act, that the cheque was issued by the petitioner and received by opposite party no. 1 for discharge of petitioner's debts to the complainant/opposite party no.1, has not been rebutted in the instant case. The cheque bearing the signature of the petitioner and drawn on Mughberia Central Cooperative Bank Limited being cheque No.1551 dated 30.03.2015 has been produce as exhibit-1 - the learned Magistrate was abrest of the essential evidence that the cheque issued by the petitioners was dishonored and on demand by notice the drawer failed to make payment. Therefore the learned Judicial Magistrate committed no error in finding the accused/ petitioner guilty of the offence punishable under section 138 of the Negotiable Instrument Act. The petitioner having issued the cheque in question is liable for non-clearance of the same and non-payment of the dues to opposite party no.1. To ensure due payment to the drawee of a cheque, the court trying the offence is empowered under section 138 of the Negotiable Instrument Act to impose a sentence of imprisonment which may extend to two years or with fine, which may extend to twice the cheque amount or both - there are no illegality in the impugned judgment where a substantive sentence of three months of imprisonment as well as a compensation twice the cheque amount has been awarded in favour of the opposite party no.1, against the petitioner. There is no merit in the criminal revision filed by the petitioner and the same is dismissed - revision dismissed.
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2021 (12) TMI 786
Dishonor of Cheque - rebuttal of presumption - discharge of any debt or other liability - preponderance of probability - Section 139 of the N.I. Act - HELD THAT:- Section 139 raises a reverse presumption against the accused by providing that the holder of a cheque shall be presumed to have received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability - The Explanation to Section 138 provides that, for the purposes of the said Section, debt or other liability means a legally enforceable debt or other liability. If the evidence-on-record in the instant case is taken into consideration, it is the test of preponderance of probability that has to be applied to the case made out by the accused/respondent no.1 for the purpose of rebuttal of the presumption under Section 139 of the N.I. Act. Further, the materials submitted by the complainant can be relied on by the accused in order to raise such a defence, in some cases not requiring adducing evidence of his/her own - the prosecution case is that the independent seizure of other cheques from the same cheque book, details of which were separately given in several items of the Seizure List, indicates that the CBI merely seized the empty, or partially empty, cheque book which might not have contained the leaves of the incriminating cheques, thereby lending credence to the possibility of the accused having issued the dishonoured cheques. Equal weight can very well be attached to either of such theories for the purpose of preponderance of probabilities. In the present case, no valid documentary evidence could be produced by the complainant and/or the prosecution for substantiating the legality and/or existence of any enforceable debt or other liability on the part of the accused and the Court has to resort to a balance of probabilities between the contentions of the parties - A plausible case has been made out by the defence as regards the non-existence of any such legally enforceable debt or other liability, also because the said debt/liability is not reflected from the relevant balance-sheet which was produced as evidence. Thus, illegal share transactions, which were the premise of such alleged liability, could not be construed, even as per the prosecution case, to be legally enforceable . From the evidence adduced by the prosecution itself, several questions arise as regards the veracity of the chain of events sought to be projected by the prosecution. Upon a perusal of the judgment and order impugned in the appeal, it is evident that the Trial Judge took sufficient pains to discuss all the relevant facets of the matter and the governing law and, upon comprehensive consideration of the materials-on-record and the law applicable, arrived at the findings and the final decision assailed in the present appeal. Merely because of a second opinion is possible, it is not for this court, sitting in appeal, to reverse the said decision of the Trial Court, in the absence of any infirmity and/or illegality in the Trial Court s judgment - Appeal dismissed.
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