Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 27, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
GST
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GST notification faces scrutiny: Court finds potential inconsistency, assesses force majeure claims.
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Revocation of GST registration: Court grants relief to petitioner due to lack of opportunity for personal hearing.
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Delay in communicating order extends time limit for filing appeal.
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Tax demand order set aside - Mismatch in GST returns; Pay 10% demand & reply to notice.
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Construction firm's revision plea wrongly dismissed on limitation by High Court.
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Uncontested tax demand quashed, petitioner to remit 10% within 2 weeks to contest merits of GST liability.
Income Tax
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Cash sale proceeds for immovable property not liable for anti-abuse tax on cash transactions.
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Foreign company's network fees from Indian AE taxed as FTS/royalty; contested as business income sans PE.
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Comprehensive Guidance on Income Tax Assessments: From Deductions to Transfer Pricing Adjustments.
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Taxpayers vindicated: TDS credit can't be curbed based on original ITR.
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Reopening assessment invalid due to lack of reasons; "approved" alone insufficient. Approval not a ritual.
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Tax reassessment orders quashed; rectification order unsustainable due to non-existent original orders and income threshold not met.
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Taxpayer's revised return unprocessed due to misaligned tax payment, rectification denied on limitation grounds.
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Company's Transfer Pricing Adjustment Should Only Consider Associated Enterprises' Transactions.
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Assessee's online platform services not considered 'Fee for Technical Services' under India-USA tax treaty.
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Inadequate verification of loan transactions for property purchase by tax officer.
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Receipt of accommodation entries and reopening of assessment - Can Commissioner intervene if AO conducts inquiry?
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Additional income from search taxed as business income, not 60%; cash deposits accepted during demonetization.
Customs
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Confiscation of goods contested; duty paid on excess fabric; pump capacity burden on department.
Corporate Law
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Auditors penalized for professional lapses, fund diversion cover-up & shoddy audit standards.
IBC
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Operational Creditor's Application Upheld: Corporate Debtor Fails to Prove Pre-Existing Dispute.
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Denial of natural justice by authority? Guarantee overrides put option contract. Lender assignment unchallenged by guarantor.
PMLA
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Prerequisite for Money Laundering Case: Pending Scheduled Offence Case a Must.
Service Tax
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Writ dismissed, statutory remedy available. Natural justice not violated. 30 days to appeal before Appellate Authority.
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Logistics Firm's Tax Tussle: Fees Upheld, Freight & Handling Exempted.
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Show Cause Notice for Service Tax on GTA Services - Limitation Period Extended Unlawfully Based on 26AS Statement Alone.
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Contractor liable for service tax evasion despite relying on consultant's advice. Non-payment of taxes points to intent to evade.
Central Excise
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Tax credit valid despite issuing authority change, invoices suffice for availing credit.
VAT
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Creditor's illegal property charge defied IBC moratorium; Court upheld "Clean Slate" principle, quashed tax claim priority.
Articles
Notifications
News
Case Laws:
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GST
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2024 (8) TMI 1134
Freezing of bank account of petiitoner - impugned letter nowhere mentions that the bank account is frozen - HELD THAT:- Respondents, first of all, do not appear to have informed petitioner about the order dated 8th May 2024 and if such an order had been passed and communicated to petitioner, they ought to have informed their advocate, petitioner s advocate and the court when the other writ petition was taken up on 8th July 2024. This only reflects sorry state of affairs in the office of respondents. Because of lack of instructions from the officers of the department, Revenue s advocates are put in a very embarrassing position. Advocates for respondent revenue rely on instructions from the officers and therefore, it was the duty of officers to give proper and correct instructions before the matter is listed. The Principal Secretary, Ministry of Revenue, Government of India is directed to have an enquiry instituted against the officer concerned and if there has been a lapse on the part of the officers in not giving timely instructions to their advocates then (a) to take disciplinary action against the concerned officer and (b) advice all its officers to give timely instructions so that such lapses do not recur. The Principal Commissioner, Gurugram shall file affidavit in reply bringing all facts on record and also give an explanation on lapses noted above and this affidavit shall be filed and copy served on petitioner by 30th August 2024. Stand over to 9th September 2024.
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2024 (8) TMI 1133
Challenge to action on the part of the Central Board of Indirect Taxes and Customs in issuance of a notification bearing No. 56/2023 dated 28.12.2023 - HELD THAT:- It prima facie appears that the notification bearing No.56/2023 is not in consonance with the provisions of 168(A) of the Central GST Act, 2017. If the said notification cannot stand the scrutiny of law, all consequential actions so taken on the basis of such notification would also fail. This Court duly takes note of the submission of Mr. S.C Keyal, the learned Standing Counsel that the Petitioner would be entitled to the reliefs as proposed in the Financial Bill 2024. In addition to that, this Court also finds that an examination would be required as regards the applicability of the force majeure in respect to the notification bearing No. 56/2023 taking into account the contents of the Minutes of the 49th Meeting of the GST Council. However for the purpose of deciding the same, this Court is of the opinion that an opportunity has to be granted to the Respondent Authorities to place on record their stand as well as bringing on record the materials on which they claim the applicability of the force majeure. This Court is of the opinion, that the Petitioner herein is entitled to an interim protection pending the notice. Till the next date, no coercive action shall be taken on the basis of impugned assessment order dated 18.04.2024. The Respondents are directed to file their affidavits on or before 19.08.2024 - List this matter on 21.08.2024.
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2024 (8) TMI 1132
Time limitation - Rejection of petitioner s appeal under Section 107 of the Central Goods and Services Tax Act, 2017 - cancellation of petitioner s GST registration - HELD THAT:- The petitioner has explained that the delay in availing the appellate remedies was on account of certain mitigating circumstances. One Sh. Vinay Parkash Goel, who was the father of one of the Directors and the husband of another Director of the petitioner company expired on 21.04.2023. The petitioner has been afforded sufficient opportunity to be heard in the proceedings relating to its application for revocation of the impugned cancellation order. And, it is apparent that the petitioner was remiss in not availing the same. However, it is noted that the petitioner was not afforded an opportunity to be heard at the threshold stage as the impugned SCN did not specify the date and time on which the personal hearing was to be scheduled. It is considered apposite that the petitioner may be granted one more opportunity to satisfy the proper officer that it was in existence at the material time and continues to be in existence - petitioner s application for revocation before the proper officer is restored - petition disposed off.
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2024 (8) TMI 1131
Time limitation - petitioner had already requested for cancellation of its registration way-back in the year 2020, and the impugned order was passed in December, 2023, thus, same was not in their knowledge - HELD THAT:- It is noticed that the petitioner had been conveyed the order only in April 2024, and therefore, the appeal could have been filed only after April 2024, within the stipulated period of 60 days i.e. the date when the order was communicated to the petitioner. However, the provision only states that the limitation would count from the date of passing of the order. The contention of learned counsel for the petitioner is accepted that the petitioner was prevented from filing appeal within time - since there is a provision for filing of appeal, and the said provision necessary implies that the factual aspects shall be examined by the Appellate Authority. Petition disposed off.
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2024 (8) TMI 1130
Challenge to impugned order - petitioner was unaware of proceedings culminating in the impugned order - mismatch between the GSTR 3B returns of the petitioner and the auto populated GSTR 2A - petitioner agrees to remit 10% of the disputed tax demand as a condition for remand - HELD THAT:- On perusal of the impugned order, it is evident that the tax proposal pertains to the mismatch between the GSTR 3B returns of the petitioner and the auto populated GSTR 2A. It is also evident that the tax proposal was confirmed because the petitioner did not reply to the show cause notice and the personal hearing notices. In effect, the tax proposal was confirmed without considering the objections of the petitioner. In these circumstances, albeit by putting the petitioner on terms, it is just and necessary to provide the petitioner an opportunity to contest the tax demand on merits. The impugned order dated 18.12.2023 is set aside subject to the condition that the petitioner remits 10% of the disputed tax demand as agreed to within a maximum period of two weeks from the date of receipt of a copy of this order. Within the aforementioned period, the petitioner is also permitted to submit a reply to the show cause notice - Petition disposed off.
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2024 (8) TMI 1129
Maintainability of petition - barred by time limitation or not - HELD THAT:- On a perusal of the impugned orders, it is seen that despite noting the fact that this Court granted liberty to the writ petitioner to file revision petitions under Section 54 of the TNGST Act, 2006, before the Revisional authority within a period of 30 days from date of receipt of a copy of the order in WP.No.23745 to 23748 of 2016, the impugned orders have been passed rejecting the revision petition filed by the petitioner on the ground that the revision petitions filed are barred by limitation. Admittedly, the Writ Petitioner has filed Revision Petitions in time i.e., within 30 days, as mentioned in the order passed in the aforesaid Writ Petitions and even the petitioner has not been heard before the impugned orders are passed and therefore the same is in violation of principles of natural justice and hence, the order rejecting the revision petitions on the ground of limitation is per se illegal and liable to be set aside. Petition allowed.
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2024 (8) TMI 1128
Violation of principles of natural justice - petitioner was not provided a reasonable opportunity to contest the tax demand on merits - HELD THAT:- On perusal of the petitioner's reply, it is evident that the only documents enclosed with such reply are the GSTR 9, GSTR 9C and income tax documents. As contended by learned Additional Government Pleader, it was incumbent on the petitioner to provide all relevant documents to establish that the services fall within the scope of Section 9(3) of applicable GST enactments read with Notification No.13/2017 - Central Tax (Rate) dated 28.06.2017. Nonetheless, in the reply, the petitioner has asserted categorically that the services provided by him fall within the scope of the above provision and notification - it is just and necessary to provide an opportunity to the petitioner by putting the petitioner on terms. The impugned order dated 18.12.2023 is set aside subject to the petitioner remitting 10% of the disputed tax demand within two weeks from the date of receipt of a copy of this order - petition disposed off.
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2024 (8) TMI 1127
Variation in the term of the letter of acceptance - the concerned Opposite Parties after execution of the work have unilaterally withdrawn the substituted Clause-9 as per letter dated 18.05.2018 - HELD THAT:- The Opposite Parties after the work having already been executed by the Petitioners could not have varied the terms contained in Clause-9 of the letter. The impugned communication dated 06.09.2021 cannot be sustained and is accordingly set aside. The consequences of the quashing of the said communication shall follow. All actions taken based upon the said communication dated 06.09.2021 are held illegal. Petition disposed off.
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Income Tax
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2024 (8) TMI 1138
Validity of the approval accorded in terms of Section 153D - Mechanical approval without application of mind - ITAT allowing the appeal of the assessee and quashing the assessment order by holding that the approval has been given mechanically without application of mind despite the fact that Range Head HELD THAT:- An identical challenge of approval having been accorded mechanically and without due application of mind had arisen for our consideration in Pioneer Town Planners Pvt. Ltd [ 2024 (3) TMI 828 - DELHI HIGH COURT] it is seen that the PCIT has failed to satisfactorily record its concurrence. By no prudent stretch of imagination, the expression Yes could be considered to be a valid approval. In fact, the approval in the instant case is apparently akin to the rubber stamping of Yes in the case of Central India Electric Supply [ 2011 (1) TMI 89 - DELHI HIGH COURT] . In view of the aforesaid, we find no justification to interfere with the view expressed by the Tribunal. No substantial question of law arises. The appeals fail and shall stand dismissed.
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2024 (8) TMI 1137
Penalty u/s 271D - contravention of section 269SS - consideration received in cash towards sale of property - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of Katasani Tirupati Reddy [ 2024 (8) TMI 1097 - ITAT HYDERABAD] where the Tribunal by following the decision of Shri R. Dhinagharan (HUF) [ 2024 (1) TMI 61 - ITAT CHENNAI ] held that specified sum as per Explanation to section 269SS of the Act is only applicable for the advance receivable or advanced received in relation to transfer of any immovable property, but not to consideration received towards transfer of property. Thus we direct the AO to delete the penalty levied u/s 271D of the I.T. Act, 1961. Decided in favour of assessee.
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2024 (8) TMI 1136
Accrual of income in India - FTS - PE in India or not? - treatment of network fees earned during the year by the assessee as fees for technical services and royalty under the Income-tax Act and u/A 13 of the India Netherland DTAA - HELD THAT: The assessee has various business infrastructures such as IT network, E-commerce portal facilitating interface with customers, network pool of various service providers, such as freight insurance etc. - During the course of scrutiny assessment proceedings the AO noticed that, assessee has earned its income from services provided to its Indian AE i.e. Damco India Private Limited (DIPL), as network transportation fee. The transportation fee received from DIPL, was subjected to TDS treating the remittance as FTS but in the return of income was not offered to tax treating the same as business income on the ground that there was no PE in India. Since the payment was in the nature of FTS, a show-cause notice was issued proposing to treat the transportation fee as FTS. Assessee filed a detailed reply explaining that it is overall responsible for operation and maintenance of the business at global level and since DIPL is part of such network it makes use of facilities like integrated supply chain management, freight forwarding network, Group IT for common platform for integrated and efficient operations. As explained that, assessee does not charge any separate charge for use of such facilities. From the above chart it was explained that in FY 2013-14 and 2014-15, DIPL has received network income in which it failed to earn profits less than arm s length margin. It was clarified that network fee/network income is not a charge and hence it thus comes under the purview of FTS u/A 12 of India Netherlands Tax Treaty. It was strongly contended that such network fee receipts from DIPL are business income u/A 7 of India Netherlands Tax Treaty and in business of a PE, such network fee receipts are not taxable in India. The explanation of the assessee did not find favour with the AO who was of the firm belief that as per Explanation 2 to Section 9(1)(vii) FTS has been defined as any consideration for rendering any managerial, technical or consultancy services and the taxability of the FTS is also applicable in view of the treaty. Accordingly, the network fees was taxed as fees for technical services and royalty. Objections were raised before the DRP and the DRP after considering the facts and the submissions, was of the opinion that the DRP in AY 2016-17 had upheld the additions made by the AO to the total income of the assessee treating the impugned receipts as FTS. DRP further observed that the issues at hand is similar to those which were dealt by the DRP in AY 2012-13 and 2013-14. Though the DRP fairly conceded that identical additions were made in assessee s own case for AY 2013-14, 2017-18, 2019-20 and 2020-21 and the said additions were deleted by the Tribunal and since the decisions of the Tribunal were not accepted by the revenue, the DRP confirmed the action of the AO. Respectfully following the order of the Co-ordinate Bench AY 2017-18 and 2020-21 [ 2023 (6) TMI 1428 - ITAT MUMBAI] we direct the AO to delete the impugned addition on account of receipt of network fees from DIPL.
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2024 (8) TMI 1135
Designation of Income-tax Authorities under the Income-tax Act - Determination of designation in the hierarchy of Income Tax Authorities - Whether Additional Commissioner can be the TPO? - HELD THAT:- The authorization by Board only refers to the designation of an Income Tax Authority for a particular vacancy the transfer/ posting orders assign a particular officer to that vacancy. To put it in simple words, the Board authorization creates a vacancy and by virtue of transfer/posting orders the Department fills the said vacancy with the designated incumbent. As pointed earlier, the definition of Joint Commissioner in Section 2(28C) includes Additional Commissioner, therefore, in our considered view there is no infirmity or irregularity in appointing officer in the grade of Additional Commissioner to a position designated for Joint Commissioner. Thus, in view of our above findings we find no merit in both the arguments advanced by the ld.Counsel assailing validity of order passed u/s. 92CA of the Act. As a result, additional ground of appeal is dismissed. Allowability of Pro-rata amount for the year in respect of Leasehold Lands - Assessee had made claim by way of a Note in computation of income - AO rejected the claim on the ground that the amount has not been claimed in the return of income or in the revised return of income - HELD THAT:- AO has allowed assessee s claim of pro-rata amount on the leasehold land. Since, the claim of assessee has been allowed in the past i.e. A.Y 2006-07 and 2007-08 on similar set of facts, in principle we hold that assessee s claim of deduction of pro-rata amount in respect of leasehold lands deserves to be accepted, however, we deem it appropriate to restore the issue to the A.O for the limited purpose to examine quantum of claim. Ground No.1 of appeal is allowed in the aforesaid terms. Write back of provision for doubtful debts - contention of the assessee is that the quantum of aforesaid claim has been inadvertently computed - HELD THAT:- During assessment proceedings the assessee furnished details of write back of doubtful debts along with certificate from Chartered Accountant. We find that in A.Y. 2006-07 [ 2019 (2) TMI 278 - ITAT MUMBAI ] similar claim made by the assessee was denied by the A.O. The matter travelled to the Tribunal. The Tribunal restored the issue back to the file of A.O - Taking into consideration entire facts, we deem it appropriate to restore this issue back to the file of A.O for re-examination. The Assessing Officer shall also consider the fresh claim made by the assessee before the Tribunal. Interest on Income-tax refund u/s. 244A - It is undisputed that the assessee after finalization of interest amount in proceedings u/s. 154 has not filed revised return of income, nevertheless the assessee in computation of income by way of Note No.2 has mentioned that in case interest amount is reduced or withdrawn, subsequently on completion of assessment the interest chargeable to tax for the year should be considered accordingly. Or in alternate the assessee reserve the right to claim interest withdrawn by the Department as deduction for the total income for the year in which interest is withdrawn. Nevertheless, the powers of the Appellate Tribunal are not impinged to entertain fresh claim made by assessee during appellate proceedings. It is a well settled law that Government cannot charge tax in excess of what is due. Since, assessee has offered to tax excess amount the AO is directed to grant relief on the excess amount offered to tax by the assessee. Disallowance u/s. 14A r.w.r. 8D - No suo- moto disallowance was made by the assessee for earning of exempt income - Contention of the assessee is that own funds of the assessee are much more than the investments, hence, no disallowance u/r.8D(2)(ii) is warranted - HELD THAT:- It is no more res-integra that where the assessee has mixed bag of funds comprising of own interest free funds and borrowed interest bearing funds and if, own interest free funds of the assessee are sufficient to cover the investment made, it shall be presumed that the investments are made by the assessee from available interest free funds. Re.HDFC Bank Ltd. [ 2016 (3) TMI 755 - BOMBAY HIGH COURT ]. The assessee has substantiated availability of own interest free funds in the form of Share Capital and Reserves Surplus from the Balance Sheet and Funds Flow Statement. In view of the above, disallowance u/r.8D(2)(ii) is directed to be deleted. Disallowance u/s. 8D(2)(iii) - Provisions of Rule 8D would apply from the Assessment Year 2008-09 i.e. the impugned assessment year before us. Prior to Assessment Year 2008-09 disallowance u/s. 14A was made merely on estimations. Hence, the manner of making disallowance prior to Assessment Year 2008-09 would not apply to Assessment Year 2008-09 and thereafter. Hence, we are not in agreement with the first submission of the assessee, therefore, rejected. The second/alternate contention of the assessee is that disallowance be restricted to investments yielding exempt income. The Special Bench in the case of Vireet Investments Pvt.Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ] has held that for the purposes of disallowance u/s. 8D only investments yielding dividend income should be considered. The alternate prayer of the assessee is in line with the principle laid down by Special Bench, hence, we find merit in the alternate prayer made by the ld.Counsel for the assessee. The Assessing Officer is directed to compute disallowance u/r. 8D(2)(iii) on investments yielding exempt income only. Disallowance u/s. 14A r.w.r. 8D while computing book profit u/s. 115JB - HELD THAT:- Special Bench in the case of Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ] has held that while computing book profits u/s. 115JB of the Act disallowance made u/s.14A r.w.r. 8D shall not be considered. The Hon ble Karnataka High Court in the case of Sobha Developers Ltd. [ 2021 (1) TMI 378 - KARNATAKA HIGH COURT ] has reiterated that disallowance made u/s. 14A could not be added to book profits of assessee u/s.115JB. Nature of expenditure - Expenditure on issue of FCCN[ Foreign Currency Convertible Bonds] - FCCNs issued by the assessee are in the nature of convertible debentures - HELD THAT:- We find that identical issue was considered by the Co-ordinate Bench in assessee's own case in Assessment Year 2006-07 [ 2019 (2) TMI 278 - ITAT MUMBAI ] allowed expenditure on issuance of FCCN as stating whether the debenture issued is convertible or non-convertible, it is in the nature of loan. Therefore, any expenditure incurred in relation to issuance of such debenture is allowable as expenditure. Deduction u/s. 80G - assessee has claimed deduction u/s. 80G of the Act in respect of donation made during the year - HELD THAT:- We find that the assessee is having negative income (loss), therefore, there is no occasion for the assessee to claim benefit of deduction u/s. 80G of the Act. Consequently, ground No.7 of the appeal is dismissed as infructuous. Adjustment u/s. 92CA (3) of the Act in respect of export of vehicles - HELD THAT:- TPO in respect of product 207-D-31 picked the transaction with one AE i.e. Tata Uganda Ltd. having average FOB of Rs. 257,861 and compared it to a transaction with non-AE Nitol Motors Ltd. with an average FOB of 272670. The Assessing Officer /TPO while cherry picking transactions with AE turn blind eye to the other transactions with Non-AE, where the average FOB is lower and number of units sold is much higher. A perusal of the table would show that the average sale price per unit charged to AEs is higher than the average sale price per unit of comparable uncontrolled transactions. Though, the TPO held that internal CUP is not acceptable but he has not specified what other method he has applied to benchmark the transaction. Similarly, in respect of product 207-4x4-483, the TPO selected the transaction with non-AE where the average price charged is more than price charged from AE ignoring the fact that there are transaction with other non-AEs where the average price charged is less than average price charged from AEs. The TPO further failed to consider the fact that the assessee has sold only two units to the non-AE where the average price charged is more than the average price per unit charged to AEs. Thus, we are in agreement with the ld.Counsel for the assessee that to determine ALP of the transaction average price charged to AEs should have been compared to the average price of the comparable uncontrolled transactions in respect of each product/model of vehicle. TPO has resorted to cherry picking which is unacceptable in making Transfer Pricing adjustment. Thus, the adjustment made in respect of export of vehicles deserves to be deleted. Hence, ground No.8 of appeal is allowed. Adjustment u/s.92CA(3) in respect of transaction with Hispano Carrocera, S.A - HELD THAT:- It is an admitted position that as against total assets of Hispano aggregating to Euro 21.95 million the assessee has extended unsecured loans to the tune of Rs. 15 million, which count for more than 51% of the book value of total assets of Hispano. Thus, conditions set out in section 92A(2)(c) are satisfied. A perusal of Form 3CEB at page 70 to 95 of the paper book shows that while disclosing information in Clause 7 Part B i.e. the list of AEs, the assessee has disclosed the name of Hispano Carrocera S.A at Sl.No.7 in Annexure -I and against the column nature of relationship with AE it is mentioned Direct/Indirect participation in capital, control and management . Thus, in view of self declaration made by the assessee in Form-3CEB there is no element of doubt that Hispano is an AE of assessee. Adjustment u/s. 92CA(3) of the Act in respect of interest on loans granted to AE - Assessee submitted that the Contract Rate of Interest with the AEs is more than the base LIBOR/EURIBOR rates - HELD THAT:- The assessee has also brought to our attention table at page -16 of the assessment order indicating contracted rate, the base Libor/Euribor rates and the rate applied by the DRP. The assessee has also referred to effective base rates as per European Central Bank. From perusal of aforesaid table prima facie it appears that the rates charged by the assessee from its AEs is higher than the base LIBOR/EURIBOR rates. Similar adjustments were made by the TPO in the preceding Assessment Years, the DRP restricted the rate of interest to LIBOR + 200bps. The Tribunal in Assessment Year 2007-08 [ 2019 (5) TMI 15 - ITAT MUMBAI ] deleted the adjustment and restored the issue back to the file of AO to re-adjudicate the issue after considering submissions of the assessee. We deem it appropriate to restore this issue back to the file of Assessing Officer with similar directions. In the result, ground No.9 of appeal is allowed for statistical purposes. Adjustment u/s. 92CA in respect of purchase of property from Hispano Carrocera - HELD THAT:- As it cannot be said that the valuer was oblivious of the encumbrances or has not considered the total value of encumbrances on the said property. The valuer has categorically stated that the total value of encumbrances is to be deducted from the value determined. The assessee has also placed on record Government Agency report on construction and value of property purchased by the assessee from Hispano. A perusal of the said report shows the cost of construction to be applied on the office area and workshop area separately. The assessee has paid net amount of Euro 21.34 million to Hispano after deducting payments made to various parties in discharge of encumbrances. In the absence of any contrary material valuation certificate produced by the assessee from an independent valuer has to be accepted in determination of value of the property. TPO cannot arbitrarily adopt a value without there being any substantive basis. The insurance value possibly could be only of the building and not the land as there was no question of insuring land. Thus we are of the considered view that the TPO erred in adopting insured value of the property. The transfer pricing adjustment cannot be made on adhoc basis. TPO has to apply one of the prescribed method as is notified during the relevant point of time. We see no plausible reason to sustain the addition, hence, the adjustment on account of purchase of property from Hispano is liable to be deleted. We hold and direct accordingly. In the result, ground No.11 of appeal is allowed. Adjustment u/s. 92CA(3) - property leased to Hispano adopting 10% of property as fair annual value - HELD THAT:- The recitals of Lease Agreement show that the property has been leased out on monthly rent of Euro 80,000, excluding Value Added Tax charged by the State. The said rent has been calculated at Euro rate of 4% in accordance with stringent market conditions. Thus, in view of specific clause of rent in the lease agreement we observe that the findings of the TPO on this issue are contrary to the facts on record. Hence, the adjustment made on account of notional rent @10% of value of property is unsustainable, accordingly, we direct the TPO/Assessing Officer to delete the same. Short TDS credit - assessee submits that the AO has erred in granting short credit of TDS by Rs. 2.94 crores - HELD THAT:- AO is directed to examine TDS in the case of assessee during the relevant period and allow the credit of short amount, if any, in accordance with law. Thus, ground of appeal is allowed for statistical purpose. Levy of interest u/s. 234D is mandatory and consequential, hence, ground of appeal is dismissed being without any merit. Admission of additional ground - Assessment order time barred by limitation, hence, liable to be quashed - HELD THAT:- Co- Cordinate Bench in the case of Lanxess India (P) Ltd. [ 2022 (7) TMI 1532 - ITAT MUMBAI] after considering the decision rendered in the case of Vedanta Limited [ 2020 (1) TMI 168 - MADRAS HIGH COURT ] dismissed similar ground held that we are inclined to held that procedure of issuing draft assessment order laid down in the section 144C is to be followed with effect from 1-10-2009. In the instant case, though the assessment year involve is 2009-10, the draft assessment order has been issued on 28-3-2013, much after the specified date of 1-10-2009 and therefore we do not find any violation of the law by the Assessing Officer in issuing the draft assessment order on 28-3-2013 and passing of the final assessment order dated 26-2-2014 by the Assessing Officer. Therefore, the final assessment order passed by the Assessing Officer is well within the limitation provided in law. Thus, the additional grounds raised by the assessee are accordingly dismissed.
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2024 (8) TMI 1126
Refund claim - Benefit of Tax Deducted at Source [TDS] restricted - as argued AO had failed to take into consideration the total TDS which had been deducted and deposited and the refund thus being computed in light of what had been claimed in the original Return of Income - HELD THAT:- As in cases where a refund becomes due and payable consequent to an order passed in an appeal or other proceedings, the AO is obliged to refund the amount to the assessee without it having to make any claim in that behalf. The reference to Section 239 is thus clearly misconceived. The claim of the petitioner for being accorded credit of the entire TDS as reflected in Form 26AS was thus liable to be accorded recognition along with interest to be computed in accordance with Section 244A of the Act. Regard must also be had to the fact that the TDS which had been duly deposited becomes liable to be treated as tax duly paid in terms of Section 199 and interest thereon would consequently flow from the first day of April of the relevant AY to the date on which the refund is ultimately granted by virtue of Section 244A (1) (a) of the Act. The contention of the respondents, therefore, that interest would flow only from the date of the order of the Tribunal is thoroughly misconceived. In the present case the AO was called upon to give effect to a direction framed by the Tribunal. Viewed in that light, the stand as taken by the AO is clearly rendered unsustainable insofar as it restricts the claim of the petitioner to the disclosures made in the Return of Income. It would be wholly illegal and inequitable for the respondents to give short credit to the tax duly deducted and deposited based on the claim that may be made in a Return of Income. It is pertinent to note that insofar as the question of rights to live feed being treated as royalty is concerned and other allied issues pertaining to the merits of the dispute stand settled right up to this Court by virtue of the judgment rendered by us [ 2024 (1) TMI 1008 - DELHI HIGH COURT] in ITA 812/2023. We accordingly allow the instant writ petition and quash the impugned order dated 08 April 2024. A writ shall consequently issue commanding the respondents to acknowledge the credit of TDS as reflected in Form 26AS of the petitioner and to recompute the total refund.
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2024 (8) TMI 1125
Validity of reopening of assessment - invalid Approval u/s 151 to the re-opening u/s 148 - HELD THAT:- As evident that the approval order is bereft of any reasons. It does not even refer to any material that may have weighed in the grant of approval. The mere appending of the word approved by the PCCIT while granting approval u/s 151 to the re-opening u/s 148 is not enough. While the PCCIT is not required to record elaborate reasons, he has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. The reasons are the link between material placed on record and the conclusion reached by the authority in respect of an issue, since they help in discerning the manner in which the conclusion is reached by the concerned authority. Our opinion in this regard is fortified by the decision of the Apex Court in Union of India vs. M.L. Capoor [ 1973 (9) TMI 99 - SUPREME COURT ] The grant of approval by PCCIT in the printed format without any line of reason does not fulfil the requirement of Section 151 of the Act. PCCIT has failed to satisfactorily record its concurrence. By no stretch of imagination, the mere use of expression approval could be considered to be a valid approval as the same does not reflect any independent application of mind.
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2024 (8) TMI 1124
Rectification order premised on original action u/s 148 - condition specified u/s 149 (1) (b) not fulfilled namely that income alleged to have escaped assessment should be Rs. 50,00,000/- or more - In the review petition, it had been sought to be contended that since the correct order could not be uploaded, complete facts could not be brought to the notice of the Court including that the income which had escaped assessment was in fact more than INR 50 lakhs, but review petition, dismissed with the Court observing that the so called corrected order had neither been issued nor served upon the assessee. HELD THAT:- AO had clearly lost sight of the fact that once the orders under Section 148 had been quashed, there existed no determination which could have been possibly revived, rectified or corrected. We take note of the settled position in law that when a prerogative writ issues or an order comes to be quashed, it would be deemed to have never existed in the eyes of law. See Church of South India Trust Association CSI Cinod Secretariat, Madras [ 1992 (4) TMI 183 - SUPREME COURT ] We note that the power under Section 154 could have been invoked provided an order capable of rectification existed in the eyes of law. However, once the original reassessment orders came to be quashed, they would be deemed to have never existed. All that the review Court did was to accord liberty to the respondents to issue a fresh or rectified order. That would have necessarily entailed an order being framed anew and proceedings for reassessment commenced. In view of the aforesaid and the indisputable position in law which emerges we have no hesitation in coming to the conclusion that Section 154 could not have been possibly invoked. Consequently, and for all the aforesaid reasons, we find ourselves unable to sustain the order impugned. The writ petition is allowed and the impugned order is hereby quashed.
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2024 (8) TMI 1123
Penalty u/s 271(1)(c) - disallowance of interest u/sec. 57(iii) wherein the taxpayer had claimed interest expenditure against interest income which he failed to substantiate despite filing all the relevant details - HELD THAT:- Even the Revenue could not rebut the clinching fact that such a failure on assessee s part in filing all the relevant details along with the return and lack of substantiation thereof on his part, would hardly invite the impugned penal provision as per CIT vs. Reliance Petro Products (P) Ltd., [ 2010 (3) TMI 80 - SUPREME COURT ] wherein their lordships have settled the law that on each and every quantum addition/ disallowance does not attracts the impugned penal provision automatically. We find force in learned counsel s vehement submissions for deleting the impugned penalty. Ordered accordingly.
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2024 (8) TMI 1122
Rejection of the application to rectify the revised return filed - CPC not processed the revised return and rectification is not allowed - HELD THAT:- The original return filed by the assessee was processed by the CPC on 12/09/2017. However, it was found from form 26 subsequently that assessee revised the return u/s. 139(5) on 03/01/2018 and self assessment tax was paid at Rs. 10,820/-. Subsequently, the assessee once again paid SA tax which was not as per the returns so filed. The self assessment tax paid does not arise out of either the revised return or the original return filed by the assessee. In the interest of justice, we are of the opinion that assessee is to file rectification application before the Ld.AO which the AO shall consider without considering any limitation issue that may be applicable. There is bonafides on the part of the assessee as the assessee was erroneously misled to deposit taxes which is not in consonance with the income for the year under consideration. It is a trite law that no tax can be collected without the authority of law. Based on this principle, we direct the Ld.AO to consider the rectification petition filed by the assessee. AO shall verify the returns filed by the assessee and shall compute the income in the hands of the assessee in accordance with law. Assessee shall furnish all relevant evidences in support of its claim. We may once again bring it to the notice of the authorities that the 154 petition filed by the assessee shall not be dismissed on the ground of limitation and shall process the return in accordance with law.
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2024 (8) TMI 1121
TP Adjustment - TPO has made mistakes apparent from record by considering non-AE revenue and non-AE cost in the computation of TP adjustment - as argued TPO has not followed the ITAT order during the remand proceedings and not verified the computation - HELD THAT:- We find that the TPO has not followed the ld. DRP directions and not commented on the erroneous computation wherein the non-AE revenue and non-AE cost has been considered for the purpose of computing TP addition. Assessee has also filed a rectification application u/s 154 of the Act against the TP appeal effect order issued by the TPO wherein it was submitted that the TPO has made mistakes apparent from record by considering non-AE revenue and nonAE cost in the computation of TP adjustment. TPO has not followed the directions of the ITAT and Ld. DRP in the second round of litigation and has erroneously considered non-AE revenue and non-AE cost for computation of TP adjustment. This is against the basic principles of transfer pricing regulations and Chapter X of the Act wherein addition on account of transfer pricing adjustment can be made only in respect of international transactions with the AEs and not the non-AEs. Hence, we direct the AO/TPO to consider transactions between the assessee and the AEs only and rectify accordingly. The AO/TPO shall not circumvent the directions given by the ITAT and the ld. DRP. Appeal of the assessee is allowed for statistical purpose.
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2024 (8) TMI 1120
Revision u/s 263 - Addition of Provision for doubtful debts to book profit under section 115JB - HELD THAT:- PCIT held the assessment order passed u/s.153A bad in law as the AO did not consider the provision for bad debts while computing the book profits u/s. 115JB. In observing so, PCIT relied on the clause (i) of explanation (1) of section 115JB(2) of the act. On perusal of the financials of the assessee, having regard to the profit and loss account and the balance sheet, we note that there is a corresponding reduction from the loans and advances on the asset side of the balance sheet and consequently showing the net of provision for bad debt. Hon ble Supreme Court in case of HCL Comnet Systems and Services Ltd. [ 2008 (9) TMI 18 - SUPREME COURT] has observed that such actual write off would not be hit by clause (i) of explanation to section 115JB. Thus it cannot be only considered as a mere provision of account of bad and doubtful debts debited in the P L account. As noted that in case of CIT vs. Vijaya Bank Ltd.[ 2008 (9) TMI 18 - SUPREME COURT] has also observed that, by debiting to P L Account for provision of bad and doubtful advances and by reducing the same amount from the loans and advances as appearing in the balance sheet there has obliterated the said provision from its accounts and therefore would be an instance of write off and not a mere provision. Hon ble Karnataka High Court in similar situation in case of CIT vs. Kirloskar Systems Ltd. [ 2013 (12) TMI 9 - KARNATAKA HIGH COURT] took the view that, the addition of provision of bad and doubtful debts as per P L account to determine the book profits u/s. 115JB of the act is not warranted. We are of the view that the directions by the PCIT to AO to complete the assessment proceedings afresh in the light of the observations in the impugned order is bad in law. Grounds raised by the assessee stands allowed.
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2024 (8) TMI 1119
Accrual of income in India - Taxability of certain amounts received by the assessee from Indian customers as Fee for Technical Services (FTS)/Fee for Included Services (FIS) in terms with section 9(1)(vii) of the Act and Article 12(4) of India USA Double Taxation Avoidance Agreement - AO observed, the assessee is not merely providing Content Services to the customers of India, but is also providing a whole range of User Services , which are user specific, and involve a high degree of human intervention - HELD THAT:- As could be seen from the highlighted portion of the observation of AO, without properly implementing the directions of learned DRP, he has merely stated that the agreement with Gandhi Institute of Technology and Management has been discussed in the draft assessment order. By these observations what the AO implies is, learned DRP has issued directions without proper application of mind. This, in our view, is highly objectionable and against the provision contained u/s 144C(13) of the Act. AO s findings/observations on the role of assessee are self-contradictory. While on one hand, the AO has acknowledged the fact that the assessee is an aggregation service provider and not a content creator, in the same breath, he says that assessee s contention that it is a mere aggregator of educational courses is not correct. AO has not brought on record any material to establish the fact that the assessee provides technical services through its online platform. Merely because the assessee has a customized landing page, it does not mean that the assessee provides technical services, that too, through human intervention. AO in our view, has not been able to prove such fact. Even, assuming for argument s sake, the services provided by the assessee is of technical nature, that by itself would not be enough to bring such receipts within the purview of Article 12(4) of India USA DTAA, unless the make available condition is satisfied. Burden is entirely on the Revenue to prove that in course of rendition of services, the assessee has transferred technical knowledge, know-how, skill etc. to the service recipient, which enables him to utilize such technical knowledge, know-how, skill etc. independently without aid and assistance of the service provider. As relying on Relx Inc. [ 2023 (4) TMI 239 - ITAT DELHI ] and Elsevier Information Systems GmbH [ 2019 (5) TMI 405 - ITAT MUMBAI ] we hold that the receipts do not qualify as FIS under Article 12(4) of India USA tax treaty. Assessee appeals are allowed.
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2024 (8) TMI 1118
New plea of deduction u/s 54F - no capital gain was declared in the return of income. The income declared therein on profit from business or profession - AR submits that due to mistake by the previous authorized representative and the assessee, the capital gain deduction under section 54F of the Act could not be claimed in the return of income - HELD THAT:- We note that admittedly, no capital gain was shown in the return of income and no claim also made under section 54F of the Act. Had the assessee been declared capital gain in the return of income and no claim under section 54F of the Act thereon, this Tribunal would have directed the AO to consider the same by taking support from the decision of Goetze (India) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] As discussed above, the assessee himself declared income under the head business or profession and no capital gain admitted. Therefore, having no declaration of capital gain in the return of income, directing the Assessing Officer to consider the claim under section 54/54F of the Act, does not arise. As rightly pointed out by the ld. DR that there is no tax liability standing in the hands of the assessee, therefore, we find no infirmity in the order of the ld. CIT(A) and it is justified. Thus, the grounds raised by the assessee are dismissed.
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2024 (8) TMI 1117
Classification of sale of shares as short term capital asset instead of long term capital asset - Period of holding - exemption u/s 54F - HELD THAT:- The undisputed fact is that the holding period of the impugned shares is around 31 months. It is true that provisions of Section 2(42A) of the Act has been amended to exclude the holding period of unlisted shares being held for 12 months to be treated as long term capital gain but the said amendment has come from AY 2015-16 and applicable therefrom and since the impugned AY is 2013-14, therefore, the amended provisions is not applicable. Respectfully following the decision of Exim Rajathi India (P) Ltd. [ 2021 (9) TMI 866 - MADRAS HIGH COURT] we set aside the findings of the ld. CIT(A) and direct the AO to treat the gains arising from sale of shares as long term capital gains. Since we have held that the capital gains to the assessee are long term capital gain, therefore, we direct the AO to re-consider the claim of exemption u/s 54F of the Act and decide the issue afresh as per the provisions of law, after affording reasonable and adequate opportunity of being heard to the assessee. Thus, these grounds are accordingly allowed. Cash deposits - explanation of the assessee that the same has been received out of the petty loans given to friends and relatives, cannot be brushed aside lightly, considering the returned income of assessee being more than Rs. 50 Lakhs and sale consideration being more than Rs. 2 Crores. The returned income and the capital gain go on to show the status of the assessee and, therefore, deposit of petty sum of Rs. 3,08,600/- on different dates should not be looked upon adversely - we direct the AO to delete the impugned addition. This ground is also allowed.
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2024 (8) TMI 1116
Condonation of delay - dismissal of assessee appeal against order passed u/s 250 on account of delay in filing - sufficient cause for condonation of delay exists or not? - as submitted assessee had filed an application u/s 154 of the Act for rectification and assessee was in the impression that since he has already filed rectification u/s 154 and unless it has been decided he is not entitled to file an appeal. HElD THAT:- As D/R has been asked to submit before this Tribunal regarding the stage of the application u/s 154 - D/R has filed report and as per the report submitted by the ld. D/R, the rectification petition for AY 2019-20 has not been disposed off. Keeping in view the facts that the assessee against the order passed u/s 143(1) of the Act has already filed a rectification petition and that petition is yet not been disposed off. We are of this view that condonation petition should be allowed by the ld. CIT(A) and decide the case on merit. Accordingly, the order of the ld. CIT(A) is hereby set aside and assessee has been given an opportunity to place the matter before the ld. CIT(A) as further directed to either he should dispose off the case on his own level or to direct to dispose off the application u/s 154 of the Act filed by the assessee within short period. Appeal filed by the assessee is allowed for statistical purposes.
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2024 (8) TMI 1115
Revision u/s 263 - source of investment in property - as per CIT AO should have examined the genuineness of loan transactions towards acquisition of the property by making independent enquiries - HELD THAT:- We do not find any enquiries being carried out by the AO in respect of the discrepancies as discussed in the preceding para, in the course of assessment proceeding. Thus, the AO had failed to make enquires and verifications which were required to be made in order to examine the issue for which the case was selected for scrutiny. The bank statement also revealed that the assessee had no funds of his own to make these payments. It was explained that the payments towards sale consideration were made on the strength of loans taken from Infinity International and Horizon Finvest and a copy of confirmation in respect of the loans taken from these parties along with their ITR and accounts were brought on record. The evidences filed by the assessee were accepted by the AO without any verification. AO should have examined whether any interest was paid on these loans obtained and whether TDS was deducted thereon. No such enquiry was made in the course of assessment and the documents and the evidences furnished in the course of assessment proceeding were accepted by the AO on their face value without any verification. It is, thus, evident from the above facts that the AO had not conducted proper enquiries in respect of the investment in the properties and, therefore, the order of the AO was rightly treated as erroneous and prejudicial to the interest of the revenue by the Ld. Pr. CIT. It is a trite law and a well settled position that non application of mind or wrong assumption of facts or incorrect application of law by the A.O. will make the order erroneous and pre-judicial to the interest of revenue. Therefore, we do not find anything wrong with the assumption of jurisdiction u/s 263 of the Act by the Ld. Pr. CIT as the order of the AO was erroneous and pre-judicial to the interest of revenue - Decided against assessee.
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2024 (8) TMI 1114
Revision u/s 263 - Receipts of accommodation entries - reopening of assessment concluded - lack of inquiry v/s inadequate inquiry - HELD THAT:- AO had made detailed inquiries on the issue of accommodation entry which was denied by the assessee and no further evidence was brought on record to establish the said alleged transaction. It was held in the case of CIT Vs. Sunbeam Auto Ltd. [ 2009 (9) TMI 633 - DELHI HIGH COURT] that one has to see from the records as to whether there was application of mind before allowing the expenditure and one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any enquiry, even inadequate, that would not by itself give occasion to the Commissioner to pass order under Section 263 of the Act merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open. The present case cannot be treated as a case of lack of inquiry as the AO had examined the issue in the course of assessment proceeding. The scope of Commissioner s power u/s 263 of the Act would be available when the AO conducts no enquiry or no proper enquiry or doesn t apply his mind to the legal issues arising out of the material on record; only then the revisional power is available. In the present case, the AO did conduct proper inquiries based on which the case was reopened and had accepted the explanation of the assessee - PCIT was not justified in invoking the revisional jurisdiction u/s 263 - Decided in favour of assessee.
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2024 (8) TMI 1113
Taxation of additional income u/s 115BBE - surrender of additional income at the time of search - valuation of the stock of jewellery found at the time of search - Government empanelled valuer arrived at valuation with the difference in the valuation of stock of jewellery on the date of search - HELD THAT:- Assessee had the full and complete break up of bills of the same based on the actual purchase price paid by it for such items to the supplier at the time of purchase of each items of jewellery which indeed had a definite tag and which clearly mentioned separately the weight of precious metal and weight of stones with value for purchasing. This value was completely ignored by the Govt valuer at the time of search thereby resulting in alleged discrepancy. The discrepancy has been accepted by the assessee in the statement u/s 132(4) of the Act as well as in the revised return filed on 20.09.2018 by offering the discrepancy amount to tax as business income which is evident from the revised computation of income enclosed. The disclosure of additional income was made by the assessee at the time of search on 18.11.2016 while giving statement u/s 132(4) of the Act at 10 PM whereas the higher tax rate of 60% got introduced u/s 115BBE of the Act only pursuant to Taxation Laws (2nd Amendment) Act, 2016 which got notified in the official gazette only on 15.12.2016, being the date of receipt of accent of the Hon ble President of India which got further culminated as the Taxation Laws (2nd Amendment) Act, 2016. Hence, obviously the provisions of section 115BBE of the Act applying higher tax rate @ 60% cannot be applied at all in respect of search conducted prior to 15.12.2016 and incomes earned prior to 15.12.2016. Hence, the assessee is entitled for relief on this count also. We have no hesitation to hold that the additional income is to be brought to tax only as business income liable to tax at normal rate and not @60% provided u/s 115BBE. Decided in favour of assessee. Addition u/s 68 - cash deposits made during the demonetization period - HELD THAT:- No discrepancies whatsoever were found during the course of search conducted in the business premises of the assessee which was just 9 days after the date of announcing of demonetization by the Govt of India. The books of account of the assessee had not been rejected and to the extent of cash sales made , corresponding reduction in stock register had been duly made by the assessee. As stated earlier, the assessee s trade practice warranted monetary receipt of cash on its sales. The assessee had also duly explained the reasons behind issuing estimate‟ chits to the customers for receiving advance in cash for the jewellery sales to be made in future. The sales made during the quarter ended December 2016 is very much comparable with that of December 2015 and December 2017 and no abnormality is being noticed thereon as is evident from the table reproduced in earlier part of this order qua this ground. The turnover of the assessee during the year had indeed increased to Rs. 283.69 crores when compared to Rs. 216.88 crores in the immediately preceding year. The assessee had given adequate justification for huge increase in sales during the fag end of October 2016 till the first fortnight of November 2016 quoting the reasons of festivals season which fact cannot be disputed at all. There is absolutely no basis for the ld AO to arrive at the daily average sales of a particular day and arriving at the availability of cash sales as on 08.11.201 - very same transactions of Rs. 11.99 crores, being the addition made by the ld AO is already part of actual sales already disclosed by the assessee in its return of income and in the books of account. We hold that adding this sum of Rs. 11.99 crores will only result in double addition. The entire sales made by the assessee had been duly reflected in the VAT/ GST returns and no infirmity in any manner whatsoever was found by the concerned authorities. Decided against revenue. Disallowance of advertisement and exhibition expenses on ad hoc basis - AO in the assessment proceedings made an ad hoc disallowance of 10% of total exhibition expenses and advertisement expenses on the ground that the assessee could not produce vouchers for some of the transactions and hence, the same remained unverified - CIT(A) deleted addition - HELD THAT:- We find that the books of account of the assessee, book results of the assessee were not rejected by the ld AO by invoking the provisions of section 145(3) of the Act. Hence, there is no question of making any ad hoc disallowance @10% of total advertisement and exhibition expenses. The same is absolutely without any basis. As stated by the ld CIT(A), even the 3 vouchers which the AO stated in the assessment order were produced by the assessee before the CIT(A) from where it was found that payments were made to the respective parties by account payee cheques after due deduction of tax at source. Hence, we do not find any reason to interfere in the order of the ld CIT(A) granting relief to the assessee in this regard.
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2024 (8) TMI 1098
Revision u/s 263 - as per CIT despite having information regarding accommodation entries no additions were made by the AO - HELD THAT:- We have noted that the assessee provided detailed explanations and evidence to show that the transactions in question were conducted by M/s. Dee Are Products, a proprietorship firm of Divyaraj Madanlal Gupta and not by the assessee. Relevant documents, including ledger accounts, bank statements, and tax returns of M/s.Dee Are Products, were submitted to both the AO and the Ld.PCIT. PCIT, relying primarily on information available on the INSIGHT portal, concluded that there was ample evidence of transactions between the assessee and Sanjay Govindram Agrawal for accommodation entries, thus exercising jurisdiction under Section 263 - mere information on the Insight Portal cannot be considered as evidence based on which the Ld.PCIT assumed his jurisdiction especially when the assessee has explained that the transactions are not pertaining to the assessee company but pertains to another person. We note that the Ld.PCIT did not raise any query as to what enquiries were made by the Assessing Officer before proceeding to pass the assessment order in question. The opinion of the Ld.PCIT that the Assessing Officer had not made proper enquiries or verifications should be based on his objective satisfaction and not a subjective satisfaction from the assessment order. The reopening in this case was held on the basis of information received from Insight Portal, whereby, the AO asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the Assessing Officer passed the assessment order. However, a perusal of the revision order passed by the Ld.PCIT shows that the Ld.PCIT has not pointed out any error or discrepancy in the explanations and details furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the show-cause notice, the Ld.PCIT, in our view, was not justified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the AO. The conditions necessary for invoking Section 263 of the Act, i.e., the order being erroneous and prejudicial to the interest of the revenue, are not satisfied in this case - Assessee appeal allowed.
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2024 (8) TMI 1097
Penalty u/s 271D - property sold in cash - assessee pleaded that the cash was received from the purchaser on the day of registration and before the Jt. Sub Registrar only, due to pressing medical need of his mother and since the amendment has come into force only a month earlier, he was not properly advised as to the bar of receiving cash under the amendment act - HELD THAT:- Admittedly the sale took place on 3/7/2015 whereas the amendment in question has come into force w.e.f. 1/6/2015. Assessee suffered loss in this transaction and such a position is not disputed by the Department. In the circumstances, the assessee not receiving proper advice as to the non-desirability of receiving the sale consideration in cash and his explanation cannot be brushed aside. The meaning of the specified sum has also been dealt with by a Co-ordinate Bench of the Tribunal in the case of ITO vs. Shri. R. Dhinagharan (HUF) [ 2024 (1) TMI 61 - ITAT CHENNAI] , wherein the ITAT took the view that the sum specified as per Explanation to Section 269SS only applicable for advance receivable, namely, as advance or otherwise means advance can be in any manner, and therefore, this provision will not apply to the transaction that happens when the final payment at the time of registration of sale deed and payment takes place before sub-registrar for registration of property. In the present case before us, it is an admitted fact that the assessee received the amount of cash of Rs.9,38,000/- not as advance, but as the final payment in front of the Sub-Registrar at the time of registration for sale of property. Thus, we hold that there is no violation of provisions of section 269SS of the Act in the present case in the given facts and circumstances and hence, penalty under section 271D of the Act is not leviable. Hence, we allow the grounds raised by the assessee.
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Customs
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2024 (8) TMI 1112
Confiscation and redemption of goods - levy of penalty u/s 114A of CA - Suction pumps - capacity of suction pumps - Were they of 75GPD capacity as asserted by the appellant or were they of 100 GPD capacity but mis-declared as of 75GPD as asserted by the department? - If they were of 100 GPD capacity, was the method of redetermination and the value determined by the adjudicating authority correct? - Excess quantity of the non-textured fabric. Capacity of pumps - Burden of prove - HELD THAT:- Since the department is disputing the declaration made by the appellant, the department has to produce evidence - In this case, the appellant filed the Bill of Entry making some declaration regarding the nature of the goods and their value. If Revenue asserts that the declarations are not correct, it has to produce evidence in support; otherwise it would fail. The capacity declared by the appellant has not been established to be false or incorrect by the Revenue either through the certificate of the Chartered Engineer or through any other evidence. Consequently, there is no ground to reject the transaction value of the pumps. The value of the pumps declared in the Bill of Entry should therefore, have been accepted. Excess quantity of the non-textured fabric - HELD THAT:- The appellant does not dispute that excess quantity was found and that duty has to be paid on the excess quantity. It has already paid the duty. Jurisdiction to make re-assessment - HELD THAT:- It is clear that section 28 can be invoked only after the goods have been cleared for home consumption because until then, the assessment is still open and if any discrepancies are found or any adjustments have to be made, they can be done by the proper officer through re-assessment under section 17. In this case, the appellant filed the Bill of Entry and selfassessed duty and before it could be re-assessed by the proper officer, the officers of the Commissioner of Customs (Preventive) intervened and the Additional Commissioner has done this reassessment instead of allowing the proper officer to do it. Thus, the demand which he confirmed is only a re-assessment under section 17 and is not a demand under section 28. Consequently, section 28AA and section 114A which are linked to section 28 do not apply to this case. This is simply a case of assessment of the goods where excess quantity of one of the goods was found on examination on which the appellant agreed and paid the excess duty. The proper officer could have done it in due course but the Additional Commissioner of Customs (Preventive) took over and did it. Confiscation of the goods and the redemption fine - HELD THAT:- Section 111 makes certain goods liable for confiscation but does not mandate such confiscation. It is for the adjudicating authority to exercise his discretion and see if goods need to be confiscated in the facts of the case or not. In this case since the only violation is of import of excess quantity of one of the goods, it is found that no sufficient ground to confiscate the goods. Therefore, the confiscation of the goods and the redemption fine also deserve to be set aside. The confirmation of demand of duty on the excess quantity of PU Fabric is upheld - rest of the order set aside - appeal allowed in part.
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Corporate Laws
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2024 (8) TMI 1111
Professional Misconduct by the Auditors - alleged diversion of funds - Lapses in the audit of fraudulent diversion of funds to MACEL, understatement of such diverted funds and evergreening of loans through circulation of funds - Fraudulent understatements of loans and advances given to MACEL and evergreening of loans and advances - Lapses in audit of suspected diversion of funds by CDGL to M/S Classic Coffee Curing Works - Lapse in performing risk assessment procedure in respect of Interest Income of TDL - Omission and Commission by the Audit Firm - Penalty Sanctions. HELD THAT:- The failure in this audit engagement was due to violations of SAS, failure in the implementation of Standards on Quality Control and relevant provisions of the Act. Hence the role of the Audit Firm, whose responsibilities are mandated by the Act, is equally important as that of EP and EQCR Partners, whose responsibilities are prescribed in the SAS and SQC -1. Given the fact that the Audit Firm is the appointed auditor under the Act and that the EP remains mandatorily responsible for the individual audits subject to firm-level supervision, both the Audit Firm and the EP have joint and several responsibilities for the Audit. Section 132 (4) that provides for sanctions against both the chartered accountants and the firm of chartered accountants emanates from this basic premise. There is not adequate evidence of effective supervision and oversight of this audit by M/S BSR Associates LLP. Had the Audit Firm discharged its supervisory responsibilities timely and effectively such major lapses in the audit as discussed in the foregoing paragraphs could have been avoided. Further, in this case, the Firm's policies and procedures with respect to audit documentation have also been found to be non-compliant with SQC I and SA 230. Due to these fraudulent transactions the consolidated financial statements of CDEL were grossly misstated and, therefore, did not present a true and fair view of the company's affairs. As a result, the unmodified audit report issued by the Audit Firm was false and misleading for the users of these financial statements. Had the Auditors properly discussed the audit procedures with the component auditors in response to the identified risks, advised them accordingly, and exercised due professional skepticism throughout the audit, (as required by SA 200), they could have identified the material and pervasive misstatements in the CFS - The lack of professional skepticism in challenging both the management and the component auditors and the failure to address contradictory evidence was apparent in significant areas of the audit. Such omissions and commissions by an experienced audit firm cannot be taken lightly, as they are detrimental to the public interest. The Firm and Engagement Performance Metrics published by PCAOB on October 12, 2022, provides a detailed study of engagement level and firm-level quality matrices. Engagement level metrics provide information about a particular engagement of the firm, and firm-level metrics address an audit firm's overall strategy in complementing the engagement-level matrices - The report lists key Audit Quality Indicators reported by 9 leading audit firms (refer to page 14 of the report). This Audit Quality Indicators make it clear that in, actual practice across the world, the Audit Firm has an equally important role as that of EP to ensure overall quality in any audit undertaken by the Firm. Thus, it is proved that they had failed to report fraudulent diversion of funds to related parties and failed to exercise due diligence in performance of audit. Based on the foregoing discussion and analysis, it is concluded that they have committed Professional Misconduct as defined under Section 132 (4) of the Companies Act 2013 in terms of section 22 of the Chartered Accountants Act 1949. The Firm and the EP committed professional misconduct as defined by clause 5 of Part I of the Second Schedule of the CA Act, which states that an auditor is guilty of professional misconduct when he fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity - This charge is proved as the Firm and the EP failed to disclose in their report the material non-compliances by the Company. The Firm and the EP committed professional misconduct as defined by clause 6 of Part I of the Second Schedule of the CA Act, which states that a chartered accountant in practice is guilty of professional misconduct when he fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity - This charge is proved as the Firm and the EP failed to disclose in the audit report the material misstatements made by the Company. The Firm, the EP and the EQCR committed professional misconduct as defined by clause 7 of Part I of the Second Schedule of the CA Act, which states that a chartered accountant in practice is guilty of professional misconduct when he does not exercise due diligence or is grossly negligent in the conduct of his professional duties - This charge is proved as the Firm, the EP and the EQCR failed to conduct the audit in accordance with the SAS and applicable regulations, failed to report the material misstatements in the financial statements arising from diversion of tilllds circulation of funds and failed to report non-compliances made by the Company. The Firm and the EP committed professional misconduct as defined by clause 8 of Part I of the Second Schedule of the CA Act, which states that a chartered accountant in practice is guilty of professional misconduct when he fails io obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion - This charge is proved as the Firm and the EP failed to conduct the audit in accordance with the SAS and applicable regulations as well as due to his total failure to report the material misstatements and non-compliances made by the Company in the financial statements. The Firm and the EP committed professional misconduct as defined by clause 9 of Part I of the Second Schedule of the CA Act, which states that a chartered accountant in practice is guilty of professional misconduct when he fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances - This charge is proved since the Firm and the EP failed to conduct the audit in accordance with the SAS and related Quality Control Standards and Code of Ethics. Penalties and Sanctions - Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law - the infraction of the law and non-adherence to the standards of Audit, Quality Control Standards and Code of Ethics by the Auditors of a listed company viz., CDEL. The Auditors did not report fraudulent diversion of funds despite having enough evidence that public money was moved to a promoters' entity which had no business connection with the listed company. Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, we, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, hereby order imposition of monetary penalty of Rs ten crores upon M/S BSR Associates LLP; Rs fifty lakhs upon CA Aravind Maiya; and Rs twenty five lakhs upon CA Amit Somani. In addition, CA Aravind Maiya is debarred for a period of ten years and CA Amit Somani is debarred for a period of five years, from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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Insolvency & Bankruptcy
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2024 (8) TMI 1110
Pr-existing dispute or not - whether in the instant case any preexisting dispute exists which would not allow initiation of Section 9 proceedings under the Code against the Appellant / Corporate Debtor/ Corporate Debtor? HELD THAT:- It is not found that the claim of an operational creditor is undisputed and the operational debt remains unpaid. The Corporate Debtor received goods from Respondent No. 1 / Operational Creditor and has an outstanding debt exceeding Rs. 1 lakh - The Appellant / Corporate Debtor s claims of a pre-existing dispute due to the GST raids and alleged fake invoices are not substantiated with material on record as the correspondence and proceedings involving the GST authorities do not constitute a genuine preexisting dispute between the Corporate Debtor and Respondent No. 1 / Operational Creditor concerning the operational debt. The Appellant / Corporate Debtor's contentions that the company is solvent and the matter should be resolved through civil proceedings or arbitration are not relevant to the initiation of CIRP under the IBC. The appeal lacks merit as the Appellant / Corporate Debtor failed to demonstrate a pre-existing dispute as required under Section 9 of the IBC. The Adjudicating Authority rightly admitted the application filed by Respondent No. 1 / Operational Creditor and initiated the CIRP against the Corporate Debtor. Appeal dismissed.
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2024 (8) TMI 1109
Admission of Section 95 petitions filed by Alchemist Asset Reconstruction Company Limited-Financial Creditor - denial of natural justice to the Appellant by the Adjudicating Authority - invocation of Deed of Guarantee of the PG stood circumscribed by the Put Option Agreement or not - entitlement to object to the Assignment Agreement between RBL/original lender and Respondent No.1. In the facts of the present case, whether there has been denial of natural justice to the Appellant by the Adjudicating Authority? - HELD THAT:- The application of principles of natural justice requires to be determined in the background of the facts and circumstances of each case as there is no one-size fits all formula. Having said that, we need to also appreciate the background in which the Adjudicating Authority decided to reserve the matter for orders. It is significant to note that the Adjudicating Authority while reserving the matter for orders observed that the that RP had filed its report under Section 99 of IBC long back and the matter at hand was old - the statutory provisions of IBC under Section 100 provides for only 14 days time to the Adjudicating Authority to adjudicate on the admission or rejection of Section 95 application from the date of submission of the Report of the RP. In view of such stringent timelines provided under the IBC for initiation of Insolvency Resolution Process under Chapter-III of the IBC, prima facie, the Adjudicating Authority cannot be faulted in the given circumstances for having proceeded with reserving the matter for orders after giving the Appellant due liberty to file further written submissions. In view of the time-bound nature of IBC proceedings, there are no infirmity in the endeavour made by the Adjudicating Authority to expedite disposal of the present Section 95 application rather than prolong the matter. The matter remanded back to the Adjudicating Authority would be a time-consuming process and frustrate the time-lines set under IBC. Whether the invocation of Deed of Guarantee of the PG stood circumscribed by the Put Option Agreement? - Whether the Appellant-PG was entitled to object to the Assignment Agreement between RBL/original lender and Respondent No.1? - HELD THAT:- No prior consent of PG or any intimation was given to the PG about the Assignment Agreement. Since PG had given guarantee to the original lender/RBL and not to Respondent No 1, therefore, no action can be initiated against the PG. It is also canvassed by the Appellant that the Assignment Agreement was entered into to overcome the ramifications of the Put Option Agreement and aimed at securing an unfair advantage to Respondent No.1 to fabricate claims against the PG. It has been asserted that the Adjudicating Authority has failed to appreciate that the Assignment Agreement was not executed in good faith. The Deed of Guarantee entered between the original lender and PG is an independent, distinct and a special contract which has to be construed on its own terms. The terms of the Deed of Guarantee are therefore extremely material as the invocation of the guarantee had to be purely in accordance with the terms of guarantee. It is clear from the reading of the clauses contained in Deed of Guarantee that guarantee was given by the PG in unequivocal terms and the guarantee amount was to be paid by the guarantors without demur or objection once the guarantee was invoked - In the letter invoking the guarantee, it was clearly stated that the Corporate Debtor had not performed its obligation of debt repayment. It is an admitted fact that the Corporate Debtor did not discharge the debt. It is a settled position in law that under Section 128 of the Indian Contract Act , the liability of the surety is coextensive with that of principal debtor unless it is otherwise provided by the contract. This legal precept has been laid down by the Hon ble Supreme Court in the matter of Maharashtra State Electricity Board, Bombay Vs. Official Liquidator, High Court, Ernakulam and Anr. [ 1982 (10) TMI 134 - SUPREME COURT ]. In the present case, once the principal borrower failed to discharge the debt, the liability of the guarantor got triggered on the invocation of guarantee. By virtue of this Deed of Guarantee, the PG was therefore mandatorily obliged to honour its guarantee. The Adjudicating Authority did not commit any error in holding that the right of the Respondent No.1 to recover money from the PG emanates from the terms of the Deed of Guarantee which were not in any manner obliterated, overwhelmed or superseded by the Put Option Agreement with the latter having its own sphere of operation. The liability of the PG was purely dependent on the terms of the Deed of Guarantee which was independent of the Put Option Agreement - Once the Assignment Deed was duly executed and registered, the Respondent No.1 by operation of law was substituted in place of the original lender in all actions for realisation of the debt vis- -vis the Corporate Debtor. The legal position recognising the rights of an Asset Reconstruction Company to act in furtherance of assignment of debt as a valid legal right is no longer res integra. That being so, the borrower or the guarantor has no locus or right to challenge any such assignment. This Bench is of the considered view that the liability of the Appellant as surety being coextensive with that of the principal debtor in terms of the Deed of Guarantee and the Respondent No.1 having stepped into the shoes of the original lender pursuant to the Assignment Deed executed in its favour and Appellant having failed to show that debt of the principal borrower stands extinguished and having failed to honour the guarantee obligation despite invocation of personal guarantee, no error has been committed by the Adjudicating Authority in the impugned order admitting Section 95 application. There is no merit in the Appeal - Appeal dismissed.
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PMLA
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2024 (8) TMI 1108
Money Laundering - scheduled offence - proceeds of crime - misappropriation of funds of JKCA with criminal conspiracy with other accused persons. Registration of an FIR/case for a scheduled offence is a condition precedent for the registration of a case for money laundering under Section 3 of the PMLA or not - Enforcement Directorate can independently determine the commission of scheduled offences based on the charge-sheet filed by another investigating agency or not. HELD THAT:- The offence of money laundering, as defined under Section 3 of PMLA, is not made out. For commission of offence of money laundering under Section 3 of PMLA, it is required to be demonstrated that the accused has directly or indirectly, knowingly or unknowingly involved in any process or activity connected with the proceeds of crime. Such activity could be concealment possession, acquisition or use of the proceeds of crime and projecting it as untainted property. Proceeds of crime is defined in Section 2 (1) (u) clearly means any property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence. Coming to the charge-sheet presented by the CBI before the CJM, Srinagar, no scheduled offence is disclosed to have been committed. From a plain reading of Section 3 PMLA, it appears that offence under Section 3 PMLA can only be committed after a scheduled offence is committed. It is, thus, trite that commission of a scheduled offence is sine qua non for existence of proceeds of crime and commission of offence of money laundering under Section 3 of the PMLA Act. In the instant case, indisputably, the jurisdictional police, the CBI has not registered any case for commission of any scheduled offence. Enquiry by way of complaint before the CJM, Srinagar is also not in respect of any scheduled offence. In the absence of there being any case registered for commission of scheduled offence or any case pending enquiry or trial in respect of scheduled offence, authorities under PMLA have no jurisdiction to register ECIR and launch prosecution for offence of money laundering under Sections 3/4 of PMLA. When there is no scheduled offence having been registered or pending enquiry or trial, there are no proceeds of crime and, thus, there is no offence of money laundering under Section 3 of the Act. There are merit in the plea of the learned counsel for the petitioner and regret my inability to accept the argument of learned Additional Solicitor General of India which he very vehemently projected here. This petition is, accordingly, allowed.
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Service Tax
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2024 (8) TMI 1107
Demand of service tax - Invocation of extra ordinary jurisdiction of this Court under Article 226 of the Constitution inspite of the statutory remedy available - SCN reply not submitted - health issues of the petitioner - HELD THAT:- From the decision in the case of PHR INVENT EDUCATIONAL SOCIETY VERSUS UCO BANK AND OTHERS [ 2024 (4) TMI 466 - SUPREME COURT (LB)] , it is seen that the Supreme Court had observed that the High Court ought not to ordinarily entertain a writ petition under Article 226 of the Constitution, if an effective remedy is available to the aggrieved person and such a principle should be applied with great rigour in matters involving recovery of taxes, cess, fees and other types of public money. Merely because of the fact that the petitioner could not submit the reply to the show cause notice on the ground that he was incapacitated on account of his health problems cannot be a ground to involve the writ remedy more so, when the documents enclosed to the writ petition do not show the petitioner was infact incapacitated from filing the reply to the show cause notice at that relevant part of time. Therefore the question of violation of the principles of natural justice as claimed by the petitioner do not arise. Under such circumstances, this Court finds no ground to entertain the instant writ petition, taking into account that there is an alternative and an efficacious remedy available to the petitioner for which the instant writ petition stands dismissed. This Court is of the opinion that the interest of justice would be met, if further 30 (thirty) days time is granted from today to the petitioner to file an Appeal before the Appellate Authority as mentioned in the impugned order dated 26.03.2024 itself. Accordingly, this Court observes and directs that if the petitioner herein files an appeal within 30 (thirty) days from the date of the instant order, the Commissioner (Appeals) shall decide the appeal on merits without going into the question of limitation. Petition disposed off.
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2024 (8) TMI 1106
Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - non-filing of ST-3 returns - Circular No. 1074/07/2019-CX dated 12th December 2019 - HELD THAT:- From the impugned order dated 19th June 2023 it appears that respondent no. 3 has admitted in paragraph 14 that petitioner has discharged its liability for Financial Year 2016-2017 and 2017-2018 as per the declaration filed under the SVLDR Scheme - notwithstanding the outcome of Financial Year 2015-2016, in our view, petitioner certainly be entitled for issuance of Form-4 for Financial Year 2016-2017 and 2017-2018. Therefore, respondent no. 3 is directed to issue Form 4 for Financial Year 2016-2017 and 2017-2018 within one week of this order being uploaded. The show cause notice cum demand notice dated 30th December 2020, which is also impugned in the petition, is quashed and set aside - The time to issue fresh show cause notice, if required for Financial Year 2015-2016 is extended for a period of 30 days after the disposal of petitioner's declaration for Financial Year 2015-2016 - Petition disposed off.
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2024 (8) TMI 1105
Denial of interest claimed u/s. 11BB of the Central Excise Act, on delayed refunds sanctioned under Rule - 5 of the Cenvat Credit Rules, 2004 - HELD THAT:- Consistent decisions are available on the issue of payment of interest on delayed refund of unutilized credit since provision of the Law, supported by judgments of Hon ble Gujarat High Court in COMMISSIONER OF CENTRAL EXCISE VERSUS RELIANCE INDUSTRIES LTD. [ 2010 (10) TMI 190 - GUJARAT HIGH COURT] was pronounced favouring such interest payment except the one passed in Gionee India Pvt. Ltd. case, in which its inadmissibility is distinguishable and could never be taken as binding precedent for not having considered the settled position of law in this case, apart from the fact that provision under Rule 11B covers refund of accumulated cenvat credit that is payable on export under Rule-5 of Cenvat Credit Rules, which is put in the category of refund of duty and section 11BB grants interest to such refund sanctioned three months beyond receipt of the refund application, which is consistently held to be counted from the date of filing of first refund application. The appellant is entitled to get interest on refund sanctioned to it from three months after expiry of the date of filing of its first refund application for respective appeals - appeal allowed.
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2024 (8) TMI 1104
Levy of service tax - Commission/brokerage received from Shipping Lines - Cargo handling services - Difference on ocean freight collected and paid to shipping lines - Director Sitting fees - GTA services. Director Sitting fees - HELD THAT:- The Appellant has accepted the demand of service tax of Rs.2,96,020/- confirmed in the impugned order on the Director Sitting Fees and contested the remaining demands. Regarding the demand of Rs.2,96,020/- confirmed on the Director Sitting Fees, it is observed that the Appellant has already paid this amount, but not paid the interest. Accordingly, the demand of service tax upheld along with interest confirmed in the impugned order on this count. As there is no suppression of fact with intention to evade the tax established in this case, no penalty is imposable on the Appellant on this demand confirmed and upheld. Commission/brokerage received from Shipping Lines - HELD THAT:- There is no taxable service rendered by the appellant to the shipping lines and the commission earned is on account of booking of cargo with the shipping lines over the years. This amount is not liable for service tax under the category of business auxiliary service, as there is no agreement of 'commission agent' between the Appellant and shipping lines - This view has been taken by the Larger Bench of the Tribunal in the case of Kafila Hospitality Travels Pvt. Ltd. [ 2021 (3) TMI 773 - CESTAT NEW DELHI (LB)] , wherein it has been held that the commission earned for selling of space by the shipping lines is not liable to service tax under the category of business auxiliary service - the demand confirmed in the impugned order on this count is not sustainable and is set aside. Cargo handling services - HELD THAT:- It is observed that the demand of service tax has been confirmed by the ld. adjudicating authority on the amounts received by the appellant as 'reimbursable expenses' during the course of provision of CHA services. It is found that the such expenses received by the appellant are related to AD Code Registration charges, Custom Clearance charges, Port charges, EDI Registration charges, AWB fee etc. which were nothing but 'reimbursement' of actual expenses and hence they cannot form part of consideration for levy of service tax - reliance placed on the decision of CESTAT New Delhi in the case of Commissioner of Service Tax, New Delhi v. Karam Freight Movers [ 2017 (3) TMI 785 - CESTAT NEW DELHI] wherein it has been held that the amounts reimbursed on actual basis are not to be included for Service Tax purpose - the demand confirmed in the impugned order on account of cargo handling service is not sustainable and is set aside. Difference on ocean freight collected and paid to shipping lines - HELD THAT:- There is no finding in the impugned order to substantiate this allegation. From the records submitted by the Appellant it is found that the amount involved in this regard are the profit earned by the Appellant from ocean freight. Further, it is observed that the issue of taxability of profit earned on ocean freight is no longer res integra as the same issue has already been decided by this Tribunal in the case of Tierra Logistics Pvt. Ltd. [ 2023 (9) TMI 1141 - CESTAT KOLKATA] - thus, the demand confirmed in the impugned order on this count is not sustainable and the same is set aside. GTA services - Transportation charges as recipient of services - HELD THAT:- The invoice has been raised on the Appellant for transportation of the goods and it has been categorically mentioned in the said invoice that the Service Tax is to be paid by the Party. Accordingly, in respect of this invoice, the liability of payment of Service Tax on the freight amount of Rs.4,20,000/- is on the Appellant. Therefore, the Appellant is liable to pay Service Tax on this invoice on the freight amount of Rs.4,20,000/- under the category of GTA Service, along with interest. GTA services - HELD THAT:- The services provided by the various local truck owners are not related to goods transportation service as there was no consignment note issued by such persons to the Appellant. The goods were moved on the consignment note issued by the Appellant to their customers and on the value of which the customers of the Appellant were liable to pay service tax as recipients of service. Thus, in this regard, it is held that the Appellant is not liable to pay service tax under the category of GTA service - demand set aside. Appeal disposed off.
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2024 (8) TMI 1103
Extended period of limitation - levy of service tax - GTA services. Time Limitation - appellants submits that the issue has arisen on the basis of 26AS statement of the appellants supplied by the Income Tax Department and therefore, extended period cannot be invoked - HELD THAT:- It is found that Revenue has issued the Show Cause Notice on the strength of the data supplied by the Income Tax Department; Revenue claims that they have given three opportunities to the appellants by way of letters/ mails/ summonses and as the appellant did not supply data, they have taken recourse to best judgment method. The appellants claim that the summonses/ letters sent by the Department were not received by the appellant as the same were sent to their old address - The Department with all the might at their disposal could have verified the address of the appellants and the records thereof. Learned Authorized Representative submits that a huge demand of Rs.3.5 crore cannot be assessed or finalized on the basis of sample invoices - the demand is huge, the Department should have undertaken appropriate investigation into the matter. The Show Cause Notice does not bring about any positive act on the part of the appellants with intent to evade payment of duty so as to allege suppression, mis-declaration etc. in order to invoke extended period - Tribunal has been consistently holding that extended period cannot be invoked when the case is made on the basis of 26AS statement, more so, when no ingredients for invocation of extended period are present in the case. Therefore, we are of the considered opinion that no case has been made for invocation of extended period. In the instant case, the appellant is a GTA service provider wherein the service recipient is liable to pay service tax on Reverse Charge Mechanism. The Department failed to adduce any evidence to the effect that the appellants have rendered taxable service to the category of persons who do not fall under the category liable to pay service tax on RCM basis and this appropriate tax requires to be paid by the appellants themselves. In the absence of the same, the benefit of doubt has to be given to the appellants. It is not proper on the part of the Department to make allegations and show the failure on the part of the appellants to provide records as evidence. It is for the Department who are alleging to adduce evidence. The extended period cannot be invoked and thus, the appeal succeeds on limitation - appeal is allowed on limitation.
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2024 (8) TMI 1102
Levy of service tax - transportation of goods through pipeline/conduit service - works contract service - period from 01.04.2013 to 31.03.2014. Advance Received against Transmission Charges from Tea Estate and other consumers - HELD THAT:- The same issue has already been settled by this Tribunal in the appellant s own case Final Order Nos. 76345-76346 of 2024 dated 25.06.2024 [ 2024 (8) TMI 396 - CESTAT KOLKATA ] where it was held that ' Any interest therefore earned thereon shall not be includible in the gross taxable value for purpose of assessment. The department has woefully failed to establish any nexus with the security deposit to the discharge of the taxable service per se nor has it been borne out of record that such deposit in any way influences the value of the service rendered. It thus cannot form part of the taxable service and demand on this account for the aforesaid amount of Rs.40,77,945/- is required to be set aside.' - thus, the demand of service tax confirmed in the impugned order, on this count is not sustainable. Amount against cost of Gas Meter and installation charges - HELD THAT:- The amount is collected as 'security deposit' in terms of Section 14 of the PNGRB Act, 2006. Further, this amount is refundable at the time of surrender of the connection. Hence, no taxable service is rendered and the amount is not liable to Service Tax - the demand of service tax confirmed in the impugned order, on this count is not sustainable. Reconnection charges collected against re-installation - HELD THAT:- Regarding the demand of Rs.1,483/- on the reconnection charges against re-installation, it is observed that the appellant has not contested this demand. Further, in the appellant s own case, this Tribunal vide Final Order [ 2024 (8) TMI 396 - CESTAT KOLKATA ] has held that the appellant is liable to pay Service Tax on re-connection charges - the appellant is liable to pay service tax along with interest on the reconnection charges received by them. However, there is no suppression of fact with intention to evade the payment of tax exist in this case and hence, no penalty is imposed on this demand. Penalties - HELD THAT:- All the penalties imposed on the appellant are set aside. Appeal disposed off.
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2024 (8) TMI 1101
Classification of services - construction of roads services or construction of complex services - works contract services - best judgment assessment resorted to under section 72 of the Finance Act - appellant had already paid service tax, as applicable, even before the SCN was issued - applicability of section 73 (3) of the Finance Act. The submission is that the appellant was told by some consultant that it need not pay service tax and therefore based on that advice it had not obtained service tax registration and had not paid service tax. HELD THAT:- It is found that the intent can only be infered from the facts of the case. In this case, the violation of the Act or Rules is evident and it also evident that as a result the appellant had not paid service tax which it had to pay. The plea that it s consultant had advised it not to pay service tax and, therefore, it had no intent to evade cannot be accepted. If this is accepted as a ground, anybody rendering taxable services and not paying tax can simply take the plea that some consultant had advised him not to pay service tax and not take registration and service tax - in the provisions related to invoking extended period of limitation under section 73 and imposition of penalty under section 78 are identical to the provisions of section 73 (4) - there are no reason to take a different view in this regard to the extended period of limitation or imposition of penalty under section 78. The rest of the demand of service tax is upheld. The amounts already paid by the appellant as service tax need to be appropriated against the remaining part of the demand. Interest will be payable as appropriate and any amounts of interest already paid shall be adjusted towards it. Penalty imposed under section 78 of the Finance Act needs to be recomputed accordingly. Appeal allowed in part.
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Central Excise
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2024 (8) TMI 1100
Jurisdiction to issue SCN - authority issuing show cause notice is different from adjudicating authority - Denial of CENVAT Credit. Jurisdiction to issue SCN - appellant has alleged that show cause notice was issued by Assistant Commissioner, Circle-Jaipur B, CGST Audit Commissionerate, Jaipur and thus, its adjudication by Deputy Commissioner, CGST, Division-G, Jaipur, i.e. adjudicating authority, is without jurisdiction - HELD THAT:- The allegation challenging the jurisdiction is not sustainable. The adjudication authority despite being different from one which issued the said show cause notice is held to have the competent jurisdiction. CENVAT Credit - duty paying documents - HELD THAT:- An invoice issued by the service provider is sufficient to prove the admissibility of Cenvat credit of input services. Further, reference is also made to Rule 4A of the Service Tax Rules, which provides that any person who provides taxable service, on completion of the said service, shall issue an invoice or bill not later than thirty days from the date of completion of such taxable service or receipt of payment, whichever is earlier. In the present case, apparently the invoices were issued in the name of other plants of the appellant instead of being in favour of appellant. But it is also an admitted fact that the invoices were found accounted in the books of appellant, NEI Jaipur. Revenue has produced no evidence to prove that the units whose name were mentioned on the invoices had accounted those invoices in their books of accounts. Revenue has also failed to produce any evidence to prove that the input services were received by other units of NEI that the Jaipur unit. The burden was of the Revenue/department. The deficiency noticed in the invoices is held to not be enough to deny the benefit of Cenvat credit in view of the proviso to Rule 9(2) of the Credit Rules. The invoices on record have all such details as mentioned above. Inasmuch as in the present case, the invoices with incorrect address issued by the input service providers contain all the requisite particulars as required under the proviso to Rule 9(2), therefore, Cenvat credit cannot be denied to the appellant. In fact, Rule 9(2) nowhere requires mentioning the address of service recipient. The proviso to Rule 9(2) of Credit Rules kicks in only when the conditions under Rule 4A of Service Tax Rules, 1944 read with Rule 9 of the Credit Rules, are not fulfilled entirely. Thus, denial of credit is not sustainable. Appellant has also placed on record the CA certificate issued by Ashok Kanodia Co., wherein it is certified that the Cenvat credit of Rs.12.62,017 was only availed by the appellant and not by any other unit of NEI. It is already held above that it is an admissible evidence. As a settled law, credit is a indefeasible and vested right, once there is no dispute on its entitlement. The impugned order is set aside - appeal allowed.
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CST, VAT & Sales Tax
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2024 (8) TMI 1099
Recovery of dues - Validity of certain read entries/charge over the properties of petitioner no. 1 on account of dues recoverable from the erstwhile Management of the 1st petitioner-Company under the Himachal Pradesh Value Added Tax Act, 2005 (HP Vat Act), the Central Sales Tax Act, 1956 (CST Act) and Himachal Pradesh Goods and Services Tax Act, 2017 (HPGST Act). Petitioners contend that after approval of acquisition plan, it became binding on all including respondents and any act contrary to the approved plan would be illegal, particularly, when none of the respondents had challenged the acquisition plan which had also been approved by the NCLT. HELD THAT:- It is clear that the 1st petitioner-Company, who was unable to pay its dues to Financial Creditors, was made subject to a Corporate Insolvency Resolution Process by one of its Creditors , i.e., the State Bank of India under Section 7 of the IBC and it was admitted on 05.04.2018 vide Annexure P-1. As per sub-Section (4) of Section 14 of the Code, the said order of moratorium would have effect from the date of such order till the completion of the Corporate Insolvency Resolution Process - Since the provisions of the said Code had overriding effect on all laws in view of Section 238 of the Code, it was not permissible for the respondents to create a charge on the property of the petitioner-Company during the currency of the moratorium vide Annexure P-4 dt. 07.01.2020 in violation of the provisions of the IBC. Therefore, ex facie, the said order Annexure P-4 is void in law. When the IBC permits Sale of Assets of a Company in Liquidation as a going concern under Regulation 32 (e) 32A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016, and in such an e-auction conducted by the Liquidator, the current management made a plan for acquisition vide Annexure P-5A for Rs.49.95 crore and the same was approved by the NCLT on 11.05.2022 vide Annexure P-6 and Sale Certificate was also issued vide Annexure P-7 on 31.05.2022, all the claims of the respondents stood extinguished - the legislative intent was to extinguish all debts owed to the Central Government or any State Government or any Local Authority including the Tax Authorities, when once an approval was granted to Resolution Plan by the NCLT. As per the amended Section 31 of the Code, the said principle of taking over Corporate Debtor under a Resolution Plan, will also apply to taking over by way of acquisition plan. This is referred to as the Clean Slate principle of IBC - The plea of the respondents that the tax dues claimed by them will have priority as a Crown Debt , therefore, cannot be accepted, and their action in continuing the said red entry/charge on account of dues recoverable from erstwhile management of the 1st petitioner-Company under the H.P. Vat Act, 2005, HPGST Act, 2017 and the CST Act, 1956, would be clearly illegal arbitrary. A Writ of Mandamus is issued directing the 4th respondent to remove its charge/red entries/claim for the tax dues of the erstwhile management of the 1st petitioner-Company on the properties of the said petitioner forthwith, from the revenue record - Petition allowed.
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