TMI Tax Updates - e-Newsletter
March 23, 2021

Case Laws in this Newsletter:

GST Income Tax Corporate Laws Securities / SEBI Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. THE UNLAWFUL ACTIVITIES (PREVENTION) ACT, 1967 – AN OVERVIEW – PART II

   By: DR.MARIAPPAN GOVINDARAJAN

2. PROFITEERING ON SUPPLY OF RESTAURANT SERVICES: SUBWAY CASE

   By: Dr. Sanjiv Agarwal

News

1. Taxpayers are free to utilise Input Tax Credit available in their credit ledger as permissible by law to discharge their GST due for March month

2. Bankrupt Companies after lockdown was imposed due to COVID-19 pandemic

3. Sanction for prosecution accorded in 366 cases in violation of CSR provisions

4. SFIO investigating 20; RDs investigating 38 cases in misuse of corporate structure/ fraud Financial Year 2020-21

5. 1,38,051 new companies registered from April 2020 to February 2021

6. 23.24 lakh loans have been sanctioned and 18.54 lakh loans have been disbursed under PM SVANidhi Scheme

7. ₹ 57,078.22 lakh disbursed under Atal Pension Yojana till February 2021

8. Income Tax Department conducts searches in Jharkhand

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MRD1/DTCS/CIR/P/2021/33 - dated 22-3-2021

Guidelines for Business Continuity Plan (BCP) and Disaster Recovery (DR) of Market Infrastructure Institutions (MIIs)

FEMA

2. Press Note No. 1(2021 Series) - dated 19-3-2021

Review of the FDI Policy on downstream investments made by Non-Resident Indians (NRIs)

Highlights / Catch Notes

GST

• High Court Directs GST Portal Amendments for 14 Export Invoices; Orders Pending Export Refund to Be Processed.

  Case-Laws - HC : Seeking necessary amendments in the GST portal in respect of 14 pending export invoices - seeking grant of pending refund in respect of exports made through such 14 invoices - Necessary directions issued - HC
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• Court Rules: Delhi DGGI Must Halt Investigation Once Gautam Budh Commissionerate Begins Its Probe; No Dual Probes Allowed.

  Case-Laws - HC : Seeking stay on the investigation - Jurisdiction of Delhi unit of DGGI - once the Gautam Budh Commissionerate had taken steps to investigate the petitioner, the other Intelligence Units should have held their hands; an approach which is both sensible and practical. The submission made by Mr. Prakash that there is a difference in the subject matter, and, therefore, other units can also investigate, to our minds, at this juncture, does not impress us. - HC
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• Court Restores Tax Refund Case for Reconsideration Due to Lack of Show Cause Notice, Citing Rule 92 Breach.

  Case-Laws - HC : Validity of refund rejection order - excess tax was paid - As mandated by Rule 92 and is also the demand of principles of natural justice, no notice of show cause was given to the petitioner to explain as to why his claim for refund may not be rejected on merits. A unilateral decision was taken and the petitioner was conveyed the outcome of such decision i.e. rejection of the claim of the petitioner - Matter restored back - HC
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• Complaint Valid Without Prior Sanction; Section 132(6) CGST Act Applies Post-Investigation During Charge-Sheet Presentation.

  Case-Laws - HC : Jurisdiction - The complaint filed by respondent No.2 cannot be said to be beyond his jurisdiction because the previous sanction of the Commissioner as provided for under Section 132(6) of CGST Act, would be required only after the conclusion of the investigation and at the stage of presentation of charge-sheet/final report under Section 173 Cr.P.C., when judicial notice of the offence(s) are taken for the first time by a Court of law. Lodging of the FIR does not amount to prosecution and is clearly distinguishable from prosecution. - HC
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• Reclassification of Roja Pakku Goods: Petitioner's Past Classification Not Binding; Inquiry to Address Controversies Underway.

  Case-Laws - HC : Classification of goods - Roja Pakku - Merely because the petitioner had earlier opted to be classified under Chapter 21, the petitioner's past conduct cannot operate as estoppel. In fact, the petitioner's counsel made it clear that he will still clear all controversy and he will respond to the show cause and participate in enquiry, that may be initiated by the respondent - respondent should not put the petitioner's past conduct against him. - HC
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Income Tax

• High Court Upholds Tribunal's Decision: Security Deposit Shouldn't Be Added to Club's Income by Assessing Officer.

  Case-Laws - HC : Addition of security deposit - since the security deposit continues as a liability in the books of the assessee club, the assessing officer could not have added the same to the income of the assessee club. The tribunal has correctly, in our opinion, deleted the addition. - HC
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• Assessment Reopened u/s 147: AO Finds Discrepancies in Claimed Income Source, Justifying Reassessment of Tax Return.

  Case-Laws - HC : Reopening of assessment u/s 147 - As specifically stated that although it is the case of the assessee that the cash deposit was from the opening cash balance, yet upon verification of the submission filed by the assessee, the Assessing Officer noticed that there was no supporting evidence as regards the source of income. In the reasons, it has been specifically stated that the correct income should have been disclosed while filing of the return of the income - AO is justified in reopening of the assessment of the assessee - HC
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• Court Upholds DRP Decision on Transfer Pricing Method; No Breach of Natural Justice in Hearing Process.

  Case-Laws - HC : TP Adjustment - selection of MAM - CUP method or TNMM - it is not the case of the Petitioner that a hearing was not held. In fact, the Petitioners have averred that on 1st December, 2020, the final hearing in the matter was conducted by Respondent No. 2. The Petitioner had also filed its written submissions before Respondent No. 2 on the subject matter, raising the plea of consistency. Besides, detailed submissions on merit, along with the relevant materials have also been filed in support thereof. Thus, we cannot attribute any violation of breach of natural justice to the DRP on the ground of not affording an opportunity of hearing. - HC
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• High Court Affirms Tribunal: Principal Commissioner Cannot Revise Assessment Order u/s 263 for Section 80 IB(11-C) Exemption.

  Case-Laws - HC : Revision u/s 263 - Exemption claimed u/s 80 IB(11- C) - If certain assessment order was made by the Income Tax Officer the same could not be branded as erroneous by the Principal Commissioner of Income Tax merely because another view was possible - the Tribunal did not commit any error in holding that such enquiry was made by the Assessing Officer and hence there was no reason for the Pr. CIT to invoke jurisdiction u/s 263. - HC
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• Tribunal Rules CPC's Rejection of Exemption Claim u/s 143(1) Unjustified; Expenditure Must Be Considered.

  Case-Laws - AT : Exemption u/s 11 denied - intimation was issued u/s. 143(1) - The Central Processing Center has also taxed the entire gross receipt of the assessee without allowing any expenditure. This cannot be done while processing the return u/s. 143(1) of the Act. This Tribunal is of the considered opinion that Section 143(1) is meant for prima facie adjustment on the basis of material available on record without giving any opportunity to the assessee. Therefore, rejection of the claim of exemption u/s. 143(1) by Central Processing Center is not justified. - AT
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• Court Invalidates Assessment Reopening: AO's Incorrect Facts and Poor Consideration u/ss 147 and 68 Lead to Annulment.

  Case-Laws - AT : Reopening of assessment u/s 147 - Addition u/s 68 - AO has mentioned wrong and incorrect facts in the reasons recorded for reopening of the assessment and did not apply his mind to the information received from Investigation Wing. Thus, the reopening of the assessment is invalid and bad in law and is liable to be quashed. - AT
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• Ground Floor Sale: Long-Term Capital Gains Start from Property Acquisition Date, Not Possession Date, Overruling CIT Assessment.

  Case-Laws - AT : LTCG or STCG - Sale of ground floor of residential unit - whether it give rise to long term capital gains or short term capital gains - Computation from period of holding from the date of getting right in the property or from the date of taking the possession - taking delivery of possession is only a formality. Therefore, reckoning the period from the date of advance, we hold that the sale of ground floor give raise to long term capital gains and not short term capital gains as held by the CIT. - AT
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• Tribunal Waives Penalty for First-Time TDS Filing Default Due to Lack of Technical Knowledge and Infrastructure.

  Case-Laws - AT : Penalty u/s 272A (2) (k) - assessee has failed to submit the quarterly TDS statements in Form No. 26Q - The reasonable cause of ignorance of technical knowledge lack of infrastructure and the first time default on the part of the assessee was accepted by the Tribunal as a reasonable cause. The provisions of section 273B provides that no penalty shall be imposable on a person or the assessee inter alia u/s 272A (2) for any failure if he explain that there was a reasonable cause for such failure. - AT
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• Land Transfer Dispute: Tax Appeal Dismissed, Only 35% of Land Considered Transferred for Capital Gains Calculation.

  Case-Laws - AT : Long Term Capital Gain - CIT(A) in holding that the land to the extent of 35% only is transferred whereas entire land has been transferred to the developers for which the assessee has received consideration of 65% of constructed area - we found that the revenue is raising a new issue at this stage. - now raising a ground for treating the transfer to the extent of 100% is neither justified on merits nor the same can be raised by the revenue at this stage. Accordingly, we dismiss this ground of appeal raised by the revenue - AT
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• Income Tax Act Section 263 Revision: Lack of Evidence for Source of Share Capital u/s 68 Leads to Case Review.

  Case-Laws - AT : Revision u/s 263 - Addition u/s 68 - there is no material on record to demonstrate the source of funds so infused by way of share capital in the assessee company. The Assessing officer has merely relied on the statement of the assessee company that the shares have been allotted to the respective shareholders and in support, only the name of the shareholders and respective amount invested by them have been submitted. - the order so passed by the AO is clearly erroneous and prejudicial to the interest of Revenue. - AT
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• Late Payment of ESI/EPF Contributions Leads to Taxable Income Additions u/s 36(1)(iv) Due to Delays.

  Case-Laws - AT : Disallowance for late payment of employees contribution to ESI and PF - The respective enactment has although provided deterrent to the employer in the form of interest and penalty after late payment, however the employee will be still deprived of the interest if the contribution is paid after the due date of deposit. In view of provision of section 36(1)(iv) Act, the employer is discouraged to make deposit of employees contribution to ESI/EPF after the due date prescribed in respective enactment. - Additions confirmed - AT
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Indian Laws

• Directors Not Liable for Cheque Bounce Without Evidence of Control or Signature, High Court Likely to Quash Case.

  Case-Laws - HC : Dishonor of Cheque - vicarious liability of the Directors for having committed the offence under Section 138 of the N.I.Act - There is no allegation in the entire complaint that the present petitioners were either incharge of the Administration/Business of the company or that they are signatories to the cheque in question. - The complaint insofar as the present petitioners is liable to be quashed - HC
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Service Tax

• Court Rules Against Including Material Costs in Works Contract u/r 3; No Retrospective Tax Amendments Allowed.

  Case-Laws - AT : Valuation - inclusion of value of materials supplied by the respondent under a separate material supply contract with EDAs in the gross value of Works Contract Service - Rule 3 of Works Contract (Composition Scheme for payment of Service tax) Rules, 2007 - If the contention of the revenue is accepted it will amount to give retrospective effect to the amendment of 07.07.2009 which is not permissible under law - AT
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VAT

• Penalties Under KVAT Act Sec 72(2) Aren't Automatic; Specific Conditions Under Sec 64 Must Be Met First.

  Case-Laws - HC : Levy of penalty under Section 72(2) of KVAT Act - Wrong classification of goods - it is evident that the levy of penalty under Section 72(2) of the Act is neither automatic nor mandatory. - the condition precedent for invoking the powers under Section 64 of the Act, is not fulfilled. - HC
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• High Court Rules Amendment to Section 40 Has Retrospective Effect, Overturns Karnataka Appellate Tribunal's Time-Barred Decision.

  Case-Laws - HC : Period of limitation for initiating assessment - amendment with retrospective effect - it can be inferred that the amendment in Section 40 by virtue of the Amendment Act, is with retrospective effect and the KAT could not have set aside the order passed by the Assessing Officer and the First Appellate Authority by treating the assessment as barred by the period of limitation. - HC
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Case Laws:

• GST

• 2021 (3) TMI 860
  Seeking necessary amendments in the GST portal in respect of 14 pending export invoices - seeking grant of pending refund in respect of exports made through such 14 invoices - HELD THAT:- This writ application is disposed off with a direction to the respondent No.4 to immediately act as per the above and sanction the refund, in accordance with law, as claimed by the writ applicants within a period of 12 weeks from the date of receipt of this order. In case of any further difficulty, it shall be open for the writ applicants to revive this writ application.

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• 2021 (3) TMI 859
  Seeking grant of transitional credit under Section 140(1) of the CGST Act - amount of credit was shown in the wrong column in the Form GST TRAN 1 - HELD THAT:- The issue arising in the present writ application is squarely covered by a judgment of this Court in the case of JAKAP METIND PVT LTD. VERSUS UNION OF INDIA THROUGH THE SECRETARY AND 6 OTHER (S) [ 2019 (11) TMI 710 - GUJARAT HIGH COURT] where it was held that respondents are directed to either open the online portal so as to enable the petitioner to again file the rectified Form GST TRAN- 1 electronically or accept the manually filed FORM GST TRAN 1 with corrections on or before 30th November, 2019. The respondents are directed to either open the online portal, so as to enable the writ applicants to again file rectified Form GST TRAN-1 electronically or accept the manually filed from the GST TRAN-1 with necessary corrections on, or before, 18.05.2021 - application allowed.

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• 2021 (3) TMI 858
  Seeking stay on the investigation - Jurisdiction of Delhi unit of DGGI - whether the respondents would raise an objection before the Allahabad High Court, on the ground of territoriality - HELD THAT:- A prima facie case, at least at this stage, that since investigation was commenced, in the first instance, by the Gautam Budh Nagar Commissionerate, as far back on 19.03.2020, the other Intelligence units should have held their hands. A perusal of the circular dated 05.10.2018 is suggestive of the fact that once the Gautam Budh Commissionerate had taken steps to investigate the petitioner, the other Intelligence Units should have held their hands; an approach which is both sensible and practical. The submission made by Mr. Prakash that there is a difference in the subject matter, and, therefore, other units can also investigate, to our minds, at this juncture, does not impress us. Therefore, while we are inclined to give time to the respondents to file their reply to the captioned application within next two weeks, for the moment, no coercive measures will be taken against the petitioner. If, in the interregnum, investigation is necessitated, in line with the circular dated 05.10.2018, it shall be carried out only by the Gautam Budh Nagar Commissionerate. The search officers will ensure that there is no invasion of privacy. List the application on 22.04.2021.

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• 2021 (3) TMI 857
  Validity of refund rejection order - compliance with the provisions of the CGST Act and the Rules framed thereunder, or not - violation of the principles of natural justice - contention is that rejection of refund claim of the petitioner is not in conformity with the proposal made in the show cause notice that was served upon the petitioner - HELD THAT:- It is true that any order passed by the adjudicating authority including an order passed under Section 54 of the Act read with Rule 92 of the Rules of 2017 is appealable before the appellate authority and the appellate authority is empowered to make such further enquiry, as may be necessary and pass such order as it thinks just and proper, confirming, modifying or annulling the decision or order appealed against, but shall have no power to remand the case to the adjudicating authority that has passed the impugned order. However, contention of learned counsel for the petitioner is that the impugned order is not only cryptic but in sheer violation of the principles of natural justice. It is trite that alternative remedy is not a complete bar to the entertaining of writ petition filed for enforcement of any of the fundamental rights or where there has been a violation of principles of natural justice or where the order under challenge is wholly without jurisdiction or the vires of statute are under challenge. As mandated by Rule 92 and is also the demand of principles of natural justice, no notice of show cause was given to the petitioner to explain as to why his claim for refund may not be rejected on merits. A unilateral decision was taken and the petitioner was conveyed the outcome of such decision i.e. rejection of the claim of the petitioner - Learned counsel for the petitioner is correct that with regard to the passing of order of rejection of the refund claim of the petitioner on merits, he was never put on notice nor was any opportunity of being heard ever afforded to him. It is, thus, apparent that the impugned order passed by the adjudicating authority i.e. respondent No.1 herein traverses beyond the scope of show cause notice, which was served upon the petitioner to show cause as to why his claim should not be rejected having been filed beyond limitation. Thus, impugned order of rejection of refund claim of the petitioner is not inconformity with the proposal made in the show cause notice that was served upon the petitioner when the adjudicating authority found it barred by limitation. The case remanded back to respondent No.1 for passing order afresh after putting the petitioner to proper show cause notice and after affording him a reasonable opportunity of being heard - petition allowed by way of remand.

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• 2021 (3) TMI 856
  Constitutional Validity of Sections 109(3) and 109(9) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Mr. Singh will place on record an affidavit as to what decision, if any, has been taken by the GST Council on aspects referred to in the order dated 19.11.2019. This affidavit will be filed before the next date of hearing. List the matters on 13.05.2021.

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• 2021 (3) TMI 855
  Seeking grant of Regular Bail - wrong availment of Input Tax Credit - Section 132 (1) (c) of the Central GST Act, 2017 and Punjab GST Act, 2017 - HELD THAT:- The order relied upon the counsel appearing for the State and Mr. Sourabh Singla in RAKESH ARORA VERSUS STATE OF PUNJAB [ 2021 (2) TMI 41 - PUNJAB AND HARYANA HIGH COURT ] wherein regular bail had been denied to the petitioner therein was primarily on the ground that the investigation was still incomplete. In the instant case that would not be so. The matter already stands investigated and the challan stands presented and therefore, custody of the petitioner herein would not longer be required. The petitioner is directed to be released on regular bail on execution of adequate personal/surety bond amounting to Rs. 10 lakhs to the satisfaction of concerned trial Court/Duty Magistrate - Petition allowed.

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• 2021 (3) TMI 854
  Validity of search order and summons issued - reasons to believe of suppression of facts present or not - Section 67 of the CGST Act, 2017 - HELD THAT:- The respondents are directed to produce the record in order to enable the Court to examine as to whether the condition precedent of recording the reasons to believe is present in the instant case - Upon the production of the documents, the respondent authorities may assess the tax payable by the petitioner. If the tax payable can be assessed the petitioner may deposit the tax with the authorities for securing a release of the goods under Section 67(6) of the Act of 2017. List on 22.03.2021.

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• 2021 (3) TMI 853
  Jurisdiction - power of respondent No.2, who was an ETO, to set the criminal law in motion without the previous sanction/permission of the Commissioner of Central Government as provided for under Section 132(6) of the CGST Act - whether lodging of FIR amounts to prosecution or not - procuring bogus purchase invoices to avail ineligible credit - HELD THAT:- Since the inherent powers vested under Section 482 Cr.P.C. are extremely wide and undefined, a great deal of circumspection needs to be exercised. In the case in hand, as also stated by the learned counsel for the petitioner, investigation is still underway and final report under Section 173 Cr.P.C. has not yet been presented by the investigating agency. Therefore, this Court would not be justified in embarking upon the truthfulness or falsehood of the allegations levelled in the complaint. Moreover, a perusal of the FIR in question does prima facie disclose the commission of offences alleged against the petitioner. Needless to add the correctness or otherwise of the allegations would be gone into by the trial Court as and when the evidence is adduced by both the parties. No doubt, Section 4(2) Cr.P.C. does stipulate that if a special procedure is prescribed under a special enactment then the procedure would have to be followed as per the enactment and not under the Code and perusal of Section 132(6) of the CGST Act, also makes it abundantly clear and leaves no manner of doubt that a person under this section can be prosecuted for an offence only with the previous sanction of the Commissioner. However, in the case in hand the prosecution of the petitioner has not even been initiated. Prosecution of a person or an accused commences only when the Magistrate or Court concerned takes cognizance of the same. In other words, prosecution means the initiation or commencement of the criminal proceedings when formal charge-sheet is presented before a Court of law. Coming to the instant case, as already admitted by the learned counsel for the petitioner, investigation is still underway and chargesheet/ final report under Section 173 Cr.P.C. has not yet been presented before the Court concerned. The complaint filed by respondent No.2 cannot be said to be beyond his jurisdiction because the previous sanction of the Commissioner as provided for under Section 132(6) of CGST Act, would be required only after the conclusion of the investigation and at the stage of presentation of charge-sheet/final report under Section 173 Cr.P.C., when judicial notice of the offence(s) are taken for the first time by a Court of law. Lodging of the FIR does not amount to prosecution and is clearly distinguishable from prosecution. Petition dismissed.

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• 2021 (3) TMI 852
  Provisional attachment of Bank Accounts, Stock and Plot - Section 83 of CGST Act - HELD THAT:- So far as the bank account is concerned, the same was ordered to be defreezed or released by way of the ad-interim order passed by a Coordinate Bench of this Court. Provisional attachment of immovable property - HELD THAT:- We need not adjudicate this writ application on merits in the wake of two developments: First, the impugned order of provisional attachment of the immovable property has outlived its statutory life, and secondly, it is brought to our notice that the final assessment proceedings have also been concluded. Application disposed off.

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• 2021 (3) TMI 842
  Classification of goods - Roja Pakku - Change in classification, post GST - whether it come under Chapter 8 of the Central Excise Tariff Act, 1985 or classified under Chapter 21? - HELD THAT:- There is considerable merit in the contention of the petitioner s counsel that the petitioner also deserves to be given a treatment of parity and not taxed at a higher rate, if the petitioner s product is comparable to Nizam Pakku and Crane Pakku. More than anything else, as per Article 141 of the Constitution of the India, the law declared by the Hon ble Supreme Court is law of the land. Merely because the petitioner had earlier opted to be classified under Chapter 21, the petitioner s past conduct cannot operate as estoppel. In fact, the petitioner s counsel made it clear that he will still clear all controversy and he will respond to the show cause and participate in enquiry, that may be initiated by the respondent - the writ petition is disposed of giving liberty to the respondent to proceed against the petitioner with the demand but then, by not putting the petitioner s past conduct against him.

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• Income Tax

• 2021 (3) TMI 850
  Provision for wage arrears - whether an ascertained liability - HELD THAT:- Following the ratio laid down by the Hon ble Supreme Court in the judgments reported in Bharat Earth Movers Vs. Commissioner of Income Tax [ 2000 (8) TMI 4 - SUPREME COURT] and Calcutta Co. Ltd., Vs. Commissioner of Income Tax [ 1959 (5) TMI 3 - SUPREME COURT] the question of law is decided against the Revenue and in favour of the assessee.

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• 2021 (3) TMI 849
  Addition of security deposit - tribunal has gone on to hold that the security deposits being refundable, it continues to be shown as liability in the books of the assessee club up-until it is paid - ITAT deleted the addition - HELD THAT:- Having regard to the provisions of Articles 2 and 3, which we have extracted hereinabove, it is clear that the security deposit is both interest free and refundable, which is required to be paid to the member, if she/he opts for its refund or ceases to be a member of the assessee club. Given this finding of fact, to our minds, since the security deposit continues as a liability in the books of the assessee club, the assessing officer could not have added the same to the income of the assessee club. The tribunal has correctly, in our opinion, deleted the addition. These are the findings of fact, which we are not inclined to interfere with, as we find that there is no perversity in the view taken by the tribunal on the given facts. - Decided against revenue.

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• 2021 (3) TMI 848
  Withhold of refund exercising powers u/s 241A - HELD THAT:- A plain reading of Section 241A shows that the mere issuance of the scrutiny notice under Section 143 (2) of the Act cannot stall the remittance of refund to the assessee. The refund can only be stalled if the conditions stipulated in Section 241A of the Act, to which we have made a reference above, are fulfilled, i.e., the A.O. records his reasons in writing as to why the release of refund is likely to affect the interests of the Revenue and that this step of the A.O. receives the imprimatur [which obviously would mean prior approval] of his superior officer, i.e., Principal Commissioner or Commissioner as the case may be. Revenue has brought nothing on record to show that an order under Section 241A of the Act has been issued. As a matter of fact, no counter-affidavit has been filed by the Revenue. The mandate of the law requires the Revenue to remit the amount determined in its order dated 02.10.2019 to the petitioner along with interest as required under the provisions of the Act. This is also the view of the coordinate Benches of this Court taken in Maple Logistics and Ericsson India Pvt. Ltd. [ 2019 (11) TMI 340 - DELHI HIGH COURT] Prior to the A.O. passing an order under Section 241A of the Act, it may possibly be a constructive approach if the assessee is heard. There are several cases where assessees are looking for liquidity in the form of money received via refund and even if the A.O. is of the view that release of refund is likely to adversely affect the interests of the Revenue, the Revenue could, in a given case, take security in the form of bank guarantee or other solvent security as deemed fit and thus, in a sense, balance the interests of both the assessee and the Revenue. We have only given one illustration, there could be several situations of like nature and therefore, perhaps hearing the assessee at some stage, either before or after, the A.O. may help in resolving such disputes.

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• 2021 (3) TMI 847
  Correct head of income - Gain on sale of land - property owned by co-owners - capital gain or business income - HELD THAT:- The assessee and Shri Narendra Kanhaiyalal Parikh were joint purchasers of agricultural land by virtue of sale-deeds dated 23.03.2004 and 29.04.2004. After converting the same for non+agricultural use, various plots came to be sold. Prima-facie we find that as the co-owner has been granted benefit of capital gains with regard to the same transaction which assessment order has been accepted by the Revenue, said aspect deserves to be taken into consideration while adjudicating the claim of the assessee for seeking benefit of capital gains. The said assessment order dated 30.03.2013 was in existence when the Tribunal decided the appeal. The same was however not brought on record by the assessee. In the peculiar facts of the present case as it is found that co-owner of the same land has been granted benefit of capital gains we find that the effect of the assessment order passed in the case of the co-owner deserves to be considered by the Income Tax Appellate Tribunal. For the said purpose, a re-consideration of the proceedings by the Income Tax Appellate Tribunal would be necessitated. The substantial question of law as framed is answered by holding that the effect of the sale transaction of the coowner being extended the benefit of capital gains deserves to be considered by the Income Tax Appellate Tribunal as income from the same transaction has been treated as business income insofar as the assessee is concerned. In that view of the matter the following order is passed: The order passed by the Income Tax Appellate Tribunal, Nagpur Bench, Nagpur on 23.11.2017 is set aside. The proceedings are remanded to the Tribunal to re-consider the appeal with a liberty to the assessee to raise additional grounds in support thereof. The assessee is at liberty to place on record the assessment order dated 30.03.2013 passed by the Assessing Officer in the case of Shri Narendra Kanhaiyalal Parikh for its due consideration by the Income Tax Appellate Tribunal without going into the question of limitation. The appeal shall be decided on its own merits without being influenced by any observations made in this judgment. The appeal be preferably decided within a period of three months from the date of its first hearing.

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• 2021 (3) TMI 840
  Reopening of assessment u/s 147 - unexplained cash transactions of withdrawal and deposit from the bank accounts were duly recorded in bank accounts and also reflected in the audited annual account - whether the revenue is justified in reopening the assessment beyond the period of 4 years under Section 147? - HELD THAT:- We are of the view that after receiving the information from the NMS the Assessing Officer has verified the documents and explanation offered by the assessee and was not agree with the explanation and based on the outcome of the verification, drew the inference that the transactions of cash deposit was not shown in the return of income for the year under consideration and noted that the true facts of transactions having not been disclosed by the assessee and income has escaped assessment. As examined the copy of bank statements of this writ application. The assessee has not produced the copy of cash books for the years 2010-11 and 2011-12. We found some discrepancies in the bank statements with regard to opening balance and withdrawals of the cash amount. The explanation of the assessee before the Assessing Officer indicates that the assessee had not explain the transactions of cash withdrawal and deposits in a precise manner. In other words, he should have disclose and point out the entry wise explanation before the revenue authority, enable them to draw necessary inference with regard to genuineness of the transactions. We are of the view that the information received by the system was specific and clear and after verification of the material evidence produced by the assessee the Assessing Officer disclosed his mind that the assessee failed to explain the source of cash deposit and has reason to believe that the income has escaped assessment. Therefore, it cannot be said that the Assessing officer has not applied his mind and there was no satisfaction by his own with regard to escapement of income. As specifically stated that although it is the case of the assessee that the cash deposit was from the opening cash balance, yet upon verification of the submission filed by the assessee, the Assessing Officer noticed that there was no supporting evidence as regards the source of income. In the reasons, it has been specifically stated that the correct income should have been disclosed while filing of the return of the income. Thus, in our opinion, this is not a case, in which, the Assessing Officer could be said to have not been considered the explanation offered by the assessee in response to the notice issued under Section-133( 6) of the Act while recording the reasons for reopening. The order of this Court in Swati Malove Divetia [ 2018 (9) TMI 804 - GUJARAT HIGH COURT] is in the facts of that particular case. In view of the discussions made hereinabove, we hold that the Assessing Officer is justified in reopening of the assessment of the assessee and it cannot be said that the impugned notice is without jurisdiction and bad in law.

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• 2021 (3) TMI 837
  TP Adjustment - selection of MAM - CUP method or TNMM - DRP held that an independent arm s length transaction, entered into by the Petitioner s parent company with an independent entity in Algeria was the acceptable comparable - Applying this acceptable comparable, the commission payable fell in the acceptable range of 0.5% to 1%, and was found proper and legal and did not require any adjustment - HELD THAT:- There are reasons given by the DRP for upholding the action of the TPO and we cannot analyse the same, while exercising writ jurisdiction. The aforesaid reasoning would have to be tested before the appropriate forum. The factual background would have to be necessarily evaluated by the AO while framing the assessment order. Therefore, in the instant case, we cannot say that directions are non-speaking and there is a breach of principles of natural justice. The objections and the material placed by the Petitioner have been examined, but for the reasons noted above, the DRP has taken a different view. Even if we were to assume for the sake arguments that this view is erroneous, we cannot hold it be an error of jurisdiction. Every error of an authority is not open to judicial review merely by terming it to be a jurisdictional error , although the same may, at a later stage, be set aside for being erroneous We will have to venture into the factual matrix of the case and come to a conclusion on whether the findings of the DRP are proper, and comment on the methodology behind the determination of the ALP. There cannot be any denying the fact that each assessment year is an independent proceeding and therefore the factual finding given by the DRP while agreeing with the TPO with regard to the method to be applied for determining the ALP will have to be examined by the appropriate forum. On the aspect of the Petitioner not being afforded an opportunity of hearing, we may only observe that it is not the case of the Petitioner that a hearing was not held. In fact, the Petitioners have averred that on 1st December, 2020, the final hearing in the matter was conducted by Respondent No. 2. The Petitioner had also filed its written submissions before Respondent No. 2 on the subject matter, raising the plea of consistency. Besides, detailed submissions on merit, along with the relevant materials have also been filed in support thereof. Thus, we cannot attribute any violation of breach of natural justice to the DRP on the ground of not affording an opportunity of hearing.

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• 2021 (3) TMI 836
  Revision u/s 263 - Exemption claimed u/s 80 IB(11- C) - whether the observation made in the order passed by the Tribunal that proper verification and enquiry was made by the Assessing Officer before granting such exemption was correct? - HELD THAT:- As found that the Assessment Officer did make necessary enquiry by issuing questionnaire to the assessee for the assessment year 2012-13 seeking proof of deduction along with the details of deduction as well as exemption claimed by the Assessee. Similar notice under Section 142(1) of the said Act was also replied to by the assessee and it is in that backdrop that the Assessment Officer was pleased to allow the deduction under Section 80 IB (11-C) - Members of the Tribunal thus found that the reason for invoking jurisdiction by the Principal Commissioner of Income Tax u/s 263 of the said Act had no foundation. If certain assessment order was made by the Income Tax Officer the same could not be branded as erroneous by the Principal Commissioner of Income Tax merely because another view was possible. The order of the Income Tax Officer was required to be shown to have been made without any enquiry and not accordance with law. These aspects were missing in the said assessment order. We find that this observation of the Tribunal is correct considering the nature of verification and enquiry made by the Assessment Officer. In the earlier assessment year 2011-12 similar deduction was claimed by the assessee under Section 80 IB (11-C) of the said Act and it was granted by the Assessing Officer. In the decisions relied upon by the learned counsel for the respondent this position has been considered and it was observed that similar deduction having been allowed in the earlier year could not have been denied in the subsequent assessment years. Thus after perusing the material placed on record including the questionnaire, summons under Section 131 of the said Act and notice under Section 142(1) of the said Act, we are satisfied that the Tribunal did not commit any error in holding that such enquiry was made by the Assessing Officer and hence there was no reason for the Principal Commissioner of Income Tax to invoke jurisdiction under Section 263. - Decided in favour of assessee.

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• 2021 (3) TMI 835
  Rectification u/s 254 - disallowing on account of interest paid - disallowing a sum on account of interest paid on delayed deposit of TDS - HELD THAT:- There is an apparent mistake in the order of the Ld. CIT(A) as he has adjudicated the grounds of appeal not at all related to the grounds raised by the assessee in Form No. 35. Another aspect is that in the Form of Verification , the appellant s name is Rupen Patel whereas the Ld. CIT(A) has mentioned Parwinder Kaur as the appellant as per signature. This is a clear case where the 1st para of the impugned order relates to the present assessee. The subsequent paras relate to some other assessee. The issues decided on merit by the Ld. CIT(A) relate to some other assessee. Because of this unfortunate situation, we set aside the order of the Ld. CIT(A) and restore the matter to him to pass a de novo order, after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the Ld. CIT(A) on the date of hearing. Appeal is allowed for statistical purposes.

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• 2021 (3) TMI 834
  Exemption u/s 11 denied - intimation was issued u/s. 143(1) rejecting the claim of the assessee u/s. 11 of the Act by the Central processing Center at Bangalore - typographical error was crept in while filing the return of income electronically, the assessee apparently typed as 10(23C)(vi) instead of Section 11 - HELD THAT:- It is not in dispute that the assessee has referred the registration number of the Trust in the grounds of appeal before the ld. CIT(A). It is also not in dispute that right from the incorporation, the assessee trust was granted exemption up to AY 2016-17. It is also admitted fact that for AY 1983-84, the AO rejected the claim of the assessee for exemption u/s. 11 on the ground that assessee was carrying business activity. However, the ld. CIT(A) allowed the claim of the assessee. The order of the ld. CIT(A) was confirmed by this Tribunal and also by jurisdictional High Court. In view of the above facts and situation, this Tribunal is of the considered opinion that merely because the copy of the registration certificate u/s.12A was not filed before the ld. CIT(A) that cannot be reason for rejecting the claim of the assessee u/s. 11 of the Act. Moreover, if the Department expects further material including the copy of the registration certificate the claim of the assessee cannot be rejected while processing the return u/s. 143(1). The Central Processing Center has also taxed the entire gross receipt of the assessee without allowing any expenditure. This cannot be done while processing the return u/s. 143(1) of the Act. This Tribunal is of the considered opinion that Section 143(1) is meant for prima facie adjustment on the basis of material available on record without giving any opportunity to the assessee. Therefore, rejection of the claim of exemption u/s. 143(1) by Central Processing Center is not justified. AO is directed to grant exemption u/s.11 - Decided in favour of assessee

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• 2021 (3) TMI 833
  Reopening of assessment u/s 147 - Addition u/s 68 - unexplained share capital received - HELD THAT:- AO in the assessment order has specifically mentioned that the return of income filed originally u/s 139(1) shows assessee has received share capital of Rs. 50 lakhs and unsecured loans of Rs. 2.10 crores in assessment year under appeal. Thus, there was no reason for the AO to mention in the reasons recorded for reopening of the assessment that there is an escapement of income on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. The above facts on record clearly show that during the course of search no specific material or evidence was found against the assessee for receiving any accommodation entry from S.K. Jain group of cases. AO did not refer to any material found during the course of search against the assessee in the reasons recorded for reopening of the assessment. AO believed the information received from Investigation Wing that assessee has received accommodation entry but all the annexure seized during the course of search from S.K. Jain group of cases as discussed above did not implicate the assessee of receiving any accommodation entry. No material was found during the course of search as to how Sh. S.K. Jain group was controlling the investor companies or the companies provided loan to the assessee. Such fact is also not corroborated by any evidence or material, if found during the course of search. Thus, the AO recorded incorrect and wrong facts in the reasons recorded for reopening of the assessment. AO independently did not apply his mind to the information received from Investigation Wing and merely believed the same to be correct for the purpose of reopening of the assessment despite no specific material was found during the course of search against the assessee company. Whatever material was recovered during the course of search or any statement recorded during search in the case of S.K. Jain group of cases, such material was never supplied to assessee or confronted or given any right of cross examination to the assessee. Such material cannot be used against the assessee. AO has mentioned wrong and incorrect facts in the reasons recorded for reopening of the assessment and did not apply his mind to the information received from Investigation Wing. Thus, the reopening of the assessment is invalid and bad in law and is liable to be quashed. The decisions relied upon by Ld. Counsel for assessee support our findings. In this view of the matter, we set aside the orders of the authorities below and quash the reopening of the assessment. Appeal of assessee is allowed

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• 2021 (3) TMI 832
  TDS u/s 195 - payments u/s.40(a)(i) of the Act for non-deduction of tax on professional charges - HELD THAT:- Professional services rendered by an individual or a firm of individuals [other than a company] who is a resident of one of the Contracting States is taxable only in that State unless individual or firm has a fixed base in India. In this case, on perusal of details filed by the assessee, we find that M/s. KL Gates has rendered professional services in connection with dispute with Tranzact Financial Services and such services are in the nature of independent professional services as defined under Article 14 and hence are outside the scope of definition of royalties as defined u/s.9(1)(vi) of the Act, and thus, outside the scope of provision of section 195 - We are of the considered view that the assessee is not liable to deduct tax at source u/s.195 of the Act, when payment is made to offshore entity for rendering independent professional services which covered under Article 14 of DTAA between India and Australia, consequently not liable for withholding tax. Therefore, the same cannot be disallowed u/s.40(a)(i) of the Act. Professional charges paid to M/s. TWB Pty Ltd., a company of Chartered Accounts - In this case, evidences filed by the assessee clearly proves that M/s. TWB CA does not have any permanent establishment in India and services are rendered outside India in connection with filing of statutory returns and liaison with statutory authorities. Therefore, said payment is outside the scope of provisions of section 195 of the Act, because it is neither in the nature of royalties as defined u/s.9(1)(vi) of the Act nor in the nature of fess for technical services because the nature of services rendered by the company of accountants does not make available technical knowledge, expertise, skill, know-how or processes to the assessee. Therefore, said payment is also outside the scope of provisions of section 195 of the Act and thus, the assessee is not liable to deduct tax at source u/s.195 of the Act. Therefore, we are of the considered view that the AO as well as the CIT(A) has erred in disallowing professional charges paid to offshore entities for non-deduction of tax at source u/s.195 of the Act. Hence, we direct the AO to delete additions made towards legal and professional charges paid to M/s. TWB CA and M/s. KL Gates. TDS u/s 194J - disallowance of internet charges and professional charges u/s.40(a)(ia) of the Act for non-deduction of tax at source - HELD THAT:- Admittedly if any payment is made without deduction of tax at source, then said payment cannot be allowed as deduction u/s.40(a)(ia) of the Act. Further, if the assessee does not deduct tax at source within the due dates specified in respective provisions of the Act, but tax deducted at source has been deducted on or before furnishing return of income u/s.139(1) of the Act, then such payment cannot be disallowed u/s.40(a)(ia) of the Act. In this case, the AO has disallowed provision for expenses like internet charges and professional charges on the ground that the assessee has failed to deduct tax at source u/s.194J of the Act. It is a case of the assessee that it has deducted TDS on impugned payments in subsequent financial year, but before the due dates specified in sub-section (1) of section 139 of the Act. If the claim of the assessee is correct, then the impugned payments cannot be disallowed u/s.40(a)(ia) of the Act. Therefore, to verify the facts the issue has been set aside to the file of the AO for the limited purpose of verification with regard to ascertaining the fact of deduction of TDS on or before the due date of furnishing return of income u/s.139(1) of the Act. In case, the assessee files necessary evidences to prove that it had deducted TDS on or before due date specified u/s.139(1) of the Act, then the AO is directed to delete disallowance of expenses u/s.40(a)(ia) of the Act.

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• 2021 (3) TMI 831
  Disallowance of huge business expenditure - onus to prove - no business operation for the year under consideration - there is no nexus between expenditure debited into profit loss account and business operation of the assessee thus disallowed entire expenditure - HELD THAT:- In order to allow deduction for any expenditure, the assessee should prove the nexus between expenditure incurred and debited into profit loss account and business operations of the assessee. Further, assessee also needs to prove that expenditure has been wholly and exclusively incurred for the purpose of business. In this case, on perusal of details filed by the assessee, we find that although assessee has debited huge expenditure under various heads of expenditure, but failed to file any evidences to prove that there is a nexus between expenditure debited into profit loss account and business operations of the assessee. Therefore, it is a well settled principle of law that whether or not any revenue from operations normally overhead expenditure incurred for maintaining corporate status of the assessee needs to be allowed. To ascertain the fact with regard to nature of expenditure and necessity of incurring such expenditure with reference to business operations of the assessee, the evidences needs to be examined by the AO. Therefore, to verify the claim of the assessee that there is a nexus between expenditure debited into profit loss account and business operations, the issue has been set aside to the file of the AO with a direction to the AO to reconsider the explanation furnished by the assessee along with necessary evidences. In case, the AO finds that the expenditure debited into profit loss account are necessary to incur for maintaining corporate status of the assessee, then the expenditure incurred by the assessee needs to be allowed irrespective of the fact that there is no revenue from operations. Appeal filed by the assessee is allowed for statistical purposes.

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• 2021 (3) TMI 830
  Addition u/s 68 - bogus LTCG - assessment order is based upon the Ad-Interim order of the SEBI - HELD THAT:- It can be seen that the entire assessment order has been framed by the Assessing Officer without conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the SEBI order without conducting any independent and separate enquiry in the case of the appellant. It is provided u/s 142(2) of the Act that for the purpose of obtaining full information in respect of income of loss of any person, the Assessing Officer may make such enquiry as he considers necessary. Whether the assessee has discharged his onus cast upon him by provisions of section 68 of the Act or not is purely a question of fact and considering the vortex of evidences, we are of the considered view that the assessee has successfully discharged the onus cast upon him by provisions of section 68. As mentioned elsewhere, the discharge of onus is purely a question of fact, the judicial decisions relied upon by the ld. DR would do no good on the peculiar plethora of evidences in respect of facts in hand and hence the judicial decisions relied upon by both the sides, though perused, but not considered on the facts of the case in hand except the decision of the coordinate bench discussed elsewhere because the same exparte Ad-Interim order of SEBI was considered and facts are mutatis mutandis same. We, accordingly, direct the Assessing Officer to accept the long term capital gain declared as such and delete the addition. SEBI order is dated 22.12.2020 whereas the transactions which have been considered in this appeal took place in F.Y. 2014-15 and therefore, restrain after a gap of more than 5 years would do no good to the Revenue. This order has restrained named noticees from accessing security market by issuing prospectus, offer document or advertisement soliciting money from the public in any manner for a period of 8 years. Obviously, this restraint is prospective.

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• 2021 (3) TMI 829
  Revision u/s 263 - Sale of ground floor of residential unit - whether it give rise to long term capital gains or short term capital gains - Computation from period of holding from the date of getting right in the property or from the date of taking the possession - as per CIT assets sold (ground floor of residential site) as short term capital gains and the assessee is entitled to deduction u/s 54 on investment of new asset (flat) - HELD THAT:- Assessee gets a right to the impugned property on the date of payment of advance, i.e., on 28.06.2008 and payment of balance amounts is only a follow up action and taking delivery of possession is only a formality. Therefore, reckoning the period from 28.06.2008, i.e. the date of advance, thus hold that the sale of ground floor give raise to long term capital gains and not short term capital gains as held by the CIT. Whether assessee is entitled to deduction u/s 54? - HELD THAT:- Admittedly, the assessee is handed over possession of new flat in the month of November 2011 and gruhapravesham was completed on 12.03.2012. Since the assessee was handed over the possession of the new flat only in November 2011, that date should be considered for all practical purposes, the date of acquisition of new flat for claiming deduction u/s 54 - As mentioned earlier, window of purchase of new asset is available to the assessee from 24.05.2011 to 24.05.2014. Therefore, handing over possession of new asset being in the month of November 2011 falls within the period of window mentioned above. Hence, hold that the assessee is entitled to deduction u/s 54 of the I.T.Act on purchase of new asset - Decided in favour of the assessee.

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• 2021 (3) TMI 828
  TP Adjustment - notional interest on outstanding receivables - HELD THAT:- AR fairly conceded that outstanding amount on account of sales/services billed to AE akin to loan advanced by assessee is an international transaction. As held in the case of Avenue Asia Business Advisors (P.) Ltd. v. DCIT [ 2017 (9) TMI 1295 - DELHI HIGH COURT] , there should be TP adjustment on this count after making proper TP study by the TPO after considering the period of credit enjoyed by the comparables and also applicable LIBOR rate in the place of AEs for benchmarking the rate of interest to arrive at the ALP. With these observations, we remit the issue in dispute to the file of AO/TPO to benchmark the interest rate in the light of the decisions cited by ld. DR. Further, we make it clear that the TPO should compute the interest only for the relevant assessment year after going through the relevant agreements entered by the assessee with AEs while computing the ALP. Assessee s appeal is partly allowed for statistical purposes.

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• 2021 (3) TMI 827
  Reopening of assessment - mismatch of TDS Certificate and income declared by the assessee - Reopening on the basis of audit objection - HELD THAT:- Hon ble Gujarat High Court in the matter of Vodafone West Ltd. vs. ACIT [ 2015 (5) TMI 216 - GUJARAT HIGH COURT] has held that reassessment proceeding cannot be initiated merely on basis of audit objection, where Assessing Officer has no subjective satisfaction. As it can be seen after going through the impugned order that Ld. A.O. made reassessment on the basis of audit objection. We are of the considered opinion that Ld. A.O. should have formed independent opinion and copy of the said opinion should have been given to the assessee. As we can see that exercise was not carried out by the Ld. Assessing Officer and merely on the basis of audit objection by the Departmental Officer in reassessment proceedings addition were made and same is not tenable in the eyes of law. We hold that proceeding u/s. 147/148 are invalid therefore assessee deserve to get relief on this technical ground, we do not want to go into the merit of the case. Thus, respectfully following above said judgments, we allow appeal of the assessee.

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• 2021 (3) TMI 826
  Estimation of income - Rejection of books of accounts - AO estimated the net profit @ 2% of the gross receipts holding that the assessee has failed to account for the receipts appearing in Form 26AS - CIT(A) restricted the addition to 1.5% of the gross receipts - HELD THAT:- As pointed out by the Ld. counsel, in the past three years, the gross commission of the total receipts remained below 1%. CIT(A) has determined the addition @ 1.5% and as per settled law when the books of account are rejected, the profit is determined on estimation basis In determining the profit on estimation basis, the past history plays a vital role. Therefore, we are of the considered view that the net profit rate of 1.5% sustained by the Ld. CIT(A) is on higher side in view of the past history. Hence, we find merit in the contention of the Ld. counsel that 1.5% profit rate estimated by the Ld. CIT(A) is on higher side. Accordingly, in the interest of justice, we partly allow the appeal of the assessee and modify the order passed by the Ld. CIT(A) and restrict the net profit rate to 1% of the gross receipts, which is more than the percentage in the last 3 years. We therefore, direct the Assessing Officer to compute the addition @ 1% of the gross receipts. Appeal filed by the assessee is partly allowed.

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• 2021 (3) TMI 825
  Disallowance u/s 80IA - AO disallowed deduction claimed stating that the assessee does not have any profits available for claiming deduction - business losses/ deprecation of earlier years, which have been set off against the income have been notionally brought forward and set off against the profits for the relevant assessment year thereby reducing the profits - assessee stated that for the purpose of computing deduction u/s 80IA, unabsorbed depreciation of earlier years already set off against income of the assessee in the preceding years should not be notionally brought forwarded and set off u/ s 80 IA(5) for determining claim of deduction - HELD THAT:- In the present case, there is no dispute that the losses incurred by the assessee were already been set off and adjusted against the profits of the earlier years. During the relevant assessment year, the assessee has exercised the option of claiming deduction u/ s 80IA. There is no unabsorbed depreciation or loss of the eligible undertaking and the same were already absorbed in the earlier years. There is a positive profit during the year. The Assessing Officer s calculation of treating the each unit independently and setting off the profits against the losses of the unit which have already been set off against by the profits of the assessee in the earlier years cannot be held to be legally valid. AO is directed to verify the same for accuracy of the figures from the returns filed for the earlier assessment years. The appeal the revenue on this issue is dismissed. Whether the brought forward losses need to be set off against the profits earned during the year before claiming the deduction u/s 80IA or not? - On a concurrent reading of what constitutes on initial assessment year and the provision for brought forward of losses, the eventual conclusion derives from such reading is that in case the assessee has existing brought forward losses which were either could not be set off against the profits and if the assessee considers any year as the initial assessment year for the benefit of Section 80IA in such cases, the eligible profits would be determined only after setting off of the losses/ unabsorbed depreciation carried forward in the year the deduction is claimed. Deduction u/ s 14A r.w.r. 8D - Whether the Assessing Officer have recorded any cogent reason for his dissatisfaction or not? - HELD THAT:- In the instant case, the AO cannot be faulted for not being satisfied with the claim of the assessee. The AO is justified in presuming that the assessee has incurred expenditure towards administrative activities necessary to earn the exempt income. Once, the inference of the AO is found to be correct, the provisions of Rule 8D sets in. Owing to the decisions of the Hon ble Courts and the facts of the instant case, we hold that the Assessing Officer has rightly not satisfied with the contentions of the assessee and the disallowance. Whether the ld. CIT (A) was correct in deleting the amount under Rule 8D(2)(ii) or not? - CIT (A) deleted the addition - We hold that in the absence of incurring of any expenditure of interest by the assessee to any party on account of interest with regard to the amounts invested, we hold that the provisions of Section 8 D(2)(ii) cannot be attracted. Hence, we hereby decline to interfere with the action of the ld. CIT (A). Whether the ld. CIT (A) was correct in confirming the amount under Rule 8D(2)(iii) or not? - During the year, the assessee has received Rs. 29.86 Cr. and claimed that no expenditure has been incurred for earning this income. During the assessment proceedings before the AO, the assessee has offered Rs. 2,30,000/- as approximate expenditure incurred. As per the settled position and on the facts of the case as mentioned above, the provisions of Rule 8D(2)(iii) are invited to the facts of the case. Hence, the action of the AO determining of percentage of the average investments for disallowance as per Rule 8D(2)(iii) cannot be faulted with. Disallowance should be confined to the investments yielding exempt income. Hence, the ground of the assessee on this aspect is accepted. The revenue is hereby directed to re- compute the disallowance taking into account only those investments that have yielded exempt income. TDS u/s 194A - disallowance u/s 40 (a)(ia) on the ground that no TDS was deducted on the guarantee commission paid to the bank - HELD THAT:- Notification No. 56/2012 dated 31.12. 2012 clarifies that no tax will be deducted at source w.e. f. 01. 01.2013. This cannot imply that deduction of tax will be done prior to 01.01.2013. This is a clarificatory notification. The clarifications issued by the Board pertain to the statute in force from the date of insertion. Circulars cannot be treated as amendments which generally have a prospective effect unless specified as retrospective. In our view the assessee was not required to deduct TDS on bank guarantee commission as there is a conspicuous absence of principle - agent relationship envisaged under Section 194H. There is no principle- agent relationship between a bank and its customers. Further, the amount charged by a bank, not in the nature of a commission as per Act. Disallowance on account of CSR - AO disallowed the expenditure claimed stating it was not incurred wholly and exclusively for the purpose of business of the assessee - CIT (A) supported the order of the Assessing Officer holding that the Corporate Social Responsibility expenditure is an application of income. An application of income is not an allowable deduction for computing taxable income of any company - HELD THAT:- The expenditure incurred by the assessee is in no way connected with the business of the assessee or earning of the income. As per section 37 therefore the expenditure has not been incurred wholly and exclusively for the purpose of the business and cannot be allowed as a deduction. We have also gone through the arguments of the assessee that the explanation is prospective in nature. Since, we are of the view that the explanations are only with regard to the main provisions of the Act, the explanation are brought in to pact the provisions and to avoid any confusion in interpretation. The effect of the explanation shall be from the date of insertion of the provision. The explanations gives clarity to the statute as it is and as it was meant to be. Hence, keeping in view the clear provisions of the Section 37(1), Explanation thereof, Section 135 of the Companies Act, and keeping in view the fact that the CSR expenses are a charge on the profits and the expenses incurred by the assessee are not expenditure allowed as per Sections 30 to 36, we dismiss the appeal of the assessee on this ground. Education ( SHEC ) on Income Tax and Fringe Benefit Tax is an allowable expenditure for computing total income as per the provisions of the Income Tax Act, 1961 - HELD THAT:- Keeping in view the provisions of the Act pertaining to Section 40(a)(ii) and Section 115JB, Circular of the CBDT No. 91/58/66-ITJ(19), the orders of Co-ordinate Benches of ITAT and judicial pronouncements of the Hon ble High Court of Bombay and Hon ble High Court of Rajasthan, we hereby direct the revenue to allow the claim of deduction of the Education Cess and FBT as per the provisions of Section 37 of the Income Tax Act.

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• 2021 (3) TMI 824
  Penalty u/s 272A (2) (k) - assessee has failed to submit the quarterly TDS statements in Form No. 26Q and only after the show cause notice issued by the AO for levy of penalty u/s 272A(2)(k) the assessee has submitted the quarterly statements for all the four quarters of these four years - HELD THAT:- There is no dispute that the assessee has been submitting the quarterly TDS statements in Form No. 24Q regularly without any default or delay however, only in respect of the TDS deducted from the payment other than salary, the assessee has filed to submit the quarterly statement in Form No. 26Q for these assessment years. It is pertinent to note that the assessee has duly deduct TDS and also deposited the same in the Government account within the prescribed due date and the default on the part of the assessee is only on account of submitting the quarterly TDS statements within the prescribed due date. The assessee has explained the cause of default as unawareness of the concerned staff of the office of the assessee whereas the salary is a regular payment to the employees and deduction of TDS and deposit of the same to the account of the Government is a regular practice followed by all the offices, but the TDS on other than the salary payment is depending upon the instance of payment or credit and therefore is not a regular payment like salary. Hence, it is a bonafide inadvertent mistake. The reasonable cause of ignorance of technical knowledge lack of infrastructure and the first time default on the part of the assessee was accepted by the Tribunal as a reasonable cause. The provisions of section 273B provides that no penalty shall be imposable on a person or the assessee inter alia u/s 272A (2) for any failure if he explain that there was a reasonable cause for such failure. Appeals of the assessee are allowed.

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• 2021 (3) TMI 822
  Assessment u/s 153A - addition on account of credit entries in the bank account is in the nature of incriminating material found during the course of search or the bank account was undisclosed account - HELD THAT:- It transpires that these are the bank accounts of the assessee duly disclosed in the balance sheet and even the amounts received as advances have been duly disclosed and shown in the respective balance sheets of the individuals. In all these cases, the original return of income was filed on July 2011 and thereafter, no notice u/s 143(2) was issued, which inter alia means that the return of income had attained finality and is to be reckoned as assessed income. On the date of search i.e., on 20.3.2016 the assessment for the assessment year 2011-12 is to be treated as unabated assessment in terms of second proviso to section 153A. If that be the situation, then any addition which has to be made should be based on incriminating material qua that assessment year during the course of search and seizure operation. There are now plethora of various high Court judgments which have reiterated the principle that in case of unabated assessment, the addition can be made in the assessment framed u/s 153A only when there is any incriminating material found during the course of search and it is only in the cases of abated assessment AO has power to assess or reassess the undisclosed income and the other income. CIT (A) in the impugned order has not disputed the fact that the additions made by the AO in all the four cases are based on any incriminating material found during the course of search albeit they are based on entries in the regular bank account duly disclosed by the assessee. It is not the case of the AO that these are unaccounted bank statements which were unearthed during the course of search. Hence it can be concluded that these additions are not based on any incriminating material found during the course of search and thus in such a situation thus such an addition are beyond the scope of assessment u/s 153A therefore, the same are directed to be deleted. Appeals filed by the assessee are allowed.

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• 2021 (3) TMI 821
  Reopening of assessment u/s 147 - receipt of certain information from the Investigation Wing of the Department that the assessee was beneficiary of certain accommodation entries pertaining to bogus purchases - HELD THAT:- only reason for rejecting the contention of the assessee was that the assessee could not produce the books of account before the Lower Authorities. In our considered opinion this approach of the Lower Authorities is not correct in as much as it remains undisputed that the assessee had duly filed copies of audited accounts at the time of filing of the return of income and so it cannot be inferred that the assessee did not maintain any books of account. Further the evidentiary value of the VAT returns cannot be simply be brushed aside specially when the same were brought to the notice of the Assessing Officer in the very first instance when the assessee was raising objections against the initiation of reassessment proceedings. Even the table produced by the Assessing Officer in his assessment order depicts only payments made to M/s Maa Durga Trading Company and there is no entry depicting purchases from the said company. In such a situation, on the factual matrix of the case, it is our considered opinion that the reopening in the instant case was bad in law specially, when the error in the approach of the Assessing Officer in recording of reasons on account of alleged bogus purchases was brought to the notice of the Assessing Officer in the objections raised by the assessee against initiation of re-assessment proceeddings. In the instant case, although, the assessee has filed return of income, the Assessing Officer proceeding to reopen the assessment by mentioning that no voluntary return had been filed by the assessee and, thereafter, proceeded to reopen the assessment on wrong appreciation facts on record, in such a situation, we have no option but to quash the reassessment proceedings itself. Accordingly, relying on the above mentioned judicial precedents, we quash the re-assessment proceedings. Even on merits, the addition has no feet to stand on as the impugned addition has been made on account of alleged bogus purchases and the assessee has demonstrated with an ample evidences that there were no purchases from M/s Maa Durga Trading company during the year under consideration. The Assessing Officer has made a disallowance on account of those purchases which were not even debited to the Profit Loss Account during the year under consideration. Therefore, on merits also this addition cannot be sustained. Appeal of the assessee stands allowed.

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• 2021 (3) TMI 820
  Assessment u/s 153A - Addition u/s 68 - absence of any incriminating material found during the course of search - HELD THAT:- AO in the instant case, made addition for A.Y. 2003-04 and Rs. 50 lakhs for A.Y. 2004-05 by invoking the provisions of section 68 since the assessee could not substantiate with evidence to his satisfaction regarding the identity and credit worthiness of the investor companies who have invested in the share capital of the assessee and the genuineness of the transaction. We find, the ld.CIT(A) upheld the action of the AO. It is the submission of the ld. Counsel for the assessee that since the addition made by the AO and sustained by the CIT(A) for both the years are not based on any incriminating material found during the course of search, and is based on post-search enquiries, therefore, such addition deserves to be deleted. We find some force for the assessee. A perusal of the assessment order as well as the order of the CIT(A) for both the years clearly shows that the addition is not based on any incriminating material found as a result of search, but, the same is based on post search enquiries made by the AO. It is also pertinent to mention that the AO while making the addition has relied on the enquiries conducted for examining investments made in the case of M/s Vikas Telecom Ltd and in M/s DD Resorts Pvt. Ltd. since the companies who have made investment in the assessee company have also made investments in the above two companies - no seized document was referred to by the AO in the body of the assessment order. Be that as it may, the addition in the instant case is not based on any incriminating material and based on post search enquiries which is evident from the assessment orders as well as the orders of CIT(A) for both the years. Under these circumstances, we have to see whether such addition can be sustained in unabated assessment completed u/s 153A of the Act. As in the case of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] has held that in the absence of any incriminating material found during the course of search, no addition can be made u/s 153A of the Act in case of a completed assessment. Appeals filed by the assessee are allowed.

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• 2021 (3) TMI 819
  Long Term Capital Gain OR business income - value of 35% land area transferred to developer - HELD THAT:- In the present case, there is nothing to show that the land was purchased with the intention to sell at a profit or with requisite intention to bring it within the para meters of stock-in-trade . As not shown that the assessee is a regular dealer in real estate. Rather, it appears that the land was not purchased by the assessee, but was inherited by him from his father and the development agreement was entered into even after lapse of around 12 years thereafter. As per the Development Agreement, the developer had all the obligation of execution of work. Even the assessee was debarred from interfering in the working of the developer. On the contrary, no funds of the assessee were deployed rather he received security deposit from the developer. Therefore, after considering the terms and conditions as contained in Development Agreement and following the decisions referred above, we are also of the view that the gains in the present case is to be chargeable to tax under the head capital gains . In the present case, it has no where been shown that the land was purchased by the assessee with the intention to sell at a profit or with requisite intention to bring it within the parameters of stock-in-trade . Therefore, after considering the factual position as enumerated hereinabove, we found that the ld. CIT(A) has rightly concluded that the gains are to be charged to tax under the head capital gains . No new facts or circumstances have been brought before us by the ld. DR in order to controvert or rebut the findings so recorded by the ld. CIT(A), therefore, we find no reason to interfere into or deviate from the findings of the ld. CIT(A). Accordingly, we uphold the same. Whether provisions of section 50C are applicable? - HELD THAT:- Cost of acquisition shall be allowed in the proportion of built up area sold/surrendered to builder as bears to total built up area acquired by assessee from developer in lieu of 35% land. CIT(A) has further held that in 3rd issue, the assessee is whether deemed sale value of land transferred and value of constructed area transferred is to be taxed or not as such constructed area was received in exchange of 35% land only. On perusal of the order it is seen that the Assessing Officer considered only the area transferred to the builder i.e. 4129.37 Sq. ft. and not the total area. Since, the assessee transferred these constructed areas to the builder the same is liable to be taxed. On such sale, income is to be computed under the head capital gain comprising of long term capital gain on property land area and short term capital gain on constructed area. Against this, the Assessing officer only took the estimated sale value as per DLC rate at Rs. 3,27,25,257/- without any deduction of cost which is wrong. Considering the totality of facts and circumstances, we found that the ld. CIT(A) has passed a speaking and reasoned order discussing all the details of the case of the assesse, therefore, we do not find any reason to interfere into or deviate from the findings so recorded by the ld. CIT(A) and we uphold the same. CIT(A) in holding that the land to the extent of 35% only is transferred whereas entire land has been transferred to the developers for which the assessee has received consideration of 65% of constructed area - we found that the revenue is raising a new issue at this stage. It is undisputed fact that the AO had admitted the transfer of the land to the extent of 35%, as has been declared by the assessee in his return of income and not to the extent of 100%. Considering the totality of facts and circumstances, we hold that now raising a ground for treating the transfer to the extent of 100% is neither justified on merits nor the same can be raised by the revenue at this stage. Accordingly, we dismiss this ground of appeal raised by the revenue. Cost of deduction - as submitted that there is no provision under the law to work out that deduction on the basis of valuation adopted by the Stamp Duty Authority as the capital gain has to be calculated by allowing deduction for cost of acquisition/indexed cost of acquisition as per provisions of law whereas the ld. CIT(A) has erred in directing to allow deduction for cost on the basis of floor wise valuation accordingly the Stamp Valuation Authorities - HELD THAT:- CIT(A) while holding that the gains to be chargeable to tax under the head capital gains be directed to allow deduction for cost on the basis of floor wise valuation whereas there is no provision under the law to work out that deduction on the basis of valuation adopted by the Stamp Duty Authorities. Therefore, we modify the order of the ld. CIT(A) to the extent that the A.O. is directed to consider the sale value under the capital gains and worked out proportionate long term capital gain in respect of land and short term capital gain in respect of construction by allowing the deduction for cost of acquisition/indexed cost of acquisition as per provisions of law. Therefore, with this modification, we uphold the other operative portion of the ld. CIT(A) and restore this issue back to the file of the A.O. for deciding the issue as per directions given

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• 2021 (3) TMI 818
  Estimation of income - bogus purchases - DR submits that the estimation of profit @ 8% done by the AO and then affirmed by the Ld. CIT(A), being reasonable - HELD THAT:- We set aside the order of the Ld. CIT(A) and direct the AO to restrict the additions limited to the extent of bringing the G.P. rate on disputed purchases at the same rate of other genuine purchases

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• 2021 (3) TMI 815
  Rectification u/s 254 - HELD THAT:- There is no mistake apparent from record as per the submission of the assessee above. Assessee is seeking review of the order. Paragraph 13 14 of the above order duly considers the relevant aspect. ITAT has not considered ITAT Bangalore bench decision in the case of Texport Overseas Private Limited versus DCIT. [ 2018 (9) TMI 1977 - ITAT BANGALORE ] - In this regard it is noted that ITAT in the earlier part of its order has duly noted that the assessee has referred to several decisions. We are of the opinion that there is no requirement that each and every case law cited by the assessee has to be specifically dealt with in the order of ITAT unless the same is found to be applicable on the facts of the case. We are of the considered opinion that assessee is seeking a review of the order of the ITAT which is not sustainable in law. Upon careful consideration we find that ITAT has duly appreciated the submissions and thereafter passed the order upholding the order s of authorities below. We find that by way of this miscellaneous application the assessee seeks a review of the order of the tribunal in the garb of rectification of mistake apparent from record. It is settled law that a review of the order in the garb of rectification of mistake apparent from record is not permissible in law. Accordingly this miscellaneous application filed by the assessee stands dismissed

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• 2021 (3) TMI 814
  Revision u/s 263 - disallowing claim of depreciation - application filed by the assessee making an alternative claim of amortization of expenditure incurred in the BOT project - AO passed an order under section 154 of the Act on 14-03-2019 allowing assessee s claim of amortization in terms of CBDT circular No. 9 of 2014 - HELD THAT:- While deciding assessee s appeal against disallowance of depreciation on BOT project, Commissioner (Appeals) has directed the assessing officer to allow the claim of depreciation. It is observed, in the fresh assessment order passed under section 143(3) r.w.s. 263 of the Act the assessing officer, after verifying the details, has recorded a categorical finding that the expenditures claimed by the assessee on the BOT project are genuine. AO has also given effect to the directions of learned Commissioner (Appeals) by allowing depreciation on the BOT project. AO has carried out the directions of, both, PCIT and learned Commissioner (Appeals) in letter and spirit. Validity of assumption of jurisdiction u/s 263 - In principle, we agree with the learned Counsel for the assessee that the reassessment order cannot be held as either erroneous or prejudicial to the interest of revenue, as, the assessment was reopened only for the purpose of disallowing assessee s claim of depreciation. In the reassessment proceeding the assessing officer was not required to examine the genuineness of expenditure capitalized as it was a subject matter of original assessment proceeding. Be that as it may, in the fresh assessment order the assessing officer has verified the details of expenditure capitalized and found them to be genuine. AO has also allowed assessee s claim of depreciation. Thus, in view of the fresh assessment order passed under section 143(3) r.w.s 263 the issues raised in the present appeal are now of mere academic interest. In effect, the present appeal of the assessee having become infructuous, does not require adjudication.

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• 2021 (3) TMI 813
  Disallowance u/s 14A - expenses incurred for the purpose of earning exempt income - CIT(A) who restricted the disallowance to the extent of exempt income earned by way of dividend in all the years - HELD THAT:- As assessee in its appeal filed relating to assessment years 2006-07 and 2007-08 urging that the entire disallowance made u/s. 14A of the Act needed to be deleted since Rule 8D was not applicable in the impugned years, we are not convinced with the same. Merely because the AO had adopted an incorrect method for working out the disallowance does not mean that the entire disallowance was not tenable in law, more particularly when the ITAT had in the first round held that in the light of the fact that the assessee had earned exempt income, section 14A of the Act was attracted and the AO was only required to work out the disallowance as per the provisions of law. Having held so, however, we are of the view that the incorrect application of formula by the AO for the impugned years needs to be looked into and a proper method for working out the disallowance need to be arrived at in the said two years i.e. 2006-07 and 2007-08. This issue, therefore, also needs reconsideration at the end of the Ld. CIT(A). Therefore, all the appeals are restored back to the Ld. CIT(A) with the direction to rework the amount of disallowance of expenses u/s. 14A for all the assessment years in accordance with law, giving a clear finding of the nature of the expenses disallowed. Application of Rule 8D for calculating disallowance of expenses u/s. 14A of the Act, is restored back to the Ld. CIT(A) with the directions to calculate the same as per appropriate method, in accordance with law.

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• 2021 (3) TMI 812
  Denying the deduction under section 80P to the society in respect of interest paid - HELD THAT:- As provisions of section 80P(2)(4), a co-operative bank as such does not mean a cooperative society. The Ld. Counsel for the assessee in this respect has submitted that the intention of the legislature is to deny deduction to the cooperative bank and not to the cooperative society. We are not convinced with the above argument of the assessee. As per the provisions of section 80P(2)(d), what has been allowed is interest or dividend derived by the co-operative society with investment in any another co-operative society. The meaning of co-operative society cannot be taken differently for the investor and for the Institution (investee). The provisions of section 80P(4) specifically states that the provisions of this section will not apply to any co-operative bank. The plain meaning of which is that the same interpretation is to be given in case of an investor co-operative society and to the bank in which the investment is made. The Co-operative Bank cannot be given a different interpretation as an investee Bank. Two different meanings cannot be ascribed to the same word in the same provision. We hold that the assessee is not entitled to any deduction on interest income as per the provisions of section 80P(2)(d) of the Act. However, so far as the claim of the assessee that the assessee is entitled to deduction us 80P(2)(a) is concerned, the said issue has not been looked into by the Ld. CIT(A) despite a ground in this respect taken by the assessee before the Ld. CIT(A). Matter is restored to the file of the Ld. CIT(A) for the limited purpose of adjudicating on the plea of the assessee regarding its eligibility of deduction of interest income u/s. 80P(2)(a) - CIT(A) will give proper opportunity to the assessee to present its case and address on this issue by way of a speaking order. - Appeal of the assessee is treated as allowed for statistical purposes.

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• 2021 (3) TMI 811
  Revision u/s 263 - Addition u/s 68 - order passed by Assessing Officer u/s 143(3) was held to be erroneous and prejudicial to the interest of the Revenue - HELD THAT:- Where there is a failure to offer explanation on part of the assessee and its shareholders and it would be incumbent on part of the AO to seek such an explanation and where the AO has not sought such an explanation and there is thus a failure to record the satisfaction by the AO, the same will render the order erroneous due to non-application of relevant provisions as applicable in the instant case and thus, the order so passed would be without application of mind. In the instant case, we find that during the course of assessment proceedings, the AO vide notice u/s 142(1) dated 24.08.2017 has enquired about the source of increase in share capital during the year under consideration along with documentary evidence and in response, the assessee company vide letter dated NIL- Annexure C has submitted a chart giving the name of the three shareholders and amount of share capital allotted to each of them during the month of December 2014, January 2015 and March 2015 totalling Rs. 120 crores. There is no explanation submitted regarding source of such funds and no documentary evidence has been brought on record by the assessee company. AO has however taken the said submission on face value and no further show-cause or enquiry/examination has been conducted by him. Useful reference can be drawn to facts and findings of Malabar Industrial Co. ltd [ 2000 (2) TMI 10 - SUPREME COURT] . In that case, the appellant entered into an agreement for sale of the estate of rubber plantation and the agreement provided, inter alia, for payment of the consideration in instalments as scheduled therein. Purchaser could not adhere to the schedule and on his request, the parties agreed to the extension of time for payment of the instalments on condition of his paying compensation/damages for loss of agricultural income and other liabilities. Accordingly, the appellant passed a resolution also to that effect on 25-9- 1983 and the purchaser paid the said amount. In the annexure to the return filed by it for the assessment in question, the amount was noted as compensation and damages for loss of agricultural income. By order dated 31-10-1985, the ITO accepted the same and endorsed nil assessment for that year. The Commissioner having examined the records of the assessment found that the nil assessment order passed by the ITO was erroneous and it was prejudicial to the interests of the Revenue and held that the said amount was unconnected with any agricultural operation activity and was liable to be taxed under the head Income from other sources . In the instant case as well, there is no material on record to demonstrate the source of funds so infused by way of share capital in the assessee company. The Assessing officer has merely relied on the statement of the assessee company that the shares have been allotted to the respective shareholders and in support, only the name of the shareholders and respective amount invested by them have been submitted. We therefore find that the facts of the present case are pari- materia with that of the Malabar Industrial (supra) and following the same, the order so passed by the AO is clearly erroneous and prejudicial to the interest of Revenue. Where the matter has not been examined by the AO at first place, the law doesn t contemplate that the ld Pr CIT should step in the shoes of the AO and examine all such material and evidence for the first time. Had it been a case of an enquiry already been conducted by the AO, in such a scenario, where the ld Pr CIT holds a different point of view, in such a scenario, he has to record as to why the enquiry so conducted by the AO is erroneous and prejudicial to the interest of Revenue. Therefore, the contention so advanced by the ld AR cannot be accepted. AO did not make any inquiries to ascertain whether the business of the assessee company was set up or not and consequent claim of business loss rendering the order so passed as erroneous and prejudicial to the interest of Revenue - Pr CIT has already held that issue of setting up of business is to be largely decided by the facts of each case and the AO has been directed to verify the necessary details in case of the assessee and the decide the same a fresh. Therefore, it is not a case that the said decision has been held as binding on the AO rather the AO has been directed to apply the legal proposition so emerging therefrom and apply the same to the facts of the present case. The AO was also directed to provide an opportunity to the assessee and the said opportunity may now be read and understood to also allow the assessee to bring the distinguishing features as so contended by the AR. Increase in tangible assets where the AO failed to verify purchase of fixed assets made during the year - Pr CIT has recorded a finding that no details were available on record and such details have been submitted during the revisionary proceedings vide letter dated 9.03.2020 and the AO has been directed to verify the same. No contention has been advanced by the ld AR in this regard, hence, no interference is called for. Outward foreign remittance towards purchase of machinery which has not been examined by the AO during the assessment proceedings - Pr CIT has recorded a finding that the assessee has submitted Form 15CA vide reply dated 9.03.2020 and the AO has been directed to verify the same. No contention has been advanced by the ld AR in this regard, hence, no interference is called for. We accordingly upheld the order passed by the ld Pr CIT u/s 263 of the Act setting aside the assessment order passed by the Assessing officer for the limited purposes of examining the aforesaid issues afresh after making necessary examination and verification and providing necessary opportunity to the assessee. - Decided against assessee.

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• 2021 (3) TMI 810
  Addition of salary and wages expenses - HELD THAT:- CIT(A) herself has accepted that there is increase in profit during the year as compared to preceding year and also the Assessing Officer has not pointed out any specific instance of the defect. She also taken note of the decisions cited by the authorized representative of the assessee. When no specific defect in bills or voucher has been pointed of by the Assessing Officer, no addition on adhoc basis can be sustained in view of the decisions above.Accordingly, we delete the addition which was sustained by the Learned CIT(A). The ground No. 1 of the appeal of the assessee is accordingly allowed. Disallowance for late payment of employees contribution to ESI and PF - HELD THAT:- As per the provisions of the Act, if employees contribution is paid to the respective department after due date as specified in respective enactment, the employer shall not be allowed deduction under the head profit and gains of the business . There is a distinction between employer and employee contribution to ESI/EPF. If contribution of the employee is deducted out of his salary and not paid to the respective department, it is the employer who enjoys the funds of the employee for his benefit in the business and the employee is deprived of interest accrued on said contribution. The employer hold the payment as a trustee till the due date of deposit provided in respect of enactment. The respective enactment has although provided deterrent to the employer in the form of interest and penalty after late payment, however the employee will be still deprived of the interest if the contribution is paid after the due date of deposit. In view of provision of section 36(1)(iv) Act, the employer is discouraged to make deposit of employees contribution to ESI/EPF after the due date prescribed in respective enactment. Thus, respectfully following the decision of Bharat Hotels Ltd [ 2018 (9) TMI 798 - DELHI HIGH COURT] the finding of the Ld. CIT(A) on the issue in dispute is upheld. The ground No. 2 of the appeal of the assessee is accordingly dismissed.

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• 2021 (3) TMI 809
  Deduction u/s 80IB - assessee has claimed deduction claiming to have two units - AO found that there was only one unit - HELD THAT:- The assessing officer found that there was only one unit. The same was already enjoying deduction under section 80IB(4). This was the last year of the claim of deduction under section 80IB for that unit. In the current year assessee claimed that it has established another unit named unit-II, and claimed deduction under section 80IB(4) for both the units. AO found that assessee had only done substantial increase in the capacity of its existing unit and was trying to pass it off as establishment of a second unit. In this regard assessing officer also obtained report from the additional director investigation. The said report duly provided that there was only one unit which was also corroborated by the examination of ADI from the assessee s work s manager. Simply increase in capacity and production figure cannot fructify the assessee s claim of deduction under section 80IB for the assessment for establishment of a new unit when all other factors show that there is no establishment of a separate undertaking. The decisions referred by learned CIT(A) are not at all applicable on the facts of the present case. Here it is a clear finding that this is the last year of eligibility of claim u/s. 80IB(4) deduction of the eligible unit and the assessee has tried to pass off an increase in production capacity as establishment of new unit. The Assessing Officer has duly found that there is no establishment of a new unit. Only an increase in production is being passed off as establishment of new unit. Not a single ingredient for establishment of new unit has been noted by the Assessing Officer or ADIT on his physical visit to the unit. In this regard we note that a Constitution bench of the honourable Supreme Court in the case of Commissioner of Customs (Import) Vs M/s. Dilip Kumar Company [ 2018 (7) TMI 1826 - SUPREME COURT] has expounded that in case of exemption provisions if two views are possible the one in favour of the Revenue has to be adopted. Moreover we find that learned CIT(A) has not adjudicated the alternative plea of the assessee. Assessee is aggrieved by this. Assessee has also filed cross objection in this regard. In our considered opinion interest of justice will be served if the issue is remitted to the file of learned CIT(A). Learned CIT(A) is directed to consider the issue afresh and decide on all the aspects of the grounds raised by the assessee including alternative plea. Appeal by the revenue stands allowed for statistical purposes

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• 2021 (3) TMI 807
  Rejection the Application for Registration u/s. 12AA - nature of contributions made by the pharmaceuticals companies terming the same as sponsorship and also holding that such contributing companies also deducting TDS on their such sponsorship contributions and therefore same being largely driven by their object of maximizing the profits of the sponsors/sponsoring entities and any activities so conducted with such sponsorships cannot be termed as charitable activities - HELD THAT:- Since, Section 12AA of the Act pertains to registration of the trust and not to assess of what a trust has actually done, we are of the view that the term activities in the provision includes proposed activities . That is to say, a Commissioner is bound to consider whether the object of the Trust is genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of Section 12AA. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust. As far as the facts of the present case are concerned, the objects of the Trust were not considered by the ld. CIT(E), therefore, we are of the view that overall scheme and theme of the activities which are undertaken by the appellant is to make people at large aware of Cancer diseases, its dangers and what preventive care against the same was possible. Therefore, at the time of issue of granting registration, the only basis which is required to be considered is the overall objects of the Trust and its overall intent and not the basis of resources to carry out such activities or an outcome of any such activities of charitable nature undertaken without any intent or purpose of profit. Therefore, keeping in view our above discussion, we set aside the order passed by the ld. CIT(E) and direct him to grant registration u/s 12AA of the Act to the appellant. However, in case at a later stage, after granting registration, if it is found that the activities of the appellant actually carried out by the Trust are not genuine, being not in accordance with the objects of the Trust, then in that eventuality, the ld. CIT(E) is at liberty to invoke the provisions of sub-section (3) of Section 12AA of the Act independently - Appeal of the assessee is allowed.

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• 2021 (3) TMI 805
  Refund u/s 241A - whether notice has been issued by the Assessing Officer u/s 241A - HELD THAT:- We are informed that respondent no. 4 is responsible for ordering payment of the refund amount. List the matter on 18.03.2021. In case there is no clarity, on this issue on the next date of hearing, we will assume that there is no order passed under Section 241 A of the Income Tax Act, 1961. Furthermore, the concerned officer will join the proceedings on the next date of hearing.

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• 2021 (3) TMI 804
  Refund u/s 241A - HELD THAT:- The counsel for the petitioner states that the refund has already been delayed for one and a half years. This state of affairs cannot be tolerated. If within two weeks it is not informed that any notice under Section 241A of the Income Tax Act, 1961 has been issued and the notice not placed before this Court, this Court will direct refund without granting any further time.

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• 2021 (3) TMI 803
  TP Adjustment - foreign exchange fluctuation gain/loss should be treated as non operating income/expenses for the purpose of computation of Profit Level Indicator (PLI) of the tested party and the comparables - HELD THAT:- Tribunal in the case of Ameriprise India (P) Ltd. [ 2016 (3) TMI 1272 - DELHI HIGH COURT] this issue is answered in favour of the assessee and the TPO/AO is directed to determine the ALP of the international transactions afresh after considering forex gain/loss as operating in nature. Ground raised in appeal by the assessee is allowed. Comparability - HELD THAT:- Cat Technologies Limited - As going by the submissions of assessee that Cat Technologies Limited is persistent loss making company only, if forex is taken as non-operating in nature. In the foregoing paragraphs while deciding Ground No.4 in this appeal, we have already arrived at the findings that forex has to be taken as operating in nature. In such scenario, the Ld. Counsel did submit that Cat Technologies Limited will not be considered as persistent operating loss making company. Taking the totality of facts and circumstances, we direct the TPO/AO to include this company i.e. Cat Technologies Limited in the final set of comparables with that of the assessee. Evoke Technologies Pvt. Ltd. - As assessee who included this company in the list of comparables. As such, the primary burden of proving comparability was on it. It is just elementary that comparability can be established with reference to various factors. Apart from filters, it is essential to consider the nature of business of the company and other qualitative information, such as, related party transactions, mergers and acquisition etc. if any and the detailed composition and manner of revenue recognition, which predominantly help in deciding the comparability. Such qualitative information can be obtained only from the Annual Report of the company for the relevant year. Simply relying on the quantitative figures for the year under consideration with reference to the Annual Report of the company for the succeeding year does not in any manner assist in deducing the qualitative information and the resultant comparability. It is a matter of record and admitted position that the assessee did not furnish Annual Report of the Company before the Authorities below which could have assisted them in ascertaining the comparability of this company with that of the assessee. The same position is continuing before the Tribunal as well. Since the assessee failed to prove the comparability with reference to the Annual Report of this company, we are satisfied that the Authorities below were justified in excluding this company in the final list of comparables. Maveric Systems Ltd - The assessment year under consideration is 2014-15 with the corresponding F.Y. 2013-14. Since the unit got physically moved during June 2014 i.e. in the succeeding financial year, the factor of relocation of its SEZ unit cannot be considered as extraordinary event for the year. However, it is also an admitted position that this company received compensation on account of such relocation which was shown as income during the year in the P L account under Exceptional item , but was not considered as operating revenue. Since this income on account of relocation relates to the very fact of relocation, the income on account of such relocation also needs to be considered as item of operating revenue. Though the assessee was contesting before the Authorities below that the income of Rs. 4.96 Crore should not be taken as operating revenue, but, it was fairly conceded by the Ld. AR before the Tribunal that this income can be included in the operating revenue of this company for the purpose of determining its PLI. We, therefore, direct to include this company in the final list of comparables. Further, we clarify that in computing the PLI of this company, income of Rs. 4.96 Crore should also be taken as a part of operating revenue. Persistent Systems Limited - Materials available on record that this company is functionally not comparable with that of the assessee company and more so because, segment wise information regarding product or services are not available in respect of this company. Therefore, we direct the AO/TPO to exclude Persistent Systems Limited from the final list of comparable companies with regard to its software development service segment. Thirdware Solutions Limited is to be excluded. TP adjustment has to be done restricting to the proportion of transaction with Associated Enterprises only - Hon ble Bombay High Court in the case of CIT Vs. Hindustan Unilever Ltd [ 2016 (7) TMI 1245 - BOMBAY HIGH COURT] has observed that Transfer Pricing adjustment has to be done only in respect of international transaction with Associated Enterprises. The Pune Bench of the Tribunal in the case of DCIT Vs. Magna Steyr India P. Ltd. [ 2018 (10) TMI 1886 - ITAT PUNE] had occasion to refer the decision of the Hon ble Bombay High Court in the case of CIT Vs. Thysseen Krupp Industries India Pvt. Ltd., [ 2015 (12) TMI 1076 - BOMBAY HIGH COURT] wherein it has been held the transfer pricing adjustment, if any, has to be made vis- -vis associated enterprises transaction and not on entity level. Accordingly, Pune Bench of the Tribunal directed AO/TPO to re-compute the ALP of international transactions of the assessee with its associated enterprises on the basis of the transactions with associated enterprises only. Respectfully following the above referred judicial pronouncements, we direct the AO/TPO to determine the TP adjustment, if any, to be restricted to the international transactions of the assessee with its Associated Enterprises only

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• Corporate Laws

• 2021 (3) TMI 817
  Seeking to implead applicant as Additional Respondent No.23 in the Company Petition No. 21/KOB/2020 and all related Interlocutory Applications on the files of this Tribunal - HELD THAT:- Section 424 of the Companies Act, 2013 stated that the Tribunal is guided by the principles of natural justice, which underlines the need to hear all parties interested and concerned in the issue before the Tribunal and may be effected by any order passed by the Tribunal. Hence the persons who are interested in the proceedings have necessarily to be impleaded to the proceedings. The prerogative to hear or not to hear a party depends on the court concluding as to whether he is proper person to be heard and that if the court is of the opinion that one should be heard for a proper adjudication in the issue before it, definitely he should be heard for which he should be made a party to such proceedings. The impleadment of the applicant herein as one of the respondents will not be likely to be effected in any manner the interests of the petitioners in the Company Petition, and that the contention of the petitioners in the CP/respondents 1 to 8 herein that the applicant herein is not a necessary party cannot be accepted. Application is allowed - the applicant herein Mr.C.Mohanan Pillai residing at Krishna Priya, Podiyattuvila PO, Valakom, Kollam-691532 is impleaded as Additional Respondent No.23 in the Company Petition - However, the prayer to implead him in all related Interlocutory Applications is rejected, for the reason that such a prayer cannot be accepted by this Tribunal, because a person seeking impleadment may be impleaded in a Petition in which he is sought to be impleaded and not any other petition.

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• 2021 (3) TMI 808
  Seeking sanction of the Scheme of Amalgamation - Sections 230 to 232 of the Companies Act, 2013 - HELD THAT:- The meetings of the Equity Shareholders of both the Applicant Companies are dispensed with as their consents by way of affidavits have been received. Meeting of the Preference Shareholders of Transferee Company is dispensed with as their consents by way of affidavit have been received. Meetings of the unsecured creditors of Applicant Companies are dispensed with in view of consents received by way of affidavits. Since, there are no Secured Creditors in both the Applicant Companies, therefore there is nothing to call and convene of their meetings. However, Rule 8 of the Rules requires the notice of the meetings to be sent to the Statutory Authorities in Form CAA 3. Since the calling and convening of the meetings are being dispensed with, the applicants shall have to make a specific prayer while moving the second motion petition to issue the notice to those Statutory Authorities. The First Motion Application stands allowed

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• Securities / SEBI

• 2021 (3) TMI 806
  Insider trading - appellants entered into suspected insider trading being privy to unpublished price sensitive information ( UPSI ) of declining profits of TJL and disposed of their promoter shareholding and thereby avoided losses - violation of Code of Conduct applicable to insiders by not taking pre-clearances from the concerned authority of the company for trading in the shares of the company during the UPSI period - contention of the appellants that the impugned order has been passed in haste and that too without show-causing the appellants and thereby not providing them an opportunity of presenting the full facts - HELD THAT:- Having heard the learned counsel for the parties at reasonable length, we proceed to dispose of the appeal at the stage of admission itself without calling for reply/rejoinder etc. as this matter is squarely covered by our orders in Abhijit Rajan s case [ 2019 (11) TMI 1598 - SECURITIES APPELLATE TRIBUNAL MUMBAI] and Dr. Udayant Malhoutra s case [ 2020 (6) TMI 742 - SECURITIES APPELLATE TRIBUNAL MUMBAI] wherein held even if it is assumed that the information was is a price sensitive information, still the appellant cannot be blamed of insider trading for the reasons that he did not trade on the basis of the information . The appellant was able to show his dire need to infuse fund in the entity under the master restructuring agreement to implement a CDR package as detailed supra. He was even required to sell his agricultural land and flat details of which are already given hereinabove.appellants therein were able to rebut the presumption that they traded on the basis of UPSI as they had a necessity to sell the shares. In the present appeal before us, however, since all the facts are yet to be analysed by the respondent SEBI upon hearing the appellant, we do not propose to make any comment on the merit of the case at this stage. Accordingly, we quash and set aside the impugned Order, except as a Show Cause Notice (SCN), upon deposit of the amounts as specified below. Appellants are directed to file a reply to the SCN within four weeks from today. The respondent will decide the matter finally after giving an opportunity of hearing to the appellant either through physical hearing or through video conference within six months thereafter. In the interim, in order to safeguard the interests of the investors in the securities market and also to protect the integrity of the securities market, we further direct the appellants to deposit the specified amounts.

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• Service Tax

• 2021 (3) TMI 841
  Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - scope of services - HELD THAT:- It is not in dispute that the petitioner has not responded to the show cause notices and hence, there has been some lapse on their side. Taking note of the submission made by the learned counsel for the petitioner and also that initially they had intended to avail the benefit under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and however, due to circumstances including Pandemic, they were not able to fulfill the requirements under the said scheme, the impugned order deserves to be looked into in an appropriate manner insofar as the order has been passed without participation of the petitioner. Even if the petitioner were to prefer an appeal, the authority which has passed the order will have no benefit of the contentions on its merits as sought to be made out in the present writ petition. It would be an appropriate case to afford an opportunity for the petitioner to put forth his case on merits so that a reasoned order is passed by the Assessing Authority. Taking note of the nature of contentions taken including in specific, as regards to the business transaction in Annexure-B not being service , which is a jurisdictional objection, the matter requires consideration - Petitioner is directed to appear before the respondent on 08.03.2021. Petitioner to co-operate for early disposal of the proceedings and shall not seek for unnecessary adjournments. Looking into the nature of discretion exercised in favour of the petitioner, it would be appropriate that the authority dispose off the proceedings after appearance of the petitioner within a period not later than 30 days - Petition allowed by way of remand.

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• 2021 (3) TMI 838
  Recovery of excess pre-deposit made - pendency of appeal where the assessee demonstrates proof of payment of 7.5% or 10% as may be applicable - Section 35F of the Central Excise Act, 1944 - HELD THAT:- It is only a technical contention taken by the petitioner. In light of the order passed by the appellate authority on the application for condonation of delay in the appeal, whereby the appellate authority has rejected the assertion of the Department as regards delivery of notice on 30.10.2019 as the notice was not in requisite Form i.e., ST-4, it is not open for this Court to enter into the question of appeal having been filed beyond the period of limitation and hence permit the recovery. If that were to be so and appeal was presented within the period of limitation, as noticed by the appellate authority, the petitioner was entitled to the benefit of prohibition of recovery from the date of institution of appeal which would extend to prohibition of any recovery subsequent to 08.01.2021, which would include prohibition of Citi Bank making payment to the Department Thus, recovery of a sum of Rs. 2,52,85,310/- made as per the Demand Draft bearing No.620628 favouring the Principal Commissioner of Central Tax, GST Bangalore East Commissionerate , dated 11.01.2021 referred to at Annexure-J, being illegal, such recovery is set aside while observing that any further action for recovery is to be made only in terms of Paragraph No.4.3 of the Circular dated 16.09.2014 - petition disposed off.

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• 2021 (3) TMI 823
  Valuation - inclusion of value of materials supplied by the respondent under a separate material supply contract with EDAs in the gross value of Works Contract Service - Rule 3 of Works Contract (Composition Scheme for payment of Service tax) Rules, 2007 - HELD THAT:- From the perusal of explanation to Rule 3 of Works Contract (Composition Scheme for payment of service tax) Rules, 2007 it is clear that the amendment in Rule 3 (explanation to rule 3) would not be applied to any works contract where the execution under the said contract has commenced or where any payment has been made in relation to the said contract on or before 07.07.2009. As per the clear provision under the amended Rule 3 reads with amended explanation and two circular clarifying provision of the said amendment, it is clear that any contract which is executed or payment their against (except the way of credit/ debit) made prior to 07.07.2009, the value of goods supplied under the separate contract cannot be included in the gross value of Works Contract Service - As regard the contention of the revenue that the respondent have executed one composite works contract irrespective of having two separate contract one for supply of goods and other for supply of services, it should be treated as one contract and value of both the contract should be taken together for arriving at gross value of the works contract. To counter the situation like in the present case the amendment was brought with effect from 07.07.2009. If the contention of the revenue is accepted it will amount to give retrospective effect to the amendment of 07.07.2009 which is not permissible under law as per the settled position by Hon ble Supreme Court in various cases that any amendment cannot be made applicable. Retrospectively unless it is specifically mentioned therein, therefore even considering the undisputed fact of two contracts the value of goods supplied under separate contract cannot be added in the value Works Contract Service. Extended period of limitation - wilful suppression of facts or not - HELD THAT:- There is no suppression or wilful misstatement on the part of the respondent. The Learned Commissioner in the impugned order also observed that the respondent has filed periodical ST-3 return regularly and disclosed all the necessary details as may be required. The respondent also provided contract wise/ invoices wise details along with ST-3 return filed before the Jurisdictional Authority. In this circumstances charge of suppression or wilful misstatement do not survive against the respondent - extended period of limitation is not invokable. Appeal dismissed - decided against Revenue.

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• Central Excise

• 2021 (3) TMI 846
  Rejection of refund claim - time limitation u/s 11B of the Central Excise Act, 1944 - claim of the appellant regarding applicability of Entries No.12(a) and 12(c) of the Mega Exemption Notification No.25/2012-ST dated 20.06.2012 is ignored - HELD THAT:- While dealing with the appeal, the second ground of challenge, had not been adverted to. This issue has also not been adjudicated by the Custom Excise and Service Appellate Tribunal - There is no adjudication on the issue that, in case, the exemption sought by the appellant under the Mega Exemption Scheme is allowed, the limitation for refund claim under Section 11B of the Act would not come into play. On the limited issue to examine the claim of the appellant seeking for benefit of the Mega Exemption Scheme, the matter is liable to be relegated to the Commissioner (Appeals), as the validity of the finding on the said issue in the order of rejection dated 13.3.2019 has to be examined by him - appeal allowed by way of remand.

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• 2021 (3) TMI 845
  Validity of reversal of Order-in-Original passed by the Commissioner of Central Excise, pursuant to an order of remand passed by the Tribunal in the earlier round of litigation - HELD THAT:- On a perusal of the Order-in-Original, more particularly, the findings from paragraph 36 to paragraph 39, the same was found to be almost a verbatim repetition of the findings rendered by the Hon ble Technical Member in the earlier round of litigation before the Tribunal, which was a minority view. On a reading of the order in its entirety, there appears to be a missing link, which was noted by the Tribunal and the Tribunal observed that the Department failed to establish any link about the payment to the assessee-firm s transactions and that the appellant-partner never admitted any clandestine removal and all that he had accepted was the payment to three persons, who were employees of SWC and that there is no evidence placed by the Department to show purchase of the raw material, Oleum. Further, the important aspect that the appellant did not have sufficient storage facility for such huge quantity of LAB, was also noted to be a very relevant factor. Further, the Tribunal rightly noted that the Adjudicating Authority did not follow the directions issued by the Tribunal while remanding the matter for de novo consideration and it reiterated only the statements of persons with regard to the supply of LAB through SWC and failed to address the issue on the procurement of Sulphuric Acid/Oleum. The findings rendered by the Tribunal would clearly show that a thorough fact finding exercise has been done and the missing links have been pointed out by the Tribunal and we find the entire matter to be fully factual and no question of law would arise for consideration in the appeals filed by the Revenue. The onus was on the Department to prove that there was clandestine manufacture and removal by the assessee-firm and this having not been established to the extent required, there was no error or perversity found in the approach of the Tribunal warranting interference. The Tribunal ought to have granted full relief to the appellant-partner, instead of restricting the penalty to Rs. 2,00,000/-. That apart, no reason has been assigned by the Tribunal as to why it did not vacate the entire penalty and thought fit to reduce it to Rs. 2,00,000/- , though the Tribunal had exonerated the assessee-firm entirely. Therefore, the order passed by the Tribunal, insofar as sustaining the penalty to the tune of Rs. 2,00,000/- calls for interference. Application is allowed and the substantial questions of law raised by the appellant-partner are answered in favour of the appellant-partner.

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• 2021 (3) TMI 816
  Refund of CENVAT Credit - time limitation - although the amount paid by the appellant under protest during the course of investigation itself but when adjudication order passed the same was appropriated - HELD THAT:- As Section 11B itself states that the limitation of one year as prescribed under Section 11B shall not apply wherein any duty or interest if any paid on such duty has been paid under protest. Further the Master Circular itself has directed to their departmental officer that in all the cases where appellant authority has decided the matter in favour of the appellant, the refund alongwith interest is to be paid to the appellant within 15 days of the receipt of the letter of the appellant seeking refund irrespective of whether or the order authorities proposed challenged by the department or not. As departmental circular as well as the provisions of law are very much clear that when duty is paid under protest the time limit prescribed under Section 11B is not applicable therefore, the authorities below has misplaced being have not interpreted the law and unnecessarily drag the appellant into litigation up to the level of this Tribunal - the appellant is entitled to claim refund along with interest and the same is to be sanctioned to the appellant within 30 days of receipt of this order. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2021 (3) TMI 844
  Levy of penalty under Section 72(2) of KVAT Act - Wrong classification of goods - aluminum castings - whether classifiable as non-ferrous castings under Entry 66 of the Third Schedule to the Act or would fall under unscheduled goods and are liable to be taxed at the rate of 12.5%? - HELD THAT:- From perusal of Section 72(2) of the Act, it is evident that when dealer has filed the returns in the prescribed form and he understates his liability to tax or overstates his entitlement to a tax credit by more than 5% of the actual liability to pay tax, he is liable to pay penalty equal to 10% of the amount of such tax under or overstated. However, the provision requires that before levy of penalty, the dealer has to be given an opportunity to show-cause in writing against the imposition of penalty. It is only after consideration of the cause shown by the dealer, the penalty can be imposed - It is graphically clear that the discretion is with the matter of imposition of penalty and not with regard to the rate of penalty. Thus, it is evident that the levy of penalty under Section 72(2) of the Act is neither automatic nor mandatory. In the instant case, First Appellate Authority, after detailed examination of the material available on record, has found that there is a scope for ambiguity in classification of aluminum castings as non-ferrous castings and according to the Authority, the aluminum castings may be classified under Entry 66 as non-ferrous castings and are liable to tax only at the rate of 4%. The First Appellate Authority has also found that there was a scope for ambiguity and in any case, the transactions were revenue neutral and therefore no mala fide intention would be attributed to the dealer. It is relevant to mention here that the sine qua non that the condition precedent for exercising powers under Section 64 of the Act is that the order of the Authority should be prejudicial in the interest of the Revenue - in this case, both the aforesaid conditions are not fulfilled as the order passed by the First Appellate Authority is well considered which is passed with meticulous appreciation of the material available on record. Therefore, the condition precedent for invoking the powers under Section 64 of the Act, is not fulfilled. Appeal allowed - decided in favor of appellant.

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• 2021 (3) TMI 839
  Period of limitation for initiating assessment - retrospective effect - period involved in the present case is the assessment period from April 2006 to March 2007 - appeal dismissed by order dated 31.12.2015, against which an appeal was preferred before the Karnataka Appellate Tribunal and the KAT has allowed the appeal preferred by the assessee on the point of limitation alone - HELD THAT:- This Court in the case of M/S CIFTECH SOLUTIONS PVT. LTD., M/S. SREE SHEELE PRIVATE LIMITED, M/S. STEEL AUTHORITY OF INDIA LIMITED, M/S. SRI NIDHI GRANITES PRIVATE LIMITED, M/S. NARAYANA DEVADIGA, WIPRO LIMITED, M/S SRIDEVI AGENCIES, M/S INTERNATIONAL FLAVORS FRAGRANCES INDIA PVT. LTD., M/S. ALCOATS, SRI M.S. SRINIVAS PROPRIETOR, M/S S.V. INDUSTRIES M/S. RAMACHANDRA PHARMA CHEM M/S BINDU PROMOTERS AND DEVELOPERS M/S AYYAPPA INDUSTRIES VERSUS STATE OF KARNATAKA OTHERS [ 2015 (8) TMI 1389 - KARNATAKA HIGH COURT ] has taken a view that the amendment granting limitation to the Assessing Officer to initiate reassessment proceedings treating the period of limitation to be within eight years and that too with retrospective effect. Thus, it can be inferred that the amendment in Section 40 by virtue of the Amendment Act, is with retrospective effect and the KAT could not have set aside the order passed by the Assessing Officer and the First Appellate Authority by treating the assessment as barred by the period of limitation. The impugned order passed by the Karnataka Appellate Tribunal, Bengaluru is set aside - The matter is remanded back to the Assessing Officer to pass the order afresh in accordance with law. The parties will appear before the assessing officer on 1.3.2021 - petition allowed by way of remand.

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• Indian Laws

• 2021 (3) TMI 861
  Abatement of revision proceedings on the death of accused person - HELD THAT:- This Court has to decide the Revision on merits, even after the death of the applicant/petitioner. It is discretionary power of the High Court to examine the correctness, legality or propriety of any finding, sentence or order passed by any inferior Court. On the death of the convicted person, the question of serving the whole or portion of his sentence of imprisonment does not arise, but the sentence of fine still remains to be examined. If the fact that the fine will have to be paid out of the estate of the deceased petitioner, in revision, the ground for giving the heir or legal representative a right to continue the Appeal or the privilege of maintaining or continuing the revision, in my considered opinion, no prejudice will be caused to the complainant, if the legal heir of the deceased applicant is permitted to continue with the revision application to the extent of imposition of fine amount, which is around Rs. 10 lakhs. Otherwise also, this Court will have to examine correctness, legality or propriety of the order passed by the Appellate Court, even after the death of the petitioner. Condonation of delay in filing criminal revision application - HELD THAT:- Though application is moved under Section 394(2) of Cr.P.C. which provides for abatement on the death of the appellant, there is no provision for bringing the legal representative on record in respect of Revision. As such, there is no question of condonation of delay. Applications allowed.

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• 2021 (3) TMI 851
  Dishonor of Cheque - vicarious liability of the Directors for having committed the offence under Section 138 of the N.I.Act - HELD THAT:- Perusal of the papers produced along with the petition shows that the cheque in question bearing No.000093 dated 28/7/2015 drawn on an account maintained in Bank by accused No.1 is at page 18 of the petition papers. It is signed only by accused No.2. The signatures of the present petitioners does not appear on the same. There is no allegation in the entire complaint that the present petitioners were either incharge of the Administration/Business of the company or that they are signatories to the cheque in question. Reliance placed in the case of SMS PHARMACEUTICALS LTD. VERSUS NEETA BHALLA [ 2005 (9) TMI 304 - SUPREME COURT] where it was held that The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for conduct of its business. When that is so, holders of such positions in a company become liable under section 141 of the Act. By virtue of the office they hold as Managing Director or Joint Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under section 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of section 141. The proceedings on the file of learned I Additional JMFC, Bagalkot, for offence punishable under Section 138 of the Negotiable Instruments Act, 1881 is quashed - petition allowed.

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• 2021 (3) TMI 843
  Seeking quashment of the NIT (bid) open tender process with regard to Revised 3rd Call - Seeking direction to respondents-State to initiate the fresh tender process - It is alleged by the petitioner that the petitioner is presently working at a rate which comes to rupees 405 Crore annually for five years, whereas the respondent No.4 has submitted bid to the tune of Rs. 642 Crore annual for five years with a clause for increase every year depending upon inflation - HELD THAT:- The petitioner has relied upon the judgments passed by the Supreme Court in the case of Shimnit Utsch India Pvt. Ltd. [ 2010 (5) TMI 944 - SUPREME COURT ], wherein it has been held that State has administrative discretion to cancel entire tender process in public interest provided such action is not actuated with ulterior motive, arbitrariness, irrationality or is in violation of some statutory provisions - In the facts of the present case, there is no arbitrariness on the part of the respondents in finalizing the selection of respondent No.4, especially when the petitioner had not submitted any bid before the cut-off date. Since the petitioner has not participated, therefore, his argument that the respondents could have fatched better price has no merit. The petitioner got advantage of already extended one year in two phases of six months for one or another reason. The judgment in the case of STATE OF ASSAM ORS. VERSUS SUSRITA HOLDINGS PVT. LTD. [ 2014 (4) TMI 1138 - SUPREME COURT ] the Apex Court held that the sale may be either by public auction or private contract. In either case the trustee has to keep in mind that he must obtain the most advantageous price. In the facts of the said case the tender process was set aside and directions were issued for fresh tender but in the facts of the present case nothing has been brought by the petitioner to show in what manner the respondents have acted arbitrarily in finalizing the tender of the respondent No.4. In the present case the petitioner has failed to point out any arbitrariness on the part of the respondents in selection of respondent No.4. The petitioner has to blame himself for not participating in the tender process - There is no illegality or arbitrariness in decision making process of the respondents in finalizing the bid of the respondent No.4, especially when the petitioner himself has not participated in the tender process. Petition dismissed.

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