TMI Tax Updates - e-Newsletter
October 18, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
Income Tax
-
Claim of interest expenditure on loan - put to use - Tribunal was right in allowing the appeal filed by the assessee and holding that the term “put to use” applies to capital asset only because capital asset is held to facilitate the business activity and sometimes, it needs to be prepared after it is acquired for being used to facilitate the business activity and in the instant case, the assessee was able to establish that substantial activities had been done in the project, which would go to show that the property purchased has been put to use. - HC
-
Addition u/s 68 - unsecured loan - Very fairly, the learned Senior counsel has submitted that, specifically that chance of personal hearing, though was not asked by the petitioner/Assessee, that become incumbent on the part of the petitioner/Assessee to seek such a chance of personal hearing, in view of the peculiar facts of the case, where, the petitioner has been placed to explain with the documents already submitted to the revenue people to establish that the transactions under which, the petitioner/Assessee accepted that sum from a lender was a genuine transaction taken through the bank. - such a chance can be given to the petitioner/Assessee - Matter restored back - HC
-
Reopening of assessment u/s 147 - Scope of conditions as envisaged as per provisions of Section 151 - in the present case, the conditions U/s 151 of the Act for recording satisfaction by the Commissioner has been validly done as the said satisfaction was on the basis of reasons recorded by the A.O. and not de hors it and thus according to us, the satisfaction independent of reason recorded by the A.O. is not envisaged any way in Section 151 of the Act. - AT
-
Appeal before the CIT(A) against the draft order - It is only the appeal filed by the assessee against the order u/s 144C(3) passed by the AO on 23.01.2020 that an effective and legally tenable appeal would call for decision. In our considered opinion, the ld. CIT(A) took an unimpeachable view in treating the appeal against the draft order as ‘defective’ and thus ‘not maintainable’.- AT
-
Rate of tax u/s 115A - Incorrect tax rate applied by the assessing officer on the income offered by the assessee - if strict and literal interpretation of a statutory provision leads to undesirable consequences and not only renders it unworkable but also causes harassment to the taxpayer, then, it has to be avoided and the provision has to be construed harmoniously to make it workable - AT
-
Revision u/s 263 by CIT - The power of the Commissioner under Section 263 of the Act is in the nature of supervisory jurisdiction. This power is granted to correct an error, which is prejudicial to the interest of the Revenue in the order of the Assessing Officer, even if it is approved by the Joint Commissioner, who is also falling below the rank of the Pr. Commissioner. If the argument of the ld. AR is accepted then the supervisory authority of the Pr. Commissioner granted under the Act is hampered. - Whatever was to be excluded by the law has already been provided under that Section and the only exception are the issues ‘decided and considered’ in the appellate orders. - AT
-
Reopening of assessment u/s 147 - Reopening based on information of investigation wing - Bogus purchases - two well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary - assessing officer was justified. - AT
-
Exemption u/s 10(10D) on the maturity value of the Keyman Insurance Policy - Assessee received the amount on maturity of Keyman Insurance Policy after coming into effect of the amended Explanation-1 to section 10(10D) of the Act. The decision relied by assessee may not be of any help to the assessee as there is no retrospective application of the provision. In this view of the matter, in our considered opinion, the assessee is not eligible to claim exemption under section 10(10D) of the Act on the maturity value of the Keyman Insurance Policy. - AT
-
Revision u/s 263 by CIT - Even if we agrees to the contention of the Ld. A.R. of the assessee that Explanation 2(c ) below section 263(1) of the Act is not applicable for AY 2014-15, still it does not in any way make any impact on the finding made by the Ld. PCIT that the AO has not enquired into the five (5) issues raised by him in the SCN - we uphold the action of the Ld. PCIT to have invoked Section 263 of the Act to interdict the assessment order - AT
-
Revision u/s 263 - scope of limited scrutiny - PCIT has directed the AO to pass the assessment order afresh ignoring that when the case is selected for limited scrutiny, the jurisdiction of CIT for holding the order erroneous or prejudicial to the interest of revenue is confined only to the issue of limited scrutiny and not to direct the AO to pass a denovo assessment afresh by raising issues beyond what is permitted in the limited scrutiny. Hence, the direction given by Ld. CIT is also bad in law. - AT
IBC
-
Supersession of Board of Directors of respondent No.2 - appointment of the administrator further mentioning that respondent No.1 intends to shortly initiate the process of resolution of respondent - inspection conducted by the RBI - inspection revealed serious deterioration in its financial position. - The present is not a fit case where for invocation of extra ordinary jurisdiction under Article 226 of the Constitution of India. - HC
-
CIRP process - security deposit and/or intercorporate deposit - Whether this ‘Security Deposit’ and the interest thereon would fall within the ambit of the definition of ‘Financial Debt’ as defined under Section 5(8)(f) of the Code? - the status of Appellant is that of a Financial Creditor vis-à-vis the amount of ‘Security Deposit’ as per Section 5(7) read with Section 5(8) of the Code - the said amount of debt herein is to be treated as a ‘Financial Debt’. - AT
-
Liquidation of Corporate Debtor - timeline prescribed in the liquidation proceedings or not - Since the objective of the IBC is to prefer resolution over liquidation and maximisation of the value of assets of the Corporate Debtor at any stage, it would be in fitness of the scheme of IBC to make all possible efforts to revive the Corporate Debtor. - The Liquidator is directed to place without further delay, the Scheme in accordance with Section 230 of the Companies Act, 2013 submitted by the Applicant, before the Creditors in compliance of the directions of the Hon'ble NCLAT - Tri
Service Tax
-
SEZ units - refund of service tax paid on input services used in the authorized operations - rejection of claim on the ground that the refund claim is filed beyond the time-limit of one year from the date of payment of Service Tax - The appeals are partly allowed and partly remanded. - AT
-
Refund of service tax paid - Export of services or not - intermediary - Rule 2(f) read with Rule 9 of Place of provision of Service Rules, 2012, clearly provides that ‘intermediary’ which means one who procure or an agent, does not include a person who provides the main service or supply of goods on his account. The appellant have provided the services to their holding company located India outside India, on their own account. Thus, the appellant have exported their services. - Refund allowed - AT
-
Classification of service - Franchise Service or not - one stop painting solution to the customers - When there is a specific clause in the agreement which bars the home solution service provider from representing the respondent, then how it has been claimed that such representational rights have been granted to the home solution service provider. - Nothing has been brought on record by which it can be stated that such representational rights were granted to the home solution service provider - No Demand can be made - AT
Central Excise
-
Benefit of Exemption - When the dyed yarn is made out of twisted yarn and the twisted yarn in turn is made out of duty paid or draw twisted yarn the dyed yarn is also to be considered as having been manufactured out of duty paid textured or drawn twisted yarn therefore, they are eligible for the benefit of the said notifications - the dyed yarn made out of the yarn purchased from the open market is entitle to the exemption. - AT
-
Valuation - Nature of amount received - the appellant received some amount from the buyers of scrap and some amount from Honda India for the value of the auto parts - Rule 5 of the Central Excise (Valuation) Rules, 1975 also talks of additional consideration flowing directly or indirectly from the buyer to the assessee. In view of the peculiar nature of the business arrangement between the appellant, Honda India and the buyers of auto parts, it is clear that the amount received by the appellant from Honda India has flown indirectly from the buyers. - Demand of duty with penalty confirmed - AT
Articles
Notifications
Customs-
81/2021 - dated
14-10-2021
-
Cus (NT)
Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver
DGFT-
39/2015-2020 - dated
14-10-2021
-
FTP
Amendment in Export Policy of Diagnostic kits
-
38/2015-2020 - dated
14-10-2021
-
FTP
Amendment in Export Policy of Syringes
-
37/2015-2020 - dated
14-10-2021
-
FTP
Amendment in Export Policy of Melt Blown Fabric
GST - States-
REV03-17025(35)/1/2020. - dated
27-9-2021
-
Andhra Pradesh SGST
DELEGATION OF POWERS UNDER SECTION 167 OF THE APGST ACT, 2017
-
56 /GST-2 - dated
14-10-2021
-
Haryana SGST
Amendment of notification no. 08/GST-2 dated 22.03.2021 under the HGST Act, 2017
-
(19/2021) FD 16 CSL 2021 - dated
4-10-2021
-
Karnataka SGST
Amendment in Notification (01/2021) No. FD 16 CSL 2021, dated the 5th March, 2021
-
(12/2021) FD 55 CSL 2021 - dated
30-9-2021
-
Karnataka SGST
Seeks to exempt KGST on specified medicines used in COVID-19, up to 31st December, 2021
-
(11/2021) FD 55 CSL 2021 - dated
30-9-2021
-
Karnataka SGST
Amendment in Notification (39/2017)No. FD 48 CSL 2017, dated the 17th October, 2017
SEZ-
S.O. 4247(E) - dated
8-10-2021
-
SEZ
Central Government de-notifies an area of 1.593 hectare, thereby making the resultant area as 8.82 hectare at Sarpavaram Village, Kakinada Rural East Godavari District in the State of Andhra Pradesh
Circulars / Instructions / Orders
News
Case Laws:
-
GST
-
2021 (10) TMI 688
Application for amendment of the writ petition - seeking to have an order declaring Circular dated October 9, 2018 as ultra vires the provisions of Section 16 of the Integrated Goods and Services Tax Act, 2017 read with Rule 96 of the Central Goods and Services Tax Rules, 2017 - direction to amend the shipping bills filed by the petitioner under section 149 of the Customs Act, 1962 - HELD THAT:- The amendments, if allowed, would not change the original character to the writ petition - In such view of the matter, the application for amendment stands allowed. List the writ petition on December 14, 2021.
-
2021 (10) TMI 687
Delay of 50 days in filing the review petition - refund claim - encashment of Bank Guarantees - HELD THAT:- The grounds urged by the review petitioners may be grounds of appeal but would not be grounds for review within the ambit and meaning of section 114 read with Order 47 Rule 1 of the Code of Civil Procedure, 1908. No rehearing of a concluded matter is permissible while seeking review. There are no error apparent on the face of the record nor any documents which the review petitioners could not present at the time of hearing despite due diligence. Also there are no sufficient cause to rehear the concluded matter. Present is not a fit case for review - review petition dismissed.
-
Income Tax
-
2021 (10) TMI 690
Undisclosed interest income on amount deposited with HSBC, Geneva - HELD THAT:- Coordinate Bench of the Tribunal in assessee's own case for AY 2006-07 [ 2018 (2) TMI 1731 - ITAT DELHI ] qua this foreign bank account maintained by the assessee with HSBC Bank, Geneva has partly allowed the appeal for statistical purposes by remitting the case back to the AO with direction to adjudicate afresh in accordance with law after obtaining the verificatory report from the bank Since the present assessment framed u/s 153A read with section 143(3) of the Act is an offshoot of initial assessment framed in AY 2006-07 qua the foreign bank account maintained with HSBC Bank, Geneva on account of interest income in the subsequent years, we are of the considered view that this case is also required to be remitted back to the AO to decide accordingly as per order passed in AY 2006-07. So, we refrain from entering into merits of this case in order to give free hand to the parties to the appeal to argue their case before the AO afresh. Consequently, the impugned order passed by the ld. CIT (A) is set aside and remitted back to the AO to decide afresh after providing an opportunity of being heard to the assessee. Appeal filed by the Revenue is allowed for statistical purposes.
-
2021 (10) TMI 689
Best judgement assessment u/s 144 - estimation of income - assessee had filed ITR declaring loss and the AO has estimated profit by estimating the net profit of 2% on sales turnover - HELD THAT:- First observation in the matter is that the assessee has not, at any stage, including before the Tribunal, disputed the invocation of sec. 144, and for which reference is also made to the assessee's submissions. As regards sec. 145(3), a sale bill is a primary document of any business entity selling goods or services, also having legal implications. It is the sale bill that evidences the sale, raising a charge on the buyer, and on the basis of which the sale consideration can be correlated with the good sold there-against, including the quantity thereof. Yielding thus its sale price, excess of which over the cost thereof is profit by definition. This is irrespective of whether the sale consideration is received/receivable wholly or partly in cash (legal tender) and, further, of whether the buyer demands his copy thereof or not. As regards lease money and sealing bottling charges, surely one would not normally expect inflation therein, however, there is nothing on record to exhibit the reconciliation of the payments with the amounts claimed, which are in no insubstantial sums. The non-acceptance of the assessee's book results, and completing the assessment as a best judgment assessment, is, under the circumstances, unexceptional. Reasonability of the estimation of profit - The normal profit, i.e., but for the said loss, is thus ₹ 9,79,868, or about 3% of sales, the quantum of which approximates that by the assessee for the relevant year. It is this profit rate that is therefore relevant and comparable. The said case, which is thus comparable, favours the Revenue's estimation rather than being supportive of the assessee's case. Rather, normal market conditions, as against dull, which obtained in that year, would yield a still higher profit rate. Why, the assessee's disclosed profit is at 1.3%, as against 3% in the cited case. The Hon'ble jurisdictional High Court in Badri Prasad Bhagwandas Co. [ 1994 (10) TMI 268 - MADRAS HIGH COURT ] approved a net profit rate of 5% of sales. The estimation of the net profit of the liquor business at 2% of sales is, thus, reasonable, and upheld. I decide accordingly, and the assessee fails on its' Gd. 1. Addition on account of unexplained capital introduced by the partners - There is nothing to show that the said withdrawal has been in cash and, two, no date-wise breakup of the same has been provided. Also, and equally, in the absence of any break-up of the withdrawal, stated to be in cash, it cannot be linked with the investment in his name in the assessee-firm, the stated avenue of the said withdrawal. SJ has a negative capital in the firm Santosh Jaiswal (Ratlam), which in fact exceeds his investment in the assessee-firm. Rather, the said firm itself has no capital. In view of his negative balance therein, there is no question of his withdrawing his capital therefrom, and which therefore is not a correct description of the source of his investment in the assessee-firm. That, however, would not materially alter the assessee's explanation as to source, which, thus, is to be regarded as a borrowing from SJ (Ratlam), a firm in which he is a 30% partner As already clarified that the immediate source of investment by SJ can only be said to be the cash available with him, on the relevant dates, from any source, accounts of all of which, as it appears, are audited. In fact, that all the relevant accounts stand maintained and, further, audited, is itself a reason for remission inasmuch as it indicates the existence of the relevant evidence with the assessee, while at the same time though it does make it unfathomable that the same were not produced and relied upon in evidence, and despite abundant opportunity provided to do so. Needless to add, the AO, in the event of the assessee being not cooperative, shall be at liberty to draw all permissible inferences in law. He shall adjudicate afresh per a speaking order, in accordance with law, taking into account all the explanations and materials furnished by the assessee before him. Thus decide accordingly. Oral plea for allowance of interest to partners, disallowed in assessment - The same is indefensible in view of the clear, not disputed, application of sec. 144 so that a firm, though assessable as a firm, is yet not entitled to deduction, inter alia, in respect thereof . This is irrespective of the fact that the assessee-firm, despite not holding the licence, may yet be validly carrying on the liquor business, as sought to be canvassed with reference to the provisions of the Akbari Rules as applicable for f.y. 2004-05. Another aspect of the matter, which therefore needs to be clarified, is that to the extent the firm's capital is regarded as unexplained and, thus, as its' income, no claim qua interest on partner's capital would even otherwise survive thereon.
-
2021 (10) TMI 686
Claim of interest expenditure on loan obtained for the purchase of land in MRC Nagar - Significance of term put to use - as per AO assessee, having not commenced the project in MRC Nagar and had not offered any income from the project, all the expenditures, which are specifically attributable to the project, have to be accounted as 'Work-in-Progress' and only when the income is generated and offered from the project, the expenditure can be claimed - HELD THAT:- When the appeal was being heard by the CIT(A), the assessee furnished an Abstract of Expenses pertaining to MRC Nagar project and the expenses were in the nature of advertisement expenses, architect fees, CMDA charges, consultancy charges, electricity charges, legal fees, rent, security charges, site expenses, various labour charges and purchase of materials. Assessee had also furnished the ledger accounts for these expenses and also the facts that they carried on major work of demolition of the existing structure which was newly built by the previous owner for Hotel business and this demolition was done by the assessee. This factual position would go to show that the land was put to use in the Assessment Year under consideration. Tribunal had rightly noted that the term put to use in the proviso in Section 36(1)(iii) would be applied to capital asset/income earning apparatus/facilitating the business activity and therefore, the Statute envisages the importance of such capital asset should be put to use in the business in contra distinction to the inventory of the assessee. Tribunal noted that the inventory in the business/holding of inventory in the business by itself is a business activity in the normal course and in continuation of business of construction pursued by the assessee - attempt to apply the proviso to the case of the assessee would lead to wrong interpretation of law and therefore, the reasons given by the Assessing Officer to disallow the interest expenditure by applying the provisions of Section 36(1)(iii) is not in accordance with law - Tribunal noted that the assessee is into the business of Real Estate Development and in the process of executing two projects at different places and the Assessing Officer was not justified in treating the two projects on stand-alone basis and also that the property in MRC Nagar was not put to use. Tribunal noted that the assessee has offered substantial income from the Atlantic project and the attempt to apply Matching Concept principle is misconceived. Tribunal was right in allowing the appeal filed by the assessee and holding that the term put to use applies to capital asset only because capital asset is held to facilitate the business activity and sometimes, it needs to be prepared after it is acquired for being used to facilitate the business activity and in the instant case, the assessee was able to establish that substantial activities had been done in the project, which would go to show that the property purchased has been put to use. - Decided against revenue.
-
2021 (10) TMI 685
Non providing of personal hearing - Respondent No.2 without granting a personal hearing passed an assessment order on 23.09.2021 - HELD THAT:- Even if we accept what Respondent No.2 say that there was extreme urgency as scrutiny assessment was getting time barred by limitation on 30.09.2021, he still had one week to grant a personal hearing and there was no tearing urgency to pass the assessment order impugned in this petition.. We set aside the assessment order dated 23.09.2021 and remand the matter to the Assessment Officer to pass a fresh assessment order, within six weeks from this order getting uploaded in the High Court website, in accordance with law. Assessing Officer, however, shall grant a personal hearing to petitioner in accordance with the rules prescribed. We clarify that we have not made any observation on merits.
-
2021 (10) TMI 684
Addition u/s 68 - unsecured loan - violation of principles of natural justice - HELD THAT:- Here in the case in hand, as pointed out a huge sum has been added in the income of the Assessee for the concerned assessment year. Whether such a huge sum is a taxable income or not, is a major question to be decided in the issue, however, before going into the merits of that issue, whether complete opportunity had been given to the petitioner/Assessee, which includes the personal hearing. Very fairly, the learned Senior counsel has submitted that, specifically that chance of personal hearing, though was not asked by the petitioner/Assessee, that become incumbent on the part of the petitioner/Assessee to seek such a chance of personal hearing, in view of the peculiar facts of the case, where, the petitioner has been placed to explain with the documents already submitted to the revenue people to establish that the transactions under which, the petitioner/Assessee accepted that sum from a lender was a genuine transaction taken through the bank. This Court feel that, such a chance can be given to the petitioner/Assessee, otherwise even if appeal is field against the assessment order, if this point is once again raised before the appellate authority, the appellate authority also has to necessarily consider the same and in that case, the entire assessment process, which culminated in the impugned order, would get further delayed. Therefore, instead of relegating the Assessee to approach the appellate authority to raise the same point of getting a personal hearing from the revenue, this Court feel that, since the chance of getting a personal hearing is part and parcel of the principles of natural justice, therefore, it comes within the domain of the writ jurisdiction, and on that ground, this Court feel that this writ petition can be entertained. After giving such an opportunity of personal hearing as indicated above for one day, it is open to the revenue to proceed to pass a fresh order of assessment, in accordance with law and on merits.
-
2021 (10) TMI 683
Addition on account of difference of stock value - CIT-A deleted the addition as no valid basis of making the addition further, the alleged difference will also cannot be said to be undisclosed income - HELD THAT:- We do not find any infirmity in the order of the Ld. CIT(A) on this issue. We find an identical issue had come up before the Tribunal in assessee s own case in the immediately succeeding A.Y. 2014-2015 [ 2019 (8) TMI 292 - ITAT DELHI] - We uphold the order of the Ld. CIT(A) on this issue and the ground of appeal number.1 raised by the Revenue on this issue is dismissed. Addition on account of difference in cash statement given to the bank and as per books of account - CIT(A) deleted the addition on the ground that addition made by the A.O. is not based on any valid evidence and merely based on the statement given to the bank which is a third party evidence - HELD THAT:- Since the Ld. CIT(A) while deleting the addition has relied upon the decision of Commissioner of Income Tax vs., Sidhu Rice and General Mills [ 2004 (7) TMI 12 - PUNJAB AND HARYANA HIGH COURT] therefore, in the absence of any contrary material brought to our notice against the decision of the Hon ble jurisdictional High Court relied upon by the Ld. CIT(A), we do not find any infirmity in his order deleting the addition. Accordingly, ground of appeal number 2 raised by the Revenue is dismissed. Addition of low house hold withdrawals - addition towards house hold expenses is very low keeping in view the rising of price day by day and the minimum expenses required for sustaining the family - CIT-A deleted the addition - HELD THAT:- As stated earlier, the family of the assessee consists of self and his wife and the two children are earning separately and are residing in Pune and Chandigarh respectively. The assessee also owns ancestral agricultural land of about 10 acres and the income from agriculture is also used for meeting the house hold expenses. Apart from the above, the assessee is staying in his own house in a small town. Therefore, in the absence of any evidence before the A.O. to show that the assessee has incurred any extravagant expenditure for maintaining a lavish life style or has performed any marriage function etc., estimating the addition on presumption and surmises, in our opinion, is not sustainable in Law. In view of the above discussion and respectfully following the decision of the Tribunal in assessee s own case in the succeeding assessment year [ 2019 (8) TMI 292 - ITAT DELHI] - we uphold the order of the Ld. CIT(A) on this issue - Decided against revenue.
-
2021 (10) TMI 682
Reopening of assessment u/s 147 - undisclosed sale of immovable property - Non appearance of assessee before AO - assessee submitted additional evidences as ignored - denial of natural justice - HELD THAT:- Since the assessee could not appear before the A.O. as the notice could not be served upon the assessee as the assessee had already charged the old address, therefore, in absence of the assessee, the matter was decided by the A.O - in order to put forth all his defence, the assessee had filed an application before the erstwhile CIT(A) under Rule 46A of the Income Tax Rules, 1962 for leading additional evidence and in this respect had placed on record bunch of documents. CIT(A) had not touched or considered the facts of documents placed on record and relied upon by the assessee but had dismissed the appeal filed by the assessee merely on the ground that the assessee had raised merely jurisdictional issue and no paper book or submissions have been filed by the assessee in respect of his claim on merits. After perusal of the record, we found that the assessee had already filed the application for leading additional evidences submitted by other evidences as mentioned by the assessee in above para before the erstwhile CIT(A) on 26/6/2019 but all these documents escaped the attention of NFAC, Delhi while deciding the appeal of the assessee because of that the rights of the assessee stand prejudiced. Considering the totality of facts and circumstances of the case and in the interest of principles of natural justice, we restore the matter back to the A.O. with direction to decide the appeal afresh - Appeal of the assessee is allowed for statistical purposes only.
-
2021 (10) TMI 681
Reopening of assessment u/s 147 - Scope of conditions as envisaged as per provisions of Section 151 - mandation of recording satisfaction by the Commissioner - assessee had made deposit during the year under consideration in SBBJ Bank - HELD THAT:- While drawing strength from the decision of Hon ble Rajasthan High court in the case of CIT Vs Uttam Chand Nahar [ 2006 (4) TMI 56 - HIGH COURT, RAJASTHAN ] we are of the view that in the present case, the conditions U/s 151 of the Act for recording satisfaction by the Commissioner has been validly done as the said satisfaction was on the basis of reasons recorded by the A.O. and not de hors it and thus according to us, the satisfaction independent of reason recorded by the A.O. is not envisaged any way in Section 151 of the Act. Therefore, considering the totality of facts and circumstances of the case, we dismiss this ground of appeal raised by the assessee. Unexplained income of the assessee - As submitted that during the year under consideration, he sold a rural agricultural land situated at Gram-Barso, Tehsil and Distt.- Bharatpur which is excluded from the purview of capital asset as per provisions of Section 2(14) of the Act and the said sale consideration received from the sale of the land was deposited in his bank account - As document of transfer is required by law to be reduced in writing and needs registration as has been done by executing sale deed which was got registered, therefore, the terms contained in the sale deed are to be believed which exclusively contains that a sum of ₹ 6.75 lacs were sale consideration of the entire land belonging to the assessee as well as his co-owners and thus when once an specific evidence by way of registered document has been placed on record, then in that eventuality as per Section 92 of the Indian Evidence Act, 1872, no contrary oral evidence is permissible. Thus, considering the totality of facts and circumstances more particularly when the registered sale deed has been executed between the parties which specifically contains that a sum of ₹ 6.75 lacs were paid by the purchasers to the assessee and his co-owners in lieu of purchase of the entire land in question and the said conveyance deed has also been corroborated by the statement of Smt. Nutan Sharma and Smt. Pushpa Arora recorded U/s 133(6) of the Act and no contrary evidence has been lead by the assessee in order to controvert or rebut the said presumption which is attached with the registered document. The case law relied by the ld. AR in the case of Shri Pappu Ram saran [ 2020 (9) TMI 228 - ITAT JAIPUR ] is not applicable on the facts and circumstances of the present case under consideration, therefore we are not conveniencd with the arguments put forth by the assessee before us. Therefore, we feel no reasons to interfere into or to deviate from the findings so recorded by the ld. CIT(A) - Appeal of the assessee is dismissed.
-
2021 (10) TMI 680
Excess stock of gram pulses not recorded in the books of account - As per assessee stock taking was not done either in the presence of the assessee or his Authorized Representative - assessee also submitted that the basis of calculation of excess stock and short stock and the inventory sheet prepared during the course of survey should be provided - CIT-A deleted the addition - HELD THAT:- We observe that the search was conducted on Dudani Group on 05.10.2015 u/s 132 - A survey action was also conducted on the assessee firm premises. Physical stock was done by the survey team. Additions were made by the ld. AO on the basis of inventories of stock and trading account prepared by survey team which were allegedly different from the amounts as per books of accounts maintained by the assessee. Assessee has submitted a summary of stock as on the date of survey i.e. 05.10.2015, as per books of account of the assessee and alleged stock inventories prepared by the survey team. CIT(A) deleted the impugned additions on appreciating the following facts:- i). Survey team did not consider the stock kept at Pragati Warehouse ii). Survey team wrongly analyzed the stock of Channa as stock of Channi which was actually recorded in the regular books of account as stock of Channa which was kept at Narmada Valley Warehouse . iii). Revenue authorities not providing the basis of valuation of physical stock to the assessee, thus denying the principles of natural justice. iv). Revenue failed to bring any instance of bogus purchase made by the assessee. v). No cogent/positive/incriminating material was found during search/survey to support the alleged addition. Find no infirmity in the finding of Ld. CIT(A) and the same stands confirmed. Accordingly all the grounds raised by the revenue are dismissed.
-
2021 (10) TMI 679
Dismissing the appeal of the assessee against the draft order as not maintainable - Whether draft order cannot be assailed before CIT(A)? - HELD THAT:- As the assessee preferred appeal against the draft order, in our considered opinion, the ld. CIT(A) was fully justified in dismissing the same as not maintainable. It is an altogether different matter that there was a mistake on the part of the AO in passing draft order by wrongly mentioning it as the completion of assessment u/s.144C(13), which gave an impression to assessee that the order passed by the AO was not a draft order but final appealable order. The consequences flowing from the wrong mentioning of section 144C(13) in the draft order, including the assessee later on unsuccessfully attempting to file appeal against the final order u/s.143(3) r.w.s. 144C(3) during the pendency of appeal filed against the draft order, though may constitute a bona fide reason for the belated filing of appeal before the ld. CIT(A) against the order passed u/s.143(3) r.w.s. 144C(3), but cannot legally validate the appeal filed against the draft order so as to warrant its adjudication on merits by the ld. first appellate authority. It is only the appeal filed by the assessee against the order u/s 144C(3) passed by the AO on 23.01.2020 that an effective and legally tenable appeal would call for decision. In our considered opinion, the ld. CIT(A) took an unimpeachable view in treating the appeal against the draft order as defective and thus not maintainable .
-
2021 (10) TMI 678
Delayed employees contribution to ESI and PF - Disallowing the PF and ESI payments as deposited before the due date of filing of the return during the year - HELD THAT:- In the instant case, admittedly and undisputedly, the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act - As noted that the ld CIT(A) has referred to the explanation to section 36(1)(va) and section 43B introduced by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance bill, 2021, however, he has simply failed to consider the express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . The impugned assessment year is assessment year 2019-20 and therefore, the said amendment cannot be applied in the instant case. Addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of the employees s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee.
-
2021 (10) TMI 677
Exemption u/s 11 - rejection of application made u/s. 12AA - genuineness of activities including the proposed activities - Whether charitable activities includes the proposed activities also? - CIT-A discussed the original trust deed and held that the irrevocability clause is not there - HELD THAT:- As assessee are charitable in nature and though assessee had undertaken small expenditures towards charitable activities but the fact remains that such activities are genuine activities when considered in the context of objects clause of the trust deed. Therefore, keeping in view the spirit of judgment of the Hon'ble Supreme Court in the case of Ananda Social Educational Trust [ 2020 (2) TMI 1293 - SUPREME COURT ] where yours lordships have held that activities includes proposed activities also. We hold that assessee s activities are genuine when examined in relation of objects clause of the trust deed and therefore we direct the ld. CIT(E) to grant registration to the assessee forthwith - Decided in favour of assessee.
-
2021 (10) TMI 676
Disallowance u/s 36(1)(iii) - interest payment by the assessee on notional basis - HELD THAT:- In this case, the assessee had made advances/loans by expecting to establish business connections with the above entities. There is no compulsion under the Income Tax Act that interest should always be charged on any lending, nor there is any requirement that income must be earned by utilizing the capital borrowed with interest so as to be entitled to the deduction u/s 36(1)(iii) - keeping in view the relations of the assessee with the above entities, we found that all the above three entities were having direct nexus with the business activities/operations and all these entities also help in the business of the assessee either directly or indirectly by way of procuring/securing orders or selling goods, exploring new markets etc., therefore, we are of the considered view that the ld. CIT(A) has rightly concluded that the amount so advanced by the assessee to these entities were for commercial and business expediency. CIT(A) has passed a speaking and reasoned order discussing all the facts and circumstances as well as legal propositions of law therefore, considering the totality of facts and circumstances and case laws, we find no reason to interfere in the order of the ld. CIT(A) qua this issue, hence, we uphold the same - Appeal of the Revenue is dismissed.
-
2021 (10) TMI 675
Income accrued in India - Addition being reimbursement of expenses - FTS - Non offering to tax of travel cost - assessee is a company incorporated in the United States of America (USA) and is a tax resident of that country - as per assessee travel cost not being in the nature of fees for technical services (FTS) and purely reimbursement of expenditure incurred, is not taxable either under the provisions of the Act or under the India-USA Double Taxation Avoidance Agreement (DTAA) - Whether travel cost received by the assessee by way of reimbursement can be regarded as FTS? - HELD THAT:- While ignoring the decisions of the Tribunal has relied upon the observations of the higher departmental authorities. This, in our view, is most undesirable - though,DRP has acknowledged that in assessment years 2009-10 and 2010-11, the Tribunal has decided the issue in favour of the assessee; however, relying upon a solitary amendment made to the agreement between the parties and distinguishing the decisions of the Tribunal in assessee s own case, learned DRP has upheld the addition made by the assessing officer. On a careful perusal of the amended clause 1.2 of the agreement as referred to by learned DRP, we do not find much difference, except, the mode and manner of quantification of the FTS. Thus, in our considered opinion, the spirit of the old clause 1.2 has not undergone any substantial change by the amendment. Be that as it may, even after the amendment to the agreement was effected from 01-04-2012, the Tribunal has consistently decided the issue in favour of the assessee from assessment years 2009-10 onwards. In the latest order passed for assessment year 2015-16 [ 2020 (4) TMI 752 - ITAT MUMBAI] , the Tribunal following its order in assessee s own case in assessment year 2014-15 has deleted the addition - Thus we delete the addition made by the assessing officer. This ground is allowed. Rate of tax u/s 115A - Incorrect tax rate applied by the assessing officer on the income offered by the assessee - As there are certain conditions set out in section 115A(1); however, it has to be considered whether such conditions are mandatorily required to be fulfilled, even, in a case where specific approval is neither required nor contemplated as per the extant rules/regulations/guidelines of RBI or Central Government. In case, the Government has not laid down any guidelines or procedure for approval for the subject transaction, the assessee cannot be expected perform an impossible task - if strict and literal interpretation of a statutory provision leads to undesirable consequences and not only renders it unworkable but also causes harassment to the taxpayer, then, it has to be avoided and the provision has to be construed harmoniously to make it workable - it is a fact on record that all these aspects have not been examined either by the assessing officer or by learned DRP while deciding the disputed issue. No merit in contention of learned departmental representative that the 10% rate would be applicable from assessment year 2017-18, we do not find any merit in such submission - Undisputedly, by way of Finance Act, 2015, the applicable tax rate of 10% in place of 15% has been brought to the statute w.e.f. 01-04-2016 - the tax rate of 10% would be applicable from assessment year 2016-17 onwards. As regards the contention of learned Departmental Representative that the master direction of RBI speaks of consultancy services, hence, would not be applicable, we find such argument thoroughly misconceived. A reading of Explanation (a) to section 115A(1)(b)(B) makes it clear that FTS would have the same meaning as in Explanation 2 section 9(1)(vii) of the Act. As per Explanation 2 to section 9(1)(vii) of the Act, FTS would include consideration for managerial, technical or consultancy services. Thus, consultancy services would also come within the definition of FTS. It is relevant to observe, in course of hearing, learned counsel for the assessee submitted that in all other assessment years, similar payment received by the assessee has been taxed @10% as per section 115A(1)(b) of the Act. If that is so, applicability of rule of consistency also needs to be examined - We restore the issue to the assessing officer for fresh adjudication keeping in view the discussion made herein before. The assessing officer should not only take note of the master direction of RBI and any other rules and regulations issued/framed by the RBI/Central Government but must also examine the applicability of decisions to be relied upon by the assessee - This ground is allowed for statistical purposes.
-
2021 (10) TMI 674
Penalty u/s 271(1)(c) - defective notice u/s 274 - whether notice issued by the ld. A.O. was 'vague' and also because the 'charge' was not specified? - HELD THAT:- We are of the view that penalty u/s 271(1)(c) of I.T Act levied by AO has no legs to stand at present, when the corresponding Assessment Order has already been quashed by Ld. CIT(A) holding that the additions made in the assessment order cannot survive. When the assessment order has been quashed, and the additions made therein do not survive; the penalty levied u/s 271(1)(C) of I.T. Act on the corresponding quantum additions also cannot survive. We take support from judicial precedent in the case of K.C. Builders [ 2004 (1) TMI 7 - SUPREME COURT] wherein as held that where the additions made in the Assessment Order, on the basis of which penalty for concealment was levied, are deleted, by ITAT or otherwise, the penalty cannot stand by itself and is liable to be cancelled - Decided in favour of assessee.
-
2021 (10) TMI 673
Revision u/s 263 by CIT - validity of the revision order passed beyond the period of limitation prescribed u/s 263(2) - reopening of assessment u/s 147 commenced in the case of assessee - HELD THAT:- As reopening of assessment as contemplated under section 147 of the Act is for the specific purpose of assessing the escaped income - in a reassessment proceeding, the assessing officer can only assess that income which has escaped assessment. The income which is subject matter of assessment in the original assessment proceedings or which was in the domain of the assessing officer in course of original assessment proceedings certainly cannot be considered in the re-assessment proceedings - If at all, any order which can be considered to be erroneous and prejudicial to the interest of revenue for non consideration of the issues raised by learned PCIT, certainly, it has to be the original assessment order passed u/s 143(3) of the Act and not the re-assessment order passed u/s 143(3) r.w.s. 147 - PCIT could have exercised her powers u/s 263 of the Act only in respect of the original assessment order passed under section 143(3). As the original assessment order having been passed on 06-02-2014, the impugned order passed under section 263 of the Act is barred by limitation in view of section 263(2) of the Act. At this stage, we consider it our duty to deal with the submissions of learned departmental representative that the assessee did not represent its case before learned PCIT and did not raise the issue of limitation. On perusal of records, it is seen that learned PCIT issued the show cause notice under section 263 of the Act on 08-03- 2021 and passed the impugned order on 19-03-2021 with undue haste. In fact, the assessee has raised specific grounds before us, being grounds 8 and 9, to the effect that neither hearing notice was issued to the assessee nor any opportunity of being heard was provided. - Decided in favour of assessee.
-
2021 (10) TMI 672
Revision u/s 263 - denial of natural justice - non providing the reasonable opportunity of being heard to the person - HELD THAT:- As it is not in dispute that notice dated 25/03/2021 was signed and issued only on 25/03/2021 by the Ld. PCIT, while fixing the date of hearing on next day i.e. 26/03/2021 at 1.00 PM and the impugned order was passed on the very next day i.e. 27/03/2021 while sidelining the adjournment application dated 26/03/2021 filed by the Assessee which clearly reflects that the notice issued on dated 25/03/2021 fixing the date of hearing on 26/03/2021 was illusory and farce in nature and had no essence of principles of natural justice, thus goes to show that no reasonable opportunity of being heard was afforded to the Assessee before passing the adverse order against it. On the aforesaid analyzations and considerations and following the mandates in the case of Amitabh Bachchan (supra) [ 2016 (5) TMI 493 - SUPREME COURT ] wherein it was held that failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice and in the case of Maneka Gandhi vs. Union of India [ 1978 (1) TMI 161 - SUPREME COURT ] wherein it was held that if the order is passed by the authority without providing the reasonable opportunity of being heard to the person affected by it adversely will be invalid, the question of remanding the case to the file of Ld. PCIT as prayed for by the Ld. DR, at this juncture at all does not arise as held by co-ordinate Benches as well in the aforesaid cases. - Decided in favour of assessee.
-
2021 (10) TMI 671
Revision u/s 263 by CIT - Non enquiry by AO on claim of expenses submitted by the assessee in its books and statements of accounts submitted along with return - HELD THAT:- We are inclined to hold that the present case is squarely covered in favour of the revenue by the decisions of Hon ble Jurisdictional High Court of Delhi in the case of Gee Vee Enterprises [ 1974 (10) TMI 29 - DELHI HIGH COURT] and CIT vs. Nagesh Knitwears P. Ltd. [ 2012 (6) TMI 65 - DELHI HIGH COURT] as in the present case, the AO did not raise any query of make any inquiry pertaining to the claim of expenses submitted by the assessee in its books and statements of accounts submitted along with return and this is a clear case of lack of inquiry . We may also point out that if the AO fails to conduct the said investigation, he commits the error and the word erroneous includes failure to make inquiry. In such cases, the order becomes erroneous because necessary inquiry or verification has not been made and not because a wrong order has been passed on merits. Therefore, on this ground the appeal of the assessee fails. Approval of the Addl. CIT had been received u/s 153 D - Categorically here the orders are not passed even under the instructions of the superior authority or under the direction of the superior authority, but merely an approval was granted by the Joint Commissioner of Income Tax under Section 153D of the Act to pass the orders. Provisions of Section 153D speak about prior approval for assessment in the case of search . They also provide for obtaining the prior approval of the Joint Commissioner for merely passing an order. Therefore, any order passed by the Assessing Officer can be revised under Section 263 of the Act irrespective of the fact that any authority has granted any direction to the Assessing Officer. Natural corollary would be show that all orders of search and seizure passed under Section 153A or under Section 153C of the Act are required to be passed after prior approval of the Joint Commissioner except as provided under Section 154BA(12). Therefore, if the argument of the Ld. AR is to be accepted then in such cases where the assessment has been framed under Section 153A or Section 153C, the same will go out of the ambit of the provisions of Section 263 of the Act and such a view is directly contrary to the decision in T .N .Civil Corporation [ 2003 (1) TMI 7 - SUPREME COURT] , NIIT LTD. VERSUS UNION OF INDIA ORS. [ 2009 (12) TMI 927 - DELHI HIGH COURT] and M/S OSHO FORGE LTD. [ 2018 (5) TMI 161 - PUNJAB AND HARYANA HIGH COURT] . The power of the Commissioner under Section 263 of the Act is in the nature of supervisory jurisdiction. This power is granted to correct an error, which is prejudicial to the interest of the Revenue in the order of the Assessing Officer, even if it is approved by the Joint Commissioner, who is also falling below the rank of the Pr. Commissioner. If the argument of the ld. AR is accepted then the supervisory authority of the Pr. Commissioner granted under the Act is hampered. On provisions of Section 263 of the Act give un-fettered right to the Commissioner of Income Tax to revise any order passed by the Assessing Officer. Whatever was to be excluded by the law has already been provided under that Section and the only exception are the issues decided and considered in the appellate orders. Therefore, the reasoning of the arguments advanced by the Ld. AR on this line also fails and we dismiss the same. Thus we hold that the impugned order passed u/s 263 of the Act is illegally sustainable and no interference is called for. - Decided against assessee.
-
2021 (10) TMI 670
Revision u/s 263 by CIT - assessee had derived interest income on the fixed deposits made with the Karur Vysya Bank, Hyderabad followed by its claim of administrative expenditure, financial costs and depreciation etc. - PCIT holds that the said three heads of expenses are in the nature of pre-operative expenditure which could not be set-off against the assessee's foregoing interest income and AO's action allowing the assessee's claim in a very casual and mechanical manner deserves to be revised for want of proper enquiry rendering the impugned assessment as both erroneous as well as prejudicial to interest of the Revenue - HELD THAT:- As assessee's administrative expenses are in the nature of compulsorily office expenditure which have been held eligible for intra-head set-off against income from other sources than u/s. 57(iii) by the Assessing Officer. The factual position is hardly different qua its latter two heads of financial costs; including that directly paid to the bank of ₹ 2,8,53/- (supra) pertains to the very account only as well as the fact that the impugned depreciation/amortization has been a continuing relief granted very well from the preceding assessment years, whose facts and figures are nowhere in dispute. Coupled with this, the assessee has also filed on record the necessary correspondence/show cause notice issued by the Assessing Officer in Section 143(2) 142(1) notices dt. 13-05-2014 and 24-02-2015 followed by its detailed reply on 02-12-2015 - PCIT has erred in law and on facts in assuming Section 263 revision jurisdiction. We quote hon'ble apex court's landmark decision in Malabar Industrial Co. [ 2000 (2) TMI 10 - SUPREME COURT ] wherein it was held that an assessment has to be both erroneous as well as causing prejudice to the interest of the Revenue; simultaneously, before it is sought to be subjected to exercise of revision jurisdiction u/s. 263. Their lordships further make it clear that it is not each and every assessment which attracts Section 263 revision but only wherein the Assessing Officer has not taken one of the two possible views; as the case may be. We draw strong support therefrom and reverse the learned PCIT's action exercising Section 263 revision jurisdiction. The impugned Section 143(3) regular assessment dt. 16-03-2015 stands revived as the necessary corollary therefore assessee's instant Section 263 is accepted. - Decided in favour of assessee.
-
2021 (10) TMI 669
TP Adjustment - TPO considered royalty payment as a separate international transaction and proceeded to test the royalty transaction separately by applying comparable uncontrolled transaction - HELD THAT:- Rejection of the two comparables by the TPO, are based on conjectures and surmises. It is pertinent to note that the filters used by the TPO does not indicate that the high rates in respect of determination of ALP of royalty is one of the criteria of the rejection while confronting the assessee. The ratio laid down by the Hon'ble High Court in case of ChrysCapital Investment [ 2015 (4) TMI 949 - DELHI HIGH COURT ] is applicable in the present case. Hence there is no need to interfere with the findings of the CIT(A). The appeal of the Revenue is dismissed.
-
2021 (10) TMI 668
Revision u/s 263 by CIT - Disallowance u/s 14A - HELD THAT:- It is an undisputed fact that the assessee was holding investments in mutual funds in Dividend Option Scheme up to 30-09-2014 and thereafter switched over to Growth Funds. The amount of exempt dividend income up to 30-09-2014 stood at ₹ 21.93 crore. The only dispute is on computation of disallowance under clause (iii) of Rule 8D(2). Whereas the AO computed the disallowance at 0.25% by taking the average value of investment as on 01-04-2014 and 30-09-2014, the ld. PCIT has canvassed a view that the disallowance has to be made at 0.50% irrespective of the period during which the investments yielded exempt income. The calculation put forth before the Tribunal for demonstrating that the assessment order was not prejudicial to the interest of the Revenue has neither been vetted by the AO or the ld. CIT. We refrain from making any comment on its correctness without considering the corresponding details. It would be in the fitness of the things if the impugned order is set-aside and the matter is restored to the file of ld. CIT for ascertaining if the order passed by the AO is also prejudicial to the interest of the Revenue in the manner in which the assessee is trying to make out so as to clothe him with the jurisdiction to take action under section 263 of the Act. If the calculation of the assessee is found to be flawed and the assessment order also remains prejudicial to the interest of the revenue, then the impugned order revising the original order has to be upheld. In the otherwise scenario, the power of the ld. PCIT for revising the assessment order would be lacking if the assessment order is found to be only erroneous but not prejudicial to the interest of the Revenue. Needless to say, the assessee will be allowed a reasonable opportunity of hearing by the ld. CIT before embarking upon the above fresh exercise. Assessee appeal is allowed for statistical purposes.
-
2021 (10) TMI 667
Validity of Reopening of assessment u/s 147 - non supply of copy of the approval of PCIT - HELD THAT:- Apart from stating that the AO had not supplied him copy of the approval of PCIT, could not point out any other defect in the reopening of the assessment. In our opinion, the assessee could not substantiate as to how the reopening is bad in law. Therefore, in absence of any merit in the arguments advanced by the ld. Counsel for the assessee, the ground challenging the validity of reassessment proceedings is dismissed. Addition of cash deposit - A perusal of the bank account shows that on certain dates, there are substantial cash withdrawals. However, neither the AO nor the CIT(A) has considered the same properly as to what is the extent of cash withdrawn from the bank account so as to enable the assessee to re-deposit the same after meeting his personal expenses, etc. - there are various other investments and deposits made by the assessee out of the said bank account - matter needs fresh adjudication by the AO. He shall also verify the past and subsequent records as to whether the assessee is opting for presumptive tax u/s. 44AF - AO is directed to verify the total cash withdrawals from the said bank account and after taking into account reasonable personal expenses and investments, etc., may consider the benefit of redeposit in the bank account from the said cash withdrawals. Appeal filed by the assessee is partly allowed for statistical purposes.
-
2021 (10) TMI 666
Exemption u/s 11 - Denial of exemption by AO as objects of the assessee society may seem to be charitable, yet the activities carried out by the society, which yielded income to it are commercial in nature - CIT-A allowed benefit of exemption u/s. 11 12 - HELD THAT:- As decided in assessee's own case [ 2017 (10) TMI 721 - ITAT DELHI ] appeal has been filed, just for sole reason that the decisions rendered by the Tribunal in assessee's own case for AY 2009-10 has not been accepted by the department and appeal has been filed in the Hon'ble High Court. This trend of filing appeal is not only disappointing but leads to the multiplicity of the litigation because otherwise no substantial illegality or perversity has been pointed out by the Revenue. The order passed by the Director of Income-tax (Exemption) cancelling the registration of the respondent under section 12A was invalid inasmuch as the Director Income-tax (Exemptions) did not have the jurisdiction to do so till 01.06.2010 when the amendment was introduced in section 12AA(3) - In the light of the above decision of the Co-ordinate Bench of the Tribunal in the assessee's own case, in the absence of any material change in the factual matrix, we hereby decline to interfere with the order of ld. CIT(A) - Decided in favour of assessee.
-
2021 (10) TMI 665
Penalty u/s 271(1)(c) - defective notice u/s 274 - allegation of non specification of clear charge - Whether reasons for imposition of penalty i.e it was on account of concealment of income and was not on account of inaccurate particulars of income? - HELD THAT:- As in the reply to penalty notice , the assessee has mentioned that the Assessing Officer has initiated the penalty on the concealment of the amount and not for filling of inaccurate particulars of income, further the assessee sought time as the matter was pending before CIT(A) . Admittedly, in the present case, the income was not disclosed by the assessee in the return of income filed by the assessee, however, the income was brought to tax only after the search was conducted by the revenue authorities in the premises of the assessee and thereafter the assessee has surrendered the amount as mentioned in the assessment order and also in the penalty order, by declaring the amount in the return filled consequent upon the receipt of notice under section 153A. In our considered opinion, the disclosure of amount in the return of income filed consequent to receipt of the notice under section 153A, was not voluntary, rather assessee was forced to surrender, on account of the search carried out by the Department. In our view the penalty was rightly imposed by the assessing officer after being satisfying that the assessee was habitual defaulter and despite survey/search the assessee had not declared the income and had only declared income after the receipt of the notice. Whether the penalty can be deleted on the basis of non-specific notice? - It is pertinent to note here that in this case the assessee was having the clarity as to what charge were levelled in the notice i.e. concealment of income only and, therefore, the assessee had not asked the Assessing Officer to specifically mention on what basis he sought to impose the penalty. On the other hand, the assessee in the reply reproduced hereinabove, in the penalty proceedings, had mentioned that no penalty can be levied on account of concealment of income (refer para 3.3 supra). Since there was no ambiguity in the mind of the assessee on what basis the penalty sought to be imposed and after considering the reason for imposing the penalty the assessee has specifically mentioned in the reply as reproduced herein above in paragraph 3.3. Therefore, the question of deleting/scoring one of the clause is immaterial being innocuous in nature. Hon ble Constitutional Bench in the case of Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT ] had laid down the guidelines for quashing the penalty proceedings initiated on account of non-specific notice or non-scoring of, non-applicable reason for penalty. It is pertinent to mention here that the Constitution Bench has not discussed the facts of each cases much less cases identical to the case before us whether in such cases the penalty is required to be deleted or not. Thus we delete the penalty levied by the Assessing Officer in all the appeals filed by the revenue. Accordingly, the appeals filed by the revenue are dismissed and the cross objections filed by the assessee are allowed.
-
2021 (10) TMI 664
Reopening of assessment u/s 147 - payment towards the credit card bill made - withdrawal of cash from the assessee's bank account for making credit card payment - HELD THAT:- If we look at the assessment order passed by the Assessing officer, the addition has been made on account of the reason that the assessee has failed to explain the source of cash deposits/payments towards credit card bills. There is however nothing on record in terms of assessee's bank statement and credit card statement which shows that cash has been withdrawn from the assessee's bank account and thereafter, the payment has been made towards discharge of credit card liability. In absence of the same, it can be reasonably concluded that the payment has been made through banking channels towards discharge of credit card liability and there is thus clearly a mismatch between the reasons so recorded and basis of the addition so made by the Assessing officer. There is nothing on record that besides the AIR information, the AO has either these details in his possession or have sought these details by conducting further independent and direct enquiry during the course of assessment proceedings and which explains as to why the same were never shared with the assessee - in such peculiar circumstances, where the assessee is disputing making any cash payments and in absence of any tangible material brought on record by the Revenue and shared with the assessee in order to enable the latter to put forward his explanation, we do not see any justifiable basis to make the addition in the hands of the assessee and the addition so made is hereby directed to be deleted. Addition made by the AO wherein the assessee has again requested to provide the requisite information/material in possession of the AO - Besides the AIR information, the AO has neither these details in his possession nor have sought these details by conducting further enquiry during the course of assessment proceedings and hence, the same were never shared with the assessee - in absence of any tangible material brought on record by the Revenue and shared with the assessee in order to enable the latter to put forward his explanation, we do not see any justifiable basis to make the addition in the hands of the assessee and the addition so made is hereby directed to be deleted.
-
2021 (10) TMI 663
Penalty u/s 271(1)(c) - bogus loan and interest paid on bogus loans - HELD THAT:- When the impugned addition that had found the very basis for imposing penalty u/s. 271(1)(c) of the Act had been vacated by the Tribunal, vide its order passed [ 2019 (6) TMI 584 - ITAT MUMBAI] therefore, the consequential penalty imposed by the A.O cannot survive on a standalone basis and has to meet the same fate. On a perusal of the order of the CIT(A), we find that he had after taking cognizance of the fact that the impugned additions had been vacated by the Tribunal struck down the the penalty imposed by the A.O under Sec. 271(1)(c) - Decided in favour of assessee.
-
2021 (10) TMI 662
Penalty u/s. 271(1)(c) - penalty levied on the enhancement of income made by CIT(A) - HELD THAT:- Quantum enhancement which was made by CIT(A) and which is the basis of the impugned penalty has been restored to the file of CIT(A) by the Co-ordinate Bench of Tribunal for deciding the issue afresh as per the directions contained therein. Sub-clause (iii) of Section 271(1) contemplates that if it is held that the assessee concealed the particulars of income or furnished inaccurate particulars of income, then in addition to tax, if any, payable by him, a sum which shall not be less than, but shall not exceed three times, the amount of tax sought to be evaded by the reason of the concealment of particulars of his income or furnishing of inaccurate particulars of income, be directed to be paid. Penalty equivalent to the tax sought to be evaded or three times of the tax is to be computed on the addition for which a charge is to be proved that the assessee has concealed the particulars of this income. The addition in the present case is yet to be made. In such a situation, we are of the view that there cannot be any question of computing the penalty unless the amount is determined on which the allegation of evading tax can be levied. We therefore set aside the issue of penalty also to the file of CIT(A) and it is left to the wisdom of CIT(A) who may initiate or not initiate penalty proceedings after finalizing of quantum addition if any made to the income of the assessee. Thus ground of assessee is allowed for statistical purposes.
-
2021 (10) TMI 661
Addition u/s. 68 - loan received by the appellant from Sunil Kumar Prashan Kumar HUF interest thereon - HELD THAT:- We have no hesitation to hold that the assessee has sufficiently discharged the onus which lay upon it in terms of Section 68 of the Act. In this view of the matter, we set aside the order of the CIT(A) on this point and direct the Assessing Officer to delete the addition on this score. Ad-hoc disallowance out of vehicle, travelling and telephone expenses partly sustained by the CIT(A) - HELD THAT:- As the assessee could not, in any manner, controvert the view taken by the CIT(A). The action of the CIT(A) being reasonable on the facts of the case and in the absence of any serious rebuttal thereof, we decline to interfere. GP estimation - adopting GP rate of 9.30% in place of GP rate of 7.03% arising from the book results - assessee contends that it is mainly in the business of imports and any fluctuation in the foreign exchange rate could naturally have cascading effect on the Gross Profit where the contract for sale has already been entered - HELD THAT:- As Gross Profit in the subsequent assessment years have fallen down further from 7.03% to 5.39% in sync with increase in turnover. The book results in the subsequent year have been accepted by the Revenue. Thus, when seen on broader parameters, the book results of the assessee should be believed and should not be discarded. The benefit of doubt, if any, needs to go to the assessee - more so where such mathematical ratios cannot be explained to the hilt. The assessee, to our mind, has explained the fall in GP in a broader reckoning with reasonable particularity. The action of the Revenue Authorities thus deserves to be set aside and the plea of the assessee for restoration of book results deserves to be accepted - Decided in favour of assessee.
-
2021 (10) TMI 660
Validity of the assessment initiated without service of the notice u/s. 143(2)(i) - Notice was never served upon the assessee within the limitation period - HELD THAT:- In the present case since the notice u/s. 143(2) of the Act was not served upon the assessee within specified period i.e on or before the Ist day of June 2003, therefore, the assessment framed in the absence of service of notice u/s. 143(2) of the Act on the assessee within the specified period provided u/s. 143(2)(i) of the Act for the relevant assessment year under consideration by the Assessing officer was not valid. Accordingly, the same is quashed. Appeal of the assessee is allowed.
-
2021 (10) TMI 659
Deemed income - accrual of income - year of accounting of e-auction sale - unaccounted sale proceeds of E-Auctioned Iron ore by Monitoring Committee - HELD THAT:- As per case M/S VEERABHADRAPPA SANGAPPA CO. VERSUS THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, BELLARY. [ 2020 (12) TMI 1145 - ITAT BANGALORE] it is very necessary to examine, whether the quantity of goods sold was identified on the date of e-auction, and whether sale proceeds to be received during the assessment year under consideration are quantified by the M.C. If these two ingredients were verifiable on the date of e-auction, then only the assessee is required to recognize the income as deemed income accrued in the assessment year under consideration. Otherwise, the assessee is not required to recognize income in the assessment year under consideration. CIT(Appeals) has not examined these two ingredients. With these observations, we set aside the order of CIT(Appeals) and remit the issue back to the file of the Assessing Officer to examine these two ingredients and decide the issue afresh in the light of the above order of the Tribunal. Revenue's appeal is partly allowed for statistical purposes.
-
2021 (10) TMI 658
Disallowance of deduction u/s 35(1)(ii) - donation made by the assessee to one donee organization is held to be non-genuine - HELD THAT:- As decided in Batanagar Education And Research Trust [ 2021 (8) TMI 139 - SUPREME COURT ] where substantial amount of money received as donations by assessee-trust by way of cheques was ploughed back or returned to donors in cash and assessee, misused status of trust conferred upon it by section 12AA, cancellation of registration under sections 12AA and 80G was justified. Therefore the donation given by the assessee was never to a trust registered u/s 12 AA and 80 G. Thus we confirm the orders of the lower authorities where assessee has rightly been denied the deduction u/s 35 (1) (ii) of the act. Appeal filed by the assessee is dismissed.
-
2021 (10) TMI 657
Addition u/s 69A r.w.s. 115BBE - Unexplained jewellery found from the locker - assessee was unable to explain the source of jewellery found from the locker maintained with Union Bank of India - assessee was stating that the jewellery found from the locker was belonging to the assessee Chhabi Anand, her husband Mr. Shail Anand, her minor son Tarush Anand, unmarried sister-in-law Ms. Shikha David and Late mother-in-law Sobha David - HELD THAT:- The submission of the assessee before the lower authorities that the address of Ms. Shikha David, the unmarried sister-in-law of the assessee is the same as that of the assessee has not been controverted. Merely because the husband of the assessee did not mention the name of Ms. Shikha David in his statement recorded u/s 132(4) in my opinion cannot be a ground to disregard the contention of the assessee that Ms. Shikha David was staying with her in the house belonging to her mother Shikha David who is the mother-in-law of the assessee. There is no evidence on record brought by the Revenue that Ms. Shikha David who is unmarried at the relevant time was staying elsewhere and not at her parental property. Under these circumstances, the affidavit of Shikha David stating that jewellery weighing 468.260gms which was kept by her in locker of her sister-in- law for safe custody cannot be brushed aside, especially when the entire family doesn t have any other locker. Affidavit of the husband and sister-in-law of the assessee stating that jewellery weighing 442.344gms belonging to their late mother Mrs. Sobha David i.e. mother-in-law of the assessee was rejected by the learned CIT(A) on the ground that there is no credible or reliable documentary evidence - there cannot be any credible or reliable evidence except the affidavit of the children of the deceased person in such cases. Although, it may not be accepted in toto however the same also cannot be rejected in toto . Therefore, considering the CBDT instruction/circular 1916 dated 11.05.1996 if the benefit of 500gms of every married woman, 250gms for unmarried woman and 100gms jewellery for every male member of the family is allowed then entire jewellery found from the locker stands explained. - Decided in favour of assessee.
-
2021 (10) TMI 656
Addition u/s 68 or business receipts - on money receipts - CIT(A) justification in holding that the cash received by the assessee was in the nature of business receipt and could not be treated as income under section 68 - HELD THAT:- As decided in in assessee s own Group company viz., Sai Ashray Developers Pvt. Ltd. [ 2021 (6) TMI 662 - ITAT MUMBAI ] as held that issue for our consideration is squarely covered in favour of the assessee and against the Revenue.
-
2021 (10) TMI 655
Income accrued in India - Validity of assessing the sale proceeds of software sold to Indian customers as royalty income - assessee is a company incorporated and operating in Netherlands - DTAA entered between India and Netherlands - HELD THAT:- As assessee is granting license to the integrators and also authorizing the integrator to grant license only for the purpose of using the software. An identical issue of granting license to use software was examined in the context of its taxability as royalty by Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence[ 2021 (3) TMI 138 - SUPREME COURT] . Thus sale proceeds received by the assessee on sale of software licenses cannot be categorized as Royalty within the meaning of provisions of DTAA. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete the addition made as royalty income.- Decided in favour of assessee.
-
2021 (10) TMI 654
Exemption u/s 10(10D) on the maturity value of the Keyman Insurance Policy - scope of amendment brought to explanation 1 to section 10(10D) - HELD THAT:- We will go through the provisions of section 10(10D) of the Act and also the explanation 1 to this section. The provision of section 10D of the Act which was made it clear that any amount under the LIC policy including bonus would not be taxable - aforesaid provision have certain exceptions as provided in clause (A) which provided that any sum received under keyman insurance policy would not be eligible for exemption. In case of the assessee that an assignment of policy was made on 2.6.2009 and maturity amount was received on 22.2.2015. Now the contention of the A.R. is that amendment brought to explanation 1 to section 10(10D) of the Act by the Finance Act, 2013 w.e.f. 1st April, 2014 would not be applicable to the assessee's case since the assignment in the case of name of assessee has taken place much prior to the amendment. As discussed earlier, section 10(10D) of the Act specifically excluded any sum received under a keyman insurance policy from exemption u/s. 10(10D) of the Act. By Finance Act, 2012, w.e.f. 1.4.2013, explanation 1 was inserted explaining the expression Keyman Insurance Policy . Assessee received the amount on maturity of Keyman Insurance Policy after coming into effect of the amended Explanation-1 to section 10(10D) of the Act. The decision relied by assessee may not be of any help to the assessee as there is no retrospective application of the provision. In this view of the matter, in our considered opinion, the assessee is not eligible to claim exemption under section 10(10D) of the Act on the maturity value of the Keyman Insurance Policy. Valid Notice u/s. 143(2) - transfer of case u/s 127 - notice issued u/s. 143(2) of the Act by ITO Ward-11(1), Belgaum is without jurisdiction and as such the assessment order was framed is ab initio - HELD THAT:- Admittedly notice u/s. 143(2) of the Act dated 25.9.2017 was issued by ITO Ward-1(1) Belgaum. However, he is not the concerned assessing officer of the assessee and actual assessing officer was ITO Ward-1 Bellary/ACIT Circle-1 Bellary. Being so, the notice issued u/s. 143(2) of the Act, ITO Ward-1(1) Belgaum is without jurisdiction. Consequently, the assessment framed by ACIT Circle-1 Bellary on the basis of such notice issued u/s. 143(2) dated 25.9.2017 by ITO Ward-1(1) Belgaum cannot be sustained - We uphold the objections raised by the Assessee against the validity of the impugned order u/s. 143(3) for AY 2015-16. We accordingly hold that since in the present case no valid notice u/s.143(2) was issued by the AO who held jurisdiction over the case of the Assessee the consequent order passed u/s. 143(3) dated 7.12.2017 was legally unsustainable and therefore is null in the eyes of law and therefore quashed. The assessee accordingly succeeds on the preliminary legal issue raised before us.
-
2021 (10) TMI 653
Reopening of assessment u/s 147 - Reopening based on information of investigation wing - Bogus purchases - HELD THAT:- As relying on PUSHPAK BULLION PVT LTD [ 2017 (8) TMI 961 - GUJARAT HIGH COURT] assessing officer validly assumed the jurisdiction for making re-opening under section 147 on the basis of information of investigation wing Mumbai. So far as other submissions of the ld AR for the assessee that there is no live link of the reasons recorded, we find that the Hon ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd [ 2016 (8) TMI 277 - GUJARAT HIGH COURT] clearly held that when assessing officer received information from the investigation wing that two well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified. Hence, the ground No. 1 in assessee s appeal is dismissed. Estimation of income - CIT(A) was of the view that disallowance of 12.5% of impugned purchases/bogus purchases would be reasonable to meet the end of justice - As in the present case the assessee has declared the GP @ 0.78%. It is settled law that under Income-tax, the tax authorities are not entitled to tax the entire transaction, but only the income component of the disputed transaction, to prevent the possibility of revenue leakage. Therefore, considering overall facts and circumstances of the present case, we are of the view that disallowances @ 6% of impugned purchases / disputed purchases would be sufficient to meet the possibility of revenue leakage. Appeal raised by the assessee is partly allowed.
-
2021 (10) TMI 652
Estimation of income - bogus purchases - CIT(A) worked out the profit element embedded in the impugned purchases at 15% of the value of such purchases - HELD THAT:- The impugned purchases formed part of the sales/contract receipts of the assessee had not been dislodged by the A.O, therefore, it can safely be gathered that the assessee had procured the impugned material not from the aforementioned hawala parties but from the open/grey market. After giving a thoughtful consideration to the observations of the CIT(A), we do not find any infirmity in the view taken by him that the addition qua the impugned purchases claimed by the assessee to have been made from the aforementioned party was liable to be restricted only to the extent of the profit which the assessee would have made by procuring such goods at a discounted value from the open/grey market. Quantification of the aforesaid profit element we are of the considered view that the CIT(A) had taken the GP rate of the assessee for the last eight years i.e. AY 2007-08 to AY 2014-15 of 15.88% as a yardstick and on the said reasoned basis restricted the addition to 15% of the value of the impugned bogus purchases of ₹ 2,12,513/-. Accordingly, backed by our aforesaid deliberations we find no merit in the appeal of the revenue and dismiss the same. The Grounds of appeal dismissed.
-
2021 (10) TMI 651
Revision u/s 263 by CIT - other expenses claimed in the P L account been not examined properly by the ld. AO during assessment proceedings by conducting necessary enquiry. Ld. Pr. CIT observed that the ld. AO has not examined the original evidences nor has issued any summon u/s 131 of the Act - HELD THAT:- Case of the assessee was selected for limited scrutiny in which one of the criteria was large expenses claimed in the P L account - notice u/s 142(1) of the Act was issued to the assessee by the AO calling various information from the assessee which ld. Pr. CIT has himself referred in the impugned order. The assessee having filed a reply has also been accepted by the Pr. CIT. Further, ld. Pr. CIT has also appreciated that notices u/s 133(6) of the Act were issued in the case of four parties to verify the genuineness of transport expenditure. We notice that expense of transportation have doubled, but there increase is in consonance to the increase in turnover. Whether Ld. AO has examined the large expenses? - In reply to the notice u/s 142(1) of the Act, the ld. AO has mentioned that the details have been filed, some other details were asked to be filed including para-wise details of transportation charges paid, copy of PAN card. This query of the ld. AO was satisfied by the assessee by filing the necessary details. Ld. AO has also issued notices u/s 133(6) of the Act to some of the persons to whom the assessee has paid the transportation charges. All these exercises at the end of the AO are sufficient enough to show that specific information were asked by the ld. AO regarding large expenses. Reply was filed by the assessee. Thereafter, some more information was called for by the ld. AO. Again there was a detailed reply filed by the assessee. AO has conducted enquiry by issuing notice u/s 133(6) of the Act. Ld. AO also made disallowance of expenses appearing in the P L account. All these exercises indicate that there is proper application of mind by the AO on the issue referred in the impugned notice. It cannot be said to be a case of no enquiry. The documents placed before uswhich remains uncontroverted at the end of the ld. D/R are sufficient enough to show that sufficient enquiry was conducted by the AO for examining the issue of large expenses claimed in the P L account. Since the issue referred in the impugned notice forming basis of invoking provision of Section 263 of the Act has been thoroughly examined by the AO leave no room for Ld. Pr. CIT to assume jurisdiction u/s 263 of the Act without undertaking any enquiry at its end to show that the order of the ld. AO is erroneous and prejudicial to the interest of the Revenue. - Decided in favour of assessee.
-
2021 (10) TMI 650
Revision u/s 263 by CIT - whether the requisite jurisdiction necessary to assume revisional jurisdiction is existing in this case before the Pr. CIT rightfully exercised his revisional power? - HELD THAT:- We find that the AO has not made any enquiry into the issue raised by the Ld. PCIT. On specific query as to whether the commission payment made by the assessee was specifically selected for scrutiny and whether this issue was enquired into by the AO, the Ld. A.R failed to show us from PB as to whether the AO has enquired into it or not. Thus we find this is a case wherein on the five (5) issues pointed out by the Ld. PCIT, the AO has not made any enquiry at all. Thus it is a case of lack of enquiry. We respectfully agree with the proposition laid by the Hon ble Delhi High Court in the case of ITO vs. D.G. Housing [ 2012 (3) TMI 227 - DELHI HIGH COURT ] that when there has been an enquiry conducted by the AO on an issue which later on the Ld. PCIT felt to have not been enquired properly/inadequate enquiry by the AO, then the Ld. PCIT, in such a scenario should enquire by himself and should point out as to how where the AO has gone wrong in his enquiry and should return a finding as to how the view of the AO was unsustainable in law. Therefore, the case law relied upon by the Ld. A.R is not applicable to the facts of the case. A.R. thereafter made a feeble attempt to show that para 2.3 on CBDT s instruction NO. 2/2016 dated 10.03.2016 was not applicable in this case for AY 2014-15. We note that instruction of such nature is procedural in nature i.e. when there is a transfer pricing issue before the AO, he is duty bound to examine as to whether the criteria spelled out in the CBDT circular/instruction is fulfilled or not and then to take a decision whether to refer the same to TPO or not and therefore it would take immediate effect from 10.03.2016 onwards. We note that AO has passed the assessment order on 26.12.2016 and it is not the case of the assessee that the CBDT instruction no. 3/2016 has been passed after 26.12.2016. Therefore we do not find any merit in the contention of the assessee. Whether PCIT erred in taking the aid of Explanation 2(c) below section 263(1) of the Act which is applicable only from AY 2015-16? - Even if we agrees to the contention of the Ld. A.R. of the assessee that Explanation 2(c ) below section 263(1) of the Act is not applicable for AY 2014-15, still it does not in any way make any impact on the finding made by the Ld. PCIT that the AO has not enquired into the five (5) issues raised by him in the SCN and since we have concurred with the same, even if we discard explanation 2 (c) below section 263 of the Act it does not help the assessee s contention. Therefore, in the light of the aforesaid discussion we uphold the action of the Ld. PCIT to have invoked Section 263 of the Act to interdict the assessment order dated 26.12.2016. The assessee s appeal fails.
-
2021 (10) TMI 649
Revision u/s 263 - scope of limited scrutiny - case of assessee was selected for limited scrutiny for four reasons, i.e. (i) contract receipt/ fees mismatch (ii) sales turnover (iii) sundry creditors and (iv) tax credit mismatch - HELD THAT:- The assessee explained all these queries and the mismatch between Form 26AS vis- -vis audited P L A/c with reference to the turnover/ gross receipt, TDS credit and the turnover reported in audit report as compared with ITR was explained. So far as verification of sundry creditors is concerned the same was explained by filing confirmation of M/s Krishna Infrastructure which is the main sundry creditor of ₹ 4.10 crores out of total sundry creditors of ₹ 4,59,61,765/. The sundry creditors were mainly in respect of outstanding sub-contractor payment and the explanation for increase in sundry creditors vis- -vis last year was also furnished before the CIT - on issue of mismatch of turnover and TDS credit, the ld. PCIT has not raised any issue but in respect of sundry creditors he has raised the issue in Sec.263 order ignoring that this issue has been thoroughly examined by the AO during the course of assessment proceedings. Thus, on this issue, the order of AO cannot be held to be erroneous or prejudicial to the interest of revenue. Only when the AO notices that there is potential escapement of income exceeding ₹ 5 lacs then the case may be taken for complete scrutiny. However, on verification of the issues taken up for limited scrutiny, the AO has not found anything incorrect and therefore, there was no reason for him to ask for complete scrutiny. Therefore, in respect of Chapter VI-A deduction, if the AO has not made an enquiry the same cannot be considered as erroneous or prejudicial to the interest of revenue more particularly when such claim is allowed in the preceding year and is verifiable from the capital account of assessee for the year under consideration. On the issue of large amount of sundry creditors and expenses claimed in the P L A/c the same is duly explained before the AO, who after making necessary verification and enquiry from the assessee has accepted the explanation of assessee. Therefore, on the issue of increase in sundry creditor with respect to turnover as compared to the preceding year, therefore, in our view, the order passed by the AO cannot be held to be erroneous or prejudicial to the interest of revenue. The ld. PCIT has directed the AO to pass the assessment order afresh ignoring that when the case is selected for limited scrutiny, the jurisdiction of CIT for holding the order erroneous or prejudicial to the interest of revenue is confined only to the issue of limited scrutiny and not to direct the AO to pass a denovo assessment afresh by raising issues beyond what is permitted in the limited scrutiny. Hence, the direction given by Ld. CIT is also bad in law. We are not in agreement with the view taken by the ld. Pr.CIT in the facts and circumstances of the case and therefore we hold that the assessment order, subjected to revision u/s 263, is not erroneous and prejudicial to the interest of the revenue - Decided in favour of assessee.
-
2021 (10) TMI 648
Reopening of assessment u/s 147 - ex- part e order passed by CIT-A - assessee has made cash deposit in his savings bank account maintained with Oriental Bank of Commerce, Janak Puri and the assessee has not offered any explanation regarding the source of the same - CIT(A) passed the ex parte order on the ground that despite five opportunities granted by the CIT(A), the assessee did not appear before him to substantiate his case - submission of assessee that there was no notice issued u/s 143(2) of the Act before completing the assessment u/s 144/147 of the IT Act despite the assessee filed the return of income in response to the notice u/s 148 - HELD THAT:- As the submissions made by the assessee before the Tribunal were not submitted before the CIT(A) and the CIT(A) has passed an ex parte order since the assessee did not appear before him despite five opportunities granted by the CIT(A). Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue back to the file of the CIT(A) with a direction to grant one final opportunity to the assessee to substantiate his case - Appeal filed by the assessee is allowed for statistical purposes.
-
Customs
-
2021 (10) TMI 647
Seeking issuance of detention certificate recommending waiver of detention and demurrage charges and to ensure grant of waiver demurrage and detention charges on the goods - HELD THAT:- In view of the stand taken by the learned Standing Counsel appearing for the respondent that he has already rendered opinion to comply with the directions already indicated in the order of this Court in M/S. DIAMOND NUTS, REP. BY ITS AUTHORIZED SIGNATORY, DR. R.K. BHOODES VERSUS THE PLANT PROTECTION OFFICER (E) , DEPUTY COMMISSIONER OF CUSTOMS (GROUP I) , CENTRAL WAREHOUSING CORPORATION, TUTICORIN [ 2021 (5) TMI 1000 - MADRAS HIGH COURT] and such opinion having been accepted was acted upon by sending communication dated 09.08.2021 by the Assistant Commissioner (Legal) (Customs) to the Assistant Commissioner (Import) at Tuticorin, and necessary orders definitely would be passed by such Officer giving relief sought for by the petitioner in this writ petition, this Court feels that by recording the aforesaid development that necessary orders would be passed by the Assistant Commissioner (Import) at Tuticorin, in favour of the petitioner within the shortest possible time. This Writ Petition is disposed of.
-
Corporate Laws
-
2021 (10) TMI 646
Maintainability of petition - availability of alternative remedy of appeal - Principles of natural justice - due service of notice to all Respondents present in India and overseas - HELD THAT:- It may not be necessary to delve into detail the submissions made by learned Counsel for the rival parties. Suffice it to say that while learned Counsel for the Petitioners submitted that the impugned order was passed without providing due opportunity of hearing to the Petitioners and thus violative of the principles of natural justice, learned Addl. Solicitor General of India pointed out that Petitioners have got efficacious alternative remedy by way of appeal and therefore Petitioners should be relegated to the appellate forum. Union of India had made all possible efforts to serve copies of the Petitions to the Respondents either by email or by delivering physical copies or by post. Tribunal recorded that some of the Respondents had received copies and some had not received entire paper book. Therefore they had stated that they were not in a position to defend the matter in any manner. Though on this count adjournment was not sought for, the same was denied - there is no finding recorded by the Tribunal as to which of the Respondents were served and as to which of the Respondents did not receive entire paperbook. It is fundamental to the judicial system which we follow that before adverse order is passed against a party it is required to be duly served and a reasonable opportunity of hearing should be granted to it. Failure to do so will strike at the very root of the justice delivery system - the Tribunal is directed to hear the Petitioners afresh and thereafter pass appropriate order(s) in accordance with law - petition disposed off.
-
Insolvency & Bankruptcy
-
2021 (10) TMI 645
Supersession of Board of Directors of respondent No.2 - appointment of the administrator further mentioning that respondent No.1 intends to shortly initiate the process of resolution of respondent - HELD THAT:- The statutory inspection of respondent No.2 was conducted by Reserve Bank of India under section 45N of the Reserve Bank of India Act, 1934 (RBI Act) with reference to its financial position as on March 31, 2020. Such inspection revealed serious deterioration in its financial position. Respondent No.2 has defaulted in its payment obligations in respect of bank borrowings and market borrowings, which is a matter of serious concern. Because of such defaults, Reserve Bank of India in exercise of powers conferred under section 45IE of the RBI Act has superseded the Board of Directors of respondent No.2 and has appointed Shri. Rajneesh Sharma as its administrator with immediate effect. Coming to the press release dated 04.10.2021, not only Reserve Bank of India has informed about supersession of the Board of Directors and appointment of administrator but it has also informed that it intends to shortly initiate the process of corporate insolvency resolution of respondent Nos.2 and 3 under the Insolvency and Bankruptcy Code, 2016 and more particularly under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 and would apply to the NCLT for appointing the administrator as the insolvency resolution professional. The present is not a fit case where for invocation of extra ordinary jurisdiction under Article 226 of the Constitution of India. The contention made on behalf of the petitioner that there is no proximate cause for issuance of the impugned order, cannot be agreed upon. As a matter of fact there need not be any proximate cause for an action like the impugned one - petition dismissed.
-
2021 (10) TMI 644
CIRP process - security deposit and/or intercorporate deposit - Whether this Security Deposit and the interest thereon would fall within the ambit of the definition of Financial Debt as defined under Section 5(8)(f) of the Code? - HELD THAT:- For a debt to be termed as Financial Debt , the basic elements that are to be seen is whether (a) there is disbursal against consideration for time value of money and (b) whether it has a commercial effect of borrowing. The definitions provided in Sections 5(7) and 5(8) show that a Financial Creditor refers to a person to whom Financial Debt is owed and includes even a person to whom such a debt has been legally assigned or transferred to. A Financial Debt is a debt alongwith interest which is disbursed against the consideration for the time value of money and it may include any of the events specified in sub-Clause (a) to (i). The Legislature has included any financial transaction in the definition of Financial Debt which are usually for a sum of money received today to be paid over a period of time in instalments, or in a single payment in future. In the instant case, the word Security Deposit mentioned in Clause 10 of the MoU has to be given the correct interpretation as specified by the Hon ble Supreme Court in V.E.A Annamalai Chettiar and Anr. [ 1952 (12) TMI 37 - SUPREME COURT ]. The true effect of the transaction ought to be determined from the terms of the Agreement, keeping in view, the facts and circumstances of the case. In the instant case, the Sales Promotion Agreement mandated a Security Deposit carrying interest at 21% per annum. It is not in dispute that the Corporate Debtor did not adhere to the payment of interest and that there was a default. In other words, neither the Debt nor the Default is disputed. The Corporate Debtor had accepted the Security Deposit from the Appellant and credited the interest for some time against such amounts for the period 2014-15, and bearing in mind the payment of interest on the amounts borrowed by the Corporate Debtor is nothing but a consideration for the time value of money and the interest is being paid to the Appellant for using the money belonging to the Appellant over a period of time and hence we arrive at the conclusion that the status of Appellant is that of a Financial Creditor vis- -vis the amount of Security Deposit as per Section 5(7) read with Section 5(8) of the Code - the said amount of debt herein is to be treated as a Financial Debt . Appeal allowed - decided in favor of appellant.
-
2021 (10) TMI 643
Liquidation of Corporate Debtor - timeline prescribed in the liquidation proceedings or not - Section 60(5) of IBC, 2016 read with Rule 11 of NCLT Rules 2016 - HELD THAT:- The IBC does not prescribe any such timeline as prescribed in the Regulations for submission of the Scheme. However, the judgement in the case of Y. Shivram vs. S. Dhanpal Ors. [ 2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] allows the Adjudicating Authority (Tribunal) to extend the period/timeline if there is a chance of approval of arrangement of the scheme. Thus, it could be inferred that the timeline prescribed in the Liquidation regulations is directory in nature. That in the instant case, the OTS proposals made by Applicant were rejected by SIDBI. However, the Scheme proposed by the Applicant on 19.06.2020 has neither been placed by the Liquidator before the COC nor has been considered by the sole financial creditor, SIDBI - It is also a fact that the Liquidator, who was also the RP, had failed to bring a Resolution Plan for the Corporate Debtor resulting in Liquidation of Corporate Debtor. That as on date, there is a situation of a deadlock and no progress has been made by the Corporate Debtor in the last 2 years. That the Liquidator has neither been able to auction the assets of the Corporate Debtor nor it has placed the Scheme of the Corporate Debtor before the COC or the sole financial creditor SIDBI. The only route available to the Corporate Debtor to come out of the clutches of the Liquidation is via the Scheme of Compromise and Arrangement proposed under Section 230 of Companies Act, 2013 - Since the objective of the IBC is to prefer resolution over liquidation and maximisation of the value of assets of the Corporate Debtor at any stage, it would be in fitness of the scheme of IBC to make all possible efforts to revive the Corporate Debtor. The Liquidator is directed to place without further delay, the Scheme in accordance with Section 230 of the Companies Act, 2013 submitted by the Applicant, before the Creditors in compliance of the directions of the Hon'ble NCLAT - application allowed.
-
Service Tax
-
2021 (10) TMI 642
SEZ units - refund of service tax paid on input services used in the authorized operations - rejection of claim on the ground that the refund claim is filed beyond the time-limit of one year from the date of payment of Service Tax - Chartered Accountant certificate not signed by the statutory auditor - services included in the specified list of services or not - original invoices have not been submitted - applicability of N/N. 09/2009-ST dated 03.03.2009, as amended vide N/N. 15/2009-ST dated 20.05.2009 superseded by N/N. 17/2011-ST dated 01.03.2011. Rejection on the ground of time limitation - HELD THAT:- It is not disputed that all claims had been filed on or before the last date for filing the refund claims. These were returned by issuing Deficiency Memo since the appellant had not furnished necessary documents - It can be seen from the Deficiency Memo that the refund claim is returned to the appellant. There is no decision on merits; there is no application of mind or a speaking order rejecting the claim. In the present case, the appellant has filed the refund claims originally within a period of one year and therefore, the date on which the claims were re-submitted along with documents cannot be considered to be the date of filing claim so as to deny the refund on the ground of limitation - The Tribunal in the case of BALMER LAWRIE CO. LTD. VERSUS COMMISSIONER OF C. EX., KOLKATA-VI [ 2014 (8) TMI 977 - CESTAT KOLKATA] considered a similar issue and held that when the claim has been filed within the limitation period of one year and returned by the Department for removal of defects, the date of subsequent re-submission cannot be taken as the date on which the claim is filed afresh. This issue as to whether the terms and conditions prescribed in the Service Tax Notifications will prevail over Section 26 of the SEZ Act, 2005 read with Section 51 of the SEZ Act, 2005 was analysed by the Hon ble High Court of Telangana and Andhra Pradesh in the case of GMR AEROSPACE ENGINEERING LIMITED AND ANOTHER VERSUS UNION OF INDIA AND OTHERS [ 2019 (8) TMI 748 - TELANGANA AND ANDHRA PRADESH HIGH COURT] . This Tribunal in the case of M/S. TVS LOGISTICS SERVICES LTD. VERSUS THE PRINCIPAL COMMISSIONER OF SERVICE TAX CHENNAI SOUTH COMMISSIONERATE [ 2021 (8) TMI 450 - CESTAT CHENNAI] has applied the above decision of the Hon ble High Court of Telangana and Andhra Pradesh and held that Section 51 of the SEZ Act, 2005 has an overriding effect. The denial of the benefit of exemption by relying upon procedural requirement of a Notification would be against the provisions laid down in the SEZ Act. The terms and conditions of the Notifications (04/2004-ST, 09/2009-ST and 17/2011-ST, as applicable for different periods) cannot be pressed into application to deny the substantive benefit of exemption enshrined in Section 26 of the SEZ Act, 2005 - the rejection of refund claims on the ground of being time-barred cannot sustain and requires to be set aside. Rejection on the ground that the auditor s certificate is not signed by the statutory auditor who was engaged during the period when the refund is claimed - HELD THAT:- Learned Consultant for the appellant has explained that the auditor s certificate has been issued by M/s. Price Waterhouse Co. who were engaged at the time of filing the applications for claiming refund, who were the statutory auditors at that point of time - When the statutory auditor has given the certificate, there are no error so as to deny the refund on the allegation of the certificate not being issued by the proper person as required in the Notification. The rejection of refund claims on this ground is set aside. Rejection of refund on the ground that the services are not used for authorized operations - HELD THAT:- When the services have been approved for authorized operations by the authority competent to do so, then the Department cannot deny the refund stating that it does not appear that the services are used for authorized operations. The view taken by the authorities below to deny the refund is not supported by any cogent reasons - the rejection of refund on this ground is not justified. Rejection on the ground of non-submission of original invoices - HELD THAT:- The appellant asserts that they have produced the photocopies of all the invoices. The requirement as per the Notification is to produce proof of payment of Service Tax. If the photocopies of the invoices establish the transaction as well as the payment of Service Tax, the Department ought not to have rejected the refund claim stating that original invoices are not produced. We therefore cannot agree with this view taken by the authorities below. If the appellant produces proof of payment of Service Tax, the same should be considered - this issue is remanded to the Adjudicating Authority, who shall re-consider this issue after verifying the copies of the invoices/documents produced by the appellant. The appeals are partly allowed and partly remanded.
-
2021 (10) TMI 641
Refund of service tax paid - Export of services or not - intermediary - services provided by the appellant to its parent company in Hong Kong - Period Oct 2015 to March 2016 and April 2016 to Sept 2016 - HELD THAT:- Admittedly, the appellant have received the charges for their services in convertible foreign exchange. Rule 2(f) read with Rule 9 of Place of provision of Service Rules, 2012, clearly provides that intermediary which means one who procure or an agent, does not include a person who provides the main service or supply of goods on his account. The appellant have provided the services to their holding company located India outside India, on their own account. Thus, the appellant have exported their services. The appellant is entitled to refund of the service tax paid under mistake. Further, the tax has been paid under mistake, is in the nature of Revenue deposit and no limitation is attracted for refund on such deposit - the Adjudicating Authority is directed to grant the refund within a period of thirty days from the date of receipt of this order, alongwith interest @12% per annum, starting from the end of three months from the date of application (09.03.2017), till the date of disbursement of the amount. Appeal allowed - decided in favor of appellant.
-
2021 (10) TMI 640
Classification of service - Franchise Service or not - one stop painting solution to the customers - respondent recovered certain income under the head Home Solutions Operations - Revenue was of the view that these services will fall under a category of franchisee service as defined under Section 65(105)(zze) of the Finance Act, 1994 - HELD THAT:- It is not settled law that unless and until representational rights have been actually transferred to the franchisee, the service tax could not have been levied under the category of franchisee services. The terms of the agreement clearly provide that home solution service provider is barred from making any statement on behalf of the company or in any manner how to represent the respondent. When there is a specific clause in the agreement which bars the home solution service provider from representing the respondent, then how it has been claimed that such representational rights have been granted to the home solution service provider. Nothing has been brought on record by which it can be stated that such representational rights were granted to the home solution service provider. The reliance placed by Revenue in the case of Australian Foods India Ltd. COMMISSIONER OF CENTRAL EXCISE, CHENNAI-II VERSUS M/S AUSTRALIAN FOODS INDIA LTD. [ 2013 (1) TMI 330 - SUPREME COURT ] is totally misplaced - this decision also does not help the case of Revenue, as this decision has not been rendered in the case where the issue was in respect of franchisee services but was in case of trade and brand name. The appeal filed by Revenue is dismissed.
-
Central Excise
-
2021 (10) TMI 639
Maintainability of appeal - being two units of the appellants involved in this case, whether only one appeal is sufficient or one more appeal is required to be filed? - interpretation of various notifications and availability of exemption - HELD THAT:- This issue was not disputed by the revenue in earlier two round of appeals, which attained finality, therefore at this stage the objection of the revenue is not tenable. Moreover, even though there are two units i.e. Twisting unit and other is Dyeing unit but both the units belongs to one company, hence only one consolidated appeal is sufficient, particularly when Order-In-Original is one common order in respect of both the units. Hence, the revenue s objection on this point is not sustained. Exemption under N/N. 5/1998-CE, N/N. 5/1999-CE, N/N. 6/2000-CE, N/N. 3/2001-CE, N/N. 6/2002-CE - twisted yarn - dyed yarn - fulfilment of conditions of manufacture of exempted goods from the duty paid inputs or not - inputs procured from open market on commercial invoices can be treated as duty paid goods or otherwise - Whether the condition of use of duty paid goods stands satisfied in a case where the duty was paid on the textured or draw twisted yarn by the appellant which was then utilized in the twisted yarn and on the said twisted yarn the exemption was availed? - HELD THAT:- In the present case, the duty demand is on twisted yarn and dyed yarn. The twisted yarn was manufactured out of partially oriented yarn/non-texturized yarn purchased and textured by the appellant and on which textured yarn appellant paid duty and the texturized yarn or draw-twisted yarn which was purchased from the manufacturers under the Central Excise Invoices or from the open market from various dealers under Commercial invoices. Twisted yarn manufactured out of the Yarn textured by the appellant - HELD THAT:- When the yarn is purchased from the open market it is deemed to be duty paid and the appellant does not have to show the purchase on payment of duty. The adjudicating authority simply relied upon the statements of the appellant s representative that the base yarn was purchased from local merchants from open market without duty paid invoice. Only on the basis of these statements, it cannot be established that the base yarn procured from the open market shall be treated as non duty paid. Dyed yarn - HELD THAT:- The same was manufactured partly from twisted yarn received from the appellant s twisting unit which was made out of duty paid textured or draw twisted yarn and the textured or draw twisted yarn purchased from the open market. In this case since right from the processing of textured or draw twisted yarn up to the manufacture of dyed yarn, the activities were carried out by the appellants themselves. Since the initial raw material i.e. Textured or draw Twisted yarn on which excise duty was paid, the condition of the exemption provided to dyed yarn that the same should be manufactured out of duty paid goods stands satisfied - When the dyed yarn is made out of twisted yarn and the twisted yarn in turn is made out of duty paid or draw twisted yarn the dyed yarn is also to be considered as having been manufactured out of duty paid textured or drawn twisted yarn therefore, they are eligible for the benefit of the said notifications - the dyed yarn made out of the yarn purchased from the open market is entitle to the exemption. Time Limitation - HELD THAT:- In the present case the issue involved is of interpretation of notification. On the same issue there were number of judgments including the judgment of Supreme Court in favour of the assessee therefore, the appellant had entertained bona fide belief that they are entitle for the exemptions notifications therefore, it cannot be said that there is any fraud, collusion, wilful misstatement or suppression of facts or contravention with intention to evade duty on the part of the appellant - demand for the longer period is not sustainable. The impugned order is not sustainable on merit as well as on limitation - Appeal allowed - decided in favor of appellant.
-
2021 (10) TMI 638
Valuation - Nature of amount received - Recovery of Central excise duty with interest and penalty - amount received by the appellant from M/s. Honda Siel Car India Ltd. [Honda India], for the loss suffered by the appellant on account of the cancellation of the contract for supply of auto parts used in the manufacture of vehicles - HELD THAT:- Section 4(1) of the Excise Act deals with valuation of excisable goods for purposes of charging of duty of excise. It provides that where the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall be, if the assessee and the buyer of goods are not related and the price is the sole consideration for the sale, be the transaction value. Transaction value has been defined under section 4(1)(d) of the Excise Act to mean the price actually paid or payable for the goods. The dispute in the present appeal relates to the amount which the appellant received from Honda India due to cancellation of the contract. This amount obviously was to make up for the reduced price which the appellant received from the sale of auto parts manufactured by the appellant. The Department alleges that this was infact the balance consideration received by the appellant from Honda India under the guise of compensation and, therefore, should be included in the transaction value - It clearly transpires from the business arrangement that the appellant had received a substantial amount from Honda India, even though the terms of the contract did not provide for payment of any amount to the appellant if the contract of supply of auto parts was cancelled by Honda India. What is also important to notice is that even for the subsequent year the appellant also claimed that it had to sell the auto parts as scrap since the contract was cancelled. It transpires from the business arrangement between the appellant, Honda India and the buyers that the appellant received some amount from the buyers of scrap and some amount from Honda India for the value of the auto parts and there is no good reason as to why this amount received by the appellant from Honda India should not be included in the transaction value of the goods - the contention of the appellant that the amount cannot be included in the transaction value since the consideration must flow only from the buyer to the seller of goods, in view of the business arrangement arrived at in the present case, cannot be accepted. Rule 5 of the Central Excise (Valuation) Rules, 1975 also talks of additional consideration flowing directly or indirectly from the buyer to the assessee. In view of the peculiar nature of the business arrangement between the appellant, Honda India and the buyers of auto parts, it is clear that the amount received by the appellant from Honda India has flown indirectly from the buyers. There is, therefore, no error in the order passed by the Commissioner (Appeals) - appeal dismissed.
-
Indian Laws
-
2021 (10) TMI 637
Cancellation of granted Interim Bail - the conditions of interim bail was fulfilled or not - non-appearance of petitioner on assigned date - jurisdiction to adjudicate the matter placed - issuance of Look Out Circular - HELD THAT:- Without giving notice to the petitioner, interim order should not have been cancelled to issue warrant of arrest on the prayer of the respondent nos.3 and 4 merely on the ground of non-appearance made on behalf of the petitioner on the assigned date. It is made hereby clear that the petitioner has a fundamental right of movement and right to life as enshrined in Article 19(1)(b) of the Constitution of India. Therefore, he has a right to travel beyond the territory of India as held by the Hon ble Supreme Court in Maneka Gandhi vs. Union of India [ 1978 (1) TMI 161 - SUPREME COURT ] and in case of Satwant Singh Sawhney Vs. D. Ramarathnam Assistant [ 1967 (4) TMI 196 - SUPREME COURT ] wherein it has been held by majority decision of the Hon ble Apex Court that the expression personal liberty which occurs in Art. 21 of the Constitution includes the right to travel abroad and that no person can be deprived of that right except according to procedure established by law. The mere prescription of some kind of procedure cannot even meet the mandate of Article 21. The procedure prescribed by law has to be fair, just and reasonable, not fanciful, oppressive or arbitrary. The Look Out Circular against the passport issued at the instance of the respondent nos. 3 and 4 dated 12.3.2021 is hereby quashed, however, the petitioner in usual course would cooperate the respondent authorities if so required through video conferencing as the petitioner is non-est at the present in the respondent company no. 6 and if the respondent authority nos. 3 and 4 have any further investigation to be made, they are at liberty to seek assistance of Resolution Professional because the respondent no. 6 company is controlled by them - Application allowed.
|
