TMI Tax Updates - e-Newsletter
March 4, 2019

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. ‘INTERMEDIARY SERVICES’ CANNOT BE CLASSIFIED AS ‘EXPORT OF SERVICES’

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. The 7th Regional Comprehensive Economic Partnership (RCEP) Intersessional Ministerial Meeting Concludes in Cambodia

Notifications

Customs

1. 19/2019 - dated 1-3-2019 - Cus (NT)

Amendment to the Notification No. 63/1994-Customs (N.T) dated 21st November, 1994, w.r.t Golakganj LCS

GST - States

2. 21/2019-GST - CT/GST-14/2017/198 - dated 20-2-2019 - Assam SGST

Seeks to extend the due date for furnishing FORM GSTR-3B for the month of January,2019 to 22/02/2019

3. ORDER No. 1/2018 - dated 30-1-2019 - Assam SGST

Assam Goods and Services Tax (Removal of Difficulties) Order, 2018

4. 20/2018-GST - CT/GST-14/2017/185 - dated 31-12-2018 - Assam SGST

Seeks to extend the time limit for furnishing the return in FORM GSTR-3B for the newly migrated taxpayers.

5. 19/2018-GST - CT/GST-14/2017/184 - dated 31-12-2018 - Assam SGST

Seeks to extend the time limit for furnishing the return in FORM GSTR-3B for the newly migrated taxpayers

6. 18/2018-GST - CT/GST-14/2017/183 - dated 31-12-2018 - Assam SGST

Seeks to extend the time limit for furnishing the return in FORM GSTR-3B for the newly migrated taxpayers

7. FTX.56/2017/Pt-I/160 - dated 17-12-2018 - Assam SGST

Seeks to provide taxpayers whose registration has been cancelled on or before the 30th September, 2018 time to furnish final return in FORM GSTR-10 till 31st December, 2018.

8. G.O. Ms. No. 173 - dated 31-12-2018 - Tamil Nadu SGST

Insert the Explanation in the Notification No. II(2)/CTR/532(d-14)/2017 dated the 29th June, 2017

9. G.O. Ms. No. 169 - dated 31-12-2018 - Tamil Nadu SGST

Exemption on supply of gold by nominated agency for export of jewellery

10. G.O. Ms. No. 165 - dated 31-12-2018 - Tamil Nadu SGST

Seeks to fully waive the amount of late fees leviable on account of delayed furnishing of FORM GSTR-B for the period July, 2017 to September, 2018 in specified cases

11. G.O. Ms. No. 161 - dated 31-12-2018 - Tamil Nadu SGST

Seeks to amend Notification No. II(2)/CTR/800(e-8)/2018 dated 10th September, 2018

12. G.O. Ms. No. 160 - dated 31-12-2018 - Tamil Nadu SGST

Amendment in Notification No. II(2)/CTR/695(d-2)/2018 dated 6th August, 2018

13. G.O. Ms. No. 159 - dated 31-12-2018 - Tamil Nadu SGST

Tamil Nadu Goods and Services Tax (Fourth Removal of Difficulties) order. 2018

14. G.O. Ms. No. 158 - dated 31-12-2018 - Tamil Nadu SGST

Tamil Nadu Goods and Services Tax (Third Removal of Difficulties) Order, 2018

15. G.O. Ms. No. 157 - dated 31-12-2018 - Tamil Nadu SGST

Tamil Nadu Goods and Services Tax (Second Removal of Difficulties) Order, 2018

16. G.O. Ms. No, 156 - dated 12-12-2018 - Tamil Nadu SGST

Tamil Nadu Goods and Services Tax (Removal of Difficulties) Order, 2018

IBC

17. S.O. 1091(E) - dated 27-2-2019 - IBC

Central Government notifies persons who may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority, on behalf of the financial creditor

18. S.O. 1090(E) - dated 26-2-2019 - IBC

Central Government appoints Dr. Rajiv Mani, Joint Secretary and Legal Adviser, Ministry of Law and Justice, Department of Legal Affairs as ex-officio member in the Insolvency and Bankruptcy Board of India vice Sh. G. S. Yadav, ex-Joint Secretary and Legal Adviser

Circulars / Instructions / Orders

FEMA

1. 22 - dated 1-3-2019

Hedging of exchange rate risk by Foreign Portfolio Investors (FPIs) under Voluntary Retention Route

2. 21 - dated 1-3-2019

‘Voluntary Retention Route’ (VRR) for Foreign Portfolio Investors (FPIs) investment in debt

Customs

3. PUBLIC NOTICE NO. 23/2019 - dated 1-3-2019

Entity Registration and Approval under new Sea Manifest Regulations

4. PUBLIC NOTICE NO. 04/2019 - dated 26-2-2019

Discontinuation of printing of Advance Authorisations/Export Promotion Capital Goods (EPCG) Authorisations on security paper by DGFT for authorisations issued with EDI ports as port of registration

5. Public Notice No: 19/2019 - dated 25-2-2019

Procedure for disposal of un-claimed/un-cleared cargo under section48 of the Customs Act, 1962, lying with the custodians

6. PUBLIC NOTICE NO. 03/2019 - dated 21-2-2019

Amendments to the All Industry Rates of Duty Drawback effective from 20.02.2019

7. PUBLIC NOTICE No. 02/2019 - dated 15-2-2019

Mandatory of Declaration of Standard UQC in Bills of Entry - ICES Advisory 01/2018

8. PUBLIC NOTICE NO. 15/2019 - dated 15-2-2019

Extension of facility of Direct Port Delivery to AEO importers at JNCH

9. PUBLIC NOTICE NO. 13/2019 - dated 6-2-2019

Standard Operating Procedure consequent to commencement of “Document Processing Area” in the Parking Plaza and Gate Automation for Export & Import through NSICT/NSIGT, GTI & JNPCT

Highlights / Catch Notes

Income Tax

• Reopening Assessment Not Justified by AO's New Perspective Based on Similar Material from Previous Year.

  Case-Laws - HC : Reopening of assessment - Merely because in the later year, the AO takes a different view on the basis of similar material, which may have been collected during such process, would not permit him to reopen the assessment.
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• Penalty u/s 271(1)(c) Invalidated Due to Defective Notice Failing to Specify Charge u/s 274.

  Case-Laws - AT : Penalty u/s 271(1)(c) - Defective notice u/s 274 - In SCN issued u/s 274, AO does not strike out the inappropriate words to specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income, Imposition of penalty not sustained.
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• No Penalty Under Sec 271E for Cash Loan Repayment if Identity Verified and Payment Genuineness Unquestioned.

  Case-Laws - AT : Levy of penalty u/s. 271E - violation of provisions of Section 269T - If identity of person is proved and genuineness of payment is not doubted by the AO then ontentions of assessee of ‘bonafide belief’ for repayment of loans in cash is acceptable and the penalty u/s. 271E is not leviable.
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• Assessing Officer Accepts Cash as Income Without Inquiry; No Penalty u/s 271AAA Applied.

  Case-Laws - AT : No surrender at the time of search but cash seized was included in the computation of income and offered for tax which was duly accepted by the AO without any further query - no penalty u/s 271AAA was leviable.
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• Penalty u/s 271(1)(C) Unenforceable Without Clear Evidence of Inaccurate Income Details or Concealment.

  Case-Laws - AT : Penalty u/s 271(1)(C) - addition sustain on Bogus purchases - When it is not discernible from the assessment order as to whether assessee has furnished inaccurate particulars of income or has concealed particulars of income so as to apply the deeming provisions contained under Explanation1 (A) & 1(B) of the Act, the penalty u/s 271(1)(c) of the Act is not sustainable.
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• Tribunal Nullifies Income Tax Order, Deletes Penalty Imposed u/s 271(1)(c) Due to Lack of Basis.

  Case-Laws - AT : Penalty u/s 271(1)(c) - Tribunal has set aside the order of the CIT(A) regarding enhancement of income, therefore, the very basis on which the penalty was levied by the CIT(A) does not survive. Penalty deleted.
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• Section 54F Deduction Eligibility Challenged in Section 263 Revision for AO's Inadequate Examination of Taxpayer's Claim.

  Case-Laws - AT : Revision u/s 263 - eligibility of claim for deduction u/s 54F - If it born out from record that AO has not examined the claim of assessee for deduction and allowed the same without application of mind then revision u/s 263 is permissible.
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• Reassessment Notice u/s 148 Invalid Due to Lack of New Evidence; Based on Opinion Change Only.

  Case-Laws - HC : Reopening of assessment - The assessment order makes it very clear that reassessment proceedings by issuing notice u/s 148 were done merely on the basis of change of opinion. There was no tangible material to arrive at a conclusion that there was escapement of income by the assessment.
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• AO Must Record Satisfaction u/s 271(1)(c) for Penalty; Omission Blocks Penalties for Undocumented Additions.

  Case-Laws - AT : Penalty u/s 271(1)(c) - non recording of satisfaction - When satisfaction for initiation of penalty proceedings u/s 271(1)(c) of IT Act is recorded by the AO in assessment order in respect of certain additions and not recorded in respect of certain other additions; it acts as a bar against levy of penalty U/s 271(1)(c) in respect of those additions in respect of which such satisfaction was not recorded in the assessment order or during the assessment proceedings
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• Income Tax Assessment Reopening Invalid if Based Only on Audit Objections Without Assessing Officer's Independent Judgment (Section 143(3)).

  Case-Laws - AT : Reopening of assessment - Original assessment u/s 143(3) - Reopening of assessment merely on the basis of objection raised by audit party is not permissible if AO has not applied his mind independently to arrive at the conclusion as to whether he had reasons to believe that income of the assessee was escaped from tax in the assessment for the relevant year.
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• Appellate Decisions in Income Tax Cases Cannot Be Revised u/s 263; Must Be Challenged in Higher Forums.

  Case-Laws - AT : Revision u/s 263 - Issue considered and decided in appeal by appellate authorities, such matters cannot be subject to revision u/s 263. Rationale behind exclusion of such orders from purview of section 263 is that, if CIT (A) decides issue against revenue, revenue has right to challenge it before higher appellate forum.
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• Stay Petition Must Show Prima Facie Case, Financial Hardship, and Balance of Convenience, Not Just Rely on Circular.

  Case-Laws - HC : Stay petition for stay of demand must contain note for the existence of a prima facie case, financial stringency of petitioner and the balance of convenience and it should not only based on circular to obtain the relief.
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• Challenge to Section 153A Search Fails Due to Delay; Objections Must Be Raised Promptly to Assessing Officer.

  Case-Laws - HC : Assessment u/s 153A - Validity of search on grounds of absence of panchas - Delay in raising plea that no punchas is available at the time of search is Fatal. It should be raised before AO.
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• Section 245C Settlement Application Invalid if Additional Income Disclosed Post-Filing in Income Tax Cases.

  Case-Laws - HC : Settlement application filed u/s 245C - If assesse voluntarily offer additional income after filing Settlement application, it will lead to quashing of Settlement proceedings on the ground that original application u/s 245C, did not contain a full and true disclosure of the undisclosed income.
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• Assessee's Export Activities Qualify for Tax Benefits u/s 10B, Including Export Quotas and Margin Money Interest.

  Case-Laws - HC : Deduction u/s 10B - sale of export quota and interest on margin money - There the sole activity engaged in by the assessee is export, all incomes generated by the conduct of the business of the unit would be eligible to the benefits u/s 10A/10B.
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• Reopening Assessment u/s 143(3) After Four Years Invalid Due to Lack of Prima Facie Belief by AO.

  Case-Laws - AT : Reopening of completed assessment u/s 143(3) after 4 years - though the ld.AO has to form a prima facie belief only, but has not analysed any of these details while forming a belief that income has escaped assessment, more particularly, when he is leveling allegations that it was escaped on account of non-disclosure of facts fully and truly. Reopening is invalid
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• No penalty u/s 271(1)(c) if full disclosure is made and claim is debatable without revenue loss.

  Case-Laws - AT : No penalty levied u/s. 271(1)(c) if assessee has made complete disclosure of details of claim in Accounts as well as return. Further if claim is a debatable and there was no loss to revenue, no penalty is leviable.
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Customs

• New Sea Manifest Regulations: Register and Get Approval for Compliance to Streamline Customs and Enhance Security in Maritime Trade.

  Circulars : Entity Registration and Approval under new Sea Manifest Regulations
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FEMA

• FPIs Gain Flexibility to Hedge Currency Risk Under Voluntary Retention Route in India, Enhancing Investment Stability.

  Circulars : Hedging of exchange rate risk by Foreign Portfolio Investors (FPIs) under Voluntary Retention Route
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• Foreign Portfolio Investors Gain Flexibility in Indian Debt Markets Through Voluntary Retention Route Scheme.

  Circulars : ‘Voluntary Retention Route’ (VRR) for Foreign Portfolio Investors (FPIs) investment in debt
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IBC

• Initiating Insolvency Under I&B Code Is Irreversible, May Affect Non-Defaulting Running Businesses in Resolution Process.

  Case-Laws - AT : The process under the ‘I&B Code’, once set in motion, is irreversible and leads to exceptional and serious consequences. - A running business, which has made no default, would be put under resolution process.
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Central Excise

• Manifold Business Forms Classified Under CETA 4901, Not CETA 4820, as Per Central Excise Case Law.

  Case-Laws - AT : Classification of goods - manifold business forms including printed/ blank continuous computer stationery forms and printed cut sheet forms - goods are required to be classified under CETA 4901 and not under CETA 4820
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• Supreme Court Rules Board Circular Cannot Override Judgment on CENVAT Credit for GTA Service; Credit Denied.

  Case-Laws - AT : CENVAT Credit - input service - GTA Service - once the Hon’ble Apex Court has declared the law, the Circular issued by the Board cannot override the judgment of the Apex Court - thus, credit not allowed.
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• Refunds for Unutilized Cenvat Credit Post-GST Must Be Issued in Cash, Not Credited Back to Account.

  Case-Laws - AT : Refund of unutilized amount lying in Cenvat credit account post GST - no authority can sanction refund claim to be credited in Cenvat credit account - refund is allowed in cash
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• Central Excise Rule 12B: Preventing Exploitation of Job Work to Circumvent Aggregate Turnover Limits.

  Case-Laws - SC : Job work - Computation of Aggregate turnover of the goods - If the contention of the Appellant is accepted, a dealer may get the goods referred to in Rule 12B manufactured from several job workers to ensure that the value of the clearances from each job worker is less than the limit prescribed for individual clearances. In such a case the emphasis in the Rule regarding aggregate clearances would be rendered meaningless.
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VAT

• Maharashtra Ordered to Transfer VAT Collected from Appellant to Odisha Due to Inter-State Sales Ruling.

  Case-Laws - AAAR : Since the stock transfer claim of the appellant is found to be not tenable and the transactions in question are found to be inter-State sales, the State of Maharashtra will have to be directed to pay to the State of Odisha an amount collected from the appellant towards VAT
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Case Laws:

• GST

• 2019 (3) TMI 149
  Application for stay of the impugned order - VAT paid under the pre-GST regime - claim for input tax credit - Held that:- As an interim arrangement, we direct the petitioner to deposit of Rs. 5,11,60,450/- with the respondent authorities within 3 weeks from today. On the deposit being made, the same would be converted into an interest bearing FDR for a period of nine months. The FDR amount and the interest accrued thereon would abide by further orders of this Court - It is made clear that this is only an interim arrangement and the Court has not expressed any firm and final view. List on 19.02.2019.

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• 2019 (3) TMI 148
  Maintainability of Advance Ruling application - applicable fee not paid - Circular No. 25/25/2017-GST - Held that:- It is mandatory as section 97(1) read with Rule 104 of the CGST/MGST Act to pay applicable fee of Rs. 5000/- each under SGST and CGST Act to be deposited as per the provision of Section 49 of the Act. If not the application would be treated as an incomplete application liable for rejection - In the instant case, applicant has deposited only a fee of Rs. 5000/- and not the full amount. As such application is incomplete and is liable for rejection - application for Advance Ruling rejected as being not maintainable.

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• 2019 (3) TMI 147
  Withdrawal of Advance ruling application - Held that:- The Application in GST ARA form No. 01 of Maharashtra Rajya Sahakari Dudh Mahasangh Maryadit Mumbai vide reference ARA NO. 100 dated 14.12.2018 is disposed of as being withdrawn unconditionally.

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• Income Tax

• 2019 (3) TMI 146
  Revision u/s 263 - Unexplained cash credit u/s. 68 - amounts received by the assessee towards share capital and share premium - as per assessee no proper opportunity was given to the assessee to discharge the onus casted upon it as required when section 68 - change in address of assessee initimated - summons u/s. 131 of the directors of the assessee company (to old address) - reassessment order ex parte by invoking sec. 144 - no proper opportunity provided to the assessee. HELD THAT:- Effective verification of the documents produced by the assessee could not be possible because within 30 days of the assessee submitted the written submission along with documents, the AO passed the “Best Judgment Assessment” u/s. 144 of the Act. And we note that other than issuing summons u/s. 131 of the directors of the assessee company (to old address) no other investigation as directed by Ld. CIT was conducted by AO as is discernable from the order. So, in the light of the aforesaid facts, we find force in the submission of the Ld. AR that no proper opportunity the assessee got during the reassessment proceedings before the AO. Since proper opportunity was not given to assessee by AO during the reassessment proceedings, we are of the opinion that assessee should get proper opportunity before the AO during reassessment proceedings. In the light of the Hon’ble Supreme Court’s decision in Tin Box Company [2001 (2) TMI 13 - SUPREME COURT] and taking into consideration the fact the order of the IT passed u/s. 263 of the Act in similar cases being upheld up to the level of Apex Court, and taking note of Hon’ble Delhi High Court’s order in Jansampark Advertising & Marketing Pvt. Ltd. [2015 (3) TMI 410 - DELHI HIGH COURT], we set aside the order of the Ld. CIT(A) and remand the matter back to the file of AO for de novo assessment and to decide the matter in accordance to law after giving opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.

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• 2019 (3) TMI 145
  Exemption u/s 80IB(10) - Appellant has contributed its land to the JDA for its development and the developer has made the investment in construction of flat - Whether before entering into this JDA, the capital asset was converted into stock-in-trade and capital gain on its transfer was also offered at the time of sale of flats? - HELD THAT:- Assessee shall be allowed for exemption under 80IB(10) with respect to the profit earned on sale of its flats. But during the course of hearing, a doubt was raised as to whether the assessee has converted his capital asset as a part of stock-in-trade before entering into JDA. As this aspect was never verified by the lower authorities though the assessee has placed the documentary evidence in support of his contentions, but it requires verification from the lower authorities. We are of the view that let this point be examined by the AO. If the assessee succeeds in demonstrating that land held as capital asset was converted into stock-in-trade before entering into JDA and the assessee itself has offered the capital gain accrued on conversion of capital asset into stock-in-trade while filing the return along with the claim of exemption of business profit earned on sale of flat of his share under section 80IB(10) of the Act. If the assessee succeeds in proving that capital asset was converted into stock-in-trade, before entering into JDA, claim of exemption of deduction under section 80IB(10) be allowed. - Decided in favour of assessee for statistical purposes.

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• 2019 (3) TMI 144
  TP Adjustment - selection of comparable - functional similarity - Importance of Brand value in selection of comparable - good comparable - HELD THAT:- With respect to Kerala Travels Interserve Ltd., we have carefully perused its financial statements and we find the main revenue is from different activities and not from the tour operations. Therefore, Kerala Travels Interserve Ltd., cannot be held to be the good comparable and we accordingly direct the AO/TPO to exclude this company from the list of comparables. With regard to Cox & Kings it is involved in different activities besides tour operation and has its own brand value. Therefore, it cannot be held to be a good comparable for determination of the ALP for the international transactions. We accordingly direct the AO/TPO to exclude this company from the list of comparables while determining the ALP for international transactions. Accordingly, we direct the AO/TPO to exclude these two comparables and recompute the ALP in terms indicated above after setting aside the assessment order in this regard.

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• 2019 (3) TMI 143
  Rectification of mistake - Entitlement to the relief under section 89(1) - revised application under section 154 - Particulars of the mistake proposed to be rectified - HELD THAT:- Authorities while issuing the impugned notice have totally ignored the orders passed by the Income Tax Officer dated 30.08.2011 and the CIT-A order dated 01.10.2012 wherein it has been held that relief under Section 89(1) of the Act is allowable to the petitioner for which he can file a revised application under Section 154 and that it was pursuant to the aforesaid observations of the Income Tax Officer and the CIT-A that the petitioner had filed the revised application under Section 154. The respondents have also overlooked the fact that the petitioner’s claim was allowed by order dated 05.12.2014 mainly in view of the previous orders dated 30.8.2011 and 1.10.2012. The authorities have also not taken into consideration the fact that in the proceedings taken up by the authorities on the revised application under Section 154 the authorities duly asked the petitioner to submit a form under Section 10-E of the Act and also sought for and received information from the Bank regarding the salary paid towards subsistence allowance pursuant to the orders passed by this Court and that it was on the basis of the aforesaid information and the document filed by the petitioner that benefit under Section 89(1) was given to the petitioner. As constrained to observe that the submissions made by the learned counsel for the respondents to the effect that the relief under Section 89(1) of the Act was barred by limitation and, therefore, could not have been allowed by the ITO, Jabalpur vide order dated 15.12.2014, does not find any mention in the particulars of the mistake that were proposed to be rectified in the notice dated 09.05.2017 and is apparently an afterthought. Income Tax authorities while passing the order dated 1.8.2017, Annexure R-6, has totally ignored and omitted to take note of the findings recorded by the Income Tax Officer in its order dated 30.8.2011 to the effect that the relief under section 89(1) of the Act, is allowable to the petitioner and for which purpose he could have filed a revised application under section 154 of the Act, which has been affirmed and confirmed by the CIT-A by order dated 1.10.2017. The authorities have simply taken note of the fact that the application under section 154 of the Act, was dismissed without taking note of the aforesaid finding and has revised the order. Very initiation of the impugned Section 154 proceedings was misconceived and uncalled for as there was no mistake in the previous orders requiring rectification in view of the admitted and undisputed fact that the petitioner is entitled to claim benefit under Section 89(1) of the Act, and that his claim thereunder is allowable. Petition allowed.

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• 2019 (3) TMI 142
  Penalty u/s 271(1)(c) - furnishing inaccurate particulars of his income - exemption u/s 80-P claimed though it was excluded from the purview of Section 80-P of the Act w.e.f. 01.04.2007 - error in filing return - HELD THAT:- It is pertinent to note that Section 80-P is a part of Chapter VI-A of the Act. It is also pertinent to note that under Section 80-B(5) of the Act, the gross total income means the total income computed in accordance with the provisions of the Act before making any deductions under Chapter VI-A of the Act. Evidently, the assessee had furnished inaccurate particulars of his income and had also concealed the particulars of his income which were deliberate and intentional. The Tribunal or the appellate authority committed no error or illegality in not accepting the plea of the assessee that the mistake in filing its return was bonafide and because of the amendment in the Finance Act, 2006 excluding the assessee from the purview of Section 80-P. Mistake in filing the return occurred - assessee lacked the services of professional chartered accountants can also not be accepted in as much as under Section 44-AB - HELD THAT:- The assessee was required to get its account audited by an accountant as defined in Section 288(2)-Explanation, i.e. chartered accountant within the meaning of Chartered Accountants Act, 1949. It is not a case where the assessee has claimed deductions under any head which had been disallowed by the revenue but is a case where the assessee had concealed its total taxable income and furnished inaccurate details in its return. The appellant/assessee was not able to establish his bonafides regarding the inaccurate particulars furnished in his return. The proceedings under Section 271(1)(c) of the Act were rightly initiated against the assessee and the penalty was also rightly imposed on him.- Decided against assessee.

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• 2019 (3) TMI 141
  Deduction u/s section 80HHC - computation of benefit - entitled to claim only the Net value of the sale of DEPB (Duty Entitlements Pass Book) after deducting its face value - HELD THAT:- The controversy is no longer res integra and the same is covered by the aforesaid decision of the Hon ble Supreme Court in ED. SASSOON AND COMPANY LIMITED AND OTHERS VERSUS COMMISSIONER OF INCOME-TAX, BOMBAY CITY [1954 (5) TMI 2 - SUPREME COURT] and the Assessee is entitled to take only the Net amount of the sale value after deducting the face value of the DEPB for the purpose of Section 80HHC while applying Explanation (baa) of the said provision in the present case. - Decided in favour of the Assessee

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• 2019 (3) TMI 140
  Depreciation on windmill denied - sham transaction - proof of ownership - assessment u/s 143(3) - AO disbelieved the transaction to be one of purchase of 80% shares in the windmill and held that the transaction is only a finance transaction - tribunal allowed depreciation - HELD THAT:- Tribunal has analysed the entire transactions in great depth to confirm the order passed by the CIT(A), had analysed the business prudence and found that no businessman doing finance would lend money to earn such a low interest even assuming that the assessee is able to get the benefit of depreciation at 100% which would result in reduction of the income of the assessee in the present case over a period of two years by Rs. 8.10 Crores. Tribunal observed that it would be of no benefit to the assessee, insofar as when the windmill is sold at any point of time the windmill will be depreciated asset and the income would be taxable as a short term capital gain due to the applicability of Section 50. The Tribunal noted that the existence of the windmill was not disputed by the Revenue and the payment by M/s.Surana Industries Ltd., to the assessee in regard to the quantum and the method of computation of quantum was also not disputed. Further, it analysed every attendant facts and circumstances, and rejected the stand taken by the Assessing Officer that the transaction was a 'sham transaction' - no substantial question of law.

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• 2019 (3) TMI 139
  Addition u/s 40A(2)(b) - remuneration paid to trustees - reasonableness of the expenditure - the entire amount paid as remuneration to the Directors was allowed by Tribunal in upholding the view of CIT (Appeals) - HELD THAT:- Trust has been created for the purpose of doing business. Trust has earned income and the remuneration is paid to the trustees. The trustees have also paid taxes for the remuneration received by them. Therefore, it is not for the AO to conclude what is an appropriate payment or remuneration to be paid to the trustees. As in the case of S.A Builders Ltd. v. CIT [2006 (12) TMI 82 - SUPREME COURT] held that the reasonableness of the expenditure is to be judged from the point of view of the businessman and the Revenue cannot sit in the arm chair of the businessman to decide what is reasonable and what is not. - Decided in favour of assessee. Foreign travel expenses - allowable business expenses u/s 37(1) - AO disallowed the claim based on the type of visa, which the trustee had produced for consideration - HELD THAT:- It does not mean that under a tourist visa, no business can be transacted. There is no material to indicate that no business was done by the assessee in these trips. Therefore, the order of the CIT(A) as well the Tribunal is just and proper. Under the circumstances, we hold that Tribunal was right in allowing the foreign travel expenses incurred by the trustee and thereby, the ingredients under Section 37(1) - Decided in favour of assessee.

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• 2019 (3) TMI 138
  Earlier AAR filed in the AAR Mumbai Bench of this Authority as connected with the present application - HELD THAT:- It is necessary to direct that the said application be transferred to this Bench and tagged to the present application. Hence we direct that earlier AAR be tagged to the present application. Office to take necessary steps to ensure that the said application filed in AAR Mumbai Bench is transferred to this Bench and tagged to the present application. Office to issue necessary notice to the parties and communicate copy of this order to them.

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• 2019 (3) TMI 137
  Foreign exchange loss on reinstatement of closing balance of foreign currency loan amount - Capital or revenue - CIT (A) held that Exchange Loss on Restatement of Closing Balance of Foreign Currency Loan Amount which is essentially capital in nature is liable to be added back to the Total Income of the Assessee Company. - HELD THAT:- assessee has opted not to press the ground. But in this appeal, assessee intend to argue the ground. We, however, carefully examined the submissions raised by the assessee recorded in the order of CIT(A) and we find that CIT(A) has properly adjudicated the issue and no interference therein is called for. Disallowance u/s 40A - Part disallowance of service charge paid to holding company - No doubt raised regarding service or payment - No allegation of excessive payment - No comparable - HELD THAT:- We find that this service agreement was executed on 1.4.2009, according to which assessee was required to pay 0.5 % of the total turnover as fees for the services rendered by the holding company MEMG International India Pvt. Ltd. AO has not doubted the payment made by the assessee to MEMGIIPL on account of services rendered by them. But he has made the disallowance of its part without assigning any reason. He has not brought any comparable case to demonstrate that the payment made by the appellant is in excessive. Therefore, we are of the view that without bringing any cogent material on record to demonstrate that the payment made by the appellant is in excessive no disallowance can be made; more so in the light of the fact that both the companies are assessed to Income tax at maximum marginal rate - disallowance made by the AO is not proper and accordingly we set aside the order of the CIT(A) and delete the additions. Disallowance u/s 14A - HELD THAT:- CIT(A) has re-examined the claim of the assessee and reiterated its contentions that no expenditure was incurred in earning the dividend income. The CIT(A) re-examined the claim in the light of provisions of section 14A r.w.r. 8D of the Rules and was of the view that indirect cost attributable towards exempted income has to be disallowed for which it has to be computed as per Rule 8D(2)(iii) of the Rules. Now aggrieved, assessee is before us and during the course of hearing he could not demonstrate that no indirect expenditure was incurred to earn the exempted income from the investment of Rs. 1.52 crores. Therefore, we find no infirmity in the order of the CIT(A). Allowable revenue expenditure - Expenses related to abandoned project without acquiring any new asset - HELD THAT:- The expenditures incurred was an account of expansion of business and the project was finally abandoned without acquiring any new asset for enduring benefit, therefore, the entire claim is allowable as revenue expenditure. But the CIT(A) spread over the entire claim for 5 years and allowed 1/5th of the claim in the impugned assessment year and these findings are not challenged by the assessee. Therefore, we are confirming the order of the CIT(A) passed in this regard having found no merit in the contention of the Revenue that the expenditures are of capital in nature. Slump sale - transfer of business as envisaged u/s 2(42C) - HELD THAT:- The capital gain cannot be computed as per provisions of section 50B of the Act. Since we have held that it is not a slump sale of a going concern, we find no justification to deal with the other issues with regard to the net worth of the assets and its cost of acquisition and computation of capital gain. So far as receipt of Rs. 10 lakh by the assessee on account of transfer of hospital business is concerned, no argument was advanced by the Revenue. The assessee however offered this amount by way of long term capital gain under section 50B in his return of income. Since we have already held that it is not a transfer of business as a going concern as it is not a slump sale and capital gain cannot be computed, the receipt of Rs. 10 lakhs be taxed in accordance with law in the hands of the assessee. We also do not wish to adjudicate other issues with regard to inclusion of land and building to the transferred undertaking while calculating net worth and whether net worth of a capital asset can be in negative figure. Accordingly, we set aside the order of the CIT(A) and delete the additions made in this regard. Disallowance invoking provisions of section 40A(2) - HELD THAT:- No disallowance can be made without establishing that claim raised by the assessee is excessive against the fair market rate. Since we have taken a view on similar set of facts, we find no justification to adjudicate the issue again in this appeal. Accordingly, we set aside the order of the CIT(A) and direct the AO to allow the claim of the assessee. Dividend incomes on investment in its subsidiaries - HELD THAT:- In the instant case, whatever arguments is advanced before us it was not advanced before the lower authorities. Moreover, he has not furnished the detailed explanations with regard to expenditure incurred for earning exempted income. He blatantly said that no expenditure was incurred and this stand of the assessee cannot be accepted in the light of the fact that investment was made to the tune of Rs. 1.943 crore on which assessee has earned the exempted income. Therefore, we are of the view that lower authorities have rightly adjudicated the issue in the light of given facts and circumstances of the case. Disallowance u/s 14A - HELD THAT:- We find that AO has computed the disallowance invoking the provisions of section 14A r.w.r. 8D of the Rules. While doing so, the AO did not examine the nature of investment whether the investment was made with the intention to earn dividend income or to make strategic investment in subsidiaries to have control over it. With regard assessment year 2011-12, we find that average of investment is to be taken. In that year, opening investment was Nil, therefore, the investment made in that year cannot be called to be the average investment. We however find force in the contention of the assessee that average investment should be Rs. 55.33 crores but it requires a proper adjudication. We accordingly set aside the order of CIT(A) in all assessment years and restore the issue to the file of the AO to re-examine the claim of the assessee in the light of nature of investments and also the opening and closing balance of investments. Disallowance of payments made to Allegro Corporate Finance Advisors Pvt. Ltd. treating the same as capital expenditure - HELD THAT:- Expansion of business has already been examined by us in foregoing appeals and we have concluded that the expenditure incurred for the expansion of the existing business, should be treated as revenue expenditure. Therefore, following the same view, we hold in this case that since the expenditure was incurred for the expansion of the existing business in terms of new beds and services and aid in raising equity funds approximately 100 crores from the interested investors to finance its expansion plan is certainly a revenue expenditure and be allowed as deduction under section 37. Disallowance of consultancy fees paid to MHSPL -commercial expediency - HELD THAT:- Once the assessee has already entered into agreement with its holding company for rendering the financial and management services, there is no justification to enter into separate agreement with the other group companies for which substantial amount is to be paid. The AO has doubted the very fact of rendering of certain services. During the course of hearing, nothing has been placed before us to specify a particular type of services rendered which could not be rendered by MEMG International Pvt. Ltd. In the light of these facts, we are of the view that the expenditure incurred by the assessee under this agreement is not on account of commercial expediency and we therefore are of the view that Revenue authorities have rightly disallowed the claim. Accordingly, we confirm the order of the CIT(A) in this regard in both the years. Set off brought forward of losses claimed by the assessee - AO has denied the assessee s claim in view of the fact that in the preceding assessment year 2011-12 vide order under section 143(3) the loss was set off against the addition made therein - HELD THAT:- Before the CIT(A), the assessee has clarified his position and the CIT(A) has directed the AO to give necessary consequential effect in the light of finding of the CIT(A) in assessee s appeal for assessment year 2011-12. We do not find any infirmity in the directions. Now we have already disposed off the appeal of the assessee for assessment year 2011-12 and therefore the consequential effect is to be given in this impugned assessment year keeping in view the finding of the appeal of assessee for the assessment year 2011-12

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• 2019 (3) TMI 136
  Bogus forfeiture of shares - amount invested in the forfeited shares - Short Term Capital Loss - HELD THAT:- Taking note of the factual situation into consideration, the Tribunal held that the decision taken by the assessee cannot obviously be treated as a sham or colourable devise. We are in agreement with the finding recorded by the Tribunal which was rendered on re-appreciation of the factual details. Furthermore, the Tribunal had noted that there is no whisper or any allegation that the amount invested in the forfeited shares has come back to the assessee in any form whatsoever. Tribunal noted that the forfeiture are not claimed to be bogus nor it has been shown to be a fraud or colourable devise. Thus, on facts the Tribunal convinced that the forfeited shares cannot be treated to be a fraudulent transaction or colourable device. As perused the order passed by the CIT(A) and we find that the CIT(A) has not given any positive finding as to how the transaction to be termed as a colourable device or fraudulent transaction. In fact the order proceeds on surmises and conjunctures and there is no finding to the effect that a colourable device was conceived by the assessee to defraud the revenue. Thus, for the above reasons, there is no ground made out to interfere with the factual finding rendered by the Tribunal. - Decided against the revenue

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• 2019 (3) TMI 135
  TP Adjustment - ALP determination - import price of the transaction with the Associated Enterprises was lower than that with the unconnected enterprises - HELD THAT:- In certain cases the import price of the transaction with the Associated Enterprises was lower than that with the unconnected enterprises. TPO, however, took only those transactions where the import price with the Associated Enterprises was higher. We cannot but observe that there was no warrant for the TPO to interfere with the valuation of the transactions; where the assessee had shown lower valuation for imports from the Associated Enterprises, since those were the admitted price of the assessee itself. In those instances where there was a higher valuation shown in the imports from the Associated Enterprises, the ALP was fixed by the AO finding that there was a difference of more than 5% with the valuation of transactions with unconnected enterprises. As has been contended by the assessee, the very intention of fixation of ALP is to ensure that by mere manipulation of prices i.e. showing higher prices for imports and lower for exports, the actual profit in a transaction shall not be suppressed. Thus resulting in tax being avoided on the income generated in a transaction with an Associated Enterprise; the benefit of which will flow back to the assessee itself. The exercise undertaken by the TPO, according to us, was perfectly in tandem with the intention of the Legislature. There can be no ground taken that there was a pick and choose adopted by the AO. ALP had to be fixed only with respect to those instances of imports, where the valuation was higher when the transaction was with an Associated Enterprise than a similar transaction with unconnected enterprise. - Decided in favour of the Revenue and against the assessee

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• 2019 (3) TMI 134
  Penalty u/s 271(1)(c) - assessee has not disclosed full material facts regarding the issue of Permanent Establishment (PE) in India attributable to the activities carried out from this PE and has thereby concealed the particulars of its income - HELD THAT:- Undisputedly, assessment orders framed by the AO have been upheld by the CIT (A) as well as by the Tribunal, who have held that GE Overseas entities have PEs in various forms and these are fixed place PE, Office PE, construction PE and agency PE and in case of oil and gas business, involves in installation and commissioning would also constitute construction PE and since the assessee has earned global profit of 10% on the sales made to the customer in India, the income chargeable to tax as attributable to the PE was computed at 3.5% of the sales made. The question as to whether the assessee is having fixed place PE in India is “debatable one” and in these circumstances, penalty levied by the AO is not sustainable in the eyes of law. Identical issue has been decided in favour of the assessee. Since substantial question of law has been framed by Hon’ble High Court on the issue if the assessee is having fixed place PE in India, which is the basis of levying/confirming the penalty u/s 271(1)(c) the issue becomes debatable, hence penalty u/s 271(1)(c) is not leviable. - Decided in favour of assessee.

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• 2019 (3) TMI 133
  Levying penalty u/s 271(1)(c) - enhancement of income - HELD THAT:- As decided in assessee's own case [2018 (11) TMI 641 - ITAT DELHI] for assessment years 2012-13 and 2014-15 as doubted the surplus without examining each and every item of income. Therefore, restore this issue to the file of the Assessing Officer. The order of the Tribunal came after the penalty was levied by the CIT(A) u/s 271(1)(c) for both the years. Since the Tribunal has set aside the order of the CIT(A), therefore, the very basis on which the penalty was levied by the CIT(A) does not survive. Therefore, the penalty levied by the CIT(A) is directed to be deleted. Thus hold and direct accordingly. The grounds raised by the assessee are accordingly allowed.

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• 2019 (3) TMI 132
  Reopening of assessment - reopening of tantamount to fishing or roving inquiry - reopening of assessment beyond four years - HELD THAT:- AO during the scrutiny for assessment year 2012.13 had not raised any query on this aspect and had not verified the same during the assessment. In that view of the matter, he was of the opinion that the issue requires verification; which would tantamount to fishing or roving inquiry. His reference to the subsequent assessment, in absence of any additional material outside of the present assessment proceedings would not form a valid source of information permitting him to reopen assessment. If during the assessment of the later assessment year, the AO collects or chances upon new material which may have bearing on the assessment of the assessee, and in case where the assessment is sought to be reopened beyond four years, he can also establish lack of true and full disclosures on the part of the assessee, it may be open for him to reopen assessment of the earlier year. Merely because in the later year, the AO takes a different view on the basis of similar material, which may have been collected during such process, would not permit him to reopen the assessment. Under these circumstances, the AO's reference to further exercise undertaken while carrying out scrutiny assessment for the assessment year 2014-15 during which he decided to tax the assessee at higher rate would not enable the AO in the present case to reopen the assessment beyond four years. - Decided in favour of assessee.

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• 2019 (3) TMI 131
  Reopening of assessment - reasons to believe - Allegation of no work done by the company for PACL Ltd without any material - HELD THAT:- Opinion of the AO was that though Rs. 15 crores was received by the assessee from PACL for developing of land and the receipts was also duly disclosed but the expenses claimed in respect of the same were not allowable as it was not actually incurred as he was of the opinion that the actual development work of the land was not done. We find the recording could not point out as to what was the expense claimed by the assessee which was allegedly not incurred by the assessee and the basis of such belief. As there was no material before the AO at the time of making of recording on the issue to show that any expense claimed by the assessee was not allowable as deduction and as the receipt of Rs. 15 crores was duly disclosed as income by the assessee, there was no valid reason to believe that any income of the assessee which was chargeable to tax has escaped assessment for the year under consideration. Consequently, the assumption of jurisdiction to reopen the assessment, in the instant case, was bad in law. Hence, the impugned order of reassessment is hereby cancelled. - Decided in favour of assessee.

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• 2019 (3) TMI 130
  Validity of invoking revisionary jurisdiction by CIT u/s 263 - lack of enquiry on the part of the AO on the list of taxable and non-taxable services - HELD THAT:- There is no incorrect assumption of facts and wrong application of law neither on the part of the AO nor has been pointed out by the ld CIT in his section 263 order. Hence it could be safely concluded that though not considering the revised return while completing the assessment on 10.3.2014 would make the order of the AO erroneous, it does not cause any prejudice to the interest of the revenue as all the requisite details were already on record with supporting evidences and the same were duly examined by the AO. Hence it is not the case of lack of enquiry on the part of the AO on the list of taxable and non-taxable services disclosed by the assessee. We hold that the twin conditions precedent for invoking revisionary jurisdiction u/s 263 of the Act is conspicuously absent in the instant case and accordingly by placing reliance on the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Company Ltd vs CIT (2000 (2) TMI 10 - SUPREME COURT), revisionary jurisdiction u/s 263 cannot be invoked by the CIT-A - Decided in favour of assessee.

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• 2019 (3) TMI 129
  Penalty u/s 271(1)(c) - Deduction u/s 80IC - 8th year on account of substantial expansion to the undertaking - entitlement to 100% claim - bonafide belief - Penalty u/s 271(1)(c) on account of wrongful claim of deduction - HELD THAT:- Relying upon the decision rendered by the High Court of Himachal Pradesh in M/s Stovekraft India’s case (2017 (12) TMI 69 - HIMACHAL PRADESH HIGH COURT), it was recorded by the Tribunal that under the provisions of the Act, the assessee was entitled to claim deduction under Section 80IC of the Act on account of substantial expansion of the unit. Even otherwise, this was not a case of furnishing of inaccurate particulars of income or concealment of income. Revenue has not been able to point out any error or illegality in the findings recorded by the Tribunal that the claim of deduction @ 100% for the year under consideration by the assessee was on account of bonafide belief of the assessee and not on account of furnishing of any inaccurate particular or concealment of income, thus, warranting interference by this Court - decided in favour of assessee.

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• 2019 (3) TMI 128
  Deduction u/s 80IC - denial of claim on unit I as it has not fulfilled the conditions of substantial expansion u/s 80IC(8) CIT (A) has allowed the claim following its earlier years decision- HELD THAT:- Issue is already decided in favour of the assessee on the same set of facts in earlier years wherein vide para No. 11 the Co-ordinate Bench has allowed the claim of the assessee for deduction under section 80IC of the Act on substantial expansion. Allowability of other incomes such as sale of licenses, service charges, interest on fixed deposit received, interest on others, miscellaneous income and security bonds forfeiture u/s 80IC - HELD THAT:- During the year the assessee has earned above income with respect to unit I on which CIT (A) has held that they are not derived from industrial undertaking, but disallowance can be only to the extent of 30% as unit is eligible for deduction under section 80IC of the Act. In fact the ground is misconstrued by the Revenue. In fact the impugned assessment year being the 6th assessment year and assessee is not eligible for deduction of the other income @ 100% but only 30% and, therefore, following his own decision for assessment year 2004-05 he has restricted the total deduction being 30%. In view of this, the ground No. 2 of the Revenue does not survive, hence dismissed. Regarding 30% disallowance in the appeal of assessee - following earlier years order - set aside the whole issue back to the file of the Assessing Officer to test each of the income whether they are derived from the industrial undertaking or not by considering the decision of the Hon’ble Supreme Court in the case of Liberty India [2009 (8) TMI 63 - SUPREME COURT] and then decide whether deduction under section 80IC of the Act is eligible or not on such income. Disallowance under section 14A - As the dividend income, if any, receivable from US company is not an exempt income thus CIT-A held that only half per cent of an average value of exempt income to the extent of investment in an Indian company could be disallowed under section 14A - HELD THAT:- No infirmity in the order of the CIT (Appeals) to this extent with respect to expenditure. Further with respect to the interest expenditure, it was held that assessee has sufficient funds as paid up capital which fairly exceeds the investment of Rs. 7.25 lakhs and, therefore, no disallowance can be made. We do not find any reason to disagree with the above proposition of the learned CIT (Appeal). Nature of expenditure - software development expenditure - revenue or capital expenditure - benefit of enduring nature - HELD THAT:- The above expenditure is product development expenditure and not software development expenditure. The above expenditure has been paid as a professional fees to M/s. Express Marketing, Dehradun, towards development of new product in unit I related to equipment required by rigs in oil industry. It was not a new line of business, but was merely expenditure in development of the existing line of the business. The assessee is engaged in the business of manufacturing of machineries and equipments and development is for the same product. In view of this such expenditure cannot be held to be capital expenditure, but it is a revenue expenditure - Decided in favour of assessee.

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• 2019 (3) TMI 92
  Bogus purchases - assessment u/s 143(3) - assessee has failed to file any evidence in the form of confirmation from aforesaid parties - CIT-A restricted the addition to 20% - HELD THAT:- CIT(A) has categorically arrived at the conclusion that the assessee has failed to adduce any evidence to prove the genuineness of two creditors in question and that purchases shown by the assessee in the name of M/s. Lotus Communication and M/s. Deepa Enterprises were not genuineness, thus, bogus, as only entries have been received by the assessee in the shape of purchases, it is difficult to make out, as to how, the CIT(A) has restricted the addition made by the AO to 20%. Consequently appeal filed by the revenue is hereby allowed by setting aside the findings returned by CIT(A) and the assessment order passed by AO is hereby restored. - Decided against assessee Penalty u/s 271(1)(c) - assessee has concealed his particulars of income / furnished inaccurate particulars of income to evade the tax on concealed income - HELD THAT:- Following the law laid down by Hon’ble High Court in CIT vs. Manjunatha Cotton and Ginning Factory & Ors. [2013 (7) TMI 620 - KARNATAKA HIGH COURT] we are of the considered view that the AO has failed to fulfill the condition laid down u/s 271(1)(c) of the Act before levying the penalty which is not automatic. Even otherwise, when it is not discernible from the assessment order as to whether assessee has furnished inaccurate particulars of income or has concealed particulars of income so as to apply the deeming provisions contained under Explanation1 (A) & 1(B) of the Act, the penalty u/s 271(1)(c) of the Act is not sustainable. - Decided in favour of assessee

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• 2019 (3) TMI 91
  Levy of penalty u/s. 271E - violation of provisions of Section 269T - assessment completed u/s. 143(3)on returned income - Assessing Officer has held that the assessee’s books of account are audited and the assessee was assisted by a tax consultant and therefore, the ‘bonafide belief’ is not believable. - technical breach of provisions - HELD THAT:- First two persons are the Directors of the company and their identity is proved and the genuineness of the said payment is also not doubted by the Assessing Officer. As regards the other two parties, we find that assessee had taken vehicle loans and the repayment was made in cash and therefore, the genuineness of these transactions also could not be doubted. The Co-ordinate Bench of the Tribunal in the case of Dillu Cine Enterprises (P) Ltd., Vs. Addl. CIT [2001 (9) TMI 248 - ITAT HYDERABAD-A] has considered the issue of penalty leviable for technical breach of provisions where the transactions are genuine, and has held that when the transactions are not for evasion of tax/concealment of income and bonafide belief of the assessee was that it could have made the payment in cash, penalty is not automatic and the penalty levied there under u/s. 271D of the Act is not valid - Thus we are inclined to accept the contentions of assessee of ‘bonafide belief’ for repayment of loans in cash and the penalty u/s. 271E of the Act is deleted. Also see M/S. MUTHOOT FINANCIERS, NEW DELHI [2015 (2) TMI 212 - DELHI HIGH COURT]- Decided in favour of assessee.

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• 2019 (3) TMI 90
  Addition of interest income - advances given - assessee has failed to prove commercial considerations involved in giving such advances - diversion of loan funds for giving impugned advances - lack of clarity - HELD THAT:- It is not a case of addition of Notional interest income. Before us, the assessee has not furnished the copies of financial statements and hence we are unable to appreciate the contention of the assessee. In addition to the above, the assessee has also furnished a copy of ledger account to submit that there are business dealings between the assessee and M/s TIPL. A perusal of the same would show that the assessee appears to have sold some properties to M/s TIPL and received money in installments, while the issue before us is with regard to the advances given by the assessee to M/s TIPL. In any case, this ledger account copy and the nature of business transactions have not been examined by CIT(A). There is lack of clarity on the facts surrounding the issue. The assessee claims that it has not diverted any loan funds for giving impugned advances and it has used only its rental income proceeds for giving the advances. However, CIT(A), after analyzing the financial statements of the assessee, has given a finding that the assessee does not possess interest free funds equivalent to or in excess of the advance given. A.R also submitted that the quantum of advance mentioned by the tax authorities is not correct. This issue requires fresh examination at the end of CIT(A) by providing one more opportunity to the assessee to substantiate its case. - Decided in favour of assessee for statistical purposes.

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• 2019 (3) TMI 89
  Assessment u/s 153A - search u/s. 132A - unaccounted cash payment - unexplained cash receipts - undisclosed salary receipts - HELD THAT:- The assessee was specifically asked about the cash payment received in question no. 22. However, assessee stated that he will not able to reply and accounts persons will clarify the same. However, no clarification about cash payments received was filed by the assessee subsequently before the Assessing Officer. amount of Rs. 10,00,000/- was received for IRCTC purposes by the assessee, however where and how this amount was utilized, the assessee did not file any reply for the same. During the course of assessment proceedings, also the assessee was specifically asked about this however no reply was filed by the assessee. Assessee himself has mentioned vide reply to question no. 3 that his total salary was Rs. 1.31 crores. All these facts indicate that assessee was receiving salary in cash which was not being recorded by M/s Zoom Developers Pvt. Ltd. and as well as by the assessee in their books of accounts. Therefore, the amount of cash received by the assessee of Rs. 24,25,000/- was rightly added to the total income of the assessee as unexplained income of the assessee and the same was rightly confirmed by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issues in dispute and reject the grounds raised by the Assessee.

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• 2019 (3) TMI 88
  Penalty u/s 271(1)(c) - Defective notice u/ s 274 - non specification of exact charge against the assessee as to whether he concealed the particulars of his income or furnished inaccurate particulars of such income - non strike out the inappropriate words from notice - HELD THAT:- Show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. See JEETMAL CHORARIA VERSUS A.C.I.T., CIRCLE-43, [2017 (12) TMI 883 - ITAT, KOLKATA]. - Decided in favour of assessee.

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• 2019 (3) TMI 87
  Penalty u/s 271(1)(c) - defective notice - non strike out the inappropriate words from notice - HELD THAT:- Show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. See JEETMAL CHORARIA VERSUS A.C.I.T., CIRCLE-43, [2017 (12) TMI 883 - ITAT, KOLKATA]. - Decided in favour of assessee.

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• 2019 (3) TMI 86
  Penalty u/s 271(AAA) - no surrender by the assessee and the seized cash was included in the computation of income and offered for tax which was duly accepted by the AO - HELD THAT:- In this case the assessee had surrendered a certain amount as undisclosed income in the statement recorded during the search proceedings and had, thereafter, not substantiated the manner in which the undisclosed income was earned. In the present case, there was no surrender by the assessee and the seized cash was included in the computation of income and offered for tax which was duly accepted by the AO without any further query. We also note that this case is covered in favour of the assessee by an order of the coordinate Bench of this Tribunal in the case of Mahavir Prasad Jaipuria vs. ACIT [2017 (10) TMI 875 - ITAT DELHI) wherein held that where the AO had accepted the assessee’s surrender without any questions being asked, no penalty u/s 271AAA was leviable. Therefore, on the same analogy, we do not find this case a fit case for imposition of penalty. - Decided in favour of assessee.

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• 2019 (3) TMI 85
  Revision u/s 263 - eligibility of the assessee to claim deduction under section 54F - HELD THAT:- It is not clear from the record as to whether the AO has examined the claim for deduction under section 54F and allowed the same after due application of mind. We notice that the Principal CIT has expressed certain views with regard to the contentions of the assessee and has also directed the AO to redo the assessment in the light of observations made by him. We are of the view that the AO should be given free hand in this matter. Accordingly, we modify the order passed by the Principal CIT and direct the AO to examine the issue of deduction u/s 54F of the Act in accordance with the law, without being influenced by the observations made by the learned Principal CIT in the impugned revision order - Appeal filed by the assessee is partly allowed.

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• 2019 (3) TMI 84
  Penalty imposed u/s 271(1)(c) - Search and seizure action u/s 132 - fresh assessments were completed u/s 153A - HELD THAT:- In view of the fact that the Tribunal has held the assessment proceedings u/s 153A of the Act as being void ab initio and invalid and has also deleted the additions on merits in all the four years under appeal, the impugned penalties do not survive. The orders of the CIT (Appeals) are set aside and the impugned penalties are directed to be deleted - Decided in favour of assessee.

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• 2019 (3) TMI 83
  Assessment u/s 153A passed against company ceased to exist - scheme of amalgamation conceived - HELD THAT:- We decide the issue in assessee’s favour and hold that the Assessment Order passed on the amalgamated company is not amenable to the assessment proceedings. Accordingly the Assessment Order framed by the AO is hereby annulled. - Decided in favour of assessee.

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• 2019 (3) TMI 82
  Reopening of assessment - Original assessment u/S. 143(3) - basis of change of opinion - Failure to disclose truly and fully all material facts necessary for assessment - eligible for tax benefits u/s 80IA - HELD THAT:- Assessee is a Contractor who is engaged in the construction work in respect of a Project on behalf of the developer and earns profit at various stages of the construction and does not have stakes in the financial viability of the project. AO held that he is being paid regularly for the work done by him and at no stage of work it owns any of the projects. AO held that the assessee is not a developer within the meaning of Sec. 80IA and, therefore, will not be eligible for tax benefits u/S. 80IA. ITAT held that there was no new material before the AO for assumption of valid jurisdiction for initiation of re-assessment proceedings and reopening of assessment u/S. 147/148. As held that reopening was done based upon the same material which was before the Assessing Officer during the regular assessment proceedings and there was no new tangible material. Court has carefully gone through the order passed by the Tribunal. The aforesaid order makes it very clear that reassessment proceedings by issuing notice u/s 148 were done merely on the basis of change of opinion. There was no tangible material to arrive at a conclusion that there was escapement of income by the assessment. AO has the power to reopen assessment provided there is tangible material to come to a conclusion that there is escapement of income from assessment and the reason must have a live link with formation of belief. In the present case as the reassessment proceedings were initiated on the basis of same material which was available before the AO and mere change of opinion led to reassessment. Department has certainly placed reliance upon a judgment case of Kalyanji Mavji Co., Vs. Commissioner of Income Tax West Bengal reported in [1975 (12) TMI 2 - SUPREME COURT] however, the apex Court in the case of Indian Eastern Newspaper Society [1979 (8) TMI 1 - SUPREME COURT] after taking into account the judgment delivered in the case of Kalyanji Mavji [1975 (12) TMI 2 - SUPREME COURT] has held that change of opinion does not empower the AO to reopen the assessment and, therefore, the judgment relied upon by the learned counsel is of no help to the Department.

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• 2019 (3) TMI 81
  Revision u/s 263 - difference in the purchase value of certain shares reflected by the assessee in the Balance Sheet - LTCG - HELD THAT:- Long Term Capital Gains / loss workings as per Income Tax Act and profit/loss as per books of accounts on sale of investments which indicate that there was no discrepancy in the figures of cost of shares as reflected in the Balance Sheet and as reflected in the computation of income. All these details were made available with AO, who with due application of mind as well as after due examination, accepted the assessee’s working. Consequently, the observations made by CIT-A on this account are factually incorrect and therefore the same could not form the basis of invoking revisional jurisdiction u/s 263. Sundry debtor - Typographical Error - Revisional authority stood explained by the assessee during assessment proceedings as well as during revisional proceedings which is further evident from the fact that sundry debtors balances as reflected in the Balance Sheet matches with the details filed by the assessee during assessment proceedings as supported by confirmation of accounts filed by the assessee in respect of concerned sundry debtor. Last but not the least, the alleged discrepancy, viewed from any angle, would have no bearing on assessee’ income during impugned AY and therefore, there could be no occasion to term the assessment order as prejudicial to the interest of the revenue on this account. This being the case, the twin conditions as envisaged by Section 263 viz. the orders should be erroneous as well as prejudicial to the interest of the revenue, remained unfulfilled on this issue Sale of investment - HELD THAT:- Upon careful consideration of financial statements, it is undisputed fact that the shares held by the assessee, has all along, been reflected under the head investments rather than as stock-in-trade which is further fortified by the fact that the investments are valued at cost as against stock-in-trade which is generally valued at lower of cost or market price. It is settled legal position that it is possible for the assessee to maintain two portfolios i.e. an investment portfolio held as capital asset giving rise to income / loss under the head capital gains and trading portfolio held as stock-in-trade giving rise to income / loss under the head business income which has also been accepted by CBDT in circular No. 4 of 2007 Investments sold by the assessee during impugned AY were long term investments made between AY 2004-05 to 2006-07 and the same were held as investment valued at cost in the Balance Sheet which lend credence to the arguments of AR, in this regard. Proceeding further, we find that the aforesaid position has also been accepted by the revenue by way of acceptance of returned income for AYs 2006-07 as well as for AY 2009-10 in scrutiny assessment u/s 143(3), the copies of which have been placed on record. This is further fortified by undisputed fact that even during set-aside proceedings consequent to impugned order u/s 263, the resultant income from shares has again been assessed under the head Capital Gains only by AO despite the observation of CIT that the income should have been assessed under the head business income. Statutory audit u/s 44AB - Initiation of penalty proceedings - - HELD THAT:- We find that when the income was assessed under the head capital gains, which was one of the possible views, the same did not constitute assessee’s turnover for the purpose of Section 44AB and there could be no occasion for Ld. AO to initiate penalty proceedings against the assessee for non-compliance of the provisions of Section 44AB. Further, it is undisputed fact that other income reflected by the assessee did not exceed the prescribed threshold limit u/s 44AB and therefore, the provisions of Section 44AB were not applicable to the assessee. This being the case, we do not find any error in the quantum assessment order which necessitate revisions by Ld. CIT. We find certain force in the argument raised by AR in view of the fact that under law, AO is not permitted to review the orders. The cancellation of entire assessment order and direction for reframing of assessment de novo would empower AO to review the already concluded issues which is not the intention of the legislatures. We conclude that Ld. CIT was not justified in blanket set aside of the assessment order and direct Ld. AO to reframe the same de-novo. - Decided in favour of assessee.

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• 2019 (3) TMI 80
  Penalty u/s 271(1)(c) - non recording of satisfaction - addition u/s 40A(i)(a) - non specification of charge - Held that:-Initiation of penalty proceedings by the AO is valid only if the AO is satisfied in the course of any proceedings, that the Assessee has concealed the particulars of income or furnished inaccurate particulars of income. When this satisfaction for initiation of penalty proceedings u/s 271(1)(c) of IT Act is recorded by the AO in assessment order in respect of certain additions during the assessment proceedings; and not recorded in respect of certain other additions; it acts as a bar against levy of penalty U/s 271(1)(c) in respect of those additions in respect of which such satisfaction was not recorded in the assessment order or during the assessment proceedings. As regards the submission of the Assessee that the AO did not make specific charge against the Assessee in the notice u/s 271(1)(c) whether the penalty proceeding were for concealment of particulars of income or for furnishing of inaccurate particulars of income, this ground need not be adjudicated as we have already cancelled the penalty and this ground/contention is purely academic in view of our decision to cancel the penalty. When there is no valid initiation of penalty proceedings U/s 271(1)(c) of IT Act in respect of certain additions made in the assessment order; it is immaterial if the AO made specific charge against the Assessee: whether the penalty proceedings were for concealment of the particulars of income or for furnishing of inaccurate particulars of income.

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• 2019 (3) TMI 79
  Reopening of assessment - Original assessment u/s 143(3)- reopening on basis of objection raised by audit party - Disallowing the proportionate of depreciation expenses on building in respect of let out portion such building on the contention that the building was partly let out and partly used for business - reasons for reopening of assessment was not provided - HELD THAT:- We note that at the appellate stage, CIT(A) did not give detailed finding about validity of reopening of the assessment u/s 147 except to say that the AO had already discussed the issue while passing the order stating therein that there was an excess allowance of business expenditure which resulted in under-assessment of business income and therefore confirmed the order passed by the AO. In order to initiate the reassessment proceedings, the notice under section 148 should be issued to the assessee. It is well settled law that initiation of reassessment proceedings u/s 147 without issuing notice under section 148 of the Act is void ab initio. How the assessee can defend his case if the reasons for reopening of assessment is not provided to him? Apart from this the AO has reopened the assessment completed u/s 143(3) on the basis of objection raised by audit party. AO has not applied his mind independently to arrive at the conclusion as to whether he had reasons to believe that income of the assessee was escaped from tax in the assessment for the relevant year. Therefore the material on record, we are unable to uphold the stand of the AO for reopening the assessment U/s 147/148, therefore, we cancel the reassessment order passed by the assessing officer under section 147 of the Act. - Decided in favour of assessee.

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• 2019 (3) TMI 78
  Revision u/s 263 - capital gain arising to assessee under collaboration agreement - no change in income computed by assessing officer prior to initiation of 263 proceedings and post initiation of 263 proceedings - CIT found that order passed by AO u/s 143 (3) is erroneous and prejudicial to interest of revenue - original order passed by AO has been carried forward by assessee before learned CIT (A) who has also passed an order - Merging of AO's order with CIT (A) - HELD THAT:- Whatever has been considered and decided in appeal by appellate authorities, such matters cannot be subject to revision under section 263 of income tax act. Rationale behind exclusion of such orders from purview of section 263 of act (revisionary proceedings) is that, if CIT (A) decides issue against revenue, revenue has right to challenge it before higher appellate forum. Therefore, generally revenue cannot have dual power of revision as well as appeal on same issue, as generally they are mutually exclusive. In present case CIT has also passed an order under section 263 on issue of chargeability of income from house property and consideration of source of investment in mutual fund and bank deposit. On both cases income determined by learned assessing officer originally prior to order u/s 263 and assessment order under section 143 (3) of act pursuant to order under section 263 of income tax act is same. There is no change in income computed by assessing officer prior to initiation of 263 proceedings and post initiation of 263 proceedings. Hence, it is apparent that there is no error in order of AO. computation of capital gain by CIT - consideration received on sale of capital gain - appeal before learned CIT(A) - HELD THAT:- Issue of net sale consideration has already been decided by learned assessing officer and adjudicated by learned CIT (A), it is out of purview of provisions of section 263 of income tax act, since matter has already been considered and decided by appellate authority. There is no dispute on indexed cost of acquisition. Therefore, it is apparent that on computation of capital gain learned CIT was not correct in assuming jurisdiction under section 263 of act as matter was considered and decided by appellate authority. Therefore, on this ground also order of learned CIT passed under section 263 of income tax act is not sustainable.

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• 2019 (3) TMI 77
  Stay petition - recovery proceedings - the existence of a prima facie case - financial stringency and the balance of convenience - seeking grant of stay as addition made is sixty (60) times of the returned income and the assessment order passed is high pitched and biased to the interest of the revenue - HELD THAT:- Case of MRS. KANNAMMAL VERSUS INCOME TAX OFFICER WARD 1 (1) TIRUPUR [2019 (3) TMI 1 - MADRAS HIGH COURT] to be followed as held AO insisted on payment of significant portions of the disputed demand prior to grant of stay resulting in extreme hardship for tax payers. Assessing Officer ought to have taken note of the conditions precedent for the grant of stay as well as the Circulars issued by the CBDT and passed a speaking order. Of course the petition seeking stay filed by the petitioner is itself cryptic. Inclined to set aside the impugned order dated 11.10.2018, as being mechanical and passed without application of mind. Equally mechanical is the stay petition filed by the assessee, which simply relies upon the circulars issued without reference to the existence of a prima facie case, financial stringency and balance of convenience.

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• 2019 (3) TMI 76
  Assessment u/s 153A - Validity of search on grounds of absence of panchas - preparation of mahazar as also recording of statements under oath, were carried out in the presence of Police and without any panchas - After such proceedings were carried out two persons were called from the outside and forced to sign the mahazar - HELD THAT:- If that was the case, we agree with the Counsel that probably, the assessee could not have raised objections before the search party itself, especially when it is averred that the search was in the presence of Police. However, that does not preclude the assessee from raising a contention before the Assessing Officer when notice is issued in the proceedings under Section 153A. If that had been raised at the first instance and cross-examination was not allowed by the Assessing Officer, definitely, it could have been considered by any of the Appellate Authorities. The fact that even then, the assessee could have won over the panchas would be irrelevant insofar as the passage of time having occasioned only by reason of the Assessing Officer having not followed the requirement of law, of examining the panchas when it was first sought for. Having not raised the contention before the Assessing Officer we perfectly agree with the Standing Counsel that if it is permitted at the appellate stage, it could only lead to chaos. Referring to decision in Pooran Mal [1973 (12) TMI 2 - SUPREME COURT] which itself specifically spoke of the safeguards insofar as a search under Section 132 held that compliance with the provisions of the CrPC, with respect to search and seizure is the most important safeguard insofar as the acceptability of the search is concerned. If there is no compliance with the most important safeguard, definitely it should fail. We have no quarrel with the proposition as laid down in the cited decisions. But however, the contention raised here is with respect to the absence of panchas; which we are of the firm opinion, should have been raised at the first instance. The non-presence of panchas raised for the first time before the First appellate authority after a period of three years from the search conducted, cannot at all be countenanced. There was no valid ground for the Tribunal to cancel the assessment in the light of the order of the co-ordinate Bench which the Tribunal has specifically referred to and found to be distinguishable. The questions to be answered in favour of the revenue Limitation under Section 153B - contention taken up is that the order was dispatched after the office hours - HELD THAT:- Requirement as noticed by the Tribunal from the judgment of this Court in Cochin Plantations Ltd. v. State of Kerala [1997 (2) TMI 76 - KERALA HIGH COURT] is to ensure that by the last day of limitation, the order is beyond the control of the authority concerned; ensuring that no changes or modifications are made after the expiry of limitation period. Hence if a conscientious officer passed the order on the last day of limitation and dispatched it after office hours, it cannot be said to be a factor vitiating the order or enabling the limitation period to be applied to find a bar for issuing the said order. - Decided against the assessee Rejection of books of accounts - estimation of turnover - pre-search enquiry had revealed sale of 2.02 gms of gold locket on the basis of an estimate slip which did not find a place in the accounts of the assessee - HELD THAT:- As search revealed estimate slips issued for a period of 15 days which totalled a sale of 175.174 gms; whereas the sale accounted for the said 15 days was only 17 gms. This is the basis on which the Assessing Officer rejected the accounts and estimated the turnover. The materials as revealed in the search in our opinion, was sufficient to reject the books of accounts of the assessee. Estimation of Income - estimation of turnover 10 times - Disclosed Gross Profit of 36.55% to 48.08% in its accounts. - HELD THAT:- IA reasonable computation was made considering the Gross Profit available in that line of business and a far lower gross profit of 20% was adopted for all the years. The estimation was made at ten times the returned turnover, finding that only 10% of the sales are accounted. The addition of ten times turnover was reduced by the First Appellate Authority to five times. The Tribunal modified it slightly to make it six times. There is absolutely no question of law arising from the estimation. Personal investment of the Managing Partner - HELD THAT:- The learned Standing Counsel Sri.Jose Joseph also points out that there was no separate addition made on that count and the addition made is only on the turnover at ten times, reduced later to six times, with gross profit @ of 20%. We also find that such a ground was not taken up before any of the appellate authorities. Hence we do not think that such a ground can be raised at the stage of appeal under Section 260A - Assessee appeal dismissed.

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• 2019 (3) TMI 75
  TP adjustment - AMP expenses and transfer pricing adjustment in Intra Group Services - re-characterization of transaction involving AE - HELD THAT:- Issues are squarely covered in assessee’s favour by the Hon'ble High Court as well as Tribunal in Assessment Year 2012- 13 [2015 (12) TMI 1332 - DELHI HIGH COURT] Assessee is justified in contending that the re-characterization of its transaction involving its AE for the two years which have been fully disclosed in the TP Study on the basis of it not being for commercial expediency of the Assessee is clearly beyond the powers of the TPO and contrary to the legal position explained in EKL Appliances Ltd.’s case [2012 (4) TMI 346 - DELHI HIGH COURT]) The Court is satisfied that the Revenue has not been able to show the existence of an international transaction involving AMP expenses between the Assessee and its AE - Decided in favour of assessee.

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• 2019 (3) TMI 74
  Settlement application filed u/s 245C - full and true disclosure of the undisclosed income - Settlement commission direct commissioner to file report which was filed - Assessee offered voluntarily additional income after report - Settlement commission directed assessee to reconcile difference with Department - Assessee again offered additional income - offer of additional incomes should be presumed that the original application under Section 245C, did not contain a full and true disclosure of the undisclosed income - Assessment framed determining undisclosed income - HELD THAT:- This is not a case in which the assessee had merely accepted the additions suggested by the Commission, to settle the matter once and for all times. At the first stage, even before the assessee was directed to sit along with the A.O. and the officer of the Commission to reconcile the differences, which led to the suggestions from the side of the Commission; a disclosure of further income was made, which was not available in the original application made under Section 245C. This leads to a definite conclusion that there was no full and true disclosure of the undisclosed income and the source from which it derived in the application filed under Section 245C as held in Ajmera Housing Corporation [2010 (8) TMI 35 - SUPREME COURT OF INDIA] We hence set aside the judgment of the learned Single Judge, as also the order of the Settlement Commission for reason of the assessee having not made full and true disclosure under Section 245C. The Commission ought not to have proceeded with the application when the assessee made a voluntary offer of additional income, when the application was pending, in addition to that disclosed in its application under Section 245C. Noticing the long pendency of the matter before the Settlement Commission and before this Court, it is only proper that the assessee be permitted to file an appeal from the assessment order. The assessee shall be permitted to file an appeal within thirty days from the date of receipt of a copy of the judgment of this Court in the Writ Appeal

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• 2019 (3) TMI 73
  Deduction u/s 10B - basis of computation of the deductions - assessee is a 100% export-oriented unit - income on sale of export quota and interest on margin money deposits for opening letter of credit - HELD THAT:- Basis of computation of the deductions enumerated under Chapter VI A is different from that set out for special deductions like section 10A and 10B. Relief under section 10A is granted in respect of profits derived from the eligible activity of export, computed as a proportion of the profits of the business of the undertaking. Export reliefs such as Duty Drawback, REP Licences and DEPB have been brought within the ambit of business income in terms of sub-sections (iiia) to (iiie) of section 28 of the Act, vide Finance Act, 1990 with retrospective effect from 01.04.1962. Income from sale of export quota thus falls under the head 'business income' to be included in the computation of 'Profit and Gains of business or profession' entitled to relief under section 10B. As regards interest income, the assessee states that the assessee imports raw materials under a letter of credit. The sanctioning bank mandates that a percentage of the amount be maintained as margin money and retained as a Time deposit. The deposit is created out of the working capital limits sanctioned by the bank. Interest is paid on the working capital assistance and processing charges and earned on the lien marked deposits. Both the componants of interest have a direct nexus to the business activity carried on by the assessee. There the sole activity engaged in by the assessee is export, all incomes generated by the conduct of the business of the unit would be eligible to the benefits under section 10A/10B. The orders of the authorities below are reversed and the issue answered in favour of the assessee

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• 2019 (3) TMI 72
  Reopening of assessment - assessment reopened after expiry of four years - scrutiny assessment u/s 143(3) has been made - non-disclosure of facts fully and truly - Certain expenses disallowed in case of company being personal nature - perquisite value of this expenditure in hand of director - Interest free loan provided by company to Director not having substantial interest - notional interest will became perquisite value in hand of director - live-link between formation of opinion showing escapement of income vis-à-vis information available with the AO. - disallowance of Advertisement expenses - HELD THAT:- There cannot be any benefit of personal nature in advertisement expenditure. Similarly, printing and stationery expenses were related to the company. Out of the above expenditure, how it could be construed that element of personal nature is involved, and its perquisite value in the hands of the Director. The AO has not analysed details of these expenditure while forming a belief that income has escaped assessment. Taking into consideration nature of expenditure, we are of the view that there was no specific expenditure which can be termed as incurred exclusively for the personal needs of the Directors. If company wants to pay taxes, that is its discretion, but for that a completed assessment of the director after four years cannot be reopened. Availment of loans from two companies without paying interest - HELD THAT:- Assessee was having share holding of 9% and 4.3% in the aforesaid two companies viz. Umnesh Complex PLtd., and Mihika Buildcon P.Ltd. He was not having substantial interest in these companies. It was brought to the notice of the ld.CIT(A) that assessee has not obtained any loan from Mihika Buildcon P.Ltd. during this year. It was opening balance. As contended that non-charging of interest on the debit balance in the running account of the directors would not constitute a perquisite. Judgment of Hon’ble Supreme Court in the case of V.M. Salgaocar & Bros. Pvt. Ltd. Vs. CIT [2000 (4) TMI 2 - SUPREME COURT] was pressed into service. Again, though the AO has to form a prima facie belief only, but has not analysed any of these details while forming a belief that income has escaped assessment, more particularly, when he is leveling allegations that it was escaped on account of non-disclosure of facts fully and truly. To our mind, the AO has not demonstrated this aspect in the reasons recorded by him. Personal expenses disallowance in hand of company - perquisite value in hand of director - HELD THAT:- CIT(A)has made a detailed analysis of all the expenditure, and thereafter recorded a finding that there is no personal element involved in all these expenditure. They cannot be considered as perquisite in the hands of the director. After going through well reasoned order of the ld.CIT(A), we do not find any error on this issue. It is upheld. Non charging interest from the assessee on loan extended by companies - treated as perquisite in the hands of the assessee under section 2(24)(iv) - HELD THAT:- As observed by the ld.CIT(A) that there is no fresh loan taken by the assessee from Umnesh Complex PLtd., and Mihika Buildcon P.Ltd. It is an opening balance. No interest was charged in earlier years nor any perquisite value was assessed. Similarly, the CIT(A) has observed that if the directors have running account with the company, then non-charging of interest on the debit balance would not constitute a perquisite. The ld.CIT(A)has made reference to large number of decisions while taking note of assessee’s submissions at page nos.39 to 41 of the impugned order. After going through the finding of the ld.CIT(A) we do not find any error in the order of the ld.CIT(A)

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• 2019 (3) TMI 71
  Loss on sale of fixed assets - added in computation of the total income - profit adjusted in computation of the depreciation - double addition - HELD THAT:- Profit and loss on sale of assets it is apparent that the assessee has taken the net difference between the profit and loss on sale of the fixed assets and same is found to be the profit and therefore same has been reduced from the total income in the computation of the total income. Therefore, we fully agree with the authorised representative that the above is a double addition as assessee itself as adjusted the business income/loss with the above disallowable item. On careful looking of the CIT-A where the whole issue is considered. Not find that the CIT-A has correctly considered the claim of the assessee. CIT-A has confused with the computation of the depreciation as well as the book entry of the loss on sale of fixed assets debited in the profit and loss account. Disallowance on account of legal and professional charges - debited under the head miscellaneous expenses - HELD THAT:- The assessee has not substantiated the same before the lower authorities and by producing the basis of such professional fees. And therefore in the interest of the justice and to determine whether assessee has actually incurred these expenditure for the purposes of the business are not, the whole issue is set aside back to the file of the learned assessing officer with a direction to the assessee to substantiate the same with the production of the necessary evidences in the form of the appeal of the contract of the professionals. Accordingly, of the appeal of the assessee is allowed with above direction. Disallowance on account of fluctuation loss - effect of change in the foreign exchange rates - HELD THAT:- The above issue is squarely covered by the decision of the honourable Supreme Court in case of Woodward governance [2009 (4) TMI 4 - SUPREME COURT]. As before the learned assessing officer no information is provided by the assessee, we set aside this issue before the learned assessing officer with a direction to the assessee to show the amount of foreign exchange loss incurred by the assessee in terms of accounting standard 11 issued by the Inst of chartered accountants of India with respect to the vendor balances. AO is also directed to verify the detail and if the same is on account of the vendor’s the claim of the assessee is allowable. AO then after verification may allow the loss of the foreign exchange fluctuation. - Decided in favour of assessee.

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• 2019 (3) TMI 70
  Penalty u/s 271(1)(c) - deduction u/s. 36(1)(iii) on the interest expenses on borrowed funds utilized for purchase of inventories / stock in trade - AO held that interest expenses cannot be allowed as deduction - complete disclosure of the details of the transactions - HELD THAT:- No infirmity in the order passed by the CIT(A) in deleting the penalty levied u/s. 271(1)(c) as the assessee has made complete disclosure of details with regard to the claim for deduction u/s. 36(1)(iii) on the interest expenses in respect of the flats purchased and shown in the Books of Accounts as well as in the return of income. Further, whether the assessee is entitled for deduction U/s. 36(1)(iii) of the Act on the interest expenses on borrowed funds utilized for purchase of inventories / stock in trade is a debatable issue. Thus, we hold that there is neither concealment of income nor furnishing of inaccurate particulars of income by the assessee in respect of its claim for interest expenses. Hence no penalty is leviable u/s. 271(1)(c) of the Act - Decided in favour of assessee. Loss incurred by the assessee on account of debiting the interest expenses to the Profit and Loss Account, is not allowable to carry forward - assessee filed belated return of income - There is no taxes ought to be evaded by the assessee as the assessee has not carried forward loss to the subsequent years. - HELD THAT:- loss arising out of claim of interest could also be not carried forward as the assessee filed belated return of income and therefore there is no loss to the Revenue. Hence no penalty is leviable u/s. 271(1)(c) of the Act - Decided in favour of assessee.

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• 2019 (3) TMI 69
  Penalty u/s 271(1)(c) - assessee having fixed place PE in India - HELD THAT:- GE Overseas entities have PEs in various forms and these are fixed place PE, Office PE, construction PE and agency PE and in case of oil and gas business, involves in installation and commissioning would also constitute construction PE and since the assessee has earned global profit of 10% on the sales made to the customer in India, the income chargeable to tax as attributable to the PE was computed at 3.5% of the sales made. The question as to whether the assessee is having fixed place PE in India is “debatable one” and in these circumstances, penalty levied by the AO is not sustainable in the eyes of law. Since substantial question of law has been framed by Hon’ble High Court on the issue if the assessee is having fixed place PE in India, which is the basis of levying/confirming the penalty u/s 271(1)(c) of the Act, the issue becomes debatable, hence penalty u/s 271(1)(c) is not leviable. See CIT-II vs. Liquid Investment and Trading Co.[2010 (10) TMI 1021 - DELHI HIGH COURT]. - Decided in favour of assessee.

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• Benami Property

• 2019 (3) TMI 93
  Suit for permanent and mandatory injunction - Prayer for a decree of mandatory injunction in favour of the plaintiffs for removing the defendant, her agents, etc. from one room on the ground floor of the suit property - substance of the actual defence of the defendant from a perusal of the written statement is that the property in question has been purchased from the joint family fund obtained from the joint family business belonging to the father of the parties - Held that:- Clearly, vague, unsubstantiated and evasive pleas have been held to be sufficient ground to hold that there are admissions in the pleadings and a decree is liable to be passed under Order 12 Rule 6 CPC. The pleas taken by the defendant in the written statement are vague, inconsistent and do not in any manner whatsoever show that any worthwhile defence is raised or any right exists in favour of the defendant to enable her to continue to occupy the suit property. The defence taken by the defendant is vague and unsubstantiated and a mere attempt to prolong the present litigation. Accordingly, no defence is available to the defendant. The present application under Order 6 Rule 12 CPC is liable to be allowed. Whether the claim of the defendant would be barred under the Prohibition of Benami Property Transaction Act, 1988? - Held that:- A suit would not lie to enforce any right in respect of the property held benami against the person in whose name the property is held. No defence can also be based on any right in regard to any properties held benami. What the defendant had sought to plead is that the present suit property has been bought by the plaintiffs in the name of the plaintiffs out of the funds generated from the family business/funds generated after disposing of the joint family property - The plaintiff has failed to aver the basic requirements to show or plead about existence of any Hindu undivided family or joint family property. The pleas raised by the defendant are vague, unsubstantiated and frivolous. The defence raised by the defendant is clearly barred by Section 4 of the Prohibition of Benami Property Transaction Act. The exception to the Act as stated in section 2(9)(A)(i) or (iv) are not applicable. There is a clear averment made in the plaint that the defendant was inducted into the suit property as a licensee. This plea in the plaint has not been specifically denied which is clear from the paras of the plaint that were noted above especially paras 3, 5 and 15 of the plaint read with the relevant paras of the written statement. Instead the defendant has chosen to raise vague and unsubstantiated plea about the suit property having been bought from funds siphoned off from the family business/from sale of joint family property - there is no proper denial of the averment in the plaint that the defendant was inducted as a licensee - once a licensee would always be a licensee. The license given in favour of the defendant stands terminated. The defendant would clearly be liable to be evicted. Present adjudication is confined to the plaint herein and the defence raised in the written statement filed by the defendant and the documents thereof. Hence, the findings recorded herein would not prejudice the defendant in her adjudication of the said afore-noted suit - present application allowed.

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• Customs

• 2019 (3) TMI 127
  Confiscation of containers - empty containers were retained by the appellant and not returned back to the supplier - case of the department is that since the containers were not returned back and retained by the appellant, its value should have been declared to the Customs in the bills of entry but the same was suppressed - Held that:- The shipping bill and invoice clearly bear the description of the goods duly packed in the container - From the description given in the above invoice, it can be seen that the fact regarding import of plate mill duly packed in container were correctly declared by the overseas supplier in the documents. From the certificate given by the supplier also, it is clear that the supply of Hi Reversing Plate Mill complete in all respect are duly packed in the containers and the value of the machine is inclusive of cost of containers. In this position, there is no basis to allege that either the appellant has not declared or mis-declared the description of the goods or suppressed the value of the containers. The ratio of Hon'ble Supreme Court. Judgment in the case of Union of India vs. Jain Shudh Vanaspati [1991 (11) TMI 78 - SUPREME COURT OF INDIA] wherein it was held that Edible Oil imported in stainless steel containers, separate duty not leviable on such containers and such containers are not liable to confiscation. As per the facts, which are undisputed, the entire deal between the supplier and the appellant was to import the machine under EPCG scheme duly packed in the container. Therefore, it is not a case of mis-declaration or suppression of any value - Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 126
  Amendment in the bills of entry - Section 149 of the Customs Act, 1962 - customs duty paid on the provisional price - Held that:- In this case, price was provisional and this fact was known to the Department and at the time of filing the Bill of Entry also, it was stated that the price is provisional. More over the variation clauses of sale and purchase agreement entered into between the respondent and the supplier clearly show that the price was provisional. Further, in terms of Rule 5(1)(b) of the Customs (Appeals) Rules, 1982, the assessee is entitled to produce any evidence before the adjudicating authority, if that evidence was in existence - e-mails received from the supplier were after the Order-in-original was issued and therefore the respondent was justified in producing the same before the Commissioner(Appeals) who considered the same. There is no infirmity in the impugned order which is upheld by dismissing the appeal of the Revenue.

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• 2019 (3) TMI 125
  Refund of SAD - N/N. 102/2007-Cus. read with Board Circular No. 16/2008 and Section 27(1) of Customs Act, 1962 - refund rejected on the ground of time limitation - Held that:- A cursory reading of the N/N. 102/2007-Cus. and N/N. 93/2008-Cus. would clearly reveal that in the public interest, such notifications were made by the Government of India and SAD was made applicable to counter balance CST/VAT and create a level playing field for domestic goods so that price different from the locally manufacture goods and imported goods would not put the local manufacturer in a disadvantageous position - Admittedly CST, VAT are collected for distribution among the states, for which it is difficult to understand why SAD is introduced as a counter balance. It appears that only to maintain the price equilibrium, SAD has been introduced as a precautionary major to provide coverage to indigenous goods. Therefore, it is collected with the above purpose of providing a security to such indigenous goods and collected as a security from the importer so that the movement they sale it up in the domestic market, they will pay CST/VAT accordingly and get back the SAD already paid, by way of refund. Amended sub-para (c) of para 2 which stipulated the time period to filed claim of refund as one year from the date of payment of said additional duty of Customs should be read as effective payment of additional duty of Customs by way of CST/VAT as the purpose of payment of SAD at the time of import was in the nature of counter balancing the CST/VAT etc. which could be treated as par with security - Such stipulation of time frame is meant for payment of CST/VAT which was realised against counter balance by way of payment of SAD, the same period of one year is to be computed from the date of payment of CST, VAT etc., upon sale of goods. It is a settled principle that Tribunal being creature of statute, cann t go beyond the provisions of law but there is no impediment on the part of the Tribunal to read into the law to provide meaning and Charity to the provisions of law for the purpose of making it virtually implementable. The appellant refund claim is to be reassessed on the basis of date of payment of CST/VAT etc. that was earlier deposited by way of SAD that has been exempted vide Notification No. 102/2007-Cus. and 93/2008-Cus. and allowed if claim is made within one year of payment of CST/VAT - Appeal allowed in part.

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• Insolvency & Bankruptcy

• 2019 (3) TMI 124
  Initiation of the ‘Corporate Insolvency Resolution Process’ - invoking Corporate Guarantee - HELD THAT:- The ‘principal borrower’ has already made representations to the Appellant for reconciliation of account but the Appellant has not come forward to reconcile till date. Only upon this reconciliation, the Appellant is entitled to demand the recalculated interest component from the ‘principal borrower’, if any or adjust any surplus amount which have been received by the Appellant. If in the event, the ‘principal borrower’ fails to pay the interest component, if any, as per the fresh demand made on reconciliation, only then the Appellant will be entitled to invoke the ‘corporate guarantee’ of the Respondent in terms of specific and contingent contract between the Appellant and the Respondent. Significantly, the ‘Corporate Guarantees’ given by the Respondent can be invoked only “In the event of a default on the part of the borrower”. The said ‘Corporate Guarantee’ cannot be invoked as on date, since there is no fresh demand made by the Appellant to the ‘principal borrower’ for the recalculated interest and consequently there is no debt that is due and/or payable hence there is no default by the ‘principal borrower’ with respect to interest. Which disentitles the Appellant to proceed in the present appeal. The process under the ‘I&B Code’, once set in motion, is irreversible and leads to exceptional and serious consequences. If the appeal is allowed that would mean suspension of the Board of Directors of the ‘Corporate Guarantor’, appointment of ‘Interim Resolution Professional’, so on and so forth. A running business, which has made no default, would be put under resolution process. On the other hand, if the ‘principal borrower’ pays the amount, if any, found payable upon reconciliation of accounts, it would confirm that there never existed any debt which is due and payable or defaulted by the ‘Corporate Guarantor’. The actions that would follow on allowing of this appeal cannot be reversed and the ‘Corporate Guarantor’ cannot be compensated in any manner.

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• 2019 (3) TMI 123
  Corporate Insolvency Resolution Process (CIRP) - existence of dispute - HELD THAT:- Corporate Debtor has communicated the issue of poor quality of goods to the Petitioner on 28.06.2014. The issue of poor quality of goods supplied was again raised by the Corporate Debtor in its letter dated 28.07.2014. In the letter of the Corporate Debtor dated 19.09.2014 it has again communicated its inability to pay the outstanding amount due to the poor quality of the goods supplied and that it was assured a compensatory deduction of $25/MT by Glints in lieu of the loss caused. As demanded the deduction of 10% advance that it has paid from the total outstanding amount. The same were repeatedly communicated to the Petitioner by the Corporate Debtor vide its letter dated 19.11.2014, 02.12.2014 and in its reply to the Demand Notice dated 04.01.2018. The letter of the Petitioner dated 23.03.2015 communicating the settlement terms to the Corporate Debtor clearly mentions that it has note of the continuous denial by the Corporate Debtor of any obligation towards the Petitioner against the sale invoice. Argument of the Petitioner that it is not concerned with any alleged issues with regard to the quality of goods and all such issues, if exists, are between Glints and the Corporate Debtor and ought to be resolved between them is not tenable. We are of the opinion that there exists a dispute with regard to the alleged unpaid operational debt which is supported by documents and the operational creditor had notice of the same before the date of the Demand Notice. We hereby reject this petition as under section 9(5)(2)(d).

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• 2019 (3) TMI 122
  RP duties - Possession of the property, papers and all documents relating to the Corporate Debtor company to the RP - HELD THAT:- The Resolution professional as also reported that Mr Gaurav Dave abused the RP while she was discharging her duties as Court officer. Such actions of the Ex-directors can never be tolerated. We at this moment provide two days to the Ex-Directors to comply with the directions given by us and hand over the entire possession of the property, papers and all documents relating to the Corporate Debtor company to the RP. RP is directed to submit the status report on 25.2.2019. Mr Gaurav Dave and Mr Vishal Dave should remain present in person in the court on 25.2.2019, and they have to file compliance of the court order, failing which we shall be forced to take action against them. In this case, till date, RP has not got the control of the Corporate Debtor. After taking full control of the Corporate Debtor, she has to comply with the directions of the Hon’ble NCLAT.

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• PMLA

• 2019 (3) TMI 121
  Offence under PMLA - Provisional attachment - Held that:- The party may or may not be able to succeed in their relief for quashing the final order, merely on sole ground by stating since the copy of reasons to believe is not served, therefore, the final order be quashed.The proceeding is main factor. In the present appeals, the appellants have requested the ED to supply the copy of reason to believe at least during the pendency of appeals, who refused to accede the request. Thus, the decision referred does not help the case of respondent. This Tribunal at this stage is not deciding the issue of validity of reasons to believe or whether recordal of reasons to believe prior to passing of provisional attachment order separately or along with the PAO or at the stage of issuance of notice under section 8(1). The said issue has already been argued in other appeals, the same would be considered and decided on merit. In the present, the only issue is with regard to supply of copies thereof. Validity of recording may or may not be challenged by the appellants after supplying copies of the same. Thus, it is wrong to allege on behalf of respondent – ED that the said judgement rendered by the Hon ble Division Bench of the Delhi High Court in J. Sekar [2018 (1) TMI 535 - DELHI HIGH COURT] cannot be relied upon or not applicable. Unless it is set-aside by the Supreme Court, the same remains effective. The same may not be binding upon the parties. Thus, the said judgement passed by the Division Bench in the case of J. Sekar (Supra) has a binding effect to this Tribunal. During the course of hearing, respondent has produced the photocopy of reason to believe to this Tribunal who also tried to explain that major part of reason to believe are incorporated in the provisional attachment order, therefore, there is no need to supply the copy of reasons to believe to the appellants. Level playing field - The parties in every case are entitled to apply the principles of equal opportunity to address their respective cases on merit before court regardless of any stringent law. A level playing field is concept of fairness where each party has an equal chance to succeed. Under this concept, one party cannot take advantage against other party (who is unheard)in the absence of reasons of allegations and to stop to prove its innocence. Unfairness can never be shown to any party not to know allegations raised against him by any agency/authority/tribunal, otherwise it would be called one sided action. Thus, each party should be given equal chance to succeed, even the party may be on weak wickets. Thus, as considered view that the appellants are entitled to know the allegations against them in the reason to believe and are entitled to challenge the same in accordance with law. Mere denial to supply copy shall be treated as injustice to the parties and curtail the fair defense and trial in the matter. In the present appeals, counsel for the respondent and IO have confirmed before this Tribunal that major part of the reasons to believe are incorporated in order of provisional attachment, then where is the difficulty. Thus, I direct that copy of the reasons to believe be supplied within one week to each of the appellants who shall be entitled to file the response, if any, three weeks thereafter.

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• Service Tax

• 2019 (3) TMI 120
  Classification of service under Construction of Complex Service or Works Contract Composition Scheme - Evasion of duty - Extended period of limitation - Held that: - it was concluded that even in case of row houses under the facts and circumstances being more than 12 under one scheme of Rajasthan Housing Board having common water supply, park, community centre thus will qualify under ‘Construction of Residential Complex Service’ and accordingly held liable to Service Tax. Similarly, construction of Police Quarters for Avas Vikas Ltd. (Government of Rajasthan) was held liable to Service Tax under ‘Construction of Residential Complex Service’. So far the Service Tax on construction of park, boundary wall is concerned, we find that the said issue was considered by a coordinate Bench of this Tribunal in M/S KARNI CONSTRUCTION COMPANY VERSUS CCE & ST, JAIPUR – I [2018 (6) TMI 803 - CESTAT NEW DELHI] where it has been held that work in the nature of construction of boundary wall, construction of rain water drains is not liable to Service Tax as part of residential complex and also does not qualify as facility for the residents of the quarters. Such works in the nature of infrastructure development or external development. Further the said work is also not taxable under ‘Works Contract Service’ under sub para (b) of para (ii) of sub-clause (2) of the (zza) of section 65 (25) of Finance Act, 1994, as not used for commercial purpose. Appeal allowed with consequential relief.

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• 2019 (3) TMI 119
  Demand of duty - Penalty - Held that: - it is clear that the appellant has discharged the service tax along with interest before issuance of show cause notice. The same has been appropriated in the adjudication order passed by the adjudicating authority. Sub-section (3) of section 73 says that whenever service tax is paid up along with interest, before issuance of show cause notice, no penalties or in particular no show cause notice has to be issued - Appeal allowed with consequential relief.

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• 2019 (3) TMI 118
  CENVAT Credit - duty paying invoices - credit availed on the strength of invoices issued by service providers who are not registered with Department - scope of SCN - Held that:- The impugned order is contrary to the SCN as well as the Order-in-Original because in the Order-in-Original, the issue of Rule 9(bb) was set aside whereas the Commissioner (A) has relied upon Rule 9(bb) and denied the credit which is beyond the SCN. Further, the provision of supplementary invoice is not applicable in the present case because in the present case, only invoices were issued and not the supplementary invoices. Further, in the case of Commissioner of Service Tax, Bangalore Vs. Kyocera Wireless (India) Pvt. Ltd., [2016 (4) TMI 799 - KARNATAKA HIGH COURT] it was held that registration with the Department not a pre-requisite for claiming credit. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 117
  Constitutional validity of rule 3 of the Place of Provision of Services Rules, 2012 - Vires of Serial No.10 of Notification No.30/2012-ST - Held that:- Issue Notice returnable on 20th March, 2019.

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• 2019 (3) TMI 116
  Refund of service tax paid - SEZ Unit - specified input services used for the services exported - N/N. 12/2013-ST dated 1.7.2013 - fiscal concessions to SEZ - Held that:- This Tribunal has consistently held that the benefit under the SEZ Act shall have an overriding effect as long as the input services are consumed within the SEZ and refund has to be sanctioned in favour of the assessee. Issue decided in appellant own case LOWE’S SERVICES INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX, BANGALORE NORTH [2019 (1) TMI 180 - CESTAT BANGALORE], where it was held that The appellant is a SEZ unit and as per Section 26 read with Rule 31 of SEZ Rules 2006 along with Section 51 of SEZ Act, the SEZ Act has overriding impact over other laws and SEZ units are exempt from payment of service tax for any service which is used for their authorized operations. Rejection of refund claim to the extent of Rs. 17,723/- paid under Reverse Charge Mechanism - Held that:- Rejection is wrong because the appellant in all has paid service tax amounting to Rs. 43,012/- and out of the total amount of Rs. 43,012/-, a sum of Rs. 25,190/- was granted to the appellant and the balance of Rs. 17,723/- which was paid through the same challan was rejected.

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• 2019 (3) TMI 115
  Penalty u/s 78 - Non-payment of service tax - registration not taken - Manpower Recruitment or Supply Agency Service - Held that:- Out of the total service tax demand of Rs. 45,06,956/-, an amount of Rs. 41,28,676/- service tax amount relating to Manpower Recruitment or Supply services was paid up by the appellant before issue of SCN and the remaining amount of Rs. 3,79,198/- was paid after issue of the adjudication order - Penalty u/s 78 not sustainable. Valuation - amount related to reimbursable expenses - demand of Rs. 3,78,280/- - Held that:- No proof has been put forth at the adjudication stage or before the lower appellate authority to substantiate their claim - For these reasons, the issue relating to the demand of Rs. 3,78,280/- is remanded to the adjudicating authority, to enable the appellant to produce the necessary documentary evidence and to prove that the same relates to expenses which were reimbursed by M/s. Shakti Sugars - matter on remand. Appeal allowed in part and part matter on remand.

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• 2019 (3) TMI 114
  Classification of services - Business auxiliary services or not - appellants were booking space for cargo transportations in airlines/ships and paid the charges for the same. While charging their customers towards such freight charges, the appellants bill/collect extra charges in excess of the charges paid to the airlines/ships. Demand of Rs. 1,92,04,675/- and Rs. 36,00,891/- with interest payable under the category of Business Auxiliary Service - Held that:- The Tribunal in the case of M/s. Freight Systems (India) Pvt. Ltd. Vs. Commissioner of G.S.T. & Central Excise, Chennai South Commissionerate [2018 (7) TMI 333 - CESTAT CHENNAI], held that the demand of service tax on such freight charges under Business Auxiliary Services is unjustified - demand set aside. Penalty - Demand of Rs. 15,53,701/- with interest on excess charges - Held that:- The said demand with interest has been paid up voluntarily by the appellant during the Department audit. Ld. Consultant submits that the appellant is not contesting the said demand - the matter as regards penalty, it is held that there cannot be any penalty in this case since the amount was already paid up on being pointed out - demand upheld - penalty set aside. Demand of Rs. 2,33,285/- on commission received from steamer agents/airlines - time limitation - Held that:- The demand of Rs. 2,33,285/- on airline/steamer commission is hit by limitation since it is even beyond the extended period of limitation that can be covered in the Show Cause Notice dated 05.04.2010 - demand set aside. Appeal allowed in part.

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• 2019 (3) TMI 113
  Refund claim - Rule 5 of Cenvat Credit Rules 2004 read with Notification No. 27/2012 dated 18.06.2012 - non-speaking order - principles of natural justice - Held that:- The impugned order has been passed without giving proper reasons and without considering the facts involved in the case. Further the Commissioner (Appeals) has only given general principles for granting the refund without adverting to the facts of the present case. Further it is found that the impugned order has been passed without affording an opportunity of hearing. The impugned order which is passed in complete violation of the principles of natural justice and without considering the facts and the grounds of appeal is liable to be set aside. Matter remanded back to the Commissioner (Appeals) to pass a de novo order after considering the facts and the grounds of appeal and after affording an opportunity of hearing to the appellant - appeal allowed by way of remand.

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• 2019 (3) TMI 112
  Commercial and Industrial Construction Service - Supply of Tangible Goods service - Held that:- The appellant is not disputing the liability of service tax confirmed by the adjudicating authority under the category of Commercial and Industrial Construction Service as also under the category of Supply of Tangible Goods - we do not discuss the dispute relating to these services, but uphold this portion of demand. Cargo Handling Service - Held that:- One type of orders were executed for supply of materials such as river sand and crusher grit. We have perused some of the purchase orders received by the appellant for this activity. The purchase order clearly shows that the contract was for supply of material and can by no stretch of imagination, be considered as for providing Cargo Handling Service - no service tax is payable for this activity under the category of Cargo Handling Service - demand set aside. Appropriation of Service Tax amount of Rs. 31,30,180/- - Held that:- The Consultant for the appellant has submitted that this amount is incorrect and that appellant has totally paid a sum of Rs. 34,37,399/-. The adjudicating authority is directed to verify this fact and correct his record. It is seen from the record that the appellant has already discharged the service tax as admitted by them under the category of Commercial or Industrial Construction Service , Supply of Tangible Goods Service as well as for Transportation of Goods under GTA - the demands for service tax set aside under the category of Cargo Handling Service - Since the entire liability has already been discharged by the appellant even prior to issue of show cause notice, there is no justification for imposition of penalty under section 76 - penalty set aside. Appeal disposed off.

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• 2019 (3) TMI 111
  Condonation of delay in filing appeal - time limitation - relevant time for communication/service of order - appeal dismissed on the ground of limitation as the appeal was preferred beyond 7 years - entire case of the appellant rests on a ground that the change of address of the appellant was communicated by the appellant to the Department on 15.11.2010 by way of updating the same in Form ST-1. Despite that the Order-in-Original dated 27.01.2011 was been sent by the Department to the old address itself - Short payment of service tax. Held that:- There was no occasion with the appellant to be aware about the said Order-in Original. It is impressed upon that it is only after the recovery proceedings initiated that the Order-in-Original came to the notice of the appellant and the appeal was preferred before Commissioner (Appeals). It is apparent from grounds of appeal as well as from the application of appellant before Commissioner (Appeals) praying for rectification of mistake. The show cause notice is of October, 2007 and was served on the previous address. There is no denial on the part of the appellant that the show cause notice was received by the appellant - the foremost argument of the appellant about ignorance of the adjudication of the said show cause notice is not at all acceptable. It is clear beyond doubts that the appellant has been highly negligent about the status of investigation based whereupon the impugned SCN was issued. Rather appellant has nowhere denied receiving the show cause notice. Even presuming that even SCN was not received by the appellant, still there is no reasonable explanation as to why the address which got changed in the year 2007 was not brought to the notice of department till the year 2010 that too only by way of ST-1 Return. The otherwise apparent fact is that the impugned order was dispatched to the appellant through the valid mode, as provided in law, and the same has never been returned to the Department - the Commissioner (Appeals) was statutorily bound to not to condone the delay beyond 90 days. There is opined no infirmity in the order under challenge. Delay of seven years is denied to be condoned - application dismissed.

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• Central Excise

• 2019 (3) TMI 110
  Demand of duty short paid - time limitation - intent to evade or not - Held that:- The arguments of the appellant that the entire demand is barred by limitation is not sustainable because the irregularity was detected during the audit. Therefore, the demand is not barred by limitation and extended period has been rightly invoked. Adjustment of excess duty paid with the short payment of duty - Held that:- This issue is no more res integra and has been settled by various decisions of the Tribunal which has allowed the adjustment of duty. It is a fact that the appellant has paid the entire short paid duty of Rs. 19,36,869/- along with interest and he wanted to adjust the excess paid duty amounting to Rs. 10,52,311/- - the adjustment of duty is permitted under law and the benefit of the same ought to have been allowed to the appellant but the same was not allowed by the Commissioner(Appeals) - thus, appellants are entitled to the adjustment of excess duty paid by them to the tune of Rs. 10,52,311/- against the short paid duty. Demand of Interest - Held that:- The appellants are liable for interest on the short paid duty which is to be determined after adjusting the excess duty paid. Unjust enrichment - Held that:- The refund has been wrongly rejected on the ground of unjust enrichment whereas in the facts and circumstances, unjust enrichment is not applicable. For the purpose of quantification of duty liability after adjustment and for quantification of interest liability, the case remanded back to the original authority for adjustment of duties and also for determination of interest payable by the appellant - appeal allowed by way of remand.

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• 2019 (3) TMI 109
  Clandestine manufacture and removal - sponge iron, steel ingots, runners, dolochar & char - short payment of duty of excise by undervaluing the excisable goods - cash found in he premises, whether unaccounted or not? - the case of the Revenue is mainly on the basis of procurement of unaccounted raw materials and its use in the manufacture of unaccounted finished goods, alleged to have been cleared clandestinely - Held that:- In the search proceedings no unaccounted cash was found - also, iron ore is a controlled commodity and no iron ore can be dispatched or received by the appellant assessee, without permit issued by the competent authority of the mines department of the States Government. Normally iron ore is dispatched in wagons from the mines, which is accompanies by ‘Fit Pass’ or permit issued by the competent authority. No supplier of alleged quantity of iron ore have been identified. Neither there is evidence of any transportation for receipt of unaccounted iron ore. Similarly there is no evidence of receipt of other raw materials like dolomite and coal - the allegations are mainly based on the unsubstantiated data retrieved from laptop/ pen drive which is not reliable, as the same does not have evidentiary value as provided under Section 36B of the Act, as the condition precedent for placing reliance in respect of data obtained from computer/pen drive, etc have not been established, like whether the paper print out containing data was produced by the computer during the period over which the computer was regularly being used during the relevant period by the person having lawful control over use of the said computer. Further, the document seized from the guesthouse cum residential premises of Shri Nitin Agarwal also lack evidentiary value - also, it is evident from the records that stock verification have been done by way of eye estimation on the date of search, as no calculation sheet is admittedly available on record. Further, there is no corroborative evidence of clandestine activity by way of unexplained consumption of electricity, excess utilisation of labour, evidence of clandestine transportation nor there is evidence of any clandestine cash flow found. The allegations in the show cause notice are presumptive and are not based on the actual state of affairs and /or corroborative evidence - the impugned order is not maintainable - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 108
  Classification of goods - manifold business forms including printed/ blank continuous computer stationery forms and printed cut sheet forms - classifiable under 4820 of CETA, 1985 or not - SSI Exemption - Held that:- The ld. consultant is correct in his assertion that the classification of the impugned goods has been settled by case laws cited by him, in particular, the Tribunal’s decision in Data Processing Forms Pvt. Ltd. [ 2011 (9) TMI 921 - CESTAT AHMEDABAD]. This being so, at least in respect of the items in Table like LIC Intimation letter, share certificates, bus ticket, boarding pass, etc. all generated by computer stationery will not be exigible to tax. It is appropriate to remand the matter back to the original authority who will take note of in such re-adjudication and apply the ratios laid down in the decisions cited - The authority shall look into the claim and after applying the ratio of the case laws, it is found that the impugned goods are required to be classified under CETA 4901 and not under CETA 4820, the authority shall exclude the turnover thereof from the taxable turnover for the purposes of the SSI notification 8/2003-CX - appeal allowed by way of remand.

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• 2019 (3) TMI 107
  CENVAT Credit - input service - GTA Service - place of removal - Held that:- In the present case as per the purchase orders, the appellant is supposed to supply the goods at the buyer’s premises and the price of the goods include outward freight - the various circular issued by the Board in the year 2007, 2014 clearly show that evidences of the parties is to be ascertained as to when the property in the goods passes along with the other documents i.e. purchase order, invoices etc. Hon’ble Supreme Court in the case of Ultra Tech Cement [2018 (2) TMI 117 - SUPREME COURT OF INDIA] has held that Cenvat Credit on goods transport agency service availed for transport of goods from place of removal to buyer’s premises was not admissible to the respondent - the subsequent Circular issued in 2018 does not help the appellant because once the Hon’ble Apex Court has declared the law, the Circular issued by the Board cannot override the judgment of the Apex Court - thus, credit not allowed. CENVAT Credit - CHA Service - Held that:- The services rendered by CHA falls under the definition of input service and therefore the appellants are entitled to the CENVAT credit on CHA services - credit allowed. CENVAT credit - insurance service - Held that:- Perusal of the amendment in the input service w.e.f. 01/04/2011, it is found that General Health insurance is excluded from the definition of input service - credit not allowed. Extended period of limitation - penalty - Held that:- There were divergent views during the period in dispute on the issue, therefore the allegation of suppression with intent to evade payment of duty is not sustainable - the demand beyond the normal period of limitation is set aside as there was no intention to evade payment of duty - penalty also not sustainable. Appeal allowed in part.

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• 2019 (3) TMI 106
  Goods supplied as donation for earthquake relief - Benefit of exemption under N/N. 2/2001-CE and 16/2001-CE. - Held that:- The goods supplied as donation for earthquake relief are exempted - In the appellant’s case, even though the clinker was not supplied but though the cement supplied contains the clinker and therefore, it is clear that clinker is deemed to have been supplied for earthquake relief. Therefore, the appellant are entitled for the exemption under Notification No. 2/2001-CE. CENVAT Credit - common input used in dutiable as well as exempt goods - fuel - separate accounts for fuel was not maintained as per Rule 6(2) of Cenvat Credit Rules which requires maintenance of separate accounts except for the inputs intended to be used as fuel - Held that:- The only lapse is that the appellant have availed and retained Cenvat credit on fuel. Though the appellant have discharged obligation prescribed under Rule 6 (2) of Cenvat Credit Rules, 2004 but by availing Cenvat credit on fuel, the obligation under sub Rule 1 of Rule 6 of Cenvat Credit Rules, 2004 has not been discharged. In terms of Rule 6(1) of Cenvat Credit Rules, 2004, if the appellant have reversed full Cenvat credit attributed to the goods cleared under Notification No. 16/2001-CE, the appellant become eligible for exemption - Since, the ld. Counsel has agreed to reverse the credit, we direct the appellant as well as the Adjudicating Authority to ensure the reversal of Cenvat credit on fuel attributed to the goods cleared under exemption Notification No. 2/2001-CE and 16/2001-CE. Appeal allowed by way of remand.

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• 2019 (3) TMI 105
  CENVAT Credit - overriding commission paid to M/s. Monara Engineering & Trading Pvt. Ltd. - Demand alongwith interest and penalty - Held that:- In the present case, it is not disputed that the appellant has in fact received services of overseas trading partner and the same has been used for export of goods. It is also a fact that appellant has actually paid the service tax as applicable under Reverse Charge Mechanism under Section 66A of the Finance Act, 1994. Further, such availment of CENVAT credit of service tax paid on commission should be allowed under CENVAT Credit Rules. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 104
  Imposition of penalty equal to 50% of the demand under Rule 15(2) of the CCR, 2004 - appellant has paid the entire duty along with interest much before the issuance of SCN and has prayed that the case should be closed - Held that:- The appellants have shown CENVAT credit taken on various items in their books of accounts and the Revenue has not brought out any material to show that there was suppression of fact on the part of the appellant with intent to evade payment of duty - it is now well settled law that the allegation of suppression, wilful statement etc. are grave and the burden to prove this allegation is always on the Revenue. Further, it is well established position of law that mere failure, inaction or negligence on the part of the assessee not to pay tax/duty cannot be considered as amounting to suppression and something positive or deliberate with holding of information which the assessee knew or otherwise that he acted in deliberate defiance of law is required to be established. Penalty not warranted - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 103
  Refund in cash - refund of unutilized amount lying in Cenvat credit account - grievance of the appellant is that after introduction of Central Goods and Service Tax Act, 2017 all refund claims are to be sanctioned in cash - Held that:- Considering the fact that on introduction of Central GST Act, 2017, Section 142 deals the situation which directs the authorities to sanction all the refund claims in cash, therefore, no authority can sanction refund claim to be credited in Cenvat credit account - refund is allowed in cash - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 102
  SSI Exemption - threshold limit for exemption - supply made to the job worker exceeding Rs. 25 lakhs limit - Held that:- Civil appeals are dismissed.

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• 2019 (3) TMI 101
  Job work - Computation of Aggregate turnover of the goods - Rectification of mistake - Section 35L of the Central Excise Act, 1944 - clearance of cotton fabrics and cotton made-ups without payment of any duty - case of appellant is that the job workers were the manufacturers and that no liability could be fixed on the traders - Circular dated 30.10.2003 - threshold limit of clearances for each job-worker - whether the Appellants liability is only in respect of the clearance of that job worker whose clearance was greater than the limit of Rs. 25 lakhs or in respect of the entire aggregate value of clearances? Held that:- The Exemption Notification dated 30.04.2003 exempts first clearances for home consumption, upto an aggregate value not exceeding twenty lakh rupees . The emphasis is on the aggregate value and what is exempted is, upto an aggregate value . The conditions stipulated in Para 2 of said Exemption Notification, specially clauses (i) and (ii) again emphasize the applicability in respect of aggregate value of clearances for home consumption and not separately regarding individual clearances . The extent of limits was raised by subsequent Notification dated 17.05.2003. 3 Introduced on 25.03.2003 - The Exemption Notification does not put the matter at individual clearances of job workers and what is to be considered is an aggregate value of the clearances. It is well settled that if a legal fiction is introduced that legal fiction must be taken to the logical end. If the contention of the Appellant is accepted, a dealer may get the goods referred to in Rule 12B manufactured from several job workers to ensure that the value of the clearances from each job worker is less than the limit prescribed for individual clearances. In such a case the emphasis in the Rule regarding aggregate clearances would be rendered meaningless. The assessment made by the Appellate Authority and the Tribunal was, therefore, correct - Consequently, it was not the individual clearance of one single job worker alone exceeding the limit of Rs. 25 lakhs but the aggregate of all clearances made by the Appellant, was liable to duty. Appeal dismissed.

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• 2019 (3) TMI 100
  CENVAT Credit - common inputs used in dutiable as well as exempt goods - iron ores - reversal of 6% of iron ores in terms of Rule 6(3A) of CCR 2004 - whether the iron ore fines are to be treated as excisable goods manufactured by the appellant which are exempted by virtue of exemption notification and correspondingly whether an amount needs to be reversed under Rule 6(3) of CCR 2004? - Held that:- W.E.F. 01.03.2015, the reversal under Rule 6(1) of CCR is necessary even in respect of non excisable goods which are cleared for consideration from the factory - post 01.03.2015, even for iron ore fines, reversal of CENVAT Credit is necessary. As the matter is a decided matter on merits, there is no need to go into the question of limitation. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 99
  CENVAT Credit - inputs or not - credit availed on the strength of invoices received from the supplier of liquefied Oxygen / Nitrogen/Argon gas which are finished products treating the same as ‘inputs’ - Held that:- The appellant has paid the duty on value addition and the same has been accepted by the Department and hence the appellant has paid the higher duty than the CENVAT credit claimed by him, therefore he cannot be denied the CENVAT credit - Further, the appellants even before the Commissioner(Appeals) has given sufficient proof in the form of invoices and other documents showing that he has paid duty on higher value The issue is decided in the case of COMMISSIONER VERSUS CREATIVE ENTERPRISES [2009 (7) TMI 1206 - SUPREME COURT], where it was held that if the activity of the assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit can’t be denied by holding that there is no manufacture. Credit allowed - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 98
  Condonation of delay in filing appeal - relevant dates of communication of order - whether the 3 days beyond 90 days are liable to be excluded to hold the appeal to be filed on the 90th day of the receipt of the order? - Held that:- Section 4 of the Limitation Act is relevant in this respect which speaks about the expiry of prescribed period when the Court is closed. As per this Section, the day when the Court is closed has to be excluded and the appeal is allowed to be instituted on the day when the Court re-opens. The section goes on to explain that if during any part of the normal working hours the Court remains closed on a particular day same has also to be excluded. There is no dispute on the fact that last days of filing the impugned appeal i.e. 23rd & 24th June, 2018 were the days when the office of adjudicating authority below was closed on account of the days being Saturday and Sunday. Those two days, in view of Section 4 of the Limitation Act has to be excluded. Further, Section 12 of Limitation Act clarifies that the day of receiving the order has to be excluded while computing the period of limitation. Thus, the third day also remains excluded - Resultantly, it is clear that the appeal in hand stands filed on 90th day from the date of receipt of the order. Commissioner (Appeals) has committed an error while holding the appeal which was otherwise filed on the day of expiry of the limitation to still be barred by time - matter is remanded back to the adjudicating authority for the adjudication on the merits thereof.

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• 2019 (3) TMI 97
  Valuation - subsidy in the form of Challan Form 37B - inclusion of subsidy amount in the assessable value - Section 4 of the Central Excise Act, 1944 - Revenue has taken the view that payment of VAT using 37B Challans cannot be considered as actual payment of VAT - Held that:- As per the concept of transaction value outlined in Section 4, with effect from 01/07/2000, any sales tax/VAT actually paid can be deducted from the transaction value for payment of excise duty. In the present case, for the initial period the assessees are required to remit the VAT recovered by them at the time of sale of the goods manufactured. A part of such VAT is given back to them in the form of subsidy in Challan 37 B. Such Challans are as good as cash but can be used only for payment of VAT in the subsequent period. In terms of the scheme of the Government of Rajasthan payment of VAT using such Challan are considered legal payments of tax - In view of the above, Revenue is not correct in taking the view that VAT liability discharged by utilizing such subsidy challans cannot be taken as VAT actually paid. There is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans - Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 96
  Condonation of delay n filing appeal - appeal dismissed on the ground of time bar - relevant dates for communication/service of order - Valuation - manufacture of various gases - Held that:- The order of the Original Authority dated 31 December 2015 was dispatched by RPAD and is shown by the post office records to have been delivered on 13 January 2016. Even though the appellant has procured another certified copy of the order on 26 August 2016, we are of the view that the date of service of the order-in-original is to be considered as 13 January 2016, since the order was dispatched by RPAD in terms of Section 37C (i) of the Central Excise Act, 1944. The Hon’ble Supreme Court has categorically held in the case of Singh Enterprises [2007 (12) TMI 11 - SUPREME COURT OF INDIA] that the Commissioner (Appeals) has no power to condone delay beyond the period of one month after the normal time limit of two months. There is no infirmity in the order passed by the Commissioner (Appeals) - appeal dismissed.

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• CST, VAT & Sales Tax

• 2019 (3) TMI 95
  Reopening of assessment - Reassessment of tax liability - disallowance of branch transfer claim - Rule 12(4) of the Central Sales Tax (Orissa) Rules, 1957 - suppression of facts - consignment sales - it was alleged that appellant had sold goods of the value of Rs. 1,25,41,276/- to its consignment agent in the guise of stock transfer against pre-existing contract - Form - F declarations - reversal of ITC. Held that:- From the TECR received from the Vigilance Wing Sambalpur it becomes apparent that the appellant had suppressed material facts and projected inter-State sales as stock transfers to evade tax. The Assessing Authority has, after verification of documents, independently drawn the conclusion that the appellant has suppressed material facts and the Tribunal has concurred with the same. I have no reason to defer from the view taken by the Assessing Authority and the Tribunal because it is based on proper analysis of the documents and other evidence. Pertinently the most vital documents i.e. the Sale Order Acceptances were not produced by the appellant before the audit team at the time of tax audit. They were not produced at the time of regular assessment for verification. This is, therefore, a case of suppression of material facts. There is undoubtedly misrepresentation of relevant facts. Reopening of the assessment therefore cannot be faulted. Moreover, Rule 12(4) of the Rules also permits the Assessing Authority to reopen the assessment in such circumstances. It is not possible in this case to say that the Assessing Authority i.e. the DCST has not conducted any enquiry. Undoubtedly, the Assessing Authority has to conduct an enquiry - It must be remembered, however, that no particular form of enquiry is prescribed. What should be the nature of enquiry is for the Assessing Authority to decide. After enquiry, he may pass an order on such declaration before the assessment or along with the assessment. Thus it can be concluded that, the Assessing Authority has conducted an enquiry and recorded in the reassessment order that Form-F declarations deserve to be rejected. The Assessing Authority has followed the mandate of law. Admittedly, during the hearing of Appeal No. FA 2 (C) of 2011-12, the appellant did not draw the Tribunal’s attention to the impugned order. Had the impugned order been shown to the Tribunal, the Tribunal might have followed it. Unfortunately, even the Revenue did not draw the attention of the Tribunal to the impugned order. Conduct of both sides needs to be deprecated. The appellant has not drawn the attention of the Tribunal to the impugned order obviously because it was against it. More callous is the approach of the Revenue in not pointing out this order to the Tribunal when it was in its favour. Rreversal of ITC - Held that:- There is substance in the submission of Mr. Pani, learned Counsel for the State of Odisha that it is raised for the first time in this appeal and therefore it is not possible at this stage to ascertain how far the said claim is true. No evidence is produced in this behalf. Since the stock transfer claim of the appellant is found to be not tenable and the transactions in question are found to be inter-State sales, the State of Maharashtra will have to be directed to pay to the State of Odisha an amount of Rs. 5,01,600/- collected from the appellant towards VAT - Since the appellant has deposited Rs. 3,76,238/- with the State of Odisha pursuant to this Authority’s interim order dated 24.09.2015 taking that amount also into account, the appellant will have to be directed to pay a sum of Rs. 6,27,115/- to the State of Odisha. The State of Maharashtra is directed to return an amount of Rs. 5,01,600/- collected by it towards VAT from the appellant to the State of Odisha - The appellant is directed to pay an amount of Rs. 6,27,115/- to the State of Odisha in terms of the assessment order dated 24.01.2011 passed by the Deputy Commissioner of Sales Tax, Sambalpur Range, Sambalpur - appeal dismissed.

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• 2019 (3) TMI 94
  Refund of the tax paid under protest - notifications granting reduced tax benefit to certain industries with a certain turnover - whether the prohibition on refund of tax already paid; could be mandated in the notification granting retrospective exemption or reduction of rate of tax? - Held that:- Hon'ble Supreme Court in Yesyem Arecanut Co. [2014 (3) TMI 737 - SUPREME COURT] also considered the very same issue, where it was held that By amendment, though the rate of tax was reduced to 4%, the assessee cannot take advantage of the same and gain undue monetary advantage not due to him. When there are two decisions of the Hon'ble Supreme Court, both by co-ordinate Benches, The High Court has to follow the later decision and in such circumstances, it is prudent to follow this decision as it is later to the decision CORPORATION BANK VERSUS SARASWATI ABHARANSALA AND ANOTHER [2008 (11) TMI 387 - SUPREME COURT OF INDIA]. Petition dismissed.

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