Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 15, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
GST
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Revocation of cancelled petitioner's GST registration - The cancellation of registration in the instant case is under Section 29(2)(a) of the CGST Act and the order rejecting the application for revocation of cancellation is passed under Section 30 of the CGST Act. The recovery and cancellation are two separate actions and it is not a pre-requisite to decide the liability of payment of the petitioner under the CGST Act to cancel its registration. - the order dated 10.07.2020 is a reasoned order and the same cannot be held as without jurisdiction and in violation of any principles of natural justice. - HC
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Profiteering - supply of Services by way of admission to exhibition of cinematography films where the price of admission ticket - there has been a reduction in the rate of tax from 28% to 18% on "Services by way of admission to exhibition of cinematograph films - The profiteered amount is determined for the period from 01.01.2019 to 06.01 2019 - the Respondent has voluntarily deposited the profiteered amount with interest in CWFs - No penalty - NAPA
Income Tax
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Advance ruling system for residents - it appropriate to recommend to the Central Government to consider the efficacy of the advance tax ruling system and make it more comprehensive as a tool for settlement of disputes rather than battling it through different tiers, whether private or public sectors are involved. A council for Advance Tax Ruling based on the Swedish model and the New Zealand system may be a possible way forward. - SC
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Interest income of the appellant-Corporation - income from other sources u/s 56 or Business income u/s 28 - The business activity of the appellant-Corporation is really that of an intermediary to lend money or give grants. Thus, the generation of interest income in support of this only business (not even primary) for a period of time when the funds are lying idle, and utilised for the same purpose would ultimately be taxable as business income. The fact that the appellant- Corporation does not carry on business activity for profit motive is not material as profit making is not an essential ingredient on account of self- imposed and innate restriction arising from the very statute which creates the appellant-Corporation and the very purpose for which the appellant- Corporation has been set up. - SC
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Addition u/s 40A(3) - cash payments made by the assessee to the agriculturists/farmers for purchase of land - CIT-A have found that the assessee has failed to prove the stand taken by him that the transaction took place at the place where there were no banking facilities. The aforesaid finding has been affirmed by Tribunal. - Additions confirmed - HC
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Exemption u/s 54EC - Since assessee had invested ₹ 71 lakhs in two different financial years and within six months from the date of transfer of the capital assets, the limit of ₹ 50 lakhs is per financial year. Hence, the assessee is eligible for deduction of ₹ 71 lakhs u/s 54EC - AT
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Addition on account of deemed dividend u/s 2(22)(e) - Admittedly, the assessee company is registered with stock exchange and fulfill all the conditions of Section 2(18) which is definition of “company in which public is substantially interested.” - AO has also failed to substantiate as to how the amount in question is in the shape of a loan/advance received by the assessee company. - Additions deleted - AT
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Exemption u/s 11 - income applied outside India - Proper application for approval u/s 11(1)(c) - When the Assessing Officer appeared before us in person, he did not even dispute that; all he wanted to verify was as to how the contributions to Cornwell University USA and Harvard University USA tend to promote the international welfare in which India is interested, but then, for the detailed reasons set out earlier in the order, that is what he cannot be permitted to do, as it falls beyond the call of his duty. We reject this plea as well. - AT
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Disallowance of Travelling and conveyance expenses appearing as credit card payment in the AIR - No doubt, the taxpayer is having details of expenses claimed as reimbursement by the employees but in order to authenticate the same it has not taken on record the copies of the credit card bills of its employees to prove that the expenses have been incurred by the employees for the business purposes. - AT
Customs
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Confiscation - imposition of redemption fine and penalties - mis-declaration of imported goods - the overseas supper had wrongly shipped different types of goods - However, it an admitted position that the importer-appellant did not take proper steps to check the cargo before presentation of the Bills of Entry for assessment purpose and accordingly, it cannot plead that the action on its part is entirely bonafide. - The quantum of redemption fine and penalty reduced - AT
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The adjudicating authority has lost sight of the fact that the appellant's company is an artificial or non-human entity, cannot function or operate without involvement of the natural person i.e. the directors or the authorized persons. Therefore, we are of the considered view that the charges of guilt of 'collusion', 'wilful misstatement' or 'suppression of facts' cannot be levelled against the appellant, justifying invocation of the provisions of Section 28AAA of the Act - AT
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Under-valuation of import goods - Since the investigations with regard to alleged fraud committed in exportation of goods in the originating country, has not attained finality, it cannot be hypothetically concluded that the appellant had indulged into the activities of undervaluing the goods - the present proceedings initiated against the appellant were premature and cannot be sustained - AT
Corporate Law
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Restoration of name of respondent in the Registrar of Companies - allowing this petition would only enable the petitioner (Income Tax Department) to conduct further proceedings under the Income Tax Act - the ingredients provided for in 252(1) of the Act, are satisfied - the petition is allowed - Tri
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Restoration of the name of the Company in the Register of Companies - The present petition is filed by the shareholder-cum-promoters of the Company and is within the period of 20 years after the publication of official notification, striking off the name of company from the Register of Companies. - the name of the company deserves to be restored in the ROC - Tri
Service Tax
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Proof of payment of service tax - challans copies do not have legible bank seal - since the said challans are supported with CBEC website payment confirmation, there is no reason to doubt the payment of tax. Considering the totality of the facts of the case and that the assessee is a Public Sector Undertaking, there is no reason to confirm the demand when service tax stands already paid and there is no loss of revenue to the Exchequer. - AT
VAT
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Levy of penalty - Evidently there was no intention on the part of the assessee to evade or avoid taxes and therefore, levy of 15% penalty being totally illegal is quashed - However, penalty equal to 0.1% of the turnover has been confirmed since no doubt that the assessee did not submit the audit report in terms of Section 53(1) and (2) of the TVAT Act within the time prescribed under the said Section. - HC
Case Laws:
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GST
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2020 (9) TMI 500
Transfer petition from National Anti-Profiteering Authority (NAA) - request for transfer of the writ petitions pending in the High Courts of Bombay, Gujarat and Karnataka, to the Delhi High Court - constitutional validity of Section 171 of CGST Act, 2017 - HELD THAT:- Let notice, returnable within two weeks, be issued through all permissible modes.
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2020 (9) TMI 499
Revocation of cancelled petitioner's registration - CGST Act - It is the contention of the petitioner that it has been regularly filing its monthly returns disclosing the trading transactions and also paying the GST tax liability within the due dates - HELD THAT:- It is not in dispute that the show cause notices, the order of cancellation and the order rejecting the application for revocation of cancellation are passed by proper officer. The show cause notice dated 18.03.2020 and the order of cancellation of registration dated 06.06.2020 have already been challenged before this Court in W.P.No.8167/2020 and cannot be challenged in the present writ petition. Pursuant to the order passed in W.P.No.8167/2020, respondent no.4 has issued the notice dated 03.07.2020 to the petitioner. There is no jurisdictional error in the said notice. The petitioner has made his representation on 06.07.2020 and has been given a personal hearing by respondent no.4 and thereafter, he has passed the order dated 10.07.2020. Thus, the said order is a speaking order and it records the reasons for rejecting the application of the petitioner for revocation of cancellation of registration. The intimation to the petitioner dated 21.07.2020 is pursuant to the order dated 10.07.2020 and it has to be construed as an intimation of the decision taken on 10.07.2020 by respondent no.4, though the reason assigned in the said intimation and the manner in which the same is styled may be erroneous. Even otherwise, the order dated 10.07.2020 is a reasoned order and the same cannot be held as without jurisdiction and in violation of any principles of natural justice. If the petitioner is aggrieved by the said order, it ought to have filed an appeal under Section 107 of the CGST Act. The petitioner cannot challenge the same by way of a writ petition. The petitioner has filed the writ petition because it initially challenged certain provisions of the CGST Act and the CGST Rules which could not have been done by way of an appeal. However, for the reasons best known to the petitioner, it has given up the said prayer and has confined its arguments to erroneous exercise of jurisdiction by the respondents which this Court finds untenable for the aforementioned reasons. However, the Court is of the opinion that the petitioner cannot be bereft of its right of appeal as contemplated under the CGST Act. Petition dismissed.
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2020 (9) TMI 498
Profiteering - supply of Services by way of admission to exhibition of cinematograph films - allegation that the benefit of reduction in the rate of GST not passed on by way of commensurate reduction in price - contravention of provisions of section 171 of CGST Act - penalty - HELD THAT:- It is clear from the investigation carried out by the DGAP that the base price of the admission ticket has been increased from ₹ 84.75 to ₹ 89.29 for the Emerald Circle category and from ₹ 59.32/- to ₹ 60.50/- for the Dress Circle category as mentioned in Table-A above. Therefore, the Respondent has not reduced the base prices of the admission tickets in respect of the Emerald Circle and Dress Circle categories, instead maintained the pre-rate reduction cum tax prices by increasing the base prices of the above categories of admission tickets. Further, in respect of the prices of admission tickets for the Emerald category, it was found that no sales had been made by the Respondent during the period of investigation. Therefore, it can be concluded that there was no profiteering in the Emerald category of admission tickets. It has been established that the Respondent has resorted to profiteering by way of either increasing the base prices of the service while maintaining the same selling prices or by way of not reducing the selling prices of the service commensurately, despite a reduction in GST rate on Services by way of admission to exhibition of cinematograph films where price of admission ticket is one hundred rupees or less from 18% to 12% w.e.f. 01.01.2019 to 30.06.2019. On this account, the Respondent has realized an additional amount to the tune of ₹ 5,31,625/- from the recipients which included both the profiteered amount and GST on the said profiteered amount. Thus the profiteering is determined as ₹ 5,31,625/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the prices of his tickets as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount of ₹ 5,31,625/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited. Since the recipients, in this case, are not identifiable, the Respondent is directed to deposit the amount of profiteering of ₹ 5,31,625/- in the Central Consumer Welfare Fund (CWF) and the Telangana State CWF in two equal parts as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with 18% interest. Penalty - HELD THAT:- The Respondent has denied the benefit of rate reduction to his customers/recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence for violation of the provisions of Section 171 (1) during the period from 01.01.2019 to 30.06.2019 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section. However, perusal of the provision of Section 171 (3A) of the CGST Act, 2017 under which penalty has been prescribed for the above violation shows that Section 171 (3A) of the Act has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.01.2019 to 30.06.2019 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) of the Act cannot be imposed on the Respondent retrospectively - notice for imposition of penalty is not required to be issued to the Respondent.
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2020 (9) TMI 497
Profiteering - supply of Services by way of admission to exhibition of cinematography films where the price of admission ticket - allegation that the reduction in the rate of GST not passed on by way of commensurate reduction in price - violation of the provisions of Section 171 of the CGST Act, 2017 - penalty - HELD THAT:- It is observed from the record that the Respondent is engaged in the business of running of cinema screens and sale of cinema tickets in the State of Telengana. It is also revealed from the plain reading of Section 171 (1) of the CGST Act, 2017 that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second about the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the record that there has been a reduction in the rate of tax from 28% to 18% on Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees w.e.f. 01.01.2019, vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. Therefore, the Respondent is liable to pass on the benefit of the above tax reduction to his customers in terms of Section 171 (1) of the above Act. It is also apparent that the DGAP has carried out the present investigation w.e.f. 01.01.2019 to 31.07.2019. The profiteered amount is determined as ₹ 4,20,731/- for the period from 01.01.2019 to 06.01 2019 as mentioned in Tables-B to D of the DGAP's Report dated 31.01.2020 as per the provisions of Section 171 (1) read with Rule 133 (1) of the CGST Rules, 2017. The Respondent has reduced his prices commensurately w.e.f. 07.01.2019 in terms of Rule 133 (3) (a) of the above Rules therefore, no further direction is required to be passed on this account. Further, since the recipients of the benefit, as determined above are not identifiable, the Respondent has voluntarily deposited the profiteered amount of ₹ 4,20,731/- along with interest of ₹ 10,065/- in the CWFs of the Central and the State Government in accordance with the provisions of Rule 133 (3) (c) of the CGST Rules, 2017. Penalty - HELD THAT:- The Respondent has contravened the provisions of Section 171 (1) of the CGST Act, 2017. However, since, the penalty prescribed under Section 171 (3A) of the CGST Act, 2017 for violation of the above provisions has come in to force w.e.f. 01.01.2020 and the infringement pertains to the period from 01.01.2019 to 06.01.2019 and the Respondent has also deposited the profiteered amount alongwith the interest therefore, no penalty is proposed to be imposed on the Respondent - As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this order was required to be passed within a period of 6 months from the date of receipt of the Report from the DGAP under Rule 129 (6) of the above Rules. Since, the present Report has been received by this Authority on 31.01.2019 the order was to be passed on or before 30.07.2020.
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Income Tax
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2020 (9) TMI 496
Interest income of the appellant-Corporation - whether would fall within the category of income from other sources under Section 56 for which allowable deductions are enumerated under Section 57 of the IT Act OR income from business - High Court opined that since the business of the appellant-Corporation was to receive funds and to then advance them as loans or grants, the interest income earned which was so applied would also fall under the head D of Section 14 of Chapter IV of the IT Act under the head of profits and gains of business or profession being a part of its normal business activity - HELD THAT:- We are in agreement with this view taken by the High Court, as the only business of the appellant-Corporation is to receive funds and then to advance them as loans or grants. The interest income arose on account of the fund so received and it may not have been utilised for a certain period of time, being put in fixed deposits so that the amount does not lie idle. That the income generated was again applied to the disbursement of grants and loans. The income generated from interest is necessarily inter- linked to the business of the appellant-Corporation and would, thus, fall under the head of profits and gains of business or profession . There would, therefore, be no requirement of taking recourse to Section 56 of the IT Act for taxing the interest income under this residuary clause as income from other sources. To decide the question as to whether a particular source of income is business income, one would have to look to the notions of what is the business activity. The activity from which the income is derived must have a set purpose. The business activity of the appellant-Corporation is really that of an intermediary to lend money or give grants. Thus, the generation of interest income in support of this only business (not even primary) for a period of time when the funds are lying idle, and utilised for the same purpose would ultimately be taxable as business income. The fact that the appellant- Corporation does not carry on business activity for profit motive is not material as profit making is not an essential ingredient on account of self- imposed and innate restriction arising from the very statute which creates the appellant-Corporation and the very purpose for which the appellant- Corporation has been set up. Whether the amounts advanced as grants from this income generated could be adjusted against the income to reduce the impact of taxation as a revenue expense? - The logical conclusion is that every application of income towards business objective of the appellant-Corporation is a business expenditure and nothing else. The endeavour of the Revenue Department to rely on the judgment in the Sitaldas Tirathdas case [ 1960 (11) TMI 17 - SUPREME COURT ] is not appreciable since that was a case dealing with the obligation of an individual who was compelled to apply a portion of his income for the maintenance of persons whom he was under a personal and legal obligation to maintain. The IT Act does not permit any deduction from the total income in such circumstances. No force in the submission of the Revenue Department that the direct nexus of monies given as outright grants from the taxable interest income cannot be distinctly identified. This is a question of fact. The plea of the respondents is based on a pure conjecture. It is the case of the appellant-Corporation throughout that it can easily demonstrate the direct and proximate nexus of interest earned through grants made, as its accounts were duly audited. In fact, CIT(A) allowed the business expenditure only to a certain amount on the basis of the facts and figures as emerged from the balance sheet. This is a burden which was to be discharged by the appellant-Corporation and the CIT(A) had been satisfied with the nexus of interest income with the disbursement of grants made, as having been established. The amount agreed to be given should be given as a loan or grant, or both is entirely at the business discretion of the appellant-Corporation. No grantee has a superior title to the funds. Hence, this is not a case of diversion of income by overriding title. We may record here that income has to be determined on the principles of commercial accountancy. There is, thus, a distinction between real profits ascertained on principles of commercial accountancy.The scheme of the IT Act requires the determination of real income on the basis of ordinary commercial principles of accountancy. To determine the real income , permissible expenses are required to be set off. As prior to insertion of this sub-clause, such expenses would be permissible under the general Section 37(1) of the IT Act, which provides for deduction of permissible expenses on principles of commercial accountancy. Post amendment, such expenses get allowed under the specific section, viz. Section 36(1)(xii) after the amendment by the Finance Act, 2003. We would, thus, like to conclude that we are unable to agree with the findings arrived at by the AO, ITAT and the High Court albeit for different reasons and concur with the view taken by the CIT(A) for the reasons set out hereinbefore. It is, thus, left to this Court as stated above to strike the final blow and allow the appeals, leaving the parties to bear their own costs, while noticing with regret the inordinately long passage of time and the wastage of judicial time on deciding, who is principally right when in either eventuality it benefits the Central Government.
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2020 (9) TMI 495
Unexplained cash credits in bank accounts - HELD THAT:- From perusal of the order passed by the Income Tax Appellate Tribunal, we find that the Tribunal has not decided the issue on merits and ought to have adjudicated the issue with regard to unexplained credits to the tune of ₹ 50,00,000/- and ₹ 65,10,000/-. Tribunal has held that orders of reassessment have been rendered infructuous. The issue with regard to unexplained credits to the tune of ₹ 50,00,000/- and ₹ 65,10,000/- needs to be adjudicated. The Tribunal erred in not adjudicating the issues on merits and therefore, we answer the first substantial question of law in favour of the revenue. Therefore, it is not necessary to answer the second substantial question of law. In the result, the impugned order dated 21.12.2012 passed by the Income Tax Appellate Tribunal is hereby quashed and the matter is remitted to Commissioner of Income Tax (Appeals) to determine the issue afresh with regard to the unexplained cash credits to the tune of ₹ 50,00,000/- and ₹ 65,10,000/-.
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2020 (9) TMI 494
Fringe benefit tax u/s 115WB(2)(c) - Sales Promotion Expenses and conference charges - HELD THAT:- Admittedly, the expenditure was incurred by the assessee for the purpose of holding dealers conference. Therefore, the aforesaid expenditure would not have arrived at for determining assessee's liability towards fringe benefit tax under Section 115WB(2)(c). Similarly, the expenses incurred by the assessee towards sales promotion cannot be taxed in view of provision contained in Section 115WB(2)(d). CIT (Appeals) therefore, rightly allowed the assessee's appeal in respect of dealers trading expenses and sales promotion expenses. It is pertinent to note that the Tribunal has recorded a finding that expenditure incurred by the assessee on sales promotion had no nexus on employer-employee relationship and for expenses incurred in holding dealers meet, the question of employer-employee relationship does not arise. Therefore, the order passed by the Commissioner of Income Tax (Appeals) was rightly upheld. - Decided in favour of assessee.
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2020 (9) TMI 493
Taxability of interest paid commonly known as Broken Period Interest - correct head of income - Business income or income from other sources - HELD THAT:- In the instant case, the assessee bank ever since, its inception has been offering the Broken Period Interest income earned from the sale of securities as business income under Section 28 of the Act and not as income under the head 'income from other sources'. Therefore, Broken Period Interest paid to the sellers of securities was claimed as allowable deduction from its business income under the Act. The Tribunal while recording the finding in favour of the assessee has relied upon the decision of the Supreme Court in CITIBANK [ 2008 (8) TMI 766 - SUPREME COURT]. - Decided in favour of assessee.
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2020 (9) TMI 492
Addition u/s 40A(3) - cash payments made by the assessee to the agriculturists/farmers for purchase of land - HELD THAT:- It is evident that the assessee's authorized representative in his written submission had disclosed the reason for payment in cash on the ground that the payments were made at place which was not served with any banking facility. AO has found that the place at which the payment was made had banking facility and therefore, has held that the assessee failed to prove that it was covered in the exception clause as provided under Section 40A(3) read with Rule 6DD. CIT-A have also found that the assessee has failed to prove the stand taken by him that the transaction took place at the place where there were no banking facilities. The aforesaid finding has been affirmed by Tribunal. Therefore, the contention of the appellant that it had taken a defence before the authorities that the parties were identifiable and the transactions were genuine cannot be accepted, as the aforesaid contention is being raised for the first time in this appeal, which even otherwise is contrary to the material on record, which has already been referred. The aforesaid findings are findings of fact and this court as a general rule would not interfere except in cases where the parties have ignored material evidence or have acted on no evidence, or have drawn wrong inference from proved facts by applying the law erroneously. The assessee has not been able to show that its case falls in any of the aforesaid categories. - Decided against assessee.
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2020 (9) TMI 491
Revision u/s 263 by CIT - claim of Long Term Capital Gain exemption on shares not discussed in the Assessment Order u/s.143(3) - HELD THAT:- There was proper disclosure of exempt LTCG in assessee s computation of income. The transactions were duly explained by the assessee with requisite documentary evidences during the course of regular assessment proceedings. The assessment order takes note of the fact that various details were called from assessee which were duly submitted and placed on record. These details include notes and explanations on the issues that came up for discussion during the course of hearing. It could be concluded that there was due application of mind by Ld. AO on the stated issue and the claim was admitted after due verification. Merely because the issue was not elaborately discussed in the quantum assessment could not be a ground to invoke revisional jurisdiction u/s 263 particularly when the details called for by Ld. AO were submitted and placed on record. Copies of documents / office note which formed the basis of invocation of jurisdiction was never supplied to the assessee. Assessee all along denied having made any such affidavit that aforesaid income was declared under Income Declaration Scheme, 2016. However, the copy of the affidavit, stated to be in assessment records, was never confronted to the assessee to controvert his submissions. Mere suspicion could not be a ground to invoke jurisdiction u/s 263. There is no adequate material on record which would demonstrate the fulfillment of both the conditions to demonstrate that the order was erroneous as well as prejudicial to the interest of the revenue.- Revisional jurisdiction u/s 263 could not be sustained - Decided in favour of assessee.
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2020 (9) TMI 490
Exemption u/s 54EC - Investment in two different financial years - investment made in NHAI bonds - A.O. concluded that both the investment in NHAI bonds happened in the same financial year i.e. in the financial year 2013-14 - HELD THAT:- As per the provision of section 54EC(1) of the Act and its first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. The amendment in Finance (No.2 Act) 2014 relate to assessment year 2015-16 (i.e. insertion of second proviso to section 54EC(1) and the same applies prospectively for and from assessment year 2015-16. Since assessee had invested ₹ 71 lakhs in two different financial years and within six months from the date of transfer of the capital assets, the limit of ₹ 50 lakhs is per financial year. Hence, the assessee is eligible for deduction of ₹ 71 lakhs u/s 54EC - Decided in favour of assessee.
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2020 (9) TMI 489
Intimation u/s 200A - rectification is passed u/s 154 - rate of tax on gross payment cannot be automatically applied in the case of deduction of TDS u/s 192 - as contended that sec. 206AA is inapplicable to persons whose income is below taxable limit - HELD THAT:- CIT(A) has erred in dismissing the appeal solely for the reason that demand has been raised vide intimation u/s 200A of IT Act and assessee ought to have filed appeals against the same. Once an order of rectification is passed u/s 154 of IT Act, the original order passed u/s 200A itself is modified and what remain thereafter is, not the order of rectification, but the orders u/s 200A of the Act as rectified. Therefore though demand was raised in intimation passed u/s 200A of the IT Act, the same demand continued in the intimation passed u/s 154 of IT Act. Hence, we are of the view that assessee has a legal right in filing an appeal against the said intimation. Moreover, there is no restriction/prohibition in challenging the intimation passed u/s 154 of the IT Act without challenging the intimation passed u/s 200A. For the aforesaid reasons, we set aside the CIT(A) orders for 2011-12 2012-13 and remand the case to him. CIT(A) is directed to pass orders on merits/grounds raised before him for asst. Years 2011-12 2-12-13. Appeal filed by assessee is allowed for statistical purposes.
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2020 (9) TMI 488
Disallowance of 18% notional interest calculation on Advance given against property in the Real Estate business of Appellant Company - no agreement or receipt etc was furnished to evidence the advance against property - HELD THAT:- Assessee failed to substantiate its claim that the loan/advance was meant for real estate business i.e. purchasing the property. On record there is no agreement to purchase nor any receipt showing that the advance was meant for buying the property. In fact, in none of the cases, the purchase of property got materialized. AR submitted that the assessee company had advanced ₹ 6.37 crores towards purchase of property out of which ₹ 17 lacs had been paid in A.Y. 2007-08. These advances were received back in the subsequent assessment years (A.Y. 2009-10 and 2010-11) as the deal could not be materialized and the amount advanced towards it was received back. This aspect was not looked into by the AO as well as the CIT(A) and needs to be looked into in its entirety. Therefore, it will be appropriate to remand back this issue to the file of the AO for proper adjudication. Ground Nos. 1 and 2 are partly allowed for statistical purpose. Disallowance u/s 14A r.w.s. Rule 8D - proximate cause between exempt income and expenses incurred to earn such income - HELD THAT:- AR submitted that the assessee has earned exempt income to the tune of ₹ 2,86,370/- whereas the Assessing Officer has made disallowance amounting to ₹ 10,58,926/-. The CIT(A) as well as Assessing Officer has not looked into the aspect of actual exempt income and the investment at large. Therefore, this issue also needs to be verified in its entirety. Addition on account of deemed dividend u/s 2(22)(e) - HELD THAT:- Section 2(22)(e) of the Act is not applicable in cases of companies in which public are substantially interested and the assessee company is a Public Limited Company and therefore, provisions of Section 2(22)(e) cannot be applied. Admittedly, the assessee company is registered with stock exchange and fulfill all the conditions of Section 2(18) which is definition of company in which public is substantially interested. Thus, the submissions of the Ld. AR are acceptable and are supported by the decisions of the Tribunal in cases of DCIT vs. M/s Sindu Realtors Pvt. Ltd. [ 2016 (5) TMI 58 - ITAT DELHI] . In this case also Section 2(22)(e) of the Act is not applicable and as rightly deleted the addition by the CIT(A). Further, the Assessing Officer has also failed to substantiate as to how the amount in question is in the shape of a loan/advance received by the assessee company. Ground No. 1 of the Revenue s appeal is dismissed. Interest disallowance on share application money investment - CIT-A deleted the addition holding that making investments in the shape of share application money was a normal business activity of the assessee and therefore, it cannot be held that it was not for business purposes - HELD THAT:- As observed by the CIT(A) that given share application money to the same company in A.Y. 2006-07 also, but no notional disallowance was made by the Assessing Officer in that assessment year. CIT(A) was right in deleting the said addition as similar share application money was given in earlier assessment year and no such disallowance of interest has been made therein. The Revenue cannot without any reasonable cause change its stand for the present assessment year. Therefore, when there is no change in the facts of the present case, then no disallowance in the present assessment year can be made. Ground No. 2 of the Revenue s appeal is dismissed. Interest income on accrual basis - HELD THAT:- Assessing Officer made an addition in respect of un-matured interest charges treating the same as interest income for the year under consideration. The CIT(A) deleted the said addition holding that the said addition was made by the Assessing Officer without properly appreciating the facts of the present case and accounting principles adopted by the assessee. But the CIT(A) has not looked into the material on record which needs to be verified. Therefore, this issue needs to be verified by the Assessing Officer in its entirety. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground No. 3 of Revenue s appeal is partly allowed for statistical purpose. Unexplained investment in property - HELD THAT:- In fact the amount has been shown much below the stamp duty amount. The Assessing Officer held that as per the registered documents the market value of land is higher and stamp duty has been paid on the higher value which proves the rate of land in that are at the relevant period. But from the perusal of the Assessment order it cannot be seen that the Assessing Officer has brought out any evidence to substantiate that any amount more than what has been recorded in the sale deed was paid by the assessee and in the absence of any such evidence, no addition can be made merely on the basis of presumption. CIT(A) rightly deleted this addition and there is no need to interfere with the findings of the CIT(A).
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2020 (9) TMI 487
TP Adjustment - reimbursement of the expenses paid by the assessee to its associated enterprise on account of the expats salary which is utilised by the assessee for providing services to the other parties and cost +10% markup is charged - HELD THAT:- Services been duplicative in nature than absolutely independent customer i.e. Bharti Retail Ltd would not have obliged to pay anything for such services. Same are also not shareholder services since assessee would not have availed the services from its associated enterprise then it would have had to hire similarly experienced personnel from external sources. It was further held that assessee was the sole and absolute beneficiary of the services. For assessment year 2013-14 TPO has deleted the addition on account of determination of the arm s-length price of the similar services for that year. In view of the above facts, respectfully following the decision of the coordinate bench in assessee s own case for the earlier years, and subsequently when Transfer Pricing Officer himself has deleted the addition for subsequent year i.e. assessment year 2013-14 and for earlier years i.e. assessment year 2009-10 and 2010-11, we direct the learned Transfer Pricing Officer/AO to delete the addition and accordingly we allow ground No. 2-6 of the appeal. Disallowance u/s 14A with Rule 8D - HELD THAT:- Assessee has earned a tax free income in the form of dividend of ₹ 746,786. Admittedly, the assessee has not disallowed any expenditure u/s 14 A. The claim of the assessee is that it has not incurred any expenditure for earning of the exempt income. Assessing Officer without recording of the any satisfaction with respect to the correctness of claim of the assessee, invoke the provisions of Section 14A and applied the computational methodology provided under Rule 8D of the Income Tax Rules. According to Section 14A(2)of the Act, the learned Assessing Officer should have recorded his satisfaction about the correctness of the claim of the assessee. If no such satisfaction is recorded, no disallowance can be made. In the present case admittedly Assessing Officer has not recorded any satisfaction as provided u/s 14A (2) , which is a mandatory requirement, we delete the disallowance u/s 14A.
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2020 (9) TMI 486
Exemption u/s 11 - income applied outside India - Proper application for approval u/s 11(1)(c) - CBDT approval to the exemption being granted in respect of payments made by the assessee trust - assessee trust had spent monies for creation of endowment funds, through contribution at the Cornell University USA, for scholarship of Indian students, as well as for foreign collaboration project between Indian and Cornell scientists, and grant of financial assistance to Harvard Business School for construction of a new executive building named Tata Hall - whether the amounts so spent by the assessee trust will be treated as permissible application of the trust income, and, accordingly, will be the assessee be eligible for tax exemption, under section 11, in respect of that income? HELD THAT:- CBDT approval states in so many words, the extent to which such income is applied for such purposes outside India . Clearly, where the income of the trust is applied for such purposes upto the specified amount, the actual application of income, and not the amount so specified in the CBDT approval, will be covered by exemption available under section 11(1)(c). It goes without saying that where the actual application of income of the trust exceeds the permitted contribution in paragraph 1 of the CBDT approval, the exemption under section 11(1)(c) will be available only to the extent specified in paragraph 1 of the CBDT approval. That is the limited verification, in terms of the CBDT approval, required to be made by the Assessing Officer. Ironically, however, when we asked, during the course of hearing before us, as to what verifications would the Assessing Officer like to carry out now, learned Departmental Representative, as also the Assessing Officer appearing in person, submitted that the verification required is for the purposes of ensuring that such an application of income of the trust outside India, i.e. by contributions to the Cornell University and Harvard University, tend to promote international welfare in which India is interested . That exercise, for the detailed reasons set out above, cannot be conducted by the Assessing Officer, nor does the scheme of the Act, or facts of the case- particularly in the light of material on the basis of which the CBDT has granted the approval, permit so. Even though there is no res judicata in the income tax proceedings, the principles of consistency apply to the income tax proceedings nevertheless, and, in the light of these principles of consistency, it was not open to the Assessing Officer to decline the benefit of section 11(1)(c), in respect of application of income of the trust outside India by making contributions to Cornell University USA and Harvard University USA, only for these two years, when, on the same set of facts, the benefit of section 11(1)(c) has been allowed for all other years. Taken note of the stand of the CIT(A) that the approval granted by the CBDT is not specifically stated to be retrospective in nature, and, therefore, it cannot be given retrospective effect. We do not see any merits in this line of reasoning. Whether the expression retrospective effect is specifically used in the approval or not, when it is specifically stated that the order shall have the effect for the period covered by assessment years 2009-10 to 2016-17 , there is no escape from the position that the order applies to the period so covered from the assessment years 2009-10 to 2016-17. CIT(A) has clearly been hyper pedantic in his approach, and, in any case, there is no justification for his obsession with the expression retrospective effect - particularly when the fact of retrospective effect is so glaring from the content of the CBDT approval. As regards learned CIT(A)'s stand that since application for approval under section 11(1)(c) is made only on 31st March 2015, it cannot apply for the assessment year 2011-12 (and 2012-13) , it proceeds on the assumption that the prior application for the CBDT's approval for application of income of the trust outside India is required but then this assumption is not correct inasmuch as no such time limit is stipulated under section 11(1)(c). Wherever time limits for taking approvals of the prescribed authorities are stipulated, such as in 10(23C), 12A(1)(a), 80HHD(4), the legislature has specifically provided for the same. In the absence of a time limit prescribed by the statute, no matter how desirable- even if that be so, it cannot be inferred. The only verification required, as we have held earlier in this order, was with respect to the extent to which such income is applied for such purposes outside India and that verification is not even in dispute as all the related payment details and RBI remittance approvals have already been filed before the Assessing Officer, at the assessment stage, and the same have not been faulted at all. When the Assessing Officer appeared before us in person, he did not even dispute that; all he wanted to verify was as to how the contributions to Cornwell University USA and Harvard University USA tend to promote the international welfare in which India is interested, but then, for the detailed reasons set out earlier in the order, that is what he cannot be permitted to do, as it falls beyond the call of his duty. We reject this plea as well. CIT(A) was in error in upholding the denial of claim of the assessee for exemption in respect of application of income of the trust outside India, by way of contributions made to Cornell University USA and Harvard University USA - Decided in favour of assessee.
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2020 (9) TMI 485
TP Adjustment - Comparable selection - TCS E Serve International Ltd., TCS E Serve Ltd. chosen by the ld. TPO in order to benchmark its international transactions qua ITES segment - HELD THAT:- TCS E Serve International has been found to be not a suitable comparable vis-o-vis ITES provider in case of Avaya India Pvt. [ 2019 (7) TMI 1279 - DELHI HIGH COURT] on ground of having given huge amount to Tata Sons Ltd. towards brand equity; having no segmental bifurcation between transaction processing and technical services; having huge intangible in the form of brand value having considerable effect on its PLI. All the aforesaid facts go to prove that TCS E Serve International, admittedly rejected by the ld. TPO in AY 2011-12, is not a suitable comparable for benchmarking the international transactions qua ITES segment, hence ordered to be excluded. TCS E Serve as not a suitable comparable vis-o-vis routine service provider on grounds of its large scale of operation and clientele base having huge turnover and having given huge amount to Tata Sons Ltd. towards brand loyalty and having no segmental bifurcation between transaction processing and technical services. Rectification u/s 154 - operating cost of the appellant instead of actual operating cost which is a mistake apparent from record thereby resulting in decrease in the operating margin of the Appellant from 17.00% to 9.06% - HELD THAT:- Since both the ld. AR for the taxpayer as well as ld. DR for the Revenue have fairly conceded that it is a mistake apparent on record, the AO/TPO are directed to rectify the mistake after duly verifying the records/documents. MAM selection - TPO rejected the method adopted by the taxpayer, applied Comparable Uncontrolled Price (CUP) method and computed the ALP of the transaction at nil - HELD THAT:- Issue is remitted back to the ld. TPO/AO to follow the directions given by the ld. DRP and to pass the order accordingly. Disallowance of Travelling and conveyance expenses appearing as credit card payment in the AIR - AO/DRP disallowed the same on the ground that no document evidence viz. bills/vouchers in support of its claim has been brought on record by the taxpayer to establish that the expenses reimbursed by the taxpayer to the employees have been duly considered in computing the taxpayer's income - HELD THAT:- No doubt, the taxpayer is having details of expenses claimed as reimbursement by the employees but in order to authenticate the same it has not taken on record the copies of the credit card bills of its employees to prove that the expenses have been incurred by the employees for the business purposes. In these circumstances, we are of the considered view that the issue is required to be remitted back to the AO to decide afresh by providing an opportunity of being heard to the taxpayer to explain the details of the amount reimbursed to the employees. Ground is allowed in favour of the taxpayer for statistical purposes. Determining arm's length interest rate at 10.85% on account of interest on delayed collection of receivables from its AE - HELD THAT:- Undisputedly, in AY 2010-11, in taxpayer's own case, ld. DRP held that the period of delay may be restricted to the very same accounting year for which benchmarking is being done i.e., till 31st March and interest should be computed accordingly to the period of delay only. It being an identical issue consistent approach by the Revenue authorities is required to adopt in order to stop unnecessary litigation. So, we are of the considered view that the issue is required to be remitted back to the AO/TPO to decide in accordance with the view taken in AY 2010-11 as well as law laid down in Kusum Healthcare Pvt. Ltd. i [ 2017 (4) TMI 1254 - DELHI HIGH COURT] . So, Ground determined in favour of the taxpayer for statistical purposes.
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Customs
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2020 (9) TMI 484
Provisional release of seized goods - In-shell Walnuts imported under the DFIA Scheme - exemption under N/N. 98/2009-Cus dated 11.09.2009 - HELD THAT:- The imported In-shell walnuts are not liable for confiscation and the exemption claimed by the Appellant appears to be correct in view of the judgement of the Hon ble Madhya Pradesh High Court in case of GLOBAL EXIM ANOTHER VERSUS THE UNION OF INDIA OTHERS [ 2018 (10) TMI 1485 - MADHYA PRADESH HIGH COURT ] and the order of the co-ordinate Bench of this Tribunal in case of M/S UNI BOURNE FOOD INGREDIENTS LLP VERSUS COMMISSIONER OF CENTRAL EXCISE, HYDERABAD-II [ 2019 (3) TMI 1449 - CESTAT HYDERABAD ]. It has been held in the said decided cases that In-shell Walnut is allowed to be imported against the DFIA issued for export of assorted confectionery and biscuits under SION E1 and E5 respectively as input items namely, Nut and Nut products, relevant food flavour, flavouring agent/flavour improvers, dietary fibre and fruit/cocoa powder. The ratio of the judgment in the case of Global Exim was held to be inapplicable to the facts of the present case by the learned Commissioner of Customs on the ground that the said judgment delivered by the Hon'ble Madhya Pradesh High Court was accepted by the department and not appealed against on the monetary limit fixed by the CBEC - With regard to the precedential value of the decision of this Tribunal in the case of M/s Unibourne Food Ingredients LLP, the learned Commissioner of Customs has held that such order of the Tribunal has not been accepted and the department is in the process of filing an appeal before the Hon'ble High Court of Telangana. Further, the technical opinion dated 08.08.2018 furnished by the Joint Director, JNCH Lab, opining that walnuts may be used of source of dietary fibres in the manufacture of Biscuits/Cookies and confectionery was not discussed by the learned Commissioner of Customs in the impugned communication dated 28.06.2019. In order to meet the ends of justice, as an interim measure, the impugned communication directing the appellant for execution of Bond/Bank Guarantee and submission of undertaking for payment of the future adjudged dues should be stayed till final disposal of the case through proper adjudication process - Appeal allowed.
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2020 (9) TMI 483
Confiscation - imposition of redemption fine and penalties - mis-declaration of imported goods - goods declared as Crystallised Glass Panel Grade B - test reports revealed that the goods were Agglomerated Marble and not Crystallised Glass Panel Grade B , as declared by the appellant - HELD THAT:- In this case, the facts are not in dispute that the appellant had filed the Bills of Entry, declaring the description of goods as 'Crystallised Glass Panel Grade B', whereas as per the test report obtained by the department, the same were reported to be 'Agglomerated Marble'; that the value in respect of both the category of goods were also different. Thus, there was misdeclaration in respect of both description and value of goods. Further, the subject goods were also imported in violation of the provisions of Foreign Trade Policy. All these aspects of statutory contravention were admitted and accepted by the Proprietor of the appellant-importer in the statement recorded under summon in terms of Section 108 ibid. Hence, under the facts and circumstances of the case, it is evident that the penal consequences provided under Sections 111, 125(1), 112(a)(i) and 114AA ibid are attracted for confiscation of imported goods, imposition of redemption fine and penalties. It is found from the available records that though the importer-appellant had placed the purchase order for import of 'Crystallised Glass Panel, but the overseas supper had wrongly shipped different types of goods, the fact of which had also been acknowledged in the e-mail correspondence dated 09.12.2018. Further, the supplier had also expressed his willingness to take back the consignments as per the description provided in the Bills of Entry filed by the importer-appellant. However, it an admitted position that the importer-appellant did not take proper steps to check the cargo before presentation of the Bills of Entry for assessment purpose and accordingly, it cannot plead that the action on its part is entirely bonafide. The quantum of redemption fine and penalty imposed on the importer appellant can be reduced to meet the ends of justice. Accordingly, while upholding the impugned order on merits of the case, we reduce the redemption fine from ₹ 1,18,85,000/- to 18,00,000 - penalty imposed under Section 112 of Customs, Act, 1962 reduced from ₹ 7,50,000 to ₹ 2,50,000. Penalty under Section 114AA on Shri Sumeet Agarwal, proprietor of the importer-appellant - learned counsel argues that it is a settled principle of law that simultaneous penalties cannot be imposed on both - HELD THAT:- What we have before us is the imposition of penalty on the company under Section 112(a) and imposition of Penalty on the proprietor under section 114AA, ibid. The facts of the case and issue dealt are different. However, looking in to the facts and circumstances of the case, penalty imposed on Shri Sumit Agarwal reduced to ₹ 1,00,000. Appeal allowed in part.
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2020 (9) TMI 482
100% EOU - non-payment of Customs Duty - 100% cotton comber Noil - violation of conditions/provisions of Notification No. 52/2003-cus dated 31.3.2003 and conditions mentioned in their Letter of Permission (LOP) and the undertaking given by them in their B-17 Bond - Monetary limit involved in the appeal. HELD THAT:- In the present set of 11 appeals, 8 appeals from Sr. No. 1 to 8 of the table mentioned in para 1 of this order, can be dismissed under the Litigation Policy as per Circular No. F. No. 390/Misc/163/2010-JC, dated 17.12.2015, which prescribes the monetary limit of ₹ 10 lakhs. In view of the Customs Notification cited above, first 8 Appeals in the table cited above are dismissed under the Litigation Policy without going into the merit of the case. Further, after completion of the hearing, learned AR for the Revenue brought to our notice that the issue which is involved in the present case has been referred to the larger Bench in appeal No. C/85110/2013. He further prayed that the present appeals should be adjourned awaiting the decision of the Larger Bench in the case of M/S. EUROTEX INDUSTRIES EXPORTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLHAPUR [ 2020 (9) TMI 448 - CESTAT MUMBAI ]. Since the issue involved in the present case has already been referred to the larger bench, therefore, we order that three appeals are adjourned and should be listed after the decision of the larger Bench. Thus, 8 appeals namely, Appeal No. C/88586, 88590 and 88592 to 88597/2013 are dismissed under the Litigation Policy dated 17.12.2015 and 3 appeals namely, Appeal No. C/88598, 88599 88603/2013 are adjourned and to be listed after the decision of the larger Bench.
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2020 (9) TMI 479
Valuation of import goods - marble blocks and slabs - undervaluation - allegation is that the appellant had presented undervalued invoices to the Customs for assessment of goods and that the amounts indicated in the undervalued invoices were remitted through banking channels and that portion of the value which was excluded from the invoices, was paid in cash or wire transfer - HELD THAT:- The learned adjudicating authority in the impugned order at paragraph 12 has held that even though the show cause notice has referred to the recovery of documents during the search operation, but the subsequent investigation did not throw any light on such documents and the entire case was made out only on the basis of 12 Bills of Entry. Further, it has also been noted in para 15 thereof, that the Note-Verbale, which formed the bedrock of the present proceedings, indicated only commencement of criminal proceedings against the indenting agents and that the Deputy Director, DRI was unable to provide information regarding the finality of the proceedings against such persons on the ground that the investigation was under the competency of the Public Prosecutor s office of the Italian Republic at the Tribunal of Massa Carra. Furthermore, the learned adjudicating authority in para 16 thereof, has noted that in the present case, the modus operandi of undervaluation mentioned in the Note-Verbale was not followed (a) intelligence regarding generic descriptions being used without revealing the actual variety of marble, did not stand scrutiny; (b) intelligence regarding price being in the range of 230-240 euros per tonne also did not stand and (c) the investigation did not produce any evidence of financial flowback through nonbanking channels in low tax countries. The learned adjudicating authority in this case has accepted that the Note-Verbale only indicated commencement of criminal proceedings against the indenting agents in Italy and did not conclusively prove the guilt against such persons. In fact, as noted in the impugned order, even the Deputy Director of DRI had also expressed his inability to provide information regarding the final outcome of criminal proceedings against such persons. Since the investigations with regard to alleged fraud committed in exportation of goods in the originating country, has not attained finality, it cannot be hypothetically concluded that the appellant had indulged into the activities of undervaluing the goods - the present proceedings initiated against the appellant were premature and cannot be sustained. Further, in the statement recorded under summon, Shri K.M. Swamy, Director of the appellant had denied the fact regarding involvement of the intermediaries/indenting agents in purchases made by the appellants in respect of the disputed goods from the Italian suppliers. Furthermore, the investigations made by DRI did not produce any evidence of financial flow back through non-banking channels in low tax countries. Thus, under such circumstances, the charges of undervaluation cannot be leveled on the appellant. The learned adjudicating authority has rejected the declared value in respect of the subject Bills of Entry under Section 14(1) ibid read with Rule 12 ibid and re-determined the assessable value under Section 14(1) ibid read with Rule 3(1) ibid, holding that sufficient evidence exists to show that actual invoice values were hidden from the Indian Customs authorities and manipulated invoices were presented for assessment purposes. We find that in support of such contentions, no credible evidences were produced by the department. Further, the procedures laid down under Rule 12 ibid have not been succinctly followed for rejection of the declared value - In this case, it is an admitted fact on record that the mandates of Rule 12ibid read with Rules 4 to 9 ibid have not been complied with by the department. Thus, rejection of declared value is contrary to the statutory provisions and accordingly, redetermination of the alleged transaction value cannot stand for judicial scrutiny. There are no merits in the impugned order - appeal allowed - decided in favor of appellant.
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2020 (9) TMI 478
Classification of export goods - ropes of various types made of PP and Polyester - MEIS Scheme - HELD THAT:- It is an admitted fact on record that in compliance of Section 50 ibid, the appellant had submitted all the requisite particulars/information for assessment and ascertainment of the duty liability, if any, in respect of the Shipping Bills, which were accepted by the proper officer of Customs and the appellant was permitted by an order under Section 51 ibid for clearance of the subject goods for exportation. In so far, an order of assessment is concerned, Section 129D ibid provides for passing of certain orders by the competent authority(s). Sub-sections (2) and (3) of Section 129D of Customs Act - HELD THAT:- no appeals were filed by the Department against the assessment orders passed on the Shipping Bills before the Commissioner (Appeals) under Section 128 of the Act. Hence, the issue of classification and other facets concerning exportation of subject goods covered under the already assessed Shipping Bills was attained finality and any issues arising out of finalisation of such Shipping Bills cannot be questioned or agitated by the Department subsequently by initiating show cause proceedings against the exporter, the appellant herein. In this case, the Department has initiated show cause proceedings and confirmed the adjudged duty demand under Section 28AAA of the Act on the appellant. The provisions contained therein for recovery of duties are applicable only in the eventuality, where an instrument issued to a person has been obtained by him by means of 'collusion'; or 'willful misstatement'; or 'suppression of facts'. We find that the learned Commissioner has dealt with such statutory provisions and their application to the facts of the present case at paragraph 10 in the impugned order. He has not particularly referred to any communication addressed by the office of Development Commissioner functioning under the DGFT to hold that the appellant got the MEIS scrip issued by the said authority by means of collusion, willful misstatement or suppression of facts. Further, there is no material evidence available on record to prove that the competent licensing authority under the Foreign Trade Policy had initiated any proceedings against the appellant alleging acquisition of the scrips in a fraudulent manner. The allegation with regard to MEIS benefits wrongly availed by the appellant does not have an independent nexus to the Customs Act, 1962 inasmuch as such scheme designed for the Merchant Exporter are dealt with under the Foreign Trade Policy (2015-2020) and Foreign Trade (Development Regulation) Act, 1992. The adjudicating authority has lost sight of the fact that the appellant's company is an artificial or non-human entity, cannot function or operate without involvement of the natural person i.e. the directors or the authorized persons. Therefore, we are of the considered view that the charges of guilt of 'collusion', 'wilful misstatement' or 'suppression of facts' cannot be levelled against the appellant, justifying invocation of the provisions of Section 28AAA of the Act - The impugned order in paragraph 12(ii) has confiscated the goods covered under Shipping Bill Nos. 7289261 and 7289281 both dated 12.07.2017 and imposed redemption fine on the appellant by relying upon the test report dated 02.11.2017 furnished by the DYCC/JNCH. The said report confirms that the Rope in question comprised of Polypropylene as the primary/major ingredient. It is evident that the integral part and parcel of the principles of natural justice has been violated in this case inasmuch as reasons are the soul of any judicial order and good and proper reasoning make its body strong, which admittedly is absent in the present case. Accordingly, the matter should be remanded to the original authority for grant of opportunity to the appellant for cross examining the chemical examiner and thereafter to address the issue in a just and fair manner. The impugned order is set aside, in so far as it has changed the classification of exported goods from CTH 56079090 to CTH 56074900, resulting in confirmation of duty demand along with interest and imposition of penalty on the appellant - As regards confiscation of goods and imposition of redemption fine, the impugned order is set aside and appeal is allowed by way of remand to the original authority for grant of permission to the appellant for cross examining the chemical examiner and thereafter to adjudicate the matter based on the outcome of such examination report. Appeal disposed off.
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Corporate Laws
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2020 (9) TMI 476
Sanction of Scheme of Arrangement - sections 230 to 232 of the Companies Act, 2013 - HELD THAT:- The Petitioner Companies have complied with all the requirements as per directions of the Tribunal and have filed necessary affidavits of compliance in the Tribunal. Moreover, the Petitioner Companies through their Counsel undertake to comply with all statutory requirements, if any, as required under the Act and the Rules made there under as applicable. The undertakings given by the Petitioner Companies are accepted - The Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai, has filed its Report dated 5th August, 2020, inter alia stating therein that save and except as stated in para IV (a) to (g) of the Report, the Scheme is not prejudicial to the interest of shareholders and public. In response to the observations made by the Regional Director, the Petitioner Company has also given necessary undertakings and clarification. The observations made by the Regional Director have been explained and the clarifications and undertakings given by the Petitioner Companies have been explained in Para 8 above. The Undertaking filed by the Petitioner Companies in response to the said report, is accepted by this Tribunal - From the material on record, the Scheme appears to be fair and reasonable and does not violate of any provisions of law and is not contrary to public policy. The Petition be and the same is allowed subject to the following. i. The Scheme, with the Appointed Date fixed as 1st October, 2019 placed at Page Nos. 655 to 669 of the CP (CAA) No. 940/230/MB-I/2020 is hereby sanctioned. It shall be binding on the Petitioner and the Companies involved in the Scheme and all concerned including their respective Shareholders, Secured Creditors, Unsecured Creditors/Trade Creditors and Employees. ii. The Registrar of this Tribunal shall issue the certified copy of this order along with the Scheme forthwith. The Petitioners are directed to file a copy of this Order along with a copy of the Scheme with the Registrar of Companies concerned, electronically in E-Form INC-28, within 30 days from the date of receipt of the Order from the Registry. iii. The Petitioner Companies to lodge a copy of this Order and the Scheme duly authenticated by the Deputy/Assistant Registrar of this Tribunal with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, if any, payable within 60 days from the date of receipt of the Order. iv. The Petitioner Company shall comply with the undertakings given by it. v. All concerned shall act on a copy of this Order along with Scheme duly authenticated by the Deputy/Assistant Registrar of this Tribunal. vi. The Petitioner Company is directed to issue newspaper publications with respect to approval of the Scheme, in the same newspapers in which previous publications were issued. vii. The Petitioner Company shall take all consequential and statutory steps required under the provisions of the Act in pursuance of the Scheme. viii. Any person interested in above matter shall be at liberty to apply to the Tribunal for any directions that may be necessary.
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2020 (9) TMI 475
Sanction of Scheme of Arrangement - Sections 230 to 232 of Companies Act - HELD THAT:- From the material on record, the Scheme appears to be fair and reasonable and does not violate any provisions of law and is not contrary to public policy. Since all requisite statutory compliances have been complied with, consolidated Company Petition in CP (CAA) No.936/MB.V/2020 is made absolute in terms of prayer clause - The Scheme is hereby sanctioned and the Appointed Date is fixed as 31st March, 2019. The Petitioner Companies are directed to lodge a certified copy of this Order alongwith a copy of Scheme of Arrangement with the concerned Registrar of Companies, electronically inform INC-28, as per the relevant provisions of the Companies Act, 2013, within 30 days from the date of issue of the order by the Registry, duly certified by the Deputy/Assistant Registrar of this Tribunal - The Petitioner Companies to lodge a copy of this Order, duly certified by the Deputy/ Assistant Registrar of this Tribunal, along with a copy of the Scheme, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable within 60 days from the date of receipt of copy of the Order.
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2020 (9) TMI 473
Restoration of the name of the Company in the Register of Companies - Section 252(1) of the Companies Act, 2013 - HELD THAT:- The petition is filed under Section 252(1) of the Act, however, it can be seen that it actually satisfied the provisions of Section 252(3) of the Act and it would be appropriate to consider and decide the present petition under Section 252(3) of the Act. The present petition is filed by the petitioner within a period of 20 years from publication in the Official Gazette of notice under Section 248(5) of the Act - The Income Tax Department has raised outstanding demand of ₹ 4,40,60,940/- including interest under Section 234A 234B of the Income Tax Act, 1961. It has been stated that an appeal against the demand is pending before the Commissioner of Income Tax (Appeals)-2, Chandigarh. It would be in the interest of Income Tax Department that the company is revived so that recovery proceedings can be continued by the Department, expeditiously. The petitioner-company has entered into agreement to purchase the land (Annexure 5) and the learned counsel representing petitioner-company has submitted that the company has filed appeal against the civil suit in respect of the specific performance before the High Court of Punjab and Haryana - thus, the ingredients provided for in 252(3) of the Act, are satisfied. The petition is allowed and the name of the company be restored in the Register of Companies, subject to deposit of ₹ 30,000/- as costs with the Pay and Accounts Officer, Ministry of Corporate Affairs within a period of three weeks from the receipt of certified copy of this order.
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2020 (9) TMI 472
Restoration of the name of the Company in the Register of Companies - Section 252(1) of the Companies Act, 2013 - HELD THAT:- The petition is filed under Section 252(1) of the Act, however, it can be seen that it actually satisfied the provisions of Section 252(3) of the Act and it would be appropriate to consider and decide the present petition under Section 252(3) of the Act. The present petition is filed by the shareholder-cum-promoters of the Company and is within the period of 20 years from publication in the Official Gazette of notice under Section 248(5) of the Act - The present petition has been filed by the petitioners, who are aggrieved by the order of ROC and is within 20 years time period after the publication of official notification, striking off the name of company from the Register of Companies. The company was also engaged in the business transactions as seen from the bank statement and has fixed deposits in its name (Annexure 9) at the time when its name was struck off from the Register of Companies and therefore, the name of the company deserves to be restored in the Register of Companies, maintained by the ROC - thus, the ingredients provided for in Section 252(3) of the Act, are satisfied. The petition is allowed and the name of the company be restored in the Register of Companies, subject to deposit of ₹ 20,000/- as costs with the Pay and Accounts Officer, Ministry of Corporate Affairs within a period of three weeks from the receipt of certified copy of this order.
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2020 (9) TMI 471
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and default or not - HELD THAT:- Section 7(5) of the Code provides for admission of the application where the Adjudicating Authority is satisfied that (a) a default has occurred; (b) the application under sub-section (2) of Section 7 is complete; (c) there is no disciplinary proceedings pending against the proposed Resolution Professional. The first condition is that a default has occurred. From the facts narrated above, we find that the default has occurred - The second condition is that the application under Section 7(2) is complete. No objections in this regard, were raised during the hearing of the petition. We have discussed the contents of the application above and we conclude that the application is complete - The third condition is that there are no disciplinary proceedings pending against the proposed Resolution Professional. In the present case, Mr. Ajay Kumar Jain, IBBI/IPA-002/IP-N00415/2017-2018/11188, has been proposed as Interim Resolution Professional. Form 2 filed by the proposed Interim Resolution Professional is at Page 212 of the petition. Mr. Ajay Kumar Jain has certified that there are no disciplinary proceedings pending against him with the Board or Indian Institute of Insolvency Professional of ICAI. He has also affirmed that he is eligible to be appointed as a Resolution Professional in respect of the corporate debtor in accordance with the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporation Persons) Regulations, 2016. In view of the satisfaction of the conditions provided for in Sections 7(5) of the Code, the petition for initiation of CIRP in the case of M/s Maruti Kesari Nandan Agro Foods Pvt. Ltd., is admitted - Petition admitted - moratorium declared.
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2020 (9) TMI 470
Approval of the Composite Scheme of Arrangement - Section 230 to 232 of Companies Act - HELD THAT:- The Independent Statutory Auditors of the Transferor Companies and the Transferee Company have filed the Certificate in relation to compliance with the Accounting Standards, and certified that the proposed scheme is in conformity with the accounting standards specified under Section 133 of the Act, read with relevant rules as applicable. Thus, the Petitioner Company has complied with proviso to Section 230 (7) / Section 232 (3) of the Companies Act, 2013. The Petitioner companies have submitted that no investigation proceedings are pending against them under the provisions of the Companies Act, 1956 or the Companies Act, 2013 and no proceedings are pending against the petitioner companies under Section 235 to 251 of the Companies Act, 2013 or under relevant provision of the Companies Act, 1956 - In view of absence of any other objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal, sanctions the Composite Scheme of Arrangement, annexed as Annexure 9 with the Company Petition as well as the prayer made therein. The scheme is approved.
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2020 (9) TMI 469
Restoration of name of respondent in the Registrar of Companies - time limitation - Section 252(1) of the Companies Act, 2013 - HELD THAT:- Before passing the order of striking off the company from the Register of Companies, the ROC need to have make sufficient provision for the payment or discharge of its liabilities and obligations by the company within a reasonable time. It is quite evident from the contents of petition that respondent No.1 has failed to provide notice to the petitioner-Income Tax Department before taking any action under Section 248(5) of the Act and was not able to make any provision for payment or discharge of its liabilities and obligations. It is also pertinent to mention that the respondent No.2-company has filed Form STK-2 as prescribed under Section 248(2) of the Act and Rule 4(1) of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. Copy of Form STK-2 is found attached with the petition as Annexure A-4. It is observed that the name of Respondent No.2-company was struck off pursuant to filing of Form STK-2 before respondent No.1-ROC. It is also contended by the petitioner that after the search and seizure operation was conducted and opportunity was given by the Assistant Director of Income Tax (Investigation) to respondent No.2 to produce the books of accounts/bills/vouchers etc., which were not declared in Schedule BA in the return of income filed and non-disclosure of account in the return of income, the source of credits in bank account remained unexplained and taxable under Section 69 and 69A of the Income Tax Act, 1961, but no explanation was given by the respondent No.2. It is also observed that allowing this petition would only enable the petitioner to conduct further proceedings under the Income Tax Act. Therefore, this petition deserves to be allowed. Thus, the ingredients provided for in 252(1) of the Act, are satisfied - the petition is allowed and it is just and equitable to restore the name of respondent No.2-company in the Register of Companies.
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Insolvency & Bankruptcy
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2020 (9) TMI 481
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- It is pertinent to state here that this is not the forum to examine and adjudicate as to which portion of the claims are admissible. Tribunal will also not examine the relative merits of dispute. It is beyond the scope of this forum to decide as to which party and to what extent is responsible to pay amounts when there is a serious allegation of fabrication and misrepresentation. There is material to believe that disputes certainly exist in the facts of the present case and it is right to have the matter tried out before the axe, in the form of Corporate Insolvency Resolution Process, falls. There has been no admission of operational debt by the respondent. In fact, there has been a pre-existence of dispute regarding bills raised and services provided by the applicant. Dispute existed much prior to the issuance of notice under Section 8 of the Code as there are various issued were raised in respect of services provided by applicant to the respondent. The claim of pre-existing dispute suggests the need of elaborate investigation. It is reiterated that existence of dispute in the present case cannot be ruled out - the respondent has raised dispute with sufficient particulars. Hence, the amount of claim raised by the applicant clearly falls within the ambit of disputed claim. Section 9(5)(ii)(d) of the Code provides that adjudicating authority shall reject the application if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. Petition dismissed.
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2020 (9) TMI 474
Maintainability of petition - initiation of CIRP - Corporate Debtor has committed default for a total outstanding amount - Petitioner and Respondent submit that the Parties are inclined to settle the matter, however, the Respondent has not provided a settlement schedule acceptable to the Petitioner - HELD THAT:- As the parties have come forward to settle the matter, and the Respondent is seeking a staggered schedule of payments as terms of settlement, at this point we would not go into the merits of the claim or the dispute, and allow time to the Petitioner and the Respondent to settle the matter mutually. If the settlement fails, the Petitioner would be at liberty to file a fresh petition for admission - the Respondent's plea that it be given some more time to negotiate/settle/clear the debt needs to be accepted, and the Respondent/Corporate Debtor be directed to settle the debt at the earliest in consultation with the Petitioner/Operational Creditor, considering the amount involved and the present economic scenario, despite the argument of the Petitioner that it is a fit case for admission. Petition is disposed of by directing the Respondent/Corporate Debtor to repay the debt or the amount as settled with the Petitioner within a period of four months, failing which, the Petitioner would be at liberty to file a fresh petition for admission.
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Service Tax
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2020 (9) TMI 477
Security Service - Reverse Charge Mechanism - requirement to deposit service tax on the portion of 75% of taxable value towards receipt of security service was made applicable for the first time w.e.f. July 2012 - whether the appellant is liable to deposit service tax under Security Service under reverse charge when the entire service tax amount has been reimbursed to the service provider who has deposited the same with the Govt. Treasury as claimed by the appellant? HELD THAT:- The original authority while confirming demand has observed that since the tax paid challans copies do not have legible bank seal, the same could not be relied. The appellant has also submitted the payment confirmation from the CBEC website showing the challan wise tax payment - No finding has been given by the learned Commissioner (Appeals) with regard to the submission of said certificate and challan details. Instead the learned Commissioner (Appeals) has reiterated the findings given by the lower authority. The payment is duly supported by way of confirmation from the CBEC website which is on record. Neither the tax calculation details nor the payment confirmation has been disputed by both the authorities below. The only reason assigned by the lower authority for not accepting the said challans is that same did not bear legible bank seal - since the said challans are supported with CBEC website payment confirmation, there is no reason to doubt the payment of tax. Considering the totality of the facts of the case and that the assessee is a Public Sector Undertaking, there is no reason to confirm the demand when service tax stands already paid and there is no loss of revenue to the Exchequer. The demand of service tax, interest and penalty set aside - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (9) TMI 480
Validity of assessment Order - time limitation - main contention raised on behalf of the revision petitioner is that the impugned assessment order passed by the Superintendent of Taxes(Assessing Officer) Agartala for the period from 2011-12 to 2014-15 was ultra vires the provisions of Section 33 of the TVAT Act, 2004 because such assessment was absolutely time barred - Imposition of penalty on the ground of evasion of tax by way of concealment of taxable turnover was made without affording reasonable opportunity of hearing to the petitioner - imposition of penalty in terms of Section 53(3) of the TVAT Act after affording reasonable opportunity of hearing to the assessee - non submission of the audited accounts of his company in absence of prescribed form in terms of Section 53(1) of TVAT Act. Whether the impugned assessment order dated 29.09.2016 passed by the Superintendent of Taxes(Assessing Officer) Agartala for the period from 2011-12 to 2014-15 is ultra vires the provisions of Section 33 of the TVAT Act, 2004 being hit by limitation? - HELD THAT:- It is an admitted fact that the impugned order of assessment dated 29.09.2016 passed by the Assessing Officer covers the period of the assessment from 2011-12 to 2014-15 meaning thereby the tax period in question ended on 31st March, 2015 - As provided under sub-section (1) of Section 33 of the TVAT Act, 2004, no assessment under Section 31 and 32 shall be made after expiry of five years from the end of the tax period to which the assessment relates. Section 33 of the TVAT Act, 2004 lays down the prescription of limitation of 5 years from the end of the tax period to which the assessment relates. The revision petitioner contends that the order of assessment for the years 2011-12 to 2014-15 being ultra vires of Section 33 need to be quashed and set aside and in consequence the order dated 28.02.2017 of the Revisional Authority upholding the assessment order should also be quashed. Apparently the assessment order dated 29.09.2016 for the tax period from 2011-12 to 2014-15 was made after issuing notice dated 31.08.2016 to the assessee. The tax period of 2011-12 ended on 31st March, 2012 for which the assessment order was made on 29.09.2016 within the period of limitation provided under Section 33 of the TVAT Act and obviously, therefore, the assessment order for the years 2013-14 2014-15 also made on 29.09.2016 was well within the period of limitation of five years. As such the contention of the petitioner that the assessment order is hit by limitation is devoid of merit. Whether the imposition of penalty@15% on the petitioner on the ground of evasion of tax by way of concealment of taxable turnover was made without affording reasonable opportunity of hearing to the petitioner? - HELD THAT:- In the case in hand, admittedly no separate show cause notice in terms of Section 75A was issued to the dealer before imposition of 15% penalty on him - from a plain reading of Section 75A and having regard to the strict letter of the law, it becomes abundantly clear that penalty cannot be imposed for mere failure to pay tax unless there are materials to show that such failure was deliberate with a view to evade payment of tax liability. Evidently there was no intention on the part of the assessee to evade or avoid taxes and therefore, levy of 15% penalty being totally illegal is quashed by us for the entire period of assessment. Whether the penalty equal to 0.1% of the turnover was imposed on the assessee in terms of Section 53(3) of the TVAT Act after affording reasonable opportunity of hearing to the assessee? - HELD THAT:- Imposition of penalty equal to 0.1% of the turnover for non submission of the audit report in terms of Section 53 of the TVAT Act is mandatory. The assessment order dated 29.09.2016 as well as the order dated 28.02.2017 of the Commissioner of Taxes in Revision Case No 18 to 21 of 2016 go to show that the dealer failed to submit the audit report within time in terms of Section 53 of the TVAT Act. Neither before the assessing officer nor before the Revisional Authority (Commissioner of Taxes) the assessee ever pleaded that he submitted the audit report in terms of Section 53(1) and (2) of the TVAT Act within the time specified in sub-section (2) of Section 53. Rather he pleaded before the Assessing Authority as well as the Revisional Authority (Commissioner of Taxes) that he could not submit the audit report within time. There is, therefore, no doubt that the assessee did not submit the audit report in terms of Section 53(1) and (2) of the TVAT Act within the time prescribed under the said Section. The findings of the assessing officer as well as the Revisional Authority, as quoted above, are not disputed by the petitioner. Evidently, the assessment order dated 29.09.2016 imposing mandatory penalty equal to 0.1% of the turnover of the company of the assessee was imposed on the assessee in terms of Section 53(3) after hearing the assessee. Therefore, the assessment order with regard to imposition of penalty equal to 0.1% of the turnover of the company of the assessee suffers from no illegality. Whether the assessee can be saddled with the liability of non submission of the audited accounts of his company in absence of prescribed form in terms of Section 53(1) of TVAT Act? - HELD THAT:- It is no case of the petitioner that he could not submit the audit report within time in terms of Section 53(2) of the TVAT Act due to non availability of such Form. Assessment Order upheld except the penalty equal to 15% imposed by the assessing officer - petition allowed in part.
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