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TMI Tax Updates - e-Newsletter
July 8, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Charging interest u/s 234B - MAT credit - Here it is a clear-cut case of computational error. Anybody, either the AO or the assessee, would have computed the tax liability of the assessee at that particular time would have correctly claimed MAT credit available to the assessee and charged interest u/s 234B of the income tax act. - Interest liability sustained.
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Slump sale of windmills - Short term capital gains - wind mills constitute separate undertaking and the Ld. CIT(A) has rightly directed the AO to compute the capital gains as a slump sale u/s 50B (2)
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Validity of assessment u/s 153A - ‘Document’ was seized during the course of the search proceedings from the premises of Cosmos group, therefore, as per Sec. 132(4A)(i) and Sec. 292C(1)(i) of the Act, the normal presumption would be that the said ‘document’ belonged to the said searched person i.e Cosmos group. Nothing is discernible from the “satisfaction note” as to how the aforesaid presumption was rebutted by the A.O, and on what basis the seized document which was generated, created, maintained and retrieved from the e-mail account of the assessee, from its office premises, was held by the A.O as belonging to the assessee and not the searched person i.e Cosmos group.
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Revision u/s 263 - bogus purchases - the assessment order does not indicate that AO had examined the genuineness of the purchase transaction in the light of the audited accounts of the assessee. The amount was shown to have been outstanding goes unverified and the assessment order is silent on this aspect. - PCIT rightly assumed jurisdiction
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Revision u/s 263 - The records of the instant case speaks that no details were filed by the assessee before the Ld. A.O to prove the reasonableness of payments made to relatives nor any indication is there on behalf of the Ld. A.O to call for specific details relating to payment to relatives u/s 40A(2)(b) of the Act. Thus in our considered view there is “no enquiry” about the reasons No.4 i.e mismatch in amount paid to related persons u/s 40A(2)(b) and therefore Ld. PCITT has rightly invoked his power u/s 263 of the Act setting aside the order of Ld. A.O with regard to these reasons.
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Denial of claim under section 54G - assessee cannot be denied exemption under section 54G for the reason that plant and machinery has not been purchased. It is clear that for the assessment year in question all that is required for the assessee to avail of the exemption contained in the section is to 'utilize' the amount of capital gains for purchase and acquisition of new machinery or plant and building or land. - even an agreement to purchase is good enough.
Customs
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100% EOU - shortage of imported materials and non-movable items - the appellants have violated the conditions of the Notification and in terms of the Bond they have submitted at the time of import, they are liable to pay duty along with applicable interest - penalty u/s 114A and other penal provisions cannot be invoked when the goods were permitted to be cleared by the officers.
IBC
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CIRP - Reimbursement of Compounding fees - Who is responsible for offence or compounding of offence under the Income Tax Act which was committed much before the initiation of CIRP proceedings - In the instant case as per the prosecution Respondent No. 1 has committed the offence under section 276 -B read with Section 278-B of the Income-tax Act, therefore, he has filed the Application before the compounding authority. Liquidator has not committed the alleged offence therefore; he is not required to file Application before compounding authority accepting that he has committed an alleged offence.
Service Tax
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Classification of services - Works Contract Service or not - Construction / Building of Multi-Level Car Parking (MLCP) built by the appellant at New Delhi Airport (Terminal-III) - the Multi-Level Car Parking (is an amenity primarily for passengers), is adjacent to the main terminal building and the same is the part of aerodrome/ airport. - Benefit of exemption is available.
Case Laws:
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GST
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2020 (7) TMI 163
Grant of Statutory Bail - offence under Section 132(1)(b) (c) and 132(5) of the CGST Act 2017 - inability to deposit cash security - it is the contention of the petitioners that due to Covid-19 pandemic, the family members are unable to raise funds and deposit the amount - HELD THAT:- The petitioners are ordered to be released on bail on executing their own bond for a sum of ₹ 50,000/- each, before the Superintendent of the concerned prison, in which the petitioner has been confined and thereafter on their release - each of the petitioners shall furnish two sureties who shall deposit title deeds of immovable properties each to the value of ₹ 20lakhs before the Additional Chief Metropolitan Magistrate (EO-I), Egmore, Chennai within four weeks from the lifting of the lock down or the commencement of the Court's normal functioning, failing which the bail granted by this Court shall stand dismissed automatically.
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2020 (7) TMI 162
Filing of Form TRAN-1 - transitional credit - time limitation - vires of Rule 117(1A) of Haryana GST Rules, 2017 - HELD THAT:- The Petitioner has challenged vires of Rule 117 (1A) of Rules, however we do not think it appropriate to declare it invalid as we are of the considered opinion that Petitioner is entitled to carry forward Cenvat Credit accrued under Central Excise Act, 1944. The Respondents have repeatedly extended date to file TRAN-I where there was technical glitch as per their understanding. Repeated extensions of last date to file TRAN-I in case of technical glitches as understood by Respondent vindicate claim of the Petitioner that denial of unutilized credit to those dealers who are unable to furnish evidence of attempt to upload TRAN-I would amount to violation of Article 14 as well Article 300A of the Constitution of India. The Respondents are directed to permit Petitioner to upload TRAN-I on or before 30.06.2020 and in case Respondent fails to do so, the Petitioner would be at liberty to avail ITC in question in GSTR-3B of July 2020 - Petition allowed.
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Income Tax
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2020 (7) TMI 161
Power to transfer cases u/s 127 - Stay on transfer of case - Period of limitation for passing an assessment - intra-Court appeal - This is a case where the assessment files are being transferred from one city to a neighbouring city hardly 158 kms. away, in the same State. What inconvenience can this cause to V.V. Minerals No.2, especially when they have business and offices in several cities? Held That:- We are aware that Section 127 of the IT Act does not create any geographical classification. Nevertheless, the judgments of Courts should not be read as Euclid's theorem, but, should be understood in the context in which they were rendered, and a blind and pedantic following of precedents is not expected of Constitutional Courts. First submission of Mr. Lakshmi Narayanan, Mr. Senthil Kumar submitted that V.V. Minerals No.2 had challenged only the transfer order, that too belatedly, and had obtained the order of stay and not the proceedings under Section 153-A of the IT Act and therefore, in the absence of stay of the proceedings under Section 153-A, ibid., the stay that has been granted in respect of transfer of proceedings will not save running of the period of limitation of the proceedings under Section 153-A of the IT Act. This Court finds sufficient substance and force in the submission of Mr. Senthil Kumar. The instant intra-Court appeal fails and is accordingly dismissed.
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2020 (7) TMI 160
No adjudication on the appeal - Counsel appearing for the Income Tax Department submits that there would not be an aversion to the Commissioner of Income Tax Appeal, in case an appropriate direction is issued for the adjudication of the appeal - HELD THAT:- Dispose of this writ petition with a direction to the 1st respondent to take a call on the appeal Ext.P2 or interim application preferred against the assessment order as expeditiously as possible, within a period of one month from the date of receipt of a copy of this judgment, after affording an opportunity of hearing to the petitioner in accordance with law. Till such time, coercive action if any pertaining to Ext.P1 order is ordered to be kept in abeyance. It is made clear that the interim direction shall be operative only till the adjudication of the appeal.
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2020 (7) TMI 159
Exemption u/s 11 - proof of charitable activity - Assessee was granted registration under section 12AA by order dated 20/06/1988 - non applicability of provisions of sec.2(15) - HELD THAT:- As decided in assessee's own case [ 2015 (7) TMI 169 - KARNATAKA HIGH COURT] referring to the provisions of the KIDA Act [Karnataka Industrial Areas Development Act, 1966], and principle laid down in the aforesaid decision of the HonbIe Delhi High Court in the case of India Promotion Organization [ 2015 (1) TMI 928 - DELHI HIGH COURT] in our view, will clearly show that the Assessee does not driven primarily by desire or motive to earn profits but to do charity through advancement of an object of general public utility. The assessee is operating on no profit basis. This is substantiated by the actual income received on operations of the Assessee and the expenditure incurred set out in the earlier paragraphs of this order. Proviso to Sec 2(15) of the Act is therefore not applicable to the case of the Assessee. We therefore hold that the Assessee is entitled to the benefits of Sec.11 of the Act. The AO has not disputed the conditions necessary for allowing exemption u/s.11 of the Act, except the applicability of proviso to Sec.2(15) of the Act. In view of our conclusions that the said proviso is not applicable to the case of the Assessee, we hold that the Assessee's income is not includible in-the total income and therefore the income returned by the Assessee is directed to be accepted. We therefore hold that income of assessee will be eligible to claim exemption under section 11 - Decided in favour of assessee. Surplus arises due to interest income and other income in the nature of penalty and other charges, and not from activity of acquisition of land and providing infrastructure facilities for industrial development - HELD THAT:- As we note that Ld.AO has not verified whether, assessee satisfies provisions of section 11 so far as application of income is concerned, for availing exemption under section 11 of the Act. We accordingly, direct Ld.AO to verify the same and to consider claim in accordance with law. Depreciation on assets of trust - double deduction - HELD THAT:- Both sides submits that this issue stands squarely settled in favour of assessee by decision in case of CIT vs Rajasthan and Gujarat Charitable Foundation Poona [ 2017 (12) TMI 1067 - SUPREME COURT] wherein as noted that, amendment to section 11 (6) of the Act introduced by Finance Act No.2/2014 is prospective in nature, and will be effective from assessment year 2015-16 onwards. Hon ble Supreme Court upheld the observations of ITAT Mumbai, which was confirmed by Hon ble Bombay High Court in case of DIT (E) vs Framjee Cawasjee Institute [ 1992 (7) TMI 331 - BOMBAY HIGH COURT] wherein it was held that if amount has been spent on acquiring assets and has been treated as application of income in the year. - Decided against revenue.
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2020 (7) TMI 158
Condonation of delay - delay of 30 days - HELD THAT:- As on 22nd of April 2019 the learned CIT A passed two orders in case of the assessee for same assessment year 2013 14 in two subject matters i.e. one was against the order passed u/s 143 (3) of the act and second was against the order passed u/s 154 of the act withdrawing MAT credit. On the legal advice, the assessee preferred an appeal, which was delayed by 30 days. According to us, delay was for the sufficient cause and assessee did not derive any benefit by filing delayed appeal. Further, before ITAT, cause of justice must be served and pedantic approach should be abdicated. Therefore relying on the decision of the honourable Supreme Court in case of collector, land acquisition versus MST Katiji [ 1987 (2) TMI 61 - SUPREME COURT] we condone the delay and proceed to decide the issue is on merits. Rectification of mistake u/s 154 - reduction of MAT credit u/s 115 JAA - debatable issue or not? - HELD THAT:- Amount of tax credit Under the above sections shall be carried forward and set-off in a future year in which tax becomes payable on the total income computed in accordance with the provisions other than Section 115JB. Thus, it is clear that it can be set-off in that year when tax computed under normal provision is more than a minimum alternate tax payable by the assessee. There is an outer time limit provided, that it cannot be carried forward beyond 10 years. There is no other condition to claim the benefit of the set off credit has been prescribed. Furthermore, there is no provision that the assessing officers should determine the tax credit, which shall be carried forward and set off. It is an inbuilt mechanism of the law of the credit and set off - on application of a particular formula, if the tax payable Under the normal computation is higher than the minimum alternate tax payable by the assessee, and if the assessee has MAT credit available, same shall be granted as a credit to the assessee against the tax liability - No option available either to the assessing officer or to the assessee. AR also could not show us that this issue is debatable. According to us, language of law is simple and clear - we reject the argument of the learned authorised representative that MAT credit is also an option to the assessee. We do not find that there is such option available to the assessee. It is automatic. Therefore, we do not find any debatable issue involved in adjusting the MAT credit against the tax liability of the assessee. In the present case, MAT credit given to the assessee was found to be a mistake apparent from the record. We do not find any reason to disturb the finding of the lower authorities that the learned assessing officer has correctly assumed jurisdiction u/s 154 of the income tax act to rectify MAT credit granted to the assessee wrongly. We dismiss ground number 1.1 of the appeal. Transfer pricing adjustment confirmed by the learned Dispute Resolution Panel - Merely because the assessee has disputed the assessment before the higher appellate forum, it does not deprive the right of the revenue to rectify the assessment order or the tax demand raised against the assessee provided the action of the assessing officer false within the parameters of Section 154 of the act. Learned CIT A has correctly rejected this argument of the assessee. Even otherwise, if the assessee gets any relief on account of the order of the appellate authorities, naturally, the income and the consequent tax liability of the assessee would be adjusted pursuance thereto. Therefore, pendency of appeal before the higher forum cannot be a ground to hold that the order passed by the learned assessing officer u/s 154 of the act is not proper, if it is otherwise in order. Therefore, upholding the orders of the lower authorities, we do not find any merit in ground number 1.2 of the appeal. Charging interest u/s 234B - HELD THAT:- The provisions of Section 234B in a clear term impose mandate to collect interest at the rates stipulated therein. There is no discretion is available at the end of the assessing officer or with the assessee to not to compute/pay the above interest. Thus, it is clear that the provisions of Section 234B are mandatory and the assessing officer is dutybound to charge interest u/s 234B of the income tax act. The honourable courts have granted certain leniency if there is a shortfall arising because of the interpretation of the law or unclear tax liability to the assessee. It may also happen where the advance tax liability arises because of a subsequent court ruling or an amendment. In all these cases, courts have taken a lenient view to not to allow the assessing officer to charge interest u/s 234B of the act. However, before us that is not the case. Here it is a clear-cut case of computational error. Anybody, either the AO or the assessee, would have computed the tax liability of the assessee at that particular time would have correctly claimed MAT credit available to the assessee and charged interest u/s 234B of the income tax act. Therefore, we do not find any infirmity in the order of the learned assessing officer in computing interest liability u/s 234B of the income tax act.
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2020 (7) TMI 157
Revenue recognition of the work completed to the returned income - return was selected for scrutiny assessment under CASS - HELD THAT:- The assessee has recognized the revenue in Assessment Year 2015-16 onwards when the completion exceeded 30%. The reasons for the reduction in the estimated cost of project from ₹ 362 crores as on 31.03.2014 to ₹ 349.53 crores as on 31.03.2016 has been well explained at para 37 of the AS 7 which is mentioned elsewhere and the reason for reduction in the estimated cost so far as the case in hand is concerned is due to selling cost which was earlier taken at ₹ 25 crores which was reduced rs. 12.35 crores. It is pertinent to note that the assessment order for Assessment Year 2014-15 was filed on 29.09.2015. This means that the Assessing Officer was well aware of the revenue recognition in Assessment Year 2015-16 and, therefore, grossly erred in making additions in Assessment Year 2014-15 for income which has been duly recognized in subsequent assessment year. As relying on M/S EXCEL INDUSTRIES LTD. AND MAFATLAL INDUSTRIES P. LTD. [ 2013 (10) TMI 324 - SUPREME COURT] Assessing Officer / CIT (Appeals) were not justified in substituting the cost as on 31.03.2014 with the cost on 31.03.2016. The addition made by the Assessing Officer is not justified on the facts of the case. We accordingly direct the Assessing Officer to delete the addition - Decided in favour of assessee.
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2020 (7) TMI 156
Disallowance u/s 40(a)(i) - Selling Expenses payments to non-resident agents - HELD THAT:- It is not in dispute that the issue is same as have already been considered in earlier year by the Tribunal [ 2017 (9) TMI 820 - ITAT DELHI] . The parties are also same. Tribunal examined the issue in the light of agreement and material on record and found that the agent had their base situated in Abroad and moreover services were also rendered by them outside. Therefore, assessee is not required to deduct tax at source while making payments in question. A.O. in the assessment order has also made disallowance since in earlier year also of the same issue and no TDS have been deducted. Therefore, the facts being identical, no disallowance is required in the matter. We, therefore, following the Order of the Tribunal in the case of assessee for the A.Y. 2010-2011, set aside the Orders of the authorities below and delete the addition. - Decided in favour of assessee.
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2020 (7) TMI 155
Depreciation on Non-compete Fee @25% - HELD THAT:- Respectfully following the consistent view of the Tribunal [ 2019 (6) TMI 542 - ITAT MUMBAI ] we direct the A.O. to allow deprecation on non compete fee @ 25% by treating it as an intangible asset. Disallowance of depreciation on adoption of wrong actual cost of various fixed assets - HELD THAT:- As decided in own case [ 2019 (6) TMI 542 - ITAT MUMBAI ] Co-ordinate Bench has restored this issue back to the file of Assessing Officer after placing reliance on the earlier order of Tribunal in assessee s own case for assessment year 2006-07. Disallowance of interest under section 36(1)(iii) - AO held that the investments have been made by utilizing borrowed interest bearing funds in the aforesaid subsidiary companies AND the investment is unrelated to the business of assessee - HELD THAT:- We find that in assessment year 2012-13 disallowance under section 36(1)(iii) of the Act was made by the Revenue on identical set of facts. The Co-ordinate Bench of the Tribunal following the order of Tribunal in assessee s own case in preceding assessment years deleted the disallowance [ 2019 (6) TMI 542 - ITAT MUMBAI ] - Decided in favour of assessee. Addition of unutilized CENVAT u/s 145A - exclusive method followed by the assessee was not in accordance with provisions of section 145A - HELD THAT:- We find that the addition on account of unutilized CENVAT credit was made in assessee s case in assessment year 2012-13 for similar reasons. The Tribunal restored the issue back to the Assessing Officer. TP Adjustment - corporate guarantee commission and interest on loan extended to subsidiary Piramal Glass UK ltd. - HELD THAT:- As in assessee's own case [ 2019 (6) TMI 542 - ITAT MUMBAI ] DRP has directed the Assessing Officer to compute interest at LIBOR plus 3%.Tribunal has directed to compute interest on interest free loan advanced to the AE at LIBOR plus 200 basis points. Insofar as adjustment on account of corporate guarantee commission is concerned, the Tribunal has directed the Assessing Officer to compute the corporate guarantee fee @ 0.5% - We respectfully following the decision of the Co-ordinate Bench partly allow ground. Disallowance made under section 14A r.w.r 8D - HELD THAT:- DRP has directed the Assessing Officer to delete the disallowance. However, it appears that the Assessing Officer has failed to give effect to with the directions of the DRP on this issue. The ground of the appeal are restored to the Assessing Officer to give effect to the directions of the DRP on the issue of disallowance under section 14A r.w.r. 8D. Disallowance under section 14A of the Act for the purpose of computing profit book profits under section 115JB - HELD THAT:- Since we have already restored the issue of disallowance under section 14A r.w.r. 8D to the Assessing Officer for giving effect to the order of DRP, the ground No.XI is also restored back to the Assessing Officer for reconsideration in line with the decision of Special Bench in the case of ACIT vs. Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ] - The ground of the appeal is allowed for statistical purpose. Short credit of TDS - HELD THAT:- This issue is restored back to Assessing Officer for re-verification. The Assessing Officer is directed to allow TDS credit as per actual records. The ground of appeal allowed for statistical purpose. Short interest under section 244A - HELD THAT:- This ground is consequential. Therefore, the same is dismissed. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]
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2020 (7) TMI 153
Slump sale of windmills - Short term capital gains - definition of undertaking is given in 2(42C) and section 2(19) - AO denied the claim of the assessee treating the gains of the windmill as long term capital gains u/s 50B of the Act and treated the same as gains on depreciable assets u/s 50 - whether the windmill constitutes separate undertaking or not? - HELD THAT:- Though the assessee has not separately maintained the books of accounts, separate ledger accounts are maintained and claiming deduction u/s 80IA separately for the income generated from the individual units each year. As per the Profit Loss account, we observe that the assessee is computing profits separately, from wind mills and in a position to ascertain the income and expenditure separately for the windmills as well as for the assessee's business. Coordinate Bench of ITAT, Pune in its order in the case of M/s Sargam Retails (P.) Ltd. [ 2017 (12) TMI 1257 - ITAT PUNE] held that windmill is a separate undertaking. Therefore, we hold that wind mills constitute separate undertaking and the Ld. CIT(A) has rightly directed the AO to compute the capital gains as a slump sale u/s 50B (2) and no interference is called for. Accordingly, we uphold the order of the Ld. CIT(A) and dismiss the appeal of the revenue.
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2020 (7) TMI 152
Validity of assessment u/s 153A - Presumption of the documents seizued u/s 292C - assumption of jurisdiction by the A.O under Sec. 153C - pre-mended Sec. 153C applicability - whether A.O had wrongly assumed jurisdiction under Sec. 153C of the Act, despite the fact that no money, bullion, jewellery or other valuable article or thing or any books of accounts or documents belonging to the assessee were seized during the course of the search proceedings conducted - scope of amendment to section - HELD THAT:- It is the date of search that has to be considered to be the relevant date for the purpose of applying the amended provisions of Sec. 153C(1) of the Act. As such, in the case before us as the search proceedings were conducted on Cosmos group on 24.09.2014, therefore, the provisions of pre-amended Sec. 153C (i.e prior to amendment w.e.f 01.06.2015) would be applicable. On the basis of our aforesaid observations, we vacate the view taken by the CIT(A) to the contrary that the post-amended Sec. 153C would applicable in the present case. Document was seized during the course of the search proceedings from the premises of Cosmos group, therefore, as per Sec. 132(4A)(i) and Sec. 292C(1)(i) of the Act, the normal presumption would be that the said document belonged to the said searched person i.e Cosmos group. Nothing is discernible from the satisfaction note as to how the aforesaid presumption was rebutted by the A.O, and on what basis the seized document which was generated, created, maintained and retrieved from the e-mail account of the assessee, from its office premises, was held by the A.O as belonging to the assessee and not the searched person i.e Cosmos group. CIT(A) while dismissing the appeal of the assessee had proceeded on the fact that the seized document viz. jewels wrkng up to 31.08.2014.xls related to the assessee, and therefore the assumption of jurisdiction by the A.O as per the post-amended Sec. 153C (i.e as applicable w.e.f 01.06.2015), was valid and legal. As observed by us hereinabove, the revenue has accepted the aforesaid observations of the CIT(A). Now, when we have concluded that the assumption of jurisdiction in the case of the assessee before us has to be looked into as per the pre-mended Sec. 153C (i.e applicable prior to 01.06.2015), therefore, the aforesaid view so taken by the CIT(A) cannot be sustained and is liable to be vacated. At the same time, as the seized document jewels wrkng up to 31.08.2014.xls admittedly does not belong to the assessee, therefore, the jurisdictional requirement to justify the assumption of jurisdiction under the pre-amended Section 153C of the Act (i.e prior to 01.06.2015) is not found to have been satisfied. In the backdrop of our aforesaid observations, the assumption of jurisdiction by the A.O under Sec. 153C is vacated for want of jurisdiction.- Decided in favour of assessee. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]
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2020 (7) TMI 151
Reopening of assessment - treating Exempt Interest and Rental income under section 10(24) as Taxable income of the assessee - non providing the sufficient opportunity of being heard, without providing the copy of recorded reason for issuing the notice under section 148 - HELD THAT:- Assessee has not filed any return of income U/s 139(1) of the Act and the A.O. has initiated reassessment proceedings U/s 147/148 by issuing notice U/s 148 on the basis of AIR information showing the interest income received by the assessee from SBBJ. Exemption claimed by the assessee U/s 10(24) of the Act was denied by the A.O. and consequently, the entire income as shown in the return of income has been assessed to tax while framing the reassessment order on 23/12/2017. Since no body has appeared and attended the proceedings before the ld. CIT(A), therefore, the appeal of the assessee was dismissed by impugned order passed ex parte. It is pertinent to note that even the documentary evidence regarding the registration of the assessee s Trade Union was not produced either before the A.O. or before the ld. CIT(A), therefore, in these facts and circumstances the assessee has now produced all the documentary evidences to show that the assessee is a registered Trade Union and the income during the year was earned from interest from the bank deposits as well as rental income in respect of the property owned by the assessee. Since this explanation and documentary evidence were not available before the authorities below and the ld. CIT(A) has dismissed the appeal of the assessee ex parte, therefore, in the interest of justice, we set aside the matter back to the record of the A.O. to frame the assessment de novo after considering all the documentary evidences regarding source of income and eligibility of the assessee for exemption U/s 10(24) of the Act. Appeal of the assessee is allowed for statistical purposes only.
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2020 (7) TMI 150
Revision u/s 263 - bogus purchases - AO had not examined the genuineness of the purchase transaction - whether the PCIT is justified in setting aside the assessment order and directing the learned Assessing Officer to pass the assessment order de novo by calling relevant details, applying the relevant law in an objective manner? - HELD THAT:- PCIT perused the assessment order and assessment records and found that the assessment order dated 21/12/2017, passed by the learned Assessing Officer under section 147/143(3) was erroneous insofar as prejudicial to the interest of the revenue. The impugned order does not show that the review of the assessment order dated, 21/12/2017 by the JCIT is the sole basis for exercise of jurisdiction under section 263 of the Act by the ld. PCIT. Forward of the case by the JCIT is only triggered the process of the ld. PCIT perusing the assessment order and assessment records to reach a conclusion that the order passed under section 147/143(3) of the Act was erroneous, insofar as it is prejudicial to the interest of the revenue. PCIT reached an independent conclusion as to the nature of the assessment order after perusal of the assessment order and assessment record, and consequently cannot it be said that the action was taken by the learned PCIT was on the borrowed satisfaction. We expressed our opinion that the assessment order does not indicate that AO had examined the genuineness of the purchase transaction in the light of the audited accounts of the assessee. More particularly the fact that out of the alleged purchasers of ₹ 69,75,369/- , there was payment to the suppliers only to the extent of ₹ 14 lakhs and the balance amount of rupees. 55,75,369/- was shown to have been outstanding goes unverified and the assessment order is silent on this aspect. Order passed under section 263 of the Act clearly shows that the learned PCIT had examined the record and reached a reasonable conclusion that this non-examination of the genuineness of the purchases to apply the law laid down by the Hon ble Gujarat High Court in the case of NK Proteins [ 2016 (6) TMI 1139 - GUJARAT HIGH COURT ] renders the impugned assessment order as erroneous insofar as it is prejudicial to the interest of revenue. It cannot, therefore, be said that the learned PCIT did not conduct any independent enquiry to reach a conclusion that the assessment order is also prejudicial to the interest of the revenue. Learned PCIT is right in his observation that the examination of the genuineness of the purchases is necessary in this case. PCIT rightly assumed jurisdiction and it is only after perusal of the assessment order and assessment record, he rejected the contentions of the assessee that the view taken by the learned Assessing Officer is also one of the plausible views.- Decided against revenue. Acceptance of trading results - Assessee submitted procedure for assessment in the case of the persons engaged in the diamond manufacturing and/or trading, and this instruction says that if such an assessee had shown a sum equal to or higher than 6% of his total turnover from such business, as is income under the header Profit and Gains of Business or Profession for a particular assessment year, the learned Assessing Officer shall accept his trading result - HELD THAT:- While declining to quash the impugned order section 263 of the Act, we direct the learned Assessing Officer to examine the books of accounts of the assessee in the light of the observations made by the learned PCIT, and also to consider the CBDT instruction bearing number 2 of 2008 dated 22/2/2008 and to take a plausible view to pass the fresh assessment order. Apeal of the assessee is allowed in part.
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2020 (7) TMI 149
Revision u/s 263 - Case is selected for limited scrutiny u/s 143(2) - inadequate or no inquiry - Large other expenses claimed in the Profit Loss A/c and Mismatch between income/receipt credited to P L A/c considered under other heads of income and income from heads to income other than business/profession - HELD THAT:- It is not in dispute that under the limited scrutiny the Ld. A.O is required to keep his investigation and examination limited to the extent of the reasons for which limited scrutiny has been taken up. So his focus should be limited to the reasons but in such situation what is required from the A.O is to put best of his focus and pinpointed examination of information of the assessee so as to arrive at the correct income of the assessee. The file records should speak by itself that the A.O has given/delivered his best to justify that in the scrutiny for limited purpose, no stone is left unturned for the issues raised in the limited scrutiny case by way of in depth examination. Looking to the reasons and the enquiry conducted by the Ld. A.O as far as the reason No.3 Large other expenses claimed in the Profit Loss Account and reason No.5 i.e. Mismatch between income/receipt credited to P L A/c considered under other heads of income and income from heads to income other than business/ profession , are concerned we find that the Ld. A.O has clearly observed in the assessment order that he has checked the books of accounts, bills and vouchers and has conducted sufficient enquiry and had made some disallowance of expenses. Once enquiry has been conducted with specific observation of having checked the books of accounts, bills and vouchers then in these circumstances Ld. PCIT was not justified in invoking the provisions u/s 263 of the Act and holding that the assessment needs to be set aside since the Ld. A.O has not examined properly the reasons No. 3 5 mentioned herein above which were also the reasons for selecting the case of limited scrutiny. High ratio of refund to TDS and low net profit or loss from large gross receipts - The details of sales made in the preceding and current year and the details for increase in purchase cost were the bare minimum details which the Ld. A.O could have gone through to form an opinion. Merely accepting the few liner reply of the assessee cannot be held to be sufficient or minimum enquiry in case of such limited scrutiny. The enquiry conducted by the Ld. A.O in the instant case for reasons 1 2 cannot be termed as adequate enquiry. Rather looking to the reply given by the assessee which is not at all clear in itself, in our view the Ld. A.O has not conducted any enquiry with regard to reasons No. 1 2 relating to High ratio of refund of TDS and Low Net profit or loss shown for large gross receipts. Thus Ld. PCIT was justified in setting aside assessment order by invoking the provisions of Section 263 of the Act and holding that the Ld. A.O has not conducted proper enquiry with reference to Reasons No. 1 2. Mismatch in amount paid to related persons u/s 40A(2)(b) reported in audit report and ITR - One of the information relates to payment to related persons u/s 40A(2)(b). The auditor take information from the assessee and gives the details of the relatives with the amount of payment and the nature of such expenditure in the format provided in Form 3CD. These details may help the Assessing Officer to examine the payment related persons if the case is selected for scrutiny. We can say that these details assist the Assessing Officer to frame a correct assessment and energy is saved to gather related information from the huge financial data maintained by the assessee. There is hardly any occasion that such payment to relatives is disallowed by the Tax Auditor in his report by way of qualification of Audit Report and the same amount is mentioned in the ITR. Since no disallowance is made by the Tax Auditor the details of payment made to the relatives is mentioned in Report but the amount in ITR is NIL there occurs mismatch. Now when the case has been selected for limited scrutiny u/s 143(2) of the Act with one of the reasons relating to the mismatch to payment made to relatives it is not that simple that the Ld. A.O merely matches the I.T return to the Tax Audit return and comes to a conclusion that there is no mismatch. It will be too narrow approach which cannot be accepted in scrutiny cases. So what is required on the part of the Ld. A.O is to call for the details for the payments made to the related persons and examine the transactions as per the provisions of Section 40A(2)(b) of the Act and after examining the details if he frames a view that such payments are neither excessive nor unreasonable with regard to fair market value and goods and services, may infer that no disallowance is called for. This examination of the transaction of payment made to relatives u/s 40A(2)(b) of the Act should be well documented and assessment records should speak by itself about the enquiries conducted by the Ld. A.O. The records of the instant case speaks that no details were filed by the assessee before the Ld. A.O to prove the reasonableness of payments made to relatives nor any indication is there on behalf of the Ld. A.O to call for specific details relating to payment to relatives u/s 40A(2)(b) of the Act. Thus in our considered view there is no enquiry about the reasons No.4 i.e mismatch in amount paid to related persons u/s 40A(2)(b) and therefore Ld. PCITT has rightly invoked his power u/s 263 of the Act setting aside the order of Ld. A.O with regard to these reasons. We are of the considered view that the action of Ld. PCIT of invoking the provisions of Section 263 of the Act and setting aside the assessment order is partly held to be justified. Appeal of the assessee is partly allowed
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2020 (7) TMI 148
Exemption of the indexed cost of acquisition and improvement - AO denied assessee claim of cost of improvement stating that he did not furnish any proof to substantiate cost of improvement on the sold property, Ld.AO also denied - HELD THAT:- Coming to quantification of construction/improvement carried out by assessee on plot purchased, there is mention of of some construction in the year 2005-06 being new building of 1400 sq.ft RCC roofing and shed 500 sq.ft with AC sheet roofing in valuation report dated 06/12/2012 by SPR Associates, placed at page 14 to Annexure 1 in paper book, The valuation report values new building constructed by assessee at ₹ 1,000/- per sq.ft and ₹ 800/- per sq.ft for shed, approximately valuing at 14 lakhs and 4 lakhs respectively. Further assessee has not been able to establish the balance amount being utilised for any other construction or any improvements carried out by assessee on the existing buildings. We are therefore unable to appreciate the quantification made out by assessee to the extent of ₹ 1,41,77,065/-. Also that there is nothing on record to establish that various valuation reports referred to and relied upon by assessee have been before AO. In the interest of justice, direct Ld.AO verify the reports and to consider cost of improvement/construction in accordance with law. Ld.AO shall ascertain by way of proper enquiries regarding construction/improvements that originally existed at the time of purchase and any construction/improvements subsequently carried out by assessee on plot for purposes of computing capital gains in the hands of assessee. Denial of claim under section 54G - assessee did not fulfil necessary conditions for eligibility - assessee had not used new land for industrial purpose - HELD THAT:- Hon ble Supreme Court in case of Fibre Boards (P) Ltd. vs CIT [2015 (8) TMI 482 - SUPREME COURT] held that, even an agreement to purchase is good enough, and that assessee cannot be denied exemption under section 54G for the reason that plant and machinery has not been purchased. It is clear that for the assessment year in question all that is required for the assessee to avail of the exemption contained in the section is to 'utilize' the amount of capital gains for purchase and acquisition of new machinery or plant and building or land. Admittedly, in present facts of the case, assessee has utilised capital gains for purchasing new land in an area other than urban area as specified under section 54G of the Act within the time period specified therein. Reject reasoning of Ld.AO to deny exemption claimed by assessee. Further, reasoning of Ld.CIT (A) has already been negated as the evidences relied upon by Ld.AR speaks in volumes, of structures existing on original assets, from the time the plot of land was transferred to assessee by Karnataka Industrial Areas Development Board. - We hold that assessee is eligible for exemption under section 54G of the Act. The quantum of capital gains to be considered under section 54G would have to be computed in accordance with law. Ld.AO is directed to granting benefit u/s 54G while computing capital gains. Compute capital gains in respect of original asset sold by assessee in accordance with law.
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Customs
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2020 (7) TMI 147
Seizure - Smuggling of Gold - offences under sections 133 and 135 of the Customs Act, 1962 - HELD THAT:- It is seen that the petitioners have committed very serious offence and the offences registered against the petitioners are clearly attracted. Moreover, they have been arrested and remanded to judicial custody. Further, there is apprehension that the accused persons would have continued in indulging in mobilising gold in huge quantity. Therefore, this Court is not inclined to grant bail to the petitioners, and these criminal original petitions are dismissed.
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2020 (7) TMI 146
100% EOU - shortage of imported materials and non-movable items - Import of silk yarn and grey silk fabrics without payment of duty availing relevant Notifications 53/2007 52/2003 - HELD THAT:- The officers of DRI have found in addition to the shortages detected by the auditors, shortages in respect of goods claimed to have been re-imported by the appellants in consequence to the rejection of the same by the foreign buyer. The appellants have argued that as the warehousing period is not over, the demand is premature. Whereas, we find that Learned Commissioner has confirmed the demand in terms of the Notification No. 53/97 dated 03.06.1997 and 52/03 dated 31.03.2003 as the goods were neither utilized within the prescribed period nor any extension was sought. It is found that among other conditions, Notification No. 52/2003 requires the appellants to maintain proper account of the receipt, storage and utilization of the goods. The investigation conducted by the Revenue shows that the so-called re-imported goods were not found in the factory premises and no proper accounts of the same has also been done. The appellants have taken the plea that import, export, re-processing and re-export is a continuous exercise and that the re-imported goods were in the work in progress. This argument is not acceptable. It is not the case of the appellants they have maintained records showing the receipt, utilization and disposal of re-imported goods. Under the circumstances, it is found that the appellants have violated the conditions of the Notification and in terms of the Bond they have submitted at the time of import, they are liable to pay duty along with applicable interest. Penalty u/s 114A of the Customs Act, 1962 - HELD THAT:- There is merit in the argument of the appellants to the extent that the Revenue is free to demand and collect duty along with interest, in terms of the Bonds submitted by the appellants at the time of import in terms of Notification No. 52/03. The Bond submitted in terms of the Notification binds the appellants to pay back the duty and interest in the event of any violation. The said Notification does not provide for imposition of any interest and therefore, we set aside the penalty imposed. Also, the appellant s submission vis- -vis confiscation is also acceptable in terms of the Notification - penalty under Section 114A and other penal provisions cannot be invoked when the goods were permitted to be cleared by the officers. However, the Revenue will be free to recover duty along with interest in terms of the Notification - Commissioner has not imposed any fine in lieu of confiscation. Appeal allowed in part.
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Insolvency & Bankruptcy
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2020 (7) TMI 145
CIRP - Reimbursement of Compounding fees - Who is responsible for offence or compounding of offence under the Income Tax Act which was committed much before the initiation of CIRP proceedings - HELD THAT:- Admittedly the CIRP commenced vide order dated 7-8-2017 by the Adjudicating Authority under section 7 of the I B Code and Mr. Savan Godiawala was appointed as Interim Resolution Professional and subsequently confirmed as Resolution Professional of the Corporate Debtor thereafter, vide order dated 27-8-2018 passed by the Adjudicating Authority, the Appellant Mr. Savan Godiawala was appointed as the Official liquidator of the Corporate Debtor i.e., Respondent No. 2. It is also admitted fact that on 31-3-2016 Income-tax Office, Shri Mandip ACIT, Income-tax Department filed complaint under section 276-B read with Section 278-B of the Income-tax Act against the Respondent No. 1 being Managing Director and person responsible and in charge of day to day affairs of the Company and Respondent No. 2 i.e., Corporate Debtor with the allegation that the Tax deducted at source under various sections of TDS amounting to ₹ 37,90,87,796/- during the financial year 2012-2013 but has not deposited the said tax to the Government account within the stipulated period i.e. on or before 7 days from the end of the month in which the deduction is made as per the provisions of Income-tax Act read with Rule 30 of the Income Tax Rules. Thus, the Respondent No. 1 and 2 have committed offence punishable under section 276-B read with Section 278-B of the Income-tax Act for the offence the punishment is prescribed a minimum imprisonment of 3 months which can be extended up to an imprisonment of 7 years. Thus, it is clear that much before CIRP Process the alleged offence has been committed by the Respondent Nos. 1 and 2. The question involved in this Appeal is that actually who has committed the default by non-depositing the TDS in time certainly the alleged offence is committed during the financial year 2012-13. Therefore, the person responsible and in charge of the day to day affairs to the Company at relevant time has committed the default. Therefore, he only can be punished. As per the allegation, the Respondent No. 1 G Venketesh Babu was a person responsible and in charge of day to day affairs of the Company being Managing Director. It is true that as per Section 35(1)(k) of the I B Code, it is duty of the liquidator to institute or defend any suit, prosecution or other legal proceedings, civil or criminal in the name of on behalf of Corporate Debtor. Compounding of offence is a process whereby the person/entity committing default will file an Application to the compounding authority accepting that it has committed an offence and so that same should be condoned - In the instant case as per the prosecution Respondent No. 1 has committed the offence under section 276 -B read with Section 278-B of the Income-tax Act, therefore, he has filed the Application before the compounding authority. Liquidator has not committed the alleged offence therefore; he is not required to file Application before compounding authority accepting that he has committed an alleged offence. The Ld. Adjudicating Authority has misconstrued the provisions of Section 35(1) (k) of I B Code, and directed the liquidator to reimburse the compounding fees to Respondent No. 1 - appeal allowed.
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2020 (7) TMI 144
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - possession of apartment with stipulated time limit - HELD THAT:- In the present case, the Respondent emphatically contends that it could not commence construction despite approval of the building plan dated 23rd July 2013, as the said approved imposed certain pre-conditions including but not limited to (a) obtaining grant of approval by Ministry of Environment and Forest, (ii) Fire Safety Approval before the commencement of construction. The Respondent obtained environmental approval on 12th December 2013, and the said approval reiterated the requirement for approval of the Fire Department. Therefore, the Respondent applied for Fire Safety Approval on 23rd October 2013, before starting any construction - Adjudicating Authority accepted the contention of the Respondent and held that there was no default on the part of the Corporate Debtor and further observed that the financial Creditor has also failed to prove that any debt was due and payable by the Corporate Debtor. It is on record that the Corporate Debtor/Respondent was to handover the possession of the apartment within 60 months, i.e. 42 months (commitment period) + 6 months grace period + 12 months extended period from the date of approval of building plan and on fulfilment of the pre-conditions imposed thereunder as per clause 13.3 to 13.5 of the Agreement - It is noticed that the despite the approval of building plan on 23rd July 2013 project could not be started due to the certain pre imposed conditions, including but not limited to obtaining the grant of approval by Ministry of Environment and Fire Safety approval, before the commencement of construction. The Respondent obtained the environmental approval on 12th December 2013 and the said approval reiterated the requirement of approval by the Fire Department. Therefore, the Respondent applied for the Fire safety Approval on 23rd October 2013, and before starting any construction, approval from the Fire Department, in terms of Section 15 of the Haryana Fire Safety Act, 2009 was material for the fulfilment of the obligations of the Respondent and commencement of construction. Accordingly, the date of handover of possession is to be computed from the date of grant of Fire Safety Approval, i.e. dated 27th November 2014. There are no justification for the interference with the Impugned Order - appeal dismissed.
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Service Tax
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2020 (7) TMI 143
Classification of services - Works Contract Service or not - Construction / Building of Multi-Level Car Parking (MLCP) built by the appellant at New Delhi Airport (Terminal-III) - whether the same forms part of the Airport and hence exempt or is separate from the airport and taxable as works contract service? - HELD THAT:- Multi- Level Car Parking constructed by the appellant at IGI Airport, New Delhi, is part of the Airport, as is evident from the definition of Airport in clause (b) of Section 2 of the Airport Authority of India Act, 1994, read with clause (2) of Section 2 of Aircraft Act, 1934. We further find that Aerodrome has been defined in clause (2) of Section 2 of Aircraft Act, means any definite limited ground or water area intended to be used, either wholly or in part for the landing and departure of aircraft and includes all buildings, shed, vessels and other structures thereon or appertaining thereto - thus, the Multi-Level Car Parking (is an amenity primarily for passengers), is adjacent to the main terminal building and the same is the part of aerodrome/ airport. Applicability of decision in the case of GMR Hyderabad Int. Airport Ltd., vs. CCE [ 2019 (3) TMI 818 - CESTAT HYDERABAD ] - HELD THAT:- In the said case, the issue involved was that of allowability of Cenvat credit on capital goods, inputs and input services in the hand of GMR, used in construction of Hotel (Novotel), wherein this Tribunal held that the contractor who constructed the Hotel, have availed abatement under Notification No. 1/2006-ST, in discharging service tax liability, hence no Cenvat credit is allowable under conditions of the notification. Such facts are not obtaining in this appeal. Appeal allowed - decided in favor of appellant.
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