TMI Tax Updates - e-Newsletter
July 26, 2022

Case Laws in this Newsletter:

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

Articles

1. NRI Taxation Services in Delhi India

   By: Atul Sharma

2. Critical study of provisions of CENTRAL GOODS AND SERVICES TAX ACT, 2017–( in short CGST) Section 7 and 8 part of CHAPTER III -LEVY AND COLLECTION OF TAX. – 6 th article in series.

   By: DEVKUMAR KOTHARI

3. Revenue Department cannot pass a demand order beyond the scope of the SCN

   By: Bimal jain

News

1. 163rd Income Tax Day: A journey towards Nation Building

Notifications

Customs

1. 44/2022 - dated 23-7-2022 - Cus

Reduction in duty / AIDC on crude soya, sunflower and palm oils - Seeks to amend Notification No. 49/2021-Customs, dated the 13th October, 2021.

GST - States

2. 07/2022-State Tax - dated 22-7-2022 - Delhi SGST

Amendment in Notification No. 73/2017- State Tax, dated the 31st January 2018

Circulars / Instructions / Orders

GST - States

1. Trade Circular No. 02 T of 2022 - dated 22-7-2022

Mandatory furnishing of correct and proper information of inter-State supplies and amount of ineligible/blocked Input Tax Credit and reversal thereof in return in FORM GSTR-3B and statement in FORM GSTR-1

2. Trade Circular No. 03 T of 2022 - dated 22-7-2022

Clarification on various issue pertaining to GST

3. Trade Circular No. 04 T of 2022 - dated 22-7-2022

Clarification on issue of claiming refund under inverted duty structure where the supplier is supplying goods under some concessional notification

4. Trade Circular No. 05 T of 2022 - dated 22-7-2022

Prescribing manner of re-credit in electronic credit ledger using FORM GST PMT-03A

5. Trade Circular No. 06 T of 2022 - dated 22-7-2022

Manner of filing refund of unutilized ITC on account of export of electricity

6. Trade Circular No. 07 T of 2022 - dated 22-7-2022

Withdrawal of Circular No. 106/25/2019-GST dated 29.06.2019

7. 172/04/2022 - dated 14-7-2022

Clarification on various issues pertaining to GST

8. 173/05/2022 - dated 12-7-2022

Clarification on issue of claiming refund under inverted duty structure where the supplier is supplying goods under some concessional notification

Customs

9. 10/2022 - dated 25-7-2022

Clarification on Electro-Chemiluminescence Immunoassay kits

Highlights / Catch Notes

GST

• High Court Dismisses Writ Petitions; Petitioners Can File Appeals Due to Extended Limitation Period Amid COVID-19 Lockdown.

  Case-Laws - HC : Maintainability of petition - availability of alternative remedy of appeal - the impugned orders invariably in all these cases were dated 10.01.2020, the three months limitation and one month condonable period to file an appeal ends only some time in April 2020, by that time the Covid-19 pandemic first wave situation started and there was a complete lock down of the entire Country from the third week of March 2020 and taking that grim situation, the Hon'ble Supreme Court also in the suo motu writ petition has extended the limitation period upto May 2022. - these writ petitions are rejected with the liberty to the petitioner by relegating the petitioner to go before the Appellate Authority to file appeals - HC
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Income Tax

• Assessee's TDS Deduction on Service Charges Reclassified from Section 194J to Section 194C, Acknowledging Excess Deduction.

  Case-Laws - AT : TDS u/s 194J or 194C - The assessee had infact deducted tax @10% on the service charges component charged by Social Kinnect. In our considered opinion, even this payment would be liable for tax u/s.194C of the Act as admittedly Social Kinnect is not rendering any professional services to the assessee as detailed supra. The assessee had deducted excess TDS in the instant case in respect of this service charges paid to Social Kinnect. In respect of reimbursement sought by Social Kinnect with mark-up, the same is payable only pursuant to a contract of work entered into by the assessee with Social Kinnect which falls within the ambit of Section 194C of the Act and not u/s.194J - AT
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• Denial of Section 10B Deduction for Scrap Sales Deemed Unjustified Due to Lack of Proper Investigation by AO.

  Case-Laws - AT : Deduction u/s. 10B - Scrap sales - AO simply rejected the invoice on the ground that the scrap is not generated from the EOU unit. The Assessing Officer has not made any attempt to verify the buyer of the scrap, whose full address is being given in the invoice with TIN Number and proper VAT tax and Additional VAT taxes were collected on the above sales. Thus, the Assessing Officer without making proper enquiry simply denied the claim of scrap sales eligible for deduction u/s. 10B of the Act, which is in our considered view is not proper in law and unjustified. - AT
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• Section 40(b) Clarified: Interest to Partners Yields Nil Impact, No Double Disallowance, Confirms Tax Appeal.

  Case-Laws - AT : Addition u/s 40(b) - interest payment to partners - in the computation of income the interest of partner is added and deducted and thus, the effect while preparing the computation of income is nil and there is no loss of revenue - Merely the said adjustment not done in the profit & loss account the double disallowance cannot be made. Even the ld. CIT(A) has also confirmed that in the computation of income the same is disallowed and allowed giving it the effect as Nil. In terms of these observations the ground no. 1 raised by the assessee is allowed. - AT
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• Finance Act 2015: TDS u/s 194A(3)(V) & Disallowance Section 40(a)(ia) Effective from June 1, 2015.

  Case-Laws - AT : TDS u/s 194A(3)(V) - Disallowance u/s 40(a)(ia) - the amendment as brought in by Finance Act, 2015 was prospective in nature and applicable only from 01.06.2015. It is only on and from 01.06.2015, the assessee could be held liable for such TDS but not before that date. On the basis of this decision, it could be concluded that the co-operative banks have thus been taken out of the purview of beneficial exception only from 01.06.2015 and not before that. - No additions - AT
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• Cricket Betting Income Estimated at 1% of Seized Transactions Deemed Fair by Tax Authorities, Assessment Confirmed.

  Case-Laws - AT : Estimation of income - transactions relating to cricket betting - estimate made by the Assessing Officer of the assessee’s income at 1% of the total transactions of cricket betting as found recorded in the laptops seized from the possession of the assessee is quite fair and reasonable and the learned CIT(A) was fully justified in confirming the same. - AT
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• Tax Exemption for Cricket Promotion: Section 11 Eligibility Not Denied Due to Surplus Generation u/s 2(15) Proviso.

  Case-Laws - AT : Exemption u/s 11 - promotion and development of the game of Cricket - proviso to section 2(15) is invoked in the case of the assessee as the activities of the assessee are being run on commercial basis - given that the assessee society is generating surplus year after year is not the deciding factor to determine whether it is eligible for exemption under section 11 of the Act. And on this ground alone, the exemption claimed by the assessee society under section 11 can not be denied. - AT
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• Excise Duty Exemption is a Capital Receipt, Excluded from MAT Calculation u/s 115JB of Income Tax Act.

  Case-Laws - AT : MAT computation u/s 115JB - Disallowing exclusion of Excise Duty Exemption as capital receipt availed during the year under consideration in computing book profit as per section 115JB - As per Memorandum issued by the Ministry of Commerce & Industry, we find that the excise duty exemption is purely capital receipt and is neither chargeable to tax under the normal provisions of the Income Tax Act nor is to be included as part of the book profit for computing the minimum alternative tax as per the provisions of section 115JB of the Act. - AT
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• Unaccounted Cash Payments u/s 69C Dismissed Due to Unreliable Employee Statements; Appeals Commissioner Upholds Decision.

  Case-Laws - AT : Addition on account of unaccounted cash payments u/s 69C - Addition on the basis of the statements given by four employees in the course of search u/s 132(4) - not only were the original statements of the four (4) employees inconsistent, unreliable and suffers from contradiction and the admission made were not backed by any corroborative evidence and these statements had also been retracted and each of the four employees were able to withstand the cross-examination of the AO. Therefore, following the Board Instructions (supra), we find ourselves in agreement with the findings of the Ld. CIT(A), that it was improper for the AO to draw adverse inference on the basis of the retracted testimonies of the four employees. - AT
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• Entity's Section 12A Registration Restored; Second Search Evidence Cannot Justify Cancellation, Rules Tribunal.

  Case-Laws - AT : Exemption u/s 11 - registration u/s 12A Cancelled - evidences collected during search - second search is a different proceeding that materials cannot be imported for cancellation of the registration granted u/s 12A of the Act, when the issue was restored to him by order of the Tribunal - Being so, the Principal CIT is not expected to place reliance on material gathered in second search and he cannot be considered it so as to cancel registration at this point of time. - AT
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• Court Grants Elderly War Widow Another Chance to Contest Tax Notice Validity u/s 148 of Income Tax Act.

  Case-Laws - AT : Validity of reopening of assessment - the assessee cannot be allowed to take the benefit of plea of no service of notice u/s 148 of the Act when even as per the various documents filed before us, the assessee was having three addresses - As sympathetic view of the fact that the assessee is an elderly warwidow, who might have been put to disadvantage by some unscrupulous elements behind her back, and also keeping in mind the principle of natural justice, we are of the considered opinion that even though we have upheld the findings of the Ld. CIT(A) regarding service of notice u/s 148 of the Act, in the interest of substantial justice, the assessee should be given another opportunity to explain the entire transaction and establish with proof her contention regarding non-taxability of the same before the Ld. CIT(A). - AT
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Customs

• Customs House Agent Avoids License Revocation; Security Forfeiture Annulled, Rs. 50,000 Penalty Imposed for Reporting Delay.

  Case-Laws - AT : Seeking waiver of forfeiture of security as well as penalty imposed on CHA - time period for reporting the changes - It is noticed that the appellant has claimed that the delay occurred largely due to the fact that one of his partner died and he was not in a right frame of mind. It is noticed that the impugned order has, taking a lenient view, not revoked the license of the appellant - Taking into account the circumstances and the facts of the case, further lenient view is adopted. The case is not of a significant violation but only that of a delay in reporting. Moreover, the appellant did not process any document during this period. - the order of forfeiture of security deposit of Rs. 5 lakhs is set aside but the penalty of Rs. 50,000/- on the Customs Broker is sustained, for this lapse - AT
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Corporate Law

• Equity Share Valuation Issues: Companies Act Section 59(4) Allows Fresh Valuation to Correct SEBI Act Compliance Discrepancies.

  Case-Laws - Tri : Valuation of the fair price per equity share of the Respondent Company - low valuation of shares in the exit offer - Section 247 or other provisions of the Companies Act or Rules do not specifically provide for conducting valuation if it is required under the provisions of the SEBI Act. It therefore follows that if the Register contains entries in respect of valuation done in, contravention of the SEBI Act, then in order to rectify those entries fresh valuation should be permissible under the Companies Act since Section 59(4) of the Companies Act provides for such rectification. - Tri
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Indian Laws

• Accused Can Face Charges u/s 138 and Section 420 for Cheque Bounce and Fraud Without Double Jeopardy Conflict.

  Case-Laws - HC : Dishonor of Cheque - For proving offence under Section 138 of NI Act, it has to be established that the cheque has been issued by the accused to discharge a legally enforceable debt or liability and the same has been dishonoured for insufficiency of funds etc. and despite receipt of statutory notice of demand, the accused has failed to pay the amount of cheque within the stipulated time - offence under Section 420 of IPC is made out at the time of issuance of the cheque itself which is not the case with offence under Section 138 of NI Act. Therefore, the two offences are distinct from each other and the principle of double jeopardy or rule of estoppel does not come into play. - The complainants are well within their rights to continue prosecution for both these offences i.e. offences under Section 138 of NI Act and Section 420 of IPC simultaneously. - HC
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IBC

• NCLT Dismisses CIRP Application: Balance Sheet Not Liability Acknowledgment, Supreme Court Orders Re-adjudication.

  Case-Laws - SC : Initiation of CIRP - NCLT rejected the application - NPA - Period of limitation - NCLT that, a statement contained in the balance sheet cannot be treated as an acknowledgement of liability under Section 18 of the Limitation Act - Proposal of OTS is older than 3 months - the position of law has been set at rest. Neither the NCLT nor the NCLAT had the benefit of adjudicating upon the factual controversy in the context of the decisions of this Court. - Matter restored back for re-adjudication - SC
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• Resolution Plan Shields Applicant from Pre-CIRP Claims; Ensures Continuation of Corporate Debtor's Permits and Licenses.

  Case-Laws - Tri : Seeking approval of the Resolution Plan - The Resolution Applicant cannot be saddled with any previous claim against the Corporate Debtor prior to initiation of its CIRP. For the permits, licenses, leases, or any other statutory right vested in the Corporate Debtor shall remain with the Corporate Debtor and for the continuation of such statutory rights, the Resolution Applicant has to approach the concerned statutory authorities under relevant laws. - AT
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• NCLAT: Liquidator's lack of valid AFA doesn't void liquidation order, but appointment reconsidered due to negligence.

  Case-Laws - Tri : CIRP - Grounds on which the Liquidator can be changed - the non-holding of a valid AFA will not render the order of liquidation passed by the Adjudicating Authority illegal or invalid and moreover the Hon'ble NCLAT it has stated that if any irregularity is brought by the Appellant, then this Tribunal may have a re-look at the appointment of the Liquidator, in the present case. - The Liquidator has failed to exercise due care and diligence in performance of the powers and functions while discharging his functions as Liquidator - New liquidator appointed - Tri
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Service Tax

• Appellant's Late Tax Payment Not Fraudulent; Show Cause Notice Unwarranted u/s 73(3) Instead of 73(4).

  Case-Laws - AT : Extended period of limitation - evasion of service tax or not - The appellant had, in fact, lost by not paying service tax in time and has not gained anything at all. It is thus found that there is no evidence of fraud or collusion of willful misstatement or suppression of facts or contraventions with an intent to evade service tax on the part of the appellant. In the absence of these elements, the appellant is not covered by Section 73(4) and is squarely covered by Section 73(3). The show cause notice should therefore not have been issued to the appellant. - AT
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• Service Tax Refund Denied Due to Expired Limitation Period u/s 11B; Tribunal Upholds Original Self-Assessment.

  Case-Laws - AT : Denial of refund of Service Tax - Period of limitation - It is apparent that while the Revenue’s attempt to classify the service provided by the appellant under the ‘Commercial Industrial Construction Service’ and to include the value of free supply material has failed in the Tribunal, the original self-assessment of the appellant made under the head of ‘Erection Commissioning Installation’ remained undisturbed. - the limitation prescribed under Section 11B would be applicable and consequently, the refund claim filed much after the period of limitation would not be admissible - AT
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• Refundable Security Deposits Not Subject to Service Tax for Renting or Leasing Services, Court Rules.

  Case-Laws - AT : Levy of Service Tax - refundable security deposit collected by the Appellant from its customers - the said amounts are not collected towards any provision of service but as a refundable deposit and as such the amounts cannot be treated as consideration for renting/leasing of immovable property services. - AT
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Case Laws:

• GST

• 2022 (7) TMI 1057
  Maintainability of petition - availability of alternative remedy of appeal - Validity of assessment order - non-filing of returns - Section 62(1) of the GST Act - HELD THAT:- Insofar as the provision made under Section 62 of the Act, under which, as has been rightly pointed out by the learned counsel appearing for the petitioner, since he has not chosen to file the return within 30 days from the date of the orders which are impugned herein, the chance of getting a deemed withdrawal of the assessment orders are lost and therefore, the chance of the petitioner to get remedy under Section 62(2) was closed and therefore, the further appeal alone is the only remedy for the petitioner - When there is an appeal remedy available under Section 107, it is the settled proposition that, writ petition cannot be filed by invoking the extraordinary jurisdiction of this Court as that would be possible in three circumstances viz., violation of principles of natural justice, violation of statutory provisions or for want of jurisdiction of the authority who passes the impugned order. The reason being that, the impugned orders invariably in all these cases were dated 10.01.2020, the three months limitation and one month condonable period to file an appeal ends only some time in April 2020, by that time the Covid-19 pandemic first wave situation started and there was a complete lock down of the entire Country from the third week of March 2020 and taking that grim situation, the Hon ble Supreme Court also in the suo motu writ petition has extended the limitation period upto May 2022. The recovery proceedings for the balance amount, for which, if at all the Bank accounts of the petitioner are attached, the same can also be directed to be lifted by way of interim order, hence that can very well be considered objectively by the Appellate Authority if such an application is made by the petitioner. The impugned orders cannot be successfully challenged before this Court on the ground of non-exhausting the alternative, efficacious appellate remedy which is available to the petitioner under Section 107 of the GST Act, hence, these writ petitions are rejected with the liberty to the petitioner by relegating the petitioner to go before the Appellate Authority to file appeals - Petition disposed off.

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• Income Tax

• 2022 (7) TMI 1058
  Addition of interest credited in Escrow Account - AR contended that the assessee has no right to receive the interest in the impugned year and mere credit of the interest in the Escrow Account would not result in accrual until there is a right to receive the same - whether assessee had not earned any right in respect of the sale consideration nor the interest credited in the Escrow Account? - whether the interest has accrued in the relevant assessment years and can be brought to tax? - HELD THAT:- In the instant case, the condition was imposed for withdrawal of the money as per clause 10 of the SPA entered by the assessee and others with M/s.Exide Industries Limited. As per clause 5.1 of the Escrow Agreement, the assessee did not have any right to receive the interest credited in the Escrow Account unless and until the Sales Tax liability was cleared. The total sales tax liability in the instant case was far exceeding the consideration which was deposited in the Escrow Account by the purchaser. The assessee s had disclosed for assessment, the entire interest income that was credited over a period of time and received by the assessee during the financial year relevant to the assessment year 2018-2019. In the light of the above said factual situation, we deem it appropriate to delete the addition made by the A.O. and sustained by the CIT(A) with reference to the interest income that is credited in the relevant assessment year. Unexplained Cash Deposit - assessee has furnished a copy of cash flow summary and the cash book along with the bank statement, wherein it is seen that there are cash withdrawals - HELD THAT:- In the interest of justice and equity, we restore the issue to the files of the A.O. The A.O. is directed to examine the cash flow summary and the cash book along with the bank statement and decide the matter afresh in accordance with law. Needless to state, the assessee shall be heard before a decision is taken in the matter.

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• 2022 (7) TMI 1056
  Reopening of assessment u/s 147 - scope of new provision section 148A - As contended present case should be governed by the newly amended provisions relating to proceeding under section 147 and the formalities of which have not been observed and complied with, and as such, the same is bad in law - HELD THAT:- As decided in UNION OF INDIA ORS. VERSUS VERSUS ASHISH AGARWAL [ 2022 (5) TMI 240 - SUPREME COURT] instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Courts ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the new provision section 148A and the Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law As the present order shall be applicable PAN INDIA and all judgments and orders passed by different High Courts on the issue and under which similar notices which were issued after 01.04.2021 issued under section 148 are set aside and shall be governed by the present order and shall stand modified to the aforesaid extent. The present order is passed in exercise of powers under Article 142 of the Constitution of India so as to avoid any further appeals by the Revenue on the very issue by challenging similar judgments and orders, with a view not to burden this Court with approximately 9000 appeals. We also observe that present order shall also govern the pending writ petitions, pending before various High Courts in which similar notices under Section 148 of the Act issued after 01.04.2021 are under challenge. The impugned common judgments and orders passed by the High Court of Allahabad and the similar judgments and orders passed by various High Courts, more particularly, the respective judgments and orders passed by the various High Courts particulars of which are mentioned hereinabove, shall stand modified/substituted to the aforesaid extent only.

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• 2022 (7) TMI 1055
  Disallowance u/s 80P - interest income earned by a cooperative society on its investments held with a co-operative bank - HELD THAT:- We are of the considered view that the assessee is a co-operative society which is entitled for deduction under section 80P(2)(d) being interest earned from deposits in a co-operative society. In the case of New Ideal Co-operative Housing Society Ltd [ 2021 (2) TMI 578 - ITAT MUMBAI] and also in the case of M/s Solitaire CHS Ltd [ 2019 (12) TMI 80 - ITAT MUMBAI] held that the interest income earned by a cooperative society on its investments held with a co-operative bank would be eligible for claim of deduction under section 80P(2)(d) - In the case on hand, the CIT(A) has not disposed of the appeals on merit citing reasons that the assessee has not furnished complete details of the ITR, we deem it appropriate to restore the matter to the file of the Ld.CIT(A) for deciding the appeal fresh - Appeal of the assessee is allowed, for statistical purpose.

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• 2022 (7) TMI 1054
  TDS u/s 194J or 194C - transactions entered into by the assessee with Social Kinnect by construing it to be in the nature of professional services - HELD THAT:- We find that assessee company had entered into an agreement with Social Kinnect (vendor) whereby vendor would act as digital media agency for the assessee company. The said agreement envisaged provision of various services by Social Kinnect to the assessee such as e-mail services, web management, online media buying and management fees. During the year under consideration, the assessee had received single invoice specifying respective services provided by Social Kinnect. The sample invoices copies were duly produced by the assessee before the ld. AO. For web management and management fees, the assessee has deducted tax at source @10% u/s.194J of the Act and for e-mail services and online media buying, influencer charges, the assessee had deducted tax at source @2% u/s.194C of the Act. It is not in dispute that assessee made payment to Ad agency i.e. Social Kinnect. We find from the perusal of the agreement with Social Kinnect and scope of services defined therein, Social Kinnect would engage various professional artists for preparation and execution of the advertisement content and Social Kinnect would provide ultimate advertisement content on behalf of the assessee in digital platform We find that there is no direct connection or direct agreement between assessee company and the professional artists who had assisted in advertisement content. The agreement with professional artists are only with the advertisement agency i.e. Social Kinnect and not the assessee. Hence, Social Kinnect while making payments to those professional artists, would be liable for TDS @10% u/s.194J of the Act as those professional artists are rendering professional services to Social Kinnect. The assessee had merely taken the services only from Social Kinnect. It is not the look out of the assessee to understand the source from where the Social Kinnect obtains its professional services. Once the advertisement content is provided by Social Kinnect in a digital platform, the assessee is bound to make payments to Social Kinnect for that advertisement content. This would constitute the payment made for carrying out any work falling within the ambit of provisions of Section 194C of the Act only. We find from the sample bills issued by Social Kinnect to the assessee, Social Kinnect had raised in its invoice two components of its charges - (i) Seeking reimbursement of professional charges paid by it to various artists with mark up and (ii) its service charges. The assessee had infact deducted tax @10% on the service charges component charged by Social Kinnect. In our considered opinion, even this payment would be liable for tax u/s.194C of the Act as admittedly Social Kinnect is not rendering any professional services to the assessee as detailed supra. The assessee had deducted excess TDS in the instant case in respect of this service charges paid to Social Kinnect. In respect of reimbursement sought by Social Kinnect with mark-up, the same is payable only pursuant to a contract of work entered into by the assessee with Social Kinnect which falls within the ambit of Section 194C of the Act and not u/s.194J Thus we hold that the entire payments made by the assessee to Social Kinnect would fall only within the ambit of provisions of Section 194C of the Act and not u/s.194J of the Act. Accordingly, the ground raised by the assessee is allowed.

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• 2022 (7) TMI 1053
  Condonation of delay - appeal filed by the assessee is delayed by 384 days - Denial of natural justice - no opportunity to explain whether such delay was for sufficient cause or not - order under Section 154 of the Act according to which the demand has arisen - HELD THAT:- According to the provision of Section 249(2)of the Act, the appeal to the learned CIT (A) shall be presented within 30 days from the date of service of the notice of demand relating to the assessment order. As claimed by assessee that order under Section 154 of the Act was not available on ITBA but only the tax computation sheet is available. Such order was made available to the assessee only on 28 February 2019 and therefore, according to the assessee the appeal is field within time provided under Section 249(2) of the Act. CIT (A) perused column no. 14 of form no. 35 but did not peruse the column 2(b) and (c) of the same form. Merely, based on column no. 14 of form no. 35 the appeal of assessee was considered as delayed by taking the date of the order as 9 February 2018. There was dispute that the order was passed on 9 February 2018 but received by assessee on 28 February 2019. Appeal is required to be filed within 30 days from the date of receipt of order. Therefore, appeal as claimed by the assessee is filed in time and therefore, learned CIT (A) should have perused the various columns filed in form no. 35, which is stated to be true to the best of the information of the director of the company. CIT [A] looked at the date of order i.e. 9/02/2018 , noted that appeal is filed on 28/03/2019 , in column where it is mentioned that there is no delay in filing appeal, held that appeal is delayed by 384 days , no condonation request is filed, hence, dismissed appeal. CIT (A) should have at least given an opportunity to the assessee of clarifying the above facts stated when mobile number and email address of the assessee are provided at column no. 17 of form no. 35. If one looks at the stand of the assessee, appeal is not delayed. Therefore, according to us, the learned CIT (A) could not have held without giving an opportunity of clarifying about the timely filing of the appeal that appeal is delayed and dismissing the appeal of the assessee holding that it is filed late. We set aside this appeal back to the file of the learned CIT (A) to first examine, a. What is the mode and delay of the service of the order u/s 154 to the assessee and whether such service is in accordance with the law or not. b. Whether there was any deal in filing of the appeal or not for the reasons stated above and then decide about the condonation of the same. c. If it is found that appeal is really delayed, assessee must be given an opportunity to explain whether such delay was for sufficient cause or not. In the event , assessee submits such an explanation, to consider it in accordance with law. d. If the appeal of the assessee is found to have been filed in time and in accordance with law, the appeal of the assessee should be decided on the merits of the case in accordance with the law. e. If it is found that appeal is really delayed, assessee must be given an opportunity to explain whether such delay was for sufficient cause or not. In the event , assessee submits such an explanation, to consider it in accordance with law.

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• 2022 (7) TMI 1052
  Levy of penalty proceedings u/s 271(1)(c) - additions made of the amount deposited in Bank A/c maintained with HSBC, Geneva, Switzerland - HELD THAT:- We find that similar addition arising out of the same bank deposits in the same bank account was made in the case of husband of the assessee Mr. Bhushan Lal Sawhney has been deleted [ 2021 (6) TMI 99 - ITAT DELHI] Before us, no distinguishing facts in the present case and the case of assessee s husband i.e., Mr. Bhushan Lal Sawhney has been pointed-out by the Ld. D.R. In such a situation, since the facts of the present case are identical to that of Mr. Bhushan Lal Sawhney, the husband of assessee, therefore, following the reasons for decision by the ITAT, Delhi Benches in the case of husband of assessee Mr. Bhushan Lal Sawhney, no addition is called for in the hands of the assessee. In view of the above, we set aside the orders of the authorities below and delete the entire addition. As no basis is left for levying of penalty under section 271(1)(c) of the I.T. Act. Thus, no penalty could be levied against the assessee. In view of the above discussion, we set aside the Orders of the authorities below and cancel the penalty in all the assessment years under appeals. - Decided in favour of assessee.

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• 2022 (7) TMI 1051
  Deduction u/s. 10B - fluctuation in the rate of foreign exchange as on the date of balance sheet - HELD THAT:- As far as foreign exchange fluctuation rate is concerned, this issue has been settled by the jurisdictional High Court in the assessee s own case for the Assessment Year 2008-09 and also in the case of CIT vs. M/s. Pentasoft Technologies Ltd.[ 2010 (7) TMI 75 - MADRAS HIGH COURT] - Respectfully following the above judicial precedents, we have no hesitation in holding that fluctuation in the rate of foreign exchange as on the date of balance sheet is an item of expenditure allowable u/s. 37(1) of the Act and the assessee is eligible for deduction under 10B as well as u/s. 80IA of the Act respectively. Scrap sales and claim of deduction u/s. 10B - As has been rightly argued by the ld. A.R., the assessee being engaged in the business of dies and chemicals, normal wear and tear used to happen on the machineries used for its manufacturing activities, which requires regular replacement. As it can been seen from the invoice, the purchaser s TIN Number. is reflected and mode of transport is also said to be through Local Truck and the Vehicle No. is also reflected in the invoice for removing of 4890 KG of loose Heavy MS Scrape. AO simply rejected the invoice on the ground that the scrap is not generated from the EOU unit. The Assessing Officer has not made any attempt to verify the buyer of the scrap namely M/s. Hanuman Traders, whose full address is being given in the invoice with TIN Number and proper VAT tax and Additional VAT taxes were collected on the above sales. Thus, the Assessing Officer without making proper enquiry simply denied the claim of scrap sales eligible for deduction u/s. 10B of the Act, which is in our considered view is not proper in law and unjustified. Therefore, the A.O. is directed to grant the claim of deduction under 10B of the Act on the sale of scraps.

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• 2022 (7) TMI 1050
  Exemption u/s 11 - assessee is a Trust registered u/s. 12AA - assessee has not filed the Audit Report in Form 10B along with the return - HELD THAT:- As filing of Form 10B electronically along with the Return of Income has become mandatory because of the amended Sections 11 13 of the Act, by the Finance Act, 2015. This being the first year of e-filing of these forms, representations have been received by the Board/field authorities stating that the Form No. 10 could not be filed with in the specified time for the assessment year 2016-17. Considering the hardship faced by the assessee, the CBDT issued Circular No. 7/2018, authorizing Commissioner of Income Tax, to admit belated application in Form No. 10 in respect of Assessment Year 2016-17 which were filed belatedly. Thus, the finding of the ld. CIT(A) that, he has no power in condoning the delay in filing Form 10B is legally correct in law. As rightly argued by the Ld. D.R., the assessee seems to be consistently filing the above Form 10B belatedly, for which proper remedy left to the assessee is approaching the Administrative CIT, who is to condone the delay but not with filing appeal u/s. 250 of the Act. We do not find any infirmity in the order passed by the CIT(A) and it has open to the assessee to avail the appropriate legal remedy in accordance with Income Tax Act. We also further found that the case laws relied upon by the Ld. Senior Counsel will not be applicable to the present case, since in the case of Mayur Foundation cited [ 2004 (12) TMI 48 - GUJARAT HIGH COURT] wherein the Assessment year involved is 1980-81 and in the case of Xavier Kelavani Mandal P. Ltd. ( 2004 (12) TMI 48 - GUJARAT HIGH COURT] wherein the Assessment Year involved is 2006-07. In our considered view, filing of Form 10B is being mandatory because of the amendment made in Finance Act, 2015 with effect from 01.04.2016 applicable for the Assessment Year 2016-17. Therefore the above case laws are clearly distinguishable to the facts of the present case. Thus, the grounds raised by the assessee are hereby rejected and the appeal filed by the Assessee is dismissed.

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• 2022 (7) TMI 1049
  Addition u/s 40(b) - interest payment to partners - reply of the assessee that the assessee has debited only 12% interest in cost calculated for the purpose of computing profits of the concern - Expenditure on account of interest payment on statutory liabilities - reply of the assessee that the assessee has debited only 12% interest in cost calculated for the purpose of computing profits of the concern - HELD THAT:- It is not disputed that the assessee is regularly assessed to tax and the method of capitalizing interest in the cost of construction is not even not disputed in the earlier years. The assessee has supported his contention by filling the detailed calculation showing that excess claim is considered while computing the stock valuation and the same is confirmed by the ld. CIT(A). This fact is also confirmed by the ld. CIT(A). CIT(A) has also confirmed that in the computation of income the interest of partner is added and deducted and thus, the effect while preparing the computation of income is nil and there is no loss of revenue as verified and contended by the ld. CIT(A). Thus, when the assessee has separately adjusted that excess interest while working out the closing inventory and this fact categorically confirmed in the findings of the ld. CIT(A) in his order, we do not find any merit for sustaining the addition merely the assessee has not given effect in the interest account. As rightly argued by the ld. AR of the assessee that if it is to be done so by the assessee then in that case it will result in double addition of that figure one in the interest account and another in inventory holding. The contention of the assessee that the excess interest is adjusted while working out the closing inventory is confirmed by the ld. CIT(A) and is not disputed before us by ther revenue. The ld. AR of the assessee also cited the Annexure C (Page 47 48 of assessee paper book ) of the Tax Audit report annexure carried out as per provision of section 44AB of the act, where in the tax auditor has also confirmed this treatment that the excess interest claim has been corresponding reduction in cost of construction. This has not been challenged or discussed by the lower authorities. Merely the said adjustment not done in the profit loss account the double disallowance cannot be made. Even the ld. CIT(A) has also confirmed that in the computation of income the same is disallowed and allowed giving it the effect as Nil. In terms of these observations the ground no. 1 raised by the assessee is allowed. Addition u/s 43CA - As argued AO made addition without considering the reply of the assessee and without referring to the DVO - HELD THAT:- The assessee has to claim that the value adopted or assessed or assessable by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer. In the present case the ld. AR of the assessee not placed any evidence that the claim was placed before the ld. AO. All the decision relied upon are applicable where the assessee make a claim and not considered by the lower authority and in that the case the courts have held that the addition made without giving an opportunity to the assessee is not sustainable whereas in this case the assessee has chosen to remain silent on the issue. Assessee reiterated the submissions raised before the lower authorities and has not countered the finding that this issue has never been raised before the assessing officer and assessee has given their reply on this very specific issue without contending the valuation as per their letter dated 19.12.2018 filed before the AO. In the absence of any cogent evidence placed before us we do not find any reasons to depart on the findings of the orders of the lower authorities and thus, this ground no. 2 of the assessee is dismissed.

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• 2022 (7) TMI 1048
  TDS u/s 194A(3)(V) - Disallowance u/s 40(a)(ia) - deduction of TDS on interest paid by a cooperate society to a member thereof - as per AO assessee was not a cooperative society but a cooperative society engaged in the business of banking - CIT-A deleted the addition - HELD THAT:- As assessee is registered under Tamilnadu Cooperative Societies Act, 1983 and it has obtained license from RBI to carry out banking activities u/s. 22(1) read with Section 56(6) of Banking Regulation Act, 1949. It has paid interest and submits that there is no requirement of deduction of tax at source in this year. On the other hand, the case of Ld. AO is that the statutory provisions provide for different effect to co-operative society and central district co-operative society engaged in the business of banking. Therefore, the assessee was obligated to deduct TDS on Time/Term deposits and the failure to do so would attract disallowance u/s. 40(a)(ia). The amendment brought in by Finance Act, 2015 was only to clear the doubt regarding the applicability of provisions of Sec. 194A(3)(v) to cooperative banks. As rightly held in the impugned order, this issue has been held in assessee s favor by Hon ble High Court of Madras in the case of Coimbatore District Central Cooperative Bank Ltd.[ 2016 (1) TMI 370 - MADRAS HIGH COURT] none of the State or Central enactments such as the Tamil Nadu Co-operative Societies Act, 1983, the Multi-State Co-operative Societies Act, 2002, the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949 and the National Bank for Agriculture and Rural Development Act, 1981 make any distinction between a co-operative society engaged in carrying on banking business and a co-operative bank. However, the amendment as brought in by Finance Act, 2015 was prospective in nature and applicable only from 01.06.2015. It is only on and from 01.06.2015, the assessee could be held liable for such TDS but not before that date. On the basis of this decision, it could be concluded that the co-operative banks have thus been taken out of the purview of beneficial exception only from 01.06.2015 and not before that. We order so. In the result, the impugned order could not be faulted with. - Decided against revenue.

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• 2022 (7) TMI 1047
  Assessment u/s 153A - Addition of income earned by the assessee from cricket betting - addition as estimated by applying a net profit rate of 1% on the total transactions as found recorded in the laptops - HELD THAT:- As different explanation was offered by the assessee in respect of cash found and seized during the raid conducted by the Vigilance Squad of State Police, Gandhinagar, and although it was initially stated to be the income of the assessee relating to his cricket betting business, this stand was subsequently changed by the assessee by stating that the same was belonging to his brother-in-law Mr. Himanshu and even the affidavit of Mr. Himanshu was also filed owning the said cash. As in the statement recorded assessee again changed this stand by stating that the cash found and seized was his income from dalali. Even though there was no mention of any real estate agency business in the said statement, there was a specific mention by the Assessing Officer that a letter as filed by the assessee during the course of assessment proceedings stating that he was doing dalali business of sale and purchase of land, flat bungalows in the last two years. Thus find no infirmity in the orders of the authorities below to treat the cash found and seized during the raid conducted by the Vigilance Squad of State Police, Gandhinagar at the residential premises of the assessee as his commission/dalali income from real estate agency business. Addition of 1% of total transactions relating to cricket betting - The assessee also never offered any satisfactory explanation regarding the nature of the said transactions as well as the income earned by him from the said transactions despite sufficient and specific opportunity afforded by the Assessing Officer in this regard during the course of assessment proceedings. He also did not produce any books of account or other relevant details to show the exact amount of income earned by him from the said transactions. Assessing Officer, therefore, was left with no option but to estimate the income of the assessee at 1% of the total transactions for both the years under consideration as found recorded in the laptops found from the possession of the assessee. Whether the estimate so made by the Assessing Officer and confirmed by the learned CIT(A) is fair and reasonable in the facts and circumstances of the case? As noted that neither before the authorities below nor even before the Tribunal, the assessee has brought anything on record to show that the profit actually earned by him from the transactions of cricket betting was lower than 1% as estimated by the Assessing Officer and confirmed by the learned CIT(A). Thus we are of the view that the estimate made by the Assessing Officer of the assessee s income at 1% of the total transactions of cricket betting as found recorded in the laptops seized from the possession of the assessee is quite fair and reasonable and the learned CIT(A) was fully justified in confirming the same. In that view of the matter, we find no justifiable reason to interfere with the impugned order of the learned CIT(A) on this issue and upholding the same, we dismiss both the appeals filed by the assessee.

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• 2022 (7) TMI 1046
  Exemption u/s 11 - promotion and development of the game of Cricket - proviso to section 2(15) is invoked in the case of the assessee as the activities of the assessee are being run on commercial basis - registration granted u/s 12AA was withdrawn - HELD THAT:- Firstly, it is not in dispute that the registration of the assessee society u/s 12A has been restored by the Tribunal vide its order dated 09.06.2016 [ 2016 (6) TMI 499 - ITAT JAIPUR] and on appeal by the Revenue, the order so passed by the Tribunal has been affirmed by the Hon ble Rajasthan High Court [ 2018 (8) TMI 196 - RAJASTHAN HIGH COURT] Therefore, the primary condition for availing exemption under section 11 and 12 of the Act that the assessee society should be registered u/s 12A is satisfied in the instant case. Thus in the instant case, we are of the considered view that given that the assessee society is generating surplus year after year is not the deciding factor to determine whether it is eligible for exemption under section 11 of the Act. And on this ground alone, the exemption claimed by the assessee society under section 11 can not be denied. Allowance of expenses towards grants to District Cricket Associations - HELD THAT:- We allow the expenditure incurred by the assessee by way of grants given to various District Cricket Association as claimed by the assessee. Accordingly ground no. 2 of the revenue is dismissed. Adopting accrual system of accounting and not the payment system of accounting as the Trust/AOP/Society/Institution exempted under the IT Act is not employed to adopt accrual system of accounting - HELD THAT:- As perused the material available on record and it is noted that the method of accounting shall be cash or mercantile as per section 145(1) of the Income Tax Act 1961, as consistently followed is allowed. Regarding the provision of expenses, it is noted that the same is provided and adjusted from year to year and the amount shown in the Balance Sheet is the closing balance at the end of the year. Regarding the separate claim, if any, the ld. CIT (A) has already given opportunity to the AO in this matter. Accordingly, the Ground no. 3 of revenue is dismissed.

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• 2022 (7) TMI 1045
  MAT computation u/s 115JB - Disallowing exclusion of Excise Duty Exemption as capital receipt availed during the year under consideration in computing book profit as per section 115JB - HELD THAT:- We find that the excise duty exemption has been admittedly the capital receipt and the finding of the CIT(Appeals) that the excise duty exemption is not liable to be taxed under the normal provisions of the Income Tax Act being not in dispute for us, the alleged capital receipt cannot be categorised as part of the book profit. In the case of assessee being covered by the excise duty notification, such sum collected on the goods manufactured and sold is in the nature of incentive subsidy given for establishing the units in backward areas and to generate employment opportunities. As per Memorandum issued by the Ministry of Commerce Industry, we find that the excise duty exemption is purely capital receipt and is neither chargeable to tax under the normal provisions of the Income Tax Act nor is to be included as part of the book profit for computing the minimum alternative tax as per the provisions of section 115JB of the Act. Thus Ground No. 2 raised by the assessee is allowed. Claim of deduction of amortisation of leasehold land expenses - AO rejected the assessee s claim on the ground that the amortisation of leasehold land does not specify the conditions laid down in section 35D(2) of the Act and is also not liable to deduction under section 37 - whether the alleged expense has been expended wholly and exclusively for the purposes of business? - HELD THAT:- As it is not in dispute that the leasehold lands taken by the assessee on lease are used for carrying out business operation and the lumpsum lease money was paid as per the agreement and was required to be paid at the beginning of the lease term but the said sum is spread over the entire lease term. Now what is the mechanism to quantify the amount and how to spread the amount across the lease period. Assessee has taken guidance from the Accounting Standard 19 issued by the Institute of Chartered Accountants of India and in accordance with the procedure laid down therein and principal of accounting has debited the annual amount of lease in the profit loss account and balance prepaid lease money is shown on the assets side in each year. The amount of amortisation debited to profit loss account is reduced from the advance lease money paid. We find no error in this way of accounting treatment of the amortisation of the leasehold expenses and thus the same being spent exclusively for the business purposes has been rightly claimed as expenditure by the assessee under Section 37 of the Act. Our view is supported by the decision of the Coordinate Bench of Delhi in the case of NIIT Technologies Ltd [ 2020 (6) TMI 526 - ITAT DELHI] wherein it was held that the assessee would be entitled to claim 1/90th of amount of total lease rent every year till period of lease of 90 years as revenue expenditure and entire lease rent amount would not be allowed during the relevant year. Thus amortization of leasehold land and land development charges deserves to be allowed as an expenditure under section 37 - Decided in favour of assessee. Corporate Guarantee given by the assessee to its Associated Enterprises - HELD THAT:- Inter-corporate guarantees are a common business practice. Within an affiliated corporate group, some entities represent higher credit risks than others. The weaker entities may either be unable to obtain financing or may be able to obtain credit facilities only upon unfavourable terms. When a corporate borrowing group includes multiple businesses, it is common for lenders to look to guarantees of corporate affiliates to support the credit facility. In the instant case, the corporate guarantee has been provided by the assessee on behalf of the Associated Enterprise and is in the nature of a downstream guarantee, where the guarantee is provided by the parent company for obligations of its subsidiary. So far as the issue that the present transaction of giving corporate guarantee falls under the category of international transaction, it is not under the dispute before us, as it was held against the assessee by the ld. CIT(Appeals) and against the said view, the assessee has not filed any appeal or Cross Objection. Computation of quantum of Corporate Guarantee fee adjustment to be made in the hands of assessee - As respectfully following the decision of the Coordinate Bench, Mumbai in the case of Everest Kento Cylinder Ltd [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] we confirm the view taken by the ld. CIT(Appeals), who has rightly held that the arm s length guarantee commission charge should be restricted at 0.5% of the guaranteed amount. Thus no interference is called for in the order of ld. CIT(Appeals) and the grounds raised by the revenue on the issue of Corporate Guarantee Fees are dismissed. Downward adjustment in respect of purchases made by eligible unit from non-eligible unit - assessee-company operates various units of which some units eligible for deduction u/s 80IA(10) (hereinafter called as eligible units ) and some are non-eligible units - HELD THAT:- TPO had agreed with the TNMM method adopted by the assessee. The reasons given for TPO adjustment is very general in nature merely referring to the profit margin of the eligible units to the non-eligible units. Ld. TPO has not given any analysis to demonstrate that how the purchase of any material by eligible units from non-eligible units could have yielded extra profits. We, therefore, are in conformity with the finding of the ld. CIT(Appeals) that no downward adjustment of profit of eligible units be sustained. As far as the ground raised by the Revenue on account of Rule 46A of the Act, ld. D.R. failed to file the necessary evidences to indicate as to what new documents were filed before the ld. CIT(Appeals) which were not placed before the ld. TPO and the ld. Assessing Officer. Therefore, all the grounds raised by the Revenue on account of issue of inter-corporate transactions deserve to be dismissed.

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• 2022 (7) TMI 1044
  Addition on account of unaccounted cash payments u/s 69C - Addition on the basis of the statements given by four employees in the course of search u/s 132(4) - CIT-A deleted the addition - HELD THAT:- As these statements considered on their own did not in itself inspire confidence to justify the addition made by the AO u/s 69C of the Act, for the reason that not only were there apparent factual inconsistencies but also the averments made by these four employees were general in nature and none of them divulged any specific details regarding any project in relation to which these so-called gratuitous payments were being made. Even the Ld. CIT-DR was unable to rebut the inconsistencies pointed out by the Ld. AR (as outlined in the preceding paragraphs) in the statements of the four (4) employees. It is also noted that each of the above four (4) employees had named Mr. Rajesh Sidhwani to be the person who was responsible for handling cash and that according to them, he would provide them with the cash for making the liaisoning expenses. We note that when Mr. Rajesh Sidhwani was confronted with the statements of these four employees, he had emphatically denied being involved in any such provision of cash for liaisoning work and gratifications. Effect of the retraction affidavits - As noted that the retraction affidavits had been sworn before the Notary Public (within seven days of the original statement) and were submitted before the AO (albeit late). We note that after perusal of the retracted affidavits, the AO had summoned all the four employees and cross-examined them under oath. Copies of their statements recorded upon cross examination by the AO have been placed before us. Having perused the same, it is noted that each of the four employees withstood the cross examination. And each of them stood by their retraction and re-affirmed that their original statements were obtained under duress and coercion. AO tried to but failed to extract any information or detail whatsoever in the cross-examination which would in any manner support his AO s allegation that gratuitous payments in cash were being made by the assessee. On these facts, we are unable to agree with the Ld. CIT-DR that the retraction statements ought to be discarded when they had stood the ground when cross-examined by AO that the statements recorded earlier was obtained involuntarily, so it is unsafe to rely on the four persons earlier statements to take an adverse view against the assessee regarding the purported gratuitous payments. Therefore, on conspectus of the aforesaid facts discussed, it is noted that not only were the original statements of the four (4) employees inconsistent, unreliable and suffers from contradiction and the admission made were not backed by any corroborative evidence and these statements had also been retracted and each of the four employees were able to withstand the cross-examination of the AO. Therefore, following the Board Instructions (supra), we find ourselves in agreement with the findings of the Ld. CIT(A), that it was improper for the AO to draw adverse inference on the basis of the retracted testimonies of the four employees. Thus we therefore do not see any reason to interfere with order of the Ld. CIT(A) and accordingly dismiss the Ground Nos. 1 to 3 raised by the Revenue in AY 2018-19. Disallowance u/s 14A of the Act read with Rule 8D - Scope of amendment brought in Section 14A - HELD THAT:- Absence of any exempt income, no disallowance u/s 14A of the Act is permissible. Whether the following Explanation inserted by the Finance Act, 2022 in Section 14A of the Act is required to be retrospectively applied and fastened on the assessee or not? - the legislative intent is clear, the amendment brought in by the Finance Act, 2022 on this issue as discussed, will take effect from First April 2022 and not before as contended by the Ld DR. In our considered view, therefore, the new Explanation inserted in Section 14A of the Act with effect from 01-042022 cannot be applied in the assessment years under consideration for the present case as it is for AYs 2016-17 to 2018-19, and therefore according to us, the decisions cited in Paras 33 to 37 above continue to hold good and are binding upon us. - Decided against revenue.

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• 2022 (7) TMI 1043
  Exemption u/s 11 - registration u/s 12A Cancelled - as submitted assessee had been carrying on charitable activities by running, schools, engineering colleges and medical colleges - evidences collected during search - Appeals were allowed by Tribunal, the order of ITAT is not accepted by the Income Tax Department and the appeals against the same is filed before Hon ble High Court of Karnataka - HELD THAT:- The pending of the appeal before Hon ble High Court cannot be reason to cancel the registration u/s 12A of the Act. The Tribunal is the higher forum, which has considered the entire issue and deleted various additions and decided issue in favour of assessee. The Ld. Principal CIT is bound to follow the order of the Tribunal being lower in hierarchy and he is not expected to pass such comments unless the order of the Tribunal is reversed by due process of law. The Ld. Principal CIT cannot sit in judgement over the order of Tribunal. Principal CIT considered the seized material collected by search conducted on 10.10.2019 and assessment completed on 30.9.2021. In our opinion, second search is a different proceeding that materials cannot be imported for cancellation of the registration granted u/s 12A of the Act, when the issue was restored to him by order of the Tribunal - Being so, the Principal CIT is not expected to place reliance on material gathered in second search and he cannot be considered it so as to cancel registration at this point of time. Accordingly, we restore the registration granted to the assessee w.e.f. 20.1.1992. Appeal of assessee allowed.

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• 2022 (7) TMI 1042
  Validity of reopening of assessment - main contention of the assessee is that the notice u/s 148 of the Act had been issued at the wrong address i.e. where the assessee had not been residing - HELD THAT:- Admittedly, the assessee had an address in Ludhiana and she also has an address in Mohali and another address in Chandigarh. From the records also, it is not coming out as to what is the correct address of the assessee as per the PAN records. In such a situation, we are of the considered view that the assessee cannot be allowed to take the benefit of plea of no service of notice u/s 148 of the Act when even as per the various documents filed before us, the assessee was having three addresses. In such a situation, we would concur with the categorical findings of FAA that the notice u/s 148 of the Act had been served on the assessee through affixture. Moreover, it is not the case of the assessee that her case was dismissed ex-parte by the Ld. CIT(A) or her assessment was completed ex-parte by the Assessing officer as at both the Forums her case had been duly represented by some authorised representatives as is apparent from the assessment order as well as the First Appellate order. Here again, the veracity of the assessee s contention that she had not authorised anybody to represent her, cannot be verified for want of adequate proof. The assessee s contention that the signature on Form 35 is not hers, is a matter within the realm of Forensic Experts. Further, as per record, even notice u/s 142(1) had been received by the assessee and had been duly responded to. Therefore, we reject the assessee s legal ground that the subject assessment is liable to be set aside for want of service of notice u/s 148 of the Act. We dismiss the grounds raised by the assessee in this regard. For merits of addition assessee has made several averments in which she has denied that she had ever filed any appeal before the Ld. First Appellate Authority and it has also be averred that she had neither appeared nor engaged any counsel to appear on her behalf either before the Assessing officer or before the Ld. CIT(A). In this affidavit, she has also mentioned about an ongoing matrimonial dispute between her son and his wife and it has also averred that the combined order of the Ld. CIT(A) is in the name of Shri Raj Partap Singh and the assessee and that Shri Raj Paratap Singh is the brother-in-law of her son - As sympathetic view of the fact that the assessee is an elderly warwidow, who might have been put to disadvantage by some unscrupulous elements behind her back, and also keeping in mind the principle of natural justice, we are of the considered opinion that even though we have upheld the findings of the Ld. CIT(A) regarding service of notice u/s 148 of the Act, in the interest of substantial justice, the assessee should be given another opportunity to explain the entire transaction and establish with proof her contention regarding non-taxability of the same before the Ld. CIT(A). Appeal of the assessee stands partly allowed for statistical purposes.

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• 2022 (7) TMI 1041
  Assessment u/s 153A - Addition based on the seized e-mail conversations - Unaccounted investment on transfer of RL shares by Anil R Patel - HELD THAT:- We hold that the ld. CIT(A) has correctly deleted the addition considering the decision of Hon ble Gujarat High Court in the case of PCIT v. Saumya Construction [ 2016 (7) TMI 911 - GUJARAT HIGH COURT] wherein it has been held that no addition can be made in an assessment u/s 153A, if no incriminating material is found during the search. In the present case, the decision of the Hon ble Gujarat High Court is squarely applicable as no incriminating material found during the course of the search. Hence, we hold that ld. CIT(A) has correctly deleted the addition made by relying on the decision of Hon ble Gujarat High Court. - Decided against revenue.

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• 2022 (7) TMI 1040
  Disallowance of loss - absence of any justification to support the incurring of any genuine loss by the appellant in any business carried on in the name and style of M/s.Dindayal Associates - proprietorship firm DA where the assessee purportedly was carrying on share trading business - claim of the Revenue is that this share trading business was the benami of SG and not of the assessee, and therefore denied claim of loss - HELD THAT:- We uphold the order of the ld.CIT(A) that the business of share trading transactions carried on in the proprietorship concern, DA was not that of the assessee, but of SG and denial of claim of business loss to the tune is accordingly upheld. Ground No.1 raised by the assessee is dismissed. The appeal of the assessee is dismissed. Reopening of assessment u/s 147 - We fail to understand how the AO could now attribute escapement of income of the assessee on account of this same share trading business, which as per the AO himself ,does not belong to the assessee at all. As on the date of recording reasons for escapement of income i.e. on 4.10.2006, the assessment order passed, which was reopened under section 148 of the Act ,dated 30.3.2004 had categorically held that the assessee had not carried on the share trading business. Therefore, this very order passed u/s 143(3) wherein the assessee was held to have not carried out any share trading transactions, could not possibly have been reopened u/s 147 on account of escapement of income relating to this very share trading business only. Assumption of jurisdiction to frame reassessment u/s 147 is clearly invalid. Re-assessment framed, therefore, u/s 147 of the Act is set aside. The appeal of the assessee is allowed on this count. Validity of assessment order passed u/s 158BD - satisfaction note recorded by the AO of the assessee on various grounds - HELD THAT:- The information against the assessee not emanating from search conducted on any person, the proceedings u/s 158BD to assess undisclosed income of the assessee for the block period could not have been conducted as per law. The order passed therefore u/s 158BD of the Act is, we hold, invalid. The satisfaction note records confirmation of the assessment order passed in the case of MRS which event took place on 28/12/2004, which is much subsequent to the date of issuance of notice under section 158BD i.e. on 24.11.2003. This goes to show that in any case the satisfaction whatsoever was recorded by the AO after issuance of notice u/s 158BD. Thus we hold that present proceedings conducted on the assessee under section 158BD of the Act and consequent assessment order passed under section 158BD of the Act is against the law and hence invalid. The order so passed under section 158BD is therefore set aside. This ground is allowed, and the appeal of the assessee is allowed. Addition of withdrawal of cash from the benami accounts - CIT-A deleted the addition - HELD THAT:- Though the appeal of the Revenue is merely academic since we have already held the order passed by the AO under section 158BD in the present case in the appeal of the assessee, but even on merits, we find that the ld.CIT(A) thrashed the very basis of the AO for making addition of Rs.1.05 crores by noting that there was no cash withdrawal from the benami account of the proprietorship concern, DA , but in fact it was kept in fixed deposits in the name of proprietorship concern. The Department was unable to controvert this fact. Therefore, the very basis of the AO for making addition in the hands of the assessee of Rs.1.05 crores does not survive, since the Ld CIT(A) has noted the fact that no cash was actually withdrawn. In view of the same, we see no reason to interfere in the order of the CIT(A) in deleting the addition.

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• 2022 (7) TMI 1024
  Delayed deposit of employee share of PF/ES - processing return of income u/s 143(1) of the 1961 Act, by invoking provision of Section 36(1)(va) read with Section 2(24)(x) - scope of amendment - HELD THAT:- As observed that Hon ble Jurisdictional High Court in the case of Sagun Foundry Private Limited [ 2016 (12) TMI 1479 - ALLAHABAD HIGH COURT] has held that deduction is to be allowed for belated payment of employee contribution to PF/ESI which is deposited beyond the due date stipulated under the relevant statutes governing PF/ESI, but the same stood deposited before the due date for filing of return of income as is prescribed u/s 139(1) We hold that in the instant appeal for ay: 2018-19, if the employee share of PF/ESI is deposited by employer to the credit of employee with the relevant fund maintained for PF/ESI before the due date of filing of return of income u/s 139(1) of the 1961 Act, then the assessee shall be entitled for deduction u/s 36(1)(va) - assessee s counsel has filed tax-audit report in which detail/ bifurcations of employee share of PF/ESI along with date of payment is mentioned but challans for deposit of PF/ESI are not filed. The said tax-audit report is placed on record in file. Thus for limited purposes, we are directing AO to verify the challans evidencing deposit of aforesaid employee share of PF/ESI and that it was deposited before the due date prescribed for filing of return of income u/s 139(1), before allowing claim of deduction u/s 36(1)(va) - assessee is directed to file before AO complete details/bifurcation of employees share of PF/ESI, which was added to income of the assessee u/s 36(1)(va) read with Section 2(24)(x) along with relevant paid challans, for verification. While passing the above order, we also note that several Division Benches of ITAT across Country have now passed appellate orders, even after considering the amendments made to Section 36(1)(va) and 43B of the 1961 Act by Finance Act, 2021, holding that if the employee share of PF/ESI is deposited by employer to the credit of employee with the relevant fund maintained for PF/ESI before the due date of filing of return of income u/s 139(1) of the 1961 Act, then the tax-payer shall be entitled for deduction u/s 36(1)(va) - Appeal of assessee allowed.

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• Customs

• 2022 (7) TMI 1039
  Seeking waiver of forfeiture of security as well as penalty imposed on CHA - time period for reporting the changes in Regulation 12 and 13 - case of appellant is that the registration with Ministry of Corporate Affairs was obtained on 01.09.2018 and the intimation to the Customs was given on 10.10.2018 - sufficient reasons for delay provided or not - compliance with Regulation 7 of the CBLR 2018 as well as Regulation 13 of CBLR, 2013 or not - HELD THAT:- Regulation 7 clearly lays down that the change of constitution of a Customs Broker needs to be communicated within 60 days from the date of such change for the grant of license under Regulation 7. In the instant case, the change was made on 11.12.2014 but it was reported only on 10.10.2018 after a considerable delay. In view of above, there is a clear violation of CBLR, 2013 under which the appellant was licensed. As mere wrong mention of the relevant CBLR would not vitiate the order, the appellant has violated the provisions. It is noticed that the appellant has claimed that the delay occurred largely due to the fact that one of his partner died and he was not in a right frame of mind. It is noticed that the impugned order has, taking a lenient view, not revoked the license of the appellant - Taking into account the circumstances and the facts of the case, further lenient view is adopted. The case is not of a significant violation but only that of a delay in reporting. Moreover, the appellant did not process any document during this period. The forfeiture of security deposit of Rs. 5 lakhs and imposition of penalty of Rs. 50,000/- under Regulation 18 of CBLR, 2018 is excessive - the order of forfeiture of security deposit of Rs. 5 lakhs is set aside but the penalty of Rs. 50,000/- on the Customs Broker is sustained, for this lapse - appeal allowed in part.

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• Corporate Laws

• 2022 (7) TMI 1038
  Seeking appointment of one or more Independent Valuer(s) to valuate the fair price per equity share of the Respondent Company - low valuation of shares in the exit offer - Valuation ordered under section 247 of Companies Act, valid or not - scope under section 59 of Companies Act - HELD THAT:- The Respondent No. 1 Company in the first instance failed to act as per the obligatory requirement in terms of the SEBI Circular and it was only after repeated request by the Petitioner that the Respondent No. 1 Company provided its shareholders with an Exit Offer. Reluctance on the part of the Respondent company to provide copies of the annual returns and balance-sheet for the years 2014-17 to the Petitioner creates doubts about the bona fide intentions of the Respondent. The Respondents also refused to provide the Valuation Report of its shares to the Petitioner. This also does not reflect well on the bona fide intentions of the Respondent Company and its Directors with respect to justifying the share price it offered in the Exit Offer. The Petitioner had already been made an offer of Rs. 125 per share and subsequently the Exit Offer was only of Rs. 18.42 per share are significant and sufficient enough grounds to cast doubts about the veracity of the valuation of shares got done by the Company for its Exit Offer. Therefore, in the interest of equity, justice and fair play for the Applicant and other public shareholder a revaluation of the shares by an independent valuer is necessitated and the independent valuer should also take into account under-valued transactions or bogus expenses if any, incurred, before the earlier valuation was done. Whether the present petition comes within the ambit of Section 59 of the Companies Act? - HELD THAT:- The Petitioner has claimed that the promoters have purchased shares during the period of the Exit Offer and that for the purpose of Section 59, rectification is not limited only to public shareholders , but includes promoters and Members of the Company. Be that as it may, such rectification would only follow consequentially and be contingent upon the findings of a fresh valuation in respect of the fair price of the shares - the matter needs to be considered on the strength of the factual position apparent from the oral and written submissions of the parties. It is also pertinent to mention that the Petitioner could not have approached this Tribunal under the Provisions of Chapter XVI of the Companies Act, 2013 as he did not have the requisite numbers. Also, since the Respondent No. 1 Company is now delisted, the Petitioner and other public shareholders are deprived of the benefit of getting the market/traded value of their shares and must perforce have to be content with value of shares in the Exit Offer - the Authorized representative of the Petitioner via Application under Right to Information Act, 2005 was informed by the Respondent No. 10 vide its letter dated 30.08.2019 that necessary Notices have been issued by it to the Respondent No. 1 company and its Directors; however it also informed the authorized representative of the Petitioner to approach this Tribunal for appropriate action in the matter. Valuation ordered under section 247 of Companies Act - HELD THAT:- The Respondents have also contended that valuation cannot be ordered under Section 247 of the Companies Act, 2013 since valuation under Section 247 would be limited to valuation required to be done under the provisions of the Companies Act and the valuation prayed for by the Petitioner is a valuation to be done under the SEBI Circular (which has been issued under the provisions contained in the SEBI Act). It is noteworthy here that while Section 59(4) of Companies Act provides for rectification of Register if transfer of securities is in contravention of the provisions of the SEBI Act. Section 247 or other provisions of the Companies Act or Rules do not specifically provide for conducting valuation if it is required under the provisions of the SEBI Act. It therefore follows that if the Register contains entries in respect of valuation done in, contravention of the SEBI Act, then in order to rectify those entries fresh valuation should be permissible under the Companies Act since Section 59(4) of the Companies Act provides for such rectification. This Tribunal therefore orders that an independent valuer be appointed forthwith from the list of approved valuers of IBBI by Respondent No. 1 Company, the services of whom will be compensated by the Respondent No. 1 Company. The independent valuer will submit his report on the valuation of shares of the Respondent No. 1 Company within a period of 3 months from the date of his appointment - The Respondent No. 1 Company will take all further necessary action on the basis of the valuation of shares arrived at by the independent valuer. The Applicant will be at liberty to approach the appropriate authority or legal forum for any grievance necessitated on the basis of the valuation report.

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• Insolvency & Bankruptcy

• 2022 (7) TMI 1037
  Initiation of CIRP - NCLT rejected the application - NPA - Period of limitation - NCLT that, a statement contained in the balance sheet cannot be treated as an acknowledgement of liability under Section 18 of the Limitation Act - Proposal of OTS is older than 3 months - HELD THAT:- The decisions in Sesh Nath Singh [ 2021 (3) TMI 1183 - SUPREME COURT ], Laxmi Pat Surana [ 2021 (3) TMI 1179 - SUPREME COURT ] and Asset Reconstruction Company [ 2021 (4) TMI 753 - SUPREME COURT ] have subsequently been followed in numerous decisions of this Court delivered by two-Judge Benches, namely: Dena Bank v C. Shivakumar Reddy [ 2021 (8) TMI 315 - SUPREME COURT ], STATE BANK OF INDIA VERSUS VIBHA AGRO TECH LIMITED [ 2021 (10) TMI 1348 - SUPREME COURT] , Devas Multimedia Private Ltd. v Antrix Corporation Ltd. and Another [ 2022 (1) TMI 774 - SUPREME COURT ] and SVG Fashions Pvt. Ltd. (Earlier Known As SVG Fashions Ltd.) v Ritu Murli Manohar Goyal and Another [ 2022 (4) TMI 16 - SUPREME COURT ] - In all these decisions the principles emerged that An acknowledgement in a balance sheet without a qualification can be relied upon for the purpose of the proceedings under the IBC. In view of the above decisions, the position of law has been set at rest. Neither the NCLT nor the NCLAT had the benefit of adjudicating upon the factual controversy in the context of the decisions of this Court. The principles which emerge are that: (i) The provisions of Section 18 of the Limitation Act are not alien to and are applicable to proceedings under the IBC; and (ii) An acknowledgement in a balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgement was within a period of three years from the original date of default. It is also noted that Mr Niranjan Reddy has relied upon documentary material to indicate that the acknowledgements of liability were within a period of three years from the date of default and, hence, the applicant filed by the appellant under Section 7 of the IBC was within limitation. Reliance has also been placed on the letter of revival dated 26 April 2015 and the offer of OTS on 6 November 2015. Since we are inclined to restore the proceedings back to the NCLT for fresh adjudication in view of the decisions of this Court noted above, we are not entering upon the factual dispute on whether the application filed under Section 7 of the IBC would result in an initiation of the CIRP in the present case. The appropriate course of action would be to keep open all rights and contentions of the parties on merits to be adjudicated upon before the NCLT. The proceedings shall stand restored to the file of the NCLT for adjudication afresh, keeping all rights and contentions of the parties open on the factual aspects of the controversy.

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• 2022 (7) TMI 1036
  Seeking approval of the Resolution Plan - section 30(6) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The RP has certified that the Resolution Plan does not contravene any provisions of law for the time being in force. On examination of the Resolution Plan, we also find that the Resolution Plan does not contravene any provisions of law. We also hold that the Resolution Plan is in compliance with the provisions stated in Regulations 38 and 39 of the IBBI (CIRP of the Corporate Person) Regulations, 2016, and the interests of all stakeholders are taken care of. The term of the plan is also stated. Hence, there are no reason to reject this Resolution Plan on any grounds. The Resolution Applicant cannot be saddled with any previous claim against the Corporate Debtor prior to initiation of its CIRP. For the permits, licenses, leases, or any other statutory right vested in the Corporate Debtor shall remain with the Corporate Debtor and for the continuation of such statutory rights, the Resolution Applicant has to approach the concerned statutory authorities under relevant laws. Application allowed.

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• 2022 (7) TMI 1035
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - quantum of debt - HELD THAT:- A perusal of counter filed by Corporate Debtor shows that, the Corporate Debtor has not disputed the debt and only disputed the quantum of the debt. As per Section 5(6) of IBC, dispute if any as to debt, shall be regarding existence of debt. In the case in hand, the existence of debt is not disputed, as according to corporate debtor, the quantum of debt alone is in dispute. Hence, the operational debt in this case remain undisputed stands admitted and established. Since, it is not the case of corporate debtor that it discharged the said debt, the default also stands established. Petition admitted - moratorium declared.

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• 2022 (7) TMI 1034
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Whether the Corporate Applicant is able to prove that it is unable pay the Debt claimed in the Application, hence the present Application is filed for initiation of Corporate Insolvency Resolution Process against it? - HELD THAT:- This Application is filed by the Corporate Applicant namely M/s. Enaar Steel and Alloy Private Limited under Section 10 of the IBC, 2016 for initiation of Corporate Insolvency Resolution Process, as the Corporate Applicant is not in the position to meet its obligations and has further committed default in meeting its obligations. The Corporate Applicant has filed along with its application its financial statements for the year ending on 31st March, 2020 which is showing loss, and has long term borrowings to the tune of Rs. 1,05,61,504 and other liabilities including short term provisions to the tune of Rs. 2,04,82,836. The Financial Statements further reflects that the asset base of the Corporate Applicant is so low as on 31.03.2020. The current assets show only Rs. 30,508.85 and non-current assets show Rs. 6,31,597. The Corporate Applicant has also enclosed along with its application the notice of Extra Ordinary General Meeting of the Company dated 10.10.2021 for approval of filing application under Section 10 of the IBC, 2016 which was held on 01.11.2021 and 05.11.2021, wherein the resolution was approved in the Extra Ordinary General Meeting authorising Mr. Devesh Kumar Agarwal/Mr. Jitesh Kumar Agarwal, Directors of the Company, to make, file an application before Adjudicating Authority for initiation of Corporate Insolvency Resolution Process and further proposed to appoint Mr. Pavan Kankani, Insolvency Professional to act as Interim Resolution Professional at a remuneration of 1,50,000/- per month plus applicable taxes and reimbursements. One of the important Operational Creditors of Corporate Applicant, the Southern Power Distribution Company of Telangana Limited (TSSPDCL) have also filed their Affidavit conveying their No objection for initiation of Corporate Insolvency Resolution Process as pleaded - On going through the Resolutions passed by Corporate Applicant and latest Financial Statements filed by Corporate Applicant, it is clear that the poor financial health of the Corporate Applicant. Application admitted - moratorium declared.

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• 2022 (7) TMI 1033
  Seeking to maintain status quo and not to take no further actions as the Liquidator of the Corporate Debtor pending the disposal of this Application - seeking removal of Liquidator of the Corporate Debtor - requirement under Regulation 7A of the Insolvency and Bankruptcy Board of India (Resolution Professionals) Regulations, 2016 not met - suppression of material facts - HELD THAT:- On a conjoint reading of Section 33 of IBC, 2016 with Section 16 of the General Clauses Act, 1897 would show that the Authority which has the power to appoint a person, equally has the power to suspend or dismiss that person, in the absence of any specific powers conferred thereto. Thus, by virtue of Section 16 of the General Clauses Act, 1897 it clear that this Adjudicating Authority has the power to dismiss the Liquidator since this Authority is vested with the powers under Section 33 and 34 of IBC, 2016 to appoint a Liquidator. Grounds on which the Liquidator can be changed - HELD THAT:- The provisions of IBC, 2016 does not explicitly state the grounds on which the Liquidator can be removed. In the absence of the specific provisions under the IBC, 2016 we may resort to Section 276 of the Companies Act, 2013 - In the present case, the Liquidator has stated in his reply that no stakeholder has the right to seek for replacement of Liquidator and that once the Liquidator is appointed, he cannot be removed unless there is a serious allegation of corruption. If we go by the contention as made by the Learned Liquidator then it should be construed that the Liquidator is infallible and this Adjudicating Authority has to simply close its eyes and let the Liquidator do whatever he wants. As to the present case of M/s. Jeypore Sugar Company Limited, it is to be seen that in the previous hearings serious allegations have been made against the Liquidator by the stakeholders that he has shared the valuation report with the prospective Scheme proponents and the Liquidator has also not denied the same. It is an admitted fact that the Liquidator has shared the valuation Report of the Corporate Debtor with the prospective Scheme proponents which lead to the proponents quoting value on par with the valuation report. Such an act committed by the Liquidator is viewed seriously by this Tribunal. The said act of the Liquidator would amount to failure to exercise due care and diligence in performance of the powers and functions and as such, it is one of the grounds on which the Liquidator can be changed. In so far as the appointment of Liquidator is concerned, it is an undisputed fact that the Respondent/Liquidator herein has accepted the assignment in respect of the Corporate Debtor without holding a valid AFA. Further, the Appellant viz. IDBI Bank was given the liberty to bring to the notice of the Adjudicating Authority to have a re-look at the appointment of the Liquidator so far as the Authorization is concerned - It is to be noted here that IIIPI and also the IBBI have issued show cause notice to the Respondent and has stated that the Respondent has accepted the assignment without holding a valid AFA and hence IIIPI imposed a penalty of Rs. 10,000/- upon the Respondent. The same is also reflecting the order passed by IBBI. Hence, it is crystal clear that the Respondent has accepted the assignment without holding a valid AFA, however as observed by the Hon ble NCLAT, the non-holding of a valid AFA will not render the order of liquidation passed by the Adjudicating Authority illegal or invalid and moreover the Hon ble NCLAT it has stated that if any irregularity is brought by the Appellant, then this Tribunal may have a re-look at the appointment of the Liquidator, in the present case. The Liquidator in respect of the Corporate Debtor viz. Jeypore Sugar Company Limited has failed to exercise due care and diligence in performance of the powers and functions while discharging his functions as Liquidator in respect of the Corporate Debtor viz. M/s. Jeypore Sugar Company Limited and hence he is required to be replaced. Thus, under the provisions of Section 33 and 34 of IBC, 2016 read with Section 16 of the General Clauses Act, 1897 read with Section 276 of the Companies Act, 2013, from the latest list provided from IBBI, for the period from July 2022 to December 2022, we hereby appoint Mr. S. Hari Karthik as the Liquidator in respect of the Corporate Debtor viz. Jeypore Sugar Company Limited. The outgoing Liquidator/Respondent is directed to handover the charges to the newly appointed Liquidator within a period of 7 days from the date of this order. Application allowed.

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• Service Tax

• 2022 (7) TMI 1032
  Extended period of limitation - evasion of service tax or not - service tax with interest paid on being pointed out (under Reverse Charge mechanism) - suppression of facts or not - scope of section 73(4) of Finance Act - Revenue Neutrality - HELD THAT:- It is undisputed that the appellant had, initially, not paid service tax on the services received under reverse charge mechanism for the relevant period and had, on being pointed out by DGCEI, immediately paid the same with interest and took Cenvat credit of the service tax paid. It is also undisputed that the Cenvat credit was available to it. Needless to say that the appellant could not have and has not taken Cenvat credit of the interest paid on the service tax because it is not available as Cenvat credit. It is also undisputed that it was paying service tax prior to the disputed period and was availing Cenvat credit of the service tax paid. After the changes in the Act in 2012, from a regime where only specified taxable services were chargeable to service tax to one where all services were taxable except those in the negative list, the appellant had not paid service tax but did so after being pointed out by DGCEI. Whether the appellant is covered by Section 73(4)? - HELD THAT:- This sub-section applies to cases where service tax has not been paid by reasons of (a) fraud; or (b) collusion; or (c) willful misstatement; or (d) suppression of facts or contravention of the provisions with an intent to evade payment of service tax. According to the Revenue the appellant had suppressed the facts and contravened provisions with intent to evade paying service tax. It is a well settled law that fraud, collusion, willful misstatement and suppression all require the intent to be established - The notice can be issued within the normal period of limitation (which varied from time to time) OR extended period of limitation of five years if the elements of fraud, collusion, willful misstatement or suppression of facts or contraventions with an intent to evade are present. This power to issue the show cause notice is further limited by Section 73(3) which states that no show cause notice can be issued if the tax is paid before the notice is issued. However, Section 73(3) does not apply in cases covered by Section 73(4) which applies if there are elements of fraud, collusion, etc. which are identical to the elements required to invoke extended period of limitation. Thus, the charge of service tax is not reduced or abated with efflux of time but only the remedy available to the Revenue goes if it is time barred. Further, the remedy available to the Revenue is also subject to the other limitations under Section 73(3) which is available in all cases where the tax is paid before the issue of show cause notice unless the elements of fraud, collusion, etc. indicated in Section 73(4) are present. As discussed, each of these elements require an intention. Revenue Neutrality - HELD THAT:- Revenue neutrality becomes significant to determine if the appellant had an intention to evade or otherwise although it does not make any change to the charging section. The intention of any person can only be inferred from the circumstances of the case. The case of the Revenue is that the appellant had intention to evade service tax. No evidence of it, is found - All that happened in this case is by not paying the service tax when it is due but by paying it late, the appellant had to pay interest on it as well. The interest is not available as Cenvat credit. The appellant had, in fact, lost by not paying service tax in time and has not gained anything at all. It is thus found that there is no evidence of fraud or collusion of willful misstatement or suppression of facts or contraventions with an intent to evade service tax on the part of the appellant. In the absence of these elements, the appellant is not covered by Section 73(4) and is squarely covered by Section 73(3). The show cause notice should therefore not have been issued to the appellant. The elements required to impose a penalty under Section 78 are identical to the elements required to invoke Section 73(4) and it is found that they are not present, the penalty under Section 78 should not have been imposed on the appellant. Further, Section 80 under which penalties could have not been imposed for reasonable cause for failure was also available to the appellant since the lis in the case began when the show cause notice was issued on 2 June 2014 and Section 80 was abolished only in 2015. The fact that the Commissioner adjudicated the matter after 2015 makes no difference as cases have to be decided as per the law when the lis began. Appeal allowed - decided in favor of appellant.

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• 2022 (7) TMI 1031
  Denial of refund of Service Tax - Revenue sought to change the classification of service from Erection Commissioning and Installation Service to Commercial Industrial Construction Service and adjustment of amount already paid under old head to new head - inclusion of value of free supply material in the assessable value - HELD THAT:- The appellant had classified the service provided by them under Erection Commission and Installation Service and had paid service tax amounting to Rs. 20,22,971/-. Later on, Revenue initiated proceedings seeking to classify the service provided by them under Commercial Industrial Service and also sought to include the value of free supply material in the assessable value for the purpose of tax. The issue was decided by original adjudicating authority in favour of appellant on the grounds of limitation and the demand was set aside. It is apparent that while the Revenue s attempt to classify the service provided by the appellant under the Commercial Industrial Construction Service and to include the value of free supply material has failed in the Tribunal, the original self-assessment of the appellant made under the head of Erection Commissioning Installation remained undisturbed. The claim of refund is in respect of assessment under the head of Erection Commissioning and Installation remains undisturbed. Thus the claim of refund can only be made in respect of original assessment under the head of Erection Commissioning Installation . In this background, the limitation prescribed under Section 11B would be applicable and consequently, the refund claim filed much after the period of limitation would not be admissible - Appeal dismissed.

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• 2022 (7) TMI 1030
  Levy of Service Tax - refundable security deposit collected by the Appellant from its customers - reimbursement of expenses from its customers on account of water, electricity and diesel expenses incurred for provision of services - termination charges collected from customers for early termination of lock in period of lease - Cenvat credit of works contract services and other services for construction of immovable property - Cenvat Credit on event management services for promotion of business of the Appellant. Applicability of service tax on refundable security deposit collected by the Appellant from its customers - HELD THAT:- It is found from the case records that it is not in dispute that the said amounts are collected as a refundable security deposit by the Appellant and the same is returned to the customers at the end of the lease period with no interest as per section 5 of the Lease Deed as submitted by the Appellant - the said amounts are not collected towards any provision of service but as a refundable deposit and as such the amounts cannot be treated as consideration for renting/leasing of immovable property services. Tribunal in the case of SAMIR RAJENDRA SHAH VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLHAPUR [ 2014 (11) TMI 499 - CESTAT MUMBAI] , it was held that As per the agreement, the Service Tax is payable separately by the lessee. As the appellant has not recovered Service Tax from the lessee, they may recover separately. Therefore, the contention of the appellant as they have not recovered the Service Tax from the lessee, the rent recovered by them be treated as cum-Service Tax is not acceptable. Thus, the demand of service on security deposit cannot be sustained and is thus set aside. Demand of service tax on reimbursement of expenses of diesel, water and electricity from the customers - HELD THAT:- The issue of inclusion of reimbursements in the consideration for value of services was dealt by Hon ble Supreme Court in the case of Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd. [ 2018 (3) TMI 357 - SUPREME COURT] and Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 was held to be ultra vires the section 67 of the Finance Act, 1994. In the case at hand, the fact that the expenses are mere reimbursement based on total cost incurred by the Appellant and the total floor area of the customers is not in dispute which goes to show that there is no profit element involved in the above reimbursements. The department has not been able to contradict the above fact either. Hence, having regard to the judgment of the Hon ble Supreme Court, it is found that the Appellant cannot be saddled with the liability on such reimbursements on account of water, electricity and diesel charges and thus the demand of service tax on this ground cannot be sustained either and is thereby quashed. Service tax on termination charges - HELD THAT:- There was no service rendered by the Appellant towards such charges and the same was in the nature of penalty for early termination than the agreed terms of lease. Thus, it is not a consideration for the service of renting of immovable property but a compensation or liquidated damages for reneging the contract of renting. Also, it is on record that the department has considered the above amounts for termination charges also in the demand under security deposit above as these charges were adjusted with the deposit lying with the Appellant and thus on this score also, the demand cannot be sustained as it will lead to taxing the same amount twice - the demand on account of termination charges is also liable to be quashed. Eligibility of Cenvat credit on input services used for construction of immovable property - HELD THAT:- The period covered in the present appeals is June 2007 to March 2011 i.e. prior to the Cenvat credit Rules, 2004 which were amended w.e.f 01.04.2011 - Cenvat credit of input services as availed by the Appellant for construction of immovable property which was further let out to various customers is allowed. Cenvat credit on event management services - HELD THAT:- Rule 2(l) of the Cenvat Credit Rules, 2004 doesn t exclude any such service from the eligibility of availment of Cenvat credit as these expenses have been incurred in the course of furtherance of business and are thus business promotion expenses and the same is eligible as Cenvat credit. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2022 (7) TMI 1029
  Levy of penalty on Directors u/r 26 of CER, 2002 - exemption under a notification that granted area based exemption was wrongly obtained by the Company and its Directors - contention of the Department that a Company was not entitled to claim area based exemption was rejected - HELD THAT:- Learned counsel for the appellant has placed the decision of the Tribunal in M/S KOTDWAR STEELS LIMITED, SANJEEV JINDAL, DIRECTOR, SANJEEV GUPTA, DIRECTOR, DINESH CHANDRA JOSHI, BRIJMOHAN AGARWAL VERSUS CCE, MEERUT [ 2016 (10) TMI 385 - CESTAT NEW DELHI] by which ten appeals were allowed. The contention of the Department that a Company was not entitled to claim area based exemption was rejected. The impugned order in so far as seeks to impose a penalty of Rs.5 lakhs on the appellant, therefore, deserves to be set aside and is set aside - Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2022 (7) TMI 1028
  Maintainability of appeal - compliance with the pre-condition to deposit - failure on the part of learned Single Judge to appreciate the issue raised as to the denial of violation of principles of natural justice - HELD THAT:- The appellant has challenged Ext.P2 the original order imposing service tax on the appellant. Section 85 of the Finance Act deals with Appeals to the Commissioner of Central Excise (Appeals). Section gives the right to any person aggrieved by any decision or order passed by any adjudicating authority subordinate to the Principal Commission of Central Excise or Commissioner of Central Excise to the Commissioner of Central Excise (Appeals). In view of the specific provision for appeal under the statute, this court is not justified in entertaining the Writ Appeal under Article 226 of the Constitution of India. As far as the condition for pre-deposit for filing the appeal, the same cannot be taken as a ground for entertaining the jurisdiction of this court. When a statute prescribes a precondition for filing the appeal, the same cannot be bypassed by this court. There are no ground to interfere with the judgment of the learned Single Judge - Appeal dismissed.

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• Indian Laws

• 2022 (7) TMI 1027
  Dishonor of Cheque - forum shopping - complaints have been filed after about two and half months of service of statutory notice of demand by the petitioner/accused - offences under Section 420 and 506 of IPC stand disclosed against the petitioner - prosecution twice on the basis of some set of facts - double jeopardy - Section 138 of NI Act - HELD THAT:- The Supreme Court in the case of SANGEETABEN MAHENDRABHAI VERSUS STATE OF GUJARAT ANR. [ 2012 (4) TMI 728 - SUPREME COURT] , while dealing with exactly the same question i.e. whether prosecution for offence under Section 138 of the NI Act and offences under Section 406, 420 of IPC can be continued simultaneously against an accused on same set of facts, observed that In the case under N.I. Act, there is a legal presumption that the cheque had been issued for discharging the antecedent liability and that presumption can be rebutted only by the person who draws the cheque. Such a requirement is not there in the offences under IPC. In the case under N.I. Act, if a fine is imposed, it is to be adjusted to meet the legally enforceable liability. There cannot be such a requirement in the offences under IPC. The case under N.I. Act can only be initiated by filing a complaint. However, in a case under the IPC such a condition is not necessary. Thus, it is clear that offences under Section 138 of the NI Act and Section 420 of IPC are distinct from each other because ingredients of the two offences are different. While in a prosecution under Section 138 of NI Act, fraudulent or dishonest intention at the time of issuance of cheque need not be proved but in a prosecution under Section 420 of IPC, such intention is an important ingredient to be established. For proving offence under Section 138 of NI Act, it has to be established that the cheque has been issued by the accused to discharge a legally enforceable debt or liability and the same has been dishonoured for insufficiency of funds etc. and despite receipt of statutory notice of demand, the accused has failed to pay the amount of cheque within the stipulated time - offence under Section 420 of IPC is made out at the time of issuance of the cheque itself which is not the case with offence under Section 138 of NI Act. Therefore, the two offences are distinct from each other and the principle of double jeopardy or rule of estoppel does not come into play. The mere fact that respondent Mushtaq Ahmad had lodged an FIR, which has culminated in lodging of a challan against the petitioner containing allegations relating to the same transaction which is subject matter of the impugned complaints, does not make out a case of forum shopping or double jeopardy. The complainants are well within their rights to continue prosecution for both these offences i.e. offences under Section 138 of NI Act and Section 420 of IPC simultaneously. The contention of learned counsel for the petitioner in this regard is without any merit. Petition dismissed.

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• 2022 (7) TMI 1026
  Dishonor of Cheque - acquittal of the accused from the charges - legally enforceable debt or not - raising of presumptions - rebuttal of presumptions - Onus to prove - Section 138 of Negotiable Instruments Act - HELD THAT:- In the present case, the accused has admitted signature on the cheque in question. As per the scheme of the NI Act once the accused admits signature on the cheque in question, certain presumptions are drawn, which result in shifting of onus. Section 118 of the NI Act lays down the presumption that every negotiable instrument was made or drawn for consideration. Another presumption is enumerated in Section 139 of NI Act. The provision lays down the presumption that the holder of the cheque received it for the discharge, in whole or part, of any debt or other liability. The combined effect of these two provisions is a presumption that the cheque was drawn for consideration and given by the accused for the discharge of debt or other liability. Both the sections use the expression shall , which makes it imperative for the court to raise the presumptions once the foundational facts required for the same are proved. It has been held by a three-judge bench of the Hon ble Apex Court in the case of RANGAPPA VERSUS SRI MOHAN [ 2010 (5) TMI 391 - SUPREME COURT ] that the presumption contemplated under Section 139 of NI Act includes the presumption of existence of a legally enforceable debt. Once the presumption is raised, it is for the accused to rebut the same by establishing a probable defence. In the present case, the complainant examined himself as the sole witness. To raise the presumption of cheque having been issued in discharge of legally recoverable debt and drawn for lawful consideration arising by virtue of Section 118(a) and Section 139 of NI Act, the testimony of the complainant must be of such a character as to be believed as gospel truth because the complainant has accepted that there was no witness to the transaction. The perusal of oral as well as documentary evidence produced by the complainant shows that there is no mention in the notice sent to the accused that the alleged amount of money was given to the accused as a loan - the presumption of existence of a legally enforceable debt can not be drawn as it has been rebutted by the circumstances itself. The learned trial court has rightly hold that the cheque in question was not issued by the accused for the discharge of his legal liability as the presumption stood rebutted by the circumstances itself. Consequently, it can be said that no legal liability exists in favour of the complainant, thus, the second ingredient to the offence under section 139 of NI Act does not stand proved. Cogent evidence is required to be proved beyond reasonable doubt to secure conviction in a criminal trial which lacks in the present case. Appeal dismissed.

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• 2022 (7) TMI 1025
  Dishonor of Cheque - funds insufficient - discharge of legally subsisting liability or not - Acquittal of the accused - section 138 of NI Act - whether complaint is barred by time limitation or not - HELD THAT:- This is an appeal against the order of acquittal. This Court, considering an appeal against an order of acquittal, would upturn the findings of the lower Appellate Court, if only the same is not a possible view. In this regard, as far as the first finding of the Trial Court, regarding the period of limitation and presentation is concerned, even though the Court staff was examined by the accused, he has stated that he was not the concerned staff during the relevant period. The complainant states that the complaint was presented before the appropriate Court and it was returned. Not making of initials and seal can be a mistake of the Court, for which, the complainant cannot be found fault with. Even if there is a delay in representation, still the original date of complaint is only to be taken into account for the purpose of the limitation. Second, it is also held that the mistake of the Court cannot be put against the complainant, the said findings of the lower Appellate Court that the complaint is barred by limitation is not a possible view and is legally erroneous and therefore, the said findings cannot be sustained. Apart from the question of limitation, the lower Appellate Court, while re-appreciating the entire evidence on record, had rightly observed that the contention of the accused that the complainant is a sleeping partner of the Concern M/s. Ramesh Paper Marts was not at all denied by the complainant and therefore, this Court is of the view that the contention of the complainant that the accused was introduced through one of his friends in Chennai, in the year 2008, is unbelievable. The very fact that the accused had initiated criminal proceedings even though belatedly and even after referral by the Police, filed a protest petition and thereafter, filed a private complaint, especially when he has issued stop payment for the cheque, creates a doubt in the case of the complainant so as to make out a probable defence that the cheque was not issued on 07.07.2009 at Chennai in the manner as projected by the complainant. Further, the Appellate Court also held that in view of the probable defence and in the absence of further proof towards the advancing of loan and discharge of legally subsisting liability, has come to the conclusion that the complainant has failed to establish his case about the legally enforceable liability and acquitted the accused. Thus, even though the learned Counsel for the appellant was able to dislodge the finding regarding the limitation by projecting a clear-cut case, the finding of the lower Appellate Court, with regard to the merits after considering the factors and the discrepancies in the evidence of the complainant, coupled with the evidence adduced by the accused, cannot be upturned by this Court in the appeal against acquittal, as on the appreciation of the evidence, such a view by the lower Appellate Court is possible. There are no merits in this Criminal Appeal, against the order of acquittal - appeal dismissed.

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