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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter March 18, 2024 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise Articles Making SME Payments by 31st March 2024 for compliance u/s 43B(h) of Income Tax Act ITR U How to file ITR of previous 3 years Confiscated goods and vehicles can be released by depositing 25% of the amount mentioned in the Order in cash and furnishing a bank guarantee for the balance Notifications Central Excise 10/2024 - dated 15-3-2024 - CE Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022 to increase the Special Additional Excise Duty on production of Petroleum Crude. Customs 07/2024 - dated 15-3-2024 - ADD Seeks to extend ADD on Aluminium Road Wheels imported from China PR. G.S.R. 210 (E) - dated 15-3-2024 - Cus Corrigendum : Notification No. 60/2023-Customs, dated the 19th October, 2023 21/2024 - dated 15-3-2024 - Cus Seeks to amend notification No. 22/2022- Customs dated 30.04.2022, in order to notify third tranche of India-UAE CEPA 20/2024 - dated 15-3-2024 - Cus Seeks to further amend No. 11/2018-Customs, dated the 2nd February, 2018, to exempt SWS on EVs imported under of the Ministry of Heavy Industries' Scheme to promote manufacturing of electric passenger cars in India. 19/2024 - dated 15-3-2024 - Cus Seeks to amend No. 50/2017-Customs, dated the 30th June, 2017 to give concession to EVs imported under of the Ministry of Heavy Industries' Scheme to promote manufacturing of electric passenger cars in India. 23/2024 - dated 15-3-2024 - Cus (NT) Seeks to amend Notification No. 58/2021-Customs (N.T.), dated the 01.07.2021 under sub-section (2) of Section 151B of the Customs Act, 1962 to notify Agreement or Arrangement on Cooperation and Mutual Administrative Assistance (CMAA) in Customs Matter of India and with other Countries Income Tax 32/2024 - dated 15-3-2024 - IT Central Government specifies the “The Press Trust of India Limited, New Delhi” as a news agency set up in India solely for collection and distribution of news for two assessment years 2022-2023 to 2023-2024 for the purpose of section 10(22B) Highlights / Catch Notes GST Cancellation of GST registration of the petitioner - Rule 22 (3) of CER - The court examines the validity of the show cause notice issued by the respondent and considers the petitioner's argument regarding the ex-parte physical verification. It emphasizes the need for adherence to Rule 25 of the Central Goods and Service Tax Rules, 2017, regarding the conduct of such verifications. - The court interprets Rule 22(3) of the Rules, which stipulates a timeframe for issuing an order in response to a show cause notice. It concludes that the provision is directory rather than mandatory, as there are no specified consequences for non-compliance within the stipulated timeframe. Visit to Get Source Levy of penalty u/s 129 (3) of the GST Act - Allegation that appellant/petitioner did not generate e-Way Bill with a view to evade tax - Despite the petitioner presenting digital copies of e-Invoice and e-Way Bill, the revenue authorities imposed a penalty, leading to the petitioner challenging this decision in court. The court ruled in favor of the petitioner, highlighting the failure of the authorities to verify digital documents and the unjustified harassment faced by the genuine taxpayer. Visit to Get Source Classification of supply of goods - Water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavoured (other than drinking water packed in 20 litre bottles) - The case revolves around the classification of the output and water sold by the Appellant, an effluent treatment plant. Disputes arose regarding whether the output should be classified as goods and if the water sold falls under a specific heading. The AAAR ordered a re-examination of the matter by the lower authority in light of new evidence presented during the appeal process. Visit to Get Source Scope of supply - transfer of title of goods by the Applicant to its customers or multiple transfers within the FTWZ - The AAAR finds that the AAR failed to address the appellant's question comprehensively, as it only discussed para 8(a) of Schedule III and did not consider para 8(b) or other relevant entries. Hence, the matter is remanded to the lower authority for a fresh examination. - The AAAR notes that the AAR did not thoroughly examine whether FTWZ should be considered as a customs bonded warehouse. Therefore, it directs the lower authority to consider this aspect along with other contentions raised by the appellant. Visit to Get Source Rejection of application for Advance Ruling - Levy of GST - The appellate authority observed that the rejection of the advance ruling application was based on the investigation initiated by DGGI. The rejection did not consider the GST applicability issue directly. - The authority found that the rejection of the application lacked procedural fairness. The appellant was not provided with materials and comments forwarded by DGGI, depriving them of the opportunity to respond. Consequently, the case was remanded to the lower authority for reconsideration while ensuring the appellant's right to a fair hearing. Visit to Get Source Levy of GST - Composite supply or not - Various services provided to employees - The Authority concluded that GST is applicable on the amount charged to employees for canteen services and car lease facilities provided by the company. It ruled that GST is not applicable on the recovery of medical insurance premiums and transportation facility charges from employees if provided as per contractual agreements between the employer and the employee. ITC is not available on expenses related to employee vaccination and health benefits. However, ITC is available on gardening expenses incurred by the company for maintaining green belts as mandated by environmental regulations. Visit to Get Source Income Tax Reopening of assessment - non-application of mind by AO - Borrowed satisfaction - Reliance on investigation initiated by Directorate General of Goods and Services Tax (“DG GST”) - The court observed that both the AO and the PCIT failed to properly assess the information and circumstances before approving the reopening notice. They did not adequately verify the petitioner's compliance with disclosure requirements or consider the timing constraints for issuing such notices. This lack of diligence amounted to a total non-application of mind, rendering the approval and subsequent proceedings unsustainable. Visit to Get Source Reopening of assessment - The High Court held that no case for reason to believe was made out by the AO. They observed a lack of application of mind in the reasons recorded for reopening the assessment. It was noted that the information relied upon by the AO contained inaccuracies, indicating a non-application of mind. - The Court found that the AO did not address the factual positions asserted by the petitioner in their objections, further indicating a lack of proper consideration. - Ultimately, the Court concluded that the reassessment proceedings were initiated on incorrect facts and lacked jurisdiction, thus quashing the impugned notices and order. Visit to Get Source Validity of Reopening of assessment - acquisition of immovable property jointly - husband’s assessment in hands of wife - The court quashed and set aside the order dated 31st March 2023 passed under Section 148A(d) of the Act. The court concluded that it was not a suitable case for reopening the assessment concerning the petitioner. The court highlighted the lack of necessity in seeking details from the petitioner regarding the source of funds, given that it was established that she had no involvement in the transactions. Moreover, the court noted the surprising behavior of the Principal Chief Commissioner of Income Tax, who sanctioned the issuance of the order instead of directing the assessing officer to drop the proceedings against the petitioner. Visit to Get Source Reopening of assessment - shares were transferred by way of a gift - The petitioner argued that the transfer of shares as a gift did not attract capital gains tax liability and that there was no valid reason to believe income had escaped assessment. In this case, Section 45 read with Section 47 read with Section 48 of the Act makes it clear that the AO could not have any tangible material to form a belief that income has escaped assessment. - The court upheld the petitioner's arguments, ruling that the notice lacked validity due to the absence of tangible material supporting income escapement and confirming that the transfer of shares as a gift did not incur capital gains tax liability. Visit to Get Source Reopening of assessment u/s 147 - claim of deduction u/s 36(1)(viia) - provision for Non-Performing Advances as per the RBI Regulations - The court observed that the petitioner had adequately addressed the AO's queries regarding the deduction claim during the original assessment. Additionally, the court noted that the petitioner had not claimed any deduction for rural advances, contradicting the basis for the alleged escapement of income. - The court deemed the reopening of the assessment as a clear case of change of opinion by the AO, which did not justify reassessment. Visit to Get Source Addition u/s 68 - buyback was not genuine and added back the buyback amount as unexplained income - Section 68 of the Income Tax Act, 1961, which deals with unexplained credits, was found inapplicable as the transaction was genuine, and the identity and creditworthiness of the company were established. - The tribunal upheld the findings of the Commissioner of Income Tax (Appeals) that the income arising from the buyback of shares was exempt under Section 10(34A) of the Act. Visit to Get Source Rectification proceedings u/s. 154 - Unexplained investment addition u/s 69 - The case involved the treatment of surrendered undisclosed income under the head of Business Income versus taxation u/s 115BBE of the Income Tax Act. The appellant argued against the rectification notice issued to tax the surrendered income u/s 115BBE, contending that it should be taxed as business income. The Tribunal, citing precedent cases, ruled in favor of the appellant, stating that if the surrendered income is related to regular business activities, it should be taxed as business income. Therefore, the order passed u/s 154 to tax the income u/s 115BBE was quashed, and the appeal was allowed. Visit to Get Source Transfer Pricing Adjustments - Validity of the order passed u/s. 92CA(3) - period of limitation - 60 days have to be counted prior to the date of last date of limitation u/s 153. - The date for passing of ld. TPO’s order was on or before 31/10/3019, because the completion of assessment u/s. 153(1), i.e., 21 months from the end of the assessment year plus 12 months extension considering TP reference has been made was 31/12/2019 - The ITAT agreed with the assessee, holding that the transfer pricing order was indeed barred by limitation. The tribunal emphasized the need for adherence to prescribed timelines for the validity of such orders. Consequently, the transfer pricing order was quashed. - Therefore, the tribunal declared the final assessment order as void and barred by limitation. Visit to Get Source Revision u/s 263 - Method of accounting adopted for revenue recognition of the project - The Tribunal decided that the Pr.CIT erred in directing the AO to reassess based on the method of accounting adopted for revenue recognition. It noted that the appellant had consistently followed the project completion method, which had been accepted by the revenue authorities in the past, and the AO had applied his mind to this issue in the assessment. The Tribunal set aside the Pr.CIT's order on this issue, ruling in favor of the appellant. Visit to Get Source Revision u/s 263 - Deemed rental value - income from house property - applicability of provisions u/sec. 23(5) - The ITAT found that the Pr.CIT's order was justified in directing a fresh assessment concerning the determination of deemed rental value under section 23(5) of the Act, thus upholding the jurisdiction under section 263 for this matter. Visit to Get Source TP Adjustment - Interest on delayed receivables - The ITAT found that the conditions laid down by previous rulings, specifically in the case of PCIT vs. Kusum Healthcare, were met, justifying the inclusion of interest on delayed receivables as a separate international transaction. The Tribunal emphasized the need for proper inquiry by the Transfer Pricing Officer (TPO) over time to identify patterns indicating benefits to AEs, and rejected the appellant's argument that the receivables' impact was already considered in the working capital adjustment. Visit to Get Source Assessment u/s 153A - Addition u/s 69A on Investment in FDR and difference in credits received in bank accounts but not considered in the ITR - The judgment addresses appeals filed by the assessee against orders of the Commissioner of Income Tax (Appeals) for multiple assessment years. The main issues revolve around additions made by the Assessing Officer without incriminating material found during search operations. The Tribunal ruled in favor of the appellant, stating that such additions lack legal basis. Visit to Get Source Maintainability of appeal against Scrutiny assessment u/s 143(3) or intimation u/s 143(1) - Cause of action - The ITAT notes that the assessment under section 143(3) solely relies on adjustments made in the intimation under section 143(1), with no independent discussion on the assessed income. - However, it is established that the cause of action for the appeal arises from the intimation under section 143(1), and no cause of action arises from the order passed under section 143(3) of the Act. - Ultimately, the appeal filed by the assessee is dismissed. Visit to Get Source Customs The Ministry of Finance, Department of Revenue, has issued Notification No. 06/2024-Customs (ADD) on 14th March 2024, concerning the imposition of anti-dumping duty on Self-Adhesive Vinyl (SAV) originating from China PR and imported into India. This decision follows the final findings of the designated authority, which concluded that the product under consideration was exported to India at dumped prices, causing material injury to the domestic industry. Visit to Get Source The Ministry of Finance, Department of Revenue, issued Notification No. 05/2024-Customs (ADD) on March 14, 2024, concerning the review of anti-dumping duty on imports of Ethylene Vinyl Acetate (EVA) Sheet for Solar Module from China PR. - The authority recommended the continuation of anti-dumping duty to alleviate injury to the domestic industry. - In exercise of its powers, the Central Government imposed anti-dumping duty on the specified goods originating from China PR, with varying rates depending on the producer, to be levied for a period of five years, unless revoked, superseded, or amended earlier. Visit to Get Source The Ministry of Finance, Department of Revenue, issued Notification No. 04/2024-Customs (ADD) on March 14, 2024, concerning the imposition of anti-dumping duty on Para-Tertiary Butyl Phenol (PTBP) imported into India from Korea RP, Singapore, and the United States of America. The notification follows the findings of the designated authority, which concluded that the dumping of PTBP from these countries has caused injury to the domestic industry. Visit to Get Source The Ministry of Finance, Department of Revenue, issued Notification No. 03/2024-Customs (ADD) imposing anti-dumping duty on Printed Circuit Boards (PCBs) imported from China PR and Hong Kong into India. The notification follows findings by the designated authority indicating that the subject goods were being exported to India below normal values, causing material injury to the domestic PCB industry. Visit to Get Source Revocation of the customs broker licence - Misuse of G-Cards - sub-letting of the licence on commission basis for a monthly consideration - The case involved the suspension and subsequent revocation of a custom broker license due to misuse and violations of licensing regulations. The appellant admitted to subletting the license and allowing unauthorized use, leading to the Tribunal and later the High Court upholding the revocation as proportionate to the offense. Visit to Get Source Seeking release of the goods imported - betelnuts/supari described as Menthol Scented Sweet Supari (“goods”) - nature of the mix created - The petitioner sought clearance of imported goods after obtaining a favorable classification ruling and a positive test report from the FSSAI. However, the respondents delayed clearance based on a report from the DYCC, which raised concerns about the presence of kernel husk fragments. The High court ruled in favor of the petitioner, emphasizing that the classification ruling and the FSSAI's report should have been respected, and the presence of kernel husk fragments did not warrant withholding clearance. Visit to Get Source Confiscation of the gold bars - remelted gold of foreign origin or not - The admissibility and weight of retracted statements - The Tribunal found that the appellants had provided sufficient evidence of a legitimate purchase, including a tax invoice and payment evidence through a banking channel, thereby proving the gold's Indian origin and legitimate acquisition. - The Tribunal recognized the principle that retracted statements could not be solely relied upon for conviction unless supported by independent, credible evidence. In this case, the retraction was deemed credible due to the lack of corroborative evidence of smuggling. Visit to Get Source Confiscation - fine - penalty - Mis-declaring the quantity of cigarettes imported under warehouse bill of entry for re-export purpose - The customs authorities confiscated the mis-declared goods and imposed redemption fines, along with a penalty under the Customs Act, 1962. On appeal, the Appellate Tribunal upheld the confiscation and imposition of redemption fines but reduced the penalty imposed, considering factors such as the perishable nature of the goods, absence of significant profit, and the continued custody of the confiscated goods by the department. Visit to Get Source Penalty of penalty for abetment of the fraudulent export scheme - The appellant was accused of misdeclaration and fraudulent export of ready-made garments in order to claim undue export incentives. - The CESTAT found that proper examination procedures were followed by customs officials. It noted that the responsibility for any irregularities in the examination process cannot be solely attributed to the customs official involved. - The CESTAT found evidence supporting the allegations of misdeclaration and fraudulent export. It noted the appellant's involvement in arranging fake documents and procuring cheap quality goods for export. The Tribunal upheld the penalty imposed under section 114 of the Customs Act. Visit to Get Source Seeking revocation of suspension of the Customs license - execution of fake export through Land Customs Station - the Tribunal found that the continuous suspension of the Customs Broker's license without initiating further proceedings or issuing a notice for revocation or penalty was unlawful. The Tribunal concluded that the Appellant had a valid case for seeking the revocation of the license suspension. Visit to Get Source Valuation of the imported goods - Mis-classification of goods - While the CESTAT upheld the under-valuation allegation, it dropped the demand related to mis-classification. The Tribunal relied on evidence of undisclosed payments to overseas suppliers, which indicated undervaluation of the imported goods. However, it noted that the rough entries in the appellant's notebooks lacked evidentiary value and could not be the sole basis for determining undervaluation. Visit to Get Source DGFT The DGFT Notification No. 76/2023, dated 15th March 2024, amends the Foreign Trade Policy regarding the export condition of De-Oiled Rice Bran. It extends the prohibition on its export under ITC HS code 2306 and any other HS code until 31st July 2024, modifying the previous deadline of 31st March 2024. Visit to Get Source The DGFT, issued Notification No. 75/2023 on March 14th, 2024, imposing a Minimum Export Price (MEP) on the export of Natural Honey under the ITC HS code 0409 00 00. This action is taken in accordance with the Foreign Trade (Development & Regulation) Act, 1992, and the Foreign Trade Policy, 2023. The MEP is set at US$ 2000 per Metric Ton (PMT) until December 31st, 2024, or until further orders. Visit to Get Source SEZ The proposed amendment to Rule 21B of the Special Economic Zones Rules, 2006 seeks to broaden the scope of activities allowed within International Financial Services Centres (IFSCs). Originally, Rule 21B permitted units in IFSCs to engage in aircraft leasing activities without the requirement of maintaining a separate office, provided it was approved by the International Financial Services Centre Authority. However, the proposed amendment replaces the term "aircraft leasing" with "aircraft or ship leasing," thereby expanding the types of leasing activities permitted within IFSCs to include both aircraft and ships. Visit to Get Source FEMA The proposed amendment to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, marks a significant expansion in the definition of "unit" under clause (aq). By including partly paid-up units, subject to SEBI regulations and government consultation, the amendment reflects an effort to accommodate evolving financial practices and market dynamics within the regulatory framework. Visit to Get Source Corporate Law Criminal proceedings against the Directors - Nature of financial transactions - vicarious liability - The High court found that the allegations, if proven, constituted criminal offenses, including cheating and misappropriation of funds, which are distinct from mere civil disputes over financial transactions. - The court clarified that directors could be held responsible if they were directly involved in the fraudulent activities of the company, rejecting the argument against vicarious liability in this context. - The court observed that the appointment of a provisional liquidator did not preclude the initiation of criminal proceedings by the complainant company. - The court concluded that there was no abuse of process and that prima facie, the allegations warranted a trial. Visit to Get Source IBC Seeking condonation delay of 41 days in filing the present appeal - Sufficient reasons for delay or not - initiation of CIRP - Despite the appellant's claim of lack of awareness, the NCLAT noted evidence provided by the respondent showing that the appellant was informed of the impugned order through various means, including emails and representation by their advocate. Therefore, the NCLAT rejected the appellant's contention of lack of awareness. - The NCLAT emphasized that the limitation period for filing an appeal under the IBC starts from the date of the order and not from the date the appellant becomes aware of the order. The Tribunal also rejected the appellant's request to exclude certain days while calculating the limitation period, stating that such exclusions were not justified under the IBC. Visit to Get Source PMLA The Ministry of Finance, through a notification dated March 14, 2024, has exercised its authority under section 11A of the Prevention of Money-laundering Act, 2002. This notification permits certain reporting entities to perform authentication under the Aadhaar Act for the purposes specified in the Money-laundering Act. The decision is made after consultation with relevant authorities and upon satisfaction that the mentioned reporting entities comply with the standards of privacy and security outlined in the Aadhaar Act. Visit to Get Source Service Tax Levy of service tax - real estate agent - collecting transfer/administrative charges - Referring to precedents, the Tribunal affirmed that charges for changes in property ownership records are not causative factors for sale or purchase transactions. They emphasized that the appellant operated on a principal-to-principal basis with buyers, old or new, and thus, did not qualify as a real estate agent in the context of the service tax law. - The Tribunal concluded that the transfer/administrative charges collected by the appellant were not liable to service tax under the category of real estate agent services Visit to Get Source Nature of activity - sale or service - The appellant procured COA/stickers/labels under a Microsoft OEM Customer License Agreement, affixing them to Thin Clients installed with Microsoft software, questioning whether this constituted a sale of goods or a service under ITSS. - The tribunal held that merely affixing stickers/labels, providing authenticity to software loaded onto Thin Clients, does not constitute a 'service' received under ITSS. It distinguished the transaction from the distribution/sale of software, focusing on the sale of embedded systems without transferring copyright. Thus, the transaction was deemed a 'sale' of goods, not a service taxable under ITSS. Visit to Get Source Central Excise Clandestine removal - alleged shortage of goods said to be found on the basis of comparison of the quantity accounted in SAP system - The tribunal found the demand based on the alleged shortage to be unsustainable. It held that the department could not ignore the records maintained in the SAP system while making comparisons with a defunct manual register. The department's approach was inconsistent, as it had not accepted the SAP records for one purpose but relied on them for another. The tribunal emphasized that documentary evidence maintained in the regular course of business should prevail over physical stock discrepancies, especially when the department's methodology was flawed. Visit to Get Source Valuation - inclusion of notional cost of drawings and designs supplied free of cost by Maruti to the vendors in the assessable value of parts or components manufactured by vendors - The Tribunal held that the notional cost of drawings and designs supplied free of cost by Maruti could not be included in the assessable value of parts and components manufactured by the vendors. It was observed that these specifications were provided at the 'Request for Quotation' stage for the purpose of short-listing the vendors and were not used in the actual production of the parts or components. The detailed drawings and designs prepared by the vendors, which were essential for the production, were based on their own development and technology support from other companies. - Tribunal allowed all the appeals filed by the vendors. Visit to Get Source Case Laws: GST 2024 (3) TMI 748 Cancellation of GST registration of petitioner - time limitation - petitioner states that an appeal was filed against such cancellation order but that such appeal was rejected as being time barred - HELD THAT:- The appellate authority cannot be faulted for rejecting the appeal in view of the language of Section 107 of the Central Goods and Services Tax Act, 2017. At the same time, the petitioner should not be left without remedy. The reasons set out in the order of cancellation is non filing of returns for a continuous period of more than six months. In Suguna Cutpiece v. The Appellate Deputy Commissioner (ST)(GST) and others, [ 2022 (2) TMI 933 - MADRAS HIGH COURT] , this Court directed restoration of registration subject to certain conditions. In the over all facts and circumstances, the petitioner is entitled to an order on similar lines. The petitioner is directed to file returns for the period prior to the cancellation of registration, together with tax dues along with interest thereon and the fee fixed for belated filing of returns within a period of forty five (45) days from the date of receipt of a copy of this order - Petition disposed off. 2024 (3) TMI 746 Violation of principles of natural justice - ex-parte order - petitioner states that he could not file a reply as he did not had access to the portal as the registration of the petitioner had been cancelled retrospectively - HELD THAT:- Perusal of the Show Cause Notice shows that the Department has given separate headings excess claim Input Tax Credit [ITC], under declaration of ineligible ITC and ITC claim from cancelled dealers, return defaulters and tax non-payers. The impugned order, however, after recording the narration, records that a demand as ex-parte is created - the petitioner was unable to access the Show Cause Notice or reply to the said Show Cause Notices. The impugned order which had been passed solely on account that petitioner had not file a reply cannot be sustained. The matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 22.12.2023 is set aside - Petition disposed off. 2024 (3) TMI 745 Retrospective cancellation of registration - SCN does not put the petitioner to notice that the registration is liable to be cancelled retrospectively - petitioner had no opportunity to even object to the retrospective cancellation of the registration - Violation of principles of natural justice - HELD THAT:- The SCN and the impugned order are bereft of any details accordingly the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 27.02.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 18.02.2021 i.e., the date when the Show Cause Notice was issued. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off. 2024 (3) TMI 744 Cancellation of GST registration of petitioner - Interpretation of statute - Rule 22 (3) of CER - date of reply to SCN - whether the expression used shall issue an order within a period of 30 days is mandatory or directory? - HELD THAT:- Rule 22 (3) of the Rules refers to two separate proceedings. One initiated by the taxpayer by submitting an application seeking cancellation of registration and the other by the proper officer by issuance of show cause notice for cancellation of the registration. The timeline provided for issuance of an order is 30 days for both the proceedings. If the intention was that the proper office would forfeit the right to pass an order, then an anomalous situation would arise with regard to proceedings where the taxpayer voluntarily applies for cancellation. If the proper officer, qua the said proceedings, also forfeits the right to issue an order, then the application seeking cancellation would be deemed to be rejected and the taxpayer would continue to remain registered despite his desire to seek cancellation of registration. The expression shall issue an order used in Rule 22 (3) of the Rules cannot be construed as mandatory for proceedings under Rule 21 and directory for proceedings under Rule 20. Accordingly, we hold that the expression shall be passed within 30 days used in Rule 22(3) of the Rules is not mandatory but is only directory. The contention of learned counsel for the petitioner cannot be accepted that the authorities have lost the right to pass an order after the lapse of period of 30 days of the filing of the reply by the petitioner to the Show Cause Notice issued under Rule 21 of the Rules. The petition is accordingly disposed of directing the Proper Officer to expeditiously pass an order on the Show Cause Notice, preferably within a period of two weeks from today. 2024 (3) TMI 743 Levy of penalty u/s 129 (3) of the GST Act - appellant/petitioner did not generate e-Way Bill with a view to evade tax - violation of provisions of the GST Act read with GST Rules - HELD THAT:- The e-Invoice in Form GST Invoice-I is auto populated / generated on the common platform after e- Invoice is uploaded on the said portal in the manner prescribed in the said Rules. Further Part-B of the e-Way bill has been uploaded after filing up the relevant details of the vehicle transporting the goods. In the facts of this case it is not disputed that the e-Way Bill contained the complete details in Part-A and Part-B. Most importantly once these documents are produced, statutory duty is cast upon the revenue authorities to verify the authenticity of the said documents. All the documents (soft copies/e-invoices e-way bills) are in the official reach of the department. Hence, the verification is a very simple procedure which is required to be executed by the revenue authorities. Evidently in this case they failed to do so. The case of the petitioner is consistent that the driver was carrying digital copies of the tax invoice as well as e-Way Bill on his mobile number. The Revenue did not verify the digital device of the driver. If the assessee always had relevant documents in his favour, it stands to reason that there was no cause for him not to provide the digital copy of the e-Way Bill to the driver when the goods were being transported. After the driver had produced the digital copy of the tax invoice, it was the responsibility of the revenue to verify the same from the portal. The portal also contains the e-Way Bill which is auto populated after the e-Invoice uploaded. Evidently the Revenue failed to do so. The revenue cannot fasten the penalty upon the tax payers for its own default. The argument on behalf of the revenue to the effect that once the demand raised on the assessee was satisfied by making of payment, the assessee could not carry the order of penalty in appeal and is liable to be rejected - The assessee under Section 129(1) of the GST Act, 2017 has an option either to provide security or to make payment and satisfy the demand in full. However, the mere fact that the assessee has made payment will not disentitle him for carrying the order imposing the penalty in appeal. Since all the documents have been admittedly produced before the authorities at the time of inspection, there was no cause for detention, seizure or imposition of the penalty as has been done by the authorities in this case - It is noteworthy that the revenue is not challenged the authenticity of the bills or the fact that they were not duly filled it or the details were absent in the said bills. No irregularity in the bills have been pointed out on behalf of the revenue. The impugned order dated 04.01.2023 whereby the Assistant Commissioner, Commercial Tax, Mobile Squad-VII, Ghaziabad as well as the order dated 09.05.2023 passed by the respondent No.3/learned appellate authority/Additional Commissioner, State Tax, Mobile Squad, Unit-7, Ghaziabad are liable to be quashed and are quashed - Petition allowed. 2024 (3) TMI 742 Condonation of delay in filing appeal - sufficient cause for delay or not - Classification of goods - Bike and Scooter seat cover - to be classified under CTH 87089900 or not - taxable at GST rate of 28% or not - HELD THAT:- The appellant has presented sufficient cause that prevented them from filing the appeal within the normal period. Therefore, the delay of 21 days beyond the normal time limit in filing the appeal is condonable as provided under the proviso to Section 100(2) of CGST Act, 2017. Further it is found that this authority is empowered vide Section 101(1) of the CGST/TNGST Acts, 2017 to pass such orders as deemed fit. 2024 (3) TMI 741 Classification of supply of goods - Water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavoured (other than drinking water packed in 20 litre bottles) - to be classified under heading 2201 or not - HELD THAT:- The issue in the instant case requires a re-examination by the AAR, especially in view of the fact that a test report is now available in respect of a sample of the appellant themselves, and in view of the fact that such other documents like consent letter, process explanation, etc., have also been adduced by the appellant. The interest of justice will be met by remanding the case to the lower authority, with a direction to re-visit the issue, take into cognizance the documents now available such as the test report, consent order, etc., and to pass necessary orders as per the provisions of law, after offering an opportunity of personal hearing to the appellant - The matter is remanded to the Lower Authority for re-examination and passing of appropriate fresh orders into the matter, after following the principles of natural justice. 2024 (3) TMI 740 Scope of supply - transfer of title of goods by the Applicant to its customers or multiple transfers within the FTWZ - goods stored in FTWZ will be covered under the scope of Schedule III of the CGST Act, 2017 or not - applicability of Integrated Tax (IGST) Circular No. 3/1/2018 dated 25.05.2018 - HELD THAT:- Since the Authority for Advance Ruling had erred in not answering the question raised by the Appellant in its entirety and also not discussed all the contentions of the Appellant put forth in their original application. Hence, justice will be met by remanding the case to the lower authority, with direction to consider the question raised by the Appellant in its entirety, to give findings on the other points raised by the Appellant and to offer them another opportunity of personal hearing before deciding the case as per the provisions of law. The AAR should examine afresh whether the activities proposed to be undertaken by the Appellant are covered by entry 8(a), 8(b) or any other entry in Schedule III of CGST Act, 2017 or otherwise. All aspects of the matter are kept open for decision by the AAR. 2024 (3) TMI 739 Violation of principles of natural justice - failure to share documents and comments forwarded by DGGI, with the appellants - Rejection of application for Advance Ruling - Levy of GST - various fees collected by Tamil Nadu Medical Council, a Government Authority - HELD THAT:- The rejection of application for advance ruling in the instant case stems from the fact that an investigation initiated by DGGI against the appellant is pending on the same issue. This being the case, the advance ruling authority ought to have shared the new findings of DGGI that was lying before them, and discussed the same in detail, either during the personal hearing, or thereafter, before proceeding to finalise the case. The principles of natural justice have not been followed in the instant case since the advance ruling authority had erred in not sharing the documents and comments forwarded by DGGI, with the appellants - the ends of justice will be met by restoring the application for advance ruling to its original position, by way of remanding the case to the lower authority, with a direction to forward the letter dated 03.04.2023 of DGGI alongwith its enclosures, if any, to the appellant enabling them to comment on the same, and to offer them another opportunity of personal hearing before deciding the case as per the provisions of law. The matter is remanded to the Lower Authority for consideration and passing of appropriate orders, after following the principles of natural justice. 2024 (3) TMI 738 Levy of GST - Composite supply or not - recovery of nominal amount by the Applicant from employees for availing the facility of Canteen at the factory premises - recovery of premium of Medical Insurance Policy from the employees for them and their dependents at actuals under the HR Policy - recovery of nominal amount from employees for using of transportation facility to and from the factory and office premises provided to the employees in the course of employment - facility of Car extended to the employees of the Applicant-Company in the course of employment - ITC on facility of canteen service provided to employees by applicant as statutory obligation under Factories Act - ITC on on expense incurred for the well-being of employees such as vaccination and other benefits to avoid any disruption in Business - ITC on GST charged for gardening expenses of the Applicant-Company. Whether GST is applicable on recovery of nominal amount by the Applicant from employees for availing the facility of Canteen at the factory premises? - HELD THAT:- The canteen service provided by the applicant company on its own account to its employees, is a composite supply which gets treated as a supply of service in terms of Entry No. 6 of Schedule II to the CGST Act, 2017 - the amount charged on the employees by the applicant, whether nominal or otherwise, is to be treated as the consideration for such supply of canteen service on its own account to its employees on which taxes under GST is liable to be discharged by the applicant/employer. Whether Input Tax Credit is available on facility of canteen service provided to employees by applicant as statutory obligation under Factories Act - HELD THAT:- GST charged on the inward supplies received, if any, in relation to the provision of food to the employees by the applicant is admissible as ITC to them, provided the number of direct employees in the establishment is more than 250. Further, it is also held that while availing such ITC, the proportionate credit to the extent of cost recovered from such employees is required to be reversed by the applicant/employer. Whether GST is applicable on the recovery of premium of Medical Insurance Policy from the employees for them and their dependents at actuals under the HR Policy - HELD THAT:- The applicant is just a facilitator in the transaction relating to insurance, and practically no supply of service is made in the course or furtherance of business by the applicant in the instant case. Since the provision of this insurance cover to the employees and their dependents is reportedly provided in terms of the HR policy of the Applicant-Company, the same is to be treated as a contractual agreement entered into between the employer and the employee in accordance with clause 1 of Schedule III of the CGST Act, 2017, which is neither a supply of goods nor a supply of service. As per Section 7(2) of the Act, ibid, Schedule III supersedes Schedules I and II, which means that even if it is considered as a supply under Section 7(1), no tax will be payable in view of the provisions contained in clause 1 of Schedule III - no supply of service by the applicant is present in the instant case involving the collection and remitting of insurance premium to the insurance companies, and therefore GST is not liable to be discharged on such cases. Whether GST is applicable on recovery of nominal amount from employees for using of transportation facility to and from the factory and office premises provided to the employees in the course of employment? - HELD THAT:- In the instant case, the cab operators are the actual services providers, and that the applicant is not involved in any supply of transportation service to the employees, Further, in the instant case the applicant themselves pay up the actual cost of transportation to the service providers, i.e., the cab operators, but recovers only a nominal portion of the transportation cost from the employees, whereby the remaining portion of the transportation cost is borne as expenditure by the applicant. Further, since the nominal amount recovered from the employees forms part of the total cost reimbursed to the transportation service providers, no consideration actually accrues to the applicant in the instant case as well - no supply of service by the applicant is present in the instant case involving the transportation facility extended to the employees through a third party, and therefore GST is not liable to be discharged on such cases. Whether GST is applicable on facility of Car extended to the employees of the Applicant-Company in the course of employment? - HELD THAT:- In the instant case, the Applicant-Company reportedly pays the lease premium directly to car leasing company, and the overall salary cost of the related employees will get reduced to the extent of cost incurred by Applicant-Company to extend the expense incurred in relation car facility provided to employees for office purpose. However, wo notice that the circumstances relating to the car lease premium differs basically from the other cases discussed above in view of the fact that these types of car facility are normally provided to a few specific employees of the organisation, and that they are not general in nature like the canteen facility, insurance facility or the mass transportation facility - the cars are normally booked under the name of the company/organization, and it remains with them for a specific period, or until the lease period is over. Therefore, when the applicant provides the said service to their employees on their own account, and when the clement of perquisite is absent in the instant case, it is held that under the circumstances of the case, GST is applicable on the facility of Car extended to the employees of the Applicant-Company, even if it is in the course of employment. Whether Input Tax Credit can be availed on expense incurred for the well-being of employees such as vaccination and other benefits to avoid any disruption in Business? - HELD THAT:- As per Section 17(5)(b) of the CGST Act, 2017, the supply of goods or services or both in relation to health services cannot be availed as ITC, unless it is obligatory for an employer to provide the same its employees under any law for the time being in force. We notice that inspite of their claim that providing medical facility is part of service contract, the applicant has not adduced any details or documentary evidence in support of the same, and as a result no further discussions could be made in this regard. Moreover, even in the event of considering the same as an obligation or responsibility on the part of the employer, the same should be mandated under any law for the time being in force, and this aspect has not been substantiated by the applicant - the only respite available to the applicant in the form second proviso to Section 17(5)(b) of the CGST Act, 2017, also stands exhausted as discussed above, and therefore it is held that Input Tax Credit cannot be availed on the expense incurred for the wellbeing of employees such as vaccination and other health benefits extended to them. Whether Input Tax Credit is available on GST charged for gardening expenses of the Applicant-Company? - HELD THAT:- The definition of input service provided under Rule 2(1) of the erstwhile CENVAT Credit Rules, 2004 was already wide enough to encompass the availability of credit on such gardening services, as it contained the words, whether directly or indirectly, in or in relation to the manufacture . Whereas the definition of input service provided under Section 2(60) of the CGST Act, 2017, is much wider as it contains the words in the course or furtherance of business - Having been mandated by the Tamil Nadu Pollution Control Board under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, as amended in 1987 (Centred Act 14 of 1981), and the rules and orders made thereunder, as discussed in detail above, it is observed that gardening and maintenance of green belt in and around the unit s premises is an activity in the course or furtherance of business that is mandatorily required to be carried out by the applicant - ITC is available on the input services received by the applicant in the instant case, in relation to gardening activities carried out within the factory premises. Income Tax 2024 (3) TMI 737 Reopening of assessment - non-application of mind by AO - reopening after the expiry of four years - Borrowed satisfaction - Reliance on investigation initiated by Directorate General of Goods and Services Tax ( DG GST ) - as per AO Assessee had made transaction with two concerns [concerns did not have any assets or inventories or were indulging in sales and purchases that appeared to be fraudulent and bogus] - HELD THAT:- Entire basis on which the AO has formed a belief that income chargeable to tax has escaped assessment is that an investigation was initiated by Directorate General of Goods and Services Tax ( DG GST ), Mumbai on M/s. Meher and M/s. Nyles Sales Agencies Pvt. Ltd. ( Nyles ) in the month of September 2019. During the course of investigation it was found both these entities did not have any assets or inventories or were indulging in sales and purchases that appeared to be fraudulent and bogus. Reasons state that on analysis of available bank statements of Nyles it has been noticed that amounts were debited in the bank accounts immediately after credit entries. Assessee company was one of the beneficiary entities who made transaction of Rs. 3,39,00,000/- with Nyles. The fact is Assessee did have financial transactions with Nyles but Assessee had taken a loan from Nyles and not made any payment to Nyles or supplied any goods to Nyles. In the order disposing objections, the AO simply says that Assessee had made transaction with Nyles and that was enough to issue the notice for reassessment. The least that was expected of the AO is, on receipt of information, examine the same in the context of the facts of this case and satisfy himself whether the information received does prima facie lead to a reasonable belief that income chargeable to tax has escaped assessment. If the AO had only bothered to examine the records, he would have certainly found that in the annexure to the Form No. 3CD filed under Rule 6G(2)-statement of particulars required to be furnished under Section 44AB of the Act, Petitioner has disclosed that it had taken from Nyles an amount as loan. Even the PAN number of Nyles is recorded. Even the balance sheet as on 31st March 2015 indicates under the head Long Term Borrowings-Unsecured Loans against Nyles. Therefore, it clearly shows that the AO has acted on the satisfaction of the DG GST, Mumbai that income chargeable to tax has escaped assessment. It must also be borne in mind that a notice has been issued more than four years after the expiry of relevant assessment year and this was a case where assessment under Section 143(3) of the Act has been completed. Therefore, the AO was obliged to examine the information received in the context of the facts on record. If such an exercise were to be done, it is likely that the AO would have come to the conclusion that there was no failure to disclose truly and fully all material facts necessary for assessment. The entire proceedings in this case would also be hit by proviso to Section 147 of the Act which bars any reopening after the expiry of four years where assessment u/s 143(3) of the Act has been completed unless there was failure to truly and fully disclose material facts. The impugned notice is bad in law as it has not been issued by the AO on his satisfaction that there is reason to believe that income chargeable to tax has escaped assessment. Further, there has been total non-application of mind by the AO, the Range Head and the PCIT. Decided in favour of assessee. 2024 (3) TMI 736 Reopening of assessment u/s 147 - Reasons to believe - as per assessee AO has proceeded on fundamentally wrong facts - HELD THAT:- The facts mentioned in the reasons for reopening pertain to another entity viz. M/s. Paranjape Properties and Investments Private Limited and not of Petitioner because, as stated in the petition, Petitioner had filed return of income declaring total income of Rs. 24,19,30,640/- and the tax liability of Rs. 6,21,47,815/-. Petitioner had also claimed Rs. 3,29,91,090/- as refund and an assessment order accepting the return of income has been passed u/s 143(3) of the Act. Moreover, the assessment order referred to in the reasons is dated 25th December 2018, whereas the assessment order in the case of Petitioner was passed on 27th December 2018. In Paragraph No. 4 of the reasons, the AO says In this case, more than four years have lapsed , whereas it is less than four years. No affidavit-in-reply has been filed opposing the petition though till date enough opportunity since 11th April 2022 was given to file reply. We agree with Petitioner that the reasons recorded are based on incorrect facts. We also agree that no attempt has been made to deal with these errors in the order on objections and the order on objections in fact has more errors. All these indicate total non-application of mind and certainly adverse inference has to be drawn against the Revenue. As held in Ankita A. Choksey ( 2019 (1) TMI 862 - BOMBAY HIGH COURT] the condition precedent of reason to believe that income chargeable to tax has escaped assessment on correct facts must be satisfied by the AO so as to have jurisdiction to issue the reopening notice. In the present case, the AO has proceeded on fundamentally wrong facts to come to a belief/conclusion that income chargeable to tax has escaped assessment. Further, even when the same is pointed out by Petitioner, the AO in his order disposing the objections does not deal with the factual position. Thus there can be no reason for the AO to believe that income chargeable to tax has escaped assessment. Decided in favour of assessee. 2024 (3) TMI 735 Reopening notice issued to a non-existent entity - scheme of amalgamation approved - a wholly owned subsidiary of Petitioner ( LSIPL ) stood amalgamated with Petitioner - notice issued to company amalgamated for non filling Return - In the affidavit-in-reply, it is stated that the notice was issued because information was received through NMS/ITBA system under Multiyear NMS which is Non-filers Monitoring System (Priority 1) that LSIPL had not filed its return of income for AY 2013-2014 and AY 2014-2015 HELD THAT:- As stated that certain transactions were noticed under the PAN number of LSIPL during financial years pertaining to these assessment years, i.e., AY 2013-2014 and AY 2014-2015 and hence, for the purpose of applicability of provisions of the Act, LSIPL was not non-existing company. At the same time in the affidavit-in-reply it is further stated It is accepted that company was not required to file its income tax return from the appointed date as per scheme of amalgamation. As noted earlier, the appointed date was 1st April 2012. The entire basis of notice, which according to Respondents was issued due to non-filing of income tax return, collapses. In the circumstances, we see no reason to go into further averments made in the petitions or further grounds taken in the petitions. Assessee appeal allowed. 2024 (3) TMI 734 Reopening of assessment - Notice issued after more than four years of the expiry of relevant assessment year - as alleged Cello Stationery Product (Firm) has deposited cash in its bank account - partnership firm was converted into a private limited company - HELD THAT:- Reason to believe recorded that the firm M/s. Cello Stationery Products used to exist with effect from 1st April 2008 and in the year 2009, the partnership firm was converted into a private limited company. The entities were allotted different PANs due to which while filing AIR Report, bank has erroneously quoted PAN for the firm instead of the company. In the reasons, it is also recorded that in response to a notice under Section 133(6) of the Act, HDFC Bank, Malad (East) Branch has stated that the Account has cash deposits for AY 2013-2014 and the account was opened for CSPPL on 29th May 2008 and assessee has made total cash deposits of Rs. 1,87,39,187/- for FY 2012-2013. The HDFC Bank has also confirmed by its letter that there were nil cash deposits for firm Cello Stationery Products. Therefore, the AO should have recorded in the reasons to believe as to how he has come to the conclusion that apart from the amount of Rs. 1,87,39,187/- certified to have been deposited in cash by HDFC Bank, there is another deposit of Rs. 1,86,33,520/-, because admittedly there is only one bank account. Moreover, in the certificate which is annexed to the petition issued by the HDFC Bank giving details of cash deposited during the said financial year, the cash deposited is in two parts, i.e., more than Rs. 2,00,000/- and less than Rs. 2,00,000/-. The total deposit of more than Rs. 2,00,000/- comes to Rs. 1,86,33,520/- and cash deposit of less than Rs. 2,00,000/- is Rs. 1,05,667/- and the total of these two figures is Rs. 1,87,39,187/-. Therefore, the AO without examining these details has recorded the reasons to believe, which indicates non-application of mind. When these details have been brought to his notice admittedly in the objections filed by Petitioner, the AO instead of dealing with this duplicity has simply stated that those details will be considered during the reassessment proceedings. He has also not dealt with Petitioner s assertion in the objections that those amounts deposited in cash have been offered to tax. Strangely even in the affidavit-in-reply, Respondents after admitting that the bank has certified that only Rs. 1,87,39,187/- were deposited in cash during FY 2012-2013, has not explained as to how they proposed to reopen the assessment on the allegation that a sum of Rs. 3,73,72,707/- chargeable to tax has escaped assessment. It clearly shows that neither there was any independent application of mind by the AO while recording reasons nor application of mind by the sanctioning authority while giving approval. The reassessment proceeding was made on wrong and incorrect facts and therefore, makes the reopening null and void. The assessee has pointed out that there was only one bank account where only Rs. 1,87,39,187/- has been deposited in cash. HDFC bank also has issued such a certificate in response to notice that it received u/s 133(6) of the Act. The AO in his order disposing the objections does not deal with the factual position asserted by Petitioner. Therefore, there could be no reason for the AO to believe that income chargeable to tax has escaped assessment. Decided in favour of assessee. 2024 (3) TMI 733 Validity of Reopening of assessment - acquisition of immovable property jointly - husband s assessment in hands of wife - addition made as assessee has not submitted the details of source of sum paid for purchase of property by her husband, source and the details of receipt of amount from the relatives, whereas the husband s income is only Rs. 18,49,980/- - as submitted property was purchased by her husband and all the payments were made by him and Petitioner also explained that Petitioner s name was included as a joint holder in the agreement for sale, but no payment has been made by Petitioner HELD THAT:- Revenue has strongly opposed the petition, but at the end he agreed that those details have to be sought from the husband for husband s assessment and not from Petitioner herein because the AO has accepted that Petitioner has not made any payment for purchase of property. We also have to notice that surprisingly the Principal Chief Commissioner of Income Tax has also accorded sanction for issuance of this order instead of directing the AO to drop the proceedings against Petitioner. We hereby quash and set aside the order passed u/s 148A(d) of the Act, because in our opinion, it is not a fit case for reopening the assessment in the case of Petitioner. 2024 (3) TMI 732 Reopening of assessment - shares were transferred by way of a gift - Admittedly is respondents case that petitioner had transferred those shares without consideration - Whether transfer of shares by way of gift is an exempt transfer under Section 47(iii) and accordingly, not liable to capital gains as defined u/s 45 of the Act? - HELD THAT:- We are conscious that in this case return was accepted u/s 143(1) of the Act. Even in that case, the principle requirement that the AO has reason to believe that income chargeable to tax had escaped assessment would still survive. Though this formation of belief by the AO must be prima facie and at the stage when the Court is testing validity of such a notice, it would not be necessary for the Assessing Officer to conclusively establish that the income chargeable to tax had escaped assessment, for various reasons we are convinced that the reasons for reopening lack validity. In this case, Section 45 read with Section 47 read with Section 48 of the Act makes it clear that the AO could not have any tangible material to form a belief that income has escaped assessment. On scrutiny of the statutory provisions as the transaction in question does not invite any tax liability, we cannot accept revenue submission that there is some tangible material to form a belief that there is an escapement of income. Section 47 (1)(iii) of the Act, which deals with transactions not regarded as transfer, expressly provides nothing contained in Section 45 shall apply to any transfer of a capital asset under a gift or will or an irrevocable trust. The case in hand, therefore, would be governed by the main body of sub-clause (iii) of Section 47 of the Act. Therefore, even if there is a transfer of a capital asset under a gift, which admittedly in the case herein, it shall not amount to a transfer under Section 45 of the Act. If it does not amount to a transfer under Section 45 of the Act, no capital gains will be payable because Section 45 is the only taxing provision for capital gains. A gift is commonly known as voluntary transfer of property by one to another without any consideration. A gift does not require a consideration and if there is a consideration for the transaction, it is not a gift. Since in the reason to believe it is admitted that shares were transferred by assessee to NCPL without consideration, certainly it is a gift. Infact it is not even respondents case that is it not a gift. Mr. Sharma submitted, as an after thought, that assessee being a Trust it can be reasonably presumed that the transfer was for a consideration because anything a Trust does is for the benefit of its beneficiaries. It is not the case of the Revenue in the reasons to believe or in the order disposing objections or even in the affidavit in reply. Therefore, this submission cannot be even considered. We cannot proceed on hypothesis and deal with such presumptuous argument. Moreover, if the transfer is not valid, the property still remains with the Trust and in such a situation, there can be no capital gain. Decided in favour of assessee. 2024 (3) TMI 731 Reopening of assessment u/s 147 - claim of deduction u/s 36(1)(viia) - Petitioner filed its return of income ( ROI ) for AY 2010-11 declaring a total income but subsequently, filed a revised ROI as added back an amount being a provision for Non-Performing Advances as per the RBI Regulations. Petitioner has also claimed an amount as deduction u/s 36(1)(viia) of the Act being 7.5% of the profit of Petitioner and claim was disclosed in the computation of income HELD THAT:- Issue of deduction u/s 36(1)(viia) of the Act was under active consideration of the AO - AO had called upon Petitioner to give details of outstanding balance in provision for bad and doubtful debts created u/s 36(1)(viia) and also raised a specific query in respect of rural branches separately and called for proof of such rural branches. It is also stated in the Petition, and that has not been denied, that Petitioner was called upon to make submissions for the relevant assessment year on the basis of the notice issued for AY 2008-09. Petitioner vide its letter submitted the details including, inter alia, details of bad debts written off, details of outstanding balance and deduction claimed u/s 36(1) (viia) for the last three years. It is also averred in the petition that Petitioner clarified that Petitioner had claimed deduction under Section 36(1)(viia) of the Act only for 7.5% of total income but had not claimed any deduction for rural advances as on 31st March 2010 and the 7.5% being Rs. 65,37,16,370/-. In the affidavit in reply, there is no denial and it is just stated, I offer no comments as facts are stated . Therefore, as held in Aroni Commercials Limited [ 2014 (2) TMI 659 - BOMBAY HIGH COURT] it is settled law that once a query is raised during the assessment proceedings and Assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is also not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. Therefore, the reopening of the assessment, in our view, is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment. When the assessment order was passed the decision of the Apex Court in Catholic Syrian Bank Ltd [ 2012 (2) TMI 262 - SUPREME COURT] was available. In our view, the AO was supposed to be aware of the decision of the Apex Court in Catholic Syrian Bank Ltd. (supra), but did not refer to the said judgment or deal with the said judgment because he was satisfied with Petitioner s explanation that Petitioner had claimed deduction under Section 36(1)(viia) of the Act only for 7.5% of the total income and had not claimed any deduction for rural advances as on 31st March 2010. Therefore, this is a clear case of change of opinion and that cannot be a basis for reopening the assessment. One more point which requires mention is Petitioner has categorically stated and it has been accepted in the assessment order that it has not claimed any deduction for rural advances. If that is the case, there is no basis for any escapement of income. When the petition was admitted on 20th April 2016 also the Court had expressed a prima facie view that the AO would have formed a necessary opinion taking a view that the decision of the Apex Court in Catholic Syrian Bank Ltd. (supra) would not militate against the view canvassed by Assessee and allow the claim of Petitioner for deduction under Section 36(1)(viia) of the Act. Decided in favour of assessee. 2024 (3) TMI 730 Validity of reopening of assessment - Reasons to believe - non- independent application of mind by AO/Borrowed satisfaction - as argued jurisdictional preconditions have not been fulfilled in the present case, as the belief found by the AO is based on an audit objection without fulfilling an objective criteria - HELD THAT:- As details admittedly, were made available to the AO by Petitioner itself. It is thus clear that there is no failure on the part of Petitioner to disclose fully and truly the necessary information. Department has heavily relied upon the audit objections received from its own revenue Department to justify reopening of assessment. But it is clear from the documents themselves that the AO had sought explanation from Petitioner in respect of queries raised by the audit party. Petitioner has averred that as before the Respondent No. 1 made his submissions to the revenue audit objection he called for submissions from the Petitioner - each of the said audit objections have been duly explained by the Petitioner s Chartered Accountant through their letters dated 20.02.2018 and 01.11.2019. Petitioner understands that the then Respondent No. 1 had found the said explanation to be satisfactory and accordingly responded to the revenue audit objections. This is because from January, 2019 upto March 2021 that is for almost 26 months, no corrective steps were taken by the Respondent No. 1 in respect of any of the said items . This has not been denied in the affidavit in reply. Thus, we have no hesitation in holding that there was no failure on the part of Petitioner to disclose fully and truly the material facts, nor there was any tangible material with the AO, which could have otherwise justified the reopening of assessment by issuing the notice impugned. In the present case, the notice to reopen assessment does not even remotely make any mention of any tangible material has come to the notice of the AO after passing original assessment order to conclude that there was an escapement of assessment. The AO has failed to aver what material fact that Petitioner has failed to disclose fully and truly. It is clearly the very information which was before the AO as provided by Petitioner on the basis of which, a different view is being taken. Decided in favour of assessee. 2024 (3) TMI 729 Reopening of assessment - reasons to believe - admissibility of deduction u/s 80G - as argued jurisdictional pre-conditions have not been fulfilled in the present case as the belief formed by the AO is based on an audit objection without fulfilling an objective criteria - HELD THAT:- It is seen that prior to the passing of the original assessment order, AO has raised queries, each of which were duly responded by Petitioner. Petitioner has explained that no deduction was claimed by it except that under Section 80G of the Act. Copies of receipts of donations were also provided as proof of donation. All these details were also included in the computation of income. It is seen from the revised statement of income that an amount as shown as inadmissible expenses under Section 37 in Schedule 1. Schedule 7 specifies the donee s details showing the 50% deductible amount of the qualifying amount. Petitioner has, thus, submitted detailed explanation along with supporting documents. The documents on record also indicate that the Audit Wing of the Department raised certain objections to the original assessment order including the issue of deduction under Section 80G of the Act. It is seen that the AO justified the original assessment order to the audit party without accepting any adjustment to the same. The notice providing the reasons to believe itself is based on verification of the profit and loss account and computation of income showing the amount of CSR expenses debited under the head other expenses and the said amount being added back and claimed as deduction under Chapter VA as donation. The notice further goes on to say that during the course of original assessment proceedings, neither the AO has asked for any details and information on this issue from Assessee nor has Assessee volunteered any details. From the perusal of the documents, two glaring facts emerge. One is that all material/documents necessary for computing the income were disclosed and submitted by Petitioner during the course of assessment proceedings leading to an irrefutable conclusion that there was no failure on the part of Petitioner to disclose fully and truly all material facts. Secondly, there is a notable absence of any fresh tangible material coming to the knowledge of the AO and the reopening of assessment is purely on a re-examination of the very same material on the basis of which the original assessment order was passed. It is a well-settled principle of law that an AO has no power to review and this power is not to be confused with the power to reassess. The Apex Court in Commissioner of Income Tax, Delhi v. Kelvinator of India Ltd. ( 2010 (1) TMI 11 - SUPREME COURT ) has reiterated that mere change of opinion cannot be a ground for reopening concluded assessment. Thus the reopening of the assessment, in our view, is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment - reasons to believe notice itself indicates that the AO was already seized with information prior to passing of the original assessment order and as such, there is no tangible information on the basis of which he has allegedly formed the requisite belief. Decided in favour of assessee. 2024 (3) TMI 728 Exemption u/s. 11 being a Trust registered u/s. 12A - disallowing the exemption claimed by the assesse as while filing the return of income the assessee did not provide the details of new registration / approval obtained u/s. 12AB - HELD THAT:- Now, before the Tribunal, the assessee has filed a copy evidencing the new approval for registration u/s. 12AB. Therefore, hereby remit the matter back to the file of the Ld. AO to examine the new approval filed before the Tribunal (Form 10AC,) and decide the issue afresh after affording a reasonable opportunity of being heard to the assessee as per the principles of natural justice and in accordance with law. Accordingly, grounds raised by the assesse are allowed for statistical purposes. 2024 (3) TMI 727 Condonation of delay - assessee preferred an appeal before the CIT (A)-NFAC belatedly with a delay of 895 days - sufficient cause to condone the delay or not? - HELD THAT:- There is no representation on behalf of the assessee to represent the assessee s case and to explain the sufficient cause to condone the delay caused while filing the appeal before the CIT(A)-NFAC. It is a settled principle that the burden heavily lies on the assessee to explain the sufficient cause which prevented the assessee to file an appeal within the prescribed time limit. As per section 5 of the Limitation Act, 1963, any appeal or any application, may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period. It implies that the delay of each day needs to be justified and there must be sufficient cause for not preferring the appeal which is lacking in the instant case. Hon ble Supreme Court in the case of Ramlal vs. Rewa Coalfields Ltd.[ 1961 (5) TMI 54 - SUPREME COURT ] has held that the cause for the delay in filing the appeal which by due care and attention could have been avoided cannot be a sufficient cause within the meaning of the limitation provision. Where no negligence, nor inaction, or want of bona fides can be imputed to the appellant, a liberal construction of the provisions has to be made in order to advance substantial justice. In the present case, the assessee took more than two years to file the appeal before the Ld. CIT(A)-NFAC. But, the assessee has not given any plausible reasons before the CIT(A)-NFAC which constitutes a sufficient cause to condone the delay. Considering these facts and circumstances of the case, CIT(A)-NFAC has rightly dismissed the condonation of delay petition filed by the assessee - Appeal filed by the assessee is dismissed. 2024 (3) TMI 726 Addition u/s 68 - buyback was not genuine and added back the buyback amount as unexplained income - CIT(A) deleted the addition and allowed the benefit of exemption u/s 10(34A) - HELD THAT:- AO s show-cause notice was issued on 23.09.2021 and reply was sought latest by next date i.e. 24.09.2021. The assessee did respond by furnishing reply by letter dated 24.09.2021. This is not fair. Reasonable opportunity to the assessee is a must. Secondly, the facts have not been marshalled and appreciated in right perspective. Admittedly, AO incorporated in the assessment order only some contents of the reply dated 24.09.2021 furnished by the assessee to his show- cause notice dated 23.09.2021 and hastened to conclude that buyback was not genuine and added back the buyback amount as unexplained income u/s 68 of the Act. This is not correct. CIT(A) has given clear finding that the identity of UMS is established; genuineness of transaction is also proved as buyback was carried out as per the procedure prescribed under the Companies Act and approval from the Registrar of Companies was also taken; income distribution tax on buyback u/s 115QA was duly paid; the creditworthiness is established from the financials of UMS i.e. Balance Sheet at 31.03.2017, 30.11.2017 and 31.03.2018 of UMS and Knaup Management Services Pvt. Ltd. ( KMS ) which is 100% wholly owned subsidiaries of UMS and lastly, Valuation Report of UMS and KMS etc. under Rule 11UA of the Income Tax Rules, 1962. We endorse the findings of the Ld. CIT(A) that income arising to the assessee shares-holder as a result of buyback is exempt u/s 10(34A) of the Act by virtue of amendment brought on the statute book by the Finance Act, 2013 w.e.f. 01.04.2014. Accordingly, we sustain the order of the Ld. CIT(A) and reject the appeal of the Revenue. 2024 (3) TMI 725 Penalty u/s 271(1)(c) - additions made in the assessment order u/s 143(3) on estimate basis - HELD THAT:- Following guideline from the decision of Dilip N. Shroff [ 2007 (5) TMI 198 - SUPREME COURT] , Hon ble Madras High Court decided in CIT vs. Cafco Syndicate Shipping Co [ 2007 (7) TMI 35 - HIGH COURT, MADRAS] that disallowance on the ground that the expenditure was huge or that some vouchers were not available is not good enough to justify penalty in absence of anything more to suggest that the claim was not bonafide. There is no evidence in the case of the assessee that the claim was malafide. There is nothing on record that inadmissible expenses were claimed or that the expenses were incurred for purposes other than assessee s business. AO imposed the impugned penalty on the assessee for concealing particulars of his income. This is contrary to the facts on record. AO proceeded to compute the income of the assessee on the basis of the particulars as per tax audit report of gross turnover, gross profit, GP rate, depreciation, net profit and net profit rate. AO accepted the income declared but disallowed 10% of the claim of expenses on the turnover on the basis of details furnished during the course of assessment proceedings. Therefore, there is no concealment of particulars of income by the assessee so as to justify levy of the impugned penalty. As observed that the CIT(A) has not given any finding on the contention raised before him by the assessee that it was incorrect on the part of the AO to hold that the assessee concealed his income only on the basis of disallowance of expenses on estimate. CIT(A) is silent on the plea of the assessee contained in statement of facts also that the assessee withdrew his quantum appeal challenging the said disallowance on the assurance from the then AO that no penalty would be levied. No attempt at all has been made by the CIT(A) to have this plea verified. CIT(A) did not give any credence to the above contention and plea of the assessee for no valid reasons. Appeal of the assessee is allowed. 2024 (3) TMI 724 Disallowance u/s 43B - Disallowance towards the unpaid GST - HELD THAT:- The assessee did not debit the amount to the profit and loss account as an expenditure not the assessee claimed any deduction in respect of amount. In fact, the assessee has treated the same as current liabilities and provisions and also given the description under Schedule 7 regarding duties and taxes. Thus, the contention of the ld. A.R. that the provisions of section 43B is not applicable to the assessee as the assessee has paid the GST amount before filing of the return of income appears to be correct. The decision of Hon ble Apex Court in case of Chowringhi Sales Bureau Pvt. Ltd. [ 1972 (10) TMI 4 - SUPREME COURT] will not be applicable as in the present case, assessee had given the details of the current liabilities and not estimated the same and was not debited the same as an expenditure in profit and loss account and not claimed any deduction to that effect. But since the assessee had paid the said amount prior to filing of the return of income, the decision of Hon ble Delhi High Court will be applicable in case of assessee as the ratio laid down by the Noble Hawitt (I)(P) Ltd. [ 2007 (9) TMI 238 - DELHI HIGH COURT] will be squarely applicable in the present case. Thus, the appeal of the assessee is allowed. 2024 (3) TMI 723 Reopening of assessment u/s 147 - Case reopened after the lapse of a period of four years - change of opinion - eligibility for deduction u/s. 80IA - HELD THAT:- On a perusal of the assessment record, it transpires that as per the reasons to believe, the view taken by the A.O while framing the original assessment vide his order u/s. 143(3) dated 17.04.2012 had been revisited based on a mere change of opinion of the successor A.O as against that of his predecessor. On a perusal of the record, it can safely be gathered that the reopening of the concluded assessment of the assessee was based on the same set of facts as were available with the A.O. while framing the original assessment. To sum up, no fresh material/document had come in the possession of the A.O. after the culmination of the original assessment proceedings, which would have vested jurisdiction with him to reopen the concluded assessment of the assessee. Our aforesaid conviction is duly fortified on a bare perusal of the reasons to believe , which reveals that the reopening of the concluded assessment of the assessee was based on a mere re- appreciation of the facts available on record by the successor A.O. DR on being confronted with the aforesaid factual position could not rebut the same. A.O. had traversed beyond the scope of his jurisdiction and had wrongly reopened the concluded assessment of the assessee under Sec. 147 of the Act. We are unable to comprehend what new material or information had come up before the A.O., which justified the reopening of the concluded assessment of the assessee. We are afraid that re-appreciation of the facts already available on record before the A.O. while framing the original assessment is not permissible u/s 147. It would be relevant to point out that the view taken by the Full bench of the Hon ble High Court of Delhi in CIT Vs. Kelvinator of India [ 2002 (4) TMI 37 - DELHI HIGH COURT] that the failure of the A.O to consider certain material that was available on record while framing the original assessment cannot justify the reopening of his concluded assessment, as the same would amount to opening of the assessment based on a change of opinion , which is not allowed as per the mandate of law, had thereafter been approved by the Hon ble Apex Court in CIT Vs. Kelvinator of India [ 2010 (1) TMI 11 - SUPREME COURT] . On careful perusal of the original assessment framed by the A.O vide his order passed u/s. 143(3) dated 17.04.2012 reveals that he had at length deliberated upon the assessee's claim for deduction u/s. 80IA of the Act and only after found it in order had accepted the same. Also, the A.O. had looked into the assessee's claim for depreciation on various assets and as is discernible from the assessment order, had partly disallowed his claim for depreciation on motor cars. Considering the aforesaid facts, we are of a firm conviction that it is not only a case that no fresh material had come to the notice of the A.O after the culmination of the original assessment which would reveal any income of the assessee chargeable to tax had escaped assessment, but in fact, is a case where the assessee's claim for deduction u/s. 80IA of the Act as well as depreciation was looked into by the A.O. while framing the original assessment and were allowed after necessary deliberations. We, thus, concur with the contention of the Ld. AR that as the concluded assessment of the assessee had been reopened based on a mere change of opinion , therefore, the same had rightly been struck down on the said count itself by the first appellate authority. Scope of the 1st proviso to Sec. 147 - We are unable to comprehend what facts the assessee had failed to disclose which would have otherwise justified bringing his case within the realm of the extended period contemplated in the 1st proviso of section 147 of the Act. As the assessee had disclosed fully and truly all the material facts as were necessary for his assessment for the year under consideration, i.e., AY 2010-11; therefore, it could by no means be held to be in default to bring it within the sweep of 1st proviso of Section 147 of the Act. Thus we concur with the contention of the Ld. AR that the assessment of the assessee for AY 2010-11 that was earlier framed under Sec. 143(3), dated 17.04.2012, dehors any failure on his part to fully and truly disclose all material facts necessary for his assessment could not have been reopened by the AO vide Notice u/s 148, dated 31.03.2016, i.e, after the expiry of four years from the end of the relevant assessment year. Decided in favour of assessee. 2024 (3) TMI 722 Lumpsum disallowance of certain expenses to cover up the possible leakages of revenue in net profit - said expenses are inflated, non-business personal nature as per his convenience - assessee has paid the expenditure in cash and the same are merely self made kaccha bill and the genuiness of these bills are cannot be compared with the registered dealer when paid with cheque - HELD THAT:- The bench noted that the expenses supported by self-made slips of employees and kaccha bills of local traders do not mean that these expenses are not genuine or could not be verified when there is no observation of a single instance in the order of the lower authority. In fact kachha bill itself suggest the necessity and urgency of the expenditure and therefore we are of the considered view that it is in correct perspective in as much as there is no qualification by the Chartered Accountant and during assessment proceedings ld. AO has not pointed out any single irregularity/ inaccuracy in the vouchers produced by the assessee. Thus there is no need to sustain the lumpsum disallowance of Rs. 5 lac. We derive support from the case of ACIT Vs. Ganpati Enterprises Ltd. [ 2013 (12) TMI 1097 - ITAT DELHI] where in held that The findings extracted nowhere reveals what was the total amount of expenditure claimed by assessee, which specific voucher was not in accordance with law. In a just sweeping statement, AO observed that on verification, some of the expenses were found to be unverifiable, but what were those expenses, he should make out in the assessment order, only then he can disallow them. Therefore, the said disallowance was to be deleted. Ground no. 1 raised by the assessee is allowed. Addition of interest against interest free loans - as argued assessee has sufficient non-interest bearing fund available in the books of accounts - HELD THAT:- Assessee has sufficient non-interest bearing funds to give advance to its members and the interest received is more than the interest paid. Thus, as respectfully following the finding recorded by Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] wherein it has been held that Tribunal having found that the interest free funds available to the assessee were sufficient to meet its investment, it could be presumed that funds were given to subsidiaries out of interest free funds and therefore, interest referable to funds given to subsidiaries is allowable as deduction u/s 36(1)(iii). Considering that aspect of the matter and when it is very much clear that the assessee is having sufficient interest free fund no notional interest be disallowable. In terms of these observations ground no. 2 raised by the assessee is allowed. 2024 (3) TMI 721 Rectification proceedings u/s. 154 - Unexplained investment addition u/s 69 - amount as surrendered by the appellant on account of unexplained and out of books of investment in land and its subsequent sale - appellant did not establish any connect regarding how its business income has been utilized to invest in the said land or make any expenditure regarding the same, therefore, this investment is clearly unexplained as per section 69 required to be considered for taxation as per the provisions of section 115BBE HELD THAT:- As evident that the assessee has disclosed the discrepancies as income and not any asset or income allegedly undisclosed. Therefore, it is the income on account of error or omission on the part of the assessee during the business and the same view is taken by the jurisdictional high court in the case of in case of CIT vs Bajargan Traders [ 2017 (11) TMI 388 - RAJASTHAN HIGH COURT ] where in High Court held that when the assessee is dealing in sale of food grains, rice and oil seeds and the excess stock which is found during survey is stock of rice then, it can be said that investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. Therefore, the investment in the excess stock is to be brought to tax under head business income and not under the head income from other sources. Further in the case of Shri Lovish Singhal [ 2018 (5) TMI 1646 - ITAT JODHPUR ] the Jodhpur Tribunal applying the proposition of law laid down in the Bajargan Traders (supra), held that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found u/s. 69 of the Act and accordingly held that there is no justification for taxing such income u/s. 115BBE of the Act. Even the similar view taken in case of ACIT vs Shri Sudesh Kumar Gupta [ 2020 (6) TMI 463 - ITAT JAIPUR ] issue under consideration was whether rectification proceedings u/s. 154 were permissible when at the first place while passing assessment order u/s. 143(3) provisions of section 69 were not invoked for charging higher rate of tax u/s. 115BBE, wherein the coordinate bench held that the assessing officer has not invoked the provisions of section 69 at the first place while passing assessment order u/s. 143(3) and therefore, the provisions of section 115BBE which are contingent on satisfaction of requirement of section 69 cannot be independently applied by invoking the provisions of section 154 - no merit in the order passed u/s. 154 of the act and the same is quashed. Assessee appeal allowed. 2024 (3) TMI 720 Transfer Pricing Adjustments - Validity of the order passed u/s. 92CA(3) - period of limitation - HELD THAT:- TPO can pass an order u/s 92CA of the Act at any time before 60 days prior to the date on which period of limitation referred to u/s 153 expires. Thus, 60 days have to be counted prior to the date of last date of limitation u/s 153. Thus, the date for passing of ld. TPO s order was on or before 31/10/3019, because the completion of assessment u/s. 153(1), i.e., 21 months from the end of the assessment year plus 12 months extension considering TP reference has been made was 31/12/2019. Thus, the final assessment order is clearly barred by limitation in view of the decision of the Hon ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd. [ 2022 (4) TMI 808 - MADRAS HIGH COURT ] Accordingly, we hold that the ld. TPO order is invalid and accordingly, is quashed. If there is no TPO order consequently, the entire transfer pricing adjustment proposed by the ld. TPO and the international transaction becomes non-est which is also liable to be quashed. Whether once the ld. TPO order is held to be nullity of or barred by limitation then could AO have passed the draft order treating it to be as 'eligible assessee? - In the instant case, it will be apparent that there is no transfer pricing variation arising as a consequence of the order of the ld. TPO once the said transfer pricing order is held to be time-barred, non-est and void ab-inito from the very date of its existence and inception. The entire premise to adopt the special procedure under section 144C of the Act and treat the assessee an eligible assessee rests on the fact that the order passed under section 92CA(3) of the Act has resulted in transfer pricing variations prejudicial to the interest of the assessee. Accordingly, once the assessee becomes an ineligible assessee, the very foundation for proceeding to pass the draft assessment order does not survive, meaning thereby, that the draft assessment order passed in the instant case becomes legally invalid and hence, al consequential proceedings on the basis of the said order fail In the instant case, a reference was made by the Ld. AO to TPO as per the provisions of section 92CA(1) of the Act an accordingly the timelines prescribed u/s 153 of the Act. Accordingly, the time limit to complete the assessment u/s. 143(3) expired on 31/12/2019 and accordingly, the whole assessment order is void ab initio being barred by limitation. Appeal of the assessee 2024 (3) TMI 719 Deduction u/s 80P - interest income - HELD THAT:- So far as the Revenue s attempt to come out a distinction between nominal and regular members interest income(s) is concerned, hon'ble apex court s recent landmark decision in Mavilayi Service Co-operative Bank Ltd., vs., CIT [ 2021 (1) TMI 488 - SUPREME COURT] has further settled the issue that the same does not bar an assessee from raising sec. 80P deduction once these twin memberships are in tune with the corresponding state s cooperative law. Revenue further denying section 80P(2)(a)(i) deduction for the reason a Souharda Society is registered under Karnataka Souharda Sahakari Act, 1997 than an eligible assessee covered u/s. 2(19) of the Act applicable in case of a credit cooperative society only - Revenue could hardly dispute the clinching fact that the instant issue has already been decided in assessee s favour and against the department by hon ble jurisdictional high court s in Government of India, Ministry of Finance vs., Karnataka State Souharda Federal Cooperative Ltd., [ 2022 (1) TMI 540 - KARNATAKA HIGH COURT] thereby holding that such cooperative societies registered under the Karnataka Souhadra Sahakari Act, 1997 very well come under the purview of a cooperative society defined u/s. 2(19) of the Act. That being the case, we reject the Revenue s sole substantive ground. 2024 (3) TMI 718 Levy of late fee u/s 234E r.w.s. 200A - applying section 200A(l)(c) of the Act retrospectively - HELD THAT:- As decided in own case in [ 2024 (3) TMI 685 - ITAT DELHI] respondent had had imposed the late fee only u/s 234E of the Act for the assessment years 2012-2013, 2013-2014, 2015- 2015. Section 200A(L)(c) of the Act was not introduced during the said assessment years. In the absence of any provisions under section 200A of the Act, when they have processed the application for TDS under section 200A, no late fee can be imposed under section 234E. Hence, in such view of the matter, this Court feels that the impugned orders are liable to be set aside. - Decided in favour of assessee. 2024 (3) TMI 717 Taxability of income in India - FIS - sub-contracting charges paid by SPi India to the Assessee - condition of make available of technical knowledge - India-USA DTAA - HELD THAT:- As decided in Assessee s own case for A.Y 2019-20 [ 2023 (7) TMI 406 - ITAT DELHI ] sub-contracting charges received by the assessee does not satisfy the make available condition as envisaged under Article 12(4) of the India-USA DTAA and hence are not chargeable to tax as FIS in India in the hands of the assessee. Accordingly, all the grounds of appeal are decided in favour of the assessee. Taxability of sales commission - The assessee renders services relating to e-publishing work in the nature of editorial services including page composition, language polishing, indexing, correcting faulty grammar and punctuation etc. We have held that the said sub-contracting charges do not come within the purview of Fees for Included Services ( FIS ) under the India-USA DTAA the connected service of sales and marketing support service also does not satisfy the make available conditions and hence, is not taxable. Accordingly, we allow ground of assessee and delete the addition. Levying interest u/s 234A - assessee submitted that as per the notification No.93/2020/F. No.370142/35/2020-TPL, dated 31/12/2020, the due date for furnishing income tax return for the impugned AY 2020-21 was extended to February, 15, 2021, therefore, the AO erred in levying interest u/s 234A for the A.Y.2020-21 as the assessee has filed the return of income on February, 2021, which is well within the extended due date - HELD THAT:- We remand the issue to the file of the AO with a direction to verify the extended due date for filing the return and the actual date of return filed by the Assessee and pass appropriate order in accordance with law. According, the ground No.5.1 of the assessee is partly allowed for statistical purposes. Levying of interest u/s 234B - Considering the submission made by the AR, we deem it fit to remand the issue of levying interest u/s 234B of the Act to the file of the AO to verify and re-compute the assessed income and the tax thereon in accordance with law. Accordingly, ground No.5.2 of the assessee is partly allowed for statistical purpose. Non-consideration of refund due to the assesse - assessee submitted that while arriving at the demand payable in the computation sheet, the AO erred in making an erroneous in adjustment towards amount refunded without appreciating the fact that no refund was granted to the assessee and sought for remanding in the issue to the file of the AO - HELD THAT:- Considering the submission made by the AR, we remand the issue involved in ground to the file of the AO to consider the submission 2024 (3) TMI 716 Revision u/s 263 - Deemed rental value - income from house property - applicability of provisions u/sec. 23(5) - CIT has passed the revision order with a directions to assessing officer to examine and verify on two aspects (i) annual rental value of unsold flats in respect of completed projects determined under the provisions of section 23(5) and (ii) method of accounting adopted for revenue recognition of the project - HELD THAT:- We on perusal of the information and correspondence of the assessee in the assessment proceedings, found that there is no discussion on the provisions of section 23(5) of the Act. Whereas the AO has called for the information with respect to various inventories and the details of flats as referred in the order u/sec. 143(3) of the order but there is no specific query raised or dealt on the applicability of provisions u/sec. 23(5) of the Act in the proceedings. The provisions are applicable from A.Y 2018-19 and the AO should have made enquiries on these facts and in the correspondence of the assessee there is a general information with respect to unsold flats but not on determination of deemed rent on the flats as per the provisions of section 23(5) of the Act. Whereas in the A.Y 2017-18, the A.O has made addition of the notional rent on the projects of Chaturbhuj and Yashvawin and passed order u/sec. 143(3) r.w.s 263 r.w.s 144B of the Act and the appeal is pending before the CIT(A). Further the assessee has not challenged the revision order u/s 263 of the Act and the AO has passed the order u/sec. 143(3) r.w.s 263 of the Act. DR submissions are that the Pr.CIT has dealt on these facts which proves that the A.O. has not applied his mind and the A.O has not made enquiries on the specific issue. We find the A.O has called for the information, but there is no examination and verification of the facts or findings by the A.O on the determination of deemed rental income - matter needs to be verified and reasons for claim should be justified by the assessee as discussed above. No infirmity in the order of the Pr.CIT on the directions to A.O. on the determination of deemed rental value u/sec. 23(5) of the Act and we up hold the same and dismiss this ground of appeal of the assessee. Method of accounting adopted for revenue recognition of the project - The assessee has applied the method of accounting consistently from earlier years and was accepted by the revenue authorities and the assessee has offered the income on adopting project completion method and the income was offered in the A.Y 2019-20 which is not disputed. We find the assessee has filed the information incompliance to the notices issued and clarifications are filed over a period of time in the assessment proceedings. AR emphasized that the assessee has been fallowing project completion method from the earlier years and was being accepted by the revenue and it cannot be disturbed. AO has applied the mind and has accepted the assessee s project completion method, were the assessee has been consistently fallowing the policy of revenue recognition as per Accounting Standards. Whereas the assessee has diligently complied with the provisions of Act, and maintained the facts /details in the books of accounts and fallowed the method of accounting. Accordingly we find that the AO has applied his mind on method of accounting and the information and took a possible view considering the information of offering of income for the A.Y 2019-20. Therefore we are of the opinion that the directions of the Pr.CIT order in respect method of accounting of revenue recognition cannot be sustained and we set aside the order of the Pr. CIT on this directions and allow this ground of appeal in favour of the assessee. Appeal filed by the assessee is partly allowed. 2024 (3) TMI 715 Revision u/s 263 - Basis of the revision proceeding based on the revenue audit objection - PCIT held that the assessee is not eligible to claim benefit u/s. 10AA and there is lack of enquiry by the ld. AO on the points upon which the assessment was reopened - HELD THAT:- Claim was already allowed from the assessment year 2011-12 and the issue based on the survey has already been examined for all the years in the reassessment proceeding from the A.Y. 2010-2011 to 2017-2018. The entire basis of the proceeding u/s. 263 is based on the revenue audit objection. All the issues relevant for scrutiny assessment have been considered by the AO and all relevant enquiries were carried out and there is no fault found the PCIT in other years also and thus it is nothing but a change of opinion when the assessment pursuant to notice u/s. 148 has already been completed and there is no error or fault in the order passed by the assessee and the other issue raised in the reasons recorded for reopening wherein the assessee contented that Rental of plant machinery and building by M/s Pinkcity Colorstones Pvt. Ltd. was to its DTA Unit, i.e., Mahapura Unit and not to Sitapura SEZ Unit. Even the SEZ Rules do not permit to take Building / Plant Machinery on rent, without prior permission of the Development Commissioner and no such permission was taken. No statement by any Director or Employee that plant machinery and building have been given on rent by M/s Pinkcity Colorstones Pvt. Ltd. to Sitapura SEZ Unit. SEZ unit has constructed its own Building and purchased Plant Machinery. M/s Pinkcity Colorstones Pvt. Ltd. has not sold any plant machinery to Sitapura SEZ Unit. M/s Pinkcity Colorstones Pvt. Ltd. was not having strong profits but on the contrary was incurring regular losses. Employees of M/s Pinkcity Colorstones Pvt. Ltd. were absorbed by its DTA Unit, i.e., Mahapura Unit and not by Sitapura SEZ Unit. There is no bar that deduction u/s. 10AA will not be permitted if the management of two companies is similar. Items were not transferred from its Mahapura Unit to Sitapura SEZ unit, even otherwise, some raw-materials (gemstones) were sold which were used for manufacturing by SEZ unit, even otherwise there is no bar under the Act in order to claim deduction u/s. 10AA. The assessee already submitted that in the initial years casting machine were not available in Sitapura SEZ unit, hence, casted components were purchased from Pink City Color Stones Pvt Ltd. Thus the proceeding initiated u/s. 263 is merely based on the audit objection and there is no independent view of the ld. PCIT and even on merits when the claim has been accepted by re-opening the case after survey which has been completed there cannot be third inning to the revenue. To drive home to this contention drive strength from the finding of the Hon ble apex court in case of Parashuram Pottery Works Co. Ltd [ 1976 (11) TMI 1 - SUPREME COURT] held we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity. Thus we quash the order passed by the PCIT, Central, Jaipur. Decided in favour of assessee. 2024 (3) TMI 714 Validity of reopening of the case u/s. 147- addition of unexplained cash credit u/s. 68 - allegation of bogus share transaction - HELD THAT:- Admittedly, it is a fact on record that the transaction undertaken by the assessee in the year under appeal before us is in respect of sale of shares held as investment which had been duly reported in the audited financial statements giving their opening balances from the preceding years. The reasons recorded by the assessee for reopening the case do not in any way point out towards this nature of transaction. They only suggest that assessee had received the amounts from the said company which has been alleged to be fictitious shell company. We have also gone through the documents placed in the paper book which evidently demonstrates that the assessee has sold its shares held as investment and the amount has been received through proper banking channel from the company against the said sale of shares. We have also taken note of the basis of addition which has been noted as amount received towards issue of share capital and share premium by the assessee to the respective company from whom the amount is received as not a correct fact. Thus we hold that the reassessment proceeding initiated u/s. 147 are not in accordance with law - on the merits of the case, assessee has evidently demonstrated the nature and source of the amount received in its bank account which is against the investment held by it in the Balance sheet. Assessee appeal allowed. 2024 (3) TMI 713 TP Adjustment - Interest on delayed receivables - HELD THAT:- As per explanation (i)(c) of Section 92B of the Income Tax Act as amended by Finance Act, 2012 w.r.e.f. 01.04.2002, the interest receivables is an international transaction. Section 92B(i)(c) reads capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business. In the instant case, the revenue has clearly shown a pattern by analyzing the statistics over a period of time which is spread over more than one year and based on that the AO came to conclusion that there exists an arrangement. In the case of Albany Molecular Research Hyderabad Research Center (P.) Ltd. [ 2020 (11) TMI 1018 - ITAT HYDERABAD] held that interest on outstanding receivables is a separate international transaction and directed to charge interest by applying LIBOR + 200 Points. In the case of Apache Footwear India Pvt. Ltd. vs. ACIT [ 2023 (4) TMI 521 - ITAT HYDERABAD] concluded that interest on outstanding receivables from the AE is required to be separately benchmarked and interest should be charged on the delayed period @ 6% on the receivables. We also make it clear that interest cannot be charged on each and every receivable and has to be examined on case to case basis and the TPO has to enquire and analyze the statistics over a period of time to discern a pattern to come to a conclusion that the arrangement reflects an international transaction. The AO has to examine the transactions of similar in nature with non-AEs to come to a conclusion to charge interest and also to determine the basis of interest to be charged. In this case, the inter company services agreement provides for charging of interest on delay of receivables after 60 days. The argument that the chargeability may accrue and doesn t necessarily binding on the assessee to charge the interest cannot be accepted. The very purpose of transfer pricing mechanism and determination of arm s length price is to examine whether the related party is given undue benefit at the cost of the profits and the consequent taxes to be paid in India. Hence, we direct that the adjustment on account of receivables be computed after following the directions of the ld. DRP. The AO has considered each and every transaction and arrived at right conclusion to determine the adjustment. While computing so, it is directed that the AO shall set off the receivables cleared by the AEs in less than 30 days or received in advance as ordered by the ld. DRP. These directions are applicable to the year in question as the chargeability on interest receivables varies from year to year. The LIBOR is an internationally recognized rate which is appropriate to benchmark and to determine ALP on receivables. The mark-up decided by the ld. DRP is held to be reasonable. In the result, the appeal of the assessee on this ground is partly allowed. Capitalization wireless ports - disallowance by capitalizing the cost incurred towards purchase of indoor wireless ports and allowing depreciation at the rate of 15% - as submitted that the cost incurred for purchase of indoor wireless ports is for replacement of parts and not in the nature of acquisition of new plant and machinery - AO has in this regard, has, recorded a categorical finding that these indoor wireless ports are not spare parts replaced but they have been purchased a fresh as a part of or as an acquisition of plant and machinery - HELD THAT:- The indoor wireless ports are in the nature of computer peripherals and hence, deprecation @60% is allowable. The appeal of the assessee on this ground is allowed. Allocation-expenses SEZ/non SEZ units - assessee submitted a bifurcation of income and expenses between SEZ and taxable units along with schedule of fixed assets and depreciation for both SEZ and taxable units and employee details for both SEZ and taxable units - HELD THAT:- The assessee had maintained separate books of accounts in respect of its SEZ and taxable units, which were audited by its auditor and the certificate furnished before the AO. The assessee had also furnished the statement of computation of income, profit and loss account of the SEZ unit to the AO to substantiate that the expenses (both direct as well as direct) have been correctly accounted in the SEZ unit. The AO has not pointed out any discrepancy in the aforesaid documentary evidences furnished by the Appellant. It is a settled position of law that the actual expenditure which directly pertains to a particular unit cannot be allocated to other unit. AO has also allocated the Repair and Maintenance expense to the SEZ unit ignoring the fact that as per clause 3.10 of the lease agreement of the SEZ unit all repair are to be carried out by Lessor. Thus, the allocation of such expenses is fundamentally flawed. Staff welfare expenses, contribution to gratuity and recruitment expenses being directly identifiable cannot be apportioned on the basis of number of employees. With respect to indirect/ common costs as well, the turnover basis for allocation of indirect/ common expenses is the most reasonable method which had been consistently followed by the Appellant in the preceding years and duly accepted by the revenue authorities. Hence, we find that the reasons given by the Revenue and the case laws relied there upon cannot be said to be reasonable grounds to reallocate the expenses in existence of the facts contrary to the decision taken by the ld. DRP. The appeal of the assessee on this ground is allowed. Increase in Capital Reserve - disallowance of additional claim for deduction paid to the employee towards compensation for cancelled stock awards - HELD THAT:- In this case, the amount of additional claim for deduction cannot be taxed since deduction for expenditure of equivalent amount stands disallowed as prior period expenditure and the disallowance be restricted to Rs.11,04,38,263/-. The directions of the ld. DRP are affirmed to that extent. 2024 (3) TMI 712 TDS u/s 195 - Remittances made to US based company M/s. IGTL Solutions (USA) - HELD THAT:- A Co-ordinate Bench of the Tribunal [ 2024 (3) TMI 633 - ITAT HYDERABAD directed AO to cause verification of the certificate and in the event the contents of the certificate issued in section 195(3) are found to be correct and genuine, then the consequences would be that the remittances that have been made to M/s. IGTL Solutions (USA) would be non-taxable so far as the TDS is concerned, since if the contents of such certificate are accepted, then the action on the part of the Revenue in carrying out a deduction at source on the remittances made to M/s. IGTL Solutions (USA) would be bad. Hence, while respectfully following the order of the Hon ble High Court [ 2023 (9) TMI 1445 - TELANGANA HIGH COURT] direct the learned Assessing Officer to cause verification of the certificate dated 10/02/2003, issued under section 195(3) of the Act and if it is found to be genuine, the consequence shall be that the entire remittances that were made to M/s. IGTL Solutions (USA) would be non-taxable so far as TDS is concerned, and the impugned order under section 201(1A) of the Act will have no legs to stand. Grounds are answered accordingly. 2024 (3) TMI 711 Addition u/s 36(1)(va) r.w.s. 2(24)(x) - delayed deposit of Employees Contribution to ESI PF - assessee has submitted that in fact, there was no delay in depositing of Employees Contribution to ESI PF and there was a mistake/inadvertent error on the part of the accountant in mentioning the dates of the deposit resulting into the aforesaid disallowance - HELD THAT:- The matter is restored on the issue to the file of the Assessing Officer to verify the contention of the assessee and if the Employees Contribution to ESI PF is found deposited within the due date as prescribed under the relevant statues, then no disallowance be made in that respect. Adjustments u/s 143(1)(a)(ii) - Disallowance of deduction u/s 80JJAA while processing the return u/s 143(1) - HELD THAT:- As decided in Sujatha Pugazendhi vs. ACIT[ 2023 (4) TMI 288 - ITAT CHENNAI ] as held that up to assessment year 2020-21, there is no provisions u/s. 143(1)(a) of the Act to make any adjustments towards Chapter VI-A deductions while processing return of income u/s. 143(1)(a) of the Act. Therefore, we are of the considered view that even if assessee does not file return of income on or before due date prescribed u/s. 139(1) of the Act, then no adjustment can be made towards Chapter VI-A deductions under the head C- deductions in respect of certain income. Since, deduction u/s. 80JJAA comes under Chapter VI-A under the head C, in our considered view, while processing return of income for the assessment year 2018-19, the AO cannot make any adjustments while processing return of income u/s. 143(1)(a) of the Act. Therefore, we are of the considered view that the AO is erred in making additions towards deduction claimed u/s. 80JJAA of the Act, while processing return of income u/s. 143(1)(a) Respectfully following the above decision of the Tribunal, the addition made by the CPC/Assessing Officer while processing the return u/s 143(1) of the Act in respect of deduction claimed u/s 80JJAA of the Act is ordered to be deleted. 2024 (3) TMI 710 Addition u/s 68 - Genuineness of LTCG and claim of exemption u/s 10(38) - sale of penny stock script - HELD THAT:- Assessing Officer and Ld.CIT(A) has applied the concept of Human probabilities and held the above said scrip to be a penny stock without bring on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider. Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non-genuine. - Accordingly the Ground No.1 raised by the assessee is allowed. Addition u/s 68 - bogus loan transaction - as alleged assessee failed to prove the capacity and genuineness of the transactions - HELD THAT:- AO has observed from the financial statements of the lender companies and he formed opinion on the basis of earning capacity and not on the basis of funds available to make to loan to others. In our view what is needed to be seen is the funds available with the lenders to make the loan to form an opinion on the capacity of the lenders not the earning capacity. These are financial entities, has to be judged on the basis of funds available in the business. With regard to genuineness of the transaction, we observe that assessee has taken unsecured loans from Blue Circle Services Ltd., JMD Sounds Ltd and JMD Telefilms Industries Ltd., and submitted the confirmations letters from them which are placed on record. At the same time, assessee also submitted bank statements and financial statements of Blue Circle Services Ltd., JMD Sounds Ltd and JMD Telefilms Industries Ltd., in the Paper Book and it is brought to our notice that assessee has repaid the unsecured loans taken by it along with interest. As brought to our notice that the assessee has repaid to JMD Sounds Ltd current financial year itself, the same is placed on record at Page No. 128 and 129 of the paper book. Similarly, the payment of JMD Telefilms Ltd in the same financial year, the same is place on record at Page 123 and 124 of the paper book. The payment of Blue Circle Service Ltd are paid in the subsequent assessment year along with interest. Therefore, assessee has demonstrated that assessee has taken unsecured loans and repaid the same along with interest. Normally accommodation entries are taken and the unsecured loans remain unsettled for a long period of time. However, in this case, the assessee has taken the loan and repaid the same along with interest, it clearly indicate that the loan transaction is genuine. Also brought to our notice that the assessment was reopened mainly on the basis of statement of Shri Jagdish Purohit and Shri Jagdish has subsequently retracted the statement given. Therefore, the genuineness has to be seen independently. Accordingly, Ground No.2 raised by the assessee is allowed. Disallowance made on account of interest expenses - deduction u/s 57 or u/s 37(1) - As we have adjudicated Ground No.2 in favour of the assessee and the issue involved is disallowance of interest on the same loan. This ground being interest paid i.e., consequential to Ground No. 2, is also allowed in favour of the assessee. 2024 (3) TMI 709 Addition u/s 68 - unexplained sundry creditors - as before NFAC, no reply has been filed - NFAC observed that ld. AO has passed speaking order with detailed discussion on the issue involved therein and the assessee has not pursued the appeal before NFAC - HELD THAT:- Admittedly, there was no response from the assessee before NFAC. As such, NFAC has confirmed the order of the ld. AO. Before us, ld. A.R. submitted that these are trade creditors emanated from the purchases made by assessee in the assessment year under consideration. Once the department has accepted the purchases as genuine, the other limb of the same transaction being a trade creditors cannot be doubted or no addition could be made on this count. In our opinion, at this stage, we are not in a position to decide the appeal on merit as the NFAC/CIT(A) has not gone in to the merit of the issues raised by the assessee before it. Being so, in our opinion, it is appropriate to remit the entire issue in dispute to the file of NFAC/CIT(A) to decide the same after giving opportunity of hearing to the assessee. Appeal of the assessee is partly allowed for statistical purposes. 2024 (3) TMI 708 Assessment u/s 153A - Addition u/s 69A on Investment in FDR and difference in credits received in bank accounts but not considered in the ITR - Whether CIT(A) has erred in confirming the addition without bringing on record any incriminating material found during the course of search? - HELD THAT:- As undisputed facts from the record, that nothing incriminating material was found during the course of search and that the additions made by AO were not based on any incriminating materials/paper seized during search operation in respect of the assessment year 2013-14 and 2014-15. It is seen that the whole additions have been made on the basis of bank statement submitted in response to questionnaire issued by the AO. In our view, it is settled law that no addition can be made u/s 153A otherwise than on the basis of incriminating document. In view of the judgement of Abhisar Buildwell Pvt Ltd. ( 2023 (4) TMI 1056 - SUPREME COURT] in absence of incriminating material, AO would not assume the jurisdiction to assess or reassess total income of the appellant in the present case. As such, the additions made by the AO and sustained by the Ld. CIT(A) are liable to be deleted. Thus, ground of assessee is allowed. Assessment u/s 153A or 153C - addition has been made on the basis of material seized during search conducted on a person other than the assessee (i.e., an independent search warrant was issued) - AY 2018-19 - HELD THAT:- It is admitted facts on record that in the present case, the assessment proceedings were imitated and completed u/s 153A of the Act, based on material seized during search conducted on a person other than the assessee. In the present case, in our view, the assessment proceedings could only be initiated u/s 153C and not 153A of the act, and that to only after satisfaction was so arrived in the case of proceedings of M/S Golden Tulip Hospitality Pvt. that the material found and seized during search were being pertains to the appellant. Thus, the CIT (A) has failed to appreciate the fact that the searched premises from where the ledger was found does not belong to the assessee, and therefore, the assessment order passed by the AO u/s 153A is liable to be held without jurisdiction. 2024 (3) TMI 707 Maintainability of appeal against Scrutiny assessment u/s 143(3) or intimation u/s 143(1) - Cause of action for appeal arising from assessment or intimation - Application for rectification of intimation pending - AR contended that the income was assessed at 10% as per the intimation u/s 143(1) of the Act whereas in the assessment completed u/s 143(3) of the Act, it was treated as business profit and taxed at 30% as against 10% at special rate u/s 115BBDA HELD THAT:- On perusal of the impugned Assessment Order passed u/s 143(3) it is clear that AO has assessed the total income solely relying on the adjustment made by the AO/CPC in the intimation made u/s 143(1). In the impugned Assessment Order passed u/s 143(3) there is no independent discussion as regards the income assessed at Rs. 23,29,62,420/-. Section 246A specifically provides for an appeal as against intimation issued under section 143(1) of the Act. In the instant case, total income has been assessed as per the intimation passed u/s 143(1). Therefore, the cause of action for the assessee arises from the intimation issued u/s 143(1) and appeal ought to have been filed as against the same. The assessment completed u/s 143(3) of the Act merely adopts the assessed figures in the intimation order passed under section 143(3) of the Act. Therefore, no cause of action arises from the order passed u/s 143(3) of the Act. Section 143(4) of the Act only mentions that on completion of regular assessment under section 143(3) or 144 of the Act, the tax paid by assessee under section 143(1) of the Act shall be deemed to have been paid toward such regular assessment. That by itself does not mean there is merger of intimation under section 143(1) with that of regular assessment under section 143(3) / 144 (unless issue has been discussed and adjudicated in regular assessment under section 143(3) / 144 of the Act). Assessee, against the intimation under section 143(1) of the Act, has filed a rectification application under section 154 of the Act and the same is pending disposal. CIT(A) in the impugned order has directed the AO to dispose off the said rectification application - Moreover, if assessee is advised to file an appeal as against the intimation u/s 143(1) a liberal approach may be taken for condonation of delay since assessee s application for rectification of the intimation under section 143(1) of the Act has been filed within time and same is pending disposal. With the above said observation, the grounds of the assessee are rejected. Customs 2024 (3) TMI 747 Seeking a writ/order/direction to the respondent No.2 to record the petitioner's statement under Section 108 of the Customs Act, in the presence of his advocate i.e. at a visible but not audible distance, during his interrogation - HELD THAT:- The petitioner's advocate is permitted to remain present when the petitioner is summoned for interrogation. The petitioner's advocate to remain present at a visible but not audible distance. We also permit videography of the said interrogation, however, at the cost of the petitioner. It is made clear that if the advocate is unable to remain present or if the person videographing is not present, that will not be a ground for the petitioner, not to remain present, before the appropriate authority, when summoned. Petition allowed. 2024 (3) TMI 706 Revocation of the customs broker licence - Misuse of G-Cards - sub-letting of the licence on commission basis for a monthly consideration - contravention of regulations 10, 11 (a), (b), (d), (e) (m) of the Regulations - HELD THAT:- We are unable to accept the submission of the learned counsel for the petitioner for the reason that a Customs Broker occupies a very important position in the customs house. A lot of trust is kept in the customs broker by the importers, exporters as well as by the Government agencies. To ensure appropriate discharge of such trust, the Customs Broker Licensing Regulations have been framed and there has to be strict compliance thereof. Any contravention of such obligation would invite sanction as provided in the Regulations. We are of the view that the appellant having admitted permitting the use of his licence by third party in exchange for monthly remuneration, the punishment of cancellation of licence is not disproportionate. Further, as noticed no substantial question of law arises in the subject appeal. Thus, the appeal is dismissed. 2024 (3) TMI 705 Territorial Jurisdiction - Validity of summons issued - investigation against the assessee at different locations - Import of gold and silver findings - summons issued u/s 108 by the third respondent, which is the Customs Department in Hyderabad - petitioner is based in Uttar Pradesh and that investigation has been initiated in Chennai and Hyderabad - HELD THAT:- Challenge is to a summons dated 09.02.2024 and proceedings pursuant thereto. Except in extraordinary situations or in cases where the person issuing the summons does not have jurisdiction or authority to do so, it is inappropriate in exercise of discretionary jurisdiction under Article 226 to interfere with summons' and proceedings pursuant thereto. In this case, the earlier summons and investigation was undertaken by the Customs Department in Hyderabad. The impugned summons was issued by the DRI at Chennai. At this preliminary stage, it is neither advisable nor appropriate to second guess the object and purpose of the investigation. As correctly pointed out by learned junior standing counsel for the third respondent, the fact situation in this case is different from that in the judgment of the Division Bench in as much as the petitioner here is based in Uttar Pradesh. More importantly, in this case, the earlier investigation was at the instance of the Customs Department and this investigation is at the instance of the DRI, Chennai. Thus, I am not inclined to interfere with the impugned summons. Therefore, W.P.No.5880 of 2024 is dismissed. No costs. Consequently, W.M.P.No.6511 of 2024 is closed. 2024 (3) TMI 704 Seeking release of the goods imported - betelnuts/supari described as Menthol Scented Sweet Supari ( goods ) - nature of the mix created - FSSAI issued test report Split Areca Nut with mild smell of Menthol and confirmed to FSSAI standards (Exhibit H ) - DYCC - presence of kernel husk fragments - classification of confirmed to be falling under CTH 21069030 - HELD THAT:- From the materials on record, there was no reason for the Respondents to discard the opinion as rendered by the FSSAI so as to take a stance not to clear the goods for home consumption. In our opinion, there was also no reason for the Respondents to disown or read into the report of the DYCC as to what has actually not been provided, namely, that there are impurities in the goods much less harmful. With the assistance of the learned counsel for the parties, we examined the issue as to what is the purport of the DYCC s report when it uses the words that the samples u/r contain pieces of kernel husk fragments . It appears from the material furnished before us by the learned counsel for the parties, and which ought not to be in dispute that the kernel husk is the hard (brown) portion of a coconut, the particles of which may get mixed when the kernel (white edible portion inside the coconut) is grated. If the grating in a given case is little deep, it is likely that the actual kernel is mixed with the particles of the hard portion (skull of the coconut) which holds the kernel. It is also likely that some strings of the outer husk of the kernel (literally the dry fiber part of the coconut ) can also be described to be kernel husk. Thus, we do not find that there is any objectionable or any fatal impurity which would render the goods to be labelled as prohibitory. In our opinion, the respondents ought not to have taken such a decision that the goods should not be granted a clearance and/or a situation is brought about that they do not conform, to the opinion as rendered by the CAAR. In our view, in the facts of the present case, accepting such stand, as taken on behalf of the respondents would certainly render nugatory, the ruling of the CAAR, as also the report of the FSSAI and the DYCC. Such stand of the department thus, cannot be sustained. The Petition is allowed. 2024 (3) TMI 703 Confiscation of the gold bars - remelted gold of foreign origin or not - Penalty - Seizure of gold - irregular weight and size - scope of Sec 123 - proof of bonafide purchase - validity of the retracted statement - HELD THAT:- The statement recorded by Revenue at the time of panchanama proceedings cannot be said to be freely given as Mr. A. Praveen Kumar was travelling with his wife and sister and was under fear that his wife and sister may also be arrested. Evidently, all were detained and brought to DRI office. The statement being not free is also evident from the fact that the appellant, at the first opportunity in his bail application, has denied his statement recorded on 10.03.2020 and had also stated that they have purchased gold on proper invoice. Further, the statement of Mr. V.B. Vimal of Srinidhi Gold, Coimbatore does not inspire confidence, as he stated that he does not transact in gold other than by way of banking channel. Further, he stated that he sometimes facilitates purchase from the open market, if required by customer on payment of cash, for which he charges nominal commission of Rs.2000/- per kg. The statement is self contradictory and evidently, he was under pressure when the statement was recorded as on the said date, his shop was searched and records were examined and there was shortage of gold as per stock register. Further, Smt. A. Varalakshmi, in her very first statement (on summons), has stated the fact that they had negotiated purchase of gold from M/s Aryan Gold, Bangalore and had accordingly, gone there with her son Mr. A. Praveen Kumar who assists her in the family business and they had taken delivery on credit basis. Further, she had stated that the payment for the same has been made through banking channel. From the perusal of the copy of invoice produced, it is evident that M/s Aryan Gold are registered with GST department and have also charged GST on the transaction. Further, Mr. Somanath of M/s Aryan Gold, who was also examined by the officers, has supported the transaction of sale of subject gold in question, to the appellants on credit basis and subsequently, received the payment through banking channel and in support thereof, had produced both the copy of invoice as well as copy of his bank statement. Thus, there is independent external evidence available in the facts of this case and the genuinity of the transaction is evident from the bank statement, wherein payment has been received by the seller from the buyer in due course within a period of about 15 days from the date of sale. As the transaction is through banking channel, thus, prima facie is evidence of its genuineness. Thus, appellants have discharged the onus u/s 123 on them and they have explained the source with certainty. Accordingly, allow these appeals and set aside the impugned orders. The appellants Smt. A. Varalakshmi or Mr. A. Praveen Kumar are held entitled to receive back the gold, and if the same is already disposed of by the department, are held entitled to receive the sale proceeds of the same with interest as per Rules. All penalties also stand set aside. Appeals allowed. 2024 (3) TMI 702 Confiscation - fine - penalty - Mis-declaring the quantity of cigarettes imported under warehouse bill of entry for re-export purpose - HELD THAT:- On reading of the observations made by the learned Commissioner (Appeals), we find that he took a lenient view in reducing the quantum of penalty on the appellant. However, considering the overall facts and circumstances of the case, more particularly, absence of the profit margin involved in the case in hand and that the confiscated goods were still under the custody of the department, we are of the view that the ends of justice would be met, if the quantum of penalty is further reduced. Thus, the impugned order is modified to the extent of reducing the quantum of penalty from Rs.10,00,000/- (Rupees Ten Lakhs) to Rs.5,00,000/- (Rupees Five Lakhs) u/s 112(a) ibid, which shall be paid forthwith by the appellant. The appeal is disposed of in the above terms. 2024 (3) TMI 701 Duty liability - interest - penalty - Duty-free imports against the scrips issued under the target plus scheme of the Foreign Trade Policy - HELD THAT:- According to Ld AR, the ineligibility of the exports, against which the scrips had been issued, rendered the exemption granted on the imports to be invalid. Reliance was placed on the decision of the Hon ble Supreme Court in Munjal Showa Ltd v. Commissioner of Customs Central Excise [ 2022 (9) TMI 1076 - SUPREME COURT] . We find that the show cause notice was issued consequent to cancellation of the scrips by the licensing authority which, itself, was prompted by reporting of the issue by the investigating agency. We find that the Hon ble High Court of Telangana had since set aside the cancellation of the scrips for restoration of status quo ante. This had sufficient impact on the outcome in the impugned order as to place it in jeopardy. Thus, it will only be appropriate to have the matter decided afresh, to enable which we set aside the impugned order and restore the dispute before the adjudicating authority for disposal of the show cause notice, preferably, within four months of receipt of this order. 2024 (3) TMI 700 Penalty of penalty for abetment of the fraudulent export scheme - Shifting the burden on Customs officials for proper examination of Goods - misdeclaration of quantity and value - charge of committing an act or omitting to commit act - claim for authorization exempting duties under the duty entitlement pass book (DEPB) scheme in the Foreign Trade Policy (FTP) on future imports - HELD THAT:- The impugned order has held that the goods having remained, albeit in the containers, in a designated area of the port of export after examination by the officer-noticee, and, though the adjudicating authority shied away from saying so, after the cessation of control over the goods by the appellant, possibility of substitution could not be foreclosed with much the same benefit flowing from shipment of goods of unknown provenance and diminished value as before; that, in any case, is different violation and allegation not incorporated in the show cause notice. With the officer-noticee having been discharged from the allegation of not having conformed to the statutory mandate in section 51 of the Customs Act, 1962, the conformity of the contents of the container, at that point in time, with the declaration is beyond controversy. No evidence has been brought on record that the goods were not substituted after examination which would have been manifested by appeal of Revenue against the dropping of charges against officer-noticee. It would appear that such possibility had not been conjectured and not investigated by the agencies of Revenue and, in the circumstances, is not amenable for refutation of the claim of appellant seeking the benefit from that finding. The show cause notice contains narration of role of appellant in procuring the goods, as found, and of his role in procuring documentation for non-existent goods as well as the greasing of the system to leach the exchequer. These are derived from statements which were not subjected to the rigour of section 138B of Customs Act, 1962. Those may not, therefore, be appropriate grounds for connecting the appellant with misdeclaration or entering goods for export without declaration. The plausibility of goods having conformed to declaration, though found otherwise subsequently, at the time of completion of statutory obligation devolving on the appellant is no longer fiction and, in the absence of refuting thereto with facts, must serve the exporter too. Consequently, we set aside the impugned order and allow the appeal. 2024 (3) TMI 699 Seeking revocation of suspension of the Customs license - execution of fake export through Land Customs Station - HELD THAT:- We find that the continuous suspension of the license of the Customs Broker without either conducting an inquiry or issuing a notice for revocation of the license or imposition of penalty is bad in law and needs to be set aside. We, therefore, find that the Appellant has made out a case for seeking the revocation of the suspension of the Customs license. Without passing any remarks on the merits of the case of revocation of license or imposition of penalty and giving full liberty to the Commissioner to proceed in the matter as per the regulations, order of the suspension of the Customs Broker license cannot be sustained. Thus , the appeal is allowed. 2024 (3) TMI 698 Valuation of the imported goods - Mis-classification of goods - value of the goods on the basis of some entries taken from the rough note books and diaries - Demand - Penalty levied - imported goods as pre-sensitized positive offset aluminium plates - classified under CTI 8442 50 39 - whether the entries in the notebook/ diaries can be considered for determining the transaction value - HELD THAT:- In the present case, the corroborative evidence, as noted above, indicates that the value mentioned by the appellant in the Bills of Entry is comparable to the assesseed value of the good imported by other importers at the same time. The value is also comparable to the value determined by the designated authority in the Final Notification in anti-dumping matter. It would be seen from the comments that rough entries were made and they cannot be considered towards payment received from imports. It needs to be noted that Rakesh of Aakruti Impex is an Indian buyer and Ajit Kumar Jain has maintained receipt and payment from him in Rupees with exchange rates of RMB and USD for rough estimation. Aakruti Impex is the only buyer of offset printing plate imported by Barfo Impex under the seven Bills of Entry and sold under 22 VAT invoices. The contention of the appellant, therefore, is that the local rough estimates of Rakesh of Aakruti Impex made in foreign exchange were for rough business estimation only and they cannot be considered towards payment made to overseas supplier, more particularly when the value of the imported goods is comparable to the contemporaneous imports and the value indicated in the Final Anti-Dumping Notification dated 15.05.2020. Hence, it is not possible to accept the contention of the department that the transaction value was required to be rejected as the rough registers indicated some additional consideration, apart from the banking transactions, and the transaction value was correctly re-determined in accordance with the 2007 Valuation Rules. Thus, the impugned order dated 06.01.2020 passed by the Principal Commissioner deserves to be set aside and is set aside. Customs Appeal are, accordingly, allowed with consequential relief (s) if any. Corporate Laws 2024 (3) TMI 697 Criminal proceedings against the Directors - Petitioner contending that financial transactions, inherently civil in nature, were wrongly dragged into criminal litigation - Applicability of vicarious liability in criminal proceedings - Invocation of inherent jurisdiction of this Court under Section 482 CrPC - criminal breach of trust, cheating, dishonestly inducing delivery of property, forgery and criminal conspiracy - HELD THAT:- It is manifested that the criminal contents are emanated from the alleged financial transaction took place between the present applicants along with their company namely M/s Dignify Builtech Private Ltd. and opposite party No. 2. Although financial transaction between them is admitted, however, route of money transaction has been disputed by both the parties. Opposite party No. 2 came with the case that there was bipartite financial transaction/agreement between the opposite party No. 2 and the accused company. Thus, opposite party No. 2 has directly transferred the amount in the account of accused company, having considered the negotiation took place between them. However, present applicants came with the case that it was a tripartite agreement between the parties involving one more company namely M/s Shubhkamna Builtech Private Ltd. Thus, it appears that there was circuitous route in transferring the money through another corporate being M/s Shubhkamna Builtech Private Ltd. It would not be befitting to make any comment on the summoning order, however, technicality, if any, is not sufficient to drop the entire criminal proceeding initiated at the behest of opposite party No. 2. In this eventuality, it is always open to the present applicant to raise this objection before the court concerned, who is not bound with the police report submitted under Section 173 CrPC and the court can issue summons, having considered the facts and circumstances of the case and the material available on record, against the other person as well, who has not been arraigned in the charge sheet. He would be at liberty to take action under Section 319 CrPC. Sections 190 and 204 of the CrPC does not restrict the jurisdiction of the court concerned in issuing process against any accused, if warranted. It is admitted to the parties that no final winding up order has been passed under the Companies Act and, while appointing provisional liquidator, company court/tribunal can impose certain conditions/limitations upon the provisional liquidator. Thus, it is evident from the relevant portion of order dated 20.9.1997 passed by Hon ble Delhi High Court that provisional liquidator had been appointed with limited power to take all the assets, books of account and the record of the company. Exhaustive power has been given to the liquidator under the provisions of the Companies Act which, in fact, is applicable after the conclusion of winding up proceedings, therefore, there are no force in the submission that criminal proceedings should not have been initiated without sanction of the court competent - Even assuming that there is requirement of prior sanction of the court competent to institute a case on behalf of company under liquidation, no limitation has been imposed on the power of the court concerned to entertain the criminal prosecution launched in the ordinary course under the provisions of the code of criminal procedure. Provision relating to the prior sanction before filing litigation on behalf of the company is required only to ascertain the financial liabilities of the company and to secure its funds. The opposite party No. 2 has not committed any illegality in instituting a criminal proceeding against the present applicants, who have been arraigned in the FIR for the offence under several sections of the IPC. The criminal proceeding initiated on behalf of respondent No. 2 against the present applicant is maintainable and learned Magistrate has rightly taken cognizance on the police report submitted under Section 173 CrPC. On the facts as mentioned in the FIR prima facie commission of offence is made out against the present applicants, who are the directors of the accused company and were throughout instrumental in inducing the present applicant to purchase the land situated near NOIDA Express Way and dishonestly misused the money for other work which they had received from opposite party No. 2 in lieu of transferring the land which was agreed upon between the parties to be purchased for opposite party No. 2. Disputed question of fact has been raised by the learned counsel for the applicants in order to prove the innocence of the present applicants which can more appropriately be scrutinized by the trial court. In the facts and circumstances of the present case, there are no abuse of the process of Court nor any justifiable ground to pass an order so as to secure the ends of justice. No ground is made out warranting indulgence of this Court in exercise of inherent jurisdiction under Section 482 CrPC to quash the criminal proceeding as prayed for. The instant application under Section 482 CrPC, being misconceived and devoid of merits, is dismissed. Insolvency & Bankruptcy 2024 (3) TMI 696 Seeking condonation delay of 41 days in filing the present appeal - Sufficient reasons for delay or not - Admission of section 9 application - initiation of CIRP - HELD THAT:- Any person aggrieved by any order of the Adjudicating Authority is vested with the statutory right of filing an appeal. However, the statutory right to file the appeal is required to be exercised within a period of 30 days of the impugned order before this Tribunal. If for certain reasons the right to file appeal is not exercised within the prescribed 30 days, the proviso to Section 61 (2) can be invoked which proviso provides that the appeal can still be filed subject to such appeal being filed up to a further period of 15 days only. The statutory construct is absolutely clear and unambiguous that the limitation period provided under Section 61(2) of IBC is 30 days which is extendable by a maximum of 15 days. Thus, no appeal can be filed after the expiry of the extended period of 15 days and that any appeal filed within the extended limitation period can be admitted only after satisfying the Appellate Tribunal that there was sufficient cause justifying the delay of 15 days. IBC by virtue of being a special statute, this Tribunal is not empowered to condone any delay beyond the statutory prescriptions in IBC containing a provision for limitation. This legal precept has been squarely laid down by the Hon ble Supreme Court and for this purpose reference made to the judgement of the Hon ble Supreme Court in Kalpraj Dharamshi vs Kotak Investment Advisors Ltd [ 2021 (3) TMI 496 - SUPREME COURT] wherein it has been noticed that IBC being a special statute, for purposes of calculating the period of limitation to file an appeal, the governing section shall be Section 61 of the IBC. Section 61 of the IBC has to be interpreted keeping in mind the overall purpose and object of the IBC which inter-alia includes timely resolution of the CIRP. That being an avowed objective of this legislation and it being settled law that for purposes of calculating the period of limitation to file an appeal in any IBC proceeding, the governing Section shall be Section 61 of the IBC, the submission of the Appellant that the period of limitation shall commence for filing the appeal when the Appellant became aware of the order is untenable. Undisputedly, the present impugned order was pronounced on 22.11.2023. Thus, limitation for filing the appeal starts from 22.11.2023 and does not depend upon when the Appellant becomes aware of the order. The date on which the order is pronounced is to be excluded from the calculation of limitation in terms of Section 12(1) of the Limitation Act. The 30 days period comes to an end on 22.12.2023 and further period of 15 days comes to an end on 07.01.2024. The Appeal having been filed on 01.02.2024, the appeal has clearly been filed with a delay of more than 15 days from the date of expiry of limitation - the jurisdiction to condone the delay is limited to only 15 days under Section 61(2) of IBC, hence, the delay condonation application cannot be entertained. The delay condonation application deserves to be dismissed. In result, the delay condonation application is dismissed and the Memo of Appeal is rejected. PMLA 2024 (3) TMI 695 Money laundering - written complaint filed by Bank of Baroda based on EY audit alleging that the company along with others including the petitioner committed bank fraud to the tune of Rs. 57.29 crores - petitioner is aggrieved by continuance of ED investigation conducted by the respondent under Section 120B read with Section 420 IPC, Section 13(2) read with Section 13(1)(d) of Prevention of Corruption Act, 1988 against M/s Technovaa Plastic Industries Private Limited (Company) and others, wherein petitioner is named as accused No. 3 - HELD THAT:- The summons issued by ED cannot be quashed merely because the relevant documents required for purpose of investigation or confrontation to the petitioner, have not been specified in the summons. It needs to be kept in perspective that under the scheme of PMLA, 2002 upon identification of existence of property being proceeds of crime, the Competent Authority is to inquire into relevant aspects in relation to such property and take necessary measures in this regard as per provisions of PMLA, 2002. Since ECIR in an internal document created by Department before initiation of prosecution against persons involved with process or activity connected with proceeds of crime, it is not necessary to reveal the evidence collected by the ED at this stage in the summons forwarded to the petitioner. Petitioner is yet to be absolved of scheduled offence by way of discharge, acquittal or quashing and as such protection orders cannot be issued in favour of petitioner ignoring the mandate under Section 45 of PMLA, 2002 for grant of bail. Further the summoning in exercise of statutory powers cannot be stalled merely on mere apprehension that petitioner may be arrested and prosecuted on basis of summons issued after registration of ECIR, in proceedings initiated by ED. In the facts and circumstances, no grounds for interim relief are made out at this stage. It may be clarified that no observations have been made on merits or demerits of the proceedings initiated by Enforcement of Directorate at this stage, and the questions are left open to be considered in the light of investigation by ED. Application disposed off. Service Tax 2024 (3) TMI 694 Levy of service tax - sales/gross receipts - demand worked out on the basis of Income Tax Returns for the year 2014-15 to 2017-18 filed by the appellant and on the basis of 26 AS and profit and loss accounts for the aforesaid period - Corroborative evidences or not - time limitation - HELD THAT:- It is an established principle of law that no tax can be demanded on figures artificially worked out, merely on the basis of some third party data unless they are co-related independently with other evidence. The sustenance of demand amount without other corroborative evidence cannot be upheld. Moreover, due abatement of threshold exemption limit, if admissible, is a right of the appellant and cannot be ignored and therefore cannot be denied. Moreover, it is held in a series of cases that no tax is leviable on the tax component perse. The demand for duty as made out in the show cause notice and consequent demand for payment of interest and penalty cannot be considered and is not made out. The impugned order of the lower authority is set aside and the matter remanded with the direction that due abatement as admissible to the appellant based on threshold limits, as well as discounting of sales that are VAT paid be considered before re-adjudicating the matter afresh. Appeal disposed off by way of remand. 2024 (3) TMI 693 Liability to service tax - construction activities - main contractor was discharging Service Tax liability - Revenue is of the view that during the impugned period, sub-contractors are required to pay Service Tax in terms of Master Circular No. 96/7/2007-S.T. dated 23.08.2007 - Time limitation - HELD THAT:- Although in terms of the Master Circular No. 96/7/2007-S.T. dated 23.08.2007 the respondents were liable to pay Service Tax being the sub-contractor, on the premise that the main contractor had discharged their Service Tax liability, the respondents did not pay Service Tax. The fact of non-payment of Service Tax had come to the knowledge of the Revenue in 2008 when the audit was conducted at the end of the main contractors, who were discharging Service Tax liability on the activity of the respondents who were sub-contractors. Despite that, no investigations were conducted at the end of the respondents. Time Limitation - HELD THAT:- Moreover, the Show Cause Notices were issued after almost three years of knowing the fact that the respondents were not paying Service Tax being sub-contractors - The whole of the demand is barred by limitation. There are no merit in the appeals filed by the Revenue. The same are dismissed. 2024 (3) TMI 692 Levy of service tax - collecting transfer/administrative charges for providing services in relation to change/substitution of the names in cases where the property were transferred by original customers - suppression of facts or not - extended period of limitation - HELD THAT:- M/s Vatika Ltd. have charged administrative/transfer expenses for incorporating the name of the new buyer in their records in case of any sale by the original buyer to others; it is not brought on record as to whether M/s Vatika Ltd. were involved in any sale/purchase of the property as a mediator or in any capacity. They have not involved themselves in the negotiations between the purchaser and seller. Tribunal has been consistent in holding that such transfer/administrative charges are not chargeable to service tax. Tribunal held in the case of CST, NEW DELHI VERSUS M/S ANSAL PROPERTIES AND INFRASTRUCTURES LTD. [ 2017 (9) TMI 1071 - CESTAT NEW DELHI] that in the present case the respondent is a real estate developer selling their constructed flats. They are dealing with the buyers, old or new, on principal to principal basis. Accordingly, we are in agreement with the impugned order that no service tax liability can be confirmed against the respondent under this category. Appeal filed by Revenue is dismissed. 2024 (3) TMI 691 Nature of activity - sale or service - Classification of services - purchase/import of Certificate of Authenticity(COA)/ stickers/labels on high sea sale basis from M/s Priya Ltd., later affixed on the manufactured Thin Clients already installed with MS software embedded system procured from local Microsoft authorized distributors - Information Technology Software Services or not - demand issued on 23.06.2011 for the period from 01.04.2008 to 31.03.2010 - invocation of extended period of limitation. Whether the purchase/import of COAs/stickers / labels will result in sale or service? HELD THAT:- On a cumulative reading of the definitions and the Licence Grants and Limitations in the present context, it is found that the appellant are engaged in the manufacture of Thin Clients , which required a software to make it functional/operational and they are not distributors/resellers of the installed/ embedded software. For the said purpose, to acquire the necessary software to be embedded with the system, they entered into an agreement with MS, whereby they were authorized to procure off-shelf MS OS software, which also provided them the right to replicate into individual hard discs installed later into the Thin Clients. The software would be operational or functional only with affixation of the stickers i.e. COAs procured separately for each of the Thin Clients from the authorized MS distributors. Clause m of the Licence Grants and Limitations makes it clear that the appellant shall not advertise, provide a separate price for, or otherwise market or distribute the Licensed products or any images as a separate item from the Embedded system. Merely by affixing the stickers / labels providing authenticity to software loaded to each of the Thin Clients cannot be construed as a service received by the appellant under the category of ITSS as held by the Commissioner in the impugned order - in the absence of a transfer of copyright of the software but only on mere right to use the software as clarified in the aforesaid circulars in explaining the scope of the levy as service' under ITSS, distinguishing the same from levy of excise duty and applicable customs duty being Information Technology software falling under Chapter 85 of Central Excise Tariff Act, 1985 or CTA,1985 as the case may be, the import of stickers/labels, later affixed to the Thin clients cannot considered as a service and attract levy under ITSS. There are merit in the contention of the learned senior advocate for the appellant that the whole transaction/activity including the installation of the software and later affixing stickers / labels to the Thin Clients procured / purchased on HSS basis from M/s. Priya Limited are in the nature of sale and not service. Consequently, demand of service tax on reverse charge basis on the Appellant cannot be sustained. Time Limitation - suppression of facts or not - HELD THAT:- The stickers / labels have been imported by the appellant by filing relevant Bills of Entry from time to time and the said stickers/labels are assessed as goods by the Customs department, which are later warehoused as per the procedure under the Customs Act and the Rules made thereunder. In these circumstances, allegation of suppression of facts cannot be sustained. The appeal succeeds both on merit as well as on limitation. Central Excise 2024 (3) TMI 690 Availment of wrongful benefits under the Central Excise Notification - Appellant is a sub contractor of ONGC or not - goods cleared under International Competitive Bidding - invoking condition no. 41 c (iv) of the Customs Notification No. 12/2012 Customs dated 17.03.2012. to deny the Appellant exemption availed under Central Excise Notification - Appellant has not furnished an affidavit to the effect that they are the bonafide sub contractors of ONGC - HELD THAT:- The demand has been raised by the Department asserting that the Appellant has not furnished an affidavit to the effect that they are the bonafide sub contractors of ONGC. It is pertinent to note here that the condition for claiming exemption under the said notification corresponds to the requirement of the goods being eligible for exemption and the furnishing of such documents in support of the claims by the importers whereas in the present case the Appellants are domestic suppliers and as regards the goods being eligible for exemption there exists no dispute to the fact by the Department. The said issue under similar circumstances has been settled by the Hon ble Tribunal, Mumbai in the case of KENT INTROL PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2014 (2) TMI 633 - CESTAT MUMBAI] has held that So long as the goods are exempt, the condition to be satisfied by the domestic suppliers is that they should be supplied under International Competitive Bidding which the appellant has fulfilled in these appeals. Therefore, we have to uphold the contention of the appellant and reject the contention of the Revenue. In view of the above judgment, in the present case being similar issue and facts involved that of above judgment, the Appellant are eligible for exemption under Central Excise Notification under Notification No. 12/2012 CE upon fulfilling all conditions stipulated therein, thus sufficiently establishing that the goods dealt with by the Appellants qualify for exemption - it is found that the department s allegation that the Appellant has wrongfully availed exemption has no basis as demand has been confirmed demand on an insignificant issue as domestic manufacturers cannot be expected to comply with such conditions that are required to be imposed on importers. Therefore, the appeal succeeds on merits. The impugned orders are set aside and appeals are allowed. 2024 (3) TMI 689 Valuation - physician samples cleared by the appellant to the principal manufacturer or manufactured and cleared on job work basis - applicability of Rule 4 read with Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 or Rule 8 of the said Rules - levy of penalty under Rule 25 of the Central Excise Rules - HELD THAT:- The Hon ble Supreme Court in MEDLEY PHARMACEUTICALS LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE [ 2011 (1) TMI 13 - SUPREME COURT] has laid down This Court has upheld the conclusion of the Tribunal that the physician s samples have to be valued on pro-rata basis. The physician samples cleared to their principal manufacturer are assessable under Rule 4 read with Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Also, the physician samples manufactured and cleared on job work basis for free distribution also be assessed on the value of retail sale price of similar goods and not under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, since the same were not cleared for captive consumption as observed by the Tribunal in the case of GOA ANTIBIOTICS PHARMACEUTICALS LTD, GOA VERSUS GOA ANTIBIOTICS PHARMACEUTICALS LTD, GOA VERSUS [ 2013 (12) TMI 390 - CESTAT MUMBAI] - the demand of differential duty with interest confirmed in the impugned orders does not warrant interference. Penalty u/r 25 of the Central Excise Rules, 2002 - HELD THAT:- Since the issue relates to interpretation of valuation rules, there are no merit in imposing penalty on the appellant under Rule 25 of the Central Excise Rules, 2002. The impugned orders are modified to the extent of setting aside the penalty, while upholding the demand of differential duty with interest in all the appeals. Appeals are disposed of. 2024 (3) TMI 688 Recovery of amount already discharged as duties of central excise for the period from March 2011 to July 2011 by debit of CENVAT balance - assessee had not been subjected to the requirement of rule 8(3A) of Central Excise Rules, 2002 - HELD THAT:- There is a clear finding that, in view of all declarations having been made and the deficiency noted therefrom, none of the ingredients permitting imposition of penalty under section 11AC of Central Excise Act, 1944 were existent. The appeal has not controverted this finding. The impugned order also found that the stipulation on manner of payment of duty has been breached for March 2011 to July 2011 but that, in the absence of recovery mechanism in Central Excise Rules, 2002, only penal consequences may arise. This, too, has not been controverted in the appeal. It was also held that the disputed amount, as arrears of duty, was payable either by deposit or debit of CENVAT balance in much the same way as regular discharge of duty liability. The grounds of appeal put forth the unheard of, and perverse, proposition that law, in the form of Act and Rules, will always prevail over judgements; apparently, these worthies are unaware that law comprises streams which include legislated statutes and judge-rendered opinions. They also seem to be in ignorance of interpretative function which vests exclusively in the judicial institutions. If that is the comprehension of law among enforcers of an enactment that is also the author of their being, it is a saddening to those who believe in rule of law. Indeed, Montesquieu, and several of those who followed, would surely be turning over in their graves at this patent disrespect for this fundamental foundation of rule of law. The impugned order has directed that duty discharge must be accompanied by interest. There is no appeal against that part of the order - there are no reason to interfere with impugned order - appeal dismissed. 2024 (3) TMI 687 Clandestine removal - alleged shortage of goods said to be found on the basis of comparison of the quantity accounted in SAP system - sole ground based on which the demand has been confirmed by the Commissioner is that there was certain difference in quantity of fruit pulp accounted for in RG1 Register (defunct) and those physically available in the factory premises, when compared with the stock accounted for in SAP system - Extended period of limitation - penalties - HELD THAT:- The Department s claim is that differential quantity between the two has been considered as clandestinely removed by the Appellants and the demand has been confirmed accordingly. It is an admitted fact that the Appellants were maintaining all their records, including statutory records relating to production and clearance of the final products, in SAP system. Inter alia, the production as well as clearances of fruit pulp was accounted for on day-to-day basis in said SAP system and this fact was brought to the notice of the Officers, who conducted the stock taking, on the very first day of their visit to the factory and subsequently, by way of various correspondence exchanged by the Appellants with the Commissioner. It is found that despite repeated requests, the Department preferred to compare the physical stock with defunct RG-1 stock, even though correct stock, on day-to-day basis, was maintained by the Appellants in their SAP system - the records maintained in SAP system cannot be manipulated easily. For the reason best known to department, no attempt was made by department to cross check the veracity of averments made by appellant regarding maintenance of record on SAP systems was made. When the Dept. did not accept the records maintained by the Appellants in their SAP system while issuing the SCNs for confiscation of excess stock of finished goods claimed to be found by the Officers, then the Dept. cannot take an altogether different stand and rely upon the records maintained in SAP system and compare it with so called RG-1 for confirming demand on the alleged shortage of goods - the claim of the Appellants that if the balance quantity recorded in SAP system and correct physical stock available is compared, there was no excess stock and rather there was negligible shortage due to leakage of drums, date expired stock, puffing, handling/storage loss, etc. When physical stock verification carried out by the Officers was not fool proof and there were anomalies, the benefit of doubt should be extended to the assessee. Further, the allegation of clandestine removal of goods cannot be based on assumption or surmises and the Department should prove clandestine removal with cogent and tangible evidences - It is an admitted fact that no incriminating documents were found or recovered by the Officers during their both visits to the factories and the so called shortage was alleged solely based on physical verification and method adopted by them for comparison of figures shown in RG1 Register/ER1 Returns and in SAP system, which appears to be not a correct method, when the Dept. was taking different stand at different points of time. In the facts of the case, the SAP alone was the proper account being maintained and there cannot be any comparison with so called RG1 register either for excess or for shortage. The physical stock taking is a verifiable fact which needed to be compared with production and clearance of pulp as reflected in SAP system. The computation of demand is not proper, as the Dept. has taken the total production accounted in SAP system, subtracted the quantum of production accounted in RG1 so called quantity physically found in the factory at the time of stock verification, and the differential quantity was claimed to be shortage and alleged to be cleared clandestinely, which is not correct, as the Dept. should have compared physical stock with the details accounted in SAP system. Taking all the aspects of the case and the evidences, it is found that the Department has not been able to conclusively prove clandestine removal of goods. So far as valuation adopted by the Appellants for stock transfer of fruit pulp to their sister unit is concerned, it is found that the same is correct, as they have adopted comparable price and no favoured treatment was afforded and, hence, differential duty confirmed in the impugned Order, is not sustainable - Therefore, entire exercise also leads to revenue neutral situation and there was no inducement for the Appellants to undervalue the fruit pulp stock transferred by them to their sister units. Therefore, the demand confirmed on this count is not sustainable and deserves to be set aside. Penalties - HELD THAT:- In the absence of any conscious and deliberate suppression of facts or wilful mis-declaration and also in the absence of mens rea, penalty is not imposable. Therefore, the penalty imposed on the Appellant-company deserves to the set aside. Since Shri Sameer Sharma, Associate Vice President of the Company, has acted as an employee, in the ordinary course of discharging his assignments, and he could not have unduly gained anything personally, penalties imposed on Shri Sameer Sharma is not sustainable and deserves to be set aside. The impugned Orders are not sustainable on merits - Appeal allowed. 2024 (3) TMI 686 Valuation - inclusion of notional cost of drawings and designs supplied free of cost by Maruti to the vendors in the assessable value of parts or components manufactured by vendors and cleared to Maruti for the purpose of payment of central excise duty or not - demand of differential central excise duty from the vendors - Extended period of limitation - HELD THAT:- In the present case, Maruti provided specifications of the parts or components to be fitted in the motor vehicles manufactured by Maruti to the potential vendors. The parts or components have necessarily to be manufactured as per the requisite dimensions of the parts or components so that they can be fitted in the vehicles manufactured by Maruti. It is for this reason that Maruti shared the requirements at the Request for Quotation stage. The detailed drawings and designs were prepared by the Research and Development Division of the appellant with the help of technical support received from Denso, Japan. Maruti does not have the necessary technology to manufacture the products. As such, the technology has been patented by the parent company of the appellant, namely Denso, Japan for which the appellant has also been paying running royalty amount for receipt of technical support. The appellant has also included the cost incurred towards preparation of detailed drawings and designs in the assessable value of the final products. The specifications provided by the Maruti were merely layout or dimensions of the desired parts or components. The appellant prepared detailed drawings and designs for alternator assembly in line with the specifications provided by Maruti. The designs prepared by the appellant contain details of various elements to be used in the manufacture of alternator assembly. It contains 23 sub-components required for manufacturing alternator assembly, which is not even referred to in the specification drawings provided by Maruti to the appellant. This would show that it is the responsibility of the appellant to design and manufacture the parts or components. Thus, the specification drawings are neither used in the production of the components nor are they necessary for the production of the components. Rule 6 of the 2000 Valuation Rules is, therefore, not attracted. Learned authorized representative appearing for the department has placed reliance upon the decisions of the Tribunal in COMMISSIONER OF CENTRAL EXCISE JAMSHEDPUR VERSUS TATA MOTORS [ 2008 (12) TMI 129 - CESTAT KOLKATA] and M/S. AVTEC LTD., M/S. FORD INDIA (P) LTD. VERSUS CCE, LTU, NEW DELHI [ 2017 (3) TMI 996 - CESTAT NEW DELHI] These decisions deal with cases of drawings supplied by the motor vehicle manufacturers to the manufacturers of parts and components free of cost, but the designs were supplied after the sale agreement was executed and the manufacturer used the same for producing the components. There is nothing in these decisions which may indicate that the specification drawings were supplied at the stage of tender process and identification of vendors, nor does it transpire from the said decisions that after receipt of specification from buyer, the vendors prepared their own detail drawings and designs on the basis of which the final components were manufactured. The present appeals do not relate to toolings being supplied free of cost by Maruti to the appellant. In fact, the show cause notice also admits that tooling cost has been amortised and excise duty has been paid - thus, the notional cost of drawings and designs supplied free of cost by Maruti to the vendors cannot be included in the assessable value of the parts and components manufactured by vendors and cleared to Maruti for the purpose of payment of central excise duty. Extended period of limitation - HELD THAT:- It would not be necessary to examine the contention that has been raised by the learned counsel for the appellants that the extended period of limitation could not have been invoked in the facts and circumstances of the present case. The impugned order set aside - appeal allowed.
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