Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 18, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Garnishee notice - the issuance of Garnishee notice dated 25.02.2022 are in violation of principles of natural justice and the procedure prescribed under the JGST Act, the summary of show cause notice contained in GST DRC-01 is quashed; the adjudication order dated 1st November 2021 is quashed; the summary of the order and demand notice contained in GST DRC-07 dated 01.11.2021 (Annexure-6) and also Garnishee notice dated 25.02.2022 are also quashed. - HC
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Supply or not - activity of providing complimentary tickets by the appellant - Activity of providing free complimentary tickets does not fall within the domain of supply as it does not have the element of consideration. However, where such complimentary tickets are being provided by the appellant to a related person or a distinct person the same shall fall within the ambit of supply on account of Schedule I of the Act and the appellant would be liable to pay tax on the same - AAAR
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Validity of advance ruling - revenue appeal - though the Appellant has informed that there are several alerts issued against the said firm by department and that they have indulged in claiming refund of accumulated ITC obtained through fraudulent means and many search operations have been conducted against the party, but, nowhere it has been objected by the Appellant that the questions raised in the advance ruling application of the respondent is already pending or decided in any proceedings in the case of an applicant under any of the provisions of the Act - The order issued by the Authority for Advance Ruling, Uttar Pradesh is proper and needs no interference. - AAAR
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Profiteering - purchase of flats - it is alleged that the Respondent had not passed on the commensurate benefit of ITC to him - post-GST, the Respondent has been benefited from additional ITC to the tune of 5.40% (6.67%-1.27%) of his turnover and the same was required to be passed on to the Applicant No. 1 and the other homebuyers/shop buyers/customers. The Authority determines the amount profiteered by the Respondent for the Project Arihant Anchal Phase I, during the period 1.07.2017 to 30.09.2019 as Rs. 1,78,32,984/-. - NAPA
Income Tax
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Reopening of assessment u/s 147 - the firm to which the notice has been sent is no longer in existence, as it has been succeeded by a company - The mere filing of letter dated 07.12.2021 will not exonerate the petitioners from not responding to the earlier and subsequent notices issued and it is of the considered view that no infirmity is made out warranting interference in the impugned orders under Article 226 of the Constitution of India. - HC
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Unexplained bank deposits - dispute between the parties that the bank account herein belongs to assessee’s son - He could hardly have rebut the clinching fact that the assessee’s son; who was a minor at the time of account opening, has become a major on 23.05.2011 who is assessable in his independent capacity. We also wish to quote section 64(1A) of the Act wherein clubbing of income is provided in case of a “minor” child only which is not the case before us. Faced with the situation, we conclude that both the learned lower authorities have erred in law and on facts in adding the impugned cash deposits in assessee’s hands- AT
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Assessment u/s 153A - Addition of unapproved purchases based on peak calculation - the aforesaid addition is not based on any incriminating documents or material found during the course of search, albeit is has been made on the basis of search conducted after more than 2 years in case of different persons and based on certain information received on 24.03.2014 - the same is outside purview and the addition made u/s 153A is unabated assessment. - AT
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Validity of reopening of assessment u/s 147 - Mandation of obtaining sanction of JCIT - addition made u/s 68 - It is a well settled legal principle that when a statutory provision requires a certain act to be done by a particular authority in a particular manner, it should be done by that authority in that manner only. Any other authority, be it higher or inferior, cannot substitute the authority prescribed under the statute. The legal principle on this aspect is very much clear and leaves no room for doubt. - AT
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Deduction u/s 80IB - undertaking not qualifying as an SSI (Small Scale Industry) unit - Considering our finding above of inclusion of computers cost, patterns, fixtures and factory equipment and product development and preoperative cost, this alone makes the assessee ineligible to SSI status as per IDRA Act and it can be safely held accordingly therefore that the assessee is not eligible to deduction u/s 80IB of the Act. - AT
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Levy of penalty u/s. 271(1)(c) - In the present case the assessee has demonstrated that the conditions specified in explanation 3 have not been fulfilled. He has pointed out that during the time period u/s 153 of the Act in the present case notice u/s 148 of the Act was issued to the assessee in response to which return was filed by him. - no penalty in the present case was leviable on the assessee for not having disclosed his income of capital gains earned on a property sold. - AT
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Penalty u/s 271(1)(c) - the proposition suggesting to read the mandate of copyright royalty cases in the context of industrial royalty cases is grossly misconceived. - The mere fact that an assessee has not challenged the addition does not per se lead to imposition or confirmation of penalty u/s.271(1)(c) of the Act thereon. The relevant facts and circumstances of the case need to be viewed independently for the purpose of penalty, which is distinct proceeding. Amongst others, it is a well settled proposition that penalty cannot be imposed on a debatable issue. - AT
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Revision u/s 263 - For the purpose of exercising jurisdiction u/s 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interest of the revenue has to be preceded by some minimal enquiry by Pr. CIT/CIT. If the Pr. CIT/CIT is of the view that the AO did not undertake any enquiry, it becomes incumbent on the Pr. CIT/CIT to conduct such enquiry. If the Pr. CIT/CIT does not conduct such basic exercise then the Pr. CIT/CIT is not justified in setting aside the order u/s. 263 of the Act. - AT
Customs
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Violation of principles of natural justice - removal of “Risky Exporter” Tag from the Indian Customs, EDI System - it will not augur well to continue the brand of the petitioner as a “Risky Exporter” in the absence of fresh material available on record. In any event, the tag which has been fastened to the EDI System pertaining to the petitioner as a “Risky Exporter” has been done without notice to the petitioner. Therefore, if there is any other material, it will be open to the respondents including the 2nd respondent to put the petitioner on notice and take appropriate action in accordance with law. - HC
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Valuation - payment of CVD on MRP basis - Demand of differential duty of customs for the extended period of limitation, along with imposition of penalty - It is mentioned in the Show-Cause Notice that investigation was started by the department only after declaration of MRP/RSP suo moto by the appellant in the Bill of Entry filed in October, 2009 and subsequent Bills of Entry. - no case has been made of by the revenue that the appellant, in spite of having knowledge of such compliance towards MRP, have deliberately not declared. - the demand shall be limited to the normal period of limitation - AT
IBC
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Appellant are Financial Creditors or not - no direct disbursal of amount to the Corporate Debtor/Guarantor - Related Parties of the Corporate Debtor or not - The Appellants do have Positive Powers and are in a position to directly and indirectly Control the management and the policy decisions of the Corporate Debtor and hence there are no illegality in the Impugned Order passed by the Adjudicating Authority affirming the decision of the RP in deleting the Appellants from being part of the CoC as stipulated for under Section 21(2) of the Code. - AT
PMLA
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The offence of money laundering is not an independent or autonomous offence but is dependent on commission of a predicate offence. In other words an offence under the PMLA is not a standalone offence. It is relatable to commission or an offshoot of a scheduled offence. In so far the petitioner is concerned, as noticed above, there is no charge of scheduled offence against him - it is trite that for allegation of money laundering against one person, property belonging to another person cannot be attached. - HC
Service Tax
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Evasion of Service Tax - Presumption of documents - none of the alleged invoices / documents was produced by the Appellant or seized from the Appellant’s premises or control. - commission services - Burden of proof is on the Revenue and same is required to be discharged effectively. The details contained in records of service recipient are actually not acceptable as evidence that the Appellant has provided the taxable services, therefore, it cannot be accepted as admissible piece of evidence. Moreover, none of the persons, on whose statements reliance was placed by the department, were cross-examined. - AT
Central Excise
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Refund claim of unutilised PLA (Personal Ledger Accounts) balance lying in their Central Excise Accounts as on 30/06/2017 - barred by limitation in view of section 11B of the Central Excise Act, 1944 or not - State cannot enrich itself unjustly when no duty was liable to be paid by the petitioner therein. - Refund allowed - AT
VAT
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Refund of Input Tax Credit - export sales - zero rated sales - delay in filing of Form W - The strict application of the timelines under the Act will not be applicable, particularly, in a situation where the assessee concerned, is otherwise entitled in law, to the same. The filing of the form claiming refund cannot be equated to claim of ITC itself which would have an impact on the quantification of turnover itself. - HC
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Levy of Entry tax - goods which were imported from outside of state of West Bengal - Having regard to the deletion of Entry 52 of the State List and bearing in mind the provision contained in Section 265 of the Constitution we are impelled to hold that the State Legislature did not have the legislative competence to bring in such amendment insofar as it relates to the West Bengal Tax on Entry of Goods into Local Areas Act, 2012. - Section 5 & Section 6 of the West Bengal Finance Act, 2017 are ultra-vires and unconstitutional - AT
Case Laws:
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GST
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2022 (7) TMI 706
Blocking of electronic credit ledger in respect of reversed Input Tax Credit (ITC) - Electronic Credit Register blocked earlier has now been unblocked - HELD THAT:- Since the grievance of the petitioner has now been redressed by the respondents, therefore, no cause of action now survives in the present writ petition. The writ petition is disposed of as no cause of action now survives.
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2022 (7) TMI 705
Seeking grant of stay of recovery of demand of interest calculated on delayed payment of admitted tax - appeal has been summarily rejected under Section 107 of the Odisha Goods and Services Tax Act, 2017 - HELD THAT:- This Court is not inclined to go into factual disputes. However, considering the reconciliation statements filed by both sides on the peculiar facts of the present case, it would be mete and proper if the Petitioner deposits a sum of Rs.9,25,43,693.52, the order(s) dated 24th May, 2022 passed by the Appellate Authority shall stand set aside and the appeal(s) shall be restored to file for adjudication on merits unless other defects, if any, as required under the statute is removed. Since all the bank accounts have been seized and the Petitioner is unable to operate, it is not possible to deposit the entire admitted interest at one go. Therefore, he prayed for lifting forthwith the attachment on the Bank to enable it to deposit Rs.5,00,00,000/- within 48 hours and the Petitioner undertakes to deposit rest of the amount out of Rs.9,25,43,693.52 in two equated fortnightly instalments but not later than 16th August, 2022 - Upon such deposit of the aforesaid amount, the Revenue/Opposite Parties shall forthwith ensure the withdrawal of all the attachments made in pursuance of the original demand(s). Petition disposed off.
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2022 (7) TMI 704
Lifting of provisional attachment of Bank Accounts - some of the bank accounts have 0 credit balance - HELD THAT:- A perusal of the details would show, that some of the bank accounts have 0 credit balance. The cumulative credit balance available, as per the details set out in the said table, is Rs.1,67,550.12/- - it is informed by Mr Harpreet Singh, who appears on behalf of the respondent/revenue, that there are 13 bank accounts, against which provisional attachment orders have been issued. These bank accounts, we are told, concern entities and persons, which are not being investigated. This position is affirmed by Mr Singh. The respondent/revenue will lift the provisional attachment order issued qua 38 bank accounts - concerned banks will remit the amounts available in the accounts of the petitioners to the respondent/revenue, upon necessary intimation being received by them - petitioners will be afforded opportunity to contest the show cause notice, if served on the petitioners. Petition disposed off.
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2022 (7) TMI 703
Validity of SCN and summary SCN - case in the petition is that the show-cause notices at Annexure-2 in the respective writ petitions is in teeth of the provisions of Section 73(1) the JGST Act 2017 - non-application of mind - violation of principles of natural justice - HELD THAT:- The notices under section 73(1) of the Act of 2017 at Annexure-2 in the respective writ petitions are in the standard format and neither any particulars have been struck off, nor specific contravention have been indicated to enable the petitioners to furnish a proper reply to defend themselves. The show-cause notices can therefore, be termed as vague. This Court has, in the case of M/S. NKAS SERVICES PRIVATE LIMITED. VERSUS THE STATE OF JHARKHAND, THE COMMISSIONER OF STATE TAXES, RANCHI, DEPUTY COMMISSIONER OF STATE TAXES, GODDA [ 2021 (10) TMI 880 - JHARKHAND HIGH COURT] categorically held that summary of show cause notice in Form GST DRC-01 cannot substitute the requirement of a proper show cause notice under section 73(1) of the Act of 2017. It seems that the authorities have, after issuance of show-cause notices dated 20.08.2020, 27.008.2020 and 28.08.2020 (Annexure-2 in the respective writ petitions) and Summary of show cause notices contained in GST DRC-01 (Annexure-3 in the respective writ petitions) of the same date, proceeded to issue Summary of the Order dated 12.12.2020 and 14.12.2020 (Annexure-4 in the respective writ petitions). Respondents have also not brought on record any adjudication order. The impugned show-cause notices and Summary of the Show Cause Notices dated 20.08.2020, 27.08.2020 and 28.08.2020 (Annexure-2 3 in the respective writ petitions) and Summary of Orders contained in Form GST DRC-07 dated 12.12.2020 and 14.12.2020 (Annexure-4 in the respective writ petitions) are quashed - Petition allowed.
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2022 (7) TMI 702
Garnishee notice - Service of SCN under sub- Section (1) of Section 73 of the Jharkhand Goods and Services Tax Act, 2017 - condition precedent for issuance of any Order under Section 73(9) ibid or any other provisions of the Act - HELD THAT:- It is evident that in terms of Sections 70(4) (5) in case an adverse order is to be passed against the assessee, the assessee is to be granted three opportunities to furnish reply, if the time is sought for. In the absence of proper show cause notice for furnishing reply, petitioner was prevented from taking his defence and submitting a proper reply to the show-cause notice. The adjudication order has been passed straightaway without following due procedure prescribed under Section 73 read with section 75(4) (5) of the JGST Act. The aforesaid infirmities have vitiated the adjudication proceeding. Considering the facts and circumstances and that the impugned proceedings leading to the adjudication order dated 1st November 2021 and the issuance of Garnishee notice dated 25.02.2022 are in violation of principles of natural justice and the procedure prescribed under the JGST Act, the summary of show cause notice contained in GST DRC-01 is quashed; the adjudication order dated 1st November 2021 is quashed; the summary of the order and demand notice contained in GST DRC-07 dated 01.11.2021 (Annexure-6) and also Garnishee notice dated 25.02.2022 are also quashed. The matter is remanded to the State Tax Officer, Dhanbad to initiate a fresh proceeding in accordance with law after issuance of proper show cause notice under Section 73(1) of JGST Act - writ petition disposed off.
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2022 (7) TMI 701
Maintainability of appeal - appeal filed within the time limitation or not - It is submitted that if the date 12.12.2019 is taken as a relevant date for ascertaining the period of limitation, the appeals filed on 17.02.2020 were within the period of limitation - HELD THAT:- Reliance placed in the case of JOSE JOSEPH, VERSUS ASSISTANT COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE, ALAPPUZHA, ADDITIONAL COMMISSIONER (APPEALS) , KOCHI, THE UNION OF INDIA [ 2022 (1) TMI 50 - KERALA HIGH COURT] where it was held that When the mode of appeal prescribed by Rules is only the electronic mode, the time limit of three months can start only when the assessee had the opportunity to file the appeal in the electronic mode. The assessee cannot be blamed if he waited for the order to be uploaded to the web portal, even if he had in the meantime received the physical copy of the order. It is directed that if the appeals filed by the petitioner are within time, counting the period of limitation from 12.12.2019, the appeals shall be heard and decided on merits - petition disposed off.
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2022 (7) TMI 700
Supply or not - activity of providing complimentary tickets by the appellant - proving of the complimentary tickets to related party as well - levy of tax on such complimentary tickets - input tax credit - HELD THAT:- The argument by the appellant that on account of absence of consideration in such activity or transaction, the same should not fall within the territory of supply is well taken and therefore the activity of providing such free or complimentary tickets is not a supply as per the GST Act - However, it is important to note here that as per section 7 of the Act read with Schedule I any activity or transaction between the related person including employee shall be treated as supply even if the aspect of consideration is not there. So, where such complimentary tickets are being provided by the appellant to related person as defined in section 15 of the Act or to distinct person as defined in section 25 of the Act the same would fall within the ambit of supply even if there is no consideration. Input Tax Credit - HELD THAT:- The appellant has tried to build upon the argument by deploying sub-section (5) of section 17 of the Act to argue that even though this transaction does not fall within the domain of supply but the availment of input tax credit cannot be denied. Here the appellant has conveniently missed the principle in relation to availment of ITC. Looking broadly at the scheme of things under the GST Act it can be deduced that the availment of ITC directly flows with the taxability of the outward supply. Where the output supply is either not taxable that is exempt or has been used or deployed for non-business purpose the Act does not provide for availment of ITC in relation to such supply - The expression exempt supply as defined under the Act means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply. So, the activity of providing complimentary tickets is an exempt supply, and therefore there shall be no availment of ITC in relation to same in accordance with sub-section (2) of section 17 of the Act. Thus, appellant would not be eligible to avail input tax credit in relation to such activity. But, where such activity or transaction is treated as supply on account of being provided by the appellant to a related person or a distinct person the appellant would be entitled to avail input tax credit for the same.
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2022 (7) TMI 699
Validity of advance ruling - revenue appeal - Levy of GST - Supply of extra packs of cigarettes along with regular supply quantity without receiving any extra consideration for that additional supply - GST ON extra packs of cigarettes - ascertainment of taxable value which can be attributed to such extra packs of cigarettes for levy of GST - whether extra packs of cigarettes would be considered as exempt supply or free samples and hence attracts provisions of Section 17(2) of the UPGST, Act 2017 read with Rule 42 of the UPGST Rules 2017, or clause (h) of Section 17(5) of the UPGST Act, 2017? HELD THAT:- Cigarettes are subjected to ad-valorem taxation as well as specific taxation of quantity based system, therefore any ruling passed without considering all aspect of applicable is bad in law - The Authority for Advance Ruling does not have authority to discuss about Central Excise Act, 1944, IGST Act, 2017 and GST (Compensation to State) Act, 2017. Buy one get one free clause in the Circular No. 92/11/2019-GST dated 07.03.2019 talks about only certain sections of trade and industry such as pharmaceutical companies etc and not about evasion prone commodity like cigarette and pan masala - The respondent did not inform the Authority that there are several alerts issued against the said firm by department and that they are indulged in claiming refund of accumulated ITC obtained through fraudulent means and many search operations have been conducted against the party. Ad-valorem / specific taxation - mandate of the Advance Ruling Authority - Compensation Cess - HELD THAT:- The advance ruling can be sought on the questions specified in the sub-section (2) of the Section 97 of the Act and there is no bar on the any specific commodity / entity, in the Act. Further, it is also observed that the Authority for Advance Ruling can give its ruling, on the question specified under sub-section (2) of the Section 97 of the Act, with reference to the tax levied under the Act. If any particular commodity attracts tax/cess, levied under any other statutory Act/Rules then the advance ruling will be restricted to the tax portion levied under the CGST Act, 2017 only. The application for advance ruling can only be rejected if the issue raised in the application has already been pending or decided in any proceedings in the case of an applicant under any of the provisions of the Act - It is observed that though the Appellant has informed that there are several alerts issued against the said firm by department and that they have indulged in claiming refund of accumulated ITC obtained through fraudulent means and many search operations have been conducted against the party, but, nowhere it has been objected by the Appellant that the questions raised in the advance ruling application of the respondent is already pending or decided in any proceedings in the case of an applicant under any of the provisions of the Act.
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2022 (7) TMI 698
Profiteering - purchase of flats - it is alleged that the Respondent had not passed on the commensurate benefit of ITC to him by way of commensurate reduction in price against payments due to him - contravention of section 171 of CGST Act - interest - penalty - HELD THAT:- The Authority finds no reason to differ from the above detailed computation of profiteering in the DGAP's Report or the methodology adopted. Hence, the Authority holds that, the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 1.27% and during the post-GST period (July-2017 to September-2019), it was 6.67%, This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 5.40% (6.67%-1.27%) of his turnover and the same was required to be passed on to the Applicant No. 1 and the other homebuyers/shop buyers/customers. The Authority determines the amount profiteered by the Respondent for the Project Arihant Anchal Phase I, during the period 1.07.2017 to 30.09.2019 as Rs. 1,78,32,984/-. Therefore, the amount of ITC benefit to be passed on by the Respondent to all the homebuyers/shop buyers/customers is Rs. 1,78,32,984/-. This amount is inclusive of Rs. 34,137/- (including GST on the base amount of Rs. 31,104/-) which is the benefit of ITC required to be passed on with respect to Flat no. 4-301 in Tower Benicia which has been agitated by the Applicant No. 1 - the amount of Rs. 1,78,32,984/- (including 12% GST) that has been profiteered by the Respondent from his homebuyers/shop buyers/customers, including Applicant No. 1, shall be refunded by him, along with interest @18% thereon, from the date when the above amount was profiteered by him till the date of such payment, in accordance with the provisions of Rule 133 (3) (b) of the CGST Rules 2017. Interest - HELD THAT:- The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs.1,78,32,984/-. Hence the Respondent is directed to also pass on interest @18% to the homebuyers/shop buyers/customers, including Applicant No. 1 on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date of passing on/ payment. as per provisions of Rule 133 (3) (b) of the CGST Rules 2017. Penalty - HELD THAT:- The Respondent has denied the benefit of tax reduction to his buyers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section. However. since the provisions of Section 171 (3A) have come into force w.e.f 01.01.2020 whereas the period during which violation has occurred is w.e.f. 01.07.2017 to 34.09.2019, hence the penalty prescribed under the above Section cannot be imposed on Respondent retrospectively for the impugned period.
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2022 (7) TMI 648
Maintainability of petition - direction to pass interim order - HELD THAT:- There is no scope of passing any interim order in the matter and the issues involved require affidavits from the respondents for final adjudication. Let the respondents file affidavit in opposition within four weeks; reply thereto, if any, to be filed by the petitioner within two weeks thereafter - List the matter for final hearing seven weeks hence.
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Income Tax
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2022 (7) TMI 697
Notice seeking reopening of assessment and penalty challenged - bar to the entertainment of a writ petition - Valid proof of breach of principles of natural justice or fair play - respondents, submitted that an assessment order was made on 30.03.2022 in pursuance of the impugned notices Petitioner has an alternate and efficacious remedy available to them to challenge the assessment order; therefore, this petition may not be entertained - HELD THAT:- We think this is not a fit case for exercise of our extraordinary and equitable jurisdiction, particularly since the assessment order has already been made in pursuance of the impugned notices, and the Petitioner has an alternate and efficacious remedy of appeal against such assessment order. The records do not make out a prima facie case of breach of principles of natural justice or fair play. The impugned notices may have been marked to PAN number, which the Petitioner claims it had already surrendered. However, the record also bears out that the impugned notices were served on the Petitioner's Chartered Accountant through email. Moreover, this email Id was registered by the Petitioner with the Income Tax Department for service of notices. Therefore, Ms. Linhares's contention that the Petitioner is only attempting to create some grounds to allege the failure of principles of natural justice eventually cannot be lightly brushed aside. There is nothing like a technical breach of the principles of natural justice. At least some prejudice will have to be demonstrated. Respondents have produced documentary material on record that at least prima facie indicates that cash deposits of an amount of Rs. 27,74,53,108/- were made in the Petitioner's bank account as against the PAN number that the Petitioner claims to have already surrendered. Additionally, in the affidavit filed by the Assistant Commissioner of Income Tax, it is asserted that even after 2012, PAN was used by the Petitioner for regularly conducting business transactions. There is also a statement that all notices were sent through the registered email Id quoting this PAN. Ms. Linhares maintained that even the assessment order had been validly served on the Petitioner. However, without prejudice and based on the instructions she submitted, the respondents would upload the assessment order against PAN (AAACC9272H) to enable the Petitioner to appeal the assessment order dated 30.03.2022 within seven days from today. However, she clarified that this was without prejudice to her contention about the earlier good service. We dismiss this petition but grant liberty to the Petitioner to appeal the assessment order dated 30.03.2022 on all grounds, including the grounds now raised in this petition, subject no doubt to all legal objections that the respondents might have in the matter. We clarify that the observations in this order are only prima facie and in the context of considering whether to entertain this petition or relegate the Petitioner to avail of the alternate remedy. Therefore, if the Petitioner does appeal the assessment order dated 30.03.2022, such appeal will have to be decided in accord with law and on its own merits without being unduly influenced by the prima facie observations that we have made in this order.
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2022 (7) TMI 696
Reopening of assessment u/s 147 - procedure followed by the officer - Petitioner stated that the firm to which the notice has been sent is no longer in existence, as it has been succeeded by a company - HELD THAT:- As admitted position that the address of the firm and the company is one and the same. Thereafter, the Assessing Authority has once again issued notice under Section 142(1) of the Act on 09.03.2022 calling upon the company to respond by 11.03.222. Admittedly, the petitioners have not responded to this notice as well. It is in these circumstances that the impugned orders of assessment have come to be passed, on 30.03.2022, 31.03.2022 and 31.03.2022 respectively. No infirmity in the procedure followed by the Assessing Authority and also find that sufficient opportunity has been granted to the assessees to make their submissions and such opportunities have not been availed. The mere filing of letter dated 07.12.2021 will not exonerate the petitioners from not responding to the earlier and subsequent notices issued and it is of the considered view that no infirmity is made out warranting interference in the impugned orders under Article 226 of the Constitution of India.
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2022 (7) TMI 695
Unexplained bank deposits - dispute between the parties that the bank account herein belongs to assessee s son - this bank account had seen cash deposits of Rs.28 lacs which have been assessed in assessee s hands - HELD THAT:- The assessee appears to have opened the foregoing bank account in the name of his erstwhile minor son Mr. Virendra Mahadik long back. He had also furnished his PAN number at the time of his minor son s bank account opening. Mr. Jasnani vehemently argued that the learned lower authorities have rightly gone by assessee s PAN for taxing the impugned cash deposits in his hands. He could hardly have rebut the clinching fact that the assessee s son; who was a minor at the time of account opening, has become a major on 23.05.2011 who is assessable in his independent capacity. We also wish to quote section 64(1A) of the Act wherein clubbing of income is provided in case of a minor child only which is not the case before us. Faced with the situation, we conclude that both the learned lower authorities have erred in law and on facts in adding the impugned cash deposits in assessee s hands. - Decided in favour of assessee.
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2022 (7) TMI 694
Deduction claimed u/s. 80IB - assessee has not filed the prescribed Form 10CCB while filing the return of income - HELD THAT:- We find that even though it is claimed by the Ld. AR that there was a technical error which prevented the assessee from filing/uploading the Form-10CCB along with return of income filed u/s. 139(1), the Ld. AR could not produce the Form-10CCB claimed to have been prepared by the assessee on the date of filing of return of income u/s. 139(1) of the Act. CIT(A) simply relied on the plea of the assessee that the assessee has obtained the Form 10CCB along with the other statutory reports but has not called for its verification. On query from the Bench to produce the Form 10CCB of the Act prepared on 26/10/2017 as claimed by the assessee, the Ld. AR could not produce the same before us. Ld. AR simply relied on the online submission of Form-10CCB on 19/3/2018. We are of the considered view that since the Form-10CCB is not filed along with the return of income rejecting the claim of the assessee by the Ld. AO is in accordance with law and we hereby uphold the order of the Ld. AO and quash the order of the Ld. CIT(A). It is ordered accordingly. - Decided in favour of revenue.
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2022 (7) TMI 693
TDS u/s 195 - default u/s. 201 - Non deduction of TDS on payment made to non-resident -HELD THAT:- In the instant case, Smt. Davuluri Sai Swapna has filed her return of income in response to the notice U/s. 148 of the Act for the AY 2012-13 admitting a total taxable income of Rs. 16,16,878/- and offered capital gains of Rs. 15,22,953/-. AO of the non-resident ITO, Ward-12(2), Hyderabad passed the assessment order U/s. 143(3) r.w.s 147 of the Act on 12/6/2019 accepting the return filed by the NRI Smt. Davuluri Sai Swapna. Since the non-resident has discharged her obligation with respect to payment of capital gains tax, the assessee cannot be taxed once again for non-deduction of TDS U/s. 195. It is also observed that the seller Smt. Davuluri Sai Swapna is a non-resident from the assessment order passed by AO, Ward-12(2), Hyderabad. Similarly it is also noticed that the AO erred in not adopting the SRO value as prescribed U/s. 50C of the Act while concluding the assessment of the Non-Resident. The reliance placed by the Ld. DR in ITO vs. Shri Rang Infrastructure (P) Ltd ( 2019 (9) TMI 307 - ITAT AHMEDABAD] is distinguishable on the fact that the extension of the period of time limit U/s. 201(3) applies only to residents and not to NRIs and hence reliance cannot be placed for the instant case. Thus we are of the considered view that treating the assessee as an assessee in default U/s. 201 of the Act is not valid in law. We therefore are inclined to quash the order of the Ld. CIT(A). Appeal of assessee allowed.
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2022 (7) TMI 692
Allowance of Public issue expenses u/s 37(1) or allowing 1/5th of the same under section 35D - HELD THAT:- While considering the contingency like where the object of enhancement of the capital was to have more working funds for the assessee to carry on its business and to earn more profit and that in such a case the expenditure that is incurred in connection with the issue of shares to increase the capital has to be treated as revenue expenditure, the Hon ble Apex Court held that though the increase in the capital results in expansion of the capital base of the company and incidentally that would help in the business of the company and may also help in profit making, the expenses incurred in that connection still remain the character of a capital expenditure since the expenditure is directly related to the expansion of the capital base of the company. The observations of the Hon ble Apex Court in the case of Brooke Bond India Limited ( 1997 (2) TMI 11 - SUPREME COURT] are applicable to the facts of the case on hand on all fours. Irrespective of the fact of assessee increasing the capital base, whether it is for working capital or for creating the capital asset, the expenditure incurred in that connection still retains the character of capital expenditure to reach section 37(1) of the Act has no application and is governed only by 35D of the Act. We have no hesitation to hold that the CIT(A) committed error in allowing the entire expenditure as revenue expenditure under section 37(1) of the Act, and the Assessing Officer was right in accepting the contention of the assessee before him that the 1/5th of the public issue expenses are allowable as deduction under section 35D of the Act. We, accordingly, set aside the orders of the Ld. CIT(A) on the aspect of applicability of section 37(1) of the Act to the public issue expenses, and restore the order of the learned Assessing Officer allowing such expenses in accordance with section 35D - Appeal of revenue allowed.
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2022 (7) TMI 691
Assessment u/s 153A - Addition of unapproved purchases based on peak calculation - HELD THAT:- As brought on record, notice u/s 133(6) were sent to the parties from whom assessee had made purchases which has not been disputed and no addition has been made in those cases; and in case of Vitrag Jewels, no notice u/s 133(6) was issued. AO came to know about this information only on 24.03.2014 and order was passed in 31.03.2014, therefore he had no occasion to issue the notice to the said party. The entire premise of the AO is coloured by the fact that assessee had made purchases from the entities controlled by Rajendra Jain Group and other accommodation entry provider group. He had not even examined whether assessee had made purchases from any of these parties which has been mentioned in assessment order. All other parties to whom notices were issued u/s 133(6) have given their response and no addition has been made by the AO. Thus, the entire premise for making addition has no legs to stand once the purchase made from Vitrage Jewels, AO has not made any enquiry or sent notice u/s 133(6). Once the assessee had filed all the details of purchases, stock register and corresponding sales and the entire transaction are through banking channel and there is no discrepancy found either in the quantity of purchases or sales, then the addition on some hypothetical working peak investment as done by him cannot be sustained. The same is directed to be deleted. Otherwise also, the aforesaid addition is not based on any incriminating documents or material found during the course of search, albeit is has been made on the basis of search conducted after more than 2 years in case of different persons and based on certain information received on 24.03.2014, i.e., in respect of transaction of Rajendra Jain Group of companies. AO has sought to make the impugned addition which cannot be held to be on the basis of any seized or incriminating material found during the course of search of the assessee. Accordingly, the same is outside purview and the addition made u/s 153A is unabated assessment. Thus, on this ground also, the addition cannot be sustained. Disallowance made to the labour contractor - As documents corroborate that these labours had worked for assessee and have been employed by these labour contractors to work for the assessee. And also go to prove the genuineness of the payments to the labourers and thus same cannot be disallowed. Thus, on these facts and circumstances, the payment made to the labour contractors cannot be held to be non-genuine. Accordingly, the addition made by the AO on account of disallowance paid to labour contractor is deleted. Bogus purchases - HELD THAT:- AO has completely gone on a very wrong premise to observe that addition is being made, because the parties belong to Rajendra Jain Group and other groups. Here in this case, the information itself was received on 24.03.2014 and the assessment order passed on 31.03.2014. Thus, there was no occasion to send the notice u/s 133(6) to these parties. Whatever observation he has made with respect to notice u/s 133(6) which was made to the other parties with whom purchases has been debited, has been verified and confirmed by the parties on which, no addition has been made by the AO. In so far as genuineness of the purchases of these parties, we find from the perusal of documents enclosed in the paper book clearly establishes the purchases made are genuine and without any inquiry by the AO done, addition cannot be sustained. In any case, assessments for AY 2007-07 and 2008-09 had attained finality during the date of search and there was not pending assessment, therefore no addition could have been made without any incriminating material found during the course of search and the aforesaid addition on account of purchase is not based on any incriminating documents found during search. Accordingly, the same cannot be sustained on this ground also. Disallowance of legal and professional fees - AO had made the disallowance on the ground that information has been received from the DCIT, CC-1, Ernakulam - HELD THAT:- We find that there is no dispute that the above 2 persons were legal professionals with whom assessee had entered into an agreement of retainership for rendering services for which they have raised their invoices and payments have been made through banking channel after deducting TDS. The details of the invoices with regard to both the aforesaid parties have been filed which are not in dispute. Now, whether rendering of the legal services had yielded any result or asking for any proof of any legal advice is immaterial. If there was a proper agreement of retainership for legal advice and for statutory compliances is given to certain professionals for rendering legal services and they have raised the bills and are completely unrelated parties, then disallowance cannot be made on the ground that assessee had not proved any rendering of any legal advice. Assessee has already explained the above reason as to why assessee had sought their engagement. Therefore, such addition is directed to be deleted. Assessee appeal allowed.
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2022 (7) TMI 690
Assessment order passed during the continuation of moratorium period - In case of the assessee, the matter is pending before the Insolvency Professional in terms of The Insolvency and Bankruptcy Code, 2016 ( the Code ) and moratorium period has been declared as per section 14 of the Code - HELD THAT:- It is pertinent to note that as per the provisions of section 14 of the Code, institution of a Suit or continuation of pending Suit or proceedings against the Corporate Debtor including execution of any judgment, decree, or order in any Court of law, Tribunal, Arbitration Panel or other authorities, shall be prohibited during the moratorium period. The period of moratorium shall have the effect from the date of such order till the completion of CIRP; or if, during the CIRP period, Hon‟ble NCLT approves the resolution plan under section 31(1) or passes an order for liquidation of corporate debtor under section 33 of the Code, moratorium shall cease to have effect on date of such order. It has not been disputed by either of the parties that moratorium period is still continuing in the present case. We find that the Hon‟ble Supreme Court in case of Alchemist Asset Reconstruction Co. Ltd. v/s Hotel Gaudavan Pvt. Ltd., [ 2017 (12) TMI 1107 - SUPREME COURT] held that even arbitration proceedings cannot be initiated after imposition of the moratorium under section 14(1)(a) has come into effect and it is non est in law and could not have been allowed to continue. We are of the view that in case of assessment proceedings, the only option available with the Assessing Officer is to keep the proceedings in abeyance during the continuation of moratorium period as per section 14 of the Code and there is no option to quash the same in totality. Since, if the assessment proceeding is dropped then same cannot be revived upon completion of the moratorium period and only remedy available with the Assessing Officer will be under the provisions of section 154/147/263 of the Act, provided the jurisdictional conditions as laid down in the said sections are satisfied. Appeal by the assessee have been filed by the Director of the assessee company, which after initiation of CIRP has become functus officio. We further find that the Interim Resolution Professional / Resolution Professional has not been impleaded as a party in the appeals before us by filing revised Form No. 36. Similarly, in the appeal filed by the Revenue also revised Form No. 36 including the Interim Resolution Professional / Resolution Professional has not been filed. Once the insolvency proceedings commenced under the Code, all the litigations are to be pursued by Interim Resolution Professional / Resolution Professional appointed by the Committee of Creditors and not by the company. In view of the above we are of the considered view that the present appeals, in the present form, are not maintainable. Thus, respectfully following the aforesaid decision in Monnet Ispat Energy Ltd. ( 2017 (9) TMI 1907 - DELHI HIGH COURT] which approach has also been adopted by various coordinate bench of the Tribunal, we dismiss the present cross appeals with a liberty that upon completion of the moratorium period, if it is so decided, both the parties may seek recall of this order by impleading Managing Director / Director, representing the new management of the assessee company, or the Official Liquidator, as the case may be.
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2022 (7) TMI 689
Revision u/s 263 by CIT - Wrongful allowance of deduction u/s 80P - As per CIT assessment order erroneous one causing prejudice to the interest of the Revenue so far as the latter had accepted section 80P(2) deduction claim representing interest income derived from deposits kept with M/s. Yes Bank, Bank of Baroda and UCO Bank - HELD THAT:- . We find the instant issue to be any more res integra as learned co-ordinate bench's order in [ 2021 (12) TMI 1259 - ITAT PUNE ] to hold that the interest income earned on the investment of surplus money with banks is also eligible for exemption u/s.80P(2)(a)(i). PCIT has erred in law and on facts in exercising his section 263 revision jurisdiction in the given facts and circumstances of this case. His order under challenge is reversed accordingly as not sustainable in law. - Decided in favour of assessee.
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2022 (7) TMI 688
Addition u/s 69A - cash deposits in saving bank account - appellant has made cash deposit soon after the demonetization - as per assessee cash deposit relates to the past savings and part of the amount received from sundry debtors and loans and advances and submitted a list of persons with name their addresses and against their names the amounts were reported - HELD THAT:- It is common in our society that old ladies sometimes keep cash with them for various reasons including for medical emergencies. The assessee in the instant case is an old lady and deriving income from pension. Assessing Officer in the instant case has given a credit of Rs.2,50,000/- only and made the addition of Rs.4,72,523/- by treating the past withdrawals from the Bank A/c as not available to the assessee. However, nothing has been brought on record that the assessee had spent any huge amount for acquisition of any asset or for performing of any functions such as marriage etc., in the family by spending huge money. Therefore, in our opinion, there is some force in the argument of assessee that the part of Rs.9,94,862/- which was withdrawn from the Bank in the past two years will be available to the assessee for making the deposit of Rs.7,60,000/- during the demonetization period. Therefore, the Assessing Officer as well as the CIT (A)-NFAC, are not justified in accepting only Rs.2,50,000/- as available and thereby sustaining the balance amount of Rs.4,72,523/-. Accordingly, we set aside the order of the CIT(A)-NFAC and direct the Assessing Officer to delete addition made him. The grounds raised by the assessee are accordingly allowed.
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2022 (7) TMI 687
Unexplained credit in the capital account of the assessee - During the course of survey operations documents/books of account/loose papers were found and impounded - HELD THAT:- There is no evidence that is forthcoming on behalf of the assessee to show that, as a matter of fact the payments were made under this agreement dated 06/11/2015, on the date so mentioned therein and the sale deeds were accordingly registered on the name of the vendees. There is also no denial of the fact that, as a matter of fact, the sale deeds were registered on 22/06/2016 in respect of the properties that is to be found in the agreement of sale dated 06/11/2015. Apart from the fact that the sale consideration under these four sale deeds was Rs. 23.77 lakhs, even such amount was also received in the financial year relevant for the assessment year 2017-18. The findings of the Ld. CIT(A) that the assessee bought various properties during the year and the property was bought on 30/06/2015 which was earlier to the agreement of sale, wherein the credit issue of Rs. 43 lakhs was to be considered, goes unchallenged and unimpeached. We are of the considered opinion that the alleged agreement of sale dated 06/11/2015 is not at all helpful in proving the case of the assessee and there is no evidence to show that the assessee received the entire sale consideration of Rs. 43 lakhs during the previous year relevant to the assessment year 2016-17. Even if we believe this, still the doubt entertained by the Ld. CIT(A) that inasmuch as the assessee bought property worth on 30/06/2015 wherein the credit issue was to be considered, goes unimpeached. We, therefore, do not find any reasons to interfere with the findings and the conclusions reached by the authorities below. There is no merit in the grounds of appeal and the same are dismissed.
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2022 (7) TMI 686
Assessment u/s 153A - during the course of search at the premises of the assessee gold jewellery weighing 5543grams (net.wt.) and 175.30 carat diamond jewellery were found which was valued by the Registered Valuer - HELD THAT:- Quantity in weight of gold jewellery found on the date of search and the quantity of gold jewellery declared in the Wealth Tax Return on the valuation date should have been first considered. Thereafter, whatever withdrawals available to the assessee for purchase of such diamond/gold jewellery on the basis of the market value should have been considered and only the balance amount should have been added or if according to the AO the source stands explained, then no addition should have been made. However, in the instant case neither the AO nor the CIT (A) have done this exercise, nor even the assessee has done this exercise and the addition has been made on the basis of lumpsum market value which in our opinion is a flawed exercise. In view of the above discussion, we deem it proper to restore the issue to the file of the AO with a direction to do this exercise of quantifying the weight of diamond and gold jewellery on the date of search and that has been declared in the Wealth Tax Return prior to the date of search. If the assessee in the wealth tax return has not quantified the weight of such diamond/gold jewellery and consolidated value has been given, then the same, in our opinion has to be brought down to the quantity of diamond and gold jewellery by adopting the market value as on the date of valuation. Thereafter due credit should be given for new purchases as per availability of cash. AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. The grounds raised by the assessee on this issue are accordingly allowed for statistical purposes.
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2022 (7) TMI 685
Validity of reopening of assessment u/s 147 - Mandation of obtaining sanction of JCIT - addition made u/s 68 - HELD THAT:- Admittedly, before initiation of proceeding under section 147 of the Act, there was no assessment made either under section 143(3) or section 147 of the Act. Therefore, assessee s case falls under sub-section (2) of section 151 of the Act. Thus, before issuance of notice under section 148, sanction of JCIT was required to be obtained. However, on perusal of the form for recording the reasons for initiating the proceedings under section 148 and obtaining sanction/approval for issuance of notice u/s 148 of the Act, a copy of which was submitted before us by learned Departmental Representative, it is very much evident that the AO has obtained the approval/sanction of the Commissioner of Income Tax on 28.03.2011 for issuance of notice under section 148 - Therefore, it is very much clear, the sanction/approval obtained by the AO for issuance of notice under section 148 of the Act is not by the competent authority in terms with section 151(2) of the Act. In fact, in the reasons recorded, the Assessing Officer has clearly stated that he has obtained approval/sanction from the Commissioner of Income Tax. It is a well settled legal principle that when a statutory provision requires a certain act to be done by a particular authority in a particular manner, it should be done by that authority in that manner only. Any other authority, be it higher or inferior, cannot substitute the authority prescribed under the statute. The legal principle on this aspect is very much clear and leaves no room for doubt. Merely because the approval/sanction is granted by a superior authority, it will not make the proceeding valid. Though, there are host of other decisions laying down the same legal principle, however, for avoiding multiplicity, we desist from discussing all the case laws. Thus, considering the fact that sanction/approval for issuance of notice under section 148 of the Act has not been granted by the prescribed authority in terms with section 151(2) of the Act, the notice issued under section 148 of the Act has to be declared as invalid. As a natural corollary, assessment order passed, in pursuance thereof, is also invalid. The said assessment order, being legally unsustainable, has to be quashed. Accordingly, we do so.
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2022 (7) TMI 684
Validity of Best Judgement assessment u/s 144 - GP rate estimation - unexplained bank deposits - HELD THAT:- AO offered sufficient opportunity to the assessee issuing notices u/s. 142(1) and 143(2) of the Act, which were duly served upon the assessee. This fact has not been controverted by the assessee. Under these given circumstances, the ld. AO was justified in framing the best judgment assessment u/s. 144 of the Act. Ground no.1 raised by the assessee is dismissed. Addition @ 8% on the turnover not declared by the assessee - On going through the observations of the ld. AO in the assessment order, we find that the assessee has declared net profit at Rs. 2,92,780/- on turnover of Rs.19,73,155/-. The assessee declared net profit rate @ 14.80% approx - as based on the information received by the ld. AO, it was revealed that the assessee was operating 12 bank accounts and total amount deposited during the year under consideration is Rs. 95,65,429/-. The turnover shown by the assessee is only Rs.19,73,155/- and remaining amount Rs.75,92,274/- is suppressed turnover, not declared by the assessee in the return. We also find that the ld. AO has fairly applied net profit @ 8% on the total amount deposited in the bank accounts at Rs.95,65,429/- treating it as turnover and calculating net profit at Rs. 7,65,234/- and after giving benefit of income of Rs. 2,92,780/- declared by the assessee remaining amount of Rs.4,72,454/- has been added. In our view, this finding of the ld. AO stands rightly confirmed by the ld. CIT(A). We, thus, find no infirmity in finding of the ld. CIT(A). Therefore, ground no. 2 raised by the assessee is dismissed. Addition of interest income - As the assessee could not controvert this fact that Rs.87,749/- was appearing in the interest received by the assessee in 26AS statement on which tax of Rs.9077/- was deposited is not offered for taxation in the I.T return. CIT(A) has rightly confirmed the impugned addition of Rs.87,749/- made by the ld. AO for interest income not disclosed by the assessee. Ground no. 3 raised by the assessee is dismissed.
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2022 (7) TMI 683
Validity of order u/s 143(3) as within the statutory time limit prescribed u/s 153 or not? - HELD THAT:- As assessee did not prove with cogent evidence that assessment order passed u/s 143(3), dated 31.03.2013, is beyond the statutory time limit prescribed under the Act. We note that in assessee s case the assessment year under consideration is A.Y. 2010-11. For assessment year (AY) 2010-11, the AO is supposed to frame assessment order within two years from the end of the assessment year, which ends on 31.03.2013. We note that AO passed the order u/s 143(3) on 31.03.2013, which is within the statutory time limit prescribed u/s 153 - Counsel did not furnish any evidence to demonstrate that the order under section 143(3) was passed beyond the statutory limit. The assessment order passed under section 143(3) of the Act dated 31.03.2013, was served on the assessee, on 03.04.2013, that does not mean that order was passed on 03.04.2013. The service of assessment order on the assessee is a different thing altogether. Therefore, we dismiss the ground no.1 raised by the assessee. Disallowance of deduction claimed u/s 80IB(10) - HELD THAT:- As we note that assessee company has not fulfilled the conditions of section 80IB(10) of the Act. However, we note that assessee has submitted before us a letter dated 03.05.2007 of Bardoli Nagarpalika, which is paced at paper book page no.1 and also submitted letter dated 09.07.2008 of Nagar Niyojan (town planner), Surat Branch, these papers were not examined by the assessing officer. Therefore, we remit this issue back to the file of the assessing officer to adjudicate the issue afresh. The assessee is also directed to submit relevant evidences and documents to prove its claim of deduction under section 80IB(10) - Therefore, statistical purposes, ground no.2 raised by the assessee is allowed. Addition of development/construction receipts as alleged unrecorded receipts - HELD THAT:- We note that as the issue is squarely covered in assessee s own case wherein the Co-ordinate Bench held that it would be reasonable to estimate 6% on net profit on total on-money receipts. We note that addition of development/construction receipts was made by the assessing officer, treating it alleged unrecorded receipts/on-money. Accordingly, Assessing officer is directed to estimate 6% of net profit on total on-money/unrecorded receipts - Appeal of assessee allowed.
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2022 (7) TMI 682
Revision u/s 263 - income should have been assessed as undisclosed income of the assessee, and accordingly taxed under section 115BBE and without allowing deduction of interest/remuneration paid to partners - income so disclosed was to be treated as business income and not as income from other sources - HELD THAT:- As found that there was nothing stated in either pre-amended or post-amended provisions of section 115BBE that where assessee surrenders undisclosed income during search action for relevant year, tax rate has to be charged as per provisions of section 115BBE. ITAT held that there was no finding that provisions of section 115BBE had been invoked by AO during assessment proceedings and tax rate had been charged at rate of 30 per cent on surrendered income u/s 115BBE and thus, action of AO in rectifying and increasing rate of taxation from 30 per cent to 60 per cent on undisclosed income in view of amended section 115BBE did not come within purview of section 154. ITAT accordingly held that the action of AO in invoking jurisdiction under section 154 was not legally tenable. Again, the ITAT Jaipur in the case of Sudesh Kumar Gupta [ 2020 (6) TMI 463 - ITAT JAIPUR] held that where while completing assessment under section 143(3), Assessing Officer did not invoke provisions of section 69, provisions of section 115BBE which were contingent on satisfaction of requirements of section 69, could not be independently applied by invoking provisions of section 154. During the course of assessment proceedings, the assessing officer had made due enquiries and was aware of the fact that assessee had disclosed the amount as business income in his return of income in respect of which it had claimed expenditure in relation to interest/remuneration paid to partners. After making due enquiries, AO allowed the claim of the assessee by treating the undisclosed income found during survey as assessee s business income and allowing corresponding expenditure against the same in the assessment proceedings. Therefore, in light of the facts of the case and the judicial precedents on the subject as discussed above, in our view, Ld. PCIT has erred on facts and in law in invoking section 263 provisions in the instant facts, to hold that the order passed by the assessing officer is erroneous and prejudicial to the interests of the revenue. In the result, the appeal of the assessee is allowed.
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2022 (7) TMI 681
Deduction u/s 54 - according to AO the property was purchased on 30.06.2006 and the assessee was in possession of the property for less than 3 years and therefore, the assessee is not eligible to claim LTCG - HELD THAT:- We find CIT (A) dismissed the appeal filed by the assessee, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the assessee that although the purchase of the property was registered on 30.06.2006, however, the assessee was in possession of the property on the basis of agreement of sale dated 5.10.2000 and the assessee was showing rental income from the said property in the return filed for the A.Ys 2005-06 2006-07 and therefore, the assessee was in possession of the property. It is the submission of assessee that the lower authorities have not verified the documents properly and therefore, the assessee should be given an opportunity to substantiate his case. We find some force in the above argument of assessee. The paper book filed by the assessee shows that the assessee filed return of income for the A.Ys 2005-06 2006-07 and for subsequent years and has disclosed the rental income from the said property. In our opinion, the matter requires a revisit to the file of the AO since various documents filed by the assessee including the copy of the return for the A.Ys 2005-06 2006-07 disclosing the rental income from the property in question has not been verified by the lower authorities - we deem it proper to restore the issue to the file of the AO with a direction to grant one more opportunity to the assessee to substantiate his case and decide the issue as per fact and law. The assessee is also hereby directed to appear before the Assessing Officer without seeking any adjournment under any pretext failing which the Assessing Officer is at liberty to pass appropriate order as per law including allowability of deduction u/s 54 - The grounds raised by the assessee are accordingly allowed for statistical purposes.
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2022 (7) TMI 680
Deduction u/s 80IB - allocation of common expenses between exempted and non-exempted units are not accepted - HELD THAT:- CIT (A) has erred inasmuch as the decision in the case of Goetze India Ltd. ( 2006 (3) TMI 75 - SUPREME COURT] which is fully applicable on the facts of the case wherein proper and due revised return was held to be sine qua non for acceptance of the revised claim and it was clearly held that CIT (A) has no power to make any such concession stop. However, in the same order, it was held that the order in this case does not impinge upon the powers of the ITAT to admit and adjudicate upon grounds raised otherwise then by proper revised return. We direct that the revised claim is to be admitted and adjudicated upon by the AO. However, we note that in the assessment order framed qua deduction u/s 80IB, AO only dealt with and allowed the claim and discussed on merits only that aspect of claim under section 80IB which were mentioned in the original claim. However, as regards the revised claim, the merits have not been gone into by the AO and he has rejected the claim as unadmitted. CIT (A) has admitted the claim and decided the issue very laconically placing reliance upon several case laws. There is no discussion in the order of ld. CIT (A) as to who has examined the factual aspect of the case. He simply accepted the statement of the assessee and passed the same as his own order relying upon the case laws and proposition. Even after, referring to the decision in the case of Liberty India ( 2009 (8) TMI 63 - SUPREME COURT] which expounded that indirect expenses which do not have any direct nexus with the undertaking cannot be deducted in computing the profit of the undertaking. He went on to accept that the assessee has been able to establish the direct nexus between income and expenses of the industrial units situated at Samba and Udhampur. He also noted that it is also argued that the indirect and head office expenses have been excluded from allocation amongst exempt and non-exempt units. Based on such reasoning, he has directed the Assessing Officer to re-compute the taxable income. We find that the above exhibits lack of proper application of mind. Without referring to any factual material on the basis of arguments and submissions, ld. CIT (A) has given finding on factual aspects which is not sustainable in law. As held in the case of Kapurchand Shrimal [ 1981 (8) TMI 2 - SUPREME COURT] it is the duty of the appellate authority to correct the errors in the orders of authorities below and remand the matter for re-adjudication with or without direction unless prohibited by law. Accordingly, in the interest of justice, we remit this issue to the file of AO. AO shall examine the grounds which are rejected by him by duly considering the merits of the case, factual aspects and case laws in this regard. Appeal of the Revenue stands allowed for statistical purposes.
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2022 (7) TMI 679
Deduction u/s.80P(2)(a)(i) - AO noted that the assessee s society is not only advancing loans to members but also advancing loans to associated members in contravention of the provisions of section 80P(2)(a)(i) - According to AO, the assessee co-operative society is doing finance business, therefore, the AO disallowed the claim of deduction u/s.80P(2)(a)(i) - HELD THAT:- Admitted facts are that the assessee is a co-operative society engaged in the business of development of agricultural activities, milk products etc., and also financing to its members i.e., accepting and providing loans to its members, whether associate members or members. We noted that the AO disallowed the claim of deduction on the ground that the assessee had lent money to the members who are associate members and have received the interest at par with the commercial banks. According to AO, the assessee is not eligible for claim of deduction u/s.80P(2)(a)(i) of the Act and according to him, the assessee s activities are purely in the nature of commercial banking activity and therefore hit by provisions of section 80P(4). As the issue is squarely covered and the facts are identical to the above referred case laws, respectfully following the Hon ble Supreme Court decision in the case of Mavilayi Service Cooperative Bank Limited [ 2021 (1) TMI 488 - SUPREME COURT] , Hon ble Madras High Court decision in the assessee s own case [ 2021 (1) TMI 1087 - MADRAS HIGH COURT] S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd., 2015 (9) TMI 1540 - ITAT CHENNAI] and the Co-ordinate Bench decision in the case of Tamilnadu Co-operative State Agriculture and Rural Development Bank Limited [ 2022 (6) TMI 770 - ITAT CHENNAI] we dismiss the appeal of Revenue. Consequently, all the three appeals of Revenue are dismissed.
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2022 (7) TMI 678
Deduction u/s 80IB - undertaking not qualifying as an SSI (Small Scale Industry) unit as defined under the section,which is a necessary prerequisite for claiming the said deduction - HELD THAT:- As we find, had nothing to state in justification of its claim of exclusion of items in the nature of Patterns, fixtures and Factory equipments which it had itself treated as Plant and Machinery but excluded as per IDRA notification and which the DRP noted did not qualify for exclusion as per the notification. Therefore we find merit in the finding of the DRP on this account. The value of these items and in itself makes the assessee ineligible for SSI status. The decision of the ITAT in the preceding year does not help the assessee since it clearly does not approve exclusion of these items but only those mentioned to be excluded in the notification - we agree with the DRP/AO that there is no justification for exclusion of product development cost and preoperative Revenue expenses capitalized,both added to the cost of Plant and Machinery by the assessee itself. The notification r.w section 11B of IDRA only talks of cost of Plant and Machinery as originally incurred. Once these costs are admittedly incurred for Plant and Machinery there is no scope for excluding them. Considering our finding above of inclusion of computers cost, patterns, fixtures and factory equipment and product development and preoperative cost, this alone makes the assessee ineligible to SSI status as per IDRA Act and it can be safely held accordingly therefore that the assessee is not eligible to deduction u/s 80IB of the Act. However we shall deal with the remaining exclusions also With respect to the remaining items disqualified ,we agree with the findings of the DRP that having not discharged its onus of physically verifying its claim of excluding these items as qualifying as Tools ,Jigs and Dyes ,that too on its own request and the financial records of the assessee belying this claim, the said claim also needed to be rejected. The Ld.Counsel for the assessee has been unable to controvert that as per its own financial statements the assessee had separately classified assets qualifying as Tools Jigs to the extent of only Rs.5,15,136/-.The act of the assessee therefore of splitting the admitted cost of Plant and Machinery of Rs.3,74,00,831 /-,we agree with the DRP, was only breaking down its machine to its components ,reducing the machine in turn to only its frame which surely does not qualify as Plant and Machinery. This is all the more relevant since the assessee has otherwise been unable to justify its claim by way of physical verification done on its own request. The decision of the ITAT also in the preceding years does not come to the assistance of the assessee since all these facts were not there before the ITAT. We uphold the findings of the DRP/AO that the assessee did not qualify as an SSI Unit and was therefore not eligible to deduction u/s 80IB - The order of the AO denying deduction u/s 80IB is accordingly upheld. Ground of appeal No.2 of the assessee is dismissed. TP Adjustment - Upward Revision and Royalty Payment being computation of arm s length price in relation to international transactions though fully explained - HELD THAT:- Undeniably the AO has treated the ALP of the royalty transaction as Nil for the reason that the AE did not recover any such payment from its other AE s. Firstly it is basic and fundamental that ALP of an international transaction refers to the value at which the transaction would have been conducted at arm s length, ruling out any scope of manipulation in the same on account of relation between the two parties entering into it. Therefore there cannot be any determination of the ALP of the transaction by comparing it with an AE of the tested party. In the present case the AO has done exactly this by comparing the royalty charged by the AE of the assessee from its other associated entities. This comparison cannot result in determination of Arms Length Price of the transaction. For this reason alone the ALP determined by the AO at Nil in the present case needs to be rejected. Even otherwise we find that this issue has been adjudicated in the case of the assessee for A.Y 2004-05 wherein identically the ALP of royalty determined at Nil was rejected by the ITAT noting that similar Royalty consistently paid by the assessee in the past has been allowed, that the AO failed to bring on record the ordinary profits which the assessee could earn in such type of business and the expenditure having been incurred for the purpose of business could not be denied completely. We find that the Hon ble High Courts have categorically held in the said decisions that it is not part of the TPO s jurisdiction to consider whether or not expenditure incurred passed the test u/s 37(1) of the Act. It has been held that the only authority of the TPO is to conduct a Transfer Pricing analysis to determine ALP and not to determine whether there is a service or not from which assessee benefits. Determination of the ALP of the Royalty transaction at Nil by the AO is held to be not in accordance with law. The adjustment therefore made to the income of the assessee is therefore directed to be deleted. TP adjustment made to the cost of the purchases made by the assessee from its associated enterprise - only contention of the assessee before us was that it had objected to the adoption of the PBIT of the assessee company @7.03% pointing out that none of the data as regards revenue or cost were matching with the profit and loss account of the assessee and had submitted summary of the financial information also to the ACIT TPO-2 - HELD THAT:- As this issue of arm s length price of the purchase transaction entered into by the assessee with its associate enterprise is restored back to the TPO to rework the arm s length price of the transaction after considering the anomaly pointed out by the assessee in its original calculation. Ground of appeal No.3 is therefore allowed for statistical purposes. Non considering Service Income as Business Income for the purpose of Deduction u/s 80IB - A.O./DRP denied the same noting that it could not be said to be derived from the industrial undertaking which was the essential prerequisite for claiming deduction under the said section - HELD THAT:- This denial of deduction was made without prejudice to the denial of claim of the assessee to deduction u/s. 80IB of the Act on account of the finding by the revenue authorities that the assessee did not classify as SSI unit to be eligible to claim the deduction. Since we have held the assessee ineligible to claim deduction u/s 80IB. Disallowing Foreign Exchange Loss - HELD THAT:- Disallowance of foreign exchange loss relating to loss availed for capital work is upheld - A.O. is directed to grant depreciation as per law on the same. Ground of appeal of the Assessee is accordingly dismissed.
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2022 (7) TMI 677
Levy of penalty u/s. 271(1)(c) - portion of income relating to capital gain declared by the assessee in his return filed in response to notice u/s 148 - CIT-A held that it clearly proved that the assessee tried his best to evade taxes and filed return of income only when it was detected by the department - Assessee argued that mere fact of non-filing of return of income did not tantamount to concealment/furnishing inaccurate particulars of income for the purpose of levying penalty u/s. 271(1)(c) - HELD THAT:- As decided in CHHAGANLAL S UTERIYA VERSUS INCOME-TAX OFFICER [ 2011 (5) TMI 641 - GUJARAT HIGH COURT] position of law was that non filing of return per se would not attract penalty u/s 271(1)(c) of the Act. It thereafter noted Expl 3 to section 271(1)(c) and interpreting the same held that only on fulfillment of all conditions specified therein would penalty u/s 271(1)(c) be levied for no filing of return of income originally even if subsequently the assessee files the same in response to notice u/s 148 - penalty to be levied as per Expl 3, the assessee should be a nonfiler of return, no return ought to have been filed within the time specified for framing assessment u/s 153 of the Act and no notice u/s 142(1) /148 of the Act should have been issued to the assessee for filing return within this time period. Also the AO should be satisfied that the assessee had taxable income for the said year. The court interpreted that in such eventuality even if the assessee files return after the expiry of time u/s 153 of the Act in response to notice u/s 148 of the Act, he shall be deemed to have concealed particulars of his income and be liable for penalty u/s 271(1)(c). In the present case the assessee has demonstrated that the conditions specified in explanation 3 have not been fulfilled. He has pointed out that during the time period u/s 153 of the Act in the present case notice u/s 148 of the Act was issued to the assessee in response to which return was filed by him. The aforesaid fact has remained uncontroverted before us. In view of the same, we hold the issue is squarely covered in favour of the assessee by the decision of the Hon ble jurisdictional High court. Thus we hold that no penalty in the present case was leviable on the assessee for not having disclosed his income of capital gains earned on a property sold. The penalty therefore confirmed by the Ld.CIT(A) on the same is directed to be deleted. - Decided in favour of assessee.
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2022 (7) TMI 676
Exemption u/s 54F - investment made in two residential units - order passed by the AO u/s 143(3) holding that deduction claimed by the assessee u/s 54F for the year under consideration was liable to be withdrawn and the income to that extent was taxable in the hands of the assessee for AY 2018-19 when the amount kept in capital gain account was withdrawn and utilized for making investment in purchase of two residential units - HELD THAT:- Claim as made in the return of income filed for the year under consideration is not disturbed by the authorities below and the assessee having allegedly made investment in purchase of two residential units, the deduction claimed under Section 54F is held to be liable to be withdrawn in AY 2018-19 when the said investment was made by the assessee by withdrawing the amount deposited in the capital gain account in view of the provision of subsection (1) of Section 54F - assessee has contended that the CIT(A) ought to have left with issue open to the Assessing Officer to decide on merits in AY 2018-19 instead of giving a finding on merit that the assessee is not eligible for deduction under Section 54F of the Act since the said issue was not involved for consideration on merit in the year under appeal, i.e. AY 2016-17. We find merit in this contention of assessee and since the learned DR has also not raised any objection in this regard, we modify the impugned order of the learned CIT(A) and direct the Assessing Officer to decide the issue relating to the assessee s claim for deduction under Section 54F of the Act afresh on merit in AY 2018-19 after giving the assessee an opportunity to establish his case that the investment was made by him in purchase of one residential unit and not two residential units as alleged by the Assessing Officer. Appeal of the assessee is treated as partly allowed.
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2022 (7) TMI 675
Penalty u/s 271(1)(c) - Software Maintenance service charges treated as Royalty in the draft order - HELD THAT:- Access is automatically obtained to the underlined technology of the Facility when it is used. But, strictly speaking, the user of an equipment implies its use simpliciter de hors access to its underlined technology facilitating the operation. As section 9(1) of the Act is a deeming provision and it unequivocally provides, inter alia, for treating consideration for the use of equipment as royalty, we cannot countenance the contention of the ld. AR for reading the words 'use of equipment as equivalent of `getting access to the underlined technology . In our view, the proposition suggesting to read the mandate of copyright royalty cases in the context of industrial royalty cases is grossly misconceived. That appears precisely to be the reason for the assessee appreciating the correct position as per law and thus accepting the assessment order and not challenging the taxability of the amount as royalty in quantum proceedings. The mere fact that an assessee has not challenged the addition does not per se lead to imposition or confirmation of penalty u/s.271(1)(c) of the Act thereon. The relevant facts and circumstances of the case need to be viewed independently for the purpose of penalty, which is distinct proceeding. Amongst others, it is a well settled proposition that penalty cannot be imposed on a debatable issue. If a favourable view initially canvassed by the assessee is judicially substantiated, it cannot lead to imposition of penalty simply because there exists a contrary view which the assessee has finally chosen by not filing an appeal. Reverting to the prevailing factual panorama, we find that as against the unfavorable view of the Pune Tribunal in the cases there is another decision in Ovid Technologies Inc. [ 2022 (3) TMI 1019 - ITAT DELHI ] holding that consideration received for granting license to access online database does not fall within the definition of Royalty. In view of the prevalence of divergent views on the point, we hold that the penalty is not sustainable. The conclusion drawn in the impugned order is, ergo, accorded imprimatur on this legal score. Appeal of assessee allowed.
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2022 (7) TMI 674
Income accrued in India - Taxability of payment received by the assessee from Indian hotel owners pursuant to the International Marketing Program Participation Agreement ( IMPPA‟) - HELD THAT:- From the perusal of comparative table of agreements involved in Marriott International Inc. and in the case of assessee, which is forming part of the impugned order, it is evident that both the agreements are broadly similar in respect of nature of services and consideration received. Thus, respectfully following the aforesaid decision in MARRIOTT INTERNATIONAL INC C/O. MARRIOTT HOTELS INDIA PRIVATE LIMITED [ 2022 (5) TMI 730 - ITAT MUMBAI] we deem it appropriate to set aside all the grounds raised in assessee‟s appeal to the file of the assessing officer with similar directions, as passed in the aforesaid decision.
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2022 (7) TMI 673
Addition u/s 68 - benefit of peak credit - HELD THAT:- We find from the said statement recorded on oath that the proprietor has also mentioned the dates and amounts on which the said money was advanced by the assessee and when the same was returned to assessee by Maladeep Construction - we find that this part of the statement of proprietor of Maladeep Construction also tally with the bank statement of assessee s account. Thus, following the principle for application of peak credit as laid down in D.K. GARG [ 2017 (8) TMI 450 - DELHI HIGH COURT] we are of the considered view that the assessee is entitled to benefit of peak credit only in respect of this transaction, which is mentioned in statement of proprietor of Maladeep Construction and which also tallies with assessee s bank statement, since in respect of said transaction, linkage/chain of transaction through banking channel is evident and therefore, the assessing officer is directed to grant the benefit of peak credit to the assessee in respect of this transaction. In respect of other transactions in assessee s bank account, if the assessee is able to prove linkage/chain of transaction through banking channel then in respect of those transactions also, following the principle laid down by Hon ble Delhi High Court in aforesaid decision, benefit of peak credit should be granted to the assessee. With the above directions, we remand the matter to the assessing officer for de novo adjudication - assessee is directed to file necessary details in support of its claim of peak credit in respect of other transactions - As a result, grounds no. 4 and 5 raised in assessee s appeal are allowed for statistical purpose. Addition u/s 68 - accommodation entry receipts - HELD THAT:- As in the present case, the assessee has not admitted itself to be an accommodation entry provider and has claimed itself to be an employee working in finance company having income from salary in addition to having the distribution agency and the fact whether any commission income was earned by the assessee is also not on record. Further, even before the lower authorities assessee has not claimed to have earned commission income. Thus, the petition seeking admission of additional ground filed by the assessee is rejected. From the perusal of profit and loss account of Rainbow Enterprises, forming part of the paper book, it is evident that the assessee was paid remuneration of Rs. 30,081 as partner and said amount was added as business income by the Assessing Officer. In view of the above, we do not find any infirmity in the impugned order passed by the learned CIT(A) upholding the aforesaid addition
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2022 (7) TMI 672
Revision u/s 263 by CIT - deduction under Section 80P(2) - HELD THAT:- It is observed that the assessment completed by the AO under Section 143(3) of the Act allowing the similar claim of an assessee for deduction under Section 80P(2) of the Act in respect of interest income earned on the deposits with Mehsana Urban Co-operative Bank was set aside by the same learned PCIT vide his order passed under Section 263 of the Act in the case of the People Co-op. Credit Society Ltd by relying on the decision in the case of Totgars Co-operative Sale Society ( 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] and, on appeal by the assessee, the Coordinate Bench of this Tribunal [ 2022 (3) TMI 71 - ITAT AHMEDABAD] set aside the order passed by the learned PCIT under Section 263 of the Act restoring that of the Assessing Officer by relying inter alia on the decision of the Hon ble jurisdictional High Court in the case of State Bank of India [ 2016 (7) TMI 516 - GUJARAT HIGH COURT] The issue involved in the present case is thus squarely covered by the decisions rendered by the Tribunal in the case of the People Co-op. Credit Society Ltd. ( 2022 (3) TMI 71 - ITAT AHMEDABAD] and Sardar Patel Co-op. Credit Society Ltd ( 2022 (6) TMI 843 - ITAT AHMEDABAD] wherein a similar issue involving identical facts and circumstances has been decided by the Tribunal in favour of the assessee and even the learned DR has not been able to dispute this position. We, therefore, follow the said decisions of the Coordinate Bench of this Tribunal and set aside the impugned order passed by the PCIT under Section 263 of the Act restoring that of the Assessing Officer passed under Section 143(3) of the Act. Appeal of assessee allowed.
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2022 (7) TMI 671
Delayed deposit of employee's contribution towards PF and ESIC - Scope of amendment - HELD THAT:- Admittedly the assessee has deposited the impugned contributions to the PF/ESI though after due date as prescribed under the relevant provisions of PF/ESI Act but within the time allowed u/s. 43B i.e. up to the due date u/s. 139(1) for filing of income. Regarding the amendments made through Finance Act, 2021, it is specifically mentioned by the legislature that the amendments are effective from 01.04.2021. As decided in M/S. EXPRESS ROADWAY P. LTD. case [ 2021 (10) TMI 514 - ITAT DELHI] as soon as employees contribution towards provident fund or ESI is received by the assessee by way of deduction or otherwise from the salary/wages of the employees, it will be treated as 'income' at the hands of the assessee. It clearly follows therefrom that if the assessee does not deposit this contribution with provident fund/ESI authorities, it will be taxed as income at the hands of the assessee. However, on making deposit with the concerned authorities, the assessee becomes entitled to deduction under the provisions of Section 36(1)(va) of the Act. Section 43B(b), however, stipulates that such deduction would be permissible only on actual payment. This is the scheme of the Act for making an assessee entitled to get deduction from income insofar as employees' contribution is concerned. It is in this backdrop we have to determine as to at what point of time this payment is to be actually made - Decided in favour of assessee.
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2022 (7) TMI 670
Revision u/s 263 - Irregular allowance of capital loss as Business loss - HELD THAT:- In the present case as the Ld PCIT has not considered the request of the assessee under the time limitation. Further the PCIT has not arrived at any conclusion on the issues raised under proceedings initiated u/s 263 only the issues were set aside to the files of AO with directions to verify and pass a fresh assessment order as per law. Our considered view on this issue is that, if Pr. CIT/CIT is of the view that any enquiry is necessary in the matter, then he should either himself make such enquiry or may get such enquiry conducted. For the purpose of exercising jurisdiction u/s 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interest of the revenue has to be preceded by some minimal enquiry by Pr. CIT/CIT. If the Pr. CIT/CIT is of the view that the AO did not undertake any enquiry, it becomes incumbent on the Pr. CIT/CIT to conduct such enquiry. If the Pr. CIT/CIT does not conduct such basic exercise then the Pr. CIT/CIT is not justified in setting aside the order u/s. 263 of the Act. Ld PCITs stand to set aside the case back to the files of AO on count of the limitation of time is not acceptable. PCIT s action to initiating proceedings u/s 263 are not according to law and was not able to establish that the order of AO was erroneous and prejudicial to the interest of revenue, therefore order passed u/s 263 for the AY 2011-12 is not sustainable, hence quashed. Assessee stated regarding order u/s 263 by the Ld PCIT for AY 2010-11 is a copy paste of the order for the AY 2011-12 of the same assessee - We have perused the material available and observed that the order u/s 263 of the was passed for AY 2010-11 by the Ld PCIT is entirely akin to the order passed for AY 2011-12 and hence cannot be considered as a valid order, therefore not sustainable, accordingly quashed. Appeal of assessee allowed.
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2022 (7) TMI 669
Revision u/s 263 - Benefit u/s 11 - foreign contribution and other donations were received - HELD THAT:- We note that audited financial statements, statement of computation of income, details of non-corpus donations received during the year, income expenditure account, receipt payment account etc. were available with AO during the assessment proceedings. A perusal of the same shows that all the necessary facts required for adjudication of the claim of the Appellant were already on record. In response to notice dated 24.01.2017 issued by the AO, the Appellant had filed reply dated 29.06.2017 giving details of the trust its objects and providing other information/details sought for by the AO. As brought to the notice of AO that opening balance of INR 70.55 Crores of the receipt and payments account consisted of corpus donations of INR 65 Crores received by the trust in the earlier years which has been applied for the objects of the trust as is clear from bare reading of the receipts and payments account. Since the claim made by the Appellant as well as all the facts were apparent and clearly on record, we do not agree with the CIT(E) that any further inquiry/verification was warranted in the facts of the present case. There was nothing on record to invite further enquiry into the matter in view of the disclosures already made. According to CIT(E), AO fell in error by not enquiring about the source of money applied by the Appellant towards the objects of the trust since the foreign contribution was deposited in escrow account. See CHOTANAGPUR DIOCESAN TRUST. VERSUS INCOME TAX OFFICER. [ 1986 (7) TMI 210 - ITAT PATNA] As Appellant had submitted that the assessment order is not erroneous and in support thereto had highlighted that the amendments to Section 10(23C) and 11 of the Act which provide that applications out of corpus shall not be considered as application for charitable purposes have been introduced w.e.f. 01.04.2022, and are not applicable to Assessment Year 2015-16. Ld. Authorised Representative for the Appellant has contended that the view taken by the AO is correct. According to us it is certainly a plausible view, if not the correct view, which cannot be disturbed by CIT(E) in exercise of powers of revision under Section 263 of the Act. We set aside the order, passed by the CIT(E) under Section 263 of the Act and restore the Assessment Order, dated 08.12.2017. Appeal of assessee allowed.
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Customs
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2022 (7) TMI 668
Smuggling - Gold - offences punishable under Section 132, 135 of Customs Act, 1962 - whether the application filed by the accused, even before the complaint is taken on file and even before the sworn statement is recorded is maintainable? - HELD THAT:- The offense complained is punishable with a maximum punishment of Seven years and therefore, this is a warrant case otherwise than by police report. Therefore, Section 245 Cr.P.C is the relevant provision applicable. Discharge under Section 245(1) is after recording of evidence , if there is no ground to proceed. Only under Section 245(2), the accused can be discharged at any state prior to the same - if the charge is groundless then the learned Magistrate is empowered to discharge the Accused under Section 245(2) of Cr.P.C. It is in this context, this case begs the question that the phrase at any previous stage of case whether would amount even at the presentation and check and call on stage of the complaint, that is, when the complaint is neither taken on file, nor the proceedings under Section 200 of the Code of Criminal Procedure has taken place by examination of the complainant on oath and or taking cognizance of offenses. It is clear that previous stage could be from the stage of Section 200 of Cr.P.C., whereby the learned Magistrate upon taking cognizance, is entitled, either to straight away issue process or conduct an enquiry by postponing the issue of process under Section 202 of Cr.P.C. Thereafter, either he can issue process or dismiss the complaint under Section 203 of Cr.P.C. - depending on the circumstances of the case, it can be held that even before the issue of process or examining the sworn statement of the complainant, there could be cognizance in a particular case. The only requirement is that the learned Magistrate should have taken authoritative notice of the allegations made in the complaint. In this case, upon presentation of the complaint, without taking any authoritative notice, the matter was simply adjourned to another day with the endorsement check and call on . Neither the complaint is numbered nor the sworn statement is recorded. This is the stage, in which the form of the complaint is being looked into before taking notice of any kind of the allegations in the complaint. Though the words at any previous stage of the case is meant to from the stage of inception i.e., under Section 200 of Cr.P.C., the same would not be extended to the 'check and call on' stage as it will be in the domain of the complainant, if the complaint is returned to modify, add, delete the contents of the complaint - the learned counsel for the petitioner is right in contending the application filed by the Accused No. 1, even though the couched in the phrase of ' dropping of all further proceedings' can mean an application for discharge as per Section 245(2) only and still it is pre-mature. Application disposed off.
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2022 (7) TMI 667
Levy of penalty on deceased husband of appellant (non-executive director of the company) - Advance License scheme - non-fulfilment of export obligation on the part of the company - defaulter under Foreign Trade (Development and Regulation) Act, 1992 - vicarious liability of Director of the company - HELD THAT:- There is nothing in the impugned orders as to what was the role of each director and how Mr. Bhatt was a directing mind or will of TPI. This would run contrary to the principle of vicarious liability which requires detailing the circumstances under which a director of a company can be held liable. No doubt, a corporate entity is an artificial person which acts through its officers, directors, managing director / chairman etc. It is the cardinal principle of criminal jurisprudence that where there are allegations of vicarious liability, then there has to be sufficient evidence of the active role of each director. There has to be a specific act attributed to a director or the person allegedly in control of management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company. From the impugned orders, it is clear that the entire charge undisputedly, is levelled against TPI for not fulfilling the advance licence obligations. No notice was admittedly issued to petitioner in petitioner's name. That being the case, there was a clear violation of the principles of natural justice. In point of facts, prejudice has been actually caused to Mr. Bhatt. This is so because the show-cause-notice was not issued in the name of Mr. Bhatt or even to his correct address. Even show-cause-notice issued to TPI did not contain specific allegation against Mr. Bhatt to which he could reply. No opportunity as such was given to Mr. Bhatt to represent against the proposed imposition of penalty. Obviously, Mr. Bhatt was not heard before the impugned orders were passed whereby penalty has been imposed upon him. The proceedings against Mr. Bhat were void ab initio. If only a notice had been sent to Mr. Bhatt identifying the specific acts attributable to him, Mr. Bhatt could have represented against the imposition of any penalty. He could have placed on record various facts and circumstances to show that even if any offence was committed by TPI, he had no hand in it. All these circumstances, if he were able to establish them, would have absolved him of the liability of penalty. Even on the question of prejudice, the impugned order imposing the penalty on Mr. Bhatt could not be sustained. Petition disposed off.
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2022 (7) TMI 666
Principles of Natural Justice - respondents can file application before the Settlement Commission under section 138 of the Customs Act, 1962 or not - interpretation of classification of the goods under the Customs Tariff Act, 1975, by Settlement Commission - vehicle - to be classified under CTH 87.02 or under 87.03? - HELD THAT:- Reading of 87.03 clearly states that all vehicles classifiable under heading 87.02 are excluded. The heading Motor-homes under 87.03 refers to Motor-homes having less than 10 seater capacity such as station wagons. 87.02 clearly provides This heading covers all motor vehicles designed for the transport of ten persons or more (including the driver) . If in the show-cause-notice, petitioner admits that seating arrangement was for ten persons including the driver, it would place the subject vehicle clearly within the meaning of 87.02 and 87.02 is expressly excluded in 87.03. There are no reason to interfere with the impugned order - petition dismissed.
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2022 (7) TMI 665
Violation of principles of natural justice - removal of Risky Exporter Tag from the Indian Customs, EDI System - Seeking to grant the pending duty drawback under the provisions of the Customs Act, 1962 as well as the pending refund of Integrated Credit Goods and Service Tax (IGST) - compensation for the delay in granting refund of duty drawback - compensation for the delay in the refund of IGST - HELD THAT:- It not possible to proceed on the basis of assumptions and presumptions since as of now, the only allegation against the petitioner is that few of the suppliers are suspected suppliers. The 3rd respondent Department directed the petitioner to reverse the credit availed by them alleging that the suppliers are nonexisting suppliers. This demand made by the Department has been complied with by the petitioner. Therefore, it will not augur well to continue the brand of the petitioner as a Risky Exporter in the absence of fresh material available on record. In any event, the tag which has been fastened to the EDI System pertaining to the petitioner as a Risky Exporter has been done without notice to the petitioner. Therefore, if there is any other material, it will be open to the respondents including the 2nd respondent to put the petitioner on notice and take appropriate action in accordance with law. The petitioner apart from seeking for removing the Risky Exporter tag also seeks for a positive direction to grant the pending duty drawback under the provisions of the Customs Act and also grant the refund of the IGST. At this juncture, no such positive direction can be issued to the authorities but the authorities are bound to take action in accordance with law. If, in the opinion of the authority, for some valid reasons, there is doubt as to the entitlement, then the petitioner has to be put on notice and an opportunity has to be granted to the petitioner. The competent authority of the 2nd respondent Department is directed to lift/remove the Risky Exporter tag affixed in the Indian Customs, EDI System concerning the petitioner within three weeks from the date of receipt of the server copy of this order - application disposed off.
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2022 (7) TMI 664
Valuation - payment of CVD on MRP basis - Demand of differential duty of customs for the extended period of limitation, along with imposition of penalty - allegation is that the appellant should have paid the customs duty based on the MRP, whereas the appellant have paid the customs duty on the transaction value - there was no MRP affixed on the goods imported and sold by the appellants - intent to evade tax, present or not - HELD THAT:- The only allegation in the show cause notice for invocation or extended period of limitation is that, the appellant have filed two Bills of Entry dated 06/10/2009 and 05/01/2010 wherein they have suo moto declared the RSP of the goods for the purpose of calculation of CVD at the time of import. It was further observed that prior to this, the appellant had not declared the RSP with intent to evade the Customs duty. Thus, the appellant have intentionally hidden the fact to evade the requisite duty on the CVD component. It is mentioned in the Show-Cause Notice that investigation was started by the department only after declaration of MRP/RSP suo moto by the appellant in the Bill of Entry filed in October, 2009 and subsequent Bills of Entry. The statement of the proprietor was recorded under Section 108 on 08/12/2009 wherein, he inter alia stated that although they are importing from the year 2004 they have never declared RSP or MRP at the time of import. It was only after they came to know about Notification No. 49/2008-CE as amended by Notification No. 18/2009-CE, they have understood the requirement to declare MRP/RSP and accordingly they have started declaring - no case has been made of by the revenue that the appellant, in spite of having knowledge of such compliance towards MRP, have deliberately not declared. The extended period of limitation is not invocable in the facts and circumstances. Thus, the demand shall be limited to the normal period of limitation, which is six months starting from the date of the Show-Cause Notice. The penalty imposed under Section 114A is also set aside. Appeal allowed.
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Corporate Laws
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2022 (7) TMI 663
Request to implead M/s. Avadh Projects (proposed respondent no. 6) as a party in the main company petition - seeking impleadment on the ground that said M/s. Avadh Projects has purchased the assets of the respondent no. 1 company during the pendency of the main company petition when there is an order of status-quo to maintain the fixed assets of the company - maintenance of start quo - HELD THAT:- The petitioner, having lost in Civil Court way back in the year 2017, has come out with this application. It is seen from the material on record that proposed respondent no. 5 had purchased the assets of respondent no. 1 company prior to filling of main company petition. Before purchasing the assets, a notice was published calling upon the objections. The proposed respondent no. 5 may be a bonafide purchaser of the assets. He cannot be dragged into this litigation at this stage, more particularly, when the issue that whether the proposed respondent no. 5 is a bonafide purchaser of the assets? is still pending before the Civil Court. This Tribunal in its limited jurisdiction cannot decide the above civil rights of the parties. Moreover, the issue that whether the main company petition itself is maintainable or not is still pending for consideration of this Tribunal. If the finding on that issue goes against the petitioner, then, the main company petition itself is required to be dismissed and this application also would thereby become infructuous - the petitioner alleged that the proposed respondent no. 6 purchased the assets though there was an order of status quo to be maintained relating to the fixed assets of respondent no. 1 company. This application is not maintainable at least at this stage - Application dismissed.
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Insolvency & Bankruptcy
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2022 (7) TMI 662
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- In Section 9 Application of the I B Code, 2016, the Adjudicating Authority is to examine whether a Notice of Dispute was received by the Operational Creditor or whether there is a record of Dispute in Information Utility. An Existence of an undisputed Debt, is a sine quanon for initiating the Corporate Insolvency Resolution Process - An Adjudicating Authority has to adhere the mandate of Section 9 of the I B Code, 2016, and in particular the mandate of Section 9 (5) of the Code and to admit or to reject the Application, as opined by this Tribunal, after all, the Adjudicating Authority is not required to be satisfied as to whether the Defense is likely to succeed or not. The merits of dispute are not the concern at this stage, but only an Adjudicating Authority is to satisfy at this stage, about the Existence of Dispute, which is good enough to invalidate the Section 9 Application - It is to be remembered that the Dispute and/or the Suit or Arbitration Proceedings, must be pre-existing, it must exist before receipt of Demand Notice or Invoice. As long as the Dispute is not a spurious or an illusory or hypothetical one, the Adjudicating Authority is to admit the Section 9 Application filed by the Petitioner/Applicant/Operational Creditor. As far as the present case is concerned that it is latently and patently quite clear that the two Account Statements of the 2nd Respondent/Corporate Debtor and M/s. Vaishnavi Impex were properly kept separately and in the light of foregoing detailed discussions and also this Tribunal considering the fact that the prior to and after issuance of Demand Notice dated 16.03.2020 by the 1st Respondent/Operational Creditor to the 2nd Respondent/Corporate Debtor, the 2nd Respondent/Corporate Debtor had not raised any Dispute in regard to the Goods supplied by the Operational Creditor and in fact, the 2 nd Respondent/Corporate Debtor had admitted the Debt through emails, the 2nd Respondent/Corporate Debtor having utilised the Goods supplied by the 1st Respondent/Operational Creditor cannot avoid or evade its responsibility in not making the payment of Debt of Rs.3,60,11,075/-, because it had committed Default and therefore, without any hesitation, this Tribunal holds that the Adjudicating Authority, (National Company Law Tribunal, Amaravati Bench), had rightly admitted the CP(IB) No./60/9/AMR/2020, which does not suffer from any material irregularity or patent illegality in the eye of law. Appeal dismissed.
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2022 (7) TMI 661
Appellant are Financial Creditors or not - no direct disbursal of amount to the Corporate Debtor/Guarantor - Related Parties of the Corporate Debtor or not - individual Homebuyer has the locus to challenge the admission of a Claim of another Creditor/Financial Creditor or not - appellant can make a Claim on the basis of the Guarantee Deed which was never invoked pre-commencement of the CIRP, and remained uninvoked even as on the date of filing of the Claim, thereby meaning that Right to Payment has not yet accrued - Appellants were in a position to control the affairs of the Corporate Debtor, to fall within the ambit of the definition of Related Party as defined under Section 5(24) of the Code or not. Financial Debt or ot - direct disbursal of amount by ECL to the Corporate Debtor - Applicability of decision in the case of Anuj Jain [ 2020 (2) TMI 1259 - SUPREME COURT ], to the facts of the attendant case and holding that the Appellants are not Financial Creditors in view of the fact that there was no direct disbursal of amount to the Corporate Debtor/Guarantor - HELD THAT:- This Tribunal is of the considered view that ECL, being the original lender had disbursed the amount in terms of the Facility Agreement entered into and the disbursement of debt is essentially to the Issuer/Borrower and not to the Corporate Guarantor i.e., Palm Developers. By providing Corporate Guarantee, Palm Developers has agreed to incur the debt, if due and payable. A Guarantee is included as one of the illustrations which specifies the definition of Financial Debt under Section 5(8)(i) of the Code - despite the fact that there was no direct disbursal of amount to the Corporate Guarantor, any amounts released to the Issuer/Principal Borrower and not to the Corporate Guarantor does constitute Financial Debt as defined under Section 5(8) of the Code and it cannot be said that such amounts do not have consideration for Time Value of Money. In the facts of the attendant case, it has to be only seen whether there was a default and the amounts are due and payable as on the date of filing of the Claim - thus, the ratio of Anuj Jain is not applicable to the facts of the attendant case on hand. Locus of the Individual Homebuyer/Financial Creditor to challenge the constitution of the CoC - HELD THAT:- The fact which is to be kept in mind is that the Appellants have not preferred any Section 7 Applications, but have filed Claims in the ongoing CIRP Proceedings of the Principal Borrower/Saha and the Corporate Guarantor/Palm Developers. - This Tribunal is of the earnest view that the Appellants cannot Claim the amounts in the CIRP of the Corporate Debtor who is a Corporate Guarantor on the basis of the Deed of Guarantee which was never invoked as on the date of filing of the Claims. The record also does not show that any Notice in terms of Clause 2.1(ii) of the Deed of Guarantee was ever issued to the Corporate Debtor. There are no substance in the argument of the Appellant Counsel that no such Notice is required to be issued as invocation of Guarantee is not a pre-condition to file a Claim. The Deed of Guarantee stipulates such a notice to be issued which was never sent as the Deed was never invoked prior to CIRP filing of Form C - When the Appellants Claim has been rejected in the CIRP of the Principal Borrower, the onus is on the Appellants to substantiate how their claims can be admitted in the CIRP of the Corporate Guarantor when they have not even invoked the Guarantee prior to CIRP commencement, or as on the date of filing of Form C, which they have failed to discharge. Issue of Related Party - HELD THAT:- It is seen from Clause 21 of the Sanction Letter that ECL had the controlling power to appoint Real Estate Agent/Distribution Agent on behalf of the Corporate Debtor for sale of specific residential units/inventory totaling to 1,77,9000 sq. ft. saleable area in various projects of the promoters - In the terms and conditions of the Facility Agreement, under the caption Special Conditions Clause 24(4) it is clearly stated that The Borrower shall execute irrevocable Power of Attorney authorizing representatives of Lender to execute the sale deed and represent on behalf of the Borrower and Security Providers before the Registrar on its behalf to register the Sale Deed for units to be sold in each of its Projects. The first part of the term Control refers to de jure control, which includes the right to appoint directors of the Company. The second part of the expression Control refers to de facto control, whereby, person/body corporate directly or indirectly can positively influence in any manner, the management or policy decisions. Any decision which has a long term effect, for formulation of Business Plans, comes within the purview of policy making. The argument that the Clauses with respect to Business Plans and any substantial/important charges requiring the approval of the Debenture Holders, is only restrictive and does not construe positive control is untenable. The irrevocable PoA executed in favour of the Debenture Holders suggests Positive and proactive control as the Appellants are in a position to take proactive decisions regarding the rights of the Corporate Debtor. The Appellants do have Positive Powers and are in a position to directly and indirectly Control the management and the policy decisions of the Corporate Debtor and hence there are no illegality in the Impugned Order passed by the Adjudicating Authority affirming the decision of the RP in deleting the Appellants from being part of the CoC as stipulated for under Section 21(2) of the Code. Appeal dismissed.
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2022 (7) TMI 660
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- In the present case, the Corporate Debtor has raised this issue of poor quality only after consuming the goods. The Contract between the parties was executed and adjudicated upon, therefore, in the light of the provisions of the Contract Act, the Corporate Debtor could not be allowed to do so. The Corporate Debtor has acknowledged its liability but is ready to make payment of only Rs.2,00,000/- instead of Rs.8,66,234/- being claimed by the Operational Creditor. The liability is duly admitted by the Corporate Debtor. The petition is otherwise complete in all respects - Petition admitted - moratorium declared.
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2022 (7) TMI 659
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - the Corporate Debtor had to make payment to the Operational Creditor for supply of the goods subject matter of this case, which was to be made in USD - Operational Creditors - HELD THAT:- Since it appears to be beyond the control of the Corporate Debtor to make the payment to the Operational Creditor in US Dollar, in spite of the fact that the Corporate Debtor approached the Hon ble High Court and the Hon ble High Court issued certain directions to the Reserve Bank of India, this appears to be a case which has to be considered by the Reserve Bank of India, following the directions of the Hon ble High Court. It is granted that the amount of interest bearing FDR as proposed by the Corporate Debtor itself through their counsel will be deposited and shall remain deposited in FDR because if and when the Reserve Bank of India grants necessary permission to remit the said foreign currency to the Operational Creditor, the said amount would immediately be utilized for the said purpose because it is an admitted liability which has to be liquidated as soon as the permission of Reserve Bank of India is granted. The Corporate Debtor is directed to make a deposit of the approximate conversion of USD in Indian Rupees and place the same with the Registry of this Court, within 60 days from this order - application disposed off.
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2022 (7) TMI 658
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - purchase of flats - Financial Creditors - existence of debt and dispute or not - HELD THAT:- This petition is not maintainable because all these applicants who are stated to have booked their flats and deposited the amount with the Corporate Debtor have joined hands and made an association to file this application because individual applicants could not have filed any such application but since the claim of most of the applicants had become time barred, and since some of them are related to one of the Directors of the Corporate Debtor namely Prabhash Chandra, a letter was issued by that Director to bring all their claims within limitation. Letter dated 28th May, 2018, written by the said Director to all the applicants specifically referring to the agreement dated 17th July 2015 being agreement for purchase of flat with the builder. Clause 8 of the said agreement, however, specifically provided the amount of consideration to be paid by the applicants who booked their flats. With a view to give life to the dead claims of the applicants, most of whom were known to or related to the said Director, this application has been filed at the behest of the said Director Mr. Prabhash Chandra in collusion with all these applicants for mutual vested interest. The Corporate Debtor has placed before us the detailed facts and submitted that a petition C.P No. 92/2021 under section 241-242 of the Companies Act is also pending before this bench between the parties. If we exclude the time barred claims of the applicants, this petition is even otherwise not maintainable being below the threshold limit. The basic principle of law under the Indian Contract Act, 1872 is that, the parties to the agreement are equally bound to perform their respective parts and if a party does not perform its part, it cannot ask the other party to play its corresponding duty or part. The applicants in this matter have deposited the 10% amount or even loss with the Corporate Debtor pursuant to the agreement between them and except for the letter dated 28th May, 2018 which is disputed by the Corporate Debtor as having been issued by the company, which was based on the alleged decision taken by the board meeting of the company which was attended to only by one of the Directors Prabhash Chandra in the absence of the other Director, who has denied the issuance of that letter, it appears to a collusive petition. There are no bona fide substance in this petition and the petition is, therefore, dismissed.
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PMLA
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2022 (7) TMI 657
Money Laundering - Criminal Conspiracy - proceeds of crime - scheduled offences or not - reasons to believe - Validity of the summons issued - validity of provisional attachment order - issuance of summons to explain the source of funds for the premia paid for the insurance policies - HELD THAT:- On perusal of Section 5 of PMLA, more particularly to sub-section (1) thereof, it is evident that the requirement of the law is that the competent attaching authority must have reason to believe, which must be recorded in writing, on the basis of material in his possession that any person is in possession of any proceeds of crime and such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime, before he provisionally attaches such property for the limited period not exceeding 180 days. The sine qua non for exercising power under sub- section (1) of Section 5 is that the attaching authority must have reason to believe, which must be recorded in writing. Such reason to believe must be formed on the basis of material(s) in his possession that any person is in possession of proceeds of crime and that such proceeds of crime are likely to be concealed etc. Therefore the material in possession of the attaching authority must pertain to the above two aspects and on the basis of such materials he must form the reason to believe. In other words, the reason to believe must have a direct nexus or live link with the materials in possession pertaining to the above aspects. The expression reason to believe has been subjected to numerous judicial pronouncements. It is an expression of considerable import and finds place in a number of statutes - fiscal, penal etc. However, the expression reason to believe is not defined in the PMLA. But this expression is explained in Section 26 IPC as per which a person may be said to have reason to believe a thing, if he has sufficient cause to believe that thing but not otherwise. In the context of Customs Act, 1962, it confers jurisdiction upon the proper officer to seize goods liable to confiscation under sub-section (1) of Section 110 of the said Act. The offence of money laundering is not an independent or autonomous offence but is dependent on commission of a predicate offence. In other words an offence under the PMLA is not a standalone offence. It is relatable to commission or an offshoot of a scheduled offence. In so far the petitioner is concerned, as noticed above, there is no charge of scheduled offence against him - it is trite that for allegation of money laundering against one person, property belonging to another person cannot be attached. On a thorough consideration of all aspects of the matter, it can be held that respondents had clearly exceeded their jurisdiction in issuing the impugned summons and passing the impugned Provisional Attachment Order against the petitioner. Those are wholly unsustainable in law being without jurisdiction. Therefore question of relegating the petitioner to the adjudicating authority would not arise - when the impugned summons and the impugned Provisional Attachment Order are without jurisdiction, question of Section 24 of PMLA coming into play does not arise. Petition allowed.
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Service Tax
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2022 (7) TMI 656
Evasion of Service Tax - Presumption of documents - none of the alleged invoices / documents was produced by the Appellant or seized from the Appellant s premises or control. - commission services - it is also alleged that Appellant have availed the cenvat credit without having any corroborative evidence - when the appellant had not submitted any reply before the adjudicating authority and not submitted documents / records and additional evidences before the adjudicating authority, can it do so before the appellate tribunal in their support? - HELD THAT:- The Law/Rules has not precluded CESTAT from considering new grounds/ evidence. In the present matter it is on record that during the search at the premises of the Appellants, no invoices/ debit notes etc., raised to their customers were found. In the present matter, transactions records were called from the various customers of Appellant. The said alleged debit notes/ invoices were provided by the customers to department. Further it is on record that during the search at the premises of M/s Forward Resources Pvt. Ltd., department seized the records/documents containing Income tax TDS statements of Appellant. It is mandate of law that presumption of documents in certain cases under Section 36A of the Central Excise Act is available only when the documents are produced by or seized from the custody or control of the person concerned. In view of Section 36A of Central Excise Act, 1944 it is only when such document is tendered in evidence against the person who produced the same or from whose custody or control it was seized that the presumption under Section 36A is available - In the present case admittedly none of the alleged invoices / documents was produced by the Appellant or seized from the Appellant s premises or control. When the presumption under Section 36A is not available, the burden of proof is squarely on the Department to prove that the source documents are related to the Appellants and that any taxable services under the source documents were actually provided by the Appellant. This burden has not at all been discharged in the present case. The department could not have simply accepted the customers documents provided by them on its face value and the same needed strict corroboration which is completely absent in the present case. It is settled law that though the admission is extremely important piece of evidence but it cannot be said to be conclusive and it is open to the person who has made the admission to show that this is incorrect. It is also noted that there are numerous decisions of the Tribunal laying down the principle that such admission of persons, cannot be considered to be conclusive evidence to establish the case against the assessee. Burden of proof is on the Revenue and same is required to be discharged effectively. The details contained in records of service recipient are actually not acceptable as evidence that the Appellant has provided the taxable services, therefore, it cannot be accepted as admissible piece of evidence. Moreover, none of the persons, on whose statements reliance was placed by the department, were cross-examined. The Hon ble P H High Court in case of M/S G-TECH INDUSTRIES VERSUS UNION OF INDIA AND ANOTHER [ 2016 (6) TMI 957 - PUNJAB HARYANA HIGH COURT ] has held that Section 9D of the Act has to be construed strictly, as mandatory and not merely directory - In the present matter the Adjudicating Authority had failed to follow the requirement of Section9D of the Act regarding examination in chief of witness, therefore demand of service tax on the basis of statements of persons cannot be sustainable. When the Service tax is demanded on alleged services, it is the responsibility of the department to show that the appellant had rendered these services to customers with positive evidences. In the present case department failed to do so. The Appellant produced the copies of Debit Notes/ Consignment notes and copies of invoices raised by the transporters to the appellant along with Affidavit. The said documents clearly established that the nature of the service provided by the Appellant to their above customers are in the nature of Goods Transport Agency service - Further on the basis of documents/ records received from customers of Appellant, revenue alleged that the they have collected the service tax payment. However on the basis of records of other persons it cannot be concluded that Appellant have collected the service tax from their customers. In the present matter revenue in support of their contentions nowhere produced any corroborative evidence in the form of Bank Details or any documents recovered from the business premises of the Appellant by which it can be concluded that Appellant have collected the Service tax. In the present matter department clearly failed to prove the case that Appellant have collected the service tax from their customers. The show cause notice alleged that Appellant have provided business auxiliary services, whereas appellant have provided the GTA services as discussed above. Even if it is assumed that appellant have provided the business auxiliary service the impugned show cause notice has not specified under which clause of the definition of Business Auxiliary Service the activity of the Appellant falls. For determining the taxability of services, it very important to specify the activity of the assessee. In the absence of the specification of the exact sub-heading under which the service falls, taxability of service cannot be decided. CENVAT Credit - HELD THAT:- The charges against the Appellant are that they have not produced the input service documents on which they have taken cenvat Credit. It is contrary to this fact, the appellant has recorded the receipt of the input services in their cenvat account and along with affidavit produced the cenvat credit account, copies of input service invoices on the basis of which Cenvat credit has been availed by them - there are no reason to deny the Cenvat Credit. Other issues such as Limitation, demand to be made under Section 73 or 73A, omission of Chapter V the Finance Act, 1994 vide Section 173 of CGST Act etc. are not dealt upon and the same are kept open. The demand of service tax (except the amount of service tax payable as per the appellant, admitted by the appellant and deposited as stated in the appellant s submission) interest and penalty is not sustainable and the same is accordingly set aside - Appeal allowed.
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2022 (7) TMI 655
Service of order - Time Limitation - case of the Appellant is that they never received the Order-in-Original dated 10.08.2016, which was dispatched on 18.08.2016, certified copy of which was received by the Appellant on 27.04.2017 - HELD THAT:- The Appellant s claim that they never received the Order-in-Original dated 10.08.2016 through the postal delivery system as claimed by the Senior Superintendent of Post Offices, Meghalaya Division vide letter dated 11.10.2017 and it was only when the Superintendent (Adjudication), Central Excise Service Tax, Agartala issued a certified copy to the Appellant on 27.04.2017, they received the copy of the Order-in-Original and filed the Appeal before the First Appellate Authority. It would not be out of place to mention that the Appellant is not going to gain in adopting the delay tactics in filing the Appeal as has been observed by the Ld.Commissioner(Appeals). It is observed from the records that against the adjudicated demand of Rs.11,36,469/-, the Appellants have already paid Rs.10,19,283/-, which has also been appropriated in the Order-in-Original. The matter is remanded to the Ld.Commissioner(Appeals) to decide the Appeal on merits without going into the aspect of limitation - Appeal is allowed by way of remand to the Ld.Commissioner(Appeals).
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2022 (7) TMI 654
Seeking withdrawal pf appeal of the Department - monetary amount involved in the appeal - power of Commissioner(Appeals) to remand - error apparent on the face of record or not - HELD THAT:- Where the subject matter of an appeal already filed before this Tribunal is found to be less than Rs.50.00 Lakhs, the Department is supposed to seek withdrawal of the said appeal. Keeping in view the same and the fact that without following the monetary limits the proper jurisdiction of this Tribunal shall be affected, also keeping in view that the appeal is filed by the Department, the first party of the litigation who is the master of its litigation, the request of withdrawal as made by the appellant-Department is hereby accepted. Power of Commissioner (Appeals) to remand - HELD THAT:- On perusal of Section 35A(3) of Central Excise Act 1944, makes it clear that the provision do not extend power of remand to the Commissioner (Appeals). Also from the order of Commissioner (Appeals) in para 14 thereof he has specifically acknowledged the entitlement of the appellant to seek the impugned refund. It is observed that the order of Commissioner (Appeals) has committed apparent non-compliance of statutory provisions (Section 35 A of CEA) the same amounts to be an error apparent on the face of the said order. Hence, while accepting the request of the Department for withdrawing the impugned appeal but keeping in view that the appellant was also to file an appeal seeking the same prayer as the Department has prayed and that the time of that appeal has already expired that liberty is given to the appellant to seek the appropriate remedy before commissioner (Appeals). Commissioner (Appeals) is required to consider their prayer in case the assessee exercises the said appropriate remedy, without applying the bar of limitation. The impugned appeal of the Department is allowed to be withdrawn. Appeal stands dismissed as withdrawn.
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Central Excise
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2022 (7) TMI 653
Reversal of CENVAT Credit - capital goods removed as such - non-furnishing of documentary evidence in support of the contention that CENVAT/MODVAT credit on these capital goods, is not availed - suppression of material facts or not - HELD THAT:- Appellant has cleared the capital goods which have been procured them in the year 1976 and thereafter for setting up their production facility at Kanjur. Subsequently during the period these capital goods were dismantled and removed by the appellant to their Mandideep unit after reversal of the credit on the depreciated value of the capital goods. It is fact of common knowledge that the Scheme of MODVAT Credit was introduced in the Year 1986 for the inputs and was in the year 1994 extended to the Capital Goods. Subsequently the scheme of MODVAT Credit was changed to CENVAT Credit scheme, and the scheme as was prevalent during the relevant period the scheme applicable was as laid down by the CENVAT Credit Rules, 2004. Commissioner has in the para 13, noted the above fact. In the case of the capital goods when the MODVAT Credit scheme was introduced, it was provided that person claiming the credit in respect of the Capital Goods was required to intimate about the receipt of Capital Goods and installation of the same to jurisdictional officers. Hence all the information in respect of the Capital Goods against which the MODVAT/ CENVAT Credit has been taken will be available with the revenue authorities. Noting the fact that the capital goods were removed by the appellant after having been put to use for considerable period of time, the approach adopted by the appellant to reverse the amount determined on the basis of book value of the capital goods, or depreciated value of capital goods cannot be faulted with. Revenue has not produced a single instance by referring to the credit account of the appellants to establish that these capital goods are the one against which they have actually taken the credit, and these goods have been cleared as such. On the contrary they have hypothetically calculated the amount of the credit to be reversed by denying the depreciation as claimed by the appellant while clearing these capital goods to their Mandideep unit. The fact of utilization and condition of these capital goods could have been easily verified by the revenue authorities at the time of their clearance from the Kanjur Marg unit of the appellant or could have been subsequently verified at the Mandideep unit. The issue is found completely revenue neutral as the quantum of duty/ credit reversed will be available as credit to the appellant unit at Mandideep - appeal allowed - decided in favor of appellant.
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2022 (7) TMI 652
Refund claim of unutilised PLA (Personal Ledger Accounts) balance lying in their Central Excise Accounts as on 30/06/2017 - barred by limitation in view of section 11B of the Central Excise Act, 1944 or not - HELD THAT:- The issue involved hereinis no more res integrain view of various decision of this Tribunal on this issue, including the decision in the matter of M/S. WMW METAL FABRICS LIMITED VERSUS COMMISSIONER, CGST, JAIPUR-I [ 2021 (8) TMI 657 - CESTAT NEW DELHI] , it has been held by the co-ordinate Bench of the Tribunal that the PLA deposits are mere deposits for the purpose of their utilisation in the future and the same is not duty, in which case the provision of section 11B would not apply and if the same is not in a position to utilise, the depositor has to be held as the owner of the said amount which is required to be refunded to them in the absence of any limitation prescribed under the Act for such refunds. Even the Hon ble High Court of Punjab and Haryana at Chandigarh which is the jurisdictional High Court, in the matter of INDIAN OIL CORPORATION LTD. VERSUS COMMISSIONER OF C. EX., NEW DELHI [ 2010 (4) TMI 625 - PUNJAB HARYANA HIGH COURT] while deciding the issue about applying the limitation prescribed u/s. 11B ibid on un-utilised PLA balance has held that the rejection of application of claimant by the Central Excise Authorities on the ground that the application has been filed beyond the prescribed period from the date of crediting the amount in their personal ledger accounts cannot be sustained because the State cannot enrich itself unjustly when no duty was liable to be paid by the petitioner therein. The appellant are eligible for the refund claim of unutilized balance lying in their PLA (Personal Ledger Accounts) - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (7) TMI 651
Validity of assessment order - seeking extension of stay - request for extension of stay rejected on the ground that there is no provision under the TNVAT Act for considering such extension - HELD THAT:- The provisions of Section 51(4) state that, notwithstanding the preferring of the appeal under sub-Section (1) of Section 51, tax shall be paid in accordance with the order of assessment, as against which appeal is preferred - the first proviso states that the appellate authority may, in his discretion, issue such directions as he thinks fit in regard to the payment of tax before disposal of the appeal subject to the appellant furnishing sufficient security to his satisfaction in the form and manner as he may stipulate. In a situation where the hearing of the appeal exceeds the period of 180 days from date of grant of stay, then the stay granted stands automatically vacated. The purpose of insertion of the second proviso is to ensure speedy disposal of appeals, since where interim protection is once obtained there is a tendency to stretch the benefit inordinately with the appeals stagnating inordinately. This causes accumulation of the substantial arrears of tax and penalty demands. It is to protect against such a situation that the second proviso has been inserted - the rigour of the second proviso would not be applicable to a case such as the present one, where the petitioner has cooperated in full in the disposal of the appeals and there is admittedly no delay on its part or any attempt to protract the appeal proceedings. The stay granted originally is extended, by concurrence of the respondent as well and a direction issued to R2 to dispose the appeals within a period of three (3) months from today, subject to the petitioner extending the validity of the bank guarantee for an another period of three (3) months - Petition allowed.
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2022 (7) TMI 650
Refund of Input Tax Credit - export sales - zero rated sales - delay in filing of Form W - Section 18(3) of the Act read with Rule 11(2) of the VAT Rules, 2007 - HELD THAT:- Section 19(11) grants a benefit to the assessee stating that if an assessee has failed to set-off ITC in respect of output tax liability in any month, then, he shall have the benefit of an extended time limit for such claim, that is, before the end of financial year or before 90 days from the date of purchase, whichever was later, to make such claim - the claim, once made, would have an impact on the quantification of turnover itself and cannot be equated to a claim for refund. Assessees are granted the benefit of ITC as a set-off against liability and such claim would have a substantial impact upon the computation of tax liability. It was thus necessary for an assessee to exercise this right within the time granted by statute. In the event the timeline had been missed, a further extension of time was granted under Section 19(11). An assessee who misses even the extended timeline had indeed missed the benefit of ITC availment and the returns of the assessee as filed, would be taken to be final. The strict application of the timelines under the Act will not be applicable, particularly, in a situation where the assessee concerned, is otherwise entitled in law, to the same. The filing of the form claiming refund cannot be equated to claim of ITC itself which would have an impact on the quantification of turnover itself. Thus, and for the reasons set out in the preceding paragraphs, the reliance placed by revenue upon the case of ALD Automotive Pvt. Ltd. does not further its case in the present matter. The writ petition is allowed.
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2022 (7) TMI 649
Levy of Entry tax - goods which were imported from outside of state of West Bengal - Vires of West Bengal Tax On Entry of Goods into Local Area Act. 2012 - violative of Article 301 304(a) of the Constitution or not - HELD THAT:- The indubitable and undeniable position is that by virtue of the 101st Constitution Amendment Entry 52 of List II (State List) of the Seventh Schedule was omitted / deleted. It would be somehow beneficial to see Entry 52 before it was omitted by the said amendment - It is, therefore, apparent that the source or fountain of the legislative power of the State Legislature (in our case West Bengal) came to be dried up and, therefore, it could very well be said that the State Legislature did not have the legislative competence to introduce amendment in the Entry Tax Act of 2012 on 06/03/2017 by the West Bengal Finance Act, 2017 but the grey area is, Section 19 of the Constitution 101st Amendment Act. On perusal particularly when the judgment of the ld. Single Bench striking down the Entry Tax Act of 2012 now pends for appeal it can very well be said that whether the original Act indeed satisfy the constitutional tests within ambit of Article 304(a) of the Constitution will be taken care of the Appellate forum i.e., the Division Bench of the Hon ble Calcutta High Court and it is only incumbent upon us to decide whether the Amending Act of 2017 i.e., Finance Act of 2017 whereby the Entry Tax Act was validated and given retrospective effect is hit by the lack of legislative competence. It must be held that the transitional provision contained in Section 19 of the 101st Amendment Act cannot come in aid to save the amendment of the Entry Tax Act introduced by way of Finance Act, 2017. The State Legislature cannot be said to have legislative competence to bring in the impugned amendment and validation of the Act - Even assuming for a moment that the West Bengal Entry Tax Act was not struck down by any judgment of the High Court can it be said that the amendment introduced retrospectively and validation of the Act by way of introducing Finance Act of 2017 is within the legislative competence of the State Government? Having regard to the deletion of Entry 52 of the State List and bearing in mind the provision contained in Section 265 of the Constitution we are impelled to hold that the State Legislature did not have the legislative competence to bring in such amendment insofar as it relates to the West Bengal Tax on Entry of Goods into Local Areas Act, 2012. Thus, Section 5 Section 6 of the West Bengal Finance Act, 2017 are ultra-vires and unconstitutional - the applications filed by the petitioners are allowed on contest but without any order as to costs.
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9911796707
