TMI Tax Updates - e-Newsletter
December 30, 2024

Case Laws in this Newsletter:

GST Income Tax Customs FEMA PMLA Service Tax Central Excise Indian Laws

Articles

1. VOLUNTARY CANCELLATION OF GST REGISTRATION – WHETHER REVOCABLE?

   By: DR.MARIAPPAN GOVINDARAJAN

2. Bonafide intent must be proved when property is purchased from GST defaulters

   By: Bimal jain

3. Our bank account is attached by the GST officer. How do I manage my operations now

   By: Pradeep Reddy

4. Understanding Challan 280 for Income Tax Payment

   By: Ishita Ramani

News

1. Household Consumption Expenditure Survey: 2023-24

2. DPIIT signs MoU with private company ‘boat’ to help startups

Circulars / Instructions / Orders

DGFT

1. 36/2024-25 - dated 27-12-2024

Enlistment of PSIAs and Addition of area of operation of PSIAs in terms of Para 2.52 (c) of HBP 2023 in Appendix-2G

Highlights / Catch Notes

GST

• High Court Allows Filing GST Appeal Without Pre-Deposit, Question of Exemption/Waiver Pending.

  Case-Laws - HC : The HC granted the Petitioner four weeks' time to file an appeal challenging the impugned orders, without requiring the mandatory statutory pre-deposit of 10% of the disputed tax amount u/s 107 of the Central Goods & Services Tax Act, 2017. The issue of whether exemption, waiver or reduction can be granted regarding GST demands remains to be adjudicated by the HC.
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• Petitioner's right to natural justice upheld, impugned order quashed for lack of Show Cause Notice opportunity.

  Case-Laws - HC : HC quashed impugned order dated 21.02.2024 for violation of natural justice as Petitioner did not receive Show Cause Notice. Matter remanded to Department to provide opportunity to Petitioner to reply to Show Cause Notice before fresh consideration.
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• Businesses Allowed to Correct GST Returns, Claim Rightful Input Tax Credits for 2018-19 After Court Intervention.

  Case-Laws - HC : The HC allowed the petition for rectification of inadvertent error in GSTR-3B returns for 2018-19 and invocation of doctrine of necessity. The impugned Order-in-Original was quashed and matter remanded to the Assessing Officer to pass fresh order after considering petitioner's application for Input Tax Credit entitlement u/ss 16(5) and 16(6) of the GST Act. Parties anonymized.
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• Statutory Interest Must Be Paid on Delayed GST Refunds Despite Initial Rejection, High Court Rules.

  Case-Laws - HC : The HC allowed the petition. The petitioner is entitled to statutory interest u/s 56 of the CGST Act on the delayed refund, notwithstanding the initial rejection of the refund application. The mere fact that the HC order did not specifically allude to Section 56 does not detract from the petitioner's right to claim interest, which must be paid as per the statute. The application for refund shall be examined and disposed of in accordance with law.
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• Unfair GST cancellation upheld by tax authorities despite business premise verification.

  Case-Laws - HC : The HC quashed the orders dismissing the application for revocation of GST cancellation order. Despite the inspection confirming the business premises matched the registration certificate, the appellate authority dismissed the application without assigning proper reasons, violating principles of natural justice. The HC held that once the inspected site conformed to the registration disclosures, the dismissal order was unsustainable. The lack of reasoned basis for rejection rendered both the dismissal order and the appellate order unsustainable, necessitating quashing.
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• Provisional GST Attachment Orders Overturned: Authorities Violated Natural Justice by Denying Oral Hearing Despite Request.

  Case-Laws - HC : The HC quashed the impugned provisional attachment orders passed by the Adjudicating Authority. No oral hearing was afforded to the petitioner in violation of principles of natural justice u/s 75(4) of the CGST Act, despite the petitioner's prayer for an opportunity of hearing in written submissions. The order was set aside and the matter remanded on this ground alone, following the Supreme Court's judgment in Whirlpool Corporation case.
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• Court clarifies notices in case, allows proceedings to continue with conditions.

  Case-Laws - HC : The HC held that while the respondent-authorities were required to continue the proceedings on the earlier show-cause notices, they had misinterpreted the HC's order and issued fresh de novo impugned notices. Instead of quashing the impugned notices and reviving the earlier ones, the HC directed the petitioner to file a reply to the impugned show-cause notices issued by the respondent-authorities. The interim order restraining the respondents from issuing further advisories or summons to the petitioner's buyers in the context of the pending proceedings was continued. The petition was disposed of.
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• Software Co. Wins Legal Battle Over Delayed GST Filing, Gets Relief on Input Tax Credits.

  Case-Laws - HC : The HC set aside the show cause notice and impugned order, remanding the matter to the stage preceding them. This was done in line with similar cases where delay in filing GST returns and claiming input tax credit for FY 2018-19 was involved. The petitioner was allowed to avail the benefit of orders passed in a comparable matter before the same HC.
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Income Tax

• A Win for the Taxpayer: Court Quashes Tax Department's Arbitrary Assessment, Orders Fresh Examination.

  Case-Laws - HC : The HC quashed the impugned order and remitted the case back to the respondents to pass a fresh order on merits. It held that invocation of Section 144 for assessment by best judgment method was unjustified. The petitioner's claim of loss from sale of derivatives was to be re-examined, despite the return not being e-verified initially. The HC clarified that reopening u/s 148 for reassessment u/s 147 cannot be disputed afresh in the de novo proceedings.
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• Charitable Trust Exemption Upheld: No Undue Benefits Given to Related Party.

  Case-Laws - AT : The ITAT held that the trust's case falls outside the scope of Section 13(1)(c)(ii) as no portion of its income was applied for the benefit of any specific person. Despite erroneous presentation in Form No. 10B and an amount appearing as advance to SCPL, which was reimbursement of expenses, the trust did not divert income or provide undue benefits to the related party. The CIT(A) correctly analyzed the facts, and the ITAT upheld the order in favor of the assessee, allowing exemption u/s 11.
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• Tax authorities can't rely solely on loose papers found during searches to make additions without solid proof.

  Case-Laws - AT : The ITAT held that additions based on loose papers/documents found during search at the assessee's premises without further corroboration would be contrary to judicial precedents. The circumstantial evidence did not contradict the assessee's assertions. Despite the search, no irregularities like excess cash or unaccounted assets were discovered. The adverse view by the AO and CIT(A) based solely on the loose papers appeared abstract without substantiation. The onus to prove the allegations lies with the Revenue, and the assessee cannot be burdened to prove a negative. Absence of supporting material, the assessee's denial, and their social status raised doubts favoring the assessee.
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• Tax Tribunal Upholds Telecom Company's Claims: Depreciation on Assets, Business Expenses, and Energy Savings Allowed.

  Case-Laws - AT : The ITAT held that: The department cannot challenge the validity of the sanctioned scheme at the implementation stage as the scheme attains statutory force binding on all stakeholders, including the department. The assessee is entitled to claim depreciation on passive infrastructure assets transferred under the scheme at Rs.1344,19,48,510. Recognition of assets at fair value pursuant to the scheme does not amount to revaluation, allowing depreciation claim under normal and MAT provisions. Expenditures like abandoned project costs, site restoration provision, service level adjustment provision, and interest on borrowings were held allowable as business expenditure or ascertained liability. Enhanced 80% depreciation was allowed on energy saving devices. Depreciation was allowed from the date of asset readiness and on provisionally capitalized assets based on accounting policy and special audit report. Salary capitalization was rejected as employees were engaged in operations. Other disallowances like difference in turnover reported for service tax and income tax, upfront fees, and unverifiable expenses were deleted based on reconciliation, judicial precedents, and documentary evidence respectively.
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• New income tax showdown: when tax authorities can ditch your books and make rough calculations.

  Case-Laws - AT : The ITAT upheld the CIT(A)'s order rejecting the assessee's books of accounts and estimating total income. When books are rejected u/s 145 and income estimated u/s 144, the estimate substitutes business income computed u/ss 30-43D. All deductions u/ss 30-43D are deemed considered in the estimate. The ITAT found no infirmity in rejecting books and estimating income.
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• Taxpayer Wins Appeal Over Unfounded Reassessment and Addition for Penny Stock Trades.

  Case-Laws - AT : The ITAT held that neither the initiation of reassessment proceedings nor the addition made by the AO u/s 68 can be sustained. The AO drew an inference from an investigation wing report on bogus long/short-term capital gains transactions involving penny stocks to reopen the assessment against the assessee without considering the assessee's business nature and inquiries during regular scrutiny assessment. The sole basis for reassessment and addition was the assessee's sale of shares identified as penny stocks, which the ITAT found untenable. Regarding the addition u/s 68, the ITAT noted the CIT(A)'s observation of a sudden steep share price rise during a recessive market was unfounded, as the AO did not refer to quoted share prices. The CIT(A) also overlooked that the assessee booked a business loss. Thus, the assessee's appeal was allowed.
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• Income from Lorries Accepted on Presumptive Basis, No Books Required; Agricultural Income and Past Savings Upheld.

  Case-Laws - AT : The assessee filed a return manually admitting income u/s 44AE from running lorries and agricultural income. The Tribunal held that when income is offered on a presumptive basis u/s 44AE, depreciation is deemed granted, whether claimed or not, so it cannot be disallowed. As the assessee admitted presumptive income u/s 44AE from lorries, maintaining books of accounts is not required, and this income must be accepted. No adverse findings were made regarding agricultural income of Rs. 2.07 lacs, which must be accepted. The claim of past savings of Rs. 5.50 lacs cannot be rejected merely due to availing a loan and must be accepted. Considering the facts, the Tribunal directed the AO to accept business income of Rs. 1.80 lacs, agricultural income of Rs. 2.07 lacs, and restrict the addition for unexplained assets to Rs. 2 lacs.
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Customs

• High Court Quashes Preventive Detention for Gold Smuggling Due to Procedural Lapses, Lack of Proper Justification.

  Case-Laws - HC : The HC quashed the preventive detention order against the Petitioner for smuggling of gold in contravention of the Customs Act. The detaining authority passed the impugned order mechanically without applying mind, violating natural justice principles. The authority's observation that the Petitioner was likely to be released from judicial custody lacked material, as the Petitioner's bail applications were already dismissed twice by the Rajasthan HC. The authority failed to demonstrate any imminent possibility of the Petitioner's release to justify the detention order. There was substantial delay in considering the Petitioner's representation. Consequently, the HC set aside the detention order dated 12.04.2024 and confirmation order dated 18.06.2024.
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• Customs Officials Sold Confiscated Gold Despite Court Order, Ordered to Pay Market Price if Petitioner Wins Appeal.

  Case-Laws - HC : The HC held that the respondent-authorities breached the interim order by disposing of the 3 gold bars confiscated from the petitioner in November 2022. Instead of demanding an explanation, the HC directed the respondent-authorities to pay the prevailing market price of the goods sold in violation of the order if the petitioner succeeds in appeal or revision. The petition was disposed of.
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• Customs authorities have discretion to not penalize for false declarations if made outside Customs proceedings.

  Case-Laws - AT : The CESTAT held that the expression 'liable to penalty' u/s 114AA of the Customs Act, 1962 means that a person who knowingly makes a false declaration may be penalised, but it does not mandate imposition of penalty. The adjudicating authority has discretion to judicially decide whether to impose penalty or not. Even if the case is decided against the appellant's firm for misdeclaration of machinery's year of manufacture to obtain EPCG license, the appellant cannot be penalised u/s 114AA as the alleged misdeclaration was not in any proceeding under the Customs Act but under the Foreign Trade Policy. Therefore, the appeal against the penalty imposed on the appellant u/s 114AA was allowed.
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• Customs Penalties Overturned Due to Lack of Evidence in Import Misdeclaration Case.

  Case-Laws - AT : Appellant's penalties u/ss 112(a), 112(b), and 114AA of the Customs Act, 1962 set aside. Reliance solely on co-accused statements without corroborative evidence found inadequate to establish appellant's guilt regarding mis-declaration of goods and manipulation of import documents. No evidence produced by revenue to substantiate appellant's role in arranging finance, purchasing disputed goods from China, or providing manipulated import documents. CESTAT held statements of co-accused without independent corroboration insufficient legal evidence. Lack of evidence regarding appellant's physical acts related to disputed goods or signed declarations rendered penalties unjustified. Appeal allowed.
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• Customs Overvaluation of 'Induction Cookers' Imports Overturned by Tribunal.

  Case-Laws - AT : Appellants challenged enhancement of values of imported 'Induction Cookers' by respondent without following best assessment method or providing admissible evidence. CESTAT held there was no justification to compare goods imported by different importers as specifications and features vary. No admissible evidence was provided to reject transaction value declared by appellants. Respondent discarded declared value without basis. Paying duty under compulsion cannot be considered acceptance of loaded value. In absence of justifiable reason, enhancement of declared value is untenable. Appeal allowed.
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FEMA

• Software Firm Fined for Overpaying Royalties to Foreign Partners, Breaching Currency Rules.

  Case-Laws - AT : The AT upheld the adjudication order regarding contravention of Section 5 of FEMA read with Rule 4 of FEMA (Current Account Transactions) Rules, 2000, for remitting royalty to overseas parties exceeding permissible limit of 5% on local sales. The respondents had filed CST returns and respective State Level Sales Tax Returns disclosing actual sale price for taxation purpose, duly considered by the adjudicating authority. The AT held that sale price only relates to consideration for transferring property in goods without abatement except as provided, rejecting the appellant's reliance on a case pertaining to calculation of net income and not net sale price. The AT was not convinced by the appellant's submissions in view of its observations.
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PMLA

• Court Strikes Down Seizure of Pre-Crime Assets, Affirms Rights Against Unjust Asset Freezes.

  Case-Laws - HC : Writ petition partly allowed. Order of provisional attachment of petitioner's immovable properties purchased prior to 2014 u/s 5(1) of PML Act set aside as without jurisdiction. Properties acquired before commission of alleged offence cannot be attached as proceeds of crime under PML Act. Though statutory remedies exist against provisional attachment orders, writ petition maintainable if order wholly without jurisdiction. HC observed provisional attachment order cannot be challenged before any authority, but Adjudicating Authority can examine legality only from date of its order, not provisional order date. Hence, if provisional attachment without jurisdiction, writ remedy available.
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Service Tax

• Tax demands overturned due to lack of evidence for willful suppression of facts.

  Case-Laws - AT : The CESTAT held that the extended period of limitation invoked for levying service tax was unsustainable as there was no wilful suppression of facts by the appellant. The demands of Rs.1,01,6,502/- under 'sponsorship' services, Rs.13,30,558/- on inter-company expenses, and Rs.20,371/- as interest were set aside. For renting services, the demand of Rs.2,45,58,483/- was set aside, and the appellant was directed to produce evidence for the remaining Rs.34,29,130/-. The demands of Rs.73,00,732/- for import of services and Rs.2,80,40,921/- for software licenses were remanded for de-novo adjudication to determine the appellant's role and liabilities. The penalties were also set aside. The appeal was disposed of accordingly.
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Central Excise

• Tiles Duty Evasion Case Crumbles Due to Lack of Cross-Examination & Flimsy Evidence Hashtags.

  Case-Laws - AT : Allegations of clandestine removal of polished vitrified tiles and evasion of duty were primarily based on private documents/records recovered from premises of M/s K.N. Brothers/Shree Ambaji Enterprises, Shroff, and office of Shri Pravin Shirvi, Broker/middlemen. CESTAT held that opportunity of cross-examination was not provided, violating principles of natural justice. Reliability of statements was doubtful as there were discrepancies in amounts mentioned. Cross-examination of witnesses is mandatory u/s 9D of the Act. Untested statements of third parties cannot be sole basis for adverse conclusion against assessee. Positive and tangible evidence is required to establish clandestine removal, not assumptions and presumptions. Entire demand was theoretical and theoretical. Impugned order set aside and appeal allowed.
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Case Laws:

• GST

• 2024 (12) TMI 1401
  Recovery of excess ITC - Seeking issuance of a writ in the nature of mandamus directing waiver from payment of the mandatory statutory pre-deposit of 10% of the disputed tax amount under Section 107 of the Central Goods Services Tax Act, 2017 in order to enable the Petitioner to file an appeal - HELD THAT:- This Court has not examined the legislative scheme. However, at this stage, the Petitioner now prays that he may be given four weeks additional time to file the appeal. Considering the fact that the issue as to whether any exemption, waiver or any reduction can be granted qua GST demands or not is yet to be adjudicated by this Court, it is deemed appropriate to permit the Petitioner, as a unique case, to file the appeal challenging both impugned orders, within a period of four weeks from today. Petition disposed off.

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• 2024 (12) TMI 1400
  Service of SCN - Challenge to impugned order on the ground that the said order has been passed pursuant to the Show Cause Notice which was not received by the Petitioner - Violation of principles of natural justice - HELD THAT:- In the present case, the affidavit dated 19th December, 2024 has been filed to the effect that the Show Cause Notice and the order dated 21st February, 2024 were not received on the registered email ID or physically - After having perused the said affidavit, this Court is of the view that following the earlier decisions passed by this Court, the Petitioner herein also deserves to be given an opportunity to reply to the Show Cause Notice. The impugned order dated 21st February, 2024 is set aside - the matter is remanded back to the concerned Department for fresh consideration after providing an opportunity of hearing to the Petitioner - petition disposed off by way of remand.

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• 2024 (12) TMI 1399
  Input tax credit - rectification of an inadvertent error in the GSTR-3B returns for the period 2018-19 - invocation of doctrine of necessity - HELD THAT:- It would be in the interest of justice to remand the matter back to the respondent-Authority so as to enable the petitioner to file appropriate application for entitlement to take Input Tax Credit in the returns filed under Section 39 of the GST Act as the returns are already filed by the petitioner within the prescribed time limit of 30th November, 2021. The impugned Order-in-Original dated 04.04.2024 passed in Form GSTR DRC-07 is hereby quashed and set aside and the matter is remanded back to the respondent-Assessing Officer to pass afresh de-novo order after considering the application to be filed by the petitioner as per the provisions of Sections 16 (5) and 16 (6) of the GST Act in accordance with law - Petition disposed off by way of remand.

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• 2024 (12) TMI 1398
  Challenge to order u/s 73 of the Central Goods and Services Tax Act, 2017 - statutory obligation of adjudicating authority u/s 73 (9) of the CGST Act to determine the tax - principle argument of the petitioner is that the procedure adopted by the Proper Officer is unknown to law - HELD THAT:- The petitioner has different registration in the State of Telangana. Thus, the Proper Officer of Telangana is an independent statutory authority and was under no obligation to wait for the outcome of the decision taken by the Maharashtra State GST Department. In the absence of determining the tax as per sub-Section 9 of Section 73, the impugned order is bad in law and ultra vires Section 73 (9) of the CGST Act. Revenue submits that the impugned order, on this ground, may be set aside and the matter may be remitted back to the proper officer to decide it a fresh. The impugned order dated 31.08.2024 is set aside and the matter is remanded back - Petition disposed off by way of remand.

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• 2024 (12) TMI 1397
  Grant of statutory interest in terms of Section 56 of the Central Goods and Services Tax Act, 2017 on delayed refunds - refund application was originally rejected - applicability of Section 56 of the Act - HELD THAT:- The authority appears to harbour the view that since the refund application had come to be originally rejected, the provisions of Section 56 would not apply. The said view is clearly rendered untenable and appears to have been rendered in ignorance of the order dated 15 March 2023 pursuant to which the writ petition had itself come to be allowed and the orders passed by the respondent authorities quashed and set aside. The mere fact that the order dated 15 March 2023 did not specifically allude to the provisions contained in Section 56 of the Act would also not detract from the right of the writ petitioner to claim interest which must be paid in terms of the statute itself. While allowing the writ petition, it is also observed that the application for refund would be examined and disposed of in accordance with law . Conclusion - The petitioner is entitled to interest on the delayed refund as per Section 56 of the CGST Act, notwithstanding the initial rejection of the application. Petition allowed.

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• 2024 (12) TMI 1396
  Rejection of application for revocation of the Goods and Services Tax cancellation order - non-conducting of business at the declared place and issuing invoices without corresponding supply of goods or services - the appellate authority was convinced to dismiss the appeal solely on the ground that the GSTI had also alleged in its report that the address particulars which were mentioned were different from those which existed on their record - no proper reason for dismissal of application - violation of principles of natural justice - HELD THAT:- Once the site which was inspected and which was stated to be the place from where business was being carried on was found to be in conformity with the disclosures made in the original registration certificate, the order of the appellate authority is clearly rendered unsustainable. It is ex facie apparent that apart from using the phrase any supporting documents and others , no further reason was assigned as to why the said application merited dismissal - The order of 29 February 2024 cannot be sustained. Conclusion - In view of the fact that proper reason was not assigned as to why the said application merited dismissal, the order of the appellate authority dated 30 May 2024 as well as the order dated 29 February 2024 pursuant to which the revocation application came to be dismissed, are quashed. Petition allowed.

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• 2024 (12) TMI 1395
  Seeking to quash the impugned order - provisional attachment orders - no oral hearing in the matter was afforded to the petitioner - violation of principles of natural justice - HELD THAT:- It is evident that the respondent Adjudicating Authority has failed to provide any opportunity of hearing to the petitioner though he has prayed in the written submissions - there is a breach of the principles of natural justice as held by the Hon ble Apex Court in the case of WHIRLPOOL CORPORATION VERSUS REGISTRAR OF TRADE MARKS, MUMBAI ORS. [ 1998 (10) TMI 510 - SUPREME COURT] . Conclusion - The impugned order is required to be quashed and set aside only on the ground of violation of the principles of natural justice by not providing opportunity of hearing as contemplated in Section 75 (4) of the CGST Act, more particularly, when the petitioner has prayed for such opportunity of hearing in the reply. Petition disposed off by way of remand.

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• 2024 (12) TMI 1394
  Challenge to notice issued in Form DRC-1 dated 29.09.2023 for the period of July 2017-March 2018 and the notice issued in Form GST DRC-01A dated 27.09.2023 - violation of principles of natural justice - HELD THAT:- The respondent-authorities were required to continue the proceedings of hearing of the show-cause notices, however, as per the understanding of the respondent-authority which, in our opinion is misplaced, the respondent-authorities have issued the fresh de novo impugned notices on the belief that the entire proceedings are quashed and set aside by this Court. Be that as it may, the petitioner is not put to any prejudice except that the direction issued by this Court to complete exercise within three months is not yet completed even after two years. In view of the above facts, instead of quashing impugned notices and reviving the earlier notices, it would be in the interest of justices to relegate the petitioner to file reply to the impugned show-cause notices which are issued by the respondent-authorities pursuant to the order passed by this Court under misbelief that the earlier notices have been also quashed and set aside by this Court. It is required to continue the interim order passed by this Court whereby, the respondents are restrained from issuing any further advisory or summons to buyers of the petitioner in the context with the pending proceedings i.e. impugned show cause notices which are required to be disposed of - petition disposed off.

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• 2024 (12) TMI 1393
  Time limitation - Delay in filing of GST returns and claiming input tax for the financial year 2018- 19 by the petitioner - HELD THAT:- As similar matters have been remanded to the stage of show cause notice, it is opined that it would be appropriate to pass a similar order for the instant writ petition also there is no reason why the orders passed in M/S. SADHANA ENVIRO ENGINEERING SERVICES VERSUS THE JOINT COMMISSIONER OF CENTRAL TAX; THE PRINCIPAL COMMISSIONER OF CENTRAL TAX BENGALURU; UNION OF INDIA; STATE OF KARNATAKA REPRESENTED BY ITS SECRETARY, BANGALORE [ 2024 (9) TMI 1648 - KARNATAKA HIGH COURT] should not enure to the benefit of the petitioner. The petitioner is relegated to the stage of show cause notice dated 02.11.2022 (Annexure-J) issued by respondent No.2 and the subsequent impugned order dated 12.05.2023 (Annexure-K) are hereby set aside - petition disposed off.

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• 2024 (11) TMI 1407
  Extension of time limitation - delay in filing GSTR 3B for the financial year 2019-20 by the petitioner - HELD THAT:- Amendment has been effected to Finance Act, 2024 more particularly Section 118, wherein, time for filing the returns and claim input tax credit has been extended and the petitioner would be satisfied if the impugned orders are set aside and petitioner is given an opportunity to reply to show cause notice issued. Parties are remitted to the stage of show cause notice dated 21.05.2024 issued by respondent No.1 (Annexure-A to the writ petition) and dated 07.08.2024 issued by respondent No.2 (Annexure-D to the writ petition) and the respondents are directed to give effect to and implement the amended provisions contained in Section 118 of the Finance Act, 2024 relating to insertion of Section 16(5) to the CGST/KGST Act, 2017 by providing sufficient and reasonable opportunity and hear the petitioner and proceed further in accordance with law within a period of one month from the date of receipt of certified copy of this order. Petition disposed off by way of remand.

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• Income Tax

• 2024 (12) TMI 1392
  Cancellation of exemption granted u/s 12AA - Activities of the Board could not be termed to be charitable in nature - According to the Revenue, the assessee was performing the functions which were regulatory in nature; not engaged in the advancement of objects of general public utility; not performing its duties, in accordance with the objects for which it was established; was only carrying on monitoring and supervising activity; receiving grant from the Government and generating income in the form of consent fee etc HELD THAT:- AO completed assessment and assessed the entire income over expenditure to determine the net taxable income. However, this order was set aside in appeal vide order dated 05.11.2014 and affirmed by the Appellate Authority, constraining the Revenue to file these appeals. Significantly, we find that the factual matrix has not been considered or discussed by the Tribunal/Authorities below. Rather, perusal of order passed by the Appellate Authority demonstrates that there is no reasoning assigned as to on what basis it arrived at the conclusion mentioned in the order. Remand the matters back to the Commissioner of Income Tax for taking a fresh decision, after considering the rival contentions of the parties. Commissioner of Income Tax shall discuss the factual matrix and also, as to whether the case of the assessee is covered by any of the decisions rendered by this Court in Pollution Control Board and Himachal Pradesh Road Transport Corporation [ 2009 (12) TMI 1070 - HIMACHAL PRADESH HIGH COURT]

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• 2024 (12) TMI 1391
  Reopening of assessment - petitioner had wrongly given the details of short term capital gain and had admitted to loss - HELD THAT:- Admittedly, the petitioner has admitted to the wrong return of Income that was filed on 12.04.2017 in its communication dated 24.06.2022. Since the return was also not e-verified, the reasons were not furnished to the petitioner which entitled the petitioner to request for a speaking order. Short term capital gains there were also loss from the sale of derivatives which has been denied merely on the ground that the return that was filed on 09.07.2021, could not be allowed as the returns were not e-verified - As per the decision in the case of Goetze (India) Ltd [ 2006 (3) TMI 75 - SUPREME COURT] a claim which was not made in the Return cannot be allowed by the AO. The Return that was filed by the petitioner on 09.07.2021 even though it was not e-verified, was admittedly substituted by another return on 11.03.2022. It cannot be said that the petitioner did not file the return to claim set off/deduction for the alleged/purported loss or loss from the sale of derivatives as has been observed in the impugned order. To balance the interest of both the petitioner and the Income Tax Department, the impugned order can be set aside and the case can be remitted back to the respondents to re-examine whether the claim of the petitioner on the alleged loss incurred from the sale of derivatives can be allowed or not, as invocation of Section 144 of the Act, for assessment by best judgment method in impugned Assessment Order is not justified. The impugned order is quashed and the case is remitted back to the respondents to pass a fresh order on merits and in accordance with law. It is made clear that invocation of machinery u/s 148 of the Act for the purpose of 147 of the Act, cannot be the subject matter of fresh dispute in the denovo proceedings.

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• 2024 (12) TMI 1390
  Denial of exemption u/s 11 - violation of section 13 - erroneous presentation of Form No. 10B report - agreement constituted a violation of the charitable trust's purpose and allowed for undue benefits to SCPL, a related party - HELD THAT:- As decided in assessee s own case for assessment year 2016-17 [ 2022 (8) TMI 733 - ITAT AHMEDABAD ] Sec.13(1)(c)(ii) can apply only if any part of the charitable income of the trust has been used or applied for the benefits of the said persons during the previous year. Since no portion of the income of the assessee has been applied for said person, therefore, the case of the assessee falls outside the scope of this section. Trust is in receipt of income by way of management charges from SCPL and also all of its liabilities have been taken over by the same therefore there is a fact that there is no undue benefits of the use of trust property have been taken by any other persons. There is no diversion of income of the trust as per Explanation of Sec. 13(2)(d) and 13(2)(g) of the Act as the trust has been benefitted greatly and its deficit of trust duly reduced to a great extent. W Some erroneous presentation of Form No. 10B report does not disentitle the trust for claiming exemption u/s. 11 of the Act. Similarly, the amount of advance in favour of SCPL appearing in the balance sheet was not advance but the reimbursement of the expenses. In the light of the aforesaid facts and circumstances, we are of the considered opinion that the CIT(A) has analyzed the facts correctly and given a judicious finding which does not call for any interference from outside - Decided in favour of assessee.

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• 2024 (12) TMI 1389
  Penalty u/s 271(1)(c) - unexplained cash credit addition u/s 68 for want of supporting documentary evidences - HELD THAT:- Assessee did offer an explanation which has been found bona fide, and the addition was partly restricted due to a lack of supporting documentary evidences. Such explanation was not found to be false or bogus. Non recording of satisfaction - Penalty order is devoid of satisfaction regarding the applicability of specific limb of section 271(1)(c), which is a prerequisite for levy of penalty. It is beyond comprehension that as to the non compliance of PAN or filing of return of income attract penalty under section 271(1)(c) of the Act. Non specification of clear charge - Penalty order is conspicuously absent about the particular limb of section 271(1)(c) of the Act under the aegis of which penalty is levied. It is excruciating to note that while calculating penalty concealed income has, for the first time, brought on record. But the satisfaction in the order which is of prime importance is altogether absent. The impugned order passed by the learned CIT(A) has merely echoed the order passed by the AO and the same ergo is fit to be jettisoned, thus provisions of section 271(1)(c) are not attracted in this case - Decided in favour of assessee.

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• 2024 (12) TMI 1388
  Addition by rejecting books of accounts u/s. 145A - estimating the gross profit at the rate 20.97 percent - assessee has been consistently seeking adjournment - HELD THAT:- CIT(Appeals) has taken a reasonable approach in the matter and has correctly concluded that the assessee has not been able to establish the genuineness of expenses and therefore, the AO was correct in rejecting books of account of the assessee, since the assessee s accounts completely failed in giving a correct picture of the true state of affairs of the assessee s business expenses and thereby making it difficult to verify the genuineness of expenses. Accordingly, we find no infirmity in the order of Ld. CIT(Appeals) so as to call for any interference.- Decided against assessee.

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• 2024 (12) TMI 1387
  Rectification of mistake - Denial of benefit of exemption u/s 11 - non-submission of copy of the registration certificate u/s 12AA - HELD THAT:- According to Blackstonian theory, it is not the function of the Court to pronounce a new rule but to maintain and expound the old one . In other words, the Judges do not make law; they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make a new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite sometime, the decision rendered later on would have retrospectively effect, clarifying the legal position which was earlier not correctly understood. In view of the above authoritative pronouncements, we are of the view that the CIT(A) was not correct in dismissing the appeal of assessee. We, therefore, set aside the order of CIT(A) and direct the AO to allow benefit of exemption u/s 11 of the Act. This ground of assessee is allowed.

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• 2024 (12) TMI 1386
  Additions towards alleged unexplained expenditure and unexplained receipt of money - loose papers and documents found in the course of search at the premises of assessee - presumptions available u/s 132(4A) r.w.s 292C - HELD THAT:- The loose papers/documents found in the course of search and referred to in the course of hearing on behalf of the Revenue shows some kind of estimates issued by one, R.B.Bros. (Contractor) towards in the name of Balyan House . No inquiry has been made from the contractor despite the particulars allegedly available. It is not known whether such estimate is attributable to assessee or other tax-payers living jointly in the same house. It was for the Revenue to probe in to the matter. Despite extreme course of search, no irregularity in the form of excess cash or other unaccounted assets has been claimed to be discovered. The circumstantial evidence thus, do not stand to the contrary to the assertions made by the assessee. Additions based on mere discovery of loose papers/documents without anything more, in such circumstances would tantamount to holding the conclusiveness of such loose papers for the purpose of assessment. Such view if taken, would run contrary to the judicial dicta available in this regard. The adverse view taken by the AO as well by Ld.CIT(A) based on the loose papers/documents seized in the course of search appears to be of abstract nature and without corroboration. Preponderance of probabilities in the facts of the present case is in favour of the assessee and against the Revenue. The least which the Revenue could have done was to pose a pointed question to the assessee u/s 132(4) at the time of search itself. The Revenue failed to do so. It is well settled that onus lies on the persons who alleges. The assessee cannot be placed within impossible burden to prove a negative point in the case of K.P.varghese [ 1981 (9) TMI 1 - SUPREME COURT] . The assessee having denied its privy to the information found as per loose sheet, the onus was somewhat shifted to the Revenue. No negative evidence to support the entries was found despite a drastic step of search. Absence of material and denial by the assessee coupled with the social status of the assessee where a large number of people regularly visit the premises of the assessee, do raise estoppels. The benefit of doubt thus, requires to go in favour of the assessee.

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• 2024 (12) TMI 1385
  Addition u/s 68 - share application money received by the assessee as income of the assessee from unexplained sources - HELD THAT:- In this case has not made any independent enquiry to verify the genuineness of the transactions. Assessee having furnished all the details and documents before the AO and the AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. Assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifted upon the AO to examine the evidences furnished and even made independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee. Even applying the ratio laid down in the case of PCIT vs. NRA Iron and Steel Pvt. Ltd. [ 2019 (3) TMI 323 - SUPREME COURT] impugned additions are not warranted in this case. Appeal of the revenue is dismissed.

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• 2024 (12) TMI 1384
  Revision u/s 263 - Additions u/s 68 - unexplained cash credit - unexplained expenditure u/s 69C - HELD THAT:- Receipt Alleged to be unexplained cash credit is offshoot of earlier grant of loan to M/s. Shalini Holdings Ltd. The receipt of money by way of repayment of loan earlier granted cannot be taken in the same pedestal as that of receipt of loan per se. Requirement of proving creditworthiness in such a situation of repayment has been read down in SBD Estates P. Ltd. [ 2018 (3) TMI 1592 - BOMBAY HIGH COURT] and Vijay Dewellers Pvt. Ltd [ 2019 (3) TMI 291 - ITAT MUMBAI] It was observed that in the case of repayment of loan earlier given by the assessee, there is no requirement on the part of the assessee to prove the source of funds of the borrower making repayment towards its existing obligation. Similar view has been expressed in Veedhata Tower P. Ltd. SBD Estate [ 2018 (4) TMI 1004 - BOMBAY HIGH COURT] Thus on this score itself on standalone basis, the addition made is unsustainable in law. We further advert to the other line of plea such as placing reliance on statement of searched person without providing cross-examination as well as the seized documents involving the assessee. The assessee on its part has duly attended before the AO in pursuance of notice issued u/s 131 of the Act and provided the requisite explanations. It is also noticed that the assessment of borrower showing repayment of loan has been duly made wherein no adverse observations have been made by the AO towards providing any accommodation entry to any person. Thus, when seen holistically, the receipt of money can neither be regarded as accommodation entry by way of loan nor the assessee has been provided with the cross-examination of the searched person giving rise to the consequential action against the assessee. The order of the CIT(A) is thus set aside and the AO is directed to delete the additions so made under section 68 69C of the Act. Appeal of the assessee is allowed.

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• 2024 (12) TMI 1383
  Depreciation of passive infrastructure assets (PIAs) - AO concluded that it is a case of simple transfer and the actual cost of the PIAs in hands of the assessee would be determined basis the amount of consideration paid by the TowerCos, which in the present case is Nil - whether the PIAs were acquired by the tower companies without any consideration from the operating companies would qualify as a gift? - HELD THAT:- The department cannot question the validity of the sanction of the scheme when the approved scheme is at the stage of implementation. The scheme once sanctioned by the competent court is binding on all the stakeholders which admittedly include the department also. Accordingly, the revised return filed by the assessee by giving due effect to the scheme of demerger and merger had to be accepted and given effect to by the revenue. In support of this proposition, the learned AR rightly placed reliance on the decision of Dalmia Power Ltd [ 2019 (12) TMI 991 - SUPREME COURT] Since, the due notices were issued to the income tax department before sanctioning of the scheme by the competent court, the binding nature of the scheme cannot be questioned or challenged at the time of implementation of the scheme as the scheme had attained statutory force not only between the transferor or transferee company but also between statutory authorities to whom notices were issued by the Court. The action of the learned CIT(A) in the instant case before us merging both the schemes, is wrong. It is to be noted that parties to the scheme in the first step of demerger are different and parties to the scheme in the 2nd step of merger are different. By merging both schemes together, the learned CIT(A) is only try to rewrite the scheme which is not permissible. Under the erstwhile provisions of the Companies Act, 1956, there is specific provision in Section 394(7) of the Companies Act, 1956 wherein, liberty was given to the tax department to challenge the scheme of arrangement sanctioned by the competent court before the higher court. This admittedly was not done in the instant case before us by the income tax department. Hence, the scheme of arrangement under 2 independent steps carried out in the instant case before us cannot be questioned at all. The first scheme which was sanctioned did contain the element of gift of assets. Hence, the aspect of gift, as rightly contended by the learned AR before us, attaining finality, is correct and deserve to be accepted. The assessee would be entitled for claim of depreciation on the assets (PIAs) transferred to the tower companies under the transfer scheme which was specifically transferred to assessee under the merger scheme w.e.f. 01.04.2009 in the sum of Rs. 1344,19,48,510/-. If depreciation benefit is not given to the assessee at the value of assets which ultimately stood transferred, then none of the parties could have claimed depreciation on those assets. On this ground also and considering and totality of the facts and circumstances and in view of the detailed observations made herein above by taking due cognizance of scheme of arrangement under two steps process being sanctioned independently by the Hon ble High Court by duly accepting the element of gift involved in the first step and respectfully relying on the judicial precedent herein above, we hold that the assessee should be eligible for allowance of depreciation in its hands. Hence, disallowance made on account of depreciation is hereby directed to be deleted. Upward adjustment of depreciation on aforesaid assets obtained pursuant to the scheme of arrangement, while computing book profits u/s 115JB - Pursuant to the scheme of amalgamation, the value of assets are to be recognized at their fair values only. As in the case of Priapus Developers Pvt. Ltd. [ 2019 (4) TMI 1283 - ITAT DELHI] had considered an identical issue where shares acquired pursuant to amalgamation were recognized at their fair values, wherein the learned AO treated the same as revaluation and denied deduction of fair value as cost of acquisition while computing book gains on transfer of shares. The Tribunal held that recognition of shares at fair value does not amount to revaluation. Hence the assessee would be entitled for claim of depreciation in the computation of book profits under section 115JB of the Act. Accordingly, the Ground Nos. 10 11 raised by the assessee are allowed. Disallowance of Capital Work In Progress (CWIP) written off - HELD THAT:- The genuineness of incurrence of such expenditure is also not doubted by the revenue. The only grievance of the revenue is that the expenses were incurred by the assessee for setting up of a new tower site which is capital in nature and since the said project of setting up of tower site got abandoned / aborted, the said entries of expenditure continues to remain as capital in nature and the abandoned project loss would only have to be construed as capital loss and not revenue business loss. The fact of the project getting aborted/ abandoned is not disputed by the revenue. That the project is linked with the primary business of the assessee is not doubted. Hence, if such business project gets abandoned, the amount already spent on the said project would only have to be construed as a business loss when the same is written off in the books and hence squarely allowable as deduction. This issue is also no longer res integra in view of the decision of Idea Cellular Ltd [ 2016 (10) TMI 181 - BOMBAY HIGH COURT] wherein held that since the new cellular towers were constructed in addition to the existing towers and no new business was being set up by assessee, expenditure incurred in respect of the said abandoned cell towers would be allowable business expenditure u/s 37(1). Decided in favour of assessee. Disallowance of Provision for Site Restoration Obligation (SRO)/ Asset Restoration Obligation (ARO) under normal provisions of the Act and also in the computation of book profits u/s 115JB - AO concluded that the provision of expenses on account of SRO/ ARO as an unascertained liability not eligible for deduction both under the normal provisions of the Act as well as in the computation of book profit u/s 115JB - HELD THAT:- We hold that whenever the said provision exceeds the actual expenditure incurred at the time of expiry of lease period, excess provision, if any, would get reversed by credit to Profit and Loss account and consequentially becomes taxable u/s 41(1) of the Act. Hence, we have no hesitation to hold that the provision made for expenses on account of SRO/ ARO as an ascertained liability. Reliance is also placed on the decision of Rotork Constrols India (P) Ltd [ 2009 (5) TMI 16 - SUPREME COURT] and Bharat Earth Movers Ltd [ 2000 (8) TMI 4 - SUPREME COURT] Hence, it become an allowable expenditure both under the normal provisions of the Act as well as in the computation of book profit u/s 115JB of the Act. Accordingly, Ground raised by the assessee are hereby allowed. Disallowance of provision for expenses treating the same as unascertained liability both under normal provisions of the Act as well as in the computation of book profit u/s 115JB - HELD THAT:- The said provision of expenses have been actually made by the assessee on scientific/ rational basis in consonance with the accrual system of accounting regularly employed by the assessee and in consonance with AS- 29 issued by ICAI. In our considered opinion, the said expenditure would have to be squarely allowed as deduction both under normal provisions of the Act as well as in the computation of book profit u/s 115JB of the Act as it falls under the category of ascertained liability. Accordingly, the Ground raised by the assessee are allowed. Disallowance of provision for Service Level Adjustment (SLA) credits both under normal provisions of the Act as well as computation of book profit u/s 115JB of the Act - AO treated the aforesaid provision for SLA credits as unascertained liability - HELD THAT:- We find that the said provision of SLA credits made by the assessee is made on a scientific basis having proper rationale for the same as it is akin to provision made for warranty. In view of the decision of Rotork Controls Pvt Ltd [ 2009 (5) TMI 16 - SUPREME COURT] we hold that the aforesaid provision of SLA credit would have to be construed as an ascertained liability eligible for deduction both under normal provisions of the Act as well as in the computation of book profit u/s 115JB of the Act. Accordingly, ground raised by the assessee are allowed. Disallowance of interest paid u/s 36(1)(iii) - HELD THAT:- As in the instant case that there is no extension of existing business. The assessee has merely got new circles to render telecom services wherein towers are installed. Accordingly, in our considered opinion, proviso to section 36(1)(iii) of the Act per se is not applicable. Further, we find that the issue in dispute is covered in favour of the assessee by the decision of this Tribunal in assessee s own case for AY 2009-10 [ 2019 (6) TMI 474 - ITAT DELHI] . Once it is held that borrowed capital has been utilized for the purpose of business of the assessee, the interest paid on such loan becomes an allowable deduction u/s 36(1)(iii) - Reliance in this regard has been rightly placed on the decision of Core Healthcare Ltd [ 2008 (2) TMI 8 - SUPREME COURT] There is absolutely no basis for the lower authorities to arrive at the average credit period of 90 days obtained from the vendors or average period taken for installation/ construction of tower sites - Decided in favour of assessee. Denial of additional claim of enhanced depreciation of energy saving device @80% as against 15% granted by the revenue - HELD THAT:- We find that the devices installed by the assessee are only to ensure uninterrupted power supply at the tower sites at the required temperature level. Hence, these equipments do fall under the category of energy saving device eligible for enhanced rate of depreciation of 80%. Hence, the ld AO is directed to grant 80% depreciation on this energy saving device and recompute the allowable income tax deprecation u/s 32 of the Act for the year under consideration and also for subsequent years consequentially Decided in favour of assessee. Upward adjustment of depreciation on aforesaid assets obtained pursuant to the scheme of arrangement, while computing book profits u/s 115JB - HELD THAT:- Pursuant to the scheme of amalgamation, the value of assets are to be recognized at their fair values only. The Delhi bench of this Tribunal in the case of Priapus Developers Pvt. Ltd. [ 2019 (4) TMI 1283 - ITAT DELHI] had considered an identical issue where shares acquired pursuant to amalgamation were recognized at their fair values, wherein the learned AO treated the same as revaluation and denied deduction of fair value as cost of acquisition while computing book gains on transfer of shares. The Tribunal held that recognition of shares at fair value does not amount to revaluation. The assessee would be entitled for claim of depreciation in the computation of book profits under section 115JB of the Act. Accordingly, the Ground raised by the assessee are allowed. Disallowance made on account of depreciation in relation to provisional capitalization added to the cost of fixed assets - HELD THAT:- It is pertinent to note in the special audit report issued for the assessment year 2010-11, the special auditor has categorically accepted the accounting policy/ basis adopted by the assessee and had specifically noted that provisional capitalization needs to be added to the cost base of tower site in order to measure the cost of fixed assets capitalized and depreciation there on. In view of the modus operandi adopted by the assessee which stood uncontroverted by the revenue before us and in view of the report of the Special auditor, we hold that no fault could be attributed on the basis of derivation of provisional capitalization by the assessee as narrated and detailed supra. Accordingly, we hold that the depreciation on aforesaid provisional capitalization deserves to be allowed as the corresponding assets thereon are already ready for use. We find that the learned CITA had duly appreciated this contention of the assessee and on which, we do not find any infirmity. Accordingly Ground raised by the revenue is dismissed . Disallowance of depreciation on tower sites from RFAI notice generation date - HELD THAT:- We find that the Hon ble Courts have already held that the term use as referred to in Section 32 of the Act is not restricted to actual use , but also includes passive use i.e. assets kept ready for use which should also be considered for the purpose of claim of depreciation. The date on which the depreciation is being claimed by the assessee and the date for which depreciation is granted to the assessee by the revenue only results in a timing difference and effectively becomes revenue neutral and hence the revenue need not have any grievance on the same. Thus we hold that depreciation on tower sites are to be allowed from RFAI notice generation date. Hence, we do not find any infirmity in the order of the Learned CITA granting relief to the assessee. Accordingly, Ground raised by the revenue is hereby dismissed. Capitalization of salary expenses - AO capitalization of salary expenses and granting depreciation thereon in the facts and circumstances of the case - HELD THAT:- We find that the employees are not only engaged in setting up of tower sites, rather majority of responsibilities relate to post setting up of tower sites and help in day to day operations of the assessee company. Hence it could be safely concluded that there is absolutely no basis for the Learned AO to even allege that these divisions perform only pre-capitalization work. We find that these salary expenditures are incurred in a routine course of business having direct nexus with the business operations of the assessee company and hence would be squarely allowable as deduction which fact has been duly appreciated by the Learned CITA while granting the relief to the assessee. Hence we do not find any infirmity in the order of the Learned CITA granting relief to the assessee. Accordingly, the Ground raised by the revenue is hereby dismissed. Partial deletion of disallowance made on account of provision for expenses, treating it as an ascertained liability - HELD THAT:- As provision has been made for expenses on a rational basis by strictly following the principles mandated for mercantile system of accounting and those provided in AS-29 issued by ICAI and they are to be construed only as an ascertained liability consequentially allowable as deduction. Accordingly, we do not find any infirmity in the order of the learned CITA granting relief to the assessee qua the same - Ground raised by the revenue is hereby dismissed. Difference in turnover reported in service tax return and income tax return - CIT(A) deleted addition - HELD THAT:- CIT-A had rightly admitted the additional evidences filed by the assessee under Rule 46A of the Income Tax Rules containing the turnover reconciliation statements between service tax returns and income tax return as the same are very much required for determination of the issue in dispute before him. DR before us could not draw our attention to any errors or deficiencies in the said reconciliation statement submitted before the Learned CITA. CITA on due verification of the said reconciliation statement was convinced that there was no difference in the turnover declared in the income tax return vis- -vis the service tax return. Hence we do not find any infirmity in the order of the Learned CITA granting relief to the assessee in this regard - Ground raised by the revenue is hereby dismissed. Disallowance on account of upfront fees - CIT(A) deleted addition - HELD THAT:- The issue in dispute is no longer res integra in view of the decision of this Tribunal in assessee's own case for assessment year 2009-10 [ 2019 (6) TMI 474 - ITAT DELHI] wherein the loan upfront fees paid by the assessee was held to be revenue expenditure, also confirmed by HC [ 2023 (11) TMI 88 - DELHI HIGH COURT] dated 31-10-2023 - Ground raised by the revenue is hereby dismissed. Disallowance of unverifiable expenses - CIT(A) deleted addition - HELD THAT:- From the perusal of the details filed by the assessee, we find that assessee has not only placed the invoices, but also agreements of almost all the vendors for the 17 transactions, both during the assessment proceedings as well as before the Learned CITA proceedings. The assessee on its part had duly discharged its onus of genuineness of the expenditure. These facts were not appreciated by the Learned AO, whereas the Learned CITA appreciated the same and granted relief to the assessee. Nowhere the incurrence of the expenditure wholly and exclusively for the purpose of business has been doubted by the Learned AO. Hence the expenses becomes an allowable deduction in accordance with the mercantile system of accounting followed by the assessee. Accordingly, the Ground raised by the revenue is dismissed. Unverifiable expenses due to discrepancy in the PAN - HELD THAT:- We find that the learned CITA had duly appreciated the contentions of the assessee and rightly deleted the disallowance made on account of expenses - Ground raised by the revenue is dismissed.

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• 2024 (12) TMI 1382
  Rejecting the books of accounts - estimating the total income of the assessee - HELD THAT:- Once the books of account are rejected by invoking the provisions of section 145 of the Act and the income is estimated to the best of judgment as per the provisions of section 144 of the Act, the said estimate is made in substitution of the business income that is to be computed in accordance with the provisions contained in sections 30 to 43D as laid down in section 29 of the Act. Consequently, all the deductions which are referred to in sections 30 to 43D of the Act are deemed to have been taken into account while making such an estimate. Useful reference in this regard may be made to the decision of Indwell Constructions [ 1998 (3) TMI 121 - ANDHRA PRADESH HIGH COURT] and Banwari Lal Banshidhar [ 1997 (5) TMI 37 - ALLAHABAD HIGH COURT] . For these reasons, we do not agree with this plea of the Revenue. No infirmity in the order of the Ld. CIT(A) in rejecting the books of accounts and estimating the total income of the assessee. We accordingly uphold the same.

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• 2024 (12) TMI 1381
  Disallowance u/s 14A - appellant had received dividend income and made suo moto disallowance - HELD THAT:- Disallowance made by the assessee as even the strategic investments have to be considered while computing the disallowance under Rule 8D r.w.s. 14A of the Act. In view of the decision of State Bank of Patiala [ 2018 (11) TMI 1565 - SC ORDER] the disallowance u/s 14A has to be restricted to Rs. 3,75,000/- which was the amount of dividend received by the assessee. The contention of the CIT(A) that it was an isolated case and the facts are not identical to the facts of the case of the assessee does not appear to be correct as in that case Hon ble Supreme Court had dismissed the Special Leave Petition both on the ground of delay as well as on merits and the order of the Hon ble Punjab and Haryana High Court which upheld the order of the Tribunal that amount of disallowance u/s 14A could be restricted to amount of exempt income only and not a higher figure was thereby confirmed and the decision of the Hon ble Supreme Court is binding on the High Court as well as the Tribunal. Appeal of assessee allowed.

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• 2024 (12) TMI 1380
  Levy of penalty u/s.271(1)(c) - case was reopened u/s.147 for the reason that the some of the equity-oriented funds were not covered u/s.10(38) to claim the exemption - assessee submitted that it had inadvertently claimed exemption u/s.10(38) in respect of 10 transactions being transactions related to 10 debt mutual funds but in fact the assessee was eligible for indexation on these funds and if the indexation benefit is worked out it would result in a Capital Loss which it ought to have claimed - HELD THAT:- We note that the assessee s return of income was accepted by the AO in two assessment orders without any additions. Hence, it is admitted fact that the AO has not found any mistake / errors in the income declared / offered by the assessee. In this case, even if the computation has been properly made, then there would be no escapement of income and hence reopening should have been dropped and consequently no penalty can be imposed on the reassessment order. Therefore, the action of the AO and that of the CIT(A) cannot be countenanced. Assessee s reliance on the decision of Reliance Petro products Limited [ 2010 (3) TMI 80 - SUPREME COURT] that making inaccurate claim in law cannot tantamount to furnishing inaccurate particulars is applicable to the present case as all the details of capital gain transactions in dispute are very much part of the Return of Income along with the Schedules. We are of the considered opinion that, the penalty u/s.271(1)(c) is not warranted and hence we are inclined to delete the same. Decided in favour of assessee.

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• 2024 (12) TMI 1379
  Addition of peak credits - deposit through cheque and bank transfer in the undisclosed bank accounts - HELD THAT:- Lower authorities have given a concurrent finding that the bank account has been duly considered for the purpose of computing peak credit which has been assessed in the hands of the assessee. All the bank statements that has been used to make the circular transactions were before the AO and on that basis, peak credit has been arrived at Rs. 2.99 crores. CIT(A) has considered and duly ascertained the peak credit of bank account of the assessee s father Shri V. Gurunathan, which is duly considered for the purpose of computing peak credit in the hands of the assessee. AO has verified this fact and CIT(A) while giving finding has considered the assessee s father s bank account and circular transactions entered into the assessee s bank accounts, which are part of assessee s paper-book, we find no infirmity in the order of CIT(A) directing the AO to assess only the peak credit and no further addition is to be made - Appeal filed by the Revenue is dismissed.

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• 2024 (12) TMI 1378
  Revision u/s 263 - Addition u/s 56(2)(vii)(b) - difference in stamp duty value and purchase price of property - HELD THAT:- As during the course of assessment proceedings, assessee furnished explanations and documentary evidences to assail the invocation of provisions of Sec.56(2)(vii)(b). AO accepted the claim of the assesses with due application of mind. Considering the given factual matrix, the said view of Ld. AO could be said to be one of the possible views. CIT(A), in our considered opinion, could not have substituted the opinion of Ld. AO with that of his own view unless the view of Ld. AO was shown to the perverse or not in accordance with law. Therefore, revision of the order could not be held to be justified on this score. AO has omitted to consider the addition as made of unaccounted investment u/s 143(3) - The assessee has already preferred a petition u/s 154. Apparently, the demand as raised on account of addition has already been satisfied by the assessee. Therefore, it would suffice on our part to direct Ld. AO to rectify the reassessment order by adopting correct income and by granting applicable deductions / tax credit to the assessee as available to him. Assessee appeal allowed.

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• 2024 (12) TMI 1377
  Validity of reopening of assessment - Addition u/s 68 - transaction in shares of companies identified as penny stock by the Investigation Wing - HELD THAT:- AO has drawn inference from a report from investigation wing related to bogus long long/short term capital gains transaction to initiate reassessment proceedings against the Assessee without considering the nature of business of the Assessee and the inquiries conducted during the regular scrutiny assessment proceedings. The sole basis of initiating the reassessment proceedings and making addition in the hands of the Assessee is the fact that the Assessee had sold the shares of a company identified as a penny stock by the investigation wing. In our view, the approached adopted by the AO cannot be countenanced. We hold that in the facts and circumstances of the present case, neither the initiation of reassessment proceedings nor the addition made by the AO on merits can be sustained. Addition u/s 68 - CIT(A) has noted that there was sudden and steep rise in the price of shares when general market trend was admittedly recessive and that the Assessee had failed to provide explanation for steep rise in price of shares. We find no basis for the aforesaid observation made by the CIT(A) as the AO has not made any reference to quoted prices of the Shares. After referring to reasons recorded and the general modus operandi stated in the report of the investigation wing, the AO has added the sale consideration in the hands of the Assessee u/s 68 of the Act holding the same as unexplained income. The basic underlying facts that the Assessee has booked business loss in the case at hand has escaped the attention of the CIT(A) leading to incorrect factual observation and conclusion. Assessee appeal allowed.

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• 2024 (12) TMI 1376
  Reopening of assessment - Addition u/s 68 - non considering assessee's objections against reopening - HELD THAT:- The assessee had demanded reasons for reopening. On receipt of reasons, the assessee filed detailed objections. None of the objections were dealt with by Ld. AO and no formal speaking order was passed accepting or rejecting the objections raised by the assessee. As in the case of Jayanthi Natarajan [ 2017 (9) TMI 1042 - MADRAS HIGH COURT] as relying on GKN Driveshafts (India) Ltd. [ 2002 (11) TMI 7 - SUPREME COURT] categorically held that in case the objections were not disposed-off by way of speaking order then it amounts to violation of natural justice and the assessment proceedings are vitiated as null and void. The present case was on identical facts. AO, in assessment order dated 26-03-2013, made addition on account of land purchase, cash payment for land purchase and disallowed expenses. The loan taken from aforesaid entity was accepted and no addition was made in respect thereof. Clearly, an opinion was formed on the issue of advance received from SRSR. Having satisfied with assessee s submissions, in this regard, Ld. AO chose not to make any addition in that respect. The same is further evidenced by the fact that the aforesaid order was subjected to revision u/s 263. The revisionary authority, upon perusal of case records, flagged issue only with respect to another entity M/s Pacific Chennai Infrastructure Pvt. Ltd. However, no discrepancy was noted with respect to transaction carried out with SRSR. In such a case, the second reopening was nothing but triggered on mere change of opinion which is impermissible in law. Addition u/s 68 - We concur with the adjudication of Ld. CIT(A) that the assessee had duly discharged the onus u/s 68 to establish the identity of the lender, its creditworthiness as well as genuineness of the transactions. The debt was settled subsequently and no case of addition u/s 68 could be made out against the assessee. No addition could be made merely on the basis of suspicion, conjectures and surmises. Therefore, we see no reason to interfere in the impugned order on merits also.

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• 2024 (12) TMI 1375
  Validity of the re-assessment proceedings - addition made on account of alleged bogus purchases - reassessment initiated on the basis of information received from the Principal Director of Income Tax (Investigation) - HELD THAT:- Information received from the investigation wing formed sufficient tangible material for initiation of re-assessment proceedings u/s147 of the Act. As per the reasons recorded, the Assessing Officer had formed a belief that income had escaped assessment since the Appellant had booked bogus purchases and thereby, failed to made full and true disclosure during the assessment proceedings. Therefore, we reject the challenge to the validity of the re-assessment proceedings. Since the re-assessment proceedings were validly initiated no fault could be found in the action of the AO including in the ambit of re-assessment proceedings, the escapement of income on account of the alleged bogus purchases. Estimation of income - Addition of entire purchase price in the hands of the Appellant cannot be sustained. Accordingly, by following the judgment of Mohammad Haji Adam Co. [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] AO is directed to restrict the addition to the difference, if any, between (a) the gross profits margin offered to tax in relation to genuine purchases and (b) the gross profits margin offered to tax in relation to alleged bogus purchases. Decided partly in favour of assessee.

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• 2024 (12) TMI 1374
  Unexplained cash credits to bank u/s.68 r.w.s.115BBE - cash deposits made during the demonetization period maintained by Mulagumoodu Branch solely on the ground that the appellant could not bifurcate the deposits made in SBNs and non SBNs in the said branch - HELD THAT:-The assessee has demonstrated the source for such deposits emanating from the fees collected prior to 08.11.2016 as the total deposits made in SBNs in both the branches was only Rs. 16,92,000/-. It is also demonstrated by the assessee that the consistent cash deposits in all the months. AO has not rejected the books of account maintained by the assessee. We are of considered view that in this case AO had not brought on record any concrete evidence to reject the explanation of the appellant. Hence, we delete the addition sustained by the ld.CIT(A). Decided in favour of assessee.

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• 2024 (12) TMI 1373
  Unexplained asset u/s 69 - assessee filed return of income manually admitting an income u/s 44AE from running of lorries and agricultural income - HELD THAT:- When the income is offered on presumptive basis u/s 44AE, depreciation is deemed to be granted to the assessee whether it is claimed or not. Therefore, the same could not have been disallowed by Ld. AO. The assessee has admitted income on presumptive basis u/s 44AE from lorries and therefore, it is not required to maintain any books of accounts. In such a case, this income has to be accepted. No adverse findings have been rendered for agricultural income. The assessee has offered agricultural income of Rs. 2.07 Lacs which is to be accepted. The claim of past savings of Rs. 5.50 Lacs cannot be rejected merely because the assessee has availed loan. Therefore, the same has to be accepted. Considering the entirety of facts of the case and with a view to settle the dispute, we direct Ld. AO to accept business income of Rs. 1.80 Lacs and also agricultural income of Rs. 2.07 Lacs. The addition for unexplained asset would stand restricted to Rs. 2 Lacs.

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• Customs

• 2024 (12) TMI 1372
  Seeking quashing of the preventive detention order - Smuggling of Gold - contravention of Sections 132, 135 (1) (a) and 135 (1) (b) of the Customs Act - substantial delay in the consideration of representation of the Petitioner - non-application of mind while passing the impugned detention order - violation of principles of natural justice. Non-application of mind by the Detaining Authority - HELD THAT:- The observation made by the detaining authority to the extent that the Petitioner was likely to be released from judicial custody, is without any material. This is in view of the fact that the bail applications of the Petitioner had already been dismissed twice by the Hon ble Rajasthan High Court by that time, and admittedly, no other application seeking bail was pending at that time when the impugned order was passed. The Hon ble Supreme Court in Binod Singh v. District Magistrate, Dhanbad [ 1986 (9) TMI 387 - SUPREME COURT] , while setting aside the detention order against the Petitioner therein, who was already in jail at the time of service of the detention order, has observed and held that 'If a man is in custody and there is no imminent possibility of his being released, the power of preventive detention should not be exercised. In the instant case when the actual order of detention was served upon the detenu, the detenu was in jail. There is no indication that this factor or the question that the said detenu might be released or that there was such a possibility of his release, was taken into consideration by the detaining authority properly and seriously before the service of the order. A bald statement is merely an ipse dixit of the officer. If there were cogent materials for thinking that the detenu might be released then these should have been made apparent.' In the present case, apart from the impugned detention order, even in the counter affidavit dated 17th September, 2024 filed on behalf of the Respondent Nos. 1 and 2, it has not been demonstrated that there was a possibility of the Petitioner being released from the judicial custody to justify the impugned order of detention. Substantial delay in the consideration of representation of the Petitioner - HELD THAT:- This Court need not examine the ground of delay which had allegedly occurred in placing and considering the representation moved by the Petitioner on 06th July 2024. Conclusion - This Court is of the considered opinion that the impugned order of detention was passed mechanically without any due application of mind and is liable to be set aside. Accordingly, the present Petition is partly allowed and the impugned order of detention dated 12th April, 2024 and confirmation order dated 18th June 2024 are set aside. Petition disposed off.

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• 2024 (12) TMI 1371
  Confiscation of 3 Gold Bars found from the petitioner - HELD THAT:- It is difficult to understand as to how the respondent-authorities could have disposed of the gold in November, 2022 in breach of the interim-order passed by this Court which has continued to operate till date. Instead of calling upon the respondents to give explanation for breach of the order of this Court, in the interest of justice, we hereby direct the respondent-Authorities to pay the market price, prevailing at the relevant time, of the goods which was sold in violation of the order passed by this Court in case the petitioner succeeds in appeal or in revision, if any. Petition disposed off.

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• 2024 (12) TMI 1370
  Levy of personal penalty u/s 114AA of the Customs Act, 1962 - Jurisdiction of the Commissioner of Customs (Preventive) Jodhpur in issuing the SCN - what is the meaning of the expression liable to penalty ? - HELD THAT:- The term liable could either mean that one is responsible by law to do something or that one is likely to experience something undesirable. If one is liable to pay interest, for instance, it means one has an obligation to pay interest. However, if one is liable to penalty, it can only mean that one may be penalised. Thus, as per Section 114AA of the Customs Act, one who knowingly makes, signs, uses or causes to be made, signed or used a false declaration may be penalised. Nothing in this section says that such a person shall be penalised. The expression liable to is used in several sections of the Customs Act and its scope was interpreted in the context of confiscation by the Delhi High Court in Jain Exports (P) Ltd. vs. Union of India Others [ 1988 (5) TMI 50 - SUPREME COURT] . The High Court held that not only does the adjudicating authority have the discretion to decide whether or not to confiscate goods which are liable to confiscation, but it has to exercise this discretion judicially and not arbitrarily. The meaning of the expression shall be liable to confiscation or penalty in the Customs Act is that a penalty may be imposed on the person who falls under the section or, as the case may be, the goods which fall under the section may be confiscated. The adjudicating authority not only has the discretion but also an obligation to judiciously exercise it and decide whether to impose penalty or not or, as the case may be, confiscate or not confiscate the goods. The mis-declaration of the year of manufacture of the capital goods was discovered only on investigation. Since the EPCG licence was obtained through mis-declaration, the machinery so imported was not eligible for exemption from duty and therefore, duty is recoverable along with interest and penalties - The allegation is that in the application made to the DGFT for EPCG scheme [under the Foreign Trade (Development Regulation) Act, 1992 read with the Foreign Trade Policy 2009-2014], the manufacturers had mis-declared the year of manufacture of the machinery to be imported. Insofar as M/s. Nimbark Textile Mills of which the appellant is the proprietor is concerned, this matter is before the Commissioner to decide in the remand proceedings. Even if the case is decided against M/s. Nimbark Textile Mills, the appellant herein can still not be penalised under Section 114AA of the Customs Act because this section renders one liable to penalty only in case of mis-declaration with knowledge or intent in any proceeding under the Customs Act which is not even the allegation. Any mis-declaration before DGFT to obtain a licence is not a declaration in a proceeding under the Customs Act but a proceeding under Foreign Trade Policy framed under the Foreign Trade (Development Regulation) Act, 1992. The impugned order cannot be sustained insofar as the penalty imposed on the appellant under section 114AA of the Customs Act is concerned - Appeal allowed.

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• 2024 (12) TMI 1369
  Levy of penalty u/s 112(a), 112(b) and 114AA of Customs Act. 1962 - mis-declaration of goods and manipulation of import documents - reliability of statement of Proprietor of M/s Dhairya International (Importer) and other co-accused - HELD THAT:- The proceeding only on the basis of statement of co-accused is not sufficient to hold the Appellant guilty of mis-declaration of goods and manipulated import documents in absence of any search and recovery of corroborative evidence from him or his place. The alleged statement of the co-accused cannot be relied upon to implicate a person on charges of mis-declaration of goods and manipulation of import documents. Therefore, it was incumbent on the Investigating Officer, to have searched and recorded statement of the Appellant and to further prosecute him in the matter on the basis of its finding. Therefore, the proceedings against Appellant on the basis of the statements of the co-accused is not sufficient to hold him guilty of disputed imported goods. It is a settled law that no person shall be implicated in a crime merely on the basis of an allegation levelled by a co-accused, without any corroborative evidence. The role of the appellant in the present matter was argued by the department was to arrange finance and to purchase disputed goods from China and export to India. Ld. Consultant has opposed this argument on the ground that no evidences provided by the revenue in this regards. There are force in argument of Ld. Consultant. It is also noticed that no physical act of the appellant in relation to the goods in question has been brought out to justify the penalty on the appellant under the above sections. Penalty u/s 112 of CA - HELD THAT:- The entire case of the Revenue against the appellant is based upon the statements of the co noticees. It is well-established law that the statements of the co-noticees, unless corroborated in material particulars by independent evidence, do not constitute the legal evidence. There is nothing on record to establish by the revenue with documentary evidence that Appellant had abetted in the relation to disputed imported goods for purpose of imposition of penalty under Section 112(a) and/or 112(b) of the Customs Act, 1962. Imposition of penalty under Section 114AA of Customs Act, 1962 - HELD THAT:- In the present disputed matter all the declaration related to import of goods is signed and filed by Shri Guarav Patel. In fact Appellant has not made any declaration to the Custom Authorities as required under the Customs Act, 1962. No document etc., which has been produced by the revenue which was signed by the Appellant. It is also found that in the present matter revenue in support of allegation that Appellant is guilty of providing manipulated import documents i.e invoice, packing list, phytosanitary certificate etc. from China by showing description of goods as Bamboo Sticks for making Agarbattie not produced any single documentary evidence. As the ingredients for invocation of provisions of Section 114AA are absent in the present case penalty under the said section is not justified. Conclusion - Penalties are set aside, emphasizing that reliance solely on co-accused statements without corroborative evidence is inadequate for establishing guilt. The impugned order is set aside to the extent it imposes penalties upon the present appellant - Appeal allowed.

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• 2024 (12) TMI 1368
  Valuation of imported Induction Cookers - Enhancement of values based on the best assessment method - case of appellant is that the respondent failed to follow the basic rule to discard the transaction value and enhanced the value without any admissible evidence - no speaking orders - violation of principles of natural justice - HELD THAT:- There is no justification to compare the goods imported by different importers, since the specifications and the features would be different for different brands and models which would have a bearing on the value. There is no admissible evidence forthcoming in the impugned order to reject the transaction value. The appellants stated that they have explained to Customs that the value declared was the correct value. It was also submitted that even as per the import documents, such as the import invoice and the letter of credit opened in favour of the beneficiary/foreign supplier, there was no extra remittance and the value declared needs to be accepted as the Transaction value. However, the respondent without formally rejecting the declared values, proceeded to discard the value without any basis. Merely by paying the duty as assessed by the adjudication authority due to compelling reasons like mounting demurrage charges and the delay in clearance cannot be considered as acceptance of the loaded value. Thus, the findings of the adjudication authority that the assessment order passed by the Department is based on the value and classification declared by the importer is factually incorrect. Conclusion - In the absence of any justifiable reason, enhancement of the declared value is not tenable. Appeal allowed.

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• FEMA

• 2024 (12) TMI 1367
  Contravention of Section 5 of FEMA read with Rule 4 of FEMA (Current Account Transactions) Rules, 2000, for remitting royalty to overseas parties exceeding within the permissible limit of 5% on local sales - HELD THAT:- During the adjudication proceedings, the respondents have filed CST returns and respective State Level Sales Tax Returns in which they have disclosed the actual sale for the purpose of taxation. This has been duly taken into account by the learned Adjudicating Authority, which is also borne out in page 168 of the RUD filed by the respondents. The above provisions clearly reflect that sale price only relates to the consideration of transferring of property in goods with no other abatement other than what is provided in the above provisions. The respondents have filed CST Returns and respective State Level Sales Tax Returns in which they have disclosed the actual sale price for the purpose of taxation and this has been duly taken in the account by the Ld. Adjudicating Authority and thereafter, he passed the detailed and well- reasoned adjudication order. During the arguments Appellant ED also relied upon the judgment in case M/s Jhawar International Overseas Versus ITO [ 2010 (1) TMI 1277 - ITAT AHMEDABAD ] wherein held that the commission was not deducted from the export invoices in an ad-hoc manner and it was clearly under an agreement between the buyer and the seller, as also between the buyer and the agent. Consequently, the assessee was under an obligation to deduct commission from the gross invoice values. In the present case, there was a compulsion to deduct the commission from the export invoices which was clearly indicated in the confirmation letters of the agents, the ingredients which were necessary for such deduction of commission to be treated as diversion of income by overriding title was clearly present. Accordingly, he stressed that the commission of sales of Rs. 269,88,52,221/- needs to be deducted from the gross sale value, for calculating the percentage of royalty. We are not convinced with the submission made by Ld. counsel for the Appellant ED, in view of my observations recorded in para no. 11, coupled with the fact that judgment relied upon by appellant ED pertains to for calculation for net income, but not the net sale price.

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• PMLA

• 2024 (12) TMI 1366
  Seeking to quash the order of provisional attachment - order of provisional attachment of immovable properties of the petitioner is without jurisdiction or not. Whether this writ petition is maintainable? - HELD THAT:- The scheme of section 5 (3) of the PML Act indicates that a person aggrieved by a provisional order of attachment cannot challenge such an order before any authority - In Santiago Martin v. Union of India [ 2023 (10) TMI 66 - KERALA HIGH COURT ] it was observed that there is no appeal against a provisional attachment order. The statute contemplates a complaint to be filed by the Officer who issued the attachment order to prefer a complaint to the Adjudicating Authority under section 5 (2) of the PML Act. If the provisional attachment is found to be illegal, the Adjudicating Authority s order will be effective only from such a date and not the date of the provisional order. Even if the attachment is wholly illegal, still, at least for the period during which the provisional attachment remained in force, the property would have the taint of a proceeds of crime - Thus, if an order of attachment of a property is without jurisdiction or a non est, the remedy under the statute may not be a completely efficacious and alternative mechanism. Hence, if the order of provisional attachment under section 5 of PML Act is without jurisdiction, a writ petition is maintainable and can even be entertained. Whether the order of provisional attachment of immovable properties of the petitioner, dated 13-10-2023, is wholly without jurisdiction? - HELD THAT:- A perusal of Ext.P1 reveals that the authority who issued the said order had no case that any proceeds of the crime involving the petitioners had been taken out of the country. In such circumstances, the attachment of properties purchased by the petitioners prior to 2014, under the provisions of section 5(1) of PML Act is ex-facie null and void and wholly without jurisdiction - Since this Court is of the view that the provisional attachment of properties purchased prior to 2014 cannot be proceeded against under section 5 of PML Act, the said order of attachment to that extent is wholly without jurisdiction. Petitioners need not be relegated to pursue the alternative remedy for those three properties. Therefore the provisional order of attachment relating to the immovable properties purchased by the petitioners prior to 2014 is liable to be set aside. Conclusion - The writ petition is maintainable if the provisional attachment order is without jurisdiction, despite the existence of statutory remedies - Properties acquired before the commission of an alleged offence cannot be attached as proceeds of crime under the PML Act. This writ petition is allowed in part.

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• Service Tax

• 2024 (12) TMI 1365
  Valuation of service tax - requirement to include value for transportation of limestone in VCES 1 declaration - period 1-10-2007 to 31-12-2012 - HELD THAT:- In view of CBEC vide Circular F. No. 232/2/2006-CX.4 dated 12.11.2007, it appears that department entertained a view that transportation of minerals outside i.e. from mines to a factory premises was covered under Goods Trasport by Road services upto 31.05.2007 only, and thereafter was covered under the composite definition of mining services w.e.f. 01.06.2007. On such interpretation, appellant s VCES application which was initially accepted with issuance of discharge certificate, was sought to be rejected and service tax relating to transportation services was demanded for the period 1-10-2007 to 31-12-2012 - It is seen from para 5 of the circular that activity of transportation of mineral is post-mining activity and is chargeable to service tax under the relevant taxable services i.e. Goods Transport by Road. It is further noticed from the available records that transportation of limestone is treated as separate service by the appellant and SCL for which consideration is separately agreed between them which is separately charged by the appellant to SCL through its another proprietorship firm namely M/s. Harsidhi Transport. Thus, mining and transportation services are separate services falling under separate specific heading of sub-clauses of sub section (105) of section 65, where transportation of goods by road is classifiable under clause (zzp) of clause (105) w.e.f. 01.01.2005 and the mining services provided in the mines are classifiable under clause (zzzy) of clause (105) of the Finance Act, 1994 and the same therefore cannot be considered as composite service. Conclusion - The transportation services are not part of mining services for VCES purposes. The impugned Order of Commissioner cannot be sustained and is therefore set aside. Appeal allowed.

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• 2024 (12) TMI 1364
  Liability to pay service tax on SBM hiring charges, CHA charges, loading charges, GMB shipping fee in respect of user of Reliance SBM at Hazira by ONGCL for transportation of naphtha to OPAL SEZ unit at Dahej - demand confirmed on the ground of ONGCL not having followed the procedure under N/N.12/2013-ST for availing exemption from payment of service tax - HELD THAT:- Firstly, the service was provided by the reliance for use of their SBM and reliance has admittedly paid the service tax. The appellant have simply raised the invoice for the reimbursement of the actual amount paid by them to the reliance. Therefore, the appellant is not the service provider whereas they are the service recipient and therefore, they are not liable to pay service tax. Secondly, the demand of service tax on service which has already suffered the service tax is demanded twice on the same service which is not permissible. Thirdly, though the appellant have issued the invoices initially but the same were reversed subsequently, as contract with OPAL was amended retrospectively and consequently, the appellant did not receive any consideration for these so called services. In this position, as per the retrospective amendment in the contract, no consideration exist, therefore in absence of any consideration the service tax demand is absolutely illegal, unconstitutional and incorrect. Levy of penalty - HELD THAT:- Since, the penalty is consequential to the demand which is non-existent as per this order, question of any penalty does not arise. Hence, the Revenue s appeal is without any substance. Service tax cannot be levied twice for the same service, and in the absence of consideration, a service tax demand is invalid - the demands made in the impugned order is not sustainable. Appeal allowed.

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• 2024 (12) TMI 1363
  Time limitation - suppression of facts or not - liability of sub-contractor to pay service tax - demand of service tax for the period July 2012 to March 2015 on the ground that the benefits and exemptions claimed by the appellant is not correct - HELD THAT:- It is found from the records and copy of ST-3 produced, that appellant had been filing the ST-3 returns regularly to their Jurisdictional Range Officers. It is on record that the appellant shown all the details in ST-3 Returns. Appellant has shown the details of exempted services in their all the ST-3 Returns and has also shown the fact that they were availing exemptions. Appellant in the ST-3 Returns had disclosed the value of services and also disclosed the exempted services for the relevant period and said facts nowhere disputed by the Ld. Adjudicating authority therefore, the revenue could not urge that there was suppression of facts by the appellant with an intent to evade payment of service tax. It is also found that it is admitted facts that Appellant acted as sub-contractor to M/s L T. It also to be noted that at the relevant time there were conflicting decisions of the Tribunal regarding payment of service tax by a sub-contractor and it is only when the Larger Bench in the matter of COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. [ 2019 (6) TMI 518 - CESTAT NEW DELHI-LB] that it was settled that a sub-contractor would have to discharge the service tax liability even if the main contractor had discharged the service tax liability. Conclusion - There is nothing on record to show that any suppression of facts or wilful misstatement were made on the part of the appellant who has filed periodical ST-3 return regularly and disclosed all necessary details as required. In these circumstances charge of suppression or willful misstatement with intention to evade Service Tax cannot be alleged against Appellant. For this reason no mala fide can be attributed to appellant. Hence longer period of demand cannot be invoked. The demand being under the extended period is set aside and appeal is allowed.

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• 2024 (12) TMI 1362
  Invocation of extended period of limitation - suppression of facts or not - levy of service tax - sponsorship services - inter company management/service expenses shared with parent company - Renting of Immovable Property - import of services availed from associate enterprises - software license and maintenance/support agreement produced by the appellant - interest on failure to remit the tax as per the Point of Taxation Rules, 2012. Invocation of extended period of limitation - suppression of facts or not - HELD THAT:- As per the law laid down by Hon'ble Apex Court in the matter of M/s Anand Nishkawa Co Ltd Vs. CC Meerut [ 2005 (9) TMI 331 - SUPREME COURT] if correct information is not disclosed deliberately to evade payment of duty and when facts are known to both the parties, omission by one to do so be would not render suppression of facts. Mere failure to declare will not amounts to wilful suppression. There must be some positive act from the side of assessee to find wilful suppression as per Section 11A of the Central Excise Act, 1994. Thus, the impugned order confirming demand beyond the normal period of limitation is unsustainable. Nonpayment of service tax of Rs. 1,01,6,502/- under 'sponsorship' services - HELD THAT:- The appellant produced sufficient evidence to prove that the consideration for demanding said amount under 'sponsorship; services has been arrived without considering the details of expenses as explained in ibid, paras. Since, the actual amount of sponsorship fee is only Rs. 2,15,55,828/- and considering the fact that the appellant had discharged their liability on the said amount on Reverse Charge basis, service tax of Rs. 1,01,6,502/- demanded as per the impugned order under 'Sponsorship' services is unsustainable. Demand of Rs. 13,30,558/- on inter company management/service expenses shared with parent company - HELD THAT:- The appellant produced the challan evidencing payment of service tax of Rs. 2,23,79,555/- on a consideration of Rs.21,66,08,189/- against various services on inter company management/service expenses shared with the parent company. As regards demand of Rs. 13,30,558/-there are no details furnished by the Adjudication authority or as per the SCN to find out the category under which alleged short payment of Rs. 13,30,558/- was demanded. In the absence of any specific allegation, no finding can be made that there is a short payment as held in the impugned order. Thus, the said demand is also unsustainable. Demand of interest of Rs.20,371/- alleging failure to remit the tax as per the Point of Taxation Rules, 2012 - HELD THAT:- Since the detail breakup of the amount is not specified in the SCN, Appellant could not produce any submission to that effect. Considering the fact that the Appellant were paying service tax continuously and discharged huge amount of service tax under different categories as and when they were liable to pay, demand of interest of Rs.20,371/- without specifying the detailed breakup of the amount is unsustainable. Demand of Rs. 2,45,58,483/- under 'Renting of Immovable Property' - HELD THAT:- As per the evidence produced by the appellant including the certificate issued by Chartered Accountant, the total service tax liability is only Rs. 1,77,00,220/- and not Rs.2,46,02,902/- as alleged. Out of this, service tax of Rs. 58,28,607/- was already deposited by landlords and for Rs.10,74,075/-, the appellant claims that the amount represents rent less charged by landlords, who were not liable to register under the service tax registration, since their turnover during the impugned period was below the threshold limit prescribed in this regard. However, Adjudication Authority confirmed higher amount on the ground that during the course of audit the assessee could produce only two challans of Rs.41,00,483/- each dated 31.10.2011 and 28.12.2011 and the third challan of Rs.6,49,143/- dated 31.03.2012. But the assessee has failed to produce any challan for the payment of the remaining amount of Rs.34,29,130/-. Since the assessed has not fulfilled the Court's order, they are not eligible for the concession i.e. deposit of 50% of the service tax liability with the department. Hence Adjudication Authority confirmed Service Tax of Rs. 2,45,58,483/- under the above head - there is an omission on the part of appellant and as well as Adjudication Authority to appreciate the facts in right perception - The facts can be considered only by the adjudication Authority on the above directions after extending reasonable opportunity for adducing evidence regarding the payment of service tax. Demand of Rs. 73,00,732/- on import of services availed from associate enterprises - HELD THAT:- There are strong force on the submission made by the appellant that the overall income is only attributed to trading activity and same cannot be considered as receipt of any commission. However, the details can be verified only after verifying the records produced by the appellant. Hence issue is remanded to adjudication authority for considering the documents /evidence relied by the appellant and to find out the demand for normal period, if any payable by the appellant. Non-payment of service tax of Rs.2,80,40,921/- on software license fee - HELD THAT:- As per the software license and maintenance/support agreement produced by the appellant, no conclusion can be made that the onus for payment of license fee both for new licenses as well as for maintenance and support is on M/s Levi Strauss Co., both in respect of company owned/operated stores as well as for franchises as held by Adjudication Authority. The issue can be settled only on careful consideration of the role of the appellant whether they acted as pure agent of the parent company as claimed by the appellant. Hence, Adjudication Authority is directed to verify the contract and the role played by the appellant in providing software license during the relevant period in the De-novo Adjudication. Conclusion - The impugned order confirming demand beyond the normal period of limitation is unsustainable. Penalties imposed by adjudication authority are also set aside. Further the demand confirmed on 'Sponsorship' services under Reverse Charge Mechanism (RCM) is set aside. Regarding demand under renting of immovable services, service tax demand of Rs. 2,45,58,483/- is set aside,, appellant shall produce evidence regarding payment of remaining amount of Rs.34,29,130/- and in case the appellant fails to produce sufficient evidence regarding payment of entire amount, appellant is liable to pay balance amount with interest. As regarding other services, the demands as per impugned order is set aside and appeal is remanded to adjudication authority to conduct de-novo adjudication as per the above finding for the normal period. Appeal disposed off.

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• 2024 (12) TMI 1361
  Levy of service tax - Business Auxiliary Service - sales incentives received by the Appellant from M/s MSIL for achieving specified sale target - HELD THAT:- The issue is no more res integra as the issue is settled by the Tribunal in the matter of M/s Roshan Motors Ltd. [ 2022 (8) TMI 1254 - CESTAT NEW DELHI ], wherein it is held that the dealers and manufactures work on principal to principal basis and it was further held that sale promotion activities are undertaken by the dealer is for mutual business of a dealer and manufacturer. Accordingly CESTAT, New Delhi held that such incentives cannot be treated as consideration for any service. Conclusion - The incentives received by the Appellant cannot be considered as taxable service under the category of 'Business Auxiliary Service' as held by the Adjudication authority. The impugned orders are set aside and appeals are allowed.

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• Central Excise

• 2024 (12) TMI 1360
  CENVAT Credit - inputs or not - bought-out items - denial on the ground that the bought-out items do not qualify as inputs under Rule 2(k) of the Credit Rules, as they are stored at the gate only and no manufacturing activity is carried out on them - scope of SCN - Inclusion of value of the accessories, on which CENVAT credit is availed, in the assessable value of the motor vehicles cleared by the respondents - suppression of facts or not - extended period of limitation. Admissibility of CENVAT credit on certain bought out items purchased by the respondent and supplied along with the vehicles - HELD THAT:- It is found that learned Commissioner correctly finds that the only requirement for the entitlement to avail CENVAT credit is that the inputs are capital goods must be received in the factory of manufacture of final products; the receipt of the inputs in the factory is not disputed and therefore, credit is admissible. It is further found that relying on the decision of the Hon ble Supreme Court in the case of Mehra Brothers Vs Joint Commercial Officer [ 1990 (11) TMI 144 - SUPREME COURT] , learned Commissioner finds that the test as to verify whether an item is an accessory or part of the vehicle is whether the article or articles in question would be an adjunct or an accompaniment or an addition for the convenient use of another part of the vehicle or adds to the beauty, elegance or comfort for the use of the motor vehicle or as a supplementary or secondary to the main or primary importance and the other test may be whether a particular article or articles or parts can be said to be available for sale in an automobile market or shops or places of manufacture - the Commissioner applied this test and the provisions of the Rules and came to a conclusion that the items qualify to be parts or accessories . Scope of SCN - HELD THAT:- The learned Commissioner rightly finds that the impugned items are either parts or accessories and therefore, credit is admissible before 01.03.2011 or after 01.03.2011. Authorized Representative for the Revenue tried to explain during the hearing on the basis of a sample invoice that the value of the impugned accessories is not included in the assessable value of the motor vehicles. It is found that this submission is beyond the scope of the show cause notice and the grounds of appeal. Revenue s appeal is very clear that it is only on the grounds that learned Commissioner (Appeals) has not given any findings as to the impugned goods vis- -vis their admissibility to CENVAT credit. Therefore, it is not open for the Revenue to set up a new case at this juncture. Inclusion of value of the accessories, on which CENVAT credit is availed, in the assessable value of the motor vehicles cleared by the respondents - HELD THAT:- It is found that inclusion or otherwise of the value of the accessories, on which CENVAT credit is availed, in the assessable value of the motor vehicles cleared by the respondents, is not the subject matter of the grounds of appeal. In view of the assertions by the adjudicating authority that such value of the accessories is included in the assessable value of the motor vehicles; the argument of the learned Authorized Representative does not succeed. As the Department has accepted the OIO dated 25.11.2013 and no proceedings have been initiated for further period, it is not open for the Department to dispute the admissibility in the impugned case. Hon ble Apex Court in the case of S.S. Engineers [ 2023 (7) TMI 717 - SC ORDER] held that ' Having regard to the fact that for the subsequent period, the Department has taken a stand that the bought-out items are not entered in the factory and the Assessee has not claimed credit on them, there is no case for adding their value in the assessable value and hence no proceeding need be initiated in the form of a show cause notice, we find that for the previous period, in respect of which this appeal arises, the stand of the Department cannot be contrary to what has been stated above. Hence, we do not find any merit in the appeal.' Conclusion - Revenue's appeal, upholding the Commissioner's order that allowed CENVAT credit on the disputed items, dismissed.

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• 2024 (12) TMI 1359
  Refund of the excess duty paid on cement supplied to institutional buyers, specifically government and semi-government entities - principles of natural justice. Refund of Excess duty - HELD THAT:- In view of the categorical finding in the impugned order that the appellants have not submitted records and in view of the data sheets submitted by the learned Consultant, there are reasons to believe that there are supplies to other than institutional customers. It is incumbent upon the appellants who are claiming refund to satisfy the authorities with evidence to substantiate the quantum and fact of their clearances to institutional customers. Applicability of principles of natural justice - HELD THAT:- The Bench cannot sit in judgment over a record/ evidence to which the lower authorities were not privy to. Therefore, in the interest of justice, the issue must travel back to the original authority to verify the claim of the appellants both on the issues of merit and unjust enrichment. Conclusion - In view of lack of clear evidence, the issue must travel back to the original authority to verify the claim of the appellants both on the issues of merit and unjust enrichment. Appeal disposed off by way of remand.

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• 2024 (12) TMI 1358
  Recovery of wrongfully availed CENVAT Credit - activity of trading - exempted service prior to 01.04.2011 or not - requirement to comply with Rule 6 of the Rules of 2004 - time limitation. HELD THAT:- The Bangalore Bench of this Tribunal in the case of Commissioner of Central Excise, Bangalore Vs. Lenovo (India) Pvt. Ltd. [ 2021 (11) TMI 899 - CESTAT BANGALORE] , had dealt with the present issue and also considered different views expressed by other Co-ordinate Benches. Since the appellants had bonafide belief that exempted service should not be considered as trading activity for the period prior to 01.04.2011, not entering the CENVAT particulars in the ER-1 return, even though reflected in the internal records, would not call for invocation of the extended period of limitation. In such circumstances, the show-cause notice was required to be issued within the normal period of one year i.e., from the date of taking the CENVAT Credit of the disputed service. Since the show-cause notices were issued beyond the normal period of one year, in our considered view, the same are barred by limitation of time insofar as proceedings were initiated for recovery of wrong availment of CENVAT Credit for the period upto 31.03.2011. It is found that the learned adjudicating authority has not specifically discussed about this aspect of reversal of CENVAT Credit at the ISD stage, as claimed by the appellants. Therefore, the matter should go back to the original authority for ascertaining the fact as to whether, the appellants had reversed the common input services at the time of issuance of invoices by the ISD and that such credit was not distributed to the manufacturing unit located at Pune for availment of CENVAT Credit of Service Tax in respect of the common input services. Conclusion - Since the appellants had bonafide belief that exempted service should not be considered as trading activity for the period prior to 01.04.2011, not entering the CENVAT particulars in the ER-1 return, even though reflected in the internal records, would not call for invocation of the extended period of limitation - For the period after 01.04.2011, the matter is remanded back to the original authority for ascertaining the fact as to whether, the appellants had reversed the CENVAT Credit at the ISD level and CENVAT Credit has not been distributed to the manufacturing unit located at Pune. Appeal disposed off by way of remand.

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• 2024 (12) TMI 1357
  Clandestine removal of polished vitrified tiles - evasion of duty - allegations primarily based upon the private documents/records recovered from the premises of M/s K.N. Brothers/ Shree Ambaji Enterprises, Shroff and office premises of Shri Pravin Shirvi, Morbi, Broker/middlemen - opprotunity of cross-examination not provided - reliability of statements - violation of principles of natural justice. HELD THAT:- On going through the relied upon documents and documents scanned in impugned show cause notice it is found that in the said documents mentioned the words PS but in the table prepared by the DGGI, they have mentioned name of Shri Pravinbhai R. Shirvi and in total amount of cash paid to Shri Pravinbhai R. Shirvi aggregates to Rs. 18,21,600/- only whereas on the other hand vide show cause notice it is alleged that total amount of cash aggregating to Rs. 15,62,92,335/- was paid to the Authorized person of Appellant, the same is completely unbelievable. It is also found that in present matter to find out the truth, appellant requested the cross-examination of Shri Jayesh Mohanlal Solanki, Proprietor of M/s. K.N. Brothers, Rajkot, Shri Suresh Girdharbhai Gangwani, Proprietor of M/s. Shree Siddhnath Agency, Rajkot, Shri Lalit Ansumal Gangwani, actual owner of M/s KN Brother and also other persons. However despite such request, cross-examination was not afforded by the Ld. Lower Adjudicating Authority. When statement of a third party is relied upon against an assessee, the assessee has a right to cross-examine such witness otherwise, statement of the concerned person, and in any case, statement of a said persons, could not have been relied upon for holding anything against the appellant. In the circumstances, it was incumbent upon adjudicating authority to follow the mandate of section 9D of the Act by way of examining the witness and thereafter giving opportunity to the appellant to cross-examine them. Having disregarded this mandate of section 9D, results is to giving up on the said statements for proving the truth contained therein. It is well settled law that though the statements carry good persuasive value but such untested statements of third parties cannot be made stand-alone basis for arriving at an adverse conclusion against the assessee. Though an admission or a statement is extremely important piece of evidence but the same has to bear the test of veracity through the tool of cross examination - In the case of NU Trend Business Machine Pvt Ltd v. Commissioner of Central Excise, Chennai, [ 2001 (11) TMI 134 - CEGAT, CHENNAI] , it was held that the demand based on the statements of persons who have not turned up for cross-examination, is unsustainable. The entire evidence referred to by both the adjudicating authority in the present matter stand on a doubtful platform and cannot be made the basis for confirming huge demands on the ground of clandestine activity. Similarly, in the case of CCE, Chandigarh-1 v. Shingar Lamps Pvt. Limited [ 2010 (3) TMI 277 - PUNJAB HARYANA HIGH COURT] , the Hon ble High Court held that the private records which have been discovered during the raid may not be sufficient for holding clandestine production and removal but there should be some positive evidence suggesting clandestine production and removal. Conclusion - The allegations of clandestine removal are required to be established by production of positive and tangible evidences and should not be arrived at on the basis of assumptions and presumptions - Case of the Revenue in the present matter is only based upon the records of Shroff and Broker/middleman which even do not contain the name of the appellant and statements which are not supported by any independent corroborative evidence. The whole demand is theoretical. The impugned order cannot be sustained and accordingly the same is set aside - Appeal allowed.

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• Indian Laws

• 2024 (12) TMI 1356
  Grant of renewal of license L-10BB on account of the fact that premises, wherein business was being run in previous years in terms of form L-10BB stands upgraded to principal place of business - HELD THAT:- It is not in dispute that after the orders passed by this Court, the writ petitioner has in fact shifted his premises and had sought a licence, which was rejected by the appellant-department. Essentially, in the impugned order dated 16.4.2024, there is no mention as to in which premises, the business is being run by the writ petitioner, that was described and was the subject matter of the writ petition. The appeal is dismissed as having been rendered infructuous.

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