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2023 (11) TMI 1147 - ITAT MUMBAI
Addition on account of purchase return - variation of G.P. and N.P ratio - assessee is selling the products on consignment basis on sale of Sabyasachi products - goods are received by the assessee on consignment basis - as argued as per the double entry accounting principles, if there is an increase in cost of purchase, then there is a corresponding increase in valuation of closing stock and there will not be any impact on income - HELD THAT:- Assessee is in the business of trading as well as trader of Sabyasachi products for which assessee receives commission on the basis of consignment sale. We observe from the record that assessee’s main as well as major income is from commission. It is very much visible from the statement of profit and notes forming part of the financial statements in particular Note - 14 and Note – 16. It clearly shows that the assessee’s main income is commission income which matches with the revenue from operation declared by the assessee.
Assessee has to declare purchases and sales received from Sabyasachi products which is on consignment basis. However, as per the requirement of VAT, assessee has to declare both the purchases as well as sales in its Books of Accounts and assessee has to declare the goods kept under its control i.e., opening goods on consignment basis and total purchases for the year less purchase returns during the year under consignment.
Since the goods are received by the assessee on consignment basis assessee may have to return consigned goods back to Sabyasachi in case of defective or unsold stocks.
In the line of trade particularly with respect to consignment sales assessee is not the owner of the goods and he is responsible to make the sales on behalf of the other party and in return assessee is eligible to get only the percentage of agreed commission.
Assessee has squared up the purchases and sales in its financial records and no doubt assessee has declared substantial amount as purchases return back to Sabyasachi. It is the responsibility of Sabyasachi to declare the above activities in its Books of Accounts. Since assessee is only a commission agent assessee has recorded the transactions to square up the sales and purchases in its Books of Accounts and declared only the commission income as its main source of income. Therefore, we are not inclined to accept the findings of the Assessing Officer in this regard.
Variation in G.P and N.P ratio - As we observe that assessee has received percentage of commission lesser than the previous year turnover and also the assessee has declared additional employee cost compared to previous year, since these issues were not contested before us, we are not inclined to make further comments on these issues. Accordingly, Ground No. 1 raised by the assessee is allowed.
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2023 (11) TMI 1146 - ITAT BANGALORE
Disallowance u/s. 14A r.w.s. Rule 8D being expenditure incurred towards earning exempt income - AO noted that the assessee has claimed exemption u/s. 10(34) towards dividend and interest on tax free bonds u/s. 10 - assessee made an adhoc disallowance in relation to income not forming part of total income under ‘proportionate expenditure of treasury department in terms of section 14A’ - HELD THAT:- This issue has been settled by the Hon’ble jurisdictional High Court in assessee’s own case for AY 2011-12 & 2012-13 [2021 (2) TMI 1366 - KARNATAKA HIGH COURT] as held assessee has admittedly not incurred any expenditure. This case pertains to income on dividend, which by no stretch of imagination can be treated to be an expenditure to attract the provisions of Section 14A of the Act. In view of aforesaid enunciation of law by WALFORT SHARE AND STOCK BROKERS (P) LTD [2010 (7) TMI 15 - SUPREME COURT] substantial question of law framed by this court is answered in favour of the assessee and against the revenue.
Disallowance u/s. 36(1)(vii) in respect of bad debts written off by the bank - AO noted that the assessee claimed deduction of bad debts without actually writing-off the debts as irrecoverable in the individual accounts of the debtors concerned - HELD THAT:- We notice that the from the decisions of the coordinate Bench quoted by the assessee in AY 2014-15 [2022 (3) TMI 134 - ITAT BANGALORE] as careful reading of explanation to section 36(1)(vii) would indicate that nowhere it suggests that the proviso to section 36(1)(vii) would apply in respect of bad debt written off relating to non-rural advances. In the aforesaid view of the matter, we hold that assessee would be eligible to avail deduction of an amount of Rs. 209.94 crore representing actual write off in the books of account of bad debts relating to nonrural/urban advances in terms with section 36(1)(vii), as proviso to the said section would not apply to non-rural advances. Accordingly, we delete the addition made by AO and confirmed by ld. CIT(A) - Decided in favour of assessee.
Disallowance u/s. 36(1)(viia) - calculating average aggregate advances of rural branches - AO noted that the bank has claimed a sum as deduction in respect of provision made for bad & doubtful debts u/s. 36(1)(viia) and computed 10% of aggregate average advances (AAA) of the rural branches & 7.5% of the total income before 36(1)(viia) & provisions created in the books - AO held that only fresh advances made during the month by the rural branches should be considered for computing the AAA as per Rule 6ABA and observed certain discrepancies in the classification of rural branches by the assessee bank that 37 branches could not be classified as rural branches, as the population as per Census 2011 exceeds 10,000 in those areas, and accordingly held that incremental advances made by non-rural branches shall be excluded for computation the AAA. - HELD THAT:- We find that this issue was considered by this Tribunal in the latest judgement in assessee’s own case for AYs 2014-15 & 2015-16 in [2023 (11) TMI 1022 - ITAT BANGALORE] to hold that the while calculating average aggregate advances of rural branches under section 36(1)(viia), both advance outstanding as well as fresh advances are to be considered. We further note that AO has reverted a clear factual finding in the assessment order that population in these 37 branches exceeded ten thousand as per Census 2011. Before that CIT (A) the assessee could not produce credible evidence. Considering the totality of facts, we remit this issue to the CIT(A) for verification of population of 2011 Census of 37 branches and the assessee is directed to produce the documentary evidence in support of its claim. Accordingly this ground is partly allowed for statistical purpose.
Applicability of provisions of section 115JB of the Act to the assessee bank - corresponding new bank - case of the assessee is that clause (b) of sec.115JB(2) is made applicable to banking companies, since banking company is included in sec. 211 of the Companies Act. However, it is the contention of the assessee that it is not a ‘banking company”, i.e., it is a “corresponding new bank” - HELD THAT:- This issue also considered by this Tribunal in the latest judgement in assessee’s own case for AYs 2014-15 & 2015-16 [2023 (11) TMI 1022 - ITAT BANGALORE] as held the issue has been decided as stating provisions of sec. 51 of the Act specifically states that only certain provisions of BR Act are applicable to “Corresponding new bank”. We noticed earlier that the Ld CIT(A) has proceeded to decide this issue by observing that all provisions of BR Act are applicable to the Company. We notice that the Ld CIT(A) did not consider the effect of provisions of sec. 51 of the BR Act upon the assessee. Hence the decision taken by him under the impression that all the provisions of BR Act are applicable to the assessee is faulted one. In our view the Ld CIT(A) should considered the effect of provisions of sec. 51 of BR Act and accordingly he should have appreciated the contentions of the assessee on the definition of “banking company”, provisions of sec. 211(2) of the Companies Act etc. Since these aspects go to the root of the issue, in our view, this issue needs to be examined at the end of Ld CIT(A) afresh. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to his file for examining it afresh - Thus we remit this issue also to the file of CIT(A) for fresh consideration and decision as per law in the same terms.
Allowable revenue expenses - expenditure by way of penalty for violation of RBI directions - AR submitted that the amount paid to RBI was in the ordinary course of business and he further requested that the matter may be sent back to the CIT(A) for submitting necessary details, while the ld. DR supported their orders - HELD THAT:- After considering the rival submissions, we note that the assessee admitted that penalty was imposed by RBI for lapses on the part of the bank in adhering to KYC norms and deficiencies in internal control mechanism. The lower authorities held that penalty imposed for infraction of law is not an admissible expenditure. Accepting the prayer of the assessee, we remit this issue to the CIT(A) for fresh decision as per after giving proper opportunity to assessee. The assessee is also directed to furnish necessary documents in support of its claim.
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2023 (11) TMI 1145 - ITAT MUMBAI
TP Adjustment - corporate guarantee to AE constitutes an international transaction u/s 92B - CIT(A) reducing the arm’s length guarantee fee rate of 2.5% determined by the Assessing Officer/TPO to 0.5% - HELD THAT:- For the Assessment Year 2008-09 and 2009-10 the Tribunal had, following the decision of the Tribunal in the case of the Assessee for the Assessment Year 2007-08 [2015 (5) TMI 639 - ITAT MUMBAI] agreed with the CIT(A) that providing corporate guarantee to an AE constitutes an international transaction and had accepted the guarantee fee rate of 0.5% determined by the CIT(A) as the arm’s length rate while rejecting the rate proposed by the Assessee. There is no change in the facts and circumstances of the case. Nothing has been placed before us to persuade us to depart from the view taken by the Tribunal in the case of the Assessee for the preceding assessment years on this issue.Thus we do not find any infirmity in the order passed by the CIT(A).Ground No. I & II raised by the Assessee are dismissed.
TP Adjustment - interest on loan to Associated Enterprises - Assessee voluntary made an adjustment in the computation of total income by computing interest at the rate of 1.53% (i.e. Average US LIBOR + 1%) in case of interest free USD loan to Aditya Birla Minacs Philippines and at the rate of 5.50% in case of interest free CAD loan to AVTL, Canada - HELD THAT:- As decided in assessee own case has accepted LIBOR plus 1% as arm’s length rate of interest.
Thus keeping in view the above decisions of the Tribunal in the case of the Assessee, which continue to hold the field, we do not find any merit in the contention advanced by the Assessee that no transfer pricing adjustment was warranted. The decision of CIT(A) to hold LIBOR + 1% as arm’s length rate of interest in respect of loan for AEs is in line with the above decisions of the Tribunal in the case of the Assessee.
Disallowance of claim of proportionate premium paid arising on account of repayment of optionally convertible debentures - CCDs were initially issued the Assessee had no obligation to pay premium, interest, or charges in relation to the CCDs as the same were convertible into equity on expiry of 60 months as per the conversion formula which was to be mutually agreed by the Assessee and the subscriber/holder of CCDs - HELD THAT:- It is admitted position that the CCDs were transferred from subscriber to holders and from holder to subsequent holders over a period of time. At the time of conversion the CCDs were held by ABNL, however, during the relevant previous year the CCDs were not held by ABNL. Therefore, the modification of terms as agreed upon between the ABNL and the Assessee, cannot change the terms and conditions which were binding upon the Assessee and the holders of CCDs at the relevant time according to which the debentures were to be compulsorily convertible into equity.
Given the facts and circumstances of the present case, we are of the view that the commercial arrangement entered into by the Assessee subsequent to the filing of return of income for the relevant previous year, cannot be applied retroactively to make additional claim leading to reduction of the income returned by the Assessee.
Having perused the judicial precedents cited on behalf of the Assessee, we conclude that, in view of the above, none of the judicial precedents cited apply to the factual matrix before us and therefore, the same do not advance the case of the Assessee. We confirm the order passed by the CIT(A) rejecting the claim for deduction in respect of proportionate premium on redemption of OCDs made by the Assessee during the assessment proceedings. Decided against assessee.
Addition u/s 36(1)(iii) in respect of the interest and other expenses incurred for acquisition of shares of a subsidiary company - CIT(A) deleted disallowance - HELD THAT:- Tribunal [2016 (8) TMI 1417 - ITAT MUMBAI], has allowed deduction for interest and other expenses incurred by the Assessee under Section 36(1)(iii)/37 of the Act on the ground of commercial expediency/exigency as such interest & other expenses were incurred in connection with the loans taken by the Assessee for DBS Bank which has been utilized for making investment in AVTL, Canada which had acquired Minacs Worldwide Inc, Canada, leading to significant rise in the business of the Assessee.
We note that the appeal preferred by the Assessee against the above order of the Tribunal on the issue of deletion of disallowance under Section 36(1)(iii) of the Act has been dismissed by the Hon’ble Bombay High Court [2019 (10) TMI 760 - BOMBAY HIGH COURT]. Further, the Special Leave Petition [2020 (10) TMI 1213 - SC ORDER] preferred by the Revenue against the aforesaid order of the Hon’ble Bombay High Court has also been dismissed on the ground of delay. Thus no infirmity in the order passed by the CIT(A) in allowing the claim for deduction.
Disallowance of Employee Stock Option Scheme (ESOP) expenses - Allowable revenue expenses u/s 37(1) or not? - HELD THAT:- In view of the Special Bench of the Tribunal in Biocon Ltd. [2013 (8) TMI 629 - ITAT BANGALORE] allowed deduction of ESOP expenses under Section 37(1) of the Act stands confirmed by the Hon’ble High Court [2020 (11) TMI 779 - KARNATAKA HIGH COURT] we do not find any infirmity in the order passed by the CIT(A) allowing the claim for deduction of ESOP Expenses under Section 37(1).
‘Mark to Market’ loss - loss pertaining to forward contracts treated as notional loss - Assessee had claimed deduction for foreign exchange loss booked by the Assessee as ‘Mark to Market’ loss pertaining to forward contracts entered into by the Assessee for hedging the foreign exchange of risk in the course of export business - AO disallowed the same holding the same to be notional loss by placing reliance upon the Instruction No. 3 of 2010 dated 23/03/2010 issued by Central Board of Direct Taxes (CBDT) - HELD THAT:- while Instruction No. 3 of 2010, dated 23/03/2010, was binding upon the Assessing Officer, the same was not binding on the courts or this Tribunal. In this regard, it could be pertinent to the refer to the judgment of M/s Suven Life Sciences Ltd [2017 (9) TMI 1598 - ITAT HYDERABAD] wherein the Tribunal had rejected the identical reasoning given by the Assessing Officer and allowed the claim of the Assessee for deduction of ‘Mark to Market’ losses as held that the loss suffered by the assessee on account of fluctuation in the rate of foreign exchange as on the date of the balance sheet is an item of expenditure u/s 37(1) - Decided against revenue.
Delayed payments of employees’ contribution to ESIC - Payment made after the expiry of the time specified in the applicable statute but before the filing of tax return under Section 139(1) - HELD THAT:- This issue is no longer res integra and stands decided against the Assessee and in favour of the Revenue by the judgment of the Hon’ble Supreme Court in the case Checkmate Services Private Ltd [2022 (10) TMI 617 - SUPREME COURT] wherein the Hon’ble Supreme Court has held that where an assessee failed to deposit Employees' Contribution towards Provident Fund and Employees’ State Insurance within due date prescribed in respective statutes, deduction under Section 36(1)(va) of the Act was not allowable. The non-obstante clause contained in Section 43B of the Act would not apply in the case of employees’ contribution held in trust by assessee-employer. Therefore, such assessee-employer would not be absolved from the liability to deposit employees’ contribution on or before the due date specified in the respective statutes as a pre-condition for claiming deduction under Section 36(1)(va) of the Act. - Decided against assessee.
CIT(A) admitted the additional claim of the Assessee - HELD THAT:- As relying upon the judgment of Pruthvi Brokers & Shareholders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] wherein after considering the judgment of Goetze India Ltd. Vs. CIT [2006 (3) TMI 75 - SUPREME COURT] it was, inter alia, held that the first appellate authorities was entitled to entertain and adjudicate even a new claim raised by the Assessee for the first time before the first appellate authority. Accordingly, we do not find any infirmity in the order passed by the CIT(A).
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2023 (11) TMI 1144 - ITAT DELHI
Addition on account of Share Application Money u/s 68 - burden of proving the creditworthiness of creditors and the genuineness of the transaction - HELD THAT:- CIT(A) found that the assessee failed to prove the genuineness of the transaction and the creditworthiness of the creditors. The initial burden of proving the creditworthiness of creditors and the genuineness of the transaction is cast upon the Assessee as per Section 68.
In the present case, as the Assessee has not proved the burden cast upon it u/s 68 of the Act by providing requisite evidence before the Authorities, therefore, in our considered opinion, the Ld. CIT(A) has rightly confirmed the addition on the basis of remand report.
Disallowance of addition in the fixed asset, addition on account of sundry creditors and the disallowance expenses were also remained unexplained by the Assessee before the AO or before the CIT(A). Therefore, we find no reason to interfere with the above disallowances made by the AO which has been confirmed by the CIT(A). Accordingly, we find no merit in the grounds of appeal of the assessee.
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2023 (11) TMI 1143 - ITAT CHANDIGARH
Assessment u/s 153A - undisclosed investments - reopening of assessment u/s 153A beyond six years but not more than ten years - relevant assessment years - evidence available to the AO was relating to the loose sheet whereby the unexplained investment of the assessee has been taken by the AO at Rs.45,00,000/- - Whether any incriminating material found during the search action? - HELD THAT:- The provisions of section 153A are in itself is separate code.
After the search action u/s 132 of the Act, the assessment/reassessment is reopened for the six years preceding the date of search. However, as laid down in case of Abhisar Buildwell P Ltd [2023 (4) TMI 1056 - SUPREME COURT] no addition can be made in respect of completed/unabated assessment years in assessments carried out u/s 153A in the absence of any incriminating material found during the search action.
The assessment years beyond six years but not more than ten years can be reopened u/s 153A of the Act only if the AO is in possession of evidence depicting the escapement of income of aggregating Rs.50,00,000/- or more in such relevant assessment years beyond six years from the date of search.
These provisions extending the assessment beyond six years and upto ten years put a stringent condition of possession of evidence with the AO of escapement of income of Rs.50,00,000/- or more. Such provisions extending the scope of assessment beyond six years from the date of search has to be construed strictly and the evidence relied upon by the AO in such assessments of extended period must be a tangible evidence.
As noted above, it has been held time and again by various courts of law that the DVO's report on standalone basis without any corroborating material cannot be construed as incriminating material and hence the additions solely on the basis of the DVO's report are not sustainable. In the case of the assessee, even there is no difference found out between the investment disclosed by the assessee in the books of account as compared to the DVO's report in respect of property at Leela Bhawan Chowk, Patiala.
Under the circumstances, since the evidence relating to the undisclosed investments in respect of "relevant assessment years" as defined in Explanation 1 to 4th Proviso of section 153A(1) was less than Rs.50,00,000/-, therefore, the reopening of the assessment of the "relevant years" was bad in law and the same is hereby quashed. Assessee appeal allowed.
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2023 (11) TMI 1142 - ITAT MUMBAI
Additions against unsecured loan as accommodation entries - Assessee claimed that, it may be considered as accommodation entries/circular-trading/ layering of funds and therefore suo-moto offered commission income in the range of 0.5% to 1% of the funds circulated by the company as its income - HELD THAT:- It was the assessee who had voluntarily stated before the AO that if the monies transacted through the two (2) entities are held to be tainted, then the company may be regarded as entity involved in providing accommodation entries thereby suggesting that it was not the beneficiary of the unexplained sum of Rs. 87 Lakhs but it was an aide who was facilitating the same and therefore only commission income could be inferred in relation thereto.
If that be so, then as a natural corollary all the transactions conducted by the assessee during the year through its bank account has to be treated as accommodation entries facilitated by them.
The assessee cannot blow hot and cold at the same time and assert that the sum to the extent of Rs. 87,00,000/- identified by the Investigating authorities be treated as tainted and the rest of the transactions be accepted at its face value to be sacrosanct. Since assessee failed to produce any material to prove the genuiness of un-secured loan (other than entries in financials), I am unable to subscribe to the contention of the assessee that it had received genuine unsecured loans out of which investments were made/purchased and therefore these transactions should be overlooked.
Having held that the assessee was never engaged in business of trading in shares but providing accommodation entries in guise of the same, all the alleged purchase & sale transactions conducted by the assessee was rightly regarded as accommodation entries by the AO.
Estimation of commission income - As we find prima facie merit in the plea of the Ld. AR that in the facts of the case, both inward and outward remittances may not be considered as accommodation entries provided to ultimate beneficiaries which yielded commission income. Rather, the payments made/cheques issued by the assessee company would represent the accommodation entries provided by it and that the inward remittances represents the funds layered by the assessee to provide such accommodation entries. Hence, in the facts and circumstances of the case as seen from records, in my considered view, the commission income was required to be estimated only with reference to the aggregate of the debit entries found in the bank statement of the assessee and that the credit entries ought not be considered.
We find force in the Ld. DR’s contention that such an exercise would remain academic in absence of the bank statement of the assessee. Hence, in the fitness of the matters, the limited issue regarding quantification of commission income is set aside back to the file of the AO with direction to the assessee to produce/furnish its bank statement for verification and quantification of debit entries for estimation of commission income. The AO shall allow sufficient opportunity and time to the assessee in this regard. In case the commission income estimated comes to a figure higher than the sum originally added or the assessee fails to provide or furnish the bank statement, then the commission income as originally estimated by the AO would stand confirmed.
Appeal stands partly allowed for statistical purposes.
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2023 (11) TMI 1141 - ITAT BANGALORE
Estimation of income on deficit gold jewellery - in search proceedings AO noted shortage of stock of gold ornaments as compared to the stock register maintained by the assessee - suppressed sales - estimation by applying the gross profit rate of 6.44 % on the value of the alleged deficit stock found in course of search - contention of the ld. A.R. is that same amount of jewellery was found in the residence of Managing Director of assessee during the course of search action and the same was the stock taken from the shop by Managing Director for the purpose of safe custody - HELD THAT:- As stocks have been kept in the MD’s residence before bar coding of the same. It was also admitted that jewellery found at the residence of MD is also having bar code of the shop.
Thus it cannot be presumed that excess stock found during the course of search action at the residence of MD is not belong to the present assessee since stock found at the residence of MD is of same quantity and it is the usual practice followed by the assessee and it has to be inferred that there was a movement of stock from assessee’s shop to MD’s house. Hence, there was an impugned shortage of jewellery in the hands of present assessee.
It is quite natural to give telescopic benefit to the assessee by observing that the jewellery found at the residence of MD of present assessee is belong to the assessee itself and due telescoping benefit to be given. As such, the finding of lower authorities that there was suppression of sale of jewellery in the hands of assessee have no legs to stand. Accordingly, the addition is deleted and this ground of the assessee is allowed.
Unexplained investment in silver articles - excess silver articles to the tune of 1.801 kgs. - HELD THAT:- The contention of the ld. A.R. is that total stock of silver articles was at 1008 kgs. On weighing the same, there was excess of silver articles to the tune of 1.801 kgs., which is very minimal and which is only 0.1786%. It may be due to weighing difference in scale due to wind or due to any other reasons. This minimum difference cannot be considered as excess silver articles found during the course of search action and due margin to be given for such minimal weighing difference. This addition is deleted. This ground of appeal of the assessee is allowed.
Unexplained expenditure - additions by the ld. AO on the basis of loose slips found during the course of search action - HELD THAT: -It is an admitted fact that the department has not collected any corroborative material supporting the entries in these loose slips. In our opinion, unless it is substantiated or corroborated by any material evidence in support of such notings in the loose slips or notings in diary, the addition cannot be made by the authorities. The suspicion in the minds of the revenue authorities that the assessee has made certain payments as per the loose slips cannot be reason to make an addition. In the absence of concrete evidence brought on record by the authorities concerned, the addition cannot be made. The suspicion cannot replace the material evidence brought on record. It is also be noted that the authorities have to follow the principles of natural justice and the description of the documents in the form of loose slips are not enough to make an addition without furnishing the copy of these documents to the assessee and also without giving an opportunity of cross examination of the concerned parties, who has written these loose slips. The loose slips having certain jottings are not speaking one and it cannot be basis for any inference to make an addition. Accordingly, the addition made on the basis of unsubstantiated loose slips cannot be sustained. Accordingly, the addition is deleted and this ground of appeal of the assessee is allowed.
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2023 (11) TMI 1140 - ITAT AMRITSAR
Exemption u/s 11 and 12 - Charitable Activity u/s 2(15) - Exemption denied invoking section 13(8) as there is no application of section 2(15) in the activity of the assessee - assessee is purely the urban development concern - addition made for payment towards public utility and towards Municipal Community - HED THAT:- The assessee is an Urban Development Society, and the assessee is developing land provided by the municipal community with the motive for development of Fazilka City after development the land has to be sold, so, in such circumstance, the profit has to be computed on based on two methods only, i.e. percentage completion method or the project completion method. The assessee is purely the urban development concern and claimed exemption u/s 11 and 12.
The observation of the revenue is dismissed. As the assessee is eligible for exemption u/s 2(15) of the Act related to its activities. We respectfully relied on the order of Ahmedabad Urban Development Authority [2022 (10) TMI 948 - SUPREME COURT] that the activities of assessee is eligible for Section 2(15) of the Act. The Legal Ground of the assessee is adjudicated in favour of the assessee.
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2023 (11) TMI 1139 - ITAT VISAKHAPATNAM
Penalty u/s 271B - not getting the books of account audited u/s 44AB - as alleged cash deposits made exceeded the threshold limit as per section 44AB - CIT(A) held that since the assessee failed to get his accounts audited u/s 44AB treated the cash deposits as turnover of the assessee, though it was affected on behalf of the Principal and since the assessee was getting commission and discounts on such sales - HELD THAT:- Principal i.e. Bharti Airtel Ltd. is liable to deduct tax at source. The service provider is responsible for collection of moneys from the post paid subscribers of Airtel, on behalf of Airtel in accordance with the terms of the Agreement and the Airtel shall pay the commission / incentives. The agent is liable to pay tax only on the commission / incentive received.
AO levied penalty on the assessee as the cash deposit during the F.Y. 2016-17 exceeded the threshold limit u/s 44AB of the Act, treating the same as turnover of the assessee, though he is only an agent who provided services for the Principal. The only contention of the assessee is only an agent / service provider and he was under bonafide belief that he was not liable to get the books of accounts audited as the commission income was below the threshold limit and thus the assessee’s case is covered u/s 273B.
On similar set of facts, the decision was taken in favour of the assessee by the coordinate bench of the Tribunal in the case of Anunoy Mukherjee [2023 (2) TMI 1221 - ITAT KOLKATA] as held assessee is receiving commission income and tax is deducted at source by the Telecom company treating the cash deposits as amount collected on behalf of the Telecom company from various customers and deposited in the bank account and commission on such deposits is given by the Telecom company. The reasons cited by assessee prima facie found to be reasonable because the assessee was under bonafide belief that he was not liable to get the books of accounts audited as the commission income was below the threshold limit and this was the first year of the business venture taken up by the assessee and thus assessee’s case is covered u/s 273B.
Thus we hold that the provisions of section 273B of the Act applies to the case of the assessee since the assessee has a reasonable cause for not getting the books of account audited and the penalty shall not be imposable on the assessee u/s 271B of the Act - Decided in favour of assessee..
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2023 (11) TMI 1138 - ITAT KOLKATA
Condonation of delay filing appeal in ITAT - delay of 1326 days - sufficient Reason for delay - HELD THAT:- If we examine the explanation of the assessee then, it would reveal that basically the delay has occurred on account of lacunae by the erstwhile tax consultant of the assessee Shri S.K. Paul and the assessee did not have any malafide intention to cause the delay. Therefore, cumulative setting of all these factors would suggest that there is no deliberate delay at the end of the assessee because the assessee was not going to gain anything from delaying this appeal. It is also pertinent to note that the Hon’ble Supreme Court in the case of N. Balakrishnan Vs. M. Krishnamurthy [1998 (9) TMI 602 - SUPREME COURT] has observed that period of delay does not matter. It is the quality of the explanation. If some valid reason is there, then any period can be condoned. In this case delay was caused due to fault of the erstwhile tax consultant of the assessee. Taking into consideration all these factors, we condone the delay and admit this appeal.
Revision u/s 263 - unexplained cash deposits - as per CIT no explanation as to the nature and source of the cash deposit and as to whether the same is explained for income tax purposes given - CIT observed that AO framed the assessment without making enquiries and verifications which should have been made - HELD THAT:- As submissions were filed by the assessee regarding the cash collected from investors, depositing them in ICICI Bank account and then payments made to project organisers and thereafter the cash withdrawal from ICICI Bank account and refunded to the investors.
As submissions filed by the assessee which pertains to the deal of purchase of land from Ramel Group of Industries which could not materialize, it is established that the alleged cash deposit and withdrawal are not related to the business turnover of the assessee and the same is a separate transaction.
Since the assessee was able to satisfy the AO that alleged cash withdrawal are not part of the regular business carried out by the assessee of trading in goods, he accepted the contention by way of proper application of mind and took plausible view provided under the statute and did not make any addition for cash deposits. It has been consistently held that where on a particular issue, AO has conducted a detailed enquiry, called for the relevant information to which necessary compliance has been made by the assessee and ld. Assessing Officer took a plausible view which may or may not be beneficial to the revenue but the assessment order is not erroneous, then under such circumstances, the jurisdiction u/s 263 of the Act, cannot be invoked.
As considering the fact that issue referred in the show cause notice u/s 263 of the Act, in respect of source of cash deposited in the bank account of the assessee held with ICICI Bank, assessee having successfully explained the said transaction before the ld. Assessing Officer after passing through detailed enquiry and again before ld. Pr. CIT, the submissions were made giving proper details in which the ld. Pr. CIT failed to find any specific error as no such defect has been recorded in the impugned order. Therefore, since detailed enquiry has been conducted by the ld. Assessing Officer on the issue raised in the show cause notice and a plausible view has been taken, we are of the considered view that ld. Pr. CIT erred in assuming jurisdiction u/s 263 - Decided in favour of assessee.
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2023 (11) TMI 1137 - CESTAT CHENNAI
Conversion of Free Shipping Bills to Drawback Shipping Bills - Period of limitation - Monetary limit involved in the appeal - HELD THAT:- The Review Committee has put forward grounds challenging the Final order passed by the Tribunal dt. 30.09.2021 directing the adjudicating authority to verify and allow the conversion of shipping bills. When the order passed by the department denying the request for conversion has been set aside by the final order dt. 30.09.2021 passed by Tribunal, the only remedy available for the department is to file an appeal against such order before the Higher Forum. The Tribunal while passing the Final order has already taken into consideration the Board’s circular as well as the decisions passed on the very same issue. The Commissioner has correctly followed the direction of the Tribunal and passed the impugned order - there are no grounds to interfere with the impugned order. Same is sustained.
Monetary limit involved in the appeal - HELD THAT:- On perusal of records, it is seen that the matter does not involve any duty, penalty or fine, or confiscation of goods and it falls below Rs.50 lakhs and therefore falls under the new Litigation Policy with regard to Customs cases to be filed before the Tribunal. The appeal falls within the monetary limits of litigation policy.
Appeal filed by Revenue dismissed.
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2023 (11) TMI 1136 - CESTAT AHMEDABAD
Exemption from Customs Duty - import of Boron Ore - applicability of Sr.No. 130 of customs notification No. 15/2017-CUS dated 30.06.2017 - period from 26.12,2017 to 11.05.2020 - HELD THAT:- It is found that the eligibility of the exemption on import of ‘Boron Ore’ was in dispute in many cases and a bunch of appeals have been disposed of by this Tribunal in the case of PRADIPKUMAR P PATEL VERSUS C.C., AHMEDABAD [2023 (1) TMI 1318 - CESTAT AHMEDABAD], wherein the Tribunal has remanded the matter to the Adjudicating Authority.
Since, in the above decision of this Tribunal identical issue that of in the present appeal is involved, it is in the interest of justice that the present matter may also be remanded and to be decided by passing a de-novo order by the Adjudicating Authority considering the observation made in the above decision.
Appeals are allowed by way of remand to the Adjudicating Authority.
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2023 (11) TMI 1135 - CESTAT NEW DELHI-LB
Levy of anti-dumping duty on the imports of MEG from Kuwait, Saudi Arabia and United States of America (subject countries) - Validity of Notification dated 27.10.2022 - domestic industry suffered material injury in terms of the provisions contained in the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 or not - HELD THAT:- It can be seen that there has been a significant increase in imports from the subject country in the period of investigation, in excess of the demand supply gap. Further, since financial year 2019-20, the imports have started coming at dumped prices and the landed value of such imports has been even below the raw material prices. Thus, evidently there has been a significant increase in dumped imports from financial year 2019-20 onwards. It needs to be noted that though in the period of investigation there was a slight decline in subject imports as compared to financial year 2019-20, such decline was on account of Covid-19 pandemic and, therefore, cannot undo the previous increase - it can be concluded that there has been an increase in ‘dumped imports’ in the period of investigation as compared to 2017-18 and 2018-19.
The accepted position on record is that even in the absence of volume injury to the domestic industry during the period of investigation, the price effect of dumped imports by itself would be a sufficient factor for examining whether the dumped imports are causing material injury to the domestic industry.
It is seen that with respect to the factors relevant for assessing the price injury of the domestic industry, the designated authority has relied only on the increase in profit and return on investment in the period of investigation as compared to 2019-20, and has ignored the fact that the profit and return on investment has remained significantly below 2017-18 and 2018-19 level.
The designated authority, in the present case, has exclusively relied upon the marginal improvement in the period of investigation as compared to 2019-20 and has ignored the trends over the years before that. Such selective examination, particularly in the present facts where the domestic industry itself has claimed injury since 2019-20, may defeat the entire purpose of injury assessment.
The inevitable conclusion, therefore, is that the designated authority would have to re-examine the matter in the light of the observations made above. For this purpose, the designated authority shall give an opportunity to both the appellant and the respondents for submitting their written submissions and after examination of the submissions and after considering the observations made, give its final findings.
The final findings of the designated authority contained in the Notification dated 27.10.2022 are, accordingly, set aside and the matter is remitted to the designated authority to give final findings - Appeal allowed.
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2023 (11) TMI 1134 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Contempt petition - CIRP proceedings - Preferential, undervalued, extortionate, fraudulent or wrongful trading - Pre-mature application or not - whether the Business Service Agreement (BSA) is valid and legal for which the Resolution Professional is cognizant and has initiated the Transaction Review Audit of various transaction to ascertain, whether any transaction fall under the ambit of preferential, undervalued, extortionate, fraudulent or wrongful trading under the provision of the Code? - HELD THAT:- Taking into consideration the entire facts and circumstances prevailing at the time when the application was filed and at the time the order was passed that when the application was filed a serious question was raised about the legality and validity of BSA and the Adjudicating Authority was of the view that RP has already initiated transaction review audit of various transactions, therefore, the application was premature at that stage but the apprehension of the applicant therein was found legitimate and necessary directions were given to the RP.
Since, the order dated 31.05.2023 by which the interim protection was granted to KCPL (Appellant) has been upheld by the Hon’ble Supreme Court because the civil appeal filed against the order dated 31.05.2023 has been dismissed, therefore, it is directed that this order of stay dated 31.05.2023 shall continue till the decision of the applications filed under Section 45 and 66 of the Code by the RP. The Adjudicating Authority is further directed to make all efforts to decide as early as possible the applications filed under Section 45 and 66 of the Code by the RP to the earliest but not later than 3 months from the date of passing of this order - appeal disposed off.
Second appeal - this filed by TNSI Retail Pvt. Ltd. on being aggrieved against the observation of the Adjudicating Authority recorded in the impugned order that “the apprehensions of the Applicants are legitimate” - HELD THAT:- There are not much substance in this appeal because after the receipt of transaction review audit, prima facie it is evident that there are issues involved which have been brought to the notice of the Adjudicating Authority by the RP by filing of the applications under Section 45 and 66 of the Code, therefore, this appeal is found to be without merit and the same is hereby dismissed.
Third appeal - HELD THAT:- TNSI is a 100% subsidiary of FRL, therefore, the board can be changed by the RP or he can take it over and follow the direction issued in the impugned order - the contention of the Appellant not agreed with - appeal dismissed.
Contempt petition - HELD THAT:- Since the appeal is being disposed of as the entire matter is again under consideration by the Adjudicating Authority by virtue of applications filed under Section 45 and 66 of the Code by the RP, there are no substance in the present petition as well and the same is hereby dismissed.
It is hereby ordered that the stay regarding the Appellant shall operate in respect of the area in its possession in the aforesaid Mall - Matter disposed off.
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2023 (11) TMI 1133 - KERALA HIGH COURT
Recovery of confirmed demand - Freezing the bank account of the petitioner - petitioner neither filed an appeal nor paid the tax and penalty - non-registration under Finance Act - HELD THAT:- The petitioner neither filed an appeal nor paid the tax and penalty as determined, and therefore, notice under Section 87(b) of Chapter V of the Finance Act 1994 came to be issued for freezing the bank account of the petitioner. It was also said that the total amount outstanding was Rs. 1,05,73,062/- - petitioner neither made use of the statutory remedy of appeal within the time prescribed as per Section 85(3A) of the Finance Act 1994 nor did he reply to the notice issued in Ext .P7 and after the expiry of the maximum period of appeal of three months, the petitioner approached this Court by filing this writ petition.
This Court does not exercise the appellate jurisdiction against the Order-in-Original. It also cannot be said that the Order-in-Original is without jurisdiction or that there has been a violation of the principle of natural justice. Considering the fact that the petitioner failed to exercise the right of appeal within the limitation period prescribed under the Statute, this Court is not in a position to extend the limitation period for filing the appeal - Since the order does not appear to be without jurisdiction, nor has there been a violation of Article 14 of the Constitution of India inasmuch as the petitioner was issued show cause notice, he filed a reply, and he was also granted an opportunity of hearing, there are no ground to interfere with the impugned order and notice in Exts. P6 and P8.
Petition dismissed.
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2023 (11) TMI 1132 - TELANGANA HIGH COURT
Default in payment of service tax - Prosecution proceedings against the director of the company - offence punishable u/s 89 of Finance Act, 1994 r.w.s. 9 and 9AA of Central excise Act - Period covered is 2011-12 to 2015-16 - Prosecution launched in 2018 - CIRP Proceeding under IBC - Closure of Liquidation proceedings against Corporate Debtor since the company was sold as going concern - all the liabilities, dues of the company stand extinguished as per the provisions of IBC - HELD THAT:- A perusal of record discloses that the Liquidator of the accused No. 1-company has filed application praying for closure of the liquidation process of the corporate debtor and the National Company Law Tribunal, Hyderabad Bench-II vide order dated 07.02.2023 held that the assets of the Corporate Debtor were sold to the successful bidders; that as seen from Form-H, an amount of Rs. 10,23,89,263/- realized from the sale of Liquidation Estate was distributed among the stake holders as per Section 52 or 53 of the Code, 2016 and that the Final Report discloses that the Liquidator has sold the Corporate Debtor as a going concern as such it is a fit case for closure of liquidation process, and accordingly ordered for closure of the liquidation proceedings against the corporate debtor.
As per the judgments of the Hon’ble Supreme Court in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR & ORS. [2021 (4) TMI 613 - SUPREME COURT] and various other Courts, the amendment, which comes into existence subsequent to the launching of the proceedings are not applicable to the past acts. The laws or amendments made shall be prospective in nature and not retrospective and they cannot be ex post facto laws for punishing the accused.
If the Legislature itself thought of clarifying the position of law, it would not be appropriate for the Court to assume that something else and then to go on to punish the person for criminal offences. Therefore, this Court is of the considered opinion that the petitioner shall not be punished for the offences registered under the amended provisions, which come into existence subsequent to the launching of the proceedings.
Petition allowed.
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2023 (11) TMI 1131 - TELANGANA HIGH COURT
Legality and validity of the order-in-original dated 23.03.2023 passed by respondent No. 1 - respondent No. 1 did not put the petitioner on notice regarding production of original supporting documents - non-taxability of the services rendered - HELD THAT:- The ends of justice would be met if an opportunity is granted to the petitioner to produce the relevant documents in support of its claim that services rendered by the petitioner are exempted from service tax in terms of the notification dated 20.06.2012.
The impugned order-in-original dated 23.03.2023 is set aside - matter remanded back to the file of respondent No. 1 who shall give due opportunity of hearing to the petitioner and thereafter pass a fresh order in accordance with law - petition allowed by way of remand.
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2023 (11) TMI 1130 - CESTAT CHANDIGARH
Levy of Service tax - reimbursement of expenses - inclusion in the assessable value or not - appellant provided services of promotion, marketing of petroleum products, customer care and other auxiliary services on behalf of their client M/s BPCL - HELD THAT:- It is found that the appellant was only operating the BPCL filling stations which was COCO outlet and were getting reimbursement of expenses as shown by them in their monthwise statement annexed at page 76 to 81 of the paper book. Further, it is found that the Chartered Accountant has also certified that the appellant was only getting reimbursement of expenses viz. salary/wages for manpower, conveyance, tea and coffee remuneration of operator.
In view of the decision of the Hon’ble Apex Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [2018 (3) TMI 357 - SUPREME COURT] reimbursible expenditure is not includable in the taxable value. We also find that once the appellant has deposited to Rs. 2,40,598/- before the issuance of show cause notice vide two TR6 challans both dated 31.05.2007 which is also noted in the show cause notice then in that situation the show cause notice should not have been issued. Further, it is also found that the imposition of penalty under both the Sections 76 & 78 is also not tenable in law.
The impugned order is not sustainable in law - Appeal allowed.
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2023 (11) TMI 1129 - CESTAT NEW DELHI
Levy of service tax - amounts collected as reimbursement of electricity charges - reimbursement of air conditioning charges - invocation of Extended period of Limitation - penalty - HELD THAT:- Reimbursable expenses have been held to be not consideration for service by the High Court of Delhi in case of INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. VERSUS UOI. & ANR. [2012 (12) TMI 150 - DELHI HIGH COURT] - thus, no service tax can be charged on the reimbursable expenses which the appellant had collected towards providing electricity and air conditioning.
Invocation of Extended period of Limitation - HELD THAT:- Since the issue decided on merits in favour of the appellant insofar as the demand of service tax on these two expenses is concerned, and since the appellant is not contesting the rest of the demand, the question of invoking extended period of limitation need not be examined.
Levy of penalty - HELD THAT:- The appellant had reasonable cause for failure to pay service tax and, therefore, by invoking section 80, the penalties are set aside.
The appeal is partly allowed by setting aside the demand of service tax on reimbursable expenses towards electricity and air conditioning collected by the appellant and upholding the rest of the demand with interest.
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2023 (11) TMI 1128 - CESTAT HYDERABAD
Availment of irregular credit - Clandestine Removal - failure to maintain proper records of receipt, issue and consumption of raw materials/inputs required for manufacture of the finished goods, being MS ingots and MS fabrication - HELD THAT:- From analysis of data in the balance sheet for the period 2004–05 to 2007-08, it appeared that there is great variation in production parameters including the power consumption per unit of production of ingots. The basic raw materials required for manufacture of MS ingots are sponge iron, pig iron and/or scrap. Sponge iron was also used in plants using coal-based technology and gas-based technology. The percentage of usage of charge mix was maximum 30% in the case of gas based sponge iron, and it may be as high as 80% in case of coal-based sponge iron. The yeild was also higher by 2% in case of gas-based sponge iron.
Admittedly, Appellants have maintained sufficient records of their transactions, production, etc. They have furnished regular returns and other prescribed forms which have not been found to be untrue or wrong - It is further found that the demand raised for alleged clandestine production and clearance of finished goods and raw materials is vague and not based on any proper prescribed norms. Further such demand is hit by the ruling of Hon’ble Supreme Court in the case of COMMISSIONER OF C. EX., MEERUT-I VERSUS RA CASTINGS PVT. LTD. [2010 (9) TMI 669 - ALLAHABAD HIGH COURT].
CENVAT Credit - HELD THAT:- The items in question, viz., MS angles, bars, coils, beams, plates, channels, etc., have admittedly been used in the factory of production. It is found that part of these inputs have been used in the fabrication of EOT Crane, which is used for material handling inside the factory. It is further found that some of the items like MS bars, which are required to stir the molten steel during production, get melted and become part of the molten steel in the furnace and thus, gets consumed in the manufacture of finished goods. Further, inputs like new plates and coils have been used in repair of the furnace lining, which has to be done periodically. Thus, the Appellants have rightly taken Cenvat credit and the disallowance of credit is bad during the period under dispute.
The impugned order set aside - appeal allowed.
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