TMI Tax Updates - e-Newsletter
July 23, 2016

Case Laws in this Newsletter:

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

TMI SMS

• CBDT clarified the scope of 'Limited Scrutiny', the scrutiny assessment proceedings and conversion of case to 'Complete Scrutiny'

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Articles

1. THE REAL ESTATE REGULATORY AUTHORITY

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. INFLATION

2. Economic growth

3. Funds for Startups

4. New application process to fast track the allotment of PAN and TAN

5. RBI Reference Rate for US $

Notifications

Companies Law

1. F. No. 1/30/NCLAT/CL-V/2013 - dated 21-7-2016 - Co. Law

National Company Law Appellate Tribunal Rules, 2016

2. F. No. 1/30/2013/CL-V - dated 21-7-2016 - Co. Law

National Company Law Tribunal Rules, 2016

Circulars / Instructions / Orders

VAT - Delhi

1. No.F.3(378)/Policy/VAT/2016/489-494 - dated 21-7-2016

Speedy disposal of all refund claims

SEZ

2. F.1/5/2016-SEZ - dated 14-7-2016

Instruction regarding documents to be forwarded for full notification/additional area notification/partial de-notification/full de-notification/change of name of devbeloper or co-developer and shifting of unit from one SEZ to another SEZ

Income Tax

3. F .No.279/Misc./M-74/2016-ITJ - dated 19-7-2016

Implementation of the Direct Tax Dispute Resolution Scheme 2016

4. No. 312/67/2016-OT - dated 14-7-2016

Expeditious disposal of refunds in non-CASS cases – relaxation of requirements of Section 245 of the I. T. Act 1961

5. 5/2016 - dated 14-7-2016

Direction regarding scope of enquiry in cases under ‘Limited Scrutiny’ selected through CASS 2015 & 2016

6. F.NO.1/04/2016-NS.II - dated 13-5-2016

Revision of Interest Rates for NSC and KVP Certificates

7. F. No.173/237/2016-ITA-I - dated 6-5-2016

Central Board of Direct Taxes Notified Committee for Purposes of Rule 10VA(4)

8. LETTER F.NO.SYSTEM/ITBA/RSA TOKEN/16-17/121 - dated 28-4-2016

Revised RSA Token Policy 2016

DGFT

9. 11/2015-20 - dated 21-7-2016

Deduction of State /Central Taxes collected from the customers while calculating foreign earnings for SFIS/SEIS Schemes

Customs

10. 33/2016 - dated 22-7-2016

Review of entity based facilitation programmes viz. Accredited Client Programme (ACP) and Authorized Economic Operator (AEO) programme — Revised Guidelines

Highlights / Catch Notes

Income Tax

• 'Limited Scrutiny' Cases: Assessments Restricted to Specific Issues Unless Converted to 'Complete Scrutiny' per Procedure.

  Circulars : In cases under ‘Limited Scrutiny’, the scrutiny assessment proceedings would initially be confined only to issues under ‘Limited Scrutiny’ and questionnaires, enquiry, investigation etc. would be restricted to such issues. Only upon conversion of case to ‘Complete Scrutiny’ after following the procedure outlined above, the AO may examine the additional issues besides the issue(s) involved in ‘Limited Scrutiny’.
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• Court Upholds Legality of Tax Survey u/s 133A; Dismisses Petitioner's Attempt to Block Summons via Article 226.

  Case-Laws - HC : Whether survey conducted by the officers under Section 133A of the Act in the business premises of the petitioner and the residences of the Director is illegal ? - What the petitioner seeks to indirectly achieved is to injunct a summon, which cannot be done, that too in exercise of jurisdiction under Article 226 of the Constitution. - writ petition dismissed - HC
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• Assessing Officer Can Use Investigation Findings if Independent Evaluation Shows Taxable Income Escaped Assessment.

  Case-Laws - HC : It is true that the Assessing Officer had relied heavily on the investigation carried out by the investigation wing and the material collected during such process, which culminated into a final report submitted by the investigation wing. However, it is not impermissible for the Assessing Officer to rely on such material, as long as of course he has applied his mind to the materials on record and formed his own belief that on the basis of such material, it can be stated that income chargeable to tax has escaped assessment. - HC
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• Concerns Raised Over Revenue's Inconsistent Legal Representation in Income Tax Cases; Advocates Overburdened with Multiple Appeals.

  Case-Laws - HC : Quality of representation on behalf of the Revenue - Inconsistent stand being taken by the Revenue in different appeals raising identical issues - most matters are distributed amongst a few Advocates with the result we have occasions where a single Advocate appears in eight/nine matters a day. This indeed is expecting the moon from the panel Advocate. - HC
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• Court Upholds Orders on Excess Stock and Sales Suppression, Grants Relief to Assessee Based on KVAT Act Findings.

  Case-Laws - HC : Additions on account of finding of excess stock and suppression of sale - impact of VAT assessment - though we confirm the orders impugned before us, we are of the view that the assessee is entitled to get the benefit of the reduced excess stock as determined by the authorities of the KVAT Act in their order - HC
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• Interest Income for 100% EOU Included in Business Profits Deduction u/s 10B, High Court Affirms Tribunal's Decision.

  Case-Laws - HC : It is not in dispute that the surplus funds were of the 100% EOU. As such, the interest earned thereon has to be regarded as part of the “profit of the business of the undertaking. Tribunal was correct in directing the Assessing Officer to treat the interest income as part of the profits of business of the 100% E.O.U. eligible for deduction u/s 10B and compute deduction accordingly - HC
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• Assessing Officer Can Reopen Six Years of Tax Returns if Incriminating Material is Found u/s 153A.

  Case-Laws - HC : While it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year. - HC
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• Accounting Standards Matter for Income-Tax Act: Expenditure on Tools Considered Revenue Expenditure.

  Case-Laws - AT : The submission of revenue that the accounting treatment to be meted out to a transaction in accordance with the Accounting Standard has no relevance for the purposes of the Income-tax Act, 1961, is a submission which does not commend to us. Thus, expenditure on tools is to be allowed as revenue expenditure - AT
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• Jurisdiction u/s 263 of Income Tax Act upheld for provision on future construction contract losses.

  Case-Laws - AT : Exercise of jurisdiction u/s 263 of the Act in respect of provision for future losses on construction contract was fully justified. - AT
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• Penalty u/s 158BFA(2) Deemed Unjustified After Reduction and Recalculation of Undisclosed Income by Assessing Officer.

  Case-Laws - AT : The proceedings for imposition of penalty u/s 158BFA(2) were initiated on the basis of earlier finding by the AO. However not only undisclosed income has been reduced but the basis for calculating the undisclosed income has also been changed, in our view, the imposition of penalty, was not warranted - AT
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Customs

• Court Rules Soft Shell Filters for Blood Bags Not Classified as Blood Filtering Equipment, Circular Overturned.

  Case-Laws - HC : Classification of import of soft shell filter for blood bag - whether the goods imported by the petitioner is “filtering equipment for filtration of blood”. - The Circular is not in terms with the statutory provisions and is liable to be set aside. - HC
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• High Court Overturns Orders Due to Lack of Evidence for Serving Show Cause Notice on Petitioner.

  Case-Laws - HC : Recovery of duty drawback granted earlier - since there is no proof to show that the show cause notice was served on the petitioner, all the orders which have been passed by all the respondents against the petitioner set aside - HC
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• Commissioner (Appeals) Rules for Assessee; Revenue's Appeal Dismissed Due to Document Verification Failure.

  Case-Laws - AT : Validity of order of orders of Commissioner (appeal) in favor of assessee - assessee submitted the documents first time before the commissioner (appeals) - There is nothing that prevented the department from calling for these particulars and examine the genuineness of the documents - Appeal of the revenue dismissed - AT
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Indian Laws

• Supreme Court Upholds Legality of Land Resumption; Accusations of Disguising Sale Through Share Transfer Dismissed.

  Case-Laws - SC : Transfer of plot by way of transfer of shares in a company to another company - under the garb of transfer of shares, the respondents have completed the sale and is creating a screen to conceal this aspect. - resumption of the allotted land by the appellant was legal and proper. - SC
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Service Tax

• Period for Service Tax Refunds Linked to Service Date, Invoice Issuance, or Payment Receipt for Exports.

  Case-Laws - AT : Period of limitation - relevant date - refund of accumulated credit of service tax paid on input services used in exports of services - the date on which services are rendered or the invoices are raised for same, or the amounts are realised by the service provider, as applicable, would be the relevant date. - AT
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Central Excise

• Court Rules Cenvat Credit on Construction Services for Staff Quarters Valid; Demand Set Aside Due to Audit Findings.

  Case-Laws - AT : Extended period of limitation - Suppression of facts - Demand based on subsequent department audit - Cenvat Credit - input services - credit of service tax availed on construction service of staff quarters, school building and hospital building during 2008-09 to 2010-2011 - Nexus with manufacturing activity - demand set aside - AT
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• Cenvat Credit Approved for Insurance, Courier Services, and Royalties on Plant Equipment Under Central Excise Rules.

  Case-Laws - AT : Cenvat Credit - eligible input services - Insurance on Plant & Machinery - Courier Services - Royalty Charges - Credit taken on ISD invoices - credit allowed on all the services - AT
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• Appellant Entitled to Refund of Excess Duty Paid; Amount Classified as Deposit, Not Subject to Unjust Enrichment Doctrine.

  Case-Laws - AT : Refund claim of excess duty paid - unjust enrichment - after issuance of corrigendum the excess duty, paid lacks the colour of duty and is merely a deposit - the excess paid is only an amount deposited by appellant, not being duty is not hit by doctrine of unjust enrichment. - appellant is eligible for refund - AT
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• Court Rules Duty Valuation for Malted Foods Must Use Transaction Value u/s 4, Not MRP-Based Duty.

  Case-Laws - AT : MRP Based duty u/s 4A or transaction value u/s 4 - bulk supply of malted milk food, malted food and malt extract powder etc. - sale of rejected lot to other customer - valuation to be made u/s 4 - AT
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• Refund Approved Due to Chartered Accountant Certificate and Buyer Support; Revenue Failed to Challenge Evidence of Unjust Enrichment.

  Case-Laws - AT : Refund - in view of the Chartered Accountant Certificate, payment of duty under protest, reflection of excess duty as receivable in the balance sheet and the certificates of the buyers are conclusive factors to examine the scope of the unjust enrichment and the Revenue having not rebutted the said evidence - Refund allowed - AT
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VAT

• High Court Sets Aside Demand Overturned Due to Retrospective Cancellation of Supplier Registration, Violating Natural Justice Principles.

  Case-Laws - HC : Reversal of input tax credit - the supplier dealers' Registration Certificates have been cancelled with retrospective effect - the impugned orders have been passed in violation of principles of natural justice as the respondent has proceeded to complete the assessment on totally different grounds than what was mentioned in the pre-revision notice - demand set aside - HC
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Case Laws:

• Income Tax

• 2016 (7) TMI 940
  Addition under Section 2 (24)(x) read with Section 36(1)(va) - provision for gratuity made towards approved gratuity fund - Addition u/s 40A - Held that:- Only before this Court for the first time the plea has been taken by the assessee that the provision has been made for the purpose of payment to an approved gratuity fund, i.e., the LIC Group Gratuity Scheme. It is apparent that the appellant is now trying to raise, at a belated sage, a pure question of fact which has not been raised by it before any of the three lower authorities. As such a pure question of fact cannot be permitted to be raised by the assessee at this belated stage. Along with the memorandum of appeal the assessee has brought on record two letters dated 27.08.2002 and 31.03.2003 of the Life Insurance of India which merely refers to LIC Group Gratuity Scheme for the employees of the assessee and the amounts that would become payable, if the assessee subscribes to the said scheme. The date of the second letter is 31.03.2003, i.e., last date of the previous year of the assessment year in question and till that date it does not appear that there was any concluded contract between the assessee and the LIC for subscribing to the said scheme nor anything has been brought on the record to show that the contribution had been made for the previous year relevant to the assessment year in question. In the said circumstances, it is not open to learned counsel for the appellant to even raise and argue such a question in view of the clear provisions of Section 40A (7) of the Act. The appellant was certainly not entitled to deduction of the said provision made for gratuity and see no reason to interfere with the finding that has been recorded concurrently by all the three authorities. Thus, in the light of the aforesaid discussions, the first substantial question of law is decided in the negative, in favour of the assessee and against the revenue. Second substantial question of law that whether the Tribunal was correct in holding that the assessee was not entitled to deduction of gratuity in view of Section 40A is answered in the affirmative against the assessee and in favour of the revenue.

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• 2016 (7) TMI 939
  Non-furnishing of the statements - whether survey conducted by the officers under Section 133A of the Act in the business premises of the petitioner and the residences of the Director is illegal ? - Held that:- It is not in dispute that none of the persons, who have given statements as mentioned above, have approached this Court for furnishing the copies of the statements. The petitioner, the company represented by one of its Directors, who has not given a statements, now seeks for copies of the statements given by the other persons. In such factual scenario, the petitioner has no vested right at this juncture to insist upon copies of such statements. The plea that all those individuals are connected with the company and the company is being targeted, is hardly a ground to accede to the prayer made by the petitioner. Further, the plea that even if the other persons, who have given the statements, are not entitled to look into the statements given by others, but the petitioner is entitled to look into those statements is a flawed submission, especially when, investigation is going on and each individual has given statements. Therefore, acceding to the prayer sought for by the petitioner would definitely hamper the investigation. The survey was conducted in various places and the residences of the other Directors/Employees/Consultant etc., and those persons have not joined the petitioner in seeking such a prayer. That apart, if the prayer sought for is to be considered, it would result in interdicting an investigation process. What the petitioner seeks to indirectly achieved is to injunct a summon, which cannot be done, that too in exercise of jurisdiction under Article 226 of the Constitution. The plea of malafides has not been specifically pleaded or established, mere use of the expression is not sufficient. It is evident that till date the investigation is yet to be completed and their statements are yet to be used against any persons much less the company. In the light of the above, this Court is of the view that the prayer sought for cannot be granted for the reasons set out in the preceding paragraphs, as it would amount to interference of an investigation and injuncting a summon procedure.

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• 2016 (7) TMI 938
  Penalty levied u/s.271(1)(c) - additional income disclosed in furtherance to section 153A notice - Held that:- In terms of explanation 5A, thus even in a case where during the search, the assessee is found to be the owner of any income based on any entry in the books of account or other documents or transactions, the penalty would attach, provided other requirements are fulfilled. This clause was not there in original explanation 5 which applied till 1st June 2007 and has therefore, to be applied in the present case. We have perused the order of assessment and found that entire amount of 2.06 crores pertained to on-money receipts by the assessee. There was no money, bullion, jewellery or other valuable article or thing of such value found during the search and the additional income was based on materials collected during the search. Prior to 1st June 2007, therefore, by applying explanation 5, penalty could not have been levied. Looked from this angle, we do not find any error in the view of the Tribunal. For the reasons somewhat different from those recorded by the Tribunal, therefore, this tax appeal is dismissed. - Decided in favour of assessee.

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• 2016 (7) TMI 937
  Reopening of assessment - MAT applicability - Held that:- Even as per the Assessing Officer, presently there is no escapement of income chargeable to tax. If we put the reasons cited by the Assessing Officer in simple terms, his case is that by making some additions and disallowances in the order of assessment, the assessee has been taxed. As per the income so computed, the provision for Minimum Alternative Tax would not apply. However, the assessee has challenged such additions and disallowances. If these additions and disallowances are set aside, the net income of the assessee would dip below, the minimum prescribed for a company and therefore, the assessee would be covered under the MAT regime. In the original assessment, no computation of MAT was carried out. In short, the apprehension of the Assessing Officer is that if the appeal by the assessee in connection with the assessment order in question is allowed, there may arise the question of applying MAT formula. For various reasons, reopening of assessment cannot be permitted on such ground. Firstly even as per the Assessing Officer, presently there is no escapement of income chargeable to tax. Secondly, and equally importantly, if the assessee succeeds in appeal, by virtue of which, the normal tax computation comes to below the prescribed limit so as to kickin MAT provisions, the same can always be applied as a consequence of the appellate order or by way of giving effect to the order in appeal. To this, even learned counsel for the petitioner raised no dispute, of course, except for contending that whether the MAT provision applies to the petitioner at all, itself would be a question which the petitioner can even at that stage raise before the authority. - Decided in favour of assessee.

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• 2016 (7) TMI 936
  Application of Section 44 AD - Determination of Net Profit Rate - Held that:- Section 44AD would not apply in the case of the respondent assessee. Resultantly, the challenge to the claim of depreciation having been allowed by the Tribunal must fail. So far as the challenge by the Revenue to the application of Net Profit Rate @ 7% is concerned, the same has been ordered to be applied by the Tribunal after considering the entire facts and circumstances of the case before it, which we do not find as arbitrary or perverse and resultantly, choose not to interfere with the same. The argument of the learned counsel for the appellant to apply Net Profit Rate of 8% as provided under Section 44AD (1) of the Act is also required to be rejected as in view of the proviso to Section 44AD (1) of the Act, since the gross receipts paid or payable in the case of the assessee are over 40 lacs, the provisions of Section 44AD (1) of the Act, as reproduced above, would not be attracted in the case of the respondent-assessee.

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• 2016 (7) TMI 935
  Attachment orders - Priority on debts - overriding effects - whether the notice issued under Section 13 (2) of the SARFAESI Act by IDBI tantamounts to an attachment and would get precedence over the attachment of the property in question by the ITD by its order dated 25th November 2013 - Held that:- In the present case, the notice issued by IDBI under Section 13 (2) of the SARFAESI Act was prior to the impugned order dated 25th November 2013 passed by the ITD attaching the property in question. IDBI was entitled, in terms of Section 13 (2) read with Section 35 of the SARFAESI Act, to proceed to bring to sale by way public e-auction the property in question on 25th February 2015 notwithstanding that the ITD had passed the impugned attachment order dated 25th November 2013. In view of the legal position explained in Bombay Stock Exchange v. V.S. Kandalgaonkar (2014 (10) TMI 368 - SUPREME COURT ) the ITD is precluded from relying on the proviso to Section 281 of the IT Act to prevent the registration of the sale deed executed in favour of the Petitioner in respect of the ground floor of the property in question. Its instructions to the contrary to Respondent No. 3 are, therefore, unsustainable in law. Consequently, the attachment order dated 25th November 2013 issued by the ITD insofar as it relates to the ground floor of the property in question is hereby set aside. Respondent No. 3 will, within a period of not later than four weeks from today, proceed to register the sale deed executed by IDBI in favour of the Petitioner in respect of the ground floor of the property in question.

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• 2016 (7) TMI 934
  Deemed dividend u/s 2(22)(e) - amount under the head ‘reserve and surplus’ representing share premium and credit balance of profit and loss account - Held that:- Income Tax Appellate Tribunal was justified in allowing relief to the assessee by treating the amount under the head ‘reserve and surplus’ representing share premium and credit balance of profit and loss account as not falling within the ambit of deemed dividend under section 2(22)(e). Revvenue has not advanced any submission to show that the aforesaid view of the learned Tribunal is wrong in law. We , as such, find no reason to interfere with the views taken by the learned Tribunal. - Decided against revenue

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• 2016 (7) TMI 933
  Addition towards adjustment entry of closing stock valuation as a consequential effect to the accepted ‘VDIS’ proceedings - Held that:- Necessary entry in the trading account has since been made to give effect to the under valuation of stock pertaining to the earlier year which was declared under the VDIS Scheme. The reconstructed trading account as stated in the submission of the appellant clarifies the position in this regard. It is therefore held that necessary effect to the VDIS declaration has since been given in the case of the appellant and no further addition on this account during the assessment year under consideration is called for. Addition is therefore deleted - Decided in favour of the assessee.

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• 2016 (7) TMI 932
  Reopening of assessment - International transaction - Held that:- Prima facie the sanction for re-opening the assessment of the Commissioner of Income Tax was also in respect of International transaction, which was a subject matter of assessment completed much prior to 1st day of July, 2012. Therefore, the impugned notice is hit by Sub-Section (2B) of Section 92CA of the Act. As this objection goes to the root of matter, it would be appropriate that this objection of the petitioner be considered by the Assessing Officer and disposed of expeditiously. It is true that normally we would not let an assessee challenge a reopening notice before us on a ground not taken in the objections made to the Assessing Officer. However, on the face of it, it appears that the impugned notice is without jurisdiction. However, rather then admitting the petition and staying the notice in the peculiar facts, the Assessing Officer should have a chance to deal with it. In the above view at this stage, we are not disturbing the impugned notice or the order disposing of the objection and only directing the Assessing Officer to consider the petitioner's objections in respect of Section 92CA (2C) of the Act. It is made clear that in case the petitioner files its objections/representation with regard to Section 92CA (2C) of the Act within one week from today, the Assessing Officer will dispose of the same within a period of four weeks from the date the petitioner file its objections/representation only on the issue of Section 92CA (2C) of the Act. It is made clear that with regard to the other objections contended by the petitioner we are not inclined to entertain this petition. We direct a stay of the impugned notice for further period of ten weeks from today. This would enable the petitioner to challenge the order disposing of the objection in respect of Section 92CA of the Act raised by the petitioner

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• 2016 (7) TMI 931
  Reference to DVO - non recording of defect in books of account - Held that:- Assessing Officer did not find any glaring discrepancy in the books of accounts and the Assessing Officer who had passed the block order had not made any adverse comments on the expenditure so incurred. Thus, when the Assessing Officer recorded a finding that the accounts are duly audited and complete details are available and when the Assessing Officer has not rejected the books of account, he cannot make a reference to the Valuation Officer. See Goodluck Automobiles (P.) Ltd. vs. Assistant Commissioner of Income tax [2012 (9) TMI 157 - Gujarat High Court ] - Decided in favour of assessee.

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• 2016 (7) TMI 930
  Reopening of assessment - nature of expenditure - capital expenditure OR revenue expenditure - interest free loan advanced by assessee company to a sister concern - Held that:- Both the issues came up for consideration before the Assessing Officer at the time of original assessment. In the letter dated 27.7.2011, the assessee had given the breakup of the expenditure of sum of 1.74crores pointing out that the same was closing stock as on 31.3.2009. The assessee also gave breakup of such sums and the purpose for which such expenditure was incurred. In a later communication dated 4.10.2011, the assessee had made a detailed submission why no addition should be made on the ground that the assessee had made interest free advances to a sister concern.Any attempt on part of the Assessing Officer now to revisit such claims would be based on change of opinion. Even the Assessing Officer did not discard the assessee's contention that the claims were originally examined by the Assessing Officer. He in fact, suggested that such examination was not proper and that therefore, the claims were required to be disallowed. Surely, the Assessing Officer was not acting in the capacity of a revisional authority and, therefore, had no jurisdiction to judge the consideration bestowed to these claims by the Assessing Officer. In fact, there is yet another additional ground with respect to the ground of addition recorded in the reasons. The assessee has in the objections pointed out that no such claim of expenditure was ever made and the amount was shown in the closing stock thereby eliminating from the expenditure side, an issue not examined by the Assessing Officer while disposing of such objections at all. Be that as it may, on the first ground itself of the claim having been examined by the Assessing Officer, the petition must succeed. - Decided in favour of assessee.

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• 2016 (7) TMI 929
  Reopening of assessment - the case of the department is that the assessee had claimed bogus labour contract charges paid to these contractors to inflate the expenses and thereby deflate the profit - Held that:- Labour contractors were paid sizable amount of labour charges without such labour work having been taken by the assessee. Surely, these aspects were not at large before the Assessing Officer during the original assessment proceedings. Any examination by the Assessing Officer of the assessee's claim of labour expenses would be confined to the declarations made by the assessee and the material produced by the assessee in response to the queries raised by the Assessing Officer. When later on, fresh material has come on record, which would primafacie suggest claim of bogus labour charges, examination by the Assessing Officer at the time of scrutiny assessment, would not permit the petitioner to argue that such issue cannot be gone into again by reopening the assessment. The question of true and full disclosure and the issue having been examined during the original assessment proceedings substantially overlap in the present case. If the allegations contained in the reasons recorded are ultimately established, which must depend on the nature of material that may ultimately be brought on record during the reassessment and with respect to which we obviously would not make any comment, it would certainly indicate that the assessee had claimed bogus labour contract charges without incurring them. According to the department, in large number of cases, labour contractors who were in fact, the employees of the assessee, were paid labour charges without their being any such expenditure being incurred by the assessee. If these facts are ultimately established, it would only indicate that the assessee had claimed higher expenditure than what was incurred thereby suppressing the profit. It is true that the Assessing Officer had relied heavily on the investigation carried out by the investigation wing and the material collected during such process, which culminated into a final report submitted by the investigation wing. However, it is not impermissible for the Assessing Officer to rely on such material, as long as of course he has applied his mind to the materials on record and formed his own belief that on the basis of such material, it can be stated that income chargeable to tax has escaped assessment. It was in this context, we have reproduced the concluding portion of the reasons recorded by the Assessing Officer, which are in the nature of his observations on the basis of materials supplied by the investigation wing collected during the search operations. These observations indicate the application of mind by the Assessing Officer and his own formation of belief that income chargeable to tax has escaped assessment. This is therefore, not a case of the Assessing Officer proceeding on a borrowed satisfaction of the investigation wing. Thus Assessing Officer shall carry out the reassessment on the basis of material that may come on record during the assessment, unmindful of any of the observations made herein above. - Decided against assessee

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• 2016 (7) TMI 928
  Quality of representation on behalf of the Revenue - Inconsistent stand being taken by the Revenue in different appeals raising identical issues. - Maintenance of website to keep the record and status of cases before the courts. On browsing the site, it is evident that the activity of monitoring and updating the site has been outsourced to a private party. One key area that must be borne in mind is authenticity of the information uploaded and updated. If in future the requirements increase the software must be scalable and in any event must be compatible with system of the department. In the event of the third party service provider being different at any point in time, the data available on the site after the change of service provider cannot be put to risk of loss of content and/or authenticity. This will ensure a stable and dependable resource for research and representation. We trust the above concern would have been taken care of by the Revenue. There are a large number of appeals filed by the Revenue from the orders of the Income Tax Appellate Tribunal. However, we find that the distribution of work amongst the panel lawyers is not equitable and also without any consideration of the issue of law involved vis-a-vis the experience of the Advocate briefed. Moreover, we find that most matters are distributed amongst a few Advocates with the result we have occasions where a single Advocate appears in eight/nine matters a day. This indeed is expecting the moon from the panel Advocate. Resultantly, the preparation suffers, leading to inadequate performance. It would therefore be appropriate to have more number of Advocates on the panel and distribute work amongst them. This would at least give an opportunity to the Advocate to prepare properly for appropriate representation. We hope the Revenue would consider our observations and make attempts to ensure that it is properly represented. This can only happen when meritorious Advocates are appointed. This would ensure that the Officers of the Revenue would value his advise as a learned man of experience and not treat him as an employee, merely because he is appointed at the instance of the Commissioner of Income Tax.

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• 2016 (7) TMI 927
  Condonation of delay - Held that:- When an assessee is suffering huge losses for over a period of time, it has to be assumed that they have genuine hardship and that genuine hardship can be redressed or avoided only on payment of the amount which is legally due to them. Of course, the delay is also a matter which is required to be considered by the Commissioner while directing refund of the amount. Section 119 (2) (b) clearly indicates that if it considers desirable or expedient so to do, authorize the Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief, in accordance with law. Therefore, when the Commissioner is given the power to adjudicate all such issues and find out that on account of non-payment, genuine hardship will be caused to a person, the Commissioner will have to condone the delay. In the case on hand in Ext.P4, the reference is made to the returns filed for the Assessment years 2006-07 onwards and 2008-09. It is stated that in the subsequent years, returns were filed belated. That by itself cannot be a reason to arrive at a finding as to whether there is any hardship caused to the assessee or not. In the case on hand, it is demonstrated by the material placed that the assessee company was suffering huge losses. In the said circumstances, if the amount claimed is not refunded, definitely their losses will be much more than what is computed presently. In the said circumstances, it would have been appropriate for the Commissioner to have condoned the delay.

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• 2016 (7) TMI 926
  TDS u/s 194C - payments made to Mukadams and Transporters - Held that:- Considering the decision of this Court in the case of Krishak Bharati Co-operative Ltd. (2012 (10) TMI 655 - GUJARAT HIGH COURT ) wherein this Court has held that to transport the gas was a part of sale transaction, and therefore, the assessee, therein, was not required to deduct TDS, the question, which is raised in the present appeal is required to be answered in favour of the assessee. Decided in favour of the assessee

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• 2016 (7) TMI 925
  Addition u/s 14A - CIT(A) deleted the addition - Held that:- The sole question arisen in this appeal is squarely covered by decision of this Court in case of Commissioner of Income Tax vs. Corrtech Energy P. Ltd. reported in [2014 (3) TMI 856 - GUJARAT HIGH COURT ] wherein held disallowance under section 14A of the Act could not be made as the assessee did not make any claim for exemption of any income from payment of tax - Decided in favour of assessee

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• 2016 (7) TMI 924
  Capital loss of sale of shares and securities - Held that:- Insofar as the first question is concerned, the identical issue has been decided in case of Commissioner of Income Tax vs. Mohmed Juned Dadani [2013 (2) TMI 292 - GUJARAT HIGH COURT ] - Decided in favour of assessee. Claim of depreciation in respect of leased assets - Held that:- The assessee has been able to prove genuineness of the depreciation claim qua the air pollution control equipment in question leased out to M/s. Rajendra Steel Ltd. - Decided in favour of assessee.

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• 2016 (7) TMI 923
  Evidence under section 158BB - statement of the respondent as well as of the employee alongwith the documents seized - Held that:- The retraction of the statement was made by Shri Chimanlal Shah by making an affidavit which was filed in this office after about two to three months. The statements under section 132(4) of the Act were recorded on 18.06.2003 and 01.08.2003 where as the affidavit for retraction by Shri Chimanlal Shah was filed in this office on 26.09.2003. If the statement of Shri Chimanlal Shah was recorded by using duress, intimidation or coercion, they would have immediately on the same day or on the following day filed the retraction. The very fact that they kept quiet for almost 2-3 months after recording the statement proves beyond doubt that the statement was not recorded by using any force by the search party. Therefore, the affidavit filed by and Shri Chimanlal Shah was an afterthought and it was simply advice to frustrate the efforts of the Department to sniff off the unaccounted income of the assessee Whether evidence found as a result of search or other such materials or information is sufficient enough to conclude that there was concealment of income? - Held that:- When in respect of previous Assessment Year 2004-05 also the Tribunal had dismissed the HC-NIC Department’s appeal on the ground that the addition in that year also was based on extrapolation, it emerged beyond pale of doubt that for the addition made for the year 2005-06 there was no evidence whatsoever and the same was presumptive in nature. - Decided in favour of assessee

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• 2016 (7) TMI 922
  Benefit under Section 80P denied - assessee is primarily engaged in lending loans for non agricultural purposes - Held that:- In the recent decision in the case of Chirakkal Service Co-operative Bank Ltd., Kannur vs. the Commissioner of Income Tax, (2016 (4) TMI 826 - KERALA HIGH COURT ), the High Court considered similar substantial questions of law as held that the assessee is a primary agricultural society, the Kerala High Court has answered the substantial question of law in favour of the assessee and held that the primary agricultural credit societies, registered as such under the KCS Act and classified so under that Act, including the appellants, are entitled to such exemption. Therefore, the aforesaid decisions is applicable to the instant case. Thus we are of the view, that the substantial question of law framed in the instant appeals, is answered against the Revenue. The exception barred out in Section 80P (4) of the Income Tax Act, 1961, is applicable to the assessee credit society. Hence, the appeals are accordingly dismissed. - Decided in favour of assessee

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• 2016 (7) TMI 921
  Assessment based only on the statement under Section 133A - Levy of penalty under Section 67 of the KVAT Act - finding of excess stock and suppression of sale - Held that:- It is seen that the Revenue relied on letter dated 18.09.2007 issued by V. Ahammed to the Assistant Director of Income Tax (Investigation) clarifying his statement under Section 133A of the Act. This shows that the maker of the statement himself has re-affirmed the statement and nothing has been produced by the assessee to show that the contents of the statement are incorrect. In such a situation, we cannot accept the contention now raised by the learned counsel for the assessee and hold the assessments to be illegal. During the course of hearing, the learned for the appellant produced before us order No.TRL-08/06-07 dated 08.08.2007, whereby the penalty proceedings under Section 67 of the Act were compounded by the assessee on payment of 28000/- as compounding fee which shows that the total suppression detected was only 2,10,595/-. This means that the penalty proceedings were initiated on the basis that there was excess stock of 14,38,785. In the final order that was passed, the said amount is now reduced to 2,10,595. Since the assessment under the Income Tax Act has been completed quantifying the suppression of sale based on the excess stock detected in the inspection conducted by the authorities under the KVAT Act on 17.08.2006, the reduction in the excess stock as seen in the final order passed in the proceedings under Section 67of the KVAT Act, should have an impact on the assessment under the Income Tax Act also. Therefore, though we confirm the orders impugned before us, we are of the view that the assessee is entitled to get the benefit of the reduced excess stock as determined by the authorities of the KVAT Act in their order No.TRL- 08/06-07 dated 08.08.2007. For that matter, we remit the proceedings to the Assessing Officer, who will issue revised orders taking into account the order dated 08.08.2007 passed by the Intelligence Officer, Squad No.II, Tirur. The appeals are accordingly disposed of remitting the matter to the Assessing Officer to pass fresh orders as directed above.

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• 2016 (7) TMI 920
  Interest income treated as part of the profits of business of the 100% E.O.U. eligible for deduction under Section 10B - Held that:- Total turnover shall naturally include receipt on account of interest. The legislature does not appear to have provided for excluding the amount of interest from the total turn over as has been done in the case of 80HHC by explanation (baa) of sub-section (4C) thereof. In that case, 90% of the income arising out of interest has to be excluded from the profits of the business for the purpose of arriving at deduction available under Section 80HHC. But an identical provision is not there. Therefore, that provision cannot be imported by implication. The submission that the amount earned from interest was not intended to be taken into account for the purpose of giving benefit under subsection (1) of Section 10B may be correct. But the amount of deduction available to a 100% export oriented undertaking is necessarily dependent upon the formula provided in subsection (4). There is, as such, no scope for any controversy that part of the money was earned from interest and not from export. There is no requirement for the purposes of section 10B to establish direct nexus between the income and the undertaking. The entire business income of the 100% EOU will be the “profits of the business of the undertaking”. It has been held above that the interest earned on temporarily surplus business funds of the 100% EOU deposited with banks for short periods is business income and has in fact been so assessed. It is not in dispute that the surplus funds were of the 100% EOU. As such, the interest earned thereon has to be regarded as part of the “profit of the business of the undertaking. Tribunal was correct in directing the Assessing Officer to treat the interest income as part of the profits of business of the 100% E.O.U. eligible for deduction under Section 10B and compute deduction accordingly - Decided in favour of assessee

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• 2016 (7) TMI 919
  Validity of reassessment - Held that:- The entire decision making process, including hurriedly passing an assessment order seems to be vitiated. We have exercised our extraordinary jurisdiction as no authority can ignore the binding decisions of this Court. The theory of mistakes and misplacing of papers in the overall context does not inspire confidence. It would require consideration. The authority concerned must factor in the time period of four weeks while disposing of the objections before commencing reassessment proceedings. Prima facie this appears also to be a case of breach of natural justice as no sufficient time was given to the assessee to meet the objections of the Revenue and for the Assessing Officer to consider the assessee's response to it. We have given a detailed order at the interim stage, because normally we do not entertain a Writ Petition wherein assessment order has been passed after participation of the assessee in the assessment proceedings. However looking at the context in which the assessment order has come to be passed, prima facie, we are of the view that it would require detailed consideration. Accordingly, there shall be an interim relief in terms of prayer clause (d).

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• 2016 (7) TMI 918
  Addition on account of VRS payment - ITAT confirming the order of the CIT(A) in deleting the addition - Held that:- It is not in dispute that the law applicable to the assessee is as at 1st April, 2000. The revenue sought to rely upon Section 35DDA which was introduced with effect from 1st April, 2001. Therefore, the contention of the revenue failed both before the CIT(A) and before the learned Tribunal. The circular referred to in the question does not help the revenue either. Mrs. Gutgutia has not relied upon that circular. In that view of the matter, the question no.1 is answered in the affirmative in favour of assessee Addition of sundry expenses - Held that:- When the disallowance was made purely on the basis of conjecture there was no alternative to the CIT(A) or to the learned Tribunal but to delete the disallowance. - Decided in favour of assessee

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• 2016 (7) TMI 917
  Addition on suppression of sales - Held that:- From the evidence on record, it surfaces that two Sales Bill No.77 dated 13.03.1997 for 6,79,840/- and Bill No.81 dated 20.03.1997 for 9,33,632/- showing sale of yarn and again two sales Bill No.77 and 81 dated 04.03.1997 for 4,58,902/- and 4,59,260/- totalling to 9,18,162/- were raised showing sale of cotton. In paragraph 9 as referred herein above, the CIT (Appeals) has given cogent and convincing reasons to arrive at the conclusion that only the profit has to be taken into account. In the facts of the case, we answer the question in favour of the assessee

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• 2016 (7) TMI 916
  Addition towards interest waived by the financial institution - Entitlement to deduction u/s 43B - Held that:- Tribunal was right in holding that the assessee is entitled for deduction under Section 43B, with respect to the interest on loan waived by the Bank in one time settlement and thus, answered the first substantial question of law against the revenue.

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• 2016 (7) TMI 915
  Rejection of books of accounts - ITAT allowed the rejection - Held that:- The Commissioner (Appeals) examined each discrepancy pointed out by the Assessing Officer and after giving detailed reasons in respect thereof, found that none of the eight grounds taken by the Assessing Officer for rejecting the books of account are valid also confirmed by ITAT. Assessing Officer was not justified in rejecting the books of account of the assessee. Essentially therefore, the impugned order is based upon concurrent findings of fact recorded by the Tribunal after appreciating the material on record. The learned counsel for the appellant is not in a position to dislodge the findings of fact recorded by the Tribunal by pointing out any material to the contrary, nor is it the case of the revenue that the Tribunal has placed reliance upon any irrelevant material or that any relevant material has been ignored. Under the circumstances, in the absence of any perversity being pointed out in the findings of fact recorded by the Tribunal after appreciating the material on record, the conclusion arrived at by the Tribunal being based upon findings of fact, does not give rise to any question of law, much less, a substantial question of law warranting interference. - Decided against revenue

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• 2016 (7) TMI 914
  Disallowance on account of interest expenses - ITAT allowed the claim - Held that:- While the Department has consistently accepted the claim of the assessee in the earlier years when the income under the head “income from other sources” was more than the interest expenditure, such claim is sought to be disallowed in the year under consideration only because the interest expenditure exceeds the interest income. Having regard to the past history of the assessee, this court is of the view that the Tribunal was wholly justified in holding that the total expenditure incurred for earning the income has to be allowed and cannot be restricted to a proportion of the income and deleting the disallowance made by the Assessing Officer on account of interest expenses. - Decided in favour of assessee.

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• 2016 (7) TMI 913
  Revision u/s 263 - claim of deduction amortized value of leasehold land under the provisions of section 35D and depreciation on office equipments - Held that:- As regards the claim for depreciation on office equipments at the rate of 15%, the Tribunal noted that such claims had been allowed in earlier years in the assessment orders passed under section 143(3) of the Act and such orders had attained finality. Insofar as the claim under section 35D of the Act is concerned, the Tribunal has found that the deduction under section 35D had been allowed in the earlier years also and has rightly observed that it is not the case of the revenue that on the issue of deduction under section 35D, the deduction for earlier years had been withdrawn, inasmuch as, without disturbing the earlier years, it cannot be said that the claim of deduction under section 35D was not allowable to the assessee. Thus, the Tribunal, on merits, has found that the view adopted by the Assessing Officer to be sustainable view. The revenue had not brought any material on record to demonstrate that the view adopted by the Assessing Officer was an impermissible view and was contrary to law so as to warrant exercise of revisionary powers under section 263 of the Act. Having regard to the findings recorded by the Tribunal on the merits of each claims of the assessee, it is evident that the view adopted by the Assessing Officer was a plausible view. It is settled legal position, as held by the Supreme Court in the case of Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, (2000 (2) TMI 10 - SUPREME Court ) , that if on the same issue, two views are possible and the Assessing Officer has taken one such view, the same would not warrant exercise of powers under section 263 of the Act. - Decided in favour of assessee.

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• 2016 (7) TMI 912
  Disallowance on account of unverifiable purchases - Held that:- Assessing Officer has disallowed 10% of the purchases on an ad-hoc basis, whereas the Commissioner (Appeals) has deemed it proper to reduce the disallowance to 2% after considering the gross profit rate and net profit rate. In either case, the disallowance is based on an estimate. While there is no basis for the estimate adopted by the Assessing Officer, there is some basis in the estimate adopted by the Commissioner (Appeals). Under the circumstances, it cannot be said that the impugned order passed by the Tribunal whereby it has upheld the order passed by the Commissioner (Appeals), suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. - Decided against revenue.

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• 2016 (7) TMI 911
  Addition u/s 153A - Held that:- Under section 153A of the Act, an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. As rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court in the case of Commissioner of Income-tax-1 v. Jayaben Ratilal Sorathia (2013 (7) TMI 850 - GUJARAT HIGH COURT ) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year. - Decided in favour of assessee.

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• 2016 (7) TMI 910
  Disallowance of business expenditure - ratio of personnel cost - nexus between the expenditure incurred and the business of the assessee - only objection of both the authorities is that the assessee was suffering loss but had paid higher salary to its employees - why was the assessee not reducing his expenses proportionately when in was earning lesser income - Held that:- There is a basic and fundamental flaw in the approach of the AO and the FAA. They have tried to step in to the proverbial shoes of the businessman. It is not their domain to decide as to how much expenditure is to be incurred or under which it head it has to incurred. Assessee has to decide its business needs and no other person is authorised to do so. Whether or not to incur any expenditure or how much expenditure to be incurred is the prerogative of an assessee. The employee are not hit by the provisions of section 40A of the Act, so, the FAA was not justified in questioning the reasonableness of the expenditure. Both of them have ignored the principle of commercial expediency. Phrase commercial expediency would include such purpose as is expected by the assessee to advance its business interest and may include measures taken for preservation, protection or advancement of its business interests. AO has no role to decide the ‘Laxman-Rekha’ of ‘preservation, protection or advancement of his business interest. ’ Reasonableness of an expenditure cannot and should not be the deciding factor while allowing an expenditure u/s. 37 of the Act. In the case before us, both the authorities have misdirected themselves and ventured in to prohibited territory. Therefore, their action cannot be endorsed. Reversing the order of the FAA, we decide the effective ground of appeal in favour of the assessee.

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• 2016 (7) TMI 909
  Reopening of assessment - Additions made on account of bogus purchases - Held that:- AO had specific information that the assessee had obtained accommodation bills from Hawala dealers to the extent of 10,69,87,060/- for three AYs i.e. AY 2009-10, 2010-11 and 2011-12. A survey was carried out at the premises of the assessee. The AO on the basis of the statement of the Director of the assessee company wherein he had declared additional income for the year under consideration reopened the assessment. Thus, the AO was having sufficient reason to believe that there was escapement of income. Accordingly we do not find any infirmity in the order of AO for reopening the assessment. Coming to the disallowance of alleged bogus purchases,we found that these suppliers were found to be non-genuine by the sales tax department, even though it was the contention of ld. AR that suppliers were registered with VAT where stringent process is followed for issuing VAT registration like photo, verification of address (residential and office), ration card and proof of residence. However, at the very same time, we cannot ignore the actual purchases made by the assessee, which was utilised for its construction purpose and sales.AO recorded a finding to the effect that the rate of items supplied by hawala dealers was higher as well as lower also but the ultimate effect of the purchases from all such hawalas dealers has resulted in the higher profit margin shown by the assessee. It means there is no adverse effect of the purchase so made even from the hawala dealers, insofar as purchase so made have actually been consumed and similar profit has been shown by the assessee in respect of these purchases when utilized in construction and/or sold. As carefully gone through the particulars of the alleged bogus bills, nature of goods supplied, products supplied and payments details. We had also verified the confirmation of accounts for purchase of goods, bank statement showing payments made for alleged purchase bills. The purchase so made were consumed by the assessee in the business of its civil and interior work which includes external and internal glazing of glass work and providing & fixing aluminum windows. We had also verified the comparative GP and NP rate shown by the assessee which appears to be reasonable as compared to the other business house engaged in the similar line of civil and interior work. The net profit rate shown by the assessee ranged between 3.04% to 3.61%. From the record we found that assessee had shown GP rate of 16.39% and 23.49% in the assessment year 2009-10 and 2010-11, which is much better than the gross profit rate shown in the assessment year 2008-09 at 11.41%. Moreover the GP rate shown by the assessee is comparable to the GP rate shown by other assessee engaged in similar trade. However, to safeguard the interest of revenue and to cover the leakage of revenue, if anyone, and also totality of facts and circumstances of the case before us, we direct the AO to restrict the addition to the extent of 2% of alleged bogus purchases so made. - Decided partly in favour of assessee

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• 2016 (7) TMI 908
  Deduction under section 10B denied - Held that:- In the present case, the income of the assessee from maintenance or services was not assessed as its income from business. It has been assessed as “income from other sources”. It has also to be kept in mind that the assessee has nowhere pleaded that service was only provided on the items sold by it. Therefore, to my mind, the ld.Revenue authorities have rightly rejected the claim of the assessee. I do not find any error in the order of the ld.CIT(A). - Decided against assessee.

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• 2016 (7) TMI 907
  Reopening of assessment - Held that:- Explanation-1 to Sec.147 of the Act gives power to the AO to re-open the assessment In our opinion, for reopening of assessment , it is not necessary that information must be derived from external source of any kind or that there must be a disclosure of new and important matters subsequent to re-opening of assessment. The re-assessment is permissible even if the information is obtained from proper investigation from the materials and records or from any enquiry or research into the facts or law. The tax payer cannot be allowed to take advantage of any lapse on the part of the AO. In the instant case, admittedly assessment is reopened within four years and the assessment was reopened for considering the disallowance expenditure of tools. As such, we cannot say that there is a change of opinion, since there is no opinion formed by the AO in the re-opening of assessment on this issue. Accordingly, we upheld the reopening of assessment made by the AO. Treatment of expenditure on tools as capital expenditure - Held that:- Sub-section (3) of section 211 provides that until the Central Government prescribes an accounting standard in consultation with the National Advisory Committee as set up under section 210A of the Companies Act, 1956, pursuant to a recommendation of the Institute of Chartered Accountants of India the Accounting Standard issued by the Institute of Chartered Accountants of India shall prevail. Therefore, we have no difficulty in accepting the submissions of learned counsel for the assessee that it was obliged to capitalise the entire cost of spares in consonance with the mandatory provisions of Accounting Standards (AS) 2 and (AS) 10. The assessee has been maintaining a mercantile system of accounting, therefore, the treatment of emergency spares in accordance with the revised Accounting Standard (AS) 2 and (AS) 10 would be in consonance with the mercantile system of accounting which under the Act the Revenue is required to look at for computing income of the assessee chargeable under the head " Profits and gains" from business. The submission of ld.D.R that the accounting treatment to be meted out to a transaction in accordance with the Accounting Standard has no relevance for the purposes of the Income-tax Act, 1961, is a submission which does not commend to us. Thus, expenditure on tools is to be allowed as revenue expenditure - Decided in favour of assessee.

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• 2016 (7) TMI 906
  Addition made on account of low GP - sole objection of the AO was that the assessee has not been maintaining stock register and also order placement registers - Held that:- According to the ld.CIT(A), the assessee has been maintaining stock register on-line. Its accounts are subject to inspection under direct control of drug authorities, which could not be conducted without maintenance of proper stock records. As far as fall in GP is concerned, the ld.CIT(A) was satisfied with the explanation given by the assessee. After taking into consideration all these facts and circumstances, do not find any reason to interfere in the order of the ld.CIT(A) on this issue. Addition u/s 40A(2)(b) - Held that:- Section 40A(2)(b) contemplates that if persons by virtue of their relationship or position with the management persuade the assessee to pay a higher amount of remuneration in lieu of services, then such higher amount of remuneration could be disallowed. In other words, if those services could be availed from the open market at a lower rate, then, excess payment is to be disallowed. In the present case, the assessee has paid commission to four persons. The objection of the AO is that they are simple graduates and they could not earn this much of income. But I failed to understand the reasoning of the AO, because, he has not given any basis for doubting the capability of all four persons. AO has not referred any material as to how services rendered by them could be availed at a lower rate from the market. The ld.CIT(A) has rightly deleted the addition Addition on loss due to flood - CIT(A) deleted the addition - Held that:- FAA did not concur with this conclusion of the AO on the ground that, if this type of plea is being accepted, then, there could not be any loss to any concern. The acceptance of the insurance company could not be a guiding factory for gauging the loss of any assessee. After taking into consideration the finding of the CIT(A), do not find any reason to interfere in it. Disallowance of misc. expenses - CIT(A) deleted such disallowance on the ground that misc. expenses claimed by the assessee are only 0.16% of the turnover - Held that:- CIT(A) was satisfied that the assessee has not debited any personal expenditure or other expenditure, which are not linked with the business in the misc. expenses. After considering the smallness of the expenditure and the reason assigned by the ld.CIT(A) no reason to interfere with the order of the ld.CIT(A) on this issue Disallowance of Keyman Insurance premium - Held that:- The assessee is entitled for deduction of the premium paid on the KIP for the partner. The ld.CIT(A)has rightly deleted the impugned addition Revenue appeal dismissed.

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• 2016 (7) TMI 905
  Disallowance under Rule 8D(iii) r.w.s. 14A - non recording of requisite satisfaction before making the disallowance - Held that:- AO has to record the satisfaction having regard to its books of account. In our view AO has not recorded the requisite satisfaction before making the disallowance u/s. 14A(2) of the Act. We also find that from the Memorandum Explaining the provision of Finance Bill, 2006 and CBDT in its Circular dated 28 of 2006 states that since the existing provision of Sec. 14A did not provide a method of calculating the expenditure incurred in relation to income which did not form part of the total income of assessee. There was a considerable dispute between the taxpayers and the Department for determining such expenditure as per section 14A of the Act. It was in this background, that sub-section (2) of Sec. 14A of the Act was inserted so as to provide an uniform method applicable in the situations where Assessing Officer is not satisfied with the correctness of the claim of assessee and such sub-section (3) of Sec. 14A of the Act clarify that the application of method would be attracted even under a situation where the assessee claimed that no expenditure at all was incurred in relation to earning of non-taxable income. In our considered view, it was necessary for the AO to arrive at applying the provision of the Act 14A of the Act to record the ‘satisfaction’ after having regard to its books of account. - Decided in favour of assessee

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• 2016 (7) TMI 904
  Suppression of income - whether he closing stock calls for reduction to the extent of the reduction of purchases due to wrong entry ? - Held that:- It is clear from the order of CIT(A) that the assesse was not able to substantiate the fact that by reason of the inflation of purchases there was neutralizing entry whereby there was increase in the value of the closing stock and therefore there cannot be any inference of suppression of income. Even before us no fresh material is brought to our notice to either dislodge the findings of CIT(A) or to come to a conclusion contrary to the one reached by CIT(A). - Decided against assessee. Road tax and insurance premium - capital or revenue expenditure - Held that:- When a new vehicle is acquired the insurance premium and the road tax paid would assume the character of the cost paid in acquiring the asset. But for incurring these expenses, the vehicle cannot be put to use by the assessee. We are therefore of the view that the treatment of the road tax and insurance premium as capital expenditure, in the facts and circumstances of the present case, was proper and calls for no interference. Depreciation in respect of the Oil Tanker - Held that:- CIT(A) has proceeded on the basis that the Hindustan Petroleum Corporation Ltd has to give permission for use of the oil tanker by the assessee for transporting petroleum products and since such permission was not given, it cannot be said that the tanker was kept ready for use. In our view this conclusion of the CIT(A) cannot be sustained. The circumstances viz., absence of permission of HPCL, can at best lead to the conclusion that the assessee was unable to persuade Hindustan Petroleum Corporation Ltd., to give permission for use of the oil tanker for transporting petroleum products. It cannot however be said that the oil tanker was not kept ready to put to use. There was no impediment for use of the oil tanker for transporting petroleum products and this fact is not disputed by the revenue. In the given facts and circumstances of the case we are of the view that the assessee has successfully established that the vehicle in question was ready for use though it was not actually put to use. We therefore are of the view that the claim of the assesee for deduction on account of depreciation ought to have been allowed and the same is directed to be allowed. - Decided in favour of assessee.

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• 2016 (7) TMI 903
  Revision u/s 263 - provision for future losses on construction - Held that:- AO is deemed to have applied his mind to the claim of the assessee for deduction. We are of the view that this stand taken by the assessee cannot be sustained. The basis on which the loss was arrived has not been enquired into by the AO. As to whether AS-7 will apply to the case of the assesee and as to whether the computation of the loss done by the assessee in accordance with AS-7 is a matter which ought to have been enquired into by the AO. His failure to make an enquiry on these aspects and accepting the claim of the assessee for deduction was erroneous and prejudicial to the interest of the revenue. The law is well settled that if the AO fails to make an enquiry on an issue, which in the given facts and circumstances of the case, calls for an enquiry then the order of the AO should held to be erroneous and prejudicial to the interest of the revenue.ITO being not only an adjudicator but also an investigator, he cannot remain passive in the face of a return which is apparently in order but calls for further enquiry in the facts and circumstances of the case and the word `erroneous' in s. 263 includes the failure to make such an enquiry. We are therefore of the view that exercise of jurisdiction u/s 263 of the Act in respect of provision for future losses on construction contract was fully justified. Payments being in the nature of accommodation entry - Held that:- CIT was justified in invoking the jurisdiction u/s 263 of the Act even in respect of the payments made to M/s. Sintex Infra Projects Ltd.n the given facts and circumstances we do not find any ground to interfere in the order of CIT. As rightly contended by the CIT DR before us, the assessee is at liberty to put forth all contentions with regard to the allowability of the provision for future losses on construction contract and also as to how the payments made to M/s. Sintex Infra projects Ltd is not in the nature of accommodation entries and are genuine. The AO will look into the submissions of the assessee and after taking into consideration the evidence and materials before him, he is free to come to the conclusion as to whether the claim made by the assessee has to be accepted or not, uninfluenced by the fact that the assessment is being made to direction u/s.263 of the Act. With these observations, we dismiss the appeal of the assessee.

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• 2016 (7) TMI 902
  Revision u/s 263 - deemed dividend addition u/s 2(22) - Held that:- From the foregoing discussion we find that all the disclosures regarding the sales and purchases of jute materials were available before the AO at the time of assessment. The transaction has been duly reported by the assessee in the tax audit report as required u/s 40A(2)(b) of the Act. There was no adverse remark in the tax audit report. After considering the material information placed before us, we are of the considered view that AO was in possession of sufficient information about the aforesaid transaction. Accordingly he formed the opinion that the transaction is in the nature of current account and out of the purview of the provisions of section 2(22)(e) of the Act. Section 2(22)( e) of the Act covers only such situations, where the shareholder alone benefits from the loan. In the instant case the company benefits from the said transaction, it will take the character of a commercial transaction and hence will not qualify to be dividend. Now it can be said that sec. 2(22)(e) of the Act covers only those transactions which benefit the shareholder alone and results in no benefit to the company. On the other hand, if the transaction is mutual by which both sides are benefited, it is undoubtedly outside the purview of provisions of sec. 2(22)(e) of the Act. From the above, it is clear that the loan account differs from current account and the provisions of section 2(22)( e) of the Act, being a deeming section, cannot be applied to current account. In such circumstances, the order of the ld. CIT under section 263 of the Act is not sustainable in law. Payment of gratuity - Held that:- From the facts of the case, we find that AO has given a very clear finding that claim of gratuity was not made in assessee’s books of account but it was claimed separately in the computation of income which was not allowed by AO while framing original assessment order. So in the instant case, we find that the question for the deduction on account of gratuity in the computation of total income does not arise. Disallowance under section 14A - Held that:- In our view of the fat that some enquiry was made is sufficient to debar the authorities from exercising the powers u/s 263 of the Act. The Tribunal was accordingly justified in setting aside the order passed u/s 263 of the Act. We do not find any substantial question of law arising for consideration the appeal is accordingly dismissed. In the case on hand, the AO has made an addition by invoking the provision of section 14A of the Act after making the necessary enquiry. The instant case is duly covered with the decision of Hon’ble Allahabad High Court M/s Ashok Handloom Factory Pvt. Ltd. (2016 (3) TMI 650 - ALLAHABAD HIGH COURT ) wherein held that it is settled law that the commissioner of income tax can exercise his jurisdiction u/s 263 of the Act only in cases where no enquiry is made by the Assessing Officer, therefore relying on the same, we reverse the order of Ld. CIT for u/s 263 of the Act. - Decided in favour of assessee

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• 2016 (7) TMI 901
  Penalty imposed and sustained u/s. 158BFA (2) - Held that:- As per Section 158BFA(2) no incriminating material found or seized from the possession of the appellant during the course of proceedings on the basis of which the addition was made. Even the basis for filing the block return has shown the undisclosed income of 4,52,220/- and tax liability as 2,84,889/- has been change. Subsequent to the passing of the assessment order, the matter was taken up by the assessee before the ld CIT(A). The first appellate authority has reduced the addition of 53,82,768/- to 19,83,184/-. This figure of arriving at 19,83,184/- was arrived after taking into considering the submission of the assessee. Thereafter the Tribunal has further reduced the amount of 19,83,184/- of the CIT(A) to 10,63,184/-. The reduction in amount was on the basis of peak income investment determined by the assessee himself on the basis of direction issued by the ld CIT(A). In our view, the basis for addition made by the A.O. was on account of diaries and entries made in the name of Bhandari on the assumption that Mr. Bhandari was the benami of the appellant. However, this very basis was subsequently modified by the ld CIT(A) and by the Tribunal , whereby both the authorities instead of deciding the quantum addition on the basis of Benami transaction in the name of Bhandari , have estimated the income of the assessee on the basis of the peak derived on the basis of the documents given to the assessee. Thus, in our view, there is a total change on the basis of initiation of the penalty. The Hon ble Allahabad High Court in the case of Shadiram Balmukund (1971 (2) TMI 16 - ALLAHABAD High Court ) and Hon ble Calcutta High Court in the case of Ananda Bazar Patrika Pvt. Ltd. (1978 (4) TMI 57 - CALCUTTA High Court ) has held that when the very basis of initiation of penalty has changed then the initiation of penalty is no more sustainable in the eyes of law. Also we have gone through the order passed by the ld A.O. on the quantum proceeding, no satisfaction has been mentioned by the ld A.O. in the assessment order before issuing show cause notice and referring the matter for initiation of penalty.The satisfaction for imposition of penalty is required to be recorded by the ld A.O in the assessment order. The ld A.O. has determined the undisclosed income at 67,77,020/- as against 4,52,220/- undisclosed shown in the block of return, whereas in appellate proceeding it was reduced to 10,63,184/- on estimate basis. Therefore, the proceedings for imposition of penalty were initiated on the basis of earlier finding by the AO. However, as mentioned hereinabove, not only undisclosed income has been reduced but the basis for calculating the undisclosed income has also been changed, in our view, the imposition of penalty, was not warranted, therefore, we deem it appropriate to delete the same - Decided in favour of assessee.

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• Customs

• 2016 (7) TMI 886
  Classification of import of soft shell filter for blood bag - whether the goods imported by the petitioner is “filtering equipment for filtration of blood”. - claim of exemption under Sl.No.309(i) of notification No.12/2012 CE dated 17/3/2012 - validity of Circular No.19/2013 - The contention urged by the revenue while supporting the Circular is that in view of the specific entry under sub heading 8421, the item cannot come under Chapter 90 - The main contention urged by the petitioner is that if the product is classified under Chapter 9018, then the product is eligible for exemption or reduction in basic duty of customs. It is contended that the Circular issued by the 2nd respondent is illegal since the item in question namely Disposable Sterilized Dialyzer and Microbarrier would only fall under chapter heading 9018 and not under chapter heading 8421. Held that:- a bare reading of various tariff items coming under Chapter sub heading 8421 do not tend me to think that a component for filtering blood could be included in any of the items coming under 8421. The word “other” occurring in 8421 99 00 can have relation only to the main heading parts relating to centrifuges including centrifugal dryers or other parts which can be characterized as coming under such equipment and cannot be imported to sub heading 9018 90. Therefore, Note 2(b) clearly applies to the fact situation since there are no entries in the tariff head items which can take care of parts and accessories of renal dialysis equipment which comes under the tariff head 9018 90 31. The Circular is not in terms with the statutory provisions and is liable to be set aside. - Decided in favor of assessee.

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• 2016 (7) TMI 885
  Levy of anti dumping duty - Import of PVC Resin Suspension Grade S65D from Taiwan - Country of Exports / origin - it was submitted that there is no requirement that the goods should be physically exported from the European Union and that the country of export having been mentioned in Serial No.5 in the table found in the Notification No.27/2014 has to be interpreted to mean that the country of supplier/exporter in the case is United Kingdom. Held that:- Inspite of this clarification having been issued, the petitioner was issued with the show cause notice and he brought to the notice of the authority the clarification issued, yet the authority while passing the order in original proposed to confirm the proposal in the show cause notice on the ground that the Notification No.27/2014 was not amended. The authority was well justified in taking such a stand in the order-in-original because the communication of the Directorate General of Anti-Dumping and Allied Duties dated 11.09.2014 did not fructify into a notification by the Government of India. However, now the things stand cleared in the light of the notification dated 22.01.2016 which is a corrigendum to the notification dated 13.06.2014 which has partially modified certain entries and in particular, the 'Country of exports' Thus, the question of insisting that the goods had to be physically shipped from the country of export is not necessary as has been clarified by the corrigendum dated 22.01.2016. In the light of the above, the impugned orders in original calls for interference - Demand set aside - Decided in favor of assesssee.

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• 2016 (7) TMI 884
  Recovery of duty drawback granted earlier - show cause notice was not served - export of goods - failure to submit Bank Realisation Certificate issued by the concerned Banks within the period allowed u/s.8 of the FEMA Act, read with Regulations, 2000 and Para 2.41 of the Export and Import Policy 2004-2009 and section 75 of the Customs Act, 1962 evidencing the realisation of sale proceeds in respect of the shipping bills under which the goods were exported. Held that:- As already pointed out, since there is no proof to show that the show cause notice was served on the petitioner, all the orders which have been passed by all the respondents against the petitioner required to be interfered with. In the result, the writ petition is allowed and the impugned orders passed by the first respondent 17.06.2015 ; the order of the 2nd respondent / Appellate Authority dated 25.07.2013 and the order passed by the 3rd respondent dated 25.02.2013 are set aside and the matter is remanded back to the 3rd respondent for fresh consideration, who shall issue notice to the petitioner; call for the documents, call the petitioner for personal hearing during which the petitioner is entitled to place all documents to prove that the amounts have been realised within the time stipulated under the Statute and after taking into consideration the decision of the Central Government in the case of Modern Process Printers, pass fresh orders on merits and in accordance with law. - Decided partly in favor of assessee.

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• 2016 (7) TMI 883
  Validity of order of orders of Commissioner (appeal) in favor of assessee - assessee submitted the documents first time before the commissioner (appeals) - Valuation - import of goods - related parties - additions towards design and validation fees and towards machine Installation and Commission Support Charges - Revenue in appeal - Held that:- The department could have verified the genuineness of the agreements and other documents filed by the respondent before the Commissioner (Appeals). This having not been done, nor any allegation as to the documents being illegal or against law, this submission also fails. With regard to the other aspects of design and validation fees, it is once again the grievance of the department that the respondent herein had not furnished the bill of material containing components / assemblies for these projects and the constituents of locally procured components etc. before the Adjudicating Authority but produced only before the Appellate Authority. Once again, we state that it is not the case of the department that the bill of material containing the list of component and other bills were not at all filed and what was filed was per se tainted with false documents. There is nothing that prevented the department from calling for these particulars and examine the genuineness of the documents. Appeal of the revenue rejected - Decided against the revenue.

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• Corporate Laws

• 2016 (7) TMI 877
  Bonafide public announcements - whether, the WTM of SEBI is justified in holding that some of the unimplemented corporate announcements were made by SIL with the fraudulent intention of influencing the price of SIL scrip and thereby enable the promoter group entities to off load the shares of SIL at the inflated prices and make unlawful gains? - Held that:- There is nothing on record to suggest that any meetings were held with adjoining land owners and Vishwas Infrastructure Ltd. in connection with the alleged joint venture, before or after the public announcements. Further, the land documents furnished by the appellants related to the year 2009, whereas, the public announcements relating to acquisition of lands were made in the year 2007. Moreover, the said documents related to notices of stamp duty and corresponding sale deeds with regard to some agricultural land, to which neither SIL nor Vishwas Infrastructure Ltd. were parties. Apart from the above, very fact that proposal to acquire 200 acres of land has been abandoned on ground of unavailability of appropriate tract of land and steep rise in land prices, clearly shows that the public announcements were made without ascertaining the availability of suitable land at suitable prices. Moreover, decision to abandon the project relating to acquisition of land under joint venture was taken belatedly and even BSE was intimated about the abandonment of the proposal for acquisition of 200 acres of land much after the issuance of show cause notice by SEBI. In these circumstances, the decision of the WTM of SEBI that the public announcements relating to acquisition of 200 acres of land for development under joint venture was not made with bonafide intentions cannot be faulted. Even the public announcements relating to amalgamation of companies cannot be said to be bonafide announcements because, after making such public announcements no further steps were taken in that behalf. Argument of the appellants that they were waiting for the right time to act on the proposal is unacceptable because, in the ordinary course, decision to amalgamate companies is taken only if the circumstances as on that date demand amalgamation of companies. In the present case, public announcements relating to amalgamation were made in the year 2007, however, no steps were taken to implement it for several years and it is only on 30.4.2013, after receipt of show cause notice issued by SEBI, SIL announced withdrawal of its decision relating to amalgamation of Companies. Thus it is abundantly clear that the public announcements relating to amalgamation of companies were not bonafide public announcements. For all the aforesaid reasons, the decision of WTM of SEBI that three public announcements made by appellants were not made with bonafide intentions cannot be faulted. These unimplemented public announcements coupled with various other factors led the WTM of SEBI to arrive at a conclusion that the unimplemented public announcements were made with fraudulent intentions to facilitate the promoter group entities to off load the shares of SIL at inflated prices. In these circumstances no fault can be found with the impugned order. Since the appellants have already undergone the punishment, question of considering any mitigating factor does not arise.

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• Service Tax

• 2016 (7) TMI 899
  Period of limitation - relevant date - refund of accumulated credit of service tax paid on input services used in exports of services - Held that:- It is not disputed that there is a time limit of one year prescribed under Section 11B of the Central Excise Act, 1944. However this time limit runs from the relevant date . The question is which is the relevant date in the case of such accumulated credit of service tax paid on input services used in export services. In the case of refund of central excise duty on goods consumed within the country, it is the date of payment of duty. In the case of export of goods, the relevant date is the date of shipping bills. In the case of services rendered, the date on which services are rendered or the invoices are raised for same, or the amounts are realised by the service provider, as applicable, would be the relevant date. Amendment to notification Notification No. 27/2012-CE (NT) dated 18.06.2012 by Notification No. 14/2016-CE (NT) dated 01.03.2016 is clarificatory in nature - Decided against the assessee.

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• Central Excise

• 2016 (7) TMI 898
  Cenvat Credit / Modvata Credit - purchase of tray casting as capital goods - Held that:- Once it is not in dispute that the petitioner is entitled to the benefit of the modvat credit on the eligible capital goods, namely, tray casting in the present case, as was clarified even by the department by issuing circular No. 276/110/96-TRU dated 2.12.1996, the denial thereof to the petitioner is totally illegal. Even if the petitioner had failed to refer to the circular at the time of hearing of the appeal before the Tribunal, in fact, it was the duty of the department itself to have taken care of the circular and not indulge any party in unnecessary litigation, as even the facts suggest that very initiation of the proceedings against the petitioner to deny the benefit of modvat credit was after the circular had already been issued, which entitled the petitioner to the benefit of modvat credit. - the writ petition is allowed.

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• 2016 (7) TMI 897
  Clandestine removal of goods - tribunal had set aside the demand - Held that:- it is evident that the Tribunal has discussed the evidence on record in detail and has based its conclusions upon findings of fact recorded by it upon appreciation of the evidence on record. Having regard to the evidence which has come on record as discussed hereinabove, in the opinion of this court, it is not possible to state that the findings recorded by the Tribunal are in any manner contrary to the record of the case. Though the learned counsel for the appellant have assailed the impugned order on various grounds, they have not been in a position to dislodge the findings of fact recorded by the Tribunal after appreciating the evidence on record. Under the circumstances, the view adopted by the Tribunal being a plausible view and the impugned order passed by the Tribunal being in consonance with the evidence on record, it cannot be said that the findings recorded by the Tribunal are in any manner perverse. It, therefore, follows that in the absence of any perversity in the findings of fact recorded by the Tribunal on an appreciation of the evidence on record, even if on the same set of facts, it was possible for this court to take another view, the same would not give rise to a question of law, much less, a substantial question of law, warranting interference. - Decided against the revenue.

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• 2016 (7) TMI 896
  Extended period of limitation - Suppression of facts - Demand based on subsequent department audit - Cenvat Credit - input services - credit of service tax availed on construction service of staff quarters, school building and hospital building during 2008-09 to 2010-2011 - Nexus with manufacturing activity - Held that:- Even if it is so, if the appellant take credit, which is disputable, that by itself, will not form basis for invoking fraud, etc. Further, two different audits have been conducted. Initially, certain service tax credits for the year 2008-09 were sought to be denied. Thereafter, based on another audit report, further service tax credits were sought to be denied which covered the said period also. The earlier demand was on the maintenance of these buildings whereas the latter demand was on construction of these buildings. The credits taken by the appellants were reflected in the statutory records. If such credits were not available in the records, the question of their being pointed out by the audit does not arise. Further, ld. Commissioner (Appeals) examined the question of time bar with reference to time period between the knowledge of the department and issue of demand and held that knowledge of the department is not relevant to decide the relevant date. As mentioned earlier, the demand for the period 2008-2009 to 2010-2011 has been issued on 10.12.2012.On this basic fact, which is not disputed, the time bar has to be applied. No tenable reason has been recorded by the lower authorities for invoking extended period of demand in this case. In the present case, the appellant availed credits under the belief that these are rightly eligible to them. No element of fraud or suppression or mis-statement could be brought out by the Revenue in the present case. - Demand set aside - Decided in favor of assessee.

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• 2016 (7) TMI 895
  Cenvat Credit - eligible input services - Insurance on Plant & Machinery - Courier Services - Royalty Charges - Credit taken on ISD invoices - Held that:- The period of dispute is post April 2011 and it is relevant to state that the words "procurement of inputs, accounting, auditing, financing" were a pact of definition of "input service". Without courier, it is not possible for the invoices to be despatched from one place to another. The denial of credit on the courier service is therefore erroneous and is accordingly set aside. Cenvat credit on the input services on the amount paid towards Royalty charges as eligible for credit and is used by the manufacturer is in or in relation to the manufacture of the final products. Credit taken on ISD invoices - The marketing office work towards the objectives such as revenue generation, cost reduction or risk mitigation of the units engaged in the manufacture and clearance of the final products. - There is no finding nor an allegation that these conditions stand violated and accordingly, the credit taken by them is in order. Credit allowed - Decided in favor of assessee.

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• 2016 (7) TMI 894
  Claim of refund - duty was paid under protest or not - unjust enrichment - amount was not recovered from the customers - Held that:- in view of the Chartered Accountant Certificate, payment of duty under protest, reflection of excess duty as receivable in the balance sheet and the certificates of the buyers are conclusive factors to examine the scope of the unjust enrichment and the Revenue having not rebutted the said evidence - Refund allowed - Decided against the revenue.

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• 2016 (7) TMI 893
  Refund claim of excess duty paid - unjust enrichment - manufacture of Cement and Clinker - By Notification No. 12/2012.CE dated 17-03-2012, the rate of duty for cement other than those cleared in packaged form (ie. loose cement was enhanced from 10% to 12%. - Later, a corrigendum to Notification No. 12/2012 was issued as F. No 334/1/2012-TRU dated 22-03-2012 by which proviso was inserted to Sl.No.52. Thus, the rate of duty payable on Sale to Industrial 120/- per Mt. Specific rate. - Pursuant to the Corrigendum, appellant filed refund claim for the excess duty paid. Held that:- after issuance of corrigendum the excess duty, paid lacks the colour of duty and is merely a deposit - the excess paid is only an amount deposited by appellant, not being duty is not hit by doctrine of unjust enrichment. - appellant is eligible for refund. The appeal is allowed with consequential reliefs, if any. - Decided in favor of assessee.

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• 2016 (7) TMI 892
  Claiming SSI exemption through creating dummy units - clubbing of clearance of different units - Held that:- it is clear that the Commissioner has taken into account all the allegations and contentions and arrived at a conclusion that M/s Andhra Poly Pack is an independent unit and their clearances cannot be Clubbed with that of respondent herein. We have to agree that there is no evidence to establish any mutuality of interest between the two units. - No demand - Decided against the revenue.

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• 2016 (7) TMI 891
  Validity of Confiscation of material under Rule 25 of CER when the appellant is paying duty under Section 3A of the Central Excise Act, read with Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. - Held that:- The appellant was obligated to explain the licit source of purchase of the packing materials lying in stock. It is evident that the appellant have not made any attempt to explain before the Courts below nor have filed any such explanation before this Tribunal. In this view of the matter, I uphold the order of confiscation of the packing material. So far redemption fine is concerned, I reduce the same to the amount of duty evaded at 1,42,984/-. As the appellant have himself not removed the excisable goods from the factory of manufacture, I hold that no penalties are leviable under Rule 25 of Central Excise Rules 2002. So far the penalty imposed by Id. Commissioner under Rule 26 of Central Excise Rules, 2002, is concerned, I set aside the same as the same have been imposed without any notice to the appellant and/or opportunity of hearing. - Decided partly in favor of assessee.

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• 2016 (7) TMI 890
  Power of commissioner (appeals) to enhance the penalty - the power of the first Appellate Authority, in Revenue matter, were power of enhancement, is also vested in the Appellate Authority, the powers are coterminous with the adjudicating authority. In other words, what the adjudicating authority can do or could have done, can be done by the Id.Commissioner (Appeals). - Accordingly, we are not in agreement to the Id. Single Member's observation, that no higher penalty could have been imposed by the Id. Commissioner (Appeals), in the appeals filed by the assessee, which were both filed heard and disposed of prior to the filing of the appeals by the Revenue. - there is no error in the orders of the Id.Commissioner (Appeals) - Decided against the revenue.

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• 2016 (7) TMI 889
  Recovery of tax dues of the defaulter - Liability of the auction purchaser of the assets - Held that:- the erstwhile owner, Hans Pharmaceuticals 10 lakhs (Rupees Ten Lakhs) deposited under the Interim Order of the Honourable High Court. Thus the appeal is allowed with consequential benefits. - Decided in favor of appellant.

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• 2016 (7) TMI 888
  Demand of duty - Pan Masala Packing Machines (Capacity Determination Collection of Duty) Rules, 2008 - period from 05.06.2012 to 29.06.2012 - Held that:- the duty for the period 28.06.2012 to 30.06.2012 was payable by 05.07.2012 in terms of 3rd proviso to Rule9 of the said Rules. In the circumstances, there is no delayed payment of duty and consequently no liability to pay interest as the assessee in this case paid the duty of 3,60,000/- on 29.06.2012 for the period 28.06.2012 to 30.06.2012 and also no penalty is levied either as there was no delay in discharge of appropriate duty. - demand set aside - Decided in favor of assessee.

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• 2016 (7) TMI 887
  MRP Based duty u/s 4A or transaction value u/s 4 - bulk supply of malted milk food, malted food and malt extract powder etc. - sale of rejected lot to other customer - Held that:- the issue is no longer res-integra, as the revenue have accepted that in case of bulk sale made by the appellant, without affixing MRP to the institutional customers and sale of rejected lot to other customer on as is where is basis the provisions of Standards of Weight & Measurements Act, 1976 or the Legal Metrology (Packaged Commodities) Rules, 2011, are not applicable and accordingly, the appellants have rightly assessed the duty under the provisions of Section 4 of the Act in case of clearance to institutional consumer in bulk sale packages not meant for retail sale. - Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2016 (7) TMI 941
  Failure of the Department to make refunds in terms of Section 38 of the DVAT Act - Held that:- Not only is the dealer getting the refund far beyond the time period specified under Section 38 of the DVAT Act but the Department is ending up paying far more interest on the refund amount than what is permissible or contemplated in terms of Section 38 of the DVAT Act. There has to be some accountability fixed within the Department for the lapses on part of those processing refund application resulting in such unnecessary payment of interest beyond what is permissible. This is an additional reason why the Court refuses to countenance the so-called 'fail-safe' system devised by the Department for staggering the release of refund of payment once a refund application has been processed, verified and found to be in order. As far as the present petition is concerned, Mr. Narayan, on instructions states that the refund amount due together with interest will be released to the Petitioner through ECS on or before 26th July 2016. On the basis of the said assurance, the petition is disposed of with liberty to the Petitioner to revive it if the refund is not received within the time assured. A copy of this order be delivered through a Special Messenger to the Commissioner, VAT, so that appropriate instructions can be issued to ensure that the processing of refund applications is not delayed and that the time limits specified under Section 38 of the DVAT Act are strictly adhered to

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• 2016 (7) TMI 882
  Classification - sales of “printed laminated paper rolls along with ploythelene strip bobbins” - whether falls within the entry “cardboard boxes and cartons” falling within Entry 12(iv) Schedule IIA of the Gujarat Sales Tax Act, 1969 - Held that:- In the case of Lt. Governor, Delhi and others v. Messrs. Ganesh Flour Mills Co. Ltd. [1973 (1) TMI 74 - SUPREME COURT OF INDIA]it was observed that, Packing materials are necessary not only for solid articles but also for those in liquid and semiliquid form. As the Tinsheets and Tinplates were intended to be used for packing of vegetable products, the respondent was entitled to the benefit of clause (c) of Section 8(3). - Learned AGP was not in a position to differentiate the aforesaid proposition of law, as may warrant us to take a different view.

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• 2016 (7) TMI 881
  Rejection of books of accounts - demand of sales tax - evasion of tax - Held that:- both the assessing authority as well as Tribunal have failed to discharge this statutory obligation which stood placed upon them. All that the two authorities have done is to assess the revisionist on the basis of the rough/provisional balance sheet which was found in the premises during the course of survey. This, in the opinion of the Court, does not comply with the mandatory obligation placed upon the statutory authorities by and under the provisions of sub section (3) of Section 7 of the 1948 Act. - Matter remanded back.

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• 2016 (7) TMI 880
  Reversal of input tax credit - the supplier dealers' Registration Certificates have been cancelled with retrospective effect - Held that:- In fact, the respondent has also recorded the fact that the petitioner has accounted for the purchases and made payment through cheques or banks. If that is the case, if there is any doubt, the respondent could have called for the bank statement. Without doing so, the question of completing the assessment by stating that Bank Statement and Moment details were not given, is not tenable since there was no request made by the respondent to produce any of the documents and thus the impugned orders have been passed in violation of principles of natural justice as the respondent has proceeded to complete the assessment on totally different grounds than what was mentioned in the pre-revision notice. Accordingly, the petitioner is entitled to succeed. - Writ petition allowed - Decided in favor of assessee.

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• 2016 (7) TMI 879
  Estimation of sales turnover - demand of sales tax / VAT - suppressed sales - Held that:- though the basis of the estimation of the gross profit is the profit as disclosed in the sale bills, when this proposal was conveyed to the assessee in the show cause notice and thereafter, the assessee had the opportunity to produce his books of accounts, including the sale bills. Despite the availability of such opportunities at no stage of the proceedings, the assesssee produced the documents or the sale bills. Held that:- On the other hand, the learned senior Counsel made an attempt to introduce a new case by making reference to a certificate purported to have been issued by the Village Officer to the effect that there was a flood in the area, which resulted in loss of documents. The resultant situation is that the assessee is unable to produce any document showing what exactly was his gross profit. On the other hand, admittedly in the inspection, certain bills were recovered, which disclosed the average gross profit of 80% and its genuineness is not disputed. In such a situation, we are not prepared to find fault with the Revenue in estimating the turnover tax by taking the gross profit as disclosed in the bills that were recovered. Further, the assessee cannot have any grievance, since the gross profit has now been reduced to 50% against the declared gross profit of 41.32%. - Appeal dismissed - Decided against the assessee.

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• 2016 (7) TMI 878
  Reversal of input tax credit - validity of assessment orders - while completing the assessment, the respondent, with regard to this issue, did not assign any reasons, but only confirmed the proposal to reverse the input tax credit merely by observing that the petitioner has not furnished their purchase invoices - violation of the principles of natural justice - Held that:- Since those issues involve disputed questions of fact, the petitioner has to necessarily exhaust the remedies available under the Act either by filing a petition for review under Section 84 of the Act or by filing an appeal before the Appellate Authority. In view of the above, the writ petitions are partly allowed, the impugned orders rendered by the Assessing Officer with regard to issue No.4 as to the reversal of input tax credit on a differential purchase turnover, are set aside and the matters are remitted back to the respondent for fresh consideration. The respondent is directed to furnish all the details sought for by the petitioner with reference to invoice numbers, dates, names of the sellers and sale value, within a period of three weeks from the date of receipt of a copy of this order. - Matter restored before the AO

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• Wealth tax

• 2016 (7) TMI 900
  Applicability of Circular No. 1979 dated 27.03.2000 - excess liability allowed by mistake and rectified under Section 35 of the Wealth Tax Act - Tribunal ordered as no exceptional circumstances as provided in the above said circular was pointed out by the learned D.R. for filing this appeal before this Tribunal - Held that:- Though in the instant appeal, Revenue has assailed the correctness of the order of the Tribunal, inter alia on the grounds that the Tribunal has missed to note that the Revenue has raised the special circumstances, referred to, in paragraph 3 of the Circular applicable to the facts of the present case, no material has been placed before this Court to substantiate the same. That apart, Revenue has raised the said ground for the first time before this Court, which is also not substantiated. Thus accepting the contention of the respondent/ assessee, all the substantial questions of law have to be answered against the Revenue

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• Indian Laws

• 2016 (7) TMI 876
  Transfer of plot by way of transfer of shares in a company to another company - in the year 2002, Chandigarh Administration notified the rules called Allotment of Small Campus Site in Chandigarh Information Services Park, Rules, 2002 (hereinafter referred to as the Rules ). Rule 9 of the Rules provided that transfer of the campus site by the allottee shall not be allowed for a period of 10 years from the date of allotment or till all dues are fully paid up whichever is later. Similar condition was incorporated in the allotment letter dated 1.6.2006 by which 6 acres of land was allotted to the respondents. It was necessary to make the construction within 3 years from the date of allotment. Held that:- It is apparent that in spite of the clear direction made by this Court, the respondent has suppressed the facts with respect to its deal with M/s. Teledata Ltd. There is concealment of material facts by the respondent in spite of having been directed to disclose the full facts in the counter affidavit by specific order passed on 16.7.2015. It has been mentioned in para 17 that sale of its subsidiaries to M/s. Esys Global Holding meant that these liabilities were transferred to the buyer. Thus there is sale of assets and subsidiaries and the denial that there is no sale is incorrect statement. In the affidavit dated 24.7.2008 in paras 10 and 11, it is apparent that purchase by M/s. Esys Dubai of the assets of M/s. Esys Singapore and its subsidiaries after taking regulatory approvals which were required for transfer of shares. Thus, under the garb of transfer of shares, the respondents have completed the sale and is creating a screen to conceal this aspect. Deal with Teledata is also apparent from the aforesaid paras 19 to 21 of the affidavit of Mr. Vikas Goel. Unfortunately, the respondent has concealed the facts with respect to Teledata and has not come out with clean hands. The provisions of Rule 9 of the Rules and Clause 15 of the allotment letter have been clearly violated. Thus, we are of the considered opinion that the order passed by the High Court is not sustainable and resumption of the allotted land by the appellant was legal and proper. - Decided in favor of revenue.

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