TMI Tax Updates - e-Newsletter
May 30, 2016

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. CLUBBING OF ESTABLISHMENTS UNDER EMPLOYEES’ PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT, 1952

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Finance Minister to Leave today for Japan on 6-Day Official Visit: To Meet Investors for Investment in India

Notifications

VAT - Delhi

1. F3(671)/Policy/VAT/2016/284-296 - dated 27-5-2016 - DVAT

Withdrawal of Delhi Sugam -1 (DS-1)

Circulars / Instructions / Orders

Income Tax

1. 21/2016 - dated 27-5-2016

Clarification regarding cancellation of registration u/s 12AA of the Income-tax Act, 1961 in certain circumstances

DGFT

2. 13/2015-2020 - dated 27-5-2016

Single application for filing claim under MEIS for shipments from different EDI Ports

Highlights / Catch Notes

Income Tax

• Section 263 Revision: Assessee-Company Failed to Prove Assessing Officer Examined Insurance and Client Receipts. Revision Order Upheld.

  Case-Laws - AT : Revision u/s 263 - amount received from the insurance company as well as the clients - Assessee-company could not demonstrate before us that this issue was examined by the AO during the course of assessment proceedings - revision order sustained - AT
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• Court Confirms Additions for Extra Depreciation Claimed on Reimbursed Tools and Dyes by Assessee.

  Case-Laws - AT : The assessee is getting additional benefit on account of depreciation claimed on the tools and dyes which have been reimbursed by the clients to it by claiming additional depreciation on the same - additions confirmed - AT
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• Interest from Bank Fixed Deposits u/s 11(5) Tax-Exempt; Section 2(15) Proviso Not Applicable to Assessee. (5) (15.

  Case-Laws - AT : Interest earned on fixed deposit with banks complying with the provisions of Section 11(5) is exempt and the proviso to Section 2(15) has no application to the facts of the assessee's case. - AT
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• Section 11 Income Tax Act: Charitable Purpose Exemption Expanded, "Activity for Profit" Clause Removed from Section 2(15.

  Case-Laws - AT : Exemption u/s 11 - charitable purposes - the words "not involving the carrying on any activity for profit" were dropped from section 2(15) - As long as broader public cause is served, whether by the State funding or by efficient regulation of the affairs, it is an object of general public utility. - AT
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• Court Confirms Discrepancy in Stock Values and Bogus Creditors in Canara Bank Case for 2004-2005.

  Case-Laws - AT : Addition of difference between the value of stocks falsely declared to Canara Bank as at 31-03-2004 and 31-03- 2005 confirmed - Addition of bogus creditors confirmed - AT
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• Assessee Not Liable for Withholding Tax on RPS Energy Payments Under India-UK DTAA, Section 195 Not Applicable.

  Case-Laws - AT : TDS u/s 195 - assessee in default - withholding of tax - A.O in treating the assessee as an assessee in default for not deducting tax at source on remittances made to M/s. RPS Energy Ltd., U.K. - India-UK DTAA - Activity of carrying out the 3D Seismic interpretation etc. - Not taxable in India - No TDS liability - AT
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• No Additional Tax Imposed on Minor Shortages in Auto Parts Due to Pilferage and Wear in High-Volume Business.

  Case-Laws - AT : Addition on account shortage of automobile parts - while conducting business of items which are huge in numbers, a minor shortage on account of pilferage, handling, wear and tear etc. cannot be ruled out - No addition - AT
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• Penalty Imposed for Late Self-Assessment Tax Payment Deemed Unjust u/s 221(1) Due to Technical Breach.

  Case-Laws - AT : Penalty levied u/s 221(1) - delay in payment of self assessment tax u/s 140A - assessee had filed its return of income on 30.09.2010 without payment of taxes - due date of filing of return was extended to 31st January, 2011 - entire taxes has been paid by 1.12.2010 - the breach is merely a technical breach and for which no penalty should have been levied - AT
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• Penalty u/s 271E waived for cash payments to director; reasonable cause per Section 273B found valid.

  Case-Laws - AT : Penalty u/s 271E - violation of Section 269T - assessee was duly necessitated by force to make the payments in cash to its director for onward transmission to the buyers of agricultural lands - assessee had duly adduced reasonable cause in terms of section 273B - No penalty - AT
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• No Penalty Imposed for Single Cash Book Entry u/s 271D; No Additional Cash Source Created for Assessee.

  Case-Laws - AT : Penalty u/s 271D - violation of provisions of section 269SS - merely by passing one receipt entry in cash book and one payment entry in cash book for a sum, no additional source of cash had emanated to the assessee - No penalty - AT
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• Claim 50% Additional Depreciation Next Year for Short-Term Used Plant & Machinery Under 180 Days Rule.

  Case-Laws - AT : Assessee is entitled to claim 50% of additional depreciation in the succeeding year when the plant and machinery was put in use for less than 180 days in the preceding previous year. - AT
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• Court Validates Interest Payments to M/s Saini Car Scheme as Legitimate Business Expenses u/s 40A(2)(b.

  Case-Laws - HC : Addition on account of interest paid to M/s Saini Car Scheme under Section 40A(2)(b) - The advancing of loan to the employees was for business purposes of the assessee - No addition - HC
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Customs

• Revenue Dispute: Excessive Duty Drawback Claim Challenged Due to Lack of Comparable Goods Pricing Evidence.

  Case-Laws - AT : Excessive claim of duty drawback - The allegation of the Revenue is that the goods overvalued - it cannot be alleged that the goods were undervalued in the absence of contemporaneous price for the purpose of like kind of goods - AT
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• DRI Officers Cannot Issue Show-Cause Notices for Recovery of Wrongful Drawbacks u/r 16 of 1995 Drawback Rules.

  Case-Laws - AT : DRI officers have no jurisdiction to issue show-cause notice for recovery of erroneously drawback claim under Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995 - AT
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Central Excise

• Cenvat Credit Approved for Reimbursement of Rack, Wagon Handling, and Port Railway Usage Charges with Service Tax.

  Case-Laws - AT : Eligibility of Cenvat credit - Debit notes raised for claiming reimbursement of rack handling charges, wagon handling charges and port railway usage charges and service tax thereon paid by them - Credit allowed - AT
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• Waste and Scrap Used in Manufacturing Deemed Duty-Paid; Notification No. 180/88-CE Conditions Met.

  Case-Laws - AT : The goods procured from open market cannot be related to a particular manufacturer. It cannot be presumed that the said waste and scrap has originated without payment of duty - Therefore, it has to be accepted that the waste and scrap used by the appellant for manufacture of their final product is duty paid accordingly, the condition of notification No. 180/88-CE stand fulfilled - AT
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VAT

• High Court Rules: Claiming Input Tax Credit on Fake Invoices Violates Act, Penalty Imposed for Non-Compliance.

  Case-Laws - HC : Availing of input tax credit on photostat tax invoices/bogus invoices in the absence of selling dealer remitting the taxes to the Government and the investigations providing that they are non-existing dealers amounts to violation of the provisions of the Act and attracts levy of penalty - HC
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Case Laws:

• Income Tax

• 2016 (5) TMI 1187
  Revision u/s 263 - amount received from the insurance company as well as the clients - Held that:- The crux of the issue is that the fact that there was no loss of revenue has to be conclusively demonstrated. In the present case, one cannot come to a conclusion that there was no loss of revenue without verification of the assessment records for the assessment years 2006-07, 2007-08 and 2008-09. The ld.CIT had only set aside the issue to the file of the AO to verify this fact from the assessment records for the years 2006-07, 2007-08 and 2008-09. Hence, the ratio laid down by the Hon’ble Karnataka High Court in the case of Infosys Technologies Ltd.(2012 (1) TMI 76 - KARNATAKA HIGH COURT ) is squarely applicable to the facts of the case. Where the issue was not examined by the AO the ld.CIT was justified to remand the issue to the file of the AO for de novo verification. Assessee-company could not demonstrate before us that this issue was examined by the AO during the course of assessment proceedings. Hence, we are of the considered opinion that the order passed by the ld.CIT , in exercise of his power vested under the provisions of sec.263 of the Act, is proper and valid in law and the ld.CIT is justified in assuming jurisdiction u/s 263 of the Act. - Decided against assessee.

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• 2016 (5) TMI 1186
  Revision u/s 263 - lack of enquiry by the AO - Held that:- A perusal of order passed by the AO under section 143(3) clearly shows that there is no discussion whatsoever on the various issues pointed out by the ld. CIT in the notice issued under section 263. The ld. Counsel for the assessee also has not been able to bring anything on record to show that the enquiries as warranted in the facts and circumstances of the case were actually made by the AO during the course of assessment proceedings. The mere fact that the errors on the part of the AO in not conducting enquiries in respect of relevant issues while completing the assessment were pointed out by the ld. CIT on the basis of details and documents available on record by itself cannot prove that such enquiries were actually conducted by the AO during the course of assessment proceedings. There is nothing brought on record to show that such enquiries were indeed conducted by the AO. We therefore, find ourselves in agreement with the ld. DR that it was a case of lack of enquiry on the part of the AO while completing the assessment under section 143(3) and such lack of enquiry made the assessment order passed by the AO under section 143(3) erroneous as well as prejudicial to the interest of the Revenue giving jurisdiction to the ld. CIT under section 263 to set aside the same with a direction to the AO to make the assessment afresh. We therefore, uphold the impugned order of the ld. CIT passed under section 263 - Decided against assessee.

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• 2016 (5) TMI 1185
  Disallowance of claim of expenses incurred against the professional receipts received from “Resonance Institute”, Kota - Held that:- The assessee has not produced any evidence either before the Assessing Officer or CIT(A) and also not before us. Therefore, we set aside this issue to the Assessing Officer to verify the expenses as claimed by the assessee. The assessee is also directed to produce all the evidences before the Assessing Officer to complete the set aside proceedings. Accordingly, both the appeals of the assessee for both the assessment years are set aside to the Assessing Officer for de novo. - Decided in favour of assessee for statistical purposes only.

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• 2016 (5) TMI 1184
  Eligibility for deduction u/s 80IB(10) on a plot/housing project - Held that:- Ownership of the plot is not necessary for availing the claimed deduction u/s 80IB(10) of the Act. See Radhe Developers case [2011 (12) TMI 248 - GUJARAT HIGH COURT] - Decided in favour of assessee

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• 2016 (5) TMI 1183
  Transfer pricing adjustment - inclusion of ICRA as comparable - Held that:- If the TPO himself had included ICRA as a comparable in earlier and subsequent years there was no justification for not including the same for the year under consideration on the ground that it had suffered losses. As stated earlier, if the results of ICRA are considered for TP purposes, the case will fall within the range of ± 5% and the adjustment made by the TPO would not survive. Considering the peculiar facts and circumstances of the case we hold that while finalising the TP adjustment ICRA should have been included as a comparable and that the TPO was not justified in making the adjustment of 63.881akhs.Effective ground of appeal is decided in favour of the assessee.

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• 2016 (5) TMI 1182
  Disallowance of additional depreciation on tooling cost recovered from the customers - Held that:- From the facts it is quite clear that the assessee first adds the amount of tools and dyes to its capital assets and claims the depreciation on the same. At the time when it gets reimbursed for the same, the same is reduced from the opening balance. This way, the assessee is getting additional benefit on account of depreciation claimed on the tools and dyes which have been reimbursed by the clients to it by claiming additional depreciation on the same - Decided against assessee Disallowance of interest u/s 36(1)(iii) on loans raised for business purposes - Held that:- In consonance with the order of the I.T.A.T. in assessee's own case for the earlier assessment year and also taking into consideration the fact that the bank rate in this year is around 15.7%, we hereby hold 16% rate of interest to be reasonable, as these are unsecured loans and are always available at a rate higher than the bank rates. - Decided partly in favour of assessee Disallowance of interest u/s 36(1)(iii) on alleged interest free advance ignoring the facts that the said advance was given out of own funds - Held that:- 5. Once, it is established that for a given situation, the assessee has not borrowed any money, for that matter, putting it reverse, the assessee has used his owned funds or interest free funds, there is no question of proving that the funds so taken from owned or interest free funds are used for business purposes. There being no claim of any interest expenditure, no question of deduction to be allowed under section 36(1)(iii) of the Act arises. Once it is presumed that the lending as in the present case is made out of owned funds, assessee need not show the business expediency for the same. An assessee or for that matter any person is free to use his own funds the way he wants. In the present case, as the assessee has used owned funds for such lending, we do not find any need to go into the question of commercial expediency - Decided in favour of assessee

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• 2016 (5) TMI 1181
  Sales turnover computation - Held that:- the decision of the Tribunal is binding on the Assessing Officer and he cannot pick up a word or sentence from the order of the Tribunal de hors the context of the question under consideration and construe it to be complete law declared by the Tribunal. A judgment must be read as a whole. Being so, the Assessing Officer cannot sit in judgment over the order of the Tribunal, and he is required to give just effect to the order of the Tribunal. If he has any grievance, he is at liberty to appeal against that order of the Tribunal before higher forum. We direct the AO to strictly consider that the assessee has only manufactured 156 WTGs and inter divisional transfer cannot be treated as sales and the same has to be reduced from the total sales and he has to arrive the cost of 1 WTG by dividing the total cost of manufacture by 156 WTGs and correspondingly recompute the sale turnover and grant depreciation on 6 WTGs at applicable rate which were inter-divisional transfers Levy of interest u/s.220(2) - Held that:- The period specified under section 220(1) has to be taken into consideration from the date of passing of the fresh assessment order and not the earlier assessment order, which has been set aside. Accordingly, this issue is decided in favour of the assessee.

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• 2016 (5) TMI 1180
  Transfer pricing adjustment - Held that:- We agree with the contention of the Ld. Counsel that adjustment if at all is required to be made then the same should be made in respect of transactions with the AE only accordingly, the TPO is directed to make the adjustment only with respect to transaction with the AE and not for the entire revenue as costs. Whatever disallowances which has been made by the AO under various heads should be reduced from the operating cost as it will amount to double addition. Disallowances of software and license - alternatively, as claimed by assessee that if the same is treated as capital expenses, then depreciation under section 32 should be directed to be allowed - Held that:- It can be seen that, some of the expenditures are periodical and recurring in nature, which cannot be held to be capital in nature. Because these expenditures are part and parcel for running of and maintenance of computer programmes essential for business. However, all these details and bills and vouchers along with the nature of expenditures have not been examined properly by the AO as well as by the DRP, therefore, in the interest of justice, we feel that the issue of software expenses should be remitted back to the file of the AO and should be decided afresh after considering these bills and vouchers and also the nature of expenses. It is clarified that if payment is recurring in nature purely for software then same cannot be disallowed as capital. In case some of the expenditures are treated as capital then, needless to say that AO will allow deprecation of such expenditure. Disallowance of travelling expenses being 50% claim - Held that:- Even before us, the entire details have not been furnished. However, looking to the fact that foreign travelling expenses has been recurring expenditure in all the assessment years and in this year, the percentage is only 3% of the total turnover, therefore, in the interest of justice, we feel that the disallowance made should be restricted to 25% of the total expenditure debited on account of travelling expenses. Thus, the assessee gets part relief on this score. Similarly, on ad-hoc disallowance of telephone and communication, the same was made 50% on total expenditure claimed at 14,76,748/- on the ground that relevant details have not been furnished. Since similar position is continuing at the stage of the Tribunal also, therefore, like in the travelling expenses, we direct the AO to disallow 25% of the total expenditure debited on this head. Thus, assessee gets part relief on this score also.

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• 2016 (5) TMI 1179
  Taxing the bank interest as income from other sources - assessee is a charitable organisation with DIT (E), Mumbai, under Section 12A - Held that:- The assessee depositing money in the bank does not constitute trade, commerce or business. The Assessing Officer has in fact gone much beyond and held that the interest itself constitutes taxable income falling foul of the proviso to section 2(15). If the Assessing Officer's view is correct, it will militate against the mandate requirement and object of Section 11(5) of the Act read with Section 13 of the Act. These Sections require an entity seeking the shelter of Sections 11 to 13 to deposit its surplus funds in specified assets and it cannot be that the mandate requirement and object of Section 11 (5) which serves to put in place a mechanism to regulate the funds of the charitable institutions are overcome, overridden and nullified by an interpretation so that the very mandate of Section 11(5) if complied with results in the institutions being declared to be non-charitable. This is a contradiction in terms and therefore must be rejected. Accordingly, we hold that the interest earned on fixed deposit with banks complying with the provisions of Section 11(5) is exempt and the proviso to Section 2(15) has no application to the facts of the assessee's case. In view of the above, we set aside the order of both the lower authorities and direct the AO to delete the addition of interest so made which is exempt u/s.11(5) of the Act and the proviso to Section 2(15) has no application to the facts of instant case. - Decided in favour of assessee

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• 2016 (5) TMI 1178
  Income from works contract and machine hiring charges - AO estimated the net profit at 10 per cent. of gross contract receipts on the ground of unverifiable nature of account, from which, he has allowed salary and interest to partners - Held that:- It is the case of the assessee that the authorities below have estimated the income from contract works at 10 per cent. as against 8 per cent. before allowing bank interest and depreciation, which is arbitrary and excessive. We observe that the order of the learned Commissioner of Income-tax (Appeals) does not put forth any reasons and views specifically for which he has confirmed the order of the Assessing Officer on this issue and it is much more general in nature. The assessee has itself computed net profit at 6.30 per cent. of gross contract receipts. In our considered view, taking into account the net profit generally applicable in the case of works contract, the net profit at 8 per cent. will be reasonable. Therefore, we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue and direct to estimate the net profit at 8 per cent. as against 10 per cent. adopted by the authorities below. Addition under section 68 made on account of Shaym Trading Co. and Sahoo Enterprises - Held that:- We observe that although the assessee is pleading that sundry creditors are genuine, but it is on record that the sundry creditors have denied any transactions with the assessee during the relevant year. In view of this, we set aside the order of the learned Commissioner of Income-tax (Appeals) and restore the issue to the file of the Assessing Officer to verify whether the said creditors are genuine or not and if it is found to be genuine, then relief may be allowed to the assessee Credit of TDS amount and the levy of interest under section 234B and section 234C - Held that:- Cuttack Bench in the case of Biraja Construction v. Asst. CIT [2013 (12) TMI 295 - ITAT CUTTACK ] wherein the Tribunal has held that it is necessary to direct the Assessing Officer to verify the TDS certificate by the assessee or partners in the return for the purpose of claiming credit for TDS, when the Assessing Officer has accepted the income was to be given credit to the assessee being the firm returning the income for claiming the advance tax paid but deducted at source. The Assessing Officer in that order is directed to give credit to the assessee in accordance with the provisions of the Income-tax Act, 1961. Respectfully following the same, we set aside the order of the learned Commissioner of Income-tax (Appeals) and restore the matter to the file of the Assessing Officer to verify whether the income is taken in the hands of the firm and if so, he is directed to give credit to the TDS amount to the assessee in accordance with law. The levy of interest under section 234B and section 234C is consequential

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• 2016 (5) TMI 1177
  Validity of reopening of assessment - Held that:- Re-assessment proceedings are initiated based on the same set of information as was available at the time of original assessment proceedings and therefore it amounts to mere change of opinion which cannot be a valid ground for re-opening assessment as held by the Hon’ble Supreme Court in CIT vs. Kelvinator of India Ltd., (2010 (1) TMI 11 - SUPREME COURT OF INDIA ). In the above circumstances, we hold that formation of belief by the AO that income escaped assessment is not based on material and the substratum for the reopening was not laid down in the reasons recorded. Therefore, the condition precedent i.e. reason to belief that income escaped assessment is totally absent. This is a jurisdictional condition which requires to be satisfied for assumption of jurisdiction u/s 147. Non-satisfaction of this condition renders all the proceedings initiated u/s 147 null and void. Therefore, we have no hesitation to hold that the re-assessment proceedings initiated by AO are illegal and cannot be sustained in law. - Decided in favour of assessee

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• 2016 (5) TMI 1176
  Genuineness of the production and sale of fertilisers and the amount of subsidy received from the Government of Uttar Pradesh - Held that:- Commissioner of Income-tax (Appeals) has recorded the findings that the assessee was engaged in manufacturing and sale of fertilisers and such findings have been made based on the remand reports and the orders of the trade tax authorities and the Central Excise authorities and the Directorate of Agriculture, U. P. Government. The learned Commissioner of Income-tax (Appeals) has also based his findings on the order of the Meerut court in an first information report filed against the assessee for showing fictitious production of fertilisers which was upheld by the High Court. We find that it could not be shown by the Revenue to us as to how such findings are not in consonance with the material on record. In view of quite speaking order based on evidence passed by the Commissioner of Income-tax (Appeals), we uphold the order of the Commissioner of Income-tax (Appeals). - Decided against revenue Estimation of net profit - Held that:- We agree with the contention of the learned authorised representative that the estimation of net profit in any case should be on a reasonable basis and we find that the maximum assessed profits shown by the assessee in the earlier years is 8.42 per cent. Further, since no other reasonable basis has been given by the learned Departmental representative, we hold that the reasonable net profit rate taking into consideration the past history of the assessee be taken at 8.5 per cent. and the income of the assessee be calculated accordingly. - Decided partly in favour of assessee

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• 2016 (5) TMI 1175
  Exemption u/s 11 - charitable purposes - business activity incidental to the attainment of objectives of the trust - the words "not involving the carrying on any activity for profit" were dropped from section 2(15). - Held that:- As long as broader public cause is served, whether by the State funding or by efficient regulation of the affairs, it is an object of general public utility. It is also important to bear in mind that costs of proper development of area are also costs incidental to the plots and units sold by the assessee and, therefore, these two things should not be seen in isolation The authorities below were not justified in declining the benefit of section 11 read with section 2(15) to the assessee, and in holding that the assessee-trust was not covered by advancement of any object of general public utility. We, therefore, direct the Assessing Officer to delete the disallowance of exemption - Decided against revenue

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• 2016 (5) TMI 1174
  Addition u/s 68 - failure to produce evidence in respect of credit entries in the capital account of the partner - Held that:- Learned counsel for the assessee has produced a copy of the assessment order dated 20.12.2010 passed by the Assessing Officer, whereby the claim of the assessee has been accepted. The said order is taken on record. However, it is not disputed by the learned counsel for the revenue that after remand, the order was passed on 20.12.2010 accepting the version of the assessee. - Decided in favour of the assessee Addition on account of interest paid to M/s Saini Car Scheme under Section 40A(2)(b) - Held that:- The amount received by the assessee from Saini Car Scheme were for business purposes. The assessee advanced a sum of 17,60,053/- as loans to employees on which no interest was charged. The advancing of loan to the employees was for business purposes of the assessee. The factual matrix was neither controverted by the revenue nor any contrary material was produced before the Tribunal to show that the addition of 6,16,645/- was wrongly deleted.- Decided in favour of the assessee

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• 2016 (5) TMI 1173
  Disallowance of deduction u/s 36(1)(va) for employees contribution beyond due date of payment - Held that:- The assessee credited the amount of employees contribution in the books and delayed in depositing the same with PF/ESI department within the statutory time limit. Ld. Assessing Officer further observed that assessee was required to deposit PF on a monthly basis but in respect of PF deducted at 59,784/- the same was deposited after the due date of payment and claimed the same to be deductible u/s 43B of the Act to have been deposited before the due date of filing the return. Respectfully following the decision in the case of CIT vs. GSRTC [2014 (1) TMI 502 - GUJARAT HIGH COURT] Assessing Officer has rightly disallowed the deduction u/s 36(1)(va) of the Act at 59,784/- in regard to employees contribution deposit beyond due date of payment - Decided against assessee Disallowance of proportionate interest - Held that:- Looking to the past history of decisions by the coordinate bench in assessee’s own case it has been repeatedly held that no disallowance is called for on account of proportionate disallowance of interest for application of borrowed funds to interest free loans and advances and therefore, for the year under appeal also we do not find any reason to interfere with the order of ld. CIT(A) in deleting the disallowance - Decided against revenue Addition on account shortage of automobile parts - Held that:- From going through the records, we observe that short was duly shown in the quantitative details forming part of tax audit report showing therein a shortage of 1111 number of parts. We however, observe that complete quantitative details have been maintained and no defect has been pointed out by ld. Assessing Officer during the course of assessment proceedings. We further observe that total number of 825262 nos. of components were sold during the year and in percentage terms the shortage is just 0.13% of the total items sold. We are of the considered view that ld. Assessing Officer has made an estimated addition without corroborating the facts with the books of accounts and not pointing out any mistake in the quantitative purchase and sale nor any defect has been pointed out in the manufacturing activities carried on by the assessee and not appreciating the fact that while conducting business of items which are huge in numbers, a minor shortage on account of pilferage, handling, wear and tear etc. cannot be ruled out. Therefore, ld. CIT(A) has rightly deleted the addition - Decided against revenue Disallowance of diesel expenses and trip and bhatta expenses - Held that:- Respectfully applying the ratio of the decision taken by coordinate bench on the issue which is verbatim same in assessee’s own case the disallowance on account of trip bhatta and diesel expenses to be restricted to 1/3rd of the total disallowance of 41,74,300/-. In other words, disallowance sustained by ld. CIT(A) at 13,82,433/- is upheld. - Decided against revenue

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• 2016 (5) TMI 1172
  Suppression of sales - Held that:- When the assessee had filed annual return showing higher turnover and paid the amount of CST on the basis of CST sales reported in annual return and this is not shown to us that any rectification request was made before sales tax authority or that any refund was received or claimed from the sales tax authority on account of higher amount of CST sales reported in annual return by mistake, this is not acceptable that there is a mistake in the amount of CST sales as per the annual return filed before the sales tax authority. Monthly returns are filed earlier after each month and thereafter, annual return is filed after the end of the financial year and in the present case, the annual returns for the financial year 2004-05 was filed on 01-06-2005. Hence, it cannot be claimed that there is a mistake in the annual return only on this basis alone that figure of sale reported in monthly return is less, as compared to figure of turnover reported in annual return because the annual returns are filed after proper verification and generally, we find that there may be mistake in the monthly return and not in the annual return. Mere comparison with the monthly return is not sufficient, particularly when there is no rectification application filed before the sales tax authority, asking for rectification in annual return and asking for refund of excess sales tax paid on the basis of mistake in the annual return. Hence, we find that no merit in this contention that there is mistake in the annual return - Decided against assessee Addition of difference between the value of stocks falsely declared to Canara Bank as at 31-03-2004 and 31-03- 2005 - Held that:- We find that as per the Tribunal’s order in assessee’s own case for assessment year 2004-05 wherein it was held that closing stock as on 31-03-2004 should be considered as opening stock on 01-04-2004 relevant for the assessment year 2005-06. In the present year, the closing stock as per stock statement given to Canara Bank as on 31-03-2005 is 51.70 lakhs. The closing stock as per the stock statement submitted to Canara Bank as on 31-03-2004 was of 35,74,910/- and the AO made the addition of difference amount only of 15,95,091/-. This is in line with the Tribunal order in assessee’s own case for the assessment year 2004-05 - Decided against assessee Addition of bogus creditors - Held that:- The addition in dispute as per this ground of 7.24 lakhs is in respect of these creditors. It is also noted by the learned CIT(A) that even in appeal, the assessee could not establish anything better. The assessee has filed confirmation of these three creditors by way of additional evidence on pages 338 to 340 of the paper book but this is not a case where confirmation was not available earlier. In fact, these three creditors filed confirmation before the AO also and they appeared before the AO and confirmed only part amount of the credits and the AO allowed the benefit to the extent of credit amount confirmed by these creditors. There is nothing brought on record before any of the authorities below or before us that why these parties confirmed only part of the amount of the credit when they appeared before the AO. Therefore, on the basis of these confirmation letter submitted before us as additional evidence, no relief can be allowed to the assessee in view of the fact that these parties appeared before the AO and confirmed only part amount of credit and nothing has been brought on record by the assessee to show that there was any mistake in the statement of these three parties before the AO, as per which they confirmed only part amount of credits - Decided against assessee Unexplained cash deposit - Held that:- The entire amount of closing stock of earlier year has been considered by the AO as opening stock of the present year and the additions was made by the AO to the extent of excess of closing stock of the present year over such opening stock. It means that the entire amount of opening stock has been considered as part of the closing stock of the present year and therefore, such opening stock cannot be available for explaining cash deposit in the bank because, even if it is held that opening stock was sold and the sale price was used for purchasing different items which were available in closing stock then also, G.P addition has to be made in respect of such sales out of opening stock. Under these facts, the assessee does not deserve any relief on this point. Moreover, ld.CIT(A) has no power to set aside the matter to the file of the AO and he has to decide the issue himself and if required, he may obtain remand report from the AO. In the present case, ld.CIT(A) has restored the matter to the file of the AO with some directions. The order of the ld. CITA) is not sustainable and therefore, we set aside his order on this issue and restore the matter back to his file for a fresh decision Validity of assessment - period of limitation - Held that:- We find that as per the provisions of sub-sec.2A of sec. 153 of the IT Act, 1961, the AO had to pass a consequential assessment order after setting aside of the matter to his file by the Tribunal as per its order u/s 254 of the IT Act. The present assessment order had been passed by the AO after passing of the order by the Tribunal u/s 254(2) of the IT Act as per which, the scope of the original Tribunal order was enlarged by the Tribunal and therefore, we find force in the submission of the ld. DR of the revenue that the period of limitation as provided in sub-sec.2A of sec.153 has to be considered from the receipt of this order in M.P. in the office of CIT and when this is done than it is clear that the present assessment order is not time barred because the same is passed before the expiry of one year from the end of FY in which the order u/s 254(2) of the IT Act was passed by the Tribunal. - Decided against assessee.

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• 2016 (5) TMI 1171
  TDS u/s 195 - assessee in default - withholding of tax - A.O in treating the assessee as an assessee in default for not deducting tax at source on remittances made to M/s. RPS Energy Ltd., U.K. - India-UK DTAA - Activity of carrying out the 3D Seismic interpretation including basin modeling, culminating in prospect generate along with GRV calculations, play fairway mapping and risking of prospects for exploratory drilling. The A.O further observed that the non-resident is furnishing the report which consists development and transfer of a technical plan and technical design which enables the assessee to take decision of exploration in the Block MB-OSN-20-5/2. The A.O further observed that the report contains number of Maps, designs, Seismic Data charts and figures. Held that:- For the sake of completeness, there are significant distinction between the definition as prescribed u/s. 9 of the Act of “fees for technical services” as compared with the definition prescribed in Article 13 of Indo-UK treaty. But the settled law is that the provisions of DTAA overrides the provisions of IT Act in the matter of ascertainment of taxability under the Income Tax Act. At this juncture, it is worth to mention the decision of the Hon’ble Supreme Court in the case of GE India Technology Centre Pvt. Ltd. [2010 (9) TMI 7 - SUPREME COURT OF INDIA] wherein the Hon’ble Apex Court has decided that there was no obligation for withholding tax on any person making payment to a non-resident, if the payment made to non-resident is not chargeable under the provisions of the I.T. Act. After considering the totality of the facts of the case in hand, in our considered opinion, the revenue could not prove that there was transfer of Technology by M/s. RPS Energy Ltd to the assessee nor it has been proved that the impugned transactions have made available technical expertise skill or knowledge by processing the data provided by the assessee. Nor it has been proved that the assessee can apply independently and without assistance and undertake such survey independently excluding RPS Energy Ltd. in future. Assuming that M/s. RPS Energy Ltd., rendered services as defined u/s. 9(1)(vii) Explanation 2 of the Act, yet it does not satisfy the requirement of technical services as contained in India-UK DTAA. We set aside the findings of the ld. CIT(A) and direct the A.O to delete the impugned addition. - Decided in favour of assessee.

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• 2016 (5) TMI 1170
  Disallowance u/s 14A - Held that:- Even if the investment did not yield any dividend in the year under consideration, the disallowance under section 14A of the Act on the expenditure incurred for earning income is warranted, notwithstanding the fact that no such income was earned. Further, we find that while making investment, the element of expenditure involved in the process cannot be ruled out. However, this expenditure may not be direct. Thus, there is an expenditure involved in making these investments. Therefore, there is a need to identify and apportion a reasonable amount of expenses as attributable for earning the exempted income. After taking various factors into consideration, came to a conclusion that such expenses can be reasonably calculated @ 0.5% of the average investments made by the assessee. For this purpose, the legislature has arrived at a common formula to calculate the expenses @ 0.5% of the average investments made as per step-3 of the formula given in Rule-8D. Accordingly the legislature incorporated and introduced the Rule-8D. Further, as could be seen from the assessment order, the Assessing Officer has rightly quantified the expenditure under Rule 8D(2)(iii) and disallowed under section 14A of the Act. - Decided against assessee Disallowance of additional depreciation under section 32(1)(iia) - whether the assessee is entitled to carry forward 50% of additional depreciation in the succeeding year when the plant and machinery was put in use less than 180 days in the preceding previous year? - Held that:- Assessee is entitled to claim 50% of additional depreciation in the succeeding year when the plant and machinery was put in use for less than 180 days in the preceding previous year. Thus, respectfully following the decision in the case of Automotive Coaches & Components Ltd. v. DCIT (2016 (4) TMI 34 - ITAT CHENNAI ), we direct the Assessing Officer to allow 50% of additional depreciation in the succeeding year as claimed by the assessee. - Decided against revenue

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• 2016 (5) TMI 1169
  Penalty levied u/s 221(1) - delay in payment of self assessment tax u/s 140A - Held that:- From the analysis of provisions of section 140A(1), we find that the section requires that assessee is liable to pay taxes on the total income on the basis of any return u/s 139 after reducing the advance taxes and tax deducted at source, if any and such return shall be accompanied with the proof of payment of such taxes and interest. Sub-section 3 of section 140A requires that if an assessee fails to pay whole or any part of any such tax or interest the assessee shall be deemed to be an assessee in default and therefore, the provisions of Act shall apply accordingly. It is apparent from the above that section 140 (A)(1) of the Act applies in respect of return required to be furnished u/s 139 of the Act. The return in this case was required to be furnished u/s 139 of the Act by 31st January, 2011. The entire tax was paid by 1.12.2010 which is much prior to the due date of filing of return which happened to be 31/01/2011 and if the entire tax has been paid before the filing of due date of return there can not be said to be default u/s 140A(1) of the Act. The only default committed by assessee is that it had filed its return of income on 30.09.2010 and by the date of filing of return the taxes were not paid but the fact remains the due date of filing of return was extended to 31st January, 2011 and, therefore, technically the assessee was entitled to pay taxes before the due date of filing of return which happened to be 31st January, 2011. The entire taxes has been paid by 1st December, 2010 and therefore, the breach is merely a technical breach and for which no penalty should have been levied. Moreover, the assessee has paid interest as applicable under the provisions of Act. Therefore, keeping in view the entire facts and circumstances and specifically the fact that assessee belonged to disturbed area of Jammu Kashmir, the penalty in this case was not impossible - Decided in favour of assessee.

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• 2016 (5) TMI 1168
  Penalty u/s 271D - violation of provisions of section 269SS - Held that:- We find that the assessee instead of merely responding by way of journal entry on 26.9.2006 in its books, had erroneously passed a receipt entry and a payment entry in its cash book. Hence the entire penalty proceedings had been triggered only based on mere book entries of the assessee and there is no categorical finding that the assessee indeed had received cash from the director when the assessee had actually denied the same. We also find that independent examination of the director was made by the Learned AO to ascertain the true facts, wherein the director had categorically stated on oath that he neither had any cash balance or paid any cash loan to the company. We also find that merely by passing one receipt entry in cash book and one payment entry in cash book for the same sum of 17,25,000/-,no additional source of cash had emanated to the assessee, which fact is quite evident from the relevant pages of the cash book itself, forming part of the paper book filed before us. We find that the closing cash balance as on 26.9.2006 was only 13,17,466.11 and it had not increased by 17,25,000/- as alleged by the Learned AO. We are convinced that there is no case for invoking the provisions of section 269SS of the Act and hence the penalty levied u/s 271D for violation of section 269SS of the Act thereon is quashed herewith - Decided in favour of assessee Penalty u/s 271E - violation of provisions of section 269T - Held that:- assessee was duly necessitated by force to make the payments in cash to its director for onward transmission to the buyers of agricultural lands. - assessee had duly adduced reasonable cause in terms of section 273B of the Act and hence no penalty could be levied u/s 271D of the Act. Further,t here is nothing on record that transactions made by the assessee is not genuine and the amount involved was unaccounted. - There is no case for invoking the provisions of section 269T of the Act and hence the penalty levied u/s 271E for violation of section 269T of the Act thereon is quashed herewith.- Decided in favour of assessee

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• 2016 (5) TMI 1167
  Entitlement to deduction on account of premium paid on Keyman Insurance Policies of its partners - Held that:- As decided in Pr. Commissioner of Income Tax-I, Ludhiana v. M/s Ramesh Steels, Ludhiana [2016 (5) TMI 1155 - PUNJAB & HARYANA HIGH COURT] in the case of the assessee where it has been held that the Keyman insurance policy taken out in respect of partner of the firm would be admissible expenditure. Premium paid by the assessee related to period beyond 31.3.2005 - whether not allowable deduction for the assessment year 2005-06? - Held that:- Learned counsel for the revenue was unable to show that the claim of deduction of premium on Keyman insurance policy amounting to Rs. 84,68,494/- was erroneously granted and the order of the Tribunal was unsustainable

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• 2016 (5) TMI 1166
  Exemption under section 11 - capital expenditure incurred by the assessee on objects of general public utility - Held that:- Apex Court in S.RM.M.CT.M. Tiruppani Trust's case (1998 (2) TMI 3 - SUPREME Court ) had held that the amounts spent on acquiring capital assets for the trust were exempt. In the present case, the town development expenditure of 3,79,192/- and expenditure against works of 8,76,538/- was incurred by the Improvement Trust under the statutory scheme as envisaged in Punjab Town Improvement Trust Act, 1922 and, therefore, would be entitled to exemption. Learned counsel for the respondent-revenue has not been able to dispute the settled legal position and also the factual matrix noticed hereinbefore. Accordingly, the substantial question of law is answered in favour of the assessee and against the revenue

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• 2016 (5) TMI 1165
  Agriculture land - measurement of distance - Held that:- The distance is more than 9 kms and treating the land sold as agricultural land and, thus, no substantial question of law is arising in this appeal.

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• 2016 (5) TMI 1164
  Applicability of provisions of section 80P - whether the appellant is a "co- operative bank" which is a "primary agricultural credit society"? - Are the provisions of section 80P of the Income-tax Act excluded in terms of sub-section (4) of that section ; from application in relation to the Kerala State Co-operative Agricultural and Rural Development Bank Limited ; governed by the provisions of the Kerala State Co-operative (Agricultural and Rural Development Banks) Act, 1984 ; hereinafter, the 'CARDB Act' ? - Held that:- The condition in sub-clause (2) of clause (cciv) of section 5 of the Banking Regulation Act is to the effect that a primary co-operative society should not be one which permits admission of any other co-operative society as member, to be a "primary agricultural credit society". The provisions of the Kerala Co-operative Land Mortgage Banks Act, 1960 and of the CARDB Act show that the appellant Kerala State Co-operative Agricultural and Rural Development Bank Limited may admit a primary bank as its member. "Primary bank" as defined in section 2(h) of the CARDB Act means, among other things, a co-operative society. Therefore, the appellant does not satisfy the condition prescribed in sub-clause (2) of clause (cciv) of section 5 of the Banking Regulation Act and hence, it is not a co- operative bank which is a primary agricultural credit society. In view of the aforesaid conclusion, we answer the question formulated above holding that the assessee does not fall within sub-section (4) of section 80P of the Income-tax Act for the assessment year in question. Hence, the impugned decision of the Tribunal does not warrant interference - Decided against assessee

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• 2016 (5) TMI 1163
  Levy penalty u/s 271(1)(c) - undisclosed capital gain - assessee has sold the property during the financial year 2007-08 and computed the capital gain for the assessment year 2009-10 for which no satisfactory explanations has been offered - Held that:-AO dealing with the matter is to consider whether the explanations offered by the assessee or the person as the case may be is reasonable and as regards the reason was on account of reasonable cause. In the present case on hand, on perusal of the available records, we find that the assessee has voluntarily disclosed the capital gains for the assessment year 2009-10 on transfer of immovable property. Whether the particular capital gain is taxable for the assessment year 2008-09 or 2009-10 is a finding of fact which needs to be examined with reference to the facts available on record. The assessee proved that he had handed over the possession of the property in the financial year 2009-10. It is also undisputed fact that he had disclosed the capital gain for the A.Y. 2009-10. Penalty u/s 271(1)(c) of the Act could be imposed when all the necessary facts were not disclosed by the assessee before the assessing officer. We further noticed that when the facts was brought to the notice of the assessee, the assessee has accepted the proposal mooted by the A.O. and offered the capital gain in respect of 3 sale deeds for the assessment year 2008- 09. Therefore, the A.O. was not correct in coming to the conclusion that the assessee has concealed the particulars of income for the assessment year 2008-09. In the present case on hand, the assessee has disclosed necessary facts, before the A.O. before the assessment was reopened for the impugned assessment year. Therefore, we are of the view that it is not a fit case for levy of penalty for concealment of income or furnishing inaccurate particulars of income. Therefore, we direct the A.O. to delete the penalty levied u/s 271(1)(c) of the Act. - Decided in favour of assessee

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• 2016 (5) TMI 1162
  Revision u/s 263 - CIT has taken the view that the assessing officer has completed the assessments without making proper enquiries with regard to the incriminating documents - Held that:- It cannot be held that the assessing officer did not carry out enquiry or verification which should have been done, since the facts and circumstances of the case and the incriminating document was not considered to be strong by the AO to implicate the assessee. Thus, we are of the view that the assessing officer has taken a plausible view in the facts and circumstances of the case. Even though the Ld Pr. CIT has drawn certain adverse inferences from the document, yet it can seen that they are debatable in nature. Further, as noticed earlier, the Ld Pr. CIT has not brought any material on record by making enquiries or verifications to substantiate his inferences. He has also not shown that the view taken by him is not sustainable in law. Thus, we are of the view that the Ld Pr. CIT has passed the impugned revision orders only to carry out fishing and roving enquiries with the objective of substituting his views with that of the AO. Hence we are of the view that the Ld Pr. CIT was not justified was not correct in law in holding that the impugned assessment orders were erroneous. At the time of hearing, it was pointed out to Ld D.R that there are references to various names such as Mumbai Naveen, Ravi Mumbai, Vijaya Mum, Sanjeev Shetty etc. Further the entries are dated from March 99 to February, 2012. Under these set of facts, a specific question was asked to Ld D.R as to how these entries can transalate into income in the hands of the assessee, since the same lists out payments made to various persons on various dates. Unless it is established that these payments can be taken as income in the hands of the assessee, they cannot be assessed in his hands. In that case, it cannot be said that these entries would cause any prejudice to the interests of the revenue, if they are not assessable in the hands of the assessee. The Ld D.R replied that these aspects require examination at the end of the assessing officer. The said stand taken by the department clearly shows that they are also not sure as to whether these entries could be considered as income in the hands of the assessee. Further, we notice that the Ld Pr. CIT has not brought on record any material to show that these amounts were paid to the assessee or on his behalf. Even if it is considered for a moment that the assessee could be linked with it, without showing that the entries noted down in the impugned document results in income in the hands of the assessee, in our considered view, it cannot be said that the assessment orders passed by the AO could be taken as prejudicial to the interests of the revenue. Accordingly we are of the view that the revision orders passed by Ld Pr. CIT falls on this ground also. - Decided in favour of assessee.

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• 2016 (5) TMI 1161
  Reopening of assessment - information received from the Directorate of Income Tax (Investigation) - Held that:- After going through the reasons recorded by the AO, we are of the view that AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. - Decided in favor of the Assessee

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• 2016 (5) TMI 1160
  Addition u/s 68 - unsecured loans received - Held that:- The appellant has been able to prove the identity, genuineness and creditworthiness of Sanjay Patel HUF, Jayaben Patel and Bharti Patel repeatedly and certainly, when there is a provision of showing income @ 8% on the civil construction receipts u/s 44AD of the Act, then the parties taking sub-contract work are free enough to get themselves covered under the provisions embedded in the Statute. The ld. Assessing Officer has not raised any doubt in the books of accounts as the same have not been rejected u/s 145(3) of the Act and no specific defect in the actual working of the appellant has been pointed out in its books of accounts and above all construction work has been completed to the satisfaction of contract awarders, then in such situation ld. Assessing Officer was not correct in making the addition of 20,01,300/-. We accordingly delete the same - Decided in favour of assessee. Disallowance in respect of interest paid to depositors - Held that:- The same is consequential, because as we have already held that no addition is called for towards the unsecured loans of 20,01,300, then certainly assessee will be eligible for claiming interest of 3,79,616/- in respect of interest paid to depositors. - Decided in favour of assessee. Disallowance @ 15% of the labour expenses paid to five sub-contractors being related parties u/s 40A(2)(a) - Held that:- . For making any such addition, it will be necessary for the Assessing Officer to scrutinize the reasonableness of the expenditure and to exercise his judgment in a reasonable and fair manner and to satisfy that there is no attempt to evade taxes. In the case of the assessee, there has been no such exercise done by the Assessing Officer by way of scrutinizing the expenditure paid to the related parties and comparing the rates with the available market rates and further to ascertain that these related parties has been paid on a higher rate or excess amount in comparison to the general market rate. We also observe that the detailed ratewise chart is available on record which the related parties has provided to the assessee on the basis of which work has been awarded to them and the same have been completed to the satisfaction of the contract awarders. We also observe that no disallowance on payment to sub-contractors to related parties have been made u/s 40A(2)(b) of the Act during the assessment proceedings completed u/s 143(3) of the Act for Assessment Year 2005-06 and 2006-07. In such situation, when there is a complete absence of specific working which should have been carried on by the ld. Assessing Officer to arrive at a decision that excessive payments have been made to the related parties in comparison with the fair market rates as well as comparison with the rates of work awarded by the appellant to its other sub-contractors and also in the given situation when the books of accounts have not been rejected and all other expenditures have been accepted without pointing out any error, then in such situation estimated addition should not be called for. We, therefore, delete the addition - Decided in favour of assessee. Disallowance made u/s 40(ia) - Non deduction of tds u/s 194H on the deemed commission payment made - Held that:- We failed to understand that how such type of addition or disallowance can be made by ld. Assessing Officer without appreciating the fact that the complete value of contract received by PIPL from the Government has been shown as revenue in its books of accounts and thereafter complete contract has been sub-contracted to the appellant at 89.5% of the contract price by way of which 10.5% remained with PIPL as a part of its profit which have been subjected to tax. Further 89.5% of the contract price has been shown as Revenue by the appellant and together with this sub-contract, the appellant has carried on other contract work also and gross turnover of 5,19,71,858/- has been achieved by the appellant during the year under appeal and a net profit of 16,52,490/- has been shown in its return of income. There is no justification given by the ld. Assessing Officer that on what basis deemed commission payment has been calculated at 43,18,175/- and going a step further how can a provision of Section 40(a)(ia) can be applied for non-deduction of deduction u/s 194H of the Act on this deemed commission of 43,18,175/-, even when no such expenditure has been claimed by the assessee in its profit and loss account.- Decided in favour of assessee.

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• 2016 (5) TMI 1159
  Reopening of assessment - delayed payment of PF and claim of deduction u/s.80IB without furnishing the full certificate of Form 10CCB along with return of income - Held that:- Since admittedly in the instant case the notice u/s.148 has been issued beyond a period of 4 years from the end of the relevant assessment year and there is no allegation by the AO in the reasons recorded for such reopening that there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment, therefore, following the decision of the Tribunal in assessee’s own case for A.Y. 2005-06 we hold that the notice issued by the AO u/s.148 in the instant case is void ab-initio. The grounds raised by the assessee on the issue of validity of reopening is thus decided in favour of the assessee.

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• 2016 (5) TMI 1158
  Lease receipts received - assessed under the head ‘business’ or ‘house property’ - Held that:- The Government of Andhra Pradesh has allotted 150 acres of the appellant for development of Biotechnology Park, the appellant developed the Park, constructed the premises, provided required facilities and is exploiting the entire premises as a commercial venture. Therefore, the income is to be assessed under the head ‘business income’. We arrive at irresistible conclusion that in this case, letting of the properties is in fact is the business of the assessee. The assessee therefore, rightly disclosed the income under the Head Income from Business. It cannot be treated as ‘income from the house property’. - Decided in favour of assessee

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• 2016 (5) TMI 1157
  Addition on account of entries found noted during the course of survey - Admission in statement during search - Held that:- The additional income offered at 9,38,50,009/- is computed on the basis of a document prepared at the end of the previous year relevant to assessment year under appeal and the loose paper under reference contained the entries prior to the end of the previous year, thus the same stood covered in the memoranda state of affairs as at 31.03.2008 and any further addition is not warranted. It is therefore, contended by ld. counsel that the Ld. CIT(A) has rightly deleted the addition and thus the order of Ld. CIT(A) deserves to be uphold on this score. - Decided against revenue Adhoc disallowance of expenses - Held that:- It is to be borne in mind that department cannot chose both i.e. tax the assessee on enhanced surrendered and further go on adding separate entry one by one on assumptions. The fair course will be to take each entry, quantify each and make separate addition for each. It is very unjustified to add the surrender and further add each item, this amount to double jeopardy which is not permissible. Looking at the entirety of circumstances and fact that the assessee enhanced his surrender from 3,50,42,961/- to 9,38,50,009/-; the fact that the balance sheet reflects the sum total of his transactions as on 01.04.2008, it is not justifiable to add the totals of both the balance sheets. On verification of both the balance sheets it emerge that the one filed for income tax purposes is part of and incorporated in the one found during the course of survey. Therefore, in our considered view, the addition of 2,13,15,248/- as excess liabilities has been rightly deleted by ld. CIT(A). His order on this issue is upheld - Decided against revenue Addition of interest income - Held that:- Shri Rajendra Ji Was debtor who has squared up his account with the assessee as on 01.04.2008. Ld. DR could not dispel such factual findings. Further it is found that assesee’s cash balance as per balance sheet is 18,20,852/- and this amount being the interest income of the assessee during the year has been included in this cash balance on the basis of which the surrender has been made. In our considered view the impugned addition of 3,45,000/- has been rightly deleted by ld. CIT(A), which order deserves to be upheld - Decided against revenue Surrender of undisclosed income towards investment and expenditure - Held that:- As the facts emerge sworn statement of NLA has been duly endorsed by the assessee to the effect that the investment in the impugned property was made by the son NLA a fact which is uncontroverted and clinches the issue in favour of the assessee. There is no material to suggest that investment in this behalf was made by assesssee. During survey proceedings in respect of loose papers including page 5 of Exhibit A-14 assessee son, in reply to question No. 18 of the statement categorically stated that these entries related to the purchases of plot of land in his own name for a total consideration of 45,40,200/-. In reply to question No. 23 also NLA admitted amount 30,40,200/- as his undisclosed investment. In our view without dislodging NLA’s clear statement,, ld. AO made an addition of 32,43,730/- in this behalf in the hands of assessee on surmises. There is no merit in sustaining the addition on the basis of AO’s vague observation. Since the impugned investment was owned by son by an uncontroverted sworn statement, there is no reason to expect assessee to offer or tax it in his hands. Thus there is no substance in inferring or assuming that assessee went back on his statement. In view of these facts and circumstances we hold that revenue has failed to substantiate that undisclosed investment is made by assesse based on any cogent evidence, reason or logic.- Decided against revenue

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• Customs

• 2016 (5) TMI 1195
  Seeking modification in the order to remove the rider of obtaining permission from the learned trial court for each visit to abroad and come back to India - Appeal is pending against adjudication order but the presence of the petitioner is required before the learned trial court during trial court of the case - Held that:- since the petitioner is having good business at UAE and his wife and family are also residing there if permission will not be given to him to visit UAE, then his business may be adversely effcted and his family may also suffered therefore, this petiton deserves acceptance. The learned trial court is directed to decide the application of the petitioner pending before it since 18.1.2016 within two days from the date of receipt of the certified copy of this order and accord him permission and in future, if he wants to go abroad after informing the court, he may be allowed to go abroad whenever necessity arises so that his business may not be affected and he may also take care of his family subject to the condition that trial, before the trial court may not be effected. - Decided in favour of petitioner

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• 2016 (5) TMI 1194
  Validity of order passed by writ court - Clearance of goods covered by the commercial invoice and consignments of Alloy Steel Deformed Bars also forthwith lying in the port of Chennai - Held that:- the proposition, which has been proposed by the writ petitioner that till the contempt is purged the appeal against the writ petition cannot be heard has no merit and, therefore, we reject the said preliminary objection and issue notice to the respondents on merit as well as on I.A.No.5511/2015, I.A.No.6418/2015 and 6425/2015. Appellants are directed to supply the copy of memo of appeal to Shri V.K. Jain, learned counsel for the respondent No.1, so that he may seek further instructions in the matter, within a period of 3 days from today. Looking to the fact that in contempt proceedings order has been passed and in case, if stay is not granted against the appellants then, the impugned order will be executed and both the writ appeals of the department will be rendered as infructuous apart of facing contempt by the writ court. - Interim relief and stay granted

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• 2016 (5) TMI 1193
  Confiscation in lieu of redemption fine and imposition of penalty - Section 114A of the Customs Act, 1962 - Mis-declaration of description of imported goods - Zinc Ash” as “Zinc Dross” - No intention to evade duty - Held that:- the goods imported are Zinc Ash and not Zinc Dross. Therefore, mis-declaration of the description of the goods and non-eligibility for import of the goods under the advance licence mentioned in the Bill of Entry is established. Therefore, we do not find any reason to interfere with the impugned order of the Commissioner of Customs, Kandla. However, we do find that the Adjudicating authority has not extended the benefit of 25% penalty, which the appellants are eligible for as per Section 114A of the Customs Act, 1962. The Appellants are eligible for the same even at the appellate stage as per the decision of the Hon’ble Gujrat High Court in the case of CCE Vs Harish Silk Mills [2010 (2) TMI 494 - GUJARAT HIGH COURT] and CCE Vs G.P.Presstress Concrete Works [2012 (8) TMI 933 - GUJARAT HIGH COURT]. We, therefore, extend the said benefit to the Appellants subject to fulfillment of conditions thereof. The impugned order is upheld with the above modification. - Decided partly in favour of appellant

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• 2016 (5) TMI 1192
  Jurisdiction - Whether the show-cause notice issued by DRI for recovery of erroneously granted drawback in terms of Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995 can be held valid show-cause notice - Held that:- in the case of Era International v. Union of India [2011 (8) TMI 885 - Punjab and Haryana High Court] wherein the Hon'ble Punjab and Haryana High Court following the decision in the case of CC Vs. Sayed Ali [2011 (2) TMI 5 - Supreme Court] has held that the preventive office cannot be the proper officer for issuance of show-cause notice to seize the goods. As no such amendment was made under Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995 in respect of issuance of show-cause notice. In fact, the amendment dated 6.7.2011 was made only in section 28 was retrospective with effect from 16.9.2011 and the circular CBEC dated 31.5.2011 was only for the amendment limited for proper officer under Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995. The said circular did not consider that the DRI officers are to be the proper officers under Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995 but as no retrospective amendment carried out in the said rule so far as conformation of jurisdiction by DRI officers for issuance of show-cause notice is concerned, therefore, the DRI officers have no jurisdiction to issue show-cause notice for recovery of erroneously drawback claim under Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995. Demand of duty and imposition of penalty - Section 114 of the Customs Act, 1962 - - Fraudulent export of bicycle parts under export execution (sic : promotion) scheme like drawback DEPB etc. - Availed excess drawback claim erroneously - Held that:- the impugned goods was examined at the port of shipment and no single discrepancy was detected in regard to description, quality, quantity or value of the goods. All the consignments were examined found to be correct and the goods were assessed, thereafter let export order was issued. Further, it is found that no incriminating documents found by DRI during the course of search at the residence of various partners or the officers of the appellants. The only allegation against the appellant is that the Consulate General of India at Dubai has given report showing that only small fraction of iron was auctioned by Dubai DHS 31000 equivalent to 3,10,000/-. It was also found that out of 3 merchants/financiers only one company was not found at the address. The allegation of the Revenue is that the goods overvalued as the goods have been examined at the end of the supplier also. Therefore, it cannot be alleged that the goods were undervalued in the absence of contemporaneous price for the purpose of like kind of goods. I further find that the Revenue is heavily relied on the statement of Shri Navdeep Goyal representative of shipping agency but he was not made available for cross-examination. Therefore, the said statement cannot be relied on. During the course of investigation, it was found that the appellant exported bicycles parts which were procured from various suppliers who processed the bicycles parts. There is no single evidence on record to show that the appellant has manufactured/ used sub standard raw materials and all the suppliers have admitted that they have provided goods to the appellants. The appellant is a regular supplier/exported various other consignments of bicycles parts of similar nature. No departmental officers were alleged that having conspiracy with the appellants and there is verification report is on record. Therefore, in the absence of any supportive evidence except the report from the Consulate General of India at Dubai which is also not conclusive. In the absence of any such supportive evidence, it cannot be alleged that the appellant has availed excess drawback claim erroneously. Therefore, I do agree for setting aside the demand on merits. - Decided in favour of appellant with consequential relief

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• Corporate Laws

• 2016 (5) TMI 1188
  Non-applicant marking a letter - Held that:- This court cannot come to a conclusion that the official liquidator is in possession of the original bills, vouchers and receipts evidencing expenses of 1,33,501/- or the deposit slips in the name of the company in liquidation to an extent of 79,900/-. Consequently, in the obtaining facts of the case, find no force in the application. The same is dismissed. However, as stated above qua the letter dated 26-11-2010, the non-applicant No.1 shall be free to take proceedings under Section 65 of the Evidence Act which shall when the occasion arises, be addressed in accordance with law of its merits.

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• Service Tax

• 2016 (5) TMI 1206
  Imposition of penalty - Section 77 and 78 of the Act - Transport of goods by road and scientific and technical consultancy services - Technical testing done by a foreign service provider - Voluntarily paid service tax along with interest prior to issuance of SCN - Held that:- with regard to imposition of penalty under section 77, I find that department is correct in demanding the tax but the appellant had contended that penalty under section 77 ought not to be 10,000/- but only 5000/- as the period of dispute is prior to enactment of Finance Act, 2011. Penalty under section 77 is liable to be upheld accordingly. - Decided partly in favour of appellant

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• Central Excise

• 2016 (5) TMI 1205
  Eligibility of Cenvat credit - Debit notes raised for claiming reimbursement of rack handling charges, wagon handling charges and port railway usage charges and service tax thereon paid by them - Held that:- by respectfully following the decision of Hon'ble Apex Court in the case of Indian Farmers Fertilizer Coop Ltd. Vs CCE Ahmedabad [1996 (7) TMI 141 - SUPREME COURT OF INDIA] and also by relying on the decision of Tribunal in the case of Shree Cement Ltd. Vs CCE Jaipur [2013 (3) TMI 79 - CESTAT NEW DELHI], the appellant is eligible for Cenvat credit. - Decided in favour of appellant

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• 2016 (5) TMI 1204
  Entitlement for Nil rate of duty in terms of Notification No.180/88-CE dt. 13.5.1988 - Aluminium products manufactured out of waste and scrap of Aluminium purchased from open market - Held that:- the waste and scrap was procured from open market and not from any particular manufacturer. The goods procured from open market cannot be related to a particular manufacturer. It cannot be presumed that the said waste and scrap has originated without payment of duty. Therefore, it has to be accepted that the waste and scrap used by the appellant for manufacture of their final product is duty paid accordingly, the condition of notification No. 180/88-CE stand fulfilled. Therefore the appellant is entitled for the said exemption notification by applying the decision of Tribunal in the case of Baroda Ferro Alloys & Ind. Ltd. Vs. Commissioner of C. Ex., Vadodara [1999 (11) TMI 385 - CEGAT, MUMBAI]. - Decided in favour of appellant

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• 2016 (5) TMI 1203
  Whether summons issued by the respondent-authority is devoid of any merit and substance - Right to be accompanied by the lawyers - Petitioner is neither a Director nor a post holder in M/s Netshelter Marketing Limited - High Court did not find any reason to entertain the writ petition mainly for the various facts and reasons and therefore dismissed with a cost to deposit reported in [2016 (5) TMI 1156 - JHARKHAND HIGH COURT] - Apex Court dismissed the special leave petition

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• 2016 (5) TMI 1201
  Validity of order passed by the Settlement Commission - Violation of principles of natural justice - Calculation filed at the back of the petitioner and no opportunity granted to the petitioner to explain the same - Held that:- by considering the fact that no opportunity has been granted to the petitioner and therefore, the prayer is allowed the Settlement Commission is directed to consider the additional submissions of the petitioner filed on 22.12.2014 and after granting opportunity of hearing to the petitioner, pass an appropriate order within a period of two months from the date of filing of certified copy of the order. - Petition disposed of

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• 2016 (5) TMI 1200
  Demand of Central Excise duty - confiscation of seized MS Pipes from two different premises; for imposition of penalties under the various provisions of Central Excise Rules, 1944 - correctness of the conclusion drawn by the Original Authority on the duty liability of the main appellant - Held that:- It is apparent that the admission of the main appellant to the limited duty liability, as mentioned and the rejection of their application for settlement of the case has been the main reason for confirmation the whole demand against the main appellant. We find that the Original Authority has to record the various evidences alongwith the reason for admitting such evidences after giving due consideration to the appellant’s plea. When the appellants made request specifically in writing for cross examination of the persons whose statements have been relied upon, the Original Authority's finding on such request has to be recorded. We find the request for cross examination itself has not been recorded. While admittedly non-payment of duty exist in this case, the quantification of non-paid duty has to be arrived at by analyzing the evidences and taking into account the defence submission alongwith their plea for cross examination as sought for by the appellant. Considering the above we are constrained to observe that the impugned order in the present form cannot be sustained and has to be set aside. We do so accordingly. The case is remanded back to the Original Authority for a fresh decision keeping in view the observations made above. The appellants shall be given due opportunity to present their case and thereafter the Original Authority may decide the case as expeditiously as possible.

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• 2016 (5) TMI 1199
  Imposition of penalty - Rule 25 of the Central Excise Rules, 2002 and Rule 15(1) of CENVAT Credit Rules, 2004 for non-compliance of Rule 8,12 of Central Excise Rules, 2002 - Held that:- with regard to imposition of penalty under Rule 25 of Central Excise Rules, 2002 it is found that the Appellant has paid the tax along with interest even before the issuance of show cause notice and that there has been delay only in payment of duty by the Appellant and not default in payment of duty as alleged. The Appellant have admitted their duty liability in the ER-1 returns but have not paid the duty due to late receipt of money from their customers which have not been disputed by the revenue. Therefore, by applying the decision of Gujarat High Court in the case of Commissioner of Central Excise I find no other reason as to why CENVAT Credit should not be used for payment of duty. Hence the penalty levied under Rule 15(1) of CENVAT Credit Rules, 2004 is also liable to be set aside. - Decided in favour of appellant with consequential relief

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• 2016 (5) TMI 1198
  Demand of duty - Capacitors cleared by BCEPL without payment of duty under the cover of challans and documents in the name of BCPL - Held that:- on careful consideration of the evidences as analyzed by the Commissioner (Appeals), it is clear that the clearances of excisable goods from the premises of BCEPL could not be attributed to the old stock of capacitors purported to have been cleared in 1994 to the Indore Office of BCPL. There are sufficient evidences to support the conclusion of the lower authorities. Further, the inconsistencies in the pleas made by BCEPL, tends to support the case of non-duty paid clearances. Period of limitation - Demand of modvat credit - inputs not utilized in the manufacture of final product - Held that:- it is seen that BCEPL have opted out of modvat scheme to avail exemption at the end of financial year 1998-99. Due intimation has been given to the Department. In the impugned order, the demand of modvat credit was set aside on the ground of time bar. It is a fact that the allegation of inputs having not been used in the manufacture of final product before opting out of modvat scheme has been based on the modvat accounts, RG-I and other records maintained by the BCEPL. As pointed out in the impugned order, there is no allegation of clandestine removal of goods on which credits were availed. I agree with the findings of the ld. Commissioner (Appeals) on this issue of demand being hit by time bar. Demand of modvat credit - wires and cables cleared under various challans - Held that:- the findings of the ld. Commissioner (Appeals) is that these cables and wires have been cleared by BCEPL in connection with installation work for MPEB, at various places. It is an admitted fact that these cables and wires are required for such installation. In the absence of evidences on record to the contrary, there is nothing to indicate that BCEPL have collected amount over and above the invoices raised to MPEB and as such, the demand on wires and cables could not be sustained. I agree with the findings of the ld. Commissioner (Appeals) in this regard. Reduction of penalty by Commissioner (Appeals) - Section 11 AC of the Act - Held that:- ld. Commissioner (Appeals) examined the applicability of Section 11 AC introduced on 28.09.96. Considering the application of legal provisions during the material time and also considering the findings on duty liability as well as the period involved in such liability, the Commissioner (Appeals) had examined and given his findings in the impugned order. There is no infirmity in the said findings. Similarly, regarding penalties on BCEPL and Shri Ajit Bhandari, the impugned order requires no modification in view of the above analysis and findings. The impugned order is upheld - Appeals dismissed

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• 2016 (5) TMI 1197
  Entitlement for availment of Cenvat credit - receipt of duty paid goods i.e. Oil Slump Body, Cylinder Head & Rover Cylinder - availed Cenvat credit thereon - reissue the same on payment of duty or for export - no manufacturing activity has been undertaken - Held that:- the assesee is entitle to avail Cenvat credit on the duty paid goods even though the said duty paid goods does not undergo manufacturing process. The only condition is that if the duty paid goods is cleared after process which amounts to manufacture, the assesee is required to pay duty on the transaction value and if the goods are cleared without manufacturing process the duty which required to be paid is equal to the Cenvat credit availed. Rule 16 also holds the duty paid goods as inputs therefore the Cenvat credit is admissible. Entitlement for availment of Cenvat credit - Inward GTA service - goods on which credit was allegedly wrongly taken is not input service - Held that:- the goods are inputs in terms of Rule 16, therefore, the inward transportation of such goods shall be undoubtedly qualified as input service, even as per the interpretation drawn by the Ld. Commissioner, therefore the credit on inward GTA service in respect of transportation of the goods namely Oil Slump Body, Cylinder Head & Rover Cylinder is also admissible. Since we are of the view that Cenvat credit in respect of the goods is admissible in terms of Rule 16 and consequently Cenvat credit is admissible on GTA service, we are not going into other issues raised by the Ld. Counsel. The impugned order is set aside. - Decided in favour of appellant with consequential relief

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• 2016 (5) TMI 1196
  Clandestine removal of goods - Shortage of quantity of MS ingots and MS bar - Demand of duty and imposition of penalty - Section 11 AC of the Act - Contravention of provisions of rules 4, 6, 8, 10, and 11 of the CER 2002 - Held that:- it is found that there is discrepancy in the manner of stock taking. Such manner of stocktaking can give only an estimation and an approximate result. Based on such an approximate calculation which is in the nature of eye estimation, no adverse inference can be drawn against the appellant. It is further evident that the statement recorded of the director on 19/6/08 was recorded in the dead of the night and as such no reliance can be placed on any admissions made in such a statement which can not be said to be freely given. It also indicates the high handedness adopted by the inspection team during the course of inspection and recording of statement. I further hold that deposit of tax does not amount to admission on the part of the appellant. The appellant have neither shown or admitted clearance in the subsequent returns and nor have admitted any clandestine removal categorically. On being questioned, pointedly for the alleged shortage it was stated by the Director, the production figures are reported by the person who is not much educated and as such there are discrepancies due to inadvertence. It further found that revenue have not brought any incidence or corroboration as to clandestine removal of the finished goods. Therefore, the impugned order is set aside. - Decided in favour of appellant with consequential relief

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• CST, VAT & Sales Tax

• 2016 (5) TMI 1191
  Whether both the authorities below were justified in dismissing the appeals of the appellant by holding the condition of pre-deposit of 25% as mandatory for the entertainment of appeal - Held that:- the issue stands covered by the decision of this Court in the case of Punjab State Power Corporation Limited v. The State of Punjab and others [2016 (2) TMI 245 - PUNJAB AND HARYANA HIGH COURT]. Therefore by following the same, the order passed by the Deputy Excise and Taxation Commissioner (Appeals) and by the Tribunal are set aside. The matter is remanded back to the Deputy Excise and Taxation Commissioner (Appeals). - Appeal disposed of

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• 2016 (5) TMI 1190
  Imposition of penalty under Section 72(2) of the KVAT Act - Disallowance of input tax credit in respect of goods viz. iron and steel purchased from the registered dealers - Selling dealers were absconding and were involved in bill trading - Held that:- from the various judgments, it is clear that the burden lies on the petitioner to establish that the dealers from whom the petitioner had purchased the goods have remitted the tax collected to the Government. Mere obtaining the registration number by the selling dealers would not suffice to claim input tax credit unless the petitioner has discharged the burden of proof in support of the input tax claimed. No input tax credit could be allowed on the basis of the photostat copies of tax invoices. Availing of input tax credit on photostat tax invoices/bogus invoices in the absence of selling dealer remitting the taxes to the Government and the investigations providing that they are non-existing dealers amounts to violation of the provisions of the Act and attracts levy of penalty under Section 72(2) of the Act. - Decided against the petitioner

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• 2016 (5) TMI 1189
  Demand of purchase tax - Input tax credit disallowed - Whether the Tribunal was justified in ignoring the judgment of M/s Gobind Sugar Mills and following the judgment of M/s Jagatjit Sugar Mills case despite the fact that the issue and facts in Govind Sugar Mills case are almost identical to the issues and facts of the present case and whether the appellant is liable to pay tax on the purchase of sugarcane under the provisions of Punjab General Sales Tax Act, 1948, when the Punjab Sugarcane (Regulation of Purchase & Supply) Act, 1953 is in force which is a special Act - Held that:- the issue stands concluded against the appellant by this Court in the case of M/s AB Sugars Ltd. v. State of Punjab and another [2015 (8) TMI 62 - PUNJAB & HARYANA HIGH COURT]. Therefore, by following the same the appeal is concluded. - Decided against the appellant

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