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Showing 101 to 120 of 1440 Records
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2023 (5) TMI 1340
Smuggling - Import of cut betel nut from Nepal - Seizure of goods - confiscation - Contravention of the provisions of Notification No. 09/96-Cus - Onus to prove - HELD THAT:- We find that it is an admitted fact that the item, betel nut is not a notified goods in terms of Section 123 of the Customs Act, 1962. Therefore, onus lies on the Revenue to prove that the goods in question are smuggled one. The revenue has not come up to any direct evidence to prove that the betel nut in question is a smuggled one, but tried to shift the onus on the respondent to prove that the goods are not smuggled one.
The whole case has been hitched on the basis of statements of driver and khalasi. The goods might have come from Nepal, which are to send to Delhi. Nowhere, it is coming out of the impugned goods were imported for Nepal illegally. As Revenue has failed to prove with cogent evidence that the goods are smuggled one. Therefore, onus on the Revenue remains unfulfilled.
Thus, we do not find any infirmity in the impugned order and the same is upheld. Accordingly, the appeal filed by the Revenue is dismissed.
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2023 (5) TMI 1339
Denial of CENVAT Credit - TMT bars were sold by the appellant, which are used in Mega Power Project against the goods to be supplied against the international competitive bidding - benefit of N/N. 6/2006-CE dated 01.03.2006 - HELD THAT:- In the case of Industrial Perforation (India) Pvt. Ltd. [2019 (12) TMI 111 - CESTAT KOLKATA], this Tribunal has observed the only condition is that goods are cleared under International Competitive Bidding for use in the specified Mega Power Projects which are exempted from customs duty. The supply of subject goods in the instant case for Mega Power Project under International Competitive Bidding is on record and not in dispute. Moreover, since the case of the appellant has already been settled by the Co-ordinate Bench of the Tribunal as noted above, the appellant is legally entitled to exemption from payment of Central Excise duty and thus the duty demand is not sustainable.
It is not in dispute that the subject goods are used for Mega Power Project through International Competitive Bidding. Therefore, by relying on the above cited decisions, the appellant is entitled for the exemption as claimed.
There are no merit in the impugned order and the same is set aside - appeal allowed.
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2023 (5) TMI 1338
Reversal of CENVAT Credit - common input services - electricity used in a residential colony and power wheeled out to RSEB or used in the residential colony - penalty under Rule 15(2) of the Cenvat Credit Rules - extended period of limitation.
Extended period of limitation - HELD THAT:- The issue is wholly interpretational in nature and also it is undisputed fact that the appellant have maintained proper records of the transactions and they were subject to regular inspection and audit by the Department. In this view of the matter, the extended period of limitation is not available to the Revenue. Accordingly, demand will survive only for the normal period.
Reversal of CENVAT Credit - HELD THAT:- The appellant is not liable for reversal of duty on the power used in the residential township, which is situated closed to the factory of the appellant and it is an ‘industrial township’ maintained by the appellant, which requires necessary technicians and workmen on short call and as and when required for running the factory. Accordingly, the appellant is not required to reverse the proportionate cenvat credit for common input and input services towards the power used in the residential colony - the appellant is liable to reverse the proportionate cenvat credit attributable to power wheeled out to RSEB.
The matter remanded to the Original Adjudicating Authority to recalculate the amount to be reversed only towards the power wheeled out to RSEB. The appellant shall be entitled to consequential benefit in accordance with law. Thus, the appeal is allowed by way of remand.
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2023 (5) TMI 1337
Penalty - Confiscation of goods - Import of Beetle Nuts from Bangladesh - seeking permission to re-export the goods to Mayanmar and deposited the redemption fine - SAPTA Certificate - Violation of the provisions contained in DGFT’s notification referred earlier, duty at Tariff Value so fixed by the government u/s 14(2) of Customs Act not charged - HELD THAT:- Disputing the option to reexport the said goods subject to payment of redemption fine and duty the Appellants crave leave of the order passed by the Authorities. Referring to the Hon’ble Supreme Court’s decision in the case of Siemens Limited vs. Collector of Customs 1999 (8) TMI 84 - SUPREME COURT in support of their contention that redemption find and duty were not payable as the imported goods were ordered to be re-exported, they plead for quashing of the impugned order.
It is evident from the show cause notice, that it carries no reference to the test report dated 02.04.2014 and therefore the Order in Original placing reliance on the said test report (samples of which were alleged to be drawn at the back of the assessee), to arrive at the impugned findings, is clearly beyond the scope of the show cause notice. Further, the imported goods have been lying all along, in the custody of the Department, notably for several months, without proper storage conditions and that the initial test reports by the laboratory CFL at Kolkata vide their test report dated 03.12.2013 have found nothing as would render the imported goods unfit for human consumption. The said order of the Department, being in violation of the Principles of Natural Justice, is clearly contrary to the prescriptions of the Hon’ble Apex Court in Siemens Ltd. referred to supra.
The Appellants are not liable to any penal consequences, even though the goods may have become unfit for human consumption. The two test reports when read together clearly indicate that at the time of import, there was no finding about the imported betel nuts being unsuitable for human consumption. The fact that the goods are not re-exported and are now required to be destroyed and so ordered as per due process of law by the authorities, hence no redemptions fine is imposable thereon. The Appellant is also not liable for any penalty for reasons as discussed. The impugned order is therefore, liable to be set aside.
We therefore set aside the impugned order in original and allow the appeal, with consequential relief.
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2023 (5) TMI 1336
Payment of freight for transport of goods by road on the entire value of taxable Service - Entitlement to Abatement under Notification 32/2004-Service Tax - refund claim - Challenge of self-assessment - Unjust enrichment - Compliance with conditions for availing abatement under Notification 35/2004 - HELD THAT:- We observe that the conditions have been imposed on the GTA to give such a declaration on consignment notes. Thus making a declaration on consignment is a burden imposed on GTA and not on service receiver who is made liable to pay Service Tax. Only that they have to be a little vigilant in this regard that GTA’s make such a declaration to make them eligible for the abatement. We observe that the Transporters have issued a certificate to the effect that they have not availed credit on capital goods or inputs, which was accepted by the original adjudicating authority, but rejected by the Revision Authority.
The Appellant has produced certificates received from the transporters to the effect that no credit on capital goods or inputs was availed by them as required in terms of notification 35/2004-Service Tax dated 03.12.2004. The evidences submitted by the Appellant clearly indicate that they have fulfilled the conditions stipulated in the notification and accordingly, we hold that the lower authority has rightly sanctioned the refund claim.
During the course of hearing the Ld A.R raised some issue regarding not challenging the self-assessment by the Appellant, non examination of the unjust enrichment angle by the original authority etc. We observe that they were not the issues raised in the Revision order by the Commissioner. Accordingly, we find no infirmity in the order passed by the original authority sanctioning the refund.
Thus, we set aside the impugned Revision order dated 28.10.2009 passed by the Commissioner and allow the appeal filed by the Appellant.
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2023 (5) TMI 1335
Transaction Value - Reassessment of assessable value u/s 17(5) - Non speaking order - Imports PU Leather cloth of various thickness - HELD THAT:- It is a established principle in law that any reassessments undertaken by the officers and enhancement of the value of imported goods has to be clearly spelt out by way of a speaking order issued Section 17(5) of the Customs Act, 1962. Any value loading therefore cannot be undertaken without specified reasons.
There is nothing forthcoming from the case papers as to the basis of rejection of the declared transaction value, except for what at best is in the nature of hearsay evidence, till at least substantiated in accordance with legal provisions. This is particularly so, when the goods have been imported from the manufacturer/agent directly. There is no justification given by Revenue in loading the consignment’s declared value, except for what is stated earlier. The rejection of the manufacturers invoice value is therefore without any cogent explanation. The reassessment is as cryptic as the rejection of the transaction value.
It is clearly indicated in the Commissioner (Appeals) orders that the self assessment/import took place on the manufacturer’s invoice and the said fact of issuance of invoice has not been disputed. The issue therefore, has no warrant for action as per DRI’s letter or the CCRs as said to be fed in the ICES 1.5 System on the basis of communication from Commissioner (Customs). Thus, the appeal filed by the revenue is shorn of any merit and is thus liable to be dismissed. The order passed by the lower authority, the Ld. Commissioner (Appeals) is required to be maintained and upheld.
Thus, the appeal filed by the Commissioner of Customs (Port) Kolkata is dismissed.
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2023 (5) TMI 1334
Manpower Recruitment or Supply Agency Service - Seeking amendment in the cause title as well as in the ST-5 Form annexed to the appeal memorandum - Refund of unutilized Cenvat credit - HELD THAT:- We find that the impugned order in this case has failed to appreciate that the staff selected for employment were the employees of the foreign service recipient and not the employees of the appellant. Further, the agreements entered into between the appellant and the overseas entity were not properly scrutinized by the Ld. Commissioner (Appeals), which is evident from the fact that the appellant does not have necessary certificate to carry on the business of Ship Management Services.
Hence in our considered view, the services provided by the appellant pursuant to the agreements, would appropriately be classifiable under Manpower Recruitment or Supply Service, for which the appellant got themselves registered with the service tax department. We find that considering an identical issue, the Tribunal in the case of Commissioner of Central Excise, Mumbai Vs. Jubilant Enpro Pvt. Ltd.[2013 (3) TMI 735 - CESTAT MUMBAI], has held that the correct classification of services provided by the appellant therein should fall under the taxable category of ‘Manpower Recruitment or Supply Service’ and not under ‘Ship Management Service’.
Thus, we conclude that during the disputed period, the appellant had provided ‘Manpower Recruitment or Supply Service’ to the overseas entity and that as per the terms of the agreement, since the recipient of service was located outside India, the service should be considered as export; and as a consequence, the appellant should be entitled for the benefit of refund of input tax credit availed by it.
Therefore, by setting aside the impugned order, the appeal is allowed in favour of the appellant.
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2023 (5) TMI 1333
Refund of unutilized balance in CENVAT credit - Conformity of appellate determination - competence to decide on the refund entitlement - HELD THAT:- Finality of the order of the Tribunal is beyond question and it was incumbent upon central excise formations to implement the order without let or hindrance. The original authority took cognizance and proceeded to render the appropriate conclusion. The jurisdictional Commissioner of Central Excise took the path of disregard duly acclaimed in full measure by the first appellate authority.
By transgressing the direction of the Tribunal and seeking recourse from Commissioner of Central Excise (Appeals), the reviewing authority is in the very same jeopardy that caused admonishment supra the Hon’ble Supreme Court. This cannot be tolerated by any stretch. The first appellate authority is in no less of jeopardy for the original authority has clearly attested to the urgency in implementing the order without awaiting the outcome of review.
Appeal allowed.
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2023 (5) TMI 1332
Application for Rectification of Mistake (ROM) - errors apparent on the face of record - demand confirmed on the ground that the Appellants were using machines for the purpose of stitching and hence travelled beyond the scope of show cause notice - HELD THAT:- The Adjudicating authority has examined the decision of the Hon’ble Supreme Court in the case of COLLECTOR OF CENTRAL EXCISE, NEW DELHI VERSUS LOUIS SHOPPE [1995 (3) TMI 108 - SC ORDER] and given a finding in the Order-in-Original regarding the applicability of that decision in the present case. The Tribunal also examined the submissions made by the Appellant and given a finding in respect of the issue on merits. The Tribunal has also given a finding regarding the reasons for invocation of extended period. After examining all these issues the Final Order was issued by the Tribunal.
A perusal of the decision clearly indicate that for considering the ROM, the discovery of the mistake must not require a long process of reasoning. If an issue raised by the Appellant has not been discussed at all in the Order by the Tribunal, then only such an error can be rectified under an ROM. In this case the two grounds raised by the Appellants have been discussed in the Final Order of the Tribunal. If a submission has been made by the Appellant and it was not examined by the Adjudicating authority, then the Tribunal can go into that issue and find out whether the Adjudicating authority was right in taking the decision.
The remedy available to the Appellant is only to file an appeal against the order before the superior appellate forum and not an ROM for rectifying the mistake. In view of the above discussion, these issues raised by the Appellant cannot be rectified under this ROM Application.
Accordingly, the ROM filed by the Appellant, is dismissed.
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2023 (5) TMI 1331
Clandestine removal - wire rods - corroborative evidence or not - Penalty u/r 26 of CER - penalty imposed merely on the basis of the statement of the co-accused - whether the appellant had conducted himself in a manner to invite the necessary ingredients of Rule 26 of the Central Excise Rules, 2002 and whether, the case laws relied upon in support, come to the rescue of the appellants? - HELD THAT:- From the facts on record, it is noticed that the appellant when confronted with computer ledgers retrieved from the hard disk of computers of SPRML showing the details of clandestine supply of wire rods to the appellants, admitted to have been in receipt of goods indicated. This statement said to be given voluntarily, recorded under Section 14 of the Central Excise Act was never retracted nor any intimation sent to any authority alleging co-ercion, threat, duress etc., under the circumstances the voluntary character of the said statement cannot be doubted. The question thus remains whether the appellant can be held liable on the basis of the statement tendered by the coaccused.
The Hon’ble Rajasthan Court in the case of ACTO, ANTI EVASION-I, ALWAR. VERSUS KHANDELWAL FOODS PRODUCTS, RAJASTHAN TAX BOARD, AJMER [2016 (10) TMI 1010 - RAJASTHAN HIGH COURT] had held a delayed retraction and made before appellate authority to be of no avail. The Hon’ble Court observed that the onus was on the assessee to bring to the notice of higher officials, if any wrong had happened. It is settled law that retraction is to be filed close on the heels of the statement recorded and not before any other authority but the one before whom the said statement was tendered. Also a statement merely alleging as taken under pressure, without any corroborative evidence carries no weight and has been held to be an afterthought.
Thus, it is evident from the facts herein that the appellants dealt with the non-duty paid goods knowingly and was consciously aware of their non-duty paid character. By purchasing and selling such goods and dealing in other related manner the appellants have rendered themselves liable for penal consequences.
Appeal dismissed.
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2023 (5) TMI 1330
Jurisdiction - Assessment Order is barred by limitation or not - power of the High Court to exercise jurisdiction under Article 226 of the Constitution of India in a case where the appeal is filed beyond the condonable period of limitation asper the statute - HELD THAT:- It is profitable and relevant to refer the judgment of the Hon’ble Supreme Court in Assistant Commissioner (CT) LTU, Kakinada and others v. M/s. Glaxo Smith Kline Consumer Health Care Limited [2020 (5) TMI 149 - SUPREME COURT]. The question before the Hon’ble Supreme Court emanated from the judgment and order passed by the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh in [2018 (11) TMI 1780 - TELANGANA HIGH COURT] is whether the High Court, in exercise of its writ jurisdiction under Article 226 of the Constitution of India, can entertain a challenge to the assessment order on the ground that the statutory remedy of appeal against that order stood foreclosed by the law of limitation.
In the light of the observations made by the Hon’ble Apex Court in M/s. Glaxo case, the question was answered in negative taking a view that the High Court cannot exercise its jurisdiction under Article 226 of the Constitution of India to attend the cause where the statutory appeal filed beyond the condonable period of limitation as a matter of course.
The powers of High Court under Article 226 of the Constitution of India though wide, should be exercised with self-imposed restraint, and as such the Court cannot issue any writ which is inconsistent with the legislative intent regarding the prescribed period of limitation under Section 31 of the VAT Act, 2005, thereby making the legislative scheme and intention behind the proviso futile. The party who approaches the court under writ jurisdiction, has to substantiate the plea of “inability” to file appeal within the prescribed time.
Furnishing ‘C’ forms after passing assessment order - HELD THAT:- In the instant case, the First Appellate Authority and Second Appellate Authority did not make any attempt to refer and consider whether the service of pre-assessment notice, notice for personal hearing and service of assessment order before the Assessing Authority were made in accordance with the statute and if not, the resultant violation of principles of natural justice. They have not considered the case of the petitioner in right perspective as to the service of notice as per Rule 64 of the AP VAT Rules. Under these circumstances, there is no option for the petitioner except to seek indulgence of this Court under Article 226 of the Constitution, on the ground of gross violation of principles of natural justice - in the peculiarity of the present case, since the pre-assessment notice was not served as per the procedure, we deem it fit that an opportunity shall be given to the assessee to place the material supporting direct export sales under Section 5 (1) of the C.S.T Act for claiming exemption.
The matter is remitted to the Assessing Authority for fresh consideration within a period of three months from the date of receipt of a copy of this order. Consequently, the garnishee notice issued by the 2nd respondent to the 5th respondent is set aside subject to the petitioner maintaining Rs. 38,03,561/- i.e., the balance of the disputed tax in the bank account, till disposal of the Assessment Order.
Petition is allowed by way of remand.
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2023 (5) TMI 1329
Jurisdiction of CIT(A) u/s 251 - Classification of Interest-Free Loans as Perquisites - Taxability as salary u/s 17 - action for not deducting TDS from the perquisite in respect of interest free loans given to directors - importance of adhering to the powers granted by the Act
HELD THAT:- In the case in hand after deciding the grounds the CIT(A) directed the AO to take appropriate action for not deducting TDS from the perquisite in respect of interest free loans given to directors and to take appropriate action to tax the perquisites u/s. 17 of the Act.
In our considered view these directions were unwarranted and uncalled for as the issue was not before the CIT(A) no such power has been granted by the Act, therefore, the impugned direction of the CIT(A) is held to be in excess of the jurisdiction conferred by section 251 of the Act and hence same are directed to be deleted. Ground No.2 and 3 taken together are allowed.
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2023 (5) TMI 1328
Estimation of profit/ income - method of accounting for recognizing income - Percentage Completion Method (PCM) or Profit Margin Method (PMM) - assessee in principal accepted Percentage Completion Method (PCM) and returned profit whereas the AO estimated the profit at 9.31% under Profit Margin Method (PMM) - CIT(A) deleted the addition on the ground that the A.O. without rejection of books of accounts u/s. 145 of the Act, but estimated the income based on Profit Margin Method - HELD THAT:- Cordinate Bench of this Tribunal for earlier Assessment Year 2014-15[ 2022 (11) TMI 70 - ITAT AHMEDABAD] deleted the addition as DR was unable to point any infirmity in the findings of the CIT(A) that as per the guidance note issued by the ICAI for accounting of construction contracts the cost of land was to be excluded for calculating the Construction and Development cost of the project, nor was he able to controvert the factual findings of the CIT(A) that after excluding this cost of land the CDC completed by the assessee during the year was below the prescribed 25% of the Estimated cost of the project. Basis of the AO for recognizing Revenue from construction contracts of the assessee during the impugned year was the CDC, as per his calculation exceeding the prescribed limit of 25% of the estimated cost of project, which the Ld.CIT(A) correctly found to be factually incorrect.
Disallowance u/s 36(1)(ii) - interest free advances given - CIT(A) deleted addition as CIT(A) has held that the assessee had surplus interest free funds surplus far excess of the interest free advances - HELD THAT:- It is settled principle of law by various judgments of the Jurisdictional High Court that when the interest free funds available with the assessee were far in excess of investments, it can be said that the investments are made out interest free funds, then the disallowance made u/s. 36(1)(iii) by the A.O. is not justifiable. Respectfully following the jurisdictional High court in the case of Amod Stamping Pvt. Ltd.[2014 (7) TMI 753 - GUJARAT HIGH COURT] the disallowance made by the A.O. is unjustifiable and the same is hereby deleted.
Revenue appeal dismissed.
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2023 (5) TMI 1327
Grant of bail - Smuggling - possession of codeine phosphate in a consignment of phensedyl bottles loaded in two nylon bags - HELD THAT:- The investigation is complete; chargesheet has been filed, though the charges are yet to be framed. The conclusion of trial will, thus, take some reasonable time, regardless of the direction issued by the High Court to conclude the same within one year from the date of framing of charges. The petitioners do not have any criminal antecedents. There is, thus, substantial compliance of Section 37 of the NDPS Act.
In such circumstances, but without expressing any views on the merits of the case, it is deemed appropriate to release the petitioners on bail subject to the terms and conditions as may be imposed by the Trial Court.
SLP disposed off.
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2023 (5) TMI 1326
Rectification proceeding’s and orders passed on a non-existent entity - HELD THAT:- Admittedly, in this case, the order u/s 154 of the Act was passed on United Western Bank Ltd. which merged with the IDBI Bank Ltd. The information of the merger was intimated to the Revenue on 5th August, 2015. There was also a specific request made by the assessee to the Income Tax Officer, Satara to transfer the PAN of United Western Bank Ltd. to LTU, Mumbai.
The internal correspondence of the Revenue also shows that the AO was aware about the merger. Still the AO chooses to pass the rectification order in the name of a non-existent entity. Such order of rectification is to be quashed.
Decision of Mahagun Realtors [2022 (4) TMI 347 - SUPREME COURT] does not apply to the facts of the case as fact and intimation of merger was within the knowledge of ld AO. In the result, we confirm the order of the learned CIT (A) and dismiss the appeal of AO.
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2023 (5) TMI 1325
Addition u/s 68 - addition of entire Share Capital & Share Premium - no compliance from assessee by way of which identity, genuineness of the share subscribers and creditworthiness of the transactions can be established - Assessee made investment in land by raising share capital for which cost of land was very low and would fetch good sale price at high profits after its development, claimed ld. Counsel - HELD THAT:- As submitted that assessee had acquired 690.51 decimals of land area. There is nothing on record to demonstrate as to how these lands were acquired in terms of their conveyance deeds. In the written submissions furnished by assessee it is submitted that investment of assessee is in land and at the time of transactions and in view of huge quantity of land, cost of lands was very low but after the development of same, price of the same would be very high and profitable. As stated that “assessee is valuing investments at books value, whereas, the intrinsic or fair market value is much more. While issuing shares, fair market value of the shares has to be taken into account and the person paying the premium has factually benefitted from the purchase of shares at premium.”
Assessee also submitted that in order to justify its fair market value had made an attempt to furnish the submissions before AO for which it is stated in the written submission “assessee had during the course of assessment, approached to AO and tried to provide the fair market value of the investment held which proves the reasonableness of the premium, but ld. AO was not interested to do so.” Ongoing through these submissions, we find them to be general and vague in nature and in no way establishes the identity, creditworthiness of the share subscribers and the genuineness of the transaction.
It is difficult to comprehend the reason for the investment in the assessee company by the share subscribers when there is no track record for the assessee, this being the broken year and the very first year of incorporation. Preponderance of probabilities weighs in favour of Revenue when the fact on record is that shares have been issued on two consecutive dates, first being on 30/03/2012 to five individuals from whom no share premium has been charged and on the very next date on 31/03/2012, a hefty premium of Rs. 4,990/- has been charged from two share subscribing companies. It is also important to note in this case that none appeared before ld. AO to discharge the onus casted u/s 68 of the Act so as to enable the AO to make the necessary enquiries for establishing the identity and creditworthiness of share subscribers as well as genuineness of transactions.
As also observed that the main object clause contained in the Memorandum of Association does not fall in line with the activity of land dealing claimed to have been undertaken by assessee during the year. Also, from perusal of financial statements of two share subscribing companies, it is observed that source of investment by these two companies are also from the share capital and share premium raised by them while issuing their own shares to other closely held companies. Further, the assessee itself has claimed that there is no noticeable business activity during the year.
Thus assessee has failed to establish the basic ingredients of Section 68 of the Act - Decided against assessee.
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2023 (5) TMI 1324
TP Adjustment - transaction of corporate guarantee constitute international transaction or not? - HELD THAT:- On perusal of order passed by CIT(A), we find that the CIT(A) has held that transaction of granting corporate/performance guarantee constitutes an international transaction keeping in view Explanation (i)(c) to Section 92B of the Act (inserted with retrospective effect from 01.04.2002 by Finance Act 2012), whereby 'guarantee' has been specifically included in the definition of ‘international transaction’ as defined in Section 92B of the Act. The view taken by the CIT(A) is supported by decision of the Tribunal in Assessee’s own case for the Assessment Year 2012-13 [2020 (9) TMI 1101 - ITAT MUMBAI]. Accordingly, we hold that the transaction of giving guarantee is international transaction requiring determination of ALP and transfer pricing adjustment.
Upward transfer pricing adjustment - Assessee had advanced sum without charging any interest - advance given by the Assessee were akin to loan - HELD THAT:- CIT(A) deleted the addition by placing reliance of the decision of the Tribunal in the case of the Assessee for the Assessment Year 2012-13 [2020 (9) TMI 1101 - ITAT MUMBAI] wherein as held that the advances were towards fulfilment of the assessee’s obligation of being a JV partner as any financial incapacitation of JV would adversely affect the continuation of the project and ultimately jeopardize the interest of the assessee. Therefore, the said advances could not be put in the category of loans as done by the lower authorities. Further, it could not be said that JV entity derived / gained certain benefits out of such advances but rather it was the assessee who would ultimately gain by continuing with the projects and taste the fruits of the success of project. Hence, not convinced with impugned adjustments as confirmed by first appellate authority, we direct Ld. AO to delete the same - Decided against revenue.
TP adjustment pertaining to different Performance Guarantees - HELD THAT:- There is nothing on record to persuade us to take a view different from the view taken by the Co-ordinate Benches of the Tribunal for the preceding assessment years for the same performance guarantees as held performance guarantees were given by the Bank of India, Mumbai Branch in favour of CCWE, a customer of Assessee's AE (i.e. KEC Global FZ LLC), and Bank of India, had charged guarantee commission of 0.93% per annum in respect of the same which was recovered by the Assessee from the AE. For Assessment Year 2010-11, 2011-12 and 2012-13, the Tribunal has accepted the aforesaid rate of 0.93% as arm’s length rate of guarantee fee. Thus, facts and circumstances being identical, we dismiss Ground No.2(i) to (ix) raised by the Revenue.
Arm’s length rate of guarantee fee for corporate guarantees at 2% - HELD THAT:- Perusal of the order passed by TPO shows that the TPO had determined arm’s length guarantee fee at the rate of 2% by way of estimation. During the course of hearing, it was pointed out by the Learned Authorised Representative for Assessee that the corporate guarantee was given for working capital loan facility granted to the AE in which the Assessee was 50% partner, and therefore, there was no default risk. Further, repayment of loan was secured by way of charge against the receivables from Saudi Electric Company, a Government Undertaking and a client of the Assessee’s AE and therefore, the Assessee had only provided secondary security. The aforesaid submission, at best, supports the view taken by the CIT(A) to adopt the lower rate of 0.6% proposed to be charged by the bank of the Assessee as the arm’s length rate for corporate guarantee fee instead of 2% determined by the TPO/Assessing Officer. Given the facts and circumstances of the present case, we are not inclined to interfere with the order passed by the CIT(A) on this issue. Accordingly, Ground No. 3(ii)–(iii) raised by the Revenue are dismissed.
Unrealized foreign exchange loss arising from foreign exchange contracts - HELD THAT:- As relying on the Assessment Year 2009-10 to 2012-13 in assessee own case [2019 (9) TMI 437 - ITAT MUMBAI], [2021 (5) TMI 816 - ITAT MUMBAI], [2020 (9) TMI 1101 - ITAT MUMBAI] held that MTM losses on hedging contracts would be accrued losses and hence, an allowable expenditure.
Deduction for education cess as well as higher & secondary education cess - HELD THAT:- Both sides agreed that this issue stands covered in favour of the Revenue by the judgment passed by Chambal Fertilizers & Chemicals Limited [2022 (12) TMI 1098 - SC ORDER] wherein it has been held that as per Explanation 3 to provision of Section 40(a)(ii) of the Act inserted by Finance Act, 2022 (with retrospective effect from 01.04.2005) surcharge or cess forms a part of 'tax' and therefore, deduction for the same cannot be allowed under Section 37.
Aggregation of Corporate guarantees - HELD THAT:- As we have accepted Assessee’s contention that 0.60% be accepted as arm’s length rate of corporate guarantee fee. Accordingly, given the facts and circumstances of the case, we accept the alternative contention of the Assessee and direct the TPO/Assessing Officer to recomputed the transfer pricing adjustment by taking rate of 0.6% as arm’s length rate for corporate guarantee fee for all corporate guarantee given by the Assessee, (except for the corporate guarantees aggregating to USD 8,03,00,000/- given on behalf of wholly owned subsidiaries KEC Transmission LLC and KEC US LLC, USA in which case arm’s length corporate guarantee fee shall be determined by adopting rate of 0.02%).
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2023 (5) TMI 1323
Rectification u/s 254(2) - scope/power of rectifying the mistakes apparent from record - Tribunal has not adjudicated/not considered the orders relied upon by the Ld. AR during the course of hearing as well as holding that non-applicability of the judgement of the Hon’ble Orissa High Court is a mistake apparent from record - HELD THAT:- Tribunal has taken cognisance of the decision of Hon’ble Orissa High Court and has given its view on the aspect of interest on staff loans whether business income or not. The view taken by the Tribunal is independent view after considering the decisions of the Hon’ble Gujarat High Court and the Hon’ble Orissa High Court and the Delhi Tribunal. The Tribunal has categorically noted the distinction on facts that in the said cases the interest earned on staff loan/advances was treated as business income noting the fact that they were given as mandatory incentives.
This fact being not demonstrated in the present case, therefore, all these decisions were held to be not applicable in the present case. This cannot be termed as mistake apparent from record as the decisions cited by the Ld. AR were adjudicated and considered while expressing the view by the Tribunal in order and applicability of the decision of the Hon’ble Orissa High Court has also been taken into account after expressing our view - Miscellaneous Applications do not survive and hence are dismissed.
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2023 (5) TMI 1322
Late deposit of employee’s contribution to PF/ESI etc. - assessment carried out u/s 143(1) - reliance on information in the return of income/audit report - interpretation of law which was prevailing as on the date of filing of subject Income tax Return (ITR) and any subsequent pronouncement of law or retrospective amendment on the concerned issue - HELD THAT:- In the present case as observed there is no change of law. the statutory provisions have not been amended retrospectively, rather, it was a question only of interpretation of statutory provisions. Moreover, as noted above, provision in the decision of the Hon’ble Calcutta High Court in the case of ‘CIT vs. Vijay shree Ltd.’ [2011 (9) TMI 30 - CALCUTTA HIGH COURT] the sole issue raised before the Hon’ble Calcutta High Court was as to whether the provisions of section 43B will have to be applied retrospectively or prospectively without any discussion on the issue whether the employer’s contribution mentioned in section 43 would also include employees’ contribution. It was not the case that the assessee was not aware that the decision of the hon’ble High Court was subject to appeal before the hon’ble Supreme Court and that the decision of the Hon’ble High Court could be reversed by the Hon’ble Supreme Court. Similarly, the case law cited by the ld. counsel in the case of Modern Fibotex India Ltd. [1994 (3) TMI 17 - CALCUTTA HIGH COURT] the other case laws of different High Courts relied by the ld. counsel, are not applicable in view of the settled proposition of law by the Hon’ble Supreme Court in the various case laws as discussed above.
AO power or jurisdiction to disallow the aforesaid amount while processing the return u/s 143(1)(a) - as argued Despite Hon'ble Supreme Court judgement in Checkmate Services (P) Ltd. [2022 (10) TMI 617 - SUPREME COURT] prima facie adjustment u/s. 143(1)(a) of the Act cannot be made to disallow u/s. 36(1)(va) the employees' contribution to PF/ESI deposited belatedly after due date prescribed under relevant statute if deposited within due date of filing ITR - In view of the above facts, “as indicated in the audit report”, in my humble view, would mean that where the information in the audit report is suggestive of some disallowance but not taken into account by the assessee in computing the total income in the return, the AO/CPC would give intimation to the assessee of such proposed adjustments and whereupon the assessee has the right to file response/objection to such adjustment and the AO/CPC is required to consider such response/objection before making the adjustments. Therefore, the word ‘indicate’ does not mean that the auditor is required to specifically mention that such and such disallowance is required to be made in the case of the assessee, rather, correct view would be that the auditor is required to furnish the information and that information can be compared and considered by the Assessing Officer/CPC in the light of the relevant statutory provisions as well as relevant laws and if such information is suggestive of any adjustment of disallowance, the Assessing Officer will make such disallowance after giving opportunity to the assessee to rebut the same.
The views of the Coordinate bench of the Tribunal in ‘Kalpesh Synthetics Pvt. Ltd. [2022 (5) TMI 461 - ITAT MUMBAI] in no manner is suggestive that the djustment u/s 36(1)(va) cannot be made while processing the return u/s 143(1) of the Act, rather, the above view is limited to the proposition that if the law laid down by the High Court/Supreme Court is otherwise as compared to the factual information given in the audit report, then the law laid down by the Hon’ble High Court/Supreme Court would prevail over the tax audit report. Therefore, the Coordinate Mumbai Bench in the said case of “Kalpesh Synthetics Pvt. Ltd. vs. DCIT” (supra) has also mentioned time and again that in the audit report factual information is given, whereupon the Assessing Officer has to apply the prevailing law. As observed above, the law has been settled by the Hon’ble Supreme Court on the issue in the case of Checkmate Services Pvt. Ltd. [2022 (10) TMI 617 - SUPREME COURT]. The law declared by the Hon’ble Supreme Court is to be treated as if the same was the right interpretation since the date of the inception of the relevant provision and, therefore, even as per the decision of the Coordinate Bench of the Tribunal in ‘Kalpesh Synthetics Pvt. Ltd. vs. DCIT’ (supra), the issue is required to be decided in favour of the Revenue and against the assessee.
Interpretation of the existing old provisions - Whether law prior to amendment should be taken in favour of the assessee by taking the due date as mentioned u/s 43B ? - The law prior to amendment should be taken in favour of the assessee by taking the due date as mentioned u/s 43B of the Act - we are not convinced with the above submission of assessee. As discussed above, there is no mention in 43B of the Income Tax Act regarding the due date of filing of return as due date of deposit of employees’ contribution to PF/ESI etc. Even the law as prevailing prior to amendment brought by Finance Act 2021 on this issue has been settled by the Hon’ble Supreme Court and it has been held by the Hon’ble Supreme Court that as per the statutory provision of section 43B of the Income Tax Act as prevailing prior to the amendment brought vide Finance Act 2021, non-obstante clause u/s 43B could not apply in case of amounts which were held in trust as was case of employee’s contribution which were deducted from their income and was held in trust by assessee-employer as per section 2(24)(x), thus, the said clause would not absolve assessee-employer from its liability to deposit employee’s contribution on or before due date as prescribed u/s 36(1)(va) as a condition for deduction.
Due to new statute/amendment brought by new statute, there is some conflict with the other existing older provisions either in the same statute or any other Act - As there is no conflict between a prevailing old law or new law in this case, rather, the amendment has been brought to the relevant provisions with prospective effect and there is no conflict between any existing/unamended old provisions and the new provisions. Further even under the amended provisions, the application of section 43B to the provisions of section 36(1)(va) of the Income Tax Act has been done away with. Even if the contention of the ld. counsel is to be accepted, the new law is against the assessee even in respect of employer’s contribution to ESI/PF what to say of, the employees’ contribution. If the new law has to prevail then the provisions of section 43B will not have any application and therefore, this contention raised by the counsel for the assessee is of no help to assessee but to Revenue. Therefore, there is no force in the above arguments of the ld. counsel. However, it is made clear that my above discussion in any manner does not hold that the amendment provisions will prevail over the old provisions to section 36(1)(va), rather, there is no conflict in the prevailing law with any of the existing provisions in the Income Tax Act after amendment brought by Finance Act, 2021 relating to the issue under consideration. The above contention of the ld. counsel is totally misconceived.
Appeal of the assessee stands dismissed.
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2023 (5) TMI 1321
Professional misconduct by CA - Continuation of Audit engagement disregarding Independence requirements - Failure to understand nature or business of Giri Vidhyuth (India) Limited (GVIL) - Lapses in audit relating to fraudulent diversion of funds worth Rs. 520 crores, understatement of related party loan by Rs. 350 crores and evergreening of loans - Lapses in evaluation of going concern assumption - Lapses In audit relating to Statement of Cash Flows - Failure to ensure compliance with section 134(1) of the Act - Failure to comply with SA 700-Forming an Opinion and Reporting on Financial Statements - Failure to comply with SA 230-Audit Documentations, SA 260, Communication with Those Charged With Governance & SA 265-Communicating deficiencies in Internal Control to Those Charged With Governance and Management - Failure to comply with SA 300-Planning an audit of Financial Statements - Failure to comply with SA 720-The Auditor's Responsibilities Relating to Other Information - sanctions and penalties.
HELD THAT:- The Auditors have committed Professional Misconduct as defined under Section 132(4) of the Companies Act 2013 in terms of section 22 of the Chartered Accountants Act 1949 (CA Act) as amended from time to time, and as detailed below:
a) The Auditors committed professional misconduct as defined by clause 5 of Part 1 of the Second Schedule of the CA Act, which states that an auditor is guilty of professional misconduct when he "fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity",
b) The Auditors committed professional misconduct as defined by clause 6 of Part 1 of the Second Schedule of the CA Act, which states that an auditor is guilty of professional misconduct when he "fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity".
c) The Auditors committed professional misconduct as defined by clause 7 of Part 1 of the Second Schedule of the CA Act, which states that an auditor is guilty of professional misconduct when he "does not exercise due diligence or is grossly negligent in the conduct of his professional duties".
d) The Auditors committed professional misconduct as defined by clause 8 of Part 1 of the Second Schedule of the CA Act, which states that an auditor is guilty of professional misconduct when he "fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion".
e) The Auditors committed professional misconduct as defined by clause 9 of Part 1 of the Second Schedule of the CA Act, which stales that an auditor is guilty of professional misconduct when he "fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances".
In addition to above, the Audit Firm has committed Professional Misconduct as defined Section 132(4) of the Act as failure to exercise due diligence and being grossly negligent in the conduct of professional duties, as the Audit Firm failed to exercise due diligence and was grossly negligent in the conduct of professional duties, thus, violated SQC 1.
Thus, all the charges of professional misconduct in the SCN (Except charges relating to noncompliance with SA 320, which has been dropped) stand proved based on the evidence in the Audit File, the Audit Report dated 21.11.2020 issued on behalf of the Firm, the submissions made by the Auditor and the Financial Statements of GVIL for the FY 2019-20.
Penalties and sanctions - HELD THAT:- Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is hereby ordered:
a) Imposition of a monetary penalty of Rs. One Crore upon M/s. Sundaresha & Associates. In addition, M/s. Sundaresha & Associates is debarred for a period of Two years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. This debarment period will start after completion of two years debarment period imposed in case of Tanglin Development Limited for FY 2018-19 vide NFRA order dated 26.04.2023.
b) Imposition of a monetary penalty of Rs. Five Lakhs upon CA C. Ramesh-In addition, CA C. Ramesh is debarred for a period of Five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
c) Imposition of a monetary penalty of Rs. Five Lakhs upon CA Chaitanya G. Deshpande. In addition, CA Chaitanya G. Deshpande is debarred for a period of Five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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