TMI Tax Updates - e-Newsletter
February 20, 2021

Case Laws in this Newsletter:

GST Income Tax Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. PROFITEERING CHARGES ON SUPPLY OF FLY ASH BLOCKS CONFIRMED:  REDUCED RATE BENEFIT NOT PASSED ON

   By: Dr. Sanjiv Agarwal

News

1. Eleventh India-EU Macroeconomic Dialogue held today

2. Five more states undertake partial Power Sector Reforms, get additional borrowing of ₹ 2,094 crore

3. Income Tax Department conducts searches in Bengaluru

4. Income Tax Department conducts searches in Hyderabad

Notifications

Customs

1. 23/2021 - dated 18-2-2021 - Cus (NT)

Appointment of Common Adjudicating Authority

2. 22/2021 - dated 18-2-2021 - Cus (NT)

Appointment of Common Adjudicating Authority

3. 21/2021 - dated 18-2-2021 - Cus (NT)

Appointment of Common Adjudicating Authority

4. 20/2021 - dated 18-2-2021 - Cus (NT)

Appointment of Common Adjudicating Authority

5. 19/2021 - dated 18-2-2021 - Cus (NT)

Appointment of Common Adjudicating Authority

GST - States

6. G.O.MS.No. 22 - dated 4-2-2021 - Andhra Pradesh SGST

Notification of class of persons under proviso to section 39(1)

7. G.O.MS.No. 21 - dated 4-2-2021 - Andhra Pradesh SGST

Special procedure for making payment of 35% as tax liability in first two (2) months

8. G.O.MS.No. 20 - dated 4-2-2021 - Andhra Pradesh SGST

Amendment in Notification G.O.Ms.No.264, dated 11-9-2020

9. G.O.MS.No. 19 - dated 4-2-2021 - Andhra Pradesh SGST

Bringing the provisions of Section 7 of the Andhra Pradesh Goods and Services Tax (Amendment) Act, 2019 into force

10. G.O.MS.No. 5 - dated 7-1-2021 - Andhra Pradesh SGST

Prescribing the due date for furnishing FORM GSTR-1 for the quarters October, 2020 to December, 2020 and January, 2021 to March, 2021 for registered persons having aggregate turnover of up to 1.5 crore rupees in the preceding financial year or the current financial year

11. CCST Ref. No. CCW/GST/74/2015 - dated 23-12-2020 - Andhra Pradesh SGST

Extension of the due date for furnishing of FORM ITC-04 for the period July- September 2020 till 30th November, 2020

12. S.O. 03/P.A.5/2017/S.128/Amd./2021 - dated 11-1-2021 - Punjab SGST

Amendment in Notification No. SO.13/P.A.5/2017/S.128/2018, dated the 27th February, 2018

13. S.O. 06/P.A.5/2017/S.39/2021 - dated 8-1-2021 - Punjab SGST

Class of persons under proviso to section 39(1) of Punjab Goods and Services Tax Act, 2017

14. S.O. 05/P.A.5/2017/Ss.148 and 39/2021 - dated 8-1-2021 - Punjab SGST

Seeks to notify special procedure for making payment of 35% as tax liability in first two month

15. S.O. 04/P.A.3/2020/S.1/2021 - dated 8-1-2021 - Punjab SGST

Bring to force section 7 of the Punjab Goods and Services Tax (Amendment) Act, 2020

Highlights / Catch Notes

GST

• High Court urges review of blocked E-Way Bill facility due to GSTR 3B filing defaults; seeks reasoned order on refund eligibility.

  Case-Laws - HC : Default in submission of GST returns - E-Way Bill (EWB) generation facility of the petitioner blocked on the EWB Portal in the event the petitioner fails to file their GSTR 3B returns for two financial years - the interest of justice would be met if the respondents being the Principal Commissioner, GST, North-eastern Region would examine the matter and pass a reasoned order on the entitlement of the petitioner for a refund. - HC
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• Court Grants Bail Under GST Act Sections 69 & 132(1), Emphasizes Need for Concrete Info Before Arrest.

  Case-Laws - HC : Seeking grant of Bail - Section 69 and 132(1) of GST- The belief must not be based on mere suspicion; it must be founded upon information - Bail jurisprudence which has evolved over the years stands on a different footing altogether. This is more so in the present case when admittedly respondents have not lodged any first information before the police under section 154 Cr.P.C. Respondents have also not filed any complaint before the competent magistrate under section 200 Cr.P.C. In fact there was no formal accusation against the petitioner prior to arrest. The first time such accusation has been placed on record was after arrest that too in the form of remand application. - Bail granted subject to conditions - HC
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• Court Advises Petitioner to Engage in Section 73 GST Proceedings Over Blocked ITC Due to Vendor's Non-filing of GSTR-3B.

  Case-Laws - HC : Ineligible ITC availed - Blocking of its electronic credit ledger due to non-filing of GSTR-3B by its vendor - This Court is also of the view that the petitioner should subject himself to the proceedings initiated u/s 73 before the GST officer and produce all relevant documents, invoices, records, etc. for proper adjudication thereupon. - HC
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Income Tax

• Petitioner misled tax authorities by filing under defunct company name, cannot claim error in assessment order.

  Case-Laws - HC : Draft assessment order passed in the name of company as merged/amalgamated with the petitioner company - Petitioner played a trick on the Income Tax Department to hoodwink its liability. Since the return was filed by the petitioner in the name of a non-existing company namely Mando India Ltd, the petitioner cannot take advantage of its own mistake and turnaround and state that the respondent has passed the wrong order in the name of non-existing company. - HC
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• High Court Rules Security Deposit Not a Deemed Dividend u/s 2(22)(e), Deletes Tax Addition.

  Case-Laws - HC : Deemed dividend addition u/s 2(22)(e) - The sum so paid has been adjusted towards security deposit which is evident from the books of the company and therefore, the aforesaid deposit is outside the purview of Section 2(22)(e) amounts to trade advances which was recovered from rentals during the usual course of business. The trade advances arising during usual course of business and not for individual benefit of the assessee and the same amounts to advance payment of the rents adjusted monthly with the ledgers of the assessee - Additions deleted - HC
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• Reopening of assessment u/s 147 justified despite available details; original return processed without scrutiny.

  Case-Laws - HC : Reopening of assessment u/s 147 - details available in the books of account for balance sheet or profit or loss account cannot absolve the assessee from his disclosure obligation under Section 147 of the Act as in the instant case, without any scrutiny, the original return was process under Section 143(1) of the Act. - It cannot be said that there was no material before the AO to reopen the assessment - HC
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• Assessee's Rs. 72,00,000 donation to Roman Catholic Diocese deemed ultra vires; violates Section 11(1)(a) of Income Tax Act.

  Case-Laws - AT : Exemption u/s 11 - donation to other charitable institution - during the year under consideration admittedly the said donee entity was never engaged in the activities of medical relief and running of hospitals - the act of donating/contributing ₹ 72, 00, 000/- as donation by the assessee to donee viz. Roman Catholoc Diocose Private Limited , was ultra vires the object clause of the donor and does not comply with the mandate of Section 11(1)(a). - AT
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• Court Rejects Addition of Unexplained Cash Credit u/s 68; Supports Taxpayer's Evidence During Demonetization Period.

  Case-Laws - AT : Unexplained cash credit u/s 68 - cash deposited during the demonetization period - since the AO has accepted the sales/turnover of the assessee which were reflected in the audited books of accounts, as well as the explanation of assessee is supported by material on record, the AO/Ld. CIT(A)’s action of addition cannot be countenanced. - AT
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• Assessing Officer's failure to provide evidence of undisclosed income; Assessee met initial burden of proof.

  Case-Laws - AT : Addition u/s 68 - A.O. failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between the Investors and the assessee. A.O. has also not brought any evidence on record that even if the share applicants did not have the means to make the investments, the investments made by them actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. Assessee discharged its initial onus - AT
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• Invalid Reopening of Assessment on Unexplained Bank Deposits Due to Incorrect Reasons by Assessing Officer.

  Case-Laws - AT : Validity of reopening of assessment - unexplained bank deposits - A.O. has recorded incorrect, wrong and non-existing reasons in the reasons recorded for reopening of the assessment reproduced above and have also did not apply his mind to the information received from REIC - reopening of the assessment is illegal and bad in Law and liable to be quashed - AT
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• Disallowed Salaries u/s 40A(2)(B) Overturned Due to Lack of Fair Market Value Inquiry by Assessing Officer.

  Case-Laws - AT : Addition u/s 40A(2)(B) - payment to related person - Salary to wives of the partners of the firm - Ld. A.O has not made any efforts in this regard and without making any enquiry about the fair market value of the services or the experience of the employees or the comparison of similar type of salary paid for the work performed by other employees of the concern has just resorted to make disallowance which in our view is uncalled for. - AT
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• Penalty Imposed for Violating Section 269SS: Unsecured Loan Over Rs. 20,000 Not Justified by NEFT Speed, No Section 273B Immunity Granted.

  Case-Laws - AT : Penalty levied u/s 271D - accepting unsecured loan above ₹ 20,000/- violating provisions of section 269SS - In the present times the bank transfers are quick through National Electronic Funds Transfer (In short ‘NEFT’) which hardly takes a day to transfer the amount. - Assessee do not deserve any immunity from paying the penalty u/s 271D of the Act by taking the shield/cover of Section 273B of the Act claiming it to be a reasonable cause for the said failure. - AT
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• No TDS Liability on Foreign Commission Payments u/s 40(a)(i) as Income Doesn't Arise in India.

  Case-Laws - AT : TDS u/s 195 - disallowance u/s 40(a)(i) - commission paid to non-resident outside India for the services rendered outside India will not fall in the category of the income received or deemed to be received in India as well as accrues or arises or is deemed to accrue or arise in India. - No TDS liability - Additions deleted - AT
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• Assessee's GAM charges reimbursed on actual basis allowed; no income element involved per Revenue's undisputed facts.

  Case-Laws - AT : Expenses Incurred with no income element - Reimbursement of Global Account Management (GAM) charges - These so called expenses without any income element embed in them are then reimbursement to the assessee on actual basis by Expeditors International India. These facts were neither disputed by the Revenue before the DRP in Assessment Year 2010-11 nor in the present Assessment Year i.e. A.Y. 2011-12. The activities were not changed in the present assessment year as well. - Claim of expenses allowed - AT
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• Option Price from Joint Venture Share Sale Not Taxable, Revenue's Interpretation Lacks Merit, Says Investor in Insurance Business.

  Case-Laws - AT : Nature of receipt - option price received against to sell the shares of the joint-venture company - After considering all these facts the Dabur has invested into the insurance business by assuming the risk as a business man. Thus, the treatment of the joint-venture agreement by the revenue and its interpretation that option price received by Dabur is a revenue receipt and is chargeable to tax as income is devoid of any merit. - AT
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• Assessee Ineligible for Section 80IA Deduction: Interest and Surcharges Not Directly Tied to Main Business Activity.

  Case-Laws - AT : Deduction u/s.80IA - Interest and other income - the assessee is not entitled for deduction towards eligible profit u/s.80IA of the Act in respect of other income because said income does not have first degree nexus with the main business activity of the assessee. - Further surcharge received from Electricity Board does not form part of income from operations, which is eligible for deduction u/s.80IA. - AT
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• No Evidence of Income Concealment Found in Section 132 Search; Taxpayer's Books of Account Accepted Without Estimation.

  Case-Laws - AT : Estimation of income - NP determination - non rejection of books of accounts - The assessee has maintained regular books of account which are duly audited. A search u/sec. 132 was conducted but no evidence was found indicating concealment of income. - there is no basis for estimation of income - AT
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Indian Laws

• Court Dismisses Application to Extend Term of IP Appellate Board Chairperson Beyond Age Limit of 65 Years.

  Case-Laws - SC : Right to be appointed / function as Chairperson Intellectual Property Appellate Board, till a new chairperson of Board is appointed - The applicant seeks extension of the term of the incumbent Chairperson of the board - Crossing the age limit of 65 years - Therefore, the argument that the technical members, in their position at the board as of now, cannot function without a chairperson, is unsustainable. - Application dismissed - SC
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• POA holder can file private complaints u/s 200 on behalf of original complainant, court confirms legal standing.

  Case-Laws - HC : Right on power of attorney (POA) holder - Maintainability of a private complaint under Section 200 of the Code at the behest of the original complainant - on perusal of the record including the contents of power of attorney and the complaint, this Court is of the view that power of attorney holder can maintain a private complaint filed under Section 200 of the Code. - HC
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• Higher Court Remands Cheque Dishonor Case Due to Trial Court's Inadequate Evidence Assessment, Citing Negotiable Instruments Act.

  Case-Laws - HC : Dishonor of Cheque - acquittal of the accused - Without discussing the evidence of complainant or accused in a proper perspective simply stating there are latches in the complainant's case without stating what are those latches the finding is not tenable or legally sustainable. The trial court has committed a serious error in not appreciating the oral and documentary evidence. Except this limitation point no other points have been answered with reference to settled principle of law in appreciating evidence in case of Negotiable Instrument Act or Cheque Bounce case - Matter remanded back - HC
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Service Tax

• Summons in GST Inquiry: No Arrest Authority for Officer, Investigation Focuses on Respondent No.2's Alleged Evasion.

  Case-Laws - HC : Inquiry proceedings under Service Tax - apprehension of arrest - The summons issued to the petitioners / petitioner No.2, does not authorize the investigating officer to arrest petitioner No.2, but have been issued only for the purpose of completing the investigation into evasion of GST undertaken by respondent No.2. In this view of the matter, we do not see any reason for the petitioners / petitioner No.2 to apprehend arrest on presenting himself before the investigating officer in response to the summons which have been issued to the petitioners. - HC
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Central Excise

• Commissioner (Appeals) Decision Flawed: No Proof of Letter Delivery Violates Natural Justice Principles, Adjournment Denial Unjustified.

  Case-Laws - AT : Principles of Natural Justice - The Commissioner (Appeals) did not have any proof of the postal department regarding service of the letter dated January 10, 2018 and only a presumption has been drawn by the Commissioner (Appeals) that since the letter dated January 10, 2018 was sent by speed post, it must have been delivered prior to January 23, 2018. In the absence of the any documentary proof regarding service of the letter January 10, 2018 upon the appellant, the Commissioner (Appeals) was not justified in forming such an opinion and refusing adjournment to the appellant. - AT
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VAT

• VAT Audit Report Validity Upheld; No Breach of Section 64(4) Tamil Nadu VAT Act; Petitioner Liable for Liabilities.

  Case-Laws - HC : Jurisdiction - Validity of impugned VAT Audit Report - Merely because the statements were recorded in front of the second respondent, by itself, will not mean that the Audit was carried out by the second respondent in contravention of 64(4) of the Tamil Nadu Value Added Tax Act, 2006 - In any event, no prejudice or harm will be caused to the petitioner merely because the Audit Report was generated after an Audit held on 14.03.2014. - petitioner cannot disown and distance itself for the liability - HC
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Case Laws:

• GST

• 2021 (2) TMI 770
  Errors in the common portal of the GSTN which is preventing them to file the statement in compliance of Section 52 (3) of the Central Goods and Service Tax Act, 2017 [CGST Act] read with Rule 67 of the Central Goods and Service Tax Rules, 2017 - HELD THAT:- The statement of Mr. Amit Bansal is taken on record and further it is directed that the Petitioner to approach Ms. Shrishty Saxena, the concerned Officer, with GSTN on 17th February, 2021 at 11:00 AM for the purpose of filing and uploading the statement in compliance of Section 52 (3) of the CGST Act. Ms. Shrishty Saxena will assist the Petitioner in filing and uploading the statement on the online portal. In the event, for any technical reason, the statement is not uploaded on the portal, she would accept the statement manually and forward it to the concerned Commissionerate for processing the same. Mr. Narsimhan has also pointed out that, on account of the error on the portal and delay/ non-filing of the statements within the period stipulated, there is a possibility that the Petitioners are burdened with levy of penalty and interest under the provisions of the CGST Act. On this aspect, we can only observe that, if and when the penalty or interest are levied on account of delay in filing the statement, that is eventually filed electronically or manually on 17th February, 2021, as the case may be, the Petitioner would be at liberty to approach the concerned Commissionerate with a representation explaining the reasons for the delay that prevented them to file the statement within the statutory timelines. The representations as and when filed, shall be considered, and disposed of in accordance with law, having regard to the circumstances noted in this order - Petition disposed off.

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• 2021 (2) TMI 769
  Seeking direction to respondent for reimbursement of GST at 12% on the value of construction work done under the agreement entered into with the 5th respondent - seeking direction to respondents not to deduct VAT amount and 1% of CGST and SGST while releasing the final bill in relation to the agreement - seeking direction to refund of the VAT amount deducted to the petitioner along with 18% interest from the due date till the date of payment along with exemplary costs - HELD THAT:- The action of the 7th and 8th respondents in not granting refund to the 5th respondent on the pretext that application for refund was filed beyond the period specified under the TVAT Act cannot be countenanced, and the respondent ought to have granted refund of the amount being the amount collected without authority of law. This Court is of the considered view that there are no bonafides or justification on part of the 1st to 6th respondents in seeking to adjust a sum of Rs. 11,93,172/- from the GST payable to the petitioner at the rate of 12% in respect of the work executed under the agreement dated 05.08.2017 and also seeking to deduct TDS at the rate of 1% under GST - Similarly, the action of 7th and 8th respondents in not refunding the amount remitted by the 5th respondent as VAT liability for the work executed, post-introduction of GST, on the ground of the refund application having been filed beyond the period specified under the Act, also cannot be held to be valid. Petition allowed - decided in favor of petitioner.

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• 2021 (2) TMI 767
  Demand of interest under Section 50 of the JGST Act, 2017 - alleged irregular input tax credit availed - Petitioner has sought declaration that it is not liable to pay interest for such mistake in filing GSTR-3B for the month of July 2017 wherein inadvertently he had included the transitional credit amount of Rs. 3,11,43,255/- again though it was filed in GSTR TRAN-1 as transitional credit in terms of Section 140 of the Act - HELD THAT:- Learned counsel for the respondents CGST and GSTN is allowed four weeks time to obtain instructions and file counter affidavit. One week thereafter is allowed to the petitioner to file reply thereto, if so advised. Addition of parties be made by 19th February 2021. Office to place the file for inspection and addition of parties on requisition being made within the same time. Post the matters in the week of 5th April, 2021.

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• 2021 (2) TMI 766
  Default in submission of GST returns - E-Way Bill (EWB) generation facility of the petitioner blocked on the EWB Portal in the event the petitioner fails to file their GSTR 3B returns for two financial years being 2018-19 and 2019-20 - Rule 138 E (b) of the CGST Rules, 2017 - petitioner takes a stand that as because the amount has not been refunded to the petitioner, therefore, the petitioner had defaulted in submitting the GST returns for the aforesaid two financial years - HELD THAT:- We are not very much impressed with the said submission of the petitioner by linking up a refund being entitled to them under some other provisions of law and the requirement of law to submit their tax returns. We are also of the view that the same stand of the petitioner cannot bestow a legal right upon them not to pay the required GST under the law or not to submit their returns for two given financial years. But at the same time, if the petitioner is of the view that as because an amount of Rs. 14,42,51,265/- had not been refunded to them and the requirement of tax to be paid by them is a small amount compared to the refund they are entitled and therefore they are unable to pay it, we are of the view that the interest of justice would be met if the respondents being the Principal Commissioner, GST, North-eastern Region would examine the matter and pass a reasoned order on the entitlement of the petitioner for a refund. The petitioner accordingly shall forthwith submit a representation before the Principal Commissioner, GST claiming and justifying the reasons for the refund as indicated above and in the event such representation is submitted, the Principal Commissioner shall pass a reasoned order thereon within a period of 10(ten) days from the date of submission of such representation. In doing so, the Principal Commissioner may also give a hearing to the petitioner. Upon considering the representation, the Principal Commissioner may pass a reasoned order on the entitlement of the petitioner for such refund within a period of ten days from the date of submission of the representation - Till such order is passed by the Principal Commissioner, the earlier interim order dated 14.10.2020 requiring the respondents not to block the EWB Portal of the petitioner shall continue. In the event, the representation is not submitted within a period of three days from today, the continuation of the interim order shall no longer hold. Petition disposed off.

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• 2021 (2) TMI 765
  Seeking permission for withdrawal of petition - Levy of interest - delay in filing of GSTR-3B Returns resulting into delayed payment of Gross Tax Liability for the Financial year 2019-20 up to December, 2019 - section 50 of the Goods Service Tax Act, 2017 - HELD THAT:- In view of the request made by learned counsel for the petitioner, the writ petition is dismissed as withdrawn.

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• 2021 (2) TMI 762
  Seeking grant of Bail - Constitutional validity of section 132(1) (b) of the Central Goods and Services Tax Act, 2017 - Seeking declaration that the power under section 69 of the CGST Act can only be exercised upon determination of the liability - HELD THAT:- The Commissioner may authorize arrest of a person only if he has reasons to believe that such a person has committed any offence under the clauses mentioned therein. The expression reasons to believe is an expression of considerable import and in the context of the CGST Act, confers jurisdiction upon the Commissioner to authorize any officer to arrest a person. This expression finds place in a number of statutes including fiscal and penal. Without dilating much, it can safely be said that the expression reasons to belief postulates belief and the existence of reasons for that belief. The belief must be held in good faith: it cannot be merely a pretence. Reasons to believe does not mean a purely subjective satisfaction. It contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief. The belief must not be based on mere suspicion; it must be founded upon information. Such reasons to believe can be formed on the basis of direct or circumstantial evidence but not on mere suspicion, gossip or rumour. It is open for a court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief. A rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the officer and the formation of his belief. Courts have also held that recording of reasons distinguishes an objective from a subjective exercise of power and is a check against arbitrary exercise of power. The Principal Additional Director General has recorded her reasons after going through the facts and the arrest proposal put up before her. She recorded that she had reasons to believe that the petitioner had committed the two offences as mentioned above, which are cognizable and non-bailable. Thereafter she noted that during the course of the investigation, petitioner had not co-operated with the department and had tried to mislead the investigation. Offences were committed with full disregard to the statutory provisions with intent to defraud Union of India of its legitimate revenue. Therefore, she agreed with the proposal to arrest the petitioner in order to ensure that he does not tamper with crucial evidence and does not influence the witnesses as well as does not hamper in the investigation process. The requirement under sub-section (1) of section 69 is reasons to believe that not only a person has committed any offence as specified but also as to why such person needs to be arrested. From a perusal of the reasons recorded by the Principal Additional Director General, we find that other than paraphrasing the requirement of section 41 Cr.P.C., no concrete incident has been mentioned therein recording any act of tampering of evidence by the petitioner or threatening / inducing any witness besides not co-operating with the investigation, not to speak of fleeing from investigation. In such circumstances, we are of the view that the Principal Additional Director General could not have formed a reason to believe that the petitioner should be arrested. Bail jurisprudence which has evolved over the years stands on a different footing altogether. This is more so in the present case when admittedly respondents have not lodged any first information before the police under section 154 Cr.P.C. Respondents have also not filed any complaint before the competent magistrate under section 200 Cr.P.C. In fact there was no formal accusation against the petitioner prior to arrest. The first time such accusation has been placed on record was after arrest that too in the form of remand application. A remand application by its very nature cannot be construed to be a first information or a complaint as is understood in law. If the remand application is excluded, then till today after 26 days of custody of the petitioner, there is still no formal accusation against the petitioner - the continuing the detention of the petitioner may not at all be justified. In a case of this nature, it is the duty of the constitutional court to strike a fine balance between the need for custodial interrogation and the right of an accused to personal liberty. It is directed that the petitioner shall be enlarged on bail subject to the following conditions:- 1) petitioner shall be released on bail on furnishing cash surety of Rs. 5,00,000.00 before the Additional Chief Metropolitan Magistrate, 8th Court, Esplanade, Mumbai and within two weeks of his release, to furnish two solvent sureties of the like amount before the said authority; 2) petitioner shall co-operate in the investigation and shall not make any attempt to interfere with the ongoing investigation; 3) petitioner shall not tamper with any evidence or try to influence or intimidate any witness; 4) petitioner shall also deposit his passport before the Additional Chief Metropolitan Magistrate, 8th Court, Esplanade, Mumbai.

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• 2021 (2) TMI 751
  Ineligible ITC availed - Blocking of its electronic credit ledger due to non-filing of GSTR-3B by its vendor - Rule 86A(1)(a)(i) of the Jharkhand Goods andService Tax Rules, 2017 - the case of the petitioner is that these notices have been issued without proper application of mind - Principles of natural justice - HELD THAT:- Under the revised notice the demand has been reduced since the tax dues have been partially deposited through the interim resolution professional. Petitioner has shown evidence of invoice and payment details, but instead of proceeding against the vendor (respondent no.4),the impugned notices have been issued for reversal of ITC against the petitioner. However, learned counsel for the petitioner does not dispute that a proceeding under Section 73(1) of the JGST Act read with Rule 142(1A) of the JGST Rules 2017 has been initiated against the petitioner and is presently pending before the respondent no.3. This Court is also of the view that the petitioner should subject himself to the proceedings initiated under Section 73 of the JGST Act before the respondent no.3 Deputy Commissioner of State Taxes, Adityapur Circle, Jamshedpur and produce all relevant documents, invoices, records, etc. for proper adjudication thereupon. It would not be proper for the Writ Court to enter into the merits of the controversy at this stage in such circumstances. Petitioner should appear before the respondent no.3 on 8th February 2021.

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• 2021 (2) TMI 750
  Principles of natural justice - validity of attachment order - case of petitioner is that no amount is due and payable and the order of attachment dated 4th of March, 2020 stands issued without application of mind - applicability of the provisions of Sections 16, 37, 39, 44 and 62 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- In the attending facts and circumstances, it would be only more appropriate, as is also so submitted by Shri Gautam Kumar Kejriwal, learned counsel for the petitioner, that the petitioner approaches the appellate authority highlighting the issues raised before this Court, as also pointing out the errors apparent on the face of record, if any, enabling the authority to reconsider the petitioner s case based on the material so placed. Petition disposed off.

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• 2021 (2) TMI 748
  Violation of Principles of Natural Justice - seeking opportunity of submitting its case and also of hearing on the issues of facts and law before any fresh decision is taken by the respondent assessing authority - HELD THAT:- The principles of natural justice in passing the order stands violated - the impugned order dated 30.11.2019 passed by the Respondent No.2, the Joint Commissioner of Sate Taxes, Danapur Circle, Patna needs to be quashed and set aside, for the same to have been passed without following the principles of natural justice. In terms of the impugned order, financial liability stands fastened. Thus, it entails civil consequences, seriously prejudicing the petitioner inasmuch as, without affording any adequate opportunity of hearing or assigning any reason. It stands clarified that deposit of such amount would be without prejudice to the respective rights and contentions of the parties and the order which the authority may pass upon the matter being remanded for consideration afresh - the impugned order dated 30.11.2019 passed by the Respondent No.2, the Joint Commissioner of Sate Taxes, Danapur Circle, Patna for the period 1st quarter of 2017-18 under Section 73(9) (50) of Bihar Goods and Service Tax Act, 2017 is set aside and following directions issued: (a) the petitioner shall deposit a sum of Rs. 10 lacs with the authority on or before 6th February, 2021; (b) the petitioner shall appear before the authority on 6th February, 2021 in his office at 10:30 A.M., on which date he shall place on record additional material, if so required and desired; (c) also, further opportunity shall be afforded to the parties to place additional material, if so required and desired; (d) petitioner undertakes to fully cooperate and not take any unnecessary adjournment; (e) the authority shall decide the matter on merits, in compliance of the principles of natural justice, on or before 3rd April, 2021; (f) liberty reserved to the parties to take recourse to such remedies as are otherwise available in accordance with law; (g) we have not expressed any opinion on merits and quashed the order only on the ground of violation of principles of natural justice. (h) if necessary, proceedings during the time of current Pandemic [Covid-19] would be conducted through digital mode; (i) needless to add, with the passing of the order, if it is eventually found that deposit made by the petitioner is in excess of the amount determined due and payable, the same shall positively be refunded expeditiously as per the provisions of the statute. Petition disposed off.

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• 2021 (2) TMI 705
  Clandestine manufacture and removal - excess stock of Perfume/Compound found in the residential premises - seizure and detention of excess found goods - Confiscation - HELD THAT:- It is found that on being asked by the officers of DGGI regarding documents pertaining to excess stock of perfume/compound found in his residence, Sh. Ashok Agarwal, Director of M/s. MPPL, Jaipur stated that the said perfume/compound were lying at his residence premise is pertained to M/s. MPPL, Jaipur and was kept to maintain the secrecy of their technical know-how of the product as they had to carry out certain process of blending perfume/compound in his residence premises since last one year. During the statement of Sh. Ashok Agarwal, Director of M/s. MPPL, Jaipur all seized records were shown to find out the relevant invoices of seized perfume/compound but he replied that he was unable to find out the relevant records of perfume/compound, seized by the officers of DGGI under panchanama dated 10/11-11-2017. Further, he had stated that they had purchased perfume/compound from M/s. Gupta Company, Delhi and M/s. Kelkar Company. Regarding excess/unaccounted stock of perfume/compound valued at Rs. 15,79,200/- found unaccounted during search on 10-11-2017, no plausible explanation regarding their procurement/non-accountal of the same in their records/books of account was put forward by the appellant neither during the time of search nor afterwards. Sh. Ashok Agarwal, Director of the appellant company who was looking after the day-to-day affairs of the company and also personally supervised daily activities also admitted the unaccounted stock of perfume/compound and agreed to pay the applicable tax. Further, he has abetted and assisted the clandestine manufacture and removal of taxable goods by acquiring possession, removing, depositing, keeping, concealing and dealing in goods which he knew were liable to confiscation. The appellants have acted intentionally in order to avoid payment of CGST/SGST and did not maintain proper record of the stock of raw material perfume/compound found excess stored in their residence premises, as required under Rule 56 of the CGST Rules, 2017. Further, they did not file monthly/periodically return in respect of the said goods procured and stored in their factory premises as required under the law. They did not maintain stock details of the aforesaid goods in the stock register and did not file monthly GSTR-1 and GSTR-3B returns which also shows that these perfume/compound were procured without any valid documents and intended for manufacture of finished goods to be cleared without payment of tax and the finished goods were intended for clandestine removal without payment of Tax. The appellants were required to comply the provisions of law and to follow the procedure as prescribed under CGST Act/Rules but the appellants have completely failed to do so. Therefore, the goods found in excess/unaccounted were liable for confiscation under Section 130 of the CGST Act, 2017 read with Rule 139 of CGST Rules, 2017 and read with Section 130 of the Rajasthan GST Act, 2017 and the appellants were also liable for penal action under Section 122(1)(xvi) and (xviii)/125 of the CGST Act, 2017 and the Rajasthan GST Act, 2017 - Sh. Ashok Agarwal, Director of the Company was responsible for day-to-day affairs of the company had consciously and deliberately indulged in activities of clandestine manufacture and clearance/supply of taxable goods. Therefore, he is also liable to penalty under Section 122(3)/125 of the CGST Act, 2017. The reliance placed by the appellants in their defence is squarely not applicable in the instant case. Appeal dismissed.

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• Income Tax

• 2021 (2) TMI 764
  Assessment u/s 153A - no incriminating material found in search - HELD THAT:- No substantial question of law arises, as the matter is squarely covered by Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] which has been correctly applied to the facts of the case by the ITAT. The ITAT, in the impugned order has held that in the audited report filed by the assessee along with the report, cash book, ledger, bank book etc. were mentioned; that the respondent assessee was maintaining books on TALLY Accounting Software which was seized during the search and was being treated as incriminating material; however, regular books of account of the assessee, by no stretch of imagination, could be treated as incriminating material to form basis of framing assessment under Section 153A read with Section 143(3) . Assessment for the Assessment Years 2008-2009 and 2009-2010 were completed under Section 143(3) vide orders dated 28th July, 2010 and 31st May, 2011 respectively and audited books of account were thoroughly examined and details of purchase of milk must have been scrutinized as it was part of audited financial statement of accounts; as per Kabul Chawla supra, completed assessments can be interfered only on the basis of some incriminating material unearth during the search. With respect to the Assessment Years 2010-2011 to 2012-2013, the ITAT held that though no assessment was framed under Section 143(3) but it could safely be concluded that the period of limitation for issuing a notice under Section 143(2) expired much before the date of the search; reliance was placed on Chintels India Ltd. Vs. Deputy Commissioner of Income-Tax [ 2017 (7) TMI 746 - DELHI HIGH COURT] holding that once an assessee does not receive a notice under Section 143(2) of the Act within the stipulated period, such an assessee can take it that the return filed by him has become final and no scrutiny proceeding are to be undertaken with respect to that return. Revenue appeal dismissed.

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• 2021 (2) TMI 763
  Refund claim on Fringe benefit tax value as per Section 115 WD(4) paid in excess - petitioner took the stand that the value of contribution to statutory pension fund cannot be considered as a perquisite and therefore, cannot be regarded as fringe benefit under the Income Tax Act - petitioner remembered that they had erroneously paid FBT for the year 2007-08 - request for refund rejected - Power and jurisdiction of the first respondent in entertaining the claim of refund - CIRCULAR 9/2015 [F.NO.312/22/2015-OT] states that any claim of refund exceeding Rs. 50.00 lakhs shall be considered by the Board - The learned standing counsel pointed out that this Court had invoked Section 119 of the Income Tax Act in favour of the petitioner. But then, the circular issued by the board circumscribes the power and jurisdiction of the first respondent in entertaining the claim of refund. The petitioner seeks refund to the tune of more than two crores. Therefore, according to him, if all all the claim could have been considered only by the Board not by the first respondent.this circular talks of an outer time limit for entertaining the refund application. When the circular states that a claim for refund will not be entertained beyond six years from the end of the assessment year for which the claim is made, that will have to be given a strict application. HELD THAT:- We find the contentions of the learned standing counsel to be sustainable - we are not in a position to interfere with the order impugned in the writ petition. Also note that the first respondent has not at all taken note of the spirit of my order dated 12.06.2019 - if the petitioner was not liable to be pay any fringe benefit tax, then, the department ought to have refunded the same. The income tax department being an arm of the State is bound by the constitutional mandate enshrined in Article 14 of the Constitution of India. In other words, the department is bound by the principles of fairness and reasonableness. As conscious that any taxing statute will have to be construed strictly and there is no scope for applying equitable principles. But the case on hand is not one of tax liability. As per the legal position that is presently prevailing, the petitioner was not at all liable to have made any payment of FBT in respect of contribution towards Superannuation Fund. In fact, the case on hand turns less on the maintainability of the claim for refund, but more on the lawfulness of the department in retaining the amount paid by the petitioner without any corresponding legal liability. The circular issued by the Central Board of Direct Taxes is no doubt binding on the authorities including the first respondent. But then, a constitutional court is not bound by such a circular. Section 119 of the Act also does not have any limitation. We permit the the petitioner to file an appropriate application before the Central Board of Direct Taxes. Since as on date there is absolutely no tax liability on the part of the petitioner herein, the said application will be entertained without reference to limitation. CBDT will pass orders on the petitioner s application thereon within a period of twelve weeks.

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• 2021 (2) TMI 760
  Draft assessment order passed in the name of company as merged/amalgamated with the petitioner company - succession to business otherwise than on death - HELD THAT:- Since, the transferor company Mando India Ltd. had merged with the petitioner Mando Automotive Private Limited (formally Mando India Steering Systems Private Limited) with effect from 01.04.2013 in terms of the order of amalgamation dated 25.06.2013 and since the returns under Section 139 of the Income Tax Act, 1961 for the Assessment Year 2013-14 was filed in the name of defunct transferor Mando India Ltd, it is clear that the petitioner is bound by return filed by its director. Further, from a reading of Section 170 of the Income Tax Act, 1961, it is clear that the successor shall be assessed in respect of the income of the previous year after the date of succession. It was incumbent on the part of the petitioner to have either got the PAN Number altered or surrendered, it should have filed a composite return in its name in terms of the Sanction Scheme of Amalgamation. Under Section 2(1B) of the Income Tax Act, 1961, all the properties and liabilities of the amalgamating companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation. Therefore, the petitioner cannot disown its liability as a successor. Further, it is a paradox for the petitioner to expose the course of dead and defunct company in this Writ Petition if according to it the said company does not exist. As per the Sanctioned Scheme of amalgamation, all tax and liability of the transferor company (Mando India Limited), from the appointed dates, shall, for all purposes, be treated as the tax, cess, duty, liabilities or refunds, claims and etc. Further, the Sanction Scheme of amalgamation mandates the petitioner to file necessary revision in the income tax returns also pursuant to provisions of the Scheme. Petitioner had taken over all the assets and liabilities of the said Mando India Limited. The petitioner should have filed in its tax return a composite tax return including the return for the Assessment Year 2013-2014 of the said Mando India Limited. Instead, the petitioner deliberately filed return in the name of the transferor company (Mando India Company) on 29.11.2013 which had already ceased to exist with effect from 01.03.2013. Petitioner deliberately mislead the Income Tax Department by assuming that it can file returns with the Permanent Account Number (PAN) of a defunct transferor company with the view to take undue advantage of certain lines of decision to force the Income Tax Department to commit such mistake. Permanent Account Number (PAN) signifies the identity of an assessee under the Income Tax Act, 1961 for assessment. Therefore, no merits in the submission of the learned counsel for the petitioner. Petitioner played a trick on the Income Tax Department to hoodwink its liability. Since the return was filed by the petitioner in the name of a non-existing company namely Mando India Ltd, the petitioner cannot take advantage of its own mistake and turnaround and state that the respondent has passed the wrong order in the name of non-existing company. WP dismissed.

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• 2021 (2) TMI 758
  TDS u/s 194C OR 194J - payments made to M/s. Karnataka Board and M/s. Rites Ltd for rendering of services in connection with construction of Engineering and Polytechnic college Buildings in the State of Karnataka - relationship between the assessee and RITES and Karnataka Housing Board was principal and agent OR not? - HELD THAT:- Assessee is a wing of Government of Karnataka carrying out the constitutionally mandate function of imparting education to the students in the state of Karnataka. It was further held that appellant controls the technical education being provided in around 195 Engineering Colleges, 291 Polytechnic Colleges, 12 Junior Technical Schools and 76 fine Arts College. It has further been held that the government of Karnataka directed the assessee to appoint a particular agency like M/s Rites Ltd. Or M/s Karnataka Housing Board for every new building. The agency is remunerated by providing a specific percentage usually around 7% to 10% of the project cost for each building in the form of service charges. It has further been held in paragraph 8.10, the Commissioner of Income Tax (Appeals) has gone into details of memorandum of understanding entered into with M/s Rites Ltd. or M/s Karnataka Housing Board and has held that the provisions of Section 194C are not applicable to the facts of the case. The aforesaid finding of fact has been affirmed by the tribunal. In the peculiar facts of this case, we are not inclined to interfere with the concurrent findings of fact, in the absence of any perversity being demonstrated before us. Therefore, the substantial question of law is answered against the revenue and in favour of the assessee.

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• 2021 (2) TMI 757
  Deemed dividend addition u/s 2(22)(e) - amount received in lieu of Security Deposit and Lease Rentals - ITAT treated it as loans or advances within the meaning of Section 2(22)(e) - HELD THAT:- The word loan means anything lent specially money on interest whereas, deposit means a sum of money paid to secure an article at service etc. Therefore deposit is not covered by the decision of Section 2(22)(e) of the Act. In the instant case, the assessee received certain sum from the company which was subsequently adjusted with the security deposit. The company did not give loan to the assessee to construct a building but kept a deposit as any other commercial transaction. The sum so paid has been adjusted towards security deposit which is evident from the books of the company and therefore, the aforesaid deposit is outside the purview of Section 2(22)(e) amounts to trade advances which was recovered from rentals during the usual course of business. The trade advances arising during usual course of business and not for individual benefit of the assessee and the same amounts to advance payment of the rents adjusted monthly with the ledgers of the assessee. Commissioner of Income Tax (Appeals) has also held that under the commercial transactions, the assessee had given prime property and after construction to the company and the company was benefited as the building after construction was let out to the company at much lower rate than the market price and therefore, the transaction in question is commercial transaction and is outside the purview of Section 2(22)(e) of the Act.- Decided in favour of assessee.

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• 2021 (2) TMI 756
  Block assessment - whether block assessment years 1986-87 to 1996-97 is barred by limitation? - excess depreciation is to be brought to tax in the block assessment made under chapter XIV-B - HELD THAT:- Matter was remitted to tribunal for fresh consideration. The finding of the tribunal that the issue with regard to limitation cannot be adjudicated as the same would be beyond the purview of the order of remand cannot but be said to be perverse. The order passed by the tribunal was set aside in its entirety by this court. Therefore, it was open for the assessee to raise the plea of limitation. Therefore, the first substantial question of law is answered accordingly. Since, the tribunal has not adjudicated the issue with regard to limitation, the impugned order dated 17.10.2014 passed by the tribunal insofar as it pertains to finding with regard to the issue of limitation is hereby quashed and the tribunal is directed to decide the issue of limitation with regard to the order of assessment passed by the Assessing Officer for the block assessment years 1986-86 to 1996-97.

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• 2021 (2) TMI 755
  Telescoping benefit to unexplained investment - telescoping of expenses to be allowed against income declared - benefit of matching principle - As assessee while inviting attention of this Court to the judgment of the Supreme Court in J.K. Industries Limited and Another Vs. Union of India and Others [ 2007 (11) TMI 401 - SUPREME COURT ] submitted that the assessee is entitled to the benefit of matching principle. HELD THAT:- In view of the law laid down by the Supreme Court in J.K. Industries Limited (supra) and in view of the aforesaid decision, the assessee is entitled to take a plea with regard to the matching principle and since the assessee has not been heard on the aforesaid issue, we deem it appropriate to quash the order passed by the Tribunal in so far as it pertains to the appeal preferred by the revenue and remit the matter to the Tribunal to decide the same afresh after affording an opportunity to all the parties on the aforesaid issue. Needless to state that it will be open for the parties to raise all the contentions which are admissible in law to them. Therefore, it is not necessary for us to answer the substantial questions of law.

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• 2021 (2) TMI 752
  Reopening of assessment u/s 147 - independent application of mind or not? - AO relied upon information received from the Investigation Wing, Surat, while recording the reasons for reopening of the assessment - undisclosed bank account of the writ applicant - HELD THAT:- Authority concerned had relied on the primary information of the undisclosed account and after independent inquiry and upon verification of the return of income and other documents, recorded his satisfaction and formed a reasonable belief that, the income of the writ applicant has escaped assessment and therefore, the reasons recorded for reopening of the assessment as referred to above, we are of the view that, the Assessing Officer was justified to reopen the assessment. The income of return for the year under consideration, was not taken on further scrutiny as provided under Section 143(3) and the same was accepted under Section 141 of the Act. It is required to be noted that, Section 139 of the Act impose an obligation on the assessee to furnish voluntarily a return of his total income and further makes it obligatory to disclose all material facts necessary for his assessment for that year fully and truly. It was the duty of the assessee to bring to the notice of the respondent with regard to transactions made in the bank account which were relevant for the assessment for that year. Merely submission or production of books of accounts or other documents is not sufficient. It is profitable to refer the explanation 1 of Section 147 of the Act, which explains that, the production before the Assessing Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of foregoing proviso. Thus we hold that, details available in the books of account for balance sheet or profit or loss account cannot absolve the assessee from his disclosure obligation under Section 147 of the Act as in the instant case, without any scrutiny, the original return was process under Section 143(1) of the Act. It cannot be said that there was no material before the Assessing Officer to reopen the assessment and he proceeded mechanically based on the sole information received from the Investigation Wing and the impugned notice is without jurisdiction and contrary to Section 147 - Decided against assessee.

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• 2021 (2) TMI 743
  Assessment u/s 153A - HELD THAT:- During the course of search itself assessee was asked the questions about the brokerage income received on the land transaction between the two parties, the proof of which was found during the course of search. It is not the case that the Ld. A.O has initiated fresh enquiry during the assessment proceedings carried out u/s 143(3) r.w.s. 153A - Had there been no reference to any seized material qua the statement given during the course of search the assessee had a strong case on legal ground but it is not so in the instant case. Since there is a specific reference in the assessment order of the incriminating material found during the course of search which instigated the search team to ask various questions regarding the actual income earned by the assessee, it cannot be said that the alleged addition is made without referring to any incriminating material. Therefore the assessee fails to succeed on this legal ground which in our considered view deserves to be dismissed. Accordingly the additional ground raised by the assessee is dismissed. Addition for unaccounted brokerage income - HELD THAT:- We find that during the course of search assessee was asked specific question regarding the alleged unaccounted brokerage income which was subsequently confronted to the assessee during the assessment proceedings. There is no issue with regard to the income offered for Assessment Year 2009-10 and 2010-11. Out of the brokerage the fact that Rs. 10,00,000/- has been offered to tax is accepted by the Ld. A.O. Regarding the remaining amount of Rs. 17,00,000/-, sum of Rs. 7,00,000/- is claimed by the assessee to have not been received till date. Revenue has failed to discharge its onus by bringing any material on record found during the course of search or post search by way of gathering information from the parties who agreed to give brokerage to assessee that the assessee has actually received the brokerage of Rs. 7,00,000/-. Departmental Representative could not controvert the fact that the assessee is showing the income on cash basis and in absence of any material against the assessee we find no justification in the addition of Rs. 7,00,000/- for the income which the assessee has not received yet. However Ld. Counsel for the assessee has stated that in case it is received in subsequent year/years the same shall be offered to tax. As regards the remaining amount which the assessee has accepted to have received in cash during financial year 2013-14 relevant to Assessment Year 2014-15 and duly claimed to have been offered to tax, the same can be examined by Ld. A.O by calling necessary details relevant to Assessment Year 2014-15 in order to ascertain the correctness of the assessee s claim. In case it is found correct then the Ld. A.O will delete the addition of Rs. 10,00,000/- A.O is directed to extend reasonable opportunity of being heard to the assessee to place necessary submission and documents on record. Addition of Rs. 17,00,000/-, the addition of Rs. 7,00,000/- stands deleted and the remaining addition of Rs. 10,00,000/- shall stand deleted if the assessee is able to prove to the satisfaction of Ld. A.O that sum towards brokerage income earned from the transaction of immoveable property between M/s D.S. Enterprises and late Maharani Laxmi Kumari (concluded during Assessment Year 2009-10) have been offered to tax in the Income Tax Return filed for Assessment Year 2014-15.

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• 2021 (2) TMI 742
  Addition u/s 68 - credits in the form of NSC commission - On perusal of the reply of the Manager SBM, Holenarasipura Branch, the AO found that some of the credit entries had a description NSC commission received from Post Master, Holenarasipura - HELD THAT:- Impugned addition can be examined within the parameters of section 69A of the Act as that would be the proper provision of law applicable in the present case. As rightly contended by the learned DR, the Hon ble Karnataka High Court in FIDELITY BUSINESS SERVICES INDIA (P.) LTD. [ 2018 (7) TMI 1738 - KARNATAKA HIGH COURT] has not chosen to follow the ratio laid down by the Hon ble Allahabad High Court in the case of Smt. Sarika Jain[ 2017 (7) TMI 870 - ALLAHABAD HIGH COURT] and has upheld powers of Tribunal in an appeal as encompassing very wide range. On merits on the addition made by the AO addition to the extent which is a credit appearing in the bank account as on 01.03.2010 cannot be sustained as the same is an amount transferred from SBM, Doddaballapur Branch. Credit to this extent stands explained and addition to this extent is directed to be deleted. As far as addition being an entry appearing in the bank account on 23.03.2010 being the amount received from C. D. Padmanabha, the issue has to be examined afresh by the AO and the assessee has to explain the nature of this credit. Similarly, addition of Rs. 1,51,738/- being the credit appearing in the bank account as on 03.04.2010 is a credit appearing in the books of accounts of the assessee of the previous year relevant to Assessment Year 2010-11 and therefore this addition cannot also be sustained and the same is also directed to be deleted. With regard to other credits, the issue is remanded to the AO for considering afresh as the CIT(A) has not adjudicated the issue and the issue requires verification at the AO s end. The AO is directed to afford the assessee right to cross-examine the persons from whom the AO received information and based on which he made the impugned addition. The AO will afford opportunity of being heard to the assessee. Disallowance of 40% of expenditure claimed by the assessee in earning income from LIC - HELD THAT:- It is clear from perusal of the conclusion in the CIT(A) s order that he has agreed with the contention of the assessee that the disallowance of expenses is on the higher side. Nevertheless, he has sustained the addition for want of supporting evidence filed by the assessee - disallowance of 15% of the expenses claimed by the assessee would be just and reasonable considering the facts and circumstances of the case and the observations of the CIT(A).

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• 2021 (2) TMI 741
  Income from undisclosed sources - money deposited in the bank account - HELD THAT:- It is clear from the orders of the revenue authorities that they not made any reference to the documentary evidence filed by the assessee. The case of the Revenue appears to be that M/s. Sneha International was rotating cash by transferring funds to various entities. M/s. Sneha International received cash and thereafter transfered funds to M/s. Sherawali Corporation and M/s. Venkata Industries who in turn transferred funds to the Assessee in the form of RTGS bank Transfer. The claim of the Assessee was that the receipts by the Assessee from the aforesaid two parties was for sale of shares of a company by name Mag Impex Ltd., was not disbelieved either by the AO or the CIT(A). As far as the assessee is concerned, he has filed confirmation of Sherawali Corporation and Venkata Industries. CIT(A) has ignored this confirmation on the ground that the signature of the confirming parties were barely visible. The address of the confirming parties are very much available in the confirmation and if any doubt persisted on the veracity of the confirmation, then the proper course would have been to issue summons to the confirming parties to find out the truth or otherwise of the transactions on sale of shares on account of which monies were received by the assessee through banking channels. CIT(A) has confirmed the addition made by AO ignoring the evidence available on record. In my view the evidence filed by the assessee satisfactorily explains the credits in question and the impugned addition has been made ignoring the material on record on the basis of surmises and conjectures. There is an allegation that it is Assessee s money which went to Sneha International and that was deposited by Snehal International in a bank account and from that bank account funds were transferred to M/S.Sherwali Corporation and M/S.Venkata Industries, but there is no evidence to substantiate such allegation. Assessee has produced material evidence to show that the sum in question was received on account of sale of shares and no evidence has been brought on record to counter the plea of the assessee. No such evidence has been brought on record in the present case except to make an allegation that Sneha International was involved in rotating cash and the bank transactions in question had been made by Sneha International in favour of M/S.Sherwali Corporation and M/S.Venkata Industries after depositing such cash in their bank account. The learned Counsel has rightly placed reliance on the decision in the case of Orissa Coporation Pvt. Ltd., [ 1986 (3) TMI 3 - SUPREME COURT] and case of ACIT Vs. Hanuman Agarwal [ 1983 (9) TMI 25 - PATNA HIGH COURT] for the proposition that without issuing summons under section 131 of the Act to a party who filed confirmation, no adverse inference can be drawn by the AO - Appeal by the assessee is allowed.

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• 2021 (2) TMI 740
  Disallowance of commission expenses - assessee failed to produce the requisite evidences, including contract agreement between the parties - assessee sought to justify the commission expenses only in view of the tax deducted at source by the assessee - HELD THAT:- Before us, assessee has submitted that the commission deducted by the digital platform company, namely, Homeshop 18 also included taxes, refunds, shipping and freight charges etc. as per the agreement with the said company. Assessee has undertaken before us that the relevant document shall be filed before the Assessing Officer and, therefore, one more opportunity may be provided to the assessee. I n view of the submissions of the assessee and in the interest of substantial justice, we feel it appropriate to restore this issue back to the file of the Assessing Officer for deciding afresh in the light of the documentary evidences including, agreement with the digital platform company to whom the commission has been paid. Accordingly, the order of the learned CIT(A) is set aside and the issue in dispute is restored back to the file of the Assessing Officer for deciding afresh. Appeal of the assessee is allowed for statistical purposes.

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• 2021 (2) TMI 739
  Exemption u/s 11 - Registration u/s 12AA denied - donation to Roman Catholic Diocese Private Limited - during the year under consideration admittedly the said donee entity was never engaged in the activities of medical relief and running of hospitals - whether donation given by one charitable institution to another charitable institution is to be treated as application of income u/s 11 and is exempt from income-tax? - as per AO object of the donor and the donee society are not same, as can be seen from their Memorandum of Association, and hence said amount cannot be considered as application of income for charitable purposes - HELD THAT:- we do not find that any clause in the object clause of Memorandum of Association of the assessee was wide enough to cover the activities in the field of education , as all the clauses are towards incidental and attainment of main object of the assessee to establish and run hospitals, nursing homes , welfare homes , rest houses for the good and benefit of the people. The entire object clauses of the assessee as well of the donee are reproduced by ld. CIT(A) in its appellate order. The Residuary clause M is also towards the attainment of main object of the assessee to establish and run hospitals, nursing homes , welfare homes , rest houses for the good and benefit of the people, - Thus, in our considered view the act of donating/contributing Rs. 72, 00, 000/- as donation by the assessee to donee viz. Roman Catholoc Diocose Private Limited , was ultra vires the object clause of the donor and does not comply with the mandate of Section 11(1)(a). It is true that the assessee can either itself carry out charitable activities or it can contribute to other trust or institution who is carrying on the activities which are also the same/similar as per assessee s object clause in Memorandum of Association. The assessee s Memorandum of Association permit carrying on activities to establish and run hospitals , nursing homes, welfare homes , rest houses for the good and benefit of the people and the assessee infact is engaged in running hospital and school of nursing at Allahabad, while the donee entity namely Roman Catholic Diocese Private Limited is engaged in the activities in the field of education.. Although , the object clause of Roman Catholic Diocese Private Limited refers to hospitals , but what transpires from enquiries conducted by lower authorities that during the year under consideration admittedly the said donee entity was never engaged in the activities of medical relief and running of hospitals , and in fact it utilized the donation of Rs. 72 lacs received from assessee for the purposes of education. The objects of the donor viz. assessee only permitted to engage in activities to establish and run hospitals, nursing homes, welfare homes, rest houses for the good and benefit of the people, and other objects which are incidental to the attainment of above main object . The objects as are approved by assessee no where stipulated engaging in educational activities and its act in donating Rs. 72 lacs to a charitable organization namely M/s Roman Catholic Diocese Private Limited who is engaged in educational activities, is an act ultra vires to the object clause of the assessee and also does not fulfill the condition as stipulated u/s 11(1)(a) to apply its income for such purposes in India . Thus, based on detailed discussions above, we hold that the assessee will not be entitled for exemption of Rs. 72 lacs paid by it as donation to M/s Roman Catholic Diocese Private Limited, under the provisions of Section 11(1)(a) of the 1961 Act and the appeal filed by assessee fails.

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• 2021 (2) TMI 738
  Revision u/s 263 - Disallowance u/s 14A - HELD THAT:- No doubt that the Ld. A.O has raised specific query with regard to huge interest expenditure as to whether they were allowable as business expenditure and secondly issue of disallowance u/s 14A of the Act and to these specific queries detailed replies were filed by the assessee which are stated above and duly considered by Ld. A.O and he after discussing the issue in detail in the assessment order has confirmed the disallowance u/s 14A of the Act. It thus shows that the present case is neither of no enquiry or incomplete enquiry at the end of the Ld. A.O nor the order u/s 143(3) of the Act can be said to be erroneous so far as prejudicial to the interest of revenue as the Ld. A.O has taken one of the possible views provided under the law and the application of mind by the Ld. A.O is clearly discernable from records as well as the assessment order. There was no room left for Ld. PCIT to have assumed his jurisdiction u/s 263 of the Act on the issues raised in the show cause notice. We accordingly quash the impugned order passed u/s 263 of the Act and restore the assessment order u/s 143(3) of the Act dated 28.8.2016. The sole ground raised by the assessee is allowed.

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• 2021 (2) TMI 737
  Unexplained cash credit u/s 68 - cash deposited during the demonetization period - AO acknowledges that the assessee has filed audited accounts and produced copy of the ledger of the sales and purchases along with copy of the books related to the purchase and sales made by the assessee without supporting bills and invoices - HELD THAT:- As brought to notice by the Ld. A.R that assessee is into dry fish business and his accounts are audited for the last seven (7) years. - the profit embedded in sales amunt has been accepted by the AO, so, question is whether separate addition is justified and whether this action of AO amounts to double addition of the same trading receipt. No doubt in such a factual scenario, it amounts to double addition. When the justifiability of separate addition is to be examined, it should be borne in mind that the AO is making a guess about the source of demonetized currency. And the assessee is assailing the guess work with an explanation which should be tested; and if the explanation given by the assessee is a plausible/probable from a traders/business man s/prudent man s angle/view, then that cannot be brushed aside by the AO, without disproving the explanation / facts or by giving cogent reasons. Statement of bank accounts of assessee (3 bank accounts) it is noted that assessee has deposited in his three bank account (pre-demonetization) an amount to the tune of Rs. 2,38,94,037/- and during (Post-demonetization period) the assessee had deposited to the tune of Rs. 2,38,94,037/- and it is found that the total bank deposit tallys with the figure shown in trading account i.e., Rs. 4,76,78,990/- (Rs. 4.76 crores). So taking into account all these facts and circumstances and demonetization being declared on the night of 8/9th November, 2016, it is noted that AO has accepted the invalid currencies to the tune of Rs. 11,08,796/- because it was shown by the assessee in his regular books maintained as on 08.11.2016. The assessee s explanation in respect of Rs. 12,41,704/- is that it is the amount which has been deposited by the sundry debtors as on 08.11.2016 which is found to be correct for the reason that the sundry debtors as on 08.11.2016 was to the tune of Rs. 14,93,120/- as is evident from the list of sundry debtors . So on the same reasoning as adopted by the AO to have accepted Rs. 11,08,796/- (invalid currency notes) as genuine (trade receipt), I find no reason not to accept the explanation of assessee that Rs. 12,41,704/- was deposited by the sundry debtors reflected in the books as on 08.11.2016. And since the AO has accepted the sales/turnover of the assessee which were reflected in the audited books of accounts, as well as the explanation of assessee is supported by material on record, the AO/Ld. CIT(A) s action of addition of Rs. 12,41,704/- cannot be countenanced. So on this factual finding the assessee s explanation regarding Rs. 12,41,704/- is plausible. And it is noted that the AO / Ld. CIT(A) / Ld. D.R could not disprove or controvert this fact and so it is accepted. In the aforesaid facts and circumstances, the assessee depositing invalid notes to the tune of Rs. 12,41,704/- cannot be dis-believed as from any tainted source or termed as black money. So taking into consideration the peculiar over all facts and circumstances discussed supra, it is directed that the addition of Rs. 12,41,704/- be deleted - Appeal of the assessee is allowed.

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• 2021 (2) TMI 736
  Allowable revenue expenditure u/s 37(1) - Contribution made to Star Shiksha Samity which runs a school in the Mills compound of the appellant for education and welfare activities of the children of the employees - according to AO it is in the nature of donation and liable to be disallowed - HELD THAT:- We note that explanation 2 to section 37(1) of the Act came into operation w.e.f 01.08.2015 and cannot be held as retrospective. We also find that this claim of the assessee is not as per the CSR - we note that the expenses have been claimed under the head staff/labour and other welfare expenses and the fact discernable is that the assessee maintains a school in the name of Star Paper Mill Higher Secondary School in its own mill compound and as well as expenses are meant for the maintenance of the school as well as play ground etc. which are for the welfare of the children of the mill workers as well as to the local residents have not been controverted by the authorities below. Since such similar claims made by the assessee for maintenance of school has not been disallowed in the earlier years, so by applying principle of consistency we direct the AO to allow the expenditure claimed by the assessee. Expenditure u/s 43B on the payment basis - payments in respect of entry tax on fuel kept under advance account in the balance sheet - HELD THAT:- The entry tax levied by the Govt. of UP is an allowable deduction u/s 43B sub-clause (a) of the Act provided the amount is remitted by the assessee (entry tax) and will be allowed in the year in which the sum is actually paid by the assessee . Since the issue of tax which was paid to the UP Govt. was sub-judice, as discussed supra, the assessee did not claim the deduction but was shown in the balance sheet as advance, and did not claim in its return of income. And since this claim/ground is raised before us for the first time, in the interest of justice, this issue is remanded to the file of AO for verification. If the AO finds that the assessee has actually paid the entry tax to the Govt. of UP as entry tax and has not claimed deduction in its ROI, then the sum may be allowed in accordance to section 43B of the Act. Appeal of the assessee is allowed for statistical purposes.

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• 2021 (2) TMI 735
  Addition u/s 68 - search seizure operation under section 132 - substantial increase in the share capital and introduction of share premium during the year under consideration - HELD THAT:- Assessee produced sufficient documentary evidences before A.O. to prove the ingredients of Section 68 - A.O. did not make any further enquiry on the documents filed by the assessee and also did not make any inquiry from the Investors directly or indirectly. A.O. failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between the Investors and the assessee. A.O. has also not brought any evidence on record that even if the share applicants did not have the means to make the investments, the investments made by them actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. Assessee discharged its initial onus to prove the identity of the Investors, their creditworthiness and genuineness of the transaction in the matter. The Ld. CIT(A), therefore, rightly deleted the part addition in respect of 26 creditors with reference to the present Departmental Appeal. - Decided in favour of assessee.

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• 2021 (2) TMI 734
  Validity of reopening of assessment - unexplained bank deposits - reasons recorded for reopening of the assessment are reproduced above in which A.O. has mentioned that as per information received from REIC through Income Tax Officer, Ward-43(4), New Delhi, assessee has involved in smuggling of various banned items - HELD THAT:- As assessee has explained that assessee-firm is engaged in business of trading and exporting various products. A.O. did not dispute the explanation of assessee that assessee is an exporter. Therefore, whatever sale proceeds were received by assessee in assessment year under appeal from foreign buyer, have been deposited into the impugned bank accounts of the assessee. The details of the same are noted in the assessment order. A.O. ultimately did not make any addition against the assessee of the impugned amounts as have been mentioned in the reasons recorded for reopening of the assessment. A.O. has also not made any addition against the assessee on account of any income earned by assessee through smuggling activities. The A.O, thus, recorded wrong, incorrect and non-existing reasons in the reasons recorded for reopening of the assessment. It would also show that A.O. did not apply his mind to the information received from REIC through ITO, Ward-43(4), New Delhi. The A.O. without any basis has recorded wrong, incorrect and non-existing reasons for reopening of the assessment. The A.O. also did not mention in the reasons that as to how much amount, the income chargeable to tax has escaped assessment in the case for assessee for assessment year under appeal. All these facts clearly support the explanation of assessee that A.O. without any cause or justification recorded wrong, incorrect and non-existing reasons for reopening of the assessment. As relying on SHRI NATRAJAN MONIE VERSUS THE INCOME TAX OFFICER, WARD 2 (5) , GURGAON. [ 2020 (12) TMI 345 - ITAT DELHI] it is clear that A.O. has recorded incorrect, wrong and non-existing reasons in the reasons recorded for reopening of the assessment reproduced above and have also did not apply his mind to the information received from REIC through ITO, Ward-43(4), New Delhi. Therefore, we are of the view that reopening of the assessment is illegal and bad in Law and liable to be quashed. - Decided in favour of assessee.

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• 2021 (2) TMI 733
  Deduction towards prior period expenditure - crystalization of work/services rendered in earlier year - mercantile system of accounting followed - CIT-A deleted the addition - HELD THAT:- It is not in dispute that the accounts of the assessee have been prepared in accordance with the mandate provided under the Electricity Act. The clear statutory mandate issued by the Government with regard to maintenance of accounts enabled the assessee company, being a Public Sector Undertaking (PSU), to disclose the prior period expenses and prior period income separately in its accounts. CIT(A) had duly recognised the method of accounting regularly followed by the assessee in the instant case. We find that the ld. CIT(A) had taken due cognizance of each and every item pertaining to prior period expenses and had understood the modus operandi thereon and duly appreciated the fact of assessee company conducting its operations with huge net work which eventually explains the time taken for accounting of various expenses contributing to the delay and slippage of an annual accounting year. CIT(A) also took note of the accounts of the assessee company getting scrutinized by Statutory Auditors, Internal Auditors and also by the Controller of Auditor General of India. It is pertinent to note that none of them had given any adverse remarks about the aspect of prior period expenditure. We find that the ld. CIT(A) had categorically given a finding that all the expenses reflected in the prior period expenses except the one which were voluntarily disallowed by the assessee in the return of income, though debited to prior period expenditure during the year, got crystallised during the year under consideration and hence, becomes allowable expenditure. None of these findings given by the ld. CIT(A) were rebutted by the Revenue before us. We also find that the Hon ble Jurisdictional High Court in the case of yet another Public Sector Undertaking in CIT vs. Mahanagar Gas Ltd.[ 2013 (7) TMI 118 - BOMBAY HIGH COURT] had an occasion to go through the same issue. Thus we find no infirmity in the order of the ld. CIT(A) granting relief to the assessee in respect of prior period expenditure. Accordingly, the grounds raised by the revenue in this regard are dismissed

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• 2021 (2) TMI 732
  Rectification u/s 254 - Revision u/s 263 - two rounds of appeal before the ITAT against the order of learned CIT passed under section 263 - fulfilment of condition under section 80IB - MA against the ITAT order arising that ITAT has not considered the issue raised. Proper opportunity to the assessee has not been given by the learned CIT while passing the order under section 263 - HELD THAT:- In the first round of appeal before the ITAT, on assessee s plea that assessee has not been provided proper opportunity and there has been violation of principle of natural justice the ITAT had already remanded the matter to the learned CIT. Thereafter the learned CIT gave the assessee proper opportunity of being heard and passed afresh order. This order was duly upheld by the ITAT discussing all the facets of the merits. Now again the assessee is filing miscellaneous application contending that assessee has not been given proper opportunity by the learned CIT in as much as final order u/s. 263 is on a different ground than that was mentioned in the notice u/s. 263. Hence there is violation of principles of natural justice. We note that notice u/s. 263 is not something which the learned CIT issues in the second round of proceedings before him. Hence, in our considered opinion the assessee is seeking review of the order already passed after duly considering all the facts. This is not permissible under section 254(2) of the I.T. Act. Miscellaneous Application stands dismissed.

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• 2021 (2) TMI 731
  Reopening of assessment u/s 147 - Validity of notice issued - non specification of reasons to believe - CIT-A quashed notice - HELD THAT:- In the instant case, there is no mention in the notice issued u/s 148 of the I.T.Act that escapement of income was due to failure on the part of the assessee to make true and full disclosure of income. On the facts and circumstances of the case, since the A.O. in the original assessment has considered the entire issue and concluded the assessment, the reassessment initiated after four years from the end of the relevant assessment year is on account of mere change of opinion, which is not permissible in law. Therefore we confirm the CIT(A) s order in quashing the reassessment proceedings. Estimation of income - NP determination - CIT(A) had categorically found net profit is at the rate of 18.13% of the sales for the year, and therefore, for gross profit of 16.29% arrived at by the A.O. is factually incorrect. It was also found by the CIT(A) that N.P. of 18.13% is higher than NP declared for the previous assessment year and the subsequent assessment year. The above categorical finding of the CIT(A) has not been dispelled by the Revenue by placing any contra evidence. In the light of the finding of the learned CIT(A), which was not controverted by the Revenue, we uphold the impugned order of the CIT(A) as correct and in accordance with law. Revenue appeal dismissed.

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• 2021 (2) TMI 730
  Addition u/s 40A(2)(B) - selecting the case for limited scrutiny is the payment to related person mismatch - HELD THAT:- In the Annexure 3CD to Form 3CB of the Act read with section 44AD of the Act one of the point to be examined by the auditor is with regard to the payment made to related parties and in case excessive amount is paid the same needs to be reported. Post audit u/s 44AB of the Act when the assessee files the return there is a specific column in the Income Tax Return form, where the assessee has to report any such disallowance u/s 40A(2)(b) of the Act. Before us neither the audit report is placed nor copy of Income Tax Return form is produced. Even in the assessment order the Ld. A.O has not made any observation in this regard. There are no specific guidelines before us which could show that under limited scrutiny what needs to be examined by Ld. A.O for the reasons payment to related persons mismatch . In absence of these details which have not been provided by either the parties, the legal ground raised by the assessee deserves to be dismissed. Salary to wives of the partners of the firm - Disallowance of expenses paid to the relatives can be made by the Ld. A.O if he is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market of the goods, services or facilities for which the payment is made or the legitimate needs of the business or professional of the assessee or the benefit derived by accruing there from are considered to be excessive or unreasonable. A.O failed to bring on record the fair market value of the alleged services to be provided by the employees and also failed to show the basis of computing Rs. 1,00,000/- as the legitimate salary for the work to be performed. Ld. A.O has not made any efforts in this regard and without making any enquiry about the fair market value of the services or the experience of the employees or the comparison of similar type of salary paid for the work performed by other employees of the concern has just resorted to make disallowance which in our view is uncalled for. Ld. Departmental Representative could not show that whether the alleged payments were not paid through account payee cheque or they were not disclosed in the regular return of income of the payee. We find no justification in the order of Ld. A.O for making the adhoc disallowance - delete the disallowance made by the Ld. A.O u/s 40A(2)(b) - Decided in favour of assessee.

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• 2021 (2) TMI 729
  Penalty levied u/s 271D - accepting unsecured loan above Rs. 20,000/- violating provisions of section 269SS - whether case of the assessee should falls under the provisions of Section 273B ? - reasonable cause, leading to failure of complying the provisions of Section 269SS - HELD THAT:- It is not the case that the place where the assessee is residing has no banking facility nor it is demonstrated that all the cash creditors are agriculturists having no banking facility in the area of their residence. The assessee in the instant case has set up a petrol pump allotted by Indian Oil Corporation (In short IOC ). All the transactions with IOC are to be carried out through banking channel. In the present times the bank transfers are quick through National Electronic Funds Transfer (In short NEFT ) which hardly takes a day to transfer the amount. Ld. Counsel for the assessee failed to controvert this fact and the general submission that the cash loans were taken to purchase the land for setting up a petrol pump and is in the nature of business expediency fails to find any merit. In our view it was not a reasonable cause for the said failure of taking cash loan exceeding Rs. 20,000/- Assessee do not deserve any immunity from paying the penalty u/s 271D of the Act by taking the shield/cover of Section 273B of the Act claiming it to be a reasonable cause for the said failure. We accordingly set aside the finding of Ld. CIT(A) and confirm the action of the Ld. A.O levying the penalty u/s 271D - Decided in favour of revenue.

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• 2021 (2) TMI 728
  Non admission of the additional evidence by the ld. CIT(A) - Addition u/s 68 - AO not satisfied as to the nature and source of the credit having been proved - HELD THAT:- The materials furnished for the first time by the assessee could perhaps have been called for by the ld. CIT(A) from it, but that would only be where he had, after applying himself to the facts and circumstances of the case, including the materials before the AO, come to the conclusion that some further were required, while the documents furnished before the ld. CIT(A) were at the very outset, i.e., the beginning of the proceedings before him, per the first letter addressed to him by the assessee-appellant. That is, there was no occasion for him to have considered calling for any of the said documents. Also, as it appears, no inquiry stands made by him with the assessee as to which of those documents were in fact furnished by the assessee before the assessing authority. This, rather, gives rise to the question as to whether it is a case to which r. 46A(4), which is akin to rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, would, strictly speaking, apply. Suffice to state that he ought to have, in the view of the clear mandate of s. 68, recording a clear finding in the matter, required the AO, before whom the burden of proof is required to be discharged by the assessee, to examine the same. Reference here may also be made to Tin Box Co. v. CIT [ 2001 (2) TMI 13 - SUPREME COURT] explaining that an opportunity before an appellate authority does not substitute that before the assessing authority. The course suggested by us for being followed by the ld. CIT(A) supra, is equally valid for us, being in fact the dictate of justice in the facts and circumstances of the case. As exhorted by the Apex Court time and again, as in CIT v. Walchand Co. (P.) Ltd. [ 1967 (3) TMI 2 - SUPREME COURT] wherein, expounding on the jurisdiction as well as the duty of the Tribunal as the final fact finding body, it explained that it is to deal with and determine questions which arise out of the subject-matter of the appeal in the light of the evidence, and consistently with the justice of the case. For the reasons afore-stated, notwithstanding the non-satisfaction of the conditions of r. 46A(1)/(2), as indeed of r. 46A(3), the issue with regard to the maintainability of the impugned credits u/s. 68 is restored to the file of the AO. He shall be at liberty to require, besides the documents furnished by the assessee before the ld. CIT(A), any other as he may deem fit and proper under the circumstances. Likewise, the assessee is not constrained in any manner. The whole purpose of the open set aside is a proper decision on the merits of the case, i.e., u/s. 68, law on which is well-settled. We may here also express our view with regard to the adverse inference drawn by the AO with regard to the creditor s claim u/s. 54, since allowed. The said claim cannot be called into question in the instant proceedings. In fact, the AO also doesn t do so, and his objection proceeds on the basis of the said claim, i.e., presuming its validity, inasmuch as the amount realized by way of sale proceeds of the property by the creditor stands invested by her in the purchase of another, claiming sec.54 exemption on that basis, which does not appear to have been examined in an assessment as else the AO would have referred thereto, also citing perhaps the creditor s submissions therein, in support of his objection. The issue on merits is qua s. 68, i.e., toward furnishing a satisfactory explanation as to the nature and source of the credits in the assessee s books, so that, irrespective of their taxability in the hands of the creditor, an assessee with the Revenue, where the same are shown by the assessee-firm as arising from the creditor, i.e., be it sourced from her capital or current income or even her confirmed liability, the onus on it to explain the same u/s. 68 gets discharged, which would shift back only on an infirmity in the assessee s case being pointed out or material in rebuttal thereof brought out by the Revenue. Further, as afore-noted, it would be a different matter where the genuineness of the arrangement/s under which the credits arise is in doubt, which has to be on some cogent basis, and of which there is upto now no suggestion. This aspect, though concerning the merits of the addition, which we are not called upon to address, has been clarified inasmuch as while the AO relies thereon, the ld. CIT(A) has not expressed any view thereon, so that it may not, at least in principle, form a bone of contention between the parties or survive our adjudication, which has been sought to be guided by the decision in Walchand Co . (P.) Ltd . (supra).

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• 2021 (2) TMI 727
  Exemption u/s 11 - rejecting the registration u/s 12AA(1)(b)(ii) to the appellant Trust - genuineness of activities is not established - no clause in the trust deed / memorandum of association that the beneficiaries are the class / section of public and not the specific individuals - assessee argued no opportunity of being heard given - AR contended that in the event of winding up of the activities of the trust, the properties of the trust can be donated to other trust as per clause 26 of the memorandum of association - HELD THAT:- No specific clause in the trust deed /memorandum of association that the properties of the trust shall be transferred to another trust having similar objectives in the event of winding up of its activities - On perusal of the objects of the trust, it is transpired that the activities of the trust are for the purpose of the education which comes within the definition of charitable activity as provided under section 2(15) of the Act. Furthermore, the activities /objects of the society have nowhere been doubted by the ld. CIT (Exemptions) which are appearing in clause 3 of the trust deed. We also find that there was specific clause in the Memorandum of Association specifying that in the event of winding up of the activities of the trust, the properties held by the trust shall be transferred to other trust having similar objects.What is transpired that necessary clauses are very much appearing in the memorandum of association as highlighted by the ld. CIT (Exemptions) in his order. Thus, it can be inferred that all the compliances as required by the ld. CIT (Exemptions) have been duly complied by the assessee. Whether the ld. CIT (Exemptions) has verified the clauses as discussed above - From the finding of the ld. CIT (Exemptions), it is transpired that he has not verified the above clauses. Assessee has made the reply to the queries referred by the ld. CIT (Exemptions) vide letter dated 03.04.2019 which is placed on record. It is also important to note that the ld. CIT (Exemptions) in his order has also made reference to such letter of the assessee dated 03.04.2019 which can be verified from the order of the ld. CIT (Exemptions). Thus, it cannot be said that the assessee failed to furnish the details as desired by the assessee during the proceedings before him. Accordingly, we are of the view that inaction by the Revenue on the details furnished by the assessee should not cause any prejudice to the assessee. Hon ble Bombay High Court in the case of CIT (Exemptions) Vs. Setco Foundation [ 2019 (2) TMI 532 - BOMBAY HIGH COURT ] has held that it is not necessary to have the winding up clause in the trust deed. The issue to be considered for registration is the object of the Trust and genuineness of its activities. The impugned order also makes reference to Section 55 of the Bombay Public Trust Act 1950 which provides for the contingency of absence of dissolution clause in the trust deed. The finding of the ld. CIT (Exemptions) is contrary to the facts available on record. Accordingly, it is inferred that the assessee has complied the conditions imposed under the provisions of section 12AA of the Act for granting the registration. Accordingly, in view of the above and after considering the facts in totality, we set aside the issue to the file of the ld. CIT (Exemptions) with the direction to grant registration to the assessee under section 12AA of the Act as per the provisions of law. Hence, the grounds of appeal of the assessee are allowed for the statistical purposes.

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• 2021 (2) TMI 726
  TDS u/s 195 - disallowance u/s 40(a)(i) on account of non-deduction of tax at source while paying sales commission to non-residents - as held by the AO that the payment of commission by the assessee to non-resident agents is fee for technical services and hence the assessee was required to deduct tax at source - HELD THAT:- Commission has been paid to various non-resident entities in respect of sales affected by the assessee outside of India, the services have been rendered by these entities outside of India and the payments have been made outside of India. In light of these undisputed facts, the legal proposition laid down in the aforesaid decision equally applies in the instant case and commission paid to non-resident outside India for the services rendered outside India will not fall in the category of the income received or deemed to be received in India as well as accrues or arises or is deemed to accrue or arise in India. Such commission payment or part thereof cannot therefore be held chargeable to tax in India and in absence of any income chargeable to tax, there was no liability to deduct tax at source u/s 195(1) and the provisions of section 40(a)(i) therefore cannot be invoked in the instant case. Further, out of total commission payment of Rs. 99,84,436, an amount of Rs. 1,55,867/- has been paid to a resident entity on which TDS has already been done which is again out of the ambit of provisions of section 40(a)(i) of the Act. In light of above discussions and considering the entirety of facts and circumstances of the case, the disallowance made by the Assessing officer by invoking provisions of section 40(a)(i) is hereby directed to be deleted. Appeals filed by the assessee are allowed.

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• 2021 (2) TMI 725
  Disallowance of business promotion expenses - expenditure incurred by the assessee on doctors - expenses on cath lab, marketing, travel of staff, paramedicines etcwhat is the cut off date of disallowance of expenses relating to doctors, whether it is 01.08.2012 or 14.12.2009 - HELD THAT:- As decided in PHL case ( 2017 (1) TMI 771 - ITAT MUMBAI ) had held that expenditure incurred on doctor before 01.08.2012 be allowed as revenue expenditure. CBDT Circular No.5/2012 dated 01.08.2012, clearly states that any expense incurred in violation of MCI Regulations dated 10.12.2009, is inadmissible u/s 37(1) of the I.T.Act w.e.f. 01.08.2012 (i.e. prospectively). Thus we hold that expenditure relating to doctors incurred by the assessee prior to 01.08.2012 need to be allowed as revenue expenditure. Since we are concerned with A.Y s 2007-2008 to 2011-2012, the CBDT Circular No.5/2012 dated 01.08.2012 does not have effect on these cases. Accordingly, we direct the A.O. to delete the disallowance of business promotion expenses in A.Y. 2007-2008 to 2011- 2012. Hence ground is allowed. Disallowance of discount to customers - HELD THAT:- In light of the ITAT order dated 29.01.2018 for A.Y s 2012- 2013 and 2013-2014, [ 2018 (1) TMI 1623 - ITAT BANGALORE ] we restore the issue of discount given to customer, to A.O. for de novo consideration with following directions, namely - (a) Discounts given in the invoice itself should be allowed without making any further enquiry; and (b) Discounts given to hospitals may be allowed after making enquiry. Disallowance of bad debts u/s 36 - HELD THAT:- Revenue has not established that conditions stipulated u/s 36(2) of the I.T.Act was not fulfilled with respect to any of the debts which were written off by the assessee during the previous years. Under these circumstances, we are of the view that disallowance made by the Revenue authorities is incorrect as the assessee is only required to write off the bad debts and is not required to establish that it has become really bad. Accordingly, we direct the A.O. to allow the claim of bad debt raised by the assessee.

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• 2021 (2) TMI 722
  Reopening of assessment u/s 147 - Addition qua bank deposits and ICICI credit card payments - HELD THAT:- Assessing Officer has to act on the basis of reasons to believe and not on reasons to suspect . In the instant case, the initiation of proceedings u/s. 147 of the Act are based upon no evidence and/or un-corroborative material. The Assessing Officer further failed to establish the nexus with the reasons recorded and alleged material available with the AO before initiation of proceedings and Bank Statements later received and got verified by the AO and/or produced by the Assessee. Competent authority is also required to indicate some link or nexus with the material available, while recording reasons for belief that the amount acquired is chargeable to tax has escaped the assessment, which in this case the AO failed to establish. Even the Ld. CIT(A) was absolutely unjustified in upholding the reopening of the assessment u/s. 147 of the Act, without appreciating the facts of the case, explanation submitted and evidences placed on record judiciously. In cumulative effect on the aforesaid analyzations, observations and peculiar facts and circumstances, we do not have any hesitation to hold that the proceedings u/s. 147 of the Act itself are vague, consequently the assessment order is liable to be quashed, hence ordered accordingly. Resultantly the order under challenge is set aside. Decided in favour of assessee.

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• 2021 (2) TMI 721
  Denial of registration u/s.12 AA and u/s. 80G - travel trip to dubai - some of the donors have accompanied the visually impaired people on tour to Dubai - HELD THAT:- As carefully perused the list of donors and the list of travelers. There is some force in the submission of the DR that some of the donors are also travelers. The point raised by the counsel can also be not brushed aside lightly as the visually impaired persons need volunteers to look after them. However, we find that such list was not explained by the appellant before the CIT(E). Moreover, in the submission made before the CIT(E) the appellant has mentioned that 33 visually impaired persons took trip, however, the CIT(E) in his order has mentioned that the appellant has organized a trip to Dubai for 13 visually impaired persons. The accompaniment of the volunteers alongwith visually impaired people have not been explained properly by the appellant before the CIT (E). We restore the quarrel to the files of the CIT(E). The assessee is directed to explain with evidence why some donors travelled with the visually impaired persons and their relations, if any. The appellant is further directed to demonstrate that no benefit/profit was derived by Rising Star Tour and Travel from the arrangement made with the appellant. The CIT(E) is directed to examine issues afresh after giving a reasonable and fair opportunity of being heard to the appellant.

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• 2021 (2) TMI 718
  Expenses Incurred with no income element - Reimbursement of Global Account Management (GAM) charges - AO held that the services to the managerial/consultancy has to be considered in respect of fee for technical services/fee for included services in terms of Section 9(1)(vii) of the Income Tax Act, read with Article 12(5) of the Double Taxation Avoidance Agreement - DRP confirmed the order of the Assessing Officer thereby holding that the GAM reimbursement and consideration received on account of cost allocation of flight logistic Support Services where in the nature of FIS and make available technical knowledge, experience, skill, knowhow in terms of Article 12(4)(v) of the DTAA - HELD THAT:- The assessee during the assessment year 2011-12 has categorically mentioned that the nature of these operations is purely logistic support provided by the assessee for shipment of transport of goods perform outside in India and the contract is entered between expertise international India Pvt. Ltd. and the customers i.e. at the consigner sent in the case of expert of Consignment from India to overseas countries found USA and between the assessee and the customer that is at the consignment end in the case of import of consignment from other countries i.e. USA to India. As regards GAM charges/expenses, the cost of these group is allocated to a respective countries benefited to these services and are incurred outside India. GAM staff is employed with the assessee and there is no employer-employee relationship between the employees and the expeditor international India. These actual expenses incurred by the assessee are allocated in proportion to the Revenue by the relevant expedite group entity in that country from that particular customer account which is managed by the GAM team. These so called expenses without any income element embed in them are then reimbursement to the assessee on actual basis by Expeditors International India. These facts were neither disputed by the Revenue before the DRP in Assessment Year 2010-11 nor in the present Assessment Year i.e. A.Y. 2011-12. The activities were not changed in the present assessment year as well. Therefore, though the contention of the Ld. DR was that the agreement was not taken into account as well as the TP Study was not taken into account in Assessment Year 2010-11 does not stand correct as the agreement related to fright logistic support services and global account management charges were very much mentioned in order dated 30/09/2020 by the Tribunal - Appeal of the assessee is allowed.

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• 2021 (2) TMI 717
  Nature of receipt - option price received against to sell the shares of the joint-venture company - revenue or capital receipt - Whether option price received against a right to purchase shares granted to CUIH is a right separate and distinct from the right to an increase in the value of the shares and then taxing the option price received as a revenue receipt is arbitrary, unjust and bad in law? - Whether option price received by the assessee year to year @ 20 % of subscription amount is an income of the assessee or a capital receipt - Contention of the revenue is the option money so received by the assessee year to year does not bear the character of a capital receipt but it is a revenue receipt as it is received annually in terms of the agreement - HELD THAT:- Option price received by Dabur from CUIH is subject to the determination of market value per share held by Dabur. This is evident from the reading of clause number 16 and 16 A of the agreement. Option price received by the assessee is directly linked with the transfer of Dabur shares. Dabur shares are to be transferred always at the market rate and if the Dabur incurs certain losses , then same shall be to an extent be recouped by CUIH. If there is upside in the market value of share , such defined gain on transfer of Dabur share is to be retained by Dabur. As we have already held that option price received by the assessee, though received on a regular basis and generating constant cash flow in the hands of the assessee, however, there is a liability on the assessee to repay such option price when such shares are sold in certain events. Therefore, though it is received on a regular basis and used to generate an income regularly in the hands of the assessee, it cannot be said that it is an income. Shares held by Dabur is a capital asset of the assessee. The shares are locked in for the reason that the right of first refusal to buy the shares of Dabur rests with CUIH. In return, CUIH has paid Dabur option price, which is merely an advance against the purchase of the shares by CUIH at a later point of time. Thus option price, is required to be adjusted in all the transactions wherever the shares of Dabur would be transferred either to CUIH, or its nominee, or to a third party in all the events. Therefore, even otherwise the option price received by the assessee is merely a liability of repayment in the event the market value of the shares of the company is determined. It may happen that in certain circumstances the assessee may retain the option price and in certain circumstances the assessee may have to repay the option price back to CUIH. However, the triggering event would be the transfer of shares of Dabur in the company. Dabur was holding 74% of equity and thus was a majority partner - On careful reading of the complete agreement, it is apparent that it is a shareholders agreement for making investment in a company which is also incorporated in the articles of association of the company. There are Tag along and Drag along rights of both the shareholders enshrined therein. Further as per clause number 16 option price is to be refunded by the assessee in certain events to CUIH. In fact option price is refunded when FDI rules were relaxed and foreign party was entitled to hold 49% equity. At that moment 23% of Dabur shares were transferred in favour of CUIH in terms of provisions of clause 16 of the agreement and option price was refunded proportionately. Therefore, it cannot be said that the 20% return on subscription price has been paid by CUIH to the assessee as a return on its investment and hence it is income. Principle of accrual of income is not different in accounting theory and taxation principal. Therefore, on reading of the comprehensive agreement of jointventure between the shareholders i.e. shareholders agreement, it is apparent that option price received by the assessee annually is merely an advance receipt of sale consideration of shares to be transferred by assessee in favour of CUIH, its nominee or to 3rd party. Even such Option price received is always a liability of the assessee , as there are relevant clauses of the agreement where assess needs to refund the same to CUIH based on market value of shares. Undeniably, there are circumstances where the Option price is to be retained by the assessee , but all these depends on the triggering even of sale of Dabur shares , not before that. Further the option price is also to be adjusted in full value of consideration of shares as when those are transferred. Thus, Option price is capital receipt, received in advance by the assessee. One more reason to say so is that when assessee has subscribed to the shares of the company, according to clause number 10 which describes the dividend policy amongst the shareholders, any dividend received by the assessee if at all, is not adjustable against option price. Thus Dabur shares are also entitled to Dividend , If any. It is not the case of the revenue that at the time of investment Dabur has not looked into the viability of business of insurance, government policies of foreign direct investment in insurance sector and continuity of CUIH in the business of insurance. After considering all these facts the Dabur has invested into the insurance business by assuming the risk as a business man. Thus, the treatment of the joint-venture agreement by the revenue and its interpretation that option price received by Dabur is a revenue receipt and is chargeable to tax as income is devoid of any merit. Market value of the shares does not change the amount of return receivable by the assessee - Sale of such shares was never linked with the market value of shares. In case before us, the price at which the shares are to be transferred by Dabur to the other shareholder is at market value and Dabur is also entitled to increase in market value of those shares above total of option price and subscription price. Further, according to clause number 7.4 of that agreement, the failure of Mahindra to support AT T shall constitute a breach under that agreement. In Case before us, Dabur has right of veto and there is no clause that failure of Dabur to support CUIH constitutes a breach of the agreement. In the notes on accounts, the appellant had duly disclosed about the joint-venture agreement and had disclosed that the interest paid on borrowed funds for acquisition of shares had been capitalized and included in the cost of investment. In the notes on account the disclosure was also made about the receipt of option money from CUIH and its adjustment would be made at the time of reduction of shareholding in Aviva life insurance Co Ltd by Dabur in favour of CUIH and the adjustment would be made and accounted for in the year of the transfer of shares. The learned assessing officer for all those years, after verifying the terms and conditions of the agreement as well as notes on accounts, have never taxed the option money so received as income of the assessee. Thus, revenue has accepted stand of assessee about considering option price to be taxed under the head capital gains at the time of transfer of Dabur shares However, up to assessment year 2011 12 i.e. For eight assessment years, consistently this position is maintained by assessee as well as the income tax authorities. Now revenue has changed its stand. Principles of Estoppels and Resujudciata do not apply to the tax matters is an established principle, but principle of consistency does. Saying that there was an error in earlier acceptance of the order/stand of the assessee, therefore revenue s stand is changed stating that there is no heroism in perpetuating an error, there is no quarrel with that principle but the revenue must point out what is the error in the consistently adopted methodology acceptable to revenue and the assessee for such a long time. In the present case the only pillar on which changed stand of revenue stands is the decision of the coordinate bench in case of Mahindra Telecommunications Investment Private Limited [ 2016 (6) TMI 99 - ITAT MUMBAI] which we have already held to be on different facts and different issue. In view of principle of consistency, also appeal of the assessee deserves to succeed. Ground number 1 and 2 of the appeal of the assessee is allowed holding that the option money received by the assessee is capital receipt which requires an adjustment only at the time of transfer of the shares by Dabur to CUIH while working out resultant capital gain thereon.

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• 2021 (2) TMI 716
  Weighted deduction u/s 35(2AB) denied - case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued - CIT(A) observed that the assessee has not maintained separate books of accounts for R D facility, and hence it is not verifiable as to how much expenditure they actually incurred for research development activity - HELD THAT:- CIT(A) has put reliance on form no. 3CL. To our mind this reasoning is not sustainable because the assessee is a company which has returned income of more than Rs. 20.67 cores. It has given list of expenditure, which we have taken cognizance while extracting the submissions of the assessee filed before the ld. CIT(A). The first item in this list is consumption of stores and spare parts. It has been quantified at Rs. 2,82,703/-. This item cannot be an item from overall list of spares and stores of a company whose returned income is more than Rs. 20.67 crores. Thus, according to the assessee, it has submitted complete details during the assessment proceedings as well as before the ld. CIT(A). But none has bothered to look into. After perusal of the details of expenditure, we are of the view that the ld. CIT(A) has failed to analytically examine the claim of the assessee. He simply proceeded on basis of the list of expenditure submitted before the DSIR. Provision nowhere contemplates that assessee would claim deduction only those expenditure whose details has been forwarded to the DSIR for the purpose of availing certificate of approval for organization engaged in research activity. If an assessee independently demonstrates expenditure in the research activity (see the submission extracted above), then their nature is required to be looked into before taking a call for an addition. No such efforts were made by the Revenue authorities. Therefore, orders of the Revenue authorities are not sustainable. - Decided in favour of assessee.

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• 2021 (2) TMI 715
  TP Adjustment - CIT(A) restricting the addition made by the Assessing Officer on the basis of working provided by the TPO, where the arms length margin was taken at 27.80% - HELD THAT:- The facts on the basis of which learned Commissioner (Appeals) has concluded thus, clearly emerge from the additional evidences furnished by the assessee. It is a fact that the additional evidences were forwarded to the TPO for his examination and necessary comments; however, he has chosen not to do so and has simply stated that additional evidences should not be admitted. Assessee has amply demonstrated that the transactions with the AEs are at arm s length. It is further to be noted that in Assessment Year 2004-05 similar adjustment made by the TPO and reduced by Commissioner (Appeals) by adopting identical method was restored back to the Assessing Officer by the Tribunal [ 2013 (1) TMI 369 - ITAT MUMBAI] . Thus, on overall consideration of facts and circumstances of the case, we are of the view that the revenue has failed to bring on record any material or substantive argument before us to controvert the findings of learned first appellate authority. That being the case, we do not find it appropriate to interfere with the decision of learned Commissioner (Appeals). Ground raised is dismissed.

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• 2021 (2) TMI 714
  CIT(A) dismissing the appeal of the assessee on account of non appearance - HELD THAT:- As per the provision of section 250(6), the order of the Ld. CIT(A) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision. However, in the instant case, the Ld. CIT(A) without disposing the issue on merit has simply dismissed the appeal of the assessee due to non appearance which is not as per law. Restore the issue to the file of the Ld. CIT(A) with the direction to give one final opportunity to the assessee to substantiate its case and decide the issue as per fact and law. The assessee is also hereby directed to appear before the Ld. CIT(A) without seeking any adjournment under any pretext failing which the Ld. CIT(A) is at liberty to pass appropriate order as per law.

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• 2021 (2) TMI 713
  Disallowance of other income for computation of deduction u/s.80IA - AO excluded other income for the purpose of computing deduction claimed u/s.80IA of the Act, on the ground that said other income is not derived from the business in order to be eligible for claiming deduction - AO was further of the opinion that unless income is having first degree nexus with the main business activity, the income is not eligible for claiming the benefit of deduction provided under the Act - CIT(A) upheld the findings of the AO - HELD THAT:- On perusal of the assessment order and also the order of the Co-ordinate Bench of this Tribunal in assessee s own case for earlier assessment years, it clearly shows that the issue in regard to exclusion of other income being handling charges, interest received from employees and miscellaneous income has been held to be not linked with industrial activity of power generation and therefore, in view of the decision of the Hon ble Supreme Court in the case of M/s. Liberty India Ltd., vs. CIT [ 2009 (8) TMI 63 - SUPREME COURT ] same did not have a direct link with the business of power generation, and hence, while computing deduction u/s.80IA of the Act, the other income has been excluded. The facts for the year under consideration are similar to the facts considered by the Tribunal for earlier years except to the extent of two new items of income being surcharge from electricity boards and interest from others [interest received from Fenner India Limited as per terms of agreement. Therefore, the assessee is not entitled for deduction towards eligible profit u/s.80IA of the Act in respect of other income because said income does not have first degree nexus with the main business activity of the assessee. Surcharge from Electricity Boards , the issue has came up for discussion for the first time in the impugned assessment year and hence, needs to be considered in light of arguments advanced by the assessee that it has first degree nexus with business of generation and distribution of power. We have examined the claim of the assessee in light of proviso to Regulation 5(3) of Central Electricity Regulatory [terms and conditions of tariff] Regulations 2009 and find that although the assessee claims that it has received surcharge from Electricity Boards for delayed payment of receivables in respect of supply of electricity, but in principle said payment represents interest for delay in payment of dues to the assessee. Therefore, we are of the considered view that interest earned by the assessee for delay in payment of receivables cannot be characterized as income earned from business operations merely for the reason that said receipt is received from supplier. The character of any receipt would not change for the simple reason that the said receipt is received from the first degree supplier who is related to main business activity of the assessee. Hence, we are of the considered view that there is no merit in arguments of the assessee that surcharge received from Electricity Board form part of income from operations, which is eligible for deduction u/s.80IA. Interest from others, we find that the assessee has received interest from M/s. Fenner India Limited as per terms of contract and said interest has been recognized as other income. Although, the assessee claims it had direct nexus with the business operation of the assessee, but on perusal of details, we find that it is simpliciter interest received from the party for delay in payment as per terms of contract. Therefore, the same cannot be considered as income generated from business operations which is eligible for deduction u/s.80IA of the Act Alternative plea of the assessee that in terms of arbitral award - we find that compensation paid in terms of arbitral award is not linked to interest earned by the assessee from the party and hence, the same cannot be set-off against interest earned by the assessee. Therefore, alternative plea of the assessee is rejected. We further note that a similar issue has been considered by the Co-ordinate Bench of the Tribunal in assessee s own case for assessment year 2012-13 in [ 2017 (8) TMI 1628 - ITAT CHENNAI ] where under identical set of facts the Tribunal has upheld re-computation of eligible deduction u/s.80IA of the Act, however accepted the plea of the assessee for deduction of 10% expenses towards other income while computing the deduction Assessee is not entitled for deduction u/s.80IA of the Act in respect of other income and consequently confirm the additions made by the AO towards disallowance of excess deduction claimed, however allow the alternate plea of the assessee towards deduction of expenses in relation to earning of other income and direct the AO to allow 10% deduction towards expenses and re-compute deduction u/s.80IA of the Act Disallowance of expenditure u/s.14A - HELD THAT:- We find that disallowance of expenditure in relation to exempt income u/s.14A of the Act is recurring issue and is a subject matter of deliberation of the Tribunal in the assessee s own case for assessment years 2007-08 to 2012-13. Further, the Tribunal after considering relevant facts and also following its earlier order has set aside the issue to the file of the AO and directed him to re-adjudicate the issue in accordance with law. Addition towards surcharge recoverable from Electricity Boards - AO as well as the ld.CIT(A) were of the opinion that when there is no uncertainty in realization of surcharge from Electricity Boards, the question of postponement of income for taxation on receipt basis does not arise, when the assessee is following mercantile system of accounting - HELD THAT:-The view taken by the AO as well as the ld.CIT(A) has been upheld by the Tribunal in assessee s own case for earlier years, where the Tribunal by considering various clauses of tri-party agreement between the assessee and Government of India observed that, when payment is outstanding for more than 90 days from the date of billing, the same is required to be recovered through adjustment of surcharge and the same can be adjusted out of plan assistance of respective State Governments and hence there was an assurance created through the tri-party agreement and the Government of India for recovery of surcharge from Electricity Boards. Hence, the assessee s contention that there was no certainty in recovery of dues is ill-founded and the quantum of interest is also fixed in the tri-party agreement entered between the parties. Therefore, there is no doubt regarding the payment of dues when there is binding tri-party agreement. Accordingly, held that surcharge recoverable from Electricity Boards is taxable on accrual basis, but not on receipt basis. In this view of the matter and consistent view taken by the Tribunal in assessee s own case for earlier years, we are of the considered view that surcharge recovered from Electricity Board is taxable on accrual basis as and when the assessee has been accounted in the books of accounts. However, if assessee has already offered said amount to tax on receipt basis, due credit must be given to the assessee for the year in which such income is offered to tax. Accordingly, the ground raised by the assessee for both assessment years are dismissed. Deduction claim u/s.80IA in respect of income derived from unit TPS-I expansion is squarely covered in favour of the assessee by series of decisions of Co-ordinate Bench of ITAT, Chennai in assessee s own case for assessment years 2008-09 to 2010-11. Disallowance of excess depreciation on UPS - AO has disallowed excess depreciation claimed on UPS at the rate of 60% on the ground that UPS is not a part of computer system which is eligible for higher depreciation - HELD THAT: -This issue is covered in favor of the assessee by the decision of ITAT, Chennai Bench in assessee s own case for assessment year 2012-13, where under identical set of facts the Tribunal by following its earlier order and also by the decision of Hon ble Supreme Court in the case of CIT vs. BSES Rajdhani Power Ltd. [ 2010 (8) TMI 58 - DELHI HIGH COURT ] held that UPS is an integral part of computer system eligible for higher depreciation at the rate of 60%. Depreciation on civil structures, water supply and drainage systems - assessee has claimed depreciation at the rate of 15% on civil structures qua water supply and drainage system, on the ground that it is part of plant and machinery eligible for depreciation at the rate of 15% - AO has allowed depreciation at the rate of 10% applicable to buildings and has disallowed excess depreciation claimed over and above 10% on the ground that civil structures qua water supply and drainage system cannot be considered as part of plant and machinery - HELD THAT:- We find that the issue of depreciation on civil structures qua water supply and drainage system is a recurring issue which is a subject matter of deliberations by the Coordinate Bench of the Tribunal in the assessee s own case right from assessment years 2007-08 to 2012-13. The Tribunal under identical set of facts has held that civil structures qua water supply and drainage systems is part of plant and machinery and eligible for depreciation at 15% applicable to plant and machinery. Deduction towards insurance spares - Nature of expenditure - HELD THAT:- find that the Tribunal has considered an identical issue for assessment year 2012-13 [ 2017 (8) TMI 1628 - ITAT CHENNAI ] where by following the decision of Jurisdictional High Court in assessee s own case for assessment years 1993-94 to 1999-2000 held that insurance spare consumption to be treated as revenue in nature.

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• 2021 (2) TMI 711
  Estimation of income - Bogus purchases - disallowance/addition to the extent of 12.5% of such bogus purchases - HELD THAT:-12.5% of such suspicious purchases have been considered the profit element embedded in such purchases. However, the estimation of rate of profit return must necessarily vary with the nature of business and no uniform yardstick can be adopted. In the present case, the appellant himself has agreed for estimation of profit element, on above referred purchases @13.71% on such suspicious purchases. In view of the facts and circumstances of the case and above discussions, the Ld. AO is directed to restrict the addition @13.71% on above referred suspicious purchases. No infirmity in the order passed by the Ld.CIT(A) in restricting the addition to 13.71% as against the entire bogus purchases disallowed by the Assessing Officer. SHRI SIMIT P SHETH L/R OF SHRI PANKAJ J SHETH C/O MANISH G SHAH case followed - [ 2012 (2) TMI 598 - ITAT AHMEDABAD] - Grounds raised by the revenue are dismissed.

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• 2021 (2) TMI 710
  Correct head of income - rental income from Operating Family Entertainment Center cum Mall and Maintenance Charges - Income from House Property or Profit and Gains from Business or Profession - HELD THAT:- Rental income should be assessed as business income is covered in favour of the assessee by the following decisions in assessee s own case [ 2019 (2) TMI 360 - ITAT MUMBAI] , . [ 2017 (10) TMI 1419 - ITAT MUMBAI] , [ 2017 (7) TMI 779 - BOMBAY HIGH COURT] Respectfully following the aforesaid precedence we hold order of learned CIT(A) not upholding the action taken by the AO in treating the rental income from Operating Family Entertainment Center cum Mall and Maintenance Chargesas Income from House Property against the assessee s claim of Profit and Gains from Business or Profession . - Decided in favour of assessee.

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• 2021 (2) TMI 709
  Reopening of assessment u/s 147 - invalid notice - incorrect reasons are recorded and there was non-application of the mind on the part of the Approving Authority while giving sanction under section 151 - HELD THAT:- We are of the view that the issue is covered by the Order of ITAT, Delhi G-Bench, Delhi in the case of VRC Township Pvt. Ltd., Delhi [ 2020 (10) TMI 1223 - ITAT DELHI] in which reopening of the assessment in identical circumstances was held to be bad in law and sanction accorded by the Sanctioning Authority was also found invalid, therefore, reopening of the assessment was quashed. In the present case, the Learned Counsel for the Assessee has pointed-out that assessee has raised this issue before the Ld. CIT(A), but, he has rejected the submissions of the assessee holding that Section 147(b) as mentioned in the reason and Format is a typographical human error which is curable under section 292B of the I.T. Act, 1961. This issue is also considered in the Order of VRC Township Pvt. Ltd., (supra) following the decision of Hon ble Bombay High Court in the case of Kalpana Shantilal Haria [ 2018 (1) TMI 195 - BOMBAY HIGH COURT] . Following the same reasons for decision, we set aside the Orders of the authorities below and quash the reopening of the assessment in both the assessment years under appeals. All additions stand deleted. Accordingly, appeals of the Assessee are allowed.

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• 2021 (2) TMI 708
  Condonation of delay - delay of 480 days - Assessee put forth divorce/ matrimonial/penal proceedings filed by his daughter-in-law against the entire family which have not been accepted by the ld. CIT (A) and dismissed the appeal in limine - HELD THAT:- We are of the considered view that multiple matrimonial/penal proceedings launched by the daughter-in-law against the assessee s entire family is a sufficient reason beyond the control of the assessee and sufficient to condone the delay, hence ld. CIT (A) has erred in not condoning the delay and is ordered to be condoned it and consequently directed to dispose off the appeal on merit, after providing an opportunity of being heard to the assessee. Consequently, the appeal filed by the assessee is allowed.

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• 2021 (2) TMI 707
  Assessment of trust - addition on account of anonyms donation u/s 115BBC - HELD THAT:- As all the donations initially flagged by the AO as anonymous donation have been duly verified by way of confirmation, PAN numbers, copies of ITR, copy of bank statement of the donor and found correct both by the AO as well as ld. CIT (A). So, we find no ground to interfere with the impugned findings deleting the addition in question by the ld. CIT (A) by accepting the appeal filed by the assessee. Consequently, the appeal filed by the Revenue is dismissed.

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• 2021 (2) TMI 706
  Estimation of income - NP determination - non rejection of books of accounts - search u/sec. 132 was conducted in the business premises of the assessee as well as residential premises - Assessee objecting for estimation of income stating that assessee has agreed the addition due to pressure and on apprehension of levying the penalty - HELD THAT:- There was no material and no defects were pointed out by the AO. Even though search was conducted no evidence was found by the AO evidencing the suppression of income or the inflation of purchase or inflation of expenditure. The assessee has maintained regular books of account which are duly audited. A search u/sec. 132 was conducted but no evidence was found indicating concealment of income. The assessee relied on the decision of ITAT, Rajkot Bench in the case of ACIT Vs. RushabhVatika [ 2013 (11) TMI 211 - ITAT RAJKOT] wherein the coordinate bench has held that without rejection of books of account question of application of net profit does not arise. In the case of Pr.CIT Vs. Marg Ltd.[ 2017 (7) TMI 823 - MADRAS HIGH COURT] also held that profits of the assessee cannot be estimated without rejection of books of account. In the case of Dhakeswari Cotton Mills Ltd. Vs. CIT [ 1954 (10) TMI 12 - SUPREME COURT] held that AO is not entitled to make a pure guess work or suspicion without any reference or without any material at all. Taking into consideration of all the above aspects, in the instant case, there is no basis for estimation of income, therefore, estimation of income made without having any material is bad in law, thus, we uphold the order of the ld. CIT(A) and dismiss the appeal of the Revenue.

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• Corporate Laws

• 2021 (2) TMI 753
  Recovery action by secured creditors and financial institutions, who extended financial help to the original borrowers / guarantors - action under section 29 of the State Financial Corporation Act, 1951 - HELD THAT:- A part of the sale consideration was converted into loan and the said purchaser M/s. Shree Industries Ltd. also defaulted and the said purchaser / borrower approached the BIFR / AAIFR under the provisions of the Sick Industrial Companies (Special Provisions) Repeal Act, 1985, as it then existed and while the proceedings were pending before the BIFR / AAIFR, a new law in the form of the Insolvency and Bankruptcy Code, 2016 came to be enacted by the Parliament and the proceedings regarding insolvency Resolution / Recovery from the defaulting corporate debtor on its winding-up were to be taken up by the National Company Law Tribunal (NCLT), which was constituted under the provisions of Section 408 of the Companies Act, 2013. Section 408 of the Companies Act, 2013 stipulates that the NCLT shall exercise such powers and functions as may be conferred on it by the provisions of the Companies Act, 2013 or any other law for the time being in force. Under the provisions of IBC, 2016, the NCLT is designated and defined as the Adjudicating Authority and thus, has all the relevant powers to deal with these issues - In view of Section 408 of the Companies Act, 2013 stipulates that the NCLT shall exercise such powers and functions as may be conferred on it by the provisions of the Companies Act, 2013 or any other law for the time being in force. Under the provisions of IBC, 2016, the NCLT is designated and defined as the Adjudicating Authority and thus, has all the relevant powers to deal with these issues. It appears that the Company, whose reference was pending before the BIFR / AAIFR, could make a reference to the NCLT under the provisions of the IBC, 2016, within 180 days from the date of commencement of the IBC, 2016, which is 28.05.2016 - If the said Company, whose reference is pending before the BIFR / AAIFR, does not make such reference to the NCLT, then what happens to the pending proceedings seems to have not been specified in the provisions of the IBC, 2016 or other relevant laws. Whether the abatement will become final or such pending proceedings could be referred to the NCLT, by any of the parties or by the Court, is a question for our consideration. As prayed by Learned Counsel, time is granted to them to make submissions on the following points :- (i) Whether any proceedings, in any manner, in respect of the Assets of the Company in question M/s. Ganpati Pulp and Paper Mills Ltd or M/s. Shree Industries Ltd., are pending before the NCLT or not and if the proceedings are pending, the details and status of the same may be placed before the Court? (ii) If no such proceedings are pending before the NCLT as of now, whether this Court can refer the entire matter to the NCLT and direct it to decide all the questions of law involved in the present case and the questions of facts, including the respective rights of the secured creditors, leaving it open to the parties to raise their respective claims / counter-claims and defences before the NCLT at this stage or not? Put up on 09.02.2021 on the top of the Board, as prayed.

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• 2021 (2) TMI 719
  Approval of Scheme of Demerger - Section 230 read with Section 232 of the Companies Act, 2013 - HELD THAT:- As required under Rule 16 of the Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 paper publication has been affected in two Newspapers, i.e., the Times of India (English) and Deepika (Malayalam) on 28.02.2020 and no objection has been received from any corner against the Scheme of Demerger of the Petitioner Company - this Bench is of the view that the Scheme of Demerger placed before this Bench on 18.02.2020, can be sanctioned. Hence, this Tribunal Sanction the Scheme of De-merger between M/s. Commodity Online (India) Limited (Demerged Company) with M/s. Celebrus Commodities Limited, 27/540, III Floor, EAK Towers, Main Avenue, Panampilly Nagar, Kochi- 682 036 (the Resultant Company/ Transferee Company) and the Appointed Date of the Scheme is fixed as opening hours of 31st March, 2019. This Tribunal found that the Scheme of Demerger appears to be fair and reasonable and it is also not violative of any provisions of law and is not contrary to any public policy - All the assets and liabilities including taxes and charges, if any, and duties of the Demerger Company, shall, pursuant to Section 232 of the Company Act, 2013, be transferred to and become the liabilities and duties of the Transferee Company M/s Celebrus Commodities Limited. Petition disposed off.

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• Insolvency & Bankruptcy

• 2021 (2) TMI 724
  Recovery of disputed outstanding amount - default period is varying from over 200 days to approximately 500 days - allegation is of manipulation of accounts department - HELD THAT:- Keeping in mind the provisions of law laid down in the Code and the Hon ble Apex Court Judgment which has made the provisions of applicability of the Code amply clear as far as initiation of proceedings by Operational Creditor against the Corporate Debtor is concerned, we are very much clear that the following facts are proved beyond doubt which has been complied with in accordance with the Hon ble Apex Court Judgments and provisions of the Code. The debt became due from July 2018, the question is whether it became payable by the Corporate Debtor under the law, the answer is in negative because there were quality other issues raised by the Corporate Debtor. The Operational Creditor has issued a Demand Notice dated 18.11.2019 received on 06.12.2019 by the Corporate Debtor and within the stipulated period, the Corporate Debtor vide its letter dated 09.12.2019 has replied and proved beyond doubt that there is an existence of dispute particular the cracks in the projects sites, reduced quality of goods supplied, short supply of concrete multiple snags in windows and doors etc also raising issue to initiate arbitration proceedings for excess sum of over Rs. 9.51 Crore paid to the Appellant etc. This meets the criteria of genuine dispute raised within stipulated period. Accordingly, under Section 9(5)(ii)(d) Application needs to be rejected. The provision of the Code cannot be invoked for recovery of outstanding amount as well as it cannot be misused to drop the curtain on a healthy organization. The Objective of the Code is to consolidate and amend the laws relating to reorganization and Insolvency Resolution of Corporate Persons. Using the platform of the Code, threatening the vendor to release even disputed amount is not fair and equitable. There are no merit in the appeal and the Adjudicating Authority has rightly rejected the Application under Section 9 of the Code. The Appeal deserves to be dismissed and hence dismissed.

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• 2021 (2) TMI 720
  Seeking to extend the CIRP for 90 days in order to get a Potential Resolution Applicant - Section 12 of the Insolvency and Bankruptcy Code 2016 - HELD THAT:- From a reading of sub-section (2) of Section 12, it is clear that Resolution Professional should file an application to the Adjudicating Authority for extension of the period of the Corporate Insolvency Resolution Process, only if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of 75% of the voting shares. In the present case, the subject matter of the case is regarding the extension of the CIRP period, when the CoC resolved for liquidation of the Corporate Debtor. It is seen that the resolution for further extension of time for submission of EoI has been rejected by the Committee of Creditors in the 3rd CoC meeting held on 30.11.2020 and the Resolution Professional have no power for seeking extension based on a letter submitted by the erstwhile Director or the potential Resolution Applicant, who has not submitted any credentials to the Resolution Professional to prove his net worth and interest in the matter. The underlying object and principle of the Code, in resolving a debt ridden Corporate Debtor, cannot be lost sight of. The adherence to specific timeline for resolution is the essence, which in effect would bring about successful resolution of a beleaguered Company. It is found that the invitation for EoI was widely published in two newspapers namely Indian Express and Kerala Kaumudhi , the last date of submission of EoI was 08.02.2020. The ground that the potential Resolution Applicant due to lack of knowledge failed to submit EOI within time cannot be accepted. Besides no indulgence can be given to someone who hasn t been vigilant enough. The Potential Resolution Applicant has not shown sufficient cause for its delay in submitting its EoI. Mere stating by the applicant herein that it is on account of Covid-19 Pandemic would not be considered as sufficient reason to condone the delay. No reason is assigned as to how the pandemic affected the efforts of the potential Resolution Applicant in approaching the Resolution Professional in submitting the EoI. The potential Resolution Applicant, if any, has been negligent in submitting the EoI to the RP and the present application filed by the erstwhile Directors to grant further time during the last minute of completion of CIRP is not acceptable - Application dismissed.

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• Service Tax

• 2021 (2) TMI 772
  Refund of excess paid service tax - time limitation - date of deposit of tax vis- -vis date of filing of refund claim in terms of Section 11B of the Central Excise Act, 1994 - HELD THAT:- On reading of Section 11B of Central Excise Act 1944, It is found that any person claiming refund must make an application for refund before the expiry of one year from the date of payment of tax and not from any other date. The clock for one year would start ticking from the date on which the appellant has paid the tax. Thus plain reading of the provisions of section 11B; it is found that the claim is not time barred as the appellant had filed refund claim within one year from the date of payment of tax. As per decision of the tribunal in the case of DURALINE INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, GOA [ 2008 (9) TMI 295 - CESTAT MUMBAI] the date of refund claim shall be reckoned from the date when the refund application was originally filed, not from the date when defects pointed out by the department and were cured by the appellant. Thus, the amount excess paid in May, 2010 is in the nature of Revenue deposit. Further, there is no limitation for refund of Revenue deposit. In this view of the matter it is held that the refund claim is not barred by limitation. It is also found that the tax was paid through CENVAT credit account and not through cash challans. The excess amount of duty liable to be re-credited in the CENVAT credit Account as the Appellant cannot be given liberty to encash accumulated CENVAT credit bypassing Rule 5 of CENVAT Credit Rules, 2004. Accordingly, I direct the Adjudicating Authority to grant the refund of the said amount of Rs. 9,92,929/- and to be re-credited in the CENVAT credit Account. Appeal allowed - decided in favor of appellant.

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• 2021 (2) TMI 768
  Inquiry proceedings under Service Tax - apprehension of arrest - Seeking stay of proceedings and consequential penal action, initiated against the petitioners pursuant to issuance of summons - Section 83 of the Finance Act, 1994 read with Section 14 of the Central Excise Act, 1944 - HELD THAT:- Though the Central Excise Act and the Finance Act, 1994 to the extent of Chapter V of the said Act have been repealed, sub-section (2) of section 174 states that the aforesaid action shall not affect any investigation, inquiry, verification (including scrutiny and audit) assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, service charge, penalty, fine etc. and other legal proceedings or recovery of arrears or remedy as may be instituted, continued or enforced and any such tax may be levied or imposed as if the aforesaid acts had not been so amended or repealed. Thus it is evident that respondent No.2 has power and authority to issue summons to the petitioners and more specifically petitioner No.2 under the provisions of the aforementioned statutes to give evidence and produce the relevant documents in inquiry. The power to summon persons to give evidence and produce documents in inquiry is a statutory function regulated by the aforementioned provisions of the statutes. Sub-sections (1) and (2) of Section 14 of the Central Excise Act state that summons to produce documents or other things in the possession of or under the control of the person summoned can be issued by an officer duly empowered by the Central Government and all persons so summoned shall be bound to attend and state the truth upon any subject respecting which they are examined or make statements or to produce such documents and other things as may be called upon. Sub-section (3) of section 14 states that every such inquiry as aforesaid shall be deemed to be a judicial proceedings within the meaning of section 193 and section 228 of the Indian Penal Code, 1860 - On a thorough reading of the summons dated 12.10.2020 and 13.11.2020 it is clear that the summons have been issued to petitioner No.2 calling upon him to tender oral evidence and produce documents or things which have been specified in the summons. The summons clearly state that an inquiry in connection with GST under the CGST Act, 2017 is being undertaken by the Superintendent / Appraiser / Senior Intelligence Officer and that the attendance of petitioner No.2 is considered necessary to give evidence and produce documents. Perusal of the summons signify that there is no threat of arrest as perceived and argued by the petitioners / petitioner No.2. This is buttressed by the fact that under section 70 of the CGST Act tendering of evidence or production of document is to be done in the same manner as done by a civil court under the provisions of the Civil Procedure Code, 1908. The summons specifically call upon the petitioner to tender evidence and produce documents and clarification as stated in the summons dated 12.10.2020. There is a clear mandate on the petitioner No.2 to honour the summons and present himself in the inquiry undertaken in connection with evasion of GST under the CGST Act by the investigating officer. The summons do not state that the petitioner No.2 shall be liable for arrest or will be arrested as the statutory provisions under which the summons have been issued pertain to investigation undertaken by the statutory officer. Hence there is no reason for the petitioners to assume that the petitioner No.2 on presenting himself before the investigating officer will be arrested or apprehended. The inquiry which is undertaken by respondent No.2 is a statutory inquiry pertaining to evasion of GST under the CGST Act wherein the petitioner No.2 has been called upon to tender his oral evidence as also to produce the documents that may be required for the purpose of completing the inquiry by the investigating officer. Petitioners apprehension that petitioner No.2 will be apprehended / arrested / incriminated since the inquiry pertains to evasion of service tax / GST is not well founded. The summons dated 12.10.2020 makes it succinctly clear that the petitioners are required to tender oral evidence and produce certain documents. Investigation is under way pursuant to the raid which was carried out at the premises of the petitioners on 03.04.2019 and seizure of the material and documents by the authority. It is therefore incumbent upon the petitioners to cooperate in the investigation / GST inquiry - the summons issued to the petitioners / petitioner No.2, does not authorize the investigating officer to arrest petitioner No.2, but have been issued only for the purpose of completing the investigation into evasion of GST undertaken by respondent No.2. In this view of the matter, we do not see any reason for the petitioners / petitioner No.2 to apprehend arrest on presenting himself before the investigating officer in response to the summons which have been issued to the petitioners. The summons issued to the petitioners / petitioner No.2 on 12.10.2020 and 13.11.2020 are valid and no interference is called upon - it is directed that petitioner shall remain present before the concerned investigating officer / authority in the office of the Directorate General of GST Intelligence, Mumbai Zonal Unit, NTC House, 3rd Floor, N.M. Road, Ballad Estate, Mumbai - 400 001 on 1st March 2021 at 11:00 a.m. for the purpose of inquiry and thereafter as and when required. If the petitioners cooperate in the investigation, respondents shall not take any coercive steps against the petitioners - petition disposed off.

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• 2021 (2) TMI 712
  Condonation of inordinate delay in filing the appeals - no reason produced or such delay - HELD THAT:- There are no cogent reason for such inordinate delay in filing the appeals before the Tribunal. Mere filing of an application signed by Authorized Signatory of the appellant company does not serve the purpose for condoning such delay, wherein no plausible reason has been mentioned in the application for such an excessive delay. In the absence of any justifiable reason, the present Miscellaneous Applications (COD) do not sustain - Application dismissed.

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• Central Excise

• 2021 (2) TMI 723
  Principles of Natural Justice - appellant submitted that the order passed by the Commissioner (Appeals) has been passed ex-parte for the reason that though the appellant had sought adjournment on January 23, 2018 since it received the letter intimating that hearing would take place on January 23, 2018 itself, but instead of adjourning the matter, the Commissioner (Appeals) decided the appeal on merits - HELD THAT:- It transpires from a perusal of the order passed by the Commissioner (Appeals) that initially a letter dated December 13, 2017 was sent to the appellant for appearance on January 8, 2018 but since the appellant did not appear nor any adjournment was sought, another letter dated January 10, 2018 was sent to the appellant by speed post for appearance on January 23, 2018. However, on that date, a letter dated January 23, 2018 was received by the Commissioner (Appeals) from the appellant seeking adjournment for the reason that the aforesaid letter dated January 10, 2018 was received by the appellant only on January 23, 2018. The Commissioner (Appeals) did not grant an adjournment as he did not believe that the letter dated January 10, 2018 that was sent by speed post was received by the appellant on January 23, 2018. The Commissioner (Appeals) did not have any proof of the postal department regarding service of the letter dated January 10, 2018 and only a presumption has been drawn by the Commissioner (Appeals) that since the letter dated January 10, 2018 was sent by speed post, it must have been delivered prior to January 23, 2018. In the absence of the any documentary proof regarding service of the letter January 10, 2018 upon the appellant, the Commissioner (Appeals) was not justified in forming such an opinion and refusing adjournment to the appellant. In all fairness, the Commissioner (Appeals) should have accepted the request made by the appellant for adjourning the hearing to the third or fourth week of February 2018, as was requested by the appellant. The order passed by the Commissioner (Appeals), therefore, deserves to be set aside on this ground alone. The order dated January 31, 2018 passed by the Commissioner (Appeals) is set aside and the Commissioner (Appeals) is directed to decide the appeal afresh after providing opportunity to the appellant, without being influenced by any of the observations made in the earlier order dated January 31, 2018 passed by the Commissioner (Appeals) - Appeal allowed.

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• CST, VAT & Sales Tax

• 2021 (2) TMI 761
  Compounding of Offence - detention of goods - allegation is that invoice raised by the supplier declared the name of the consignee, which was an unregistered place of business of the petitioner and therefore the documents were construed as invalid - HELD THAT:- An Adjudication Notice dated 20.07.2015 was issued to the petitioner. It stated that that the petitioner had not declared No. 48, Bye pass Road, Kalavasal, Madurai as additional place of its business and therefore, there was a violation of Rule 5(5)(c) of the Tamil Nadu Value Added Tax Rules, 2007 and therefore, the petitioner had wilfully evaded payment of tax under Section 71(1)(b) of the Tamil Nadu Value Added Tax Act, 2006 - The petitioner replied to the said Adjudication Notice dated 20.07.2015 vide its reply/objection dated 19.08.2015. In the said reply/objection, the petitioner questioned the jurisdiction of the respondent and stated that only jurisdictional Assessing Authority was empowered under the Act to adjudicate tax liability and hence requested for dropping of the proceeding. The impugned order dated 20.01.2016 was passed by the respondent. In the impugned order, the respondent has merely stated that the reply of the petitioner was an afterthought and as such deserves no consideration. In the impugned order, it has also been observed that the explanation of the petitioner cannot be accepted as there was an offence committed by the petitioner under Sections 71(3)(a) and 71(7) of the TNGST Act, 2006 and therefore, an opportunity was given to the petitioner to compound the offence under Section 72(1)(a) of the TNVAT Act, 2006. In the case of Vestas Wind Technology Vs. The Commercial Tax Officer, Enforcement and Ors. [2020 (5) TMI 500 - MADRAS HIGH COURT] , the Court dealt with identical situation and observed that Failure to obtain separate registration for the site office attracts penal provision Section 71(1)(b). Thus, this Writ Petition is allowed by restricting the compounding fee to be paid by the petitioner for a sum of Rs. 2,000/- under Section 72(1)(b) of the Tamil Nadu Value Added Tax Act, 2006 - respondent shall adjust the amount paid by the petitioner and refund the balance amount to the petitioner or in the alternative, permit the petitioner to adjust such amount for discharging its tax liability under the current tax regime - petition allowed.

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• 2021 (2) TMI 759
  Jurisdiction - Validity of impugned VAT Audit Report - challenge on the ground that the VAT Audit was conducted by the second respondent Commercial Tax Officer/Senior Audit Officer, Enforcement (North), Chennai, based on an authorization of the first respondent Joint Commissioner (CT), Enforcement-I, Chennai which is impermissible under Section 64(4) of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT:- It is noticed that by a communication dated 21.08.2013, the Commissioner of Commercial Taxes has identified the dealers whose business were to be audited and common letter was addressed to all the Joint Commissioners (CT), Enforcement. The Commissioner has sent a list of dealers whose business were to be audited in terms of Section 64(4) of the Tamil Nadu Value Added Tax Act, 2006. The VAT Audit was carried out by the first respondent in presence of a Commercial Tax Officer as is evident from the signature and seal in the VAT Audit Report. The Commercial Tax Department depends on officers to conduct the Audit. It cannot mean that Audit has to be personally carried out by an officer not below the rank of Deputy Commercial Tax Officer. The fact that the statements were recorded in the presence of a Commercial Tax Officer, by itself, will not mean that there is violation of Section 64(4) of the Tamil Nadu Value Added Tax Act, 2006. It merely explained that a Commissioner may order for audit of the business of any registered dealer by an officer not below the rank of Deputy Commercial Tax Officer. In this case, authorization to conduct the Audit was based on the order of the Commissioner of Commercial Taxes to all the Joint Commissioners (Enforcement). The first respondent had in turn conducted the Audit with the help of the second respondent. Merely because the statements were recorded in front of the second respondent, by itself, will not mean that the Audit was carried out by the second respondent in contravention of 64(4) of the Tamil Nadu Value Added Tax Act, 2006 - In any event, no prejudice or harm will be caused to the petitioner merely because the Audit Report was generated after an Audit held on 14.03.2014. After the Audit is completed, a notice is to be sent for revision of assessment under Section 27 of the Tamil Nadu Value Added Tax Act, 2006. It is therefore not open for the petitioner to disown and distance itself for the liability that may be eventually fastened under Section 27 of the Tamil Nadu Value Added Tax Act, 2006. The respondents are directed to issue appropriate Notice in accordance with law and complete the proceedings and pass appropriate order, within a period of six months from the date of receipt of a copy of this order - petition disposed off.

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• 2021 (2) TMI 749
  Revision/reopening of regular assessment - Section 16 of the Tamil Nadu General Sales Tax Act, 1959 - HELD THAT:- While the petitioner has tried to distance from the liability by shifting the burden on the respondent, the respondent on the other hand has passed an order without proper discussion and has merely reiterated the content of the revision notice - It was for the petitioner to have properly explained the case as to why the documents that were collected by the Department during inspection would not justify a revision of the assessment for enhancement of tax liability of the petitioner. In absence of a proper explanation from the petitioner there is a strong presumption that the petitioner deliberately did not account for those transaction in the books of accounts/bills and the sales were clandestine in nature to evade tax. They prima facie indicate that the conduct of the petitioner was to suppress the facts with a view to evade tax. The respondent was therefore entitled to pass a speaking order by drawing adverse inference and confirm the liability as the officers acting under the provisions of the Tamil Nadu General Sales Tax, 1959 are expected to pass orders based on the principles of preponderance of probabilities. However, there is no proper discussion in the impugned order. Nevertheless, the petitioner ought to have filed an appeal before the Appellate Commissioner under the provisions of the Tamil Nadu General Sales Tax Act, 1959. If the petitioner had filed an appeal under the provisions of the Act, petitioner would have pre-deposited 25% as a condition for filing the appeal and another 25% at the time of stay petition before the appeal was taken up for final hearing. Instead, the petitioner present writ petitions and prolonged the litigation for the last 18 years and thereby deprived the revenue to the state - The petitioner has abused the jurisdiction of this Court by filing the writ petitions the present writ petition even though the petitioner had a choice to approach the Appellate Commissioner against the impugned order. By filing the present writ petition, the petitioner has gained time and postponed the liability. The matter is remitted back and the petitioner is directed to deposit 50% of the disputed tax with the respondent within a period of one month from the date of receipt of this order - petition allowed by way of remand.

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• 2021 (2) TMI 747
  Principles of Natural Justice - validity of assessment order - availability of alternative remedy of appeal - HELD THAT:- It appears that the Department did not agitate the matter further and they accepted the order passed in the writ petition and the Assessing Officer took up the matter for denovo adjudication in terms of the order of remand and the proceedings have ultimately culminated in an assessment order dated 29.04.2019, which according to the learned counsel for the appellant is in favour of the appellant. Thus, taking note of the factual situation qua the prayer sought for by the petitioner and also taking note of the earlier orders passed by this Court remanding the matter back to the Assessing Officer and also the fact that the Assessing Officer has passed consequential orders dated 29.04.2019, we are inclined to follow the same procedure for the subject assessment years as well - Appeal allowed by way of remand.

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• 2021 (2) TMI 744
  Direction to issue C-Forms in respect of the High Speed Diesel procured/purchased by the Petitioner Company from the Oil Companies - seeking permission to procure the High Speed Diesel through the inter-State purchase under the Concessional CST rate - HELD THAT:- The issue involved in the present writ petition is no more res integra in view of the judgment passed by the Division Bench of this Court in THE STATE OF RAJASTHAN, THROUGH ITS PRINCIPAL SECRETARY, DEPARTMENT OF FINANCE, JAIPUR, THE COMMISSIONER, COMMERCIAL TAXES DEPARTMENT, GOVERNMENT OF RAJASTHAN, JAIPUR AND THE COMMERCIAL TAXES OFFICER, COMMERCIAL TAXES DEPARTMENT, SPECIAL CIRCLE-II, KOTA VERSUS ASI INDUSTRIES LIMITED, (FORMERLY KNOWN AS ASSOCIATED STONES INDUSTRIES KOTAH LIMITED) , UNION OF INDIA, NEW DELHI AND INDIAN OIL CORPORATION LIMITED [ 2019 (11) TMI 1061 - RAJASTHAN HIGH COURT ], which has been followed by this Court as well as the other Coordinate Benches of this Court where it was held that this Court is of the opinion that denial of C Forms is purely on account of exigencies of advent of the GST regime which compelled the assessee to migrate to and obtain GST Registrations which rendered at the same time its CST registrations ineffective. This was inadvertent and beyond its control. The present writ petition is allowed and the respondents are held liable to issue C-Form in the purchase of High Speed Diesel procured by the petitioner-company for mining purposes from inter-State trade - In the event of the petitioner having paid any amount on account of respondents wrongfully refusal to issue C-Form, the petitioner would be entitled to refund/adjustment of the same from the concerned authorities and collect the taxes. The concerned authorities are directed to process the claim within 12 weeks from today. Petition allowed.

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• Indian Laws

• 2021 (2) TMI 771
  Right to be appointed / function as Chairperson Intellectual Property Appellate Board, till a new chairperson of Board is appointed - The applicant seeks extension of the term of the incumbent Chairperson of the board - Crossing the age limit of 65 years - Trademarks Act, 1999 - HELD THAT:- Section 84 (2) of the TM Act no doubt states that a bench of the board shall consist of a judicial and a technical member. However, it is subject to other provisions of the TM Act. Section 84(3) commences with a non obstante clause and stipulates, by Section 84(3)(a) that a chairperson may, in addition to discharging the functions of the Judicial Member or Technical Member of the Bench to which he is appointed, discharge the functions of the Judicial Member or, as the case may be, the Technical Member, of any other Bench. Thus, in the absence of any member, the chairperson may, if the occasion so arises, act as technical or judicial member. Section 87 enables a vice-chairperson, or as the case may be the senior-most member of the board to act as chairperson in the event of a vacancy to that position, or in the event of the incumbent s inability to function in the post. Furthermore, significantly, Section 85 inter alia stipulates the qualifications for the post of chairperson or vice-chairperson. The relevant provisions of this section reveal that there is no bar for a technical member to be appointed as a regular chairperson, provided she or he has for at least two years, held the office of a Vice-Chairperson . In fact, the incumbent five technical members all hold legal qualifications (three of them holding masters in law, including one who holds a post-doctoral qualification). Four of these incumbent members were practising advocates in specialized fields of intellectual property (trademarks, and copyright) and one technical member (patents) had experience in the Patent Office. These members had practical legal experience of ten to fifteen years. The fact that they were appointed as technical members cannot obfuscate the fact that they are legally trained and qualified. Therefore, the argument that the technical members, in their position at the board as of now, cannot function without a chairperson, is unsustainable. Application dismissed.

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• 2021 (2) TMI 754
  Right on power of attorney (POA) holder - Maintainability of a private complaint under Section 200 of the Code at the behest of the original complainant - HELD THAT:- The original complainant, Mr. Jakka Vinod Kumar Reddy, has filed a complaint under Section 200 of the Code against respondent Nos.2 and 3 herein for the aforesaid offences through his power of attorney holder, Mr. Jakka Kiran Reddy. In the said complaint, it is specifically mentioned that the power of attorney holder is well acquainted with the facts of the case and he has been duly authorized by the original complainant to file the complaint at his behest. A copy of the power of attorney dated 13.12.2019 executed by the said Mr. Jakka Vinod Kumar Reddy is also filed. In the said power of attorney, it is specifically mentioned that the original complainant is living in Bangkok, Thailand, being pre-occupied to pursue the professional badminton training of his daughter, Miss. Jakka Vaishnavi Reddy, who represents India in Badminton on the International Circuit, was being ranked as Junior World No.2, as such, he will not be in a position to travel to Hyderabad, thereof as such, he has appointed Mr. Jakka Kiran Reddy as his power of attorney holder to file complaints, civil proceedings etc. It is also mentioned in the power of attorney that he does hereby agree to ratify and confirm all the acts and deeds done by his attorney in his name and on his behalf in respect to all the Courts of India, to be constituted as acts and deeds done by him as if personally present. Said facts would reveal that the petitioner herein has executed the above said power of attorney on 13.12.2019 to do certain acts on his behalf including filing of complaints. In the complaint, power of attorney holder has specifically mentioned that he is well acquainted with the facts of the case and he has been authorized by the complainant to file the complaint on his behalf. A perusal of the record would also reveal that the petitioner herein has filed a memo dated 18.12.2020 before the Sessions Court stating that the power of attorney holder can maintain a private complaint. Though, the said memo was filed, the Sessions Court has returned the complaint with the above said endorsement - on perusal of the record including the contents of power of attorney and the complaint, this Court is of the view that power of attorney holder can maintain a private complaint filed under Section 200 of the Code. Petition allowed.

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• 2021 (2) TMI 746
  Dishonor of Cheque - acquittal of the accused - section 138 of Negotiable Instrument Act 1881 - Whether the learned trial court has appreciated the evidence before the court in the light of the sound principles regarding appreciation of evidence in cases arising out of Cheque Bounce under Negotiable Instrument Act 1881? - HELD THAT:- The question of issuing statutory demand notice under section 138 of N.I Act arose only after receipt of the dishonour memo by the Bank. Before receipt of the said intimation the complainant cannot send or could not send demand notice mentioning future date as a Bank intimation regarding dishonour of cheque. The endorsement by the postal authorities, the seal of the postal department on cover and postal receipts coupled with contents of the said notice clearly indicates that the notice was sent on 03-08-2009 but not on 03-07-2009. The trial court wrongly interpreted the said aspect and without considering the effect of general clause Act section 27 has come to a conclusion that, cause of action on notice dated: 03--08-2009 is barred by limitation and wrongly held that the accused is to be acquitted for want of cause of action and bar of limitation in filing complaint. The trial court shall frame proper point for consideration as to the legally enforceable debt or liability and also frame points for consideration as to presumption arising under section 118 and 139 of Negotiable Instrument Act and also to raise a point as to whether the accused has rebutted that presumption by preponderance of probabilities proves that his defense as probable. Without discussing the evidence of complainant or accused in a proper perspective simply stating there are latches in the complainant s case without stating what are those latches the finding is not tenable or legally sustainable. The trial court has committed a serious error in not appreciating the oral and documentary evidence. Except this limitation point no other points have been answered with reference to settled principle of law in appreciating evidence in case of Negotiable Instrument Act or Cheque Bounce case. Therefore, it is wise to set aside the order of the trial court and to remand the case for fresh disposal of case in accordance with law i.e., to hear both the parties and pass appropriate Judgment by giving reasons and findings both on evidence and the law except on the point of limitation which is admittedly within a period of limitation and held in favour of the complainant by this court. Appeal allowed.

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• 2021 (2) TMI 745
  Dishonor of Cheque - insufficiency of funds - acquittal of the accused - HELD THAT:- In the constructive imputation, notice to be considered as they are in the same cluster of management of the company. Accused No.3 is the authorized signatory to cheque. In the second notice issued address, names are there but notice is addressed to accused No.3. In the light of first presentation due knowledge of impugned notice have thereunder the impact and hyper technicality cannot be allowed to veto the regular process of law. In the context and circumstances There is no lacunae in presentation of the cheque. Another point that was submitted by learned counsel Sri.Chokka Reddy for respondents is that there is an agreement not to take action for first two years on the face of it which defence neither was raised nor could be accepted to exonerate the accused. Learned counsel for appellant submits the complainant is not affluent and it is very difficult for him to tolerate the financial burden. The cheque admittedly is issued in respect of existing legally recoverable debt and there was mandatory obligation and accused had issued the cheques in discharge of the obligation and that came to be dishonoured and tried to raise hyper technical issues against the substantive rights which cannot be accepted and on the other hand for the reasons morefully stated above It is found that the accused has committed offence punishable under Section 138 of the Negotiable Instruments Act and is liable to face punishment. In the process Judgment passed by the learned trial Judge is liable to be set aside. Accused is convicted for the offence punishable under Section 138 of the Negotiable Instruments Act and sentenced to pay a fine of Rs. 2,00,000/-. Out of which complainant be given compensation of Rs. 1,90,000/- payable by the accused and Rs. 10,000/- is ordered to be adjusted to the State Exchequer - appeal allowed.

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