TMI Tax Updates - e-Newsletter
May 28, 2021

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

Articles

• Major Amendment in Registration Procedure u/s 12A & 80G

News

• Second virtual trade fair by APEDA focussing on horticultural products commences;

  ---

• CCI receives notice under Green Channel filed by Motherson Sumi Systems Limited (MSSL), Samvardhana Motherson International Limited (SAMIL), Sumitomo Wiring Systems Limited (SWS) relating to an intra-group reorganization of the Motherson Group and is deemed approved

  ---

Highlights / Catch Notes

Income Tax

• Reopening of assessment u/s 147 - the benefit of doubt in certain factual aspects must be held in favour of the Revenue and not in favour of the assessee. This being the principles to be adopted, this Court has no hesitation in arriving a conclusion that there is reason to believe for reopening of assessment and the reasons furnished by the Department can not be construed as change of opinion. - HC
  Visit to Get Source

  ---

• Revision u/s 263 - requirement to issue show cause notice u/s 263 - denial of natural justice - We do not agree with the contention of the ld Counsel to the effect that ld PCIT can give direction to the assessing officer in respect of those issues which are part of his show cause notice under section 263 - there is no requirement to issue notice under section 263 of the Act. The requirement under section 263 of the Act, is to give an opportunity of hearing only - AT
  Visit to Get Source

  ---

• Reopening of assessment u/s 147 - 'reason to believe' OR 'reason to suspect' - AO reopened the assessment based on change of opinion, which is not acceptable as per the decisions quoted supra. Therefore, we quash the reopening of assessment made by the AO and the grounds raised by the assessee on this issue are allowed. - AT
  Visit to Get Source

  ---

• Penalty u/s.271(1)(b) - no compliance to notice u/s 142(1) - The AO levied the penalty for non-compliance of notice dated 13.06.2016, however, there is no reference of such notice for the assessment order, therefore, the order in levying penalty under section 271(1)(b) is invalid. - Furthermore, hen assessee itself offered additional income, which was debited on account of interest on TDS and the same was accepted by AO. And no other issue was identified nor was any other addition made in the assessment order, no penalty should be levied - AT
  Visit to Get Source

  ---

• Disallowance with regard to provision made for maintenance of the roads - the maintenance expenditure to be incurred in five years was ₹ 60.34 crore, project operations were started on 09.08.2011 and estimation of maintenance expenditure was estimated to ₹ 12.07 crores and being not having full year operations of the project, provision was created for only one quarter i.e. ₹ 12.07 crore/4 i.e. ₹ 3 crore. - the claim of provision as made by the assessee is in accordance with settled principal of law - AT
  Visit to Get Source

  ---

• Exemption u/s 11 - Charitable activity u/s 2(15) - assessee drawing the receipt from various regulatory activities - Various other authorities including Aligarh Development authority, NOIDA development authority etc , which are discharging the similar functions as that of the assessee and were created under the Development Act 1973, wereheld to be entitled for deduction u/s 11 the Income Tax Act by ITAT, Delhi. - the assessee is also entitled to deduction u/s 11 - AT
  Visit to Get Source

  ---

• Disallowance on depreciation claimed on assets of transmission business - AO failed to explicate as to how the transfer would fall within the meaning of demerger as given under section 2(19AA) and as how all the condition specified under section 2(19AA) of the Act were satisfied. - AT
  Visit to Get Source

  ---

• Unaccounted cash loans - Addition on money received by the assessee - transactions found on Cloud Data - since the amounts had already been added by the AO and the same had already been subjected to tax in the hands of MBDL and related entities, therefore, the ld. CIT(A) after considering all those facts had correctly deleted the addition made in various assessment years. - AT
  Visit to Get Source

  ---

Customs

• Suspension or revocation of registration of authorised courier - failure in exercising due diligence - The appellant, as an authorized courier, is prohibited from opening the packages. It would have been a difference case, if there was sufficient evidence that the appellant was aware that the goods were counterfeit shoes or if the appellant had a role to play in the scheme to import them - The only fault of the appellant is that instead of receiving the KYC documents directly from the hands of the owners of M/s Legend Creations and M/s. Personal Creations, it received the documents with covering letters handed over by third person - The appellant has not violated Regulation 12(1)(v) and therefore, revocation of the registration and forfeiture of security deposit under Regulation 13(1) and imposition of penalty under Regulation 14 cannot be sustained - AT
  Visit to Get Source

  ---

Indian Laws

• Dishonor of Cheque - Generally, in the criminal law, mens rea is an essential component of crime but dishonour of cheque is a criminal offence where there is no need to prove a mens rea. The offence under Section 138 would be made out only if the dishonoured cheque is drawn by the drawer in favour of the drawee for discharge of legally enforceable debt or liability. Essentially, there is element of civil liability between the drawer and drawee of the cheque but if the ingredients of Section 138 are made out, it is a criminal offence to be tried in the manner provided under Section 142 of the NI Act. - HC
  Visit to Get Source

  ---

• Dishonor of Cheque - pre-existing liability - Rebuttal of presumption - The appellant has inherent weaknesses in his case. All the same, even if there are lapses in the defence version that cannot be taken use of by the appellant. Here the appellant has not established that the cheque was issued in a transaction as alleged by him and therefore, the presumptions under Sections 118 and 139 of the N.I. Act cannot be drawn in favour of the appellant. - HC
  Visit to Get Source

  ---

Service Tax

• Demand of service tax - the Preferential Location Charges were correctly subjected to Service Tax at same rate as that of Construction of Residential Complex Service by the Appellant and the differential demand of Service Tax alongwith interest and penalty therefore must be quashed and set aside. The Appellant also becomes entitled to consequential relief in form of refund as claimed for by them on this count, in terms of Section 11B of the Central Excise Act, 1944. - AT
  Visit to Get Source

  ---

• CENVAT Credit - denial on the ground that the subject goods being attached to earth, are immovable in nature - whether the finding of the Tribunal that the towers, shelters and accessories used by the appellant for providing ‘business support services’ are immovable property is correct or not? - - The Commissioner committed an error in denying CENVAT credit to the appellant. - AT
  Visit to Get Source

  ---

• CENVAT Credit - input services - It is noticed that the renting of Immovable Property Service came into existence with effect from 01.06.2007 and therefore credit of Commercial and Industrial Construction Service for the period prior to levy of service tax on Renting of Immovable Property Service cannot be allowed. The credit of services availed after 01.06.2007 is however admissible. - AT
  Visit to Get Source

  ---

• Levy of service tax - remuneration paid by a company to the Managing Director and the whole time Executive Director - whether such income is a salary income or otherwise the same can be established on the basis of employment conditions for employment of directors as company’s employees. In the entire proceedings the appellant have not produced the appointment order of the directors as employees containing the terms and conditions of the employment - Matter remanded back - AT
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2021 (5) TMI 848
  TP Adjustment - Compensation received on demerger of its mobile segment business - petitioner s case that, since in the second order passed by the TPO, dated 31.01.2021, this aspect was left open for examination by the AO, the AO could not have taken recourse to the provisions of Section 92CA(4) of the Act, and made the addition without giving an opportunity to explain its stand - HELD THAT:- We tend to agree with the contentions made by petitioner. Since, the matter requires further examination, issue notice. Revenue accepts service on behalf of the respondents/revenue. Counter-affidavit will be filed within three weeks from today. Rejoinder thereto, if any, will be filed before the next date of hearing.

  ---

• 2021 (5) TMI 847
  Faceless assessment u/s 144B - Approval of personal hearing - HELD THAT:- Once an assessee [i.e., the petitioner, in this case] requests for a personal hearing, the officer in-charge, under the provisions of clause (viii) of Section 144B(7) of the Act, would have to, ordinarily, grant a personal hearing. In any event, since Ms. Malhotra is not able to inform us as to whether steps under sub-clause (h) of Section 144B(7)(xii) of the Act have been taken by respondent no. 1, we are inclined, at least at this stage, to agree with the contentions advanced on behalf of the petitioner. Accordingly, issue notice. Ms. Malhotra accepts service on behalf of the respondents/revenue.

  ---

• 2021 (5) TMI 844
  Reopening of assessment u/s 147 - Change of opinion or not - Benefit of doubt - HELD THAT:- The petitioner is bound to establish the reasons stated for reopening of assessment. Certain intricacies raised by the Department with reference to certain transactions are to be adjudicated in the manner known to law and the High Court cannot go into the details of such transactions so as to make a finding, which would cause prejudice to either of the parties. Such accounting transactions are to be scrutinised by the experts and such an exercise cannot be done by the High Court more specifically in a writ proceedings wherein, the very initiation of proceedings for reopening of assessment is under challenge. Even the benefit of doubt in this regard should be held in favour of the Revenue and not in favour of the assessee. Even in case where the petitioners are raising certain doubts regarding the reason to believe and if the Department arrives certain reasons in respect of factual aspects and the informations provided or the income disclosed then the High Court must in all fairness allow the Department to conduct an adjudication by affording opportunity to the assessee, so as to conclude the proceedings, and in this regard, it is to be reiterated that the benefit of doubt in certain factual aspects must be held in favour of the Revenue and not in favour of the assessee. This being the principles to be adopted, this Court has no hesitation in arriving a conclusion that there is reason to believe for reopening of assessment and the reasons furnished by the Department can not be construed as change of opinion.

  ---

• 2021 (5) TMI 842
  Disallowance of expenses - Allowable business expenses - AO granted 50% relief and held that the assessee had not submitted the detailed statement of expenditure with supporting material before the Tribunal - HELD THAT:- AO was of the prima facie view that the assessee would have incurred expenses under various heads mentioned by them. The assessee has to be fully blamed for inviting such a finding. Had they produced relevant documents to justify the expenditure claimed by them, which, according to them, were towards vessel handling charges, traveling and conveyance allowances, labour charges, secretarial expenses, postage and courier, then, in all probabilities, the assessee might have got relief before the Tribunal. The second aspect is that before the First Appellate Authority, the assessee did not effectively contest the matter though they were represented by an authorized representative, who appeared to have given an explanation, which, in all probabilities, did not appeal to the First Appellate Authority and he had stated that the authorized representative had no explanation as to why additions made were incorrect or excessive. Only before the Tribunal, the assessee had taken up the matter seriously and they have been able to convince the Tribunal for two of the three issues required to be remanded. Considering all and since the Assessing Officer has to reconsider two of the issues, we would like the Assessing Officer to look into the issue relating to other expenses claimed by the assessee for 50% of disallowance. If the assessee is able to produce documents, the Assessing Officer shall consider the same and redo the assessment along with the other two issues, which have been remanded to him by the Tribunal.

  ---

• 2021 (5) TMI 840
  Reopening of assessment u/s 147 - whether the revenue is justified in reopening the assessment for the year under consideration? - HELD THAT:- The facts mentioned in the affidavit by the revenue could not be termed as new ground or new reasons to supplement the reasons recorded by the Assessing Officer. The contention raised by the learned counsel for the writ applicant that, by way of affidavit in reply, the revenue has improved the reasons recorded, has no any merit and cannot be accepted to hold that, the exercise to reopen the assessment is without jurisdiction. AO failed to record an independent finding as to how the income has escaped assessment - Under such facts and circumstances, it is vehemently contended that, the Assessing Officer while recording the reasons for reopening the assessment did not have any valid reasons to believe that, the income earned by the assessee by way of long term capital gain has escaped assessment. A bare perusal of the reasons recorded and further clarification of the information made by the revenue by way of affidavit in reply would make it clear that, the company Tuni Textile Ltd., was used in providing bogus accommodation entries of long term capital gain by certain entities like broker etc. AO himself was satisfied with regard to the information and other materials on record, he formed an opinion that, the income has escaped assessment. Therefore, when the information was specific with regard to transactions of penny stock entered into by the assessee with the Tuni Textile Ltd., and AO had applied his independent mind to the information and upon due satisfaction, led to form an opinion that, the amount of claim of LTCG claimed by the assessee is chargeable to tax has escaped assessment, which facts suggests that, there is live link between the material which suggested escapement of income and information of belief. Under the circumstances, we are satisfied that, there was enough material before the Assessing Officer to initiate proceedings under Section 147 of the Act. We do not agree with the contention that, merely on the information, the Assessing Officer has recorded the reasons and on the basis of borrowed satisfaction, he formed an opinion with respect to the income chargeable to tax has escaped assessment. As examined the issue of valid sanction as raised by the learned counsel for the writ applicant. We take the notice of the fact that, the copy of the approval has been provided to the assessee at the stage of passing the order of disposing the objections raised by the assessee. Therefore, it is evident that, in the instant case, the authorities concerned have given approval after due application of mind and expressed their satisfaction with regard to the reasons recoded for reopening of the assessment. No hesitation to hold that it could not be said to have that there was no material or grounds before the Assessing Officer and the assumption of jurisdiction on the part of the Assessing Officer u/s 147 of the Act to reopen the assessment by issuing impugned notice under Section 147 of the Act is without authority of law, which render into the notice unsustainable. Therefore, the assessee failed to make out a case.

  ---

• 2021 (5) TMI 831
  Revision u/s 263 - requirement to issue show cause notice u/s 263 - denial of natural justice - contention of the assessee to the effect that ld PCIT can give direction to the assessing officer in respect of those issues which are part of his show cause notice under section 263 - HELD THAT:- PCIT can give direction to the assessing officer in respect of only those issues which were part of his show cause notice under section 263 of the Act and he cannot give direction to the assessing officer in respect of those issues which are not part of his show cause notice under section 263 of the Act. We do not agree with the contention of the ld Counsel to the effect that ld PCIT can give direction to the assessing officer in respect of those issues which are part of his show cause notice under section 263 - there is no requirement to issue notice under section 263 of the Act. The requirement under section 263 of the Act, is to give an opportunity of hearing only Thus there is no requirement to issue show cause notice under section 263 of the Act, the requirement is to give an opportunity of being heard. Also gone through the order ld PCIT passed by him under section 263 and noted that assessee has been given enough opportunity of being heard on the issues raised by ld PCIT. All notices issued by the ld PCIT covered all the issues raised by the ld PCIT under section 263 of the Act and AR of the assessee was aware about all these issues and in fact submitted reply to the ld PCIT during 263 proceedings in respect of these impugned issues. Hence, the contention of the ld Counsel for the assessee that these issues were not part of the show cause notice under section 263 of the Act, is not acceptable, in the light of the bare facts narrated above. The contention of the ld Counsel that Ld PCIT has issued notice only for Loans and not for Advances , is not tenable. We note that ld PCIT has found out specific mistakes in the assessment order framed by the assessing officer. The ld PCIT has used the terminology advance received which is nothing but unsecured loans , vide para 4(i) of PCIT order. Therefore, to use the different terminology to address an issue in the order, (which gives the same meaning), does not vitiate the order of ld. PCIT. Unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on which revision of the assessment order is tentatively being proposed. Such a notice is not required. What is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. Since the order of the Assessing Officer has been held by us to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances narrated above, therefore, the exercising of revisional jurisdiction by the ld Principal CIT is vaild in the eyes of law and, therefore, we are inclined to uphold the order of ld PCIT to invoke revisional jurisdiction u/s 263 - Decided against assessee.

  ---

• 2021 (5) TMI 830
  Rectification u/s 154 - unexplained cash credit u/s 68 to the assessee s income under the normal provisions of the Act and instead wrongly adding the same to the book profit of the assessee u/s 115JB - HELD THAT:- We concur with the view taken by the CIT(A) that as the omission on the part of the A.O to add the unexplained cash credit u/s 68 to the assessee s income under the normal provisions of the Act and instead wrongly adding the same to the book profit of the assessee u/s 115JB of the Act was a mistake which was glaring, apparent, patent and obvious from record, the A.O, thus had rightly rectified the same by invoking the powers vested with him u/s 154 We are unable to comprehend as to on what basis it is claimed by the ld. A.R that the issue in question being a debatable one would fall beyond the realm of the jurisdiction vested with the A.O u/s 154 of the Act. Be that as it may, in our considered view as the A.O remaining well within the scope of his jurisdiction had rectified the aforesaid mistake, thus, principally he cannot be held to have traversed beyond the scope of the jurisdiction that was vested with him u/s 154 of the Act. Withdrawal of the set-off of the brought forward unabsorbed depreciation that was earlier allowed by the A.O vide his assessment framed u/s 143(3) r.w.s 144C(1) - CIT(A) while disposing off the assessee s appeal against the order passed by the A.O u/s 154, had directed him to ascertain the assessee s claim of brought forward unabsorbed depreciation and allow set-off of the same as per law while computing its total income - CIT(A) that in case the assessee s claim for brought forward depreciation (as was claimed by the assessee vide its letter dated 14.09.2017) was not admissible, then, the A.O shall in his order give reasons as to why the said claim was not admissible. In our considered view, the CIT(A) had in all fairness directed the A.O to ascertain the assessee s claim of brought forward unabsorbed depreciation and allow set-off of the same as per law while computing its total income. A.O had been directed to give reasons in case the assessee s claim for brought forward depreciation is not found to be admissible by him. No infirmity in the aforesaid view of the CIT(A) who in context of the aforesaid issue in question had rightly upheld the exercise of jurisdiction by the A.O u/s 154 of the Act, subject to certain verifications of facts.We are of a strong conviction that the claim of the ld. A.R that the A.O had exceeded his jurisdiction and rectified the aforesaid issues which were not free from debate and involved a long drawn process of reasoning is devoid and bereft of any substance and does not merit acceptance. The Ground of appeal No. 6 is dismissed. Reassessment order passed by the A.O u/s 143(3) r.w.s 147 was quashed by the CIT(A) by treating the same as void ab initio, therefore, no rectification of the said non-existent order could have been carried out - Though the reassessment order passed by the A.O u/s 143(3) r.w.s 147 was quashed by the CIT(A) by treating the same as void ab initio, however, the original assessment order passed under Sec. 143(3) r.w.s 144C(1), wherein the set-off of unabsorbed depreciation was allowed by the A.O therein continued to subsist and did hold the ground. The issue pertaining to allowing of set-off of unabsorbed depreciation by the A.O found its roots in the original assessment order passed by the A.O u/s 143(3) r.w.s 144C(1), and the same was not effaced pursuant to the quashing of the reassessment order passed by the A.O u/s 143(3) r.w.s 147. We, thus, are of the considered view that as the issue pertaining to allowing of set-off of unabsorbed depreciation by him vide the assessment order passed u/s 143(3) r.w.s 144C(1), had not merged in the reassessment order, the A.O, thus, was well within his jurisdiction in rectifying the mistake as regards allowing of set-off of unabsorbed depreciation vide his order passed under Sec. 143(3) r.w.s 144C(1), as the assessee had no unabsorbed depreciation left for set-off for A.Y 2008-09. Accordingly, we uphold the order passed by the A.O to the extent he had rectified his mistake as regards allowing of set-off of unabsorbed depreciation of ₹ 11,49,85,610/- vide his original assessment order passed u/s 143(3) r.w.s 144C(1). The directions given by the CIT(A) to the A.O, viz. (i). to ascertain the assessee s claim of brought forward unabsorbed depreciation and allow set-off of the same as per law while computing the assessee s total income; and (ii). to give reasons in case if the assessee s claim for brought forward depreciation is not found to be admissible by him, are not being disturbed by us. The Grounds of appeal No(s). 1 to 4 to the extent relatable to the aforesaid issue in question are dismissed in terms of our aforesaid observations. Addition of the share premium that was added by the A.O vide his order passed u/s 154, dated 16.09.2017 as an unexplained cash credit within the meaning of Sec. 68 - If the rectification in question i.e addition of the share premium that was treated as an unexplained cash credit by the A.O u/s 68 vide his reassessment order passed under Sec. 143(3) r.w.s 147 to the income of the assessee determined under the normal provisions is sustained, then, the same would result to supplementing the original assessment order that was passed by him u/s 143(3) r.w.s 144C(1) with an addition that was never made by the A.O, which we are afraid is absolutely not as per the mandate of law. If the rectification order passed by the A.O u/s 154, dated 16.09.2017 qua the addition of share premium of ₹ 32,21,48,679/- to the income of the assessee determined under the normal provisions is sustained, then, it would result to a blatant traversing or in fact invalid assumption of jurisdiction on the part of the A.O resulting to an enhancement of the assessment originally framed by him vide his order passed u/s 143(3) r.w.s 144C(1), dated 28.01.2014, which we are afraid is not in conformity with the express provisions of law. We, thus are of the considered view that the rectification order passed by the A.O u/s 154 qua the addition u/s 68 of the share premium to the income of the assessee determined under the normal provisions cannot be sustained and is liable to be vacated. Thus issue in question and Ground of appeal No. 5 are allowed in terms of our aforesaid observations.

  ---

• 2021 (5) TMI 829
  Revision u/s 263 - addition u/s. 40(a)(ia) being the payment made u/s. 194C without deducting tax on it - Assessee submitted that instead of giving one more opportunity, the Ld. CIT(Appeals) has dismissed the appeal of the assessee, though knowing that submissions were misplaced therein. - HELD THAT:- It is correct, the submissions made before the Ld. CIT(Appeals) by the assessee were not relevant to the assessment order passed u/s. 143(3) of the Act. That nonetheless, the Ld. CIT(Appeals) should have given one more opportunity to the assessee to file the correct submissions. Therefore, we are of the considered view, in the interest of justice, one more opportunity should be given to the assessee so that they can represent their case on merits by filing correct submissions before the Ld. CIT(Appeals). In view thereof, we set aside the order of the Ld. CIT(Appeals) and remand the matter back to his file for fresh adjudication as per law complying with the principles of natural justice. Appeal of the assessee is allowed for statistical purposes.

  ---

• 2021 (5) TMI 828
  Reopening of assessment u/s 147 - 'reason to believe' OR 'reason to suspect' - Disallowance of depreciation on investments - HELD THAT:- It is well settled by a number of judgments of the Hon'ble Supreme Court that the twin conditions which are required to be fulfilled before an Assessing Officer can exercise his jurisdiction under clause (a) of section 147 of the Act are (a) that the Assessing Officer must have reason to believe that income, profits or gains chargeable to tax had either been under assessed or had escaped assessment and (b) that the Assessing Officer must have reason to believe that such escapement or underassessment was caused by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. In the case on hand, all the information relating to depreciation on investments were there before the AO at the stage of original assessment, as there was no failure on the part of the assessee to disclose fully and truly all material facts that are necessary for completion of the assessment and further we observe in the reasons recorded, there is no reason to believe, allegation on the assessee that the income of the assessee under assessed or had escaped assessment. The contention of the assessee is that no new material has been found by the AO in the reassessment proceedings and therefore reopening of assessment is only due to change of opinion and that too beyond the time limit as prescribed in the proviso to section 147 of the Act which is bad in law. the reopening of assessment can be quashed on two counts, i) no new material was brought on record by the AO in the reopening of assessment to establish that the income of the assessee has escaped assessment as the assessee has already disclosed all the information necessary for completion of original assessment and ii) the reopening of assessment made beyond four years from the AY under consideration. We are of the view that the AO reopened the assessment based on change of opinion, which is not acceptable as per the decisions quoted supra. Therefore, we quash the reopening of assessment made by the AO and the grounds raised by the assessee on this issue are allowed.

  ---

• 2021 (5) TMI 827
  Unexplained cash credit u/s.68 - HELD THAT:- As assessee submitted before us that from other business cash has been deposited into the bank account. On perusal of the balance sheet of Shri Sai Wines, there is no investment shown by the assessee as investment in toll of cantonment board of secunderabad and on the liabilities side of the balance sheet filed by the assessee, there is no liability in the name of other business. The balance sheet filed the assessee has shown under the head capital account , the opening balance is O and the capital brought in is ₹ 2,84,64,000/-. Fixed capital has been introduced in the business during the year, the figure of which is tallied with the submissions made by the assessee at paragraph No. 4 as quoted supra. Assessee before us, alternatively, submitted that it is a loan, but not a capital and the same is to be returned to the depositors/creditors. Even if this alternative argument of the assessee is considered by following the judgment of Kedarnath Jute Manufacturing Co Ltd [ 1971 (8) TMI 10 - SUPREME COURT] the entry in the books of account is not relevant, then, still the assessee has to satisfy the AO as per section 68 of the Act. Therefore, we are of the considered opinion that the issue in dispute shall be remitted back to the AO for de-novo assessment. Accordingly, we restore the matter back to the file of the AO for de-novo adjudication, after giving reasonable opportunity of hearing to the assessee in the matter. Appeal of the revenue is treated as allowed for statistical purposes

  ---

• 2021 (5) TMI 826
  Penalty u/s.271(1)(b) - no compliance to notice u/s 142(1) - HELD THAT:- Perusal of assessment order reveals that there is no reference of alleged notice dated 13.06.2016. No addition for non-compliance of information or any evidence were made by AO. The while passing the assessment order. Rather, the assessee itself suo moto offered the action which was debited on account of interest on TDS. At first appellate stage, the appeal of the assessee was dismissed in non-prosecution for non-compliance of notices. Keeping in view the smallness of issue and again in restoring the matter to the file of ld.CIT(A), it may came up on hearing after long time. There is a reference of conflicting in dates in order of penalty under section 271(1)(b) of the Act. The AO levied the penalty for non-compliance of notice dated 13.06.2016, however, there is no reference of such notice for the assessment order, therefore, the order in levying penalty under section 271(1)(b) is invalid. Even if, we assume that there was a non-compliance of notice dated 13.06.2016, by intentionally or unintentionally, the assessee ultimately in response to notice dated 11.08.2016 made honest compliance therefore, if any non-compliance committed on earlier occasions deserves to be ignored, when assessee itself offered additional income, which was debited on account of interest on TDS and the same was accepted by AO. And no other issue was identified nor was any other addition made in the assessment order. Considering the aforesaid factual documents, we are of the view that the assessee has made a bonafide compliance, therefore, no penalty under section 271(1)(b) of the Act. In the result the grounds of appeal raised by the assessee are allowed.

  ---

• 2021 (5) TMI 825
  LTCG - transaction of sale of land - HELD THAT:- While considering the similar contention of assessee in the said held that when the transaction of sale of land was taken during the financial year 2011-12 relevant to the assessment year 2012 -13, the amended provision of section 55A(a) would not be applicable and one shall be guided by the wrest while provision of un-amended section 55 A(a) of the Act. Therefore, respectfully following the same, we allow the ground No. 1 raised by the assessee. In view of the above factual and legal discussion and keeping in view the consistent decision of Hon ble Jurisdictional High Court in Gauranginiben S Sodhan [ 2014 (2) TMI 78 - GUJARAT HIGH COURT] and CIT vs. Pooja Prints [ 2014 (1) TMI 764 - BOMBAY HIGH COURT] -grounds of appeal raised by the assessee are allowed.

  ---

• 2021 (5) TMI 824
  Depreciation on maintenance of Road - AO allowed depreciation @ 10% instead 25% as claimed by the assessee - availability of depreciation to the assessee whether it is to be allowed keeping the right to collect toll fee as intangible assets or it to be treated as building or plant machinery - HELD THAT:- As relying on North Karnataka Expressway Ltd. [ 2014 (11) TMI 351 - BOMBAY HIGH COURT] and ACIT vs. Progressive Construction Ltd. [ 2017 (3) TMI 1167 - ITAT HYDERABAD] we hold that the assessee is eligible for depreciation @ 25% as claimed by the assessee. Thus, Ground of appeal No. 1 raised by the assessee is allowed. Disallowance made by the Assessing Officer with regard to provision made for maintenance of the roads - HELD THAT:- As assessee took us through the chart wherein it was mentioned that the maintenance expenditure to be incurred in five years was ₹ 60.34 crore, project operations were started on 09.08.2011 and estimation of maintenance expenditure was estimated to ₹ 12.07 crores and being not having full year operations of the project, provision was created for only one quarter i.e. ₹ 12.07 crore/4 i.e. ₹ 3 crore. Reliance is placed upon the judgment of Hon'ble Supreme Court in M/s. Rotork Controls India (P.) Ltd. vs. CIT [ 2009 (5) TMI 16 - SUPREME COURT] Further, reliance was placed upon the judgment of Hon'ble Supreme Court in the case of Bharat Earth Movers vs. CIT [ 2000 (8) TMI 4 - SUPREME COURT] and M/s. Mokama Munger Highway Ltd. vs. ACIT [ 2019 (7) TMI 1816 - ITAT HYDERABAD] Thus we are of the considered view that the claim of provision as made by the assessee is in accordance with settled principal of law. Therefore, the authorities below were not justified in making the disallowance. - Decided in favour of assessee.

  ---

• 2021 (5) TMI 822
  Exemption u/s 11 - Charitable activity u/s 2(15) - assessee drawing the receipt from various regulatory activities - as per revenue activities of the appellant as activities in nature of Trade, Business or Commerces or rendering services in relation to trade, commerce or business - assessee/appellant is a body corporate constituted under Uttar Pradesh Urban Planning Development Act, 1973. The assessee was filing its returns of income in the status of 'Local Authority' and claiming exemption d/s 10(20A) earlier - HELD THAT:- Activities like Income from sale of plots/ lands ,Freehold conversion income, interest income from instalments,development charges, building plan sanction fees, lease rent, income from stamp duty , Building rent,Sale of masterplan book/tender form,Cycle/scooter/car stand charges and Miscellaneous incomewere discharged by the assessee in accordance with the objects of the Development Act 1973 and other statutory obligations, and therefore we have no hesitation to hold that all these activities are charitable in nature. These activities were undertaken by the assessee on account of the mandate given to it to do generalize charitable activities for the planned development of the city. These are regulatory and development activities which were done by the assessee and the receipt of the revenue was on account of the said activities. The predominant character of the activities continues to be that of the state and therefore the element of welfare and charity is inbuilt. In the light of the above we hold that these activities also charitable in nature From the reading of section 18 of the Development Act, it is clear that, the authorities entitled to transfer, dispose of and use the land in the manner provided by the state government or in any other manner as deemed fit. In our considered opinion, the giving of building on rent, parking space, sale of tender document for the purpose of development etc are having direct nexus with the obligation of the assessee under the act. The receipt of the amount on account of the above said activities are related to the statutory and state function of the assessee authority. In our view the above said activities were undertaken by the assessee on account of its obligation under the act and were done by the assessee keeping in mind the welfare and interest of the citizen in mind. The said activities were undertaken by the assessee without any discrimination and on the basis of the guidelines issued by the state government and other authorities in this regard. Respectfully following the decision of the coordinate bench in the matter of JHANSI DEVELOPMENT AUTHORITY [ 2021 (1) TMI 680 - ITAT AGRA] we hold that the assessee activities like Income from sale of plots/ lands ,Freehold conversion income, interest income from instalments, development charges, building plan sanction fees, lease rent , income from stamp duty , Building rent, Sale of masterplan book/tender form, Cycle/scooter/car stand charges and Miscellaneous income were discharged by the assessee in accordance with the objects of the Development Act 1973 and other statutory obligations , and therefore we have no hesitation to hold that all these activities are charitable in nature.The activities of the assessee in receipt of amount from such activities cannot be examined in isolation, as the assessee was propelled to do all these activities under the statutory obligation under Development Act 1973 and therefore even if there is receipt more than the threshold limit, then also these activities which were driven by the Development Act, 1973 cannot be held to be in the nature of trade commerce or business. Various other authorities including Aligarh Development authority, NOIDA development authority etc , which are discharging the similar functions as that of the assessee and were created under the Development Act 1973, wereheld to be entitled for deduction under Section 11 the Income Tax Act by ITAT, Delhi. In the light of the above we are of the opinion that the assessee is also entitled to deduction under section 11 of the Income Tax Act for the activities mentioned hereinabove.- Decided in favour of assessee.

  ---

• 2021 (5) TMI 821
  Disallowance of depreciation - CIT- deleted the addition - Revenue's sole substantive argument that the CIT(A) has admitted the additional evidence in violation of Rule 46A of the Income Tax Rules - HELD THAT:- We do not find any such admission of additional evidence under the sub-rule (1) to (3) - even if it is taken as an instance of assessee having filed its detailed documents pertaining to the corresponding assets forming subject matter of the depreciation claim, the same appears to be under the clause-4 of Rule 46A only wherein the CIT(A) is entitled to act on its own as well where it can direct the assessee for production of any such document. We make it clear in addition to all this that the assessee's clinching fact supporting the acquisition of the corresponding fixed assets qua its depreciation claim has nowhere been challenged on merits. We thus affirm the CIT(A)'s findings on this first issue. Disallowance of employees provident fund's delayed payment - Addition u/s 2(24)(x) r.w.s. 36(1)(va) r.w.s.43B - CIT-A deleted the addition on the ground that the necessary compliance had been made before the due date of filing of the return - HELD THAT:- We find no merit in the Revenue's instant arguments as well since the Explanatory Memorandum to Finance Bill, 2021 has clarified to the effect that the employees' provident funds payment issue comes u/s. 36(1)(va) of the Act only but the same is applicable from 01-04-2021 than having any retrospective effect. We hold in view of all these facts that the CIT(A) has rightly deleted the impugned employees provident fund disallowance made by the AO. Addition u/s 40(a)(ia) disallowance - assessee's failure to deduct TDS - HELD THAT:- It is an admitted fact that no TDS had been deducted at the assessee's behest. CIT(A)'s detailed discussion on this tribunal's Special Bench decision in the case of Merilyn Shipping and Transport Ltd.[ 2012 (4) TMI 290 - ITAT VISAKHAPATNAM] ) holding that the impugned disallowance applies only in case of expenses remaining payable as on 31st March of the relevant previous year than those already paid. This reasoning no more holds the ground in view of the Palam Gas Service Vs. CIT [ 2017 (5) TMI 242 - SUPREME COURT] , settling the law that the impugned statutory provision applies both in case of paid as well as payable expenses. We thus reverse the CIT(A)'s conclusion deleting the impugned disallowance on legality aspect. The legislature has itself incorporated Section 40(a)(ia) second proviso in the Act inserted vide Finance Act, 2012 w.e.f. 01-04-2013 that the main provision itself does not apply in case the assessee is not an assessee in default u/s. 201(1) 1st proviso of this Act. Hon'ble Delhi high court's decision in CIT Vs. Ansal Landmark Townships Pvt. Ltd. [ 2015 (9) TMI 79 - DELHI HIGH COURT] holds that the same is a curative proviso having retrospective effect. There is hardly any dispute that the said amended proviso; to be read in light of Section 201(1) first proviso, stipulates that the impugned statutory provision does not apply in case the assessee concerned is not the assessee in default for having not deducted TDS qua the corresponding expenditure payments. We thus, restore the instant issue back to the Assessing Officer to be examined afresh in light of Section 40(a)(ia) second proviso r.w.s. 201(1) first proviso in accordance with law. The assessee is directed to file all the necessary details to be followed by three effective opportunities of hearing. Disallowance of section 80G - CIT- A deleted the addition - HELD THAT:- Since there is no indication that CIT(A) having admitted additional evidence under Rule 46A(1-3) of the Income Tax Rules. This fourth substantive ground is also rejected therefore.

  ---

• 2021 (5) TMI 817
  Disallowance u/s 40(a)(ia) - payment of operation and management charges AND reimbursement of expenses - HELD THAT:- As decided in own case[ 2015 (7) TMI 1374 - ITAT AHMEDABAD] wherein held that provision of section 40(a)(ia) of the Act are not applicable in the case of the assessee and on the base of the consistency matter was decided in favour of the assessee. Disallowance u/s. 14A r.w.r. 8D - HELD THAT:- In this case the assessee is having huge interest free funds for making investments and there being no nexus of the borrowed funds and investments made the disallowance was interest expenses cannot be made. However, assessee had taken alternate plea that the total exempt income earned during the year is only ₹ 3,40,000/- hence disallowance u/s. 14A cannot exceeds this sum. CIT(A) considering the judgment of Jurisdictional High Court in the matter of CIT vs. Corrtech Energy P. Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] wherein it is held that disallowance cannot be more then exempt income. Thus, in our considered opinion order of the Ld. CIT(A) does not required any kind of interference at our end. He has passed the detailed and reasoned order therefore this ground of revenue is dismissed. Disallowance of Management Charges u/s 40A(2)(b) - HELD THAT:- As decided in own case similar grounds has been raised in assessee's own case in appeal filed by the revenue wherein we have dismissed this ground of appeal. Thus, in parity with the above said order we dismissed this ground of appeal of revenue.

  ---

• 2021 (5) TMI 816
  Disallowance on depreciation claimed on assets of transmission business - slump sale of demerger - AO was of the view that the transaction was nothing but a demerger u/s 2(19AA) of the Act , hence the assessee was entitled to claim depreciation on the WDV of the block of assets and not on the inflated value arrived after revaluation - HELD THAT:- As decided in own case [ 2019 (9) TMI 437 - ITAT MUMBAI] AO failed to explicate as to how the transfer would fall within the meaning of demerger as given under section 2(19AA) and as how all the condition specified under section 2(19AA) of the Act were satisfied. Revenue has not disputed the findings of the first appellate authority that the transfer in question is a case of slump sale and not a case of demerger. The valuation has also not been disputed. Under these circumstances, for the reasons noted in the assessee's appeal, we have to necessarily uphold the order of the first appellate authority and dismiss ground of the revenue. Disallowance of mark-to-market loss - assessee had debited a sum on account of foreign exchange gain/loss in the Profit Loss account for the year under consideration - AO was of the view that unrealized forex loss was neither an accrued loss nor an actual loss and it does not fit into any of the criteria prescribed for allowability of an expenditure or loss as per the provisions of the Act - HELD THAT:- As decided in own case [ 2019 (9) TMI 437 - ITAT MUMBAI] Loss claimed by the assessee on account of fluctuation in the rate of foreign exchange as on the date of balance-sheet is allowable as expenditure under section 37(1). Appellant has been actually providing for such MTM losses in its Books of Account in accordance with the applicable Accounting Standards and accordingly, even for this reason, the deduction would be allowable to the Appellant while computing its taxable income.Appellant prays that the MTM losses arising on account of forward contracts entered into by the Appellant be considered as an accrued loss to the Appellant and thereby allowed as deduction while computing the taxable income. Addition of performance guarantees for its AEs - HELD THAT:- As decided in own case [ 2019 (9) TMI 437 - ITAT MUMBAI] when internal comparable uncontrolled price is available that should be considered as the most direct and reliable way to apply the arm s length principle. In any case, there is absolutely no loss to the assessee and no bearing on the profits or losses as the entire cost of 0.93% has been duly recovered by the assessee from its AE. Hence, the action of the CIT(A) in holding no further adjustment to ALP is required in respect of the subject mentioned guarantee commission transaction and consequently directing the deletion of addition confirmed. Bank guarantee and corporate guarantee provided to Chadian Company for Water and Electricity (CCWE) - HELD THAT:- This guarantee was required by CCWE, who had given contract to the AE, before giving any advance to the AE. In effect, this bank guarantee was issued to CCWE for securing the advance payment from CCWE by the AE. It was the contentions of the assessee before the TPO that bank had charged 0.93% as the guarantee commission and there was no formal guarantee agreement entered in this regard ; that the credit rating issued by CARE is A+ and credit rating of the AE was not done; no benchmarking was done by the assessee as executing guarantee in favour of a bank on behalf of the AE was not an international transaction. Also the assessee explained to the TPO that the corporate bond rates for United Arab Emirates (UAE) were not available; however, the rate of interest on borrowings made in the country in which the AE is situated is quite low in comparison with bond rate prevailing in India; therefore, Indian Corporate Bond Rates should not be applied for benchmarking ; the bank had charged the assessee 0.93% for issuing this bank guarantee to CCWE on behalf of its AE for securing the advance payment for executing contract. Thus the submission of the assessee is that this guarantee fee of 0.93% has been duly recovered by it from its AE and hence, there is no impact and profit or loss of the assessee. As decided in own case [ 2019 (9) TMI 437 - ITAT MUMBAI] the findings given hereinabove in respect of performance guarantee to CCWE by us would hold good for this bank guarantee also. Accordingly, we hold that the finding of the ld. CIT(A) and consequently deletion of adjustment on account of bank guarantee. Corporate guarantee provided to ICICI Bank on behalf of KEC USA LLC and Transmission LLC USA - HELD THAT:- As relying on own case [ 2020 (9) TMI 1101 - ITAT MUMBAI] direct the TPO/AO to re-compute the arm s length of the guarantee commission @ 0.20%.

  ---

• 2021 (5) TMI 815
  Rectification petition u/s 254(2) - certain vital submissions advanced on behalf of the Revenue were ignored / not considered by the ITAT - HELD THAT:-The said allegation has no basis since all the relevant findings given by the A.O. for present case, findings given by the Ld. CIT(A), the argument advanced by the Ld. Special Counsel for the Revenue and his reliance placed on various judgments, the submission of the Ld. Counsel for the Assessee alongwith various case laws relied upon by him and the rejoinder of the Ld. Special Counsel for the Revenue have been discussed in detail in the impugned order dt. 07/02/2020 and that after considering all the aforesaid facts as well as the argument alongwith various judicial pronouncement, a just decision has been taken by the ITAT. The contention of the Ld. Counsel for the Assessee that the facts of the assessees cases were different from case of Shri Brij Bhushan Singal and Ors had already been considered and thereafter it has been held that the facts of the present case were similar to the fact of the case of Shri Brij Bhushan Singal and Ors, therefore this contention of the Ld. Special Counsel for the Assessee that the ITAT omitted to take note of the submission advanced on behalf of the revenue in the impugned order was factually incorrect. In this Misc. Application the Revenue wrongly alleged that the non cognizance of the live nexus existing between the incriminating material found during the search action at various places / premises and non adjudication of the question as to what constitutes the incriminating material, the said allegation is factually incorrect. The another contention of the Department is that there was omission to take into consideration the reliance placed by the Revenue on the various decision and return a finding with regard to vital submission of the Revenue is concerned, we have already pointed out that all the submissions and the case laws relied by the Ld. Special Counsel for the revenue find place of the impugned order and after considering those submissions as well as case laws, the conclusion has been drawn by the ITAT. As already pointed out that there is no mistake apparent from the record therefore, we are of the view that the Misc. Application moved by the Department is not maintainable. In the present case, it appears that the Department wants to get the order passed by the Tribunal reviewed which is not permissible as the ITAT has no power to review its order and the right platform / forum for redressal of this grievance on any special question of law arising from the order of the ITAT would be the Hon'ble High Court under section 260A. In the present case the ITAT passed the order in consonance with judicial principle laid down by the Hon'ble Apex Court in the aforesaid referred to case of Shukla Brothers and all the four preposition of judgment stands fulfilled in the impugned order [ 2020 (2) TMI 786 - ITAT CHANDIGARH] for the A.Y. 2008-09 viz there is adequate clarity on thought, decision has been well reasoned,the reason for decision have been well communicated and the order is well reasoned. In the present case since all the arguments alongwith the various judicial pronouncements relied upon by both the parties, were duly considered, there exists no manifest error in the decision of the ITAT. Therefore, in view of the totality of the fact as discussed herein above, we do not see any merit in this Misc. Application moved by the Department.

  ---

• 2021 (5) TMI 814
  Unaccounted cash loans - Addition on money received by the assessee - transactions found on Cloud Data - entries pertaining to unaccounted capital and advances were found in the N Trading on Cloud Data - addition of unexplained unaccounted capital, advances, interest and surplus profit earned were on the basis of incriminating seized data - CIT-A deleted the addition - HELD THAT:- We found that the transaction recorded in the cloud data of N Trading was owned up by the main person of the company MBDL with regard to the transactions like transactions under the heading of unsecured loans (receipt and payment) and consequent interest payment thereof. As gone through the order of the Hon'ble Settlement Commission dated 16-05-2019 passed in the case of MBDL and have also gone through the statement of Shri N.K. Gupta, main person of MBDL group wherein we found that M/s. Mangalam Builder Developer Ltd.(MBDL) had already owned up all the data found in cloud as belonging to them. On the basis of the same, it filed settlement petition before Settlement Commission on 28.03.2018. As per the petition filed by MBDL before the Hon'ble Settlement Commission the `peak deposit' of unaccounted Capital introduced, loans and advances and interest paid and received was considered for computing the income. Accordingly income was offered on the basis of cloud data of N. Trading Company.The same is accepted by the Settlement Commission. CIT(A) observed that it is evident that the surplus being referred to by the Ld. AO is not profit from the projects but the receipts of 'on money' credited to the capital accounts of the partners which has been considered in the additional income offered by MBDL and accepted by the Hon'ble Settlement Commission. Thus on merits also since the amounts had already been added by the AO and the same had already been subjected to tax in the hands of MBDL and related entities, therefore, the ld. CIT(A) after considering all those facts had correctly deleted the addition made in various assessment years. The Bench also noted that no new facts have been brought by the Revenue in controverting the order of the ld. CIT(A) to the issue in question. In this view, of the matter, we find no reason to interfere with the order of the ld. CIT(A). Thus the appeal of the Revenue for the assessment is dismissed.

  ---

• Customs

• 2021 (5) TMI 837
  Smuggling - Foreign marked Gold - burden of proving the non-smuggled nature of the seized goods - gold jewellery confiscated covered by section 123 of the Customs Act or not - cash seized as sale proceeds of smuggled goods confiscated under section 121 covered by Section 123 of the Customs Act or not - reasonable belief that the goods/cash seized were smuggled so as to shift the burden under section 123 upon the appellants or not - discharge of responsibility of proving non-smuggled nature of the seized goods/cash - Confiscation - penalty - HELD THAT:- The burden of proof shifts under Section 123, when (a) there must be goods to which the section applies; (b) the goods must have been seized; and (c) the seizure must be under a reasonable belief that they are smuggled goods. Whether the goods seized in the case are covered under section 123? - HELD THAT:- There is also no allegation that the currency is smuggled. It has been confiscated as sale proceeds of smuggled goods, and not as smuggled goods. Such currency (being fruit of a poisonous tree), is liable to confiscation under section 121. A plain reading of section 123, which shifts the burden of proof, does not show it covers sale proceeds of smuggled goods. Therefore, while gold and manufactures thereof (jewellery in this case) are covered by section 123, currency is not covered at all. Thus, as far as currency is concerned, the burden of proof is on the department and not on the person from whom it is seized. Confiscation of Jewellery - HELD THAT:- The case of the Revenue is NOT that it is smuggled but that it is made from smuggled gold. Therefore, notwithstanding this change of form (from primary gold to ornaments), jewellery would be liable to confiscation under section 120. If the jewellery was allegedly smuggled and was seized under such a reasonable belief, section 123 would apply. Since jewellery is not even alleged to be smuggled, section 123 does not apply unless it can be shown that it has been made out of smuggled gold. Whether the officers had a reasonable belief, as required under Section 123, that the seized goods were smuggled goods - HELD THAT:- When searched, the gold was seized not only from their bags but also from concealed in shoes and from specially made pockets of the backpack. When asked, they could not produce any document to show legitimate import. The seized goods included 9 gold bars with foreign markings with purity of 99.5%, five cut pieces of gold and also of 99.5% purity and 120 foreign marked gold coins with a purity of 91.6%. The rest of the goods were jewellery and miscellaneous gold items of 87.5% purity. In our considered view, in this factual matrix, the officers had a reasonable belief that they were smuggled goods. Therefore, the condition of reasonable belief is fulfilled insofar as the alleged smuggled goods are concerned. - Similarly, the gold coins seized in the Jammu based businesses of Deepak were also of foreign origin and therefore, the officers had a reasonable belief that they were smuggled gold. The confiscation of these goods under sections 111(d) and section 111(i) are sustainable and confiscation under section 111(p) needs to be set aside. Gold jewellery weighing 4.687 kg and miscellaneous items of gold weighing 0.742 kg with a purity of 87.5% seized - HELD THAT:- T he jewellery is not liable to confiscation in the absence of any evidence that it is smuggled or it has been made by converting smuggled gold. The mere fact that the jewellery was found along with the smuggled gold bars and gold coins makes no difference. Foreign origin gold coins weighing 1118.24 grams in all seized from the business premises of M/s. Radhika Jewellers and M/s. Baibhav Ornaments, Jammu seized on 24.8. 2017 - HELD THAT:- Import of gold was permitted during the relevant period only by authorized agencies and the appellants were not so authorized. If they had purchased the gold from some authorized agency, they would have the documents to establish this fact. From the records of the case, it is evident that the appellants could not produce any such documents to show that these were not smuggled. Therefore, the presumption is that these are smuggled gold. As discussed above, these coins are liable for confiscation under section 111(d) of the customs Act. Indian currency amounting to ₹ 9,64,000 seized from Baibhav Ornaments and ₹ 3,64,500 seized from Radhika Jewellers - HELD THAT:- The currency was seized under section 121 as sale proceeds of smuggled goods . This section states that Where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods, the sale-proceeds thereof shall be liable to confiscation . This section does not shift the burden of proof to the person(s) from whom the cash is seized. It is for the Revenue to establish that the cash which was seized was (a) the sale proceeds; (b) the goods sold were smuggled goods; and (c) the person who has so sold the goods had either the knowledge or the reason to believe that the goods were smuggled. Merely because some unaccounted for cash is lying, it cannot be confiscated unless the three conditions in Section 121 are fulfilled - From the records of this case, it is not found that the Revenue has established any of these factors or even identified which were the smuggled goods which were sold by the person from whom the cash is seized. Penalty of ₹ 50,00,000 imposed on Deepak Handa under Section 112 - HELD THAT:- It is not in doubt that Deepak was in possession of and was found carrying smuggled gold bars and gold coins which we have held were correctly confiscated under Section 111(d) and 111(p) of the Customs Act. Therefore, Deepak had rendered himself liable to penalty under section 112. A penalty of ₹ 50,00,000/- was imposed upon him. Considering that we had set aside some of the confiscations (jewellery and currency) as not sustainable, we reduce the penalty on Deepak Handa to ₹ 20,00,000/-. Penalty of ₹ 10,00,000 imposed on Ravi Handa under Section 112 - HELD THAT:- Ravi Handa, brother of Deepak Handa was managing the Baibhav ornaments in Jammu where 1118 grams of the confiscated foreign marked gold coins recovered. Indian currency recovered from him was also confiscated which we have set aside. Considering these factors, it is found that Ravi Handa has rendered himself liable to penalty under Section 112 but the penalty needs to be reduced. Accordingly, we reduce the penalty imposed on Ravi Handa to ₹ 2,00,000/-. Appeal allowed in part.

  ---

• 2021 (5) TMI 835
  Suspension or revocation of registration of authorised courier - failure in exercising due diligence - receipt of bills of entry under the cover of letters - case of appellant is that appellant was only a courier agent who filed bills of entry of the importers - HELD THAT:- The job of an authorized courier agent is somewhat similar to the job of a customs broker. He is required to file declarations before the customs officers in respect of all the consignments, which were imported by him based on the documents. He has no authority to open the consignment. Further he is also required to verify the identity of the importers through KYC documents. In other words, he needs to verify whether the importer actually exists or otherwise which is part of the due diligence process. In this case, the appellant received the KYC documents of all the three alleged importers under the cover of their letters but they were received through Balvinder Singh. Having received the documents, the appellant verified the KYC documents and found the importers to be genuine - The second set of documents which the appellant received is in the form of invoices along with the consignments. These are received from the overseas exporter. Based on these documents, the appellant filed declarations with the customs. On investigation, customs officers found that the shoes which were imported were counterfeit Nike shoes. The fact that they were counterfeit was ascertained after an expert evaluation by Nike Creations, the brand holder. The appellant, as an authorized courier, is prohibited from opening the packages. It would have been a difference case, if there was sufficient evidence that the appellant was aware that the goods were counterfeit shoes or if the appellant had a role to play in the scheme to import them - The only fault of the appellant is that instead of receiving the KYC documents directly from the hands of the owners of M/s Legend Creations and M/s. Personal Creations, it received the documents with covering letters handed over by Balvinder Singh. This action of the appellant does not constitute not exercising due diligence to ascertain the correctness and completeness of any information which he submitted to the proper officer with reference to any work related to the clearance of imported goods as required under Regulation 12(1)(v). The appellant has not violated Regulation 12(1)(v) and therefore, revocation of the registration and forfeiture of security deposit under Regulation 13(1) and imposition of penalty under Regulation 14 cannot be sustained - Appeal allowed - decided in favor of appellant.

  ---

• Corporate Laws

• 2021 (5) TMI 818
  Rectification of mistake - seeking amendment of the Company Petition by incorporating certain paras - HELD THAT:- This Tribunal is of the opinion that in the interests of justice, the applicants may be permitted to amend the Company Petition incorporating the paragraphs and reliefs sought therein. Respondents can very well counter those averments and the reliefs, raising limitation, if any, by filing detailed counter affidavit, so that this Tribunal can consider those arguments also while finally disposing of the Company Petitions. The applicants are directed to file the amended Company Petition in both cases serving copy to all the respondents, within two weeks from today - Application allowed.

  ---

• Insolvency & Bankruptcy

• 2021 (5) TMI 823
  Approval of Resolution Plan - HELD THAT:- There is no communication from the RP to the Applicant rejecting the claim. It is no defence to argue that the list of creditors was uploaded on the website of the corporate debtor, and therefore, there is constructive notice to the world at large. Be that as it may, as soon the Applicant came to know of it, he filed an application under section 60(5) of the Code on 03.02.2020, seeking judicial intervention in the matter. It cannot be the fault of the applicant that the application which was filed on 03.02.2020, could not come up for hearing before the application for approval of the Resolution Plan came up on 04.02.2020. It cannot now be contended that the Adjudicating Authority denuded of jurisdiction to deal with the present application only because the Resolution Plan has been approved - the answering Respondent's objections on the maintainability of the applications on the sole ground that such applications cannot survive after the Resolution Plan has been approved, is hereby overruled. The applications be listed for arguments on merits on 09.06.2021, since the Resolution Plan is currently being implemented and any delay will defeat the ends of justice.

  ---

• 2021 (5) TMI 819
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - service of demand notice - HELD THAT:- The date of default relied upon by the Operational Creditor is 29.11.2019 - In the instant case, the nature of transaction is such that it was necessary to annex the invoices for proving the existence of default. Since the invoices bearing no. 1056 to 1059 were not annexed by the Operational Creditor with the Demand Notice, its reliance on 29.11.2019 as the date of default is erroneous. This defect is of such a nature that it cannot be allowed to be rectified at this stage by exercising our power as stipulated under the Proviso to Section 9(5)(ii) of IBC 2016. The Hon'ble Supreme Court in B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES [ 2018 (10) TMI 777 - SUPREME COURT] inter-alia, held that the Limitation shall be computed from the date of default. In the instant case as discussed earlier, the date of default relied upon by the Operational Creditor as 29.11.2019 has been found to be erroneous. Therefore, basing on the date of default of 29.11.2019, the question of computing of limitation does not arise. Whether a different date of default could be adopted basing on the other invoices and other dates relied upon by the Operational Creditor? - HELD THAT:- From the perusal of the invoices, it is observed that the last invoice annexed in the petition is of 17.02.2014. If we assume 17.02.2014 as the date of default for calculating Limitation, it is contended by the Operational Creditor through its rejoinder that the present petition is not barred by Limitation since the Corporate Debtor has made a part payment of ₹ 5,00,000/- on 06.01.2017 through cheque and the Petition has been filed on 31.12.2019, which is within 3 years from the date of encashment of cheque. In the instant case, the Operational Creditor has relied upon the invoices pertaining to the period from 14.01.2014 to 11.11.2019 in its main Petition as well as in the demand notice under Section 8 of IBC, 2016 to compute the Operational Debt amounting to ₹ 63,76,9474/-. The details of the unpaid invoices are given in the Para 10 of this order. Therefore, in the light of the aforesaid Judgment, we cannot cut short invoices till 17.02.2014 for deriving a date of default for computing the period of limitation. The Demand Notice issued by the Operational Creditor under Section 8 of the IBC 2016 is defective. Further, this Tribunal does not have a discretion to cut short the invoices to derive a date of default for the purpose of computing the period of Limitation - Petition dismissed.

  ---

• Service Tax

• 2021 (5) TMI 836
  Refund of excess service tax paid - Demand of differential rate of tax on Preferred Location Service - CENVAT Credit - input services - Renting of Immovable Property Service - HELD THAT:- The issue of Preferential Location Charges and natural bundling thereof with main service under Section 65(3) of the Finance Act, 1994 has been decided in the case of M/S SJP INFRACON LIMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, NOIDA [ 2018 (12) TMI 253 - CESTAT ALLAHABAD] where it was held that In the present case construction of residential complex service is the service which gives essential character to the package of the service and, therefore, the charges are essentially required to be bundled with the single service namely construction of residential complex service - thus, the Preferential Location Charges were correctly subjected to Service Tax at same rate as that of Construction of Residential Complex Service by the Appellant and the differential demand of Service Tax alongwith interest and penalty therefore must be quashed and set aside. The Appellant also becomes entitled to consequential relief in form of refund as claimed for by them on this count, in terms of Section 11B of the Central Excise Act, 1944. Renting of immovable property service - HELD THAT:- The SCN itself suggests that the demand is raised since the service availed is essentially a business entity and the property is to be used for accommodation of Directors/Senior Management personnel. This in itself is not sufficient to hold that the nature of service was that of Renting of immovable property for commercial use. The Appellant has adduced evidence in form of Electricity bills and Certificate from Co-Op Housing Society, which shows that only one Director was permanently residing at the leased accommodation premises and the property had not commercial use. There is no dispute as such that the leased premises was used only as residential dwelling of the Director - the demand on this count also must be quashed and set aside. Appeal allowed - decided in favor of appellant.

  ---

• 2021 (5) TMI 834
  CENVAT Credit - denial on the ground that the subject goods being attached to earth, are immovable in nature - whether the finding of the Tribunal that the towers, shelters and accessories used by the appellant for providing business support services are immovable property is correct or not? - HELD THAT:- The finding recorded by the Delhi High Court in VODAFONE MOBILE SERVICES LIMITED, INDUS TOWERS LIMITED, TOWER VISION INDIA PRIVATE LIMITED, BHARTI INFRATEL LIMITED, VERSUS COMMISSIONER OF SERVICE TAX, DELHI [ 2018 (11) TMI 713 - DELHI HIGH COURT] where it was held that machine or apparatus annexed to the earth without its assimilation by fixing with nuts and bolts on a foundation to providing for stability and wobble free operation cannot be said to be one permanently attached to the earth and therefore, would not constitute an immovable property - It is seen that the decision of the Bombay High Court in M/S. BHARTI AIRTEL LTD. (EARLIER KNOWN AS BHARTI TELE-VENTURES LTD.) VERSUS THE COMMISSIONER OF CENTRAL EXCISE [ 2014 (9) TMI 38 - BOMBAY HIGH COURT] was considered by the Delhi High Court. Whether the assessees are entitled to claim CENVAT credit on the towers and shelters either as capital goods or inputs in terms of Rule 2 (a) and (k) of the CENVAT rules and whether towers and shelters would qualify as accessories ? - HELD THAT:- The finding recorded by the Delhi High Court in VODAFONE MOBILE SERVICES LIMITED on this issue and held that There is actual use of tower and shelters in conjunction with the Antenna and the BTS equipment in providing the output service, which also includes provision of the Business Support Service. Whether the Tribunal erred in applying the nexus test with reference to MS angles and channels as according to the appellant what was bought to the site were towers, shelters and accessories in CKD/SKD conditions for providing services? - HELD THAT:- Delhi High Court in VODAFONE MOBILE SERVICES LIMITED has held that the CESTAT erred in applying the nexus test and therefore, credit has to be extended to the duty paid MS angles and channels. Whether the appellant was justified, in terms of rule 4(1) of the CENVAT Rules, in claiming CENVAT credit of excise duty paid by the manufacturer of towers and shelters after receipt of such towers and shelters at the premises? - HELD THAT:- Delhi High Court in VODAFONE MOBILE SERVICES LIMITED has held that The entitlement of CENVAT credit is to be determined at the time of receipt of goods. The fact that such goods are later on fixed/fastened to the earth for use would not make them a non-excisable commodity when received. Therefore, this question is answered in favour of the assessee and against the Revenue. Whether emergence of immovable structure at intermediate stage (assuming without admitting) is a criterion for denial of CENVAT credit? - HELD THAT:- Delhi High Court in VODAFONE MOBILE SERVICES LIMITED, INDUS TOWERS LIMITED, TOWER VISION INDIA PRIVATE LIMITED, BHARTI INFRATEL LIMITED, VERSUS COMMISSIONER OF SERVICE TAX, DELHI [ 2018 (11) TMI 713 - DELHI HIGH COURT] that towers and pre-fabricated shelters form an essential ingredient in the provision of telecommunication service as they are used for the purpose of supplying the service and would qualify as inputs and, therefore, CENVAT credit can be availed. Appeal allowed - decided in favor of appellant.

  ---

• 2021 (5) TMI 833
  CENVAT Credit - input services - services of commercial and industrial construction availed by them for construction of their premises - HELD THAT:- The issue regarding admissibility of Cenvat credit on Commercial and Industrial Construction Service used for construction of building which in turn are used for renting purpose has been settled by Hon ble High Court of Madras in THE COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI VERSUS M/S. DYMOS INDIA AUTOMOTIVE PRIVATE LIMITED [ 2018 (9) TMI 1135 - MADRAS HIGH COURT] where it was held that as construction service is an eligible service for credit for providing output service of renting of immovable property and without construction of the building, the renting of immovable property cannot be provided, the credit remains allowed. It is noticed that the renting of Immovable Property Service came into existence with effect from 01.06.2007 and therefore credit of Commercial and Industrial Construction Service for the period prior to levy of service tax on Renting of Immovable Property Service cannot be allowed. The credit of services availed after 01.06.2007 is however admissible. Cenvat credit for prior period - other output services namely Banking and Financial Services, Goods Transport Agency Service, Management and Maintenance and Repair Service and Sponsorship Service - HELD THAT:- The services specified above have no relation to the building. If at all these services are only be provided from very small part of the building the rest of the building has been rented by the appellant which at the material time was not taxable service. Thus, the admissibility of credit needs to be examined from that aspect. Moreover it is also not clear if the said services Banking and Financial Services, Goods Transport Agency Service, Management and Maintenance and Repair Service and Sponsorship Service were provided from same premises or from elsewhere. Admissibility of the credit is the question of law and therefore the appellant s can raised at the stage of first appellate level also. Since this aspect has not been examined by the lower authorities the impugned order is set aside and the matter is remanded to the original adjudicating authority for fresh consideration after taking note of above observations. Appeal allowed by way of remand.

  ---

• 2021 (5) TMI 832
  Levy of service tax - remuneration paid by a company to the Managing Director and the whole time Executive Director - salaries or not - Managing Director and whole time Executive Director of the appellant company - employees or not - scope of Service under section 65B(44) of the Finance Act, 1994 - HELD THAT:- The Learned Commissioner despite the submission of the appellants that the remuneration paid by the appellants to the managing director and the executive director of the company was shown as Salary and declared in Form- 16 which is a income tax return for the salary income decided that the remuneration paid is not a salary but directors remuneration. Therefore, the same is liable to service tax in the hands of the appellant - though in the Income tax return the remuneration was declared as salary income but it is a self declaration. However, whether such income is a salary income or otherwise the same can be established on the basis of employment conditions for employment of directors as company s employees. In the entire proceedings the appellant have not produced the appointment order of the directors as employees containing the terms and conditions of the employment. The matter needs to be reconsidered taking into account not only the position of income tax but also on the basis of terms and conditions of the employment - appeal allowed by way of remand.

  ---

• Central Excise

• 2021 (5) TMI 838
  CENVAT Credit - inputs - welding electrodes - denial on the ground that the welding electrodes used in the maintenance of plant and machinery cannot be called as inputs used in the manufacture of their final products - Penalty - HELD THAT:- A perusal of the SCN shows that the actual period in respect of the disputed CENVAT is April 2013 to March 2014. The period is significant since the definition of input under CENVAT Credit Rules, 2004 was changed with effect from 1.3.2011 and this amended definition is relevant for the period of dispute. Penalty - HELD THAT:- There is no dispute that the welding electrodes were used in the factory of the manufacturer as they were used to maintain the machinery. Therefore, they are squarely covered by the definition of input under Rule 2(k). Unlike the definition of input prior to 1.3.2011, for something to qualify as an input, it need not be used in or in relation to manufacture of the final product but it only needs to be used within the factory of the manufacturer. There is no dispute that the welding electrodes have been so used. CENVAT credit can therefore, not be denied. Consequently, the penalty also cannot be imposed. The impugned order dated 16.02.2018 passed by the Commissioner (Appeals) denying the CENVAT credit and upholding the penalty is contrary to law and cannot be sustained - Appeal allowed - decided in favor of appellant.

  ---

• CST, VAT & Sales Tax

• 2021 (5) TMI 841
  Issuance of C forms - Concessional rate of duty - purchase of High Speed Diesel from suppliers in other States - HELD THAT:- The issue is covered by a decision of this Court in M/S. THE RAMCO CEMENTS LTD. VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE ADDITIONAL COMMISSIONER (CT) [ 2018 (10) TMI 1529 - MADRAS HIGH COURT] where respondents are directed to permit these petitioners to download 'C ' forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of 'C' declaration forms. Petition allowed.

  ---

• Wealth tax

• 2021 (5) TMI 820
  Wealth tax assessment - Computation of net wealth - AO while determining the value of the assets and net wealth, as considered the photographs of the property/assets submitted by the Assessee and the value of the entire assets including the land and building as determined by the Sub-Registrar, Visakhapatnam who had adopted a comprehensive value of ₹ 1.95 crores for both the land and structures vide registration deed dated 20/02/2008 - HELD THAT:- Commissioner considered the Form No. 23AC submitted by the Assessee to the ROC and observed that from the record, it is seen that small structure standing on the piece of land is in dilapidated condition and the photographs of the property confirms the position. Assessee failed to demonstrate the fact that the structure was used for business purpose. Assessee failed to prove the point that the relevant property was utilized for business purpose. The Ld. Commissioner further held that it is not the case of the Assessee that the property was used for residential purpose or any other meaningful purpose. Ultimately, the ld. Commissioner observed that small and dilapidated structure of the Assessee is not functionally useful and was neither utilized for business purpose nor residential purpose and therefore, the AO is justified in stating that given the size of the land/plot, section 5(1)(vi) is attracted Nothing specific was pointed out to fault the determination of the value of the assets and therefore we concur the finding of the ld. Commissioner to the effects that the case of the Assessee does not fall in the category of house and the land appurtenant to the house. We are unable to find out any reason to controvert the finding of the authorities below, hence, we do not any hesitation to hold that the order under challenge does not suffer from any perversity, impropriety or illegality, consequently, the same is liable to be upheld. Appeal of the Assessee deserves dismissal.

  ---

• Indian Laws

• 2021 (5) TMI 846
  Dishonor of Cheque - application of criminal law in the absence of mens-rea - validity of the demand notice issued by the respondent - HELD THAT:- The complaint filed by the respondent, supported by the relevant documents i.e. three original dishonoured cheques, demand notice and reply to the demand notice given by the petitioner, do make out the ingredients of Section 138 of the N.I.Act. It is not the case of the petitioner that the ingredients of Section 138 of the N.I. Act are not made out and, therefore, the impugned order is bad in law and the complaint itself not maintainable. Though Section 138 NI Act penalizes the dishonour of cheque, yet dishonour of cheque by itself is not an offence under Section 138 and to become an offence the ingredients are required to be fulfilled - the stage of taking cognizance of an offence upon receiving a complaint precedes the examination of complainant and his witness under Section 200 Cr.P.C. It is thus incorrect to say that the cognizance of offence upon receiving a complaint of facts constituting such offence is taken only after examination of the complainant and his witness present, if any on oath. The preliminary statement of the complainant and his witness in attendance is recorded only with a view to decide taking further steps in the complaint, like issuance of process for securing the presence of the accused. There is no denying the proposition that in a case involving the dispute purely of a civil nature, the criminal law cannot be set in motion but, it is equally well settled that certain offences like the offences of cheating, criminal breach of trust, criminal misappropriation and offence under section 138 of the NI Act do arise out of the civil transactions and if the ingredients of offence/offences are made out, criminal law too can be set in motion alongside the civil remedy for resolution of the dispute - Generally, in the criminal law, mens rea is an essential component of crime but dishonour of cheque is a criminal offence where there is no need to prove a mens rea. The offence under Section 138 would be made out only if the dishonoured cheque is drawn by the drawer in favour of the drawee for discharge of legally enforceable debt or liability. Essentially, there is element of civil liability between the drawer and drawee of the cheque but if the ingredients of Section 138 are made out, it is a criminal offence to be tried in the manner provided under Section 142 of the NI Act. The conclusion that the complaint filed by the respondent and the impugned summoning order issued by the trial court are fully in consonance with law and do not deserve to be interfered with in exercise of inherent jurisdiction vested in this court by Section 482 of the Cr. P.C. - Petition dismissed.

  ---

• 2021 (5) TMI 845
  Dishonor of Cheque - Suit against the respondents for perpetual injunction restraining the respondents from interfering with the peaceful possession and enjoyment of the appellant over the suit schedule property - HELD THAT:- Since the appellant is seeking temporary injunction against the respondents contending that he is in possession of the suit schedule property, the burden is on the appellant to first establish that he continues to be in possession of the suit schedule property. Such possession in respect of agricultural land is normally reflected in the Village pahanies - Even according to the appellant, the column dealing with possession in Village pahani dt.25.06.2019 in respect of the subject property shows the names of the respondents and not the name of the appellant. The instant suit has been filed on 06.07.2020, long after the respondents obtained the interim injunction orders on 06.09.2019 in IA No.682 of 2019 in OS No. 108 of 2019 - On the pretext that there is no mention of delivery of possession in Ex.P1 Agreement of Sale, it is not open to the appellant to contend that he continued to be in possession particularly when such alleged possession is not supported by revenue records such as pahanies. The Court below did not commit any error in refusing to grant temporary injunction in favour of the appellant - Appeal dismissed.

  ---

• 2021 (5) TMI 843
  Dishonor of Cheque - pre-existing liability - Rebuttal of presumption - acquittal of the accused - offence punishable under Section 138 of the Negotiable Instruments Act - merely for the reason that the first respondent has admitted his signature on the Ext.P1 cheque, whether that would automatically invite the invocation of presumptions under Sections 118 and 139 of N.I.Act? - HELD THAT:- Once the execution of the cheque is admitted or proved, necessarily it is the legal consequence that the complainant is entitled to draw the presumption under the above said sections. Then only the accused/first respondent is expected to discharge the burden and rebut the presumptions that are drawn against him. Here certainly, the first respondent has denied the execution of the cheque. In other words, he has denied any money transaction with the appellant. Now the remaining question is whether the cheque is proved to have been executed by the first respondent. The prosecution should be able to establish their case on their own. The lapses on the part of the defence cannot be made advantage by the prosecution. Similarly, there is no substance in the contention that the appellant did not state the details of the transaction etc. By numerous authorities, it has been stated that such details are not necessary to be stated in the complaint. If it is proved that the cheque was executed and issued by the first respondent/accused in discharge of a legally enforceable liability, then the appellant is entitled to draw the presumptions. But here, the appellant has inherent weaknesses in his case. All the same, even if there are lapses in the defence version that cannot be taken use of by the appellant. Here the appellant has not established that the cheque was issued in a transaction as alleged by him and therefore, the presumptions under Sections 118 and 139 of the N.I. Act cannot be drawn in favour of the appellant. The facts of the case vis-a-vis the facts of the authorities relied on by the learned counsel for the appellant are clearly distinguishable. Here the very case of the first respondent is that he had not borrowed any amount from the appellant nor the Ext.P1 was given to the appellant - the appellant could not establish that there was long standing acquaintance between them which prompted him to lend so much money to the first respondent. In the circumstances and in the absence of fool proof evidence, he cannot be entitled to draw the presumptions. Appeal dismissed.

  ---

• 2021 (5) TMI 839
  Dishonor of Cheque - absence of reliable evidence - one more opportunity of hearing sought - section 138 of NI Act - principles of natural justice - HELD THAT:- It seems that it is only in the interest of justice that the appellant be afforded one more opportunity to adduce evidence by producing and marking the cheque return memo in question through a competent witness. It is also noted that both the courts below have noticed the execution and issuance of the cheque by the 1st respondent. In the circumstance, due to an inadvertent omission on the part of the appellant, interest of justice cannot be stultified. The matter is remanded to the trial court for fresh disposal, after affording opportunity to the parties to adduce fresh evidence, in continuation of the evidence already adduced - Appeal allowed by way of remand.

  ---