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TMI Tax Updates - e-Newsletter April 23, 2019 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws Articles INC – 22A – All about Active Company Tagging Identities and its Verifications IMPOSING TAX ON ADVERTISING BY MUNICIPAL CORPORATION - ultra vires News Repayment of 7.28% Government Stocks 2019 Auction for Sale (Re-Issue) of Government Stocks Highlights / Catch Notes GST Profiteering - supply of “Snacks” - benefit of reduction in the rate of tax not passed on - Profiteering proceedings are only concerned with ascertaining whether the Respondent had passed on the benefit of rate reduction to his customers or not - have no concern with the above factors such as stiff competition, increase in the raw material and transportation costs, discounts to his dealers etc. - amount of profiteering determined Visit to Get Source Rectification of mistake in GST TRAN-1 of the petitioner’s declaration - transitional credit - matter is remitted back to the GST Council to reconsider the case of petitioner taking into consideration the ratio of decisions of various High Courts mentioned in order. Visit to Get Source Income Tax Revision u/s 263 - There cannot be any estoppel against law and method of accounting/policy followed by tax-payer which is contrary to law even if accepted by the AO after due enquiry cannot be said to be a view which could be said to be one of the possible or a plausible view - view of the Ld. CIT cannot be held to be merely a change of opinion - revision upheld Visit to Get Source Nature of income - profit earn on sale of shares - STCG or Business Income - in the earlier assessment years the assessee had consistently shown the receipts of sale of share as capital gain which the revenue had also accepted - AO desired to tax income as business income in the current year, in view of the change in tax rates, which was same in the earlier years - held as STCG - no question of law arises Visit to Get Source Addition on the basis of statement in survey u/s 133A - filed reconciliation statement - surrendered certain amount on the basis of certain discrepancies in cash and in the valuation of closing stock - cannot be conclusive and binding on the assessee once he is able to substantiate with evidence to the satisfaction of the A.O. - matter remanded Visit to Get Source Revision u/s 263 - Debit balances written-off - no evidence or material on record including the order sheet of the A.O. to establish that A.O. examined the said issue at assessment stage - Since no investigation or enquiry, Explanation-2 to Section 263 is clearly attracted - revision upheld Visit to Get Source Rectification u/s 254 - non consideration of admission of additional evidence - Bench has to evaluate the admissibility of the additional evidence and then, it has to evaluate whether the additional evidence filed by the assessee will have a bearing to lead a different conclusion or come to conclusion as per earlier bench decision - Rectification application accepted Visit to Get Source Rectification u/s 154 - commercial building or residential building - AO has brought on record that the entire building was a commercial building - based on this finding CIT(A) rectified its order - An erroneous finding of fact is undisputedly an error apparent from record rectifiable u/s 154 Visit to Get Source Revision u/s 263 - expenditure on purchased CDs on Jain Religion - AO had carried out detailed enquiries and taken a plausible view and accepted the assessee's treatment of expenditure - Revision not permissible Visit to Get Source TDS u/s 193 - interest on debenture credited to comply with the mandatory requirements of law - requirement of TDS cannot be stretched to unreasonable levels when interest was neither claimed by debenture holders nor paid as assessee was a sick industrial unit and referred to BIFR - canceling of demand u/s 201(1) is correct in light of principle of real income theory Visit to Get Source Condonation of delay of 1625 days - issue on merit is covered in favour of the assessee - all other years where such an issue arises, the assessee has filed appeals - not permitted to ignore long and inordinate delay and take unlimited period of time for filing appeal Visit to Get Source Payment of non-compete fees - revenue expenditure or capital expenditure - agreement with the promoter of the Company to avoid immediate competition - same business continue - No new business was acquired - no enduring benefit - allowable revenue expenditure Visit to Get Source Accrual of income - effect of addendum of agreement - merely because in the original agreement, the parties had agreed to a higher sum by way of sale consideration, such amount cannot be stated to have accrued to the assessee, ignoring later developments reducing consideration due to slum in the business - income accrued based on revised terms. Visit to Get Source Reassessment u/s 147 - once the AO noticed the factum of bogus purchases and accommodation entries and in scrutiny assessment and taxed in the manner he thought was appropriate, he cannot be allowed to shift the stand by issuing notice of reopening of assessment without any further material available - mere change of opinion - notice set aside Visit to Get Source Reassessment u/s 147 - assessee's claim of deduction u/s 10B was scrutinized in original proceedings - any attempt on part of AO to reexamine the claim, without any material would be based on change of opinion - clearly impermissible Visit to Get Source IBC Corporate Debtor - applicability of section 43, look back period - related party transaction - preferential transaction - undervalued transactions - it is a transaction in the ordinary course of business of the Corporate Debtor and cannot be held as undervalued, preferential or a transaction defrauding creditors. Visit to Get Source Interim resolution professional (IRP) and / or resolution professional (RP) - contraventions of several provisions of the Insolvency and Bankruptcy Code, 2016 (Code), the IBBI (Insolvency Professionals) Regulations, 2016 (IPR) and the Code of Conduct under regulation 7(2) thereof - Conditions and restrictions imposed. Visit to Get Source Central Excise Valuation of goods sold at the depots - the absence of a transaction value from the depot would bring the impugned goods within the ambit of section 4 (1)(b) of Central Excise Act, 1944 and rule 7 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2002. Visit to Get Source Extended period of limitation - suppression and mis-statements of facts - mere non-payment of duty cannot be equated with evasion and, even less so, with intent to evade. That has to be established by circumstances Visit to Get Source Case Laws: GST 2019 (4) TMI 1247 Principles of natural justice - Confiscation - noting sheet is totally blank - section 130 of the Central Goods and Services Tax Act / Gujarat Goods and Services Tax Act, 2017 - HELD THAT:- There is nothing on record to indicate relevant dates on which the proceedings took place. Considering the fact that this is a file maintained by a Government authority, it is difficult to understand as to how there are no notings with regard to the proceedings undertaken by the concerned officer. Stand over to 24th April, 2019 to enable the respondents to file an affidavit-in-reply. 2019 (4) TMI 1246 Requirement of pre-condition for filing return of Form GSTR-3B - HELD THAT:- There is no response from the respondents No.2 and 3, by way of ad-interim relief, the petitioner is permitted to file manual returns in Form GSTR-3B for the months November, 2017 onwards, which would be subject to final outcome of the petition. Stand over to 13th June, 2019. 2019 (4) TMI 1245 Rectification of mistake in GST TRAN-1 of the petitioner s declaration - transitional credit - post GST Regime - main contention of the petitioner is that the petitioner while putting his Form has committed an error - whether the petitioner has a prima facie case for consideration? HELD THAT:- High Court of Madras, in the case of MSR Iron and Steel Industries India Private Limited and others v. Joint Commissioner of Sale Taxes, Coimbatore Division, Coimbatore and others [2018 (9) TMI 543 - MADRAS HIGH COURT] has held that A circular has been already issued on 03.04.2018 by the Central Board of Indirect Taxes, by setting up a Grievance Redressal Mechanism to address certain grievance of the Assesses, which contemplates the appointment of a Nodal Officer to address the problem faced by the tax payers due to the problem faced by such people in the GST portal during the transitional period. The GST Council is directed to reconsider since the time is extended - the matter is remitted back to the GST Council to reconsider the case taking into consideration the case cited - petition disposed off. 2019 (4) TMI 1244 Profiteering - supply of Snacks - benefit of reduction in the rate of tax not passed on - contravention of the provisions of Section 171 (1) of the CGST Act, 2017 - Penalty - HELD THAT:- The claim of the Respondent that he could not have reduced his prices after the tax reduction due to stiff competition from other exempted and compounding manufacturers, resistance from his customers, increase in the raw material and transportation costs and he was providing robust profit margins and discounts to his dealers cannot be accepted as the present proceedings are only concerned with ascertaining whether the Respondent had passed on the benefit of rate reduction to his customers or not and have no concern with the above factors mentioned by him. The commensurate benefit of tax reduction was required to be passed on by him by reducing his prices irrespective of the above factors, which he had failed to do. It is also on record that the Respondent vide his written submissions dated 16.01.2019 has asked for permission to remit the profiteered amount in three instalments. Therefore, there is absolutely no doubt that the Respondent has resorted to profiteering and has not passed on the benefit of tax reduction to his customers. The Respondent has indulged in profiteering in violation of the provisions of Section 171 (1) of the CGST Act, 2017 and has not passed on the benefit of reduction in the rate of tax as per the Notification No. 34/2017-Central Tax (Rate) dated 13.10.2017 supra in respect of the products being supplied by him to his customers and therefore, he is liable for action under Rule 133 of the CGST Rules, 2017. Respondent has acted in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has not passed on the benefit of reduction in the rate of tax to his recipients by commensurate reduction in the prices. Accordingly, the amount of profiteering is determined as ₹ 12,76,306/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is directed to deposit the profiteered amount of ₹ 12,76,306/- along with the interest to be calculated @ 18% from the date from which the above amount was collected by him from the recipients till the above amount is deposited - Since the recipients in this case are not identifiable, the Respondent is directed to deposit the amount of profiteering of ₹ 6,38,153/- in the Central Consumer Welfare Fund (CWF) and ₹ 6,38,153/- in the Kerala State CWF as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with 18% interest. Penalty - HELD THAT:- The Respondent has deliberately and consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect tax invoices which is an offence under Section 122 (1) (i) of the above Act and hence he is liable for imposition of penalty under the above Section read with Rule 133 (3) (d) of the CGST Rules, 2017 - A notice has already been issued to him on 10.12.2018 to show cause why penalty should not be imposed upon him. However, no detailed submissions have been filed by him on the issue of penalty. Therefore, keeping in view the principles of natural justice a fresh notice be issued to him before imposition of penalty. Application disposed off. 2019 (4) TMI 1213 Constitutional Validity of Section 174 of KSGST Act - time limitation u/s 25(1) of the KVAT Act - HELD THAT:- The issue covered by the decision in the cas of M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [ 2019 (2) TMI 300 - KERALA HIGH COURT] , where it was held that The petitioner's plea is rejected that the State lacks the vires to graft Section 174 into KSGST Act, 2017. Petition dismissed. Income Tax 2019 (4) TMI 1243 Reopening of assessment u/s 147 - assessee's claim of deduction u/s 10B was not allowable - HELD THAT:- The assessee as per the relevant provisions of section 10B, existing at the relevant time, had chosen the initial assessement year of 1997- 1998. The assessee thus made a claim for deduction under section 10B of the Act through said assessment year 1997 -1998 and onwards. AO during the course of original assessment proceedings had examined the entire claim, had also enquired into the commencement of manufacturing and period of claim of deduction and all other conditions needed to be fulfilled for sustaining claim under section 10B. In the opinion of the tribunal, therefore, reopening the assessment on the same issue would not be permissible. The tribunal referred to and relied on the decision in the case of CIT Vs. Kelvinator of India Ltd. Reported [ 2010 (1) TMI 11 - SUPREME COURT OF INDIA] . No error in the view of the tribunal. When during the original scrutiny assessment, the assessee's claim of deduction under section 10B of the Act was scrutinized, any attempt on part of Assessing Officer to reexamine the said claim, without any material would be based on change of opinion. Reopening of assessment was therefore clearly impermissible. - Decided in favour of assessee. 2019 (4) TMI 1242 Disallowance to the extent of 25% out of labour charges and off loading expenses - HELD THAT:- It can thus be seen that the entire issue is based on appreciation of materials on record. CIT(A) and the Tribunal concurrently held that there was sufficient evidence to enable the AO to make the disallowance, the only question being of quantification thereof. In absence of such findings being perverse, no question of law would arise. Assessee however submitted that the Assessing Officer could not have relied upon the statements of the contractors without providing cross-examination to the Assessee. There is nothing on record to suggest that the Assessee had asked for such cross- examination which the Assessing Officer disallowed. - Decided against assessee. 2019 (4) TMI 1241 Stay of demand u/s 220(6) - in order rejecting stay no reference is made to the facts of prima facie case, financial stringency and balance of convenience - opportunity to personal hearing has also not been granted - directed to pay 20% of the arrears immediately in the view that CBDT office memorandum in F.No.404/72/93-ITCC dated 29.12.2016, being mandatory - HELD THAT:- As far as first two points are concerned, there is clear violation of principles of natural justice insofar as no personally opportunity has been granted and the order itself is mechanical and non speaking. As far as the third aspect is concerned, I have had occasion to deal with similar orders passed by assessing officers in order of MRS. KANNAMMAL VERSUS INCOME TAX OFFICER WARD 1 (1) TIRUPUR [ 2019 (3) TMI 1 - MADRAS HIGH COURT] The above order is applicable on all fours to the facts of the present case. In the light of the fact that the personal hearing sought for has not been granted accordingly, the order is not speaking and mechanical and there is absolutely no application of mind of the officer to the existence of prima facie case, financial stringency and balance of convenience, there is a merit in the submission of the petitioner that the order requires to be set aside. I accordingly do so. The officer shall fix a date for hearing of the stay application, issue notice to the petitioner and pass orders in accordance with law, within a period of four weeks from the date of receipt of a copy of this order. Till the disposal of the said petition, no coercive proceedings shall be initiated as regards recovery of the disputed demand. - writ Petition is disposed 2019 (4) TMI 1240 Exemption u/s 11 - assessee is a mutual concern OR charitable institution - application of the funds as per Section 11 - Whether assessee club is not covered by the principle of mutuality thereby violating provisions of Section 13 which disentitles the trust from claiming exemption under Section 11 ? - sports activities and other recreation amenities are mainly for members and not charity - HELD THAT:- The fact that the membership of the club is open to a section of the community doesn't mean that the club has been constituted for the advancement of any other object of general public utility - AO did not have an occasion to consider the application of the funds as per Section 11, since he had come to the conclusion that the Assessee does not fulfill the charitable purpose as defined in Section 2(15) . As relying on DIRECTOR OF INCOME TAX (EXEMPTION) VERSUS GOREGAON SPORTS CLUB [ 2012 (4) TMI 214 - BOMBAY HIGH COURT ] question regarding exemption u/s 11 would stand remitted to the Assessing Officer in determining whether the requirement of Section 11 of the Income Tax Act, having duly fulfilled as regard to the application of fund. Such exercise may be carried out expeditiously. 2019 (4) TMI 1239 Reopening of assessment u/s 147 - notice beyond the period of four years from the end of relevant assessment year - Assessee was beneficiary of bogus purchase bills and accommodation entries - change of opinion - HELD THAT:- Factum of the petitioner being beneficiary of bogus purchase bills and accommodation entries was within the knowledge of the AO even during the original scrutiny assessment. He therefore, passed the order of assessment in which he added a sum of ₹ 45.14 lacs to the income of the assessee by taking profit ration of 9.20% on the total bogus purchases and accommodation entries. Through the reasons, now he wishes to add the entire amount holding a belief that such sum represents the petitioner's undisclosed income. We are not called upon to decide whether the AO's first approach of taxing only the profit element embedded in bogus purchases was correct or that his later approach of taxing the entire bogus purchases is correct. What we are called upon to judge is whether in facts of the present case, he can change his basis of assessing the income. In clear terms, once the Assessing Officer noticed the factum of bogus purchases and accommodation entries and in scrutiny assessment, taxed the same in the manner he thought was appropriate, he cannot be allowed to shift the stand by issuing notice of reopening of assessment. This would be based on mere change of opinion. We may stress on the point that after the assessment was completed, there was no further material available with the Assessing Officer which would enable him to form a belief that the income chargeable to tax had escaped assessment - Impugned notice is also set aside. - Decided in favour of assessee. 2019 (4) TMI 1238 Deduction u/s 80 IA - Assessee is termed as contractor he had developed, operated and maintained infrastructural facility - HELD THAT:- These appeals are admitted for consideration on following re framed substantial questions of law : (a) Whether, the respondent / assessee fulfills the requirement stipulated in Section 80 IA(4) of the Income Tax Act, 1961 once the conclusion reached is that it is contractor and not developer as stated in the sub section? (b) Whether, in the facts and circumstances of the case the Income Tax Appellate Tribunal was right in holding that even if the Assessee is termed as contractor he had developed, operated and maintained infrastructural facility and hence entitled to the deductions within the meaning of sub section? Depreciation @80% on civil construction, electrical and other non integral installations - Revenue argues that the expenditure in such activities cannot be seen as a part of installation of windmill and, therefore, the depreciation prescribed for the same would not be available to the assessee - HELD THAT:- Similar question had come up for consideration in THE COMMISSIONER OF INCOME TAX III, PUNE VERSUS COOPER FOUNDARY PVT. LTD. [2011 (6) TMI 837 - BOMBAY HIGH COURT] Tribunal has recorded finding of fact that windmill was erected in the desert area of Rajasthan which required special foundation of reinforced cement concrete and that the said reinforced cement concrete formed integral part of the windmill. Case of Commissioner of Income Tax Vs. Herdilla Chemicals Ltd. [ 1983 (6) TMI 1 - BOMBAY HIGH COURT] followed in allowing the claim of the assessee. In our opinion, the finding recorded by the Tribunal that RCC foundation forms integral part of the windmill is a finding of fact and no question of law arises from the same 2019 (4) TMI 1237 Accrual of income - effect of addendum of agreement - sale of rights - HELD THAT:- The facts as noted above clearly show that, the terms of initial agreement were revised through the addendum which was also executed during the same year. As per the revised terms, the assessee would receive only ₹ 5 crores during the current year and further ₹ 40,00,000/- in the subsequent year. The assessee only received subject sum of ₹ 5 crores, deducted tax at source on such payment and also claimed the same as its income. Correspondingly, the purchaser had claimed a sum of ₹ 5 crores by way of expenditure. By no logic, the sum of ₹ 7 crores can be stated to have accrued in favour of the assessee. Even the amount of ₹ 40,00,000/- to be received in the later year by virtue of addendum was never paid and the reasons for such non-payment was also recorded on 25th February, 2009 mainly attributing to the slow business and slum in the market. No question of law therefore arises. Expenditure of consultancy charges out of sale of rights to the audio songs - HELD THAT:- Tribunal while accepting the assessee's stand, noted that the payee has accepted the subject amount by way of income. The Tribunal also noted that the payment was made through cheque. The assessee had also pointed out the nature of services rendered by the Consultant. In the circumstances, the Tribunal accepted the assessee's contention of expenditure. The issue is predominantly based on facts. The Tribunal has noted the relevant fact and come to the conclusion that the expenditure was genuine and was made for the purpose of services rendered by the Consultant. No question of law arises in this respect. Allowable business expenditure u/s 37 - 'expenses for purchase of rights held as in the nature of dead expenses - HELD THAT:- We are in agreement with the view of the Tribunal. The assessee had purchased copyrights for a limited period of two years by incurring total cost of ₹ 2.25 crores. This expenditure was thus a business expenditure. Merely because, the assessee could sell only one of the three rights by giving a license to INX Media Ltd. would not change the nature of this expenditure. No question of law therefore arises in this respect also. - Revenue appeal dismissed. 2019 (4) TMI 1236 Payment of non-compete fees - allowable revenue expenditure u/s 37 or capital expenditure - whether payment was made by the assessee not only for acquiring an enduring benefit by stopping the erstwhile promoters in competing with the assessee in similar line of business but also to consolidate its business and therefore the same expenditure is a capital expenditure? - HELD THAT:- Tribunal considered the expenditure in question as revenue expenditure and granted the entire benefit for the year under consideration itself. In the case of M/s. Everest Advertising Pvt. Ltd. [2015 (1) TMI 968 - BOMBAY HIGH COURT ], the Division Bench of this Court had granted similar benefit in the case where the non-compete agreement was for a period of three years. The Madras High Court in the case of Asianet Communications Ltd. V. Commissioner of Income Tax, Chennai [ 2018 (8) TMI 1554 - MADRAS HIGH COURT ] also treated the expenditure as revenue in nature in a case where the non-compete agreement was for a period of five years holding that the same did not result into any enduring benefit to the assessee. Looking to the nature of non-compete agreement, as also the duration thereof, the Courts have recognised such expenditure as Revenue expenditure. In the present case, the assessee had executed subject agreement with the promoter of the Company to avoid immediate competition. The business of the assessee company continue. No new business was acquired. The benefit therefore was held by the Tribunal instantaneous. Tribunal was justified in treating the said payment of non-compete fees as revenue expenditure - Decided against revenue 2019 (4) TMI 1235 Unaccounted cash payments - search u/s 132 - two draft agreements found mentioning different sales consideration of same property - AO alleged that difference received in cash - HELD THAT:- The assessee pointed out that the agreement was never acted upon since later on it was found that the land was subject to several reservations of the Government departments such as the water supply department, fire department etc. Part of the land was also occupied by encroachers. The land was also found to be of new tenure which would imply that unless the same was converted into old tenure, the development on such land would not be possible. Inter-alia on such grounds, the Tribunal accepted the assessee's contention that the draft agreement was never acted upon by the parties Entire issue is factual. The Tribunal took into account the relevant facts and came to the conclusion that the addition of said sum of ₹ 1.53 crores by the Assessing Officer was not sustainable. No question of law arises in this respect. Addition based on the basis of loose papers found during search - HELD THAT:-While deleting the additions, the Tribunal assessed the material on record there is no evidence about the payment of amount of ₹ 20 lakh by cheque about which the investigation wing/search party has made thorough investigations, then the presumption about the payment of cash cannot be drawn under such circumstances. The additions solely on the basis of suspicion, how strong it may be, in our view, are not sustainable in the eyes of law. We therefore set aside the impugned additions made by the lower authorities. The appeal of the assessee is therefore allowed 2019 (4) TMI 1234 Condonation of delay of 1625 days - sufficient reasons for delay - issue on merit is covered in favour of the assessee - order was received by the peon as partner was outstation, who forgot to bring this to the notice of anyone - HELD THAT:- Explanation is not sufficient. Firstly, by merely making a statement that the peon who received the order forgot to inform anyone, the assessee cannot hope to explain such gross inordinate delay. Secondly, the date when he met with an accident, the period during which he was incapacitated due to such accident and such other relevant information is not supplied. There is no material to establish that he met with an accident due to which he could not attend the business of the firm nearly two years as claimed. The explanation is totally inadequate. We cannot ignore long and inordinate delay caused in filing appeal before the Tribunal. The conduct of the party may permit us to be liberal in condoning delay in a given case. However, merely because in other years appeals came to be filed by a litigant would not imply that he can take unlimited period of time while filing appeal in the later years. Delay rejected to be condoned. 2019 (4) TMI 1233 TDS u/s 193 - non deduction of tax on the interest paid to debenture holders - default u/s 201(1) - assessee was a sick company and was before BIFR - HELD THAT:- The assessee had issued convertible debentures to Banks and Financial Institutions, however, soon thereafter the assessee -company went sick and was before BIFR. No interest was paid on such debentures under such circumstances.The assessee to comply with the legal requirements, had credited such interest in the accounts of the debenture holders. Revenue may be correct in pointing out that the requirement of deducting TDS may arise even in a case where such interest is credited in the accounts of the creditor. However, in the peculiar facts of the present case such requirement cannot be stretched to unreasonable levels. The debenture holders never claimed interest. The assessee could never pay the interest. The assessee was a sick industrial unit. Its case was before BIFR. The entries crediting the interest had to be made to comply with the mandatory requirements of law. On the principle of real income theory also the order of Commissioner (Appeals) and the Tribunal can be supported. Appeal dismissed. 2019 (4) TMI 1232 Scope of assessment u/s. 153C - no incriminating material found during the search - recording of satisfaction - HELD THAT:- Tribunal has come to the conclusion that, there was no incriminating material found during the search on the basis of which the additions for any of the years under consideration could have been sustained. In that view of the matter, keeping other conclusions of the Tribunal aside, the additions were correctly deleted. This view is taken by Delhi High Court in the case of Commissioner of Income Tax V/s. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] - no question of law arises - Decided against revenue 2019 (4) TMI 1231 Revision u/s 263 - AO while passing the original assessment order had not examined the issue of allowability of the expenditure to acquire marketing rights of CD's - ITAT was justified in quashing the order passed by CIT u/s. 263 - HELD THAT:- It is by now well settled that, the Commissioner can exercise revisional powers under Section 263 of the Act only when it is found that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. In the present case, the Tribunal noted the observations of the Assessing Officer in the order of remand to the effect that Jain munis do not advocate spread of religion through use of computers, source of electronic media is usually shunned, very small section of the community uses computer technology for religious purposes as plenty of printed literature is available in the market. All these factors led to the market value of the CDs declining dramatically. It was on account of these reasons, that the assessee had incurred substantial loss arising out of reduction in the value of stock lying at the end of the year. The Tribunal, therefore noted that the Assessing Officer had carried out detailed enquiries and taken a plausible view. No reason to interfere with the view of the Tribunal. No question of law arises - Decided against revenue 2019 (4) TMI 1230 Estimation of Net Profit - sale on trading business - ITAT estimating net profit at 1.0% - HELD THAT:- At one stage, the Tribunal rejected the assessee's contention that the disclosure of gross profit at the rate of 1% to 1.5% in the new business, was correct reflection of the profitability. However, in the later portion, the Tribunal subjected the turnover from such business at a profit rate of 1%. This has clearly resulted into erroneous finding being arrived at by the Tribunal. Being an exercise predominantly in the nature of fact finding, we would therefore request the Tribunal to do it afresh after hearing both sides. For such purpose, we restore the Appeal before the Tribunal. We have not expressed any opinion on the merits of this issue and the Tribunal shall give its finding independently of any of the observations which have been made in this order. 2019 (4) TMI 1229 Disallowance of Amortized Premium - HELD THAT:- It is an admitted position that the controversy involved in the present case is no longer res integra as the same stands concluded by a decision of this High Court in the case of Commissioner of Incometax, RajkotII v. Rajkot District Cooperative Bank Ltd . . [ 2014 (3) TMI 110 - GUJARAT HIGH COURT] held that amortisation of premium paid on acquisition of securities when the same are acquired at the rate higher than the face value. Such amortisation would have to be for the remaining period of maturity. This precisely the Tribunal had directed in the impugned order. Though contended, no contrary instructions of CBDT are brought to our notice. The instruction in question having been issued under section 119(2) of the Incometax Act, 1961, would bind the Revenue. No question of law, therefore, arises. 2019 (4) TMI 1228 Revision u/s 263 - possible view - change in opinion - taxing the marked to market income on realized basis - assessee has claimed deduction for mark to market gains on open forward foreign exchange contracts as on the Balance Sheet date which was allowed by the AO. - CIT was of the view that the assessment order passed by the AO as erroneous so far as is prejudicial to the interest of revenue keeping in view Accounting Standard (AS) 30 and provisions of Section 145 - AS 11 - assessee has submitted that the AO made necessary inquiries for gain or loss on foreign exchange fluctuation - HELD THAT:- We are presently concerned with AY 2011-12. Thus, for us AS-11 issued by ICAI is relevant as we are dealing with AY 2011-12. The AS 11 The Effects of Changes in Foreign Exchange Rates dealt with manner in which changes occurring in foreign exchange rates as on the date of Balance Sheet are to be accounted for . The said Accounting Standard AS 11 is mandatory in nature and it was also notified by MCA and the companies are required to follow accounting treatment as specified in AS-11 rather than following Schedule VI of the Companies Act, 1956. The companies are mandatorily required to follow mercantile system of accounting as provided u/s 209 of The Companies Act, 1956. When Accountant Standards are issued by ICAI and they are notified by Ministry of Corporate Affairs , it has a binding force of law on companies and if the accounts are prepared in violation of notified Accounting Standards, then it could not be said that the accounts reflect true and fair view. AS-11 was duly notified by Ministry of Corporate Affairs, Government of India. The assessee has rightly accounted for said unrealised gains on mark to market basis on open forward contracts in foreign exchange on the date of Balance Sheet in its audited financial statements prepared for the year under consideration under the Companies Act. But the assessee erred in deducting these gains while computing income chargeable to tax under provisions of the 1961 Act because there is no other contrary provision in the 1961 Act stipulating the manner in which such losses/gains are to be brought to tax. When the expert body like ICAI issue Accounting Standards prescribing manner in which accounts are to be prepared and later it is notified by Government of India, Ministry of Corporate Affairs as mandatorily to be followed, it has force of law and it cannot be simply brushed aside while computing income chargeable to tax unless there are express provision in the 1961 Act to the contrary. There is no provision in the 1961 Act to contrary brought to our notice explaining in the manner how to bring to tax unrealised gains/losses of open forward contracts in foreign exchange on mark to market basis on the date of Balance Sheet. Perusal of AS-11 clearly stipulates that it is applicable to forward contracts in foreign exchange and the gains/losses on the reported date are to be taken to profit and loss account by converting on the rate of exchange prevailing on the reporting date. Thus in our considered view the accounting policy followed by the assessee for computing income by not bringing to tax unrealised gains/loss on the foreign exchange fluctuation on open forward contracts on mark to market basis on date of Balance Sheet based on the foreign currency rates prevailing on the reporting date was not a correct policy dehors binding force of AS-11 as well decision of Hon ble Supreme Court in the case of Woodward Governor India Private Limited [ 2009 (4) TMI 4 - SUPREME COURT] and will not result in computing correct income chargeable to tax within provisions of the 1961 Act. The decision of Hon ble Supreme Court in the case of Woodward Governor India Private Limited (supra) was rendered on 08.04.2009 while we are presently concerned with AY 2011-12. There cannot be any estoppel against law and method of accounting/policy followed by tax-payer which is contrary to law even if accepted by the AO after due enquiry cannot be said to be a view which could be said to be one of the possible or a plausible view and hence the view of the Ld. CIT cannot be held to be merely a change of opinion as learned CIT cannot be said to be substituting her view to the view of the AO rather what learned CIT through her revisionary powers u/s 263 was intending to be bring to tax income based on correct view in bringing to tax income chargeable to tax under the provisions of the 1961 Act which is supported by binding force of AS-11 and judgment of Hon ble Apex Court in the case of Woodward Governor India Private Limited(supra). Further, with the rollovers of these forward contracts in foreign exchange , the liability to pay tax can be indefinitely postponed. Thus, we hold that assessment order passed by the AO was not only erroneous but was also prejudicial to the interest of Revenue and the learned CIT has rightly invoked provisions of Section 263 of the 1961 Act . We have noted that learned CIT relied on AS 30 but it is AS 11 which is applicable for the year under consideration and method adopted by assessee to compute income chargeable to tax does not satisfy mandate of Section 145 of the 1961 Act. At the same breath, we are agreeable with the contention of learned counsel for the assessee that there cannot be double taxation of the same income which will result into double jeopardy which is impermissible as the same income cannot be taxed twice which is cardinal rule of taxation. We direct the AO to re-compute income of the succeeding year after verification so that the same income is not taxed twice - appeal dismissed in the manner indicated above 2019 (4) TMI 1227 Rectification u/s 254 - capital expenditure on CSR allowance - HELD THAT:- We notice that ld. AR submits that ITAT in its order ignored the decision of coordinate bench in assessee s own case decided in its favour, where the capital expenditure on CSR was allowed. He basically presses the point that ITAT should have followed the earlier orders but rather ITAT has distinguished the earlier order and discussed the issue in detail. The bench has discussed the relevant issue at length before coming to the conclusion, in our view, the argument of assessee suggest that we technically review the findings in the order passed. We do not think, we have right/power u/s 254(2) to review any of our order. Disallowance u/s 40(a)(ia) for non-deduction of tax on commission paid - HELD THAT:- Assessee came up on appeal objecting to the CIT(A) s order even though CIT(A) has given relief to the assessee but heavily relying on the decision of Merilyn Shipping [ 2012 (4) TMI 290 - ITAT VISAKHAPATNAM] . Ld. AR argued that the basic payment itself is not commission. Therefore, ITAT cannot take a view in line with AO. But, we notice that ld. CIT(A) has given relief to assessee relying on Merilyn Shipping decision and the Bench has adjudicated considering the recent development on the subject of paid/payable issue. Further, Bench has discussed at length before coming to the conclusion at variance with earlier years orders. Thus, the argument of the ld. AR suggest that we sit and review our own order. From the above, it is clear that ld. AR argues before us to review our own order. We do not have any right/power u/s 254(2) to review our order and we have not noticed any mistake apparent from record to modify anything u/s 254(2) of the Act. Therefore, the MA filed by the assessee is dismissed. 2019 (4) TMI 1226 Deemed dividend addition u/s 2(22)(e) - assessee has taken an advance over and above the accumulated profit declared in the Balance sheet of the company - reduction of tax liability from accumulated profit - HELD THAT:- As relying on GAUTAM SARABHAI TRUST NO. 23. [ 2001 (3) TMI 229 - ITAT AHMEDABAD-B] the accumulated profit, which is freely available for distribution of dividend, it does means that the profit after deduction of all liabilities due from the company is still profit which is available for distribution of dividend. The profit which is completely free from liabilities are the profit available for distribution of dividend. In the given case, no doubt, it is showing accumulated profit, but, it has determined tax liabilities, after deducting the tax liabilities, the profit available in the business for the purpose of dividend is negative accumulated profit. Therefore, the accumulated profit for the purpose of section 2(22)(e) is nil, hence, we delete addition u/s 2(22)(e) even though in this case, all the ingredients available to invoke the provision but the company does not have enough accumulated profit for distribution of dividend after deduction of tax liabilities. Accordingly, ground raised by the assessee is allowed. 2019 (4) TMI 1225 Rectification u/s 254 - non consideration of admission of additional evidence - Whether it alter the outcome of the decision? - HELD THAT:- Assessee has no doubt filed additional evidence before the Bench at the time of original hearing, but, in the ITAT order, there is no reference to such additional evidence nor it gave any findings whether accepted the additional evidence or declined. We are not in a position to express our view at the admissibility of the additional evidence and in the first place, it appears that it might have some bearing on the outcome of the decision, in case, the additional evidence is accepted. First, Bench has to evaluate the admissibility of the additional evidence and then, it has to evaluate whether the additional evidence filed by the assessee will have a bearing to lead a different conclusion or come to conclusion as per earlier bench decision. Therefore, in our view, assessee has a reasonable plea to consider. Therefore we are inclined to accept the contention of the assessee and re-fix the appeal of the assessee in order to adjudicate afresh. MA filed by the assessee is allowed. 2019 (4) TMI 1224 Penalty u/s 271(1)(c) - quantum additions - HELD THAT:- Issues regarding quantum additions have been either allowed or set aside to the Assessing Officer by Tribunal therefore, the penalty sustained by Learned CIT(A) do not survive and hence these are deleted. The Assessing Officer in the set aside proceedings may initiate penalties after completion of assessment in accordance with law. - Appeals of the assessee are allowed. 2019 (4) TMI 1223 Addition u/s 68 - Denial of principal of natural justice - addition merely on the strength of statement of third party - no statement is confronted to the assessee much less offered for cross examination which also lacks of independent corroboration from any incriminating material - HELD THAT:- As decided in SMT. JYOTI GUPTA VERSUS THE I.T.O, DELHI [ 2018 (11) TMI 1353 - ITAT NEW DELHI] since the impugned addition was made on the statement of Sh. Vikrant Kayan [third party] without providing any opportunity to the assessee to cross examine the same, which is in violation of principle of natural justice and against the law laid down by the Hon ble Supreme Court of India in the case of Andaman Timber vs. CIT [ 2015 (10) TMI 442 - SUPREME COURT] - Decided in favour of assessee. 2019 (4) TMI 1222 Rectification u/s 154 - deduction u/s. 54F denied - mistakes apparent from record - commercial building or residential building - AO has brought on record that the entire building was a commercial building - based on this finding CIT(A) rectified its order - HELD THAT:- CIT(A) in the earlier proceedings had held that the property on the second floor to be residential property. AO in the second round of litigation had observed that the entire building is a commercial building and therefore, held that the assessee is not eligible for deduction u/s. 54F. CIT (A) therefore, rectified the earlier order u/s. 154 on the basis of the findings of Assessing Officer. No doubt, u/s. 154 of the Act, only mistakes apparent from record can be rectified and if an order u/s. 154 has to be passed after long drawn arguments, then, it cannot be said that there is a mistake apparent from record. However, except for relying on the earlier order of the CIT (A), the assessee has brought on record any evidence to demonstrate that the two units on second floor of the building were residential units. AO has brought on record that the entire building was a commercial building and the assessee was entitled to office space on second floor of the building. Thus, clearly, it was factually incorrect to hold that the assessee has received two residential units. An erroneous finding of fact is undisputedly an error apparent from record rectifiable u/s 154 of the Act. Therefore, according to me, the order u/s. 154 issue stain able. Thus, the assessee s appeal is allowed. In view of the appeal holding the order u/s. 154 of the Act as sustainable, the order against the assessment order u/s. 143(3) r.w.s. 254 of the Act is also held to be sustainable. 2019 (4) TMI 1221 Revision u/s 263 - Debit balances written-off - claimed as business loss u/s 37 or under section 28 - HELD THAT:- A.O. passed the assessment order under section 143(3) of the I.T. Act, 1961, in which the A.O. did not mention any fact, explanation of assessee or his findings with regard to issue of debiting balance written-off by the assessee in the books of account. Assessee failed to produce any evidence or material on record including the order sheet of the A.O. to establish if A.O. examined the said issue at assessment stage. He has merely referred to certain replies filed by the assessee without reference to any query raised by the A.O. It is, thus, established on record that the A.O. did not examine this issue at assessment stage. Since no investigation or enquiry have been made on the present issue and the Ld. Pr. CIT passed the Order on 31.03.2016, therefore, Explanation-2 to Section 263 is clearly attracted in the present case The conditions of Explanation-2 to Section 263 of the I.T. Act which clearly satisfied in the present case. Therefore, the assessment order is clearly erroneous in so far as it is prejudicial to the interests of the Revenue on this issue. - Decided against assessee 2019 (4) TMI 1220 Addition of unexplained expenditure u/s 69C - no incriminating material found in search and seizure - advertisement expenses - disallowance u/s 14A - additional ground filed by the assessee challenging additions made u/s 153A as bad in law as the same were not made on the basis of incriminating material found during the course of search - HELD THAT:- Since, in the instant case also, a bare perusal of the assessment order shows that there is no mention of any incriminating material found during the course of search with respect to unexplained advertisement expenses or expenditure for earning tax free dividend income, therefore, in absence of any incriminating material found during the course of search, no addition on account of bogus advertisement expenses or disallowance u/s 14A r.w. Rule 8D can be made. In view of the decision of the coordinate Bench of the Tribunal in assessee s own case [ 2019 (3) TMI 1023 - ITAT DELHI] , we allow the legal ground raised by the assessee under Rule 27 of the ITAT Rules, 1963 and decide the same in favour of the assessee. Since the assessee succeeds on the legal ground, therefore, the appeal filed by the Revenue is dismissed. Disallowance u/s 14A - no exempt income - HELD THAT:- Since it is an admitted fact that no exempt income has been received by the assessee during the year, therefore, in view of the latest decision of the Hon'ble Supreme Court in the case of PCIT vs. Oil Industry Development Board of India [ 2019 (3) TMI 1571 - SUPREME COURT OF INDIA] , where it has been held that in absence of any exempt income, no disallowance u/s 14A r.w. Rule 8D is permissible, no disallowance u/s 14A r.w. Rule 8D is called for. 2019 (4) TMI 1219 Penalty u/s 271(1)(c) - Quantum addition extinguished - HELD THAT:- We find that sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. The assessee would be directed to pay a sum in addition to taxes, if any, payable him, which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment of income and furnishing of inaccurate particulars of income. The quantification of the penalty is depended upon the addition made to the income of the assessee. Since in the present case, basis for visiting the assessee with penalty has been extinguished by the AO by not making additions pursuant to the order of the Tribunal the impugned penalty does not survive. In other words, there is no room for the Revenue to impose penalty under section 271(1)(c) in this case. - Decided in favour of assessee. 2019 (4) TMI 1218 Addition on the basis of statement in survey u/s 133A - Difference in the closing stock and excess cash found - Addition on account of difference in cash and stock as per books of accounts and actual found by the Income Tax Official - Assessee filed certain reconciliation statement regarding the discrepancy in cash and valuation of closing stock - HELD THAT:- The assessee during the course of assessment proceedings had filed the movement of stock from 1st April, 2007 till 17th May, 2007. It has also given the quantity and rate of the stock found during the course of survey. We find AO, instead of examining the same has gone by the statement of the partner during the course of survey. No doubt, the assessee, in the instant case, had surrendered certain amount during the course of survey on the basis of certain discrepancies pointed out to one of the partners regarding the discrepancy in cash and the discrepancy in the valuation of closing stock. However, the same, in our opinion, cannot be conclusive and binding on the assessee once the assessee is able to substantiate with evidence to the satisfaction of the A.O. regarding the discrepancies. The lower authorities in the instant case appears to have made the addition solely on the basis of the statement recorded during the course of survey instead of examining thoroughly the reconciliation statement filed by the assessee during the course of assessment proceedings regarding the difference in the cash found and the difference in the valuation of closing stock - restore the issue to the file of the AO with a direction to thoroughly examine the reconciliation statement filed by the assessee - grounds allowed for statistical purposes. 2019 (4) TMI 1217 Disallowance of interest expenses - Assessee company has raised unsecured loan/other credits from various parties - HELD THAT:- While we accept the proposition as laid down by the ld.CIT(A) in principle, however, the fact remains that no evidence was filed either before the Assessing Officer or before the CIT(A) to suggest that such advances were given to companies/parties engaged in the business of real-estate and, in fact, the assessee has either purchased land from the said parties or has entered into any agreement with the same parties. The assessment order clearly reveals that despite opportunities granted by the Assessing Officer, the assessee failed to produce any documentary evidence to support its claim that the advances were given for purchase of land. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee. - Decided in favour of revenue for statistical purposes. Disallowance of Foreign Travel expenses, Business Promotion expenses and rebate - additional income surrendered by the assessee will cover the disallowance above - HELD THAT:- During the course of assessment proceedings, the assessee did not furnish the details as called for by the Assessing Officer for which he disallowed foreign travelling expenses and business promotion expenses. Although the CIT(A) deleted the addition/disallowance on the ground that the assessee has surrendered an amount of ₹ 461.15 lakh towards disallowance u/s 40A(3)/40(a)(ia) and u/s 68 and 69C of the Act and other unexplainable documents/entries for which no addition is called for, however, it is a fact that the assessee has claimed deduction u/s 80IB(10) on the additional income so declared. Therefore, it cannot be said that the additional income surrendered by the assessee will cover the disallowance of the above expenditure for want of bills and vouchers and the expenditure which is being claimed by the assessee. We, therefore, reverse the order of the CIT(A) and restore the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee. Ground of appeal Nos.2, 3 and 4 raised by the Revenue are accordingly allowed for statistical purposes. 2019 (4) TMI 1216 Appeal dismissed for non prosecution - non appearance by assessee - HELD THAT:- When these appeals were called for hearing, neither anybody appeared on behalf of the assessee nor adjournment application was filed. We find that proper notice of hearing has already been sent to the assessee. Under these circumstances, in our considered opinion, it appears that the assessee is not interested in prosecuting these appeals. As such we hold that these appeals are liable to be dismissed for non prosecution. We dismiss these appeals filed by the assessee for non prosecution. However, the assessee is at liberty to move application u/s 254 of the Act in case the assessee so desires. 2019 (4) TMI 1215 Withdrawal of registration granted U/s 12AA(3) U/s 10(23C)(vi) - allegation relate to diversion of fund of the assessee society for personal purposes, non-genuine scholarship expenses and addition to fixed assets in view of the payments made to Rajasthan Housing Board in contravention of Section 11(5) r.w.s 13(1)(c) - HELD THAT:- Diversion of the funds of the assessee society for personal purposes - collection of old denomination note as fee and deposit the same in related Co-operative Bank - HELD THAT:- We therefore find that there was suspicion in the mind of authorities that assessee s funds have been diverted as the cash book doesn t reflect any outward movement of cash. Further, even the Bank has not recorded such funds and there are allegations regarding exchange of old currency notes with new notes. To our mind, once the cash is found in possession of the bank where the assessee maintains its bank account and it is confirmed by the Bank officials that the cash so found belong to the assessee society, there is no basis to hold onto such suspicion as far as the assessee society is concerned. In the instant case, firstly the funds belonging to the assessee society have been physically found in the possession of the Bank at its strong room and not in possession of Shri keshav Badaya. Secondly, such funds have not been used or applied and have been physically found and thus, there is no benefit which can be said to have actually been gained by Shri Keshav Badaya either directly or indirectly in his individual capacity by having such funds in the possession of the Bank. In light of above, we are of the considered view that the provisions of section 13(1)(c) are not attracted in the instant and the contentions so advanced by the Revenue and the ld CIT DR cannot be accepted. Therefore, we find that it is a case of mere suspicion and not a conclusive finding and even the Department itself has given a clean chit to the Bank. As far as the assessee society is concerned, bank officials as well as the assessee s records conclusively prove that the funds so found are fees collected from the students duly recorded in the books of accounts and infact, such amount has been seized by the Department which further proves that there was no diversion of funds and no application for personal benefit of any person. Therefore, there is no basis to sustain the findings of the ld Pr CIT. Only in a scenario, where it is proved beyond doubt that the funds of the assessee society have actually been diverted for purposes other than the stated objects of the assessee society, it can be said that such funds have not been utilized for the purposes the exemption under the Income Tax Act has been granted to the assessee society and to the extent of such diversion, the provisions of section 11 and 12 shall not apply. Further, where the Revenue through its investigation finds that there is actual diversion of funds of the assessee society and such diversion has actually resulted in direct/indirect benefit of the related persons so defined u/s 13(3) of the Act, the activities and the conduct of the assessee society will surely come under the cloud. In the instant case, the cash has been physically found in possession of the assessee s bank and the said cash belongs to the assessee society as corroborated by the statements of the bank employees, there is thus no basis to hold that there is any diversion of funds of the assessee society for the personal benefit of Badaya family and the same cannot be a basis to withdrawn the exemption so granted to the assessee society u/s 12AA. Non-Genuine Scholarship Expenses - we find that the Revenue authorities have to appreciate that a student studying in a College or University cannot be equated with a regular vendor or a service provider. A student involvement is limited to the educational sphere and to a limited extent where he/she and their parents/guardians are required to pay his fees and receive scholarship wherever he/she is eligible for the same and nothing beyond that. Therefore, where there is a non compliance on part of certain students to respond to such notices/summons in a timely manner and in some cases, where they have responded though with wrong facts, the authorities have to appreciate the same in a more realistic manner rather than in a ritualistic manner and their conclusions should not be guided solely by non-appearance of certain students before them. In other words, unless the Revenue authorities are ceased of sufficient material or information and such material/information is credible enough to prove that the assessee society is withdrawing the funds of the society in the guise of scholarship expenses systematically over a period of time and such funds are not reaching the students concerned in whose name the scholarship payments have been shown to have been made, in such a case, the authorities have all the right and the jurisdiction to proceed against the society. However, in the instant case, there is nothing on record which has been brought on record to prove such mis-management and diversion of society funds. In our considered view, scholarship payments are genuine payments made by the assessee society and there is no basis to hold that the assessee society has misused the society funds in guise of scholarship payments. Therefore, the said findings of the ld Pr CIT cannot be sustained and cannot be made a basis to hold that the assessee society is not carrying out its activities as per its objects and the exemption granted u/s 12AA should be withdrawn. Payment made to Rajasthan Housing Board in contravention of Section 11(5) read with Section 13(1)(c) - We therefore find that the assessee society has entered into an agreement to sell with Adarsh Gyan Vidhalaya Samiti wherein the former has agreed to purchase an institutional plot of land which has been allotted to the latter vide conveyance cum perpetual lease deed for 99 years by the Rajasthan Housing Board. There are enabling provisions in the conveyance cum perpetual lease deed which allows such transfer subject to approval and sanction of Rajasthan Housing Board. Necessary permission has been sought from the Rajasthan Housing Board for such transfer in favour of the assessee society and the same is currently awaited and on receipt thereof, formal sale deed shall be executed in favour of the assessee society. The assessee society has already paid substantial amount of ₹ 6.73 Crores, out of total purchase consideration of ₹ 7.54 Crores in terms of agreement to sell, directly to Rajasthan Housing Board. Further, the assessee society is in effective possession of the said plot of land as it has since built a school building thereon and carrying on its educational activities and the fees so received have been reflected in its books of accounts. In the instant case, the assessee society having entered into an agreement to sell with Adarsh Gyan Vidyalya Society and having paid a substantial amount in consideration for purchase of land and in possession of the said land has clearly made an investment in an immoveable property though the same is subject to approval of Rajasthan Housing Board and signing of the final conveyance deed. Accordingly, in light of above discussions and in the entirety of facts and circumstances of the case, the payment to Rajasthan Housing Board is not in contravention of section 11(5) r/w section 13(1)(c) of the Act. Therefore, the findings of the ld Pr CIT cannot be sustained and cannot be made a basis to hold that the assessee society is not carrying out its activities as per its objects and the exemption granted under section 12AA should be withdrawn. In light of above discussions and in the entirety of facts and circumstances of the case, the findings of the ld Pr.CIT relating to diversion of fund of the assessee society for personal purposes, nongenuine scholarship expenses and payments made to Rajasthan Housing Board in contravention of Section 11(5) read with Section 13(1)(c) of the Act cannot be sustained. These are merely apprehension which have been raised by the ld. Pr. CIT and there is no credible evidence on record which can conclusively demonstrate that the assessee is not working as per the objects for which registration was initially granted, that the activities of the assessee s society are not genuine or any personal benefit has been derived by any person so defined u/s 13(3) of the Act. The case of the assessee therefore doesn t falls U/s 12AA(3) and 12AA(4) of the Act. In light of our details discussion and findings, the registration of the assessee society u/s 12AA is hereby directed to be restored from the date the same was withdrawn and cancelled by the ld. Pr. CIT in terms of the impugned order. 2019 (4) TMI 1214 Addition based on mismatch in amount reflected in AIR/26AS and the P L account - verification of wrong entry - HELD THAT:- As held in case of P.K. Rajasekar [ 2016 (9) TMI 1498 - ITAT CHENNAI] , Where assessee claimed that there was wrong credit entry by payer-client in Form 26AS, the AO has to examine its genuineness. The Assessing Officer was conferred the power of civil court to examine and find out the real nature of transaction. If the Assessing Officer could not exercise the power conferred on him, it is not known how the individual citizen of this country will be able to find out the genuineness of the transaction. Also it has been laid down by the CBDT in its Instruction No. 5/2013 dated 08.07.2013 that the AO may also, if deemed necessary, issue a notice to the deductor to compel him to file correction statement as per the procedure laid down. Therefore, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make an order afresh after giving reasonable opportunity of being heard to the assessee. We also direct the assessee to file the relevant documents/evidence before the AO. - Appeal is allowed for statistical purposes. 2019 (4) TMI 1193 Nature of income - profit earn on sale of shares - STCG or Business Income - HELD THAT:- CIT (Appeal) and tribunal held in favour of the assessee mainly on the ground that in the earlier assessment years the assessee had consistently shown the receipts of sale of share as capital gain which the revenue had also accepted. We do not find any error in view of tribunal. The tribunal had noted that in the earlier years the assessee had suffered loss. Therefore in the current year if the income was to be treated as business income, capital loss of the earlier year would not be assessable against such income. It appears that the Assessing Officer desired to tax income as business income in the current year, in view of the change in tax rates, between short term capital gain and business income, which in the earlier years was same. In such circumstances, no question of law arises - Appeal is dismissed Customs 2019 (4) TMI 1212 Maintainability of Settlement Commission application of Co-noticee - Imposition of penalty u/s 112(A) of Customs Act - scope of Section 127(B)(1) of the Customs Act - case of the Respondents is that the SCN dated 10.05.2006 was issued to the Petitioner for the limited purposes of imposing penalty under Section 112(A) of the Customs Act and that such demand for penalty does not come within the scope of Section 127(B)(1) of the Customs Act - HELD THAT:- It is clear that a common show cause notice dated 10.05.2006 was issued to M/s.Sri Devi Extractions Private Limited, Sri Vijay Jhavesr, Sri J.Kaviyarasan and Khader Nawaz, namely, the Petitioner herein. It is also the admitted position that the primary Applicant and other co-noticee approached the Settlement Commission and the said Application was admitted and settled vide Admission-cum-Final Order No.52/2006-Cus. dated 28.08.2006. The judgments relied upon by the learned counsel appearing for the Petitioner in the case of MAHARAJA CARGO VERSUS CUS. C. EX. SETTLEMENT COMMISSION, CHENNAI 2014 (11) TMI 1103 - MADRAS HIGH COURT [2014 (11) TMI 1103 - MADRAS HIGH COURT] are squarely applicable to the facts of present case, where it was held that when the Application of the main Applicant is admitted by the Commission, the Application of the co-noticee should also be entertained so as to avoid multiplicity of proceedings. The Application of the Petitioner for settlement should also be taken up for hearing and decided on merits - Petition allowed. 2019 (4) TMI 1211 Condonation of inordinate delay of 321 days in filing the appeals - HELD THAT:- The delay in filing the appeals before this Tribunal, is condoned. The Miscellaneous Applications (COD) are allowed. Maintainability of appeal - monetary amount involved in the appeal - HELD THAT:- The disputed duty involved in these cases is below the monetary limit of ₹ 10 lakhs which has been notified by the Government vide Circular No.390/Misc./163/2010-JC(17- 12-2015) dated 17th December, 2015 and F.No.390/Misc./116/2017-JC dated 04.04.2018. Accordingly, the appeals are dismissed under litigation policy. 2019 (4) TMI 1210 The process of implementation of issue of Final Order No 75647 of 2017 dated 02.02.2017 has been initiated and will be completed soon. Accordingly, no further directions are being issued on the Misc. Application, the same should be listed on Board on 22.02.2019. 2019 (4) TMI 1209 Maintainability of appeal - absence of the appellant and counsel - monetary amount involved in the appeal - HELD THAT:- Due to the continuous absence of the appellant and counsel, it is presumed that the appellant is not interested in prosecuting the matter. Further, the amount involved is only ₹ 76,000/- and as per the provisions of Section 35B of Central Excise Act, 1944, the appeal is liable to be dismissed on monetary limits. The appeal is dismissed both on the ground of non-prosecution and also on monetary limit. Insolvency & Bankruptcy 2019 (4) TMI 1208 Corporate Debtor - applicability of section 43, look back period - related party transaction - section 5(24) of the I B Code - preferential transaction - undervalued transactions - initiation of Corporate Insolvency Resolution Process - HELD THAT:- On perusal of the definition of the Related Party as given in Section 5(24)(i) of the Code, it is clear that body corporate, which is a holding company, the subsidiary or an Associate Company of Corporate Debtor, or a subsidiary of a holding company to which the Corporate Debtor is also a subsidiary, is covered u/s.5(24)(i)of I B Code as a related party. In the present case, the impugned transactions are with the holding company of the Corporate Debtor. Thus, the transaction can be said to be with a related party of the Corporate Debtor. Further, the look-back period as provided u/s.43(4)(a) will be two years preceding the insolvency commencement date. In this case, the insolvency commencement date is 27.6.2017. Therefore, only the transaction made between 28.6.2015 to 27.6.2017 will fall within the look-back period, as provided under section 43(4)(a) of the Code. The look-back period in the present case, as per the provisions of section 43(4)(a), would start from 28.6.2018. Therefore, the transactions carried on during the period 01.04.2015 to 26.6.2015 will be out of the purview of the Preferential Transactions. The Bottling agreement as entered into between the holding company and the Corporate Debtor is not produced on record by either side. As per the submission of the Applicant, the change in business model took place in F.Y. 2015-16 and without any specific date, it would be an obvious assumption that the transaction of change in business model took effect on 01.04.2015. Therefore, the transaction of change in the business model of the corporate Debtor falls beyond the look-back period and cannot be challenged as a preferential transaction under section 43 of the I B Code. Undervalued transaction - HELD THAT:- In the present case, on perusal of the forensic audit report, we found it written in the report that as per the agreement of the Corporate Debtor with MS Biotech Pvt. Ltd., the operating cost of the Corporate Debtor electricity, labour, security, etc. is to be borne by the MS Biotech Pvt. Ltd. however it is not the actual practice followed and the operating cost is born by the Corporate Debtor itself - The impugned transaction took place in the ordinary course of business of the Corporate Debtor and therefore exempted from being undervalued transaction. Sub-lease Agreement - HELD THAT:- Where the company is facing a financial crunch, the management of the company, in their commercial wisdom, would make all possible efforts to generate funds from whatever resources the company possess. The Corporate Debtor had a licence to operate its unit at an enhanced capacity but lacked the required funds to operate and utilise its resource optimally. In such a scenario, if the management of the company decides to sub-lease its extra and idle resource, which the company is neither utilising or can utilise in future due to the paucity of funds, it cannot be said as a transaction to defraud the creditors. It is a transaction in the ordinary course of business of the Corporate Debtor and cannot be held as undervalued, preferential or a transaction defrauding creditors - the relief sought by the Applicant against the sub-lease agreement is not maintainable and rejected. Machinery transferred - HELD THAT:- It is clear that the impugned assets were transferred to the holding company with an intent to protect the value of the assets. However, there is no consideration received by the Corporate Debtor against the said transfer, and the assets were not sold but only transferred to the holding company for its utilisation. Had the assets not being transferred, there was a risk of them getting wasted and spoiled. It is not disputed that the ownership of the assets is still with the Corporate Debtor and they are part of the liquidation estate of the Corporate Debtor - the assets of the Corporate Debtor shall be returned and restored to the Corporate Debtor by the holding company within one month from the date of this order. Application disposed off. 2019 (4) TMI 1207 Liquidation of the corporate debtor, M/s Integrated Caps Pvt. Ltd. - Initiation of Corporate Insolvency Resolution Process - Section 9 of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In the absence of any resolution plan and for want of time beyond statutory CIRP period; there is no other alternative but to order in conformity with the required majority decision of the CoC for liquidation of the corporate debtor under Section 33 of the Code. Application is allowed by ordering liquidation of the corporate debtor, namely M/s Integrated Caps Pvt. Ltd. in the manner laid down in the Chapter III of Part II of the Insolvency and Bankruptcy Code, 2016. 2019 (4) TMI 1206 Interim resolution professional (IRP) and / or resolution professional (RP) - contraventions of several provisions of the Insolvency and Bankruptcy Code, 2016 (Code), the IBBI (Insolvency Professionals) Regulations, 2016 (IPR) and the Code of Conduct under regulation 7(2) thereof, and the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. HELD THAT:- The DC finds that Mr. Ruia has contravened the provisions of sections 20, 22, 23, 208(2)(a) and (e) of the Insolvency and Bankruptcy Code, 2016, regulations 33 and 34 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and regulations 7(2)(a), (b) and (h) of the IBBI (Insolvency Professionals) Regulations, 2016 read with clauses 1, 2, 5, 9, 10, 12, 14, 16, 18, 19, 24, 25 and 27 of the Code of Conduct thereof. The registration of Mr. Sanjay Ruia as an Insolvency Professional, having Registration No. IBBI/IPA-001/IP-P00353/2017-2018/10654, shall be suspended for two year - Mr. Ruia shall not seek or accept any process or assignment or render any services under the Code during the period of suspension. He shall, however, continue to conduct and complete the assignments / processes he has in hand as on date of this order - Mr. Ruia shall (i) undergo the pre-registration educational course specified under regulation 5(b) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 from his Insolvency Professional Agency, and (ii) work for at least six months as an intern with a senior insolvency professional, at any time during the period of suspension, to improve his understanding of the Code and the regulations made thereunder. Service Tax 2019 (4) TMI 1205 CENVAT Credit - input services - Freight - GTA Service - reverse charge mechanism - HELD THAT:- There is no doubt that the tax liability on consideration for goods transport agency service falls upon the recipient of the service. It is also not in doubt that the individual truck operator is outside the pale of the taxable service in section 65 (105) (zzp) of Finance Act, 1994 as it is not the transport per se that is liable to tax but only such transportation as organised through an entity which takes responsibility for the safe delivery of the goods instead of the transporter; the undertaking of such responsibility is evidenced by the issue of consignment note and a truck operator, taking such responsibility upon itself, is not the object of the tax - The tax-paying recipient is, undoubtedly, entitled to avail the CENVAT credit of such tax incidence. If the payments made by the appellant were in the nature of financing of the cost of delivery to be deducted subsequently from the dues owed to the cane farmers, it would not have been labelled as freight in the books of accounts. At the same time, we are deprived of any certainty that the disputed amount was, indeed, obtained from the final accounts as asserted in the impugned order. We can certainly advert that none of the documents on record are amenable to description as consignment notes - the nature, and extent of, expenditure incurred as freight needs further scrutiny before it can be subjected to tax with the sure conviction that these were consideration for road transport contracted by the appellant. Appeal allowed by way of remand. 2019 (4) TMI 1204 Construction of Residential Complex - construction of houses for the Rajasthan Housing Board and M/s. Ansal Properties - HELD THAT:-The issue decided in the case of COMMISSIONER VERSUS MACRO MARVEL PROJECTS LTD. [ 2009 (7) TMI 1222 - SUPREME COURT] , where it was held that construction of individual residential units are not subject to levy of service tax - appeal allowed - decided in favor of appellant. 2019 (4) TMI 1203 Extended period of limitation - Business Auxiliary Services or not - multi-level marketing activities - HELD THAT:- The issue covered by the decision in the case of PARAMJIT KAUR VERSUS C.S.T., DELHI [ 2018 (4) TMI 962 - CESTAT NEW DELHI] , where it was held that Since the issue relates to interpretation of the taxability of service, the extended period of limitation cannot be invoked for confirmation of the service tax demand. The demand to be barred by limitation, except a part of the period, for which the matter is being remanded to the lower authorities for quantification of the demand falling within the limitation period - penalty set aside - appeal disposed off. 2019 (4) TMI 1202 Commercial and Industrial Construction Services - services of laying of pipeline for M/s. Jaipur Development Authority and M/s. Public Health Engineering for transportation of water by them - HELD THAT:- There is no dispute about the factual position that the alleged services were provided by the appellant to M/s. Jaipur Development Authority and M/s. Public Health Engineering. All the activities which stand mentioned by the adjudicating authority in the above referred paragraphs were activities connected to laying of pipelines. The said pipelines are being used by the service recipient for transportation of water, as per the constitutional duty of the said service recipients to provide clean water to the public. An identical situation was considered by the Tribunal in the case of NAGARJUNA CONSTRUCTION CO. LTD. VERSUS COMMR. OF C. EX., HYDERABAD [ 2010 (5) TMI 232 - CESTAT, BANGALORE] where it was held that laying of pipelines for transportation of water, which is meant for further distribution to the public at large would not be covered by the expression Commercial , so as to attract the service tax liability. Extended period of limitation - HELD THAT:- The fact that the matter was under litigation before the Tribunal and was ultimately concluded in favor of the assessees - also the issue was not free from doubt and there could be a bonafide belief on the part of the assessee to entertain a view that since the said activity is being done for the statutory authorities, the same would not be taxable. As such, the demand is barred by limitation. Appeal allowed - decided in favor of appellant. 2019 (4) TMI 1201 Demand of service tax - construction of complex services - works contract service - HELD THAT:- The issue covered by the decision in the case of MACRO MARVEL PROJECTS LTD. VERSUS COMMR. OF SERVICE TAX, CHENNAI [ 2008 (9) TMI 80 - CESTAT, CHENNAI] , where it was held that construction of individual residential units are not subject to levy of service tax - appeal allowed - decided in favor of appellant. 2019 (4) TMI 1200 Classification of service - Construction services - period of dispute is 10/09/2004 to 31/07/2006 - Commercial or Industrial Construction Service or Works Contract Service - assessee claims this to be composite contract - HELD THAT:- It is considered a contract for construction of Chimney for Super Thermal Power Plant. In the contract, clause 5.1.0 specifically mentions that the Sales Tax is to be paid on Works Contract basis. Hon ble Supreme court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] held that the composite contract involving supply of goods as well as providing Service Tax will be liable to Service Tax only under the category of works contract service after its introduction with effect from 01/06/2007. The Apex Court has further held that such individual contract cannot be made liable for payment of Service Tax under any other Category prior to the introduction of Works Contract Service. In the present case, since it is a composite contract, it will be liable to payment of Service Tax only with effect from 01/06/2007 under the category of Works Contract Service . Since the demand in the present case is entirely prior to this date, the Service Tax taken is liable to be set aside in lying with the Apex Court s decision. Appeal allowed - decided in favor of appellant. Central Excise 2019 (4) TMI 1199 Valuation of goods sold at the depots - Finalization of provisional assessment - adoption of transaction value to finalise the provisional assessment of goods sold at the depots instead of ascertainment under rule 7 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - clearance of goods on stock transfer basis - HELD THAT:- The scheme of valuation provides for assessment of duty on the transaction value which conforms to the parameters laid down in section 4 (1) of Central Excise Act, 1944. Such assessment may be final or could be deferred for final assessment through recourse to rule 7 of Central Excise Rules, 2002. In either situation, the transaction value is to be adopted unless at the time of clearance and assessment, under rule 5 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2002 there is lack of conformity to the word picture depicted in section 4(1)(a) of Central Excise Act, 1944. Therefore, it is only when the assessee opts for final assessment in the first instance despite doubt about rate of duty or valuation at the place of removal that recourse may be had to Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2002. Any other interpretation would render the provisions of rule 7 of Central Excise Rules, 2002 to be inoperable and superfluous. It is seen from the records that the order of the competent authority for provisional assessment, under rule 7 of Central Excise Rules, 2002, requires that the assessment be finalised at the end of every quarter. The said rule prescribes an outer time limit of six months for such finalisation which may be extended by the competent authority. Should be goods remain unsold beyond such statutory limit, the absence of a transaction value from the depot would bring the impugned goods within the ambit of section 4 (1)(b) of Central Excise Act, 1944 and rule 7 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2002. Appeal dismissed - decided against Revenue. 2019 (4) TMI 1198 Extended period of limitation - suppression and mis-statements of facts involved or not - Valuation - assessment of duty in accordance with section 4A of Central Excise Act, 1944 for the period from April 2003 to March 2007 - HELD THAT:- There is no doubt that the contravention of any of the provisions of Central Excise Act, 1944 or the rules framed thereunder can also be cause for invoking the extended period of limitation provided for in section 11 A of Central Excise Act, 1944. Nonetheless, while that may be a necessary limb, it does not suffice in the absence of the second limb, viz., intent to evade duty. It is a well-settled in law that mere non-payment of duty cannot be equated with evasion and, even less so, with intent to evade. That has to be established by circumstances. The practice by the appellant between 2003 and 2007 to discard applicability of section 4A of Central Excise Act, 1944 may not be easily amenable to labelling as intended to evade duty. In matters concerning the invoking of the extended period, which is also attended by a penalty of like amount under section 11AC of Central Excise Act, 1944, mere presumption will not suffice. The ingredients must be clearly established and benefit of doubt, if any, must go to the assessee. We are unable to accept the contention of Revenue that the adjudicator authority had failed to appreciate the circumstances appropriately while dropping the demand for the extended period - Appeal dismissed - decided against Revenue. 2019 (4) TMI 1197 100% EOU - debonding of unit - CENVAT Credit - denial on the ground that since the goods were exempted under Notification No. 23/03-CE dated 31.03.2003 (Serial No.1) unconditionally, therefore, the appellant should not have paid the SAD and consequently they were not entitled for cenvat credit - HELD THAT:- The appellant have admittedly paid the SAD without availing any exemption notification by virtue of Notification No. 19/03-Cus dated 01.03.2003, therefore, on this ground itself they are eligible for cenvat credit. Secondly, even if it is assumed that the goods is exempted under notification No. 23/03-CE, it has been held by the Coordinate Bench of this Tribunal in the case of CENTURY YARN VERSUS COMMISSIONER OF C. EX., INDORE [ 2011 (4) TMI 369 - CESTAT, NEW DELHI] that Notification No. 23/03-CE is not applicable in the case of de-bonding, therefore, there is no question of applicability of Notification No. 23/03-CE. The appellant is entitled for SAD paid by them at the time of de-bonding - Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2019 (4) TMI 1196 Reopening of assessment - bogus Form-F - sale of Butter and Deshi Ghee - interstate sale or not - HELD THAT:- Learned counsel for the revisionist could not dispute that findings recorded by the authorities below as well as by the Tribunal are findings of fact and nothing could be shown to demonstrate that the said findings are perverse or contrary to record or are otherwise not in accordance with law. Revision dismissed - decided against revisionist. 2019 (4) TMI 1192 Conditional order of stay - HELD THAT:- There is no reason to interfere in the matter - Considering the fervent plea made by the learned counsel for the petitioner, the petitioner shall be allowed to comply with the direction in four instalments starting from 11-03-2019 followed by every month. Petition disposed off. Wealth tax 2019 (4) TMI 1195 Urban land chargeable to wealth tax - Agricultural lands situated within the limits of city corporation - Lands in question exempted for wealth tax under section 2(ea) - HELD THAT:- Lands in question are exempted from wealth tax under section 2(ea) of the Wealth Tax Act, hence, not chargeable to wealth tax Agricultural lands situated within the limits of city corporation on which no construction is put up is not chargeable to wealth tax. Therefore, the assessee's case squarely falls within the definition of agricultural land as well as the amended provisions of Wealth Tax Act, where construction is not permissible. Accordingly we hold that the lands in question are exempted for wealth tax u/s 2(ea), hence not chargeable to wealth tax. We are unable to sustain the orders of the lower authorities and allow the appeal of the assessee. See SRI VEGESNA ANANTHA KOTI RAJU VERSUS DCWT (INTERNATIONAL TAXATION) VISAKHAPATNAM [ [ 2018 (2) TMI 1878 - ITAT VISAKHAPATNAM] ] Indian Laws 2019 (4) TMI 1194 Fake Note/Counterfeit Money - Section 489(B) of Indian Penal Code - presence of element of mens rea or not - whether on the basis of the material collected by the investigating agency and on the basis of which chargesheet has been filed, whether invocation and application of Section 489(B) of IPC against the Petitioner is justified? HELD THAT:- Mere possession of the counterfeit notes is not punishable under law and it must be established by prosecution that possession was with a knowledge that the said currency notes are fake or counterfeit. In such circumstances, in absence of any evidence brought on record by the prosecution as a part of chargesheet to demonstrate that possession of the Petitioner of the alleged currency notes which were deposited by her in the bank on 19th December, 2016 was with a knowledge that the same were counterfeit, Petitioner cannot tried for an offence under Section 489(B) in absence of any material to attribute such a knowledge on her part. This is a fit case where we should exercise our inherent jurisdiction under Section 482 of Code of Criminal Procedure and in any contingency even on culmination of a trial, the charge leveled against the Petitioner cannot be proved and would result into an acquittal - Petition allowed.
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