Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 21, 2020
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Securities / SEBI
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Classification of goods - ‘Access Card’ printed and supplied by the Appellant based on the contents provided by their customers - They will fall under the description of the term ‘leaflet’ under 4901 10 20 - Liable to GST @5% - AAAR
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Club and association services - principles of mutuality - Rotary Club - contributions received from the members in the Administration Account for expending the same for the weekly and other meetings and other petty administrative expenses - classification of supply - The amount collected as membership subscription and admission fees from members is not liable to GST as supply of services. - AAAR
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Classification of goods - rate of GST - production and making of nutritional powder for special dietary use called Prohance-D Chocolate variant - ‘diabetic food’ or not - The Order of the AAR classifying the product Prohance-D (Chocolate) under heading 21069050 is hereby set aside - The product would instead classify as a diabetic food covered under chapter heading 21069091. - AAAR
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Levy of IGST with penalty - e-way bill has not been generated for the movement of goods - The instant appeal is accepted and the order passed by Assistant Commissioner is set aside - The tax and penalty deposited by the appellant u/s 129 (1) may be refunded - A penalty of Rs Ten Thousand only is imposed on the taxpayer under section 122 (1) of the Act. - Commissioner
Income Tax
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Provision for Site Restoration - Expenses allowable u/s 37(1) - Merely because the contract period was long viz., 25 years, which too now stands extended by period of ten years or more and therefore the actual work of site restoration may happen after 35 years depending upon the actual exploration of oil reserves and the Site restoration would be undertaken only if there is no longer some oil to be explored or drawn out and, therefore, it cannot be said that the provision made for the three Assessment Years presently at the beginning of the Contract period was irrational or an disallowable expenditure. - HC
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Penalty u/s.271BA - When the transactions related to the assessee falls under the clause(i) of Section 92BA of the Act, which has already been removed by the Finance Act, 2017 w.e.f. 01.04.2017, therefore, the imposition of penalty u/s.271BA of the Act for failure to furnish the report in prescribed Form No.3CEB in terms of provisions of section 92E of the Act, does not survive at all. - AT
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Unexplained Unsecured Loans - Additions made by the ld.AO in the case of assessee are against the principles laid down u/s.68 - no addition could have been made by the ld.AO as in the present case the assessee has already discharged his initial onus. Therefore, the unsecured loan received by the assessee cannot be termed as unexplained. - AT
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Rejection of books of accounts u/s 145(3) - On money receipt - estimation of income - considering the facts that the project undertaken by the assessee comes under deduction of section 80IB(10) hence, there may not be any intention to disclose the lower rate of profit. Considering these facts, and taking in to account net profit in construction business, it would be reasonable to estimate 6% of net profit on total on-money receipts - AT
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Penalty u/s.271-C - non deduction of TDS on Leave Travel Allowance (LTA) - reasonable cause for the failure - when the High Court admits substantial question of law on an addition, it becomes apparent that the addition is certainly debatable. In such circumstances no penalty can be levied u/s 271C. - AT
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Income from other sources - Addition on account of difference between sale consideration of property purchased by assessee and the guideline value of the said property for stamp duty purposes, by invoking provisions of Section 56(2)(vii) - additions deleted on various grounds - AT
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Rectification of mistake - if according to the assessee, the order of the ITAT needs to be visited again or the evidences submitted need re-appreciation again in light of assessee’s arguments, the same would amount to review of the matter not permissible u/s. 254(2) - However, on second issue, order recalled - AT
Customs
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Demand of pending dues of Cost Recovery Charges alongwith the interest - Customs Cargo Service Provider (CCSP) - in the show-cause notice the only allegation is that the appellant has not fulfilled the conditions as laid down in Regulations 5 (1) (iii), 5(2) and 5(3). Therefore, the payment of recovery in the impugned order is beyond the show-cause notice and is not sustainable. - AT
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Undervaluation of goods - The department could not establish as to how the information about load port document was procured by the Revenue and therefore the information stated in the Show Cause Notices obtained from exporting country is not reliable as evidence. - AT
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Refund of SAD - Focus Product Scheme - Commissioner (Appeals) is finding fault with the judgment of the Hon'ble Delhi High Court that since the said circular was not brought to the notice, the Judgement is not correct. The said action on the part of the Commissioner (Appeals) amounts to contempt of the Hon'ble High Court - AT
Direct Taxes
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Prohibition of Benami Property Transactions - 'provisional attachment' of the property - If the Appellants do not have any intention to alienate the property, they need not feel worried about 'provisional attachment'. - HC
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Declaration of sale deed as Benami - Seeking certified copy of ITR from the department in respect of respondent no. 2 - income tax returns are public documents and they can be summoned by the Court. - HC
SEBI
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An independent director shall be held liable only in respect of such acts of omission or commission by a company which had occurred with his knowledge, consent or connivance or where the independent director had not acted diligently. - AT
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The SEBI is empowered to pass an ex-parte interim order only in extreme urgent cases and that such power should be exercised sparingly. In the instant case, we do not find that any extreme urgent situation existed which warranted the respondent to pass an ex-parte interim order. - AT
Service Tax
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Extended period of limitation - No offense and penalties can be created with retrospective effect nor in the facts and circumstances of the case extended period of limitation can be invoked - thus, neither extended period of limitation can be invoked nor the penalties can be sustained. - AT
VAT
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Input tax credit (ITC) - failure to produce the documents to verify the claim of genuineness of the Input Tax Credit claimed by the Assessee - merely because the registration details existed on the rolls of the Revenue Department, it could not per se prove the validity and verification of the transactions in question. - HC
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Grant of reimbursement of Commodity Taxes/Value Added Tax paid by the petitioner - Direction to the respondents to issue appropriate notification giving effect to the provisions of Tripura Industrial Investment Promotion Incentive Scheme, 2007 - Tripura VAT Act, 2004 - The petitioner has made out a case for issuing appropriate directions - HC
Case Laws:
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GST
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2020 (2) TMI 896
Classification of goods - Access Card printed and supplied by the Appellant based on the contents provided by their customers - whether classifiable under HSN code 4901 10 20 under the description brochures, leaflets and similar printed matter? - scope of supply - principal supply or not - benefit of N/N. 1/2017-CT (Rate) Sl.No.201 1/2017-IT (Rate) Sl.No.201 dated 28.06.2017 and SGST/UTGST Notifications - challenge to AAR decision. HELD THAT:- The activity undertaken by the Appellant is one which brings into existence a distinct item i.e Access Card which is used by the recipient to distribute to the pilgrims. This card is a bar coded multi-colour no-tear card. Printing is an activity which results in the emergence of the Access card . Printing is an activity which is ancillary to the emergence of the Access card. The printing activity undertaken by the Appellant is for the purpose of bringing into existence the Access card. The Access card is put to farther use by the recipient M/s Trilok Security Systems in the performance of the Mass Queue Management System services. The intention of the Appellant s activity is to bring into existence an Access card for which printing is ancillary. The resultant product Access card is therefore a product of the printing industry. The lower Authority has relied on the CBIC Circular No 11/11/2017-GST dated 20.10.2017 to hold that the activity undertaken by the Appellant is a supply of service. The principal supply in the case of the Appellant is not the printing service but a supply of the Access cards which is a product emerging out of the printing activity. Therefore, the provisions of Para 5 of the Board s Circular will apply in this case and the printing and supply of Access cards by the Appellant is a supply of goods. We therefore set aside the ruling given by the lower Authority. The Access cards being printed cards in single sheets are classifiable under sub-heading 4901 10 20 under the category of pamphlets, booklets, brochures, leaflets and similar printed matter. They will fall under the description of the term leaflet under 4901 10 20 - In the GST rate Notification No 01/2017 CT (R) dated 28.06.2017, Brochures, leaflets and similar printed matter, whether or not in single sheets are covered under entry SI.No 201 of Schedule I with rate of 2.5% CGST and 2.5% SGST. The ruling of AAR set aside.
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2020 (2) TMI 895
Taxability - contributions received from the members in the Administration Account for expending the same for the weekly and other meetings and other petty administrative expenses - club and association services - principles of mutuality - classification of supply - supply of goods or supply of services - HELD THAT:- It is observed that the Appellant is not providing any specific facility or benefits to its members against the membership subscription charged by it, as the entire subscription amount is spent towards meetings and administrative expenditures only. Thus, the Appellant is not doing any business as envisaged under section 2(17) of the CGST Act, 2017. Once it has been established that the Appellant is not doing any business in terms of section 2(17) of the CGST Act, 2017, it can be deduced that activities carried out by the Appellant would not come under the scope of supply as envisaged under section 7(1) of the CGST Act, 2017. The impugned activities of the Appellant to be supply, then the membership fee collected by the Appellant, which is purely in the nature of a reimbursement for the meetings and administrative expenditures incurred by the Appellant to sustain and propagate their inherent objectives and programs, would be subject to the double taxation as the amount spent towards the meetings and administrative expenditures is already subjected to GST at the hands of the suppliers of these input services or goods used in the meetings, events and other administrative functions of the Appellant. Thus, doing so would clearly be against the legislature s intention of the formulation of GST, which certainly does not embrace the idea of double taxation - Once the core issue regarding the taxability of the membership subscription fee has been decided, the answers to the other issues/questions posed by the Appellant vide their advance ruling application will follow and the same do not warrant separate discussions. The amount collected as membership subscription and admission fees from members is not liable to GST as supply of services.
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2020 (2) TMI 894
Classification of goods - rate of GST - production and making of nutritional powder for special dietary use called Prohance-D Chocolate variant - diabetic food or not - appellant has stated that Prohance-D is a nutritional powder -special dietary use for people with Diabetics - though the AAR held that the product is a food , it held that it is not a diabetic food - Challenge to AAR decision. HELD THAT:- Prohance-D Chocolate contains some extra special ingredients which differentiate from the normal Prohance. All the ingredients in it especially Isomaltulose, Gum Arabic, Inulins, Myo-Innositol, Sucralose, Fructose are sugar replacements or sugar substitute. Gum Arabic is used as a soluble dietary fiber . The fact that these products are used in the Prohance-D shows that it is specially meant for people suffering from diabetes and is also marketed as meal replacement for diabetics. As per the definition of Diabetic food in the Dictionary of Food and Nutrition by David Bander, it covers foods that has specially formulated for people suffering from diabetics. In the present case, the impugned product though generally contributes to the well being of patient is specially formulated for diabetic patients as is evident from the fact that it contains certain sugar replacements which are not found in the normal Prohance. It is therefore specially directed for diabetics. In such a scenario, whether a normal person not suffering from Diabetes would opt for the Prohance-D variant as a meal replacement? The answer is no. Such a person would opt for Prohance and not for Prohance-D as it can be normally expected that only a diabetic patient would go for the Prohance-D variant. This makes it very clear that that the product is formulated for diabetic patients, is targeted at that particular segment and therefore, can be termed as a diabetic food . It is true that the heading 2106 also covers Compound preparation for making nonalcoholic beverages under which heading is the product classified by the AAR. Heading 2106 covers both the descriptions and the Explanatory Notes to the HSN do not make it clear as to which product category the explanatory note given above applies. It is only under Customs Tariff Act that the category for diabetic foods is carved out under the Heading 2106. But the very fact that the explanatory note explains what a diabetic food gives an indication as to what is intended to be covered by it. The intention is that foods which contains sugar replacement or sugar substitutes are meant to be covered by heading 2106 and such food may be products like sweets and gums also. In the instant case, the impugned product also contains sugar substitutes and therefore it will be covered by the term diabetic food . The AAR has also observed that the product is not a diabetic food because it does not contain high amount of dietary fiber and although the fact that it contains Gum Arabic, Gum Arabic is not a great source of dietary fiber. However, the AAR has not given any references in support of the statement that Diabetic Foods have to contain dietary fibre. Also, it is felt that such a qualification would not be required to classify a product as diabetic food. As the HSN also considers food containing sugar replacements as diabetic food, the above product would also classify in it. The Order of the AAR classifying the product Prohance-D (Chocolate) under heading 21069050 is hereby set aside - The product would instead classify as a diabetic food covered under chapter heading 21069091.
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2020 (2) TMI 893
Demand of tax and penalty - Truck carrying Pan Masala - discrepancy in the valuation of goods leading to revenue loss - petitioner submits that if at all if the respondent department intends for confiscation proceeding or to initiate appropriate proceedings, that would be under Sections 129 and 130 of the Rules, 2017, which may be against the owner of the goods and not against the petitioner/driver - HELD THAT:- This court is of the opinion that the petitioner as such as of now would not have any grievance so far as demand notice dated 17.01.2020 (Annexure P/4) is concerned in view of the fact that the owner has subsequently entered appearance in the same proceeding and is contesting the case on merits. Petition disposed off.
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2020 (2) TMI 892
Levy of IGST with penalty - e-way bill has not been generated for the movement of goods - supply of exempted goods i.e. plants as per Rule 138 (14) (E) of CGST/HPGST Rules, 2017 - scope of supply under section 7 of HPGST/CGST Act, 2017 - HELD THAT:- It appears that there is no dispute regarding quantity /quality of goods and further it has been clearly mentioned on the challan that the goods are not for sale only for repair. Since the transaction has no tax implications, the proper office while adjudicating the case has taken into consideration the invoice value of the nine month old purchase invoice for determining the tax and penalty in this case under section 129(1) of the Act. The method used for valuation of transaction is not just and proper as the disputed goods were old and were dispatched for repair. As there is no doubt that the taxpayer has violated the provisions of the CGST/HPGST Act, 2017, so is liable to pay penalty. The tax payer has transported goods without the cover of proper documents (e way bill is one of them). The instant appeal is accepted and the order passed by Assistant Commissioner State Taxes Excise-cum- Proper Officer, North Enforcement Zone Palampur dated 27.11.2018 is set aside - The tax and penalty deposited by the appellant under section 129 (1) may be refunded and a penalty of Rs Ten Thousand only is imposed on the taxpayer under section 122 (1) of the Act.
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Income Tax
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2020 (2) TMI 891
Exemption u/s 11 - assessee continuing to be registered u/s 12AA - extension of exemption under Section 80G of the Act which was denied by the subordinate authorities - HELD THAT:- Tribunal correctly relied upon the judgment of this Court in CIT Vs. Shri Vishav Namdhari Sangat [ 2013 (2) TMI 294 - PUNJAB HARYANA HIGH COURT] holding that Circular No. 5/2020 and Circular No.7/2010 issued by Central Board of Direct Taxes had given perpetuity to the exemptions granted under Section 80G(5) of the Act and consequently, allowed the exemption to continue. - Decided in favour of assessee
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2020 (2) TMI 890
Provision for Site Restoration - Expenses allowable u/s 37(1) - HELD THAT:- Assessee is engaged in the business of oil exploration in India and as per the Product Sharing Contract between The Government of India, Oil and Natural Gas Corporation Limited (ONGC), Videocon Petroleum Limited, Command Petroleum (India) Pte Limited, Ravva Oil (Singapore) Pte Ltd, with respect to contract Area identified as Ravva Oil Gas Fields. The Assessee Company undertaking such oil exploration was obligated under the Clause 1.77 and 14.9 of the Contract to restore the site by filling up the pits, after the oil exploration work is over. For the three Assessment Years in question, the provision made by the Assessee for 'Site Restoration cost' under the contractual obligations of the Assessee in the Product Sharing Contract, made on scientific basis was clearly an allowable expenditure under Section 37(1) - The only ingredient required to be complied with for Section 37(1) is that the expenditure in question should be laid out or expended wholly for the purpose of business of the Assessee. There is no dispute that the Provision in question was made wholly and exclusively for the purpose of business. The only dispute was that expenditure not actually incurred in these years and the amount was to be spent in future out of the Provision made during these Assessment years namely A.Y.1996- 1997 to 1998-1999. No prohibition or negation for making a provision for meeting such a future obligation and such a provision being treated as a revenue expenditure under Section 37(1) of the Act. The Hon'ble Supreme Court in the case of Calcutta Company Limited [ 1959 (5) TMI 3 - SUPREME COURT] clearly held that the words Lay (laid out) or Expend includes expendable in future also, which has been quoted by us above. The making of a Provision by an Assessee is a matter of good business or commercial prudence and it is to set apart a fund computed on scientific basis to meet the expenditure to be incurred in future. There is no time frame or limitation prescribed for the said provisions to be actually spent. Merely because in the context like the one involved in this case, the contract period was long viz., 25 years, which too now stands extended by period of ten years or more and therefore the actual work of site restoration may happen after 35 years depending upon the actual exploration of oil reserves and the Site restoration would be undertaken only if there is no longer some oil to be explored or drawn out and, therefore, it cannot be said that the provision made for the three Assessment Years presently at the beginning of the Contract period was irrational or an disallowable expenditure. The question of commercial expediency is a usual business and the economic decision to be taken by the Assesee and not by the Revenue Authorities and therefore the provision made on a reasonable basis, cannot be disallowed under Section 37(1) of the Act, unless it can be said to be have no connection with the business of the Assesee. The words wholly and exclusively for the purpose of business is a sufficient safeguard and check and balance by the Revenue Authorities to test and verify the creation of provisions for meeting a liability by the Assessee in future and its connectivity with the business of the Assessee. Assuming that such set apart provision is not actually spent in future or something less is spent on Site Restoration, nothing prevents Revenue Authorities and Assessee himself to offer it back for taxation in such future year, the unspent Provision to be brought back to tax as per Section 41(1) of the Act. - Decided in favour of assessee.
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2020 (2) TMI 889
Set off of trading loss as incurred in commodity trading denied - AO treated the entire transaction as non genuine and bogus - HELD THAT:- Facts on record show that the Assessing Officer did not make any enquiry from M/s Lazara Commodities Pvt Ltd and treated the entire transaction as non genuine and bogus on the strength of the statement of Shri Vikas Kumar Agarwal. We find that vide reply dated 25.12.2018, while submitting the financial and tax details of M/s Lazara Commodities Pvt Ltd, the assessee had made a specific mention that if any direct confirmation from the broker is required for the transactions done with it, the Assessing Officer may obtain directly from the broker by using his powers u/s 133(6) of the Act. Assessing Officer has not made any independent enquiry from M/s Lazara Commodities Pvt Ltd and disallowed the claim of loss solely on the statement given by Shri Vikas Kumar Agarwal, some entry provider based in Kolkata. Assessing Officer should have made enquiry directly from M/s Lazara Commodities Pvt Ltd. Therefore, in the interest of justice and fair play, we restore this issue to the file of the Assessing Officer. Ground No. 1 allowed for statistical purposes. Disallowance of short term capital loss - sale of shares - HELD THAT:- The fact that the shares were sold to the mother of the assessee, raises a suspicion on the genuineness of the transaction. We are surprised to find that when the shares were purchased, the Assessing Officer did not make any enquiry and at the time of sale, the Assessing Officer is questioning the purchase price of the shares. Further, Rule 11UA of the Rules contains rules for determination of fair market value and Rule 11UA(1)c)(b) of the Rules provides for determination of fair market value of unquoted equity shares. Though the assessee has furnished a valuation report, but whether the said report is in line with the relevant rules has not been examined by the Assessing Officer. Restore this issue to the file of the Assessing Officer as directed to examine the valuation report to determine whether the same is in line with Rule 11UA of the Rules. The Assessing Officer may also make necessary enquiries from the valuer and after giving reasonable and fair opportunity of being heard to the assessee, decide the issue afresh.
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2020 (2) TMI 888
Penalty proceedings initiated u/s.271BA - failure to furnish the report in prescribed Form No.3CEB in terms of provision of section 92E - HELD THAT:- On perusal of the provisions of Section 92BA of the Act, we found that once the clause in the said section is omitted by the subsequent amendment, it would be deemed that clause(i) was never been on the statute and there is no specification in omitting the said clause by the statue as to whether the proceeding initiated or action taken on this, shall continue or not. We have also perused the order of the CIT(A) dated 30.07.2019, copy of which is placed on record, thereby deleting the quantum addition in the case of the assessee following the above amendment in the provisions and relying on the decisions of Kolhapur Canesugar Works Ltd. [ 2000 (2) TMI 823 - SUPREME COURT], GENERAL FINANCE CO. AND ANOTHER [ 2002 (9) TMI 3 - SUPREME COURT], TEXPORT OVERSEAS PRIVATE LIMITED VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE (1) (1) , BENGALURU. [ 2017 (12) TMI 1719 - ITAT BANGALORE] When the transactions related to the assessee falls under the clause(i) of Section 92BA of the Act, which has already been removed by the Finance Act, 2017 w.e.f. 01.04.2017, therefore, the imposition of penalty u/s.271BA of the Act for failure to furnish the report in prescribed Form No.3CEB in terms of provisions of section 92E of the Act, does not survive at all. Accordingly, we allow the appeal of the assessee and cancel the penalty levied u/s.271BA
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2020 (2) TMI 887
Transfer pricing adjustment made in respect of advertisement, marketing and promotion (AMP) expenditure - international transaction or not? - HELD THAT:- AMP expenditure was incurred for penetrating the market and increasing the sales. In any case of the matter, no material has been brought on record by the Transfer Pricing Officer to demonstrate that there is an agreement/arrangement with the AEs for incurring AMP expenditure to promote the brand of the AEs. Further, the entire AMP expenditure has been in curred in India and paid to third parties in India. Thus, keeping in perspective the aforesaid factual position, we have to hold that the AMP expenditure incurred by the assessee cannot come within the purview of international transaction. Further, it is evident, the Transfer Pricing Officer has treated the AMP expenditure as part of international transaction following the Special Bench decision of the Tribunal in LG Electronics India Pvt. Ltd. [ 2013 (6) TMI 217 - ITAT DELHI ] and has also applied BLT method for computing arm's length price. It is relevant to observe, the aforesaid Special Bench decision of the Tribunal in LG Electronics India Pvt. Ltd. [ 2013 (6) TMI 217 - ITAT DELHI ] has been disapproved by the Hon ble Delhi High Court in Maruti Suzuki India Ltd. [ 2015 (12) TMI 634 - DELHI HIGH COURT ]. The Hon ble High Court has held that the BLT method is invalid as it is not prescribed in the statute. Various Benches of the Tribunal following the decision of the Hon ble Delhi High Court in Maruti Suzuki India Ltd. (supra), have consistently held that AMP expenditure incurred by the assessee in India cannot come within the purview of international transaction. Adjustment proposed by the Transfer Pricing Officer while determining the arm's length price of the price paid towards import of goods from the AEs - HELD THAT:- While computing its margin with regard to the international transaction relating to import of goods from the AEs, the assessee has claimed economic adjustment towards the AMP expenditure incurred by it. It is the claim of the assessee that compared to the comparables whose marketing expenditure worked out to 0.87% of operating income, assessee s marketing expenditure worked out to 21% of the operating income. Thus, it is the claim of the assessee that necessary adjustment has to be given on account of marketing expenditure while computing the margin. It is observed, while considering similar claim made by the assessee in assessment year 20007 08, the Transfer Pricing Officer has allowed 50% of the adjustment claimed. In fact, in Assessment Year 2012 13, though, learned Commissioner (Appeals) had granted similar relief on account of economic adjustment, however, the revenue has not contested the relief granted by the first appellate authority. Considering the above, we uphold the decision of learned Commissioner (Appeals) on the issue. Grounds raised are dismissed.
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2020 (2) TMI 886
Addition u/s 41(1) - Cessation of liability to pay - HELD THAT:- Admittedly the assessee constructed a society named Matrinagar Co-operative Housing Society Bharuch and was thus required to incur expenses on account of drainage boundary wall, temple etc. towards development of the society. Since these expenses were incurred by the owner of the society for which assessee was required to reimburse them therefore the assessee had created a provision in the books of account towards this liability. We also found that Matrinagar Association has not given up their right to recover the amount from the assessee. In the absence of confirmation it cannot be presumed that Matri Nagar Association has given up right of recovery of the said amount from the assessee and moreover the said amount has also been shown as payable by the assessee is also a pointer that assessee still admits the liability to pay. After appreciating the facts of the present case, we are of the view that for invoking provisions of section 41(1) of the Act, there has to be remission of liability. There is no remission or cession of liability in the case of assessee. Remission has to be granted by the creditors and the cession of the lability may occur either by reason of operation of law. Remission of liability arises only when the creditor voluntarily gives up the claim. The cession of liability arises when it ceases to exist in the eyes of law for all purposes - Since as far as the facts of the present case, the assessee has still shown the creditors as payable, therefore, there is no cessation of liability. - Decided in favour of assessee Advance towards sale of house property - HELD THAT:- From the records, we are noticed that assessee has received the money from three different persons who were not relatives of the assessee and it is also undisputed fact that assessee had received the money in pursuance of an authority to sell entered into on 01-09-2008. A.O. has recorded the statements of the persons from whom the advance was received. These persons have categorically confirmed and admitted of have doing agricultural activities. The land holdings in the form of 7/12 and also the certificate of Talati cum mantri has already been placed on record. The method by which the tissue were procured by the creditors was sold in the market has also been mentioned by the respective persons. All those persons have specifically stated that agricultural activities being carried out by them. The certificate of Talati also shows that the land owned by those persons are very fertile and the early income for the year under consideration was between 8 to 9 lacs for these individuals. Apart from that they have also specifically stated before the assessing officer that the amount was advanced from accumulated savings of past years. Since there is ample documentary evidence on record which proves the identity, creditworthiness and genuineness of transactions on the record in the form of agreement to sell, affidavits, statement of persons who had made the payment to the assessee and their source of payment, certificate of Talati and mantri and also proof of land holdings, therefore, all those documentary evidences cannot be disbelieved and additions cannot be made, merely rejecting the evidences filed and the evidences given by the assessee do not entitle the AO to make the addition u/s. 68 of the Income Tax Act as held by the Hon ble Supreme court in the case of Orissa Corporation Pvt. Ltd. [ 1986 (3) TMI 3 - SUPREME COURT] . More particularly in this case the assessee has discharged his onus by putting forth all the documents, evidence placed on record clearly shows that agreement to sell was entered into by the assessee with the above three persons who had substantial land and confirmed the payments made in the statement also in an affidavit, therefore, the creditworthiness of the persons as well as genuineness of the transactions with the assessee stood established and thus the addition u/s. 69 could not be sustained. - Decided in favour of assessee
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2020 (2) TMI 885
Unexplained Unsecured Loans - Addition u/s 68 - consequential disallowance on account of interest paid on above Loans - HELD THAT:- Since all the confirmations from the depositors have been submitted, so there was no conclusion of any afterthought or make believe transactions. All the transactions are duly recorded in the regular books of accounts. Therefore, genuineness of those cannot be doubted. Even otherwise, Hon'ble jurisdictional Gujarat High Court in the case of DCIT Vs. Rohini Builders [ 2001 (3) TMI 9 - GUJARAT HIGH COURT] along with PAN and confirmation, then in that eventuality no additions are sustainable. Even in the case of CIT Vs. Ranchhold Jivabhai Nakhava [ 2012 (5) TMI 186 - GUJARAT HIGH COURT] it has categorically been held that when once the initial onus has already been discharged by the assessee, then in that eventuality it was the duty of the ld.AO to ascertain from the ld.AO s of those lendors, whether in the respective returns they have shown existence of such amount of money or not. The ld.AO in the present case has not carried out any such exercise as has been laid down by the Hon'ble Gujarat High Court in the case of CIT vs. Ranchhod Jivabhai Nakhava(supra). Additions made by the ld.AO in the case of assessee are against the principles laid down u/s.68 - no addition could have been made by the ld.AO as in the present case the assessee has already discharged his initial onus. Therefore, the unsecured loan received by the assessee cannot be termed as unexplained. Thus, no addition on that account is sustainable. Disallowance being 20% general labour wages, workers salaries and freight expenses of lumsum basis - only reason for making disallowances was that assessee was not maintaining any register and had only submitted self-made vouchers - HELD THAT:- We notice that in this particular year, there are less expenditure, then that occurred in the earlier years. Therefore, keeping in view of the above submissions, we are of the view that there is no justification of making any disallowance on account of expenses incurred by the assessee. When the assessee has substantiated the same by producing documents, therefore, we delete the addition/disallowance, accordingly Ground No.3 is allowed.
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2020 (2) TMI 884
Rejection of books of accounts u/s 145(3) - On money receipt - estimation of income - addition on account of entire construction receipts as alleged unrecorded receipts - HELD THAT:- CIT (A) was not justified in confirming the addition of entire on-money receipts amounting to ₹ 4,72,02,368. Therefore, only estimated net profit is required to be taxed. We find that the assessee has shown net profit at 4.55.% for the assessment year under consideration and 4.59% for A.Y. 2010-11. Further, the Hon`ble High Court in the case of CIT V. Abhishek Corporation [ 1998 (8) TMI 110 - ITAT AHMEDABAD-C] has upheld the net profit at 1.31% as declared by the assessee in that case. The net profit rate disclosed at 4.55% during the assessment year under consideration by the assessee in books of accounts and considering the facts that the project undertaken by the assessee comes under deduction of section 80IB(10) hence, there may not be any intention to disclose the lower rate of profit. Considering these facts, and taking in to account net profit in construction business, it would be reasonable to estimate 6% of net profit on total on-money receipts - Appeal of the assessee is partly allowed.
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2020 (2) TMI 883
Rectification u/s 154 - rectifiable mistake coming within the section 154 - deduction u/s. 80P(2) rejected - HELD THAT:- In the present case, the question is not making any claim by the assessee in his return of income or before the Assessing Officer during the assessment proceedings or before the CIT(A) in the proceedings u/s. 143(3) r.w.s 147 and 250 of the I.T. Act. When the CIT(A) proceeded to rectify his earlier order by placing reliance on the judgment of the Jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] the assessee made this claim before the CIT(A) on which facts relating to the mistake is not apparent on record and the related documents connected with this claim of the assessee were not at all filed either before the Assessing Officer or before the CIT(A). Being so, such claim cannot be entertained by the CIT(A) while he is deciding the issue under section 154 r.w.s. 250 of the I.T. Act. Hence, no infirmity in the order of the CIT(A) on this issue in rejecting the claim of the assessee u/s. 80P(2)(d) of the I.T. Act. Reliance placed by the Ld. AR on the judgments of the Supreme Court in the case of National Thermal Power Corporation Ltd. vs. CIT [ 1996 (12) TMI 7 - SUPREME COURT] and Goetze (India) Ltd. vs. CIT [ 2006 (3) TMI 75 - SUPREME COURT] have no application to the facts of the present case since they were delivered on different set of facts. No merit in the claim of the assessee u/s. 80P(2)(d) of the I.T. Act made during the proceedings u/s. 154 of the I.T. Act before the CIT(A). Thus, this ground of appeals of the assesses is rejected.
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2020 (2) TMI 882
Penalty u/s 271(1)(c) - Addition of unexplained deposits and interest thereon - HELD THAT:- As decided in own case [ 2019 (10) TMI 1026 - ITAT PUNE] we find that the Tribunal deleted the additions on merits. Therefore, it is reasonable be infer that the Tribunal granted relief to the assessee on merits in quantum appeal. As such, there is no dispute on the issue of deletion of the said addition, which is the subject matter of the penalty. Accordingly, the impugned penalty levied u/s 271(1)(c) of the Act shall not survive. - Appeal of the assessee is allowed.
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2020 (2) TMI 881
Rectification u/s 154 - Deduction u/s 80P(2) denied relying on the judgment of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] - HELD THAT:- CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) without examining the activities of the assessee society. The Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P. In view of the dictum laid down by the Full Bench of the Hon ble jurisdictional High Court (supra) restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. AO shall examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969, subject to jurisdiction granted to the assessee as per the certificate of registration issued by the Registrar of Co-operative Societies, and accordingly, consider the allowabillity of deduction u/s 80P(2) of the I.T.Act. - Decided in favour of assessee for statistical purposes.
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2020 (2) TMI 880
Penalty u/s.271-C - non deduction of TDS on Leave Travel Allowance (LTA) - reasonable cause for the failure - HELD THAT:- The facts of the case of the Assessee in these appeals is identical to the case decided in the case of State Bank of India [ 2019 (1) TMI 145 - ITAT JAIPUR] and therefore the ratio laid down therein will squarely apply to the facts of the Assessee s case and therefore following the ratio laid down therein, the penalty imposed is liable to be cancelled. In the case of Ankita Electronics Pvt. Ltd . [ 2015 (3) TMI 1029 - KARNATAKA HIGH COURT] had an occasion to deal with issue whether penalty can be levied when quantum proceedings are pending in the Hon ble High Court and substantial question of law is framed for consideration by the High court on the default which is the basis for initiating penalty proceedings and held that when the additions in respect of which penalty under Section 271(1)(c) of the Act was levied, are challenged in appeal before High Court and when High Court has admitted for consideration the correctness of such addition then it means that the additions made were debatable and would lead credence to the bonafides of the assessee and in such circumstances imposition of penalty was not proper and was rightly deleted by the Tribunal. We are of the view that levy of penalty u/s.271C cannot be sustained and the same is directed to be deleted. - Decided in favour of assessee.
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2020 (2) TMI 879
Income from other sources - Addition on account of difference between sale consideration of property purchased by assessee and the guideline value of the said property for stamp duty purposes, by invoking provisions of Section 56(2)(vii) - HELD THAT:- The State Government has noted the hardships faced by parties in real estate transactions and brought down the guideline value in 2017. In the instant case before us, firstly the differential is only 3.711% which is less than 5% and there cannot be precision in all the cases that consideration should be same or higher than guideline value as there are several factors which determine the actual sale consideration. Assessee challenged guideline value being adopted by the AO for the purposes of Section 56(2)(vii) and matter was referred by AO to valuation cell but report of the DVO is not brought on record by Revenue even before us while it was incumbent on revenue to bring on record report of DVO, thirdly the State Government has itself reduced the guideline value in 2017 which is indicator of the fact that the market value of the property was lower than guideline value which aspect is taken note by State Government and amendments were made in guideline value in tune with market price albeit in 2017 while we are presently seized of ay: 2016-17 . Amendments were made by Finance Act,2018 in Section 56(2) where in differential upto 5% was allowed and no additions be made under deeming fiction of Section 56(2) albeit it is applicable from ay: 2019-20 onwards and fifthly no incriminating evidence is brought on record by Revenue which could evidence that assessee in fact paid higher sale consideration than the actual sale consideration recorded in registered sale document albeit we are aware that Section 56(2) is deeming section and Revenue is not obligated to bring on record any incriminating material in such circumstances to prove that actual sale consideration paid by tax-payer is higher than that recorded in sale document , thus keeping in view cumulative effect of our aforesaid reasonings, we delete the additions - Decided in favour of assessee.
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2020 (2) TMI 878
Rectification of mistake - Transfer Pricing adjustment of export of FDF to AE - HELD THAT:- The word assessee should be read as authorities in second line of para 18 of the above order. The ld. Counsel of the assessee has contended that ITAT finding is incorrect. He contends that various submissions and evidence has not been properly appreciated. By calling the factual finding as incorrect, the same cannot take the issue out of review being sought by the assessee. Furthermore, the various issues as mentioned above are finding of the fact by the Tribunal after considering the submissions and perusing the record. What the assessee is now seeking clearly review of the order not permissible u/s.254(2). Hence, if according to the assessee, the order of the ITAT needs to be visited again or the evidences submitted need re-appreciation again in light of assessee s arguments, the same would amount to review of the matter not permissible u/s.254(2). Hence, in our considered opinion, the Miscellaneous Application in this regard is liable to be dismissed and the same is dismissed as such. Disallowance of E-connectivity charges - Tribunal has noted that there were no convincing arguments by the ld. Counsel of the assessee, hence, the ITAT had upheld the order of the authorities below. Now, since it is the contention of the ld. Counsel of the assessee, assessee s own case which was in favour of assessee on the said issue has not been considered, in our considered opinion, there is a mistake apparent from the record in the order of the Tribunal. Hence, on the conclusion of the decision of Apex Court in the case of Honda Siel Power Products Ltd [ 2007 (11) TMI 8 - SUPREME COURT] . Accordingly, we recall the order of the disallowance of e-connectivity charges.
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Benami Property
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2020 (2) TMI 877
Prohibition of Benami Property Transactions Act 'provisional attachment' of the property has been ordered till the final adjudication - power to confiscate the property - HELD THAT:- Show cause notice was issued to the Appellants on 02.05.2019, which was served on 09.05.2019 and pursuant to their request, notice was also served on the Appellants in 'Hindi', by post, on 04.06.2019. On submitting a reply to the show cause notice, it was considered and the 2nd Respondent found that the particulars furnished by the Appellants did not reconcile with the materials on record. It was accordingly, that a prima facie finding was rendered to the effect that the matter required to be proceeded further; thus passing Annexure P/1 order of provisional attachment in terms of the mandate under Section 24 (5) of the Act of 1988. Annexure P/1 provisional attachment was later confirmed, pending final adjudication, vide Annexure P/2 dated 27.08.2019. Considering the sequence of events and the nature of challenge raised by the Appellants/writ Petitioners, in the light of the version put forth by the Respondents as discussed by the learned Single Judge, it is evident that no prejudice has been caused to the Appellants/Petitioners in any manner, because of the 'provisional attachment'. This is more so, in view of the submissions made by the learned counsel for the Appellants during the course of hearing, that the Petitioners/Appellants would undertake that they would not alienate the properties till the adjudication is finalized. If the Appellants do not have any intention to alienate the property, they need not feel worried about Annexures P/1 and P/2 'provisional attachment'. What will be the course of action to be ordered by the 2nd Respondent on culmination of the adjudication proceedings, is a matter which is still to be ascertained. How the properties of the Appellants/Petitioners, covered by the Annexure P/3, are going to be dealt with by 2nd Respondent is yet to be decided. Whether any provisions of the statute which are 'substantive' in character would be applied retrospectively by the 2nd Respondent, is also not known; which can be considered only after passing the final order. The very purpose of passing 'provisional order of attachment', pending adjudication, is only to see that no third party interest is created over the property. When the Appellants concede that they do not have any intent/idea to alienate the properties, there cannot be any genuine grievance in this regard as well. The Annexures P/1 and P/2 order passed by the proceedings issued by the 2nd Respondent are only of interim measure; which is only to sub-serve the final verdict and always subject to the outcome of the adjudication. This Court finds that the interference declined by the learned Single Judge is not liable to be assailed under any circumstance.
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2020 (2) TMI 859
Declaration of sale deed as Benami - Seeking certified copy of ITR from the department in respect of respondent no. 2 - transfer of suit schedule property in the name of the petitioner company - grant of permanent injunction restraining respondent Nos.1 and 2 and their men from interfering with the suit schedule property - HELD THAT:- Since the examination of the said documents would go to the roots of the case, the Court below ought to have allowed the said IAs and directed respondent No.3 to produce the said documents. Apart from the same, if the said documents are produced before the Court below, no prejudice would be caused to respondent Nos.1 and 2. The judgment relied on by the Court below in RAJU SEBASTIAN, SUNIL KUMAR P.S., ANIYAN ABRAHAM VERSUS UNION OF INDIA, BHARAT PETROLEUM CORPORATION LIMITED, THE TERRITORY MANAGER (RETAIL) [ 2019 (9) TMI 673 - KERALA HIGH COURT] cannot be made applicable to the facts of the present case under the pretext of infringement of privacy effecting Article 21 of the Constitution of India, as the issue involved in the present case is whether respondent No.2 had the financial capacity to purchase the suit property. Therefore, to decide the said issue, it is essential to produce income tax returns and bank statement of account of respondent No.2 before the Court below. If the same are produced before the Court below, the same does not result in violation of Article 21 of the Constitution of India, as they are Government documents and are accessible to others. In PENTAKOTA SURYA APPA RAO AND OTHERS VERSUS PENTAKOTA SEETHAYAMMA AND OTHERS [ 1975 (7) TMI 56 - ANDHRA PRADESH HIGH COURT] , a division Bench of this Court held that income tax returns are public documents and they can be summoned by the Court. In view of the above, the order of the Court below cannot be sustainable and is liable to be set aside. Petition allowed.
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Customs
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2020 (2) TMI 876
Demand of pending dues of Cost Recovery Charges alongwith the interest - Customs Cargo Service Provider (CCSP) - period from 01/01/2016 till 31/03/2018 - cancellation of CHA license on failure of payment of dues alongwith imposition of penalties - mechanism for recovery of dues not present - scope of SCN - HELD THAT:- The appellant is an approved Customs Cargo Service Provider under the HCCAR, 2009. Further, the appellants for the last two years have paid the Cost Recovery Charges of ₹ 42,11,029/- [01/01/2014 to 31/12/2014] and ₹ 58,23,776/- [01/01/2015 to 31/12/2015] and the appellants were eligible for exemption from payment of Cost Recovery Charges from 04/12/2015 in terms of Boards Instructions dated 12/09/2005. Further, the appellants vide letter dated 11/01/2016 to the Commissioner of Customs sought exemption/waiver from payment of Cost Recovery and the Commissioner of Customs vide its letter dated 16/02/2016 to Additional Director General and Under Secretary to the Ministry of Finance, Department of Revenue informed that the appellants have achieved the bench mark in the year 2014-15 and 2015-16 and that the appellants have also remitted the Cost Recovery Charges up to 31/12/2015. In the show-cause notice the allegations against the appellant was that they have violated the Regulations 5(1)(iii) relating to Insurance Policy and Regulations 5(2) relating to non-payment of cost recovery charges and Regulation 5(3) relating to Bank Guarantee. Out of these three charges, the Commissioner has held that the appellant has complied with the Regulation 5(1)(iii) and 5(3) and has confirmed the demand under Regulation 5(2) - Further, the impugned order directing the appellant to pay Cost Recovery Charges of ₹ 2,18, 47,100/- is beyond the show-cause notice because in the show-cause notice the only allegation is that the appellant has not fulfilled the conditions as laid down in Regulations 5 (1) (iii), 5(2) and 5(3). Therefore, the payment of recovery in the impugned order is beyond the show-cause notice and is not sustainable. In HCCAR, 2009, no recovery mechanism for recovery of Cost Recovery Charges has been provided and this has been considered by the Tribunal in the case of CONTAINER CORPORATION OF INDIA LTD. VERSUS CC, JODHPUR [ 2019 (2) TMI 507 - CESTAT NEW DELHI] and it has been held by the Tribunal that if the Regulation has no provisions for recovery of unpaid Cost Recovery Charges then the recovery cannot be effected in law. The impugned order directing the appellant to pay the pending dues of Cost Recovery Charges for the period from 01/01/2016 till 31/03/2018 along with interest is premature and cannot be given effect to unless the application of the appellant dated 11/01/2016 to the Commissioner of Customs seeking exemption/waiver from payment of Cost Recovery Charges is decided by the respondent - appeal disposed off.
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2020 (2) TMI 875
Undervaluation of goods - import of certain spares of automobiles - not branded goods - appellant submitted that the Revenue did not have any evidence that the appellants have made payment to the overseas exporters in addition to what was stated in the invoices and in the absence of any additional consideration flowing from the importer to the exporter overseas, under the provisions of Customs Act, 1962, transaction value has to be accepted - HELD THAT:- Though the adjudicating authority has stated that the goods were found to be branded, the information as to which brand the goods were belonging to is totally missing in the adjudication order. The objection raised by the appellant in respect of documents which were load port documents is valid and Revenue could not establish that the load port documents were admissible evidence for relying for initiating any proceedings. The department could not establish as to how the information about load port document was procured by the Revenue and therefore the information stated in the Show Cause Notices obtained from exporting country is not reliable as evidence. Other than that there is no evidence relied on in the Show Cause Notice for alleging undervaluation - thus, undervaluation in the present case is not established. Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, NOIDA VERSUS M/S. SANJIVANI NON-FERROUS TRADING PVT. LTD. [ 2018 (12) TMI 738 - SUPREME COURT] that in the absence of any contrary evidence, the value actually paid has to be accepted as Transaction Value. The value actually paid is Invoice value. Impugned order set aside - appeal allowed with direction to Revenue to assess the Bills of Entry on the basis of value declared in the Bills of Entry and complete the assessment within a period of two weeks from the date a copy of this order is served by the appellant on Revenue.
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2020 (2) TMI 874
Refund of SAD - Focus Product Scheme - denial of refund on the ground that SAD has not been paid in cash but through scrips and as such the amount cannot be refunded - HELD THAT:- Strong reliance has been placed on the Hon'ble Bombay High Court judgement in Allen Diesels India Pvt. Ltd. v. Union of India [ 2016 (2) TMI 247 - DELHI HIGH COURT ] where the Hon'ble High Court had held that for refund of SAD it is not necessary that the same should have been paid in cash and it is sufficient if the payment is through using various scrips. Commissioner (Appeals) is finding fault with the judgment of the Hon'ble Delhi High Court in Allen Diesels India Pvt. Ltd. v. Union of India [ 2016 (2) TMI 247 - DELHI HIGH COURT ] that since the said circular was not brought to the notice, the Judgement is not correct. The said action on the part of the Commissioner (Appeals) amounts to contempt of the Hon'ble High Court inasmuch as non-following of a judgment of the superior courts by finding faults in the same, is admittedly not in accordance with the legal adjudication proceedings. Commissioner (Appeals) being a senior officer of the Revenue should have been aware of the legal precedent of following the higher courts decision irrespective of his personal views of the judgment being correct or otherwise. Appeal allowed - decided in favor of appellant.
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Securities / SEBI
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2020 (2) TMI 873
Default in price offered by the acquirers - open offer eligibility - entitlement of all shareholders for receiving interest - offer price made by the acquirers was grossly inadequate as the Target Company GTL had a plot of land worth about ₹ 2000 crore which was not reflected in the said valuation - HELD THAT:- The appellant, instead of emphasizing the relevant facts over-emphasized three valuation reports and the infrequently traded nature of GTL shares in 2018 which has no relevance and sought interest to all shareholders etc. which is untenable. The crux of the matter is simple; whether the price offered by the acquirers and the interest paid thereon to certain shareholders are in consonance with the applicable regulatory provisions and Court orders thereon. Clearly for frequently traded shares Sub Regulation 20(4) is applicable and if an open offer has been made under Takeover Regulations 1997 that process has to be completed under the same Regulations as is explicitly stated in Sub Regulation 35(2)(c) of the new Takeover Regulations 2011. Here, it is an undisputed fact that the trigger for public announcement / open offer came on November 12, 2009 and consequently public announcement was made. Though the open offer was delayed on account of the subsequent stand (for recalling the public announcement) taken by the acquirers the original date of trigger does not change. The valuation done as per the applicable methodology under Regulation 20(4) is not questioned; what is questioned is the valuation in 2018 which is not applicable in the matter. When the offer price of ₹ 101/- per share was made based on the price given by the acquirers in 2009 what is implemented here is the same price. Moreover, since the market price captures the intrinsic value of the GTL shares including GTL's properties, assets etc. in 2009 and since it was a frequently traded share rightly no valuation was necessary as per the applicable Regulations. It is also an undisputed fact that interest to original shareholders who tendered their shares have been given by the acquirers @ ₹ 60.25 per share and for other shareholders @ ₹ 0.45 - we find no merit in the submissions made by the appellant regarding either the offer price or the entitlement of all shareholders for receiving interest.
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2020 (2) TMI 872
Fraudulent and Unfair Trade Practices relating to Securities Market - Dealing illiquid scrip in order to create artificial volume and market price for vested gain - HELD THAT:- Appellant did not furnish the requisite information to the investigation team. Further, no reply was filed by the appellant pursuant to the show cause notice. Inspite of service of the summons, the appellant failed to appear nor filed any reply to defend himself even though ample opportunity of personal hearing was given. Charge levelled against the appellant remained unreburted. Further, we find that the AO considered the material evidence on record and came to a conclusion that the price payable to the stock exchange pursuant to the default committed by the appellant's client in the delivery of shares was not recovered by the appellant from its client leads to an irresistible inference that the appellant was itself dealing in the illiquid scrip in order to create artificial volume and market price for vested gain. It has come on record that during the period when the appellant's alleged client sold 120 shares the price rose from ₹ 4,351/- per share to ₹ 4,438/- per share. AO was thus, of the opinion that creating artificial volumes and increase in the price scrip was violative of Regulations 3 and 4 of the PFUTP Regulations. The AO also found that due diligence was not carried out by the appellant in the registration of the client and that the appellant had failed to satisfy itself about the genuineness and financial soundness of its client. We are of the opinion that the documents filed before this Tribunal were not produced by the appellant either before the investigation team or before the AO. Such documents cannot be considered by this Tribunal unless leave of the Tribunal is taken by filing an application for production of additional evidence in consonance with the principles of Order 41 Rule 27 of the Code of Civil Procedure. Such documents cannot be entertained nor can it be considered by the Tribunal. Maximum penalty imposed - AO has considered the factors under Section 15J of the SEBI Act and has held that the material available on record is insufficient to quantify the amount of disproportionate gain or unfair advantage made by the appellant or the loss suffered by the investors as a result of the acts done by the appellant can be ascertained. Considering this aspect, we find that since the quantification could not be done, the AO on the basis of approximation has levied a penalty of ₹ 15 lacs which in our opinion is just and appropriate. In the given facts and circumstances of the case, we find that a maximum penalty under Section 15HA and 15HB is ₹ 25 crores which could be imposed. Considering the gravity of the offence, the AO has only imposed a penalty of ₹ 15 lacs instead of imposing a maximum penalty.
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2020 (2) TMI 871
Independent director liability in respect of acts of omission or commission by a company - Fraudulent issue of debentures - HELD THAT:- Decision to issue debentures and consequent allotment was made by the company during the period when the appellant had never attended the Board Meeting. The decision making process done by the company was concluded in the absence of the appellant. The appellant had no say in the decision making process made by company and its directors with regard to the issuance of debentures. Thus, the finding of the WTM in paragraph no. 18.4.2 of the impugned order that the appellant was involved in the decision making process relating to the issuance of debentures is factually incorrect and based on surmises and conjectures. The said finding in the light of the aforesaid cannot be sustained. Admittedly, the appellant was appointed as an independent director and was not involved in the day to day affairs. Section 42(10) of the Companies Act, 2013 indicates that where the company makes an offer or accepts monies in contravention of this Section in that case the company and its promoters and directors shall be liable for penalty. The provision makes it apparently clear that the liability of director is only to the extent of penalty and not for the refund of the monies collected from the subscribers. The liability to refund the amount under Section 42(10) of the Companies Act, 2013 is fastened upon the company. Thus, the direction of the WTM directing the appellant to refund the money is wholly incorrect. An independent director shall be held liable only in respect of such acts of omission or commission by a company which had occurred with his knowledge, consent or connivance or where the independent director had not acted diligently. In the instant case, there is no finding that the appellant had given his consent or that he had connived with the other directors in the issuance of debentures or had not acted diligently and therefore the liability to refund the amount cannot be fastened. The impugned order in so far as it relates to the appellants cannot be sustained and is quashed. The appeal is allowed. The amount realised by the respondent pursuant to the impugned order from the accounts of the appellants shall be refunded within four weeks from today along with the interest @ 12% per annum.
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2020 (2) TMI 870
Non disclosure on transfer of shares - exemption by Regulation 10 of SAST Regulation seeked - appellants' reason that all the transfers were between the group i.e. the husband and wife i.e Appellant no.1 and 2 and their private limited Company i.e. Appellant no.3 - HELD THAT:- What is exempted under this regulation is the obligation to make an open offer. The disclosure requirement is not exempted by this Regulation. It is to be noted that while appellant Bharat Patel holds an independent account. So far as another account is concerned appellant Minal Patel is the first holder of the same alongwith Bharat Patel. The next of the account is of appellant PAT Financial Consultants Pvt. Ltd. which is a private limited Company. As per the reply submitted to SEBI, appellant PAT Financial Consultants Ltd had various shareholders like son and daughter of appellant Bharat Patel and Minal Patel besides themselves. The term 'persons acting in concert' has nothing to do with the disclosure requirement. The same is to be applied in case of requirement of open offer to be made under the regulations. It is an admitted fact that the beneficial ownership in the shares was transferred at the various points of time which required to be disclosed by the appellant either to the Company or to the stock exchanges as per the regulations. Having failed in this, they would be liable for penalty. The order of the Adjudicating Officer would show that a lenient view is already taken on the imposition of penalty as described supra. In the result, the following order. The appeal is hereby dismissed.
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2020 (2) TMI 869
Liability for action in case of default - RTA [Registrar to the Issue and Transfer Agent he appellant] fails to comply with any conditions subject to which registration has been granted or contravenes any of the provisions of the Act, Rules, Regulations or By laws of the Stock Exchange the said RTA shall be dealt with in the manner provided under Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 ('Intermediaries Regulations of 2008') - HELD THAT:- The impugned order is harsh and unwarranted. We are of the opinion that there was no real urgency in passing an ex parte ad interim restraint order which virtually amounts to passing a final order especially when a detailed enquiry has been ordered. The respondent is empowered to pass an ex-parte interim order only in extreme urgent cases and that such power should be exercised sparingly. In the instant case, we do not find that any extreme urgent situation existed which warranted the respondent to pass an ex-parte interim order. We are of the opinion that the impugned order is not sustainable in the eyes of law as it has been passed in gross violation of the principles of natural justice as embodied in Article 14 of the Constitution of India. The restraint order is in our opinion unjustified. At this stage, we can stay the operation of the impugned order to a limited extent. We, however, find that no useful purpose would be served in keeping the appeals pending and directing the respondent to file a reply. Thus, we are deciding the appeal itself, without calling for a reply at the admission stage itself. The impugned order insofar as it restrains the appellant from accepting fresh clients is quashed. Other directions issued by the WTM of SEBI will continue to operate against the appellant. The appeal is partly allowed. In the circumstances of the case, there shall be no orders as to costs.
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2020 (2) TMI 868
Shares acquired through off market transaction - non disclosure of such acquisition under Regulation 13(1) of the PIT Regulations, 1992 - HELD THAT:- Appellant is required to be partly allowed. The observation of the Adjudicating Officer that the appellant has violated the Regulations will have to be accepted. However, the monetary penalty would have to be set aside and the appellant deserves to be let off on warning for the reasons to follow:- 1. The appellant has filed on record at Exhibit 'G' page 98 a copy of the order dated 20th October, 2005 of the Bombay High Court in Company Application No.21 of 2005 in Company Petition No.353 of 2003. It would show that one Company namely Solid Carbide Tools Ltd. was already directed to be wound up. In the said proceedings, the appellant had filed the said application claiming to be a creditor of the Company. In the order, the High Court has noted that one Mr. Mukesh Kothari was the director and chairman of the said Company namely Solid Carbide Tools Ltd. Since the year 2001, however said Mr. Mukesh Kothari became a proclaimed offender and was facing criminal prosecution. So far as the claim of the present appellant is concerned, it was found that the appellant had pledged his personal fixed deposits to the Union Bank of India for advances made to Solid Carbide Tools Ltd. Since the loan was not repaid by this Company, the bank invoked the said deposit for adjusting outstanding claim and, thus, the appellant had become the creditor of the said Solid Carbide Tools Ltd. These facts would show that the appellant was the creditor of Solid Carbide Tools Ltd. of which Mr. Kothari was the promoter and chairman. Mr. Kothari remained a proclaimed offender since 2001 upon proclamation by the concerned criminal court. According to the respondent SEBI, the appellant had acquired 4,84,000 shares of the present Company from said Mr. Kothari. According to the appellant, the shares were handed over to him in the year 2001 which ultimately could be transferred in his name in the year 2013 as detailed above. The record would further show that the present Company also remained defunct from the year 2000 and even the trading in the same is suspended by the BSE. The print out of the trading data of the Company obtained from the website of BSE and placed at Annexure B to the written submission as detailed supra would show that there were no trading activity in the shares. All these facts would show that in order to recover the debt, the appellant was rather forced to accept the shares of the present Company awaiting the clearance of the loan in cash. However, as Mr. Kothari went missing and was even proclaimed as an offender by the criminal court, willy nilly he had to get those shares transferred in his name regularly. As regard the disposal of the shares as detailed above, the appellant submitted that he was forced under duress to transfer those shares. One of the disclosures was made through Mr. Sarkhot regarding that transfer however the rest of the disclosures could not be made. Mr. Sham Gandhi in person argued before us. He submitted that he is now 75 years old. He is the victim of circumstances as detailed supra and, therefore, since the acquisition of shares or disposal of shares did not entail him of any gain or loss to any shareholder as the Company is completely defunct, slapping a monetary penalty would amount to adding insult to injury. He, therefore, submitted that the appeal be allowed. Taking into consideration that the appellant is now 75 years old and finding that he was forced to accept the shares by Mr. Kothari as corroborated by the order of the Bombay High Court in Company Petition and that one disclosure regarding the disposal is made, in our view, though the violation of the regulations is proved, monetary penalty is not warranted in this case. Hence appeal is partly allowed. The order of the Adjudicating Officer declaring that the appellant has violated the regulation is hereby upheld. The order of the Adjudicating Officer imposing penalty of ₹ 3 lakhs is hereby set aside. Instead the appellant is hereby warned that the appellant shall not repeat similar violation in future.
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Insolvency & Bankruptcy
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2020 (2) TMI 867
Admissibility of Winding up petition - the liquidation proceeding are at the stage of holding meeting between the Financial Creditor and the Corporate Debtor-the company in liquidation - HELD THAT:- The law laid down by Hon'ble Supreme Court in FORECH INDIA LTD. VERSUS EDELWEISS ASSETS RECONSTRUCTION CO. LTD. [ 2019 (1) TMI 1442 - SUPREME COURT ] is that there is no bar by admission of a petition under Section 433(e) and (f) read with section 434 and 439 of the Companies Act, 1956 - In other words, the remedy of filing a petition under Section 7 IBC would continue to be available to a financial creditor. After a reading of section 7 of the Code along with Rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, we are satisfied that a default has occurred and the application under sub-section (2) of section 7 is complete. The IRP proposed does not have any disciplinary proceedings pending against him. Petition admitted - moratorium declared in terms of section 14 of the Code.
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PMLA
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2020 (2) TMI 866
Validity of order passed by way of corrigendum - incompetence of the Adjudicating Authority in passing the order by way of corrigendum - the order passed by the Adjudicating Authority after having become funtus officio - power of review - Delivery of the possession of the ground floor of the property attached - HELD THAT:- The appellant has taken the legal plea about the incompetence of the Adjudicating Authority in passing the order dated 09.10.2019 by way of corrigendum. The said order dated 09.10.2019 is under challenged before this Tribunal and the same is pending. The legal plea which has been taken in the application has also been taken in that appeal. If the order dated 09.10.2019 is considered and any decision is taken in the present application on the same legal issue than it would have the effect on the merit of the said appeal. Therefore, the contention raised in the appeal cannot be considered without hearing the aforesaid appeal on merit. The order of handing over the possession of rented floor was passed on 17.10.2019. The applicant accepted the order. When the date of handing over the possession came she tried to retain the possession on different grounds - there are no prima facie grounds to re-visit the order - application dismissed.
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Service Tax
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2020 (2) TMI 865
Levy of Service Tax - activity of transportation of pipes by road from their factory to site - reverse charge mechanism - HELD THAT:- It is no doubt that the appellant is executing works contract but during their activity, they are receiving services of transportation and in terms of Rule 2(1)(d)(v) of Service Tax Rules, they are required to pay service tax being a service recipient of transportation under reverse charge mechanism. Therefore, the appellants are liable to pay service tax along with interest. Penalty - HELD THAT:- Considering the facts of the case that the appellant is entitled to avail CENVAT Credit thereon, therefore, by invoking Section 80 of the Finance Act, 1994, the penalty imposed on the appellant is set aside - appellant is at liberty to avail CENVAT Credit of service tax paid being service recipient on the transportation service. Appeal disposed off.
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2020 (2) TMI 864
Levy of service tax - reimbursable expenses received - Management Consultancy Services - period October, 2001 to March, 2006 - vires of Rule 5 of the Service Tax (Determination of Value) Rules,2006 - time limitation - HELD THAT:- The demand of Service Tax of ₹ 19,02,103/- on reimbursable expenses is clearly not sustainable for the reason firstly that the Service Tax (Determination of Value) Rules, 2006 came into force w.e.f. 19-04-2006 whereas the period of dispute on this count is from October,2001 to March, 2006. Since, the valuation rules are substantive in character, it cannot be given retrospective effect as held by the Hon ble Supreme Court in the case of UOI Vs. Inter Continental Consultants and Technocrats Pvt. Ltd. [ 2018 (3) TMI 357 - SUPREME COURT ] - Secondly, Rule 5 of the Service Tax (Determination of Value) Rules,2006 which seeks to include reimbursable expenses into the gross amount charged is declared ultra vires of Section 67 of the Finance Act,1994 by the Hon ble Supreme Court in the case of UOI Vs. Inter Continental Consultant Technocrats Pvt. Ltd. - demand set aside. Commercial Training or Coaching Services - HELD THAT:- The training provided by the Appellant is relating to enhancement of ability, skill development and productivity are vocational training which are not general academic courses and the Appellant is entitled to exemption under Notification No.9/2003-ST Dated 20-06-2003 as amended and Notification No.24/2004-ST Dated 10-04-2004 which exempts vocational training by Commercial Training or Coaching Centre from levy of service tax. As per Explanation to Notification No.9/2003-ST Dated 20-06-2003 vocational training institute means a commercial training or coaching centre which provides vocational coaching or training that import skills to enable the trainee to seek employment or undertake self employment directly after such training or coaching. Further, Notification No.24/2004-ST Dated 10-09-2004 is amended by Notification No.3/2010-ST dated 27-02-2010 by which the Explanation is substituted w.e.f. 27-02-2010 which defines vocational training institute to means an Industrial Training Institute or Industrial Training Centre affiliated to the National Council for vocational training offering courses in designated trades as notified under the Apprentice Act. The said amendment is applicable from 27-02-2010 - The period under dispute in the instant case is prior to 27-02-2010. From the perusal of Para 3 of the show cause notice dated 27-10-2008, it is found that the Appellant have been claiming that they are providing vocational training services which are not commercial training services. The case of the Appellant is directly covered by decision of the Tribunal in the case of CCE Vs. Ashu Exports Pvt. Ltd. [ 2014 (3) TMI 863 - DELHI HIGH COURT] wherein it is held that courses imparted in procedural and practical skill based training in areas such as export-import management, retail management and merchandising would be entitled to exemption under Notification No.9/2003-ST and Notification No.24/2004-ST. Extended period of limitation - Penalties - HELD THAT:- No offense and penalties can be created with retrospective effect nor in the facts and circumstances of the case extended period of limitation can be invoked - thus, neither extended period of limitation can be invoked nor the penalties can be sustained. The impugned Order is seta side to the extent of demand prior to March, 2006 and the period beyond the normal demand in Section 73 of the Finance Act, 1994 - appeal disposed off.
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Central Excise
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2020 (2) TMI 863
Permission for withdrawal of appeal - Monetary limit for filing appeal - HELD THAT:- These appeals involve a question of the financial implication which is well below the fixed limit prescribed by the relevant notification dated 22.08.2019. The tax effect in the Appeals is ₹ 22 Lakhs. Appeals are dismissed as withdrawn.
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CST, VAT & Sales Tax
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2020 (2) TMI 862
Input tax credit - failure to produce the documents to verify the claim of genuineness of the Input Tax Credit claimed by the Assessee - HELD THAT:- The present writ appeal deserves to be allowed and the matter deserves to be remanded back to the Assessing Officer for enquiry and verification in the matter. Without production of the relevant documents, the Assessee cannot claim the Input Tax Credit and since admittedly the Assessee has not produced the relevant documents, merely because the registration details existed on the rolls of the Revenue Department, it could not per se prove the validity and verification of the transactions in question. Appeal allowed by way of remand.
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2020 (2) TMI 861
Grant of reimbursement of Commodity Taxes/Value Added Tax paid by the petitioner - Direction to the respondents to issue appropriate notification giving effect to the provisions of Tripura Industrial Investment Promotion Incentive Scheme, 2007 - Tripura VAT Act, 2004 - period from 2008-09 to 2013-14 - HELD THAT:- Where a responsible authority such as the State Government formulates and publishes an incentive scheme making detail provisions for attracting investment, recognizing incentives, laying down conditions of eligibility for claiming such incentives, withdrawing from such scheme only by way of inaction of issuance of notification, would lead to applicability of the principle of promissory estoppel. It would also be a question of credibility of the Government of inviting investments and thereafter backing out from the promise of providing incentives by citing the reason of non issuance of notification, that too without justifying reasons for such inaction. The ground of the applications of the petitioner not being in proper form or verification is purely technical objection and the defects if any are curable. The petitioner has made out a case for issuing appropriate directions - it is directed that the respondents shall process the claims of the petitioner for reimbursement of the VAT and other taxes as per the Tripura Industrial Investment Promotion Incentive Scheme, 2007 and pay to the petitioner such sum as found admissible out of the claims of the petitioner for said assessment years - petition disposed off.
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Indian Laws
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2020 (2) TMI 860
Interpretation of statute - Sections 3(1)(b), 3(2) and subsections 5(a) and (b) of the Bombay Entertainments Duty Act, 1923 - rate of entertainment tax payable by the respondents - admission and entertainment to the amusement park - High Court held that entertainment duty to be levied for the amusement park is 50% of 15% i.e. 7.5% under Section 3(2) of the Act, therefore, in terms of Section 3(5)(a) and (b) of the Act, the entertainment duty is 50% of 7.5% i.e. 3.75%. The High Court held that such interpretation is on the basis of a cumulative reading of the provisions of the Act. HELD THAT:- There are no merit in the argument raised by learned counsel for the writ petitioners. In respect of first three years falling in Section 3(5)(a) of the Act, there is no dispute, as no duty is payable. The controversy revolves around the levy of entertainment duty for the fourth and fifth year and subsequently from the sixth year onwards. Sub-clause (ii) of Section 3(5)(a) contemplates that duty @50% under clause (b) of sub-section (1) or, as the case may be, sub-section (2) of Section 3 would be payable. In respect of the first part of sub-clause (ii) of Section 3(5)(a) of the Act, there can possibly be no dispute as the entertainment duty is 50% of 15% leviable under Section 3(1)(b) of the Act. The argument that when a lumpsum amount is paid as a right of admission for all rides and games, then it becomes admission to series of entertainment, is not tenable. The writ petitioners issue one ticket including one or more rides or games situated in one compound. It is not the case of the writ petitioners that for every ride or game, it is charging separately - The admission to entertainment in terms of Section 2(d) of the Act includes all rides and games which are provided by the service provider. Once an admission ticket is granted, it is not in terms of Section 3(2) of the Act but only in terms of Section 3(1)(b) of the Act. Section 3(2) of the Act has no applicability for a visitor to an amusement park who does not fall in any of the four categories mentioned in Section 3(2) of the Act. Since, the activities undertaken by the writ petitioners are not failing part of Section 3(2) of the Act, therefore, they are not entitled to rebate of 50% provided to specified category of persons in Section 3(2) of the Act - Since Section 3(2) is not applicable to all amusement parks for all other activities, therefore, the entertainment duty in terms of Section 3(5)(a) of the Act alone would be leviable. The duty under Section 3(2) of the Act would be leviable only in respect of specified categories mentioned therein. The judgment of the High Court that in terms of Section 3(5)(a) of the Act, the entertainment duty is 50% of the duty payable under Section 3(2) of the Act, cannot be agreed upon - appeal allowed - decided in favor of appellant.
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