Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 24, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Classification of goods - HSN code - rate of tax - wastes - Cinder Half-burnt Coal / Char Dolachar - ESP / Bag Filter Dust generated during the process of manufacturing Sponge Iron - commodities fall under HSN Code “2619 00 90” - AAR
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Levy of GST - time of supply - point of taxation - period involves both pre-GST period as well as post GST regime - flats allotted to land owner by the builder - As per Notification No.4/2018 Dt:25.01.2018 the date of transfer of possession of the building or the right in it to the person supplying development rights will be the time of supply and the liability to pay tax on the said services shall arise on that day. The time of supply shall not be at any other time - AAR
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Search and seizure - jurisdiction of CGST Delhi North Commissionerate - reasons to believe - Admittedly, in the instant case, no investigations were carried out against RJT by the CGST Delhi North Commissionerate. The authorization, (and qua which there is no dispute) was based on the communication dated 05.03.2021 addressed by Joint Commissioner (AE), Gautam Budh Nagar to the Additional/Joint Commissioner, CGST Delhi North Commissionerate. - the search and seizure conducted by CGST Delhi North Commissionerate are declared unlawful - HC
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Revenue appeal against the decision of Single member bench of HC - Transition of unavailed input tax credit - non filing of TRAN-1 - section 140 of the Central Goods and Service Tax Act, 2017 - Granting an opportunity of hearing is only to enable the process of decision-making simpler. It is one of the basic principles of natural justice. In the process of rendering justice, an opportunity of hearing is a basic postulate - appeal dismissed. - HC
Income Tax
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Expenditure incurred in connection with transfer of the capital asset - As pertinent to note that lease deed was executed in the year 1996 in favour of the lessee and was cancelled in the year 2009 after a period of 13 years. The reference to the lease deed is found even in the registered sale deed dated 13.05.2009. The lessee had offered the amount received by it as income in its return. The amount was paid by the assessee and was an expenditure incurred wholly and exclusively for transfer of an asset and therefore, it is deductible u/s 48 - HC
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Exemption u/s 11 - Corpus Donation - the corpus fund donated to the assessee cannot be included in the income and expenditure account but has been rightly shown by the assessee in its liability side of the Balance Sheet since the nature of the receipt is capital in nature. Therefore, the assessee succeeds and we allow the claim of the assessee and overturn the decision of the authorities below. - AT
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Exemption u/s 11 - charitable activity u/s 2(15) - In the absence of any evidence to show that the hostel facilities were provided to anybody other than students and staff of the trust, the hostel facilities provided by the educational institution shall be construed to be the intrinsic part of the ‘educational activities’ of the assessee and they cannot be considered different than activities of the society of ‘education’ - It comes under the charitable purpose which is exempt u/s 11 - AT
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Disallowance u/s 35(1)(ii) - withdrawal of approval by the CBDT as was granted to the said HHBRF was only on 06.09.2016 i.e. much after the donation made by the assessee. Principally, even if subsequently for any reason if approval granted is withdrawn the deduction claimed cannot be denied. We, thus, are of the considered opinion that the disallowance made under Section 35(1)(ii) of the Act is not sustainable in the eye of law and hence quashed - AT
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Validity of reopening of assessment u/s 147 - addition of transactions in HSBC Bank - AO is not sure whether income has to be assessed in the hands of assessee or his ex-wife. Next, he was not sure in which assessment year it has to be taxed, whether AY 2002-03 or 2003-04. In addition, he is not sure who is the exact owner of this bank account. - AO reopened the assessment merely on suspicion and surmise - Reassessment orders quashed - AT
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Revision u/s 263 - As the assessee’s claim of having incurred the expenses towards furtherance of its charitable objective; and also its claim of having received donations, both local and foreign, had been accepted by the A.O without carrying out necessary verifications, therefore, the aforesaid contention of the assessee is devoid and bereft of any merit, and thus, cannot be accepted. - No infirmity in the order passed by the CIT under Sec. 263, wherein he had after rightly observing that the assessment order u/s 143(3) had been passed by the A.O in a perfunctory and routine manner without any verification, cross checks or test checks - AT
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Addition of cash salary u/s 69C - Assessee argued that proposed cash was also found during the course of first search and therefore, cannot be put to use for making assessment consequent to the second search and even otherwise, according to the appellant, the document is dumb as it clearly states that the salary was only proposed and never paid - this expenditure cannot be added as income from undisclosed sources and therefore, no addition can be made. - AT
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Levy of penalty u/s 271(1)(c) - Defective notice - non specification of charge - Notice as barred by limitation u/s 275 - mere non-acceptance of the explanation so submitted by the assessee can be made a basis for addition in the quantum proceedings, however, the same cannot result in levy of penalty u/s 271(1)(c) - AT
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Penalty u/s 271(1)(c) of the Act is liable to be imposed only where the assessee has concealed its particulars of income or furnished inaccurate particulars. Action of making addition on ad–hoc basis does not result into imposition of penalty u/s 271(1)(c) of the Act and hence cannot be termed as either concealment or furnishing of inaccurate particulars of income. - AT
Service Tax
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Refund of credit availed on the service tax paid on input services - The services having been exported, the service tax paid on the input services used for export of services should be refunded to the appellants as per Rule 5 of Cenvat Credit Rules, 2004. The appellants have properly accounted in their books of account. Not mentioning the credit availed in ST-3 returns is only a procedural lapse, which can be condoned. - AT
Central Excise
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Clandestine Removal - reliability of statements - sufficiency of evidence or not - In a serious case such as evasion of duty by fraud, the degree of appreciation of evidence has to be higher than in a case of allegation of mere delay in payment of duty though in both cases the evidence has to be appreciated on the preponderance of probability. - there is enough evidence to establish the case put forth by department. The role of the Managing Director in such activity is also clear. - AT
Case Laws:
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GST
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2021 (7) TMI 929
Classification of goods - HSN code - rate of tax - wastes - Cinder Half-burnt Coal / Char Dolachar - ESP / Bag Filter Dust generated during the process of manufacturing Sponge Iron - levy of GST Compensation Cess @ ₹ 400/- per tonne be applicable on sale of waste. HELD THAT:- The Hon ble Apex Court of India in the case of UNION OF INDIA VERSUS AHMEDABAD ELECTRICITY CO. LTD. [ 2003 (10) TMI 47 - SUPREME COURT ] held that unburnt or partly burnt pieces of coal have no capacity to produce flame because of low or reduced calorific value and therefore classified such coal/dust as Cinder. Further, Hon ble CESTAT in the case of CC, CE ST, HYDERABAD-II VERSUS M/S REACTIVE METALS OF INDIA PVT LTD., M/S BINJUSARIA SPONGE POWER PVT LTD. [ 2017 (9) TMI 1547 - CESTAT HYDERABAD ] held that by Product Char Dolochar emerging during manufacture of Sponge Iron is classifiable under CETH 2619 00 90 - Similar stand has been taken by Hon ble CESTAT in the case Bellary Steel Alloys Ltd v. CCE.,[ 2005 (10) TMI 180 - CESTAT, BANGALORE ]. W.R.T ESP bog/filter dust, we hold that they are also classifiable under 2619 00 90. Thus, both unburnt or half-burnt coal and dust falls under entry 28 of Schedule III of Notification No.01/2017 Dated: 28.06.2017 and attracts 18% tax under IGST and 9% under CGST/SGST Acts.
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2021 (7) TMI 928
Levy of GST - time of supply - point of taxation - period involves both pre-GST period as well as post GST regime - flats allotted to land owner by the builder by way of supplementary agreement on 15.05.2017(i.e., before GST regime) - construction will be completed during GST regime - supplementary agreement entered by the developer with a land owner, is allotment letter or not - liability under existing law - exemption under present law. HELD THAT:- From the understanding of the phrase Constructed complex it follows that such a complex, building or civil structure should first be in place so that its possession or the rights in it may be transferred by the developer to the person supplying development rights - such transfer of possession or transfer of right in the building shall be accomplished by a conveyance deed or similar instrument such as allotment letter. As per Notification No.4/2018 the time of supply to determine liability to pay tax on development rights by a land owner to a developer is the date on which the building or the rights in an existing building are handed over to the land owner by way of a conveyance deed or an allotment letter - If the applicant has handed over the building after inception of CGST SGST, then the liability to pay tax will arise under CGST SGST. What is the Time of supply and point of taxation with respect to flats allotted to land owner by the builder by way of supplementary agreement on 15.05.2017(i.e., before GST regime) where as the construction will be completed during GST regime? - HELD THAT:- As per Notification No.4/2018 Dt:25.01.2018 the date of transfer of possession of the building or the right in it to the person supplying development rights will be the time of supply and the liability to pay tax on the said services shall arise on that day. The time of supply shall not be at any other time. Is this date to be concluded as the date of allotment for payment of service tax in respect of construction services provided to landlord ignoring the fact that the construction was continued subsequently from May, 2017 to November, 2018? - HELD THAT:- No, the applicant has to pay tax as per the time of supply indicated above. Will it be sufficient and adequate compliance, if the appellant complies law and remit entire service tax on the entire area earmarked to landlord? - HELD THAT:- No, the applicant has to pay tax as per the time of supply indicated above. What is the Constructed complex referred to in the notification? - HELD THAT:- Constructed complex refers to a building or a completed structure.
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2021 (7) TMI 926
Seizure of heavy vehicle - Ashok Leyland trucks - e-way bills for these heavy vehicles not present - it was asserted that the goods were being brought within the State by contravening the provisions of Tripura State General Sales Tax Act, 2017 - intent to evade tax - HELD THAT:- Superintendent of Taxes has adopted a procedure which is wholly irregular. In the show cause notice dated 15th May 2021, he had not elaborated the ground that the e-way bills did not carry the reference to the temporary registration numbers duly certified by the State RTO authorities, a ground which he raised in subsequent communication dated 20th May 2021. The petitioner, therefore, did not have opportunity to meet with these grounds. Further, he has raised a demand for unpaid tax with penalty and sought to recover the same from the consignee - This is wholly irregular. Demand notice must be preceded by an order of assessment, an order which can also be challenged by the person aggrieved before the appellate authority. In the present case the initial show cause notice which the Superintendent of Taxes issued to the petitioner did not contain the grounds which were mentioned in the later communication dated 21st May 2021. The reply that the petitioner therefore filed to the show cause notice, on 19th May 2021, did not cover the grounds and allegations made in the communication dated 20th May 2021 - Though the Superintendent of Taxes is permitted to carry out proper assessment and pass an order of assessment, the petitioner must be given an additional opportunity to file reply. Demand notice dated 29th May 2021 is set aside - For the purpose of carrying out assessment, the show cause notice, dated 15th May 2021 read with the communication dated 20th May 2021, from the Superintendent of Taxes to the petitioner shall be treated as a show cause notice - petition disposed off.
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2021 (7) TMI 925
Refund claim - petitioner was not heard by the appellate authority before passing the impugned order - email regarding personal hearing was sent to the wrong email address - principles of natural justice - HELD THAT:- The contentions of learned counsel for petitioner is correct inasmuch as the notice was sent to the wrong email address. The appeal is remanded back to the Joint Commissioner, Appeals I, Central GST, Delhi for a de novo adjudication. The Joint Commissioner, Appeals I, Central GST, Delhi shall decide the matter in accordance with law by way of a reasoned order after giving an opportunity of hearing to the petitioner - Petition allowed by way of remand.
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2021 (7) TMI 924
Search and seizure - Gold Flake Super Star cigarettes - illicit trade/supply - jurisdiction of CGST Delhi North Commissionerate - reasonsto believe - Whether or not, requisite statutory ingredients were present to enable the concerned respondents to exercise the power vested upon them under Section 67(2) of the CGST Act? HELD THAT:- The first proviso to subsection (2) of Section 67 states that wherever it is not practicable to seize any such goods, the proper officer or any officer authorized by him, may serve on the owner or the custodian of the goods, an order that he shall not remove, part with, or otherwise deal with the goods except with the prior permission of such officer - What is crystal clear upon a perusal of the provisions of subsection (1) and (2) of Section 67 is that the expression reasons to believe controls the exercise of powers under the said provisions. Therefore, unless the basic jurisdictional facts exist, in a case, the power conferred under subsections (1) and (2) of Section 67 cannot be exercised. The expression reasons to believe is found in various statutes concerned with revenue laws, and therefore, has undergone a forensic analysis, metaphorically speaking, by Courts, in several cases. What is clear is that before the proper officer not below the rank of Joint Commissioner decides to either conduct the search and seizure himself or authorize another person in writing to do the same, he should have, reasons to believe, that any goods are liable to be confiscated or any documents or books or things which, are useful or relevant to any proceedings under the CGST Act, are secreted in any place - In this case, the search and seizure was conducted by an Inspector of the CGST Delhi North Commissionerate based on the authorization of the Additional Commissioner of the same department i.e. CGST Delhi North Commissionerate. Admittedly, in the instant case, no investigations were carried out against RJT by the CGST Delhi North Commissionerate. The authorization, (and qua which there is no dispute) was based on the communication dated 05.03.2021 addressed by Joint Commissioner (AE), Gautam Budh Nagar to the Additional/Joint Commissioner, CGST Delhi North Commissionerate. Both the order of seizure of documents and the order of prohibition, simply replicate the language of subsection (2) of Section 67 and the corresponding Rule i.e. Rule 139(2). Thus, the very trigger for conducting the search [i.e. the authorization issued by the Additional Commissioner, CGST Delhi North Commissionerate] was flawed and unsustainable in law - there was a reasonable explanation as to why the stock register was not found at the premises on the day [ i.e. 05.03.2021] when the search was conducted by CGST Gautam Budh Nagar/Noida with the assistance of the Delhi North Commissionerate. The Additional Commissioner, CGST Delhi North Commissionerate exercised his powers for according authorization to conduct search and seizure, at RJT's premises, even though the jurisdictional ingredients were absent. The request of Joint Commissioner (AE), Gautam Budh Nagar conveyed through the communication dated 05.03.2021, was only to ascertain as to whether RJT, which was the L2 supplier of M/s Mridul Tobie Inc., was in existence. There was no independent application of mind by the Additional Commissioner, CGST Delhi North Commissionerate - The officers concerned should bear in mind that the search and seizure power conferred upon them, is an intrusive power, which needs to be wielded with utmost care and caution. The legislature has, therefore, consciously ringfenced this power by inserting the controlling provision, i.e., reasons to believe . The application filed on behalf of RJT [i.e. CM No. 16668/2021] which inter alia seeks a direction for setting aside the order dated 12.05.2021, directing the provisional release of goods, based on the terms contained therein - the search and seizure conducted by CGST Delhi North Commissionerate are declared unlawful - Petition disposed off.
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2021 (7) TMI 923
Jurisdiction assigned to State Tax Officers in view of the decisions taken by the GST - Circular No. 01/2017 dated 20.09.2017 - constitutional body constituted under Article 279A of the Constitution of India - proceeding/ inquiry initiated by the Respondents against the Petitioner, legal or not - section 6(2)(b) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- This Court is of the view that as the Impugned Summons have been withdrawn and the inquiry proceedings have been closed, the issue sought to be adjudicated upon by the petitioner cannot be decided in a vacuum. Consequently the present writ petition and application are disposed of leaving the aforesaid question of law open to be decided in the event a fresh proceeding is initiated or summons are issued to the petitioner by the Central Tax Officers (GST Officers). The order be uploaded on the website forthwith.
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2021 (7) TMI 911
Revenue appeal against the decision of Single member bench of HC - Transition of unavailed input tax credit - non filing of TRAN-1 - section 140 of the Central Goods and Service Tax Act, 2017 - HELD THAT:- The input tax credit is required by law to be credited to the electronic credit ledger of an assessee. Failure to credit the input tax credit is an infraction of section 140(1) and to Rule 117(3) of the GST Rules. Input tax credit is an asset in the hands of the dealer. A registered dealer had a statutory right under the VAT regime to get refund. Unutilized input tax credit of the erstwhile regime can be denied from being credited to the electronic credit ledger only under the contingencies mentioned in the proviso to section 140(1) - It is axiomatic that computer literacy has not reached its pinnacle in our country. Technical glitches at the transition stage to GST should not affect above said statutory right of dealers. Attempt must always be made not to deprive a dealer from a bonafide claim, through technicalities. It is profitable in this context to refer to certain observations of the High Court of Punjab Haryana in ADFERT TECHNOLOGIES PVT. LTD. VERSUS UNION OF INDIA AND ORS. [ 2019 (11) TMI 282 - PUNJAB AND HARYANA HIGH COURT] where it was held that By not allowing the right to carry forward the CENVAT credit for not being able to file the form GST Tran-1 within the due date may severely dent the writ-applicants working capital and may diminish their ability to continue with the business. Such action violates the mandates of Article 19(1)(g) of the Constitution of India. Granting an opportunity of hearing is only to enable the process of decision-making simpler. It is one of the basic principles of natural justice. In the process of rendering justice, an opportunity of hearing is a basic postulate - appeal dismissed.
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2021 (7) TMI 909
Transition of unutilised input tax credit - petition is sought to be dismissed on account of non-joinder of necessary/proper parties - Section 140 of the Central Goods and Service Tax Act, 2017 - HELD THAT:- The writ petition is disposed off with a direction to the IT Redressal Committee of GST Council to take a call on the petitioner's request for transition input tax credit in accordance with law, after affording an opportunity of hearing, by taking into consideration the provisions of Section 140 of the Central Goods and Service Tax Act, 2017, within a period of forty five (45) days from the date of receipt of a certified copy of the judgment. Writ petition stands disposed of.
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2021 (7) TMI 869
Refund of excess paid ITC - refund rejected on the ground that the excess payment of ITC can be re-credit to ITC ledger only by GST PMT-03 as per sub rule (4A) of Rule 86 CGST Rules,2017 as amended vide N/N. 16/2020 dated 23.03.2020 - Ambiguity in the order - HELD THAT:- On examination of reconciliation chart in respect of tax liability of the appellant, generated by appellant through GSTN common portal, as well perused the ledger account of balance sheet with regard to output supply in month of October-2019 it is found that the appellant had made supply only two suppliers on 21.10.2019 and 24.10.2019, wherein GST payable were ₹ 9,093.76 only and same are being reflected in GSTR-1, however, GST were paid through ITC ₹ 2,69,212.54 and same are also being reflected in GSTR-3B. Therefore, in view of the records it is found that the appellant had paid excess tax of ₹ 2,60,118.24 through ITC in month of October-2019. On going through the provisions of Rule 86 (4A) read with Rule 92 (1A) of CGST Rules, it is found that if any registered person has claimed any refund amount paid as Tax wrongly paid or paid in Excess for which debit has been made from the Electronic Credit Ledger the said amount shall be re-credited by an order in Form of CGST PMT-03 to the Electronic Credit Ledger of the registered person by the proper officer. There are force in the appellant contention that excess tax paid through ITC should be re-credited in Form PMT-03 - appeal allowed - decided in favor of appellant.
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Income Tax
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2021 (7) TMI 922
Assessment u/s 153A - incriminating material found during the course of search or not? - HELD THAT:- Both the CIT(A) as well as the ITAT have held in the instant case that the addition is not based on any incriminating material found during the course of search and the assessment was not pending on the date of search. The observations of the AO relied upon by Mr. Sharma do not give us any insight or clue about the incriminating material which is claimed to be in existence. In the proceedings before the CIT(A) as well as the ITAT, the Revenue has not made any attempt so as to disclose the incriminating material. Even in the present appeal, the revenue is unable to explain or give us any indication about the same. The findings of facts returned by CIT(A) and ITAT are not be interfered with lightly. The view taken by the tax authorities based on the decision of CIT Vs. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] cannot be held to be perverse. The questions of law proposed by the Revenue are squarely covered by the aforesaid judgment. - Decided in favour of assessee.
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2021 (7) TMI 921
Validity of Draft Assessment Order - to be treated as notice u/s 142(1) or not - impugned draft assessment order specifically states that certain losses and expenditures were either not admissible or not genuine or not verifiable - HELD THAT:- Draft Assessment Order had put the petitioner to notice as to what will be the additions and deletions. Also the issue raised at the highest in the present writ petition is with regard to interpretation of draft Assessment Order which can certainly be urged and considered in Appeal. In fact, the jurisdiction to interpret the nature of draft Assessment order is vested with the Appellate Authority. This Court is further of the view that the argument that whether the petitioner s response was considered or not would have to be raised before the appellate authority while hearing the appeal and not in writ jurisdiction. The said argument in the present case requires minute examination of the Show Cause Notice as well as the response filed by the petitioner, which is not permissible in writ jurisdiction. Consequently, as the petitioner has alternative efficacious remedy, present matter need not be entertained in writ jurisdiction. Accordingly, the present writ petition and applications are dismissed.
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2021 (7) TMI 920
Refund of the excess advance tax deposited by the Petitioner - Also seeking interest at the rate of 12% from the date of deposit of original challan up to the date of realization of such amount - HELD THAT:- This Court is of the view that the Petitioner in the year 2021 cannot seek refund of the excess advance tax deposited for the Assessment Year 2000-01, as it is a stale claim. It is settled law that representations made by the Petitioner would not extend the period of limitation. In any event, the Bank vide letter dated 13th May, 2016 had informed the Respondent that it has no record with regard to the excess payment made by the Petitioner for the Assessment Year 2000-01. No proceeding had been filed by the petitioner within three years from the said date. Consequently, the present writ petition is dismissed on the ground of delay and laches.
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2021 (7) TMI 919
Faceless Assessment u/s 144B - HELD THAT:- This Court is of the opinion that petitioner is correct in submitting that Section 144B of the Act had been violated and the assessment proceeding had been completed in the present case in violation of the principles of natural justice. This Court sets aside the impugned assessment order dated 06th April, 2021 as also the notice of demand issued u/s 156 and the notice for initiating the penalty proceedings u/s 274 read with Section 270A. The respondent/revenue will be at liberty to proceed with the assessment process, albeit, under the provisions of Section 144B. Needless to add, if a show cause notice-cum-draft assessment order is served on the petitioner, an opportunity would be given to the petitioner to file its response/objections to the same. Is a variation proposed in the income of the petitioner, an opportunity of personal hearing will also be accorded. In sum, the procedure prescribed u/s 144B will have to be followed by the respondent/revenue. Writ petition is disposed of in the aforesaid terms.
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2021 (7) TMI 918
Faceless assessment u/s 144B - Petitioner filed objections against the show cause notice within the short time allowed and requested for grant of personal hearing in terms of Section 144B(7)(vii) to demonstrate the material not considered in show cause notice and explain the evidence filed, which was neither allowed nor rejected by the respondent -HELD THAT:- This Court is of the view that Section 144B (7) provides for a personal hearing - In Gurgaon Realtech Limited vs. National Faceless Assessment Centre Delhi [ 2021 (6) TMI 433 - DELHI HIGH COURT] Coordinate Bench of this Court has held that an appeal that was filed, albeit, only to ensure that limitation is not crossed, is not an impediment in proceeding ahead with the writ petition. Keeping in view the aforesaid facts and mandate of law, the impugned assessment order dated 30th April, 2021 as well as notice of demand are set aside and the matter is remanded back to the AO, who shall grant an opportunity of hearing to the petitioner by way of Video Conferencing and thereafter pass a reasoned order in accordance with law.
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2021 (7) TMI 917
Interest free loans advanced by the assessee to its subsidiaries - transfer of income without transferring assets u/s. 60 or 61 - CIT (A) and ITAT have recorded concurrent findings of fact that the loans advanced by the assessee to its subsidiaries were not sham transactions or paper transactions, but further, such loans were advanced for reasons of commercial expediency - HELD THAT:- There are findings of fact that the assessee is the holding company and has a deep interest in its subsidiary. Besides, there is material on record that the loans that were advanced to the subsidiaries were not from the borrowed monies. It is also not the case where the assessee had claimed any deductions on the interest paid for borrowing the monies to advance interest-free loans to its subsidiaries. Rather, the material on record suggests that the assessee had reserves of over ₹ 1,000 crores and further, even the subsidiaries, did not derive any interest income as such from out of these interest-free advances received from the assessee. All these circumstances do establish a case of commercial expediency even applying the principles laid down in S.A. Builders (supra). Therefore, based on S.A. Builders [ 2006 (12) TMI 82 - SUPREME COURT ] there is no case made out to interfere with the view taken by the CIT (Appeals) and the ITAT. The assessee, has quite rightly relied on Reliance Communication [ 2012 (5) TMI 160 - BOMBAY HIGH COURT ] which has after considering S.A. Builders [ 2006 (12) TMI 82 - SUPREME COURT ] held that the expression commercial expediency is an expression of wide import and includes such expenditure as a prudent businessman incurs for business. An expenditure, which is commercially expedient, may not be incurred under a legal obligation, but so long as it meets the requirement of commercial expediency, it has to be allowed. In the present case, there is not even any allegation that the interest-free loans advanced by the assessee were utilized for the personal benefit of the directors of the sister concern - Decided in favour of assessee.
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2021 (7) TMI 915
Expenditure incurred in connection with transfer of the capital asset - compensation by the appellant to the lessee can be claimed as expenses - assessee had executed a lease deed in favour of the lessee on 22.02.1996 for a period of 40 years in respect of land measuring 29,845 square feet - HELD THAT:- As pertinent to mention here that the assessee for the AY 2007-08 had offered an income of ₹ 10,05,000/- from the lessee under the head of 'House Property', which was accepted by the AO and the aforesaid rental income was taxed. Subsequently, it is not open for the AO to deny the existence of the aforesaid transaction in the subsequent Assessment Year. As pertinent to note that lease deed was executed in the year 1996 in favour of the lessee and was cancelled in the year 2009 after a period of 13 years. The reference to the lease deed is found even in the registered sale deed dated 13.05.2009. The lessee had offered the amount received by it as income in its return. The amount was paid by the assessee and was an expenditure incurred wholly and exclusively for transfer of an asset and therefore, it is deductible u/s 48 - The findings recorded by the authorities under the Act is perverse. Substantial question are answered in favour of the assessee and against the revenue.
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2021 (7) TMI 914
Exemption u/s 54F - Whether all the mandatory requirements and conditions were fulfilled on the facts and circumstances of the case? - HELD THAT:- Exemption under Section 54 of the Act is dependant on the date of acquisition of the property and not on the date of payment made in respect of such property. It is also noteworthy to mention that to claim an exemption under Section 54F of the Act, it is not necessary that the same sale consideration should be used for construction of a new house property. It is also noteworthy that Section 54F of the Act is a beneficial provision, which has been enacted with an object to promote investment in housing and enable the assessee to save tax on capital gains. It is a well settled rule of interpretation that benevolent provision should be interpreted liberally bearing in mind the object for which the provision is enacted. From narration of aforementioned facts, it is evident that the assessee had complied with the conditions stipulated u/s 54F of the Act and was entitled for exemption. The finding recorded by the tribunal that since, payments were made prior to one year before the date of transfer of shares and therefore, the assessee is not entitled to claim exemption u/s 54F of the Act cannot but be termed as perverse.
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2021 (7) TMI 910
Claim of refund of tax as per Section 89(1) - grievance of the petitioner is that at the time of submitting the income tax return for the financial year 2013-2014, in the assessment year 2014-2015, the petitioner is entitled to the refund as per Section 89(1) - HELD THAT:- Considering the limited scope of the prayer sought for in this writ petition, without going into the merits of the case projected by the petitioner either in his representation or in this Writ Petition, the respondents are directed to consider the representation of the petitioner dated 17.12.2019, on merits and in accordance with law and pass appropriate orders within a period of twelve weeks from the date of receipt of a copy of this order. Such exercise shall be done after giving due opportunity to the petitioner.
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2021 (7) TMI 907
Revision u/s 263 by CIT - deduction of CSR expenses u/s 80G which the AO has allowed erronouslly as per express prohibition given by Explanation 2 of Sub-section (1) of Section 37 - HELD THAT:- We concur with the contention of the assessee that since Parliament intended certain restrictions to only CSR expenditure in respect of two donations included by an assessee as CSR expenditure i.e. [Swachh Bharat Kosh and Clean Ganga Fund] has impliedly not made any prohibition/restriction in respect of claim of CSR expenses in other cases if it is otherwise eligible under Section 80G. The assessee has made donation by RTGS Through UCO Bank which is received by Shree Charity Trust which was 80G(5)(vi) certificate of the Department. The assessee has also made payment to Pt. Jashraj Music Academy Trust and the approval u/s 80G (5)(vi) of the Act in respect of Pt. Jashraj Music Academy Trust is found given by Director of Income Tax (Exemption). Therefore, since the assessee satisfies the condition u/s. 80G of the Act of the donees, the assessee s claim for deduction of CSR expenses/contribution u/s 80G of the Act was allowed after enquiry by the AO. Thus we are of the opinion that the action of the AO allowing the claim u/s. 80G of the Act is a plausible view - PCIT has not been able to make out a case that on this issue raised by him, the AO's order is erroneous as well as prejudicial to the revenue. So the jurisdictional fact as well as law is absent for invoking revisional jurisdiction. - Decided in favour of assesee.
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2021 (7) TMI 906
Exemption u/s 11 - Corpus Donation as added with the income of the assessee - HELD THAT:- Donors/Trusts/entities have paid the amount by the mode of RTGS/cheque the details of which are given in the aforesaid documents/receipts. So, from this fact it is evident that the corpus donation were not given by the students by way of fees which has been segregated by the assessee in the form of building fund or capitation fee etc. Therefore, we note that the Ld. CIT(A) misdirected himself by wrongly assuming the facts which is contrary to the material placed on record and, therefore, his findings are perverse. For the purpose of this proviso, income of the funds or trust or institution shall not include income in the form of voluntary contributions made with specific direction that they shall form part of the corpus of that institution. Here in this case, as we have noted the donors have specifically given direction to use the fund towards corpus and since the explanation is for removal of doubts and it is being clarified it is retrospective in operation and, therefore, the corpus fund donated to the assessee cannot be included in the income and expenditure account but has been rightly shown by the assessee in its liability side of the Balance Sheet since the nature of the receipt is capital in nature. Therefore, the assessee succeeds and we allow the claim of the assessee and overturn the decision of the authorities below. Thus, this ground of appeal of the assessee is allowed. Provision for gratuity payable (determined by way of actuarial valuation) -Whether it would not constitute application of income in terms of the provisions of sec. 10(23C)(vi)? - HELD THAT:- We agree that the gratuity to the employees is a statutory obligation, and therefore is obliged by law to disburse the same when the employees demit office or superannuate. In this case, the assessee has booked provision for gratuity as per the actuarial valuation and the manner and determination of the same is a scientific process adopted by expert professionally trained in the valuation and as such it cannot be compared with mere estimate of expenses to be incurred in future. We are of the opinion that the assessee s claim in respect of provision for gratuity as per the actuarial valuation should have been allowed in the facts and circumstances of the case; and, consequently, the impugned order of the Ld. CIT(A) is set aside and the AO is directed to allow the provision for gratuity as application of income - Appeal of the assessee is allowed.
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2021 (7) TMI 905
Exemption u/s 11 - charitable activity u/s 2(15) - assessing hostel surplus as business income of the assessee - assessee is a Society running Educational Institutes, Medical Colleges and Charitable Hospitals which is affiliated with All India Counsel for Technical Education - HELD THAT:- It is undisputed that assessee is carrying educational activity and running various Colleges especially Medical Colleges and Charitable Hospitals. The income from charitable activities declared by the assessee was NIL and the assessee earned gross receipt on account of educational activity whereas the assessee is also running hostels for the students as per the UGC Guidelines which is an ancillary activity. In the absence of any evidence to show that the hostel facilities were provided to anybody other than students and staff of the trust, the hostel facilities provided by the educational institution shall be construed to be the intrinsic part of the educational activities of the assessee and they cannot be considered different than activities of the society of education - The addition amounting made by the AO and sustained by the CIT(A) is not correct. CIT(A) and the AO failed to consider that the hostel facility is incidental to achieve the object of providing education as per object of the trust and hence comes under the charitable purpose which is exempt under Section 11 - Appeal of the assessee is allowed.
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2021 (7) TMI 904
Deduction u/s. 80IB (10) - AO was of the opinion that four years have since lapsed and the assessee needs to complete the project within 5 years the AO accordingly formed a belief that the claim of the deduction of the assessee expires and hence not eligible for the claim of deduction u/s. 80IB (10) - HELD THAT:- There is no dispute that the assessee has been offering income on project completion method. We find that the CIT(A) while allowing the appeal has given a liberty to the AO to determine the correct profit under the percentage completion method and further given the liberty to withdraw the relief if subsequently the AO finds that the assessee has not complied with any of the requirements of section 80IB (10) of the Act. We do not find any error or infirmity in such finding of the CIT(A) which calls for no interference. - Decided against revenue.
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2021 (7) TMI 903
Exemption u/s 11 - transaction of foreign contribution - assessee has claimed expenses incurred in foreign currency outside India - Addition on no approval of the Board for exemption u/s 11(1)(c) - assessee did not register itself with FCRA nor filed return, the Assessing Officer was of the opinion that the assessee has violated the provisions of FCRA in respect of foreign contribution - addition had been made during the assessment since the order of the Board as per the proviso to section ll(l)(c) had not been received - HELD THAT:- Findings of the ld. CIT(A) show that absence of order of the Board questioned by the Assessing Officer has been found subsequently at the appellate stage which prompted the ld. CIT(A) to delete the disallowance made by the Assessing Officer. Since the order is now available, we do not find any reason to interfere with the findings of the ld. CIT(A). This ground is, accordingly, dismissed. Denial of application of income - HELD THAT:- As decided in INDO-FRENCH CENTRE FOR THE PROMOTION OF ADVANCED RESEARCH [ 2017 (9) TMI 40 - ITAT DELHI] when a transaction is between Government of India and Government of any foreign country or territory, FCRA is not attracted. When undisputedly, the transaction is a grant given by French Government to the assessee society which is a joint venture of French Government and Government of India, the transaction of transferring the grants is a transaction between both the countries as specified in the letter (supra). Furthermore, vide letter dated 08.06.1985, available addressed to Secretary General, Ministry of External Relations, Government of France by Shri Ramesh Bhandari, the then Foreign Secretary, it is categorically made clear that, the assessee society established for promotion of scientific research etc. will be exempt from payment of income-tax. we find no illegality or perversity in the findings returned by Id. CIT (A). - Decided against Revenue.
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2021 (7) TMI 902
Bogus LTCG - Addition u/s 68 - Penny stock - exemption u/s 10(38) - HELD THAT:- Denial of claim u/s 10(38) is not justified and the order of learned CIT(A) is reversed and ground of the appeal are allowed.
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2021 (7) TMI 901
Addition on account of rehabilitation expenses being capital in nature - HELD THAT:- There is no infirmity in the order of the CIT(A) in deleting the addition made by the AO on account of rehabilitation expenses as the decision of CIT(A) is in consonance with the decision of ITAT in own case for AYs 2002-03 to 2004-05. Therefore, we uphold the order of CIT(A) and dismiss the grounds raised by the revenue on this count. Addition on account of penalty suspense account - HELD THAT:- As assessee withholds some amount as per the agreement for different defaults committed by the contractor which accounted for under the head penalty suspense and once the contractor makes good for the defaults, the amount withheld is returned back to the contractor. Therefore, we are of the view that treating the recovery amount, which is made as per the agreement, for which the contractors are agreed and refunded to the concerned contractor on completion of the targeted work satisfactorily, but, the assessee failed to prove the same by way of documentary evidence when it was refunded, whereas, assessee stated that it has been refunded. Considering the facts and circumstances of the case, we restore the issue back to the file of AO with a direction redecide the issue on submission of the evidence before him by the assessee. The assessee is directed to substantiate its claim by way of producing documentary evidence before the AO. Accordingly, the grounds raised by the assessee on this issue are treated as allowed for statistical purposes. Addition on account of prospecting and leasing expenses - AO observed that the assessee had debited an amount to Profit loss account being 100% of prospecting and mining lease expenses under the head operational expenses - Since the said expenditure is covered under provisions of section 35E of the Act, the AO asked the assessee to show cause as to why the said expenditure should not be allowed only to the extent of 1/10th - Rejecting the submissions of the assessee, treating the above expenditure as capital in nature, the AO disallowed an amount - HELD THAT:- When the assessee preferred an appeal before the CIT(A), as contended by the assessee in the ground, the CIT(A) did not adjudicate this ground of appeal. Therefore, we remit this issue back to the file of CIT(A) with a direction to adjudicate the issue on merits after providing reasonable opportunity of hearing to the assessee. Thus, ground No. 2 is allowed for statistical purposes. Addition towards corporate social responsibility expenditure - HELD THAT:- CIT(A) before remitting the issue to the file of AO observed that the expenditure debited by the assessee under the head corporate social responsibility is in principle allowable. However, he observed that the AO did not examine the nature and correctness of the expenditure debited. Therefore, we also remit this issue to the file of the AO with a direction to examine the nature and correctness of the expenditure debited and decide the issue in accordance with law after providing reasonable opportunity of being heard to the assessee. Accordingly, this ground is treated as allowed for statistical purposes.
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2021 (7) TMI 900
Deduction u/s 54F denied - assessee owning 5 residential houses on the date of transfer of villa Nos.24 and 25 - contention of the assessee is that at the time of sale of the property, assessee was not in possession of more than one residential house as the villas handed over to assessee by Ambience Properties Limited are not in habitable condition and that they are semi-finished villas - HELD THAT:-Settlement has been done for extra works to be carried out by the developer. Earlier, as per the Joint Development Agreement-cum-General Power of Attorney, the assessee was supposed to receive 5 Villas, which must have been complete villas, which had been allotted and ; the settlement agreement is only for extra works to be carried out by the developer. It is also not clear that what extra works to be done. It is also not clear from the submissions of the assessee that what was incomplete in the building and what works have to be carried out in the same to be fully habitable. As per the JDA, it must have been allotted complete villas. In view of the above observations, we observe that the arguments advanced by the ld. AR are wrong and not proper that on the date of allotment the villas allotted were inhabitable conditions. The case laws relied on by the ld. AR are not applicable to the case of the assessee. Also, even before us, the assessee failed to substantiate its claim that the developer has handed over semi-finished villas with documentary evidence in this connection, we are of the view that merely writing/ mentioning that the developer has allotted semi-finished villas is not sufficient to claim as the assessee has to substantiate the same by way of documentary evidence that upto what extent the works were completed in the villas and what works are pending to get fully furnished villas - Decided against assessee.
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2021 (7) TMI 897
TP Adjustment - comparable selection - Rejection of filter which was applied by the ld. TPO wherein companies having export sales less than 75% of the total sales - HELD THAT:- We find that assessee is mainly into operations being a low risk captive service provider providing back office support services in the nature and operations of technology, oversight services and other share services to its associated enterprises. It is not in dispute that assessee s ITES segment is mainly catering to export market. Hence, there is absolutely no harm in ld. TPO applying the filter by rejecting the companies having export sales less than 75% of its total sales. The arguments of AR that the comparable companies having more domestic sales than the export sales could also be considered as comparable as per Rule 10A(a) of the Rules could be appreciated in the event, where the percentage of export sales and domestic sales are equal or the differences between them are not huge. As stated earlier in the instant case, there is no dispute that assessee in its ITES segment had been catering predominantly in export market to its AEs. Hence, it would be just and fair to have comparable companies which are also having more than 75% of its sales derived from export market. Hence, we hold that the filter adopted by the ld. TPO in this regard would be a valid filter. Rejection of filter which was applied by the ld. TPO wherein companies having related party transactions more than 25% of sales - We are unable to persuade to accede to these arguments of the ld. AR in view of the fact that any comparable company having more than 25% of related party transactions would be able to have advantage in prices negotiated between the controlled entities (that is related parties) and it becomes controlled transactions and that such negotiated advantageous pricing mechanism would certainly have a major bearing on the PLI of the said comparable company that is why the spirit of provisions of Chapter X of the Act mandate that a controlled transaction should be always comparable with uncontrolled transaction for the purpose of determination of arm s length price. Hence, it would be just and fair to apply a filter by rejecting comparable companies having related party transactions more than 25% of the operating revenues. Hence, we hold that this filter applied by the ld. TPO for the purpose of determination of arm s length price is to be considered as a valid filter.None of the observations considered by the ld. TPO were even addressed by the ld. CIT(A) in his order, as rightly pointed out by the ld. DR before us. Accordingly, the ground No.2B raised by the revenue is allowed. Rejection of filter which was applied by the ld. TPO wherein companies having consistent losses - We find that A.Y.2010-11 is the first year of operation of the assessee company. We are in agreement with the argument advanced by the ld. AR that consistent loss making companies are to be construed as those companies which are incurring operational losses year after year or atleast in the last three years including the year under consideration. We are also in agreement with the argument advanced by the ld. AR that if a particular comparable had made profits in the earlier two years and had incurred losses during the year under consideration alone, then, the said company would not fall under the ambit of persistent loss making company. Since assessee is in the first year of operation where due to heavy investments made in the initial year and claim of depreciation thereon, among other factors, the assessee is bound to incur losses and therefore, assessee indeed is justified in comparing the companies which had incurred losses during the year under consideration. Hence, the loss making company per se cannot be eliminated for the purpose of comparability. It has to be seen depending upon the facts and circumstances of each and every case. This filter applied by the ld. TPO would not be a valid filter for the purpose of comparability of benchmarking analysis vis- -vis assessee company. Hence, we hold that the ld. CIT(A) had rightly rejected this filter applied by the ld. TPO.
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2021 (7) TMI 896
Allowability of claim of deduction u/s 80IB(10) - proportionate deduction - flats whose built up area exceeded area prescribed limit of 1000 sq. fit.- CIT held, that assessee was eligible for proportionate deduction u/s 80IB(10) of the Act in respect of 70 flats out of the 106 flats sold during the year under consideration - HELD THAT:- We find that CIT(A) while deciding the issue in favour of the assessee had noted that the facts in the year under consideration were identical to that of A.Y. 2008-09 2009-10. We find that against the order of CIT(A) for A.Y. 2008-09 2009-10, the Revenue had carried the matter before the Tribunal. The Co-ordinate Bench of Tribunal in [ 2016 (5) TMI 1555 - ITAT DELHI] and vice versa, vide order dated 30.05.2016, had dismissed the appeal of Revenue. Before us, the Learned DR could not point out any fallacy in the findings of CIT(A). In such a situation, we find no reason to interfere with the order of CIT(A). Thus the grounds of Revenue are dismissed.
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2021 (7) TMI 895
Un-explained cash credits u/s. 68 - correctness of both the lower authorities' action treating its share application money as unexplained - HELD THAT:- In view of the fact that its investor entity prima facie appears as a group company only which had escaped the consideration of learned lower authorities. We therefore restore the instant sole issue back to the AO for his fresh adjudication as per law. The assessee or its authorised representative shall appear before the AO on or before 30-11-2021 and shall file all the necessary details of investor entity at its own risk and responsibility to be followed by three effective opportunities of hearing. - Assessee's appeal is treated as allowed for statistical purposes.
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2021 (7) TMI 894
Disallowance u/s 35(1)(ii) - donation made to one 'Herbicure Health Care Bio-herbal Research Foundation' as bogus - case of the Revenue that the certificate for receiving donation of that institution was cancelled on 06.09.2016 and therefore, the assessee's claim is bogus - HELD THAT:- As relying on M/S. THAKKAR GOVINDBHAI GANPATLAL [ 2019 (7) TMI 1559 - ITAT AHMEDABAD] addition made merely on the basis of the statement made during the survey proceeding and in the absence of any evidence showing the donation received by HHBRF returned back in cash to the assessee after taking commission the said transaction cannot be held to be bogus. Moreso, withdrawal of approval by the CBDT as was granted to the said HHBRF was only on 06.09.2016 i.e. much after the donation made by the assessee. Principally, even if subsequently for any reason if approval granted is withdrawn the deduction claimed cannot be denied. We, thus, are of the considered opinion that the disallowance made under Section 35(1)(ii) of the Act is not sustainable in the eye of law and hence quashed. - Decided in favour of assessee.
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2021 (7) TMI 893
Nature of expenditure - abandoned sugar projects - revenue or capital expenditure - HELD THAT:- Once the expenditure incurred for starting new business forms capital expenditure, the very analogy is to be adopted qua of the abandonment of a new project as well. We find no merit in the instant reasoning in light of the M/s. Binani Cement Ltd. Vs. CIT [ 2015 (3) TMI 849 - CALCUTTA HIGH COURT] that the impugned claim indeed forms revenue and not capital expenditure. We thus reverse both the learner lower authorities' action declining the assessee's claim for this sole reason alone. - Decided in favour of assessee.
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2021 (7) TMI 892
TP Addition - application of the TNMM as the most appropriate method - HELD THAT:- As found as an admitted position that the facts and circumstances of the instant appeal are similar to those of the earlier years. Tribunal has passed orders starting from assessment year 2009-10 to 2015-16, whose copies have been placed on record. In the lead order, which has been followed in later years, the application of the TNMM as the most appropriate method has been accepted in preference to the CUP method as applied by the TPO. After giving certain directions, matter has been sent back to the AO/TPO for deciding the issue accordingly. DR fairly conceded that the facts and circumstances of the instant appeal are mutatis mutandis similar to those of earlier years. Respectfully following the precedent, we set-aside the impugned order and remit the matter to the file of AO/TPO for deciding this issue afresh in accordance with the directions given by the Tribunal in assessee's own case for the earlier assessment years Deduction for Education Cess and Secondary and Higher Education Cess paid on income-tax while computing the Income from Business and Profession for the year under appeal - Admission of additional ground - HELD THAT:- Having gone through the subject matter of the additional ground taken by the assessee, it is apparent that the same raises a pure question of law. We, therefore, admit the same. On merits, it is found that the issue raised through the additional ground is no more res integra in view of the judgment of Hon'ble jurisdictional High Court in Sesa Goa Lt. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] in which it has been held that Education Cess is not disallowable expenditure u/s. 40(a)(ii) of the Act. Similar view was earlier taken by the Hon'ble Rajasthan High Court in Chambal Fertilisers and Chemicals Ltd. and Another [ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT] . We, therefore, direct the AO to ascertain the correct amount of education cess and then allow a deduction for it, after allowing opportunity of hearing to the assessee.
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2021 (7) TMI 890
Condonation of delay - delay of 599 days has occurred - HELD THAT:- We note that the delay in filing the appeal has not occurred on account of gross negligence of the assessee. We note that sub-section 5 of section 253 of the Act provides that Tribunal may admit the appeal or permit filing of memorandum of cross objection after expiry of relevant period, if it is satisfied that there was sufficient cause for not presenting it within that period. We note that assessee has explained the delay successfully, therefore he deserves that delay in filing the appeal should be condoned. Ex-parte order by CIT-A - HELD THAT:- As the assessee did not appear during the appellate proceedings, however, we note that ld. CIT(A) has also adjudicated the issue on merits taking into account the assessment order and statement of facts furnished with Form No. 35. The ld. CIT(A) has given five opportunities of hearing, but none appeared before him. we note that order passed by the ld. Assessing Officer is also an ex-parte order under section 144 therefore we note that assessee could not plead his case before the ld. Assessing Officer. We also note that during the assessment stage, the ld. Assessing Officer has issued several notices to the assessee, but assessee did not make the compliance and therefore, the ld. Assessing Officer has passed the ex-parte order under section144 of the Act. We note that in assessee's case the evidences and books of accounts are to be verified at primary stage, therefore, we are of the view that the said lis should be remitted back to the file of the ld. Assessing Officer for fresh assessment. Hence, we set aside the order of Ld. CIT(A) and remit the issue back to the file of the assessing officer for de-novo adjudication.
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2021 (7) TMI 889
Addition u/s 68 - income of the assessee from the commodity profit - AO made the addition observing that the brokers did not come up to verify the transactions - HELD THAT:- AO was required to make proper enquiries before reaching to the conclusion that the transaction of commodity profit was bogus - the interest of justice will be well-served if the matter is restored to the file of the Assessing Officer with a direction to make further necessary enquires to arrive at a correct conclusion in this respect by using the powers of summoning and attending of witness etc. as per the provisions of Income Tax Act - the impugned order of the CIT(A) is set aside and the matter is restored to the file of the Assessing Officer with the above stated directions. Appeal of the assessee allowed for statistical purposes.
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2021 (7) TMI 888
Capital gain arising from transfer of agricultural land - Addition u/s 68 in respect of agriculture income - HELD THAT:- Section 10(1) of the Income Tax Act provides that agricultural income is not to be included in the total income of the assessee. The result is that agricultural income is not only exempt from tax but, under the scheme of Income Tax Act, is also to be excluded in computing the total income on the basis of which the rate applicable to the taxable income is determined. Since 1973 the annual Finance Act has superseded this scheme by providing for inclusion of agricultural income in the total income for the limited purpose of determining the rate applicable to the taxable income. These provisions are constitutional. Agricultural income has to be exempted from tax under the Income Tax Act because Parliament has no power under the Constitution to levy tax on agricultural income - Parliament has power to levy tax on capital gain arising from transfer of agricultural land. The State legislatures are entitled to impose a tax on any of the categories of agricultural income which are exempted from tax under Income Tax Act. As based on the land holdings and land taken on rent basis to do agricultural activities, the farmers have justified the agricultural income earned by them by furnishing evidences such as, land holding records in the form No. 7, 12, 8-A and 6 etc. Besides, addition was sustained by the Ld. CIT(A) based on the statement of Shri Gajanand B. Patel without providing an opportunity to cross examine, wherein we noted that addition cannot be sustained only on the basis of the statement of Shri Gajanand B. Patel. We also note that CIT(A) has sustained the addition in the hands of all the eighteen farmers based on the statement of Shri Gajanand B. Patel without providing an opportunity to cross examine the said statement hence conclusion reached by the CIT(A) based on the statement of Shri Gajanand B. Patel is not acceptable. We have preceded and for the reasons alluded, we are of the opinion that addition should be deleted.
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2021 (7) TMI 886
Unexplained cash deposits in bank accounts - assessee claimed to be received cash gift from his father - HELD THAT:- The true transaction supported with the evidences cannot be denied in absence of any other contrary evidences on record. Assessing Officer could not revert facts of date of cash deposits on 27.07.2013 in the bank account which was supported by the sale agreement dated 25.07.2013, bank statement of the assessee and also by the affidavit of his father and statements of his father. The lower authorities have not stated that these documents are after thought and after the date of deposits. The assessee has furnished various evidences as two sale agreements dated 25.06.2013 and 25.07.2013 respectively, affidavit, statements of father recorded by the AO. All these cannot be said self-serving evidences and the AO nowhere found any contradiction in these evidences. Thus, here the assessee has not only proved source of cash deposit but also source of source. When the donor had been examined by the Assessing Officer himself admittedly who had given the money to the assessee which not disproved by the authority. The Assessing officer has not found any contradiction in the affidavits, statements and agreements etc. The assessee has also proved, identity (not denied by the AO), genuineness which the ld. AO not disputed, Capacity has also been proved by the assessee by filling various material evidences as above and has not been doubted as he did not speak a single word on the capacity of the donor. The persons fully explained the sources of gift given by him with the material evidences We are of the view that the assessee has proved the source of source of deposit in his savings bank account, therefore, we direct the A.O. to delete the addition made qua this issue. - Decided in favour of assessee.
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2021 (7) TMI 885
Correct head of income - Addition of severance compensation - Addition u/s. 56(2)(vii) - maintainability of the appeal - second round of proceedings also accomplished - Whether receipt in question could neither be charged to tax under the head 'Profits Gains of Business' u/s. 28(iia) of the Act nor by way of 'capital gains' u/s.45 - Whether second situation did exist on the facts so as to invoke the provisions of Section 28(iia) or Section 45? - HELD THAT:- This Tribunal does not have the power of enhancement nor can it take back the benefit already granted by the AO to the assessee. As stated earlier, the AO sought to tax only sum to the extent of ₹ 174,20,35,742/- u/s. 56(2)(vii) of the Act and the same was again reiterated in the remand report furnished before the ld. CIT(A) - this ground raised by the Revenue seeking to tax the entire sum of ₹ 200 crores cannot be entertained at this stage before us. Moreover, this ground also contradicts the Form No. 36 filed by the Revenue. Upon being afforded the opportunity to explain the maintainability of the appeal, the Revenue filed a note dated 30/10/2018 along with revised grounds of appeal but they stood by their Form 36 which was filed on 06/11/2019. In Column 7 of the said Form, the Revenue has clearly stated that the disputed addition is ₹ 174,20,35,742/- and not ₹ 200 crores as claimed in this ground (i). For the reasons as aforesaid, this ground of appeal is held to be not maintainable. Revenue without prejudice to one another seems to be an attempt to make fishing and roving explorations to bring to tax the compensation under several Sections of the Act. Having had two opportunities i.e., of the first second round of proceedings, the AO/Revenue is still not clear as to under which specific Section does it seek to tax the compensation received by the assessee. Revenue has raised several sections to tax such compensation inter alia including such provisions which was never the case of the AO as well. It appears that the Revenue wants an academic debate before this Tribunal and explore the possibility of taxing the compensation under each of the five specified heads of income. As held Revenue cannot travel beyond the case of the AO. He is required to restrict himself to the averments made by the AO and support or strengthen it, but nothing beyond. CIT, DR's averment that, this stand taken by the Revenue in the first round of appeal were the private and personal views of the counsel appearing on their behalf and that this statement was made without seeking their approval and for that reason they are legally permitted to raise this issue again before this Tribunal. If that had been the case that the Revenue was not agreeable to this stand, nothing prevented them from agitating this before the higher appellate forum being the Hon'ble Calcutta High Court or file a Miscellaneous Application u/s. 254(2) in this regard. Admittedly, the Revenue did not pursue either of the remedies available to them. Consequentially therefore, this stand of the Revenue before the Tribunal that the compensation was not taxable u/s. 56(2)(vii) has since attained finality and the legal effect is that the AO's order charging to tax, the receipt u/s. 56(2)(vii) also goes. Hence, the pith and substance that one can draw from this event, that consequent to the order dated 16/11/2018 passed by this Tribunal in the first round of appeal proceedings, against which no appeal was preferred by the Revenue, there is no addition in existence u/s. 56(2)(vii) of the Act of ₹ 174.20 crores in the hands of the assessee for the relevant AY 2014-15. As rightly held by the ld. CIT(A), since the Revenue had conceded this ground before this Tribunal, the AO could not have agitated this issue again in the remand proceedings and that the stand on this issue had become final. Estoppel indeed applies on these facts. For the reasons aforesaid, we agree with the contention of the ld. AR of the assessee that ground (ii) taken by the Revenue seeking to tax the compensation u/s. 56(2)(vii) is unsustainable in law and hence is not being entertained. Taxability of compensation u/s. 28(iia) or 45 - In the facts of the present case also, the Revenue has clearly failed to lay down whether the second situation did exist on facts so as to test the provisions of Section 28 or Section 45 of the Act. Instead the Revenue's case before the ld. CIT(A) continued to be the same as the original assessment order i.e. the compensation was taxable u/s. 56(2)(vii) of the Act. Hence, without laying down the foundational facts, the Revenue cannot be permitted to re-urge taxability under Section 28 or Section 45 of the Act. Revenue's claim of taxing such receipt u/s. 17(3)/56(1) was neither their case in the original assessment order or the first round of appeal proceedings or in the second round before the ld. CIT(A). These grounds raised by AO/Revenue shows that they have not still made up their mind as to which section of the Act is attracted in the facts of this case and exposes the lack of application of mind. For the reasons as set out in Paras 11.2 to 11.4 above, these grounds raised by the Revenue being alien to the case of the AO is held to be not maintainable. Addition made in the original assessment order u/s. 56(2)(vii) ceased to exist consequent to the order passed by this Tribunal in the first round on 16/11/2018. Hence, there was no surviving addition in existence to the returned income of the assessee. No further appeal was preferred by the Revenue on this aspect and therefore this particular issue had crystallised and attained finality. Further even before the ld. CIT(A) in the second round, it was never the case of the AO that the second situation prevailed or that addition was required to be made under Section 28(iia)/45/17(3)/56(1) of the Act. Instead the AO remained firm on the stand taken in the original assessment order u/s. 56(2)(vii) of the Act. Neither did he brought any material/fact through his remand-report called for by the Ld. CIT(A) in the second round to facilitate/make-out a factual basis for the Ld. CIT(A) to bring the receipt in the teeth of the charging section under the Act or under Section 28/45/17(3)/56(1) of the Act. Thus we note that the AO failed to bring any facts on record in front of the Ld. CIT(A)[ second round] to fit in the second situation as stated by him in the assessment order (supra) and for which precise reason this Tribunal remitted the matter back to Ld. CIT(A) who enjoyed coterminous powers as that of AO. In the absence of material/facts as required to bring the receipt in the teeth of section 28(iia) or under section 45 of the Act, the Ld. CIT(A) didn't made any addition or raised any demand consequent thereto was raised upon the assessee. Even Column (7) of Form 36 filed by the Revenue shows that they are disputing addition which was made u/s. 56(2)(vii) of the Act (which has already been conceded and given up in first round) and not the purported sum of ₹ 200 crores under Section 28(iia)/45/17(3)/56(1) of the Act. This shows the self contradictory stand of the AO/Revenue - Decided in favour of assessee.
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2021 (7) TMI 884
Validity of reopening of assessment u//s 147 - information received from third party - non independent application of mind - HELD THAT:- As per the assessment order, it is clear that the assessee's case is reopened on the basis of the information received from the Director of Investigation and without applying his mind, the AO has reopened the case of the assessee. - Decided in favour of assessee.
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2021 (7) TMI 883
Unexplained cash - search action at the residence and lockers of the assessee and his wife cash was found from residence and locker at Vijay Bank and at Central Bank of India held jointly by the assessee and his wife - HELD THAT:- CIT(A) has recorded the finding of the fact that imprest balance of ₹ 5.00 lakhs with Sri Suresh Garg is duly recorded in the combined daybook of M/s MDL and MFL maintained by the cashier , which has been seized during the course of the search. This factual finding has not been disputed by the Revenue. The daybook has been maintained in regular course of the business and therefore evidentiary value of the same cannot be ignored. On the date of the search, cash in hand in cash book of M/s MFL at Paota Sahib was of ₹ 5, 40,401/-, whereas physical cash of ₹ 1, 15, 412/- was only found from the factory premises of M/s MFL and M/s MDL. Thus, there was a physical shortage of the cash at the premises of the companies. The revenue has not pointed out any other application of the cash, which has not been found physically. The assessee has explained transfer of money from Sri Suresh Garg to the assessee by way of supporting evidences - DR has not brought on record any documentary evidence including statements u/s 132(4) of the Act of the assessee, or sh Suresh Garg or personals of the company M/s MFL to contradict the claim of the assessee of transfer of money from sh Suresh Garg to the assessee. Similarly, regarding the availability of Pin money and savings the assessee has explained with the help of cash flow statement supported by assessment orders of assessee, his wife and their HUF, copies of their respective balance sheets and their cash withdrawal as reproduced by the Learned CIT(A) in para 4.1(m) of the impugned order. No reason not to accept availability of cash in the hands of the assessee and his wife to explain the cash has been made in the hands of the assessee. - Decided against revenue. Addition of unexplained foreign exchange - CIT-A deleted the addition - HELD THAT:- Revenue has failed to point out any error in the finding of the Ld. CIT(A) on the issue in dispute except the issue of the additional evidences, which has already been dealt by the Tribunal in order sheet dated 05/10/2009. In our opinion, the assessee has discharged his onus of explaining the source of currency found from his premises and the Revenue has not pointed out any fault in the evidences filed by the assessee. In such circumstances, we uphold the finding of the ld CIT(A) on the issue of dispute. Addition on account of unexplained investment in the shares - HELD THAT:- AO has not attempted to examine the source of investment in the shares of the companies. The Assessing Officer has neither conducted any inquiries form Dr Shamsher Prakash. Before the Ld. CIT(A), the assessee has provided details of source of investment by Dr Shamsher Prakash and thus the assessee has discharged his onus. Thus where source of investment has been duly explained through banking transaction from the account of Sh Shamsher Prakash, the investment in shares cannot be held as unexplained investment of the assessee. The finding of the Ld. CIT(A) on the issue in dispute is well reasoned and accordingly, we uphold the same. Addition on account of deposit in City Bank, Singapore - CIT- A deleted the addition - HELD THAT:- It is the onus of the assessee to substantiate its claim of entries of investment in fixed deposits or mutual funds and reinvestment of liquidation of the same in the bank statement under reference. In view of the above facts and circumstances, we feel appropriate to restore this matter to the file of the Assessing Officer for examining application of the peak balance theory and addition to be made for deposits in the bank statement on the basis of the documentary evidences which would be furnished by the assessee before him. If the amount of USD 16, 953 and USD 12, 430 8R are found to be credited as a result of liquidation of earlier investment made out of the same bank statement, then following the peak balance theory no addition could be made to the extent of original investment amount in such mutual funds etc - This ground of the appeal of the Revenue is allowed for statistical purposes. Unexplained expenditure - HELD THAT:- Narration of the items includes Tin plates, spoons, Singh etc. but the document does not speak whether the number(s) represent quantity or currency. In our opinion, even if we presume that this document belongs to the assessee and the assessee has failed to rebut presumption under section 132(4A) of the Act, but the document nowhere reflects whether it is a purchase of the goods or merely estimate. The document is not a bill of purchase andit mentions only certain items/name and certain figures against them. The document is dumb as far as indication of purchase or investment by the assessee or the number as currency. In our opinion, to treat those figures as purchase or investment by the assessee, is based on the presumption, without any corroborating evidence, and therefore Ld. CIT(A) is justified in deleting the addition. Unexplained investment - investment/expenditure recorded in concerned loose paper was different from alleged investment by Dr Shamsher Prakash - CIT-A deleted the addition - HELD THAT:- We find that first two dates mentioned in the loose paper is date next to what mentioned as remittance date. The amounts of these two dates are also approximately matching. The date and amount mentioned against NRO in the loose paper is matching exactly with the remittance from NRO account received in the bank account of M/s Mahaan Protein Ltd. In our opinion, matching of the date and amount of investment from NRO account establish that other entries in the loose paper are also related to investment by Dr Shamsher Parkash, because in case of other entries in loose paper , the amount are approximately equivalent to INR ( Indian rupees ) equivalent of amount remitted by Dr Shamsher Prakash. In our opinion, the assessee has discharged his onus of rebutting the presumption by the Assessing Officer under section 132(4A) of the act. We also find that the Assessing Officer has not been able to identify any other investment made by the assessee despite carrying out thorough search of his residential and official premises. In the circumstances, the finding of the Ld. CIT(A) on the issue in dispute is well reasoned and we uphold the same. - Decided against revenue. Unexplained investment in jewellery - as during the course of search action at the residence of the assessee, a loose paper containing some amount against rough estimate by the jeweller has been found, which is inventorised - HELD THAT:- We find that no where it is mentioned that those items of the jewelry have been actually purchased by the assessee. There is no mention of any payment made by the assessee also. The addition cannot be made only on the basis of the existence of alleged well-known practice presumed by Assessing Officer. AO was required to bring on record name of the jeweller and corresponding purchase bills if any before making addition in the hands of the assessee on the basis of this loose paper. In our opinion, the Assessing Officer has squarely failed in bringing any such documentary evidence and thus no addition can be made without evidence of actual purchase of jewellery by the assessee. Even if we presume for a moment that the jewellery listed in the loose paper was purchased by the assessee, same is than included in the list of the jewelry found from the premises, and therefore no separate addition on the basis of this loose paper is required. In view of the above facts and circumstances, the finding of the Learned CIT(A) on the issue in dispute is upheld. Addition on account of unexplained deposit - burden of proof was on the assessee that the amount was the part of the disclosed asset or belong to some other person and in failure to do so, the AO is justified in making the addition - CIT-A deleted the addition - HELD THAT:- We find that there is no mention of the name of the assessee. On this paper card No. has been mentioned as 8496. The document is on the letterhead of some bank having name as Bank One . AO has not carried out any enquiry from the relevant bank and ascertained to whom this card or the transaction relates. Making addition on the basis of incomplete information, only on the basis of the guess work is not justified in cases of search assessment. No infirmity in the finding of the Learned CIT(A) on the issue in dispute and accordingly, we uphold the same. The ground of the appeal of the Revenue is accordingly dismissed. Block assessment - Unexplained gifts - undisclosed income to be made as per section 158BA(2) - HELD THAT:- We find that gifts received were appearing in books of accounts and disclosed for the purpose of Income-tax return by the assessee and no incriminating material much less any material related to such gifts was found during the course of the search . The Ld. CIT(A) has relied on the decision of the Hon ble Delhi High Court in the case of Ravi Kant Jain [ 2001 (3) TMI 52 - DELHI HIGH COURT ] wherein it is held that block assessment is not substitute for regular assessment. We do not find any error in the order of the Learned CIT(A) in following decision of the Hon ble jurisdictional High Court. No error in the order of the Learned CIT(A) on the issue in dispute and accordingly uphold the same. Unexplained expenditure on foreign travel - HELD THAT:- It is settled law that addition under block assessment can be made for undisclosed income only as laid down under section 158BA(2) of the Act read with explanation thereof - finding of the Learned CIT(A) that addition could be made in block assessment only on the basis of the evidence found during the course of the search or inquiries made in relation to material found during the course of the search, is justified, which is also supported by the binding precedents of Hon ble Delhi High Court in the case of Ravi Kant Jain[ 2001 (3) TMI 52 - DELHI HIGH COURT] Further, the Ld. CIT(A) has also held that the assessee has discharged onus of explaining the source of the expenditure, which has been incurred mostly by the business concerns, in which assessee is director. Foreign travel expenses in relation to his wife/family has been added by the Assessing Officer on the basis of presumption that wife/family must have travelled along with the assessee during foreign visit. In our opinion, no such addition could be made merely on the basis of presumption without bringing any evidence on record. In view of these facts and circumstances, we uphold the finding of the Ld. CIT(A) on the issue in dispute. The ground of the appeal of the Revenue is accordingly dismissed. Unexplained investment in household goods - HELD THAT:- AO has simply rejected the claim of the assessee of year and amount of the investment and valued at current market price. Each item must have been having detail of manufacturing and their year of sale could have been easily verified from the respective manufacturer or distributor or dealer of those goods. No attempt has been made by the Assessing Officer for verifying the year of purchase of these goods by the assessee and has simply valued the price of the goods at current market value. In some cases , the assessee has also supported investment by way of the bills , which are also not been accepted by the Assessing Officer. Assessing Officer has also not considered the household withdrawal of the assessee and his family members. Where investment is recorded in the books of accounts of companies in which assessee is director, the source of investment stands explained and hence , no addition for unexplained source can be made in the hands of the assessee. In view of the above, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly we uphold the same.
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2021 (7) TMI 882
Validity of reopening of assessment u/s 147 - addition of transactions in HSBC Bank, Geneva - co-ownership in bank account with ex-wife - assessee argued that amendment to section 147 would not be applicable to the Appellant s case and therefore the re-assessment was not valid - HELD THAT:- As per reasons recorded, the assessee has invested along with his ex-wife in HSBC Bank, Geneva and the transaction with HSBC Bank were not disclosed to the department. However, it has not been stated that the said investment in HSBC was out of income which escaped assessment. AO also has not mentioned in the aforesaid reasons that he was satisfied that the above income escaped assessment. He simply relied on the information received in his possession to come to the conclusion that this HSBC bank account belonged to the assessee. In the present case, the AO simply relied upon the information received by him and stated that the investment in assessee s joint account with his ex-wife with HSBC Bank which has not been disclosed in the return of income filed by the assessee is the income which escaped assessment in the hands of assessee - AO simply acted upon the information and did not apply his own mind to the information to arrive at a belief independently that on the basis of material before him to come to the conclusion that income has escaped assessment - it is a joint account of assessee with his ex-wife, Ms. Vandana Virwani with HSBC Bank, Geneva and the assessee solely cannot be considered as owner of the account so as to bring the entire transaction in that account in the hands of the assessee. AO has just suspicion in his mind and it is trite law that an assessment cannot be reopened merely on the basis of suspicion and initiation of reassessment proceedings u/s. 148 of the Act on the basis of this aspect was invalid in the eye of law. AO framed assessment on protective basis in AY 2002- 03 which clearly shows that he was not sure as to whether assessee was having income which escaped assessment AO is not sure whether income has to be assessed in the hands of assessee or his ex-wife. Next, he was not sure in which assessment year it has to be taxed, whether AY 2002-03 or 2003-04. In addition, he is not sure who is the exact owner of this bank account. HSBC bank account is a joint account with assessee s ex-wife. It does not lead to the conclusion that the assessee is the sole owner and beneficial of the said bank account in order to bring this deposit as taxable in the hands of assessee as the owner of the account. The onus of proving lies with the department. This legal proposition has been laid down in the case of CIT v. K. Chinnathamban [ 2007 (7) TMI 204 - SUPREME COURT] wherein it was held that where a deposit stands in the name of a third person and where that person is related to the assessee, then in such a case the proper course would be to call upon the person in whose books the deposit appears or the person in whose name the deposit stands to explain such deposit. AO reopened the assessment merely on suspicion and surmise, without there being any positive material in his possession to prove that the assessee is the owner of the bank account or having beneficial interest in this bank account. Therefore, we are of the opinion that the reopening of assessments are bad in law, which cannot be sustained. Accordingly, we quash the reassessments. - Decided in favour of assessee.
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2021 (7) TMI 881
Revision u/s 263 - assessee was selected for scrutiny assessment as per the Computer Aided Scrutiny Selection ( CASS ) for two fold reasons, viz. (i). that the assessee trust had received substantial amount of foreign donations;and (ii). that the assessee trust had claimed to have incurred huge amounts on charity - HELD THAT:- We hold a strong conviction that in a case where the A.O in order to satisfy himself about the genuineness and veracity of a claim raised by the assessee had raised a query and called for certain details/information, then, the acceptance of such claim dehors furnishing of the reply and the requisite details that were called for by the A.O, can only be stamped as acceptance of the claim without making any verification. It can safely or in fact inescapably be gathered that it is not a case of an inadequate verification as had been canvassed by the ld. A.R, but a case where the assessee s claim had been accepted without carrying out any verification. We are unable to persuade ourselves to subscribe to the claim of the ld. A.R that the CIT had exceeded his jurisdiction, and thus, had wrongly observed that as the A.O had accepted the assessee s claim for expenditure of ₹ 11.88 crores without making necessary verifications, therefore, the order passed by him u/s 143(3), dated 28.06.2017 was erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Sec. 263. A.O had failed to carry out verifications as regards the expenditurer claimed by the assessee to have been incurred towards furtherance of its objects, therefore, the order passed by him u/s 143(3), dated 28.06.2017 was erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Sec. 263. We shall deal with the contention of the ld. A.R that now when the A.O had recognized the assessee s right to exemption of income being a charitable institution, thus, in the absence of any prejudice cause to the revenue, the CIT was precluded from exercising his revisional jurisdiction. We have given a thoughtful consideration to the sad contention of the ld. A.R and are unable to persuade ourselves to subscribe to the same. As the assessee s claim of having incurred the expenses towards furtherance of its charitable objective; and also its claim of having received donations, both local and foreign, had been accepted by the A.O without carrying out necessary verifications, therefore, the aforesaid contention of the assessee is devoid and bereft of any merit, and thus, cannot be accepted. No infirmity in the order passed by the CIT under Sec. 263 of the Act, wherein he had after rightly observing that the assessment order u/s 143(3), dated 28.06.2017 had been passed by the A.O in a perfunctory and routine manner without any verification, cross checks or test checks, had thus, set-aside the order with a direction to the A.O to conduct a fresh assessment, uphold his order - Decided against assessee.
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2021 (7) TMI 880
Disallowance u/s 14A r.w.r. 8D - suomoto disallowance by assessee - HELD THAT:- As following the decision of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd.[ 2018 (3) TMI 805 - SUPREME COURT] and the decisions of the Hon'ble Jurisdictional High Court referred to above , we direct the Assessing Officer to delete the disallowance made u/s. 14A r.w. Rule 8D of I.T.Rules for the assessment years 2012-13 and 2013-14 by accepting the suomoto disallowance of expenditure considered by the assessee for earning exempt income for the purpose of computing the disallowance u/s. 14A r.w. Rule 8D of I.T.Rules. Additional ground No.1 filed by the assessee is allowed. Deduction in respect of Education Cess, Secondary and Higher Education on Income-tax - HELD THAT:- This issue is squarely covered by the decision of the Hon'ble Bombay High Court in the case of Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] where in held that Education Cess and Higher and Secondary Education Cess are liable for deduction in computing income chargeable under head of profits and gains of business or profession . Respectfully following the said decision of the Hon'ble Jurisdictional High Court allowing the additional ground No.2 of grounds of appeal, we direct the Assessing Officer to compute the income of the assessee after allowing deduction in respect of Education Cess, Secondary and Higher Education Cess on Income-tax. Expenditure incurred on Employee Stock Option Plan (ESOP) - HELD THAT:- We observe that the issue is decided in favour of the assessee by the Special Bench of the Tribunal, Bangalore Bench in the case of Biocon Ltd [ 2013 (8) TMI 629 - ITAT BANGALORE] and affirmed by the Hon'ble Karnataka High Court in the case of CIT v. Biocon Limted [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] . Thus, respectfully following the said decision we direct the Assessing Officer to allow the expenditure on Employee Stock Option Plan. Additional ground No.3 of the assessee is allowed.
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2021 (7) TMI 879
Assessment u/s 153A - share application money received - HELD THAT:- As material in respect of investor companies were admittedly found during the course of first search and therefore, it cannot be used against the assessee for making the addition in the assessment proceedings consequent to the second search and therefore, the very basis of addition on account of share application money does not survive. Hence on account of share application money stands deleted and consequential addition of brokerage @. 5% on such amount of share capital also stands deleted. Without prejudice, we have examined the nature of the material found and we find that the same cannot be said to be incriminating. The Hon ble High Court of Delhi in the cases of RRJ Securities [ 2015 (11) TMI 19 - DELHI HIGH COURT] and Index Securities Pvt. Ltd. [ 2017 (9) TMI 585 - DELHI HIGH COURT] and in many other decisions have held that blank signed transfer forms and blank cheque books do not constitute incriminating material and they do not lead to any inference of escapement of income and therefore, cannot under any stretch of imagination be said to be incriminating documents. Therefore the addition in respect of share capital cannot be made for the completed assessment years i. e. AY 2007-08 to 2011-12 in absence of any incriminating material found in search. Addition u/s 68 - As in respect of share capital, the ld. AR repeatedly stated that as far as possible, all the documentary evidences including register of minutes of meeting of shareholders were produced for verification and the copies of the same were also filed. All the documents establishing the genuineness of the transaction including the bank statements, board resolutions, Certificate of Chartered accountants etc. are attached.The assessee has also claimed to have filed evidences relating to the source of the share application money. All these evidences have neither been rebutted nor has any inquiry led to any inference that these are mere paper work and have been found to be bogus. Based on these evidences Ld. CIT (A) has deleted the additions in all the yearas on this score. Under these circumstances, we have no hesitation in holding that both in law and on facts, the above addition is not correct and deserves to be deleted - Decided in favour of assessee. Addition of cash salary under section 69C - Assessee argued that proposed cash was also found during the course of first search and therefore, cannot be put to use for making assessment consequent to the second search and even otherwise, according to the appellant, the document is dumb as it clearly states that the salary was only proposed and never paid - HELD THAT:- Looking to the nature of documents, we have no hesitation in holding that based on these documents this expenditure cannot be added as income from undisclosed sources and therefore, no addition can be made. Addition relating to purchase of scrap and unaccounted investment - HELD THAT:- These additions have been made on the basis of gate registers, documents from scrap dealers, bilties from transporters, etc. found in search conducted by the Excise Department. There is no reference to any other material found during the search by Income-tax department on the assessee. The only reference and basis of addition were proceedings initiated under the Central Excise Act. Assessee brought to our notice the order of the Principal Commissioner, Central Excise dated 19. 06. 2018 and order of Hon ble Customs, Excise and Service Appellate Tribunal dated 27. 03. 2019 which was received after the order of CIT(Appeal). The assessee got no opportunity to file this order which clearly shows that all the additions made by the Assessing Authority of Excise were deleted by the Principal Commissioner, Central Excise and Customs, Excise and Service Appellate Tribunal. Since the entire additions made by the AO were based on the additions made by the Adjudicating Officer of Excise and the said additions were finally deleted by the Principal Commissioner, Central Excise and Customs, Excise and Service Appellate Tribunal, there is no question of the same addition to be sustained. Hence this addition has also been deleted. The assessee had also sought cross examination of the various persons referred to in Excise order which has not been provided, the addition is also against the principles of natural justice. On this count also, the addition deserves to be deleted. Payment of land at Chhattisgarh - Addition made on the basis of evidence found during the course of survey - HELD THAT:- There is nothing to show that the payment was made outside the books of account. Assessee also stated that the transaction pertaining to difference of ₹ 5,56,000 is in respect of purchase of land and has been duly recorded in books and the transaction pertaining to difference of ₹ 732,150 pertains to M/s Prakash Thermal Power Ltd which is a group concern of the assessee company and the amount is duly accounted by it. The Ld. AR for the assessee also stated that theLd. AO has incorrectly totalled the addition to ₹ 23,99,260 instead of ₹ 12,88,150.Therefore, the addition stands deleted and the assessee gets relief. Addition on account of shifting of profits from the steel unit to the power unit - addition based on material found in the first search - HELD THAT:- Tax has been paid on book profits and any change in sale price will not impact the book profits.Assessee has paid tax of ₹ 42. 81 crores on book profits of ₹ 251. 89 crores. Even if the allegation of the Ld. AO is believed to be true, even then there will be no change in the tax liability of the Assessee. The book profits will remain unchanged as the profit of power division will reduce but profit of steel division will increase by the same amount. The tax liability as per normal provisions would still be less than tax as per MAT. Assessee submitted the same before the Ld. AO and even filed the computation before and after considering the addition made by the Ld. AO. However the Ld. AO failed to consider the same. CIT (A) has considered this reply and deleted the addition stating that Assessee has paid tax under Mat and no demand is created by AO after reducing deduction under 80IA of act hence no tax benefit is achieved by the Assessee. The facts and submission given above clearly proves that there is no instance to show any shifting of profit and therefore, we delete this addition. The Assessee gets relief of ₹ 76,35,72,743 and ₹ 52,80,20,878 in the AY 2010-11 and AY 2011-12 on this issue.
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2021 (7) TMI 877
Penalty u/s 271(1)(c) - Addition of 12.5% of the bogus purchases - HELD THAT:- It is now well settled that because the assessee has not contested the quantum addition made by the Assessing Officer, the penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of income by the Assessing Officer is unsustainable in the eyes of law. Assessing Officer imposed penalty under section 271(1)(c) of the Act on estimation basis without adducing any evidence on record for concealment of income. Penalty under section 271(1)(c) of the Act is liable to be imposed only where the assessee has concealed its particulars of income or furnished inaccurate particulars. Action of making addition on ad hoc basis does not result into imposition of penalty u/s 271(1)(c) of the Act and hence cannot be termed as either concealment or furnishing of inaccurate particulars of income. We find support from the series of decisions by different High Courts as well the decision of the Co ordinate Benches of the Tribunal, wherein it was held that when addition is made on estimate basis, penalty is not sustainable in the eyes of law - Decided against revenue.
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2021 (7) TMI 874
Status of a trust/AOP - Valid status of trust - revocable trust - allegation that trust was a colourable device to evade taxes - Holding the trust as a non-revocable trust - Revocation of Contributions Taxability of the Income at the right place and in right hands - Holding assessee trust as an indeterminate Trust (discretionary trust) - HELD THAT:- Since the issue has already discussed and decided in the case of M/s. Scheme A1 of ARCIL CPS 002 XI Trust [ 2020 (9) TMI 465 - ITAT MUMBAI] the facts narrated above is quite similar to the facts of this case, therefore, we are of the view that the assessee has revocable trust and the income is liable to be treated in the hands of the beneficiary. Accordingly, we set aside the finding of the CIT(A) on this issue and decide this issue in favour of the assessee.
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2021 (7) TMI 871
Addition as speculative income - value shown in the contract note for sale was different than the value shown in Form 10DB in respect of transactions of shares of Ceat Limited - value of sale of equity shares of Ceat Limited - AO considered the sale consideration of equity shares as per the computation for calculating Securities Transaction Tax - assessee's contention that the actual sale consideration has to be taken and not the value considered for computing STT, was rejected - HELD THAT:- Conclusion arrived by the learned AO that the assessee suppressed the value of sales by comparing two figures is erroneous. Further there is no difference in the turnover of Ceat Limited between the books and the contract notes. It is only for the purpose of calculation of Securities Transaction Tax (Form 10DB) based on VWAP (Volume Weighted Average Price), two different values of Sales are appearing in the Contract Note - Decided in favour of assessee.
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2021 (7) TMI 870
Levy of penalty u/s 271(1)(c) - Defective notice - non specification of charge - Notice as barred by limitation u/s 275 - whether AO has erred in imposing penalty under section 271(1)(c) without specifically pointing out in the show cause notice, whether the penalty was proposed on concealment of particulars of income or for furnishing inaccurate particulars of income - HELD THAT:- In the instant case, the ld CIT(A) has passed the order on 19.09.2011 and the penalty order has thereafter been passed by the AO on 22.03.2013 which is well within the limitation period of one year from the end of financial year in which the order of the ld CIT(A) has been received by the Commissioner. In the result, the contention so advanced by the ld AR in so far as the impugned order is barred by limitation cannot be accepted. Defect in the show-cause notice issued u/s 271(1)(C) - Uncertain charge at the time of initiation of penalty proceedings is followed by a certain charge and definite finding at the time of passing the penalty proceedings as to the concealment of particulars of income and the penalty order so passed cannot be vitiated on the ground of uncertain charge and non-application of mind as so contended by the ld AR. Unsecured loan receipts - Assessee has submitted before the Tribunal that the payment have been received through cheque, all creditors have confirmed the amount and filed their confirmations, all the transactions have been entered in the books of accounts and bank balance show sufficient funds and basis such contentions, the Tribunal had remanded the matter to the file of the AO with the direction that where the assessee has filed the confirmations before the AO, then the AO in case of any doubt will issue summons to these creditors to verify the correctness thereof. We find that there is no further enquiry or summons issued by the AO to the specified creditors and the findings as given in the original order were reiterated by the AO in the order passed pursuant to directions of the Tribunal. In the above background, we therefore agree with the contention of the ld AR that once the explanation has been submitted by the assessee along with necessary confirmation and other evidences, the onus shifts on the AO to disprove the same by bringing contrary evidence on record and which in the instant case, has not been disproved by the AO and therefore, mere non-acceptance of the explanation so submitted by the assessee can be made a basis for addition in the quantum proceedings, however, the same cannot result in levy of penalty u/s 271(1)(c) No other contention has been advanced on merits of levy of penalty an addition of unexplained/bogus credits and unexplained advances against flat bookings. Hence, the levy of penalty on such addition are hereby confirmed. - Decided partly in favour of assessee.
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2021 (7) TMI 868
Carry forward of unabsorbed depreciation and set off against the income which is beyond the period of eight assessment years - HELD THAT:- Having regard to the submissions made on either side, following the ratio laid down in Harvey Heart Hospitals Ltd. [ 2021 (1) TMI 296 - MADRAS HIGH COURT] and Sanmar Speciality Chemicals Ltd.[ 2020 (9) TMI 770 - MADRAS HIGH COURT] the question of law is decided against the Revenue and in favour of the assessee as held unabsorbed depreciation pertaining to the assessment year can be carry forward and adjusted after the lapse of eight assessment years in view of the section 32(2) as amended by the Finance Act, 2001. - Decided against revenue.
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Customs
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2021 (7) TMI 916
Seeking immediate release the goods without charging any demurrage or rent charges - auction of seized goods ordered, despite deposit of duty and detention certificate for waiver of rent/demurrage charges - HELD THAT:- The matter requires consideration. Issue notice to respondent no. 3, returnable with five weeks. Steps may be taken within a week. All the respondent may file their counter affidavits within four weeks. Rejoinder affidavit may be filed within one week thereafter. List thereafter.
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2021 (7) TMI 913
Seeking refund of dual payment made - applicability of Section 19 of the Lighthouse Act, 1927 - allegation is that the expression used in the said section is, excess payment and, not dual payment - HELD THAT:- There are no merits in the writ appeal warranting interference, for the reasons that the writ court has considered the statutory provisions, and has rightly come to the conclusion that Section 19 of the Lighthouse Act, 1927 cannot be made applicable to the case on hand, as the expression used in the said section is, excess payment and, not dual payment , made by the petitioner, on account of a technical flaw, in the web portal, in not accepting the online payment and thus, the writ petitioner was constrained to make a manual payment of ₹ 6,33,144/-. Now that, the amount is stated to have been deposited with the office of the Director General of Lighthouses and Lightships, U.P., with a view to resolve the dispute and to avoid further litigation, a direction to the Director General of Lighthouses and Lightships, U.P. is issued, to refund the sum of ₹ 6,33,144/- to M/s.Seahorse Ship Agencies Private Limited, within a period of one month from the date of receipt of a copy of this judgment. Appeal disposed off.
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2021 (7) TMI 912
Renewal of CHA License - appellant's CHA licence has already expired on 13.04.2020, appellant was directed to apply fresh for certificate - Section 130 of the Customs Act, 1962 - HELD THAT:- The simple affect of the adjudication of CESTAT is that the orders of respondent, either placing the appellant under suspension or denying renewal or confirming the decisions taken, are all set aside. There is nothing against the appellant as on date warranting the appellant to apply afresh for CHA licence. The directions are inconsistent with final orders of the CESTAT. The appellant, therefore, is entitled for consideration of application made in Annexure-B for renewal - appellant, therefore, is entitled for consideration of application made in Annexure-B for renewal. Appeal allowed.
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Corporate Laws
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2021 (7) TMI 878
Prayer to be transposed as the Respondent in Company Petition - HELD THAT:- This Application is not filed with any bona-fide purpose. It is filed almost 2 years from the date on which the Petitioner No. 3 decided to withdraw himself as one of the Petitioners. In this case, the remaining Petitioners completed their arguments in main petition and when we called upon Respondent No. 2 to make his submissions, this application came to be filed by Petitioner No. 3. It appears to us that. Petitioner No. 3 has filed this Application only to delay the hearing of the main petition. It is seen from the record that Petitioner No. 3 has consented to join as the petitioner. He had signed vakalatnama of Mr. S. Subha Reddy. Later on, he withdrew the same. It is alright if he does not wish to continue as the Petitioner but he cannot be added as Respondent that too against the wishes of remaining Petitioners and when they did not make any allegations against him, they did not claim any relief against him. Application rejected with cost of ₹ 1,00,000/- to be paid to the remaining Petitioners.
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2021 (7) TMI 875
Restoration of name of Company in the Register of Companies - Section 252(3) of the Companies Act, 2013 - HELD THAT:- Section 252(3) of the Companies Act, 2013 confers on this Tribunal powers to Order to restore the name of the Company in the Register maintained, provided such application is filed by (i) the Company or (ii) by any Member or (iii) any creditor or (iv) any workmen of the Company within 20-years from the date of publication of the notices under Section 248(5) in Official Gazette about striking off name of such Company provided further that it is seen from the material on record that at the time its name being struck off, the Company was doing its business or carrying its operations. The Company had not generated any revenue from its operations during the financial years 2010-11 to 2013-14 and 2016-17 to 2017-18, and in all these years it had incurred losses. However, the Financial Statements indicate that immediately before the Company was Struck Off it had generated revenues from operations during the financial year ended on March 31, 2015 and March 31, 2016. During the said two years it has also recorded profits - appellant has filed along with the application a copy of Income Tax return Acknowledgement for the Assessment Year 2019-20, which indicate Gross Total Income of ₹ 1,74,740/- and amount of ₹ 51,354/- paid as tax - also, Appellant has produced a copy of bank statement for the period 01.04.2019 to 31.03.2019 which indicate that the Company is maintaining Bank Account No. 510101005003376 with Corporation Bank. Thus, the Company is a going concern and was in operation when its name was struck off - The Registrar of Companies, the respondent herein, is ordered to restore the original status of the Appellant Company - application allowed.
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2021 (7) TMI 873
Scheme of Arrangement - seeking to dispense with the meetings of the Equity Shareholders and Unsecured Creditors of all the Applicant Companies and Secured Creditors of Transferee Company - Sections 230 to 232 Read with Section 66 of the Companies Act, 2013 and Rule 3(2) of the Companies (CAA) Rules, 2016 - HELD THAT:- The Companies have followed extant provisions of Companies Act in framing the Scheme in question, which are duly approved by the Board of Directors of the Companies involved. The Statutory Auditors/Chartered Accountants of the Companies have also issued respective Certificates by inter-alia certifying the details of shareholders, creditors, and compliance of accounting treatment as prescribed U/s 133 of the Companies Act, 2013 with reference to the Scheme in question. The Applicant Companies have disclosed all the material facts relating to the Scheme in question and filed necessary documents along with the Application. Various directions regarding holding and convening of various meetings issued - application allowed.
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2021 (7) TMI 872
Liquidation of the Company/Corporate Debtor - no viable resolution plan was provided to CoC - Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Despite all possible steps as required under the Code taken during the CIRP, the CoC did not receive any viable resolution plan/proposal for revival of the Company. The CoC in its wisdom has resolved with 100% voting share in favour of the liquidation of the Company. This Authority has no reason before it to take a contrary view in terms of Section 33(1)(a) of the Code. Therefore, it has no option than to pass an order for liquidation of the Company in the manner laid down in Chapter III of the Code. The Corporate Debtor i.e. M/s. ISR Infra Private Limited shall be liquidated in the manner as laid down in Chapter-III of the Code - Application allowed.
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Insolvency & Bankruptcy
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2021 (7) TMI 876
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial creditors or not - existence of debt and dispute or not - time limitation - HELD THAT:- It is evident from the Part 2 of Form 1 which has been filed by Financial Creditor that no date of default has been mentioned in the Form 1. Hence, on perusal of the application filed under section 7 of IBC, 2016, the date of default can be ascertained as 22.12.2014, the date on which the Corporate Debtor sent a mail to the financial Creditor accepting that the said project has been delayed and acknowledged the liability. Whereas, the financial Creditor has filed the present application under section 7 of IBC, 2016 on 21.11.2019. The Present application filed under section 7 of the IBC, Code, 2016 fails the test of Limitation as far as the Code is concerned as it is clearly evident that the date of default i.e., 22.12.2014 had occurred over three years prior to the date of filing of application i.e., 21.11.2019, thus, the present application is time barred. Petition dismissed.
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Service Tax
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2021 (7) TMI 927
Reopening of old assessments - Notifications dated 30 th January 2009, 10 th September 2014, February 2015 - Circular dated 03rd March 2015 - Para 12.3 and 12.4 of the Master Circular No. 1053/02/2017-CX - Rule 3 of the Service Tax Rules, 1994 - HELD THAT:- Issue notice. Ms. Anju Gupta, Advocate accepts notice on behalf of respondent no. I-UOI. Mr. Harpreet Singh, Advocate accepts notice on behalf of respondent nos. 2 and 4. Let a counter-affidavit be filed within four weeks.
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2021 (7) TMI 899
Refund of CENVAT credit - Certain FIRCs were addressed to unregistered premises - certain FIRCs were not produced can be considered as Export Turnover or not - invoices addressed to unregistered premises - non-compliance with the conditions 2(g) and 2(h) of N/N. 27/2012-CE(NT), dated 18.06.2012 - ceiling of the provisions of section 142(3) of CGST Act, 2017 - amount of refund claimed in ST-3 return, not debited - HELD THAT:- The appellants have not been able to explain the required documents before the refund sanctioning authority. The learned counsel has submitted that they would be able to produce and also explain in regard to necessary documents if they are given further chance. The matter requires to be remanded to the refund sanctioning authority - Appeal allowed by way of remand.
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2021 (7) TMI 898
Refund of credit availed on the service tax paid on input services - Information Technology Services and also export of same service - reverse charge mechanism - period July, 2013 to September, 2013 - refund denied on the ground that the said credit has not been shown in the ST-3 returns - HELD THAT:- It is not in dispute that the appellants are eligible for credit to the tune of ₹ 16,93,074/- on the service tax paid by them under reverse charge mechanism on input services availed by them. The only reason for denying the credit is that they have not reflected such availment of credit in ST-3 returns for July, 2013 to September, 2013 - The services having been exported, the service tax paid on the input services used for export of services should be refunded to the appellants as per Rule 5 of Cenvat Credit Rules, 2004. The appellants have properly accounted in their books of account. Not mentioning the credit availed in ST-3 returns is only a procedural lapse, which can be condoned. The appellants are eligible for refund as claimed by them - Appeal allowed - decided in favor of appellant.
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2021 (7) TMI 887
SSI Exemption - branded service or not - service falling under threshold limit or not - Cable operator service - benefit of N/N. 6/2005-ST dated 1.03.2005 - exemption denied on the ground that appellant provided Branded service - HELD THAT:- Similar issue decided in the case of MS BLUE STAR COMMUNICATION, MS EK ONKAR DIGITAL SERVICES, MS SHARMA CABLE, MS EK ONKAR ENTERPRISES, MS SHIVA CABLE VERSUS C.C.E. S.T. -LUDHIANA [ 2019 (2) TMI 1385 - CESTAT CHANDIGARH] where it was held that appellants are entitled for exemption under Notification No.6/2005-ST dated 01.03.2005 and Notification No. 33/2012-ST dated 20.06.2012, extended period of limitation is not invokable, and appellants are liable to pay service tax on the gross value of services received by them and is entitled to avail cenvat credit of service tax paid on the amount remitted to the MSO. Relying on the decision of this Tribunal in the case of Blue Star Communication, following order is passed:- a) the appellants are entitled for exemption under Notification No. 6/2005-ST dated 01.03.2005 and Notification No. 33/2012-ST dated 20.06.2012. b) the extended period of limitation is not invokable. Consequently, no penalty is imposable on the appellants c) the appellants are liable to pay service tax on the gross value of services received by them and is entitled to avail cenvat credit of service tax paid on the amount remitted to the MSO. d) The adjudicating authority shall quantify the demand for the period within the period of limitation on production of data of services provided by the appellant of cable service to the subscribers within the 30 days of receipt of this order on which the appellant shall paid the service tax, if payable along with interest. The matter is remanded back to the Adjudicating authority for quantification of demand - the appeal is allowed by way of remand.
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Central Excise
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2021 (7) TMI 908
CENVAT Credit - inputs or not - menthol oil/flakes - Jurisdiction of supplier - sanctity of promulgation of such geographically delimited harbours of privilege - HELD THAT:- From the record of proceedings, it is found that the several independent arguments for setting aside the demand of duties, and the imposition of detriments, was disregarded by the adjudicating authority on the assurance of the finding of lateral jurisdiction on goods not having been supplied - It would, therefore, appear that the adjudicating authority was influenced entirely by the finding of non-manufacture on the part of the supplying units by the coordinate statutory functionary which ceases, owing to nullification by the coordinate bench of the Tribunal, to sustain the impugned order in the absence of any other limb. In the circumstances of these facts as well as the non-consideration of several contentions put forth on behalf of the appellants, the impugned order does not commend itself as redolent of the essential qualifications of being legal and proper - the matter be remanded to the original authority for a fresh determination of the conclusions leading from the evidence available on record - appeal allowed by way of remand.
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2021 (7) TMI 891
Clandestine Removal - reliability of statements - sufficiency of evidence or not - cross-examination of statements - persons failed to stand the earlier statements - principle of preponderance of probability - difference of opinion - Majority Decision - HELD THAT:- The two types of standards of proof applied in proceedings are proof beyond reasonable doubt and proof of preponderance of probability. The appreciation of evidence in either of these types of standards of proof differs depending on the facts involved. In a serious case such as evasion of duty by fraud, the degree of appreciation of evidence has to be higher than in a case of allegation of mere delay in payment of duty though in both cases the evidence has to be appreciated on the preponderance of probability. In adjudication proceedings, there may be factors established in favour of appellant and some in favour of Revenue. The established factors will lead or indicate whether the unestablished factors are probable or not. Needless to say that the conclusion has to be drawn on established facts and probable facts and not on presumption of facts. In grave cases of forgery, fraud, conspiracy etc. seldom direct evidence would be available. In a case of fraud there is always an intention to hide / delete / eliminate or cover up the acts of fraud. Such violations of law go undetected for a long period by tactful ways of hiding, deleting or covering up the fraud. For the same reason, the process of investigation and collecting evidence also become humongous and challenging. This would equally apply to the requirement to prove and establish such evidence in court. While applying the standard of proof of preponderance of probability, in the present case though some of the witnesses have negated their original statements in the cross-examination, the statement of Shri Kalyan Chakravarthy, Shri Duraga Prasad, the misdeclaration of the goods seized from the premises of transporter SRMT, Chennai, discrepancies / reconciliations in accountsmaintained by V. Srinivas Mahesh and others would sufficiently prove the allegations raised in the Show Cause Notice. In para 100 of the Order in Original, the adjudicating authority has discussed the defect of non-supply of relied upon documents. Even without considering the evidence of such documents there is enough evidence to establish the case put forth by department. The role of the Managing Director in such activity is also clear. Demand confirmed.
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