TMI Tax Updates - e-Newsletter
October 16, 2017

Case Laws in this Newsletter:

Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

TMI SMS

• Composition Scheme - value of supply of any exempt services shall not be taken into account

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Highlights / Catch Notes

• GST:

  GST Rate Schedule - notifying rates of IGST @ 5%, 12%, 18%, 28%, 3% and 0.25% on supply of goods. - Notification as amended
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• GST:

  Rates for supply of services under IGST Act - Notification as amended
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• GST:

  Mandatory payment of GST under reverse charge mechanism (RCM) on supply of Goods - Notification as amended
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• GST:

  Absolute Exemption from IGST / GST on supplies of goods - Notification as amended
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• GST:

  Mandatory payment of GST under reverse charge mechanism (RCM) on supply of services - Notification as amended
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• GST:

  The services provided by Overseeing Committee members to RBI shall be taxed under the reverse charge mechanism under GST
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• GST:

  Exempted supply of services under IGST - Notification as amended
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• GST:

  Reverse Charge Mechanism (RCM) - payment of tax u/s 5(4) of the IGST Act, 2017 exempted till 31.03.2018
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• GST:

  Exemption for inter state supply of handicraft goods from the requirement to obtain registration under GST - Notification as amended
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• GST:

  Composition Scheme - value of supply of any exempt services shall not be taken into account
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• VAT:

  Container Freight Statio (CFS) cannot be treated as a garnishee of the third respondent - HC
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Articles

• ROLE OF GST PRACTITIONERS

Notifications

• Companies Law

• F. No. 05/17/2017-IEPF - dated 13-10-2017 - Co. Law
  Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2017

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• Customs

• 79/2017 - dated 13-10-2017 - Cus
  Seek to amend various Customs exemption notifications to exempt Integrated Tax/Cess on import of goods under AA/EPCG. schemes

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• 78/2017 - dated 13-10-2017 - Cus
  Seeks to exempt goods imported by EOUs from integrated tax and compensation cess

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• 77/2017 - dated 13-10-2017 - Cus
  Customs seeks to amend notification No. 50/2017-Customs to prescribe BCD and IGST rates on certain goods

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• 95/2017 - dated 13-10-2017 - Cus (NT)
  Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver

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• 11/2017 - dated 13-10-2017 - Cus (NT)
  Appointment of Common Adjudicating Authority by DGRI

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• GST

• 46/2017 - dated 13-10-2017 - CGST
  Seeks to amend notification No. 8/2017-Central Tax - turnover limit for Composition Levy

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• 37/2017 - dated 13-10-2017 - CGST Rate
  Reduced rate of Central Tax tax (CGST) on the leasing of motor vehicles - where purchased and supplied on lease before 1.7.2017

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• 36/2017 - dated 13-10-2017 - CGST Rate
  Seeks to amend notification No. 4/2017-Central Tax (Rate) - Reverse charge (RCM) on certain specified supplies of goods

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• 35/2017 - dated 13-10-2017 - CGST Rate
  Seeks to amend notification No. 2/2017-Central Tax (Rate) - Absolute Exemption from GST on supply of goods

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• 34/2017 - dated 13-10-2017 - CGST Rate
  Seeks to amend notification No. 1/2017-Central Tax (Rate) - CGST Rate Schedule for supply of goods

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• 33/2017 - dated 13-10-2017 - CGST Rate
  Seeks to amend notification No. 13/2017-CT(R) regarding services provided by Overseeing Committee members to RBI - reverse charge mechanism (RCM)

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• 32/2017 - dated 13-10-2017 - CGST Rate
  Seeks to amend notification No. 12/2017-CT(R) - Exempted supply of services

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• 31/2017 - dated 13-10-2017 - CGST Rate
  Seeks to amend notification No. 11/2017-CT(R) - Rates for supply of services

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• 7/2017 - dated 13-10-2017 - GST CESS Rate
  Reduced rate of compensation cess on the leasing of motor vehicles - where purchased and supplied on lease before 1.7.2017

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• 6/2017 - dated 13-10-2017 - GST CESS Rate
  Seeks to amend notification No. 2/2017-Compensation Cess (Rate) regarding reduction in cess rates for leasing of motor vehicles purchased and leased prior to 01.07.2017

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• 39/2017 - dated 13-10-2017 - IGST Rate
  Seeks to amend notification No. 8/2017-Integrated Tax (Rate) - Rates for supply of services

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• 38/2017 - dated 13-10-2017 - IGST Rate
  Reduced rate of Integrated Tax (IGST) on the leasing of motor vehicles - where purchased and supplied on lease before 1.7.2017

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• 37/2017 - dated 13-10-2017 - IGST Rate
  Seeks to amend notification No. 4/2017-Integrated Tax (Rate) - Reverse charge (RCM) on certain specified supplies of goods

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• 36/2017 - dated 13-10-2017 - IGST Rate
  Seeks to amend notification No. 2/2017-Integrated Tax (Rate) - Absolute Exemption from IGST on inter-state supply of goods

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• 35/2017 - dated 13-10-2017 - IGST Rate
  Seeks to amend notification No. 1/2017-Integrated Tax (Rate) - IGST Rate Schedule for supply of goods

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• 34/2017 - dated 13-10-2017 - IGST Rate
  Seeks to amend notification No. 10/2017-IT(R) regarding services provided by Overseeing Committee members to RBI - reverse charge mechanism (RCM)

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• 33/2017 - dated 13-10-2017 - IGST Rate
  Amendments in the Notification No.9/2017- Integrated Tax (Rate), dated the 28th June, 2017 - Exemptions on supply of services

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• 16/2017 - dated 13-10-2017 - UTGST
  Seeks to amend notification No. 2/2017-Union Territory Tax - - turnover limit for Composition Levy

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• 37/2017 - dated 13-10-2017 - UTGST Rate
  Reduced rate of union territory tax (UTGST) on the leasing of motor vehicles - where purchased and supplied on lease before 1.7.2017

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• 36/2017 - dated 13-10-2017 - UTGST Rate
  Seeks to amend Notification No. 4/2017- Union Territory Tax (Rate), dated the 28th June, 2017 - Reverse charge (RCM) on certain specified supplies of goods

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• 35/2017 - dated 13-10-2017 - UTGST Rate
  Seeks to amend notification No. 2/2017-Union territory Tax (Rate)dated the 28th June, 2017 - Absolute Exemption from UTGST on supply of goods

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• 34/2017 - dated 13-10-2017 - UTGST Rate
  Amendments in the Notification No.1/2017-Union territory Tax (Rate), dated the 28th June, 2017 - UTGST Rate Schedule for supply of goods

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• 33/2017 - dated 13-10-2017 - UTGST Rate
  Seeks to amend notification No. 13/2017-UTT(R) regarding services provided by Overseeing Committee members to RBI - reverse charge mechanism (RCM)

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• 32/2017 - dated 13-10-2017 - UTGST Rate
  Seeks to amend notification No. 12/2017-UTT(R) - Exemptions on supply of services

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• 31/2017 - dated 13-10-2017 - UTGST Rate
  Seeks to amend notification No. 11/2017-UTT(R) - Rates for supply of services under UTGST

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Circulars / Instructions / Orders

• GST - 01/2017-Central Tax - dated 13-10-2017
  Composition Scheme - the Central Goods and Services Tax (Removal of Difficulties) Order, 2017
• GST - 01/2017-Union Territory Tax - dated 13-10-2017
  Composition Scheme - the Union Territory Goods and Services Tax (Removal of Difficulties) Order, 2017
• Customs - 40/2017 - dated 13-10-2017
  Pilot Implementation of Paperless Processing under SWIFT-Uploading of Supporting Documents-reg.

News

• India’s Foreign Trade: September 2017

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• India has high growth potential for next two decades: Jaitley

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Case Laws:

• Income Tax

• 2017 (10) TMI 638

  MAT computation - Computation of ‘Book Profits’ u/s 115JB - Held that:- AO was not competent to go into the computation of ‘Book Profits’ u/s 115JB of the Act except to the limited extent of making additions and reductions as laid out in Explanation (1) to sec. 115JB of the Act. We find that the ld CIT(A) has also tested the claim of depreciation as per the provisions of Explanation (1) to sec. 115JB while coming to the view that the AO was not authorized to make the addition while re-working the extent of depreciation claimed by the assessee.

  The accounts of the assessee have been certified by the Statutory Auditors. The accounting policies followed by the assessee have not been found fault with by the Statutory Auditors or the authorities concerned under the Companies Act. In such cases, the AO is not permitted to make any variation by holding that the assessee has not followed the mandate of the Accounting Standards and the provisions of Companies Act while preparing its financial statements. The object of sec. 115JB is to bring to tax the book profits as shown by the company to its shareholders and keeping in view the aforesaid object behind sec. 115JB of the Act and the judicial pronouncements on the scope of the ‘AO’s powers computing the book profits, we do not find any reason to interfere with the impugned order passed by the ld CIT(A) on this issue and therefore uphold the same.

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• 2017 (10) TMI 637

  Suppression of the sales - Held that:- In the instant case, suppression of the sales for the month of August 2003 has been established on the basis of discrepancy in the sales recorded in books of accounts and sales recorded in the computer at shop, which is used for billing i.e. primary record of sales. Thus, in view of suppression of the sales found in the month of August, 2003 on the basis of the primary records and not finding of the primary records of the sales for the period from April, 2003 to July, 2003 in the computer at shop, relying on decision of third Member in the case Overseas Chinese Cuisine Vs. ACIT (1996 (1) TMI 148 - ITAT BOMBAY) the habit of suppressing the sales can be presumed to be existing in the period from April, 2003 to July, 2003 and which is a legitimate presumption drawn under the law.

  We are of the opinion that that the assessee company was engaged in suppression of the sales during the period from April, 2003 to July, 2003 also. The suppression of sales amounting to ₹ 34,96,514/- for the month of April, 2003 to July, 2003 has been worked out on the pro rata basis (58.50 %) of the sales entered in the books of accounts for this period. We do not find any error in the principle employed for working out the amount of suppressed sales for the period from April, 2003 to July, 2003.

  Working out of profit on suppressed sales - Held that:- In principle we are agreed that cost of goods should be reduced out of the sales while working out the profit. But in the instant case, during the course of survey proceedings no evidence was found that assessee incurred expenses on raw material etc. which were not entered in the books of accounts. Thus, it is evident that all the expenses towards the cost of goods, whose sales has not been recorded in the books of account, are already entered in the regular books of accounts. Once the expenses towards the suppressed sales are already entered in the regular books of accounts, such expenses are not required to be reduced out of the suppressed sales. If it is found that both the sales as well as cost of goods sold are not recorded in the books of accounts, then only, while computing the undisclosed profit, the cost of goods should be reduced out of the suppressed sales. But in present case, no such evidence of any cost of goods sold incurred out of books of accounts was found during survey. In the circumstances, we are of the opinion that entire suppressed sales for the period from April, 2003 to the date of survey amounting to ₹ 44,64,425/- is the amount liable to be taxed as undisclosed profit.

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• 2017 (10) TMI 636

  Reopening of assessment - Disallowance of 100% of bogus purchase - Held that:- Tangible and cogent incriminating material were received by the AO which clearly showed that the assessee was beneficiary of bogus purchase entries from bogus entry providers which formed the reason to believe by the AO that income has escaped assessment. The information so received by the AO has live link with reason to believe that income has escaped assessment. On these incriminating tangible material information, assessment was reopened. At this stage there has to be prima facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to the guilt. As relying on CIT Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME Court] we justify the validity of reopening in this case.

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• 2017 (10) TMI 635

  Reopening of assessment - non compliance with the mandatory requirement of notice being issued by the AO to the assessee under section 143(2) - Held that:- As notice under section 143(2) was never issued by the AO upon the assessee and he completed the assessment under section 143(3) r.w.s. 147 of the Act. In the absence of notice under section 143(2), the assessment framed is not a valid assessment and we have no hesitation in holding that the assessment is invalid and we accordingly quash the same. Since we have quashed the assessment, we find no justification to deal the issues on merit. - Decided in favour of assessee.

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• 2017 (10) TMI 634

  Chargeability to tax u/s 115O - Chargeability of additional income tax in respect of the amount declared distributed or paid by a domestic company by way of dividend on or after 01.04.2003 - Held that:- It is noted that the facts for the A.Y. 2011-12 are almost identical as A.Y. 2010-11 and therefore in view of the finding on this issue for the A.Y. 2010-11 on principle this issue is decided in favour of the assessee because the instance of chargeability of tax arises on 30.09.2011 when the dividend was declared which would fall in the A.Y. 2012-13 and not in the A.Y. 2011-12. It is pertinent to note that there are two instances of chargeability of DDT and the dispute is only regarding the assessment year in which the dividend so declared by the assessee is chargeable to tax u/s 115O of the Act. Therefore, as far as the principle demand on account of DDT is concerned there is no dispute about the total amount of principle demand and the only dispute which may arise in any case is regarding the interest on the said demand. The dividend declared on 30.08.2011 is chargeable to DDT only during the A.Y. 2012-13 but AO has not raised any demand for the said assessment as it was assessed for the A.Y. 2011-12. Therefore, even if the tax liability is determined in the A.Y. 2011-12 it is in fact the liability for the A.Y. 2012-13

  Accordingly, this issue set aside to the record of the AO to verify the payment made by the assessee on 10.10.2011 on account of DDT in respect of the dividend amount of ₹ 1,95,00,000/- declared on 30.09.2011. If the said amount is till available for credit in the account of the assessee and has not been adjusted against any other tax liability then the Assessing Officer may consider the said amount against the taxability on account of DDT which is chargeable for the A.Y. 2012-13. Assessee of the appeals are allowed.

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• 2017 (10) TMI 633

  Scope of rectification of mistake - ITAT power under the Act to consider miscellaneous application in so far as Section 254(2) - Held that:- Hon’ble Supreme Court in the case of K. Ravindranathan Nair (2017 (8) TMI 537 - SUPREME COURT OF INDIA) where Hon’ble Supreme Court observed that right to appeal is vested in the litigant at the commencement of Lis and therefore, such vested right cannot be taken away and cannot be impaired or made more stringent by any subsequent legislation unless the subsequent legislation said so either expressly or by necessary intendment. An intention in interfere or impair a vested right cannot be presumed unless such intention be clearly manifested by the express words or by necessary implication.

  Applying the proposition of law laid down by Hon’ble Supreme Court, we can safely infer that right to appeal which includes right to file rectification application arises at the time of passing the original order and such right can only be taken away when there is a retrospective amendment. In the instant case before us, the amendment so brought in u/s.254(2) was prospective and applicable to the orders passed after 01/06/2016, and not the orders passed prior to 01/06/2016. Undisputedly in the instant case the order of Tribunal sought to be rectified was dated 06/09/2013 which is much prior to the date of amendment. Accordingly amended provisions of Section 254(2) limiting the period of filing rectification application within a period of six months is not applicable to the instant case before us.

  We do not find any justification in declining the rectification application which was filed within the prescribed time limit prevailing prior to amendment brought in Section 254(2) of I.T. Act w.e.f. 01/06/2010.

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• 2017 (10) TMI 632

  Special auditor appointment u/s 142(2A) - Held that:- It would be incorrect to hold that the ld CIT(A) has failed to adjudicate on the grounds relating to the appointment of the special auditor and the audit report so submitted by the special auditor. We have gone through the findings of the ld CIT(A) and don’t see any infirmity or perversity in the said findings. The ld CIT(A) has taken into the consideration the fact relating to volume and complexity of transactions and the fact that the assessee himself failed to reconcile the documents found during the course of survey with the books of accounts and basis that, he has confirmed the action of the AO to recommending the appointment of the special auditor after taking appropriate permissions from the ld CIT after providing reasonable opportunity to the assessee. Further, it is noted that based on documents impounded during the course of survey and the fact that the assessee failed to reconcile the same with the books of accounts, the special auditor has come to specific findings which are contained in his special audit report. In the result, ground no. 1 of the assessee’s appeal is dismissed.

  Estimation of net profit rate pursuant to rejection of books of accounts - Held that:- The special auditor has pointed out various discrepancies in terms of 62 entries relating to various vouchers/bills/challans etc which could not be verified from the books of accounts. The special auditor also pointed out 251 entries of cash payments exceeding ₹ 20,000 in violation of section 40A(3) of the Act. In our view, these are serious discrepancies as pointed by the AO based on review of assessee’s books of accounts, special audit report and other details on record, and we accordingly don’t see any justifiable basis to deviate from the view taken by the AO in rejection of the books of accounts of the assessee and invoking the provisions of section 145(3) of the Act.

  Regarding estimation of profits pursuant to the rejection of the books of accounts, the AO has segregated the turnover relating to work directly executed by the assessee and the work executed through the sub-contractor. In respect of directly executed work, the AO has applied the net profit rate of 12.5% subject to interest and depreciation following the ratio laid down by the Hon’ble Rajasthan High Court in case of Jain Constructions [2014 (8) TMI 167 - RAJASTHAN HIGH COURT ] and in respect of work executed through the sub-contractor, the AO has accepted the net profit of 3% as submitted by the AO during the course of assessment proceedings. Nothing has been brought on record to suggest the case of Jain Construction, which is apparently in the same line of business, is not a comparable case with that of the assessee. We accordingly find that there is a reasonable basis for the AO to estimate the net profit and the same is hereby confirmed

  Inpendent financial transactions relating to infusion of capital - Held that:- It is in relation to independent financial transactions relating to infusion of capital and in absence of satisfactory explanation relating to source of such infusion, the same has been brought to tax. The said addition is independent of determination of net profit which has been estimated by the AO which is in replacement of business income computed under section 29 of the Act and is thus not vitiated by estimation of net profit. A detailed discussion in this regard is contained in subsequent paragraphs in relation to addition u/s 40A(3) and 69C of the Act and the same should be read alongwith the present findings. Hence, we confirm the order of the ld CIT(A) and the ground no. 3 of assessee’s appeal is dismissed.

  Disallowance of capital expenditure u/s 37 - Held that:- In our view, the said disallowance of capital expenditure u/s 37 should have been factored in by the AO while estimating the net profit @ 12.5% and replacing the net profit u/s 29 determined by the assessee and hence, separate addition on this account is not warranted. Hence, the said findings of the ld CIT(A) is set-aside and the ground no. 4 of assessee’s appeal is allowed.

  Unverified bank deposits and DD payments - Held that:- Since there is no direct linkage of these payments found with the Bank accounts, the AO’s argument cannot be totally discounted. Hence, except for the amount of ₹ 14,72,000/- mentioned above, the remaining amount is to be considered as unexplained deposits for whatever purposes used. Since the explanation in respect of the other amounts was not found to be satisfactory, the addition to the extent of balance amount of ₹ 8,32,667/- is accordingly confirmed.

  Undisclosed income not accounted for in the books of account - Held that:- During the course of assessment proceedings, the assessee has surrendered ₹ 89,000 relating to rental income not disclosed in the return of income and an amount of ₹ 27,950 towards sale of scrap which has been adjusted against the site advance account instead of crediting the profit/loss account. Further, an amount of ₹ 3,25,563 has been considered by the AO as unexplained and illegal income from pool based on documents impounded during the course of survey for which the assessee has failed to offer any explanation to the satisfaction of the AO or even during the appellate proceedings. Hence, the abovesaid findings of the ld CIT(A) are confirmed and the ground of assessee’s appeal is dismissed.

  Addition u/s 40A(3) - Held that:- In the instant case, the AO has rejected the books of accounts and estimated the net profit. The Hon’ble Andhra Pradesh High Court in case of Indwell Constructions vs CIT (1998 (3) TMI 121 - ANDHRA PRADESH High Court) has held that where the books of accounts are rejected, all the deductions which are referred to under section 29 are deemed to have been taken into account while making such an estimate of income and where such an estimate is made, it is in substitution of the income that is to be computed under section 29. All the deductions which are referred to under section 29 are deemed to have been taken into account while making such an estimate. In the instant case, this will also mean that the embargo placed in section 40A(3) is also taken into account and there cannot be a separate disallowance under 40A(3) of the Act.

  Addition on account of unexplained expenditure - Held that:- the provisions of section 69C, as we have seen above, are crystal clear and there is no iota of doubt in our mind that where the AO has noticed that certain expenditure has been incurred by the assessee, the primary onus to discharge is clearly on the assessee to provide an explanation relating to source of such expenditure to the satisfaction of the AO. It is the assessee who has incurred the expenditure at first place and it is he who has to demonstrate that the expenditure has been incurred from known sources of his income. Where he fails to demonstrate, the consequences of section 69C will follow. Even going by the assessee’s contentions, we find that the ld CIT(A) has himself confirmed the addition on account of undisclosed income of ₹ 4,51,513 and to that extent, the findings of the ld CIT(A) are self-contradictory.

  In light of above discussions, in respect of transactions reported at item no. 85, 86, 87 and 88 of Annexure 4 of the special audit report, the addition made by the AO u/s 69C amounting to ₹ 14 lacs is hereby confirmed.

  Now coming to transactions reported at item no. 68, 69,70,71,72, 73 and 74 on perusal of the order of the ld CIT(A), we however donot see a specific finding of the ld CIT(A) which has addressed the matter in light of documents marked as Annexure A-24 impounded during the course of survey and the contentions so advanced by the assessee. In the interest of justice and fair play, we hereby set-aside the matter for the limited purposes of examining Annexure A-24 impounded during the course of survey and the items reflected at Item no. 68, 69,70,71,72, 73 and 74 based on Annexure A-24 and as reported as part of Annexure 4 of the special audit report, and taking into consideration the findings of the special auditor, to decide as per law as to whether the provisions of section 69C are attracted in the instant case or not. Needless to say, both the revenue and the assessee would be provided reasonable opportunity to represent their case before the ld CIT(A).

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• 2017 (10) TMI 641

  Entitlement to adopt AS-31 issued by ICAI - institute revised its instructions and issued AS-31, making it mandatory only with effect from the financial year 2011-2012 and the assessee adopted AS-31 for the assessment year 2008-2009, which, according to the Assessing Officer, resulted in loss of revenue - Held that:- Despite our specific query as to whether there was any statutory prohibition preventing the assessee from adopting AS-31 for the assessment year 2008-2009, the revenue was unable to show us any such statutory bar. In other words, it is evident from the submissions made by the revenue itself that the assessee was legally entitled to adopt AS-31 for the assessment year 2008-2009. If that be so, the Assessing Officer could not have faulted the assessee for having adopted AS-31 for the assessment year 2008-2009 and maintained its account on that basis. The revenue has no case that if AS-31 was validly adopted by the assessee, the assessee could not have been allowed deduction towards loss under derivative contracts of ₹ 63,73,179. Therefore, the conclusion is irresistible that the assessee was legally entitled to adopt AS-31 for the assessment year 2008-2009 and on such adoption, the assessee was entitled to the deduction as well. If that be so, the Tribunal was fully justified in its conclusion that the Assessing Officer was not justified in making the impugned disallowance of ₹ 63,73,179. Therefore, we do not find any illegality in the order of the Tribunal.

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• 2017 (10) TMI 631

  Claim for exemption u/s 54 - rejected the assessee’s claim for exemption u/s 54 instead of sec. 54F of the Act on the ground that it was the assessee himself who claimed exemption u/s 54F - Whether the AO while passing rectification u/s 154 should have to give benefits to assessee available u/s 54, even though there is no claim made by the assessee to that effect? - Held that:- A perusal of the order of assessment dated 27/3/2014 for asst. year 1996-97, as extracted above, clearly establishes the assessee’s averment that the AO has passed this order brazenly, ignoring the binding decision of the Hon’ble Karnataka High Court in assessee's own case [2012 (8) TMI 1100 - KARNATAKA HIGH COURT] for fresh consideration of the assessee’s claim for exemption u/s 54 instead of u/s 54F of the Act as originally claimed.

  We find that there is not even a whisper in the order of assessment to show that the AO complied with the binding decision of the Hon’ble High Court of Karnataka in considering the assessee’s claim u/s 54 of the Act and adjudicating thereon in the light of the Hon’ble Courts observations/directions in this regard. The ld CIT(A)’s finding in the impugned order to the contrary; that the AO has complied with the directions of the Hon’ble High Court (Supra) in considering the assessee’s claim for exemption u/s 54 of the Act; is, in our view, not borne out from a plain reading of the order of assessment dated 27/3/2014 for asst. year 1996-97 (extracted Supra) and appears to be more a figment of his imagination based on nonexistent assumptions.

  In this view of the matter, we are of the considered opinion that the order of assessment for asst. year 2006- 07 passed by the AO u/s 143(3) r.w.s 260A of the Act dated 27/3/2014 is to be set aside, as evidently the AO has not followed the Hon’ble High Courts directions for consideration of the assessee’s claim for exemption u/s 54 of the Act in accordance with law and the Hon’ble courts observations in this regard. We accordingly set aside the impugned orders of the authorities below i.e of the AO/CIT(A), and remand the issue of consideration of the assessee’s claim for exemption us/ 54 of the Act to the file of the AO for fresh consideration and to pass a reasoned, speaking order thereon

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• 2017 (10) TMI 630

  Revision u/s 263 - Held that:- It is not permissible for the Pr CIT to disturb a concluded assessment on the ground that the AO has not dealt with or discussed in the assessment order the issues examined by him during the assessment proceedings. It is enough if the AO has elicited information/explanations from the assessee and the assessee has filed the same before the AO so long as there is no incorrect appreciation of facts or the assessment is not contrary to or not in accordance with law.

  We are of the considered opinion that in the present case the AO has specifically called for explanation from the assessee on all points during the course of assessment proceeding and thereafter has taken a possible view. Moreover, it is not necessary for the AO to give detailed findings or elaborate in the assessment order on each and every issue which has been examined during the course of scrutiny proceedings. Besides, the case of the assessee is squarely covered by the ratio laid down in the various case laws referred to by the ld AR discussed briefly hereinabove while a series of cases relied upon by the revenue have been carefully perused and are found to be distinguishable on facts and are not applicable. The amendment to section 263 is also prospective.

  Thus, the reversionary proceedings u/s 263 are not validly initiated in view of the facts that the issues raked up by the Pr,IT stand examined by the AO in the assessment proceedings and the ld Pr CIT has failed to state as to how the order of AO is erroneous and not in accordance with law or settled legal position. Even on merit, the assessee is entitled to all the deductions/claims as per the provisions of the Act. Considering all these facts in totality and respectfully following the ratio laid down in the various decisions of the Jurisdictional and other High Courts e are of the considered view that the jurisdiction by the Pr,IT u/s 263 of the Act was invalidly assumed. Accordingly we set aside the proceedings u/s 263 of the Act as being invalid and also consequent order of PCIT u/s 263 of the Act. Appeal of the assessee is allowed.

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• 2017 (10) TMI 629

  Penalty levied u/s 271(1)(b) - appellant has not furnished 'consent form' in respect of alleged undisclosed overseas bank account - Held that:- In the present case the information was received by the government of India under the information exchange agreement with other countries. Issue involved is not of registering or mere technical or venial compliance default by the assessee but it is with respect to holding a foreign bank account with the bank of the foreign country, which has not been allegedly disclosed by the assessee to the Indian tax authorities. Therefore it is neither a technical nor venial default to not to sign a consent letter to arrive at the true facts of that particular bank account when the two of the relatives of the assessee are also subject to similar proceedings and addition in their hands are confirmed by the 1st appellate authority

  In view of above facts we do not find any infirmity in the order of the ld. AO in levying penalty u/s 271(1) (b) of the act of ₹ 10,000/- for all these seven years and Ld CIT (A) in confirming the same. - Decided against assessee.

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• 2017 (10) TMI 628

  Distribution of amount out of corpus - assessee is a beneficiary of trust called AADT - whether teared as capital receipt not chargeable to tax - Held that:- We find that the case of the assessee is squarely covered by the decisions referred by the assessee whereas the facts in the cases relied upon by the revenue are distinguishable on facts and law. Accordingly, we hold that the distribution out of corpus funds received by the assessee is capital in nature of capital receipt not liable to tax. Accordingly AO is directed to delete the addition. The ground of appeal by the assessee is allowed.

  Income from undisclosed sources - gifts received - whether the gift from the company can be treated as gift or unexplained receipt in the hands of the assessee? - Held that:- The gift received by the assessee is permissible and the element of natural love and affection is not relevant and material. We therefore, hold that corporate gift is valid. Accordingly, we set aside the order of ld.CIT(A) and direct the AO to delete the same.

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• 2017 (10) TMI 627

  Realm of rectification under section 254(2) - Scope of rectification - penalty levied on 25% of the disallowance made in respect of purchases made from three parties, who were stated to be not found at their given address - ITAT held separate inquiries of the proceedings were not required to be conducted by the A.O. at the stage of penalty proceedings - Held that:- There is no dispute with regard to the fact that the scope of Section 254(2) of the Act is to the extent of any mistake apparent from record. The Tribunal cannot re-appreciate the law and the facts in the garb of rectifying the mistake. If there is any non-appreciation of fact in a particular manner which as per assessee should have been done, would not constitute a mistake. The grievance of the assessee is that the Tribunal has considered those decisions which were not cited during the course of hearing. Section 254(2) of the Act does not permit the Tribunal to review its order. The re- appreciation of facts, without any apparent factual error in the nature of facts and figures would not fall in the realm of rectification under section 254(2) of the Act. Hence, the present application is beyond the scope of the Section 254(2) of the Act. Therefore, same is hereby dismissed.

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• 2017 (10) TMI 626

  Validity of assessment u/s 153C - period of limitation - whether date of recording of satisfaction u/s 153C of the Act may be taken as date of handling over of seized documents? - Held that:- Date of receiving the seized documents and other evidences should be taken as 29.01.2013. By virtue of first proviso to section 153C, date of initiation of search for computing six assessment years has to be counted as if date of search is 29.01.2013. Six assessment years covered uls 153C would be A.Y. 2007-08 to A. Y. 2012-13. Therefore, impugned assessment years 2006-07 cannot covered within six assessment years as envisaged u/s 153C. Accordingly, Ld. CIT(A) rightly held that the impugned assessment for A. Y. 2006-07 is time barred and not covered u/s. 153C of I.T. Act. Accordingly, the impugned assessment order was rightly held annulled, which does not need any interference on our part, hence, we uphold the same. Appeal of the Revenue is dismissed.

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• 2017 (10) TMI 625

  Adjustment of Bad Debts & diminution in value of investments from computation of book profits u/s 115JA - Held that:- We find that Section 115JA of the Act is a special provision introduced to the Income Tax Act by the Finance (No.2) Act, 1996 w.e.f. 01/04/1997 and as per subsection (1) of the said provision, in the case of a company whose total income computed under the Act is less than 30% of its book profits, then the total income chargeable to tax in the relevant previous year shall be deemed to be an amount equal to 30% of such book profit. Sub-section (2) of the said provision provides that the company referred to in subsection (1) of Section 115JA must prepare a profit & Loss Account in accordance with the provisions of Parts II and Part III of the Schedule VI of the Companies Act, 1956. The ITAT Mumbai benches in the case of Krung Thai Bank PCL Vs. JCIT [2010 (9) TMI 18 - ITAT, MUMBAI] have held that the provisions contained in Section 115JB, which in other words is also known as Minimum Alternative Tax [MAT] provisions, are not applicable to banking companies since they are not required to prepare a Profit & Loss Account in accordance with the provisions of Parts II and Part III of the Schedule VI of the Companies Act, 1956. We hold that since the provisions of Section 115JA are not applicable to the assessee.

  No additional interest has been computed u/s 234D in reassessment proceedings and the same did not arise out of reassessment proceedings.

  Sale of shares - treated as capital gain and not as business income chargeable to tax u/s. 28 - Held that:- We find that the assessee is consistently following such classification and treatment of income from investment since past many years. The revenue has nowhere disputed that permanent investment were carried at cost price. Further, upon perusal of the order of Ld. CIT(A) for AY 2002-03, we find that the same issue arose in that year also and Ld. CIT(A) upheld the stand of the assessee and concluded that the income from investment was rightly offered under the head capital gains. It is noteworthy that the revenue, in its appeal for AY 2002-03, accepted the stand of Ld. CIT(A) and did not prefer any further appeal qua this issue. Therefore, following the rule of consistency, we see no reason to disturb the findings of Ld. CIT(A) in this year and therefore, inclined to dismiss revenue’s appeal on this ground. Resultantly, the revenue’s appeal stands dismissed.

  Interest u/s 234D on the premises that the quantum assessment order u/s 143(3) read with section 147 did not contain any specific directions for the same. However, it is settled legal position that charging of interest is mandatory and consequential in nature and therefore, no specific direction to charge the same is required in the quantum assessment order. So far as the quantum is concerned, we find that the assessee has been charged interest u/s 234D pursuant to original quantum assessment order passed u/s 143(3). We have already dismissed revenue’s appeal for this year and therefore, practically, the assessee is not saddled with any further additions in reassessment proceedings. Hence, this ground raised by the assessee also becomes infructuous and hence, dismissed in limine

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• 2017 (10) TMI 624

  Allowability of depreciation - proof of property usage for business purposes - Held that:- The assessee purchased the property during impugned AY and this was the first year of claiming depreciation & other expenses against the same. The assessee, although claimed depreciation and repair charges against the same but could not prove the factum of usage thereof for business purposes in any manner and therefore, failed to discharge the onus of substantiating the same. No cogent evidences could be furnished by assessee to prove the fact that the said premise was used for the business purposes of the assessee and therefore failed to fulfill the primary conditions of Section 32 & Section 37. The Ld. CIT(A) has rightly distinguished the facts of AY 1995-96 to 1997-98 since in those years, it was found that the said premises was being used for the purpose of compiling various representations to be filed before various government agencies. Therefore, finding no substance in assessee’s Ground.

  Charging of interest u/s 234A/B/C - Held that:- Uphold charging of interest u/s 234 and restore the issue on similar line to the file of Ld. AO for re-computation of interest u/s 234.

  charging of interest u/s 220(2) - Held that:- Upon perusal of the same, we find that Ld. CIT(A) has clinched the issue in right perspective on the facts of the case and the same is quite logical and fair one. From the chronology of event, we find that only the original assessment order was set aside by the Tribunal whereas the reassessment order remained intact. Therefore, the peculiar situation gave rise to separate periods for the purpose of computation u/s 220(2). CIT(A) understood the same in the context of judicial pronouncements as well as statutory provisions including CBDT circular and the same being, quite fair and logical, require no interference on our part. Hence, while confirming the same, we dismiss, this ground of assessee’s appeal.

  Disallowance u/s 14A - Held that:- AO has already adjusted the total expenses claimed by the assessee for various disallowances already made and arrived at the impugned disallowance. The Ld. CIT(A) after considering the span during which the related transactions were carried out, computed the same at 1/12th, which was quite fair and reasonable and do not require our interference at all. Therefore, finding no reason to interfere with the same, we dismiss this ground of assessee’s appeal. Resultantly, the appeal of the assessee stands partly allowed for statistical purposes.

  Estimated expenditure against the income earned by the assessee - Held that:- The assessee earned profit on sale of Shares as ₹ 6,41,459/-, against which Ld. AO has allowed estimated expenditure of 10% i.e. 64,145/- in the absence of proper books of accounts. The Ld. CIT(A) has confirmed the same, against which the assessee has raised this ground. On factual matrix, we find the same to be fair and logical estimation since no books were maintained by the assessee and therefore, see no reason to interfere with the same.

  Sale price of 7500 shares of ACC sold by the assessee - Held that:- Find that the assessee, to some extent, could substantiate the reflected sale price whereas Ld. AO without controverting the same in any manner with any cogent material, took the average of prevailing price of 14/09/2009 and applied the same and added the differential amount to the income of the assessee, which was not fair and proper. Therefore, we are of the considered opinion that the addition has been made merely on the basis of doubts, conjectures and surmises without supporting the same with any cogent material. Hence, finding the stand of Ld. CIT(A) fair and reasonable, we see no reason to interfere with the same and inclined to dismiss revenue’s appeal qua this ground.

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• 2017 (10) TMI 623

  Rectification of mistake - whether the tax deduction of tax at source at wrong rates would constitute mistake apparent from record or not? - refund claim - applicability of DTAA application - Held that:- In the instant case, the deductor is the assessing officer himself and he is the authority to grant refund to the assessee also. Hence, the assessee can go to no other person than the assessing officer seeking rectification of the order as well as the refund. Since the assessee has taken the view that the AO has deducted tax at a wrong rate, it has filed a petition before him to correct the same. If one agree for a moment that the deductor alone can claim refund of TDS amount, in the instant case, the assessing officer alone can claim refund since the AO was the deductor of tax at source.

  Assuming for a moment that the AO grants refund to himself, in this peculiar situation, what the AO would do with the money so refunded by him to him. He has to ultimately return the same to the assessee only. Accordingly, under this peculiar facts, we are of the view that the Ld CIT(A) was justified in holding that the deduction of tax at source at wrong rate would constitute mistake apparent from record. We also notice that the AO has not given any reason or authority to show that the rate of tax of 42.024% was correct in accordance with the law. Whereas, the assessee is taking support of the provisions of DTAA to contend that the rate of tax applicable is only 10%. Hence application of wrong law would also result in mistake apparent from record. In our view, the foregoing discussion would also show that this issue does not give rise to any debatable issue at all. Accordingly we are of the view that the Ld CIT(A) was justified in directing the AO to entertain the rectification application.

  Since the assessing officer himself was the deductor of TDS and since we have held that he can rectify the order, the question of filing of return of income by the assessee for claiming the refund, in our view, does not arise at this stage and the same cannot be a ground for entertaining the rectification application.

  Assessee has claimed that the tax is required to be deducted at source @ 10% as per the provisions of DTAA. CIT(A) has, while holding that the mistake pointed out by the assessee would constitute a mistake apparent from record, has also referred to the rate of 10%. We notice that the Ld CIT(A) has directed the AO to rectify the mistake. However, we notice that the assessing officer has rejected the rectification application at threshold and did not examine the claim of the assessee about the rate at which the Tax is required to be deducted. The claim of the assessee made in the rectification application needs to be examined in accordance with the law. The assessee has also not clarified as to whether it has claimed refund of excess deduction of tax, if any, by filing return of income for the year under consideration. Accordingly we modify the order of Ld CIT(A) and direct the assessing officer to dispose of the rectification petition in accordance with the law by duly considering the plea of the assessee as per the provisions of the Act and the provisions of DTAA and also after affording adequate opportunity of being heard to the assessee. Appeal of the revenue is treated as partly allowed for statistical purposes.

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• 2017 (10) TMI 622

  Disallowance of wages paid at various sites - nature of expenditure - Held that:- We find that the assessee is a contractor and developing/working on various sites for which labourers were employed and supervised by Shri Dada Kadam and he used to disburse the salaries in cash at the sites by taking the same on the basis of requisition from Mr. Dinesh Ojha who was cashier of the assessee. During the course of hearing before us, the assessee produced the some sample receipts taken from the laborers which proved that the assessee has maintained books and other records of the payments to the laborers. It is customary in the business of construction to pay wages through the Supervisor/munshis and therefore, we are in agreement with the conclusion drawn by the ld.CIT(A) that all these payments were not genuine. However some reasonable disallowance should meet the ends of justice as the assessee has failed to furnish the necessary documentary evidences before the lower authorities. Accordingly we direct the AO to restrict disallowance on account various deficiencies and non vouched cash payments at ₹ 20,00,000/-. This ground is partly allowed.

  Addition being estimated profit on work-in-progress as appeared in profit and loss account - Held that:- We find that the assessee has been regularly showing the WIP in its accounts which represents the unbilled work done on behalf of the various clients. The nature of business of the assessee is such that materials are normally delivered at the sites of the customers/ contractor’s and necessary modifications and fittings are done at the site of the project. At the yearend incomplete work is shown as WIP. This is a regular feature in business of the assessee. The WIP is automatically accounted for in the next year and also billed accordingly depending upon the completion of work and profit on the said amount is offered to tax accordingly. We find merit in the submissions of the ld.AR and has gone through the previous years in which the ld.CIT(A) has deleted the similar additions made by the department. The department has not further appealed before the higher forum. In view of all the order of CIT(A) is not correct in upholding the additions and therefore we reverse the same and direct the direct the AO to delete the addition. - Decided in favour of assessee.

  Disallowance being 10% of the cash expenses incurred - addition as unproved and unsubstanted cash expenses u/s 40(A)(3) - Held that:- As clear from the above provision of section 40A(3) of the Act that the expenses exceeding ₹ 20,000/- incurred in cash would be disallowed u/s section 40A(3) of the Act. But in the instant case the AO has made estimation which has been confirmed by the ld.CIT(A). Therefore, we are inclined to set aside the order of the ld.CIT(A) on this issue for the reasons that no disallowance is possible u/s 40A(3) of the Act on estimation and adhoc basis and direct he AO to delete the addition. - Decided in favour of assessee.

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• 2017 (10) TMI 640

  Penalty u/s 271(1)(c) - condonation of delay - non filing of the penalty appeal under Section 271(1)(c) - Held that:- Whether there is sufficient cause or not depends upon each case and primarily is a question of fact to be considered taking into totality of events which had taken place in a particular case. No cogent and satisfactory explanation has been furnished by the learned counsel for the appellant-assessee even before this Court for inordinately long delay of 613 days in filing the appeal before the Tribunal. The explanation furnished by the assessee as noticed in the earlier part of the order does not satisfy the test of sufficient ground as contemplated under Section 5 of the Limitation Act, 1963.

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• 2017 (10) TMI 639

  Stay petition to stay the demand of tax - Held that:- As the appeal petition has already been entertained by the first respondent, this Court is of the view that it is a fit case to grant liberty to the petitioner to approach the second respondent to file the stay petition to stay the demand of tax as qualified in the assessment order dated 16.12.2016 and the second respondent can be directed to take appropriate decision in the matter, considering the prima facie case which the petitioner makes out.

  Writ petition is disposed of by directing the second respondent to keep in abeyance the impugned notice dated 16.12.2016 for a period of two weeks from the date of receipt of copy of this order. Within such time, the petitioner shall file an application for stay of demand of tax as qualified in the assessment order dated 16.12.2016

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• Customs

• 2017 (10) TMI 621

  Validity of SCN - revocation of CHA license - time limit for issuance of SCN - Whether the orders for revocation of licence of the appellant is without jurisdiction in that the show cause notice for the same was issued beyond the mandatory time limit of 90 days as fixed by Regulation 20(1) of the CHALR, 2004? - Regulation 22(1) of the CHALR, 2004.

  Held that: - the Court held that the show cause notice issued beyond the limitation period and was not sustainable - reliance placed in the case of Sanco Trans Limited Versus The Commissioner of Customs Sea Port/Imports Customs House [2015 (7) TMI 455 - MADRAS HIGH COURT], where it was held that when the impugned show cause notice has been issued beyond the statutory period, as rightly pointed out by the learned senior counsel for the petitioner that the same cannot be sustained for want of jurisdiction.

  Once the limitation prescribed is mandatory, as has been declared by the courts of law, it cannot be stated that, because of the other issues, that is the merit of the case, this mandatory requirement of the limitation can be ignored.

  It is not the case of the 1st respondent that the 90 days limitation contemplated under Regulation 22(1), is directory. It is also not the case of the 1st respondent that the show cause notice was issued within the limitation period of 90 days from the date of offence report - Since the offence report was dated 22.9.2010 and the show cause notice, admittedly, was issued only on 18.11.2011, there can be no doubt that the said show cause notice was issued well beyond the period of limitation of 90 days.

  The Revenue has not issued the show cause notice dated 18.11.2011 within the period of limitation prescribed under Regulation 22(1) CHALR, 2004 and thus, the consequent proceedings involving revocation of the appellant's CHA licence and forfeiture of its security deposit, is unlawful.

  Appeal allowed - decided in favor of appellant-assessee.

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• 2017 (10) TMI 620

  Freezing of petitioner's Bank Account - duty drawback benefit - Held that: - Learned counsel for the Petitioner points out that nowhere in the said SCN is any reference made to the fact that the Petitioner’s bank account was frozen - with the investigation having been completed and the SCN having been issued, the justification for continuing with the freezing of the bank account of the Petitioner does not survive.

  Non-issuance of “scrips” to the Petitioner - shipping bills of Petitioner placed on an “alert” list - Held that: - it is stated that “This is a pre-emptive measure taken to safeguard the Government revenue.” Significantly, there is no mention of any provision of law by the Customs Department justifying the freezing of the Petitioner’s bank account.

  The Court directs that the Petitioner’s Bank Account shall stand de-frozen - petition allowed.

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• Insolvency & Bankruptcy

• 2017 (10) TMI 619

  Insolvency and Bankruptcy procedure - non-co-operative attitude of the key managerial personnel of the Corporate Debtor - Held that:- The facts discussed above would also make it quite clear that there has not been proper monitoring by the Regional Office of Canara Bank holding major voting share in the committee of creditors and when the continuation of interim resolution professional was not accepted, application was supposed to have been filed in terms of sub-section (3) of Section 22 of the Code for replacement of the IRP.

  In view of the above, the following directions are issued:-

  (i) Notice be issued to the Chief Manager, Canara Bank and the Chief Manager, Bank of Maharashtra to appear in person on 25.09.2017 and to show cause as to why an application has not been made so far for replacement of the IRP in terms of Section 22 of the Code.

  (ii) Notice also to the Regional Manager, Canara Bank. Chandigarh to file a report before 25.09.2017 as to why the proper monitoring of the sensitive matter like the resolution process under the I.B. Code. 2016 is not being done.

  (iii) Notice to Mr. R.K. Kapoor, Chartered Accountant, C/o R.K. Kapoor & company, the statutory auditors of the company to appear in person on 25.9.2017 and to file an affidavit explaining the circumstances as to why the statutory record has not been handed over to the IRP and to show cause as to why the proceedings for violation of the directions of this Tribunal while appointing Interim Resolution Professional be not initiated.

  (iv) Notice to the Intervener Mr. Ashwani Kumar Prabhakar, the Director of the Corporate Debtor to file his affidavit and to appear in person on 25.09.2017 to show cause as to why action be not initiated for not complying with the instructions of the Interim Resolution Professional in the collection of information and handing over management of the Corporate Debtor.

  (v) Commissioner of Police, Ludhiana to provide necessary police protection/assistance to Mr. Anil Kumar, Interim Resolution Professional in the performance of his functions, as and when Mr Anil Kumar makes a request to the police department in the discharge of his duties.

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• Service Tax

• 2017 (10) TMI 616

  Time limitation for filing of an appeal - the Hon’ble Punjab and Haryana High Court have disposed off the writ petition filed by the appellant on 19.02.2015 and thereafter within 26 days, the appellant filed the appeal before the ld. Commissioner (A) - Held that: - provisions of Section 35 of the Central Excise Act, 1944 are to be read in a manner with the limitation for filing the appeal shall start from 19.02.2015 as held by this Tribunal in the case of M/s Mehul Jhaveri [2013 (9) TMI 139 - CESTAT MUMBAI], where it was held that the time taken by the appellant in litigation before the Hon’ble Bombay High Court was excluded then the appeal filed before the Commissioner (Appeals) was within the time.

  The appellant has filed the appeal before the Ld. Commissioner (A) within 26 days after the disposal of their writ petition by the Hon’ble High court of Punjab and Haryana - the appellant has filed the appeal before the Ld. Commissioner (A) within time - the matter is remanded back to the Ld. Commissioner (A) to decide the issue on merits - appeal allowed by way of remand.

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• 2017 (10) TMI 615

  Refund claim - Rule 6 of CCR, 2004 - whether compliance of Rule 6(3) of CCR, 2004 was made or not by the service provider has no bearing on the refund? - Held that: - even if it is not the case of refund but if the service is provided and service provider does not comply with the Rule 6, recovery cannot be made from the service recipient. In such case action for recovery of any dues, action under statute to be taken against service provider. Taking into account all these facts, refund of service tax which was born by the appellant cannot be affected - refund of service tax which was born by the appellant cannot be affected - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 614

  Manufacture - Scope of Business Auxiliary Services - 'processing of goods' - whether the manufacturing of boilers and parts thereof on behalf of client would fall within the definition of Business Auxiliary Service? - Held that: - The Hon’ble Apex Court in the case of Commissioner of Income Tax, Kerala Vs. Tara Agencies [2007 (7) TMI 4 - SUPREME COURT OF INDIA] has held that On clear construction and interpretation of Section 35B(1A) of the Act, we are clearly of the opinion that the responden’s activity amounts to ‘processing’ only and the activity does not amount to either ‘production’ or ‘manufacture’. The term ‘processing’ has not been included in Section 35B(1A) of the Act, therefore, the respondent is not entitled for weighted deduction under Section 35B(1A) of the Act.

  The activity of the appellants would not amount to manufacture - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2017 (10) TMI 613

  CENVAT credit - inputs/capital goods - MS angles, channels, joists, beams, etc. - the said items used for manufacture of capital goods, viz., fabrication / manufacture of hot blast stoves - Held that: - the issue in the present appeal is covered by the decision in the case of CCE vs. SLR Steels Ltd. [2012 (9) TMI 169 - KARNATAKA HIGH COURT] decided by the Hon’ble Karnataka High Court, where it was held that Once a storage tank and pollution control equipment constitutes capital goods and any raw material purchased for construction of those goods, the duty paid could be utilized as a cenvat credit by the assessee notwithstanding the fact that the storage tank is an immovable property.

  Tribunal for the earlier period has already decided in favor of the assessee by holding that the assessee is entitled to the CENVAT credit on these items which are used for fabrication of hot blast stove.

  Appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 612

  Clandestine removal - shortage of inputs in comparison to the book balance as detected during the stock verification - case of Revenue is that the labor payment vouchers would be relied upon to establish the charge of clandestine removal - it is contended by the Revenue that the evidentiary value of loose sheets and the writing pads is beyond any doubt to establish charge of clandestine removal.

  Held that: - It is clear that the assessee complained to the Commissioner of Central Excise against the visiting officers and apparently, no steps had been taken - There is no tangible evidence to indicate manufacture and clandestine removal of the goods. The preponderance of probabilities in the context of the evidences vis-a-vis, the statement does not lead to conclusion of charge of clandestine removal. Therefore, the Commissioner (Appeals) rightly set aside the demand of duty partly.

  The amount of ₹ 43,533.59 was confirmed for shortage of raw materials ascertained during the stock verification. There is no material available on record of removal of the shortage materials clandestinely without payment of duty and the imposition of penalty of equal amount of duty is not justified.

  Regarding the confiscation of the excess finished goods and the imposition of fine and penalty, the excess quantity of finished goods was ascertained during stock verification. A feeble attempt was made by the ld.Counsel of the assessee that the stock verification was not conducted in proper manner - The adjudicating authority observed that he customer of the assessee stated that in earlier occasion, he received the goods without invoice. It is already stated that the customers retracted the statements immediately. In any event, the finding of the adjudicating authority on the basis of the customers is not tenable unless there is material available on record in relation to the seized goods - the confiscation of the excess finished goods is justified for contravention of the Rules and the amounts of imposition of fine and penalty are excessive.

  The imposition of redemption fine and penalty of ₹ 1,00,000/- and ₹ 85,000/- respectively are reduced to ₹ 50,000/- and ₹ 35,000/- respectively - decided partly in favor of appellant.

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• 2017 (10) TMI 611

  CENVAT credit - appellant failed to pay duty from their PLA account - invocation of provisions of Rule 8(3A) of the CER 2002, justified or not? - Held that: - reliance placed in the case of M/s Space Telelink Ltd. [2016 (3) TMI 1261 - DELHI HIGH COURT], where the order of the Gujarat High Court in Indsur Global Ltd. v. Union of India [2014 (12) TMI 585 - GUJARAT HIGH COURT] has been stayed - the demand u/r 8(3A) of CER, 2002 is not sustainable - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 610

  SSI Exemption - use of Brand Name of other person - brand name coined by the appellant and its marketing agencies - Held that: - Since it is not disputed that the coining of the brand name together by the appellants and the customers, it is the bounden duty of the department to establish that the appellant has been using the brand name belonging to another. The marketing agencies have produced letters stating that they do not claim any ownership of such brand name - it cannot be held that the appellant has been clearing goods with the brand name belonging to another person.

  With regard to issue of parallel invoice, the amount involved is only ₹ 13,219/- therefore, the appellant would come within the SSI exemption limit.

  Appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 609

  CENVAT credit - inputs procured by the appellants from an EHTP unit - Department was of the view that the appellant is not eligible to take 100% of the CENVAT credit of duty paid on inputs and instead they are eligible to avail only 50% as provided under Sub Rule 7 of Rule 3 of CCR, 2004 - Held that: - the EHTP unit has not paid duty by availing the exemption under Sl.No.2 of the N/N .23/2003. The primary purpose and scope of CENVAT Credit scheme is to neutralize the cascading effect of duty portion on inputs suffered by the manufacturer. It is not disputed that appellant was borne the full quantum of duty amount passed on to him by the EHTP unit - when the EHTP has paid duty the appellant is eligible to avail credit of the entire duty paid on the goods. The department cannot restrict the credit availed to 50% when the EHTP has not applied the notification for the purpose of paying duty - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 608

  CENVAT credit - Iron & Steel items - the items in question were used in supporting structures of capital goods which are permanently attached to the earth - Held that: - on the identical issue, the Tribunal in the case of Commissioner of Central Excise & Customs, BBSR-II Vs. S.P.S. Steel & Power Ltd. [2017 (7) TMI 844 - CESTAT KOLKATA], where it was held that the eligibility of a manufacturer for credit on iron steel and items which are in fact found to be used in the fabrication of identifiable capital goods which are in turn used for manufacture of excisable goods - appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2017 (10) TMI 607

  Reversal of ITC - stock transfer of goods covered by Form F - TNVAT Act - Held that: - The Court took into consideration the amendment to the TNAVT Act, 2006 by notification in G.O.(Ms)No.18, Commercial Taxes and Registration (B1) Department, dated 29.01.2016 whereby a separate column was given in Annexure 12 for Stock Transfer/Consignment sales without Form F Section 19(2). This having not been brought to the Assessing Officer, the Court sets aside the reversal of Input Tax Credit reversal for Stock Transfer covered by Form F and remanded the matter to the respondent for fresh consideration.

  With regard to the levy of penalty is concerned, it is seen that the entire turnover has been culled out from the books of accounts and the petitioner has been called upon to furnish the details which the petitioner has promptly complied with - it has to be seen as to whether it is a case where penalty could have been imposed under Section 27(4) of the Act. There is no allegation that the petitioner has wilfully failed to disclose the assessable turnover or the conduct of the dealer was contemporaneous with an intent to develop the revenue or to somehow avoid payment of tax. Unless these ingredients are established, the question of levy of penalty does not arise. Therefore, to that extent, this Court is fully convinced that the levy of penalty under Section 27(4) is not conferred.

  The matter is remanded to the respondent for fresh consideration with a direction to call upon the petitioner to appear in person and explain the incongruity of the transaction and after obtaining the explanation, the respondent is directed to redo the assessment in accordance with law - appeal allowed by way of remand.

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• 2017 (10) TMI 606

  Levy of tax - Subsequent sale - Form C - Whether Commercial Tax Tribunal was legally justified in deleting the amount of tax on otherwise subsequent sale as provided u/s 3b read with Section 6(2) of Central Sales Tax Act and according to the provisions of 9(1) proviso the State of U.P. where the dealer is registered and from where form-C has to be issued, State of U.P. has power to levy tax on such kind of central sale?

  Held that: - once the contract was given over for execution to sub-contractors, there was no transfer of property in goods by the principal contractor nor would it be permissible to view the subcontracting as involving a re-transfer - the property in such contract passes by accretion.

  The Court is of the considered view that once the transaction had been taxed in the hands of the sub-contractors, no subsequent transfer of property in goods occurred so as to warrant the Department taking the position that there was a subsequent sale - revision dismissed.

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• 2017 (10) TMI 605

  CFS - Validity of Form U notice issued under Rule 9(4) of the Tamil Nadu Value Added Tax Act, 2006 - whether petitioner could be teated as Garnishee or not? - Held that: - Admittedly, the petitioner is not a garnishee as they are only CFS duly licensed by the Customs Department. The amount, which they have recovered by sale of the goods is the amount which is lawfully due to them and the sale proceeds of the steel did not cover the entire dues and it is stated that some more amount is recoverable from the third respondent. Thus, the petitioner is not required to pay any monies to the third respondent, but the case is vice versa.

  Identical issue arose for consideration before this Court in the case of Tvl.Sical Multimodal and Rail Transport Ltd., v. The Assistant Commissioner (CT), Cholavaram Assessment Circle and others [2015 (11) TMI 689 - MADRAS HIGH COURT], wherein the The correctness of such notice was challenged in the writ petition and the writ petition was allowed and a direction was issued to refund the amount, which was recovered by the Commercial Taxes Department by attaching the bank account of the petitioner.

  The petitioner cannot be treated as a garnishee of the third respondent and the impugned Form U notice is wholly without jurisdiction - petition allowed - decided in favor of petitioner.

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• 2017 (10) TMI 604

  Validity of assessment order - the petitioners have violated the conditions of the EOU status, as they have not qualified themselves for exemption and there is a shortfall in the export of the goods - Held that: - when the Assessing Officer issued a notice to establish whether the petitioners have fulfilled their export obligations, it was the duty on the part of the petitioners to appear before the Assessing Officer and produce necessary documents in support of their stand. The petitioners have failed to do so - there is no error in the impugned assessment orders, dated 18.04.2005 nor in the consequential demand, which are impugned in these Writ petitions.

  The petitioners should be directed to go back to the Assessing Officer and clearly explain their stand as to how the allegation made against them is unsustainable - petition disposed off.

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• Wealth tax

• 2017 (10) TMI 603

  Valuing an asset for the purposes of Wealth Tax Act - Correct method of the valuation of the property Alpana Cinema for assessment under Wealth Tax Act - reference was made to the Departmental Valuer by Assessing Officer - High Court has expressed opinion that Wealth Tax Officer was justified in adopting the land and building method as if there is loss in the business or in other words there is negative income, it cannot be possible to say that the property in question has no marketable value - Held that:- Overriding power has been provided to override the normal method of valuation of property as given by subsection 7(1) to arm the Wealth Tax Officer to adopt the method of valuation as given in subsection (2)(a). The purpose and object of giving overriding power is not to fetter the discretion. The Wealth Tax Officer is not obliged to mandatorily adopt the method provided in Section 7(2)(a) in all cases where assessee is carrying on a business. The language of subsection (2)(a) does not indicate that the provisions mandate the Wealth Tax Officer to adopt the method in all cases of running business

  Resort to Section 7(2) (a) is discretionary and enabling provision to Wealth Tax Officer to adopt the method as laid down in Section 7(2)(a) for a running business but the above enabling power cannot be held as obligation or shackles on right of Assessing Officer to adopt an appropriate method. In the present case reference was made to the Departmental Valuer by Assessing Officer under Section 7(3). Thus there is a conscious decision of the Assessing Officer to obtain the report from the Departmental Valuer. The above conscious decision itself contains the decision of Assessing Officer not to resort to Section 7(2)(a).

  The Wealth Tax Officer having referred the Departmental Valuer to value the property, in consequent to which reference for valuation report having already been received on 26.07.1977 which has relied in the assessment. Objections to the valuation report were considered by the Appellate Authority and having been rejected, we do not find any fault with the assessment made by the Wealth Tax Officer. We are of the view that the High Court did not commit any error in interfering with the order of ITAT.

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• Indian Laws

• 2017 (10) TMI 618

  Offence under NI Act - eligibility of judgment of the DRAT - Held that:- The plea taken by the petitioner with respect to the testimony of the Notary Public has been discussed at length by the DRAT and findings were given after appreciating the evidence led by the parties before the DRT. We are inclined to concur with the said findings. The Notary Public is no doubt, an independent witness acting under the authority of law and discharging the duties assigned to him by virtue of the N.I. Act. In the absence of any mala fides or bias, being proved against him, his testimony has more credence over any other witness produced before the Tribunal. We therefore find no illegality on the part of the DRT or the DRAT in relying on the evidence of Shri S.L. Tyagi, the Notary Public whose testimony is also supported by the documents which he had maintained during the course of his work and the attending circumstances.

  The next argument advanced by the learned counsel for the petitioner that the averments in the OA are vague and do not disclose details like the date of presentation of the bills of exchange, the date of discount, the name of the person in the OBC who had returned the bills of exchange unpaid, etc., doesn’t have any force.

  We find no infirmity in the said findings returned by the DRAT for the reason that the bills of exchange were drawn by the respondent No.3 in favour of the petitioner and were accepted by the petitioner and therefore, the petitioner is the acceptor and the drawee under Section 7 of N.I. Act. The argument of the learned counsel for the petitioner that since the accounts between petitioner and respondents No.3 stood settled, no claim can be raised against the petitioner, is of no consequence. It is noteworthy that the OA was filed in the year 2014 and the DRT-II had passed an order on 06.01.2014. The petitioner alleges that it had settled its accounts with the respondent No.3 between 09.11.1998 to 01.05.1999. Despite the said version, no such plea was taken by the petitioner in its written statement filed before the DRT-II, in response to the OA of the contesting respondents. Even otherwise, the alleged settlement with the respondent No.3 was much after the date when the bills of exchange were presented to the petitioner by Shri S.K. Tyagi, Notary Public on 23.10.1998 and notice of protest was given. It is apparent from the record that the petitioner had been taking contrary stands before the DRT-II and the DRAT and this fact has been noted in the impugned order

  The argument of the petitioner that the judgment of the DRAT is based on surmises and conjectures is devoid of substance. The DRAT has noted the pleas of the petitioner, as taken before the DRT-II in its written statement and juxtaposed them with the pleas taken in the appeal. The view of the DRAT is therefore not based on surmises and conjectures, but is simply a reproduction of the different and shifting stands taken by the petitioner before different fora.

  In all opinion that the impugned judgment is based on cogent evidence brought on record. Learned counsel for the petitioner has failed to point out any illegality, infirmity or perversity in the impugned judgment for interference.

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• 2017 (10) TMI 617

  Complaint under Section 138 of the Act - entering a compromise deed - Held that:- The respondent No.2 has no right to back out from the compromise deed dated 21.08.2015 particularly when he has made a specific averment in the said compromise that he has received the cheque amount to his entire satisfaction and has further made a statement that nothing remains due between the parties and he undertakes to withdraw the complaint filed by him under Section 138 of the Act.

  It is on the basis of compromise deed dated 21.08.2015, the petitioner and his brother did not pursue the FIR case and by not coming forward to honour the compromise, the respondent No.2 intends to take undue benefit without there being any right whatsoever. This conduct on the part of respondent No.2 backing out from the compromise needs to be deprecated.

  Accordingly, in the light of the compromise deed dated 21.08.2015 (Annexure P-4) (colly), the complaint No.271 dated 09.07.2014 (Annexure P-1) filed by respondent No.2 under Section 138 of the Negotiable Instruments Act, 1881 and all consequential proceedings arising therefrom are quashed. The summoning order dated 10.07.2014 (Annexure P-2) passed by learned Judicial Magistrate 1st Class, Ludhiana, whereby the petitioner has been summoned to face trial under Section 138 of the Act in the aforesaid complaint, is set aside.

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