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2021 (8) TMI 974
Revision u/s 263 - assessee had omitted to disclose the long term capital gain - AO had failed to examine and consider the fact that the assessee had omitted to disclose the long term capital gains while computing his income - HELD THAT:- By referring to the returns submitted by the assessee available a submission is made that the aforesaid conclusion is arrived at by the Principal Commissioner that there is merit in the claim that the Assessing Officer failed to examine and consider that the assessee had omitted to disclose the long term capital gains amounting to ₹ 5,30,257/- . Accordingly a submission is made that the conclusion of there being an erroneous assessment is absent.
Counsel also raises the submission that the aforesaid items are covered under the provisions of Section 10(38) of the IT Act wherein itself there is a provision that the aforesaid items are exempted from payment of income tax and even if there is any discrepancy in the return submitted by the assessee, the same would not be prejudicial to the interest of revenue.
We find that a prima facie case has been made out by the petitioner. Considering the balance of convenience and irreparable loss that the petitioner may suffer, further process pursuant to the order dated 24.03.2021 under Section 263 of the IT Act shall remain stayed until further order(s).
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2021 (8) TMI 973
Seeking stay on the direction given by the Respondent for recovery of amount from the bank account of the Petitioner - HELD THAT:- The assurance and undertaking given by learned counsel for the petitioner/applicant is accepted by this Court and the petitioner is held bound by the same. Accordingly, till further orders, there shall be stay of respondent and stay of the operation of the order passed by the Respondent No.2, subject to the condition as stipulated - Application disposed off.
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2021 (8) TMI 972
Clearance of goods imported by the petitioner - return of bank guarantees furnished at the time of provisional assessment - classification under CTH 23065020 or not - HELD THAT:- On 14.06.2021 time was sought for finalisation and an extension of four weeks was granted. On 14.07.2021, since the matter was still hanging fire, some more time was granted putting the respondents to terms. The terms imposed have been complied with, as stated in memo dated 10.08.2021. As regards the finalisation of the assessments R3, under cover of memo dated 13.08.2021, has stated that provisional assessment has been finalised in line with the classification declared by the petitioner in the bills of entry in question being CTH 23065020.
The mandamus sought for thus stands achieved and this writ petition is closed.
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2021 (8) TMI 971
Adjustment of tax due under Direct Tax Vivad Se Vishwas Act, 2020 [DTVSV Act] with the amount as already been deposited by the Petitioner on account of the Penalty Order and to refund the excess amount in a time bound manner - HELD THAT:- In the opinion of this Court, if the petitioner is entitled to refund of ₹ 11,36,800/- after making payment of ₹ 4,21,000/-, it is not understood as to why the respondents cannot itself adjust the amount of ₹ 4,21,000/- against the amount of ₹ 11,36,800/- already deposited by the petitioner on account of the Penalty Order dated 04th January, 2018.
The present writ petition is disposed of with a direction to the respondents to adjust the tax demand amounting to ₹ 4,21,000/- under DTVSV Act with the amount of ₹ 11,36,800/- already deposited by the petitioner on account of the Penalty Order dated 04th January, 2018 on or before 31st August, 2021 and refund the balance amount within a further period of four weeks.
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2021 (8) TMI 970
Profiteering - infringement of legal rights - seeking direction to NAPA for deletion of proceedings against the petitioner - HELD THAT:- This Court is of the view that it is a settled law that in order to have the locus standi to invoke the extraordinary jurisdiction under Article 226 of the Constitution of India, the applicant should ordinarily be one who has a personal or individual right in the subject matter of the application. In other words, as a general rule, infringement of some legal rights or prejudice to some legal interest inhering in the petitioner is necessary to give him a locus standi in the matter.
Since in the present case, the Petitioner has not been held guilty of violation of the Central Goods and Services Tax Act, 2017 and NAPA has no objection if the Petitioner is deleted from the array of parties, this Court is of the view that the Petitioner has no locus standi to maintain the present petition - the notice dated 17th June, 2021 referred to by learned counsel for the Petitioner is deemed to have been withdrawn.
Petition disposed off.
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2021 (8) TMI 969
Provisional release for re-export of the goods - mis-declaration of declared goods - exaggerated value of the goods - suppression, misdeclaration, misclassification and import of prohibited goods - HELD THAT:- The petitioner is a 100% export-oriented unit and thus, any difference in the declaration of the value of the goods to be exported by the petitioner would not make much difference, as the petitioner would be entitled to seek 100% refund of the duty paid.
The petitioner is directed to furnish a bond amounting to ₹ 15 crores within seven days of the petitioner submitting the said bond and complying with the other formalities as per law, the respondents are directed to provisionally release the goods in question for re-export.
The writ petition has been disposed off.
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2021 (8) TMI 968
Seeking finalization of provisional release of goods - re-assessment of Bill of Entry - Section 17(5) of the Indian Customs Act - HELD THAT:- It becomes apodictic clear that this Court will be fully justified in issuing orders, as prayed for by the petitioner. However, as regards Ext.P11 Bill of Entry, the only order considered, is to direct the respondents to issue the petitioner an order as per Section 17(5) of the Customs Act.
The competent among the respondents will immediately take up Ext.P1 and issue final orders qua the provisional release of goods covered by it, after affording an opportunity of hearing to the petitioner, as expeditiously as is possible, but not later than one month from the date of receipt of a copy of this judgment - appeal disposed off.
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2021 (8) TMI 967
Maintainability of appeal - availability of alternative remedy - Provisional release of seized goods - Gold Ornaments - section 110A of Customs Act - HELD THAT:- The attempt of the Department is to bypass the remedy of an appeal against Ext.P10 and that too when, in the appeal preferred by them, interim orders have not been obtained as of yet. The extraordinary jurisdiction under Article 226 of the Constitution of India cannot be utilised by a party to a lis to arm themselves with a sword from this Court, while their statutory remedies are being pursued, unless there are extraordinary circumstances. The claim of the Department that there are extraordinary circumstances based upon the Circular issued on 16.08.2017, though attractive in the initial blush, on a deeper analysis, not of much substance.
Since it is submitted across the Bar that the appeal against Ext.P10 order is pending consideration before the Appellate Tribunal, it is not proper to express any opinion on the merits of the issue - Appeal dismissed.
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2021 (8) TMI 966
Maintainability of petition - availability of alternative remedy of appeal - error apparent on the face of record or not - HELD THAT:- In Section 161 of the Act, it has been made clear that “without prejudice to the provisions of Section 160 and notwithstanding anything contained in any other provisions of this Act, any authority, who has passed or issued any decision or order or notice or certificate or any other document, may rectify any error which is apparent on the face of record in such decision or order or notice or certificate or any other document, either on its own motion or where such error is brought to its notice by any officer appointed under this Act or an officer appointed under the State Goods and Services Tax Act, etc.
In both way, the petitioner has got alternative appeal remedy or remedy of review to rectify the error under Section 161 of the Act as stated supra. While that being so, in view of the settled legal position, where except under two exceptions for want of jurisdiction and violation of principles of natural justice, writ petitions are not entertained without exhausting the appeal remedy, especially, in respect of revenue matters (tax matters), the hierarchy of forums by way of appeals as has been provided, the assessee / petitioner is expected to exhaust the said appeal remedy and without exhausting the same, no writ petition can be entertained, straightaway without the two circumstances available.
This Court is inclined to dispose of this writ petition, by relegating the petitioner to approach the appellate authority or the adjudicating authority as the case may be, as indicated above, within a particular period and if such endeavour is made by the petitioner, within the time to be stipulated in this regard, the same may be entertained by the appellate authority and decided - Petition disposed off.
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2021 (8) TMI 965
Levy of penalty - Section 11AC of the Central Excise Act, 1944 - opportunity of hearing provided - HELD THAT:- The order was followed by a show cause notice for the imposition of penalty dated 18.11.2020. The notice called for a reply in writing within one week as well as fixed a personal hearing on 30.11.2020 through video conference. It appears that in the meanwhile the petitioner has challenged the order of the learned single Judge. Vide letter dated 27.11.2020 the petitioner has brought to the notice of the respondent the details of filing of the Writ Appeal, requesting the Commissioner, Central Excise to keep the matter in abeyance till such time the Writ Appeal was heard. It is also not in dispute that on 30.11.2020, the petitioner as well as the second respondent had telephonically communicated with each other wherein the petitioner reiterated the request for keeping the matter in abeyance.
This is not a matter that would justify intervention under Article 226 of the Constitution of India. Admittedly, due opportunity has been provided to the petitioner prior to the passing of the impugned order. The petitioner, however was more inclined to pursue the Writ Appeal and thus did not avail of the opportunity that was extended. Incidentally, the Writ Appeal has also come to be dismissed by order of the Division Bench dated 01.02.2021. Thus the petitioner is relegated to alternate remedy, if it so desires. If an appeal challenging the impugned order is filed within a period of eight (8) weeks from today, the same shall be taken on file by the respondents without reference to limitation, but ensuring compliance with all other statutory conditions.
Petition dismissed.
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2021 (8) TMI 964
Penalty u/s 271(1)(c) - defective notice u/s 274 - Assessment framed u/s 92CA(3) - HELD THAT:- Following the decisions rendered in the cases of CIT vs. Manjunatha Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT], CIT vs. SSA’s Emerald Meadows [2016 (8) TMI 1145 - SC ORDER] and Pr. CIT Vs Sahara India Life Insurance Company Ltd [2019 (8) TMI 409 - DELHI HIGH COURT]we are of the considered view that when the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act, the penalty proceedings initiated u/s 271(1)(c) are not sustainable.
Thus when the very initiation of the penalty by way of issuance of vague and ambiguous notice u/s 271(1)(c) read with section 274 of the Act without specifically charging the assessee if he has concealed the particulars of income or has furnished inaccurate particulars of such income, subsequent penalty proceedings are not sustainable, hence penalty levied by the AO and confirmed by the Id. CIT (A) is not sustainable.
Assessment framed u/s 92CA(3) - TPO simply did not accept the bench marking of the assessee and has directed the Assessing Officer to consider the levy of penalty u/s 271(1)(c) of the Act in accordance with Explanation 7. As decided in VERIZON INDIA PVT. LTD. [2016 (8) TMI 1287 - DELHI HIGH COURT] in the absence of any overt act, which disclosed conscious and material suppression, invocation of Explanation 7 in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was engrafted in the statute. It might lead to a rather peculiar situation where the assessee who might otherwise accept such determination may be forced to litigate further to escape the clutches of Explanation 7 - we do not find any merit in levy of penalty u/s 271(1)(c) of the Act.- Decided in favour of assessee.
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2021 (8) TMI 963
CENVAT Credit - services provided by the dealers to the customers on behalf of the appellant - meaning of input services pre and post 01.04.2011 - reliance to be placed on precedent decisions - whether the earlier Division Bench decisions of the Tribunal in M/S. CARRIER AIRCONDITIONING & REFRIGERATION LTD. VERSUS CCE, GURGAON [2016 (3) TMI 124 - CESTAT NEW DELHI], M/S HONDA MOTORCYCLE & SCOOTER INDIA PVT. LTD., SHRI SUNIL GUPTA AND SHRI NAVEEN KUMAR VERSUS CCE & ST, ALWAR [2018 (12) TMI 929 - CESTAT NEW DELHI] and M/S SAMSUNG INDIA ELECTRONICS PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS CENTRAL EXCISE & SERVICE TAX [2016 (11) TMI 867 - CESTAT ALLAHABAD] should be relied upon as precedents and the decision of the Tribunal rendered on 24.11.2017, in the own case of the appellant, should be taken to have been rendered per incuriam? - HELD THAT:- The principle of per incuriam can be applied for such decisions which have been given in ignorance of some statutory provision or some authority that is binding.
In the present case, the Tribunal in M/S CASE NEW HOLLAND CONSTRUCTION EQUIPMENT (I) PVT LTD VERSUS CCE INDORE [2017 (11) TMI 1481 - CESTAT NEW DELHI], distinguished the earlier binding decisions of the Tribunal on a mistaken belief that an amendment had been made in a definition of “input service”, whereas the ‘means’ clause of the definition had come up for consideration before the Tribunal and it had not been amended. The Division Bench proceeded on an assumption that the benefit of CENVAT credit was being taken by the appellant therein either under the ‘includes’ clause or ‘excludes’ clause of the definition of ‘input service’, which portion had been amended whereas reliance had been placed by the appellant on the decisions which had interpreted the ‘means’ clause of the definition of the ‘input service’. It was, therefore, clearly a case where that part of the statutory provision that should have been applied was ignored and that part of the statutory provision that was not relevant to the controversy was considered. When CENVAT credit was sought to be justified by the appellant under the ‘means’ clause, for which reliance was placed on the earlier decisions of the Tribunal, there was no necessity to examine whether it can be justified under the ‘includes’ clause or ‘excludes’ clause of the definition. The decision rendered by the Tribunal on 24.11.2017 is, therefore, clearly per incuriam.
It is, therefore, considered appropriate to follow the three decisions rendered by the Tribunal in Carrier Airconditioning & Refrigeration, Honda Motorcycle and Samsung India Electronics in preference to the later decision in M/S CASE NEW HOLLAND CONSTRUCTION EQUIPMENT (I) PVT LTD VERSUS CCE INDORE [2017 (11) TMI 1481 - CESTAT NEW DELHI], which has distinguished these three decisions on a non-existent ground.
The appellant correctly availed CENVAT credit on the amount of service tax paid for the services provided by the dealers to the customers on behalf of the appellant for fulfilling the warranty obligations of the appellant - Appeal allowed - decided in favor of appellant.
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2021 (8) TMI 962
Addition u/s 68 - Addition based on evidences collected and statements of various person in search - assessee was one of the entry provider of accommodation entry and provided entries in the nature of bogus transaction in the form of sales/purchases and unsecured loans - HELD THAT:- It is pertinent to note that all the documents were before the Assessing Officer and the Assessing Officer has merely relied upon the statement of Sh. Rajendra Jain which was later on retracted. The assessee has given the details of purchase bills, sales bills, stock register and bank statements and after going through the evidences which was before the Assessing Officer and before us , it is found that the same is tallying with, with the transaction which was allegedly held as bogus transaction by the Assessing Officer . Thus, as per the documents provided by the assessee transaction is genuine, parties were before the search/investigation wherein and there statements on record which does not reflect that the assessee is actual for the of the accommodation entry. The statements were also retracted later on. Thus, the sanctity of the statement cannot be the sole basis for making an addition.
The transaction in the present Assessment Year i.e. Assessment Year 2008- 09 is genuine, identity and the credibility has also been established by the assessee. Therefore, Section 68 will not attract and the additions made by the Assessing Officer which was confirmed by the CIT(A) is not just and proper. - Decided in favour of assessee.
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2021 (8) TMI 961
Penalty u/s 271(1)(c) - Assessee wrongly claimed the income as agricultural income - Entitled for exemption u/s 10(1) denied - HELD THAT:- The present assessment years also are not the simple case of disallowance of expenditure as in the case of Reliance Petro Products Private Limited [2010 (3) TMI 80 - SUPREME COURT]. The facts remains unchanged that the real activity of purchase of the seeds has been planned and arranged in such a way as it look like the agricultural activity but the assessee has not succeeded in camouflaging its real activity.
One of the strange features in the kind of arrangement or documentation of the assessee is that in case of no yield or damage of crop, the expenses on labour or service or fertilizer etc. has to be borne by the farmer because in absence of no crop, there would be no procurement price to the farmer and the farmer will get nothing. In such circumstances, how the assessee could explain that the cultivation has been done by the company. Another strange feature is that how the assessee can claim as cultivator as its name is not appearing in the revenue land records maintained either as lessee of the land or the cultivator. Since the Tribunal in preceding Assessment Years have already given a finding that the assessee made claim of agricultural income in mala fide manner in gross abuse of the provisions of the Income Tax Act and since the facts of the impugned year are identical, therefore, respectfully following the order of the Tribunal in assessee’s own case in preceding year,[2017 (12) TMI 1058 - ITAT DELHI] we uphold the penalty imposed by the AO. Thus, the order of the CIT(A) is reversed and we uphold the findings of the Assessing Officer. - Decided in favour of revenue.
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2021 (8) TMI 960
Levy of service tax - sharing of Revenue received by the appellant under joint venture agreement - demand where there is no joint venture agreement and the appellant were liable to pay service tax but the service tax was deducted - Business Auxiliary Service - difference between the telephone recharge amount paid by the customers and appellant remitted the amount to BSNL - HELD THAT:- The difference amount between the sale of SIM card / recharge of SIM card and the amount remitted to the telephone company is nothing but only commission on which suffered service tax in the hands of principal.
Entire matter needs reconsideration. Our views being prima-facie should not influence the findings to be given afresh by the Adjudicating Authority - Appeal allowed by way of remand.
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2021 (8) TMI 959
Addition on account of long term capital gain - Assessment in the hands of members of the assessee society or society itself - AO has taken a view that the long term capital gain on sale of plot of land to be taxed in the hands of the assessee society whereas the assessee pleaded that such long term capital gain will be taxable in the hands of the members of the assessee society who were the real owners of the land - HELD THAT:- Members of the society have contributed funds for the purchase of the land. The land was purchased by the society only after the introduction of the new members along with the old continuing members who were the real owners of the land.
On sale of the land, the society has made distribution to the members in the proportion of the contribution made by the members at the time of the purchase of the land. The genuineness of the member was established from the filing of their income tax return and assessment made in some of the cases.
AO has not brought on record any material which establish non-genuineness of the members of the society - all the members of the society were assessed to tax, in the case of the four members assessments have been made u/s. 143(3) of the Act, the capital gain shown by them in their return of income was duly accepted by the AO, in all these four cases assessment were made in the jurisdiction of the same range wherein the case of the society was assessed - action of the AO for taxing the long term capital gain arising on sale of land in the hands of the assessee society is amount to double taxation since the same has been taxed in the hands of individual member. After considering the above cited facts and circumstances, we consider that ld. CIT(A) has rightly deleted the impugned addition - Decided in favour of assessee.
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2021 (8) TMI 958
Refund of SAD - Appeal found to be filed beyond the period of one year from the relevant date - applicability of N/N. 102/2007-Cus dated 14.9.2007 - HELD THAT:- In terms of N/N. 102/2017, no doubt utmost requirement is that the refund of SAD will be available only after the imported goods are being sold by the importer with the necessary proofs of the said sale along with certificate of the statutory auditor.
The relevant time for seeking refund of SAD is the date when the imported goods have been sold. It is an admitted fact that substantial quantity of imported goods was sold by the appellant in the year 2016 itself under the invoice No. R1/240 dated 22.12.2016. Output VAT on such sale was also charged and was paid vide State Government treasury. The N/N. 102/07 of 14.9.2007 (amended) was very much in existence. Ignorance, thereof is not right to be pleaded by the appellant - There is no sufficient reason quoted for waiting till March, 2018. In the absence of such explanation it is held that limitation mentioned in the amended N/N. 102/2007 is rightly invokable for the impugned refund claim.
Appeal dismissed.
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2021 (8) TMI 957
Condonation of delay in filing appeal - proper explanation for delay provided - HELD THAT:- The delay has been reasonably explained, and there appears to be no deliberate latches on the part of the appellant. Accordingly, the condonation of delay application is allowed.
As the appellant have died, this appeal abates. Accordingly, the appeal is also disposed of as abated.
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2021 (8) TMI 956
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Pre-Existing Dispute or not - invocation of Arbitration Clause by Operational Creditors - time limitation - HELD THAT:- The contention of the Learned Solicitor General that the Application under Section 9 is barred by Limitation cannot be sustained as the Pre-Existing Dispute was an ongoing one continuing from the date when the Arbitration Clause was invoked by the ‘Operational Creditor’ themselves. Additionally, the fact remains that the Appeals under Section 37 were dismissed for default only on 29.11.2019. Hence, the Appeal cannot be stated to be barred by Limitation.
Whether pendency of a proceeding for execution of an Award or a Judgement/decree bar an ‘Operational Creditor’ to prefer a Petition under the Code. The Judgement of M/S. ANNAPURNA INFRASTRUCTURE PVT. LTD. AND ANR. VERSUS M/S. SORIL INFRA RESOURCES LTD. [2017 (8) TMI 1330 - NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI] relied upon by the Learned Counsel is not applicable to the facts of this case as the ‘Dispute’ in this instant case is still pending as Arbitration under Section 37 Appeal is still pending till date. If the Appeal under Section 37 had been decided, then ‘Execution’ comes into the picture. ‘Money Recovery’ and ‘Triggering of Insolvency’ are not parallel proceedings.
Section 8(2)(a) provides that Existence of a Dispute, [if any, or] record of the pendency of the suit or Arbitration Proceedings filed before the receipt of such Notice or invoice in relation to such Dispute. At the outset, what has to be seen is ‘whether there is any Existence of Dispute’, ‘if any or’ record of the pendency of the suit or Arbitration Proceedings - In the instant case, it is an admitted fact by both the parties that disputes arose way back in the year 2003 and 2004, and based on the terms of MoU entered into, the ‘Operational Creditor’ themselves invoked the Arbitration Proceedings. Both the Arbitral Awards were assailed by the ‘Corporate Debtor’ under Section 34 of A&C Act, 1996 and were dismissed by separate Orders dated 27.02.2012 and 29.02.2012 respectively - the Demand Notice was issued on 14.02.2020. The Application was filed on 02.03.2020.
Upon restoration, the Appeal relates back to the original date of filing and therefore we note that there was a Pre-Existing Dispute prior to the date of issuance of the Demand Notice.
There is a possibility that the ‘Corporate Debtor’ may succeed on any claim or part of the claim. Hence, it is apposite to observe that the ‘Operational Debt’ herein, could not be said to be an ‘undisputed debt’. Following the ratio in ‘Mobilox Innovations Pvt. Ltd.’ [2017 (9) TMI 1270 - SUPREME COURT] wherein it was inter alia held that so long as a dispute truly exists in fact and is not spurious, the Adjudicating Authority ought to have dismissed the Application.
Appeals are allowed and the Impugned Order is set aside.
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2021 (8) TMI 955
Validity of search u/s 132 - contention of the ld. AR is that search action was not valid and due procedure laid down u/s. 132 of the Act was not followed - HELD THAT:- In this case, search was conducted u/s. 132 on 15.10.2015 by issuing valid warrant in the name of assessee and also Panchanama was drawn with proper local witnesses. As on date there was Explanation inserted in section 132 by the Finance Act, 2017 with retrospective effect from 1.4.1962 prohibiting appellate authorities to go into the reasons recorded by the concerned appellate authorities for directing search against the assessee. This amendment will have effect in the present case. Therefore, the Tribunal cannot be expected to go into the said question.
It is only for the Constitutional posts to examine the validity of search action. More so, this issue was also decided in the case of Prathibha Jewellery House [2017 (11) TMI 1744 - KARNATAKA HIGH COURT]where the writ petition was dismissed holding that law was amended by insertion of aforesaid Explanation by the Parliament in section 132 by the Finance Act, 2017 w.r.e.f. 1.4.1962 and it was held that the Appellate Authorities could not go into the reasons recorded by the concerned Income Tax Authority for directing Search action. In view of this, we are of the opinion that the assessee is precluded in challenging the validity of search action before the Tribunal.
Validity of notice issued u/s. 153A - HELD THAT:- As per clause (a) of sub section (1) of section 153A, at the stage of issue of notice u/s 153A, the only requirement is to ask the assessee to file return of income for relevant six years covered by section 153A and whether after filing of return of income, the assessment to be made by the AO will be assessment or reassessment has to be determined afterwards and not at the time of issue of notice u/s 153A. Similar view was taken in the case of Rajesh Exports Ltd.[2018 (12) TMI 278 - ITAT BANGALORE]in para 17 of the Tribunal’s order. In this view of the matter, this ground is dismissed.
Status of the assessee - According to the ld. AR, trust is not a person referred to in section 2(31) of the Act and the CIT(Appeals) ought to have held that assessment made on a nonexistent status is bad in law - HELD THAT:- In this case, the assessee itself has filed return of income in the status of “trust” and the same was followed by the AO in framing assessment u/s. 153A of the Act. Being so, we do not find any infirmity in the order of AO. This ground is dismissed.
Validity of assessment u/s 153A - HELD THAT:- There are various incriminating material found during the course of search and as rightly pointed out by the ld. DR, it cannot be accepted that no incriminating material was found during the search action. As in Canara Housing Development Co. case [2014 (8) TMI 642 - KARNATAKA HIGH COURT] held that once the assessment is validly reopened, the AO has to take into account all the three types of income to complete the assessment or reassessment, as the case may be. The three types of income are (i) income disclosed in the return of income, (ii) undisclosed income during the search, and (iii) any other income which is not disclosed in the earlier return and not unearthed during the search. In our considered opinion, if incriminating material is found during the search u/s. 153A, all three types of income has to be assessed by the AO and in view of the judgment of Canara Housing Development Co. (supra) this legal ground has no merit.
Unaccounted capitation fees in cash - Reliance on seized material and post-search statements - HELD THAT:- Addition made by the AO is based on unsubstantiated loose sheets and jottings without proper cross-examination of the person who has admitted the contents therein. Being so, it cannot be stated as full-proof of material evidence to substantiate the addition. In our opinion seized documents do not support the AO’s contention that assessee has received unaccounted capitation fees for admission of the students to the college. It also does not suggest that the assessee has paid commission to agents to bring the students for admission to college.
Similarly it does not suggest payment of any amount to the trustees for their self-benefit. Going through the entire facts of the case it creates only a suspicion in the minds of the revenue authorities that the assessee has collected unaccounted capitation fee - the suspicion not enough to hold that the assessee has collected unaccounted capitation fees in absence of concrete evidence bought on record by the authorities concerned. The suspicion cannot replace the material evidence brought on record by the authorities
Statement of 2 cannot be basis for making such huge additions on collection of capitation fees. It cannot be considered as appropriate sample to frame the assessment on the basis of their statement - assessee requested for cross examination of all the parties whoever have given the statements against the assessee, if any, which was not provided at all - such statements cannot be relied upon.The revenue authorities bound to follow the principle of natural justice and ought to have given proper opportunity of examination and cross examination of the parties concerned whose statements are relied upon to frame the assessment. In our opinion the discovery of documents not only sufficient to conclude the collection of unaccounted capitation fees, cross examination of concerned parties is also important.
The revenue authorities recorded statement of only 5 students out of more than 800 students and out of 5 only 2 are confirmed. The two statements recorded cannot be relied upon without confronting the same to the assessee. The statement of these two persons confirming payment of capitation fees is fully uncorroborated and non-production of them for cross-examination cannot be considered as incriminating material so as to sustain the addition. The rough notings in the loose papers are not full-proof evidence without proving the correctness of the same. Nothing was recorded in the orders of lower authorities that assessee has deviated from its objects for which approval u/s. 12A was granted and not applied its funds towards its objects. No evidence was brought out to show that the amount of capitation fees alleged to have been collected resulted in creation of any unaccounted assets by the trust or trustees or by any interested person. On this count also the addition cannot be sustained.
Evidence collected by the authority is not sufficient to establish that the stand that the assessee has collected unaccounted capitation fees for admission of students to various courses in the assessee’s college. We are aware that entire evidence has to be appreciated in a wholesome manner and even where there is documentary evidence, the same can be overlooked if there are surrounding circumstances to show that the claim of assessee is opposed to normal course of human thinking, conduct and human probability. Even applying this principle to the present case, we have difficulty in rejecting the assessee’s plea as opposed to normal course of human conduct. The circumstances surrounding the case are also not enough to reject the assessee’s explanation. We have considered all the material on record and also the statement of the parties as discussed in the earlier paragraphs.
No evidence was brought on record to show that amount of alleged capitation fees which have been collected was misused by the assessee or by any interested persons.There is no allegation that the assessee is not imparting education and it is an admitted fact that thousands of students are studying in the college and assessee has been carrying on educational activities imparting medical education. It fulfilled the requirement of imparting education which are not doubted or challenged by the authorities. Being so, exemption u/s. 11 of the Act cannot be denied.
The unsubstantiated and uncorroborated seized material alone cannot be considered as conclusive evidence to frame these assessments. The words “may be presumed” in section 132(4) of the Act given an option to the AO concerned to presume these things, but it is rebuttable and it does not give a definite authority and conclusive evidence. The assessee is having every right to rebut the same.
No addition can be made in the absence of any corroborative material. Since there was no examination or cross-examination of persons concerned, the entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search cannot be sustained. The evidence on record is not sufficient to uphold the stand of revenue that assessee is collecting huge unaccounted capitation fees in the guise of carrying on educational activities.
As already held that there are various loose sheets, scribblings, jottings and Excel sheets taken from the computer having no signature or authorization from the assessee’s side. These are unsubstantiated documents and there is nothing to suggest any undisclosed assets of assessee found during the course of search. More so, it does not show any recovery of the undisclosed assets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets - Decided in favour of assesee.
Denial of exemption u/s. 11 - AO denied the exemption under sec 11 of the Act for the major reason that the trust has received capitation fee in cash and has been carrying on the activities which are not in accordance with the objects of the trust - HELD THAT:- Unless the department shows that there was breach of conditions laid down for grant of exemption u/s. 11 of the Act, the benefit of exemption u/s. 11 cannot be denied. The assessee enjoyed registration granted during this period and the assessee also demonstrated that the assessee’s predominant objects remain the same i.e., carrying out the charitable activities for the purpose of advancement of education and not to earn profit. Earning surplus income by carrying out educational activities is not a reason to deny exemption u/s. 11 of the Act. The assessee’s predominant activity is carrying out educational activities which is charitable in nature.
The trust cannot be deprived of the benefit of exemption u/s. 11. Further, as we have discussed in elsewhere in the order there is no concrete evidence for collection of unaccounted capitation fees and it is not possible to deny the exemption u/s 11 of the act. It is also noted that even if the assessee constructed the temple inside the campus of the education institution for the benefit of the students and employees and also for public, it cannot be construed as violation of section 12(1)(a) of IT Act. There was one more allegation that assesse has collected exorbitant fees but in our opinion the fees has been fixed by the state authority and there was no violation noted by the state authority or MCI. As discussed in earlier para of this order about the authenticity of the seized material, we have held that it is not foolproof. In such circumstances it cannot be relied upon - Decided in favour of assessee.
Allowance of depreciation - HELD THAT:- The assessee is entitled for depreciation u/s. 32 on assets where it has been laid out as application of income for charitable purposes u/s. 11(1)(a) of the Act. The amendment brought to section 11(6) of the Act by the Finance (No.2) Act, 2014 which became effective from AY 2015-16 and depreciation in such case being precipitation in nature. Accordingly, by placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT v. Rajasthan & Gujarati Charitable Foundation Poona, [2017 (12) TMI 1067 - SUPREME COURT] the AO is directed to grant depreciation for AY 2010-11.
Undisclosed cash receipts - HELD THAT:- We have already held in earlier para of this order that unsubstantiated material cannot be full-proof material evidence to sustain the addition. We also hold that mere existence of concealment even in one year is not sufficient to estimate the income of other years on that basis. It is pertinent to place reliance on the order of this Tribunal in the case of Anjaneya Brick Works. [2002 (1) TMI 256 - ITAT BANGALORE] wherein it was held that estimation of income could not be made relying on the seized documents which related to another accounting period and not the accounting year under consideration and, therefore, addition could not be made on the basis of incriminating documents relating to subsequent year.
So the rule of uniformity cannot be and should not be applied on the estimate basis. There can be time and times when the uniformity can be maintained but for that case there should be some direct evidence available in a given case - As decided ANAND KUMAR DEEPAK KUMAR. [2006 (8) TMI 166 - DELHI HIGH COURT] merely because some discrepancies were found in assessee’s books in the pre-search period of unaccounted sales, it could not be presumed that such a discrepancy continued even in the post-search period, when there is no evidence to support such a view, and, therefore, addition could not be made on the basis that the assessee had made unaccounted sales throughout the accounting year. Being so, there is no question of extrapolation of income in all these assessment years.
Disallowance of donation u/s 37 - HELD THAT:- The donations have been given to the registered and approved institution i.e., R.L. Jalappa Foundation which is duly registered u/s. 12A of the Act by way of account payee cheque and the same is to be allowed as an application of income. This ground of the appeal of the assessee is allowed.
Rate of Tax - contention of the AR is that even if exemption u/s. 11 is denied, maximum margin rate of tax cannot be applied in view of the CBDT circular number 320 dated 11/01/1982 - HELD THAT:- We are agreeing with the contention of the AR. in our opinion this ground of appeals does not require any adjudication as we have already held that assessee is entitled for exemption 11 of the I.T. Act.
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