Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 28, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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TCS liability u/s 52 - where multiple ECOs are involved in a single transaction of supply of goods or services or both through ECO platform and the Supplier-side ECO is himself the supplier of the said supply - TCS is to be collected by the Buyer-side ECO while making payment to the supplier for the particular supply being made through it.
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TCS liability u/s 52 - where multiple ECOs are involved in a single transaction of supply of goods or services or both through ECO platform and where the supplier-side ECO himself is not the supplier in the said supply - Compliance including collection of TCS, is to be done by the supplier-side ECO who finally releases the payment to the supplier.
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Difference in Input Tax Credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for the period 01.04.2019 to 31.12.2021. - CBIC clarified the issues in detail
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Interest u/s 50(3) of the CGST Act, 2017, in cases of wrong availment of IGST credit and reversal thereof - There will not be any interest liability u/s 50(3) of CGST Act if, during the time period starting from such availment and up to such reversal, the balance of input tax credit (ITC) in the electronic credit ledger, under the heads of IGST, CGST and SGST taken together, has never fallen below the amount of such wrongly availed ITC - Circular
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Jurisdiction - power to issue a notice u/s 61(3), once returns have been submitted by the assessee before initiating action u/s 74 of the Act - The scrutiny proceedings of return as well as proceeding under Section 74 are two separate and distinct exigencies and issuance of notice u/s 61(3), therefore, cannot be construed as a condition precedent for initiation of action u/s 74 of the Act. - Petition dismissed - HC
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Levy of GST - Credit Card loan - tax charged by the bank on each instalment of interest together with the loan amount paid by the appellant. - the appellant’s above transaction with the bank was a service which could not be termed as a credit card service and was not exigible to the Integrated Goods and Service Tax (IGST) - HC
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Dereliction of duties on the part of the concerned officer - Almost two years of the judicial time has been wasted only for the reason that respondent at first wanted to place the counter affidavit on record and then sought further time to file counter affidavit. - Cost of ₹5,000/- imposed on the respondent i.e. Commissioner of GST. - HC
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Violation of the principles of natural justice (audi alteram partem) - When the statute itself provides that a hearing is required to be given to the person against whom an adverse decision is contemplated, it cannot be contended on behalf of the authorities that the same is not mandatory. - HC
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Validity of rejection of appeal due to non supply of certified copy of the order - defective appeal - the appellate authority has to intimate the applicant with regard to the defect in the appeal by giving him opportunity to rectify the defect, so that the appellant can remove the same within the time stipulated. - Matter restored back - HC
Income Tax
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Compounding of offences - compounding application rejected due to delay in filing the application - just because the first application was rejected for default, does not mean the second application should be rejected. - There is no restriction also on the number of applications that could be filed. The only requirement u/s 279(2) is that the complaint filed should be still pending - HC
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Estimation of gross profit - Unexplained expenditure u/s 69C - authorities below have not accepted books results and have estimated the profit - Merely because there is a fall in gross profit rate would not ipso facto be the reason for rejection of book results. - AT
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Applicability of higher rate of tax u/s 115BBE - The contention that excess cash could be treated as business income rejected. - The action of the lower-authorities in holding excess cash as deemed income u/s 69A attracting higher rate of tax u/s 115BBE sustained - AT
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Accrual of interest expenditure / income - CIT(A) deleted the disallowance u/s 36(1)(iii) - Where there is no certainty of collection, revenue cannot be said to be accrued at all. As per the Mercantile System of Accounting also, which follows accrual method of accounting, where there is no certainty of collection of revenue, income cannot be recognized. AS-9 is for the purpose of accounting for income on mercantile basis only. - AT
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Addition u/s 271AAB - assessee has disclosed the income after the search - in the assessment order penalty was initiated for the marriage expenses of the son for which no addition is made and the AO failed to record the satisfaction so as to whether the income disclosed were undisclosed income of the assessee or not the levy of the penalty is unsustainable in law. - AT
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Deduction u/s 80IA(4) - whether assessee is not a contractor, but developer of infrastructure facilities? - we have analyzed one contract/agreement with the government on sample basis. The findings given with respect to the contract elaborated above shall also be applied in all the contracts which were subject to the deduction under section 80-IA(4) of the Act. - Deduction allowed - AT
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Enhancement of income made by CIT(A) u/s 251(1) - valuation of shares - Rule 11UA(2)(b) - Discounted Cash Flow Method (DCF) - the CIT(A) have committed an error in rejected the valuation done by the assessee from prescribed expert as per the prescribed method, which ultimately resulted in enhancement of income of the Assessee u/s 251(1) - Additions deleted - AT
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Addition u/s 68 - accommodation entry receipts - The investors are corporate entities duly assessed to tax and have made investment through banking channel from their own sources which fact has neither been denied nor rebutted in the assessment nor by the first appellate authority. This is also evident from the chart exhibited elsewhere. - CIT(A) rightly deleted the additions - AT
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TDS u/s 194C - payments to several vendors in relation to its procurements from them, consisting of apparels/ clothes/ footwear/ goods manufactured by these vendors - ‘works contract’ v/s ‘purchase of goods’ - The provisions of Section 194C were not applicable, and more particularly the agreement did not fall within the definition of ‘works contract’ - AT
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Rectification u/s 154 - Modification of order more than 10-year-old order - The interest u/s 234B and u/s 234C has not been charged while issuing the intimation and the demand raised as per the record was Nil. The date of order u/s 154 was 16.01.2017 pertaining to the Assessment Order passed u/s 153A and date of rectification order u/s 154 r.w.s. 254/143(3) was dated 09.12.2020 which tried to modify the order of 2009 - the order of the rectification, rectifying the order of the earlier decade is barred by limitation and cannot be held to be legally valid. - AT
Customs
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Revenue appeal - Question of law or facts - Drawback claim - If there is violation of the principles of natural justice, the court can interfere. If there is an error of law apparent in the order, it vitiates it. The court will not re-examine facts or evidence. It cannot substitute its views with that of the court or authority below. If the finding on facts is plausible, the court will not interfere. - HC
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Levy of Penalty - diversion of gold - Bin handler to keep the gold in safe custody - The allegation in the show-cause notice is that as the importer could not fulfill the export obligation, therefore, the appellant was responsible for diversion of the said gold into domestic market. There is no evidence available on record that how the appellant was involved in diversion of gold by the importer - AT
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Exemption from Customs Duty - high density polyethylene granules - Ican be seen that the product is high density polyethylene and it consists of 98% ethylene by weight. Therefore, even though some additives in very miniscule percentage exists in the composition but chemical character of the product i.e. high density polyethylene does not get altered and the same cannot be classified in any other entry other than high density polyethylene. - Benefit of exemption allowed - AT
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Refund - Failure of the authority of pass fresh de-novo order in remand proceedings - At this belated stage where the documents are not available with the department and this thing has been repeatedly coming on record and that the duty was paid under protest, the party is entitled to relief and matter remanded to Commissioner (Appeals) to allow the benefit of the Notification sought by the party after due examination of the same, as per law specially provisions of Section 149.- AT
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Classification of goods proposed to be imported - Thermal Printer Ribbons (TPR) - the purpose of ribbon in TPR is to serve as a medium for printing graphic images and text on an ID plastic card by use of heat. In the thermal printing process, pigmented dye and/or resin is never transferred to the card by means of impact but due to the heat on the printer head. In summary, the functionality and the physical characteristics of Thermal Printer Ribbon and typewriter ribbon are clearly not akin. - AAR
Indian Laws
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Dishonour of Cheque - existence of legally enforceable debt or liability - vicarious liability of nominee and non-executive directors - The contention does not cut much ice as perusal of Form No. MGT-7 nowhere shows that the petitioners were non-executive directors and E-Form DIR 12 also reveals that there was no change in directors in 2021 as well as in 2022 and the petitioners were only nominee directors of SMPL - Petition dismissed - HC
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Dishonour of Cheque - Legally enforceable debt or not - The offence under Section-138 arises only when a cheque that represents a part or whole of the legally enforceable debt at the time of encashment is returned by the bank unpaid. Since the cheque did not represent the legally enforceable debt at the time of encashment, the offence under Section-138 is not made out. - HC
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Dishonour of Cheque - suspense of sentence subject to deposit of 20% of cheque amount - the petitioner doubting the order of the learned Sessions Judge and camouflaging the same to be an order under Section 143A of NI Act is not proper and sustainable. - HC
Case Laws:
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GST
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2023 (7) TMI 1104
Bail granted subject to condition that appellant shall deposit a sum of Rs.1.5 crores within a period of 12 weeks from the date of his actual release - appellant submits that the condition to deposit Rs. 1.5 crores within 12 weeks from the date of his actual release as a pre-requisite condition for the bail is not sustainable inasmuch as the First Information Report was in respect of wrongfully availing the Input Tax Credit - HELD THAT:- In one of the identical matters, i.e. Criminal Appeal No.186 of 2023 [ 2023 (1) TMI 1168 - SC ORDER] , Mr. K.M. Nataraj, learned ASG appearing for the Union of India/State had fairly stated that such a condition cannot be imposed while granting bail. Considering the above facts and circumstances, the condition directing the appellant to deposit a sum of Rs.1.5 crores within 12 weeks from the date of his actual release is not liable to be sustained and is hereby set aside - The rest of the conditions in the impugned order granting bail are sustained. Appeal allowed.
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2023 (7) TMI 1103
Jurisdiction - power to issue a notice u/s 61(3), once returns have been submitted by the assessee before initiating action u/s 74 of the Act - HELD THAT:- In the present case it does not appear that any discrepancy was noticed by the department in the returns of the petitioner nor any such deficiency was pointed out to the assessee for it to be rectified by it. The returns, therefore, remain intact. It is later at the stage of consideration of the return that the department has found that proper tax has not been deposited and consequently proceedings under Section 74 has been initiated and concluded against the petitioner. In the statutory scheme the course followed by the department would clearly be permissible in law. The argument that unless deficiency in return is pointed out to the assesee, and an opportunity is given to rectify such deficiency, that the department can proceed under Section 74 is not borne out from the statutory scheme and the argument in that regard therefore, must fail. The scrutiny proceedings of return as well as proceeding under Section 74 are two separate and distinct exigencies and issuance of notice under Section 61(3), therefore, cannot be construed as a condition precedent for initiation of action under Section 74 of the Act. Merely because no notices were issued under Section 61 of the Act would mean that issues of classification or short payment of tax cannot be dealt with under Section 74 as exercise of such power is not dependent upon issuance of notice under Section 61 - the petitioner has a remedy of preferring appeal which has not been availed. Various facts are asserted during the course of hearing to highlight the incapacity of the petitioner due to which the appeal could not be filed earlier. The petitioner is permitted to prefer such appeal within two weeks from today and in the event such an appeal is filed, the same shall be entertained without raising any objection with regard to limitation - petition dismissed.
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2023 (7) TMI 1102
Levy of GST - Credit Card loan - tax charged by the bank on each instalment of interest together with the loan amount paid by the appellant. As per I. P. Mukherji, J Transaction was a credit card service or not? - HELD THAT:- It is quite plain that to constitute credit card service, the service should be between the issuer of the card and the holder of the card and that the service should have some relationship or nexus with the holding, operation or use of such card including transactions made with it. Otherwise, a bank may be an issuer of a card to a card holder. The same card holder may be an ordinary savings account holder with the bank. The service rendered by the bank in relation to such ordinary account holding does not have any relationship with the service rendered by the bank to the same customer as a card holder in transactions concerning the card - The loan transaction had to be taken as an altogether separate transaction. It had no relationship with the relationship between the appellant and the bank arising out of issue, holding or operation of the credit card. Hence, the appellant s above transaction with the bank was a service which could not be termed as a credit card service and was not exigible to the Integrated Goods and Service Tax under the notification dated 28th June, 2017 - appeal allowed. As per Biswaroop Chowdhury, J. Besides accepting the conclusions arrived by I. P. MUKHERJI J., the followings have been added by Mr. Biswaroop: As respondent City Bank granted Loan to the appellant repayable with interest it is to be treated as loan simpliciter and cannot be equated with Credit Card. The basic difference between loan and credit Card is that the former is granted as a necessity and is a welfare scheme and the later is a facility granted to customers to get goods and services on credit from 3rd parties by availing the Credit Card Services of the Bank regarding payment - Thus loan and Credit Card Services cannot be equated. Thus loan to a Credit Card holder is to be treated as a loan and nothing else. Appeal allowed.
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2023 (7) TMI 1101
Violation of the principles of natural justice (audi alteram partem) - petitioner was not afforded an opportunity of personal hearing before passing of the impugned order - alleged fraudulent business transactions - traders found to be non-existent - HELD THAT:- It is an admitted case that neither the petitioner nor any legal representative on its behalf had been granted any personal hearing so as to explain or canvas its case before the Adjudicating Authority. The respondent despite being afforded several opportunities to file the counter affidavit, has not denied the allegations or the contentions raised by the petitioner. Thus, the averments made in the petition stand admitted by the respondent, as the same have not been traversed. When the statute itself provides that a hearing is required to be given to the person against whom an adverse decision is contemplated, it cannot be contended on behalf of the authorities that the same is not mandatory. In the facts of the present case, there is a clear violation of the principles of natural justice. The order has been passed disregarding the specific provisions incorporated by the Legislature in consonance with the well-settled principles of audi alteram partem - it is difficult to understand why and how any person with a reasonable understanding of the law could observe that a telephonic conversation and the visit of the representative of a party can be considered as a personal hearing - the impugned order, therefore, has been passed in clear violation of the provisions of Section 75(4) and Section 75(5) of the CGST Act and is also in clear violation of principles of natural justice. The Officer seems to be in some sort of hurry to conclude adjudication prior to the end of Financial Year on 31.03.2021 and passed the order, the very next day of filing of the reply - the same is clearly not only in violation of statutory principles of the Act but also is clear violation of the principles of natural justice. The mere availability of alternate remedy, however, does not oust the jurisdiction of the High Court and will not make the writ petition as not maintainable. The availability of alternate remedy does not operate as a bar on the power of the High Court to exercise jurisdiction under Article 226 of Constitution of India. The present case is a clear case of violation of the provisions of the Act as well as the violation of principles of natural justice and is a fit case for exercise of discretionary jurisdiction of the High Court under Article 226 of the Constitution of India. The matter remanded to enable the respondent to pass a fresh order after affording the petitioner a due opportunity to be heard. Dereliction of duties on the part of the concerned officer - HELD THAT:- The conduct of the respondent, as discussed above, is highly improper. Almost two years of the judicial time has been wasted only for the reason that respondent at first wanted to place the counter affidavit on record and then sought further time to file counter affidavit. - Cost of ₹5,000/- imposed on the respondent i.e. Commissioner of GST.
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2023 (7) TMI 1100
Maintainability of petition - availability of efficacious alternate remedy of filing an appeal - goods have already been released - intent on the part of the appellant to evade the payment of tax - HELD THAT:- The adjudicating authority has considered the facts and given his own reasoning as to how he is not agreeable to the submissions made by the appellant. The correctness of the decision taken by the original authority based on the facts and circumstances has to be adjudicated and when disputed questions of fact are involved, it is but appropriate for the appellant to invoke the appellate authority since the appellate authority will be able to re-appreciate the factual position and come to a conclusion. The appellant should file a statutory appeal and the appellate authority should consider the appeal petition both on facts as well as on law and after affording an opportunity of personal hearing to the authorised representative of the appellant, a reasoned decision shall be rendered on merits and in accordance with law. Appeal disposed off.
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2023 (7) TMI 1099
Seeking release of detained vehicle - Allegation on the ground that the E-way Bills generated on the basis of tax invoices is for ODC vehicle type but the vehicle being used for transporting the goods was truck (open body) (HGV) common truck - HELD THAT:- Prima facie, the petitioner has no intent to evade tax, nor there is any allegation by the respondent No. 1 that the petitioner has the intent to evade duty nor any duty has been evaded. Learned counsel appearing for the Revenue prays for and is granted four weeks' time to file counter affidavit. Two weeks' thereafter is granted to counsel for the petitioner to file rejoinder affidavit - Considering the submissions advanced by learned counsel for the petitioner, till the next date of listing, the effect and operation of the order dated 10.7.2023 passed by the respondent No. 1 in Form CST DRC-07 imposing penalty of Rs. 8,47,164/- upon the petitioner shall remain stayed. The respondent No. 1 shall also release the goods and vehicle confiscated under the impugned order on such conditions as may deem fit and proper.
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2023 (7) TMI 1098
Maintainability of appeal (appeal challenging the order of determination of Tax) - appeal rejected due to non supply of certified copy of the order - dismissal for delay in filing the appeal, justified or not - HELD THAT:- There is no dispute that the petitioner preferred the appeal on 28.06.2021. If the authority found some defect, the obligation casts on the appellate authority to intimate the appellant with regard to the defect in the appeal itself. But as it appears nothing has been placed on record nor any argument has been advanced by the Revenue Department with regard to intimation of any defect, but rejected the same after long lapse of around 11 months only on 17.05.2022. Even if that will also be taken into consideration, the action of the opposite parties is absolutely arbitrary, unreasonable and contrary to the provisions of law and in violation of the principle of natural justice, reason being, if the party files an appeal in ignorance of the position that he has to file the certified copies of the order and the filing of appeal is defective one, then the appellate authority has to intimate the applicant with regard to the defect in the appeal by giving him opportunity to rectify the defect, so that the appellant can remove the same within the time stipulated. If that would have been adhered to after grant of such opportunity, then certainly right accrues in favour of the appellate authority to reject the same since the Principle of Natural Justice has been complied with. Nothing has been placed on record to that extent and mechanically the same has been rejected showing non-supply of the certified copies, which this Court does not accept. The order passed by the appellate authority under Annexure-1 in rejecting the appeal preferred by the petitioner for non-supply of the certified copies, cannot sustain and the same is hereby set aside and the matter is remitted back to the appellate authority to entertain the same and pass order after allowing the petitioner to remove the defect as would be pointed out by the appellate authority - Petition allowed by way of remand.
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2023 (7) TMI 1097
Challenging the Initiation of proceedings on the ground that relating to the very same period audit has been completed earlier and DGGI Wing is already in seisin of the matter - violation of provisions of Sections 61 and 65 of the CGST Act - HELD THAT:- The impugned proceedings need not be interfered at this stage and the issues involved can be decided only after affidavit to be filed by the respondents. Respondents are directed to file affidavit-in-opposition within four weeks. Petitioner to file reply thereto, if any, within two weeks thereafter - List this matter for final hearing in the monthly list of September, 2023.
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Income Tax
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2023 (7) TMI 1096
Exemption u/s 10B - eligibility criteria - whether deduction can be claimed for a period of 10 consecutive years beginning with the previous year in which the assessee begins manufacture of the products? - simultaneous benefit u/s 80IC claimed - As held by HC assessee was not entitled to the benefit u/s 10B and in view of the impossibility to claim the both together, the claim under Section 80IC had been given up, we would think that it will be in the fitness of things that we remit the matter back to the Assessing Officer for consideration of the case of the assessee u/s 80IC HELD THAT:- Petitioner has moved an application for permission to withdraw the present special leave petition. Leave, as prayed for, is granted. The special leave petition is dismissed as withdrawn.
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2023 (7) TMI 1095
Validity of reopening of assessment - allegation of violation of the process mandated under Section 144B(6)(viii) as not granting personal hearing - exemption u/s 54 denied to assessee for the reason that the sale consideration in question was spent in purchase of another immovable property in the name of her son and not in her own name - assessee disclosing her condition with medical records, the petitioner sought adjournment for 15 days to respond to the show cause notice but the Assessment Officer allowed her time only till 04.03.2023 - according to the petitioner, she had specifically requested for personal hearing in order to explain that the sale consideration of the immovable property was spent by her to purchase another immovable property in the name of her son owing to her medical condition; but even personal hearing was not granted to the petitioner and the same is not just in violation of the process mandated u/s 144B(6)(viii) HELD THAT:- As mentioned above, learned counsel for respondent revenue in all fairness conceded that petitioner deserves a fair hearing on the issues. In the overall circumstances described above, the impugned assessment order as well as the consequent demand notice, both dated 15.03.2023 are set aside and the matter is remanded to the Assessment Officer to proceed further in accordance with law, of course, with due consideration to the judicial precedents referred to in the reply dated 04.03.2023 of the petitioner and after granting her a fair opportunity to be heard in person or through authorized representative.
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2023 (7) TMI 1094
Compounding of offences - compounding application rejected due to delay in filing the application - HELD THAT:- Division Bench of this Court in Durgeshwari Hi-Rise Farms (P) Ltd. Vs. Chief Commissioner of Income Tax (TDS) [ 2018 (10) TMI 1605 - BOMBAY HIGH COURT] was considering a matter where the assessee had filed more than one compounding application. Though court has observed that the order was being passed in peculiar facts of that case, we find that the court has observed that just because the first application was rejected for default, does not mean the second application should be rejected. Therefore, we make it clear to respondent no. 3 that the compounding application cannot be rejected on the ground of delay in filing the application. Moreover, there is no restriction also on the number of applications that could be filed. The only requirement under sub-section (2) of Section 279 of the Act is that the complaint filed should be still pending which Mr. Suresh Kumar concurs with Mr. Walve, is still pending. Therefore, we dispose the petition with a direction to respondent no. 3 to consider and dispose petitioner s application dated 8th October 2015 within 8 weeks from today. Before passing any order which shall be a reasoned order dealing with every submission of petitioners, a notice of personal hearing shall be given which shall be communicated at least five working days in advance.
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2023 (7) TMI 1093
Reopening of assessment u/s 147 - sufficient material available to form a belief that income which was otherwise chargeable to tax had escaped assessment - Capital gain computation - real difference in the capital gains emanated from the difference in the cost of acquisition, as taken by the petitioner and that which was arrived at by the AO - validity of PCIT's i.e., the authority granting approval for reopening - HELD THAT:- Highest rate qua each parcel of land would be approximately Rs.10 per square metre. This very extract goes on to note that as on 01.04.1981, the cost of acquisition of land sold by the petitioner should have been Rs. 2000/- per 250 square meters, which would work out to Rs. 8 per square metre. AO, based on this reasoning arrived at the cost of acquisition, which is, in effect, the market value of land as on 01.04.1981, by multiplying Rs. 8 per square meter with the total land area sold by the petitioner i.e., Rs. 2,63,194/-. The product of which is Rs. 21,05,552/-. Counsel for the parties agree that the AO had to index the cost of acquisition, which is what the petitioner did. Notwithstanding the above, the AO, as noticed above, has not applied his mind to the input received by him from the DCIT via letter dated 27.01.2015. It appears that the AO did not indicate as to why Rs. 8 per square metre was taken as the rate, as against Rs. 10 per square metre, while ascertaining the cost of acquisition. AO did not have the relevant material in his possession. This aspect has been emphasized by Dr Gupta by referring to assertions made in paragraphs 11 and 24 of the writ petition, wherein it is averred that the AO did not have relevant material in his possession before triggering the reassessment proceedings. This plea is supported by referring to the counter-affidavit, where there is no denial qua the assertion made in the writ petition. What makes matters worse is that the Principal Commissioner of Income Tax [in short, PCIT ], while granting approval, has adopted an almost nonchalant approach. AO, while putting a probative value with regard to the capital gains in the reasons recorded by him, somehow has also missed adjusting the deduction claimed by the petitioner under Section 54EC of the Act. As noted hereinabove, the petitioner had claimed deduction of Rs.1 crore in this regard. Therefore, for the foregoing reasons, there has been complete non-application of mind by the AO, both with regard to the provision which was applicable in the instant case and also insofar as his failure to secure the material that was available with the DCIT in arriving at the market value of the land as on 01.04.1981, which, as noticed above, forms the basis of the cost of acquisition. PCIT i.e., the authority granting approval for reopening the reassessment proceedings, did not do better. PCIT, in fact, rubber-stamped the attempt of the AO to reopen the assessment. Courts have, time and again, held that such an approach is to be abjured - Decided in favour of assessee.
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2023 (7) TMI 1092
Application u/s 119(2)(a)/(b) requesting allowing carry forward of losses rejected - HELD THAT:- Respondent No. 1 has not articulated as to why it cannot grant relief prayed for by Petitioner. Reasons introduces clarity in an order. The order howsoever brief, should indicate an application of mind all the more when the same can be further challenged. Hon ble Apex Court in Uttar Pradesh State Road Transport Corporation vs. Jagdish Prasad Gupta [ 2009 (3) TMI 1070 - SUPREME COURT OF INDIA] has stated reasons introduce clarity in an order. The order howsoever brief, should indicate an application of mind all the more when the same could be further challenged. Therefore, without making any observations on the merits of the matter, we hereby quash and set aside the order and remand the matter back to Respondent No. 1. Respondent No. 1 shall pass a reasoned order dealing with every submissions made by Petitioner and before passing any such order, shall also give a personal hearing to Petitioner.
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2023 (7) TMI 1091
Unexplained cash credit u/s 68 - penny stock - bogus share transactions - HELD THAT:- In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent s bank account has been debited. The shares were also transferred into respondent s Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent s bank account. CIT[A] found there was no reason to add the capital gains as unexplained cash credit u/s 68 - The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal.
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2023 (7) TMI 1090
Penalty u/s 270A - though the assessee has furnished loss under Income from Other Sources (which includes the disallowed depreciation as well) but was ultimately ignored by neither claiming set off in current AY 2018-19 nor carry forward/brought-forward benefit in next AY 2019-20 - HELD THAT:- We find that the loss computed by an assessee under the head Income from other sources can be set off against any other income in current year u/s 70 and 71 but in the present case, the assessee was not having any other income, hence unable to claim set off. Further, the carry-forward of loss of Income from other sources head to next year is permitted u/s 74A and that section permits carry-forward of a particular type of loss i.e. loss from owning and maintaining race horses. Since the assessee s loss had not arisen from such a source, there was no enabling provision to allow carry forward benefit. Therefore, the software utility itself did not allow set off in current year or even carry forward. Be that as it may, irrespective of whether it was the assessee who voluntarily did not claim any set off or carry forward of loss of Income from Other Sources or it was automatic in the situation by virtue of law, the fact remains that the Total Income as per return was Rs. Nil and the AO has also assessed Total Income at Rs. Nil. Coupled with this, it is also a fact that the assessee is not having any benefit of set off or carry forward of loss. When it is so, we agree with the submission of Ld. AR that the situation does not fall within any of the clauses of section 270A(2), not even under clause (g) of section 270A(2). Being so, the present case does not attract penalty provision in terms of section 270A(2) read with section 270A(8). We are therefore inclined to delete the penalty imposed upon assessee and we do so. The assessee succeeds in this appeal.
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2023 (7) TMI 1089
Revision u/s 263 - Receipt taxable in the hands of the assessee as Fee for Technical Services ( FTS )/Fee for Included Services ( FIS ) u/s 9(1)(vii) of the Act and Article 12 of India-USA DTAA - As per CIT assessee had received a sum from customers in India on which though tax was deducted @ 10% at the time of remittances but the same was not offered to tax in India - HELD THAT:- Keeping in view the fact that the Tribunal in in assessee s own case [ 2023 (4) TMI 239 - ITAT DELHI] decided this issue on merits in favour of the assessee, in our humble opinion, the very basis of assumption of jurisdiction by the Ld. CIT under section 263 of the Act in AY 2017-18 presently under consideration does not survive. As in the absence of any material available on record to prove that the assessee is providing full fledged service and solutions for legal professions, we are of the opinion that the A.O. has committed an error in making the addition. In view of the same, the payment received by the assessee is in the nature of Business Profit which cannot be brought to tax in India in the absence of PE. Accordingly, the grounds of both the appeals of the assessee are allowed.
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2023 (7) TMI 1088
Unexplained credit u/s 68 - advance received by the assessee from alleged prospective buyers of plots where PAN details were not available - CIT-A restricted addition - HELD THAT:- We have noted from the orders authorities below that the assessee had furnished PAN details in a few more cases of advances received, to the ld.CIT(A) and taking note of the same, he had deleted the addition made with respect to these advances following the directions of the ITAT. This method was followed by the Ld.CIT(A) in subsequent years also ,wherein following the direction of the ITAT in A.Y 2008-09 and based on details furnished by the assessee of available PAN numbers of advances, he deleted the addition made by the AO to the said extent. AO not being provided an opportunity to go through the details furnished by the assessee, which the ld.CIT(A) had suo moto taken cognizance of and further reduced the addition under section 68 - We do not find merit in this contention of the ld.DR. The Ld.CIT(A) has allowed relief to the assessee following the directions of the ITAT. In the process he has himself verified the fulfilment of condition directed by the ITAT. We see no infirmity in the same. Ultimately what the ld.CIT(A) has done is undisputedly in the light and in accordance with the direction of the ITAT in Asst.Year 2008- 09. Therefore, we do not find any merit in the grounds raised by the Revenue vi-a-vis restriction of addition made by the ld.CIT(A) under section 68 of the Act. Disallowance of interest expenses u/s 36(1)(iii) - CIT-A deleted addition - HELD THAT:- No reason to interfere in the order of the ld.CIT(A) who has deleted the disallowance of interest u/s 36(1)(iii) of the Act giving factual finding, which have remained uncontroverted by the Revenue before us as under Interest bearing funds were not found by the AO to be utilized for non-business purpose and Interest free advances given by the assessee were made in the course of business of the assessee. In view of the above, order of the ld.CIT(A) deleting the addition of interest under section 36(1)(iii) of the Act is upheld.
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2023 (7) TMI 1087
Estimation of gross profit - Unexplained expenditure u/s 69C - addition made by applying gross profit ratio on gross receipts - authorities below have not accepted books results and have estimated the profit - AO proceeded to make addition on the basis of peak on the other hand - CIT(A) reduced the addition by taking into account double addition made by the AO of the same item - HELD THAT:- We are unable to sustain the findings of Ld.CIT(A) for sustaining the addition partly on the basis of fall in gross profits without pointing out any specific discrepancy in accounts that resulted into suppression of true figure of gross profit. The findings should not be pure guess works, it should have certain foundation. In the case in hand, Lower authorities have failed to advert to the contentions of the assessee that difference between the figures reported in Form 26AS and actually recorded in the books of assessee was due to business model of assessee. The other party did not book expenditure in a particular year for that the assessee cannot be held responsible for them before. This fact ought to have been verified by the lower authorities before proceeding to reject books of accounts. Law is well-settled that the AO while resorting to estimation should consider all aspects surrounding the transactions. Merely because there is a fall in gross profit rate would not ipso facto be the reason for rejection of book results. Therefore, considering the material placed on record, the impugned order is hereby, set aside and the issue is restored to the file of AO for deciding it afresh. The AO is hereby, directed to verify the correctness of the claim of the assessee regarding mismatch of figure in Form 26AS arose because of booking of income by the assessee in the year under appeal and by recipient of services in next year. He would decide the issue in accordance with law. Thus, Ground Nos. 2 3 raised by the assessee are allowed for statistical purposes. Addition made on account of difference between Form 15CA and Tax Audit Report - contended on behalf of the assessee that the difference arose because of the fact that the amount was paid post negotiation which resulted into decrease in payment - HELD THAT:- Before Assessing Authority, no explanation in difference of remuneration was furnished thus, the unreconciled difference was admitted by the assessee. We find that the assessee has not brought any evidence supporting its contention that there were certain negotiations with other party for reduction in payment. In the absence of such evidence, we do not see any reason to interfere in the findings of lower authorities, the same is hereby affirmed. Thus, Ground raised by the assessee is rejected.
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2023 (7) TMI 1086
Excess stock found during the survey proceedings as unexplained investment u/s 69 r.w.s.115BBE - applicability of the provision of section 69/69A/69B and consequential higher rate of tax u/s 115BBE in respect of the income surrendered and offered to tax by the assessee on account of excess stock and excess cash found during survey - HELD THAT:- Excess stock - Once the facts emerging from record shows that the excess stock found during survey was a part of entire lot of stock of assessee, part of which is recorded in books of account and part of the same was not found recorded and therefore, treated as excess stock at the time of survey and consequently surrendered by the assessee and also offered to tax in the return of income then the excess stock cannot be treated as deemed income u/s 69 or 69B of the act. Accordingly, this issue is decided in favour of the assessee. Excess-Cash - Neither before lower-authorities nor before us, the assessee has not shown anything to demonstrate that the said reply was not correct. Therefore, there could hardly be any dispute that the excess-cash represented assessee s income from unexplainable source attracting the provisions of section 69A. AR, in his submission, has referred to a part of the reply and not taken into account this part of assessee s reply. Being so, we are inclined not to accept Ld. AR s submission that the excess cash could be treated as business income. We uphold the action of lower-authorities in holding excess cash as deemed income u/s 69A attracting higher rate of tax u/s 115BBE. The assessee fails to this extent. Appeal of assessee is partly allowed.
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2023 (7) TMI 1085
Accrual of interest expenditure / income - Disallowance u/s 36(1)(iii) - Applicability of AS-9 issued by the ICAI - CIT(A) deleted the additions - As per AO assessee was following Mercantile System of Accounting hence the interest income accrued on the advances is taxable - CIT(A) deleted the disallowance finding merit in the reasoning given by the assessee before it for the short charging of interest or noncharging of interest on the impugned advances, as there was no possibility of collecting the same since the principal amount of advance itself was overdue and not being collected, therefore the assessee had stopped charging interest on the same or was booking only the amount of interest actually received from the said party - HELD THAT:- We find no merit in this contention of the Revenue since it is a self-defeating argument. AS-9, issued by the Institute of Chartered Accountants of India, which is the parent body of the Chartered Accountant professionals, guiding and governing the professionals, prescribes manner of recognition of Revenue and it categorically states that revenue can be said to be accrued only when there is certainty of collection of the same. Therefore, where there is no certainty of collection, revenue cannot be said to be accrued at all. As per the Mercantile System of Accounting also, which follows accrual method of accounting, where there is no certainty of collection of revenue, income cannot be recognized. AS-9 is for the purpose of accounting for income on mercantile basis only. Therefore, the contention of the ld. DR that AS-9 had been incorrectly applied by the ld. CIT(A), while the mercantile system should have been applied is completely contradictory contention. No infirmity in the order of the ld. CIT(A) in holding that the short charging of interest on certain loan/advances given by the assessee and also non-charging of interest on certain other loans/advances was as per the Mercantile System of Accounting; and, therefore, there was no case for making any disallowance u/s 36(1)(iii) - Appeal filed by the Revenue is accordingly dismissed.
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2023 (7) TMI 1084
Unexplained money u/s.69A - Cash receipt claiming to be marriage gift and therefore exempt - HELD THAT:- Admittedly, this cash was deposited by assessee during demonetization period whereas the claim of assessee is that this was received as gifts in cash in marriage on 07.12.2015. There is no direct evidence available with the assessee to substantiate his claim but going through the customary system in Indian society, we agree with the observations of CIT(A) that no economic transaction can be divorced from the underlying social cultural factors. It is customary in Indian society and according to status one receives gifts in marriage. Hence, we further want to estimate by looking into the fact that assessee might not have received cash gift of Rs. 1,00,00,000/- and CIT(A) has already allowed relief of Rs. 30,00,000/-, we want to make a further estimate and delete the amount of Rs. 20,00,000/- further. Thereby, the total deletion is i.e., deleted by CIT(A) of Rs. 30,00,000/- plus deletion now by the Tribunal of Rs. 20,00,000/-, aggregate comes to Rs. 50,00,000/-. Hence, we sustain the balance of Rs. 50,00,000/- as unexplained money u/s.69A - First two grounds raised by the assessee are partly allowed as indicated above. Applicability of provisions of section 115BBE - We are of the view that in the instant case before us the provisions of Section 115BBE of the Act as amended by second amendment Act by the Taxation Laws (second amendment) Act, 2016 will apply w.e.f 01.04.2017 on enhanced rate of tax @60% instead of @30%. The enhanced rates applies from the commencement of the assessment year relevant to previous financial year. In this case, this applies to Financial Year 2016-17 relevant to Assessment Year 2017-18. Hence, we find no force in the arguments of the Ld. Counsel and hence same are rejected. This issue is decided in favour of Revenue and against assessee.
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2023 (7) TMI 1083
Addition u/s 271AAB - assessee has disclosed the income after the search - HELD THAT:- When the provisions for levy of penalty under section 271AAB is a specific provision to deal with the undisclosed income and it provides a strict penal action then the corresponding duty of the tax authority is also equally stringent. The AO cannot escape from following the strict mandatory requirement of law and particularly the principle of natural justice. AO has neither specified the grounds and clause of section 271AAB nor has dealt with the same in the impugned order passed under section 271AAB. AO has also not given a finding that the case of the assessee falls in the definition of undisclosed income provided under clause (c)(i) of Explanation to section 271AAB. When the transactions of investment in real estate are recorded in the diary being other documents maintained by the assessee for the said purpose, then in the absence of any requirement of maintaining regular books of accounts by the assessee, the case of the assessee would not fall in the definition of undisclosed income as per clause (c) of Explanation to section 271AAB of the Act. There is clear absence of the satisfaction as to which limb of the penalty exist in this case by the AO in the assessment order and in issuance of notice u/s. 271AAB of the Act to levy the penalty. We have also noted that in the assessment order penalty was initiated for the marriage expenses of the son for which no addition is made and the AO failed to record the satisfaction so as to whether the income disclosed were undisclosed income of the assessee or not the levy of the penalty is unsustainable in law. We see no infirmity in the order of the ld. CIT(A). Based on these observations the appeal filed by the revenue stands dismissed.
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2023 (7) TMI 1082
TP Adjustment - Determination ALP of Management Fees - HELD THAT:- As gone through the evidences filed before us and noted that these evidences need to be examined by the Assessing Officer/ TPO afresh in regard to management fee paid by assessee to its associated enterprises for the services rendered. The AO/TPO will also go into the details of e-mail correspondence and other evidences before deciding the issue. Hence, this issue is remitted back to the file of the AO/TPO for fresh consideration. This issue of Revenue's appeal is allowed for statistical purposes. Disallowance of deduction claimed by assessee u/s.80IA - HELD THAT:- As assessee company is engaged in the business of operation of container freight station at various locations Irungattukotta, Tripuru, Karur, Pondicherry, Tuticorin and Mumbai. According to assessee, CFS facility is duly approved and recognized as an offshore facility by customs/port authorities originally existed alongside the seaport/airport. Even this CFS was notified vide notification No. 10682 dated 01.09.1998 as an infrastructure facility for the purpose of provisions of section 80IA(4) of the Act. Since the issue is covered by the case of Ennore Cargo Container Terminal [ 2017 (4) TMI 615 - MADRAS HIGH COURT] we dismiss this issue of Revenue's appeal. Disallowance made on business development expenses - This business expenditure claimed to be on account of tamil film produced by the Chairman of assessee company Sattam Oru Iruttarai and there was a request from the staff of the clients for tickets and accordingly, the same were provided - HELD THAT:- This expenses of tickets for staff of clients was for the purpose of maintaining good relations with the clients and hence, this being business expenditure was allowed by CIT(A). We find no infirmity in the order of CIT(A) and hence, the same is confirmed. This issue of Revenue's appeal is dismissed. Addition u/s 36(1)(va) 2(24)(x) - Payment made on account of provident fund and ESI being employees contribution beyond the due dates as prescribed under the respective statutes - HELD THAT:- As noted that this issue is now stands covered by the decision of Checkmate Services P. Ltd [ 2022 (10) TMI 617 - SUPREME COURT] wherein held that the amounts beyond the due dates under the Provident Fund Act and ESI Act is not to be allowed in term of provisions of section 36(1)(va) 2(24)(x) of the Act. Hence, this issue being covered in favour of Revenue.
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2023 (7) TMI 1081
Deduction u/s 80IA(4) - whether assessee is not a contractor, but developer of infrastructure facilities? - assessee, a private limited company, is engaged in the business of construction activity and development of infrastructure and other projects i.e., irrigation canal, road construction - HELD THAT:- The assessee has undertaken projects which are in the nature of infrastructure facilities in the capacity of the developer as admitted by the ld. CIT-A. Accordingly, we concur with the findings of the Ld. CIT(A) that the assessee has undertaken the projects of infrastructure facility as envisaged under the provisions of section 80 IA(4A) of the Act in the capacity of the developer. The explanation below to section 80IA(13) should be read in such a way that the object of the provisions of section 80IA (4) of the Act should not be defeated. As discussed above, the sole purpose of the benefit of deduction under section 80IA(4) of the Act was to bring the development in the area of infrastructure facilities for which the country was in deficient. Thus, if the literal meaning is drawn from the word of the developer and accordingly the deduction of the benefit given under section 80 IA of the Act is denied, then the object for which the provisions of section were brought under the statute will be defeated. Therefore, the provisions of section 80IA (4) of the Act should be read in such a way that the object of the statute should not be defeated. We are inclined to hold that the assessee who is only engaged in the activity of development of infrastructure facility is eligible to claim the deduction u/s 80IA(4). AR before us submitted `that projects in respect of which the deduction was claimed by the assessee were of identical nature. Therefore, we have analyzed one contract/agreement with the government on sample basis. The findings given with respect to the contract elaborated above shall also be applied in all the contracts which were subject to the deduction under section 80-IA(4) of the Act. In view of the above, the grounds of appeal of the Revenue with respect to the admissibility of the claim of the assessee under section 80-IA (4) of the Act are hereby dismissed. Decided in favour of assessee. Net interest income from the eligible profit for calculation of deduction u/s 80IA of the Act - We hold that only net interest income should be excluded while computing the eligible income u/s 80IA(4) of the Act. Hence, the ground of appeal of the Revenue is hereby dismissed. Disallowance of employee contribution to the provident fund u/s 36(1)(va) r.w.s. 2(24)(x) - HELD THAT:- The deduction for the payment made under section 36(1)(va) would be allowed in respect of employee s contribution towards ESI if such payment is made on/before due date as specified under the relevant Act. Thus, the payment made by the assessee on account of employee contribution towards ESI after the due date stands disallowed in view of the judgment in the case of M/s Checkmate Facility and Electronics Solutions Pvt. Ltd. [ 2018 (10) TMI 994 - GUJARAT HIGH COURT] We uphold the order of the AO. Hence, the ground of appeal of the Revenue is allowed. GP estimation - best judgement - rejection of books of accounts - HELD THAT:- Best judgment assessments cannot be based on wild guess, rather it should be based on some materials available on hand relating to the assessee which should be taken into account and that too after providing the opportunity of being heard to the assessee as well as considering the provisions of the Act and Rules of Income Tax Rules. After rejecting book results, the Assessing Officer has to determine the income in reasonable and scientific manner after considering the results/ performance of the earlier years or some comparable cases. We note that the foundation of rejecting the books of accounts and estimating the gross profit of the assessee was based on the fact that the assessee has made purchases from the shell companies. However, we note that there was no purchase made by the assessee from the so-called alleged shell companies and therefore we are of the view that no addition is warranted in the year under consideration. As such the gross profit declared by the assessee in the books of accounts should be accepted as it is. Thus, the ground of appeal of the assessee for the AY 2009-10 is allowed and ground of appeal of the Revenue is dismissed. The average profit declared by the assessee in the last immediate three preceding year can be adopted as the parameter for determining the income of the assessee after rejecting the books of accounts. The average profit of the assessee in the last three years i.e. A.Y. 2007-08 to A.Y. 2009-10 stands at 19.30% (21.40 + 18.82 + 17.43) whereas the original Gross profit of A.Y. 2010-11 is declared at 18.95% of the gross turnover. On perusal of the order of the authorities below, nothing was found out whether there was any change in the facts and circumstances of the year under consideration viz a viz in the earlier years. There was no change in the business activity of the assessee. Accordingly, we workout the differential amount of gross profit at .35% (average gross profit of last 3 years @ 19.35% current year GP @ 18.95) of the turnover and direct the AO to make an addition of Rs. 68,36,22056.00 being .35% of Rs. 201,06,53,107.00 only. Thus, the ground of appeal of the assessee for the AY 2010-11 is partly allowed and ground of appeal of the Revenue is dismissed. Likewise, for the AY 2011-12 we note that the average gross profit of the assessee in the last three years i.e. A.Y. 2008-09 to A.Y. 2010-11 stands at 18.52% (18.82 + 17.43 + 19.30) whereas the original Gross profit of A.Y. 2011-12 is declared at 18.95% of the gross turnover. Thus, it is seen that the assessee has declared greater gross profit than of the earlier years. Accordingly, we are of the view that no addition is warranted in the given facts and circumstances. Thus, the ground of appeal of the assessee for the AY 2011-12 is allowed and ground of appeal of the Revenue is dismissed.
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2023 (7) TMI 1080
Penalty u/s 271AAB - confession of additional income during search and seizure operation levy of penalty is mandatory in nature OR discretionary? - in course of search, the assessee surrendered an income on account of land advance which he admitted as his additional business income for current year - HELD THAT:- As decided in Rajendra Kumar Gupta [ 2019 (1) TMI 1545 - ITAT JAIPUR] and in view of the above deliberation that the income surrendered is not an undisclosed income as specified in Explanation (c) of Section 271AAB of the Act, therefore, we do not concur with the findings of the ld. CIT(A) as the ld. AR of the assessee has very explicitly narrated the case in his written submission countering the decision taken by the ld. CIT(A) in his order. Thus, the grounds of appeal raised by the assessee in his appeal are allowed.
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2023 (7) TMI 1079
Addition u/s 68 - unexplained share premium and share capital - onus to prove - HELD THAT:- Assessee effectively discharged the burden cast upon them u/s 68 of proving identity of the investors, the genuineness of the transactions and the creditworthiness of the parties with respect to the transactions that took place between the Assessee and the investors. Since the Assesses filed the bank statements of the parties conclusively proving that the impugned sums were received through normal banking channels from the bank accounts of the parties, the burden of proving the genuineness of the transactions between the Assessee and the parties and the creditworthiness of the parties to invest in the share capital of the Assessee Companies stood discharged. Once the Assessee established the identity of the parties, the genuineness of the transactions and the creditworthiness of the parties to invest in the share capital of or advance loans to the Assessee Companies, the burden shifted to the Revenue to prove the contrary. The Ld. A.O has failed to discharge the secondary onus of demolishing/disproving the genuineness of the documentary evidences filed by the Assessee. Decided in favour of assessee. Enhancement of income made by CIT(A) u/s 251(1) - addition under the head from other sources by applying Section 56(2)(viib) on protective basis by rejecting the valuation report furnished under Rule 11UA (2) (b) of the Income Tax Rules i.e. Discounted Cash Flow Method (DCF Method) - HELD THAT:- There is no dispute that legally the assessee had option to choose the valuation of the shares as per Rule 11UA of the IT Rules. When the statute provides for particular procedure, authorities have to follow the same and cannot interpret or permitted to act in contravention of the statute. The said legal principal is based on the legal maxim Expression Unis Est Exclusion Alterius . Thus, we hold that the CIT(A) have committed an error in rejected the valuation done by the assessee from prescribed expert as per the prescribed method, which ultimately resulted in enhancement of income of the Assessee u/s 251(1) of the Act. Accordingly, we allow of the Assessee and delete the enhancement made by the CIT(A).
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2023 (7) TMI 1078
Addition u/s 68 - assessee failed to explain the genuineness of the sundry creditors - HELD THAT:- Assessee has successfully demonstrated before us about the genuineness of the transactions with the sundry creditors with the help of the facts that there was a steep increase in the purchase and sale, as well as sundry creditors and debtors during the year and amount more than the alleged sundry creditors was outstanding to be received from the sundry debtors and in the subsequent year on the realization of the sundry debtors, most of the alleged sundry creditors have been paid which is reflected from the fact that sundry creditors which was standing due at Rs. 3.99 Crores, during the financial year 2014-15, came down to Rs. 1.34 Crores and remained paid subsequently. Since the assessee has successfully explained the source and identity of sundry creditors, nature and genuineness of the transactions, proved that the payments to the sundry creditors have been made and since the revenue has not doubted the genuineness of the sale and correctness of the book results, we do not find any justification in the action of the Assessing Officer in making the addition u/s 68 - set aside the finding of the ld. CIT(A) and delete the addition made u/s 68 - Decided in favour of assessee.
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2023 (7) TMI 1077
Addition u/s 68 - accommodation entry receipts - basis for dismissing the vortex of evidences is the fact that the notice u/s 133(6) of the Act issued by the AO was returned unserved - HELD THAT:- We find that in the case in hand, the investors throughout have confirmed the investment and no material has been led by the AO to even allege that such investment was made from the coffers of the assessee company as it is not the case of the Revenue that the assessee has purchased cheque by paying cash to the investor company. The investors are corporate entities duly assessed to tax and have made investment through banking channel from their own sources which fact has neither been denied nor rebutted in the assessment nor by the first appellate authority. This is also evident from the chart exhibited elsewhere. Considering all we are of the considered opinion that the assessee has discharged the primary onus cast upon it by provisions of section 68 of the Act. It is not the case of the Revenue that the assessee is a beneficiary of accommodation entry. For AY under consideration is Assessment Year 2012-13 and for this Assessment Year, the assessee is not required to establish source of source. Decided in favour of assessee.
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2023 (7) TMI 1076
TPA - selection of MAM - rejection of RPM as MAM and application of TNMM as MAM - International Transaction of purchase of formulations - HELD THAT:- TPO mainly relied on the fact that the comparables have incurred lesser cost of AMP expenses, which again, in our view is not correct reason for rejecting RPM. The comparison here is at a gross margin level and the TPO has not given any adverse finding with regard to the gross margin ratio of the asessee. Thus we hold that RPM is the most appropriate method in assessee s case. However with regard to the trading segment, there is a need for deciding the benchmarking analysis of the transactions as has been done by the assessee in its transfer pricing study. TPO has proceeded on the basis that TNMM is the most appropriate method and in the process, has not decided the comparability analysis done by the assessee under RPM method. We, therefore, deem it fit to restore the issue of benchmarking analysis under RPM to the file of the TPO with a direction to re-determine the ALP of international transactions of the assessee after accepting RPM as the most appropriate method. The assessee shall, in the course of the remand proceedings, file with the TPO, the relevant details with regard to the functionality, assets employed and the risks (FAR) of the comparables, to be considered by the TPO for benchmarking the ALP of the international transactions, as per RPM.
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2023 (7) TMI 1075
TDS u/s 194C - payments to several vendors in relation to its procurements from them, consisting of apparels/ clothes/ footwear/ goods manufactured by these vendors - works contract v/s purchase of goods - HELD THAT:- While examining clause (e) as introduced by the Finance (No.2) Act, 2009, noted that it contains a positive affirmation that the expression 'work' will cover manufacturing or supplying a product, according to the requirement or specification of a customer, by using material purchased from such customer. Also been noted by the Hon ble High Court [ 2004 (3) TMI 11 - BOMBAY HIGH COURT] that clause (e) has placed the position beyond doubt by incorporating language to the effect that the expression work' shall not include manufacture or supply of a product according to the requirement or specification of a customer by using material which is purchased from a person other than such customer. As noted that, (i) the agreement in the instant case, was on a principal to principal basis, (ii) the manufacturer had his own establishment where the product was manufactured, (iii) the material required in the manufacture of the article or thing was obtained by the manufacturer from a person other than the assessee, (iv) the property in the articles passed upon the delivery of the product manufactured, and (v) until delivery, the assessee had no title to the goods. Thus the provisions of Section 194C were not applicable, and more particularly the agreement did not fall within the definition of works contract as laid down in Explanation to Section 194C of the Act. As in the present case, the assessee is not accustomed to providing specifications or designs to the suppliers. It is also not a case that the suppliers are manufacturing the goods at the instance of the assessee. Further, the goods supplied are not under the brand/name of the assessee and instead bear the brand/mark/name of the respective supplier/original manufacturer. No reason to interfere with the order of the Ld. CIT(A) in holding that the payments made under the SOR agreements did not fall within the ambit of Section 194C of the Act and therefore the assessee did not have any liability to deduct tax at source on such payments u/s 194C - Decided in favour of assessee.
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2023 (7) TMI 1074
Rectification u/s 154 - Issuance of intimation u/s 143(1) on charging of interest u/s 234B and 234C - audit objection raised at a later stage on the issue of non-levy of interest - Period of limitation - HELD THAT:- The interest u/s 234B has not been charged while issuing the intimation u/s 143(1). The assessee has filed revised return on 26.02.2010 and assessment u/s 143(3) was completed on 11.05.2010. The notice u/s 143(2) was issued on 19.08.2009. The assessee has filed revised return on 26.02.2010 which has been duly taken cognizance and the assessment u/s 143(3) was passed on 11.05.2010. The interest u/s 234B and u/s 234C has not been charged while issuing the intimation and the demand raised as per the record was Nil. The date of order u/s 154 was 16.01.2017 pertaining to the Assessment Order passed u/s 153A and date of rectification order u/s 154 r.w.s. 254/143(3) was dated 09.12.2020 which tried to modify the order of 2009. With the filing of the revised return and issue of notice u/s 143(2), the revenue looses the right of processing the return u/s 143(1). The provision of section as amended by the subsequent Finance Act 2017 merely mentions that the processing of return shall not be necessary where a notice has been issued u/s 143(2) which was mainly brought in the Income Tax Act to stop the granting of refunds in the case of assessee's, whose return has been taken for scrutiny u/s 143(2). We find that the Hon ble Supreme Court in the case of CIT Vs. Gujarat Electricity Board [ 2002 (10) TMI 5 - SUPREME COURT] held that where summary procedure u/s 143(1) has been adopted, a regular assessment can be made u/s 143(3) after issuing of notice u/s 143(2) but the converse is not correct. The provisions u/s 143(1D) provides that notwithstanding anything contained in sub-section (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2). Hon ble Apex Court held that Section 143(1) enacts a summary procedure for quick collection of tax and quick refunds and it was meant for seeking any rectification u/s 154. Thus, we find the order of the rectification u/s 154 passed by the revenue authorities on 09.12.2020 rectifying the order of the earlier decade is barred by limitation and cannot be held to be legally valid.
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Customs
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2023 (7) TMI 1073
Drawback claim on account of utilization of goods procured from DTA as per Rule 34 of Special Economic Zone Rules, 2006 - Same entity of different entity. According to the respondent writ petitioner, Kariwala Green Bags procured goods from the domestic tariff area. According to the authorities, Kariwala and Kariwala Green Bags were different entities. Foreign exchange was received on export of the goods by Kariwala and not Kariwala Green Bags. The appellants point of view is that to get the benefit of drawback the exporter, importer and the recipient of the foreign exchange have to be one entity. HELD THAT:- The scope of interference of the writ court whether in its original or appellate jurisdiction with factual findings in a decision is extremely limited. It can interfere if the authority has failed to exercise its jurisdiction or has exceeded its jurisdiction. If there is violation of the principles of natural justice, the court can interfere. If there is an error of law apparent in the order, it vitiates it. The court will not re-examine facts or evidence. It cannot substitute its views with that of the court or authority below. If the finding on facts is plausible, the court will not interfere. If the findings on facts are so glaringly and grossly erroneous or so perverse, unreasonable and unconscionable that no prudent person could have arrived at them, the court can interfere. Short of this, the court has very little powers of probing into an impugned order. On each and every point in issue, the learned judge has come to a plausible finding in support of the respondent s entitlement to its duty drawback claim - there are no reason to interfere with it. The appeal is accordingly dismissed.
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2023 (7) TMI 1071
Benefit of N/N. 30/2004-CE dated 09.07.2004 on import of silk fabrics - denial on the ground of non-fulfilment of condition of the notification, that no CENVAT Credit of duty paid on inputs shall be taken by the importer - HELD THAT:- The condition as per the notification is that the importer should not have availed the CENVAT Credit on the inputs. In the present case, it is an admitted position that the respondent has not availed any such credit. However, the reason for denying the benefit of the notification is that in the case of the appellant no such credit is admissible being a trader. The Tribunal had occasion to analyse the very same issue in the case of CC CHENNAI (SEAPORT-EXPORT) AND ENTERPRISES INTERNATIONAL LTD. VERSUS SUN STAR INTERNATIONAL AND OTHERS [ 2015 (8) TMI 191 - CESTAT CHENNAI] where it was held that the respondents are eligible for CVD exemption under Notification No. 30/2004-C.E., dated 9-7-2004. The appeal is without any merits. The Department appeal is dismissed.
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2023 (7) TMI 1070
Levy of Penalty - import of Gold - allegation is that the importer through its authorized handler i.e. Appellants have deliberately contravened provisions introduced by the Government of India for regulating import of gold into India - HELD THAT:- The facts are very clear that one Shree Ganesh Jewellery House (I) Private Limited imported five consignments of gold of 100 kgs each and five initial Bills of Entry for Ex-bond warehouse were filed by the importer through Appellant No.(2) and thereafter, Appellant No.(1) filed five Ex-bond Bills of Entry for clearance of 80 kgs of gold each for home consumption on payment of duty. The gold was kept in private bonded warehouse of the importer and the Appellant No.(3) has provided service for safe custody of the gold, which is on record. The gold was imported in terms of RBI Circular dated 14.08.2013. As per the said Circular , 20% of every lot of import of gold imported to the country is exclusively made available for the purpose of exports and balance of domestic use, which means out of total imported gold, 80% can be cleared for home consumption, which were assessed and allowed on payment of duty and 20% of the gold was cleared to the importer in terms of Notification No.56/2000Customs dated 05 .05.2000 wherein all the demand was exempted with the condition that the importer shall, after processing the said gold, reexport the same - The Appellant No.(1) (2) filed Ex-bond Bills of Entry and for home consumption, after clearing the gold, the job of the Appellant No.(1) (2) came to an end. They have nothing to do with the gold in question. As they have cleared the gold first to the importer on bonded warehouse and thereafter, cleared for home consumption on payment of duty. These are not in dispute. In these set of facts, there is no role of the Appellant No.(1) (2) to allege that they have made gold liable for confiscation for non-fulfillment of export obligation by the importer - Thus, the penalties on the Appellant Nos.(1) (2) cannot be imposed under Section 112 of the Customs Act, 1962. With regard to Appellant No.(3), the duty of the Appellant No.(3) is to safe custody of the imported gold, which is a private bonded warehouse of the importer and while assessing the Bills of Entry for ex-bond warehouse, the goods were allowed to be stored in the Bin provided by the appellant for safe custody of the gold. Thereafter, the Appellant No.(3) has handed over 400 kgs of gold on duty paying documents by Appellant No.(1) i.e. not in dispute - It is the facts on record that the importer was nominated agency and the same was allowed to the importer for export production under exemption Notification No.56/2000-Customs dated 05.05.2000 under their own internal documents and it was the duty of the importer to submit a consolidated monthly account of the goods released exporter wise and duly duty involved while will be worked on the basis of effective rate of duty - thus, it is very much clear that the job of the appellant is mainly safe custody of the gold in question and as per the agreement executed between the importer and the appellant from time to time, the appellant s duty was assigned for storage of duty free gold and silver imported by the importer for export purposes. Thus, it is very much clear that the appellant cleared the gold to the importer, who provided Bin warehouse to the importer for further processing to export of the same. The allegation in the show-cause notice is that as the importer could not fulfill the export obligation, therefore, the appellant was responsible for diversion of the said gold into domestic market. There is no evidence available on record that how the appellant was involved in diversion of gold by the importer - the appellant being a duty assigned to keep safe custody of duty free gold in their Bin, cannot be held liable for diversion of gold by the importer in domestic market and for non-fulfilment of export obligation. Therefore, the penalty on the Appellant No.(3) is also not imposable. Penalties set aside - appeal allowed.
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2023 (7) TMI 1069
Valuation of import goods - H.R. steel plates - allegation that physical weight is in excess to the weight mentioned in their import documents such as import invoices, Bill of lading etc. - enhancement of value to the extent of excess undeclared weight - HELD THAT:- There is no dispute that the weight of the HR steel plates is calculated on theoretical basis taking thickness, length and width of the HR steel plates and the supplier also issue invoices. Accordingly, there is no extra consideration if on this basis there is any increase in physical weight therefore, irrespective of minor difference in weight the value of the goods remain same. Therefore, in our opinion no value can be enhanced on the basis of the weight variation in the facts of the present case .This is an international practice for calculating the weight of similar goods like HR steel plates in the present case. It is obvious that when a theoretical weight is taken by adopting a formula the same will never be matching exactly with the physical weight of the goods. Therefore, due to this minor increase or decrease in the weight valuation cannot be varied. This issue is no longer res-Integra in the appellant s own case this Tribunal has decided the matter in their favour which is reported at M/S. WELSPUN CORP. LIMITED VERSUS COMMISSIONER OF CUSTOMS, MUNDRA [ 2018 (12) TMI 173 - CESTAT AHMEDABAD . ] where it was held that the manner of computing the physical weight was not the most scientific one inasmuch as the physical weight was arrived at by first arriving at the tare weight of the truck trailer and thereafter arriving at the weight of the truck trailer with the steel plates loaded on it. The demand in the present case is not sustainable. Hence, the impugned order is set aside appeal is allowed.
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2023 (7) TMI 1068
Exemption from Customs Duty - high density polyethylene granules which is chemically modified - applicability of exemption N/N. 12/2012-Cus dated 17.03.2012 (Serial No. 237) - HELD THAT:- From the notification, it can be seen that as per the Serial No. 237, the polymers of ethylene mentioned at serial (iii), it is clear that exemption is granted to High Density Polyethylene (HDPE). Now it is to be examined that the appellant s goods falls under the description of High Density Polyethylene or otherwise - It is found that Customs department drawn sample and got it tested from Customs House laboratory, Kandla which has reported that goods are chemically modified polymers. The samples were re-tested to ascertain the goods imported are chemically modified or otherwise. From the composition, it can be seen that the product is high density polyethylene and it consists of 98% ethylene by weight. Therefore, even though some additives in very miniscule percentage exists in the composition but chemical character of the product i.e. high density polyethylene does not get altered and the same cannot be classified in any other entry other than high density polyethylene. Thus, even though miniscule percentage of different chemicals including additive mixed with HDPE, the goods remain as high density polyethylene and therefore clearly covered under the exempted entry in Notification No. 12/2012-Cus dated 17.03.2012 - the appellant is entitled for exemption under Notification No. 12/2012-Cus in respect of their imported goods i.e. High density polyethylene. Appeal allowed.
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2023 (7) TMI 1067
Classification of import goods - Un-Coated Calcite Powder or precipitated Calcium Carbonate? - to be classified under Tariff Heading No. 25309030 or under Tariff Heading No. 2836500? - HELD THAT:- The Learned Commissioner (Appeals) has held that I find that the said Appellants have not come up with any material contradicting two substantial evidences brought on records by the department viz. (i) relevant Panchnama during which it was prima-facie appeared that the goods under reference were Calcium Carbonate and not the declared goods and (ii) the report of the Chemical Examiner who categorically opined that the goods in question are Precipitated Calcium Carbonate. It is a matter of common knowledge that the word precipitated preceding to Calcium Carbonate itself indicates that the goods under reference are not obtained as natural resources and thus classifiable under Chapter 25 but it is a manufactured item, classifiable under Chapter 28. The order is well reasoned and is properly backed by opinion of chemical analyst. We therefore find no merits in the grounds taken by the appellant and find that the impugned order is sustainable. The appeal is therefore dismissed.
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2023 (7) TMI 1066
Principles of Natural Justice - Reopening of Self Assessment - Department never came in appeal against setting aside of the assessment order by the Commissioner (Appeals) - HELD THAT:- In the first round of litigation, an assessment was made by the party and the assessment order were duly approved by the departmental officers and duty was paid under protest. The so-termed self assessment order were set aside by the learned Commissioner(Appeals) to require original authority to issue a fresh order as there was lack of cooperation by the department in providing all the relevant documents. The original authority also had the same predicament of not having the relevant records but overlooked that the self assessment orders were in any case set aside, continued to proceed and concluded that he is not competent, not being a proper officer to reopen the same. This is in complete defiance of order of Ist appellate authority. On appeal to the Commissioner (Appeals), in the second stage he also expressed opinion in his findings that a person has to be aggrieved by self assessment to litigate the matter further. At this belated stage where the documents are not available with the department and this thing has been repeatedly coming on record and that the duty was paid under protest, the party is entitled to relief and matter remanded to Commissioner (Appeals) to allow the benefit of the Notification sought by the party after due examination of the same, as per law specially provisions of Section 149. Appeal allowed by way of remand.
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2023 (7) TMI 1065
Classification of goods proposed to be imported - Thermal Printer Ribbons (TPR) - classifiable under Tariff Item 8443 99 59 of the First Schedule to the Customs Tariff Act, 1975 or not? - rate of duty applicable on the import of Thermal Printer Ribbons - HELD THAT:- TPR consist of the following core components viz., supply and take-up spools, thermal transfer ink ribbon, geared and non-geared flanges, a RFID tag (communicates information to the printer) and a cleaning roller. The product does not consist of Ink cartridge or Ink nozzle spray. It is the ink in the ribbon which melts from the heat in the print head and is transferred on the Card. It has been submitted that Thermal Printer Ribbon is a part of Thermal Transfer Printing Machinery and therefore falls for classification under Heading 8443 Printing machinery used for printing by means of plates, cylinders and other printing components of heading 8442; Other printers, copying machines, and facsimile machines, whether or not combined; parts and accessories thereof . The applicant has relied upon judgment of the CESTAT, Mumbai in the case of M/S HONEYWELL AUTOMATION INDIA LTD. VERSUS COMMISSIONER OF CUSTOMS, ACC, MUMBAI [ 2017 (10) TMI 409 - CESTAT MUMBAI ] whereunder it was held that Thermal Printer is a printing device capable of being connected to an Automatic Data Processing Machine or a network to print output and thus would be covered under CTH 8443 32 90. Based on the established ratio of CESTAT, Mumbai's decision in case of Honeywell Automation India Ltd. applicant has further stated that since Thermal Printer Ribbon (TPR) is an integral part of the Thermal printer and without TPR the thermal printers cannot function, the TPR be classified as a part of Thermal Printer under CTH 8443 99 -Parts and accessories of goods of sub heading 8443 31, 8443 32 and further Tariff item 8443 99 59 -Other. Applicant while basing their argument on functionality and physical characteristics of the product has further submitted that TPR cannot be classified under Chapter Heading 9612 as the Thermal Printer Ribbon is different from typewriter/computer printer ribbons because of the difference in the physical characteristics and printing process. CTH 9612 comprises of Typewriter or similar ribbons, inked or otherwise prepared for giving impressions, whether or not on spools or in cartridges . The product in question cannot be described as a typewriter or similar ribbons, inked or otherwise, prepared for giving impressions. A typewriter ribbon is typically narrow and thin while the Thermal Printer Ribbon in the present case is wide. Further, the purpose of the typewriter ribbon is to serve as a medium for printing text on paper by impression from impact - In contrast, the purpose of ribbon in TPR is to serve as a medium for printing graphic images and text on an ID plastic card by use of heat. In the thermal printing process, pigmented dye and/or resin is never transferred to the card by means of impact but due to the heat on the printer head. In summary, the functionality and the physical characteristics of Thermal Printer Ribbon and typewriter ribbon are clearly not akin. Thermal Printing Ribbon (TPR) proposed to be imported by the applicant falls under CTH 8443 99 59 of the First schedule to the CTA, 1975. Rate of duty applicable to the Thermal Printer Ribbon falling under the CTH 8443 99 59 is BCD- Nil IGST -18%.
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Service Tax
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2023 (7) TMI 1064
Non-payment of service tax - it is alleged that noticee is charging and collecting service tax from their clients on the taxable service provided but not depositing the same with the Government exchequer - HELD THAT:- There are no reason to interfere with the impugned judgment and order of the High Court. The civil appeal is dismissed.
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2023 (7) TMI 1063
Classification of services - transportation of goods by road service or not - transporting mined ore from the top to the bottom i.e. mine head to pit head and to the Railway siding situated within the mines area - period October 2007 to March 2011 - HELD THAT:- The issue of levy of service tax on providing services for transportation of ore within the mining area for the period post-01/06/2007, after the introduction of the levy viz. Mining of Minerals, Oil or Gas services, has been settled by the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR VERSUS SINGH TRANSPORTERS [ 2017 (7) TMI 494 - SUPREME COURT] where it was held that the activity undertaken by the respondent i.e. transportation of coal from the pit-heads to the railway sidings within the mining areas is more appropriately classifiable under Section 65(105)(zzp) of the Act, namely, under the head transport of goods by road service and does not involve any service in relation to mining of mineral, oil or gas as provided by Section 65(105)(zzzy) of the Act. The principle laid down by the Hon ble Supreme Court is squarely applicable to the facts of the present case. Consequently, the impugned orders are set aside - appeal allowed.
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Central Excise
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2023 (7) TMI 1072
Process amounting to manufacture or not - applicability of CBEC Circular dated 07.11.2007 - HELD THAT:- No writ lies against the show-cause notice, more particularly, when the petitioner has already responded to the show-cause notice by submitting his reply to it. The apprehension of the petitioner that the Assessing Authority may not adjudicate their reply to show cause notice on merits in view of the circular of C.B.E.C. dated 07.11.2007 can be taken care of by providing that the Assessing Authority which is seized of the matter shall consider the reply to the show-cause notice submitted by the petitioner along with all evidences, documentary or otherwise, purely on merits without being influenced by the circular of C.B.E.C. dated 07.11.2007. Petition disposed off.
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2023 (7) TMI 1062
Condonation of delay in filing this application - exact number of days in filing the application, also not stated in application - HELD THAT:- It will be too late for the appellant to take umbrage under Rule 7, more particularly, when they were served at an interlocutory stage in the year 2007 itself when the prayer for stay made by the department was refused. Further reference has also been made to Rule 9 which relates to the notice for filing of paper book. From the conduct of the applicant/respondent, it is clearly seen that they were not diligent in prosecuting the matter and they have come out with such an application at such a belated stage without even specifically mentioning as to the exact number of days in filing the application, in the application states, delay, if any, in filing the instant application for recalling may be also condoned. Application dismissed.
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2023 (7) TMI 1061
Levy of Excise Duty on quantity discount claimed - refund of excess duty paid due to extending the quantity discount, even if the appellant have not opted for provisional assessment - HELD THAT:- There is no fault in appellant s giving quantity discount to their customers. Since the goods first cleared from the factory to appellant s depot, no discount was involved and consequently the quantity discount was given from depot therefore, such discount is not liable to duty. Therefore excise duty paid is clearly refundable. Objection of the Revenue that since appellant have not followed the provisional assessment refund is not payable - HELD THAT:- This issue is no longer res-integra as in the appellant s own case this Tribunal in SAVITA OIL TECHNOLOGIES LTD VERSUS C.C.E. S.T. -VAPI [ 2023 (3) TMI 833 - CESTAT AHMEDABAD] has taken a view that merely because the assessee has not followed the provisional assessment, admittedly the excess payment of duty must be refunded to the assessee. Therefore, the appellant is entitled for refund of excess duty paid due to extending the quantity discount to the customers. However, the factual aspect of correct quantification can be verified by the adjudicating authority, if required - appeal disposed off.
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CST, VAT & Sales Tax
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2023 (7) TMI 1060
Revision of remand assessment order - vires of Section 174 (2) (3) of Haryana Goods and Services Tax Act, 2017 - effective and alternative remedy of filing reply not effected - opportunity to file appeal against the order passed by the revisional authority before the appropriate forum not provided - HELD THAT:- It is very much explicit that the High Court can entertain a writ petition even though the alternative remedy has not been availed if there is pure question of law and the matter can be decided without going into disputed questions of fact, if the proceedings initiated by the assessing authority/any other revenue authority are without jurisdiction or, if there is violation of principles of natural justice or if the writ petitioner seeks enforcement of any fundamental right. The main thrust of argument raised by the petitioner for assailing the impugned show cause notice is that it was illegal and without jurisdiction and was liable to be quashed as it was issued in violation of Section 29 (2) (e) of the HVAT Act by respondent No.2 who would require it to produce documents and books of accounts pertaining to the A.Y. 2011-12 while conducting proceedings on this notice though the petitioner was not required to maintain and preserve such documents and books of account beyond a period of eight years from close of relevant assessment year. The argument so raised by the petitioner appears to be attractive but on a careful perusal of the record, the same lacks any merit. When the respondent No.2 in the impugned notice has not sought production of the account books for the relevant assessment year and when the respondents have rather clarified that they would not be needing production of the same at the stage of determining the impugned show cause notice, the impugned notice could not be stated to be illegal or without jurisdiction merely because it was issued after expiry of period of eight years from the closing of A.Y. 2011-12. In the present set of circumstances, any finding by this Court at this stage is likely to be prejudicial to the interest of either of the parties to this petition. The issues raised in the show cause notice are required to be determined by the respondent No.2 at the first instance. The matter has to be determined in the light of the submissions that may be advanced by the petitioner as well as the revenue in course of such determination. The question as to whether the assessment order is liable to be revised is yet to be determined by the revisional authority. In such circumstances, the writ petition does not deserve to be allowed. Consequently, without expressing any opinion on the merit of the issues raised in the course of the arguments, this petition is dismissed but the petitioner is allowed, a further period of 30 days from today to file reply to the impugned show cause notice and to participate in the proceedings.
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Indian Laws
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2023 (7) TMI 1059
Dishonour of Cheque - existence of legally enforceable debt or liability - vicarious liability of nominee and non-executive directors - HELD THAT:- Taking into consideration the various provisions of Cr.PC which have been discussed in various judgments time and again demonstrate that the Negotiable Instruments Act, provides sufficient opportunity to a person who issues the cheque. Once a cheque is issued by a person, it must be honoured and if it is not honoured, the person is given an opportunity to pay the cheque amount by issuance of a notice and if he still does not pay, he is bound to face the criminal trial and consequences. It is seen in many cases that the petitioners with malafide intention and to prolong the litigation raise false and frivolous pleas and in some cases, the petitioners do have genuine defence, but instead of following due procedure of law, as provided under the N.I. Act and the Cr.PC, and further, by misreading of the provisions, such parties consider that the only option available to them is to approach the High Court and on this, the High Court is made to step into the shoes of the Metropolitan Magistrate and examine their defence first and exonerate them. The High Court cannot usurp the powers of the Metropolitan Magistrate and entertain a plea of accused, as to why he should not be tried under Section 138 of the N.I. Act. This plea, as to why he should not be tried under Section 138 of the N.I. Act is to be raised by the accused before the Court of the Metropolitan Magistrate under Section 251 of the Cr.PC under Section 263(g) of the Cr.PC. In view of the procedure prescribed under the Cr.PC, if the accused appears after service of summons, the learned Metropolitan Magistrate shall ask him to furnish bail bond to ensure his appearance during trial and ask him to take notice under Section 251 Cr.PC and enter his plea of defence and fix the case for defence evidence, unless an application is made by an accused under Section 145(2) of N.I. Act for recalling a witness for cross-examination on plea of defence - Once the summoning orders in all these cases have been issued, it is now the obligation of the accused to take notice under Section 251 of Cr. PC., if not already taken, and enter his/her plea of defence before the concerned Metropolitan Magistrate s Court and make an application, if they want to recall any witness. If they intend to prove their defence without recalling any complainant witness or any other witnesses, they should do so before the Court of Metropolitan Magistrate. Moreover, as far as the contention of the Ld. Counsel for the petitioners that the petitioners were only nominee and nonexecutive directors of M/s Sure Waves MediaTech Private Limited (SMPL) at the relevant time when the offence was committed and were neither in charge of the conduct of business nor involved in the day to day affairs of SMPL, does not cut much ice as perusal of Form No. MGT-7 nowhere shows that the petitioners were non-executive directors and E-Form DIR 12 also reveals that there was no change in directors of M/s Sure Waves MediaTech Private Limited in 2021 as well as in 2022 and the petitioners were only nominee directors of SMPL. There are no flaw or infirmity in the proceedings pending before the Trial Court - petition dismissed.
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2023 (7) TMI 1058
Dishonour of Cheque - Legally enforceable debt or not - acquittal of the accused - rebuttal of mandatory presumption - HELD THAT:- Once the fundamental ingredients which gives rise to cause of action under Section-138 of N. I. Act have been established a mandatory presumption under Section-139 of N. I. Act, is effected in favour of complainant and it also extends to the existence of legally enforceable liability itself. A three judged bench of Hon'ble Apex Court in RANGAPPA VERSUS SRI MOHAN, [ 2010 (5) TMI 391 - SUPREME COURT ] has held that this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant. On perusal of the record it is found that complainant did not adduce the original deed of partnership and accordingly not exhibited the same. Furthermore Sri Asish Datta (arbitrator) was not cited as a witness by the complainants and no original A/C No. 11866553823 (C/C) was submitted and exhibited. Moreover, at the time of preparation of deed of addendum 03 persons namely Raiharan Majumder, Ashis Datta and Umesh Majumder put their signatures as a witnesses but they were not examined by the complainant and in respects of cheques, as per deed of addendum, were issued on 19.12.2016 and it is deposited in the bank on 31.07.2017 i.e. to say beyond the period of limitation i.e. six months. Thus, this Court is also of the opinion that the accused has successfully rebutted the mandatory presumption of law and also successfully controverted the story of the complainant. Complainant in his complaint petition as well as in examination-in-chief stated that they have been doing business of brick industries and construction work of the M/S Vida Engineering Company Ltd., and the accused was made attorney on behalf of the said Vida Engineering Company Ltd. but no document is placed by the complainants to prove the same and it is also admitted by the complainants in their cross-examination. The complainant is also failed to prove that on the day of issuing of cheque the liability of accused was equivalent to the cheque amount. As per Exbt.2, i.e. the reply of notice to accused person and he admitted that there has been a debt of Rs.29,00,000/- with SBI, Belonia Branch in the name of partnership farm. Section-138 creates a deeming offence. The provisos prescribe stipulations to safeguard the drawer of the cheque by providing them the opportunity of responding to the notice and an opportunity to repay the cheque amount. The conditions stipulated in the provisos need to be fulfilled in addition to the ingredients in the main provision of Section-138. It has already been concluded above that the offence under Section-138 arises only when a cheque that represents a part or whole of the legally enforceable debt at the time of encashment is returned by the bank unpaid. Since the cheque did not represent the legally enforceable debt at the time of encashment, the offence under Section-138 is not made out. The subject matter involved in this petition is not the cheque amount but, it is a settlement of account of the transaction made is the amount made under the demand notice i.e. Rs.13,50,000/- but whereas the cheque amount is Rs.10,00,000/- each x 4 = Rs.40,00,000/-. Since, litigation under Section-138 is purely technical in nature, the scope of the same cannot be enlarged. This Court is of the view that the appellants have failed to prove their projected case against the respondent No.1 and consequently, the instant appeal preferred by the appellants stands dismissed. Hence, the order of acquittal recorded by the learned Court below does not deserve any interference. The Judgment and order of acquittal passed by the learned Court below is affirmed.
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2023 (7) TMI 1057
Dishonour of Cheque - suspense of sentence subject to deposit of 20% of cheque amount - contention of the petitioner is that the Trial Court had not properly considered the evidence in its proper perspective - HELD THAT:- It is seen that the petitioner has filed these petitions on a wrong notion that the order passed by the Principal Sessions Judge, Erode, is under Section 143A of NI Act. Section 143A of NI Act provides power to direct interim compensation at the stage of trial on sufficient cause being shown by the drawer of the cheque. In Sub-section (2) of Section 143A of NI Act, it is clear that the interim compensation under sub-section (1) shall not exceed 20% of the amount of the cheque. Under Sub-section (1) of Section 148 of NI Act, it is the Appellate Court may order the appellant to deposit minimum of 20% of the fine or compensation awarded by the Trial Court. At the stage of trial, interim compensation shall not exceed 20% of the amount of the cheque on sufficient cause being shown by the drawer of the cheque and on the other hand, in the appellate stage this 20% is the minimum amount to be deposited as interim compensation and the condition of sufficient cause is not provided for the reason that the accused after trial, convicted by the Trial court and on conviction, prefers the appeal. This being so, the petitioner doubting the order of the learned Sessions Judge and camouflaging the same to be an order under Section 143A of NI Act is not proper and sustainable. Petition dismissed.
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