TMI Tax Updates - e-Newsletter dated: January 19, 2024 - with Direct Tax, Indirect Tax and GST Updates and Updates on FTP, FEMA, IBC & Corporate Laws etc. published on TMI with Latest Case Laws

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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter January 19, 2024 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax TMI Short Notes 1. Insight into Penalties for Procedural Lapses in Customs Documentation Customs: Summary: The case involving Patnaik Steels & Alloys Limited and the Commissioner of Customs addresses penalties for procedural lapses in customs documentation under the Customs Act, 1962. The appellant was penalized for not submitting documents within the required 30-day period for one out of eight Bills of Entry. Initially fined Rs. 5000, the penalty was increased to Rs. 50,000 upon appeal by the Department. The tribunal found the original penalty sufficient, noting the appellant's eventual compliance and lack of justification for the increased penalty. The decision emphasizes proportionality in penalties for procedural violations, balancing compliance with fairness. 2. Legalities of Input Tax Credit Refunds (IGST), period of limitation and COVID-19 pandemic: A Case Study Analysis GST: Summary: A High Court ruling addressed the complexities of refunding unutilised Input Tax Credit (ITC) under the Integrated and Central Goods and Services Tax Acts, focusing on a Business Process Outsourcing company's claim. The company sought a refund for exports made from April 2018 to March 2019. The core issue was whether the COVID-19 pandemic period should be excluded from the limitation period for filing refund claims. The court determined that the pandemic period should be excluded, making the refund application timely. The appellate order was quashed, and the company was awarded a refund of Rs. 734,732. This case emphasizes the importance of understanding procedural norms in tax matters, especially during extraordinary circumstances like the pandemic. 3. Reversal of CENVAT Credit: A Critical Analysis of a Recent Legal Dispute Central Excise: Summary: A recent legal dispute adjudicated by the Calcutta High Court examined issues related to the Central Excise Duty and CENVAT Credit Rules. The core dispute involved the availing of CENVAT credit without separate records for manufacturing dutiable and exempt goods, raising questions about procedural credit claims. The Department's appeal was based on a late application for credit reversal and demand quantification. The court ruled that the Show Cause Notice demanding 5% or 10% of exempted product value was unsupported by law, allowing the assessee's appeal and setting aside penalties. The case relied on a Telangana High Court precedent, emphasizing that authorities cannot impose credit reversal decisions on assessees who do not maintain separate accounts. The ruling clarified that Rule 6(3) merely provides options for service providers, and authorities can only disallow wrongly availed credit. This case clarifies the legal framework for CENVAT credit claims and reversals. 4. Taxation of Employee Benefits: TDS on value of accommodation provided to the employees at the rate of 15 percent of salary Income Tax: Summary: The legal case between the Assistant Commissioner of Income Tax and the Indian Institute of Technology Delhi centered on the taxation of rent-free accommodation provided to employees. The Revenue argued that IIT Delhi should deduct tax at source, valuing the accommodation at 15% of employees' salaries under Section 17(2)(ii) of the Income Tax Act. IIT Delhi contended that its employees should be taxed similarly to government employees, given its governmental ties. The tribunal found no concession in rent, thus ruling the perquisite value as nil and dismissing the Revenue's appeal, emphasizing the need for context-specific application of taxation laws for autonomous institutions. 5. The Intricacies of Unexplained Investment and Legal Recourse: A Comprehensive Analysis of a recent Case Income Tax: Summary: A recent ruling by the Income Tax Appellate Tribunal (ITAT) Visakhapatnam addresses unexplained investments in property transactions. Originating from a survey under section 133A of the Income Tax Act, 1961, the case involved a significant land purchase in Visakhapatnam. The Tribunal examined the legitimacy of claimed funding sources and the legal validity of cancellation deeds. It concluded that the cancellation of a sale deed requires a civil court decree to be valid, upholding the Income Tax Officer's additions under section 69. The judgment underscores the importance of proving the creditworthiness of investment sources and proper documentation in property transactions. 6. Navigating Legal Intricacies: Power to arrest under PMLA and compliance with CrPC PMLA: Summary: The Supreme Court of India examined the legal complexities of the Prevention of Money Laundering Act 2002 (PMLA 2002) and the Code of Criminal Procedure 1973 (CrPC 1973) in a case involving a Tamil Nadu Cabinet Minister. The case focused on the legality of arrest under Section 19 of the PMLA 2002, the interplay with Section 167 of the CrPC 1973, and the applicability of habeas corpus petitions. The Court emphasized the necessity of procedural compliance for arrest validity, clarified the non-applicability of Section 41A CrPC in PMLA cases, and highlighted the precedence of PMLA provisions over CrPC in case of conflict. 7. Intricacies of Taxation on Interconnect Charges in Telecom: Unraveling the Concept of 'Use or Right to Use' Income Tax: Summary: The article analyzes a ruling by the Income Tax Appellate Tribunal (ITAT) regarding interconnect charges (IUC) in the telecom sector, focusing on the concept of 'use or right to use' in international telecommunication services. A Spain-based telecom company, which provided services to Indian operators, argued that IUC receipts were not taxable in India. However, the Assessing Officer classified these as Royalty or Fee for Technical Services, leading to tax demands. The ITAT concluded that IUC charges did not qualify as 'royalty' since they did not involve the use or right to use intellectual property. This ruling clarifies the interpretation of 'royalty' in international telecommunications and emphasizes the precedence of the India-Spain DTAA over domestic laws. 8. The Priority of Secured Creditors in Financial Recoveries: A Comprehensive Analysis of Central Bank of India vs. State of Himachal Pradesh & Ors VAT / Sales Tax: Summary: The Himachal Pradesh High Court's decision in the case involving the Central Bank of India and the State of Himachal Pradesh addresses the priority of secured creditors over government claims for tax dues. The bank, a secured creditor, auctioned a mortgaged property under the SARFAESI Act after the borrower defaulted. The court affirmed that the secured creditor's rights, as outlined in Section 26E of the SARFAESI Act, take precedence over government tax claims. This ruling limits the traditional Crown Debt doctrine, enhancing the security of banks in asset recovery and promoting financial stability in India. 9. Navigating the Intricacies of Seizure and Confiscation under the GST Regime: A Detailed Analysis of a Landmark High Court Judgment" GST: Summary: A High Court judgment examined the legal framework of seizure and confiscation under the GST Act. The case involved a petitioner seeking the release of seized silver bars, cash, and mobile phones. The petitioner argued against the seizure of currency, claiming it did not qualify as 'goods' under the Act. The court analyzed Section 67, emphasizing that 'goods' exclude money, and defined 'things' as materials relevant to tax proceedings. It ruled that seizure powers are limited and ordered the release of items not used in the notice. The judgment clarifies the boundaries of tax authorities' powers and protects taxpayer rights. 10. The Principle of Mutuality in Taxation: A Comprehensive Analysis of a Landmark Supreme Court Decision Income Tax: Summary: The Supreme Court of India ruled on a landmark case involving several clubs and the Income Tax Department, focusing on whether interest earned on bank deposits by clubs is taxable under the principle of mutuality. The case, arising from appeals across High Courts, examined the taxability of various income sources of clubs, such as property income and interest from financial instruments. The Court concluded that the interest income from fixed deposits was taxable, as the investment disrupted the mutuality principle by involving commercial activities with banks. This decision impacts how clubs manage surplus funds and their tax obligations, emphasizing the distinction between mutual and commercial activities. 11. Legal Nuances in CENVAT Credit Rules and Extended Limitation Periods: A Detailed Analysis Service Tax: Summary: The case analyzed by the tribunal in New Delhi addresses two main issues: eligibility for CENVAT credit and the applicability of the extended period of limitation for tax reassessment. The tribunal scrutinized the CENVAT Credit Rules to clarify conditions for availing tax credits and assessed the legal grounds required to invoke an extended period for tax reassessment. It concluded that the extended period cannot be invoked without evidence of fraud or intentional suppression. The tribunal ruled in favor of the appellant, finding insufficient grounds for the extended limitation period, thus rendering most of the tax demand invalid due to being time-barred. 12. Cenvat Credit - Input Service Distributors and the Extended Period of Limitation in Service Tax Law: A Case Analysis Service Tax: Summary: The case involves a Public Sector Undertaking (PSU) providing telecommunication services, which faced a dispute over the validity of availing CENVAT credit on input services. The Department of Central Excise and Service Tax challenged the credit based on procedural non-conformity. The Tribunal ruled in favor of the PSU, emphasizing that procedural lapses should not negate substantive rights, especially when the reality of services is undisputed. Additionally, the Tribunal rejected the extended period of limitation for issuing a show-cause notice, citing a lack of evidence for fraud or intent to evade taxes, thus reinforcing taxpayer rights and procedural fairness. 13. Complexities of Gold Importation - Prohibited Goods and Redemption: An Analysis of the 2023 (8) TMI 1008 - Delhi High Court Case Customs: Summary: The Delhi High Court case 2023 (8) TMI 1008 examines the legal complexities of gold importation into India, focusing on the Customs Act 1962. Central issues include whether gold is classified as 'prohibited' under the Act and if undeclared importation constitutes smuggling. Petitioners challenge the confiscation and denial of redemption of gold, arguing inconsistency in enforcement. Customs authorities contend that the petitioners acted as carriers, not owners, and failed to prove the gold was not smuggled. The court analyzed legal provisions and precedents, emphasizing the need for clarity and consistency in customs law application. 14. A Case Study on Condonation of Delay in filing the Appeal in Indian Legal System Indian Laws: Summary: The Supreme Court of India addressed the issue of delay condonation in a land acquisition appeal, where the government sought to appeal against enhanced compensation awarded by a Reference Court. The High Court had condoned the government's delay, citing administrative challenges. The appellants argued that these reasons were insufficient. The Supreme Court examined the concept of 'sufficient cause' for delay, emphasizing a liberal interpretation favoring justice. Ultimately, the Court upheld the High Court's decision, stressing the importance of balancing procedural requirements with substantive justice, setting a significant precedent for future cases involving delay condonation in government-related matters. 15. Restrictions on availing Input Tax Credit (ITC) - constitutional validity of Section 16(4): A Landmark Judgment GST: Summary: A high-profile case challenged the constitutional validity of Section 16(4) of the Central Goods and Services Tax Act 2017, which limits the time for claiming Input Tax Credit (ITC). The petitioner, a proprietorship firm, argued that this section violated Articles 14, 19(1)(g), and 300A of the Indian Constitution. The court ruled that Section 16(4) is constitutional, as ITC is a benefit contingent on statutory conditions. It stated that Article 19(1)(g) does not apply to juristic persons and emphasized legislative discretion in economic policy. The judgment clarifies the legislative scope in defining tax benefits. Articles 1. DENIAL OF SUBSISTENCE ALLOWANCE TO THE SUSPENDED EMPLOYEE By: DR.MARIAPPAN GOVINDARAJAN Summary: The article discusses the denial of subsistence allowance to suspended employees, focusing on legal provisions and court rulings. Suspension is a temporary removal from duties, not employment, and employees are entitled to a subsistence allowance during this period, as per Section 10(A) of the Industrial Employment (Standing Order) Act, 1946. The article reviews a case where an employee was required to mark daily attendance to receive this allowance. The High Court ruled this condition illegal, emphasizing that statutory benefits cannot be curtailed by company practices. The court ordered the payment of the allowance with interest, reinforcing employees' rights under the Act. 2. Should employees suffer incase the employer defaults in payment of TDS? By: Vivek Jalan Summary: The Karnataka High Court ruled that employees should not be penalized if their employer defaults on depositing Tax Deducted at Source (TDS) with the government, as seen in the case involving Kingfisher Airlines. The court emphasized that under Section 205 of the Income Tax Act, employees are not liable to pay the tax already deducted from their salaries. The Delhi High Court reaffirmed that recovery of such taxes should be pursued against the employer, not the employees. This judgment provides significant relief to employees, ensuring they are not held accountable for their employer's failure to remit deducted taxes. 3. Section 16(2)(c) of the CGST Act and Rule 36(4)(c) of the CGST Rules are constitutionally valid By: Bimal jain Summary: The Kerala High Court upheld the constitutional validity of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017, and Rule 36(4) of the Central Goods and Services Tax Rules, 2017. A business owner challenged these provisions, arguing they violated Article 14 due to denial of Input Tax Credit based on discrepancies between GSTR-2A and GSTR-3B. The court emphasized judicial restraint in tax legislation, stating that provisions can only be invalidated if proven manifestly unconstitutional or arbitrary. Finding no such arbitrariness, the court dismissed the appeal, affirming the provisions' validity. News 1. Cabinet approves equity investment by (i) South Eastern Coalfields Limited for setting-up 1×660 MW Thermal Power Plant through JV of SECL and MPPGCL; and (ii) Mahanadi Coalfields Limited for setting-up 2x800 MW Thermal Power Plant through MBPL Summary: The Cabinet Committee on Economic Affairs approved equity investments for setting up thermal power plants by subsidiaries of Coal India Limited. South Eastern Coalfields Limited (SECL) will invest Rs. 823 crore for a 1x660 MW power plant in Madhya Pradesh with a project cost of Rs. 5,600 crore. Mahanadi Coalfields Limited (MCL) will invest Rs. 4,784 crore for a 2x800 MW plant in Odisha, with a project cost of Rs. 15,947 crore. These projects aim to provide cheaper power, with SECL partnering with Madhya Pradesh Power Generating Co Ltd and MCL operating through Mahanadi Basin Power Ltd. 2. Cabinet approves creation of posts for the 16th Finance Commission Summary: The Union Cabinet, led by the Prime Minister, has approved the creation of three new posts for the 16th Finance Commission. These include two Joint Secretary positions and one Economic Adviser role. The commission, established under Article 280 of the Constitution as of December 31, 2023, requires these positions to support its functions. All other necessary positions within the commission have already been established according to delegated powers. 3. India’s Journey from Crisis to Confidence (Speech by Shri Shaktikanta Das, Governor, Reserve Bank of India - January 17, 2024 - Delivered at an event organised by the Confederation of Indian Industry (CII), Davos, Switzerland) Summary: The Governor of the Reserve Bank of India highlighted India's economic resilience and growth trajectory at a global event. Despite global economic challenges, India remains the fastest-growing major economy, with a projected GDP growth of 7.3% for 2023-24. The country's strong domestic demand and integration into global trade have bolstered its economy. Inflation is easing, and financial stability is reinforced by robust banking and non-banking sectors. The fintech and payments ecosystem, particularly the Unified Payments Interface (UPI), has revolutionized financial inclusion. The central bank's proactive measures and regulatory reforms support sustainable growth and financial stability. 4. Department of Revenue, Ministry of Finance, invites suggestions on draft ‘Indian Stamp Bill, 2023’ from public within a period of 30 days Summary: The Department of Revenue, Ministry of Finance, India, has released a draft of the Indian Stamp Bill, 2023, seeking public feedback within 30 days. This draft aims to modernize the stamp duty regime and replace the outdated Indian Stamp Act of 1899. The current Act, which governs the tax levied via stamps on transaction instruments, has become partially redundant. The new legislation intends to reflect contemporary needs and objectives. Suggestions can be submitted in a prescribed format via email, as part of the pre-legislative consultative process. Notifications GST - States 1. CT-8-0009-2023-Sec-1-V(CT) (05) - dated 17-1-2024 - Madhya Pradesh SGST Rescind the Notification No. CT-8-0009-2023-Sec-1-V (CT) (34), dated the 1st September, 2023 Summary: The Madhya Pradesh State Government, utilizing its authority under Section 148 of the Madhya Pradesh Goods and Services Tax Act, 2017, has rescinded Notification No. CT-8-0009-2023-Sec-1-V (CT) (34), dated September 1, 2023. This rescission is effective from January 1, 2024, and excludes actions taken or omitted prior to this date. The order is issued in the name of the Governor of Madhya Pradesh by the Deputy Secretary of the Commercial Tax Department. 2. CT-8-0005-2023-Sec-1-V (CT) (02) - dated 12-1-2024 - Madhya Pradesh SGST Seeks to extend dates of specified compliances in exercise of powers under section 168A of MPGST Act Summary: The Madhya Pradesh Commercial Tax Department has issued a notification extending the deadlines for specified tax compliance under Section 168A of the Madhya Pradesh Goods and Services Tax Act, 2017. The extension applies to the issuance of orders under Section 73, sub-section (9) for recovery of unpaid or short-paid tax, or wrongly availed input tax credit. The new deadlines are April 30, 2024, for the financial year 2018-19, and August 31, 2024, for the financial year 2019-20. This notification is effective from December 28, 2023, as per the recommendations of the Council. 3. CT-8-0009-2023-Sec-1-05(CT) (01) - dated 10-1-2024 - Madhya Pradesh SGST Amendment in Notification No. CT-8-0009-2023-Sec-1-05(CT) (34) dated the 1st September, 2023 Summary: The Madhya Pradesh State Government has amended Notification No. CT-8-0009-2023-Sec-1-05(CT) (34) dated September 1, 2023, under the Madhya Pradesh Goods and Services Tax Act, 2017. The amendment changes the effective date of the notification from July 31, 2023, to January 1, 2024. This change is made based on the recommendations of the Council and is issued by the Commercial Tax Department in Bhopal, signed by the Deputy Secretary. 4. 1501/XI-2–23-9(47)-17-T.C. 249-U.P. Act-1-2017-Order (309)-2023 - dated 29-11-2023 - Uttar Pradesh SGST Taxable persons who are not able to file an appeal under the aforesaid Act, such taxable persons will follow the special procedure. Summary: Taxable persons unable to file an appeal under the Uttar Pradesh Goods and Services Tax Act, 2017, by March 31, 2023, or whose appeals were rejected due to late filing, are required to follow a special procedure. They must file an appeal in FORM GST APL-01 by January 31, 2024, after paying the admitted tax and 12.5% of the disputed tax, capped at 25 crore rupees, with at least 20% paid via the Electronic Cash Ledger. No refunds will be granted until the appeal is resolved, and appeals not involving tax demands are inadmissible. This notification is effective from November 2, 2023. 5. 1468/XI-2–23-9(47)-17-T.C.-241-U.P. Act-1-2017-Order (308)-2023 - dated 17-11-2023 - Uttar Pradesh SGST Amendment in Notification No. KA.NI.-2–843/XI-9(47)-17-U.P. Act-1-2017-Order (10)-2017, dated June 30, 2017 Summary: The notification amends a previous order from June 30, 2017, under the Uttar Pradesh Goods and Services Tax Act, 2017. The amendment introduces a new entry, 3B, exempting certain services provided to a Governmental Authority from GST. These services include water supply, public health, sanitation conservancy, solid waste management, and slum improvement. Additionally, references to the Ministry of Railways are added in several entries concerning the Department of Posts. The amendment is effective from October 20, 2023, as ordered by the Governor of Uttar Pradesh. 6. 1429/XI-2–23-9(47)-17-T.C. 243-U.P. Act-1-2017-Order (301)-2023 - dated 31-10-2023 - Uttar Pradesh SGST Amendment in Notification No. KA.NI.-2–846/XI-9(47)-17-U.P. Act-1-2017-Order (13)-2017, dated June 30, 2017 Summary: The notification amends a previous order under the Uttar Pradesh Goods and Services Tax Act, 2017. It modifies the language in the opening paragraph of the original notification from June 30, 2017. The amendment specifies that the construction of a complex or building intended for sale, where the price includes the value of land, is subject to certain conditions unless the full payment is received after a completion certificate is issued or after first occupation. This amendment is effective retroactively from October 20, 2023, as ordered by the state government. Circulars / Instructions / Orders Income Tax 1. F. No. 225/132/2023/ITA-II - dated 1-12-2023 Processing of returns of income validly filed electronically with refund claims under section 143(1) of the Income-tax Act, 1961 beyond the prescribed time limits in non-scrutiny cases Summary: The Central Board of Direct Taxes has extended the deadline for processing electronically filed income tax returns with refund claims for assessment years 2018-19, 2019-20, and 2020-21, where processing was delayed due to technical issues beyond taxpayers' control. The new deadline for processing these returns is January 31, 2024, provided they are not selected for scrutiny, do not show a payable demand, or are not delayed due to taxpayer fault. Administrative approval from the Principal Chief Commissioner of Income Tax is required for processing, and subsequent refund issuance will follow standard procedures. 2. F. No. 187/3/2020-ITA-I - dated 25-10-2023 Order under section 119 of the Income-tax Act, 1961 (the Act) Assigning the role of Pr.CCsIT of the region and Pr. CCIT (NaFAC) Summary: The Central Board of Direct Taxes has issued an order under section 119 of the Income-tax Act, 1961, modifying a previous directive from March 31, 2021. This order redefines the role of the Principal Chief Commissioner of Income Tax (NaFAC), emphasizing responsibilities such as implementing faceless assessment policies, formulating guidelines and standard operating procedures for various assessment and technical units, ensuring technical support for legal matters, and advising on improving the efficiency of faceless assessment processes. The order is effective immediately. IBC 3. IBBI/EXAM/63/2024 - dated 18-1-2024 Reduction of cooling-off period between two consecutive attempts in Limited Insolvency Examination and Valuation Examinations Summary: The Insolvency and Bankruptcy Board of India (IBBI) has announced a reduction in the cooling-off period between consecutive attempts for the Limited Insolvency Examination and Valuation Examinations. Previously set at two months, the interval is now reduced to 21 days, allowing candidates more flexibility and opportunities to improve their performance. This change aims to create a more dynamic and responsive examination system. The new policy will be implemented for exams conducted after three months from the circular's date, as per the authority granted by the Insolvency and Bankruptcy Code, 2016, and related regulations. Customs 4. PUBLIC NOTICE - dated 12-1-2024 Container delivery process for fully RMS facilitated Import Consignments - m/r Summary: The circular outlines the process for container delivery of fully Risk Management System (RMS) facilitated import consignments at the Customs House in Kandla. Importers can avail Direct Port Delivery (DPD) for Full Container Load (FCL) containers if certain conditions are met, such as filing advance Bills of Entry without the need for sample drawl or alerts. The notice specifies procedures for applying for DPD, including document submission and criteria fulfillment. It aims to expedite customs clearance, reduce physical interactions, and lower compliance costs. The notice also mandates monthly reporting by terminal operators and importers, effective from January 15, 2024. Highlights / Catch Notes GST CGST Authority and DGGI Lack Superior Powers Over State GST in Bank Account Attachments, Challenging Authority Balance. Case-Laws - HC : Power of CGST Authority / DGGI over State GST authorities - Attachment of Bank accounts - conflict with the notification issued by the CBEC from time to time, concerning guidelines for attachment of Bank Accounts - it will be at loss to say that the DGGI is raising a question about credibility and competence of the State GST Authorities, in carrying out the investigation concerning wrong/inadmissible availment of Input Tax Credit, inasmuch as, the officers of the DGGI does not enjoy any special power or privilege in comparison with the officers of the State GST Authorities. - HC Visit to Get Source Hearing Notice Flawed: Authorities Ordered to Comply with 2017 Act for Fair Personal Hearing in Justice Violation Case. Case-Laws - HC : Violation of principles of natural justice - date of personal hearing, time of personal hearing and venue were not mentioned in the notice - This petition is disposed of thereby directing the authorities to afford an opportunity of hearing to the petitioner strictly in accordance with the provisions of Section 75(4) of the Act of 2017. - HC Visit to Get Source Income Tax Reassessment Invalid: Notice Issued in June 2021 Exceeds Limitation Period, Rendering Proceedings Time-Barred. Case-Laws - HC : Reopening of assessment u/s 147 - Time limit for notice - (TOLA) application - as the foundation of the entire reassessment proceeding, viz., the notice issued in June 2021 itself was barred by limitation in view of non-applicability of Notification No. 20/2021, the superstructure sitting thereon, viz., the reassessment proceedings initiated pursuant to judgment in Ashish Agarwal will also be regarded as beyond time limit. - HC Visit to Get Source ITAT Permits Rectification for Adverse Judgment Contestation, Overrides Monetary Limits Regardless of Tax Effect. Case-Laws - HC : Rectification u/s 254 allowed by ITAT - The adverse judgment relating to the said issues will be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect. The assessment order passed by the Assessing Authority clearly provides that the undisclosed income belonging to the assessee is as per the investigation of C.B.I. thus, the learned Tribunal has not committed any illegality or irregularity in allowing the Miscellaneous Application filed by the Revenue. - HC Visit to Get Source Opportunity to Resubmit Applications for Compounding TDS Offences Granted; No Limitation Period for Such Offences. Case-Laws - HC : Compounding of the offence committed for failure to pay the Tax Deducted at Source (TDS) - There is no limitation prescribed - Since the applications filed by the petitioner and its Directors are bereft of any details, the petitioner is given a fresh chance to file an amended copy of applications for compounding of the offence explaining the reasons as to why the offences for which they have been prosecuted should not be compounded under Section 279(2) of the IT Act, 1961. - HC Visit to Get Source Loan Interest Deduction Valid Without Immediate Revenue if Business Purpose Proven; No Excessive Spending Found. Case-Laws - AT : There no merit in the argument of the ld. DR that unless some revenue is shown from the project, the assessee cannot justify the loan and the interest expenditure was rightly disallowed. We are of the considered view that when business expediency in regard to the expenditure is established how far it fetches revenue in the relevant assessment year is not of much consideration unless there is specific evidence of wasteful or excessive expenditure, which is not the case here. - AT Visit to Get Source Income Surrendered in Survey Not Taxed Under Deeming Provisions; Assessed as Business Income at Normal Tax Rate. Case-Laws - AT : The income surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69 of the Act and the same has to be assessed to tax under the head “business income”. In absence of deeming provisions, the question of application of section 115BBE doesn’t arise and normal tax rate shall apply. - AT Visit to Get Source Income Tax Assessments Overturned Due to Mechanical Approval Process Lacking Proper Review by Joint Commissioner. Case-Laws - AT : Validity of assessments made u/s 153A - prior approval of the draft assessment order u/s 153D - the approval u/s 153D of the Act has been granted by the ld. JCIT in the instant case before us in a mechanical manner without due application of mind, thereby making the approval proceedings by a high ranking authority, an empty ritual. - AT Visit to Get Source Arm's Length Price Upheld for Management Services; No Extra Transfer Pricing Adjustments Needed. Case-Laws - AT : TP Adjustment - Upward adjustment of Arm’s Length Price in respect of Management Services - These services are not in the nature of stewardship or shareholder activity. The payment to Schaeffler Holding (China) Co. Ltd. at the actual costs incurred in providing such services plus 5% mark-up is at ALP, which does not require any transfer pricing addition. - AT Visit to Get Source Reversal of Tax Claims Without New Evidence Not Legal Under Income Tax Act Sections 153C/153A. Case-Laws - AT : Assessment u/s 153C/153A when no case was pending for the related assessment year - un-abated assessment - the action of AO reversing/withdrawing the claim allowed in the original assessment on same set-off facts without any incriminating/seized materials qua assessee qua assessment year is not legally sustainable - AT Visit to Get Source Cash Deposits During Demonetization for Gemstone Trading Under Scrutiny; Additions Rightfully Deleted by CIT(A. Case-Laws - AT : Addition u/s 68 - cash deposits during demonetization period - trading in precious and semi precious Gem Stones - AO doubted the cash sales for the reason that the buyers were not identified and each sale was below Rs. 2,00,000/- - CIT(A) rightly deleted the additions. - AT Visit to Get Source Exemption for Offshore Fund Scheme Upheld; Separate Registration Unnecessary, SEBI Approval Confirmed for Tax Benefit. Case-Laws - AT : Validity of exemption u/s 10(23D) - offshore fund scheme maintained by the assessee - The observation of the Assessing Officer in order to grant exemption under section 10(23D) has to have a separate registration is uncalled for and the various documents submitted by the assessee proves that the offshore fund scheme maintained by the assessee is an approved unit by the SEBI. - CIT(A) rightly granted benefit of deduction / exemption - AT Visit to Get Source Assessing Officer's Addition u/s 68 Challenged Over Alleged Bogus Share Sale Proceeds; Genuine Trading in Question. Case-Laws - AT : Addition u/s 68 - bogus sale proceeds of shares - Since, the assessee has only dealt with the above transaction after receiving the shares thru “will” from his mother, he has nothing to offer any explanation. AO has proceeded to make the addition based on the various statements of the operators. At the same time, he has not brought on record how the assessee is involved in the above transaction except trading in the stock exchange. He has not established any relationship with any of the operators. - AT Visit to Get Source Offshore Supply to India Not Taxed: No Permanent Establishment for Assessee, Income from Services Exempt. Case-Laws - AT : Bombardier Transportation India Pvt. Ltd. (BTIL) is not PE of the assessee in India and accordingly, since there is no PE of the assessee in India, the offshore supply of sub-assemblies to BTIL/income from intermediary services cannot be taxed in India. - AT Visit to Get Source Customs EPCG Scheme Case: Timely EODC Issuance Should Grant Relief, Aligning with High Court and Tribunal Precedents. Case-Laws - AT : EPCG Scheme - fulfilment 100% export obligation - No doubt, that the EODC has been issued after much delay, however, the same was issued prior to the passing of the order-in-original passed by the Adjudicating Authority on 26.02.2016 and much before the impugned order on 19.11.2019. The fact that the EODC has been issued showing complete fulfilment of 100% Export Obligation, the Appellate Authority was required to consider the same and in the light of the various decisions of the High Court as well as of this Tribunal, ought to have granted the necessary relief. - AT Visit to Get Source Confiscated Goods Misdeclared on Import; Penalty and Fine Upheld at Rs. 4.5 Lakh for Goods Valued at Rs. 22.9 Lakh. Case-Laws - AT : Levy of Redemption Fine and penalty - Confiscation of imported goods - The goods imported were restricted goods and could have been imported on the basis of the Licence issued by the DGFT and being misdeclared in respect of description, weight and value were liable for confiscation and penalty under Section 112(a) of the Act for his act of omissions and commissions. The redemption fine imposed on the appellant of Rs.4,50,000/- is commensurate with the assessable value of the goods of ₹22, 90, 920/ and hence requires no interference. - AT Visit to Get Source Customs Broker's license revoked for smuggling red sanders with fake export documents; appeal against revocation dismissed. Case-Laws - AT : Continued revocation of the Customs Broker (CB) license - Conspiracy - Smuggling - red sanders - illegal export of prohibited goods - when the documents relating to the export goods were fabricated and declared goods of ‘Fabric glue/carpets’ was substituted with prohibited ‘Red Sanders’, a clear attempt to smuggle the goods in an illegal manner in violation of the Customs Act, 1962 and Foreign Trade Policy have been orchestrated by the appellants CB. - Appeal of the CB dismissed - AT Visit to Get Source Customs Duty Exemption Case: Verification of Cocoa Powder Origin Under Free Trade Agreement Lacks Evidence. Case-Laws - AT : Import of cocoa powder under free trade agreement - origin of goods - Benefit of exemption from duty of customs - to displace the certificate of origin issued by the Malaysian authority, which is in the nature of documentary evidence, the verification process by the Customs Authorities of India reference to issuing authorities to do a retroactive check is required. In the present instance no such request for verification report in respect of the appellant has been brought on record - Demand set aside - AT Visit to Get Source IBC Liquidation Process: No Vested Rights for Bidders' Plans; Accurate Asset Valuation Crucial for Fairness and Maximizing Value. Case-Laws - AT : A bidder in the liquidation process does not have a vested right to have their resolution plan considered or approved. - Regarding valuation of property, NCLAT highlighted the importance of this property in the liquidation process and the need for its proper valuation. - It was deemed crucial for maximizing the value of the assets and ensuring fairness in the liquidation process. - AT Visit to Get Source Service Tax Extended Limitation Period Invalidated for CENVAT Credit Due to Full Disclosure in ST-3 Return. Case-Laws - AT : Extended period of limitation - irregular availment of CENVAT Credit - The ST-3 return for the period October 2010 to March 2011 in which details were disclosed was also filed by the appellant on 25.04.2011. - the appellant had not suppressed facts, much less suppressed facts with an intention to evade payment of service tax. - Demand set aside - AT Visit to Get Source Central Excise Investigating Officer Failed to Follow Safeguards u/s 36B in Case of Alleged Clandestine Removal. Case-Laws - AT : Clandestine Removal - non-production of corroborative evidences - The provisions of Section 65B of Indian Evidence Act and Section 36B of Central Excise Act, 1944 of the Act are pari-materia. It is evident from the panchanama, and the appeals records that the investigating officer had failed to follow the safeguard as mandated under Section 36B of the Act. - AT Visit to Get Source Court Upholds CENVAT Credit for Imported Coal CVD; No Unfair Advantage Over Domestic Buyers Found. Case-Laws - AT : Validity of availing CENVAT credit of CVD paid on import of coal - The department argued that granting credit to buyers of imported coal, while domestic coal buyers couldn't avail of such credit, disrupts the level playing field. - A consistent view has been taken by the various Benches on the provisions of Rule 3(1) and the distinction between the customs notification and the central excise notification. There is no reason to take any contrary view in the present case - Credit cannot be denied - AT Visit to Get Source VAT State Officials' Appeals Dismissed After 362-Day Delay; Court Finds Justification Insufficient. Case-Laws - HC : Condonation of delay of 362 days in filing the appeals - State officials failed to file appeal in time - No ground has been made out to condone the delay in the peculiar facts and circumstances as the reasons given in the applications are not acceptable and the cogent reasons are missing to condone the lax approach of the authorities - applications for condonation of delay as well as main appeals are dismissed. - HC Visit to Get Source Case Laws: GST 2024 (1) TMI 813 Levy of penalty - non filling up of Part B of the e-Way Bill - HELD THAT:- Reliance placed in the case of M/S CITYKART RETAIL PVT. LTD. THRU. AUTHORIZD REPRESENTATIVE VERSUS THE COMMISSIONER COMMERCIAL TAX U.P. GOMTI NAGAR LKO. AND ANR. [ 2022 (9) TMI 374 - ALLAHABAD HIGH COURT] where it was held that In the present case, prima-facie no intent to evade the duty can be ascertained, only on the allegation that Part-B of the e-way bill was not filled, more so, in view of the fact that the vehicle in which the goods were being transported on a Delhi number. In the present case, the facts are quite similar to one in M/s City kart Retail Pvt. Ltd. s case and there are no reason why this Court should take a different view of the matter, as the invoice itself contained the details of the truck and the error committed by the petitioner was of a technical nature only and without any intention to evade tax. Once this fact has been substantiated, there was no requirement to levy penalty under Section 129(3) of the Act. The orders dated November 10, 2020 and January 10, 2022 are quashed and set aside - The petition is allowed. 2024 (1) TMI 812 IGST refund claim - it was submitted that there was an alert reflected in the automated system that processes the claims for such refunds and that the refunds of IGST were not processed due to this alert - HELD THAT:- If the State GST wanted the alert to continue, they would have said so in their communication dated 06.12.2023. Besides, as submitted by Mr Nadkarni and supported by Ms Priyanka Kamat, these are matters of IGST refund on account of exports. Therefore, at least prima facie, the State GST officials would not have any role to play concerning these refunds. In times when efforts are on to promote the ease of doing business and to minimise official discretion, withholding refunds due to prima facie red tape should not be encouraged. Neither should the taxpayers nor the exchequer suffer for avoidable delays in such matters. The 5th Respondent is directed to ensure forthwith that the alerts are removed consistent with the statement which was made by the learned Senior Standing Counsel and recorded by us in our order dated 12.12.2023. The 5th Respondent must also take necessary steps to ensure that the balance amount of Rs. 90,21,320/- is processed in terms of the law and refunded/ credited into the Petitioner s bank account within a maximum of seven days from today. If this is not done, then the liability to pay interest on this amount will have to be saddled on the incumbent now holding the position of the 5th Respondent. 2024 (1) TMI 811 Seeking grant of Regular Bail - failure to deposit tax liability - HELD THAT:- No doubt, at the time of granting bail, the criminal antecedents of the petitioner are to be looked into but at the same time it is equally true that the appreciation of evidence during the course of trial has to be looked into with reference to the evidence in that case alone and not with respect to the evidence in the other pending cases. In such eventuality strict adherence to the rule of denial of bail on account of pendency of other cases/convictions in all probability would lend the petitioner in a situation of denial the concession of bail. Considering the fact that the trial is almost over as only two formal witnesses are to be examined out of total 47 witnesses, as has been stated by learned State counsel and the next date of hearing before the trial Court is 22.01.2024 added with the fact that the trial is at the fag end, therefore, no fruitful purpose would be served by keeping the petitioner behind the bars. The petitioner is directed to be released on regular bail on his furnishing bail and surety bonds to the satisfaction of the trial Court/Duty Magistrate, concerned - Petition allowed. 2024 (1) TMI 810 Seeking grant of Regular Bail - fake and forged documents - HELD THAT:- Without considering or evincing any opinion upon the culpability of the petitioner, this Court is of the considered opinion that the instant petition is amenable for being allowed. This Court deems it appropriate to grant the concession of regular bail to the petitioner. Therefore, without commenting upon the merits and circumstances of the present case, the present petition is allowed. 2024 (1) TMI 809 Jurisdiction and Authority in GST Proceedings - Power of CGST Authority / DGGI over State GST authorities - Attachment of Bank accounts without Determination of Liability - conflict with the notification issued by the CBEC from time to time, concerning guidelines for attachment of Bank Accounts - HELD THAT:- Bare perusal of section 6 of the Act, especially Section 6(2)(b), when read with the Clarification dated 05.10.2018, further read with Clarification dated 22.06.2020, when read together, it clearly denotes and implies that it is a chain of a particular event happening under the Act and every any enquiry/investigation carried out at the behest of any of the Department are interrelated. Even if it is accepted that the submission of the Respondent No. 5 that the proceedings initiated by the Respondent No. 5 is on the basis of an information received from Noida; in that event also, it will be at loss to say that the DGGI is raising a question about credibility and competence of the State GST Authorities, in carrying out the investigation concerning wrong/inadmissible availment of Input Tax Credit, inasmuch as, the officers of the DGGI does not enjoy any special power or privilege in comparison with the officers of the State GST Authorities. The Preventive Wing of the CGST and DGGI Wing of the CGST, shall forward all their investigation carried out as against the petitioner and inter-related transaction to the State Authorities, who shall continue with the proceedings from the same stage - the Respondent No. 4 5 to make over the entire investigations carried till date to Respondent No. 3, who shall carry out further proceedings as against the petitioner in accordance with law. Application disposed off. 2024 (1) TMI 808 Prayer for granting installment in making payment of tax and interest in question - HELD THAT:- Considering the case made out in the writ petition relating to its financial hardship and for the delay on the part of the respondent State GST authority in detecting such mistake of revenue due against the petitioner and in the interest of justice this writ petition is disposed of by granting installment of making payment of the tax dues and interest in question. 2024 (1) TMI 807 Violation of principles of natural justice - neither SCN was served upon the petitioner nor any opportunity of hearing was afforded to the petitioner - HELD THAT:- Considering the facts and circumstances of the present case, the provisions of Section 73 read with Section 75(4) of the WBGST/CGST Act, 2017, proper officer is bound to afford an opportunity of hearing where either a request in writing is received by him from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person. To afford opportunity of hearing is a statutory mandate which cannot be violated by proper officer and in the event of violation the order passed by the proper officer cannot be sustained. Under the circumstances, the impugned order dated 25.03.2021 passed by the proper officer for the period April 2018 to March 2019 cannot be sustained and deserves to be quashed and the matter deserves to be remanded to the concerned Authority to pass an order afresh in accordance with law after affording reasonable opportunity of hearing to the petitioner/appellant. Article 226 of the Constitution of India confers very wide powers on High Courts to issue writs but this power is discretionary and the High Court may refuse to exercise the discretion if it is satisfied that the aggrieved person has adequate or suitable remedy elsewhere. It is a rule of discretion and not rule of compulsion or the rule of law. Even though there may be an alternative remedy, yet the High Court may entertain a writ petition depending upon facts of each case. It is neither possible nor desirable to lay down inflexible rule to be applied rigidly for entertaining a writ petition. The impugned order dated 25.03.2021 for the period from April 2018 to March 2019 passed by the Assistant Commissioner of State Tax (GST), Jalpaiguri Charge under Section 73 of the WBGST Act, 2017 and CGST Act, 2017, cannot be sustained and is hereby quashed - Matter is remitted back to the proper officer/Assistant Commissioner of State Tax (GST) Jalpaiguri charge to pass an order afresh in accordance with law under Section 73 of the WBGST Act, 2017/CGST Act, 2017, after affording reasonable opportunity of personal hearing to the appellant/petitioner - Petition allowed by way of remand. 2024 (1) TMI 806 Seeking grant of Regular Bail - evasion of GST - supplying goods without issuing invoices - HELD THAT:- Considering the fact that the petitioner has been in custody since 13.11.2023, that the investigation has progressed, though the charges against the petitioner are serious, bail is granted to the petitioner, taking note of the length of detention, on strict conditions. This application is allowed and the petitioner is granted bail subject to the conditions imposed. 2024 (1) TMI 805 Violation of principles of natural justice - date of personal hearing, time of personal hearing and venue were not mentioned in the notice - opportunity for hearing before determining the tax value also not provided - HELD THAT:- From a perusal of the notice dated 11.08.2021, it is quite clear that though in the opening para of the notice the petitioner was granted the opportunity to appear before the authority for a personal hearing, no details in this regard were mentioned in the notice and the date of personal hearing, time of personal hearing and venue were left blank. This petition is disposed of thereby directing the authorities to afford an opportunity of hearing to the petitioner strictly in accordance with the provisions of Section 75(4) of the Act of 2017. The Revenue may fix a date for the personal appearance of the petitioner and on that day, the petitioner shall appear before the authority. If the petitioner fails to appear before the authority on the date fixed by the Revenue, the Revenue may proceed further. Income Tax 2024 (1) TMI 804 Condonation of delay filling appeal - Connection usage charges paid to Foreign Telecom Operator(s) - Royalty OR Fees for Technical Services - HC dismissed appeal as there was a gross delay of four years and hundred days in preferring the appeals u/s 260A - High Court, not being satisfied with the explanation offered dismissed the appeals, out of which this special leave petition(s) arises - HELD THAT:- What we find curious is that the Department instead of seeking to ascertain the reasons for there being over four years delay in filing the appeals u/s 260A of the Act has simply sought to get the imprimatur of this Court on the impugned order of the High Court. Although following the other special leave petitions which have been dismissed by this Court as they arise from the same common impugned order, we may have to dismiss this SLP(s), we nevertheless direct that the concerned authority to file an affidavit before this Court explaining as to what inquiry has been made or action has been taken vis-a-vis the gross delay of four years and hundred days in filing the appeals before the High Court. The said affidavit shall be filed within a period of three weeks from today. Prima facie this special leave petition(s) may also have to meet the same fate, as other cases dismissed by this Court but however, pending passing of such an order, we direct the concerned officer to file an affidavit within a period of three weeks from today. 2024 (1) TMI 803 Reopening of assessment u/s 147 - Time limit for notice - period of limitation to issue notice - validity of a notice issued under Section 148/148A - scope of Taxation and other laws (Relaxation and Amendment of certain provisions) Act, 2020 (TOLA) application - provisions of the new reassessment law introduced by the Finance Act, 2021 - HELD THAT:- As per the unamended Section 149(1)(b) of the Act, the outer time limit to issue a notice under Section 148 was 6 years from the end of the relevant assessment year and thus, for AY 2013-14, the time limit expired on 31st March 2020. Under the amended provision, a notice under Section 148 can be issued within a period of 3 years or 10 years, the latter available only after fulfilling certain stipulated additional conditions, including the limitation provided for by the first proviso to Section 149(1) of the Act. The first proviso to Section 149(1) stipulates that no notice under Section 148 can be issued at any time in a case for any assessment year, if a notice under Section 148 could not have been issued at that time on account of being beyond the time limit specified under the unamended Section 149(1)(b), i.e., as it stood prior to the Finance Act, 2021. Applicability of Section 149 to be seen qua the notice under Section 148 and not with respect to the notice issued under Section 148A(b) or the order passed under Section 148A(d) of the Act. In the present case, as for AY 2013-14, the 6 years period expired on 31st March 2021, extended under Section 3(1) of TOLA. Therefore, the impugned notice dated 28th July 2022, which is under challenge in the petition, is barred by limitation. Reassessment notices issued for AY 2013-14 are patently barred by limitation as the six years limitation period under the Act (as extended by Section 3 of TOLA) expired by 31st March 2021. However, even on the Revenue s demurrer and assuming that such reopening notices could travel back in time and that the provisions of TOLA protected such reopening notices (we do not agree), even then, in so far as the notices issued for AY 2013-14 is concerned, would in any case be barred by limitation. As stated earlier, under the erstwhile Section 149, a notice under Section 148 could have been issued within a period of six years from the end of the relevant assessment year. The Notifications issued under TOLA, viz., Notification No. 20/2021, which is relied upon by the Revenue, only cover those cases where 31st March, 2021 was the end date of the period during which the time limit, specified in, or prescribed or notified under the Income Tax Act falls for completion. The limitation under the Income Tax Act, 1961 (erstwhile Section 149) for reopening the assessment for the AY 2013-14 expired on 31st March 2020. Hence, Notification No. 20/2021 did not apply to the facts of the present case, viz., reopening notice for the AY 2013-14. Therefore, the Revenue could not issue any notice under Section 148 beyond 31st March 2021 and hence, even the relate back theory of the Revenue could not safeguard the reassessment proceedings initiated after 1st April 2021 for AY 2013-14 Therefore, in the present case, as the foundation of the entire reassessment proceeding, viz., the notice issued in June 2021 itself was barred by limitation in view of non-applicability of Notification No. 20/2021, the superstructure sitting thereon, viz., the reassessment proceedings initiated pursuant to judgment in Ashish Agarwal will also be regarded as beyond time limit. Therefore, on this ground as well, the impugned reopening notice dated 28th July 2022 issued for AY 2013-14 in petitioner s case is barred by limitation and deserves to be quashed and set aside. Alternatively, it is well settled that a notice under Section 148 of the Act cannot be issued in order to reopen the assessment of an assessee in a case where the right to reopen the assessment was already barred under the pre-amended Act on the date when the new legislation came into force - The notice issued under Section 148 of the Act, impugned in this petition, for AY 2013-14 is issued beyond the period of limitation. Decide in favour of assessee. 2024 (1) TMI 802 Rectification u/s 254 allowed by ITAT - maintainability of Department appeals filed against relief given by CIT(A) - as argued Tribunal by allowing the Miscellaneous Application has gone into the merits of the case which is beyond its jurisdiction - Income Tax Department has preferred an application u/s 254(2) with Rule 13 of the Income Tax Appellate Tribunal Rules, 2007 mainly contending that the assessment order was passed pursuant to seizure of cash by the CBI and intimation of the same was sent to the department and the monetary limits prescribed in Para 3 of the said circular will not apply and appeal will be filed inspite of the low tax effect. Whether the learned Income Tax Tribunal committed illegality in allowing the Miscellaneous Application exercising its power conferred under Section 254(2) of the Income Tax Act? HELD THAT:- In the present facts Tribunal vide its order while dismissing the appeal has taken into consideration the circular dated 11.07.2018 but has not taken into consideration when the said circular was amended on 20.07.2018 and subsequently Clause 10(e) has been inserted which clearly provides that if addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/Directorate General of G.S.T. Intelligence (DGGI). The adverse judgment relating to the said issues will be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect. The assessment order passed by the Assessing Authority clearly provides that the undisclosed income belonging to the assessee is as per the investigation of C.B.I. thus, the learned Tribunal has not committed any illegality or irregularity in allowing the Miscellaneous Application filed by the Revenue. The order passed by the Income Tax Tribunal allowing the application is in accordance with the judgment passed by the Hon ble Supreme Court in case of T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay vs M/s Vokart Brothers, Bombay [ 1971 (8) TMI 3 - SUPREME COURT] Tribunal has not committed any illegality in allowing the Miscellaneous Application vide its order dated 19.10.2023 as there is apparent on the face of the record which can very well be rectified by the Tribunal while exercising the power under Section 254(2) of the Income Tax Act. The judgment cited by the learned counsel for the petitioner in case of Reliance Telecom Ltd. [ 2021 (12) TMI 211 - SUPREME COURT] the Hon ble Supreme Court has held that the power conferred under Section 254(2) of the Act is akin to the Order 47 Rule 1 of the C.P.C. while considering the application u/s 254(2) Tribunal is not required to revisit the earlier order and go into the details of merits. The powers u/s 254(2) of the Act are only to rectify/correct any mistake apparent from the record. 2024 (1) TMI 801 Reopening of assessment u/s 147 - deduction claimed by the petitioner for a sum towards advertising and marketing expenditure for Model Flat and New Sales Office Expenses Exclusive and Market Expenses Express - as per DR no corresponding income from the project for which the expenses were incurred and Respective projects may not have started during the relevant to the previous year for the assessment year - HELD THAT:- Since no revenue was recognized expenses incurred under the head marketing and sale expenses have been classified work in progress which should not have been reckoned as revenue expenditure. The second issue is regarding capitalised of a sum towards Loan Processing Charges pursuant to closure of the loan and switching over of the loan. This was not an issue that was raised before the aforesaid AO dated 27.11.2019 was passed. There was only disclosure in the Financial Statements that were filed by the petitioner before the Assessing Officer before the Assessment Order was passed on 27.11.2019. Notice issued u/s 148 is dated 30.03.2021. It is before the expiry of 4 years. If the income has escaped assessment, invocation of Section 148 of the Income Tax Act, 1961 cannot be interfered. There is no final determination of the tax liability in the impugned order dated 04.02.2022 seeking to reopen the assessment that was completed vide Assessment Order dated 27.11.2019. It is open for the petitioner to urge that the deductions claimed by the petitioner were perfectly in order and therefore question of adding the amounts back to the taxable income of the petitioner would not arise. Therefore, this writ petition is liable to be dismissed. Accordingly, this writ petition is dismissed. Liberty is however given to the petitioner to raise all objections before the Assessing Officer under Section 143(3) r/w 147 148 of the Income Tax Act, 1961 as it stood prior to 01.04.2021. 2024 (1) TMI 800 Unexplained income u/s 68 - sale proceeds of the share treated as bogus - ITAT deleted addition - HELD THAT:- Tribunal has arrived at a finding of fact that shares of Sunrise Asian Ltd. sold by the assessee cannot be doubted as bogus and exemption u/s 10(38) of the Act was rightly availed by the assessee. Tribunal has also concluded that the presumption drawn by the AO was not corroborated by any evidence to establish the alleged non-genuine transaction by the assessee. It was, therefore, rightly held by the Tribunal that the claim of the assessee for exemption of Long Term Capital Gains u/s 10(38) of the Act cannot be held to be bogus on the basis of presumption in absence of any evidence brought on record by the assessee with regard to shares of Sunrise Asian Ltd, which is not even found to be rigged by the SEBI also. Tribunal has also considered that the assessee held the shares for two and half years and after holding the shares for a long period, the same were sold by the assessee and therefore, reliance was placed on the decision of this Court in the case of Jagat Pravinbhai Sarabhai [ 2023 (1) TMI 44 - GUJARAT HIGH COURT] . - Decided against revenue. 2024 (1) TMI 799 Compounding of the offence committed for failure to pay the Tax Deducted at Source (TDS) - Second respondent invoked the provisions of Section 276B to prosecute the petitioner and its Directors - HELD THAT:- Under Section 279(2) of the IT Act, 1961, the Principal Chief Commissioner, Chief Commissioner, Principal Director General or the Director General, as the case may be, can compound any offence committed by an assessee, which is punishable under Chapter XXII of the IT Act, 1961. Applications can be filed either before or after the institution of the case. The well-settled principal of law is that such applications should be filed before conviction is handed over to an assessee and at the earliest. Applications filed by the petitioner and its Directors for compounding of the offences u/s 200, 204 read with Rule 30 of the Income Tax Rules, 1961 on 25.11.2022 were clearly beyond the time prescribed in the Circular dated 16.09.2022 issued u/s 119 of the IT Act, 1961. There is no limitation prescribed for compounding of the offences committed by an assessee u/s 279(2) of the IT Act, 1961. It is only in para 7(ii) to the above mentioned Circular, it has been stated that in a case where prosecution complaint has already been filed in a court of law, the application for compounding of offence cannot be filed later than 12 months from the end of the month of filing of the complaint before the Court. There is exception to the above rule in Para 9.1 of the same circular as in deserving case, the restrictions in Para 7(ii) can be relaxed with the approval of the Principal Chief Commissioner within beyond 24 months but before the expiry of 36 months from the date of the complaint before the Court. The limitation in the above circular cannot bind either the petitioner or this Court. The limitation in the Circular is not mandatory. It is to be construed as directory. There cannot be any restriction/limitation for filing application for compounding of offence contrary to Section 279(2) of the IT Act, 1961. There is also no useful purpose in prosecuting an assessee who may otherwise deserve to compound the offence. This is also not a case where the petitioner has been convicted of the offence in E.O.C.C.Nos.193 and 194 of 2018 and had filed the applications for compounding of the offence thereafter u/s 279(2) of the IT Act, 1961. The applications filed by the petitioner for the respective Assessment Years for compounding the offence are bereft of details. Therefore, even if the limitation prescribed in Circular dated 16.09.2022 bearing Ref.F.No.285/08/2014-IT(Inv.V)/196 of the Central Board of Direct Taxes (CBDT) issued u/s 119 of the IT Act, 1961 was overlooked, there was no material available with the first respondent to determine whether the petitioner otherwise deserved to compound the offences. As the respective application filed by the petitioner are bereft of the details required for compounding the offence, it is the view of the Court that the petitioner can be given an opportunity to explain the case properly, as in deserving and appropriate cases, applications to compound the offence cases can be allowed to be filed. There is no point in prosecuting an assessee whose conduct may otherwise warrant compounding of offence(s). As long as there is no conviction, such application can be entertained, considered and ordered. Since the applications filed by the petitioner and its Directors are bereft of any details, the petitioner is given a fresh chance to file an amended copy of applications for compounding of the offence explaining the reasons as to why the offences for which they have been prosecuted should not be compounded under Section 279(2) of the IT Act, 1961. Such amended applications shall be filed within a period of thirty days from the date of receipt of a copy of this order. Therefore, the impugned Common Order is quashed and the cases are remitted back to the first respondent to pass a fresh order on merits within a period of six months from the date of receipt of a copy of this order. 2024 (1) TMI 798 Disallowance of expenses made u/s 14A - AO made addition applying the computation mechanism provided in second and third limb of Rule 8D(2) of the Income Tax Rules - CIT(A) deleted the disallowance as there was no exempt income claimed by the assessee - HELD THAT:- This issue is no longer res integra in view of the decision of Era Infrastructure (India) Ltd [ 2022 (7) TMI 1093 - DELHI HIGH COURT ] wherein it was held that no disallowance u/s 14A of the Act could be made when there is no exempt income. Further it was held that the amendment made by Finance Act, 2022 to section 14A by inserting a non-obstante clause and Explanation will take effect from 1-4-2022 and cannot be presumed to have retrospective effect. Hence the entire arguments advanced by the ld. DR before us had already been addressed in this decision by the Hon ble Jurisdictional High Court. Hence we do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee in this regard. Accordingly, the ground raised by the revenue in this regard is dismissed. Disallowance of interest u/s 36(1)(iii) - AO observed that the assessee had given certain interest free advances on one hand and had been paying interest on its borrowings on the other hand and concluded that the borrowed funds were diverted for non-business purposes - CIT(A) deleted addition - HELD THAT:- We find that the CIT(A) on going through the complete details of loans and advances given by the assessee had come to the conscious conclusion that only a sum of Rs 10,59,07,288/- had been advanced for non-business purposes. Hence it could be reasonably inferred that impliedly the ld. CIT(A) had accepted to the fact that the remaining advances were indeed given by the assessee for the purpose of its business as a measure of commercial expediency only. We find that the revenue was not able to bring on record any contrary evidences to the same before us. Once it is proved that the advances were given as a measure of commercial expediency and given in the ordinary course of business, there is no question of disallowance of interest u/s 36(1)(iii) - Reliance in this regard is placed on the decision of Hon ble Supreme Court in the case of S A Builders Ltd correctly [ 2006 (12) TMI 82 - SUPREME COURT ] Decided against revenue. 2024 (1) TMI 797 Addition of cash deposit unexplained - assessee stated that the entire cash deposits were made out of cash balance available with him - HELD THAT:- Assessee had made deposit in HDFC Bank out of cash balance available on various dates. We find from the said imprest account maintained in the books of Yash Impex, there is no negative cash balance of single date. Hence, we hold that the entire cash deposit made by the assessee in the bank account is properly explained with proper source. We also find that the assessee had given date wise details of cash deposits together with the respective source before the lower authorities. These facts are not properly appreciated by the lower authorities while adjudicating the issue in dispute. We also find from the audited balance sheet of Yash Impex as on 31.03.2012, on the asset side, a sum was shown under the head current asset as Surendra Kumar Gupta imprest. All these facts collectively could prove indeed have sufficient cash balance which explained the cash deposit made in the bank account. Hence, there is absolutely no case for making any addition on account of cash deposits in the hands of the assessee. Hence, we direct the ld AO to delete the addition made in the sum on account of cash deposit. Decided in favour of assessee. 2024 (1) TMI 796 Capital gain - addition of differential amount u/s 50C on the ground that sale consideration is less than circle rate - assessee has objected to the same by stating that fair market value is less than circle rate - AO made the reference u/s 50C(2) to the Ld. DVO on 12/11/2018 who did not send the valuation report till the finalization of assessment order - AO was not convinced with the claim of the assessee that section 50C is not applicable in case of leased properties and made the addition HELD THAT:- As considered the order of the Hon ble Supreme Court in the case of R.K. Palshikar (HUF) s case [ 1988 (5) TMI 3 - SUPREME COURT ] and observe that was case primarily for determination as to if capital gains tax is payable by the assessee on amounts of premium received by the assessee in respect of lease granted by the assessee. In those circumstances, the 99 year lease was considered to be transfer of capital asset generating capital gains. However, with regard to applicability of section 50C, the capital asset is to be of the nature of land or building or both and, on that basis, the coordinate Bench has given relief to the assessee which has been followed by CIT(A) and we see no reason to deviate from and interfere in the order of the ld.CIT(A). Ground No.1 to 3 are not sustainable. Disallowance u/s 36(1)(iii) - borrowed funds have been advanced to subsidiary by the assessee - AO questioned the loans given to related parties and, finding no commercial expediency or business interest in giving such loans, made the addition which was deleted by the CIT(A) by accepting the plea of the assessee that the amounts were given to the subsidiary for the purpose of development of projects in which the assessee also had substantial interest - HELD THAT:- It came up during the argument that presently the project is going on and loan is standing. We find no merit in the argument of the ld. DR that unless some revenue is shown from the project, the assessee cannot justify the loan and the interest expenditure was rightly disallowed. We are of the considered view that when business expediency in regard to the expenditure is established how far it fetches revenue in the relevant assessment year is not of much consideration unless there is specific evidence of wasteful or excessive expenditure, which is not the case here. Thus, we find no substance in the grounds. Disallowance of travelling expenses - CIT(A) has restricted the disallowance on ad hoc basis to 25% - HELD THAT:- CIT(A) has self contradicted himself by recording satisfaction on basis of audited financial and also while considering the plea of assessee, that the AO has not made any specific requisition in respect of such travelling expenses, the ld.CIT(A) concluded that the assessee had also failed to establish any link of such expenses with the business of the assessee. If Ld. CIT(A) was satisfied with audited financial then ad hoc disallowance should not have been made. At the same time while considering the plea of assessee that AO had not called for specific information Ld. CIT(A) concluded that assessee had not provided any live link then Ld. CIT(A) should have exercised his powers to enquire the matter himself or given opportunity to assessee to provide the link of such expenses with the business of the assessee. In the light of the aforesaid, we are of the considered view that the ad hoc disallowance by the ld. CIT(A) was not justified and the issue is required to be restored to the file of the AO to give an opportunity to the assessee to provide necessary evidences of procuring business by the visits of its employees/directors and, thereupon, the ld. AO shall decide the issue afresh. Disallowance arises out of the examination of loans and advances related party - HELD THAT:- AR has pointed out that this advance was not given in the present year and that this was also a business advance. We are of the considered view that as without giving assessee an opportunity of hearing this variation in the order of AO is made by the Ld. CIT(A) the matter needs to be restored to the files of Ld. CIT(A) to consider the same again after giving opportunity of hearing to the assessee. The ground no. 1 in cross-objections of assessee are accordingly allowed for statistical purposes. Disallowance on account of excessive remuneration paid to Shakti Nath - HELD THAT:- We are of the considered view that ad hoc disallowance cannot be made u/s 40A(2)(a) without a finding of the A.O as to what as per him, is the fair market value. Even if it is assumed that the payment made is excessive and unreasonable, such arbitrary and baseless, adhoc disallowances cannot be upheld. The ld. AO was supposed to give a factual analysis of the evidences to establish that the expenditure is excessive or unreasonable having regard to the fair market value of the services of Shri Shakti Nath. On the one hand, the ld. AO observed that the assessee has not filed any evidences justifying the payment and, on the other hand, he allowed 70% of the remuneration. This itself is arbitrary and the CIT(A) has rightly deleted the same. Thus, this ground of the Revenue has no substance. 2024 (1) TMI 795 Nature of Income as surrendered during survey proceedings - surrendered amount as business income OR deemed income i.e income from undisclosed sources - CIT (Appeals) sustained the surrendered amount u/s 68 of credit entry and u/s 69 of excess stock - appellant contended that surrendered amount represents the business income as the appellant has no other source of income Whether deeming provisions of Section 68 can be invoked in respect of amount introduced in the capital account of the assessee and found credited during the course of survey in the books of accounts of the assessee? - HELD THAT:- The Survey team had asked a specific question to the assessee during the course of survey to explain the source of capital introduced during the financial year 2018-19 relevant to assessment year 2019-20 and in response, the assessee had stated that he was unable to explain the source of capital introduced during the during the financial year 201819 relevant to assessment year 2019-20, however, in order to buy piece of mind, he voluntarily surrendered the sum - Therefore, during the course of survey, the assessee has failed to offer any explanation regarding the source of such capital introduced in his capital account. Even during the course of assessment and appellate proceeding, we find that no explanation is forthcoming from the assessee. We therefore find that basis material available on record, the credit entry in the capital account of the assessee clearly demonstrate that the receipt of money by the assessee and in absence of any explanation from the assessee explaining the source of such capital introduced, the provisions of section 68 are clearly attracted and we therefore affirm the findings of the ld CIT(A) as far as bringing to tax the amount under section 68 of the Act. Whether the AO has invoked the deeming provisions of section 69 and brought to tax excess stock found during the course of survey which is sustained by the ld CIT(A)? - In the instant case there is no physical distinction between the accounted stock and unaccounted stock. No such physical distinction was found by the Revenue either. We therefore find that the difference in stock so found out by the authorities has no independent identity and is in terms of value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as business income. Thus the income surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69 of the Act and the same has to be assessed to tax under the head business income . In absence of deeming provisions, the question of application of section 115BBE doesn t arise and normal tax rate shall apply. The AO is thus directed to assess the income under the head Income from Business/profession and apply the normal rate of tax. 2024 (1) TMI 794 TP Adjustment - Upward adjustment of Arm s Length Price in respect of Management Services - AO observed that the assessee had entered into international transactions and had paid fees for availing management services from it s Associated Enterprise in China - CIT(A) decided the issue in favour of the assessee on the ground that the ITAT Pune in assessee s own case for A.Y. 2009-10 [ 2019 (6) TMI 1716 - ITAT PUNE] has decided this issue in favour of the assessee - HELD THAT:- In view of the arguments put before us, it would be useful to reproduce the relevant extracts of the ITAT ruling rendered in assessee s own case for A.Y. 2009-10 as held that the assessee entered into an agreement with Schaeffler Holding (China) Co., Ltd for receipt of Management support. Services , for which separate benchmarking was required to be done. Such services were actually rendered. These services are not in the nature of stewardship or shareholder activity. The payment to Schaeffler Holding (China) Co. Ltd. at the actual costs incurred in providing such services plus 5% mark-up is at ALP, which does not require any transfer pricing addition. We, therefore, set aside the impugned order by holding that the international transaction of payment of Fees for Management, services is at ALP, which does not require any transfer pricing addition. Upward adjustment of ALP made by the TPO in respect of benchmarking of manufacturing segments - As decided in own case or A.Y. 2009-10 in the interest of justice, the TPO is directed to re-compute the adjustment. 2024 (1) TMI 793 Validity of assessments made u/s 153A - prior approval of the draft assessment order u/s 153D - as argued search assessment was framed pursuant to the approval granted u/s 153D by JCIT, Central Range-4 Delhi in a mechanical manner and accordingly, the entire search assessments deserve to be quashed - As per assessee approval u/s 153D of the Act had been accorded by the ld. JCIT within a short span of time of either one day or on the same day on which draft orders were forwarded to him - Whether the approving authority has not applied his mind for giving approval u/s 153D? - HELD THAT:- We have gone through the approval granted by the ld. JCIT on the date mentioned in the table hereinabove u/s 153D of the Act. The said approval letter clearly states that a letter dated 29.12.2017 was filed by the Ld. AO before the ld. JCIT seeking approval of draft assessment order u/s 153D of the Act. JCIT has accorded approval for the said draft assessment orders on the very same day i.e., on 29.12.2017 for various assessment years in the case of various assessees. In any event, whether is it humanly possible for an approving authority like the ld. JCIT to grant judicious approval u/s 153D of the Act for 40 cases for various assessment years on a single day is the subject matter of dispute before us. Further, section 153D of the Act provides that approval has to be granted for each of the assessment year whereas, in the instant case, the ld. JCIT has granted a single approval for all assessment years put together. We find that the reliance placed by the Ld. AR on the decision of the Hon ble Orissa High Court in the case of M/s Serajuddin Co [ 2023 (3) TMI 785 - ORISSA HIGH COURT] is well founded. We find that similar issue has been addressed in the case of PCIT vs. Anju Bansal [ 2023 (7) TMI 1214 - DELHI HIGH COURT] wherein, under similar circumstances, the Hon ble Delhi High Court categorically held that statutory approval given by a quasi judicial authority without due application of mind as contemplated in section 153D of the Act would be fatal to the entire search assessment proceedings. Thus we have no hesitation in holding that the approval u/s 153D of the Act has been granted by the ld. JCIT in the instant case before us in a mechanical manner without due application of mind, thereby making the approval proceedings by a high ranking authority, an empty ritual. Decided in favour of assessee. 2024 (1) TMI 792 Assessment u/s 153C/153A - disallowing spill-over additional depreciation u/s 32(1)(iia) - incriminating material found/unearthed during the course of search or not? - HELD THAT:- We note that the aforesaid claim was considered and allowed by the AO in the original assessment order u/s 143(3)/144C(13). In such a scenario, the AO ought not to have reversed the decision of his predecessor, without the aid of any incriminating material found/unearthed during the course of search to suggest that the action of AO in the first round was vitiated/obtained by fraud/bogus claim. Assessment u/s 153C/153A when no case was pending for the related assessment year - un-abated assessment - HELD THAT:- That is not the case of AO/Ld. DR, therefore, having found that for AY. 2008-09, the original assessment was passed u/s 143(3)/144C(13) of the Act on 21.11.2012, it has become final and not pending before AO (on date of search/centralization of assessee s case), therefore, for the purpose of assessment u/s 153C/153A of the Act, AY. 2008-09 is an un-abated assessment and therefore the action of AO reversing/withdrawing the claim allowed in the original assessment on same set-off facts without any incriminating/seized materials qua assessee qua assessment year is not legally sustainable and therefore we uphold the action of Ld. CIT(A) on the legal issue and hold that the AO s action of making disallowance of spill over depreciation is legally unsustainable. See Abhisar Buildwell (P.) Ltd [ 2023 (4) TMI 1056 - SUPREME COURT] and Singhad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] Decided in favour of assessee. 2024 (1) TMI 791 Addition u/s 68 - cash deposits during demonetization period - trading in precious and semi precious Gem Stones - AO doubted the cash sales for the reason that the buyers were not identified and each sale was below Rs. 2,00,000/- - CIT(A) deleted the addition - HELD THAT:- As correctly decided by CIT(A) AO has objection to the deposits in cash being in installments and keeping the cash in hand in spite of the fact that CC limit was bearing interest. The assessee has explained the reason for keeping the amount as cash in hand because he wanted to use the said cash for purchase of some property and if the said amount would have been deposited in the CC account the same would not have been available to the assessee for purchase of any immovable property as the banker do not allow use of CC limit for anything other than the trading transactions. The contention of the appellant deserves to be accepted. Similarly depositing the cash in bank account in piecemeal over the period cannot lead to any adverse inference. It is known fact that post demonetization, long queues were witnessed and there were security issues during those days. Under these circumstances not taking entire cash, in one go, for deposit in bank was a prudent decision. Once availability of cash by way of sale of goods is established in the cash book depositing the same in bank over a period, under the circumstances, cannot be doubted. Thus inclined to agree with the contentions made by the assessee appellant. The addition is without any basis and is solely based on surmises and conjectures and therefore the same is deleted. As decided in Shri Mahendra Kumar Agarwal [ 2022 (11) TMI 1333 - ITAT JAIPUR] we find the explanation of the assessee is genuine and the sales cannot be doubted merely on surmises and conjectures on the ground of non-furnishing of address and PAN of the customer. The AO did not make any enquiry on the material submitted by the appellant. She merely proceeded on statistical analysis to make the addition on account of cash deposits. We agree with the findings of ld. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. In fact the AO neither found any concrete and conclusive evidence of back dating of the entries of sales, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account. The AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act. Therefore, the contention of the revenue on the facts and circumstances of the case is not accepted and we see no reason to interfere in the order of the ld. CIT(A). Decided in favour of assessee. Correct head of income - interest income as income from other sources or business income - HELD THAT:- CIT (A) has decided the issue assessee has also paid interest on CC limit and interest to different private parties. Since the amount of CC limit as well as private borrowings are used for advancing the money on which interest income is earned, the assessee incorporated the transactions in his profit and loss account maintained for his business. Borrowing money on interest and advancing the same for earning interest, in a systematic manner over number of transactions makes the activity as business. Assessee has taken CC limit for business purpose. It has also advanced loans and has received interest on such loan. When the loan has been taken and advanced for business purpose the action of the assessee in reporting the said transactions under the head business is fully justified. Therefore, AO treating the said income from other sources and therefrom allowing interest expenditure only is not legally correct. Accordingly, the change of head and restricting the expenditure by learned AO is uncalled for. Relief is allowed to the assessee by deleting the addition - Decided against revenue. 2024 (1) TMI 790 Validity of exemption u/s 10(23D) - offshore fund scheme maintained by the assessee - Exemption denied for the reason that there was no Certificate of Registration from SEBI as per the requirement of the Act - HELD THAT:- We observe from the record submitted that the erstwhile Unit Trust of India which is an investment body under the Unit Trust of India Act of 1963 and it was having the authority to launch various unit schemes under section 21 of the Unit Trust of India Act 1963. Under this authority it was also permitted to launch for investment by persons resident outside India, with that authority UTI India Fund Unit Scheme 1986 (assessee) was launched which is one of the approved scheme under the Unit Trust of India Act, 1963 especially for investments by persons resident outside India and this scheme was launched to augment the offshore funds. Therefore, it is required to register for a separate PAN to facilitate foreign remittance. It is important to note that these offshore funds were approved by Central Government as well as Reserve Bank of India and the income earned therefrom was always exempt and so pursuant to the provisions of section 32 Unit Trust of India Act, 1963. SEBI was established as a statutory body in the year 1992 which came into force on 30th January, 1992. After establishment of SEBI, all the securities came under the regulations formulated by SEBI. Subsequently, UTI Act 1963 was repealed by the Government of India by The Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002. We observe that after Repeal Act, specified company was formed by State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India subscribing in equal proportion to the share capital of the specified company namely UTI Trustee Company Private Limited, a company under The Companies Act, 1956. Pursuant to the above restructuring of the UTI, all the Schemes of the UTI were transferred to above mentioned two successors with effect from 01st February, 2003. The Schemes listed in the Schedule I of the Repeal Act were transferred to and vested in the SUUTI and the Schemes listed in Schedule II of the Repeal Act were transferred to and vested in the UTI Mutual Fund. Assessee fund is one of the schemes listed in Schedule II (Sr. No. 37) of the Repeal Act and vested with UTI Mutual Fund. With the above restructuring of the Act and since assessee was established to cater to the offshore funds it retained its identity separately from the other schemes and maintained separate books of accounts and continued with the same PAN. The assessee is registered under the various schemes listed in Schedule II of the UTI Mutual Fund which is listed at Sl.No. 37 shows that assessee s scheme is one of the scheme approved by the SEBI and it need not have to have a separate registration by the SEBI. It is enough that the SEBI approves all the schemes equally under the Schedule II of the list which is vested with UTI Mutual Fund. Therefore, the observation of the Assessing Officer in order to grant exemption under section 10(23D) has to have a separate registration is uncalled for and the various documents submitted by the assessee proves that the offshore fund scheme maintained by the assessee is an approved unit by the SEBI. Therefore, we do not see any reason to interfere with the findings of the Ld. CIT(A). Accordingly, appeal filed by the revenue is dismissed. 2024 (1) TMI 789 Addition u/s 68 - bogus sale proceeds of shares - shares procured from the mother post demise by Will - HELD THAT:- Assessee s mother who bought the initial shares through preferential allotment and at the demise of his mother, he got those shares by will . Assessee has sold those shares through his regular broker in the BSE. We observe that all the shares were purchased and sold through the proper banking channel. AO has observed that the shares sold by the assessee is one of the penny stock of Rander Corporation Ltd, he reopened the assessment and summoned the assessee to explain why the above shares should not be treated as penny stock and the sales proceeds should not be treated as undisclosed income u/s 68 of the Act. AO informed the assessee that the entry operators, brokers and exit operators of the above said shares have given statements wherein they agreed that this is penny stock and they were transacting in these shares to accommodate the beneficiaries to claim deduction u/s 10(38) of the Act. Since, the assessee has only dealt with the above transaction after receiving the shares thru will from his mother, he has nothing to offer any explanation. AO has proceeded to make the addition based on the various statements of the operators. At the same time, he has not brought on record how the assessee is involved in the above transaction except trading in the stock exchange. He has not established any relationship with any of the operators. As relying on Shri Abhishek Doshi [ 2023 (6) TMI 87 - ITAT MUMBAI] only difference is the script is different, however, the assessee has no saying on the script traded by him and there is no relationship established with the accommodation entry providers anywhere on the record. Further the assessee himself a regular investor and not linked to any other suspected transactions. Merely because he has dealt with one of the suspected scripts, we cannot take adverse view without actually bring any material on record. Decided in favour of assessee. 2024 (1) TMI 788 PE in India - accrual of income in India - offshore supply of sub-assemblies - HELD THAT:- in the assessee s own case in [ 2023 (8) TMI 957 - ITAT DELHI] AY 2010-11 wherein ITAT had held that Bombardier Transportation India Pvt. Ltd. (BTIL) is not PE of the assessee in India and accordingly, since there is no PE of the assessee in India, the offshore supply of sub-assemblies to BTIL/income from intermediary services cannot be taxed in India. Decided in favour of assessee. 2024 (1) TMI 787 Denial of foreign tax credit (FTC) - rule is directory or mandatory? - assessee has filed the Form No. 67 beyond the due date and after processing of return of income U/sec 143(1) - Assessee has filed Form No 67 online on the portal of the Income Tax Department on 6.07.2022 in order to comply with Rule 128 of Income Tax Rules - HELD THAT:- We find under Section 90 of the income tax Act allows double taxation relief in respect of agreements with foreign countries or specified territories and also Section 91 o the I T Act deals with the taxability of income where the countries which don t have agreements. Further there is no amendment in the Section 90 of the Act with regard to claim of FTC and in such cases Rule procedures are directory and not mandatory. As decided in the case of Ms. Brindra Rama Krishna, [ 2022 (2) TMI 752 - ITAT BANGALORE] Hon ble Tribunal has observed that the filling of Form No.67 is not mandatory but directory There is no amendment on these aspects in the Section 90 of the Act and the Rules cannot override the Act and therefore the filing of Form.No 67 is not mandatory but it is directory. Accordingly, we considering the facts, circumstances and ratio of the judicial decisions restore the disputed issue for limited purpose to the file of the assessing officer to grant Foreign Tax Credit after verification and in accordance with the law. Further the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information and allow the grounds of appeal of the assessee for statistical purposes. 2024 (1) TMI 766 Deduction u/s. 80P(1) r/w s. 80P(2)(a)(i) - claim inadmissible by the Revenue inasmuch as it included interest and dividend income on investments with co-operative banks; commercial banks; and financial institutions, as well as commission income (GDCS Thalayal commission), besides dividend from unlisted equities - HELD THAT:- Any member of the public can, therefore, become a member on paying a nominal sum, which in fact is insisted upon as a practice, making co-operative societies, as the assessee, essentially public institutions, the restriction on area of operation being also not applicable to those formed prior to the commencement of the Amendment Act of 1999 (s. 2(oaa)). Assessee is, thus, for all intents and purposes, a co-operative bank, i.e., a co-operative society in the business of banking, even as explained in several decisions, including in Mohammed Usman v. Registrar of Co-operative Societies [ 2002 (11) TMI 686 - HIGH COURT OF KERALA] We are conscious of it being not licenced with RBI, as required under BRA, as aspect considered in Mohammed Usman (supra). Further, it may, by virtue of its bye-laws, consistent with the Kerala Act, been titled to be so licenced, as was found by the Tribunal in Sivapuram SCB Ltd. [ 2024 (1) TMI 765 - ITAT COCHIN] wherein the matter stands discussed in detail, further explaining that being unlicenced would imply it operating outside RBI s regulatory control, but not alter the nature of income arising. And which to our mind is only relevant insofar as the activity of business of banking, an eligible activity u/s. 80P(2)(a)(i) of the Act, is concerned. Continuing further, the Hon ble Apex Court has per a series of decisions cited supra, clarified that interest earned on investment of reserve funds by a co-operative bank would be a part of the income of the banking business. True, the decisions are with reference to cooperative banks, and the investment in the instant case is not out of statutory reserves, but the same is only for the reason that the provisions of BRA have not been invoked. They shall apply in principle, i.e., where an entity, otherwise eligible, is undertaking banking business. The investment of funds would in any case only be in terms of it s bye-laws read with the Kerala Act; it s accounts being subject to statutory audit there-under. The commission income, being in respect of credit to it s members, again falls to be considered as part of its main activity, i.e., business of banking, and, in any case, from provision of credit to it s members. The impugned income, including from chitty business, would thus fall to be covered u/s. 80P(2)(a)(i), which regards the activity of the business of banking and of provision of credit to it s members by a cooperative society, at par. Without prejudice to the foregoing, where and to the extent any interest or dividend income does not fall to be regarded as of a banking business, the same, to the extent it arises from investments with co-operative banks, would stand to be deducted u/s. 80P(2)(d) of the Act, as clarified in Perroorkada SCB Ltd. [ 2021 (12) TMI 1084 - KERALA HIGH COURT] which is again premised on the same understanding, i.e., of co-operative banks being co-operative societies in the business of banking. Surely, cooperative banks, in contradistinction to cooperative societies, are public institutions, meant for public at large, and, thus, cannot be regarded as cooperative societies meant for it s members, which is explained as the rationale of the provision, as indeed the exclusion of cooperative banks w.e.f. 01/4/2007 from the purview of s. 80P, by the Apex Court in The Citizen Co-operative Society Ltd. [ 2017 (8) TMI 536 - SUPREME COURT] So, however, as explained in Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] taxing statutes are to be strictly read, construing the benevolent provisions liberally. Section 80P(2)(a)(i) itself regards the business of banking as an eligible activity for the purpose of deduction thereunder, w/s. 80P(4) being in the nature of proviso. It is perhaps these aspects, i.e., reading it in consistence therewith; that prevailed with the Hon ble Court in Perroorkada SCB Ltd. [ 2021 (12) TMI 1084 - KERALA HIGH COURT] in construing the mandate of s. 80P(2)(d) thus, even as the prescription of s. 80P(4) is applicable for the entire provision. The said decision is even otherwise binding on this Tribunal. Assessee appeal allowed. Dividend income on unlisted securities , the same is not shown by the assessee to be forming an integral part of the business of banking, only whereupon would it stand to be covered u/s. 80P(2)(a)(i), as explained in Totgar s Co operative Sale Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT] , confining the benefit there-under to operational income, and not on investment of funds deemed surplus for the time being. The said income, or any other income falling under the same category, would though stand to be covered u/s. 80P(2)(c) of the Act. Assessee, though undertaking banking business, is not a co-operative bank, i.e., as defined u/s. 5(cci) of the BRA, which stands excluded for the benefit of s. 80P, u/s. 80P(4) of the Act. Accordingly, income in respect of which deduction u/s. 80P(2)(a)(i) stands claimed and disallowed, which does not fall to be considered as part of the income of the banking business, including provision of credit to it s members, as afore-discussed; or on investment with co-operative banks, to the extent it exceeds the limit u/s. 80P(2)(c) of the Act, would only be liable to be disallowed. We direct accordingly. Customs 2024 (1) TMI 786 Smuggling - attempt to export the gold jewellary through illicit route of Bangladesh border - penalties - HELD THAT:- The gold jewellary were recovered from the possession of Shri Chandi Biswas by the BSF officers in the Barantala Bazar and the same were handed over to the Customs officers for further necessary action under Customs Act - It is observe that the investigation has not brought in any evidence on record to substantiate the allegation that there was an attempted export of the said gold jewellary. The appellant has submitted documentary evidence in the form of three invoices claiming ownership of the gold jewellery seized. There is no investigation conducted by the department to ascertain the genuineness of the invoices. Shri Chandi Biswas in his statement dated 30.10.2018 stated that he was permanent staff of Shri Goutam Halder and the gold was handed over to him by the said Shri Goutam Halder for handing it over to M/s. Majumdar Jewellers. The investigation has not brought in any evidence to disprove this claim. Accordingly, the allegation of attempted export of the gold jewellery in the impugned order is not substantiated. In view of the above, the confiscation of the gold in the impugned order is not sustainable. Penalties - HELD THAT:- Shri Chandi Biswas was holding the gold ornaments having purity of 91.6%. It was handed over to him by Shri Goutam Halder for giving it to Shri Biplab Majumdar. The impugned order has not brought on record the offence committed by each one of the appellants warranting penalties on them. As there is no evidence available on record for the attempted export as alleged in the impugned order, the penalties imposed against all the three appellants are not sustainable. Appeal allowed. 2024 (1) TMI 785 EPCG Scheme - Failure to submit the evidence of fulfilment of Export Obligations as per notification - failure to submit Export Obligation Discharge Certificate (EODC) - HELD THAT:- The delay in issuance of EODC has been considered in various decisions and the same has been held to be in favour of the importer, where the delay is on the part of the DGFT - In the present case, it is found that the appellant had been requesting the DGFT to grant him extension of two years to fulfil the 100% Export Obligations. Under the notification, the Authorities are empowered to grant extension of time, as can be inferred from the provisions of Clause 4 of the Notification. The application made by the appellant seeking extension of time by two years, was maintainable and should have been granted by the Licensing Authority. As per the documents produced by the appellant, it is found that he had fulfilled the balance Export Obligations vide Shipping Bill No.8467213 dated 19.03.2015 and though it appears that there have been several communications in that regard between the appellant and the DGFT, EODC was finally issued on 16.02.2016. No doubt, that the EODC has been issued after much delay, however, the same was issued prior to the passing of the order-in-original passed by the Adjudicating Authority on 26.02.2016 and much before the impugned order on 19.11.2019. The fact that the EODC has been issued showing complete fulfilment of 100% Export Obligation, the Appellate Authority was required to consider the same and in the light of the various decisions of the High Court as well as of this Tribunal, ought to have granted the necessary relief. Since the appellant has complied with the conditions of fulfilling 100% export obligation and which stands approved as per the EODC issued by DGFT, no fruitful purpose will be served in denying the benefit to the appellant. Once EODC is issued by DGFT, it cannot be said that the appellant had violated any of the conditions of the Notification. The matter is remanded to the Adjudicating Authority for a fresh decision after taking into consideration the EODC issued by the Additional Director, DGFT on 16.02.2016 - Appeal allowed by way of remand. 2024 (1) TMI 784 Confiscation of imported goods - levy of Redemption Fine and penalty - misclassification of goods - old un-mutilated mixed hosiery - restricted item or not - HELD THAT:- It is found that an old un-mutilated mixed hosiery clothing classifiable under Tariff item 63090000 is a restricted item as per Indian Trade Classification (Harmonised System) of Import Items, 2017 (ITC) (HS), 2017 notified by the Central Government under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (as amended from time to time) read with paragraph 2.01 of the Foreign Trade Policy, 2015 2020. As per para 2.08 of the Foreign Trade Policy, restricted items are permitted under an import License/Authorisation/Permission granted by the Director General of Foreign Trade. The appellant has not submitted any such license and therefore the total duty evaded is Rs.3,05,641/-. The present case is squarely covered by the decision in the case of B.K. Spinning Mills (P) Ltd. versus Collector Customs, Cochin, [ 1999 (8) TMI 359 - CEGAT, NEW DELHI] , where the Bills of Entry were assessed to duty by classifying them under Customs Heading 6310.90 as Completely Pre-mutilated Synthetic/Woollen rags which were allowed to be imported without license as per the provisions of the export import policy, however, on examination they were found to contain serviceable, non-mutilated used clothes and also the declared value was not found to be correct transaction value. The Tribunal relying on the decision of the Apex Court in Garg Mills (P)Ltd versus Additional Collector [ 1998 (9) TMI 86 - SUPREME COURT] held that the goods are used and worn clothing, classified under Customs Heading 6309 and confiscation of goods under Section 111(m) of the Act is sustainable. The goods imported were restricted goods and could have been imported on the basis of the Licence issued by the DGFT and being misdeclared in respect of description, weight and value were liable for confiscation and penalty under Section 112(a) of the Act for his act of omissions and commissions. The redemption fine imposed on the appellant of Rs.4,50,000/- is commensurate with the assessable value of the goods of Rs.22, 90, 920/ and hence requires no interference. Appeal dismissed. 2024 (1) TMI 783 Seeking release of the goods or allow mutilation of the goods so as to use them as scrap - request denied on the ground that request for mutilation was made only after the offence was detected - rejection of declared value - confiscation - redemption fine - penalty - HELD THAT:- In the case of PRINCE FORTIFIED STEELS PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS, TUTICORIN AND VICE-VERSA [ 2018 (5) TMI 270 - CESTAT CHENNAI ], the Tribunal has held that It is confirmed that appellant is not a trader of imported goods in the guise of scrap for trading purpose. Therefore, bona fide of the appellant is justified being actual user. We also find that pre-shipment inspection certificate clearly indicates that HMSS supplied was unshredded . In view of the decisions relied upon by the appellant, if the goods are yet to be cleared, we direct that the goods may be released to the appellants after effective mutilation under the Customs supervision (as per the request of the appellant), thereby rendering them as scrap. Scrap so generated after mutilation will be cleared on payment of appropriate Customs duty as per the values declared by the appellant in the documents presented before the authorities. The impugned order is set aside along with confiscation and imposition of penalty and redemption fine - Appeal allowed. 2024 (1) TMI 782 Continued revocation of the Customs Broker (CB) license - Conspiracy - Smuggling - red sanders - illegal export of prohibited goods - failure on the part of appellants to fulfill the obligations cast under Regulations 10(a), 10(e), 10(j), 10(k) and 10(n) of CBLR, 2018 - HELD THAT:- There is definitely delay in adjudication and that for the export transactions occurred in November, 2015, the order of revocation of appellant s customs broker license has been passed on 28.03.2019. Though Revenue has not explained why there was such a long delay of 3 years and months in taking action against appellants, when the information about fraudulent exports was received on 16.05.2016. Though the first order-in-original revoking immediate suspension, was passed on 10.06.2016, action against the appellants under CHALR/CBLR vide Show Cause Notice was issued on 14.05.2018. The impugned order has been passed after almost nine months from the date of issue of SCN. In this regard we find that the appellants had filed an appeal before the Tribunal against the order dated 10.06.2016, which was disposed by the Final Order of the Tribunal dated 11.01.2017. Even though no detailed reasons were recorded in detail justifying the delay in passing the impugned order by the learned Principal Commissioner, there were reasonable grounds for alleged delay. The appellants did not fulfill their obligation as a Customs Broker for exercising due diligence in terms of the various obligations given to them. The facts brought out in the DRI investigation and the findings in the impugned order, clearly demonstrate that when the documents relating to the export goods were fabricated and declared goods of Fabric glue/carpets was substituted with prohibited Red Sanders , a clear attempt to smuggle the goods in an illegal manner in violation of the Customs Act, 1962 and Foreign Trade Policy have been orchestrated by the appellants CB. Thus, we find that revocation of CB license, imposition of penalty and forfeiture of security deposit by the learned Principal Commissioner on account of the appellants failure in not fulfilling of Regulations (a), (e), (j), (k) and (n) of Regulation 10 ibid CBLR, 2018 is appropriate and justifiable. There are no infirmity in the impugned order passed by the learned Principal Commissioner of Customs (General), Mumbai in revoking the license of the appellants and for forfeiture of security deposit, inasmuch as the violations had arisen on account of alleged nefarious activities of G card pass holder who is a director of the appellants CB. There are no reason for interfering with the impugned order - appeal dismissed. 2024 (1) TMI 781 Import of cocoa powder under free trade agreement - origin of goods - whole case of the department is based on presumptions and assumptions that all the above might have transpired in their cases also vis-a-vis the cases which were investigated by the DRI - HELD THAT:- In the present case, the lower authorities have confirmed order simply on the basis of a communication of DRI which pertained to different parties about which verification was done. In the present instance, there is no evidence of department having conducted any verification of the certificate of origin as is the requirement under Annexure-III the Customs Tariff (determination of Origin of Goods under the Preferential Trade Agreement between the Governments of the Republic of India and Malaysia) Rules, 2011. It is found that to displace the certificate of origin issued by the Malaysian authority, which is in the nature of documentary evidence, the verification process by the Customs Authorities of India reference to issuing authorities to do a retroactive check is required. In the present instance no such request for verification report in respect of the appellant has been brought on record - it is found that this fails to comply with the requirement of the Annexure-III (ibid) of the relevant free trade agreement. Appeal is allowed. Insolvency & Bankruptcy 2024 (1) TMI 780 Conflict Between IBC and Companies Act: The contention was whether the IBC 2016 and its regulations should yield to Section 230 of the Companies Act 2013 regarding a scheme for compromise or arrangement. The Appellate Tribunal observed that these laws should be interpreted harmoniously to further the object of the IBC. Role and Actions of the Liquidator: The liquidator s actions, particularly in the valuation of assets and the handling of the liquidation process, were under scrutiny. The Appellate Tribunal noted allegations of flawed valuation, especially regarding the property in Rayagada, and the failure to include this property in the Asset Memorandum. Valuation of the Rayagada Property: A significant issue was the zero valuation ascribed to the Rayagada property by the liquidator, which was initially valued at a much higher rate. The Appellate Tribunal highlighted the importance of this property in the liquidation process and the need for its proper valuation. Section 230 Scheme Proponent Rights: The Appellate Tribunal discussed the rights of a scheme proponent under Section 230 of the Companies Act. It was noted that a bidder in the liquidation process does not have a vested right to have their resolution plan considered or approved. Stakeholders Consultation Committee s Role: The role and decisions of the Stakeholders Consultation Committee were also a point of contention. The Appellate Tribunal noted that the approval of the secured creditors and consultation with stakeholders were essential in the process. Applicability of IBC Regulations: The Appellate Tribunal emphasized the need to follow IBC regulations in the liquidation process, including the proper valuation of assets as per Regulation 35 and the inclusion of disputed assets as per Section 36(3)(e). Requirement for Fresh Valuation and Inclusion of Rayagada Property: The Appellate Tribunal concluded that a fresh valuation of the assets, including the Rayagada property, was necessary. It was deemed crucial for maximizing the value of the assets and ensuring fairness in the liquidation process. Maintainability of the Appeal: Finally, The Appellate Tribunal held that the appeal was not maintainable because the appellant, being a bidder, was not a stakeholder in the corporate debtor and thus not an aggrieved party as per the IBC. On going through the impugned order passed by the Adjudicating Authority/NCLT, Division Bench II, Chennai, in directing a fresh valuation of the assets of Corporate Debtor, including the Rayagada Property , as per Regulation 35(2) of the IBBI (Liquidation Process) Regulations, 2016 and consequently, to update the Asset Memorandum and thereafter, to invite the Schemes , from the Prospective Scheme Proponents , as per Section 230 of the Companies Act, 2013, are free from any legal flaws. Appeal dismissed. Service Tax 2024 (1) TMI 779 Non-payment of service tax - goods transport agency service - service of overseas commission agent used for exportation of goods - benefit of exemption N/N. 18/2009-ST dated 07.07.2009 - HELD THAT:- The Learned Commissioner (Appeals) has rejected the appeal of the appellant on the ground that they have not submitted the required documents, however, on the contrary it is clearly on record that all the documents have been submitted which are sufficient to establish the correlation between the export of goods and input services used for such export, therefore, the appellant are prima facie entitled for the exemption N/N. 18/2009-ST. However, since the documents have not been verified by the Commissioner (Appeals), the matter needs to be reconsidered by the Learned Commissioner (Appeals) in the light of the documents which are already on record. If at all any other document is required, the appellant has liberty to submit before the Commissioner (Appeals). Appeal is allowed by way of remand to the Commissioner (Appeals) for passing a fresh order. 2024 (1) TMI 778 CENVAT Credit - input services - input services were received by them prior to their obtaining registration and commencing of output service - Rule 2(l) of the Cenvat Credit Rules, 2004 - period November 2012 - HELD THAT:- The principle is that any service taken for providing output service is input service if such service is used by a provider of output service. The statutory provisions governing the Service Tax nowhere provides the time limit for utilisation of the input services nor does it require any one-to-one co-relation that input service availed in any particular month should be utilised when the assessee provides output service. The Revenue is required to take a practical approach that the process for providing output service takes time and it is essential on the part of the appellant to make proper arrangements so that output service can be provided without interruption. The period prior to providing the output services and billing its members for output services, the appellant incurred expenditure from April, 2012 to October, 2012 which were essential and used for providing output services. The Authorities below have held that the appellant is ineligible to avail Cenvat Credit of input service on the services which were used prior to registration. The issue is no longer res-integra as the same stands concluded in the earlier decision in JINDAL STEEL POWER LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR [ 2008 (4) TMI 176 - CESTAT, NEW DELHI] where it was held that Thus the utilisation of credit was permissible in view of the extended definition of output service and in view of the fact they also started rendering output services. The appellant is entitle to claim the Cenvat Credit and therefore, the issue of any interest and penalty does not arise - the Appellate Authority has passed the impugned order without application of mind as the impugned order is verbatim of the Order-in-Original and needs to be set aside on this ground itself - the impugned order is set aside and the appeal stands allowed. 2024 (1) TMI 777 Extended period of limitation - irregular availment of CENVAT Credit - suppression of facts or not - whether the extended period of limitation under the proviso to section 73(1) of the Finance Act could have been invoked in the facts and circumstances of the case? - HELD THAT:- The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax, the provisions of the said section shall have effect as if, for the word one year , the word five years has been substituted - the appellant had not suppressed any information from the department in the ST-3, returns nor is there any allegation in the show cause notice or a finding in the impugned order that a particular fact had not been disclosed since all that has been stated is that the appellant was not entitled to take CENVAT credit but as it had taken, it suppressed material facts from the department. It has been settled by the Supreme Court and the Delhi High Court that mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of service tax. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. The inevitable conclusion that follows from the aforesaid discussion is that the appellant had not suppressed facts, much less suppressed facts with an intention to evade payment of service tax. The extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act, therefore, could not have been invoked in the facts and circumstances of the present case. The impugned order dated 12.12.2014 passed by the Commissioner disallowing CENVAT credit taken by the appellant and ordering for its reversal with penalty and interest cannot, therefore, be sustained as the entire amount covered by the show cause notice and the order is under the extended period of limitation - it will not be necessary to examine whether the appellant had correctly availed CENVAT credit. The impugned order dated 12.12.2014 passed by the Commissioner is, therefore, set aside - appeal is allowed. 2024 (1) TMI 776 CENVAT Credit - Input Service - availing the abatement under N/N. 1/2006 dated 01.03.2006 was in operation which did not allow abatement if cenvat credit including cenvat credit on input services has been availed - HELD THAT:- The appellant has admitted that they have wrongly availed cenvat credit of Rs. 64,698/- because of the mistake committed by their newly appointed staff who was not aware of the Notification No. 1/2006 dated 01.03.2006. Subsequently, the appellant reversed the cenvat credit of Rs. 64,698/- alongwith interest and informed the department. Once the appellant has reversed the wrongly availed cenvat credit alongwith interest it would amount to as if no credit has been availed as held by the Hon ble Supreme Court in the case of Chandrapur Magnet Wires (P) Ltd. [ 1995 (12) TMI 72 - SUPREME COURT ] and subsequently followed by various Tribunals and the High Courts. The impugned order is not sustainable in law - Appeal allowed. 2024 (1) TMI 775 Levy of Service Tax - Business Auxiliary Service - amount received from the Foreign Companies against the services such as appraising Indian Companies about the product of foreign companies on the basis of which the Indian Companies were directly placing their purchase orders to the foreign companies - HELD THAT:- It is found that the Adjudicating Authority has held that the service provided by the appellant is export of service relying on the decision in the case of M/S. BLUE STAR LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE [ 2008 (3) TMI 32 - CESTAT BANGALORE] and the same was upheld by the Hon ble Bombay High Court reported at CST, Mumbai - VI vs. Blue Star Ltd [ 2018 (9) TMI 1421 - BOMBAY HIGH COURT ]. On perusal of the fact of the Blue Star Ltd it is observed that the fact in that case and fact of the present case are absolutely identical. Therefore, the Adjudicating Authority has rightly relied upon this decision. The respondent has provided the services to the foreign companies in relation to sales promotion and marketing of the goods of foreign company, therefore the service was received by not an Indian supplier of goods but the foreign companies who exported goods to India. In this case the Indian customers who purchased the goods from foreign companies are not the recipient of services of business auxiliary provided by the respondent. Therefore, it is incorrect to contend that service was consumed within India. In fact the service is consumed in aboard in the hands of the foreign companies who engaged the respondent for providing the services of sales promotion and marketing, therefore, the contention of the Revenue in their appeal is apparently incorrect as per the facts of the present case. The impugned order is upheld - appeal filed by the revenue is dismissed. 2024 (1) TMI 774 Levy of Service Tax - Management, Maintenance or Repair service - appellant have under taken the production activity in their factory for and on behalf of the M/s. Gharda Chemicals Ltd. by using their own plant - HELD THAT:- In the appellant s own case for the previous period by two cited cases in Gujarat Insecticides Limited Versus Commissioner of Central Excise ST, Surat-II [ 2023 (3) TMI 1173 - CESTAT AHMEDABAD ] and Gujarat Insecticides Ltd Versus C.C.E. S.T. -Surat-II [ 2023 (2) TMI 781 - CESTAT AHMEDABAD ], on the identical issue this Tribunal has decided that the under the same set of arrangement between the appellant and M/s. Gharda Chemicals Ltd. the demand under management, maintenance or repair service shall not be sustainable. The issue is squarely covered by the above two orders of this Tribunal, whereby, it was held that under the arrangement between the appellant and M/s. Gharda Chemicals Ltd. there is no provision of service of management, maintenance or repair service, whereas, the activity of the appellant is of production of excisable goods. Therefore, following the above decisions of this Tribunal in the present matters also the demand shall not sustain. The impugned orders are set aside - appeals are allowed. Central Excise 2024 (1) TMI 773 CENVAT Credit - issuance of invoices without supply of goods - Penalty - HELD THAT:- The same issue has come up before this Tribunal in the case of M/S UMA IRON STEEL INDUSTRIES LIMITED, M/S CALCUTTA METAL CORPORATION, M/S JEKAY INTERNATIONAL TRACK PRIVATE LIMITED, M/S DAYAL COMMERCIAL COMPANY. M/S CARNATION INDUSTRIES LIMITED, M/S CARNATION INDUSTRIES LIMITED, M/S INDIAN ALLOYS FABRICATORS, M/S HOBB INTERNATIONAL PRIVATE LIMITED, M/S KISHAN BAJAJ @ KRISHAN CHANDRA BAJAJ, M/S MAA SHAKTI IRON WORKS, M/S RAJPUT ROLLING MILLS, M/S J.P. STEEL UDYOG VERSUS COMMISSIONER OF CGST EXCISE, HOWRAH [ 2023 (10) TMI 1108 - CESTAT KOLKATA] , has held that the cenvat credit received by the said companies from the same Ganesh Forging Comapany as eligible. In the present case also the Appellant submitted evidence to the effect that they have paid transportation charges to the carrier who carried the said inputs to their factory and also paid service tax on the freight. Accordingly, by following the ratio of this Tribunal, the Cenvat credit availed by the Appellant based on the invoices issued by M/s Ganesh Forging Company cannot be denied. Thus, the impugned order denying the credit is not sustainable. Penalty - HELD THAT:- Since the credit is held to be eligible, the penalty imposed on the Appellants Shri. Shorab Ali, Managing Director and Shri.Nasim Khan, Authorized signatory are also not sustainable. The impugned order set aside - appeal allowed. 2024 (1) TMI 772 Clandestine Removal - non-production of corroborative evidences to prove that the appellant has manufactured such huge quantity of final product - reliability and admissibility of computer print out as an evidence in terms of Section 36B of Central Excise Act - HELD THAT:- Section 36B(2) provides the conditions in respect of computer printouts. In the present matter the computer was not shown to have been used regularly to store or process information for the purposes of any activities regularly carried on by the appellants. It was also not shown that information of the kind contained in the computer printout was regularly supplied by the appellant to the computer in the ordinary course of activities. Again, it was not shown that, during the relevant period, the computer was operating in the above manner properly. The above provision also casts a burden on that party, who wants to rely on the computer printout, to show that the information contained in the printout had been supplied to the computer in the ordinary course of business of the company. We find that none of these conditions was satisfied by the Revenue in this case. In the present case, the data was not stored in the computer but the officers had taken the printout from the Hard Disk drive by connecting to the computer. The officers had not obtained any certificate as required under Section 36B of the said Act. It is also noted that none of the conditions under Section 36B(2) of the Act, 1944 was observed. The provisions of Section 65B of Indian Evidence Act and Section 36B of Central Excise Act, 1944 of the Act are pari-materia. It is evident from the panchanama, and the appeals records that the investigating officer had failed to follow the safeguard as mandated under Section 36B of the Act. In the present matter there is no supportive evidence found by the revenue with regard to receipt of inputs, place from where inputs are purchased, nor there is shortage of inputs as per raw material accounts, electricity consumption have not been challenged to show that there was excess consumption. Further production capacity of the appellant not challenged by the revenue. It became apparent that the department has not led any corroborative evidence to support the allegations of clandestine clearance. There is no evidence regarding procurement of raw material, transportation of raw material, payment for unaccounted raw material and its transportation to sustain the allegation of clandestine manufacture and removal by the appellant. No evidence has been led by the Department to show that the appellant had sufficient production capacity to produce the quantity of goods alleged to have been produced clandestinely - It is now a settled position of law that mere slips/chits are not sufficient for the purpose of confirming the allegation of clandestine manufacture and removal of goods. In an identical matter the Tribunal in the case of K. RAJAGOPAL VERSUS COMMISSIONER OF CENTRAL EXCISE, MADURAI [ 2002 (1) TMI 151 - CEGAT, CHENNAI ] also held that the entries made in the private note books or chits is not a conclusive piece of evidence to prove clandestine removal unless the scribe of note book are examined and other corroborative evidence processed in the matter. In the present matter department alleged that there was shortage of 550Kgs. of Billets as per the Daily Stock account and as per the actual stock during Panchanama. However on going through the said panchnama we noticed that nowhere it has shown in the panchanama whether any stock taking has been taken place. There is no any weighment slip. Moreover, inasmuch as there is no evidence that said shortages are on account of any clandestine removal - It is a well settled position of law that serious allegation cannot be made merely on assumptions and presumptions and in the absence of detailed supporting evidence, the charge of clandestine removal cannot be upheld. The impugned order cannot be sustained and accordingly the same is set aside - Appeal allowed. 2024 (1) TMI 771 Penalty under Rules 26 27 of Central Excise Rules, 2002 - evasion of Central Excise duty - whether the co-noticees stand to lose the substantial benefit of settlement under the SVLDR Scheme due to the fact that they have not applied for the Scheme whereas the main noticee has settled the case under SVLDR Scheme? - HELD THAT:- The issue is no longer res integra having been decided by various benches of the Tribunal. This Bench in M/S JPFL FILMS PRIVATE LIMITED, JALAN JEE POLYTEX LTD., KAVITA INTERNATIONAL AGENCY, KULDEEP SINGH, DP SINGH, R KNITFAB, PERFECT DESIGNER, VK KALRA, RELIANCE INDUSTRIES LIMITED, KANPUR WOOL INDUSTRIES, SWASTIK TRADING CO., APEX CORPORATION AND MANSA TRADERS VERSUS COMMISSIONER OF CENTRAL EXCISE, LUDHIANA [ 2023 (12) TMI 304 - CESTAT CHANDIGARH] where it was held that the benefit of the Scheme cannot be denied to the appellants just because they did not file the declaration under SVLDR Scheme. The appeal is allowed. 2024 (1) TMI 770 Process amounting to manufacture - marketable commodity - case of Department is that scraps so cleared appeared to be generated out of a process - HELD THAT:- The Commissioner (Appeals) clearly held that the process of segregation of various scraps would not amount to manufacture under section 2(f) of the Central Excise Act and as the respondent had not availed CENVAT credit on such scrap, no duty liability would arise on clearance of such scrap. This finding is based on decisions of the Supreme Court in M/S. SATNAM OVERSEAS LTD. VERSUS COMMNR. OF CENTRAL EXCISE, NEW DELHI [ 2015 (4) TMI 356 - SUPREME COURT ] and also M/S. SERVO-MED INDUSTRIES PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI [ 2015 (5) TMI 292 - SUPREME COURT ]. The findings recorded by the Commissioner (Appeals) do not suffer from perversity. Appeal dismissed. 2024 (1) TMI 769 Validity of availing CENVAT credit of CVD paid on import of coal - Recovery/reversal of credit along with interest and equivalent penalty - credit in respect of CVD paid under notification no.12/2012-Cus. dated 17.03.2012, on import of coal - HELD THAT:- Whereas the appellant have imported coal and CVD of 2% is leviable in terms of Customs notification no. 12/2012 Cus. dated 17.03.2012. There is no restriction provided in Rule 3 as regards duty paid under Customs notification. This restriction is applicable only in case of indigenous goods on which the excise duty at 2% was paid by availing notification no.12/2012-CE which is not the case here. Reference was made to the decision of the Supreme Court in M/S SRF LTD., M/S ITC LTD VERSUS COMMISSIONER OF CUSTOMS, CHENNAI, COMMISSIONER OF CUSTOMS (IMPORT AND GENERAL) , NEW DELHI [ 2015 (4) TMI 561 - SUPREME COURT ] which had clarified that notification no.12/2012-CE is applicable only in respect of indigenously manufactured coal and not in respect of imported coal. Even if the importer wants to avail the exemption notification no.12/2012-CE for payment of CVD, the same will not be available to the importer and therefore in the case of import, the notification no.12/2012-CE is not relevant. The decision of the High Court of Gujarat in the case of Lonsenkiri Chemicals Industries [ 2018 (9) TMI 1439 - GUJARAT HIGH COURT ] has also been consistently found to be distinguishable for the reason, to quote from the decision of the Principal Bench of the Tribunal in Hindustan Zinc [ 2020 (10) TMI 1032 - CESTAT NEW DELHI ], where it was held that The appellant therein had availed the benefit of serial numbers 67 and 128 of the Central Excise Notification dated March 17, 2012. It is for this reason that the High Court held that because of the condition set out in proviso (b) of rule 3(1)(i) of the CENVAT Credit Rules that the appellant would not be entitled to avail CENVAT credit. It is found from the aforesaid decisions that a consistent view has been taken by the various Benches on the provisions of Rule 3(1) and the distinction between the customs notification and the central excise notification. There is no reason to take any contrary view in the present case where the respondent has paid additional duty of customs under Section 3(1) of the Customs Tariff Act and availed the benefit of the Customs notification dated 17.03.2012 and also availed Cenvat Credit of the additional duty of Customs under Rule 3(1)(vii) of the Cenvat Credit Rules. The impugned order of the Commissioner (Appeals) upheld - The present appeal filed by the department, is accordingly dismissed. CST, VAT & Sales Tax 2024 (1) TMI 768 Inclusion of coal unloading charges in the value of goods defined u/s 2(h) Entry Tax Act 2007 which are incurred for emptying the railway wagons within the stipulated time after the transportation of goods into the local area - imposition of entry tax on Loco Diesel Charges and Salary of Loco Staff incurred for bring coal from Dadri Plant to Coal Handling Plant after the transportation of goods into the local area - HELD THAT:- It is clear that the Tribunal erred in law in not considering the issue as to whether the charges with regard to both the issues were incurred prior to entry of the goods in the local area or were incurred subsequent to entry of goods in local area - questions are answered in favour of the revisionist and against the revenue. The matter is remanded to the Tribunal for consideration afresh. Imposition of entry tax in the hands of the applicant on purchases made by contractors against 20 Form 38 - HELD THAT:- There is no infirmity in the order passed by the Tribunal being the last fact finding body. Accordingly, this question is answered against the assessee and in favour of the revenue. The writ petition is disposed of. 2024 (1) TMI 767 Condonation of delay of 362 days in filing the appeals - State officials failed to file appeal in time - HELD THAT:- The State officials had proceeded with leisure while doing all other work except attending to the filing of the present appeals. A Three Judges Bench of the Apex Court in STATE OF UTTAR PRADESH ORS. VERSUS SABHA NARAIN ORS. [ 2021 (1) TMI 1171 - SUPREME COURT] has opined upon such kind of cases which are called as certificate cases and imposed heavy costs for wastage of judicial time. It is refrained from imposing the costs while noting that the lead case itself was already dismissed on the same ground but the State apparently learnt no lesson while filing the present set of appeals thereafter. Rather the first appeal was dismissed on 27.03.2019 by the Coordinate Bench and inspite of that the present set of appeals was only filed on 05.10.2019. It is, thus, apparent that the concerned officer has paid scant regard to the fact that the lead case has also been dismissed, but despite that took no steps to file the appeals expeditiously thereafter. Thus, no ground has been made out to condone the delay in the peculiar facts and circumstances as the reasons given in the applications are not acceptable and the cogent reasons are missing to condone the lax approach of the authorities - applications for condonation of delay as well as main appeals are dismissed.
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TMI Tax Updates - e-Newsletter January 19, 2024

TMI Short Notes

1. Insight into Penalties for Procedural Lapses in Customs Documentation

2. Legalities of Input Tax Credit Refunds (IGST), period of limitation and COVID-19 pandemic: A Case Study Analysis

3. Reversal of CENVAT Credit: A Critical Analysis of a Recent Legal Dispute

4. Taxation of Employee Benefits: TDS on value of accommodation provided to the employees at the rate of 15 percent of salary

5. The Intricacies of Unexplained Investment and Legal Recourse: A Comprehensive Analysis of a recent Case

6. Navigating Legal Intricacies: Power to arrest under PMLA and compliance with CrPC

7. Intricacies of Taxation on Interconnect Charges in Telecom: Unraveling the Concept of 'Use or Right to Use'

8. The Priority of Secured Creditors in Financial Recoveries: A Comprehensive Analysis of Central Bank of India vs. State of Himachal Pradesh & Ors

9. Navigating the Intricacies of Seizure and Confiscation under the GST Regime: A Detailed Analysis of a Landmark High Court Judgment"

10. The Principle of Mutuality in Taxation: A Comprehensive Analysis of a Landmark Supreme Court Decision

11. Legal Nuances in CENVAT Credit Rules and Extended Limitation Periods: A Detailed Analysis

12. Cenvat Credit - Input Service Distributors and the Extended Period of Limitation in Service Tax Law: A Case Analysis

13. Complexities of Gold Importation - Prohibited Goods and Redemption: An Analysis of the 2023 (8) TMI 1008 - Delhi High Court Case

14. A Case Study on Condonation of Delay in filing the Appeal in Indian Legal System

15. Restrictions on availing Input Tax Credit (ITC) - constitutional validity of Section 16(4): A Landmark Judgment

Articles

1. DENIAL OF SUBSISTENCE ALLOWANCE TO THE SUSPENDED EMPLOYEE

2. Should employees suffer incase the employer defaults in payment of TDS?

3. Section 16(2)(c) of the CGST Act and Rule 36(4)(c) of the CGST Rules are constitutionally valid

News

1. Cabinet approves equity investment by (i) South Eastern Coalfields Limited for setting-up 1×660 MW Thermal Power Plant through JV of SECL and MPPGCL; and (ii) Mahanadi Coalfields Limited for setting-up 2x800 MW Thermal Power Plant through MBPL

2. Cabinet approves creation of posts for the 16th Finance Commission

3. India’s Journey from Crisis to Confidence (Speech by Shri Shaktikanta Das, Governor, Reserve Bank of India - January 17, 2024 - Delivered at an event organised by the Confederation of Indian Industry (CII), Davos, Switzerland)

4. Department of Revenue, Ministry of Finance, invites suggestions on draft ‘Indian Stamp Bill, 2023’ from public within a period of 30 days

Notifications

1. CT-8-0009-2023-Sec-1-V(CT) (05) - dated 17-1-2024 - Madhya Pradesh SGST

2. CT-8-0005-2023-Sec-1-V (CT) (02) - dated 12-1-2024 - Madhya Pradesh SGST

3. CT-8-0009-2023-Sec-1-05(CT) (01) - dated 10-1-2024 - Madhya Pradesh SGST

4. 1501/XI-2–23-9(47)-17-T.C. 249-U.P. Act-1-2017-Order (309)-2023 - dated 29-11-2023 - Uttar Pradesh SGST

5. 1468/XI-2–23-9(47)-17-T.C.-241-U.P. Act-1-2017-Order (308)-2023 - dated 17-11-2023 - Uttar Pradesh SGST

6. 1429/XI-2–23-9(47)-17-T.C. 243-U.P. Act-1-2017-Order (301)-2023 - dated 31-10-2023 - Uttar Pradesh SGST

Circulars / Instructions / Orders

1. F. No. 225/132/2023/ITA-II - dated 1-12-2023

2. F. No. 187/3/2020-ITA-I - dated 25-10-2023

3. IBBI/EXAM/63/2024 - dated 18-1-2024

4. PUBLIC NOTICE - dated 12-1-2024

Highlights / Catch Notes

GST

CGST Authority and DGGI Lack Superior Powers Over State GST in Bank Account Attachments, Challenging Authority Balance.

Hearing Notice Flawed: Authorities Ordered to Comply with 2017 Act for Fair Personal Hearing in Justice Violation Case.

Income Tax

Reassessment Invalid: Notice Issued in June 2021 Exceeds Limitation Period, Rendering Proceedings Time-Barred.

ITAT Permits Rectification for Adverse Judgment Contestation, Overrides Monetary Limits Regardless of Tax Effect.

Opportunity to Resubmit Applications for Compounding TDS Offences Granted; No Limitation Period for Such Offences.

Loan Interest Deduction Valid Without Immediate Revenue if Business Purpose Proven; No Excessive Spending Found.

Income Surrendered in Survey Not Taxed Under Deeming Provisions; Assessed as Business Income at Normal Tax Rate.

Income Tax Assessments Overturned Due to Mechanical Approval Process Lacking Proper Review by Joint Commissioner.

Arm's Length Price Upheld for Management Services; No Extra Transfer Pricing Adjustments Needed.

Reversal of Tax Claims Without New Evidence Not Legal Under Income Tax Act Sections 153C/153A.

Cash Deposits During Demonetization for Gemstone Trading Under Scrutiny; Additions Rightfully Deleted by CIT(A.

Exemption for Offshore Fund Scheme Upheld; Separate Registration Unnecessary, SEBI Approval Confirmed for Tax Benefit.

Assessing Officer's Addition u/s 68 Challenged Over Alleged Bogus Share Sale Proceeds; Genuine Trading in Question.

Offshore Supply to India Not Taxed: No Permanent Establishment for Assessee, Income from Services Exempt.

Customs

EPCG Scheme Case: Timely EODC Issuance Should Grant Relief, Aligning with High Court and Tribunal Precedents.

Confiscated Goods Misdeclared on Import; Penalty and Fine Upheld at Rs. 4.5 Lakh for Goods Valued at Rs. 22.9 Lakh.

Customs Broker's license revoked for smuggling red sanders with fake export documents; appeal against revocation dismissed.

Customs Duty Exemption Case: Verification of Cocoa Powder Origin Under Free Trade Agreement Lacks Evidence.

IBC

Liquidation Process: No Vested Rights for Bidders' Plans; Accurate Asset Valuation Crucial for Fairness and Maximizing Value.

Service Tax

Extended Limitation Period Invalidated for CENVAT Credit Due to Full Disclosure in ST-3 Return.

Central Excise

Investigating Officer Failed to Follow Safeguards u/s 36B in Case of Alleged Clandestine Removal.

Court Upholds CENVAT Credit for Imported Coal CVD; No Unfair Advantage Over Domestic Buyers Found.

VAT

State Officials' Appeals Dismissed After 362-Day Delay; Court Finds Justification Insufficient.

Case Laws:

GST

Income Tax

Customs

Insolvency & Bankruptcy

Service Tax

Central Excise

CST, VAT & Sales Tax

Quick Updates:

TMI Tax Updates - e-Newsletter
January 19, 2024