TMI Tax Updates - e-Newsletter
February 27, 2018

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws PMLA Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

TMI SMS

• Consumer co-operative society - the assessee is a mutual association and the income of the society is not chargeable to tax u/s 4

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Articles

1. How to import goods in Malaysia from India ?

   By: Kishan Barai

News

1. The Union Minister of Finance and Corporate Affairs, Shri Arun Jaitley : ₹ 11 Lakh crore target for Priority Sector lending to Agriculture Sector is an achievable target

2. RBI Reference Rate for US $

Notifications

GST - States

1. G.O.Ms.No. 42 - dated 23-2-2018 - Telangana SGST

Reduction of late fee in case of delayed filing of form GSTR-6

2. G.O.Ms.No. 41 - dated 23-2-2018 - Telangana SGST

Reduction of late fee in case of delayed filing of form GSTR-1

3. G.O.Ms.No. 40 - dated 23-2-2018 - Telangana SGST

Reduction of late fee in case of delayed filing of form GSTR-5A

4. G.O.Ms.No. 39 - dated 23-2-2018 - Telangana SGST

Telangana Goods and Services Tax (Amendment) Rules, 2018

5. G.O.Ms.No. 38 - dated 23-2-2018 - Telangana SGST

Reduction of late fee in case of delayed filing of form GSTR-5

6. G.O.Ms.No. 33 - dated 10-2-2018 - Telangana SGST

Amendment in Notification G.O. Ms No. 123, Dt. 30.06.2017

7. G.O.Ms.No. 30 - dated 9-2-2018 - Telangana SGST

Government of Telangana notifies “Waybill” that is to be issued by the registered person for intra-State movement of goods.

8. G.O.Ms No.29 - dated 9-2-2018 - Telangana SGST

State Government rescinds, Notification G.O.Ms.No.25, Dated 31-01-2018

9. G.O.Ms.No. 25 - dated 31-1-2018 - Telangana SGST

Telangana Government appoints the 1st day of February, 2018, as the date from which the provisions of serial numbers 2 & 3 of the notification G.O.Ms.No.229, Revenue (CT- II) Department, Dated: 09-10-2017, shall come into force

10. G.O.Ms.No. 21 - dated 22-1-2018 - Telangana SGST

Reduction of late fee in case of delayed filing of FORM GSTR-4

11. G.O.Ms.No. 20 - dated 22-1-2018 - Telangana SGST

Telangana Goods and Services Tax (Eighth Amendment) Rules, 2017

12. G.O.Ms.No. 19 - dated 22-1-2018 - Telangana SGST

Time period for furnishing the details in FORM GSTR-1

13. G.O.Ms.No. 18 - dated 22-1-2018 - Telangana SGST

Telangana Goods and Services Tax (Seventh Amendment) Rules, 2017

14. G.O.Ms.No. 16 - dated 16-1-2018 - Telangana SGST

Supercession of notification G.O.Ms No. 286, Revenue (CT-II) Department, dated 18-12-2017

15. G.O.Ms.No. 300 - dated 29-12-2017 - Telangana SGST

Telangana Goods and Services Tax (Removal of Difficulties) Order, 2017

IBC

16. S.O. 780(E) - dated 22-2-2018 - IBC

Central Government appoints Shri Gyaneshwar Kumar Singh, Joint Secretary, Ministry of Corporate Affairs as ex-officio member in the Insolvency and Bankruptcy Board of India vice Shri Amardeep S. Bhatia, Joint Secretary

Income Tax

17. 12/2018 - dated 22-2-2018 - IT

Centralised Communication Scheme, 2018

18. 10/2018 - dated 19-2-2018 - IT

Income-tax (First Amendment) Rules, 2018

SEZ

19. S.O. 786(E) - dated 15-2-2018 - SEZ

Central Government notifies the 10.09 hectares area at Village-Behrampur & Balola, Tehsil-Sohna, District-Gurgaon

Circulars / Instructions / Orders

VAT - Delhi

1. F.6 (7)/DVAT/L&J/2013-14/2599 - dated 16-2-2018

Delegation of Powers vested in Commissioner VAT

FEMA

2. 18 - dated 26-2-2018

Risk Management and Inter-bank Dealings: Revised guidelines relating to participation of a person resident in India and Foreign Portfolio Investor (FPI) in the Exchange Traded Currency Derivatives (ETCD) Market

Highlights / Catch Notes

Income Tax

• CBDT Launches Centralized Scheme for Issuing Notices and Processing Information to Aid Assessing Officers.

  Notifications : CBDT made a scheme for centralised issuance of notice and for processing of information or documents and making available the outcome of the processing to the Assessing Officer.
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• Rule 17A Amended: Charitable Trusts Must Submit Form 10A Electronically for Income Tax Registration.

  Notifications : Application for registration of charitable or religious trusts, etc. - Rule 17A amended - Form No. 10A to be submitted electronically
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• Section 40(a)(ia) Addition Unjustified: Recipient Admitted Income, Paid Taxes; Expense Reimbursement Validates Non-Deduction of TDS.

  Case-Laws - AT : Addition in case of failure to deduct TDS u/s 194C - Since the recipient has already has admitted the income and paid the taxes and the amount in question was reimbursement of expenses, we hold that the addition made by the A.O. u/s 40(a)(ia) is unsustainable - AT
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• Consumer Co-op Society's Income from Electric Power Distribution Exempt from Tax u/s 4 of Income Tax Act.

  Case-Laws - AT : Income of the consumer co-operative society - mutual association - activity of purchase and distribution of electric power - the assessee is a mutual association and the income of the society is not chargeable to tax u/s 4 of the IT Act - AT
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• Section 69 Addition Challenged: Bank Account Discrepancy Leads to Rejection of Assessee's Books of Account.

  Case-Laws - AT : Addition u/s.69 - difference of cash balance in the bank account as per books of account and as per the bank statement - once the books of accounts of the assessee are rejected, the same cannot be relied for making addition u/s. 69 - AT
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• High Court exempts penalty for late tax filing after search, as returns filed within 10 days post-deadline u/s 158BFA(2).

  Case-Laws - HC : Penalty u/S.158BFA(2) - on receipt of the notice following the search and seizure, the assessee has filed his returns within ten days of the expiry of the time stipulated for filing such returns and paid a part of the tax on the admitted undisclosed income - No penalty - HC
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• CBDT to Decide on Extension Request for Tax Payment Under Income Disclosure Scheme 2016, Evaluating Section 119(2) Powers.

  Case-Laws - HC : Application for extension of time for payment of last installment of tax under the Income Disclosure Scheme 2016 - It would be for the Board (CBDT) to judge the facts on record and come to the conclusion whether this is a fit case for exercise of powers u/s 119(2) - HC
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• Court Rules No Extension for Final Payment Deadline in Income Declaration Scheme 2016; Strict Terms Apply.

  Case-Laws - HC : Delay in payment of last installment of the Income Declaration Scheme, 2016 (IDS 2016) - there is no provision under the scheme, to grant any time, after 30.9.2017, to pay the amount of installment. - HC
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FEMA

• New Guidelines for Indian Residents & FPIs in Exchange Traded Currency Derivatives Market to Boost Transparency & Stability.

  Circulars : Risk Management and Inter-bank Dealings: Revised guidelines relating to participation of a person resident in India and Foreign Portfolio Investor (FPI) in the Exchange Traded Currency Derivatives (ETCD) Market
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Service Tax

• SCN to Bhootpurva Sainik Security & Detective Service invalid after proprietor's death; no demands on heir.

  Case-Laws - AT : Recovery of dues from legal heir - whether the SCN is validly issued in the name of Bhootpurva Sainik Security & Detective Service (after death of proprietor) - no demand can be raised through defective notice - AT
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• Chartered accountants offering legal and advisory services liable for service tax under Finance Act Sections 65(65) & 65(105)(r).

  Case-Laws - AT : Chartered accountant - liability of service tax - activities like legal assistance, advisory work etc. were taxable under "Management, Consultant" service in terms of Section 65 (65) read with Section 65 (105) (r) of Finance Act, 1994. - AT
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• Assessee Avoids Penalties u/ss 76 & 78 for Unpaid Tax; Business Closure Averted by Paying Tax with Interest.

  Case-Laws - HC : Penalty u/s 76 and 78 - the assessee cannot be penalised for non receipt of the tax from Rajasthan Housing Board. He has also not received tax and paid the same with interest, therefore, if penalty is imposed, he would have no other option but to close its business - no penalty - HC
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Central Excise

• Exemption for Goods Used in Handicrafts and Utensils Upheld; Appellant Proves Intended Use, Securing Notification Benefit.

  Case-Laws - AT : Benefit of exemption - actual user condition - intended for use in the manufacture of handicrafts and utensils - The intended use of the said goods has been established by the appellant, in that circumstance, the benefit of the notification cannot be denied. - AT
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• Criticism of Authorities' Misinterpretation of Rule 5A on Removal of Damaged Capital Goods for Cenvat Credit Lacks Contextual Understanding.

  Case-Laws - AT : Cenvat Credit - removal of damaged parts of capital goods - Independent and solo reading of Rule 5A without appreciating the context in which the same is appearing, as has been done by the authorities below, is not in accordance with the principles of interpretation of law. - AT
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VAT

• Assessee Entitled to Tax Refund on Excess Due to Price Variation Clause for Cylinder Pricing Adjustment.

  Case-Laws - SC : Refund of tax paid on excess amount - price variation clause - since the price of the cylinder has been reduced, the assessee cannot charge more than the price fixed, is bound to refund the excess amount collected and is therefore legally entitled to get refund of the tax paid on the excess amount - SC
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Case Laws:

• Income Tax

• 2018 (2) TMI 1601
  Delay in payment of last installment of the Income Declaration Scheme, 2016 - Held that:- Admittedly, there is no provision under the Income Declaration Scheme, 2016, to grant any time, after 30.9.2017, to pay the amount of installment. In absence of any provision, we cannot permit the petitioner to deposit the amount or direct the petitioner to deposit the amount before the department. The decision cited by the learned counsel for the petitioner in the case of Vijay Omprakash Bansal [2001 (12) TMI 24 - BOMBAY High Court] is distinguishable on facts. For the above mentioned reasons and in absence of any provision under the Income Declaration Scheme, 2016, no case is made out to quash the letter issued by Principal Commissioner of Income Tax – II, Indore, as prayed is made out.

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• 2018 (2) TMI 1600
  Application for extension of time for payment of last installment of tax under the Income Disclosure Scheme 2016 - Time for payment of Tax - Held that:- The relevant facts which include the circumstances under which the petitioner claims incapacity to make the payment of the last installment. It would be for the Board to judge the facts on record and come to the conclusion whether this is a fit case for exercise of powers under sub-section (2) of section 119 of the Act. We request the Board to do so preferably within three months from the date of receipt of copy of this order. If the petitioner is willing to deposit such amount of third installment with reasonable interest as may be directed by the Board, he may indicate so in writing to the Board within 10 days from today.

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• 2018 (2) TMI 1599
  Stay of the recovery of the demand - Held that:- It is made clear that in the peculiar facts of the case we have not examined the merits of the Petitioners challenge to the impugned order dated 18th May 2017 and the recovery notice dated 21st September 2017 and 26th September 2017. Petitioner on instructions states that the Petitioner would fully cooperate for an early disposal of the appeal by the CIT(A). In support of the above, it is stated that the Petitioner will not seek any adjournment and would attend the hearing on the dates, if any, fixed by the CIT(A) in the pending appeal.

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• 2018 (2) TMI 1598
  Rejection of books of accounts - difference in stock statement - Held that:- There was no dispute that the addition had been made only on the ground of inflated statements furnished to the bank authorities for the purpose of availing larger credit facilities and was of the opinion that no addition can be made only on such basis. Tribunal further observed that it was an acceptable position in the commercial world that whenever cash credit facilities are availed by a businessman from the banks, to safeguard his cash credit limit, inflated stock statements are supplied to the banks for the purpose of fulfilling the margin requirements of the bank. Tribunal was of the view that no addition should be made on such count and dismissed the appeal filed by the revenue and allowed the cross objection filed by the assessee. Difference in stock statement was as regards the value of the stock and not the quantity thereof. Insofar as the value of the stock is concerned, as noted by the Tribunal, the value shown in the books of account was at cost or market price, whichever is lower and the value adopted for the stock statement supplied to the bank was at market price. Inflated statements came to be furnished to the bank authorities for the purpose of availing larger credit facilities, wherein the value of the stock was inflated. In the absence of any difference in stock in the statements furnished by the bank and in the books of account, the Tribunal was justified in holding that no addition could be made based upon the statement supplied to the bank.

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• 2018 (2) TMI 1597
  Reopening of assessment - failure to comply with TDS provisions on commission - Held that:- The Petitioner in its objections to the reasons pointed out that no where in its accounts any amounts have been shown as discounts on sale to its stockists. Thus, the amount of commission being shown as discount does not arise. In fact, it was pointed out that in its Revenue recognition policy as disclosed in its accounts, sales are recognised net of discounts. Thus, no expenditure/deduction is claimed on account of discount in respect of sales of its goods made to its stockists. The aforesaid fundamental objection of the Petitioner on facts has not been dealt by the order disposing of the objections. Thus, rendering the entire process of taking a second look, particularly on facts, before proceeding to reassess, futile. Even before us the Revenue has not been able to show that in its accounts the Petitioner had claimed any amount of expenditure as discount on sales of its products to stockists. All the above is indicative of the absence of application of mind by the Assessing Officer to the tangible material obtained in the form of the order passed by the Deputy Commissioner of Income Tax (TDS). Accordingly, there shall be a stay in terms of prayer clause (d) of the Petition.

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• 2018 (2) TMI 1596
  Declaration under the Kar Vivad Scheme - petitioner paid the tax at 40% on the disputed income and sought complete waiver of interest in terms of the Kar Vivad Scheme - Held that:- We find that there is nothing on record to indicate that the tax arrears of 87/have been adjusted with the tax refund of 10,800/for the Assessment Year 1997-98. Petitioner has, on instructions, stated before us that till date the petitioner has not received any order passed under Section 245 of the Act by the authorities under the Act adjusting the tax arrears of 87/payable for Assessment Year 198485 with the refund of 10,800/. For the first time, we find that in the affidavit dated 22nd July, 1999 of the respondent no.1 such a claim has been made. Moreover, it merely states that the tax arrears of 87/has been adjusted against the refund of 10,800/due to the petitioner. However, it is completely silent as to the date when this adjustment took place nor has the affidavitinreply annexed to it the order passed under Section 245 of the Act which made the adjustment. In view of the affidavit being silent on the date on which the adjustment was done, an adverse inference must be drawn that the adjustment, if any, had not taken place before filing of the declaration on 22nd December, 1998. Thus, on the date when the declaration was filed on 22nd December, 1998 tax arrears of 87/was payable by the petitioner to the Revenue and 40% of the disputed tax amount which would be 52/which would be payable under the Scheme. Thus, if the amount of 52/is paid, it would resulted in a complete waiver of the interest payable by the petitioner. Thus the collection of amounts on account of interest consequent to the Certificate dated 19th February, 1999 is outside the Kar Vivad Scheme and retention thereof by the State is without authority of law. Thus it would be appropriate to direct the respondent no.1 to modify / amend its Certificate dated 19th February, 1999 under Kar Vivad Scheme and grant a complete waiver of interest payable under the Act in view of there being tax arrears on disputed income as on the date of filing of the declaration. The petition is allowed in terms of prayer clause (b1). The respondent no.1 is directed to amend the Certificate dated 19th February, 1999 issued under Section 90(1) of the Kar Vivad Scheme to grant complete waiver on payment of interest.

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• 2018 (2) TMI 1595
  Penalty u/S.158BFA(2) - additions made over and above the undisclosed income declared by the assessee in its return filed u/S.158BC(a) - Held that:- While payment of interest is mandatory, levy of penalty is discretionary. Sub-Section (2) of Section 158BFA of the Act, accordingly, vests discretion in the Commissioner (Appeals) whether to levy or not to levy penalty. It is trite position of law that any discretion vested in an authority has to be exercised in a reasonable and rational manner depending upon the facts and circumstances of each case. In the light of the true purport of Sub-Section (2) of Section 158BFA of the Act as explained above, we are of the opinion that the order of the Tribunal confirming the order of the Commissioner (Appeals) does not suffer from any illegality. Both the appellate fora have taken into consideration the fact that on receipt of the notice following the search and seizure, the assessee has filed his returns within ten days of the expiry of the time stipulated for filing such returns and paid a part of the tax on the admitted undisclosed income. The view was, therefore, taken by both the appellate fora that on the facts of the case, the Assessing Officer ought not to have exercised his discretion for imposition of penalty. - Decided against revenue

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• 2018 (2) TMI 1594
  Approval u/s. 12AA denied - eligibility criteria - assessee has not filed the relevant details in support of its registration application - Held that:- Assessee refers to the relevant statement of facts pleading therein that father of the managing trustee and President had demised at the time when the registration’s case was fixed before CIT(Exemptions). He stated to have filed for adjournment application as well. The assessee is very much interested in pursuing its registration plea before the CIT(Exemptions). She has also filed a detailed compilation of all the relevant details comprising of forwarding letter of registration application, Form 10A, copy of memorandum and request of Association of the Trust, Charity Commissioner’s Bhuj’s Certificate, PAN card, notice dated 07.05.2015, adjournment application sent through courier, its tracking detail, death certificate of father of the managing trustee, reply of notice dated 07.05.2015 (which could not be filed), copy of enquiry application dated 05.01.2016 and request letter seeking copy of the impugned order; respectively. The above details in support of assessee’s registration application need to be examined in detail in corresponding proceedings. - Decided in favour of assessee for statistical purposes.

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• 2018 (2) TMI 1593
  Benefit of exemption u/s 12AA - Addition of administrative expenses as inadmissible being 30% of the expenses claimed under this head - addition of claim for application of income towards capital assets - addition of allowed as concession against fee of students as no details of such students, to whom the concession was provided, had been filed - Held that:- We find that it is undisputed fact that the assessee is a registered trust and is also enjoying exemption u/s 12A of the Act. It is also undisputed fact that the benefit of exemption u/s 12A was not withdrawn. Learned CIT(A) after going through the detailed submissions of the assessee and after obtaining remand report of the Assessing Officer has rightly deleted the addition by holding that the registration u/s 12A was not cancelled. CIT(A) has categorically held that the books of account of the assessee were audited and necessary audit report in the prescribed form was filed with the return of income. He has also held that the Assessing Officer during the remand proceedings had not commended adversely on the written submissions filed by the assessee. As regards the adverse comments by the Assessing Officer regarding depreciation claimed by the assessee, we find that in the case of CIT vs. Krishi Utpadan Mandi Samiti [2013 (11) TMI 1062 - ALLAHABAD HIGH COURT], under similar facts and circumstances, has held that depreciation was allowable even if the entire capital expenditure was allowed as deduction. With effect from 01/04/2015 section 11(6) has been inserted by which it has been laid down that income of trust/society registered u/s 12A shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income u/s 11 in the same or any other previous year. This amendment is prospective and is applicable from 01/04/2015 and before this many courts, as noted by learned CIT(A) in his order, have held that depreciation claim is allowable. The case of assessee relates to assessment year 2011-12 and therefore, this amendment will not be applicable in the case of the assessee. - Decided against revenue

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• 2018 (2) TMI 1592
  Disallowance on marketing and distribution expenses - Held that:- It is evident from quantum assessment order that Ld. AO has not doubted the genuineness or bonafides of the expenses but made adhoc disallowance of 5% only on the premise that the assessee failed to justify the apportionment of the expenses, which was nothing but a business decision for the assessee. No material has been brought on record by AO to support the contention that the impugned expenses were excessive or unreasonable in any manner. Secondly, we find that the assessee and payee are subsidiary of a third entity namely HDFC Ltd. and during impugned AY, the transactions between two such subsidiary entities were not covered by clause 40A(2)(b)(iv). The said relation has subsequently been covered by Finance Act, 2012 w.e.f. 01/04/2013. Disallowance of certain legal & professional fees being reimbursed by the Assessee to HDFC AMC to carry out investigations pursuant to certain SEBI directions - Held that:- A perusal of the above give strength to our findings that complete responsibility to conduct the affairs of the mutual fund rested with the Trustee Assessee. As per the terms of the directions, the Trustees of the mutual fund were required to set up an investigation committee to examine all the transactions / dealings by Mr. Nilesh Kapadia. The Trustees were required to submit a plan to overhaul the internal control systems and the internal preventive measures of HDFC AMC to avoid recurrence of such instances in future. Hence, upon conjoint reading of Trust Deed and SEBI directions as above, we conclude that the said expenditure was incurred by the assessee to safeguard / protect its business interest and therefore, allowable to the assessee in terms of Section 37. CIT(A) clinched the issue in the right perspective but had no justification to restrict the impugned expenditure to 50%. We find that genuineness of the expenditure was not in dispute. If the expenditure was restricted to 50% then as a logical consequence, the remaining expenditure was to be allowed to HDFC AMC since as per the logic of Ld. first appellate authority, the said expenditure was to be shared equally between the two entities. Even in that eventuality, the whole exercise would remain revenue neutral as both entities fall in the same tax bracket and we see no fruitful reason to disturb the already concluded assessments. We uphold that the impugned disallowance was not justified - Decided in favour of assessee.

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• 2018 (2) TMI 1591
  Estimation of profit on accommodation turnover - CIT-A confirming the addition @ 3% as against 0.57% declared by the assessee - contention of the assessee that commission estimation by the AO is on the higher side when compare to the nature of business and also his gross profit admitted in the earlier years wherein he has derived the GP of less than 1% - Held that:- No merit in the arguments of the assessee for the reason that the assessee himself has admitted before the Investigation Wing that he is involved in providing accommodation entries to various beneficiaries. Though there is no mention of cash component of commission in the survey report, it is an admitted fact that in this kind of transactions the entry provider will derive certain benefits for issuing accommodation entries. AO has rightly estimated reasonable percentage of commission on total accommodation entries provided by the assessee. Though the assessee claims that the commission estimated by the AO is on higher side he failed to justify the gross profit declared in his business in the earlier years with any other comparable case. Therefore, we are of the view that the AO was right in estimating 3% commission on total accommodation entries - Decided against assessee.

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• 2018 (2) TMI 1590
  Penalty on the disallowance of expenditure on estimate basis- Held that:- Respectfully following the judgment of the Hon’ble Jurisdictional High Court in Commissioner of Income Tax vs. Nokia India Pvt. Ltd. (2012 (7) TMI 35 - Delhi High Court) wherein held that the penalty on estimation basis cannot be sustained. Thus direct the assessing officer to delete this penalty. Penalty on disallowance in respect of made on account of foreign travel - assessee submitted that the supporting evidences were destroyed in fire he submitted that the travel by the Directors of the Company abroad was for the business purpose - Held that:- The factum of the destruction of evidence in fire is not rebutted by the revenue by placing any contrary material on record. We, therefore, under the facts of the present case hold that the claim of the assessee was bona fide and direct the assessing officer to delete the penalty. - Assessee appeal allowed.

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• 2018 (2) TMI 1589
  Revision u/s 263 - order of AO erroneous in so far as prejudicial to the interest of Revenue - Lack of enquiry with regard to issue of allowability of prior period expense by AO - Held that:- It is undisputed fact that no opportunity was afforded to the assessee in the instant case by the ld CIT to address on the aspect of 'lack of enquiry' on the allowability of prior period expenses. We hold that the ld CIT erred in concluding that lack of enquiry with regard to allowability of prior period expenses on the part of the ld AO would automatically make the order of ld AO erroneous and prejudicial to the interest of the revenue in the facts and circumstances of the case in as much as no opportunity of hearing was given to the assessee in that regard. No hesitation in quashing the impugned order passed by the ld Pr.CIT u/s 263 - Decided in favour of assessee.

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• 2018 (2) TMI 1588
  Interest claimed as expenditure disallowed u/s. 36(1)(iii) - Held that:- No reason to interfere with the findings of Ld.CIT(A) holding that the investments are for business purposes and no amount of interest can be disallowed u/s. 36(1)(iii). The order of Ld. CIT(A) is as per the finding of facts by AO in consequential proceedings and in tune with the orders of ITAT in earlier years. Disallowance u/s 14A r.w.r. 8D - Held that:- Rule 8D(ii) envisages only the interest which is not directly attributable. Having given a finding that the interest paid is for the purpose of investment in business and allowing the same u/s. 36(1)(iii), the same cannot be considered as ‘directly not attributable interest’. When there is direct nexus with business, the same cannot be considered again u/r 8D(ii). Therefore, the disallowance of interest under Rule 8D(ii) does not arise. To that extent, the order of CIT(A) is not correct factually as well as legally. While examining the fresh investment of 2,82,67,573/- in KRAEL during the year, if any interest allowable to that investment out of borrowed funds, the corresponding interest is directly disallowable u/s. 36(1)(ii). But, he gave a finding that the investment is for the purpose of business, consequent to finding of AO in later year. While invoking rule 8D(ii), he should have at best considered that amount of investment for proportionate disallowance, but directly he took entire average of entire investment and disallowed, even the interest allowable under the head ‘business’. The order of CIT(A) is thus based on misconceptions and wrong appreciation of facts and law thus, not sustainable. Hence, his order and findings from paras 6.13 to 6.17 are thus, set aside. Neither the AO nor the CIT(A) has considered any amount for disallowance under Rule 8D(iii). Therefore, this forum cannot invoke the said rule. Disallowance u/s. 14A cannot be made/restricted, by this forum as there is nothing to disallow under Rule 8D(ii) and AO or CIT(A) has not disallowed any amount under Rule 8D(iii). The grounds are accordingly considered allowed.

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• 2018 (2) TMI 1587
  Reopening of assessment - assessee has made the payment towards the conversion expenses but not deducted TDS as required u/s 194C - addition u/s 40(a)(ia) - payer has offered the amount for tax purpose - Held that:- In the assessee’s case the recipient has admitted the entire receipt as income and filed the return of Income. Following the decision of coordinate bench in the case of B. Dwarakanatha Reddy Vs. DCIT [2015 (10) TMI 2046 - ITAT HYDERABAD] we hold that provisions of section 40(a)(ia) are not applicable provided the payer has offered the amount for tax purpose and have paid or deemed to have paid the taxes on such income. Since the recipient has already has admitted the income and paid the taxes and the amount in question was reimbursement of expenses, we hold that the addition made by the A.O. u/s 40(a)(ia) of the Act is unsustainable and accordingly, we uphold the order of the Ld. CIT(A) and dismiss the revenue’s appeal.

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• 2018 (2) TMI 1586
  Income of the consumer co-operative society - chargeable to tax u/s 4 or not - Proof of mutual association - Claim of deduction u/s 80P - activity of purchase and distribution of electric power - mutuality concept - Held that:- There is no dispute that the assessee is a mutual association established for the purpose of supply of electricity to the rural farmers at a reasonable price to improve the infrastructure. All the members and contributors are identifiable and the contributors as well as the consumers are the same. There is no other outsider is involved in the association. As in the case of Merchant Navy Club [1971 (9) TMI 59 - ANDHRA PRADESH High Court -] and Royal Western India Turf Club Ltd. (1953 (10) TMI 9 - SUPREME Court) held that the income of the club was not profit from business assessable u/s 10 of the IT Act on mutuality basis. In the instant case, there is no dispute that contributors and the consumers are one and the same. In the absence of bye laws regarding the disposal of surplus assets, section 69B of AP Cooperative Societies Act 1964 would be applicable and in such case, the surplus would be vested with the Registrar who shall hold it in trust and shall transfer it to the reserve funds of the society registered with the similar objects. In the similar circumstances, in CIT Vs. West Godavari District Rice Millers Association [1983 (9) TMI 47 - ANDHRA PRADESH High Court] held that income of the society is exempt even if the surplus goes to some other society with similar objects on dissolution. As the assessee has amended the bye laws and placed before the CIT(A), after got registered with the Registrar of society to enable the assessee to distribute the surplus assets among its members before completion of the appellate proceedings. Therefore, we hold that the assessee is a mutual association and the income of the society is not chargeable to tax u/s 4 of the IT Act - Decided in favour of assessee.

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• 2018 (2) TMI 1585
  Addition u/s 68 - set off of unabsorbed depreciation - Held that:- Instant case the addition was cash credits u/s 68 and the income required to be taxed as income from other sources and to be included in the gross total income. Once the addition is included in the gross total income, the AO has to allow the set off of unabsorbed depreciation loss as provided u/s 71 of the IT Act. Hon’ble Supreme court in CIT vs. Mother India Refrigeration Industries Private Ltd. (1985 (8) TMI 2 - SUPREME Court) held that the unabsorbed carried forward depreciation par takes the character of current year depreciation in the following year and the same is allowed to be set off against other heads of income of that year. AO has not assigned any reason for denying the claim of the assessee for set off of unabsorbed depreciation. Section 71 deals with the set off of loss from one head against income from another head. After setting up of losses against income under the same head, if the net result is still losses, the assessee can set off the such losses u/s 71 against income of the same year under any other head. Section 71 permits the assessee to set off losses other than capital gains against the income from other heads. Since the unabsorbed depreciation par takes the character of current year’s depreciation in the following year, we hold that the CIT(A) has rightly allowed the set off of unabsorbed depreciation and we do not find any infirmity in the well reasoned order of the Ld. CIT(A) and the same is upheld. - Decided against revenue.

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• 2018 (2) TMI 1584
  Determining the annual letting value of the property which was let out and disallowance of certain expenditure - Held that:- As seen from the order of the AO, he has not considered the issue in the correct perspective. The building is subject to let out only to a hotel business as it contains rooms and also restaurant. The ground floor and first floor building, having road frontage and using for show room purposes, may fetch a higher rent but that does not indicate that all the floors in the building will fetch the same rent. Therefore, adoption of 100/- per sq. ft., is not only arbitrary but also without any basis as well. Since the ratio of commercial rent received in ground floor with that of hotel property in earlier years is not available and since no other comparable rent details were placed on record, we are of the opinion that the matter requires re-examination by the AO, particularly keeping in mind the principles laid down by the Hon'ble Bombay High Court in the case of CIT Vs. Tip Top Typography (2014 (8) TMI 356 - BOMBAY HIGH COURT) relied on by assessee Assessee also offered other incomes, particularly rent on furniture and fixtures. Assessee also claimed service tax and other expenditure. Whether those incomes can be considered as part of house property income or has to be assessed separately either under the head ‘business’ or under the head ‘other sources’ also require re-examination by the AO. The allowance of various expenditure depends on the head under which incomes are assessed. - Decided in favour of assessee for statistical purposes.

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• 2018 (2) TMI 1583
  Eligibility for deduction u/s 80IA (4) in respect of Tuirial lot II Tuirial lot Ill and Lohari Nagpala projects - scope of work and terms and conditions of contract between the assessee and the principles - Held that:- To be qualified for claiming deduction u/s 80IA assessee should be a developer of infrastructure facility whether on its own or on behalf of third party principles, but if such activity is in the nature of developing an infrastructure facility within the meaning of section 80IA, then the assessee is eligible for deduction towards profits and gains of undertakings which carried out development of infrastructure facility. In this case, all the projects developed by the assessee including on-going projects and new projects on which the development has been commenced during the year under consideration are all related to developing an infrastructure facility for water supply schemes and hydro-electric power generation, which are in the nature of infrastructure facilities as defined u/s 80IA(4). The scope and nature of work and terms of contract clearly establishes an undisputed fact that the assessee is a developer of infrastructure facility which would entails the assessee deduction u/s 80IA(4) of the Act. AO has erred in denying deduction claimed u/s 80IA(4). CIT(A), though in principle accepted the fact that the nature of works undertaken by the assessee in respect of three new projects are similar to the nature of works undertaken by the assessee in respect of projects already considered by the ITAT, denied the deduction claimed u/s 80IA by holding that the assessee is merely a works contractor executing works for development of infrastructure facility. Hence, we reverse the findings of the CIT(A) in respect of three new projects - Decided in favour of assessee. Disallowance of expenditure in relation to exempt income u/s 14A - Held that:- We find merits in the arguments of the assessee for the reason that the assessee has demonstrated with evidences that its investment in shares of subsidiaries and capital account of joint ventures are strategic investments for the purpose of controlling interest as its infrastructure projects are developed under JVs and in the name of subsidiaries. We further noticed that the assessee’s own fund in the form of share capital and reserves is more than its investment in shares and capital account of subsidiaries and JVs. Once, its own funds are more than its investment, then it is deemed that its investment are out of its own funds and no interest bearing fund is used for making investment and hence, no disallowance is called for in respect of interest expenses. This legal proportion is supported by the decision of Hon’ble Bombay High Court in the case of HDFC (2014 (7) TMI 724 - BOMBAY HIGH COURT ) and Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT) wherein it is held that if the assessee is having both interest free as well as interest bearing funds at his disposal, the presumption has to be that the interest free funds have been utilized for interest free loans. In this case, admittedly assessee’s own funds are more than its investment in shares and capital accounts and hence, we are of the considered view that the AO has erred in disallowing interest expenses under rule 8D(2)(ii) of the IT Rules. Investments in foreign subsidiaries needs to be excluded for the purpose of determination of average value of investments to work out disallowances under rule 8D(2)(iii) of the Rules. If disallowances worked out under Rule 8D(2)(iii) is more than the amount of dividend income received during the year, than the AO is directed to restrict the disallowances to the extent of exempt income earned during the year as the disallowances contemplated u/s 14A of the Act cannot swallow the entire exempt income earned during the year as held in the case of Joint Investment (P) Ltd. As ACIT (2015 (3) TMI 155 - DELHI HIGH COURT). Rejection of credit for TDS on machinery and mobilization advance in the year of deduction - Held that:- As decided in assessee's own case [2015 (11) TMI 1665 - ITAT MUMBAI] direct the AO to allow credit for TDS in the year of TDS deduction. Additions made towards mismatch in AIR information for lack of reconciliation - Held that:- The assessee has received mobilization advance / machinery advance from the principles on which TDS has been deducted at the time of making payment as per the provisions of section 194C of the Act, whereas, the assessee is recognizing the Revenue as and when the work is completed and running bill is submitted to the assessee on which again TDS has been deducted at the time of payment. The advance received from the clients has been adjusted against running bill either in the year of receipt of advance or in the subsequent year which leads to difference in income recognized in the books of accounts and information appeared in AIR database. The assessee claims that it has reconciled every entry appeared in the AIR information with its books of accounts. Therefore, we are of the considered view that the issue needs to be examined by the AO in the light of our observations and also reconciliation filed by the assessee Short TDS credit - Held that:- credit for TDS needs to be given if resultant income from such TDS has been considered in the books of accounts. But facts are not clear whether the assessee has filed reconciliation before the AO to explain TDS credit appeared in Form 26-AS with corresponding receipts in its books of accounts. Therefore, we are of the considered view that the issue needs to be re-examined by the AO in the light of claim of the assessee. If the assessee is able to reconcile TDS credit as per Form 26-AS to its books of accounts with corresponding receipts, then the AO is directed give credit for TDS as per Form 26-AS. levy of interest u/s 234B - Held that:- The levy of interest u/s 234B is of mandatory in nature and the AO has no discretion, whatsoever in charging such interest and it depends upon income assessed and advance tax including TDS credit paid by the assessee. If there is tax payable as per the income computed in the assessment, then the AO is expected to workout interest under this section on prescribed rates for specified period as per the computation mechanism provided under section 234B of the Act. Therefore, we are of the view that there is no merit in the ground of the assessee

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• 2018 (2) TMI 1582
  Revision u/s 263 - assessment order passed by the AO is erroneous insofar as it is prejudicial to the interest of the revenue - AO has allowed deduction claimed u/s 35(1) towards R & D expenditure even though the assessee is not eligible for deduction - Held that:- AO has allowed deduction claimed u/s 35(1) without any discussion as to whether the claim made by the assessee is in accordance with provisions of section 35(1) or not. We further notice that the authorised representative of the assessee accepted before the CIT that it has not maintained separate books of account in respect of R&D facility even though it was required to maintain separate books of account as per the provisions of the Act. CIT was right in setting aside the assessment order passed by the AO u/s 143(3) as the assessment order is erroneous insofar as it is prejudicial to the interest of the revenue. We find merit in the arguments of the assessee that the CIT has given specific direction to the AO to disallow deduction claimed u/s 35(1), without offering an opportunity to furnish necessary details. The CIT, in his order, has given specific direction to the AO to disallow claim of deduction u/s 35(1), in the fresh assessment order passed consequent to order passed u/s 263. Therefore, we are of the view that the direction given by the CIT needs to be modified to the extent of allowing the AO to examine the claim of the assessee in the light of provisions of section 35(1) and explanation of the assessee so as to come to a conclusion that assessee is not eligible for deduction. - Appeal filed by the assessee is partly allowed, for statistical purpose.

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• 2018 (2) TMI 1581
  Disallowance u/s 14A R.w.r. 8D - Held that:- In this case the direct expenditure of 82,000/-has been admittedly incurred on demat accounts, which is evidently toward earning exempt income. Since in this case exempt income is only of 10,000/-, applying the decision of the Hon’ble Delhi High Court in the case of Joint Investment Private Limited (2015 (3) TMI 155 - DELHI HIGH COURT) would not be appropriate as in that case the assessee itself volunteered for disallowance of 2, 97, 440/-as attributable under section 14A of the Act, but in the instant case assessee has not attributed any expenses toward earning the exempt income, even the direct expenditure of 82,000/-on demat accounts Respectfully following the finding of the Tribunal in case of Vireet Investment Private Limited (2017 (6) TMI 1124 - ITAT DELHI), we restore the matter to the file of the Assessing Officer with the direction to consider only the investment which yielded exempt income, for the purpose of average value of investment while computing the disallowance under section 14A of the Act read with Rule 8D of Income-tax Rules, 1962.

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• 2018 (2) TMI 1580
  Validity of reopening of assessment - Non recording of reasons u/s 148 - notice issued without jurisdiction - cash deposits are made in the bank account of the assessee - Held that:- When no reasons are recorded for reopening the assessment prior to issuance of notice, the reassessment proceedings must fail for that reason alone. It is well settled in law that the reasons as recorded for reopening the assessment are to be examined on a standalone basis. Nothing can be added to the reasons so recorded, nor anything can be deleted from the reasons so recorded. In the present case, the reasons recorded states that cash deposits are made in the bank account of the assessee, but mere fact that these deposits have been made in bank account does not indicate that these deposits constitute an income which has escaped assessment. The reasons recorded for reopening assessment do not make out a case. AO on a standalone basis and on self-explanatory basis has not brought out any reasons for such reopening. When we are examining the deposits per se in the bank account of the assessee, could it be the basis of holding the view that income has escaped assessment? The reason to believe that income has escaped assessment is not established by the Assessing Officer. The ld. CIT(A) has not at all adjudicated upon the significance of the reasons recorded by the Assessing Officer before initiation of proceedings under section 147/148 of the Act in his order and summarily dismissed the appeal filed by the assessee. The factum per se of deposits in the bank account of the assessee could not be the basis for holding that the income chargeable to tax has escaped assessment overlooking that the source of deposits need not necessarily be income of the assessee and that such reasons recorded were not sufficient to believe escapement of income. - Decided in favour of assessee.

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• 2018 (2) TMI 1579
  Disallowance of discount and commission - Held that:- In the immediately preceding assessment year 2012-2013 5% of discount and commission was disallowed by the AO which was deleted by the CIT(A) on the ground that the disallowance of 5% was without any material or basis. However, as find that in the year under consideration the disallowance was not made on any estimate basis but was made for absence of evidence or details. Therefore, the facts of the instant year is distinguishable from the facts of the preceding years. The assessee submitted before us that after the invoice is raised further discount is allowed to buyers to keep them in good humour and such further discount are debited in the profit and loss account. Thus find force in the above submission of the assessee. But in absence of full details the entire payment of cash and discount cannot be accepted. It shall be in the interest of justice to estimate such cash discount @1% of the sale. - Decided partly in favour of assessee.

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• 2018 (2) TMI 1578
  Assessment proceeding u/s.147 read with 144 - Addition u/s.69 - rejected of books of accounts - failure of the assessee to reconcile the difference of cash balance in the bank account as per books of account and as per the bank statement - Held that:- AO made assessment u/s.143(3) by passing the order on 23.12.2011 by rejecting the book results of the assessee and estimating the income by applying rate of 8% on the gross contract receipts of 49, 10, 212/- and estimated the income at 3, 92, 816/-. Thereafter the AO passed an order u/s.147/144 on 11.02.2015 making an addition of 1, 00, 000/- u/s.69 on account of difference between the amount shown in the bank account maintained with Allahabad Bank and the amount shown in the books of accounts of assessee. On appeal, the CIT(A) confirmed the action of AO. As the original assessment u/s.143(3) was made by the AO by rejecting the books of accounts of the assessee and estimating the income of the assessee at 8% of the gross contract receipt of 49, 10, 212/-. It is trite law that once the books of accounts of the assessee are rejected, the same cannot be relied for making addition u/s.69 - Decided in favour of assessee.

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• 2018 (2) TMI 1577
  Addition towards unexplained cash deposit in bank - estimation of net profit rate - Held that:- Perusal of the credit entries in the bank account of Shri Kailalsh Singh reveals that regular account payee cheques have been credited in the bank account of Shri Kailalsh Singh which are on account of contract /business receipts for road construction. This proves that the cash withdrawal by the assessee is out of the business receipts of Shri Kailalsh Singh. These business receipts of Shri Kailalsh Singh shown in the bank statement are 4 taxable only to the extent of profit earned from the road construction business - we assume that the alleged cash deposits made by the assessee are also the part of business/ contract receipts. Certainly when the business receipts are towards road construction business only the profit element can be subject to tax. Thus when both the parties are unable to prove their stand in full, deem it proper to estimate net profit rate @8% on the alleged cash deposit/business receipt of 89,35,000/- in order to meet the ends of justice. We accordingly do so and confirm the addition at 7,14,800/- as against the addition of 89,35,000/- made by the Assessing Officer. - Decided partly in favour of assessee.

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• 2018 (2) TMI 1542
  Bogus purchases - addition to the extent of 15% of the unverifiable purchases - Held that:- AO has not disputed the sale of the assessee which is corresponding to the purchase the books of accounts were rejected because of the reasons that that assessee has made purchase from these three parties who were indulged for providing bogus bills without any actual delivery of goods. Once the books of accounts are rejected by the AO the income of the assessee is required to be computed on estimated basis and best decision of the AO. AO cannot make an addition to the book result on account of purchase which is part of the trading account and therefore, after rejection of books of accounts only the course of action left with the AO assessee is to estimate the income by applying proper GP or NP rate. We set aside the orders of the authorities below qua this issue and direct the AO to assessee the income of the assessee on the basis of the average gross profit, declared and admitted by the AO or attained finality. The AO to consider the past history of the GP of the assessee for arriving to the average rate of GP. - Decided in favour of assessee for statistical purpose.

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• Customs

• 2018 (2) TMI 1576
  ADD - import of Para Nitro Aniline (PNA) originating in and exported from China PR - N/N. 88/2011-CUS dated 09/09/2011 - Sunset Review - Held that: - the confidential version of final finding which contained all the crucial data was perused by us during the course of hearing - It is clear that the data relevant in para 38, 68, 77 and 78 of the final finding were duly examined by the DA. In fact, on close perusal of such data, we have no reason to differ from the findings as recorded by the DA. PNA produced by Suzhou Luosen Auxiliary Companies Ltd. and exported by Wujiang City Yilin Foreign Trading Co. Ltd. was originally subjected to the lowest of AD duty on conclusion of the original investigation. During sunset review the DA examined various parameters in order to determine the possible recurrence or continuation of likelihood of dumped and injury in case of non-continuation of AD duty already imposed - The learned Counsel for the appellants submitted that all the 4 parameters are to be examined and findings to be recorded in terms of Annexure II of the AD Rules. We note that the DA did take into account these parameters as listed in para 73 of the final finding. Appeal dismissed - decided against appellant.

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• 2018 (2) TMI 1575
  Refund of excess duty paid - benefit of N/N. 21/2002-Cus dated 1.3.2002 at serial no.248(1) - denial on the ground that they had complied with all the provisions of exemption notification and that relocation did not, in any way, breach the conditions specified therein - Held that: - on perusal of the records, it is seen that the rejection of the refund claim was without fulfillment of the prerequisite of a notice of the grounds on which the refund application was sought to be rejected. Not only is this a legal precondition but is necessary to ascertain the legality and propriety of rejection of the claim by the lower authority. We are deprived of such touchstone. The only option before us is to restore the refund application to the original authority for disposal in accordance with the provisions of section 27 of Customs Act, 1962 - appeal restored.

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• 2018 (2) TMI 1574
  Refund of SAD - N/N. 102/2007 Cus dated 14.09.2007 - denial on the ground that no amount was realized or received by the appellant company against 4% SAD paid by them as per the bills of entry - Held that: - the issue herein is squarely covered by the ruling of the Hon’ble Madras High Court in the case of CCE v. Flow Tech Power [2006 (1) TMI 37 - HIGH COURT OF JUDICATURE (MADRAS)], where it was held that duty had been absorbed by the assessee which was submitted that the Chartered Accountant’s Certificate and the profit and loss account also confirmed that the duty paid on the impugned goods had been absorbed by the assessee and had been shown as expenditure in profit and loss account and had not been passed on to the customer. Accordingly, it was concluded by the Hon’ble High Court that there was no error in the order of this Tribunal, directing to grant relief of SAD - refund allowed - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1573
  Classification of imported goods - Natural Calcite Powder - appellant classified it under CTH-25309030 - It appeared to Revenue that the goods imported were not Natural Calcite Powder but they were Processed Calcium Carbonate Powder and therefore, the goods were detained and samples were drawn and sent to Central Revenue Control Library, New Delhi (CRCL) - Case of appellant is that that CRCL did not have equipment to test the said samples and therefore, the test report given by CRCL was in doubt and that the appellant had right to ask retest of the samples from any other laboratory other than CRCL. Held that: - in the case of M/s Rathi Enterprises, [2015 (2) TMI 81 - CESTAT NEW DELHI] this Tribunal had held that CRCL did not have facility to test the samples and therefore, the test report given by CRCL is in doubt and that the appellant had right to ask retest of the samples from any other laboratory other than CRCL. The related confiscation and imposition of penalty and re-determination of value of consignments related to Bills of Entry filed on 25/09/2014 & 30/09/2014 is not sustainable - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1541
  Classification of imported goods - Rommelag Bottle Packing Machine - classification under CTH 84224000 was changed to under CTH 84773000 by Revenue - Held that: - For such variation there is no reason stated by Revenue why the first classification sought as CTH 84773000 was converted into CTH 84775900. Neither in page No.327 nor in page 348 of the appeal folder exhibiting adjudication finding reason for change of classification under CTH 84224000 to CTH 84775900 is explained - Law is well settled that burden of proof is of Revenue to show that goods falls under a different CTH than declared - appeal allowed.

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• Corporate Laws

• 2018 (2) TMI 1572
  Director disqualified for violation of Section 164(2)(a) of the Companies Act, 2013 - petitioner found that the resignation which he had tendered to the company had not been filed with the Registrar of Companies - benefit of CODS-2018 Scheme avalability - Held that:- (i) The petitioner may file all the requisite returns in relation to the company in order to enable him to avail the benefits under the CODS-2018 Scheme; (ii) The petitioner would also submit the necessary application under CODS-2018 Scheme along with its requisite charges; (iii) The aforesaid documents and applications will be submitted online to the Registrar of Companies. It is clarified that if the petitioner does not avail of the CODS-2018 or file the necessary documents as required, in addition to other consequences, the petitioner would also be liable to be prosecuted for Contempt of Court.

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• 2018 (2) TMI 1571
  Winding up of company - present application was filed after the Official Liquidator had taken possession of at least two of the major assets of the company (in liquidation) and all further proceedings towards winding-up of the company (in liquidation) have been stayed - Held that:- From a perusal of the application filed by the applicant company, it appears that the same has been filed with a bare assurance to revive the company (in liquidation), without disclosing the actual facts and figures with regard to the outstanding statutory and other dues of the company (in liquidation). The applicant has only alleged that the secured creditors of the company (in liquidation) being the banks and financial institutions have chosen to remain outside the winding up proceeding. There is no statement in the application about the source of fund of the applicant for payment of the outstanding dues of even the creditors, at whose instance the company (in liquidation) suffered the order of winding up. The fact that there is total lack of bona fide on the part of the applicant to file the present application and to obtain the said order dated March 22, 2017 is further evident from the fact that even though in Annexure “E” to the application, it held out to pay substantial amounts to each of its creditors, at whose instance the winding-up applications had been admitted, within six months from the date of stay of the winding-up proceeding but admittedly, not a single penny has been paid to any of the creditors in spite of expiry of six months from the date of the order dated March 22, 2017.

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• PMLA

• 2018 (2) TMI 1570
  Offence under PMLA - conducting the searches- retention of seized property - opinion based on “Reason to Believe” - Held that:- The main purpose of conducting the searches, as mentioned in the reason to believe, no material or any seizure of incriminating documents or any demonetized currency. The search of the said lockers conducted was not in conformity with the provisions of law relating “reasons to believe” for conducting search of the lockers. Copy of the reasons to believe here also not been served. The Respondent at no stage has stated that the contents of Bank Locker are “proceeds of crime and there is no whisper even in the complaint against the Appellant. In the present case there are no allegation against assessee involving in the schedule offence or under the PML Act, 2002. More than 180 days period already expired. No proceedings are initiated against the appellant. Only on the basis of apprehension jewellery ornaments are attached. No document and currency was recovered in the locker when it was search. So the reasons of believe on the face of it loose its validity. The involvement of her brother cannot be attributed to her as nothing indiscriminating material was either alleged or recovered from her and from the locker. Both sisters are married sister. Section 20(1) of PMLA bars and prohibits retention of the seized property beyond 180 days from the day on which such property was seized.The prohibition of the lockers of the appellant is lifted accordingly by allowing the appeal.

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• Service Tax

• 2018 (2) TMI 1568
  Penalty u/s 76 and 78 - suppression and evasion of Service Tax - Whether the Tribunal was justified in passing a contradictory order and thereby deleting the penalty only on the ground of non receipt of tax by the assessee from the service receiver? Held that: - It is observed that the assessee has not received tax from the Rajasthan Housing Board which is a Government Corporation, therefore, the assessee cannot be penalised for non receipt of the tax from Rajasthan Housing Board. He has also not received tax and paid the same with interest, therefore, if penalty is imposed, he would have no other option but to close its business. The view taken by the tribunal is not only justified but it is the only view which can be taken - appeal dismissed - decided against Revenue.

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• 2018 (2) TMI 1567
  Chartered accountant - liability of service tax - certain considerations received by the appellant for other services (service activities are advice on finance, management, social / political issues, legal matters, negotiations, retainer service etc., to various corporate entities.) rendered by him in his professional capacity as a Chartered Accountant - Revenue entertained a view that such of the above activities like legal assistance, advisory work etc. were taxable under Management, Consultant service in terms of Section 65 (65) read with Section 65 (105) (r) of Finance Act, 1994. Held that: - The guidelines in Code of Ethics framed under the Chartered Accountant Act, 1949 categorically state that Chartered Accountant can practice to render entire range of Management Consultancy and other Services . The appellant contested the tax liability for services rendered to Dishnet DSL Ltd. and Essel Mining Industries on the ground that these are more in the nature of legal services - the scope of tax entry for Management Consultant Service covers any service, either directly or indirectly, in connection with management of any organization in any manner and includes any person who renders any advice, consultancy or technical assistance, relating to conceptualising, designing, development, modification, rectification or upgradation of any working system of any organization. We note the ambit of service activity is very wide and not exhaustively listed - all the services rendered by Appellant, now under dispute are covered in such scope of tax entry as above. Revenue neutrality - extended period of limitation - Held that: - The statutory provisions which are directly relevant to the practicing Chartered Accountant were amended and the very nature of profession of the Appellant will make it clear that there could have been no bonafide belief about non-liability to tax in the present circumstances - extended period rightly invoked. Appeal dismissed - decided against appellant.

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• 2018 (2) TMI 1566
  Clearing and Forwarding Agents service - activity of lifting and handling of iron & steel products from SAIL, RINL and TATA - non-payment of service tax - Held that: - in the present case, the original authority has not passed the order as per the direction of the remand order of the Commissioner (Appeals). We also find that the original authority has reconfirmed the demand and the penalties without applying its mind as per the direction of the remand order. Also, the service rendered by the appellant does not fall under the category of Clearing & Forwarding Agent service because they were not receiving the goods nor storing them nor forwarding those to the clients but they are only supervising the loading of the goods at the stockyards of SAIL, RINL and Tisco for which they paid handling charges which does not fall under the category of Clearing & Forward Agent service. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1565
  Franchise agreement - perations, Management and Development Agreement (OMDA) with the AAI - Held that: - the issue has came up before the Hon’ble Delhi High Court in the case of Delhi International Airport P. Ltd. & Mumbai International Airport P. Ltd. Versus Union Of India & Ors. [2017 (2) TMI 775 - DELHI HIGH COURT], where it was observed that OMDA does not constitute a franchise in terms of Section 65 (47) of the Finance Act and the transaction between the petitioners and AAI does not constitute a taxable service in terms of section 65 (105 (zze) of the Finance Act, 1994 - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1564
  Penalty u/s 78 - malafide intent - Held that: - the Original Authority has come to a conclusion that there was no mala fide on the part of the respondent - also, Revenue has not raised any ground to challenge the said finding by the Original Authority - appeal dismissed - decided against Revenue.

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• 2018 (2) TMI 1563
  Recovery of dues from legal heir - whether the SCN is validly issued in the name of Bhootpurva Sainik Security & Detective Service (after death of proprietor) and secondly whether the legal heir of late Mr. U.N. Pandey, Mr. Sashi Bhusan Pandey is liable for the dues, if any of the said Bhootpurva Sanik Security & Detective Service? Held that: - Mr. Shashi Bhushan Pandey, the legal heir of late Mr. U.N. Pandey is not liable for any dues of Bhootpurva Sainik Security & Detective Service, as admittedly show cause notice was issued after the death of his father. So far the dues of the said firm are concerned the Revenue is directed to locate the erstwhile remaining partners of the said firm and enforce recovery from them. From going through the show cause notice it is not evident whether the same is directed to proprietorship or the partnership concerned. Thus, under these circumstances held no proper service accordingly service that there is no proper authority with the Court below to pass the impugned order. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2018 (2) TMI 1562
  Benefit of exemption - actual user condition - N/N. 05/2006-CE dated 1.3.2006 - intended for use in the manufacture of handicrafts and utensils - Held that: - The only condition is to be complied with by the appellant that the goods sold by them and to be intended for use in the manufacture of utensils and handicrafts - Admittedly, as per the invoices issued by the appellant as well as their buyer, the intention is very much clear that the said goods were to be used for manufacture of utensils/handicrafts. The intended use of the said goods has been established by the appellant, in that circumstance, the benefit of the notification cannot be denied. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1561
  Clandestine manufacture and removal - plastic disposable glasses - it was revealed that the electricity consumption in the appellant s factory was dis-proportionate to the production of the goods recorded in books - Held that: - the department has filed the appeal only on the ground of excess electricity consumption - this issue is no more res-integra. By now it is the settled law that excise duty cannot be demanded on the basis of excess electricity consumption. The decision of Hon’ble Allahabad High Court in the case of R.A. Castings [2010 (9) TMI 669 - ALLAHABAD HIGH COURT], relied upon where in Hon’ble High Court has held- Mere electricity consumption cannot be the only basis for determining duty liability. Appeal dismissed - decided against Revenue.

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• 2018 (2) TMI 1560
  100% EOU - Refund of unutilized CENVAT credit - Rule 5 of the CCR 2004 - denial for the reason that the claims have been filed beyond the period of one year prescribed in Section 11B of the CEA 1944 - Held that: - Even though the notification has made Section 11B applicable, the refund in terms of Rule 5 is different from a claim for rebate on duty paid on excisable goods exported out of India - Refund under Rule 5 is for refund of Cenvat credit accumulated due to export of goods under bond. This refund depends not only upon the accumulated Cenvat credit due to exports, but also the inability of the manufacturer to use it for payment of duty of domestic clearances. It has been held by the Honorable High Court of Karnataka in the case of mPortal India Wireless Solutions P. Ltd. vs. CST, Bangalore [2011 (9) TMI 450 - KARNATAKA HIGH COURT] that the limitations under Section 11B does not apply for refund of accumulation of Cenvat credit. The appellants will be eligible for refund as claimed by them, if otherwise eligible without being hit by the limitations under Section 11B - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1559
  Manufacture - business and trading of perforated sheets and wire netting - Department came to the conclusion that the activity of perforation of flat rolled steel sheets procured from the open market would amount to manufacture in terms of Section 2(f) of the CEA 1944 - Held that: - the Hon’ble Allahabad High Court in the case of Agra Metal Perforators vs. Commissioner, Sales Tax [1980 (7) TMI 242 - ALLAHABAD HIGH COURT] has expressed the clear opinion that after perforation, the iron sheet emerges as a different commercial commodity - the activity of perforation of flat rolled steel sheets does amount to manufacture. Extended period of limitation - Held that: - there can be no justification for invoking the extended period of limitation under Section 4A for demand of such duty - demand restricted to normal period. Appeal allowed in part.

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• 2018 (2) TMI 1558
  CENVAT credit - denied mainly on the basis of certain irregularities alleged with reference to transportation and non-existence of evidence for transportation of duty paid inputs to the premises of the respondent - Held that: - On due consideration of the material evidence which has come on record the Tribunal came to the conclusion that no case is made out to reverse the findings recorded by the Commissioner and upheld the order and dismissed the appeal - appeal dismissed - decided against Revenue.

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• 2018 (2) TMI 1557
  Clandestine manufacture and removal - shortage of raw material and finished goods - allegation on the basis of entries made in the records maintained by M/s. Amit Steels - whether charges of clandestine clearance can be upheld based upon the said unverified statement of Shri Narendra Agarwal? Held that: - Admittedly, his cross examination has not been done and the appellant has not been able to verify the correctness of the same. The name of the company as reflected in the records of M/s. Amit Steels was Shree Balaji Maharaj and not the present appellant. It is only the basis of said statement of Shri Narendra Agarwal that the Revenue has proceeded against the appellant. It is well settled law that allegation of clandestine removal are required to be discharged by the Revenue by producing sufficient, positive and cogent evidence. There is nothing in the present impugned order of the lower authorities indicating any procurement of excess raw material, conversion of the same into final product and clearance of the same without payment of duty. The statement of the transporter recorded by the officers has also not given any details of the clearances made from the assessee factory except to state in a wide manner that he was engaged in transportation of goods. No customers have been identified and there is no evidence of payment of any consideration for such clearances. Hon ble Allahabad High Court in the case of CCE vs Meenakshi Castings [2011 (8) TMI 896 - ALLAHABAD HIGH COURT] has held that shortages of finished stock, without evidence of clandestine removal could not lead to inference of evasion of duty, and no penalty is imposable. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1556
  CENVAT credit - appellant removed various types of scrap generated from the old and used capital goods which were mainly in the nature of damaged parts of the structures of capital goods - Revenue by entertaining a view that as the appellant had availed Cenvat credit on the said capital goods, they were required to pay an amount equal to the duty leviable on the transaction value of such scrap, in terms of the provisions of Rule 3(5A) of the CCR 2004. Held that: - the entire Rule 3 of CCR 2004 relates to the availment of Cenvat credit on capital goods and the clearance of capital goods subsequently, either as such or in the shape of waste and scrap. As such sub rule 5A would also take its colour from the preceding rules which are relatable to the clearance of capital goods on which credit has been availed - Independent and solo reading of Rule 5A without appreciating the context in which the same is appearing, as has been done by the authorities below, is not in accordance with the principles of interpretation of law. The said sub rule 5A has to be interpreted by applying the principles of noncitur-a-sociis and cannot be picked up independently. The said sub-rule refers to the clearance of capital goods as waste and scrap and not the parts of the capital goods. In such a scenario, even the strict application of sub rule 5A is not called for. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1555
  CENVAT credit - SCN has been issued on the ground that the appellants have availed irregular Cenvat credit on the basis of invoices issued by the first stage dealer M/s Regal Metal and Ferro Alloys, Karampura, Delhi - Held that: - the dealer supplied the different material to the Noticee on which the amount of duty had not been paid. When the duty had not been paid on the said material, the recipient of the goods i.e. Noticee was not allowed to take CENVAT Credit is respect of the goods on which no duty was paid. Thus, it is found that the Noticee had indulged in the wrong availment of CENVAT Credit with the connivance of the dealer for the different goods on which no duty was paid by the manufacturer/supplier. Extended period of limitation - Held that: - the appellants had clearly suppressed the facts, which came to light only during the investigation - Once there is element of suppression, the Department is well within its powers to issue a show cause notice within 5 years of the relevant date i.e. filing of return of March, 2007 - extended period of limitation has been correctly applied. Appeal dismissed - decided against Appellant.

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• 2018 (2) TMI 1554
  SSI exemption - assignment of Brand name - whether a Trade Mark/Brand Name can be assigned for a meagre consideration of 3,000/- cash? - Held that: - Hon’ble Supreme Court of India in the case of Commissioner of Central Excise, Goa Versus Primella Sanitary Products [2005 (4) TMI 70 - SUPREME COURT OF INDIA], has held that the person who has right over Trade Mark, can assign the right of Trade Mark to another person through a deed of assignment for any amount of consideration. With effect from 01/04/2004 appellants were entitled for benefit of N/N. 08/2003-CE - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1553
  Excess of raw material and finished goods - confiscation of excess goods - Held that: - out of total quantity of 13680 kg of finished goods it was alleged that 84 kg is found in excess. But how these goods were weighed and worksheet has not been provided to the appellant. In that circumstance, being a negligible quantity of excess found goods cannot be held liable for confiscation. Revenue sought to confiscate the raw material found excess in the factory premises of the appellant. As per Rule 25 of Central Excise Rules, 2002, the excisable goods are liable for confiscation. Excisable goods are the goods which are manufactured by the appellant. Admittedly, the raw material has not been manufactured by the appellant - confiscation not permitted. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1552
  Penalty u/r 15(2) of CCR 2004 - claim of appellant is that erroneous utilization of credit was inadvertent and without deliberate motive which would foreclose the invoking of extended period of limitation for recovery - Held that: - No evidence has been placed on record by the appellant that the ingredients for invoking of section 11AC were not in existence - the lower authorities had no option but to impose a penalty as a direct consequence of duty - appeal dismissed - decided against appellant.

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• 2018 (2) TMI 1551
  Penalty u/r 15(2) of the CENVAT Credit Rules 2004 - reduction of penalty to 25% as prescribed in the said rule - Held that: - CENVAT credit wrongly availed along with the interest thereon had been made good before the adjudication proceedings were completed, thus entitling the assessee to reduced penalty in the order of the original authority - There has been a glaring lapse on the part of the original authority in not recording the option of reduced penalty in the adjudication order. The matter remanded back to the said authority for re-determination of the scope and limit of invoking the penal provisions - Appeal allowed by way of remand.

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• 2018 (2) TMI 1550
  Refund claim - interest charged on the tax paid prior to the commencement of five year period of limitation - Held that: - Interest is a burden that accrues to ineligible utilisation of amounts that otherwise should have been at disposal of the public exchequer. Undoubtedly, no tax or duty is recoverable for the period that lies beyond the limitation prescribed in the statute and such tax not being recoverable, interest burden thereon should not lie even if the tax by sheer mischance, ended up in the funds of the Government of India - the appellant has closed the doors to his claim of refund of interest on ground of equity - appeal dismissed - decided against appellant.

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• 2018 (2) TMI 1549
  Benefit of N/N. 41/11 dated 18.11.2011 - denial on the ground that M/s Jindal Power Ltd. had allotted a space by crossing road for manufacturing the pipes exclusively for M/s Jindal Power Ltd. which was considered as a separate site by Department - Held that: - it appears that the Circular No. 456/22/99-CX dated 18.05.1999 issued by the Department prescribes that separate off road site will also be considered as the same included any premises made available to the manufacturer of the goods falling under Heading No. 68.07 and sub-heading 7308.50 of the Schedule to the Central Excise Tariff Act, 1985 - benefit to be allowed - appeal allowed - decided in favor of assessee-appellant.

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• CST, VAT & Sales Tax

• 2018 (2) TMI 1548
  Refund of tax paid on excess amount - price variation clause - rejection on the ground that there is no provision under the Act for reducing or refunding the amount of tax once the amount of tax has been paid - Section 2(39) of the Rajasthan Sales Tax Act, 1994 - Held that: - In IFB Industries Limited v. State of Kerala [2012 (3) TMI 66 - Supreme Court of India], the issue was with regard to the definition of ‘turnover’. This court held that to take the benefit of trade discount and to make it eligible for exemption, all that the assessee is required to prove was that the purchaser had paid only the sum originally charged less the discount and that this should be a regular practice in the trade. A bare reading of Section 2(39) of the Rajasthan Sales Tax Act, which defines “sale price” clearly indicates that it is the price which is either paid or payable to a dealer as consideration for the sale. The definition itself makes it clear that any sum by way of any discount or rebate according to the practice normally prevailing in the trade shall be deducted and shall not be included in the sale price. The definition of ‘turnover’ means the aggregate amount received or receivable by a dealer. In the instant case, when the orders were placed with the assessee, the price was not finalized by the MoP 682/is only a provisional price subject to review and it was clearly understood by the parties that the final price applicable after 01.07.1999 will be the price as approved by the MoP 682/per cylinder, it was under a legal obligation only to receive that price which was fixed by the MoP & NG - since the price of the cylinder has been reduced, the assessee cannot charge more than the price fixed, is bound to refund the excess amount collected and is therefore legally entitled to get refund of the tax paid on the excess amount. The assessee shall be refunded the amount of sales tax paid on the excess amount - assessee also entitled to interest - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1547
  Validity of inspection alleged to have been conducted in the place of business of the petitioner - principles of natural justice - Held that: - it is seen that there is no document produced by the Department to show that despite the business premises having been sealed by the Forest Department still he was carrying on business. If the petitioner had been carrying on business it would have been illegal, since the seal of the premises cannot be opened without express orders and permission from the Forest Department. Therefore, the question of inspecting the sealed premises that too on 09.04.2015 is impossible. The entire proceedings initiated by the respondent are thoroughly flawed for serious procedural infirmities and for that reason, the impugned order is liable for interference. Petition allowed - decided in favor of petitioner.

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• 2018 (2) TMI 1546
  Whether the first respondent was justified in levying and demanding interest under the provisions of the Tamil Nadu Tax on Luxuries Act, 1981, when there is no such provision provided under the Act, especially, Section 9 of the Act? Held that: - identical issue decided in the case of S. Gurunathan Versus The Deputy Commercial Tax Officer [2014 (7) TMI 579 - MADRAS HIGH COURT], where it was held that During the relevant assessment year, there was no provision to levy interest on belated payment of additional tax or in other words, there was no provision enabling the applicability of Section 24(3) towards tax due, under the Act - interest cannot be demanded for belated payment on Additional Sales Tax, as there is no substantial provision in the TNAST Act itself and similarly, no penalty can be levied, as there is no charging Section under the TNAST Act to levy penalty for the relevant Assessment year. Demand do not sustain - petition allowed - decided in favor of petitioner.

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• 2018 (2) TMI 1545
  Validity of pre-revision notice - pre-revision notice issued without exhausting the statutory alternative remedy - Held that: - It is not in serious dispute that the appellant in response to the pre-assessment notice, originally submitted its objections on 29.04.2011 stating among other things that due to the wrong entry in the computers for the respective months, the error has occurred and while verification, the Statutory Auditor revealed the said fact and certification of correct turnover has also been obtained and therefore, prays for dropping of the proposal for levying additional sales tax and it is also followed by yet another objections dated 18.05.2011. The appellant without attending the personal hearing has rushed to the Court and filed the Writ Petition and it was entertained and they had the benefit of interim orders and the writ petition ultimately came to be dismissed on the ground that it is a premature one. This Court on an independent application of mind, is of the considered view that there is no error apparent on the face of the record - petition dismissed as pre-mature.

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• 2018 (2) TMI 1544
  Validity of assessment order - TNGST Act - CST Act - Held that: - this Court deems it appropriate to grant liberty to the petitioner to file an application under Section 55 of the TNGST Act which is a power given to rectify any error apparent on the face of record - petition disposed off.

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• Wealth tax

• 2018 (2) TMI 1543
  Penalty imposed u/s 18(1)(c) of Wealth Tax Act - furnishing of inaccurate particulars of net wealth - invalid notice - Held that:- Though the CWT(A) has issued the show cause notice stating that the assessee was required to explain the reasons for furnishing inaccurate particulars, concealment of wealth, it was not clearly made known for which offence the assessee is required to submit his explanation. The Ld.CWT(A) should have struck off the irrelevant column and made known the assessee by mentioning for which reason the penalty was initiated. Penalty u/s 18(1)(c) of WT Act are parimateria to Income Tax Act 271(1)(c). As per settled case laws non striking the irrelevant column in the notice issued u/s 18(1)(c) renders the notice invalid and consequent penalty required to be cancelled. - Decided in favour of assessee.

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• Indian Laws

• 2018 (2) TMI 1569
  Selection process of Tribunals - it was claimed that substantial steps have taken place in the selection process for the Central Administrative Tribunal and it is desirable that appointments be made expeditiously - Search-cum-Selection Committees (SCSC) - Held that: - In all cases where the CJI has nominated the Chairperson of the SCSC for making recommendations for appointment of Chairperson/President/Presiding Officer of any tribunal and the Committee has begun its work by holding a meeting, the process will continue on the basis of the terms and conditions and eligibility stated in the advertisement issued or, as the case may be, as notified on the directions of the SCSC for ascertaining expression of interest. All recommendations made or to be made by any SCSC as referred to above for appointment of Chairperson and/or members shall be processed further.

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