TMI Tax Updates - e-Newsletter
May 25, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. COST ACCOUNTING STANDARD ON CAPACITY DETERMINATION

   By: DR.MARIAPPAN GOVINDARAJAN

2. Revenue Department cannot block Electronic Credit Ledger by making negative balance

   By: Bimal jain

3. Assessee should approach the Commissioner under Section 80 of the CGST Act to seek relief for payment of interest in instalments

   By: Bimal jain

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CFD/CFD-TPD-1/P/CIR/2024/55 - dated 24-5-2024

Audiovisual (AV) presentation of disclosures made in Public Issue Offer Documents

2. SEBI/HO/MRD/MRD-PoD-1/P/CIR/2024/57 - dated 24-5-2024

Modification in Staggered Delivery Period in Commodity Futures Contracts

Customs

3. PUBLIC NOTICE No. 12 / 2024 - dated 22-5-2024

Launch of functionalities/features on Customs Brokers Licensing Management System (CBLMS).

4. PUBLIC NOTICE No. 07/2024 - dated 1-3-2024

Procedure for delivery of the Arrival/ Departure manifest-reg

Highlights / Catch Notes

GST

• Gauhati High Court Stays Tax Recovery Enforcement Over Unpaid Taxes and Input Tax Credit Misuse Amid Force Majeure Dispute.

  Case-Laws - HC : Before the Gauhati High Court, the issue revolved around the recovery of tax not paid or short paid, or input tax credit wrongly availed or utilized, leading to ineligible Input Tax Credit (ITC). The challenge was made against Notifications u/s 168A of the CGST Act. The court interpreted the term 'force majeure' as per the Explanation to Section 168A, encompassing events like war, epidemic, flood, drought, etc., affecting the Act's implementation. Various High Courts, including Allahabad, Gujarat, Punjab & Haryana, and Madras, had granted interim relief to the assessees, allowing proceedings but barring final orders or recovery. Given the ongoing examination of similar issues by different High Courts, the Gauhati High Court stayed the enforcement of recovery against the petitioner until further orders.
  Visit to Get Source

  ---

• Allahabad High Court Clarifies Independent Prosecution Permission Under CGST Act Section 134, Emphasizes Procedural Fairness.

  Case-Laws - HC : Before the Allahabad High Court, the issue revolved around the permission for prosecution independent of adjudication proceedings. The court emphasized that administrative satisfaction, as per Section 134 of the CGST Act, is to be determined by the Commissioner and not influenced by findings in adjudication. It was noted that the petitioner was not part of the adjudication process and was not given an opportunity to present their case before adverse observations were made in the order. Consequently, the court disposed of the writ petition, recognizing the importance of procedural fairness and the distinct roles of the Commissioner and the Additional Commissioner in such matters.
  Visit to Get Source

  ---

• HD: Appeal was dismissed for delay in filing under BGST Act. Appeal restored subject to conditions.

  Case-Laws - HC : In the case before Patna High Court, the issue was the condonation of delay in filing an appeal under sections 73 and 74 of the BGST Act. The court held that appeals under these sections must be filed by a specified date. However, it was noted that appeals pending before the authority could still be considered properly filed, even if there was a delay. The court ordered the appeal to be restored to the authority's files, subject to certain conditions being met by the petitioner. The impugned order was set aside, with the petitioner required to fulfill the conditions by a specified deadline for the appeal to be considered on its merits. The petition was disposed of accordingly.
  Visit to Get Source

  ---

• Delhi High Court Invalidates GST Registration Cancellation; Orders Re-evaluation of Petitioner's Response to Show Cause Notice.

  Case-Laws - HC : The Delhi High Court addressed the cancellation of GST registration due to an alleged excess claim of Input Tax Credit. The court found that the order was based solely on the petitioner's lack of response, without considering evidence provided by the petitioner. The court ruled that the petitioner should be given an opportunity to respond to the Show Cause Notice and that the Notice should be re-adjudicated in accordance with the law. The order of 21.12.2023 was set aside, and the Show Cause Notice was restored for further proceedings.
  Visit to Get Source

  ---

• E-way Bill Expired Due to Tyre Puncture: Court Reduces Penalty, No Evidence of Tax Evasion Found.

  Case-Laws - HC : The Rajasthan High Court considered a case involving the detention of goods due to an expired e-way bill, raising concerns about tax evasion. Citing a judgment from the Madhya Pradesh High Court, the Rajasthan High Court found that the delay in the e-way bill expiration was not due to fraudulent intent or negligence. The court noted that the expired e-way bill resulted from a delay caused by a tyre puncture, absolving the petitioner of any intention to evade tax. Emphasizing that all CGST/SGST taxes were paid, the court deemed the penalty imposed under Section 129(3) of the CGST Act unjustified, as the issue was the expired e-way bill, not the absence of one. The court quashed the impugned notice and orders, reducing the penalty to Rs. 10,000 under Section 122 of the CGST Act, as there was no evidence of tax evasion. The petition was partially allowed.
  Visit to Get Source

  ---

Income Tax

• Supreme Court affirms ICAI's authority to limit tax audits by Chartered Accountants, postpones enforcement until April 2024.

  Case-Laws - SC : The Supreme Court examined the validity of a guideline issued by the Institute of Chartered Accountants of India (ICAI) imposing a numerical restriction on the maximum number of tax audits a Chartered Accountant can accept u/s 44AB of the IT Act, 1961. The Court held that the Council of ICAI, under the 1949 Act, had the legal competence to impose such guidelines to regulate the profession of Chartered Accountants. The restriction was deemed reasonable and in the public interest to maintain the quality of tax audits. The Court quashed disciplinary proceedings against Chartered Accountants for breaching the guideline, citing uncertainty in the law due to the quashing of the earlier guideline. The Court reserved liberty for ICAI to enhance the specified number of tax audits in the future. The guideline was deemed not to be given effect until 01.04.2024. The Court disposed of the writ petitions accordingly, with liberty for representations to be made regarding any future amendments to the
  Visit to Get Source

  ---

• Deduction Denied for Profits from Repairs: Lack of Manufacturing Connection u/s 80IB.

  Case-Laws - HC : The case involves a dispute regarding the eligibility of deduction u/s 80IB for profits derived from repairs and maintenance services of moulds in an industrial undertaking. The court held that to qualify for the deduction, the industrial undertaking must derive profits from the manufacture or production of any article or thing. The receipts from repairs and maintenance were found to lack a direct nexus with the manufacturing activity, as evidenced by the absence of related contracts or documentation. Therefore, the profits from repairs and maintenance were deemed ineligible for deduction u/s 80IB, emphasizing that the deduction is limited to profits derived from the actual manufacturing or production activity of the industrial undertaking.
  Visit to Get Source

  ---

• Tribunal Upholds Deletion of Penalty on Bogus Purchases; No Concealment Found in Income Estimation Case.

  Case-Laws - AT : In the case of 2024 (5) TMI 1132 before the ITAT Mumbai, the issue pertained to penalty proceedings u/s. 271(1)(c) concerning the estimation of income on bogus purchases. The CIT(A) applied a gross profit rate of 10% on the bogus purchases instead of the entire amount added by the assessing officer, leading to the deletion of the penalty. The tribunal held that since the payments for the purchases were evidenced in the books and through banking channels, with corresponding utilization in the manufacturing account accepted, the entire purchases could not have been added u/s. 69C. The decision was in line with precedents such as PCIT vs. Jagdish Thakkar and PCIT vs. S V Jiwani. Consequently, the appeal of the Revenue was dismissed as there was no concealment of income based on the estimated profit rate of 10%. The penalty was rightly deleted by the CIT(A), as there was no furnishing of inaccurate particulars or concealment of income.
  Visit to Get Source

  ---

• ITAT - Additions u/s 68 - Source not substantiated - Only commission at 0.15% of alleged accommodation entry / amount to be added.

  Case-Laws - AT : In the case before ITAT Delhi, the issue revolved around the computation of commission income on credit entries and unexplained cash credit u/s 68. The assessee failed to substantiate the source of cash deposits but argued that he has only earned commission income on the entries provided by him. The Tribunal, considering previous rulings, treated the assessee as an Entry Operator and determined commission at 0.15% on the disputed amount. The AO was directed to charge commission accordingly.
  Visit to Get Source

  ---

• Intimation u/s 143(1) Moot Post Regular Assessment; Section 11 Exemption Appeals Focus on Full Assessment.

  Case-Laws - AT : The ITAT Delhi held that the merger of intimation/proceedings u/s 143(1) with regular assessment u/s 143(3) results in the intimation losing relevance once regular assessment is completed. The AO denied exemption u/s 11 due to non-filing of Form 10B, but the intimation u/s 143(1) only serves to verify information accuracy and does not carry the legitimacy of an assessment. The intimation merges with the regular assessment under u/s 143(3), making the appeal against the intimation infructuous. The eligibility for exemption u/s 11 post registration u/s 12A should be raised in the appeal against the regular assessment. The appeal was partly allowed in favor of the assessee, determining the demand raised in the 143(1) intimation as not sustainable.
  Visit to Get Source

  ---

• Tax Assessment Overturned: ITAT Delhi Rules Final Order Illegal Due to Missed Deadline on DRP Order Upload Timing.

  Case-Laws - AT : The ITAT Delhi held that the assessment u/s 144C(13) was time-barred, questioning the legality of the final assessment order. Referring to the case of GS Chatha Rice Mills, the crucial fact for the appeal was the date of uploading the DRP order onto the ITBA portal, which was unambiguously shown as 27th April 2022 in the intimation letter. All other submissions by the Respondents were considered, but the date of uploading the DRP order was deemed critical. As per section 144C(13), the assessment had to be completed by 31st May 2022, but in this case, it was finalized on 30th June 2022, making it time-barred and null. Consequently, the impugned assessment order dated 30th June 2022 was set aside as being barred by limitation, and the appeal of the assessee was allowed.
  Visit to Get Source

  ---

• ITAT Delhi rules no unexplained cash credit under Sec. 68; journal entries only. Allows project expenses despite earlier invoice.

  Case-Laws - AT : The ITAT Delhi addressed an addition u/s 41(1) converted from u/s 68, focusing on whether there was actual receipt of money or just journal entries for account adjustments. The AR argued that the entries were for loan adjustments from a prior year. The tribunal found the CIT(A)'s conclusion erroneous as there was no actual receipt of money, only journal entries reflecting borrowed funds and liabilities transferred to M/s Vrinda Developers Pvt. Ltd. The tribunal held that the journal entry did not constitute unexplained cash credit u/s 68, as it was a book entry transfer without a real cash credit. Citing a similar case, the tribunal emphasized the need for actual flow of funds to trigger the explanation requirement. Additionally, the tribunal allowed the expenditure related to a project started in the relevant year, despite the invoice being raised in the previous year. The decision favored the assessee based on project-related expenditure evidence.
  Visit to Get Source

  ---

• Tax Tribunal Overturns Bogus Purchase Addition Due to Lack of Evidence; Upholds Right to Cross-Examine and Natural Justice.

  Case-Laws - AT : The ITAT Hyderabad held that the addition of bogus purchases based on information from the Investigation Wing was not justified. The burden of proof shifted to the AO once the assessee provided documents and payments for the purchases. The AO should have examined the entities involved and provided evidence if the invoices were not genuine. The Revenue failed to present positive evidence against the genuineness of the purchases. The Tribunal emphasized that accepted sales and taxes paid by the assessee made it difficult to argue against the genuineness of purchases. The Tribunal rejected the Revenue's argument and cited legal precedents supporting the assessee's case. The right to cross-examine is a fundamental aspect of natural justice, and failure to provide this opportunity violates principles of fair play. The Tribunal allowed the appeal of the assessee based on these considerations.
  Visit to Get Source

  ---

• ITAT Mumbai upheld deduction u/s 80IA for business activities despite additions/disallowances on bogus purchases.

  Case-Laws - AT : The ITAT Mumbai upheld the disallowance made u/s. 80IA due to the assessee not claiming the deduction u/s. 80IA in response to the return filed u/s. 153A. The AO added bogus purchases, but the CIT(A) confirmed the addition while allowing deduction u/s. 80IA as the purchases were related to business activity. The AO applied gross profit rate to one party's purchases and deemed the other party's transactions as 'bogus,' leading to an increase in business income eligible for u/s. 80IA deduction. The ITAT relied on CBDT Circular No.37 of 2016 and past precedents, affirming the CIT(A)'s decision. The appeal was decided against the revenue.
  Visit to Get Source

  ---

• ITAT Kolkata held that no valid notice u/s 148 was issued by jurisdictional AO for reassessment. Reassessment proceedings deemed illegal.

  Case-Laws - AT : The ITAT Kolkata ruled on the validity of an assessment order u/s 147. The jurisdictional AO did not issue a valid notice u/s 148. The assessee argued that the ACIT lacked jurisdiction and a fresh notice should have been issued by the correct authority. Since no such notice was issued, the assessment proceedings were deemed illegal and void ab initio. The ITAT held that without a valid notice u/s 148, the reassessment proceedings were bad in law and quashed them, deleting the additions made. The appeal by the assessee was allowed.
  Visit to Get Source

  ---

• ITAT JODHPUR: Addition based on cash from property agreement termination & disputed business expenses deleted.

  Case-Laws - AT : The ITAT Jodhpur ruled on additions made based on cash received for termination of a property purchase agreement and business expenses related to disputed agreements. The tribunal held that in the case of termination of the property agreement, the cash source was established as the property was not transferred due to non-payment by the assessee. Regarding the investment in property, the registered deed supported the claim, and objections were not raised. The business expenses were deemed legitimate and should be deducted from income. Grounds 3(a), (b), and (c) of the assessee were allowed.
  Visit to Get Source

  ---

• ITAT Raipur held disallowance u/s 14A not justified as AO mechanically applied Rule 8D without proper satisfaction.

  Case-Laws - AT : The ITAT Raipur ruled on disallowance u/s 14A r.w.r. 8D regarding expenditure on exempt income. The assessee argued that no disallowance of interest expenditure claimed as deduction was warranted as it had sufficient self-owned funds for exempt income investments. The AO mechanically applied Rule 8D(2)(ii) for disallowance without proper satisfaction on the claim. The AO's general observations did not meet the legal requirement for a valid determination. The tribunal set aside the CIT(A)'s decision to uphold the disallowance, ruling in favor of the assessee due to the AO's failure to meet statutory obligations in assessing the claim.
  Visit to Get Source

  ---

• ITAT: Best Judgement assessment u/s 144: Assessee failed to provide any material contradicting the AO's findings

  Case-Laws - AT : In the case before ITAT Delhi, the Appellate Tribunal upheld the assessment made by the Assessing Officer (AO) u/s 144 of the Income Tax Act. The additions included depletion in the value of investment, writing off of debit balance, disallowance under section 40(a), and treatment of unsecured loans. The Tribunal noted that the assessee failed to provide any material contradicting the AO's findings. The auditor of the assessee also acknowledged the capital nature of the investment depletion, debit balance, and disallowances. Due to the lack of evidence and failure to confirm unsecured loans, the Tribunal affirmed the AO's findings and dismissed the assessee's appeal.
  Visit to Get Source

  ---

• ITAT Hyderabad rules property sale gains as capital gains, emphasizes consistent treatment for similar Joint Development Agreements.

  Case-Laws - AT : The ITAT Hyderabad addressed the issue of determining the correct head of income for gains on the sale of property, whether it should be classified as business income or capital gains based on the intention of the assessee. The tribunal emphasized the importance of consistency in applying decisions across connected assessees with similar Joint Development Agreements (JDA). The tribunal held that if a co-ordinate Bench had previously ruled in favor of an assessee with rights from the same JDA, the principle should be applied uniformly unless there is a change in law or facts. The Revenue's inconsistent treatment of assessees in similar situations was deemed unacceptable, as it goes against the principle of certainty and fairness in tax law. The tribunal also upheld the CIT(A)'s decision to treat the income as long-term capital gains, in line with the co-ordinate Bench's reasoning and circulars issued by the Revenue.
  Visit to Get Source

  ---

• ITAT Indore grants registration u/s 12AB to assessee for charitable activities. Commercial receipts not exceeding 20% of total receipts.

  Case-Laws - AT : The ITAT Indore considered an appeal regarding exemption u/s 11 and registration u/s 12AB for a charitable organization. The CIT(E) rejected the application based on the belief that the organization's commercial receipts exceeded 20% of total receipts. However, the ITAT found that the organization was not engaged in trade or business but provided services for charitable purposes, charging nominal fees to cover costs. Citing precedent, the ITAT concluded that such activities did not constitute commercial activities. The ITAT set aside the CIT(E)'s decision and directed the grant of registration u/s 12AB, allowing the organization's appeal.
  Visit to Get Source

  ---

• Tribunal Dismisses Penalty Relief Claim for Defective Notice; Rejects Penalties on Estimated Income from Bogus Purchases.

  Case-Laws - AT : The ITAT Mumbai addressed two key issues in the case. Firstly, regarding the penalty u/s 271(1)(c), the tribunal held that the absence of a tick mark on the notice did not prejudice the assessee as they were fully aware of the reasons for penalty initiation. The tribunal emphasized that the assessee actively participated in the proceedings and responded to the notice adequately. Citing the Veena Textiles case, the tribunal dismissed the argument that the defective notice provided grounds for relief.Secondly, concerning the penalty imposed on the estimation of income from bogus purchases, the tribunal ruled in favor of the assessee. It highlighted that when additions are based on estimates, as in this case where a percentage of bogus purchases was added, penalty u/s 271(1)(c) is not sustainable. The tribunal noted that since the purchases were paid through legitimate channels and there were corresponding sales, applying an ad hoc GP rate on alleged bogus purchases does not warrant a p
  Visit to Get Source

  ---

• ITAT Hyderabad upheld Corporate Guarantee Commission at 0.53% for foreign AEs. Interest on Trade Receivables benchmarked at 6% SBI rate.

  Case-Laws - AT : The ITAT Hyderabad upheld the Corporate Guarantee Commission at 0.53% for guarantees to foreign AEs, rejecting the AO's 1.8% rate. The tribunal determined the pro rata guarantee at 30.50% of a $10 million loan balance. The CIT(A) classified corporate guarantees as international transactions and set the commission at 0.53%. Interest on trade receivables was benchmarked at 6% SBI rate. The tribunal remanded R&D, Head Office, and Marketing expenses issues back to the AO/TPO for fresh assessment, citing a violation of natural justice. The tribunal directed the assessee to provide segmental accounts for accurate benchmarking. The tribunal excluded certain comparables based on RPT filter agreement.
  Visit to Get Source

  ---

Customs

• CESTAT Chandigarh: Appeals by Revenue below Rs.50 lakhs limit not maintainable as per CBIC circular.

  Case-Laws - AT : In the case before CESTAT Chandigarh, the issue revolved around the monetary limit for filing appeals by the Revenue Department as per CBIC circulars. The latest circular dated 02.11.2023 set a threshold of Rs.50 lakhs below which no appeal should be filed before CESTAT, with a requirement to withdraw any such appeals already filed. This circular was issued u/s 131BA of the Customs Act, 1962. The appeals in question had duty amounts below the prescribed limit, making them non-maintainable. CESTAT dismissed all 13 appeals based on the CBIC instructions, without delving into any legal questions.
  Visit to Get Source

  ---

Indian Laws

• Accused convicted u/s 138 N.I. Act for dishonour of cheque. Even a blank signed cheque leaf implies a debt under u/s 139

  Case-Laws - HC : The Calcutta High Court ruled on a case involving dishonour of a cheque due to insufficient funds. The accused was acquitted as the complainant failed to prove money lending authority and rebut the presumption u/s 139 of the Negotiable Instruments Act. The court held that the demand notice and presumption favored the complainant. The magistrate's findings were deemed contrary to the law. Referring to a Supreme Court case, it was stated that even a blank signed cheque leaf implies a debt under u/s 139. The accused was convicted u/s 138 and directed to pay a fine of Rs. 8 lakhs within two months or face imprisonment. The application was disposed of accordingly.
  Visit to Get Source

  ---

IBC

• Tribunal Upholds Resolution Plan, Dismisses Appeal; Struck-Off Company's Financial Obligations Affirmed Despite Revival Status.

  Case-Laws - AT : The National Company Law Appellate Tribunal, Principal Bench, New Delhi, addressed the validity of the Corporate Insolvency Resolution Process (CIRP) against a struck-off company. The Tribunal found that the company's revival status in the Master Data of the Corporate Debtor and non-compliance with the Companies Act did not absolve it of financial liabilities. Late claims post-approval of the Resolution Plan were not accepted, as confirmed by the Tribunal. The impact of settlement agreements on the Corporate Debtor's liability was also discussed, with the Tribunal emphasizing the continued obligation of the Corporate Debtor to discharge its financial debt despite claims to the contrary. The Tribunal dismissed the appeal, upholding the order approving the Resolution Plan.
  Visit to Get Source

  ---

PMLA

• Indian Supreme Court Quashes Arrest Over Lack of Written Grounds, Sets Precedent for PMLA and UAPA Cases.

  Case-Laws - SC : The Supreme Court of India examined the legality of the arrest of the petitioner under the Prevention of Money Laundering Act (PMLA) and the Unlawful Activities (Prevention) Act (UAPA). The Court found no significant difference between the provisions of Section 19 of the PMLA and Section 43B of the UAPA regarding the communication of grounds for arrest. Both provisions stem from the constitutional safeguard under Article 22(1) of the Indian Constitution. The Court emphasized the fundamental right of an arrested person to be informed in writing of the grounds for arrest promptly. Failure to provide written grounds of arrest before remand vitiates the arrest and subsequent proceedings. The Court held that the arrest and remand orders were invalid, quashed them, and directed the release of the appellant. The judgment sets a binding precedent for all courts in the country.
  Visit to Get Source

  ---

Service Tax

• CESTAT New Delhi held that service tax on late delivery & non-execution of work as compensation is not applicable as per circular by Department of Revenue.

  Case-Laws - AT : CESTAT New Delhi ruled on the levy of service tax on income (compensation received) from late delivery of materials and non-execution of work. The appellant, engaged in electricity generation, was found to have provided a 'declared service' u/s 66E(e) of the Finance Act. The circular by the Department of Revenue clarified that there must be an express or implied agreement for taxable supply to exist, emphasizing the need for consideration in such agreements. The Tribunal's decisions in similar cases supported the appellant, leading to the dismissal of the department's appeal. The Service Tax Appeal by the appellant was allowed.
  Visit to Get Source

  ---

• Appellate tribunal grants refund with interest for service tax paid under protest; allows CENVAT credit distribution to manufacturing units.

  Case-Laws - AT : The CESTAT Allahabad Appellate Tribunal ruled in a case involving the demand of service tax for services rendered by a non-resident from a country outside India related to the issuance of Foreign Currency Convertible Bonds (FCCB) falling under banking and financial services. The appellant had paid the service tax under protest and deposited the amount demanded during the investigation. The tribunal held that the demand of service tax against the appellant was dropped, entitling them to a refund of the amount paid along with interest. The appellant had taken CENVAT credit of the amount deposited and distributed it to their manufacturing units as they were registered as an input service distributor. The tribunal found no reason to disallow the distribution of the credit, as the service tax was deemed not payable. The tribunal also noted that the show cause notice and impugned order did not cite any legal provisions for the recovery of CENVAT credit, rendering the recovery order invalid.
  Visit to Get Source

  ---

Central Excise

• Admissibility of electronic evidence u/s 36B - Compliance issue - Demand quantification based on cash to invoice value - CESTAT set aside the demand.

  Case-Laws - AT : The case before CESTAT Chennai involved the recovery of short-paid excise duty, interest, and penalty, focusing on the admissibility of electronic evidence obtained during previous proceedings for a different company. The key issues included compliance with Section 36B of the Central Excise Act, 1944, quantification of demand based on cash to invoice value, and alleged suppression of facts. The tribunal found that the electronic evidence did not comply with Section 36B, rendering it inadmissible. Additionally, the method of quantifying duty based on dealer prices from different regions was deemed inappropriate. Ultimately, the demand for duty, interest, and penalties was not sustained, and the appeal was allowed.
  Visit to Get Source

  ---

VAT

• Andhra Pradesh HC: GST registration canceled. Petition dismissed on the ground of delay.

  Case-Laws - HC : The case before the Andhra Pradesh High Court involved a challenge to the cancellation of GST registration due to delay in filing a writ petition and alleged violation of natural justice principles. The court held that the retrospective effect of the impugned order was valid. Referring to a Supreme Court decision, it clarified that claims for refund must adhere to specific rules and limitations. The court found no violation of natural justice as the petitioner failed to respond to a show cause notice. It also determined that no hearing opportunity was required before the suspension of registration. Ultimately, the petition was dismissed.
  Visit to Get Source

  ---

Case Laws:

• GST

• 2024 (5) TMI 1140
  Condonation of delay in filing appeal - appeal barred by time as the same was filed beyond the prescribed period of limitation - HELD THAT:- Although, the explanation does not appear to be entirely satisfactory, however, for the ends of justice, the delay in filing the appeal under Section 107 of the said Act should be and is accordingly condoned and the order dated 20th December 2023 issued in Form GST APL-02 stands set aside. The appeal is accordingly restored to its original file and number. The petition is disposed off.

  ---

• 2024 (5) TMI 1139
  Recovery of tax not paid or short paid or of input tax credit wrongly availed or utilized - Ineligible Input Tax Credit [ITC] - Challenge to Notifications u/s 168A of CGST Act - HELD THAT:- In the Explanation to Section 168A of the CGST Act, 2017, the expression force majeure means a case of war, epidemic, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature or otherwise affecting the implementation of any of the provisions of the Act. It is noticed that the time limit under sub-section [10] of Section 73 of the CGCT Act was extended once prior to the Notification dated 31.03.2023. The Hon ble Allahabad High Court, the Hon ble Gujarat High Court, the Hon ble Punjab Haryana High Court, the Hon ble Madras High Court and this Court, have provided interim reliefs to the noticees/assessees by inter alia observing that the proceedings in pursuance of the impugned Show Cause Notice may proceed but no final order shall be passed and if final order is passed already, no recovery is to be effected. The said interim orders are stated to be in operation till date. Taking note of the fact that similar issues are being examined by different High Courts including this Court; this Court is inclined to provide that till further orders of this Court, the recovery of the amount assessed against the petitioner by the Order-in-Original shall not be enforced.

  ---

• 2024 (5) TMI 1138
  Challenge to an order passed by the respondent under Section 73 of the CGST/TNGST Act - discrepancies in GSTR-1 and GSTR-3B returns filed by the petitioner - HELD THAT:- This Court is inclined to set aside the impugned order dated 12.10.2023 issued on the ground of mismatch with regard to the GSTR-1 and the GSTR-3B returns filed by the petitioner and considering the submission of the learned counsel for the petitioner that he is ready to submit all the documents along with proper explanation before the first respondent. The impugned order dated 12.10.2023 is set aside and the matter is remanded back to the first respondent for fresh consideration - Petition disposed off by way of remand.

  ---

• 2024 (5) TMI 1137
  Validity of notice by which GST-interest liability on account of delay in payment of GST has been issued - notice has been issued on a pre-judged determination of interest liability without affording any opportunity of hearing - Violation of principles of natural justice - HELD THAT:- The contents of the notice clearly show that in case opportunity of voluntary compliance as suggested was not availed, appropriate action for recovery of interest shall be initiated under Section 79 of the CGST Act, 2017 and corresponding provisions under IGST Act, 2017 and RGST Act, 2017. Therefore, the notice only gives the petitioner an opportunity to make voluntary compliance. It goes without saying that if the petitioner is not accepting the same and not making voluntary compliance, the respondents would be initiating proceedings under Section 79 of the CGST Act, 2017. There is no reason at this stage to hold that the petitioner would not be given proper opportunity of hearing against proposed recovery. The petitioner is disposed off.

  ---

• 2024 (5) TMI 1136
  Disposal of petition in absence of constituted Tribunal - applicability of Section 112(8) of Rajasthan Goods and Services Tax Act, 2017 - HELD THAT:- This petition, at this stage, is disposed off with a direction that in case petitioner makes payment as per provisions contained in Sub-section(8) of Section 112 of the Act, further proceedings shall not be drawn for recovery of the balance amount, provided that the petitioner avails statutory remedy of appeal within a period of three months from the date of the constitution of the Tribunal. Petition disposed off.

  ---

• 2024 (5) TMI 1135
  Permission for prosecution independent of adjudication proceedings - pre-judging of issues in adjudication order - administrative satisfaction contemplated under Section 134 of the CGST Act - absence of petitioner in adjudication proceedings - HELD THAT:- No useful purpose may be served in keeping this petition pending or calling for counter affidavit at this stage. This much is clear that the administrative satisfaction contemplated under Section 134 of the CGST Act, 2017 is to be recorded by the Commissioner. It is not to be dictated by any findings recorded in adjudication proceedings - At the same time, the Additional Commissioner who has passed the adjudication order is not the Commissioner. It is also true that the petitioner was not party to the adjudication proceedings and was not heard before adverse observation came to be recorded in the impugned order. The writ petition is disposed of.

  ---

• 2024 (5) TMI 1134
  Condonation of delay in filing appeal - appeal rejected for being beyond the statutory time limit - extension of time for filing appeals u/s 73 and 74 of the BGST Act - HELD THAT:- An appeal against an order under Section 73 or 74 has to be filed on or before 31.01.2024, and any appeal filed which is pending before the authority could also be considered as properly filed, even if there is delay in such filing. In the present case, the appeal was filed and was dismissed by the first Appellate Authority. In such circumstances, it is only proper that the appeal be restored to the files of the Authority subject to the conditions under paragraph no. 3 being satisfied - Hence the petitioner would be entitled to satisfy paragraph no. 3 of the aforesaid Notification by paying up the deficient amounts as would be required to maintain the appeal under the notification. The impugned order dated 03.05.2023 at Annexure-4 is set aside on condition of the assessee satisfying the aforesaid conditions before the time stipulated in Notification; i.e. 31.01.2024, in which event, the appeal would be taken up and considered on merits - petition disposed off.

  ---

• 2024 (5) TMI 1126
  Cancellation of GST registration of petitioner - excess claim of Input Tax Credit or not - demand u/s 73 with penalty - order passed solely on the ground that there was no response received from the petitioner - HELD THAT:- Perusal of the order shows that the same has been passed solely on the ground that there was no response received from the petitioner. Petitioner has annexed the copies of certain account statements as well as invoices to contend that the petitioner had not availed Input Tax Credit, contrary to its entitlement. Keeping in view the peculiar facts and circumstances of the case, one opportunity should be granted to the petitioner to file a response to the Show Cause Notice. Thereafter, the Show Cause Notice shall be re-adjudicated in accordance with law. The impugned order dated 21.12.2023 is set aside. The Show Cause Notice is restored on the file of proper officer - Petition disposed off.

  ---

• 2024 (5) TMI 1122
  Detention of goods - e-way bill had expired 44 minutes ago - evasion of tax or not - HELD THAT:- This Court considers it appropriate to reproduce the relevant portion of the judgment rendered by a Division Bench of the Hon ble Madhya Pradesh High Court in the case of M/s. Daya Shaker Singh vs. State of Madhya Pradesh [ 2022 (8) TMI 814 - MADHYA PRADESH HIGH COURT ] where it was held that In the instant case, the delay of almost 4:30 hours before which E-way Bill stood expired appears to be bona fide and without establishing fraudulent intent and negligence on the part of petitioner, the impugned notice/order could not have been passed. This Court further observes that the only fault lying with the petitioner was that the e-way bill with regard to the goods that were being transported had expired 44 minutes before the inspection took place due to the delay caused resulting from the tyre puncture for no fault of either of the petitioner or the driver of the truck, thus it cannot be said that there existed an intention to evade tax or any fraudulent intention on part of the petitioner; the only issue lied with expiry of the e-way bill and not renewing the same. It is not in dispute that all taxes under the regime of CGST/ SGST were paid for. This Court further observes that the impugned notice was issued and the impugned order dated 01.03.2021 was passed under Section 129 (3) of the CGST Act, 2017, the same being completely unjustified in the eye of law as the issue was not one of there not being an e-way bill, but one of the existing e-way bill having expired during transit, thus imposition of such a heavy penalty for a minor offence is unacceptable and the penalty imposed should have been as per Section 122 of the CGST Act, 2017 of Rs. 10,000/-, as there is no apparent case of tax evasion. This Court is of the opinion that the impugned notice and the impugned orders dated 01.03.2021 and 24.05.2021 deserve to be quashed and set aside and the same are hereby quashed and set aside - Petition allowed in part.

  ---

• Income Tax

• 2024 (5) TMI 1141
  Validity of limits on tax audits to be done by the Chartered Accountants - mandatory ceiling limit imposed by Clause 6.0, Chapter VI of said Guidelines on the number of tax audits that a Chartered Accountant can accept in a financial year under Section 44AB - numerical restriction on the maximum number of tax audits accepted by CA - Potential Enhancement of the Specified Number of Tax Audits - validity of Clause 6 of Guidelines No. 1-CA(7)/02/2008 dated 08.08.2008 issued by the Institute of Chartered Accountants of India [ICAI] - Liberty as reserved to the respondent-Institute to enhance the specified number of audits that a Chartered Accountant can undertake under Section 44AB of the IT Act, 1961, Whether the Council of the respondent-Institute, under the 1949 Act, was competent to impose, by way of Guidelines, a numerical restriction on the maximum number of tax audits that could be accepted by a Chartered Accountant, u/s 44AB of the IT Act, 1961, in a Financial Year by way of a Guideline? - HELD THAT:- As perused the impugned Guideline dated 08.08.2008 which is extracted above. The same has to be read in the context of the respondent-Institute functioning under the overall control, guidance and supervision of the Council which means the Council of the Institute has to carry out the duties so as to achieve the objects of the Act as delineated in its various provisions of the 1949 Act, vide Section 15. The power vested in the Council is general insofar as the carrying out the provision of the Act is concerned and in particular and without prejudice to the generality of the aforesaid powers, certain duties have been specifically delineated. This is evident on a reading of sub-sections (1) and (2) of Section 15 of the 1949 Act. One of the objects of the 1949 Act is to ensure that the profession of the Chartered Accountant in the country maintains high professional ethics and renders quality service inasmuch as Chartered Accountants are absolutely necessary for the efficient tax administration in the country. That on account of their services, the onerous duties cast on the assessing officer as well as the ITD is reduced. This would however depend upon the quality of service that is rendered by the Chartered Accountant as a professional for which regulation of the profession is necessary and the respondent-Institute has been established for, inter alia, such regulation of the profession. Chapter V of the 1949 Act assumes importance - the deeming provision would imply that with the passage of time, there could be newer misconducts which could be included in the Schedules in the form of regulations or Guidelines. The Schedules are a part of the 1949 Act which has been passed by the Parliament. But bearing in mind the fact that in future, it may not always be possible for the Parliament to go on amending the Schedules to the Act so as to incorporate newer professional misconducts particularly with emerging technology and its applicability to the profession of Chartered Accountancy in India, Part II of Second Schedule by way of a foresight has delegated the power to the Council to make any regulation or Guideline, the breach of which would amount to a misconduct. This delegation to define and enumerate a misconduct by way of a regulation or a Guideline is a legislative device adopted by the Parliament so as to leave it to the discretion of the Council of the respondent-Institute to incorporate, define and insert a Guideline or a regulation, the breach of which would result in a misconduct committed by a Chartered Accountant. The delegation of this power under Part II of the Second Schedule of the 1949 Act made by Parliament in favour of the Council of the respondent-Institute cannot be faulted with. This is on account of the fact that the 1949 Act itself defines certain types of misconduct vis- -vis a Chartered Accountant. But in the year 1949, the Parliament could not have envisaged every possible variety or type of commission or omission which could be a misconduct by a Chartered Accountant. Therefore, the delegation has been made by the Parliament to the Council of the respondent-Institute to make regulations or Guidelines, the breach of which would result in a professional misconduct. The aforesaid delegation of the Parliament to the Council of the respondent-Institute is clearly to define possible types of misdemeanours in the Second Schedule in the form of a regulation or a Guideline, the breach of which would result in a misconduct in futuro. This is in order to avoid the Parliament itself amending the Schedules to the 1949 Act every time a different type of misconduct is to be inserted to the Schedules by way of an amendment to the Act. Therefore, the regulation or Guideline issued by the Council, the breach of which would result in a professional misconduct, being a part of clause 1 of Part II of the Second Schedule have to be read as part and parcel of the 1949 Act itself. The delegation of powers to add newer types of misconducts by way of a regulation or a Guideline is neither excessive nor ultra vires under Section 22 of the 1949 Act which deems any breach of a regulation or Guideline as a misconduct as per Clause 1 of part II of Schedule II to the 1949 Act. Thus Council of the respondent-Institute had the legal competence to frame the impugned Guideline restricting the number of tax audits that a Chartered Accountant could carry out which was initially thirty and later raised to forty-five and thereafter to sixty in an assessment year. Therefore, the Council of the respondent-Institute having the legal competence to frame the Guidelines, the breach of which would result in professional misconduct, in terms of clause 1 of Part II of the Second Schedule of the 1949 Act cannot be held to be vitiated on account of there being lack of competency or powers to frame the impugned Guideline by the Council of the respondent-Institute. The argument advanced by the petitioners regarding the issuance of the Guidelines dated 08.08.2008 by the respondent-Institute is hit by the vice of excessive delegation, is hence without substance. Accordingly, we answered the point No. 1. Reasonable restrictions upon the freedom of trade, business, occupation or profession in the interest of the general public - Whether the restrictions imposed are unreasonable and therefore, violative of the right guaranteed to Chartered Accountants under Article 19 (1) (g) of the Constitution? - Whether the restrictions imposed are arbitrary and illegal and therefore, impermissible under Article 14 of the Constitution? - The present petitioners assertion that the undertaking of more than a specified number of tax audit assignments would not imperil the integrity and quality of the tax audit does not persuade us because a reasonable possibility of the fall in quality owing to the surfeit of tax audit assignments exists. Therefore, we find it proper to trust the wisdom of the respondent-Institute as it has acted on bona fide and genuine recommendations of the CAG and the CBDT. We find no fault in the endeavour of the respondent-Institute to eliminate the possibility of the conduct of tax audits in an insincere, unethical or unprofessional manner. Keeping the aforesaid in mind, there is no difficulty in concluding that by virtue of being a licensee, a privilege is conferred on Chartered Accountants. An elaborate and extensive process of recommendations and policy-making preceded the insertion of Section 44AB in order to achieve the public interest of prevention of tax leakages and more efficient tax administration. It is in pursuance of this primary goal of public interest that a further privilege under Section 44AB was extended to Chartered Accountants to conduct quality tax audits, so as to enable the interest of the public exchequer. This Court must consider the public interest involved not only from the perspective of the Chartered Accountants but rather from the perspective of the general public. In the present cases, it has been contended that public interest manifests as a benefit to the public exchequer in terms of appropriate quality of tax audit reports under Section 44AB. The restriction placed under Section 224 of the Companies Act, 1956 with regard to the number of companies which could be audited by an auditor or firm of auditors is also an instance of regulation of the profession of Chartered Accountants intended by the Parliament so as to ensure that standard and quality in the audit of accounts of companies as defined under Section 3 of the Companies Act, 1956 are maintained. This is to protect the rights and interest of the shareholders as well as the investors in the companies. Any omission or inadvertence in the auditing of such company accounts would inevitably have an adverse impact not only on the balance-sheets of the companies but also on the potential investments and growth of the companies. There has not been any challenge to the said regulation which is in the form of a restriction. Any breach of the restriction placed on the Chartered Accountants under Section 224 may lead to misconduct under the provision of 1949 Act. Whether exceeding such specified number of tax audits can be deemed to be professional misconduct ? - It was borne out during the course of arguments and through the submissions made in the Counter Affidavit that the tax audit monitoring mechanism was firstly, self-regulatory, wherein the disciplinary mechanism would kick in only on a complaint made/information received and not otherwise. Furthermore, the Tax Audit Monitoring Cell was created only after the CAG Report No. 32/2014, and even after that, initially notices were sent only selectively to Chartered Accountants who had completed more than two hundred audits not to all who had breached the impugned Guideline. As a rule of statutory interpretation, we find that the aforesaid principles, in an equitable legal system, should be applicable to the present circumstances. Thereby, for the limited period of uncertainty, the rule against doubtful penalization as a principle could, in the interest of justice and equity, be made applicable and the benefit of uncertainty be given to those subjected to misconduct proceedings in the instant writ petitions and to also those Chartered Accountants who may have received notices from the respondent-Institute and who may not have approached any court of law or to other similarly situated Chartered Accountants who may not have been proceeded against. We, therefore, find much force in the alternative plea made by the petitioners herein. In these circumstances, due to the uncertainty in law owing to quashing of the earlier Guideline and the pendency of the Special Leave Petition filed by the respondent-Institute before this Court and the enforcement of a fresh Guideline, we quash the disciplinary proceedings initiated against the petitioners herein. This is for the simple reason that only the writ petitioners have been proceeded against, while even according to the respondent-Institute, there were around twelve thousand Chartered Accountants who had breached the Guideline and had undertaken tax audits over and above the specified number but no action whatsoever was initiated against of them. Respondent-Institute is at liberty to enhance the specified number of tax audits that could be undertaken by practicing Chartered Accountants under Section 44AB of the IT Act, 1961. For that purpose, liberty is reserved to the practising Chartered Accountants to make their suggestions to the respondent. We dispose of the writ petitions in the following manner: a) Clause 6.0, Chapter VI of the Guidelines dated 08.08.2008 and its subsequent amendment is valid and is not violative of Article 19 (1) (g) of the Constitution as it is a reasonable restriction on the right to practise the profession by a Chartered Accountant and is protected or justifiable under Article 19 (6) of the Constitution. b) However, the said clause 6.0, Chapter VI of the Guidelines dated 08.08.2008 and its subsequent amendment is deemed not to be given effect to till 01.04.2024. c) Consequently, all proceedings initiated pursuant to the impugned Guideline in respect of the writ petitioners and other similarly situated Chartered Accountants stand quashed. d) Liberty is reserved to the respondent-Institute to enhance the specified number of audits that a Chartered Accountant can undertake under Section 44AB of the IT Act, 1961, if it deems fit. e) Liberty is also reserved to the writ petitioners or any other member of the respondent-Institute to make a representation in the above context which may be taken into consideration in the event respondent-Institute intends to amend the Guideline as per point No. (d) above. f) The writ petitions as well as all the transferred cases are disposed of in the aforesaid terms. g) The Registry to intimate the concerned High Courts regarding disposal of the transferred cases accordingly.

  ---

• 2024 (5) TMI 1133
  Deduction u/s 80IB - profits derived from repairs and maintenance service of the moulds manufactured in the appellant industrial undertaking - assessee submits that the activity of repairs and maintenance of moulds was closely related to the activity of manufacture of moulds manufactured in the industrial undertaking in question and, as such, deduction u/s 80IB cannot be denied to the appellant HELD THAT:- The deduction is available for five assessment years beginning with the initial assessment year and thereafter 25% of the profits and gains derived from such industrial undertaking manufacturing or producing any article or thing. Thus, the basic eligibility criteria under the aforesaid sub-sections 80IB is that the assessee must be an industrial undertaking fulfilling all the conditions specified in sub-section 2, it must derive profits and gains from business under subsection 4. Therefore, an industrial undertaking in an industrially backward State specified in the 8th Schedule, to be eligible for deduction u/s 80IB, must be manufacturing or producing any article or thing and the profits and gains derived from such activity of manufacture or production of any article or things. In the present set of facts we find that undisputably the receipt on account of repair and maintenance does not relate to profits and gains derived by the industrial undertaking from the business of manufacture or production of any article or thing. It is neither the case of the appellant/assessee that repairs of moulds was a necessary condition of contract of sale of moulds, nor any evidence in the form of such contract of sale or any other documentary evidence were produced by the appellant/assessee at any stage of the proceedings from assessment upto Tribunal stage. Under the circumstances, receipts from repairs and maintenance of moulds by the appellant/assessee cannot be said to be eligible for deduction under section 80IB of the Act, 1961 particularly when there was no direct nexus to the profits and gains derived from repairs and maintenance, with the manufacturing of moulds by the industrial undertaking. Thus, on true construction of sub-Sections (1), (2) and (4) of Section 80IB of the Act, 1961 and in view of the law laid down in the case of Saraf Exports [ 2023 (4) TMI 420 - SUPREME COURT ] an industrial undertaking, which becomes eligible for deduction on satisfying sub-Section (2), would be entitled to deduction under sub-Section (1) only to the extent of profits derived from manufacture or production of any article or thing by such industrial undertaking. Thus, the industrial undertaking eligible for deduction under Section 80IB shall be entitled for deduction only from the profits and gains derived from industrial undertaking by manufacturing or producing article or thing and not from profits attributable to industrial undertaking. There is nothing on record to show that the repairs and maintenance charges have a direct nexus with the business activity of manufacture and sale of moulds by the appellant/assessee. Therefore, profits and gains derived by the appellant/assessee (industrial undertaking) from repairs and maintenance is not eligible for deduction u/s 80IB since such profits and gains have not been derived by the industrial undertaking from the manufacture or production of any article or thing as provided under sub-Section (2).

  ---

• 2024 (5) TMI 1132
  Penalty proceedings u/s. 271(1)(c) - Estimation of income on Bogus purchases - CIT(A) applied gross profit of 10% on the bogus purchases as against the addition made by the ld. AO of entire purchases and deleted the penalty - HELD THAT:- We find that once it is not in dispute the payments for the purchases have been from the books and trough banking channels and assessee has also shown corresponding utilization in the manufacturing account and same has been accepted, then entire purchases could not have been added u/s. 69C. Accordingly, we do not find any infirmity in applying the profit rate of 10% which is in line with the decision of PCIT vs. Jagdish Thakkar [ 2022 (9) TMI 307 - BOMBAY HIGH COURT] and in the case of PCIT vs. S V Jiwani [ 2022 (10) TMI 173 - BOMBAY HIGH COURT] Accordingly, the appeal of the Revenue is dismissed. Penalty imposed - Once the assessee had declared purchases and produced all the corresponding bills including the delivery challans and the source of the purchases are through books and through account payee cheques and corresponding utilization of purchases and the manufacturing has not been disputed, then there cannot be any furnishing of inaccurate particulars or concealment of income on estimated profit rate of 10%. Accordingly, we hold that ld. CIT(A) has rightly deleted the penalty. Decided against revenue.

  ---

• 2024 (5) TMI 1131
  Computation of commission income on credit entries - Unexplained cash credit u/s 68 - assessee could not substantiate the source of cash deposits - assessee argued that the assessee has only earned commission income on the entries provided by him whether in cash or by in any other mode and he has withdrawn around Rs. 6 Crores in cash from one account and hence the amount of cash credit should not be treated as unaccounted money being part of business of accommodation entry HELD THAT:- We find that the similar issue has been adjudicated by this Tribunal in the assessee s own case for the earlier and subsequent assessment years [ 2022 (7) TMI 1515 - ITAT DELHI] wherein the Tribunal having treated the assessee as a Entry Operator determined commission @0.15%, hence keeping in view the said order, we direct the AO charge commission @0.15% on the amount of Rs. 160,10,097/-.

  ---

• 2024 (5) TMI 1125
  Merger of intimation/proceedings u/s 143(1) with regular assessment u/s 143(3) - Exemption u/s 11 - Claim denied by the AO in sec. 143(1) proceedings on non-filing of Form 10B along with the return of income - HELD THAT:- Assessee has not filed the form 10B along with the return of income due to the fact that it did not had the registration u/s 12A, and the assessee was claiming the benefits under the concept of mutuality. We observe that the assessee has applied for registration before filing the return of income for the current assessment year on 27.03.2019 and subsequently filed the ROI on 30.03.2019. The ROI was processed u/s 143(1) of the Act on 10.11.2019 and denied the benefit u/s 11 on the basis of not filing the Form 10B on time. Statutory notice u/s 143(2) was issued on 22.09.2019. Further notices u/s 142(1) were issued in order to proceed with the regular assessment. Accordingly the assessment u/s 143(3) was completed. When regular assessment was completed and the relevant intimation issued u/s 143(1) will automatically merges with the assessment passed u/s 143(3). Therefore, it loses its relevance once the regular assessment is processed and it is only an intimation towards the accuracy of the information submitted by the assessee. Assessee has claimed deduction u/s 11 and failed to file the form 10B along with the ROI. Based on the above observation, the claim of the assessee was denied by the AO in sec. 143(1) proceedings. Therefore, there is no denial of fact that AO can make the above disallowance, however, the validity of the intimation issued u/s 143(1) is limited to mere intimation of correctness and accuracy of the income declared in ROI and its accuracy based on the information submitted along with the ROI. It does not carry the legitimacy of an assessment. When the assessment was processed under regular assessment then it loses its individuality and merges with the regular assessment. We are in agreement with the findings of Ld CIT(A) that the intimation u/s 143(1) merges with the order passed u/s 143(3) of the Act and the appeal against the above intimation becomes infructuous. In our view, he should have stopped with the above findings and should not have proceeded to decide the issue on merits, because it is brought to his knowledge that the assessee has filed appeal against the regular assessment order. Therefore, he has travelled beyond the mandate. The issue of allowability of section 11 is already considered in the regular assessment and that issue is already in appeal before FAA. Therefore, reviewing the same is uncalled for. Intimation merges with the regular assessment when the proceedings are initiated u/s 143(3) of the Act. Therefore, the admitted fact that the appeal against the intimation is infructuous. The grievance of the assessee is that Ld CIT(A) has not stopped with the findings but gave findings on the merits. After considering the submissions, we are also of the view that the findings on allowability u/s 11 is uncalled. Particularly when the issue under consideration is under challenge before another Appellate Authority. Eligibility for exemption u/s 11 after grant of registration u/s 12A - This is accepted fact on record that the assessee is eligible to claim exemption after the introduction of first proviso to sec. 12A(2) of the Act with the applicable conditions in Finance Act 2018. Since there is no change in the objects and activities in the case of the assessee, there is no doubt that the assessee is eligible to claim the benefit. However, in our view, this issue has to be raised before the FAA in the appeal against regular assessment passed u/s 143(3) of the Act. Since the issue is still under appeal before FAA, this issue can be decided by the FAA without taking any clue from the appeal decided u/s 143(1) of the Act by the present CIT(A). Therefore, the issue raised against the intimation order is decided in favour of the assessee and hold that the order passed u/s 143(1) is merged with the regular assessment passed u/s 143(3) and it does not have legs to stand on its own once the regular assessment proceedings are initiated. At the same time, we are also hold that the findings of the Ld CIT(A) on the maintenance of the appeal as infructuous, hence, the demand raised in the 143(1) intimation does not survive. Appeal filed by the Assessee is partly allowed.

  ---

• 2024 (5) TMI 1121
  Addition made on the basis of the cash received for termination of agreement of purchase of the property - Addition of business expenses related to disputed agreements - rejection of the assessee s claim that the ld. CIT(A) had not considered the evidence duly filed by the assessee during assessment and appeal hearing - HELD THAT:- An agreement of sale of property the property is not transferred. The property and all other documents should be transferred at the time of registration subject to completion of all pecuniary activities. There is a reasonable ground that assessee had failed to pay Rs. 20 lacs to the party. So, the agreement is terminated, and cash was refunded. So, the source of cash is well established. Related to addition of investment in property amount to Rs. 1,57,51,042/-. The registered deed is duly annexed with the submission. DR had not made any objection and Mr. Ahmed Noor made investment of his share in the property. This amount cannot be taken in the hands of the assessee in presence of the primary evidence, registered deed. Related to expenses amount to Rs. 19,75,000.- the assessee deducted expenses from income this amount is fully related to this business and the addition should be deleted. Accordingly, ground nos. 3 (a), (b) and (c) of the assessee are allowed

  ---

• 2024 (5) TMI 1120
  Validity of the assessment order framed u/s 147 - no valid notice u/s 148 of the Act was issued by the jurisdictional AO - Assessee contended that, once ACIT, Circle-24(2), Hooghly had admitted that he did not have jurisdiction over the assessee, and the correct jurisdiction lies with ACIT, Circle-23(1), Hooghly, then a fresh notice u/s 148 of the Act ought to have been issued by ACIT, Circle-23(1), Hooghly for carrying of the re-assessment proceedings. Since no such notice was issued, the same is of fatal nature and makes the impugned assessment proceedings as illegal, bad in law and void ab initio. HELD THAT:- We are inclined to hold that since no valid notice u/s 148 of the Act was issued by the jurisdictional assessing officer for reopening of the assessment proceedings, the alleged re-assessment proceedings are bad, illegal and void ab initio and deserves to be quashed. Accordingly, additions made in the said re-assessment proceedings stands deleted on this legal ground itself. Appeal filled by assessee allowed.

  ---

• 2024 (5) TMI 1119
  Disallowance made u/s. 80IA - assessee has not claimed deduction u/s. 80IA in response to the return filed u/s. 153A -. AO rejected the explanation and held that bogus purchases are to be added -HELD THAT:- Here in this case addition has been confirmed by the ld. CIT(A) however, he has given relief by holding that all the additions / disallowances on account of purchases are related to business activity and therefore, deduction u/s. 80IA would be allowed in line with the CBDT Circular No.37 of 2016. AO with regard to purchases made from one party has applied gross profit rate and with regard to other party has treated the entire transaction of purchase as bogus . All these have lead to enhancement of business income only which otherwise is eligible for deduction u/s. 80IA, because even ld. AO has also assessed under the head business income . Accordingly, in view of the CBDT Circular and the past precedents in case of the assessee, we do not find any infirmity in the order of the ld. CIT(A) and same is confirmed. Decided against revenue.

  ---

• 2024 (5) TMI 1118
  Bogus purchases - addition as based on information from the Investigation Wing of Mumbai regarding accommodation entries - HELD THAT:- Once the assessee has produced the documents evidencing the purchases of the goods from the said two entities viz., M/s. Ankia Exports and M/s. Pankaj Exports and the payments made thereto, the onus to prove the negation is shifted to the Ld.AO. AO should have been examined M/s. Ankia Exports and M/s. Pankaj Exports by issuing summons U/s. 131 of the Act or calling for informations u/s 133(6) of the Act and find out whether these two entities existed or non-existed or in alternative should have been brought on record any evidence to prove that the invoices produced by the assessee were not genuine. No positive evidences were brought on record by the Revenue to show that the expenditure claimed by the assessee by way of purchase of jewellery were not genuine. We are also of the opinion that once the sales made by the assessee have been considered accepted and taxes have been collected from the assessee, then it is difficult to accept the contention of the Ld. AO that the purchases made by the assessee were not genuine. In the case on hand also, once the Revenue has accepted the sale of the assessee and taxed the assessee, then the Revenue cannot charge solely on the basis of alleged bogus purchases. Further, we may also draw the support from the decisions referred to by the assessee (supra) in support of his case, wherein it was held in the case of bogus purchases, only some percentage of the bogus purchases is required to be considered as additional income. In the light of the above, we find no merit in the argument of the DR and therefore the same is required to be rejected. DR has referred to the decision of in the case of Nokia India Private Limited [ 2015 (5) TMI 820 - ITAT DELHI] wherein the Tribunal has held that unless the assessee asked for the cross-examination, the assessee cannot be permitted to raise such ground at a later stage. Similar view was also taken in the other judgments cited by the learned DR herein above. Though, during the course of argument one of the contentions raised by the learned AR for the assessee is that the assessee has not been given the opportunity of cross-examination and therefore on that ground also the order passed by the lower authorities is not tenable. However, to counter the argument of the learned AR, the learned DR had filed the written submissions which are reproduced herein above. Violation of principles of natural justice and fair play - We are of the considered opinion that the right to cross-examine is a matter of right vested in the assessee by virtue of the various pronouncements of the Hon ble Supreme Court and also in the realm of principles of natural justice. The law is clearly settled that no person should be criticised and is subjected to any civil liability unless a chance to rebut and cross-examine is granted to the assessee. For the above said propositions, we hereby rely upon the ratio laid down in the case of Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] and Odeon Builders (P.) Ltd [ 2019 (8) TMI 1072 - SUPREME COURT] Therefore, in our considered view this objection of the Revenue is also without any merit. To conclude, in the light of the above observations, we hereby allow the appeal of the assessee.

  ---

• 2024 (5) TMI 1117
  Addition u/s 41(1) converting the same having been made u/s 68 - actual receipt of money or only journal entry made an adjustment of accounts - Prior period expenses - AR has primarily contended that it is mere case of journal entries made for adjustments of loan taken in earlier year - HELD THAT:- The purpose of section 68 of the Act, the conclusion drawn by the CIT(A) was erroneous because on the one hand, without there being any actual receipt of money, a mere journal entry was passed during the year in regard to entries of borrowed funds standing as unsecured loan and amount receivable from two different set of parties. On the other hand, the CIT(A) has doubted the identity of two lenders on the basis that companies are deregistered and their whereabouts are not known. However, the addition is made on the basis that source of credit shown as unsecured loan received from M/s Vrinda Developers Pvt. Ltd., remains unexplained. The journal entry only shows cessation of liability towards the two companies on the basis that these liabilities are taken over by M/s Vrinda Developers Pvt. Ltd. Thus, the conclusion of failure to explain the source of funds credited during the year in the name of M/s Vrinda Developers Pvt. Ltd. is an erroneous finding. The journal entry had the debit effect on the bank account with the increase in the bank balance and credit effect on the loan account. The assessee has explained that no entry in this regard was effected in the P L Account as a credit effect on the unsecured loan account was reflected in the balance sheet only. We are of the considered view that the opening balances on account of unsecured loans of the two parties and certain amount receivable from M/s Vrinda Developers Pvt. Ltd., being in the background of journal entry, then for the purpose of section 68 it cannot be said to be an unexplained cash credit. The fictitious cash entry in the bank account without any real credit of cash to the cash book cannot give rise to inclusion of the amount of the entry increasing bank balance as unexplained cash credit. Book entry transfer lets transfer only through the respective accounts in the books of the concerns. Accordingly, the deletion was made which was sustained by the Tribunal further observing that since there was no physical transfer of money from the account of Shri Pritam Goel and only a journal entry was passed, the findings of the AO that transaction was sham is baseless. A coordinate Bench at Delhi in the case of DCIT vs. M/s Glass Tech India Ltd [ 2022 (3) TMI 1281 - ITAT DELHI] while dealing with the provisions of section 68, has held that it is not just an entry of cash credit in the books of account that would create liability of explanation from the assessee, but, there should be an actual flow of funds. Once the flow of funds is established, then, the question of explanation from the assessee actually arises. Thus, we are inclined to allow these grounds of the assessee. Prior period expenses - Allowability of expenditure being related to the project which had started in the year under consideration - All evidences make it clear that though the invoice for commission was raised by M/s Vrinda Developers Pvt. Ltd. in the last year, however, the expenditure being related to the project which had started in the year under consideration, the same is allowable in the year under consideration. In the light of the aforesaid, this ground is decided in favour of the assessee.

  ---

• 2024 (5) TMI 1116
  Assessment u/s 144C(13) as time barred - applicability of time limits u/s 144C(13), and the legality of the final assessment order - HELD THAT:- Applying principles laid down in case of GS Chatha Rice Mills [ 2020 (9) TMI 903 - SUPREME COURT] only relevant fact necessary for deciding in present appeal relating to time barred assessment, is time of uploading by DRP of DRP order onto ITBA portal. Intimation letter to DRP order unambiguously shows 27th April 2022 as date of uploading of DRP order. This fact cannot be disputed. Except this critical and relevant information everything else (like when order is visible to AO, date of uploading some document by DCIT/ACIT circle 2 (1) (1) Delhi) has been submitted by Respondents. It is fair to conclude that date of uploading DRP order on ITBA portal is 27.04.2022. As per section 144C(13) of the Act, assessment had to be completed on or before 31.05.2022. In present case the assessment is completed only on 30.6.2022 i.e., it is time barred null and void. Therefore, impugned assessment order dated 30.06.2022 is set aside being barred by limitation - Appeal of the assessee is allowed.

  ---

• 2024 (5) TMI 1115
  Deduction u/s. 80P(2)(a)(i) and 80P(2)(d) - assessee has invested its fund in co-operative banks and earned interest thereon - HELD THAT:- Assessee has received interest from cooperative bank but it is not clear whether the interest payer is a bank and registered with Reserve Bank of India and holding licence from RBI for carrying out banking business as per RBI Act. In addition, in the judgment of Kerala State Cooperative Agricultural and Rural Development Bank Ltd. KSCARDB [ 2023 (9) TMI 761 - SUPREME COURT] it has been discussed in detail the definition of cooperative banks and co-operative society. If the payer bank falls under the definition of co-operative bank in the light of the judgment of Hon ble Apex Court then the assessee is not eligible to get deduction u/s. 80P(2)(d) on such interest income received from cooperative banks, therefore this issue is remitted back to the Ld.AO. Deduction of expenditure u/s 57 - Assessee has received interest from other co-operative bank on its investments. In this regard, the Ld.CIT(A) has not given benefit of deduction u/s. 80P(2)(d) as per the judgment of the Jurisdictional High Court 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] . The revenue authorities have considered the entire interest as income from other sources u/s. 56 and no cost of expenses u/s. 57 has been allowed to the assessee. While calculating the income, the net income should be considered as taxable income after reducing the expenditure incurred towards earning of such income. Therefore relying on the judgment of Totgars Co-operative Sales Society Ltd. [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] assessee is eligible for claim of its cost of funds on the entire interest income. Reliance is also placed on the judgment of The West Coast Paper Mill Employees Souhardha Credit Co-op. Ltd. [ 2023 (8) TMI 1110 - ITAT BANGALORE] . Accordingly, the assessee is directed to provide the details of cost of funds before the assessing officer. Therefore for allowing cost of funds, we are remitting this issue to the assessing officer for determining the cost of funds for earning interest income. Appeals of the assessee are partly allowed for statistical purposes.

  ---

• 2024 (5) TMI 1113
  Best judgement u/s 144 - Addition of Depletion in value of investment, Debit balance written off, Amount disallowable u/s 40(a), Unsecured loans - HELD THAT:- The assessee has not brought any material contradicting the finding of the AO. Even it is found that Auditor of the assessee himself recorded about the depletion in value of investment being capital in nature, debit balance being capital in nature and disallowance made u/s 40(a) of the Act and disallowance made u/s 14A of the Act. The assessee grossly failed to bring on records material evidence, contradicting the findings of AO on impugned additions. In the absence of any contrary material filed by the assessee and the assessee, failed to get confirmation of the unsecured loan taken from the concerned parties, we do not see any reason to interfere in the findings of AO, the same is hereby affirmed. Appeal of the assessee is dismissed.

  ---

• 2024 (5) TMI 1112
  Disallowance u/s 14A r.w.r. 8D - expenditure incurred on exempt income - as argued assessee company had sufficient self-owned funds for sourcing its exempt income yielding investment, therefore, no disallowance of any part of the interest expenditure that was claimed as deduction was called for in its case - HELD THAT:- When the assessee company in the present case had claimed that no part of the administrative/other expenses claimed by it as a deduction were incurred in relation to the income which did not form part of its total income, then the A.O only after being satisfied that having regard to the accounts of the assessee, as placed before him, it was not possible for him to generate the requisite satisfaction with regard to the correctness of the claim of the assessee, thus, only after rejecting the said claim of the assessee, after complying with the aforesaid statutory obligation as stood cast upon him, could have validly proceeded with and determined the amount of such other/administrative expenditure incurred in relation to the income which did not form part of its total income. We however find that in the case of the present assessee company the AO had carried out the disallowance of the other/administrative expenditure u/s 14A in a mechanical manner as per the methodology provided in Rule 8D(2)(ii). The general observations of the AO can by no means partake the color and character as that of a satisfaction, which as per the mandate of law is required to be arrived at by him with regard to the correctness of the claim of the assessee in respect of the administrative/other expenses claimed to have been incurred in respect of income which did not form part of the total income of the assessee company, having regard to the accounts of the assessee, as were placed before him. Thus, being of the considered view that as the A.O had summarily carried out the disallowance of the administrative/other expenses u/s 14A, as per the methodology provided in Rule 8D(2)(ii), without satisfying the statutory requirement of first arriving at a satisfaction as required by the mandate of law, having regard to the accounts of the assessee as placed before him, therefore, am unable to persuade myself to uphold the disallowance which had been sustained by the CIT(A). The order of the CIT(A) sustaining the disallowance u/s 14A is thus set aside. Decided in favour of assessee.

  ---

• 2024 (5) TMI 1111
  Correct head of income - Nature of gain on sale of property - business income OR capital gains - intention of assessee - consistency approach - assessee had entered into the JDA element of profit sharing between the assessee and the developer - assessee got 2.40% share of total Revenue - Scope of Circular issued by the Revenue and the MCQ replies given by the Revenue in the context of Section 45(5A) of the Act under the heading Joint Development Agreement HELD THAT:- Once the co-ordinate Bench in the case of connected assessees whose rights are emanated from the same JDA, had decided the issue in favour of the assessee, then the said principle laid down by the co-ordinate Bench is required to be applied to all the assessees unless there is a change in law or facts. The Revenue in the instant case has failed to point out any change in law or facts in the case of assessee and therefore, we are left with no other option but to follow the decision of the co-ordinate Bench of the Tribunal in the case of Vinod Narapa Reddy [ 2020 (10) TMI 354 - ITAT BANGALORE] - Department had accepted that the assessee in those cases was entitled for long term capital gain. In our view, the department is supposed to take coherent, consistent and uniform stand against all the assessees, who are similarly situated and whose rights are emanating from the very same agreement. In our view, the department cannot take the contrary view, which has been taken in a group of assessees to the determinant to the assessee before us. The law abhor uncertainty and selective approach against any individual. The assessee can opt for monetary consideration and receive the consideration in the shape of share in the sale of project. In the light of the above, though, the clarification and the MCQ(supra) had been issued subsequently, however, the circular and the MCQ are in the same line of reasoning as given by the co-ordinate Bench and therefore, the order passed by the CIT(A) with respect to treating the income received by the assessee as long term capital gain is permissible and was in accordance with law. Accordingly, we dismiss the grounds of the Revenue on this aspect. Deduction u/s 54F - AO while examining the case of the assessee has not decided on the entitlement of the assessee under section 54F of the Act, as the AO has considered the income received by the assessee as business income - Issue remanded back to the file of AO with a direction to decide the claim of allowability of the assessee u/s 54F in accordance with law after granting due opportunity of hearing to the assessee. The assessee also shall be at liberty to file documents, if any, as required for proving its case and the Assessing Officer shall consider such evidences, if any, filed by the assessee. Needless to say, the Assessing Officer shall examine those documents / evidence filed by the parties and thereafter pass a detailed speaking order.

  ---

• 2024 (5) TMI 1108
  TP Adjustment - corporate guarantees extended to its foreign AEs - AO captured the Corporate Guarantee fee at 1.8% at the outstanding loan amount - as per AR corporate guarantees extended to its foreign AEs are in the nature of shareholder activities and the assessee did not incur any expenditure, therefore, benchmarking of an activity of shareholder without any consideration is not in accordance with provisions of the Act and well accepted principle that no service fee is required to be paid for rendering shareholder services by an enterprise to its associated enterprise as a shareholder HELD THAT:- As relying upon the decision of Aurobinda Pharma [ 2023 (4) TMI 1254 - ITAT HYDERABAD] we uphold the computation of Corporate Guarantee Commission at 0.53%. Undoubtedly, in the facts of the case of Aurobinda Pharma (surpa), we had determined the amount guaranteed as corporate guarantee commission @ 0.5%. However, considering the facts of the present case, we are of the opinion that the computation of the amount guaranteed as corporate guarantee commission @ 0.53% would be appropriate. Furthermore, the Revenue cannot be worsen of thereby reducing the corporate guarantee commission from 0.53% to 0.50% in its appeal. Accordingly, the appeal of the Revenue on this aspect is without any basis. Other aspect on which the CIT(A) has granted relief is that the assessee has only provided the corporate guarantee to its AE to the extent of 30.50% on the outstanding loan balance of US $ 10 million advance to its AE. In our view, the pro rata corporate guarantee is required to be calculated as directed by the Ld.CIT(A) on the amount for which the assessee has sought which would be 30.50% of the total amount of US $ 10 million advanced to its AE. Therefore, the corresponding corporate guarantee commission @ 0.53% is required to be computed on the amount of 30.50% of assessee s share on the outstanding loan balance of US $ 93,05,376. Accordingly, grounds 2 to 4 of the Revenue appeal are dismissed. Whether the corporate guarantee given by the assessee to its AE would constitute the international transactions or not ? - CIT(A) after relying upon the Explanation to 22A had decided the issue and has held that the grant of corporate guarantee to its AE would constitute international transactions. After holding the grant of corporate guarantee as international transaction, CIT(A) has adjudicated and determined the corporate guarantee @0.53% instead of @1.90% on the outstanding amount of the corporate guarantee. Hence, we do not find any reasons to interfere with the findings given by the CIT(A) and accordingly, the grounds 2(a) to 2(c) and 3 raised by the assessee for A.Y. 2017-18 are dismissed. Interest on outstanding Trade Receivables - As consistently held that the interest on delayed outstanding trade receivables is an international transaction and after holding so, we have benchmarked the international transactions at 6% SBI rate. Computation of interest on delayed receivables - We had consistently followed and granted the credit period of 60 days which we have also done in the case of M/s Aurobindo Pharma Ltd [ 2023 (4) TMI 1254 - ITAT HYDERABAD] wherein we have also granted the credit period of 60 days, which is also in the same of line of business. No special treatment can be given to the assessee. Furthermore, once the assessee failed to justify and substantiate the credit period of 90 days before the lower authorities, it is preposterous to claim 180 days credit period before the Tribunal. Hence, we do not agree with the contention of the assessee. With respect to the submission that assessee has not charged any interest from the non-AE and therefore, the non-AE should be considered as an internal comparable. This contention of the assessee is without any basis and the assessee failed to establish that the assessee has not charged any interest from its non-AE before the lower authorities and further, the assessee failed to prove that the non-AE were operating in the same segment, product, region and with the same terms and conditions of sale and purchase of Pharmaceutical products. Comparable selection - scope of Related Party Transaction (RPT) filter - As both the parties have agreed for exclusion of these two companies namely, M/s. Sun Pharma Laboratories and M/s. Macleods Pharmaceuticals Ltd and therefore, we direct the TPO / Assessing Officer to exclude these two comparables. Accordingly, we allow the grounds of Revenue. R D Expenses, Head Office Marketing Office Expenses while computing the PLI of the comparable companies - Grievance of the Revenue before us is that the ld.CIT(A) while excluding R D expenses, Head Office and Marketing Office Expenses had not given the opportunity to the AO while computing the margins of the comparables after excluding the R D expenditure, Head Office and Marketing Office Expenses - In our view, the law requires the CIT(A) to grant the opportunity to the Assessing Officer/TPO before making any adjustment on account of excluding R D expenses, Head Office and Marketing Office Expenses in the financials of the comparable. The ld.CIT(A), has not done the same and has thus violated the principle of natural justice under 46A of I.T. Rules. We deem it appropriate to remand back the entire issue of TP adjustment with respect to both the eligible specified domestic transaction to the file of the Assessing Officer/TPO for passing a fresh order after affording the opportunity of hearing to the assessee. We further direct the assessee to provide the segmental accounts of the non-exempt units, more particularly, the assessee s transaction with its eligible undertaking and with the other non-related parties so that the ld TPO can benchmark the specified domestic transactions accurately. AO/TPO shall consider any other documents as may be filed by the assessee in accordance with law. In the light of the above, the ground of the Revenue appeal are allowed for statistical purposes.

  ---

• 2024 (5) TMI 1107
  Penalty u/s 271(1)(c) - allegation of defective notice on non specification of clear charge - concealment of particulars of income or furnishing of incorrect particulars of such income - test of prejudice - non strike off any one of the twin charges against the assessee - whether assessee has been prejudiced by the non striking of the one of twin limbs on which penalty can be levied? HELD THAT:- Facts clearly shows that issue of non striking of any of twin charges were not raised before ld AO or CIT (A) for both the years. It is argued before us for the first time. It is also a fact that assessee was fully aware why penalty proceedings are initiated. It is also not shown before us that what prejudiced is caused to the assessee by not striking off one of the twin charges in a notice issued u/s 274 r.w.s. 271 (1) (c) of the Act. Thus, It is apparent that notwithstanding the defective notice, the assessee was fully aware of the reason as to why the Assessing Officer sought to impose penalty. Thus, significant features of the case in hand are that penalty proceedings were initiated during the assessment proceedings. The Assessing Officer had although issued a notice without a tick mark, it appears that both the limbs under section 271(1)(c) namely concealment of particulars of income and furnishing inaccurate particulars of such income were attracted in the facts of the case. Further At no point of time, the assessee had a grievance in regard to the section 271(1) (c) notice being in any manner vague, ambiguous and not being understood by the assessee in regard to the limbs under section 271(1)(c) being attracted. Assessee had wholeheartedly participated at the hearing before the Assessing Officer and The notice was in fact, responded by the assessee on both the counts as falling under section 271(1)(c) of the IT Act. As per binding decision of Veena Textiles [ 2024 (1) TMI 701 - BOMBAY HIGH COURT] we hold that non striking of any limb in notice u/s 274 rws 271 (1) (c) of the Act does not come to rescue of the assessee where the assessee never having raised any objection from very inception on account of defect in notice, the assessee was prevented from raising such grounds, without showing prejudice caused to him. Hence, Ground No 1 is dismissed. Penalty imposed on Estimation of income on bogus purchases - HELD THAT:- When the addition is sustained based on estimates penalty u/s 271 (1) c) is not sustainable. See M/S ETCO PROFILES PVT. LTD. [ 2015 (6) TMI 1214 - ITAT, MUMBAI] In the present case AO made addition of 12.5 % of the Bogus purchases which was confirmed by the ld CIT (A), on appeal before ITAT it was reduced to 5 % - Once, the source of payment of purchases have been made through books of accounts and through account payee cheques and there is corresponding sales, then merely because some adhoc GP rate has been applied on such alleged bogus purchases to factor in suppression of alleged gross profit, no penalty can be levied. Thus, it was held that on such estimates penalty cannot be levied. Decided in favour of assessee.

  ---

• 2024 (5) TMI 1106
  Exemption u/s 11 - Application for registration u/s 12AB rejected - charitable activity u/s 2(15) - conclusion of CIT(E) that the commercial receipts for assessee are more than 20% of the total receipt - HELD THAT:- The entire thrust of the CIT(E) is regarding services provided by the assessee against charges without even considering the fact whether the charges are nominal or reasonable mark up over cost that too is also applied for charitable purpose or achieving charitable objects of the assessee. The conclusion of CIT(E) that the commercial receipts for assessee are more than 20% of the total receipt is contrary to the fact that the assessee is not doing any trade or business but is providing the services for achievement of charitable objects and in that process nominal fee is charged which is also not more than 20% of the total receipts of the assessee as manifest from the details given in the forgoing part of this order. The Co-ordinate Bench of this Tribunal in case of Crisp Society [ 2021 (12) TMI 1499 - ITAT INDORE] has considered this aspect of nature of the activities of the assessee rust or education institute is running with a nominal fee to cover cost on account of its activities that cannot be held to be a commercial activity. Sometime trust or the other institution does not get complete donations either from public or from the government. In that case, if those trusts or education institutes charging nominal amount of fee in order to carrying out its activities in a smoother way, this cannot be called a part of commercial activities. Therefore, respectfully following the aforesaid judgments and as assessee is imparting education and training to students and public, its activities have not been doubted by the lower authorities. Therefore, in such circumstances, benefit of Section 11 of the Act cannot be denied. We set aside the impugned order of the CIT(E) and direct the CIT(E) to grant registration u/s 12AB of the Act to the assessee. Assessee appeal allowed.

  ---

• 2024 (5) TMI 1102
  Assessment order u/s 147 - assessment having framed by the incorrect AO - assessee submitted before us that the assessment has been framed by the AO without any jurisdiction as notice u/s 148 of the Act as well as notice 143(2) of the Act were issued by ITO, Ward-61(4), Kolkata whereas the assessment was framed by ITO, Ward-6(1), Kolkata. HELD THAT:- We find that the assessee has filed the return of income with AC, Range-24, Kolkata whereas the notice u/s 148 of the Act dated 31.03.2017 and 143(2) of the Act dated 6.7.2017 were issued by ITO, Ward-61(4), Kolkata. We note that the assessee objected to the jurisdiction of the AO who issued the said notices vide letter dated 1.4.2017 and considering the assessee s request, the case was transferred to ITO, Ward-6(1), Kolkata and the assessment was framed accordingly. Now the question before us whether the assessment so framed by ITO, Ward-6(1), Kolkata is invalid. In view of the fact that notice u/s 148 as well as 143(2) of the Act were issued by ITO, Ward 61(4), Kolkata. We are inclined to hold that the order framed by ITO, Ward-6(1), Kolkata without issuing any notices u/s 148 of the Act as well as u/s 143(2) of the Act when the officers have sufficient time to issue the notices when the assessee raised objections of jurisdiction is apparently without jurisdiction and is accordingly quashed. Appeals of the assessee are allowed.

  ---

• Customs

• 2024 (5) TMI 1105
  Monetary Limit - Filing of Appeal by the Revenue / Department - threshold limit for filing appeals as per Central Board of Indirect Customs (CBIC) circulars - Instruction are binding effect Or not - Valuation - Validity of enhanced value assessment - HELD THAT:- In the present cases, we are concerned with the CBIC s latest circular dated 02.11.2023, wherein it has been specifically prescribed that no appeal shall be filed before the CESTAT below the monetary limit of Rs.50 lakhs and if already filed, will have to be withdrawn. These instructions have been issued in exercise of its power u/s 131BA of the Customs Act, 1962. The perusal of the circular cited supra shows that the same prescribes monetary limit below which the department shall not file appeal before the CESTAT, the High Courts and the Supreme Court. In so far as, the CESTAT is concerned the monetary limit prescribed is Rs.50 lakhs. Para 3 of the said circular prescribes that in respect of the pending cases before the CESTAT, the High Courts and the Supreme Court which are below the monetary limits, process of withdrawal of the appeal would be undertaken by the department. It is pertinent to mention here that the amount of duty involved in each of the appeal is below of the threshold limit prescribed in circular dated 02.11.2023 issued by the CBIC wherein it is provided that if the duty amount involved is less than Rs.50 lakhs, then no appeal shall be filed before the CESTAT, and if already filed, the same will be withdrawn by the department. Thus, we are of the considered opinion that the present appeals filed by the department are not maintainable in view of the instructions issued by the Board and consequently we dismiss all these 13 appeals leaving the question of law, if any, open.

  ---

• Insolvency & Bankruptcy

• 2024 (5) TMI 1110
  Approval of Resolution Plan - validity of proceeding of CIRP against the Corporate Debtor - Corporate Debtor having struck off from the Register maintained by Registrar of Companies - revival of struck off company - Impact of settlement agreements on the liability of the Corporate Debtor. Validity of CIRP against a struck-off company - HELD THAT:- The company is now active in the Master Data of the Corporate Debtor in the records of the MCA, which has also been brought on record as Annexure-8 to the Additional Affidavit filed by the Resolution Professional. There are no substance in the submission of learned counsel on behalf of the Ex-Director of the Corporate Debtor that company having been struck off on 29.10.2019 the entire proceedings of the IBC need to be set aside. Company owed financial liability to the Financial Creditor and on default committed by the Corporate Debtor, Section 7 application was filed. The liabilities of the company cannot be simply washed out by action of company of non-compliance of the provisions of Companies Act, non-filing of the relevant financial documents and other filings. If the submission is accepted of the Appellant that proceeding could not have been proceeded, the easiest thing for a company would be to get struck off to wash of its all liabilities, which submission cannot be accepted. Non-acceptance of claims filed post-approval of the Resolution Plan - claims were filed after the Committee of Creditors (CoC) had already approved the Resolution Plan - HELD THAT:- The Tribunal upheld the Resolution Professional s decision not to accept these late claims and noted that an application seeking admission of the claim was dismissed on 16.08.2023, which was not further challenged. Impact of settlement agreements on the liability of the Corporate Debtor - HELD THAT:- The submission of the Appellant that under the settlement agreement dated 18.06.2018 and 21.06.2018 it was Super Cassettes Industries Private Limited who has to make payment of Corporate Debtor is no more available to the Appellant since one of the parties i.e. the Financial Creditor has already nullified all the understanding in writing within four days from the said settlement. Thus, liability of the Corporate Debtor to discharge its financial debt continues. More so, admission of Section 7 application on the basis of debt and default has become final and in the proceeding regarding plan approval it is not open for the Ex-Director of the Corporate Debtor to contend that there is no debt owed by the Corporate Debtor. The submission of the Appellant that debt is to be paid by Super Cassettes Industries Private Limited is fallacious and cannot be accepted. Thus, no grounds raised by the Appellant to interfere in the order dated 12.10.2023 approving the Resolution Plan. Appeal dismissed.

  ---

• PMLA

• 2024 (5) TMI 1104
  Legility of arrest of petitioner - inherent difference between the provisions contained in Section 19 of the PMLA and Section 43A and 43B of the UAPA - HELD THAT:- There is no significant difference in the language employed in Section 19 (1) of the PMLA and Section 43B (1) of the UAPA which can persuade to take a view that the interpretation of the phrase inform him of the grounds for such arrest made by this Court in the case of Pankaj Bansal [ 2023 (10) TMI 175 - SUPREME COURT ] should not be applied to an accused arrested under the provisions of the UAPA. The provision regarding the communication of the grounds of arrest to a person arrested contained in Section 43B (1) of the UAPA is verbatim the same as that in Section 19 (1) of the PMLA - As a matter of fact, both the provisions find their source in the constitutional safeguard provided under Article 22 (1) of the Constitution of India. Hence, applying the golden rules of interpretation, the provisions which lay down a very important constitutional safeguard to a person arrested on charges of committing an offence either under the PMLA or under the UAPA, have to be uniformly construed and applied. There is no doubt in the mind of the Court that any person arrested for allegation of commission of offences under the provisions of UAPA or for that matter any other offence(s) has a fundamental and a statutory right to be informed about the grounds of arrest in writing and a copy of such written grounds of arrest have to be furnished to the arrested person as a matter of course and without exception at the earliest. The purpose of informing to the arrested person the grounds of arrest is salutary and sacrosanct inasmuch as, this information would be the only effective means for the arrested person to consult his Advocate; oppose the police custody remand and to seek bail. Any other interpretation would tantamount to diluting the sanctity of the fundamental right guaranteed under Article 22 (1) of the Constitution of India. The remand order dated 4th October, 2023 records that the copy of the remand application had been sent to the learned Advocate engaged by the accused appellant through shri App. A bare perusal of the remand order is enough to satisfy us that these two lines were subsequently inserted in the order because the script in which these two lines were written is much finer as compared to the remaining part of the order and moreover, these two lines give a clear indication of subsequent insertion. Once this Court has interpreted the provisions of the statute in context to the constitutional scheme and has laid down that the grounds of arrest have to be conveyed to the accused in writing expeditiously, the said ratio becomes the law of the land binding on all the Courts in the country by virtue of Article 141 of the Constitution of India. There is no hesitation in the mind of the Court to reach to a conclusion that the copy of the remand application in the purported exercise of communication of the grounds of arrest in writing was not provided to the accused appellant or his counsel before passing of the order of remand dated 4th October, 2023 which vitiates the arrest and subsequent remand of the appellant - the appellant is entitled to a direction for release from custody by applying the ratio of the judgment rendered by this Court in the case of Pankaj Bansal. The arrest of the appellant followed by remand order dated 4th October, 2023 and so also the impugned order passed by the High Court of Delhi dated 13th October, 2023 are hereby declared to be invalid in the eyes of law and are quashed and set aside. Appeal allowed.

  ---

• Service Tax

• 2024 (5) TMI 1130
  Demand of service tax on charges related to banking and financial services - Service charge received against Working Capital Term Loan (WCTL) - income from pre-payment for financial charges received against seed capital - registration charges on the one time settlement - HELD THAT:- We find that the issues raised in these proceedings are already covered by the decision of Coordinate Bench in appellant s own case. Thus, it is seen that the issue is settled in favour of the appellants in respect of income from pre-payment of financial charges received against seed capital and in respect of registration charges on the one time settlement. However in respect of service charges received against WCTL, the issue has been decided against the appellant. Thus, we set aside the demand in so far as seed capital and registration charged on the one time settlement is concerned and we confirm the charges in respect of WCTL. The impugned order is modified accordingly.

  ---

• 2024 (5) TMI 1123
  Demand of service tax - service tax so paid under protest - service rendered by a non-resident from a country outside India - issuance of Foreign Currency Convertible Bonds (FCCB) - banking and financial services - Recovery of Interest and Imposition of Penalty - Recovery of CENVAT credit wrongly taken or erroneously refunded - HELD THAT:- As per the impugned order the demand of service tax made against the appellant has been dropped. They had deposited the amount demanded in show cause notice during the course of investigation under protest and are entitled to refund of the same along with the interest as prescribed in law. However while depositing the said amount appellant had taken the cenvat credit of the same and as they are registered as input service distributor distributed the same to their manufacturing units. We in view of above undertaking do not find any reason to disallow the distribution of the said amount taken as credit by the appellant. Impugned order does not record any reason for disallowing the credit and its distribution, except that the service tax has been held to be not payable by the impugned order. In any case the entire exercise of recovering the said credit from the appellant is nullity as the appellant is entitled to refund of the same/ similar amount along with interest as per the impugned order. We are in agreement with the submission made by the appellant that show cause notice issued to them do not record any reason or the provisions in law as per which this recovery of CENVAT Credit is to be made. Even the impugned order does not record any provisions under which this recovery has been ordered. In absence of statement of any such provision in the show cause notice or the impugned order, the impugned order to this extent cannot be upheld. Thus, we do not find any justification in implementation of the impugned order to extent it orders for recovery of CENVAT Credit, in view of the undertaking given by the appellant during the course of argument on appeal. Appeal is disposed of.

  ---

• 2024 (5) TMI 1114
  Levy of service tax - appellant, engaged in the generation of electricity - Income from late delivery of the materials/goods and non-execution of work - applicability of circular issued by the Department of Revenue - Whether the appellant provided a declared service u/s 66E(e) of the Finance Act - HELD THAT:- A service conceived in an agreement where one person, for a consideration, agrees to an obligation to refrain from an act, would be a declared service u/s 66E(e) read with section 65B(44) and would be taxable u/s 68 at the rate specified in section 66B of the Finance Act. Likewise, there can be services conceived in agreements in relation to the other two activities referred to in section 66E(e) of the Finance Act. Circular dated 03.08.2022 issued by the Department of Revenue regarding applicability of goods and service tax on liquidated damages, compensation and penalty arising out of breach of contract in the context of agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act . This Circular emphasizes that there has to be an express or implied agreement to do or abstain from doing something against payment of consideration for a taxable supply to exist and such an act or a situation cannot be imagined or presumed to exist merely because there is a flow of money from one party to another. It also mentions that unless payment has been made for an independent activity of tolerating an act under an independent arrangement entered into for such activity or tolerating an act, such payment will not constitute consideration and such activities will not constitute supply . The issue in the present appeals is covered by the decisions rendered by the Tribunal in South Eastern Coalfields [ 2020 (12) TMI 912 - CESTAT NEW DELHI] and Northern Coalfields [ 2023 (1) TMI 934 - CESTAT NEW DELHI] and, therefore, it has to be held that service tax could not have been demanded from the appellant. In the result, Service Tax Appeal filed by the appellant is allowed and Appeal filed by the department is dismissed.

  ---

• Central Excise

• 2024 (5) TMI 1129
  Recovery of Central Excise duty - non-inclusion of investment subsidy in transaction value - HELD THAT:- The issue was examined by the Tribunal in M/s. Harit Polytech Pvt. Ltd. vs. Commissioner, Central Excise and CGST-Jaipur I [ 2023 (3) TMI 1120 - CESTAT NEW DELHI] and it was observed that The subsidy amount, therefore, cannot be included in the transaction value for the purpose of levy of central excise duty under section 4 of the Excise Act. The order passed by the Commissioner cannot be sustained and is set aside - Appeal allowed.

  ---

• 2024 (5) TMI 1128
  Valuation - incentive received under Sales Tax package Scheme of Incentive - whether the same is on account of discount and should form part of the transaction value under Section 4(1) (a) read with Section 4(3) (d) of the Central Excise Act, 1944? - HELD THAT:- An identical issue to the present case has been dealt with by the Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE, RAIGAD, BALKRISHNA INDUSTRIES LTD., ESSEL PROPACK LTD. VERSUS UTTAM GALVA STEELS LTD., BHUSHAN STEEL LTD., JSW ISPAT STEEL LTD., COMMISSIONER OF CENTRAL EXCISE, AURANGABAD [ 2015 (10) TMI 1727 - CESTAT MUMBAI] where it was held that In any case, in the present case, the amount payable has not been varied by the Sales Tax Authorities. Under the facts of the present cases, in our view, the Explanation may not be of any help to the Revenue as at the time of clearance, the term actually payable was relevant and not actually paid . Further, the amount of actually payable sales tax has not been varied by the Sales Tax Authorities. The Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE VERSUS MAZAGON DOCK LTD. [ 2005 (7) TMI 105 - SUPREME COURT] have held that subsidy received from the Government cannot be said to be the additional consideration, as it is not received from the buyer either directly or indirectly and thus, not includable in the price of the excisable goods for the purpose of payment of central excise duty. There are no merits in the impugned orders passed by the learned Commissioner (Appeals) in confirming the adjudged demands on the appellant. Therefore, the impugned orders are set aside - appeal allowed.

  ---

• 2024 (5) TMI 1127
  Recovery of Excise Duty u/s 4A or u/s 4A of Central Excise Act, 1944 - package is more than 10 gm - Applicability of Standards of Weights and Measures Rules, 1997 - invocation of Extended period of Limitation - HELD THAT:- N/N. 49/2008-CE (NT) dated 24.12.2008 mentions the applicability of Section 4A only to pouches/ packages whose net weight is more than 10 gm; it is not the Department s case that chewing tobacco sold by the appellant in the impugned pouches is more than 10 gm. It is found that notwithstanding the fact that MRP is printed on the pouch, provisions of Section 4A can be made applicable only when the weight of the net contents is more than 10 gm, as required under Standards of Weights and Measures Rules, 1997. Under these circumstances, it is found that the gross weight of the pouch or the net weight of the pouch including the freely supplied lime tube cannot be the criteria for adopting valuation of Section 4A. Invocation of Extended period of Limitation - HELD THAT:- It is found that the appellant is a longstanding assessee; has been filing all the declarations and tax returns; under the circumstances, the extended period cannot be invoked. Therefore, there is merit in the appeal filed by M/s Jaimal Singh Kundan Lal Khatri(Appeal No. E/57/2012) on limitation also. Appeal disposed off.

  ---

• 2024 (5) TMI 1109
  Recovery of short-paid excise duty along with interest and penalty - admissibility of electronic evidences recovered by the investigating officers during earlier proceedings for another company - reliable evidence or not - compliance with the provision of Section 36B of the Central Excise Act, 1944 or not - quantification of demand as arrived in the Show Cause Notice vide para 7.1 to 7.17 adopting percentage of cash to invoice value is correct or not - suppression of facts or not. Electronic evidences have complied with the provision of Section 36B of the Central Excise Act, 1944 or not - demand adopting percentage of cash to invoice value is correct or the same needs to be arrived at only based on the evidences available on record - demand of Central Excise Duty on CGC on the amounts collected in cash over above the value - HELD THAT:- The data in the pen drive seized from M/s SVPNSN Balasivaji Co., was retrieved at some point of time in earlier proceedings. As per SCN, Sl. No. 12 of RUD are printouts of ledgers contained in pendrive and laptop bound into 5 books. As per SCN, Sl. No. 13 is the extract of ledgers recovered from M/s. SvPNSN Balasivaji Co. Sl.No.38 is the print out of ledger taken from laptop of Shri B.Saravanan seized in 2017. The other proint outs are the whatsapp messages, SMS, contact details obtained from several mobile phones. While recording statements during this investigation, the officers have asked the partners/directors of CGC and B. Saravanan to affix their signatures in these bound books - it is not understood how such affixing of signature on bound books would make the data retrieved from electronic item to be admissible in evidence in para 13.4 of impugned order the excerpts from statement of Shri B. Saravanan would show how the department got his signature on these bound books - The affixing of signatures on the bound volume of books would not suffice compliance of Section 36B. Compliance of requirement of Section 36B of Central Excise Act - HELD THAT:- Without complying Section 36B it is not possible to hold that the data retrieved from pen-drive and laptop (seized in 2017) is admissible in evidence. This is more important as this pen-drive and laptop are the only documents relied by AA for confirmation of demand of the duty - Though some kind of certificate is produced for retrieval of data from mobile phones, there is no certificate at all for compliance of Section 36B for retrieval of data from the pen drive and laptop seized in 2017. Section 36B of Central Excise Act, 1944 is similarly worded as Section 65B of Indian Evidence Act 1872. The Hon ble High Court of Delhi in the case of CCE Vs Jindal Nickel Alloys Ltd., [ 2019 (11) TMI 122 - DELHI HIGH COURT ] considered the admissibly of electronic evidence where the allegation was suppression of production of finished products and clearance of goods. The Hon ble High Court held that the provisions of Section 36B are mandatory. The evidence tendered by the key witness from whom the pen drive and lap top were recovered shows that he has denied the allegations. The original authority has disregarded his retraction of statement as an afterthought - A mere retraction may not make a statement irrelevant or inadmissible. In the present case, the witnesses were already subject to cross examination in 2019 as per Section 9 D of the Central Excise Act, 1944. After such cross-examination and filing of SVLDRS application, he is again summoned to give statement under Section 14 on the very same set of facts. It is deposed by him that on 09.03.2021 and 10.03.2021 he has given statements before the officers only because he was assured that he would not be implicated in the proceedings. Undervaluation on the basis of both suppressing the actual value in the invoices and also supply of goods without invoices - HELD THAT:- In the search conducted in the present proceedings, though CPU, laptop, mobile phones were seized these have not been the basis for allegation of undervaluation or demand of duty. Other than the electronic evidence of 2017 and the retracted statements there is no evidence to establish undervaluation. It is therefore concluded that department has miserably failed to establish the allegation of undervaluation. On the basis of the data retrieved from the pendrive /laptop the price of the goods sold by dealers at Gujarat and Maharastra has been adopted to quantify duty on the goods cleared by the appellant. The price of such goods which have seasonal demand (festival seasons) would vary when sold by dealers, at different places. The quantification of duty on the basis of dealer price at Maharastra and Gujarat appears to be too extra ordinary method for quantification of duty and in appropriate too. The demand of duty, interest, penalties cannot sustain. The impugned order is set aside - Appeal allowed.

  ---

• CST, VAT & Sales Tax

• 2024 (5) TMI 1124
  Violation of the principles of natural justice - Delay and laches in filing the writ petition - opportunity of hearing not provided - cancellation of petitioner s registration of GST - Digital signature on the impugned order - Retrospective effect of the impugned order. Time limitation - HELD THAT:- The Hon ble Apex Court in M/s. Godrej Sara Lee ltd. v. The Excise and taxation Officer cum Assessing Authority [ 2023 (2) TMI 64 - SUPREME COURT] , held that the theory of mistake of law and the consequent period of limitation of three years from the date of discovery of such mistake of law cannot be invoked by an assessee taking advantage of the decision in another assessee s case. All claims for refund ought to be, and ought to have been, only under and in accordance with Rule 11/Section 11B and under no other provision and in no other forum. The decisions of the Court saying to the contrary were overruled therein. In the aforesaid case it has not been held that the period of limitation for filing writ petition is three years - The Hon ble Apex Court clearly held that Writ Court while deciding writ petition is required to remain alive to the nature of the claim and the unexplained delay on the part of the writ petitioner. Violation of principles of natural justice - HELD THAT:- The show cause notice dated 01.04.2023 was issued to the petitioner and the petitioner did not submit any reply. In the order of cancellation in the first sentence it shows that this has reference to your reply dated 18.04.2023 in response to the notice to show cause dated 01.04.2023 , and in the second sentence, it clearly states that no reply to notice was filed by the petitioner . The case of the petitioner is that he did not file any reply. Consequently, there is no violation of principles of natural justice since the petitioner was served with the show cause notice and he did not file any reply. Opportunity of hearing - HELD THAT:- So far as the opportunity before passing the order of suspension is concerned, the suspension was passed during the pendency of the proceedings for cancellation, the opportunity of hearing is not required. Any legal provision could also not be placed that opportunity was required before suspension. The petition is dismissed.

  ---

• Indian Laws

• 2024 (5) TMI 1103
  Dishonour of Cheque - insufficient funds - legally enforceable debt or not - aquittal of accused - complaint did not produce any document to show that he has money lending authority - failure to rebut the presumption under Section 139 of the Negotiable Instruments Act - HELD THAT:- In the present case, the Complainant has sent a demand Notice on the Cheque being dishonoured. And the presumption as per Section 139 N.I. Act is in favour of the Complainant. The accused did not rebut the presumption in any manner whatsoever. The findings of the Learned Magistrate is clearly against the provisions of Section 139 of the N.I. Act and thus not in accordance with law. In Oriental Bank of Commerce vs Prabodh Kumar Tewari, [ 2022 (9) TMI 264 - SUPREME COURT] , the Supreme Court held that Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt. The Respondent No. 2/accused, Raja Dutta is hereby convicted of the offence punishable under Section 138 of the Negotiable Instruments Act and is hereby directed to pay a fine of Rs. 8 lakhs within a period of two months from the date of this order in default to suffer imprisonment for six months and in default, the trial Court shall proceed in accordance with law. Application disposed off.

  ---