Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 28, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Cancellation of registration due to shifting of unit from one state to another - Seeking restoration of Goods and Service Tax (GST) registration, which was canceled ab-initio - the material on record indicates that the petitioner was carrying on its business from its principal place of business in Delhi and had shifted it to Haryana. In these facts, the petitioner’s registration cannot be cancelled from the date he had obtained the same. - HC
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Eligibility and conditions for taking Input Tax Credit (ITC) - Section 16(2)(c) of CGST Act - no tax had been remitted by the suppliers, since GSTR 3B had not filed by them - admittedly, there has been no opportunity granted to the petitioner prior to the passing of impugned order dated 20.01.2023 and this is a fatal flaw. Order dated 20.01.2023 is set aside. - HC
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Taxability of amount received - Co-operative Housing Society - receipt of a gratuitous payment from an outgoing member for the time he has resided in the society - no corresponding service being provided separately by the tax payer society - the said contribution by the outgoingmember is nothing but Advance amounts paid to the society for services carried out or to be carried out for the members of the Society and is therefore taxable as per the GST Laws. - AAAR
Income Tax
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Withholding of refund - AO is also required to give detailed and compelling reasons as to how the release of the refund will adversely affect the interest of the Revenue. - The reasons as set forth in the communication are bereft of any details and only reproduce the wordings of Section 241A of the Act with some additional sketchy and vague details. There is also a complete absence of reasoning. - HC
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Validity of assessment order u/s 143(3) r.w.s.144B - First 21 pages of the assessment order is a verbatim extract of the show cause notice. In page nos.22 and 23 in two paragraphs the reply given by the assessee has been summarized. From page nos.23 to 36 of the assessment order it is once again extract of the show cause and ultimately at page nos.37 and 38 the total income has been determined and the assessment is completed. - The impugned assessment order is a classical example as to how an assessment should not be made. - HC
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Exemption u/s 11 - While none may successfully contend or invoke res judicata in taxation matters, at the same time, in absence of any difference of fundamental fact or law arising in subsequent Assessment Year and in face of the same dispute having been thrashed out inter partes in earlier Assessment Year and a definite opinion having been formed by the Tribunal for the same - HC
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Disallowance on account of interest payment on TDS deposited to the Income Tax Department - interest paid on late payment of TDS is compensatory in nature and is an allowable deduction under section 37(1) of the Act - AT
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Denial of benefit of carry forward & setting off of loss and exemption u/s 11 r.w.s. 12 - Belated filing of ITR - In the impugned case on hand, the total receipts declared by the assessee , we observe that there is excess expenditure over income which is loss suffered by the assessee during the year. Therefore, in this case, the claim of deduction from income under section 11 and 12(1) (ba) does not arise. - AT
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Reopening of assessment u/s 147 - addition on account of unsecured loan from 3 parties - AO has reopened the assessment based upon wrong facts, wrong appreciation of facts and without any application of any mind, in as much as, the assessee has not taken any credit entry but, in fact, have made debit entries and, therefore, by no stretch of imagination provisions of section 68 of the Act can be applied. - AT
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Reopening of assessment u/s 147 - addition of other receipts u/s. 68 r.w.s. 115 BBE - allegation made by the revenue is general in nature and the addition of the whole of the receipt is not warranted. - AT
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TDS u/s 194A - assessee in default - failure to upload Form 15G/15H of the depositors in roper format - Considering the fact that the assessee has not deducted tax at source u/s 194A of the Act after receiving the physical copies of Form 15G & 15H, it should not be considered as an assessee in default. - AT
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Exemption u/s 54F - artificial transfer of one house by way of gift deed - colourable device to claim exemption - The assessee artificially created a gift deed of the property with a view to fit into the provisions of section 54F, so that he can claim the deduction against the sale of capital asset. The act of the assessee was prearranged step for execution, and it served no commercial purpose but was motivated to avoid paying taxes. - No exemption - AT
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Correct head of income - transfer of property as stock in trade - Valuation - Application of provisions of section 50C - the AO and CIT(A) erred in applying provisions of section 50C of the Act and determination of full value consideration to compute short term capital gains from transfer of property. - Additions deleted - AT
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Income from other sources u/s. 56(1) - gift of shares received by the assessee - The gift received by the assessee in present case is in the capital field and can be brought to tax under the head capital gain. Accordingly, the provision of section 56(1) cannot be resorted to. - AT
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Income deemed to accrue or arise in India - receipts towards IT support services - the payment received for IT support services cannot be treated either as fee for technical services or as royalty both under the Act as well as under the DTAA. - AT
Customs
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Seeking provisional release of the goods - import of consignments of fresh Kiwi Fruits from UAE - In the facts and circumstances of the case, when the petitioner has agreed to abide by the conditions which may be imposed in light of the decision of this court in M/s. A and A Shipping Services, which could be applied to guide the final order to be passed, this court is inclined to grant the prayer by allowing the provisional release of the goods. - HC
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Refund - principles of unjust enrichment - CA certificate - there is no requirement in law that a certificate must be issued only by the statutory auditors. So long as the certificate is issued by a Chartered Accountant and it is consistent with the accounts such as Balance Sheet and Profit and Loss statement, the certificate deserves to be accepted. - AT
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Classification of imported goods - import of Manual Breast Pump - the product has nothing to do with any medical or surgical procedures nor is it used by any medical practitioner. It is only a facilitating device for self use by lactating mothers. The impugned order classifying the manual breast pump under CTH 39269090 is upheld. - AT
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Seeking restoration of appeal - application for restoration of appeal has been filed after more than six years - Any decision regarding action under the Customs Act against the exporter and/or the appellant are separate proceedings. - Application dismissed - AT
Central Excise
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Recovery of erroneous refund - Once the order in original sanctioning the refund came to be set aside in a proceeding under Section 35E of the Act and the proceedings under Section 35E was initiated within the time prescribed under Section 35E of the Act, thereafter there is no question of any further notice u/s 11A - SC
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Levy of personal penalty under Rule 15(1) of Cenvat Credit Rules, 2004 - wrong availment of CENVAT Credit by the company - appellant submits that appellant is a technocrat and employed as Director operations and looking after production activities of the Company - The penalty under Rule 15(1) on the present appellant, who is merely an employee of the Company, is not sustainable - AT
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Refund - Period of limitation - Considering the beneficial object of establishing the SEZ tax free, without any burden of duties, the procedural lapse, if any, cannot be the basis to deny the refund to the appellant. The exemption is intended to be absolute is further evident from para 3 (II) of the Notification which provides for ab-initio exemption. - AT
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Invocation of extended period of limitation - In the present case, there are no new materials / evidence unearthed by the department which has formed the basis for determination of the duty. All the figures were available to the department as per the invoices submitted by the respondents - the invocation of extended period cannot be justified. - AT
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Valuation - inclusion of subsidy - Under the promotion policy involved in these appeals, the subsidy does not reduce the sales tax that is required to be paid by the assessee. The entire amount of sales tax collected by the assessee from the customers is required to be paid. - What has been retained by the appellant is basically the subsidy amount and it is not the case of the Department that subsidy amount has to be included in the transaction value. - Subsidy amount not to be included in the transaction value - AT
Case Laws:
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GST
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2023 (3) TMI 1169
Seeking restoration of Goods and Service Tax (GST) registration, which was canceled ab-initio - petitioner s claim for refund of ITC was rejected because the petitioner was found to be non-existent and non-functional at the registered place of business - whether the petitioner s GST registration is liable to be cancelled and if so from which date? HELD THAT:- There is no dispute that the petitioner had over a period from August, 2017 to November, 2022 filed its return and paid the necessary taxes. The petitioner has filed a statement for the tax liability from 01.07.2017 till November, 2022. The petitioner claims that it had transferred the business and continued it under the same name, albeit in partnership with another individual, with effect from 31.07.2021 - There appears to be no dispute that the firm constituted on 31.07.2021 had applied for and obtained GST registration in respect of its principal place of business in Haryana. The physical inspection carried out by the Range Officer had also indicated that a board was found hanging outside the premises which mentioned that the unit M/s A.S. Fasteners has been shifted to Badli Industrial Area. This supported the petitioner s contention that he was carrying on the business from its principal place of business till July, 2021 and thereafter from its principal place of business in Haryana. In terms of Section 29(2) of the Act, the proper officer has the discretion to cancel the registration from such date as he may deem fit if any of the reasons as set out in Section 29(2) of the Act are established. In the present case, there is no allegation that the petitioner had obtained its registration by means of fraud, wilful misstatement or suppression of facts. In any view, there is no material to establish any such allegation as there is no dispute that the petitioner had filed his returns and paid the tax as disclosed by it. The only ground on which the petitioner s registration has been cancelled is that he has contravened the provisions of the Act inasmuch as he has not filed the requisite returns for transfer of stock and capital goods. He has also not filed the requisite information disclosing transfer of business to the firm - However, the material on record indicates that the petitioner was carrying on its business from its principal place of business in Delhi and had shifted it to Haryana. In these facts, the petitioner s registration cannot be cancelled from the date he had obtained the same. It is considered apposite to direct that the impugned order dated 14.01.2022 cancelling the petitioner s registration with effect from 02.07.2017 be set aside. The respondent no.1 shall initiate proceedings for cancellation of the petitioner s registration with effect from 31.07.2021 and also determine the amount of tax, penalty or interest that may be payable by the petitioner for not reflecting the transfer of stock and capital goods to the firm. The impugned order dated 09.03.2022 rejecting the petitioner s application for refund is also set aside - petition disposed off.
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2023 (3) TMI 1168
Eligibility and conditions for taking Input Tax Credit (ITC) - Section 16(2)(c) of CGST Act - no tax had been remitted by the suppliers - HELD THAT:- There is a mandate cast upon the petitioner/claimant to ITC to ensure compliance with the provisions as, in the alternative and as a natural consequence of Section 16(2)(c), he would be entitled to ITC - No fault can be attributed to the Department in this regard, since three suppliers, Techno Rubber Plastic and Co., Techno Rubber and Plastic and M/s.Unique Autoplastics Private Limited had uploaded their invoices in GSTR -1, but no tax had been remitted by them, since GSTR 3B had not filed by them. The petitioner, as a consequence, suffered reversal of ITC, IGST, CGST and SGST. In the present case, the petitioner has chosen to seek rectification of order-in-original dated 29.07.2022 based upon the aforsaid decisions. The Court has no intention of intervening in the conclusion of the assessing authority on this aspect. However, the procedure followed by the authority is clearly contrary to the third proviso to Section 16 of the Act that necessitates that, where the authority proposes to take a view adverse to the applicant, due process must be followed - In this case, admittedly, there has been no opportunity granted to the petitioner prior to the passing of impugned order dated 20.01.2023 and this is a fatal flaw. Order dated 20.01.2023 is set aside. The petitioner shall be heard by issue of notice and orders passed on the Section 161 application within a period of four (4) weeks from today. This Writ Petition is allowed.
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2023 (3) TMI 1167
Demand of interest and late payment fees - unable to file its GST returns on account of technical glitches - interest or late payment charges can be levied for the period technical glitches had prevented the petitioner from filing its returns, or not - communication dated 22.02.2023, informing that a sum of ₹7,45,618/- is payable by the petitioner on account of late payment fee and interest - this communication can be treated as SCN or not. HELD THAT:- The communication dated 22.02.2023, can be considered as a notice for engaging in consultation prior to the issuance of the show cause notice. The petitioner would be afforded the opportunity of hearing on the question whether any interest or the late payment charges as mentioned in the communication dated 22.02.2023 are payable by it. In the event, the respondents consider that there is any delay on part of the petitioner after the technical glitches have been resolved, it would be open for the respondents to issue a show cause notice for the recovery of any amount of interest, or other charges payable by the petitioner, in accordance with law. Petition disposed off.
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2023 (3) TMI 1166
Taxability under CGST Act - receipt of a gratuitous payment from an outgoing member for the time he has resided in the society - no corresponding service being provided separately by the tax payer society - HELD THAT:- In the instant case, outgoing member of the society, Mr Sanjay Prakash Sahjwani, has made payment of Rs 17,70,000/- to the society which appellant claims to be voluntary contribution on his own will and volition. On bare perusal of the affidavit submitted by the appellant in respect of an outgoing member by the name Mr. Sanjay Prakash Sahjwani mentions that the amount of Rs 17,70,000/- is being given towards Building Betterment Fund . It is clearly stated in the affidavit that the said amount is inclusive of GST. Further, the appellant has also submitted a copy of the Affidavit of Shri Chandresh Thakker, Treasurer of the Appellants Society, before the MAAR. On bare perusal of the affidavit submitted by the Treasurer, it is clear that the amount given by the outgoing member Mr. Sanjay Prakash Sahjwani (towards Building Betterment Fund ) has been transferred by the Appellant Society towards Major Repair Fund . Appellant accounted the said transaction of Rs 17,70,000/- in its books of accounts on 7-3-2020 under the accounting head Major Repair Fund and has reported Net amount of Rs 15,00,000, CGST 9% of Rs 1,35,000/- and SGST 9% of Rs 1,35,000/-. Appellant has also received transfer premium of Rs 29,500/- [25,000 Net+2250 CGST+2250 SGST] from the outgoing member Mr Sanjay Sahjwani which Appellant has accounted in its books of account on 7-3-2020. The appellant is trying to give a colour of voluntary and gratuitous payment for amount received from a Transferor/Outgoing member which is collected and will be used for carrying out Major Repairs in future as is evident from the Affidavits submitted by the outgoing member Mr Sanjay Sahjwani and Shri Chandresh Thakker, Treasurer of the Appellant Society. Accounting entries in the books of accounts also supports the view taken by MAAR. The observations of MAAR agreed upon, that the said contribution by the outgoingmember is nothing but Advance amounts paid to the society for services carried out or to be carried out for the members of the Society and is therefore taxable as per the GST Laws.
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Income Tax
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2023 (3) TMI 1165
Withholding of refund - As submitted by Petitioner, that where refund has been withheld by the Revenue, the provisions of Section 241A require that reasons be recorded in writing by the concerned Officer to withhold the refund and also that the approval of Principal Commissioner or Commissioner is to be taken - HELD THAT:- The issue of withholding of refund under the provisions of Section 241A of the Act is no longer res integra. This Court in various decisions has inter-alia held that a refund may be withheld subject, however, to reasons being recorded in writing on how the grant of refund in the opinion is likely to adversely affect revenue . It is well settled that a refund cannot simply be withheld if an Assessee is selected for scrutiny assessment or where a notice has been issued under sub-section (2) of Section 143 of the Act. AO is also required to give detailed and compelling reasons as to how the release of the refund will adversely affect the interest of the Revenue. The reasons as set forth in the communication are bereft of any details and only reproduce the wordings of Section 241A of the Act with some additional sketchy and vague details. There is also a complete absence of reasoning. Petitioner is a well reputed company with a large net-worth running into several billion dollars and not a fly-by-night operator. It is a tax Assessee for the last several years and the credit worthiness of the Assessee is also not in dispute. Merely because a notice has been issued under Section 143(2) of the Act, it is not a sufficient ground to withhold the refund under the provisions of the Act. As has been held in Maple Logistics case [ 2019 (11) TMI 340 - DELHI HIGH COURT] it would be wholly unjust and inequitable for the AO to withhold a refund by citing the reason that a scrutiny notice has been issued and such an interpretation of the provision would be contrary to the intent of the legislature. The ReFAC(AU) has been completely swayed by the fact that the case of the Assessee has been selected by CASS for scrutiny assessment. PCIT (ReFAC)(AU) has also mechanically accorded permission to withhold the refund till the date of finalization of assessment without any application of mind in the matter. The orders are bereft of cogent reasons and are not in consonance with the principles enunciated in Maple Logistics case [ 2019 (11) TMI 340 - DELHI HIGH COURT] and Ingenico International case [ 2021 (3) TMI 848 - DELHI HIGH COURT] and hence, cannot be sustained. We set aside the order(s) - Respondents shall conduct a de novo exercise bearing in mind the provisions of Section 241A of the Act and principles articulated hereinabove, within six weeks of receipt of a copy of the Judgment.
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2023 (3) TMI 1164
Validity of assessment order u/s 143(3) r.w.s.144B - as argued it is total violation of the principles of natural justice and it has ignored all the formalities to be observed as enumerated under the Standard Operating Procedure (SOP) for faceless assessment orders - HELD THAT:- On a cursory perusal of the assessment order one gets an impression that it is in compliance with the SOP as it contains requisite sub-headings but however, on a closure reading of the assessment order it is found that the AO has acted in a most perverse manner in passing the assessment order. First 21 pages of the assessment order is a verbatim extract of the show cause notice. In page nos.22 and 23 in two paragraphs the reply given by the assessee has been summarized. From page nos.23 to 36 of the assessment order it is once again extract of the show cause and ultimately at page nos.37 and 38 the total income has been determined and the assessment is completed. The impugned assessment order is a classical example as to how an assessment should not be made. AO has reduced the procedure to an empty formality, which has to be deprecated. This leaves us with no other option except to quash the assessment order.
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2023 (3) TMI 1163
Exemption u/s 11 - res judicata - Denial of exemption as assessee is primarily engaged in commercial activities - Scope of rule of consistency - as per AO activities carried out by the assessee during instant assessment year were not found to be covered by the limb of 'charitable purpose' as defined in section 2(15) - ITAT dismissed appeal of revenue denying the benefit of section 11 - HELD THAT:- Since primary facts affecting the claim of exemption on the strength of 'charitable purpose' pursued by the assessee remained common for all Assessment Years, as were specifically examined during the assessment proceedings for A.Y. 2010-11, as have remained unaltered throughout, it is to be seen if any different view may have been taken by the revenue authorities despite application of rule of consistency as enunciated by the Supreme Court in Radhasoami Satsang vs. Commissioner of Income Tax [ 1991 (11) TMI 2 - SUPREME COURT ] Revenue has not pointed out any fact difference- of fact or in law having arisen in the Assessment Year in question. That aspect has not been pressed. Activity pursued by the assessee having remained same and it not being in dispute that the assessee was granted registration under Section 12 A of the Act which registration has also remained intact, it is not possible to allow the revenue to entertain another view in the subsequent Assessment Year solely because each Assessment Year is a separate unit. While none may successfully contend or invoke res judicata in taxation matters, at the same time, in absence of any difference of fundamental fact or law arising in subsequent Assessment Year and in face of the same dispute having been thrashed out inter partes in earlier Assessment Year and a definite opinion having been formed by the Tribunal for the same as had also attained finality and has been consistently applied in the case of the assessee itself (over different Assessment Years), which orders have also attained finality, the rule of consistency would commend that view to prevail, in all succeeding Assessment Years. Findings recorded by the Tribunal do not give rise to any substantial question of law - Decided against revenue.
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2023 (3) TMI 1162
Unexplained investment u/s 69 - Reliance on District Valuation Officer s valuation report - whether the addition made by AO in all the assessment years based on the initial valuation report submitted by the Valuation Officer pursuant to a reference made by the DDIT(Investigation), was within jurisdiction? - HELD THAT:- Tribunal, in our view, rightly took note of the decision of the Hon ble Supreme Court in Smt. Amiya Bala Paul [ 2003 (7) TMI 4 - SUPREME COURT] and held that the DDIT did not have the power to make the reference to the DVO, which power he acquired only on 1st April, 2017 by virtue of the Finance Act, 2017 u/s 132(9B) - Tribunal noted that neither the DVO filed the valuation report pursuant to the AO s reference dated 22nd January, 2016 nor the DVO filed the valuation report pursuant to the reference by the CIT(A) through the AO by letter dated 29th January, 2019. Thus, the learned Tribunal noted that the addition has been made only on the basis of the initial valuation report dated 18th November, 2014, which was pursuant to the DDIT s reference and on the said date he had no power to call for such report.Tribunal is fully justified and the order does not call for any interference - Decided against revenue.
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2023 (3) TMI 1161
Delay depositing dues under Income Declaration Scheme, 2016 - seeking condonation of delay in paying the balance amount together with interest - HELD THAT:- This Court directs the first respondent to pass final orders on merits and in accordance with law on the petitioner's representation dated 17.10.2022, seeking to condone the delay in paying the balance amount together with interest under the Income Declaration Scheme, 2016 within a period of twelve weeks from the date of receipt of a copy of this order.Writ Petition is disposed of.
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2023 (3) TMI 1160
Validity of Best judgment assessment - As argued by petitioner on the ground that they have not received the draft assessment order and principles of natural justice has been violated - HELD THAT:- Taking note of the fact that the petitioner has been provided with sufficient opportunities to respond to the notices sent by the respondents, as seen from the tabular column referred to supra, no further time can be granted to the petitioner to submit a reply as rightly held by the respondents under the impugned assessment order. Petitioner has expressed financial difficulties in paying the pre-deposit amount. Petitioner seeks sufficient time for the petitioner to mobilize the funds to enable the petitioner to file a Statutory Appeal as against the impugned assessment order. Being an assessment order, this Court deems it fit to grant time to the petitioner to file a Statutory Appeal as against the impugned assessment order. Petitioner has not made out any case for interference by this Court under Article 226 of the Constitution of India as the principles of natural justice has not been violated by the respondents. This Court deems it fit to grant four weeks time for the petitioner to file the Statutory Appeal as against the impugned order before the Statutory Appellate Authority. Writ Petition is disposed of by directing the petitioner to file the Statutory Appeal as against the impugned assessment order before the Statutory Appellate Authority within a period of four weeks from the date of receipt of a copy of this order.
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2023 (3) TMI 1159
Validity of Reopening of assessment u/s 147 - order u/s 148A - Unexplained deposit in bank account - HELD THAT:- Assessee failed to furnish the explanation for the credits reflected in his Bank account as well as failed to produce the source for deposits made - Assessee has failed to furnish the return of income for the assessment year 2018-19. The absence of explanation from the Assessee in respect of the credits reflected in his Bank account leads to believe that there is an escapement of assessment. Since the first respondent in the impugned order has given sound and justifiable reasons for rejecting the petitioner s contentions as raised in this writ petition, the question of interfering with the impugned order by this Court will not arise. This Court does not find any merit in this writ petition. Accordingly, this writ petition stands dismissed.
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2023 (3) TMI 1158
Disallowance of Non-agricultural assessment charges paid by the assessee - HELD THAT:- CIT-DR could not bring before us any contra facts as recorded by the Ld. CIT(A) and no materials is also placed before us to the finding of the AO. In absence of the same, we have no hesitation in deleting the addition made by the AOon account of NAA charges. Grounds raised by the Revenue dismissed. Disallowance of Infrastructure up gradation charges - assessee has offered the income during the Assessment Year 2011-12 thereby the Ld. CIT(A) deleted the addition for the present Assessment Year 2010-11 - HELD THAT:- As the assessee has offered the above income in the Assessment Year 2011-12, the A.O. is not justified in disallowing in the Assessment Year 2010-11. Therefore the order of the Ld. CIT(A) does not require any interference and the same is upheld. Thus the Revenue appeal in ground no. 5 is devoid of merits and the same is liable to be dismissed.
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2023 (3) TMI 1157
Deduction u/s 54F - payment for purchase of property and registration after the due date of filing of return - AO denied the claim on the ground that the assessee has not fulfilled the procedural requirement laid down by the law of depositing sale proceeds into the capital gain account scheme with a nationalized bank before the due date of furnishing of return, which was confirmed by the ld. CIT(A) - HELD THAT:- Even though the assessee has not invested the sale proceeds in Capital Gain Account Scheme, but complied with the conditions under section 54F(1) by purchasing an independent house for a consideration of ₹.2 crores by executing sale agreement on 09.01.2016 by paying advance of ₹.50 lakhs and the remaining amount of ₹.1.50 crores was paid on the date of registration of sale deed on 04.10.2017, which are not in dispute. The provisions of section 54F of the Act are beneficial provisions and are to be considered liberally in the aspect of limitation period. The investment in residential property is must which the assessee has proved with evidence and complied before the lower authorities. As following case of CIT v. Smt. Umayal Annamalai [ 2020 (7) TMI 630 - MADRAS HIGH COURT] we set aside the order of the ld. CIT(A) and direct the AO to allow the deduction section 54F of the Act to the assessee. Appeal filed by the assessee is allowed.
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2023 (3) TMI 1156
Deduction u/s 80-P - Claim denied by the CPC - Delay filling ROI - AO rejecting the application, observed that the return of income had been filed late, i.e. beyond due date u/s 139 (1) - as per AO no deduction under Chapter VIA heading C would be allowed unless the return was filed before the due date u/s 139(1) - HELD THAT:- It is not in question that section 80AC of the I.T. Act, as amended by Finance Act, 2018, stipulated that for claiming deduction u/s 80P of the Act, the return of income was required to be filed before the due date, as prescribed by section 139(1) and in the present case, the return was filed belatedly. It was only by the amendment to section 143(1) (a)(v) brought in by Finance Act, 2021, that the CPC can be said have been vested, exercising powers u/s 143(1)(a), to make disallowance on the ground of belated return. Prior to that, as per the un-amended provisions, the AO could disallow a claim u/s 143(1) (a) only on the grounds of arithmetical error or that the Assessee had made an incorrect claim, etc. Reference, in this regard, may be had to Fatehraj Singhvi Ors. v. UOI and Ors [ 2016 (9) TMI 964 - KARNATAKA HIGH COURT ]. It goes without saying that in the absence of enabling powers, no disallowance can be made. As such, enabling provisions being absent, the CPC did not have the jurisdiction to make the disallowance in question, in the order u/s 143 (1) - For this, we find support from The Lanjani Co-operative Agri Service Society Ltd., VPO Lanjani, Kangra (HP) v. The DCIT (CPC) Bangaluru [ 2022 (9) TMI 345 - ITAT CHANDIGARH ] - Decided in favour of assessee.
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2023 (3) TMI 1155
Penalty u/s. 271(1)(c) - deduction u/s. 80P(2)(a)(i) denied - inaccurate claim OR inaccurate particulars of income - whether the assessee has furnished inaccurate particulars of income with respect to the interest income from the nationalized bank by claiming the deduction under section 80P(2)(a)(i)? - HELD THAT:- The claim of the assessee at the most can be regarded as inaccurate claim which cannot be equated with the furnishing inaccurate particulars of income . It is for the reason that nothing has been brought on record by the authorities below suggesting that the assessee has furnished the particulars of income with dishonest intent. As regards the Explanation 1 to section 271(1)(c) of the Act, there was no iota of evidence suggesting that the explanation offered by the assessee was false. Thus the claim of the assessee cannot be said amounting to concealment of particulars of income . There was no finding of the authorities below qua the fact that the assessee fails to substantiate the explanation offered by him and fails to prove that such explanation is bonafide with respect to material facts relating to the computation of total income. Thus in our considered view the provisions of Explanation 1 to section 271(1)(c) of the Act cannot be attracted in the given facts and circumstances. We set aside the finding of the learned CIT (A) and direct the AO to delete the penalty levied by him under section 271(1)(c) of the Act. Thus the ground of appeal of the assessee is allowed.
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2023 (3) TMI 1154
Excise Duty refund as non-taxable under the normal provisions of the Act - claim was not made before the AO but was claimed through additional ground before CIT(A) - as no claim of subsidy as being capital receipt was made before the AO and that CIT(A) given a finding that the facts relating to excise duty subsidy are not available on record, thus CIT(A) was fully justified in denying the claim of the assessee - HELD THAT:- We find that the claim of excise duty being capital receipt was not accepted by CIT(A) in view of the fact that no claim was made before the AO and no reasons were furnished by assessee to demonstrate as to what prevented the assessee from raising such claim before the AO. We do not agree with the aforesaid reasoning of CIT(A) for denying the claim of the assessee in view of the facts in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] after considering the decision of Hon ble Supreme Court in the case of Jute Corporation India Ltd. [ 1990 (9) TMI 6 - SUPREME COURT] as held that assessee is entitled to raise the additional ground not merely in terms of legal submissions but also legal claim not made in the return filed by it. Appellate authorities have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. We are, therefore, of the view that CIT(A) was not justified in not admitting the additional ground and deciding the issue. Claim and quantum of excise duty subsidy - Assessee has neither placed any material on record to demonstrate as to what is the excise duty refund claimed and other relevant details. Further in the absence of any finding on the issue of lower authorities and considering the totality of the aforesaid facts, we are of the view that the issue raised in the present ground needs to be re-examined at the end of CIT(A) - restore the issue back to the file of CIT(A) and direct him to decide the issue afresh in accordance with law. Appeal of the assessee is partly allowed for statistical purposes.
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2023 (3) TMI 1153
Disallowance on account of interest payment on TDS deposited to the Income Tax Department - AO had proposed the impugned disallowance u/s 43B which allows deduction of statutory dues in the year of actual payment irrespective of the year in which the liability was incurred - As submitted by the assessee that the said payment of interest is evidenced by Bank Challan and the DRP directed the Ld. AO to allow the assessee s claim provided evidence of payment is produced before the Ld. AO - HELD THAT:- Impugned disallowance for the reason assigned now is also not sustainable. Identical issue arose for consideration before Mumbai Bench of the Tribunal in M/s. M L Reality [ 2021 (9) TMI 877 - ITAT MUMBAI] and the Tribunal in M/S. M.L. REALTY VERSUS ACIT 22 (2) , MUMBAI [ 2021 (9) TMI 877 - ITAT MUMBAI] held that interest paid on late payment of TDS is compensatory in nature and is an allowable deduction under section 37(1) of the Act - Decided in favour of assessee. Disallowance paid towards arrears for contribution to provident fund - AO made the impugned disallowance for the sole reason that challans evidencing payment were not submitted - HELD THAT:- After hearing all and finding that the assessee has established that the payment was made for PF arrears and documents were brought on record, we hold that the impugned disallowance is not sustainable. It is, therefore, deleted. Appeal of the assessee is allowed.
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2023 (3) TMI 1152
Addition u/s 68 - Unexplained cash deposits - HELD THAT:- AO has noted that it was the contention of the assessee that the deposits of Rs.74,40,000/- in cash in his bank account was out of the sale proceeds of the agricultural land. AO has noted that the copy of the registered sale deed that was furnished by the assessee revealed that the agricultural land was sold for only Rs.22,01,000/-. He accordingly considered the balance cash deposits of Rs.52,39,000/- as unexplained and accordingly addition was made. Before us, assessee had not placed any material on record to point out any fallacy in the findings of lower authorities. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of assessee is dismissed.
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2023 (3) TMI 1151
Denial of benefit of carry forward setting off of loss and exemption u/s 11 r.w.s. 12 - Belated filing of ITR - excess of expenditure over income as per the financials for the year under appeal - CIT [A] upholding the disallowance of the exemption claimed u/s.11 on the ground that the return was not filed in accordance with the Provisions contained in Sec. 12A[1][ba] i.e. within the Due date u/s 139[4A] of the Act under the facts and in the circumstances of the appellant s case - HELD THAT:- CPC has charged the income tax on the entire gross receipts without giving effect of the expenditures incurred by the assessee towards earning of the income. The income has been defined in section 2(24) of the Act., the income should be construed in its general meaning but not to the entire receipts, if the assessee has incurred any expenditure towards earning the income, in such case, the assessee is entitled for deduction of expenditure incurred as prescribed in the Income Tax Act. There may be disallowances of the expenditures, which are not in conformity within the provisions of the Income Tax Act. Assessee filed return of income belatedly as per section 139(4) of the Act. The section 139(4A) of the Act prescribes that all other provisions of the Act shall apply as if it were a return required to be furnished under sub-section (1) of section 139 of the Act. The income is arrived after deducting the allowable expenditures as per the I.T. Act. 1961. In the impugned case on hand, the total receipts declared by the assessee , we observe that there is excess expenditure over income which is loss suffered by the assessee during the year. Therefore, in this case, the claim of deduction from income under section 11 and 12(1) (ba) does not arise. No doubt that the assessee has filed his return of income belatedly but he was required to compute his income and the income is below the threshold limit and in this case no tax shall be charged on the entire receipts. We also make it clear that the assessee will not get the benefit of carry forward setting off of loss for the subsequent year as prescribed u/s 139(3) - we set aside the order of the CIT(A). Accordingly, appeal of the assessee is partly allowed.
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2023 (3) TMI 1150
Validity of reassessment proceeding u/s 147 v/s 153C - material found and seized during the course of search and seizure operation - whether AO should have invoked provisions of section 153C of the Act and not section 147/148? - HELD THAT:- As identical legal issue raised by the assessee was adjudicated in favour of the assessee by case of Vikram Munishwarlal Bajaj [ 2018 (10) TMI 1599 - ITAT PUNE] wherein hold that the re-assessment order passed u/s 148 of the Act in the present case does not stand and therefore the assessment framed by the AO to be null and void. Re-assessment proceedings initiated against the assessee under section 147 / 148 of the Act are not warranted. The Assessing Officer after receipt of information belonging to the assessee should have invoked provisions of section 153C of the Act and not section 147 / 148 of the Act. Accordingly, we hold so - reassessment order passed under section 148 of the Act does not stand. The Assessing Officer is thus, directed to cancel the same - Decided in favour of assessee.
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2023 (3) TMI 1149
Reopening of assessment u/s 147 - addition on account of unsecured loan from 3 parties - source of information available with the AO was the letter of the DDIT, INV, New Delhi wherein it has been stated that the accommodation entries in the name of paper companies were debited - HELD THAT:- Accommodation entry was mentioned as purchase/ investment/ advance and the assessee was described as beneficiary from the above transactions. On going through the bank statement, it is noted that the assessee has made payment through RTGS to both the parties. These demonstrative facts clearly show that the AO has reopened the assessment based upon wrong facts, wrong appreciation of facts and without any application of any mind, in as much as, the assessee has not taken any credit entry but, in fact, have made debit entries and, therefore, by no stretch of imagination provisions of section 68 of the Act can be applied. A perusal of the reasons recorded for reopening of assessment clearly show that the Assessing Officer has reasons to belief that the assessee was beneficiary of accommodation entries. AO has accepted the objections of the assessee, and has not assessed or reassessed the income, which was the basis of the notice. Therefore, in light of the judgment of Jet Airways [ 2010 (4) TMI 431 - HIGH COURT OF BOMBAY] it would not be open to the Assessing Officer to assess income under some other issue independently. No error or infirmity in the findings of the ld. CIT(A). Assessment order deserves to be quashed and has been rightly done so by the ld. CIT(A), which calls for no interference. Decided against revenue.
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2023 (3) TMI 1148
Addition u/s 68 - cash deposits in bank account - non rejection of books of accounts - HELD THAT:- opinion of the assessing officer is required to be formed objectively with reference to the material available on record. Hence, application of mind is sine qua non for forming the opinion. The only reason placed by the ld. AO in his order that the full name, address or/and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit has not been given. It is voluntary to the customer to provide their personal information to the assessee while goods being sold and even the law does not mandate to the assessee up to an amount of Rs. 2 lac. The action of the ld. AO making an addition u/s 68 as unexplained cash deposit without rejecting the books of account is unwarranted. Even the ld.AO has not find any defects in the details submitted by the assessee and audited books were considered and accepted while finalizing the assessment. As relying on SHRI CHANDRA SURANA [ 2022 (12) TMI 750 - ITAT JAIPUR] case we vacate the addition made under section 68 of the Act as the same cannot be made without rejecting the books of account of the assessee regularly maintained by the assessee and the said cash deposited is duly supported by the entries passed in the books of account and part of the sale accepted by the AO. Appeal of the assessee is allowed.
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2023 (3) TMI 1147
Reopening of assessment u/s 147 - addition of other receipts u/s. 68 r.w.s. 115 BBE - During course of search in the inquiry conducted it was gathered that that Dineshchandra R. Agarwal Infracon Private Limited has generated unaccounted money by way of booking bogus Sub-contractors Expenses and assessee is one of the entity who has received amount against expenses incurred by such concern as subcontractor expenses - HELD THAT:- No discussion in the assessment order about the tangible material or statement the addition made. It is based on the general information received the assessment was re-opened. Assessee demonstrated before us that he has discharged primary onus casted upon him and has proved the performance of the work and the same is supported by the tangible evidence placed on record. The records so produced was not disputed but also not tested for its correctness and in the absence of these exercise the documents placed on record cannot be placed a side and the decision be made merely based on some information on which there is no basis discussed or confronted to the assessee. Allegation of work that is disputed by the revenue considering that the same are bogus in nature cannot be considered so because the assessee has demonstrated before us with the work order issued by M/s. Dineshchandra R. Agarwal Infracon Private Limited wherein the address of the work is mentioned as Painting Runway Airfoce Station, Nal Site Bikaner and work at Runway resurfacing project AT Nal AF station Bikaner . Both these work were required to be carried out at the Nation pride military organization and the entry and attention are strictly monitored and therefore, there is no reason to be believe that though M/s. Dineshchandra R. Agarwal Infracon Private Limited may be indulged in booking for some bogus expenditure but in this case the primary material does not suggest so and in spite of the relevant material placed by the assessee the revenue did not prove that the work has not been carried out - allegation made by the revenue is general in nature and the addition of the whole of the receipt is not warranted. No hesitation to vacate the addition made by the ld. AO for an amount as the assessee has already declared profit @ 8 % of the receipt as it evident from the finding of the ld. AO. In terms of these observations the ground no. 2, 3 and 4 are allowed.
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2023 (3) TMI 1146
Disallowance of higher depreciation on Oil drilling rigs given on hire - AO disallowed the excess on the ground that the assessee is not a mineral oil concern - CIT-A deleted the addition - HELD THAT:- In the instant case, both the conditions are duly satisfied since the oil rigs being plant of specific category are owned by the assessee and further it is used in drilling operations for the purpose of exploration and extraction of mineral oil in the field of mineral oil concerns. As relying on M/S. HLS INDIA LTD. [ 2011 (5) TMI 322 - DELHI HIGH COURT] as confirmed by SC [ 2012 (2) TMI 669 - SC ORDER] as held that depreciation is allowable to mineral oil concerns @ 100% on the equipments used below the earth surface. If the same depreciation is not allowed to other business concerns on the ground that the owner of these equipments is not a mineral oil concern but it is just providing an assistance or leasing these equipments to a mineral oil concern then definitely this other concern will charge more for these services and consequently the mineral oil concerns will be commercially forced not to outsource wireline logging activities to other companies but to do it themselves - Accordingly, we dismissed the ground no. 1 of the Revenue. Disallowance of leave encashment claimed on provisional basis - HELD THAT:- Since the Hon ble Apex Court in the case of CIT Vs. HLS India Ltd. [ 2012 (2) TMI 669 - SC ORDER] decided against the Revenue, the Ld. DR has withdrawn the Ground No. 2. Accordingly, Ground No. 2 is dismissed as withdrawn. TDS u/s 194C - disallowance of mobilization expenses u/s 40(a)(ia) - Addition on the ground that the payment debited to profit and loss account of mobilization charges are not covered under the provisions of section 194C(6) of the Act as the payment are not made to contracts for playing, hiring or leasing goods carriages - HELD THAT:- PAN of the parties have been submitted before the AO and the assessee had duly submitted TDS returns giving the details of the payments made to transporters on which no TDS was deducted and a statement showing expenses not in the nature of transportation expenses vide reply dated 01.03.2016. Even if there is violation of provisions of Sec. 194C(7), disallowance u/s 40(a)(ia) does not arise, if assessee had complied with the provision of Sec. 194C(6). In the instant case, the assessee had obtained PAN of the transporters and duly complied with the provisions of Sec. 194C(6) -TDS was not required to be deducted by the assessee. Hon ble Kolkata Tribunal in the case of Rani Ghosh [ 2018 (6) TMI 1812 - CALCUTTA HIGH COURT] held that if the assessee compliance with provision of section 194C(6), the disallowance u/s 40(a)(ia) of the Act does not arise just because there is a violation of provision of section 194C(7) of the Act. The section 194C(6), 94C(7) and section 194C(7) of the Act are independent of each other and cannot be read together to attract disallowance u/s 40(a)(ia) of the Act read with section 194C. No error in the order of the CIT(A) in deleting the disallowance of mobilization expenses - Ground No. 3 of the Revenue is dismissed. Disallowance of repair and maintenance (equipment expenses) - HELD THAT:- The above issue has also been decided in favour of the assessee on earlier years by the Tribunal [ 2022 (3) TMI 1333 - ITAT DELHI] as held AO has merely proceeded on a hypothesis of such expenditure being capital in nature without showing any justifiable grounds for doing so. AO has capitalized such expenditure without showing any reasonable grounds. On the contrary, we find merit in the conclusion drawn by the CIT(A) holding the same to be revenue expenditure on the face of such tell-tale facts. - Decided against revenue.
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2023 (3) TMI 1145
Validity of Revision u/s 263 - validity of transfer order u/s 127 - Validity of assessment order paased by non jurisdictional AO - as argued assessment order passed by AO is void, illegal and non-est - As per assessee initial notice of assessment was issued by the ITO Ward-4 Palanpur and without completing the procedure as laid out u/s 127 for transfer of jurisdiction without any prior intimation to the assessee, the case file of the assessee was transferred to ITO Ward 3(3)(2) Ahmedabad and therefore the assessment order itself was bad in law - HELD THAT:- DR has not been able to bring forth any material on record to substantiate that the procedure as envisaged under section 127 of the Act for transfer of files was fulfilled in the instant set of facts. It is a well-settled principle of law that power of transfer is a quasi-judicial function and was be exercised in a fair and reasonable manner and not in an arbitrary or mechanical way. The opportunity of being heard must be given to the assessee not only when the case is to be transferred despite the objection of the assessee, but also when it is not to be transferred despite his request. Needless to say, the objections raised by the assessee must be appropriately dealt with by the Commissioner and an order that does not consider the objections is liable to be quashed. As decided in case of Melco India (P.) Ltd. [ 2002 (1) TMI 11 - DELHI HIGH COURT] held that since no notice u/s 127 of the Act was issued to petitioners giving them an opportunity of being heard, impugned order passed by Commissioner was invalid and liable to be set aside - we are of the considered view that since the necessary procedure for transfer of case was not followed in the instant set of facts, the assessment order in the instant set of facts is null and void. Also no fresh notice of assessment was issued by ITO Ward 3(3)(2) and for this reason also, the assessment order passed by ITO Ward 3(3)(2) is null and void since there is a legal requirement to issue a separate notice of assessment to the assessee. Once it is held that the assessment order itself is null and void, can such assessment order be the subject matter of revision u/s 263? - It is a well-settled principle of law that once the assessment order passed itself is null and void, the same cannot be the subject matter revision under section 263 of the Act. In the case of Inder Kumar Bachani (HUF) [ 2005 (12) TMI 240 - ITAT LUCKNOW-A] ITAT held that as the order of the Assessing Officer passed under section 147 / 143(3) was itself void, the order of PCIT passed under section 263 for quashing this order was without jurisdiction. Thus we are of the considered view that since the assessment order passed by ITO Ward 3(3)(2), Ahmedabad itself was null and void, the same could not be the subject matter of revision under section 263 of the Act. Appeal of the assessee is allowed.
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2023 (3) TMI 1144
Revision u/s 263 - scope of revision proceedings initiated - Proof of erroneous order prejudicial to the interests of the Revenue - HELD THAT:- Possible view shall mean a issue, which is debatable and there could be more than one possible views. The consideration of the Commissioner as to whether an order is erroneous in so far it is prejudicial to the interests of Revenue must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded. Since the AO has already examined the case and made complete enquiry wherein no infirmity appears then in that case, the Ld PCIT was not justified in passing the impugned revision order. Appeal of the assessee is allowed.
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2023 (3) TMI 1143
TDS u/s 194A - failure to upload Form 15G/15H of the depositors in roper format - assessee in default u/s 201(1)/201(1A) - HELD THAT:- Assessee has acted within the four corners of law and did not deduct tax on such interest for which the depositors have filed Form 15G 15H. Though the assessee is required to uphold the same in a proper format, but it failed to do so due to some technical defect but since the physical copies are available, revenue authorities should not have treated the assessee in default. See ALLAHABAD BANK case [ 2021 (4) TMI 14 - ITAT DELHI] and THE KARUR VYSYA BANK LTD. case [ 2017 (9) TMI 829 - ITAT BANGALORE] Considering the fact that the assessee has not deducted tax at source u/s 194A of the Act after receiving the physical copies of Form 15G 15H, it should not be considered as an assessee in default. Therefore, we delete the demand raised by the ld. AO for non-deduction of tax at source u/s 194A of the Act as well as interest levied thereon for AY 2016-17 and 2017-18 for non-submission of Form 15G 15H, and allow the grounds raised by the assessee.
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2023 (3) TMI 1142
Disallowance u/s.14A r.w.r. 8D(2)(iii) - sufficiency of own funds - assessee submitted that he has earned no exempt income during the year and had its own funds which are more than the investment made by it in the unquoted shares - HELD THAT:- We find that the issue where assessee has earned no exempt income during the ye ar no disallowance is called for u/s. 14A of the Act has been addressed in the case of PCIT Vs. Era Infrastructure (India) [ 2022 (7) TMI 1093 - DELHI HIGH COURT] holding no disallowance is required to be made in the case of the assessee because it has not earned any tax-free income and allowed the appeal of the assessee by deleting the addition so made. Further, the issue relating to assessee having own fund more than the investments made in the investments yielding exempt income has been dealt with in favour of the assessee by the Hon ble jurisdictional High court of Calcutta in the case of REI Agro Ltd. [ 2013 (12) TMI 1517 - CALCUTTA HIGH COURT] . Decided in favour of assessee. Disallowance u/s. 40A(2) - interest charged by one party at a rate of interest @16% compared to 10% by the remaining other parties - HELD THAT:- We note that there is no dispute on the payment of interest. The issue is in respect of rate of interest which has been charged @ 16% vis- -vis 10% by the other parties. We note that the difference in terms and conditions with Carvan Creations Pvt. Ltd. which have been effectively brought on record and considered by the Ld. CIT(A), and also the fact that how this party is a related party within the meaning of sec. 40A(2)(b) for which nothing is brought on record to establish the said relationship. No reason to interfere with the finding given by the Ld. CIT(A) and accordingly, dismiss ground no. 2 taken by the revenue in this respect. Disallowance of depreciation claimed on its speed boat - As per AO rental income from the said boat which is not allowable - HELD THAT:- CIT(A) noted that rental income from boat has to be assessed either as business income or income from other sources. It cannot be assessed as income from house property. Accordingly, depreciation was allowed on the boat even though it had earned rentals for three months - We do agree with the observations and findings of Ld. CIT(A) in allowing the claim of depreciation. Undisclosed stock a property which was developed under a Joint Venture Agreement (JV) with Japna Estates - HELD THAT:- CIT(A) after going through the facts of the case and the terms and conditions of the JV Agreement, found that 4th floor of the building belonged to the developer in terms of the JV agreement and, therefore, there was no question of this floor being shown as part of stock of the assessee and, therefore, there cannot be any undisclosed stock on account of 4th floor of the building. He thus, deleted the addition made in this respect - Revenue has also raised the contention that Ld. CIT(A) should have called for a remand report in respect of additional evidence for which we note that Ld. CIT(A) has objectively analysed and gone through the JV agreement placed before him in accordance with coterminous power vested into him. On perusal of the facts and the observations made by the Ld. CIT(A), we do not find any reason to interfere with the findings given by ld. CIT(A). Accordingly, this ground of appeal of the revenue is dismissed. Addition made towards bogus purchase relating to the issue of undisclosed stock detailed - HELD THAT:- As three floors of the building were with the assessee and the 4th floor and the roof rights was with the developer, there was no element of any bogus purchase on this account. Ld. CIT(A) by observing these facts has deleted the addition made on this account - We agree with the finding given by the Ld. CIT(A) and accordingly dismiss the ground of appeal of the revenue in this respect.
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2023 (3) TMI 1141
Addition of excess stock - Addition in the hands of assessee during the course of survey - HELD THAT:- Fact remain undisputed that the alleged stock is part of business income and the fact that it has been confirmed by the ld. AO in his order also. However, it is judicially settled principle that only profit element in such excess stock should be brought under the purview of the tax. The gross profit rate and net profit rate disclosed by the assessee in the audited financial statements and also taking into consideration the submissions made the assessee is ready to offer 12% profit on excess stock and with a view to end of dispute between the parties sustained the addition on account of undisclosed stock @12% of undisclosed stock and partly allowed ground raised by the assessee. TDS addition on freight charges - violation of provisions of section 194C(7) - HELD THAT:- As in the case of ACIT vs Mr. Mohammed Suhail [ 2015 (2) TMI 1187 - ITAT HYDERABAD] specifically held that provisions of section 194C(6) is independent of section 194C(7) and just because there is violation of provisions of section 194C(7) disallowance of u/s 40(a)(ia) does not arise if the assessee complies with the provisions of section 194C(6) of the Act. We find that the assessee complies with the provisions of section 194C(6) disallowance u/s 40(a)(ia) does not arise just because there is violation of provisions of section 194C(7) of the Act - Authorities below are not justified in treating the expenses incurred by the assessee for freight charges as disallowable u/s 40(a)(ia) of the Act and adding back as claimed as expenses towards freight charges and such addition shall stand deleted. Appeal of the assessee is allowed.
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2023 (3) TMI 1140
Exemption u/s 54F - Denial of claim as assessee has used a colourable device to claim exemption u/s. 54F - as per revenue there is artificial transfer of one house by way of gift deed just prior to the effective date - HELD THAT:- In the present case, as seen assessee was engaged in the artificial transfer of one house by way of gift deed just prior to the effective date - As u/s 23 and 24 of the Indian Contract Act, 1872, when the object is to defeat any provisions of law, and when consideration is of such nature that, if permitted, it would defeat the provisions of any law, the contract will be void. In the present case, per se gift deed was not executed on account of natural love and affection but was executed by the assessee to artificially avail the deduction u/s 54F. We cannot countenance the assessee's conduct and allow the assessee to misuse and exploit the beneficial provisions of section 54F - Undoubtedly, as per the assessee, he is an individual having a high net worth and paying huge taxes. The assessee artificially created a gift deed of the property with a view to fit into the provisions of section 54F, so that he can claim the deduction against the sale of capital asset. The act of the assessee was prearranged step for execution, and it served no commercial purpose but was motivated to avoid paying taxes. The orders passed by the assessing officer and ld.CIT(A) were within the four corners of law and do not require any interference. Appeal of the assessee is dismissed.
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2023 (3) TMI 1139
Correct head of income - Profit derived from transfer of property under the head capital gains or business income - reasons given by the AO to assess consideration received for transfer of property under the head capital gains, because the assessee could not justify claim of stock in trade in the books of accounts with any evidence - HELD THAT:- The intent of the assessee when the property has been purchased was to commercially exploit the property keeping in mind the locational advantage of the property - assessee had also made clear its intention by recording purchase of property as stock in trade in the books of accounts for the relevant assessment years. Therefore, assessee has rightly declared profit derived from transfer of property under the head profit and gains of business and profession. It was only the AO by wrong appreciation of facts has assessed profit derived from sale of property under the head capital gains by holding that income declared by the assessee under the head profit and gains from business or profession is afterthought. Observations of the AO is nothing but suspicion and surmise, but not backed by any evidence. On the other hand, the evidences filed by the assessee clearly suggests that the impugned property sold for the assessment year is a stock in trade and profit derived from transfer of property is assessable under the head profit and gains from business or profession. AO and the CIT(A) completely erred in assessing profit derived from transfer of property under the head capital gains. Application of provisions of section 50C - In this case, what was transferred by the assessee is a stock in trade, but not a capital asset. Therefore, we are of the considered view that provisions of section 50C cannot be applied when asset transferred is not a capital asset. Thus, we are of the considered view that the AO and CIT(A) erred in applying provisions of section 50C of the Act and determination of full value consideration to compute short term capital gains from transfer of property. Thus, we direct the AO to delete additions made towards computation of short term capital gains from transfer of property. Appeal filed by the assessee is allowed.
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2023 (3) TMI 1138
TP adjustment - Comparable selection - Functional dissimilarity - HELD THAT:- Auto Ignition Ltd.- On diversified business, export sale, incurring of expenditure on R D activities and presence of intangibles, we are of the considered opinion that Auto Ignition cannot be considered as a comparable company. We, therefore, direct the A.O./TPO to exclude Auto Ignition from the list of comparables. Chheda Electricals - Main ground on which the assessee is seeking exclusion of this company are capacity utilisation and Chheda claiming tax deduction u/s.80IC - The adjustment towards capacity utilisation has been contended as a separate issue by the assessee and hence the exclusion of this cannot be sought on this ground. Further the company enjoying the tax deduction u/s.80IC in our view is not a criteria for seeking exclusion. Further we notice that Chedda is functionally similar to the assessee. We, therefore, uphold inclusion of Chheda Electricals in the list of comparables. Naina Semiconductors Ltd - In view of all these i.e., diversified business, export sale, and incurring of expenditure on R D activities, we are of the considered opinion that Naina cannot be considered as a comparable company. We, therefore, direct the A.O./TPO to exclude Naina from the list of comparables. Hind Rectifiers Ltd. - We notice that the comparable company has earned profits in FY 2012-13 and therefore following the ratio laid down in Affinity Express India P Ltd ( 2016 (3) TMI 1121 - ITAT PUNE] we hold that these companies should be included for the purpose of comparability and computation of ALP. Incap Limited - TPO rejected the comparable on the ground that the same did not appear in search undertaken by TPO - We are of the view that identical directions as per PRISM NETWORKS PRIVATE LIMITED case [ 2022 (2) TMI 1296 - ITAT BANGALORE] it would be just and sufficient in the present case hence the regarding inclusion of the aforesaid company as comparable company is hereby set aside to AO/TPO for fresh consideration. Continental Device India Private Limited - We are of the considered view that the exclusion of Continental Device should be upheld as the company is having spends on R D and carry intangible whereas for the assessee the year under consideration is the first year of operation. Working capital adjustment - We remit the issue to the file of AO/TPO to consider the working capital adjustment taking into consideration the details submitted by the assessee after allowing an opportunity of hearing to the assessee. Denial of capacity utilisation - assessee had made an adjustment toward capacity utilisation on the ground that it is the first year of operation in the manufacturing segment - TPO denied the same by stating that the capacity utilisation adjustment can only be made for comparable and not in the hands of the tested party - HELD THAT:- We notice that the assessee has submitted the workings for the capacity utilisation of for the manufacturing segment . Considering the details furnished and respectfully following the above decision M/S. TOKAI RIKA MINDA INDIA PVT. LTD. [ 2023 (3) TMI 706 - ITAT BANGALORE] we remit the issue back to the AO/TPO with similar directions. Needless to say that the assessee be given a reasonable opportunity of being heard. It is ordered accordingly. TPO considering the incorrect operating cost - HELD THAT:- In the interest of justice to give one more opportunity to the assessee, we remit the issue to the TPO to verify and allow the correct operating expenses for the purpose of computing the operating margin of the assessee. Additions made to building and plant machinery - HELD THT:- AO in the remand proceedings has enhanced the disallowance for the reason that invoices were not enclosed for some of the additions and also purchase vouchers were not enclosed for certain other additions. We also notice that the assessee has submitted the full details pertaining to the additions before the lower authorities. Given these facts, in the interest of justice, we are of the considered view that the assessee should be given one more opportunity to substantiate the claim.
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2023 (3) TMI 1137
Deduction u/s 80P - interest received from BDCC bank - AO upheld that the income by way of interest earned on deposit or investment on ideal surplus funds does not change its characteristics irrespective of the fact that whether such interest income earned from scheduled bank or a cooperative bank, thus clause (d) of Section 80P(2) of the Act would not apply in the case of the assessee - HELD THAT:- The assessee is a primary agricultural credit society and its income is derived from trading in food grains, fertilizers and providing credit facilities to it members. It has received interest from BDCC bank on which it has claimed deduction under Chapter VIA but the AO has denied the claim and the CIT(A) has also confirmed the order of the AO that the assessee is not eligible to claim deduction under Section 80P(2) of the act on interest received from BDCC bank. Respectfully following the above judgement in assessee s own case [ 2021 (11) TMI 1145 - ITAT BANGALORE] the matter needs to be examined in the light of the above as observed in the above judgement. Therefore the case is remanded back to the file of the AO for a fresh consideration. Needless to say that reasonable opportunity be given to the assessee and the assessee is also directed not to seek unnecessary adjournments for early disposal of the appeal. Appeal filed by the assessee is allowed for statistical purposes.
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2023 (3) TMI 1136
Income from other sources u/s. 56(1) - gift of shares received by the assessee - AO held that receipt of shares as some kind of colorable device and therefore, taxed the market value of said shares as income from other sources‟ - HELD THAT:- As gift of shares cannot be held to be sham transaction and the whole purpose of was correct legal rights and obligations and in accordance with the law. The receipt of gift by the assessee is neither chargeable to tax u/s. 56(1) or u/s. 28(iv) of the Act. The gift received by the assessee in present case is in the capital field and can be brought to tax under the head capital gain. Accordingly, the provision of section 56(1) cannot be resorted to. Whether the receipt of shares at nil consideration can construed as business income liable for tax u/s 28(iv)? - We agree with the findings and the observations of the CIT(A) that the benefit of perquisite as stipulated under clause (iv) of Section 28 that it should arise from business or profession, i.e., assessee must have performed some business activities or carried out business and he must have received any benefit or perquisite in the course of business or profession. The share of Dish TV as a gift does not arise out of business dealing and accordingly, rightly being held by the ld. CIT (A) that is not taxable under the said provision. Therefore, the said receipt is not taxable u/s. 28(4). Accordingly, the deletion of the addition made by the ld. CIT (A) is upheld and Ground No. 1 of the revenue's appeal is dismissed. Receipt of share premium is concerned, the same is not chargeable to tax unless the provisions of Sections 56(2)(vii a) or (vii b) are invoked that it is in excess of fair market value of shares which provision will apply from A.Y. 2013-14 and not in A.Y. 2012-13 - finding of the ld. CIT (A) in deleting the said premium is confirmed. CIT(A) has already dealt with the valuation of the shares which was done on Net Asset Value method based on the report of independent Chartered Accountant and assessee has considered the market value of asset being share of the listed company. There is categorical finding of the fact that the share of the Dish TV were purchase from the open market at Rs. 255 Crores and the fair value of the shares was taken at 260 Crores in the valuation report for the purpose of arriving of the fair value of the shares and therefore, the AO's observation in this regard has been found to be incorrect. Finding and observation of the ld. CIT (A) as incorporated in forging paragraphs are in consonance with fact and material on record as well as the provisions of law and accordingly, same is confirmed and consequently, the revenue ground is dismissed. Disallowance u/s. 14A read with Rule 8D - HELD THAT:- Admittedly there is no exempt income during the year and therefore ld. CIT(A) rightly held that no disallowance can be made under this Section. Apart from that the reasoning given by the ld. CIT(A) has incorporated above is based on correct appreciation of facts and law and therefore the same is confirmed.
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2023 (3) TMI 1135
Income deemed to accrue or arise in India - receipts towards IT support services - 'Fees for Technical Services' ( FTS ) as per India- Netherlands DTAA - whether be treated as fee for technical services under the Act as well as under the DTAA as has been done in earlier years - HELD THAT:- This Tribunal for A.Y.2017-18 in assessee s own case had disposed of the appeal [ 2022 (8) TMI 1263 - ITAT MUMBAI] wherein by following its own order for A.Y.2016-17 [ 2020 (3) TMI 1417 - ITAT MUMBAI] held that the payment received for IT support services cannot be treated either as fee for technical services or as royalty both under the Act as well as under the DTAA.
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2023 (3) TMI 1134
TP Adjustment - MAM selection - TNMM or CUP method - TNMM method selected by the appellant to benchmark transaction - HELD THAT:- We hold that there was no justification in rejecting the TNMM method applied by the assessee as in the preceding year. Since as per the same computation the assessee's margin was found to be at arm's length.We set aside the order of authorities below and decide the issue in favour of the assessee. Since we have already allowed the assessee's appeal on this issue. For lack of justification in changing the method of bench marking we are not dealing with the arguments on other aspects of merits of application of CUP method computation of arm s length price by the Transfer Pricing Officer in this case. Decided against revenue. Addition u/s 69C - assessee was not able to establish the purchases - HELD THAT:- The assessee has possession of the purchased documents and the payment was made through banking channels. So, this addition cannot be sustained u/s 69C. The ld. Counsel has submitted the catena of judgments with corelated fact of the case. The identity was proved as payment was made by banking channel. Possession of invoice has never been challenged. We find no infirmity in the transaction of assessee. Accordingly, the addition made by the AO is liable to be quashed. Decided against revenue. Disallowance of weighted deduction u/s 35[2AB] - difference between the amount claimed in the return of income and has approved by the DSIR in Form No. 3CL - HELD THAT:- In the terms of provision 35(2AB) needs to be approved by DSIR.Research and Development Facility is approved and prescribed by the authority, DSIR in Form 3 CM then the expenses incurred by the assesseehave to be allowed u/s 35(2AB) and the same cannot be curtailed. To the quantum approved in Form No. 3CL in the pre amendment period. We are fully relied on the order of the coordinate bench. The first step was recognition of facility by the prescribed authority and entering an agreement between the facility and the prescribed authority. The ld. AO cannot curtail the expenses which was contributed to R D in pre amended period. Accordingly, the addition made by the ld. AO amount is liable to be quashed. - Decided against revenue.
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2023 (3) TMI 1118
Validity of assessment order u/s 143(3) r.w.s.144B - difference between not proper dealing or sufficiently dealing with no reasoning or not dealing at all - as argued while passing the impugned assessment order, formalities under Standard Operating Procedure (SOP) concerned has not been adhered to by not dealing with the rebuttal by the petitioner point-wise - HELD THAT:- It is not a case that the AO has not at all adhered to or complied with the formalities of SOP. The said impugned order has elaborate discussion on the point-wise rebuttal. It seems that petitioner is not satisfied with the reasoning and the way of dealing points of the rebuttal by the petitioner. There is a difference between not proper dealing or sufficiently dealing with no reasoning or not dealing at all. In this case it appears that petitioner is not satisfied with the reasoning and finding recorded by the AO in the impugned assessment order. This case does not fall in those categories of cases where the impugned order is either without jurisdiction or is patently in contrary to any statutory provisions or there is violation of principle of natural justice or there is any procedural irregularities in course of impugned assessment proceeding. So far as finding and the reasoning given by the AO /any adjudicating authority is concerned which is based on evidence, writ court in exercise of its constitutional writ jurisdiction under Article 226 of the Constitution of India should not act as an appellate authority over such assessment order and substitute the reasoning and finding by an Assessing Officer with its own finding and reasoning. WP dismissed.
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Customs
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2023 (3) TMI 1133
Seeking provisional release of the goods - import of consignments of fresh Kiwi Fruits from UAE - perishable nature of goods - section 110 of the Customs Act, 1962 - HELD THAT:- Under the statutory provisions, the seizure of the goods would follow the inquiry and investigation to be further followed by adjudication process which may or may not ultimately lead to confiscation of imported goods as contemplated in section 111 of the Act. The stage of inquiry has yet not been started. It is reflected that though goods were seized on 16.1.2023, so far the petitioner is not issued show cause notice. In any case, the adjudicatory proceedings have not started - The court finds that when the goods are perishable in nature, the authorities should act with greater swiftness to proceed with the adjudicatory mechanism and take a final decision. As far as the prayer for provisional release of the goods are concerned, it could be considered not only on the basis of the facts obtaining, but also in view of decision of M/S. A AND A SHIPPING SERVICES VERSUS UNION OF INDIA [ 2022 (12) TMI 778 - GUJARAT HIGH COURT] as could be gathered from the contents of para 9.2 of the said decision. In that case, the seizure of the goods of very nature was based on identical allegation namely that the same Phytosanitary Certificate issued by the Chilen authorities were used for different consignments by different importers. In the facts and circumstances of the case, when the petitioner has agreed to abide by the conditions which may be imposed in light of the decision of this court in M/s. A and A Shipping Services, which could be applied to guide the final order to be passed, this court is inclined to grant the prayer by allowing the provisional release of the goods. As far as the conditions on which the goods may be released to the petitioner, the court leaves the said aspect to the competent authority concerned who shall prescribe the conditions on the lines of the conditions prescribed by this court in M/s. A and A Shipping Services exercising sound discretion in that regard and upon compliance of such conditions shall provisional release the goods. The authorities shall permit the release of the goods on directions imposed.
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2023 (3) TMI 1132
Seeking refund of the excess additional duty of customs paid - period 26.03.2015 to 22.06.2015 - application was filed beyond the period of one year and hit by time limitation or not - principles of unjust enrichment - HELD THAT:- It is undisputed that the issue was decided by the Hon ble High Court of Delhi in its judgement dated 06.08.2018 and the matter was remanded to the original authority to decide the refund on merits. It is also evident from the judgment that the question of limitation was asserted by the Revenue before the High Court and it was not accepted. Therefore, there was no error on the part of either the Assistant Commissioner or the Commissioner (Appeals) in sanctioning the refund without considering the limitation as both authorities were bound by the order of the Delhi High Court. Unjust enrichment - HELD THAT:- By examining what treatment was given to the disputed amount of duty or tax in the accounts, it can easily be verified whether it was passed on, either directly or indirectly, to the customers. In this case it has not been so passed. Learned special counsel for the Revenue vehemently argued that the Chartered Accountant s certificate cannot be relied upon. However, on a query from the Bench, he could not produce any document whatsoever to either establish the fact that duty has been passed on by the respondent or to show that the Chartered Accountant certificate s was incorrect. There are no force in this submission of the learned special counsel. In the absence of any evidence by the Revenue on this count, the submission by the respondent that during the relevant period, M/s Naveen Associates were their Chartered Accountants must be accepted. Even otherwise, there is no requirement in law that a certificate must be issued only by the statutory auditors. So long as the certificate is issued by a Chartered Accountant and it is consistent with the accounts such as Balance Sheet and Profit and Loss statement, the certificate deserves to be accepted. The appeal filed by the Revenue deserves to be dismissed - Appeal dismissed.
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2023 (3) TMI 1131
Classification of imported goods - import of 3040 pieces of Manual Breast Pump, Electric Breast Pump and Conduit Connector Cover for medical use - classifiable under CTH 9018 or under CTH 3926 - HELD THAT:- The heading of chapter 9018 provides instruments and appliances used in medical, surgical, dental or veterinary sciences including scientigraphic apparatus, other electro medical apparatus and sight testing instruments. The breast pump does not fall in any of the categories under the chapter heading. They are not used to perform any specialized surgical procedure nor is used by any medical practitioner. They are simple devices for self use to facilitate the lactating mother in discharge of breast milk as per their convenience. The goods do not require any medical supervision and are available in the market without any prescription. The heading covers a very wide range of instruments and appliances which, in the vast majority of cases are used only in professional practice (e.g. by doctors, surgeons, dentist, veterinary surgeons midwives) either to make a diagnosis, to prevent or treat an illness or to operate etc. - The Chapter Heading 3926 on the other hand provides other articles of plastics and articles of other materials. This heading covers articles not elsewhere specified or included, of plastics (as defined in Note 1 to the Chapter) or of other materials of heading 39.01 to 39.14. Reference to the catalogue as (Annexure D) by the appellant to say that breast pump is a medical device is also not correct as it itself says that this website provides general information on breast pumps and is not intended to provide medical advice. Further, the appellant has referred to the definitions across the European Union and the USA FDA etc of the term 'medical device' (Annexure E), however on perusal of the same, it is found that the definition of medical device basically implies to devices used for the purpose of diagnosis, prevention, monitoring, treatment or alleviation of disease, injury or handicap or investigation, replacement, modification or support of the anatomy or of a psychological process. This itself supports the view that the breast pump does not merit classification as a medical device‟ as it has no such use. There is no quarrel with the principle that most specific entry prevails over general entry, however there is no specific entry for manual breast pump. The product is made of plastic and is a common usable item - the product has nothing to do with any medical or surgical procedures nor is it used by any medical practitioner. It is only a facilitating device for self use by lactating mothers. The impugned order classifying the manual breast pump under CTH 39269090 is upheld. Appeal dismissed.
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2023 (3) TMI 1130
Seeking restoration of appeal - application for restoration of appeal has been filed after more than six years - seeking recall of order - in a related matter which was the cause of initiation of action in these proceedings has now been remanded by the Tribunal to the Commissioner - HELD THAT:- There was no infirmity in the final order passed by this Tribunal based on the circumstances available on that date. Having passed the Final Order, this Tribunal has became functus officio. If the appellant was aggrieved by the final order the proper course of action could have been to file an appeal. Simply because in a related matter which was the cause of initiation of action in these proceedings has now been remanded by the Tribunal to the Commissioner, the final order does not become invalid and we find no ground to recall our final order and restore this appeal. It also needs to be pointed out that the action against the appellant was initiated based on a letter of Commissioner of Customs, Kandla dated 3.12.2010 addressed to the Commissioner, Jodhpur and NOT based on any Order-in-Original passed by any Commissioner. Consequent upon the investigation by DRI a show cause notice came to be issued to the exporter M/s Dadi Impex. During investigation, it came to light that the applicant/appellant before us acted as CHA and in discharging his functions, violated certain provisions of CHA Licensing Regulations. These allegations of violation of CHALR by the appellant/applicant have been confirmed by the Commissioner, Jodhpur and upheld by the Final Order dated 9.8.2016. Any decision regarding action under the Customs Act against the exporter and/or the appellant are separate proceedings. The application for restoration application is accordingly, dismissed.
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PMLA
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2023 (3) TMI 1129
Provisional Attachment Order (PAO) - Permission to sell the immovable property - It is submitted that the subject property could not have been included as proceeds of crime by the Adjudicating Authority (PMLA) - HELD THAT:- It is observed that the challenge is to a PAO dated 2nd September, 2019 and the purpose of ensuring that the subject property is duly sold and the amounts are realized, has been achieved. Further, the Petitioner has a remedy under Section 8(2) first proviso of the PMLA Act, 2002 to approach the Adjudicating Authority (PMLA) and to establish that the subject property is not involved in money laundering. The matter shall now proceed before the Adjudicating Authority under the provisions of PMLA Act, 2002 - Petitioner would be free to file an application before the Adjudicating Authority under Section 8 of the PMLA Act, 2002 and raise contentions that the subject property is not subject matter of any money laundering activities and was purchased much before the allegations were raised. Petition disposed off.
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Service Tax
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2023 (3) TMI 1128
Levy of Service tax - Industrial or Commercial Construction Service - service of industrial painting job - scope of SCN - HELD THAT:- The learned Commissioner (Appeals) travelling beyond the show cause notice and adjudication order decided that the service tax is payable under the head of Management, maintenance and repair service. This approach of the learned Commissioner (Appeals) is absolutely illegal and incorrect. The learned Commissioner (Appeals) has no power to create a new case before him which is not flowing from the show cause notice therefore, on this ground alone the impugned order is not sustainable. However, since the learned Commissioner (Appeals) has upheld the demand under Management, maintenance and repair service and not under Industrial or Commercial Construction Service the matter needs to be reconsidered by the learned Commissioner (Appeals). The learned Commissioner (Appeals) shall decide the appeal considering the service under Industrial or Commercial Construction Service. Accordingly, the impugned order is set aside - Appeal is allowed by way of remand to the Commissioner (Appeals) for passing afresh Order-in-Appeal preferably within a period of two months from the date of this order.
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2023 (3) TMI 1127
Jurisdiction - power of Commissioner (Appeals) to remand the matter to Adjudicating Authority - Section 35 A of Central Excise Act, 1944 / Section 128 A (3) of the Customs Act, 1962 - HELD THAT:- As per the judgment of the Hon ble Jurisdiction High Court of Gujarat in the case of COMMISSIONER OF SERVICE TAX VERSUS VERSUS ASSOCIATED HOTELS LIMITED [ 2014 (4) TMI 406 - GUJARAT HIGH COURT] in which the support was taken from the Hon ble Supreme Court Judgment in the case of MIL INDIA LTD. VERSUS COMMISSIONER OF C. EX., NOIDA [ 2007 (3) TMI 8 - SUPREME COURT] . On this settled position this Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE ST, AHMEDABAD VERSUS ADANI POWER LIMITED [ 2020 (3) TMI 810 - CESTAT AHMEDABAD] dealing with one of the issue of remanding power of the Commissioner (Appeals) held that the learned Commissioner (Appeals) has power to remand the matter to the Adjudicating Authority. Thus, the Commissioner (Appeals) has indeed power to remand the matter. Accordingly, there is no error in the impugned order to the extent the matter was remanded to the Adjudicating Authority. Appeal of Revenue dismissed.
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Central Excise
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2023 (3) TMI 1126
Recovery of erroneous refund - requirement of issuance of separate SCN - review of speaking order - whether the separate notice under Section 11A of the Central Excise Act is necessary for the recovery of the amount when an erroneous refund is granted through the speaking order is reviewed under Section 35E of the Act? - time limit prescribed under Section 11A. HELD THAT:- In the present case the original authority while passing the O-I-O allowed the refund. That the order-in-original sanctioning the refund was the subject matter of review under Section 35E of the Act. On merits the Reviewing Authority set aside the order-inoriginal sanctioning the refund. Therefore, as such stricto sensu it can be said to be giving effect to the order passed under Section 35E of the Act. As such the assessee is claiming the refund on the basis of O-I-O sanctioning the refund which as such has been set aside in the proceedings under Section 35E of the Central Excise Act. Once the order in original sanctioning the refund came to be set aside in a proceeding under Section 35E of the Act and the proceedings under Section 35E was initiated within the time prescribed under Section 35E of the Act, thereafter there is no question of any further notice under Section 11A of the Central Excise Act as observed by the Tribunal affirmed by the High Court on quashing and setting aside the order in original sanctioning the refund in exercise of powers under Section 35E of the Act which otherwise is prescribed under the Act within the time stipulated under Section 35E of the Act, thereafter necessary consequence shall follow and thereafter there is no question of any refund pursuant to order in original. The impugned judgment and order passed by the High Court and that of the Tribunal are hereby quashed and set aside and the order passed by the Commissioner (Appeals), Mumbai dated 13.05.2005 is hereby restored - Appeal allowed.
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2023 (3) TMI 1125
Interest on pre-deposit amount - amount deposited by the petitioner to avail its right of appeal under Section 35FF of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 - Petitioner s request for interest on pre-deposit for the period 15.09.2009 till 20.09.2016 was rejected - HELD THAT:- It is the respondents case that since the petitioner is aggrieved by the order of the Adjudicating Authority limiting the refund to the amount of pre-deposit, the appropriate remedy for the petitioner is to file an appeal against the said order. It is also emphasized that the Adjudicating Authority would now have no powers to review its own orders and therefore, it does not have jurisdiction to entertain the petitioner s request for reconsidering payment of interest. Notwithstanding the petitioner may have a right to appeal against the order refunding the principal amount while ignoring the interest thereon; it is not deemed necessary to relegate the petitioner to avail such remedy considering that there is no dispute that the petitioner would be entitled to interest on the said amount - According to the petitioner a sum of ₹24,50,959/- is due and payable to the petitioner on account of interest on the pre-deposit. It is considered apposite to set aside the communication issued by respondent rejecting the petitioner s request for interest and direct the Adjudicating Authority to entertain its request for interest on the pre-deposit amount on merits and disburse the said amount as calculated - petition allowed.
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2023 (3) TMI 1124
EOU - Clandestine Removal - evasion of huge excise duty on the clearance of goods clandestinely from the EOUs - fraudulent advance license could not have been issued - malafide intent or not - penalty under Rule 26 of CER - HELD THAT:- The appellant have admittedly issued false performance certificate to fraudulent parties who, on the basis of the said certificates obtained the advance license and such advance licenses were used for evasion of huge excise duty on the clearance of goods clandestinely from the EOUs. Without the performance certificate, the fraudulent advance license could not have been issued and huge revenue loss could not have occurred to the government exchequer. Therefore, for the entire offence the appellant s role is key role. The appellant has also not verified any credentials of their so-called clients. It is also a fact on record that the appellant have categorically admitted in his statement that if he would have known that so huge revenue involvement is there, he could have charged heavy amount of fees as compared to Rs.1500 per certificate. With this statement, the mala fide of the appellant is clearly established. This tribunal dealing with the similar fact maintained the penalty imposed on the Chartered Accountant for issue of Solvency/Export performance certificate in the case of MAHESH P. PATEL SUDESH D. NANAWARE VERSUS COMMISSIONER OF CUSTOMS (EP) , MUMBAI AND COMMISSIONER OF CUSTOMS (EP) , MUMBAI VERSUS SPECTRUM FABRICS [ 2018 (6) TMI 17 - CESTAT MUMBAI] where it was held that it can be seen that the appellant Shri Sudesh Nanaware, being a consultant, has admitted the pre-decided plan for committing the fraud. Therefore, he was rightly imposed the penalty under Section 112(a). The appellant has been rightly imposed with a penalty under Rule 26 of Central Excise Rules - there are no infirmity in the impugned order to the extent of penalty of Rs. 5 lacs was imposed upon appellant under Rule 26 - the penalty is upheld - appeal dismissed.
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2023 (3) TMI 1123
Levy of personal penalty under Rule 15(1) of Cenvat Credit Rules, 2004 - wrong availment of CENVAT Credit by the company - appellant submits that appellant is a technocrat and employed as Director operations and looking after production activities of the Company - SCN barred by time limitation or not - HELD THAT:- The appellant is an employee Director in the Company M/s. Diamond Power Transformers Limited who was alleged to be indulged in fraudulent availment of Cenvat credit. Penalty in the present case was imposed under Section 15(1) of Cenvat Credit Rules, 2004 on the appellant on the ground that he was overall in-charge and involved in the fraudulent availment of Cenvat credit. From the plain reading of Rule 15(1), it is found that a person shall be liable to penalty who takes or utilize Cenvat credit in respect of input or capital goods or input services wrongly or in contravention of any of the provisions of these Rules - In the facts of the present case, it is M/s. Diamond Power Transformers Limited who has availed fraudulent Cenvat credit, the appellant being employee Director has not availed Cenvat credit for himself therefore, Rule 15(1) is not applicable on the person who has neither availed Cenvat credit nor is the beneficiary of Cenvat credit. Accordingly, penalty under Rule 15(1) was wrongly imposed on the appellant. This issue has been considered by this Tribunal in the case of SHRI MUKESH DANI, SHRI DH WADHWANI VERSUS C.C.E. S.T. -SURAT [ 2017 (3) TMI 1145 - CESTAT AHMEDABAD] wherein it was held that personal penalty has been proposed to be imposed on the appellants under Rule 15 of CCR, 2004, and the authority below has nowhere observed that the correct Rule is other than Rule 15 of CCR, 2004, hence, the plea raised by the ld. AR for the Revenue cannot be accepted at this stage. The penalty under Rule 15(1) on the present appellant, who is merely an employee of the Company, is not sustainable - appeal allowed - decided in favour of appellant.
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2023 (3) TMI 1122
Refund of service tax paid on input services - rejection on the ground of time limitation - whether the claim for refund of service tax paid on input services has been filed within the time limit in terms of para 3 (III) (e) of the Notification No 12/2013-ST dated 01.07.2013 and if the same is hit by latches, is the appellant entitle to condonation of delay? HELD THAT:- The Special Economic Zone Act, 2005 is a special statute basically enacted for the establishment of SEZ providing special benefits by way of exemptions with a view to promote the Exports. Section 26 of the SEZ Act read with Rule 31 of SEZ Rules, 2006 provides wholesale exemption from payment of duties under the Central Excise Act, Customs Act and from Service Tax under the Finance Act, 1994 on taxable services provided to SEZ units / developers for carrying on authorised operations in a Special Economic Zone - The intention of the Legislature in granting exemption from levy of duties and taxes was to ensure that the SEZ units function burden free. The whole object is to boost the SEZ units. The High Court of Andhra Pradesh in GMR AEROSPACE ENGINEERING LIMITED AND ANOTHER VERSUS UNION OF INDIA AND OTHERS [ 2019 (8) TMI 748 - TELANGANA AND ANDHRA PRADESH HIGH COURT] after analysing the provisions of the SEZ Act, 2005 and the provisions of the Finance Act, 1994 concluded that the notification issued under section 93 of the Finance Act, 1994 cannot be pressed into service for finding out whether a unit in SEZ qualifies for exemption or not. Subsequently, the Tribunal in M/S. SRF LIMITED VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, LTU NEW DELHI AND COMMISSIONER OF CGST, AND CENTRAL EXCISE, INDORE [ 2022 (4) TMI 989 - CESTAT NEW DELHI] dealt with the issue of entitlement of refund of service tax where some of the services were directly provided to and paid for by the SEZ unit while certain other services were provided to the head office which was registered as an Input Service Distributor (ISD) and on examining the various provisions of the SEZ Act, observed that there is duplication as the Act itself provides for exemption of central excise duty, customs duty and the service tax, however there are exemption notifications issued under the respective laws subject to certain conditions. Time limitation of one year for filing the refund claim - HELD THAT:- Tribunal in the case of C.C.E. S.T., - RAJKOT VERSUS M/S RELIANCE INDUSTRIES LTD [ 2019 (3) TMI 877 - CESTAT AHMEDABAD] , whereby it has been clarified that the condition under para 3 (III) (e) of the Notification for filing the refund claim within one year is applicable only in respect of refund claimed under Table I of Form A-4. For Table II, the refund claim can be filed when the SEZ unit receives the ISD invoices as the format in Table II particularly the specifications in column 9,10 and 11, required that refund cannot be filed without the ISD invoices. Further, it was held that no time limit has been prescribed for issuing ISD invoices under Rule 7 of Cenvat Credit Rules, 2004 for distributing credit under ISD invoices. It was then concluded that for a minor procedural lapse, if the SEZ unit is burdened with duties or taxes the whole objective of SEZ scheme will stand defeated. It is evident that the appellant fulfilled the criterias of eligibility to claim refund of the service tax paid on input services in terms of the Notification No 12/2013-ST. Infact it is not the case of the revenue that the appellant is not eligible to make such claims. Their only objection is to the claim being filed beyond the period of one year as per the notification - Considering the beneficial object of establishing the SEZ tax free, without any burden of duties, the procedural lapse, if any, cannot be the basis to deny the refund to the appellant. The exemption is intended to be absolute is further evident from para 3 (II) of the Notification which provides for ab-initio exemption. From what has been observed by the adjudicating authority is that for the period January to March 2017, service tax was paid prior to 01.10.2016 and the refund claim was filed on 10.10.2017 and therefore it is beyond the period of one year. Even, if one calculates the actual delay the same appears to be somewhere around 10 days or so. Similarly, for the period April to June, 2016 service tax was paid prior to 01.03.2017 and refund claim was filed on 28.03.2018. In both the cases, the delay is neither exorbitant nor unreasonable which on the face of it cannot be condoned - It is the well established principle that the eligibility criteria laid down in an exemption notification are required to be construed strictly, however once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. Refund claim allowed - appeal allowed.
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2023 (3) TMI 1121
Benefit of Exemption - condition of manufacture without the use of electricity power - Eligibility for benefit under N/N. 6/2002-CE dated 1.3.2002 as amended - dipped match splints procured by the respondents were actually manufactured using electricity - invocation of extended period of limitation - HELD THAT:- The department has come on appeal aggrieved by the very same order which set aside the demand on the ground that the Show Cause Notice is time-barred. The learned AR has been at pains to argue that the respondents knew that they are purchasing dipped match splints which have been manufactured using electricity and in such circumstances they ought to have obtained registration and paid excise duty. That therefore the respondents have suppressed facts - there are no substance in the argument put forward by the learned AR or in the grounds put forward in the appeals filed by the department. Interpretation of the notification - HELD THAT:- There were decisions in favour of the assessee as well as the Revenue. The Commissioner (Appeals), Tirunelveli vide Order-in-Appeal dated 28.4.2005 has referred to Board Notification NO. 1/93-CX-4 dated 2.12.1993 wherein Board clarified that In the present case parts are manufactured by a manufacturer with the aid of power. Such parts manufactured with the aid of power are purchased by another manufacturer of footwear who used such parts for manufacture of foot wear without the aid of power. So long as the second manufacturer does not use any power, in or in relation to manufacture of foot wear either in his factory or in the factory of his job workers, it cannot be construed that power has been used in the manufacture of foot wear only because the raw materials bought and used by him had been manufactured with the aid of power. This case is squarely governed by Circular No.4/87 C.E. dated 19.6.87. It is discussed by the Commissioner (Appeals) that the said Circular would apply for interpretation of the notification 6/2002 and that the assessee is eligible for benefit of notification. In the present case, there are no new materials / evidence unearthed by the department which has formed the basis for determination of the duty. All the figures were available to the department as per the invoices submitted by the respondents - the invocation of extended period cannot be justified. The appeals filed by the department are dismissed.
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2023 (3) TMI 1120
Valuation - inclusion of subsidy - Third Member Decision - Difference of opinion - capital/wage subsidy in question reduces the selling price of goods or not - amount of subsidy under dispute is not an independent amount received by the appellant - facts in this appeal are similar to the facts in the case of Super Synotex India Ltd. [ 2014 (3) TMI 42 - SUPREME COURT ] or not - appellant have received VAT subsidy (directly affecting the selling price of the goods) - provisions of Section 9 of Rajasthan VAT Act has not been considered in the case of Shree Cement Ltd. [ 2018 (1) TMI 915 - CESTAT NEW DELHI] leading to erroneous judgment in the said case. HELD THAT:- Section 4 of the Excise Act, which deals with valuation of excisable goods for the purposes of charging of duty of excise, provides that where the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods such value shall, in a case where the goods are sold by the assessee, be the transaction value provided the assessee and the buyer of the goods are not related and the price is the sole consideration. Transaction Value, in terms of section 4 (3) (d) of the Excise Act, means the price actually paid or payable for the goods when sold but does not include the amount of duty of excise, sales tax and other taxes, if any actually paid or actually payable on such goods. The Scheme that came for consideration before the Supreme Court in Super Synotex was Sales Tax New Incentive Scheme for Industry, 1989 (Sales Tax Incentive Scheme) . Under the said Scheme, an assessee was entitled to retain 75% of the sales tax collected from the customers and was required to deposit only 25% with the Government. The Commissioner held that the assessee was availing partial sales tax exemption under the Sales Tax Incentive Scheme upto 75% of the tax liability and was paying only 25% of the sales tax, despite collecting the entire consideration from the customers and, therefore, the additional amount collected under the camouflage of incentive tax would form part of the value for levy of excise duty - it was held by Supreme Court that since 25% of the amount collected as sales tax from the customers was paid by the assessee and the remaining 75% of the amount collected was retained, it became profit or the effective cost paid to the assessee by the purchaser and this 75% was, therefore, to be treated as the price of the goods. The Supreme Court emphasised that the amount paid as sales tax was only 25%. Under the promotion policy involved in these appeals, the subsidy does not reduce the sales tax that is required to be paid by the assessee. The entire amount of sales tax collected by the assessee from the customers is required to be paid. A portion is deposited through VAT 37B challan issued to the assessee by the State Government as subsidy under the promotion policy and the balance amount is deposited by the assessee in cash through VAT 37A challan. What has been retained by the appellant is basically the subsidy amount and it is not the case of the Department that subsidy amount has to be included in the transaction value. In COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I VERSUS M/S WELSPUN CORPORATION LTD. [ 2017 (5) TMI 177 - CESTAT MUMBAI ], the Scheme that was under consideration was the Incentive Scheme 2001 under the Economic Development of Kutch. The assessee was allowed to recover the sales tax amount/VAT amount but it could be retained as an incentive amount. The Tribunal held that the liability to pay sales tax/VAT was not extinguished at the time of removal of goods since it is not exempted from payment of sales tax/VAT and it was clear from the Scheme as well as the eligibility certificate that the amount of sales tax allowed to be remitted to the respondent was towards capital subsidy. Thus, it was not a case where sales tax was not payable but was a case where it stood actually paid as the remission was an incentive or a capital subsidy which the State Government granted with respect to the investment made in the earthquake ravaged region of Kutch in the State of Gujarat. The decision of the Supreme Court in Super Synotex India would not be applicable to the facts of the present case as that was a case where 25% of the amount collected as sales tax from the customers was paid by the assessee and the remaining 75% of the amount was retained by the assessee, which amount was treated to be the price of the goods. In the promotion policy involved in the present case, the subsidy does not reduce the sales tax that is required to be paid by the assessee as the entire amount of sales tax collected by the assessee from the customer is paid. The subsidy amount, therefore, cannot be included in the transaction value for the purpose of levy of central excise duty under section 4 of the Excise Act. The reference is answered in the following manner: a- Subsidy under the promotion policy does not reduce the selling price; b- The amount of subsidy under the promotion policy is not an additional consideration; c- The decision of the Supreme Court in Super Synotex India would not be applicable to the present case; d- The subsidy amount under the promotion policy does not affect the selling price of the goods; e- Section 9 of the Rajasthan VAT Act, 2003 would have no application to the facts of the present case; and f- As regards appropriate case for reference to the ld. Third Member on the questions framed by the ld. Member (Technical), as neither party raised any objection on this issue, the reference has been answered. The matter shall now placed before the regular bench hearing the excise appeals.
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CST, VAT & Sales Tax
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2023 (3) TMI 1119
Disallowance of exemption from payment of tax under 1996-2001 industrial policy - molasses, bagasse and filter mud - disallowance on the ground that it would amount to dual benefit because the petitioner is enjoying the benefit of deferral of purchase tax on sugarcane - sale of by-products namely, molasses, bagasse and filter mud - disallowance when the petitioner's application for granting of FAVC was pending consideration before the SLCC. HELD THAT:- The AO (Assessing Officer) has disallowed the exemption on the premise that it would amount to dual benefit to the petitioner. The State Government have also denied the benefit which has been considered in the aforementioned writ petition. Thus, the subject matter is common in the said writ petition and this revision petition. In our considered opinion, the reasons recorded while allowing the writ petition also answer the contentions urged by the assessee and the Revenue in this revision petition and this revision petition merits consideration. The questions of law are answered in favour of the assessee and against the Revenue - Revision petition is allowed.
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