Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 28, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Challenge to the order of ITAT on the ground that it erred in allowing the assessee to belatedly appeal against the orders of the Assessing Officer – assessee once accepted the decision, cannot take the advantage of later decision of high court in another case - HC
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Recovery of dues from third person - group company – TRO’s own observations, that the consequence of APIIC revoking consent could very well be considered “force majeure”, thus resulting in the EMGF debt continuing to be owed to EHTPL, is consistent with this line of reasoning - HC
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Validity of direction of special audit – AO was justified in holding that the interest of the revenue had to be protected by ordering a special audit - HC
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Lease rent received by the assessee from letting out buildings along with other amenities in a Software Technology Park is chargeable to tax under the head ‘income from business’ - HC
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The idea of “once for all“ payment and “enduring benefit“ are not to be treated as something akin to statutory conditions, nor are the notions of “capital“ or “revenue“ a judicial fetish - HC
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Loss from house property situated outside India - CIT(A) is not correct in holding that income from house property from Australian property was not assessable in India - AT
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Scope of section 68 - Society/Bank not required to go for detailed verification of address/ whereabouts of the customers - addition u/s 68 cannot be made merely because the address of the customers are incomplete - AT
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Allowance of depreciation and partners salary etc. from estimated income applying the provisions of Section 44AD - AO is directed to allow the salary and interest paid to the partner subject to the limitation provided in section 40(b) - AT
Customs
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Proceedings against Courier agency - For bonafide action on the part of the appellant, the provisions of Regulation 13(b) and 13(c) of the said Regulations are not attracted. - AT
Indian Laws
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Narendra Modi's Cabinet: List of ministers with portfolios
Central Excise
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Rebate under Rule 18 - payment of interest on delayed payment after the goods have been cleared cannot be construed to mean that the condition of payment of duty prior to the export of goods has been complied - HC
Case Laws:
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Income Tax
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2014 (5) TMI 861
Challenge to the order of ITAT on the ground that it erred in allowing the assessee to belatedly appeal against the orders of the Assessing Officer – Claim of deduction u/s 80HHC of the Act – Effect of retrospective amendment w.e.f. 1.4.1992 - Whether a litigant can take advantage of a decision in another litigation belatedly – Held that:- Following Tilokchand Motichand & Ors. vs H.B. Munshi & Anr, [1968 (11) TMI 86 - SUPREME COURT OF INDIA] - the retrospective amendment was introduced after the original assessment - The introduction of the amendment occasioned the re-assessment - The reassessment order gave effect to the amendment - The assessee was content, it accepted the order which became final - the reassessment order cannot be sought to be indicted in as much as the finality which attaches itself to the reassessment order cannot be affected, merely because a later judgment of the Gujarat High Court held the amendment to be arbitrary, to the extent of its retrospectivity – Decided in favour of Revenue.
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2014 (5) TMI 860
Block assessment - Inclusion of period up to date of execution of warrant - Whether the period up to the date of execution of warrant of authorization u/s 132A is to be included in the “Block Period” in view of the Explanation 2 of Section 158BE of the Act – Held that:- Block period has been defined to mean the period comprising previous years relevant to the six assessment years preceding the previous year in which search u/s 132 of the Act is conducted or requisition u/s 132A is made. It also includes a part of the previous year till the date when the search under section 132 of the Act is conducted or such requisition under section 132A is made - the words of a statute must be understood in the natural, ordinary sense - Phrases and sentences must be construed according to their grammatical meaning, unless construing the words of a statute as per their ordinary meaning would lead to absurdity - The ordinary meaning of words and expressions may also be discarded where it leads to inconsistencies and repugnancies with the other provisions of the Act - the context of the statute may require that the words and expressions be read in conformity with the context. Whether Explanation 2 to Section 158BE can be extended to interpret Section 158B(a) of the Act – Held that:- The opening words of the said Explanation indicate that the same has been introduced for the purposes of creating a legal fiction - This is clear from the use of the words “deemed to have been executed” - The opening words of the said Explanation also clearly indicate that the legal fiction has been introduced for the purposes of removing any doubt with regard to the expression “authorization which is referred to in Section 158BE(1)” - the Legislature did not intend to extend this Explanation for interpreting any other provision except as specifically indicated - the scope of legal fiction in a statute would be confined only for the purposes for which it has been introduced – Relying upon The Supreme Court in the case of Vodafone International Holdings BV v. Union of India [2012 (1) TMI 52 - SUPREME COURT OF INDIA] - the ordinary, natural meaning of the words used u/s 158B(a) need not be departed from - There is no ambiguity in the language - the definition of the expression “Block Period” as understood by the plain language of Section 158B(a) also conforms to the scheme of Chapter XIV-B of the Act – there was no reason to read the expression “requisition was made” to not mean the date on which the authorized officer made the requisition but to mean the date when he received the records/assets pursuant thereto. The Block Period adopted by the AO was not in accordance with the provisions of the Act, the assessment made by the AO would also require to be reviewed – the matter is remitted back to the AO for assessment of the income for the block Period 01.04.1995 to 18.09.2001 - the assessee had given details of the cash rewards received by him including the names of the officers who had given the cash rewards to the assessee – This can be easily be verified by the AO by making enquiries with the DRI - the affidavit filed by the assessee could not have been rejected summarily without verifying the facts from the relevant authority - The AO would also have to determine whether the cash seized by the CBI included any amount received by the assessee as cash rewards as asserted by him – Decided in favour of Assessee. Rejection of Penalty – Held that:- The Tribunal has concluded that the assessee was under a belief that the cash rewards received by the assessee were not taxable – the decision to remand the matter with respect to the assessment to the AO, the question of levy of any penalty on account of the amount being treated as undisclosed income is also remanded to the AO without expressing any opinion on the decision of the Tribunal – Decided against Revenue.
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2014 (5) TMI 859
Recovery of dues from third person - group company – Disputed debt - Whether the TRO in its attempt to discern whether there is an apparent falsity in EMGF’s affidavit objecting to the alleged liability to EHTPL, has actually adjudicated on the question of a disputed debt, thus exceeding his jurisdiction – Held that:- Section 226(3) does not confer any jurisdiction to adjudicate the indebtedness of a third party to the assessee and was only was confined to first, cases where the third party “admits to owing money or holding money on account of the assessee” - cases where it is “indisputable that the third party owes money or holds money on the account of the assessee” - when liability itself is disputed by the third party, Section 226(3) was no source of power to the AO to adjudicate on that question - It merely empowers the AO to discover falsity in the objections filed by the garnishee, in cases where it is an admitted or an indisputable debt. The TRO held that none of the litigation calls into question the validity of the development agreement - in any event, the debt is not susceptible to being cancelled - The Court differs from the TRO on the limited ground because it would neither be appropriate nor possible for the Court to predict the outcome of any litigation - any number of outcomes could ensue from the litigation through several contractual and other possibilities – the Court reiterates that any potential effect that the litigation may have on the debts in existence, is too distant a contingency to account for, given the need to only decide the existence of an admitted or indisputable liability - the TRO’s own observations, that the consequence of APIIC revoking consent could very well be considered “force majeure”, thus resulting in the EMGF debt continuing to be owed to EHTPL, is consistent with this line of reasoning – Decided against Assessee.
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2014 (5) TMI 858
Existence of Association of Person – AAR decided that petitioner herein and CINDA constituted an AOP and applicant can be said to have a business connection in India for the purpose of application of section 9(1) of the Act - As the applicant is excluded from the relief under section 90(2) of the Act, the fiscal jurisdiction to tax the offshore supplies would be governed under the Act - Held that:- Following Linde AG, Linde Engineering Division And Another Versus Deputy Director of Income Tax [2014 (4) TMI 975 - DELHI HIGH COURT ] the AOP is one in which two or more persons join together for a common purpose or common action and there is a joint management or joint action by the two or more persons - In order to treat persons as an association, it is necessary that the members must have a common intention and must act jointly for fulfilling the object of their joint enterprise. The matter was not examined in the light by the Authority for Advance Rulings, it would be appropriate that the matter with regard to the question of AOP is remitted to the Authority to return a finding based upon the above legal principles - matter remanded back – Decided in favour of Assessee.
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2014 (5) TMI 857
Application for rectification of order – order of settlement commission - Benefit of amount of excise duty – Held that:- The order of the Commission does not suffer from any patent illegality, which may warrant any interference in the exercise of the writ jurisdiction - the assessee has not reflected sum as amount of excise duty paid during the AY 2008-09 in the statement of the case filed before the Commission - if such amount would have been disclosed, the income would be lower than the income declared by the assessee in his statement of facts - by not reflecting the disclosed income for payment of excise duty, the assessee wishes to take benefit of payment of excise duty in the rectification application - the Commission is the authority competent to examine the extent of undisclosed income - The Commission has framed an opinion that the benefit of the amount of the excise duty cannot be given to the assessee as it would negate even the undisclosed income shown in the statement of facts – the opinion is possible finding as per the facts noticed by the Commission – thus, there was no illegality in the order passed by the Commission – Decided against Assessee.
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2014 (5) TMI 856
Validity of order of remanding back the addition – Amount added as undisclosed income - Held that:- The decision of the Tribunal cannot be accepted as to the remanding the matter back to the AO is in any manner perverse or raises a question of law – the contention of the assessee that the amounts noted on the documents reflected contributions to Virendragram project was required to be verified and the same could be done by examining the entries in relation to the Virendragram project – there was no infirmity with this reasoning. Deletion of certain addition made by AO – Unexplained expenses – Held that:- Revenue contended that he Tribunal had deleted various deletions made by the AO without appreciating the evidence on record – revenue has not been able to point out any specific instance which indicates that the decision of the Tribunal is perverse or not informed by reason. Deletion of household assets and unexplained sum – Held that:- The Tribunal found that the explanation given by the assessee with regard to the household items as well as with respect to the bank deposits in the account of M/s Bhatnagar Design were not satisfactory - the Tribunal concluded that the ad hoc addition of ₹ 10 lacs made on account of bogus expenses as well as the amount accepted by the assessee as undisclosed income were sufficient to include the - the finding of the Tribunal cannot be stated to be perverse – No substantial question of law arises foe consideration - Decided against Revenue.
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2014 (5) TMI 855
Validity of direction of special audit – Failure to produce books of accounts - Held that:- At various stages of the assessment for AY 2011-12, sufficient opportunities were granted to the assessee to produce the tax audit report u/s 44AB of the Act and besides it, the books of account, bills and vouchers as well as the annual audit report for justifying the claim u/s 80-IB(10) of the Act - Once after the grant of a reasonable opportunity to the assessee as required by law, the AO has indicated the material on the basis on which he has come to the conclusion that a special audit was necessary, it would not be open to the Court to test the sufficiency of the grounds - the Court would be justified in interfering in a case where there has been a breach of the procedural requirement of complying with the principles of natural justice or where there is absolutely no material whatsoever to sustain the conclusion that the grounds which have been relied upon do exist. The CIT (Central), Kanpur, as well as the AO have furnished cogent reasons for holding that the grounds which are stipulated in Section 142(2A) of the Act have been duly established - the assessee had failed to produce the books of account, that does not leave the AO with a recourse to Section 145A of the Act as the only available means to determine the income of the assessee for the purposes of an assessment - the requirement contained in Section 142(2A) of the Act about the specialized nature of the business activity of the assessee is broad enough to comprehend the facts - The assessee consistently obstructed the assessment proceedings by refusing to produce relevant information which was in its possession ostensibly because there was a dispute in the Management before the Company Law Board - The AO was justified in holding that the interest of the revenue had to be protected by ordering a special audit – thus, there was no reason to interfere in the order – Decided against Assessee.
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2014 (5) TMI 854
Levy of interest u/s 234A, 234B and 234C of the Act – Held that:- Following C.I.T. Vs DIVINE HOLDINGS PVT. LTD [2012 (4) TMI 100 - BOMBAY HIGH COURT] - the tribunal has erred in taking a view that the assessee being a notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992 is not liable to pay interest u/s 234A, 234B and 234C of the Act - interest is chargeable and merely because the assets and properties are attached does not mean that the liability to pay interest will not arise – the order of the Tribunal is set aside - Decided in favour of Revenue.
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2014 (5) TMI 853
Treatment of rental income – Letting put of building with other amenities – Business income OR income from house property – Held that:- Following COMMISSIONER OF INCOME TAX-III v/s VELANKANI INFORMATION SYSTEMS (P) LTD. [2013 (8) TMI 113 - KARNATAKA HIGH COURT] - firstly what is the intention behind the lease and secondly what are the facilities given along with the buildings and documents executed in respect of each of them is to be seen. Thirdly it is to be found out whether it is inseparable or not. If they are inseparable and the intention is to carry on the business of letting out the commercial property and carrying at complex commercial activity and getting rental income therefrom, then such a rental income falls under the heading of profits and gains of business or profession. Decision of tribunal holding that the lease rent received by the assessee from letting out buildings along with other amenities in a Software Technology Park is chargeable to tax under the head ‘income from business’ is correct - Decided against Revenue.
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2014 (5) TMI 852
Disallowance of loss of foreign exchange fluctuation – Held that:- A part of the business being handled by the erstwhile TATA IBM has been handed over to the assessee-company in view of bifurcation of the software and hardware business - For the transfer of domestic customer database and the man power, the assessee had paid ₹ 5.3 crores and ₹ 9.38 crores respectively towards the consideration as per the agreement entered into between the parties - insofar as payment for getting domestic customer database - assessee has only got right to use that database, the company which has provided such database is not precluded from using such database - the expenditure incurred is for the use of database and not for acquisitions of such database - payment made towards access to information base and for transition of customer order filing is a business consideration – there is no question of acquisition of any assets when the access is made and the payment is made for the same - The payment cannot be treated as revenue expenditure – there is no infirmity or irregularity in the finding of the Tribunal. Payment made towards transfer of human skill – Held that:- Relying upon Jonas Woodhead And Sons (India) Limited Versus Commissioner of Income-Tax [1997 (2) TMI 4 - SUPREME Court] - The idea of "once for all" payment and "enduring benefit" are not to be treated as something akin to statutory conditions, nor are the notions of "capital" or "revenue" a judicial fetish - What is capital expenditure and what is revenue are not eternal varieties but must needs be flexible so as to the respond to the changing economic realities of business - The expression "asset or advantage of an enduring nature" was evolved to emphasize the element of a sufficient degree of durability appropriate to the context – the order of the Tribunal is upheld and as such no substantial question of law arises foe consideration - Decided against Revenue.
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2014 (5) TMI 851
Remand back made to the AO - Disallowance of Business Promotion Expenses – Held that:- The Tribunal remanded the matter to the Assessing officer to consider this claim as per the facts and materials brought on record and in accordance with law - The explanation given by the assessee for not being able to place the documents earlier on record has been accepted - The technical view taken by the lower authorities is thus corrected – there was no error on the part of the Tribunal when the assessee is given an opportunity, or its order is vitiated by any error of law apparent on the face of record – thus, no substantial question of law arises for consideration – Decided against Revenue. Disallowance of guarantee commission paid to the two Directors – Held that:- Tribunal found that the Accountant of the Company committed a mistake in paying the commission @ 3.51% to the Directors and the assessee conceded before the Tribunal that this was a mistake and the commission has been restricted not 1% as claimed by the Revenue but 1.77% - The total payment, therefore is not more than Rs.10,52,000 - the Tribunal did not commit any error in upholding the limited payment and particularly when it is not found to be unreasonable or excessive – thus, the order of the Tribunal is upheld – Decided against revenue. Disallowance of deduction u/s 80IB of the Act – Held that:- The Tribunal has noted that the AO should have given an opportunity to submit the audit report in the new form - The disallowance is only because the audit report has not been filed by the assessee in the prescribed format - The matter was thus of form and not of substance - All that the Tribunal has permitted is that the audit report be brought on record - The reasons assigned by the assessee are found to be bonafide - If they are not attributing any deliberate or intentional act to the assessee then the Tribunal was justified in allowing the claim - The Tribunal performed its duty as the last fact finding authority and exercising appellate jurisdiction –no substantial question of law arises for consideration - Decided against Revenue.
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2014 (5) TMI 850
Dismissal of application of revision u/s 264 of the Act - Unexplained investment u/s 69 of the Act – Held that:- The AO vide order dated 5.12.2011 and the CIT while passing order dated 28.3.2013, u/s 264 of the Act had completely ignored the same - the CIT had passed the order which is not a speaking one – Relying upon CIT vs. Smt.P.K.Noorjahan [1997 (1) TMI 6 - SUPREME Court] addition u/s 69 of the Act is within the discretion of the AO as according to the words used in the section, it was incumbent upon the AO to consider the facts and circumstances of the case before making an addition. It is clear from the orders passed by CIT and the AO that inspite of opportunity having been provided to the assessee to appear before them, but did not chose to appear and Shri Amit Kashyap could not be confronted to the assessee who had tried to own the responsibility for maneuvering the entire transaction - on a query being put to the counsel for the assessee as to why did the petitioner enter into transaction on behalf of Tarlochan Singh who was stranger and had no relationship with the assessee, but they were unable to give any reply much less satisfactory reply – thus, no illegality or perversity could be pointed out in the orders passed by the AO and the CIT – Decided against Assessee.
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2014 (5) TMI 849
Loss from house property situated outside India - Liability to offer overseas rental income to tax by the resident individual – Held that:- Plain reading of Sec 90(2) shows that wherever DTAA is applicable in case of an assessee then the assessee has an option to apply either Indian Tax Laws or provisions of DTAA if same are more beneficial to the assessee - it is an option of the assessee whether to return income under the Indian tax laws where DTAA is applicable - if the assessee has exercised the option of filing return under Indian law, it could not have been refused simply because DTAA was applicable because it was option of the assessee - the assessee had right to file the return of global income in India and the Revenue is bound to give effect to such return – thus, CIT(A) is not correct in holding that income from house property from Australian property was not assessable in India – the order of the CIT(A) is set aside and the AO is directed to assess the income of house property that is loss from such house property in the hands of the assessee – Decided in favour of Assessee.
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2014 (5) TMI 848
Concealment of income - Penalty u/s 271(1)(c) of the Act - CIT(A) deleted the penalty on the ground that, original assessment order dated 31.12.2008 u/s 143(3) r.w.s. 153A and u/s 143(3) r.w.s. 250 dated 25.6.2010 has been annulled and treated as infructuous – Held that:- As decided in assessee's own case for the earlier assessment year, it has been held that the AO’s orders giving effect to the then CIT (A)’s order are not maintainable, the quantum appeals based on the original assessment orders have been knocked down - CIT (A) was justified in coming to a conclusion that the appeals preferred by the assessee against the orders of the AO giving effect to the then CIT (A)’s order were not maintainable - CIT (A) was also justified in treating the assessees’ appeals as infructuous against the penalty orders passed by the AO u/s 271(1)(c) of the Act which emanated from the original assessment orders – Decided against Revenue.
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2014 (5) TMI 847
Addition by estimation of gross profits @25% - Assessee shown profits @10.85% - Held that:- The wages register was found tampered, the Revenue stamps found affixed were not even in existence during the period of payment as is evidenced by the report of the General Manager, Indian Security Press, Nashik - The assessee is not only a contractor in making furniture but is also an interior decorator - The gross profit margin of 10.85% shown by the assessee appears to be much lower in this line of the business added to this, the wages are not verifiable - the AO has also not brought on record any comparable justifying his adoption of GP margin at 25% - neither the assessee has justified his claim of profit and at the same time found to have manipulated the wages register which amounts to filing of inaccurate particulars and tampering with the profit nor the Revenue has brought any cogent material evidence on record to justify the adoption of GP rate of 25% - there was no choice but to make a fair estimate of the profit – the AO is directed to restrict the adhoc addition of Rs. 20,00,000 – Decided partly in favour of Assessee.
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2014 (5) TMI 846
Addition made u/s 68 of the Act - Unexplained cash credits - Application of section 41(1) of the Act – Held that:- In the first round of litigation the CIT(A) observed that provisions of section 41(1) cannot be applied - the addition can be made u/s 68 of the Act as unexplained cash credit - the view taken by the CIT(A) have not been challenged by the Revenue, they attained finality - the case deserves to be considered only in the backdrop of section 68 of the Act - the plea of the assessee that no fresh cash credit was taken in the previous year relevant to A.Y. 2002-03 was not disputed by the tax authorities - Whether the creditor is Hatima Textiles Ltd. or D’souzas, the fact remains that there is no fresh cash credit in the year under consideration – thus, addition cannot be made u/s 68 of the Act – Decided in favour of Assessee.
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2014 (5) TMI 845
Validity of reopening of assessment – Reason to believe - Reduction of Claim of Deduction U/s 80 IB of the Act - Held that:- Assessee contended that the reopneing of assessment vide notice u/s 148 dated 31st March 2010 is beyond four years from the end of the assessment year - the reassessment is not valid in view of the proviso to section 147 of the Income Tax Act - since no disallowance has been made by the AO in the reassessment proceedings u/s 80IB – thus, the grounds for reopening of the assessment becomes infructuous – Decided in favour of Assessee. Reduction in the Claim of Deduction U/s 80HHC of the Act – Held that:- The original assessment was completed u/s 143(3) and after expiry of four years - The AO has reopened the assessment vide notice u/s 148 issued on 31st March 2010 - the assessee has made the reference to Circular No. 772 dated 23.12.1980 and claimed that when the deduction is claimed for more than 100% only in such cases suitable safeguard is provided to prevent undue advantage of double deduction - Relying upon Lalitha Chem Industries Pvt. Ltd Vs. DCIT [2013 (11) TMI 1494 - BOMBAY HIGH COURT] - the AO has power to re-assess but has no power to review an assessment - The power of re-assessment could only be exercised if certain pre-conditions are satisfied - the AO must have reason to believe that income chargeable to tax has escaped assessment. For reopening the assessment the primary condition to be satisfied is that the AO must have reason to believe that the income chargeable to tax has escaped assessment and this reason to believe must be based on some tangible material and cannot be a mere assertion of the AO - the reopening of assessment after four years from the end of the assessment year in the case of the assessee is without any tangible material on the basis of which the AO could have formed the belief that the income assessable to tax has escaped assessment and further since the assessment has been reopened after expiry of four years - in the absence of any allegation that income assessable to tax has escaped assessment by the reason of failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment, the reopening is hit by the proviso to section 147 - the reopening of assessment is not sustainable and set aside – Decided in favour of Assessee.
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2014 (5) TMI 844
Scope of section 68 of the Act – Society included or not – Business of banking – KYC norms followed and systematic record maintained - Held that:- Following Citizen Co-op. Society Ltd. Versus Additional Commissioner of Income-tax, Range-9, Hyderabad [2012 (9) TMI 756 - ITAT HYDERABAD] - assessee is a Society carrying on the Banking business to its own members and the business is carried on with certain set of guidelines and procedures - Deposits were accepted by staff along with the application at the counters - To the extent of the maintenance of the records is concerned, it is already seen that a systematic record was maintained by the assessee with regard to the transactions by the Bank. It has accepted all the documents as required under KYC norms - the assesses has proved the identity of the depositor - amounts in the accounts maintained by the assessee are deposits of the customers and/or not under the control of the assessee - provisions of Section 68 are not applicable to the Bank - Society/Bank not required to go for detailed verification of address/whereabouts of the customers - addition u/s 68 cannot be made merely because the address of the customers are incomplete - CIT(A) rightly deleted the addition - the order of the CIT(A) is upheld with regard to deletion of addition u/s 68 of the Act on the deposits accepted by the assessee from public – Decided against Revenue.
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2014 (5) TMI 843
Validity of Ex-parte order – Opportunity of being heard not provided – Confirmation of ad-hoc disallowance – Held that:- The CIT(A) had confirmed the order of the AO ex-parte in the absence of the assessee - after considering the plea of the assessee's counsel at length, the matter is required to be remit back – thus, the matter is remitted back to the CIT(A) for fresh adjudication after giving adequate opportunity of hearing to the assessee – Decided in favour of Assessee.
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2014 (5) TMI 842
Gross receipts to be estimated @5% instead of 3% - Rejection of books of accounts – allowance of depreciation and partners salary from estimated income applying the provisions of Section 44AD - Held that:- On examination of the books of account with reference to the voucher produced, the Assessing Officer found that the voucher does not tally with the cashbook - When the voucher does not tally with cashbook, the book results will not reflect the correct profit of the assessee - The Assessing Officer has rightly rejected the books of account - When the books of account were rejected the only method available to the Assessing Officer is to estimate the profit - The profit ratio cannot be a constant factor for each and every year - Tribunal has been uniformly estimating the profit from main contract at 8% to 12.5% depending upon the factual situation and 5% to 7% on the sub contract depending upon the factual situation. Claim of seigniorage charges – Held that:- The material supplied by the Government/contractor will not have any element of profit - it shall be reduced from the contract receipts - the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit – thus, the AO is directed that while computing the total contract receipts the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit. Estimation of income @5% - Grant of depreciation - Held that:- Following Indwell Constructions Versus Commissioner Of Income-Tax [1998 (3) TMI 121 - ANDHRA PRADESH High Court] - the deduction available u/ss. 30 to 38 shall be deemed to have been already given full effect and no further deduction under those sections shall be allowed - Depreciation is allowable u/s. 32 of the Income-tax Act - as provided in section 44AD no further/separate deduction shall be allowed - the claim of depreciation on the estimated income is not justified. Payment of interest and salary to the partner – Held that:- The provision of section 44AD as it is applicable for the assessment year under consideration and the amendment made with effect from1.4.2011 it is obvious that the Legislature intended to allow the interest and salary separately from the estimated income – the AO is directed to allow the salary and interest paid to the partner subject to the limitation provided in section 40(b) of the Act – Decided against Revenue.
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Customs
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2014 (5) TMI 867
Waiver of pre-deposit of penalty - import of Polyester Spun Yarn - customs duty exemption under Duty Free Credit Entitlement (DFCE) scheme - Held that:- it is an admitted position that the appellant knowing fully well facilitated the diversion of the goods imported under Target Plus Scheme in complete disregard of the provisions of law, for which he received a consideration. Thus, the appellant appears to have actively aided and abetted evasion of customs duty and, therefore, penalty was imposable on the appellant under the provisions of Section 112(b) of the Customs Act, 1962. If penalty is imposable, there is no reason why at the interim stage, the applicant should not be put to terms. A pre-deposit of ₹ 15 lakhs against the confirmed penalty of ₹ 75 lakhs works out to only 20% of the penalty imposed and cannot be said to be harsh or excessive. Even in the earlier order of the Tribunal, the appellant has paid a sum of ₹ 68 lakhs against the confirmation of duty demand of ₹ 1.79 crore, which approximately works out to 40% of the demand confirmed. Therefore, in the present case, a pre-deposit of ₹ 15 lakhs ordered by the Member (Technical) cannot be faulted - Decided against assessee.
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2014 (5) TMI 866
Valuation of goods - Determination of transactional value - Enhancement in value - Demand of differential duty - Held that:- The enhancement of the value has been done under Rule 5 of the Customs Valuation Rules, 1988. As per the said Rule, if more than one value is found, then the lowest of the such value shall be used to determine the value of the imported goods. In the present case as pointed out by the ld. Counsel, the department has assessed identical goods at lower values ranging from US $ 1070 to US $ 1090 PMT, whereas the value declared by the appellant is higher at US $ 1100 PMT. Further, the price adopted for comparison is not a declared value but an enhanced value by the Customs. The values declared in those transactions ranged from US $ 1050 to US $ 1090 PMT. In the case laws cited by the appellant, this Tribunal has already held that for the purpose of comparison of contemporaneous imports, the value to be adopted is not the value arrived at after loading by the department but the value that has been declared and accepted without any enhancement. Besides, we notice that no evidence has been led by the Revenue in the instant case to counter the appellant's contention that the transaction value declared by them, as evident from the documents is not the real transaction value. Transactional value declared by assessee accepted - Decided in favour of assessee.
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2014 (5) TMI 865
Proceedings against Courier agency - Valuation of goods - Mis declaration - Penalty - Held that:- Allegation against the appellant is that they failed to advice the client properly to comply with the provisions of the Customs Act, 1962 as required under Regulation 13(b) and failed to exercise due diligence to ascertain the correctness or completeness of any information relating to the clearance of the import goods or of export goods as envisaged under Regulation 13(c) of the Courier Import & Export (Clearance) Regulation, 1998. On perusal of the records it is seen that there is no evidence adduced by the Revenue to substantiate the allegation that the appellant failed to carry out the responsibility in respect of the impugned transactions. The appellant accepted the value given by the shipper/importer and have declared the same in the courier bill of entry. For such bona fide action on the part of the appellant, the provisions of Regulation 13(b) and 13(c) of the said Regulations are not attracted. Accordingly, we are of the view that imposition of penalty on the courier agency is not warranted for mis-declaration of value by the importer - Decided in favour of appellant.
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Corporate Laws
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2014 (5) TMI 864
Winding up of company - Inability to pay debts - Respondents contends that only partial amount is due to them - Held that:- services were provided by the petitioner to the respondent company and the respondent is liable to pay for the services being provided to the respondent. However, the respondent company has disputed the amount claimed by the petitioner is due and payable by the respondent - invoices for the month of August, 2011 could not be raised as the services of the petitioner were terminated in the month of July, 2011. The said contention is liable to be rejected in view of the e-mail dated 16.09.2011 sent by the respondent to the petitioner. The respondent company, by an e-mail dated 16.09.2011, has terminated the service of the petitioner with effect from 16.09.2011 - It is also well settled that proceedings under Section 433(e) cannot be used by a creditor as a means for recovery of its dues - Following decision of Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami and Anr.: [1965 (1) TMI 16 - IN THE SUPREME COURT OF INDIA] - It cannot be held that Respondents is unable to pay its debts - Therefore, petitioner may institute appropriate proceedings for recovery of the dues claimed by the petitioner - petition dismissed - Decided against Petitioner.
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FEMA
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2014 (5) TMI 863
Contravention of Section 9 (1) (d) of Foreign Exchange Regulation Act, 1973 - Payment made on behalf of foreign national without prior approval of RBI - Held that:- There can be no doubt that a retracted statement under Section 40 FERA, cannot form the sole basis for determining whether the maker of such a statement is guilty of contravening any of the provisions of FERA. It shall have to be corroborated by other independent evidence. In determining whether such a retracted statement can be relied upon, it will have to be examined whether the statement could be said to have been made voluntarily. Statement made by Mr. Saluja contains a wealth of details on the transactions undertaken by him at the behest of either his brother Dr. R.S Saluja or others. He has explained in minute detail the entries in the loose sheets. The details on every page of the loose sheets could not have been explained by anyone other than one fully conversant with the transactions. It is impossible for such details to have been fabricated by the officials of the ED. There is nothing credible brought on record by Mr. Saluja to persuade the Court to conclude Mr. Saluja was under threat, duress or any form of coercion that at the time when he made the statement and that he did not make it voluntarily. The entries/notings in the loose sheets recovered from his residence as explained by Mr. Saluja in his statement under Section 40 FERA fully substantiated the case of the ED that he had involved himself in transactions in violation of the FERA. Further corroboration was from the details of the STD calls exchanged between Mr. Saluja, Mr. Kedia and Mr. Shah. The fact that the foreign exchange may not have been recovered from the residence of Mr. Saluja does not weaken the case of the ED. According to the ED, the Indian currency paid to Mr. Saluja was for delivery of foreign exchange abroad. As noted in the AO, the details of the foreign bank accounts were available in the documents seized from the residence of Mr. Saluja. The telephone number of Mr. Gopalani was found in the loose sheets recovered from the residence of Mr. Saluja. One of these loose sheets at page 19 contained instructions in writing by Mr. Gopalani. This was confirmed by the report of the hand writing expert. Mr. Gopalani did not challenge the report of the handwriting expert. He did not seek to cross-examine the expert. The report, therefore, corroborated the retracted statement of Mr. Saluja that he had received instructions from Mr. Gopalani to pay USD 50,000 to Geeta Soni. The aforementioned evidence was sufficient to conclude that Mr. Gopalani had contravened Section 9 (1) (f) (i) FERA. - Decided against Appellants.
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Service Tax
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2014 (5) TMI 878
Goods Transport Agency Service - CENVAT Credit - whether the assessee, manufacturing excisable goods is eligible to discharge service tax liability on GTA service from their cenvat credit account or by cash during the period April 2006 to January 2007 - Held that:- in view of the Notification No.10/08-CE (NT) dt. 1.3.2008, GTA service was excluded from the definition of "output service" under Rule 2(p) of the Cenvat Credit Rules, 2004 and therefore, they are eligible to utilize cenvat credit for payment of service tax on GTA service prior to 1.3.2008. - following the decisions of the Division Bench in the case of Shree Rajasthan Syntex Ltd. (2011 (8) TMI 265 - CESTAT, NEW DELHI), impugned order in so far as the demand of tax along with interest for the period 19.4.2006 to January 2007 is set aside - Decided against Revenue.
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2014 (5) TMI 877
Waiver of pre-deposit of Service Tax - Construction, Repair or Maintenance services - Held that:- Demand has been confirmed against the applicant after taking into consideration the information filed by the applicant in their ST-3 Returns, claiming the benefit of Notification No. 15/04-ST Dated-10. 9.2004. It is the stand of the Revenue that the applicant had claimed abatement under the said Notification both on the construction services as well as on the Repair and Maintenance services, whereas, it is the contention of the applicant that the benefit of Notification No. 12/03-ST dated-20/06/2003 need to be applied to the construction service as well as to the Repair and Maintenance service. However, from the records we find that the applicants have never claimed the benefit of Notification No. 12/2003-ST Dated-20.6.2003 in their ST-3 Returns filed nor in their reply to their show cause notice. Prima facie, the claim against Notification No. 12/03-ST dated-20/06/2003, could not be verified by the lower authorities as it was not claimed. In these circumstances, we are of the view that the applicants have not been able to make out a case for total waiver of dues adjudged against them. Consequently, we direct the applicant to deposit 25% (Twenty Five Per cent) of the Service Tax amount within a period of eight weeks from today and report compliance on 12th of March, 2014. On deposit of the said amount, balance dues adjudged would stand waived and its recovery stayed during the pendency of the appeal. - Conditional stay granted.
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2014 (5) TMI 876
Eligibility of the CENVAT credit of service tax paid - Interest - Penalty - Held that:- appellant is liable to pay interest even if the credit is not utilized. That being the position, the demand for interest made by the appellant has to be upheld - Interest upheld - Penalty waived - Decided partly in favour of assessee.
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2014 (5) TMI 875
Waiver of pre deposit - Demand of service tax - Mandap Keeper services provided to members - period April 2008 to September 2010 - Held that:- there is no dispute that the applicant collected the subscription charges from their members - Gujarat High Court in the case of Sports Club of Gujarat Ltd. (supra) declared that Section 65 (25a), Section 65 (105) (zzze) and Section 66 of the Finance (No.2) Act, 1994 as incorporated/amended by the Finance Act, 2005 to the extent that the said provisions purport to levy service tax in respect of services purportedly provided by the petitioner club to its members, to be ultra vires. - Following decision of Sports Club of Gujarat ltd. Vs UOI [2013 (7) TMI 510 - GUJARAT HIGH COURT] - Stay granted.
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Central Excise
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2014 (5) TMI 872
Rebate under Rule 18 of the Central Excise Rules, 2002 - whether, in the given circumstances where the petitioner had not deposited the excise duty prior to the export of goods, the petitioner would be entitled to rebate under Rule 18 of the Central Excise Rules, 2002, on the goods exported by it - Held that:- petitioner has paid the excise duty on the automotive parts that were exported, albeit after the goods were so exported - since there was some delay in payment of duty, the petitioner had also paid interest on the same. It is, therefore, contended that the petitioner should not be deprived of the benefit of rebate on duty under Rule 18, which is available where duty paid goods are exported. One of the conditions for grant of rebate under Rule 18 of Central Excise Rules is that the excisable goods be exported after payment of duty. - discharging the liability to pay Excise Duty in the manner as provided under Rule 8 of the Central Excise Rules cannot be construed as compliance of the conditions for availing rebate under Rule 18 of the said Rules. Sub rule (3) of Rule 8 of the Central Excise Rules only provides for payment of interest if Excise Duty is not deposited within the specified time, however, payment of interest on delayed payment after the goods have been cleared cannot be construed to mean that the condition of payment of duty prior to the export of goods has been complied. - Decided against assessee.
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2014 (5) TMI 871
Waiver of pre deposit - CENVAT Credit - services availed at the retail stores, outward freight, membership fees and sales commission - Whether in facts & circumstances of present case impugned stay order dated April 21, 2014 passed by the CESTAT directing the Appellants to deposit ₹ 40 lakhs with interest as a condition precedent for hearing the Appeal is correct in law inasmuch as Appellants have demonstrated strong prima-facie case & thus made out a case for complete waiver of pre-deposit of duty, interest & penalty - Held that:- It will not be appropriate to examine the dispute on merits since any observation made by the Court would prejudice the case of either of the parties in the pending appeal. Suffice it to state that the Appellate Tribunal, on a prima facie analysis, has granted waiver of pre-deposit on deposit of ₹ 40 lacs together with proportionate interest which amount has been directed to be deposited within six weeks from the date of the order. The issue of financial hardship has not been raised before us and nor does it appear to have been raised before the Appellate Tribunal - No substantial question of law arises - Decided against assessee.
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2014 (5) TMI 870
100% EOU - Refund claim on difference between the duty paid on finished goods and the goods lying in stock on which duty was paid earlier – Maintainability of appeal - whether the order of the Tribunal relates, among other things, to the determination of any question having a relation to the rate of the duty of excise or to the value of goods for the purpose of assessment - Held that:- preliminary objection to the maintainability of the appeal would have to be accepted. Among the issues, the issue which was considered by both the first adjudicating authority as well as by the appellate authority, was whether the duty which was payable on the finished goods which were lying in the stock at the time of de-bonding, was liable to be paid in accordance with the proviso (ii) to section 3(1) of the Central Excise Act, 1944. The issues which arose before both the adjudicating authority as well as the appellate authority included a determination of the status of the unit - as an EOU as claimed by the assessee or as a DTA unit as claimed by the revenue. The claim of the assessee includes a determination of whether an exemption from payment of duty would be available under the exemption notification dated 31 March 2003 which applies to an EOU. Finally, a determination was necessary on whether the unit would continue to be an EOU till the final exit order was passed on 10 June 2011 and whether the assessee would be liable to pay duty on the finished goods as on 31 March 2011 which were exported on 30 April 2011 and 16 May 2011 before the passing of the final exit order. These issues would be intrinsically connected with the rate of the duty for the purpose of assessment. - Appeal not maintainable - Decided against Revenue.
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2014 (5) TMI 869
Clandestine removal of goods - Onus to prove - Held that:- onus was on the Department to prove that there was clandestine removal of the fabrics by the assessee. Investigating agency appears not to have examined twelve buyers whose names have been revealed in the confessional statements of all the three individuals, which later on have been retracted. It appears that the show cause notice, which was issued after nearly six months, and therefore, there was sufficient time available with the investigating agency. However, in absence of any corroboration, if both the authorities have chosen not to uphold the action of the Revenue, no perversity could be seen in the findings of both of them - Decided against Revenue.
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2014 (5) TMI 868
Duty demand - Clandestine manufacture and clearance of goods - Whether the appellants have indulged in clandestine manufacture and clearance of goods - Held that:- Demand is not made only on the basis of few confessional statements made by the appellants but there are other documentary evidences also. There are evidences to the aspect that during stock taking both raw materials and finished goods were found short. The transporter of finished goods has confirmed to the clandestine removal of the goods involving Central Excise duty of Rs.10,04,619/-. The diaries No.1 to 4 maintained by the employee of the main appellant also indicate clandestine procurement of raw materials and clearances of finished goods without payment of duty. All these duty evasion indicators are further corroborated by the confessional statements of the appellant and does not leave any doubt that appellants were indulging in clandestinely manufacturing and clearing excisable goods in view of the parameters fixed by the judicial pronouncements relied upon from time to time. - Decided against the assessee. Quantification of duty liability - submission of the appellants that there is duplication of amounts during calculation of the duty demanded in the show cause notice. - Held that:- As the verifications and duty calculations can only be done by the adjudicating authority, therefore the case is required to be remanded to him for necessary re-quantification of duty. Penalties under various provisions of the Central Excise Act, 1944 and Central Excise Rules, 2002 are also required to be proportionately calculated / imposed upon the appellants. For the above limited purpose, the case is remanded to the adjudicating authority to decide the issue in de-novo consideration after affording an opportunity of personal hearing to the appellants. - Decided partly in favour of assessee.
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CST, VAT & Sales Tax
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2014 (5) TMI 874
Procedure for revision - procedure for filing revision is prescribed in Chapter 27 of the High Court Rules - Service of notice - Held that:- affidavit of service has to accompany revision application, but proviso to sub Rule 2 provides, that, if due to lack of time or for any other sufficient reason, affidavit of service is not accompanying the application filed by Commissioner of Trade Tax, such affidavit must be filed within three weeks' of the date of institution of application. Therefore, a revision would be treated to be validly filed by an assessee if it is accompanied by affidavit of service, but in case of revision filed by Commissioner of Trade Tax, affidavit of service must accompany revision, but for valid reasons, this condition would stand dispensed with, but, the affidavit of service then, must be filed within three weeks' of the date of institution of - In case no such affidavit is filed and the assessee is not served by Commissioner of Trade Tax, meaning thereby there is no notice or opportunity to the assessee and revision has not been filed in the manner prescribed in the Rules. This revision was filed in 2005 and till date affidavit of service has not been filed. In my view it is fit case where this Court must reject revision having not been filed in accordance with rules and for non-compliance of requirement of Chapter 27 Rule 5(2) of High Court Rules - Decided against Revenue.
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2014 (5) TMI 873
Whether Tribunal is correct in holding that the petitioner has collected Additional Sales Tax from the Electricity Board overlooking the fact that it is not the tax collected but reimbursement made by the Electricity Board - Taxable Turnover - Collection of Additional Sales Tax or reimbursement made by the Electricity Board - Held that:- Records reveal that the petitioner has collected 2.25% as additional sales tax on their sales turnover from TNEB - So there is no dispute that there is collection of additional sales tax by assessee which is contrary to the provisions of the Tamil Nadu Additional Sales Tax Act - Therefore, it is only the reimbursement of the amount by the TNEB as per the agreement entered between the assessee and the TNEB and the same cannot be construed as an offence which warrants levy of penalty - There is no dispute that there is reimbursement of Additional Sales Tax - It may not be a direct collection but the fact remains that there is collection of tax though the payment is made by the Electricity Board voluntarily - Once, the assessee received additional sales tax, it certainly amounts to violation of Section 2(2) - So all the authorities below had given a finding that there is collection of additional sales tax and hence there is a violation of the provisions of the Act - Thus, the same finding is confirmed. Whether Tribunal was correct in upholding the levy of penalty imposed u/s 12(5)(iii) of the TNGST Act, 1959 – Reduction in Penalty – Held that:- Section 3-A contemplate quantum of amount should not exceed 1 = times such amount - Assessee is a Government of India undertaking and there was agreement between the Electricity Board and assessee - As per the agreement, Additional sales tax was reimbursed and the same amounts to clear violation of provisions of Section 2 therefore, liable to pay levy penalty u/s 3A - Section 3-A prescribe only maximum amount of penalty and there is no minimum amount of penalty prescribed - After considering the facts and circumstances and also the bona-fide belief of assessee, this Court of the view that the authorities are wrong in levying 100% penalty - It is reasonable to levy 20% of penalty as against 100% penalty levied by the authorities. Levy of Penalty u/s 16(2) - Wilful non-disclosure of turnover - Held That:- The said provision is not applicable to the facts of the case - Penalty could be levied u/s 16(2), only when AO satisfy that the escape from the assessment is due to wilful non-disclosure of assessable turnover by the dealer - According to assessee, the Assessing Authority before imposing penalty could have considered the explanation and levied penalty under Section 16(2) and the authorities below have not at all considered the explanation and there is no finding that there is wilful non-disclosure of turnover - Relying upon Anantharam Veerasinghaiah and Co., Vs. Commissioner of Income Tax A.P., [1980 (4) TMI 2 - SUPREME Court] - Levying of penalty AO u/s 16(2) is not justified - It is well settled principle that the degree of finding for the imposition of penalty has to be on higher order than that required for the purpose of making an assessment –The authorities should give a finding that there is wilful non-disclosure of the turnover - Here, there is no such finding - On the other hand, the assessee gave objections to the Assessing Authority and was under the bona fide belief that the turnover was not subjected to tax – Therefore, the order of Tribunal is set aside - Revision is partly allowed – Decided partly in Favour of Assessee.
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Indian Laws
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2014 (5) TMI 862
Appointment to the candidate on the basis of merit, in the suitability test - Interpretation of circular - Administrative Tribunal, by its judgment has quashed the order dated 10.4.2006, selecting Ms. Suman Devi as Inspector, Central Excise, under the sports quota and thereafter has directed the respondents to offer appointment to the candidate on the basis of merit, in the suitability tesHeld that:- The tribunal completely misconstrued the circular of the department and clearly misdirected itself while examining the issue raised before it. Awarding of 100 marks to Suman Devi was viewed with suspicion and an observation was made that the department had pre-decided to select Suman Devi and for this purpose she was awarded 100 marks. This observation of the tribunal was wholly incorrect and was clearly an outcome of surmises. Since under the policy a candidate with international experience and was in form during the recent past, was entitled to grant of preference, as such awarding higher marks to her over and above the marks awarded to Gyan Prakash Singh who merely had participated at Inter-University level, more so many years all i.e. 1991-92, 1992-93 and 1993-94 was clearly valid and justified. Awarding of marks in field tests and its consideration for determining merit was valid and the view to the contrary taken by the tribunal is wholly unsustainable in law. The tribunal also failed to consider that similar marks were given by department to other candidate also. The Tribunal had clearly misconstrued and misread the departmental circular dated 9.3.1987 and 4.5.1995 and the scheme for recruitment itself, which amounted to manifest error of law. The finding of the tribunal, therefore, cannot be sustained - judgment and order of the tribunal dated 17.9.2008 cannot be sustained and the same is, therefore, set aside - Decided in favour of appellant.
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