TMI Tax Updates - e-Newsletter
August 6, 2020

Case Laws in this Newsletter:

Income Tax Customs Insolvency & Bankruptcy Central Excise

Articles

1. Central KYC registration Authority and Wastage of national resources

   By: shivaprasad chhatre

2. S.40 (a) (ia) r.w.s 194C - SHREE CHOUDHARY TRANSPORT COMPANY (SC) – COUNSELS MISSED TO POINT OUT THAT NO SUBSTANTIAL QUESTIONS OF LAW WERE FRAMED BY HIGH COURT and did not request for restoration of appeal to High Court- a fit case for review.

   By: DEVKUMAR KOTHARI

3. TRANSPORT SUBSIDY – REVENUE RECEIPT OR CAPITAL RECEIPT?

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Due to COVID-19 pandemic CESTAT suspended sitting of all benches from Aug 4, 2020 to Aug 14, 2020

Notifications

Customs

1. 67/2020 - dated 4-8-2020 - Cus (NT)

Seeks to amend Notification No. 12/97-Customs (N.T.) dated the 2nd April, 1997

GST - States

2. ORDER NO. 08/2019-STATE TAX - dated 31-7-2020 - Himachal Pradesh SGST

Himachal Pradesh Goods and Services Tax (Eighth Removal of Difficulties) Order, 2019

3. ORDER NO. 02/2019-STATE TAX - dated 31-7-2020 - Himachal Pradesh SGST

Himachal Pradesh Goods and Services Tax (Second Removal of Difficulties) Order, 2019

4. ORDER NO. 01/2020-STATE TAX - dated 31-7-2020 - Himachal Pradesh SGST

Himachal Pradesh Goods and Services Tax (Removal of Difficulties) Order, 2020.

5. F.12(46)FD/Tax/2017-Pt-III-212 - dated 4-8-2020 - Rajasthan SGST

Seeks to notify class of registered persons for the purpose of e-invoice

6. F.12(46)FD/Tax/2017-Pt-III-211 - dated 4-8-2020 - Rajasthan SGST

Rajasthan Goods and Services Tax (Ninth Amendment) Rules, 2020

7. F.17(151)ACCT/GST/2017/5833 - dated 20-7-2020 - Rajasthan SGST

Removal of pendency of registration application filed during COVID period

8. G.O. (Ms.) No.124 - dated 31-7-2020 - Tamil Nadu SGST

Goods and Services Tax - Tamil Nadu Goods and Services Tax Act, 2017 - Special procedure for a class of registered persons for furnishing of return and payment of tax - Erratum to Notification - Issued.

9. G.O. (Ms.) No.123 - dated 31-7-2020 - Tamil Nadu SGST

Goods and Services Tax - Tamil Nadu Goods and Services Tax Act, 2017 - FORM GSTR-1 - Waiver of late fee payable under section 47- Erratum to Notification - Issued.

Highlights / Catch Notes

Income Tax

• Court Upholds Assessment Notice Validity u/s 147 Despite Amalgamation; Original Company Considered Operational Post-Merger.

  Case-Laws - HC : Validity of reopening of assessment u/s 147 - notice issued to a company which is non-existent on the date as it stood amalgamated with the appellant/petitioner - ts conduct of filing return of income in the name of OAS after the amalgamation and obtained refunds issued in the name of OAS, which will all go to show that M/s.OAS continued to exist even after amalgamation. - Therefore, appellant cannot canvass the point that OAS was nonexistent and the proceedings initiated in its name would be bad in law. - HC
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• High Court Upholds Disallowance of Interest Deduction on Loan for Land Purchase u/s 36(1)(iii) of Income Tax Act.

  Case-Laws - HC : Deduction of interest paid for the borrowed amount used for business purpose - Loan taken from Bank given to Holding company as interest free Advance - Addition u/s 36(1)(iii) - The AO found that the holding Company had borrowed loans from Banks and there was no occasion rather need for the holding Company to take advances from the assessee for the purpose of purchase of the land - Additions confirmed. - HC
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• CIT's Revision u/s 263 Upheld: AO Failed to Independently Verify Tax Return Discrepancies.

  Case-Laws - AT : Revision u/s 263 by CIT - difference arising in the revised return - taking a view should be backed by reasons and that reasons should be demonstrated in the order itself with evidences brought on record and independent enquiry conducted. In this case, the AO has only done the work of extraction of submissions of the Ld. AR and nothing else and therefore, in fact the AO has not formed any view. - we uphold the order passed u/s.263 - AT
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• Taxpayer's Depreciation Claim on Leasehold Rights Revised u/s 263; Stamp Duty Expenses Not Eligible for Depreciation.

  Case-Laws - AT : Revision u/s 263 - claim for depreciation on the leasehold rights - claim of depreciation of capitalized amount of stamp duty Paid - Allowing of the assessee’s claim for depreciation on the stamp duty expenses (pending registration) by the A.O cannot be held to a possible view in law, therefore, no infirmity arises from the order passed by the Pr. CIT u/s 263 - AT
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• Section 68: Gifts from Family Disallowed Without Proof of Agricultural Income Validity; Ration Card Not Financial Status Indicator.

  Case-Laws - AT : Addition u/s 68 - Disallowance of gift received from father and brother - the agricultural income disclosed by them cannot be disputed unless some facts emerged that they have not carried on agricultural activities or have suffered losses in the agricultural activities. Normally farmers do not rely on the banking channel for conducting their day to day activities and do accumulate cash balance - by the class of ration card possessed by the individuals one cannot determine such individuals to belong to people of poor means. - AT
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• Assessee's Deduction Denied: Insufficient Evidence of Investment in New Residential Property u/s 54F of Income Tax Act.

  Case-Laws - AT : LTCG - Claim of deduction u/s. 54F - Even before us at this stage, the assessee has not produced any evidence to prove that she had invested in another residential house property. Claim of the assessee that she had invested in residential house property by way of payment through cheque to her spouse alone will not establish that she has actually acquired the residential house by complying with all the other provisions of the Act. - AT
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• Reassessment for 2010-11 Upheld: AO Validly Reopened u/s 147 Due to Unverified Taxpayer Claims.

  Case-Laws - AT : Validity of Reopening of assessment u/s 147 - AO never had occasion to verify various claims made by the assessee in the return of income - When in the course of assessment proceedings for the assessment year 2012–13, AO was informed about the receipt of compensation from NTCL for the AY 2010-11 - Reassessment proceedings sustained. - AT
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• Capital Gain Case: AO Must Refer to DVO for Property Valuation if Agreement Date Differs from Registration Date.

  Case-Laws - AT : Capital gain computation - stamp duty valuation - when the date of agreement fixing the amount of consideration and the date of registration of the property being the capital asset is different, the matter should be referred to the DVO by the Ld. AO for determination of the valuation as on the date of agreement keeping in view the provision - instead AO determined the value himself - Additions deleted - AT
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Customs

• Customs Broker License Revocation Challenged for Non-Compliance with Section 138B; Procedural Flaws Highlighted in Adjudication Process.

  Case-Laws - AT : Revocation of Custom Broker license - forfeiture of security amount - imposition of penalty - the impugned order is bad for not complying with the mandate of Section 138B of the Customs Act. Even a copy of the statement was not supplied to the appellant. - the adjudicating authority have accepted the report of the inquiry officer in a mechanical way, without application of mind. - AT
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IBC

• Court Upholds IBBI's Authority to Levy Fees on Insolvency Professionals u/s 196 of IBC; No Constitutional Violation Found.

  Case-Laws - HC : Vires of Section 196 of the IBC - power of IBBI to levy fees on IP - excessive delegation - The IBBI does provide significant services, including in relation to IPs and that there is broad correlation between fees and services. Given the fact that direct or arithmetical correlation as between the fee received and service rendered is not necessary especially in the context of regulatory fees, Regulation 7(2)(ca) of the IP Regulations does not suffer from any constitutional infirmity on account of the absence of quid pro quo. - HC
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Central Excise

• Goods Classification: Kaoline and Aluminum Coated Paper under Central Excise Tariff Items 48115900 & 48101390.

  Case-Laws - AT : Classification of goods - Kaoline Coated Paper - aluminum coated paper/metalized paper - To qualify classification under Tariff Item No.48115900, the goods should be other than “bleached, weighing more than 150 g/m2” and should either be coated with plastic or should be impregnated with plastic or covered with plastic - To be classified under Tariff Heading 48101390 as claimed by the appellant - AT
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Case Laws:

• Income Tax

• 2020 (8) TMI 75
  Validity of reopening of assessment u/s 147 - notice issued to a company which is non-existent on the date as it stood amalgamated with the appellant/petitioner - HELD THAT:- Assessing Officer was not aware of the amalgamation of the company moreover, the return of income for the assessment year 2014-15 had been filed on 07.03.2016 in the name of OAS by the appellant confirming the position that OAS was a functioning entity. Further, income tax refund issued by the Department in favour of OAS has been duly received and encashed by the appellant. Therefore, appellant cannot canvass the point that OAS was nonexistent and the proceedings initiated in its name would be bad in law. The decisions relied on by the appellant were sought to be distinguished. The learned Single Bench after consideration of the factual position, noted the conduct of the appellant in not bringing to the notice of the Revenue about the amalgamation, its conduct of filing return of income in the name of OAS after the amalgamation and obtained refunds issued in the name of OAS, which will all go to show that M/s.OAS continued to exist even after amalgamation. Therefore, the learned Single Bench correctly concluded that by the very conduct, the appellant had led the Department to believe that OAS, as an entity, existent. - Decided against assessee.

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• 2020 (8) TMI 74
  Deduction of interest paid for the borrowed amount used for business purpose - Loan taken from Bank given to Holding company as Interest free Advance - Addition u/s 36(1)(iii) - HELD THAT:- Assessee s case that this advance is paid to the holding Company for the investments made by them for securing land to be developed by the assessee.There is a Joint Development Agreement in which the assessee and the holding Company agreed to share profits at the rate of 50% each. Within about two months another Agreement dated 09.06.2009 is entered into by modifying certain clauses in the Joint Development Agreement, where under, the holding Company gets 75% of the Book profits. The Assessing Officer found that the holding Company had borrowed loans from Banks and there was no occasion rather need for the holding Company to take advances from the assessee for the purpose of purchase of the land. Apart from that the Assessing Officer found that the assessee was paying Rs. 42,85,869/- toward operational expenses and in the Ledger Account, this was shown as Joint Venture Share of the holding Company. This fact also led the Assessing Officer to conclude that there was no necessity for the assessee Company to give any advance to the holding Company. As held by the Hon ble Supreme Court of India in M/s. S.A. Builders vs. CIT [2006 (12) TMI 82 - SUPREME COURT ] the allowability or otherwise of interest payment under Section 36(1)(iii) depends on the facts and circumstances of the case. Currently, the Assessing Officer, the CIT (A) and the Tribunal, on facts held against the assessee.

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• 2020 (8) TMI 73
  Validity of proceedings u/s 158BD - non recording satisfaction note for issuing notice under Section 158BD - HELD THAT:- This appeal cannot be pursued by the Revenue in the light of the Board s circular in Circular No.24/2015 dated 31.12.2015. In the said circular, it has been stated that the guidelines of the Hon ble Supreme Court in the case of M/s.Calcutta Knitwears [2014 (4) TMI 33 - SUPREME COURT] with regard to recording any satisfaction note were brought to the notice of all for strict compliance and it has been clarified that even if the AO of the searched person and the other person is one and the same, then also, he is required to record his satisfaction as has been held by the Courts. As clarified that filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the said judgment. Taking note of the said decision, the Board directed that pending litigation with regard to recording of satisfaction note under Section 158BD/153C of the Act should be withdrawn/not pressed if it does not meet the guidelines laid down by the Hon ble Apex Court. - Decided against revenue.

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• 2020 (8) TMI 72
  Revision u/s 263 by CIT - difference arising in the revised return - justification of mistake committed by the assessee vis- -vis his filing of original as well as revised return of income - HELD THAT:- When we peruse the order of assessment, we find there is no discussion at all as rightly pointed out by the Ld. DR on this very fact regarding the difference in figures in the original return and corrected computation. AO has only extracted the submissions of the Ld. AR, extracted the original return and revised computation and finally accepted them without any application of his mind. The case laws relied on by the Ld. AR has been considered by us and in these decisions, the legal principle common is that whenever the Quasi-Judicial Authority is making any decision on the given facts, there must be nexus between the reasons given by the Quasi-Judicial Authority with regard to the documents on record for which finally he arrives at that decision. The decision must reflect the reasoning of the Officer. By plain reading of the decision one should understand how the author has arrived at a particular conclusion. The thought process should be reflected therein. In this case in the assessment order, the entire exercise is missing. Merely extraction of submissions cannot justify that the Assessing Officer has applied his mind. Supreme Court in the case of Rampyari Devi Sarogi vs. CIT [1967 (5) TMI 10 - SUPREME COURT ] and Tara Devi Aggarwal v. CIT [1972 (11) TMI 2 - SUPREME COURT] has been held that where Assessing Officer has accepted a particular contention/issue without any enquiry or evidence whatsoever, the order is erroneous and prejudicial to the interest of the Revenue. AO while accepting the documents submitted by the Ld. AR, has not conducted any specific enquiry as to the facts of the case. There is no iota of evidence brought on record by the Assessing Officer justifying that there was mistake committed by the assessee vis- -vis his filing of original as well as revised return of income. Assessee also argued that the view taken by the AO may not be a proper one as per CIT is concerned nonetheless, it is definitely an appropriate view. We do not agree with the contention of the Ld. AR since taking a view should be backed by reasons and that reasons should be demonstrated in the order itself with evidences brought on record and independent enquiry conducted. In this case, the AO has only done the work of extraction of submissions of the Ld. AR and nothing else and therefore, in fact the AO has not formed any view. - we uphold the order passed u/s.263 - Decided against assessee.

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• 2020 (8) TMI 71
  Revision u/s 263 - claim for depreciation on the leasehold rights - claim of depreciation of capitalized amount of stamp duty paid - HELD THAT:- Stamp duty expenses incurred for taking the property under consideration on lease for a period of 33 years was to be construed as an intangible asset within the meaning of Sec. 32(1)(ii), and thus eligible for depreciation, cannot be accepted. Apart from that, we are also unable to comprehend that as to how a simpliciter payment of stamp duty expenses on the lease agreement (pending registration), would bring into existence an intangible asset of the same genus, as that of the six specified categories of assets, viz., knowhow, patents, copyrights, trademarks, licenses or franchises, as contemplated in Sec. 32(1)(ii) . Insofar the plethora of judicial pronouncements that have been pressed into service by the assessee, in order to drive home its claim that the expenses incurred towards payment of stamp duty expenses on the lease agreement (pending registration) was in the nature of an intangible asset falling within the meaning of Sec. 32(1)(ii) same being distinguishable on facts would thus not assist its case. A.R had not brought to our notice any judicial pronouncement/order, wherein it has been held that the stamp duty expenses incurred on a lease agreement (pending registration) was to be construed as an intangible asset eligible for depreciation u/s 32(1)(ii) - We are unable to comprehend that as to on what basis the A.O while framing the assessment had vide his order passed u/s 143(3), dated 12.02.2015, therein allowed the assessee s claim for depreciation on the capitalised amount of stamp duty expenses (pending registration). Allowing of the assessee s claim for depreciation on the stamp duty expenses (pending registration) by the A.O cannot be held to a possible view in law, therefore, no infirmity arises from the order passed by the Pr. CIT u/s 263, dated 30.03.2017, observing, that the allowing of the assessee s claim for depreciation of Rs. 1,39,11,652/- i.e @25% on the amount of stamp duty deposited, had rendered the order passed by the A.O u/s 143(3), dated 12.02.2015, as erroneous insofar it was prejudicial to the interest of the revenue. On finding no infirmity in the order passed by the Pr. CIT u/s 263 - Decided against assessee.

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• 2020 (8) TMI 70
  Deduction u/s 54F disallowed - sale proceeds received by the assessee was utilised for purchase of the new residential property in the name of his son AND new asset is also purchased within the due date of filing of the return by the assessee - bank loan obtained by the assessee s son from the HDFC Bank does not appear to be the source for the purchase of the new residential house by the assessee s son - HELD THAT:- Violations made by the assessee s son with respect to the terms of loan agreement entered with HDFC Bank towards the purchase of the residential house is of no relevance as far as the Income Tax Act is concerned for granting deduction U/s. 54 of the Act. Penal action against such violation if any has to be initiated by the Bank, as per the Banking Regulations Act or as per the terms of the agreement between them and not by the Revenue. Case decided SHRI KAMAL WAHAL [ 2013 (1) TMI 401 - DELHI HIGH COURT] has also held that wherein the assessee purchases new house in the name of his wife and not in the name of any stranger who was unconnected with him, exemption cannot be denied if entire investment had come out of proceeds of old property . From the above it is clear that the assessee has not violated any of the provisions mentioned in section 54F of the Act in order to be denied for the benefit of deduction. Therefore,set aside the order of the Ld CIT (A) on the issue and direct the Ld. AO to grant the benefit of deduction U/s.54F of the Act to the assessee

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• 2020 (8) TMI 69
  Disallowance u/s 14A r.w.r. 8D - HELD THAT:- For the process of making investment in one s own company, factually it is not possible to incur any expenditure unless the investments are made out of interest-bearing funds. When a company is formed it is obvious that all the expenditure related to its management, formation etc., are met out by the newly formed company itself out of its capital and not by the individual or the assessee company who promotes such subsidiary company. Revenue Authorities have not pointed out any expenditure incurred by the assessee company towards such investment other than the apprehension of interest expenditure incurred, from the statement of accounts and the books of accounts produced by the assessee before them. Since, the assessee company has claimed that it had invested in its 100% subsidiary company out of its non-interest bearing funds and has not incurred any expenditure towards such investment earning exempt income, We are of the considered view that these factual aspects must be examined by the Ld. AO and if the submission of the assessee company is found to be correct, then delete the addition made by invoking the provisions of section 14A r.w. Rule 8D of the Rules, and if found otherwise pass appropriate order in accordance with law and merit. Disallowance u/s 40(a)(ia) - assessee in default u/s. 201(1) - HELD THAT:- Assessee has not deducted tax at source for the payment made towards interest for Rs. 4,94,956/-. It is apparent that the provisions of section 40(a)(ia) of the Act will come into play. However, the second proviso to section 40(a)(ia) of the Act has come into effect from 1/4/2012 by virtue of Finance Act, 2012 wherein it is stated that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the taxes on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso . On perusing the facts of the case, we find that the Ld. AO has not verified that the assessee is treated as an assessee in default U/s. 201 of the Act or otherwise. Hence, We hereby remit this issue also back to the file of the Ld. AO to decide the matter in accordance with the provisos of section 40(a)(ia) - Appeal of the assessee is allowed for statistical purposes

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• 2020 (8) TMI 68
  Addition u/s 68 - Disallowance of gift received from father and brother - HELD THAT:- It is an undisputed fact that both assessee s father and brother own substantial areas of agricultural land. Therefore, the agricultural income disclosed by them cannot be disputed unless some facts emerged that they have not carried on agricultural activities or have suffered losses in the agricultural activities. Normally farmers do not rely on the banking channel for conducting their day to day activities and do accumulate cash balance - by the class of ration card possessed by the individuals one cannot determine such individuals to belong to people of poor means. It is a generally known fact that on many instances even wealthy farmers possess ration cards of low economic class. CIT (A) s observation to hold that the quantum of savings of the assessee s father and brother cannot be relied upon is not appropriate. Considering the extent of land owned by the assessee s father and brother, their creditworthiness for accumulating the fund cannot be doubted and can be treated as reasonable. Further, the assessee s father and brother have also confirmed the transaction by furnishing their confirmation statements - Addition u/s 68 deleted - Decided in favour of assessee. Disallowance of unsecured loan - assessee has received an amount of Rs. 3 lakhs from Smt. B. Nirmala as loan treated as bogus - HELD THAT:- Smt. B. Nirmala is engaged in the activity of running a small shop. Therefore, she has some source of income. Further, possessing ration card of low economic strata does not categorically prove that the assessee does not have any resources to earn reasonable income or financially unsound. Moreover, apparently the entire transactions are made through the banking channel. Accumulating an amount of Rs. 3 lakhs by an individual engaged in a small business activity is not an unrealistic factor. Thus the loan transaction cannot be treated as bogus - Decided in favour of assessee.

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• 2020 (8) TMI 67
  Benefit of deduction u/s. 54F denied - Admission of additional evidence - addition under the head LTCG with respect to the sale of her commercial property - AR argued by stating that the additional evidence submitted by the assessee will establish that the assessee is entitled to the claim of deduction - HELD THAT:- On examining the paper book submitted by the assessee we are of the considered view that it is quite relevant for deciding the claim of the assessee for obtaining the benefit of deduction U/s. 54 / 54F. Assessee is not engaged in any other activities and solely dependent on her husband / family. Therefore, it is quite possible that the assessee might not have been able to provide the requisite documents before the Ld. Revenue Authorities at the time of hearing. Hence, in the interest of justice, we hereby remit the matter back to the file of Ld. AO with directions to admit the additional evidence filed before us and also any other relevant documents filed by the assessee for the first time and thereafter decide the issue afresh in accordance with merit and law after providing proper opportunity to the assessee of being heard. Appeal of the assessee is allowed for statistical purposes Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]

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• 2020 (8) TMI 66
  Capital gain computation - adoption of Valuation report from the Ld. DVO in accordance with the provisions of section 50C - HELD THAT:- Sale value declared by the assessee is only 46% of the SRO value of Rs. 16,54,500/- (Rs. 7,56,250 X 100 / 16,54,500). Since the property sold by the assessee is a litigated property, I am of the considered view that the market value of the property cannot exceed the actual sale consideration received by the assessee of Rs. 7,56,250/-. Hence, do not find it appropriate to adopt the SRO value for the purpose of computation of the capital gains in the hands of the assessee, rather it would be appropriate to adopt the actual market value of the property taking into consideration of the litigation involved in the property, which is nothing but the actual sale consideration received by the assessee. Therefore,hereby direct the Ld. AO to compute the capital gains in the hands of the assessee based on the actual sale consideration received by the assessee of Rs. 7,56,250/-. Claim of deduction u/s. 54F - Even before us at this stage, the assessee has not produced any evidence to prove that she had invested in another residential house property. Claim of the assessee that she had invested in residential house property by way of payment through cheque to her spouse alone will not establish that she has actually acquired the residential house by complying with all the other provisions of the Act. Therefore, find no merit on this ground raised by the assessee. Hence, hereby confirm the order of the Ld. Revenue authorities on the issue. Appeal of the assessee is partly allowed.

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• 2020 (8) TMI 65
  Unaccounted money - search proceedings - Onus to prove - donation/capitation fees over and above the regular course fees paid in cash by parents of the students for taking admission in various medical courses - HELD THAT:- Since the Revenue Department alleged that assessee has paid cash of Rs. 27 lakhs as donation/capitation fees, therefore, onus is upon A.O. to prove through cogent and reliable evidence that assessee has in fact paid cash by way of donation of capitation fees to the Medical College and Dr. P. Mahalingam. In the present case, the entire case is set-up on the basis of statement of Dr. P. Mahalingam recorded during the course of search under section 132(4) in which, he has admitted to have received donation/capitation fees in cash. However, the assessment order is silent if any right of cross-examination have been allowed on behalf of the assessee at the assessment stage. CIT(A) at the appellate stage asked the A.O. for production of Dr. P. Mahalingam and allow an opportunity to the assessee for cross-examination. The A.O. issued summons to Dr. P. Mahalingam at the appellate stage for providing an opportunity to the assessee to cross-examine his statement, but, Dr. P. Mahalingam did not appear at the appellate stage, therefore, the fact remained that assessee has been denied right to make cross-examination to the statement of Dr. P. Mahalingam. Any adverse material collected at the back of the assessee when not confronted and that if any statement is recorded by the A.O./Revenue Department at the back of the assessee and such statement is not allowed for cross-examination on behalf of the assessee, such material cannot be considered against the assessee in the Income Tax proceedings and such material/statement cannot be read in evidence against the assessee. See ANDAMAN TIMBER INDUSTRIES [ 2015 (10) TMI 442 - SUPREME COURT] and KISHINCHAND CHELLARAM [ 1980 (9) TMI 3 - SUPREME COURT] Onus upon the Revenue Department to prove that assessee paid cash to Dr. P. Mahalingam or the Medical College is not discharged in the present case. - Decided against revenue.

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• 2020 (8) TMI 64
  Validity of assessment framed u/s 144 r.w.s. 147 - Appeals arising from the ex- parte orders - Non service of Notice - Condonation of delay - HELD THAT:- After knowing the fact that the assessee is not residing at the address where the notice was sent through speed post the AO attempted to serve the notice through alternative mode of affixture. Since, the assessee has not left his current address or any other address where the authorities can send the communication or notice, therefore, the Assessing Officer cannot be held as fault for the service affected through affixation at the last non address. Hence, in the facts and circumstances of the case the contention of the ld. AR cannot be accepted that the assessment orders framed by the AO for want of valid notice is void and liable to set aside. Appeals filed by the assessee against the assessment orders were dismissed by the ld. CIT(A) due to the delay in filing the appeal - CIT(A) held that these appeals filed by the assessee are not maintainable. It is pertinent to note that when the assessee was undisputedly out of India and residing in Australia and has not received the notices issued by the AO as well as assessment orders passed U/s 144 r.w.s. 147 then the reasons explained by the assessee for delay in filing the appeals ought to have been accepted as a reasonable cause. AO has accepted the fact that the assessee vacated the premises at which the assessee was earlier living as a tenant as back as 6-7 years back from the date of the notice issued u/s 148 - Even otherwise the assessee has explained the reasons for delay in the affidavit that he was out of India and holding passport of Australia. In the absence of receipt of notice as well as orders by the assessee there was a delay in filing the appeals.Assessee has explained a reasonable cause for delay in filing the appeal accordingly, the delay in filing the appeals before the ld. CIT(A) is condoned. Penalty orders passed U/s 271(1)(c) of the Act were also ex- parte order as nobody has appeared and the reasons for non appearance are the same as explained by the assessee in respect of the quantum of appeals -appeals arising from the penalty orders are also set aside to the record of the ld. CIT(A) for deciding the same afresh after giving one more opportunity of hearing to the assessee as well as disposal of the quantum appeals - Appeals filed by the assessee are allowed for statistical purposes.

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• 2020 (8) TMI 63
  Correct head of income - assessability of lease rent received under the head income from house property or business income - compensation received on account of damages for deprivation and use of occupation - HELD THAT:- Conduct of the assessee clearly shows that in three subsequent assessment years the assessee have accepted the rental income as income from house property. That being the case, the rule of consistency would clearly apply insofar as treatment of compensation received in the impugned assessment year as well. Therefore, in our opinion, the compensation received by the assessee has been correctly assessed under the head income from house property. Decisions relied upon by AR would not be applicable to the facts of the present case as in the instant case, the assessee itself in the subsequent assessment years has offered the compensation as income from house property. The assessee cannot be permitted to change the head of income according to his own sweet will and convenience. The contention of the learned Counsel for the assessee to explain the reasons for offering of compensation under the head house property income in subsequent years, in our view, stands on thin ice, hence not acceptable. Validity of Reopening of assessment u/s 147 - HELD THAT:- Admittedly, the return of income filed by the assessee was initially processed under section 143(1) and was not subject to scrutiny. Therefore, the Assessing Officer never had occasion to verify various claims made by the assessee in the return of income. When in the course of assessment proceedings for the assessment year 2012 13, the Assessing Officer was informed about the receipt of compensation from NTCL, he verified all the relevant fact and thereafter concluded that the compensation received by the assessee is assessable under the head income from house property. On the basis of such information received in assessment year 2012 13, the Assessing Officer has re opened the assessment under section 147 of the Act in the impugned assessment year. We do not find any legal infirmity in the action of the Assessing Officer in re opening the assessment under section 147 of the Act. - Decided against assessee. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]

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• 2020 (8) TMI 62
  Bogus purchases - on the information from Sales Tax Department the AO had added the entire purchases in assessee s income - assessee has paid VAT on the goods so purchased - HELD THAT:- Looking to the gross profit ratio declared by the assessee it is clear that the assessee has shown very reasonable gross profit ratio in all the years under consideration. There are various judicial pronouncements to the fact that in case gross profit shown by the assessee is 15% or more no addition is warranted. In the instant case the assessee has declared gross profit of 16.47% in A.Y. 2009-10, accordingly I direct the AO not to make any addition. However, in assessment years 2010-11 and 2011-12 the gross profit shown by the assessee is 12.75% and 14.88%, which are lower than 15%. Accordingly direct the AO to make addition to the extent of shortfall in gross profit in these two years as compared to the gross profit of 15% i.e. 2.25% in A.Y. 2010-1 0.12@ in A.Y. 2011-12. - Decided partly in favour of assessee.

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• 2020 (8) TMI 61
  Interest received u/s 28 of Land Acquisition Act 1984 - Capital gain or income from other sources - Whether it does not fall under the category of capital asset?- AO granted deduction u/s 57 of the Act at the rate of 50% instead of exemptive the entire amount - HELD THAT:- As decided in Dnyanoba Shajirao Jadhav [2018 (2) TMI 105 - ITAT PUNE] said receipts are not taxable as the same is covered by the provisions of section 28 of the Land Acquisition Act, 1984. The interest received u/s 28 of the said Act is not taxable. In our considered opinion, the Assessing Officer and the CIT(A) made an error in not complying with the judgement of the Hon ble Supreme Court in the case of CIT vs. Ghanshyam (HUF) [2009 (7) TMI 12 - SUPREME COURT]. AO shall decide the issue after granting reasonable opportunity of being heard to the assessee during the remand proceedings and allow the claim after due verification of the calculation, figures and the applicability of the said decisions cited above (supra). Thus, the grounds raised by the assessee are allowed for statistical purposes.

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• 2020 (8) TMI 60
  Unexplained cash credit - addition on account of share capital u/s 68 - CIT-A deleted the same only on the ground that the same amount was added in the hands of share subscribing company - HELD THAT:- M/s. SNR Trading Co. (P) Ltd. was assessed to tax u/s 143(3) of the Act and the amount of share capital said to have been invested in the assessee company is explained because source of money in question was assessed in the hand of investor company. The identity of M/s. SNR Trading Co. (P) Ltd., genuineness of transaction and creditworthiness is proved. Therefore, the addition made in the hands of assessee is not maintainable to the fact the source of share capital and premium is found to be explained in terms of provisions u/s 68 of the Act. Therefore, we find no infirmity in the order of CIT(A) and it is justified. Thus, only issue raised by the revenue is dismissed.

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• 2020 (8) TMI 55
  Capital gain computation - stamp duty valuation for the purpose of adopting value of consideration u/s 50C - date on which the agreement to sale was entered into OR date on which the transactions actually took place - Whether Section 50C applies to the seller of the land and not to the power of attorney holder/constituted attorney of the transaction in question? - HELD THAT:- When the date of agreement fixing the amount of consideration and the date of registration of the property being the capital asset is different, the matter should be referred to the DVO by the Ld. AO for determination of the valuation as on the date of agreement keeping in view the provision of Sec.50C of the Act instead of that as we find in the case in hand the Revenue has assessed the valuation of the property on the basis of the valuation so assessed by the Stamp Duty Authority and the difference amount has been added to the total income of the assessee which in our considered view is not permissible in law. See AMITKUMAR AMBALAL (HUF) VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-10, AHMEDABAD [ 2017 (11) TMI 1904 - ITAT AHMEDABAD ] - We delete the addition made thereof. Hence, assessee s appeal is allowed. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]

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• Customs

• 2020 (8) TMI 59
  Revocation of Custom Broker license - forfeiture of security amount - imposition of penalty - export of prohibited goods - NDPS goods - It appeared to Revenue that appellant had not obtained any authorisation from the exporting firm M/s Hindustan Exim India and further allowed CB licence to be used for exporting of NDPS goods - validity of relied upon documents - HELD THAT:- Customs has blindly relied upon the investigation by the Delhi Police, but at the same time have erred in not referring to the charge sheet submitted by Delhi Police under NDPS Act before the Additional Special Judge, Patiala House - the relied upon documents have not been supplied to the appellant. Ashish Sharma, Prop. of M/s Hindustan Exim India, whose statement has been heavily relied in the present proceedings (which was recorded by the Delhi Police) was never examined by the Customs Authority at any stage or in this proceeding. Thus, the impugned order is bad for not complying with the mandate of Section 138B of the Customs Act. Even a copy of the statement was not supplied to the appellant. The appellant have produced copy of authorisation given to them by M/s Hindustan Exim India, to act as their custom broker - thus, no show cause notice appears to have been issued in the alleged offence under the Customs Act so far. Thus, the adjudicating authority have accepted the report of the inquiry officer in a mechanical way, without application of mind. The respondent Commissioner to restore the Customs Broker license of the appellant within a period of thirty days from the date of receipt / service of this order - appeal allowed - decided in favor of appellant.

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• Insolvency & Bankruptcy

• 2020 (8) TMI 58
  Vires of Section 196 of the IBC - power of IBBI to levy fees on IP - excessive delegation - whether Regulation 7(2)(ca) is ultra vires Section 196 and 207 of the IBC? - HELD THAT:- Section 196(1)(a) expressly confers power on the IBBI to register insolvency professional agencies and IPs, and to renew, withdraw, suspend and cancel such registration. Section 196(aa) expressly empowers the IBBI to regulate the working of IPs, insolvency professional agencies and information utilities and Section 196(c) thereof expressly empowers the IBBI to levy fees or other charges including for registration of insolvency professional agencies and IPs and for the renewal of such registration. In addition, it is found that Section 207(1) mandates that every IP should register himself with the IBBI within such time, in such manner, and on payment of such fee as may be specified by regulations. Moreover, Section 240 is the general regulation making power of the IBBI and Section 240(1) does not impose any restraints on the powers of the IBBI, except that regulations should be consistent with the IBC and the rules thereunder and should be for the purposes of carrying out the provisions of the IBC - thus, there can be no question whatsoever with regard to the powers of the IBBI to frame regulations with regard to the fee payable by IPs and insolvency professional agencies. As regards the charging of fees as a percentage of remuneration, it is noted that the fee making power is not subject to any fetters except that it should be for carrying out the purposes of the IBC. Given this statutory framework, it is concluded that the IBBI is duly empowered under Sections 196 and 207 of the IBC to levy a fee on IPs, including as a percentage of the annual remuneration as an IP in the preceding financial year. Whether quid pro quo is absent in the levy of fees as a percentage of the annual remuneration/turnover and whether Regulation 7(2)(ca) is liable to be set aside for such reason? - HELD THAT:- In this case, it is evident that Parliament enacted the IBC by drawing on the BLRC Report and the bill prepared by the BLRC. In both the FSLRC and BLRC Reports, it was recommended that the regulator should be self-sufficient at least with regard to operational expenses by collecting fees to finance its activities. When viewed in this context, it is clear that Section 196(1)(c) and 207 of the IBC and the IP Regulations are intended to fulfil the object and purpose of the IBC as regards the functioning of the IBBI - Under Section 28(4) and (5), if the RP acts without seeking the approval of the CoC, the CoC is entitled to report the matter to the IBBI for taking necessary action against the RP. The IBBI does provide significant services, including in relation to IPs and that there is broad correlation between fees and services. Given the fact that direct or arithmetical correlation as between the fee received and service rendered is not necessary especially in the context of regulatory fees, Regulation 7(2)(ca) of the IP Regulations does not suffer from any constitutional infirmity on account of the absence of quid pro quo. Whether Regulation 7(2)(ca) suffers from excessive delegation? - HELD THAT:- The IBC contains adequate safeguards to ensure that the Parliament effectively supervises all rules and regulations with the power to modify or even annul the same. Likewise, adequate safeguards are in place to ensure that the funds of the IBBI are utilized for the purposes of fulfilling the role of the IBBI under the IBC. Thus, the delegate has not been vested with unfettered power - Therefore, it cannot be said that there is excessive delegation to the IBBI. Petition dismissed.

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• Central Excise

• 2020 (8) TMI 57
  Jurisdiction - power to remand the case to authority for fresh adjudication after taking additional evidence - CENVAT Credit - credit for the same services allowed for previous years/period - input services - Manpower, Fabrication Erection services - WCT SERTX services - Repairs Maintenance service - interpretation of definition of input services - initiation of Recovery Proceedings on completely wrong implication of law - HELD THAT:- The assessee having lost the opportunities before the three authorities below, namely the Assessing Authority, the Commissioner of Central Excise (Appeals) as well as Tribunal, all of them being fact finding body and who could have allowed such evidence to be brought on record by the assessee to examine the claim of CENVAT Credit of the assessee on merits, the only submission which has impressed us a little bit is that such claim in favour of the assessee was allowed by the authorities below in the previous period. Though no such evidence is placed by the assessee, there is no reason to disbelieve this statement of the learned counsel for the assessee and the same is also not controverted by the learned counsel for the Revenue with some evidence. Instead of answering the question at this stage, without there being findings on the merits of the claim of the assessee by the authorities below, it would be appropriate to remand the case to the First Appellate Authority, namely the Commissioner of Central Excise (Appeals), subject to payment of cost of Rs. 50,000/- by the appellant/assessee company to the respondent Department. The said contribution of Rs. 50,000/- may be deposited within a period of four weeks from today - appeal disposed off.

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• 2020 (8) TMI 56
  Classification of goods - Kaoline Coated Paper - whether aluminum coated paper/metalized paper cleared by the appellant during the disputed period merits classification under Central Excise Tariff Heading 48101390 or 48115900? - HELD THAT:- To qualify classification under Tariff Item No.48115900, the goods should be other than bleached, weighing more than 150 g/m2 and should either be coated with plastic or should be impregnated with plastic or covered with plastic. Also, CRCL vide its report dated 24.11.2011 have categorically reported that the samples were free from plastic material - thus, the classification arrived at by lower authorities is not sustainable. Appeal allowed - decided in favor of appellant.

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