Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 2, 2018
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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E-Way Bill System User Manual for SMS Operations
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E-Way Bill System FAQ - The common portal for generation of e-way bill is https://ewaybillgst.gov.in
Income Tax
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Computing the book profit u/s 115JB - MAT - whether the tariff charged by the assessee from 01.04.2005 and till the final order of the CERC is contingent and cannot be said to have crystallized or attained certainty and is, therefore, liable to be added back to the assessee’s income? - Held No - HC
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Penalty u/s 271(1)(c) - revision u/s 263 - In the absence of any finding of the AO with regard to concealment of income or with regard to furnishing of inaccurate particulars of income, the CIT clearly erred in holding that omission to record satisfaction to initiate penalty proceedings was erroneous or prejudicial to the interest of Revenue. - HC
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Claim of deduction u/s 80IB - by virtue of the processing done on milk by the assessee, the milk gets pasteurized, thereby becoming free of bacteria, and thus, potable and consumable. Obviously, therefore, the quality and nature of the milk gets irreversibly altered by such processing - deduction allowed - AT
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Addition u/s 68 - credit purchase of Supari, as unexplained cash credits - it is found that the gross profit and net profit shown by the assessee is progressive and the AO has not doubted the same - No additions - AT
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Claim of TDS credit - assessee following cash accounting method - TDS certificates shows higher gross receipts then what is shown in the return of income and profit and loss account - additions were corrected deleted by the CIT(A) - AT
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Unexplained investment u/s 69 - The aspect that this income was not declared in the original return of income cannot be a ground to automatically conclude that it is unexplained investment - AT
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Addition on account of the interest income earned by the cooperative society - when the income has been offered by those societies in their own hand it cannot be taxed in the hands of the assessee. - AT
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Addition made u/s. 43B - interest paid to financial institutions on loans - assessee argued that the company constructed the buildings to the Government of Andhra Pradesh on no profit and no loss basis and disallowance of any expenditure would result into income which the assessee has not derived from carrying on its operations - AO directed to verify the facts.
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Personal expenses or business expenses - Unless the assessee submitted the details of the names of the clients or customers with whom the Directors held talks and the number of days spend therein, it is not possible to hold that the entire expenditure claimed by the assessee is wholly and exclusively for the purpose of the business of the assessee - AT
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Eligibility for deduction u/s 80P - assessee to invest 25% of its profits in the reserve funds, which in turn, are parked in FDRs with Bank of Maharashtra - assessee is entitled to claim deduction under section 80P(2)(a)(i) - However, the assessee is not entitled to claim the said deduction on Saving Account interest - AT
Customs
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Import of prohibited goods - waste - When even violation of the general principles of law are deemed to be illegal, it cannot be said that violation of enacted laws are not illegal. What we have to see is whether there was any illegality attracting the rigor of re-export. - HC
DGFT
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GENERAL PROVISIONS REGARDING IMPORTS AND EXPORTS - Chapter 2 of Foreign Trade Policy 2015-2020 as amended - Import policy for Second Hand Goods imported for the purpose of repair / refurbishing / re- conditioning or re- engineering is laid down.
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DUTY EXEMPTION /REMISSION SCHEMES - Chaper 4 of Foreign Trade Policy 2015-2020 as amended - Import of raw Sugar under DFIA scheme
Corporate Law
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Filing of Annual Financial statements and Annual Returns under the Companies Act, 2013 - Condonation of Delay Scheme, 2018 - scheme extended upto 30th April, 2018.
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Relaxation of additional fees and extension of last date of filing of AOC-4 XBRL E-Forms using Ind AS under the Companies Act, 2013 - Circular
Central Excise
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CENVAT credit - Cement and Steel items - irrespective of the classification of components, spares and accessories, when those are fitted to the machines/machineries of the above eligible Chapters, the same should also be considered as capital goods for availment of Cenvat Credit of Central Excise duty paid thereon. - AT
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SSI exemption - clubbing of clearances - Merely because the partner of two units happen to be the same, by itself, is not sufficient to establish that one unit is dummy of another - AT
VAT
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Input tax credit - the officer at whose instance further investigation was initiated on the basis of his prima facie finding relating to huge mismatch and excess claim of inputs tax credit by the petitioner, has himself conducted the assessment - the reasonable likelihood of bias cannot be ruled out - HC
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Principles of Natural Justice - the assessing officer is a quasi-judicial authority and in exercising his quasi-judicial function of completing the assessment, he is not bound by the instructions or directions of the higher authorities. - HC
Case Laws:
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Income Tax
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2018 (3) TMI 1592
Addition u/s 68 - proof of identity, genuineness and creditworthiness of the shareholders - failure to establish the source of source - Held that:- The requirement to explain the source of source of funds in respect of amounts credited in the books of a company in which the public are not substantially interested as share application money was brought in the statute with the introduction of proviso to Section 68 of the Act by Finance Act, 2012. This proviso was introduced w.e.f. 1st April, 2013. Thus, it would have no application in respect of receipt of share application money received prior thereto. In this case, we are dealing with the issue of share application money in the previous year relevant to Assessment Year 2008-09. Therefore, the proviso to Section 68 of the Act would have no application. - Decided in favour of assessee
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2018 (3) TMI 1591
Penalty u/s 271(1)(c) - Held that:- The assessee, after service of notice u/s 271(1)(c) upon him, never objected to it alleging non application of mind by the AO and did not raise any question, going to its root, at the earliest or even before the Commissioner of Income Tax (Appeal). Even before ITAT while opposing the order, no such effort was made and orally the contentions based upon omission to strike down some part or portion in notice, not applicable in the matter, were raised. Thus, the fact that such an objection which should have been raised at the earliest, was not raised before the authority imposing penalty or then before CIT (A) or then in appeal memo, is lost sight of. The impact of failure to raise it “so”, is also not evaluated. The question whether such a ground needed to be taken at the first available opportunity, the impact of failure to so raise it, therefore, need to be answered in present matter. The perusal of order passed by the I.T.A.T. does not show consideration of this aspect. The other contentions which pertain to merits of the matter, therefore, need not be gone into and cannot be gone into by this Court in present appeal. In present facts when the I.T.A.T. has not looked into the effect of omission to raise such a contention at the first available opportunity, we are inclined to answer the question in favour of the revenue. Accordingly, we quash and set aside the order dated 30.06.2017 and restore Appeal back to file of I.T.A.T., Nagpur, for its fresh consideration in accordance with law. We give liberty to the respondent – assessee to raise his contentions on legality of notice under Section 271(1)(c) of the Income Tax Act by adding appropriate ground and grant liberty to the department to raise appropriate challenge thereto.
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2018 (3) TMI 1590
Unexplained expenditure U/Sec. 69 - amount found in the accounts of one Mr. Satishchand G. Mittal as his income received from the assessee - Held that:- Mr. S. G. Mittal had shown the income of ₹ 3,61,500/as his income by way of interest received from the appellant and as such authorities have safely concluded that the company had in fact paid this amount to Shri S. G. Mittal during assessment year 2008-2009 out side its books of account. It tantamounts to unexplained expenditure. The theory that interest was not paid, cannot be accepted. No substantial question of law arises.
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2018 (3) TMI 1589
Computing the book profit u/s 115JB - MAT - whether the tariff charged by the assessee from 01.04.2005 and till the final order of the CERC is contingent and cannot be said to have crystallized or attained certainty and is, therefore, liable to be added back to the assessee’s income? - Held that:- The liability in the present case also has definitely arisen, although it would have to be quantified and discharged to adjust it at a future date, i.e., the date on which the CERC determined the tariff. It is not even suggested by the revenue that the liability was not likely to be incurred. Considering the nature of the assessee’s enterprise and the mode of fixation of tariff, it is reasonably certain that the liability would arise. Nor is it suggested that the liability was not capable of being estimated with reasonable certainty. The assessee estimated the liability after taking all the relevant factors into consideration. Indeed, the liability was enhanced on account of the CERC fixing the tariff at a rate lower than that sought by the assessee. The difficulty in estimating does not convert the accrued liability into a conditional one as held by the Supreme Court. Further, as held by the Supreme Court, it is upon the tax authorities to arrive at a proper estimate of the liability having regard to all the circumstances of the case. It is not suggested that the liability was not properly estimated. - Decided in favour of assessee.
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2018 (3) TMI 1588
TPA - comparable selection - excluding Informed Technologies India Ltd. from the set of comparable companies on account of its high profit margin accepted Treating companies engaged in various different activities classified broadly as ITES can be treated as functionally comparable - Held that:- For the purposes of arriving at the Arms Length Price (ALP) of the services rendered by it, the Revenue placed reliance upon M/s. Maple E-Solutions Ltd. as a comparable. However, M/s. Maple Solutions Ltd. is a BPO providing call service centre. The Tribunal on examination of the activities carried out by the respondent and the activities carried out by M/s. Maple E-Solutions Ltd., found that they are functionally different and, therefore, could not be used as a comparable in arriving at ALP. The impugned order held that merely because the call centre business is also understood broadly as an IT enabled services, would not by itself lead the respondent assessee and M/s. Mapple E-Solutions Ltd. to become a comparable, looking at the functional difference between the two. The view taken by the Tribunal on the facts is a reasonable and possible view. Excluding Maple E Solutions from the comparable set on the ground that there had been complaints of fraud etc. against the directors of the company - Because of the unreliability of the data of M/s. Maple E-Solutions Ltd., it could not be used as a comparable to determine the ALP of the respondent assessee's services. The above view of the Tribunal has not been shown to be perverse in any manner.
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2018 (3) TMI 1587
Reopening of assessment - validity of reasons to believe - previous assessment order was passed ignoring the existing judgments or materials - Held that:- When it is not the case of the Assessing Officer that the reassessment was necessitated on account of a fresh information, either with regard to the facts or law received by him, he is denuded of the jurisdiction to initiate reassessment proceedings merely because the previous assessment order was passed ignoring the existing judgments or materials. Non-noticing of the existing judgments squarely falls under the categories of oversight, inadvertence or mistake committed by the ITO and those reasons do not constitute a justifiable ground under Section 147(b) of the Act for initiating reassessment proceedings. Reassessment was made based on the judgments which admittedly existed when the original assessment order was passed. The Commissioner (Appeals) and also the Income Tax Appellate Tribunal have mechanically upheld the order of the Assessing Officer without proper appreciation of true scope and purport of Sections 147 and 148 of the Act with reference to the relevant case law. On the analysis as above, we hold that the impugned reassessment, on the facts of the case, was without jurisdiction and accordingly we hold substantial questions of law Nos.1 and 2 in favour of the assessee
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2018 (3) TMI 1586
Penalty u/s 271(1)(c) - revision u/s 263 - Principal Commissioner jurisdiction to pass such order - Held that:- Principal Commissioner, we find, has recorded a finding that on examination of the records, it is found that the Assessing Officer had in the assessment order established that the Assessee had concealed his income by filing inaccurate particulars . There is no such finding in the order of assessment. The Principal Commissioner seems to have distorted the order of assessment. The finding of the Principal Commissioner is to that extent perverse. In the absence of any finding of the Assessing Officer with regard to concealment of income or with regard to furnishing of inaccurate particulars of income, the Commissioner clearly erred in holding that omission to record satisfaction to initiate penalty proceedings was erroneous or prejudicial to the interest of Revenue. The learned Tribunal rightly set aside the direction of the Principal Commissioner directing the Assessing Officer to initiate penalty proceedings although we may not agree with the reasoning in its entirety. - Decided in favour of assessee.
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2018 (3) TMI 1585
Penalty u/s 271(1)(c) - claim of set off long term capital gains in the return of income filed pursuant to notice u/s.148 - assessee withdrew the claim - Held that:- In the original return of income, the assessee made this legal claim of set off of long term capital gains against long term capital loss arising from the sale of shares of Dotex International Limited to its 100% holding company NSE Limited which was hit by provisions of Section 47(v) of the Act as it will not constitute transfer which claim stood withdrawn by the assessee itself, but every legal claim which is filed and which is not allowed by the Revenue does not automatically lead to the levy of penalty u/s 271(1)(c) rather in the instant case on coming to know of the inadmissibility of the said claim of set off by virtue of Section 47(v), the assessee itself disallowed the said claim before being confronted by the Revenue while filing return of income in pursuance to notice u/s 148. The decision of the Hon’ble Supreme Court in the case of Reliance Petroproducts Private Limited (2010 (3) TMI 80 - SUPREME COURT) is applicable and in fact the assessee voluntarily withdrew the said claim in the return of income filed and hence no penalty is exigible u/s 271(1)(c) under these circumstances as explanation offered is genuine and bonafide . No penalty u/s 271(1)(c) is exigible in this case - Decided in favour of assessee
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2018 (3) TMI 1584
Calculating the net profit @12.68% on closing WIP - assessee has claimed to have offered to tax entire income arising from this project in AY 2008-09 when the project was claimed by the assessee to have been completed - Held that:- This matter need to be restored to the file of the AO for verification whether the assessee has offered entire income arising from this project in AY 2008-09 when the project was stated by the assessee to be completed and also to verify since when the project completion method was adopted by the assessee for computing income from this project as the project was stated to be started in 1995 and the stand adopted by the Revenue for the earlier years in accepting project completion method of earlier years. If the aforesaid contentions of the assessee are found to be correct, then additions will stand deleted. AO shall grant proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. AO shall admit evidences filed by the assessee in its defence in the interest of substantial justice Penalty u/s 271(1)(c) - undisclosed being compensation from Chedda Housing - Held that:- Revenue is contending that it is only after when the assessee was cornered by revenue, the assessee came forward and made disclosure of income voluntarily being compensation from Chedda Housing which was earlier disclosed as an unsecured loan. It is very crucial to have correct facts on record and there has to be ad idem as to the findings of the authorities below so as to establish bonafide of the assessee or there need to be proper justification for arriving at contrary findings and it can not be left in the realm of speculation. It is also not on record as to under what circumstances, the said income was earned by the assessee and what made the assessee in not disclosing the said income. The assessee is claiming that the same to be an accountant mistake. This aspect also needs to be looked into to establish the bonafide of the assessee and whether the assessee is able to come out with reasonable explanations and justifications to come out of clutches of penalty provisions u/s 271(1)(c) of the 1961 Act. Thus this matter needed to be restored to the file of the AO for recording the entire factual matrix of the case and then arrive at the decision as to the leviability of penalty u/s 271(1)(c) of the 1961 Act in accordance with law. - Appeal of assessee decided for statistical purposes.
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2018 (3) TMI 1583
Penalty levied u/s 271(1)(c)read with Explanation 5A - assessee as stressed that in the notice issued under section 274 of the Act, there is no striking of inappropriate limb - Held that:- As satisfaction was recorded by the Assessing Officer that the assessee had concealed its income and penalty was also levied on the same account under Explanation 5A to section 271(1)(c) of the Act. This issue has already been adjudicated at length by us in the case of Kanhaiyalal D. Jain Vs. ACIT [2016 (12) TMI 1238 - ITAT PUNE]S we have held that where recording of satisfaction by the Assessing Officer while initiating penalty is clear and not ambiguous, then merely because one of the limbs has not been struck off the notice, does not make the proceedings invalid. In view of the same, we find no merit in the plea of assessee and the same is dismissed. Levy of penalty us 271(1)(c) - claim of deduction under section 54 - Held that:- The assessee having made a wrong claim in the return of income i.e. by way of claim of deduction under section 54 on account of investment in two properties and in respect of capital gains account with bank not having been made by the assessee, tantamount to furnishing of inaccurate particulars of income and justifiably, penalty under section 271(1)(c) of the Act is leviable on such furnishing of inaccurate particulars of income. Assessment made u/s 153C or 148 - documents were found during the course of search at the residence of partners of assessee firm on the basis of which, additional income was to be assessed in the hands of partnership firm - Held that:- When during the course of search under section 132 of the Act at the residence of Mrs. Vasundhara S. Joshi and Shri Shailesh Joshi, loose paper bundle Nos.6, 7, 8 and 9 were found, which depicted the receipts and expenditure relating to different outlets being run under the partnership firms and the additional income was also offered by the persons searched on behalf of partnership firms, in which he was partner, on the basis of such documents found during the course of search, then for making addition in the hands of partners, provisions of section 153C of the Act are attracted. Once the said provisions are so attracted, then there is no question of initiating any proceedings under section 147 / 148 of the Act. Accordingly, we hold that proceedings initiated under section 147 / 148 of the Act are thus, not correctly initiated. Validity of penalty proceedings u/s 271(1)(c) - Held that:- As in the given circumstances, proceedings under section 153C of the Act were required to be initiated and not proceedings under section 148 of the Act, though the assessee had participated in assessment proceedings but the same does not preclude the assessee from raising this jurisdictional issue while arguing the appeal relating to levy of penalty for concealment under section 271(1)(c) of the Act. We hold that in such circumstances, the initiation of penalty proceedings under section 271(1)(c) of the Act is invalid and bad in law. Consequently, penalty order passed under section 271(1)(c) of the Act does not survive
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2018 (3) TMI 1582
Penalty u/s 271C - payment of royalty to the payee u/s 194(J) - Held that:- We observe that the assessee was liable for TDS under the provisions of the Income Tax Act on the payment of royalty to the payee u/s 194(J). Assessee has not deducted TDS. After perusing the documents it was found that the order was passed by the assessing officer u/s 201(1) / 201(1A) on 22.01.2010 and the assessee had paid the entire TDS and interest amount on 07.01.2010, i.e., before passing of the order with the Punjab National Bank Challen no. 00290 which is on paper book at page no. 4. The assessee has also filed TDS return with the National Security Deposits Ltd. on dated 13.01.2010 which too is before the passing of the order by the assessing officer. - Decided in favour of assessee.
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2018 (3) TMI 1581
Reopening of assessment - addition on account of un-explained cash credit u/s 68 - Held that:- We observe that the assessee has filed a paper book which has not been certified by the appellant or any other authorized persons. CIT(A) has decided the issue on the basis of documents filed before him. There is no clear from the order of the ld. CIT(A) that what type of documents were submitted before him by the assessee and on those documents whether the ld. CIT has conducted any enquiry or not . The Remand report were also not called from the Assessing officer where as the assessee has filed additional evidence under Rule 46A which has been accepted by him without conducting any further enquiry. In these circumstances , we think it appropriate in the interest of natural justice to restore the matter back to the file of ld. CIT(A) for deciding the appeal afresh
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2018 (3) TMI 1580
Reopening of assessment - Held that:- Undisputedly, the assessment order was passed u/s 143(1), whereby the return of the assessee was only processed on 19.09.2006. While processing the return, obviously, no ‘opinion’ was formed by the AO as regarding the claims made in the return. Now, once per se, no opinion came to be formed at that time, the AO cannot be said to have initiated the reopening proceedings merely on a change of opinion. Claim of deduction u/s 80IB regarding sales of liquid milk on the proportionate profit - Held that:- Both the Authorities below have held that liquid milk is not a product of an industrial undertaking. This, in my considered opinion, is not justified. It remains undisputed that by virtue of the processing done on milk by the assessee, the milk gets pasteurized, thereby becoming free of bacteria, and thus, potable and consumable. Obviously, therefore, the quality and nature of the milk gets irreversibly altered by such processing. Thus, in this regard, the assessee is entitled to deduction u/s 80IB of the Act. AO is directed to grant exemption u/s 80IB as claimed by the assessee. Quantification of deduction u/s 80IB - whether such deduction is to be allowed on the amount arrived at before setting off the un-absorbed brought forward depreciation, or after setting off the un-absorbed brought forward depreciation- Held that:- the special deduction under Chapter VI-A of the IT Act has to be computed on the gross total income determined after deducting all deductions allowable under sections 30 to 43D of the Act; that the quantum of deduction allowable u/s 80 IA of the Act has to be determined by computing the gross total income from business, after taking into consideration all the deductions allowable under sections 30 to 43D of the Act; that the quantum of deduction under section 80IA has to be determined on the total income computed after deductions allowable under sections 30 to 43D of the Act; that the assessee’s claim of 100% deduction without taking into consideration depreciation which they wanted to utilize in the subsequent years, would be ana-thema to the scheme under section 80IA of the Act, which is linked to profit and if the contention of the assessee were to be accepted, it would allow them to inflate the profits-linked incentives provided under section 80IA of the Act, which could not be permitted; and that the provisions of section 80IB of the Act (which is under consideration herein), are in pari materia with those of section 80IA of the Act. See Plastiblends India Ltd case [2017 (10) TMI 423 - SUPREME COURT OF INDIA]
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2018 (3) TMI 1579
Addition u/s 68 - credit purchase of Supari, as unexplained cash credits - Held that:- The assessee had made purchases of ₹ 3,00,90,226/- from M/s. Ganesh Trading Co., Kolkata on credit, against of which, part payment of ₹ 65,00,000/- was made to the said creditor through banking channel and balance amount of ₹ 2,35,90,226/- was shown as credit balances appearing in the name of said creditor in the books of assessee, which too was paid in succeeding years through banking channel and the Revenue Authorities have not raised any doubt on discharge of this liability in subsequent years. The assessee has also filed a comparative chart, showing the turnover, gross profit and net profit for three consecutive years including the year in dispute, on perusal of which, it is found that the gross profit and net profit shown by the assessee is progressive and the AO has not doubted the same. It is also worth mentioning that the addition of ₹ 2,35,90,226/- if added to the declared profit of ₹ 8,69,652/- as shown in the comparative chart filed, the gross profit would work out to ₹ 2,44,59,878/- giving GP rate of 105.22%, which is not appealing to reason at all. In view of all these facts and laying our hands on the aforesaid decisions, we are of the considered opinion that the addition made by the AO and sustained by the ld. CIT(A) was not justified. Thus addition is not sustainable - Decided in favour of assessee.
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2018 (3) TMI 1578
Validity of assessment u/s 143(3) r.w.s. 144C - Final assessment order without issuing draft assessment order under section 144C - draft assessment order passed in the case along with issue of demand notice - Held that:- In the facts of the present case, there was no proposal for making addition but the final assessment order was passed though the AO calls it a draft assessment order and also observed that the assessee was at liberty to file objections before the DRP or accept the same, but along with the said order, he also issued demand notice and also initiated penalty proceedings. The issue arising before us is identical to the issue before Tribunal in DCIT Vs. M/s. Rehau Polymers Pvt. Ltd. (2017 (8) TMI 1294 - ITAT PUNE). The draft assessment order passed by the Assessing Officer was complete assessment order which is not envisaged under section 143(3) r.w.s. 144C of the Act. Accordingly, we hold that the draft assessment order passed in the case is invalid in law. The jurisdictional issue in favour of assessee
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2018 (3) TMI 1577
Depreciation on capital assets already been allowed as application of income u/s 11 - Held that:- Identical to the issue before the Hon’ble Apex Court in CIT Vs. Rajasthan and Gujarati Charitable Foundation Poona (2017 (12) TMI 1067 - SUPREME COURT) and following the same parity of reasoning, we hold that the assessee is entitled to claim deduction on account of depreciation on the assets, cost of which has already been allowed as application of income under section 11 of the Act in preceding years. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by the Revenue.
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2018 (3) TMI 1576
Denial of deduction claimed u/s 80(P)(2)(a) - interest income on fixed deposits with nationalized banks - Held that:- The stand of the assessee right through has been that the society is not engaged in any other activity except receiving deposits from its members and providing credit facilities to its members. The assessee has made deposits with nationalized banks in order to maintain liquidity and provide ready availability of funds for repayment of deposits on redemption/maturity. These facts have not been refuted by the department, we direct the Assessing Officer to allow deduction under section 80(P)(2)(a) of the Act on the interest income earned from fixed deposits with nationalized banks. See ITO Vs. M/s. Maharashtra Bank Employees Co-op. Credit Society Ltd. [2018 (3) TMI 1562 - ITAT PUNE] - Decided in favour of assessee
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2018 (3) TMI 1575
Legality of the addition u/s 153A - deemed dividend addition u/s 2(22)(e) - time limit for issue of notice - incriminating material found during the course of search - Held that:- In the present case, the search took place on 09.09.2010 in Amrapali Group of Cases. The impugned Assessment Year before us is Assessment Year 2007-08. The assessee filed return of income on 22.10.2007. The notice u/s 143(2) of the Act could have been issued to the assessee up to 30.09.2008. No such notice was issued. Therefore, as on the date of search the assessment was completed assessment - if any addition is made in the concluded assessment it has to be made only on the basis of incriminating material found during the course of search. If there is no incriminating material found then assessment u/s 153A was to be passed only on the returned income or earlier assessed income. In the present case, it is apparent that addition has been made on the basis of the same material, which was there prior to the date of search, and no incriminating material was mentioned in the assessment order or produce before us. - Decided in favour of assessee. For deemed dividend addition u/s 2(22)(e) transactions of the loan received by the assessee is also required to be examined from the aspect of the circular where it has been stated that the nature of advances given will determine whether it would be considered as deemed dividend or not. Some of the decisions relied upon by the assessee before the Ld. CIT (A) are also mentioned in the above circular however, the Ld. CIT appeal has not verified whether the facts of the present case are covered by those decisions. In view of above facts, in the interest of Justice, we set aside ground No. 2 of the appeal back to the file of the Ld. AO. for examination of the full facts of the loans given by the lender company to the assessee and its taxability as deemed dividend. The assessee is first directed to produce all the necessary details to show that how the advances received by the assessee does not fall into the definition of deemed dividend. Addition of benefit or perquisite under section 2 (24) (iv) - Held that:- We reject the finding of the Ld. CIT (A) that benefit is to be "received" from the company. We could not find the text of the section that benefit is to be received from the company. It provides rather that the benefit is to be "obtained" from the company. Furthermore, there is no relationship between the amount advanced to the appellant to provide guarantee for raising of the bank loan by the lender company to fund the project and headed you commercial expediency. CIT (A) has applied the reasons given by him while deleting the addition of the deemed dividend also for deleting the above addition with respect to the benefit of deemed - set aside ground of the revenue to the file of the Ld. assessing officer with a direction to the assessee to show before him that how the about transaction of receiving loan from a firm to the assessee free of interest where a company where the assessee is director which is provided huge interest free funds to such firm is not chargeable to tax as income under section 2 (24)(iv) of the act. The Ld. AO may examine the arguments of the assessee and decide the issue afresh
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2018 (3) TMI 1574
Claim of TDS credit - assessee following cash accounting method - TDS certificates shows higher gross receipts then what is shown in the return of income and profit and loss account. - Held that:- Assessee has already offered the income on gross turnover of ₹ 14.76 crores following cash system of accounting. According to the method of accounting if the tax deduction at source has been made by the client on or before 31st March but payment is not received till that date, tax deducted at source is included in the income by the assessee. Therefore, according to the method of accounting followed by the assessee, no infirmity in the order of the ld CT (A) in deleting the addition. Hence, the addition made by the AO of ₹ 3.78 crores is under the accounting treatment incorrect understood by the AO. In view of this the ground No. 1 and 2 of the appeal of revenue are dismissed. Addition on account of rental receipts under the head ‘income from house property” - Held that:- Gross rent received from the tenant includes the service tax payable on the rent realized by the appellant. AO has erred in working out the Annual Value of the house property after excluding the service tax payable thereon for computing income from the house property. This finding also finds support from the fact the AO has accepted net annual value after excluding the service tax out of the gross rent receipt for computing the income from the house property in the subsequent AY. Accordingly, the service tax paid and refund of one month rent has to be deducted out of the gross Rent received from M/s with ICICI Prudential Life Insurance Co. Ltd., to arrive the Annual Value of the property. Consequentially, the addition made under the head income from the house property is deleted. - Decided against revenue
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2018 (3) TMI 1573
Unexplained investment u/s 69 - unexplained money u/s 69A - nature of receipt not explained by assessee - AO observed that, mere filing of copy of agreement is not sufficient - Information was received u/s 133(6) - Held that:- In the instant case, the nature of investment is in respect of interest which accrued to the assessee on the deposits in the Natwest Bank, London. We have already held above that the assessee has duly explained even the nature and source of the deposits in the Natwest Bank accounts and thus, said the deposits cannot be regarded as unexplained investment under section 69 of the Act. The deposits represent income from support services provided by the assessee to TPE and therefore, the conclusion of the revenue to regard the sum offered as income and assess under section 69 of the Act has no validity in law. In view of the above, we do not find merit in the claim of the revenue to treat the interest and income from deposits as unexplained investment under section 69 of the Act. The aspect that this income was not declared in the original return of income cannot be a ground to automatically conclude that it is unexplained investment particularly having regard to the aforesaid evidences and factual position placed on record which remains un-assailed despite examination at various levels. - Decided in favor of assessee. Disallowance of expenditure - Held that:- AO had made the disallowance since this audit report mentions that the expenses vouchers were not supported by documentary evidence. It has been also noted that during the appellate proceedings, the assessee has not produced any evidence to justify the claim of expenditure. It has been held that mere contention that disallowance is ad hoc was not a valid basis. Having regard to the reasonable estimate made by the learned Assessing Officer, the aforesaid disallowances were deleted. No reason to deviate from the aforesaid findings recorded by the Ld. CIT (A). The assessee has not brought any material so as to warrant a view different from the aforesaid conclusion. In view of the aforesaid reasons, claim raised by the assessee is rejected. Interest levied under section 234B and 234C - Held that:- We hold that levy of interest is mandatory and we reject the claim raised by the appellant. Imposition of penalty u/s 271(1)(c) - Held that:- AO is required to specify as to under which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated, i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. From the perusal of the notice u/s 274 r.w.s. 271, AO has not specified as to under which of the two limbs the penalty is imposable. In the circumstances and facts of the case, the penalty proceedings so initiated by the AO are bad in law and accordingly the penalties so initiated are ordered to be cancelled and the order/s of the learned CIT (A) are reversed. Thus, the legal ground raised is decided in favour of the assessee and is allowed.
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2018 (3) TMI 1572
Reopening of assessment - change of opinion - taxability of interest on fixed deposits with the societies - Held that:- On the issue of change of opinion it is apparent that Assessing Officer iin original assessment proceedings has not applied his mind to the taxability of interest on fixed deposits with the societies. Even otherwise it is a judicial decision which has been rendered by ITAT Hyderabad Bench based on which the reopening is initiated. Any judicial decision by the courts and tribunal if it is rendered subsequent to the passing of the Assessment order and if reopening is initiated of the concluded assessment, according to us, same cannot be called as change of opinion. In view of above facts we do not find any infirmity in the order of the ld CIT(A) in upholding the reopening of the assessment. In the result ground No. 1 of the appeal is dismissed. Addition on account of the interest income earned by the cooperative society Sirecila, Hyderabad on special reserve fund created and maintained by the society - Held that:- The above addition has been confirmed by the ld CIT(A) holding that decision of the coordinate bench binds him. Similar is the situation with us. If the assessee is agreed with the order of the ITAT Hyderabad Bench decision which has rendered certain findings, the assessee should have challenged the same before Hon'ble High Court. Apparently, it was not done. We have no authority to say anything on the correctness of that decision, it binds us judicially. Further, when on examination of the rules and the all other criteria related to the creation of special reserve fund and its control the coordinate bench has held that interest has accrued in the hands of the appellant. Before us except reiterating the same facts the ld AR has not produced any other evidence or any evidence of decision of the higher forum where the order of the coordinate bench is challenged by the assessee. In this circumstances we also respectfully following the decision of the coordinate bench based on which reopening has been initiated, we also confirm the addition Addition with respect to those societies whose confirmation of offering the interest income in the hands of those societies was finished by those societies - Held that:- In absence of those certificates the additions were confirmed. The ld Departmental Representative could not point out any infirmity in the order of ld CIT(A). We are also of the considered view when the income has been offered by those societies in their own hand it cannot be taxed in the hands of the assessee. In the result we do not find any merit in the appeal of the revenue hence, we dismiss all the three grounds of appeal. Addition u/s 14A - Held that:- AO is directed to restrict the disallowance u/s 14A to the extent of 0.5% of the average value of the investment as provided under Rule 8D. Accordingly, ground No. 1 of the appeal is partly allowed. Disallowance for provision of post retirement, medical expenses of the staff - addition holding that the liability of the assessee is contingent in nature - CIT(A) deleted addition holding that the claim for provision for post retirement medical benefit is an ascertain liability - Held that:- The post retirement medical benefit provision has been created by the assessee in accordance with accounting standard 15 relating to employees benefit. The above provision was made on actuarial valuation in accordance with the post retirement medical scheme. CIT(A) allowed the above claim holding that such provision is accrued liability and not contingent in nature. He relied upon the decision of the coordinate bench in Bokaro Power Supply Co. Ltd Vs. DCIT (2013 (1) TMI 782 - ITAT DELHI). Where the provision has been created on the basis of actuarial calculation on a scientific basis the liability is not contingent but definite. We do not find any infirmity in the order of the ld CIT(A) Taxability of interest income on special reserve funds - Held that:- We confirm the finding of the ld CIT(A) in deleting the above addition as assessee has produced proper confirmation with respect to the various societies who have offered the interest income on special reserve fund in their hands - Revenue appeal dismissed.
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2018 (3) TMI 1571
Validity of assessment against non existent company - company merged with another company - additions u/s 68 made towards share premium received by the assessee during the year under consideration as unexplained cash credits. - Held that:- The assessment made in the present case under section 143(3)/263/147/143(3) in the name of M/s. Lokseva Textrade Pvt. Ltd. on 25.03.2014 when the said company was not in existence having already merged / amalgamated with M/s. Param Mitra Investments Pvt. Ltd. with effect from 01.04.2013 as per the order of the Delhi High Court on 17.12.2013 is a nullity being bad in law and the same is liable to be cancelled. - Decided in favour of assessee
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2018 (3) TMI 1570
Disallowance of repair and maintenance expenditure - Held that:- When expenditure claimed by the assessee company on account of repair and maintenance disallowed on account of non-producing the vendors are held to be existed but CIT (A) has restricted the disallowance to 5% on the basis of doubt only and no addition can be made on the basis of suspicion. Disallowance of 5% made by the CIT (A) on the ground that still some doubt are there qua the existence of vendors is not sustainable in the eyes of law and hence ordered to be deleted. Disallowance of repair and maintenance expenditure paid to Chandra Singh Contractor and National Sanitation - revenue or capital expenditure - Held that:- CIT (A) has erred in confirming the disallowance of repair and maintenance expenditure paid to Chandra Singh Contractor and National Sanitation for AYs 2003-04 and 2005-06 as the expenditure are liable to be treated as revenue in nature as keeping the hotel rooms, floors, ceilings and its ambience in good condition would certainly lead to the increase of the revenue of hotel and it will also enhance its sale-ability and cannot be treated as capital expenditure of enduring nature. - Decided in favour of assessee No illegality or perversity in the deletion of the disallowance made by the CIT (A) by treating the same as expenditure incurred wholly and exclusively for the purpose of business on account of directors foreign travelling expenditure.
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2018 (3) TMI 1569
Addition made u/s. 43B - interest paid to financial institutions on loans - assessee argued that the company constructed the buildings to the Government of Andhra Pradesh on no profit and no loss basis and disallowance of any expenditure would result into income which the assessee has not derived from carrying on its operations - Held that:- In the assessee’s case, the entire amount of funds were received from Government of AndhraPradesh as interest free advance which utlised for construction of police housing and after completion of construction, the property is handed over to the Government of AndhraPradesh and the loan / advance interest gets adjusted towards cost of construction. The interest payment has to be received from the Government of Andhra Pradesh. Neither the income is accrued nor the assessee claimed the interest expenditure which remained unpaid. Hence, we hold that Section 43B not is applicable in assessee’s case. However it is not clear from the assessment order or the P&L account whether the assessee has claimed the interest due to financial institutions i.e ₹ 2,11,22,788/- in other income. Hence we remit the matter back to the file of the AO to examine whether the impugned expenditure is claimed in other income (other than income of interest from Govt. of AP as per schedule –L) or not and decide the issue as per merits. In case the assessee has not claimed the expenditure in other income the same is not to be disallowed u/s 43B. The assessee’s appeal on this ground is allowed for statistical purposes. TDS u/s 194C - Disallowance u/s. 40(a)(ia)- Held that:- The amount of the amount of ₹ 5,20,88,872/- was the amount of break up of expenditure incurred on contractors and TDS required to be deducted as on 31/03/2009. From page No.73 onwards the assessee has submitted the details of payments made and remittances made to government account before filing the return and balance remained was only ₹ 1,26,25,001/- for non deduction of tax at source. DR did not dispute the fact. Therefore, we do not find any justifiable reason for the enhancement made by the CIT(A). Hence the enhanced addition made by the CIT(A) is unsustainable and accordingly deleted. TDS u/s 194C - payment to contractor - Held that:- The assessee has submitted that neither it had made the payment nor credited the amount to the account of the contractor. Assessee also submitted that journal entries have been passed on 31st March only for the sake of showing the true and correct financial affairs and the same was reversed immediately in the beginning of the subsequent year. Further, assessee also in the subsequent year made the payments and the TDS was made on respective payments. Therefore, there is no loss to the Government. Since the assessee has neither made the payment nor credited the contractors account, there is no case for deduction for TDS tax at source u/s. 194C. Consequently, there is no case for deduction of TDS u/s 194C and does not attract the consequent disallowance u/s. 40(a)(ia) of the Act. Hence, the orders of the lower authorities are set a side and the appeal of assessee on this ground is allowed.
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2018 (3) TMI 1568
Reopening of assessment - disallowance of diesel expenditure - Held that:- AO in the assessment completed u./s 143(3) had disallowed 1/3rd of the total diesel expenditure for the reason that there was no confirmation from the tenant for incurring the diesel expenses. In the reassessment completed u/s 143(3) r.w.s. 147, 2/3rd of the diesel expenditure, which was allowed in the assessment completed u/s 143(3) of the I.T.Act, was disallowed. The assessee, on our directions, have now produced the confirmation of the tenant stating therein they have paid the rent minus the diesel expenses incurred by it. We notice that the crucial supplementary agreement dated 15.07.2008 was not produced before the A.O. Since, confirmation letter now produced before us and supplementary agreement was not before the A.O., in the interest of justice and equity, the matter needs to be examined afresh by the A.O. The A.O. shall dispose of the matter as expeditiously as possible, after affording a reasonable opportunity of hearing the assessee. - Decided in favour of revenue for statistical purposes.
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2018 (3) TMI 1567
Nature of expenditure - permit fee paid - revenue or capital expenditure - Held that:- When the business is established and is ready to commence business, then it can be said of that business that is already set up. The words “ready to commence” would not necessarily mean that all the integrated activities are fully carried out and/or wholly completed. This requirement is also complied with in this case where the assessee has already commenced business and it is going on and the impugned expenditure was incurred in connection with Vellayambalam project for getting approval from the Municipal Corporation and it cannot be said that the expenditure was incurred before the commencement of business or it cannot be disallowed on the pretext that the assessee has not offered income from Vellayambalam project in respect of which the expenditure was incurred. The impugned expenditure was incurred by the assessee after setting up of business and it is to be revenue expenditure. - Decided in favour of the assessee Disallowance being 1/5th of expenses relating to foreign travel as having incurred for personal purposes - Held that:- In this case though the assessee has claimed an expenditure towards foreign travel expenditure undertaken by the Directors the assessee has not produced details of the work carried out by the Directors at various countries. The assessee has only filed details of flight tickets in support of the claim of that expenditure. Unless the assessee submitted the details of the names of the clients or customers with whom the Directors held talks and the number of days spend therein, it is not possible to hold that the entire expenditure claimed by the assessee is wholly and exclusively for the purpose of the business of the assessee. It was necessary for the assessee to furnish details of the work carried out by the Directors at abroad in connection with the business of the assessee. Hence, the Assessing Officer is justified in disallowing a part of the expenditure as personal in nature. - Decided against assessee.
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2018 (3) TMI 1566
Liability for tax deduction u/s. 192 - assessee in default u/s. 201 and 201(1) - contribution to the PF Fund - Held that:- An identical issue was considered by the Tribunal in the case of Kodakkad Service Co-operative Bank Ltd. vs. Income Tax Officer(TDS) (2017 (3) TMI 579 - ITAT COCHIN) wherein it was held that the contribution to the PF Fund that was not recognized by the Chief Commissioner or Commissioner in accordance with the rules contained in the Part A of the Fourth Schedule or under a scheme framed under the Employees Provident Fund Act, 1952, is not entitled to deduction u/s. 80C of the Act. It was further held by the Tribunal that the interest accrued to the assessee on the contributions to such unrecognized PF was also liable for tax deduction u/s. 192. Thus we hold that the CIT(A) is justified in confirming the orders passed u/s. 201 and 201(1) of the I.T. Act. - Decided against assessee.
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2018 (3) TMI 1565
Determination of arm’s length price under section 92C - comparability analysis - Held that:- Once there is functional comparability keeping into consideration the assets employed and risks, then exclusion of some companies whose functions are broadly similar on the ground that it was loss making, cannot be sustained. We are therefore of the view that the two companies excluded by the TPO from the list of comparable companies on the ground that they were making loss that too at the net level, cannot be sustained. CIT(A) in our view erred in confirming the action of the TPO. The special bench ITAT Chandigarh in the quark systems (P) Ltd.[2009 (10) TMI 591 - ITAT, CHANDIGARH] has taken a view that merely because a comparable is making loss, it cannot be excluded from the list of comparable companies for the purpose of computation of arm’s length price. The other decision cited by the Assessee before the CIT(A) also supports the same view. We direct the TPO to include the aforesaid two loss making companies also in the list of final comparable companies. If the two companies are included then the price of the disputed international transaction carried out by the Assessee is within the (+) (-) 5% range difference permitted by the 2nd proviso to Sec.92CA(2) of the Act. Therefore addition on account of adjustment to ALP should be deleted.
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2018 (3) TMI 1564
Revision u/s 263 - omission to carry out the stated adjustment in the Book profits for FBT as envisaged by Ld. CIT has made the quantum order erroneous and prejudicial to the interest of the revenue - Held that:- Taxes borne by the assessee on non-monetary perquisites provided to employees forms part of Employee Benefit cost and akin to Fringe Benefit Tax since they are certainly not below the line items since the same are expressively disallowed u/s 40(a)(v) and the same do not constitute Income Tax for the assessee in terms of Explanation-2. See ITO Vs. Vintage Distillers Ltd. [2010 (1) TMI 56 - ITAT DELHI-H] where the Tribunal has taken the view that the term ‘tax’ was much wider term than the term ‘Income Tax’ since the former, as per amended definition of ‘tax’ as provided in Section 2(43) included not only Income Tax but also Super Tax & Fringe Benefit Tax. Therefore, without there being any corresponding amendment in the definition of Income Tax as provided in Explanation-2 to Section 115JB, Fringe Benefit Tax was not required to be added back while arriving at Book Profits u/s 115JB. The adjustment of impugned item as suggested by Ld. CIT was not legally tenable in law which leads us to inevitable conclusion that the omission to carry out the said adjustment did not result into any loss of revenue. Therefore, one of the prime condition viz. prejudicial to interest of revenue to invoke the revisional jurisdiction under the provisions of Section 263 has remained unfulfilled in the present case - Decided in favour of assessee
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2018 (3) TMI 1563
TPA - Comparability analysis criteria - Held that:- Companies non comparable with captive services provider and providing simply IT enabled services need to be deleted from final list of comparability. Working capital adjustment - Held that:- We direct the TPO/AO that no separate adjustment on account of receivables are required after considering the working capital adjustment. Accordingly, the appeal for the Assessment Year 2012-13 is treated as allowed.
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2018 (3) TMI 1562
Eligibility for deduction u/s 80P - interest income on deposits with non co-operative banks - Held that:- It is not surplus funds which has been deposited by the assessee. On the other hand, the assessee is statutorily required to deposit 25% of its profits in reserve funds, which in turn, have to be parked in FDRs with Co-operative Bank or Scheduled Banking company. The assessee before us, in line with statutory obligation of maintaining its status of Co-operative society and as per the regulations of Maharashtra State Co-operative Societies Act, was duty bound to transfer 25% of its profits to reserve funds, which it has done. There is no dispute to the same. The second aspect is the utilization of funds in reserve funds by way of making FDRs with Scheduled bank under section 70 of the said Act. The assessee has received permission of the Registrar of Maharashtra Co-operative Societies Act to make such investment with Bank of Maharashtra and also in order to carry on the business activities of providing credit facilities to its employees, it is mandatory upon the assessee to invest 25% of its profits in the reserve funds, which in turn, are parked in FDRs with Bank of Maharashtra, then interest income earned by the assessee is from carrying on its business activities. Once it is so, then the said income is assessable as ‘Income from business’ and the assessee is entitled to claim deduction under section 80P(2)(a)(i) of the Act. Accordingly, we hold so. However, the assessee is not entitled to claim the said deduction on Saving Account interest. We uphold the order of CIT(A) in directing the Assessing Officer to allow eligible deduction under section 80P(2)(a)(i) of the Act on the interest income earned on FDRs of Bank of Maharashtra.
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Customs
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2018 (3) TMI 1561
Suspension of CHA Licence - Regulation 19 of CBLR, 2013 - Time limitation - Held that: - Regulation requires the Commissioner of Customs to issue notice in writing to the broker within a period of 90 days from the date of receipt of an offence report and the Regulation does not contain any further provision in the event of its non compliance - Therefore, we are not persuaded to think that the 90 days' period prescribed in Regulation 19(1) is one of limitation, as contended by the learned Counsel for the appellant, rendering further proceedings under the Regulation invalid. Appeal dismissed - decided against appellant.
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2018 (3) TMI 1560
Redemption of goods - violation of H&OW Rules, 2016 - import of Multi Function Devices being Digital Photocopiers and Printers - whether the imported goods would come under the definition of “waste” as per the H&OW Rules, 2016? Whether Rule 15 of the H&OW rules is attracted? - Held that: - the deeming fiction does not exclude the ordinary transactions which would come within the ambit of a “sale or purchase of goods”. Just as each sub-clause therein acts independently, so does the sub-clauses and sub-rules in Rule 15 of the H&OW Rules. An illegality simply defined, is something done in contravention of and against law. Any import which is carried out flouting the laws is an illegality, within which ambit is also taken the four instances as specified in Rule 15, by a deeming fiction. We would also notice that sub-clause (iv) also takes in any deliberate dumping of hazardous or other wastes in contravention of Basel Convention, and general principles of international and domestic law. When even violation of the general principles of law are deemed to be illegal, it cannot be said that violation of enacted laws are not illegal. What we have to see is whether there was any illegality attracting the rigor of re-export. There were defects noticed and it was reported that there should be some repair carried out to make it functional - The damages or defects noticed would not result in completely compromising their functionality according to the approved agency. The certifying agency appointed by the Department certified that the machines could be used for more than five years. We do not find any reason to find that the import is of machines which are not functional as provided under the H&OW Rules. The imported goods are “other wastes” which have a potential of becoming an e-waste after its functionality expires till which time it can be used. Redemption of goods - Held that: - The importers do not even have a case that they had applied for one. They assert that the DGFT refuses to issue such an authorisation and in such circumstance, considering the requirement of MFD's, which is even evident from the policy of the Central Government, they have been importing the same and getting release of the goods on payment of redemption fine. We cannot countenance such a contention but the fact remains that even in the teeth of the violation alleged the goods can be redeemed. As far as the violation of FTP is concerned we answer the question in favour of the importer in so far as the release of the goods since there is a redemption possible by the Adjudicating Authority under the Foreign Trade Act, who has not even been apprised of the violation. Admittedly the goods were imported without an authorisation from the DGFT, which was an essential requirement as per the FTP. In the present case, the Commissioner has thought it fit to impose 20% of the value as redemption fine, obviously without looking into the Foreign Trade Act. The Tribunal reduced it to 10%. We would not interfere with that, since the appeal to the Tribunal was only by the importer. The penalty imposed under Section 114AA has been deleted by the Tribunal, which, we find, to be proper. There cannot be any allegation of false or incorrect material, statement or declaration having been produced - The penalty under Section 112 (a) sustained by the Tribunal cannot also be interfered with. Appeal allowed in part.
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2018 (3) TMI 1559
Suspension of CHA License - time limitation of proceedings - Regulation 19 of Regulations, 2013 - Held that: - by virtue of the non-obstante clause contained under Regulation 19, the proceedings under Regulations 18 and 19 will have to be treated separately and distinctly. However, the proviso to Regulation 19(2) makes it clear that, whenever the Commissioner of Customs passes an order for continuing the suspension, the further procedure thereafter shall be as provided in Regulation 20. The proceedings initiated and completed by respondent under Regulation 19 cannot be said to be bad or illegal. The allegation with respect to limitation to proceed under Regulation 20 is premature at this stage of the proceedings. Petition dismissed - decided against petitioner.
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2018 (3) TMI 1558
Provisional release of goods - quantum of bond and bank guarantee - duty free import - DFIA scheme - import of Maize Corn - Held that: - the issue relates to provisional release of the goods. The appellant, reserving its right to contest the Revenue's stand, is seeking provisional release of the goods inasmuch as the demurrage has gone very high - it is not justified to direct the appellant, at this stage, to deposit the entire ₹ 17 lakhs - appeal allowed.
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2018 (3) TMI 1557
Valuation - rejection of declared value - rule 7 of the Customs Valuation Rules, 2007 - Held that: - the Commissioner (Appeals) has not given final finding in the matter and has remanded the matter to the lower authority with certain directions to enquire the matter from the supplier’s end. No infirmity can be found in the said direction of the commissioner (Appeal), thus justifying interference in the same - appeal dismissed - decided against Revenue.
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2018 (3) TMI 1556
Benefit of N/N. 52/2003-Cus. dated 31.3.2003 - denial of exemption on the ground that the re-import had taken place after the stipulated time period of one year - Held that: - reliance placed in the case of KAR MOBILES LTD. Versus COMMISSIONER OF CUS., BANGALORE [2006 (5) TMI 362 - CESTAT, BANGALORE], where reliance placed in Board’s circular No.60/99 wherein the limitation of one year for re-import of the goods was relaxed - benefit cannot be denied on time limitation - appeal dismissed - decided against Revenue.
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2018 (3) TMI 1555
Smuggling - Mis-declaration of Confectionery goods - illegal export - N/N. 35/2008-Custom (NT) dated 02.04.2008 - Held that: - it is observed by the Adjudicating authority that they had sold the bulk quantity of Phensedyl Cough Linctus to the unscrupulous persons who had diverted the same through the smuggling channel and the Distributors had prepared the fictitious/bogus Sales details to cover up their involvement in the instant act of smuggling - the appellant's herein are acting on behalf of the Syndicate of smuggling of Phensedyl Cough Linctus. Demand upheld - Appeal dismissed - decided against appellant.
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2018 (3) TMI 1554
Smuggling - gold biscuits of foreign origin - case of appellant is that the gold purchased was imported by the supplier and for the business convenience, the same was transported again from Imphal to Kolkata after melting, to meet the demands of festival - appellant also claims that gold which was seized was not carrying any foreign origin mark - Held that: - the appellants have failed to establish that the goods found in their possession were not smuggled goods. Hence, they have failed to dislodge the presumption in terms of Section 123 of the Customs Act, 1962. There is no reason to interfere with the conclusion of the Adjudicating Authority that the seized gold biscuits are liable for confiscation under Section 111 of the Customs Act, 1962 - the penalties imposed on the persons who have actively participated in the act of smuggling gold are justified and hence upheld. Penalty on Sri Sashikanta Shinde and Sri Ajit Shinde, Dirctors and Sri Anand Kr. Agarwal, Accountant of M/s. Magna Projects - Held that: - By issuing duplicate invoices, the following persons-Sri Sashikanta Shinde and Sri Ajit Shinde, Dirctors and Sri Anand Kr. Agarwal, Accountant of M/s. Magna Projects have abeted smuggling and therefore, the penalties imposed on them are fully justified - penalty upheld. Appeal dismissed - decided against appellant.
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Corporate Laws
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2018 (3) TMI 1553
Inquiry into certain agreements and dominant position of enterprise - Procedure for scrutiny of information or reference - Opinion on existence of prima facie case - whether the writ petition is maintainable against the order made under Section 26(1) since there is no appealable remedy available under the said Act? - Held that:- The direction issued under Section 26(1) is a direction simpliciter and an administrative direction without entering upon any adjudicatory process; that it does not effectively determine any right or obligation of the parties to the lis; that mere investigation does not entile civil consequences for any person; that such direction is at the preliminary stage and of preparatory in nature without recording the findings which will bind the parties; that the function of the Commission to form an opinion under Section 26(1) is in a inquisitorial and regulatory power and therefore, the same is neither civil nor criminal but sui generis; that the jurisdiction of the Commission to act under Section 26(1) does not contemplate any adjudicatory function. Therefore, it is to be noted that the order passed under Section 26(1) itself does not give rise to a cause of action to subject the same to judicial interference, as the very challenge by way of statutory appeal against such order itself is barred under Section 53A, since such order does not result in civil consequences. When the very order passed under Section 26(1) is not appealable and the merits of the said order also cannot be questioned before this Court under Article 226, since it is administrative in nature, not deciding the rights of the parties in any manner and on the other hand, it is only in the form of preparatory, that too, at the preliminary stage, the petitioner and the supporting respondents are not entitled to question the said order by disputing or questioning the very reference made under Section 19(1)(b). What they cannot achieve directly, cannot be achieved indirectly by raising a ground against the reference made under Section 19(1)(b). Moreover, it is to be noted that both the reference and information got merged with the direction issued under Section 26(1) and therefore, such reference even assuming to be a defective one, cannot be segregated independently from the order passed under Section 26(1) and decide about its validity, more particularly, when the resultant order under Section 26(1) itself cannot be questioned as it does not result in civil consequences. Thus, it does not give any cause of action for the parties to challenge. In this case, admittedly, during the pendency of this writ petition, the investigation has already been completed and all the parties have taken part in the investigation. It is also stated that the report of the investigating officer was submitted before the Commission and all the parties have taken part in the proceedings before the Commission and have advanced their arguments. Therefore, the final order alone is to be passed by the Commission. When such being the factual position, it is for the parties to face the order and thereafter to work out their remedy, if the order goes against them. The present writ petition is liable to be dismissed and accordingly, the same is dismissed
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Service Tax
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2018 (3) TMI 1552
Refund claim - exports of iron ore fines - denial on the ground that the services were not received by the exporter M/s.Emars Mining & Construction Pvt.Ltd. because the GTA Bills were not issued in their favor - Held that: - That from the certificate given on all the original invoices or bills, it is observed that the said claimant has received and used the specified services for export of the said goods by mentioning specified shipping bill number as well as taxable specified services - the refund appears eligible for sanction stands as ₹ 37,09,530/- - the order of the adjudicating authority is restored - appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (3) TMI 1551
Principles of Natural Justice - ex-parte order - The Tribunal specifically queried but the appellant did not reply as to why the show cause notice was not responded to or why there was absence for personal hearing; both of which were admitted - Held that: - in the instant case the assessee cannot be termed to have acted with diligence. The assessee did not respond to the show-cause, failed to appear for personal hearing and challenged the order on grounds of ignorance of law. Then when the Tribunal allowed fresh consideration on terms, the condition imposed was not complied. There are no unreasonableness, in the condition imposed. There is no sufficient cause to condone the delay or interfere with the order passed - appeal dismissed.
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2018 (3) TMI 1550
Compounded levy scheme - Rule 9 of the Chewing Tobacco & Unmanufactured Tobacco Packing Machines (Capacity Determination & Collection of Duty) Rules, 2010 - Held that: - the appellant was a registered dealer under the Central Excise Department, manufacturing and packing unmanufactured tobacco from registered premises. The said registered premises, was admittedly washed away during the month of June, 2011 due to heavy rain. The rejection of documentary evidence regarding purchase of the FFS machine is erroneous, as firstly the statement of Shri Beni Prashad Sharma is vague and secondly he has admitted that the said receipt No.299 is out of his bill book. Further oral evidence of Shri Beni Prashad Sharma have got no evidentiary value, as he was neither examined in the adjudication proceedings and the same is hit by Section 9D of the Central Excise Act - the appellant is liable to pay Central Excise duty on pro-rata basis only for two days for having started production on the FPS machine from 29/06/2011 for the month of June, 2011. Penalty - Held that: - the seized FFS Machine and finished products (BCT) have been destroyed in the custody of the Department and thus the appellant had already suffered substantial loss - penalty upheld. Confiscation - redemption fine - penalty - Held that: - the confiscation of vehicle -Maruti Eco bearing Registration No.UP41 N0892, is upheld but in the interest of justice the redemption fine is reduced to ₹ 15,000/- - penalty imposed on Shri Mohammad Faheem under Rule 26 of the Central Excise Rules, 2002, is also reduced to ₹ 5,000/-. Appeal allowed in part.
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2018 (3) TMI 1549
Valuation - clearance to sister unit - extended period of limitation - Revenue entertained a view that inasmuch as in April 98, the clearance was on the higher side, the assessable value for the succeeding months has also to be adopted on the higher price - Held that: - there is no dispute that the entire 100% clearance was to their own sister unit who was availing MODVAT credit of duty paid by the present appellant - the entire exercise was revenue neutral in which case the malafide cannot be attributed to appellant - extended period of limitation not invokable - appeal allowed - decided in favor of appellant.
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2018 (3) TMI 1548
Interest - penalty - CENVAT credit - duty paying documents - GAR-7 challan - It was observed that no bills (for provisions made of the import of services) were received nor any payments were effected for the said services till the date of audit - contravention of Rule 7 of Point of Taxation Rules, 2011 read with Rule 4(7) of the CENVAT Credit Rules, 2004 - Held that: - Admittedly the credit availed by the assessee was lying in their accounts only without being utilised. In such a scenario, the confirmation of interest or imposition of penalty is not justified - appeal dismissed - decided against Revenue.
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2018 (3) TMI 1547
CENVAT credit - Cement - Whether on Cement and Steel items used for foundation for installation of machinery, which is embedded to earth, the assessee is entitled to avail Cenvat Credit on steel items in terms of Rule 2(k)/2(a) of the Cenvat Credit Rules, 2004, or not? - Held that: - no Chapter of the Central Excise Tariff Act, 1985 (CETA) has been prescribed for the components, spares and accessories for consideration as capital goods. Thus, it is evident that irrespective of the classification of components, spares and accessories, when those are fitted to the machines/machineries of the above eligible Chapters, the same should also be considered as capital goods for availment of Cenvat Credit of Central Excise duty paid thereon. It is no doubt a fact that the above machineries without its proper installation, will not be functional to the satisfaction level, in order to achieve the desired objective. Thus, applying the 'user test' the Hon'ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA] held that even though steel plates and M.S. Channels are used in fabrication of Chimney, would fall within the ambit of 'capital goods'. The eligibility to duty credit of the disputed good cannot be denied. Such eligibility either as ‘capital goods’ (accessories) or as ‘inputs’ has been examined and upheld by various decisions - reference allowed - decided in favor of appellant.
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2018 (3) TMI 1546
Closure of proceedings - Section 11 AC (d) of CEA - whether the appellant is entitled to benefit of the provisions of amended Section 11AC of Central Excise Act, 1944, as amended vide Finance Act, 2015, which was passed on 14-15/05/2015? - Held that: - the provision of Section 11AC are very clear and there is no ambiguity. The second proviso for conclusion of all proceedings comprised in a show cause notice, if duty, interest and penalty as prescribed are paid within the stipulated period of 30 days from the date of communication of the show cause notice - there is no merit in Revenue's appeal - appeal dismissed - decided against Revenue.
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2018 (3) TMI 1545
Compliance with pre-deposit - delay in making pre-deposit - Appellants, being a sick unit, come under the jurisdiction of BIFR where they have moved an application before the BIFR regarding the pre-deposit of 25% - case of appellant is that once the MDRS has been sanctioned by BIFR, they were no more obliged to deposit the amount separately as per the order of the CESTAT - Held that: - the assessee-Appellants were asked by the Tribunal to make the pre-deposit of 25% of the penalty amount, but they went to the BIFR. No cash/credit was available with them to comply with the directions of the Tribunal. Presently, more than 25% deposit has already been made, though belatedly. In the circumstances, the delay in making the pre-deposit is condoned. Appeal is restored to its original number.
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2018 (3) TMI 1544
Delay in making deposit of pre-deposit - Held that: - it appears that in the instant case there is a delay of more than 22 years which is extraordinary and the Tribunal has no power to condone this extraordinary delay - the application for condonation of Delay in filing the restoration application is rejected - decided against appellant.
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2018 (3) TMI 1543
Refund claim - input services - renting of immovable property service - insurance service - outward octroi - Customs House Agent charges - Xerox machine and printing machine - appellant filed a refund claim on the ground that they are eligible for cenvat credit in respect of the services - Held that: - appellant have paid the interest and penalty and requested for waiver of SCN. This act of the appellant closed the entire proceedings. Thereafter, neither the department can issue any SCN nor the assessee can change their stand for the reason that the department has no opportunity to issue any further SCN. In the present case, the appellant has opted for the provision of Section 11A(6) (7). Therefore the proceedings stand concluded and no grievance can be raised on behalf of either side. Appeal dismissed - decided against appellant.
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2018 (3) TMI 1542
CENVAT credit - input - welding electrodes - welding electrodes admittedly used in repair of plant & machinery of boiling house, pan, crystallizer, mill house machinery etc. being capital goods which are further used for manufacture of excisable goods - Held that: - appellant are entitled for credit availed by them on welding electrodes which are used by them for fabrication and repair and maintenance of their capital goods - appeal allowed - decided in favor of appellant.
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2018 (3) TMI 1541
SSI exemption - clubbing of clearances - dummy unit - Held that: - Admittedly the two units were separately registered with the other statutory authorities and were showing separate clearances of their final product - Merely because the partner of two units happen to be the same, by itself, is not sufficient to establish that one unit is dummy of another - appeal dismissed - decided against Revenue.
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2018 (3) TMI 1540
SSI Exemption - use of brand name - Revenue entertained a view that as the appellant used the brand name of LIC they were not entitled to avail the SSI notification benefits - Held that: - the definition of brand name is not satisfied and the provision of clause 4 of the notification would not apply - Such dairies are being manufactured by the appellant under the job work on orders of LIC which were meant to be used as gifts by LIC and it cannot be said that the appellant has manufactured the same with the brand name of another person. Time Limitation - Held that: - the demand is hit by time bar inasmuch as the fact of appellant having manufactured dairies was disclosed to the Revenue well in advance. Appeal allowed - decided in favor of appellant.
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2018 (3) TMI 1539
Refund/Abatement claim - sealing of machinery - non-production of the notified goods - Held that: - the Superintendent of Central Excise uninstalled and sealed the FFS machine on 30.08.2016. There was no production of notified goods in their factory premises from 30.08.2016 to 14.09.2016 i.e. continuous period of 15 days - there is no reason to deny the benefit of abatement - appeal allowed - decided in favor of appellant.
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2018 (3) TMI 1538
CENVAT credit - time limitation - It is alleged in the show-cause notice that the closing balances of inputs lying in stock after physical verification were reduced to the extent of the quantity found short - Held that: - It is seen that the lower authorities have not examined the issue of limitation. Hence, it is required to be examined by the lower authorities - appeal allowed by way of remand.
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2018 (3) TMI 1537
Valuation - transfer from one unit to another - Department has taken the stand that valuation as per CAS-4 Standards cannot be adopted for earlier period - Held that: - the Apex Court in the case of Cadbury s [2006 (8) TMI 2 - SUPREME COURT OF INDIA] has held that such principles can be adopted even for the earlier period - valuation determined on the basis of CAS-4 standards, adopted by the appellant for payment of duty for this period, is in order and demand made in the impugned order for differential duty cannot be sustained and is set aside - demand set aside. Valuation - margin of profit - impugned order holds that the profit margin is required to be adopted - Held that: - reliance placed in the case of CCE, AURANGABAD Versus RAYMONDS LTD. [2006 (10) TMI 7 - SUPREME COURT OF INDIA], where it was held that Cost of production will have to be determined based on the actual cost of production at the factory of production alone and not the cost of production of textile units - demand upheld. Appeal allowed in part.
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2018 (3) TMI 1536
Clandestine manufacture and removal - evidence - Held that: - It is also observed that the entire proceedings were initiated on the basis of assumptions and presumptions - Revenue had not placed any concrete evidence in support of their contention - Appeal dismissed - decided against Revenue.
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2018 (3) TMI 1535
Refund claim of excess duty paid - valuation of physician samples - Circular No.813/10/2005-CX dt.25th April, 2005 - Held that: - it is evident that during the period under consideration, the value will have to be made under Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The same was done in the instant case - refund rightly rejected - appeal dismissed - decided against Appellant.
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CST, VAT & Sales Tax
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2018 (3) TMI 1534
Input tax credit - Odisha VAT Act, 2004 - whether the opposite party no.2, who on finding discrepancies in the VAT returns had recommended further investigation and wanted submission of detailed enquiry report/evasion report, was competent to assess the petitioner under Section 43 of “the Odisha VAT Act”? Held that: - It is well settled that the principles of natural justice demand that nobody shall be a judge of his own cause. It is equally well settled that justice should not only be done but also should be manifestly be seen to have been done. In the present case, the undisputed facts show that the officer at whose instance further investigation was initiated on the basis of his prima facie finding relating to huge mismatch and excess claim of inputs tax credit by the petitioner, has himself conducted the assessment resulting in issuance of impugned assessment order under Annexure-1 and consequential demand notice under Annexure-2 - the reasonable likelihood of bias cannot be ruled out. The competent authority is directed to re-assess the assesse and complete the reassessment, preferably, within a period of eight weeks from today - Application disposed off.
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2018 (3) TMI 1533
Principles of Natural Justice - Revision of assessment - purchase of H.O.T Crane - suppression of facts - it is pleaded, the respondent being a quasi judicial authority ought to have given reasonable time before proceeding on the basis of the inspection report based on which the original notice was issued - Held that: - while the respondent had issued the pre-assessment notices on the basis of the inspection report of the enforcement wing, no prejudice would have been caused had the respondents offered an opportunity of personal hearing to the petitioner to come and explains their case before passing final orders under Section 27 of the Act. The problem had occurred in the present case only for a simple reason that the respondent failed to hear the petitioner. Division Bench of this Court in Madras Granite (P) Limited Vs Commercial Tax Officer, Arisipalayam Circle, Salem and Another reported in 146 (1) STC 642 [2002 (10) TMI 767 - MADRAS HIGH COURT] has held that It is well-settled that the assessing officer is a quasi-judicial authority and in exercising his quasi-judicial function of completing the assessment, he is not bound by the instructions or directions of the higher authorities. Finding that the respondents miserably failed to follow the mandatory provisions under Section 27(1) and 27(2)of the Act, the impugned assessment orders are unsustainable in law - impugned order set aside - petition allowed.
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2018 (3) TMI 1532
Whether in the facts and circumstances of the case, the Haryana Tax Tribunal was right in confirming dismissal of appeal by the first appellate authority in default when the first appellate authority itself entertained the appeal after the compliance of the order of the Tribunal by paying first instalment and filing of Bank Guarantee for the rest of the amount? Held that: - Admittedly, the appellant has now deposited all the installments. Since there was a delay in depositing the installments, the appellant had also paid interest amounting to ₹ 10,72,500/- on 8.8.2017. The matter is remanded to the JETC(A) to decide the appeal on merits.
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