Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 22, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Inclusion of corrected details in the EDI system to enable the petitioner to get its refund - refund of IGST with interest - direction issued - HC
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Profiteering - purchase of Flat in the Respondent’s project - allegation that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price - It is established that, respondent has profiteered - NAPA
Income Tax
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Disallowance u/s 36(1)(ii) - payment of incentive / commission to the shareholder who held 99.99% shares of the assessee - The identical expenditures stood allowed in the preceding years as also in the succeeding assessment years - No additions on the ground of consistency - HC
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Revision u/s 263 - AO ought to have made mandatory reference to the “TPO” for determining arm’s length price - Since the Finance Act, 2017 omitted sec. 92BA(i) from retrospective effect, the Assessing Officer’s inaction in not making reference to the TPO does not render the assessment erroneous causing prejudice to interest of the Revenue.- AT
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Revenue or capital expenditure - The expenditure incurred by assessee such as painting of the hotel, replacement of floor tiles, glazing works etc. are nothing but periodical expenditure which a hotel has to necessarily incur for its upkeep and cannot be termed as capital expenditure. - AT
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Penalty u/s 271(1)(c) - Defective notice - Provisions of sec.292BB would not come to the rescue of the revenue, when the notice was not in substance and effect in conformity with or according to the intent and purpose of the Act. - AT
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Penalty u/s 271(1)(c) - Assessee in this case has never revised its return during the period prescribed u/s 139(1) rather withdrew the claim during assessment proceedings when confronted by the AO. So, by no stretch of imagination, the claim made by the assessee for deduction u/s 80IB and 80G can be considered as inadvertent claim rather it is deliberate and conscious claim made to evade the taxes - AT
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Levy of penalty - The disclosure and surrender represents the underlying assets being unexplained cash as well as jewellery. Accordingly, the same will fall in the definition of undisclosed income provided in clause (c) of Explanation to Section 271AAB - AT
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Once loan transactions between the assessee and the creditor has been found to be genuine transactions, which satisfies the conditions prescribed u/s 68, then interest paid thereon cannot be considered as unexplained expenditure. - AT
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Nature of expenditure - current repairs - Replacement of an old machine with a new one would constitute the bringing into existence of a new asset in place of the old one and not repair of the old and existing machine. It therefore cannot amount to current repairs. - AT
Customs
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24x7 clearance at all the Customs formations, so as to address any congestion or delay or surge on account of the prevailing conditions or cessation thereof. -Instruction
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Classification of imported goods - Educational Charts - these charts are not in nature of maps or depicting the terrestrial features - To be classified under Heading 4911 99 90, which is based on the terms of headings in Customs Tariff and HSN Explanatory Notes for the said heading - AT
IBC
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immunity from Attachment of assets after approval of Resolution Plan - The attachment of assets of the ‘Corporate Debtor’ by the Directorate of Enforcement pursuant to order dated 10th October, 2019 as illegal and without jurisdiction. - NCLAT
Service Tax
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Refund of un-utilized Cenvat Credit - refund denied for the reason that the appellant did not debit the refund amount from its Cenvat Credit balance at the time of making the claim - the appellant did not debit the refund amount since the same was carried over to GST through TRAN-1 and that the appellant did reverse the refund amount in their GSTR-3B Return for the month of October, 2018 under ITC reversal. - refund allowed - AT
Central Excise
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Levy of personal penalty on the Manager Director of the company - there are no merits in submissions that penalty under Rule 26 could not have been imposed upon the appellant, however, the penalty equivalent to the duty evaded on by P.M.L industries on the appellant is too harsh and should be reduced. - AT
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CENVAT Credit - input services - GTA service - upto the place of removal - in the light of the fact that the appellant is a Government of India Enterprise, there is no suppression of facts nor any willful default with intention to evade duty or to avail excess Cenvat credit. Accordingly, the extended period was not invocable - AT
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Cash refund of CENVAT credit - CENVAT credit on inputs cleared as such by the supplier - rejection on the ground that the credit was availed by the EOU unit on the goods received from the DTA unit, by reversing/payment of duty through CENVAT Credit which was not admissible to the said DTA unit on inputs cleared as such - Rule 5 of CCR - refund cannot be denied - AT
VAT
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Enhancement of turnover - Sodium Silicate - Once the best judgment assessment is made by the Assessing Authority or even higher Appellate Authorities rejecting the books of accounts for the declared turnover by the Assessee, they are entitled to adopt one or more of such parameters or yardsticks to estimate the production and turnover of the Assessee. - HC
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Levy of penalty u/s 54(1)(14) of the UP VAT Act, 2008 - Unfilled (blank) column No.8 of Form 38 - The Tribunal has not correctly applied the law in this regard, as they have not given any finding about the intention to evade tax, which is a precondition for imposition of penalty. - HC
Case Laws:
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GST
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2020 (2) TMI 959
Release of seized documents after retaining the photocopy - Levy of GST - service of man power and security guards to Government/semi Government Institutions - payment of wages withheld - HELD THAT:- Taking note of the facts and circumstances of this case as disclosed in the pleadings and materials on record, it is ordered that the 3rd respondent will take up the plea made by the petitioner in Ext.P4 and after affording reasonable opportunity of being heard, may take a considered decision on the request made therein for releasing the documents mentioned therein without much delay, preferably within a period of 3 weeks from the date of production of a certified copy of this judgment. Petition disposed off.
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2020 (2) TMI 958
Inclusion of corrected details in the EDI system to enable the petitioner to get its refund - refund of IGST with interest - it is submitted that, since the party (the petitioner herein) has later filed amendments in the GST returns with IGST amounts, the refunds can be processed through an officer interface option, which is already availed in ICES and that the reference has also been made to the board s circular to the Central Board of Indirect Taxes and Customs, Circular No.08/2018-Customs HELD THAT:- Necessary action to sanction IGFT refunds in the instant case could be undertaken by the officers concerned through the office interface as detailed in the procedures provided by the Directorate General of Systems and Data Management. It is ordered the competent authority among the respondents 2 to 5 will take necessary steps to process the claim of the petitioner for refund in the light instruction / letter dated 08.01.2020. Petition disposed off.
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2020 (2) TMI 957
Profiteering - purchase of Flat in the Respondent s project - allegation that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price - contravention of provisions of Section 171 of the CGST Act, 2017 - imposition of penalty - HELD THAT:- It is clear from the plain reading of Section 171 (1) of CGST Act, that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP s Report that there has been no reduction in the rate of tax in the post GST period; hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. The Respondent has profiteered by an amount of ₹ 35,28,744/-(Annex-17) during the period of investigation i.e. 01.07.2017 to 31.12.2018. The above amount of ₹ 35,28,744/- (including 12% GST) that has been profiteered by the Respondent from his home buyers, including Applicant No. 1, shall be refunded by him, along with interest @18% thereon. from the date when the above amount was profiteered by him till the date of such payment, in line with the provisions of Rule 133 (3) (b) of the CGST Rules 2017. This Authority orders that the Respondent shall reduce the price per unit/ flat to be realized from the other home buyers by an amount commensurate with the benefit of ITC, as provided under Rule 133 (3) (a) of the CGST Rules, 2017. Imposition of penalty - HELD THAT:- Since the Respondent has denied benefit of ITC to his homebuyers in his Project Edge Towers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus committed an offence under Section 171 (3A) of the above Act, he is liable to be penalized under the provisions of the above Section. Accordingly. a notice be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. It is clear to us that the Respondent has profiteered in the project Edge Tower . Therefore, as per the provisions of Section 171 (2) of the CGST Act, 2017, this Authority has reasons to believe that there is a need to verify all the Input Tax Credits of the Respondent so as to arrive at the aggregate profiteering of the Respondent, since profiteering on the part of the Respondent has already been established in the case of Edge Towers project of the Respondent as also the fact that supplies from various projects of the Respondent are being made through a single GST registration and the same ITC Pool/Electronic Credit Ledger is being used for all the supplies being made from that registration. Therefore, the Authority, in line with the provisions of Section 171 (2) of the CGST Act, 2017 and as per the amended Rule 133 (5) (a) of the CGST Rules 2017 directs the DGAP to further examine all the other projects of the said Respondent for possible violations of the provisions of Section 171 of the CGST Act 2017 and to submit his Report as per the provisions of Rule 133 (5) (b) of the CGST Rules, 2017.
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Income Tax
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2020 (2) TMI 956
Deduction u/s 80HHC - turnover of all independent businesses to be clubbed - HELD THAT:- Claim not available on the division/unit wise profits of the business and the same is available only on the entire business profit without differentiating between the units engaged in the export and the units engaged in the domestic sales. See DEVRAJ R. AGARWAL VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [ 2016 (7) TMI 1563 - GUJARAT HIGH COURT]
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2020 (2) TMI 955
Disallowance u/s 14A read with Rule 8D - HELD THAT:- CIT(A) as well as the Appellate Tribunal rightly applied the dictum as laid by this Court in the case of Corrtech Energy [2014 (3) TMI 856 - GUJARAT HIGH COURT] this Court held that the assessee did not make any claim for exemption of any income from payment of tax. The disallowance under Section 14A of the Act cannot be made. To attract the provisions of Section 14A of the Act, 1961, it is necessary that the assessee should have earned any exempt income. If the assessee has not earned an exempt income and has not claimed so in the return of income, then the provision of Section 14A is not applicable. The concurring findings of fact recorded by the two authorities is that in the year under consideration, the assessee company had not earned any exempt income and had not claimed any such exempt income in the return of income. - Decided against revenue.
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2020 (2) TMI 954
Disallowance u/s 36(1)(ii) - payment of incentive / commission to the shareholder who held 99.99% shares of the assessee and but for the resolution to pay the commission, the sum so paid would have been passed on to him as dividend - HELD THAT:- Identical claims in respect of the incentive paid to Mr. Anshuman Magazine, Director of the assessee-Company, which stood allowed for the previous years, the Tribunal has allowed the claim of the assessee [ 2016 (4) TMI 82 - ITAT DELHI] . The revenue has indeed accepted the claim for the preceding years as well as for the subsequent years and therefore, the incentive paid to Mr. Anshuman Magazine for AY 2004-05 onwards has been assessed as salary . We find no error in the approach of the Tribunal. We also do not find any merit in the contention of the revenue that the observations of the Tribunal qua the findings of the Assessing Officer and CIT(A). Irrespective of the observations of the Tribunal, the fact remains that the reasoning of the CIT (A) for disallowance under Section 36(1)(ii) of the Act has been consistently rejected by the Tribunal for the previous years. The identical expenditures stood allowed in the preceding years as also in the succeeding assessment years. We are also unable to find any cogent material that would indicate that the expenditure was not for the purpose of the business of the assessee. This factual background does not give rise to any substantial question of law for our consideration.
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2020 (2) TMI 953
Validity of assessment order - Seizure of gold u/s 132 - Jurisdiction - Presumption u/s 292C - HELD THAT:- Since the investigation and eventual seizure by the officers of the 2nd respondent was pursuant to the tip off from the officers of the 1st respondent at the Chennai Kamaraj International Airport when the 4th petitioner was boarding the flight in evening to Kolkata on 30.06.2016 carrying gold, the 2nd respondent ought to have seized the gold and sent it to his counterpart for further investigation. Detention seizure effected by the officers at Kolkata shows arbitrary exercise of power in as much as person claiming to be the owners of the seized gold bullion and jewellery is admittedly located within the State of Tamil Nadu at Chennai and carry on business in retail sale and manufacture of gold jewellery. Seized gold should be directed to be delivered to the office of Chief Commissioner of Income Tax, Chennai who may himself decide or nominate a senior officer from the department to investigate the case. The 1st and the 2nd petitioners along with 3rd and 4th petitioners and the 4th respondent may thereafter file appropriate written submission together with evidence in support of this case before the Chief Commissioner of Income Tax or any other senior officer of the Income Tax Department who may be nominated by the Chief Commissioner of Income Tax, Chennai for the aforesaid purpose. It is for the said officer to conclude as to whether the 1st petitioner and/or the 4th respondent or both can claim ownership over the seized gold bullion and jewellery which was seized from the 4th petitioner by the 2nd respondent on 01.07.2016. If on further investigation such officer comes to a conclusion that the explanation offered by the 1st and 2nd petitioners along with the 4th petitioner and 4th respondent are unsatisfactory, appropriate steps shall be thereafter taken in accordance with law. On the other hand, if on enquiry it is concluded that the 1st petitioner or the 4th respondent are indeed the owner of the seized gold bullion and jewellery, it shall be handed over to the lawful owner or person who is entitled to it. The above exercise shall be carried out within a period of three months from date of receipt of a copy of this order strictly without any deviation. The petitioners shall be given due notice of hearing before order is passed. As far as impugned order dated 31.12.2018 passed by the 5th respondent is concerned, liberty is given to the 4th petitioner to take appropriate steps against the said order before the jurisdictional Appellate Commissioner within a period of thirty days from the date of receipt of a copy of this order.
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2020 (2) TMI 952
Revision u/s 264 - Commissioner rejecting the application u/s 264 on the ground that remedy of appeal was available to him - HELD THAT:- As petitioner relies upon the decision of this Court in Kewal Krishan Jain Vs. Commissioner of Income Tax, Jalandhar [ 2014 (1) TMI 492 - PUNJAB HARYANA HIGH COURT] to contend that this Court has set aside the similar order. Learned counsel for the revenue is not in a position to deny the applicability of the abovesaid judgment. In the circumstances, the petition is allowed - Commissioner of Income Tax is directed to decide the application under Section 264 of the Act, on merits, as per law.
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2020 (2) TMI 951
TP Adjsutment - TPO determining the arms length price of the syndication fee at 100% - ITAT remanded the matter back to the file of the Assessing Officer to decide the issue afresh by considering the decisions relied upon by the Tribunal for allocation of non-syndication fee between the assessee and associated enterprise after giving opportunity of being heard to the assessee - HELD THAT:- As decided in M/S CREDIT LYONNAIS VERSUS ADIT(INTERNATIONAL TAXATION) [ 2014 (7) TMI 1 - ITAT MUMBAI] TPO as well as CIT(A) has not brought out any comparable for determination of the arms length price but took the total income comprising interest as well as other fees charged by the foreign branches for allocation/ attribution to the assessee. In this case, the ALP has not been determined by taking into consideration uncontrolled similar transaction. Interest cannot be taken into account for attribution of income towards service charges/fees and, therefore only the fee charged by the foreign branches can be taken into consideration for making adjustment under transfer pricing provisions. Since none of the parties have come out with the suitable comparables, therefore, we find that the estimation made by the CIT(A) at the rate of 20% is just and proper, however, the same would be only in respect of the fee and charges other than interest received by the foreign branches. No error or infirmity in the view taken by the Tribunal in remanding the matter back to the file of the Assessing Officer for a fresh decision in accordance with law.
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2020 (2) TMI 950
Stay petition - whether the Tribunal is right in dismissing the stay petition ? - HELD THAT:- Though the Tribunal found that there is no prima facie case in view of the incriminating documents, considering the fact that the appellant had already deposited a sum of ₹ 15,71,293/-, out of demand of ₹ 61,99,012/-, the Interest of Justice will be complied with by directing the appellant to deposit a further sum of ₹ 15,00,000/- in three equal installments, each installments should be paid within 15 days of every month. On such payment, the dismissal order passed by the Tribunal in the stay petition is set aside and there shall be an order of interim stay till the disposal of the Appeal before the Tribunal. The question of law is answered in the above terms. It is open to the Tribunal to get along with the matter and dispose of the matter at the earliest, in accordance with law.
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2020 (2) TMI 949
Reopening of assessment u/s 147 - Exemptions against the receipt of consideration in respect of transfer of part of the rights in the brand name MTR - HELD THAT:- No reassessment/reopening can be undertaken on the basis of mere audit objections/query raised by the internal auditors of the Department. The notice impugned dated March 3, 2015 does not indicate any independent application of mind by the Assessing Officer. As could be seen from the records, the audit query vis-a-vis the reply of the Assessing Officer makes it clear that the Assessing Officer was of the opinion that the transaction involved herein relates to capital asset and the tax paid on capital gains towards the same has been accepted to be correct. This issue was examined and analysed by the Assessing Officer on multiple times. The foregoing factors would establish that the Assessing Officer had no reason to believe any escapement of income to assessment but is a clear case of change of opinion. Hence, assumption of jurisdiction by the Assessing Officer to invoke section 147 of the Act cannot be sustained. This aspect of change of opinion would be suffice to quash the impugned notice without going into the merits of the other arguments advanced by the learned counsel for the petitioner. - Decided in favour of assessee.
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2020 (2) TMI 948
Disallowance of entrance fees towards corporate membership of club - nature of expenditure - revenue or capital - HELD THAT:- The purpose of the expenditure is to have a suitable platform for meeting people and getting advantages of meeting many people at a time to maintain old contacts and also to make new contacts. The main purpose of the organization is to induce its officers to attend such places for maintaining and making contacts for the benefit of business. Even if some personal advantage is obtained by officers, it will be in nature of maintaining good relations with officers and in nature of staff welfare expenses - the expenses are incurred wholly and exclusively for the purpose of business. By obtaining membership for a period of more than one year, there may be an advantage which is in the field of revenue benefit and not for obtaining any capital asset or obtaining benefit in capital field. Therefore, such expenses will be of revenue nature. For that assessee relied on the judgment of the Hon`ble Delhi High Court in the case of CIT vs. Samtel Color Ltd. [ 2009 (1) TMI 26 - DELHI HIGH COURT] wherein consider allowability of corporate membership fees of clubs as allowable business expenditure. We find merit in the submissions of the ld counsel and direct the AO to treat entrance fees paid to club as revenue expenditure. Disallowance u/s 40(a)(ia) for non-deposit of TDS - deduction and deposits before the due date of filing of return of income - HELD THAT:- We note that the said TDS was paid before the filing of return of income u/s. 139(1) of the I.T. Act, therefore no addition should be made for that we rely on the judgement of VIRGIN CREATIONS [ 2011 (11) TMI 348 - CALCUTTA HIGH COURT] wherein it was held that the said TDS should be allowed. Respectfully following the decision of jurisdictional High Court, we hold that since the assessee has deducted and deposited tax on contractual payments under consideration before the due date of filing of return of income, disallowance u/s 40(a)(ia) is not warranted, therefore, we delete the disallowance Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As relying on NICE BOMBAY TRANSPORT (P) LTD. VERSUS ACIT (OSD) , CIT (V) , NEW DELHI [ 2019 (4) TMI 42 - ITAT DELHI] Application of Rule 8D to the facts of the case is not correct, hence, the addition on this account is hereby directed to be deleted.
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2020 (2) TMI 947
Revision u/s 263 - AO ought to have made mandatory reference to the TPO for determining arm s length price of the large specified domestic transactions(s) recorded in Form 3CEB - Scope of amendment - HELD THAT:- We find that that this tribunal s co-ordinate bench s decision in AIC Iron Industries Pvt. Ltd., Principal Commissioner of Income Tax-1, Kolkata [ 2020 (2) TMI 897 - ITAT KOLKATA] for very assessment year 2014-15 has held that such an in a claim at the Assessing Officer does not render the corresponding regular assessment to be erroneous causing prejudice to the interest of the Revenue as per statutory amendment in the Act. Since the Finance Act, 2017 omitted sec. 92BA(i) from retrospective effect, the Assessing Officer s inaction in not making reference to the TPO does not render the assessment erroneous causing prejudice to interest of the Revenue. The PCIT s revision directions under challenge are accordingly reversed. The Assessing Officer s regular assessment dated 23.11.2016 is restored - Decided in favour of assessee
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2020 (2) TMI 946
Levy of penalty u/s 271AAB - Validity of notice issued u/s 274 - whether the notice issued u/s 274 r.w.s. 271AAB of the Act suffers from fatal error and technical defect thereby not providing an opportunity to the assessee to plead her case? - HELD THAT:- From notice issued to the assessee, we find that there is no mention about various conditions provided u/s 271 AAB of the Act. In the notice dated 22.03.2016 the Ld. A.O has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. It does not talk anything about various clauses of section 271AAB of the Act for levying penalty @10%/20%/30%. Certainly such notice has a fatal error and technically is not a correct notice in the eyes of law because it intends to penalize an assessee without spelling about the specific charge against the assessee. Matter written in the body of the notice issued u/s 274 of the Act does not refer to the charges of provision of Section 271AAB of the Act makes the alleged notice defective and invalid and thus deserves to be quashed. Since the penalty proceedings itself has been quashed the impugned penalty stands deleted. We accordingly allow the legal ground raised by the assessee challenging the validity of notice issued u/s 274 r.w.s. 271AAB of the Act and quash the penalty proceeding as void ab intio. - Decided in favour of assessee.
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2020 (2) TMI 945
Penalty u/s 271B - assessee failed to obtain Audit Report u/s 44AB - verification of turnover of the assessee - HELD THAT:- It is true that ICAI issued guidance notes for tax audit u/s 44AB of the Act but since the working of calculation of turnover is not coming to the logical end from the material available on record to examine the justification of levy of penalty u/s 271B of the Act will be little early. In the assessment order A.O has not given correct finding and is mentioning about the books of accounts which the assessee has never maintained. The judgment referred and relied by the assessee will not help at this stage. Once the turnover as stated by the Ld. Counsel for the assessee is verified at the end of the Ld. A.O which is to be calculated on the basis of Guidance note issued by ICAI for tax audit u/s 44AB of the Act, the question that whether the assessee was liable to get books of accounts audited u/s 44AB of the Act needs to be taken by Ld. A.O thereafter. Set aside all the issues raised in this appeal to Ld. A.O, to carry out necessary verification with the assistance of assessee who would file all necessary details in support of its contention that the turnover is only as held by Ld. CIT(A). However the Ld. A.O is directed to compute the turnover as per the guidance note on Section 44AB of the Act issued by ICAI as well as the settled judicial precedence and provisions of law. - Decided in favour of assessee for statistical purposes.
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2020 (2) TMI 944
Addition made u/s. 43B in respect of Municipal Tax - HELD THAT:- In any case, the assessee was only a collecting agent on behalf of the State and it was the amount which was not collected, which was shown as receivable and also on the other side shown as payable to the State. The liability if any, would arise after the amount is collected and that also of the State. In such circumstances, the provision of section 43B of the Act could not be applied and the amount could not be disallowed in the hands of the assessee. Similar accounting has been carried out by the assessee in its books of accounts from Assessment Year 1999-2000 and no disallowance has been made in any of the year. Hon ble Calcutta High Court in the case of CESC Ltd. vs CIT [ 2015 (5) TMI 795 - CALCUTTA HIGH COURT] has held that where the assessee merely acts as Collecting agent for the State Government and pays the same to the State Government on collection, then, the licencee merely acts as a conduit and the Electricity Duty was not chargeable to the licencee. It was concluded by holding that Electricity Duty not being a sum payable by the assessee as a primary liability by way of tax, duty, cess or fee, then provisions of section 43B of the Act were not attracted to the licencee/assessee in respect of the Electricity Duty collected by it for being passed on to the State Government. Addition on account of cost variance reserve - CIT- A deleted the addition - HELD THAT:- On a careful consideration of this issue we are of the considered opinion that inasmuch as there is no dispute in the current year and subsequent year, the rate of tax remained the same and the dispute raised by the Revenue is entirely academic or it may have a minor tax effect. By respectfully following the decision of Hon ble Apex Court in the case of Excel Industries Ltd. [ 2013 (10) TMI 324 - SUPREME COURT] we endorse the view taken by the ld. CIT(A) and hold that this is a revenue neutral transaction. We, therefore, affirm the finding of the ld. CIT(A) on this issue. Addition of provision of surcharge levied but not realized - CIT-A deleted the addition - HELD THAT:- CIT(A) followed the binding precedent of Hon ble High Court in own case [2014 (11) TMI 58 - PUNJAB HARYANA HIGH COURT] it cannot be said that the finding of the CIT(A) is either erroneous or perverse. We, therefore, find this ground of appeal of Revenue as devoid of merit and the same is liable to be dismissed. Allowability of prior period expenses - As per CIT(A), the claim of assessee on account of Pay anomaly of employee crystallized during the year should have been accepted and he, therefore, granted relief to the assessee - HELD THAT:- On a perusal of the record and the order [ 2019 (12) TMI 1233 - ITAT DELHI] or assessment year 2006-07 in assessee s own case, we hold that the Tribunal also endorsed the view taken by ld. CIT(A) in earlier years that the liability crystallized during the year has to be allowed. We do not find anything improper in the approach of the CIT(A) to allow the expenses in respect of which the liability crystallized during the year. Hence, ground No. 3 of Revenue s appeal is dismissed. Loss due to flood, cyclone and fire - Allowable revenue expenses - HELD THAT:- On a perusal of the order for assessment year 2006-07 in assessee s own case, we find that a co-ordinate Bench of this Tribunal was of the view that the nature of expenditure is the determining factor and not the nomenclature and having regard to the expenditure, this expenditure needs to be considered as Revenue expenditure. Respectfully following the said view taken in assessee s own case, we dismiss this ground of appeal. TDS u/s 194J - Payment of wheeling SLDC charges - HELD THAT:- CIT(A) considered the contentions of the assessee and decided the issue in the light of decision of the Tribunal for assessment year 2006-07 to 2008-09. Revenue does not dispute the fact that this issue has been a recurrent issue for last several years and consistent view has been taken by the Tribunal for assessment year 2008-09 to 2009-10 and as on date, there is no contrary view from the higher forums. We, therefore, while respectfully following the consistent view taken by the Tribunal in assessee s own case under identical circumstances in earlier years, hold that the CIT(A) is right in deleting the addition and the ground of Revenue s appeal has no merits
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2020 (2) TMI 943
Bogus purchases - disallowance of labour and wages expenses - most of the bills voucher were missing and some were self generated - HELD THAT:- In the instant case, the ld.CIT(A) has deleted the addition basically on the ground that no specific instance of missing bills or self-made vouchers was mentioned by the AO and going by the general principles, he deleted the addition, therefore, the same, in our opinion, is not proper. For claiming any expenditure as allowable business expenditure, the onus is always on the assessee to substantiate with evidence to the satisfaction of the AO regarding the genuineness of such expenditure incurred wholly and exclusively for the business. Since the assessee, in the instant case, has failed to discharge the onus cast on it before the AO and the ld.CIT(A) has deleted the addition merely on the basis of the statements made by the assessee without giving any opportunity to the AO for his comments, therefore, we deem it proper to restore the issue to the file of the CIT(A) with a direction to grant an opportunity to the AO to go through the various details filed by the assessee and offer his comments and the CIT(A) shall decide the issue thereafter as per fact and law, after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Grounds No.1 and 2 are accordingly allowed for statistical purposes. Addition on account of interest on TDS - HELD THAT:- Following the decision of the Hon ble Karnataka High Court in the case of CIT vs. Oriental Insurance Company Ltd. [ 2008 (10) TMI 230 - KARNATAKA HIGH COURT] deleted the addition. The ld. DR could not controvert with any evidence so as to take a contrary view than the view taken by the ld.CIT(A). Since the ld.CIT(A) has deleted the addition basing on the decision of the Hon ble Karnataka High Court, therefore, we do not find any infirmity in the order of the CIT(A) on this issue. Undisclosed gross receipt - HELD THAT:- CIT(A), while reducing the addition from ₹ 44,21,688/- to ₹ 4,94,250/-, has verified each and every entry and has given a factual finding which could not be controverted by the ld. DR. Since the order of the CIT(A) is based on factual aspect which remains uncontroverted by the Revenue, therefore, we find no infirmity in the order of the CIT(A) reducing the addition - Decided against revenue
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2020 (2) TMI 942
Addition on account of service charges receipts - ad hoc disallowance of vehicle and telephone expenses on estimated basis - Rectification u/s 154 - HELD THAT:- No basis has been given by any of the lower authorities for making ad hoc addition on account of service charges income. Even during the course of scrutiny assessment, no defect was pointed out by the A.O. in the books of account nor the same were rejected. In absence of any specific defect or discrepancy, no valid addition can be made. In the present case, the Authorities Below have failed to point out any specific instance of suppression of service income, or any discrepancy or mistake in any manner. Under these circumstances, no such addition was legally maintainable. Even the order of the ld. CIT(A) for the A.Y. 2009-10 clearly indicates that the addition was made by the A.O. on presumption without pointing out any defect. Even the rectification order passed by the ld CIT(A) U/s 154 of the Act reversing his earlier findings, appears to be not legally sustainable in so far as there was no apparent mistake in his earlier order which could be rectified in garb of Section 154 of the Act. However, without commenting on the order passed by the ld. CIT(A) U/s 154 for the A.Y. 2009-10 reversing his earlier order passed, I do not find any merit in the ad hoc addition made during the years under consideration. Accordingly, the A.O. is directed to delete the addition Disallowance has been made by the lower authorities on estimate basis and without pointing out any specific mistake or instance of disallowable nature of expenditure. Keeping in view the totality of facts and circumstances of the case, I restrict the disallowance on account of vehicle expenses to the extent of ₹ 25,000/- and ₹ 2,500/- on account of telephone expenses.
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2020 (2) TMI 941
Reopening of assessment u/s 147 - reasons to believe and not reasons to suspect - HELD THAT:- Provisions imposing condition precedent for initiating reassessment proceedings is to ensure finality of proceedings. The Act also provides that such reason must be recorded in writing before issue of notice of reassessment so as to judge the existence of such belief before initiating reassessment proceedings by issue of notice u/s.148. The above requirements are meant to ensure that powers to initiate reassessment proceedings are not exercised in an arbitrary manner. The Courts have analyzed and explained in several cases as to what could be the valid reason to believe escapement of income, which would enable the AO to successfully reopen the assessment. It has been held that the words reason to believe are stronger than the words reason to suspect or reason to doubt . It requires more than merely satisfaction of the Assessing Officer. The belief entertained by the AO must not be arbitrary or irrational. The expression reason to believe does not mean purely subjective satisfaction of the Assessing Officer. The belief must be held in good faith. It cannot be merely pretence. Again, the belief must be of an honest and reasonable person based upon reasonable grounds. AO may act upon direct or circumstantial evidence, but his belief must not be based on mere suspicion, gossip or rumors. AO would be acting without jurisdiction, if the reasons for his belief are not material or relevant. There should be nexus between the information coming into possession of the AO and his belief on the basis of such information that income of the Assessee chargeable to tax has escaped assessment. Therefore, we note that it is a case of change of opinion and hence we quash the reassessment proceedings. - Decided in favour of assessee.
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2020 (2) TMI 940
Assessment u/s 153A - absence of any incriminating material found in search - HELD THAT:- As decided in KABUL CHAWLA [ 2015 (9) TMI 80 - DELHI HIGH COURT] in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The present appeals on the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. - Decided in favour of assessee
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2020 (2) TMI 939
Expenses under repairs and maintenance to building - Revenue or capital expenditure - HELD THAT:- Under section 37(1), any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession . Expenditure on current repairs to buildings, machinery, plant and furniture used for the purposes of the business is generally covered by sections 30 and 31 of the I.T. Act. In respect of types of repairs that do not fall under the above description, a deduction can still be allowed u/s. 37 if all the requirements for deduction under the said section are fulfilled. The expenses incurred by the assessee towards repairs and whether it is allowable as revenue expenditure or not, is a pure question of fact. In this case though the expenses incurred cannot be allowed as deduction as current repairs certainly expenses would not be a capital expenditure and all conditions being satisfied u/s. 37 expenses are to be allowed under the said section. The expenses incurred in a hotel industry may be current repairs which expenses are incurred on yearly basis and expenditure incurred on periodical basis. As mentioned earlier, assessee s hotel was already having three star facility from the year 2006 and for renewal of three star facility, the assessee had to incur the impugned expenses on periodical basis. On basis of these expenses incurred, the assessee did not derive a new asset and there was no increase in the total rooms nor there was an increase in total area of the hotel. The expenditure incurred by assessee such as painting of the hotel, replacement of floor tiles, glazing works etc. are nothing but periodical expenditure which a hotel has to necessarily incur for its upkeep and cannot be termed as capital expenditure. Assessee is entitled to deduction u/s. 37(1) - Decided in favour of assessee.
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2020 (2) TMI 938
Penalty u/s 271(1)(c) - Defective notice - notice issued u/s 274, the Assessing Officer has not struck down the irrelevant portion in the said notice - Curable defect u/s 292BB - HELD THAT:- Show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Further, the Hon ble Karnataka High Court in the case of CIT v. SSA s Emerald Meadows [ 2015 (11) TMI 1620 - KARNATAKA HIGH COURT] it was held that imposing penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice issued u/s 274 of the I.T.Act does not specify the charge against the assessee as to, whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. Also confirmed by SC [ 2016 (8) TMI 1145 - SC ORDER] Provisions of sec.292BB would not come to the rescue of the revenue, when the notice was not in substance and effect in conformity with or according to the intent and purpose of the Act. In our view, the notice issued by the Assessing Officer was not in substance, and effect in conformity with or according to the intent and purpose of the Act, since the Assessing Officer did not specify the charge for which penalty proceedings were initiated and further there was non-application of mind on the part of the Assessing Officer. For the reasons given above, we hold that levy of penalty in the present case cannot be sustained.
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2020 (2) TMI 937
Validity of directions passed by DRP u/s 144C (5) - non-speaking order - HELD THAT:- Order passed by the DRP is a non-speaking order on the issues raised by the assessee, not stating the objections raised by the assessee and the reasons have also not been given as simply the order of TPO and Assessing Officer are referred. We find that similar issue was considered by the Hon'ble Delhi High Court in the aforementioned case of Vodafone Essar Ltd. [ 2011 (12) TMI 22 - DELHI HIGH COURT] against the order passed by the DRP. We find that it is a fit case where this issue should be restored back to the file of DRP to pass a detailed order stating all the objections of the assessee and disposing them by giving a cogent and germane reason for adjudication of the objections of the assessee. We direct accordingly. After receiving the order from DRP, the Assessing Officer will again pass order u/s 144C(13) and the present assessment passed by the Assessing Officer is set aside as the DRP is directed to readjudicate the objections raised by the assessee. Allowability of expenditure relating tools and consumables - A.O. held that the assessee is considered to be eligible to claim the depreciation on the tools u/ s 32 of the Act instead of allowance u/ s 31(i)/37 - nature and functions of tools replaced by the assessee - HELD THAT:- All the tools were found to be having independent functions and do not form part of any big machinery. The learned AR also explained to us that these are not tools consumables acquired in the assessment year under consideration. In the assessment years under consideration, the assessee acquired consumable tools for day to day manufacture operation of the assessee and nothing to do with these machineries mentioned by the Assessing Officer and confirmed by the DRP in their respective orders. In our opinion, the Assessing Officer is required to examine the details relating to the incurring of expenses for tools and consumables, if they are not relating to acquisition of above independent machinery, then the Assessing Officer shall treat the same as revenue expenditure and to be allowed in toto. We restore the entire issue relating to allowability of expenditure relating tools and consumables to the file of the Assessing Officer for fresh consideration.
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2020 (2) TMI 936
Deduction u/s 36(1)(v) on payment basis - Gratuity contribution to the unapproved fund - claim was basically denied on account of non approval of the scheme by CIT - HELD THAT:- We find that subsequently the CIT vide order dated 21.09.2016 has granted the approval to the gratuity scheme and it is effective from 27.03.2012, being the date falling in the assessment year. In such a situation we are of the view that the assessee is eligible for deduction. We therefore, direct the Assessing Officer to consider the claim of assessee on merits and allow the same in accordance with law. Thus, the ground Nos.1 and 2 are allowed. Denial of claim of deduction on intangible assets - HELD THAT:- It is an undisputed fact that the assessee had acquired electroplating business of Chemetall India Pvt. Ltd. vide agreement dated 15.12.2011 for total consideration of ₹ 11.80 crores which included ₹ 11.51 crores on account of various intangibles, which were valued as per independent valuation. It is Revenue s case that intangibles cannot be considered to be intangible assets so as to eligible for depreciation. As far as the issue of allowing Non compete fee is considered, we find that the Hon ble Bombay High Court in the case of Pr.CIT Vs. Piramal Glass Limited [ 2019 (6) TMI 891 - BOMBAY HIGH COURT] on an identical issue it was held that, .....It can thus be seen that the rights acquired by the assessee under the said agreement not only give enduring benefit, protected the assessee's business against competence, that too from a person who had closely worked with the assessee in the same business. The expression or any other business or commercial rights of similar nature used in Explanation 3 to sub-section 32(1)(ii) is wide enough to include the present situation Hon ble Delhi High Court in the case of Areva T D India Ltd. Vs. DCIT [ 2012 (4) TMI 79 - DELHI HIGH COURT] has held that specified intangible assets, viz. business claims, business information, business records, contracts, employees and know-how acquired by assessee under slump sale agreement are in nature of business or commercial rights of similar nature specified in section 32(1)(ii) of the Act and are accordingly eligible for depreciation under that section. Thus the assessee is eligible for the claim of depreciation and therefore, be allowed and thus, the ground No.3 raised by the assessee is allowed.
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2020 (2) TMI 935
Penalty u/s 271(1)(c) - inadmissible claim of deductions u/s 80IB and 80G - HELD THAT:- It is a valid satisfaction because it is categorically mentioned in the satisfaction note that, assessee company has furnished inaccurate particulars with a view to evade the tax and the reason described above may be treated as satisfaction note for initiating the penalty proceedings u/s 271(1)(c) for the above two additions made . Then, on the basis of aforesaid satisfaction recorded by the AO, notice was issued to the assessee company u/s 274 r/w section 271(1)(c) of the Act which has never been challenged by the assessee company. All these facts go to prove that penalty proceedings in this case are initiated on the basis of valid satisfaction and the decisions relied upon by the assessee are not applicable to the facts and circumstances of the case. This is a case clearly distinguishable from the case of Reliance Petro Products Pvt. Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] because in this case claiming of inadmissible deductions u/s 80IB and 80G is not a wrong claim rather a deliberate and conscious scheme to evade the tax by furnishing inaccurate particulars of income, if not caught in scrutiny.- thus penalty is not sustainable in the eyes of law Assessee in this case has never revised its return during the period prescribed u/s 139(1) rather withdrew the claim during assessment proceedings when confronted by the AO. So, by no stretch of imagination, the claim made by the assessee for deduction u/s 80IB and 80G can be considered as inadvertent claim rather it is deliberate and conscious claim made to evade the taxes. Moreover, it is nowhere the case of the assessee company that the claim of deduction has been made on the basis of wrong audited reports or its audited report has been subsequently corrected by its auditors. Had there been any inadvertent mistake on the part of the assessee company to claim such deductions, assessee company would have filed revised return within the prescribed period, but no such revised return has been filed which leads to the conclusion that it was a deliberate and conscious attempt to evade tax. At no point of time, either before assessment proceedings or during appellate proceedings assessee has come forward with claim that it has acted bonafide while making the inadmissible claim u/s 80IB and 80G. When it is proved on record that the claim of deductions made by the assessee company u/s 80IB an d80G is not only incorrect but a malafide under Explanation 1 to section 271(1)(c) is attracted to confirm the penalty levied on the assessee company. - Decided against assessee. Penalty initiated on the basis of addition u/s 40A(ia) for non-deduction of TDS - Contention of the assessee in this regard is sustainable because qua addition assessee company has made full disclosure of all the facts as to making payment on which TDS was not deducted. So, the assessee had no occasion to furnish inaccurate particulars to conceal its income as the only dispute was qua deduction or non-deduction of tax for the payment made on account of legal and professional expenses. - Decided in favour of assessee.
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2020 (2) TMI 934
Penalty u/s 271(1)(c) - non specification of charge - HELD THAT:- Hon'ble High Court of Telangana A.P. in the case of Smt. Baisetty Revathi [ 2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT] has considered the very same issue and held that non-striking of the irrelevant portion of the notice issued u/sec. 274 is invalid. The very same judgment has been followed by the coordinate bench of this tribunal in the case of Konchada Sreeram 2017 (11) TMI 1164 - ITAT VISAKHAPATNAM] Therefore, respectfully following above referred to judicial precedents, we hold that the notice issued under section 274 read with section 271, dated 31/12/2009 is invalid and, therefore penalty order passed is hereby cancelled. - Decided in favour of assessee.
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2020 (2) TMI 933
TP Adjustment - MAP has been concluded for both these two years in respect of assessee company s transaction with AE in US. Hence, the TP grounds raised by both sides in these two years do not survive and the same are rejected. Computation of deduction u/s 10A - HELD THAT:- Expenses reduced from export turnover should be reduced from total turnover also for the purpose of computing deduction allowable to the assessee under section 10A of the IT Act, 1961. As per this judgment of Hon ble Karnataka High Court rendered in the case of Tata Elxsi Ltd. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT ] total turnover is sum total of domestic turnover and export turnover and therefore, if an amount is reduced from export turnover, then the total turnover also goes down automatically by the same amount.
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2020 (2) TMI 932
Unexplained share capital u/s 68 - neither the creditworthiness of these creditors nor the genuineness of transactions were established - CIT (A) has deleted the addition merely for the reason that the ld AO did not specify which director is to be presented - HELD THAT:- In case of M/s. Sunshine Infrabuild Pvt. Ltd at the Page No. 87 of the order of ld CIT(A) the assessee produced supervisor of that company and his statement was recorded, the ld CIT (A) deleted the addition on the statement of supervisor. We failed to appreciate that how the ld CIT (A) deleted the addition based on the statement of the supervisor who is not aware about the creditworthiness or genuineness of the transaction. We also failed to understand that when the directors were required to be produced, how the authorised representative could be produced in lieu of those directors. CIT (A) according to us has grossly erred in accepting the statement of authorised representative. He has also merely gone by the judicial precedents without looking at the fact that all these company who have invested with the assessee does not have adequate source of income as they are showing meager income. Those companies do not have any interest of any appreciation in the share value of the Assessee Company as well as receipt of any dividend from the assessee company. Assessee is a private limited company how it approached so many of the subscribers in different geographical locations and how they were convinced and on what conviction they invest in assessee company of such huge magnitude. AO has made the addition apart from other things the fact that despite repeated opportunities the assessee has failed to produce the directors of investor companies. The ld CIT (A) deleted the whole addition of non-Kolkata based companies even on the statement of the supervisor. Further, the assessee was asked to produce the directors of those companies at the fag end of the assessment proceedings. We failed to understand how the ld CIT (A) has deleted the addition of non-Kolkata based entities without examining the directors. He also did not exercise his own powers of inquiry. We set aside the appeal of the revenue as well as of the assessee back to the file of the ld AO with a direction to the assessee to prove the identity, creditworthiness of those depositors as well as genuineness of the whole transactions. The assessee is specifically directed to produce directors of the companies who are investors in the assessee company before the ld AO within four months from the date of this order. AO may examine the details produced by the assessee and examine the directors of all the companies to test identity, creditworthiness of their investment as well as genuineness of the transactions. Assessee may substantiate its claim by producing any further evidences, which it could not produce before ld AO due to the opportunity at the fag end of the assessment proceedings; the ld AO may also conduct any such inquiry, which is required to be carried out by him. After that, ld AO may decide the issue of applicability of section 68 of the act on these appeals afresh in accordance with law. - Appeals allowed for statistical purposes
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2020 (2) TMI 931
Revision u/s 263 - expenditure claimed for incurred but not reported (IBNR) and incurred but not enough reported (IBNER) - HELD THAT:- Adverting to the scope of section 263 of the Act. The prerequisite of the exercise of jurisdiction of section 263 by PCIT or CIT is that order of AO is erroneous in so far as prejudicial to the interest of revenue. The twin condition that order is erroneous and it is prejudicial to the interest of revenue must be fulfilled together. If anyone of them is absent- the recourse cannot be had to section 263. Further, if the Assessing Officer has adopted one of the courses permissible under the law and pass the assessment order, the same cannot be branded as erroneous unless the order passed by Assessing Officer is unsustainable in law. Thus, the twin conditions of section 263 are not fulfilled in the present case. We may reiterate here that though there is no reference in the assessment order about the examination of issues related with provisions for IBNR and IBNER. The assessee during the assessment furnished the relevant extract of IBNR and IBNER report for the year ended 31st March 2014 duly certified by the appointed actuary and copy of which was again furnished to the ld. PCIT. The ld. PCIT has not commented on the detailed reply furnished by assessee. Assessee while making submission has vehemently submitted that issue is debatable and when two views are possible, the revision of assessment order is not permissible. The Hon'ble Supreme Court in Max India Ltd.'s case 2007 (11) TMI 12 - SUPREME COURT ] held that when two views are inherently possible, the provision of section 263 would not attract. Order passed by ld. PCIT under section 263 is set-aside. - Decided in favour of assessee.
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2020 (2) TMI 930
TP Adjustment - comparable selection - assessee bench marked its ALP under Transaction Net Margin Method (TNMM) - HELD THAT:- Assessee is providing IT-enabled services / date processing services and business processing outsourcing, thus companies functionally dissimilar with that of assessee need to be deselected from final list
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2020 (2) TMI 929
Validity of initiation of penalty proceedings u/s 271AAB - Defective notice - non specifying the charge in the show cause notice - HELD THAT:- Since the assessee has offered this income in the return of income and no addition is made by the AO on this account, therefore, the AO was not under any obligation to explain and make the assessee known about the nature of charge of default committed by the assessee. Once the assessee herself has disclosed the undisclosed income based on the assets being unexplained cash and unexplained investment in the gold jewellery found during the course of search then it was very well in the knowledge of the assessee about undisclosed income and default committed by the assessee. No merit or substance in the Ground No. 1 of the assessee's appeal challenging the validity of initiation of penalty proceedings and consequential order passed u/s 271AAB of the Act. Thus Ground No. 1 of the assessee is dismissed. Levy of penalty u/s 271AAB - disclosure and surrender during the course of search and seizure action - No dispute that during the course of search and seizure action, the assessee could not explain the cash of ₹ 60,311/- and jewellery of ₹ 2,31,880/- found during search. The assessee in the statement recorded u/s 132(4) of the Act has disclosed the said amount as undisclosed income and also declared the same in the return of income filed u/s 139 of the Act. Once the disclosure and surrender made by the assessee is representing the physical assets found during the course of search and seizure action then the said amount of ₹ 2,92,191/- would fall in the definition of undisclosed income as per Explanation to Section 271AAB of the Act. The disclosure and surrender represents the underlying assets being unexplained cash as well as jewellery. Accordingly, the same will fall in the definition of undisclosed income provided in clause (c) of Explanation to Section 271AAB - Appeal of the assessee is dismissed
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2020 (2) TMI 928
Correct head of income - treatment to lease income - income from house property or business income - HELD THAT:- Carrying out all the activities which are relevant for earning the income for these properties by extending various facilities. Thus found that holding of said properties and earning income by letting out those properties is the main objective of the assessee. The income arising therefrom is necessarily assessable under the head Income from Business and profession and assessee is eligible to get deduction in respect of expenditure incurred for earning the aforesaid income and also depreciation on the business assets so held. Assessee has only one business and that is of leasing its property and earning rent therefrom. The assessee has carried out various activities for earning such income by rendering various services as required - the main intention of assessee was to exploit the immovable property by way of complex commercial activities, therefore income so earned by exploiting the property has to be taxed on as business income. No merit in the action of AO for treating the income as income from house property. - Decided in favour of assessee
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2020 (2) TMI 927
Deemed dividend u/s 2(22)(e) - HELD THAT:- Additional evidence filed by the assessee are the copies of the resolutions of the Board of Directors of the company for setting up of a hospital at Vizag and at Nagpur and also land allotment letters by MADC on receipt of payment from the assessee - letters issued by the Ministry of Corporate Affairs dated 31.07.2017 wherein the scheme of merger of Visakha Hospitals VHDL and M/s. Quality Care India Ltd, the assessee herein is approved. It is the argument of the assessee that the business of VHDL has now become the business of the assessee w.e.f. the appointed date i.e. 1.4.2016. We deem it fit and proper to admit the additional evidence and remand the same to the file of the AO for de novo consideration in accordance with law, particularly, the contention of the assessee that the advances from VHDL were received in the financial year 2011-12. Similarly, with regard to the advances of ₹ 1.00 crore from GHCL to the assessee also, the AO may re-examine the issue i.e. the period of receipt of income, whether it had accumulated profits during the relevant period and whether it was for commercial expediency as claimed by the assessee. Assessee s appeal is treated as allowed for statistical purposes.
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2020 (2) TMI 926
Late fee levied u/s 234E for belated filing of TDS statements - HELD THAT:- Although, the provision of section 234E of the Act, providing for levy of fee, in case of delayed filing of statement of TDS was there in the statute book w.e.f. 01/07/2002, but, since no corresponding amendment was made to provision of section 200A of the I.T.Act, 1961, before insertion of sub-clause (c) to section 200A by the finance Act, 2015 w.e.f. 01/06/2015, the late fee prescribed u/s 234E cannot be levied, while processing TDS statements filed and processed before 01/06/2015. In this case, on perusal of facts, we find that the Ld. AO has levied late fee u/s 234E, in respect of TDS statements filed in form 24Q for the quarter ending 15/10/2002 and 30/03/2013, which is prior to 01/06/2015. Therefore, we are of the considered view that the Ld. AO has erred in levying late fee u/s 234E of the Act, The Ld.CIT(A) without appreciating the facts has simply affirmed the findings of the Ld. AO. Hence, we direct the Ld. AO to delete late fee levied u/s 234E of the Act, for belated filing of TDS statements. - Decided in favour of assessee.
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2020 (2) TMI 925
Rectification of mistake u/s 254 - rectification v/s review - date in final penalty order u/s 271AAB was wrongly mentioned as 29/09/2016 instead of 30/09/2016 - HELD THAT:- As decided in DCIT vs M/s Sportking India Ltd, Ludhiana [ 2020 (2) TMI 898 - ITAT CHANDIGARH] . Tribunal has the power to rectify mistakes in its order. However, it is plain that the power to rectify a mistake is not equivalent to a power to review or recall the order sought to be rectified as A.O. passed the penalty order under section 271AAB of the Act, on 29/09/2016 while the approval was granted by the Joint Commissioner / Additional Commissioner of Income Tax, Central Range on 30/09/2016 and the order dated 22/04/2019 was passed after considering those facts on record, so there is no mistake apparent from the record for the purpose of rectification under section 254 - M.As filed by the Department are hereby dismissed.
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2020 (2) TMI 924
Deduction u/s 80P(2) - assessee was doing the business of banking - AO disallowed the claim of deduction with regard to interest income received by the assessee on investments made with District Co-operative Banks - CIT(A) rejected the objections raised by the assessee and passed orders u/s 154 disallowing the claim of the assessee u/s 80P(2) - HELD THAT:- CIT(A) had initially allowed the appeals of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed orders u/s 154 wherein the claim of deduction u/s 80P was denied, by relying on the judgment of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] The CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assesseesociety. 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 of the I.T.Act. In view of the dictum laid we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer to 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 and accordingly grant deduction u/s 80P(2) of the I.T.Act. Interest on the investments with Co-operative Banks and other Banks - Tribunal in the case of Kizhathadiyoor Service Co-operative Bank Limited [ 2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business instead of `income from other sources . However, as regards the grant of deduction u/s 80P of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. Appeals filed by the assessee are partly allowed for statistical purposes.
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2020 (2) TMI 923
Unexplained cash credit u/s 68 - HELD THAT:- Assessee has filed complete set of documents with regard to each and every amount of loan given to assessee right from 03/01/2012 to 02/11/2012 and also explained corresponding source of income for amount transferred to the assessee. We further noted that the loan creditor has explained the source of income out of encashment of mutual funds investments, sale of listed equity shares for which necessary contract notes from brokers and bank statement has been filed. Similarly, in respect of an amount of ₹ 20 Lacs transferred on 16/04/2012, the source has been explained from amount received from Saritha Barshikar wife of lender, for which necessary bank statement has been enclosed. The assessee has also filed income tax copy of loan creditors for the relevant financial year. From the above, it is very clear that the identity, genuineness of transactions and creditworthiness of the loan creditor has been explained with necessary evidences. CIT(A) after considering relevant facts has rightly came to the conclusion that the assessee has discharged onus cast upon u/s 68 in respect of unsecured loans taken from Mr. Ajeet N. Barshikar. No contrary evidence has been borught on record to prove findings of facts recorded by the ld. CIT(A) are incorrect. Additions towards interest paid on unsecured loans as unexplained expenditure - Once loan transactions between the assessee and the creditor has been found to be genuine transactions, which satisfies the conditions prescribed u/s 68, then interest paid thereon cannot be considered as unexplained expenditure. Accordingly, we do not find any error the findings of the Ld.CIT(A). Additions made towards cash deposits in ICICI banks and amount received from Gartner India Research, we find that the ld.CIT(A) has recorded categorical findings, in light of evidences filed by the assessee that said information has been reconciled with reference to return of income filed for the year. Hence, we are inclined to uphold the findings of the Ld. AO and reject ground taken by the revenue.
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2020 (2) TMI 922
Addition on account of creditors - HELD THAT:- As informed by AO of the alleged creditor while transmitting the Balance Sheet and the list of sundry creditors, that the name of the assessee was not to be found in such list. Further, the inspector who tried to locate the premises of M/s, Mahavir Forging (P) Ltd could not find such an entity at the given address. He was informed that such building was used as residence by its previous owner three years back and no company like M/s Mahavir Forgings had ever located in that premises. Further, on downloading the Balance Sheet filed with the letter from the ROC site, it was found that it was not signed by auditor or Director of the company, leading to the inference that the assessee was misusing name of some assessee to show bogus corridor in its books of accounts. There is no proper explanation from the assessee in respect of these reasons recorded by the learned Assessing Officer to draw the inference that the transaction is a bogus one. In the absence of any material touching on the aspect, we are of the considered opinion that the Ld. CIT(A) is justified in confirming the addition. There are no reasons warranting interference with the same. Disallowance of expenses - Assessing Officer who is the first authority directly dealing with the assessee and its business details had taken a view that 25% of the expenses should be disallowed. To take any contrary view or to modify it, there shall be some material before us or some acceptable explanation from the assessee. Since the assessee had not taken sufficient precaution for prosecution of the case on merits, we find it difficult to interfere with the discretion of the learned Assessing Officer. We, therefore, uphold the same. - Decided against assessee.
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2020 (2) TMI 921
Nature of expenditure - current repairs - Disallowance of expenditure towards cost of machinery - second round of litigation - HELD THAT:- The expenditure incurred for acquiring or replacing any machinery to run a factory or mill should be treated as capital expenditure in view of the decision in the case of Sri Mangayarkarasi Mills P. Ltd. [ 2009 (7) TMI 17 - SUPREME COURT ] wherein salient findings are summarised as under: Placing reliance on the decision of Supreme Court in the case of Saravana Spinning Mills P. Ltd. [ 2007 (8) TMI 16 - SUPREME COURT ] it held that each machine in a textile mill has an independent role to play in the mill and each machine is part of the integrated process of manufacture of yarn and is integrally connected to the other machines in the mill. However, this interconnection does not take away the independent identity and distinct function of each machine. Replacement of the machine can at best amount to a repair made to the process of manufacture of yarn. Each machine in a textile mill should be treated independently and not as a mere part of an entire composite machinery of the spinning mill. Replacement of an old machine with a new one would constitute the bringing into existence of a new asset in place of the old one and not repair of the old and existing machine. It therefore cannot amount to current repairs. Expenditure incurred by the assessee was capital in nature as it amounted to enduring advantage for the business in the form of efficient production over a period of time. Though accounting practices may not be the best guide in determining the nature of expenditure, they are indicative in nature. We sustain the addition confirmed by the ld. CIT(A) for the assessment year 2001-02. - Decided against assessee
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2020 (2) TMI 898
Rectification of mistake u/s 254 - date in final penalty order u/s 271AAB was wrongly mentioned as 29/09/2016 instead of 30/09/2016 - HELD THAT:- In the present case it is an admitted fact that the A.O. passed the penalty order under section 271AAB of the Act, on 29/09/2016 while the approval was granted by the Joint Commissioner / Additional Commissioner of Income Tax, Central Range on 30/09/2016 and the order dated 22/04/2019 was passed after considering those facts on record, so there is no mistake apparent from the record for the purpose of rectification under section 254 of the Act. No merit in these Miscellaneous Applications of the Department, accordingly the same are dismissed.
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2020 (2) TMI 897
Revision u/s 263 - Non making reference to the TPO for determining arm s length price of assessee s specific domestic transactions - scope of amendment - HELD THAT:- In EVEREADY INDUSTRIES INDIA LTD. VERSUS PRINCIPAL COMMISSIONER OF INCOME-TAX, KOLKAT-4, KOLKATA. [ 2019 (12) TMI 1033 - ITAT KOLKATA] holds that such a reference prescribed in section 92BA(i) regarding any expenditure in respect of which payment has been made or is to be made to a person referred to in clause (b) of sub- section (2) of section 40A stands omitted by the Finance Act 2017 w.e.f 01.04.17 and therefore, the foregoing omission is applicable with retrospective effect in the impugned assessment year 2014-15 as well. PCIT has erred in law and as well as on facts in terming the above regular assessment dated 19.12.16 as erroneous causing prejudice to interest of the revenue qua the assessee s specified domestic transaction not having subjected to section 92CA reference to the Transfer Pricing Officer. We make it clear that learned coordinate bench has already held in assessment year 2014-15 itself that the Finance Act 2017 s omission of section 92BA(i) carrying retrospective effect and therefore, such an inaction in not making reference to the TPO does not render the assessment erroneous causing prejudice to interest of the revenue. We accordingly reverse the PCIT s revision directions therefore. - Decided in favour of assessee.
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Customs
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2020 (2) TMI 920
Refund of SAD - denial on the ground that the description of the imported goods in Bills of Entry is Calcium Carbonate Powder but the same mentioned in the sale invoices as Mineral Powder - HELD THAT:- It is not the case of the Revenue that either the goods are different or that they are different categories per se, falling under different HSN. No doubt, appellant could have submitted a certificate by an expert in the field in order to facilitate easy appreciation of the issue by the Revenue, but then the adjudicating authority could have questioned the same, invited explanation to his satisfaction, in order to arrive at any conclusion. It is not even his case that the descriptions would bring into existence two different goods, different in all respects nor has the Revenue proved that the Mineral Powder is not a generic term for the goods in question. The Order-in-Original is not even alleging that Calcium Carbonate Powder and Mineral Powder are different. Even if they are assumed to be different, then, how they are different cannot be a guess work but based on some analysis, which is lacking. Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 919
Classification of imported goods - Educational Charts - whether classified under Custom Tariff Heading 49059990 or under Customs Tariff Heading 49119990? - maps or depicting the terrestrial features or not - HELD THAT:- It is very clear from the examination report and the sample charts produced before us that these charts are not in nature of maps or depicting the terrestrial features. Even appellant on the Bill of Entry have not claimed that these goods are maps of any kind. When it is not even the case of the importers that the imported goods are maps, then they are definitely not justified in claiming the classification under heading 4905. Hence their claim for classification under heading 4905 99 90 has been rightly rejected by the lower authorities. There are no infirmity in the impugned order determining the classification of the impugned goods under Heading 4911 99 90, which is based on the terms of headings in Customs Tariff and HSN Explanatory Notes for the said heading. However to determine the practice of assessment elsewhere a bit of research undertaken by us made us lay hand on the import data available in respect of the same goods at zuaba. com which were cleared from the ICD Tughlakabad and Nhava Sheva Port classifying the said goods in same manner. Appeal dismissed - decided against appellant.
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Corporate Laws
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2020 (2) TMI 918
Beneficial interest in the shares held by JFL/Defendant No.3 - subscription of shares on discharge of the obligations arising under agreement - grant of Permanent Injunction restraining Defendant No.2 either himself or through Defendant No.3 from in any manner interfering with the peaceful possession of the Plaintiff in the property - Mandatory Injunction directing Defendant No.3 to submit its declaration under Section 89 of the Companies Act 2013. HELD THAT:- Section 89 of the 2013 Act, which was not in force on 7th August, 2013 when beneficial interest in favour of plaintiff is claimed to be created in the shares of ATPL held by JFL, is pari materia to Section 187C of the 1956 Act save for a change of language in Section 89(8) from the wording of Section 187C(6). While Section 187C(6) provided consequences of non declaration under the forgoing provisions and which I have hereinabove interpreted as including declaration by the company under Section 187C(4), Section 89(8) provides consequences of non-declaration by the beneficial owner only. I have considered, whether on default by company, in this case ATPL, to file return under Section 89(6) and on the plea of the plaintiff of having made a declaration, the plaintiff is entitled to maintain the suit, but am unable to hold so. The records required to be maintained by a company qua beneficial interest in shares, are public records, open to inspection by all and the conduct of the plaintiff, of inspite of such declaration being not made, keeping quite till now, speaks volumes of natural course of human conduct. The plaintiff had option under Section 59 of the 2013 Act to apply for rectification of register of members, but failed to exercise the said option. The claim of beneficial ownership of shares of ATPL, even otherwise stands on the edifice of beneficial ownership of HRLIPL and which is unsustainable under Section 187C(6). The right of the plaintiff even if any, as beneficial owner of shares in the name of Samta Khinda in HRLIPL or shares in the name of JFL in ATPL could be only to exercise rights as a shareholder and not otherwise. It is not the plea of the plaintiff that the plaintiff as shareholder exercised any such rights or even made any attempt to exercise such rights. On the contrary this suit is only to retain possession of immovable property of ATPL. The plaintiff, even as beneficial owner of shares of ATPL in name of JFL, is not entitled to hold possession of immovable property of ATPL, unless permitted by resolution of Board of Director of ATPL. Though the plaintiff pleads such resolution but has not filed the same. In any case, this suit is not for declaration of existence of any such resolution of the Board of Directors of ATPL. I have already hereinabove while describing the documents dated 28th September, 2011 and 7th August, 2013, expressed doubts as to the authenticity thereof. The non-compliance of the statutory provisions which bar the plaintiff from claiming any rights as claimed in the present suit, only confirm the said doubts. I am therefore unable to find the plaintiff, on the pleaded case, to have a cause of action for the reliefs claimed and rather find the suit as aforesaid to be barred by law - Suit dismissed.
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Insolvency & Bankruptcy
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2020 (2) TMI 917
Approval of resolution plan - CIRP proceedings - immunity from Attachment of assets after approval of Resolution Plan - money laundering - whether after approval of a Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016, is it open to the Directorate of Enforcement to attach the assets of the Corporate Debtor on the alleged ground of money laundering by erstwhile Promoters? HELD THAT:- The Directorate of Enforcement has not been empowered under I B Code to decide the question. Even if the stand taken by the Directorate of Enforcement is accepted that JSW Steel Limited is a related party of M./s. Bhushan Power Steel Ltd. - ( Corporate Debtor ), the Directorate of Enforcement cannot decide whether JSW Steel Limited is ineligible under Section 29A or Section 32A (1) (a) which can be determined by the Committee of Creditors / Adjudicating Authority - Section 29A was inserted by the Insolvency and Bankruptcy Code (Amendment) Act, 2018 dated 18th January, 2018 with retrospective effect i.e. from 23rd November, 2017. The main object that persons, who are ineligible in terms of clauses (a) to (j) are excluded from acquiring the company. If a person becomes ineligible because of his own act, such person is not eligible to submit a Resolution Plan individually or jointly or in concert with - However, on the direction of the Central Government, if a person is asked to join hands with others for compliance of such direction a person cannot be held to be ineligible on the ground of related party . The attachment of assets of the Corporate Debtor by the Directorate of Enforcement pursuant to order dated 10th October, 2019 as illegal and without jurisdiction. The assets of the Corporate Debtor ( Bhushan Power Steel Limited ) of which JSW Steel Limited is a Successful Resolution Applicant is immune from attachment by the Directorate of Enforcement. Resolution plan - Held that:- the distribution on the profit made during the Corporate Insolvency Resolution Process should be made in terms of addendum to the RFP as held by the Hon ble Supreme Court. - The Monitoring Committee with the help of the Resolution Professional will now go through the RPF issued in terms of Section 25 of the I B Code and as consented to by the Resolution Applicant ( JSW Steel Limited ) will make distribution of profit accordingly. The condition imposed at paragraph 128 (j) stands substituted with the aforesaid observations. The impugned Judgment dated 5th September, 2019 passed by the Adjudicating Authority approving the plan submitted by JSW Steel Limited is approved with aforesaid modification/ clarification as made above. The order of stay of implementation of the plan stands vacated. The approved plan be given effect immediately in the manner as ordered by the Adjudicating Authority and modified/ clarified by this Appellate Tribunal.
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2020 (2) TMI 916
CIRP Process - time limitation - ex-parte/non-speaking order - HELD THAT:- Admittedly, in this case, the account of the Appellant/Corporate Debtor was classified as NPA on 29th August, 2012 thereafter, demand notice under Section 13(2) of the SARFAESI Act, was issued on 03rd October, 2012. In view of the law laid down by Hon ble Supreme Court in case of JIGNESH SHAH ANOTHER VERSUS UNION OF INDIA ANOTHER [ 2019 (9) TMI 1121 - SUPREME COURT] , it is clear that period of limitation will be computed from the date when the account of the Corporate Debtor was classified as NPA. Thus, the limitation available for initiation of CIRP under Section 7 or 9 of the I B Code was available up to 02nd October, 2015. Since the account of Corporate Debtor was classified as NPA on 29.08.2012 and after that three years period was available as the provision of Article 137 of Limitation Act and within that period on different dates, the Corporate Debtor submitted the OTS letter and acknowledged the liability, on different dates. The chart showing the acknowledgement is given in para 14 of this judgement. The OTS proposal/acknowledgement of debt was given regarding the subsisting liability of the Corporate Debtor - Given the provision of Section 18 of Limitation Act and law laid down by the Hon ble Supreme Court, on the acknowledgement of liability, afresh period of limitation started. Therefore, it is clear that the petition is not barred by limitation. In this case, it is clear that on the day of filing the petition U/S 7 of the Code, there was a subsisting liability on the corporate debtor, and due to the acknowledgement of debt in writing, though the account of the corporate debtor which was classified as NPA on 29th August, 2012, its validity got extended from time to time by acknowledgement of debt in writing and a fresh period of limitation started after the acknowledgement of debt as per provision of Sec 18 of the Limitation Act. During the argument, the Learned Counsel for the Appellant has assailed the impugned order only on the Limitation point. Based on the discussion, the petition filed by the Respondent Oriental Bank of Commerce is not barred by limitation - Appeal rejected.
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2020 (2) TMI 915
Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of debt - pre-existing debt and dispute or not - HELD THAT:- The reliefs sought by the Corporate Debtor before the learned Civil Court included the reliefs pertaining to the restoration of possession of rented premises forcefully taken back by the Operational Creditor as well as seeking to ensure the supply of aggregates to the Corporate Debtor of the same quality and at fixed prices as agreed under the MoU, dated 08.05.2017. There is evidence on record to show that there is an existence of genuine dispute between the parties prior to the issue of the demand notice served under section 8 of the IB Code by the Operational Creditor on the Corporate Debtor. This Adjudicating Authority is not inclined to admit the instant application filed by the Operational Creditor under section 9 of IB Code, 2016 - petition rejected.
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2020 (2) TMI 914
Dissolution of Corporate Applicant - permission to file a copy of the order to the ROC Bangalore etc. - CIRP process - section 54 (1) of the IBC, 2016 - HELD THAT:- The facts and circumstances of the case has established that due process of Liquidation, as per extent provisions of Code and the rules were followed by the Liquidator to liquidate the Assets of Company and the realised amounts were also distributed to the respective claimants. Therefore, the liquidation process was deemed to have completed under Chapter III of Part II of Code, and thus it would be just and appropriate for the Adjudicating Authority to dissolve the Company, and no party would be going to be affected by dissolving the Company. And the Liquidator can be directed to close the Liquidation Account, and other accounts of the Company, on receipt of copy of this order. It is hereby dissolved M/s. Eolane Electronics Bangalore Pvt. Ltd. the Corporate Applicant with immediate effect - Liquidator is permitted to close the pending viz. Liquidation Bank Account, State Bank of India and Credit Agricole Bank, as stated by him, within three weeks from the date of receipt of copy of this order. Petition disposed off.
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2020 (2) TMI 913
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Existence of debt and dispute or not - HELD THAT:- The application under section 9 of the IBC, 2016, was filed by the applicant to initiate CIRP. The said notice was accepted by the Corporate Debtor. After the service of said notice, the respondents have caused appearance in the matter and have filed their reply, in its reply to the present section 9 application, the respondent states that due to financial problems and hardship, the company is facing hardship and is not in a position to honor its financial commitments. In such a situation the company has no alternative but to submit to resolution process. The applicant has filed an affidavit under section 9(3)(b) stating that no notice of dispute from Corporate Debtor is received - We are satisfied that the present application is complete and the Operational Creditor is entitled to claim its dues, establishing the default in payment of the operational debt beyond doubt, and fulfillment of requirements under section 9(5) of the Code. Hence, the present application is admitted. Application admitted - moratorium as envisaged under the provisions of section 14(1) shall follow in relation to the Respondent prohibiting the respondent as per proviso (a) to (d) of section 14(1) of the Code.
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2020 (2) TMI 912
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- There is no pre-existing dispute regarding the unpaid operational debt, being the principal amount of ₹ 4,39,963. The invoices for the period of 18.11.2016 to 26.12.2016 were raised upon the Corporate Debtor on a running account basis, but the outstanding dues were not paid. Thus, the existence of debt and default is established - The application made by the Operational Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is more than minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, as the default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this petition and orders initiation of CIRP against the Corporate Debtor. Petition admitted - moratorium declared.
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2020 (2) TMI 911
Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of its debt - existence of financial debt - financial creditor - HELD THAT:- In Shailesh Sangani v. Joel Cardoso [ 2019 (3) TMI 1192 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] , passed on 30.01.2019, the Hon'ble National Company Law Appellate Tribunal, dealing with the issues of 'financial debt' and 'financial creditor' in somewhat identical circumstances held that In view of the decision of the Hon'ble National Company Law Appellate Tribunal in Shailesh Sangani case, the contention of the respondent-corporate debtor that the petitioner is not a financial creditor and the debt due is not a financial debt is also to be rejected. The application filed in the prescribed Form No. I is found to be complete - The conditions provided for in section 7(5)(a) of the Code being satisfied in the present case, the application for initiation of CIRP against White Water Hospitality Private Limited is directed to be admitted - application admitted - moratorium declared.
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2020 (2) TMI 910
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - pre-existing dispute or not? - HELD THAT:- The Financial Creditor has succeeded in establishing a case for triggering the Corporate Insolvency Resolution Process. The transactions alleged to have taken place between the Respondent and the Petitioners as placed on record as Annexure-2 of the written objection are not supported by any banking transaction as to when and where the cheques were drawn by the Respondent in favour of the Petitioners. These are only bald averments made and no document has been placed on record in support thereof. On the basis of these bald averments no finding could be recorded in these summary proceedings to conclude that any amount has ever been given to the Petitioners as pleaded in the written objections. The Tribunal is not an adjudicating authority to ascertain the quantum of amount of default or to pass decree as to how much amount is actually due to the Petitioners-Financial Creditors. The Code requires the adjudicating authority to only ascertain and record satisfaction in an adjudication under Section 7 of the Code as to the occurrence of default before admitting the petition. Besides in a petition under Section 7 of the Code, it does not matter that the debt is disputed so long as the debt is due and payable. 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. Petition admitted - moratorium declared.
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2020 (2) TMI 909
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- It is a settled position of law that the provisions of Code cannot be invoked for recovery of outstanding amount but it can be invoked to initiate CIRP for justified reasons as per the Code. The Hon'ble Supreme Court in the case of Mobilox Innovations (P.) Ltd v. Kirusa Software (P.) Ltd. [ 2017 (9) TMI 1270 - SUPREME COURT ] has inter alia, held that IBC, 2016 is not intended to be substitute to a recovery forum - In another latest judgment rendered in Transmission Corporation of A.P.Ltd. v. Equipment Conductors and Cables Ltd. [ 2018 (10) TMI 1337 - SUPREME COURT ], the Hon'ble Supreme Court of India has, inter alia, held that existence of undisputed debt is sine qua non of initiating CIRP. There exists a credible dispute with regards to the payment of the alleged Operational Debt - the present case is not a fit case to admit and thus the Company Petition is hereby rejected - petition dismissed.
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Service Tax
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2020 (2) TMI 908
Refund of un-utilized Cenvat Credit - refund denied for the reason that the appellant did not debit the refund amount from its Cenvat Credit balance at the time of making the claim - HELD THAT:- The period of dispute in this case is April, 2017 to June, 2017 and the application for refund was filed on 06.10.2017. There is no dispute that the appellant did not debit the refund amount since the same was carried over to GST through TRAN-1 and that the appellant did reverse the refund amount in their GSTR-3B Return for the month of October, 2018 under ITC reversal. There being no provision in the ACES system to debit the refund amount in the GST regime, subsequent reversal in the GSTR-3B file is sufficient compliance with paragraph 2(h) of Notification No. 27/2012 ibid, which is also in tune with the CBIC Circular No. 58/32/2018 ibid - there is no justification in the denial of refund by the authorities. The denial of refund is not in accordance with law - Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 907
Quantum of penalty - According to the Adjudicating Authority it is 15% of the Service tax amount whereas as per the first appellate authority it has to be 25% - service tax alongwith the interest paid on being pointed out - HELD THAT:- The appellants have all along admitted the tax liability and paid the same with the interest, wherever there is a delay. For penalty Section 78 ibid has been invoked by the Revenue. 2nd proviso to Section 78 ibid mentioned that if the assessee pays the service tax within thirty days of the receipt of order of the Central Excise Officer determining the amount of service tax u/s. 73(2), the penalty shall be twenty five percent of the service tax so demanded. The said proviso prescribing concession in penalty to the extent of 25% of duty demanded subject to payment of all dues within 30 days of the order was introduced with effect from 14.5.2003. In view of the Corrigendum issued by the Adjudicating Authority, failure of Appellant to pay penalty amount within 30 days of adjudication order cannot be held against the Appellant. The learned Commissioner in the impugned order did not extend this option to the Appellants although he ought to have given this option. May be because of recording the wrong facts in the impugned order that the Order-in- Original is dated 26.2.2016 [whereas the same is dated 15.7.2016] and the penalty of 10% was paid on 30.3.2016 and another 5% on 11.8.2016 by the Appellant. But the fact of the matter is that the show cause notice was issued on 26.2.2016 and not the Adjudication Order/Order-in-Original. In order to meet the ends of justice, the impugned order needs to be modified and it will be proper to give option to the Appellant to deposit the remaining amount of penalty in order to make it twenty five percent of the service tax amount within thirty days of the communication of this order - Appeal disposed off.
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2020 (2) TMI 906
Withdrawal of appeal - appellant had filed declaration under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT:- Taking note of the fact that the appellant has filed declaration under the said scheme, the appeal is dismissed as withdrawn with liberty for the appellant to approach the Tribunal to restore the appeal in case discharge certificate is not issued for the dispute pertaining to this appeal. Appeal dismissed as withdrawn.
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Central Excise
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2020 (2) TMI 905
Application for withdrawal of application - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - appellant submitted that under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, the duty imposed upon the appellant could be compounded - HELD THAT:- The present appeal is dismissed as withdrawn with liberty as prayed for. It shall be open for the appellant to file an appropriate application before the competent authority under the aforesaid scheme for compounding the tax imposed, which shall be considered and decided in accordance with law by passing a reasoned and speaking order.
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2020 (2) TMI 904
Levy of personal penalty on the Manager Director of the company - Quantum of penalty u/r 26 of CER - short payment of duty - clearance of Bone Meat Meal in Domestic Tariff Area on payment of duty - benefit of N/N. 13/98-CE dated 02.06.1998 - HELD THAT:- When in his appeal and throughout the proceedings appellant has not disputed that the company was clearing the goods after determining the classification of goods and payment of duty as determined by them in after availing the benefit of exemption under Notification No. 13/98-CE, the submission made by the learned Consultant to the effect that lower authorities have not followed the settled procedure of assessment i.e. determining classification etc. cannot be detrimental to the proceedings. At the relevant time the unit namely M/s P M L Industries was working under the scheme of self assessment as introduced in the year 1997 and paying the duty after determining the classification and value of the goods. Hence if the Revenue Authorities have in the present proceedings not determined the classification separately it can be concluded that department do not dispute the classification etc. There cannot be any dispute in this appeal that duty has been short paid in respect of the clearances made by M/s. P.M.L industries. Also the liability to confiscation of the goods which have been cleared on short payment of duty can be disputed. It is settled principle of law that when the two authorities have sitting separately arrived at the same finding of fact the same should normally not be disturbed till the time it can be shown to be perverse. Nothing has been produced to show that findings recorded by both the lower authorities in respect of the present appellant is perverse, hence we are not inclined to disturb the same - there are no merits in submissions that penalty under Rule 26 could not have been imposed upon the appellant, however, the penalty equivalent to the duty evaded on by P.M.L industries on the appellant is too harsh and should be reduced. Holding that penalty under Rule 26 is imposable on appellant, the same is reduced to ₹ 10,00,000/- - appeal allowed in part.
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2020 (2) TMI 903
CENVAT Credit - input services - GTA service - entitlement of credit even after 1.4.2008 on FOR sales i.e. delivery upto the factory gate of the customers - place of removal - period from October, 2007 to October, 2010 - CBEC Circular No.97/8/2007-ST, dated 23.8.2007 - HELD THAT:- Prior to the amendment of 2008, in the definition of input service as per Rule 2(l) ibid, the words used were outward transportation from the place of removal but vide notification No.10/2008-CE (NT), dated 1.3.2008 the aforesaid definition of input service was amended by substituting the same with the words, outward transportation upto the place of removal . Although the pre-amended definition of input service as contained in Rule 2(l) ibid uses the expression from the place of removal, however, after the amended w.e.f. 1.3.2008 the word from is replaced by the word upto and from the amended definition it the clear that only upto the place of removal the service is treated as input service and not beyond that - The benefit which was admissible even beyond the place of removal now gets terminated at the place of removal itself. Extended period if limitation - HELD THAT:- The issue was interpretation of statutory provision regarding availment of input service tax credit for GTA services on outward supply in cases of FOR supplies and such issues of interpretation cannot be a ground for invoking extended period - in the light of the fact that the appellant is a Government of India Enterprise, there is no suppression of facts nor any willful default with intention to evade duty or to avail excess Cenvat credit. Accordingly, the extended period was not invocable and the demand for the period, which as per learned counsel is from April, 2008 to May, 2010, is barred by limitation - So far as the period June, 2010 to October, 2010 is concerned, the same being within normal period, the Appellants are liable for the same and for the demand for this period, the show cause notice is upheld. Penalty - HELD THAT:- The appellants did not have any malafide intention, therefore they are not liable for any penalty also. For the purpose of re-calculating the demand for the normal period, the matter is remanded to the Adjudicating Authority - appeal allowed by way of remand.
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2020 (2) TMI 902
Cash refund of CENVAT credit - CENVAT credit on inputs cleared as such by the supplier - rejection on the ground that the credit was availed by the EOU unit on the goods received from the DTA unit, by reversing/payment of duty through CENVAT Credit which was not admissible to the said DTA unit on inputs cleared as such - Rule 5 of CCR - HELD THAT:- On plain reading of the Rule 11(3), it is clear that the manufacturer of a final product shall be required to pay an amount equivalent to the CENVAT Credit taken by him in respect of the inputs received for use in the manufacture of final product and lying in stock or is contained in the final product if he opts for exemption on the final product, whereas on the other hand, Rule 3(5) of CENVAT Credit Rules, 2004 allows the manufacturer to clear the inputs as such from the factory or premises of the provider of the output service, on payment of an amount equivalent to the credit availed in respect of such inputs and the removal shall be made in accordance with Rule 9 of CENVAT Credit Rules, 2004 i.e. against proper invoice - Both the said rules operate in different spheres and do not overlap. In the present case, the Appellants received the inputs when the final product was dutiable, on its exemption, chose to clear the inputs lying in stock as such following the procedure laid down in Rule 3(5) of CENVAT Credit Rules, 2004 without its use in the manufacture of exempted final product - If the argument of the Revenue is accepted that the credit attributable to the inputs lying in stock would lapse, then the Appellants would be required to clear the inputs as such either without payment of duty or reversal of credit again on the same quantity of inputs on its clearance as such which would lead to an absurd situation and it cannot be intended by the legislature. Therefore, clearance of the inputs lying in stock as on 01.03.2007, after reversal of the credit following the procedure laid down under Rule 3(5) of CENVAT Credit Rules, 2004 is in harmony with Rule 11(3) of CENVAT Credit Rules, 2004 and not in conflict - Hence, reversal of credit on the inputs cleared as such, is in accordance with the law. Whether 100% EOU unit is entitled to refund the accumulated CENVAT Credit of ₹ 78,97,716/- under Rule 5 of CENVAT Credit Rules, 2004 on export of the finished goods? - HELD THAT:- Since the DTA unit has correctly reversed the credit on the inputs cleared as such to their 100% EOU unit, who in turn, availed the credit and utilised the same in the manufacture of exported goods, cash refund of accumulated CENVAT Credit of ₹ 78,97,716/- under Rule 5 of CENVAT Credit Rules, 2004 cannot be held to be inadmissible to the EOU unit. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (2) TMI 901
Enhancement of turnover - Sodium Silicate - enhancement of turnover on the basis of fuel consumption made by the Assessee - HELD THAT:- In the decision relied upon by the learned counsel for the Assessee, MAHABIR PRASAD JAGDISH PRASAD, VARANASI VERSUS COMMISSIONER OF SALES TAX, UP. [ 1970 (7) TMI 71 - ALLAHABAD HIGH COURT] , the Division Bench of the Allahabad High Court held that merely the high consumption of electricity by the Assessee cannot be held to be a material justifying the rejection of the accounts particularly when the Assessee's accounts had been once accepted during the course of regular assessment proceedings. The learned Tribunal has not only relied upon the consumption of fuel by the Assessee to arrive at the estimation of the production and escaped turnover, but has also compared the figures of the sister concerns of the Assessee in the present case, whose production was shown to be much higher during the same contemporary period on the basis of fuel consumption only. The units in question whose cases were compared are also located in the same place in Kuthalam, where the Assessee's unit is also established. It cannot be denied that one of the yardsticks to estimate the production and turnover can be made in fuel consumption as well, the other factors like electricity consumption, consumption of raw materials etc. are also relevant, but it cannot be said that estimation on the basis of fuel consumption is per se liable to be rejected, particularly when the Assessee failed to establish that due to that yardstick of fuel consumption applied, it has resulted in a perverse finding by the learned Tribunal. The learned Tribunal, being the final fact finding body, was entitled to adopt the said criteria in the Second Appeal filed by the Revenue. The said findings of facts unless they are demonstratively shown to be perverse are otherwise binding on this Court, particularly in the writ jurisdiction, invoked by the Assessee - We are not inclined to reverse the view of the Tribunal because we find that the reasons assigned by the learned Tribunal are plausible, reliable and cogent. Once the best judgment assessment is made by the Assessing Authority or even higher Appellate Authorities rejecting the books of accounts for the declared turnover by the Assessee, they are entitled to adopt one or more of such parameters or yardsticks to estimate the production and turnover of the Assessee. The basis adopted by the learned Tribunal cannot be said to be per se wrong and estimate of turnover based upon such calculations cannot be held to be perverse - Petition dismissed.
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2020 (2) TMI 900
Levy of penalty u/s 54(1)(14) of the UP VAT Act, 2008 - Unfilled (blank) column No.8 of Form 38 - inter-state sale - intent to evade tax or not - challan number was entered int column 8 of from 38 and challan number and date and number of form 38 was mentioned in the goods receipt and goods were brought not for sale but for use in job work and subsequent return of goods after job work - HELD THAT:- Non-filling up of date in column no. 8 i.e. not mentioning date of bill / cash memo / chalan / invoice number may lead to an inference that in case of non-checking of goods the declaration form may be reused for importing goods of same quantity, weight and value to evade payment of tax but it cannot be the sole ground to impose penalty under Section 54(1)(14) of the Act, 2008. Satisfaction has to be recorded after giving opportunity to the dealer / person and after considering all the relevant materials / evidences on record that there was an intention to evade payment of tax - In the present case also the vehicle was accompanied by Form 38 and all other documents were being carried along with other documents and only due to human error column would remain unfilled. It was the duty of the Officer managing the Check Post who after discovering that some column of Form 38 found unfilled should have filled the same himself in the light of Circular dated 03.02.2009 and should have allowed the vehicle to proceed alongwith the goods. It is undisputed that the goods transported were the same which were mentioned in the various documents (bill/builty/challan etc.) carried by the driver of the vehicle - The Tribunal has only observed that non-filing of various columns in Form 38 indicates that there was intention to evade tax and only this ground rejected the appeal of the assessee. The Tribunal has not correctly applied the law in this regard, as they have not given any finding about the intention to evade tax, which is a precondition for imposition of penalty. The impugned order of Tribunal is contrary to settled legal proposition and is therefore set-aside - revision allowed.
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Indian Laws
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2020 (2) TMI 899
Maintainability of Complaint - territorial jurisdiction - it is submitted by the applicant that subsequently the legislature has amended Section 142 of Negotiable Instruments Act and has inserted Section 142-A of Negotiable Instruments Act and, therefore, in the light of the amended provisions of law, complaint lodged by the applicant before the Court of Judicial Magistrate First Class, Lahar, District Bhind is maintainable. HELD THAT:- The Supreme Court in the case of Dashrath Rupsing Rathod [2014 (8) TMI 417 - SUPREME COURT] had held that the Court where the cheque was presented has no territorial jurisdiction to entertain the complaint under Section 138 of the Negotiable Instruments Act. Thereafter, an amendment in Section 142 of Negotiable Instruments Act was incorporated and Section 142-A of Negotiable Instruments Act - From the perusal of amended Section 142(2) of Negotiable Instruments Act, it is clear that the place where a cheque was delivered through an account, the Court having local jurisdiction over such area shall also have the territorial jurisdiction to entertain the complaint. Thus, in view of the amended provisions of Section 142 of Negotiable Instruments Act, the complaint filed by the applicant before the Court of Judicial Magistrate First Class, Lahar, District Bhind is within the territorial jurisdiction of the said Court - the order passed by Judicial Magistrate First Class, Lahar, District Bhind is hereby set aside - The Trial Court is directed to restart the proceedings after giving fresh notices to the respondent because it appears that the respondent remained unserved in the present proceeding - application disposed off.
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