Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 17, 2014
Case Laws in this Newsletter:
Income Tax
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
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Commerce Secretary Reiterates India’s Stand on Trade Facilitation
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E-biz Project to Promote Business
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Modification of Price Stabilization Fund Scheme
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Trade Deficit with China
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FDI Limit in Various Sectors
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Increasing Indian Share in Global Trade
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Development of Dedicated Freight Corridor in Gujarat
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RBI Reference Rate for US $ and Euro
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India’s Foreign Trade (Merchandise): June, 2014
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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WTO Dispute Panel Report Finds us Countervailing Duty (CVD) On India’s Exports Of ‘Hot-Rolled Carbon Steel Flat Products’ inconsistent with WTO Law on Subsidies
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Cases of Voilation by Chit Fund Companies
Notifications
Highlights / Catch Notes
Income Tax
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Validity of notice u/s 148 - At the stage of issue of the notice the only requirement is to examine whether on the available material a reasonable person could form a reasonable view to believe that income chargeable to tax has escaped assessment - HC
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Penalty u/s 271(1)(c) - An assessee making a blatantly inadmissible claim is like a car driver who crosses the red light at the traffic signal and takes a chance of not being caught and not being penalised by the authorities implementing law. - AT
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Penalty u/s 271(1)(c) – In the garb of the bona fide claim an assessee cannot escape levy of penalty - Onus was not on the AO to prove the negative - AT
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Whether the assessee’s claim for deduction under section 80IA of the Act could be denied merely on the ground that these D.G. units were catering to the captive power requirement - Held No - AT
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Interest claimed on partners' capital contribution made to chit funds and interest claimed on payment to retired partners' outstanding balance - claim of deduction from income from other sources denied - AT
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Deduction u/s 10B - Failure to produce the Ratification by the Development Commissioner - assessee have been registered with the STPI, is entitled for deduction u/s 10B - AT
Service Tax
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Validity of recovery proceedings - Non payment of 50% of the tax by December 31, 2013 as per the VCES scheme - department has power to initiate recovery proceedings on such failure - HC
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Construction services - sub-contractor - appellant claims that service tax has been paid by the said principal and, therefore, there cannot be a double taxation for the same services - matter remanded back to tribunal - HC
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Irregular availment of CENVAT Credit - The omission to take registration as an Input Service Distributor can at best be considered as procedural irregularity - AT
Central Excise
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Method of valuation - Since M/s. ELCOT are neither institutional consumer nor industrial consumer, in respect of sale of CTVs by the appellant to them, MRP was required to be declared in term of SWM Rules and accordingly, the Provisions of Section 4A would be applicable - AT
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CENVAT credit availed on supplementary invoice issued by Job worker - prima facie the applicant has made out a case for availment of service tax as per Rule 9(1)(bb) of the Central Excise Rule, 2004. - AT
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Denial of Credit based on photocopy of invoices, consolidated original Bill of Entry - prima facie credit is not admissible - AT
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CENVAT Credit - Prima facie, it appears that the applicant is not eligible to avail credit where they have taken benefit of revenue expenditure under the Income Tax Act - AT
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Merely because during the period in question the appellant was indulging in clandestine activities, would not ‘ipso facto’ lead to establish that they have been indulging in such activities even during the past period - AT
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Levy of interest on differential duty raised through supplementary invoice - retrospective increase of price of finished goods - demand of interest confirmed - penalty waived - AT
VAT
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Validity of Search and seizure - Letter of authorisation was not shown to the officers/employees of the petitioner. Independent witnesses were not called during the search and seizure - held as illegal - HC
Case Laws:
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Income Tax
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2014 (7) TMI 565
Power to grant stay u/s 254(2A) of the Act – Stay to be granted beyond 365 days – Held that:- The Tribunal had no authority to extend the period of stay beyond a period of 365 days from the initial date of grant of stay - as 365 days had elapsed since 09.01.2013, when the initial stay was granted, the assessee could not approach the Tribunal for any further extension of stay – the decision in Commissioner of Income Tax- II Versus M/s Maruti Suzuki (India) Limited, Income Tax Appellate Tribunal & Another [2014 (2) TMI 1037 - DELHI HIGH COURT] followed - there is no bar for grant of relief if the Court is of the opinion that the circumstances and the ends of justice so warrant – assessee had already been granted conditional stay by the Tribunal in respect of the appeal and that the Tribunal has already heard the matter finally and has reserved orders – thus, the stay order granted by the Tribunal is to be continued till the disposal of the appeal by the Tribunal – Decided in favour of Assessee.
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2014 (7) TMI 564
Deduction u/s 80IB of the Act – Assessee contractor or developer - AO was of the view that assessee was a contractor of land owners / cooperative housing society, which is a separate legal entity, which through the Development Agreement assigned the construction work of tenements to the assessee – Held that:- CIT(A) as well as Tribunal was of the view that the assessee is a developer – Tribunal relied upon the assessee’s own case for the earlier assessment year, wherein it has been held that, the assessee was not found violating any of the conditions stipulated in section 80IB(10) – Relying upon COMMISSIONER OF INCOME TAX VS. RADHE DEVELOPERS [2011 (12) TMI 248 - GUJARAT HIGH COURT] – thus, no error has been committed by the Tribunal in dismissing the appeal preferred by the Revenue and confirming the order passed by the CIT(A), granting deduction to the assessee, as claimed, u/s 80IB of the Act – Decided against Revenue.
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2014 (7) TMI 563
Effect of amendment not considered - Sale or import to be treated as cash assistance or not u/s 28(iiib) of the Act - Premium on license purchased from outside parties – Held that:- The judgment delivered by Tribunal does not indicate that the Fifth proviso inserted by Taxation Law (Amendment) Act, 2005, with retrospective effect from April 1, 1992 was noticed by it – thus, the matter deserves to be remitted to ITAT for its fresh consideration for the opinion in the light of the Fifth proviso as also the amendment made under the Fifth Act 2005 – Decided in favour of Revenue. Business of cutting and polishing of rough diamonds - Whether the Tribunal was right in holding that for the purpose of working out deduction u/s. 80HHC, clause (a) of section 80HHC becomes applicable instead of clause (b) as the assessee was engaged in the business of cutting and polishing of rough diamonds which are imported from abroad and then selling out cut and polished diamonds in trading of polished diamonds and the percentage of trading of polished diamonds is more than 50% of the total export sales – Held that:- The decision in Gem Granites v. Commissioner of Income-Tax [2004 (11) TMI 13 - SUPREME Court] followed - in view of the aforesaid 1984 Circular, cut and polished diamonds shall qualify for deduction under sec. 80HHC of the Income-tax Act - polished and processed granite did not fall within the meaning of word "minerals" in 80HHC(2)(b) as it stood before 1991- Decided against Revenue.
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2014 (7) TMI 562
Property purchased in representative capacity - Immovable property purchased and funds illegally diverted for private use or not - Held that:- Sale consideration and stamp duty was paid from the funds of the Society and entire expenses incurred are reflected in the statement maintained by the Society and in view of the statement made by Shri G.C. Suyal that he has not purchased property for his personal use rather it has been purchased for the Society for the establishment of new school of the Society – thus, it must be held that name of Shri G.C. Suyal appears in the sale deed in a representative capacity, being President of the Society, and property belongs to the Society - Society is earning income from the purpose of the profit and also Society/Institution is doing any business – thus, the order is set aside – Decided in favour of Assessee.
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2014 (7) TMI 561
Unexplained investment in stock - Whether the Tribunal is justified in coming to the conclusion that retraction made by the assessee from the statement u/s 133(A) of the Act is legal and proper – Held that:- The AO solely relied upon the statement of Shri Kishorbhai Mohanlal Karia recorded at the time of search on 4.1.2007 which subsequently came to be retracted and / or explained within the period of 19 days i.e. 23.01.2007 - as such except statement recorded at the time of search which was subsequently retracted, there was no other material and / or corroborative material with the AO, on which, the addition of ₹ 6 lacs in the hands of Shri Kishorbhai Karia and ₹ 7,00,500/cash in hand and ₹ 25,50,320/as unexplained investment in stock in the hands of the assesse M/ s. M.P. Scrap Traders can be justified. Tribunal was of the view that in the case of CIT Vs. S. Khader Khan Sons [2013 (6) TMI 305 - SUPREME COURT] it has been held that the principle that Section 133A of the Act does not empower any I.T. authority to examine any person on oath and therefore any admission made in survey cannot by itself be made a basis for addition - the AO had no other material and / or corroborative material to justify the additions except the confessional statement of Shri Kishorbhai Karia recorded on 4.1.2007 which was subsequently retracted within a period 19 days and the same came to be explained with respect to additions – there was no reasons to interfere with the judgment and order passed by the Tribunal – Decided against Revenue.
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2014 (7) TMI 560
Time barred order u/s 153A and 153D – lack of jurisdiction - order pursuant to search and seizure – Held that:- This fact was brought to notice by the assessee on 18-03-2014 and the Revenue is directed to seek appropriate instructions from the Revenue - Revenue is not challenging the orders of the Tribunal dated 23-12-2013 and has decided to accept the same - there is a finding of the Tribunal that the proceedings were time barred - there was an inherent lack of jurisdiction to take cognizance of the proceedings since they were time barred - there is no point in continuing with the proceedings whereby the Commissioner taking suo-motu action has directed that fresh assessment be done – thus, the order is set aside only on the ground that the assessment orders themselves being time barred no further action, even suo-motu action, can be continued – Decided in favour of Assessee.
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2014 (7) TMI 559
Validity of notice u/s 148 of the Act – Reason to believe - Assessee engaged in trading of various industrial products – Failure to disclose material facts - Held that:- At the time of issuing a notice u/s 148 of the Act, it is not necessary for the AO to conclusively arrive at a finding that there has been escapement of income - At the stage of issue of the notice the only requirement is to examine whether on the available material a reasonable person could form a reasonable view to believe that income chargeable to tax has escaped assessment - the satisfaction of the AO to form a reasonable belief that income chargeable to tax has escaped assessment is not unreasonable. The recording or non-recording of the words "failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment" would not by itself bestow or oust jurisdiction – one would necessarily have to read the reasons as a whole to find out whether or not there has been a failure to disclose truly and fully all necessary facts for assessment - the reasons recorded clearly indicates that scrutiny proceedings for AY 2008-09 and survey action taken u/s 133A of the Act has brought on record evidence indicating bogus purchase bills from various parties, one of them being M/s. Rahul Industries for the AY 2005-06 as indicated in the chart annexed to the reasons recorded – the notice and the reasons recorded does indicate that there is relevant material obtained during the survey and assessment proceedings for assessment year 2008-09 on the basis of which a reasonable person could reasonably form the belief that income chargeable to tax has escaped assessment – thus, there was no reason to interfere in the notice of reassessment u/s 148 of the Act – Decided against Assessee.
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2014 (7) TMI 558
Reference u/s 55A of the Act not directed - Valuation for computing capital gain - Cost of construction of flats – Flats given to tenant without sale consideration – Assessee granted additional FSI to compensate – Held that:- The Tribunal has held that the AO did not refer the matter to the valuation officer - the tenanted property fetches low price - The tenanted property was purchased by the assessee but the same remained tenanted - None of the tenants had left the property as on 1st April, 1981- The AO added 15% to the purchase cost and tried to determine the fair value – thus, no substantial question of law arises for consideration – Decided against Revenue. The entire expenditure was incurred by him on construction of such tenaments and for handing over to the tenants - he was to be compensated by F.S.I. so as to enable him to reimburse himself the cost of construction for rehabilitating to the tenant, does not mean that the expenditure needs to be deleted straightway - revenue has failed to bring any material which would indicate as to how much F.S.I. was made available and placed at the disposal of the assessee, how much was utilized in the form of making for construction of buildings for sale in open market and how much was actually sold and the income derived - in the absence of the vital material, the CIT and the Tribunal concurrently held that the deduction was totally unjustified – Decided against Revenue.
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2014 (7) TMI 557
Deduction u/s 80P(2)(i) of the Act - Whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 – Held that:- If the co-operative society is engaged in carrying of business of banking or providing credit facilities to its members, the co-operative society is entitled for deduction on whole of the income relating to any one or more of such business – the section denies deduction to a co- operative bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank - Sec. 80P(2)(a)(i) provides two types of activities in which the co-operative society must be engaged to be eligible for deduction under sub- clause (i) - where a co-operative society is engaged in carrying on business of banking facilities to its members and to the public or providing credit facilities to its members or to the public, the income which relates to the business of banking facilities to its members or providing credit facilities to its members will only be eligible for deduction u/s 80P(2)(a)(i) - There is no prohibition u/s 80P not to allow deduction to such co- operative societies in respect of business relating to its members. Whether the Assessee is a co-operative bank or not – Held that:- In case, the assessee does not comply with the three conditions of being a cooperative society, it cannot be regarded to be a co-operative bank and the provisions of Sec. 80P(4) will not be applicable in the case of the Assessee - Once, the Assessee will not fall within the provisions of Sec. 80P(4), the Assessee, will be eligible to get deduction u/s 80P(2)(a)(i) in respect of whole of the income which the Assessee derives from carrying on the business of banking or providing credit facilities to its members - it is not necessary that the co-operative society should have a banking licence as per the definition under the Income Tax Act - The Income Tax is not concerned whether the banking business carried on by the assessee is legal or illegal - The income has to be assessed u/s 14 of the Income Tax Act under the same head even if the nature of the business is illegal. The bye-laws of society does permit the admission of other co-operative society as member - Since the assessee society did not comply all the three conditions, therefore the assessee society cannot be regarded to be a primary co-operative bank as all the three conditions are not complied with and in consequence it is not a co-operative bank and the assessee is not hit by the provision of section 80P(4) – thus, the Assessee has not to be regarded to be a primary co-operative bank as all the three basic conditions are not complied with, therefore, it is not a co-operative bank and the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i) – thus, the order of the CIT(A) is upheld and the AO is directed to allow deduction to the assessee u/s 80P(2)(a)(i) on the income generated for providing banking or credit facilities to its members – Decided in favour of Assessee.
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2014 (7) TMI 556
Penalty u/s 271(1)(c) of the Act – Declaration of necessary particulars – Failure to prove the submissions as false – Held that:- The assessee is a corporate entity and it had purchased a residential property after selling an immovable property, that LTCG arising on sale of property was not offered for taxation, that it claimed deduction u/s. 54 of the Act - there is a basic and fundamental difference between a debatable claim and an inadmissible claim - claims made under the second category have no legs of their own to stand, because such claims are tenable neither legally nor factually - disputable claims and inadmissible claims are to be treated differently - An assessee making a blatantly inadmissible claim is like a car driver who crosses the red light at the traffic signal and takes a chance of not being caught and not being penalised by the authorities implementing law. A person taking risk of not obeying the law of land has to be visited by penal provisions. Invoking penal provision and imposing exemplary penalty has become necessary as most of the returns filed by the assessee are being accepted by the department without scrutiny - if an assessee claims any deduction, he has to substantiate the claim by producing positive evidence-otherwise it cannot escape the rigor of penal provisions - penalty u/s 271(1)(c)cannot be imposed because an assessee takes a particular legal stand - just because something is mentioned in the return of income does not prove that the claim made in it is justified and allowable - Filing of return does not tie down the hands of an AO - The phrase particulars of income appearing in section 271(1)(c), has to be interpreted as facts leading to correct computation of income - whenever any material fact is not filed for correct computation of income or if filed is inaccurate, then penalty has to be imposed. Perusal of the provisions of Explanation 1 to the section provide that such penalty can be imposed only if the person fails to offer an explanation or offers an explanation which is found by them to be false or offers an explanation which assessee is not able to substantiate and fails to prove such explanation is bona fide and all the facts relating to the same and material to computation of total income have been disclosed by him. Bona fide belief of an assessee in making a claim has limited role for deciding the issue of penalty to be imposed u/s. 271(1)(c) - if an assessee, disregarding all the relevant facts and circumstances, interprets a section that suits its interest then such interpretation cannot be held bona fide belief - In the garb of the bona fide claim an assessee cannot escape levy of penalty - AO as well as FAA has given a factual and categorical finding that assessee had furnished inaccurate particular of income and had concealed income - Both of them found that explanation filed by the assessee was not as per the provisions of law. Onus was not on the AO to prove the negative - once a claim was filed by it u/s. 54 of the Act, it should have led some evidence that a reasonable prudent person would consider the same as sufficient - the issue is not about sufficiency of evidences, but non-existence of the claim that has been shown in books of accounts and that was verified to be true in the return filed - A return of income is not a just piece of paper it gives details of income, positive or negative of an assessee - It is expected from the assessees that they would filed true and accurate particulars of their income - The assessee is not a small trader of a remote place of India-it is a company that had filed return of income of more than 50 lakhs and is assisted by the professionals - A higher degree of responsibility is expected from the corporate entities - details filed by the assessee were not true and same amounted to furnishing of inaccurate particulars – thus, the order of the FAA is upheld – Decided against Assessee.
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2014 (7) TMI 555
Computation of LTCG - Banakhat cancellation charges – Cost of acquisition of land – cost of improvement - Held that:- The decision in Parshwanath Farm Versus ACIT, Cir. 7, Ahmedabad [2014 (7) TMI 367 - ITAT AHMEDABAD] followed – there is no obligation on the part of the assessee to pay any compensation as per the banakhat agreement, and it is not the assessee who has opted out from the banakhat agreement and it is the buyer on whose behest the banakhat cancellation agreement was executed - AO has rightly held that these payments of banakhat cancellation charges cannot be construed as payment made to retain the lands and in any case, it cannot be attributable to the cost of transfer of land, which has been added in the computation of capital gain in total acquisition cost. – Decided against Assessee.
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2014 (7) TMI 554
Deduction u/s 80IA of the Act – whether the assessee’s claim for deduction under section 80IA of the Act could be denied merely on the ground that these D.G. units were catering to the captive power requirement - Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee was engaged in the manufacture and sale of paper and paperboards, multi-layer boards, etc., was also into the business of power generation right from the AY 1996-97 - assessee was in the business of generation of power – the decision in Orient Paper Mills Ltd. [1989 (1) TMI 121 - SUPREME Court]- the claim of the assessee cannot be denied only on the ground that the DG set manufactured the power only for the captive consumption of the assessee - the provision of section 80IA(8) itself says that where any goods or services of the eligible business are transferred to any other business carried on by the assessee and the consideration, if any, for such transfer is recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the profit and gain for such transferred business shall be computed as if the transfer has been made at market value as on that date. The provisions of section 80IA themselves provide an answer and give a solution where there is a captive consumption of the finished goods of the eligible units - the order of the CIT(A) granting 80IA relief in respect of DG Units I, II, III and IV cannot be found fault with - the assessee has not operated the units by itself but got them operated through outsiders and the assessee is not entitled for 80IA relief is not a right approach - disallowing the assessee’s claim for deduction under section 80IA on the ground made out by the Revenue cannot stand – Decided in favour of Assessee. Claim of deduction u/s 80IA - Profit of the new Chemical Recovery Boiler – whether the steam generated by the assessee, which rotates the turbine for running of machines used for its manufacturing process and also steam alone, is a form of power or not - Held that:- The decision in SIAL SBEC BIOENERGY LTD. Versus DEPUTY COMMISSIONER OF INCOME TAX [2004 (3) TMI 342 - ITAT DELHI-C] followed - the generation / production of steam is also a form of power and the Unit-6 which is an undertaking set-up for generation of steam for its manufacturing process can be said to be for generation of power - it cannot be held that the assessee has not undertaken the generation of power in the year - The section provides that the assessee must begin to generate power during the period defined under the statue and the impugned assessment year definitely falls within that period – thus, the order of the CIT(A) is set aside and the assessee is eligible to claim deduction u/s 80IA with regard to Unit-6 also as a stand alone power generating undertaking – Decided in favour of Assessee. Exclusion of tax – Determination of transfer price - Whether the Element of tax or levy should be excluded for calculating 'Transfer Price' for the purpose of computation of deduction u/s 80IA in respect of power generating units – Held that:- The market value of supply of electricity by power unit of the assessee to the paper division of the assessee has to be seen from the angle, if the paper unit has to purchase the electricity directly from the Karnataka Electricity Board (as both the power units as well as the paper units are situated in Karnataka), then what is the price which would be paid by the paper unit to the Karnataka Electricity Board - The transfer of the price as contemplated in section 80IA(8) has to be seen having regard to the arm’s length condition i.e., what would be the price under uncontrolled transactions in the open market - the provisions of section 80IA(8) has also not been considered for arriving at a different conclusion - the provisions as contained in section 80IA(8) for determining the market price has to be followed which cannot be arrived by reducing the price by any other factors like taxes, duties, etc., as the same are embedded in the price – thus, the order of the CIT(A) is set aside – Decided in favour of Assessee. Expenses on repairs and maintenance of Plant and Machinery Building and Other Assets – Capital expenses or Revenue expenses – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the expenditure were incurred in connection with the roads, drainages, boundary walls and building, concert platform, plant and machinery, coal yard, bamboo yard etc. - The assessee has filed the details of the disallowance – the expenditures have resulted in acquisition of asset of permanent or semi-permanent nature having overlasting values - The expenditure was incurred as part of maintenance expenditure on the existing road, drainages, etc. - having regard to the details furnished, the expenditure in connection is to be considered as revenue in nature – Decided in favour of Assessee. Expenses on office taken on lease – Capital expenses or not – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee had taken office on lease and to make it fit for use the expenses were incurred on plastering, polishing, false ceiling, electrical fittings, fresh carpets etc. - The expenses were incurred on the assets not owned by the assessee - The expenditure is to give a better look to the office premises and does not result in acquisition of any asset of enduring nature - the expenditure so incurred is directed to be allowed as revenue expenditure – Decided in favour of Assessee. Claim of excise duty u/s 43B of the Act – CENVAT credit and PLA balance – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee has balance in CENVAT amount and PLA - the assessee had claimed deduction in respect of the said sums u/s 43B on payment basis - the balance lying in the CENVAT account should be allowed as deduction since it is nothing but actual payment - The balance in the CENVAT account is nothing but the excise duty paid on procurement of inputs and the same cannot be treated as advance - In the light of the provisions of section 43B, deduction u/s 43B should be allowed on payment basis irrespective of the year in which the liability is incurred - the deduction claimed u/s 43B on account of CENVAT credit is an allowable expenditure – Decided partly in favour of Assessee. Indirect expenses u/s 14A of the Act – No expenses incurred on dividend income – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the Tribunal has restored the matter to the file of the AO to verify the source of the investment whether they were out of borrowed funds or own funds - the AO has accepted the fact that no borrowed funds have been utilised for investments capable of earning exempt income and no disallowance of interest has been made - the assessee has made investment out of accumulated or surplus funds – thus, the interest should not be disallowed – matter remanded back - Decided partly in favour of Assessee. Exclusion of scrap sales from turnover - Internal consumption of power – Computation of deduction u/s 80HHC of the Act – Held that:- Insofar as the exclusion of the scrap sale is concerned, though this issue has been decided against the assessee by the Tribunal in earlier years – Relying upon CIT v/s Punjab Stainless Steel Industries [2014 (5) TMI 238 - SUPREME COURT] - sale proceeds of scrap cannot be included as part of the total turnover for the purpose of section 80HHC – thus, the order of the CIT(A) is set aside and the AO is directed to exclude the scrap sale from the total turnover while computing the deduction u/s 80HHC – Decided in favour of Assessee. Reduction of 90% of rental income – Processing and other income pertaining to cable division - Held that:- CIT(A) has merely followed the appellate order for the assessment year 2001-02 - The Tribunal has decided the issue of exclusion of 90% of the interest from the bank and others and 90% of the rental income from the profits of the business against the assessee - 90% of the rental income from the staff and 90% interest from bank and others should be excluded from the profits of the business in view of the Explanation (baa) for the purpose of computing deduction under section 80HHC - insofar as the 90% of the processing charges and other income pertaining to the cable, the same has been decided in favour of the assessee - the same should not be excluded from the profits while computing the deduction u/s 80HHC – Decided partly in favour of Assessee. Reduction of 90% of gross income instead of net income – Held that:- The decision in ACG Associated Capsules Pvt .Ltd. v/s CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] followed – the order of the CIT(A) is set aside and only 90% of the net amount of receipts in the nature as given in clause-1 of Explanation (baa) to section 80HHC should be reduced from the profits. In the present case, the receipts which is included in the profits of the assessee then only the net income same is to be deducted from the profits of the assessee for determining the profits of the business and not the gross amount of 90% of the receipts - the only net income is to be reduced from the rental income as well as interest – Decided in favour of Assessee. Deduction u/s 80IA of the Act – Reduction of profit of the business – Held that:- The decision in Associated Capsules P. Ltd. Versus Deputy Commissioner of Income-tax [2011 (1) TMI 787 - BOMBAY HIGH COURT] followed - section 80IA(9) does not affect the computability of deduction under various other provisions given under the head "C" i.e., deduction in respect of certain incomes as enumerated in Chapter-VIA. It can only affect the allowability of such deduction under other provisions so that the aggregate deduction under section 80IA and other provisions under heading "C" of Chapter-VIA do not exceed 100% of the profit of the business - both the deductions can be allowed independently so that aggregate deduction u/s 80IA and section 80HHC do not exceed the 100% profit of the business – thus, the order of the CIT(A) is set aside and the deduction u/s 80IA cannot be reduced from the profit of the business for the purpose of computing deduction u/s 80HHC – Decided in favour of Assessee. Deduction u/s 80HHC of the Act – Computation of adjusted book profit u/s 115JB of the Act – Held that:- The decision in CIT v/s Bhari Information Technology Systems Pvt. Ltd. [2011 (10) TMI 19 - Supreme Court of India] followed - the deduction claimed by the assessee u/s 80HHC has to be worked out on the basis of adjusted book profit u/s 115JA and not on the basis of profits of the business computed under the normal provisions of the Act, which are applicable for the computation of profit and gain of the business – Decided in favour of Assessee. Loss on sale of investment – Speculative loss as provided in Explanation to section 73 – Held that:- The assessee company has made a claim of loss on sale of investments – the Tribunal in the earlier assessment year of the same assessee has been held that on correct interpretation of Explanation to section 73, it will not be applicable because the AO himself has stated in the order that the assessee’s main business is not for the purchase of sale of shares but consist of paper mill and optical fiber cables - From plain reading of the provisions of Explanation to section 73, it is evident that that once the AO himself has agreed that the assessee is not engaged in the business which consist of purchase and sale of shares and it is mainly an investor, then the deeming provisions, as envisaged in the Explanation will not apply – Decided against Revenue. Deduction u/s 80M of the Act - Dividend income from investments made in shares in mutual funds - Held that:- The assessee had huge surplus funds which were interest free and also there were availability of interest free funds in the form of sales tax deferred loan, the same has not been disputed - The assessee’s investment which has generated dividend income is far less than the availability of interest free funds - there can be no presumption that borrowed funds were utilized for making the investment, so as to warrant any kind of disallowance of interest – Decided against Revenue. Expenses u/s 14A of the Act - Sufficient fund available as interest free from sales tax deferral loan – Held that:- It cannot be made u/s 14A, assessee has huge interest free surplus funds, which is evident from the fact that it has its own funds of ₹ 149.29 crores - it also had sum of ₹ 63.20 crores on account of retention of sales tax difference in this year - the investment to the tune of ₹ 49 crores that too major portion is coming from the earlier years, it can be said to be made out of the surplus funds only – Relying upon The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - no disallowance on account of interest can be made. The directors’ fees and expenses is ₹ 13 lakhs whereas, auditor’s remuneration is ₹ 5.53 lakhs - If the ratio on which the Assessing Officer has worked out the disallowance on entire expenditure, then on that ratio, the disallowance under the administrative expenses will come down to ₹ 33,253 - on a reasonable basis, the sum of ₹ 50,000 is quite reasonable for allocating administrative expenses for the purpose of making the investment on which the assessee has earned exempt income – Decided partly in favour of Revenue. Incremental wages paid during the previous year – Held that:- There is no dispute that the incremental wages from the period from 1st January 2003 to 31st March 2004, is an allowable claim - The assessee has debited wages of 15 months in this year in accordance with the AS/4 - "contingencies and events occurring after the balance sheet date". In this case, the agreement with the labours was entered on 20th April 2004 i.e., after the closing date of Balance Sheet of 31st March 2003 - the assessee was entitled to make the entry in this year and to claim such an incremental wages even for the period of three months ie., 1st January 2003 to 31st March 2003 in this year only – Decided against Revenue. Levy of interest u/s 234B and 234D of the Act – Violation of principles of natural justice – Held that:- The decision in Imami Ltd. v/s CIT, [2011 (6) TMI 163 - CALCUTTA HIGH COURT] followed - the amended provision of Section 115JB having come into force with effect from April 1, 2001, the appellant cannot be held defaulter of payment of advance tax - on the last date of the Financial Year preceding the relevant Assessment Year, as the book profit of the appellant in accordance with the then provision of law was nil, we cannot conceive of any “advance tax” which in essence is payable within the last day of the financial year preceding the relevant Assessment Year as provided in Sections 207 and 208 or within the dates indicated in Section 211 of the Act which inevitably falls within the last date of Financial Year preceding the relevant Assessment Year - Consequently, the assessee cannot be branded as a defaulter in payment of advance tax and it would be nevertheless asked to pay interest in terms of Section 234B and Section 234C of the Act for default in making payment of tax in advance which was physically impossible - no interest u/s 234B and 234D can be levied on the disallowance made u/s 115JB in view of the retrospective amendment – Decided in favour of assessee. STCG on DG sets from block of plant & machinery – Held that:- The short term capital gain arises in case of depreciable assets only if the full value of consideration exceeds the expenditure incurred wholly and exclusively in connection with such transfer to be WDV of the block of assets at the beginning of the previous year and the actual cost of any asset falling within the block of assets acquired during the previous year - It is only then the excess consideration shall be deemed to be short term capital gain – CIT(A) has given a categorical finding that the sale consideration is far less than the sum mentioned in the three parameters – thus, there was no reason to deviate from the order of the CIT(A) – Decided against Revenue.
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2014 (7) TMI 553
Commission expenses – Proof of services rendered not furnished – TDS not deducted – Held that:- Payment of commission made to M/s Trading Post, the assessee filed an agreement dated 1-9-2009 entered between M/s Trading Post and assessee submitted that the payment was made to M/s Trading Post in connection with the services rendered by it and it was a non-resident – revenue submitted that all the additional evidences need to be examined at the end of the AO – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for further explanations and information from the assessee. Claim for damaged goods – Held that:- Revenue contended that CIT(A) has deleted the disallowance by considering certain new evidences and they were not confronted to the AO resulting in violation of Rule 46A of IT Rules – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication. Foreign travelling expenses – Held that:- Assessee was specifically asked as to whether the assessee could substantiate claim relating to Shoe fairs that were claimed to have been held in foreign countries and the participation by the assessee by bringing on record any type of correspondences, brouchers, invitation etc. - the assessee could furnish the relevant details, if an opportunity is given - the assessee is vehemently contending that the foreign trips were undertaken by the partners in connection with participating in Shoe fairs and further the claim could be proved with evidences, the assessee may be given one more opportunity to substantiate its claim - the AO has accepted the submissions of the assessee that she was assisting the partners in the foreign countries in AY 2011-12 – thus, the claim of the assessee also requires proper examination – thus, the matter is to be remitted back tt he AO for fresh examination – Decided in favour of Revenue.
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2014 (7) TMI 552
Capital gain on sale of agricultural land - Determination of nature of the land sold – Held that:- As Decided in assessee’s own case for the earlier assessment year, it has been held that there is nothing on records to show that old agricultural land or agricultural operation was being carried on the same land - the land in which there were several claimants, it is unimaginable that one of the claimants can carry on the agricultural operation to the detriment of others interest and others would be silent spectators - there was search and seizure operations in the group and consequently proceedings u/s 153A were initiated - AO neither accepted the agricultural income nor gave credit to the source shown for various deposits in the bank accounts, the issue in other group has been restored to CIT(A) as a whole for deciding the appeals denovo - the claim of agricultural income in earlier years and also source of income which was brought to tax as unexplained cash credits - the additional grounds raised are not adjudicated by the CIT(A) – thus, the matter is remitted back to the CIT(A) for fresh adjudication – Decided in favour of Assessee.
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2014 (7) TMI 551
Jurisdiction u/s 263 of the Act - Claim of deduction u/s 80IA of the Act – Held that:- CIT has wrongly considered the assessment order as erroneous and prejudicial to the interests of the revenue - assessee had filed revised return making higher claim, the AO has not considered it and has passed the order allowing the original claim only - The apprehension of the CIT that ‘non-consideration of revised return at the time of assessment is a mistake’ cannot be accepted as the so-called mistake has not been rectified, so far - the order of CIT setting aside the assessment cannot be upheld - AO has to re-do assessment after considering the claims made in the revised return of income by the assessee which means, the order of CIT may lead to a situation where it can be a prejudicial order to the interests of revenue, but not the original assessment order which was revised – thus, the order of the AO cannot be considered as erroneous and prejudicial to the interests of revenue – thus, the order of the CIT as twin conditions for invoking jurisdiction u/s 263 have not been complied with and restore the order of AO – Decided in favour of Assessee.
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2014 (7) TMI 550
Validity of block assessment – Non issue of notice u/s 143(2) for making assessment u/s 158BC – validation u/s 292B - Held that:- The appeal was filed in the year 1997 and for last so many years it remained pending for some or the other reasons including the evidence of issuance of notice u/s 143(2) by the AO - notices issued u/s. 142 and 143(2) of the Act operate in different fields and they have been incorporated in the Act for specific purposes-they are not substitute for the other – Relying upon Virendra Dev Dixit Versus Assistant Commissioner of Income-tax [2010 (4) TMI 733 - Allahabad High Court] - for assessing the income of the block period AO is required to issue notice u/s. 143(2) of the Act -AO has not followed the mandatory pre-condition for assessing the income of the block period, so, we quash the order passed by the AO. Also in Assistant Commissioner of Income Tax & Anr. Versus M/s. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] it has been held that assessment completed u/s. 158BC without issuing a notice u/s. 143(2) is illegal and has to be quashed, that notice issued u/s. 142 cannot be equated u/s. 143(2) of the Act, that provisions of section 292BB of the Act are curative in nature and are applicable from 2008 only - the AO had not complied with the mandatory provisions, as envisaged by the provisions of the Act i. e. not issuing the notice u/s. 143(2) within the stipulated time so order passed by him is quashed - the order passed by the AO was without jurisdiction - Decided in favour of Assessee.
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2014 (7) TMI 549
Addition u/s 41(1) - outstanding liability since long – hawala transactions - Necessity of verification of the genuineness of creditors – Held that:- confirmation of the account statement as appearing in the assessee’s books of account is bearing the pan numbers - Even though the said confirmation is accompanied by a certificate by the ld. AR to the effect that the same stood furnished before the A.O., it is clearly false in-asmuch as the assessment order is dated 19.12.2011. How could a transaction dated 28.03.2012, which would only be confirmed by the creditor on or after the said date, be reported to the A.O. on 19.12.2011, even as the hearing before him would have presumably closed prior thereto? This falsity on behalf of the assessee is highly condemnable to say the least and needs to be depreciated in the strongest terms. - What anguishes us equally is that the same was not pointed out by the ld. DR during hearing, and which is particularly astonishing considering that the Revenue’s main charge is that the concerned creditors are not genuine traders but only hawala operators, providing accommodation entries, and that evidence had been admitted and acted upon by the ld. CIT(A) in contravention of rule 46A. - matter remanded back for fresh adjudication. Additions towards unconfirmed creditors - Held that:- No confirmation or any other material evidencing the existence of the liability to the other party, Swastik Enterprises, stands furnished at any stage, with the notice to him by the AO returning unserved, for which again no explanation stands furnished by the assessee - The amount is outstanding since 09.07.2003, i.e., for a period of almost six years as at the end of the relevant previous year, and for over 9 years by the time the matter stood decided by the first appellate authority - Nor reason for the same stands advanced at any stage, and even no claims with regard thereto were made, i.e., after a further lapse of another 1 ˝ years – it is clearly unproved and the application of section 41(1) in relation to the credit is confirmed. - Additions confirmed - Decided against the assessee. Addition u/s 68 of the Act – Genuineness of credit cannot accepted – Held that:- There is no finding to that effect that the payment to the stated extent may find reflection in the assessee’s books of account for the following year - it needs to be appreciated that if the entries in books were final or conclusive, no addition u/s 68 could at all be made - It is on the failure of the assessee to prove the veracity or the truth of the entries appearing in his accounts, which would lead to invocation of section 68 or any other relevant provision for that matter – Relying upon CIT vs. Kamaraia Pandian [1983 (9) TMI 65 - MADRAS High Court] – decided against Assessee.
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2014 (7) TMI 548
Condonation of delay – Delay of 567 days – Revision u/s 263 of the Act – Revision order misplaced by accountant - Held that:- The assessee has stated that its Accountant Mr. J. Devaraj is in-charge of tapals and usually receives letters from various government departments - there is nothing on record to show that the said Mr. J. Devaraj has misplaced any other communication received from any other government department during the said long period of more than 1-1/2 years - It looks as if the revision order alone was misplaced by the Mr. J. Devaraj - all the legitimate doubts are still remaining open and not at all clarified or cleared by the assessee - an assessee usually does not derive any advantage by not filing an appeal in time and the case of condoning the delay in filing an appeal should always be considered very sympathetically and in all fairness - it is also equally important to see that the assessee was reasonably diligent in matters relating to filing of appeal - The delay must be reasonably explained - the assessee has not explained the reasons for delay in a convincing and satisfactory manner before the Tribunal - When the Tribunal is not at all satisfied on the reasons submitted by the assessee for the delay caused in filing the appeal, it is not permissible in law to condone the delay only on the ground of fairness – thus, the delay of 567 days cannot be condoned in filing the appeal – Decided against Assessee.
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2014 (7) TMI 547
Interest claimed on partners' capital contribution made to chit funds and interest claimed on payment to retired partners' outstanding balance - claim of deduction from income from other sources - nexus with lease rent received on lodge building – Held that:- Income of the assessee from lease rent of lodge is assessed as income from other sources - While computing the income from other sources any interest paid on money borrowed for the purpose of investment so as to earn income from such asset, then such interest on borrowal is to be considered wholly and exclusively for the purpose of earning income as per the provisions of s. 57(iii) of Income-tax Act, 1961 - The dominant purpose was to be for the purpose of acquisition of assets. If the funds are not borrowed to invest them for the purpose of earning income, the provisions of s. 57(iii) cannot be applied - although the borrowing may have a remote connection with the assessee's earning of income, the dominant purpose was not to earn lease rent - it cannot be said that money was borrowed wholly and exclusively for the purpose of earning lease rent from the lodge - the assessee failed to establish the link between the investments made in chit funds by the Managing Director and role of these investments in earning lease rent - the disallowances of interest on chit funds as well as interest to retired partners is confirmed – Decided against assessee. Validity of proceedings u/s 147 r.w.s. 150(1) of the Act – Held that:- Re-assessment proceedings u/s. 147 of the Act were initiated after expiry of six years from the end of relevant assessment year and the same is time barred in terms of s. 149(1) of the Act, since the issue of notice u/s. 148 r.w.s. 149(1) can be said to have been barred by limitation and also provisions of s. 150(1) cannot be pressed into service – thus, the order of the CIT(A) is upheld – Decided against Revenue.
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2014 (7) TMI 546
Allowability of deduction u/s 10B of the Act – Statutory provisions not complied - Failure to produce the Ratification by the Development Commissioner in the Instruction No.2/2009 of the CBDT dated 09.03.2009 – whether it is enough if the assessee is registered with Software Technology Park of India as a 100% EOU or it is also necessary for the assessee to have the approval of the Board constituted by the Central Government under S.14 of the Industries (Development and Regulation) Act, 1951 - Held that:- The CIT(A) was rightly of the view that the assessee as eligible for deduction u/s 10B of the Act – the decision in VSN Makro Technology P. Ltd. V/s. ACIT [2011 (1) TMI 1275 - ITAT HYDERABAD] followed - the assessee have been registered with the STPI, is entitled for deduction u/s 10B of the Act – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.
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Service Tax
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2014 (7) TMI 586
Waiver of pre deposit - Online Information and Database Access or Retrieval Service - Tribunal held that there was no prima facie case in favour of assessee hence demand ₹ 147 crore out of total demand of ₹ 187 crores - while ordering pre-deposit tribunal distinguished the decision in the case of United Telecom (2008 (8) TMI 191 - CESTAT, BANGALORE) wherein tribunal observed that ownership of data is relevant - Held that:- The Tribunal found that out of total service tax demand of ₹ 187 crores an amount of ₹ 147 crores is within the normal period of limitation. However, we are of the opinion that the Tribunal having noted the financial hardship should have considered the claim of the Appellants that they are suffering huge losses. The Appellants pointed out that for the quarter ending on 30.09.2013 the net loss incurred is ₹ 1246.39 crores. However, the Tribunal was informed that the current assets show an amount of ₹ 4438.85 crores as on 30.09.2013. In view of huge assets available the Appellants should be put to terms. The Tribunal's direction to deposit a sum of ₹ 147 crores out of total demand of ₹ 187 crores and when the point was imminently arguable, visits the Appellants with serious consequences. - Decision in the case of Sri Srinivasa Theatre and others v/s Government of Tamil Nadu and others [1992 (3) TMI 308 - SUPREME COURT OF INDIA] followed. Tribunal could have properly balanced the rights and equities that to a limited extent a case for interference in the impugned order and direction is made out. Though not treating this order as a precedent, but confining and restricting it to the facts and circumstances of the Appellant's case that we entertain this Appeal. We entertain it only on a limited point that when the Tribunal is exercising its discretion it ought to be present its mind that if there are conflicting opinions and rendered by its different Benches, then, the Assessee should not be visited with such consequences as would amount to denying the right of appeal or completely prejudicing the case on merits. Though the provision of law in this case makes no reference to ownership, but there was an order passed making it a relevant test, then, such condition as is imposed in the present case cannot be said to be justified - order modified and Tribunal is directed to this extent that in the event the Appellants furnish a bank guarantee of a nationalized bank in the sum of ₹ 50 crores within a period of Eight weeks from the date of receipt of a copy of this order, there will be waiver of condition of predeposit and stay of recovery pending the hearing and final disposal of the Appeal before the Tribunal. It would be open for the Appellant to deposit part of the amount in cash and the balance could be secured by a bank guarantee as above - stay order modified - Decided partly favour of assessee.
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2014 (7) TMI 585
Validity of recovery proceedings - Non payment of 50% of the tax by December 31, 2013 as per the VCES scheme - Interpretation of Section 107 and Section 110 of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 - petitioners raised a point that when the proviso appended to Section 107 entitles the declarant to pay the amount after the period provided under Sub-section (3) and Subsection (4) with interest till December 31, 2014, the authorities cannot take any recourse for recovery thereof including the steps for arrest of the declarant. - It is tried to be contended by the respondent that Section 102 which contemplates for removal of doubts makes it abundantly clear that the immunity provided under the scheme would not be available to the declarant who committed default for compliance of the conditions relating to the deposit of tax dues. Held that:- On meaningful reading of the provisions contained therein it appears that the immunity as to any benefit, concession or immunity granted under Section 96 shall not be available to the defaulting declarant. The aforesaid provisions have to be read conjointly with section 110 of the said Act. If default is committed under the scheme the consequences provided in the scheme is to be adhered to and the authority cannot travel beyond the boundaries set therein. The benefit under the scheme is provided to a person against whom no enquiry or investigation or other proceeding are initiated. Section 106 of the said Act makes the position clear and, therefore, the person who voluntarily declare his liability to pay service tax, if commits defaults in complying the provisions contained under the said scheme, the authorities are bound to take action under the provisions which provides for the steps to be taken for non-compliance of any of the provisions of the said scheme. Proviso of section 107(4) for recovery alongwith interest is applicable only in respect of Sub-section (4) of Section 107 and cannot be stretched to Sub-section (3) of Section 107. The authorities can take recourse under Section 110 of the said Act, in the event any default is committed under the said scheme. - Decided against assessee.
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2014 (7) TMI 584
Maintainability of writ petition - Writ filed by tenant for services provided by landlord - Held that:- Following decision of DEVYANI INTERNATIONAL Versus UNION OF INDIA & OTHERS [2011 (3) TMI 7 - KARNATAKA HIGH COURT] - as the tenant does not fall within the definition of the term service provider, he cannot maintain the writ petition to challenge the imposition of service tax - Therefore, petitioner cannot maintain these writ petitions as, admittedly, they are the tenants and do not fall within the definition of service provider - Decided against petitioner.
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2014 (7) TMI 583
Waiver of pre deposit - Demand of service tax - Construction service - whether the commercial and industrial buildings constructed by the appellant for M/s GETCO (M/s Gujarat Energy Transmission Corporation Ltd.), M/s PGVCL (M/s Paschim Gujarat Vij Company Ltd.), M/s GTL Infra Ltd, M/s TPS Sikka (M/s Thermal Power Station, Sikka& Gandhinagar), M/s GSCSC (M/s Gujarat State Civil Supply Corporation) etc. will attract Service Tax - Held that:- Appellant is mainly undertaking the construction activities of Government projects which are either offices or the residential construction. The constructed buildings are not meant for commercial activities like making of shops etc. for letting out etc. as envisaged by the Revenue in CBEC Circulars relied upon by the appellant. The issues raised by the appellant are contentious one and need to be gone into in greater depths which can be done only at the time of final hearing. In view of the above and based on the case laws relied upon by the appellant an amount of ₹ 2,30,700/-, already paid by the appellant is considered as enough deposit for granting stay on the remaining amounts. It is accordingly ordered that there will be stay on recovery of the remaining amounts till the disposal of the appeal. - Stay granted.
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2014 (7) TMI 582
Construction services - failure to pay Service Tax when they rendered service as a sub-contractor without disclosing these facts to the department - appellant claims that service tax has been paid by the said principal and, therefore, there cannot be a double taxation for the same services. - Invocation of extended period of limitation - Held that:- According to the petitioners, referring to the circular dated August 23, 2007, the Department itself was uncertain whether the services rendered by the sub-contractor could at all be brought within the purview of taxable service attracting the service tax and such anomaly was clarified by issuing the aforesaid circular. This court, therefore, finds that all these aspects have not been dealt with by the Tribunal but the Tribunal has proceeded in a circuitous manner which is not sustainable. There is no recording of the Tribunal on the merits and this court, therefore, feels the said application should be considered afresh. - matter remanded back to tribunal - Decided in favour of assessee.
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2014 (7) TMI 581
Demand of service tax - Service tax already paid but documents were not produced - Held that:- it is the case on behalf of the petitioner that as such the petitioner had already paid the service tax within stipulated time for which the order-in-original has been passed. It is the case on behalf of the petitioner that the petitioner could not point out the number of documents before the first adjudicating authority which the petitioner has produced before this court. However, considering the fact that the documents which are produced on record before this court and now which are relied upon, were not produced before the adjudicating authority, we are of the opinion that the matter be remanded to the adjudicating authority to consider the show-cause notice afresh and after giving opportunity to the petitioner to produce on record relevant documents to prove that in fact the petitioner has already paid service tax and therefore nothing is due and payable by the petitioner. - Matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 580
Irregular availment of CENVAT Credit - Availment of credit for Unit I and Unit III - non distribution of input service credit by the Head office - Penalty u/s 11AC - Held that:- The registered office and Vatva office both are located in the same place and appellant has simply utilized the credit at Vatva instead of distributing it to various units. As submitted by the learned counsel, during the relevant period, there was no restriction for utilization of such credit without allocating proportionately to various units. The omission to take registration as an Input Service Distributor can at best be considered as procedural irregularity and in view of the decisions cited, has to be considered sympathetically. Further, it is also noticed that appellant has not got any extra benefit by doing this. In fact from the statement of Shri Chandresh C. Shah, as explained that above Cenvat credit available to them, 20% of service tax payable only was paid and balance was paid in cash. In fact, proper distribution would have enabled them to utilize full credit. It would show that the exercise is totally Revenue neutral and no loss has been caused to the Revenue (in fact Revenue has gained). In the absence of any legal requirement to avail credit based on the services received during the relevant time the procedural irregularity has to be ignored and the demand confirmed has to be set aside on this ground - it is not the case of the department that the credit was not at all admissible. The case of the department is that the credit is admissible but should have been taken in Unit-3. - Following decision of Doshion Ltd. [2012 (10) TMI 952 - CESTAT AHMEDABAD] - Assessee made out a case in their favour - demand for Cenvat credit with interest and penalty equal to the same imposed under Section 11AC of Central Excise Act, 1944 are set aside - Decided in favour of assessee.
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Central Excise
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2014 (7) TMI 575
Method of valuation - assessee paid the Duty on MRP minus abatement - retail sale or not - revenue demanded the duty on the basis of transaction value u/s 4 - Held that:- In terms of Rule 2A(b) of the SWM Rules, the provision of Chapter II of these Rules would not apply to the packaged commodities meant for "Industrial Consumer" or "Institutional Consumer". In terms of explanation to this Rule, "Institutional Consumers'" means those consumers who buy packaged commodities directly from manufacturers/packers for service industry like transportation including airways, railways or any other similar service industry and "Industrial Consumers" means those consumers who buy packaged commodities directly from manufacturers/packers for using the same in their industry for production etc. Since M/s. ELCOT are neither institutional consumer nor industrial consumer, in respect of sale of CTVs by the appellant to them, MRP was required to be declared in term of SWM Rules and accordingly, the Provisions of Section 4A would be applicable. The Appellant have paid duty on this basis only i.e. on the value determined under section 4A. - Impugned order not sustainable - Decided in favour of assessee.
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2014 (7) TMI 574
Waiver of pre-deposit - CENVAT credit availed on supplementary invoice issued by Job worker - belated payment of service tax by the Job Worker on BAS service - On the basis of the audit objection, the job worker paid the service tax and supplementary invoices were issued - denial as per Rule 9(1)(bb) of the CENVAT Credit Rules, 2004 - Held that:- During the course of an audit objection, the job worker paid the service tax and raised supplementary invoices. As no show-cause notice was issued to the job worker to determine the fact that they have evade the payment of service tax by way of fraud, collusion or willful mis-statement or suppression of facts or contravention of Central Excise Act/Rules. Therefore, prima facie the applicant has made out a case for availment of service tax as per Rule 9(1)(bb) of the Central Excise Rule, 2004. Accordingly, waiver of the requirement of pre-deposit of the entire amount of duty, interest and penalty and stay recovery thereof during the pendency of the appeal is granted - Stay granted.
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2014 (7) TMI 573
Waiver of predeposit of CENVAT credit - Denial of Credit based on photocopy of invoices, consolidated original Bill of Entry and on the ground that the procedure as per Board's Circular No. 31/2007-Cus. dated 29.8.2007 was not followed - Held that:- denial of credit on the basis of consolidated original Bill of Entry is, prima facie, covered by the decision of the Tribunal in the case of Fusion Electronics (P) Ltd. (2010 (11) TMI 285 - CESTAT, NEW DELHI). Tribunal in the case of Hi-Tech Inks P. Ltd. (2013 (12) TMI 932 - CESTAT AHMEDABAD) after considering the various decisions observed that CENVAT credit is not eligible on the basis of the photocopy of the Bill of Entry. Hence the applicant failed to make out a prima facie case for waiver of entire amount of dues. It is seen that the adjudicating authority had already allowed credit on the basis of the original copy of the Bill of Entry. The applicant had not filed any affidavit or FIR etc. in respect of loss of original copy of Bill of Entry - Conditional stay granted.
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2014 (7) TMI 572
Waiver of pre deposit - CENVAT Credit on inputs and capital goods - claim of cenvat credit as revenue expenditure in the Income tax return filed - adjudicating authority claimed interest for the period 1.4.2011 to 13.10.2011 under rule 14 of Cenvat Credit Rules on the ground that they have claimed revenue expenditure under Income Tax Act in March 2011 - Held that:- there is no dispute that appellant availed cenvat credit of ₹ 72,80,926/- in the financial year 2010-11. They have also claimed revenue expenditure of the said amount in the income tax return in the financial year 2010-11. It was reversed only in the next financial year as on 14.10.2011 - benefit of cenvat credit and the income tax benefit cannot be available simultaneously - Prima facie, it appears that the applicant is not eligible to avail credit where they have taken benefit of revenue expenditure under the Income Tax Act. In this context, demand of interest under Rule 14 of CCR is prima facie justified - stay granted partly.
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2014 (7) TMI 571
Denial of CENVAT Credit - Availment of credit on repair and maintenance of plant and machinery - Revenue contends that said activity cannot be held to be an activity associated with the manufacturing process and as such cannot be called as cenvatable input - Whether the appellant is entitled to avail the CENVAT credit of duty paid on welding electrodes and gases used for repair and maintenance of plant and machinery - Held that:- welding electrodes used for repairs and maintenance of plant and machinery would be eligible for Cenvat credit. Moreover, the definition of ‘input’ as given in Rule 2(k) of Cenvat Credit Rules, 2004 covers the goods used ‘in or in relation to manufacture’ of final products, whether directly or indirectly which is a much wider than the expression ‘used in manufacture’. While repair or maintenance by itself is not a process of manufacture, this activity certainly has nexus with manufacture of final product and would be covered by the expression – ‘used in or in relation to manufacture of final product’ as no manufacturing activity is possible with malfunctioning machinery. In view of this, impugned order is not sustainable - Following decision of Sree Rayalaseema Hi-Strength Hypo Ltd. v. CCE & C, Tirupati [2012 (11) TMI 255 - ANDHRA PRADESH HIGH COURT] - decided in favour of assessee.
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2014 (7) TMI 570
Duty demand - Shortage in stock - input output ratio - procurement of duty free goods for export - general of wastage - manufacture of EAU De Perfume containing alcohol 78% - Held that:- there is no evidence adduced by the department that any quantity of shortage was found in the Appellant's premises. Each & every raw material and inputs procured duty free have been fully utilized in the manufacture of export goods, wastage generated during the process of finished exempted goods has been fully accounted for and the duty has been paid by the Appellants. The duty has been demanded on shortage/wastage whereas shortage of goods would only mean that there has been either clandestine manufacture and utilization of goods not declared to the authorities or that there has been clandestine clearance of raw materials or inputs as such. There is no such charge of either in the Show Cause Notice or in the Order-in-original. Wastage generated during the course of manufacture of the finished goods out of raw material procured duty free for export with permission of the department, however the Appellants have not proved the input output ratio 100:100 but Appellants have already paid duty on the price of the wastage occurring in the course of manufacturing, hence there is no short payment of duty on this ground. I further find that wastage/shartage occurred during the course of the manufacture of the finished goods for export is also covered under the para 2.2.2. part VI Chapter 7 Central Excise Manual, as the wastage is genuine has to be accepted as unaccounted loss, moreover the Department has not proved anywhere any clandestine removal of raw material or finished goods, therefore the demand is not sustainable under Section 11A of Central Excise Act, 1944. - Decided against Revenue.
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2014 (7) TMI 569
Duty demand - Demand based on usage of electricity - Revenue contends that there was excess consumption of electricity, thus leading to a charge on the part of the Revenue that appellant have manufactured excess quantum of their final product than what they have reflected in their statutory records - Held that:- The appellants are not disputing the demands confirmed on the basis of entries made in the daily production records as also in the ledgers of the traders and also on the basis of raw materials supplied by the inputs supplier - apart from the electricity consumption, which according to the Revenue is much on the higher side when compared to the electricity consumed during the period 1.1.99 to 16.2.99, there is virtually no evidence against the appellant reflecting upon the excess production and clearance. We note that the clandestine removal is a serious charge against the assessee and inasmuch as the burden for the same is upon the Revenue, the same is required to be discharged by production of tangible and positive evidence. Merely because during the period in question the appellant was indulging in clandestine activities, would not ‘ipso facto’ lead to establish that they have been indulging in such activities even during the past period. To manufacture such a quantum of their final product, they need raw material and the actual production of the same and then the clandestine clearance to their buyers. The Revenue has neither established that as to who supplied the raw material to the appellant during the said longer period of two years. There is also no statement of any person actually doing the manufacturing activity so as to reveal that excess manufacture was done by them during the period. Further no buyer of the assessee stand identified by the Revenue. We also note that the statement of Shri Ravi Gupta only clarifies the position for the period from 1.1.99 to 16.2.99 and does not relate to clandestine activities for the past period. In the nutshell it can be said that there is virtually no evidence on record, except the electricity consumed, to establish the clandestine activity of the appellant. - Matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 568
Duty demand - Tribunal Confirmed demand - Assessee filed appeal before Supreme Court - When matter was pending before Supreme Court Kar Vivad Samadhan Scheme was introduced - appellant filed a declaration in terms of section 88 of the Kar Vivad Samadhan Scheme while matter was still pending before supreme Court - amount of ₹ 10,94,130/- was also paid by them - application made under Kar Vivad Samadhan Scheme was decided by the Designated Authority directing the appellant to make a full and final settlement of their tax arrears to the extent of ₹ 29,80,762.50 - appellant did not deposited the tax so determined and also did not withdraw the petition filed by them before the Supreme Court within a period of 30 days from the date of issuance of certificate by the Designated Authority, the matter was held as settled before in terms of Kar Vivad Samadhan Scheme - Subsequently the Supreme Court decided the petition filed by the appellant in their favour and set aside the orders of the lower authorities confirming demands against them - Denial of refund claim of amounts paid by assessee. Held that:- When the amount of ₹ 10,94,130/- deposited by the appellant in terms of KVSS Scheme, at the time of filing the declaration stand appropriated by the Commissioner towards confirmed demand, the same becomes a part and parcel of the demand confirmed by the Commissioner and is placed on the same platform at which the other deposits made by the assessee are placed. As such, when the appellants succeed at the Supreme Court stage, they become entitled to the refund of entire duty either directly deposited by them or appropriated by the Commissioner. As such, in my view the revenues technical objection that the provisions of Section 93 of the Finance Act, 1998, do not allow the refund of deposits made by assessee at the time of making a declaration cannot be appreciated inasmuch as by appropriating the said deposits towards the confirmed duty demand, the deposits inter alia remain deposit in terms of Section 88 of KVSS Scheme - Assessee entitled to get refund of disputed amount - Decided in favour of assessee.
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2014 (7) TMI 567
Denial of Exemption under Notification No 12/94 CE dated 01.03.1994 to Lubricating Preparations - Classification of oil manufactured by assessee - Lubricating oil or rolling mill oil - Equivalent penalty on account of suppression and willful misdeclaration of facts - Held that:- manufactured product "Servo Steerol C 6" fall under first part of the said tariff sub- headnig which is evident from the uses of the "Servo Steerol C 6" mentioned in the literature of the Appellants - meaning of speciality oil referred to in the said Notification for the purpose of allowing total exemption from duty would not be relevant in interpreting the eligibility of present Notification in allowing concessional rate of duty to 'lubricating preparations' when the said exemption Notification had been withdrawn from 1994 by the Govt., obviously, considering the same as no more relevant/necessary. Applying the meaning of lubricating preparation as mentioned in HSN and the actual use of the product as reflected by the Appellant in their literature, the said "Servo Steerol C-6" are used as lubricating preparations. Consequently, the Appellant are eligible to the benefit of concessional rate of duty i.e. 10% for the clearances of the said products during the relevant period as prescribed under Notification No.12/94-CE dated 01.03.1994 and amended by Notification No.14/95-CE dated 16.03.1995. - Decided in favour of assessee.
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2014 (7) TMI 566
Levy of interest on differential duty raised through supplementary invoice - retrospective increase of price of finished goods - Held that:- Payment of differential duty at a later date is clearly a case of short payment of duty though completely unintended and without element of deceit but interest is payable for the delayed payment. The Hon'ble Supreme Court upheld the demand of interest and set aside the penalty. It is seen that the said order of the Supreme Court was followed in later judgement in the case of CCE Vs International Auto Ltd. - [2010 (1) TMI 151 - SUPREME COURT OF INDIA]. In view of that, we uphold the demand of interest and set aside the penalty - Decided partly in favour of assessee.
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CST, VAT & Sales Tax
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2014 (7) TMI 579
Levy of penalty and interest when there was no charging section - Rejection of application under Samadhan Scheme - Bar of limitation - Maintainability of appeal - Held that:- The Period of limitation has been provided under the Act for the assessees to prefer or avail the statutory remedies under the Act and not for a Writ Petition under Article 226 of the Constitution of India - Any levy of tax including interest or penalty under any taxing statute must be in consonance with the Act. Therefore, any claim questioning the jurisdiction of the authority to levy tax can be raised by way of a Writ Petition de hors the availability of alternative remedy, as it is only a self-imposed restriction of the Courts. In the present case, considering that the locus standi of the respondents to demand interest on Additional Sales Tax and penalty is questioned, the Writ Petition is held to be maintainable. During the relevant assessment year, there was no provision to levy interest on belated payment of additional tax or in other words, there was no provision enabling the applicability of Section 24(3) towards tax due, under the Act - interest cannot be demanded for belated payment on Additional Sales Tax, as there is no substantial provision in the TNAST Act itself and similarly, no penalty can be levied, as there is no charging Section under the TNAST Act to levy penalty for the relevant Assessment year. The provisions of the TNGST Act cannot be extracted or read upon for the purpose of levy of interest or penalty under the TNAST Act. The validating Acts are applicable only to the assessment under TNGST Act. Further, in view of the bar under Article 265 on the state, the question of waiver is not applicable to a taxing statute - proceedings of the first respondent, dated 26.04.2004, confirmed by the proceedings of the second respondent, dated 12.09.2008, are set aside insofar as the levy and demand of interest of ₹ 2,09,700/- and ₹ 5,39,532/- towards penalty on the additional sales tax payable by the petitioner - Decided in favour of assessee.
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2014 (7) TMI 578
Detention of goods - petitioner prays for issuance of a writ in the nature of mandamus directing the respondents to release its goods and vehicle on furnishing of surety bond - whether the petitioner is entitled to release of goods by furnishing surety bond under section 51(6)(a) of the Act or the respondent can legitimately require the petitioner to furnish bank guarantee under section 51(6)(b) of the Act - Held that:- Procedure for furnishing information in respect of inter-State trade or commerce of goods through virtual information collection centre has been incorporated in the above mentioned rule. According to sub-rule (2), such owner or person in-charge after tendering of the aforesaid information is required to furnish electronic receipt bearing unique number allotted to him as a proof for submission of the said information. The aforesaid receipt shall be a necessary document along with the goods receipt, trip sheet or log book bill or cash memo, sale invoice, vehicle's record in which such goods are being transported. It was not disputed that there was no check-post or information collection centre which had been crossed by the transporter while going from Mandi Gobindgarh to Cheema Chowk, Ludhiana, where the documents were checked. The vehicle had been sent to Ludhiana to get cycle parts loaded which were to be loaded on the metal rolls sold by the petitioner. It was thereafter that e-ICC form was to be generated. As urged by learned counsel for the petitioner, in case the e-ICC form had been generated by the transporter earlier, the goods which were to be fetched from Ludhiana could not have been legally taken by the transporter. Thus, the case of the petitioner is covered under section 51(6)(a) and not under section 51(6)(b) of the Act. Further, the petitioner is a registered dealer under the Act and in such a situation, furnishing of surety bond would be legally permissible and the demand of bank guarantee by the respondents was unjustified. respondents are directed to release the goods and vehicle of the petitioner on furnishing of surety bond forth with - Decided in favour of assessee.
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2014 (7) TMI 577
Benefit of deduction of tax - Whether the assessee is entitled to the benefit of deduction of tax from the total value of the bills, when in the bill the assessee has not shown the value of the cost price of the goods and the tax payable thereon separately - Held that:- in the bills and invoices raised by the assessee, the value of the goods is not mentioned, the rate of tax on the said value of goods and the amount of tax is not mentioned. The total is not arrived at by adding the value of goods and tax. On the contrary in the bills and invoices a particular amount is claimed, in the bottom, a seal is put saying that the tax is collected at 12.5 per cent and the amount of tax. That is not what is prescribed under the law. If the assessee could mention the rate of tax and the amount of tax payable, he should have mentioned the same after mentioning the value of the goods and then he should have added. Then only he would be entitled to the benefit of deduction of tax from the total value mentioned in the bill. His mentioning in the books of account in a separate column, the value of the goods and the value of the tax cannot be given due weightage because what should be mentioned in the books of accounts is what is mentioned in the bill. When in the bill, he has not mentioned the value of goods and value of tax separately, the entries in the books of accounts looses its weight - assessing authority was justified in holding that the appellant was not entitled to the benefit of tax deduction, out of the total amount of tax collected in each bill. The lower appellate court instead of looking into the facts carefully was more concerned about the judgments, which are relied upon, where no law is laid down and where they were deciding the case on facts. - Decided against assessee.
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2014 (7) TMI 576
Validity of Search and seizure - Validity of authorization - seizure of documents - search of business and residential premises of directors - Held that:- Letter of authorisation was not shown to the officers/employees of the petitioner. Independent witnesses were not called during the search and seizure and the respondents took over the boxes, without issuing any receipt, from the premises of petitioner, which vitiates the entire search and seizure conducted by the respondents. The aforesaid provisions have been made to safeguard the interest of persons who are affected by such search and seizure. It was obligatory on the part of the officer about to execute the search warrant to call on two or more respectable inhabitants of the locality where the search was to be conducted, as has been held by the apex court in Sunder Singh v. State of Uttar Pradesh [1955 (11) TMI 33 - SUPREME COURT]. It was the legal obligation on the part of the respondent to call two independent respectable inhabitants of the locality to attend the search and seizure, made by them. But it is apparent that the entire procedure was given go-bye by the respondents. Even they have not cared to call any of the witness at the time of search and seizure. It is not the case of respondents that no witness was available or attended the aforesaid search and seizure, in absence of which the entire seizure can be held to be illegal. The action of the respondents in respect of search and seizure cannot be approved by this court and it is held that the entire search and seizure was illegal - The respondents have seized various documents alleging evasion of tax by the petitioner. Though the entire search and seizure has been held to be illegal, but the respondents may proceed on the basis of documents seized by them to find out whether there was any evasion of tax by the petitioner. However, the evidence so collected by the respondents in respect of evasion of tax by the aforesaid search and seizure, which has been held to be illegal, the authority considering the matter shall evaluate the evidence with great caution, as per the law laid down by the apex court in Baldev Singh [1999 (7) TMI 630 - SUPREME COURT] - Decided in favour of assessee.
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