Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 12, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Validity of SCN - Levy of penalty of 100% of tax dues reflected in the Summary of the Order are also in the teeth of the provisions of Section 73(9) of the Act of 2017, wherein while passing an adjudication order, the Proper Officer can levy penalty up to 10% of tax dues only. The above infirmity clearly shows non-application of mind on the part of the Deputy Commissioner, State Tax, Godda Circle, Godda. - HC
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Violation of principles of natural justice - ex-parte order - fair opportunity of hearing not provided - rejection of input tax credit claim - - Matter restored back with directions. - HC
Income Tax
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Levy of interest u/s 234B - terminal point for the levy of interest - the impugned judgment and order passed by the Division Bench of the High Court is without any notice to the Union of India and others and thereby without giving any opportunity to the Union of India and others, the same can be said to be in violation of the principle of natural justice and, therefore, on the aforesaid ground alone, the impugned judgment and order passed by the High Court is to be quashed and set aside- SC
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TDS u/s 194I OR 194C - External Development Charges (‘EDC’) paid to Haryana Urban Development Authority (‘HUDA’) - the Revenue does not seek to support the decision of the AO that EDC are ‘rent’ or in the nature of ‘rent’. Thus, concededly, the fundamental reasoning on which the impugned order rests is fundamentally flawed. - Petitioners in these petitions were required to deduct TDS from EDC under Section 194-I - HC
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Clubbing of minor's Income to parents income - If this income were to be taxed only after the 2nd respondent attains majority, the financial burden on the 2nd petitioner when she attains the age of majority will be huge. Moreover it would be practically impossible to get the credit of the tax deducted at source, by the bank in the year in which the minor attains majority. Further the financial hardship to the 1st petitioner does not appear to be so great as projected in the writ petition. The tax deducted at source by the 3rd respondent bank as per section 194 A (10%) will be available as credit, (Rule 37BA of the Income Tax Rules, 1962). The benefit of threshold exemption is also available. - HC
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Exemption u/s 11 - applicability of Section 2(15) - addition on account of premium on land and shades - it could not be said that the activities carried out by the Assessee were either in nature of trade, commerce or business, for Cess or Fee or any other consideration so as to attract the proviso to Section 2(15) and the same could be said to be for charitable purpose and consequently, the exemption under Section 11 was permitted. - HC
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Benefit of Vivad Se Vishwas Scheme 2020 - present appeal was filed with a delay of 958 days - Addition of undisclosed income in the garb of Long Term Capital Gain (LTCG) to claim exemption u/s. 10(38) - Assessee should not be non-suited for the default committed by the revenue in nor preferring the appeal within the period of limitation. - HC
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Assessment u/s 143(3) r.w.s 144C - Period of limitation u/s 153 - Issuance of direction by the JCIT u/s 144A - The issuance of the direction and the communication of such direction by the Joint Commissioner to the assessing officer to aid in the completion of assessment is expected to be within the overall limits provided for completion of assessment under Section 153 and Explanation (1) thereto and nowhere it is contemplated that such reference would extend the limitation. - HC
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Disallowance in respect of gift and donation given to third parties - It is just like a donation or in the nature of gift, which cannot be allowed u/s 37. However, we make it clear that if the assessee produce necessary details to claim exemption u/s 80G of the Act, the same may be examined and exemption u/s 80G may be granted after verifying the relevant details from the receipt issued by the respective party. - AT
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Depreciation on the goodwill - slump sale to subsidiary company - assessee company has valued goodwill on Discounted Cash Flow Method [DCF] - One must not forget that valuation is not an exact science and, therefore, cannot be done with arithmetic precision and such technical and complex problem should be left to the consideration and wisdom of experts in the field of accountancy. - AT
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Ad-hoc disallowance at the rate of 10% on credit card expenses - Prima Facie the said disallowance is ad-hoc in nature. AO ought to have made reference to any of such expenses given in the books which could indicate that they are personal in nature. Merely making disallowance just for the sake of concluding the assessment is not a justified approach. Expenses through credit card have been claimed as general business expenditure in order to attend the business meetings. - AT
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Disallowance as Commission Expenses - principle of res judicata - The principle of res judicata does not apply to Income Tax proceedings and the facts of each year have to be considered and merely because the claim has been allowed all these years without being examined, does not make the claim legitimate despite evidences on record proving to the contrary. - assessee was unable to demonstrate any service rendered by them as distributors. - AT
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Addition u/s 68 - Onus to prove - The theory of conduit company is not acceptable as, for being a conduit company, the assessee is duty bound to establish that the company from whom it received the amount and the company in which it invested the same amount were of the same group and it was merely an intermediary or conduit company. - AT
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Addition on account of directors’ remuneration being treated as excessive u/s. 40A(2) - once it is established that remuneration has been paid to directors then Revenue cannot put itself in the arm chair of a businessman to assume the role of ascertainment, how it is a reasonable remuneration having regard to the facts and circumstances of the case. Matter of commercial expediency should be left to the businessman concern or the board of directors - AT
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Penalty u/s 271B - the books of account of the Assessee have also been audited only on 30.09.2011, however it seems that somehow due to inadvertent or otherwise mistake in the name of Auditor, the Assessee failed to file correct audited books of account, alongwith original return of income, but it is a fact that audited books of account which are not in dispute, have duly been filed along with the revised return of income. - No penalty - AT
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Validity of Assessment u/s 153C - Notice issued by any officer other than jurisdictional AO - the entire conspectus of the case, it appears that the AO had recorded the satisfaction note prior to assuming jurisdiction over the case of the assessee as the AO got charge over the case of the assessee on 02-09-2019 - CIT(A) is not justified in sustaining the action of the AO in holding that the AO has assumed proper jurisdiction to assess the case u/s. 153C - AT
Customs
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Demand of custom duty - Period of limitation - The 39 Bills of Entries were filed during the period of August, 1996 to January, 2004. The Show Cause Notice dated 06.03.2013, has been issued approximately nine years after the last Bill of Entry. In the given facts, we are unable to accept that the appellant had issued the notice within a reasonable period. - HC
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Classification of imported goods - second and defective Plate - between the different competing chapter headings 7204 is more appropriate because the goods are more in the nature of scrap and not in the nature of Plates and Pipes. Further the disputed goods are not suitable for use as Plates and Pipes. Therefore order of both the authority classifying the disputed goods under CTH 7211, 7208 and 7206 legally not correct. - AT
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Scope of SCN - The argument that the original authority has confirmed a higher amount on grounds which are not alleged in the SCN and has thus traversed beyond the SCN is not without substance. There is also no evidence available from the impugned order or from the records that SCN and the OIO have been served on the appellant. The said plea has been put forward by the appellant from the very beginning of the litigation. - AT
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Valuation of imported goods - rejection of declared value - Redetermination of value based on NIDB data and DGOV circular is not sustainable. In the present case, no exercise of rejecting the declared value under Rule 12 and process of applying Valuation Rules sequentially were followed. Therefore, the value declared by the respondent has to be accepted. - AT
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Re-assessment of bill of entry - Since, the re-assessment at the request of party under Section 17 (4) is not as per the outcome of any appeal filed by the party - The party should have either availed appellate remedy, (if aggrieved) or could have sought timely modification of bill of entry as per applicable provisions. - AT
Service Tax
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Payment of amount owed by GAIL to respondent no.2 - assessee in default - Plainly, respondent no.1 cannot compel GAIL to pay any amount which is not due and payable by GAIL to respondent no.2. The impugned order is not open ended and directs GAIL to deposit an ascertained sum of money - HC
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Suppression of facts or not - extended period of limitation - There is a reason for a bona fide belief in such arrangement regarding non-liability of sub-contractor when the main contractor is liable to discharge full service tax. Though the said principle is not applicable against the tax liability but the question of invoking extended period is to be answered in favour of the appellant. - AT
Case Laws:
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GST
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2023 (4) TMI 406
Refund of integrated tax paid on the export of services (zero rated supply) - zero rated supplies - invoices raised in the month of October 2018 - rejection of petitioner s claim by referring to Sub-clause (D) of Rule 89(4) of Central Goods and Services Tax Rules, 2017 on the ground that the turnover reflected for the month of October, 2018 ought to be considered as the turnover for the month of November, 2018 when the remittances were received - HELD THAT:- The opening sentence of Rule 89(4) of the Rules makes it amply clear that it applies only in cases of zero rated supply of goods or services, without payment of tax under bond or letter of undertaking. There are merit in the petitioner s contention that Rule 89(4) of the Rules is inapplicable to cases of refund of integrated tax paid on zero rated supply - However, the Appellate Authority failed to address the said contention and proceeded to mechanically reject the petitioner s appeal on, ex facie, erroneous assumption that the petitioner was seeking refund of accumulated ITC. The impugned order cannot be sustained - appeal filed by the petitioner is remanded to the Appellate Authority to decide afresh - Petition disposed off.
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2023 (4) TMI 404
Seeking refund of accumulated input tax credit alongwith interest - petitioner claims that it has accumulated Input Tax Credit on account of an inverted duty structure - whether the benefit of Order-in-appeal dated 03.01.2022 can be denied to the petitioner and the refund amount be withheld solely on the ground that the respondent has decided to file an appeal against the said order? HELD THAT:- Concededly, the respondent has not filed any appeal against the order-in-appeal dated 03.01.2022, and there is no order of any Court or Tribunal staying the said order. Indisputably, the order-in-appeal dated 03.01.2022 cannot be ignored by the respondents solely because according to the revenue, the said order is erroneous and is required to be set aside. The said issue is covered by the earlier decision of this Court in MR. BRIJ MOHAN MANGLA VERSUS UNION OF INDIA ORS. [ 2023 (3) TMI 327 - DELHI HIGH COURT ] where it was held that Admittedly, the appeals have not been filed by the respondents as yet. The time for preferring the appeal has also expired. However, the learned counsel for the respondent submits that the appeals would still be in time as in terms of the circular dated 03.12.2019, the time for the Department to prefer an appeal has been extended till three months after the date on which the Tribunal is constituted. The respondents are directed to forthwith process the petitioner s claim for refund including interest - petition allowed.
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2023 (4) TMI 403
Seeking interaction with the officers of the respondent, while recording the statements, be videographed - seeking direction to respondents not to harass the petitioners - seeking not insist on payment of any amount by the petitioners during investigation - HELD THAT:- Since the petitioners have already expressed that they do not intend to deposit any amount during the investigation, no such deposit would be made by the petitioners or accepted by the respondent without leave of this Court. The learned counsel appearing for the petitioner also requests that the statement of the petitioners be recorded during the business hours. Although no prayer to this effect has been made in this petition, Mr. Harpreet Singh assures this Court that provisions of the Code of Criminal Procedure, 1973 will be followed. Petition allowed.
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2023 (4) TMI 402
Validity of SCN - Summary of Show-Cause Notice can be a substitute of a proper show- cause notice or not - section 73 of JGST Act, 2017 - levy of 100% penalty instead of 10% - HELD THAT:- Notices under section 73(1) of the Act of 2017 at Annexure-2 in the respective writ petitions are in the standard format and neither any particulars have been struck off, nor specific contravention have been indicated to enable the petitioners to furnish a proper reply to defend themselves. The show-cause notices can therefore, be termed as vague. This Court has, in the case of M/s NKAS SERVICES PRIVATE LIMITED [ 2021 (10) TMI 880 - JHARKHAND HIGH COURT ] categorically held that summary of show cause notice in Form GST DRC-01 cannot substitute the requirement of a proper show cause notice under section 73(1) of the Act of 2017. It seems that the authorities have, after issuance of show-cause notices dated 07.10.2020 and 20.10.2020 (Annexure-2 in the respective writ petitions) and Summary of show cause notices contained in GST DRC-01 (Annexure-3 in the respective writ petitions) of the same date, proceeded to issue Summary of the Order dated 12.12.2020 and 14.12.2020 (Annexure-4 in the respective writ petitions). Respondents have also not brought on record any adjudication order. Levy of penalty of 100% of tax dues reflected in the Summary of the Order contained in Form GST DRC-07 vide Annexure-4 in the respective writ petitions are also in the teeth of the provisions of Section 73(9) of the Act of 2017, wherein while passing an adjudication order, the Proper Officer can levy penalty up to 10% of tax dues only. The above infirmity clearly shows non-application of mind on the part of the Deputy Commissioner, State Tax, Godda Circle, Godda. Proceedings also suffer from violation of principles of natural justice and the procedure prescribed under section 73 of the Act and are in teeth of the judgment rendered by this Court in the case M/s NKAS SERVICES PRIVATE LIMITED. The impugned show-cause notices and Summary of the Show Cause Notices dated 07.10.2020 and 20.10.2020 (Annexure-2 in the respective writ petitions) and Summary of Orders contained in Form GST DRC-07 dated 12.12.2020 and 14.12.2020 (Annexure-4 in the respective writ petitions) are quashed - Petition allowed.
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2023 (4) TMI 401
Violation of principles of natural justice - ex-parte order - fair opportunity of hearing not provided - rejection of input tax credit claim - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, it is opined that the order is bad in law. This is for two reasons-(a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences. - Matter restored back with directions. Petition disposed off.
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Income Tax
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2023 (4) TMI 400
Levy of interest u/s 234B - terminal point for the levy of interest - Whether would be up to the date of the order u/s 245D[1] or up to the date of the order of settlement u/s 245D[4]? - Division Bench of the High Court [ 2015 (2) TMI 855 - CALCUTTA HIGH COURT] has allowed the said writ petition preferred by respondent nos.1 HELD THAT:- Considering the fact that the impugned judgment and order passed by the Division Bench of the High Court is without any notice to the Union of India and others and thereby without giving any opportunity to the Union of India and others, the same can be said to be in violation of the principle of natural justice and, therefore, on the aforesaid ground alone, the impugned judgment and order passed by the High Court is to be quashed and set aside and the matter is to be remanded to High Court to decide the writ petition afresh in accordance with law and on its own merits and after giving an opportunity to all concerned including the appellant herein. In view of the above and for the reasons stated hereinabove, the present appeal succeeds. The impugned judgment and order passed by the High Court in violation of principle of natural justice is hereby quashed and set aside.The matter is remanded to High Court to decide and dispose of the writ petition in accordance with law.
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2023 (4) TMI 399
TDS u/s 194I OR 194C - External Development Charges ( EDC ) paid to Haryana Urban Development Authority ( HUDA ) - whether merely mentioning an incorrect provision is a curable defect; it does not affect the substratum of the impugned order or renders it vulnerable to challenge? - as contented AO has erroneously mentioned that TDS was required to be deducted u/s 194-I of the Act instead of Section 194C - HELD THAT:- We do not find any merit in the contention that the substratum of the impugned order is correct, and the AO has merely referred to a wrong provision of law. The question as to the nature of EDC payment was squarely one of the issues that was required to be addressed by the AO. As concluded that the same was rent as it was in nature of an arrangement to use land. It is not open for the respondents to now contend that EDC charges are payment made to a contractor under a contract and not rent under an arrangement to use land. As noted above, it was specifically contended on behalf of the petitioner that provisions of Sections 194C/194J of the Act did not apply. AO did not allude to the said provisions, which requires a resident person paying any amount to a contractor to deduct TDS; according to the AO, the nature of the EDC is rent - AO has reasoned that the agreement between the petitioner and the State Government of Haryana (license under the HDRUA Act and the HDRUA Rules made thereunder) would be covered under the expression, any other agreement or arrangement for use of land . As conceded by the learned counsel appearing for the respondents that the view of the AO is patently erroneous. In the present case, the Revenue does not seek to support the decision of the AO that EDC are rent or in the nature of rent . Thus, concededly, the fundamental reasoning on which the impugned order rests is fundamentally flawed. The contention that the AO has merely referred to a wrong Section of the Act and therefore, the said reference may be ignored is also without merit. As noticed above, the AO has not only held that TDS was liable to be deducted under Section 194-I of the Act, he has also proceeded to analyse the said Section and hold that EDC are in the nature of rent. He has, in addition, also applied the rate of TDS at the rate of 10% for assessing the petitioner s liability. The reasoning of the AO for finding that the petitioner was obliged to deduct TDS is important. The determination of the nature of payment is vital for ascertaining whether there was any obligation on the part of the petitioner to deduct and deposit TDS on EDC. The Revenue appears to be approaching the issue from quite the reverse direction; it has for an inexplicable reason, concluded that assessees ought to deduct TDS from EDC and now seeks to find provisions of law to sustain the said conclusion. In BPTP s case [ 2020 (1) TMI 56 - DELHI HIGH COURT] AO had initiated reassessment proceedings on the ground that assessee was required to deduct TDS under Section 194 of the Act; apparently, on the premise that EDC is dividend. Before the court, it was argued on behalf of the Revenue that EDC is rent and therefore TDS was required to be deducted from payment of EDC. In the present case, the AO has proceeded on the basis that EDC is rent but the Revenue contends that it is a payment to contractor attracting the provisions of TDS under Section 194C of the Act. It is apparent from the above, that the approach of the Revenue is flawed. We reject the contention that the findings of the AO regarding the nature of EDC charges as well at the provisions referred by him for determining the petitioner s liability are not material. Petitioners in these petitions were required to deduct TDS from EDC under Section 194-I Accordingly, for the reasons stated above, the order impugned is set aside and the said petition is allowed.
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2023 (4) TMI 398
Penalty u/s 271(1)(c) - Defective notice u/s 274 - satisfaction of existence of ground under Section 271(1)(c) - assessee failed to disclose income under the head Income from Other Sources in the return of income filed - HELD THAT:- A combined reading of the authorities in Dilip Shroff [ 2007 (5) TMI 198 - SUPREME COURT] and Manjunatha Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] leads us to an inference that the satisfaction of existence of ground u/s 271(1)(c) is the sine qua non for initiation of proceedings and the penalty proceedings should be confined only to those grounds specifically stated in the notice. As recorded hereinabove, AO had issued notice only with regard to furnishing in accurate particulars. Whereas the satisfaction recorded is with regard to concealment of income particulars and the very ground has been struck-off. The notice has been issued on the specific premise that assessee had furnished inaccurate particulars of income. We are of the view that the penalty order is not sustainable in law. Decided in favour of assessee.
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2023 (4) TMI 397
Additions made on account of cash payments - Addition based on lose pape - assessee failed to discharge burden of proof - Whether CIT(A) has rightly deleted the said additional by a detailed analysis of the entries found in the seized material and the entries recorded in the books of accounts? - Revenue's specific case is, payment has been made outside the books - HELD THAT:- As before arriving at a conclusion, CIT(A) had called for a remand report from the AO and he has noted about the same in his order that in the remand report, the AO had confirmed that he had recorded the sworn statements of Shri.Arun Nayak and Shri.Pradeep Kumar Shenoy under Section 132(4) and 131 of the IT Act and they have not stated anything adverse against the Assessee. Therefore, their statements were not used by AO in scrutiny assessments. According to AO, nothing adverse was stated by him against the Assessee. Above all, it is relevant to notice that the payments through cheques have commenced from 2.5.2006 and ended on 31.5.2013. The e-mail is of the year 2010. In AO's order, the explanation given by Assessee has been recorded and it shows that according to the Assessee, initial sum of ₹5 crores was sought to be paid in cash, but subsequently the same has been paid in cheque. Both CIT(A) and ITAT which are the last fact finding authorities, on examination of the material on record, the remand report submitted by AO and by following the authority in the case of CIT v. Anil Bhalla [ 2010 (2) TMI 7 - DELHI HIGH COURT] have held that the addition made by AO based on lose paper, was not sufficient to make additions. Decided in favour of the Assessee.
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2023 (4) TMI 396
Stay of demand - petitioner has been directed to pay 20% of the demand - petitioner has approached this Court seeking direction to the Appellate Authority to consider and pass orders on the appeal without insisting on the payment as directed by the Assessment Officer - HELD THAT:- In the case on hand, the returned income was only Rs.6,93,940/- and the amount which has been arrived at is Rs.4,94,18,803/-. It is almost 71 times and going by the yardstick followed by the Division Bench of the Delhi High Court [ 2009 (2) TMI 410 - DELHI HIGH COURT] , it definitely comes under the nomenclature of high pitched. It is in the above circumstances petitioner submits that it is a case where the Appellate Authority should be directed to hear the appeal and dispose it of without insisting on payment. The counsel for the Department submitted that the appeal can be directed to be disposed of but however, it may be on the basis of a condition on payment of a portion of the tax. It is seen that the appeal had been preferred in April, 2022. It will be onerous to burden the petitioner with a condition of paying a portion of a tax in a case which necessarily has to be categorised under the high pitched category going by the decisions referred to above, particularly since the appeal has been pending for almost nine months. Writ petition is disposed of directing the petitioner to approach the concerned Assessing Authority for opening the portal for preferring a stay application and a stay application shall be preferred within two weeks from today.
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2023 (4) TMI 395
Assessment u/s 153A - As submitted documents which are in possession of the respondents/revenue and have not been relied upon - HELD THAT:- Best course forward would be to direct the CIT(A) to take a decision in the matter with regard to the documents which, although, are in possession of the respondents/revenue, have not been relied upon. As before CIT(A) proceeds further, a list of those documents will be placed on record, whereupon, the petitioner would have an opportunity to make a submission, as to the relevance of those documents for the purposes of prosecuting petitioner s appeal. The objections of the department will be taken into account and considered by the CIT(A). The parties and/or their authorized representatives will appear before CIT(A). CIT(A) will deliberate on the aspect indicated above before proceeding further. CIT(A) will not pass a piecemeal order; the order will be composite, which will deal with the aforesaid aspect as well as the merits of the appeal.
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2023 (4) TMI 394
Search operation u/s 132 - release of seized documents - as argued even though assessment order had been passed, both against the searched person and the petitioner, the documents seized have not been released - HELD THAT:- The concerned statutory authority will issue notice to the petitioner, as well as Mr Ashok Kumar, to convene on a given date, time and venue, for carrying out the exercise concerning release of seized documents found in locker No. L-322, which pertain to the petitioner. The intimation will indicate the purpose for which the proceeding is convened i.e., for release of seized documents that were found in locker No. L-322 which concern the petitioner.At this proceeding, the petitioner will be represented by a duly authorized person. In case even after the notice is served on Mr Ashok Kumar, he does not join the proceeding, the concerned statutory authority will release and hand over the documents which concern the petitioner, to its authorized representative.The entire exercise will be completed by the concerned statutory authority, within two weeks of the receipt of the copy of the order.
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2023 (4) TMI 393
Clubbing of minor's Income to parents income - income (interest on fixed deposits) accruing to a minor - whether tax at source cannot be deducted in respect of the interest income accruing on the fixed deposit under the provisions of the Income Tax Act, 1961? - HELD THAT:- Income accruing or arising in the hands of a minor child will be added to the parent's total income. Exceptions are provided only if income arises or accrues to the minor child on account of any manual work done by him or any activity involving application of his skill, talent or specialized knowledge and experience. The Income Tax Act, does not exempt the interest income accruing to 2nd petitioner on an amount received as part of death benefits of her deceased father even if, by order of Court, that income can be utilized only after the minor attains majority. The contention that the income can be taxed only after the minor attains majority cannot be accepted, as the income has accrued, on the bank crediting the account of the 2nd petitioner every year with the amount of interest payable. The ground of extreme hardship to the 1st petitioner if she is required to pay tax on the income accruing to the minor is no ground to hold that the income cannot be clubbed with that of the 1st petitioner. Harshness in a statutory provision is no ground to hold that it should not be applied in a given case. If this income were to be taxed only after the 2nd respondent attains majority, the financial burden on the 2nd petitioner when she attains the age of majority will be huge. Moreover it would be practically impossible to get the credit of the tax deducted at source, by the bank in the year in which the minor attains majority. Further the financial hardship to the 1st petitioner does not appear to be so great as projected in the writ petition. The tax deducted at source by the 3rd respondent bank as per section 194 A (10%) will be available as credit, (Rule 37BA of the Income Tax Rules, 1962). The benefit of threshold exemption is also available. The provisions of Sections 5 of the Act have no relevance in determining the questions raised. The 2nd petitioner is a minor. Therefore, the question of her following a ... system of accounting regularly employed by the assessee does not arise for consideration. WP fails.
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2023 (4) TMI 392
Exemption u/s 11 - applicability of Section 2(15) - addition on account of premium on land and shades - Tribunal allowed the exemption under Section 11 and 12 - HELD THAT:- As correctly held by Tribunal The Assessee -Corporation was constituted under the Gujarat Industrial Development Act, 1962 for the purpose of securing and assisting rapid and orderly establishment and organization of Industrial areas and Industrial estates in the State of Gujarat and for the purpose of establishing the commercial centers in connection with establishment and organization of such industries. It is also held that it could not be said that the activities carried out by the Assessee were either in nature of trade, commerce or business, for Cess or Fee or any other consideration so as to attract the proviso to Section 2(15) and the same could be said to be for charitable purpose and consequently, the exemption under Section 11 was permitted. When this issue was taken up before the Apex Court [ 2022 (10) TMI 948 - SUPREME COURT] held that section 11(4A) must be interpreted harmoniously with Section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in Section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to Section 2(15), has not been breached. Similarly, the insertion of Section 13(8), seventeenth proviso to Section 10(23C) and third proviso to Section 143(3) (all w.r.e.f. 01.04.2009), reaffirm this interpretation and bring uniformity across the statutory provisions. No substantial question of law has arisen.
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2023 (4) TMI 391
Benefit of Vivad Se Vishwas Scheme 2020 - present appeal (by revenue) was filed with a delay of 958 days - Addition of undisclosed income in the garb of Long Term Capital Gain (LTCG) to claim exemption u/s. 10(38) - revenue had opposed such a prayer by contending that the Scheme is no longer in vogue and, therefore, the respondent/assessee cannot be permitted to avail the benefit of the Scheme or file an application under the Scheme - as submitted had the appeal been preferred within the period of limitation the assessee could have filed an application well before the time stipulated under the Scheme. HELD THAT:- Assessee should not be non-suited for the default committed by the revenue in nor preferring the appeal within the period of limitation. Identical issue arose for consideration before in the case of I.A. Housing Solution Private Limited vs. Principal Commissioner of Income Tax 4 Others [ 2022 (11) TMI 1308 - DELHI HIGH COURT] as allowed the writ petition and directed the revenue to accept declaration/application forms in Form 1 and 2 filed by the assessee as valid declaration/application within a time frame and accept the balance disputed amount as stipulated by them under the provisions of the Scheme. Thus, appeal stands disposed of with a direction to the respondent to file the requisite application under the Scheme within a period of ten days from the date of receipt of the server copy of this application and such application shall be deemed to have been presented well before the last date on which the benefit of the Scheme had come to an end and the application shall be processed and the requisite forms be issued so as to enable the respondent/assessee to pay the disputed tax in terms of the conditions contained under the Scheme. Such order shall be passed by the revenue within a period of six weeks from the date on which Forms 1 and 2 are filed by the assessee.
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2023 (4) TMI 390
Assessment u/s 143(3) r.w.s 144C - Period of limitation u/s 153 - Issuance of direction by the JCIT u/s 144A - time available to the TPO to pass an order of transfer pricing - HELD THAT:- The limitations set out under sub-section (3A) of Section 92CA are to be construed in the context of, and within the overall limitation provided for u/s 153. There is, in my considered view, no situation that is contemplated that would alter the limitation set out u/s 153 save the exclusions set out under Explanation-1 to Section 153 itself. The time limits set out under sub-section (3A) of Section 92CA are thus subject to the limitation prescribed under Section 153 that can, under no circumstances, be tampered with. If the argument of the revenue is to be accepted, the limitation set out u/s 153 would stand distorted, which is an incorrect understanding of the legal position. The second proviso to Explanation-1 of Section 153 is categoric in stating that period of limitation available to the Assessing Officer for making an order of assessment shall be extended to 60 days. The 60 days period, thus must run from the date of transfer pricing order to provide for the seamless completion of assessment. The transmission of a transfer pricing order from the TPO to the Assessing Officer is an internal administrative act and cannot impact statutory limitation, which is the exclusive prerogative of Section 153 alone. The issuance of the direction and the communication of such direction by the Joint Commissioner to the assessing officer to aid in the completion of assessment is expected to be within the overall limits provided for completion of assessment under Section 153 and Explanation (1) thereto and nowhere it is contemplated that such reference would extend the limitation. This situation is not a situation that finds reference in the situations set out in Explanation I to Section 153. So too in the present case. The impugned order of assessment is held to be barred by limitation and is set aside. This writ petition is allowed.
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2023 (4) TMI 389
TP Adjustment - ALP on the corporate guarantee - Tribunal has considered the controversy and remanded the matter to the AO for denovo adjudication - HELD THAT:- As decided by Tribunal in course of proceeding before the TPO as well as before Commissioner (Appeals), the assessee had advanced detailed submissions on merits contesting the adjustment made on account of provision of corporate guarantee. While the TPO has completely rejected the submissions of the assessee, Commissioner (Appeals) did not deal with them as he held that the provision of corporate guarantee is not an international transaction. Thus, in our view, the assessee deserves a fair opportunity to contest the issue relating to the determination of ALP of guarantee commission to be charged on provision of corporate guarantee on merits. Since the matter has been remanded by the ITAT for denovo adjudication, giving detailed reasons for remand, therefore, no substantial question of law is involved in the impugned order of the Tribunal.
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2023 (4) TMI 388
Income tax liability - tax on income of a State - government body or government agency - assessee is performing sovereign function of the Government or not? - whether assessee is a state within the meaning of Article 12 of the Constitution and consequently exempt from Union tax as per Article 289 of the Constitution? - assessee is a joint venture of Government of India and Government of Karnataka is a Special Purpose Vehicle entrusted with the responsibility of implementation of Bangalore Metro Rail Project - contention of the assessee that it is an agent/instrumentality of the state and hence in view of the Article 289 of the Constitution of India, the Income Tax Act, 1961 is not applicable to the assessee. HELD THAT:- In this case, the assessee has been incorporated under Companies Act for the purpose of operation and maintenance and to regulate the working of Metro Railway in and around Bangalore so as to meet the Urban Transport requirement in Bangalore, thereby assessee carrying on the activity of railway transport of passengers and this is an independent corporation managed by a Board of Directors. The assessee corporation was enjoying monopoly i.e it was the only organisation involved in transport of passengers through rail in and around Bangalore. The assessee has been carrying on the transport of the passengers through rail in and around Bangalore by charging for tickets. The ticket price has been fixed by the corporation not at cost to cost price and it has been fixed with an element of profit. The assessee is not functioning under the policy of no profit and no loss. On the other, it is a profit oriented organisation and no profit no loss has not been the policy of the corporation and the assessee also a monopoly corporation in this field. In our opinion, the activity of transporting the passengers through rail in and around Bangalore to be considered as a business activity and the activity carried on by the assessee is nowhere different from that one carried on by private entrepreneurs and it is always by business activity of the assessee company with profit motive. In our view, the control or directions issued by the State Government would not change the character of business activity . We are of the view that activity carried out by the assessee should be examined independently and the fact that assessee is being regulated by the State Government would not make any difference. In our view, ownership of the Corporation and activities of the Corporation are two different aspects and the ownership cannot be considered or taken into account to determine the character or nature of the activities carried on by the Corporation. Capital required by the assessee company have been contributed by the Central Government as well as the State Government of Karnataka as such it is a wing of the State Government - This argument holds no merits. The assessee being separate personality of its own, incorporated under Companies Act for carrying on the business activity and the profit or loss arising there from are the profit and loss of the Corporation itself. The income derived from the Corporation from the business activities cannot be said to be income of the Karnataka State Government under Article 289.Being so, we do not find any merit in this ground of appeal and same is dismissed in all assessee s appeals. Nature of receipt - Taxation of reimbursement of state tax - revenue receipt or capital receipt - contention of the ld. D.R. is that it is a refund of sale tax to be treated as a revenue receipt - HELD THAT:- The character of the receipt has to be considered for taxing the same. If the receipt is given to recoup revenue expenditure it will take the same colour and will be deemed to be a revenue receipt in the hands of the assessee. It is the purpose for which it is given that is material and is the determining factor if the receipt was given to meet the capital cost of the assessee company that receipt to be considered as capital receipt and cannot be taxed. In other words, if the receipt has been given to meet the actual expenses of the assessee corporation in the revenue field, the same to be considered as a revenue receipt and to be taxed. These facts to be examined by the AO in all these years and if he finds the receipt is to meet the capital cost of the assessee company as per the sanction letter of the State Government, the same shall not be brought to tax. On the other if the receipt has been received by the assessee to meet the revenue expenditure or reimbursement of revenue expenditure, the charge to the P L account same to be considered as revenue receipt. Accordingly, this issue is remitted to the file of AO for fresh consideration in all these assessment years. This ground of appeals allowed for statistical purposes. Disallowance in respect of gift and donation given to third parties - AO noted that the assessee had claimed as expenditure under the head donations and gifts but the same was not added back in the computation - HELD THAT:- The main thrust is that the expenditure should have been incurred wholly and exclusively for the purpose of business or profession and it should not be capital expenditure or personal expenditure of the assessee. If the condition laid down above is not satisfied, the expenditure cannot be allowed. Before us, ld. A.R. submitted that the above expenditure incurred for the purpose of business in view of the commercial expediency - we find that the above expenditure is not incurred wholly and exclusively for the purpose of business specifically donation to Red Cross Society and Japan Relief Fund nowhere contributed to the business of assessee. It is just like a donation or in the nature of gift, which cannot be allowed u/s 37. However, we make it clear that if the assessee produce necessary details to claim exemption u/s 80G of the Act, the same may be examined and exemption u/s 80G may be granted after verifying the relevant details from the receipt issued by the respective party. This ground allowed for statistical purposes Disallowance of Forward Contract from time to time - AO noted that the assessee claimed expenditure towards forward contract premium and held that the same constitutes capital expenditure and not revenue expenditure - main contention of the ld. A.R. is that this forward contract is relating to acquisition of capital asset - HELD THAT:- In our opinion, forward contract entered into for the purpose of payment of capital liability with reference to acquisition of asset outside India, then such amount will be governed under section 43A of the Act. However, if the contract entered into for the purpose of capital liability with reference to the acquisition of capital asset within India, that loss is a capital loss. We remit this issue to the file of AO to decide afresh in the ratio laid down in the case of Sutlez Cottton Mills Ltd.[ 1978 (9) TMI 1 - SUPREME COURT] - The issue is remitted back to the file of AO for fresh consideration in assessment year 2013-14 2014-15. Taxing of the interest wrongly offered as revenue receipt - HELD THAT:- In this case, the claim of the assessee is that interest amount received during the year is not taxable and was erroneously offered to tax and placed reliance on the earlier decision of the Tribunal wherein observed that the interest income earned pre-commencement period not taxable. However, in the present assessment year 2012-13, the business of the assessee has already commenced and it is in the expansion stage and the interest earned from surplus funds after commencement cannot be considered as not taxable though it was received for expansion of the project. Accordingly, this ground of assessee is rejected in AY 2012- 13. Addition representing the interest on term deposits which the assessee did not offer for taxation - HELD THAT:- CIT(A) allowed the claim of the assessee that interest income is not taxable by placing reliance on the earlier order of the Tribunal [ 2014 (10) TMI 1054 - ITAT BANGALORE] and same has been confirmed by Karnataka High Court [ 2022 (1) TMI 653 - KARNATAKA HIGH COURT] The income generated through above impugned interest should be converted into state s equity towards the project. If it fails so same to be considered as income of the BMRCL. Accordingly, the issue is remitted to the file of AO to decide the issue in the light of judgement of Hon ble Karnataka High Court cited (supra). The ground of appeal of the revenue is partly allowed for statistical purposes.
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2023 (4) TMI 387
Bogus LTCG - Addition u/s 68 - AO disallowing the claim of exemption for LTCG and further addition @ 5% of the LTCG as unaccounted commission expenses - HELD THAT:- Since the Tribunal has already set aside the case of Hazel Mercantile Ltd. ( 2023 (1) TMI 1216 - ITAT MUMBAI ) to Ld. CIT(A) to decide afresh, on the basis of which addition made in this case was deleted, the present appeal and cross objections are required to be decided by the Ld. CIT(A) afresh in view of the findings returned by the co-ordinate Bench of the Tribunal in Hazel Mercantile Ltd. (supra).Resultantly, the present appeal filed by the Revenue and the cross objections filed by the assessee are allowed for statistical purposes.
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2023 (4) TMI 386
Addition of interest on loan - assessee has failed to substantiate the alleged interest expenses as business expenses where the identity, business activities and genuineness of transactions of loan creditor were not established - CIT-A deleted the addition - HELD THAT:- As documents furnished like landline telephone bill, letters served on the assessee from four different prominent banks including a speed post, lends credence to the assertion that lender company existed on the given address, more particularly when the lender company has been assessed by the Department and the assessment order also containing the same address. It is also observed from the assessment order of the lender company that against the nature of business, it is noted as trading in securities and iron ores which also demonstrates that assessee and the lender company are in the similar line of trade. ROC master record data also demonstrates the active status of the lender company. On the allegation that assessee did not produce the directors of the lender company, we note that neither Ld. AO nor Ld. CIT(A) made any concerted effort by issuing summons u/s 131 for enforcing the personal attendance of the directors of the lender company. Even in the remand proceedings, AO did not choose to issue summons under section 131 of the Act even though Ld. CIT(A) had given specific instruction in this respect. As per CIT(A) that the alleged advance free loan was nothing but advance to trade creditors which was an essential business requirement in expediency to maintain the level of inventory which the assessee was maintaining. He observed that loan taken by the assessee was essential for the business of the assessee and the corresponding interest expense was for business expediency, hence allowable expenditure. There is no material on record adduced by the Revenue which could rebut the documents produced by the assessee. The finding of fact arrived at, based on documentary evidence on record cannot be said to be perverse. Nothing has been pointed out that any of the findings arrived at by the CIT(A) is on the basis of misleading of evidence or failure to examine any material documents while coming to such conclusions. Decided against revenue.
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2023 (4) TMI 385
Assessment u/s 153A - incriminating material found during the search action or not? - HELD THAT:- We find that the issue is squarely covered in favour of the assessee by the decision of CIT Vs Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] followed by case of PCIT Vs RSA Digi Prints [ 2017 (9) TMI 530 - GUJARAT HIGH COURT] as unanimous to hold that in relation to the assessments which have already been concluded, the AO is precluded from making additions on any other issue except relating or concerning to the incriminating material found during the search action. AO cannot disturb the assessment order or reassessment order which has attained finality, unless the material gathered in the course of proceedings u/s 153A of the Act establishes that relief granted under the final assessment/reassessment was contrary to the fact unearthed during the course of 153A proceedings. Contention of the ld. DR that any material, which was already in possession of the Department before search, is to be treated as incriminating material is concerned has no merits. A perusal of the assessment orders show that the Assessing Officer has not mentioned in the assessment record of any such material in the case of the assessee which may be constituted as incriminating material. Department has other/additional remedies, in case, it is of the view that there was escapement of income of the assessee so far as the transactions in question pursuant to which additions have been made, the same were fully declared by the assessee in its return of income and the AO has not referred to any incriminating material found during the search action for making the impugned addition. Decided in favour of assessee.
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2023 (4) TMI 384
Depreciation on the goodwill - slump sale to subsidiary company - assessee company has valued goodwill on Discounted Cash Flow Method [DCF] - As per AO assessee overvalued the valuation of goodwill - transaction of sale of slump sale to subsidiary company is not regarded as transfer within the meaning of Section 47(iv) and the discounted cash flow method to value the goodwill was found by the AO to be erroneous - As per AO figures adopted for free cash flow are imaginary when compared to the actual figures of cash flow upto F.Y. 2014-15 - HELD THAT:- AO has completely ignored the commercial prudence of an assessee relating to valuation of an asset. Determination of fair market value has to be as per prescribed methodology and even the AO has accepted the discounted cash flow method as appropriate method for valuation of goodwill. Valuation is done on the basis of information and material available on the date of valuation and projection of future Revenue. Merely because performance did not match projections, valuation cannot be challenged, as such approach is not only irrational but lacks material foundation since the valuation is intrinsically based on projections which can be affected by various factors. One must not forget that valuation is not an exact science and, therefore, cannot be done with arithmetic precision and such technical and complex problem should be left to the consideration and wisdom of experts in the field of accountancy. Due Diligence Report of the assessee company was provided by Price Waterhouse Cooper, a well known global accounting firm, which shows that the market value of goodwill was acceptable by an independent third party. Revenue has challenged that transaction of sale of slump sale to subsidiary company is not regarded as transfer within the meaning of Section 47(iv) of the Act. But, we find that in the hands of TIEL, while framing the assessment order u/s 143(3) for A.Y 2012-13 AO has accepted income from long term capital gain for slump sale of business, thereby accepting the transfer u/s 47(iv). See cases TRIUNE ENERGY SERVICES PRIVATE LIMITED [ 2015 (11) TMI 1218 - DELHI HIGH COURT] and SMIFS SECURITIES LTD. [ 2012 (8) TMI 713 - SUPREME COURT] - Ground raised by the Revenue is dismissed.
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2023 (4) TMI 383
Revision u/s 263 - provision for NPA written back - HELD THAT:- AO conducted necessary enquiry on this issue of provisioning for non-performing assets and we also find that in the computation of total income under normal provisions, provision for NPA debited during the year is added back i.e. not claimed as deduction. As out of the total amount disallowed by AO/suo-moto disallowed by the assessee it claimed write back of provision for NPA under normal provisions and under MAT provision. These details were filed before ld. AO who has passed the assessment order after conducting the necessary enquiries. We find that since the alleged sum as already added back by the assessee in the computation of income under normal provisions for AY 2009-10 to AY 2014-15 adding the same in the current year would tantamount to double addition. Since the enquiry has been conducted on this issue and the alleged sum has already been offered to tax in the preceding years neither the order of ld. AO is erroneous nor prejudicial to the interests of the Revenue. CSR expenses claimed - From perusal of the computation of income under normal provisions we find that the assessee has suo-moto added back the alleged CSR expenses in the computation of income filed with the revised return of income and offered it to tax. We do not find any justification in the finding of ld. Pr. CIT invoking the revisionary proceedings and restoring it for examination of ld. AO. Excess depreciation - assessee company has claimed excess depreciation on the Block of Plant and machinery (80%) which is required to be disallowed - As in the assessment order passed u/s 143(3) of the Act, the learned AO has also allowed depreciation as claimed by the assessee in the revised return depreciation and not as claimed in the original return. CIT failed to appreciate the submissions filed by the assessee and held that the assessee failed to completely disclose its true and correct income by non-furnishing of details as required under the provisions of Income Tax Act and held that the assessment order is erroneous and prejudicial on this ground - assessee has revised the depreciation claim and reduced it which thus brings to a conclusion that there is no prejudice caused to the Revenue. Pr. CIT erred in invoking the jurisdiction u/s 263 of the Act on the above stated three issues which have been examined by ld. AO and in the alternate the assessee has suo-moto offered it to tax and therefore, for these reasons the order of ld. AO cannot be held to be erroneous and prejudicial to the interests of the Revenue - Decided in favour of assessee.
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2023 (4) TMI 382
Unexplained business income - credit of this amount in the account of sundry creditor was a fictitious liability - HELD THAT:- There it was a running account between the assessee and sundry creditor and all payments have been made through cheques and at the end of financial year 2007-08 there was a balance which was picked up by the AO for making addition in the hands of the assessee. As clearly revealed that the said amount was brought forward by the assessee as opening credit balance to sundry creditor and on 31.03.2009 the account was tallied and no balance was left. Ledger account of sundry creditor clearly show that the assessee has made payments to M/s Stambh Engineers through banking channel after deducting TDS and WCT and such transactions cannot be doubted in any manner. AO made addition in the hands of the assessee without any justified basis and reasoning and without bringing out any positive adverse material against the assessee to establish that the liability was fictitious. AO is directed to delete the addition. Decided in favour of assessee. Addition of depreciation as the fund towards some other income on which the assessee has earned 20% - HELD THAT:- We are unable to see any positive or adverse finding against the assessee on this factual aspect that no depreciation has been claimed by the assessee on the capital work-in-progress which also includes the transactions noted by the ld.CIT(A). Disallowance of depreciation has been made solely on the allegation that the assessee has claimed excess contract payment towards the addition to building. But, there is no findings of the authorities below that the assessee has claimed some depreciation thereon. In such a situation, the disallowance of depreciation on the baseless allegation that the amount pertaining to the depreciation disallowed was the funds towards some other income on which the assessee has earned 20%. When the assessee has not claimed any depreciation, then, no disallowance can be made in the hands of the assessee on this account. AO is directed to delete the addition. Grounds of the assessee allowed.
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2023 (4) TMI 381
Penalty levied u/s 271(1)(c) - addition u/s 68 in respect of sundry creditors as the assessee could not prove the identity, genuineness and creditworthiness of the creditors - HELD THAT:- CIT(Appeals) considered the submissions of the assessee and the averments of the AO in the penalty order and placing reliance on the decisions of various issues sustained the penalty imposed holding that the assessee has not discharged its burden to prove the identity, creditworthiness and genuineness of the creditors. No infirmity in the order passed by the Ld.CIT(A) in sustaining the penalty levied u/s 271(1)(c) of the Act. Grounds raised by the assessee are rejected.
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2023 (4) TMI 380
Ad-hoc disallowance at the rate of 10% on credit card expenses - assessee has contended that the alleged additions made by ld. AO are merely on suspicion and no defect has been pointed out in the details of the expenditure given by the assessee - HELD THAT:- In the assessment order framed u/s 153A r.w.s. 143(3) of the Act ld. AO made only two disallowances; firstly towards personal expenses included in the credit card expenses and secondly the disallowance at the rate of 10% of the foreign travel expenses. Prima Facie the said disallowance is ad-hoc in nature. AO ought to have made reference to any of such expenses given in the books which could indicate that they are personal in nature. Merely making disallowance just for the sake of concluding the assessment is not a justified approach. Expenses through credit card have been claimed as general business expenditure in order to attend the business meetings. No specific defect has been pointed out by the Revenue authorities and as claimed by ld. Counsel for the assessee that in the subsequent years no such disallowance has been made in the scrutiny proceedings carried out As alleged disallowance is based on merely conjectures, surmises and suspicion and the same deserves to be deleted. Thus, the addition for ad-hoc disallowance made is deleted. Decided in favour of assessee. Ad-hoc disallowance at the rate of 10% on foreign travel expenses - HELD THAT:- Taking a consistent view and observing that the alleged disallowance for foreign travel expenses is merely ad-hoc in nature, we delete the said disallowance. Disallowance of brokerage - HELD THAT:- The brokerage bill was received, accounted for and settled during the year under appeal. Tax at source has been deducted thereof. The genuineness of the brokerage expenses has not been doubted by the Revenue authorities. This being a genuine claim of business expenditure towards brokerage, the same deserves to be allowed. We, thus, set aside the finding of ld. CIT(A) and delete the said disallowance - Decided in favour of assessee. Nature of receipt - sales tax incentives - whether the sales tax incentive is a capital receipt and is to be excluded for the purpose of computing book profit u/s 115JB? -HELD THAT:- The sales tax incentive received by the assessee is for setting up of industries in the backward areas of West Bengal and is not directly related to the revenue growth of the assessee company, we hold it to be a capital receipt not liable to tax. See M/S. BIRLA CORPORATION LTD [ 2021 (1) TMI 154 - ITAT KOLKATA] , M/S. SOVAISPAT LIMITED [ 2020 (6) TMI 100 - ITAT KOLKATA] , CHAPHALKAR BROTHERS PUNE [ 2017 (12) TMI 816 - SUPREME COURT] , RELIANCE INDUSTRIES LTD. [ 2009 (4) TMI 516 - BOMBAY HIGH COURT] MAT Computation - exclusion of the sales tax incentive for the purpose of computing book profit u/s 115JB - HELD THAT:- The sales tax incentive which is the capital receipt (as held above in the preceding para) given to the assessee for achieving industrialization in the backward areas of West Bengal, is not required to be included in the book profit for computing the tax liability u/s 115JB of the Act - See SICPA INDIA PRIVATE LIMITED (FORMERLY KNOWN AS SICPA INDIA LTD.) VERSUS D.C.I.T., CIRCLE-8, KOLKATA [ 2017 (3) TMI 1383 - ITAT KOLKATA]
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2023 (4) TMI 379
Assessment u/s 153A - valid approval granted by the Ld JCIT u/s 153D - Addition u/s 68 - addition on account of receipt of share capital and premium thereon - HELD THAT:- As respectfully following the judgment of coordinate bench of ITAT Raipur in assessee s own case [ 2021 (9) TMI 858 - ITAT RAIPUR] and latest judgment of Hon ble Allahabad High Court in Sapna Gupta [ 2022 (12) TMI 887 - ALLAHABAD HIGH COURT] we are of the considered view that, the additional ground raised by the assessee has substantial merit, so far as the approval granted by the Ld JCIT u/s 153D was suffering with non-application of mind, based on presumptions, mechanical and illegitimate. Therefore, consequential assessments based on such non-est approval u/s 153D are void-ab-inito and cannot be sustained. Resultantly, the legal ground raised by the assessee stands allowed.
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2023 (4) TMI 378
Disallowance of interest expense - principle of consistency - assessee during the assessment proceedings expresses his inability to establishes the directs nexus of utilization of interest bearing fund for earning business income and income from other sources by contending that the funds were borrowed for making investment in properties and partnership firm on earlier occasion and he does not maintain separate books of account - HELD THAT:- Once the revenue accepted the identical claim of the assessee in the immediate preceding assessment year, then such claim made in the year under consideration should also be accepted to maintain principle of consistency, particularly in a situation where there was no change in the facts. In holding so, we draw support and guidance from the judgment of PCIT vs. Quest Investment Advisor (P.) Ltd. [ 2018 (7) TMI 479 - BOMBAY HIGH COURT] - Appeal filed by the assessee is allowed.
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2023 (4) TMI 377
Disallowance as Commission Expenses - principle of res judicata - assessee has claimed deduction of sales commission expenses paid to sister concern of the assessee firm and partners of the assessee firm - HELD THAT:- As decided in assessee own case [ 2023 (4) TMI 314 - ITAT AHMEDABAD] as held no doubt the assessee has been paying commission for the past many years and which has never been disallowed in scrutiny assessment. But the assessment orders reveal that the issues were was never examined in those years. Assessee has been claiming and has been allowed the said claim in scrutiny assessment for the past many years, we find does not help the case of the assessee. More particularly when the detailed scrutiny in this year brought out facts revealing that there was no basis and reason for paying the commission to these agents who even otherwise were closely related to the assessee, since the assessee was unable to demonstrate any service rendered by them as distributors. The principle of res judicata does not apply to Income Tax proceedings and the facts of each year have to be considered and merely because the claim has been allowed all these years without being examined, does not make the claim legitimate despite evidences on record proving to the contrary. Contention that the disallowance in any case could not have been made u/s. 40A(2)(b) - We find no merit in this consideration - A.O. has not invoked Section 40A(2)(b) for the purposes of making the disallowance - AO we find has only referred to the Section for pointing out that the agents were closely related to the assessee qualifying as specified persons as per the said section and the disallowance has been made finding the claim to be ingenuine in terms of Section 37(1) of the Act. Therefore this contention of the assessee is also rejected. Addition u/s 40A(2)(b) disallowed by CIT(A) by invoking Section 249(3) - Assessing Officer held that the assessee has not given any justification for excess interest payment @ 18% paid to related parties and hence disallowed interest paid - CIT(A) dismissed the relief granted to the assessee on a technical ground that there is a delay in filing of appeal by the assessee and accordingly he dismissed the appeal of the assessee by invoking the provision of Section 249(3) - HELD THAT:- The assessment order was passed on 27.10.2016. Therefore, apparently the assessee seems to have incorrectly mentioned the date of communication of such order as 27.10.2016. There is nothing on record that the assessment order was served upon the assessee on the same date which was by way an e-mail communication. Further, looking into minor period of delay, in filing appeal before Ld. CIT(A) in the interest of justice, we think it is a fit case that such delay should have been condoned. Accordingly, we are dismissing the order of Ld. CIT(A) to the extent it has not afforded relief to the assessee on the ground that the appeal was filed beyond the due date by invoking the provision of Section 249(3) of the Act. In view of the above observations Ground Nos. 4 5 of the assessee's appeal are allowed.
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2023 (4) TMI 376
Disallowance of expenses and depreciation - no business was conducted by the Assessee and there is no business income - DR submitted that Ld. CIT(A) has observed no TDS have been deducted on such payment of professional fees and therefore same should be disallowed u/s 40(a)(ia) - HELD THAT:- There is nothing on record that assessee had closed down the business completely and has wounded up during this year. There is a distinction between temporary suspension of the business or lull in the business and complete closer of the business. No reasons as to why when there is no closer of business during the year accept for there was no business income why the general and administrative expenses can be disallowed. Temporary suspension of business does not mean it is dissolved on the business is completely shut down its Akin to Lull business which as stated by the assessee was various genuine reasons. Accordingly, in principle such expenses cannot be disallowed. Legal expenses payments have been made by the assessee for the filling of various suit for recovery of money from the debtors like Fancy Impacts, Marble Gems, Asugems Sugey Gems which is still pending, and the suits were filed in 2012. Thus, this legal expenses cannot be disallowed as they have been incurred during carrying of the business. No TDS have been deducted on such payment of professional fees and therefore same should be disallowed u/s 40(a)(ia) - Before us, the Ld. Counsel cannot clarify that, whether any TDS have been deducted, therefore this matter is restored back to the file of the Assessing Officer to see whether any TDS has been deducted on the payment of professional legal fee to the legal firm and whether provisions of 40(a)(ia) are applicable. Thus, issue of claim of expenses as treated as partly allowed for statistical purposes. Disallowance of depreciation - once assets of forming part of the block of assets, and same where used for the purpose of business in the earlier years, then, depreciation cannot be disallowed. Accordingly, appeal of the assessee is partly allowed for statistical purposes.
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2023 (4) TMI 375
Revision u/s 263 by CIT - whether AO order is erroneous or prejudicial to the interest of the revenue? - various incomes in the profit and loss account having been claimed as deduction in the statement of total income - PCIT, has taken up the issue of income from guarantee commission, Fair Value Gain on financial instruments at FVTPL, interest income on redeemable financial instruments and gain on extinguishment of financial liability, on the ground that although those items of income have been credited into profit and loss account, but in the statement of total income reduced from the income - HELD THAT:- AO had issued notice u/s. 143(2) and called for various details for which the assessee has submitted relevant books of accounts, tax audit reports, notes on accounts and statement of total income. AO had also issued one more notice u/s. 143(2) of the Act on 27.09.2019 and specifically called for various details in respect of claim of any other amount allowable as deduction in schedule BP, details about share premium and ICDS compliance and adjustment. For which, the assessee has filed a detailed note and explained each entry passed in compliance with IND-AS Standards and how such entries have been negated in the statement of total income, which is not affecting taxable income for the impugned assessment year. All issues questioned by the Pr. CIT including the issue of securities premium has been thoroughly examined by the Assessing Officer during assessment proceedings and after being satisfied with explanation furnished by the assessee, the AO has completed the assessment. Therefore, it cannot be said that the Assessing Officer has not verified the issue which he ought to have been verified in light of explanation 2 to section 263 Income has to be computed as per the provisions of the Income Tax Act, 1961 and the ICDS principles. In the books of accounts, an Assessee may be following any other Standard as may be prescribed by the Statute governing the Assessee. ICDS being fundamental in nature, shall be applicable for computing the income under the heads Profits Gains from Business or Profession Income from other sources. Further, to the answer to question no. 5, CBDT clarified very clearly that ICDS shall apply for computation of taxable income under the head Profits Gains from Business or Profession irrespective of the Accounting Standards adopted by the companies ie., either Accounting Standards or Ind-AS. In this case, the assessee has rightly followed IND-AS standards for the purpose of disclosure of financial assets and liabilities whereas computed income for the purpose of income tax in compliance with ICDS standards which is clearly evident from the entries passed in the books and negated in the statement of total income. Further, the entry in the books which was made on a hypothetical income which did not materialized and the entry was reversed in the next year, then it could not be brought to tax as income because only real income can be brought to tax as held by the Hon ble Supreme Court in the case of CIT vs Bokaro Steel Ltd [ 1998 (12) TMI 4 - SUPREME COURT ] As assessment order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the revenue. It was only the PCIT has exercised his powers and set aside the assessment order u/s. 263 of the Act, without recording any reasons as to how and why the assessment order is erroneous which caused prejudice to the interest of the revenue. PCIT, has simply set aside the issue to the Assessing Officer for further verification, without pointing out how issues discussed in their order passed u/s., 263 of the Act is caused prejudice to the interest of the revenue. PCIT is erred in invoking jurisdiction u/s. 263 of the Act and set aside the assessment order passed by the Assessing Officer u/s. 143(3) dated 31.12.2019 and thus, we quash order passed by the PCIT u/s. 263 of the Act. Decided in favour of assessee.
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2023 (4) TMI 374
Interest free loans to its subsidiaries - no commercial expediency involved - Whether AO was right in making disallowance of interest by taking the rate of interest as 12% per annum? - Principle of consistency - HELD THAT:- When the Revenue has allowed claim of the assessee during the preceding three assessment years considering the fact of commercial expediency, then, the ld.CIT(A) cannot be held as unreasonable and unjustified in following the orders of his predecessors. It is a peculiar factual position of present AY 2015-16 that the assessee, in fact, not claimed any expenditure on interest except interest on car loan. Therefore, being unable to see any valid reason to interfere with the findings arrived at by the ld.CIT(A), we uphold the same. Accordingly, ground No.1 of the Revenue is dismissed. Disallowance u/s 14A of the IT Act r.w.r. 8D - assessee submitted that undisputedly, no exempt income has been earned by the assessee during the year under consideration, therefore, no addition could have been made in the hands of the assessee u/s 14A of the Act r.w.r 8D as relying on Cheminvest Ltd.[ 2015 (9) TMI 238 - DELHI HIGH COURT] and Crystal Crop Protection Pvt. Ltd. [ 2022 (7) TMI 1162 - DELHI HIGH COURT] - HELD THAT:- AO has made disallowance solely relying on CBDT Circular No.05/2017 dated 11.02.2014. The Hon ble jurisdictional High Court of Delhi in the case of PCIT vs. IL FS Energy Development Company Ltd. [ 2017 (8) TMI 732 - DELHI HIGH COURT] held that the court is not persuaded that in view of the Circular of the CBDT dated 11.02.2014, the decision of Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] requires reconsideration. Therefore, being unable to see any ambiguity, perversity or any other valid reason to interfere with the findings of the ld. CIT(A), we uphold the same. Appeal filed by the Revenue is dismissed.
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2023 (4) TMI 373
Penalty u/s 271(1)(c) - defective notice u/s 274 - Non specification of charges against the assessee for visiting with penalty - HELD THAT:- It is very debatable issue across the country, whether penalty could be imposed upon an assessee in the absence of any specific charge in the show-cause notice issued u/s 274 r.w.s. 271(1)(c) of the Income Tax Act. AO is required to specify the charge on which an assessee has to give explanation, namely whether penalty is to be imposed upon the assessee for concealment of income or for furnishing of inaccurate particulars. In the judgments cited before us, this question has been answered in favour of the assessee, i.e. in case, the charge is not specified in the show-cause notice, then penalty would not be imposable upon the assessee. Thus we are of the view that penalty imposed upon the assessee is not sustainable, it is deleted. Appeal of the assessee is allowed.
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2023 (4) TMI 372
Addition u/s 68 - Onus to prove - amount received from investor company was reinvested in the shares of other company - identity and credit worthiness of the investor company and genuineness of the transactions - addition made in the hands of conduit companies - HELD THAT:- In the present case, from the orders of the authorities below as well as from the paper book filed by the assessee before us, we are unable to see any document such as copies of PAN, return of income, balance sheet, confirmation, bank statements of investor company discharging the onus as per the requirement of section 68 of the Act. We also note that the assessee has successfully demonstrated that almost the entire amount received was invested in Rockland Hospitals Ltd. and the AO made addition u/s 68 of the Act in the hands of M/s Rockland Hospitals Ltd. on account of two investments including the investment made by the assessee. These documents only establish the use of amount received by the assessee, but, these facts are not capable to discharge the onus lay on the shoulders of the assessee in this regard under provisions of section 68. The theory of conduit company is not acceptable as, for being a conduit company, the assessee is duty bound to establish that the company from whom it received the amount and the company in which it invested the same amount were of the same group and it was merely an intermediary or conduit company. As assessee has miserably failed to substantiate the identity, capacity and credit worthiness of the investor company as well as the genuineness of the transaction. Except name, no details of PAN No., address, bank statement, ledger, confirmation and supporting copies of financial statements of investor company have been filed by the assessee. Decided against assessee.
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2023 (4) TMI 371
Assessment u/s 153A - offer of income by the appellant without corroborative incriminating material in search - Income surrendered u/s 132(4) during search - HELD THAT:- For the purposes of the present proceedings, we have held that the surrender admittedly on facts was made on mistaken belief of facts and law and in the face of the voluminous plethora of evidences countering each of the factors considered relevant by the Revenue for addition and that reliance was only placed upon statement of the Director and employees. In the instant case, no evidences countering/rebutting the argument of assessee on each of the factors considered relevant by the Revenue, particularly no incriminating material for addition. We have found that merely reliance is only placed upon statement of the assesse taken at the time of locker operation without confronting the incriminating material or any other corroborative evidence either at the time of recording statement u/s 132(4) or in the assessment proceedings. Such statement has no evidentiary value u/s 292C of the act as being not supported with any incriminating material/evidence. CBDT circular is binding on the revenue authorities as also followed by the CIT(A) in one of the Assessment year as above. The order of the CIT(A) is perverse to the facts on record. Accordingly, the addition made in respect of Assessment Year 2011-12 and 2012-13 is deleted. Addition of amount against bearer cheque - assessee s signatures were appearing on the backside of this alleged cheque - HELD THAT:- CIT(A) failed to establish or prove in the light of the remand report of the AO and any other material evidence such as, report of the forensic expert, to corroborate the fact of fake/authenticity of the signatures on the back side of the disputed bearer cheque and its encashment by the assessee at a later date. In view of the matter, we hold that the order of the Ld. CIT(A) has infirmity and perversity to the facts on record on the issue of addition on account of amount against bearer cheque having fake/forged signatures of the appellant assessee. We accept the grievance of assessee as genuine and hold that the Id. CIT(A) was not justified confirming the aforesaid addition - Decided in favour of assessee.
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2023 (4) TMI 370
Validity of the reopening of the assessment - scope of tangible material - assessee s claim of interest expenditure incurred on payment made - As per DR merely filing the balance-sheet cannot absolve the assessee s duty to explain/furnish fully and truly all the relevant material facts necessary for the assessment in respect of interest expenditure - HELD THAT:- Assessee had disclosed all the primary documents before the AO as discussed; and it cannot be said in the facts of this case that the assessee failed to disclose any material facts necessary for assessment on this issue (interest expenditure). Moreover, as noted this issue (Interest expenditure) has been specifically asked and assessee has replied to it - assessee cannot be said to have failed to disclose truly and fully the material/information regarding this issue. As decided in Mangalore Refinery Petro Chemicals Ltd. [ 2022 (2) TMI 1038 - BOMBAY HIGH COURT] as held it cannot be said that the income escaped assessment on account of failure to make a true and full disclosure of the material facts (in cases where the proviso operates) - the exercise would then fall in the realm of mere change of opinion on the basis of the very same material, which is legally impermissible - it cannot be said that there is a tangible material which would justify recourse to the provisions contained in section 147 of the Act, 1961. Decided in favour of assessee.
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2023 (4) TMI 369
Exemption u/s 11 denied - Audit Report in Form 10B was filed while removing deficiency u/s 139(9) and was not filed at the time of filing the return - return was treated as defective u/s 139(9) by the revenue - HELD THAT:- The filling of Form No. 10B is a procedural direction in in the proviso. The assessee is registered u/s 12A and followed the direction as per the Act during filing of return. For non-filing of Form No. 10B with the return is just a failure of procedural system. Form 10B was filed within stipulated time for removal of defect in the return. See case of Sarvodaya Charitable Trust vs. Income Tax Officer.[ 2021 (1) TMI 214 - GUJARAT HIGH COURT] The assessee had rectified the defect within stipulated time and the procedure for filing Audit Report was completed. We find that assessee is eligible for deduction u/s 11 of the Act. The addition made by the ld. AO is liable to be quashed. Accordingly, the appeal of the assessee is allowed.
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2023 (4) TMI 368
Depreciation on computer software - Intangible Asset v/s Computer Software - @25% or @60% - HELD THAT:- As relying on M/s Arkema Chemicals India P Ltd case [ 2022 (4) TMI 1182 - ITAT MUMBAI] CIT(A) has erred in denying the claim of depreciation made by the assessee on computer software @60% because assessee is entitled for depreciation on computer software, which is part of the computer @60%. Also software licence acquired by the assessee was in the nature of application software and is eligible for depreciation @60%. Assessing Officer is directed to provide depreciation as claimed by the assessee on computer software @60% - Appeal filed by the assessee is allowed.
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2023 (4) TMI 367
Additions on account of alleged unaccounted stock of goods and cash - survey action u/s 133A - assessee had voluntarily disclosed an amount - HELD THAT:- We note that addition was not solely made based on the statement rather it has made based on the evidence and documents collected during the survey proceedings. AO has stated in assessment order that additions were made based on the documents and evidences obtained by the department during the survey proceedings and not based on the statement. CIT(A) has also discussed the documents and evidences obtained by the department during the survey. Hence, addition is not based solely on the statement. We note that at the time of survey the books of accounts were not completed. At the time of assessment proceedings, the assessee has submitted audited books of accounts - assessee has not submitted the reconciliation statement for stock and cash in hand between audited books of accounts and unaudited books of accounts at survey. The assessing officer has also not asked the assessee to submit reconciliation statement, showing differences and items of differences, between audited books of accounts and unaudited books of accounts at survey, about stock and cash in hand. One more opportunity should be given to the assessee to explain the differences in stock and cash in hand, hence this issue may be remitted back to the file of the assessing officer for limited purpose to examine the reconciliation statement. The assessee is directed to submit before the assessing officer, the reconciliation statement, showing differences and items of differences, between audited books of accounts and unaudited books of accounts at survey, about stock and cash in hand. For statistical purposes, the ground no.1 of the assessee is treated as allowed. Rejection of books of accounts u/s 145(3) - assessee submitted that books of accounts of the assessee were audited and the AO without pointing out any mistake in the audited books of accounts rejected the books of accounts u/s 145(3) - HELD THAT:- As during survey unaccounted stock and cash was detected by the survey team which remained to be explained and incorporated in the books coupled with unverifiable purchase renders the books of account incomplete and incapable to show true and correct picture of the relevant year, and hence, the AO was fully justified in rejecting the book of accounts by invoking the provision of section 145(3) of the Act. Hence, we uphold the above findings of ld CIT(A) and ground no.2 of appeal of the assessee is dismissed. Estimation of income - Unaccounted purchase of goods - HELD THAT:- As relying on Pankaj K. Chaudhary [ 2021 (10) TMI 653 - ITAT SURAT] we are of the view that addition should be sustained at the rate of 6% of bogus purchases instead of 12.5% of the bogus purchases. Therefore, we direct the AO to sustain addition @ 6% of bogus purchases. Unexplained cash credit u/s 68 - HELD THAT:- Assessee has not submitted the relevant documents, that is, bank statement to prove that loans have been repaid in the subsequent year, besides audited books, if any, were not submitted. Counsel undertakes this responsibility to produce the bank statement and other relevant documents before the Assessing Officer. Therefore, we accept the prayer of the assessee and we are of the view that an opportunity should be given to the assessee to produce the bank statements and other documents to prove, identity, creditworthiness and genuineness of the cash credit. Therefore, we set aside the order of CIT(A) and remit this issue back to the file of the AO to adjudicate the issue in accordance with law. Ground allowed for statistical purposes.
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2023 (4) TMI 366
Unexplained paid up share capital u/s. 68 - assessee failed to submit copy of bank account and income tax return of the share subscriber company - HELD THAT:- Assessee has sufficiently explained the identity and creditworthiness of the share subscriber it being a sister concern and the genuineness of the transaction for which nothing contrary has been brought on record by the Revenue. We do not find any merit in the finding of CIT(A). We accordingly, allow ground no. 1 taken by the assessee and direct to delete the addition so made - Accordingly, ground no. 1 is allowed. Addition on account of directors remuneration being treated as excessive u/s. 40A(2) - As argued authorities below have not brought out any contrary material except their own observations which are based on surmises and conjecture, to demonstrate that the remuneration paid to the directors is excessive - HELD THAT:- We note that directors remuneration paid by the assessee against the turnover and net profit of the assessee in past five years demonstrate the legitimacy of the expenses incurred by the assessee and the benefits derived by it from the same. Payment made to directors is not bogus for which nothing has been brought on record by the Ld. AO. Thus, we are in agreement with the submission of that once it is established that remuneration has been paid to directors then Revenue cannot put itself in the arm chair of a businessman to assume the role of ascertainment, how it is a reasonable remuneration having regard to the facts and circumstances of the case. Matter of commercial expediency should be left to the businessman concern or the board of directors - We direct to delete the disallowance made - Accordingly, ground no. 2 is allowed. Addition u/s 40A(3) - as submitted that assessee made reimbursement of expenses incurred by the two advocates on behalf of the assessee - HELD THAT:- As from the perusal of the order of Ld. CIT(A), we take note of the facts which have been tabulated, giving all the explanations and details for the payment made to the two advocate professionals towards reimbursement of expenses incurred by them on behalf of the assessee. We do find force in the submission made by the Ld. Counsel explaining the case of the assessee as stated above and accordingly, direct for the deletion of disallowance made in this respect. Accordingly, ground no. 3 is allowed. Addition being prior period expenditure not allowable in the year under consideration - HELD THAT:- As we note that details of these expenditure are tabulated which relate to service charges, site maintenance, construction expenses and generator running and maintenance expenses for which claim of these expenses were submitted before the assessee by respective service providers after the close of accounting year and, therefore, the assessee claimed the expenses in the year under consideration. All these expenses are legitimate business expenses allowable u/s. 37(1) - Ld. Counsel also placed reliance on the decision of coordinate bench of ITAT, Mumbai in the case of Kellogs (India) Pvt. Ltd. [ 2012 (12) TMI 664 - ITAT MUMBAI] - we are inclined to direct for deletion of the addition made by the authorities below. Accordingly, ground no. 4 is allowed. Addition u/s. 36(1)(iii) - interest free advances - Counsel submitted that this disallowance has been made without establishing that borrowed fund were utilised in making interest free advances - HELD THAT:- Assessee has its own interest free funds which are substantially more as compared to the interest free advances given by it, which does not have any adverse impact on the claim of interest expenditure made by it in the P L Account. Considering the over all facts and circumstances of the case and the explanation furnished by the Ld. Counsel, we direct to delete the addition made in this respect. Accordingly, ground no. 5 is allowed. Addition on account of sponsorship expenses by treating the same as donation - assessee has claimed business promotion expenses which have been incurred by the assessee by way of contribution to various association and bodies and temples for festive occasions - HELD THAT:- The expenses incurred by the assessee are not held to be bogus or have been doubted by the authorities below. Accordingly , we are inclined to allow the claim of the expenses by the assessee and thus direct for deletion of addition made in this respect. Accordingly, ground no. 6 is allowed.
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2023 (4) TMI 365
Addition u/s 69A - additional income in settlement before the Settlement Commission - HELD THAT:- CIT(A) has deleted the addition u/s. 69A following the order in the case of M/s. Indiabulls Financial Services Ltd. [ 2022 (11) TMI 1164 - ITAT MUMBAI] . The Co-ordinate Bench has upheld the findings of CIT(A) in deleting the addition on the ground the amount has already been considered in income of the assessee and other entities, before the Settlement Commission. Thus, in facts of the instant case, we do not find any infirmity in the findings of CIT(A) on this issue, hence, the same are upheld and ground No.1 to 3 of the appeal are dismissed. Assessment u/s 153A - Addition on account of accrued interest on FDR - HELD THAT:- It is an undisputed fact that on the date of search no assessment was pending for the impugned assessment year. A bare perusal of the assessment order shows that there is no reference to any incriminating material. In the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] has held that where there is no pending assessment and no incriminating material is found during search, no addition can be made in assessment proceedings u/s. 153C r.w.s. 143(3) Addition invoking proviso to section 79 in assessment proceedings u/s 153C - Whether CIT(A) has erred in holding that it is a case of unabated assessment? - HELD THAT:- The assessee is a subsidiary of Indiabulls group. A perusal of the assessment order would show that the addition made u/s. 79 of the Act is not based on any incriminating material found and seized during the course of search. In so far as the argument of the ld. Departmental Representative that it is a case of abated assessment, the same is unsubstantiated, hence rejected. In absence of any incriminating material coupled with the fact that it is a case of unabated assessment, no addition could have been made by the Assessing Officer based on any material which was already available on record at the time of regular assessment [Re. CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] Appeal by the Revenue is dismissed
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2023 (4) TMI 364
Disallowance of employee contribution of PF and ESI - distinction between employer's contribution which is its primary liability under law [in terms of Section 36(1)(iv)] and its liability to deposit amounts received by it or deducted by it from its employees' [in terms of Sec. 36(1)(va)] - HELD THAT:- As there is a marked distinction between the nature and character of the two contributions - the employer's liability is to be paid out of its income whereas the second is deemed to be an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B. If the same is not deposited as per mandate of Sec. 36(1)(va), the deduction of the same would not be available to the assessee. Thus, this issue stands in favor of revenue and we respectfully follow the same. Respectfully following the recent decision of Checkmate Services P. Ltd.[ 2022 (10) TMI 617 - SUPREME COURT] and considering our findings and adjudication in preceding paragraphs, the impugned disallowances stand confirmed. Appeal of the assessee is dismissed.
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2023 (4) TMI 363
Addition u/s 68 - Penny stock transactions - bogus loss believing on report of investigation conducted by Investigation Wing, Kolkata - AO held that transaction relate to trading in these three scrips of Dhenu Buildcon Infra Ltd., Global Securities Ltd. and Turbotech Engineering Ltd. are bogus, coloured and not genuine - HELD THAT:- We find that there are large number of assessees, who have transacted with equity shares of the above named three scrips and claimed benefits under the provisions of the Act. Apart from these scrips, there are other scrips also in Kolkata, who were found to be penny stock and transactions on papers only. Hon'ble Calcutta High Court has recently considered this aspect in its judgment in the case of Swati Bajaj Others [ 2022 (6) TMI 670 - CALCUTTA HIGH COURT] - In a number of appeals, Coordinate bench of ITAT, Kolkata has rejected the claim of the assessees, where the assessee transacted in the shares of such companies. All these transactions have been held as bogus by the Hon'ble Jurisdictional High Court. We affirm the view taken by the Revenue Authorities who have rejected the claim of the assessee and made the additions. Decided against assessee.
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2023 (4) TMI 362
Nature of expenditure - repair of false ceiling - capital expenditure or revenue expenditure - HELD THAT:- As from the invoice as well as work order nothing is clear whether the entire area i.e. 177500 sq. ft. which is claimed by the Assessee for repair, maintenance, modification and overhauling of air conditioning ducts, got damaged completely or partly . It is also not clear whether false ceiling was replaced with the new one or just repaired old one without disturbing the originality and what were the terms and conditions qua quotation/agreement/work order if any executed for doing the repair of false ceiling and what material/manpower used. Hence, view justice would be met by remanding the instant issue to the file of the AO for decision afresh. We clarify that primary onus would be on the Assessee to establish the sanction plan or any other document to show that previously the building had false ceiling, the exact dimension and expenditure incurred for repairing of false ceiling, the material used, the mode of repair, use of resources/manpower, quotation/ agreement/work order and its the terms and conditions - Ground no. 1 stands allowed for statistical purposes. Disallowance being difference in form 26AS and P L A/c - oversight TDS amount could not be deposited -HELD THAT:- It is too the case of the Revenue Department here that the Assessee has already claimed the TDS during the relevant assessment year in respect of amount credited in the FY 2011-12 or any other assessment year. Hence, in view of the judgment of the Hon ble Punjab Haryana High Court in Abbott Agency [ 2013 (10) TMI 1173 - PUNJAB AND HARYANA HIGH COURT ] which was also relied upon in the case of M/s Kema India Private Ltd. Vs. ITO [ 2022 (4) TMI 109 - ITAT DELHI ] we are inclined to allow the claim of TDS in the year under consideration. Consequently, the addition made by the AO and sustained by the learned Commissioner, which is under consideration stands allowed. Ground-2 is allowed.
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2023 (4) TMI 361
Penalty u/s 271B - Assessee failed to file correct audited books of account, alongwith original return of income but with revised return - HELD THAT:- In the instant case, the Assessee filed its return of income on 30.09.2011 and the books of account of the Assessee have also been audited only on 30.09.2011, however it seems that somehow due to inadvertent or otherwise mistake in the name of Auditor, the Assessee failed to file correct audited books of account, alongwith original return of income, but it is a fact that audited books of account which are not in dispute, have duly been filed along with the revised return of income. The facts and figures of the original return and the revised return are exactly same and there is nothing contrary. Even it is not the case of the Revenue-Department that the Assessee has failed to get his accounts audited for the year under consideration and/or failed to furnish report of such audit as required u/s 44AB of the Act before the finalization of the assessment order, as mandated u/s 271B of the Act - Appeal filed by the Assessee stands allowed.
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2023 (4) TMI 360
Application u/s. 80G(5) (vi) r.w.s. 11AA rejected - genuineness of charitable activity could not be established for the reason that appellant was charging fee from the participants and most of the expenses are by way of cash - registration was issued u/s 12AA - HELD THAT:- As a matter of fact for subsequent years the permission was granted showing that the genuineness of charitable activity was considered established for following years also. This all shows arbitrary exercise of the statutory power vested under the Act for passing the impugned order. On the contrary, the ld CIT(E) failed to follow or distinguish, the settled position of law that if registration was issued u/s 12AA of the Act then the natural consequence should have been to grant permission under Section 80G of the Act. As relying on BHARAT VIKAS PARISHAD MAHARANA PRATAP NYAS [ 2019 (2) TMI 661 - ITAT DELHI] CIT(E), New Delhi is directed to grant approval to the assessee under section 80G(5)(vi) of the Income Tax Act, 1961, for the relevant year, from the date of application.
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2023 (4) TMI 359
Revision u/s 263 - assessment order erroneous and prejudicial to the interests of the Revenue - Peney stoch transactions - As per CIT there was no query from the AO as to the genuineness of the claim for exemption u/s 10(38) under the head long term capital gains - As argued by assessee case was selected for limited scrutiny, therefore, the question of examination of issue of genuineness of claim for exemption u/s 10(38) does not arise - HELD THAT:- On mere perusal of the said notice, it would be clear that there was no query from the Assessing Officer as to the genuineness of the claim for exemption u/s 10(38) under the head long term capital gains . The appellant cannot be blow hot and cold one hand say that the case was selected for limited scrutiny and on the other hand the issue was examined by the Ao. Thus, the contentions made in this behalf by the appellant are devoid of any merit. It can be safely concluded that the AO had failed to examine the genuineness of claim for exemption u/s 10(38) of the Act. As no reasonable opportunity was given by the ld. PCIT during the course of proceedings before him - As the appellant could not demonstrate before us that the notice was received after expiry of the date of hearing of the proceedings u/s 263 - As established the fact that the shares of M/s. NCL Research Financial Services Ltd. were reported as penny stock by the Investigation Wing of the Income Tax Department, Kolkata, the transactions of purchase and sale of shares in M/s. NCL Research Financial Services Ltd. are part of the fraud played by the operators involved in the penny stock. PCIT was not clear in his finding, therefore, the order should be declared null and void - It cannot be accepted for the reason that the ld. PCIT has only set-aside the assessment to re-do the assessment after giving an opportunity of hearing to the appellant, since this issue was not examined by the AO during the course of assessment proceedings. We also make it clear that even the information received after the completion of assessment constitutes a part of the record for initiation of proceedings u/s 263 of the Act In the case of PCIT vs. Swati Bajaj [ 2022 (6) TMI 670 - CALCUTTA HIGH COURT] is squarely applicable, wherein, it has held that failure of the AO taking into the report of the Investigation Wing of the Income Tax Department and accepted the claim for exemptions on account of long term capital gains and the exemption arisen from transaction with penny stock, renders the assessment erroneous and prejudicial to the interests of the Revenue - Appeal filed by the assessee stands dismissed.
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2023 (4) TMI 358
Validity of Assessment u/s 153C - Notice issued by any officer other than jurisdictional AO - loans taken from Kolkata companies were only accommodation entries and the assessee as well as Shri Baldeep Goyal paid unaccounted cash to these companies on receiving loans through cheque / other modes - HELD THAT:- AO (ACIT, Central Circle-3, Jaipur) who was AO of Shri Baldeep Goyal, got the jurisdiction over the case of the assessee vide order dated 02-09-2019 passed by ld. Pr. CIT, Jaipur-2 u/s 127 of the Act. From the entire conspectus of the case, it appears that the AO had recorded the satisfaction note prior to assuming jurisdiction over the case of the assessee as the AO got charge over the case of the assessee on 02-09-2019 We have noted that as on 01-08-2019 when satisfaction note was prepared the AO was not having jurisdiction over both the cases i.e. Shri Baldeep Goyal and the assessee- Shri Arun Agarwal. Hence, the case of M/s. Super Malls Pvt Ltd. [ 2020 (3) TMI 361 - SUPREME COURT] has been incorrectly relied upon by the ld. CIT(A). CIT(A) is not justified in sustaining the action of the AO in holding that the AO has assumed proper jurisdiction to assess the case u/s. 153C of the Act. Hence, the solitary ground raised by the assessee is allowed by quashing the orders of the ld. CIT(A) and the AO.
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Customs
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2023 (4) TMI 357
Demand of custom duty raised under Section 28B of the Customs Act 1962 - proceedings initiated were barred by limitation or not - respondent had imported goods for supply to the Ordinance Equipment Factory, Kanpur (OEF) without payment of duty - benefit of the N/N. 39/96-Customs dated 23.07.1996 - HELD THAT:- It is relevant to note that the period of limitation as provided under Section 28 of the Customs Act is a period of five years from the relevant date. It is, thus, apparent that the learned CESTAT had proceeded on the basis that a reasonable period for taking an action under Section 28B of the Customs Act would also be a period of five years - Thus, even if it is accepted that the limitation period under Section 28 of the Customs Act cannot per se be imputed to any action under Section 28B of the Customs Act, there can be no cavil that action should be taken within a reasonable period. In this case, it is apparent that the learned CESTAT found that the period of five years, which is the prescribed period of limitation under Section 28 of the Customs Act, would be a reasonable period. The 39 Bills of Entries were filed during the period of August, 1996 to January, 2004. The Show Cause Notice dated 06.03.2013, has been issued approximately nine years after the last Bill of Entry. In the given facts, we are unable to accept that the appellant had issued the notice within a reasonable period. There is no substantial question of law that arises for consideration by this Court in this appeal - Appeal dismissed.
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2023 (4) TMI 356
Classification of imported goods - second and defective Plates having width of less than 600 mm as well as more than 600 mm and Second and Defective Pipes - classifiable under CTH 7204 or under CTH 7206? - Benefit of concessional rate of duty under Notification No. 21/2002-Cus., dated 1-3-2002 (Sl. No. 190B of the Table) as amended - Valuation of goods - enhancement of declared value - quality of the imported goods - HELD THAT:- The revenue has not considered the disputed goods as scrap on the basis test report. The test report does not specify that the subject goods are scrap. However on the basis of test report it cannot be decided that the disputed goods were not scrap. Scrap whether used or cut pieces by virtues of its physical properties will contain composition of its prime material. Merely by using or cutting the material will not alter its chemical composition. In such case there is no surprise that the chemical parameters of prime material and scrap grade material may be same but externally the goods may be different in quality and use. Therefore without accepting, even if the chemical composition is same of both quality of goods, the scrap material cannot be construed as prime material or seconds materials and on this basis benefit of notification cannot be denied. In the impugned matter both the adjudicating authority nowhere disputed the claim of Appellant that the goods were provisionally released on execution of bond and they have been transferred to their sister concern where they have not used the disputed goods as such but have been used for further manufacture of CTD bars etc. by the process of heat melting and slitting etc. The end use of the disputed goods was melting scrap or re-rollable scrap . Hence on the basis of end use of disputed goods also the goods are classifiable under chapter hearing 7204 and eligible for benefit of notification. The Hon ble Supreme Court in the case of TATA IRON STEEL CO. LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [ 1994 (12) TMI 73 - SUPREME COURT ] held that the old and used rails, billets, plates, axles, channels etc, are to be treated as scrap. In the present case revenue classified the disputed goods under chapter heading 7211 (Plates having width of less than 600mm), 7208 (Plates having width more than 600 mm) and 7206 (Pipes). However between the different competing chapter headings 7204 is more appropriate because the goods are more in the nature of scrap and not in the nature of Plates and Pipes. Further the disputed goods are not suitable for use as Plates and Pipes. Therefore order of both the authority classifying the disputed goods under CTH 7211, 7208 and 7206 legally not correct. Increase in value made is mis-declaration in description of goods - Rejection of transaction value - enhancement of declared value - HELD THAT:- There is no dispute that the customs has power to reject the transaction value and enhance the assessable value in terms of Customs Valuation Rules. However, such rejection of transaction value and enhancement of assessable value has to be on the basis of some evidence on record. Contemporaneous imports have to be considered in reference to quality, quantity and country of origin with the imports under consideration. For any enhancement in assessment value, the transaction value has to be first rejected based on legal permissible ground as indicated in the valuation Rules. In the present matter, Revenue has not advanced any such evidence to support their case inasmuch as, no evidence of rejection of transaction value was produced by the department. Quality of the imported goods - HELD THAT:- There is clear understanding between the supplier and the appellant importer that the goods in question is scrap and therefore the quality of goods is Scrap and on that basis the supplier agreed to sell the goods at agreed price. As against this fact, the revenue could not adduce any evidence to reject this fact. In this fact on the quality of the goods, obviously the price cannot be the same of the prime grade material. Hence the price negotiated and finalised as sale price between the supplier and the appellant importer and declaration of the same cannot be disputed. Thus, the impugned orders cannot be sustained - appeal allowed.
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2023 (4) TMI 355
Scope of SCN - Denial of Benefit of exemption N/N. 88/94-Cus. dated 01.03.1994 - Non-production of end-use certificate from the jurisdictional Central Excise authorities - HELD THAT:- On perusal of the impugned order, it is noticed by Commissioner (Appeals) that stay was granted waiving the requirement of pre-deposit, observing that the appellant was not served with the show cause notice and the order passed by the original authority. Further, in para-11, the Commissioner (Appeals) has set aside the order of confirmation but has upheld the show cause notice, which is found to be improper. On perusal of the order passed by the original authority, it is seen that a notice was issued under sub-section (1) of Section 28 of the Customs Act, 1962 demanding duty to the tune of Rs.49,062/- for the reason that the exemption is only for duty that is in excess of 30% and not 20%. However, it is seen that amount of Rs.2,20,777/- has been confirmed by the original authority on the ground that the appellant has not produced end-use certificate. Indeed, the said finding is beyond the scope of the SCN. On perusal of Notification No.89/1994, it is found that there is no such condition attached to the goods imported under List-C. The argument put forward by the Ld. Counsel alleging that the original authority has confirmed a higher amount on grounds which are not alleged in the SCN and has thus traversed beyond the SCN is not without substance. There is also no evidence available from the impugned order or from the records that SCN and the OIO have been served on the appellant. The said plea has been put forward by the appellant from the very beginning of the litigation. The demand cannot sustain and is set aside - appeal allowed.
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2023 (4) TMI 354
Classification of the imported goods - Aluminium Composite Plates of various thickness - to be classified under heading 76061190 or under Heading 76109090? - rejection of declared value - enhancement of declared value based on NIDB data - HELD THAT:- Heading 7610 covers Aluminium structures and its parts - parts of structures illustrated in the tariff heading 7610 includes bridge and bridge sections, towers, lattice masts, roof, roofing frameworks, door, windows and their frames and thresholds for doors, balustrades, pillars and columns. The list includes in said tariff entry includes only the structural elements and not the material used in making such structural elements. Further parts of structures as the aluminium plates, rod, profiles tubes and the like fall under the tariff heading 7610 only if prepared for use in structures . In the present matter neither the show cause notice nor impugned order-in-original indicate that the imported Aluminium Composite Plate was prepared in any manner for use in structures. Therefore Ld. Commissioner (Appeals) in the present matter correctly held that the imported goods cannot be considered as prepared for use in structures and therefore falls out of the scope of heading 7610. Valuation of imported goods - rejection of declared value - Enhancement of value of imported goods - HELD THAT:- The Commissioner has rightly held that there are no reasons to reject the price declared by the respondents. There is merit in the contention of the respondent that the earlier assessment does not preclude them from protesting the enhancement of value on the same lines for subsequent imports. It is also found that in the present matter there are no reasons recorded by the revenue for rejection of transaction value before taking the exercise of revaluation and enhancement of transaction value. In the case of MODERN MANUFACTURERS VERSUS COMMISSIONER OF CUS., NEW DELHI [ 2018 (1) TMI 1472 - CESTAT NEW DELHI] the Tribunal held that enhancement of value of imported goods based on NIDB data and circular issued by DGOV without rejecting declared value under Rule 12 of Customs Valuation Rules, 2007 is not proper. Redetermination of value based on NIDB data and DGOV circular is not sustainable. In the present case, no exercise of rejecting the declared value under Rule 12 and process of applying Valuation Rules sequentially were followed. Therefore, the value declared by the respondent has to be accepted. There are no reason to interfere with the impugned order and the same is sustained - appeal dismissed - decided against Revenue.
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2023 (4) TMI 353
Re-assessment of bill of entry - Interpretation of statute - sub-section (4) and (5) of Section 17 of the Customs Act, 1962 - re-assessment of bill of entry at his own level of the self assessed Bill of Entry - APTA benefit under Notification No. 72/2005-Cus on re assessment - Rule of Noscitur a Sociis (knowing by association) - HELD THAT:- The issue is no more res-integra and has already been settled in ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT ], in which the Apex Court while dealing with the procedure after introduction of self-assessment, has held that the order of self-assessment is also an order within the meaning of section and therefore would be appealable by any person aggrieved by it. Any person who is aggrieved by an order of self-assessment has to seek remedy either by going in an appeal or the re-assessment can be done as per sub-section (4) and (5) of Section 17 of the Customs Act, 1962. The expression or otherwise when read in conjunction with expressions like verification, examination or testing of the goods would lead to conclusion that it is the Proper Officer who has to come to the conclusion in some conditional or may be provisional assessment or investigation etc, that self assessment was incorrect. Nothing in the expression of Section 17(4) indicates that re-assessment of duty can be done at the request of party which has self-assessed its Bill of Entry and after clearance wants another benefit. Therefore, construing the expression or otherwise in Section 17 (4) by the rule of ''Noscitur a Sociis'', it is opined that material has to be of the nature found out on verification, examination or testing of the goods or otherwise (which expression) can include on investigation etc., indicating to the Proper Officer only that the self assessment was not done correctly. It is also found that the expression, without prejudice to any other action which may be taken under this Act , Clause indicates that Clause 17 (4) has been worded, inter alia, as an enforcement provision and cannot be construed liberally in favour of assessee so as to allow it to change its own self assessment. This also fortifies and supports our interpretation. Since, the re-assessment at the request of party under Section 17 (4) is not as per the outcome of any appeal filed by the party, as was the case in Order-In-AppealNo.510 to 534/2013/Cus/Commr(A)/Ahd. Dated 03.12.2013 as mentioned in para 36 of the Order-In-Original, it was improper on the part of adjudicating authority to re-assess bill of entry at the request of the party under Section 17(4). The party should have either availed appellate remedy, (if aggrieved) or could have sought timely modification of bill of entry as per applicable provisions. The order of Commissioner (Appeals) is upheld - appeal dismissed.
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Insolvency & Bankruptcy
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2023 (4) TMI 352
Encroachment on the land of the Corporate Debtor - consequential implementation of the Resolution Plan - HELD THAT:- The steps have been taken for implementation of the plan and on 20.03.2023, parties submitted that the Appellant Successful Resolution Applicant is at the verge of completion of implementation of plan. Today, both the parties submit that the plan stands implemented w.e.f. 31.03.2023. In view of the fact that the plan stands implemented, there are no reason to entertain this Appeal - appeal disposed off.
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Service Tax
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2023 (4) TMI 405
Recovery of tax from third party - Payment of amount owed by GAIL to respondent no.2 - assessee in default - GAIL s case as set out in the present petition is that it has not admitted that any amount is due and payable to respondent no.2 and there is no question of GAIL making any payment to respondent no.1 on account of any amount due to respondent no.2 - HELD THAT:- It is relevant to note that the impugned order is based on the premise that GAIL owes sums in excess of ₹13,13,07,485/- to respondent no.2. However, GAIL has never admitted the said amount as due and payable. The order passed by respondent no.1 is in the nature of a garnishee order. Plainly, respondent no.1 cannot compel GAIL to pay any amount which is not due and payable by GAIL to respondent no.2. The impugned order is not open ended and directs GAIL to deposit an ascertained sum of money - In the given facts, it is clear that the impugned order directing GAIL to pay a sum of ₹13,13,07,485/- is not sustainable. There is no material to show that any such amount is due and payable by GAIL. GAIL and respondent no.2 are ad-idem that the only amount that GAIL is required to pay is approximately ₹6.54 crores after respondent no.2 has issued the invoice of ₹1.01 crores - the impugned order is set aside. However, this Court also considers it apposite to restrain GAIL from making any payments to respondent no.2 for a period of four weeks from today. The petition is disposed off.
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2023 (4) TMI 351
Non-payment of service tax - Construction Services - sub-contractor - non-filing of ST3 returns with the Department - revenue neutrality - extended period of limitation - HELD THAT:- The period of dispute is from the year 2007-08 to 2011-12. The issue is no longer res integra as the same has been decided by a Larger Bench in the case of COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. [ 2019 (6) TMI 518 - CESTAT NEW DELHI] where it was held that A sub-contractor would be liable to pay Service Tax even if the main contractor has discharged Service Tax liability on the activity undertaken by the sub-contractor in pursuance of the contract. Time Limitation - HELD THAT:- It is noted that during the relevant period, the issue as to whether a sub-contractor has to pay service tax separately even when the main contractor had discharged service tax on the very same services was subject matter of litigation before several appellate fora. The Tribunal in its decisions in the case of SEMAC PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, BANGALORE [ 2006 (8) TMI 24 - CESTAT, BANGALORE] , COMMISSIONER OF CUSTOMS C. EX., INDORE VERSUS SHIVHARE ROADLINES [ 2009 (2) TMI 202 - CESTAT, NEW DELHI] and URVI CONSTRUCTION VERSUS COMMISSIONER OF SERVICE TAX, AHMEDABAD [ 2009 (10) TMI 97 - CESTAT, AHMEDABAD] , had held that sub-contractors are not liable to pay service tax. As there were conflicting views, the issue was referred to Larger Bench. In M/S MAX LOGISTICS LIMITED VERSUS CCE, JAIPUR [ 2016 (9) TMI 1024 - CESTAT NEW DELHI ] - The extended period of limitation could not, therefore, have been invoked. While holding that the appellants are liable to service tax for services rendered by them as sub contractors, the same can be confirmed only within the normal period of limitation - Appeal allowed in part.
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2023 (4) TMI 350
Denial of Service tax Liability - construction of residential property - denial on the ground that what they undertook was in the nature of works contract service; but however, in the adjudication, the Commissioner vide impugned Order-in-Original, has confirmed the proposals made in the Show Cause Notice and it is against this order that the present appeal has been filed before this forum - whether the authority below is justified in demanding Service Tax from the appellant under construction of complex service for the period from 16.06.2005 to March 2010? - HELD THAT:- Through the orders of the various CESTAT Benches which have been considered by the Hyderabad Bench of the CESTAT in M/S PRAGATI EDIFICE PVT LTD (VICE-VERSA) [ 2019 (9) TMI 792 - CESTAT HYDERABAD ] , where it has been categorically held that no Service Tax could be levied on construction of residential complexes prior to 01.07.2010 even when the service is rendered either as service simpliciter or as a works contract. Admittedly, the period of dispute, in the first paragraph, is from 16.06.2005 to March 2010 and hence, the above ruling is squarely applicable to the present case. The demand raised in the impugned order cannot sustain, for which reason the impugned order is set aside - appeal allowed.
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2023 (4) TMI 349
Levy of service tax - construction of residential complex service (CRCS) - whether the authority below is justified in demanding Service Tax from the appellant under works contract service for the period from December 2009 to September 2010? - HELD THAT:- The Order of the co-ordinate Hyderabad Bench of the CESTAT in the case of M/s. Pragati Edifice Pvt. Ltd. [[ 2019 (9) TMI 792 - CESTAT HYDERABAD] ] is a more recent one, which has considered many orders of other co-ordinate Benches and also the decision of the Hon ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT ] - it has been categorically held that no Service Tax could be levied on construction of residential complexes prior to 01.07.2010 even when the service is rendered either as service simpliciter or as a works contract. Evidently, in the case on hand, the period of dispute is up to September 2010 and hence, in view of the above, the liability to Service Tax, if any, is restricted to the period post 01.07.2010. The demand for the period post 01.07.2010 is upheld and the demand for the period prior to this date, is set aside - The matter is remanded to the Adjudicating Authority for the limited purpose of calculating the Service Tax liability and interest, as above, after following the principles of natural justice. The appeal stands partly allowed and partly remanded.
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2023 (4) TMI 348
Valuation of goods - Erection, Commissioning and Installation Service - whether the value of materials supplied by the Appellant under a contract is required to be included in the taxable value of Service or otherwise? - suppression of facts or not - extended period of limitation - HELD THAT:- There is no dispute that there is also contract for supply of goods/Sale of goods and contract for services namely erection, installation and commissioning. Appellant have not paid service tax on supply portion on which they have paid VAT/CST. On going through the contracts and documentary evidences in the form of invoices, Balance sheet and Profit and Loss account, VAT return and detailed work sheet showing bifurcation of supply of goods and service portion separately submitted by the Appellant before us, we find that the contracts entered into by the appellants with their customers also gave the break-up of value of service portion and supply of material/goods portion. The Appellant as per the contract raise the bills and also account for the transaction in their books of account. On service portion they have paid the Service tax and on material supply portion paid the VAT/CST as applicable - Admittedly, the value of the goods and materials, which are required to be used forproviding service stand separately disclosed in the agreement/contract as also separately mentioned in the invoices raised by the appellants and their books of account. Appellants have paid the VAT on the supply of goods, in such case it has to be held that the same were sold to the customers and the service tax cannot be demanded from the appellant on the value of the said goods. Suppression of facts or not - extended period of limitation - HELD THAT:- There is no suppression of facts or any mala fide intention to evade payment of service tax on the part of appellant. Further, the ground of bona fide belief can be invoked in the present case as the main contractor who entered into agreement with the ultimate client were charging such client along with service tax as claimed by the appellant. There is a reason for a bona fide belief in such arrangement regarding non-liability of sub-contractor when the main contractor is liable to discharge full service tax. Though the said principle is not applicable against the tax liability but the question of invoking extended period is to be answered in favour of the appellant. Accordingly, there is no case of suppression of fact, fraud, misstatement etc. in the non-payment of tax on this disputed activity by the appellant and, we hold that extended period of limitation is not attracted. Appeal allowed - decided in favour of appellant.
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2023 (4) TMI 347
Classification of services - Business Auxiliary Service or not - appellant is a cricket player and engaged in paying cricket in Indian Premier League for a team owned by M/s. KPH Dreams Cricket Pvt. Limited, Chandigarh, Punjab (KPH) under the agreement between KPH and the appellant Shri Ajitesh Kamlesh Argal - receipt of remuneration - HELD THAT:- The major amount of remuneration received is towards engaging the appellant by KPH to play cricket in Indian Premier League matches - in the identical agreements, assigned other players engaged by different teams, in all those cases, this Tribunal relying on the Calcutta High Court judgment in the case of SOURAV GANGULY VERSUS UNION OF INDIA OTHERS [ 2016 (7) TMI 237 - CALCUTTA HIGH COURT ] held that arrangement between the owner Company and the cricket player is of employment hence players are not directly involved in brand promotion of a brand owner. Therefore, the activity of the cricket player does not fall under the category of Business Auxiliary Services - As per this settled legal position, in the present case also involving similar agreement and arrangement, the demand under Business Auxiliary Service does not sustain. Demand of service tax on remuneration received by the appellant from M/s. Nike India Pvt. Limited - HELD THAT:- In this case the appellant is indeed involved in direct brand promotion for the brand owner however, the appellant have claimed that the value of such service is well within the threshold limit provided under exemption notification 6/2005-ST dated 01.05.2005 - since the remuneration received by the appellant from KPH does not involve any service, the appellant shall be eligible for small scale exemption provided under Notification No. 6/2005-ST dated 01.05.2005 upto threshold limit of gross value in a financial year. The demand raised in the impugned orders is not sustainable - Appeal allowed - decided in favour of appellant.
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2023 (4) TMI 346
Levy of Service Tax - Construction of Complex Service - cooperative society of the Members have provided construction of complex service to its members - mutuality of interest - HELD THAT:- This issue is settled in the case of M/s. Shrinandnagar-iv Co-operative Housing Society Limited. This Tribunal vide order dated 30.07.2009 [[ 2009 (7) TMI 135 - CESTAT, AHMEDABAD] ] decided the matter on merit in the appellant s favour holding that the appellant is eligible for refund however, it was remanded only for the examining the aspect of unjust enrichment, holding that in the absence of a contractor hired by Society and nature of the transaction between the parties and in the light of definition of service and its liability for service tax, the transaction in this case cannot be considered taxable. With the above order of the Tribunal which was upheld by the Hon ble High Court in [[ 2011 (6) TMI 289 - GUJARAT HIGH COURT] ], the issue on merit that whether the service of construction of complex provided by the appellant s Cooperative Housing Society to its members is liable to service tax or otherwise has been settled in favour of the appellant. Appeal allowed.
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2023 (4) TMI 345
Eligibility for abatement exemption Notification No. 01/2006-ST - Commercial or Industrial Construction Service - CENVAT credit was availed but subsequently reversed - HELD THAT:- The learned Commissioner has allowed the exemption on the ground that the respondent have reversed the credit which was taken by reversing the credit, the condition of non availment of cenvat credit of the Exemption Notification stand complied with. On the very identical issue, the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI- I VERSUS M/S BOMBAY DYEING MFG. CO. LTD [ 2007 (8) TMI 2 - SUPREME COURT] held that even if the reversal is made after removal of the goods, the exemption Notification cannot be denied. Therefore, the issue is settled in favour of the assessee. There are no substance in the Revenue s appeal - Revenue s appeal is dismissed.
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CST, VAT & Sales Tax
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2023 (4) TMI 344
Maintainability of appeal - Availability of alternative remedy - rejection of returns filed by the assessee - interstate sales - Contract amounted to a turn-key job or not - composite works contract - HELD THAT:- Undisputed facts of the case are, Purchase orders are placed by the purchasers of Elevators with the assessee's unit situated at Thane in Maharashtra. The Hon'ble Single Judge has held that the documentary evidence viz. specimen copy of the Purchase Order, supporting transporter challans, delivery documents and the tax invoices reflected that the goods were manufactured in Maharashtra and movement of goods had occasioned from Maharashtra to Karnataka pursuant to the Purchase Order. It is further held by the Hon'ble Single Judge that it is discernable that supply of Elevators from the manufacturing unit at Thane in Maharashtra falls within the ambit of Section 3(a) of the CST Act. It is not in dispute that the decision in STATE OF KARNATAKA AND OTHERS VERSUS ECE INDUSTRIES LIMITED [ 2004 (11) TMI 518 - KARNATAKA HIGH COURT ] , has been accepted by the Revenue. It is also not in dispute that the assessee has taken over ECE Industries Ltd. Therefore, Revenue is bound by the said decision. Maintainability of appeal - Availability of alternative remedy - HELD THAT:- Hon'ble Single Judge has exercised her discretion and entertained the petition. The matter being fully covered by the Division Bench decision of this Court in ECE Industries Ltd., the said ground in the facts of this case is untenable. There are no legal infirmity in the impugned order - appeal dismissed.
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