Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 21, 2016
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Bombay Stock Exchange is not a statutory body and any penalties or fines paid as the case may be under regulations and bye-laws can be considered as regulations for controlling the internal obligations - penalties paid allowed as expense u/s 37(1) - AT
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Bombay Stock Exchange towards broker contingency fund and admission fees are capital in nature. - AT
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Compensation received by the assessee is for the loss of earnings only it is revenue receipt exigible to tax and not a capital receipt - AT
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Adoption of fair market value as on 01. 04. 1981 for the property inherited by the assessee from his father is correct - AT
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Penalty u/s 271AAA - There should be some undisclosed income in the form of money, bullion etc or any entry in the books of account or other documents and the same should be found in the course of search for levy of penalty - levy of penalty is not automatic - AT
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STCL on STT paid transactions to be set off against the STCG on non-STT paid transactions allowed - AT
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Building which is constructed solely for the manufacturing of medicine is a 'plant' and is entitled to higher depreciation at the rate of 25% - HC
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Charge of interest under Section 158 BFA (1) of the Income Tax Act, 1961 were automatic and the same were leviable from the date of service of the first notice - HC
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Commercial activity of any charitable trust will not be subject to tax if along with commercial activities it is engaged in providing relief of the poor, education, medical relief. - AT
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MTM losses in respect of forward foreign exchange contract debited to the profit and loss account are allowable - AT
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Unascertained liability cannot be excluded in the provision of gratuity for the computation of book profit under section 115JB - HC
Customs
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Appropriate course for release of confiscated goods is to furnish a bank guarantee for the entire amount of redemption fine and penalty - HC
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In the absence of any prima facie finding indicating the role of appellant in various frauds, suspension of Customs broker license will be harsh and unjustified - AT
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Condonation of delay in filing an appeal - Order in original was supplied to authorized person - There is no provision in Customs Act to order appellant to appoint any person as his authorized person - AT
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Import of inbuilt machine - Right of claim to the Notification No. 6/02-CE dated 01.03.2002 benefit is not allowed when declaration found to be false - AT
FEMA
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Department could be taken to be an aggrieved person and that the right of appeal under Section 19 of the Foreign Exchange Management Act, 1999 is conferred upon any aggrieved person - HC
Wealth-tax
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Notice issued to a person who is not in existence at the time of issuance of such notice renders such initiation invalid.- AT
Service Tax
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VCES declaration - Only due to arithmetical error that there is mistake in declaring the actual dues. It is also found that the appellant have paid the entire amount of correct dues along with interest before the last date. Therefore, no reason found why the VCES declaration should not be accepted - AT
VAT
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Partnership firm consists of two women partners - If purposive interpretation is made to the word 'a dealer being a woman’, it should mean that "a dealer being a woman’ would also include ‘women’ - HC
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Classification - Pet coke used in the manufacture of cement, during the course of the manufacturing process gives rise to an exothermic reaction and forms one of the ingredients of cement by losing its identity to be considered as raw material and not fuel - HC
Case Laws:
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Income Tax
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2016 (4) TMI 714
MAT computation - whether Tribunal was justified not appreciating the undisputed fact that the unascertained liability cannot be excluded in the provision of gratuity for the computation of book profit under section 115JB? - Held that:- The controversy involved in the present case stands concluded by a decision of this court in the case of Deputy Commissioner of Income Tax v. Inox Leisure Limited, (2013 (2) TMI 353 - GUJARAT HIGH COURT ) in favour of the assessee and against the revenue
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2016 (4) TMI 713
Higher depreciation at the rate of 25% on factory building - Held that:- In the order of assessment for the year 1997-1998, the Assessing Officer has recorded the following finding that as have gone through the maps and photographs and also functional use of the building and decisions. Considering all these facts and circumstances there is no doubt that the factory building is plant of the assessee. It qualifies for depreciation @ 25%. The said stand of the assessee was accepted in the subsequent Assessment Year 1998-1999. Though the said order was interfered with by the Commissioner of Income-tax while exercising the jurisdiction under Section 263 of the Income-tax Act, 1961, but such order has since been set aside by the Tribunal in its order dated 18.12.2002. Since the order of the Commissioner of Income-tax has been set aside, the order of the Assessing Officer becomes operative. Therefore, keeping in view the finding of the Assessing Officer for the previous two years and applying the functional test, we find that the building which is constructed solely for the manufacturing of medicine is a 'plant' and is entitled to higher depreciation at the rate of 25%. Thus, the question of law is answered in the affirmative in favour of the assessee and against the revenue.
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2016 (4) TMI 712
Charge of interest under Section 158 BFA (1) - Tribunal held that charge of interest under Section 158 BFA (1) were automatic and the same were leviable from the date of service of the first notice without an effective and proper communication of the order under Section 127 of the Act transferring jurisdiction from one Officer to the another - Held that:- The facts which are not in dispute are that notice under section 158BC of the Income Tax Act was issued on 24.12.2002 which was received by assessees on 04.01.2003. However, the assessees filed their return on 16.07.2004. The assessing officer calculated interest for the period starting from December, 2002 till the date of filing of the return. It is not disputed that the notice dated 23/ 24.12.2002 was issued by the transferee officer. It is only the order under Section 127 of the Act which was served on the appellants in September, 2003. The appellants were bound to comply with the notice and file their return and failure to file the return would attract interest under Section 158 BFA. - Decided in favour of the revenue.
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2016 (4) TMI 711
Penalty u/s 271AAA - Held that:- There should be some undisclosed income in the form of money, bullion etc or any entry in the books of account or other documents and the same should be found in the course of search. It is undisputed that nothing incriminating was found during the course of search by the search party with regard to the aspect of share capital and loans which were ultimately offered to tax by the assessee in the sum of ₹ 1.75 crores. Hence it goes to prove beyond doubt that the offer of undisclosed income of ₹ 1.75 crores was made voluntarily by the assessee without any detection by the department and accordingly the argument of the Learned DR that but for the search, this income would not have been offered does not hold any water and deserves to be dismissed. It is already well settled that though the income is not disclosed in the return filed u/s 139(1) of the Act, but duly disclosed in the petition filed u/s 132(4) of the Act followed by the filing of return in response to section 153A of the Act and taxes paid thereon, then the assessee would not be invited with the levy of penalty. We find that if the argument of the Learned DR that since the assessee had not offered the said income in return filed u/s 139(1) of the Act thereby levy of penalty is in order is to be accepted, then it would make the immunity provisions contemplated u/s 271AAA(2) of the Act redundant. The legislature in its wisdom had given a thoughtful consideration on the facts and circumstances under which the assessee would not be invited with the levy of penalty pursuant to the search subject to fulfillment of certain conditions stipulated in the said section . Hence in view of the above, we hold that the levy of penalty is not automatic and assessee is clearly entitled for immunity from levy of penalty. - Decided in favour of assessee
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2016 (4) TMI 710
Admission fees - nature of income - Held that:- Bombay Stock Exchange towards broker contingency fund and admission fees are capital in nature. Payment in the nature of penalty in terms of section 37 - Held that:- The assessee paid penalty for various defaults Bombay Stock Exchange like that of National Stock Exchange conducting their business control under SEBI during the course of its business transactions, therefore, we are of the opinion that the Bombay Stock Exchange is not a statutory body and any penalties or fines paid as the case may be under regulations and bye-laws can be considered as regulations for controlling the internal obligations and therefore the penalty charges cannot be said to be for infringement of any law. In the present case also the assessee paid penalty for various defaults during the course of business transactions.
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2016 (4) TMI 709
Sale of tenancy right of a property - FMV adoption - Held that:- As decided in Mina Deogun (2015 (5) TMI 10 - CALCUTTA HIGH COURT ). Since the assessee, in the present case, is held liable for long-term capital gains tax by treating the period for which the capital asset in question was held by the previous owner as the period for which the said asset was held by the assessee, the indexed cost of acquisition has also to be determined on the very same basis. In the case of Raja Malwinder Singh (2011 (1) TMI 775 - PUNAJB AND HARYANA HIGH COURT ) has held that even in a case where the cost of acquisition cannot be ascertained, section 55(3) of the Act statutorily prescribes the cost to be equal to the market value on the date of acquisition, that this being the position, capital gains are not excluded even on the plea that the value of the asset in respect of which capital gains are to be charged was incapable of being ascertained, that the view based on the assumption that where the market value cannot be ascertained, capital gains cannot be applied, is not correct being against the statutory scheme, that if the market value can be ascertained, it has to be taken to be equal thereto and if the value cannot be ascertained, it has to be equal to the market value on a specified date at the option of the assessee. Now, coming back to the facts of the case, we find that the FAA had adopted the fair market value as on 01. 04. 1981 for the property inherited by the assessee from his father which is correct - Decided against revenue
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2016 (4) TMI 708
Entitlement to exemption u/s 11(4A) - Held that:- A perusal of the chart shows that against a gross revenue of ₹ 5,36,87,019/-, the assessee has expended a sum of ₹ 4,942,490/- and the net surplus comes to ₹ 42,62,079/- which is only 7.93% of the gross receipts. It is also seen that the assessee has incurred deficits in its Guest House at Delhi, Day Care Centre at Dehradun and Senior Citizens Accommodation at Dehradun which had to be funded from the surplus at other projects. Hence, it can be logically inferred that the surplus earned is only incidental to the charitable activities. Also, there is no finding by the AO about any diversion of funds for the individual benefit of any member of the association or for the benefit of his relative. Also there is no finding by the AO regarding any kind of violation of any other conditions by the assessee, as laid down in section 13 of the Act. Therefore, in view of the factual matrix of the case as well as the judicial precedents as aforesaid, we are of the considered opinion that the assessee is engaged in providing relief to the poor, education as well as medical relief. We have no hesitation in holding that the activities of the assessee association fall within the ambit of the first three limbs viz. relief to the poor, education or medical relief and it will not be hit by the newly inserted proviso to section 2(15). Moreover, CBDT Circular no. 11/2008 dated 19th Dec, 2008 states that the commercial activity of any charitable trust will not be subject to tax if along with commercial activities it is engaged in providing relief of the poor, education, medical relief. Proviso to Section 2(15) will apply ONLY to entities whose purposes is advancement of any other object of general public utility. We have already held that the activities of the assessee association fall within the ambit of the first three limbs viz. relief to the poor, education or medical relief and it will not be hit by the newly inserted proviso to section 2(15). Accordingly, the benefit of this circular should also accrue to the assessee and, therefore, the benefit of exemption claimed by the assessee u/s 11 cannot be rightfully denied - Decided in favour of assessee
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2016 (4) TMI 707
Allowance of STCL on STT paid transactions to be set off against the STCG on non-STT paid transactions - Held that:- Following the aforesaid decision of the co-ordinate bench of this Tribunal in the case of First State Investments (Hong Kong) (2009 (7) TMI 908 - ITAT MUMBAI ), we hold that the set off as proposed by the assessee in the case on hand is to be allowed, and accordingly uphold the order of the Ld. CIT(A) in directing the Assessing Officer to permit the set off of the STCL (STT paid) against STCG’ (non STT paid). - Decided against revenue Tax levy on STCG - Held that:- We concur with the observations of the Ld. CIT(A) that no reasons have been given by the Assessing Officer for taxing the said STCG’ @ 30%, whereas the assessee has shown the same as STT paid and therefore liable to tax @10% in the return of income. Evidence to this effect has also been placed before us at pgs 41 and 60 of the assessee’s paper book which indicate that the assessee has in fact paid STT in respect of this transaction. Before us, Revenue has failed to controvert both the evidence placed before us and the finding of the Ld.CIT(A) in this regard. In this factual matrix of the case, we uphold the order of the Ld. CIT(A) on this issue in directing the Assessing Officer to tax this amount of ₹ 7,04,43,724/- @ 10%.- Decided against revenue
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2016 (4) TMI 706
MTM losses disallowed - loss in respect of cancellation of forward contracts disallowed being speculative in nature - treatment of forex losses or gains - Held that:- Assessee had recognized a loss of ₹ 2,13,43,725/- on forward foreign exchange contract of $83,45,000/- which were made in order to cover the loss due to fluctuation in exchange rate and were pending for maturity at the close of the year. At the same time the assessee also booked a gain of ₹ 4,48,05,788/- on the outstanding export receivable of $1,01,18,500/- following the same accounting system and accounting standard 11 which deals with the treatment of forex losses or gains which were not actually realized but a likely gain if the value of receivables are realized at the yearend. The same practice was being followed in the earlier year and was also accepted by the Revenue. The need to hedge is a commercial expediency and necessity which is practically followed in all the business houses engaged in import/export and these days specially the exchange rate is highly volatile. The special bench decision in case of DCIT Vs Bank of Bahrain and Kuwait (2010 (8) TMI 578 - ITAT, MUMBAI ) the special bench held that MTM losses in respect of forward foreign exchange contract debited to the profit and loss account are allowable and further held (i) a binding obligation is accrued against the assessee the moment it entered into forward foreign exchange contract(ii) consistent accounting method followed by the assessee to account for the forex gain and loss at the yearend based upon the current exchange rate cannot be disregarded(iii) the liability is said to have crystallized when a pending obligation on the date of balance sheet is determinable with reasonable certainty(iv) as per AS-11 when the transaction is not settled in the same accounting year as that in which it occurred , the exchange difference arises over more than one accounting period (v)in the ultimate analysis , there is no revenue effect and it is only timing of taxation of loss/profit. Following the decision of apex court in the case of Woolward Governor India Pvt. Ltd (2009 (4) TMI 4 - SUPREME COURT ) and special bench decision in the case of Bank of Bahrain and Kuwait(supra) , we are of the considered view that case of the assessee is fully covered by the decisions of the coordinate note benches and we therefore respectfully following the same allow the appeal of the assessee on the issue of MTM losses by deleting the disallowance - Decided in favour of assessee.
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2016 (4) TMI 705
Nature of receipt - compensation for loss of profit - capital or revenue - Held that:- As compensation received by the assessee is for the loss of earnings only it is revenue receipt exigible to tax and not a capital receipt
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2016 (4) TMI 704
Disallowance of fine paid to National Securities Clearing Corporation u/s.37(1) - AR submitted payment as fine is in lieu of non submission charges levied and partially collection of margin and argued that as per the terms of contract with NSCCL such payments are always compensatory in nature - Held that:- We are of the opinion on the basis of the debit note and debit advices though in debit advice it was referred as penalty for initial margin summary statement they take the characteristic of business transaction wholly and exclusively incurred in trading of securities and compensatory in nature. Considering the apparent facts, we set aside the order of Commissioner of Income Tax (Appeals) on this ground and we direct the Assessing Officer to delete the addition - Decided in favour of assessee Disallowance u/Sec 14A - Held that:- The ld. Assessing Officer applying the provisions of Sec.14A r.w.r. 8D(iii) has calculated the disallowance and considered B16,770/- and made an additional disallowance of B2,57,857/-. The ld. Authorised Representative reiterated his submissions and argued that the total exempted income received by the assessee is B88,252/- and assessee has voluntarily disallowed B16,770/- whereas the ld. Assessing Officer calculated disallowance under Rule 8D B2,57,857/- which is at higher side on comparison with income received and prayed deletion. We after considering the apparent facts and judicial decision of M/s.Joint Investments P. Ltd vs. CIT [2015 (3) TMI 155 - DELHI HIGH COURT ] were held that disallowance should be restricted to the extent of exempted income. Therefore, we set aside order of the Commissioner of Income Tax (Appeals) on this ground and remit the issue in dispute to the file of the Assessing Officer, who shall verify and examine the disallowance on the ratio of judicial decision.
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2016 (4) TMI 703
Deduction deduction u/s 80RR - Held that:- As relying on earlier AY 2003-04 15% of the expenses are reasonable and be attributed to earning foreign income from outside India. The AO is directed to compute deduction u/s 80RR of the Act accordingly. The appeal of the revenue on this ground is dismissed with the above direction. - Decided in favour of assessee Addition on account of ‘on money’ paid in respect of acquiring tenancy rights of heritage bungalow - payment made through undisclosed sources - CIT(A) deleted the addition - Held that:- We find from the order of AO that during the year the assessee had neither taken any property on lease nor purchased as is clear from tenancy agreement and deed of assignment which relates to the years other than the year in question. We also note that the addition in the current year was on protective basis and the substantive addition was made in the block assessment which was stated to be barred by limitation. We find merit in the arguments of ld AR that that the property taken on tenancy in the earlier year was subsequently purchased with the prior permission of the departments and the certificate u/s 269UL(3) of the Act is placed at page no 28 of the paper book. In the lights of all these facts the addition as made by the AO is just a notional and hypothetical which lacks any basis and there is nothing on records to corroborate the action of the AO. In our opinion the order of CIT (A) who had comprehensively gone in into all the issues appears to correct and does not require any interference on our part and accordingly the appeal of the revenue is dismissed. - Decided in favour of assessee
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2016 (4) TMI 702
Unexplained expenditure u/s 69C for the commission paid to the brokerage company for arranging bogus bills - AO added income from other sources which was long term capital gain from shares by treating the same as bogus for the reasons that the company M/S Goldstar Finvest Pvt Ltd was a group company of Mr Mukesh Chokshi which was involved in issuing bogus bills for purchase - Held that:- the basis of additions by the AO is completely unfounded and the AO made the addition on the basis of just conjecture and surmises that the assessee had transacted through M/S Goldstar Finvest Pvt Ltd which was a group company of Mr.Mukesh Chokshi a hawala dealer. The ld AR submitted before us that no materials has been brought on records by the AO while making additions by just giving one line (last line) observation of the assessment order. We find merit in the arguments of the ld AR that there is no basis for the said addition u/s 69 of the Act and order of FAA confirming the same is also wrong. In view of our observation in hereinabove we allow this ground in favour of assessee by deleting the addition - Decided in favour of assessee
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2016 (4) TMI 701
Assessment framed u/s. 153A - addition of deemed annual letting value - Held that:- As per clause IV, an assessment framed u/s. 153A cannot be arbitrarily made without any relevance or nexus with the seized material and the same has to be framed only on the basis of seized material found in the course of search. We revert back to the facts of the instant case and repeat that the impugned addition of deemed annual letting value does not have relevance and nexus with the seized material in question. We accept assesee’s arguments and quash the impugned assessment on this legal issue itself. His other pleas on merits challenging the impugned addition have been rendered infructuous. - Decided in favour of assessee.
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2016 (4) TMI 700
Disallowance of expenses - Genuineness of the transaction of the labour expenses not proved - Held that:- The assessee was given sufficient opportunity to furnish the evidences in support of its claim of expenses. The authorities below have recorded that no evidences were furnished. Even before this Tribunal also, no paper-book is filed by the assessee enclosing the evidences related to expenditure claimed. - Decided against assessee.
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2016 (4) TMI 699
Disallowance of interest expenses - Held that:- Once it is established that there is nexus between expenditure and the purpose of business “which need not necessarily be the business of the assessee itself”, the revenue cannot justifiably claim to put itself in the arm-chair of businessman or in position of Board of Directors and assume role to decide how much is reasonable expenditure having regard to the circumstances of case. No businessman can be compelled to maximize his profit and that the revenue authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. Considering the fact that the assessee has made land business profit of 5.45 crores in the light of the ratio laid down in the case of Hero Cycles (P) Ltd. [2015 (11) TMI 1314 - SUPREME COURT OF INDIA ]. We do not find any merit in making the addition on account of loss of interest @ 6%, we accordingly set aside the findings of the ld. CIT(A) and direct the A.O to delete the addition - Decided in favour of assessee
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2016 (4) TMI 698
Rejection of books of accounts - estimation of profit - Held that:- The assessee's plea that books of account should not have been rejected u/s 145(3) which is devoid of any merit as nowhere it has been claimed that expenses vouchers were produced by the assessee before any forum. Thus the deficiency remains un-controvered by the assessee, consequently the books of account of the assessee are rightly rejected. Apropos assessee's plea that having rejected the books of account the AO can only estimate the gross profit is also devoid of any merit. After rejection of books of account the law provides for best judgment assessment by the AO. Therefore, the assessee cannot dictate the method or way claiming best judgment assessment. The assessee's plea that he being in the business of civil construction, Section 44AD should be applied to him is baseless inasmuch as the law itself provides that provision will not be applicable to assessee having receipt above ₹ 40 lacs. The assessee's case is within the purview of Section 44AD of the Act by operation of law itself. The assessee's deliberate act of maintaining audited books of account and deliberately not producing expenditure vouchers cannot be taken lightly. No explanation has been offered by the assessee as to why expenditure vouchers could not be produced by him. Thus the act of defiance demonstrate reckless attitude of the assessee which cannot be accepted. The case laws cited by the assessee are altogether on different facts as none of them involves deliberate non furnishing of expenditure vouchers. The assessee's facts being deliberately non-production of expenditure vouchers does not fit in the four corners of the case laws cited by the assessee. - Decided against assessee
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2016 (4) TMI 697
Estimation of sale price - valuation report issued by the registered valuer relied upon for sale estimation - Held that:- On perusal of facts, we notice that the assessee entered into Joint Development Agreement with land owners. As per the said Joint Development Agreement, separate sale deeds are executed by respective parties for undivided interest in land and construction cost. The assessee is entitled for construction cost and accordingly, recognized revenue from construction cost of apartments, which is supported by valid sale deeds. The CIT(A) categorically stated that the sale price declared by the assessee is in line with valuation arrived by the registered valuer. The valuation of the property is done keeping in view of prevailing market prices of the property, which cannot be construed as sale price of the property. Therefore, in our considered opinion, the valuation report issued by the registered valuer cannot be a basis for estimation of sale price, when the A.O. could not pointed out any errors or mistakes in the books of accounts and more particularly when the sales is supported by valid sale deeds. The CIT(A) has elaborately discussed the issue. We do not see any reasons to interfere with the order passed by the CIT(A). Hence, we inclined to uphold the order passed by the CIT(A) and direct the A.O. to delete the additions. - Decided in favour of assessee.
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2016 (4) TMI 696
Additions towards income from other sources - estimation of net profit - claim of depreciation - Held that:- Once assessee himself has credited the income under the head “Income from other sources”, there is no merit in the assessee arguments that these items should be considered under block concept for claiming depreciation and to arrive at Written down Value as per section 50 of the Act. We further noticed that the assessee claims to have incurred a sum towards repair of the damaged excavator. Though assessee claims that it has incurred substantial amount for repair of the damaged excavator, the A.O. as well as the CIT(A) have failed to consider the fact that whether the said expenditure has been claimed as revenue in nature and debited to profit & loss account or capital in nature and added to the cost of the asset to claim depreciation. If the amount incurred towards repair of the vehicle is forming part of cost of the asset, then the assessee should have deducted the insurance claim from the block of asset. In this case, on verification of the depreciation schedule filed along with the return of income, we noticed that the assessee has not credited any amount in the depreciation schedule. At the same time, from the records, it cannot be ascertained that whether the expenditure is debited as a revenue expenditure or capital expenditure. Primafacia, from the entries in the financial statements, it appears that assessee has chooses to debit the relevant expenditure incurred towards repair of damaged Excavator to profit & loss account and credited the insurance claim into profit & loss account. However, in the absence of specific details and also the fact that both the authorities have failed to show any light on this aspect, we are of the opinion that the issue needs to be re-examined by the A.O. in the light of the above discussions. Hence, we set aside the issue to the file of the A.O. and direct the A.O. to verify the issue in the light of above discussion and pass fresh order after affording an opportunity of hearing to the assessee.
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2016 (4) TMI 695
Additions u/s 69A - Held that:- In the present case on hand, though assessee filed cash flow statement and also affidavit from his wife affirming having income from tuitions and interest, he failed to furnish cogent evidences to prove the genuineness of the transactions. The assessee claimed to have savings from his salary income and agricultural income. His claim that his life time savings was kept in the form of cash and deposited into bank account is quite opposite to the human probability. The explanations offered by the assessee to prove the sources for cash deposit is purely a guess work, but not supported by any cogent materials. On perusal of documents filed by the assessee in support of sources for cash deposits, i.e. his cash inflow, cash outflow and savings and mode of savings and then applied to the test of human probability, it fails to pass the test of human probability. When assessee makes a claim and which is not supported by any evidences or evidences are inadequate, then human probability test is one of the important tests laid down by the highest court of India in order to check the genuineness of the transactions. For example, a person whose annual income is ₹ 20,000/- with which he runs his living show claims that he purchased a diamond necklace worth ₹ 2 lakhs and informed the A.O. that he has bought it from out of his savings. Now when we apply the human probability test, we can easily infer that the assessee cannot have bought that necklace out of his income. In the present case on hand, though assessee claims that he had sources for cash deposits, the sources claimed and corresponding evidences fails to pass the human probability test. The CIT(A) after carefully examined the evidences filed by the assessee has elaborately discussed each and every item of source claimed by the assessee and after considering the facts and circumstances, allowed relief of ₹ 3,00,000/- and confirmed the addition to the extent of ₹ 36,04,000/-. We do not see any error or infirmity in the order passed by the CIT(A). Hence, we inclined to upheld the order of CIT(A) - Decided against assessee
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2016 (3) TMI 1072
Unaccounted deposits in the three accounts of the assessee company in Federal Bank - Held that:- In view of the admission by the Id. AR as well as the fact the four hajj firms floated by the assessee company had no infrastructure of their own and they did not even had their own bank accounts, the income of the Hajj firms is to be assessed in the hands of the assessee company only. As regards the merits of the addition is concerned, the assessee 'company had produced the details of all the transactions pertaining to the three accounts maintained in Federal Bank Calicut along with the copy of cash book, Profit and Loss account and Balance sheet of the company. The assessee has further filed the detailed analysis of the transactions carried out in the aforesaid bank. The assessee had filed the copies of details of all the bank transactions, details of sales of Air ticket and expenses pertaining to Hajj and Umrah Services for relevant assessment year along with the statement of cash flow. The ld.CIT(A) has verified the details of the bank accounts and found no infirmity in the details given by the assessee company. The objection of the revenue that the reliance should solely be placed on the statement of Sh. M. Narayana Kumar is misplaced. The assessing officer went on a wrong premise and added the entire deposits appearing in the bank accounts without deducting the withdrawals made. It is a settled principle of law that only the real income of the assessee has to be taxed and not notional income. In any case, the assessee could not have been subjected to tax only on the deposits in the bank accounts. - Decided in favour of assessee
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Customs
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2016 (4) TMI 722
Seeking quash of letter dated June 18, 2013 and declaration that the condition Nos.34(b) and 34(c) of the notification No.12 of 2012, was satisfied by the petitioner while importing - Import of gold dore bar - goods are to be imported in accordance with the packaging list issued by the mining company by whom they are produced. Held that:- the goods are not required to be imported along with the packaging list. In the Condition No. 34 the expression "in accordance with the packing list issued by the mining company by whom they were produced" is used. Normally, the courts will have to follow the rule of literal construction, which enjoins the court to take words as used and to give it the meaning, which naturally implies. As there is no allegation that the importer did not follow the procedures set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996, therefore, we do not find any fault in the order of the Hon'ble Single Judge in holding that the demand of the Deputy Commissioner for production of the packaging list from the mining company was illegal and that the importer has complied with the requirements of the notification No.12 of 2012. - Appeal disposed of
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2016 (4) TMI 721
Confiscation and penalty - Finished leather lying seized for more than a year - permitted to withdraw on payment of redemption fine - Held that:- the appropriate course would be to permit the petitioner to furnish a bank guarantee for the entire amount of redemption fine and penalty and for the goods be released to the petitioner. Therefore, it is directed to the petitioner to furnish a bank guarantee in favour of the Department, for the entire amount of redemption fine and penalty as ordered by the Order-in- Original, the goods in question shall be released to the Petitioner. - Petition disposed of
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2016 (4) TMI 720
Suspension of Customs broker licence - G Card holder employee of the appellant alleged to have been involved in fraud of manipulating the value of export goods and using the license for import of paper / paper products by various importers - Held that:- in the absence of at least a prima facie case indicating the role of the appellant in various frauds, suspension of license will be harsh and unjustified. Further, more importantly, it is found that though the suspension was confirmed on 20.11.15, till date no show cause notice has been issued to the appellant. The time limit as prescribed in CBLR 2013, has apparently not been followed. In the present case, the role of G card holder and the involvement of appellant either directly or through his G card holder are yet to be clearly alleged / established as no progress could be made in the inquiry. In the absence of any prima facie finding to that effect, suspension of license which amounts to stoppage of appellants business is not justified. Therefore, impugned order is unsustainable. - Decided in favour of appellant
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2016 (4) TMI 719
Claim of Notification benefit - Bill of Entry filed inadvertently taking the benefit of Notification No. 6/02-CE dated 01.03.2002 - Revenue contended that goods came with inbuilt machine which should not enjoy the notification benefit - Held that:- in view of the detailed examination done by the ld. Commissioner (Appeals), and being guided by the Apex Court judgment in the case of CC (Prev.), Mumbai Vs. M. Ambalal & Co. [2010 (12) TMI 16 - Supreme court of India], laying down the ratio that interpretation of law should be made to suppress the mischief and to curb ills of mis-declaration, we are in full agreement with ld. Commissioner (Appeals) that right of claim to the notification benefit is extinguished when the declaration was found to be false and deliberate mis-declaration causing revenue loss was patent. - Decided against the appellant
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2016 (4) TMI 718
Condonation of delay - Delay of 244 days - Appellant pleaded that they have not received the original OIA passed on 14.10.14 till date - Held that:- the address of the appellant is correctly written and there is no change in the address but the letter has been returned as "unclaimed". On receipt of the recovery notice, the appellant has immediately taken steps with the Commissioner (Appeals) asking for a certified copy. The Superintendent of (Appeals-II) for Commissioner (Appeals - V) intimating that they had replied to the appellant to contact their Advocate M.Velmurugan or S.Chandrasekaran, Advocate for the copy of the order. The Commissioner (Appeals) order was received from S.Chandrasekaran and the appellant written back to Commissioner (Appeals) informed that Shri.S.Chandrasekaran was not appointed by the appellant. From this, it is found that the Authorized Advocates are Velmurugan and others to appear before the Commissioner (Appeals). The appellants have not authorized Shri. Chandrasekaran. On perusal of the whole correspondence of appellants with Commissioner (Appeals), the certified copy was not issued by the Commissioner (Appeals). The appellants requested for the same. Thus, it is found that appellants obtained a copy of the impugned order through Recovery Cell by email copy dt.13.8.15. Also Section 153 of the Customs Act existed during the period in dispute. On perusal of the Customs Act,it is found that there is no provision to order authorized person. Therefore, by considering the background of the case and also considering the nature of the dispute involved, the condonation of the delay is allowed. - Delay condoned
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FEMA
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2016 (4) TMI 715
Proceedings under Section 51 of the Foreign Exchange Regulation Act, 1973 - Currency seized from the premises of assessee should be confiscated to the Central Government in terms of Section 63 of the Foreign Exchange Regulation Act, 1973 - maintainability of the appeal filed by the respondents before the Tribunal - Held that:- A careful comparison of the provisions of the Foreign Exchange Regulation Act, 1973 and the Foreign Exchange Management Act, 1999 would show that there was no post of Special Director under the Foreign Exchange Regulation Act, 1973. Under the Foreign Exchange Management Act, 1999 a Special Director was created only as Appellate Authority, though a person of the rank of Director would also be an Adjudicating Authority. Therefore, the decision in Rama Arangannal [1980 (8) TMI 203 - HIGH COURT OF MADRAS ] and Mohtesham Mohd. Ismail [2007 (10) TMI 273 - SUPREME COURT ] will not be of any assistance to the appellant, in view of the fact that the Department could be taken to be an aggrieved person and that the right of appeal under Section 19 of the Foreign Exchange Management Act, 1999 is conferred upon any aggrieved person. Since the Original Order of Adjudication was by the Collector of Customs, nominated under Section 16(1) of the Act, the appeal filed by the Special Director of Enforcement, before the Tribunal cannot be treated as not maintainable. The Department will come within the meaning of the expression "aggrieved person". Hence, the preliminary contention regarding the maintainability of the appeal filed by the respondents before the Tribunal, is liable to be rejected. On merits, as rightly observed by the Tribunal, the appellant did not file any appeal as against the finding that he was guilty of violation of Section 9(1)(d) of the Act. The discretion supposedly exercised by the Original Authority to let off the appellant with a penalty of ₹ 25,000/- cannot be approved. First of all we do not think that he had a discretion. Even assuming that he had a discretion, the manner in which the first authority exercised the discretion and the reasoning given by him are wholly unsustainable as can be seen from the extract of para 21 of the order of themOriginal Authority, which reads as follows:- "However, the case is about 9 years old and since it is an endeavour to complete the adjudication proceedings, under the repealed Foreign Exchange Regulation Act, 1973, I take a lenient view and impose a penalty of ₹ 1,00,000/- (Rupees One Lakh only) on Shri S.M.Sultan, in terms of Section 50 of FERA, 1973. " Therefore, we are of the view that the order of the Tribunal does not call for any interference
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Service Tax
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2016 (4) TMI 730
Whether penalty imposed is justified or the same is required to be enhanced - Rule 15 (2) of CCR, 2004 - Held that:- no special reasons have been given for proposing higher penalty upon BSNL. Even the grounds of appeal filed before this bench also do not disclose as to why higher penalty is required to be imposed and to what extent. On the contrary, first appellate authority has given reasons to uphold penalty to the extent of ₹ 10,000/- only. Accordingly, bench is of the view that there is no justification to interfere with the order passed by the first appellate authority. - Decided against the revenue
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2016 (4) TMI 729
Waiver of pre-deposit - Demand of service tax for GTA service under reverse charge basis - Washing and beneficiation of coal before delivering to the buyers - Applicant pay freight on arranged transport and recovere on full reimbursement from the buyers of coal - Held that - the applicant has strong arguable case against the tax liability. The consignees (buyers of coal) have claimed to have been discharged the service tax though a full verification of facts of such assertion is not before us. As the prima facie case is in favour of the applicant the waiver of pre-deposit of service tax, interest and penalty is granted. - Stay and waiver granted
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2016 (4) TMI 728
Entitlement for abatement of 40% - Notification No. 1/2006-ST - Held that:- the Ld. Commissioner has not given proper finding as regard the abatement available to the appellant to the extent of 40% from the gross value as provided under Notification No. 1/2006-ST. On perusal of the books of accounts of the appellant, it is found that the gross receipt shown in the balance sheet/profit and loss account is inclusive of catering / food. As per Notification No. 1/2006-ST the abatement of 40% is allowed subject to condition that the gross amount charge is inclusive of food items. As the cost of the food item is inclusive in the gross amount charged by the appellant, they are entitled for the abatement. Acceptability of VCES declaration - Charge of false declaration - Held that:- the mistake has occurred due to arithmetic error in quantifying the due and the same was pointed by the appellant themselves and made good by making the payment of correct amount, and for the delay in making the payment, they also paid the interest. From this fact, I do not find any intention of the appellant to make a false declaration. This is only due to arithmetical error that there is mistake in declaring the actual dues. It is also found that the appellant have paid the entire amount of correct dues along with interest before the last date. Therefore, no reason found why the VCES declaration should not be accepted. Accordingly, impugned order is set aside. - Decided in favour of appellant
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Central Excise
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2016 (4) TMI 727
Refund claim denied - doctrine of unjust enrichment - Held that:- In the instant case, the plastic pipes/tubes were cleared on payment of duty for captive consumption in the manufacture of Drip Irrigation System and the petitioner was not able to produce any documentary proof to establish that the duty has not been passed on to the buyer. In the judgment reported in Mafatlal Industries Vs. Union of India [1996 (12) TMI 50 - SUPREME COURT OF INDIA] held that it is the responsibility of the assessee to establish that the duty incidence has not been passed on to any other customer. The order of the 3rd respondent is absolutely correct, since it is settled law that refund should not lead to unjust enrichment. That apart, the petitioner was not able to show any evidence that there was no change in the price of their final product with reference to the date of commencement of the period of refund of claim. Moreover, none of the invoices for the period prior to the period of dispute was made available to show that the price charged has been uniform throughout notwithstanding the payment of duty on the plastic tubes captively consumed. Merely because duty has been paid under protest does not give credence to the claim of the petitioner that they had not passed on the incidence of duty to their customer. In these circumstances, the ratio laid down in Union of India Vs. Solar Pesticide Pvt. Ltd. [2000 (2) TMI 237 - SUPREME COURT OF INDIA ] and Mafatlal Industries Vs. Union of India [1996 (12) TMI 50 - SUPREME COURT OF INDIA] squarely applies to the facts and circumstances of the present case.
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2016 (4) TMI 726
Auction for the privilege - denial of preference - Held that:- With respect to the contention that the first respondent has granted the benefit of preference to the fourth respondent though such a relief has been declined by this Court in Ext.P9 order, we notice that such a contention was raised before this Court earlier W.P.. The said contention was considered by this Court and rejected, in Ext.P5 judgment. This Court has found that, the consequence of Ext.P9 interim order was to set at naught all the proceedings initiated against the fourth respondent pursuant to registration of the crime against him, including cancellation of his license. Therefore, a further declaration to the effect that his right of preference was available to him was unnecessary. Having suffered the said judgment, it is not open to the appellant to agitate the said contention again. Another contention put forward by the learned Counsel is that, the fourth respondent had requested for the grant of privilege to him and upon rejection therof, had participated in the auction from the general category. Since he had participated in the auction and was unsuccessful, it was not open to him to claim the privilege after the auction was conducted. We notice that, the fourth respondent had challenged the denial of preference to him before this Court in earlier W.P.. In the said writ petition an interim order had been granted by this Court staying confirmation of the auction that was conducted on 5.3.2014. It is clear from the conduct of the fourth respondent that he had challenged the proceedings of the auction without any delay and had obtained interim orders against confirmation thereof. The said writ petition was disposed of by Ext.P3 judgment, with the appellant also on the party array, directing the first respondent to consider and take a decision in the matter after hearing all the parties. Having suffered Ext.P3 judgment pursuant to which the first respondent had considered the rival contentions of the appellant as well as the fourth respondent and decided the issues, it is not open to the appellant to contend that the fourth respondent should be held disentitled to the preference claimed by him for the reason that he had participated in the auction. The said contention is therefore rejected.
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2016 (4) TMI 725
Applicability - extended period of limitation - goods cleared to sister concern on payment of duty - on assessable value of goods determined taking into consideration the average rate of the goods sold - no suppression of facts - Held that:- as per this Tribunal's order in their own case and on the very same issue reported in [2015 (12) TMI 1098 - CESTAT AHMEDABAD], there is not intent to evade payment of duty. Also there is no material available on record in justifying/supporting the allegation of intention to evade payment of duty when the goods were cleared on payment of duty by applying the formula for determination of value other than the one i.e CAS-4 method of costing. Accordingly, the impugned order is set aside. - Decided in favour of appellant with consequential relief
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2016 (4) TMI 724
Whether ingots and billets of thickness more than 3 inches can be used for manufacture of MS Bars of 6 mm - Held that:- the report of the Chartered Engineer is very specific and has been given after examining the machines installed in that Mill. The same cannot be applied in any circumstances to respondent without giving actual comparison of the machines installed and without bringing the said expert to respondent. As regards the purchase register and the change in stand of respondent, these facts are irrelevant as none of these have been alleged in the show-cause notice. - Decided against the revenue
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CST, VAT & Sales Tax
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2016 (4) TMI 723
Whether the Tribunal is justified in disposing the appeal filed by the State without considering and disposing the appeal filed by the petitioner in the interest of justice both to the petitioner and the respondent - Held that:- the second appeal filed by the assessee before the Tribunal, which was anterior in point of time, is now pending. Therefore, the third question of law deserves to be answered in favour of the assessee. - Decided partly in favour of assessee
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2016 (4) TMI 717
Classification - Whether the pet coke used in the manufacture of cement is ‘raw material’ as contended by the dealer, or ‘fuel’ as contended by the appellant - Held that:- it appears that the pet coke used in the manufacture of cement, during the course of the manufacturing process gives rise to an exothermic reaction, as a result whereof it loses its apparent identity and forms part of the end product. Essentially, therefore, pet coke forms one of the ingredients of cement and merely because there is an exothermic reaction in the preparation of cement which may be facilitated by its presence, pet coke would not cease to be a raw material. As regards the submission that the appeal against the decision of the Tribunal in the case of M/s Welspun Steel Ltd. v. The State of Gujarat has been admitted on a substantial question of law and the Tribunal having placed reliance upon such decision, this appeal also deserves to be admitted on a similar question of law, it may be noted that the Deputy Commissioner in the assessment order has categorically recorded that the said decision would not be applicable to the facts of the present case. Similarly, the first appellate authority, viz. the Joint Commissioner of Commercial Tax has also held that the decision in the case of M/s Welspun Steel Ltd. cannot be made applicable to the present case as the same relates to the use of pet coke in the manufacture of sponge iron. Therefore, it appears that it was the case of the Department that the decision of the Tribunal in the case of M/s Welspun Steel Ltd. would not be applicable to the facts of the present case, under the circumstances, merely because the appeal preferred by the State against the said order of the Tribunal has been admitted on a question of law, does not mean that the present appeal is also required to be admitted on a similar question of law, despite the fact that the impugned order does not give rise to a substantial question of law. The Tribunal, after appreciating the material on record, has found as a matter of fact that coke/pet coke used in the VSK technology is not used as a fuel but as part of feed stock and its components form part of the product, that is, clinker and that without this raw material, the product clinker cannot be manufactured. It is not the case of the appellant that the findings of fact recorded by the Tribunal are, in any manner, perverse to the record of the case, inasmuch as, no question on the ground of perversity has been raised by the appellant. On the facts as found by the Tribunal, the decision of the Supreme Court in the case of Union of India v. Ahmedabad Electricity Co. Ltd. [2003 (10) TMI 47 - SUPREME COURT OF INDIA] would be squarely applicable and therefore, the pet coke used in the manufacture of clinker clearly falls within the ambit of the expression ‘raw material’ as contemplated in section 2(19) of the GVAT Act. The Tribunal, therefore, did not commit any error in holding that pet coke is not used as fuel but is used as raw material in the manufacture of cement. The impugned order, therefore, does not suffer from any legal infirmity. - Decided in favour of respondent
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2016 (4) TMI 716
Entitlement of benefit under Section 17(4)(ii) of The Karnataka Sales Tax Act, 1957 - Petitioner firm consists of two women partners - appellant contended that merely because the words used under Section 17(4)(i) are that of "a dealer being a woman", it cannot be restricted to mean a single woman only - Held that:- it is found that if purposive interpretation is made to the word 'a dealer being a woman’, it should mean that "a dealer being a woman’ would also include ‘women’. Therefore, the view taken by the learned Single Judge cannot be sustained and deserves to be set aside. However, on the other aspects of submitting reply and the consideration thereof by the appropriate authority, it is found that no interference may be made save and except that while giving effect to the provisions of Section 17(1)(4) (ii) of the Act, the Assessing Officer or the appellate authority, as the case may be, shall consider the matter in light of the observations made by us in the present judgment and shall take appropriate decision in accordance with law. - Decided pertly in favour of appellant
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Wealth tax
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2016 (4) TMI 694
Validity of initiation of the proceedings u/s. 17 of W.T. Act - notice issued in the name of a non-existent amalgamating company - Held that:- Notably, ACRL, which was visited with the notice u/s. 17 of the Act had since amalgamated with ACL on 1.6.2004 in terms of an amalgamation scheme sanctioned by the BIFR. It is a trite law that initiation of the proceedings for reopening of the assessment hinges upon the service of a valid notice in terms of Sec. 17 of the Act. Ostensibly, the notice issued to a person who is not in existence at the time of issuance of such notice renders such initiation invalid. In the present case, the fact that the amalgamated company, i.e. ACL, subsequently appeared in the proceedings cannot take away from the fact that the notice u/s. 17 of the Act was bad in law and such defect cannot be cured merely on account of the fact that the amalgamated company appeared subsequently. It is a well established position of law that the defect in the notice of reopening cannot be cured because it goes to the root of the jurisdiction to reopen the proceedings. - Decided in favour of assessee
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