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TMI Tax Updates - e-Newsletter September 3, 2022 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Central Excise CST, VAT & Sales Tax Indian Laws Articles THE OMBUDSMAN SCHEME FOR DIGITAL TRANSACTIONS, 2019 News Shri Piyush Goyal to visit San Francisco and Los Angeles from 5-10 September to attend the first ever in-person Ministerial meeting of the Indo-Pacific Economic Framework (IPEF) Frequently Asked Questions (FAQs) on the SEBI Settlement Scheme, 2022 Notifications Customs 73/2022 - dated 1-9-2022 - Cus (NT) Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Supersession Notification No. 70/2022-Customs(N.T.), dated 18th August, 2022 GST - States G.O.MS.No.555 - dated 28-7-2022 - Andhra Pradesh SGST Amendment in Notification Go.Ms.No.258, Revenue(CT-II) Department, dated 29.06.2017 G.O.MS.No.554 - dated 28-7-2022 - Andhra Pradesh SGST Amendment in Notification G.O.Ms.No.588, Revenue(CT-II)Department, dated:12.12.2017 G.O.MS.No.553 - dated 28-7-2022 - Andhra Pradesh SGST Amendment in Notification Go.Ms.No.259, Revenue(CT-II)Department, dated 29.06.2017 S.O. 176 - dated 2-9-2022 - Bihar SGST Seeks to amend Notification No. S.O. 110, dated the 06th May, 2020 F A 3-51-2019-1-V-(57) - dated 23-8-2022 - Madhya Pradesh SGST Amendment in Notification No. F A 3-51-2019-1-V-(29), Dated 4th May 2020 1399-F.T. - dated 23-8-2022 - West Bengal SGST Seeks to Rescind notification No. 2023-F.T. dated 14.11.2017 regarding partial exemption of tax on supplies of scientific instruments to specified public funded research institutes Income Tax 105/2022 - dated 1-9-2022 - IT Income-tax (29th Amendment) Rules, 2022 SEZ S.O. 4060 (E) - dated 30-8-2022 - SEZ Sector specific Special Economic Zone for Aluminum and Aluminum products in the State of Odisha - Area de-notified - Seeks to rescind Notification No. S.O. 499 (E) dated 13th March, 2008 Circulars / Instructions / Orders IBC IBBI/EXAM/52/2022 - dated 31-8-2022 Revision of fees applicable for Limited Insolvency Examination and Valuation Examinations GST INSTRUCTION No. 04/2022-23 [GST – Investigation] - dated 1-9-2022 GUIDELINES FOR LAUNCHING OF PROSECUTION UNDER THE CENTRAL GOODS & SERVICES TAX ACT, 2017 Highlights / Catch Notes GST Seeking grant of bail - illicit supply of finished goods, namely perfumery compounds, without issuing any tax invoice and without payment of GST - A prayer for bail is not to be denied merely because of the sentiments of the community are against the accused. The primary purposes of bail in a criminal case are to relieve the accused of imprisonment, to relieve the State of the burden of keeping him, pending the trial - This is a fit case to exercise this Court’s discretion of granting bail to the applicant - HC Visit to Get Source Expired E-way bill - Seizure of goods alongwith vehicle - The petitioner needs to be given another chance to establish, as to why the subject goods did not reach their designated designation before the expiry of the e-way bill - matter is remanded to respondent no. 2, to take a fresh decision - HC Visit to Get Source Expired e-way bill - Levy of penalty - the discrepancy pointed out is only on the date of invoice which is shown as 03.02.2021 while that shown in the e-way bill was 02.03.2021. All other details in the invoice and the e-way bill tallied and had no discrepancy - Thus the error noticed is insignificant and not of any consequence for invoking the power conferred under section 129 of the Act to impose tax and penalty. - HC Visit to Get Source Expired e-way Bill - Levy of penalty - Seizure of goods alongwith the vehicle - The tax/penalty under section 129 of CGST/HPGST Act 2017 cannot be imposed merely on the basis of Expiry of E-Way bill and without proving the intention to evade the tax - the impugned order passed by the Proper Officer are quashed and set aside. However, a penalty of Rs. 15,000/- is imposed under section 125 of HPGST/CGST Act on the Appellant. Visit to Get Source Income Tax Recovery proceedings - attachment of properties from the buyers of the assets - allegation of collusion - Period of limitation to recover tax in case of defaulting assessee - In light of the statutory embargo under Rule 68B, the attachment of the properties in question, 25 years from the elapse of the assessment years in question, is wholly impermissible in law. - HC Visit to Get Source Reopening of assessment u/s 147 - AO jurisdiction in issuing notice - Once the territorial jurisdiction of respondent no.1 is admitted by the petitioner, there existed no occasion for the Assessing Officer to refer the matter for determination under sub-section (2) of Section 124 before the assessment was made. - Merely because some pecuniary limit has been fixed for purpose of distribution of work between officers, it would not mean that there shall be inherent lack of jurisdiction of AO - HC Visit to Get Source Delay in filing an appeal before CIT(A) - assessee was pursuing the matter at wrong forum - It can be appreciated that the Assessee’s claim is primarily is of wrong advice in choosing the forum under law to contest the assessment order - The stringent laws of limitation require liberal interpretation. In the case in hand apparently the ld CIT(A) has not gone at all into discussing the grounds which were submitted and with the cursory observations the appeal has been dismissed barred by limitation - Delay condoned - AT Visit to Get Source Penalty u/s 271(1)(c) - Non-consideration of reply filed by the assessee - the order levying penalty suffers from violation of principle of natural justice and non-application of mind by the AO and the same cannot be allowed to stand. The AO has not exercised his power to levy penalty in a fair, reasonable and judicial manner - Penalty order quashed - AT Visit to Get Source Exemption of capital gains earned u/s 54F - delay in investment - purchase of flat in housing society as per MOU - the consequent delay being minor delay of 5 months that too for reasons beyond the control of the assessee. The intention of the assessee all along was to invest in the new property well within the stipulated time and the delay was for reasons beyond his control and was too immaterial - Benefit of exemption allowed - AT Visit to Get Source Deduction u/s.80IB(10) - Levy of tax u/s.115JC - housing project - Neither section 115JC excludes its application in respect of housing projects approved prior to its insertion nor section 80IB(10) contains any such stipulation. As this section applies to a previous year, it cannot be construed to have applicability in part qua the other incomes and inapplicability in respect of income from the housing projects approved u/s 80IB(1) prior to its coming into force - AT Visit to Get Source Reopening of assessment u/s 147 - failure to provide the copy of recording of "reason to believe" to the assessee - copy of reasons recorded has to be provided to assessee before completion of assessment order. We find that CIT(A) has rightly accepted the contention of the assessee and after relying on number of case laws, decided the issue in favour of the assessee. - AT Visit to Get Source Determination of FMV of shares - section 56(2)(vii)(c)(ii) - AO is expected to examine the applicable provisions during the assessment proceedings. However, when the provision itself cannot be invoked, since the Balance Sheet for the year ending on 31.03.2014 was adopted and approved on 22.09.2014 i.e. after the shares were purchased, therefore as per the provisions of the I.T.Act, 1961 and I.T.Rules 1962, the AO was not required to examine the applications of section 56(2)(vii)(c)(ii) as wrongly recorded by the PCIT. - AT Visit to Get Source Speculation or non speculation loss (Business Loss) - loss incurred on futures and options (derivative transactions) - Section 43(5)(d) of the Act should have to be first given effect while computing gross total income of the assessee before applying Section 73 and its Explanation thereon. - Accordingly, the set off of F & O losses with the regular business income done by the assessee is in order. - AT Visit to Get Source Loss on account of Mark to Market - Speculation or non speculation loss - the gross total income mainly consists of income from house property, income from capital accounts and income from other sources for the assessee and thereby, the case of the assessee falls in the first exception carved out in Explanation to Section 73 - in terms of Section 43(5)(d) of the Act, the loss incurred on futures and options (derivative transactions) would have to be construed only as business loss - AT Visit to Get Source Assessment framed u/s.153A - computation of period of 6 years / 10 years in search cases - amendment of provisions of section 1153A(1)(b) - while computing ten assessment years, the starting point has to be the end of the search assessment year - CIT(A) rightly held that the 10th assessment year counted from this AY 2018-19 is AY 2009-10 and he held that notice issued u/s. 153A of the Act for AY 2008-09 could not have been issued. - AT Visit to Get Source Unexplained cash deposits - difference in turnover as unexplained investments - The reasons cited by AO that assessee had failed to file any evidence regarding his business activities is not a good reason as his return of income filed on the basis of same business has been accepted for making additions on account of cash deposits. - AO directed to assess the tax by applying 8% N.P. rate on total deposits - AT Visit to Get Source Customs Refund claim of customs duty - short landing of the imported goods - This is not a case for remission of duty but is a case of application for refund on the ground that duty was paid in excess reckoning the total quantity of goods as mentioned in the Bill of Lading while lesser quantity was actually imported/landed by the vessel. - The self assessment of duty (Bill of entry) by the appellant has attained finality and has not been appealed against, refund cannot be allowed - AT Visit to Get Source Indian Laws Dishonor of Cheque - interpretation clause ‘c’ of the proviso to section 138 of N.I. Act - Admittedly in the case in hand, the required notice was issued on 01.03.2016 which is not in dispute, however, the case has been filed on 21.03.2016, there is strict bar of filing the case in view of clause(c) of section 138 of N.I.Act before expiry of 15 days and if it is so, no cognizance of offence be taken on the basis of such complaint. - HC Visit to Get Source Central Excise Clandestine Removal - demand based on printouts taken from the computer at the factory premises itself during the course of search - , there is no certificate to such printouts, as required under Section 36B of the Act, in absence of which, the data retrieved from computer is not reliable - There is no merit in the ground taken for rectification by Revenue. - AT Visit to Get Source Validity of SCN - Reversal of CENVAT Credit - demand at specified percentage of the sales/transfer value of the exempted product - The appellant have reversed the proportionate Cenvat credit in terms of Rules 6 (3)(ii) of CCR, thus, there is no application of Rule 6 (3)(i). It is further found that the situation is wholly revenue neutral, as both the units under common management and ownership are paying duty on their dutiable finished product - AT Visit to Get Source VAT Levy VAT - health care services - supply / sale of goods to patients - implants, surgical items and medicines sold by the respondents - sale or service - whether the same was falling within the ambit of definition of "sale" as defined under Section 2(35) of the RVAT Act, 2003 or not? - test of predominance - cannot be classifiable as sale or supply of goods but the transaction will be of service on account of Predominant Test/ Aspect Doctrine - HC Visit to Get Source Case Laws: GST 2022 (9) TMI 95 Seeking grant of bail - illicit supply of finished goods, namely perfumery compounds, without issuing any tax invoice and without payment of GST - Compounding of offences - Section 132 (1) (i) of the Act - HELD THAT:- The position of law regarding grant of bail which emerges from the judgments of the Supreme Court, is that the basic jurisprudence relating to bail in economic offences remains the same inasmuch as the grant of bail is the rule and refusal is the exception so as to ensure that the accused has the opportunity of securing fair trial. It is not advisable to categorize all the economic offences into one group and deny bail on that basis. One of the circumstances to consider the gravity of the offence is the term of sentence that is prescribed for the offence the accused is alleged to have committed. Even if the allegation is one of grave economic offence, it is not a rule that bail should be denied in every case since there is no such bar created in the relevant enactment passed by the legislature nor does the bail jurisprudence provide so. A prayer for bail is not to be denied merely because of the sentiments of the community are against the accused. The primary purposes of bail in a criminal case are to relieve the accused of imprisonment, to relieve the State of the burden of keeping him, pending the trial, and at the same time, to keep the accused constructively in the custody of the court, whether before or after conviction, to assure that he will submit to the jurisdiction of the court and be in attendance thereon whenever his presence is required. This is a fit case to exercise this Court s discretion of granting bail to the applicant - the bail is granted subject to conditions imposed - application allowed. 2022 (9) TMI 94 Seizure of goods alongwith vehicle - goods not covered by valid documents - expired E-way bill - petitioner did not avail of the opportunity to demonstrate, that the goods could not reach their destination before the expiry of the validity period of the e-way bill - HELD THAT:- It is not in dispute, that against the subject goods, the tax stands paid, and that the impugned demand has been raised, only for the reason that at the time of interception, the e-way bill was not valid - This is not a case where the petitioner intended to evade tax. However, the impugned demand seeks not only the payment of tax, but also penalty. The petitioner needs to be given another chance to establish, as to why the subject goods did not reach their designated designation before the expiry of the e-way bill - matter is remanded to respondent no. 2, to take a fresh decision in the matter, after giving the petitioner due opportunity to produce relevant material/evidence to establish its case, that the delay in transporting the goods to their destination was on account of genuine reasons. Petition allowed by way of remand. 2022 (9) TMI 93 Validity of SCN - SCN did not inform the petitioner of the exact reasons thereby disabling the petitioner to file an effective reply - Section 74 of the GST Act, 2017 - HELD THAT:- If the petitioner has not yet filed any reply to the said show cause notice dated 24.12.2021 issued under Section 74 of M.P.G.S.T Act 2017 in relation to the assessment year 2017-18, then the petitioner is directed to submit a reply to the same within 30 days and with a corresponding direction to the competent Authority to decide it as expeditiously as possible. If a reply has already been submitted to the subsequently issued show cause notice dated 24.12.2021, then the same shall be considered along with earlier reply and the competent authority i.e. respondent No.3 shall proceed to pass appropriate orders in accordance with law as expeditiously as possible. Petition disposed off. 2022 (9) TMI 92 Expired e-way bill - Levy of penalty - Maintainability of petition - availability of alternative remedy of appeal - Detention of goods alongwith the vehicle - suppression or evasion of tax or not - HELD THAT:- The availability of the alternate remedy does not dissuade from granting relief as it is opined that the demand for tax and the imposition of a major penalty, in the facts of this case, was clearly without jurisdiction. The reason for invoking Section 129 of the CGST laws in this case, is only one, that the e-way bill has expired - In the facts of the present case, it is clear from a reading of Ext.P3 that the vehicle (the goods) was accompanied by an invoice which showed the value of the vehicle to be Rs.23,96,505.64 including IGST at Rs.5,24,016.86. It was also accompanied by an e-way bill that was valid up to 8.7.2019. The only discrepancy noted was that the e-way bill had expired on 8.7.2019. Circular No.64/38/2018 dated 14- 09-2018 reveals that the purpose of issuing such a Circular was to mitigate the hardships being caused to taxpayers for minor discrepancies, which had no bearing on the liability to tax or on the nature of goods being transported. The circular is statutory in nature and is binding on the Tax Officers. Thus minor discrepancies cannot be penalized contrary to the mode and procedure contemplated under the Circular. In the instant case, the discrepancy pointed out is only on the date of invoice which is shown as 03.02.2021 while that shown in the e-way bill was 02.03.2021. All other details in the invoice and the e-way bill including the nature of goods transported, the details of consignor and consignee, the GSTIN of supplier and recipient, place of delivery, invoice number, value of goods, HSN code, vehicle number etc. tallied and had no discrepancy. Thus the error noticed is insignificant and not of any consequence for invoking the power conferred under section 129 of the Act to impose tax and penalty. The situation arising in the instant case, warranted imposition of only a minor penalty as contemplated under the Circular. In view of the above, the imposition of tax and penalty upon the petitioner to the extent imposed in Ext.P6 is perverse and illegal, warranting interference under Article 226 of the Constitution of India. The matter will stand remanded to the 1st respondent who shall consider the amount of penalty to be imposed on the petitioner taking note of the findings in this Judgment and also keeping in mind the observations of this Court in Ext.P6 judgment (extracted hereinbefore), after affording an opportunity of hearing to the petitioner - petition allowed by way of remand. 2022 (9) TMI 91 Seizure of goods alongwith the vehicle - the e-way bill was found expired at the time of inspection of the vehicle - levy of tax alongwith the penalty - HELD THAT:- The person in-charge of the conveyance carrying any consignment of goods of value exceeding Rs.50,000/- should carry a copy of documents v.i.z invoice/bill of supply/delivery challan/bill of entry and a valid e-way bill in physical or electronic form for verification. Non furnishing of information in Part-B of form GST EWB-01 amounts to the e-way bill becoming not a valid document for the movement of goods by road as per Explanation (2) to rule 138(3) of HPGST/CGST Rules, except in the case where the goods are transported for a distance of fifty KM within the state or Union Territory to or from the place of business of the transporter to the place of business of the consigner or the consignee. as the case may be. As per the orders of the proper officer notice under section 20 of IGST Act read with section 129 of the HP GST Act was issued on 01/07/2019 directing both the supplier and the recipient to appear on or before 01/07/2019 at 3.00 PM to explain as to why penalty under the above stated sections should not be imposed. It is further mentioned in the order that the validity of the c-way bill had expired on 12/05/2019, whereas, the vehicle was detected on 01/07/2019 - Moreover in the impugned order there is not even a whisper nor in the body of the order which shows that the Appellant was liable to payment of tax and penalty despite the fact that IGST had already been paid on the transaction under question. The order is totally bereft of any reasoning. Before the commencement of movement of goods the supplier had raised the tax invoice. The e-way bill was also generated prior the commencement of movement which contained the details of goods, tax invoice, as well as the buyer of the goods including his registration number under the GST Act. Once the tax invoice is issued and the e-way bill generated through online GST Portal containing all details regarding the goods the information of such transaction is available with GST authorities also, therefore, the possibility of tax evasion is very remote. The tax/penalty under section 129 of CGST/HPGST Act 2017 cannot be imposed merely on the basis of Expiry of E-Way bill and without proving the intention to evade the tax - the impugned order passed by the Proper Officer are quashed and set aside. However, a penalty of Rs. 15,000/- is imposed under section 125 of HPGST/CGST Act on the Appellant. Respondent is directed to recover the amount of penalty and refund the balance to the Appellant as per law - appeal allowed. Income Tax 2022 (9) TMI 105 Reopening of assessment u/s 147 - new notice issued rather than orders to be passed u/s 148A(d) - validity of the AO s action in issuing the notice dated 23rd June 2022 - Whether contents of notice dated 23rd June, 2022 is distinct from the reasons to believe dated 27th March, 2021? - In the notice dated 23rd June 2022, the AO sought an explanation from the petitioner for receipt on an amount from an entity namely M/s Subhshree Financial Management Pvt. Ltd. during the relevant Financial Year - HELD THAT:- We are unable to accept the contention of learned counsel for the petitioner that the AO was precluded from providing the information set out in the notice dated 23rd June, 2022. In the impugned order, the AO has noted that information contained in the notice dated 23rd June, 2022 was provided to the petitioner upon her request for further material as per her reply dated 23rd May, 2022. The impugned order specifically identifies that the transaction of the petitioner with M/s Subhshree Financial Management Pvt. Ltd. dated 10th August, 2012 is subject matter of notices. In the facts of the present case as well, the petitioner in her reply dated 24th May, 2022, had while highlighting that the assertions of the AO in the notice dated 17th May, 2022 were vague had specifically sought better material and information from AO to enable a rebuttal. The issuance of notice dated 23rd June, 2022 furnishing specific details of the transaction, which as per AO is subject matter of the notice dated 17th May, 2022 cannot be faulted. A perusal of the notice dated 23rdJune, 2022 and impugned order dated 22nd July, 2022 shows that as per the AO the details of the transaction which form the basis of the notices dated 19th April, 2021 and 23rd June, 2021 are same. It is the case of the respondent that the said material was available on record and the said form the basis of the inquiry, when the initial notice dated 19th April, 2021 was issued. Pertinently, the petitioner has not offered any explanation for the transaction(s) entered with M/s Subhshree Financial Management Pvt. Ltd. Limited in the relevant financial year in her reply dated 27th June, 2022. In the absence of any explanation offered in her reply, we do not find any error in the impugned order issued by the AO. We also do not agree with the contention of the petitioner that she was denied an opportunity to respond to the allegations made in the notice dated 23rd June, 2022. Petitioner filed a detailed reply on 28th June, 2022 but elected not to explain or substantiate the transaction between the petitioner and M/s Subhshree Financial Management Pvt. Ltd. The petitioner having elected to not furnish the said information cannot contend that she was denied an opportunity of hearing. The petitioner does not dispute that there were transactions between petitioner and M/s Subhshree Financial Management Pvt. Ltd. in the relevant Financial Year. Petitioner s contention in the writ petition that this transaction was a loan transaction and it stood repaid, the same is a bare averment, unsubstantiated and it is neither evident from the record nor can this fact be determined in these proceedings, when the allegation of the Department is that it was an accommodation entry. The said submission of the petitioner will be examined by the AO in the assessment proceedings after perusing the material furnished by the petitioner. The reply dated 27th June, 2022 offered no such explanation, much less the above explanation for the transaction. This Court finds no infirmity in the impugned order passed by the AO. Accordingly, the present writ petition and application are dismissed. 2022 (9) TMI 104 Validity of Assessment u/s 153C r.w.s. 153A - issue notice for assessing or reassessing the total income for six assessment years - Period of limitation - notice for assessment year falling within six assessment years immediately preceding the assessment year - HELD THAT:- In the present case, the satisfaction note (as placed by revenue on record) has been recorded by Ld. AO on 24.09.2013 which falls in previous year 2013-14, the relevant assessment year for which is AY 2014-15. The year before us is AY 2007-08. Clearly, this year would be out of the purview of proceedings u/s 153C as per statutory mandate. This being so, the Ld. AO, in our considered opinion, had no jurisdiction to proceed u/s 153C and therefore, the consequential assessment as framed by Ld. AO could not be sustained in the eyes of law. Issuance of notice u/s 153C could not be sustained in the eyes of law for the year under consideration since the jurisdictional conditions to issue the same was not fulfilled and it was barred by limitation. Resultantly, the consequential assessment framed by Ld. AO would have no legs to stand.- Decided in favour of assessee. 2022 (9) TMI 103 Addition u/s 69A - Unexplained cash deposited in Bank account - Cash deposited by the assessee during the demonetisation period - assessee argued that deposits was out of withdrawals made earlier from the very same bank account - HELD THAT:- Amount withdrawn by the assessee was much more than the amount deposited in the very same bank account due to demonetisation - in the present case, the Revenue has not brought anything on record to show that the cash which was withdrawn by the assessee was already utilised for any other purpose. Surprisingly, the learned CIT(A) has also doubted the reason for re-depositing the cash, even during the demonetisation period. Revenue merely presumed that the cash withdrawn by the assessee from 28/07/2016 till 28/10/2016 was utilised by the assessee, without bringing anything on record. We find no reason to sustain the addition made by the lower authorities, particularly when both cash withdrawal and deposit are duly substantiated from the bank statement of the very same branch. Accordingly, we direct the AO to delete the addition made under section 69A - Ground No. 1 raised in assessee's appeal is allowed. Addition on account of cash deposited in the bank account of the partnership firm - unexplained money of the assessee - HELD THAT:- In the present case, nothing has been brought on record by the Revenue to support the above presumption. There is also no examination into the financials and business of the firm. Nor the statement of any other partner has been recorded, which could support the presumption reached by the Revenue. As it is pertinent to note that the transaction of cash deposit is made in the bank account of the firm, which is undoubtedly a separately assessed entity and also file its return of income. Thus, the aforesaid transaction of cash deposit was required to be examined in the hands of the firm rather than the assessee, which was one of the partners in the said firm. It is not the case of Revenue that in the assessment of firm it has been found that the cash belongs to the assessee. Therefore, in view of the above, we find no reason to sustain the addition in the hands of assessee on the basis of cash deposited in the bank account of the firm, which is a separate assessable entity. Accordingly, we direct the AO to delete the addition made under section 69A - Ground No. 2, raised in assessee's appeal is allowed. 2022 (9) TMI 102 Deemed dividend u/s.2(22)(e) - addition made towards the premium on redemption of the preference shares, valuation methodology of preference shares - Determination of fair market value - Scope of Rule 11UA(1)(c)(b) - HELD THAT:- A combined reading of the said rule with rule 11UA(1)(c)(c) can be taken to mean that for the purpose of valuation of preference shares also the immovable properties to be considered at guideline value since the value based on the guidance note represents the economic and commercial value of the preference shares on the date of valuation. In the given case the assessee has obtained the valuation report from the Chartered Accountant (CA) which is placed on record in page 198 of the paper book thereby complying with the requirement of the rule (1)(c)(c). In the certificate, for the purpose valuation of Equity and Preference shares, the guideline value of the land and building is considered by the CA which in our view is correct. In the light of these discussions, we see no fault in the approach of the assessee in considering the guideline value of land building to arrive the fair value of preference shares that it would fetch in the open market on the valuation date and arriving at the premium value for redemption of the preference shares. Method of valuation adopted as NAV is not disputed as the TPO has also applied the same method and impugned addition has arisen only due to the value of land and building considered by the TPO for arriving at the NAV. Considering the guideline value of land and building for the purpose of valuation of preference shares under NAV method is the right. Therefore the addition made by the TPO computing the differential premium basis the book value of assets is not sustainable. Since we have held that there cannot be any addition made towards the premium on redemption of the preference shares, the addition made by the CIT(Appeals) considering the same as deemed dividend u/s.2(22)(e) also will not survive. The appeal for the assessment year 2010-11 is allowed in favour of the assessee. Excess premium paid to APFI by the assessee on redemption of preference shares cannot be taxed u/s.2(22)(d) or 2(22)(d) - AY 2009-10 - As sub-clause (d) of sec 2(22) is applicable when there is any distribution by the company to its shareholders by a company on the reduction of its capital and in order to attract clause (d), the payment should be by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares. In the given case, the payment made by the assessee towards premium of redemption of preference shares is neither towards reduction of share capital nor towards advance or loan. We are therefore in agreement with the various arguments put forth by the ld AR in this regard. We are of the considered view that the excess premium paid to APFI by the assessee on redemption of preference shares cannot be taxed u/s.2(22)(d) or 2(22)(d) and delete the addition made by the CIT(Appeals). Appeal of assessee allowed. 2022 (9) TMI 101 Bad debts written off - Addition of sundry debtors written off - Amount in question written off as bad debt was not offered by the assessee company as its income in the year under consideration - as per revenue one of the conditions for allowing claim of the assessee for bad debt written off was not satisfied inasmuch as the fact that the amount of bad debts written off having already been offered by the assessee-company as its income in the year under consideration or in the earlier years was not established - HELD THAT:- As rightly submitted by assessee in this regard, the claim of having raised the bills on the concerned creditors was duly made by the assessee while explaining the reasons before the AO for non-acceptance of the said bills by the concerned debtors. We also find merit in the contention of assessee that the fact that these amounts were appearing as sundry debtors in the books of account of the assessee shows that the corresponding bills were duly accounted for by the assessee in its books of account and the income was duly recognized. CIT(A) in paragraph No. 2.3 of his impugned order has clearly stated that these debts having been written off in the books of account of the assessee-company in the year under consideration and having already been credited as income in the preceding year(s), the same are allowable as expenditure under Section 36(1)(vii) - we find no justifiable reason to interfere with the impugned order of the learned CIT(A) giving relief to the assessee on this issue and upholding the same, we dismiss Ground No.1 of the Revenue s appeal. Disallowance of Attimari Coolie expenses - entire amount of Attimari Coolie expenses claimed by the assessee was disallowed by the Assessing Officer for want of supporting evidence without disputing or doubting that the said expenses were fully and exclusively incurred by the assessee for the purpose of business - CIT-A restricted addition @ 25% of total expenses - HELD THAT:- we find no infirmity in the order of the learned CIT(A) on this issue restricting the same to 25% which is quite fair and reasonable. Moreover, the learned CIT(A) has followed the order of his predecessor on a similar issue in assessee s case for AY 2009-10 where a similar disallowance made by the Assessing Officer was restricted to 25%. At the time of hearing before us, the learned DR has not brought on record anything to show that the said order of the learned CIT(A) giving relief to the assessee on this issue in the immediately preceding year i.e. AY 2009-10 was challenged by the Revenue and the same has been disturbed by the Tribunal. We, therefore, find no justifiable reason to interfere with the order of the learned CIT(A) giving relief to the assessee on this issue and upholding the same, we dismiss Ground No.2 of the Revenue s appeal. 2022 (9) TMI 100 Gain on sale of Project - LTCG or business income - bifurcating the sale proceeds - sale of land treated as business profits by the assessee - bifurcating the sale proceeds of Project RMT-I (Profits on sale of land offered under LTCG and the profits on sale of flats offered as business profits) - HELD THAT:- As has been done in the assessment year 2008-09 [ 2019 (1) TMI 1987 - ITAT CHENNAI] the Assessing Officer continued to assess the income derived from the land of project RMT-II as business income in the assessment years 2009-10 to 2011-12 including the assessment year 2012-13 under consideration. As the Coordinate Benches of the Tribunal has remitted the matter back to the file of the Assessing Officer, we also remit the matter back to the file of the Assessing Officer for fresh consideration for the assessment year 2012-13. Thus, the ground raised by the Revenue is allowed for statistical purposes. Addition towards reworking of cost of construction - difference of cost of construction adopted by the assessee and the cost of construction calculated by the Assessing Officer - HELD THAT:- CIT(A) has observed that the calculation carried out by the Assessing officer in the impugned assessment order, the expenditure incurred towards construction of flats has been rightly considered on proportionate basis whereas, the assessee has considered the entire amount which are not in accordance with the facts of the case. Hence, the Ld. CIT(A) has held that the discrepancy arrived at by the assessee is not correct and accordingly, the discrepancy worked out by the Assessing Officer was confirmed. In view of the above facts, we find no infirmity in the order passed by the Ld. CIT(A) on this issue and accordingly, the ground raised by the assessee is dismissed. Disallowance u/s 14A r.w. Rule 8D - income from dividend is exempted from tax and assessee had claimed certain business expenses, however, the assessee has not admitted any expenses attributable to the earning of exempt income, accordingly, by applying the provisions of Rule 8D, the Assessing Officer determined the expenses attributable to earning of exempt income - HELD THAT:- CIT(A) has observed that the provisions of section 14A contemplate those expenses which the assessee may have incurred towards the investment attributable to exempt income - as observed that the expenses of personal in nature do not fall within the ambit of section 14A - CIT(A) rightly confirmed the disallowance made u/s 14A - no infirmity in the order passed by the Ld. CIT(A) on this issue. Accordingly, the ground raised by the assessee is dismissed. 2022 (9) TMI 99 Reopening of assessment u/s 147 - addition attributable to the reasons recorded - relation between the reasons recorded and the additions made - Assessee had made huge cash deposits in bank accounts - Whether in the absence of any addition made on the vary reasons recorded, no further addition in this case is warranted? - HELD THAT:- We have gone through the record and find that there is no relation between the reasons recorded and the additions made. As per the record before us, the AO has not enquired about the deposits in the bank and no addition has been made on account of any of the amounts received on 10 occasions as mentioned in the reasons recorded. Since, no addition has been made on the reasons recorded and since the additions made have no relation with the reasons recorded while reopening the case and cannot be attributable to the reasons recorded, hold that the Assessing Officer had deficiency of jurisdiction in assessing any other income unrelated to the reasons recorded and owing to the facts of the instant case, the Explanation 3 to Section 147 is not attracted. - Decided in favour of assessee. 2022 (9) TMI 98 Disallowance u/s 14A r.w. r. 8D - AO sought to disallow the expenditure relatable to earning of tax-free income - As contended by the assessee that it has not earned any dividend or exempted income during the year - HELD THAT:- We are of the view that no disallowance is required to be made in the case of assessee because it has not earned any tax-free income as was in the case of M/s. Era Infrastructure (India) Limited [ 2022 (7) TMI 1093 - DELHI HIGH COURT ] before the Hon'ble Delhi High Court. We allow the appeal and delete the addition. 2022 (9) TMI 97 Addition of excessive employee benefit expenses - assessee had not furnished the requisite details to the AO - CIT-A deleted the addition - HELD THAT:- It is the prerogative of the assessee to increase or decrease the salary of the employees. Nothing has been brought on record by the revenue suggesting that the salary was not paid by the assessee in the course of the business. Moving further, the amount of salary is generally fixed in nature, meaning thereby, it cannot be linked with the turnover of the assessee company. The amount of salary cannot increase and decrease in proportion to the turnover of the assessee. Thus, to our understanding, the reasoning given by the AO for making the disallowance of the salary that the salary of the assessee has increased whereas the turnover of the assessee has decreased does not seem to be tenable. Likewise, there was not filed any audited financial statements by the assessee in the earlier assessment years cannot be a ground for making the disallowance. It is for the reason that if the assessee has not filed the audited financial statements, there are separate proceedings provided under the provisions of the Act which has to be initiated against the assessee. There is no whisper in the assessment order whether such proceedings have been initiated against the assessee. So on this reasoning as well, there cannot be any disallowance of the expenses as made by the AO. Disallowance has been made by the AO on adhoc basis being 40% of the amount of salary though there is no provision under the Act for making the adhoc disallowance until and unless some evidences is available on record, suggesting that the employee salaries paid by the assessee is excessive and unreasonable in comparison to the prevailing market practice. In view of the above, we do not find any infirmity in the order of the learned CIT-A and therefore, we decline to interfere in his order. Thus, the ground of appeal of the revenue is hereby dismissed. Addition of unexplained loan and advances - claim that the advances were in nature of trade advance was not supported by the corroborative material - whether the loans and advances given in the course of the business can be treated as income under the provisions of law? - HELD THAT:- There is no provision under the Act suggesting to make the addition of the amount advances to the parties as income of the assessee. It is for the reason that the advances given by the assessee has not been claimed as deduction against the income. In the later years, when these advances are adjusted against any expenses, the question may arise in that relevant year whether such deduction by way of expenses is eligible against the income shown by the assessee. Even in that year, question of treating the advance as income of the assessee would not arise. There can be a dispute with respect to the claim made by the assessee against such advances. In other words, the advances given by the assessee per se cannot be treated as income of the assessee. We find from the submission of the assessee made before the learned CIT-A that these advances were made in the course of the business which were adjusted in the later years - assessee has filed the copies of the ledger of the parties along with the payment vouchers the genuineness of these documents were nowhere doubted by the authorities below. Even at the time of hearing, the learned DR appearing on behalf of the Revenue has not brought anything on record contrary to the finding of the learned CIT-A. Hence we do not find any infirmity in the order of the learned CIT-A and therefore we uphold the same. Thus the ground of appeal of the revenue is hereby dismissed. Difference in the opening stock and closing stock - AO during the assessment proceedings observed that the assessee has shown opening stock whereas as no return and tax audit report furnished for the last 2 immediate preceding assessment years - HELD THAT:- Admittedly, the assessee has not filed the return of income of the immediate preceding assessment years but non-filing of the income tax return cannot be a ground to disturb the opening stock of the current year until and unless some material is brought on record suggesting that the closing stock of the immediate previous is not genuine. It is also important to note that the assessee has made subsequent sales out of the opening stock which were not disturbed by the revenue authorities. The sale is possible by the assessee only out of the purchases or out of the stock held in opening stock, but the revenue has not disturbed the quantity of the items in which he is dealing. In view of the above and after considering the facts in totality, we are not inclined to uphold the addition made by the AO with respect to the opening value of stock. Difference found in the valuation of closing stock - On perusal of the sales register filed by the assessee we note that the assessee has sold different products are different rate. Most of the products were sold at a price less than 180 except on 3 of the occasions the price was charged by the assessee ₹ 412 of its product. Thus from these details, it is transpired that the assessee has not taken any price in the valuation of the closing stock based on artificial figure. Thus, details filed by the assessee for valuing the closing stock cannot be rejected in arbitrary manner. Thus in view of the above and after considering the facts in totality, we do not find any infirmity in the order of the learned CIT(A). Hence the ground of appeal of the revenue is hereby dismissed. Unexplained cash in hand shown as on 31-3-2016 in the audited financial statements - CIT-A deleted the addition - HELD THAT:- The cash in hand as on 31st of March 2016 is the net effect of cash receipts and payments made in the year under consideration. The receipt of cash arises from multiple sources such as sales realization, withdrawal from the bank, receipt of money in cash from any other source - payment of cash represent certain transactions such as deposit in the bank, payment against the purchases/expenses, loans and advances in cash etc. As such, the closing balance of cash cannot be questioned or disturbed without bringing any tangible material on record qua the cash transactions carried out by the assessee in the year under consideration. In the case on hand, the closing balance has been doubted by the AO without disturbing the cash transactions carried out by the assessee in the year under consideration. Thus, we do not find any infirmity in the order of the learned CIT-A. Accordingly, we uphold the same. Hence the ground of appeal of the revenue is by dismissed. 2022 (9) TMI 96 Addition u/s 68 - assessee has failed to offer satisfactory explanations with regard to nature and source of amounts received by the assessee - specific method for valuing preference shares - assessee has not substantiated share premium amount - addition alternatively u/s 56(2)(viib) - HELD THAT:- AO has made detailed enquiries with MFPL, being the subscriber of the preference shares and it has duly replied to all the queries posed by the AO - it has also furnished various evidences available with it. We notice that the AO did not disprove the submissions and evidences so furnished by MFPL. It is well established proposition of law that the initial onus to prove the cash credit is placed upon the assessee, i.e., the assessee has to prove three main ingredients, viz., the identity of the creditor, credit worthiness of the creditor and the genuineness of the creditor. CIT(A) has given a specific finding that the assessee has discharged the initial onus placed upon the assessee u/s 68 of the Act - AO has failed to disprove the onus discharged by the assessee, in which case, the AO could not have made the addition u/s 68 of the Act. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting the addition made u/s 68 of the Act. Addition made u/s 56(2)(viib) - The provisions of Rule 11UA(1)(c) do not prescribe any specific method for valuing preference shares. The valuation of preference shares under Discounted Free cash flow method is one of the recognized methods and there is nothing in the provisions that the said method should not be used. Hence we are of the view that the Ld CIT(A) was justified in deleting the addition made u/s 56(2)(viib) of the Act. Accordingly, we confirm the order passed by Ld CIT(A). 2022 (9) TMI 90 Disallowance of interest expenditure u/s 36(l)(iii) - borrowed funds were not utilized for the purposes of the business of Assessee but diverted to Group Companies without charging any interest thereon - HELD THAT:- Disallowance of interest expenditure made under Section 36(l)(iii) of the Act observed that the loans and advances included the investment in the immovable property and was part of the business activity, investment in the partnership firm was made wholly and exclusively for the purpose of the business, the advances recoverable and forward cover receivable included in the advances were business advances and the same were given to the suppliers with whom regular business transactions had been carried out, the advance to the DLF Ltd. given for the purpose of business and the other advances on which interest had been charged by the Assessee had been shown in the Schedule 17 forming part of the financial accounts. CIT (A) further noted that the loans and advances had been given on account of the Commercial Expediency and no notional interest could be charged on such advances given for the purposes of business. Addition u/s 14A read with Rule 8D - suo moto disallowance made by assessee - ITAT observed that the Appellant had own funds which were far more than the investments and the plain reading of Sections 14A(2) and 14A(3) showed that when the Assessee offered disallowance under Section 14A of the Act, the provisions of Section 14A(2) read with Rule 8D could not be invoked unless the Assessing Officer was dissatisfied about the correctness of disallowance so offered. Both the appellate authorities below, relying on the decision of this Court in Maxopp Investment Ltd. [ 2011 (11) TMI 267 - DELHI HIGH COURT] affirmed by Supreme Court in Maxopp Investment Ltd. v. Commissioner of Income-tax [ 2018 (3) TMI 805 - SUPREME COURT] deleted the addition made by the Assessing Officer under Section 14A of the Act observing that the Assessee had made a suo moto disallowance . Revenue appeal dismissed. 2022 (9) TMI 89 Reopening of assessment u/s 147 - AO jurisdiction in issuing notice - only submission of the petitioner is that the impugned notice u/s 148 issued by the respondent No.1 [ITO-2(1)] is without jurisdiction inasmuch as the ITO Ward 2(1) is not the jurisdictional assessing officer for the AY 2017-18 - HELD THAT:- Under sub-section (1) of Section 124 of the Act, 1961 the AO who has been vested with jurisdiction over any area, shall have jurisdiction within the limits of such area. Sub-section (5) of Section 124 starts with a non-obstante clause and provides that every AO shall have all the powers conferred by or under the Act,1961 on an AO in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120. AO vested with jurisdiction by virtue of direction of subsection (1) and (2) of Section 120 shall have all powers conferred by or under the Act, 1961 on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction. As admitted before us that respondent no.1 i.e the ITO-2(1), Moradabad has the territorial jurisdiction over the petitioner, but only objection to the jurisdiction has been raised merely on the ground that on account of pecuniary limit, the proceedings ought to have been initiated by ACIT-2, Moradabad. Once the territorial jurisdiction of respondent no.1 is admitted by the petitioner, there existed no occasion for the Assessing Officer to refer the matter for determination under sub-section (2) of Section 124 before the assessment was made. The facts and legal position as discussed above leave no manner of doubt that the respondent no.1 is the Assessing Officer having territorial jurisdiction over the petitioner. Merely because some pecuniary limit has been fixed for purpose of distribution of work between officers, it would not mean that there shall be inherent lack of jurisdiction of respondent no.1. Therefore, it cannot be said that respondent no.1 lacked inherent jurisdiction while issuing the impugned notice under Section 148 of the Act, 1961. 2022 (9) TMI 88 Recovery proceedings - attachment of properties from the buyers of the assets - allegation of collusion - Period of limitation to recover tax in case of defaulting assessee - scope of provisions of Section 281B - creation of charge/alienation of property, pending proceedings for assessment and prior to the service of notice under Rule 2 of the Second Schedule - HELD THAT:- Admittedly, the attachments have been made after the date of purchase of the properties in question, the petitioner are unrelated to the defaulting assessee and there is no allegation whatsoever in regard to collusion between the parties. The purchase is bonafide and made for valuable consideration The proviso of section 281B protects the interests of bonafide purchasers and states that the alienation of the property by an assessee shall not be void, if it has been made by such assessee for adequate consideration and without having received any notice from the Assessing Officer of the pendency of the assessment proceedings or without notice of any tax or other sums payable by such assessee. Such charge/transfer shall also not be void had it been made with the previous permission of the assessing officer. Upon a combined reading of the certificate and attachment in terms of Forms ITCP-1 and ITCP-16 respectively, the attachment in the present case is only of the rooms of the properties and there has been no attachment of any other property of the defaulting assessee. The question then that arises is as to what is the impact of a Rule 2 notice, such as the notice in the present case, which is an omnibus notice of demand. In light of the statutory embargo under Rule 68B, the attachment of the properties in question, 25 years from the elapse of the assessment years in question, is wholly impermissible in law. The question of competence or otherwise of the assessee to have made the transfers in 2008 and 2009 becomes irrelevant as on date today, seeing as the time frame set out under Rule 68B has long expired and the respondents have, admittedly not taken any action within the time provided. It must be noted that the scheme of recovery under the Second Schedule is time bound, sacrosanct and must be enforced strictly, both qua the assessee as well as the Department. Thus the impugned attachments made after purchase of the properties by the petitioners for valuable consideration cannot be sustained by the Department. Bearing in mind the elapse of time and the sequence of events that I have noticed aforesaid, the reference to incompetence under Rule 16 is entirely misconceived. 2022 (9) TMI 87 Delay in filing an appeal before CIT(A) - assessee was pursuing the matter at wrong forum - Exemption u/s 10(23C)(iiiad) - invalid return filled - order u/s 143(1) treating the whole receipts as income of the assessee and levied a huge demand of tax - HELD THAT:- Assessee was unable to cite explanation of every day of delay. In the case in hand the Assessee is a registered society acting through it s office bearers and the Assessee filed before the ld CIT(A) an affidavit of the Manager of the society explaining the circumstances of delay and also the CA looking after the affairs of the company had also filed an affidavit. It can be appreciated that the Assessee s claim is primarily is of wrong advice in choosing the forum under law to contest the assessment order. The bench is of considered opinion that in case of society or other incorporated entities a decision to contest any order of authorities, has to be examined and decision to contest has taken following a procedure. The stringent laws of limitation require liberal interpretation. In the case in hand apparently the ld CIT(A) has not gone at all into discussing the grounds which were submitted and with the cursory observations the appeal has been dismissed barred by limitation. In fact it appears that at the time of adjudication of the appeal also none from the Assessee was present. The ends of the justice require condonation of delay and giving an opportunity to contest the assessment on merits. Ground no 1 is allowed and appeal of the Assessee is allowed for statistical purpose 2022 (9) TMI 86 Reopening of assessment u/s 147 - unexplained cash deposits - HELD THAT:- Assessee had filed return of income for the year under consideration by way of e-filing. AO recorded wrongly that no ITR was filed by the assessee. It is well-settled that reasons for re-opening of the assessment is the foundation of assumption of jurisdiction for re-opening of the assessment u/s 147 - It is also well-settled that any undisputed fact which goes to prove the reasons for re-opening of the assessment is incorrect, the re-opening of assessment fails the test of law hence, deserves to be quashed. In the present case, it is not disputed by the Revenue that the assessee had filed its return of income through e-mode under different PAN - AO has re-opened the assessment on the ground that the assessee did not file any return of income. It reflects non-application of mind and the assessment was re-opened without verifying the records. It is also not disputed that for the AY 2011-12 also, the assessee had re-opened the assessment and assessed the income of the assessee - the information before the Assessing Authority was regarding cash deposited by the assessee - Therefore, the re-opening of the assessment by the Assessing Authority and treating the entire cash deposits as the income of the assessee, is contrary to the records of the authority itself. Hence, we hereby quash the impugned assessment being illegal and unjustified and delete the addition. Thus, grounds raised by the assessee are allowed. 2022 (9) TMI 85 Reopening of assessment u/s 147 - unexplained money u/s 69A - HELD THAT:- Notices u/s 148 and 142(1) of the Act were served through affixture on the assessee. Since no compliance was made by the assessee, a final show cause notice u/s 144 dated 29.10.2018 along with notice u/s 142(1) was issued to the assessee fixing the date of hearing on 14.11.2018 to furnish the reasons why the cash deposit in the saving bank account should not treated as unexplained money u/s 69A - In the said notice it was specifically mentioned that in case of non compliance, order under section 144 shall be passed. Since, even on the said date of hearing none appeared on behalf of the assessee, therefore, the order of assessment was passed under section 144/147 thereby making the addition. From the entire sequence of events and the conduct of the assessee in non compliance of the repeated notices, it appears gross negligence on the part of the assessee and wastage of precious time. Non compliance of notice issued by the Authorities and non appearance before the Authorities inspite of repeated notices/summons is dis-regard towards the Authorities - without going into merits, considering the interest of natural justice, one more opportunity is granted to the assessee, and the file is restored back to the AO for consideration afresh, subject to cost of Rs. 5,000/- for negligent attitude during income tax proceedings, to be deposited in the Prime Minister s Care Fund and proof thereof should be produced. 2022 (9) TMI 84 Penalty u/s 271(1)(c) - Non-consideration of reply filed by the assessee - AO in his penalty order stated that nobody has attended in response to the penalty notice nor given any written submissions - Allegation of violation of principle of natural justice and non-application of mind by the AO - HELD THAT:- AO by levying penalty order has categorically held that nobody has attended during the hearing or given any written submissions in reply to show cause notice issued under section 271(1)(c) - Whereas the CIT(A) has extracted the reply dated 21.3.2013 given by the assessee in his impugned order. Thus, the order levying penalty suffers from violation of principle of natural justice and non-application of mind by the AO and the same cannot be allowed to stand. The AO has not exercised his power to levy penalty in a fair, reasonable and judicial manner. Therefore, penalty levied by the AO without considering the assessee s explanation is bad in law and hereby quashed. Thus, the ground raised by the assessee is allowed. 2022 (9) TMI 83 Validity of reopening of assessment - re-assessment being made without disposing of the objections raised by assessee - HELD THAT:- AO in assessment order has clearly mentioned that the copy of reasons recorded for reopening the case was supplied to the assessee and objections filed by it was disposed of by rejecting the same. CIT(A) has also given a finding that the information was received by AO from the Investigation Wing of the Department that the assessee was a beneficiary of taking accommodation entries in the garb of share application money from entry providers and thus on the basis of specific information received by AO from Investigation Unit AO had formed belief of escapement of income and thus reopening the re-assessment proceedings was justified. He accordingly upheld the validity of the re-assessment proceedings. As far as, the addition on the merit of Section 68 is concerned, we find that CIT(A) after considering the various case laws cited in the order and after relying on those case laws and facts of the case has upheld the addition made by AO. Before us, assessee has not placed any material on record to point out any fallacy in the findings of CIT(A). In such a situation, we find no reason to interfere with the order of CIT(A) and thus the Grounds of assessee are dismissed. 2022 (9) TMI 82 TDS u/s 195 - payments made by the assessee to NEBU of Netherland is in the nature of Royalty - HELD THAT:- Perusal of the records makes it very clear that the Ld. CIT(A) has considered the Hon ble Madras High Court in the case of Verizon Communications Singapore Pte. Ltd. [ 2013 (11) TMI 1058 - MADRAS HIGH COURT] which is considered the amended provisions of Section 9(1)(vi) with Explanation 5, gives a very expansive meaning to the term Royalty and this has a bearing on the issue s so too the various clauses in the agreements which are to be looked at in a holistic manner. The findings of the lower authorities does not require any interference. In fact the assessee s reliance in its Grounds of Appeal of Jurisdictional High Court judgment in the case of Nova Technocast Pvt. Ltd.[ 2018 (5) TMI 1182 - GUJARAT HIGH COURT] is a judgment considering Explanation 2 of Section 9(1)(iv) and is not applicable to the facts of the present case. There is no contra judgments placed before us, on the post introduction of Explanation 5 in section 9(1)(iv) of the Act, enlarging the scope of the definition of Royalty . In the absence of the same, therefore the grounds raised by the assessee are hereby rejected and the appeal filed by the assessee is dismissed. 2022 (9) TMI 81 Exemption of capital gains earned u/s 54F - delay in investment - purchase of flat in housing society as per MOU - delay in investment was for reasons beyond his control - Denial of claim on the premise of the investment of net consideration received in purchase of new residential house not having been made within the time period stipulated under section 54F - HELD THAT:- As we find that as per the facts before us, the delay in investment is of a very short period of five months that too for reasons beyond the control of the assessee, the intention of the assessee being all along to buy the new asset within the stipulated period. Therefore denial of exemption for this reason makes it a denial purely for technical reasons without considering the overall facts and circumstances of the case demonstrating the true spirit of the transaction. Assessee has sold his property on 1.12.2011 and he was required to purchase a new residential house for claiming exemption under section 54F of the Act by 31.11.2013. The conveyance deed for purchase of new property has been executed five months later i.e. on 3.5.2014. It is not disputed that after depositing the sale consideration in his capital gain account scheme in May 2012, by June, 2013 the assessee had finalized the property for purchase and entered into an agreement to purchase the same also, which transaction was finally executed on 3.5.2014. This establishes his true intention of investing in the new property all along. MOU for purchase of property clearly mentions that the occupants of the building in which a flat was purchased by the assessee had agreed to form and register a cooperative housing society which was still pending as on date of entering the MOU. That it was only in December, 2014, that the society was formed, and the Vendor was allotted share certificates, thus making his title to the property clear. And immediately thereafter, within three months of the formation of the society, the assessee got possession of his property and the entire consideration was also paid. These facts are not disputed by the Revenue. There is no iota of doubt that the delay in registration of the new property was for reasons beyond his control. We are in complete agreement with the assessee that the denial of exemption u/s 54 F in the present case is for a mere technical default in not getting the new property registered in his name within the stipulated time period of two years, as specified under section 54F of the Act, the consequent delay being minor delay of 5 months that too for reasons beyond the control of the assessee. The intention of the assessee all along was to invest in the new property well within the stipulated time and the delay was for reasons beyond his control and was too immaterial. Thus we hold that the assessee is entitled in law to claim exemption of capital gains amounting to Rs.1,08,69,338/- under section 54F of the Act and direct the AO to allow the claim of the assessee. 2022 (9) TMI 80 Deduction u/s.80IB(10) - Denial of deduction as assessee failed to complete the project within the time stipulated as per the provisions of section 80IB(10) - Date of completion of the housing project - HELD THAT:- There is no reference to the alleged completion letter dated 7.3.2012 in such a Certificate. Further, the completion letter dated 24.9.2012 also does not refer to the alleged completion letter of 7.3.2012. Even otherwise, the letter dated 24.9.2012 also does not talk of the completion of construction in full. It says that: `Now, the entire project is virtually complete on the site . When the project was not fully complete but only virtually complete on 24.9.2012, it obviously, could not have been completed more than six months before that on 7.3.2012. We, therefore, treat the alleged earlier letter of 7.3.2012 as farce, whose even furnishing to the competent authority is unproved. Even if the letter is assumed as genuine, it does not indicate the final completion of construction, which was even not fully complete by 24.9.2012. In such a situation, we find it difficult to accept the contention of the assessee that the construction was completed on 7.3.2012 so as to qualify as the date of completion certificate. The sequitur is that the construction was completed after 24.9.2012 but before 30.3.2013, when the construction got fully completed beyond the virtual completion. Date of approval of the housing project by the local authority - The housing project was approved on 30.03.2007 and a period of five years from the end of the financial year in which the housing project was approved by the local authority, came to an end on 31-03-2012. Since the actual completion of the project took place between 24-09-2012 (when the assessee intimated the factum of virtual completion of the project to the District Collector) and 30.3.2013 (when the completion certificate was issued by the competent authority), the condition of completing the construction within a period of five years from the end of the financial year in which the housing project was approved, got vitiated, making the assessee ineligible for deduction u/s.80IB(10) of the Act. We, therefore, overturn the impugned order and restore the order of the AO. Levy of tax u/s.115JC - assessee computed its income under the regular provisions and also the adjusted total income u/s.115JC - HELD THAT:- AR contended that though this section is applicable to the year under consideration, but it should not be applied because the housing project was approved in an earlier year, when this section was not in vogue. We do not find any logic in the interpretation of this provision as made by the AR. This section applies as one unit for a previous year, when the income under the regular provisions is less than the adjusted income under it. Neither section 115JC excludes its application in respect of housing projects approved prior to its insertion nor section 80IB(10) contains any such stipulation. As this section applies to a previous year, it cannot be construed to have applicability in part qua the other incomes and inapplicability in respect of income from the housing projects approved u/s 80IB(1) prior to its coming into force. If the contention of the ld. AR is taken to a logical conclusion, it would mean that the section shall apply in a truncated manner, so as not to apply in respect of income from the housing projects approved earlier but apply in respect of the projects approved after the cut-off date and also other items of income, which is patently fallacious having no legal sanction. The contention of the assessee does not hold water because the assessee is seeking non-application of section 115JC on the strength of a decision, which does not have such a point raised before it. In the hue of foregoing discussion, we are satisfied that there is no merit in the ground raised by the assessee in its cross objection. 2022 (9) TMI 79 Addition of unexplained cash introduced as capital - HELD THAT:- Assessee had not complied in response to notice issued by the AO, no documentary evidences regarding genuineness of such introduction of capital before AO - AO had no other option but Rs. 5,00,000/- introduced capital was treated as unexplained capital investment u/s 69 of the Act and added back to her total income. Subsequently, at the time of hearing before the CIT(A) also the assessee contended that a sum of Rs. 8,00,000/- was withdrawn from assessee s capital towards intended expenses on 15.04.2011 and part of such withdrawal amounting to Rs. 5,00,000/- was re-deposited to the capital account. Assessee s submission was not admitted by CIT(A) as because it would be shortfall of Rs. 3,00,000/- in assessee s capital account even after crediting the net profit for the assessment year in question and the CIT(A) sustained the addition made by the ld. AO, even before us appellant also did not appear and cannot proved any contrary findings of the lower authorities below and accordingly we do not find any infirmity in the impugned order, therefore, we uphold the same. Accordingly, this issue raised by the assessee is dismissed. Addition on account of tanker - HELD THAT:- The value of asset was found missing, subsequently the details in this regard was called for from the assessee. But the assessee never complied to such notices nor file any details during entire assessment proceeding and ultimately the AO had no other option but to estimated at Rs. 1,50,000/- value of tanker for relevant assessment year and added back to the total income of the assessee. Before the CIT(A) also, the assessee did not produce any supported documents to prove the fact contrary and the CIT(a) upheld the order passed by the AO. Even before this Tribunal also, the assessee did not appear and submit any additional evidence or document to prove the fact that the addition was not sustainable - We do not find any infirmity in the findings of ld. CIT(A) and accordingly confirmed the findings made by CIT(A). Accordingly, this issue raised by the assessee is also dismissed. Addition of VAT liability - HELD THAT:- AO on perusal of audited account, it was noticed by the AO that VAT was shown as payable. However, the AO was asked the assessee to submit the copy of challan to support the actual payment of VAT was discharged and accordingly the AO had added back the amount to the total income of the assessee and the assessee while raising this issue before the CIT(A) and the assessee completely failed to show that payment of VAT was discharged and the ld. CIT(A) accordingly confirmed the action taken by the AO in respect of addition made by the AO. While we going through the findings of both the lower authority perusing the orders passed by the authorities below. We do not find any contrary view in respect of the order passed by the authorities below and while deciding this issue and we confirmed the view taken by the ld. CIT(A) in respect of deciding this issue and accordingly this issue raised by the assessee is dismissed. Accordingly, this issue raised by the assessee is dismissed. Addition on account of security deposit - HELD THAT:- AO found that the investment made made as security with LOC never appeared in balance sheet of assessee, further the assessee did not comply and filed any submission to prove the fact contrary to the findings of AO, accordingly the AO treated the deposit as unexplained income of the assessee u/s 69 of the Act and added to the income of the assessee and even before the CIT(A), the assessee did not able to show any submission and documents to prove the fact that the AO was taken contrary view, ultimately, the ld. CIT(A) affirmed the addition made by the ld. AO. We after going through the findings of the authorities below and material available on record, we do not find any infirmity in the order passed by the ld. CIT(A) while deciding this issue, therefore, we confirmed the view taken by the ld. CIT(A). Accordingly, this issue raised by the assessee is dismissed. Unexplained purchase - HELD THAT:- AO while doing the assessment he called for details from the IOC who had sold goods to assessee whereas the assessee had shown purchases from IOC and therefore, it was believed by the AO that the difference amount of purchase was unexplained purchase in the hands of assessee and was added as extra profit earned by the assessee and before the ld. CIT(A), assessee could not demonstrated any verifiable evidence, the ld. CIT(A) confirmed the action of AO. At the time of hearing before this Tribunal, assessee did not appear and submit any evidence or documents to prove the fact contrary, therefore, we do not find any infirmity in the action of ld. CIT(A) while confirming the addition made by the AO. Accordingly, this issue raised by the assessee is dismissed. Disallowance being 30% of expenses claim under the head fuel and repairs, addition on account of bonus and addition on account of sales promotion, travelling conveyance, under the head staff welfare, Misc. and general expenses and addition on account of office expenses and printing and stationery are without any basis made by the lower authorities - HELD THAT:- AO had found that assessee had incurred expenditure under various heads however no proper bills and vouchers for having incurred such expenses, assessee could not produce before the AO and even before the ld. CIT(A) assessee could not able to produce any supported bills, vouchers for such expenses and the ld. CIT(A) confirmed the order passed by the AO in this regard to the above issues. We, after, perusing the record and going through the material available on record and examining the order passed by the authorities below. We also do not find any infirmity in the impugned orders passed by the ld. CIT(A) while deciding the issues raised by the assessee. Accordingly, the issues raised by the assessee are dismissed. 2022 (9) TMI 78 Reopening of assessment u/s 147 - failure to provide the copy of recording of reason to believe to the assessee - HELD THAT:- AO in view of the judgment of Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. [ 2002 (11) TMI 7 - SUPREME COURT] was required to provide the copy of reasons to the assessee before completion of assessment which he did not do and supplied only in the month of January, 2019 whereas the assessment was completed on 19/12/2018. As regards the second argument of D. R. that the assessee applied for providing copy of reasons only in the month of January by depositing fee in January, 2019, we find that there is no fee prescribed under the Act for obtaining copy of reasons as is borne out from the provisions of section 147 148 - Providing of reasons recorded has not been mentioned in any of the sections connected with the reopening of the cases and it is only the judgment of Hon'ble Supreme Court which requires that before completion of assessment proceedings, the AO is required to provide copy of reasons to the assessee. The judgment of Hon'ble Supreme Court is binding on the Department as well as on assessee. AO was required to provide copy of reasons recorded before completion of assessment which he did not do. Reiterating the importance of providing copy of reasons to the assessee, in the case of Mithlesh Kumar Tripathi [ 2005 (11) TMI 28 - ALLAHABAD HIGH COURT] has held that if the reasons are supplied along with the notice u/s 148(2) of the Act, it shall obviate unnecessary harassment to the assessee as well to Revenue by avoiding unnecessary litigation. This is undisputed fact that the assessee, vide letter dated 07/12/2018, enclosed the acknowledgement of ITR in compliance to notice u/s 148 and also required the Assessing Officer to communicate to the assessee the copy of reasons recorded in terms of law laid down by Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. and which the AO supplied only after completion of assessment therefore, the assessment order is bad in law and is void ab initio. Various courts, including Hon'ble Supreme Court, in a number of cases have held that copy of reasons recorded has to be provided to assessee before completion of assessment order. We find that CIT(A) has rightly accepted the contention of the assessee and after relying on number of case laws, decided the issue in favour of the assessee. 2022 (9) TMI 77 Revision u/s 263 by CIT - Whether order passed by the AO u/s 143(3) r.w.s. 153A should not be revised? - Determination of fair market value of shares - provisions of section 56(2)(vii)(c)(ii) applies and the difference amount of Rs.16/- per share which should have been assessed in the hands of the assessee, being the purchaser was not properly verified by the AO - HELD THAT:- Since in the instant case the assessee has purchased shares @ Rs.36/- per share on the basis of the last audited balance sheet as on 31.3.2013 therefore, in our opinion, the order passed by the PCIT disputing the valuation of shares is totally contrary to the statutory provisions. In our opinion, merely because the director of the seller company had made a statement, the same cannot be basis for addition in the hands of the assessee unless the same is sustainable within the four corners of law. AO is expected to examine the applicable provisions during the assessment proceedings. However, when the provision itself cannot be invoked, since the Balance Sheet for the year ending on 31.03.2014 was adopted and approved on 22.09.2014 i.e. after the shares were purchased, therefore as per the provisions of the I.T.Act, 1961 and I.T.Rules 1962, the AO was not required to examine the applications of section 56(2)(vii)(c)(ii) as wrongly recorded by the PCIT. In view of the above discussion, we are of the considered opinion, that the PCIT was not justified in disputing the valuation of the shares. We accordingly set aside the order passed u/s. 263 and the grounds raised by the assessee challenging the validity of 263 proceedings are allowed. Since, the assessee succeeds on the issue of validity of 263 proceedings, the grounds challenging the validity of assessment proceedings u/s.153A in absence of any incriminating material becomes academic in nature and therefore are not being adjudicated. 2022 (9) TMI 76 Loss on account of Mark to Market - Speculation or non speculation loss (Business Loss) - loss incurred on futures and options (derivative transactions) - Section Section 43(5)(d) - whether the provisions of Explanation to Section 73 of the Act per se could be made applicable to the facts of the instant case? - HELD THAT:- In terms of Section 43(5)(d) of the Act, the loss incurred on futures and options (derivative transactions) would have to be construed only as business loss and hence the provisions of Section 73 and its explanation thereon would not come into operation at all for the same. We also hold that Section 43(5)(d) of the Act should have to be first given effect while computing gross total income of the assessee before applying Section 73 and its Explanation thereon. - Accordingly, the set off of F O losses with the regular business income done by the assessee is in order. Loss of share trading - HELD THAT:- What is left is only loss incurred on share trading and applicability of Explanation to Section 73 of the Act to the same. We have already held hereinabove that the gross total income mainly consists of income from house property, income from capital accounts and income from other sources for the assessee and thereby, the case of the assessee falls in the first exception carved out in Explanation to Section 73 - This view is further fortified by the decision in the case of CIT vs. HSBC Securities and Capital Markets India Pvt. Ltd. [ 2012 (6) TMI 715 - BOMBAY HIGH COURT ] Principal business of the assessee, not being granting of loans and advances and thereby not eligible for exception and accordingly, the deeming fiction provided in Explanation to Section 73 would get attracted. The Hon ble Apex Court in the case of Snowtex Investment Limited [ 2019 (5) TMI 1165 - SUPREME COURT ] had merely upheld the action of the Hon ble High Court in this regard. With regard to the amendment brought in Explanation to Section 73 of the Act w.e.f. 01/04/2015, the Hon ble Apex Court held that it should be given only prospective application. This has been discussed till the end of the judgement i.e. till para 33. Ultimately, the Hon ble Apex Court had only upheld the order of the Hon ble Calcutta High Court. We find the decision of the Hon ble Apex Court referred to supra is completely and effectively distinguishable with that of the assessee before us. Hence, we have no hesitation in holding that the said decision is not applicable to the facts before us and does not advance the case of the Revenue. On the contrary, the decision of the Hon ble Bombay High Court relied upon by the ld. AR in [ 2012 (6) TMI 715 - BOMBAY HIGH COURT ] is directly on the issue before us. Hence, the same would have to be followed in the facts and circumstances of the instant case. Accordingly, the ground No.1 raised by the Revenue is dismissed. 2022 (9) TMI 75 Penalty proceedings u/s 272A(2)(g) - assessee had failed to issue TDS certificate to the deductee within the prescribed time u/s 203 - HELD THAT:- The perusal of CIT(A) order reveals that CIT(A) has passed an ex parte order without deciding the issue on merits. Sub Section (6) of Section 250 of I. T. Act mandate the CIT(A) to state the points in dispute and thereafter assign the reasons in support of his conclusion. We are of the view that by dismissing the appeal without considering the issue on merits, Learned CIT(A) has failed to follow the mandate required in Sub Section (6) of Section 250. It is also a well settled principle of natural justice that sufficient opportunity of hearing should be offered to the parties and no parties should be condemned unheard. We set aside the impugned order of CIT(A) dated 17.06.2019 and restore the issue to the file of CIT(A) for re-adjudication of the issues after granting sufficient opportunity of hearing to the assessee. Assessee is also directed to furnish the details called for by the lower authorities. In view of our decision to restore the issue to CIT(A), we are not adjudicating on merits the grounds raised by the assessee. Thus the ground of assessee is allowed for statistical purposes. 2022 (9) TMI 74 Addition u/s 69A - unexplained money on account of cash found at the residence and from the bank lockers of the appellant during the course of search action u/s 132 - HELD THAT:- The provisions of section 132(4) and 132(4A) of the Act has to be read with other circumstantial situations and submissions of the assessee. The statute casts an obligation on the assessee to prove otherwise. As reproduced above in para-7, the amount of cash found at assessee s residence and locker has already been disclosed and considered in the cash flow statement of the company as opening balance in the name of assessee, same cannot be added back to the income of the assessee/appellant. The cash flow statement which has been produced by the company and relied upon by the Department has a very specific reference of the amount found at the residence and locker of the assessee. Ignoring this fact will tantamount to double addition of the same amount. A document has to be relied upon in to-to and piece meal reference is not permissible. If cash flow statement has been accepted in its totality by the Department in the case of company, no addition in the hands of assessee can be made. Statement made under section 132 and cash found [with reference to section 132(4A)] certainly make assessee rival for taxation but this liability of assessee has to be evaluated with other circumstantial evidences. If assessee is able to prove otherwise, certainly he will get rescue from the provisions of section 132(4) and 132(4A) of the Act. In that situation onus will be shifted on the Revenue to prove otherwise to make assessee liable for tax. We set-aside the additions made by the AO and restore the matter back to the file of AO, with a direction to verify assessee s submission with specific reference to the cash flow statement filed by company and relied upon by the assessee. Appeal filed by the assessee is allowed for statistical purposes. 2022 (9) TMI 73 Disallowance of interest expense claim - From the loan agreement, the Assessing Officer noted that the loan was not taken for the construction of house property - case of the assessee is that the assessee has claimed interest paid towards loan taken for the purpose of construction of building belongs to the assessee from M/s. Maurya Hotels (Madras) Private Limited, who has borrowed from M/s. Sundaram Finance Ltd. and M/s. Maurya Hotels (Madras) Pvt. Ltd. is a substantial share holder of the assessee company and offered loan to the assessee by availing loan from M/s. Sundaram Home Finance Ltd. - HELD THAT:- On perusal of the assessment order, we find that the Assessing Officer has not made any extensive enquiry with M/s. Maurya Hotels (Madras) Pvt. Ltd. as to whether it has offered loan to the assessee company for the purpose of construction of building belongs to the assessee or called for any relevant details and verified. The assessment order is very cryptic. Accordingly, we set aside the order of the ld. CIT(A) and remit the matter back to the file of the Assessing Officer to call for the details and verify as to whether M/s. Maurya Hotels (Madras) Pvt. Ltd. has offered loan to the assessee and decide the issue afresh in accordance with law by affording an opportunity of being heard to the assessee - Appeal filed by the assessee is allowed for statistical purposes. 2022 (9) TMI 72 Eligibility to claim principal portion of lease rental payments - Nature of expenditure - capital or revenue expenses - Addition made on the ground that the lease is in the nature of financial lease and the principal portion of lease amounts to cost of acquisition of capital assets which is capital in nature - HELD THAT:- Hon ble High Court of Madras in Simpson and General Finance Co. Ltd. [ 2014 (4) TMI 215 - MADRAS HIGH COURT] held that entire lease rent would be taxable in the hands of the lessor and the lessor would be entitled for depreciation on leased assets notwithstanding the accounting of the transactions as finance transaction by the lessor. This decision also supports our view as aforesaid. Considering the facts and circumstances of the case, we direct Ld. AO to allow the deduction of principal portion of leased assets. The depreciation, if any, as claimed by the assessee on such assets, shall stand reversed. We order so. The appeal stand allowed accordingly. Disallowance u/s 14A - prayer of AR is that the investment in debentures may be excluded while computing the disallowance - HELD THAT:- We find that investment in debentures would not yield exempt income for the assessee. Therefore, we direct Ld. AO to exclude the same while computing indirect expense disallowance u/r 8D(2)(iii). The appeal stands partly allowed. 2022 (9) TMI 71 Disallowance of depreciation on car on estimation basis - Car used for personal purpose of the partners of the assessee firm - Assessee contented no basis with the Revenue authorities to hold that the car had been used for personal purposes and the disallowance was based merely on surmises and conjectures - HELD THAT:- There is no basis given by the AO for his finding that the car was used for personal purposes also alongwith user in the business by the assessee. He merely states that personal user cannot be ruled out. No details have been called for, nor any inquiry done on the issue by the AO. On the contrary the AO mentions the assessee producing all books of accounts and vouchers and he having test checked the same. Nothing adverse has been found by the AO in the books of the assessee also. The disallowance surely is purely adhoc. We see no reason to uphold the disallowance and we direct the deletion of the same. Set off of unabsorbed loss of preceding year - We direct the AO to grant benefit of set off of brought-forward losses if any as available as per law. 2022 (9) TMI 70 Assessment framed u/s.153A - computation of period of 6 years / 10 years in search cases - amendment of provisions of section 1153A(1)(b) - HELD THAT:- As decided in A.R. Safiulla [ 2021 (6) TMI 867 - MADRAS HIGH COURT] has considered the amendment of provisions of section 1153A(1)(b) of the Act and noted that the search assessment year, namely, in the present case, AY 2018-19 has to be excluded and Hon'ble High Court has interpreted that the provisions of section 153 talks on this year preceding to search assessment year and similarly the amendment introduced by the Finance Act, 2017 also talks about the issuance of notice u/s. 153A of the Act, with certain conditions it can be issued beyond six assessment years but up to ten assessment years. That means while computing ten assessment years, the starting point has to be the end of the search assessment year. Respectfully following the jurisdictional High Court decision in the case of A.R. Safiulla (supra), we uphold the order of CIT(A) quashing the assessment framed u/s.153A of the Act by the CIT(A). Hence, this issue of the Revenue appeal is dismissed. 2022 (9) TMI 69 Unexplained cash deposits - difference in turnover as unexplained investments - net profit 8% be applied to the gross turnover instead of making addition of the whole of the gross receipts as income of the assessee - HELD THAT:- AO did not accept the contentions of the assessee by holding that the assessee failed to produce any evidence regarding his business activities and did not produce cash book day book etc. While holding so, the AO ignored the provisions of Section 44AD of the Act, which allows the assessee to calculate his income on the basis of turnover and which enables assessee not to maintain books of account. The reasons cited by AO that assessee had failed to file any evidence regarding his business activities is not a good reason as his return of income filed on the basis of same business has been accepted for making additions on account of cash deposits. AO has started with the returned income based on the basis of such business only. Therefore, we do not agree with the findings of AO - Since all the documents supporting the argument of the assessee are available in the file and case is very old which relates to AY 2014-15 there is no point in setting aside the matter to ld. CIT(A) who had passed an ex-parte order and has not decided the issue on merits. Therefore, on the basis of documents available on record, direct the Assessing Officer to calculate the income of the assessee by applying 8% N.P. rate on total deposits made by the assessee. 2022 (9) TMI 68 Addition u/s 68 - share application money - Whether assessee has discharged its onus by establishing identity and creditworthiness of parties and genuineness of the transaction? - HELD THAT:- The assessee has not appeared even after giving giving sufficient opportunities either dispute or to contradict the findings of the CIT(A) and no documentary evidence made available before us to negate the findings of the A.O or CIT(A). In view of the above, we do not find any merit in the Grounds of Appeal of the assessee. Accordingly, the Grounds of Appeal No. 1 to 6 are dismissed. 2022 (9) TMI 57 Nature of expenditure - Disallowance of principal component of lease payment - disallowance of the principal portion of lease rent as capital expenditure as against the claim of the appellant that the entire lease rental is revenue expenditure as a lessee - AO disallowed the same on the ground that both SFL as well as assessee claimed depreciation on the same asset - CIT(A) upheld the stand of Ld. AO on the ground that principal portion was capital expenditure and allowing the same to the assessee would amount to double deduction - HELD THAT:- As decided in M/S. TRISTAR CONTAINER SERVICES (ASIA) PRIVATE LIMITED VERSUS ACIT COMPANY CIRCLE III (1) , CHENNAI [ 2022 (6) TMI 793 - ITAT CHENNAI] assessee as a lessee would be entitled for deduction of gross lease rental payments. The assessee s methodology is to be accepted. The lease payments made by the assessee would be revenue expenditure for the assessee. We order so. The alternative claims as allowed by Ld. AO shall stand reversed. The claim of foreign exchange loss on these transactions shall be re-considered / re-adjudicated by Ld. AO in the light of our above adjudication. The ownership of the leased assets remains with the lessor. The assessee, as a lessee, pays lease rentals which are allowable as revenue expenditure for the reasons as stated in our adjudication as above. Therefore, facts being pari-materia the same, taking the same view, we would hold that principal portion of lease rentals would be an allowable deduction as revenue expenditure. The depreciation, if any, as separately claimed by the assessee on lease assets shall stand disallowed. The Ld. AO is directed to re-compute the income in terms of our above order. Customs 2022 (9) TMI 67 Refund claim - short landing of the goods - duty assessed in the Bill of Entry through self-assessment by the appellant is in excess or not - can a refund be claimed or does the Bill of Entry has to be re-assessed first before refund can be sanctioned - change in the quantity of the goods in the Bill of Entry amount to re-assessment or not - whether documents relied upon by the appellant establish that lesser quantity of goods were imported than the quantity mentioned in the Bill of Lading? HELD THAT:- Section 23(1) deals with such cases where the goods which are imported have been lost or destroyed at any time before their clearance for home consumption. No case has been made out by the appellant that the goods have actually been imported as per the Bill of Lading and thereafter they have been destroyed at any time prior to their clearance for home consumption. Therefore, section 23(1) has no application in this case. This is not a case for remission of duty but is a case of application for refund on the ground that duty was paid in excess reckoning the total quantity of goods as mentioned in the Bill of Lading while lesser quantity was actually imported/landed by the vessel. The Bill of Entry, therefore, needs to be re-assessed. Cases of remission of duty under section 23(1), are those where the goods would have been destroyed or lost (other than through pilferage) before their clearance for home consumption. Before the clearance for home consumption, the assessment of the goods under section 17 is still open and the duty can be assessed or re-assessed accordingly. The assessment once completed attains finality and can only be appealed against before the Commissioner (Appeals) or reopened through a notice under section 28. The documents relied upon by the appellant are inconclusive. In respect of MV Vinayak, for instance, the joint draught survey report is signed by the Master of the Vessel and the representatives of the two receivers- the appellant represented by Sravan Shipping Services Pvt. Ltd. and M/s. KPR Fertilisers Ltd. represented by M/s. Coromandel Shipping Agency (P) Ltd. - there is no agreement between the person who was to hand over the goods viz., the master of the vessel and the persons who were to receive them viz., the appellant that there was shortage. The Master says that he delivered the entire quantity and the appellant or his agents or the surveyors appointed by it say that the sulphur was short landed - Similarly, in the case of MV Nirman PRITI, it is indicated at the top that of the 13,200 MT BL quantity of Sulphur, only 13011.771 MT was discharged. The Master of the Vessel s remarks were that the entire quantity was discharged. So, it is a case of word of one versus the word of another. The reports are inconclusive. Therefore, even for this reason, the appellant is not entitled to a refund. The impugned order is correct and calls for no interference - appeal dismissed. 2022 (9) TMI 66 Levy of penalties u/s 112(a) of the Customs Act, 1962 and u/s 114AA of the Customs Act, 1962 - appellant s alleged involvement of forged /fake VKGUY /DEPPB license and imports there under - Violation of principles of natural justice - HELD THAT:- It is the basic principle of the Natural justice that no one can be condemned unheard. Natural Justice is an un codified law purely based on principle of substantial justice and judicial spirit. Principles of Natural Justice are the cardinal principles, which must be followed in every judicial and quasi judicial proceeding. Authorities should exercise their powers fairly reasonably impartially in a just manner. They should not decide a matter on the back of the party. There is clear violation of natural justice. Therefore, ex-parte order passed by the Adjudicating Authority will not sustain - matter remanded to the Adjudicating Authority for passing a fresh order after granting sufficient personal hearing - appeal allowed by way of remand. Corporate Laws 2022 (9) TMI 65 Revival of company under liquidation - Section 454 of the Companies Act, 1956 - HELD THAT:- There could not have been much variation in the position of the assets, since the winding up petition was filed in and about August 2016 under Section 433 of the Act and accordingly, the petition was admitted on 31.08.2016 - the Company Court appointed the OL as the provisional liquidator, and directed the directors of the company-in-liquidation to file the statement of affairs, within twenty-one days from the said date. The onus, as regards the affairs of the company-in-liquidation, at that point in time, was put on the appellant. The appellant, clearly, tarried and did not show enough alacrity to file a revival scheme - this state of affairs continued to operate, even after the appellant had obtained an order dated 31.01.2018, whereby the OL was directed to grant the appellant, access to the records of the company-in-liquidation. Demand of interest - HELD THAT:- The amount deposited by the appellant was not a debt owed to him. Therefore, no case for payment of interest was made out having regard to the parameters. Even in equity, the appellant in this case would not be entitled to interest, as he failed to present a scheme before the learned company judge, with the result that the liquidation proceedings of the company were considerably delayed. In any event, there was no bar in the appellant approaching the Court at an earlier date for refund of the money deposited by him. Therefore, it cannot even be said that the appellant was deprived of the use of money, and thus should be compensated by way of interest. The complete information was not available for filing a scheme, appears to be a ruse for explaining the lack of alacrity and keenness - appeal dismissed. Central Excise 2022 (9) TMI 64 Rectification application - mistake of fact, apparent on the face of record or not - Clandestine Removal - demand based on printouts taken from the computer at the factory premises itself during the course of search - HELD THAT:- On mere perusal of computer printouts (RUD 8), it reveals that the same is a calculation chart prepared by the Department. This is also clarified in para-4.5 of the show cause notice. It is found that the demand of Rs.3,03, 41,494/- is not based on relied upon document and such demand has been raised based on the calculation chart prepared by the Department. Admittedly, the printouts allegedly recovered, on which ld. Authorised Representative wants to place reliance at this stage, are not part of RUD. Further, there is no certificate to such printouts, as required under Section 36B of the Act, in absence of which, the data retrieved from computer is not reliable as held by the Hon ble Supreme Court in the case of ANVAR P.V VERSUS P.K. BASHEER AND OTHERS [ 2014 (9) TMI 1007 - SUPREME COURT] . There is no merit in the ground taken for rectification by Revenue. It is further found that the panchnama dated 3rd July, 2014, which the ld. Authorised Representative wants to rely upon, at this stage, has neither been relied upon in the show cause notice nor the same was placed before the Tribunal or argued at the time of hearing of the appeal. This panchnama is also not referred in the Rectification Application filed by Revenue. There is no mistake in the final order of this Tribunal - rectification application dismissed. 2022 (9) TMI 63 Validity of SCN - Reversal of CENVAT Credit - cenvatable inputs (explosives) are used by Maihar Cement Unit I in the manufacture of dutiable products (clinker and cement), as well as exempted goods i.e., limestone - non-maintenance of separate accounts for inputs used in the manufacture of dutiable and exempted goods - revenue neutrality - Rule 6(3)(b) of Cenvat Credit Rules - HELD THAT:- The show cause notices are misconceived for any demand under Rule 6(3)(b)/6(3)(i) due to the admitted fact that the appellant have admittedly reversed the proportionate credit on input/explosives for limestone cleared from the captive mines to Unit-2. Rule 6 provides for a mechanism to reverse Cenvat credit either proportionately, if it can be calculated, and in the alternative, if the same cannot be calculated with ease, the rule provides for reversal of Cenvat credit taken on common inputs by reversing a specified percentage of the sales/transfer value of the exempted product. Such reversal is restricted to the opening balance of credit in the Cenvat account at the beginning of the period as modified by Cenvat credit taken during the accounting period. The appellant have reversed the proportionate Cenvat credit in terms of Rules 6 (3)(ii) of CCR, thus, there is no application of Rule 6 (3)(i). It is further found that the situation is wholly revenue neutral, as both the units under common management and ownership are paying duty on their dutiable finished product namely cement and clinker. In case, duty was paid in terms of Rule 6(3)(i), the same was available as credit to unit 2 as input credit. Appeal dismissed - decided against Revenue. 2022 (9) TMI 62 CENVAT Credit - inputs - HR Coils and welding electrodes used for lining the plant and in its maintenance - Rule 2 (k) of CCR, 2004 or not - HELD THAT:- As may be seen all goods used in the factory by the manufacturer all final products qualify as inputs under CCR. Therefore, Cenvat credit is admissible on such goods. There is no dispute that the welding electrodes were used for maintenance of the plant and the HR Coils/Sheets were used in making lining around the furnaces in the plant. Evidently, the plant will be within the factory. Since the HR Coils as well as the welding electrodes are used within the factory of manufacturer, Cenvat credit is admissible on both as inputs. This issue is no longer resintegra and the jurisdictional High Court of Andhra Pradesh has, in the case of SREE RAYALASEEMA HI-STRENGTH HYPO LTD. VERSUS COMMR. OF CUS. C. EX., TIRUPATI [ 2012 (11) TMI 255 - ANDHRA PRADESH HIGH COURT] held that the goods in used their repair and maintenance qualify as inputs under Rule 2 (k) of CCR. The appellant is entitled to Cenvat credit as inputs on the HR Coils/Sheets and welding electrodes used in repair and maintenance of the capital goods. The impugned order cannot, therefore, be sustained. Appeal allowed - decided in favor of appellant. 2022 (9) TMI 61 Maintainability of appeal - defect relating to non-compliance of the mandatory deposit were not satisfied - HELD THAT:- It would be seen from a bare perusal of section 35F of the Customs Act that after August 06, 2014 neither the Tribunal nor the Commissioner (Appeals) have the power to waive the requirement of pre-deposit, unlike the situation which existed prior to the amendment made in section 35F on August 06, 2014 when the Tribunal, if it was of the opinion that the deposit of duty and interest demanded or penalty levied would cause undue hardship, could dispense the said deposit on such conditions as it deemed fit to impose so as to safeguard the interest of the Revenue. The Supreme Court in NARAYAN CHANDRA GHOSH VERSUS UCO BANK [ 2011 (3) TMI 1478 - SUPREME COURT] , examined the provisions contained in section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 relating to pre deposit in order to avail the remedy of appeal. The provisions are similar to the provisions of section 129E of the Customs Act. The Supreme Court emphasised that when a Statue confers a right to appeal, conditions can be imposed for exercising of such a right and unless the condition precedent for filing appeal is fulfilled, the appeal cannot be entertained - The Supreme Court, therefore, held that deposit under the second proviso to section 18(1) of the Act, being a condition precedent for preferring an appeal, the Appellate Tribunal erred in law in entertaining the appeal. It will also be appropriate to refer to a decision of the Delhi High Court in DISH TV INDIA LIMITED VERSUS UNION OF INDIA AND ORS. [ 2020 (8) TMI 183 - DELHI HIGH COURT] , wherein the requirement of pre-deposit under section 129E of the Customs Act, came up for consideration. The High Court held that when the Statue itself provided wavier of pre-deposit to the extent of 90% or 92.5% of the duty amount and made it mandatory to deposit 7.5% or 10% of duty amount, the Courts cannot waive this requirement of deposit. The appellant has not made the pre-deposit. In view of the aforesaid decisions of the Supreme Court, and Delhi High Court, it is not possible to permit the appellant to maintain the appeal without making the required pre-deposit - appeal dismissed. 2022 (9) TMI 58 Maintainability of appeal - HELD THAT:- It transpires from the order sheet transpires that no one has been appearing on behalf of the appellant, though notice sent by the Registry of the Tribunal was served upon the appellant on March 12, 2022. In the interest of justice, one more opportunity to the appellant is granted to remove the defects. Office may send a fresh notice to the appellant by speed post mentioning therein that the matter would be listed before the Tribunal on August 29, 2022. List on 29 August, 2022. CST, VAT & Sales Tax 2022 (9) TMI 60 Levy VAT - health care services - supply / sale of goods to patients - implants, surgical items and medicines sold by the respondents - sale or service - whether the same was falling within the ambit of definition of sale as defined under Section 2(35) of the RVAT Act, 2003 or not? - test of predominance - HELD THAT:- If the transaction in question is a service, then by no stretch of imagination, the petitioner-Revenue will have power to collect sales tax/VAT on the same. If the transaction in question amounts to sale, the power will be wholly exercised by the petitioner-Revenue as the same will be under their domain. In the case in hand, the respondents are running health care services wherein the patients are categorized primarily in two categories; out patients and in-patients for administrative convenience. The out patients are those who visit a hospital for routine check ups or clinical visits. In-patients are those who are admitted in the hospital for the required treatment. Normally, there is a central pharmacy from where the procured stock of medicines, implants, consumables etc. are supplied to its outlets such as; in-patient pharmacy, operation theater pharmacy and out-patient pharmacy. The in-patient pharmacy and operation theaters pharmacy supplies medicines and consumables only to in-patients - the medicines, implants, room provided on rent used in the course of providing health care services/medical treatment to the patients admitted for diagnosis for treatment in the hospital or clinical establishment are undoubtedly naturally bundled in the main services of medical treatment and it is a composite supply to facilitate health care services. The case in hand pertains to rendering of health care/medical services and not supply of goods, this Court is of the view that the value recovered by the hospitals towards the cost of medicines, implants, stents, lenses and various other charges towards room rent, supply of food cannot be classifiable as sale or supply of goods but the transaction will be of service on account of Predominant Test/ Aspect Doctrine - the substantial question of law formulated and arising out of the order impugned passed by the learned Tax Board is decided in favour of the respondents-assessees and against the petitioner-Revenue. Sales Tax Revision Petitions are dismissed. Indian Laws 2022 (9) TMI 59 Dishonor of Cheque - rebuttal of presumption - deemed service of notice - interpretation clause c of the proviso to section 138 of N.I. Act - HELD THAT:- On perusal of clause (c) of section 138 N.I.Act, it is crystal clear that the drawer of the cheque failed for payment of cheque amount within 15 days of the receipt of the notice, then only the case can be filed. Once the statutory provision has been provided in a statute it is required to be followed and that is the mandate of law to be followed the provision of that statute. Admittedly in the case in hand, the required notice was issued on 01.03.2016 which is not in dispute, however, the case has been filed on 21.03.2016, there is strict bar of filing the case in view of clause(c) of section 138 of N.I.Act before expiry of 15 days and if it is so, no cognizance of offence be taken on the basis of such complaint. The Court comes to the conclusion that the case was filed prematurely. Looking into clause (c) of section 138 of the said Act, that the cognizance order which filled up in a format suggest that there is non-application of judicial mind - Petition disposed off.
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