Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 5, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Provisional attachment of bank accounts - Section 83 of the CGST Act - If the writ-applicant is ready and willing to furnish the bank guarantee to the extent of ₹ 1.25 Crore of Bank of India or ICICI Bank, then, in such circumstances, it is ordered that the provisional attachment may no longer continue - HC
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Provisional attachment of bank accounts of the opponents - In fact so far as the controversy raised in the main matters is concerned, the same has come to an end today. - The matter as on date has reached to the stage of issue of SCN to the opponents. - It will be open for the department to issue a show cause notice in the manner they propose to and if the opponents are aggrieved in any manner with the contents of the show cause notice, they can raise the issues accordingly by way of their reply. As on date, there is nothing we need to clarify. - HC
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Classification of supply - supply of goods or supply of services - printed leaflet supplied by the applicant - The appellant, as a part of their defence, has also put forth their practical difficulties while discharging their legal obligation under EPCG/ Advance License Scheme or under supplies to SEZ, they have also shown their inability to claim refund under the category of deemed export. Without going into the merits of the practical difficulties presented by them we observe that such arguments should not have any bearing on the outcome of the legally explained order. The classification of goods or services cannot be made merely on the ground that classifying their supply in a particular manner will deprive them from other benefits. - AAAR
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Availability of concessional rate of GST - works contracts - the works contract executed by the applicant for construction of Administrative building for TSIIC falls under Sr No. 3(vi) of Notification No. 11/2017-CT (Rate) as amended till date and therefore taxable at the rate of 6% under CGST & SGST each. However for works executed from 01-01-2022, the rate shall be 9% under CGST & SGST each as the Phrase ‘Governmental authority or Governmental entity’ is excluded, vide notification Number. 15/2021, dated.18.11.2021. - AAR
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Classification of goods - pharmaceutical Pellets and Granules - Obesity is not a disease and hence reduction of weight cannot be seen as a treatment against a disease - therefore except the product Orlistat which does not fit into the above definition, others fall under medicaments used in therapeutic or prophylactic applications. - The pharmaceutical Pellets and Granules except Orlistat pellet manufactured by the applicant can be classified as medicaments and subject to GST at the rate of 12% - AAR
Income Tax
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Accrual of income towards retention money - the assessee had no right to claim any part of the retention money till the verification of satisfactory execution of the contract - That apart the CIT(A) as well as the tribunal have examined the sample contract produced by the assessee which they have entered into with the third party customers/parties and found on facts that the assessee would be entitled to the amount retained only upon satisfactory completion of the work which would be certified by the contracting parties. - Decided against Revenue - HC
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Reopening of assessment u/s 147 - Valid grant of approval u/s. 151 or not - without application of mind - In our considered view, mere scribbling of "Yes" by the approving authority, as is the case before us, can by no means suffice the statutory obligation cast upon him for granting approval after due application of mind for issuance of notice u/s. 148 of the Act by the AO, as the said statutory check would otherwise be rendered as a mere idle formality, nugatory or in fact nothing better than an eye wash, which would beyond any doubt defeat the very purpose for which the said supervisory jurisdiction of the superior authorities had been made available on the statute by the legislature. - AT
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Power to Addl. CIT to perform as AO - Validity of the assessment order - none of the notifications referred to by the Department validly authorize or empower the Addl.CIT to act as an Assessing Officer. - Revenue has not been able to produce the authorization u/s. 120(4)(b) of the Act. - The impugned assessment order is held to be bad in law, passed without jurisdiction and hence, quashed. - AT
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Revision u/s 263 - eligibility to Exemption u/s 11 - The assesse’s claim of exemption of its entire income has remained unchanged and unrevised. What has only changed is the basis of the claim that too without foregoing its original basis and as an alternate only and that too when confronted with the prospect of being denied exemption of 15% of Govt. grants as originally claimed. The same does not tantamount to revising its return by any chance. - AT
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Addition as short term capital gain by invoking the provisions of section 50C - difference between the declared sale consideration and the market value is within the range of 5% - the benefit provided under the third proviso to section 50C(1) of the Act, should be extended to the assessee, as, ultimately the value determined by the Stamp Valuation Authority has been substituted by DVO's valuation in terms of sub-section (3) of section 50C of the Act. - AT
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Reopening of assessment u/s 147 - in the present case, the ancestral property is owned by the assessee in the HUF status and so the appellant’s case was to be reopened under section 147 of the act in the status of HUF and consequently assessed in the status of HUF. We are of the view that the notice issued u/s 148 by the AO was illegal, and void abinitio. - AT
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Addition u/s 56(2)(vii)(b) - alleged excess value of unquoted equity shares - In the absence of any defect in the valuation of shares arrived by the assessee on the basis of DCF method, impugned addition as made on the basis of net asset value method is liable to be deleted. The rejection is unjustified as the valuation report is required under Rule 11UA of The Income Tax rules is based on the future aspects of the company at the time of issuing the shares, it may vary from the actual figures depending on the market condition at the present point of the time. - AT
Customs
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Withdrawal of anti-dumping duty - imports of PVC Flex Film from the China PR - A perusal for the final findings of the designated authority reveal that the trend of import volumes and landed (import) prices, and its effect on the domestic industry together with the increase in capacity, production, sales of the domestic industry, its market share, along with negative price undercutting and negative injury margins led the designated authority to conclude that there was no likelihood of injury. It is for this reason that the designated authority recommended discontinuation of anti-dumping duties. - Decision of withdrawal sustained - AT
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Violation of principle of natural justice - the impugned order dated 28th February, 2017 is set aside and remanded back to the Appellate Authority concerned on these two limited issues/grounds, which are non providing of documents to the petitioner upon which adjudicating authority has relied and denying the petitioner to cross-examine the witnesses in question on whose statement adjudicating authority has relied in its adjudication order. - HC
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Maintainability of application for settlement of the case - no show cause notice was issued - The petitioners on their own could not have assessed the duty payable on the goods which are the subject matter of two Bills of Entry and could not have paid the duty on its own to contend that the said application was maintainable. If the arguments of the learned senior counsel for the petitioners are accepted, any assessee would file an application for settlement by considering even the correspondence exchanged between the parties or affidavit-in-reply filed by the Revenue in another proceedings as show cause notice and based on such show cause notice, would compute the duty and other levy as may be leviable according to the self-assessment of the petitioners so as to claim immunity from prosecution and penalty. The writ petition is totally devoid of merit. - HC
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Maintainability of appeal - applicability of time limitation - From the discussions made by the Commissioner (Appeals), it is explicit that the department has not been able to furnish any details as to the date of receipt of order by the reviewing authority. - There are no hesitation to conclude that the review order passed by the department is beyond the time-limit prescribed under sub-section (3) of section 129D of the Customs Act, 1962 and therefore the appeals filed before the Commissioner (Appeals) are time-barred. - AT
Indian Laws
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Recovery of damages - failure to deposit the contribution of EPF or committed default as mandated under the provisions of the Employees Provident Fund & Miscellaneous Provisions Act, 1952 - Any default or delay in the payment of EPF contribution by the employer under the Act is a sine qua non for imposition of levy of damages under Section 14B of the Act 1952 and mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities - SC
IBC
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Initiation of CIRP - The issue in this case is not whether there is an ‘Admission of debt’ or ‘existence of dispute’ but whether in the absence of any sufficient evidence on record that the amounts claimed are ‘in respect of the provision of goods and services including employment or a debt in respect of (payment) of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority’ as defined under Section 5(21) of the Code - there is no sufficient evidence on record to prove that any kind of ‘Operational Debt’ is ‘due and payable’. - NCLT rightly dismissed the application - AT
Service Tax
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Refund of CENVAT Credit - export of output services - Without denying the CENVAT Credit taken/ availed by the appellant in their book of accounts during the relevant period (quarter) by way of initiating proceedings against the appellant in terms of Rule 14, revenue could not have altered the quantum of “Net CENVAT Credit” availed during the said quarter, and deny the encashment of that amount of the CENVAT Credit which is due as per the Rule 5 - AT
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Refund of service tax paid - relevant date for cancellation of sale of flat - In the present case the fund has arisen from cancellation of the sale of flats and refund of amount to the customers. In my view this stage should be considered as adjustment of service tax hence, the one year period should be computed from the date of refund of amount made to their customers against cancellation of sale of flats. - AT
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Refund of service tax paid - input services - Nexus - The reasons assigned by the authorities below in this case for denial of the refund benefit to the applicant shall not stand for judicial scrutiny inasmuch as other than the allegation of non-establishment of nexus, the department had never questioned nor pointed out any discrepancy, alleging that the ingredients mentioned in Rule 5 ibid have not been complied with by the appellant. Hence, refund benefit shall not be denied to the appellant. - AT
Central Excise
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CENVAT Credit - CVD paid by availing exemption Notification - In the present case the CVD was paid by not availing the aforesaid excise notifications but it was paid by availing Customs Notification No. 12/2012-Cus, therefore, the restriction provided in Rule 3 (i) and proviso thereof shall not be applicable to the facts of the present case.- AT
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CENVAT Credit - Input Service Distributors - credit denied by the Department on the ground that after the amendment to the definition of ‘input service’ w.e.f. 01.03.2001 in section 2(l) of the CENVAT Credit Rules, 2004, the appellant was not entitled to avail CENVAT Credit on such services - Invocation of the extended period of limitation - the issue relating to invocation of the extended period of limitation has been dealt with by the Commissioner in a very cryptic manner, though a detailed reply had been filed by the appellant. - AT
VAT
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Condonation of delay of approximately 3 years and 7 months in filing the Second Appeal - This Court finds no reason to doubt the bona fide of the assessee Company in filing the Second Appeal before the Tribunal after delay. Thus, no presumption can be attached to deliberate inaction of the assessee Company in filing the Second Appeals. There exist sufficient cause to condone the delay - the delay which has occurred in filing the Second Appeal before the Tribunal can be condoned and the appellate assessee should be given an opportunity to submit its case on merits before the Tribunal which will meet with the ends of justice. - HC
Case Laws:
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GST
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2022 (3) TMI 183
Provisional attachment of bank accounts - Section 83 of the CGST Act - HELD THAT:- When the matter was first taken up for hearing, we inquired with Mr. Shah whether his client would be ready and willing to furnish some tangible security so as to protect the interest of the revenue. The whole idea in putting this question to Mr. Shah was that upon furnishing of such tangible security, we may de-freeze the three bank accounts. Mr. Shah prayed that the matter may be kept back for sometime to enable him to take appropriate instructions from his client. If the writ-applicant is ready and willing to furnish the bank guarantee to the extent of ₹ 1.25 Crore of Bank of India or ICICI Bank, then, in such circumstances, it is ordered that the provisional attachment may no longer continue - this writ-application is disposed off with a direction to the respondent no.2 to de-freeze the three bank accounts upon the writ-applicant furnishing a bank guarantee of ₹ 1.25 Crore and individual undertakings of the Directors of the company.
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2022 (3) TMI 182
Provisional attachment of bank accounts of the opponents - Section 83 of the CGST Act, 2017 - HELD THAT:- In fact so far as the controversy raised in the main matters is concerned, the same has come to an end today. The orders of the provisional attachment of the bank accounts were ordered to be quashed and set aside. Nothing further is required to be done in that regard. The matter as on date has reached to the stage of issue of show cause notice to the opponents. If the show cause notice is issued, the opponents will have to give an appropriate reply to the same. Thereafter, the adjudication would take place and the final liability will be determined in accordance with law, if any. It will be open for the department to issue a show cause notice in the manner they propose to and if the opponents are aggrieved in any manner with the contents of the show cause notice, they can raise the issues accordingly by way of their reply. As on date, there is nothing we need to clarify. It is also open for the department to proceed against all those persons in whose favour the input tax credit availed by the opponents stood transferred respectively in their favour - Application disposed off.
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2022 (3) TMI 181
Classification of supply - supply of goods or supply of services - printed leaflet supplied by the applicant - classified under CHS No. 4901 or under SAC No. 9899? - HELD THAT:- The appellant is engaged in the activity of printing leaflets (further divided into insert/outsert), the said activity is done on the inputs namely paper, ink owned by the appellant himself and content supplied by the clients mainly located in the pharmaceutical sector - the basic transaction between the appellant (supplier) and the clients (recipient) is that the client (mostly from the pharmaceutical sector) approaches the appellant (supplier) with the content/instructions that is required to be printed in the form of leaflet. The paper and the ink used in printing is owned by the appellant. The transaction is considered to be completed only when the desired content/instructions is printed in the desired format by the appellant (supplier) and handed over to the customer. Thus, in this transaction. there is an element of supply of goods as well as supply of service. The appellant is also on record to accept that in the instant case there is a supply which comprises of goods as well as that of service. The term naturally bundled has not been defined in the act; however, if various elements of supply are naturally bundled in the ordinary course of business, then it is to be considered as being naturally bundled. The concept or ordinary course of business depends on the normal or frequent practice followed in the area of business - Another condition is that the supplies should be made in conjunction. As per the Cambridge dictionary meaning the noun 'Conjunction' is a situation in which the events or conditions happen together. In the instant case, the supply of goods as well as the service happens at the same time hence the supply can be considered to be in conjunction - it can be safely deduced that the supply made by the applicant is a composite supply, the same has also be accepted by the appellant in their grounds of appeal. The appellant, as a part of their defence, has also put forth their practical difficulties while discharging their legal obligation under EPCG/ Advance License Scheme or under supplies to SEZ, they have also shown their inability to claim refund under the category of deemed export. Without going into the merits of the practical difficulties presented by them we observe that such arguments should not have any bearing on the outcome of the legally explained order. The classification of goods or services cannot be made merely on the ground that classifying their supply in a particular manner will deprive them from other benefits. There are no infirmity in the ruling of the Advance Ruling Authority.
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2022 (3) TMI 180
Availability of concessional rate of GST - works contracts - execution of works for Telangana State Industrial Infrastructure Corporation Limited (TSIIC) - construction for administrative building for the TSIIC - taxable at 12% as prescribed in of S. No. 3 (vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended or not - appropriate rate and classification of GST to be charged by the applicant - HELD THAT:- TSIIC being wholly owned by Government of Telangana qualifies to be a Government entity under the term Government entity . The Memorandum of Association of TSIIC at clause III(a)(3) clearly states that the company pursues the objectives to implement the schemes of incentives, subsidies and the like formulated by the Government of Telangana or Government of India or other authorities or institutions and to administer such schemes of incentives from time to time in the interest of establishments and development of industries. Thus TSIIC organization works to further the policies of the State Government, Central Government and Local Government for development of industries in the State of Telangana. The applicant has executed works contracts for TSIIC which is a Government entity - this work is construction of Administrative building. Therefore the civil structure is not meant for commerce/industry or any other business - the Government entity i.e., TSIIC has procured the works contract service in relation to the work entrusted to it by the State Government. Thus, the works contract executed by the applicant for construction of Administrative building for TSIIC falls under Sr No. 3(vi) of Notification No. 11/2017-CT (Rate) as amended till date and therefore taxable at the rate of 6% under CGST SGST each. However for works executed from 01-01-2022, the rate shall be 9% under CGST SGST each as the Phrase Governmental authority or Governmental entity is excluded, vide notification Number. 15/2021, dated.18.11.2021.
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2022 (3) TMI 179
Classification of goods - pharmaceutical Pellets and Granules - to be classified as Medicaments under Sl.No.62 of Schedule II of the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017? - taxable to GST at the rate of 12%? - HELD THAT:- Each of the products has a therapeutic or prophylactic uses such as treatment of fungal infection, muscle relaxing for prostane, treatment of nausea, parkinsons, depression, gastro esophageal reflex disease, hay fever, pain and fever, strokes, joint stiffness, inflammation, headache and high blood sugar. However, for one product by name Orlistat, the use is given as weight loss and not treatment of any disease. Obesity is not a disease and hence reduction of weight cannot be seen as a treatment against a disease - therefore except the product Orlistat which does not fit into the above definition, others fall under medicaments used in therapeutic or prophylactic applications. The commodities dealt by the applicant except Orlistat qualify to fall under Serial No. 62 of the 2nd Schedule to the Notification No. 01/2017 dated:28.06.2017 and therefore are liable to be taxed at the rate of 12%.
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Income Tax
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2022 (3) TMI 222
Settlement Commission u/s 245C - Powers and procedure of Settlement Commission - legality and validity of the show cause notice issued by the Assessing Officer under Section 153A / 143(3) - whether the impugned show cause notice could have been issued pending the adjudication before the Settlement Commission? - HELD THAT:- The proviso to Sub-section (2) makes it abundantly clear that if any application has been made under Section 245C on or after the first day June 2007, it is the Settlement Commission who shall have the exclusive jurisdiction from the date on which the application was made. In view of the aforesaid, the impugned show cause notice issued under Section 153A read with Section 143(3) of the Act could not have been issued. The same could be said to be without jurisdiction.On the above short ground alone, this writ application succeeds and is hereby allowed. The impugned notice is hereby quashed and set aside
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2022 (3) TMI 221
Stay of demand - attachment order attaching pension bank account - HELD THAT:- It is not in dispute that the aforesaid application is yet to be looked into by the AO What emerges as on date is that there is an appeal before the CIT against the assessment order and there is an application filed by the writ applicant addressed to the AO for release of the pension account. We dispose of this writ application with a direction to the jurisdictional AO to take up the application filed by the writ applicant dated 12th April 2021 and decide the same in accordance with law within a period of two weeks from the date of receipt of the writ of this order. We also permit the writ applicant to file an appropriate application before the CIT(A) for the purpose of stay of demand. It is now well settled that the CIT(A) has an inherent power as an appellate authority to pass an appropriate interim order pending the final disposal of the appeal including stay of recovery. If any such application is filed by the writ applicant, the CIT(A) shall take it up for hearing expeditiously and pass an appropriate order.
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2022 (3) TMI 220
Addition u/s.68 - AO rejected the contention on the ground that the assessee could not furnish L.R. Receipt Numbers, Freight/Transport receipts etc - HELD THAT:- View point of the AO that the entire gross commission was chargeable to tax. Here is a case in which the assessee suo motu offered income from Turmeric trading activity - AO has not only taxed this income but also made an addition of ₹ 13.12 lakh on account of gross commission income from Sh. Bharat Nilakhe. He went a step further by also adding a sum when received from Sh. Bharat Nilakhe on account of profit from sale and purchase of turmeric, which also included a sum in the name of Sh. Kailash Gidwani HUF account. In view of the fact that the transactions of the assessee concerning purchase and sale of Turmeric were genuinely conducted through Sh. Bharat Nilakhe, in the same way in which he did with other more than 100 traders in Sangli, genuineness of all of which has been accepted by the Department, there is no logic in making or sustaining the additions in the hands of the assessee, which are just off shoot of such a trading activity. These additions are directed to be deleted. Addition of deemed dividend u/s.2(22)(e) - CIT(A) directed the AO to verify his records and if the transaction related to previous year relevant to the assessment year 2009-10, then no addition should be made - HELD THAT:- It is seen that the assessee contended before the ld. CIT(A) that the sum in question was received and taxed in the immediately preceding year. CIT(A) sent the matter back to the AO for carrying out necessary verification in this regard, which ought to have been done by him alone because now there is no power with the CIT(A) to restore the matter to the AO. DR failed to bring on record any material contrary to the assessee s claim as made before the ld. CIT(A) that the sum was received during the earlier year from M/s Apeksha Impex Ltd. therefore, order to delete the addition.
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2022 (3) TMI 219
Estimation of profit - Profit percentage @30% in respect of advances received from the project in earlier years - search and seizure action u/s. 132 - HELD THAT:- Revenue in the instant case has not doubted the profit percentage of 30% offered by the assessee for the year under consideration. The assessee has also not retracted the said offer of profit percentage @30%. But since projected receipts and actual receipts were substantially different, there was no occasion for the assessee to keep up its commitment given in the statement u/s. 132(4) - Hence, we are in complete agreement with the arguments advanced by the ld. AR in this regard. In view of the aforesaid observations, we have no hesitation in holding that the revenue had not made any case at all for taxing the opening balance of advances received against construction project as on 31/03/2012 by applying the differential profit percentage of 14% during the year under consideration. Accordingly, the ground No. 1 raised by the assessee is allowed. Chargeability of interest u/s. 234B and 234C of the Act which are consequential in nature. The law is now very well settled that interest u/s. 234C of the Act should be only on the returned income and not on the assessed income. Penalty u/s. 271(1)(c) of the Act which would be premature for adjudication at this stage and hence dismissed.
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2022 (3) TMI 218
Power to Addl. CIT to perform as AO - Validity of the assessment order - Order passed by Addl.CIT with or without proper authorization - whether Department validly authorize or empower the Addl.CIT to act as an Assessing Officer? - jurisdiction of Addl. CIT to pass the assessment order in the absence of any order from the Board and subsequent authorization by the concerned CIT/PCIT u/s. 120(4)(b) - HELD THAT:- Issue squarely covered in favour of assessee by the order of Tribunal in assessee s own case none of the notifications referred to by the Department validly authorize or empower the Addl.CIT to act as an Assessing Officer. In the present case as well the Revenue has not been able to produce the authorization u/s. 120(4)(b) of the Act.Thus in view of the facts of the case and the decisions relied on by the assessee, we find merit in the additional grounds challenging validity of assessment order passed by Addl.CIT without proper authorization. The assessee succeeds on the additional ground of appeal
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2022 (3) TMI 217
Revision u/s 263 - eligibility to Exemption u/s 11 - AO had not properly assessed the income, for the reason that the assessee had been granted excess exemption of 15% of its income on grants from state government - as per AO had not properly assessed the income, for the reason that the assessee had been granted excess exemption of 15% of its income on grants from state government assessee contending that since it was substantially financed by the state its income in any case was exempt u/s 10(23C)(iiiab) of the Act and that alternatively even after denying exemption of 15% of the grants of ₹ 4.72 crores, the assessee was still eligible for exemption of its entire income u/s 11 of the Act on account of application of its income for capital purposes. - HELD THAT:- assessee contending that since it was substantially financed by the state its income in any case was exempt u/s 10(23C)(iiiab) of the Act and that alternatively even after denying exemption of 15% of the grants of ₹ 4.72 crores, the assessee was still eligible for exemption of its entire income u/s 11 of the Act on account of application of its income for capital purposes. Alternative contentions of the assessee that even without claiming 15% exemption of its income from Government grants, it was entitled to exemption u/s. 11 of the Act after taking into account the amounts utilized for capital purposes - CIT(E), we find has rejected this contention of the assessee by stating that the assessee's claim of utilization of its income in capital asssets tantamounts to revising its return and therefore the contention is not acceptable. We are not in agreement with the same. The assesse s claim of exemption of its entire income has remained unchanged and unrevised. What has only changed is the basis of the claim that too without foregoing its original basis and as an alternate only and that too when confronted with the prospect of being denied exemption of 15% of Govt. grants as originally claimed. The same does not tantamount to revising its return by any chance. Also if the alternate basis of claim of the assessee was as per law the assessment order could not be held erroneous in allowing benefit of exemption u/s 11 to the assessee. Without any finding to the contrary the Ld.CIT(E) we hold had erred in finding the assessment order erroneous on this count. Thus it is abundantly clear that there was no basis with the Ld. CIT(E) at all for arrive at his finding that the assessment order passed in the present case was in error by allowing the assessee exemption of 15% of its income from Government grants. We therefore hold that the Ld.CIT(E) has failed to find any error causing prejudice to the Revenue in the present case - Decided in favour of assessee.
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2022 (3) TMI 216
Addition as short term capital gain by invoking the provisions of section 50C - determination of market value of asset as on the date of sale by the DVO - difference between the declared sale consideration and the value determined by the DVO - HELD THAT:- In the facts of the present case, admittedly, after determination of market value of asset as on the date of sale by the DVO, the difference between the declared sale consideration and the market value is within the range of 5%, as referred to, in third proviso to section 50C(1) of the Act. This, being a beneficial provision, in our considered opinion, the benefit provided under the third proviso to section 50C(1) of the Act, should be extended to the assessee, as, ultimately the value determined by the Stamp Valuation Authority has been substituted by DVO's valuation in terms of sub-section (3) of section 50C of the Act. Thus, in our considered opinion, the addition towards short term capital gain needs to be deleted. Accordingly, we delete the same.
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2022 (3) TMI 215
Deduction u/s 43B denied - Non entertaining revised claim made by the assessee - revised claim of the assessee qua deduction claimed under Section 43B has been rejected by learned first appellate authority simply due to lack of supporting evidences - HELD THAT:- As it is fairly well settled, though, before the Assessing Officer, the Assessee can make a revised claim only through a revised return of income filed under Section 139(5) however, there is no such restriction before the appellate authority. Therefore, the revised claim made by the assessee can be entertained by the appellate authority, subject to, factual verification. In the facts of the present appeal, revised claim of the assessee qua deduction claimed under Section 43B of the Act has been rejected by learned first appellate authority simply due to lack of supporting evidences. Without entering into the controversy, whether the assessee has filed the supporting evidences qua its revised claim of deduction under Section 43B of the Act, we are inclined to restore this issue to the file of the Assessing Officer for examining the claim of deduction made by the assessee under Section 43B of the Act in the revised computation of income based on the evidences available on record. Thus liberty is granted to the assessee to furnish any other evidence before the Assessing Officer in support of its revised claim of deduction under Section 43B of the Act. It is made clear, the Assessing Officer has to decide the revised claim of the assessee strictly in accordance with the evidences filed by the assessee. Assessee appeal is allowed for statistical purposes.
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2022 (3) TMI 214
Reopening of assessment u/s 147 - 2nd reopening of assessment - Long term capital gain on sale of agriculture land - Whether property belongs to HUF as it was ancestral property belonging to great grandfathers? - assessment was reopened in the status of HUF but the assessment completed in the status of individual - HELD THAT:- The subject land property was ancestral property and therefore the capital gains is required to be assessed in the hands of Shri Kewal Singh HUF as observed by CIT appeal in the earlier proceedings where case was reopened in the hands of HUF whereas assessment was completed in the hands of individual and so it was held invalid. The facts that share of long-term capital gain in the case of Shri Beldev Singh one of the brother of the assessee was assessed and confirmed in individual status cannot be a basis for again reopening the case of the appellant in individual status on the same facts. The finding of the CIT appeal, ignoring the affidavit filed by the assessee proving that the property belongs to HUF with the support of necessary evidences as and admitted by the AO that the property was ancestral property. AO and the CIT appeal has been silent as to how many heirs of first degree how the land was divided among legal years in absence of any will, agreement and decree to decide the status of the person in the case of the appellant. The question of status granted by CIT appeal to Sh Baldev Singh (Individual) was whether incorrect and capital gains need to be taxed under the status of Baldev Singh HUF remain undecided on merits as Sh Baldev Singh had withdrawal its appeal to buy peace of mind and avoid litigation and accordingly, the appeal of the assessee was dismissed by Hon ble ITAT, Amritsar vide order dated 20-|0-2016 as dismissed withdrawn cann t be said to have attained finality. Thus, the learning said appeal was factually wrong in observing so, and in our view such reopening of the assessment on the same material facts amounts to change of opinion by the AO where in the first instance he has reopened the assessment of the appellant in the status of HUF and in the second instance in the status of individual by the change of opinion which is not permitted in the eyes of law. Thus we hold that in the present case, the ancestral property is owned by the assessee in the HUF status and so the appellant s case was to be reopened under section 147 of the act in the status of HUF and consequently assessed in the status of HUF. We are of the view that the notice issued u/s 148 by the AO was illegal, and void abinitio. - Decided in favour of assessee.
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2022 (3) TMI 213
Capital Gain Tax on sale of flats - CIT(A) directing the AO to re-compute the Capital Gain Tax on sale of flats at the rate applicable for long term capital gains i.e. 20% instead of 30% applicable to short term capital gains as the flats were held for more than 3 years - HELD THAT:- Similar issue was considered and adjudicated by the Coordinate Bench in assessee s own case for the A.Y. 2013-14 [ 2021 (1) TMI 74 - ITAT MUMBAI] and decided the issue in favour of the assessee as held deeming fiction of section 50 is limited and cannot be extended beyond method of computation of the gain. That the distinction between short term and long term capital gain is not obliterated by this section. Hence, we respectfully follow the same and reject this submission of learned Departmental Representative - Also see V.S. DEMPO COMPANY LTD. [ 2016 (10) TMI 62 - SUPREME COURT] . This additional ground is allowed.
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2022 (3) TMI 212
Penalty u/s 271(1)(c) - Disallowance of business expenditure - HELD THAT:- No doubt assessee is not carrying out any business activity. However, the business of the assessee is not completely wind up by the state government and when assessee has to incur certain expenditure in order to keep the establishment alive we observe that assessee has earned only other income and not earned business income from receipts. Further, we observe that the assessment proceedings and penalty proceedings are two different proceedings we are in agreement with the finding of the Ld.CIT(A) that a particular claim made legitimately in the return of income and not allowed because of provision, the mere disallowance of legitimate claim where the factual matrix has not been suppressed, penalty cannot be leviable. In the given case assessee has brought on record all the relevant information that assessee has not carried out any business activity however it has incurred certain expenditure and claimed the same as allowable under the head business expenditure . However, the tax authorities thought it differently and disallowed the same. Merely because tax authorities has not allowed the expenditure claimed by the assessee it is certainly falls within the category of particulars declared by the assessee and the fact are same to the facts of CIT v. Reliance Petro Products (P) Ltd. [ 2010 (3) TMI 80 - SUPREME COURT ] Therefore, we are in agreement with the finding of the Ld.CIT(A), accordingly, we do not see any infirmity with the decision of the Ld.CIT(A). Accordingly, ground raised by the revenue is dismissed.
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2022 (3) TMI 211
Revision u/s 263 by CIT - Unexplained cash credit - As per CIT-A AO is erroneous on account of making inadequate enquiry and lack of verification at the time of making assessment in respect of cash deposit in the bank account with State Bank of Patiala, Pilibanga by holding that the assessment has been framed without making inquires - assessee was selected for scrutiny assessment under CASS for verifying the source of cash deposits in the assessee s bank A/c - HELD THAT:- AO after necessary deliberations had taken a possible and a plausible view, therefore, the Pr. CIT was clearly divested from exercising his revisional jurisdiction u/s 263 of the Act. Our aforesaid view, that where an AO after making proper and detailed inquiry had on the basis of a possible view accepted the assessee s claim, then, the CIT in the garb of his revisional jurisdiction u/s 263 of the Act cannot direct the AO to carry out a fuller enquiry, is supported by the judgment of Nirav Modi [ 2016 (11) TMI 1498 - SC ORDER] . In the aforesaid case, the AO after making a proper and detailed inquiry had formed a view that the amount received by the assessee as a gift from his relative was a genuine transaction. However, the CIT set-aside the order passed by the AO, with a direction to inquire into the capacity of the donors and therein decide about the genuineness of the gift transaction afresh. On appeal, it was, inter alia, observed by the Hon ble High Court, that where there are two possible views and the AO had taken one of the possible views, then no occasion to exercise powers of revision can arise. It was observed by the Hon ble High Court that the CIT could not have exercised his revisional jurisdiction for directing a fuller inquiry to find out if the view taken was erroneous, specifically when the view was arrived at by the AO after an inquiry. We are unable to persuade ourselves to find favor with the order passed by the Pr. CIT, Bathinda u/s 263 and thus set-aside the same and restore the order passed by the AO u/s 143(3) - Decided in favour of assessee.
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2022 (3) TMI 210
Addition u/s 68 - loan received from seven individuals - HELD THAT:- Assessee has discharged the burden on him to prove the identity, creditworthiness and genuineness of the loan transaction. And it is noted that the AO has not been able to controvert the material placed before him by finding any infirmity in it. Thus it is noted that the AO has drawn adverse inference against the assessee without any basis and it was only on the basis of surmises and conjectures. Other than alleging that there was deposit of cash before the cheque was given to the assessee as loan, it is noted that the AO has not taken one step ahead from that observation. When the AO noticed that there was deposit of cash just before the cheque was given to the assessee as loan, then that should have been the triggering point to enquire into the genuinety of the claim; and he should have enquired from these lenders about the purported deposit of cash in their accounts before lending money to assessee. However, no such enquiry has been made by the AO to draw adverse inference against this loan transaction. Moreover, it is noted that the AO on same breath has given a finding of fact that these seven creditors had enough cash in hand as on 31.03.2012 - no addition u/s. 68 of the Act was warranted . Therefore, the addition and the interest payment is directed to be deleted.
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2022 (3) TMI 209
Reopening of assessment u/s 147 - Addition of unexplained cash-credit in terms of sec.68 - as argued approval granted by Addl. CIT u/s 151(2) was given in a mechanical manner without application of mind - HELD THAT:- Addl. CIT has given the approval under a wrong section i.e. section 147(b) of the Act, whereas, the said section 147(b) stood omitted from Income Tax Act w.e.f. 01.04.1989. That the approval was given by the Addl. CIT under non-existent section, in a mechanical manner, without application of mind and hence, in the absence of valid approval as mandated by law u/s 151, the reopening of the assessment u/s 147 r.w.s. 148 of the Act is bad in law and without jurisdiction and hence is liable to be quashed. As per the provisions of section 147 of the Act, the Assessing Officer (in short AO ) is authorized to reopen the assessment proceedings, if he has reason to believe that any income chargeable to tax has escaped assessment. The courts of law have time and again held that such a reason to believe that the income of the assessee has escaped assessment should be based on some tangible material which comes to the knowledge of the AO. An assessment cannot be reopened under section 147 of the Act on the basis of mere suspicion. The Ld. Counsel for the assessee, as discussed in earlier paras of this order, has placed reliance on the reasons recorded by the AO for formation of belief that the income of the assessee has escaped assessment to submit that the same are not valid reasons. As approval granted by the Addl. CIT reveals that the Assessing Officer had mentioned the relevant section as 147(b) which admittedly has been omitted from the Statute w.e.f. 01.04.89 and further without application of mind to the contents of the aforesaid proposal, the Ld. Addl. CIT granted approval in a mechanical manner by saying Yes , even without application of mind that the approval has been sought under wrong section. The aforesaid contents of the approval clearly shows that the approval has been granted by the Addl. CIT in a mechanical manner without application of mind. In the case of Omkam Developers Ltd. [ 2021 (5) TMI 414 - ITAT DELHI] the Coordinate Bench of the Tribunal while relying upon the decision in the case of PCIT Vs NC Cable Ltd [ 2017 (1) TMI 1036 - DELHI HIGH COURT] has held that mere mentioning Yes for approval without any evidence of application of mind amounts to mechanical approval by CIT. Under the similar circumstances, wherein, the section for invoking reassessment has been recorded as section 147(b), the Coordinate Bench of the Tribunal observed that this showed that the Assessing Officer had filled proforma in a mechanical manner and the Ld. CIT(A) has also approved the same mechanically. Since the approval in this case was granted in a mechanical manner without application of mind by the Ld. Addl. CIT, therefore, the same does not constitute a valid approval u/s 151 of the Act and hence, the assessment of jurisdiction to reopen the assessment by the Assessing Officer on the basis of invalid approval was bad in law. - Decided in favour of assessee.
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2022 (3) TMI 208
Addition u/s 56(2)(vii)(b) - alleged excess value of unquoted equity shares as issued by the Appellant at a premium over fair market value as determined by the AO - HELD THAT:- As decided in INTELLIGRAPE SOFTWARE PVT. LTD. VERSUS INCOME TAX OFFICER, WARD-12 (3) , NEW DELHI [ 2020 (10) TMI 403 - ITAT DELHI] AO was not able to pinpoint any specific inaccuracies or short comings in the DCF valuation report of the Chartered Accountant/Valuer other than stating that year-wise results as projected are not matching with the actual results declared in the final accounts. Before the ld. CIT(A), reasons for variation between projected and actuals were duly explained. The ld. CIT(A) has accepted such explanation but rejected the DCF valuation report as submitted by the assessee. Accordingly, in the absence of any defect in the valuation of shares arrived by the assessee on the basis of DCF method, impugned addition as made on the basis of net asset value method is liable to be deleted. The rejection is unjustified as the valuation report is required under Rule 11UA of The Income Tax rules is based on the future aspects of the company at the time of issuing the shares, it may vary from the actual figures depending on the market condition at the present point of the time. Thus keeping in view the entire facts of the case, the reports of the valuer, the comparison of the actual and projected revenues, provisions of Section 56(2)(viib) and keeping in view the order of Cinestaan Entertainment Pvt. Ltd. [ 2019 (6) TMI 1367 - ITAT DELHI] wherein it has been held that the Assessing Officer cannot substitute his own value in place of the value determined either on DCF method or NAV method, the appeal of the assessee is hereby allowed.
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2022 (3) TMI 207
Late remittance of employees contribution to PF and ESI - As contended that assessee has paid the employees contribution prior to the due date of filing of return u/s 139(1) - HELD THAT:- On identical facts, the Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [ 2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down by the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] had held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1). The amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. Employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee.
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2022 (3) TMI 206
Disallowance u/s 14A r.w.r. 8D - CIT-A restricted the disallowance to the extent of dividend income earned by the assessee company during the year under consideration - HELD THAT:- It is settled principle of law that disallowance u/s 14A read with Rule 8D cannot be more than the dividend income earned and in this view of the matter, we find no illegality or infirmity in the findings returned by ld. CIT (A), hence grounds no.1 2 are determined against the Revenue. TAN defaults - late payment interest made disallowance of the same amount by adding the same back to the total income of the assessee on the ground that no supporting document/evidence has been brought on record by the assessee - HELD THAT:- Following the decision rendered in case of Oriental Insurance Co. Ltd. vs. CIT [ 2008 (10) TMI 230 - KARNATAKA HIGH COURT ] wherein it is held that, similar deduction towards payment of interest on delayed payment of TDS was allowed . Since this payment made by the assessee cannot be treated as a tax but compensatory in nature, hence allowable expenses u/s 37 of the Act. So, finding no infirmity or perversity in the impugned findings, ground no.3 is determined against the Revenue. Disallowance @ 10% of the total expenses on ad hoc basis towards repair and maintenance expenses - HELD THAT:- Since AO has not disputed audited financials of the assessee company rather proceeded to make an ad hoc disallowance merely on the basis of surmises which is not sustainable in the eyes of law. CIT (A) after thrashing the facts proceeded to delete the disallowance of the expenses in question claimed by the assessee by treating the same having been incurred for the purpose of business. So, finding no illegality or perversity in the impugned findings, ground no.4 raised by the Revenue is hereby dismissed.
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2022 (3) TMI 178
Reopening of assessment u/s 147 - Income Tax Officer/respondent No.2 jurisdiction to issue notice - investments held by the petitioner are to be treated as stock-in-trade and not as capital assets and that the petitioner should have computed the income tax liability under the head profits and gains from business or profession and not under the head capital gains - HELD THAT:- As brought to our notice that in response to impugned notice dated 30.03.2021, petitioner has filed its reply on 28.04.2021 inter alia stating therein that the Income Tax Officer/respondent No.2 does not have the jurisdiction to initiate the re-assessment proceedings against the petitioner in light of 3rd proviso to Section 147. This fact has not been denied by learned Senior Counsel for the respondents-department. In light of the submissions made by learned counsel for the parties, we dispose of the instant writ petition by directing that the jurisdictional/preliminary issue raised by the petitioner in its reply filed to the impugned notices, shall be decided first by respondent No. 2/Income Tax Officer. In case of decision going against the petitioner, it shall be granted 15 days time to avail appropriate remedy in accordance with law for redressal of its grievances in accordance with law.
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2022 (3) TMI 177
Validity of reopening of assessment u/s 147 - re-assessment notice issued under the erstwhile section147/148 after 1.4.2001 without following the mandate of new section 148A - Notice as barred by limitation - enforcement of the Enabling Act and the Finance Act, 2021 - scope of provisions of Section 148 read with Section 148A as substituted by Finance Act, 2021 - scope of provisions of Section 148 read with Section 148A as substituted by Finance Act, 2021 - substituting the provisions of the Act by means of the Finance Act, 2021 with effect from 01.04.2021, the old provisions were omitted from the statute book and replaced by fresh provisions with effect from 01.04.2021 - time limitation existing under the Act had been extended under the Ordinance - relaxation of limitation granted on account of general hardship existing upon the spread of pandemic COVID -19 - HELD THAT:- In view of judgments and orders of this Court in the case of Manoj Jain [ 2022 (1) TMI 741 - CALCUTTA HIGH COURT ] . AND BAGARIA PROPERTIES AND INVESTMENT PVT. LTD. [ 2022 (1) TMI 742 - CALCUTTA HIGH COURT ] Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void. All the impugned notices under Section 148 of the Income Tax Act are quashed with liberty to the Assessing Officers concerned to initiate fresh re-assessment proceedings in accordance with the relevant provisions of the Act as amended by Finance Act, 2021 and after making compliance of the formalities as required by the law.
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2022 (3) TMI 176
Compounding of the offence under Section 276CC read with Section 278E - compounding of the offences rejected on the ground that the application seeking compounding of the offences has not been filed within the stipulated time and that the petitioner already stood convicted by the learned Additional Chief Metropolitan Magistrate (Special Acts) Central, Tis Hazari Courts, Delhi - HELD THAT:- For application has been filed beyond the period of limitation in view of the CBDT circular dated 09.09.2019, the said objection does not survive any further. As far as the conviction is concerned, in view of the order dated 03.12.2018 passed by the learned Special Judge, the said objection also no longer survives as the conviction has been set aside. As far as the Impugned Order dated 29.01.2020 dismissing the application seeking review is concerned, we find that the reason given is untenable in law. The conviction having been set aside by the learned Special Judge, application seeking compounding of the offence cannot be rejected on the ground that the petitioner has not been acquitted of the criminal charges. In fact, such application is premised on the fact that the petitioner is facing such criminal charge and not been acquitted thereof. Submissions of learned counsel for the respondents that on facts of the case the petitioner is not entitled to seek compounding of the offence, as the applications have been dismissed without considering the merit of the same, we refrain from expressing any opinion thereon. It shall be open to the respondent no.1 to consider the application filed by the petitioner seeking compounding of the offences on its own merit and in accordance with law. The Impugned Order are set aside. The respondent no.1 is directed to consider the application of the petitioner seeking compounding of the offence under Section 276CC read with Section 278E of the Act for the Assessment Years 2008-09 to 2013-14 on merit and in accordance with law.
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2022 (3) TMI 175
Accrual of income towards retention money - assessee s case was that the retention money is payable after certain period of time on the satisfactory performance of the contract executed by the parties as per the terms of the agreement and could not be said to be accrued to the assessee at the time of raising invoice and could be said to be accrued only after the customer accepts its claim for satisfactory completion of the contract- HELD THAT:- The Court noted that only after the assessee fulfilled their obligations under the contract, the retention money would be released and the assessee would secure the right to receive such retention money. Thus, it was held that when the bills were submitted having regard to the nature of the contract, no enforceable liability accrued or arose and, accordingly, it could not be said that the assessee had any right to receive the entire amount on the completion of the work or on the submission of the bills. It was held that the assessee had no right to claim any part of the retention money till the verification of satisfactory execution of the contract. The above decision would apply with full force to the case on hand. That apart the CIT(A) as well as the tribunal have examined the sample contract produced by the assessee which they have entered into with the third party customers/parties and found on facts that the assessee would be entitled to the amount retained only upon satisfactory completion of the work which would be certified by the contracting parties.Hence, the present appeal on the said issue needs to be rejected. Accordingly, substantial question of law no.B is answered against the appellant/revenue.
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2022 (3) TMI 174
Addition u/s 68 - Unexplained cash credit - non-filing of confirmation of the creditors - HELD THAT:- Provisions of section 68 would reveal that credit of any sum in the books of the assessee for the relevant previous year is sine-qua-non for its applicability. The case of the assessee is that no sum is credited in the books of the assessee in the previous year relevant to the assessment year under appeal in the name of any of the ten creditors in respect of whom the impugned addition has been made. No material has been brought on record by the Revenue to controvert this position. According to us, the primary condition of applicability of section 68 is not satisfied in the case of the assessee. If that be so, insistence by the Ld. AO/CIT(A) upon production of confirmatory letters by the creditors is irrelevant. No doubt, the onus of proving the identity, creditworthiness and genuineness of transaction lies upon the assessee but only if the provision of section 68 applies to him. In the case at hand, the provision of section 68 itself is inapplicable to him. We, therefore, hold that the impugned addition is not based on solid legal ground and is deleted. - Decided in favour of assessee. Disallowance u/s 37 and disallowance u/s 32 - AO made the impugned disallowances out of telephone, internet, travelling, car maintenance, car insurance and depreciation on car expenses claimed by the assessee on account of possible element of personal use - CIT(A) confirmed the disallowance - HELD THAT:- Before us the Ld. AR submitted that all the expenses have been incurred only for business purposes of the assessee. It was stressed that the assessee had provided the Ld. AO the copy of ledger account and also relevant vouchers/invoices towards incurring of such expenses. AO did not question the genuineness of the expenses. After hearing the Ld. Representatives of the parties, we are of the view that the impugned disallowances are based only on surmises and conjectures and not on any adverse material brought on record. We, therefore, delete the impugned disallowances. - Decided against revenue.
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2022 (3) TMI 173
Disallowing employees' contribution to PF ESI as paid before the due date of filing of the return of income u/s. 139(1) - Scope of amendment by Finance Act, 2021, to section 36[1][va] and 43B - HELD THAT:- As in Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [ 2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd Vs. DCIT [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) - Also further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction - Decided in favour of assessee.
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2022 (3) TMI 172
Reopening of assessment u/s 147 - Valid grant of approval u/s. 151 or not - As per assessee authority granting the sanction u/s. 151 of the Act, viz. Pr. CIT, Bhatinda, had granted the approval in a mechanical manner, i.e., without application of mind - HELD THAT:- A mere scribbling or stating Yes would not suffice the statutory requirement of Sec. 151 of the Act, i.e., satisfaction on the part of the sanctioning authority, on the reasons recorded by the A.O, that it is a fit case for issuance of a notice u/s. 148 of the Act. As provided in Section 151 of the Act, no notice u/s. 148 is to be issued by an AO unless the specified approving authority is satisfied, on the reasons recorded by the AO, that it is a fit case for the issue of such notice Section 151 requires an officer of the rank of a Joint Commissioner of Income-tax to oversee the decision of the AO where the return originally filed was assessed u/s. 143(3) of the Act, and further, in a case where such reopening of an assessment is sought to be made after the expiry of a period of four years from the end of the relevant assessment year, then, the said obligation is shifted on a superior officer as therein contemplated. In our considered view, as the reopening of a case results to disturbing the finality of a concluded assessment, therefore, the authorities specified for granting of approval u/s. 151 of the Act remain under a statutory obligation of clearly applying their mind on the reasons to believe recorded by the AO and, only after being satisfied that it is a fit case for issuance of Notice u/s. 148 of the Act, approve the same. In our considered view, mere scribbling of Yes by the approving authority, as is the case before us, can by no means suffice the statutory obligation cast upon him for granting approval after due application of mind for issuance of notice u/s. 148 of the Act by the AO, as the said statutory check would otherwise be rendered as a mere idle formality, nugatory or in fact nothing better than an eye wash, which would beyond any doubt defeat the very purpose for which the said supervisory jurisdiction of the superior authorities had been made available on the statute by the legislature. Our aforesaid conviction is supported by the order of this Tribunal in the case of Shri Charanjiv Lal Aggarwal[ 2017 (4) TMI 390 - ITAT AMRITSAR] and SHRI TRALOCHAN SINGH [ 2021 (9) TMI 329 - ITAT AMRITSAR] We, thus, in terms of our aforesaid observations, are of the considered view, that as in case of the assessee before us the prescribed authority, viz. Principal Commissioner of Income-Tax, Bhatinda, had granted the approval u/s. 151 of the Act in a mechanical manner, i.e., without application of mind to the facts of the case as were there before him, therefore, the assessment framed by the AO u/ss. 143(3)/147 cannot be sustained and is liable to be vacated. - Decided in favour of assessee.
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2022 (3) TMI 171
Unauthenticated loose documents seized from the premises of some other party - Addition based on unauthenticated documents - HELD THAT:- Search conducted in the case of M/s. Kartika Gold Enterprises, the documents and details of purchase entered by M/s. Kartika Gold Enterprises have been found and seized. Based on the details of purchases, the Revenue authorities have added the entire quantum of the value of the sale of gold made by the assessee - addition of the entire amount cannot be held to be valid and there is no dispute that the sale to M/s. Kartika Gold Enterprises could not have been made without purchase of gold by the assessee. Hence, the cost of gold has to be deducted from the sale price and the profit earned by the assessee through the sale should be rightly brought to tax. The appropriate way to determine the profit earned by the assessee is to be based on the gross profit earned in the regular course of business. We find that the gross profit earned by the assessee as per the return was 1.42 per cent. as sustained by CIT (Appeals) with regard to the other transactions entered into by the assessee. Since, there is no dispute about the gross profit, keeping in view the other expenses which have already been debited in the regular books of account, we hereby hold that an amount of 1.9 per cent. of the total transaction would be the correct income evaded by the assessee. Appeal of the assessee is allowed for statistical purpose.
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2022 (3) TMI 170
Addition applying the provisions of Section 56(2)(viib) - excess share premium charged by assessee - as argued assessee was a Startup - AO did not agree with the valuation of the assessee - HELD THAT:- The submissions advanced on behalf of the assessee before the CIT(A) were a reiteration of the arguments as advanced before the AO namely, that the assessee was a Startup and the provisions of Section 56(2)(b) were not applicable. In the facts of the present case, the claim of being a Startup let alone availability of supporting evidence was not made. Assessee relied upon the CBDT Notification dated 09.08.2019 which has clarified the applicability of para 6 of the Gazette Notification which has taken into consideration the hardships faced by the Startup companies involving application of Section 56(2)(b) and has clarified that the said Notification will be applicable to those Startup companies also where addition u/s 56(viib) of the Act has been made in assessment order under the Income Tax Act before 19.02.2019 provided the assessee has specifically submitted declaration in Form No.2 that it fulfilled conditions mentioned in para 4 of the above referred notification. In the facts of the said case, the assessee thereafter, had filed Form No.2 in pursuance of para 5 of Notification dated 19.02.2019 on 23rd August, 2019. In the facts of the present case, we notice that the assessment order is dated 28.03.2016 and hence the assessee possibly may well argue that the said case is applicable, however, we find that in the facts of the said case, the Department had the benefit of the relevant documents whereas in the facts of the present case, the concerned authorities did not have the benefit of the factual claim supported by fresh evidences and hence have not taken into consideration either the legal position nor the factual position as is being now canvassed. Accordingly, we have deemed it appropriate to set aside this issue for fresh consideration on the basis of fresh evidences admitted and legal position thereon - Appeal of the assessee is allowed for statistical purposes.
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2022 (3) TMI 169
Validity of Reopening u/s 147 - non-issuance of notice under section 143(2) - HELD THAT:- In view of the decision of the hon'ble Supreme Court in the case of CIT v. Laxman Das Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT ] wherein it has been categorically held that non-issuance of notice under section 143(2) of the Act is a jurisdictional defect and cannot get cured by section 292BB of the Act, the reassessment framed in the hands of the assessee for the assessment year 2009-10 is herewith quashed. Estimation of income - bogus purchases - profit percentage was restricted to 12.5 per cent. - HELD THAT:- The assessee from its side had discharged its onus by filing all the relevant documents together with the confirmation from the said supplier including the PAN card, Aadhaar card, Income-tax return details of the supplier, among other relevant details. Hence, it could be conclusively proved that the assessee had discharged its onus to prove the genuineness of the purchases and merely because notice under section 133(6) of the Act, which had been duly served but not responded by the supplier, no adverse inference could be drawn on the assessee. We also find that absolutely no adverse inference has been drawn on the lower authorities on the documents furnished by the assessee. Hence, no addition could be made in the peculiar facts and circumstances of the instant case in the light of decision of the hon'ble jurisdictional High Court in the case of Pr. CIT v. Vaman International P. Ltd. [ 2020 (2) TMI 464 - BOMBAY HIGH COURT ] Thus we hold that no addition could be made on account of alleged ingenuine purchases in the peculiar facts and circumstances of the instant case. Accordingly, the grounds raised by the assessee on the merits are allowed for both the years. - Decided in favour of assessee.
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2022 (3) TMI 168
Nature of expenditure - non-recovery of security deposits provided to the landlords written off in the books of account are to be treated as a revenue expenditure - HELD THAT:- The assessee is dutybound to make the rent payment every month/year and the same has been claimed as a revenue expenditure in the books of account and allowable under the Act. We find the security deposits takes the character of assurance and the enduring benefit only if there is direct benefit obtained. But in the present case, the security deposit is provided to landlord and at the same time the assessee is paying the rent. The security deposit cannot be considered as an enduring benefit to the assessee as the rent is being paid. The situation changes if the assessee has provided only security deposit and no rent has been paid. The assessee has provided the security deposit and has been paying the rent regularly. We applying the principles of going concern concept, compare with the debtors, when the recovery is doubtful the claim is written off as bad debts in the profit and loss account. Assessee claim can be allowed as a revenue expenditure in this year and in future if the assessee could able to recover the money from the landlord in the legal suit or any other mode the same has to be offered as an income of the assessee. Accordingly, we set aside the order of the CIT (Appeals) and direct the AO to delete the addition and allow the grounds of appeal of the assessee.
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Customs
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2022 (3) TMI 205
Violation of principle of natural justice - documents not provided to the petitioner upon which the adjudicating authority relied in passing the order of adjudication - legal rights to cross-examine those witnesses on whose statement the adjudicating authority has relied, not allowed - HELD THAT:- On perusal of the impugned order of the Appellate Authority, it is found that the Appellate Authority has not considered and specifically dealt with particularly the aforesaid two grounds in his order and it can be said that the impugned order is a non-speaking order in this regard even without going into the merits of the case. In this case there was violation of principle of natural justice and the impugned order of the Appellate Authority is a non-speaking order on the aforesaid grounds taken by the petitioner in its memorandum of appeal filed before the Appellate Authority and accordingly, the impugned order dated 28th February, 2017 is set aside and remanded back to the Appellate Authority concerned on these two limited issues/grounds, which are non providing of documents to the petitioner upon which adjudicating authority has relied and denying the petitioner to cross-examine the witnesses in question on whose statement adjudicating authority has relied in its adjudication order. Appeal allowed by way of remand.
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2022 (3) TMI 204
Maintainability of application for settlement of the case - no show cause notice was issued by the respondents against the petitioners - application is premature before issuance of show cause notice or not - affidavit-in-reply filed by the respondents in the earlier writ petition filed by the petitioners opposing the reliefs and pointing out the stage of investigation against the petitioners pursuant to the summons issued by the respondents - show cause notice contemplated in proviso (a) to Section 127B(1), or not - HELD THAT:- A perusal of the said application for settlement of the case under Section 127B of the Customs Act, 1962 and under Rule 3 of the Customs (Settlement of Cases) Rules, 2007 indicates that in the said Form No.SC(C)-1 at Serial No.6 where the petitioners were required to submit the details of show cause notice issued to the petitioners, the petitioners referred to affidavit-in-reply-cum-notice from the respondent Commissioner which refers to investigations and seizure by DRI and their submissions placed on record and informing the case of alleged mis-declaration of material particulars intended for clearing mis-declared goods for home consumption in contravention of Rule 11 of Foreign Trade (Regulation) Rules, 1993, Section 46 of the Customs Act, 1962 - In paragraph 6 (c) of the said Form, the petitioners were required to disclose the duty demanded in the show cause notice. The petitioners stated that it was not quantified. In paragraph 10 of the said Form, the petitioners on their own mentioned the amount of duty which is payable according to the petitioners, without there being any quantification by the respondents. In the absence of a notice to show cause a mandatory jurisdictional requirement is not fulfilled. In absence of a notice to show cause, the Settlement Commission cannot assume jurisdiction. An assessee cannot by his own act of waiving the issuance of a notice to show cause confer jurisdiction upon the Settlement Commission - Admittedly in this case, no show cause notice has been issued by the respondents under any of the provisions of the Customs Act, 1962 for adjudication. There is no provision under the Customs Act providing for a deemed written show cause notice which could be considered as show cause notice which is condition precedent for filing an application for settlement under Section 127B(1) of the Customs Act, 1962. Whether affidavit-in-reply filed by the respondents in the earlier writ petition filed by the petitioners opposing the reliefs and pointing out the stage of investigation against the petitioners pursuant to the summons issued by the respondents can be construed as show cause notice contemplated in proviso (a) to Section 127B(1)? - HELD THAT:- The averments made in the affidavit-in-reply filed by the respondents for opposing the earlier writ petition filed by the petitioners challenging the Seizure Memorandum or applying for provisional release of seized goods followed by two Bills of Entry cannot amount to a show cause notice contemplated under Section 127B(1) of the Customs Act for invoking the said provision. Be that as it may, even in the said affidavit-in-reply filed by the respondents in Writ Petition No.8751 of 2021, no amount of duty, interest or any other recovery was mentioned by the respondents to be recovered from the petitioners. The Form SC(C)-1 filed by the petitioners itself was not filed in accordance with the said Form prescribed under Rule 3 of Customs (Settlement of Cases) Rules 2007 which was mandatory. Madras High Court in case of VC MOHAN VERSUS COMMISSIONER OF CUSTOMS (AIR) [ 2007 (10) TMI 83 - HIGH COURT MADRAS] has compared the provision of Section 245-D of Income Tax Act, 1961 with Section 127B(1) of the Customs Act, 1962 and has held that in the Income-tax law, application for settlement must be made before the investigation has started or before the statutory authority has collected any material or any notice is issued to the applicant. There must be a voluntary aspect in the disclosure of fact in concealment. In the present case, since the petitioners had not complied with the mandatory requirement, the application for settlement under Section 127B of the Customs Act filed prior to issuance of show cause notice by the respondents, the said application filed by the petitioners was not an application which could be adjudicated upon by the Settlement Commission under Section 127B of the Customs Act, 1962 - the said application filed by the petitioners without complying with the mandatory requirements under Section 127B(1) read with Rules being a defective application, was not maintainable at that stage and was premature. The Settlement Commission thus even otherwise could not have entertained such application based on self made laws of the petitioners by treating the affidavit-in-reply filed by the respondents in earlier writ petition as deemed written show cause notice. The Settlement Commission once again by letter dated 10th February 2022 signed by the Superintendent addressed to the petitioners pointed out the defects that neither there was any show cause notice in the instant case nor the same was pending before any adjudicating authority and thus it did not satisfy the definition of case in terms of section 127A(b) of the Customs Act, 1962. The respondents once again clarified that in view of those defects/deficiencies, it did not satisfy the condition for an application under section 127B(1) of the Customs Act, 1962 - the petitioners however did not cure the said defects as pointed out by the respondents again in the said letter dated 10th February 2022 but raised similar issues which were raised earlier in respond to the communication dated 2nd February 2022 vide their advocate s letter dated 14th February 2022. In these circumstances, the Settlement Commission issued a letter/order dated 6th February 2022 signed by the Commissioner and after referring the earlier correspondence exchanged between the parties informed the petitioners that application filed by the petitioners for settlement was defective or premature as no show cause notice was issued in the instant case as envisaged under proviso (a) to Section 127B(1) of the Customs Act or no show cause notice was pending before the adjudicating authority. The said application did not satisfy the definition of case in terms of section 127A(b) of the Customs Act, 1962. The said application thus could not be treated as an application under Section 127B(1) of the Customs Act, 1962 and was rightly returned in original to the petitioners. The petitioners were informed that the letter/order was issued with the approval of the Commissioner, Customs Central Excise and Service Tax Settlement Commission, Additional Bench, Mumbai. The petitioners on their own could not have assessed the duty payable on the goods which are the subject matter of two Bills of Entry and could not have paid the duty on its own to contend that the said application was maintainable. If the arguments of the learned senior counsel for the petitioners are accepted, any assessee would file an application for settlement by considering even the correspondence exchanged between the parties or affidavit-in-reply filed by the Revenue in another proceedings as show cause notice and based on such show cause notice, would compute the duty and other levy as may be leviable according to the self-assessment of the petitioners so as to claim immunity from prosecution and penalty. The writ petition is totally devoid of merit. Writ petition is dismissed.
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2022 (3) TMI 203
Levy of anti-dumping duty - Bills of Entry were assessed provisionally in view of the provisional levy under Notification No.79/2010-Customs dated 30.07.2010 - imports were made by the petitioner during the period between 30.07.2010 and 25.08.2011 - HELD THAT:- It is noticed that the petitioner has been sending representations from 2012, which has not been evoked any response from the respondent. Considering the fact that the issue appears to be answered by the Hon'ble Supreme Court in COMMISSIONER OF CUSTOMS, BANGALORE VERSUS M/S. G.M. EXPORTS OTHERS [ 2015 (9) TMI 1162 - SUPREME COURT] , this writ petition is disposed off without expressing any opinion on merits of the case, by directing the respondent to pass appropriate orders on the representations of the petitioner, to finalize the assessment in the subjected Bills of Entry mentioned in the representations of the petitioner. Petition disposed off.
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2022 (3) TMI 202
Maintainability of appeal - applicability of time limitation - whether the appeals filed by the department are time-barred for the reason that the review order has been passed beyond the time limit of three months as stipulated under section 129(D)(3) of the Customs Act, 1962? - refund of SAD - HELD THAT:- There is much delay in passing the review order. As per sub-section (3) of section 129D of the Customs Act, 1962, review order has to be passed within three months from the date of receipt or the communication of the order passed by the adjudicating authority. The Commissioner (Appeals) has granted several chances to the department to furnish details with regard to the date of receipt of the order passed by the adjudicating authority. In fact, the date of order of adjudicating authority itself is not furnished in many orders. The department has failed to comply with the directions passed by the Commissioner (Appeals) and thereupon he had no other way but to dispose of the appeals on the ground of limitation. However, the Commissioner (Appeals) instead of dismissing the appeals on limitation has given a further chance to the department to resubmit the appeals after obtaining the details with regard to the date of receipt of order by the reviewing authority. From the discussions made by the Commissioner (Appeals), it is explicit that the department has not been able to furnish any details as to the date of receipt of order by the reviewing authority. This Tribunal had also granted several adjournments to the department to obtain these details - ld. AR has not been able to place any such details with regard to the date of receipt of the order by the reviewing authority. There are no hesitation to conclude that the review order passed by the department is beyond the time-limit prescribed under sub-section (3) of section 129D of the Customs Act, 1962 and therefore the appeals filed before the Commissioner (Appeals) are time-barred. Appeal dismissed - decided against Revenue.
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2022 (3) TMI 167
Withdrawal of anti-dumping duty - imports of PVC Flex Film from the China PR - withdrawal of duty enforced by notification dated 08.08.2016, as further extended by notification dated 30.06.2021 upto 31.01.2022 - applicability of provisions of rule 23(3), rule 11 of the 1995 Rules to sunset reviews - HELD THAT:- Though the anti-dumping duty imposed under sub-section (1) of section 9A of the Tariff Act shall cease to have effect on the expiry of five years from the date of such imposition, but under sub-section (5) of section 9A, the Central Government, in a review, can extend the period of such imposition for a further period of five years if the Central Government is of the opinion that cessation of such duty is likely to lead to continuance or recurrence of dumping and injury. Rule 23 of the 1995 Rules provides that though the definitive anti-dumping duty shall be effective for a period not exceeding five years from the date of its publication, but an exception has been culled out namely that the designated authority can extend the period provided the designated authority comes to a conclusion upon a duly substantiated request by the domestic industry that the expiry of the anti-dumping duty would likely lead to continuation or recurrence of dumping and injury to the domestic industry. It also provides that rule 11 of the 1995 Rules would also be applicable to sunset reviews and rule 11 of the 1995 Rules requires the designated authority to determine threat of injury to the domestic industry taking into account all relevant facts in accordance with the principles set out in Annexure II of the Rules. The designated authority is mandated to undertake a rigorous examination of all the following three factors before deciding to continue the anti-dumping duty: (i) There is a duly substantiated request made by the domestic industry which implies that the domestic industry has to provide cogent evidence to substantiate its claim; (ii) There is a likelihood of continuation or recurrence of dumping in case duties are revoked; and (iii) There is likelihood of continuation or recurrence of injury to the domestic industry in case duties are revoked. In the present case, the designated authority discontinued the anti-dumping duty since the first and third conditions were found on determination to be absent. To substantiate that cessation of anti- dumping duty, which had earlier been levied by notification dated 25.08.2011 for a period of five years and thereafter continued for another period of five years on the basis of notification dated 30.06.2016 in reference to the first sunset review, was likely to lead to continuation or recurrence of dumping and injury, the appellant placed strong reliance upon the Report of Special Research and Investment Feasibility Assessment on China Polyvinyl Chloride Flexible Film/Sheet Market 2021-2025 . The designated authority, in the final findings, did not consider it appropriate to place reliance on the said report for the reason that the name of the author or the agency which prepared the report was not mentioned nor the report made any mention of the original source of data. What has to be determined in a sunset review is whether withdrawal of anti-dumping duty would lead to continuance or recurrence of injury to the domestic industry. This determination cannot be based on guess work or on mere assumption or presumption but should be based on some tangible and positive evidence. The designated authority has to conduct a rigorous examination in a sunset review before the exception that duty should be continued can apply. This requires an appropriate degree of diligence on the part of the designated authority. It cannot be urged that since after the imposition of anti-dumping duties, imports had declined and domestic production had increased, it is possible that after cessation of anti-dumping duty, the imports would increase and the domestic production would reduce. There has to be a strong explanation as to why this would happen as mere possibility of injury to domestic industry is not sufficient - the designated authority was justified in holding that there did not exist sufficient factual material to allow the designated authority to conclude that there was a likelihood of continuation or recurrence of injury in case of cessation of anti- dumping duty. The designated authority committed no illegality in not placing reliance upon the unauthenticated report. The burden of proof was on the appellant to provide tangible evidence in sunset review to substantiate that cessation of anti-dumping duty would lead to continuance or recurrence of anti-dumping. The appellant failed to discharge this burden. A perusal for the final findings of the designated authority reveal that the trend of import volumes and landed (import) prices, and its effect on the domestic industry together with the increase in capacity, production, sales of the domestic industry, its market share, along with negative price undercutting and negative injury margins led the designated authority to conclude that there was no likelihood of injury. It is for this reason that the designated authority recommended discontinuation of anti-dumping duties. The final findings of the designated authority, therefore, for all the reasons stated above, do not call for any interference in this appeal - Appeal disissed.
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Corporate Laws
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2022 (3) TMI 201
Transfer of shares - seeking validation of the purchase of 7,000,100 shares of Brainhunter, which were held by Zylog, upon enforcement of the pledge by ICICI Bank Limited, India - whether a secured creditor requires leave under Section 537 of CA 1956? - HELD THAT:- Upon perusal of Section 537, it is evident that it deals with attachment, distress, execution and sale of the estate, properties and effects of a company after commencement of winding up. It further prescribes that any of the above, if undertaken without the leave of the court, after the commencement of winding up, is void. On a textual reading, Section 537 does not exclude secured creditors from its ambit - By Act 35 of 1985, the proviso to Section 529(1) was inserted and a pari passu charge was created in favour of the workmen of a company to the extent of the workmen's portion in every secured asset of the company in liquidation. Indeed, by virtue of Clauses (a) and (b) of such proviso, the official liquidator concerned was conferred the statutory right of representing the workmen for purposes of asserting and enforcing the rights of the pari passu charge holder. Besides, Section 529A was introduced in the statute and workmen's dues became entitled to priority over all other debts. On the facts of this case, the Official Liquidator was restrained from taking steps to close the company, but all administrative decisions were required to be taken with his concurrence and he was directed to take over all money transactions and the accounts pertaining thereto. The consequence of appointing the Official Liquidator as the provisional liquidator is that he takes charge of the assets and affairs of the company concerned. When all the above factors are concerned, the only reasonable conclusion is that the legal fiction also gets triggered upon the appointment of the Official Liquidator as provisional liquidator. Although there is no documentary evidence to establish the direct knowledge of the Purchaser, the Purchaser was clearly under an obligation to undertake due diligence before acquiring 100% of the paid up share capital of Brainhunter especially when such transaction involved enforcement of a pledge. Indeed, the documents on record include communications from the Purchaser to the Reserve Bank of India (the RBI) and to the Bombay Stock Exchange (BSE) and the National Stock Exchange (the NSE) - It should also be borne in mind that the Purchaser is a company incorporated in and carrying on business in India. When these facts and circumstances are considered holistically, the only reasonable inference is that the Purchaser was probably aware that the pledgor was a company in liquidation and, without doubt, had the means to discover the same on exercise of reasonable due diligence. Therefore, either the pledgee or the Purchaser should have requested for leave before enforcing the pledge. The Purchaser says that it invested considerable sums to revive Brainhunter after the acquisition by relying upon the financial statement for the financial year ended 31.03.2021 in contradistinction to the financial statement for the financial year ended 31.03.2014 when the acquisition took place. While the accumulated losses have reduced and the share capital has increased, no definitive conclusions may be drawn since too many variables are at play - the disposition is deserving of contingent validation subject to conditions precedent. Ordinarily, a private sale without following a sealed tender or public auction process would not be validated, but in the unique circumstances of this case involving a private sale by a pledgee, in terms of and pursuant to the Pledge Agreement. The valuation of the shares of Brainhunter shall be arrived at as on the date of acquisition by the Purchaser. As regards the pledgee, ICICI Bank India, it was satisfied with the price realised on the basis of the earlier valuation. Therefore, it is just and necessary that ICICI Bank India should not be entitled to any additional consideration even if the shares are found to be of higher value on revaluation. Instead, the entire additional consideration, if any, should accrue to the benefit of Zylog. For purposes of carrying out such valuation, the Purchaser should obtain the concurrence of the learned Administrator and the Official Liquidator and appoint two renowned chartered accountants as valuers - The disposition in favour of the Purchaser is validated subject to and contingent on the fulfillment of the above requirements. If the above requirements are not fulfilled, the disposition stands declared ipso facto void. In such event, it is open to the Administrator and the Official Liquidator to file any consequential applications. In order to verify whether the conditions precedent have been fulfilled, upon receipt of the two valuation reports and after arranging for the differential consideration in terms thereof, the Purchaser shall file an application before this Court seeking permission to proceed to conclude the transaction in terms of this order. Application disposed off.
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2022 (3) TMI 200
Secured creditor of the Company in liquidation, filed a suit Salem for recovery of a sum with interest at the rate of 19.5% per annum at quarterly rest - first and paramount charge on the property that was sold by the Official Liquidator - HELD THAT:- When the matter came up for hearing on 07.09.2020, this Court directed the Official Liquidator to file a complete and comprehensive additional report and the the Official Liquidator also filed a detailed report on 15.10.2020, for which, the appellant/Bank also filed their objection. Finally, when the matter came up for hearing on 19.03.2021, this Court directed the the Official Liquidator to file the details of the re-adjudication of workmen claims with break ups on the next hearing. Accordingly, the Official Liquidator also filed a report dated 25.06.2021 with break-up details of workmen. Later, the Official Liquidator submitted that the re-adjudication work has not been completed for the reason that the disbursement work of interest amount at 4% was going on during that time. It was mentioned in the report dated 25.06.2021 that the re-adjudication work was made, instead of stating that, the calculation of arrears of wages for the years 1990 to 1993 were partially made - this Court, by the order dated 13.12.2019 in C.A.No.447 of 2019, permitted the Official Liquidator to publish notice in block letters/bold letters to contributories to prove the claim/extent of interest held by them in the subject Company in liquidation, in the The New Indian Express and Malai Malar . In compliance of the said order, the Official Liquidator issued notice. Subsequently, in response, one contributory has come forward with his claim and the same is pending for adjudication to proceed further in the matter - also, it is seen that the additional payment of dividend was already made to the appellant/Bank. Since the learned Official Liquidator has paid the amounts to the appellant/Bank, as per the earlier orders of this Court, nothing survives for consideration in this appeal - appeal dismissed.
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2022 (3) TMI 199
Approval of Scheme of Arrangement by way of Amalgamation - Sections 230-232 of Companies Act, 2013, and other applicable provisions of the Companies Act, 2013, read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- Various directions with respect to convening/holding or dispensing with the meetings of the Equity Shareholders, Secured and Unsecured Creditors issued - directions with regard to issuance of various notices also issued. The scheme is approved - application allowed.
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Insolvency & Bankruptcy
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2022 (3) TMI 198
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Debt - admission of debt or existence of dispute - existence of debt and dispute or not - whether the Appellant has filed sufficient documents to establish whether the amounts claimed in Part IV of Form 5 of the Application, are due and payable ? - HELD THAT:- There are force in the contention of the Learned Counsel for the Respondent Company that the Forensic Report filed by the Appellant herein has been obtained by them without taking the permission of the Adjudicating Authority. It is the case of the Appellant that the Respondent Company has taken different stands i.e., in their Reply to the Demand Notice dated 14/11/2019, the Respondent has submitted that the amount claimed is a Security Deposit and pertains to the Leave and License Agreement. But in their Rejoinder to the Reply dated 08/01/2020, they have denied the same. The Respondent also denies that there was any supply of goods and services between the Appellant and the Respondent. The amounts pertaining to 37 invoices have been paid by the Respondent. The same amounts reflect in Part IV of Form 5 of the Application claiming ₹ 4,16,48,466/-and ₹ 7,76,706/-. The delayed payment charges sought to be paid by the Appellant are not supported by any Agreement executed between the parties, based on which the Appellant could have exercised their rights to claim these amounts towards delayed charges. The interest charged towards penalty does not find a mention in any of the 37 invoices which are on record. The Journal Entries not supported by any other additional evidence cannot be solely relied upon to prove that the amount claimed arises out of supply of goods and services to fall within the ambit of the definition of Operational Debt as defined under Section 5(21) of the Code. Further we are inclined to observe that the dishonour of the two cheques is a subject matter of the NI Act, 1881 and recovery of those amounts under the NI Act, 1881 cannot be said to be paid towards the supply of goods and services, specifically in the light of the absence of any such Agreement or invoices to that effect. The Appellant has already initiated steps under Section 138/141 of the NI Act, 1881 and submits that the ratio of Sudhi Sachdev [ 2018 (11) TMI 1671 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] is applicable to the facts of this case, as it relates to Admission of debt and not an existence of dispute . The issue in this case is not whether there is an Admission of debt or existence of dispute but whether in the absence of any sufficient evidence on record that the amounts claimed are in respect of the provision of goods and services including employment or a debt in respect of (payment) of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority as defined under Section 5(21) of the Code - there is no sufficient evidence on record to prove that any kind of Operational Debt is due and payable . Therefore, there are no substantial grounds to interfere with the well-considered Order of the Adjudicating Authority. Appeal dismissed.
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2022 (3) TMI 197
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existence of dispute in respect of proceedings under section 138 of Negotiable Instruments Act, 1889 - time limitation - HELD THAT:- Both the parties were maintaining a running account in lieu of which invoices were being raised and part payment had been made and as the petition has been filed on 07.11.2019, hence it is well within the limitation period. The Corporate Debtor in the present case contended that the goods supplied by the Operational Creditor were through various third-party manufacturers therefore, the Operational Creditor does not have right to payment or a right to remedy for breach of contract and the operational creditor does not have right to payment against the invoices in which he does not have authority to claim payment from Corporate Debtor on behalf of third parties. However, the Operational creditor in the present application annexed the 'Payment Authority Letters' duly authorizing Operational Creditor to receive payment on behalf of third-party manufacturers from Corporate Debtor. It is pertinent to mention that the corporate debtor in its reply submitted that he reconciled his account after being issued notice of dispute, however no such documentary proof regarding any dispute regarding accounts reconciliation or with regard to material supplied has been annexed with the reply affidavit - It is further pertinent to mention that the corporate debtor in its reply to the Section 8 demand notice has stated that during the course of hearing of complaint filed by operational creditor under section 138 of N.I. Act, the corporate debtor offered an amount of ₹ 30,00,000/- towards final settlement. This Adjudicating Authority is of the view that there is an operational debt which is due from the corporate debtor and the corporate debtor has defaulted in making payment of the amount due and along with that, in the absence of any preexistence of dispute, this tribunal admits this application and initiates CIRP on the Corporate Debtor with immediate effect - Application admitted - moratorium declared.
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PMLA
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2022 (3) TMI 196
Money Laundering - scheduled offence - predicate offence - untainted money - proceeds of crime - calling for records - raising huge loans for starting a Medical College and Hospital - violation of banking norms - Non-Performing Asset (NPA) - HELD THAT:- In this case, Raveendranatha Reddy, who was the Branch Manager of Andhra Bank, appears to have sanctioned the loans to T.D.Naidu in rank violation of the Rules and therefore, he is facing the prosecution along with T.D.Naidu, before the XI Additional Special Court for CBI Cases, Chennai, for the offences under Sections 120-B r/w 420, 468 and 471 IPC and Section 13(2) r/w 13(1)(d) of the PC Act - there is no shred of material to show that Raveendranatha Reddy, had, in any manner, directly or indirectly, assisted T.D.Naidu in projecting the proceeds of crime (viz., loan amount that was disbursed by Andhra Bank to T.D.Naidu) as untainted money for him to be prosecuted under Sections 3 and 4 of the PML Act. It is true that this Court has dismissed the quash petition of the coaccused in this case, but, the complaint disclosed specific overt acts against Prabavathy (A2), Tataji (A3), Sonia (A4) and Varadharajan (A5) as to how they had assisted T.D.Naidu in projecting the proceeds of crime as untainted property. However, the case of Raveendranatha Reddy stands on a different footing, inasmuch as, he had only helped T.D.Naidu to get huge loans from the Andhra Bank by abusing his official position and nothing beyond that. Hence, the prosecution of Raveendranatha Reddy for the offence under Section 3 r/w 4 of the PML Act cannot be sustained. The proceedings qua Raveendranatha Reddy on the file of the Principal Sessions Court (Special Court for the PML Act Cases), Chennai, stands quashed - petition allowed.
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Service Tax
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2022 (3) TMI 195
Refund of CENVAT Credit - export of output services without payment of service tax - Rule 5 of the CENVAT Credit Rules, 2004 - HELD THAT:- From the reading of Rule 5, it is providing for the refund of the accumulated CENVAT Credit in the books of account against the goods exported under Bond or letter of undertaking and the services exported. The basic principle which is being provided by the said Rule, is as per the avowed policy of the Government to reduce the prices of export so that they are internationally competitive. It is also imperative to note that no country will like to export the taxes leviable locally along with the goods and services exported. To accomplish this Government has provided for various schemes to zero rate the goods and services exported. Rule 5 do not provide for disallowing any credit for any reason whatsoever. From the reading of the provisions of Rule 14 it is quite evident that if for a moment it is accepted that certain credit were wrongly or erroneously taken by the appellant contrary to the provisions contained in Rule 3 and 4 of the said Rules, then the same could have been denied by following the procedure as laid down in Rule 14. The so availed erroneous credit cannot be the subject matter of proceedings of Refund in terms of Rule 5 of the CENVAT Credit Rules, 2004 - Admittedly and undisputedly no proceedings for denial of any CENVAT Credit as claimed by the appellants, for encashment of which they have filed these refund claims have been initiated by the revenue. Without denying the CENVAT Credit taken/ availed by the appellant in their book of accounts during the relevant period (quarter) by way of initiating proceedings against the appellant in terms of Rule 14, revenue could not have altered the quantum of Net CENVAT Credit availed during the said quarter, and deny the encashment of that amount of the CENVAT Credit which is due as per the Rule 5. It is now well settled principle of law that where a statute provides for a thing to be done in a particular manner, then it has to be done in that manner, and in no other manner. It was held in the case of ADP PRIVATE LIMITED VERSUS COMMISSIONER OF SERVICE TAX, HYDERABAD-II [ 2020 (1) TMI 101 - CESTAT HYDERABAD] that the rejection of refund of Cenvat credit partly on the ground that the input services are not eligible for Cenvat credit at all is not correct in law. Appeal allowed - decided in favor of appellant.
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2022 (3) TMI 194
Refund of service tax paid - relevant date for cancellation of sale of flat - rejection of refund on the ground of time limitation - HELD THAT:- In the facts of the present case the appellant have paid service tax even though the service was not completed and subsequently when the sale agreement was cancelled the appellant have returned the value of flat along with service tax to their customers. The date of finalization i.e. Cancellation of sale of flat and refund of amount should be taken as a relevant date for computing the limitation under Section 11B - From the provision of clause (eb) of section 11B(B) it is clear that in the case where the service tax payment need to be adjusted at a later stage. The date of adjustment has to be reckoned for the purpose of computing limitation. In the present case the fund has arisen from cancellation of the sale of flats and refund of amount to the customers. In my view this stage should be considered as adjustment of service tax hence, the one year period should be computed from the date of refund of amount made to their customers against cancellation of sale of flats. Reliance placed in the case of M/S. RAMESH KUMAR AGARWAL VERSUS COMMISSIONER OF CENTRAL EXCISE CENTRAL GST, JAIPUR-I [ 2021 (7) TMI 360 - CESTAT NEW DELHI ] where it was held that The period of one year, in the given facts and circumstances, shall reckon from 15.10.2017 when appellant returned the amount of sale consideration to Shri K.K. Agarwal instead of 04.10.2016. The refund claim filed on 7th May, 2018 therefore, stands very much within the period of one year. The appellant s refund claim is not time bar - Appeal allowed - decided in favor of appellant.
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2022 (3) TMI 193
Refund of CENVAT Credit - export of services - Consulting Engineering Services or Information Technology Software Services - applicability of Circular No.62/11/2003 dated 21.8.2003 CBEC - HELD THAT:- The issue is no longer res integra having been decided in favour of the appellants by Tribunal for the past periods in M/S. INGERSOLL RAND TECHNOLOGIES AND SERVICES PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE AND CENTRAL TAX BANGALORE SERVICE TAX- I [ 2019 (11) TMI 1070 - CESTAT BANGALORE] and by the Department itself in a subsequent period in the case of appellant themselves, nothing survives in the impugned order. Appeal allowed.
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2022 (3) TMI 192
Refund of service tax paid - input services - denial of refund on the ground that those services had no nexus wth the output service exported by the appellant - HELD THAT:- Sub-rule(1) of Rule 3 of the Cenvat Credit Rules, 2004 is the enabling provision, which entitles a manufacturer or service provider to take cenvat credit of various duties and taxes itemized therein. Similarly, sub-rule (4) of Rule 3 ibid permits a manufacturer or service provider to utilize the cenvat credit so availed, for payment towards various activities including payment of duty on excisable final product and service tax on the output service. Where the credit availed or utilized in a wrongful manner, it has been mandated in Rule 14 ibid for recovery of the credit so availed/utilized from the manufacturer or service provider as the case may be. It has further been mandated that for effecting recovery of irregularly availed or utilized cenvat credit, the provisions of Section11A of the Central Excise Act, 1994 or Section 73 of the Finance Act, 1994, as the case may be, shall apply mutatis mutandis - since Rule 5 ibid itself is a self contained provision, designed with the sole objective of consideration of the refund application for the limited purpose of exportation of goods/services, the department is only confined to look into the aspect, whether the formula prescribed there under has been duly complied with by the claimant or not. The reasons assigned by the authorities below in this case for denial of the refund benefit to the applicant shall not stand for judicial scrutiny inasmuch as other than the allegation of non-establishment of nexus, the department had never questioned nor pointed out any discrepancy, alleging that the ingredients mentioned in Rule 5 ibid have not been complied with by the appellant. Hence, refund benefit shall not be denied to the appellant. It is found that entirely on the identical set of facts, this Tribunal in the case of WARBURG PINCUS INDIA PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX-I, MUMBAI [ 2018 (4) TMI 482 - CESTAT MUMBAI] has allowed the refund benefit to the exporter of service. Appeal allowed - decided in favor of appellant.
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Central Excise
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2022 (3) TMI 191
Cases are pending adjudication before the adjudicating authority - Whether the writ application pending adjudication stand infructuous and nonest? - HELD THAT:- The effect of resolution plan once approved by the NCLT vis-a-vis the claims pending adjudication is concerned, is no longer res-integra in view of the recent pronouncement of the Supreme Court in the case of Ghanshyam Mishra Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. [ 2021 (4) TMI 613 - SUPREME COURT] wherein the Supreme Court took the view as regards 2019 amendment being incorporated to Section 31 of the Insolvency and Bankruptcy Code, 2016 being treated clarificatory and declaratory in nature and thereby treating it to have come into effect retrospectively. Taking into consideration the provisions of the resolution plan as approved by the National Company Law Tribunal, Ahmedabad Bench, in case of the writ applicant along with all the reliefs, concessions and dispensations as granted in the approval order, it is hereby ordered that the present writ application is rendered infructuous, nonest and is disposed of as abated - the provision itself makes it clear that if in case the revenue is dissatisfied in any manner with the sanctioning of the resolution plan by the National Company Law Tribunal then the liberty is always reserved in favour of the revenue to prefer an appeal under Section 61 of the Code, 2016 before the National Company Law Appellate Tribunal. The present writ application does not survive and is hereby disposed of as abated and infructuous.
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2022 (3) TMI 190
CENVAT Credit - CVD paid by availing exemption Notification No. 12/12-Cus dated 17.03.2012 - HELD THAT:- The facts is not under disputes that the appellant have paid the CVD on imported coal in terms of exemption Notification No. 12/12-Cus. The restriction for availing of credit on Excise duty paid is given in Rule 3 (i) - From the proviso to Rule 3 (i) of CCR, 2004, it is clear that the restriction is provided only in respect of such duty which is paid by availing the exemption Notification No. 01/2011-CE dated 01.03.2011 or under Notification No.12/12-CE dated 17.03.2012. In the present case the CVD was paid by not availing the aforesaid excise notifications but it was paid by availing Customs Notification No. 12/2012-Cus, therefore, the restriction provided in Rule 3 (i) and proviso thereof shall not be applicable to the facts of the present case. Identical issue decided in the case of M/S. ASAHI SONGWON COLORS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST., VADODARA [ 2018 (9) TMI 159 - CESTAT AHMEDABAD] where it was held that Even if the importer wants to avail the exemption of N/N. 12/2012-CE for payment of CVD, the same will not be available to the importer and Credit is allowed. The impugned order is not sustainable - Appeal allowed - decided in favor of appellant.
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2022 (3) TMI 189
CENVAT Credit - Input Service Distributors - credit denied by the Department on the ground that after the amendment to the definition of input service w.e.f. 01.03.2001 in section 2(l) of the CENVAT Credit Rules, 2004, the appellant was not entitled to avail CENVAT Credit on such services - periods 2012-2013, 2013- 2014 and 2014-2015 - period April 2015 to March 2016, April 2016 to March 2017 and April 2017 to June 2017 - recovery of CENVAT credit alongwith interest and penalty - invocation of extended period of limitation - principles of natural justice - HELD THAT:- The appellant has produced the reply given by the appellant to the show cause notice to all the services namely communication, maintenance and repair, courier services, security services, photocopy services, architect services, insurance services, real estate/ actuarial charges, rent-a-cab and outdoor catering - All that has been stated by the adjudicating authority is that the appellant has not been able to show any nexus between the use of the service and manufacture and clearance of the final products . The adjudicating authority was required to examine the reply and deal with it rather than rejecting the contention by merely stating that the appellant has not been able to show any nexus. It has fairly been stated by learned counsel for the appellant that in regard to two services namely, rent-a-cab and outdoor catering, the appellant is not assailing the order on merits, but is assailing the order only on the quantification - also the reply filed by the appellant regarding the quantification of the demand of duty has not been considered at all by the adjudicating authority and in fact no finding has been recorded by the Commissioner - also, the Commissioner has not considered the issue raised by the appellant that notice could not have been issued to the recipient of service distributed by an ISD and no finding has been recorded. Invocation of the extended period of limitation - HELD THAT:- The issue relating to invocation of the extended period of limitation has been dealt with by the Commissioner in a very cryptic manner, though a detailed reply had been filed by the appellant. It is, therefore, a fit case where the matter should be remitted to the adjudicating authority for passing a fresh reasoned order after taking into consideration the reply submitted by the appellant - the adjudicating authority need not examine on merits whether the appellant was entitled to take credit on rent-a-cab or outdoor catering, as it has been stated by the learned counsel appearing for the appellant that it is not assailing the demand of credit on these two services. The Commissioner shall, for these two services, examine the quantification part only. Appeal allowed by way of remand.
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2022 (3) TMI 188
Refund of CENVAT Credit - input services - Outward GTA - rejection of claim on the ground that once the appellant has voluntarily reversed the Cenvat credit they cannot claim the refund - HELD THAT:- Even though the appellant has paid the amount on observation of the audit team but subsequently they realized that the amount was not payable, accordingly, they had filed a refund claim. The refund claim should have been decided on merit by the Adjudicating Authority. The appellant have the statutory right that the benefits due to them can be claimed at any stage and the same need to be disposed in accordance with law on merit. As regard merit of the case the fact that the sale of goods in relation to which they incurred the expenditure of outward transportation is on FOR sale and the freight amount is included in the price of the goods on which excise duty was paid. This Tribunal Considering the very same fact, allowed the Cenavt credit in the case of M/S ULTRATECH CEMENT LTD. VERSUS C.C.E. KUTCH (GANDHIDHAM) [ 2019 (2) TMI 1487 - CESTAT AHMEDABAD] and M/S SANGHI INDUSTRIES LTD. VERSUS C.C.E. KUTCH (GANDHIDHAM) [ 2019 (2) TMI 1488 - CESTAT AHMEDABAD] and the same was upheld by the Hon ble Jurisdictional High Court of Gujarat. The appellant is entitled for the Cenvat credit in respect of the Outward Transportation and consequently they are also entitled for the refund of the same as the same was reversed by them - Appeal allowed.
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2022 (3) TMI 187
CENVAT Credit - input services - Outward GTA - HELD THAT:- In the present case it is found prima facie that the sale is on FOR, if it is so the appellant is entitled for the Cenvat Credit in the light of the judgment in case of Ultratech Cement Ltd [ 2019 (2) TMI 1487 - CESTAT AHMEDABAD] and Sanghi Industries [ 2019 (2) TMI 1488 - CESTAT AHMEDABAD ] upheld by the Hon ble High Court of Gujarat. However, since the appellant has not filed the reply/any documents with regard to the nature of the sale whether it is FOR or otherwise, the matter needs to be reconsidered. Reliance placed on judgement by Revenue - HELD THAT:- The judgment of Ultratech cement of the Apex Court [ 2018 (2) TMI 117 - SUPREME COURT ] has been considered by this tribunal in the case of Ultratech Cement Ltd and Sanghi Industries therefore, the same stands distinguished - As regard the judgment cited by the revenue in the case of Andhra Cement Ltd [ 2020 (6) TMI 354 - CESTAT, HYDERABAD ], it is found that this judgment has not considered the judgment of this Tribunal which was upheld by The Hon ble High Court of Gujarat [ 2020 (3) TMI 1206 - GUJARAT HIGH COURT ]. However, this tribunal falls within the jurisdiction of the High court of Gujarat, the judgment of Hon ble High court of Gujarat is binding. Therefore the judgment of Andhra Cement Ltd is distinguished. Appeal is allowed by way of remand to the Adjudicating Authority to decide a fresh after verifying the documents.
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2022 (3) TMI 186
Refund of accumulated CENVAT Credit - request for transfer of accumulated balance - denial on the ground that such transfer is not contemplated in CENVAT Credit Rules, 2004 - time limitation - section 11B of Central Excise Act, 1944 - HELD THAT:- The issue of monetizing of CENVAT credit in balance with assessee had, in the light conflicting opinions within the Tribunal and decision of the Hon ble High Court of Karnataka, been considered by a Larger Bench of the Hon ble High Court of Bombay in M/S. GAURI PLASTICULTURE P. LTD., BOMBAY DYEING MANUFACTURING CO. LTD., M/S. SIMPLEX MILLS CO. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, INDORE, THE COMMISSIONER OF CENTRAL EXCISE, MUMBAI IV, THE UNION OF INDIA THROUGH THE COMMISSIONER OF CENTRAL EXCISE MUMBAI I [ 2019 (6) TMI 820 - BOMBAY HIGH COURT ] where it was held that The transitional provision that any amount of credit earned by a manufacturer under the Cenvat Credit Rules, 2002, as they existed prior to the 10th September, 2004 or by a provider of output service under the Service Tax Credit Rules, 2002 as they existed prior to 10th September, 2004 and remaining un-utilised on that day shall be allowed as Cenvat Credit to such manufacturer or provider of output service under these rules, and be allowed to be utilised in accordance with these rules. This is how the transitional provision enables carrying forward of the un-utilised Cenvat Credit. That is a distinct contingency altogether. That transitional provision does not enable us to hold that the amount of un-utilised Cenvat Credit can be refunded in cash. There is no merit in the appeal preferred before the Tribunal and the rejection of the claim for refund of accumulated credit is upheld - Appeal dismissed.
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CST, VAT & Sales Tax
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2022 (3) TMI 185
Condonation of delay of approximately 3 years and 7 months in filing the Second Appeal - appeal barred by time limitation or not - denial of input tax credit - HELD THAT:- There is no escape to the fact that there is a delay of approximately 3 years and 7 months in filing the Second Appeal before the Tribunal against the order under challenge dated 12.10.2015 passed by the First Appellate Authority confirming the assessment order. It is required to be noted that the assessment orders have been passed for A.Y. 2010-11 to 2013-14, whereby the assessment order was passed by VAT Authority on 11.03.2015. At this juncture, it is also required to be noted that the proceedings under Section 14 of the SARFAESI Act of taking over the possession of the premise of the appellant assessee at Bharuch came to be passed by the competent Authority on 24.02.2015. Thus, it can safely be presumed that since 24.02.2015, the possession of the premise of the appellant assessee was taken over by the lending bank. This Court on perusal of the contents of the letter dated 05.12.2018 produced by the appellant assessee finds that the possession and key of the aforesaid property was handed over to the authorized person of the assessee Company after 30.11.2018 - Further, it transpires from the record that as soon as the assessee Company became aware about the order dated 12.10.2015, necessary steps were undertaken by the assessee Company by filing Second Appeal before the Tribunal on 27.11.2018, whereby the appellate assessee had also complied with the provisions of pre-deposit by making payment of amount of ₹ 20 Lakh before the Tribunal. This Court finds no reason to doubt the bona fide of the assessee Company in filing the Second Appeal before the Tribunal after delay. Thus, no presumption can be attached to deliberate inaction of the assessee Company in filing the Second Appeals. There exist sufficient cause to condone the delay - the delay which has occurred in filing the Second Appeal before the Tribunal can be condoned and the appellate assessee should be given an opportunity to submit its case on merits before the Tribunal which will meet with the ends of justice. The delay of approximately 3 years and 7 months which has occurred in filing the Second Appeals before the Tribunal is hereby condoned - It is clarified that all the contentions of the respective parties as may be available in law are hereby kept open and this Court has otherwise not gone into merits of the case - Appeal allowed.
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Indian Laws
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2022 (3) TMI 184
Recovery of damages - failure to deposit the contribution of EPF or committed default as mandated under the provisions of the Employees Provident Fund Miscellaneous Provisions Act, 1952 - failure after determination under Section 7A by the competent authority - effect and implementation of Section 14B of the Act 1952? - whether the breach of civil obligations or liabilities committed by the employer is a sine qua non for imposition of penalty/damages or the element of mens rea or actus reus is one of the essential elements has a role to play and the authority is under an obligation to examine the justification, if any, being tendered while passing the order imposing damages under the provisions of the Act 1952? HELD THAT:- Undisputedly, the establishment of the appellant(s) was covered under the provisions of the Act 1952, but still failed to comply with the same and for such non-compliance of the mandate of the Act 1952, initially the proceedings were initiated under section 7A and after adjudication was made in reference to contribution of the EPF which the appellant was under an obligation to pay and for the contravention of the provisions of the Act 1952, the appellant(s) indeed committed a breach of civil obligations/liabilities and after compliance of the procedure prescribed under the Act 1952 and for the delayed payment of EPF contribution for the period January 1975 to October 1988, after affording due opportunity of hearing as contemplated, order was passed by the competent authority directing the appellant(s) to pay damages as assessed in accordance with Section 14B of the Act 1952. A two-Judge Bench of this Court in Chairman, SEBI [ 2006 (5) TMI 191 - SUPREME COURT ], while examining the scope and ambit of Section 15-D of SEBI (Mutual Funds) Regulations, 1996 regarding imposition of penalty for certain defaults in case of mutual funds, examined the question as to whether mens rea is an essential element for imposing penalty for breach of civil obligations and taking note of the binding precedent of this Court held that mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities - The three-Judge Bench of this Court in Union of India v. Dharmendra Textile Processors and others [ 2008 (9) TMI 52 - SUPREME COURT ] while examining the scope and ambit of Section 271(1)(c) of the Income Tax Act, 1961 held that as far as the penalty inflicted under the provisions is a civil liability is concerned, mens rea or actus reus is not an essential element for imposing civil penalties. Any default or delay in the payment of EPF contribution by the employer under the Act is a sine qua non for imposition of levy of damages under Section 14B of the Act 1952 and mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities - Appeal dismissed.
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