Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 13, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
GST - States
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CCT/26-2/2018-19/55 - dated
8-4-2020
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Goa SGST
Seeks to amend Notification No. CCT/26-2/2018-19/54/02 dated the 31st March, 2020
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38/1/2017-Fin(R&C)(130) - dated
8-4-2020
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Goa SGST
To exempt foreign airlines from furnishing reconciliation Statement in FORM GSTR-9C
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36/2020-State Tax - dated
9-4-2020
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Gujarat SGST
Extension in due date for FORM GSTR-3B for supply made in the month of May, 2020
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35/2020-State Tax - dated
9-4-2020
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Gujarat SGST
Extends due date of compliance which falls during 20.03.2020 to 29.06.2020 till 30.06.2020 and extends validity of e-way bills
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34/2020-State Tax - dated
9-4-2020
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Gujarat SGST
Extension in due date of FORM GST CMP-08 for the quarter ending March, 2020 till 07.07.2020 and FORM GSTR-4 for FY 2020-21 till 15.07.2020
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33/2020 - State Tax - dated
9-4-2020
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Gujarat SGST
Provides relief by conditional waiver of late fee for delay in furnishing FORM GSTR-1 for February to April, 2020
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32/2020-State Tax - dated
9-4-2020
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Gujarat SGST
Provides relief by conditional waiver of late fee for delay in furnishing FORM GSTR-3B for February to April, 2020
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F.12(46)FD/Tax/2017-Pt.V-160 - dated
30-3-2020
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Rajasthan SGST
Amendment in Notification No. F.12(56)FD/Tax/2017-Pt-I-40, dated the 29th June, 2017
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F.12(46)FD/Tax/2017-Pt.V-159 - dated
30-3-2020
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Rajasthan SGST
Amendment in Notification No. F.12(56)FD/Tax/2017-Pt-I-49, dated the 29 June, 2017
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48/GST-2019-20 - dated
7-2-2020
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Uttar Pradesh SGST
Corrigendum - Notification no. 45 dated 05th February, 2020
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GST-2019-20/F.No-509/45 /Commercial Tax - dated
5-2-2020
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Uttar Pradesh SGST
Seeks to extend the last date for furnishing of annual return/reconciliation statement in FORM GSTR-9/FORM GSTR-9C for the period from 01.07.2017 to 31.03.2018
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86/XI-2-9(47)/17 - dated
5-2-2020
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Uttar Pradesh SGST
Amendment in Notification No. KA.NI.-2-843/XI-9(47)/17-U.P. Act-1 -2017-Order-(10)-2017: Dated June 30, 2017
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Implementation of decision to expedite pending refund claims - Clarifications / Instructions / Orders
Income Tax
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Income from property held for charitable or religious purposes. - Section 11 of the Income-tax Act, 1961 as amended
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Unexplained expenditure under section 69C - allegation that, 18340 kilograms of wheat flour was purchased from the open market and had not shown the purchase cost of 123750 kilograms of wheat flour - the purchase of stock of such atta was reflected in the wheat purchase account and not in the atta purchase account. The Commissioner (Appeals) noted that the assessee had submitted documentary evidence to demonstrate the same, which was found to be correct - No addition can be made - HC
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Additions against Cessation of liability u/s.41(1) - there was nothing on record to show that there was any remission or cessation of such liability. Under the circumstances, in the absence of remission or cessation of such liabilities, the question of invoking subsection (1) of section 41 of the Act did not arise. - HC
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Disallowance of obsolete inventory written off - the assessee should produce the details of inventory, year of manufacturing/purchase, how it is to be used and how it can be construed that it has no value. Since the assessee failed to give any such details; therefore, the Assessing Officer has disallowed it. - AT
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Cash deposits in bank account as unexplained cash deposits - cash deposits pertained to assessee's retail business - Since the assessee has not maintained any books of accounts, hence, in such situation only net profit as per provisions of section 44AD is required to be estimated as net profit and not entire turnover or cash deposits reflected in the bank account. - AT
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Addition u/s 68 - unexplained cash credit - No doubt, deficiency if any is liable to be looked into even at the time of remand proceeding also. Each and every share-holder responded to the notice u/s 133(6) of the Act and submitted necessary details. The facts are not distinguishable at this stage. After the examination of each and every details by the CIT(A), the CIT(A) was of the view that the assessee has proved the identity, genuineness and creditworthiness of the share-holder. - Revenue appeal dismissed - AT
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Revision u/s 263 - validity of Reopening of assessment u/s 147 - proceedings without concerned authority having territorial jurisdiction are not valid - PCIT’s sec. 263 assumption of revision jurisdiction itself stands quashed - AT
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Addition u/s 24(b) - Claim of expenditure to run the company from rental income - assessee has itself assessed rental income under the head “Income from house property’ - such expenditure has to be allowed while computing the income of the assessee - AT
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Reference of matter to DVO - assessee challenged the fair market value adopted by the assessing officer during the course of assessment proceeding itself and made a request for referring the matter of the valuation to DVO which was not accepted. - AO directed to refer the matter of DVO and do the assessment accordingly as per law - AT
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TP Adjustment - comparable selection - filters applied by Ld.TPO - assessee is not involved in any of the strategic functions and is only undertaking preliminary tactical managerial functions. Assessee also does not undertake any marketing/business development activity. Further it is observed that assessee do not undertake any key risks. Based upon the above in our view the comparables needs to be revisited. - AT
Customs
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Permission to import Grain De Cotton (Cotton Grain) for cattle feed - restricted import or not - The impugned Notification to the extent the same defines "Animal Feed" as “kibbled-crushed seeds/pellet/dried cake form” is quashed and set aside - HC
Corporate Law
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COVID-19 related Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR) - Circular
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Clarification on contribution to PM CARES Fund as eligible CSR activity under item no. (viii) of the Schedule VII of Companies Act, 2013 - Circular
SEBI
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Private placement of securities - Allotment of Unsecured Fully Convertible Debentures (FCDs) in excess of 500 members - section 71(5) - However the restriction of 500 persons is done away if a trustee was appointed by the Company. In the instant case, it is an admitted fact that a trustee was appointed. Thus there was no restriction to the number of shareholders to whom the debentures would be issued. - AT
Service Tax
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Refund claim - Period of limitation - SEZ unit - distribution of input services (ISD) CESTAT was not justified in holding that in case of ISD invoices, for all purposes, be it cenvat or refund, the ISD invoice is deemed to be taxpaying document, and hence, the date of that invoice has to be taken even for computing the one year stipulated in clause (e) of paragraph 3(III) of Notification No.12/2103-ST - HC
VAT
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Ex-parte order passed by the Special Committee rejecting the application since the application was filed beyond the period of limitation of 3 years - Since the petitioner did not get to participate in the hearing and an ex parte order came to be passed by the 2nd respondent, the petitioner deserves an opportunity of being heard - HC
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Ab initio cancellation of the registration certificate of the appellant - In case of mere non-payment of assessed tax dues, there is no illegality in the transactions entered into by the parties, and hence, the concerned authority should exercise discretion accordingly, and if it finds on facts that a case for cancellation is made out, it may cancel the registration prospectively. - HC
Case Laws:
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GST
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2020 (4) TMI 334
Grant of Regular Bail - offence punishable under Section 132(1)(b) of CGST Act, 2017 - HELD THAT:- Taking into consideration the facts of the case, nature of allegations, gravity of offences, role attributed to the accused, without discussing the evidence in detail, this Court is of the opinion that this is a fit case to exercise the discretion and enlarge the applicant on regular bail. The applicant is ordered to be released on regular bail in connection with an offence on executing a personal bond of ₹ 10,000/- with one surety of the like amount to the satisfaction of the trial Court and subject to the conditions imposed - application disposed off.
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Income Tax
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2020 (4) TMI 333
Unexplained expenditure under section 69C - allegation that, assessee had shown inward quantity of 142090 kilograms of wheat flour and 18340 kilograms of wheat flour was purchased from the open market and had not shown the purchase cost of 123750 kilograms of wheat flour - Commissioner (Appeals), who deleted the addition also confirmed by ITAT - HELD THAT:- Assessee along with the month-wise details of purchase and sale of wheat and wheat atta (flour) showed that the atta that was sold by the assessee was converted from the stock of wheat that was already available with it. Therefore, the purchase of stock of such atta was reflected in the wheat purchase account and not in the atta purchase account. The Commissioner (Appeals) noted that the assessee had submitted documentary evidence to demonstrate the same, which was found to be correct and it was seen that the quantity records and closing stock of wheat and atta confirms the explanation. Conclusion arrived at by the Tribunal is based upon concurrent findings of fact recorded after appreciating the material on record. The learned Senior Standing Counsel for the appellant is not in a position to point out any material to the contrary so as to dislodge the findings of fact recorded by the Tribunal nor has it been pointed out that the Tribunal has placed reliance upon any irrelevant material or that any relevant material has been ignored. Under the circumstances, the conclusion arrived at by the Tribunal being based upon a pure finding of fact recorded after appreciating evidence on record, in the absence of any perversity being pointed out in the findings of fact recorded by it, the said ground of appeal does not give rise to any question of law. Unexplained current liability - Commissioner (Appeals), who deleted the addition also confirmed by ITAT - HELD THAT:- The record of the case reveals that the assessee had been purchasing goods from GASPL and was also getting job work from them. The Assessing Officer called for the contra accounts of GASPL and compared them with corresponding accounts in the assessee s books of account which showed a difference of ₹ 1,59,184/-. It appears that such difference was because of the fact that the assessee maintained two accounts of GASPL one in respect of job work and the other in respect of goods purchased, whereas GASPL kept only one account for both items. Such mistake in accounting on the part of GASPL was subsequently rectified by them by passing necessary entries. Thus, as a matter of fact there was no difference in the books of account of the assessee and GASPL. Under the circumstances, this ground of appeal also does not give rise to any question of law.
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2020 (4) TMI 332
Addition on account of unaccounted sales - Tribunal upholding the decision of CIT(A) in deleting the addition - HELD THAT:- While the assessee had not maintained a stock register, the Assessing Officer had accepted the books of account maintained by the assessee. On a perusal of the order passed by the Commissioner (Appeals), it is evident that the Commissioner (Appeals) has made lump-sum disallowance of ₹ 6,00,000/- after recording a finding that the book results have been accepted. Having regard to the fact that the Assessing Officer has accepted the books of account maintained by the assessee, no infirmity can be found in the approach adopted by the Commissioner (Appeals) in making a lump-cum disallowance after appreciating the material on record. The finding of the Commissioner (Appeals) is basically a finding of fact, to which, the Tribunal has concurred. Under the circumstances, the conclusion arrived at by the Tribunal being based upon a concurrent finding of fact recorded after appreciating the material on record, cannot be stated to give rise to any question of law. Addition made on account of power and fuel expenses - Tribunal upholding the decision of CIT(A) in deleting the addition - HELD THAT:- Commissioner (Appeals) has based his conclusion on the findings recorded by him that the Assessing Officer has not proved that the expenditure was not incurred for business purpose; nor had it been proved that the assessee had made any bogus claim; and that the Assessing Officer had also not given any reason for making such a huge disallowance. The Tribunal, in the impugned order, has concurred with the findings recorded by the Commissioner (Appeals). The conclusion arrived at by the Tribunal being based upon concurrent findings of fact recorded after appreciating the material on record, in the absence of any perversity being pointed out in such concurrent findings of fact, it is not possible to state that the impugned order gives rise to any question of law, much less, a substantial question of law.
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2020 (4) TMI 331
Suppression of closing stock - Tribunal noted as a matter of fact that the Assessing Officer has not pointed out any defect/infirmity in the books of accounts of the assessee - Tribunal upholding the order of the CIT (A) deleting addition - HELD THAT:- Tribunal has recorded concurrent findings of fact to the effect that there was no defect or infirmity in the books of accounts maintained by the assessee and has applied the decision of this court in the case of Commissioner of Income Tax vs. Arrow Exim Pvt. Ltd [ 2010 (1) TMI 769 - GUJARAT HIGH COURT ] to the facts of the present case. Under the circumstances, the Tribunal merely having applied the decision of the jurisdictional High Court to the facts of the case, the said ground of appeal does not give rise to any question of law, much less, a substantial question of law, warranting interference. Inflated current liability in the books of account - Tribunal upholding the order of the CIT (A) deleting addition - HELD THAT:- Tribunal noted that in respect of the said items of current liabilities, the Assessing Officer has not pointed out any defect during the assessment proceedings and was of the view that before placing reliance on the statement furnished to the bank, the Assessing Officer ought to have pointed out the defects/infirmities in the current liabilities and the provisions shown by the assessee in its balance sheet. The Tribunal took note of the fact that the Commissioner (Appeal) has given a finding that the creditors shown by the assessee in its books of account exist in the books of account and that the learned DR for the revenue had not disputed this finding of fact. The Tribunal, accordingly, did not find any reason to disturb the findings recorded by the Commissioner (Appeal) and dismissed the ground of appeal. Thus, the Tribunal upon perusal of the material on record has found as a matter of fact that there were no defects in the items of current liabilities shown by the assessee in its balance sheet. In the light of the fact that the conclusion arrived at by the Tribunal is based upon concurrent findings of fact recorded by it upon appreciation of the material on record, no question of law can be said to arise out of the said ground of appeal. Cessation of liability u/s.41(1) - Tribunal upholding the order of the CIT (A) deleting addition - HELD THAT:-under sub-section (1) of section 41 of the Act, any amount obtained by an assessee whether by way of remission or cessation thereof, is required to be added to his income in the year of such remission or cessation. In the facts of the present case, the Assessing Officer has made addition of liabilities in respect of two sundry creditors which according to him, the assessee was not required to pay. The assessee, however, had not written off his liabilities. Thus, there was nothing on record to show that there was any remission or cessation of such liability. Under the circumstances, in the absence of remission or cessation of such liabilities, the question of invoking subsection (1) of section 41 of the Act did not arise. The Tribunal, therefore, did not commit any error in upholding the order passed by the Commissioner (Appeals). No question of law can therefore be stated to arise out of this ground of appeal also.
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2020 (4) TMI 330
Disallowance of obsolete inventory written off - no justification was given for inventories becoming obsolete and also believes that the same should have been written off gradually - HELD THAT:- A perusal of the record would indicate that basically the assessee has written off its inventory on the ground that such inventory has become obsolete; but when the Assessing officer has enquired to submit the supporting details, what is the nature of inventory, what is the shelf-life, how it became obsolete, then nothing was produced. In other words, the assessee should produce the details of inventory, year of manufacturing/purchase, how it is to be used and how it can be construed that it has no value. Since the assessee failed to give any such details; therefore, the Assessing Officer has disallowed it. There is no disparity on facts from Assessment Year 2005-06 to this year when similar disallowance was upheld upto the Tribunal in the findings extracted supra. Therefore, we do not find any merits in this ground of appeal; it is rejected. Disallowance of prior period expense - HELD THAT:- Case of the assessee is that certain expenditures were crystallized during this year and, therefore, deduction of such expenditures deserves to be allowed to the assessee. The learned First Appellate Authority has recorded a categorical finding that these expenses have not been crystallized or pertaining to this year and they cannot be allowed in this year. After going through the well reasoned findings of the learned CIT(A), we do not find any error in it. Hence, this ground of appeal of the assessee is also rejected.
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2020 (4) TMI 329
Cash deposits in bank account as unexplained cash deposits - cash deposits pertained to assessee's retail business - facts proved that cash deposits are out of sale proceeds of textile trading. - HELD THAT:- The perusal of assessment order reveals that the assessee has not filed any details before the AO. Before CIT (A) the claim was made that the cash deposits in bank account pertained to textile business carried out by the assessee, though no books of accounts were maintained nor the bank account were disclosed in return of income. As discernible from bank account that cash deposits were made for various out stations like Delhi and UP. The bank account also reflects payments made to textile concerns. Therefore, it is clearly apparent that cash deposits are linked with business transaction of the assessee. Since the assessee has not maintained any books of accounts, hence, in such situation only net profit as per provisions of section 44AD is required to be estimated as net profit and not entire turnover or cash deposits reflected in the bank account. Following the ratio laid down in the case of CIT V. Pradeep Shantilal Patel [ 2013 (11) TMI 1646 - GUJARAT HIGH COURT] wherein it was held that where assessee admitted that cash deposits pertained to his retail business but details and nature of business were not forthcoming from record, considering total turnover of assessee, net income to be determined under section 44AD of the Act, the AO is directed to estimate net profit @ 8% of total turnover of ₹ 53,32,345 being cash deposits in bank account. - Decided partly in favour of assessee.
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2020 (4) TMI 328
Addition u/s 68 - unexplained cash credit - assessee has failed to discharge the burden to substantiate the creditworthiness of the share investors and genuineness of the transactions - AO issued the notice u/s 133(6) of the Act to all the 12 parties which were not served - CIT-A deleted the addition - HELD THAT:- At the time of hearing before the CIT(A), the assessee furnished the PAN Card of the share applicants, income tax acknowledgment for the A.Y. 2012-13, annual accounts of share applicant for A.Y. 2012-13, bank statements for AY 2012-13 depicting the payments made by the share applicants through banking channel, ROC records of the share applicant for AY2012-13 Memorandum of Association and Articles AO submitted the remand report dated 07.11.2017 basically the COT(A) relied upon the remand report and same more additional evidence, the CIT(A) analyses the record of each investor which has been mentioned in the order. There is no need to repeat the same because relevant record from each and every investor has been mentioned by CIT(A) in his order. No doubt, deficiency if any is liable to be looked into even at the time of remand proceeding also. Each and every share-holder responded to the notice u/s 133(6) of the Act and submitted necessary details. The facts are not distinguishable at this stage. After the examination of each and every details by the CIT(A), the CIT(A) was of the view that the assessee has proved the identity, genuineness and creditworthiness of the share-holder. Which facts have wrongly considered by the CIT(A) is not apparent on record. Therefore we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. - Decided against revenue.
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2020 (4) TMI 327
Bogus purchases - Addition on the basis of information gathered during the course of search and survey in the cases of accommodation entry providers giving bogus purchase bills to various parties and the assessee being one of the beneficiary of accommodation entry - AO as well as the ld. CIT(A) has estimated 8% profit - HELD THAT:- ITAT, in the case of Renisha Impex Pvt.Ltd. [ 2017 (10) TMI 1509 - ITAT MUMBAI ] has considered an identical issue and directed the AO to estimate 6% profit on alleged non-genuinene purchases. In yet another case, the ITAT, Mumbai Bench in case of M/s Decent Dia Jewel Pvt Ltd [ 2020 (2) TMI 137 - ITAT MUMBAI ] has taken similar view and estimated 6% profit on alleged non-genuine purchases. We, therefore, considereing facts and circumstances of this case and by following the case laws discussed herein above, direct the ld. AO to estimate 6% profit on alleged non-genuine purchases. - Decided partly in favour of assessee.
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2020 (4) TMI 326
Bogus purchases - AO has made 12.50% additions - assessee is one of the beneficiary of accommodation entries of bogus purchase bills issued by Hawala dealers - Addition enhanced to 100% by the ld. CIT (A) - HELD THAT:- We find that both the sides failed to prove the case in their favour with necessary evidences. Although, assessee has filed certain basic evidences, but failed to file further evidences to conclusively prove purchases to satisfactions of the Ld.AO. At the same time, the Ld. AO had also failed to take the investigation to a logical conclusion by carrying out necessary enquires, but he solely relied upon information received from investigation wing, which was further supported by information received from Maharashtra Sales Tax Department. Under these circumstances, it is difficult to accept arguments of both the sides. Further, in a situation where purchase is made from alleged hawala dealers, various High Courts and Tribunals had considered an identical issue in light of investigation carried out by the Sales Tax Department and held that in case purchases claims to have made from alleged hawala dealers, only profit element embedded in those purchases needs to be taxed, but not total purchase from those parties. Consistent with view taken by the Co-ordinate Bench in number of cases, and also by following the decision of Hon ble Bombay High Court in the case of The PCIT vs Mohammed Haji Adam Co [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] we are of the considered view that a reasonable profit on alleged bogus purchases would meet ends of justice. Hence, we direct the ld. AO to estimate 12.50% profit on alleged bogus purchases and further allow deductions towards GP already declared for the year in regular books of accounts.
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2020 (4) TMI 325
Bogus purchases - CIT(A) restricting the addition to the extent of 12.5% - HELD THAT:- Although, both authorities have taken different rate of profit for estimation of income from alleged bogus purchase, but no one could support said rate of gross profit with necessary evidences or any comparable cases. Admittedly, the assessee is in the business of trading in drugs and medicins and the retail profit margin in this kind of business is ranging between 10% to 20%. Therefore, we are of the considered view that the ld. CIT(A) has taken one of the possible method to settle dispute between the parties and estimated 12.50% gross profit on alleged bogus purchases. Hence, we are inclined to uphold order of the ld. CIT(A) and dismiss appeal filed by the Revenue..
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2020 (4) TMI 324
Revision u/s 263 - validity of Reopening of assessment u/s 147 - jurisdiction of AO Jaipur to issue notice - It is submitted that, ITO Ward-3(2) Jaipur who had issued sec. 148 notice dated 23.03.2016 did not have territorial jurisdiction to assess the appellant / taxpayer. The latter assessing authority i.e., ITO Ward- 46(1) Kolkata who framed the assessment had never issued any sec. 148 notice at all. HELD THAT:- The fact remains undisputed is that ITO Ward-3(2) Jaipur who had issued sec. 148 notice dated 23.03.2016 did not have territorial jurisdiction to assess the appellant / taxpayer. The latter assessing authority i.e., ITO Ward- 46(1) Kolkata who framed the assessment had never issued any sec. 148 notice at all. We observe in these peculiar facts and circumstances that the relevant re-assessment framed in assessee s case is not substantiate for want of a valid sec. 148 notice issued by the Assessing Officer having territorial jurisdiction. Hon'ble jurisdictional high court s decision in Ramshila Enterprise Pvt. [ 2016 (5) TMI 17 - CALCUTTA HIGH COURT] holds that the proceedings without concerned authority having territorial jurisdiction are not upheld. We therefore hold that the re-assessment forming subject-matter of PCIT s sec. 263 assumption of revision jurisdiction itself stands quashed. His revision directions under challenge are therefore non est to the limited extent being in the nature of collateral proceeding only. - Decided in favour of assessee.
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2020 (4) TMI 323
Addition u/s 24(b) - Claim of expenditure to run the company from rental income - why expenditure may not be disallowed since there is no business activity? - HELD THAT:- A body corporate has to incur certain expenditure mandatory to maintain its corporate structure. A perusal of the expenses mentioned hereinabove clearly show that all the expenses have been incurred for maintaining corporate structure of the assessee. In our considered view, such expenditure has to be allowed while computing the income of the assessee. Our this view is fortified by the decision of the co-ordinate bench in the case of Mokul Finance Pvt Ltd [ 2007 (7) TMI 351 - ITAT DELHI-I] In the case in hand, the assessee has itself assessed rental income under the head Income from house property . Therefore, the decision relied upon by the Assessing Officer/DR would do no good to the revenue - we direct the Assessing Officer to delete the addition - Decided in favour of assessee.
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2020 (4) TMI 322
Penalty u/s 271(1)(c) - defective notice - non specification of charge - Legality of notice issued u/s 274 r.w.s 271(1)(c) - HELD THAT:- From perusal of the above notice, we find that both the charges i.e. concealing particulars of income and furnishing inaccurate particulars of income are mentioned. None of them is striked down which shows that assessing officer has not satisfied himself about the charge to be leveled against the assessee. in the similar set of facts and the legal issue raised before us, we find that Hon'ble jurisdictional High Court in the case of Pr. CIT vs. Kulwant Sing Bhatia [ 2018 (5) TMI 960 - MADHYA PRADESH HIGH COURT] allowed the assessee s appeal and deleted penalty levied u/s 271(1)(c) of the Act, since the show cause notice did not satisfied the requirement of law as it was not specific. Assessing officer failed the level specific charge against the assessee by issuing defective notice and this being a fatal error renders the notice liable to be quashed. - Decided in favour of assessee.
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2020 (4) TMI 321
Reference of matter to DVO - valuation of the impugned land to valuation officer as provided in section 50C(2) - AO adopted the value as appearing in the certified copy of the sale deed - difference in market value of land as appearing in the registered sale deed, valuation report issued by Mr. Pramod Saraf and Shri D.K. Jain and sale consideration shown by assessee - HELD THAT:- In the recent decision of the Coordinate Bench Mumbai in the case of Aavishkar Film (P.) Ltd. vs. ITO, [ 2019 (6) TMI 1175 - ITAT MUMBAI] similar issue came for adjudication wherein held that even if in a case where no request is made by the assessee to make a reference to the DVO, the Assessing Officer while discharging a quasi-judicial function is duty-bound to act fairly by giving the assessee an option to follow the course provided by law to have the valuation made by the DVO . Respectfully following the decision above as in the instant case, facts are same wherein assessee challenged the fair market value adopted by the assessing officer during the course of assessment proceeding itself and made a request for referring the matter of the valuation to DVO which was not accepted. Set aside the issue raised to the file of the Ld. AO with a direction that the assessing officer will refer the matter of valuation of the impugned land to the DVO and after receiving the valuation report decide accordingly as per the provisions of law. Assessee s appeal allowed for statistical purposes.
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2020 (4) TMI 320
Deduction u/s 80P(2) - assessee was doing the business of banking, and therefore, in view of insertion of section 80P(4) of the I.T.Act with effect from 01.04.2007, the assessee will not be entitled to the deduction u/s 80P(2) - CIT(A) rejected the objections raised by the assessee and passed orders u/s 154 disallowing the claim of the assessee u/s 80P(2) - HELD THAT:- CIT(A) had initially allowed the appeals of the assessee and granted deduction u/s 80P(2). Subsequently, the CIT(A) passed orders u/s 154 wherein the claim of deduction u/s 80P was denied, by relying on the judgment of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] - The CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assessee-society. The Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P. In view of the dictum laid we restore the issue of deduction u/s 80P(2) to the files of the AO to examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act.
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2020 (4) TMI 319
TP Adjustment - comparable selection - filters applied by Ld.TPO - HELD THAT:- TPO has considered entity level revenue as well as cost for computing margin of assessee which was compared with the segmental margin of comparables. This is in total contradiction to transfer pricing law laid down by legislature. DRP failed to adjudicate this objection raised by assessee having to transfer pricing rules envisaged in the Act/Rules. DRP in a cryptic manner upheld action of Ld.TPO to be justified. Comparables that were objected by assessee has not been dealt with independently. As regards the comparables though DRP excluded certain comparables as well as upheld inclusion of remaining comparables, has not given proper reasoning for its exclusion/inclusion. It is observed that certain comparables cannot be considered in case of a captive service provider like assessee From the Transfer Pricing document placed in the paper book at page 614, it is observed that assessee is not involved in any of the strategic functions and is only undertaking preliminary tactical managerial functions. Assessee also does not undertake any marketing/business development activity. Further it is observed that assessee do not undertake any key risks. Based upon the above in our view the comparables needs to be revisited. Working capital adjustment has been restricted by Ld.TPO and upheld by DRP at 1.63% which is contrary to provisions of transfer pricing rules. As held by various decisions of coordinate benches of this Tribunal, we direct Ld.TPO to recompute working capital adjustment in actual, and to consider the same for purposes of computing arm s length margin. Risk adjustment on ad hoc basis at 1%, it is observed that there is no scientific manner which has been applied by DRP. Assessee is a low risk bearing company and therefore while computing risk adjustment risks assumed by the comparables for earning revenue in the particular segment needs to be analysed. Assessee is directed to provide for necessary details in respect of all the comparables finally selected. Ld.AO/TPO shall then compute the risk as adjustment in accordance with law. Transfer pricing issues raised by assessee is set aside to Ld.AO/TPO. Ld.AO/TPO is directed to pass a detailed order by considering all the submissions advanced by assessee in respect of each objections raised therein. Ld.AO/TPO shall granted proper opportunity to assessee of being represented as per law.
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Customs
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2020 (4) TMI 318
Scope of the term Animal Feed - Permission to import Grain De Cotton (Cotton Grain) for cattle feed consumption without insisting on the amendment under Notification dated 27.12.2017 - restricted import or not - Advance License Scheme - principles of natural justice - HELD THAT:- In the present case, no study has been conducted nor is there any reasonable ground for placing restrictions on the import of animal feed. The entire decision to amend the definition of animal feed in the Plant Quarantine Order is based merely on apprehensions voiced by Plant Quarantine Officers and is not based on any substantial material, study or past experience. As noticed earlier, the provisions of the Plant Quarantine Order provide for sufficient safeguards for the import of animal feed under Schedule VII thereof. In the opinion of this court, therefore, merely by dint of the fact that the Plant Quarantine Officers have some apprehensions or with a view to overcome such situation, the amendment in Entry No.19 of Schedule VII, which causes immense hardships to the importers and has brought such imports to a virtual standstill as the exporting countries do not export cotton grains in kibbled-crushed seeds/ pellets/ dried cake form, is not warranted, inasmuch as it places unreasonable restrictions on the import of cotton grains as animal feed despite the fact that import of such goods is unrestricted under the Foreign Trade Policy and the Customs Act. In the present case, it is evident that the reason behind the introduction of a larger definition of animal feed in Entry No.19 of Schedule-VII is merely with a view to overcome a situation, as reflected in the Draft Notification, and is not backed by any research or study which establishes that the import of cotton grains as animal feed has caused any kind of threat to the plants/plant species, as reflected in the affidavit in reply filed on behalf of the respondents. Thus, the decision to restrict the import of animal feed to kibbled/crushed seeds/ pellets/ dried cake form, which restricts the import of cotton grain as animal feed, is arbitrary or irrational and is not backed by any sound reason and renders such decision unsustainable. The impugned Notification dated 27.12.2017 to the extent the same defines Animal Feed as kibbled-crushed seeds/pellet/dried cake form is quashed and set aside - Petition allowed - decided in favor of petitioner.
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2020 (4) TMI 317
Refund of SAD - HELD THAT:- The issue decided in the case of [ 2019 (9) TMI 1331 - MADRAS HIGH COURT] - The Writ Petitions are thus closed with the consequential relief to the petitioner.
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Corporate Laws
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2020 (4) TMI 316
Permission for withdrawal of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- During the hearing on 27.11.2019, the counsel for both the parties stated that the matter has been settled and sought time for filing settlement memo and the matter was Reserved for Orders to 05.12.2019. A copy of the settlement agreement arrived between them was submitted before this Bench and sought short time for filing the original agreement along with withdrawal petition - Today when the matter was taken up for consideration, a joint Memo of withdrawal/settlement has been filed stating that the Operational Creditor and the Corporate Debtor have entered into a mutual settlement pertaining to the debt due to the Corporate Debtor. Hence they prayed before this Tribunal to permit them to withdraw the above application. Application dismissed as withdrawn.
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Securities / SEBI
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2020 (4) TMI 315
Private placement of securities - Allotment of Unsecured Fully Convertible Debentures (FCDs) in excess of 500 members - increase in the subscribed capital of the Company - section 71(5) - issuance of FCDs by the Company was public issue OR not? - WTM directed to cancel the FCDs and forthwith refund the money collected till date through the issuance of FCDs including the application money collected from investors,restriction to the number of shareholders to whom the debentures would be issued - appointment of trustees - HELD THAT:- Shareholders in their 68th Annual General Meeting held on 28th September, 2015 passed a special resolution to allot and issue 1,92,900 Fully Convertible Debentures of ₹ 250/- with the condition that the shareholders will have no right to renounce the offer in favour of any person and that these debentures would be mandatorily converted into shares upon maturity. Thus, we find from the resolution that the increase in the subscribed capital of the Company was caused by the exercise of an option which was a term, namely, a condition that the issuance of the debentures cannot be renounced in favour of any other person - provision of section 62(3) was duly complied with by the Company and was fully applicable. Further, there is nothing to indicate that the conditions mentioned in Rule 18 were not complied with. In fact the WTM has failed to notice this provision. Once this provision is applicable which is an exception to the issuance of share capital under section 62 the same is not a public offer and, therefore, the provisions of part I of Chapter III of the Companies Act are not applicable. Accordingly, the provisions of section 40 which are required to be complied with in case of a public issue is not required to be followed as in the instant case we find that the issuance of FCDs by the Company was not a public issue and the Company was not mandated to comply with the requirement of public issue under Part I of Chapter 3 of the Companies Act. Company had passed a special resolution under section 62(3) read with section 71 in respect of issuance of FCDs. The prospectus and the explanatory statement clearly state that the only members holding equity shares were eligible for allotment. It is clear that the offer of FCDs was made to the existing shareholders of the Company. Consequently, the Company was not required to ensure compliance with the limit of allottees as applicable in the case of private placement of securities. WTM was enamoured with the provisions of Section 42 and 62(1)(2) and fortified her findings by referring to Rule 13 of the Debenture Rules and 14(2)(b) of the Securities Rules. The WTM went to the extent of quoting these Section and Rules in extenso but failed to quote or even look into the provisions of section 62(3), 71 and Rule 18 of the Debenture Rules. Had any effort been made to consider these provisions, there would be no doubt that a different conclusion would have been arrived at instead of brushing aside with the observation the trigger for action in the present case in offer of FCDs itself and not of exercising an option to convert a debenture into shares of the Company . Clearly, the WTM has not understood the import of the exception clause, namely Section 62(3). We find that the WTM was more enamoured with the restriction of 200 persons contemplated in Section 42 and Rule 14(2)(b) of the Securities Rules and revolved its order around these provisions. No offer can be made to its members exceeding 500 for the subscription of its debentures unless the Company, before such offer or issue has appointed a trustee. Thus, the restriction is that debentures could be issued to only 500 persons if there is no trustee appointed by the Company. However the restriction of 500 persons is done away if a trustee was appointed by the Company. In the instant case, it is an admitted fact that a trustee was appointed. Thus there was no restriction to the number of shareholders to whom the debentures would be issued. In the light of the aforesaid, the impugned order passed by the Whole Time Member cannot be sustained.
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Insolvency & Bankruptcy
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2020 (4) TMI 314
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- The Financial Creditor has succeeded to making out a case for triggering the Corporate Insolvency Resolution Process. The material on record clearly goes to show that the Corporate Debtor had availed the loan facility and has committed default in the payment of the said debt amount. The applicant 'financial creditor' has placed on record evidence in support of the claim as well as to prove the default. The Corporate Debtor by its own admission in reply acknowledges the existence of financial debt. There is no bar for Financial Creditor from proceeding under the provisions of Code. There is no document placed on record by Corporate Debtor to show that payment of debt, as claimed by the applicant, is made or is not due and payable. The application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of the Code. A default has occurred and debt has remained unpaid. Thus, the application warrants admission as it is complete in all respects and is admitted initiating CIRP as prescribed under the Code. Application admitted - moratorium declared.
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2020 (4) TMI 313
Approval of Resolution Plan - extension of CIRP period for the Corporate Debtor - third proviso of section 12(3) of the I B Code - Effective Date as the date of approval of this Resolution Plan - HELD THAT:- On perusal of the Resolution Plan, we find that the resolution plan has necessary provisions for its effective implementation - The resolution applicant shall obtain the necessary approval required under any law for the time being in force within one year from the date of this order or within such period as provided for in such law, whichever is later. The resolution plan is approved with modifications, as mentioned above, which shall be binding on the corporate Debtor and its employees, members, creditors, guarantors, Resolution Applicant and other stakeholders involved in the resolution plan - The resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the IBBI to be recorded on its database. Application allowed.
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2020 (4) TMI 312
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- In the present case it is seen that there is a clear admission of non-payment of balance part debt and therefore there has been occurrence of default in payment of the claimed debt by the respondent corporate debtor - n the present case admittedly the demand notice in Form-3 as per section 8 of the Code was sent on 27-9-2019. It is thus seen that before filing the present application under section 9 of the Code, requisite notice under section 8 was duly served on the Respondent. In response to section 8 notice, respondent corporate debtor replied on 07-10-2019 acknowledging the outstanding amount and expressed its inability to pay the debt due to financial difficulty. In other words, the corporate debtor had not disputed the claim in its reply given in terms of sub-section (2) of section 8 of the Code. It is seen that the application preferred by applicant operational creditor is complete in all respect. The material on record clearly goes to show that the respondent committed default in payment of the claimed operational debt even after demand made by the applicant operational creditor. Respondent company also did not raise any dispute regarding the existence of operational debt. In fact, the claim of default committed by the corporate debtor has not been denied. Once the application is complete and in the absence of any dispute and with the subsistence of default, the application is liable to be admitted - on fulfilment of requirements of section 9 (5) (i) (a) to (d) of the Code, the present application is admitted. Application admitted - moratorium declared.
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2020 (4) TMI 311
Approval of Resolution Plan - Payment of statutory dues - HELD THAT:- The CoC having taken decision that the present Resolution Plan is beneficial to the Financial Creditors, Corporate Debtor and all other stakeholders, they have approved the Resolution Plan with a voting share of 70.93% on 30-10-2019 - We have not come across this Resolution Applicant asking any exemption towards the claims after approval of this plan, however, in any event, if any such exemption is mentioned anywhere in the plan that is not acceptable unless and until such relief is in accordance with law. As to action to be taken by the Corporate Debtor mentioned in the Resolution Plan as well as another clause mentioned under caption Step: XI - Actions to be taken by the Resolution Applicant - (4) of the Resolution Plan holding the suspended directors viz., Mr. Sivaramakrishnan and Mr. T.K. Santhosh should take the responsibility to get the Power of Attorney registered in favour of both new Builder/Contractor Representatives of homebuyers once the settlement of ₹ 85 lakh is made to Mr. Mukesh Jain (the current Power Agent) , the RP being the representative of the Corporate Debtor, the RP is entitled to execute the documents on behalf of the Corporate Debtor instead of asking the suspended directors who are no more representing the Corporate Debtor. The exemptions if any sought in violation of any law in force, it is hereby clarified that such exemptions shall be construed as not granted. In view of the same, this plan is hereby approved - Application allowed.
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2020 (4) TMI 310
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - It is submitted that there is a specific prayer contained under section 16G of the of the Tea Act, 1953 read with Section 16M of the Tea Act, 1953, and that the application is not maintainable because the Corporate Debtor is a Tea Company - HELD THAT:- The record is very much clear as regards supplies and payments received. The letter dated 13th January, 2016 as regards outstanding and overdue bills was duly received by the Corporate Debtor but no reply thereto was sent. No dispute as regards the payment due mentioned by the Operational Creditor in the aforesaid letter dated 13th January, 2016 was raised and the amount was not denied. In these circumstances, we can accept it as acknowledgement of its liability by the Corporate Debtor because it was duly received and signed by somebody on behalf of the Corporate Debtor and stamped with its official seal. There is no substance in the reply of the Corporate Debtor sent to the Operational Creditor in response to its demand notice - There does not seem to be any plausible defence on the side of the Corporate Debtor in the light of all the documents placed on record and referred to by the Operational Creditor. The Operational Creditor has not proposed the name of any IRP. The application filed by the Operational Creditor under section 9 of the Insolvency Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, M/s. Duncans Industries Limited is hereby admitted - Moratorium is declared for the purposes referred to in section 14 of the Insolvency Bankruptcy Code, 2016.
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2020 (4) TMI 309
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- This adjudicating authority is of the considered view that operational debt is due to the Applicant. That, service is complete and no dispute has been raised by the respondent. That, Applicant is an Operational Creditor within the meaning of sub-section (20) of section 5 of the Code. From the aforesaid material on record, petitioner is able to establish that there exists debt as well as occurrence of default - the Application filed by the Applicant on 8th January, 2019 is complete in all respect. Application admitted - moratorium declared.
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Service Tax
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2020 (4) TMI 308
Refund claim - Period of limitation - SEZ unit - Distribution of input services / credit - Period to be computed from the date of original Invoice or from the date of ISD invoice - refund claims covered by Table-II of Form A-4 of Notification No. 12/2013-ST dated 01.07.2013 - applicability of mandatory time limit for filing refund as prescribed in clause (e) of the Para 3(III) of the Notification No.12/2013-ST dated 01.07.2013 issued by the Government of India, Ministry of Finance, Department of Revenue. Whether the Tribunal was right in holding that mandatory time limit to file refund claims prescribed in clause (e) of paragraph 30(III) of Notification No. 12/2013-ST dated 01.07.2013, issued by the Government of India, Ministry of Finance, Department of Revenue, is not applicable to the refund claims covered by Table-ll of Form A-4 of the said notification? - HELD THAT:- This question does not arise out of the impugned order, inasmuch as, the Tribunal, while finding the submission of the learned counsel for the respondent that, clause (e) does not apply to refund claims covered by Table-ll of Form A-4 of the said notification, to be convincing; has not dealt with this aspect in these proceedings as it did not find any infirmity in the adjudicating authority having granted refund by following the practice and precedence set by his predecessors. Whether the Tribunal was right in holding that the adjudicating authority has exercised discretion to allow filing of refund claim beyond one year by the respondent, when the adjudicating authority had not recorded any reasons to condone such delay? - HELD THAT:- In the absence of any facts coming on record, it is not clear, as to whether or not any previous order contains reasons for extending the period for filing refund claims - Be that as it may, considering the fact that the adjudicating authority was conscious about the fact that in case of refund claims falling under Table-II, some claims were filed beyond a period of one year from the date when the ISD made actual payment to the registered service provider, it cannot be said that the view adopted by the Tribunal is not a plausible view so as to give rise to a question of law, much less, a substantial question of law. Whether the Tribunal has the power or jurisdiction to condone the delay in filing the refund claim as per clause (e) of Para 3(lll) of Notification No. 12/2013-ST dated 01.07.2013, which is vested with the Assistant/Deputy Commissioner of Central Excise? - HELD THAT:- There is a provision for allowing further time on sufficient cause, which is found in the proviso to section 8(4) of the said Act. It was the case of the revenue that with the completion of the assessment the time limit for filing C forms expires. The appellate authority comes on the scene only after the assessment is over. Under the relevant statutory provisions, an assessing authority alone can allow further time. The appellate authority is different from an assessing authority. Therefore, the appellate authority cannot allow further time and receive C forms at the appellate stage, subsequent to the assessment - the court has held that whatever discretion is conferred on the assessing authority for purposes of assessment, must so be regarded, as a matter of statutory construction, to have been conferred on the appellate authority even without the concerned statutory provision expressly naming the appellate authority in that behalf. An appellate authority, engaged as it is in precisely the same task under the fiscal statute as that of the assessing authority must also be possessed of like powers as those of the assessing authority. Whether the Customs, Excise and Service Tax Tribunal was justified in holding that in case of ISD invoices, for all purposes, be it cenvat or refund, the ISD invoice is deemed to be taxpaying document, and hence, the date of that invoice has to be taken even for computing the one year stipulated in clause (e) of paragraph 3(III) of Notification No.12/2103-ST dated 1st July, 2013? - Whether the Customs, Excise and Service Tax Tribunal was justified in holding that no reasons are required to be assigned for extending the period for filing refund claims? - HELD THAT:- On a conjoint reading of rules 7 and 9 of the CC Rules, it emerges that the input service distributor has to distribute the CENVAT credit in respect of service tax paid on input service to its manufacturing units whether in the DTA or the SEZ; and in terms of rule 9 of the said rules, the concerned unit which in the present case is an SEZ unit, is entitled to take CENVAT credit on the basis of an invoice issued by the input service distributor under rule 4A of the Service Tax Rules. Therefore, an invoice issued by the input service distributor is proof of payment having been made to the service provider and can be said to be a taxpaying document. However, while such document is proof of payment of tax, the date which such document bears is not the date of actual payment of service tax as contemplated in clause (e) of paragraph 3(III) of Notification No.12/2013-ST dated 01.07.2013 - Clause (e) of paragraph 3(III) of Notification No. 12/2013-ST dated 01.07.2013, postulates that the claim for refund shall be filed within one year from the end of the month in which actual payment of service tax was made by such Developer or SEZ Unit to the registered service provider or such extended period as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may, shall permit. Customs, Excise and Service Tax Tribunal was not justified in holding that in case of ISD invoices, for all purposes, be it cenvat or refund, the ISD invoice is deemed to be taxpaying document, and hence, the date of that invoice has to be taken even for computing the one year stipulated in clause (e) of paragraph 3(III) of Notification No.12/2103-ST dated 1st July, 2013. It is further held that the Customs, Excise and Service Tax Tribunal was not justified in holding that no reasons are required to be assigned for extending the period for filing refund claims - Both the above substantial questions of law stand answered accordingly, in favour of the appellant and against the respondent. Appeal disposed off.
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CST, VAT & Sales Tax
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2020 (4) TMI 307
Ex-parte order passed by the Special Committee rejecting the application since the application was filed beyond the period of limitation of 3 years - Return of seized goods or in the alternative furnish xerox copies of the records seized - manufacture and sale of Poultry feed which was exempted in terms of Entry No.57 of Part B of the Third Schedule of TNGST Act, 1959 - Since, the petitioner claimed to be exempted dealer, the petitioner claims that the petitioner had not maintained proper records - HELD THAT:- Powers vested with the 1st respondent include the powers to set aside orders impugned before it or direct the Assessing Officer to make a fresh assessment and/or pass fresh order in such manner as may be directed. Thus, power has been given to the 1st respondent to examine the issue without any inhibition of limitations prescribed under the Act where an assessee was unable to participate in the proceeding or appropriate order from an Assessing Officer - Though the impugned order of the 1strespondent adverts to be proceedings which was challenged before it, it fails to address the core issue before it. Since the petitioner did not get to participate in the hearing and an ex parte order came to be passed by the 2nd respondent, the petitioner deserves an opportunity of being heard - 2nd respondent is therefore directed to pass appropriate orders on merits within a period of three months from date of receipt of a copy of this order. Petition disposed off.
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2020 (4) TMI 306
Ab initio cancellation of the registration certificate of the appellant - It is claimed that the basis of the allegations and grounds neither made out nor established in the original order - Gujarat VAT Act - CST Act - principles of natural justice - HELD THAT:- Sub-section (5) of section 27 of the GVAT Act empowers the Commissioner to cancel the certificate of registration from such date as may be specified by him. On a plain reading of the sub-section, it appears that it is permissible for the Commissioner to cancel the registration even with retrospective effect - Thus under sub-section (5) of section 27 of the GVAT Act, the Commissioner is empowered to cancel the certificate of registration from such date as may be specified by him; under clause (1) of sub-se Since sub-section (5) of section 27 of the GVAT Act does not contain the words from a date not earlier than the date of the order , this is a clear indication of the legislative intent, not to curtail the date of cancellation of registration to the date of the order of cancellation of registration. In other words, sub-section (5) of section 27 of the GVAT Act permits the Commissioner to cancel the certificate of registration even with retrospective effect. This court is of the considered view that in case of non-payment of tax dues, the registration may be cancelled prospectively from the date of the order or at best from the date of violation; but not ab initio from the date of grant of registration or any date prior to the violation of the statutory provision. The registration of a dealer cannot be cancelled retrospectively to even include the period where the transactions were legal and valid and there was no violation in terms of any of the clauses contained in sub-section (5) of section 27 of the GVAT Act. While cancelling the registration of a dealer, the authority should consider the nature of the violation as well as the effect that the cancellation of the registration has, not only on the dealer but on all other dealers who have dealt with him. In case of mere non-payment of assessed tax dues, there is no illegality in the transactions entered into by the parties, and hence, the concerned authority should exercise discretion accordingly, and if it finds on facts that a case for cancellation is made out, it may cancel the registration prospectively. Thus, the Tribunal was not justified in confirming ab initio cancellation of the registration certificate of the appellant. Whether the Gujarat Value Added Tax Tribunal was justified in holding that the judgment of this court in the case of State of Gujarat v. Nageshi Enterprise, [ 2016 (12) TMI 886 - GUJARAT HIGH COURT ], wherein the dealer had specifically admitted that he was not entitled to input tax credit, would be applicable to the facts of present case? - HELD THAT:- The decision of this court in State of Gujarat v. Nageshi Enterprise has been rendered in the peculiar facts of the said case wherein the dealer had specifically admitted that he was not entitled to input tax credit, whereas in the facts of the present case, the appellant has challenged the tax, interest and penalty till the stage of second appeal, and there is no admission on its part that the transactions in question were invalid. Question No.2 is also, therefore, required to be answered in favour of the appellant and against the respondent, namely, that the Tribunal was not justified in holding that the decision of this court in the case of State of Gujarat v. Nageshi Enterprise would be applicable to the facts of the appellant. Whether the Gujarat Value Added Tax Tribunal was justified in confirming the order of the first appellate authority confirming the cancellation of registration certificate of the appellant on the basis of the allegations and grounds neither made out nor established in the original order cancelling the registration certificate? - HELD THAT:- In the facts of the present case, no notice in Form 503 has been issued to the appellant prior to the first appellate authority taking into consideration the material which did not form part of the material before the Commercial Tax Officer. Moreover, this court is of the opinion that the provisions of sub-rule (1) of rule 57 of the GVAT Rules would be applicable to assessment proceedings wherein the appellate authority is of the opinion that the demand is required to be enhanced or the penalty is not proportionate to the default. In a case of cancellation of registration pursuant to a show cause notice, the appellate authority cannot travel beyond the grounds stated in the show cause notice and expand the scope of the proceedings by placing reliance upon additional material, which was not relevant to the grounds stated in the show cause notice. The Tribunal, in the impugned order, has failed to consider the scope of the proceedings before it and has upheld the order passed by the first appellate authority on the grounds which were extraneous to the show cause notice. Moreover, as discussed hereinabove, the Tribunal has thoroughly misunderstood the facts of the case while holding that appellant had accepted that the purchases were not genuine. The Tribunal was, therefore, not justified in upholding the order passed by the first appellate authority whereby it had confirmed the order of cancellation of the registration certificate of the appellant - Answered in favour of the appellant and against the revenue. Appeal allowed - decided in favor of appellant.
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