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2021 (12) TMI 1478 - GUJARAT HIGH COURT
Validity of Reopening of assessment - HELD THAT:- As Petitioner has chosen not to press this matter at this stage. We have chosen not to go into the merits of the matter. This disposal will not come in the way of the petitioner in pursuing other legal remedies.
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2021 (12) TMI 1477 - RAJASTHAN HIGH COURT
Preferring an appeal u/s 246A - as argued if the petitioner is relegated to appellate authority, there will be hindrance in petitioner’s way as the limitation for filing the appeal has already passed - HELD THAT:- Present writ petition is disposed of with the direction to the petitioner to prefer an appeal before the appellate authority on or before 15.01.2022.
In case, appeal is preferred by 15.01.2022, the appellate authority shall consider the same, in accordance with law, ignoring the delay as the petitioner was bonafidely pursuing the present writ petition against the assessment order dated 20.07.2021.
Needless to observe that since this Court has not adjudicated on merit of the case, the petitioner will be free to raise all permissible grounds, including the ground in relation to special audit, in accordance with law.
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2021 (12) TMI 1476 - BOMBAY HIGH COURT
Seeking an injunction and restraint order against the defendants from using, divulging, distributing, publishing, revealing or dealing with the proprietary information and trade secrets of the plaintiff - whether the period of limitation for fling of written statement, as contemplated under Order 8 Rule 1 of the CPC got automatically attended, since it is expired during the period of lockdown and to be precise on 09/05/2020?
HELD THAT:- A Similar argument was advanced before the Hon’ble Supreme Court in case of SAGUFA AHMED & ORS. VERSUS UPPER ASSAM PLYWOOD PRODUCTS PVT. LTD. & ORS. [2020 (9) TMI 713 - SUPREME COURT] qua the limitation for fling of an Appeal before the National Company Law Appellate Tribunal, on dismissal of the proceedings by the NCLT on 04/08/2020, Section 421 of the Companies Act, 2013 which provide an Appeal to the Tribunal, which shall be fled within a period of 45 days, from the date on which a copy of the order of Tribunal is made available. The proviso, however, permit the Tribunal to entertain an Appeal after expiry of the said period of 45 days, but within a further period not exceeding 45 days, on being satisfied that the appellant was prevented by sufficient cause from fling the Appeal within that period. In the said case, period of 45 days was over on 02/02/2020 and the attended period, which was the discretionary period, also expired on 18/03/2020, before which the Appeal was not fled, but the Appeal came to be fled only on 28/07/2020.
There are no other option is available to me in the facts of the given case. The statutory period of limitation within which the written statement could be fled in the present case came to be attended by the discretionary power of the Court and even the period of 120 days expired on 09/05/2020 and when the lockdown came to be imposed, ‘period of limitation’ having already expired, the benefit of the order of the Hon’ble Supreme Court cannot be attended to the defendants. The learned Judge has committed no error in refusing to accept the written statement on record, holding that the defendants have forfeited their right to file the written statement, on expiry of period of 120 days.
Finding no legal infirmity in the impugned order, the same is upheld - petition dismissed.
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2021 (12) TMI 1475 - CALCUTTA HIGH COURT
Applicability of Section 115JB on electricity company - assessee is engaged in the generation of power and has been established under the provisions of Damodar Valley Corporation Act, 1948 - scope of amendment brought in Section 115JB of the Act by Finance Act, 2012 effective from 01.04.2013 - HELD THAT:- All taxation is meant for the welfare of the people in a constitutional republic and, therefore, the enquiry as to the mischief sought to be remedied by the amendment becomes irrelevant and, therefore, the Court held that the fiction fixed under Section 115JB cannot be pressed into service against the appellant therein while making the assessment of the tax payable under the Income Tax Act. On this issue, it would be beneficial to refer to the decision of ING Vysya Bank Ltd. [2020 (1) TMI 1116 - KARNATAKA HIGH COURT] wherein held that provision of Section 115JB cannot be made applicable to insurance companies, banking companies or companies engaged in generation or supply of electricity.
Effect of the amendment brought about to Section 115JB by Finance Act, 2012 with effect from 1st April, 2013 and sought to impress upon us the effect of such amendment to sustain their contention - This very issue was considered in the case of CIT, LTU vs. Union Bank of India [2019 (5) TMI 355 - BOMBAY HIGH COURT] as held that the amendments to Section 115JB are neither declaratory nor classificatory but are substantive and significant legislative changes and can be applied only prospectively.
Further, the High Court of Kerala in Principal Commissioner of Income Tax vs. State Bank of India [2019 (10) TMI 638 - KERALA HIGH COURT] had considered the identical issue in respect of a banking company and following the decision of Union Bank of India [supra] had dismissed the appeal filed by the revenue. Appeal decided in favour of assessee.
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2021 (12) TMI 1474 - ITAT HYDERABAD
TP Adjustment - DRP directed TPO /A.O. to exclude eight out of thirteen comparable entities whereby reducing arm’s length price (ALP) adjustment - HELD THAT:- We note at the outset that this tribunal’s co-ordinate bench order in Assessment Year 2009-10 in assessee's case [2014 (11) TMI 129 - ITAT HYDERABAD] itself has already excluded M/s. Eclerx Services Ltd., M/s. Cosmic Global Limited and Infosys BPO on the ground that they provide KPO services, have different business model(s) since having huge sub-contracting company brand value, diversified activity and other functional dissimilarities; respectively. Revenue has admittedly not indicated any distinction for the relevant facts in these twin assessment years.
The outcome is not different qua the remaining comparables as well wherein we find that M/s.Informed Technologies Ltd. fails revenue filter of 75% applied by the TPO himself. M/s. Jeevan Scientific Technologies Ltd. has also been rejected on the very turnover filter as well as in light of huge fluctuating margin pinpointing abnormal trend. Same factual position prevails regarding M/s. Mastiff Tech P. Ltd. having bad debts influencing its profit margin thereby reducing them from 21.78% to 2.28% only.
We lastly note that M/s. TCS E-Serve Ltd. fails to satisfy the turnover filter which is also found to be catering mainly to M/s. Citi Group having diversified portfolio than assessee's IT Enabled Services segment. Suffice to say, the learned panel has taken due note of all applicable judicial precedents as well. We thus decline the Revenue’s instant sole substantive grievance as well as the main appeal.
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2021 (12) TMI 1473 - CUSTOMS AUTHORITY FOR ADVANCE RULINGS, MUMBAI
Classification of imported goods - data projector (Optoma SA520) - to be classified under CTH 85286200 or under CTH 85286900? - applicability of Sr' No' 17 of Notification No. 24/2005-customs. dated 01.03.2005, as amended - HELD THAT:- A projector is an optical device that projects an image/video onto a surface, commonly a projection screen. The idea of a projector is to convert a small image into a much larger one so that a greater number of people can see it. A projector accepts a video/image as an input, processes it with the assistance of its inbuilt optical projection system consisting of a lens and optical source and projects the enhanced output on the projection screen' Therefore, the compatibility of a projector with input devices, such as a computer, a DVD player, etc' feeding images/videos to it and its ability to project these inputs accurately on the screen forms the most important attribute for the classification of a projector.
CTH 85286900 is a residual entry. CTH 8471 covers automatic data processing machines and units thereof; magnetic or optical readers' machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included. Chapter Note 5 (E) to Chapter 84 states that machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions. Therefore, projectors working in conjunction with devices under 8471 will be classified under heading 8528. The product data sheet lists computer graphics compatibility standards of the product, namely, WUXGA, UXGA, WXGA, SXGA+, SXGA, XGA, SVGA, VGA resized, !ESA, PC and Mac. Further, the VGA port facilitates the connection between the said projector and a laptop/ computer. Therefore it is evident that the projector in question is designed for use with an automatic data processing machine.
The projector under consideration has got certain additional ports such as HDMI, audio, composite, etc. Further, the product is compatible with an aspect ratio of 16:9, though the aspect ratio of 4:3 is native. These facts make it capable of being a video projector and consequently classifiable under CTH 85286900 also. GI Rule 3 states that "the heading which provides the most specific description shall be preferred to headings providing a more general description" - The projector imported by the applicant has got additional features such as composite port, HDMI port etc. Apart from this, it is also compatible with the 16:9 aspect ratio. The additional ports and compatibility with the 16:9 aspect ratio give additional utility in the form of an audio-video display. The differentiating features of data projectors compared to that of video projectors are discussed in table 1, which substantiates that the principal use of impugned goods, based on functions and features, is with automatic data processing machines. The presence of additional features cannot dis-entitle the impugned goods from classification under CTH 85286200.
Sr. No. 17 of Notification No. 24/2005-Customs, dated 01.03.2005, as amended, exempts all goods under subheading 85286200 of kind solely or principally used in an automatic data processing system of heading 8471. The impugned goods are solely or principally used with a computer or laptop, i.e., an automatic data processing machine. Therefore, the goods under consideration are entitled to the exemption.
The imported goods are classifiable under sub-heading 85286200 of the first schedule to the Customs Tariff Act, 1975 and would be eligible to avail benefit of Sr. No. 17 of Notification No. 24/2005-Customs, dated 01.03.2005, as amended.
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2021 (12) TMI 1472 - ITAT HYDERABAD
Undisclosed LTCG - entering into a joint development agreements - transfer of capital asset u/s 2(47) - assessee submitted he did not transfer the immoveable property as per the provisions of Section 2(47) r.w.s.53A of the T.P Act and had only entered into joint development agreement wherein she is supposed to receive a portion of constructed area in view of the land contributed by her - HELD THAT:- Assessee has only entered into a joint development agreement with the promoter of the project. As a result, the assessee has contributed her land for joint development, and by virtue of the agreement she is entitled to receive 32.30% of the total saleable constructed/developed area in the project. Hence, it is evident that during the relevant assessment year the assessee has contributed her immoveable property for the joint development of the property and eventually when her share in the developed property is sold, she will be benefited by gain or loss as the case may be unless the assessee opts to retain the developed property.
If the assessee opts for sale of her developed property, provisions of Section 45(2) of the Act may apply and Long-Term Capital Gain for the sale of the land as well as profit from the sale of the developed property would be computed in accordance with the provisions of Section 45(2) r.w.s.48 of the Act and under the head “Income from business” respectively. And if the assessee opts to retain her share in the developed property, then long term capital gain shall accrue to the assessee when the transfer of the immovable property pertaining to the share of land assigned to developer takes place.
Amount received by the assessee of Rs.7 crores is only an interest-free refundable security deposit for ensuring the project to be completed as per the terms of the agreement. Further, it is also obvious that the assessee has only permitted the developer to develop the project in her land. Therefore, it cannot be construed that the possession of the immoveable property of the assessee is vested with the joint developer as per the provisions of the Act.
Thus it is apparent that the assessee shall not be liable to be taxed for entering into a joint development agreement when neither the assessee have received any consideration nor handed over possession of the immovable property during the relevant assessment year. It is Ordered accordingly. Hence the appeal of Revenue is devoid of merits.
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2021 (12) TMI 1471 - AUTHORITY FOR ADVANCE RULING CUSTOMS, MUMBAI
Classification of imported goods - HDMI Digital Media Receiver with Alexa Voice Remote Lite as a kit - HDMI Digital Media Receiver with All-new Alexa Voice Remote as a kit - Alexa Voice Remote Lite for HDMI Digital Media Receiver - HELD THAT:- The HDMI digital receiver has a 1.7 Ghz quadcore processor and 8GB of storage. It has dual band 2x2 802.11 AC Wi-Fi with support for 5GHz networks, allowing streaming at up to 1080p at 60fps. The receiver provides HD/HDR support on compatible televisions. The HDMI digital media receiver is described by the applicant as network appliance and entertainment device for streaming digital audio/video content from the internet to television. A user sends instruction either by way of speech through inbuilt microphone in the remote or by pressing buttons on the remote. Such instructions are to select the programme/movie/any other media that the user wants to watch - The applicant has categorically stated that the digital media receiver is not capable of receiving signals from satellite/cable/terrestrial source and convert them in a suitable form for display on televisions. The device in question also does not support cellular services. It requires internet to perform. The Alexa Voice Remote Lite (lst Gen.) receives audio signals from the user, converts them into radio signals and transmits securely and wirelessly to the digital media receiver for further demodulation/processing of such radio signals. The second type of wireless remote essentially performs the same functions as described above.
From the features and functions described here-in-before, it is clear that the HDMI digital media receiver receives signals from Alexa Voice remote (lite 1st Gen./2nd Gen.) via Bluetooth. Such instructions are to select the content that the user wants to watch on his television. The digital media receiver receives instructions of the user, converts them into RF signals and transmits them to the cloud for processing by AVS. AVS converts the signals into a readable format, extracts the requested content from the Amazon cloud and transmits the same to the media receiver, which on receipt of the output, re-transmits the same for display on the user's television. Thus, HDMI digital media receiver is a device that transmits/receives RF signals and converts it into a format readable by the system and transmits the same which is displayed on the screen - the Customs Authority for Advance Rulings, New Delhi, for the identical device, considered and rejected the sub-heading 85287100 and held that digital media receiver discussed here is rightly classifiable under sub-heading 85176290.
Classification of wireless remotes - HELD THAT:- Te proper classification entry for Wireless Remote (for HDM1 Digital Media Receiver) Model No. L5B83H and Alexa Voice Remote Lite (1st Gen., Model No. H69A73), when imported separately, would be the sub-heading 85269200 and not 85176290, as originally contended by the applicant. However, when these wireless remotes are imported along with HDMI digital media receiver (Model No. S3L46N) as a kit, applying rule 3(b) of the General Rules for Interpretation of Customs Tariff, the classification of the entire kit would be sub-heading 8517620, on the ground that the digital media receiver, and not the wireless remote, gives the goods its essential character.
Benefit of exemption under serial no. 20 of the Notification No. 57/2017-Cus., dated 30-6-2017, as amended by the Notification No. 2/2019-Cus., dated 29-1-2019 - HELD THAT:- The latest amendment to the said exemption was vide Notification No. 3/2021-Cus., dated 1-2-2021, and also that the said notification provides a concessional rate of duty to all goods falling under sub-headings 85176290 and 85176990, except the following, (a) wrist wearable devices, commonly known as smart watches; (b) optical transport equipment; (c) combination of one or more of packet optical transport product or switch; (d) optical transport network products; (e) IP radios; (f) soft switches and voice over internet protocol equipment or VoIP phones, media gateways, gateway controllers and session border controllers; (g) carrier ethernet switch, packet transport node products, multiprotocol label switching transport profile products; (h) multiple input/multiple output and long term evolution products. Since, Fire TV Sticks do not appear to fall under any of the above exclusions, benefit of serial number 20 of the Notification No. 57/2017-Cus., dated 30-6-2017, as amended would be available to them.
Thus, HDMI Digital Media Receiver with Alexa Voice Remote Lite as a kit, HDMI Digital Media Receiver with All-new Alexa Voice Remote as a kit, are classifiable under sub-heading 85176290 of the first schedule to the Customs Tariff Act, 1975 - Alexa Voice Remote Lite and All-new Alexa Voice Remote, when imported separately, would be classified under sub-heading 85269200 - While the Fire TV Sticks of both the lst and 3rd generations would be eligible for the benefit of serial number 20 of Notification No. 57/2017-Cus., dated 30-6-2017, as amended; the wireless remote devices, when imported separately, wouldn't be eligible for the said notification benefit.
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2021 (12) TMI 1470 - GUJARAT HIGH COURT
Time limitation - the case is that the time period for physically submitting the application for export benefits is getting time barred - HELD THAT:- Noticing that the time period for physically submitting the application for export benefits is getting time barred on 31.12.2021, the order passed in the earlier matter particularly in Stitchwell Garments [2022 (7) TMI 1449 - GUJARAT HIGH COURT] is followed and the respondents are directed to accept the manual application without prejudice to the rights and contentions raised by the either side. The authority concerned shall also look into the same and decide subject to the final outcome of these writ petitions. This may not create equity in favour of anyone.
Let the pleadings be completed on or before 12.01.2022 - Matters to appear on 12.01.2022.
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2021 (12) TMI 1469 - CALCUTTA HIGH COURT
Violation of principles of natural justice - Rejection of the petitioner’s application for revision - application passed ex parte - HELD THAT:- On perusal of record it appears that the petitioner is habitual defaulter in appearance both before the Appellate Authority as well as Revisional Authority as appears from record and which is reflected from the recording of the Revisional Authority.
On perusal of the contents of the impugned order of the Revisional Authority, it is not that type of case where it can be called there is violation of principle of natural justice.
Petition dismissed.
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2021 (12) TMI 1468 - CALCUTTA HIGH COURT
Revision u/s 264 after eight years - eligible reasons for delay - HELD THAT:- As Petitioner submits that due to mistake he had filed an appeal before the Tribunal against the assessment order in question and it appears from record that the said appeal was dismissed on 25th September, 2014 as it appears from Annexure P-5 to the writ petition and even if the explanation of the petitioner is accepted the time was consumed by him in the appeal in that case also from the order of the Tribunal it is after almost seven years in approaching the writ court and this inordinate delay itself is sufficient ground for refusal to entertain the writ petition.
In justification of delay of this seven years, petitioner wants to rely on Paragraphs 7 and 8 of this writ petition but we are not convinced with the same since the writ court is a court of equity and it is for those who are vigilant and diligent to their rights and not for those who sleep over their rights. The impugned order being passed by giving opportunity of hearing to the petitioner but he did not avail that opportunity and he asked further adjournment.
Considering these facts, this writ petition dismissed.
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2021 (12) TMI 1467 - ITAT BANGALORE
Nature of expenses - Product Registration Charges - Revenue or capital expenditure - mercantile method of accounting followed as in the business of manufacturing of pharmaceutical products - whether product registration expenses have been charged off in the accounts constitutes as an expenditure allowable u/s 37(1) and hence disallowance is ought to be deleted? - HELD THAT:- On perusal of ledger accounts revels that payments have been made to statutory bodies either for approval or as statutory maintenance in foreign nations. Assessee has also made payments being annual fees to the Medical agencies in foreign nations. All these are recurring in nature. These payments are inextricably linked to the business of the assessee.
In respect of Patent expenditure, it is submitted that assessee has to get the patent registered in various regions in order to safeguard its product from any infringement. Further nothing has been placed on record to establish that the patent expenditure has been incurred by assessee on a new product. One aspect cannot be ignored that assessee incurs these expenses every year.
Coming to the expensed incurred by assessee in respect of the drug called ‘Dolenio’, we note that it is sold by assessee in many countries. The expenses incurred by assessee towards Mutual recognition process variation is necessary based on any change in the packing of the drug like change in color etc., or shape of the drug, or even the change of supplier.
The expenses incurred by assessee in respect of Dolenio during the years under consideration towards Mutual recognition process variation, Patent and Trade mark and other registration expenses, are be considered as revenue expenditure, allowable under section 37(1) of the Act.
Annual fee/license fees paid the ledger account revels that these are recurring in nature, and hence cannot be treated to be one time payment. These are in respect of renewal of licence with the drug authorities in respective countries to continue to hold the licence to export and sell the products developed by assessee. Accordingly we do not find any infirmity in the observation of CIT(A) to treat the payments to be revenue expenditure allowable u/s 37(1)
Disallowance u/s 14A r.w.s. D(2) (ii) - Assessee suo moto disallowed u/r 8 D(2)(iii) - AR submitted that the nature of dividend, was from investment in Mutual Funds (MFs) and that the investment was made out of surplus funds and funds from other sources and that no part of the borrowed funds was utilised for making the investment in MFs - HELD HAT:- If there be interest-free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest-free funds available. However this needs verification as on the date of investment. The cash flow statement would disclose as on the date of making investments, which had given rise to the exempted income, that the assessee had interest free funds available with it. In the interest of justice and equity, we deed it fit to remand the case to the Assessing Officer for fresh consideration. AO shall afford reasonable opportunity of being heard to the assessee. The assessee shall prove its case that it is having interest free funds for making investments, by furnishing cash flow state for the respective assessment years.
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2021 (12) TMI 1466 - MADRAS HIGH COURT
Transition of tax deducted at source under Section 140 of the TNGST Act, 2017 - HELD THAT:- Since the issue dealt by the learned single Judge in M/s DMR Constructions Vs. The Assistant Commissioner. The Government Advocate (Taxes) [2021 (4) TMI 261 - MADRAS HIGH COURT] and in the present case are one and the same that is whether the tax deducted at source under Section 5 read with Section 13 of TNVAT ACT, 2006 could be transited under Section 140 of the TNGST Act, 2017 and since the learned Government Advocate (Taxes) concedes the case and states that the respondent/Commercial Tax Department has accepted and since no contra order has been cited - the same present writ petition is followed.
Petition allowed.
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2021 (12) TMI 1465 - RAJASTHAN HIGH COURT
Fraud/cheating - Impleadment as a party - Generation of funds through forgery and criminal offences - Locus standi to be heard - HELD THAT:- The applicants who have moved applications for impleadment were heard. However, it is a settled law that such persons cannot be made a party in misc. petition where the complainant seeks invoking of inherent powers of this court for directing firm investigation and for seeking supervision of a proper investigation in a case relating to fraud and cheating. The applicants although may not be necessary party but they have a right to be heard and recognizing their locus standi the counsels have been heard.
In the case of MADHU LIMAYE VERSUS STATE OF MAHARASHTRA [1977 (10) TMI 111 - SUPREME COURT] and in the case of SIMRANJIT SINGH MANN VERSUS UNION OF INDIA (UOI) AND ORS. [1992 (9) TMI 381 - SUPREME COURT], the principle has been recognized that even if a person may not be directly connected in a criminal case and any order passed in a criminal case affects his rights, he has a liberty to move appropriate applications for questioning the legality and validity or correctness of the order which has affected his rights.
Keeping the said principle in mind, this court finds that essentially all the applicants who have been named above are those who have purchased share/shares from BSE and NSE relating to the companies which have been mentioned by the complainant in his complaint to the Investigating Officer. The shares were purchased earlier they are liable to be unfreezed. However, if the same were purchased in between and if it is found that such shares were originally purchased by way of proceeds of crime, they would be liable to be confiscated.
The petitioner as well as the applicants before this court can always submit their stand before the concerned SFIO who shall look into the entire case and reach to its own independent conclusion. If it is found that the shares as purchased by the applicants are in no manner connected, the SFIO shall be free to unfreeze the shares - petition disposed off.
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2021 (12) TMI 1464 - SC ORDER
Levy of penalty - differential tax of duty - HELD THAT:- So far as imposing the penalty is concerned, the learned Single Judge set aside the same also on quashing and setting aside the levy of differential tax. However, so far as the Division Bench is concerned, the Division Bench has not at all addressed anything on the levy of penalty. From the impugned judgment and order passed by the Division Bench, it appears that there is no discussion by the Division Bench on the levy of penalty.
Therefore, so far as the levy of penalty is concerned, the liberty reserved in favour of the petitioner to approach the Division Bench of the High Court by way of Review Petition(s) and as and when such Revision Petition(s) is/are filed within a period of four weeks from today, the same may be considered in accordance with law and on merits.
The present Special Leave Petitions stand disposed of.
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2021 (12) TMI 1463 - ITAT GUWAHATI
Assessment u/s 153C - usurpation of jurisdiction u/s 153C by the AO without first satisfying the essential condition precedent in the fourth proviso to Section 153A read with Explanation 2 of the Act - assessee had specifically objected to the AO’s action of reopening the unabated assessment for AY 2011-12 u/s 153C of the Act and had requested the AO to give details of the purported ‘assets’ (undisclosed/unaccounted assets unearthed during search qua the assessee qua the AY 2011-12) - HELD THAT:- Perusal of the assessment order impugned before us, shows that that AO did not make any addition/s in respect of escaped/undisclosed asset in the relevant AY 2011-12. Neither was the investments held in shares by the assessee found to be unaccounted/undisclosed nor was its source of acquisition disputed or held to be unexplained by the AO. We therefore find ourselves in agreement with Shri Dudhwewala that, unless the AO made addition/s of Rs. 50 Lakhs or more in relation to escaped/undisclosed asset, he could not assume jurisdiction to make addition/s on other items (viz. credit entries in bank account etc.) The reason is simple, because in such a scenario, it bellies the claim of the AO in issuing notice u/s 153C of the Act, that he is in possession of the jurisdictional fact i.e. undisclosed asset valued Rs. 50 lakhs or more has escaped assessment, for which he seeks to re-assess the income of the assessee for the 7th to 10th AY.
When the AO fails to make any addition for the ‘undisclosed asset’, then it tantamounts to admission that there was no jurisdictional fact present before the AO in the first place, and the necessary corollary is that he has wrongly assumed jurisdiction u/s. 153C for AY 2011-12 and therefore AO cannot proceed further to make other items of additions/disallowances. In such a scenario, the AO has no other option but to drop the assessment proceedings.
For this conclusion of ours, we rely on the ratio laid down in the judgments of CIT Vs Jet Airways [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] & Ranbaxy Laboratories Ltd. [2011 (6) TMI 4 - DELHI HIGH COURT] Though these judgments were rendered in the context of reopening u/s. 147 of the Act, however the ratio decidendi will apply in the present case, because, like Section 147/148 of the Act, the AO gets the authority to assess/reassess the income of a searched person or other person u/s 153A/153C for the extended assessment years (7th to 10th AYs) only if he has in his possession the jurisdictional fact, as discussed.
If the AO is found to have assumed jurisdiction erroneously on mistaken belief about the existence of jurisdictional fact or ultimately drops it (after making enquiries in the course of assessment) while framing the reassessment order; then the AO cannot legally proceed further with the assessment/reassessment and/or make any other items of additions/disallowances, for the reason that the jurisdictional fact is absent or not in existence at the first place when he usurped the jurisdiction. In the light of the aforesaid discussion, and in our considered opinion, this submission of Shri Dudhwewala is well founded and deserves to be accepted.
In view of the above and on perusal of the impugned re-assessment order, we note that the only addition made by the AO in AY 2011-12 was on account of unexplained cash credit represented by sale proceeds u/s 68 of the Act. As noted earlier, the additions on account of unexplained ‘cash credit’, could not have been made by the AO, unless he first made an addition of undisclosed ‘asset’ valued at Rs. 50 Lakhs or more.
So in this case, as there was no addition made by AO on account of undisclosed asset, we can safely infer that there was no jurisdictional fact in the AO’s hand or in his possession when he assumed jurisdiction u/s 153C for AY 2011-12 in the first place itself. As, the very usurpation of jurisdiction u/s. 153C of the Act is found to be bad in law for want of jurisdiction, the AO was precluded from making any other addition in the assessment for AY 2011-12. Hence, the AO’s action of making addition u/s 68 of the Act in the relevant AY 2011-12 is held to be unsustainable for want of jurisdiction and is therefore is quashed. The assessee thus succeeds on the first legal challenge raised in the cross objections. Hence, Ground No. 2 of the cross objections stands allowed.
Determining the abated/unabated assessment u/s 153C - date of search as ascertained - HELD THAT:- As we hold that in the case of unabated assessments of an assessee, no addition is permissible in the order u/s 153C of the Act unless it is based on any incriminating material found during the course of search.
The nature of the evidence or information gathered during the search should be of such nature that it should not merely raise doubt or suspicion, but should be of such nature which would prima facie indicate that real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in ordinary course of business. In some instances, the information, document or evidence gathered in the course of search, may raise serious doubts or suspicion in relation to the transactions reflected in regular books or documents maintained in the ordinary course of business, but in such case the AO is not permitted to straightaway treat such material to be ‘incriminating’ in nature unless the AO thereafter brings on record further corroborative material or evidence to substantiate his suspicion and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs. Until these conditions are satisfied, it cannot be held that every seized material or document is incriminating in nature, justifying the additions in unabated assessments.
We thus hold that the assertion of the AO in the 'Satisfaction Note' that having a bearing on the ‘total income’ of the assessee is perverse and erroneous. The alleged documents relied upon by the AO to usurp jurisdiction u/s 153C of the Act and justify the impugned addition did not constitute ‘incriminating material’ found in the course of search, from which any undisclosed/unexplained income could be inferred in the hands of the assessee. Hence, as there was no incriminating material against the assessee which was unearthed/seized during the search conducted on 22-12-2017 from the premises of Sagar Group, the satisfaction note prepared by the AO did not meet the condition precedent stipulated u/s. 153C of the Act, as the ‘document’ referred to, did not have any bearing on the total income of the assessee for AY 2011-12. In that view of the matter, the very assumption of the jurisdiction for AY 2011-12 is held to be bad in the eyes of law as held by the Hon'ble Supreme Court in the case of Sinhgad Technical Education Society [2017 (8) TMI 1298 - SUPREME COURT] and, accordingly the consequent order dated 3112-2019 is quashed.
We are of the view that based on the sole statement of Shri Agarwal, the AO could not have usurped the jurisdiction u/s 153C of the Act. Even otherwise, based on the discrepancy as discussed about ‘Annexure -1’ it is not safe to rely on it and above all, as discussed it did not contain anything which incriminated the assessee. Hence, such statement could not be the basis for drawing adverse inference against the assessee and therefore, no addition could have been made on the basis of such unreliable statement. We thus find that the contentions raised by the Ld. CIT DR are devoid of merits and is therefore rejected
AO had invalidly usurped jurisdiction u/s 153C of the Act as there was no incriminating material pertaining to the assessee seized in the course of search. Even the addition made in the unabated assessment for AY 2011-12 was unsustainable since it was not based on any incriminating material found in the course of search. In that view of the matter, the order dated 31-12-2019 passed by the AO is held to be a nullity and is accordingly quashed. Hence, Ground No. 1 of the cross objections also stands allowed.
CIT(A)’s action of holding the assessment order passed u/s 153C/143(3) to be ab initio void, for the AO’s failure to issue notice u/s 143(2) of the Act prior to completion of assessment - We find merit in the submission of the Ld. DR that issuance of notice under section 143(2) is not mandatory for finalization of assessment under section 153A/153C of the Act. We note that the Ld. CIT(A)’s had wrongly relied on the decisions of Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] & Laxman Das Khandelwal [2019 (8) TMI 660 - SUPREME COURT] which were distinguishable in as much as it were rendered in the context of assessments framed u/s 143(3)/158BC, where issuance of notice u/s 143(2) of the Act to assume jurisdiction over the assessee is mandatory. However, Section 153A/153C of the Act is a special provision and we find that there is no specific provision in the Act requiring the assessment to be made under section 153A/153C after issue of notice under section 143(2) of the Act.
As decided in Ashok Chaddha [2011 (7) TMI 252 - DELHI HIGH COURT]. There is no specific provision in the Act requiring the assessment made under s. 153A to be after issue of notice under s. 143(2) of the Act. Clause (b) of s. 158BC expressly provides that "the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in s. 158BB and the provisions of s. 142, sub-ss (2) and (3) of s. 143, s. 144 and s. 145 shall, so far as may be, apply. This is not the position under s. 153A. The law laid down in Hotel Blue Moon, is thus not applicable to the facts of the present case.
Impugned order passed u/s 153C of the Act to be a nullity on the premise that it was passed consequent to the return of income filed by the assessee in response to earlier notice issued u/s 153A - We note that the Ld. DR has rightly pointed out that, the Ld. CIT(A) had erroneously observed that the AO had first issued notice u/s 153A of the Act for AY 2011-12 and thereafter without consigning/dropping the earlier notice, he had initiated fresh proceedings u/s 153C of the Act. Upon examination of the records, we note that, unlike for AYs 2012-13 to 2017-18, the AO for AY 2011-12 had issued only one notice u/s 153C of the Act dated 05-12-2019 and the assessee had also filed the return of income in response thereto, pursuant to which the assessment dated 31-12-2019 was framed u/s 153C/143(3) of the Act. We thus find merit in the Revenue’s case that this finding of the Ld. CIT(A) was erroneous. Before us, the Ld. AR was unable to controvert this fact.
Thus as the very usurpation of jurisdiction by the AO u/s 153C has been held to be bad in law and, even the seized documents referred by the AO for justifying the addition/s made u/s 68 of the Act, in the unabated assessment for the AY 2011-12, did not constitute ‘incriminating material’; the order passed u/s 153C/143(3) and the AO’s action of making addition u/s 68 of the Act therein, is held to be a nullity and is unsustainable for want of jurisdiction and is therefore is quashed.
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2021 (12) TMI 1462 - PUNJAB AND HARYANA HIGH COURT
Exercise of right of redemption of mortgage - Till what time or date can the right of redemption of the mortgage be exercised by the mortgagors/borrowers in the light of the amendment to Section 13(8) of the SARFAESI Act? - HELD THAT:- Admittedly, what is stated in page-13 was passed in the Lok Sabha and the Rajya Sabha and then it became the Act 44 of 2016 and came into effect on 01.09.2016 - But the important thing to note is that this Report does not indicate that the Committee had even considered Section 60 of the Transfer of Property Act, 1882, which provides the general law of right to redeem a mortgaged asset of a mortgager vis-a-vis the provisions of the SARFAESI Act.
It no where says that there was an intention to bring about a change with regard to the time before which a mortgagor can exercise his right to redeem the mortgage.
It is clear that the legislature did not have any intention to deal with the right of mortgagor to redeem the mortgage when they amended Sec. 13(8) or to modify it in any manner; and amendment cannot be said to have intended to modify the existing law which continued even when the un-amended Section 13(8) of the SARFAESI Act was in force. The amended Sec. 13(8) was intended to only deal with the date when the secured creditor's right to transfer the secured asset should stop and nothing more.
The amended Section 13(8) of the SARFAESI Act merely prohibits asecured creditor from proceeding further with the transfer of the secured asset by way of lease, assignment or sale; a restriction on the right of the mortgagee to deal with the property is not exactly the same as the equity of redemption available to the mortgagor; the payment of the amount mentioned in Section 13(8) of the SARFAESI Act ties the hands of the mortgagee (secured creditor) from exercising any of the powers conferred under the Act; that redemption comes later; extinction of the right of redemption comes much later than the sale notice; and the right of redemption is not lost immediately upon the highest bid made by a purchaser in an auction being accepted - It is held that such a right would continue till the execution of a conveyance i.e. issuance of sale certificate in favour of the mortgagee.
Whether the petitioners are entitled to any relief? - If so, to what relief? - HELD THAT:- In the instant case since the right of redemption of the petitioners has not got extinguished till date because of non-confirmation of sale and non-issuance of sale certificate to the respondents 2 and 3, and since thepetitioners have made substantial payments amounting to ₹ 80 Lacs out of the total dues of ₹ 2,28,81,882.00 as on 29.03.2019, and have shown a bona fide intention to pay the rest of the dues within a short time, the relief granted to the petitioners subject to what is mentioned below.
Subject to the petitioners paying the entire balance outstanding dues with applicable interest to the 1st respondent-Bank within four weeks from today, the 1st respondent-Bank shall close the loan account of the petitioners and restore possession of their residential property to them - If not, this Writ Petition shall stand dismissed with costs of ₹ 25,000/- without reference to this Court - petition allowed.
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2021 (12) TMI 1461 - SUPREME COURT
Offence u/s 277 - evasion on account of misstatement or a wrong statement - non- payment of any tax before uploading of the returns - petitioners did not have money to make payment of the income tax - prosecution against all the directors of the company - reverse burden of proof - proof of willful evasion of tax or not? - HELD THAT:- We are not inclined to interfere with the impugned order and hence the special leave petition is dismissed. The dismissal of the special leave petition would not be construed as approval of the observations made in the impugned judgment - Section 202 of the Code of Criminal Procedure, 1973. Neither the dismissal nor the findings recorded in the impugned order reflect on other proceedings under the Income Tax Act, 1961.
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2021 (12) TMI 1460 - ITAT BANGALORE
Scrutiny assessment - non issuance of notice u/s 143(2) was ever issued by the Department - whether curable defect u/s 292BB? - HELD THAT:- Admittedly, no notice u/s. 143(2) was issued by the AO having jurisdiction over assessee either prior to the assessment proceedings or during the assessment proceedings. We place reliance on the decision of NITTUR VASANTH KUMAR MAHESH [2019 (5) TMI 1557 - KARNATAKA HIGH COURT] wherein Hon'ble Court took similar view. Hon'ble Court also held that provisions of section 292BB cannot cure such defect.
Based on the above discussions, we allow raised by the assessee and the order passed by the Assessing Officer u/s. 143(3) for year under consideration is held to be not legally sustainable. The assessment order dated 30.12.2016 is held to be Null in the eyes of law due to non-issuance of notice u/s. 143(2) by the Ld. AO who had jurisdiction over present assessee.
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2021 (12) TMI 1459 - ITAT GAUHATI
Assessment u/s 153A - Addition u/s 68 - Whether the AO had validly assumed jurisdiction to issue notice u/s 153A of the Act upon the assessee for AY 2011-12 in terms of fourth proviso to Section 153A of the Act read with Explanation 2 of the Act ? - HELD THAT:- Only upon valid assumption of jurisdiction, the AO ought to have proceeded against the assessee to assess the escaped asset of the assessee and thereafter other undisclosed income if any as per law. And when he does that, he first has to make addition in respect of the escaped asset [based on which AO initiated section 153A proceedings] and then only based upon the incriminating documents unearthed in the course of search, that he can make additions/disallowances in respect of other items of escaped income/credit/expense etc., if any (for unabated assessment years); in the event if no addition could be made by AO in respect of undisclosed asset [based on which AO initiated section 153A proceedings] then the AO has to drop the section 153A proceedings because, he has assumed jurisdiction on a wrong/non-existing undisclosed asset and can resume only u/s 153A only on satisfaction of new/fresh undisclosed asset/jurisdictional fact, which principle will discuss separately.
Pre-requisite condition to issuance of notice u/s 153A for the 7th – 10th AY - The extended jurisdiction to invoke/assess 7th – 10th AY is conferred on the AO by authority of law and the AO cannot confer to himself the jurisdiction in a casual manner by stating/substituting the specific jurisdictional fact to encompass all seized material. It is common knowledge that, seized material may contain both disclosed & undisclosed assets, liabilities, expenses & income. So, it is imperative that before issuance of notice u/s 153A [for the extended period], the AO sets out his objective satisfaction from the seized material, the details of the specified/undisclosed assets in his possession qua the assessee for AY 2011-12 valued Rs. 50 lakhs or more. If this essential requirement of law is not satisfied, the AO does not get the authority of law to invoke the jurisdiction u/s 153A for 7th to 10th AY.
For this, we rely upon the dictum of the Privy Council in Nazir Ahmed Vs. King Emperor [1936 (6) TMI 11 - PRIVY COUNCIL] that when a statute requires a thing to be done in a particular manner, it must be done in that manner or not at all. As discussed the language of the fourth proviso to section 153A of the Act show that issuance of notice can be resorted to by the AO only after he is in possession of the jurisdictional fact, which is found to be absent in the present case. Therefore according to us, the AO only after having in his possession the jurisdictional fact could have assumed jurisdiction and issued notice u/s. 153A of the Act or else he could not have issued notice, as done in this case. For the reasons elaborately discussed by us in the foregoing, we thus hold that the notice u/s. 153A dated 11.09.2019 was issued by the AO without authority of law and without satisfying the essential jurisdictional fact, and hence the issuance of notice u/s. 153A is held to be bad in law.
Thus according to us, the pre-requisite condition for conferment of jurisdiction under section 153A for the assessment of AY’s falling from seventh (7th) to tenth (10th) assessment years preceding the searched assessment year being the jurisdictional fact in this case is absent and the AO without fulfilling this essential jurisdictional fact erroneously invoked jurisdiction u/s 153A of the Act for AY 2011-12, which is a serious flaw and a jurisdictional defect, that cannot be cured.
Additions on account of unexplained cash credit and that too share capital, which is in the nature of ‘liability’ could not have been made by AO, unless he first made an addition of undisclosed ‘asset’ valued at Rs. 50 Lakhs or more. So in this case, as there was no addition made by AO on account of undisclosed asset, we can safely infer that there was no jurisdictional fact in the AO’s hand or in his possession when he assumed jurisdiction u/s 153A for AY 2011-12 in the first place itself. As, the very usurpation of jurisdiction u/s. 153A of the Act is found to be bad in law for want of jurisdiction, the AO was precluded from making any other addition in the assessment for AY 2011-12. Hence, the AO’s action of making addition u/s 68 of the Act in the relevant AY 2011-12 is held to be unsustainable for want of jurisdiction and is therefore is quashed.
Whether in absence of any incriminating material found in the course of search at the premises of the assessee, the additions/disallowances made in the assessments of the assessee, which were unabated/ non-pending on the date of search, could be held to be sustainable on facts and in law? - We find ourselves in agreement with the above findings of the Ld. CIT(A) that this document was a share-holding pattern document prepared by way of secretarial compliance report, which as the assessee has shown, was filed along with the company’s annual return in Form MGT-7 on 28-11-2017 with the Registrar of Companies and was therefore available in the public domain (much prior to the date of search). It is found to contain the details of the name of shareholders, their amount and percentage of shareholdings.
In our considered view, this document was a regular business document having no incriminating content whatsoever. Nothing whatsoever has been brought on record by the Revenue to correlate or link as to how the contents of this statement led to unearthing of unexplained cash credit by the AO and therefore the aforesaid factual finding of the Ld. CIT(A) remains uncontroverted. Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) on this aspect and hold that the seized document GCL-HD-1 did not constitute incriminating material or evidence.
For the reasons discussed we hold that the seized document GCL-HD-1 referred by the AO for justifying the addition/s made u/s 68 of the Act in the orders impugned before us, did not constitute ‘incriminating material’ and therefore no addition/s was legally permissible in the assessments framed u/s 153A for the AYs 2011-12 to 2015-16 for which the assessment did not abate, when the search was conducted on 22-12-2017. The assessee thus succeeds on Question (B) as well.
Whether the Joint Commissioner of Income-tax, Guwahati had validly granted approval u/s 153D of the Act and therefore whether the consequent order passed u/s 153A/143(3) was sustainable in law or not ? - As noted that the relevant copies of the letters addressed by the AO to the Jt.CIT and the letters of approval issued by the latter are not available on record, which are necessary to adjudicate this particular issue. Moreover, since we have already held the orders passed u/s 153A/143(3) of the Act and the additions made therein to be unsustainable in law for the reasons set out above, we are not inclined to return our findings with regard to this legal issue raised in the cross objections as the same has now become academic in nature.
Whether the assessee had discharged its onus of establishing the identity and creditworthiness of the share subscribers and substantiating genuineness of the transactions and therefore whether the additions made u/s 68 on account of share application monies received by the appellant was tenable on facts and in law ? - AO’s failure to personally examine the witness and his denial to allow the assessee opportunity to cross examine the Departmental witness on whose statements he was relying upon was a serious & fundamental flaw which resulted in the additions made u/s 68 of the Act to be a nullity as held by the Hon’ble Supreme Court in Andaman Timber [2015 (10) TMI 442 - SUPREME COURT]
Whether the AO had rightly computed interest u/s 234A - We find that the AO had wrongly taken the due date of filing of return in response to the notices issued under Section 153A of the Act dated 11.09.2019 to be the original due date u/s 139 of the Act i.e. 30.09.2011 for AY 2011-12, 30.09.2012 for AY 2012-13 and so on, rather than the day following the expiry of the time limit prescribed in notice u/s 153A of the Act, resulting in erroneous and excessive levy of interest u/s 234A of the Act. The AO is accordingly directed to re-compute the levy of interest u/s 234A of the Act in terms of sub-section (3) of Section 234A of the Act i.e. from the date on which the time limit for filing of return of income in response to notices u/s 153A of the Act dated 11.09.2019 had expired. This ground therefore stands allowed for statistical purposes.
Adjustment of seized cash by way of self-assessment tax in the hands of the assessee in AY 2017-18 - HELD THAT:- AR as brought to our notice that the assessee had filed a petition dated 28-02-2020 before the AO requesting him to adjust this seized cash against their tax liability for AY 2017-18. Having regard to the provisions of Section 132B(iii) of the Act, the AO is accordingly directed to grant the credit of seized cash by way of self-assessment tax in accordance with law.
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