TMI Tax Updates - e-Newsletter
August 19, 2019

Case Laws in this Newsletter:

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

Articles

1. TAX ADMINISTRATION- TRANSPARANCY – DOCUMENT IDENTIFICATION NUMBER {DIN} - CBDT CIRCULAR, just before Independence day.

   By: DEVKUMAR KOTHARI

2. THE CODE ON WAGES, 2019 – PART I

   By: DR.MARIAPPAN GOVINDARAJAN

3. Recent Advance Rulings

   By: PRABHAKAR KS

News

1. DGGI (HQs) arrests two in cases of fraudulent IGST refund claims

Notifications

Companies Law

1. F.No. 01/04/2013-CL-V- Part-Ill - G.S.R 574 (E) - dated 16-8-2019 - Co. Law

Companies (Share Capital and Debentures) Amendment Rules, 2019.

IBC

2. S.O. 2953(E) - dated 16-8-2019 - IBC

Central Government appoints the date of publication of this notification in the Official Gazette as the date on which the provisions of the Insolvency and Bankruptcy Code (Amendment) Act, 2019 shall come into force.

Circulars / Instructions / Orders

GST - States

1. 43 T of 2019 - dated 7-8-2019

Reimbursement of SGST applicable on tickets of Super 30 movie

FEMA

2. 06 - dated 16-8-2019

Foreign Exchange Management (Deposit) (Amendment) Regulations, 2019 – Acceptance of Deposits by issue of Commercial Papers

Highlights / Catch Notes

Income Tax

• Assessing Officer Adds 100% to Income for Bogus Purchases u/s 69C, Lacking Evidence of Authenticity.

  Case-Laws - AT : Addition u/s 69C - bogus purchases - Enquiries conducted by the AO prove the fact that purchases from the above parties are bogus which are not supported by necessary evidence - AO was right in making 100% addition towards bogus purchases u/s 69C.
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• Section 35 Disallowance: TDS Deductions Require Compliance with Sections 30-38 of Income Tax Act for Expenditure Claims.

  Case-Laws - AT : Disallowance u/s 35 where TDS has been deducted pursuant to section 40 - any claim of expenditure 1st has to cross the threshold of provisions of section 30-38 of the income tax act. If the claim of the expenditure fails that threshold then whether taxes deducted by the assessee or not is immaterial.
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• Authorities Cannot Apply Section 68 Without Evidence; Section 10(38) Exemption Allowed for Alleged Bogus LTCG Scheme.

  Case-Laws - AT : Bogus LTCG - addition u/s 68 - denial of exempt u/s 10(38) - AO has nowhere in the assessment order referred to any material which can prove the complicity of assessee in the alleged accommodation entry operation, hence in the light of the documents furnished by the assessee, the authorities below were not justified in invoking the provisions of section 68 in regard to the sale proceeds of shares - exemption allowable
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• Final Assessment Invalid Without Draft Order u/s 144C(1), Even if Transfer Pricing Adjustment Accepted by Taxpayer.

  Case-Laws - AT : Effect of non-passing draft assessment order u/s 144C(1) - even if assessee had accepted addition to be made on account of TP adjustment, during assessment proceedings, would not bestow the jurisdiction upon the AO and final assessment order passed in the case cannot be upheld in law, in the absence of AO passing draft assessment order, which is envisaged as per section 144C(1)
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• Income Tax Addition Overturned Due to Lack of Cross-Examination Opportunity for Assessee on Seller's Statement.

  Case-Laws - AT : Addition on account of unexplained source of investment - seller declared higher price of sales value - cross examination - when the statement of the seller is solely relied on by the AO, it is the duty of the AO to ask the assessee if he wanted to cross examine, to provide an opportunity to cross examine the seller - no such opportunity has been given by the AO - addition not sustainable
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• Rectification Order Overturned: Section 154 Cannot Withdraw Section 80P Deductions Previously Granted.

  Case-Laws - AT : Rectification u/s 154 - deduction u/s 80P - a mistake apparent on the record must be an obvious and patent mistake - considering the fact that assessee had been allowed deduction u/s 80P in earlier assessment years, AO could not have proceeded to withdrew the deduction u/s 80P in the order u/s 154 - rectification order set aside
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• Deemed Dividend: Funds for Share Investment to Secure Loan Qualify as Loan u/s 2(22)(e) of Income Tax Act.

  Case-Laws - AT : Addition u/s 2(22)(e) - even if amount given to the assessee for making the investment in the shares of the company as said investment was required for taking the loan from the bank, it is nothing but the loan/advance in terms of section 2(22)(e) as it was the duty of the promoters as a shareholder of the said company to infuse more capital - advance is not for trading or business purposes rightly treated as deemed dividend
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• Deductions u/ss 54F and 54B Valid if Investments Made Before Filing u/s 139(4.

  Case-Laws - AT : Deduction u/s 54F and 54B - investments were been made after the due date for filing of return of income u/s 139(1) but before the filing of return u/s 139(4) - when the entire amount which was subject to capital gains tax has been utilized before the filing of return of income, then the deduction u/s 54F and 54B cannot be denied - deduction allowable
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• Jurisdictional Challenge in Reassessment: Lack of Objection Doesn't Confer Authority on Assessing Officer u/ss 147 & 127.

  Case-Laws - AT : Reopening of assessment u/s 147 - transfer of case u/s 127 - jurisdiction of AO for reassessment - the issue to lack of jurisdiction can be raised at any stage in a case where the return has been filed in response to notice u/s 148/158BC/153A - the mere fact that no objection is taken before the AO would not by itself bestow jurisdiction as the AO - the proceedings are quashed
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• Companies with large registered offices exempt from notional rent tax; size not restricted under Companies Act section 23.

  Case-Laws - AT : Taxability of notional rent - company having large registered office and does not have any other property - there is a statutory requirement under the Companies Act to have a registered office and there is no restriction or condition about the size - merely on the basis of the area of the office being large, the same cannot be said to be vacant property so as to attract the provision of section 23 - not taxable
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• Tribunal Admits New Legal Challenge on AO's Authority u/s 153D in Assessment Order Case.

  Case-Laws - AT : Admission of additional ground - challenging validity of assessment order passed by the AO for the first time before Tribunal - additional ground taken by the assessee is purely a legal issue which questions the authority of the AO passing assessment order in light of specific provisions provided u/s 153D - admitted for adjudication
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• Compensation for relinquishing "right to sue" over land not taxable as capital gains under Indian law, per Section 45.

  Case-Laws - AT : Taxability of compensation for giving-up of the litigation for land - right to sue - there could not be any transfer of a "right to sue" under Indian Law and any capital receipt arising from a right to sue cannot thus be considered capital gains u/s 45 and the cost of the said right being indeterminable - capital receipt not being part of sales consideration
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Customs

• Customs Duty Refund Approved: Chartered Accountant Confirms No Unjust Enrichment as Duty Not Passed to Customers.

  Case-Laws - HC : Refund of Customs duty - principle of unjust enrichment - as per Certificate issued by the CA in favour of the respondent/Assessee to the effect that the amount of refund due has not been taken into account while arriving at the cost of services provided to the customers and therefore, the incidence of duty in question has never been passed on to the customers - refund will not result in any unjust enrichment - duly allowable
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Service Tax

• Board Denies Retrospective Issuance of Forms A1 & A2 for SEZ; SEZ Act Exemption Not Linked to Finance Act Compliance.

  Case-Laws - HC : Exemption to SEZ unit - authorised operations in a SEZ - Validity of conditions imposed - Board of approval refused to issue of Forms A1 and A2 on the ground that these forms cannot be issued with retrospective effect. - Assessee contended that, Neither the SEZ Act nor the Rules framed thereunder, make the exemption available under the Act, subject to fulfilment of conditions stipulated in any other enactment including the Finance Act, 1994. - notifications in question in so far as they relate to special economic zones, are set aside.
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• Appellant knowingly avoided service tax payments despite past compliance, losing Section 80 benefits; penalty applies.

  Case-Laws - AT : Demand of Penalty - since the appellant was aware of his service tax liability because for the earlier period he has opted for VCES Scheme and paid the service tax, therefore, intentionally he did not pay the service tax, hence he is not entitled to get the benefit u/s 80 - penalty leviable
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Central Excise

• CENVAT Credit Rule Update: EOUs Cannot Get Cash Refunds for Goods Cleared to Another EOU; Re-credit Allowed.

  Case-Laws - AT : Cash Refund of unutilized CENVAT credit of 100% EOU - goods cleared to other EOU - export goods means only those goods which are to be taken out of India to a place outside India - with the insertion of Clause (1A) in Explanation 1 of Rule 5 of CCR cash refund is not permissible, however, the appellants are entitled to take the re-credit of the CENVAT and same will not lapse as per Section 142 of the CGST Act, 2017
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• Allegations of Material Diversion Unsubstantiated Due to Lack of Investigation and Evidence; Demand Against Company Unsustainable.

  Case-Laws - AT : Clandestine removal - diversion of raw material based on statement which was retracted - neither investigation has been made from the transporter, truck driver as to where the said goods were diverted nor any investigation to identify the buyer of the diverted material and receipt of consideration by the appellant company - the demand does not sustainable
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VAT

• Tribunal's Appeal Dismissal Lacks Reasons, Order Deemed Legally Unsustainable; Agreement with Joint Commissioner Questioned.

  Case-Laws - HC : Order of the tribunal dismissing the appeal - no reasons whatsoever have been recorded by the Tribunal and the matter has been decided in cryptic manner by recording only that it had agreed with the reasons given by the Joint Commissioner (Appeals), such an order cannot be sustained in law.
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• Entities Not Liable for TDS if Job-Worker Pays Full Tax, But Interest and Penalties May Apply (Sections 13(5), 13(8.

  Case-Laws - HC : Liability of tax under TNVAT Act - Non compliance of TDS provision - tax paid by job-worker - when the deductee has paid the entire tax liability on the monies received, the entity/person, who has the obligation to TDS cannot be mulcted with liability, however, the same is liable to pay interest for the delayed period, besides penalty u/s 13(5) and 13(8)
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• Penalty for False VAT Invoices: 200% of Tax Amount u/s 55(2) of AP VAT Act, Regardless of Tax Liability.

  Case-Laws - HC : Penalty for false invoice - Section 55(2) AP VAT Act states that any VAT dealer, who issues a false tax invoice or receives and uses a tax invoice, knowing it to be false, shall be liable to pay a penalty of 200 per cent of tax shown on the false invoice - the contention that so long as the invoices are found to be false, there can be no tax liability and consequently there can be no liability to pay penalty, does not hold good
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• Assessment Order Under KVAT Act Section 25(1) Overturned for Lack of Fair Hearing on Complex Re-assessment Issues.

  Case-Laws - HC : Validity of assessment order - Section 25(1) of KVAT Act - when issues of re-assessment are fairly complex and the financial implication resulting from the proposed assessment is substantial as well then the argument that objections filed by petitioner do not warrant hearing, is subjective and R1 could not have assumed that hearing would be nothing but an empty formality - order passed without giving hearing on the objections is set aside
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Case Laws:

• GST

• 2019 (8) TMI 779
  Transmission or distribution for electricity - exemption from tax under Entry 25 of Notification No.12/2017 dated 28.6.2017 - period of the negative list regime - scenario post GST Regime - HELD THAT:- Let this matter be listed in the third week of November, 2019 within the first five cases.

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• 2019 (8) TMI 778
  Review application - Provisional release of goods - review is sought for on the ground that while the total tax demand was of 13,03,57,862/-, only 46,75,791/- has been secured by this Court and no suitable directions have been issued to secure the remaining tax demand - HELD THAT:- Issue notice on the application for condonation of delay as also on the special leave petition, returnable in four weeks - There shall be ad interim stay of operation of the impugned judgments till the next date of hearing.

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• 2019 (8) TMI 777
  Whether the amendment to Section 50 of the Central GST Act, 2017 would be retrospective and whether a notice was liable to be issued to the petitioner before attachment of his account requires examination? HELD THAT:- There shall be interim stay of the proceedings as prayed for.

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• 2019 (8) TMI 776
  Validity of detention of goods - failure to generate or produce E-Way Bill - Section 129 (1) of CGST Act, 2017 - HELD THAT:- This Court is not convinced to entertain the writ petition and adjudicate upon merits at this stage. To conform to the scheme under the Act, the writ petition is disposed of by this order. As the petitioner submitted that he has already deposited 12, 555/- towards tax incidence and the other component namely penalty is permitted be deposited in cash of 12, 555/- and upon producing proof of deposit, the goods are released forthwith. The deposit of amount by petitioner is without prejudice to the rights and contentions he has in this behalf. Petition disposed off.

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• Income Tax

• 2019 (8) TMI 775
  Addition of on account of cash found at the time of search seizure - HELD THAT:- The assessee had stated during assessment proceedings that cash found was the money received on functions or during meet by elderly members of whole family or close relatives to the younger one. . The AO had rejected this explanation on the ground that no details of the receipt in the shape of occasions, name of the relatives or other details to prove the genuineness of the cash received . We find from perusal of the record that the assessee failed to furnish any satisfactory explanation regarding the aforesaid addition of 4,15,400/- even during the appellate proceedings before Ld.CIT(A). Even during the appellate proceedings in ITAT, the assessee has failed to furnish any satisfactory explanation. Accordingly, second ground of appeal filed by assessee in ITAT is dismissed. Enhancement made by CIT(A)on account of unexplained jewellery found during search - HELD THAT:- We find that Ld.CIT(A) has given detailed reasoning for enhancement of 13,69,100/- made by him in the impugned appellate order dated 31.05.2016 on account of unexplained jewellery. During appellate proceedings in ITAT, the assessee has failed to bring any material for our consideration to persuade us to take a view different from the view taken by Ld.CIT(A) in aforesaid impugned order dated 31.05.2016. Accordingly, 3rd, 4th and 5th grounds of appeal raised by the assessee in this appeal are dismissed. - the appeal filed by the assessee is dismissed

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• 2019 (8) TMI 774
  Validity of issue of notice u/s 153C - additions made without having seized material - HELD THAT:- There is no dispute that in this case, by the time the search was conducted, the assessment was unabated and no incriminating material was found and seized from the premises of the person searched. The department has not placed any evidence to show that the incriminating material was available for the impugned assessment year. The only issue in this case is with regard to the addition of 1,07,55,000/- for which the CIT(A)has given a finding that the said amount was already admitted in the books of accounts and the assessee filed the return of income - AO made the addition on the basis of the capital account which was filed in the original return of income. No incriminating material was made available during the course of search. Notice issued u/s 153C is invalid and accordingly, we quash the notice issued u/s 153C and annul the assessment made u/s 143(3) r.w.s.153C - Decided in favour of assessee.

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• 2019 (8) TMI 773
  Addition on account of unexplained source of investment - seller declared higher price of sales value including cash deposited in account and offered for capital gain and also make statement - no opportunity for cross examination was provided - HELD THAT:- In the present case, except statement of Sri Ganta Punna Rao, no other evidence is available on record that the assessee has paid the amount more than the sale consideration. That apart, when the statement of the seller is solely relied on by the AO, it is the duty of the AO to ask the assessee that the seller has stated that he received sale consideration more than the documented price and ask the assessee if he wanted to cross examine, to provide an opportunity to cross examine the seller. In the present case, no such opportunity has been given by the AO to the assessee. We find that the observation made by the ld. CIT(A) is baseless and it cannot survive in judicial scrutiny for the reason that there is no agreement in respect of the assessee, however, he further mentioned that the seller is a habit of taking on money, therefore he came to a conclusion that assessee also paid on money. The above observation given by the ld. CIT(A) is without any basis and cannot be accepted. From the observations of the ld. CIT(A), it is very clear that the seller of the property-Sri Ganta Punna Rao is accepting on money from other persons, therefore, the deposits made in his bank account, cannot be concluded that the amount paid by the assessee. It can be also said that the amount deposited in the bank account is anybody s amount because no details are available with regard to what is the amount received and what is the amount deposit. In view of the decision of the Hon ble Supreme Court in the case of M/s. Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] and also the decision of the coordinate bench of the tribunal in the case of Sri Venkata Rama Sai Developers [ 2015 (11) TMI 1608 - ITAT VISAKHAPATNAM] and also by considering the facts and circumstances of the case, we find that the orders passed by the AO and ld.CIT(A) cannot survive. - appeal filed by the assessee is allowed

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• 2019 (8) TMI 772
  Penalty u/s 271(1)(c) - vague/defective notice - non-striking of the irrelevant portion - additional ground - HELD THAT:- We find that the decision of Hon ble High Court of Telangana A.P. in the case of Smt. Baisetty Revathi [ 2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT] being a latest judgment, has considered the very same issue and held that non-striking of the irrelevant portion of the notice issued u/sec. 274 is invalid. The very same judgment has been followed by the coordinate bench of this tribunal in the case of Konchada Sreeram [ 2017 (11) TMI 1164 - ITAT VISAKHAPATNAM] . Therefore, respectfully following above referred to judicial precedents, we hold that the notice issued u/s 274 read with section 271, dated 18/03/2016 is invalid and, therefore penalty order passed by the Assessing Officer, dated 28/09/2016 is hereby cancelled.

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• 2019 (8) TMI 771
  Addition on account of cash deposit in Bank Account - non production of parties from whom cash received - HELD THAT:- The AO in the instant case made addition on the ground that the assessee could not explain the source of such cash deposits in the bank account and the parties from whom assessee has shown to have received cash have denied/not confirmed any transaction with the assessee. I find the Ld. CIT(A) upheld the action of the AO, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the Ld. Counsel for the assessee that given an opportunity the assessee is in a position to produce those parties before the AO to substantiate the transactions by them with the assessee so as to explain the cash deposits in the bank account. Considering the totality of the facts of the case and in the interest of justice, I deem it proper to restore the issue to the file of the AO with a direction to give one final opportunity to the assessee to substantiate its case by producing the various parties in question to substantiate the cash deposit in the bank account. Penalty u/s 271(1)(c) - quantum addition restore to AO - HELD THAT:- AO levied penalty on account of addition made by him being unverified cash deposit which has been upheld by the CIT(A) - Since, the quantum addition has been restored to the file of the AO, therefore, the penalty so levied by the AO and upheld by the CIT(A) does not survive. Accordingly, the same is cancelled. However, the AO is at liberty to initiate fresh penalty proceedings u/s 271(1)(c) after completion of the assessment in the set aside proceedings

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• 2019 (8) TMI 770
  Taxability of notional rent - income from house property OR business income - as per assessee the property being used as registered office and does not have any other property, the same cannot be considered to be a vacant property - further property was also partly let out - notional rate of rent was enhanced by CIT(A) - HELD THAT:- We are of the view that the company having occupied the property for its own purposes, no notional rent can be added. It may be germane to mention here that this is the only property owned and occupied by the assessee as its registered office. It is not the case of the AO that the assessee company was having some other premises to have its office. A company having been incorporated is legally required to have its registered office irrespective of the fact whether during the year it has carried on any activity or not. There is a statutory requirement under the Companies Act to have a registered office. We are also in agreement with the contention of the Ld. AR for the assessee that the cost incurred by the company in order to comply with various statutory functions is allowable even in the absence of any business income. In case, a company does not have its own premises then such company will be required to take a premises on rent for its registered office and rent so paid being towards meeting statutory obligation will be allowable expenditure. As against this, a company which owns its own premises and uses such premises for its registered office, it cannot be said that such premises was vacant so as to charge notional rent as its income u/s 23(1). Further, we are of the view that there is no restriction or condition about the size of the registered office. Thus, merely on the basis of the area of the office being large, the same cannot be said to be vacant property so as to attract the provision of section 23. Further in the preceding assessment years and succeeding years there is no such addition has been made despite there being no change in facts. - appeal of the assessee is allowed

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• 2019 (8) TMI 769
  Bogus LTCG - addition u/s 68 - denial of exempt u/s 10(38) on sale of share of M/s KPL - accommodation entry - HELD THAT:- It is noted that the A.O has nowhere in the assessment order referred to any material which can prove the complicity of assessee in the alleged accommodation entry operation. In the light of the documents furnished by the assessee, the authorities below were not justified in invoking the provisions of section 68 in regard to the sale proceeds of shares. There is no evidence on record to disbelieve that the shares sold through registered share and stock broker. The assessee had produced all evidences to explain the source of the amounts received by the assessee from the brokers. Thus the A.O/CIT(A) was not justified in assessing the sale proceeds of shares as undisclosed income. In the light of the aforesaid documents filed before us and A.O/Ld. CIT(A) and it is noted that similar issue was before the Tribunal in the case of M/s Usha Singhania [ 2019 (2) TMI 1680 - ITAT KOLKATA] wherein long term capital gain on sale of M/s KPL was allowed by this Tribunal. Respectfully following the order of the Tribunal of this bench in the case of Usha Singhania (supra), and taking note of the documents filed by assessee to prove the veracity of the transaction and I am inclined to allow the claim of the assessee and direct deletion of the addition of 11,78,596/-. Before I part I would like to deal with the case laws cited by the Ld. DR who had submitted 23 judicial pronouncements in his support. I note that the said judicial pronouncements are all distinguishable on facts as well as on law.

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• 2019 (8) TMI 768
  Taxability of compensation for giving-up of the litigation for land - right to sue - capital OR revenue receipt - additional compensation was paid in addition to sale consideration as per sale deed - several litigation was going on in respect of land, firstly encroached by some slum lords by slum later slum redevelopment area - amicable resolution of the dispute by way of filing Consent Terms by both the parties was reached before the Hon ble Supreme Court HELD THAT:- The additional compensation of 9 Crores was payable to the assessee only pursuant to consent terms dated 03/01/2012 filed before Hon ble Supreme Court. As per Clause-5 of the consent terms, the assessee was to be paid the said compensation for time, money and effort put in by him to challenge the acquisition of the suit property and for pursuing litigation before the Authorities, Hon ble Bombay High Court and Hon ble Supreme Court. The additional compensation was towards time, cost and effort of the assessee in pursuing the litigation. This being so, we are unable to concur with the submissions of Ld. DR that the said compensation was part and parcel for the sale transaction and received by the assessee as a consideration of sale of property. On the other hand, the learned CIT(A), in our considered opinion, has clinched the issue in the proper perspective. As rightly held, there could not be any transfer of a right to sue under Indian Law and any capital receipt arising from a right to sue cannot thus be considered capital gains u/s 45. Additionally, the cost of the said right being indeterminable, the charging Section would fail as per the cited decision of Hon ble Supreme Court rendered in CIT V/s B.C.Srinivasa Shetty [ 1981 (2) TMI 1 - SUPREME COURT] . Therefore, no infirmity could be found on the issue in adjudication done by learned CIT(A). The same is further fortified by the decision of this Tribunal rendered in Sushmita Sen V/s ACIT [ 2018 (11) TMI 792 - ITAT MUMBAI] wherein it has been held that compensation received for loss of reputation and not to initiate civil or criminal proceedings would be capital in nature. Similar is the decision in ACIT V/s Jackie Shroff [ 2018 (9) TMI 1006 - ITAT MUMBAI] wherein it has been held that compensation / damages received for withdrawal of criminal complaint would be capital receipt and could not be treated as income u/s 2(24). This decision places reliance on the decision of Hon ble Bombay High Court rendered in CIT V/s Amar Dye Chem Ltd. [ 1993 (10) TMI 366 - BOMBAY HIGH COURT] - the appeal as well as cross-objections stands dismissed

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• 2019 (8) TMI 767
  Reopening of assessment u/s 147 - assessee working in Delhi police filing their return in Delhi - notice was issued by AO in Gurgaon - effect of partition in assessment proceedings and non-challange of Jurisdiction in assessment proceedings - land sold situated at a distance of less than 8 kms. from the Municipal Corporation limit of Gurgaon - HELD THAT:- Admittedly, in the instant case, the assessee was regularly filing his return of income at Delhi with his PAN No. linked with the AO at Delhi and he was residing at PS, Dwarka-Sector-9, South West District, New Delhi, in government accommodation and was getting salary from the Delhi Police, therefore, merely because the assessee has received the notice, which was sent in his Gurgaon address and has participated in the assessment proceedings will not give jurisdiction to the Assessing Officer at Gurgaon to have jurisdiction over the assessee. So far as the argument of the ld. DR that the assessee has participated in the assessment proceedings and, therefore, has apparently given his consent to the transfer of jurisdiction to the AO of Gurgaon is concerned, the same, in our opinion, would not confer jurisdiction upon the AO who otherwise was not the AO of the assessee. So far as the argument of the Revenue that the assessee has not raised any objection to the jurisdiction within the prescribed time period is concerned, we find merit in the argument of the ld. counsel that the issue to lack of jurisdiction can be raised at any stage in a case where the return has been filed in response to notice u/s 148/158BC/153A. Hon ble Bombay High Court in the case of Mavany Brothers vs. CIT [ 2015 (10) TMI 1093 - BOMBAY HIGH COURT] while adjudicating an identical issue has held that Reason to believe that income chargeable to tax has escaped assessment is a jurisdictional fact and only on its satisfaction does the AO acquire jurisdiction to issue notice. Thus this lack of satisfaction of jurisdictional fact can never confer jurisdiction and an objection to it can be raised at any time even in appeal proceedings. The mere fact that no objection is taken before the AO would not by itself bestow jurisdiction as the AO. In view of the above discussion and considering the fact that the assessee was employed with Delhi Police and was regularly filing his return of income at Delhi under ITO, Ward 64(3) [earlier ITO, Ward 40(3)] and since this fact was known to the ITO at Gurgaon, therefore, in absence of any transfer of jurisdiction u/s 127, we hold that the ITO, Gurgaon has no jurisdiction over the assessee. Therefore, the proceedings are quashed. Since the assessee succeeds on this legal ground, the various other grounds on merit are not being adjudicated being academic in nature.

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• 2019 (8) TMI 766
  Rectification u/s 154 - deduction u/s 80P denied - a mistake apparent on the record must be an obvious and patent mistake - as per AO, assessee was not eligible for deduction u/s 80P and was wrongly allowed - HELD THAT:- In the present case, with the passing of rectification order u/s 154 of the Act, original order passed u/s 143(3) will be substituted by the new order with denial of claim of deduction u/s 80P(2)(b). This in our view is not permissible more so in view of the aforesaid decision of Hon ble Delhi High Court in the case of CIT Vs. M.M.T.C. Ltd., [ 2000 (8) TMI 63 - DELHI HIGH COURT] wherein observed that power to rectify the mistake however, does not cover cases where a revision or review of the order is intended. Further, we find that Hon ble Supreme Court in the case of T.S. Balram, ITO Vs. M/s. Volkart Brothers [ 1971 (8) TMI 3 - SUPREME COURT] has held that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions . We further find that before Ld.CIT(A), it was assessee s contention that the deduction u/s 80P has been allowed to the assessee in earlier years. Considering the fact that assessee had been allowed deduction u/s 80P in earlier assessment years, therefore, also it cannot be said that the issue of deduction was a debatable issue which could be rectified u/s 154. We therefore considering the decisions cited hereinabove are of the view that in the present case AO could not have proceeded to withdrew the deduction u/s 80P in the order u/s 154. We therefore set aside the order of AO passed u/s 154 and thus, the grounds of assessee are allowed.

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• 2019 (8) TMI 765
  Penalty u/s 271(1) - defective notice - non specification the appropriate limb of clause (c) of section 271(1) - HELD THAT:- We are of the opinion that the legal requirement of making a clear cut reference to the applicable limb of clause (c) of section 271(1) is not met by the AO while initiating and levying the penalty u/s 271(1)(c). Thus, the satisfaction of the Assessing Officer suffers from ambiguity in his mind. Therefore we are of the view that such penalty is unsustainable in law legally. It is a settled legal proposition that the Assessing Officer is under obligation to specify the appropriate limb of clause (c) of section 271(1) at the time of initiation as well as at the time of levy of penalty. In view of the above deliberation on this issue, without going into the merits of the case, we set-aside the order of the CIT(A) and direct the Assessing Officer to delete the entire penalty imposed by him. Accordingly, the legal ground raised by the assessee is allowed.

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• 2019 (8) TMI 764
  Transfer of capital asset - sale of agricultural land to 6 persons - assessee claimed that consideration of two person was not received as cheque were bounced, he was still the legal owner and has not transferred the land and therefore assessee was not liable for capital gains tax - HELD THAT:- We find that CIT(A) while upholding the order of AO has noted that the sale deed was registered on 27.08.2012 in favour of six persons and in the sale deed the share of six buyers were clearly mentioned. The registration charges and stamp duty were also paid. He has further noted that no civil suit was filed by the assessee for the alleged dishonour of cheques issued by the purchasers. Before us, no fallacy in the findings of CIT(A) has been pointed out by the assessee. Further, no evidence of filing of suit by the assessee has also been placed on record by the assessee. Considering the totality of the aforesaid facts, we find no reason to interfere with the order of Ld.CIT(A). Thus, the ground No.2 of the assessee is dismissed. Disallowance of expenses incurred for transfer of capital asset - HELD THAT:- The issue in the present ground is with respect to claim of deduction of the stamp duty and other charges stated to have been paid by the assessee while computing capital gains. Before us, Ld.A.R. has not controverted the findings of Ld.CIT(A) and further he has not controverted the contention of Ld. D.R. with regard to the payment of stamp duty and other charges being not emanating from the sale deed which has been executed for the sale of property. In such a situation, we do not find any reason to interfere with the order of Ld.CIT(A). Thus, the ground No.3 of the assessee is dismissed. Deduction u/s 54F and 54B - time limit for making investment - HELD THAT:- It is a fact that the assessee had invested 55 lacs in the construction of residential house for which assessee had claimed deduction u/s 54F of the Act and 35 lakhs was invested towards purchase of agricultural land for which he had claimed deduction u/s 54B. The aforesaid investments for which the deduction has been claimed have been made after the due date for filing of return of income u/s 139(1) but before the filing of return u/s 139(4). Therefore, in a situation, when the entire amount which was subject to capital gains tax has been utilized before the filing of return of income, then the deduction u/s 54F and 54B cannot be denied to the assessee. Further since the entire amount which was subject to capital gains was utilized for the purpose of construction of new house and purchase of agricultural land, then there was no question of its deposit in notified Bank account in terms of Sec.54F(4). Considering the aforesaid facts, we are of the view that assessee is eligible for deduction u/s 54F and 54B

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• 2019 (8) TMI 763
  Effect of non-passing draft assessment order u/s 144C(1) - Transfer pricing adjustment - AO instead of passing draft assessment order, issued final assessment order along with demand notice upward TP adjustment was made u/s 92CA(3) by TPO - HELD THAT:- The Hon ble Bombay High Court in Pr.CIT Vs. Lionbridge Technologies (P.) Ltd. ( 2018 (12) TMI 764 - BOMBAY HIGH COURT ) have laid down the proposition that in terms of section 144C(1), the AO is to first pass a draft assessment order which is subject to challenge, by way of representation to the DRP. It is only after DRP disposes of representation, that AO passes a final order in terms of directions of DRP and such final order is appealable to the Tribunal. Applying the said proposition to the facts of present case and mainly relying on the proposition that mere consent of parties does not bestow the jurisdiction, where the order is beyond jurisdiction. We hold that even if assessee had accepted addition to be made on account of transfer pricing adjustment, during assessment proceedings, would not bestow the jurisdiction upon the AO and final assessment order passed in the case cannot be upheld in law, in the absence of AO passing draft assessment order, which is envisaged as per section 144C(1). Accordingly, we hold that assessment order passed in the case is without jurisdiction and bad in law. Similar issue of AO having passed final assessment order u/s 143(3) making certain adjustments to assessee s arm s length price without processing draft assessment order, the Tribunal in Soktas India (P.) Ltd. Vs. ACIT ( 2017 (2) TMI 1001 - ITAT PUNE ) it was held that the said order being against provisions of section 144C. In view of our setting aside the assessment order passed in the case u/s 143(3), the grounds of appeal raised by assessee on merits and the grounds of appeal raised by Revenue become academic in nature and the same are dismissed. - Decided against revenue

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• 2019 (8) TMI 762
  Admission of additional ground - approval u/s 153D - HELD THAT:- Admittedly, the assessee has taken legal ground challenging validity of assessment order passed by the AO in light of valid approval u/s 153D, for the first time, before the Tribunal. We find that additional ground taken by the assessee is purely a legal issue which questions the authority of the AO passing assessment order in light of specific provisions provided u/s 153D. Therefore, we are of the considered view that there is a merit in additional ground filed by the assessee and hence, the same is admitted for adjudication. Approval u/s 153D - validity of assessment order passed u/s 143(3) r.w.s. 153A - HELD THAT:- Though, copy of approval letter is not available in the assessment record, but the contents of approval letter issued by the competent authority has been reproduced in verbatim in the assessment order at para 7. Further, the approval granted in other group cases is very much available in the assessment folder. Therefore, it cannot be said that no approval had been taken. Further, the approval u/s 153D is an administrative procedure which requires to be complied with by the officers, who is discharging the assessment functions. The administration action of the department is not very much relevant for the assessee to justify its case, on merits. Therefore, when assessee goes to question the administrative procedure, rather contending its case on merits, that too, after a lapse of 4 to 5 years, then obviously, a doubt arises about intend of the assessee in taking this ground and such an attempt is derail the issue on merits and to escape on technical ground. Therefore, we are of the considered view that there is no merit in the additional ground taken by the assessee challenging validity of assessment order passed by the AO u/s 143(3) r.w.s. 153A. - additional ground rejected Addition u/s 69C - bogus purchases - MD make statements u/s 131 that the company has not followed standard operating procedures in respect of certain purchases from certain parties - HELD THAT:- It is an admitted fact that during the course of survey u/s 133A, certain loose papers, bills and other relevant documents were found, as per which, the assessee has taken accommodation / bogus purchase bills to the extent of 13.86 crores for FYs 2006-07 to 2010-11. The said quantification has been made on the basis of discrepancies noticed in respect of purchase bills from those parties in comparison to the standard operating procedure followed by the assessee in respect of central purchase department. When these discrepancies were confronted to the managing director of the assessee, Shri Ajit B Kulkarni, in his statement recorded u/s 131 he had categorically admitted that no standard operating procedure were followed in respect of purchases from 22 parties. This fact has been confirmed by the Executive Director of the company, Shri Ashok Kumar Wadhera and shri Vipin S Shah, Chief Accounts Officer of the company. Further, during the course of assessment proceedings, the AO has carried out enquiries to ascertain correctness of purchases from the above parties in light of facts brought out by the survey party and also in light of report of sales-tax department. Enquiries conducted by the AO prove the fact that purchases from the above parties are bogus which are not supported by necessary evidence. We are of the considered view that the AO has not only made addition on the basis of third party information without confronting those statements to the assessee, but carried out further verification which proved fact that those purchases are bogus in nature. In fact, the facts brought out by the AO during assessment Proceedings clearly establishes the fact of accepting bogus purchase bills from hawala dealers. Accordingly, we reject the arguments of the assessee that purchases from above parties are genuine, which are supported by necessary evidences. Hon ble Supreme Court in the case of NK Proteins Ltd vs DCIT [ 2017 (1) TMI 1090 - SC ORDER] dismissed appeal filed by the assessee and confirmed the findings of Hon ble Gujarat High Court [ 2016 (6) TMI 1139 - GUJARAT HIGH COURT] in respect of bogus purchases, where the Hon ble Gujarat High Court, after analysing necessary facts at para 6 of the order, held that once the Tribunal having come to a categorical finding that the purchases from certain parties are bogus, it was not incumbent on it to restrict the disallowance to the extent of 25% of such purchases. - we are of the considered view that the AO was right in making 100% addition towards bogus purchases u/s 69C. The Ld.CIT(A), after considering relevant facts, has rightly confirmed the findings of Ld.AO. - appeal filed by the assessee is dismissed

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• 2019 (8) TMI 752
  Maintainability of appeal - low tax effect - concession extended by the CBDT applicability - HELD THAT:- Relaxation in monetary limits for departmental appeals, vide CBDT circular dated 8th August 2019 (supra) shall be applicable to the pending appeals in addition to the appeals to be filed henceforth. DR then submits liberty may kindly be given to point out, upon necessary further verifications, and to seek recall the dismissal of appeals and restoration of the appeals in the cases (i) in which it can be demonstrated that the appeals are covered by the exceptions, and (ii) which are inadvertently included in this bunch of appeals, wherein the tax effect, in terms of the CBDT circular (supra), exceeds 50,00,000. None opposes this prayer; we accept the same. We make it clear that the appellants shall be at liberty to point out the cases which are wrongly included in the appeals so summarily dismissed, either owing to wrong computation of tax effect or owning to such cases being covered by the permissible exceptions- or for any other reason, and we will take appropriate remedial steps in this regard. All the appeals stand dismissed as withdrawn. As the appeals filed by the Revenue are found to be non-maintainable and as all the related cross-objections of the assessee arise only as a result of those appeals and merely support the order of the CIT(A), the cross objections filed by the assessee are also dismissed as infructuous. Ordered, accordingly.

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• 2019 (8) TMI 751
  Disallowance of expenses - CIT(A) directed the AO to allow the claim of expenses after verification - but, AO disallowed the expenses - according to the assessee the learned AO in examining the claim of the allowability of the expenditure has went against the direction of the learned CIT(A) - HELD THAT:- CIT Appeal has not verified the claim of the assessee but has merely sent back the claim of the assessee back to the assessing officer to properly verify the same and allow it. Meaning thereby if the claim of the assessee is falling within the four corners of the provisions of the income tax act then after proper verification the learned assessing officer should allow such claims. Therefore , if the claim of the assessee is tenable as per the income tax act then the learned assessing officer should allow it and if the claim of the assessee is not allowable according to the provisions of the income tax act, then, naturally the AO should not allow the same. According to us, this is the direction of the CIT appeal. Our view further get support from the fact that there is no finding in the order of the CIT A that these expenditure are allowable. He has merely held that the claim of the assessee is prime facie forceful. He has not held it to be allowable. As argued before us that, if by the direction of the learned CIT A, revenue is aggrieved then there should have filed an appeal before the coordinate bench. Having not filed the appeal, the revenue now cannot say that the order of the CIT A is incorrect in directing the assessing officer to allow the claim of the assessee. This argument cannot hold water for the simple reason that the learned CIT A has directed the assessing officer to allow the claim of the assessee after proper verification. This criteria also applies to the assessee for the reason that if the assessee is aggrieved, even belatedly, with the direction of the learned CIT A, it could have also filed an appeal before coordinate bench. This is also not been done by the assessee. Therefore, this argument deserves to be rejected at the threshold itself. No infirmity in the order of the learned assessing officer in examining the claim of the assessee and then allow the same is directed by the learned CIT appeal. Disallowance relating to expenditure on placement fee paid claimed as deduction u/s 35D - assessee submitted that, for subsequent years the claim of the assessee has not been disputed. - HELD THAT:- Undisputedly, this is the 1st year of the examination whether the expenditure incurred by the assessee is allowable u/s 37 (1) of the income tax act as claimed by the assessee or assessee is entitled to staggered deduction under section 35D of the act. Therefore, not disallowing the above sum in the subsequent year, does not help the case of the assessee. Even otherwise it is an established judicial precedent that claim of deduction u/s 35D is required to be tested in the year in which the expenditure have been incurred fast and not in subsequent 4 years. Disallowance u/s 35 where TDS has been deducted pursuant to section 40 - Held that:- Whether the tax is required to be deducted or not for the allowability of the expenditure would come into picture later on when the expenditure are found to be deductible as a business expenditure as per the normal provisions of the income tax act. The moment the expenditure is found to be allowable according to the normal provisions of the income tax then only it is required to be seen that whether the assessee has deducted tax at source on such payment or not. Therefore, the threshold of the withholding tax will only come later on when the expenditures are found otherwise allowable as per the provisions of the income tax act. The heading of section 40 says that amounts not deductible stating that notwithstanding anything to the contrary in section 30-38, the following amounts shall not be deducted in computing the income chargeable under the head profits and gains of business or profession and thereafter it list 1 of the expenditure which is paid to non-resident not eligible for deduction if no tax is deducted thereon. Therefore, any claim of expenditure 1st has to cross the threshold of provisions of section 30 38 of the income tax act. If the claim of the expenditure fails that threshold then whether taxes deducted by the assessee or not is immaterial. Disallowance made by the learned assessing officer being 1/5 of the aggregate expenditure being a fee paid to Messer s Baer capital partners International Ltd as placement fee for raising 600,00,00,000 of preference and equity capital confirmed. Expenditure on upfront fee paid to Messer s WDC venture for subscription of debentures not claimed in the original return of income as the same was capitalized by debiting to securities premium account - HELD THAT:- The assessee is defined as company. The liability of the payment of upfront fee did not devolve on the assessee company but on the existing shareholders. In fact it is an agreement between these parties which specifically provides that the liability for payment of upfront fees rest on the existing shareholders. Therefore it is for them only to understand and give the reasons that why it has been agreed so that the upfront fee payment is the liability of the existing shareholders and not the company. Further in the whole of the written submission as extracted above made by assessee, there is no answer that for what reasons the liability agreed by the parties was on the existing shareholders but has been debited in the books of the assessee company. As it is an agreement by the investor, the appellant investee company and the existing shareholder of the appellant company by which all of them have agreed that upfront fee payment is required to be paid by the existing shareholders and not by the assessee company, we do not find any infirmity in the order of the learned CIT A in holding that that the assessee has not incurred any expenditure as there is no liability devolve in on the appellant and hence same is not deductible in the hands of the assessee - All the grounds of the appeal which are devolving around the disallowance of the about to expenditure of the consultation placement fees paid as well as of the upfront fee are dismissed. Penalty u/s 271 (1)(C) - Addition in the assessment order with respect to certain incriminating documents relating to transactions of Shri KL Verma group - HELD THAT:- As the addition itself does not survive, the penalty u/s 271 (1) levied by the learned assessing officer and confirmed by the learned CIT A also does not survive. Therefore all the grounds of the appeal of the assessee against the levy and confirmation of the penalty u/s 271 (1)(C) of the act are allowed.

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• 2019 (8) TMI 740
  Bogus LTCG - bogus accommodation entries - HELD THAT:- Assessee has filed voluminous evidence in support of acquisition/sale of the shares in issue. The mere effect that assessee s lives at far away destination is no ground to dispute the same in view of the above overwhelming details. The assessee s brokers found also appeared before the Assessing Officer to support his case in response to section 133(6) notices. Coming to demat issue (supra), the assessee s paper book pages 15 to 16 contains the relevant contract notes regarding the scrip s market value statement particulars as well as purchase and sales details. We find that the Revenue has not placed on record any cogent evidence regarding the accommodation entry nexus between assessee, his brokerage firm and the two other firms such namely M/s. Sikaria Shares and Stock Broking Services and M/s Hira Commodities and Derivatives Pvt. Ltd. There is not even a single transaction between the assessee and the other two brokerage firms. The relevant assertion that the SEBI has also penalized the brokerages firms for price, does not carry any substance since the relevant order dated 12.04.2010 involves times between 17.08.2004 to 31.03.2005 whereas we are concerned with the assessee s allotment of shares much later i.e. on 04.02.2012 (pages 65 to 77). There is further no issue about the correctness of the corresponding amalgamation details. We conclude in these peculiar facts that the assessee has sufficiently discharged his onus of proving genuineness of the impugned share transactions in the lead assessment years. Coming to the later assessment years, both the lower authorities alleged that the assessee was involved in artificial rigging of share prices in collusion with entries. We repeat herein as well as that there is no such nexus proved with the help of cogent details which could be lead us to the conclusion of the assessee having derived non-genuine share profits. This tribunal s coordinate bench decision in Navneet Agarwal vs. ITO [ 2018 (8) TMI 509 - ITAT KOLKATA] has analyzed the entire factual/legal position to decide the very issue against the revenue. We adopt the above detailed reasoning mutatis mutandis to delete the impugned bogus long-term capital gain addition in both these assessee s appeals before us. - decided in favour of assessee

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• Customs

• 2019 (8) TMI 761
  Refund of Customs duty - principle of unjust enrichment - passing over of incidence of duty or not - HELD THAT:- The respondent/Assessee, upon directions of this Court has produced a copy of the Certificate issued by the Chartered Accountant in favour of the respondent/Assessee to the effect that the amount of refund due to the assessee has not been taken into account while arriving at the cost of services provided to the customers and therefore, the incidence of duty in question has never been passed on to the customers and refund will not result in any unjust enrichment to the assessee. No substantial question of law arises in this appeal and the finding of facts written by the learned Tribunal based upon cogent evidence including the certificate issued by the Chartered Accountant in favour of the assessee which has not been rebutted by the Revenue by any procedure known to law and such findings of facts are binding - there is no merit in the present appeal filed by the Revenue - Appeal dismissed.

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• 2019 (8) TMI 750
  Demand of duty on transportation of consignments - petitioner was earlier assured that goods will be delivered at Chennai Port without demanding any further payment - HELD THAT:- While it may be appropriate for the writ petitioner to proceed against Respondents 3 and 4 pursuant to aforesaid legal notice, it may not also be out of place to direct the second respondent to send a reply to the aforesaid undated communication (signed on 11.02.2019), which his now available at Page 9 of the typed-set of papers. This Court directs the Revenue Counsel appearing on behalf of Respondents 1 and 2 to forward a copy of the aforesaid undated communication (signed on 11.02.2019) to the second respondent forthwith with a further direction to the second respondent to send a suitable reply to the writ petitioner under due acknowledgement within 10 working days from today - Petition disposed off.

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• Corporate Laws

• 2019 (8) TMI 749
  Directions of this Tribunal to convene separate meetings - Arrangement Scheme - applicants have stated that the accounting treatment proposed in the scheme of arrangement is inconformity with the Accounting Standards prescribed under section 133 of the Companies Act, 2013 - HELD THAT:- In compliance with sub-section(5) of section 230 of the Act and rule 8 of the Companies (CAA) Rules, 2016, the applicant-companies shall send notice under sub-section (3) of section 230 read with rule 6 of the Rules with a copy of the scheme of arrangement, the explanatory statement and the disclosures mentioned in rule 6 to (a) the Central Government through the Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi ; (b) the Registrar of companies, Uttarakhand ; and (c) the Income-tax Authorities. The said notices be sent either by registered post or by speed post or by courier or by hand delivery at the offices of the authorities as required by sub-rule (2) of rule 8 of the Rules. The aforesaid authorities, who desire to make any representation under sub-section (5) of section 230 shall send the same to this Tribunal within a period of 30 (thirty) days from the date of receipt of such notice, failing which it shall be deemed that they have no representation to make on the proposed scheme. Application disposed off.

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• Service Tax

• 2019 (8) TMI 760
  Demand of Penalty - Default in payment of Service tax - cum-duty benefit - Business Auxiliary Service - period January 2013 to March 2014 - HELD THAT:- Admittedly the appellant has not discharged the service tax liability from January 2013 to March 2014 and has agreed to pay the same along with interest. Further, the appellant paid the service tax liability of 5,12,045/- for the period January 2013 to March 2014 as demanded in the show-cause notice but has not paid the interest - Further, the appellant is not charging the service tax from the ICICI Bank. He does not raise any bill on ICICI but get commission as per the agreement and service tax is not charged over and above the commission which means that the commission given by the ICICI Bank is inclusive of service tax. Cum-duty benefit - HELD THAT:- Since the appellant is not charging the service tax separately and whatever commission is received, the Department has computed the service tax liability on the same which is to be considered as cum-duty and the appellant is entitled to the benefit of cum-duty and the entire demand is to be recomputed by giving the benefit of cum-duty to the appellant. Since the benefit of cum-duty has not been given, therefore the case remanded back to the original authority to pass a De novo order and quantify the demand of service tax after giving the benefit of cum-duty and excess amount if any paid will be adjusted against interest which the appellant is liable to pay for the delay in payment of service tax. Since the appellant was aware of his service tax liability because for the earlier period he has opted for VCES Scheme and paid the service tax. Therefore, intentionally he did not pay the service tax and therefore he is not entitled to get the benefit under Section 80. The amount of penalty will also be recomputed after giving the cum-duty benefit to the appellant. Appeal allowed by way of remand.

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• 2019 (8) TMI 748
  Exemption to SEZ unit - authorised operations in a SEZ - Validity of conditions imposed - Board of approval refused to issue of Forms A1 and A2 on the ground that these forms cannot be issued with retrospective effect. - Assessee contended that, Neither the SEZ Act nor the Rules framed thereunder, make the exemption available under the Act, subject to fulfilment of conditions stipulated in any other enactment including the Finance Act, 1994. - section 26(1)(e) of the Special Economic Zones Act, 2005 - availability of effective alternative remedy - maintainability of petition - HELD THAT:- Since the refusal of a writ court to entertain a writ petition under article 226 of the Constitution of India is not out of a bar of jurisdiction, but on account of a self-imposed restriction, there is no impediment for this court to entertain a writ petition in cases, (1) where the principles of natural justice are violated ; (2) where the impugned action is without jurisdiction ; and (3) where the impugned action is without the authority of law - If the petitioners succeed on this ground, we need not drive them to the alternative remedy available under the statute. If they fail on this ground, they can always be directed to avail the alternative remedy. Whether the availability of exemptions under section 26 of the SEZ Act would depend not only upon the terms and conditions prescribed under section 26(2), but also upon the terms and conditions prescribed in the notifications issued under various enactments such as Customs Act, 1962, Customs Tariff Act, 1975, Central Excise Act, 1944, Central Excise Tariff Act, 1985, Finance Act, 1994 and Central Sales Tax Act, 1956, etc.? - HELD THAT:- The terms and conditions subject to which the exemptions are to be granted under sub-section (1) of section 26 should be prescribed by the Rules made by the Central Government under the SEZ Act, 2005. Being conscious of this fact, the executive has incorporated rule 22 in the SEZ Rules, 2006 issued in exercise of the power conferred by section 55 of the SEZ Act. It is not necessary to extract rule 22, since there is no dispute about the fact (1) that the petitioners have complied with the prescriptions contained in rule 22 of the SEZ Rules, 2006, and (2) that rule 22 of the SEZ Rules, 2006 does not stipulate the filing of Forms A1 and A2 as prescribed in the three notifications issued under section 93 of the Finance Act, 1994 - the fifth respondent does not dispute the fact that the petitioners have fulfilled the terms and conditions stipulated in rule 22 of the SEZ Rules, 2006 and that if those Rules are considered on a stand alone basis, the petitioners would be entitled to the exemptions. Sub-rule (5) was inserted under rule 47. Sub-rule (5) of rule 47 makes a reference to the provisions of the three enactments namely Customs Act, 1962, Central Excise Act, 1944 and Finance Act, 1994 and the Rules made there- under and the notifications issued thereunder. It is by virtue of this sub- rule (5) that the authorities can fall back upon the Rules and notifications issued under those three enactments. The very fact that sub-rule (5) was inserted would show, that but for its insertion, the respondents cannot fall back upon the Rules framed under the Customs Act, etc., for dealing with a question of refund, demand, adjudication, etc. - If sub-rule (5) of rule 47 had also included the procedure for grant of exemption within its purview, then the stand taken by the Department would be perfectly valid. The very fact that sub-rule (5) of rule 47 made the Rules and notifications issued under certain Acts applicable only to issues of refund, demand, etc., would show that rules 22 and 31 have independent legs to stand. Petition allowed.

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• 2019 (8) TMI 747
  Refund of service tax - input services - Man-power Recruitment Supply Agency Services provided outside India - period Jun. 15 to 03.07.2016 - rejection on the ground of time limitation and on the ground that appellants have not fulfilled the condition under Rule 6A of the Service Tax Rules, 1994 in regard to the export of services and also on the ground of doctrine of Unjust Enrichment. Time Limitation - HELD THAT:- Undisputedly, the refund claim was initially filed on 06.01.2017. The department has returned the refund claim intimating defects in the same. While doing so, the department has not mentioned the period by which the defects can be rectified and the refund claim can be resubmitted. The appellants have rectified the defects and resubmitted the refund claim on 03.07.2017. Therefore, the date on which the refund claim was originally submitted has to be taken as the date for computing the period of limitation - the rejection of refund claim on the ground of time bar is unjustified. Rejection of refund claim is that the appellant has not fulfilled the conditions of receiving consideration in convertible foreign currency - HELD THAT:- When the amount is adjusted in the bank account and remitted to the service provider in India through bank account in Indian currency, the same is to be considered as paid in convertible foreign currency - the condition provided in Rule 6A is fulfilled and the services are exported - refund allowed. Unjust enrichment - HELD THAT:- It is settled law that taxes cannot be exported and, therefore, since the services are provided outside India the doctrine of Unjust Enrichment cannot be applied to services exported. In the present case, the services having been exported outside India, the discussions made by the authority below observing that the appellants have included the element of service tax in the debit note and, therefore, the refund is hit by doctrine of Unjust Enrichment, cannot sustain - the issue of unjust enrichment is also held in favour of the appellant. Appeal allowed - decided in favor of appellant.

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• 2019 (8) TMI 746
  Refund claim - time limitation - period from Apr. 10 to Sept. 10 - Rejection on the ground of mis-classification of services - reason for rejecting part of the refund claim of 2,69,074/- was that the refund was filed beyond the period of six months prescribed in the notification - HELD THAT:- Tribunal had considered the very same issue in the appeal filed by the respondent herein in the case of M/S. ASCENDAS IT SEZ, CHENNAI PVT. LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE CHENNAI SOUTH [ 2018 (11) TMI 420 - CESTAT CHENNAI] and held that Since the service provider is a property manager, they are providing services of operation, maintenance, management also along with marketing services. Therefore, I am of the view that the mis-classification of services in the invoices cannot be a ground for rejection of refund claim. Tribunal had considered the issue of mis-description of services as well as the issue of time bar and both the issues were held in favour of the respondent herein. The very same issue is challenged in the present appeal. The issue having attained finality, I do not think it necessary to go into any discussion. Appeal dismissed - decided against Revenue.

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• Central Excise

• 2019 (8) TMI 759
  CENVAT Credit - input services - place of removal - transportation charges incurred by the manufacturer for clearance of final product from the place of removal - HELD THAT:- Reliance was placed in the cases of COMMISSIONER OF CENTRAL EXCISE, BELGAUM VERSUS M/S. VASAVADATTA CEMENTS LTD. [ 2018 (3) TMI 993 - SUPREME COURT] and COMMISSIONER OF CUSTOMS CENTRAL EXCISE AND SERVICE TAX, GUNTUR VERSUS M/S. THE ANDHRA SUGARS LTD. [ 2018 (2) TMI 285 - SUPREME COURT] where it was held that tax paid on the transportation of the final product from the place of removal upto the first point, whether it is depot or the customer, has to be allowed. The matter may go back to the learned Tribunal to look into the factual aspects of the matter again with respect to the applicability of the above two judgments of the Apex Court in the case of assessee - Appeal allowed by way of remand.

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• 2019 (8) TMI 758
  100% EOU - Cash Refund of unutilized CENVAT credit - deemed exports - Rule 5 of CENVAT Credit Rules, 2004 read with Notification No.27/2012-CE dated 18.6.2012 - Applicability of provisions of Section 142 of the Central Goods and Service Tax Act, 2017 - HELD THAT:- In the present case, appellant is a 100% EOU who has admittedly supplied the goods to another EOU and filed refund claims under Rule 5 read with Notification No.27/2012 dated 18.6.2012. Further, the goods were supplied by the appellant to another EOU after coming into force of the amendment in Rule 5. The insertion of Clause (1A) in Explanation 1 of Rule 5 of CENVAT Credit Rules effective from 1.3.2015 whereby export of goods means only those goods which are to be taken out of India to a place outside India which means that there has to be a physical export and for deemed export , cash refund is not permissible. Applicability of provisions of Section 142 of the Central Goods and Service Tax Act, 2017 - HELD THAT:- The findings of the original authority that the amount of refund claim would lapse under Section 142 of Central Goods and Service Tax Act, 2017 is not tenable in law, since there was no dispute about the fact that at the time of filing of refund claim, the appellant had debited the whole amount in their CENVAT account as required by the then Notification No.27/2012 dated 18.6.2012 and when the GST was introduced, there was no amount lying in the balance in the appellant s record. Further, provision to subsection (3) of Section 142 of Central Goods and Service Tax Act, 2017 is not applicable in the present case - appellants are entitled to take the re-credit of the CENVAT for which they had filed the refund claims and the said amount will not lapse as per Section 142 of the Central Goods and Service Tax Act, 2017. The appellants are not entitled to cash refund but they are entitled to take re-credit of the same - Appeal disposed off.

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• 2019 (8) TMI 757
  Clandestine removal - diversion of raw material - shortage of 8250 kg of polyethylene granules - period of August 02 to March 03 and January 04 to Oct 04 - denial of cross-examination - principles of natural justice - reversal of CENVAT Credit - HELD THAT:- The diversion of the raw material is based upon the statement of the transporter and the private records seized from the factory and office premises of the Appellant. The papers written by Shri Rohit Kumar Asopa kept in seized records A/29 is alleged to be containing details of payment of transportation charges to the transporter, M/s Bombay Golden (India) and receipt of cash by the appellant from the said transporter. The said papers were found to be written by Shri Rohit Kumar Asopa and as per his statement, it was written on the instruction of the director, Shri Pradeep Lohia. Reliance has also been placed upon the statement of partner of M/s Bombay Golden (India) wherein he stated that the bills were issued for the freight charges from GAIL, Pata to Silvassa and the entire amount was paid in cheque and in case of diversion of goods in Delhi, the cash on account of excess freight was returned back to the Appellant. Though the allegation is of diversion of granules, but no investigation has been made from the transporter, truck driver as to where the said goods were diverted. Even Shri Asopa who had written/ maintained the records on the basis of which the allegation of non receipt/ diversion of granules was made was not questioned about the recipient of such goods. Further it is nowhere appearing in the show cause notice as to how the consideration of such alleged diverted goods were received - The statement of Shri Asopa stands retracted by him during his cross examination and hence cannot be relied upon. Moreover the records maintained by him are in isolation and hence not reliable. The show cause notice and the impugned order has held that since the route passing through Pithol check post is the shortest route, hence the vehicles not passing through the said route cannot be said to have transported goods to Appellant s factory. Only on the basis of such assumption, it cannot be concluded that since the vehicles did not pass through said check post and hence did not reach Appellant Unit. No statements of even a single driver has been recorded - there is no substance in the contention of the show cause notice that if the goods has not been transported through shortest route, the receipt of goods by the Appellant cannot be said to have taken place. The Tribunal had directed to re-examine the statement which was not done by the adjudicating authority. The statement of Shri Rohit Kumar Asopa stands retracted by him and the director of the appellant, Shri Pradeep Lohia, has refused diversion of goods, as alleged in the show cause notice. Moreover, in absence of any investigation to identify the buyer of the diverted material and receipt of consideration by the appellant company, we are of the view that merely on the basis of transporter s statements or the private records, it cannot be concluded that the appellant, M/s Resham Petrochem has diverted the goods. Thus the demand does not sustain - In case of demand of 78,495/- we find that except arriving at shortage no evidence of removal of goods has been relied upon. The statement of Gopalji Karn, Manager and Authorised Signatory stating removal of goods is not supported by any evidence. No buyer of such goods has been shown or its transportation evidence is on record. Also no consideration has been shown to have been received on account of such alleged removal. In such case we do not find any reason to make demand from M/s Resham. The department could not establish the non receipt of inputs beyond doubt to uphold the impugned order - Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (8) TMI 756
  Validity of assessment order - Section 25(1) of KVAT Act - principles of natural justice - assessment years 2011-2012; 2012-2013, 2013- 2014, 2014-2015 and 2015-2016 - HELD THAT:- This Court is of the view that any of the hearings taken independently or together do not amount to giving opportunity of hearing to petitioner by R1. The first notice was issued in the month of January and the order was made on 25.03.2019. The events noted in record between 16.01.2019 and 01.03.2019 do not satisfy that opportunity of personal hearing was given to petitioner. Likewise admittedly there is no hearing after 01.03.2019 to make good the deficiency in affording opportunity of hearing prior to 01.03.2019. The argument that objections filed on 01.03.2019 do not warrant hearing, is subjective and R1 could not have assumed that hearing would be nothing but an empty formality. On the ground that without giving petitioner opportunity of hearing on the objections filed in this behalf, Ext.P1 order is set aside and the matter restored to file of respondent No.1. The petitioner is directed to appear before respondent No.1 on 21.08.2019. The respondent on 21.08.2019 or on any other date, to which the matter stands posted completes the assessment. The assessment is completed on or before 05.09.2019 - Matters restored to the file of respondent No.1 for disposal.

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• 2019 (8) TMI 755
  Stay of recovery - Penalty u/s 67 of the Kerala Value Added Tax Act - condition precedent for granting stay against the recovery - HELD THAT:- We are primafacie convinced that an arguable case has been set up by the petitioner in the appeal pending before the tribunal. But we dissuade ourselves from expressing any opinion on the merits of the appeal, because the same is pending before the statutory authority. We are of the opinion that the insistence for payment of 30% of the amount in dispute, pending disposal of the appeal, would work out in prejudicial to the interest of the petitioner. On the other hand, a direction for an early disposal of the appeal and till then to keep in abeyance the recovery steps, would suffice to meet the ends of justice. Petition disposed off.

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• 2019 (8) TMI 754
  Liability of tax - payment of tax by job-worker - TNVAT Act - HELD THAT:- There is no disputation that the principle of law or the proposition is that, in cases of TDS, when the deductee has paid the entire tax liability on the monies received, the entity/person, who has the obligation to deduct at source cannot be mulcted with liability. However, the rider is that the entity which has the obligation of deduction and has not complied with the same is liable to pay interest for the delayed period, besides penalty under Section 13(5) and 13(8) (respectively) of TNVAT Act. It is made clear that respondent shall redo the assessment after issuing show cause notices afresh to writ petitioner - petition disposed off.

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• 2019 (8) TMI 753
  Maintainability of petition - alternative remedy of appeal - violation of the principles of natural justice - unauthorised levy - false purchases and sales or not - HELD THAT:- It is seen from the impugned order that the assessing officer came to the conclusion that the petitioner was guilty of producing false invoices without actual movement of goods. This finding was arrived at by the assessing officer, on the basis of the facts (a) that both the sales and purchase invoices were of the same date, and (b) that there was no actual movement of goods. This factual finding, cannot be assailed before this court. The argument that no penalty would flow out of a false invoice cannot be accepted for the reason that the language employed in section 55(2) of the Act is very clear. Section 55(2) of the Act states that any VAT dealer, who issues a false tax invoice or receives and uses a tax invoice, knowing it to be false, shall be liable to pay a penalty of 200 per cent. of tax shown on the false invoice. The expression used in section 55(2) of the Act is tax shown on the false invoice . Therefore, it is not relatable to the actual turn over but the tax as shown in the false invoice - the contention that so long as the invoices are found to be false, there can be no tax liability and consequently there can be no liability to pay penalty, does not hold good. Imposition of penalty at 400% - contention is that the penalty has now been imposed at 400 per cent., which is more than what is prescribed by statute - HELD THAT:- A reading of the provision shows that the penalty is relatable to every tax invoice. Unfortunately, for the petitioner he has produced two sets of tax invoices, one relating to purchase and another relating to sale. Therefore, every tax invoice attracted a penalty of 200 per cent.,which ultimately, totalled to 400 per cent. Therefore, the said contention is also liable to be rejected. Petition dismissed.

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• 2019 (8) TMI 745
  Rejection of grant stay of collection of the disputed tax amount notwithstanding the pendency of the appeal - it has been held that when the petitioner concern already paid 12.5% of the disputed tax amount for the purpose of maintaining an appeal as required by law, it would be wholly unjust for the tax authorities to demand the balance of the disputed tax amount notwithstanding the pendency of the appeal - HELD THAT:- There is no need to interfere with the impugned judgment - SLP dismissed.

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• 2019 (8) TMI 744
  Rate of tax - ACR Conductor - rate of 4% on the sale of goods in view of the notification dated 7 March 2005 - jurisdiction under section 22 of the Trade Tax Act - In the instant case, admittedly the transaction was liable to be taxed at 4% but the assessee has only canvased the ground of equity and that he was not at fault while submitting the Form 3 Kha, wherein the rate of Tax was endorsed, hence he cannot be held liable - HELD THAT:- The aforesaid argument does not hold good in light of the settled legal position discussed hereinabove. Equity will have to give way to the provisions of law and in the present case according to the Notification No. KA NI 2 731/XI-9(37) U.P. Act 15-48 order(14) 2005, dated 07.03.2005, the transaction was liable to be taxed at the rate of 4% - the Assessing Authority, rightly exercising the jurisdiction vested in him under Section 22 of the Trade Tax Act to rectify the mistake and to levy Tax on the transaction in question as per Notification No. KA NI 2 731/XI-9(37) U.P. Act 15-48 order(14) 2005, dated 07.03.2005. It is always open for the respondent to recover the shortfall of Tax levied on the goods supplied from the purchaser in accordance with law. Revision allowed.

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• 2019 (8) TMI 743
  Levy of tax - excess stock found during inspection/survey conducted by the Income Tax Department - whether tax liability could have been fastened on the revisionist only on the basis of details provided by the Director of the revisionist company who was present at the time of survey operation rather than actual weighment of the goods? HELD THAT:- This Court is of the considered opinion that there is no infirmity with the finding of the Revenue authorities that the revisionist had stock far in excess than what was recorded in their books of account and therefore this Court does not find any infirmity in the assessment proceedings or the impugned judgment and order passed by the Tribunal. Revision dismissed.

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• 2019 (8) TMI 742
  Order of the tribunal dismissing the appeal - Imposition of Trade Tax - Annual Maintenance Contract service - tax on value of the goods used in replacement under warranty and AMC - principles of natural justice - HELD THAT:- Providing of reasons in orders is of essence in judicial proceedings. Every litigant who approaches the Court with a prayer is entitled to know the reasons for acceptance or rejection of such request. Either of the parties to the lis has a right of appeal and, therefore, it is essential for them to know the considered opinion of the Court to make the remedy of appeal meaningful. It is the reasoning which ultimately culminates into final decision which may be subject to examination of the appellate or other higher Courts. It is not only desirable but, in view of the consistent position of law, mandatory for the Court to pass orders while recording reasons in support thereof, however, brief they may be. Brevity in reasoning cannot be understood in legal parlance as absence of reasons. It is a settled canon of legal jurisprudence that the Courts are vested with discretionary powers but such powers are to be exercised judiciously, equitably and in consonance with the settled principles of law. Whether or not, such judicial discretion has been exercised in accordance with the accepted norms, can only be reflected by the reasons recorded in the order impugned before the higher Court. Often it is said that absence of reasoning may ipso facto indicate whimsical exercise of judicial discretion - The Court cannot lose sight of the fact that a losing litigant has a cause to plead and a right to challenge the order if it is adverse to him. Opinion of the Court alone can explain the cause which led to passing of the final order. Whether an argument was rejected validly or otherwise, reasoning of the order alone can show. To evaluate the submissions is obligation of the Court and to know the reasons for rejection of its contention is a legitimate expectation on the part of the litigant. The court should provide its own grounds and reasons for rejecting claim/prayer of a party whether at the very threshold i.e. at admission stage or after regular hearing, howsoever concise they may be - In the case in hand, no reasons whatsoever have been recorded by the Tribunal and the matter has been decided in cryptic manner by recording only that it had agreed with the reasons given by the Joint Commissioner (Appeals), such an order cannot be sustained in law. The matter is remanded to the Tribunal for re-consideration after affording opportunity of hearing to the parties concerned - revision allowed by way of remand.

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• Indian Laws

• 2019 (8) TMI 741
  Recovery proceedings - appellants are the purchasers of immovable property in an auction sale conducted under the Rules in the Second Schedule of the Income Tax Act, 1961 - writ petition was filed by the mother stating that whereabouts of her son were not known and she was not able to contact him - HELD THAT:- We are of the considered view that the Recovery Officer and the Tribunal have to dispose of the review and the appeal, untrammeled by any of the observations made in the impugned judgment. It would be proper for the parties to raise all their contentions, including the question regarding maintainability of the appeal and the review petition, before the authorities concerned. Additional respondents in the appeals has requested that a direction may be given to the Tribunal to dispose of the appeal pending before it only after the disposal of the review petition which was filed by the writ petitioner before the Recovery Officer. The review petition filed by the writ petitioner against the dismissal if already not disposed of, shall be disposed of by the Recovery Officer within a period of two months from today. Writ petitioner before the Tribunal shall be disposed of by the Tribunal only after disposal of the aforesaid review petition. The appeal shall be disposed of by the Tribunal within a period of three months from the date of disposal of the aforesaid review petition. However, if the review petition has already been disposed of by the authority concerned, the Tribunal shall dispose of the aforesaid appeal within a period of three months from today. It is made clear that the parties are at liberty to raise all their contentions before the authority concerned and the Tribunal, including the contentions regarding maintainability of the review petition and the appeal. The Recovery Officer and the Tribunal shall dispose of the review petition and the appeal, untrammeled by any of the observations contained in the impugned judgment.

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