Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 31, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Genuineness of the transaction going by the pay load of the vehicles, which was used for transporting the goods - It is found that the order passed by the appellate authority to be a non-speaking order in the sense that there is no independent finding rendered by the appellate authority qua the allegation against the appellants. Therefore, it is a fit case where the matter should be remanded back to the appellate authority to specifically consider the contentions, which was advanced by the appellants - HC
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Exemption from GST - activity of custom milling of paddy - the claimed benefit of tax exemption, citing reference of Circular No. 51/25/2018-GST dated 31/07/2018 is misplaced and thus it is concluded that the applicants claim of any tax exemption on custom milling of paddy merit rejection - The activity of custom milling of paddy carried out by the applicant is liable to GST at the rate of 5%. - AAR
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Classification of supply of services - local authority or not - The requirement that the authority must be established to carry out any function entrusted to a Municipality under article 243 W of the Constitution has also been fulfilled in the present case. Thus, the UPJN is a governmental authority - As the UPJN does not qualify as a 'local authority' and it qualifies as a governmental authority, tax rate of 18% is applicable on the works contract services - AAR
Income Tax
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Rectification of mistake u/s 154 - Difference of MAT credit not allowed to the assessee as related to surcharge and cess components of the MAT taxes paid in earlier years - the tax credit allowable under section 115JAA of the Act is including surcharge and cess components of tax thereon - the denial of tax credit u/s 115JAA of the Act to the extent of surcharge and cess components in the same, is a mistake apparent from the record and rectification sought to this extent is therefore upheld. - AT
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Interest earned on deposit - principle of mutuality - The interest earned on such deposit has a clear and direct nexus to the expenditure incurred in the form of electricity consumption charges and therefore, the same is allowable for set off against the expenditure and the principle of mutuality does apply on the alleged sum of interest earned on deposit with CESC Ltd. - AT
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Disallowing the expenses incurred on electricity - the aforesaid payments in terms of the bills raised by the Punjab State Electricity Corporation is an evidence of third party evidence which cannot be easily discounted as a self created evidence - merely because the Punjab State Electricity Corporation, even to the AO, has failed to respond and provide information u/s. 133(6) is a fact for which the remedy lies with the Revenue. - Assessee has no role to play and cannot be held to be answerable for the lapses of the Corporation - AT
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Addition u/s. 56(2)(viib) - valuation of shares - the valuer has merely adopted the projections made by the management and there was substantial difference in cash flow projections in both the valuation reports itself. The valuation could not be substantiated by the assessee. We also concur that only excess premium exceeding face value of shares could be brought to tax u/s 56(2)(viib). Therefore, the adjudication as done by Ld. CIT(A) in the impugned order could not be faulted with. - AT
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CIRP - Demand of income tax - Validity of order of Commissioner of Income Tax (appeals) passed u/s 250 - Once the insolvency proceedings commenced under the Code, all the litigations are to be pursued by Interim Resolution Professional appointed by the Committee of Creditors. In view of the above, we are of the considered view that the present cross-appeals, in the current form, are not maintainable. - AT
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Addition u/s 68 - Unexplained cash deposits - statement of the assessee admitting the income at the time of survey - subsequent retraction made by assessee - it is not the stand alone statement of the assessee admitting the income at the time of survey rather in the present case the revenue is having other incriminating evidence in the form of 2135 invoices, CFSL evidence of computers, statements of neighbour, statements of other persons denying the purchase of bullion and recovery of KYC documents of 65 customers. In light of the above, the Assessing Officer was right in rejecting the reliance placed by assessee on letter dt.17.01.2017.- AT
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Income deemed to accrue or arise in India - definition of ‘interest’ as provided under article 12 of the India –U.K. DTAA - the amount received by the assessee is in the nature of interest taxable @ 15% under Article 12 of India-UK DTAA - AT
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Accrual of income - option premium received on sale of 20 flats - interest free option deposits before commencement of construction - Revenue cannot decide or dictate as to how an assessee should conduct its business or maximize its profits. It is by now well settled in law that, the Revenue cannot step into the shoes of the businessman for determining reasonableness and business expediency. Hence, the Ld. DR could not have questioned the necessity, purpose and manner of raising of funds by the assessee, in the form of option deposits from HRPL, as it was outside the domain and jurisdiction of the Revenue. - AT
Customs
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Cancellation/revocation of customs broker licence - Period of limitation - No doubt there was no response on the part of the broker in responding to the enquiry report. However, nothing prevented the officer to have taken action scrupulously in line with the time periods set out under Regulation 17 of CBLR Regulations and para 7.1 of the Circular, even sans any co-operation on the part of the noticee. - HC
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Revocation of Customs Brokers License - levy of penalty - allegation of Manipulation and fabrication of lab reports - It is not understood as to how the appellant could have helped the importers by manipulating the final boiling point of the samples to below 240 degree Celsius as alleged in the show cause notice. The objective of taking the goods out of the description of SKO could only have been achieved if the final boiling point was above 300 degree Celsius. This dichotomy has not been clarified in the impugned order. - AT
Service Tax
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Taxablity - services of healthcare or predominantly cosmetic in nature or not - Melasma - Birth Mark Treatment - Hypertrichosis Treatments - Hair Laser Comb Treatment - The appellant clinics are ‘clinical establishment’ involved in Alopathy treatment, which is a recognised system of medicine in India. The appellant have been held to be clinical establishment by the Court below - the services provided by the appellant, save and except for ‘hypertrihosis treatments’ and ‘hair laser comb treatment’ fall under healthcare services and are accordingly exempt under Notification No. 25/2012-ST. - AT
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VCES scheme - Section 111 of the Finance Act, 2013 clearly provides that in case there is some liability or the declaration made is found to be improper substantially, then a show cause notice for confirming the additional tax liability would be issued under Section 111. No such notice has also been issued. In absence of notice under Section 111, there cannot be a case for rejection of the declaration made by the appellant under VCES scheme. - AT
VAT
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Validity of remanding the case - Tribunal was not correct in remanding back the matter to the assessing authority when all the material was before it and should have dealt with each of the material and decided the same - HC
Case Laws:
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GST
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2022 (12) TMI 1326
Cancellation of registration of petitioner - Genuineness of the transaction going by the pay load of the vehicles, which was used for transporting the goods - HELD THAT:- The appellate authority straight away refers to the action taken by the tax authorities of Ultadanga wherein two separate enquiries were conducted in the business premises of M/s. Suraj Enterprise and the enquiry was conducted on 14th November, 2019 and 17th February, 2020. Admittedly, the transaction done by the appellant was in October, 2018. Thus, to conclude that the other end dealer is a non-existing dealer, there should be material to show that on the date when the appellants had transaction with him, there was no valid registration. If the cancellation of the registration of the other end dealer is by way of retrospective cancellation, then the question would be as to whether it would affect the transaction done by the appellants, more particularly when the appellants have been able to show that the payments for the transaction have been done through banking challans - The appellate authority was solely guided by the action taken by the Ultadanga tax authorities without examining the specific facts and circumstances of the case on hand. It is found that the order passed by the appellate authority to be a non-speaking order in the sense that there is no independent finding rendered by the appellate authority qua the allegation against the appellants. Therefore, it is a fit case where the matter should be remanded back to the appellate authority to specifically consider the contentions, which was advanced by the appellants and also the fact that the other end dealer s registration was cancelled with retrospective effect - appeal allowed by way of remand.
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2022 (12) TMI 1325
Exemption from GST - activity of custom milling of paddy - entitlement for exemption under which notification? - HELD THAT:- The contention of the applicant, claiming that they are carrying out the function of public distribution system which is a function entrusted to a Panchayat under the Constitution of India, is incorrect and appears to be based on misconstrued notion in as much as the applicant is engaged for the aforesaid activity on behalf of the government, in lieu of monitory consideration for purely commercial gains. The applicant neither forms a part of public distribution system of the state government nor panchayat body, therefore its activity of custom milling does not comes under entry No. 3A to Notification No, 12/2017- Central Tax (Rate) New Delhi, the 28th June, 2017 as amended vide Notification No. 2/2018- Central Tax (Rate), 25th January, 2018. Accordingly, the claimed benefit of tax exemption, citing reference of Circular No. 51/25/2018-GST dated 31/07/2018 is misplaced and thus it is concluded that the applicants claim of any tax exemption on custom milling of paddy merit rejection. Circular No. 19/19/2017-GST dated 20.11.2017 from F. No. 354/263/2017-TRU issued by Government of India Ministry of Finance Department of Revenue Tax research Unit, North Block, New Delhi, clarifies on the subject of taxability of custom milling of paddy holding that milling of paddy into rice is not eligible for exemption under S. No 55 of Notification 12/2017 - Central Tax (Rate) dated 28th June 2017 and corresponding notifications issued under IGST and UTGST Acts. GST rate on services by way of job work in relation to all food and food products falling under Chapters 1 to 22 has been reduced from 18% to5% vide notification No. 31/2017-CT(R) [notification No. 11/2017-CT (Rate) dated 28.6.17, S.No. 26 refers]. Therefore, it is hereby clarified that milling of paddy into rice on job work basis, is liable to GST at the rate of 5%, on the processing charges (and not on the entire value of rice). The activity of custom milling of paddy carried out by the applicant is not exempted from the purview of Goods and Service Tax and is liable to GST at the rate of 5%.
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2022 (12) TMI 1324
Classification of supply of services - supply of Services by the Applicant to M/s. UTTAR PRADESH JAL NIGAM - local authority or not - Governmental authority or not - scope of N/N. 15/2021 Central Tax (Rate), dated 18th November, 2021 r/w. N/N. 22/2021- Central Tax (Rate), dated 31st December, 2021 - applicable rate of Tax under the Goods and Services Tax Act. 2017 on such Supplies made w.e.f. 01-01-2022 - applicable rate of tax on such supplies under the Good's and Services Tax Act, made w.e.f. 01-01-2022. Whether the Uttar Pradesh Jal Nigam (UPJN) is local authority or not? - HELD THAT:- The applicant have arrived at conclusion that UPJN is local authority on the basis of 4th character of PAN of UPJN being 'L' and the registration certificate of UPJN bearing constitution as local authority. Constitution of UPJN - HELD THAT:- UPJN was created by the Government of Uttar Pradesh by enacting the U.P. Water Supply and Sewerage Act, 1975 (hereinafter referred to as the UPWSS Act). It is a body corporate having perpetual succession and a common seal and capable of suing and being sued in its name. It has power to acquire, hold and dispose of the property - the definition of local authority in the CGST Act includes within its ambit any other authority legally entitled to or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund. Thus, for the purpose of the GST Laws, any authority legally entitled to or entrusted by the Government with the control or management of a municipal or local fund qualifies as a local authority. The Apex court in the RC Jain case [ 1981 (2) TMI 200 - SUPREME COURT] has held that that the authority should be elected by the inhabitants of the area. As per Section 4 of the UPWSS Act, the UPJN shall consist of Chairman and members appointed by the state government. As such, the UPJN is not elected by the inhabitants of the area but the same is established by the state. Therefore, the said is not satisfied in the case of UPJN - In case of UPJN, there is no local fund entrusted by the Government with UPJN. A perusal of the UPWSS Act would reveal that no municipal or local fund has been entrusted by the Government. The fund of UPJN is its own fund and cannot be equated with a fund entrusted by the Government. Thus, the important requirement in order to qualify as a local authority, viz. control and management of a municipal/local fund is absent in the present case - the UPJN is not a 'local authority'. Whether the UPJN is Governmental Authority? - HELD THAT:- To qualify as a governmental authority, such authority must be set up by an act of Parliament/State Legislature, should have 90% or more stake of government, and should carry out any function entrusted to a Municipality under article 243 W of the Constitution of India - the UPJN is a body corporate formed by the State legislature under UPWSS Act enacted by the UP State Legislature. As such, the first requirement of a governmental authority stands fulfilled in the present case. Further, as per Section 3 of the UPWSS Act, UPJN is a body corporate established by the Government of U.P., as such, the second requirement of governmental authority has also been fulfilled in the present case. Moreover, the UPJN is constituted for the development and regulation of water supply and sewerage services in the State of U.P. Under the Section 14 of UPWSS Act, UPJN is inter alia entrusted with the function to operate, run, and maintain any waterworks and sewerage system. As per Article 243 W read with Twelfth Schedule of the Constitution of India, water supply for domestic, industrial and commercial purposes and public health, sanitation conservancy and solid waste management is a function of municipality. The requirement that the authority must be established to carry out any function entrusted to a Municipality under article 243 W of the Constitution has also been fulfilled in the present case. Thus, the UPJN is a governmental authority - by way of Notification No. 22/2021-Central Tax (Rate) dated 31.12.2021, the lower rate of tax of 12% provided by Entry 3(iii) of Notification No.11/2017- Central Tax (Rate) dated June 28, 2017, was restricted to works contract supplied to Central Government, State Government, Union territory and a local authority only with effect from 01.01.2022. As the UPJN does not qualify as a 'local authority' and it qualifies as a governmental authority, tax rate of 18% is applicable on the works contract services provided to UPJN by way of Entry 3(xii) of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017.
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Income Tax
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2022 (12) TMI 1323
Rectification of mistake u/s 154 - Difference of MAT credit not allowed to the assessee as related to surcharge and cess components of the MAT taxes paid in earlier years - AO had computed the MAT credit allowable to the assessee as per provision of section 115JAA(5) of the Act only considering the normal tax components and excluded surcharge and cess from the same - HELD THAT:- We have noted that the ld.CIT(A) dismissed the assessee s appeal on the ground that there was no representation made by the assessee before him. Assessee has pointed out that on the last date of hearing, he did file written submissions to the ld.CIT(A). Be that so, we have noted the contentions of the ld.counsel for the assessee on merit also, and we find that rectification application filed by the assessee is to the effect that the assessee be allowed benefit of MAT credit as per section 115JAA(5) of the Act by including surcharge and cess in the tax credit so calculated. Precisely, this is the only issue on which the assessee has sought rectification of the intimation u/s 143(1) of the Act. We find merit in the contentions of the ld.counsel for the assessee. In a series of the decisions, the Hon ble High Courts and the ITAT have held that the tax credit allowable under section 115JAA of the Act is including surcharge and cess components of tax thereon. Denial of tax credit u/s 115JAA of the Act to the extent of surcharge and cess components in the same, we agree with the ld.counsel for the assessee, is a mistake apparent from the record and rectification sought to this extent is therefore upheld. The rectification application filed by the assessee is therefore directed to be allowed, and adjustment of tax credit as claimed by the assessee is directed to be granted. The appeal of the assessee is allowed.
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2022 (12) TMI 1322
Deduction u/s 80P - assessee s status as to whether it is a cooperative bank or a credit cooperative society as per the Revenue s and assessee s arguments, respectively - HELD THAT:- There could be hardly any dispute that hon ble apex court s recent landmark decision in Mavilayi Service Co-operative Bank Ltd [ 2021 (1) TMI 488 - SUPREME COURT] has settled the issue that assessee s registration under the respective cooperative law itself forms the decisive factor. This assessee is further found registered as credit cooperative society only. I thus reject the Revenue s instant arguments to this effect. Assessee had deposited its surplus in cooperative banks and derived interest therefrom which has been claimed as eligible for section 80P deduction - As decided in BELGAUM COAL COKE CONSUMER COOPERATIVE ASSOCIATION LTD. [ 2021 (11) TMI 1121 - ITAT PANAJI] we hold that the interest income earned by the appellant society on investment made with the cooperative bank which are also cooperative societies is exempt from the Income Tax Act u/s 80P(2)(d) of the Act. Therefore, we hold that the lower authorities was not justified in denying the claim of deduction u/s 80P(2)(d) of the Act. Accordingly, we direct the Assessing Officer to allow the same as deduction u/s 80P(2)(d) - Assessee appeal is allowed.
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2022 (12) TMI 1321
Reopening of assessment u/s 147 - reason to believe - Change of opinion - proportionate interest attributable to the interest free advances made by the assessee to its related parties - HELD THAT:- As all the material papers which the learned AO made a basis to reopen the concluded assessment were available with the learned Assessing Officer at the time of original assessment itself. From the record is also evident that the learned Assessing Officer noticed from the P L Account and Balance Sheet that during the year the assessee incurred interest expenditure on long-term borrowings and the amount of interest free advances to related parties, by specifically asking the assessee to furnish the information relating to the loans and advances where no interest was charged/chargeable. It is only after the assessee furnished the information, the assessment was complete after scrutiny considering the income only under house property and other sources , and loss from business was not allowed observing that as there remains no business income/activity, the expenditure is not allowed to be set of against income computed under other heads. We are of the considered opinion that the original assessment under section 143(3) of the Act was concluded after noticing all the relevant facts which forms basis for issuance of the notice under section 148 of the Act, and, therefore, the opinion formed by the learned Assessing Officer on subsequent perusal of the record is nothing but change of opinion and in view of the decisions of the Hon ble Apex Court in the cases of Kelvinator of India Ltd ( 2010 (1) TMI 11 - SUPREME COURT] and Techspan India ( 2018 (4) TMI 1376 - SUPREME COURT] such a course is impermissible. - Decided against revenue.
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2022 (12) TMI 1320
Deduction u/s 54B - deduction denied as agricultural land in which the capital gain was invested was purchased in the name of assessee s wife - HELD THAT:- This above view, is unsustainable. Deduction under Section 54B/54F of the Act is available in cases where investments are made in property purchased in the name of wife. Therefore, following the ratio laid down in these decisions Laxmi Narayan [ 2017 (11) TMI 1622 - RAJASTHAN HIGH COURT, JAIPUR] , Kamal Wahal [ 2013 (1) TMI 401 - DELHI HIGH COURT] , Natarajan [ 2006 (2) TMI 136 - MADRAS HIGH COURT] and Ravinder Kumar Arora [ 2011 (9) TMI 343 - DELHI HIGH COURT] Thus hold that the assessee is eligible for deduction under Section 54B of the Act. Accordingly, direct the AO to allow deduction under Section 54B of the Act - Decided in favour of assessee.
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2022 (12) TMI 1319
Estimation of income of the assessee at 10% of the administrative expenses and export expenses - HELD THAT:- As it is noticed that the issue is squarely covered in the group concern of the assessee being in the case of M/s. Serajuddin Co. [ 2022 (10) TMI 1139 - ITAT CUTTACK] and in the case of Aliza International Pvt Ltd. [ 2022 (10) TMI 1141 - ITAT CUTTACK] respectfully following the decisions of the Co-ordinate Bench of this Tribunal the disallowance as confirmed by the ld CIT(A) at 10% stands reduced to 5%. Disallowance of auxiliary service addition - As it is noticed that this issue has already been considered in [ 2022 (10) TMI 1141 - ITAT CUTTACK] . and we have reduced the said disallowance made from 10% to 5%, Ground No.3 of the revenue stands dismissed. Direction of the ld CIT(A) in adopting the total income before depreciation - HELD THAT:- As it is noticed that the ld CIT(A) has reduced the total income assessed by the AO by considering the remand report as filed by the AO and as it is noticed that the said remand report has also been extracted by the ld CIT(A) in his order, we find no reason to interfere with the order of the ld CIT(A) on this issue. Ground Nos.4 5 of the revenue stand dismissed Deemed dividend addition u/s 2(22)(e) - HELD THAT:- A perusal of the provisions of section 2(22)(e) clearly shows that the word used is on behalf, or for the individual benefit, of any such shareholder . Thus, the deemed dividend, if at all, can be assessed is to be assessed in the hands of the shareholder on whose behalf or individual benefit, the loan has been given. In the present case, the assessee is not the shareholder of M/s. Aliza International Pvt Ltd., which would attract the provisions of section 2(22)(e) of the Act. In these circumstances, we are of the view that the findings of the ld CIT(A) is on right footing and does not call for any interference. Ground No.6 of the revenue stands dismissed. Addition of other income - As submitted CIT(A) did not add the same on the ground that the net profit as shown by the assessee was inclusive of the said amount of other income - HELD THAT:- As it is noticed that the ld CIT(A) has taken into consideration the fact that the said other income has already been considered while determining the net profit as per the accounts which are audited u/s.44AB, we are of the view that no addition of the said amount is called for. Consequently, Ground No.7 of the revenue stands dismissed. Disallowance of peripheral development expenses and maintenance expenses - HELD THAT:- Respectfully following the decision of the Co-ordinate Bench in the case of Aliza International Pvt Ltd. [ 2022 (10) TMI 1141 - ITAT CUTTACK] the addition as made by the AO and confirmed by the ld CIT(A) in respect of peripheral development expenses and maintenance expenses stands deleted. Penalty levied u/s.271(1)(c) - As submitted by ld AR that the search in the case of the assessee took place on 28.5.2008 and the assessment year 2009-10 was the specified period and for the purpose of levying the penalty, if at all, was u/s.271AAA and not u/s.271(1)(c) - HELD THAT:- The penalty leviable u/s.271AAA is 10% of the concealed income whereas under section 271(1)(c), the penalty is leviable at 100% of the tax sought to be evaded. A perusal of the order of the Assessing officer shows that the AO has levied penalty at 100% of tax sought to be evaded. Consequently, the order passed by the AO cannot be held as typographical error. In regard to levy of penalty u/s.271AAA assessment year 2009-10 is the specified year in respect of the assessee, as the search took place on 28.5.2008. Respectfully following the decision of the Co-ordinate bench of this Tribunal in the case of S.M.Enterprises [ 2022 (11) TMI 275 - ITAT CUTTACK] penalty levied u/s.271(1)(c) by the AO and confirmed by the CIT(A) stands deleted.
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2022 (12) TMI 1318
Deduction u/s 80P - interest income from deposits made in cooperative banks - HELD THAT:- As relying on Belgaum Coal Coke Consumer Cooperative Association Ltd [ 2021 (11) TMI 1121 - ITAT PANAJI] we hold that the interest income earned by the appellant society on investment made with the cooperative bank which are also cooperative societies is exempt from the Income Tax Act u/s 80P(2)(d) - Therefore, we hold that the lower authorities was not justified in denying the claim of deduction u/s 80P(2)(d) of the Act. Accordingly, we direct the AO to allow the same as deduction u/s 80P(2)(d) - Appeal of assessee allowed.
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2022 (12) TMI 1317
Reopening of assessment u/s 147 - 2nd reassessment has been initiated even when the 1st assessment was due to be completed - t wo assessment orders have been passed by two different AO s - unexplained investment u/s 69A on account of purchase of shares - HELD THAT:- In this case it is noted that two assessment orders have been passed by two different AO s vide order dated 25-07-2019 and 8-12-2019 respectively. In the first assessment order dated 25-07-2019, the contentions of the assessee were accepted by the AO after due verification of the material on record. In the second assessment order dated 8-12-2019 u/s 144/147 of the Act, the AO made additions of Rs.3,41,360/- and Rs.3,59,000/- and added the same in the return of the assessee for the reason that the assessee did not submit the reply to the show cause notice issued by the new incumbent. In first appeal, the ld. CIT(A) deleted the additions against the order of the AO dated 8-12-2019 by observing that it is clear that the 2nd assessment order cannot stand the test of appeal and hence is annulled. The appeal of the assessee is allowed . Taking into consideration the above facts and circumstances of the case, we concur with the findings of the ld. CIT(A). Thus the appeal of the Revenue is dismissed.
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2022 (12) TMI 1316
Interest earned on deposit - principle of mutuality - assessee being an association for the residents of Sunny Park Apartment had to make deposit with CESC Ltd. for the purpose of power connection - Assessee contended that it was mandatory for the association to deposit with CESC Ltd. for supply of power and therefore, principle of mutuality should be applied. On the other hand, we notice that CIT(A) did not accept this contention holding that on the alleged sum, principle of mutuality will not apply and it is taxable under the head income from other sources - HELD THAT:- On going through the submissions made by assessee as well as the decision of Manipal Centre Apartment Owners Association [ 2013 (9) TMI 1293 - ITAT BANGALORE] . We are inclined to hold that as the assessee, an association of owners of Sunny Park Apartment is required to provide facilities and other amenities to the owners/occupants of the apartments and therefore, is required to make deposit with CESC Ltd. for availing electricity service connection. The interest earned on such deposit has a clear and direct nexus to the expenditure incurred in the form of electricity consumption charges and therefore, the same is allowable for set off against the expenditure and the principle of mutuality does apply on the alleged sum of interest earned on deposit with CESC Ltd. Thus, the finding of ld. CIT(A) is reversed and the alleged addition is deleted. Hence, grounds of appeal raised by the assessee are allowed.
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2022 (12) TMI 1315
Deduction u/s 80IB - Necessity to undergo manufacturing process - assessee is not engaged in the manufacturing process, not employed workers and not used machinery, therefore assessees claim in respect of 80IB was rejected - HELD THAT:- This issue under consideration is squarely covered in favour of assessee in assessee s own case by the judgment of the Division Bench[ 2022 (8) TMI 1328 - ITAT SURAT] as held assessee received orders from customers to supply the goods to them and the assessee executed these orders by way of manufacturing done by M/s Nangalwala Chemical Industries of Alwar, under the direct supervision of one of the partners. The assessee applies own technology, standard process, own raw material, own quality control/check, and the goods are manufactured as per the specification given by customers. Based on these facts and circumstances, we note that assessee is entitled to get deduction under section 80-IB - Decided in favour of assessee. Penalty u/s 271(1)(c) - HELD THAT:- Since, we have deleted the penalty as the quantum addition was deleted by the Co-ordinate Bench of this Tribunal, therefore, additional ground raised by the assessee becomes infructuous and hence does not require adjudication. Addition of unsecured loan taken - AR failed to put up the details of confirmation and creditworthiness of these parties, however, the contention of ld.counsel for the assessee is that all the confirmations were duly placed on record of the ld.CIT(A) - HELD THAT:- As decided in [ 2014 (1) TMI 1240 - ITAT AHMEDABAD] after considering all aspects of the matter, we find that the order of the l;d.CIT(A) is cryptic and, therefore, in the interest of justice, this issue is restored back to the file of ld.CIT(A) to decide it afresh after verifying the details as submitted by the assessee.
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2022 (12) TMI 1314
Addition u/s 68 on account of alleged unexplained share premium and share capital - HELD THAT:- By respectfully following the ratio laid down in the case of PCIT Vs. Rohtak [ 2019 (10) TMI 931 - SC ORDER ] and considering the facts and circumstances of the case, we find no merit in the argument of the Ld. DR to hold that the assessee has failed to establish the ingredients of Section 68 of the Act. Hon'ble Supreme Court in the case of CIT Vs. Lovely Export Pvt. Ltd. [ 2008 (1) TMI 575 - SC ORDER ] observed that even if the share capital money is received by the assessee from alleged bogus share holders, whose names are given to the A.O. The Department is free to proceed to reopen their individual assessment in accordance with law. But cannot regarded undisclosed income of the assessee Company. The present case, the assessee has substantially provided materials to prove the genuineness of the share holders apart from giving the Pan Card, name and ROC details. Therefore, we delete the addition made u/s 68 of the Act. Accordingly, the Ground No. 2 of the Assessee is allowed. Addition u/s 56(2) (viib) on protective basis - valuation arrived by the assessee either DCF Method or NAV Method - assessee has received a premium on issue of shares to various parties - According to the Ld. A.O, the value of the shares issued to the parties are very high in comparison to fair market value of such shares - contention of the Ld. AR that the valuation of the shares has been done as per DCF Method which is prescribed under Rule 11 UA to Income Tax Rules (2)(b) which has been and also certified by the Assessee s qualified Charted Accountant - HELD THAT:- Valuation Method adopted by the assessee is one of the Methods accepted under law which cannot be disturbed by the Revenue authorities without bringing any contrary material on record to sow that the method adopted by the assessee is incorrect. CIT (A) has rejected the valuation report of the assessee, by relying on decision of Agro Portfolio Pvt. Ltd. [ 2018 (5) TMI 1088 - ITAT DELHI ] The decision made in Agro Portfolio Pvt. Ltd. (supra) has been considered in the case of Cinestan Entertainment (P). Ltd. [ 2019 (6) TMI 1367 - ITAT DELHI ], wherein it is held that the Assessing Officer cannot examined or substitute its own value in place of valuation arrived by the assessee either DCF Method or NAV Method, the commercial expediency has to be seen from the point view of businessman. Further held that if law provides the assessee to get the valuation done from a prescribed expert as per the prescribed method, then the same cannot be rejected because neither the Assessing Officer nor the assessee have been recognized as expert under the law. A.O and CIT(A) has committed an error in rejected the valuation done by the assessee from prescribed expert as per the prescribed method. Enhancement of income - AR submitted that the Ld.CIT(A) enhanced the income without giving a mandatory notice required u/s 250(1) of the Income Tax Act, thus violations of principals of natural justice - HELD THAT:- In our opinion, when the CIT(A) deem it fit to enhance the assessed income, shall give mandatory notice u/s 250(1) of the Act. In the present case, admittedly no such notice issued to the assessee before enhancing the assessed income. Therefore, the action of the Ld.CIT(A) in enhancing the income of the assessee is found to be erroneous. Therefore, Ground No. 4 5 of the assessee requires to be allowed. Disallowance of business expenditure - assessee has not carried on business in the year under consideration - HELD THAT:- The contention of the Ld. AR that the assessee has already set up his business and the same was in operation, the expenditure claimed u/s 37 of the Act. Further submitted that, to claim the business expenditure, the assessee has to be set up the business and it is not mandatory that there should be actual income generated from the business. In our opinion, once the business of the assessee is set up and the expenditure incurred thereafter deserves to be allowed as business expenditure u/s 30 to 38 of the Act. There is no requirement of generation of income from such business activities. The business activity is a continuous process and it cannot be said that as soon as setting up of the business, the income will be generated and should yield income in all years. Being so, we find merit in the argument of the Ld. AR. Therefore, we inclined to allow the Ground of the assessee.
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2022 (12) TMI 1313
Disallowing the expenses incurred on electricity - manufacturing activities had not taken place - HELD THAT:- As the fact that it was an ongoing business undergoing a lull has been accepted by the AO himself as various other business expenses have been allowed. It is further seen that the aforesaid payments in terms of the bills raised by the Punjab State Electricity Corporation is an evidence of third party evidence which cannot be easily discounted as a self created evidence. The payments have been made is also not in dispute. We further find that statements of two Security Guards in February, 2016 in regard to the factual position of the assessee's business functioning in the year under consideration i.e. 2012-13 assessment year does not have much relevance. The fact that it has not been confronted to the assessee is also a fact evident on the face of the record. We further find that merely because the Punjab State Electricity Corporation, even to the AO, has failed to respond and provide information u/s. 133(6) is a fact for which the remedy lies with the Revenue. Assessee has no role to play and cannot be held to be answerable for the lapses of the Corporation. Considering the submissions of the assessee consistently on record wherein it is evident that the assessee tried to keep his business alive and viable and ultimately had to close down, expenses so disallowed in the facts of the present case cannot be sustained. Addition made is directed to be deleted. Appeal of the assessee is allowed.
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2022 (12) TMI 1312
Reopening of assessment u/s 147 - assessee has opted for Vivad-se-Vishwas Scheme by filing Form No.3. Later, the assessee could not pay the balance tax arrears and hence pleaded for recalling the appeal filed by the assessee - HELD THAT:- Objection for the issuance of notice U/s. 148 of the Act and pleaded that the reassessment proceedings are liable to be quashed as void ab initio. We find from the records that the assessee has failed to respond to the notices and the Ld. AO has rightly after seeking permission from the Additional Commissioner of Income Tax, Guntur found that the income has escaped assessment and hence notice U/s.148 was issued to the assessee. AO further observed that the assessee has failed to furnish the return of income for the relevant assessment year inspite of having capital gains. In these circumstances, we find that reopening of assessment proceedings U/s. 147 of the Act is valid in law and hence this ground raised by the assessee is dismissed. Year of taxability of capital gains - HELD THAT:- Admitted facts are that the development agreement was originally entered into by the assessee on 14/3/2016 in the ratio of 46:54 with the Developer. Consequently, additional 209 sq yds acquired subsequent to execution of the development agreement by way of revocation deed dated 18/5/2016 and added in the supplementary deed dt 18/5/2016 during the AY 2017-18. We find that the supplementary deed is an extension of the original development agreement with the same terms and conditions only with an addition of 209 sq yds. Therefore, in our considered view since the possession of the land has already been granted to the Developer vide the original development agreement entered into on 14/3/2016, the year of chargeability of capital gains in the hands of the assessee shall be AY 2016-17 and not AY 2017-18. We are therefore inclined to uphold the order of the Ld. CIT(A) on this ground and needs no interference. Accordingly, the Grounds No. 3 and 4 raised by the assessee are dismissed. Consideration received for the relinquishment of 54% of the land to the Developer - HELD THAT:- Admittedly the assessee has conveyed 54% of the land admeasuring 2579.04 sq yds to the Developer for the purpose of constructing multistoried residential complex at Mangalagiri. The consideration for the part conveyance of the land to the Developer is the receipt of the super built up area including the parking area. Admittedly both the Revenue and the assessee has not disputed the cost per square yard adopted by the Ld. AO. In these circumstances, we find that the consideration for the relinquishment of 54% of the land to the Developer shall be the cost of construction of super built up area including parking area (Rs. 4,59,62,970 + Rs. 61,28,396 = Rs. 5,20,91,366/-) shall be the deemed sale consideration for the purpose of computation of capital gains. We therefore direct the Ld. AO to compute the capital gains adopting the above deemed sale consideration. Accordingly, this ground no. 5 raised by the assessee is allowed for statistical purposes. Claim of expenses like NALA Charges, Property taxes and Deviation Charges - HELD THAT:- The receipt shows that it is paid by the assessee and we find merit in the argument of the Ld. AR that the assessee has to bear the cost of conversion of the agricultural land which would entitle the Developer to construct the multistoried residential building and which was part of the development agreement. We therefore direct the Ld. AO to allow these expenses towards the cost of construction. Further, it is also noticed from the remand report of the Ld. AO that the AO has not objected to the property tax paid by the assessee and hence these expenses incurred by the assessee shall be allowed while computing the cost of construction. With respect to deviation charges, the Ld. AR has submitted in page 53 of the paper book the fine paid of Rs. 31,36,000/- is with respect to set back as per the sanctioned plan in comparison with the completed building plan. These expenses are incurred for the entire building and the claim made by the AR that they should be allowed in the hands of the assessee could not be accepted. We find the deviation has occurred in the construction of the entire building and does not belong exclusively to the assessee. In these circumstances, the cost of deviation charges pertaining to the assessee shall be in proportion to the ratio of the land agreed between the Developer and the assessee as per the development agreement. We therefore direct the Ld. AO to allow 46% of Rs. 31,36,000/- amounting to Rs. 14,42,560/- as deduction from the capital gains for the assessee. Accordingly, this ground No.6 raised by the assessee is partly allowed. Exemption claimed U/s. 54F - DR submitted that the assessee is having two houses and hence exemption U/s. 54F cannot be allowed in this scenario - HELD THAT:- The assessee has claimed exemption U/s. 54F considering the entire built up area as one residential unit. In our view it cannot be considered as a single residential unit. AO is therefore directed to verify whether the assessee is owning more than one house to claim deduction u/s. 54F of the Act. Accordingly, we direct the Ld. AO to verify these facts and afford a reasonable opportunity of being heard to the assessee and the deduction U/s. 54F shall be allowed in accordance with law. Accordingly, this ground No.7 raised by the assessee is allowed for statistical purposes.
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2022 (12) TMI 1311
Addition u/s. 56(2)(viib) - rejecting the valuation of shares adopted by the Appellant viz., Cash flow method for issuance of shares for the AY 2015-16 - CIT(A) concurred with the stand of Ld. AO that DCF valuation was not reliable since future cash flows were exaggerated and not supported by any corroborating documentation - HELD THAT:- We are of the considered opinion that though DCF valuation is one of the prescribed methods, however, the valuation should be based on reasonable estimations and assumptions which is missing in the present case. As noted by lower authorities, the valuer has merely adopted the projections made by the management and there was substantial difference in cash flow projections in both the valuation reports itself. The valuation could not be substantiated by the assessee. We also concur that only excess premium exceeding face value of shares could be brought to tax u/s 56(2)(viib). Therefore, the adjudication as done by Ld. CIT(A) in the impugned order could not be faulted with. We order so.
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2022 (12) TMI 1310
CIRP - Demand of income tax - Validity of order of Commissioner of Income Tax (appeals) passed u/s 250 - overriding nature and supremacy of the provisions of the Code over any other enactment in case of conflicting provisions by virtue of non obstante clause contained in section 238 of the Code - Assessee is admitted to Corporate Insolvency Resolution Process ( CIRP ) and moratorium under section 14 of Insolvency and Bankruptcy Code, 2016 has commenced - HELD THAT:- The period of moratorium shall have the effect from the date of such order till the completion of CIRP; or if, during the CIRP period, Hon ble NCLT approves the resolution plan under section 31(1) or passes an order for liquidation of corporate debtor under section 33 of the Code, moratorium shall cease to have effect on date of such order. As noted above, it has been admitted that the moratorium period has commenced in the present case - Hon ble Supreme Court in case of Alchemist Asset Reconstruction Co. Ltd. v/s Hotel Gaudavan Pvt. Ltd. [ 2017 (12) TMI 1107 - SUPREME COURT] held that even arbitration proceedings cannot be initiated after imposition of the moratorium under section 14(1)(a) has come into effect and it is non est in law and could not have been allowed to continue. MONNET ISPAT AND ENERGY LTD. [ 2018 (8) TMI 1775 - SC ORDER] upheld the overriding nature and supremacy of the provisions of the Code over any other enactment in case of conflicting provisions by virtue of non obstante clause contained in section 238 of the Code. Thus, we are of the considered view that the present cross-appeals are a continuation of pending Suit against the Corporate Debtor, which is prohibited under section 14 of the Code. It is further pertinent to note that under section 178(6) of the Act, as amended w.e.f. 01/11/2016, the Code shall have overriding effect. Appeal by the assessee have been filed by the Managing Director of the assessee company, which after initiation of CIRP has become functus officio. We further find that the Interim Resolution Professional has not been impleaded as a party in the present cross-appeals before us by filing revised Form No. 36. Once the insolvency proceedings commenced under the Code, all the litigations are to be pursued by Interim Resolution Professional appointed by the Committee of Creditors. In view of the above, we are of the considered view that the present cross-appeals, in the current form, are not maintainable. We dismiss the present appeals with a liberty that upon completion of the moratorium period, if it is so decided, the assessee and the Revenue may seek recall of this order by impleading Managing Director / Director, representing the new management of the assessee company, or the Official Liquidator, as the case may be.
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2022 (12) TMI 1309
Addition u/s 68 - Unexplained cash deposits made in the appellant s bank account - statement of the assessee admitting the income at the time of survey - subsequent retraction made by assessee - as argued AO did not make any inquiries to satisfy himself about the explanation offered by the appellant although making of such inquiries is a condition prerequisite for invoking the provisions of section 68 - HELD THAT:- Retraction by the Director of the assessee - Assessee had admitted to have the entries had in the books of account, receipts and cash deposits in its bank account. Law is fairly settled with respect to the admissions made in the I.T. proceedings. Section 17 of the Indian Evidence Act also speaks about the evidentiary value of statements, both oral and documentary, in court proceedings. Admissions play a very important role in the income-tax proceedings, as admissions bound the maker. In the absence of any denial or explanation thereof, an admission is almost conclusive regarding the facts contained therein. They generally dispense with the requirement of adducing further evidence or proof to support a fact. Though section 31 of the Indian Evidence Act, 1872 states that admissions are not conclusive proof of the matters admitted, yet admissions in the absence of rebuttal may conclude an issue. Effect of Letter dt.17.01.2017 - Considering the Judgment of hon ble High Court in the case of Y. Ramachandra Reddy [ 2015 (5) TMI 429 - ANDHRA PRADESH HIGH COURT ] we are of the considered opinion that the subsequent retraction will not come for rescue of the assessee, as neither the retraction dt.17.01.2017 was made before the Assessing Officer / Investigating Wing nor it was made within reasonable time and nor any reasons for retraction of the earlier statements were given. In our view, the letter dt.17.01.2017 was after thought, motivated and against earlier conduct of assessee whereby he had accepted the income of Rs.40 Crore in the earlier statements, affidavit in PMGKY 2016 and subsequent deposit of part of tax amount of Rs. 1 crore. Further it is not the stand alone statement of the assessee admitting the income at the time of survey rather in the present case the revenue is having other incriminating evidence in the form of 2135 invoices, CFSL evidence of computers, statements of neighbour, statements of other persons denying the purchase of bullion and recovery of KYC documents of 65 customers. In light of the above, the Assessing Officer was right in rejecting the reliance placed by assessee on letter dt.17.01.2017. Whether the ld.CIT(A) was right in deleting the addition on the basis of statement of Mr. Neel Sunder Tharad recorded by Enforcement Directorate dt.26.12.2016 ? - From the comparison of statement recorded before the Enforcement Directorate u/s 50(2) and (3) of PMLA Act and confession recorded u/s 24 of the Indian Evidence Act by the police make it abundantly clear that in the statement u/s 50(2) and (3) of PMLA Act dt.26.12.2016 which is in the nature of evidence, Mr. Neel Sunder has only provided the names of 5 persons whereas in the statement recorded u/s 24 of Indian Evidence Act by Mr. Neel Sunder while he was in custody after being arrested on 11.01.2017, there is a mention of names of 12 persons with the amounts. The above said crucial aspect has not been examined by the CIT(A) while deleting the addition. In our view, the ld.CIT(A) has swayed away by the confession extracted from Mr. Neel Sunder while he was in police custody, however, the conclusion of ld.CIT(A) is without any basis, merit and against the settled principle of law. In view of section 26 of Indian Evidence Act, we are of the opinion that the statement / confession of Mr. Neel Sunder recorded by the police while he was in custody is not admissible in the eye of law. Therefore, the conclusion of ld.CIT(A) that the statement has not been confronted by the Assessing Officer is without any basis. Authorization given by the appellant to Sri Neel Sunder and his concerns to deposit the amount in the bank account of the appellant were not examined nor contradicted - Undoubtedly, it is not the case of the assessee that efforts were made by the assessee to return the amount to the Mr. Neel Sunder. Apart from the admissibility or otherwise of the confession of Mr. Neel Sunder, another fact that stares at the face of the assessee is that, as per version of the assessee, Mr. Neel Sunder has arranged the customers, money and bullion and made delivery to the customers. This version of the ass is incongruous and against human preponderance, as why Mr. Neel Sunder will approach the assessee to route his clients transaction through the assessee. In that way Mr. Neel Sunder could have completed the entire transaction right from procuring to selling the gold to customers and retained the profit himself. It is also not the case of the assessee that Mr. Neel Sunder did not have the bank account in the same Axis Bank where the money was allegedly deposited by him in the account of the assessee. There is no explanation for the redundant routing of the transactions with the assessee if we have to believe Mr. Neel Sunder. This shows that the statement of Mr. Neel Sunder s statement attributes redundancy to the role of the assessee, which we find difficult to believe. In our opinion, conduct of the assessee was incomprehensible and abnormal. The assessee either deposited its undisclosed amount or otherwise helped undisclosed, unanimous and unidentifiable persons to convert their undisclosed prohibited currency into bullion after notification of demonetization. In both circumstances, the action of the assessee was not permissible in the eyes of the law. Therefore, the order of Assessing Officer was in accordance with law, and other of ld.CIT(A) deleting the addition was without any merit. Legal sale of gold with use of prohibited currency /SBNs - SBNs were subsequently received by the assessee and were wrongfully deposited with the bank and thus, the assessee had mischievously and unscrupulously brought the SBNs into the network. In our view, the stand of the Assessing Officer is correct, as he had rightly concluded that no legal sale of gold could have made with use of prohibited currency /SBNs. Even assuming that, though legally not correct, the transactions are illegal, as opined by the AO, the income needs to be taxed, as the Income tax Act does not differentiate between legal and illegal incomes - The assessee has failed to prove the identity of the creditors, genuineness of the transactions and creditworthiness of the creditors. Therefore, the assessee had failed to discharge his onus under section 68 of the Act; hence, the order of the Assessing Officer is required to be restored and the order of the ld.CIT(A) is required to be set aside. We do it accordingly. In the result, we uphold the addition as unexplained credit in the hands of the assessee (Vaishnavi Bullion Private Limited.) - Decided in favour of revenue.
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2022 (12) TMI 1308
Disallowance of employees contribution to Provident Fund as well as ESIC - delayed deposit the employees contribution to provident fund within the due date - HELD THAT:- As it is an admitted fact that the payment of employees contribution to the provident fund was made before the due date of filing of return of income u/s 139(1) of the Act but beyond the due date as provided in the respective Statutes. Respectfully following the judgment of Hon'ble Supreme Court Checkmate Services P. Ltd. [ 2022 (10) TMI 617 - SUPREME COURT ] we hold that the assessee-employer was duty bound to deposit the employees contribution to provident fund within the due date as mentioned in the respective Statutes. Since this was not done the assessee is not entitled for deduction u/s 36(1)(va) read with section 43B of the Act and the said amount has to be construed as deemed income of the assessee and added to his total income. We do not find therefore, any infirmity with the findings of the Revenue authorities and the appeal of the assessee is dismissed.
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2022 (12) TMI 1307
Income deemed to accrue or arise in India - definition of interest as provided under article 12 of the India U.K. DTAA - justification on the part of the lower authorities in treating the receipts of the assessee as income from other sources - whether income was rightly declared as Rental Income under the head House Property and the Statutory Deduction of 30% was rightly claimed? - HELD THAT:- We see no reason to deviate from the view already taken by the Coordinate Benches and following the same, the amount received by the assessee is in the nature of interest taxable @ 15% under Article 12 of India-UK DTAA. In the result, ground of the assessee s appeal is allowed in favour of the assessee and against the Revenue.
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2022 (12) TMI 1306
Addition u/s. 69A - accommodation entries received by the assessee in respect of his own unexplained money - HELD THAT:- As no appearance was put up by the assessee in response to the notice u/s. 142(1) of the Act. Before the CIT(A) also instead of contending that the AO did not conduct independent enquiry and no details of money trail was referred, no evidence whatsoever were filed by the assessee except an affidavit and a bank statement. There were many opportunities given by the AO as well as CIT(A) but no evidences in support of claim of assessee were ever produced before both the authorities below. The provisions u/s. 69A requires explanation of assessee about the nature and source of acquisition of money and if any explanation offered by the assessee is not satisfactory in the opinion of AO, the money is deemed to be income of the assessee. Admittedly, as discussed above, no explanation was offered by the assessee in the assessment proceedings to the satisfaction of the AO and it is established that the AO framed assessment to the best of his judgment u/s. 144 - Therefore, the provisions u/s. 69A of the Act requires explanation by the assessee and when no such information offered by the assessee, we deem it proper in the interest of justice to remand the matter to the file of AO for its fresh verification. The assessee is liberty to file evidences, if any, in support of his claim. Thus, ground No. 2 raised by the assessee is allowed for statistical purpose.
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2022 (12) TMI 1305
Accrual of income - Addition pertaining to option premium received on sale of 20 flats as the income in the hands of the appellant - Whether option agreement between the appellant and Hypercity is a normal business transaction and not a sham transaction? - terms and conditions of the option agreement entered as commercially prudent - Case of the Revenue is that, this agreement was a sham transaction, which was only meant to divert profits from the assessee to HRPL - HELD THAT:- We agree with the Ld. AR that this option agreement was a commercially expedient transaction as it enabled the assessee to obtain interim funding in the form of interest-free deposits with embedded option, for its project without interest/cost and it also indirectly secured the commitment from HRPL to buy twenty (20) flats in their proposed development, whose construction had not even commenced by then, and whose sales/bookings until then was sluggish (assessee had only obtained two other bookings until FY 2010-11). The fact that HRPL, a reputed company and a subsidiary of M/s Shoppers Stop Ltd, chose to participate in this proposed development, enhanced the bankability of the project. It was also pointed out to us that, the option price agreed in 2010 was commensurate with the prevailing market value for stamp duty purposes and therefore it was not a case that the option to acquire twenty (20) flats was given to related party, HRPL at understated values. On the issue of loans of Rs.135.23 crores advanced by the assessee to its sister concerns, it is noted that they were given in the course of business and were interest bearing, and on which the assessee had derived interest income to tune of Rs.25.67 crores. On the other hand, the interest-free deposits with embedded option received from HRPL were not only interest-free but also did not entail any cash outflow. On conspectus of these facts, we agree with the finding of the Ld. CIT(A) in holding the option agreement between the assessee and HRPL to be commercially expedient and thus acceptable. Understandably, until the construction work began, there was little need of funds by the assessee. It was only when the certificate for commencement of construction was received on 27.05.2013, that the actual requirement for working capital arose, and until then the assessee had admittedly been able to secure interest free option deposits from HRPL to the tune of Rs.48.66 crores (upto FY 2013-14) against twenty (20) flats. Having regard to these facts, even this doubt raised by the Ld. DR regarding the staggered manner of payment of option deposits, is found to be untenable. Apart from the above reasons, we are also unable to countenance the action of the Ld. DR in questioning the necessity and purpose for entering into option agreement, on the premise that, it is the assessee s prerogative to decide the manner in which it wants to run its business and the Department cannot replace the wisdom of the assessee. Revenue cannot decide or dictate as to how an assessee should conduct its business or maximize its profits. It is by now well settled in law that, the Revenue cannot step into the shoes of the businessman for determining reasonableness and business expediency. Hence, the Ld. DR could not have questioned the necessity, purpose and manner of raising of funds by the assessee, in the form of option deposits from HRPL, as it was outside the domain and jurisdiction of the Revenue. Courts have time and again observed that, whether the transaction is expedient for the purpose of business has to be looked at by the Income-tax Authorities from the view-point of the assessee as a prudent businessman and not from the armchair of the AO. The Courts have observed that it is the assessee who knows its business. It is its success or failure in the business, which is material to it. It is not for the income-tax authorities to suggest, or advice, or to presume or surmise as to the expedience of the transaction. For the aforesaid reasons, we hold that the Ld. DR could not have questioned the commercial necessity for the assessee to have entered into the option agreements with HRPL. Assessee has also demonstrated before us that, it was also not the case, that by entering into this option agreement, the assessee had shifted profits to HRPL thereby reducing its tax liability. It is not in dispute that, both the assessee and HRPL are assessed in the status of company at the same applicable tax rates. It is also not the case of the Revenue that HRPL did not credit the revenues derived from sale/assignment of options as income in its books of accounts. Assessee had brought forward losses to the tune of Rs.156 crores from earlier years. Hence, even taking into account the addition of Rs.98 crores made by the AO, there were sufficient losses available with the assessee to set-off such addition and also carry forward remaining losses to future years, and hence it did not result in creation of any tax liability upon the assessee. Although, we agree with the Ld. CIT(A) that, this fact alone cannot be a decisive factor to decide the acceptability of the option agreement, but having regard to the overall facts and circumstances of the case as already discussed in the foregoing, this fact pointed out by the Ld. AR does have persuasive value. Addition made by the AO is held to be unjustified both on facts and in law. Accordingly, the Ground No. 1 of the appeal of the assessee is allowed and the Ground No. 1 of the appeal of Revenue is dismissed. Disallowance u/s 14A - assessee had made suo-moto disallowance - CIT(A) allowed the appeal of the assessee by holding that the disallowance u/s 14A was to be restricted to the extent of exempt income, by following the decision of State Bank of Patiala [ 2018 (11) TMI 1565 - SC ORDER] - HELD THAT:- Having heard rival submissions and perusing the material on records including the impugned order, we do not find any infirmity in the order of Ld.CIT(A) deleting the further disallowance made by the AO u/s 14A of the Act. Accordingly, Ground no. 2 of the appeal of the Revenue is dismissed.
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2022 (12) TMI 1304
Unexplained source of deposits - whether amount routed through bank account and registries existed in the name of M/s Vardhman Industrial Estate and its concern, proves the genuineness of transactions? - CIT (Appeals) deleted these additions based on the evidences furnished by the assessee in the form of confirmation from M/s. Vardhman Industrial Estate and its sister concern that they have paid the assessee these moneys - HELD THAT:- These moneys are routed through banking channels and they are verifiable. The finding of the ld. CIT (Appeals) that the documents show that lands were registered in the name of M/s. Vardhman Industrial Estate where the assessee acted only as an agent in facilitating the purchase of land from farmers on behalf of M/s. Vardhman Industrial Estate. As observed that the ld. CIT (Appeals) deleted these additions based on these evidences where major portion of the lands were registered in the name of M/s. Vardhman Industrial Estate and a small portion to its sister concern. Addition being cash deposits into bank account - CIT (Appeals) was of the view that it would be unreasonable to add the entire amount as these proceeds emanate from the business of the assessee which is on-going. The ld. CIT (Appeals) also observed that assessee had opening balance of Rs.24,05,867/-. Therefore, the ld. CIT (Appeals) considered the peak credit of this account as undisclosed income of the assessee and worked out the peak credit at Rs.21,59,522/-. CIT (Appeals) on appreciation of evidences furnished by the assessee deleted the additions of Rs.76,50,000/- and Rs.10,50,000/- and restricted the peak credit in respect of cash deposits into bank account at Rs.21,59,522/- which, in our opinion, is justified. Therefore, we see no good reason to interfere with the findings of the ld. CIT (Appeals). Thus, we sustain the order of the ld. CIT (Appeals) and reject the grounds raised by the Revenue.
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2022 (12) TMI 1303
Revision u/s 263 - notice to a non-existent entity - deduction u/s.80IC was wrongly allowed as it appears that the assessee firm was not carrying out manufacturing activities at the factory premises - HELD THAT:- Since, the notices issued by the revenue authorities were after the date of closure of the business they have been rightly returned answered. Since, the closure of the business as no operations could be carried and no employees were available at the premises of the factory, the notices have been returned. Hence, it cannot be concluded that during the financial year period from 01.04.2011 to 31.12.2012 was not in existence. The derivation of the ld. PCIT cannot be held to be correct. Had the manufacturing activities were carried out as on date the notices could have been served.From the record, it is clear that the manufacturing activities were not being carried out from 31.12.2012 and the cancellation of registration on 04.03.2013 was also on record. Hence, the notices could not be served and it is a fact that the manufacturing activity was not carried out as on the date of issue of notice. It certainly does not give raise to a conclusion that there was no manufacturing activity during the year 01.04.2011 to 31.12.2012. It is not worthy to conclude that the permanent closure of the business was done w.e.f. 31.03.2014. It is a fact on record that the permanent closure of the business was done w.e.f. 31.03.2014 and polynomial interpolation cannot be resorted to conclude that the assessee was not into manufacturing during the period 01.04.2011 to 31.12.2012. The authorization given by the assessee was not affixed by requisite court fee. Hence invalid. The validity or invalidity of the letter of authority cannot be a matter of proceedings u/s. 263 especially when the assessee reaffirmed the details filed by the AR.The assessee sold products to only two concerns at Bangalore namely, M/s. Creative International Pvt. Ltd. and M/s. Texport Overseas Pvt. Ltd. The bills have been duly examined. The transport bills have been duly filed before the AO which consists of South India Freight Carriers and Uttarakhand Logistics. The transport charges have been paid by the recipient. The central Sales Tax declarations/'C' Form have been duly filed. Hence, there is no reason to suspect the sales without bringing any material to prove that the bills are phoney or the entities which received the goods are bogus. Hence, the conclusion of the ld. PCIT cannot be supported. The sale invoices to those two concerns do not give any information as to how the goods have been sent to Bangalore from Roorkee. The sale invoices clearly shows that the goods have been sent by freight carrier companies named above and the recipient to pay the freight charges. The raw materials were also purchased from Bangalore which do not give any credence to the factum of purchase. Factually incorrect. No goods have been purchased from Bangalore. The Poly Yarn was purchased from Delhi and Erode The expenses incurred on account of electricity wages do not suggest any manufacturing activity carried out at the premises. The amounts have been duly examined by the AO as per the observation at page no. 2 of the Assessment Order. The electricity bills and invoices details have been duly examined and accepted by the AO with reference to books of accounts and bills. In the absence of any remark, no adverse conclusion could be drawn with regard to the provisions of Section 263 - Appeal of the assessee is allowed.
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Customs
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2022 (12) TMI 1302
Illegal detention of consignment of the petitioner of dry dates imported vide Home Consumption Bill of Entry - HELD THAT:- Considering the fact that the respondent No.3 has no objection to the release of the detained goods subject to the decision of this Court, in wake of the the Country of Origin Certificate of the consignment being genuine, the respondent No.3 has not found it necessary for any further evidence to be adduced for continuing this detention. In wake of that there will be no requirement for the Court to further adjudicate upon any of these aspects. This petition, is, therefore, disposed of as having become infructuous. Petition dismissed.
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2022 (12) TMI 1301
Cancellation/revocation of customs broker licence - main ground on which the impugned order assailed is the bar of limitation - HELD THAT:- In the present case, the date of license report is unknown and in this context, it would be relevant to refer to a decision of a learned Single Judge of this Court in the case of M/S. AM. AHAMED CO. VERSUS THE COMMISSIONER OF CUSTOMS (IMPORTS) [ 2014 (9) TMI 237 - MADRAS HIGH COURT ]. This Court, in an identical situation, where the date of offence report was unavailable, has proceeded on the basis that in such a situation it would be appropriate to adopt the date of suspension as the relevant date. This order is stated to have attained finality by both learned counsel before me and thus the settled position as on date is to the effect that where the date of offence report is unavailable, a legally appropriate substitute would be the date of suspension for purposes of computation of limitation. In the present case, the date of order of suspension is 20.09.2018 and hence, the overall period of nine months, as stipulated in para 7.1 of the aforesaid Circular, expires on 19.06.2019. The impugned order being passed on 21.10.2019, is barred by limitation on this ground as well - In the considered view of the Court, delay, whether attributable to the revenue or, for that matter, the broker, would not extend the timelines as set out both in the Circular and Regulations. No doubt there was no response on the part of the broker in responding to the enquiry report. However, nothing prevented the officer to have taken action scrupulously in line with the time periods set out under Regulation 17 of CBLR Regulations and para 7.1 of the Circular, even sans any co-operation on the part of the noticee. The impugned order is found to be barred by limitation and is set aside on this score. This writ petition is allowed.
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2022 (12) TMI 1300
Revocation of Customs Brokers License - levy of penalty - allegation of Manipulation and fabrication of lab reports - of Obtaining fabricated test reports to avoid the detection of the true identity of goods to bypass the restrictions imposed by Ministry of Commerce - allegation of import of Superior Kerosene Oil (SKO) in the guise of Industrial Composite Mixture Plus/Low Aromatic White Spirit - fundamental charge against the appellant is that the appellant tried to influence the officers of the custom laboratory, kandla for issuing fabricated test report in order to avoid the material getting classified as SKO (Superior Kerosene Oil) falling under Customs Tariff heading No.27101910 which is of restricted nature. HELD THAT:- The notice has alleged that though the imported goods were SKO falling under Customs Tariff Heading No. 27101910 but the same were misdeclared as ICMP (Industrial Composite Mixture Plus) falling under Customs Tariff heading 27101910 - The main charge of misconduct against the appellant is that he had tried to influence the officers of Kandla Laboratory and take care that the final boiling point of the cargo should be below 240 Celsius. It has been alleged that this was done in order to ensure that the goods imported by the various importers through the appellant did not qualify as SKO but qualified as ICMP. It is seen that other than alleged manipulation of final boiling point, there is no other manipulation by the appellant from the officers of the chemical laboratory, Kandla. From the test report, it is seen that the requirement of final boiling point for SKO is 300 Degree Celsius maximum. Thus, if final boiling point of any petro chemical exceeds 300 degree Celsius the same would not qualify as SKO. Alleged manipulation of the final boiling point by the officers of Kandla laboratory at the behest of the appellant - HELD THAT:- It is seen that the appellant has alleged to have asked the officers of Kandla chemical laboratory to show that the max. boiling point is below 240 degree Celsius. The motive for doing this is supposed to be that the goods should not qualify as SKO. It is not understood as to how by getting report manipulated to show that the final boiling point is below 240 degree Celsius, the appellant could have achieved the objective of getting out of the specifications of SKO as extracted from the test report of CRCL, New Delhi reproduced at para 9.3 of the show cause notice. By putting the final boiling point below 240 degree Celsius, it is obvious that the goods would qualify as SKO and not get out of requirements of being SKO. It is not understood as to how the appellant could have helped the importers by manipulating the final boiling point of the samples to below 240 degree Celsius as alleged in the show cause notice. The objective of taking the goods out of the description of SKO could only have been achieved if the final boiling point was above 300 degree Celsius. This dichotomy has not been clarified in the impugned order. Since all the charges essentially flow from this fundamental charge of manipulating test report therefore, the impugned order in the present stage cannot be sustained unless the above dichotomy is explained. The impugned order is set aside and the matter is remanded to the original adjudicating authority for fresh decision after giving opportunity to the appellant to defend themselves. Appeal is allowed by way of remand.
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Insolvency & Bankruptcy
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2022 (12) TMI 1299
Approval of resolution plan - several applications - HELD THAT:- Although we have disposed of several applications today but still there are different I.A.s filed in the IL FS group. These matters pertain to year 2019, 2020, 2021 2022. There being several applications, we request Mr. Raunak Dhillon to prepare details of all applications year wise. It is needless to say that for those applications whose chart is prepared it need not be prepared again - List these applications on 19th and 20th January, 2023 at 02.00 P.M.
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2022 (12) TMI 1298
Seeking to intervene in the proceedings filed by the Liquidator of the Corporate Debtor - seeking clarification as to whether he is allowed to scrutinise and investigate the transactions executed by the Directors of the Corporate Debtor beyond two years prior to the date of ICD and also to see the relevant documents from the Promoters - HELD THAT:- We do not find any illegality in the observation of the Learned Adjudicating Authority that there is no provision in the Code, with respect to impleadment of any Creditor apart from the Creditors who have triggered the CIRP. Needless to ad, the Appellant is at liberty to pursue other legal remedies, if so advised. Appeal dismissed.
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Service Tax
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2022 (12) TMI 1297
Taxablity - services of healthcare or predominantly cosmetic in nature or not - Melasma - Birth Mark Treatment - Hypertrichosis Treatments - Hair Laser Comb Treatment - time limitation - HELD THAT:- The appellant undertakes diagnosis, which is an art and act of diagnosing disease by symptoms and thereafter prescribing the necessary remedial treatment, diagnosis is not a simple guesswork. The appellant clinics employs qualified doctors who have completed post graduation in Dermatology. The appellant first undertakes a diagnosis of a new patient, which is done by the qualified Dermatologist for which they collect consultation charges. Pursuant to diagnosis, treatment is prescribed, the appellant clinic also prescribed the preventive measure and/or post treatment precaution. Preventive care means a measure taken to prevent disease from occurring or recurring rather than curing it. The appellant clinics are clinical establishment involved in Alopathy treatment, which is a recognised system of medicine in India. The appellant have been held to be clinical establishment by the Court below - the services provided by the appellant, save and except for hypertrihosis treatments and hair laser comb treatment fall under healthcare services and are accordingly exempt under Notification No. 25/2012-ST. Services rendered by the appellant assessee in respect of Hypertrichosis Treatments and Hair Laser Comb Treatment are held taxable under Cosmetic and Plastic Surgery service. Invocation of extended period of limitation - HELD THAT:- The appellant had maintained proper records of the transaction and has taken registration under the provisions of Service Tax and were making regular compliances. Few returns were pending for which plausible explanation has been given being non-availability of the concerned staff. The appellant has regularly deposited their admitted taxes and have also paid tax and filed pending ST-3 returns during the course of investigation. The demand has been raised by the Revenue based on the accounts and records maintained by them. Accordingly, the extended period of limitation is not invocable. Levy of penalties - HELD THAT:- As there is no suppression of facts with malafide intention to evade payment of service tax, penalty under Section 78 is set aside - the penalty of Rs. 10,000/- imposed under Section 77 of the Finance Act, 1994 for filing ST-3 late, is upheld. Appeal disposed off.
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2022 (12) TMI 1296
VCES scheme - Non-issuance of notice of rejection - Recovery of service tax alongwith interest and penalty - Non-payment of service tax due on the GTA services availed by them under reverse charge mechanism during the period April 2008 to March 2013 - failure to take service tax registration and failure to file returns as required under law - HELD THAT:- The VCES scheme has provided itself contents and has been explained by the Board in terms of various circulars issued. Once a declarant files a declaration admitting the tax liability for the period upto December 2012 in Form VCES-1, Revenue has to issue the acknowledgment in VCES-2 or reject the same by issuing a notice to the declarant. If no such rejection is done, the declarant proceeds to make the payment of the declared liability and intimates to the concerned designated authority who issues the final discharge certificate in Form VCES-3. In the present case it is not even the case of the Revenue that VCES declaration filed by the appellant has been rejected or even a notice for such rejection has been issued. It is settled law that the notice for rejection of the declaration has to be issued within thirty days as per Board Circular No 174/9/2013-ST. In absence of any such notice for rejection, it is but natural that appellant would act as per VCES-2 issued to him acknowledging the declaration. Appellant paid the declared liability and intimated the designated authority of the payment made. Even then the designated authority has not issued the settlement memo under Form VCES-3. Appellant cannot be faulted for the reason as stated in the impugned order. Section 111 of the Finance Act, 2013 clearly provides that in case there is some liability or the declaration made is found to be improper substantially, then a show cause notice for confirming the additional tax liability would be issued under Section 111. No such notice has also been issued. In absence of notice under Section 111, there cannot be a case for rejection of the declaration made by the appellant under VCES scheme. It is for the Revenue/designated authority to issue VCES scheme and failure to issue the same cannot be the ground for proceeding against the appellant. Revenue should set its record right. Demand made for the period January 2013 to March 2013 - HELD THAT:- The appellant paid the entire amount even prior to issuance of show cause notice. The benefit of Section 73(3) of the Finance Act, 1994 should have been extended to them by not issuing the show cause notice. As all amounts were paid prior to the issuance of show cause notice, the proceedings initiated cannot survive in terms of Section 73(3) of the Finance Act, 1994. Appeal allowed.
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Central Excise
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2022 (12) TMI 1295
Process amounting to manufacture or not? - whether aluminium dross and skimming arising in the course of manufacture is excisable after 10th May 2008? - HELD THAT:- It is seen from the decision of the Hon ble High Court of Bombay in HINDALCO INDUSTRIES LIMITED VERSUS THE UNION OF INDIA, CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE [ 2014 (12) TMI 657 - BOMBAY HIGH COURT] that dutiability of the impugned goods, which had been held by the Tribunal to be excisable even after the amendment inserting Explanation in section 2(d) of Central Excise Act, 1944 with effect from 10th May 2008, did not find favour in the light of several decisions. In the light of the decision of the Hon ble High Court of Bombay in their own matter on the very same impugned goods in HINDALCO INDUSTRIES LIMITED VERSUS THE UNION OF INDIA, CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE [ 2014 (12) TMI 657 - BOMBAY HIGH COURT] , which was affirmed by the Hon ble Supreme Court in UNION OF INDIA VERSUS HINDALCO INDUSTRIES LIMITED [ 2019 (3) TMI 1933 - SC ORDER] holding that nothing survives for consideration in these Special Leave Petitions and the Civil Appeal. The Special Leave Petitions and the Civil Appeal are dismissed. The impugned orders do not survive and accordingly are set aside to allow the appeals - Appeal allowed.
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CST, VAT & Sales Tax
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2022 (12) TMI 1294
Validity of remanding the case - Whether, the Tribunal, being a last fact finding authority and empowered to examine and adjudicate the factual and legal issues, has erred in remanding the appeal back to the Assessing Authority when all the material for deciding the case were available on record? - HELD THAT:- Through the present revisions, the assessee has tried to raise a question of law that whether the Tribunal which is the last fact finding court and empowered to examine and adjudicate the factual and legal issue, has erred in remanding back the matter to the assessing authority when all the materials for deciding the case was available on record. The matter of remand by various authorities, Tribunals and courts have been under active consideration of this Court and also of the Hon ble Apex Court for quite a long time. This is a case which was before the Commercial Tax Tribunal which is the last fact finding court and clothed with both power of deciding the appeal on law and fact, had remanded back the matter to the assessing authority setting aside both orders of the assessment as well as of the first appellate authority. In the present case, the Tribunal which was deciding the second appeal was required to frame the point of determination and thereupon records its finding and the decision taken by it, but only after noting the arguments of both the parties, the Tribunal remanded back the matter to the assessing authority to consider certain documents and make fresh assessment - The Hon ble Apex Court in SHIVAKUMAR ORS VERSUS SHARANABASAPPA ORS [ 2020 (4) TMI 907 - SUPREME COURT] while considering the scope of remand had held order of remand is not to be passed in a routine manner because an unwarranted order of remand merely elongates the life of the litigation without serving the cause of justice. An order of remand only on the ground that the points touching the appreciation of evidence were not dealt with by the trial court may not be considered proper in a given case because the first appellate court itself is possessed of jurisdiction to enter into facts and appreciate the evidence. In the present case, the Tribunal has not recorded any finding to the effect that the assessing authority has failed to deal any issue or has not considered the same which was essential for the right decision of the suit. The Tribunal had only required the revisionist-Company to place certain documents before the assessing authority on the basis of which the assessing authority was to arrive at the finding. The documents mentioned in the judgment was already brought to the notice of the assessing authority through the reply submitted by the assessee on show-cause notice on 12.03.2020 and the same was dealt with by the assessing authority in its assessment order - The order of remand has to be seen within the parameters of Rule 23, 23A and 25 of and not beyond that. Apart from Order 41 of CPC, there is no other provision which provides for the concept of remand. It is a borrowed provision by the taxing authorities from Code of Civil Procedure, 1908. The taxing authorities as well as the Tribunal should first understand the concept of remand before applying it. It should not be in a casual manner. Long litigation in commercial and business matter only spoils the image of the State and its functionaries and cause great loss to business world. Tribunal was not correct in remanding back the matter to the assessing authority when all the material was before it and should have dealt with each of the material and decided the same - the order dated 08.08.2022 passed by the Tribunal is hereby set aside and the matter is remitted back to the Tribunal to decide both the appeals of the assessee in accordance with law on the material available on record, as expeditiously as possible. The revisions stands partly allowed.
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