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TMI Tax Updates - e-Newsletter
February 17, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Central Excise
CST, VAT & Sales Tax
Articles
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Detention of goods alongwith conveyance - allegation is that E-invoice submitted by the petitioner is a manipulated one - The only limited relief that can be granted to the petitioner is to permit them to file a statutory appeal, if aggrieved by the impugned order before the statutory Appellate Authority as per the provisions of Section 107 of G.S.T. Act, 2017 - HC
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Seeking grant of Regular Bail - utilization of bogus Input Tax Credit (ITC) through fake documents - Needless to say, such type of cheating is rampant in our society and is often adopted by fraudsters and unscrupulous persons by causing loss to the Government Exchequer. This has become a cakewalk to amass wealth illegally over night which needs to be curbed with an iron hand. - HC
Income Tax
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Special audit u/s 142(2A) - the order u/s 142(2A) was never communicated or even uploaded on the portal - the purported order directing special audit u/s 142(2A) will not be given effect to and will be treated as not passed, as it was never communicated to the appellant-assessee - with the consent of the learned counsel for the appellant-assessee, we extend the time for passing the assessment order till 31.12.2023. - SC
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Addition u/s 69A r.w.s. 115BBE - unexplained jewellery fround in search proceddings - It is a fact on record that the income earned has been undisclosed and has been unearthed only due to the action u/s 132 and the jewellery is only application of such undisclosed income. - Hence, the provisions of Section 115BBE(1)(a) are equally applicable - AT
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Addition on account of advance against the properties - Assessee has improved his explanation step-by-step and instead of explaining facts in a proper manner at respective stage, took a contradictory stand - Now before us, assessee went one step ahead by taking plea that such advances were refunded in next assessment year. - Additions confirmed - AT
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Short Term capital Gains - Transfer / Conversion of Redeemable Cumulative Convertible Preference Share and Fully Compulsory Convertible Preference Shares to equity shares - In the present case, it is to be appreciated that the conversion of preference shares into equity shares is in the hands of the shareholder. - Thus, gain, if any, arising from such a conversion will only be taxable in the hands of the shareholder - Additions deleted - AT
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Additions of Income of other person u/s 60 & 63(b) - transfer of income without transfer of corresponding asset by the assessee - As is evident from records, FCDs were issued by TGSPL to Serco International SARL much prior to reduction in share capital. Since, there is no generation of income there can be no question of transfer of income to any other person. - Additions deleted - AT
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Addition u/s 68 - Assessee received premium of Rs.499/- against the value of share at Rs.1/- They have not given any explanation of the source of money in their hands for making payments to the assessee as share application money in cash. Therefore, revenue authorities have rightly treated it as bogus and sham transactions. AO has rightly made the addition - AT
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MAT computation - Disallowance of Debenture Redemption Reserve[DRR] - it is not the Assessing Officer who has ‘increased’ the amount of Net Profits, on the contrary it is the Appellant who had ‘reduced’ the Net Profits as shown in the audited Profit & Loss Account prepared as per the provisions of the Companies Act by the amount of Debenture Redemption Reserve created during the relevant previous year - Additions confirmed - AT
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Capital gain or salary received - Recognizing the compensation received by the assessee as the share holding of the company - the amount received quivalent to the pro-rata value of eligible shares of 15,000 out of offered shares of 50,000 be treated as capital gains u/s 48 and the remaining amount received by the assessee from the former employee be treated as per the provisions of Section 17(3)(iii). - AT
Customs
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Smuggling - Gold Biscuits - burden to prove - It is the mandatory obligation of the Court to hold a fair trial. Lack of opportunity to explain his position vis-à-vis incriminating evidence, to be used against him is definitely prejudicial to the interest of accused person. Therefore, without giving an opportunity to the accused person to explain the incriminating evidence, Court could not have used the same against the accused person to record an order of conviction. - HC
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Authorized courier - Refusal to renew the registration of the Petitioner - The Petitioner was an authorized courier for almost 25 years and the registration was renewed from time to time. - the petitioner was entitled to an opportunity to explain before taking the impugned decision. The decision taken without giving opportunity to explain will thus have to be set aside. Non-renewal therefore had serious implications for the Petitioner. - HC
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Confiscation - import of restricted items - rejection of value - as the importer had tried to import the restricted goods in violation of the provisions of the ITC(HS) Import Policy and the value had not been correctly declared, the goods were liable to confiscation. - As the goods were held to be liable to confiscation under section 111 of the Customs Act, penalty under section 112(a) of the Customs Act has been correctly imposed. - AT
Central Excise
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Tribunal not deciding the matter itself and remanding it to the Assessing Officer - it is noticed that the approach of the Tribunal is to abdicate its duty of deciding the matter on the merits or to retain the matter till the outcome of the pending matter before the Apex Court. Since this is not permissible, it is deemed appropriate that the Tribunal, which is otherwise required to decide the matter on merit, - HC
VAT
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Penalty u/s 51 (7) (b) of the Punjab Value Added Tax Act, 2005 - evasion of tax - The mere possibility of a local sale would not clothe the officials of the respondents to take such an action when there was no material on record to indicate that an attempt was made by the appellant to deliver the goods at a different place and to sell them in the local market by evading payment of tax. - HC
Case Laws:
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GST
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2023 (2) TMI 588
Validity of assessment order - Violation of principles of natural justice - no personal hearing was afforded to the petitioner in the impugned assessment proceedings - HELD THAT:- Admittedly, no personal hearing was afforded to the petitioner in the impugned assessment proceedings as seen from the impugned assessment order. An adverse decision has also been taken by the respondent against the petitioner in the impugned assessment order. Therefore, necessarily the impugned assessment order has to be quashed on the ground of violation of the principles of natural justice as no personal hearing has been granted to the petitioner as contemplated under Section 75 (4) of the GST Act, 2017 and remanded back to the respondent for fresh consideration on merits and in accordance with law. The assessment order dated 28.12.2022 is hereby quashed and the matter is remanded back to the respondent for fresh consideration on merits and in accordance with law - Petition disposed off.
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2023 (2) TMI 587
Detention of goods alongwith conveyance - allegation is that E-invoice submitted by the petitioner is a manipulated one - HELD THAT:- As seen from the impugned order, reasons have been given for rejecting the petitioner's contention in its reply dated 02.02.2023 sent by them to the show cause notice issued by the respondent. When reasons have been given, that too when the respondent has referred to Circular No.17/22-G.S.T., dated 01.08.2022, which according to them makes it mandatory for submission of E-invoice from 1st October 2022, when the aggregate turnover of the businesses exceeds Rs.10 crores in any financial year from 2017-18 to 2021-2022, this Court cannot entertain this writ petition as principles of natural justice have not been violated by the respondent as only after giving them time to submit a reply and that too after the petitioner has submitted its reply, which is also considered by the respondent, the impugned order has been passed. The only limited relief that can be granted to the petitioner is to permit them to file a statutory appeal, if aggrieved by the impugned order before the statutory Appellate Authority as per the provisions of Section 107 of G.S.T. Act, 2017 and a direction is issued to the statutory Appellate Authority as and when an appeal is filed by the petitioner to consider the petitioner's application seeking for provisional release under Section 129(1) of the G.S.T Act, 2017, after giving due consideration to the fact that the petitioner is willing to deposit the penalty amount as stipulated under the impugned order under protest for getting provisional release of the goods and the conveyance and take a decision, within a short time to prevent any further deterioration of the goods and conveyance. This writ petition is disposed of.
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2023 (2) TMI 586
Seeking grant of Regular Bail - utilization of bogus Input Tax Credit (ITC) through fake documents - allegation is that that the taxpayer had not done any business at the address provided in the registration certificate - HELD THAT:- It can safely be presumed that the petitioner in connivance with his co-accused-Ashok, had actively participated in making bogus firms i.e. Aqua Traders and R.K. Enterprises, in the names of Ankit and Rahul by preparing fake documents without their consent and knowledge. He had also prepared several other fake firms. He was involved in utilizing bogus ITC through fake documents by floating the firm M/s A.S. Enterprises, on papers only, thereby causing a loss to the Government Exchequer. Needless to say, such type of cheating is rampant in our society and is often adopted by fraudsters and unscrupulous persons by causing loss to the Government Exchequer. This has become a cakewalk to amass wealth illegally over night which needs to be curbed with an iron hand. In the instant case, as already noticed that the pointing finger of accusation against the petitioner is the seriousness of the charge - the offences alleged are economic offences which have resulted in loss to the Government exchequer. Considering the material on record, gravity and seriousness of the offence, prima facie involvement and complicity of the petitioner, it is opined that this Court do not find any ground to grant concession of regular bail to the petitioner. Petition dismissed.
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2023 (2) TMI 585
Violation of principles of natural justice (non-service of SCN) - notice in Part A of FORM GST DRC-01A not issued - requirement to issue SCN under Section 74 of CGST Act, before starting any subsequent proceeding - inherent defect in the proceedings - HELD THAT:- The present writ petition deserves to be allowed, as admittedly for initiation of proceedings against the petitioner a notice as provided for under Rule 142(1A) of the Rules in Part A of FORM GST DRC-01A was not issued, which provided for communication of details of any tax, interest and penalties as ascertained by the officer. Any subsequent reminder will not cure inherent defect in proceedings initiated against the petitioner. Similar view has been expressed by the Delhi High Court in Gulati Enterprises' case [ 2022 (5) TMI 1137 - DELHI HIGH COURT ] and this Court in M/s Skyline Automation Industries' cases [ 2023 (1) TMI 379 - ALLAHABAD HIGH COURT ] wherein also in identical facts pertaining to a case prior to the amendment of Rule 142(1A) of the Rules with effect from October 15, 2020, the impugned show cause notice was set aside and the matter was remitted back to authority concerned to initiate fresh proceedings in accordance with law. Petition allowed.
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2023 (2) TMI 544
Rejection of petitioner s appeal on the ground of delay in submission of Appeal - time limitation - HELD THAT:- Section 107 of The West Bengal Goods and Services Tax Act, 2017 deals with Appeals to Appellate Authority. Under Section 107(1), any person aggrieved by an order passed under this Act or the Central Goods and Services Tax Act by an adjudicating authority may file an appeal before the prescribed Appellate Authority within three months from the date on which the decision is communicated to such person. Sub-section (4) of Section 107 authorizes the Appellate Authority to allow the appeal to be presented within a further period of one month after the expiry of 3/6 months if the Appellate Authority is satisfied that the appellant was prevented from presenting the appeal within the aforesaid time period by sufficient cause. In the present case, there has been a delay of 36 days after three months + one month. The petitioner, through learned counsel, claims to have been ignorant of the statutory time period framed under the 2017 Act - Upon hearing learned counsel and considering the power of the Appellate Authority to extend the time period albeit within three + one month as well as the negligible period of delay, this court is of the view that the Appellate Authority should be directed to allow admission of the appeal on merits subject to the petitioner taking steps in terms of the Appeal by 11th January, 2023. Application disposed off.
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2023 (2) TMI 543
Cancellation of GST registration of petitioner - violation of principles of natural justice in quasi-judicial proceedings - ex-parte order - HELD THAT:- Notice for final disposal returnable on 3.2.2023. Let reply be filed on before the returnable date with a copy in advance by 24 hours to the other side.
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Income Tax
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2023 (2) TMI 597
Penalty levied u/s 271(1)(C) - assessee has furnished inaccurate particulars of income in the garb of fictitious cash sales and thereby claimed exemption u/s 80-IC - As held by HC AO as well as the Appellate Authority, rightly gave finding of fact that the cash sales putforth by the respondent were not genuine and the respondent had introduced its unaccounted income in the garb of cash sales. The Tribunal erred in deleting the penalty levied u/s 271(1)(c) - HELD THAT:- We do not find any good ground and reason to interfere with the impugned judgment/order and hence, the special leave petition is dismissed.
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2023 (2) TMI 596
Reopening of assessment u/s 147 - notice beyond the period of four years - Reasons to believe - whether there has been any failure to disclose material facts fully and truly by the assessee? - HELD THAT:- In the present case although the A.O. has recorded in the reasons that there was failure on the part of the assessee to disclose fully and truly material facts, it failed to identify as to what was that material fact which was not disclosed by the assessee which if so disclosed could have prevented the escapement of income. The alleged failure to disclose appears to be nothing but a statement to somehow overcome the hurdle of reopening the assessment beyond four years. A.O. could have proceeded to reopen the assessment only if he had reason to believe that income had escaped assessment . Even in the present case there appears to be no tangible material with the A.O. as can be seen from the reasons recorded and that the reference was made only to the records of the assessment. It thus appears that between the date of the order of assessment and the date of the issuance of notice, nothing new had happened. There was no new information received by the Assessing Officer nor was any reference made to any new material on record. A.O. was simply attempting to accord a fresh consideration on the issue of deduction under Section 80P of the Act claimed and allowed in favour of the Petitioner. We cannot forget that the order of assessment passed in the case of the assessee was under Section 143(3) of the Act. Petitioner had specifically claimed the deduction u/s 80P which was not only reflected in the return of income but also gone into specifically as can be seen from the notice issued u/s 142(1) of the Act where by the details of various deductions and exemptions along with documentary evidence had been sought for by the A.O., which finally led to the passing of the order of assessment where by while certain disallowances were made in respect to certain items, the claim of deduction under Section 80P was allowed. It is settled law that if a query is raised during the assessment proceedings and the assessee submits a reply thereto, leading to the passing of the order of assessment, a reopening in the absence of any new tangible material would be nothing but a change of opinion - Decided in favour of assessee.
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2023 (2) TMI 595
Miscelleneous application filed for condoning the delay in filing the appeal before the ITAT - ex-parte order was passed - ITAT dismissed the same on the ground of delay of 5 years 06 months and 23 days in preferring the miscellaneous appeal - HELD THAT:- The facts of the case reveal that the appellant had filed an application u/s 254(2) of the Act of 1961 stating that he was not able to attend the hearing and the ITAT dismissed the case of the appellant in his absence. However, earlier the matter was adjourned sine die since the ITAT was not available. No notice for next hearing was received by the appellant. The facts of the case further reveal that in respect of the appellant's appeal, an ex-parte order was passed on 13.07.2015 and miscellaneous application was preferred u/s 254(2) of the Act of 1961 which was decided vide order dated 26.09.2022. The same was dismissed as it was preferred after expiry of six months on account of the fact that Section 254(2) of the Act of 1961 provides for a limitation of six months. Keeping in view the aforesaid judgment passed in the case of CIT Vs. S. Cheniappa Mudaliar [ 1969 (2) TMI 10 - SUPREME COURT] certainly the right to file appeal cannot be extinguished as the appellant would be left remedyless. Resultantly, the impugned orders are hereby set aside and the present appeal stands allowed.
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2023 (2) TMI 594
Exemption u/s 11 - registration u/s. 12AA was rejected in terms of the new provision of the Act, 12AB - HELD THAT:- It is not in dispute that the assessee is holding the valid registration and the approval under Section 12A and 12AA of the Act was in effect but it was only for the intervening period as the registration is already available to the assessee effective from A. Y. 2022-23. The bench is of the considered view that in absence of any adverse remark on the activity of the trust merely on technical ground for this intervening period the registration cannot be canceled for this period and a benefit of having registered trust cannot be denied to the assessee when there is specific time extension limit given by the Hon ble Apex Court and TOLA for this period. The assessee is having sufficient cause for not replying to the notices issued by the Revenue. As regards the contention of the DR we are not considering his prayer to restore to this issue to the file by the ld. CIT(E) as the subsequently the ld. CIT(E) has already granted the registration to the assessee trust and there is no adverse observation by the ld. CIT(E). In light of these facts and circumstances of the case, we see no reason to sustain the order under appeal and in the absence of any controverting finding on record we vacate the order passed by the ld. CIT(E) - Appeal of the assessee is allowed.
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2023 (2) TMI 593
Assessment u/s 153C - pen drive was found and seized by the search team - unaccounted cash transactions made - CIT- A deleted addition - AY: 2014-15 - HELD THAT:- It is an admitted fact that no corroborative evidence was traced from the premises of the assessee during the search operations in the assessee s own premises - loan was taken by way of RTGS and repaid by way of RTGS was evidenced from the paper book submitted before us. Further, there is also merit in the argument of the Ld. AR that when the cash balance of Rs. 2.50 Crs was available with the assessee, why a loan was taken from M/s. Polisetty Somasundaram by M/s. Durga Marketing Corporation where the assessee is a partner deserves consideration. As held by CIT from the statement of Polisetty Somasundaram conflicting versions are noticed wherein initially it was said that the transactions in the pen drive represent their unaccounted income and later it was stated that the impugned sums were received as security deposit for the loan given to Durga Marketing Corporation. From the material facts of the case there is no merit for the addition made by the AO. Considering the above facts and circumstances and judicial pronouncements the addition is not sustainable and hence deleted - CIT(A) has rightly considered the facts and adjudicated the grounds on merits - Decided against revenue. Addition of interest payment in cash - AY: 2015-16 - HELD THAT:- We find that in the impugned assessment year 2015-16, the Ld. CIT (A) has consistently allowed the appeal of the assessee on the protective additions made by the Ld. AO with respect to the receipt of cash by the assessee in the absence of any corroborative evidence found against the assessee during the search operations in the assessee s premises - CIT(A) has directed the Ld. AO to delete the addition of interest payment in cash based on the relief allowed in deleting the addition of cash for Rs. 2.50 Crs. We are of the considered view that the Ld. CIT(A) has rightly deleted the additions in the impugned assessment year also and we do not find any reason to interfere in the decision of the Ld. CIT(A) - Dismiss the appeal of the Revenue.
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2023 (2) TMI 592
Validity of reopening of assessment - non issue and service of notice u/s. 143 (2) - HELD THAT:- Though there is a mention by the AO vide order sheet entry that there is a compliance by the assessee but again the entire assessment record were considered and we (alongwith DR) could not find any such compliance letter / details by the assessee since there is no evidence whatsoever in relation to the issue and service of notice u/s. 143 (2) of the Act. No hesitation to hold the entire assessment null and void for want of notice u/s. 143 (2) of the Act. The appeal is allowed on the additional ground. Since we have quashed the assessment order we do not find it necessary to dwell into the merits of the case. Appeal of the assessee is allowed.
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2023 (2) TMI 591
Penalty u/s. 271(1)(c) - Notice issued for concealment of income or furnishing of any inaccurate particulars of income - wrong claim of depreciation - disallowance of depreciation in the absence of purchase bills - HELD THAT:- As undisputed that the depreciation was claimed by the assessee, as worked out by the auditors. It is also not in question that the assessee company is running in profit from year to year and if depreciation were to be reduced in one year, it would have led to increase in depreciation in the subsequent year. Thus, there is no case of furnishing of inaccurate particulars of income. The claim was a bona fide claim made by the assessee on the working of the auditors. Depreciation on purchase of machinery - As per the assessee, the duplicate bills could not be produced, as the vendor having closed shop, the assessee could not obtain the same, when the original bills stood misplaced. However, as rightly observed by the ld. CIT(A), in the event of the assessee not being able to obtain copies of the bills from its vendor, it ought to have provided the details of such vendor to the Department so as to enable it to ascertain the factual position. The assessee not having done so, an adverse inference was correctly drawn against the assessee and the penalty was rightly levied. However, the penalty ought to have been levied at the minimum rate, i.e., 100% and not @ 111.5%, as has been done. The AO is directed to scale down the levy of penalty on this count accordingly. On the first issue, i.e., wrong claim of depreciation of Rs. 15,31,989/-, the penalty levied is deleted. The penalty levied on the second issue, i.e., of disallowance of depreciation of Rs. 2,09,550/-, is directed to be scaled down from the rate of 111.5% to the rate of 100%. Ordered accordingly.
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2023 (2) TMI 590
Depreciation on the computer software - @ 60% OR 2% treated as intangible asset - HELD THAT:- Hon ble High Court of Madras ,in the case of Computer Age Management Services [ 2019 (7) TMI 1153 - MADRAS HIGH COURT] has categorically held that items listed in Appendix I , prescribing rates of depreciation for different assets under the Act, have to be literally interpreted since the entry is in a taxing statute - since computer software has been defined in Appendix as any computer program recorded on disc, tape or other information storage device, it has to be identified accordingly and the description could not be ignored. Therefore irrespective of the usage of the software, the Hon ble high court held that as long as it fell within the definition provided in the appendix it qualified as computer software for enhanced rate of depreciation of 60%. In the case of Voltamp Transformers Ltd. ( 2013 (3) TMI 804 - ITAT AHMEDABAD] has also categorically held that Income Tax Rules providing for rate of depreciation makes no distinction between the system software and application software while prescribing 60% depreciation thereon. Therefore, the distinction pointed out by the ld.DR that software of the assessee was utility software and such softwares qualify as intangible assets for the purposes of rate of depreciation, we hold is of no relevance. No reason to interfere in the order of the ld.CIT(A) upholding the claim of depreciation at the rate of 60%. The ground of appeal of the Revenue is rejected.
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2023 (2) TMI 584
Special audit u/s 142(2A) - the order u/s 142(2A) was never communicated or even uploaded on the portal - HELD THAT:- We dispose of the present appeal with a direction that the purported order directing special audit u/s 142(2A) will not be given effect to and will be treated as not passed, as it was never communicated to the appellant-assessee - with the consent of the learned counsel for the appellant-assessee, we extend the time for passing the assessment order till 31.12.2023. If the AO desires special audit u/s 142(2A) he can either rely upon the earlier notice or issue a fresh notice. In case the assessing officer relies upon the earlier notice, it will be so indicated and communicated to the appellant-assessee. In either case, hearing as per law will be given. An order u/s 142(2A) if passed, will be communicated to the appellant-assessee, who will be at liberty to challenge the order in accordance with law. If any special audit is directed or ordered to be conducted, will get extended as per the provisions of the 1961 Act.
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2023 (2) TMI 583
Stay of demand - HELD THAT:- AO failed to disclose reasons while rejecting stay application and since the appellate authority also failed to consider the stay application and demanded 20% of the disputed demand, considering this limited issue, we are of the opinion that the Principal Commissioner need to re-consider and pass appropriate order as canvassed by the petitioner, by furnishing reasons. Instead of a remand to consider the application for waiver that would entail further delay, We were invited to decide on such application based on the material placed and the law as discussed above. Only in the peculiar facts of this case and with consent We have agreed. At least 10 % amount must be deposited by the Petitioner. The financial hardships projected by the Petitioner, which is a Government concern must be balanced with the interests of the revenue in public interests. As submitted that petitioner is ready and willing to deposit an amount of ₹30 lacs within a period of 2 weeks. We accept such statement and direct the petitioner to deposit ₹30 lacs with the respondent no.1, within a period of 2 weeks. This is less than 10% of the tax demanded - considering the material placed before us, instead of a remand to consider the waiver application, interests of justice would be suitably served if the Petitioner deposits 10% of the demanded amount. Further, the hearing of the appeal on merits could be expedited. Order - Respondent No.1 is directed to hear the petitioner's appeal on merit on the condition that the petitioner shall deposit an amount of 30 lacs within a period of ₹ 2 weeks from today and the balance to make up 10% of the demanded amount within further two weeks from the date of first deposit.
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2023 (2) TMI 582
Reopening of assessment u/s 147 - order rejecting the objections to reopening - Denial of natural justice - HELD THAT:- Considering all the above circumstances and applying the ratio of the judgment of this Court in Tata Capital Financial Services Limited [ 2022 (2) TMI 1093 - BOMBAY HIGH COURT] and specific directions contained therein to the revenue, we are of the considered opinion that the Assessing Officer has acted in gross violation of the directions in Tata Capital Financial Services Limited [ 2022 (2) TMI 1093 - BOMBAY HIGH COURT] and in contravention of the provisions of Article 14 of the Constitution of India. Consequently, the impugned orders issued under Section 148 of the Act, order rejecting the objections to reopening passed by the Respondent No.2, Assessment order, Notice of demand issued under Section 156 of the Act, and Penalty notice dated 31.03.2022 issued under Section 271(1)(c) of the Act, are quashed and set aside. The matter is now remanded back to the Assessing Officer, who shall provide the Petitioner with the satisfaction note of the Principal Commissioner of Income Tax, granting approval for issuance of Notice under Section 148 of the Act, the appraisal report from DDIT (Inv), and bank statements of M/S Sanyam Gems Pvt. Ltd., the statement of Shri Shripal Vora at Bhavnagar, recorded under Section 131 of the Act, and all other documents and material, which form the basis of the reasons recorded by the Assessing Officer for issuing notice under Section 148 of the Act - Decided in favour of assessee.
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2023 (2) TMI 581
Faceless Assessment Scheme as stipulated in Section 144(B) - no hearing had been given before passing the assessment order - Necessity of issuance of prior show cause notice-cum-draft assessment order before issuing the impugned assessment order - HELD THAT:- The Delhi High Court in case of Interglobe Enterprises Private Limited vs. National Faceless Assessment Centre Delhi and Another [ 2021 (7) TMI 1044 - DELHI HIGH COURT] it had held that Section 144(B)(7) mandatorily provides for issuance of prior show cause notice-cum-draft assessment order before issuing the impugned assessment order. It also provides for an opportunity of personal hearing if requested by the assessee. In absence of prior show cause notice as well as draft assessment order, no hearing had been given before passing the assessment order. The Court held it to be a blatant violation of principles of natural justice as well as mandatory procedure prescribed in Faceless Assessment Scheme as stipulated in Section 144(B) of the Act. In the instant case, the action of the respondent being in clear breach of requisite necessity of availing an opportunity to the petitioner on serving upon it the show cause noticecum- draft assessment order, the assessment order which has been finalized, deserves interference. Jurisdictional issue raised by respondent on the ground that the PAN of the petitioner is at Churu, Rajasthan - A communication is made by the Income Tax Officer, Ward-1, Churu addressed to the Principle Commissioner of Income Tax, Jaipur-2, Rajasthan for transfer of PAN from ITO, Ward-1, Churu to DCIT, Circle-3(3), Pratyaksha Kar Bhavan, Ambawadi, Ahmedabad, wherein it is stated that request letter has been received from the assessee firm for transfer of its PAN ABFFA6446E from ITO, Ward-1, Churu to DCIT, Circle-3(3), Pratyaksha Kar Bhavan, Ambawadi, Ahmedabad. The officer further has stated that he has no objection to such transfer. The assessee firm was incorporated on 06.07.2016 and as per the record, neither the assessee firm nor any of the partners of the assessee firm has any link with the territorial jurisdiction of Ward-1, Churu. Request was made to pass necessary order under Section 127 of the Act urging for appropriate territorial jurisdiction of the assessee i.e. DCIT, Circle-3(3), Pratyaksha Kar Bhavan, Ambawadi, Ahmedabad. Not only the petitioner is residing in Ahmedabad, but, he continues to do its business and operates from the State of Gujarat. For whatever reasons its PAN ABFFA6446E is with ITO, Ward-1 Churu, he already has made a request in the month of November, 2021 for the transfer with a further request that necessary directions to be issued for long term effect of this. As emphatically urged that there is no way in which the petitioner has contributed to the matter going on before the ITO, Ward-1, Churu. He has no connection with Rajasthan and therefore, he has made an application before the concerned authority. This is not only a unilateral request which has come from the petitioner, but, the Income Tax Officer looking after this aspect has also made a request for such transfer. Undoubtedly, the part of cause of action has arisen in Gujarat. The Supreme Court s decision in case of Rajendran Chingaravelu vs. R.K.Mishra, Additional Commissioner of Income-tax [ 2009 (11) TMI 341 - SUPREME COURT] was considering the maintainability of the petition under Article 226 of the Constitution of India to hold that whether even if a small fraction of cause of action arises within the jurisdiction of the State, the same would accrue within the territory of the State and the State would have a jurisdiction. Even the smallest part of cause of action when arises within the jurisdiction of this Court, it would have a jurisdiction to decide the matter and therefore also, contention raised by the respondent will have no bearing. Petition is accordingly ALLOWED quashing and setting aside the order passed by the respondent under Section 143(3) of the Act assessing total income of the petitioner with all consequential proceedings.
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2023 (2) TMI 580
Reopening of assessment u/s 147 - proposal to assess the total income of the deceased assessee - notice under section 143 issued against a dead person - HELD THAT:- Similar issue had come up before this Court in Income-tax officer vs. Bhupendra Bhikhalal Desai, [ 2021 (9) TMI 431 - SC ORDER] where the notice under section 143 issued against a dead person is held to be unenforceable in law. The Revenue in such case cannot contend that it had no knowledge about the death of the assessee and, therefore, they are entitlement to plead that the notice is not defective.- Decided in favour of assesseee.
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2023 (2) TMI 579
Revision u/s 263 by CIT - annual letting value of flats/bungalows is income chargeable to tax as `Income from house property - HELD THAT:- A close scrutiny of the provision inducted by the Finance Act, 2017, transpires that where a property is held as stock-in-trade which is not let out during the year, its annual value for a period of one year, which was later enhanced by the Finance Act, 2019 to two years, from the end of the financial year in which the completion certificate is received, shall be taken as Nil. The amendment has been carried out w.e.f. 1.4.2018 and the Memorandum explaining the provisions of the Finance Bill also clearly provides that this amendment will take effect from 01.04.2018 and will, accordingly apply in relation to the assessment year 2018-19 and subsequent years. Obviously, it is a prospective amendment. The effect of this amendment is that stock-in-trade of buildings etc. shall be considered for computation of annual value under the head 'Income from house property' after one/two years from the end of the financial year in which the certificate of completion of construction of the property is obtained on and from the A.Y. 2018-19. Instantly, we are concerned with the assessment year 2014-15. As such, the amendment cannot apply to the year under consideration. In the absence of the applicability of such an amendment, no income can be said to have accrued to the assessee from unsold flats available as stock-in-trade as per the discussion made hereinabove. We, therefore, vacate the impugned order on this score having the effect that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue requiring any revision u/s 263 of the Act on this count. Disallowance u/s 80IB(10)(f) - The Hon ble Bombay High Court in M/s. Kamat Constructions Pvt. Ltd. vs. ACIT [ 2020 (12) TMI 90 - BOMBAY HIGH COURT ] has approved the granting of deduction u/s 80IB(10) on proportionate basis. In that view of the matter, the question of denial of deduction u/s 80IB(10) in full on account of violation of certain conditions qua a part of deduction remains no more res integra. We, therefore, hold that the ld. CIT was not justified in revising the order directing the withdrawal of full amount of deduction u/s 80IB(10) instead of proportionate disallowance, more so, when the proportionate disallowance pertained to an earlier year and the same was also made. Rental income earned by the assessee was shown as income chargeable under the head Profits and gains of business or profession , which should have been Income from house property - While discussing the first issue about the notional rent on unsold units lying with the assessee as stock-in-trade, we have abundantly seen that any income anent to stock in trade can be considered only under the head Profits and gains of business or profession unless expressly provided otherwise. As such, the view point of the ld. CIT in opining that such income should be considered as house property cannot be sustained. Assessee made a consolidated Profit loss account and also separate Profit loss account of 80IB(10) unit. No deduction of interest was claimed in the eligible unit, though such deduction was there in consolidated Profit Loss account. This shows that such deduction was claimed only against the income of non-eligible units. The assessee furnished copious details before the ld. CIT to demonstrate that the loan of Rs.2.50 crore was taken only against Atharwa Vatika project on which the interest of Rs.13.99 lacs was paid and debited to the Profit loss account of this project only. CIT did not find anything amiss in such averments and details, but, still went ahead with his own view. As the interest pertained to Atharwa Vatika project [non 80IB(10) unit], there was no rationale in putting such interest fully or partly- in Profit loss account of the eligible unit. We, therefore, hold that the ld. CIT was not justified on this count also. Assessee appeal is allowed.
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2023 (2) TMI 578
Penalty u/s 271(1)(c) - assessee by filing incorrect computation of income on MAT u/s 115JB - HELD THAT:- As decided by CIT-A AO has not mentioned either in notice u/s 271(l)(c) or in assessment order as to whether it is a case of concealment of income or furnishing of inaccurate particulars of income. In view of the above findings of CIT vs. Manjunatha Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] and M/s Sahara India Life Insurance Co. Ltd [ 2019 (8) TMI 409 - DELHI HIGH COURT] the penalty order is not sustainable in the eyes of the law - Appeal of the Revenue is dismissed.
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2023 (2) TMI 577
Revision u/s 263 - deposit of cash and utilization of cash towards purchase of immovable property was never examined in the scrutiny assessment - HELD THAT:- Wealth tax returns were not filed by assessee for the relevant assessment years 2014-15 and 2015-16 despite the fact that the AO issued reopening notice u/s.16 of the Wealth Tax Act. Further, the assessments were completed only on 11.03.2022 just before issuance of notice dated 24.03.2021 which is again after completion of assessment by the AO which is dated 10.12.2019 and even after issuance of showcause notice by the PCIT which is dated 22.02.2022. It means that the wealth tax assessments h ave no value to consider the explanation of the assessee. AO has neither examined the source of cash deposit and cash payment towards purchase of immovable property and in the absence of any enquiry conducted by the AO in this regard, the assessment order is rightly been held to be erroneous and prejudicial to the interest of Revenue. No infirmity in the order of PCIT revising the assessment - Decided against assessee.
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2023 (2) TMI 576
Reopening of assessment u/s 147 - cash deposit in bank - HELD THAT:- Cash deposits in the bank account alone could not lead to formation of the belief of escapement of income by the AO. It is settled law that for valid assumption of jurisdiction to reopen the case u/s 147 there has to be belief of the AO of escapement of income based on information with him. The information of cash deposit in bank can at the most lead to suspicion of income having escaped assessment, the deposits not necessarily being in the nature of income. This suspicion can lead to a belief only when further inquiry is conducted by the AO to determine the nature of cash deposits and based on the results of the inquiry, only a belief of escapementof income can be formed. Noting the fact that the actual cash deposits in the bank accounts of the assessee this amount of cash deposits, in no case, could have resulted in escapement of income at all, being well below taxable limit even if all the cash deposits were found to be in the nature of income not returned to tax by the assessee and the assessee as per facts noted by the AO had no other income, except that held by the AO in the present reassessment proceedings. Jurisdiction assumed in the present case by the AO to reopen the case of the assessee u/s 147 of the Act was without any formation of belief of escapement of which, based on incorrect facts and thus not in accordance with law. The assessment order, therefore, so framed is held to be invalid, and accordingly set aside. Appeal of the assessee is allowed.
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2023 (2) TMI 575
Unaccounted income - unexplained investment - HELD THAT:- Barter Group had floated several companies so as to receive the share capital in these companies and providing accommodation entries to those beneficiaries who wanted their unaccounted money has to be brought in their books through accommodation entries. In fact, the names of 13 companies reveal in respect of providing the accommodation entries in the garb of unsecured loans share application money. CIT(A) observed that the appellant company made investment in the company name M/s. Subodhsagar Share Services Pvt. Ltd. which collected huge sum from various companies including the assessee company. Since the assessee company did not provide any satisfactory explanation for the investment made in the form of share application money the AO has rightly made addition. The assessee has only given the details of M/s. Subodhsagar Share Services Pvt. Ltd. that also in the tabular form and not exactly how the funds owned by the assessee. Therefore, the CIT(A) was right in confirm the addition. Hence, appeal of the assessee is dismissed.
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2023 (2) TMI 574
Disallowance of interest expenditure u/s 14A r.w. Rule 8D - disallowance under Rule 8D(2)(ii) of the Income-tax Rules with respect to interest - HELD THAT:- CIT(A) while deciding the issue in favour of the assessee has given a finding that on the loan that have been borrowed by the assessee for working capital purpose, Banks had imposed stringent End- Use conditions which prohibited the use of funds for investments in shares or other companies or capital market. The End-Use of the funds were monitored by considering the auditors certificate for End-Use compliance that were filed by the assessee. He has given a finding that no penal interest has been charged by the bank to the assessee or the loans have been recalled for violating the conditions of diverting the funds for making investments in shares or capital markets. He has thereafter given a finding that the interest bearing funds borrowed by the assessee have not been utilized for making the investments. Hon ble Delhi High Court [ 2022 (8) TMI 1344 - DELHI HIGH COURT] had upheld the order of Tribunal and had held that no substantial question of law arise for consideration. - Decided against revenue. Disallowance under Rule 8D(2)(iii) - AO has considered the average value of the entire investments for working out the disallowance @ 0.5% of the average investments - HELD THAT:- We find that Hon ble Delhi High Court in the case of Delhi International Airport (P.) Ltd. [ 2022 (10) TMI 300 - DELHI HIGH COURT] has held that Section 14A of the Act envisages that there should be actual receipt of income and hence Section 14A of the Act will not apply where no exempt income is received or receivable during the relevant previous year. Before us, it is assessee s contention that the AO has considered the average value of the entire investments (which included investments from which no dividend has been received by the assessee) for working out of the disallowance under Rule 8D(2)(iii) of the Income-tax Rules - we find force in the arguments of Learned AR. We, therefore, restore the issue back to the file of AO and direct him to work out the disallowance under Rule 8D(2)(iii) of the Income-tax Rules on the basis of investments, which have yielded exempt income and in accordance with law. Needless to state that AO shall grant adequate opportunity of hearing to the assessee and assessee is also directed to promptly produce relevant document as called for by authorities. Thus the ground of the assessee is allowed for statistical purposes.
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2023 (2) TMI 573
Addition u/s 69A r.w.s. 115BBE - unexplained jewellery fround in search proceddings - Whether seized jewellery should be assessed as income from business instead of assessing as income u/s 69A? - HELD THAT:- As gone through paper book containing computation of income wherein the amount has been explicitly shown as surrendered for tax in pursuance to search . Further, while answering to the Question posed to the assessee by the ADIT(Inv.), Unit- 8(2), New Delhi during the statement recorded u/s 131(1) - The assessee confirmed that the amount has been undisclosed and surrendered. Subsequently, the assessee filed return of income. There was no documents submitted by the assessee to prove that the jewellery has been purchased out of this income. Even if, it is so, the generation of undisclosed income and application of such income has been unraveled. It is a fact on record that the income earned has been undisclosed and has been unearthed only due to the action u/s 132 and the jewellery is only application of such undisclosed income. Hence, the provisions of Section 115BBE(1)(a) that where the total income of an assessee, includes any income referred to in section 69A and reflected in the return of income furnished under section 139, are evidently applicable in the instant case. Appeal of the assessee is dismissed.
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2023 (2) TMI 572
Deduction u/s 80P - interest income earned from loans given to associate members - assessee is not entitled for deduction towards interest income earned from loans given to associate members and also interest income earned from deposits with District Central Co-operative Bank - HELD THAT:- We find that the Tribunal had considered an identical issue in assessee s own case for assessment year 2017-18 [ 2022 (7) TMI 1379 - ITAT CHENNAI] where under identical set of facts, the Tribunal by following the decision of Hon ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited vs. CIT, Calicut [ 2021 (1) TMI 488 - SUPREME COURT] held that the assessee is entitled for deduction towards interest income earned from loans given to the associate members u/s. 80P(2)(a)(i) of the Act. We are of the considered view that the AO is erred in disallowing deduction claimed u/s. 80P(2)(a)(i) of the Act, in respect of interest income earned from loans given to associate members and thus, we direct the AO to allow deduction as claimed by the assessee. Interest income earned from deposits made with other Co-operative Banks including District Central Cooperative Bank - In this view of the matter and consistent with the view taken by the co-ordinate bench in assessee s own case for assessment year 2017-18 [ 2022 (7) TMI 1379 - ITAT CHENNAI] we set aside the issue of interest income earned from deposits made with other Co-operative Banks u/s. 80P(2)(d) of the Act, to the file of the AO and direct the AO to re-examine the claim of the assessee in light of directions given by the Tribunal in the order for the assessment year 2017-18 and decide the issue for the impugned assessment year. Appeal filed by the assessee is allowed for statistical purposes.
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2023 (2) TMI 571
Reopning of assessment u/s 147 - unexplained cash credit u/s 68 - Bogus LTCG -CIT(A) upheld the initiation of reassessment proceedings stating that AO has followed the due procedure for reopening the assessment AND Appellant has taken bogus long term capital gain accommodation entry in order to plough back his unaccounted income in his regular books - HELD THAT:- CIT(A) after considering the submissions of the assessee and findings of the AO has dismissed the appeal filed by the assessee both on jurisdiction as well as on merits of the case. In the absence of any contradictory material being available on record, we are of the considered view that the impugned order passed by the learned CIT(A) requires no interference and, therefore, is upheld. Accordingly, grounds raised by the assessee in this appeal are dismissed.
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2023 (2) TMI 570
Levying penalty u/s 271(1)(c) - Defective notice u/s 274 - HELD THAT:- The statutory notices did not provide the ground on which the penalty proceeding was initiated whether the penalty was sought to be levied for furnishing inaccurate particulars of income or for concealment of income. In the case Mohd. Farhan A Shaikh Vs. DCIT [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] the full Bench of the Hon ble Bombay High Court has held that a mere defect in the notice - not striking off the irrelevant matter, would vitiate the penalty proceedings. Thus the penalty proceedings stand vitiated on account of defect in the penalty notices, issued under Section 271(1)(c) read with Section 274 of the Act. - Decided in favour of assessee.
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2023 (2) TMI 569
Addition on account of advance against the properties - HELD THAT:- We find that the Ld. CIT(A) after considering the submission of assessee held that claim of assessee do not inspire confidence as no explanation was given as to why all properties were offered for sale and advances were received in cash. The assessee has no explanation about such fact as to why all the properties were put on sale. Before us, besides repeating the similar stand, which was submitted before AO, assessee submitted that the said advances were repaid in next/ subsequent year. We find that no such pleas were taken before assessing officer that the advances were returned either on 28.02.2013, 23.03.2013 or 28.03.2013 after withdrawals from Federal Bank that such advances were repaid in cash. Assessee has improved his explanation step-by-step and instead of explaining facts in a proper manner at respective stage, took a contradictory stand i.e., in the balance-sheet, they have shown unsecured, on show cause notice by AO took the plea that advances, which was not proved the advances against all the commercial and residential properties. CIT(A) the assessee submitted that complete evidences were produced. Now before us, assessee went one step ahead by taking plea that such advances were refunded in next assessment year. No reason to interfere with the order of Ld. CIT(A). The ratio of case laws relied by for the assessee are not applicable on the facts of the present case before hand as the assessee has taken different stand before different authorities and that too without discharging his onus during the assessment proceedings. Moreover, entire transactions were shown in cash. This ground No.1 of assessee is dismissed. Unexplained transaction of loan - addition of loan transaction from three persons as assessee failed to prove the identity, creditworthiness and genuineness of such transactions by furnish required details - HELD THAT:- On perusal of detailed furnished by assessee we find that assessee has received loan from Meenaben on 02.09.2011 and 08.09.2011 by way of transfer through banking channel. Similarly, loan from Shivabhai Rajani was received by assessee on 17.02.2012 and loan was repaid to Meena V Andani on 23.05.2015 and 25.03.2015 through banking channel RTGS process. The relevant entry in the bank statement of assessee of Federal Bank is available filed by the assessee. We find that repaid of loan had been accepted by Revenue in subsequent assessment year, so no addition loan in the year under consideration can be added as has been held by Hon'ble jurisdictional High Court in the case of CIT vs. Ayachi Chandrasekhar Narsangji [ 2013 (12) TMI 372 - GUJARAT HIGH COURT ] AO held that no details were furnished to substantiate the transaction of loan. However, before Ld. CIT(A) the assessee furnished detailed of loan transaction as has been recorded - However, no investigation of assessee carried out either by CIT(A) or through office of AO. Therefore, in absence of any adverse evidence, the disallowance of loan when the assessee has discharged his primary onus in furnishing requisites details of lender and assessee was not justified. Hence, we direct the AO to delete the addition of Rs.5.00 lakh and Rs.3.00 lakh respectively on account of loan received from Meena V. Andani and Shivabhai Rajani. We order accordingly. These grounds No.3 4 of assessee is allowed. Disallowance of various expenses - assessee submits that assessee claimed various expenses like salary of staff, depreciation on motor car, two wheelers, electric consumption, telephone bill, software expenses, insurance expenses and other miscellaneous expenses - HELD THAT:- If assessee has not proved entire expenses beyond doubt, nor the Assessing Officer has investigated or examined whichever item of the expenses incurred is genuine or not, 100% of disallowance of expenses is not justified. Therefore, keeping in view the nature of assessees business as has been accepted by the lower authorities, we find that disallowance @ 25% of expenses would meet to ends of justice and possibility of revenue leakage. Therefore, we deem it appropriate to restrict the disallowance @ 25% Rs.6,36,925/- with a rider that same shall not be treated as a precedent in any other assessment year as in each year the assessee has to substantiate the expense.
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2023 (2) TMI 568
TP Adjustment - Manufacturing activity - Internal or External TNMM - HELD THAT:- We are confronted with a situation in which not only there are huge volume differences inasmuch as sales made to AEs are less than 5% of total sales, the geographical differences also largely exist in the pattern of sales made to AEs and non-AEs. These factors cause a serious threat to the application of the internal TNMM. Under such circumstances, we hold that there can be no comparison between the price charged or profit realized by the assessee in domestic market from non-AEs and in the international markets from its AEs, thereby frustrating the application of the internal TNMM. In the hue of such significant differences, we are satisfied the internal TNMM is not the most appropriate method to be applied. We therefore, hold that it is the external TNMM which should prevail for determining the ALP of the international transaction in the manufacturing activity. Capacity utilization adjustment - TPO in the application of the external TNMM chose certain external comparables and determined the arm s length margin at 5.11% as against the assessee s OP to OC under the AE segment - HELD THAT:- In principle, there can be no hindrance in granting capacity utilization adjustment, if all the necessary particulars are made available by the assessee. In the extant case, the assessee s contention for granting the capacity utilization adjustment in the profit margin of the comparables has remained to be given effect to notwithstanding the fact that the TPO agreed for its grant and the ld. CIT(A) not going into its nuances for having allowed relief by upholding the application of the internal TNMM. As we have overturned the impugned order in applying the internal TNMM and directed to apply the external TNMM, the assessee s claim for capacity utilization adjustment will reoccur and require adjudication. We, therefore, set-aside the impugned order on this score and send the matter to the file of the AO/TPO for recomputing the ALP of the Manufacturing activity afresh in above terms. Needless to say, the assessee will be allowed a reasonable opportunity of hearing. The ground raised by the Revenue urging to apply the external TNMM is thus allowed and the ground of the assessee in its cross objection for granting capacity utilization adjustment in case of external TNMM is also accepted for statistical purposes. TP adjustment in respect of Corporate Guarantee - The credit against the guarantee fee is directed to be restricted only to the extent of Rs.1.21 crore and the excess credit allowed for Rs.2.43 crore is directed to be reduced after verification. Needless to say, the assessee will be allowed an opportunity of hearing while redetermining the amount of guarantee fee in line with the above observations and those given by the Tribunal for earlier years. Thus, the Departmental ground against exclusion of performance guarantee is allowed; and for reducing the rate of guarantee fee from 2% applied by the TPO to 1.75% by the CIT(A) is dismissed. The assessee s ground against the application of corporate guarantee fee at 1.75% by the ld. CIT(A) is partly allowed in above terms. Assessment was framed u/s.144 - deletion of addition by the ld. CIT(A) at 10% of expenses made by the AO - HELD THAT:- Assessee did not furnish necessary details during the course of assessment proceedings which led to the passing of the assessment order u/s.144. In such circumstances, the AO had no option but to frame the assessment to the best of his judgment. CIT(A) deleted the addition by considering that no such addition was made in the preceding or succeeding year. He, however, overlooked the fact that the assessee did not furnish any details of the expenses claimed in the Profit and loss account. In such a situation, the view point of the ld. CIT(A) cannot be countenanced. AR submitted that the assessee has got all the necessary details in support of the expenses and the same can be produced before the AO, if an opportunity is given. Considering the totality of the facts and circumstances of the case, we set-aside the impugned order on this score and remit the matter to the file of the AO for deciding disallowance of expenses as per law after allowing reasonable opportunity of hearing to the assessee.
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2023 (2) TMI 567
Rectification of mistake u/s 154 - Levy of late filing fees u/s 234E - Intimation u/s 200A - HELD THAT:- As decided in assessee own case [ 2023 (2) TMI 433 - ITAT PATNA] and [ 2023 (2) TMI 471 - ITAT PATNA] merely because, the Assessing Officer while accepting the request of the assessee in giving details of the up-to-date due late filing fee along with interest, that, in any way, cannot be said to be the rectification or amendment of the original order of 2015, nor any prejudiced can be said to have been caused to the assessee. Merely, giving the statement of the exact amount due to the assessee, that too, at the request of the assessee, is just the calculation provided by the Assessing Officer and the assessee, in this respect, can agitate only if the assessee is aggrieved by the aforesaid calculation given by the Assessing Officer. The assessee in the process of requesting and taking calculation of interest due cannot be said to have acquired any cause of action or right to challenge the original order dated 27.04.2015 passed u/s 200A of the Act. The assessee has not pointed out as to what mistake has occurred in the order passed u/s 154 of the Act as compared to the original order dated 27.04.2015 passed u/s 200A of the Act. In fact, no mistake apparent on record, has been alleged in the said order by the assessee itself in its correction statement/request. If the assessee is aggrieved by an order passed u/s 154 of the Act he will be entitled to file appeal against the said order. However, the assessee must bring out from the record as to what prejudice has been caused to the assessee in the order passed u/s 154 of the Act when compared with the original order which has been amended or rectified. Neither any rectification has been done by the Assessing Officer to the original order nor any cause of action has accrued to the assessee by getting up-to-date calculation of the demand. In view of this, there is no merit in the appeal of the assessee.
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2023 (2) TMI 566
Disallowance u/s 14A r.w.r. 8D(2)(iii) - exempt income comprising off dividends from mutual funds and interest on tax free bonds - HELD THAT:- As relying on case of Maxopp Investment Ltd [ 2018 (3) TMI 805 - SUPREME COURT] no disallowance can be made u/s 14A read with Rule 8D of the IT Rules, where the A.O. failed to record dissatisfaction of correctness of the claim of the assessee. Therefore the disallowance made u/s 14A r.w.r 8D(2)(iii) is deleted. This ground is allowed in favour of the assessee. Disallowance of subscription charges paid to Forester Research and Gartner - Assessee incurred expenditure on subscription charges which was paid to two non-resident entities - HELD THAT:- As respectfully following the decision of the coordinate bench of the Tribunal [ 2021 (9) TMI 1473 - KARNATAKA HIGH COURT] this issue is remanded to the ld. AO to verify the claim as per the decision of Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] . Accordingly, these grounds of appeal are allowed for statistical purposes. TDS u/s 194J - Disallowance of software expenses for not deducting tax at source - HELD THAT:- We notice that this issue is remanded to the ld. AO to verify the claim as per the decision of Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] in assessee s own case for AY 2012-13 [ 2022 (11) TMI 1317 - ITAT BANGALORE] - Respectfully following the decision of the coordinate bench we remit the issue for the year under consideration also with a similar direction. Accordingly, these grounds of appeal are allowed for statistical purposes. Disallowance of software expenses as capital expenditure - HELD THAT:- We notice that in assessee s own for AY 2012-13 [ 2022 (11) TMI 1317 - ITAT BANGALORE] has remanded the same issue to the Ld.AO to verify the claim in the light of the evidences/documents filed and respectfully following the said decision we remit the issue for the year under consideration also to the AO with similar direction. The AO is also directed to keep in mind the ratio laid down in the case of Toyota Kirloskar Motors (P) Ltd [ 2013 (2) TMI 108 - KARNATAKA HIGH COURT] and IBM India Ltd [ 2013 (10) TMI 1225 - KARNATAKA HIGH COURT] while deciding revenue or capital nature of the software spends. This ground is accordingly allowed for statistical purposes. Disallowance of brand building expenditure - HELD THAT:- Considering that there is no change in the facts, circumstances and nature of brand building expenses incurred during the year under consideration as compared to the earlier years, we respectfully follow the decision of the coordinate bench and hold that the brand building expenditure incurred during the year should be allowed and the addition is deleted accordingly. This ground is allowed. Disallowance of commission paid to non-residents - Assessee generates substantial part of its business from overseas clients mainly from the North American, European and Asia Pacific markets - HELD THAT:- As decided in assessee own case AY 2012-13 [ 2022 (11) TMI 1317 - ITAT BANGALORE] remand this issue to the Ld.AO to verify the above submissions. There is no quarrel that the benefit available to assessee as per DTAA must be granted as per the ratio of Hon ble Supreme Court in case of Engineering Analysis [ 2021 (3) TMI 138 - SUPREME COURT] AO shall verify and consider the claim in accordance with law. Deduction u/s 10AA in respect of onsite activities - HELD THAT:- We remit the issue back to the AO for verification of details and consider the claim of the assessee in accordance with law. The AO is directed to keep in mind the ratio laid down by the jurisdictional High Court in the case of Mphasis [ 2015 (10) TMI 2062 - KARNATAKA HIGH COURT] while deciding the issue on merits after giving a reasonable opportunity of being heard to the assessee. Deduction u/s 80JJAA - deduction claimed pertains to the 3rd year claim in respect of services of employees who joined in financial year 2012-13 - HELD THAT:- We notice that the coordinate bench of the Tribunal in assessee s own case for AY 2012-13 [ 2022 (11) TMI 1317 - ITAT BANGALORE] has followed the decision of Sap Labs [ 2021 (11) TMI 1129 - ITAT BANGALORE] and has remitted the issue back to the AO to consider the claim in accordance with the observations and principles laid down by the Hon ble Tribunal in the said decision. Respectfully following the decision in assessee s own case, we remit the issue for the year under consideration also back to the AO to examine the issue afresh. This ground is allowed for statistical purposes. Disallowance of payments made to overseas subsidiaries - Assessee made various payments to its associated enterprises and two other vendors which are non-associated enterprises outside India - HELD THAT:- We are of the considered view that the assessee cannot be denied the additional deduction claimed during the course of assessment towards payments made to overseas entities on the ground that the same is not made by filing revised return. Accordingly the AO is directed to consider these claims and decide the allowability of the claim on merits. Deduction for state taxes paid outside India - HELD THAT:- In assessee s case it is noticed that the lower authorities have looked into the issue only from section 90/91 perspective and has not discussed anything with regard to the allowability u/s.37. This fact has been admitted by the CIT(A) in para 18.2 of the appellate order. We are therefore of the considered view that this issue should be remitted back to the AO for fresh examination of facts and the AO is directed to keep in mind the ratio laid down in the case of Reliance Infrastructure Ltd [ 2016 (12) TMI 1293 - BOMBAY HIGH COURT] which is followed in the decision of the coordinate bench in the case of Onmobile [ 2022 (8) TMI 1343 - ITAT BANGALORE] - The assessee is directed to provide necessary information to the AO and cooperate with the proceedings. It is ordered accordingly. This ground is allowed in favour of the assessee for statistical purposes. Deduction in respect of donation made under Corporate Social Responsibility (CSR) - HELD THAT:- In assessee s case the reason for denying the deduction u/s.80G is that the deduction is not available for donations which are part of CSR expenditure. CIT(A) while upholding the order of the AO stated that the CSR spend is not voluntary and therefore cannot be treated as donation. In our view, the assessee s case is therefore covered by the decision of the coordinate bench in the case of Goldman Sachs Services Pvt. Ltd [ 2020 (11) TMI 464 - ITAT BANGALORE] and respectfully following the same we remit this issue back to the AO for verification of CSR spends in the light of the said decision. The AO is also directed to consider the ratio laid down by the coordinate bench in the case of Allegis Services (India) (P.) Ltd (supra) and allow a proper opportunity of being heard to the assessee. Disallowance of deduction under section 80G in respect of other donations - HELD THAT:- We notice that the donations made to the above organisations by the assessee are not part of CSR expenditure and the lower authorities have not verified the details pertaining to these donations separately. We also noticed that the lower authorities have considered these donations along with CSR spend while disallowing deduction u/s.80G which according to the ld AR needs to examined separately for the purpose of allowability. Accordingly we remit this issue back to the AO to verify these donations in the light of the provisions of sections 80G and decide the allowability of the deduction accordingly. This ground is allowed for statistical purposes. Deduction u/s 10AA in respect of interest income on GLES deposits with LIC, receipts from sale of scrap, interest income from loans given to employees and incentives from airlines - HELD THAT:- We are of the considered view that GLES deposits with LIC, receipts from sale of scrap, interest income from loans given to employees are covered by the decision of the Hon ble High Court in the case of Hewlett Packard Global Soft Ltd [ 2017 (11) TMI 205 - KARNATAKA HIGH COURT] and assessee s own case for AY 2007-08 to 2011-12 [ 2022 (11) TMI 1316 - ITAT BANGALORE] Accordingly we hold that these income should be included for the purpose of computing the profits eligible for deduction u/s.10AA. With respect to incentives from airlines, we notice that the same is received from few airline companies such as Lufthansa, Qatar Airways, Indigo, Spicejet etc., as incentive amount for travelling of employees, officers etc., regularly. In our considered view, the income is not directly arising out of the business of the assessee and do not have any nexus to the business of the assessee. The income is arising for the reason that some of the employees are frequently travelling in these airlines and the income thus earned is incidental to the business. Therefore applying the ratio laid down by the Hon ble Supreme Court in the case of Sterling Food [ 1999 (4) TMI 1 - SUPREME COURT] we hold that incentives received from airlines are not eligible for deduction u/s.10AA. Foreign tax credit - HELD THAT:- We remit the issue back to the AO with a direction to keep in mind the above decision of the coordinate Assessee s own case for AY 2005-06 and AY 2006-07 while considering the issue from allowability u/s.90/91 perspective. The AO is further directed to keep in mind the directions given in the earlier part of this order with regard to the allowability u/s.37 of the foreign tax credit and the additional foreign tax claimed by assessee in respect of state taxes paid. Disallowance of payments made to US authorities - HELD THAT:- Admittedly, the impugned payment is towards an offence of a foreign law and not any laws in India. The Co-ordinate Bench of the Tribunal in the case of Mylan Laboratories Ltd. [ 2019 (11) TMI 803 - ITAT HYDERABAD] had held that the amount disallowed under Explanation 1 to section 37(1) of the I.T.Act are of those for contravention of law in force in India and not in any foreign country. ITAT Hyderabad Bench in Mylan Laboratories Ltd. [ 2019 (11) TMI 803 - ITAT HYDERABAD] has held that amounts to be disallowed under Explanation 1 to section 37(1) of the Act are for those for contravention of laws in force in India and not of any foreign country. Settlement amount paid to US authorities should be allowed as deduction for the relevant assessment year. Disallowance u/s 32AC - investment in new plant and machinery - HELD THAT:- The predominant activity of the assessee is software development. Accepting the contentions of the learned AR will lead to absurd result, wherein even a small revenue of 0.1% from the activity of manufacturing or production of article or thing, will lead to a conclusion that the entire investment in plant and machinery from a non-eligible business will be eligible for investment allowance under section 32AC of I.T.Act. AR had submitted that the prescribed authority i.e., DSIR had granted approval for deduction u/s. 35(2AB) of the I.T. Act. Section 35(2AB) deals with weighted deduction in respect of expenditure incurred on scientific research on in-house research and development facility. The said emphasis is on expenditure incurred on scientific research. Moreover, the approval given by DSIR is section specific i.e., section 35 of the I.T. Act. However, looking at the background of introduction of section 32AC, the definition of the term manufacture u/s. 2(29BA) of I.T. Act, we are of the firm view that benefit deduction is available to only manufacturing sector and not the service sector. For the aforesaid reasoning and judicial pronouncements cited supra, we hold that the assessee is not eligible for deduction u/s. 32AC. Deduction u/s. 35(2AB) - HELD THAT:- In assessee s own case, the expenditure incurred by the assessee with respect to expenditure incurred during financial year 2013-14 i.e. prior to 01.07.2016. Therefore respectfully following the decision of the Coordinate Bench in case of Mahindra Electric Mobility Ltd. [ 2019 (1) TMI 20 - ITAT BANGALORE] , we held that the entire expenditure incurred by the assessee with respect to R D facility, is eligible for deduction u/s. 35(2AB). Accordingly, the disallowance made by the assessing officer is deleted.
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2023 (2) TMI 565
Short Term capital Gains - premium received by assessee for transferring Redeemable Cumulative Convertible Preference Share and Fully Compulsory Convertible Preference Shares to equity shares - CIT Allowed the appeal filed by the assessee on this issue and held that the transfer in respect of preference shares is in the hand of the shareholder - HELD THAT:- Redemption of preference shares will result in transfer within the meaning of section 2(47) of the Act was held to be in the hands of the shareholder, which in the present case is M/s Satguru Constructions. In Anarkali Sarabhai [ 1997 (1) TMI 5 - SUPREME COURT] upheld the findings of the Hon ble Gujarat High Court[ 1982 (6) TMI 50 - GUJARAT HIGH COURT] Further, the aforesaid decision of the Hon ble Gujarat High Court was followed in Kartikeya V. Sarabhai vs CIT [ 1997 (9) TMI 2 - SUPREME COURT] which was affirmed by the Hon ble Supreme Court in Kartikeya V. Sarabhai vs CIT [ 1997 (9) TMI 2 - SUPREME COURT] relied upon by the learned DR. In the present case, it is to be appreciated that the conversion of preference shares into equity shares is in the hands of the shareholder, i.e. M/s Satguru Constructions. Thus, gain, if any, arising from such a conversion will only be taxable in the hands of the shareholder. Therefore, in view of the above, we find no infirmity in the findings of the learned CIT(A) on this issue. As a result, ground No. 1 raised by the Revenue is dismissed. Addition on account of unrealised foreign exchange gain - HELD THAT:- From the perusal of the financial statement of the assessee, forming part of the paper book, we find that during the year, the assessee has only accounted for gain arising from foreign exchange fluctuation. Finding of the AO that loss on foreign exchange valuation was claimed as a deduction is contrary to the material available on record. Further, as per the provisions of section 43A of the Act, as amended by Finance Act 2002, w.e.f. 01/04/2003, the actual payment of the decreased /enhanced liability, due to a change in the rate of exchange subsequent to the acquisition of the asset in foreign currency, is a condition precedent for making adjustment in the cost of the fixed asset. Since the foreign exchange fluctuation gain, in the present case, is only due to the reinstatement of the accounts at the end of the year by considering the year-end rate of exchange, therefore, the same can neither be considered for computing the cost of the fixed assets for which loan was availed in foreign currency, nor any question arises for considering the said gain as income of the assessee for the year under consideration. Therefore, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue deleting the addition made by the AO. As a result, ground No. 2 raised in Revenue s appeal is dismissed.
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2023 (2) TMI 564
Additions of Income of other person u/s 60 63(b) - transfer of income without transfer of corresponding asset by the assessee - HELD THAT:- Nexus between two independent transaction i.e. reduction of share capital of TGSPL thereby wiping out the entire equity share holding into TGSPL and issue of equity shares by TGSPL by conversion of FCDs allotted to Serco International SARC. In the above two transactions, in our opinion there is no generation of income that could in any manner be transferred to any other person. Hence, application of section 60 of the Act in the present case fails at the first step itself. Reduction in share capital and share premium of TGSPL and conversion of FCDs into equity shares by TGSPL are two independent events. Undisputedly, with reduction in share capital and share premium the equity shares held by assessee in TGSPL have been wiped out. We fail to comprehend as to how said reduction in share capital and share premium results in transfer of profit by the assessee to Serco International SARL, to whom equity shares have been allotted after conversion of fully convertible Debentures. As is evident from records, FCDs were issued by TGSPL to Serco International SARL much prior to reduction in share capital. Since, there is no generation of income there can be no question of transfer of income to any other person. AO and the CIT(A) have erred in invoking the provisions of section 60 of the Act for making addition - Consequently, the impugned order is liable to be set aside on this ground alone. Assessee appeal allowed.
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2023 (2) TMI 563
Addition u/s 68 - Assessee received premium of Rs.499/- against the value of share at Rs.1/- - submission before us was that in order to avoid registration fees, the assessee had received the share capital in cash - HELD THAT:- In response to our question about the financial health, the ld. Counsel for the assessee submitted that this is the first year of the Company and, therefore, it s not having any taxable income, however, when we ask him the source of funds, how it contemplates to run its business, what are the project reports and what circumstance an share applicant would infuse his money in a start-up company, but nothing is available on the record. Neither the share applicant companies have any financial strength as noticed by the ld. CIT(Appeals). They have not given any explanation of the source of money in their hands for making payments to the assessee as share application money in cash. Therefore, revenue authorities have rightly treated it as bogus and sham transactions. AO has rightly made the addition - Decided against assessee.
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2023 (2) TMI 562
MAT computation - Disallowance of Debenture Redemption Reserve[DRR] while computing Book Profit u/s 115JB - Whether the said DRR is ascertained liability - Whether computation of book profits by the Appellant is not as per the provisions of Section 115JB as the reduction of Net Profits by the Debenture Redemption Reserve is not one of the prescribed adjustments and therefore not permissible? - CIT-A confirming the disallowance - HELD THAT:- As in the facts of the present case it is not the Assessing Officer who has increased the amount of Net Profits, on the contrary it is the Appellant who had reduced the Net Profits as shown in the audited Profit Loss Account prepared as per the provisions of the Companies Act by the amount of Debenture Redemption Reserve created during the relevant previous year. Even if the Debenture Redemption Reserve is taken to be in the nature of a provision, the action of the Appellant was contrary to the law laid down by the Hon ble Supreme Court in the case of Apollo Tyres Ltd [ 2002 (5) TMI 5 - SUPREME COURT ] whereas the orders passed by the authorities below are in conformity with the aforesaid judgment of the Hon ble Supreme Court. Thus, we do not find any infirmity in the order passed by the CIT(A) which deserves to be upheld on this ground alone though the CIT(A) has given further reasoning in support of his decision to confirm the order passed by the Assessing Officer. The Appellant has failed to controvert the above findings/observations of the CIT(A) which are also in conformity with the decision of the Bangalore Bench of the Tribunal in the case of D.R. Ranka Charitable Trust v. Director of Income-tax (Exemptions) [ 2010 (2) TMI 983 - ITAT BANGALORE In the result, the present appeal is dismissed.
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2023 (2) TMI 561
Unexpalined cash deposits - assessee has stated that the amounts of cash deposits include agricultural income, amount returned by brother, hand loan from father, re-deposit of earlier withdrawals and amounts withdrawn and re-deposited to maintain standard cash limit of the branch on Friday - HELD THAT:- Owning of agricultural land measuring 2 acres and 4 gundas is supported by RTC copy. Hence, earning of agricultural income cannot be doubted. However, the assessee s source of total income as detailed above is only Rs,11,31,000/- other than from salary. Assessee being employed in bank earned returned income of Rs.2,77,000/- only. Considering these facts, source available to the assessee to deposit into the bank account to be considered around Rs.10,00,000/- out of Rs.11,31,000/- as explained above. The balance amount of Rs. 4,06,150/- to be considered as unexplained and to that extent addition to be sustained. Accordingly direct the AO to make an addition of Rs.4,06,150/- as unexplained income of the assessee. Ordered accordingly.
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2023 (2) TMI 560
Addition of excess bagasse stock - revenue from suppressed sales of surplus stock of bagasse - method of valuation followed by the appellant - HELD THAT:- From the audited financial statement it ostensibly transpires that, the appellant showed no closing stock of bagasse. The Ld. AO, underlining the absence of stock records, after allowing the standard consumption from the estimated production of bagasse, the revenue from the suppressed sales of surplus stock of bagasse has carried out the addition. Since the appellant failed to negate the estimation of excess stock of bagasse available for sale and its valuation with depreciative cogent material on record leaves the computation made by the Ld. AO doubtless, thus finds force in taxing the same as revenue from suppressed sales. And the said action of Ld. TAB finds force in the light of judgement of Hon ble Supreme Court in CIT Vs British Paints India Ltd. [1990 (12) TMI 2 - SUPREME COURT] wherein held tha where accounts are prepared without disclosing the real cost of the stock-in-trade, albeit on sound expert advice in the interest of efficient administration of the company, it is the duty of the ITO to determine the taxable income by making such computation as he thinks fit. We see no reasons to interfere with the action of the Ld. TAB in bringing to tax the revenue from suppressed sales of surplus stock of bagasse, ergo we order accordingly.
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2023 (2) TMI 559
Addition u/s 68 - identity of the share applicant, their creditworthiness and the transactions are genuine transactions not proved - HELD THAT:- After perusal of the record, we are of the view that the assessee is a paper company without any real worth. Nobody is prosecuting this litigation. We fail to understand, as to how the assessee filed the appeal against orders of the authorities below but not interested in prosecuting the appeal before the revenue authorities and also before the Tribunal. There is nothing on the record which can demonstrate the genuineness of the transactions or the identity and creditworthiness of the alleged share applicant who have contributed Rs.9,90,00,000/- as premium. The assessee failed to demonstrate its financial health which can attract such huge premium on subscription of its shares. Therefore, we do not have any hesitation in concurring with the findings of the ld. CIT(A) and upholding the same. - Decided against assessee.
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2023 (2) TMI 558
Capital gain or salary received - Recognizing the compensation received by the assessee as the share holding of the company - AO held that the amounts received by the assessee is profits in lieu of salary as defined in Section 17(3)(iii) - CIT(A) considering the 'foregoing of right to receive equity share by the assessee was the same as giving up the capital asset of Share - CIT(A) deleted the addition holding that the assessee was employed earlier by M/s Tek Travels Pvt. Ltd. (TTPL) and entitled to yearly compensation plus 3% ESOP - HELD THAT:- We find that the one reason of the settlement was allotment of shares and as per the employment agreement, the shares have to be allotted @ 7500 for each year of completed service. And since, the assessee has completed only two completed years of service, for the purpose of taxation. Keeping in view the jurisprudence laid down as in the cases of CIT Vs. J. Dalmia [ 1984 (5) TMI 32 - DELHI HIGH COURT] , Baroda Cement Chemicals Ltd. [ 1985 (12) TMI 55 - GUJARAT HIGH COURT] , Bhojison Infrastructure (P.) Ltd. [ 2018 (9) TMI 1239 - ITAT AHMEDABAD] , and ACIT Vs. Jackie Shroff [ 2018 (9) TMI 1006 - ITAT MUMBAI] with regard to taxation of amount received as compensation for giving up the Right to sue and also keeping in view of the principles of real income, eligible income, receivable income and the accounting principles thereof as laid down above, we hold that the amount received quivalent to the pro-rata value of eligible shares of 15,000 out of offered shares of 50,000 be treated as capital gains u/s 48 and the remaining amount received by the assessee from the former employee be treated as per the provisions of Section 17(3)(iii). Appeal of the Revenue is partly allowed.
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2023 (2) TMI 557
Addition for the difference between income as per books and income as reflected in 26AS - Disallowance being 20% of the expenses claimed by the appellant - Assesseee submitted that addition on account of reconciliation in respect of commission income earned by the assessee is also fully explained and if given an opportunity, the assessee shall prove the genuineness of all the expenses claimed in the return of income - HELD THAT:- Assessee, both during the course of assessment and appellate proceedings displayed a non-cooperative attitude, as a result of which the orders by the AO and Ld. CIT(Appeals) had to be passed only on the basis of material available on record in absence of any corporation forthcoming on the part of the assessee. Accordingly, in interest of justice, we are restoring the matter to the file of AO for necessary verification, subject to assessee paying nominal cost of 5000/- to be paid in the Prime Minister Relief Fund in view of the facts narrated above. A ppeal of the assessee is allowed for statistical purposes.
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2023 (2) TMI 556
TP Adjustment - comparable selection - HELD THAT:- Cyber Media (India) Ltd. is into Advertisement of its wide range of clientele that includes advertisement through Magazine. Functionally in our view this company is not comparable with the assessee who is providing Marketing Services to its AE only and the same deserves to be excluded. Just Dial Ltd. company has earned revenue from operations at Rs.362,76,75,293/-. The break-up of this revenue has been given in schedule 20 which is sale from search related services, sale from other related services and other operating revenue. It is also an admitted fact that this comparable has a high turnover which is more than 200 crores as compared to the turnover of assessee which is approximately Rs. 10 crores. On this reasoning itself, this comparable deserves to be excluded. Working capital adjustment - We note that this issue is no longer resintegra as there has been various decisions passed by Coordinate Bench of this Tribunal as well as Hon ble High Court upholding the working capital adjustment being allowed to assessee on actual. We therefore direct the Ld.AO/TPO to provide the working capital adjustment on actuals in accordance with Rule 10B(1)(e) of the Rules. Exclusion of Lumax Automotive Systems Ltd. and Mahle Filter Systems India Ltd. - We note that the instances of comparables shortlisted by the Ld.TPO are basically used in automotive industry whereas assessee is manufacturing filters that are used in pharmaceutical and food processing industries. Although it is correct that while adopting TNMM as the most appropriate method, only profit based comparison is made however, the start point for every comparison is the product which is the subject matter of the international transaction. In the present facts of the case though there is no primary difference in the product being filter however the industry to which the comparables are catering is different with that of assessee and therefore there will be a different economic analysis which would impact the manufacturing activity carried on by the comparables and the assessee. In our view, these comparables cannot be considered as good for assessee as assessee is catering to pharmaceutical industry which is much more sensitive than the automotive industry. Non-granting working capital adjustment - We have already dealt this issue in ground no. 5(iv) hereinabove. Respectfully following the same, we direct the Ld.AO/TPO to compute working capital adjustment in accordance with Rule 10B(1)(e). Selection of MAM - assessee had selected TNMM as the most appropriate method by using OP/OR as the PLI - HELD THAT:- AR submitted that when the issue was raised before the Ld.CIT(A), the Ld.CIT(A) held that RPM should be the most appropriate method. Before us, the Ld.AR did not object for adopting RPM to be the most appropriate method however he submitted that no comparability analysis has been carried out in respect of the same to determine the arms length margin under the trading segment. DR also agreed to the submissions of the assessee. Based on the joint submission, we are of the opinion that the trading segment of the assessee needs to be denovo analysis by the Ld.AO/TPO by using RPM as the most appropriate method. We also direct the Ld.AO to grant Working Capital Adjustment on actuals based on the details filed. TPO is directed to carry out bench marking analysis of the trading segment by considering appropriate comparables and to compute the arms length price of the transaction in accordance with law. Disallowance u/s. 40(a)(ia) - Non deduction of TDS on computer software purchases - HELD THAT:- We note that section 40(a)(i) can be invoked only when an expenditure has been claimed by the assessee. In the instant case the purchase of software has been capitalized and the depreciation is an allowance and not an expenditure. Therefore, section 40(a)(ia) cannot be invoked for non-deduction of TDS. As relying on Tally Solutions (P) Ltd. [ 2020 (12) TMI 1160 - KARNATAKA HIGH COURT] we are of the opinion that no disallowance can be made u/s. 40(a)(ia) in the present facts of the case. Accordingly, the addition made by the Ld.AO stands deleted. - Decided in favour of assessee.
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2023 (2) TMI 555
TP Adjustment - Comparable selection - HELD THAT: - Nihilent Ltd. faced extra ordinary events of acquisition wherein lot of acquisition has taken place during the year. The Tribunal had directed the A.O/T.P.O to exclude this company from the final set of comparables. That, as demonstrated Annual Report of this company there has been a series of acquisitions taken place in respect of this company in view of their global business perspectives and therefore, following the same parity of reasoning in Optiva India Technologies Pvt. Ltd. [ 2022 (7) TMI 1339 - ITAT PUNE ] we direct the ld. A.O/T.P.O to exclude this company from the final set of comparables. Aspire Systems (India) Pvt. Ltd. - There is an amalgamation which has taken place and in view of this extra ordinary event of amalgamation this particular company has to be held as not comparable with that of the assessee. Accordingly, the ld. A.O/T.P.O is directed to exclude the same from the final list of compaables. E-Infochips Ltd. - In this case as evident there has been a merger as per the directions of the Hon'ble Gujarat High Court and therefore, because of this extra ordinary event having taken place, we direct the ld. A.O./T.P.O on the same parity of reasonings to exclude E-Infochips Ltd. from the final list of compables with that of the assessee. AcewinAgri tech Ltd - We are of the considered view that the actual position has to be ascertained before excluding or including this company, what exactly are the activities of the company has to be examined. Therefore, the issue of comparability regarding this company is remanded to the file of the ld. A.O/T.P.O for re-adjudication as per law complying with the principles of natural justice. Infobeans Technologies Ltd. has to be excluded as comparable as it is performing varied types of services and that also as per the financials of the company, its segmental financials are not available without which it is difficult to compute the correct profit margin of the relevant segment. Following the same parity of reasoning for A.Y. 2016-17, we direct the ld. A.O/T.P.O to exclude this company from the final list of comparables. Dun and Bradstreet Technologies Data Services Pvt. Ltd. is into providing vide area of sources such as D B analytic services, risk management solutions, sales and marketing solution services, supply management solution etc. It has also come on record that the assessee has earned abnormally high margin of 58.19% as is evident from the annual report of Dun Bradstreet and as such is not a valid comparable vis- -vis assessee who is a routine software development service provider to its AE working on cost + mark-up model, hence order to be excluded. Exclusion of Cybercom Datamatics Information solutions Ltd; and (ii) Fixstream India Pvt. Ltd. as comparable companies since such companies were having related party transactions of more than 25% of the sales - D.R.P has given their findings on Cybercom Datamatics Information solutions Ltd and Fixstream India Pvt. Ltd. A.O/T.P.O is directed to exclude this company from the final set of comparables if the ratio of RPT income to the total operating revenue is more than 25% - Admittedly, the ld. A.O/T.P.O has not considered these findings of the ld.D.R.P. The ld. D.R also could not bring any materials on record or evidences to demonstrate that the ld. A.O/T.P.O has complied with such directions of the D.R.P. Considering these facts in the interest of justice, this ground is remitted back to the file of the Ld. A.O/T.P.O for complying with the principles of natural justice and giving effect to the directions given by the ld. D.R.P. regarding the above mentioned companies. Inclusion of Synerzip Softech India Pvt. Ltd.- The findings of the revenue authorities are that there are no clarity of the activities of this company and even in the Annual Report is having conflicting statements where on one hand it is written that the company is engaged in outsourcing software project development and software testing. however, as per the statement of P L account for the year ended 31-03-2016 the total revenue were from software services. Further, in the Directors Report the principle business activity of this company, the name and description of main product/service is mentioned as software development . Therefore, the Annual Report does not provide any clarity regarding the correct activities of this company. Even before us also, the ld. Counsel could not produce any evidence or documents to demonstrate the actual nature of activity of this company. In absence thereof, we uphold the findings of the ld. D.R.P. This part of the ground is also dismissed. Appeal of the assessee is partly allowed for statistical purposes.
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2023 (2) TMI 554
Disallowance of rent expenditure - bogus claim of rent and being disallowance u/s 40(a)(ia) for non-deduction of tax on rent paid - HELD THAT:- We find that when the matter travelled before CIT(A), he erred in considering the correct figures of rent disallowance. He ought to have dealt with the issue of disallowances of rent separately but in the finding, he has deleted the disallowance u/s 40(a)(ia) of the Act but wrongly mentioned Rs. 3,30,000/- which ought to have been correctly mentioned at Rs. 3,67,500/-. Therefore, so far as the disallowance u/s 40(a)(ia) is concerned, the same already stands deleted by ld. CIT(A). Disallowance of Rs. 3,30,000/- is concerned the assessee has claimed that the same was paid through banking channel and included payment Paid to Mrs. Sangeeta Bhartia, Mrs. M. Mallickavalli and Smt. G. Nookaratnam. Necessary evidences have also been filed in the paper book in support of this claim. CIT(A) has not dealt with this issue, however looking to the fact that the assessee being a private limited company of which books of accounts are regularly audited and has paid the rent through account payee cheque and permanent account numbers of all the three parties are duly submitted, we find no reason to doubt the genuineness of the said claim. Therefore, the disallowance at Rs. 3,30,000/- is deleted. Hence ground no. 1 [1(a) 1(b)] raised by the assessee is allowed. Disallowance of technical service charges - said amount was paid to Bhavishya International towards the consultancy charges from April, 2014 to March, 2015 but the contents of the bill were not clear as to whether they pertain to the year under consideration - HELD THAT:- The issue needs to be restored to the file of ld. AO for necessary verification and the assessee is directed to file all the relevant details including bank statement and the nature of consultancy services taken from M/s. Bhavishya International and whether the same can be allowed as a business expenditure. Needless to mention that proper opportunity of being heard should be provided to the assessee. The assessee is also directed to remain vigilant and file necessary documents, if considered necessary, in support of its grounds of appeal and should not take adjournment, unless otherwise required for reasonable cause. Disallowance of statutory audit fees - HELD THAT:- CIT(A) could not appreciate the fact that as per the mercantile system of accounting, the assessee has rightly claimed the statutory Audit fees as expenditure for the year to which it pertains. The alleged statutory audit fees was for the FY 2014-15 i.e. AY 2015-16 for which the audit work is to be carried out from the close of the year till the finalization of the balance sheet and profit loss account. In our considered view such claim was rightly made by the assessee. Therefore, finding of ld. CIT(A) is set aside and disallowance of statutory audit fees made by AO is deleted. In the result, ground no. 4 raised by assessee is allowed. Disallowance of business promotion expenses - HELD THAT:- Assessee being unable to furnish relevant details before both the lower authorities but considering the larger interest of justice since the Directors have to incur various expenses on day-to-day basis in the regular course of business of a company, are of the considered view that disallowance of 25% of the said sum of Rs. 13,97,949/- will meet the end of justice. We accordingly confirm the disallowance partly. Disallowance of commission charges - disallowance was made by ld. AO on account of mismatch of figures - HELD THAT:- The assessee failed to succeed before ld. CIT(A) also. However, before us the assessee has made reference to the reconciliation statement providing the details that total debits for the FY 2014-15 was Rs. 9,13,458/- out of which a sum of Rs. 1,74,000/- was reduced towards reimbursement of expenses incurred by agent during direct shipment on which tax not deductible and on the remaining net commission TDS of Rs. 82,162/- was worked out and therefore, the gross commission was Rs. 8,21,620/- as per the Form No. 16A. We, thus find merit in the submissions made by the assessee and hold that disallowance for commission charges. Ground of assessee is allowed.
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2023 (2) TMI 553
TP Adjustment - export of finished goods to the associated enterprises wherein an upward TP adjustment was made - AR submitted that the products sold to the AE was one time export and did not constitute and a regular business activity of the assessee - HELD THAT:- We appreciate the argument advanced by the Ld.DR however there are various documents filed by the assessee in support of the products that are submitted to be remodified and was made to be fit for consumption. However, such modification did not fit into the strict criteria of verification as per the FDA norms and therefore stood rejected and destroyed. We note that these details and evidences filed by assessee the summary of which are reproduced hereinabove in a tabulated form has not been considered by the Ld.AO/TPO. It is also admitted fact that margin of assessee at 12% was compared with the comparables being 4% for the year under consideration and therefore some value has been received by assessee as submitted by the Ld.AR against such destroyed products by the US customs which deserves to be bench marked. We direct the Ld.AO to reconsider the claim of assessee in the light of the evidences filed and to compute the margin of assessee in accordance with law by following the principles of transfer pricing regulations. Administrative service fee paid by the assessee - assessee has also furnished the total cost incurred by the AE towards the common group services and the basis of allocating some among various group entities - HELD THAT:- As decided in assessee own case [ 2015 (10) TMI 2794 - ITAT BANGALORE ] There is no dispute that the transaction has been reported by the assessee as international transaction which was also accepted by the AO and the TPO as an international transaction. Thus, once a particular transaction is admitted as international transaction then the same falls in the ambit of the provisions of X chapter of the Act which are specific provisions to deal with such transactions between the assessee and its AE. Therefore, once the transaction is undisputedly subject matter of Chapter X of the IT Act, then the other general provisions of the Act cannot be applied simultaneously. The AO, having considered the transaction being international transaction and making a reference to the TPO for determination of the ALP cannot go back to the provisions of sec.40A(2) for determining the reasonableness of the price paid by the assessee. Our attention was invited by the learned authorised representative of the assessee that for the assessment year 2001-02 to 2002-03 the payment in question was subjected to MAP and only 25% is charged to tax. Therefore, it was accepted by the department that the services were rendered by the AE to the assessee in India. We further note that the AO has not conducted any inquiry or investigation to find out the excessiveness of the payment made by the assessee to its AE. Disallowance of inventory written off - HELD THAT:- The Tribunal for A.Y. 2002-03 in assessee s own case [ 2022 (2) TMI 284 - ITAT BANGALORE ] observed AO took the view that the inventory has been actually written off in the succeeding year and not during the year under consideration. Accordingly, the AO expressed the view that the assessee, if at all is required to write off the inventory, should have written off in the succeeding year, i.e., in the financial year 2002-03 relevant to the assessment year 2003-04. Accordingly, the AO held that the claim of the assessee is not allowable. Accordingly he disallowed the claim of write off of inventory - Based on the above submission, we deem it fit and proper to remand this issue to the Ld.AO for verification and to consider it in accordance with law. Appeal filed by assessee stands allowed for statistical purposes.
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Customs
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2023 (2) TMI 552
Smuggling - Gold Biscuits - yellow metals seized allegedly from the possession of the accused person were gold or not - burden to prove - Section 123 of the Customs Act - HELD THAT:- Section 123 of Customs Act, 1962 upon plain reading of it suggests that this provision is applicable in cases where seizure is made under the Customs Act, 1962. Since, admittedly no seizure was made following the provision of Section 102, in the humble opinion there is no scope to press Section 123 of the Customs Act, 1962 into service to draw such presumption. Learned Trial Court failed to consider this aspect of the matter - When the later general law is repugnancy or inconsistency, the later special law will prevail over the earlier general law. It has become settled principle of law that special law will prevail over and above the general legislation. The P.F.A. Act has extended certain rights to the accused person under Sections 11 and 13 of the P.F.A. Act. Launching of a prosecution under Sections 272 and 273 of the I.P.C., without following the procedure prescribed under this Special Act would amount to depriving an accused of his statutory right. The examination under Section 313 of the Code of Criminal Procedure does have the nexus with the defence, which the accused may decide to bring if necessary. It is the mandatory obligation of the Court to hold a fair trial. Lack of opportunity to explain his position vis- -vis incriminating evidence, to be used against him is definitely prejudicial to the interest of accused person. Therefore, without giving an opportunity to the accused person to explain the incriminating evidence, Court could not have used the same against the accused person to record an order of conviction. The prosecution case cannot be said to have been proved beyond reasonable doubt. The impugned judgement passed by learned Appellate Court affirming the judgement passed by learned Chief Judicial Magistrate, Malda against the accused person suffers from infirmity and should be set aside - Appeal allowed.
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2023 (2) TMI 551
Authorized courier - Refusal to renew the registration of the Petitioner - Courier Imports and Exports (Clearance) Regulations 1998 - while refusing to issue the license or renew the license, no opportunity of any hearing was given to the Petitioner - violation of principles of natural justice - HELD THAT:- The observations of the Division Bench in the case of A.S. Vasan and sons [ 2009 (4) TMI 100 - BOMBAY HIGH COURT ] are pertinent. In this case a courier who was aggrieved by non-renewal under the Regulations of 2010 had approached this court. Allowing the challenge on the ground of lack of hearing, the Division Bench observed that there can be no dispute that the order rejecting application has visited the petitioner with civil consequences. In a case where an order whether it be administrative or quasi judicial, visits the party with civil consequences in absence of any statutory exclusion under the Regulations, there would be a right to a hearing, and the right to hearing would include right to a person being heard in person if such a request is made. The Division Bench accordingly set aside the order of non-renewal on that count. From the scheme of the Regulation 2010 it is clear that the Regulations themselves contemplate an application for renewal. Grant of renewal thereof is conditional upon factual position specified in the Regulations. Not granting registration at the first instance would stand on a different footing than a case where registration is renewed from time to time over a long period and then not renewed. The Petitioner was an authorized courier for almost 25 years and the registration was renewed from time to time. Petitioner states that it has invested substantial amounts towards the business. Therefore, the non-renewal clearly had civil consequences and severe implications for the Petitioner. In these circumstances the petitioner was entitled to an opportunity to explain before taking the impugned decision. The decision taken without giving opportunity to explain will thus have to be set aside. Non-renewal therefore had serious implications for the Petitioner. The view taken by the Division Bench in the case of A.S.Vasan and sons should also be extended to the Petitioner. In the facts and circumstances of the case the opportunity to the Petitioner be given in form of hearing - It is not necessary to go into issue of maintainability of the appeal and the same is kept open - Petition allowed.
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2023 (2) TMI 550
Valuation of imported goods - rejection of declared value, and redetermination of the same - declared price of the goods, below the Minimum Import Price - violation of Policy Condition No. 1 of the ITC(HS) Import Policy which prescribed that the specified defective items can be imported free, except those for which the CIF value of imports was below the value specified for the said items - confiscation - redemption fine - penalty - HELD THAT:- In the present case, the proper officer doubted the value of the goods declared by the appellant since it was below the Minimum Import Price and sent a letter dated 09.09.2020 to the appellant. The appellant, in response to the aforesaid communication, categorically stated that the issuance of show cause notice may be waived and personal hearing may also not be given. The appellant also stated that it was the first mistake and it was not aware of the policy restriction. The appellant also categorically stated that it was ready to pay the duty amount as per the assessment value of the goods, which the appellant believed was usually on the higher side than the minimum value. Section 124 of the Customs Act does provide for issuance of a show cause notice and personal hearing but in view of the specific request made by the appellant, show cause notice was not issued and personal hearing was also not granted. The assessing officer, after rejecting the value declared by the appellant in the Bills of Entry, reassessed the value of goods. The appellant paid the enhanced value without raising any objection or protest at the time of clearing of the goods. Thereafter, an appeal was filed to assail the order passed by the Additional Commissioner. It is correct that the Assistant Commissioner could not have determined the assessable value in an arbitrary manner even if the importer had submitted in writing that it would pay the duty amount as per the assessment, but it is seen from the order passed by the Assistant Commissioner that contemporaneous datas were examined. During the course of hearing of the appeal, learned counsel for the appellant also placed certain Bills of Entry relating to identical goods submitted by the appellant. It is seen from one such Bill of Entry No. 7462561 dated 16.04.2020, that the appellant accepted the transaction value of misprint sheets as Euro 495, which would come to 600 Dollars, whereas in the present case the value has been fixed at only Euro 470.5 per MTS. It cannot, therefore, be urged that the assessable value was determined by the Assistant Commissioner in an arbitrary manner on a higher side. The Additional Commissioner has noted that as the importer had tried to import the restricted goods in violation of the provisions of the ITC(HS) Import Policy and the value had not been correctly declared, the goods were liable to confiscation. There is, therefore, no error in the order - As the goods were held to be liable to confiscation under section 111 of the Customs Act, penalty under section 112(a) of the Customs Act has been correctly imposed. There is, therefore, no error in the order passed by the Commissioner (Appeals) - Appeal dismissed.
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Central Excise
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2023 (2) TMI 549
Wrongful availment of CENVAT Credit - C.R. Coils and Zinc inasmuch as the said goods were used in the process of galvanization of C.R. Coils for conversion into G.P. Coils - process amounting to manufacture or not - HELD THAT:- In the present case, once the respondent had paid duty at the time of purchase of C.R. Coils and had taken Cenvat credit after galvanizing the sheets and took rebate of Rs.88,71,269/-, he could claim the benefit of Cenvat Credit deposited by him and this aspect has been considered by the High Court of Gujarat in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DELTA CORPORATION [ 2013 (2) TMI 31 - GUJARAT HIGH COURT] . In that case, the High Court of Gujarat was examining the manufacturing activity of item called P.D. Pumps and after purchasing such pumps, the manufacturer availed Modvat credit under Rule 57A of the Central Excise Rules, 1944 - The view of the revenue was that the assessee had purchased the P.D. Pumps from its sister concern before clearance and the assessee was to reverse such credit. The High Court of Gujarat referred to Rule 57 F(1) of the Rules, 1944 and held that inputs in respect of which credit is allowed under Rule 57A, may be used in or in relation to manufacture of a final product or could also be removed under intimation to the specified authority for home consumption in the said factory. Sub-rule 3 of Rule 3 of the CENVAT Credit Rules, 2002 makes it very clear that the Cenvat credit may be utilized for payment of any duty of excise on any final products or for payment of duty on inputs of capital goods themselves if such inputs are removed as such or after being partially processed or such capital goods are removed as such. Appeal dismissed.
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2023 (2) TMI 548
Refund of Krishi Kalyan Cess (KKC) levied under the Finance Act, 2016 - essential grievance on the part of the petitioner is of the Tribunal not deciding the matter itself and remanding it to the Assessing Officer with the further grievance that the pending matter before the Apex Court being a case of M/S. GAURI PLASTICULTURE P. LTD., BOMBAY DYEING MANUFACTURING CO. LTD., M/S. SIMPLEX MILLS CO. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, INDORE, THE COMMISSIONER OF CENTRAL EXCISE, MUMBAI IV, THE UNION OF INDIA THROUGH THE COMMISSIONER OF CENTRAL EXCISE MUMBAI I [ 2019 (6) TMI 820 - BOMBAY HIGH COURT] has no applicability. HELD THAT:- The chief reason for remanding the matter for adjudicating it de novo by the adjudicating authority is the pendency of the matter in case of M/s. M/s.Bombay Dyeing and Manufacturing Company Limited before the Apex Court. It is a Larger Bench s judgment of the Bombay High Court challenged before the Apex Court. It is given to understand that the same is still pending before the Apex Court and has not been finally decided. If the matter is still pending before the Apex Court, nobody can make a guess as to in what way it is going to result. The least the Tribunal could have done was of deciding the matter on merit as per the prevalent law or to keep the matter back. However, it has chosen to remand the matter to the adjudicating authority which is impermissible. This Court in case of COMMISSION OF CENTRAL GST VERSUS JAY CHEMICAL INDUSTRIES LTD. [ 2018 (8) TMI 1392 - GUJARAT HIGH COURT ] the question which was pending before the Tribunal was at large before the High Court. The Court held that in such a situation, the appeal ought to have been kept pending till the decision of the High Court with a liberty to both the sides to approach the Tribunal after the decision of the High Court. The approach of the Tribunal is held to have harassed both the Assessee and the Department, the matter was remanded with a direction to keep it pending and decide after the decision of the High Court in Tax Appeal pending before it on the same issue. In the instant case also, it is noticed that the approach of the Tribunal is to abdicate its duty of deciding the matter on the merits or to retain the matter till the outcome of the pending matter before the Apex Court. Since this is not permissible, it is deemed appropriate that the Tribunal, which is otherwise required to decide the matter on merit, shall decide the same keeping all contentions raised by both the sides before this Court and before the Tribunal open for them to agitate, let the same be decided without further loss of time. Petition disposed off.
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CST, VAT & Sales Tax
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2023 (2) TMI 589
Denial of the concessional rate of duty in respect of certain inter-state sales - benefit of the C-Forms denied, by cancelling of the same retrospectively - HELD THAT:- In Jain Manufacturing (India) Pvt. Ltd. v. The Commissioner Value Added Tax Anr. [[ 2016 (6) TMI 304 - DELHI HIGH COURT] ] this Court had held that C-forms cannot be cancelled retrospectively. The decision in the case of Jain Manufacturing (India) Pvt. Ltd. v. The Commissioner Value Added Tax Anr. is binding on this Court and therefore, the benefit of the C-Forms in question cannot be denied to the petitioner, by cancelling the same retrospectively. Petition allowed.
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2023 (2) TMI 547
Abatement of appeals instituted under Section 35 of Goa Value Added Tax Act, 2005, for want of pre-deposit - requirement to predeposit introduced by amendment by the Goa Value Added Tax (Tenth Amendment) Act, 2017 (with retrospective effect) - HELD THAT:- The facts, in this case, are somewhat peculiar because the appeals, as instituted originally, complied with all the conditions prescribed under the principal Act. Even after the Ninth Amendment to the principal Act, the appeals were duly compliant. Only after the Tenth Amendment was a requirement for a deposit of ten per cent of this amount because such a requirement was made applicable even to pending appeals. Considering the peculiar facts, it is opined that the Petitioner should be granted an opportunity of having its appeals heard on merits, particularly now that the Petitioner has fully complied with the requirement of a pre-deposit of ten per cent of the disputed amount. Therefore, even without going into the disputed issue of natural justice failure, we think this is a fit case where an additional opportunity should be granted to the Petitioner now that the Petitioner has already deposited ten per cent of the disputed amount before the concerned authorities. Petition disposed off.
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2023 (2) TMI 546
Validity of assessment order - reopening of the assessments under section 27 of the TNVAT Act, 2006 - Assessment Orders are barred by law of limitation or not - Violation of principles of natural justice - HELD THAT:- Admittedly, the petitioner has not sent any reply to the Show Cause Notices sent by the respondents which culminated in passing of the impugned assessment orders. The petitioner categorically contends that they never received any Show Cause Notice from the respondents - As seen from the impugned Assessment Orders, no personal hearing has also been afforded to the petitioner. Since the contentions of the petitioner raised in this writ petition have not been considered in the impugned assessment orders and the petitioner has also not been granted personal hearing in the impugned proceedings, necessarily, the impugned assessment orders have to be quashed on the ground of violation of principles of natural justice and the matter has to be remanded back to the first respondent for fresh consideration on merits. The impugned Assessment Orders all dated 30.11.2022 are hereby quashed and the matters are remanded back to the first respondent for fresh consideration - Petition allowed by way of remand.
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2023 (2) TMI 545
Penalty u/s 51 (7) (b) of the Punjab Value Added Tax Act, 2005 - evasion of tax - proper and genuine documents were issued by the vendor or not - goods consigned did not match with the goods mentioned in bills - HELD THAT:- The driver of the vehicle had shown all the invoices at ICC, Ghanauli. Though in Form VAT-35 (transit slip), no declaration as to the transaction covered by invoice No.5173 was alleged to have been made by the driver but since the transaction between the vendor and the appellant was clearly reflected from the invoices and since CST had been duly paid, therefore, there could not be stated to be any evasion of tax. Nothing had been brought on record to prove that the goods were intended to be used or sold in the State of Punjab. Rather the material placed on record clearly indicated that 117 pieces of cast crank cases had been brought into the State of Punjab for job work while on transit and the remaining 10 pieces were also for transit purposes. The absence of any written agreement between the appellant and M/s Sahil for receiving goods at Mohali did not give rise to any inference that the goods were intended to be sold at Mohali. The mere possibility of a local sale would not clothe the officials of the respondents to take such an action when there was no material on record to indicate that an attempt was made by the appellant to deliver the goods at a different place and to sell them in the local market by evading payment of tax. Appeal allowed.
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