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TMI Tax Updates - e-Newsletter January 24, 2022 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Highlights / Catch Notes GST: Levy of GST - recoveries made from the employees towards providing parental insurance - It may be concluded that, recovery of notice pay from dues of employee / payment of notice pay by the employee who could not serve the notice for the period as per contractual agreement / appointment letter does not amount to supply and therefore as per Section 7 (1A) of the CGST Act, 2017, the provisions of Schedule II does not come into play - AAR Visit to Get Source GST: Levy of GST - notice pay recoveries made from the employees on account of not serving the full notice period - It may be concluded that, recovery of notice pay from dues of employee / payment of notice pay by the employee who could not serve the notice for the period as per contractual agreement / appointment letter does not amount to supply and therefore as per Section 7 (1A) of the CGST Act, 2017, the provisions of Schedule II does not come into play - AAR Visit to Get Source GST: Classification of supply and levy of GST - Services of providing of Artificial Teeth, Crown, Bridges falls under Chapter Heading 999312, attracting Nil rate of GST only when the same are provided as Health care Services and not as a Cosmetic Services. - the services of bleaching of teeth and dental veneers for smile designing provided by dental clinic of Applicant to its patients falls under Chapter Heading 999722 at 18% GST. - AAR Visit to Get Source GST: Levy of GST on issuance of credit note as “cash discount” - Since the amount received in the form of credit note is actually a discount and not a supply by the applicant to the supplier, no GST is leviable on receiver on cash discount/incentive/schemes offered by the supplier to applicant through credit note against supply without adjustment of GST. - AAR Visit to Get Source GST: Input tax credit - Reversal of ITC - the applicant can avail the Input Tax Credit of the full GST charged on the invoice of the supply and no proportionate reversal of ITC is required in respect of commercial credit note issued by supplier for Cash discount for early payment of supply invoices(bills) and Incentive/schemes provided without adjustment of GST, if the said discount is not covered under Section 15(3)(b) of CGST Act, 2017 and the said discounts is not in terms of prior agreement. - AAR Visit to Get Source Income Tax: Reopening of assessment u/s 147 - Reopening on the basis of the audit objections - the reasons for reopening of the assessment are almost identically worded as that of audit report. In view of the foregoing, since, in the case at hand also the reopening of the assessment being at the behest of the audit party, the reopening of the assessment is misconceived, incorrect and bad in law - HC Visit to Get Source Income Tax: Undisclosed income of the assessee for the purpose of Chapter XIV B of the Income Tax Act - when section 158BB(3) is read with section 158B(b), which defines undisclosed income, we reach the conclusion that for income to be considered as disclosed income, the same should have been disclosed in the return filed by the assessee before the search or requisition - there is no question of law much less substantial question of law raised in favour of the assessee - HC Visit to Get Source Income Tax: Validity of Reopening of assessment u/s 147 - It is not at all a case that petitioner has not disclosed anything in his response. Petitioner had given the full particulars. The stand taken by petitioner was also accepted by respondents on merits. The Assessing Officer even disagreed with the audit objections but on second thought, to the objections from the auditors he has re-opened the assessment. In our view, re-opening of the assessment without any basis and merely change of opinion is not permissible while exercising the powers under Section 147 read with Section 148 of the Act. - HC Visit to Get Source Income Tax: Extension of time limit for filing returns and furnishing tax audit reports - The prayers made by the petitioners in this respect are rather wide and non specific. At this stage, we leave it to the administration to deal with these issues at its level. We are hopeful that proper resolution of the difficulties of assessees would be made at the level of the administration itself without the requirement of Court’s intervention. - HC Visit to Get Source Income Tax: Revision u/s 263 by CIT - Unexplained cash deposits - That with regard to the chargeability of cash deposit for the purpose of taxation and the applicability of section 115BBE(1) may be separately looked into by the Department. - There are several families consisting of super senior citizens whose children are well-settled but staying away from them for sake of job. It is a matter of common practice in most of the household of our country that the children take care of their parents financially even though the parents may be financially well off on their own. It is a part of moral responsibility on the part of the children for taking care of their aged parents at least by sending finances irrespective of whether they require or not. - AT Visit to Get Source Income Tax: Exemption u/s. 11 - Addition u/s 69A and 69B - With respect to the applicability of Section 69B of the Act, we find that assessee has given self-help loan to the members of the trust and given the details of such money utilized for the purposes of that activity which is returnable to the assessee without any interest. These details were also verified by the learned Assessing Officer during the course of remand proceedings and based on that the learned CIT (A) has correctly deleted the addition u/s 69B of the Act. - No addition could sustain - AT Visit to Get Source Income Tax: Addition of deemed dividend u/s 2(22)(e) - proof of incriminating material found in the course of search - There is no loan or advance received by the assessee from the company. It is seen that even as per the case of the A.O. made in the assessment order, the loan or advance has been received by the assessee from the partnership firm. Therefore, as per the admitted case of the A.O., such loan or advance having not been received by the assessee from a closely held company cannot be treated as dividend u/s 2(22)(e), since the first ingredient of section 2(22)(e) itself is not met in this case. - AT Visit to Get Source Income Tax: Penalty u/s. 271B - absence of auditing u/s. 44AB - The very fact that the assessee got its accounts audited under the Cooperative Societies Act prima facie shows that it entertained a bona fide belief that the amount of grant-in-aid received from Government of Maharashtra was not includible for the purposes of computing turnover u/s. 44AB. - Since the penalty section is covered u/s. 273B, we hold that the penalty was not required to be levied and confirmed. - AT Visit to Get Source Income Tax: Estimation of business income - The learned CIT (A) confirmed addition merely harping on non-compliance by assessee before the Assessing Officer and not applying his mind to the merits of the addition, such order is also not in accordance with the law. If the assessee is non-compliant before Assessing Officer that could not be the reason to brush aside the merits of the case and confirm addition in the hands of the assessee when complete details are available before the Commissioner of Income Tax (Appeals) - additions deleted - AT Visit to Get Source Income Tax: Revision u/s 263 by CIT - Addition u/s 68 - unexplained share application money - Since the aforesaid exercise was carried out by the second AO in the reassessment proceedings and the documents referred to above are in the assessment folder, the Second Ld. Pr. CIT erred in holding the reassessment order of the AO in respect of share capital and premium collected by the assessee as erroneous as well as prejudicial to the interest of the revenue. - the Second Ld. Pr. CIT without satisfying the condition precedent u/s. 263 of the Act has invoked the revisional jurisdiction (second time), so all his actions are ab initio void - AT Visit to Get Source Income Tax: Disallowance of claim of provision for losses - In fact, the assessee reversed the provision made in this year under consideration in subsequent two financial years. Therefore, the above facts clearly show that there is no basis for the assessee to make the provision and it is only an estimation made by the assessee. - Thus estimation of future loss was neither based on any actuarial or any scientific method of determination of its liability and thus, we confirm the orders of authorities below that the losses could not be allowed on a projected basis unless they are actually incurred and verifiable with proper accounting methods. - AT Visit to Get Source Income Tax: Validity of Reopening of assessment u/s 147 - to say that the assessee had concealed any material fact relating to EDC, is not correct. That he had reflected it is as a liability in the Balance Sheet and not shown it as revenue receipt in its Profit & Loss Account, is not a matter of fact but on the contrary it is an interpretation of the fact of receipt of EDC regarding its nature and the reasons do not bring out any material /information with the AO leading him to form this opinion of the EDC charges being Revenue in nature. DR has been unable to enlighten us as to what material fact relating to EDC was concealed by the assessee so as to empower the AO to assume jurisdiction to reopen the case of the assessee beyond four years from the relevant assessment year. - AT Visit to Get Source Indian Laws: Jurisdiction - power of CCI - There was no conflict in the interplay of the two Acts that even needed reconciliation or prohibition against either one, as the limited scrutiny was to examine the mandate of Section 3(1) read with Section 3(3) of the Competition Act. Lotteries may be a regulated commodity and may even be res extra commercium. That would not take away the aspect of something which is anti-competition in the context of the business related to lotteries - The lottery business can continue to be regulated by the Regulation Act. However, if in the tendering process there is an element of anti-competition which would require investigation by the CCI, that cannot be prevented under the pretext of the lottery business being res extra commercium, more so when the State Government decides to deal in lotteries. - SC Visit to Get Source Indian Laws: Dishonor of Cheque - insufficiency of funds - misuse of blank signed cheques by power agent - In the absence of the Principal appearing before this Court to substantiate his case and there being no tangible materials based on which the complaint given by the Principal could be made out, this Court is of the considered opinion that the initiation of the complaint is only for the purpose of harassing the petitioner and cannot be said to be a pure case of cheque dishonour attracting Section 138 of the Negotiable Instruments Act. - HC Visit to Get Source IBC: Approval of Resolution Plan - statutory dues (tax liability) - the claim of the Appellant is an Operational Debt and for all purposes the I&B Code, 2016 shall only apply. There is no special treatment or category made separately for such dues and the claim of the Appellant are to be treated as Operational Debt. - In view of the settled law, there is no special treatment that can be accorded to statutory dues under the scheme of the I&B Code - AT Visit to Get Source IBC: Initiation of CIRP - It is pertinent to note that on 09.07.2016, ‘prior to the issuance of the Demand Notice under Section 8 of the Code’, the ‘Operational Creditor’ invoked Arbitration pursuant to the 8 project orders issued by the ‘Corporate Debtor’, which itself substantiates the ‘Existence of a Dispute’. In the ‘Notice’ invoking Arbitration, the ‘Operational Creditor’ has stated that there is an outstanding amount and has further stated that they are ready to settle the disputes through Arbitration. - we are of the considered view that there is a ‘Pre-Existing Dispute’ between the parties - Application admitted by the NCLT set aside - AT Visit to Get Source Service Tax: SVLDRS-1 Declaration - rejection of the application under the scheme without rendering any opportunity of hearing to the declarant - The matter is remanded back to the Designated Committee to consider the said Declaration dated 30th December, 2019 filed by the petitioner in terms of the scheme as valid Declaration under the category “investigation, enquiry and audit” and grant consequential reliefs to the petitioner after providing due opportunity of hearing to the petitioner before finally deciding the issue - HC Visit to Get Source Central Excise: Clandestine Removal - mild steel ingots from sponge iron - pig iron - There is no explanation forthcoming in the impugned orders for discarding of the energy consumption determined during the trial production except to cast doubts by relying upon reports that, admittedly, did not test the furnace deployed by the appellant-assessee - the singular continuity of adjudicatory evaluation from the earlier period, discarded by the Tribunal in the appeal of the very same assessee and individual, to the present demand, the impugned order is bereft of sufficient facts and evidence to be sustained in appellate proceeding. - AT Visit to Get Source VAT: Levy of penalty under Section 10A of the Central Sales Tax Act, 1956 - C-Forms - inter-state sales - the essential ingredient of mens rea for levy of penalty on the petitioner, was not established. In such circumstances, the findings of the Assessing Officer as confirmed by the First Appellate Authority as well as the Tribunal that the petitioner committed the offence under section 10(b) warranting levy of penalty under section 10A of the Act, cannot be allowed to be sustained. - HC Visit to Get Source VAT: Input Tax Credit - Intra-state Stock transfer - This Tribunal is of the considered view that the dealer with a common TIN number can definitely claim input tax credit even on raw materials used for the purpose of manufacturing of goods at the time of its end product and not on stock transfer of goods claiming to be an intra-state stock transfer. - Tri Visit to Get Source Articles GST not leviable on handling charges of PDS distribution of Dhothies & Sarees/ School Uniforms to the state government COVID LIMITATION EXTENDED BY SUPREME COURT Salary cost to be included in valuation for cross charge for supply of services between head office and branch office or vice versa Notifications GST - States G.O.Ms.No.22 - dated 20-1-2022 - Andhra Pradesh SGST Amendment in Notification Go.Ms.No.494, Revenue(CT-II)Department, dated 03.11.2017 G.O.Ms.No.15 - dated 17-1-2022 - Andhra Pradesh SGST Andhra Pradesh Goods and Services Tax (Tenth Amendment) Rules, 2021. G.O.Ms.No.14 - dated 17-1-2022 - Andhra Pradesh SGST Seeks to bring in force provisions of sub-rule (2), sub-rule (3), clause (i) of sub-rule (6) and sub-rule (7) of rule 2 of the Andhra Pradesh Goods and Services Tax (Eighth Amendment) Rules, 2021 G.O.Ms.No.13 - dated 17-1-2022 - Andhra Pradesh SGST Andhra Pradesh Goods and Services Tax (Ninth Amendment) Rules, 2021 19/2021– State Tax (Rate) - dated 4-1-2022 - Tripura SGST Amendment in Notification No. 02/2017-State Tax (Rate), dated the 29th June, 2017 18/2021– State Tax (Rate) - dated 4-1-2022 - Tripura SGST Amendment in Notification No. 01/2017-State Tax (Rate), dated the 29th June, 2017 Income Tax 10/2022 - dated 21-1-2022 - IT U/s 10(46) of IT Act 1961 - Central Government notifies 'National Skill Development Corporation' in respect of the specified income arising to that body News Shri Piyush Goyal calls upon the Indian Industry to inculcate a greater appetite for risk taking Case Laws: GST 2022 (1) TMI 904 Rate of interest - in terms of the statute, the liability to pay interest would be at such rate not exceeding 6 per cent as may be specified in the notification - It is submitted that the High Court was not, therefore, justified in awarding interest at the rate of 9 per cent per annum - HELD THAT:- The liability to pay the interest @ 6 per cent per annum having not been disputed, the petitioner(s) shall refund the entire amount due to the respondent along with interest @ 6 per cent per annum within seven days from today. In case the affidavit is not filed within the stipulated period, the Special Leave Petitions shall stand dismissed without further reference to the Court. 2022 (1) TMI 903 Levy of GST - recoveries made from the employees towards providing parental insurance - notice pay recoveries made from the employees on account of not serving the full notice period - HELD THAT:- In the case of IN RE: M/S. JOTUN INDIA PVT. LTD. [ 2019 (10) TMI 482 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA] and also in the case of IN RE: POSCO INDIA PUNE PROCESSING CENTER PRIVATE LIMITED [ 2019 (2) TMI 63 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA] are similar to the facts of the present case with respect to recovery of premiums from the employees, paid by the applicant on Parental Insurance Policy, there is no reason or us to deviate from the decisions taken in both the said cases and therefore we hold that, in the instant case, GST would not be payable on recoveries made from the employees towards providing parental insurance. GST on the notice pay recoveries made from the employees on account of not serving the full notice period? - HELD THAT:- The levy under CGST Act, 2017 is on supply of goods or services or both. The word such as used preceding the words sale, transfer, barter, exchange, etc. indicates that the forms of supply shall be those which are enumerated therein or of similar character but not of other dissimilar forms of supply. The expression such as indicates the character of the transactions - The employee opting to resign by paying amount equivalent to month of salary in lieu of notice, has acted in accordance with the contract and that being the case no question of any forbearance or tolerance does arise. Further, as per the agreement, the resignation by the employee is not subject to any acceptance or approval and employee is free to tender his resignation, make payment of notice period salary to leave. Hence, there is neither any activity nor any passive role played by the employer. It must be noted here, that there is no consideration within the meaning of Sec.2(31)(b) of the CGST Act, 2017 flowing from an act of forbearance in as much as there is no breach of contract, as a question of any consideration for forbearance would arise in case of breach of contract. It may be concluded that, recovery of notice pay from dues of employee / payment of notice pay by the employee who could not serve the notice for the period as per contractual agreement / appointment letter does not amount to supply and therefore as per Section 7 (1A) of the CGST Act, 2017, the provisions of Schedule II does not come into play - also relying on the reasoning and decision in the case of GE T D INDIA LIMITED (FORMERLY ALSTOM T D INDIA LIMITED) VERSUS DEPUTY COMMISSIONER OF CENTRAL EXCISE [ 2020 (1) TMI 1096 - MADRAS HIGH COURT] it is held that, the notice pay recovered by the applicant from its employees is not liable to GST. GST would not be payable on the notice pay recoveries made from the employees on account of not serving the full notice period. 2022 (1) TMI 902 Classification of goods / services - Zirconium Oxide Ceramic Dental Blanks in different sizes - whether classifiable under Chapter Heading 69091200 as Ceramic Product as at this stage Artificial Teeth are not produced from it, even though the Product is biscuit fired having hardness of less than 9 on Moh's scale or the product is classifiable under Chapter Heading 90212100 since Artificial Ceramic Teeth are produced from the product which has hardness of 9 on Moh's scale? - Artificial Teeth, Crown, Bridges, Dental Restoratives etc as produced from the Product of Applicant - classifiable under Chapter Heading 90212100? - health care services including providing of Artificial Teeth, Crown, Bridges etc treatment by dental clinic of Applicant to its patients, excluding health care services for bleaching of teeth and dental veneers treatment - falls under Chapter Heading 999312, attracting Nil rate of GST or not - health care services namely bleaching of teeth and dental veneers for smile designing provided by dental clinic - classifiable under Chapter Heading 999312 at Nil rate of GST or Chapter Heading 999722 at 18% GST? Zirconium Oxide Ceramic Dental Blanks in different sizes - whether the impugned product can be called as a ceramic ware? - HELD THAT:- A reading of the Zircon Industry Association reveals that, Zircon is the primary mineral, which is a co-product from the mining and processing of ancient heavy mineral sand deposits. It is also referred to as zirconium silicate and has the chemical composition ZrSiO 4 . Zircon can be used either in its coarse sand form or milled to a fine powder, which is referred to as zircon flour. Zircon sand is used in the casting and foundry industries, whilst zircon flour is primarily used as an opacifier in the ceramics industry - Zircon can be processed to create zirconia by melting the sand at very high temperatures, typically above 2,600 C, in an electric arc furnace to form molten zirconia, also known as zirconium oxide (ZrO 2 ). The cooled and crushed zirconia is then used in many different applications including in advanced ceramics and biomedical implants. The subject product is described by the applicant as 'Zirconium Oxide Ceramic Dental Blanks'. The impugned product can be treated as a ceramic ware and therefore is covered under Chapter 69 of the GST Tariff. 'Pots, jars and similar articles of a kind used for the conveyance and packing of goods of ceramic attract 12% GST as per Schedule II of Notification No. 01/2017 - C.T.R. dated 28.06.2017 (Entry No. 177A). Since the impugned product cannot be considered as Pots, jars and similar articles of a kind used for the conveyance and packing of goods of ceramic the same is not covered under the said Entry No. 177A of the above mentioned Notification. The impugned product can be said to be a type of ceramic ware for use in laboratory, etc. and therefore the impugned product is aptly covered under Tariff heading 6909 of the GST Tariff. Whether Artificial Teeth, Crown, Bridges, Dental Restoratives etc as produced from the Product of Applicant is classifiable under Chapter Heading 90212100? - HELD THAT:- The applicant has not submitted whether they also have a Dental laboratory. The question (regarding making of artificial teeth) raised by the applicant appears to be a general question which is raised in respect of an activity (making of artificial teeth) by another entity and not the applicant. Since the question raised by the applicant does not pertain to an activity being undertaken or proposed to be undertaken by them, as per the provisions of Section 95 of the CGST Act, 2017, the said question cannot be answered by this authority. Whether the health care services including providing of artificial Teeth, Crown, Bridges etc treatment by dental clinic of Applicant to its patients, under Chapter Heading 999312, attracting Nil rate of GST? - HELD THAT:- Health Services in the form of Dental Services like fitment of artificial ceramic teeth, crown, bridges, dental restoratives are carried out in applicant's clinic (Clinical establishment) by qualified Dentists who can be considered as Authorised Medical Practitioners, since Dentistry is a part and parcel of Medical Practice - the Dental Services like fitment of artificial ceramic teeth, crown, bridges, dental restoratives carried out by Dentists in the applicant's clinic is nothing but Health Services and are exempt from GST as per the provisions of SL No. 74 of Notification No 12/2017 CT (Rate) dated 28.06.2017 - However the provision of fitment of artificial ceramic teeth, crown, bridges, dental restoratives carried out in applicant's clinic will be eligible for exemption only if they are carried out as a part of Health Care Services i.e. they are carried out as a diagnosis or treatment or care for illness, injury, deformity, or abnormality and not as a part of and including, cosmetic treatment. Whether health care services namely bleaching of teeth and dental veneers for smile designing provided by dental clinic of Applicant to its patients falls under Chapter Heading 999312 at Nil rate of GST or Chapter Heading 999722 at 18% GST? - HELD THAT:- As per the description given by the applicant in respect of Bleaching of teeth, it is found that, the same is a restoration of natural tooth shade or whitening beyond the natural shade. This process cannot be considered as services by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy - the said service is not covered under SAC 999312. In fact the said service is explicitly covered under SAC 999722 (Cosmetic treatment (including cosmetic/plastic surgery), manicuring and pedicuring services). Dental Veneers - HELD THAT:- Dental Veneer Treatment also, cannot be considered as services by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy. Further the said treatment falls under the exclusion part of the definition of Health care Services . The discussions made pertaining to Bleaching of Teeth is applicable in case of Dental Veneer Treatment also and therefore it is held that Dental veneer Treatment which is done to enhance a 'smile' is explicitly covered under SAC 999722 (Cosmetic treatment (including cosmetic/plastic surgery), manicuring and pedicuring services). 2022 (1) TMI 901 Input tax credit - Reversal of Credit - volume discount / Cash discount received on purchases - volume discount received on retail (on sale) - Levy of GST on issuance of credit note as cash discount - HSN Code - Cash discount for early payment of supply invoices(bills) given by the supplier of goods to the applicant without adjustment of GST - Incentive/schemes provided through credit note without adjustment of GST by the supplier to the applicant - HELD THAT:- As per the Section 15(3)(b) of CGST Act, for the cases where supply has aIready been effected and discount given after supply shall be in term of prior agreement before effecting supply of goods and specifically linked to relevant invoices, then such discount shall not include in the value of supply and ITC has to reversed by the receiver. There are two condition to satisfy the Section 15(3)(b) of CGST Act, firstly discount given after supply of goods shall be in term of prior agreement and secondly it should be linked to the relevant invoices. As per of Circular No 92/11/2019-GST clarified that secondary discounts which is not known at the time of supply shall not be excluded while determining the value of supply as such discounts are not known at the time of supply and the conditions laid down in clause (b) of sub-section (3) of section 15 of the said Act are not satisfied. In other words, value of supply shall not include any discount by way of issuance of credit note(s) except in cases where the provisions contained in clause (b) of sub-section (3) of section 15 of the said Act are satisfied. There is no impact on availability or otherwise of ITC in the hands of supplier in this case. The value of taxable supply is governed by the provisions of Section 15 of the CGST/SGST Act. The deduction of discounts from the value of taxable supply is subject to the conditions prescribed in sub-section (3) of Section 15 ibid. In the case of the applicant, the supplier of goods is issuing Commercial Credit Notes for cash discount for early payment and quantity discount after post supply without adjustment of GST - As the supplier of the goods is not reducing the original tax liability, the applicant will be eligible to avail the credit of the tax paid as per the invoice of the supplier subject to payment of the value of supply as reduced by the commercial credit notes plus the amount of original tax charged by the supplier. In other words, the applicant will not be required to reverse proportionate input tax credit. As per GST Act the applicant has to made self assessment of the supplies made by them and also proper ITC availed therefore it is mandatory on the part of the applicant to ensure that the supplier, by giving the discount through commercial credit note, has not reduced their output tax liability post sale i.e. at the time of filing annual return. If the supplier reduced their output tax liability than the applicant is mandatory required to reverse the proportionate ITC - the Applicant is not providing any service to the supplier and is only receiving the incentive/discount. Indirectly, it has an effect on the sale price of the goods purchased by the Applicant from the supplier and is actually in the form of discount. It is found that no GST is leviable on the said discounts received from the supplier. Income Tax 2022 (1) TMI 900 Reopening of assessment u/s 147 - Reopening on the basis of the audit objections - HELD THAT:- Reopening is made on the basis of the objections received from the revenue audit cell, usually referred as audit objections. Identical objection, as raised in the reasons for reopening, was raised and communicated to Petitioner on 14.03.2019. Petitioner, in response to the audit queries, had provided clarifications to the Assessing Officer. It is a well laid down principle that the re-assessment proceedings initiated merely on the basis of the audit objections are illegal and not valid in law and as such re-assessment proceedings have been repeatedly again quashed and set aside by the Courts. See INDIAN AND EASTERN NEWSPAPER SOCIETY [ 1979 (8) TMI 1 - SUPREME COURT] , JAGAT JAYANTILAL PARIKH [ 2013 (5) TMI 330 - GUJARAT HIGH COURT] and ICICI HOME FINANCE CO. LTD. [ 2012 (8) TMI 312 - BOMBAY HIGH COURT] As the reasons for reopening of the assessment are almost identically worded as that of audit report. In view of the foregoing, since, in the case at hand also the reopening of the assessment being at the behest of the audit party, the reopening of the assessment is misconceived, incorrect and bad in law. - Decided in favour of assessee. 2022 (1) TMI 899 Undisclosed income of the assessee for the purpose of Chapter XIV B of the Income Tax Act - search as well as survey and initiation of the proceedings under section 158BC read with section 158BD - assessment proceedings by determining the total and undisclosed income of the assessee - assessee is aggrieved by the addition made towards certain outstanding credits over a period of time payable to the dealers which amounts were treated as income under Section 41(1) - HELD THAT:- Admittedly, the assessee filed their return only after the conduct of search. Based on the same, the assessing officer computed the total and undisclosed income and made additions for the block period. In such circumstances, the assessee ought to have rebutted the same by giving cogent and reliable evidence, whereas they failed to do so. Therefore, they cannot be permitted to contend that based on the books of accounts furnished by them, the assessing officer made such additions. Further, the liabilities were shown in the books of accounts as outstanding credits and the same were not written back by the assessee and hence, the Tribunal rightly justified the additions made by the assessing officer as undisclosed income under section 41(1) of the Act, which could not be faulted with, in the opinion of this court. See A.R. ENTERPRISES AND COMMISSIONER OF INCOME-TAX VERSUS BR. SHAH AND OTHERS [ 2013 (1) TMI 345 - SUPREME COURT] as held for the purposes of computation of undisclosed income under Chapter XIVB, an assessee can rebut the Assessing Officer's finding of undisclosed income by showing that such income was disclosed in the return of income filed by him before the commencement of search or the requisition. In other words, when section 158BB(3) is read with section 158B(b), which defines undisclosed income, we reach the conclusion that for income to be considered as disclosed income, the same should have been disclosed in the return filed by the assessee before the search or requisition - No substantial question of law. 2022 (1) TMI 898 Exemption u/s 11 - cancellation of registration u/s 12AA(3) - CIT(E) concluded that that the activities of the trust are not genuine and they are not being carried out in accordance with the declared objects as contained in the deed of trust - ITAT set aside order for cancellation of registration holding that the assessee trust was not engaged any money laundering activity - HELD THAT:- We find that the entire issue involved in this appeal is factual. As rightly pointed out by the Tribunal the CIT(E) has not brought on record any statement made by the said Mr. Lahiri which is adverse to the interest of the assessee trust. That apart, there was no document or material available with the CIT(E) to hold that the assessee had given donation to the Batanagar Education and Research Trust during the relevant year in question, namely, assessment year 2015-2016. Thus, in the absence of any material, the Tribunal rightly concluded that the allegations against the trust based on which registration was cancelled were all bald allegations with nothing specific against the assessee - no question of law much less the substantial question of law arising for consideration in this appeal.- Decided against revenue. 2022 (1) TMI 897 Validity of order passed under Section 143(3) read with Section 144-B - denial of natural justice - principal ground of challenge as raised to the assessment order is based on the breach and non-compliance of the principles of natural justice inasmuch as there was no proper and sufficient opportunity granted to the petitioner to respond to the show cause notice issued in that regard by the respondent no.1 -.HELD THAT:- Despite the petitioner responding to the show cause notice much prior to issuance of the assessment order, there is no consideration of the reply given by the petitioner to the show cause notice. A mere statement now in the affidavit in reply that the petitioner s response to the show cause notice did not contain any new or material fact cannot be accepted as such reason/consideration is not found in the impugned assessment order. The validity of the impugned assessment order would have to be judged from its contents and the same cannot be supported by extraneous material in the form of affidavit in reply. Hence for this reason the challenge to the assessment order dated 14.05.2021 is liable to succeed. An alternate remedy by way of statutory appeal is available to the petitioner. However in view of the fact that it is apparent that the assessment order has been issued without granting due and proper opportunity to the petitioner, we are not inclined to relegate the petitioner to avail that statutory remedy. We may also state that the petitioner has challenged the provisions of Section 144-B(7)(viii) and (xii) and provisions of Section 144-B(1)(xvi)(b) and (c) of the said Act as being violative of Article 14 of the Constitution of India. Since we are not required to enter into the merits of the assessment order, such challenge is kept open for being raised at an appropriate stage, if so advised. The assessment order dated 14.05.2021 passed by the respondent no.1 is set aside. The proceedings are remanded to the respondent no.1 for a fresh consideration in accordance with law after giving due opportunity of hearing to the petitioner. 2022 (1) TMI 896 Validity of Reopening of assessment u/s 147 - notice beyond the period of four years from the end of the relevant assessment year - reliance on audit observation sheet - set-off of business loss and unabsorbed depreciation pertaining to Times Now business, which was demerged from Times Global Broadcasting Company Limited - HELD THAT:- This Court in Ananta Landmark (P) Limited Vs. Deputy Commissioner of Income-tax [ 2021 (10) TMI 71 - BOMBAY HIGH COURT] has relied upon Indian and Eastern Newspaper Society Vs. Commissioner of Income Tax [ 1979 (8) TMI 1 - SUPREME COURT] where the Court held that in every case, the Income Tax Officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has come to his notice he can reasonably believe that income had escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. Therefore, the true evaluation of the law in its bearing on the assessment must be made directly and solely by the Income Tax Officer. It is not at all a case that petitioner has not disclosed anything in his response. Petitioner had given the full particulars. The stand taken by petitioner was also accepted by respondents on merits. The Assessing Officer even disagreed with the audit objections but on second thought, to the objections from the auditors he has re-opened the assessment. In our view, re-opening of the assessment without any basis and merely change of opinion is not permissible while exercising the powers under Section 147 read with Section 148 of the Act. We have no option but to allow this petition 2022 (1) TMI 895 Extension of time limit for filing returns and furnishing tax audit reports - PIL filed by the Tax Bar Association of Jodhpur pointing out various difficulties faced by the assessee on account of the official portal of the income tax department having various glitches - prayer made was to issue direction to the CBDT to extend such time limit up to 15.02.2022 in exercise of the power under Section 119 - HELD THAT:- Presumably, these extensions are granted because the Government of India had realized that on account of technical difficulties, several assesses may not have been in a position to make the compliances. There is nothing for us to presume that the administration is not cognizable of such defects and that proper steps for removing of such defects would be taken so that the extension of last date for compliances does not remain illusory but the assesses can meaningfully take advantage of such extension. The prayers made by the petitioners in this respect are rather wide and non specific. At this stage, we leave it to the administration to deal with these issues at its level. We are hopeful that proper resolution of the difficulties of assessees would be made at the level of the administration itself without the requirement of Court s intervention. This petition is therefore disposed of at this stage with the above observations, leaving it open to the petitioners to raise these issues if in future the difficulties persist. 2022 (1) TMI 894 Reopening of assessment u/s 147 - expenses claimed on account of repair to kitchen equipments as capital in nature instead of revenue as claimed by the assessee - Notice beyond period of four years - HELD THAT:- As gone through the reasons recorded and noted that the AO has taken the reasons mainly from the audited accounts and the claim made by the assessee of expenses from the computation of income. As gone through the reasons and noted that there is no charge levied by the AO that there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year 2009-10. Rather, recording of reason clearly states that the assessee has disclosed this fact in the return of income and computation of income as well as during the course of original assessment proceedings. The ld.counsel for the assessee before us also filed the computation of income, depreciation chart and audited accounts which clearly reveals that the assessee has made claim of kitchen equipments repair and replaced during the year written off fully. See FORAMER FRANCE case [ 2003 (1) TMI 101 - SC ORDER ] In the present case the Revenue could not point out any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for relevant assessment year 2009-10, as the assessee has completely disclosed the facts relating to the claim of expenditure incurred towards repairs to kitchen equipments and furniture by replacing the table top for dosa stone, dining tables and replacement of glasses etc This expenditure is towards stainless steel sheets for replacing the worn out sheets over the dining tables and dosa table tops, glass top etc. In view of the fact that original assessment was completed u/s.143(3) of the Act for the assessment year 2009-10 and notice u/s.148 of the Act was issued on 11.03.2016, which is beyond 4 years, we held that reopening is bad in law and hence, quashed. - Decided in favour of assessee. 2022 (1) TMI 893 Revision u/s 263 by CIT - reopening of assessment u/s 147 on Short assessment of Short Term Capital Gain - AO accepted the assessee's computation without invoking the provision of section 50C - first objection of the assessee that notice u/s. 263 is beyond time - HELD THAT:- Objection of the assessee that notice u/s. 263 is beyond time is not sustainable in view of the fact that due to COVID, pandemic time barring dates were extended. This has been duly dealt with by the Ld.CIT in his order. Ld. Counsel of the assessee could not cogently rebut that time barring dates stood extended in view of the pandemic as observed by Ld.CIT. Hence, this objection by the assessee stands dismissed. Merits of the case AO accepted the assessee's computation without invoking the provision of section 50C - assessees has submitted that issue of 50C was not mentioned in the reason for reopening, hence in this assessment order, AO has not dealt with the issue 50C. This submission is not at all sustainable. Section 50C clearly provides that in case of transfer of capital assets being land or building if the value adopted by the assessee is less than the value adopted by the stamp valuation authority difference should be added as income of the assessee u/s. 50C - There is no provision in the act permitting the AO to deviate from that. Hence, the AO not invoking the provision of section 50C, certainly makes the order of AO being erroneous. Hence, invocation of the provision of section 263 of the Ld.CIT is quiet correct - we note that section 50C duly provides that ,if the assessee is not satisfied with the valuation done by Stamp valuation authority, he can object to the same to the AO and in that case AO shall refer this matter to the DVO. This aspect was mentioned by the assessee before the Ld.CIT. CIT has referred to amendment brought in Explanation 2 of section 263. However, we note that it was inserted w.e.f. 01.06.2015 and it has been held by courts that amendment is prospective. However, this is not germane in the context of fact that AO has not invoked the provision of section 50C and has passed an erroneous order prejudicial to the interest of the revenue. We find that no prejudice would be caused to the assessee by the order of the Ld.CIT, wherein, he has directed the AO to make fresh assessment in accordance with law. - Decided against assessee. 2022 (1) TMI 892 Revision u/s 263 by CIT - Unexplained cash deposits - as per CIT addition in the assessment order was charged to tax at normal rate which actually as unexplained cash deposit, which was required to be taxed u/s 69 as unexplained investment in view of the insertion of section 115BBE(1) by the Finance Act, 2012 w.e.f. 01.04.2013, any income referred to in section 68, 69, 69A, 69B, 69C 69D was required to be taxed at the rate of 30% (flat rate) and no other deduction is allowed to the assessee against such income - HELD THAT:- both assessee and her husband are super senior citizens belonging to respectable social and economical background. It has been narrated specifically that because of old age, health ailments they have liquid funds/cash at their disposal to meet any urgent medical contingencies. That even the assessee s husband retired as Colonel in Indian Army and is drawing pensions, the children i.e. both son and daughter of the assessee are well to do and they are also sending money to their parents for their day to day needs. These facts have not been disputed by the Department at all. That even in the order passed u/s 263 by the Pr.CIT, he has not been able to bring out specifically under the given facts and circumstances why the assessment order is erroneous so as to be prejudicial to the interest of the Revenue when on the contrary all the facts were scrutinized by the Assessing Officer and he has arrived at a plausible opinion on application of mind. When all the explanations and documents from the assessee have been scrutinized and examined by the Assessing Officer in such scenario the order of the assessment cannot be held to be erroneous and prejudicial to the interest of the revenue. Pr.CIT has initiated proceedings starting a fishing and roving enquiry in the matter without bringing on record any material or evidence demonstrating that he has acted in a reasonable manner. That with regard to the chargeability of cash deposit for the purpose of taxation and the applicability of section 115BBE(1) may be separately looked into by the Department. But, this is not a fit case for assuming revisionary jurisdiction u/s 263 of the Act. Before parting, we must also mention that the practicalities of given circumstances always has to be looked into by the quasi judicial authorities before resorting to any provisions of the Act. There are several families consisting of super senior citizens whose children are well-settled but staying away from them for sake of job. It is a matter of common practice in most of the household of our country that the children take care of their parents financially even though the parents may be financially well off on their own. It is a part of moral responsibility on the part of the children for taking care of their aged parents at least by sending finances irrespective of whether they require or not. These facts were explained before the Assessing Officer as evident from para 4 of the assessment order and other relevant details were furnished as and when the Assessing Officer has examined thereafter he has taken a plausible view. In such facts and circumstances, the order passed by the Pr.CIT u/s 263 is held as unjustified, invalid and liable to be quashed - Decided in favour of assessee. 2022 (1) TMI 891 Correct head of income - assessment of interest income as income from other sources or business income claimed by the assessee - HELD THAT:- The decision to invest the idle fund lying with the assessee in fixed deposit has to be accepted as a decision taken by a prudent businessman keeping in view the commercial expediency. It is not disputed that the assessee has temporarily parked its business fund in short term deposits varying between 3-9 months. When the need arises, assessee encashes the fixed deposits and utilises the funds for its business purpose. In the aforesaid scenario. it can not be said that the interest income is not inextricably linked with the business of the assessee. Therefore, in our view, the interest income earned on fixed deposits has to be treated as business income of the assessee. That being the case, it has to be set off against the revenue expenses. However this is only to the extent of interest income earned on fixed deposits. As far as income earned from mutual fund and interest from income tax refund, they have to be taxed under the head income from other sources. Thus allow assessee s claim of assessment of interest income under the head business - Whereas, the balance amount is to be taxed under the head income from other sources. In so far as the issue of set off of income from other sources against the revenue expenses in terms of section 71 of the Income Tax Act, admit the additional grounds as they do not require fresh investigation into facts. However, considering the fact that neither the Assessing Officer nor learned Commissioner (Appeals) have given any conclusive finding on this issue, I restore it to the file of the Assessing Officer for deciding assesee s claim - Appeal of the assessee is partly allowed. 2022 (1) TMI 890 Exemption u/s. 11 denied - violation of provisions of section 36A(3) of the Bombay Public Trust Act, 1950 - activities are illegal and non-genuine and/or not in accordance with the objects - AO treated the assessee trust as an Association of person denying exemption u/s 11 of the Act and thereafter applying provisions of Section 145 (3) and rejected the books of account - admission of additional evidences by the LD CIT (A) - HELD THAT:- In the remand report, objecting to the admission of the additional evidence merely stated that the assessee was given an opportunity from January 2015 to substantiate claims but assessee did not submit the same till the conclusion of reassessment proceedings in the month of March. We find that the show cause notice was issued to the assessee only on 13.03.2015, which was replied by the assessee on 23.03.2015, there after it is evident that, when the assessment order was passed on 31.03.2015, the assessee did not have any sufficient opportunity to produce those confirmations. Therefore, we find that there is no error on the part of the learned CIT (A) in admitting that confirmation which are merely supporting evidences in admitting them in deciding the same after giving the learned Assessing Officer opportunity to examine the same. Accordingly, ground number 1 of the appeal of the learned Assessing Officer is dismissed. Violation of the provisions of Section 36A (3) of the Bombay Public Trust Act - CIT (A) clearly noted that the assessee trust has taken a returnable interest free loans - claim of the AO is that the assessee should have taken a permission of the charity commissioner and as it has violated the provisions of the Bombay Public Trust Act, the assessee should be denied exemption u/s 11 of the Income Tax Act. Learned Assessing Officer in the remand report accepted that no loans were taken by the trust during the relevant year and no property of the trust has been utilized for the advantage of the trustees. Thus, in absence of any contrary evidence produced before us, we do not find any reason to not to agree with the order of the learned CIT (A) that assessee has not violated provisions of Section 36A of the Bombay Public Trust Act. Therefore, ground number 2 of the appeal is dismissed. Addition u/s 69A and 69B - There was no unexplained money, where the assessee was found to be the owner was found. The assessee gave explanation about the nature, source of such bank deposits, which was examined by AO, and no irregularity was found. Therefore, with respect to the contributions deposited in those bank accounts the provisions of Section 69A of the Act has been wrongly applied by the learned Assessing Officer, more so after the complete verification during the course of remand proceedings. Therefore, with respect to the contribution deposited in the bank account the learned CIT (A) has correctly held that same cannot be added u/s 69A of the Income Tax Act and hence, deleted. With respect to the applicability of Section 69B of the Act, we find that assessee has given self-help loan to the members of the trust and given the details of such money utilized for the purposes of that activity which is returnable to the assessee without any interest. These details were also verified by the learned Assessing Officer during the course of remand proceedings and based on that the learned CIT (A) has correctly deleted the addition u/s 69B of the Act. Accordingly, ground number 3 and 4 of the appeal of the learned Assessing Officer are dismissed. Trust exists only for a specified community - The categorical finding was given that the membership of the trust was given to any person who carries on any business or commercial activity in a particular area irrespective of any caste etc. The learned CIT(A) following the decision of M/S. DAWOODI BOHARA JAMAT [ 2014 (3) TMI 652 - SUPREME COURT] has clearly come to conclusion that the assessee trust was not created for the benefit of any particular religious community but was open to public at large carrying on any trade or commerce in a particular area. Therefore, in absence of any contrary evidence placed before us, we hold that the learned CIT (A) is correct that the provisions of Section 13 (1) (b) of the Income Tax Act are not attracted in the case of the assessee. Accordingly, ground number 5 of the appeal is dismissed. Violation of the provisions of Section 13 (1) (C) and Section 13 (2) - We find that the activity of the self-help where the loan is given by assessee without interest to the needy members of the society. Such needy persons may be the trustees of the trust also. The loan was also given to the trustees on the same terms and conditions as it was given to any other members of the society. Therefore, no special benefits were given to the trustees - identical issue has been accepted by the learned Assessing Officer in the reassessment proceedings for earlier years and assessment proceedings for subsequent years, the learned and CIT(A) has held that no income of the trust was applied for the benefit of the trustees. In view of this, we do not find any infirmity in the order of the learned CIT(A) in holding that there is no violation of the provisions of Section 13 (1) (C) and Section 13 (2) of the Act and therefore, the exemption u/s 11 of the Act cannot be denied to the trust. Accordingly, ground number 6 of the appeal is dismissed. Not adjudicating the rejection of the books of account u/s 145 - in view of our decision on the earlier grounds, wherein we have held that the assessee is entitled to the exemption u/s 11 of the Act on the accounting entries covered in those bank accounts also which were not disclosed before the learned Assessing Officer, we find that this ground becomes merely academic in nature and the learned CIT (A) is correct in not adjudicating the same. Accordingly, we dismiss ground number 7 of the appeal. Revenue appeal dismissed. 2022 (1) TMI 889 Penalty u/s. 271(1)(c) - Non mentioning of specific charge - Bogus purchases - HELD THAT:- We find that in this case the penalty notice does not identify the charge against the assessee as to whether the notice is meant for the charge against the assessee of furnishing inaccurate particulars of income or concealment of income warranting levy of penalty u/s. 271(1)(c) of the I.T.Act. . As relying on Mohammed Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] we find that the notice in this also is an omnibus show-cause notice as it does not strike off/delete the inappropriate/irrelevant/not applicable portion. Such a generic notice betrays a nonapplication of mind. Hence, the penalty levied pursuant to such a notice is not legally sustainable in law. Hence following the aforesaid precedent from the Full Bench of the Hon'ble Jurisdictional High Court we hold that the Assessing Officer was bereft of valid jurisdiction as the notice issued to assessee is unsustainable in law. The penalty levied is without jurisdiction on account of non identification of charges in the penalty notice - Decided in favour of assessee. 2022 (1) TMI 888 Deduction u/s 80P - main provision contained in section 80P(1) and (2) specifically excludes only co-operative banks, which are co-operative societies who must possess a license from the RBI to do banking business - HELD THAT:- We find that it is nobody s case that the assessee society has received interest from a co-operative bank, which is having the license from RBI. In this view of the matter, the issue is squarely covered in favor of the assessee by the aforesaid decision of Hon ble Supreme Court in THE MAVILAYI SERVICE COOPERATIVE BANK LTD. ORS. VERSUS COMMISSIONER OF INCOME TAX, CALICUT ANR. [ 2021 (1) TMI 488 - SUPREME COURT] - Decided against revenue. 2022 (1) TMI 887 Penalty u/s. 271FA - Maintainability of assessee appeal against penalty levy before the Tribunal - assessee did not file the Statement of Financial Transactions (SFT) u/s. 285BA in respect of the Specified Transactions - HELD THAT:- Section 253 of the Act contains a list of the orders appealable before the Tribunal. Sub-section (1) provides for the filing of appeals by the assessee against the orders passed under the specified sections; and sub-section (2) contains a list of the orders appealable by the Revenue. Section 253(1) does not contain an order passed u/s. 271FA. This very issue came up for consideration before the Hon'ble Rajasthan High Court in Sub-Registrar, Suratgarh, District Sri Ganganagar [ 2013 (2) TMI 911 - RAJASTHAN HIGH COURT] as approved the view taken by the Tribunal in dismissing the appeal against the order passed u/s. 271FA, as not maintainable - As further observed that the assessee has an alternative remedy by way of appeal against the impugned penalty order before the ld. first appellate authority, i.e. CIT(A) and allowed an opportunity to the assessee to file appeal against the order u/s. 271FA before the CIT(A). Similar view has been taken in DIT vs. Ravi Vijay Anr.[ 2012 (9) TMI 652 - RAJASTHAN HIGH COURT] . No contrary view by any other High Court has been brought to our notice. Respectfully following the judgments of the Hon'ble Rajasthan High Court on this score, we dismiss the appeal of the assessee as not maintainable. 2022 (1) TMI 886 Validity of Assessment u/s 144C - directions of the DRP ignored - AO has repeated the draft assessment order verbatim - HELD THAT:- In the present case, final order of assessment does not incorporate the directions of the DRP and is verbatim repetition of the draft order of assessment. We are of the view that final order of assessment, in conformity with the directions of the DRP, has to be passed within one month from the end of the month in which the directions are issued by the DRP. Since the impugned order is not in conformity with the provisions of section 144C of the Act, the same is to be held as bad in law. We quash the impugned order of assessment. Since the impugned order of assessment is quashed on the ground that the same is not in conformity with the provisions of section 144C of the Act, we are of the view that the other issues raised by the assessee in its grounds of appeal do not require any consideration. 2022 (1) TMI 885 Addition of deemed dividend u/s 2(22)(e) - proof of incriminating material found in the course of search - loan or advance received by the assessee from the partnership firm instead of closely held company - HELD THAT:- It is noted that in order to attract the fiction of section 2(22(e), it is essential that the elements of that section must be found applicable. Since section 2(22)(e) treats the loan or advance as dividend, hence it is essential to give a strict interpretation to such fiction.We have gone through section 2(22)(e) and the facts of the present case. There is no loan or advance received by the assessee from M/s Orient Crafts Ltd. It is seen that even as per the case of the A.O. made in the assessment order, the loan or advance has been received by the assessee from M/s SKA Enterprises which was a partnership firm. Therefore, as per the admitted case of the A.O., such loan or advance having notbeen received by the assessee from a closely held company i.e. from Orient Craft Ltd. or Olympus Realters P Ltd. cannot be treated as dividend u/s 2(22)(e), since the first ingredient of section 2(22)(e) itself is not met in this case. There is no question of treating the amount withdrawn by the assessee as partner from the partnership firm namely M/s SKA Enterprises in the nature of loan and advance and treat it as deemed dividend under section 2(22)(e) of the Income Tax Act. None of the ingredients of section 2(22)(e) stand satisfied in the instant case. We have also gone through part of written submissions as reproduced above where rebuttal of each and every adverse observation made by the assessing officer has been made by the assessee and we are in agreement with the assessee on all those rebuttals. CIT (A) despite recording a clear cut finding as to the nature of payments made by one entity to another in para 7.3.2 of the appeal order has committed grave error in concluding without any basis, material or evidence that M/s Super Connections India P. Ltd., M/s Olympus Realtors P. Ltd. andM/s SKA Enterprises were used as conduits. Therefore, we are unable to subscribe to this bald conclusion of CIT(A). We thus hold that the additions sustained on account of deemed dividend u/s 2(22)(e) were sustained by CIT(A) contrary to the factual position and contrary to the law contained in this regard. Hence, we reverse the Order of CIT(A) and delete the addition. - Decided in favour of assessee. 2022 (1) TMI 884 Penalty u/s. 271B - absence of auditing u/s. 44AB - assessee contended before the authorities below that it had maintained proper books of account as prescribed under the provisions of Maharashtra Cooperative Societies Act, 1960 which were duly audited as per the provisions of that Act - HELD THAT:- Section 271B requiring imposition of penalty for failure to get the accounts audited u/s. 44AB, is covered u/s. 273B, which, in turn, prescribes that no penalty shall be imposed if reasonable cause for the failure is established. We are confronted with a case of a Cooperative Society dealing with small farmers having turnover of less than ₹ 1.00 crore with the exclusion of the amount of grant-in-aid. The very fact that the assessee got its accounts audited under the Cooperative Societies Act prima facie shows that it entertained a bona fide belief that the amount of grant-in-aid received from Government of Maharashtra was not includible for the purposes of computing turnover u/s. 44AB. Had it been otherwise, it would have got the accounts audited u/s. 44AB apart from the auditing for the purposes of Cooperative Society Act. Considering all there was a reasonable cause in the assessee not getting the accounts audited u/s. 44AB resulting in attracting of section 271B of the Act. Since the penalty section is covered u/s. 273B, we hold that the penalty was not required to be levied and confirmed. The same is hereby directed to be deleted. - Decided in favour of assessee. 2022 (1) TMI 883 Denial of registration u/s. 12AA(1)(b) r.w.s. 12A - main activities of the assessee includes Providing valuers course to create skilled registered valuers in the country - assessee has failed to respond to the requirements of the CIT(E) to enable him to appreciate the relevant facts for the purposes of registration - as submitted that the registration sought under section 12AA could not be denied to the assessee where on similar facts, various other organizations like ICAI registered valuers organization, Indian Institute of Insolvency Professionals of ICAI, ICSI Insolvency Professional agency, Practising Valuers Association of India carrying similar objects as that of assessee, have been duly granted registration - HELD THAT:- As simultaneously noticed that the assessee has filed certain replies IN DAK before the CIT(E). On a reading of the impugned order, it appears that the CIT(E) has taken a view against the assessee unilaterally and without taking note of the main objects of the assessee as well as the decisions rendered in other cases placed in similar situation as claimed. The impugned order appears to be somewhat cryptic and requires elucidation on facts and law. We, therefore, deem it appropriate to restore the matter back to the file of the CIT(E)/other competent registering authority in force to examine matter DENOVO after taking cognizance of the factual position and contentions of the assessee. It shall be upon to the assessee to submit all relevant facts and its contentions before registering authority. The registering authority shall pass speaking order in accordance with law after taking note of the various submissions and contentions of the assessee. The impugned order under section 12AA(1)(b) r.w.s. 12A under challenge is thus set aside in terms observations hereinabove - Appeal of the assessee is allowed for statistical purpose. 2022 (1) TMI 882 Addition to the taxable income of the assessee trust - proof of investment under section 11(5) of accumulative profits under section 11(2) was not admitted as additional evidence under Rule 46A of the I.T. Rules 1962 - HELD THAT:- The dispute raised in the present appeal requires to be remitted back to the AO. The assessment in the instant case was made u/s. 144 of the Act. The assessee has failed to furnish the proof of evidence of amount accumulated under section 11(2) as per the objects prescribed u/s. 11(5) of the Act before the AO. The AO has, therefore, denied the benefit of accumulated available for exemption u/s. 11 of the Act. The CIT(A) has also refused to admit the additional evidence to demonstrate the compliance of section 11(5) for the purpose of availment of benefits under section 11(2) of the Act without properly weighing the facts and circumstances of the case. Having regard to the observations made by the Hon'ble Supreme Court in the case of Tinbox Company [ 2001 (2) TMI 13 - SUPREME COURT] and to prevent miscarriage of justice, we deem it expedient to restore the issue back to the file of the AO for DENOVO adjudication of the issue in accordance with law after taking into account the evidence and the defence propagated on behalf of the assessee. Needless to say, the AO shall frame the assessment after giving reasonable opportunity to the assessee for setting out its case. The order of the CIT(A) is accordingly set aside and the issue is restored to the file of the AO - Appeal of the assessee is allowed for statistical purpose 2022 (1) TMI 881 Addition u/s 14A - Assessee's former substantive ground that it has not derived any exempt income in the impugned assessment year so as to set section 14A r.w. Rule 8D in motion - HELD THAT:- Case Law Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT ], CIT Vs. Corrtech Energy Pvt. Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT ] and CIT Vs. CIT Vs. Chettinad Logistics Pvt. Limited. [ 2017 (4) TMI 298 - MADRAS HIGH COURT ] holds that the impugned disallowance is attracted only in case an assessee derives exempt income and not otherwise. We thus accept the assessee's instant former substantive grounds for this precise reason alone and make it clear that it shall be very much open for the Assessing Officer to examine the issue afresh in the year of the assessee's deriving actual exempt income in light of all the corresponding financial as per law. This first and foremost substantive ground is accepted in foregoing terms. Interest disallowance u/s36(1)(iii) - HELD THAT:- CIT(A) has rightly invoked the impugned disallowance as the assessee could not prove the impugned expenditure to have been incurred wholly and exclusively for the purpose of its own business. The assessee's case on the other hand, quoted hon'ble apex court's landmark decisions in SA Builders [ 2006 (12) TMI 82 - SUPREME COURT ] and Hero Cycles Pvt. Ltd. [ 2015 (11) TMI 1314 - SUPREME COURT ] that commercial expediency is not merely restricted to assessee's own business but also includes its subsidiaries' business activities as well. Be that as it may, we note that CIT(A)'s order has simply brushed aside the assessee's contentions without examining the clinching commercial expediency in the impugned interest expenditure. We therefore deem it appropriate to restore the instant latter issue back to the Assessing Officer for his afresh factual adjudication of assessee's business expediency element in the impugned advances to its sister concerns to be decided within three effective opportunities of hearing. 2022 (1) TMI 880 Estimation of business income - Estimating the profit rate of 7.5% on the total contract value - AO noted that the gross receipts as per Form No. 26AS with respect to the contract work of Billpower Limited as shown more than gross receipts credited in the profit and loss account of the assessee - HELD THAT:- Assessee has submitted details before the lower authorities i.e. CIT (Appeals), the statement showing reconciliation was also before the learned CIT (A) and before AO during the remand proceedings. The reconciliation submitted by the assessee, as evident that no further clarification is required there from. There is no allegation that the books of accounts of the assessee do not comply with the respective accounting standards which has a mandate of law in view of the Provisions of section 211 of the Companies Act. As the complete details were filed before the learned CIT (A) and where the annual accounts for two years filed before him clearly shows the higher income offered by the assessee from the impugned contract, we do not find any reason to set aside this issue back to the file of the learned Assessing Officer. Furthermore, the appeal before the learned CIT (A) is also a continuation of assessment proceedings only. The learned CIT (A) confirmed addition merely harping on non-compliance by assessee before the Assessing Officer and not applying his mind to the merits of the addition, such order is also not in accordance with the law. If the assessee is non-compliant before Assessing Officer that could not be the reason to brush aside the merits of the case and confirm addition in the hands of the assessee when complete details are available before the Commissioner of Income Tax (Appeals) - we direct to delete the addition - Decided in favour of assessee. 2022 (1) TMI 879 Revision u/s 263 by CIT - Addition u/s 68 - unexplained share application money - Scope of exercise of second AO in the reassessment proceedings - whether second Ld. Pr. CIT erred in exercising for the second time revisional jurisdiction u/s. 263 of the Act which action of his was wholly without jurisdiction? - HELD THAT:- All the thirteen (13) share subscribing companies identity and credit worthiness has been brought on record and genuineness of the transaction are discernable from the bank statements. Thus the second AO on the basis of the aforesaid documents has taken a plausible view and did not draw any adverse inference against the assessee, and the view thus taken by the AO cannot be termed as unsustainable in law. In the impugned order the second Ld. Pr. CIT has not found fault with the action of the second AO in giving effect to the specific directions given by his predecessor while passing the first revisional order on 23.08.2016. Thus, we note that when the second AO while framing the reassessment order pursuant to the specific direction of the First Ld. Pr. CIT's order dated 9.02.2016 (first revisional order) has complied with the specific directions of the First Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 200 pages which reveals the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the share subscribers, the satisfaction of AO as envisaged in Sec. 68 of the Act is a plausible view and the fact that the share subscribers responded to sec. 133(6) notice albeit in the first round and in the second round, the Directors of all investors pursuant to summons u/s. 131 appeared before second AO and produced all documents along with the audited financial statements and other documents referred supra, the assessee had discharged the onus upon it about the identity creditworthiness and genuineness of the share capital and premium collected by the assessee from the respective share subscribers. Since the aforesaid exercise was carried out by the second AO in the reassessment proceedings and the documents referred to above are in the assessment folder, the Second Ld. Pr. CIT erred in holding the reassessment order of the AO in respect of share capital and premium collected by the assessee as erroneous as well as prejudicial to the interest of the revenue. In the light of the aforesaid discussions and on perusal of the documents, we are of the view that AO's view to accept the identity, creditworthiness and genuineness of the share capital and premium collected from the share subscribers was a plausible view and at any rate can be termed as an unsustainable view on law or facts. Second (Ld. Pr. CIT) should himself had conducted an enquiry or at least conducted a preliminary enquiry and was able to bring some evidence/material on record to upset the AO's satisfaction in respect of identity, creditworthiness or genuineness of the share subscribers and thus recorded a finding of fact that the decision of AO's enquiry was faulted or wrong and in that process tried to show that it has resulted in a view which is unsustainable in law which would have justified his action of passing the impugned order u/s. 263 of the Act, which unfortunately is not the case. Since the AO's view on the facts collected and discussed is definitely a possible view, so in the factual background discussed in detail, we are of the considered opinion that Ld. second Pr. CIT ought not to have interfered with the AO's reassessment order which in any case can be classified as 'unsustainable in law' since it is in line with plethora of judicial decisions on the subject. Second AO has conducted enquiry as directed by the First Ld. Pr. CIT on the specific subject matter i.e. share capital and premium collected by the assessee-company. Therefore, the finding of Second Pr. CIT that the Second AO has not conducted enquiry is incorrect and is flowing from suspicion only. Since the assessee company has discharged its onus as discussed supra, and still if the Second Pr. CIT had to find the order of Second AO erroneous for lack of enquiry or for not collecting the entire facts, then the Second Pr. CIT ought to have called for the additional facts which he thinks that the Second AO has not collected from the assessee or the shareholders and then explained in his impugned order as to what effect those additional documents would have made on the second assessment order/reassessment order or in other words the impact on the decision making process of framing the second assessment order due to the failure of second AO's omission to collect the additional documents. second Ld. Pr.CIT, again cannot rake-up the same subject matter without the second Ld. Pr.CIT in the second revisional order spells out where the error happened to second AO as an investigator or adjudicator, which exercise the Second Ld. Pr.CIT has not done, so the second Ld. Pr. CIT cannot be permitted to again ask the AO to start the investigation in the way he thinks it proper on the very same subject on which merger has taken place by virtue of the order of First Ld. Pr. CIT. And if this practice is allowed, then there will be no end to the assessment proceedings meaning no finality to assessment proceedings and that is exactly why the Parliament in its wisdom has brought in safe-guards, restrictions conditions precedent to be satisfied strictly before assumption of revisional jurisdiction. Be that as it may be, as discussed above, we find that the Second Ld. Pr. CIT without satisfying the condition precedent u/s. 263 of the Act has invoked the revisional jurisdiction (second time), so all his actions are ab initio void CIT(A) has made a bald statement that the AO's assessment order attracts Explanation 2(c) u/s. 263 of the Act. - Decided in favour of assessee. 2022 (1) TMI 878 Disallowance of claim of provision for losses - AO has disallowed the provision made by the assessee on the ground that it is not an actual expenditure and not in conformity with the prudent accounting principles - CIT(A) upholding the disallowance of provision for losses holding the same as contingent in nature even though the provision was made following Accounting Standard - 7 - whether CIT(A) has failed to appreciate that disallowance of provision for losses results in taxability of income which does not exist thereby ignoring the principle of taxability and real income - HELD THAT:- Assessee has not given any scientific basis for the provision made either before the Assessing Officer or before the ld. CIT(A) or even before the Tribunal. The main argument of the assessee is that due to various unforeseen events which occurred during the course of project execution, certain unplanned costs had to be incurred by the assessee to complete the project. These costs including significant increases in material, labour and other costs to address these unplanned events, the provision of loss has been created. This is the only submission made before us. The above submission was neither placed before AO nor before the ld. CIT(A). In so far as the above statement is concerned, the ld. Counsel has not explained any basis as to how the material cost and labour cost are increased. Except stating the above, the ld. Counsel for the assessee has not explained any scientific basis for which the assessee is going to incur such huge expenditure as a loss. There is no change in the terms and conditions of the contract entered into and subsequently executed and same amount has been received. The assessee has not placed any material on record to show that any increase in the cost of material and cost of labour and other services to anticipate future loss. Apart from the above, the assessee has not incurred any loss and the assessee gain profit much more in the subsequent years. In fact, the assessee reversed the provision made in this year under consideration in subsequent two financial years. Therefore, the above facts clearly show that there is no basis for the assessee to make the provision and it is only an estimation made by the assessee. Thus estimation of future loss was neither based on any actuarial or any scientific method of determination of its liability and thus, we confirm the orders of authorities below that the losses could not be allowed on a projected basis unless they are actually incurred and verifiable with proper accounting methods. Thus, the ground raised by the assessee stands dismissed. 2022 (1) TMI 877 Delayed Employee s share of contribution to PF and ESI - determining the due date - scope of amendment made to section 36(1)(va) and 43B - HELD THAT:- In the case of Essae Teraoka Pvt. Ltd. [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] has taken the view that employee s contribution under section 36(1)(va) of the Act would also be covered under section 43B of the Act and therefore if the share of the employee s share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act, then the assessee would be entitled to claim deduction. In this case there is no dispute that the assessee made payment of the Employees share of PF/ESI on or before the due date for filing return of income for AY 2017-18 u/s.139(1) of the Act. The next aspect to be considered is whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also. On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In many decisions on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act, deserves to be deleted. - Decided in favour of assessee. 2022 (1) TMI 876 Revision u/s 263 by CIT - disallowance of expenses relatable to exempt income by invoking the provisions of Section 14A r.w.r 8D(2)(ii) (iii) i.e., interest disallowance and disallowance of club expenses - HELD THAT:- Admitted facts are that first of all this is a limited scrutiny assessment and assessee has filed reply to query raised by AO under notice issued u/s.142(1) - assessee before AO as well as before PCIT during revision proceedings filed complete details i.e., balance sheet and schedules forming part of balance sheet where complete details of own funds of ₹ 27,95,58,933/- and investments made in purchase of shares amounting to ₹ 19,19,96,254/- are available. Once these funds are available which are more than investment made, neither the AO nor PCIT proves any nexus, in that eventuality only presumption can be drawn that the assessee might have invested these funds out of interest free funds available with him. This presumption is supported by Hon ble Bombay High Court in the case of HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] - Hence, we find that the revision order passed by PCIT is without any basis on this issue and hence, deserves to be quashed. Disallowance of club expenses - We noted that there is no finding by PCIT that these are not incurred for the purpose of business and PCIT himself noted that the AO should have investigated this issue further which he has not done. What amount of investigation is required, that AO has to take a call and he has made investigation by issuing notice u/s.142(1) of the Act and the assessee had filed details and explained that it is for the purpose of business. Once, this is the case and even on merits, we are of the view that club expenses are for the purpose of business. Hence, on this issue also we reverse the order of PCIT revising the assessment and this issue is decided in favor of the assessee. In the result, the revision order is quashed and the appeal of the assessee is allowed. 2022 (1) TMI 875 Reopening of assessment u/s 147 - Whether CIT (A) has erred on law and facts by exceeding statutory powers in directing the AO to proceed u/s 147/148 read with section 150 of the Act against the assessee? - HELD THAT:- Because a cursory reading of sections 147/148 of the Act makes it clear that power u/ss 147/148 conferred by the Act on AO are to be used by him independently only if he has reason to believe that any income and also other income chargeable to tax has escaped assessment for the year under consideration. AO is not obliged to proceed on the basis of directions issued by his higher authority which would otherwise amounts to borrowed satisfaction. So, the directions issued by ld. CIT (A) are beyond his power conferred by section 250 of the Act. Hon ble Delhi High Court in case of Banwari Lal Sons [ 2002 (3) TMI 15 - DELHI HIGH COURT ] while deciding the identical issue held that, the appellate authority cannot extend the statutory time limit for reassessment by issuing suo motu directions illegally or unrelated to the subject matter of the appeal being decided by the ld. CIT (A) against the impugned order of rectification. In view of all since ld. CIT (A) being a statutory authority has no power to exceed his jurisdiction beyond the subject matter of the appeal being decided by him against the impugned order of rectification, the directions issued by him are not sustainable, hence set aside. However, concerned AO is at liberty to proceed against the assessee if so desires only in accordance with the provisions contained u/s 147/148 of the Act. Resultantly, the appeal filed by the assessee is hereby allowed. 2022 (1) TMI 874 Validity of Reopening of assessment u/s 147 - reopening resorted to beyond four years from the relevant assessment year - Eligibility of reasons to believe - reasons note that the EDC charges were shown by the assessee as a liability in its Balance Sheet under the head other liabilities and rest of the reasons is only the interpretation of the AO regarding the nature of the receipts of EDC being revenue in nature - In the last para of the reasons the AO again reiterates the disclosure of the EDC received by the assessee as a liability in its Balance Sheet - HELD THAT:- Except for the fact that the assessee received EDC during the year, no other fact has come to the knowledge of the AO and this fact as per his own admission, was disclosed by the assessee in his Balance Sheet as liability. Further it is a fact on record, which was brought to the notice of the CIT(A) also and has remained uncontroverted before us, that during assessment proceedings the assessee was asked to submit details of other liabilities, in response to which the assessee submitted the said details disclosing therein the fact of EDC received from land developers. Therefore, to say that the assessee had concealed any material fact relating to EDC, is not correct. That he had reflected it is as a liability in the Balance Sheet and not shown it as revenue receipt in its Profit Loss Account, is not a matter of fact but on the contrary it is an interpretation of the fact of receipt of EDC regarding its nature and the reasons do not bring out any material /information with the AO leading him to form this opinion of the EDC charges being Revenue in nature. DR has been unable to enlighten us as to what material fact relating to EDC was concealed by the assessee so as to empower the AO to assume jurisdiction to reopen the case of the assessee beyond four years from the relevant assessment year. No hesitation in holding that since the AO has failed to point out concealment of any material fact relating to income escaping assessment, being EDC, the reopening of the case of the assessee resorted to beyond four years from the assessment years, is against the provisions of law. The jurisdiction assumed by the AO therefore, to frame the assessment u/s 147 of the Act is, therefore, not as per law. The order passed, by the AO as a consequential is not sustainable in law and is, therefore, set aside. - Decided in favour of assessee. 2022 (1) TMI 873 Addition u/s 36(1)(va) on account of delayed payment of employees contribution towards PF ESI - amount has been deposited within the grace period of 5 days as provided under the relevant Act - Scope of amendment - HELD THAT:- In the instant case, admittedly and undisputedly, the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case, the impugned assessment year is assessment year 2014-15 and therefore, the said amended provisions cannot be applied in the instant case. See SHRI GOPALAKRISHNA ASWINI KUMAR [ 2021 (10) TMI 952 - ITAT BANGALORE] . Addition towards the deposit of the employees s contribution towards ESI and PF paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee. 2022 (1) TMI 872 Unexplained excess cash and stock found and surrendered during the course of survey as business income - survey action u/s 133A - applicability of provisions of section 115BBE - CIT-A deleted addition - HELD THAT:- The crux of the statement given during the course of survey on the facts that the alleged stock was not accepted to be undisclosed income from other sources but was a part of the business income which required some reconciliation as books of account were not completed at the time of survey proceedings - since the income alleged excess stock and excess cash found during the course of survey is part of the business income, the provisions of section 115BBE would not be applicable as rightly held by the ld. CIT(A) and also in view of the facts that there was an amendment in the provisions of section 115BBE w.e.f. 1st April 2017 and the assessee s case is pertaining to A.Y. 2015-16, thus, it is not be applicable on the case of assessee. Observation of the Ld. AO clearly indicates that he is not aware how to disclose the undisclosed income in the books of account. In case he was not satisfied with the book results, he has to first find error/mistake in the books of account, give detailed finding on it, and then should have re-casted the trading account. The manner in which the Ld. AO has made addition is not justified and thus Ld. CIT(A) has rightly deleted the addition by accepting book results shown by the assessee. AO has also not given weightage to the fact that once the excess stock has been debited in the Profit and Loss Account then the unsold stock as on 31st March 2015 also forms part of the closing stock which is to be valued as per the method regularly adopted by the assessee. We, find no reason to interfere in the finding of Ld. CIT(A) deleting the impugned addition made by the ld. AO and has also holding that the provisions of section 115BBE of the Act are not applicable on the assessee since the income declared during the course of survey is a business income . Accordingly all three grounds of appeal raised by the revenue are dismissed. Customs 2022 (1) TMI 871 Jurisdiction - arrest made in the instant case of the petitioner was in accordance with law having been made by the DRI and not a proper person in terms of the Customs Act or not - HELD THAT:- Response of the respondents be filed within a period of four weeks and in the meantime till the next date of hearing the proceedings in relation to file bearing DRI F.NO. DRI / IZU/CI/INT-02/ENQ-03/2021 are stayed. The matter in the circumstances, is directed to be renotified for the date 1.2.2022. 2022 (1) TMI 857 Valuation of imported goods - import of 52000 Kilograms of Black Pepper from Sri Lanka - prohibited goods - alleged overvaluation of said consignment at ₹ 505/- per Kilogram to get over notifications which prohibit import of black pepper valued at below ₹ 500/- per Kilogram - Notification No.21/2015-20 dated 25.07.2018 - Whether there is circumnavigation of notification qua this import is the subject matter of adjudication? - HELD THAT:- Incidentally the import is by a Vessel by water from Sri Lanka. Show cause notice has been issued, adjudication is under way. The office of the first respondent has made it clear that samples have been drawn investigation is under way and the consignment may not be required any more for further investigation. The release is also recommended by the fourth respondent-Customs Department. Moreover an earlier consignment imported by the same importer in March 2021 i.e., 37000 Kilograms of black pepper valued a little over INR 1.86 Crores was released. In this case also the purchase of black pepper was at ₹ 505/- per Kilogram and the consignment was detained on allegations of overvaluation to get over notifications banning import of black pepper valued at less than ₹ 500/- per Kilogram. There is no opinion or view on the adjudication that is under way. The question as to the actual value of the imported consignments is to be adjudicated separately as per Customs Act, 1962 and the instant order has been made perambulating within the perimeter of Section 110A of Customs Act, 1962 - Captioned writ petition is disposed of. Insolvency & Bankruptcy 2022 (1) TMI 870 Approval of Resolution Plan - statutory dues (tax liability) - difference made in the Code with regard to statutory dues and other claims (Operational Creditors) pursuant to a contract or not - any prior approval for extinguishing statutory dues is required or not - wisdom of the COC can be interfered with or not - COC has complied with the rules and regulations of the Code or not - Section 31 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The Appellant being Government of India and the statutory dues payable to the Central Government is covered under Operational Debt as defined in Section 5(21) of the Code, 2016 therefore, the Appellant fall under the category of Operational Creditor and its statutory dues fall under the category of Operational Debt. Therefore, for all the purposes the claim of the Appellant come within the definition of Section 5 of Sub Section 21 of the I B Code, 2016. As stated supra, the claim of the Appellant is an Operational Debt and for all purposes the I B Code, 2016 shall only apply. There is no special treatment or category made separately for such dues and the claim of the Appellant are to be treated as Operational Debt. - In view of the settled law, there is no special treatment that can be accorded to statutory dues under the scheme of the I B Code. Statutory dues stand on different footing than the Operational Creditors, whose claims have arisen pursuant to a contract - HELD THAT:- In the present case, the Committee of Creditors has complied with all the Rules and Regulations and the plan has been Approved by the Adjudicating Authority by 100% of voting in the 8th Committee of Creditors Meeting held on 06.12.2019. From the mandatory contents of the Resolution Plan, it is evident that the rules and regulations and Provisions of Law has been followed by the Committee of Creditors - having complied with all the rules and regulations the Adjudicating Authority rightly approved the plan of the Successful Resolution Applicant. In the Order of the Adjudicating Authority clearly states that the same shall be binding on the Corporate Debtor, its employees, members, creditors, including the Central Government, State Governments, Local Authority, Guarantors and other Stakeholders. In pursuance of the approved Resolution Plan by the Adjudicating Authority it is evident that the Appellant was paid a sum of ₹ 1 Crore towards its dues and there is no denial from the Appellant with regard to payment of ₹ 1 Crore - it is also evident that the Appellant was paid to the extent of 36.30% of the amount claimed by the Appellant. There are no infirmity or irregularity in the order passed by the Adjudicating Authority which is impugned before this Tribunal - appeal dismissed. 2022 (1) TMI 869 Seeking to intervene and object to the Appeal filed by the Appellant - Rule 11 of the NCLAT Rules, 2016 read with Rule 31 of the NCLAT Rules, 2016 - HELD THAT:- It appears that due to order dated 28.10.2021 entire CIRP has come to standstill and there is no progress in settlement outside the court in the matter and only oral assurance of different dates was given by the Learned Counsel for the Appellant and Respondent. This Bench of this Tribunal invoking inherent power and hereby ordered to vacate the interim order dated 28.10.2021 passed by this Bench in Company Appeal (AT) (Insolvency) No. 884 of 2021 whereby the constitution of COC was stayed - Application disposed off. 2022 (1) TMI 868 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Oprational creditor - pre-existing dispute - last payment was made by the Corporate Debtor on 07.11.2013, the Demand Notices were issued on 30.08.2017 and on 25.07.2018 and the Application was filed on 05.10.2018 - bar of time limitation - C Forms/Sales Tax declaration were given for the entire supply portions - liability and admission as stipulated under Section 18 of the Limitation Act, 1963 - HELD THAT:- In the instant case, the correspondence on record evidences that there indeed was a delay in the performance of the Contract and the final Notice was issued on 01.12.2013 by the Corporate Debtor to complete the works. The first Respondent/ Operational Creditor stated in their Reply that despite several requests and reminder letters from 2013 to 2017, the Corporate Debtor , instead of paying the due amounts, raised these baseless allegations and disputes. It is the case of the Operational Creditor that there is no Existence of Dispute prior to the issuance of Demand Notice - The Operational Creditor only accepted the debit of ₹ 1,25,80,121/- against 5% entry tax which was also accordingly been deducted in calculating the principal amount of Operational Debt of ₹ 13.69 Crores. Except these debits, none of the debits have been accepted or consented to by the Operational Creditor . It is also their case that fraudulent debit notes were raised by the Corporate Debtor as Purchase Orders were placed with Power Former Engineer for repairs of centrifugal machine, which was never part of the scope of work of the first Respondent. On 29.03.2014, it is the case of the Corporate Debtor that the Operational Creditor had abandoned the site and therefore, the Corporate Debtor had to take over the Project and make all the relevant payments to the vendor. The material on record shows that on 28.04.2014 another letter was addressed by the Corporate Debtor to the Operational Creditor citing all the inadequacies in the performance of the contract. On 19.06.2014, the Operational Creditor once again raised the payment for ₹ 13.34 Crores - It is clear from Section 8(2)(a) that Existence of a Dispute , (if any, or) record of the pendency of the Suit or Arbitration Proceeding filed before the receipt of such Notice or invoice in relation to such dispute should be brought to the notice of the Operational Creditor within 10 days of receipt of the Demand Notice. In this case, the Demand Notice under Section 8 of the Code claiming a sum of ₹ 13.69 Crores was issued on 25.07.2018. On 07.08.2018, the Corporate Debtor responded to the Demand Notice referring to various communications, Minutes of the Meeting and submitted that there was a Pre-Existing Dispute . It is pertinent to note that on 09.07.2016, prior to the issuance of the Demand Notice under Section 8 of the Code , the Operational Creditor invoked Arbitration pursuant to the 8 project orders issued by the Corporate Debtor , which itself substantiates the Existence of a Dispute . In the Notice invoking Arbitration, the Operational Creditor has stated that there is an outstanding of ₹ 18,12,21,452/- and has further stated that they are ready to settle the disputes through Arbitration. A brief perusal of the documents on record evidence that the Operational Creditor admitted that the contract was on lumpsum turnkey basis and stated in the Arbitration Notice that the Corporate Debtor had raised issues relating to non-adherence of the terms of the contract. The communication between the parties as noted in para 10 read together with the Arbitration invoked by the Operational Creditor , there is an Existence of a Dispute between the parties which is a genuine dispute and not a spurious, patently feeble legal argument or an assertion of fact unsupported by evidence. Appeal allowed. Service Tax 2022 (1) TMI 867 Violation of the principles of natural justice - SVLDRS-1 Declaration - rejection of the application under the scheme without rendering any opportunity of hearing to the declarant - HELD THAT:- It is not in dispute that the impugned orders have been passed without rendering any personal hearing to the petitioner. This Court in case of Thought Blurb [ 2020 (10) TMI 1135 - BOMBAY HIGH COURT ], after dealing with the provisions of the said scheme has held that summary rejection of the application under the said scheme without rendering any opportunity of hearing to the declarant would be in violation of the principles of natural justice. The rejection of the application (Declaration) will lead to adverse civil consequences for the declarant as he would have to face consequences of enquiry or investigation or audit - Non-compliance to the principles of natural justice would impeach the decision making process, rendering the decision invalid in law. The rejection of the Declaration under the said scheme filed by the petitioner without rendering a personal hearing to the petitioner, leads to adverse civil consequences for the petitioner as the petitioner would have to face the consequences of enquiry or investigation or audit. The impugned orders are in gross violation of the principles of law laid down by this Court in the case of Thought Blurb would apply to the facts of this case. Whether the petitioner was eligible to make a Declaration under the said scheme and would fall under one of the categories of the persons who are eligible to make such Declaration under section 125(1) of the said scheme or not? - HELD THAT:- Section 125(1)(e) of the said scheme provides that a person who has been subjected to an enquiry or investigation or audit and the amount of duty involved in the said enquiry or investigation or audit has not been quantified on or before 30th June, 2019 is not eligible to make a Declaration under the said scheme. In this case, the tax dues were quantified by the petitioner in the statement of its director Mohd.Azhar Ali recorded by the investigating officer on 28th February, 2019 - A perusal of section 123(c) of the said Scheme also clearly indicates that where an enquiry or investigation or audit is pending against the declarant, the amount of duty payable under any of the indirect tax enactment which has been quantified on or before 30th June, 2019 would fall within the term tax dues under the said section 123(c) of the said scheme. This Court in case of Thought Blurb (supra) has considered the objects and reasons and the purpose of introducing the said Sabka Vikas (Legacy Dispute Resolution Scheme, 2019) framed by the Government of India. The Government took cognizance of the fact that GST had completed two years. An area that concerns was that there were huge pending litigations from pre-GST regime. More than 3.75 lakhs crores were blocked in litigations in service tax and excise. There was need to unload this baggage and allow the business to move on and accordingly proposed a Legacy Dispute Resolution scheme that would allow quick closure of those litigations - A perusal of the statement of objects and reasons of the said scheme indicates that the scheme was a one time measure for liquidation of past disputes of Central Excise and service tax as well as ensure the disclosure of unpaid taxes by a person eligible to make a Declaration. The matter is remanded back to the Designated Committee to consider the said Declaration dated 30th December, 2019 filed by the petitioner in terms of the scheme as valid Declaration under the category investigation, enquiry and audit and grant consequential reliefs to the petitioner after providing due opportunity of hearing to the petitioner before finally deciding the issue - Appeal allowed by way of remand. 2022 (1) TMI 866 Seeking to re-consider the petitioner s request for benefit under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - scheme was issued on 21/06/2020 demanding the entire amount of liability on the premise that the petitioner had not made any application under the Scheme - HELD THAT:- Perusal of the form submitted by the petitioner indicates that the respondent No.2 found that there was no specific quantification done as a result of which the petitioner has been denied benefit of the said Scheme. The petitioner had moved his application with the respondent No.2 but after making enquiries with the respondent No.3 which reported not receiving any application from the petitioner, his case has not been considered for benefit under the said Scheme. It is undisputed that such application under the Scheme was made to the respondent No.2 on 31/12/2019 within time. In that view of the matter the consideration of the petitioner s claim for relief under SVLDR Scheme 2019 ought to be undertaken by respondent Nos.2 and 3. The respondent Nos.2 and 3 are directed to reconsider the form submitted by the petitioner under the SVLDR Scheme 2019 dated 31/12/2019 in the light of Circular dated 27/08/2019 - application allowed. 2022 (1) TMI 865 Refund for the service tax - development charges - time limitation - appeal was rejected as it was filed beyond the prescribed time limit of six months - HELD THAT:- It is seen that the service tax has been paid on 20.8.2014. Appellant also availed CENVAT credit on the same. After the introduction of GST, the appellant carried forward the credit to TRAN-1 credit and reflected the same in the TRAN-1 filed by them. After introduction of section 104 by Finance Act, 2017 whereby exemption from service tax was provided on development charges by way of grant of refund, SIPCOT had issued a letter to the appellant informing the appellant to file the refund claim. The due date for filing the refund claim, as per the provisions contained in 104(3) of Finance Act, 2017 is 30.9.2017. The appellant received the letter from SIPCOT on 11.9.2017. However, the refund claim has been filed by the appellant only 26.11.2018 which is beyond the period of one year. It is clear that the refund claim has been filed within a reasonable time and without much delay after receiving intimation from SIPCOT. In the present case, there is inordinate delay after receiving intimation from SIPCOT on 11.9.2017. For these reasons, these decisions are distinguishable on facts and not applicable to the case on hand - In the case of JPG CONSTRUCTION PVT LTD. VERSUS COMMISSIONER OF GOODS SERVICE TAX [ 2021 (2) TMI 367 - CESTAT NEW DELHI] , which is a decision relied by learned AR, it has to be noted that the refund claim in that case is one under section 102 and not under section 104. Under section 102, it is always the service provider who has to make the claims. There was no requirement to get document or certificates. The said case also would not be applicable to the facts. There is inordinate delay of more than one year from the intimation received from SIPCOT, the rejection of refund claim as time-barred is legal and proper - Appeal dismissed. Central Excise 2022 (1) TMI 864 Clandestine Removal - mild steel ingots from sponge iron - pig iron - cast iron and scrap evidenced by disproportionate consumption of raw material and energy - corroborative evidences or not - preponderance of probability - HELD THAT:- In the absence of any supporting evidence, it would appear that the duty leviability on manufacture is sought to be imposed on seeming inefficiency in the production process. There is also no escapement from the factual determination of the trial production in two shifts conducted under the aegis of central excise authorities. The backbone of quasi-judicial determination by preponderance of probability fails at the precipice of the trial production to afford a leap of rational inference which no extent of dogma can bridge. The failure to maintain prescribed records are no less attributable to the lack of monitorial oversight prescribed under Central Excise Rules, 2002 than the probability of having been suppressed to disable investigations into possible evasion of duty. That mutual disregard of obligation cannot be the bedrock for presuming clandestine removals by application of formulae - there is nothing on record to indicate that the shortage of raw materials pertains to the period of the impugned demand or that scrap had been procured from unknown sources. These remain as blanks in the jigsaw puzzle assembled by the adjudicating authority to confirm the demands proposed in the respective show cause notices. There is no explanation forthcoming in the impugned orders for discarding of the energy consumption determined during the trial production except to cast doubts by relying upon reports that, admittedly, did not test the furnace deployed by the appellant-assessee - the singular continuity of adjudicatory evaluation from the earlier period, discarded by the Tribunal in the appeal of the very same assessee and individual, to the present demand, the impugned order is bereft of sufficient facts and evidence to be sustained in appellate proceeding. Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2022 (1) TMI 863 Levy of penalty under section 12(3)(a) of the TNGST Act, 1959 - validity of assessment order - main contention of petitioner is that the Tribunal erred in restoring the levy of penalty on the premise that the returns filed by the petitioner were not available in the assessment file and therefore, no returns were filed during the assessment years in question - HELD THAT:- The Tribunal before reversing the order of the first appellate authority, ought to have remanded the matter back to the assessing officer to verify, as to whether the submission of the petitioner that the returns have been filed, is factually correct. But, the Tribunal failed to do so. In such circumstances, the order passed by the third respondent / Tribunal, restoring the levy of penalty, cannot be allowed to be sustained. The matter remanded back to the assessing officer to verify whether the petitioner had filed their returns and decide the legality of levy of penalty under section 12(3)(a) of the TNGST Act, 1959, after giving reasonable opportunity of hearing to the petitioner - petition allowed by way of remand. 2022 (1) TMI 862 Levy of penalty under Section 10A of the Central Sales Tax Act, 1956 - C-Forms - inter-state sales - absence of a finding that the petitioner had falsely represented at the time of purchase of goods that the same were covered by the registration certificate issued to them - section 10(b) of the CST Act - HELD THAT:- Admittedly, in the present case, there was no finding either in the assessment order or in the orders passed by the Appellate Authorities that the petitioner had made false representation that the goods purchased against 'C' Form from the inter state dealers, were covered under the Form 'B' issued to them, thereby constituting the offence under section 10(b) warranting levy of penalty under section 10A of the CST Act. In fact, all the authorities confined their enquiry to merely find, as to whether the goods purchased were mentioned in the registration certificate issued to the petitioner and they failed to make any enquiry, as to whether the petitioner had falsely represented when purchasing the goods that the same were covered by the certificate of registration issued to them, though not covered - the essential ingredient of mens rea for levy of penalty on the petitioner, was not established. In such circumstances, the findings of the Assessing Officer as confirmed by the First Appellate Authority as well as the Tribunal that the petitioner committed the offence under section 10(b) warranting levy of penalty under section 10A of the Act, cannot be allowed to be sustained. Both the writ petitions stand allowed by setting aside the orders passed by the authorities below, with respect to levy of penalty - decided in favor of petitioner. 2022 (1) TMI 861 Input Tax Credit - Intra-state Stock transfer - entitlement to input tax credit on stock transfer made by Unit-II to Unit-I which is stated to be intra-state stock transfer - effect of amendment incorporated in the year 2011 in Section 18 (8) (ix) of the JVAT Act, 2005 - HELD THAT:- In order to claim input tax credit petitioner is bound to establish a case that he is covered under any of the sub-sections of section 18 and is not present in the negative list contained u/s 18 (8) of the JVAT Act, 2005. Intra-state Stock transfer does not appear in section 18 (8) (ix) but merely because of the reason that it does not appear in section 18 (8) (ix) does not make it eligible for a claim of input tax credit. Whether Stock transfer of such goods is eligible for input tax credit or not particularity if such goods are subject to intra-state stock transfer is the point for consideration. The whole purpose of the taxation law intends to ensure that the State is not deprived of its taxation rights and the consumer is not overburdened by paying double taxes and therefore VAT law was brought into force. When intra-state transfer of sock is made practically there is no sale and such goods may be used as raw material or consumed as raw material in course of manufacturing of final product but only at the time of sale of the final product the taxes paid on such goods can be claimed as input tax credit. A Composite reading of the proviso to Section 18 (8)(ix) of the JVAT Act, 2005 clearly shows that where stock transfer of goods are made from the State of Jharkhand to any other state then in terms of the proviso the interest of state of Jharkhand is protected and the consumer is not overloaded with excessive tax and therefore, proportionate input tax credit is allowed on inter-sate stock transfer of goods or inter-state sale of goods. This is not applicable when there is intra-sate transfer of stock. In case of intra-state transfer of stock if input tax credit is claimed and if input tax credit is allowed then the other unit of the Petitioner will be at full liberty to subsequently make an inter-state transfer of stock with no requirement to claim input tax credit as he has already availed the same through its unit-11 which would be undoing the mandate of law in terms of Section 18 (8) (ix) of the JVAT Act, 2005. This Tribunal is of the considered view that the dealer with a common TIN number can definitely claim input tax credit even on raw materials used for the purpose of manufacturing of goods at the time of its end product and not on stock transfer of goods claiming to be an intra-state stock transfer. Amendment incorporated u/s 18 (8) (ix) of the JVAT Act, 2005 - HELD THAT:- This Tribunal is of the considered view that Section 18 (8) (ix) of the JVAT Act, 2005 does not allow expressly or by implication to include allowance of ITC on intra-state transfer of stocks relating to goods which are likely to be used as raw materials for manufacture and subsequent sale within the state of Jharkhand. This Tribunal is of the considered view that the Revision Application does not have any merit - Revision Application is accordingly dismissed. Indian Laws 2022 (1) TMI 860 Jurisdiction - power of CCI to inquire into allegations of bid rigging, collusive bidding, and cartelisation in the tender process for appointment of selling agents and distributors for lotteries organised in the State of Mizoram - Seeking investigation in respect of State Lottery run by the State of Mizoram - Competition Act, 2002 - HELD THAT:- A simple aspect of anti-competitive practices and cartelisation has got dragged on for almost ten years in what appears to be a mis-application by the High Court of the interplay of the two Acts, i.e., the Competition Act and the Regulation Act. We have already observed that respondent No. 1 seems to have played a very non-appreciable role in our opinion. What ought to have weighed with respondent No.1/State is what is sought to contend now, i.e., it is a victim of cartelisation and it is in its interests to cooperate with the CCI. The complaint of respondent No.4 may have been also under Section 4 of the Competition Act but it had not even referred that aspect to the DG and had decided not to proceed against the State. That should have been the end of the matter so far as the State is concerned. Yet the State, in our view, under a misconception, approached the High Court, possibly in an endeavour to defend one of its officers, respondent No. 2, whose conduct has not been very favourably commented on by the DG. Even if the State felt that these comments of the DG were not sustainable, such an aspect could have been pleaded with the CCI in pursuance of its notice and possibly the matter would have been closed at that stage - It would have been beneficial even to the State to have come to a conclusion one way or the other. The interdict post the investigation report by the DG and prohibiting the CCI from carrying out its mandate under the Competition Act is unsustainable. There was no conflict in the interplay of the two Acts that even needed reconciliation or prohibition against either one, as the limited scrutiny was to examine the mandate of Section 3(1) read with Section 3(3) of the Competition Act. Lotteries may be a regulated commodity and may even be res extra commercium. That would not take away the aspect of something which is anti-competition in the context of the business related to lotteries - The lottery business can continue to be regulated by the Regulation Act. However, if in the tendering process there is an element of anti-competition which would require investigation by the CCI, that cannot be prevented under the pretext of the lottery business being res extra commercium, more so when the State Government decides to deal in lotteries. The complaint having been made by respondent No.4 under Section 19 of the Competition Act, which provides that the Commission may inquire into certain agreements and dominant position of enterprise as envisaged under sub-section (1) of Section 3 and sub- section (1) of Section 4 of the Competition Act. The CCI found out a prima facie case for investigation by the DG under Section 3(1) of the Competition Act, the DG opined adversely, and the CCI issued notice giving an opportunity to the affected parties to place their stand before it. This process ought to have been permitted to conclude with the right available to the affected parties to avail of the appellate remedy under Section 53B of the Competition Act. Appeal allowed. 2022 (1) TMI 859 Dishonor of Cheque - seeking relief in the nature of Public Interest Litigation - personal or vested interest or not - HELD THAT:- It is evident that this is not a Public Interest Litigation but is a private and publicity interest litigation. It has been held by the Supreme Court in several judgments that while seeking relief in the nature of Public Interest Litigation, the Petitioner should have no personal or vested interest and should not be guided by any self-gain. In the garb of so-called Public Interest Litigation, the Petitioner is seeking to in effect challenge the order passed by Learned MM with regard to execution of bailable warrants, in a matter relating to Section 138 of Negotiable Instruments Act, 1881. The vested interest of the Petitioner is, therefore, writ large and the petition deserves to be dismissed on this short ground. Petition dismissed. 2022 (1) TMI 858 Dishonor of Cheque - insufficiency of funds - misuse of blank signed cheques by power agent - HELD THAT:- It is the uncontroverted case of the petitioner that her financial affairs were looked after by her husband and that she was not aware of all the transactions and the issuance of cheques and that even her income tax returns were filed by her husband. In this backdrop, a perusal of the complaint reveals that the alleged amount of ₹ 17,00,000/-, which is alleged to have been borrowed by the petitioner from her husband's brother, no details as to the manner in which the amount has been paid to the petitioner has been averred. Though it is the averment in the complaint that a sum of ₹ 14,00,000/- was borrowed by the petitioner through banking channels, however, no material whatsoever finds place in the complaint to substantiate such a payment - the contention of the petitioner that there is contradiction in the amount alleged to have been received by the petitioner in the notice and in the complaint assumes significance. In the absence of the Principal appearing before this Court to substantiate his case and there being no tangible materials based on which the complaint given by the Principal could be made out, this Court is of the considered opinion that the initiation of the complaint is only for the purpose of harassing the petitioner and cannot be said to be a pure case of cheque dishonour attracting Section 138 of the Negotiable Instruments Act. Petition allowed.
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