TMI Tax Updates - e-Newsletter
June 7, 2019

Case Laws in this Newsletter:

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

News

1. CCI approves Acquisition of the electrical and automation business of Larsen &Toubro Limited by Schneider Electric India Private Limited and MacRitchie Investments Pte. Ltd.

2. Exchange Rate of conversion of the Foreign Currencies relating to Imported and Export Goods notified

3. Rising growth concerns prompted third rate cut: Das

4. Rupee pares most early losses post RBI rate cut

5. India lost USD 13 billion to trade misinvoicing: Report

6. RBI cuts interest rates to 9-yr low, expects banks to quickly lower home, auto loan EMIs.

7. Commerce Minister to Lead Indian Delegation for G20 Ministerial Meeting in Japan

8. RBI lowers economic growth forecast to 7 pc for FY20

9. Highlights of RBI's monetary policy statement

10. RBI cuts lending rate by 0.25% to push growth.

11. FDI limit in defence sector should be raised to 51 pc: Study.

12. Governor’s Statement – Second Bi-Monthly Monetary Policy, 2019-20, June 6, 2019.

13. Statement on Developmental and Regulatory Policies

14. Commerce Minister addresses meeting of Board of Trade &Council for Trade Development and Promotion

15. Agreement for Exchange of Information between India and Marshall Islands notified

16. CCI imposes penalty on Chemists and Druggists Association and Pharmaceutical Companies

17. Second Bi-monthly Monetary Policy Statement, 2019-20 Resolution of the Monetary Policy Committee (MPC) Reserve Bank of India

18. Govt announces constitution of various Cabinet panels

19. Draft Comprehensive ITC (HS) Export policy, 2019

Notifications

Customs

1. 40/2019 - dated 6-6-2019 - Cus (NT)

Exchange Rates Notification No. 40/2019-Custom(NT) dated 06.06.2019

GST - States

2. 10/2019-State Tax (Rate) - F-10-19/2019/CT/V(49) - dated 10-5-2019 - Chhattisgarh SGST

Amendments in the Notification of the State Government, in the Commercial Tax Department, No. 11/2017-State Tax(Rate) notification No. F-10-43/2017/CT/V(79), dated the 28th June, 2017.

Income Tax

3. 10/2019 - dated 4-6-2019 - IT

Procedure for online submission of statement of deduction of tax under sub-section (3) of section 200 and statement of collection of tax under proviso to sub-section (3) of section 206C of the Income-tax Act, 1961 read with rule 31A(5) and rule 31AA(5) of the Income-tax Rules, 1962 respectively.

Highlights / Catch Notes

GST

• Petitioner Allowed to Submit Additional Representation on Goods Detention; Respondent to Decide by Saturday.

  Case-Laws - HC : Detention of goods - Petitioner, is given liberty to file additional representation/explanation by enclosing a copy of this order within twenty four hours from today and the respondent shall consider the objections raised as well as the additional representation/ explanation pass an order on or before Saturday
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• Appellate Authority to Decide on 39-Day Delay Condonation; Recovery Actions Paused Pending Decision on Stay Petition.

  Case-Laws - HC : Stay of recovery - condonation of delay of 39 days - it is for the appellate authority to consider the applications for condonation of delay and if satisfied with the explanation, to condone the delay and to thereupon consider the stay petition - Coercive steps shall be deferred till a decision is taken by the second respondent
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Income Tax

• Online Procedure for Tax Deduction and Collection Statements u/s 200(3) and 206C(3) of Income-tax Act 1961.

  Notifications : Procedure for online submission of statement of deduction of tax under sub-section (3) of section 200 and statement of collection of tax under proviso to sub-section (3) of section 206C of the Income-tax Act, 1961 read with rule 31A(5) and rule 31AA(5) of the Income-tax Rules, 1962 respectively.
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• Court Rules Ad Spending as Revenue Expense, Not Capital; No Enduring Benefit Justifies Intangible Asset Classification.

  Case-Laws - AT : Nature of advertisement expenditure - revenue or capital - public memory is very short and, therefore, the companies have to incur advertisement expenditure year after year to keep products fresh in the minds of the public hence such expenditure cannot partake the character of giving any enduring benefit - AO has grossly erred in treating such expenditure as intangible asset - revenue Exp.
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• No Penalty u/s 271BA for Bona Fide Mistake in First-Year Filing of Report u/s 92E.

  Case-Laws - AT : Penalty u/s 271BA - non furnishing of Report u/s 92E - in Section 271BA words used is “may” and not “shall”, thereby making intentions clear that levy of penalty is discretionary and not automatic - it was the first year for the assessee and same was filed in the assessment proceedings itself - even otherwise qua the domestic transactions with its sister concern no additions made by the AO/TPO - bonafide mistake - no penalty
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• No Evidence Found Linking Assessee to Bogus LTCG from Penny Stocks; Section 68 Addition Not Made.

  Case-Laws - AT : Bogus LTCG - Addition u/s. 68 - penny stock - assessee placed all evidence - a specific query is put up as to whether any of entry operators searched or survey has quoted these assessee's names or not before the Departmental Authorities - there is no such material in the case file indicating search as statement - no addition - LTCG allowable
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• DVO Error in Property Valuation for LTCG: Assessee's Land Misvalued; Rent Capitalization Method Ignored.

  Case-Laws - AT : LTCG - Deemed Sale Value - DVO was not justified in valuing the building, because the assessee was owner of the land only and the building was not constructed or owned by assessee and DVO also failed to appreciate that the property was on lease till 2040 and was only entitled to receive a sum of ₹ 10,000 per month as rent being co-owner - valuation of the property had to be made as per Rent Capitalization method
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• Court Rules No Penalty for Assessee; Auditor Responsible for Incorrect Claim u/ss 271(1)(c) and 115JB.

  Case-Laws - AT : Penalty u/s 271(1)(c) - tax u/s 115JB - assessee’s claim was that it was falling u/s 115JA and duly supported by the certificate of the auditors - If the claim was wrong the responsibility was that of the auditor who duly certified the same - assessee cannot be visited with penalty for the mistake of its consultant/auditor - no penalty
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• LTCG Claim Approved: Section 69 Addition Dismissed Due to Lack of Evidence of Illicit Activity or Broker Misconduct.

  Case-Laws - AT : Bogus LTCG - Addition u/s. 69 - nowhere in report of Investigation Wing is it seen that the assessee has indulged in any nefarious activities or her broker has carried out any stage managed/pre determined sale of the shares - the sale considerations have happened through the banking channel - no specific evidence which have been collected by the AO - LTGG allowed
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• Rental Income from Sub-letting Commercial Property Taxed as Income from Other Sources, Not as House Property Income.

  Case-Laws - AT : Correct head of income - rental income on sub-letting - Income from house property or income from other sources - assessee is not the owner of the property which is commercial in nature - taxable as income from other sources
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• ITAT admits Rule 27 application, allowing respondent to support order with new grounds.

  Case-Laws - AT : Application under Rule 27 of the ITAT Rules, 1963 - additional grounds - Rule 27 clearly set out that the respondent ‘may support the order appealed against on any of the grounds decided against him’ - Thus, Application filed under Rule 27 is admitted with additional grounds
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• Authorities Reject Addition of Cash Deposits During Demonetization; Insufficient Evidence Under Income Section 44AD.

  Case-Laws - AT : Addition of cash in hand - cash deposit in demonetization period - income u/s 44AD - there was no justification to consider the sales of assessee to be bogus or to make addition of cash in hand as per details submitted by the assessee because A.O. did not bring any sufficient evidence on record to justify the addition
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• Court Dismisses Agriculturist's Appeal for Delay in Filing; Insufficient Cause for 733-Day Delay Cited.

  Case-Laws - HC : Condonation of delay of 733 days - appellant is agriculturist, neither educated nor aware of the rights and remedies available to him for the redressal of his grievances - plea of the appellant would not satisfy the test of sufficient cause - no merit in the application
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• CIT(A) Must Decide Appeals on Merits, Not Dismiss for Non-appearance; Section 250(6) Ensures Fair Adjudication.

  Case-Laws - AT : Power of CIT(A) to dismiss appeals ex-parte - penalty u/s 271(1)(c) - Section 250(6) mandates the CIT(A) to decide the appeals on merits and not to dismiss them in default or for want of prosecution - even if the assessee failed to prosecute his appeals and to submit necessary explanation - remanded to CIT(A) for fresh adjudication
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• Court Rejects 30% On-Money Addition for Flat Sales Due to Lack of Seized Evidence u/s 153C.

  Case-Laws - AT : Assessment u/s 153C - Addition of on-money received on sale of flats - there is nothing on record to indicate that there is a reference to seized material found during the course of search vis-a-vis addition made by the AO towards estimation of 30% on-money on total sales declared for the year - addition cannot be sustained either on jurisdictional issue or on merits
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• Automatic Penalty for Declaring Undisclosed Income Post-Search u/s 132(1) of Income Tax Act; Section 271AAB Triggered.

  Case-Laws - AT : Penalty u/s 271AAB - search and seizure u/s 132(1) - if cash seized during the course of search and seizure, offered the same for taxation and accept the same in filing of return of income to the specified previous year declaring such undisclosed income - penalty u/s 271AAB attracts automatically
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• AS 7 Revision: Asset Blocks Include Know-How, Patents, Copyrights; High-Tech Simulators Qualify as Constructed Assets.

  Case-Laws - AT : Revision u/s 263 - AS 7 - construction of asset - block of asset is not restricted to building machinery plant or furniture but is extended to know-how patents Copyright etc - simulator with high configuration and technical input in design would definitely fall within the realm of an asset and the construction of such asset would definitely fall within the category of construction of asset and therefore AS 7 rightly been applied - revision quashed
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Customs

• 15% Markup Justified for Expenses and Profit; No Need to Include Royalties in Import Value Assessment.

  Case-Laws - AT : Valuation - inclusion of technical know - the original authority finds that 15% of marks up are added to cover the expenses and profit margin and therefore the relation has not influenced the prices hence there is no justification for inclusion of royalty and technical know-how in the assessable value of the imported products
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• Penalty on Customs Agent Overturned Due to Insufficient Evidence and Vague Co-Accused Statements in Mis-Declaration Case.

  Case-Laws - AT : Penalty on appellant-CHA - abetting in the mis-declaration of the imported goods - the case cannot be built on the basis of vague statement of the co-accused and mere existence of call records - neither any evidence has been found during the search of the Appellant residence nor it is clear whether investigation could reach of the actual importer - penalty without properly establishing his role is not acceptable
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• Court Allows Redemption of Smuggled Gold with Fine; Not Commercial Quantity or Professional Carrier Involved.

  Case-Laws - AT : Smuggling - Confiscation of Gold - The gold being carried in the present facts and circumstances is neither of commercial quantity nor it was carrying the gold as the carrier - even in the course of investigation admitted that he was carrying gold - it is the case of non declaration, amounting to smuggling - goods allowed to be redeemable on payment of redemption fine
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IBC

• Appellant Classified as 'Financial Creditor' Under I&B Code for Fund Disbursement as Allottee in CIRP.

  Case-Laws - AT : Financial Creditor - CIRP under I&B Code - Agreement to Sell - It is clear that the Appellant is an ‘allottee’ and further the Agreement suggest that the amount was disbursed by him towards the consideration of time value of money - the Appellant comes within the meaning of ‘Financial Creditor’.
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Service Tax

• CENVAT Credit Denied for Employee-Related Services: Club, Rent-a-Cab, Travel, and Tour Operator Not Linked to Output Services.

  Case-Laws - AT : CENVAT Credit - various input services related to employees - club and association services - rent cab service - travel agent service - tour operator service - Since these facilities provided are not the part service contract with the client of Bank they cannot be considered to be used for providing the output services.
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• CENVAT Credit Denied for Furniture in Banking Services; Switching from Capital Goods to Inputs Not Allowed.

  Case-Laws - AT : Admissibility of CENVAT Credit on various items of Furniture and Fixture to the provider of Banking and Financial Services - Since the scheme of credit in respect of Capital Goods is not identical with the scheme credit on inputs such flip flop from Capital Goods to inputs should not be permissible.
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• Service Tax Adjustment Allowed Despite 34-Month Delay, Overruling Revenue Authority's Objection u/r 6(4) Service Tax Rules. (4.

  Case-Laws - AT : Adjustment of excess payment of service tax made - whether the revenue authority justified in objecting to such adjustment on the ground that in view of rule 6(4) of the service tax rules such adjustment could have been done only in the immediately subsequent month and not after a gap of 34 months? - Held No
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• Court Examines Service Classification Under POPOS Rules: Intermediary vs. Bundled; Export Benefits Denied.

  Case-Laws - AT : Place of supply of service - Intermediary services or not - POPOS Rules - Bundled services or not - claimant has acted only to mediate the provision of service by the Channel Distribution Partner to GlobeCast - to be treated as intermediary service - benefit of export not allowed.
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• Beverage Bottler Not Providing Business Auxiliary Services for Coca Cola India, No Service Under BAS Section.

  Case-Laws - AT : Business Auxiliary Services - appellant is bottling and marketing of beverages under trade name Coca Cola, Kinley, Sprite etc - any activity which has been undertaken by a person on his own account for himself cannot be said to be covered by the 'service' even if this activity is undertaken by the person with the financial assistance/ support of other person either partially or completely - no activity has been performed for Coca Cola India
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Central Excise

• Department Must Settle Excise Duty with Official Liquidator, Not Auction Buyer.

  Case-Laws - AT : Recovery of Excise duty from the purchaser of goods in auction - Since the appellant have purchased the goods in auction, the department is free to settle their excise duty with Official Liquidator and not from the appellant.
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• Court Examines If Processing Snuff Tobacco for Non-Marketing Purposes Constitutes Manufacturing Under Legal Standards.

  Case-Laws - AT : Clandestine manufacture and removal - clearance of Snuff tobacco products - The Appellant are merely getting the raw leaves and grinding them and after making powder putting them into 50 Kgs pack which is a bulk pack. The intention is not to market. Hence the nature of product would not take it into category of manufacture.
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• Customs Exemption Misuse: Excise Duty Recovery Invalid u/r 8, Only Section 28 Demands Allowed, Order Set Aside.

  Case-Laws - AT : Mechanism for recovery of Excise duty - imported raw material was cleared under Customs exemption Notification under bond but actually used the imported goods for manufacture of products not fall under exemption notification - order sought to recover the amount u/R 8 of the Customs is not a mechanism for demand of duty and can be demanded only by the Customs officers u/s 28 - the impugned order needs to be set aside
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Case Laws:

• GST

• 2019 (6) TMI 310
  Detention of goods - bonafides in the plea of the petitioner - HELD THAT:- This Court, if considers either the objections raised by the petitioner against the detention of goods or accepts the explanation and considers releasing the goods, the same amounts to deviating from the scheme under the Act. According to her the petitioner at best could be given liberty to file additional representation/explanation and the authorities could also be directed to pass orders within three days from the date of receipt of the additional representation/explanation from the petitioner. Petitioner, is given liberty to file additional representation/explanation by enclosing a copy of this order within twenty four hours from today and the 1st respondent shall consider the objections raised in Ext. P3 as well as the additional representation/ explanation pass an order on or before Saturday.

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• 2019 (6) TMI 309
  Stay of recovery - amounts due under the assessment orders - apprehending that coercive steps - condonation of delay of 39 days in filing the appeals - HELD THAT:- Since the petitioner failed to avail the statutory remedy against the assessment orders within time, it is for the appellate authority to consider the applications for condonation of delay and if satisfied with the explanation, to condone the delay and to thereupon consider the stay petition. Writ Petition is disposed of directing the second respondent to consider and pass orders on the petitions for condonation of delay. Coercive steps shall be deferred till a decision as above is taken by the second respondent, preferably within a period of one month from the date of receipt of a copy of this judgment.

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• 2019 (6) TMI 308
  Transitional credit - HELD THAT:- A prayer for update the electronic credit ledger at the backend or directing the respondents to adjust the petitioner s future CGST liability to the extent of its transitional credit has also been made. - Advocate, appearing on behalf of respondents submitted that the GST portal has been opened for the petitioner. In view of the above, the present writ petition has been rendered infructuous and may be disposed of as such.

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• Income Tax

• 2019 (6) TMI 307
  Exemption u/s 11 - Charitable activity - whether the activities of the assessee authority are covered by first and second proviso to section 2(15) and thus not entitled to exemption u/s. 11 and 12 as per provisions of section 13(8) of the Act? - HELD THAT:- Delay condoned. Leave granted.

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• 2019 (6) TMI 306
  Interest payable u/s 234B - Collection of interest for non-deposit of advance tax in respect of the consideration received by the non-resident assessee - PE in India - DTAA - HELD THAT:- Delay condoned. Leave granted.

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• 2019 (6) TMI 305
  Admissibility of the deduction expenditure towards contribution to the State Renewal Fund - HELD THAT:- Issue stands covered by the judgment of this Court in the case of Principal Commissioner of Income Tax Vs. M/s. Rajasthan State Seed Corporation Ltd. [ 2016 (9) TMI 59 - RAJASTHAN HIGH COURT] Claim towards mines closure plan - claim denied on the ground that the assessee had not provisioned it in the books of accounts and it was not an ascertained liability - HELD THAT:- The issue stands covered by the judgment in assessee s case Principal Commissioner of Income Tax-II Vs. Rajasthan State Mines Minerals Ltd [ 2017 (10) TMI 1458 - RAJASTHAN HIGH COURT] against the revenue. Permissibility of relief on account of the same transactions and whether that was capital in nature - HELD THAT:- Here to this Court decided in favour of the assessee by the judgment in Rajasthan State Mines Minerral Ltd. Vs. Assistant Commissioner of Income Tax [ 2017 (12) TMI 1698 - RAJASTHAN HIGH COURT] Depreciation or amortization of mining land and lease hold land, the assessee had not claimed in its return - This was the ground of rejection, the CIT (A) confirmed the AO s order - as urged on the strength of the authority of Supreme Court in Goetze (India) Ltd. Vs. Commissioner of Income Tax - [ 2006 (3) TMI 75 - SUPREME COURT] that in the absence of even a revised return, such claims are impermissible - HELD THAT:- The Revenue does not contend substantively on this aspect. This court ruled in favour of the same assessee in Rajasthan State Mines Minerals Ltd. Vs. Assistant Commissioner of Income tax [ 2017 (12) TMI 1698 - RAJASTHAN HIGH COURT] the rights which are given to the assessee are of commercial rights which are akin to license for mining. 13.2. In that view of the matter, the contention of the assessee regarding depreciation u/s 32(ii) is required to be accepted, therefore, the second issue is answered in favour of the assessee and against the department.

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• 2019 (6) TMI 304
  Characterization of land - Nature of sale of land - agricultural income or capital asset - whether the properties sold were to be excluded from the meaning of capital asset as they were agricultural land as defined by Section 2(14) ? - HELD THAT:- Referring to the intention of assessee with regard to the specific transactions is to be ganged not merely from what he or the concerned entity contends but rather on an appreciation of the overall facts and circumstances presented to the Court at the time of proceeding. This Court is of the opinion that the ITAT s conclusions with rejecting the assessee s arguments that the intention was always to retain the properties acquired, as agricultural land and not treat them as capital assets for the purposes of business, cannot be characterised as unreasonable or unsound. Moreover, the analysis of facts and application of mind by the ITAT, is with respect to the facts; the findings are essentially on an application mind based upon the factual material. In the opinion of the Court, no substantial question of law is involved, which calls for interpretation. - Decided against assessee.

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• 2019 (6) TMI 303
  Condonation of delay - sufficient cause for delay of 733 and 739 days - as urged appellant is engaged in agriculture in the village of Haryana and being not educated, was not fully aware of the rights and remedies available to him for the redressal of his grievances. The appellant was unable to file the appeal on time as he had come to know about the same only from the order dated 4.10.2018 passed by the Tribunal in identical cases - HELD THAT:- Law of limitation has been enacted which is based on public policy so as to prescribe time limit for availing legal remedy for redressal of the injury caused. The purpose behind enacting law of limitation is not to destroy the rights of the parties but to see that the uncertainty should not prevail for unlimited period. The meaning to be assigned to the expression sufficient cause occurring in Section 5 of the 1963 Act should be such so as to do substantial justice between the parties. The existence of sufficient cause depends upon facts of each case and no hard and fast rule can be applied in deciding such cases. We do not find any ground to condone the colossal delay of 733 and 739 days in filing the appeals. The question regarding whether there is sufficient cause or not depends upon each case and primarily is a question of fact to be considered taking into totality of events which had taken place in a particular case. In the present case after appreciating the matter it cannot be said that there was sufficient cause for condonation of delay. However, the appeal was required to be filed within the stipulated period of limitation of 120 days. But the appellant filed the appeal before this Court on 27.2.2019, after a delay of 733 days. The plea of the appellant as mentioned above would not satisfy the test of sufficient cause. The explanation of the appellant is bereft of justification for the delay caused in filing the appeal keeping in view the totality of facts and circumstances of the present case. Thus finding no merit in the applications for condonation of delay in filing the appeal, the same are hereby dismissed

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• 2019 (6) TMI 302
  Unexplained cash deposited in the Bank account - HELD THAT:- The assessee has given an explanation regarding total cash deposit in the Bank Account. The assessee also explained that out of the total transactions and total cash deposit in the Bank account, there is still amount left for house hold expenses. The explanation of assessee was not found to be incorrect. The assessee further explained that he has salary and consultancy income which have been shown in the return of income. Whatever income have been shown in the return of income is available to the assessee to explain the cash deposited in the Bank account, therefore, there was no justification to restrict the addition, accordingly, set aside the Orders of the authorities below and delete the addition - Decided in favour of assessee. Cash deposit being made out of sale of car - A.O. observed that assessee filed affidavit of the purchaser of the car which has neither been signed by the witness or Oath Commissioner and the R.C. is still in the name of the assessee showing the ownership - CIT(A) did not accept the contention of assessee because car is not transferred in the name of the purchaser - HELD THAT:- The assessee explained that car is sold for cash of 3,21,900/- to Shri Parvender Singh who has executed an affidavit in favour of the assessee, confirming the purchase of the Car. The A.O. did not examine the deponent of the Affidavit. A.O. did not dispute the amount withdrawn by him from his Bank account. Thus, sufficient cash is available with the purchaser to purchase the car. A.O. doubted the explanation of assessee because Affidavit is not attested by the Oath Commissioner and that registration of the Car is still in the name of the assessee. It generally happens in case of purchaser of motor vehicle, purchaser did not get the vehicle transferred in their name for a longer time. If A.O. was having any doubt over the transaction, he could have summon the purchaser of the car and record his statement to verify the facts. However, no inquiry have been done in the matter. Therefore, there was no justification to disbelieve the explanation of assessee. A.O. did not make any effort to verify whether car was still in possession of the assessee. In this view of the matter, set aside the Orders of the authorities below and delete the addition - Decided in favour of assessee.

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• 2019 (6) TMI 301
  Levy of penalty u/s 271(1)(c) - non specification of charge - defective notice - HELD THAT:- From the perusal of the show cause notice Dated 30/31.03.2015, it is clear that the show cause notice issued by the A.O. for levy of the penalty under section 271(1)(c) of the Act to be bad in law as it did not specify in which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of income. The entire penalty proceedings are, therefore, vitiated and no penalty is leviable. On this score itself, similar view is taken in the case of CIT vs. M/s. SSAs Emerald Meadows [ 2015 (11) TMI 1620 - KARNATAKA HIGH COURT] as confirmed by the Hon ble Supreme Court [ 2016 (8) TMI 1145 - SC ORDER] - Decided in favour of assessee

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• 2019 (6) TMI 300
  Addition on account of cash in hand - cash deposit in demonetization period - assessee declared return of income u/s 44AD - A.O. adopted sales receipts of 15 lakhs to estimate the income of assessee u/s 68 - CIT(A) restricted the addition of 11,22,090/- i.e., to the extent of cash in hand - HELD THAT:- There was no justification for the CIT(A) to pick-up the figure of 11,22,090/- for the purpose of making the addition on the basis of estimated balance-sheet filed at assessment stage. No evidence has been brought on record as to how the assessee maintained books of account in assessment year under appeal. A.O. has specifically noted that case was selected for scrutiny because assessee had deposited cash in his three Bank Accounts, but, no addition have been made on account of such amount deposited in the Bank Accounts. There was thus, no basis for the authorities below to make any addition against the assessee. The explanation of assessee has not been found to be false. Assessee, during the course of arguments rightly contended that assessee started retail business on cloth after his retirement. Since assessee is involved in small business activity and filed return of income under presumptive provisions u/s 44AD, there was no justification to consider the sales of assessee to be bogus or to make addition of cash in hand as per details submitted by the assessee because A.O. did not bring any sufficient evidence on record to justify the addition. - Decided in favour of assessee.

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• 2019 (6) TMI 299
  Penalty under s. 271(1)(c) - disallowances u/s.40(a)(ia) and Sec.40A(3) - HELD THAT:- Firstly, the disallowances u/s.40(a)(ia) and Sec.40A(3) are statutory disallowances and there is no dispute about the genuineness of these expenses or that they were unrelated to the business of the Assessee. On such statutory disallowances, there cannot be imposition of penalty, especially when the Assessee had not made claim for deduction of these expenses in a return of income filed. Secondly, there cannot be any penalty on income which is declared in a return of income, on the facts and circumstances of the present case. Penalty u/s.271(1)(c) is imposed for concealing particulars of income or furnishing inaccurate particulars of income . When an income which is ultimately brought to tax is declared in a return of income, there can be no question of treating the Assessee as having concealed particulars of income or furnished inaccurate particulars of income . See VASAVI SHELTERS VERSUS INCOME-TAX OFFICER, WARD 4(1), BANGALORE [ 2013 (4) TMI 485 - ITAT BANGALORE] The starting point of determining concealment for imposing penalty is the return of income. If the return of income declares income which is ultimately brought to tax there can be no complaint by the revenue that the Assessee is guilty of concealing particulars of income or furnishing inaccurate particulars of income. The decision of the Tribunal in the case of Vasavi Shelters [ 2013 (4) TMI 485 - ITAT BANGALORE] supports the plea of assessee in this regard. Non specification of charge - Also the show cause notice issued by the AO before imposing penalty does not specify the charge against the assessee for which the penalty is sought to be imposed viz., as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. In the circumstances, the decision of Manjunatha Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] will apply and imposition of penalty has to be held to be not sustainable - Decided in favour of assessee.

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• 2019 (6) TMI 298
  Bogus LTCG - addition u/s 68 - exemption u/s. 10(38) denied - penny stocks purchases - benami transactions - off market transaction for purchase of shares - HELD THAT:- The assessee has furnished all evidences in support of the claim of the assessee that it earned LTCG on transactions of his investment in shares. The purchase of shares had been accepted by the AO in the year of its acquisition and thereafter until the same were sold. The off market transaction for purchase of shares is not illegal as was held by the decision of Co-ordinate Bench of this Tribunal in the case of Dolarrai Hemani vs. ITO [ 2016 (12) TMI 1074 - ITAT KOLKATA] and BLB CABLES AND CONDUCTORS PVT. LTD. [ 2018 (8) TMI 525 - CALCUTTA HIGH COURT] The transactions were all through account payee cheques and reflected in the books of accounts. The purchase of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. In the facts and circumstances of the case, it cannot be held that the transactions were bogus. We note that since the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., and when the transactions of purchase of shares were accepted by the ld AO in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. Thus we set aside the order of CIT(A) and direct the AO not to treat the long term capital as bogus and delete the consequential addition. - Decided in favour of assessee. Unexplained expenditure towards commission charges of sale of such shares by the operator - HELD THAT:- The transactions relating to LTCG were genuine and not the accommodation entries as alleged by the AO. Consequently the addition is hereby directed to be deleted. We accordingly hold that the issue is allowed in favour of the assessee.

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• 2019 (6) TMI 297
  Bogus LTCG - Addition u/s. 69 - benami transactions - sale proceeds of equity shares - AO observed that assessee was not involved in activities of transactions in other shares and the assessee has not earned any LTCG from the sale of other shares - HELD THAT:- The assessee has purchased the shares from the off market and was in the physical form and later on it was dematerialised. The shares were credited into the assessee s demat account on 20.06.2013. Later on the shares were listed in the BSE and the assessee had sold the shares through M/s. J.M. Financial Services, Mumbai. Copy of Contract Note of sale is placed and copy of demat statement is available from which statement we note that it reflects debit entry for the shares from the account. The sale considerations have happened through the banking channel (Vijaya Bank). AO has reproduced certain portions of the general report of Investigation Wing of the Income Tax Department. Nowhere from the general report of Investigation Wing is it seen that the assessee has indulged in any nefarious activities or her broker has carried out any stage managed/pre determined sale of the shares as contended by the AO. SEBI s report also does not in any way point out any wrong action against the assessee s broker or the scrips. We note that there is no specific evidence which have been collected by the AO in coming to a conclusion that the sale consideration from the sale of shares of M/s. GIFL is bogus. Lower authorities erred in holding the assessee s claim on LTCG from the sale of shares of M/s. GIFL as bogus. Therefore, we are inclined to allow the assessee s LTCG claim and, therefore, the appeal of assessee is allowed.

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• 2019 (6) TMI 296
  Penalty u/s 271(1)(c) - claim of deprecation on the premises which was let out - HELD THAT:- We find that assessee s claim, that assessee was also using the said let out premises as godown has been rejected. This aspect has to be looked from the point of view that the said prices was let out to the assessee s wife itself. Hence the assessee claim that the said prices was also being partly used for godown purposes cannot be said to be ex facie bogus. In our considered opinion assessee s conduct in this regard cannot be said to be contumacious warranting levy of penalty. Levy of penalty on account of tax u/s 115 JB under MAT - assessee s claim was that it was falling under 115 JA. This claim was also supported by the certificate of the auditors. In this view of the matter assessee s conduct cannot be said to be contumacious warranting levy of penalty. If the claim was wrong the responsibility was that of the auditor who duly certified the same. Hence it was a mistake on the part of the auditor and the assessee cannot be visited with penalty for the mistake of its consultant. Assessee need not be visited with the rigours of penal provisions u/s 271(1)(c). We draw support from the larger bench of honourable apex court in the case of Hindustan Steel vs. State of Orissa [ 1969 (8) TMI 31 - SUPREME COURT] wherein it was held that the authorities may not levy the penalty if the conduct of the assessee was not contumacious. - Decided in favour of assessee

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• 2019 (6) TMI 295
  Levy of penalty u/s 271(1)(c) - Defective notice - non specification of charge - HELD THAT:- Notice issued by the A.O. for levy of penalty under section 271(1)(c) of the Act to be bad in law as it did not specify in which limb of Section 271(1)(c), the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of income. The entire penalty proceedings are, therefore, vitiated and no penalty is leviable. On this score itself, similar view is taken in the case of CIT vs. M/s. SSAs Emerald Meadows [ 2015 (11) TMI 1620 - KARNATAKA HIGH COURT] and this decision is confirmed by the Hon ble Supreme Court [ 2016 (8) TMI 1145 - SC ORDER] Since the show cause notice is invalid due to the above reason and as such the entire penalty proceedings are vitiated. Thus, no penalty is leviable against the assessee. - Decided in favour of assessee.

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• 2019 (6) TMI 294
  Application under Rule 27 of the ITAT Rules, 1963 - additional grounds - HELD THAT:- As regards Rule 27 application filed by the assessee, Rule 27 clearly set out that the respondent may support the order appealed against on any of the grounds decided against him . The order appealed against can be challenged by the assessee only qua the aspects of the issue decided against him in deciding such overall issue against the assessee, which was contested in the appeal. Thus, Application filed under Rule 27 is admitted. Assessment u/s 153A - addition u/s 68 - HELD THAT:- Assessing Officer has passed the order without giving any nexus or relevance with the so called incriminating material. On the contrary there is no incriminating material available at all. The case laws submitted by the Ld. DR will also not hold ground in department s case as the very basis of the Assessment Order that of incriminating material and the nexus/ relevance is absent in the Assessment Order. - Decided in favour of assessee.

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• 2019 (6) TMI 293
  Depreciation claim of assessee trust - entitled to depreciation u/s 32 on assets whose cost has been allowed as application to charitable purposes - scope of Amendment in Section 11(6) - HELD THAT:- Issue is covered in favour of the assessee by the Judgment of CIT vs. Rajasthan and Gujarat Charitable Foundation [ 2017 (12) TMI 1067 - SUPREME COURT] in which it was held that the assessee is entitled to depreciation u/s 32 on assets whose cost has been allowed as application to charitable purposes u/s 11(1)(a) . We may also note that the Amendment in Section 11(6) has been brought by Finance Act, 2014, which becomes effective from A.Y. 2015-2016. Therefore, it is not applicable to assessment year under appeal i.e., 2010-2011. - Decided in favour of assessee Exemption u/s 11 - charitable activity or not? - hostel facility provided by the assessee society - HELD THAT:- We are of the view that since assessee exist for educational purpose only and hostel facility provided by the assessee society is incidental to the main objectives of the assessee society for education only, therefore, the authorities below were not justified in considering it to be activity of business in nature. Thus, the surplus out of hostel facility shall have to be considered as for educational purpose only which have to be applied for educational purposes only. Therefore, the addition made by the authorities below cannot be sustained. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. - Decided in favour of assessee

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• 2019 (6) TMI 292
  Disallowance u/s 40 A (3) - payments in cash exceeding 20,000/- -HELD THAT:- From list of payments made in cash by assessee, it is observed that none of the payments have been made to any particular person exceeding 20,000/- in a day. Payment has been made by assessee on various dates to various people, except payment made to Lalji Chauha, in the month of March for a sum of 40,000/- and 38,714/-, that too, made on different dates. When there is a failure on part of assessee to adhere to requirements of provision of section 44 (A) (3). This provision is a preventive measure and check on tax evasion and flow of unaccounted money, or to check transactions, which are not genuine and may be put as camouflage to evade tax by showing false transactions. However, in the type of business carried out by assessee, cash payments, cannot be eliminated totally. Admittedly revenue is not casting any doubt on genuineness of payments in respect of bills and vouchers placed in paper book. Assessee did not file any details regarding work carried on by these people and urgency that arose to make payments in cash. We are therefore inclined to set aside this issue back to Ld.CIT(A) for proper verification. Assessee is directed to file all details/evidences regarding work carried out by these people required to establish actual cash payment and urgency to make payment in cash. - Decided in favour of assessee for statistical purposes. Disallowance u/s 36 (1) (vii) - bad debt written off - no action to recover the debts - HELD THAT:- After amendment to section 36 (1) (vii), though assessee is only to write off the debts as irrecoverable in its account in order to claim deduction of bad debts, however, evidences of claim to be existing like invoices must be filed. Thus in view of evidences filed by assessee, we allow debts written off by assessee in respect of Mirra and Mirra Industries, Sandeep Industries and Bindal Industries respectfully following decision of TRS Ltd vs CIT [ 2010 (2) TMI 211 - SUPREME COURT] and debts in respect of other parties stand confirmed. Disallowance of sum for using car of company by directors - AO disallowed 1/5th of maintenance expenses and towards depreciation on 12 cars - Ld.CIT(A) restricted disallowance to 20%, based upon submissions advanced by assessee - HELD THAT:- CIT(A) observed that claim of depreciation was only 10,67,828/-and disallowance on maintenance of cars should be restricted to cars actually used by directors, sum of 4,19,262/-and restrict the disallowance at 20% on depreciation claimed and expenses claimed by assessee on cars which were used by directors. Admittedly assessee is not maintaining any log book to prove non-usage of cars by Directors. We, therefore, do not find any infirmity in view taken by Ld.CIT(A). Disallowance of foreign tours - allowable business expense u/s 37(1) - HELD THAT:- As observed that details filed by assessee before authorities below has not been doubted and no further verification has been carried out by authorities below in order to establish any falsity of submissions made by assessee. The details placed in paper book reveals that Sh. Tyagi, director of assessee had admittedly travelled to U.S. during Interwire Trade Exposition. Further since assessee is engaged in manufacturing, supply, commissioning of wire drawing plant and machinery of various metals and their alloys, it cannot be negated that such exhibitions would not be of any use to assessee. As authorities below has on mere surmises made addition, without there being any cogent evidence to establish anything contrary to what has been submitted by assessee, we are inclined to allow the claim of assessee. Disallowance u/s 41 (1) - old advance for purchase of machinery and same was repaid over years since purchase deal did not fructify - HELD THAT:- We do not find any reason to doubt the explanation offered by assessee which is substantiated by account statements placed in paper book unless authorities below produce any evidence to establish that the purchase was bogus. We are therefore not in concurrence with the views of Ld.CIT (A) which is based upon mere surmises and conjunctures. - Decided in favour of assessee Disallowance u/s 40A (2) (b) - HELD THAT:- Disallowance under section 40 A (2) has to be charged on reasonableness of expenditure having regard to fair market value of goods/services or facilities for which payment is made. In the facts of present case, authorities below has not cited any instances based upon which it can be ascertained that payment made by assessee was excessive and/or unreasonable. Ld.AO has not placed on record any instances of a job work carried out in respect of similar product as that of assessee to be a yardstick to form belief that payment made by assessee was excessive and/or unreasonable. Under such circumstances and after going through detailed evidences filed by assessee in the paper book, we are not in agreement with observations of authorities below and addition made deserves to be deleted . Addition of undisclosed closing stock of finished goods - HELD THAT:- CIT (A) proceeded on the footing that goods sold were from part of semi-finished goods and that assessee could not file details of goods sold. From documents placed in paper book, we are of considered opinion that goods sold are verifiable from excise records and semi-finished goods are verifiable from work in progress which was shown at closing of preceding year. We are of opinion that authorities below without verifying all these details merely on some surmises has made the addition. There is no iota of dispute in respect of documents filed by assessee by authorities below. This is a case where Ld. AO has failed to verify details as per records filed by assessee. We are therefore not inclined to uphold view of Ld. CIT (A) and the addition stands deleted.

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• 2019 (6) TMI 291
  Addition on account of undisclosed cash - survey u/s 133A at Karol Bagh Branch by the Investigation Wing of the Department excess cash of 60,00,000/- was found - assessee explained that cash of Gurgaon Branch was transferred to Karol Bagh Branch because of the closure of the showroom at Gurgaon on account of holiday - the explanation was not accepted by the A.O. because no entries to that effect have been made in the books of account - CIT-A deleted the addition - HELD THAT:- CIT(A) specifically noted that cash available as per the records seized by the Department shows availability of the cash in the books of account of assessee at 53,48,755/-. This fact has not been rebutted by the Revenue Department. Since assessee is keeping and maintaining several business entities at different places, therefore, entire cash available in the books of account of assessee of different entities should have been considered. The explanation of assessee could not be ignored that there was a transfer of cash from Gurgaon Branch to Karol Bagh Branch. Therefore, entirety of the facts and the fact that seized records itself shows availability of the cash with the assessee in the books of account clearly shows that Ld. CIT(A) on proper appreciation of facts and material on record, correctly deleted the addition - Decided against revenue Addition on account of under reporting of profit - CIT-A deleted the addition - HELD THAT:- There was no reason to compare the profit of earlier year with the profit declared in assessment year under appeal. Low project by itself is no ground to make addition. In the absence of any material on record, particularly that books of account have not been rejected by the A.O. and that the surrendered amount is treated as income from other sources by CIT(A), there was no justification for the A.O. to make this addition. CIT(A), on proper appreciation of facts, rightly found that in assessment year under appeal, the costs of the assessee have increased substantially as against the cost incurred in preceding assessment years. This fact has not been rebutted by the Revenue Authorities through any evidence or material on record. - Decided against revenue

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• 2019 (6) TMI 290
  Assessment u/s 153C - Addition of on-money received on sale of flats - proof of incriminating material as found in the course of search - AO noted that during the course of search, unaccounted cash, jewellery and incriminating documents indicating suppression of sales, etc. were found and seized as per Panchanama prepared - HELD THAT:- Although the AO has tried to establish nexus between incriminating material found during the course of search and other undisclosed asset to the assessee, but he has failed to prove the nexus between seized materials and business activity of the assessee and also receipt of on-money. Unless, the AO has brought out some cogent materials or evidences which establish receipt of on-money from sale of flats, no addition could be made, that too, on adhoc estimation of on-money on the basis of regular sales declared by the assessee. Statement recorded during the course of search including confession may be a best piece of evidence, but that by itself would not be conclusive evidence unless such statement is further supported by evidence in the form of incriminating material found during the course of search. The AO before estimating income has to bring on record some cogent materials to justify his action. In this case, on perusal of facts available on record, it is abundantly clear that nowhere the AO linked the seized material found during the course of search to the income estimated towards on-money received from sale of flats. While it is true that retraction by itself does not provide an impenetrable sheild to the concerned person, but it is also equally true that a statement per se by itself is not conclusive evidence. Supreme Court in the case of CIT vs Singhad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] has considered an identical issue and held that where incriminating material was found in the course of search, but was not related to the concerned years and hence, addition for those years could not be made in the assessment order passed u/s 153A of the Act. In this case, it is abundantly clear that there is nothing on record to indicate that there is a reference to seized material found during the course of search vis-a-vis addition made by the AO towards estimation of 30% on-money on total sales declared for the year. The Ld.CIT(A), after considering all these aspects, has rightly come to the conclusion that the addition made by the AO cannot be sustained either on jurisdictional issue or on merits. Hence, we are of the considered view that there is no reason to interfere with the findings of the Ld.CIT(A) insofar as deletion of addition made by the AO towards estimation of on-money @30% on sales declared by the assessee for the relevant assessment years. Hence, we are inclined to uphold the findings of Ld.CIT(A) and dismiss the appeal filed by the revenue.

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• 2019 (6) TMI 289
  Levy of penalty u/s 271(1)(c) - peak balance lying in the escrow bank account with HSBC Bank, Geneva - defective notice - non application of mind by AO - HELD THAT:- It is a settled principle of law that before taking any action, including levy of penalty under section 271(l)(c) of the Act, the Assessing Officer should issue a valid show cause notice to the assessee. In the present case, a bare perusal of the notice dated 28.03.2014 issued by the AO under section 274 read with section 271 of the Act shows that the same has been issued without any application of mind. The said notice has been issued in a standard format without indicating the default on the part of the Assessee and the reason for which penalty proceedings are initiated. The said notice also makes a reference to section 24(1)/22(2)/22(4)/ 23(2)/34 of the Income-tax Act 1922 and sections139(I)/I39(2)/I42(I)/l43(2) and 148 of the Income-tax Act, 1961 without cancelling the irrelevant part in the notice. In view thereof, we are of the view that penalty proceedings have been initiated, in the present ease, without application of mind thereby rendering the initiation of such proceedings and consequent passing of the penalty order under section 271(1)(c) of the Act to be illegal and bad in law. This view of ours is supported by the decision of CIT vs. Samson Perinchery [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT] wherein the decision of Karnataka High Court in the case of CIT vs. Manjunatha Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] was also considered, AO while issuing notice under section 274 r.w.s 271 of the Act, has not applied his mind. Hence, the penalty proceedings initiated in the present case is without application of mind thereby rendering the initiation of the proceedings and consequent passing of the order u/s 271(1)(c) is bad in law. Hence, we quash the penalty on this count also. - Decided in favour of assessee.

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• 2019 (6) TMI 288
  Addition on account of pre-operative expenses - allowable business expenses - CIT-A deleted the addition - HELD THAT:- If the stated chronology of events is considered in the light of the remand report of the Assessing Officer, there remains no doubt that the assessee has commenced its business in earlier assessment year. Therefore, expenses considered as pre-operative expenses by the Assessing Officer have to be treated as legitimate business expenditure for the year under consideration. The findings of the ld. CIT(A) cannot be faulted with. Ground No. 1 according dismissed. Nature of advertisement expenditure - alleged that assessee is building a brand image of the parent company - revenue or capital in nature - - CIT-A deleted the addition - HELD THAT:- During the course of assessment proceedings, the case was referred to the TPO and the TPO framed order u/s 92CA(3) of the Act on 09.01.2014 and no adverse inference was drawn in respect of I.T. notification by the assessee during the year under consideration. This shows that the TPO was satisfied with the AMP expenses incurred by the assessee and did not make any adverse comment in so far as the issue of brand building is concerned. Thus public memory is very short and, therefore, the companies have to incur advertisement expenditure year after year to keep products fresh in the minds of the public. In our considered opinion, such expenditure cannot partake the character of giving any enduring benefit. In our considered opinion, the Assessing Officer has grossly erred in treating such expenditure as intangible asset and on facts of the case, the findings of the ld. CIT(A) needs no interference. Ground No. 2 stands dismissed.

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• 2019 (6) TMI 287
  Penalty u/s 271AAB - search and seizure operation u/s 132(1) conducted and unaccounted cash was found in the office premises and the entire cash was seized - notice u/s 153A was issued and in response to which the assessee filed return of income declaring total income - HELD THAT:- There is no dispute in owning the cash seized during the course of search and seizure operation as undisclosed income of the assessee which is out of his professional income. There is no dispute that the assessee offering the same for taxation. There is no dispute in respect of payment of tax together with interest in respect of undisclosed income. There is no dispute in respect of filing of return of income to the specified previous year declaring such undisclosed income. Therefore, in our opinion the facts and circumstances in the present case fulfils the conditions as contemplated clause (a) in sub-section (1) of section 271AAB to impose penalty. Therefore, we find no infirmity in the order of CIT(A) and confirming the penalty imposed by the AO u/s 271AAB(i)(a). Further as per finding of Hon ble Court of Allahabad in the case of Sandeep Chandak [ 2017 (12) TMI 70 - ALLAHABAD HIGH COURT] that the provisions of Section 271AAB automatically attracts and the proceedings are to be carried out/completed where a search and seizure operation is carried out in which the assessee have surrendered the amount u/s 132(4) statement of undisclosed income, specify the manner in which this income was derived, filed return of income, admit the same and had paid taxes and interest on the same, we find no infirmity in the order of CIT(A) and it is justified. Thus, ground no-1 raised by the assessee is dismissed.

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• 2019 (6) TMI 286
  Power of CIT(A) to dismiss appeals ex-parte - penalty u/s 271(1)(c) - HELD THAT:- CIT(A) simply noticed the non-attendance of the assessee and thereafter dismissed the appeals for want of prosecution. It is true that the assessee failed to prosecute his appeals and to submit necessary explanation; but, again, sub-section (6) of Section 250 mandates the CIT(A) to decide the appeals on merits and not to dismiss them in default or for want of prosecution. As far as the observations of the CIT(A) that the appeals are dismissed on merits are concerned, we are of the view that no such discussion is discernible in the order of the learned CIT(A). It is just a single word for the sake of exhibiting compliance of mandate under section 250(6) of the Act. Therefore, we set aside all these orders and restore all the appeals to the file of the learned CIT(A) for fresh adjudication. CIT(A), while adjudicating these appeals, shall take into consideration the judgment in the case of B. Loganathan Vs. ITO [ 2019 (3) TMI 1003 - MADRAS HIGH COURT]. - Assessee s appeals are allowed for statistical purposes.

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• 2019 (6) TMI 285
  Penalty u/s 271AAB - defective notice - show cause notice issued by the AO without specifying the default - search and seizure u/s 132 - certain incriminating documents containing the entries of advance, unaccounted stock at business premises as well as residence, cash at the residence of the assessee and jewellery at the residence of the assessee were found and seized - assessee filed his return of income u/s 139(1) on 2nd September, 2015 declaring total income including the surrender of additional income - HELD THAT:- The show cause notice issued by the AO without specifying the default and ground for which the penalty u/s 271AAB was proposed to be levied renders the initiation of penalty proceedings invalid and consequently the order passed u/s 271AAB is liable to be quashed. Mandatory or discretionary nature of levy of penalty u/s 271AAB - Tribunal after considering all the decisions including the decision of Hon ble Allahabad High Court in case of PCIT vs. Sandeep Chandak [ 2017 (12) TMI 70 - ALLAHABAD HIGH COURT] held that the levy of penalty u/s 271AAB is not mandatory but the AO has to take a decision on the basis of the relevant facts of the case and after considering the explanation of the assessee whether the surrender made by the assessee falls in the definition of undisclosed income as proposed in explanation to section 271AAB. Accordingly this issue is decided in favour of the assessee and against the revenue. Penalty on account of excess stock - When assessee was not found to be doing any business in his individual capacity and all business of Gem Jewellery are run through the proprietorship concern of the assessee s HUF as well as the other firms and companies in which the assessee and his family members are partners and directors, the said income on account of excess stock disclosed by the assessee cannot be regarded as undisclosed income for the purpose of levy of penalty u/s 271AAB. The definition of Undisclosed Income as provided in explanation to section 271AAB has to be considered for the purpose of levy of penalty and not the mere disclosure of undisclosed income u/s 132(4). Accordingly, we delete the penalty levied u/s 271AAB in respect of the Income surrendered on account of excess stock. Since we have considered that this is not undisclosed income of the assessee, therefore, we do not propose to go into the issue of valuation of closing stock. Penalty on cash advances - As relying on SHRI RAJENDRA KUMAR GUPTA VERSUS THE DCIT, CENTRAL CIRCLE-2, JAIPUR. [ 2019 (1) TMI 1545 - ITAT JAIPUR] the mere entry of advances representing the out go of money would not constitute undisclosed income of the assessee as defined in the explanation to section 271AAB. Moreover, no efforts were made to ascertain the status of these advances given to these two persons and even whether the entries in the name of these two persons were artificial or in the name of some existing persons. Accordingly, the penalty levied u/s 271AAB on account of entries for advances is deleted. Penalty on account of cash found at the residence of the assessee - Though the assessee has surrendered the same in the statement recorded u/s 132(4), however, the mere surrender in the statement u/s 132(4) would not itself constitute undisclosed income ignoring the other relevant facts being source of cash found during the search. Once the assessee and other family members of the assessee are having the income as well as withdrawals which are many times or in hundred times of the cash found at the residence of the assessee, by considering these undisputed facts of income and withdrawals, the said cash cannot be held as undisclosed income of the assessee. Accordingly, penalty levied u/s 271AAB on account of cash found at the residence is deleted. Disclosure on account of excess jewellery found at the residence - After giving the benefit of the CBDT Instruction No. 1916 and the status of the assessee s family, the jewellery found from the residence and locker of the assessee cannot be considered as excess of the normal possession of this jewellery. Therefore, even if the assessee has disclosed the undisclosed income in the statement recorded u/s 132(4) but for the purpose of levy of penalty u/s 271AAB, all these facts are required to be taken into account. Once all these facts are considered, then the said jewellery found at the time of search and seizure action cannot be held as undisclosed income. - Decided in favour of assessee.

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• 2019 (6) TMI 284
  LTCG on sale of immovable property - reference to DVO for the Valuation of immovable property as on 01.04.1981 - manner and method of valuation as adopted by the DVO - assessee was the co owner of the property having 1/6th share in the property - determining the FMV by rent capitalization method OR fair market rent as done by the DVO - HELD THAT:- We are of the view that Ld DVO was not justified in valuing the building, as because the assessee was owner of the land only and the building was not constructed or owned by assessee. The building was constructed by the Lessee, M/s Park Chambers Private Limited. Further, we note that DVO has failed to appreciate that the property being sold by the assessee was on lease till 2040 and the assessee and the other co owners were only entitled to receive a sum of 10,000 per month as rent. Thus, the valuation of the property had to be made as per Rent Capitalization method. For this we rely on the judgment of CIT vs. Inderjit Singh [ 1984 (3) TMI 16 - PUNJAB AND HARYANA HIGH COURT]. Also see SMT. ASHA DEVI AGARWAL [ 1987 (6) TMI 18 - CALCUTTA HIGH COURT] We note that the assessing officer ought to have determined the value of property based on Rent Capitalization method. Therefore, we direct the Ld. Assessing Officer to recompute the capital gains and decide accordingly. Accordingly, grounds raised by the assessee are allowed for statistical purposes.

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• 2019 (6) TMI 283
  Correct head of income - rental income on sub-letting - Income from house property or income from other sources - ownership of property - HELD THAT:- There are two pre-conditions for charging the income as income from house property u/s 22 . Firstly, the assessee must be the owner of the property. Also, the property must not be occupied by the assessee for the purposes of his business or profession. In other words, the property should be a residential property. In the present case, neither of the above conditions of section 22 of the Act stands satisfied. The assessee, as discussed, is not the owner of the property in question. Too, the property is commercial in nature. Therefore, the provisions of section 22 of the Act are not at all applicable. Hence, the addition made as income from house property is not sustainable. Accordingly, the order under appeal is reversed and the addition is deleted.

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• 2019 (6) TMI 282
  Revision u/s 263 by CIT - Change in accounting policy - assessee had changed its accounting policy, from recognise revenue on projects from milestone billing basis to percentage completion method AS 7 to consequent to which revenue from projects and work in progress is lowered and thus loss for the year was shown higher - meaning of construction of asset - HELD THAT:- It is abundantly clear from the reading of the definition that block of asset is not restricted to building machinery plant or furniture but is extended to know-how patents Copyright etc. Therefore, whenever there is a construction of an asset and a contract is negotiated for that on standalone basis or for closely interrelated or interdependent in terms of design technology and function than in set scenario the Accounting Standard 7 shall be applicable. In view of the above the change in accounting policy by the assessee from milestone billing to percentage completion method is a plausible view and therefore even if the view has not been examined specifically by the Assessing Officer, we do not find any fault in shifting of the accounting policy by the assessee. Even this simulator with high configuration and technical input in design would definitely fall within the realm of an asset and the construction of such asset would definitely fall within the category of construction of asset and therefore accounting standard 7 had rightly been applied by the assessee and hence the order passed by the Pr. CIT u/s 263 is liable to be quashed and we do accordingly. The facts of the present case are similar to that of the facts mentioned by the Hon ble High Court in the case of A2Z Maintenance [ 2017 (2) TMI 682 - DELHI HIGH COURT] as in the present case also, the assessee has been consistently following the AS 7 from the financial year 2007-08 and therefore there cannot be any justification for the officer to doubt the bona fide of the assessee in following the AS 7 and therefore also there was no reason for the CIT to come to the conclusion that the order passed by the Assessing Officer was erroneous. - Decided in favour of assessee.

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• 2019 (6) TMI 281
  Disallowance on account of purchase of material - HELD THAT:- AO has noticed that some bills/vouchers were missing and the assessee has also accepted that vouchers might have been misplaced due to work at various sites or many a times, these would have been incurred out of imprest account. However, the findings of the AO could not be rebutted properly. Therefore, the lower authorities are justified in making addition. The primary onus lies upon the assessee to prove the expenses claimed in the profit and loss account. The assessee has submitted before the CIT(A) that all payments were made by account payee cheques, but he had not produced complete bills and vouchers before the AO. We, therefore, do not find any justification to interfere with the order of the CIT(A) on this addition. Disallowance out of vehicle expenses - it is observed that the depreciation is included in it - HELD THAT:- The depreciation is fixed expenditure in nature whether it is used exclusively for the business or partially for personal use. Thus, the element of some personal use has no role to play while granting depreciation on vehicle. Therefore, the assessee deserves deduction of depreciation and rest of the addition deserves to be sustained for want of proper verification. In respect of telephone expenditure, we are of the opinion, that the ld. CIT(A) has rightly dealt with this issue and we do not find any justification to interfere with the same. It is also mentioned that principle of res judi cata is not applicable in the income-tax proceedings and the income of the assessee is assessed on the basis of facts and circumstances attending to a particular year. Accordingly, the appeal of the assessee deserves to be partly allowed.

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• 2019 (6) TMI 280
  Penalty u/s 271BA - non furnishing of Report u/s 92E - assessee did not upload the Form No. 3CEB alongwith the return - whether failure to upload the Report was not intentional? - proof of bonafide mistake - HELD THAT:- In the facts of the present case, admittedly the assessee failed to upload Form No. 3CEB in terms of the statutory requirement. The Statute requires in terms of Section 92E that the report from an Accountant be filed in regard to the international transactions or specified domestic transactions. Law makers have used the words may and not shall , thereby making their intentions clear in as much that levy of penalty is discretionary and not automatic. The said conclusion is further justified by Section 273B of the Income Tax Act, 1961. We find that nothing has been placed before us to show that either the assessee is a habitual defaulter or that no explanation has been offered or for that matter, the explanation offered is false. No plausible reasons have been given by the Revenue why the explanation offered cannot be accepted. It is seen that the ld. CIT(A) has proceeded as though the levy of penalty is automatic. In the facts of the present case, we find that admittedly the assessee has failed to upload electronically Form No. 3CEB. Accepting the bonafide explanation consistently offered, we accept the same as an unintentional bonafide mistake. Being satisfied by the explanation offered by the assessee after considering the position of law as applicable, we hold that it was a case of bonafide mistake - Decided in favour of assessee.

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• Customs

• 2019 (6) TMI 279
  Smuggling - Confiscation of Gold - Gold carried and found concealed inside the inner supportive casing of the bag that was carried by the appellant - HELD THAT:- The gold being carried in the present facts and circumstances is not of commercial quantity. Secondly the appellant in the course of investigation upon detection of coated wire, admitted that he was carrying gold. The quantity in the present case is about 311.21 gm. Further that he was not carrying the gold as the carrier. At best it is the case of non declaration, amounting to smuggling. In view of the liberalised import policy for gold, the order of confiscation is modified and the goods allowed to be redeemable on payment of redemption fine. The redemption fine is fixed at 2.5 lakhs - Further personal penalty of 1,00,000/- under section 112 (a) (b) of the customs act is reduced to 50,000/- - The penalty under section 114AA is not modified. Appeal allowed in part.

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• 2019 (6) TMI 278
  Valuation - inclusion of technical know- how fees and royalty charges payable or paid by the Appellant to their foreign suppliers in the assessable value - HELD THAT:- The original authority finds that 15% of marks up are added to cover the expenses and profit margin and therefore the relation has not influenced the prices. The original authority also finds that the technical know-how fees is more relatable to the technology imparted than to the goods imported and that it is not a pre-condition for import of goods. It is also pertinent to note that the Appellant are also procuring 39% of the parts/components required from the domestic market. We find that Commissioner (Appeals) has not gone into the facts of the case and has not given any reasoning for the conclusion drawn therein. As far as the relationship has not influenced the pricing pattern there is no justification for inclusion of royalty and technical know-how in the assessable value of the imported products - Appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 277
  Imposition of penalty on appellant-CHA - abetting in the mis-declaration of the imported goods - HELD THAT:- In going through the Order in Original the role of Appellant was shown to be the main person behind the whole case and that is based on the statement of Shri Pansare who had claimed before the CHA that he has taken up with Shri C.R. Shukla and the statement of Shri Anwar saying that he had financial dealing with M/s. Gaylord Impex one of the importer and the fact that there are some call records showing conversation between the person involved, other than this no evidence has been brought to justify the imposition of penalty to Shri R. C. Shukla. It has not been brought out as to the exact role he played in rendering the case liable for confiscation in the Show Cause Notice nor the adjudication authority conclude that he would have been benefitted in any manner had the import been through. He understandably the revenue cannot conclude with a clinical precision. However the case cannot be built on the basis of vague statement of the co-accused and more existence of call records. It is reinforced by the fact that no evidence of any sort has been found during the search of the Appellant residence. It is also not clear whether investigation could reach of the actual importer. In such situation imposition of penalty on the Appellant without properly establishing his role is not acceptable. Appeal allowed - decided in favor of appellant.

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• Insolvency & Bankruptcy

• 2019 (6) TMI 276
  Financial Creditor -- CIRP under I B Code - Agreement to Sell - whether the appellant comes within the purview of Financial Creditor or not? - HELD THAT:- It is clear that the Appellant is an allottee and further the Agreement suggest that the amount was disbursed by him towards the consideration of time value of money - the Appellant comes within the meaning of Financial Creditor . Appeal allowed.

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• 2019 (6) TMI 275
  Initiation of Corporate Insolvency Resolution Process - Section 7 of the Insolvency and Bankruptcy Code, 2016 - Financial Creditor - failure to make repayment of loan - HELD THAT:- A conjoint reading of the aforesaid provision would show that form and manner of the application has to be the one as prescribed. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of the Code. We are satisfied that a default amounting to crores of rupees has occurred within the meaning of Section 4 of the Code and the application under sub section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Thus, the application warrant admission as it is complete in all respects. In pursuance of Section 13 (2) of the Code, we direct that Interim Insolvency Resolution Professional to make public announcement immediately with regard to admission of this application under Section 7 of the Code. The expression immediately means within three days as clarified by Explanation to Regulation 6 (1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Application admitted - moratorium declared.

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• Service Tax

• 2019 (6) TMI 274
  Application for condonation of delay in filing civil appeal as well as in the civil appeal - HELD THAT:- Learned Counsel for the respondent/caveator accepts notice and waives service of notice. List after two weeks on a non-miscellaneous day for final disposal.

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• 2019 (6) TMI 273
  Taxability of commission agents - Business Auxiliary Services - commission received for acting as the franchisee and selling their products, HESL - Exemption on agricultural produce - Commission related to agricultural produce - N/N. 13/2003-ST dated 20.06.2003 until 09.04.2004 - HELD THAT:- We find that the demand was raised on the commission received by the appellant under the head of Business Auxiliary Services which was exempted from 01.07.2003 vide notification 13/2003-ST dated 20.06.2003 until 09.04.2004 when this exemption was confined to exemption on agricultural produce only. This period also covers the disputed amount of 7,11,711/- which according to the assessee was a reimbursable expense and not so according to the department. Accordingly, the demand for the period 01.07.2003 to 09.04.2004 is set aside with consequential relief. As far as the request for setting aside of penalties u/s 76 and 78 is concerned, we do not find that the assessee has made any strong case as to why the penalties need to be waived u/s 80. Appeal allowed in part.

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• 2019 (6) TMI 272
  Business Auxiliary Services - short paid/non paid service tax - sale, promotion the marketing activities for beverages undertaken by the appellants directly promotes the sale of concentrate manufactured by or on behalf of Coca Cola, Coca Cola India (CCI) on behalf of Coca Cola USA reimburses the cost proportionately - demand of interest and penalty - extended period of limitation. HELD THAT:- The clause of the definition which is relevant for such invocation is i. Promotion or marketing or sale of goods produced or provided by or belonging to the client; . A plain reading of the said clause will make it evident that the activities undertaken by the service provider should be towards promotion or marketing or sale of goods produced or provided by the service recipient. In the present case how the Bottler Agreement or the clause 5 of the Business Protocol 2012, support such an conclusion is beyond comprehension of a rational mind. The clause 5 of Business Protocol clearly is not establishing the relationship of service provider and service recipient between the appellants and Coca Cola India - Appellants use the concentrate supplied/ procured from Coca Cola India, for the production/ manufacture of finished products. They sell their finished products in the market as pr the plan and marketing strategy finalized by them in association with the brand owners. The objective of the sale promotion activities undertaken by them is to promote the sale of Beverages of various brands owned by Coca Cola USA and bottled by them. Any further extrapolation made by revenue for drawing the conclusion is beyond the express intent of the Bottler Agreement. Since as the sale of his finished goods goes up automatically consumption of inputs will go up and accordingly he promotes the sale of input manufacturer/ supplier. In our view such an interpretation is neither logical or rational. Both input suppliers and the finished product manufacturer are independent business entity acting in the interest of their business. From the definition of service as per section 65B(44), the essential ingredient of same are any activity carried out by a person for another and consideration for undertaking such and activity . Admittedly the dispute is not in respect of declared services or negative list of services or those falling in the exclusion clause. The phrase any activity carried out by a person for another , is very clear that the activity sought to be taxed, should be the activity carried out by one person for the another person. Thus any activity which has been undertaken by a person on his own account for himself cannot be said to be covered by the said phrase even if this activity is undertaken by the person with the financial assistance/ support of other person either partially or completely - In the present case the appellants were undertaking the marketing and sales promotion activity on their own account, Coca Cola India was only providing certain financial assistance in undertaking such activity. The activity undertaken were not performed by the appellant for Coca Cola India, but was performed for themselves. Since no activity has been performed by the appellant for Coca Cola India, we are of view that mere receipt of amounts under the head Market Support Received will qualify them as service under Section 65B(44). Since we are deciding the issue on the merits itself and dropping the demand as not maintainable we do not take other issues of limitation and penalty argued before us in this appeal. The demand of service tax set aside - appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 271
  Refund of accumulated CENVAT credit - Export of services or not - POPOS Rules - Intermediary services or not - Bundled services or not - Whether the Services provided by the claimant to Globecast, located outside in respect of Broadcast of Russia Today channel in India is export of service or otherwise? - Rule 5 of CENVAT Credit Rules, 2004 - HELD THAT:- In the present case the Channel Carriage for which Channel Carriage Fees is paid by GlobeCast, to Channel Distribution Partner through claimant is the main service which has been provided by the Channel Distribution Partner and not the claimant who has acted only to mediate the provision of service by the Channel Distribution Partner to GlobeCast. This service has in no manner been provided by the claimant to the GlobeCast. In our view the services of mediation of this nature are covered by the term intermediary as defined by Rule 2(f) of the Place Of Provision of Services Rules, 2012. Since these services are covered by the term intermediary, in term of Rule 9 ibid, the place of provision of these services will be the location of the service provider that is in India. Hence these services cannot be considered as export of service as per Rule 6A of Service Tax Rules, 1994. In terms of 6A(1)(d) for a service to qualify as export of service the place of provision service should be outside India. Since in the present case these services have been provided in India as per Place of Provision of Services Rules, 2012 they cannot be termed as export of services. Intermediary services or not? - HELD THAT:- In the present case the except for routing the payment through LAMHAS, who have entered into the Channel Distribution Agreement with Channel Distribution Partners, the services of Channel Carriage were provided by the Channel Distribution Partners to TV-NOVOSTI directly. Hence the services provided by the LAMHAS in this respect qualify as intermediary services . Bundled services or not - HELD THAT:- The present case is not a case of bundled services, naturally bundled, but is case of providing services which as per the contract itself are not bundled together and hence needs to be examined on its own. In the present case the Channel Carriage Service is in no way provided by the claimant on his own account, and hence is an intermediary service. Thus the Channel Carriage Fees which is towards the Channel Carriage by Channel Distribution Partners cannot be added to the export turnover for determination of the refund of accumulated CENVAT Credit in terms of Rule 5 of the CENVAT Credit Rules, 2004. However the charges recovered as Lamhas Professional Fee and Lamhas Service Fees which are towards the services provided by Claimant to Globecast on their own account will continue to be part of the Export Turnover of the claimant - refund is to be allowed. The matter remanded back to the original authority for redetermination of the amount of refund as per Rule 5 of CENVAT Credit Rules, 2004 - appeal allowed by way of remand.

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• 2019 (6) TMI 270
  CENVAT credit - inputs - furniture and fixtures - input services - Rent a Cab services - Transport of Goods by Road Services - Travel Agent s Services/ Tour Operator Services - Forex Broker Services - Rule 6(3B) of CCR - extended period of limitation - demand of interest and penalty. Admissibility of CENVAT Credit on various items of Furniture and Fixture to the provider of Banking and Financial Services - HELD THAT:- The appellant has to take a stand at the time of claiming the CENVAT Credit as to whether he intends to take the credit in respect of the goods under consideration as inputs or capital goods. Once he claims that the goods are capital goods then he has to follow the prescriptions for availing the credit as such. Since the scheme of credit in respect of Capital Goods is not identical with the scheme credit on inputs such flip flop from Capital Goods to inputs should not be permissible - following the decision of 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] that these goods do not qualify either as Inputs or Capital Goods, we hold that credit is not admissible in respect of these goods. Admissibility of CENVAT Credit - various input services - club and association services - rent cab service - travel agent service - tour operator service - GTA Services - HELD THAT:- It s a common knowledge the perks and facilities to the employee even that of ferrying the employees from home to work place or on their relocation from one station to another on transfer etc., are provided not in term of the service contract with the client or a customer, but are provided in terms of the employment contract with the employee. These perks and facilities in terms of the employment contract are to be provided even if at particular period of time there is no output service to any client thus these are provided independent of any transaction in output services. In terms of the employment contract employees in lieu of salary, perk and facilities offered by the employer, provides his services to the employer. Thus all the facilities and perks as referred herein are specific to the employment contract and independent of the service contract that employer enters with recipient of the output service - Since these facilities provided are not the part service contract with the client of Bank they cannot be considered to be used for providing the output services. With effect from 1st April 2011, the phrase activities relating to business, such as has been deleted from the inclusion part of the definition and hence the obligations on the part of appellants to their employees in terms of employment contract, cannot be termed to be covered by the said inclusion clause neither they have been provided in course of providing the output service. Since these facilities have been provided as part of the employment contract of the employee they are purely meant for the personal consumption of the employee and hence are covered by the exclusion clause. Thus for period prior to 1st April 2011 these services will fall within the category of input services - However for the period post 1st April 2011 we hold that these services when provided for by the appellant to its employee in terms of employment contract do not qualify as input services for providing the output taxable services to the client/ customer in terms of service contract, hence CENVAT Credit in respect of these will not be admissible post 1st April 2011, if any part of these services have been received by the employee after that date - credit allowed in part. Admissibility of CENVAT Credit - Forex Broker Services - Rule 6(3B) of The CENVAT Credit Rule, 2004 - HELD THAT:- Rule 6(3B) of The CENVAT Credit Rule, 2004 as introduced with effect from 1st April 2011 only provides a manner for determining the amount to be reversed by the banking company and a financial institution including a non-banking financial company every month. This rule do not provide that credit in respect of input services used exclusively for providing the exempted services is admissible subject to reversal of 50% of that - there are no merits in the contention of appellants that order of Commissioner has been passed contrary to intent of Rule 6(3B) - the matter needs to go back to the original adjudicating authority for allowing appellants one more opportunity to substantiate their claim that during the relevant period i.e. from 07.07.2009 to 31.03.2012, they were providing both exempted and taxable output services using this common input service - matter on remand. Extended period of limitation - proviso to Section 73 (1) - HELD THAT:- In this case certain information which was available with the appellants was never disclosed to revenue, with the intention to evade payment of tax - extended period of limitation as provided for by proviso to Section 73(1) of Finance Act, 1994 is invokable in the present case. Demand for interest and penalty imposed under Section 78 of Finance Act, 1994 - HELD THAT:- Since the appellants have taken the inadmissible credit and utilized the same for payment of Service Tax, the demand of interest in respect of the inadmissible credit is justified in terms of provisions of Rule 14 of CENVAT Credit Rules, 2004 read with Section 75 of Finance Act, 1994. It is now settled law that interest under Finance Act, 1994 is statutory liability put on the person who has unduly withheld the amounts due to government - the demand of interest on the amounts that would be determined by the Commissioner in remand proceedings upheld. Penalty u/s 76 and 78 - HELD THAT:- The noticee has claimed inadmissible benefits, which remained privy to them, until unearthed by the audit officers of the service tax Commissionerate. The penalty proposed and mandated under Section 78 of Chapter V of the Finance Act, 1994 in reading of Rule 15(3) and Rule 15(4) of the CENVAT Credit Rules would, thus become imposable on the noticee - no penalty would be imposable under Section 76 of Chapter V of the Finance Act, 1994. Appeal allowed in part - part matter on remand.

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• 2019 (6) TMI 269
  Classification of services - whether the activities rendered by M/s. Ocean Sparkle Ltd. is outward transportation of goods or whether it is merely management of Marine Terminal Facility (MTF)? - HELD THAT:- M/s. Ocean Sparkle Ltd. is engaged to provide mainly Port Operations, Ship Management Services and also manpower supply service at MTF, Karaikal Port. Undisputedly, this MTF is owned by the appellant. So also from the factory gate pipeline is laid upto the MTF for transportation of the final product namely caustic soda to the MTF from where it is transported to Visakhapatnam Port. The appellant has explained in the Show Cause Notice that the activity rendered by M/s. Ocean Sparkle Ltd. is not outward transportation of goods from the factory. There is no discussion with regard to the purchase order or the agreement for delivery of the goods upto the Visakhapatnam Port in the impugned orders. Needless to say that when the ownership of the goods remained with the appellant till the buyer s premises, the sale takes place only at the buyer s end. Thus, it is the duty of the appellant to establish whether the ownership of the goods is with the appellant till the goods reaches the buyer s premises. If the appellant has agreed to supply the goods upto the buyer s premises at his own risk then, of course, the ownership belongs to the appellant till the goods reaches the buyer s premises. This fact has to be verified. Appeal allowed by way of remand.

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• 2019 (6) TMI 268
  Adjustment of excess payment of service tax made - whether any excess payment made by the assessee of service tax and the same adjusted in subsequent months from the output tax payable, whether the revenue authority justified in objecting to such adjustment on the ground that in view of rule 6(4) of the service tax rules such adjustment could have been done only in the immediately subsequent month and not after a gap of 34 months? HELD THAT:- Sub rule 4A was substituted by notification No. 1 of 2007 ST dated 1 March 2007 with effect from the same date. The appellant is entitled to make adjustment for excess tax paid and there is no such restriction under the scheme of the act read with the rules. Adjustment allowed - appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 267
  CENVAT credit - subsequent registration of the unit - whether for the input services received during the period 2007 08 to 2009 10 credit was taken during the period 2009 10, whether the same have been rightly rejected? - HELD THAT:- It is not the case that the appellant was not at all registered. They were registered at Wardha. Thus rejection of credit of the CENVAT is not tenable, in view taking of subsequent registration for the Mumbai office - further the appellant were rendering taxable service right from the financial year 2007 08, for the same project for which input services received, the invoice for output service in March 2010 was raised upon completion of the project, as per the agreement between the parties. The appellant is entitled to take the CENVAT credit - case remanded to the Adjudicating authority for the limited purpose of verification of the invoices for input services received prior to the date of registration at Mumbai office. Penalty - HELD THAT:- There is no case of misconduct on the part of the appellant - penalties set aside. Appeal allowed by way of remand.

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• Central Excise

• 2019 (6) TMI 266
  Maintainability of appeal - monetary amount involved in the appeal - HELD THAT:- Since the tax effect involved is 2,00,000/-, he may be allowed to withdraw the present appeal in view of Notification No.390/Misc./116/2017-JC dated 11.7.2018, issued by the Central Board of Indirect Taxes and Customs, New Delhi. Appeal dismissed as withdrawn with liberty as prayed for.

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• 2019 (6) TMI 265
  Clandestine manufacture and removal - clearance of Afzal brand Snuff tobacco products falling under Chapter 24 of CETA, 1985 without Central excise registration and without payment of duty - entire case of the Department is based on the test report given by the Chemical Examiner - HELD THAT:- The chemical examiner report cannot be relied upon in the light of the fact that when M/s SEPL had applied for retest of the samples by an independent entity, the department did not accept such request. Also there is no fault of the Appellant if the samples could not be re-tested after 9 years only due to lacuna on the part of the Revenue - We also find from the statement of the directors and supervisors and employees of the appellant as well as M/s SEPL that they were purchasing Culcutti tobacco / raw tobacco from farmers and undertook during, cutting, crushing and grinding of tobacco and convert the same into Gadia Powder , which was packed in 50 kg bags. No evidence has been adduced by the Department to show that the appellants purchased any katha, calcium oxide or flavouring agents. Even the chemical examiner in his report never stated that the goods were fermented and subsistence like calcium oxide, katha were added to the goods in order to hold the goods as chewing tobacco; the process of chewing tobacco is not complete unless it is fermented and liquored. Whereas the report of the chemical examiner says that the same is a coarse brown powder and if the same would have been chewing tobacco, it would not have been coarse brown powder as after mixing of katha and calcium oxide, the product may not remain so. The appellants had requested for cross examination of the chemical examiner as well as the cross examination of persons, under the provisions of Section 9D of the Central Excises Act, whose statements were relied upon. However, no such opportunity was granted to them - When the appellants since the very first day itself were claiming their goods to be tobacco powder, it was imperative for the Revenue to test the samples properly and conduct a market enquiry. It is coupled with the fact that the officers did not find any mixtures or machines in which the process of mixing the tobacco flakes with katha, calcium oxide and flavouring agents takes place. Since the goods has remained un manufactured tobacco, the same cannot be classified under impugned classification. Even the Department had accepted the fact that M/s SEPL are the owner of that goods. It is also not in doubt that the goods were ultimately for exports for which the relevant Bond / LUT were filed by M/s SEPL and evidence of exports was produced duly certified by the jurisdictional Superintendent of M/s SEPL before the adjudicating authority, which shows that otherwise also the goods were for export purpose and not liable for duty. Since the chemical examiner report being inconclusive and the appellants were not granted re-test of the samples, therefore the goods cannot be considered as chewing tobacco. It is coupled with the fact that no machines used for mixing of katha, calcium oxide or flavouring agents were found to be installed in the factory of the appellant, even though the factory was in running condition. The Appellant are merely getting the raw leaves and grinding them and after making powder putting them into 50 Kgs pack which is a bulk pack. The intention is not to market. Hence the nature of product would not take it into category of manufacture. The goods cannot be considered as manufactured chewing tobacco and would merit classification as unmanufactured tobacco falling under CTH No. 2401 since the only operation undertaken in respect of tobacco leaves was drying, cutting and seining - the impugned order holding classification of goods under CTSH No. 2403 99 10 is not sustainable. Appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 264
  Mechanism for recovery of Excise duty - recovery of amount under Rule 8 of the Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996 - Goods used for manufacture of optical fibre cables classifiable under Chapter heading 8544 70 - benefit of N/N. 24/2005-CUS dated 01.03.2005 - HELD THAT:- The customs duty is payable as per the Tariff read with any notifications at the time of import before such goods are cleared. Wherever any notification is available, subject to conditions, such conditions must be fulfilled. In case of any doubt regarding eligibility of exemption notification, the same must be construed strictly and any benefit of doubt must be given to the revenue and against the assessee - As was evident from the excise returns filed by the assessee themselves, the optical fibre cables which they had manufactured fall under Chapter heading 9001 which were not individually sheathed. Therefore, the exemption notification was not available to the products used in manufacture of OFC falling under Chapter heading 9001. Mechanism for recovery of duty - HELD THAT:- The importer may, out of real constraints or practical considerations use the material in some other manner. In such case, the demand under section 28 will not sustain. Further, there are imports in schemes such as EPCG where there is a time limit of 8 years under the Foreign Trade Policies for fulfilment of the conditions. This is clearly beyond the normal period as well as extended period of limitation under section 28. Therefore, Section 28 is the normal section for recovery of duties. Section 143 of the Customs Act provides for recovery of duty, etc., by way of bond which is as much a part of the Customs Act as section 28. However, in order to recover duty under section 143 the bond has to be enforced and demand cannot be raised under section 28 for enforcement of a bond. The usual method of enforcing any bond is by filing of civil suit and the time limit prescribed under section 28 does not apply to any such civil suits - Section 142 provides for recovery of sums due to the Government. Therefore, whenever any bond executed under the Customs Act, Rules or Regulations also mentions that amounts may be recovered under section 142 without prejudice to any other mode of recovery, the amount may be recovered by following the procedure under section 142. If the bond does not mention so, the normal provisions to proceed upon the bond apply. The impugned order sought to recover the amount under Rule 8 of the Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996 which is not a mechanism for demand of duty. Therefore, the impugned order needs to be set aside on that ground alone. Demand under section 28 - Penalties - HELD THAT:- As rightly pointed out by the learned counsel for the appellant, the same can be demanded only by the Customs officers and not the Central Excise officers - Consequently, penalties imposed under section 112 of the Customs Act also need to fail due to lack of jurisdiction itself without going into the merits of the imposition of such penalties. Appeal disposed off.

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• 2019 (6) TMI 263
  SSI Exemption - clubbing of clearances - Cable Filling Compound - Cable Cleaning Compound - fictitious firm - whether CFC falls under chapter heading 34.03 or not? - HELD THAT:- The classification has to be decided by a Chartered Engineer. A Chartered Engineer can give his expert opinion regarding the nature of the material but the classification is to be done by the officers or the adjudicating authority or the appellate authorities. We do not find that the adjudicating authority has in any way disputed the Chartered Engineer s certificate. Drawing from the Chartered Engineer s certificate he concluded that the product in question is not classifiable as lubricating preparation but as a miscellaneous chemical under Chapter heading 3823. A plain reading of Chartered Engineer s certificate also does not convince us that CFC is in the nature of a lubricant. Therefore, we find no force in the argument of the appellant and we find that the adjudicating authority was correct in classifying the product under Chapter heading 3823. Therefore, the question of exemption under notification 287/1986-CE does not apply in this case. Scope of SCN - HELD THAT:- The classification was not an issue in the show cause notice and the appellant has also not made out a case to reclassify the goods and claim benefit. Clearances without payment of duty amount to 1,21,892/- - HELD THAT:- The relevant period for this is 01.04.1991 to 31.03.1992. Learned counsel submits that this demand will not be sustainable if the department hold that VIPI is a dummy unit and VIPPL is the only correct unit as alleged in the first show cause notice. We have considered this argument and find that as far as the allegation regarding VIPI being dummy unit is concerned, we have not accepted it and therefore, set aside partly the demand with respect to the first show cause notice. Therefore, the demand to this extent under this show cause notice sustains - It is based on the clearances made in the name of VIPI and clearances in the name of AEI operating from the same premises with no separate manufacturing facilities and no separate stocks of raw materials or finished products. Clearances after obtaining Central Excise registration between November, 1992 to March, 1993 - HELD THAT:- Learned counsel submits that this demand has been made by adding turnover of AEI to their turnover for which there is no corroborative evidence. Since there was no separate manufacturing facility and AEI was operating from the same premises with no separate stock of raw materials or finished products, it can only be called a dummy unit and the department was justified in clubbing these clearances with that of VIPI. Difference between Private Register No. 106 and RT-12 returns value - HELD THAT:- There was a difference between the two but there is no sufficient corroborative evidence to show that the difference represents the clandestine removal. The demand on this account, therefore, needs to be dropped. Allegation of under valuation - HELD THAT:- This demand was arrived at for clearances made to 33 parties on the ground that clearances were shown to have been made @ 42/- per Kg while in case of others, the price adopted was 126/- per Kg. The statement of one of the recipients was recorded which he retracted during cross examination - there are no sufficient evidence to substantiate a demand on this ground. There is ground to confirm the demand to the extent of clubbing the clearances by AEI with VIPI but there is insufficient evidence to substantiate the demands on other grounds - there is no sufficient ground to substantiate the confiscation, fine and imposition of penalties on VIPI. The demand in this show cause notice was only on account of the fact that there was a difference between the value of sales shown in Central Excise and the sales income shown in the IT Returns. Such a difference can be a cause for suspicion and investigation but by itself cannot be conclusive evidence that goods were clandestinely removed and sold - Demand set aside. The matter is remitted to the original authority for the limited purpose of calculation of differential duty - appeal allowed by way of remand.

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• 2019 (6) TMI 262
  CENVAT credit - inputs - credit availed on inputs without actual use in manufacture - Revenue Neutrality - penalty - HELD THAT:- It is not in dispute that the Appellant did not undertake any manufacturing activity on goods on which the credit was availed by them. The partners of the firm and the employees have themselves accepted the fact that no activity was undertaken by them. In such circumstances no credit is allowable to the Appellant. Penalty - Revenue Neutrality - HELD THAT:- Since the Appellant has paid more duty than cenvat availed and the situation being revenue neutral, the demand of cenvat credit is not sustainable - the penalty imposed against the main Appellant M/s San Industries and the co-appellants is also not sustainable. Appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 261
  Valuation - related concern/ undertaking - Rule 9 of the Central Excise Valuation Rules - HELD THAT:- When the sale price of independent buyer and prices at which the goods were sold to M/s SMS are equal and in some cases even the sale price to M/s SMS are more, there is no reason to disturb the valuation method followed by the Appellant. The sale price to M/s SMS is not influenced by any extra commercial consideration. The depot of M/s SMS cannot be considered as of the Appellant. The Appellate authority has also relied upon the transportation cost incurred by M/s SMS over the period of time. The transportation charges incurred by SMS which includes towards other goods also cannot be a ground to disturb valuation. Further the show cause notice does not make any such allegation against the Appellant. Extended period of limitation - HELD THAT:- There was no intention of the Appellant company to suppress the fact to evade duty. In such case even the demands raised by invoking extended period of limitation are not sustainable. Appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 260
  Recovery of Excise duty from the purchaser of goods in auction - goods purchased by the appellant in auction and subsequently sold by dismantling the same as waste and scrap - time limitation - HELD THAT:- It is admitted fact that the appellants are neither manufacturer of any excisable goods nor they have used purchased goods for manufacturing other goods. They have only carried out the dismantling of waste factory goods. In this fact, the appellant has neither manufactured excisable goods nor even there an issue of availment of Cenvat Credit on such purchased goods. In this effect, when the appellant is admittedly not a manufacturer of excisable goods, no duty can be demanded under section 11A (i) if at all there is any duty liability in respect of goods purchased by the appellant, it is the manufacturer who is supposed to pay the duty and if at all there is any liability, it will arise against M/s Gujarat Narmada Auto Ltd. Since the appellant have purchased the goods in auction, the department is free to settle their excise duty with Official Liquidator and not from the appellant. It is also not the case of the department that dismantling of capital goods is amount to manufacture. Therefore, there is no basis in the department s proceedings to demand any Excise Duty from the appellant. Time limitation - HELD THAT:- The entire facts of purchase of goods under auction and sale thereof were well within the knowledge of the department. Therefore, the department if at all was of the view that any duty liability arise, they were free to issue a Show Cause Notice well within the normal period of limitation provided under section 11A (1) - demand is hit by time bar. Appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 259
  Bar on utilization of CENVAT credit - vires of Rule 8(3A) of Central Excise Rules, 2002 - HELD THAT:- Hon ble Gujarat High court in the said case of ADVANCE SURFACTANTS INDIA LTD VERSUS UNION OF INDIA [ 2017 (8) TMI 594 - GUJARAT HIGH COURT] has held that there is no one to one co-relation between raw material and finished goods and therefore to restrict utilization of credit earned up to the last date of duty payment is contrary to the principals of Cenvat Credit Rules and therefore the Hon ble High Court has held that Sub-Rule (4) of Rule 3 of Cenvat Credit Rules, 2004 is ultra vires. The default remained only from 05 March, 2008 to 12 March, 2008 - further during the period from 05 March, 2008 to 12 March, 2008 there was no payment of central excise duty through debit of cenvat credit. Therefore, in both the appeals there were no grounds to invoke provisions of Rule 8(3A) of Central Excise Rules. Appellants shall be entitled to refund of 1,80,764/- paid in cash on 07 October, 2008 along with applicable interest - appeal allowed.

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• CST, VAT & Sales Tax

• 2019 (6) TMI 258
  Rectification of the assessment order - KST Act - CST Act - HELD THAT:- This Court is not adjudicating upon the orders of the Appellate Forums to address the grievances of the petitioner in as much as the power vested with the Appellate Authority to condone the delay of 200 days in filing the appeal. Moreover, assailing the order of the Tribunal whereby the order of the Appellate Authority is confirmed, Sales Tax Revision Petitions are pending before this Court. In such circumstances, the plea of the petitioner to analyze the provisions of Section 20 and to arrive at a decision on this aspect is unreasonable/unjustifiable and cannot be countenanced. This Court is not adjudicating upon the order of the Appellate Authorities in this writ petition - petition is bereft of any merits and is dismissed.

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