TMI Tax Updates - e-Newsletter
October 12, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. CIVIL COURTS ARE NOT COMPETENT TO ADJUDICATE SUITS UNDER INDUSTRIAL DISPUTES ACT, 1947

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Revenue Deficit Grant of ₹ 9,871 crore released to 17 States

2. APEDA signs MoU with ICAR-Central Citrus Research Institute, Nagpur for boosting exports of citrus and its valued-added products.

3. Income Tax Department conducts searches in Kanchipuram, Chennai and Vellore

Notifications

GST - States

1. 38/1/2017-Fin(R&C)(218)/1938 - dated 6-10-2021 - Goa SGST

Amendment in Notification No. 38/1/2017Fin(R&C)(191) dated 12th March, 2021

2. 35/2021-State Tax - dated 7-10-2021 - Maharashtra SGST

Maharashtra Goods and Services Tax (Eighth Amendment) Rules, 2021

3. G.O. Ms. No. 29 - dated 30-9-2021 - Puducherry SGST

Seeks to extend timelines for filing of application for revocation of cancellation of registration to 30.09.2021, where due date for filing such application falls between 01.03.2020 to 31.08.2021, in cases where registration has been canceled under clause (b) or clause (c) of section 29(2) of the PGST Act

4. G.O. Ms. No. 28 - dated 30-9-2021 - Puducherry SGST

Amendment in Notification G.O. Ms. No. 6, dated 14th January, 2019

5. G.O. Ms. No. 27 - dated 30-9-2021 - Puducherry SGST

Supersession Notification G.O. Ms. No. 72, dated 10th December, 2020

6. 413-A/CTD/GST Cell/2018 - dated 30-9-2021 - Puducherry SGST

Corrigendum - Notification No. 5/2021-Puducherry GST (Rate), dated 14th June, 2021

Highlights / Catch Notes

GST

• Court Overturns Goods Seizure; Ownership Claim Ignored u/s 129(3) UP GST Act 2017, Case Reopened.

  Case-Laws - HC : True owner of goods which have been seized - Section 129(3) of the UP GST Act, 2017 - While the Revenue Counsel would contend that the goods are not traceable to a bona-fide owner at the same time, in the facts of the present case, it does appear that the impugned order dated 24.08.2021 had been passed without consideration of the petitioner's claim to ownership over the goods in question. - there is evidence of the petitioner (claiming as owner) having deposited the amount of GST on 23.08.2021 which was the date fixed in the proceedings initiated under the notice dated 17.08.2021 issued under Section 129(3) of the Act. - Ex-parte order set aside - Matter restored back - HC
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• High Court Restores GST Registration, Cites Covid-19 Pandemic as Grounds for Condoning Delay in Filing Returns.

  Case-Laws - HC : Cancellation of registration of the petitioner - The competent authority can condone the delay for filing the returns, in the attending facts and circumstances, more so, with the Onset of Pandemic Covid-19, preventing further follow up action. In the peculiar facts and circumstances, the authority ought to have condoned the delay which unfortunately was not done, despite the petitioner having made a fervent request for condonation of delay in accepting the return, preventing cancellation of registration. - GST registration restored - HC
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Income Tax

• High Court Grants Exemption u/s 10(23C)(iiiad) for Educational Institution, Disregarding Society's Donations in Ruling.

  Case-Laws - HC : Exemption u/s 10 (23C) (iiiad) denied - clubbing the voluntary contributions received by the appellant Society with the receipts of the educational institution - Tribunal has also erred in looking at provisions Section 12 AA of the Act and the fact that the donations received by the Society may not have been received with any specific instructions. It is not relevant in the facts of the present case. It is so because here the assessee had only claimed the benefit of Section 10(23C)(iiiad) with respect to the receipts of the Institution, Information Management and Technology and it had not claimed any benefit with respect to the donations received by the Society - benefit of exemption allowed - HC
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• Court Rules Commission Expenses Admissible for Assessee, Linked to Sales Revenue in Relevant Year.

  Case-Laws - AT : Disallowance of provision for commission expenses - In the instant case, the assessee is aware that it would be liable to pay commission amount to the agent when the sales is finalized and this commission expenditure is related to the revenue generated during the year under consider. Hence it is also a known liability for this year. Hence, as per accounting principles discussed above, the said commission expenditure should be provided for in the books of accounts when the relevant sales are accounted. On this count also, the claim of the assessee is admissible - claim allowed - AT
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• Court Rules Reopening of Assessment u/s 147 Invalid Due to Change of Opinion, Not Assessee's Fault.

  Case-Laws - HC : Reopening of assessment u/s 147 - double deduction u/s 80IB - In the reasons for re-opening, there is not even a whisper as to what was not disclosed. In our view, this is not a case where the assessment is sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of the assessee to disclose truly and fully all material facts that were necessary for computation of income but this is a case wherein the assessment is sought to be re-opened on account of change of opinion of the Assessing Officer about the manner of computation of the deduction. - - HC
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• Court Rules Denial of Natural Justice as Insufficient Time Given for Show Cause Response; Case Sent Back for Review.

  Case-Laws - HC : Denial of principles of natural justice - Less time to respond to SCN - As assessing officer ought to have stated as to why he gave only one day notice to respond and why notwithstanding the extension of time by a press release dated 24th April 2021 issued by CBDT extending the time to 30th June 2021, was he in a tearing hurry to pass the assessment order. - Matter restored back - HC
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• Leave Travel Allowance Disallowance Upheld; Deduction Possible for Actual Expenses Incurred and Debited During Relevant Year.

  Case-Laws - AT : Disallowance of “Provision for leave travelling allowance” - the liability to pay would arise in the hands of the assessee only when an employee makes a claim. - order of CIT(A) in confirming the disallowance, sustained - the actual expenditure towards leave travel expenses, if any, incurred by the assessee and debited to provision for leave travelling allowance during the year under consideration may be allowed as deduction. - AT
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• Interest Disallowance u/s 36(1)(iii) Upheld Due to Partners' Excess Withdrawals Exceeding Contributions.

  Case-Laws - AT : Disallowance of interest u/s. 36(1)(iii) - partners of the assessee firm had over withdrawn an amount as in excess of what was brought by them in the firm - the assessee did not have any interest free advances - now when the partners of the assessee firm had clearly over withdrawn an amount in excess of what was brought by them in the firm, therefore, the lower authorities had rightly concluded that the correlating interest expenditure pertaining to the amount so overdrawn was liable to be disallowed u/s.36(1)(iii) - AT
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• Court Upholds Disallowance of Finance Charges Due to Unexplained Diversion of Interest-Bearing Funds to Related Parties.

  Case-Laws - AT : Addition made towards disallowance of finance charges - As assessee has paid huge interest on borrowed funds. The assessee has not furnished satisfactory explanation for diverting interest bearing funds to related parties for non-business purpose. Therefore, we are of the considered view that the AO was right in disallowance of proportionate interest @ 12% - AT
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• Trust's Registration u/s 12AA(3) Cannot Be Cancelled for Genuine Educational Activities Aligning with Objectives.

  Case-Laws - AT : Cancellation of registration u/s. 12AA(3) - amendment in trust deed - Proof of change of object charitable - CIT(E) can cancel the registration only in situations, namely, i) if the activities of the such trust or institution are not genuine or ii) not being carried out in accordance with the objects of the trust or institution as the case may be. Both the situations are mutually exclusive. The trust is carrying educational activities which are within the purview of the object clause of the trust deed - cancellation of the registration is not in accordance with law - AT
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• India-Mauritius DTAA: Assessing Beneficial Ownership of Interest Income for Exemption under Article 11(3)(c.

  Case-Laws - AT : Income accrued in India - Interest income from foreign currency loan and Securities - proof of beneficial ownership of funds - eligibility ot claim exemption under Article 11(3)(c) of India-Mauritius DTAA - assessee is the 'beneficial owner' of the impugned interest income on the strength of the Tax Residency Certificate issued by the Mauritian authorities - AT
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• Dispute Over Expense Provision Disallowance Under Income Tax Act and Section 115JB for Accurate Financial Reporting.

  Case-Laws - AT : Disallowance on account of provision for expenses made under normal provisions of the Act as well as in the computation of book profits u/s.115JB - The assessee company does not have a luxury to wait for the receipt of actual bills from the concerned parties after the end of the financial year. Since assessee could not adopt “wait and watch approach‟ and had to necessarily make provision for certain expenses on an estimated basis based on past practices to finalize its accounts, the provision made thereon cannot be treated as an unascertained liability or liability which is contingent in nature. - AT
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• PCIT's Section 263 revision attempt fails; assessing officer's limited scrutiny found diligent, not erroneous or harmful to revenue.

  Case-Laws - AT : Revision u/s 263 by CIT - Assessment was framed by the assessing officer for a limited scrutiny - Once the AO had scrupulously discharged the duty assigned to him, it cannot be said by PCIT that the order passed by the assessing officer was erroneous and prejudicial to the interests of the revenue. - AT
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• Income from management support costs under India-Singapore DTAA not 'made available' per Article 12(4); not independently usable.

  Case-Laws - AT : Income accrued in India - Amount accrued to the Assessee from another group company in India on account of management support costs - FTS under the India- Singapore DTAA - principal and meaning of 'Make Available' - the operational support such as Providing advice, information and competitive expertise to local general CMH Hotel management on the operation of Hotels, which are consistent with the strategic plan can at best be the managerial consultancy service but not the services made available so that the recipient can use or replicate the such services received from the assessee. - the provisions of the Article 12(4) could not be applied to the services rendered by the assessee in the strict sense of the provisions of DTAA. - AT
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• Travel Expense Claim Denied: No Evidence for Business Purpose of London Fashion Show Trip.

  Case-Laws - AT : Disallowance of travelling expenses - Even before us, assessee has not filed any evidence to justify the travelling undertaken in a foreign country. It was only submitted that the foreign trip was undertaken to participate in a fashion show in London without any supporting evidence. In the absence of necessary supporting evidence it is not possible to establish that the expenses were incurred for the purpose of the business especially in the case of international travelling expenses - AT
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• No Deemed Rental Income on Unsold Flats: Section 23(4) Exclusion Applies as All Conditions Met for Business Use.

  Case-Laws - AT : Deemed rent u/s. 23(4) - Deemed rental income on unsold flats - In the present case that there is no dispute that the profits of the business of construction by the assessee are chargeable to income-tax. Therefore, in our view that the unsold 6 flats are occupied by the assessee are as owner; business of construction is carried on by the assessee; the occupation of the flats is for the purpose of business; and profits of such business are chargeable to Income-tax. Thus, in our opinion, all the four conditions provided in exclusion clause in section 22 of the Act are to be excluded - No additions - AT
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• Penalty u/s 271(1)(c) Challenged Due to Defective Notice; Lack of Specificity Undermines Validity.

  Case-Laws - AT : Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of charge - AO has miserably failed to specify in the notice issued under section 274 read with 271(l)(c) of the Act, "as to whether the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income”, and also merely making a claim which is not sustainable in law by itself, as in the present case, assessee’s expenditure has been disallowed by the AO, would not amount to furnishing of inaccurate particulars of income - AT
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• Transfer Pricing Adjustment on AMP Expenditure Requires Proof of Benefit to Associated Enterprise's Brand, per Section 92B.

  Case-Laws - AT : TP adjustment on account of AMP expenditure - International transaction u/s 93B - Unless it was shown that there was such an arrangement which resulted into any direct or indirect benefit to the brand of assessee’s AE, these transactions could not be regarded as international transaction u/s 92B - AT
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Indian Laws

• Company Directors Face Liability for Dishonored Cheque u/s 141 of Negotiable Instruments Act; Proceedings to Continue.

  Case-Laws - SC : Dishonor of Cheque - vicarious liability of Directors, who are not signatories to the cheques - the allegations in the complaint are that at the time at which the cheques were issued by the Company and dishonoured by the Bank, the appellants were the Directors of the Company and were responsible for its business and all the appellants were involved in the business of the Company and were responsible for all the affairs of the Company. It may not be proper to split while reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to fulfil the requirement of Section 141 of the NI Act. - Proceedings to continue against the Directors - SC
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Service Tax

• Bombay High Court: Rejecting Sabka Vishwas Scheme Application Without Hearing Applicant Contradicts Natural Justice Principles.

  Case-Laws - HC : Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - rejection of application under SVLDRS - it will be completely illogical and contrary to the object of the 'Scheme' to reject an application on the ground of ineligibility without giving an opportunity to the declarant to explain as to why his declaration should not be accepted and why relief is not due to him. Thus, principles of natural justice were read into the provision by the Bombay High Court. - HC
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Central Excise

• Court Rules No Evidence of Duty Evasion in Valuation Dispute Under Central Excise Act Sections 4 and 4A.

  Case-Laws - AT : Extended period of limitation - Method of Valuation - section 4 or section 4A of Central Excise Act or not - there cannot be any reason to hold in the instant case that the appellant’s Kolkata factory, which is owned by the same legal entity, has deliberately resorted to value the goods under Section 4A as against Section 4 of the Act. Further, no evidence has been adduced to show that the appellant has wilfully resorted to value the goods under Section 4A to evade payment of demanded duty amount. - Demand set aside - AT
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VAT

• Court Invalidates Assessment Order for Escaped Turnover Due to Lack of Proper Show Cause Notice u/s 27.

  Case-Laws - HC : Validity of assessment order - escaped turnover - it is only a summon to the petitioner to appear for a personal hearing, this should have been proceeded by a proper show cause notice - the present move, by issuing this notice, dated 11.02.2019 for personal hearing followed by the impugned order dated 09.09.2020, cannot be permitted to stay, as it would run contra to the procedure established under Section 27 of the Act and also the order passed by this Court. In that view of the matter, this Court has no hesitation to hold that the impugned order does not stand in the legal scrutiny. - HC
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Case Laws:

• GST

• 2021 (10) TMI 477
  Refund of IGST - submission is that the claim for refund is not being processed by respondent no.4 on the ground that the investigation is pending against the petitioner - section 16 of the Integrated Goods and Services Tax Act, 2017 - HELD THAT:- Having regard to the facts of the present case, it would be appropriate if the claim for the refund is processed by the respondents in accordance with law. It is found that there is no order or decision on record on the application claiming refund. In this view of the matter, it would be appropriate to direct the respondent No.4 to process the application made by the petitioner for refund and pass a reasoned order upon hearing the petitioner. The claim for refund be decided as expeditiously as possible on its own merits and preferably within a period of eight weeks from today. Petition disposed off.

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• 2021 (10) TMI 476
  Provisional attachment of the petitioner s bank account - period of one year from the date the attachment order has expired - section 83(1) of the Central Goods and Service Tax Act, 2017 read with Rule 159(1) of the Central Goods and Services Tax Rules, 2017 - HELD THAT:- It is apparent that a period of one year from May 8, 2019 when the petitioner s bank account came to be attached provisionally under section 83(1) of the said Act has expired. Considering that a period of one year from the date of provisional attachment under section 83(1) of the CGST Act has expired despite which the order of provisional attachment has not been lifted, this petition is allowed as by operation of law the provisional attachment order ceases to exist. Petition allowed.

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• 2021 (10) TMI 475
  True owner of goods which have been seized - Section 129(3) of the UP GST Act, 2017 - HELD THAT:- Undisputedly, show cause notice was issued on 17.08.2021 calling for a reply by 23.08.2021. While the petitioner claims to have submitted his written reply on 23.08.2021, he further claims to have deposited Rs. 1,37,232/- through on-line mode on 23.08.2021 itself being amount equivalent to the tax payable on the goods detained and the penalty calculated at the rate equal to tax. Proof of that payment has been annexed as Annexure No. 7 to the writ petition. While Shri C.B. Tripathi would contend that the goods are not traceable to a bona-fide owner at the same time, in the facts of the present case, it does appear that the impugned order dated 24.08.2021 had been passed without consideration of the petitioner s claim to ownership over the goods in question. Conclusion that may have been drawn contrary to the claim of the petitioner is exparte. At the same time, there is evidence of the petitioner (claiming as owner) having deposited the amount of Rs. 1,37,232/- on 23.08.2021 which was the date fixed in the proceedings initiated under the notice dated 17.08.2021 issued under Section 129(3) of the Act. The order dated 24.08.2021 cannot stand, as the same appears to have been passed ex-parte against the petitioner without consideration of his claim. The order dated 24.08.2021 is hereby set aside - matter is remitted to the respondent no. 2 to pass a fresh order after considering the petitioner claim over the goods. the petitioner shall appear before the respondent no. 2 on 13.10.2021 - Petition allowed by way of remand.

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• 2021 (10) TMI 474
  Violation of principles of natural justice - orders appeared to be ex parte in nature - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, it is opined that the order is bad in law. This is for two reasons:- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences. Impugned order set aside - petition disposed off.

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• 2021 (10) TMI 473
  Refund of IGST paid - export of goods done from Non-EDI sites - instruction no. 20/2018-Customs dated 26.11.2018 - HELD THAT:- The respondents in the Department of Revenue, Ministry of Finance, Government of India had issued an instruction no. 20/2018-Customs dated 26.11.2018 providing the procedure for processing the IGST refund claims for exports made from Non-EDI sites. It is stated that there were some technical glitches in the system which had delayed the process. It is stated that it is likely to take another four weeks to complete the process - list after four weeks.

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• 2021 (10) TMI 472
  Seeking transfer of similar petitions - HELD THAT:- Let counter affidavit be positively filed by the respondents within a period of four weeks from today. Rejoinder thereto, if any, be filed within a period of four weeks thereafter. List this case on 3rd of December, 2021.

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• 2021 (10) TMI 471
  Principles of natural justice - appeal filed by the petitioner has been rejected without considering the time petition filed by the petitioner as well as grounds of appeal mentioned in the appeal filed before him - HELD THAT:- It is brought to notice that vide impugned order passed by the Additional Commissioner of State Tax (Appeal), Purnea Division, Purnea, the appeal of the petitioner against the order dated 11.01.2021 (Annexure-3) passed by respondent no.3, namely the Assistant Commissioner of State Tax, Katihar-Purnea, Bihar has been rejected, without following the principles of natural justice. It is informed that the appeal through electronic mode stood filed by the petitioner. Learned counsel for the Revenue, states that he has no objection if the matter is remanded to the Appellate Authority for deciding the appeal afresh - appeal is restored to its original file and number - petition disposed off.

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• 2021 (10) TMI 470
  Levy of interest on Gross Tax Liability under section 50 (1) of J.G.S.T. Act, 2017 - HELD THAT:- Various defects are ignored. Let the matter be listed on 21.10.2021 under the appropriate heading.

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• 2021 (10) TMI 469
  Cancellation of registration of the petitioner - Violation of principles of natural justice - ex-parte order passed by the respondent No.3 - condonation of delay in filing returns - HELD THAT:- The petitioner had applied for registration which request was favourably considered by the authorities under the Act with a specific registration number allotted to the petitioner. Since the year 2017, petitioner has been regularly filing its return and depositing all dues. All this was done through the petitioner s Tax Consultant who was professionally engaged to undertake such task. Unfortunately, information of the returns for certain period not being uploaded, surfaced in the year 2019 and the cause was totally beyond the petitioner s reach. Perhaps, the Tax Consultant is no more in the land of living. The competent authority can condone the delay for filing the returns, in the attending facts and circumstances, more so, with the Onset of Pandemic Covid-19, preventing further follow up action. In the peculiar facts and circumstances, the authority ought to have condoned the delay which unfortunately was not done, despite the petitioner having made a fervent request for condonation of delay in accepting the return, preventing cancellation of registration. The order dated 30th July, 2019 passed by the respondent no.3, namely the Joint Commissioner of State Taxes, Munger Circle, Munger is quashed with the petitioner s registration restored, with a further direction to the respondent no.2, namely The Principal Secretary-cum- Commissioner, Department of State Taxes, Government of Bihar, Patna to finalize the petitioner s assessment and/or pass appropriate orders, in accordance with law. Petition allowed.

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• Income Tax

• 2021 (10) TMI 468
  Exemption u/s 10 (23C) (iiiad) denied - clubbing the voluntary contributions received by the appellant Society with the receipts of the educational institution - HELD THAT:- Once that difference of the receipts was acknowledged by the assessing authority, there was absolutely no other material existing to treat the donations received by the Society to be receipts of the Institution. Further reasoning offered by the appellate authority to affirm the order of the assessing authority is wholly erroneous and contrary to law. Merely because the assessee Society was the person running the Institution, it did not cause any legal effect of depriving the benefit of Section 10(23C)(iiiad) which was activity specific and had nothing to do with the other income of the same assessee. Tribunal has also erred in looking at provisions Section 12 AA of the Act and the fact that the donations received by the Society may not have been received with any specific instructions. It is not relevant in the facts of the present case. It is so because here the assessee had only claimed the benefit of Section 10(23C)(iiiad) with respect to the receipts of the Institution, Information Management and Technology and it had not claimed any benefit with respect to the donations received by the Society. There would be no clubbing of the receipts of the Institution with the other income of the Society, for the purpose of considering the benefit of Section 10(23C)(iiiad).The question of law is answered in the negative i.e. in favour of the assessee and against the Revenue.

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• 2021 (10) TMI 467
  Deduction u/s 80IB (10) - partial completion of project - Housing projects - assessee had not completed the entire project by the stipulated date, i.e. 31.03.2008 as the date when project was first approved - whether the housing project should be considered to be completed without the parking of building G as approved by the local authority? - completion certificate issued by the Pune Municipal Corporation was also in respect of only Buildings A, B, C, D, E, H and I and not in respect of Building G - Tribunal allowed the deduction - HELD THAT:- As respondent has not claimed any deduction under Section 80IB (10) on the said building G . A question that was considered was . Undisputably the entire project excluding building G has been completed within the stipulated period and the completion/ occupancy certificate was also received within the time limit prescribed under Section 80IB (10). As TDR for building G was not available upto 2011, appellant could not have constructed the said building. As held in Vandana Properties [ 2012 (4) TMI 54 - BOMBAY HIGH COURT] , the expression housing project is not defined under the Act and the expression housing project in common parlance should be accepted, which would mean constructing a building or group of buildings consisting of several residential units. In our view, the building G cannot be part and parcel of the housing project because the TDR for constructing building G itself was purchased on 19.04.2011. Consequently, in our view, respondent was entitled to claim of deduction under Section 80IB (10) of the Act. - Decided in favour of assessee.

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• 2021 (10) TMI 466
  Reopening of assessment u/s 147 - validity of reasons to believe - Long term capital loss on account of capital reduction - HELD THAT:- Assessee had incurred long term capital loss during the year against the equity shares of Ponds Exports Limited on account of capital reduction of Ponds Exports Limited wherein the face value of the shares of Ponds Exports Limited was reduced from Rs. 10/- to Re. 1/each and thus, there was an extinguishment of the proportionate right in the shares held by the Petitioner. This resulted in long term capital loss on account of capital reduction. AO had based its assessment on the accounts books and arrived at conclusion that the Petitioner had incurred long term capital loss and had allowed such long term capital loss while completing the assessment u/s 143(3) of the Act. Respondent No. 1 in the reopening of the assessment on account of change of opinion placed reliance on the same account books to opine that the Petitioner assessee had not incurred any long term capital loss during the year against the equity shares of Ponds Exports Limited and there had been no transfer of shares during the year as claimed by the Petitioner assessee - a different view has been taken from the view conclusively taken by the Assessing Officer and as held in Ananta Landmark Pvt.Ltd. [ 2021 (10) TMI 71 - BOMBAY HIGH COURT] it would not be open to reopen the assessment based on the very same material with a view to take another view. Petitioner had truly and fully disclosed all the material facts necessary for the purpose of assessment and that this was a case where the assessment was sought to be reopened on account of change of opinion of Respondent No. 1. Respondent No. 1 by recording that I have reason to believe that income chargeable to tax amounting to Rs. 20.52 cr. had escaped assessment within the meaning of Section 147 of the Act read with proviso thereto has not referred to any material fact not disclosed and merely stated that the Petitioner had failed to disclose fully and truly all the material facts necessary for its assessment for Assessment Year 2012-13. This statement is clearly made with an attempt to take the case out of the restrictions imposed by the proviso to Section 147 - Decided in favour of assessee.

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• 2021 (10) TMI 465
  Reopening of assessment u/s 147 - double deduction u/s 80IB - Whether it is a disclosure or not within the meaning of Section 147 of the Act ? - validity of reasons to believe - whether the interest was allowable as a deduction? - HELD THAT:- AO had had all materials facts before him when he made the original assessment. When the primary facts necessary for assessment are fully and truly disclosed, the AO is not entitled on change of opinion to commence proceedings for reassessment. Even if the AO, who passed the assessment order, may have raised too many legal inferences from the facts disclosed, on that account the AO, who has decided to re-open assessment, is not competent to re-open assessment proceedings. Where on consideration of material on record, one view is conclusively taken by the AO, it would not be open to re-open the assessment based on the very same material with a view to take another view. Petitioner has filed the annual returns with the required documents as provided for under Section 139 - There was nothing more to disclose and a person cannot be said to have omitted or failed to disclose something when, of such thing, he had no knowledge. One cannot be expected to disclose a thing or said to have failed to disclose it unless it is a matter which he knows or knows of. In this case, except for a general statement in the reasons for re-opening, the Assessing Officer has not disclosed what was the material fact that petitioner had failed to disclose. Petitioner had truly and fully disclosed all material facts necessary for the purpose of assessment. Not only material facts were disclosed by petitioner truly and fully but they were carefully scrutinized and figures of income as well as deduction were reworked carefully by the Assessing Officer. In the reasons for reopening, AO has infact relied upon the audited report accounts to say that the claim of petitioner of 1/5th of the construction period interest was double deduction or that it has resulted in irregular allowance of construction period interest or that petitioner was not entitled for deduction under Section 80 IB of the Act. In the reasons for re-opening, there is not even a whisper as to what was not disclosed. In our view, this is not a case where the assessment is sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of the assessee to disclose truly and fully all material facts that were necessary for computation of income but this is a case wherein the assessment is sought to be re-opened on account of change of opinion of the Assessing Officer about the manner of computation of the deduction. The notice to re-open the assessment was found entirely on the assessment records. The entire basis for re-opening the assessment is the disclosure which has been made by the assessee in the course of the assessment proceedings. It is settled law that where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not be open to the Assessing Officer to re-open the assessment based on the very same material with a view to take another view. Petitioner had during the course of the assessment proceedings made a complete disclosure of material facts. Assessing Officer had called for disclosure on which a specific disclosure on the issue in question was made. In such a case, it cannot be stated that condition precedent to the re-opening of an assessment beyond a period of four years has been fulfilled. Reopening quashed - Decided in favour of assessee.

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• 2021 (10) TMI 464
  Denial of principles of natural justice - Less time to respond to SCN - respondents gave little over 24 hours to file reply to the show cause notice and went ahead and passed the impugned order - HELD THAT:- As assessing officer ought to have stated as to why he gave only one day notice to respond and why notwithstanding the extension of time by a press release dated 24 th April 2021 issued by CBDT extending the time to 30th June 2021, was he in a tearing hurry to pass the assessment order. This assessment order has to be set aside. We hereby set aside the order. Consequential demand notice and penalty notice are also set aside. The matter is remanded for fresh consideration. Petitioner shall file a reply within two weeks after receiving a communication from the assessing officer.

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• 2021 (10) TMI 463
  Denying deduction of expatriate costs u/s 37[1] - agreement between the assessee and the employees wherein it was agreed that the income tax liability on the salary to be paid to the employees, shall be borne by the assessee-company but no such contractual liability has been established by the assessee in the present case - HELD THAT:- As the matter requires re-consideration by the Assessing Officer in the light of the ruling of this Court in M/s Rambus Chip Technologies [India] Pvt. Ltd. [ 2018 (7) TMI 2215 - KARNATAKA HIGH COURT] - More particularly, in the orders impugned, no adjudication is made on the aspect of any existing contractual liability between the assessee and its employees inasmuch as the income tax liability. Hence, setting aside the impugned order, we restore the matter to the file of the Assessing Officer to re-consider the matter sans answering the substantial questions of law raised herein.

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• 2021 (10) TMI 462
  Maintainability of appeal - low tax effect - recalling of the order [ 2019 (10) TMI 1465 - GUJARAT HIGH COURT] passed by this Court while disposing of the Tax Appeal as not pressed on the ground that the tax effect involved in the Tax Appeal was below the prescribed monetary limit of Rs. 1 Cr. as per the CBDT Circular No.17 of 2019 dated 08.08.2019 - reopen the assessment of the respondent based on the audit objections raised at the relevant point of time - HELD THAT:- While noticing that the Assessment Order passed under Section 143 (3) read with Section 148 of the I.T. Act has already been decided by this Court in [ 2019 (10) TMI 1001 - GUJARAT HIGH COURT] the notice had been issued under Section 263 (1) of the I.T. Act on 17.10.2013 for the same assessment year seeking the dis-allowance of the incremental subsidy from exemption available under Section 10 B of the I.T. Act. On the part of the respondent, we could notice the objections essentially since the recall of the order dated 01.10.2019 passed by this Court if is if has arisen due to audit objections, the same ought to be placed on the record and without placing that material on record, no order of recall can be sought. So as not to curtail the rights of the parties in raising all the contentions including that of the audit objections, more particularly, when raised keeping in mind the decision of the Bombay High Court M/S. NAWANY CONSTRUCTION CO. PVT. LTD. [ 2018 (9) TMI 800 - BOMBAY HIGH COURT] we have chosen to examine the material which has been placed before us and on satisfying ourselves on this issue, we are of the opinion that the request of the department to permit the recall of the [ 2019 (10) TMI 1465 - GUJARAT HIGH COURT] should be allowed. In the decision of Nawany Construction Private Limited [Supra] there was an attempt to get over the binding circular without placing any material before the Court, which is not the case here. Therefore, without further elaborating on this aspect so as not to curtail the rights of the parties while recalling the order, we permit the Tax Appeal to be revived and to be placed before the Bench as per the roster.

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• 2021 (10) TMI 461
  Fresh claim before appellate authorities - D.R contended that the assessee could make fresh claims only by filing revised return of income - HELD THAT:- Hon ble Karnataka High Court has held in the case of Karnataka State Co-operative Federation Ltd [ 2021 (3) TMI 694 - KARNATAKA HIGH COURT] that the assessee could raised fresh claim before appellate authorities. In the instant case, we notice that the assessee has raised claim for deduction of above said amounts before the A.O. by filing a revised computation of income and also before Ld. CIT(A) by raising specific grounds. As noticed earlier, both the tax authorities did not consider them. Accordingly, we are of the view that the claim of the assessee deserves admission. Accordingly, we admit both the claims of the assessee and restore the same to the file of the A.O. for examining them in accordance with law. Disallowance of provision for commission expenses - AO has observed that the assessee has not furnished the details of computation of commission amount and also purpose of payment - HELD THAT:- On a reading of whole of clause 3.3 of the agreement, we are of the view that the commission expenditure shall accrue as and when the sales is finalized. Hence, we are of the view that the Ld. CIT(A) was not justified in taking the view that the commission expenditure shall become due only when the payment is received from the customers. In the case of KCP Ltd. [ 2018 (6) TMI 514 - TELANGANA AND ANDHRA PRADESH HIGH COURT] has upheld the view of the Tribunal in holding that the liability to pay commission accrues when orders were secured by agents and not when supplies were effected by the assessee. There is one more angle with regard to the claim of the assessee. Under revenue cost matching principle , all expenses incurred in generating the revenue should be provided for in the books of account and also under the Principle Prudence , all known liabilities have to be provided for in the books of account. In the instant case, the assessee is aware that it would be liable to pay commission amount to Md. Ziaul Hassan Khan when the sales is finalized and this commission expenditure is related to the revenue generated during the year under consider. Hence it is also a known liability for this year. Hence, as per accounting principles discussed above, the said commission expenditure should be provided for in the books of accounts when the relevant sales are accounted. On this count also, the claim of the assessee is admissible - we are of the view that the commission expenditure claimed by the assessee is allowable in the year under consideration - we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to allow the commission expenditure claimed by the assessee. Deduction u/s 35(2AB) @ 200% of the expenditure incurred on Research and development - A.O. noticed that the R D expenditure is related to product development expenditure - HELD THAT:- It is pertinent to note that the AO had made identical disallowance in an earlier year and when the matter reached Hon ble Karnataka High Court, it has expressed the view that the A.O. has no jurisdiction to sit in the judgement over the report submitted by DSIR in form No.3CL. The appeal filed by the revenue before Hon ble Supreme Court against the decision rendered by Hon ble High Court has also been dismissed. [ 2015 (4) TMI 1064 - KARNATAKA HIGH COURT] -The decision rendered by Hon ble jurisdictional High Court is binding on all authorities below it. Since the Ld. CIT(A) has followed the decision rendered by jurisdictional High Court, we do not find any reason to interfere with the decision rendered by Ld. CIT(A) on this issue. Accordingly, we confirm his order passed on this issue. Disallowance u/s 14A r.w.r. 8D - Sufficiency of own funds - HELD THAT:- Admittedly, the own funds available with the assessee is in far excess of the investments made by the assessee. Accordingly, as per decision rendered by Hon ble Karnataka High Court in the case of Micro Labs Ltd. [ 2016 (4) TMI 219 - KARNATAKA HIGH COURT] no disallowance out of interest expenditure is called for. Accordingly, we confirm the decision rendered by Ld. CIT(A) in deleting this disallowance.

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• 2021 (10) TMI 460
  Rectification applications filed u/s 154 - Assessee is a non-resident and hence the income earned outside India - salary earned outside India has been offered wrongly in the return of income and the same is a mistake apparent from record - HELD THAT:- There is no dispute with regard to the fact that the assessee is a non-resident. It is the submission of the assessee that the salary income was earned by him abroad and hence the same is not liable to tax under the Act u/s 5(2) of the Act. There is merit in the submission of the assessee that the A.O. could not assess an income, which is not liable to tax under the Income Tax Act even if it was offered by the assessee in its return of income. As rightly pointed out by Ld. A.R., there is no estoppel against law and, in our view, the income erroneously offered in the return of income would constitute mistake apparent from record. Accordingly, we set aside the orders passed by Ld CIT(A) in both the years under consideration and restore them to the file of the AO to examine the claim of the assessee raised in the petitions filed u/s 154 of the Act in accordance with the law. In respect of AY 2010-11, the assessee has filed revised return of income and if the said revised return of income is processed, then the issue would get settled. The AO may take appropriate action which suits him. Appeal of assessee allowed for statistical purposes.

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• 2021 (10) TMI 459
  Unexplained cash credit u/s 68 - HELD THAT:- It is an admitted fact that the A.O. in the preceding as well as succeeding assessment years and also in the remand report for the impugned assessment year has mentioned that assessee is in the business of taxi operation. There is no other evidence before the A.O. that the assessee is engaged in any other activity other than taxi plying. Further the assessee is also not maintaining any books of account. Since the assessee in the instant case is engaged in the business of taxi operation as per the preceding and succeeding assessment years and as per the remand report of the A.O. for the impugned assessment year and the assessee is not maintaining any books of account, therefore, the entire deposits in the bank accounts is the business receipt of the assessee from taxi operation. Since there is a difference of Rs. 40,41,371/- between the business receipt shown at Rs. 22,20,677/- and total deposit of Rs. 62,62,048/-, therefore, in my opinion, estimation of profit @ 25% of the total difference will meet the ends of justice. Grounds raised by the assessee are accordingly partly allowed.

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• 2021 (10) TMI 458
  Revision u/s 263 by CIT - As per CIT A.O. had without proper verification and examination of records has accepted the claim of assessee -Sum surrendered by the assessee on account of unaccounted investments in the house property and against the surrendered income, the assessee had set off the business loss - HELD THAT:- We found that this issue relating to set off of loss was duly examined by the A.O. which is evident from the assessment order itself - As the amended provisions of Section 115BBE are not applicable in the case of the assessee. Even otherwise, there is specific mention of this set off at page No. 2 and para No. 6 of the order of assessment which goes to show that the matter with regard to set off was examined and verified by the A.O. With regard to reference to DVO a detailed query regarding house construction was made by the A.O. vide query dated 5/11/2018 and reply together with valuation report along with technical certificate was filed on 12.07.2018 - Further query relating to investment was raised at the time of statement recorded u/s 131 during survey. A.O. during assessment proceedings appreciated the statement and impounded material in the backdrop of surrendered income and regular income. The order sheet entry dated 06.12.2018 is testimony to the examination and verification done by AO. Thus, in this way, there had been detailed examination and verification of investment in the house construction. Therefore, ld. PCIT was not justified in invoking the provisions of Section 263 of the Act on this issue. Difference in amount of closing stock as shown in balance sheet and audit report - While computing stock turnover, stock in trade means the average of opening and closing stock. In this way, the average of opening and closing stock comes to Rs. 4869765/- and the nature of two figures are different and hence not comparable. Thus, in view of the above explanation and the documents placed on record, the ld. PCIT was not justified in invoking provisions of Section 263 of the Act on this issue. Advance as given in cash to Sh. Naveen Mahipal in two installments and the source of the credit was not examined by the A.O - Since the assessee had borrowed funds for the investment in such non business activities therefore the interest claimed be disallowed. In this regard, a very detailed and comprehensive and categorical findings was recorded by the A.O.. while doing so, the A.O. had called for Cash book vide query - The same was produced and examined as is evident from the opening paragraph of the order of assessment. Further the reflection of such advance in the balance sheet as clear from the order of the PCIT is a sufficient and adequate proof regarding the nature and source of transaction. For the asset side of the balance sheet, the liabilities as well as the capital balance constitute the basis. It is important to mention here that the PCIT also called for application of Section 269T in relation to the impugned advance against purchase of land. In this regard, we are of the view that Section 269T restricts repayment of loan, deposit or specified advance if the amount exceeds Rs. 20000 or more. However, in the instant case, there has not been any repayment of the nature specified above, rather there is rather advancement by the assessee hence the provision of sec. 269T are not attracted. Thus, the ld. PCIT was not right in invoking the provisions of Section 263 of the Act on this issue. Assessee has received unsecured loan form Shri Virendra Agarwal and the same was not examined by the A.O. - All the bank statements of the assessee are on record and in case there had been any receipt of unsecured loan from Virendra Agarwal then definitely it would have been shown therein. Our attention was also drawn to the statement containing the balance sheet of Smt. Sunita Agrawal and M/s Yogesh Enterprises as well as consolidated as on 31.3.15 was furnished - The assessee has no sufficient funds to purchase any fixed assets. Since, the assessee has not received any unsecured loans, therefore, in the absence of any receipt of unsecured loan, there is no onus to examine the creditworthiness. Thus, in our view, the ld. PCIT was not right in invoking the provisions of Section 263 of the Act on this issue. Assessee had received a total loan of Rs. 15 Lacs from one Smt. Rekha instead of Rs. 5.00 lacs as shown by the assessee - On perusal of the Bank Statement it is obvious that the immediate source of unsecured loan of Rs. 5 lakhs from Rekha Verma was the money received by her from Mr. Kripa Shankar Verma on 13.05.2015 amounting to Rs. 320000.00 through account payee cheque and from Gajanand Verma on 11.05.2015 amounting to Rs. 180000.00. Since, the current income didn t constitute the source of unsecured loan, therefore, the comparison of current income with the amount of unsecured loan does not have any meaning and relevance. It is a settled law that the assessee cannot be asked to explain whether the cash credit has suffered tax or not. IN this regard, we draw strength from the decision in the case of CIT Vs. Metachen [ 1999 (9) TMI 21 - MADHYA PRADESH HIGH COURT] . Since the case of the assessee was not subjected to audit U/s 44AB of the Act, therefore, threw as no obligation upon her to deduct tax at source. Since the A.O. was aware of the turnover and facts of the case of the immediately preceeding year, thus, did not fasten the assessee with the obligation of tax deduction at source. Thus, in our view, the ld. PCIT was not right in invoking the provisions of Section 263 of the Act on this issue. Unexplained transactions as per documents found in search - A.O. during assessment proceedings, thoroughly examined and verified the statements recorded and the documents found during survey against the backdrop of the surrendered income and regular income. The aforesaid action is before it is evident from the note sheet entry dated 6/12/2018. Thus, in this way, the observation of the ld. PCIT is not based on correct facts and therefore, the ld. PCIT was not right in invoking the provisions of Section 263 on this issue. Thus as applying the principles laid down in the case of Sir Dorabji Tata Trust [ 2020 (12) TMI 1121 - ITAT MUMBAI] it is evident that in the present case, the A.O. had made all necessary enquiries and verifications as can be expected of a prudent, judicious and responsible A.O. in normal course of his assessment work. Even ld. PCIT has not specified as to what type of enquiry ought to have been made by the A.O. which would have resulted into income or disallowance or any other adverse action, therefore, in such circumstances, the order passed by the A.O. cannot be branded as erroneous and prejudicial to the interest of revenue, therefore, we set aside and quash the order passed u/s 263 - Decided in favour of assessee.

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• 2021 (10) TMI 457
  Addition u/s 68 - unexplained cash credit in the garb of share application money / premium - Assessee company has received share application money from three parties. Two of them were Directors and one was a corporate entity - Director of the subscriber company did not appear personally - HELD THAT:- In so far as the share application money received from Directors, the AO has held the genuine transaction of the subscriber stood satisfactorily explained. In the case of share application money from corporate entity first of all the assessee discharged its onus by filing the copy of confirmation along with documents like, PAN, bank statement of the subscriber company, copy of income tax return alongwith audited accounts, etc., statement from the MCA website showing that the company is live working company. Thereafter, the AO himself carried out inquiry from the said parties and notice u/s 133(6) was sent asking for various details to corroborate the stand of the assessee. In response, the said company replied to the said notices and in fact two times reply was sent, i.e., vide letter dated 19.1.2015 and 5.3.2015. The party not only confirmed the said transaction but also explained the source of investment alongwith the set of documents as mentioned in the assessment order itself as well as in the impugned appellate order. The bank statement furnished by the said company reflected a transfer of Rs. 1,00,00,000/- of each on two occasions from its bank account with the Axis Bank to the bank account of the assessee on 10.8.2011. The company also stated that it assessed to tax income tax and duly reflected the said investment in the balance sheet. Ld. CIT (A) has also noticed that this company had sufficient source of funds in the form of share capital and reserves as per balance sheet. Apart from that, there is a categorical finding by the Ld. CIT(A) that there is no cash deposit in the bank account of share subscriber prior to issue of funds. Further, in so far as second discrepancy in the number of shares subscribed by M/s. Omexpo Enterprises Pvt. Ltd., the same was reconciled along with the share certificate filed before the Ld. CIT (A) which has been discussed in detail by him. Thus, in so far as assessee is concerned entire onus should discharge and even in the inquiry conducted by the AO, no adverse material has been found as the party has provided all the necessary details to prove the genuineness of the transaction. In these circumstances, we do not find any reason as to why the transaction has been doubted by the AO without any adverse material found during the course of inquiry conducted by the AO. Simply because Director of the subscriber company did not appear personally that does not mean that all other documents sent by the said company which are mostly statutory records as well as the income tax records can make the transaction fictitious. Thus, we do not find any infirmity in the finding and observation of the Ld. CIT(A) while deleting the said addition. As brought on record by the Ld. Counsel, the AO subsequently based on certain information emanating from search in some other case on 29.3.2012, came to the conclusion that the amount of Rs. 2,00,00,000/- is an accommodation entry and again the same amount has been added. This has been added despite noting the fact that already Ld. CIT (A) has deleted the same addition vide order dated 23.3.2017. If the same addition has been made again, then we do not find any justification for challenging the said addition in the present appeal. On this count also the ground raised by the revenue cannot be sustained - Decided against revenue.

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• 2021 (10) TMI 456
  Revision u/s 263 - As per CIT order passed by the A.O. is found to be erroneous in so far as it is prejudicial to the interests of the Revenue - incorrect/mistaken assumption of the facts of the case by way of accepting the statement of the assessee without due verification/erroneous application of provisions of the Act - HELD THAT:- A.O. had carried out all the necessary enquires and examined all the issues and had formed a possible view. It is also settled law that where two views are possible and the A.O. has taken one view, then in that eventuality, the assessment order cannot be treated as erroneous. See KWALITY STEEL SUPPLIERS COMPLEX [ 2017 (7) TMI 620 - SUPREME COURT] Even otherwise a bare perusal or bare reading of Section 263 of the Act, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo moto under it, is that the order of ITO/AO is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied or twin condition and in case if one of them is absent then recourse cannot be had to Section 263. Thus while applying the principles laid down in the case of Sir Dorabji Tata Trust Vs DCIT(E) [ 2020 (12) TMI 1121 - ITAT MUMBAI] it is evident that in the present case, the A.O. had made all necessary enquiries and verifications as can be expected of a prudent, judicious and responsible A.O. in normal course of his assessment work. Even ld. PCIT has not specified as to what type of enquiry ought to have been made by the A.O. which would have resulted into income or disallowance or any other adverse action, therefore, in such circumstances, the order passed by the A.O. cannot be branded as erroneous and prejudicial to the interest of revenue, therefore, we set aside and quash the order passed u/s 263 of the Act. - Decided in favour of assessee.

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• 2021 (10) TMI 455
  Revision u/s 263 by CIT - case was selected for scrutiny - assessee had voluntarily surrendered a sum on account of discrepancies found in the books of account and inflated expenditure - PCIT s main thrust was that the A.O. had without proper verification and examination of records has accepted the claim of the assessee - HELD THAT:- Capital Account was not directly impacted by amount surrendered. The proposition of ld. PCIT calling for reduction in debtors or creditors from surrendered amount is beyond comprehension. As per facts, the assessee is a Civil Contractor and the awarders are to be corporate or Govt. Departments. They may figure in the list of sundry debtors, but then how the amount of sundry debtors can be reduced as a result of surrender. The AO after due examination and verification subjected the surrendered income of Rs. 1.15 Crore to tax at the flat rate of 30% by invoking the provision of Section 115BBE. In this respect, a detailed discussion at page No. 7 and para 7 of the A.O. is mentioned and penalty to this effect has also been initiated, therefore, we are of the view that this issue has been examined by A.O. and thus no proceedings U/s 263 could have been invoked. Assessee has obtained unsecured loans from 22 parties but creditworthiness or none of them was verified by the A.O. - After examining the entre records and after hearing the parties, we have also found that AO after having examined all the details had not drawn any adverse inference against any loan creditors and did not follow a view unsustainable in law and thus, in our view, the assessment order was not the result of non-application of mind or any inadequate enquiry, therefore, in these circumstances, the invocation of jurisdiction U/s 263 was untenable and unsustainable in law. The courts across the spectrum have unanimously held that the order of AO can be brandished as erroneous if it is unsustainable in the eyes of law - Unexplained money received from FDRs - From the perusal of bank statement, it is obvious that the immediate source of money given to the asseesee as unsecured loan was the proceeds realized by Virendra Agarwal HUF from the FDRs. Thus, in this way, the money received from FDRs constituted the source of unsecured loan given to the assessee but the Ld PCIT doubted that the creditworthiness of the cash creditor in light of partly return of income showing income of Rs. 94,426. IN this regard, we also noticed that it was not the present income but it was the accumulated savings of the past years of the Virendra Agarwal HUF invested in the form of FDR became the source to the assessee. The ITR of Shri Virendra Agarwal (Individual) is also on record wherein an income of Rs. 31.50 Lacs has been shown in his return of income. Therefore, in the light of the entire facts and circumstances, the allegation that Mr. Virendra Agarwal was not having the creditworthiness, is baseless and unfounded. TDS has not been deducted on the interest paid to the mentioned persons and without obtaining Form No. 15G/H, the A.O. should have disallowed the claim of interest expenses - As we found that From 15G and 15H were submitted on 28/04/2016 with the department. In this regard, the copy of the acknowledgement has also been placed on record, thus in this way, there was no liability to deduct TDS. Since, Form 15G/H are already available on record, therefore, no disallowance was made by AO on account of Non deduction of TDS. Apart from this, the Chartered Accountant in TAR has not pointed out any disallowance u/s 40(a)(ia) of Income Tax Act on account of Non deduction of TDS. Therefore, we are of the view that the order passed by the ld. PCIT on this issue is bad in law. Unsecured loans received - Amount was received by way of loan by the wife of the assessee Smt. Sunita Agarwal. The reason behind the existence of Narration TO YS AC RTGS in both the transaction involving the assessee and his wife is the fact that the assessee is Prop of M/s Yash Trading Corporation and his wife is Prop of M/s Yogesh Enterprises. The cash credits were received by both of them in the bank account of their respective proprietorship concern. Therefore, the nomenclature in the narration are same. Apart from this, from the Bank statement it is obvious that the immediate source of unsecured loan of Rs. 10 lakhs to Rekha Verma was the money received by her from M/s Jaishree Products on 09.05.2015 for Rs. 3 Lacs and on 11.05.2015 for Rs. 7 Lacs through account payee cheques. Thus, in this way, the entire source of unsecured loans of Rs. 10.00 lacs stands proved. Since, the current income didn t constitute the source of unsecured loan, therefore, the comparison of current income with the amount of unsecured loan does not have any meaning and relevance. Thus, after considering the facts, we are of the view that the order passed by the ld. PCIT is unsustainable. AO had made all necessary enquiries and verifications as can be expected of a prudent, judicious and responsible A.O. in normal course of his assessment work. Even ld. PCIT has not specified as to what type of enquiry ought to have been made by the A.O. which would have resulted into income or disallowance or any other adverse action, therefore, in such circumstances, the order passed by the A.O. cannot be branded as erroneous and prejudicial to the interest of revenue, therefore, we set aside and quash the order passed u/s 263 of the Act. - Decided in favour of assessee.

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• 2021 (10) TMI 454
  Disallowance of claim made under the head Provision for medical allowance - HELD THAT:- It is the case of the assessee that it has debited the profit loss account with Provision for medical reimbursement . The actual claim, if any, made by the employees is directly debited to Provision for medical reimbursement account, meaning thereby, the actual reimbursement have not been debited to the Profit and Loss account. Since the provision for medical reimbursement claimed by the assessee has been disallowed, it is prayed that the actual medical reimbursement expenses incurred during the year should be allowed as deduction. We find merit in this prayer of the Ld. A.R. The claim of provision for medical reimbursement has been disallowed only for the reason that the same is contingent in nature. In that case, the actual expenses incurred during the year merits allowance. Accordingly, while confirming the order passed by the Ld. CIT(A) on this issue, in the interest of natural justice, we direct the A.O. to allow actual medical reimbursement expenses incurred by the assessee and which is debited to provision for medical reimbursement account during the year under consideration. Disallowance of Provision for leave travelling allowance - AO noticed that the assessee has claimed a sum as provision for leave travelling allowance. - A.O. took the view that the same is a future liability and accordingly, disallowed the same. The Ld. CIT(A) also confirmed the same - HELD THAT:- As in the case of provision for medical reimbursements, in this claim also, the liability to pay would arise in the hands of the assessee only when an employee makes a claim. We notice that the coordinate bench has decided an identical issue against the assessee in the assessee s own case in AY 2008-09. Hence, we do not find any infirmity in the decision of Ld. CIT(A) in confirming the disallowance. However, as held in the case of Provision for medical reimbursements , the actual expenditure towards leave travel expenses, if any, incurred by the assessee and debited to provision for leave travelling allowance during the year under consideration may be allowed as deduction. Disallowance of incidental expenses - A.O. disallowed the same on the reasoning that the assessee did not furnish proper details - CIT(A) confirmed the same since no detail was furnished before him also - HELD THAT:- Before us also, the assessee did not furnish nature of incidental expenses claimed by it. Under these facts, we do not have any other option but to confirm the order passed by Ld. CIT(A) on this issue. Disallowance of payment made to Bellari Agenda Task Force (BATF) - expenses were disallowed on the ground that it was not incurred in the course of business but for philanthropic purposes - HELD THAT:- As the assessee has contributed funds to BATF at the direction of local administration, which is meant to be used for the benefit of public. As observed in the above said case, the assessee would also be required to approach the appropriate Government and its authorities for grant of permits, licenses. Hence it is a prudent decision of the assessee to oblige to the appeal made by the local administration and incurred the expenses for public purposes. Hence the assessee has incurred expenses not only on account of social responsibility, but also keeping in mind the goodwill and benefit it would yield in the long run in earning profit. Hence this expenditure would be in the realm of business expenditure . We also notice that the payments made to BATF has been held to be allowable expenditure as held in HIREHAL GAVIAPPA RANGAN GOUD [ 2020 (12) TMI 973 - ITAT BANGALORE] and SHRI. GOGGAGURUSHANTIAH AND BROS [ 2020 (5) TMI 667 - ITAT BANGALORE] - thus we hold this expenditure is allowable as deduction. Disallowance of contribution to Chief Minister s Relief Fund - AO disallowed the claim on the reasoning that there is no nexus between the payment and the business of the assessee - CIT(A) also confirmed the disallowance - HELD THAT:- We notice that the assessee before the Hon ble Karnataka High Court had entered in a MOU with the Karnataka Government for construction of houses. The assessee also proved the existence of commercial expediency in incurring these expenses. However, in the instant case, relevant details are not available on record. Accordingly, we are of the view that this issue requires fresh examination at the end of the assessing officer in the light of decision in the case of Kanhaiyalal Dudheria [ 2019 (9) TMI 354 - KARNATAKA HIGH COURT] . Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore this issue to the file of AO for examining it afresh.

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• 2021 (10) TMI 453
  TP Adjustment - benchmarking of guarantee commission - HELD THAT:- As decided in own case [ 2021 (4) TMI 254 - ITAT MUMBAI] no reason to dislodge the ALP of corporate guarantee determined by the assessee at 0.43% p.a by adopting Internal CUP method. In the backdrop of our aforesaid observations we are unable to persuade ourselves to subscribe to the determination of the ALP of the corporate guarantee at 2% p.a by the A.O/TPO. We, thus, uphold the ALP of corporate guarantee as determined by the assessee at 0.43% p.a and direct the A.O/TPO to vacate the upward transfer pricing adjustment. Benchmarking done by assessee on the basis of internal CUP was to be accepted. Respectfully following earlier decisions of Tribunal, taking the same view, we would hold that benchmarking done by the assessee by adopting internal CUP was in order. The assessee has followed similar methodology in this year. Therefore, the adjustment as confirmed by Ld. DRP, in this regard, stand vacated. The Ld. AO is directed to delete the same. - Decided in favour of assessee. Benchmarking of loan transaction - HELD THAT:- The bench in own case [ 2021 (4) TMI 254 - ITAT MUMBAI] has approved the benchmarking of these transactions on the basis of internal CUP. We find the facts to be similar in this year. The assessee has followed same methodology to benchmark the loan transactions. Therefore, the adjustment as confirmed by Ld. DRP would stand deleted. Disallowance u/s 14A - assessee had suo motto offered a disallowance u/s 14A - HELD THAT:- As decided in own case [ 2021 (4) TMI 254 - ITAT MUMBAI] wherein a suo-motto disallowance offered by the assessee was rejected by the A.O, and was thereafter substituted by an enhanced amount of disallowance as per the methodology contemplated in Sec. 14A r.w Rule 8D matter set aside the matter to the file of the A.O for the purpose of re-adjudicating the disallowance afresh in light of the law laid down in the case of Maxopp Investment Ltd. Vs. CIT [ 2018 (3) TMI 805 - SUPREME COURT] - the matter of disallowance u/s 14A stand restored back to the file of Ld. AO with similar directions. Taxation of foreign exchange gains on loan transactions - Business income or capital income - AO has held the gain to be Business Income by virtue of Section 28 (iv) of the Act which provide that value of any benefit or perquisite, whether convertible into money or not, arising from the business or the exercise of profession would be chargeable as Profit and Gains of business or profession - HELD THAT:- The reasoning of Ld. DRP that foreign exchange differences would represent component of interest overlook the fact that loan transactions were in capital field and any accretion on capital account, unless specifically taxed, would not be liable to tax. Another aspect of the matter is that Ld. AO has invoked the provisions of Sec. 28(iv) to make the additions. However, as per the decision of Hon ble High Court in Mahindra Mahindra Ltd.[ 2018 (5) TMI 358 - SUPREME COURT] the provisions of Sec. 28(iv) are not applicable to a benefit that arose in cash or monetary terms. In the present case, the benefit received by the assessee upon repayment of loan is in the form of cash and therefore, the provisions as invoked by Ld. AO do not have any applicability to the facts of the case - we would hold that foreign exchange gains as arisen to the assessee were in capital field and hence, not liable to tax.

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• 2021 (10) TMI 452
  Assessment u/s 153A - undisclosed receipts of on-money received from sale of flats - incriminating document pertaining to assessee was found from the premises of other concerns - Whether evidences brought into light by the A.O. during assessment proceeding? - HELD THAT:- Entire procedure of additions in assessee s case was based on the documents found during search which related to other group companies named Silver Mansion, Silver Mansion Extension and have no any relevance or relation with the assessee co. as none of the concerns, belonging to Jhaveri Group, have the line of business in which the assessee company deals. As all the group concerns of Jhaveri Group are engaged in the business of development of land and sale thereof after plotting, whereas, the assessee company has not sold a single inch of land. It s main and core business is to construct residential and commercial units. The units are in the shape of apartment, row houses, bungalows and shops. Assessee explained that the rate fixed for the purpose of sale is as per the deal struck by the assessee with the prospective buyer and which is in unit of per sq Feet and for the purpose of calculation of saleable area, ingredients of space utilized in the construction of common area, roads, clubs, gardens, staircases and parking etc. are apportioned in the number of unit. Resultantly, a customer is required to pay 30% more than the carpet area bought by him. AO wrongly estimated rate per square feet, by comparing the rates adopted in the adjoining township, Silver Mansion , is a project of Jhaveri Group, totally disjoint with the assessee company. Similarly, some enquires conducted in the cases of Shikharji, Ajitnath Reality Pvt. Ltd. and Padmaprabhu Infrastructure Pvt. Ltd. were irrelevant as is evident from the computation of income of the assessee. Even otherwise, the issue of M/s Shikharji is before the Settlement Commission and therefore, the comparing the case of Shikarji with that of assessee is unjustified. AO failed to pinpoint a single mistake in the books of accounts maintained by the assessee. He could not pin-point any enquiry made in the assessee s case from which adverse inference could be drawn. He did not conduct any enquiry in the assessee s case which is apparent from the fact that no such details of enquiry have been incorporated in the assessment order - assessee filed complete details before the Assessing Officer in respect of sale and also the details product-wise of Phase one two.- assessee s books of accounts are audited and no any incriminating document were found relating to the assessee company during the course of search and no any defect to the maintenance of the books of accounts were noticed by the search team and the AO during the course of Assessment proceedings . Therefore, we are of the view that the additions made were uncalled for. In respect of the summons issued to some Shri Ramesh Chandra Gupta, Garima Chelani and Kokila Chelani are concerned, we find that the Assessing Officer could not bring any cogent material to establish that the assessee has business transactions with these persons. Therefore, the observations are baseless. 51% shares are held by Jhaveris and 49% by Fire Capital Fund. The investment made by Fire Capital Fund is from US Investors routed through Mauritius. Therefore, the observations made by the Assessing Officer are not justified as the assessee co. does not belong to Jhaveri Group accordingly. As AO made the addition on the basis of the aforesaid seized document and the same has been owned up by Shri Mukesh Jhaveri and Shri Abhishek Jhaveri in 50:50 ratio and paid due taxes which has been accepted by the Settlement Commission vide order dated 22.8.2016. Therefore, the ld. CIT(A) had deleted the addition of Rs. 37,07,335/-. Thus, we find that the tax in respect of the seized document has been paid and the seized document has no relevance so far as the case of the present assessee is concerned. As no single incriminating document pertaining to assessee was found from the premises of other concerns as narrated above showing that any on-money was received by the assessee - the operation under section 132 was simultaneously carried out in the project office of the company and there also no incriminating document was found or seized as is evident from the contents of the Assessment Order itself which show no reference to incriminating documents or undisclosed assets before making any addition for alleged on-money - Decided against revenue.

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• 2021 (10) TMI 451
  Computation of long term capital gain on sale of land - agricultural land initially purchased - determination of fair market value - diversion of agricultural land - Whether land in question was not a capital asset as per the provision of section 2(14)(iii)? - whether AO erred adopting the Fair Market Value of Land as on 01-04-1981 arbitrarily without determining the Fair Market Value of Land as on 01-04-1981 using the Reverse Indexation Method which is a well settled method of determination of fair market value? - HELD THAT:- Land in question was not situated within the limit of any municipality or cantonment board. Thus, in view of these facts and circumstances of the case, we find that the agricultural land initially purchased by the assessee was not a capital asset as per section 2(14)(iii) of the Act. Accordingly, the amount of capital gain accruing to the assessee till the diversion of agricultural land on 25.11.2010 shall not be eligible to tax. FMV determination - As fair market value of land as on the date of diversion i.e. on 25.11.2010 shall be taken as Rs. 68,90,415/-. Thus, in our view, as discussed supra, capital gain accruing to the assessee till the date of diversion using fair market value of Rs. 68,90,415/- shall be exempt from tax. Further, we are of the view that fair market value of Rs. 68,90,415/- as on the date of diversion shall be considered as cost of acquisition for the purpose of determination of the amount of capital gain chargeable to tax during the year under consideration. The indexed cost of acquisition of land comes to Rs. 91,00,000/- for the FY 2013-14 (AY 2014-15). We are of the view that the findings of ld. CIT(A) deserve to be set aside and accordingly, we delete the addition of Rs. 88,78,365/- made on account of long-term capital gain on sale of land. Thus, ground nos.1 to 3 raised in the appeal of the assessee are allowed. Long-term capital gain on compulsory acquisition of land - HELD THAT:- Once it is established that land compulsorily acquired by the Government was agricultural land, it makes no difference whether the said land is rural or urban since compensation received on compulsory acquisition of rural agricultural land is not chargeable to tax under the IT Act, 1961 whereas compensation received on compulsory acquisition of urban agricultural land is exempt from tax as per section 10(37) of the Act subject to conditions specified therein. However, since land compulsorily acquired by the Government in the present case was a rural agricultural land, there arises no question of taxability of capital gain on compulsory acquisition of such land. Accordingly, we set aside the findings of Ld. CIT(A) and delete the addition made on account of long-term capital gain on compulsory acquisition of land. Thus, ground no.4 raised in the appeal of the assessee is allowed. Long-term capital gain on compulsory acquisition of a part of his house - HELD THAT:- Government merely acquired 250 Sq Fts of plot area and demolished the constructed area of house of the assessee built upon such plot area at the time of compulsory acquisition. We find force in the arguments of the Ld. Counsel for the assessee that part of the house of the assessee was merely demolished and that there was no transfer of any capital asset so as to attract capital gains tax in the hands of the assessee. Thus, we are of the view that there was no transfer as per section 2(47) of the Act at the time of demolition of part of the house of the assessee and accordingly, no capital gain is taxable in the hands of the assessee in respect of demolition of part of his house. For compulsory acquisition of plot area of 250 Sq Fts is concerned, we find that the assessee merely received an amount of Rs. 15,840/- as compensation in lieu of compulsory acquisition of plot area which was way less than the cost of acquisition of the said plot area which comes to Rs. 49,331/- (Rs. 2,25,000/- (+) Rs. 21,655/- *250/1,250) as is evident from the purchase registry which has been filed on Page No. 52-58 of the paper book. Therefore, no capital gain was chargeable in the hands of the assessee even in respect of compulsory acquisition of plot area. Further, the assessee incurred substantial repair and renovation expenses to the tune of Rs. 5,23,817/- to bring back the house to a suitable condition for living subsequent to demolition done by the Government. Thus, it is clear that the assessee did not earn any long-term capital gain - Ground no.5 raised in the appeal of the assessee is allowed. Unexplained credit u/s 68 - unexplained/bogus liability - Addition of agricultural land in the head assets in the balance-sheet on the ground that during the course of assessment proceedings, in the statements u/s 131 of the I.T. Act, recorded by the Assessing Officer, the assessee failed to explain the source of the investment and also failed to produce books of accounts and any other documentary evidences in support of the claimed liability - HELD THAT:- Assessee categorically explained that corresponding adjustment in respect of addition made to agricultural land was not routed through the capital account but rather the amount of cash to the extent of Rs. 12,86,090/- was transferred from the books of accounts of the business to the personal books of accounts of the assessee. Thus, the source of agricultural land purchased by the assessee was duly explained. We also find that the agricultural land under consideration was purchased during the AY 2013-14 and not during the AY 2014-15. Addition is not sustainable on this count also. In view of these facts, the order of ld. CIT(A) on this issue deserves to be set aside. Accordingly, we delete the addition made u/s 68. Estimation of N.P. @ 8% - assessee could not produce his books of accounts during the course of assessment proceedings - HELD THAT:- CIT(A) failed to bring on record any evidence to controvert the financial results as per the audited final accounts of the assessee for the year ended 31.03.2014 rather the Assessing Officer estimated the net profit of @ 8% in adhoc manner which is not justified. The Assessing Officer/ld. CIT(A) did not consider the fact that the financial results of the assessee for the year ended 31.03.2014 were comparable with the results of the preceding as well as subsequent years. Further, the Chartered Accountant who audited the books of accounts also did not give any adverse findings regarding the books of accounts maintained by the assessee. In view of these facts and circumstances, the addition is not justified - findings of Ld. CIT(A) deserves to be set aside. Accordingly, we delete the addition made on account of estimation of N.P. @ 8%. Therefore, ground no.7 raised in the appeal of the assessee is allowed.

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• 2021 (10) TMI 450
  Disallowance of interest u/s. 36(1)(iii) - partners of the assessee firm had over withdrawn an amount as in excess of what was brought by them in the firm - HELD THAT:- A.R. had tried to dissect the negative balances appearing in the partners capital account. Bypassing the accumulated losses, the ld. A.R. had tried to impress upon us that a cumulative consideration of the net amount of capital introduced by the partners over the years revealed that there was no overdrawing of the respective capital accounts. Explanation of the assessee is devoid and bereft of any reasoning - it is a matter of fact that the partners of the assessee firm had debit balances in their capital accounts at the beginning of the accounting year, which pursuant to the further withdrawals carried out by them during the year had resulted to a debit balance in the capital account at end of the year too - the assessee did not have any interest free advances - now when the partners of the assessee firm had clearly over withdrawn an amount in excess of what was brought by them in the firm, therefore, the lower authorities had rightly concluded that the correlating interest expenditure pertaining to the amount so overdrawn was liable to be disallowed u/s.36(1)(iii) - lower authorities had rightly concluded that the correlating interest expenditure pertaining to the amount so overdrawn was liable to be disallowed u/s. 36(1)(iii) - Decided against assessee. Disallowance of the entire amount of interest expenditure u/s. 40(a)(ia) - Assessee firm had during the year under consideration paid certain amounts to NBFC s for interest, prepayment charges and loan processing fees - benefit of the 2nd proviso to Sec. 40(a)(ia) - scope of amendment - HELD THAT:- As the assessee would be eligible for the benefit of the 2nd proviso to Sec. 40(a)(ia) of the Act, though subject to the satisfaction of the conditions therein contemplated. We, thus, in terms of our aforesaid deliberations restore the matter to the file of the A.O. with a direction to reconsider the disallowance u/s. 40(a)(ia) of the aforesaid amounts subject to the satisfaction by the assessee of the requisite conditions contemplated in the 2nd proviso to Sec. 40(a)(ia) of the Act. At this stage, we may herein observe that the A.O. shall in the course of the set-aside proceedings consider the Form No. 26A that was filed by the assessee with the ITO (TDS)-1(3)(3), Mumbai on 18.07.2019. Post-amended Sec. 40(a)(ia) of the Act the disallowance therein contemplated was liable to be restricted to the extent of 30% of the amount in question as regards which the assessee had defaulted the TDS provision under Chapter XVII-B - We are of the considered view that the claim of the ld. A.R. that the disallowance, if any, u/s. 40(a)(ia) was liable to be restricted to the extent of 30% of the sum payable does not merit acceptance and is accordingly rejected. The Ground of appeal No. 2 is dismissed.

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• 2021 (10) TMI 449
  Estimation of suppressed turnover - suppressed production of IMFL - certain loose sheets found during the course of search in the business premises of the assessee, as per which there is discrepancy in purchase and consumption of secondary raw materials like caps, bottles and labels - AO has determined suppression of production by taking into account difference in purchase and consumption of caps on the basis of production reports submitted by the assessee for the month of April, 2005 - explanation of the assessee that the AO has determined suppression of production purely on estimation without there being any basis or supporting evidences that the assessee has not accounted production for the relevant period - HELD THAT:- The production department after capping the bottles and the wastage in the process returns back the unused caps to the stores. Therefore, it was claimed that the basis on which the AO had arrived a difference is completely irrational and without any basis. On the other hand, the assessee produced stock registers maintained for packing materials, as per which there is no difference in purchase and consumption of packing materials. However, the AO while making a comparison of the number of bottles used for production vis- -vis the bottles issued, has omitted to take into account unused bottles returned to stores and this numbers is considered then, the difference computed by the AO becomes almost nil. Shortage in primary raw materials like rectified spirit and neutral spirit - When you compare the nature of materials stored by the assessee to the percentage of difference in physical stock and book stock, the difference is negligible because, the raw materials like rectified spirit and neutral spirit are highly evaporable and further these raw materials are stored in wooden racks and measured in dips, which is not accurate. Therefore, the difference arrived at by the AO on the basis of physical stock taken during the course of search cannot support the case of the AO that there is discrepancy in stock of primary raw materials corresponding with difference in percentage of consumption of secondary raw materials like empty bottles, caps, as computed by the AO. Further, it was the explanation of the assessee that while taking physical stock the Department has not considered stock in the pipeline and if such stock is considered then there is no difference in stock computed by the AO. Therefore, on this count also, the reasons given by the AO to arrive at a suppression of production is not sustainable. The production of IMFL and other liquor products are fully controlled by the State Government Department. The production and sale of goods is controlled and monitored by State Excise Authorities right from procuring of rectified spirit to selling of final products. The rectified spirit is purchased by the assessee with a license issued by Commissioner of Prohibition and Excise - AO has also not pointed out any instance of violation of State Excise laws. AO has also failed to bring on record any evidence to prove that other than TASMAC, the assessee has old goods to outsiders. Once the goods manufactured by the assessee are fully controlled and monitored by State Government Authorities and there is no evidence of any wrong doing by the assessee, the AO cannot estimate suppression of production only on the basis of his own mathematical calculations by extrapolating certain figures that to without understanding the process of manufacture involved in production of IMFL products. Therefore, we are of the considered view that the AO was completely erred in estimation of suppression of production on the basis of suspicion and surmises without any cogent reasons to support his findings. The CIT(A) after considering relevant facts, has rightly deleted addition made by the AO - Decided in favour of assessee. Addition towards excess production - Addition on the basis of conversion of rectified spirit into IMFL by allowing permissible deduction towards process loss at 3% as per Rule 15A 3(a) read with 3(c) of TamilNadu Distillery Rules, 1981 - AO has worked out probable production of IMFL in bulk litres and then compared with reported production as per books of accounts of the assessee - HELD THAT:- We do not ourselves subscribe to the reasons given by the AO for the simple reason that the AO has done arithmetical calculation without understanding the process of manufacturing of IMFL by conversion of rectified spirit by adopting permissible production loss as per State Excise Rules As assessee has demonstrated with evidences that production loss reported to State Excise Authorities is within the permissible limit of 3% for all months - assessee has submitted monthly statement recording re-distillation of rectified spirit to State Excise Department in as much as, there is no action by the Excise Department for excess production loss reported over and above permissible production loss as per said Excise Rules - we are of the considered view that the AO was completely erred in determining excess production by applying his own arithmetic calculation without understanding the facts that there is no discrepancy in stock details submitted by the assessee to the State Excise Authorities and further there is no action from the authorities for violation of any of the conditions prescribed under State Excise Rules, 1981. CIT(A) after considering relevant facts has rightly deleted additions made by the AO and hence, we are inclined to uphold the findings of ld.CIT(A) and reject ground taken by the Revenue. Nature of expenses - Disallowance of landscaping charges - amount incurred towards landscaping charges is in the nature of capital expenditure, which gives enduring benefit to the assessee and hence, cannot be allowed as deduction - explanation of the assessee before the AO that landscaping charges incurred towards repair of compound wall, removing and re-fixing of electrical gadgets and landscaping factory land are is in the nature of current repairs and cannot be considered as capital expenditure - HELD THAT:- We find that the ld.CIT(A) has recorded categorical finding that landscaping activity mainly consist of growing a particular variety of grass which can by no stretch of imagination be termed as capital in nature or of enduring benefit. Therefore, we are of the considered view that there is no error in the reasons given by the ld.CIT(A) to delete addition made towards disallowance of landscaping charges as capital in nature and hence, we are inclined to uphold the findings of ld.CIT(A) and reject the ground taken by the Revenue. Addition made towards inflation in cost of old bottles - HELD THAT:- It was the claim of the assessee before the AO that Sri Renga Enterprises has agreed to supply bottles at the factory gate without charging any amount for broken bottles. Further, the entire cost of freight is borne by the supplier. Due to these reasons, the assessee had paid little more prices, when it compares to new bottles purchased from other suppliers. We find that the explanation given by the assessee appears to be bonafide and reasonable. It is the prerogative of the businessman to purchase a particular type of raw material from its own suppliers which suits to its business requirements. Moreover, the price paid for purchase of bottles cannot be compared with price paid to another supplier unless the AO brings on record some evidences to prove that specification of bottle supplied by two different suppliers are unique in type, quality and pattern. In this case, the assessee has proved with necessary evidences that it has paid to suppliers against purchases through account payee cheques. The AO has not brought on record any evidences to prove that the assessee has paid amount by cheques and get back money in cash. Therefore, we are of the considered view that the AO was erred in making addition towards inflation of cost of purchase of old bottles and new bottles only on the basis of price paid by the assessee to two different suppliers without bringing on record any cogent reasons to justify his action - Decided in favour of assessee. Addition made towards disallowance of finance charges - AO has disallowed proportionate interest cost @ 12% per annum on the ground that the assessee has diverted interest bearing funds for non-business purpose as well as advance was given for the purpose of purchase of property which is capital in nature for which the authorized representative of the assessee has agreed for the proposed addition - HELD THAT:- As assessee has paid huge interest on borrowed funds. The assessee has not furnished satisfactory explanation for diverting interest bearing funds to related parties for non-business purpose. Therefore, we are of the considered view that the AO was right in disallowance of proportionate interest @ 12% - Hence, we reverse the findings of the ld.CIT(A) and sustain the addition made by the AO towards disallowance of proportionate interest. Addition made towards disallowance of discount allowed on sales - HELD THAT:- Assessee does not have any say in allowing cash discount on sales but it is solely on the discretion of the purchaser of goods i.e., TASMAC. Therefore, we are of the considered view that expenditure debited under the head discount allowed on sales is a genuine expenditure, which was allowed as per the terms of agreement between the seller and buyer. AO without appreciating the facts has simply made addition only on the ground that such discount has not been allowed / mentioned in the invoice. The CIT(A) after considering relevant facts has rightly deleted addition made by the AO. Hence, we are inclined to uphold the findings of the ld.CIT(A) and reject ground taken by the Revenue.

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• 2021 (10) TMI 448
  Addition u/s 68 - accommodation entries in the shape of share premium obtained - Protective assessment - Income is taxable in whose hands? - The sole purpose of all the entities manage and controlled by the Employee of the main accused was to provide accommodation entries to various outside entities/persons. There was no actual business activities in any of the entity manage and controlled by such employee - HELD THAT:- The revenue is not very clear as to whom the amounts have been attributed and tax is to be collected. The ld. CIT (A) has also not given in any categorical finding as to which entity is the real owner of the amount. Hence, the matter is being remanded back to the file of the ld. CIT (A) to pass an order by giving a categorical finding on the assessability of the income. Appeal of the assessee is allowed for statistical purpose.

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• 2021 (10) TMI 447
  Cancellation of registration u/s. 12AA(3) - amendment in trust deed - Proof of change of object charitable - trust deed executed earlier was cancelled by resolving the trustees and reconstituted - HELD THAT:- The revenue has to consider whether the trust is carrying its activities as per the objectives/clauses or not. The only source of income is not the sole reason for cancellation of the registration unless its activities are beyond the object clause on the basis of which the registration was granted u/s. 12A. On examination of trust deed, we find that there is amendment in trust deed on the basis of the registration was granted. The society/trust is collecting fee from students and expending for the educational purpose and the surplus is not misappropriating other than its objects clause While cancelling the registration of the trust, which was granted earlier, the CIT(E) alleged that the remuneration paid to the trustees were very high, which is not a ground to cancel the registration. The assessee had submitted details for justifying the remuneration paid to Ms. Nirmala Diaz, founder trustee - CIT(E) has referred to clause 21 amended deed dated 20/12/2002 to cancel the registration that the trustees shall not be entitled to any remuneration for their service put in by them in connection with the management of the trust , which is not having much weightage and not a ground to cancel the registration. Ms. Nirmala Diaz, founder trustee is coordinating for smooth running of day to day activities of educational institution. Even if the CIT(E) was not satisfied with her services rendered in consonance with the remuneration paid by the trust, he could have disallowed the excess expenditure as per his opinion, but the same should not be taken a ground to cancel the registration of trust. CIT(E) can cancel the registration only in situations, namely, i) if the activities of the such trust or institution are not genuine or ii) not being carried out in accordance with the objects of the trust or institution as the case may be. Both the situations are mutually exclusive. The trust is carrying educational activities which are within the purview of the object clause of the trust deed - cancellation of the registration is not in accordance with law and therefore, we direct the CIT(E) to restore the registration granted u/s. 12AA(1)(b)(i) - Decided in favour of assessee.

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• 2021 (10) TMI 446
  Income accrued in India - Interest income from foreign currency loan and Securities - proof of beneficial ownership of funds - eligibility ot claim exemption under Article 11(3)(c) of India-Mauritius DTAA - treaty interpretation - HELD THAT:- As decided in own case [ 2020 (3) TMI 1372 - ITAT MUMBAI] CBDT Circular no. 789 dated 13.04.2000 would equally apply even in the situation before us where the application of the provisions of the India-Mauritius Tax Treaty is sought to be applied for considering the taxability of interest income as per Article 11(3)(c) of the India- Mauritius Tax Treaty - even in the context of the impugned interest income, Circular no. 789 dated 13.04.2000 (supra) of the CBDT is applicable while applying the provisions of Article 11(3)(c) of the India-Mauritius Tax Treaty. On this aspect itself we uphold the plea of the assessee that assessee is the beneficial owner of the impugned interest income on the strength of the Tax Residency Certificate issued by the Mauritian authorities. - Decided in favour of assessee.

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• 2021 (10) TMI 445
  Disallowance of provision for mark to market loss on trading of derivative instruments - treating it as notional loss both under normal provisions of the Act as well as in the computation of book profits u/s.115JB of the Act - HELD THAT:- We find that this issue is squarely covered by the order of this Tribunal in assessee s own case[ 2019 (3) TMI 1060 - ITAT MUMBAI] for earlier years. We find that the ld. CIT(A) had followed the decision relied by this Tribunal in the case of Edelweiss Securities Ltd., [ 2012 (3) TMI 612 - ITAT MUMBAI] and DCIT vs. ECL Finance Ltd. [ 2013 (1) TMI 783 - ITAT MUMBAI] , both being sister concerns of the assessee, wherein similar issue has been decided in favour of the assessee. The relevant portion of the said orders are not reiterated herein for the sake of brevity. Hence, we do not find any infirmity in the order of the ld. CIT(A) following the Tribunal order while granting relief to the assessee. Accordingly, the ground Nos. 1 2 raised by the Revenue are dismissed. Disallowance made u/s.14A of the Act r.w.r.8D(2) - suo-moto disallowance of expenses as expenditure incurred for earning exempt income - HELD THAT:- We find that the Hon ble Gujarat High Court in the case of Nirma Credit and Capital Pvt. Ltd.[ 2017 (9) TMI 485 - GUJARAT HIGH COURT] had categorically held that only the net interest expenditure should be considered for the purpose of working out the disallowance of interest under Rule 8D(2)(ii) of the Rules. Total investments the assessee is having own funds to the tune of Rs. 67.89 Crores which is evident from the perusal of the financial statements enclosed in the paper book filed before us. Hence, it could be reasonably presumed that investments only to the tune of Rs. 4.23 Crores have been made out of borrowed funds, for which disallowance of interest could be made. Hence, in the light of decision of Reliance Industries Ltd., [ 2019 (1) TMI 757 - SUPREME COURT] and the decision of the Vireet Investments [ 2017 (6) TMI 1124 - ITAT DELHI] , we direct the ld. AO to recompute the disallowance of expenses u/s.14A of the Act as under:- i) To consider only net interest expenditure as per the decision of the Hon ble Gujarat High Court in the case of Nirma Credit and Capital Pvt. Ltd., referred to supra. ii) To consider only those investments which had actually yielded exempt income to the assessee for the purpose of working out the disallowance under Rule 8D(2)(ii) and Rule 8D(2)(iii). iii) While working out the same, investments which were presumed to be made out of own funds should be given credit or should be reduced for the purpose of working out the disallowance under Rule 8D(2)(ii) of the Rules. iv) In any case, the total disallowance made u/s.14A of the Act shall not exceed exempt income. Disallowance on account of provision for expenses made under normal provisions of the Act as well as in the computation of book profits u/s.115JB - HELD THAT:- As assessee being a subsidiary of Edelweiss Financial Services Ltd., which is a listed company had to get its accounts audited on or before 31st May from the end of the accounting year in order to submit the balance sheet to the stock exchange in accordance with listing norms. The audited financial statements of the assessee company has been signed on 14th May 2013, for which purpose, obviously accounts need to be freezed at least by the end of April. Hence, for the purpose of freezing of accounts, expenses and income that had accrued need to be provided atleast on estimated basis and based on past practices prevailing in the company. The assessee company does not have a luxury to wait for the receipt of actual bills from the concerned parties after the end of the financial year. Since assessee could not adopt wait and watch approach and had to necessarily make provision for certain expenses on an estimated basis based on past practices to finalize its accounts, the provision made thereon cannot be treated as an unascertained liability or liability which is contingent in nature. In view of the same, we find that the ld. CIT(A) had rightly deleted the disallowance. Disallowance being loss incurred by the assessee of trading in commodity forward contract - CIT- A deleted the addition - HELD THAT:- CIT(A) had categorically observed that the parties with whom assessee company had entered into the forward contracts are regularly assessed to income tax and had duly paid their taxes on the income earned by them by entering into forward contracts with the assessee. The assessee has filed computation of total income and assessment orders framed in the hands of those group companies wherein it could be seen that the correct income had been duly taxed at the higher slab rate of 30%, hence, there cannot be any tax avoidance or mala fide intention on the assessee to reduce tax liability - loss incurred by the assessee in the forward contract by buying or selling the aluminium commodity, Nickel, or platinum is only incurred in the normal course of running the business of the assessee and the prices thereof are purely driven by market forces. The transactions carried out with related parties are of no relevance for disallowing the loss incurred by the assessee. Reliance in this regard has been rightly placed by the ld. AR on the decision of Pitty Bros. Pvt. Ltd., [ 1979 (1) TMI 42 - BOMBAY HIGH COURT] - No infirmity in the order of the ld. CIT(A) deleting the disallowance being the loss incurred on account of trading in forward contracts. Deduction on account of education cess - assessee has raised an additional ground - HELD THAT:- We find that this additional ground deserves to be admitted as all the facts necessary for its adjudication are already on record and there is no dispute that assessee had indeed paid the education cess. Hence, respectfully following the decision of Sesa Goa Ltd.[ 2020 (3) TMI 347 - BOMBAY HIGH COURT] we direct the ld. AO to grant deduction on account of education cess paid by the assessee as an allowable business expenditure. Accordingly, the additional ground raised by the assessee is allowed.

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• 2021 (10) TMI 444
  Revision u/s 263 by CIT - Assessment was framed by the assessing officer for a limited scrutiny - expansion of scope of limited scrutiny - HELD THAT:- The issue for which the PCIT issued the show cause notice was entirely different than the four issues examined under limited scrutiny by the assessing officer. The Board in its circular mentioned the procedure for converting the limited scrutiny case into full-fledged scrutiny. The said circular was reproduced by the PCIT in the impugned order before us. From the perusal of the above said circular, it is abundantly clear that the conditions, which are sine qua non were non-existence. Therefore, the assessing officer did not have to convert or make a request for a limited scrutiny case to fullfledged scrutiny. Since the assessing officer was only required to decide the issues specifically selected under Limited scrutiny and was not required to examine or sufficiently enquire the matters which are not referred to him as alleged by the PCIT. Once the assessing officer was required to apply his mind to the specific issues, which were duly dealt by the assessing officer in the order passed by him, it cannot be said that the order passed by the assessing officer was erroneous or prejudicial to the interest of the revenue. The revenue in its wisdom has directed the assessing Officer to decide the specific issues and laid down the condition of deviation from the specific issues after fulfilling the requirement of the circular issued by the Board in this regard. Once the AO had scrupulously discharged the duty assigned to him, it cannot be said by PCIT that the order passed by the assessing officer was erroneous and prejudicial to the interests of the revenue. - Decided in favour of assessee.

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• 2021 (10) TMI 443
  Income accrued in India - Amount accrued to the Assessee from another group company in India on account of management support costs - FTS under the India- Singapore DTAA - principal and meaning of Make Available - Assessee is providing services in the nature of operational support, accounting and legal support information technology related services etc.- assessee has challenged the treatment of Management support services charge on account of support services provided by the Assessee as Fee for Technical Services (FTS) under the India- Singapore Double Taxation Avoidance Agreement( DTAA ) - CIT(A) held that the payment for management, support service is held to be FTS except for payment of Information Technology Services - HELD THAT:- As gone through the agreement and the TP study report of the IHG India with regard to the services provided. We find that the operational support such as Providing advice, information and competitive expertise to local general CMH Hotel management on the operation of Hotels in accordance with brand standards, maintaining the qualification available with regard to the international hotel business and its management techniques and Coordinating the managerial plan and actions, advising local general CMH Hotel management on trends and changes in the hotel business in general and provide advice on the production of operating and capital budgets at the level of the CMH Hotels, which are consistent with the strategic plan can at best be the managerial consultancy service but not the services made available so that the recipient can use or replicate the such services received from the assessee. With regard to accounting support the Bench has posed a pertinent question as to why not the accounting support given be treated as the technical knowledge made available . It was answered that the accounting support given was in relation to the preparation of balance sheet and modalities and to advice production of reports regarding the budgets from time to time and the services are rendered repetitively based on the requirements of the clients and hence it cannot be treated as a service which was made available to be applied independently and in times to come. We, after going through the type of services rendered, hereby concur with the explanation given by the ld. AR. Similarly, the services rendered in connection with training recruitment and manpower specification, we find that there is neither technology transfer, knowledge transfer nor transfer of any skill or know-how. We hold that the provisions of the Article 12(4) could not be applied to the services rendered by the assessee in the strict sense of the provisions of DTAA. Hence, we hold that the decision of the ld. CIT(A) cannot be supported. Appeal of the assessee is allowed.

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• 2021 (10) TMI 442
  Disallowance of travelling expenses - CIT (A) not admitting the additional evidences filed under rule 46A of Income Tax Rule - no proof of expenses for purpose of the business especially in the case of international travelling expenses - HELD THAT:- As assessee has not brought any cogent reason with the documentary evidence justifying that he was prevented by sufficient cause to file the additional evidences before the AO during the assessment proceedings - as only contended by the assessee that the accountant who was looking after the income tax proceedings was not competent enough. But this justification of the assessee was without any documentary evidence on record such as the affidavit of the accountant, qualification of the accountant etc. AO during the assessment proceedings was requiring the assessee to furnish the specific details in support of travelling expenses but the assessee failed to do so despite having granted sufficient opportunities by the AO. To our mind, furnishing the basic details does not require much competency, therefore the argument of the assessee does not hold good. Assessee has furnished additional evidences before the learned CIT (A) in the form of credit card statements which was containing the details of the websites through which the tickets were booked such as makemy trip, cleartrip, specific airlines etc. However, in our understanding, these details alone do not justify that such travelling expenses were incurred for the purpose of the business. Even before us, assessee has not filed any evidence to justify the travelling undertaken in a foreign country. It was only submitted that the foreign trip was undertaken to participate in a fashion show in London without any supporting evidence. In the absence of necessary supporting evidence it is not possible to establish that the expenses were incurred for the purpose of the business especially in the case of international travelling expenses - Decided against assessee. Disallowance on account of salary expenses - HELD THAT:- Salary expenses have increased more in proportion to the increase in the value of the sales i.e. 24.92% of sales in immediate preceding year to 26.2% in current year. Thus, a cumulative reading of all these facts create a doubt on the genuineness of the expenses shown by the assessee - AR at the time of hearing has not brought anything on record suggesting that the impugned salary expenses were genuine which were based on the documentary evidence. No reason to interfere in the finding of the authorities below - ground of appeal of the assessee is dismissed. Disallowance on account of non-deduction of Tax u/s 40(a)(ia) - AR submitted that the payees have already included the amount received from the assessee in their financial statements and paid the due taxes thereon - primary onus lies upon the assessee to deduct the TDS under chapter XVIII-B of the Act - Whether such payees have paid the taxes on the amount received from the assessee? - HELD THAT:- Section 40(a)(ia) of the Act provides that if assessee failed to deduct or failed to deduct appropriate tax on amount paid on which it was liable to deduct tax then such amount will not be allowed as business expenses. However the legislator provided relaxation to the assessee by inserting the 2nd proviso to section 40(a)(ia) on account of failure to deduct the tax if it fulfills the condition prescribed under proviso to section 201(1) of the Act i.e. furnishing a certificate from accountant in from 26A. Duty cast on the assessee cannot be transferred to revenue. If such burden is transferred to Revenue then the importance of provision of tax deduction at source under the provision of chapter XVII (B) of the Act i.e. deduction at source will be of no relevance. However, in the interest of justice and to avoid the double taxation, we set aside the issue to the file of the AO with the direction to the assessee to submit the CA certificate to the effect that the payees have included the amount received in their income return and offer the same to tax - Thus ground of appeal of the assessee is allowed for the statistical purposes.

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• 2021 (10) TMI 441
  Income from house property - deemed rent u/s. 23(4) - Deemed rental income on unsold flats - main contention of ld. AR is that the unsold flats forms part of stock in trade and there is no intention for the assessee to let out the said unsold flats but only to sell in the market - HELD THAT:- The first condition being that the property or its part should be occupied by the assessee as an owner. There is no material evidence to show before us that the assessee is not occupied the said unsold 6 flats. The second condition is that any business or profession should be carried on by the assessee. We note that the assessee filed return showing income from such business and also engaged in the business of property development. The third condition is that the occupation of the property should be for the purpose of business or profession wherein the assessee before us shown the said 6 unsold flats as stock in trade. The last condition is that profits of such business or profession should be chargeable to income-tax. In the present case that there is no dispute that the profits of the business of construction by the assessee are chargeable to income-tax. Therefore, in our view that the unsold 6 flats are occupied by the assessee are as owner; business of construction is carried on by the assessee; the occupation of the flats is for the purpose of business; and profits of such business are chargeable to Income-tax. Thus, in our opinion, all the four conditions provided in exclusion clause in section 22 of the Act are to be excluded, therefore, we hold that no addition on account of deemed rent on unsold 6 flats can be made in the hands of the assessee - Decided in favour of assessee.

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• 2021 (10) TMI 440
  Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of charge - whether assessee has concealed the particulars of income or has furnished inaccurate particulars of income? - HELD THAT:- Bare perusal of notice issued u/s 274 read with section 271(1)(c) shows that the AO has failed to specify in the show-cause notice if the assessee has concealed the particulars of income or has furnished inaccurate particulars of income. Issuance of valid notice in order to initiate the penal provisions as sine qua non for levying the penalty as this issue has been decided in the case of CIT vs. SSA s Emerald Meadows [ 2015 (11) TMI 1620 - KARNATAKA HIGH COURT] . Hon ble Apex Court in case of CIT vs. SSA s Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER] while dismissing the SLP filed by the Revenue quashing the penalty by the Tribunal as well as Hon ble High Court on ground of unspecified notice held that notice issued by Assessing Officer under section 274 read with section 271 (1 )(c) was bad in law, as it did not specify under which limb of section 271 (1 )(c) penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. When the assessee has disclosed all the particulars in the return of income claiming certain expenses, however found to be not allowable, it would not amount to furnishing of inaccurate particulars of income to attract the penal provisions u/s 271(1)(c) of the Act, as has been held by Hon ble Apex Court in the case of Reliance Petro Products Pvt. Ltd[ 2010 (3) TMI 80 - SUPREME COURT] . Also see MANJUNATHA COTTON AND GINNING FACTORY, MANJUNATH GINNING AND PRESSING, VEERABHADRAPPA SANGAPPA AND CO., V.S. LAD AND SONS, G.M. EXPORT [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] AO has miserably failed to specify in the notice issued under section 274 read with 271(l)(c) of the Act, as to whether the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income , and also merely making a claim which is not sustainable in law by itself, as in the present case, assessee s expenditure has been disallowed by the AO, would not amount to furnishing of inaccurate particulars of income. - Decided in favour of assessee.

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• 2021 (10) TMI 439
  TP adjustment in trading segment - adoption of Most Appropriate Method - assessee has adopted RPM method as most appropriate method while benchmarking the transactions - TPO has rejected the method and adopted TNMM as the most suitable method and proposed TP adjustment - HELD THAT:- As relying on assessee s own case [ 2019 (8) TMI 1766 - ITAT MUMBAI] we direct Ld. AO / TPO to consider the benchmarking using RPM method and re-determine the issue of ALP of these transactions. This ground of assessee s appeal stand allowed for statistical purposes. TP adjustment on account of AMP expenditure - International transaction u/s 93B - HELD THAT:- We find that there is no express agreement between the assessee and its AE wherein the assessee is required to incur the AMP expenditure for brand building on behalf of its AE. All these payments are third party payments. There is no concrete material in support of conclusion of Ld.CIT that there was a prima facie arrangement between the AE and the assessee to incur such expenditure. The said observation is not supported by any express agreement on record. Unless it was shown that there was such an arrangement which resulted into any direct or indirect benefit to the brand of assessee s AE, these transactions could not be regarded as international transaction u/s 92B as held by Hon ble Delhi High Court in the case of Maruti Suzuki India Ltd. V/s CIT[ 2015 (12) TMI 634 - DELHI HIGH COURT] . Disallowance u/s 37(1) on account of Medical Freebies - expenditure has been disallowed in terms of Indian Medical Council (Professional Conduct, Etiquette and Ethics) regulations, 2002 as applicable from 14/12/2009 - HELD THAT:- As in catena of judicial decision, it has been held that the aforesaid regulations apply to Medical Practitioners only and not to pharmaceutical companies incurring such expenditure. The amount so expanded would be an allowable deduction u/s 37(1) - the regulations as referred to by lower authorities to make the disallowance are not applicable to the assessee and thus, the disallowance is not sustainable in law. By deleting this addition, we allow assessee s ground of appeal. Thus we would hold that the given transactions could not be regarded as international transaction as defined under section 92B of the Act and therefore, no transfer pricing adjustment could have been made by the Transfer Pricing Officer in this regard. The grounds raised by the assessee stands allowed which makes revenue s grounds infructuous.

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• 2021 (10) TMI 438
  Disallowance of expenses relatable to exempt income by invoking the provisions of section 14A read with Rule 8D - Sufficiency of own funds - HELD THAT:- Assessee stated that issue is squarely covered by the decision of Hon ble Bombay High Court in the case of CIT vs. HDFC Bank [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] - DR could not controvert the above facts - once the assessee has own funds more than the investment, no disallowance under Rule 8D(2)(ii) of the Rules can be made unless and until the Assessing Officer has able to prove the direct nexus. Hence, we delete the disallowance and reverse the orders of the lower authorities on this issue. Second disallowance of administrative expenses under Rule 8D(2)(iii) assessee stated that the total expenditure claimed in the profit and loss account is only 87,596/- and disallowance at the most can be restricted to this amount only. When this was pointed out to the learned Sr. DR, he could not controvert the same. Hence, we direct the Assessing Officer to restrict the disallowance under Rule 8D(2)(iii) of the Rules at Rs. 87,596/-. This issue of assessee s appeal is partly allowed.

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• 2021 (10) TMI 437
  Addition of unsecured loans by treating the same as accommodation entry - Addition based on transaction of bogus purchases - HELD THAT:- We notice that AO has merely proceeded to make addition of unsecured loans merely because the Rajat Group of Companies involved in the transaction of bogus purchases and rejected the evidences submitted before him i.e. assessee has submitted the confirmation balance and the transactions were only routed through bank and there is nothing on record brought by the AO to believe that these transactions were non-genuine and except relying on the fact that the assessee is taken some accommodation entries from Gautam Jain Group and they were subjected to search proceedings. Therefore, we inclined to accept the findings of the Ld. CIT(A). Bogus purchases - CIT(A) has agreed with the findings of the Assessing Officer that certain transactions entered by the assessee with Frontline Diamonds Pvt. Ltd. and Rajat Diamond Pvt. Ltd are non-genuine - HELD THAT:- We are of the opinion that the purchases are no doubt bogus at the same time, the Revenue has accepted the sales/stock declared by the assessee. Therefore, we are in agreement with the findings of the Ld. CIT(A) that as decided by various Hon ble High Courts held that the additional benefit acquired by the assessee in this transaction can be brought to tax not the entire value of alleged bogus purchases are not disputing the declared sales. Therefore, in the given case, the Ld. CIT(A) after analyzing the nature of business of the assessee and the transactions, he has confirmed addition of 3% of the alleged non-genuine transactions. Appeal filed by the Revenue is dismissed.

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• Customs

• 2021 (10) TMI 436
  Permission for amendment of IGM - Seeking direction to allow the name of the consignee to be changed - HELD THAT:- Considering the law laid down by this court, it would be in the interest of justice if the Competent Authority viz. the Joint or the Assistant Commissioner of Customs grants a personal hearing to the petitioners and considers the prayer of the petitioners on its own merits well within the scope of sub-section 3 of section 30 of the Customs Act, by a reasoned order after hearing all parties following principles of natural justice. The application made for amendment or substitution to the Import General Manifest be considered in accordance with law expeditiously and in any event with a period of 6 weeks from October 20, 2021 after hearing all parties. The petitioners to appear before the Competent Authority on October 20, 2021 at 11.00 a.m. - List this writ petition on December 3, 2021.

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• Service Tax

• 2021 (10) TMI 435
  Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - rejection of application without following the principles of natural justice and with utter disregard of section 126 of the Act - HELD THAT:- A plain reading of provisions of section 127 of Finance (No.2) Act, 2019 and Rule 6(3) of SVLDRS Rules, makes it clear that the Scheme is a beneficent one and aim and object of the Scheme is to unload the baggage of pending litigation relating to service tax and excise duty. While interpreting a beneficent provision, its aim and object cannot be ignored. Considering the THOUGHT BLURB VERSUS UNION OF INDIA AND ORS. [ 2020 (10) TMI 1135 - BOMBAY HIGH COURT] , it was held that it will be completely illogical and contrary to the object of the Scheme to reject an application on the ground of ineligibility without giving an opportunity to the declarant to explain as to why his declaration should not be accepted and why relief is not due to him. Thus, principles of natural justice were read into the provision by the Bombay High Court. The respondents were not justified in rejecting the petitioners application without giving them an opportunity - Petition allowed.

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• Central Excise

• 2021 (10) TMI 434
  Extended period of limitation - Method of Valuation - section 4 or section 4A of Central Excise Act or not - valuation of goods on the basis of MRP less prescribed abatement or not? - demand of differential duty amount by valuing the goods under Section 4 of the Act on the ground that the goods in bulk packs of 210 Ltr and 180 Ltr. were meant for industrial sale and not retail sale - HELD THAT:- When there are clear directions from the excise authorities from Chennai and Mumbai Commissionerate to value the goods under Section 4A in respect of factories located in respective jurisdictions, there cannot be any reason to hold in the instant case that the appellant s Kolkata factory, which is owned by the same legal entity, has deliberately resorted to value the goods under Section 4A as against Section 4 of the Act. Further, no evidence has been adduced to show that the appellant has wilfully resorted to value the goods under Section 4A to evade payment of demanded duty amount. Extended period of limitation - HELD THAT:- A general averment has been made in the SCN that the appellant suppressed the actual assessable value to justify invocation of extended period of limitation. The impugned order cannot be sustained and the same is set aside - Since the issue decided on limitation, we refrain from making any observations in respect of the merits of the case - Appeal allowed - decided in favor of appellant.

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• 2021 (10) TMI 433
  CENVAT Credit - packing material - common input used in exempted goods as well as taxable goods - non-maintenance of separate records - non-submission of proper CA certificate - Rule 6 of Cenvat Credit Rules, 2004 - maintainability of appeal u/s 35 of Central Excise Act, 1944 - HELD THAT:- The Commissioner was absolutely wrong while rejecting the application of the appellant on the ground that the SCN has been issued as per clause 73 of the Finance Act, 2010. It is independent matter to rule 6 to be settled even if either the SCN was issued or any order was passed or any appeal is pending before any forum therefore, only because the SCN was issued commissioner should not have rejected the application of the appellant. Non-submission of proper CA certificate - HELD THAT:- The same could have been advised to the appellant for submitting the correct CA Certificate. The matter is remanded to the concerned commissioner to re-decide the application dated 31.08.2010 filed by the appellant, irrespective the issuance of SCN. The appellant may be given opportunity to submit the proper CA Certificate, if required - appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2021 (10) TMI 432
  Validity of assessment order - escaped turnover - wrong availment of input tax credit - final order passed without issuance of SCN, on the basis of the pre-assessment notice - HELD THAT:- On reading of the notice/summon there can be no doubt that it is only a summon to the petitioner to appear for a personal hearing, this should have been proceeded by a proper show cause notice. However, no such show cause notice, admittedly had been given by the respondent, therefore, the present move, by issuing this notice, dated 11.02.2019 for personal hearing followed by the impugned order dated 09.09.2020, cannot be permitted to stay, as it would run contra to the procedure established under Section 27 of the Act and also the order passed by this Court. In that view of the matter, this Court has no hesitation to hold that the impugned order does not stand in the legal scrutiny. The impugned order is quashed and the matter is remitted back to the respondent for reconsideration, while reconsidering the same, a proper show cause notice as per proviso to Section 27 of the Act, indicating the circumstances, under which, the respondent found that there is an alleged escaped turnover within the meaning of Section 27 or wrong availment of input tax credit and the rate of tax to be levied on this alleged escaped turnover, shall be properly issued - Petition allowed by way of remand.

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• Indian Laws

• 2021 (10) TMI 478
  Jurisdiction of civil court to entertain the civil suit based on the Industrial Disputes Act, 1947 - termination of temporary employees - seeking execution of decree - HELD THAT:- In the present matter, the appellant has clearly founded his claim in the suit, on the provisions of the ID Act and the employer therefore is entitled to raise a jurisdictional objection to the proceedings before the civil court. The courts below including the executing court negated the jurisdictional objection. The High Court in Revision, however has overturned the lower court s order and declared that the decree in favour of the plaintiff is hit by the principle of coram non judice and therefore, the same is a nullity. As can be seen from the material on record, the challenge to the termination was founded on the provisions of the ID Act. Although jurisdictional objection was raised and a specific issue was framed at the instance of the employer, the issue was answered against the defendant. This Court is unable to accept the view propounded by the courts below and is of the considered opinion that the civil court lacks jurisdiction to entertain a suit structured on the provisions of the ID Act. The decree favouring the plaintiff is a legal nullity and the finding of the High Court to this extent is upheld. Appeal dismissed.

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• 2021 (10) TMI 431
  Dishonor of Cheque - funds insufficient - vicarious liability of Directors, who are not signatories to the cheques - whether the role of the appellants in the capacity of the Director of the defaulter company makes them vicariously liable for the activities of the defaulter Company as defined under Section 141 of the NI Act? - offence chargeable under Section 138 of the NI Act? HELD THAT:- So far as Directors who are not the signatories to the cheques or who are not Managing Directors or Joint Managing Directors are concerned, it is clear that it is necessary to aver in the complaint filed under Section 138 read with Section 141 of the NI Act that at the relevant time when the offence was committed, the Directors were in charge of and were responsible for the conduct of the business of the company. In the case on hand, reading the complaint as a whole, it is clear that the allegations in the complaint are that at the time at which the cheques were issued by the Company and dishonoured by the Bank, the appellants were the Directors of the Company and were responsible for its business and all the appellants were involved in the business of the Company and were responsible for all the affairs of the Company. It may not be proper to split while reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to fulfil the requirement of Section 141 of the NI Act. The complaint specifically refers to the point of time when the cheques were issued, their presentment, dishonour and failure to pay in spite of notice of dishonour - there are no hesitation in overruling the argument made by the learned counsel for the appellants. Indisputedly, on the presentation of the cheque of Rs. 10,00,000/ - dated 2nd June 2012, the cheque was dishonoured due to funds insufficient in the account and after making due compliance, complaint was filed and after recording the statement of the complainant, proceedings were initiated by the learned Magistrate and no error has been committed by the High Court in dismissing the petition filed under Section 482 CrPC under the impugned judgment - the High Court has rightly not interfered in exercise of its jurisdiction under Section 482 CrPC for quashing of the complaint. The proceedings could not be processed further in view of the interim order passed by this Court dated 17th October 2014 and because of the instant appeals, the other cases instituted by the respondent(s)complainant have been held up before the trial Court. Since these are the old cases instituted in the year 2012 and could not be processed further because of the pendency of the appeals in this Court, it is considered appropriate to observe that let all the three cases of which a reference been made in para 17 of this Judgment be clubbed together and be disposed of expeditiously as possible on its own merits in accordance with law without being influenced/inhibited by the observations made in the present judgment not later than six months from the date parties record their attendance before the trial Court. Appeal dismissed.

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