TMI Tax Updates - e-Newsletter
December 20, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Validity of time limit for ailing benefit of input tax credit (ITC) - Section 16(4) of the CGST Act - The provision contained in Section 16(4) of the CGST Act is violative of neither Article 14 of the Constitution nor Articles 19(1)(g) & 300A of the Constitution, however, the ground under Article 19(1)(g) is not available to the petitioner, as the petitioner, in the instant case, is not a citizen and therefore Article 19(1)(g) is not available to the petitioner herein. - HC
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GST:
Seeking GST registration to be effective from retrospective effect i.e. 1.7.2017 - Migration from erstwhile tax laws to GST - Bonafide error in making application - The petitioner no.1 entitled to the relief such that the second registration granted to him be treated to be effective from the date 1.7.2017, on a deemed basis - The disclosure made in GSTR-1 of petitioner no.1 for the month of October 2017 would be modified by GSTN to reflect on the corresponding GSTR-2A, relevant to petitioner no.2 for the period July to September 2017 and all consequences to arise to the petitioners. - HC
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GST:
Exemption from GST - the recovery of road cutting charges is not covered under an activity in relation to any function entrusted to a (i) Panchayat under Article 243 G of the Constitution; or (ii) Municipality under Article 243 W of the Constitution. - AAAR
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GST:
Levy of GST - incentives received under "Atma Nirbhar Gujarat Sahay Yojna" - The argument of the appellant therefore that they had provided services only to the person who had availed loan and not to the State Government, fails - the reliance of the appellant on various dictionary meaning to argue that both the words subsidy and incentive, mean the same, is not a plausible contention. - AAAR
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GST:
Exemption from GST - hostel accommodation extended by the Applicant hostel - accommodation services provided to students and working women - unless the twin conditions of ‘renting of residential dwelling’ for ‘use as residence,’ being inter-twined and inseparable, are not met, the exemption is not available. - it is clear that hostel accommodation is not equivalent to residential accommodation and hence we hold that the services supplied by the Applicant would not be eligible for exemption - AAR
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Income Tax:
Characterization of income - income arising from sub-licensing of shops and establishment along with the various services - ITAT, after referring to section 27 (iiib) of the Income Tax Act defining the term “deemed owner” and Section 269UA(f) of the Act defining the word “transfer”; held that the income derived by the assessee is “Income from House Property.” - the ITAT has committed a manifest error of law to ignore the object and business activity of the appellant assessee company, and misunderstood the nature of transaction of sub-license. - HC
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Income Tax:
Compounding of offences u/s 279(2) - assessee had committed not one but multiple grave offences - There is no merits in this writ petition as petitioner has shown no remorse. The petitioner has taken the chance all the way up to the Tribunal and waited for conviction order to be passed in the criminal case instituted against the petitioner for violation of the provisions of the Income Tax Act, 1961. - To allow compounding of the offence would also send wrong signal in the society. - HC
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Income Tax:
Undisclosed incomes - investment in Purchase/sale of immovable property - The onus on the department to prove that investment was made by Assessees or sale consideration received by the Assessee, as the case may be was in fact more than that depicted in the sale deed did not get discharged at all. CIT (A) has rightly held that ld. AO cannot substitute the apparent consideration mentioned in the sale deed so as to adopt the market value without bringing any material on record to show that consideration disclosed in the sale deed is in excess of the value adopted by the assessee - AT
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Income Tax:
Assessee in default u/s 201 - TDS u/s 194LBC - Income in respect of investment in securitisation trust - the assessee was not able to file form 26A before the lower authorities, therefore, the same is being filed before the Tribunal in the form of additional evidences. - assessee is not ‘assessee in default’ and therefore, the entire payment and interest levied by AO is deleted. - AT
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Income Tax:
Scope of powers vested to the CIT(A) u/s 251 are co- terminus and co-extensive with that of AO exercising quasi judicial functions. The CIT(A) is not only an appellate authority but also possess the powers of an adjudicating authority similar to that of an AO. The powers of enquiry thus in a sense, runs concurrently. Proper appreciation of all material placed before him was incumbent in law. The CIT(A) ought to have made suitable enquiries on the proprietary of sale consideration declared in the light of document seized instead of brushing aside the action of the AO in a lopsided manner. - AT
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Income Tax:
Assessment u/s 153A - Since the assessee company’s business has not commenced and that the construction of the building was done out of the capital invested by the shareholders and hence, there was no case of earning of any income, what to say of any income from undisclosed sources, therefore, the substantive addition in the hands of the assessee company was not justified. - AT
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Income Tax:
Income taxable India - taxability of receipts from consultancy services and reimbursement of expenses - characterizing receipts as Fee for Included Services (“FIS”) under Article 12(4)(b) of India - Revenue has not brought on record any materials to establish the fulfillment of make available condition of Article 12(4)(b) of India – USA DTAA. - AT
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Income Tax:
Disallowance u/s 14A r.w.r. 8D - as argued CIT(A), instead of adopting the average value of investment of which income is not part of the total income i.e., the value of tax- exempt investment, chose to factor in the total investment itself - while calculating disallowance under section 14A of the Act, only investment that have generated exempt income should be taken into consideration. - AT
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Income Tax:
Assessment u/s 153A/153C - addition on account of income from undisclosed sources - CIT(A) has given a categorical finding that the seized material belonged to the assessee company which is incriminating nature, in the case in hand the additions have been made based on the incriminating materials found during the search - Additions confirmed - AT
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Customs:
Enhancement of the value of the imported goods twice - When the freight is pre-paid and inclusive in the price, there is no requirement to add element of freight @20% for USD 585. - It is also observed that about the invoice produced by the shipping line, the appellant had no knowledge and it is not also known when such invoice was produced before custom authority at the port of export - enhancement of the value from USD 531 to UD 585 is without any basis and the same is not sustainable. - AT
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Customs:
Confiscation - redemption fine - penalty - import of musk melon dried seeds - It was on record that the amendment of the erstwhile policy on free import of the impugned goods was effected in April 2021 and the impugned goods had been shipped in the same year. It is quite possible that the appellant was in the dark about the changes in the policy and, considering that the goods have not been permitted for clearance for home consumption, it would be unjust to burden the goods with the detriments of redemption fine and imposition of penalty - AT
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Customs:
Levy of penalty on appellant u/s 114 (i) and 114 AA of the Customs Act, 1962 - assisting / abetment of export of Muriate of Potash - illicit export of goods - Based on the fact that the Appellant had prepared the documents without the signature of the exporter, no conclusion can be drawn that Appellant was aware about the presence of prohibited goods. No penalty - AT
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Customs:
EPCG Scheme - Adjudication Authority violated the terms of the remand order. - Once the Tribunal has given a finding that the appellant complied with the export obligation, Adjudication authority ought to have quantified the duty liability in accordance with the fulfillment of export obligation - AT
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FEMA:
Offence under FEMA - petitioner had made foreign remittances to different foreign companies under the guise of payments against the bogus import of services - In the present case petitioner has been unable to make out such a case which would warrant an interference of this Court with the Impugned Order. The allegations of the respondents and the defence of the petitioner would need to be tested by the Adjudicatory Authority. - HC
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FEMA:
Levy of penalty - Offence under FEMA - bidding process for the IPL franchise organised by the BCCI - We are in agreement with the finding of the Tribunal that in the absence of any discussion or justification pertaining to the basis for imposing the maximum penalty and juxtaposing this with the alleged acts attributed to each individual, the order of the Special Director is unsustainable. - HC
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Service Tax:
Refund of Service tax - The Commissioner (Appeals) also proceeded to hold that machining of rails cannot be treated as providing service by way of commissioning or installation of original works pertaining to metro. It is not possible to accept this finding. - The appellant was clearly exempted from payment of service tax - Refund allowed - AT
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Central Excise:
Valuation of goods - It is observed that after erection of the furnace, the bought-out items are part of the immovable property - the value of bought out items, which are traded goods of the Appellant, are not includable in the assessable value for the purpose of charging central excise duty. - AT
Articles
Notifications
Central Excise-
42/2023 - dated
18-12-2023
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CE
Effective rates of Special Additional Excise Duty on petrol and diesel - Amendment in Notification No. 04/2022-Central Excise, dated the 30th June, 2022
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41/2023 - dated
18-12-2023
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CE
Seeks to further amend notification No. 18/2022 - Central Excise in order to revise the SAED rate on petroleum crude
Customs-
92/2023 - dated
18-12-2023
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Cus (NT)
Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Exchange rate of Currency of Norwegian Kroner modified - Amendment in Notification No. 90/2023-CUSTOMS (N.T.), dated 7th December, 2023
GST - States-
S. R. O. No. 1353/2023 - dated
13-12-2023
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Kerala SGST
Notify a special procedure for condonation of delay in filing of appeals against demand orders passed until 31st March, 2023
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G.O.Ms. No. 122 - dated
15-11-2023
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Tamil Nadu SGST
Amendment in Notification No. II(2)/ CTR/532(d-16)/2017, dated the 29th June, 2017
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2158-F.T. - dated
7-12-2023
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West Bengal SGST
Amendment in Notification No. 1129-F.T., dated the 28th day of June, 2017
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2157-F.T. - dated
7-12-2023
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West Bengal SGST
Amendment in Notification No. 1128-F.T., dated the 28th day of June, 2017
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2156-F.T. - dated
7-12-2023
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West Bengal SGST
Amendment in Notification No. 1126-F.T., dated the 28th day of June, 2017
Income Tax-
103/2023 - dated
18-12-2023
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IT
Income-tax Amendment (Twenty-Eighth Amendment) Rules, 2023 - Insert clause x in Rule 17C of IT Rule 1962
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2023 (12) TMI 834
Permission to file an appeal - HELD THAT:- The Special Leave Petition is disposed of permitting the petitioner herein to file an appeal within a period of four weeks from today in accordance with law, if so advised.
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2023 (12) TMI 833
Maintainability of petition - impugned order is an appealable order or not - present petition is filed to avoid the payment of pre-deposit - availability of alternative remedy of appeal - HELD THAT:- Admittedly there is no rejection in writing to the request made by the Petitioner vide letter dated 26th June 2023 seeking 30 days time for making submissions and for personal hearing. The impugned order came to be passed within two weeks from the date of application for adjournment without the Respondents replying to the request for adjournment of the Petitioner - the Respondents ought to have replied to the adjournment request in writing before proceedings to pass the impugned order. The Respondents ought to have also complied with the provisions of Section 75(4) which provides that an opportunity of a hearing shall be granted, when a request is received in writing from the person chargeable with tax or penalty or where any adverse decision is contemplated against such person. Since, in the instant case, there has been a violation of principles of natural justice and the mandatory provision of Section 75(4) of the CGST Act, the Court is inclined to entertain the present petition under Article 226 of the Constitution of India and quash the impugned order dated 21st July 2023. The Order-in-Original is quashed and set aside - Respondents to pass a speaking order after considering the written and oral submissions of the Petitioner on or before 28th February 2024.
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2023 (12) TMI 832
Exemption from GST - Validity of clarification issued in para 4(1) of the Circular No. 34/8/2018-GST dated 01.03.2018 by the Government of India - charges for metering equipment, testing fee for meter, labour charges from customers for shifting of meters, charges for bills - activities undertaken by a distribution utility/licensee in accordance with the provisions of the Electricity Act, 2003 are exempt from levy of tax or not - HELD THAT:- The petitioners have not deposited any amount with the Registry of this Court. Mr. Arvind Datar, learned Senior Counsel appearing the petitioners, submits that depositing the tax in this Court would further complicate the issues. He submits that certain industrial consumers are entitled to avail Input Tax Credit in respect of the GST paid to the petitioners. He further submits that in the circumstances, the GST authorities would not receive the tax collected by the petitioners and yet certain other customers would be entitled to avail of credit for the same - There is merit in the said contention that the direction to deposit GST with this Court on a monthly basis may give rise to further complications. Since the impugned circular has been set aside and it is clarified that the supplies mentioned in the impugned circular are bundled supplies and form an integral part of the supplies of distribution of electricity, the said supplies are not chargeable to GST. Consequently, the petitioners are also not entitled to collect such charges from their customers. In this view, we consider it apposite to direct that any GST collected by the petitioners after 08.11.2023, be refunded to customers from whom the said GST has been collected. Application disposed off.
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2023 (12) TMI 831
Cancellation of petitioner's GST registration with retrospective effect from 01.07.2017 - non-filing of returns for a continuous period of six months - vague impugned order - violation of principles of natural justice - HELD THAT:- The impugned order is not sustainable as it is not informed by reason. The impugned order has also been passed in violation of the principles of natural justice as the petitioner was not afforded any opportunity of being heard. Although, the SCN called upon the petitioner to appear for personal hearing, it did not specify the date, time or venue of the personal hearing. Thus, there was no possibility for the petitioner to appear at the hearing. It is also important to note that the impugned order cancelled the petitioner s GST registration with retrospective effect from 01.07.2017. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer has a discretion to cancel the registration from any date including with retrospective effect, however, the said discretion cannot be exercised in arbitrary manner. The decision to cancel the registration with retrospective effect must be based on some objective criteria. In the present case, the petitioner s GST registration was cancelled on account of non-filing of returns for a period of six months. There are no reason for cancellation of the petitioner s GST registration even for a period when she was filing the returns. The impugned order does not provide any reason for cancellation of the GST registration let alone reason for doing so with retrospective effect - the impugned order is required to be set aside - Petition disposed off.
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2023 (12) TMI 830
Seeking cancellation of the bail granted to the respondent/accused - suppression of value of taxable supplies - non issuance of invoices with intention to evade payment of GST - HELD THAT:- When the arrest memo does not contain the reasons why the individual has to be arrested which would also be the grounds for the arrest then, at this stage, it may not be appropriate on the part of this Court to go on a hunting spree trying to cull out the reasons for arrest. They may be available in the file and it is always be to the respondent to examine them but as observed by the learned Principal Sessions Judge, the accused was not furnished with a copy of any reason to believe that it is imperative that he must be arrested. It is pointed out on behalf of the petitioner herein that in the remand report the reasons to believe that the person should be taken into custody have been stated. A remand report is for the subjective satisfaction of the Magistrate, who actually remands the accused to judicial custody. It is not intended for the accused. It is presented before the Magistrate before whom the accused is produced and contains grounds substantiating that it is required that the accused should be remanded to judicial custody and not be let out on bond or to hold that there is no necessity to be remand. Therefore, the reasons given in the remand report would not take the petitioner anywhere so far as this case is concerned. An order granting or denying bail can never be looked upon as sufficient material for passing a Judgment of either conviction or acquittal - Petition dismissed.
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2023 (12) TMI 829
Constitutional validity of Section 16(4) of the CGST Act - Validity of time limit for ailing benefit of input tax credit (ITC) - Period of limitation - violative of Articles 14, 19(1)(g) 300A of the Constitution of India - seeking declaration that Section 16(4) is merely procedural in nature which cannot override substantive conditions as mandated under Sections 16(1) 16(2) of the CGST Act HELD THAT:- In the TTWYFORD TEA CO., LTD. VERSUS STATE OF KERALA [ 1970 (1) TMI 80 - SUPREME COURT] , the Supreme Court has held that in taxation even more than in other fields, Legislatures possess the greatest freedom in classification. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it. The Supreme Court has further held that if a State can validly pick and choose one commodity for taxation and that is not open to attack under Article 14, the same result must follow when the State picks out one category of goods and subjects it to taxation. From the principles laid down by their Lordships of the Supreme Court, it is quite vivid that that the power of the legislature especially in fiscal statute is very wide and can only be challenged on two counts being it lacks legislative competence and that it infringes or takes away any of the fundamental rights or any of the constitutional provisions. However, in the instant case, the petitioner has challenged the constitutional validity of Section 16(4) of the CGST Act on the ground that it is violative of Articles 14, 19(1)(g) 300A of the Constitution. The grant of ITC has been made subject to conditions and restrictions put thereunder. Thus, the registered person is entitled for ITC in respect of any invoice or debit note for supply of goods if the requisite conditions stipulated therein are fulfilled. The right of a registered person to take ITC under sub-section (1) of Section 16 would become the vested right only if the conditions to take it are fulfilled. Similarly, in the matter of INDIA AGENCIES (REGD.) VERSUS ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES, BANGALORE [ 2004 (12) TMI 372 - SUPREME COURT] , the Supreme Court while dealing with Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957, which requires a provision for furnishing original Form C to claim concessional rate of tax under Section 8(1) of the Central Sales Tax Act, 1956, held that the said requirement under the rule is mandatory and without producing specific documents, dealer cannot claim the benefits. As such, ITC is a nature of benefit or concession extended to the dealer and it can be availed by the beneficiary as per the scheme of the statute subject to fulfillment of the conditions laid down in Section 16(4) of the CGST Act. In that view of the matter, Section 16(4) cannot be held to be violative of Article 14 of the Constitution. Whether the petitioner, which is a proprietorship firm, can claim protection of Article 19(1)(g) of the Constitution? - HELD THAT:- A careful perusal of the scheme of Article 19 of the Constitution would show that a group of rights are listed as clauses (a) to (g) and are recognized as fundamental rights conferred on citizens. Similarly, the petitioner, which is a proprietorship firm, has filed this writ petition under Article 226 / 227 of the Constitution of India, it has not been filed by any citizen in individual capacity, rather it has been filed by a proprietorship firm namely, M/s Jain Brothers through its Proprietor Mr. Amit Jain - The Supreme Court in the matter of INDIAN SOCIAL ACTION FORUM (INSAF) VERSUS UNION OF INDIA [ 2020 (3) TMI 1103 - SUPREME COURT] has categorically held that a Company being a juristic person cannot be a citizen for the purpose of Article 19 of the Constitution. Thus, in view of the provision contained in Article 19(1)(g) of the Constitution and the principles of law laid down by their Lordships of the Supreme Court, it would appear that protection under Article 19(1)(g) of the Constitution is available to a citizen and in order to claim protection under Article 19(1)(g), the person coming to the court must be a citizen, however, in the instant case, proprietorship firm has filed writ petition claiming protection of Article 19(1)(g) - in view of the legal provision flowing from Article 19(1)(g) of the Constitution and the principles of law laid down by their Lordships of the Supreme Court, the petitioner herein, which has filed the present writ petition, is only a proprietorship firm and not a citizen and therefore cannot claim protection of Article 19(1)(g). It is held accordingly and this ground claiming protection of Article 19(1)(g) is not available to the petitioner, which is a proprietorship firm. The next ground that has been raised on behalf of the petitioner that Section 16(4) of the CGST Act is violative of Article 300A of the Constitution of India, is also not at all made out, as Article 300A is right to property which is the constitutional right and clearly provides that it cannot be taken away except in accordance with law. The provision contained in Section 16(4) of the CGST Act is violative of neither Article 14 of the Constitution nor Articles 19(1)(g) 300A of the Constitution, however, the ground under Article 19(1)(g) is not available to the petitioner, as the petitioner, in the instant case, is not a citizen and therefore Article 19(1)(g) is not available to the petitioner herein. Concludingly, the petitioner has failed to make out a case to question the constitutional validity of Section 16(4) of the CGST Act as it is a constitutionally valid piece of legislation. Petition dismissed.
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2023 (12) TMI 828
Cancellation of GST registration of petitioner - wrongful availment or utilization of input tax credit or refund of tax - SCN neither indicated the venue nor the date and time when the petitioner was required to appear - principles of natural justice - HELD THAT:- Pursuant to the show-cause notice, the respondent proceeded to cancel the petitioner s GST registration by the impugned order. The said order did not specify any reasons for cancellation of the petitioner s GST registration except mentioning that no reply to the aforementioned show-cause notice was received - It is important to note that the tabular statement set out in the said order indicated that no Central tax/ State tax/ UT tax/ Integrated tax or cess was ascertained as due and payable by the petitioner. The said show-cause notice is bereft of the necessary particulars so as to enable the petitioner to respond to the same with any clarity. Further, the petitioner was not afforded any opportunity of being heard. This is because, even though the show-cause notice called upon the petitioner to appear for a personal hearing, it did not specify the date, time or the venue of such hearing - The impugned order is also bereft of any reasons. It also does not mention particulars of the invoice or transactions which, according to the concerned authority, are contrary to or in violation of the provisions of the Act. Although the petitioner has not approached this Court immediately after receiving the impugned order, we do not find that the delay is pernicious to the petitioner s claim for restoration of the GST registration. As is apparent, the impugned order cancelling the petitioner s registration was passed in violation of the principles of natural justice and is, thus, liable to be set aside. The impugned order, cancelling the petitioner s GST registration is set aside. The respondent is directed to forthwith restore the petitioner s registration - Petition allowed.
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2023 (12) TMI 827
Seeking direction to decide the Application for Revocation cancellation of Registration - seeking details for the difference in ITC as per GSTR 3B and ITC accured as per GSTR 2A - restoration of GST registration of the petitioner - HELD THAT:- The petitioner responded to the SCN dated 02.08.2023 by furnishing further information regarding the change of its principal place of business. Notwithstanding the same, the petitioner s application for revocation of the cancellation order dated 25.11.2023 has not been decided. Instead, the Proper Officer has issued a further communication dated 04.09.2023 seeking reconciliation of the difference between the Input Tax Credit claimed under the return (GSTR-3B) and the Input Tax Credit as reflected in the return (GSTR-2A) for the financial years 2020-2021 to 2023-2024 - It is apparent that discrepancy in the Input Tax Credit claimed by the petitioner was not the ground on which the petitioner s GST registration was cancelled. The petitioner claims that it is handicapped in responding to the communication dated 04.09.2003, and reconciling the Input Tax Credit Claim for more than three financial years, in absence of full access to its GST Portal. This access is unavailable as the petitioner s GST registration has been cancelled with retrospective effect. It is considered apposite to direct that the concerned officer shall decide the petitioner s application for revocation of the cancellation order after examining all aspects as to whether the petitioner was existent at its principal place of business at the material time. The writ petition is allowed.
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2023 (12) TMI 826
Detention of goods alongwith vehicle - petitioner is the owner of the goods - petitioner is willing and undertakes to pay the amount of security equivalent to the amount payable under Clause (a) of Section 129 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The goods have already been released. The enhanced security shall be deposited within a period of one month from today. Thereafter, the authority shall take out appropriate proceedings for assessment of the tax liability/penalty - The said security deposit shall remain subject to the result of the said adjudication. Needless to add that the impugned proceedings shall stand concluded in view of Section 129 (5) GST Act after deposit of the said security amount. Further, the findings in the impugned orders shall not influence the assessment proceedings under Section 73 and 74 of the GST Act or other appropriate provisions of the GST Act. Petition disposed off.
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2023 (12) TMI 825
Mismatch in Input Tax Credit - Input Tax Credit availed by the petitioner company as per their returns, is not matching with the eligible Input Tax Credit as reflected in GSTR-2A statements and is in excess in respect of CGST, IGST as well as SGST Credits - HELD THAT:- There is merit in the submission of the learned counsel for the respondent that it is trite law that the jurisdiction under Article 226 of the Constitution of India ought not to be exercised in a routine fashion at the stage of show cause notice. Though it is submitted that the issues raised are governed by orders of this Court, however, it would require investigation of facts an exercise which is alien to the jurisdiction under Article 226 of the Constitution of India. Courts have frowned on Writ Petition filed against show cause notices. The liability to pay taxes requires determination of disputed questions of fact and should be agitated before Department authorities. This Writ Petition against the show cause notice not entertained - petition disposed off.
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2023 (12) TMI 824
Seeking GST registration to be effective from retrospective effect i.e. 1.7.2017 - Migration from erstwhile tax laws to GST - Bonafide error in making application - refusal to grant benefit of Input Tax Credit (ITC) to petitioner and on supplies made to buyers - non-filing of the monthly return on the Form GSTR-3B - HELD THAT:- It is undoubtable, that in absence of any legal requirement on a ISD to file its monthly return on Form GSTR-3B , the ISD registration could never be cancelled for reason of not filing such returns. As to the present facts, it is undisputed, petitioner no.1 was neither having more than one business vertical nor he was in need to distribute any amount of ITC that may have arisen to him. Yet, Tax Invoice were issued and the amounts of tax realized by him against the old/ISD registration, without delay - The registration as a ISD being a registration granted to a facilitation office of a recipient of taxable goods or service, it could not be utilized for any taxable business transaction with a third party, by a registered person/supplier. The mistake with respect to grant of ISD registration, that forms the first error in the chain of errors noted above, may be described as mistake apparent on record. Under the erstwhile law where decisions to issue notice etc., were made only upon due application of mind, to the facts disclosed on paper upon due application of human intelligence, the procedure to offer correction was simple and direct. At present, under the Act, machine processes have been designed including auto-populated and auto-generated Forms, reports, etc., by the GSTN, ostensibly to eliminate avoidable human errors and to improve administrative efficiency. Under the present Act, by virtue of section 146, a digital common portal has been created by the GSTN to provide amongst others facilitation of registration; payment of tax; furnishing of returns; computation and settlement of integrated tax; issuance of electronic way bill etc. The petitioner no.1 entitled to the relief such that the second registration granted to him be treated to be effective from the date 1.7.2017, on a deemed basis. In absence of lack of bonafides and in face of the established machine error that it is noted, grant of that relief has become imperative for non-negotiable justice considerations. Unless that equitable relief is granted, the demand of substantive justice would stand defeated primarily to unintended human errors reflected in imperfect machine processes employed to implement procedural laws. The disclosure made in GSTR-1 of petitioner no.1 for the month of October 2017 would be modified by GSTN to reflect on the corresponding GSTR-2A, relevant to petitioner no.2 for the period July to September 2017 and all consequences to arise to the petitioners. To that extent, the order passed by the Authority for Advance Ruling may not stand in the way of the petitioners - Petition allowed.
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2023 (12) TMI 823
Cancellation of GST registration of petitioner - failure to file returns - fault committed by the petitioner's Consultant - no notice was served to the petitioner by way of physical mode and was served only through e-Portal - violation of principles of natural justice - HELD THAT:- This Court posed a question as to whether the petitioner has been served with show cause notice and the impugned orders directly through physical mode or through e-Portal, the learned Additional Government Pleader fairly admitted that all the communications, viz., the show cause notice/notice affording opportunity of personal hearing and the impugned order were not served directly through the petitioner but were only uploaded in the GST Portal. Hence, the grievance of the petitioner that they have not been served with the show cause notice and only when they received property attachment notice, they came to know about the impugned orders appears to be genuine. Further, it is clear that the respondent knowing fully well that the petitioner's GST portal was closed owing to cancellation of GST registration on 08.02.2019, since, it the respondent, who made such cancellation, ought to have issued the show cause notice directly to the petitioner by physical mode of service and not through e-Portal, which was closed on 08.02.2019 itself - even assuming that the petitioner failed to respond to the show cause notice, it is the duty of the respondent to hear the petitioner before passing orders, which are prejudicial to the interests of the petitioner, instead, the respondent proceeded to pass the impugned orders by stating that the petitioner failed to file reply, nor appeared for hearing on 10.12.2021, and hence, the proposals contained in the show cause notice are confirmed, which is not fair on the part of the respondent. This Court is of the view that the impugned orders are in violation of principles of natural justice and liable to be set aside and one more opportunity has to be granted to the petitioner to put forth their contention - matters are remanded to the respondent for re- consideration - Petition allowed by way of remand.
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2023 (12) TMI 822
Direction to pay a tax due along with penalty - petitioner did not file reply to the said show cause notice in time, and due to non-filing of reply, the respondent passed the impugned order - HELD THAT:- It is no doubt true that the petitioner is a taxypayer under section 10 of the Act and as per said section, the petitioner need not file GSTR 3B and filing of returns under GSTR 4 is suffice and accordingly, the petitioner filed GSTR 4, however, with a delay. Thus, considering the fact that the petitioner, being a Lady Proprietress and due to reverse of fortune, she was met with heavy loss, which resulted in closure of her business and due to wrong advice of the Auditor, she was not in a position to file returns in time and also not able to reply to the show cause notice owing to her ill-health, this Court in the interest of justice is of the view that one more opportunity can be granted to the petitioner for filing her reply and thereafter, the respondent shall pass fresh orders in accordance with law. The matter is remanded back to the respondent for fresh assessment - petition allowed by way of remand.
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2023 (12) TMI 821
Governmental Authority or not - payments related to work order for Fire Fighting System installation at contracted area between the appellant and M/s JSCL - Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 24/2017- Central Tax (Rate) dated 21.09.2017 - GST rate - rate of GST for service under RCM in respect of road cutting charges paid by them to JNN on behalf of M/s JSCL in relation to such contract - Recovery of such road cutting charges by the Appellant from M/S JSCL. Whether M/s JSCL are set up by an Act of Parliament or a State Legislature? - HELD THAT:- M/s JSCL are not set up by an Act of Parliament or State Legislation. Whether is it established by any Government? - HELD THAT:- M/s Jaipur Smart City Limited are a special purpose vehicle (SPV) formed on 12.03.2016 by the Rajasthan State Government (as approved by Order No. 64/2016 dated 01.04.2016 issued by the Cabinet of State of Rajasthan) to operate as a nodal agency to take up works proposed under the smart city proposal according to Smart City mission launched by the Government of India. Whether Government possesses ninety per cent or more participation in M/s JSCL by way of equity or control? - HELD THAT:- M/s Jaipur Smart City Limited is a limited company incorporated under the Companies Act, 2013 in which the Rajasthan State Government and the Jaipur Nagar Nigam (local Authority/ULB) are the promoters having 50:50 equity shareholding. We note that Jaipur Nagar Nigam being a local authority is also an extension of the Government as it is a Municipal Corporation incorporated by Rajasthan State Government under The Rajasthan Municipalities Act, 2009 . The officers of Jaipur Nagar Nigam also officiate as one of the Directors in M/s JSCL. This substantiates more than 90% control of the Government by way of participation; Therefore, it is held that M/s JSCL are covered under Governmental Authority as defined in the explanation to clause (16) of Section 2 of the IGST Act, 2017. Whether or not Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 24/2017- Central Tax (Rate) dated 21.09.2017 is applicable in respect of all payments related to work order for Fire Fighting System installation at contracted area between applicant (now appellant) and M/s Jaipur Smart City Limited? - HELD THAT:- When M/s JSCL qualify to be a Governmental Authority then the services provided to it by the appellant are considered as services provided to the Governmental Authority. Thus, Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 24/2017- Central Tax (Rate) dated 21.09.2017 is clearly applicable on the appellant in this case. GST rate for the work undertaken by applicant - HELD THAT:- The services provided by the appellant are covered under Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended. The said services are then liable to attract GST @ 12% (i.e. 6% CGST 6% SGST) during the contracted period only up to 31.12.2021, as after that, in column no. (3) of Serial No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 the words a Governmental Authority or a Government Entity has been omitted vide Notification No. 22/2021- Central Tax (Rate) dated 31.12.2021 w.e.f. 01.01.2022. Whether the applicant is liable to pay GST under RCM in respect of road cutting charges paid by them to Jaipur Nagar Nigam (JNN) on behalf of M/s Jaipur Smart City Limited in relation to such contract? - HELD THAT:- The services of granting permission/NOC for road cutting were provided by the Local Authority i.e. Jaipur Nagar Nigam (municipality) for a consideration to the business entity i.e. M/s Lakhlan Qureshi Construction Company (appellant) and not to M/s JSCL. Hence, the appellant being a recipient of the services are liable to pay GST for the charges paid to Jaipur Nagar Nigam under reverse charge mechanism. The activity of giving permission for road cutting is not mentioned in the list of works as provided under Article 243W of the Constitution entrusted to a Municipality - clause (b) of sub-section (2) of Section 7 of CGST Act, 2017 read with Notification No. 14/2017-Central Tax ( Rate) dated 28.06.2017 as amended by Notification No. 16/2018 Central Tax (Rate) dated 26.07.2018 is not applicable in this case. Therefore, the appellant are liable to pay GST @18%( i.e. 9% CGST + 9% SGST) as a recipient under RCM. Whether Recovery of such road cutting charges by the Appellant from M/s. Jaipur Smart City Limited is liable to GST? If the answer is in affirmative, what will be the GST rate? - HELD THAT:- Three conditions are required to be satisfied for a service to be covered under Entry No. 3 of the Notification which are : (1) It must be pure service not involving any supply of goods. (2) It must be provided to the Central Government or State Government or Union territory or local Authority or a Governmental Authority or a Government Entity. (3) It must be an activity in relation to any function entrusted to a (i) Panchayat under Article 243 G of the Constitution; or (ii) Municipality under Article 243 W of the Constitution. The appellant have fulfilled the condition No. 1 i.e reimbursement of road cutting charges by M/s JSCL to the appellant involves no supply of goods. Thus, the activity is purely in nature of service. Further, as it has already been decided that M/s Jaipur Smart City Limited are a Governmental Authority , therefore the second condition is also satisfied - the recovery of road cutting charges is not covered under an activity in relation to any function entrusted to a (i) Panchayat under Article 243 G of the Constitution; or (ii) Municipality under Article 243 W of the Constitution. The exemption under Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 is not available to the appellant. Thus, the appellant are liable to pay GST on recovery of such road cutting charges (from M/s JSCL) @18%.
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2023 (12) TMI 820
Levy of GST - incentives received under Atma Nirbhar Gujarat Sahay Yojna dated 16.05.2020 declared by the Gujarat Government could be considered as subsidy or not - incentive received under said scheme could be considered as supply of service under the provisions of section 7 under CGST Act - incentive received under said scheme if considered as supply then would it be covered under section 7(2) of CGST Act - incentive received under said scheme could be considered as excluded from the value of taxable supply under section 15(2)(e) of CGST Act, 2017. HELD THAT:- It is found that the Banks were provided a base percentage of loan disbursement amount as an incentive. The incentive so granted varied, meaning thereby that the percentage of incentive increased on higher disbursement of loan. At best, the incentive can be termed as a consideration to the Cooperative Banks for providing the service to the beneficiaries/loanees by extending loans under the scheme promoted by the State Government of Gujarat. The argument of the appellant therefore that they had provided services only to the person who had availed loan and not to the State Government, fails - the reliance of the appellant on various dictionary meaning to argue that both the words subsidy and incentive, mean the same, is not a plausible contention. Scope of supply u/s 7(2), ibid - Subsidy in the form of an incentive received - HELD THAT:- The appellant has not explained how incentive would fall within the ambit of section 7(2) or Schedule III. The next argument of the appellant is that the scheme is for the benefit of the public and not beneficial to an individual or private commercial enterprise and therefore the amount being paid by the Government over and above reimbursement of 6% interest is nothing but 'subsidy' - HELD THAT:- To equate this subsidy of 6% granted to the loanee, as a part of relief measure announced by the State Government on account of the pandemic situation, with the incentive granted to the Cooperative Banks and Cooperative Credit Societies, which solely depended on the performance in disbursing loans, is not a prudent argument in the first place. This incentive granted based on the performance cannot be termed as a subsidy. Even otherwise, incentive granted to Cooperative that the GAAR has clearly held that this Banks/Cooperative Credit Societies granted no benefit to the loanees. This was one of the ground adopted by the GAAR to hold that the incentive was not a subsidy. We are in complete agreement with this finding of the GAAR. Scope of Actionable claim - incentive is a subsidy or not - HELD THAT:- Actionable claim is an intangible movable property, and its transfer is dealt with in Chapter VIII of the Act, ibid. Accordingly, actionable claim means |a] claim to an unsecured debt and [b] beneficial interest in a movable property - one time incentive earned proportionate to the total disbursements of loans, would not fall within the ambit of actionable claims so as to fall within the exclusion as per Sr. No. 6 of Schedule-Ill, which deals with the activities of transactions which are neither supply of goods nor a supply of services. Incentive paid by Government under the said scheme could also be considered as the compensation towards the interest or not - HELD THAT:- Since it is not substantiated with facts as to what exactly was the rate charged for other borrowings outside the scheme, what was the rate charged by other Banks during the period under dispute etc., it is difficult to come to a conclusion as far correctness of the submission is concerned. Had that been the case, the incentive given would have been constant/static and would not have varied with the increase in the level of disbursements of loans. Even otherwise, it is found that the loans were advanced during a period when the country was going through pandemic which could have also had its effect on the market borrowings consequently on the rates charged by the Banks. The scheme provided for incentives, meaning rewards, which varied based on performance. The last submission of the appellant is that they have not supplied any goods or services and the amount cannot be considered as consideration hence is not covered u/s 7(1)(a) of CGST Act - HELD THAT:- Incentives were directly linked to the service provided by the appellant of granting loans to the beneficiary/loanee under the Scheme. Therefore, the above argument is not a legally tenable argument. Reliance placed on O Rashmi Hospitality Services Pvt. Ltd. [ 2019 (10) TMI 755 - AUTHORITY FOR ADVANCE RULING, KARNATAKA] - HELD THAT:- The ruling was sought in respect of the said subsidy. However, it is found that the ruling is not applicable to the present dispute primarily since unlike in this case, there was no incentive paid over and above the amount fixed to M/s. Rashmi. Even otherwise, in terms of Section 103 of the CGST Act, 2017, the aforementioned ruling is applicable only to M/s. Rashmi [the applicant] and the jurisdictional officer. Reliance placed on O Ponni Sugars and Chemicals Limited [ 2008 (9) TMI 14 - SUPREME COURT] - HELD THAT:- The appellant has erred in relying on the aforementioned judgement to substantiate his argument, more so since in the said judgement the two questions of law framed by the Hon'ble Apex Court were as follows - the questions on which the ruling was sought from GAAR at paragraph 7 are different. The reliance therefore, on the aforementioned judgement of the Hon'ble Supreme Court, is legally untenable. The appeal filed by appellant M/s Rajkot Nagrik Sahakari Bank Limited against Advance Ruling Authority for Advance Ruling is rejected.
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2023 (12) TMI 819
Exemption from GST - hostel accommodation extended by the Applicant hostel - eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017 and under the identical Notification under the TNGST Act, 2017, and also under Entry 13 of Exemption Notification No. 09/2017-IT (Rate) dated 28.06.2017, as amended or not - Requirement to take registration - Supply or not - Tariff heading - rate of taxability of the supply of service - composite exempt supply. Whether the hostel accommodation being provided by the Applicant to students and working women qualify to be a residential dwelling for use as residence as described in the above entry and thus eligible for exemption or not? - HELD THAT:- Generally, renting of residential dwelling involves letting out any building or part of the building by a lessor to a person or family (related persons) against a rent for using rooms which form part of a house as kitchen, bedroom, and living room etc., on the whole as residence. Thus, a common understanding of the term residential dwelling is one where people reside treating it as a home. Moreover, renting of residential dwelling does not include amenities like food, housekeeping, or laundry etc., whereas, a hostel is that of an establishment which provides living accommodation to a specific categories of persons such as students workers. The Applicant has rented out the premises with the intention of providing hotel accommodation which is more akin to sociable accommodation rather than what is typically considered as residential accommodation. A house/ residential dwelling for occupation contain one or more rooms with one/part of the room being used as kitchen and the other/part as living room etc. But, in the instant case, a single house with two or more rooms where normally a single family resides, is subdivided, and let out to different persons and rent being collected on per bed basis with bundle of other services against a consideration clearly constitutes a business of supplying accommodation services along with ancillary services. Thus, on this count as well, the impugned accommodation thus provided does not qualify as a residential dwelling and thus the question of using the same as residence does not arise. Regarding the second part of the description of service Tor use as residence it is observed that, though accommodation and residence seems to be synonymous, there is a subtle difference between the two. An accommodation is a location where someone is accommodated or provided with lodging. The term residence on other hand, in common usage, refers specifically to a place where someone resides permanently or for an extended period of time along with family/dependents - it is clear that hostels refer to a place where someone is accommodated or provided with lodging or boarding and lodging facilities against a charge or fees for the services rendered - the premises rented out by the Applicant cannot be construed as residential dwelling. The purpose and objective of the notification is nothing but to avoid taxing residential properties taken on rent by family or individuals and the benefit of exemption is not extended to the premises which do not qualify as residential dwelling for use as residence. Further, unless the twin conditions of renting of residential dwelling for use as residence, being inter-twined and inseparable, are not met, the exemption is not available. As per settled position in taxation laws, especially when exemptions or concessions or benefits are to be availed, the interpretation is to be literally and strictly construed and not in liberal terms. In effect, the place rented out is neither a residential dwelling nor being rented out for use as residence - it is clear that hostel accommodation is not equivalent to residential accommodation and hence we hold that the services supplied by the Applicant would not be eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 and under the identical Notification under the TNGST Act, 2017, and also under Entry 13 of Exemption Notification No. 09/2017 IT(Rate) dated 28.06.2017, as amended. Requirement to take registration - Supply or not - HELD THAT:- The Applicant s service of providing hostel accommodation is not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 as amended, the Applicant is very much be required to take registration under the GST Enactments, as the arrangement between the Applicant and the hostel occupants is liable to be classified as transaction in the course of furtherance of business and hence, as per Section 7(1)(a) of CGST Act, 2017 read with Entry No. 2 (b) of the Second Schedule to the CGST Act, the said transaction constitutes supply - the Applicant is required to get themselves registered in the state of Tamil Nadu, if their aggregate turnover in a financial year exceeds twenty lakh rupees. Tariff heading - rate of taxability of the supply of service - HELD THAT:- It is observed that hotels are meant for a temporary stay (2-5 days) and have lot of facilities and staff, but hostels are used for a longer period and have basic facilities with minimal staff required by the inmates to stay at a reasonable rate. Therefore, hostel services cannot be equated to a hotel accommodation and hotel GST rates cannot be applied to a hostel. Therefore, we hold that supply of hostel accommodation services (Tariff heading 9963) is taxable @ 9% CGST + 9% SGST under SI.No. 7(vi) of the above Notification In the event of the hostel accommodation being an exempt activity, whether the incidental activity of supply of in-house food to the inmates of the hostel would also be exempt being in the nature of a composite exempt supply? - HELD THAT:- Firstly, the service of providing hostel accommodation is not an exempt activity. It is seen from the submissions of the Applicant, that along with the provision of accommodation services, they are also providing food and certain other services to the inmates of the hostel for consolidated charges - The natural bundle has the characteristic of where one service is the main service and the other services are ancillary services which help in better enjoyment of the main service - As per Section 8 of the CGST Act, 2017, for a Composite supply, the tax rate on the principal supply will be treated as the tax rate on the given composite supply. It is held that since the Applicant provides a number of services in a composite manner, the hostel accommodation services provided by the Applicant, being the principal supply, which is taxable @18%, will be tax rate for the composite supply provided by them.
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Income Tax
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2023 (12) TMI 818
Validity of notice issued u/s 153C - writ direction or order to quash and set aside the impugned notices u/s 153C and the order disposing off the objections along with the show Cause Notices issued for A.Y. 2016- 17, A.Y. 2017-18 and A.Y. 2018-19 - HELD THAT:- As order speaks itself in as much as the writ petition was not entertained by the High Court for reasons to be followed which due to paucity of time was not dictated on 27.9.2021 on which the matter was disposed of. However, no reasons were dictated at all. It is also brought to our notice that the Presiding Judge of the Division Bench has also retired. In the circumstances, the writ petition will have to be re-heard. Consequently, the impugned order is set aside. The matter is remanded to the High Court. The writ petition is restored on the file of the High Court to be re-heard and an order to be passed in accordance with law along with reasons. The appeal is disposed of in the aforesaid terms.
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2023 (12) TMI 817
Disallowance u/s 14A - As decided by HC [ 2022 (9) TMI 886 - DELHI HIGH COURT] in cases where shares are held by assessee as stock-in-trade, the dividend earned on the said shares is incidental and would not attract the provisions of Section 14A - HELD THAT:- As there is a huge delay of 350 days in filing this Special Leave Petition. The reasons seeking condonation of delay are not explained to the satisfaction of this Court. Further we find that the High Court has applied a judgment of this Court in the case of Maxopp Investment Limited [ 2018 (3) TMI 805 - SUPREME COURT] [and has granted relief to the respondent-M/S PNB Housing Finance Ltd. We are, therefore, not inclined to condone the delay or/and interfere in the matter on merits. Special Leave Petition is dismissed.
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2023 (12) TMI 816
Appointment to the post of Income Tax Inspectors - Appointment against Sports Quota vacancy - HELD THAT:- Income Tax Department is willing to appoint the petitioner against the Sports Quota vacancy but, she has to produce an unconditional No Objection Certificate (for short NOC ) from her present employer, i.e., The Central Railways. It is also clarified that the appointment to be given, will be on prospective basis. The petitioner is represented by Mr. V. Chitambaresh, learned senior counsel submits that the petitioner would furnish the unconditional NOC from her current employer. She is also prepared to accept the appointment as an Income Tax Inspector, on prospective basis. Taking note of the above submissions from the learned senior counsel representing both sides, we deem it appropriate to pass the following order: (i) The petitioner is granted four weeks time to produce the NOC, from her current employer. (ii) Immediately after the NOC is produced before the Principal Chief Commissioner of Income Tax(CCA), HQ Kochi, Kerala, the appointment order will be issued appointing the petitioner as an Income Tax Inspector under Sports Quota. (iii) The appointment will be on prospective basis. With the above order, the Special Leave Petitions are allowed. Pending application(s), if any, shall also stand disposed of.
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2023 (12) TMI 815
Reopening of assessment u/s 147 - notice after your years expiry - rejection of exemption u/s 11 - HELD THAT:- We would agree with Petitioner on the aspect of commercial activities alleged by the AO that AO has presupposed that assessee is indulged in commercial activity. Just because assessee has been earning a regular income from letting out its auditorium does not mean Petitioner was indulging in commercial activities. Mr. Agrawal submitted that the Income Tax Department initiated proceedings u/s 12AA(3) of the Act to withdraw the exemption granted to Petitioner u/s 11 of the Act which proceedings have been quashed and set aside. Thus in view of the proviso to Section 147 of the Act, which squarely applies to the case at hand, re-opening of the assessment is permissible only if there was failure to disclose fully and truly material facts. Reason to believe itself indicates that amount of Rs. 2,84,19,039/- which the AO claims to have escaped assessment has been obtained from the return of income filed by Petitioner. Return of income, copy whereof is annexed to the Petition, itself indicates that income from hall charge, other charges recovered from auditorium users and compensation received for use of premises. Therefore, by no stretch of imagination being a failure to truly and fully disclose. When Petitioner s case is they are not carrying out any commercial activity, Petitioner cannot be accused of not disclosing that they were carrying out commercial activity.
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2023 (12) TMI 814
Characterization of income - income arising from sub-licensing of shops and establishment along with the various services which are rendered to the sub-licensed shopkeepers - house property or business income - Whether it can be treated as income from house property liable to be assessed u/s 22 or composite income arising from part exploitation of shops and establishment which are sub-leased as commercial assets and the services which are rendered to the shopkeepers can be treated as income arising from business falling under Section 28 of the Act? - HELD THAT:- The appellant assessee has obtained 5665 sqft. of space under a leave and licence-agreement dated 25.04.1972 from EIH Limited and has sub-licensed the space to several persons under a sub-licence agreement, along with certain services as aforementioned and for that received a composite amount as consideration on monthly basis. The assessee claimed that the sum received by it for sub-licensing, is business income but the assessing officer has not accepted it and taxed the receipts as income from house property. CIT (Appeal) allowed the appeal of the assessee and held the income to be income from business. The ITAT, after referring to section 27 (iiib) of the Income Tax Act defining the term deemed owner and Section 269UA(f) of the Act defining the word transfer ; held that the income derived by the assessee is Income from House Property. While coming to the aforesaid conclusion, the ITAT has committed a manifest error of law to ignore the object and business activity of the appellant assessee company, and misunderstood the nature of transaction of sub-license.. Thus, as per Memorandum of Association the object of the assessee company ancillary to the main object is to acquire on licence premises suitable for housing, accommodating shops, boutiques, stores, offices, showrooms for the purpose of making available on the basis of lease or licence and sub-lisence. The Assessing Officer himself recorded a specific finding in the Assessment Order that during the previous year relevant to the assessment year in question the assessee was engaged in the business of real estate and its income mainly consisted from contribution from shops. Since the object of the assessee company and its activity is the business of renting/lisencing/sub-lisencing shops etc. and it derived income mainly from the aforesaid business activity, therefore, the income from contribution/sub-lisencing derived by the assessee is business income and not income from house property. The law laid down by Hon ble Supreme Court in Chennai Properties and Investment Ltd. [ 2015 (5) TMI 46 - SUPREME COURT] and Royla Corporation Private Limited [ 2016 (8) TMI 522 - SUPREME COURT] are applicable on facts of the present case. Hence, we hold that the income in question of the appellant assessee is business income and not income from house property. Except for the assessment order in question, the appellant assessee s income from sub-letting/sub-licensing the space in question, has always been accepted by the respondent Income Tax Department as, income from business. Under the circumstances when the respondent Income Tax Department has always accepted the income of the appellant assessee from sub-licensing/sub-letting of the space in question, to be income from business, then the respondent cannot take a contrary stand in the present appeal. Assessee appeal allowed.
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2023 (12) TMI 813
Benefit of compounding of offences u/s 279(2) - denial of benefit on the ground of prior conviction of the petitioner cannot be countenanced in the light of the above mentioned decisions of this Court - assessee had committed not one but multiple grave offences - HELD THAT:- In the present case, the impugned order has been passed by the Chief Commissioner of Income Tax. A reading of the impugned order indicates that it has been passed by placing reliance on the opinion of the Regional Compounding Committee (RGC) dated 18.07.2022. Facts and law are clear. U/s 279 (2) of the Income Tax Act the Principal Chief Commissioner or Chief Commissioner or the Principal Director General of Income Tax or Director General of Income Tax may compound any offence under Chapter XXII either before or after institution of proceedings. For the aforesaid purpose, the Central Board of Direct Taxes has issued circular u/s 119 of the Income Tax Act, 1961. The power to compounding offences is vested with the Principal Chief Commissioner or Chief Commissioner or Principle Director General or Director General of Income Tax u/s 279 of the Income Tax Act, 1961 In The Chairman, Central Board of Direct Taxes and Others Versus Umayal Ramanathan, [ 2009 (4) TMI 36 - MADRAS HIGH COURT] Court allowed the case of the petitioner taking note of the fact that during the pendency of an appeal against the conviction order before the Principal Sessions Judge s Court, an Application was filed on 09.04.2012 under Section 279(2) of the Income Tax Act, 1961 for compounding of the offence. There also the application for compounding of offence was earlier rejected on the ground that the petitioner therein had been convicted of the offence. It was held that the rejection of the compounding application during the pendency of the appeal was not justified merely because the applicant/the writ petitioner therein was convicted by the Trial Court of the offence. In Inbavalli Vs The Government of India, Ministry of Finance, Department of Revenue. [ 2016 (9) TMI 209 - MADRAS HIGH COURT] rendered reported in Manu/TN/ 1996/2016 followed the above mentioned decision and allowed the case of the petitioner therein. There, the Court took note of the fact that the petitioner was a lady aged more than 70 years of age and had lost her husband and only son and was the sole proprietor of a small firm dealing in electrical and electronic appliances while allowing the writ petition.The Court in both the above mentioned cases did not take note of the aforementioned circular issued under Section 119 of the Income Tax Act, 1961 issued specifically in context of compounding of offences. There is no merits in this writ petition as petitioner has shown no remorse. The petitioner has taken the chance all the way up to the Tribunal and waited for conviction order to be passed in the criminal case instituted against the petitioner for violation of the provisions of the Income Tax Act, 1961. These decisions cited for the petitioner therefore do not come to his rescue. The circular of the Board also makes it clear that there is no scope for compounding of the offences, if there was a conviction of the person by a court of law under direct tax laws. Further, the application is belated. Petitioner has taken a chance all the way up to the Income Tax Appellate Tribunal and waited for an order of conviction by the Economic Offences Court on 06.03.2019 in EOCC No.184 of 2007.The decision of the Delhi High Court in Vikram Singh versus Union of India [ 2017 (4) TMI 621 - DELHI HIGH COURT] also does not lay down any general principle of law to be followed by Courts. Para 9 of the said decision which has been highlighted is of no relevance. The decision of the Court rendered in Ram Prakash Khemka Vs Commissioner of Income Tax [ 2007 (2) TMI 205 - MADRAS HIGH COURT] relied upon by the counsel for the respondent dealing with an identical situation also impels this Court to dismiss this writ petition. To allow compounding of the offences at this stage merely because the petitioner has paid the tax, penalty and interest would not mean that the petitioner is in return entitled to compound of the offence particularly having taken a chance for an acquittal before the Trial Court. By paying the tax, penalty and interest, the petitioner has done no favour for the revenue. What he had to do earlier, he has done later. To interfere with the impugned order and to allow compounding of the offence would also send wrong signal in the society. There has to be deterrent effect not only on the petitioner from committing similar offence in future but also on others from committing such offence by taking the tax laws casually.
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2023 (12) TMI 812
Reopening of assessment - shorter period granted to file reply to SCN - grievance of the petitioner is that when he logged on at the income tax portal for filing the reply to SCN he found that the e-reply was already closed and finally an order u/s 148A(d) was passed by the respondent No.2 - HELD THAT:- From bare perusal of Section 148A(b) it appears that minimum 7 days is required to be given to the Assessee for filing reply. This 7 day is to be calculated by ignoring the date of issue and the last date of submission. In other words, minimum 7 clear days has to be provided to the Assessee for filing reply. Thus, we see that the law is no more res-integra; inasmuch as, the words not be less than 7 days implies that clear seven days is obligatory to be given to the Assessee. Thus, on the one hand the notice which was given to the petitioner u/s 148A(b) was not in accordance with the provision of the Act, inasmuch as, only 6 clear days was given to him. So, on this score alone the notice u/s 148A(b) deserves to be quashed and set aside. From bare perusal of Annexure-3 which is the screenshot of e-proceeding clearly indicates that on 26.03.2023 itself, e-submission was closed, thus the petitioner was prevented from submitting his reply online. The argument of revenue that it was the duty of the petitioner to approach the concerned authority is misconceived and without any basis and is fit to be rejected inlimine in view of the specific provision made under the Act itself. Thus, the impugned orders requires interference. Reopening order and notices set aside.
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2023 (12) TMI 811
Validity of search proceedings u/s 132 - mandation of recording satisfaction - incriminating material found or not? - whether the exercise of the power u/s 132 (1) (b) was illegal on the grounds alleged that the Respondent Authorities had no reasons to believe the existence of the circumstances for going ahead with the searches, which was a condition precedent for exercise of the power of search and seizure? - HELD THAT:- For the purpose of exercising the powers u/s 132(1) the satisfaction ought to be satisfaction of the Authorised Official on the basis of the facts and materials available before it. Such materials must not be arbitrary, irrational, vague, distinct or irrelevant. The standard of reason for formation of the opinion has to be tested as that of an honest and prudent person who would act on reasonable grounds and come to a cogent conclusion. Reasons to believe cannot be said to be the subjective satisfaction of the Authority concerned but would be the objective view on the basis of information/materials in possession of the Authority and must be based on firm and concrete facts as regards the existence of undisclosed income. As upon search and seizure conducted, such information/materials in possession of the Authorised Official which led to the formation of the opinion may or may not lead to the discovery of incriminating materials. But in the opinion of this Court, merely because incriminating materials were not seized/found would not affect the opinion/belief formation for the purpose of exercise of powers under subclauses (i) to (v) of Section 132(1) of the Act of 1961 As in a recent judgment in the case of Principal Commissioner of Income Tax, Central 3 Vs. Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] categorically held that in case no incriminating materials is/are is unearthed during the search, AO cannot assess or reassess taking into consideration the other materials in respect of completed assessment/unabated assessment or in other words in respect of completed/unabated assessments, no addition can be made by the AO in absence of incriminating material found during search under Section 132 or requisition un/s 132A - having not found incriminating material would not effect the formation of the opinion for going ahead with exercise of powers under Section 132 of the Act of 1961. On the other hand, the consequence of not unearthing incriminating material has to be dealt with as declared by the Supreme Court in paragraph 23(iv) of the judgment in Abhisar Buildwell P. Ltd.(supra). If the Authorised Official is in possession of information and materials for which he has reasons to believe that even if the steps contemplated under Clauses (a), (b) (c) of Section 132(1) are taken, there is no likelihood of unearthing the total income, unless the powers under sub-clauses (i) to (v) of Section 132(1) of the Act of 1961 is exercised, the mere fact that it causes harassment would not render the search and seizure illegal. The statute in question i.e. the Act of 1961 mandates tax on total income from whatever source derived in the case of a resident assessee and the Authorities in terms with the Act of 1961 have been empowered subject to fulfillment of the conditions to exercise such powers seeking compliance to payment of tax on total income. The fulfillment of the condition precedent as held by the Supreme Court in District Registrar and Collector, Hyderabad Vs. Canara Bank Ors.[ 2004 (11) TMI 569 - SUPREME COURT] are adequate safeguards to exercise the powers of search and seizure. Therefore, if the condition for invoking the powers under Section 132 of the Act of 1961 are fulfilled, the exercise of powers to make search and seizure cannot be nullified on the ground of harassment. From all discussions, it cannot be said that the Respondent Authorities did not have materials and/or information for the formation of belief/opinion, more so, when this Court in exercise of powers under Article 226 of the Constitution cannot decide the sufficiency as well as the adequacy of the materials/information for the formation of belief/opinion. This Court does not find any merit in the writ petitions for which the writ petitions stand dismissed.
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2023 (12) TMI 810
Penalty u/s. 271(1)(c) - income was taxable as FTS and not u/s. 44BBB - as per AO Assessee had incorrectly returned its income as taxable u/s. 44BBB while the Assessing Officer had held the same taxable as Fee for Technical Services (FTS) - assessee is a foreign company registered under the laws of Republic of Korea as engaged in the business of development of electric power resources, generation and other related business activities, Research and Development of technology related to development and generation of electric power and also doing overseas business in relation to above, as its main objects - HELD THAT:- As rightly noted by the CIT(A), the assessee being a non resident was guided by consultants . The fact that it returned incomes under different heads in the original and revised returns filed shows that even the consultants were unable to guide the assessee with certainty in determining the head/ section under which it was taxable. Therefore merely because the AO assessed the income of the assessee as FTS u/s 115A of the Act, the assessee cannot be charged with having concealed or furnished inaccurate particulars of income for returning it as income u/s 44BBB of the Act. The fact that in similar circumstances in succeeding years the AO did not find it fit to levy penalty streghthens the case for no penalty to be levied in the impugned year. CIT(A) s , we find, has adequately dealt with the AO s basis of levying penalty noting that it rests on Form 15C disclosing income of the assessee as fts and the assessee therefore being fully aware of the nature. The Ld.CIT(A) has brushed aside this logic noting that Form 15C is required to be filed by the payer of income and the assessee is therefore not bound by any disclosure made in it since it is not responsible for the same. DR was unable to point any infirmity in this finding of the Ld.CIT(A). We see no reason therefore to interfere in the order of the Ld.CIT(A) holding that with no infirmity found in the books of the assessee and only the nature of income being in dispute it tantamounted to mere disallowance of claim which would not attract levy of penalty u/s. 271(1)(c) of the Act . The issue we agree with the Ld.CIT(A) is squarely covered by the decision of Reliance Petroproducts (P.) Ltd.[ 2010 (3) TMI 80 - SUPREME COURT] - CIT(A) has taken a holistic view and we are in complete agreement with the Ld.CIT(A) that there is no case made out by the Revenue Authorities for charging the assessee with having furnished inaccurate particulars of income so as to attract the levy of penalty u/s. 271(1)(c) of the Act. Decided against revenue. CIT(A) deleting penalty holding that taxing the receipts as FTS by Assessing Officer as opposed to that returned by the assessee u/s. 44BBB was a mere change of opinion? - HELD THAT:- The fact remains that the AO assessed the income of the assessee treating the income returned by the assessee as profits and gains of business of civil construction in turnkey power projects , u/s 44BBB of the Act, to be in the nature of Fees for Technical Services taxable u/s 115A of the Act and it is for this reason alone that penalty was levied charging the assessee with furnishing inaccurate particulars of income. There are no adverse findings with respect to the Books of accounts maintained by the assessee. All facts and figures disclosed therein have been accepted. It all therefore boils down to interpreting the nature of activities carried out by the assessee whether qualifying u/s 44BBB of the Act or being FTS. All particulars relating to the nature of income remaining unchallenged, the Ld.CIT(A)s finding that the determination of its income by AO only tantamounted to change of head is we hold correct. That the ITAT confirmed the findings of the AO makes no difference to the aforesaid fact. Therefore, the plea raised by the Revenue dismissed.
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2023 (12) TMI 809
Undisclosed incomes - investment in Purchase/sale of immovable property - difference between circle rates made for payment of stamp duty charges to State Government and market rate of the property - assumptions made by AO to calculate FMV - purchase or sale consideration recorded in the registered conveyance deed and in books or accounts are not reflecting the fair market value thereof - HELD THAT:- In this case, search action took place in these groups u/s 132 - AO compared the value mentioned in the sale deed of these properties with the fair market value of these properties calculated by him making strange assumptions and brought the difference between these two as undisclosed incomes of the assessee. These additions are not based on any corroborative materials to suggest that there was payment or receipt of money over and above the sale deed. Assessees have registered properties with the registration authorities as applicable valuations for the purpose of registration. In order to make addition as undisclosed income in these cases, the burden is on the revenue to prove that the Assessees herein have invested in any property or sold the property over and above what is in the sale deeds. There is nothing on record to show that the Assessees herein had made any investment or recieved consideration in addition to what has been disclosed in the sale deeds. In our opinion, no addition could be made in the hands of present Assessees on the basis of presumption when the valuation mentioned in the sale deed has been accepted by the registration authorities. No allegation by the ld. AO that there is any stamp duty valuation higher than the value mentioned in the sale deed. Details of buyers or sellers of these immovable properties, as the case may be, were already on record before the ld. AO and the ld. AO had all the powers to make enquiry under the Act from such sellers and buyers, the AO for the reasons best known to him did not make any such enquiry. Thus, the onus on the department to prove that investment was made by Assessees or sale consideration received by the Assessee, as the case may be was in fact more than that depicted in the sale deed did not get discharged at all. CIT (A) has rightly held that ld. AO cannot substitute the apparent consideration mentioned in the sale deed so as to adopt the market value without bringing any material on record to show that consideration disclosed in the sale deed is in excess of the value adopted by the assessee - AO cannot simply make additions on the basis of fair market value of the property. The grounds raised by revenue dismissed.
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2023 (12) TMI 808
Addition u/s 68 - Bogus share capital - addition made as identity of source was not established - onus to prove - CIT(A) confirming the addition made by the AO as Identity, creditworthiness and genuineness of transaction not proved - HELD THAT:- CIT(A) has correctly held that the assessee has not been able to establish the genuineness of the transaction and the identity and the creditworthiness of the share applicant company. We observe that the assessee was incorporated on 22.09.2012 and during the year, the total revenue of the company was Rs. 43,700/- as against this, the assessee company had received share capital of Rs. 40.34 crores for 40,340 shares issued at a premium of Rs. 9,990/- per share. Accordingly, we are of the view that the assessee has not been able to give any basis as to why the assessee company would command such a huge premium for issuance of share capital given the negligible operations carried out by the company. As creditworthiness of the share applicant company M/s. Attentive Share Trading Pvt. Ltd. has also not been established by the assessee. Further, so far as the genuineness of the transaction is concerned, no justifiable reason has been furnished as to how and on what basis the valuation of share premium of Rs. 9,990/- per share was arrived at. Therefore, looking into the instant facts we find no infirmity in the order of Ld. CIT(A) in holding that the genuineness of the transaction and identity and creditworthiness of the parties has not been established in the instant facts and accordingly, we uphold the order passed by Ld. CIT(A). We need to further mention that simply because a transaction has been carried out through banking channels or confirmation of the parties has been furnished would not make a non-genuine transaction into genuine one, and all the concerning facts of the case to be looked into in totality. Courts have taken a consistent position that the assessee is expected to establish proof of identity of creditors, capacity of creditors and genuineness of creditors in order to discharge onus cast on assessee. Mere production of party or confirmation from party will not suffice, unless the assessee is also able to substantiate their creditworthiness i.e. ability to advance the sum to the assessee. The Hon'ble Supreme Court in the case of Pr. CIT v NRA Iron Steel (P.) [ 2019 (3) TMI 323 - SUPREME COURT] held that that where assessee received share capital/premium, however there was failure of assessee to establish creditworthiness of investor companies, Assessing Officer was justified in passing assessment order making additions under section 68 for share capital / premium received by assessee company. The High Court of Allahabad in the case of Sagittraious Builders Colonisers [ 2011 (12) TMI 240 - ALLAHABAD HIGH COURT] held that not only the identity of parties, but their creditworthiness also needs to be established by the assessee. In the case of Sanjay Waman Co.[ 2001 (11) TMI 273 - ITAT PUNE] held that it is part of the duty of the assessee to furnish evidence regarding the creditworthiness of the creditors. Appeal of the assessee is dismissed.
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2023 (12) TMI 807
Revision u/s 263 - as per CIT assessment order has been passed by AO without making inquiries or verification with respect to the donation to political party claimed as deduction u/s 80GG - HELD THAT:- An inquiry made by the AO considered inadequate by the Commissioner of Income Tax, cannot make the order of the AO erroneous. In our view, the order can be erroneous if the AO fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the AO. It is AO's prerogative to make inquiry to the extent he feels proper. CIT by invoking revisionary powers u/s 263 of the Act cannot impose his own understanding of the extent of inquiry. There were number of judgments by various Hon ble High Courts in this regard. Delhi High Court in the case of CIT Vs. Sunbeam Auto [ 2009 (9) TMI 633 - DELHI HIGH COURT] made a distinction between lack of inquiry and inadequate inquiry. The Hon ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. The Hon ble Supreme Court in recent case of Shree Gayatri Associates [ 2019 (6) TMI 888 - SC ORDER] held that where Pr. CIT passed a revised order after making addition to assessee's income u/s 69A in respect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of such on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. AO completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revised order under section 263 of the Act on ground that AO had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's on-money transactions and Tribunal, thus, set aside the revised order passed by Commissioner. Revealed it is not the case that the AO has not made any enquiry. Indeed the Pr. CIT initiated proceedings u/s 263 on the ground that the AO has not made enquiries or verification which should have been made in respect of donation to the political party. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of material placed on record accepted the genuineness of the claim of the assessee. As also important to note that the learned PCIT referred the search proceeding carried out at the premises of the political party where it was discovered that said party involved in donation scam. We note that the search proceeding was carried out as on 2nd February 2021 whereas the assessment order in case of the assessee was passed as before the search proceeding. Therefore, in the given facts it was not possible for the AO to consider the finding of search. The fact of the party being involved in any scam was not before the AO. Hence, the formed his opinion based on the material available before him which in our considered opinion cannot be said as erroneous insofar prejudicial to the interest of the revenue. We hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Appeal filed by the assessee is allowed.
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2023 (12) TMI 806
Assessee in default u/s 201 - TDS u/s 194LBC - Income in respect of investment in securitisation trust - assessee trust has paid sum under the head Excess Interest Spread (EIS) to originator without deducting TDS thereon - as per AO assessee trust was liable to deduct TDS on the payment of yield to PTC holders (pass through certificates) u/s. 194LBC of the Act. - HELD THAT:- Once the originator, (AMPL) is not holding any PTC / SDI, it cannot be regarded as investor as per the terms defined in the aforesaid provisions elaborated above. It is only in a situation where the originator has subscribed to the PTCs of the securitization trust and then only it can be regarded as an investor. In case where minimum retention requirement commitment has met via any other permissible alternator, the originator does not have hold in instrument in the securitization trust and therefore, cannot be reckoned as investor. Once the originator has not subscribed in PTCs, but the MRR is maintained via cash collateral and in the form of ccollateralizing of excess receivables, then the first condition provided in Section 194LBC is not fulfilled and therefore, in our opinion there cannot be any obligation to deduct tax in terms of said Section. Cash flow received was to be utilized in the manner provided in the water flow mechanism of the trustee, the Excess Interest Spread (EIS) is the residual amount that flows to the originator and is not pursuant to any investment in the securitization trust or return of investment so made. Even assuming AMPL is to be treated as an investor, then also no tax was required to be deducted u/s. 194LBC on the EIS as the said payment was not in respect of investment made by AMPL in the PTCs issued by the assessee. The surplus here especially represents a reward earned by AMPL that its effort of creating pool of loan receivables which is capable of assigning. The MRR requirement was introduced by RBI for the first time in the year 2012 and prior to such there was no requirement for the originator to comply with MRR and even for such bills prior to 2012 EIS was paid to the originator. This further corroborates that EIS cannot be regarded as income in respect of investment. Thus, here in this case second condition is also not fulfilled and accordingly we hold that the TDS liability u/s. 194LBC is not applicable on EIS. The investor has been defined to mean a person who is a holder of any securitised debt instrument or securities or security receipts issued by the securitization trust. Once AMPL is not an investor and the conditions mentioned in Section 194LBC has not met, then the liability to deduct TDS does not trigger. As assessee had furnished form 26A however, it has been stated that when the process to generate form 26A was initiated there was technical glitches on the income tax portal and when income tax portal was migrated to new format in June 2021 and form 26A functionally was enable on the portal only in April / May 2022, therefore, the assessee was not able to file form 26A before the lower authorities, therefore, the same is being filed before the Tribunal in the form of additional evidences. Once, the form 26A has been filed and AMPL has discharged its liability for tax in respect of EIS, ostensibly in terms of proviso to section 201(1), assessee cannot be treated as assessee in default . As already held that there is no liability to deduct TDS in the present case, then whether form 26A was filed before the AO or not or has been filed before us due to the reasons as stated above is purely academic. Accordingly, we hold that assessee is not assessee in default and therefore, the entire payment and interest levied by AO is deleted. Assessee appeal allowed.
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2023 (12) TMI 805
Disallowance under the Capital Gain - Understated sale consideration on sale of property - material seized from the possession of the purchaser - CIT(A) deleted the addition - HELD THAT:- AO in the course of assessment relied upon a loose paper no.15 found from the possession of the purchaser at the time of search which reflected the sale consideration to be Rs. 40,00,00,000/- as against Rs. 36,00,76,400/- declared by the assessee. Based on material seized from the possession of the purchaser, the AO confronted the loose paper/document no.15 and also another loose paper/document no.54 to the assessee. The explanation of the assessee on the propriety of the sale consideration was called for. Summon to the purchaser was also simultaneously issued for personal deposition and to illicit information on contents of such loose paper found from their possession. AO in the assessment order has noted that neither summon to the purchaser were complied nor the assessee has offered any clarification on the issue. Apart from raising some counter question upon the AO, the assessee has not offered any worthwhile explanation. CIT(A) in first appeal however referred to pleading of behalf of the assessee and relied upon the contents of loose paper no.54 showing sale consideration as per registered deed and accepted the version of the assessee towards sale consideration of Rs. 36,00,76,400/- declared by the assessee. We observe that while holding in favour of the assessee, the CIT(A) has not discussed as to how a tangible document/ loose paper no.15 found from the possession of the purchaser in course of drastic action of search is unworthy of any reliance. The overwhelming characteristic of contents of such notings/loose paper showing part payments against the agreed sale consideration and resultant outstanding was totally ignored. CIT(A) has also not made any discussion on non-compliance of summons issued to the purchaser u/s 131 of the Act. A hand written document found from the premises of purchaser, without being disowned, called for due weight. CIT(A), to our mind, merrily accepted mundane and stereotyped defenses raised on behalf of the assessee in a perfunctory manner without seeking any comment from the AO and without traversing glaring facts. Thus, while the AO, to our mind, has discharged his quasi judicial duties in a just and proper manner, the CIT(A), on the other hand, has failed to adhere to legitimate expectation and has passed a nondescript and cryptic order without dealing with the fundamental aspects of the matter. It is surprising that a noting/ document reflecting not only sale consideration but also showing part payments and outstanding amounts has been found to be unworthy of any reliance. Scope of powers vested to the CIT(A) u/s 251 are co- terminus and co-extensive with that of AO exercising quasi judicial functions. The CIT(A) is not only an appellate authority but also possess the powers of an adjudicating authority similar to that of an AO. The powers of enquiry thus in a sense, runs concurrently. Proper appreciation of all material placed before him was incumbent in law. The CIT(A) ought to have made suitable enquiries on the proprietary of sale consideration declared in the light of document seized instead of brushing aside the action of the AO in a lopsided manner. The order of CIT(A) lacks comprehension. The CIT(A) has omitted to expound the facts in perspective while displacing the order of AO. The fallacy in action of the CIT(A) is quite visible and hence the impugned first appellate order cannot be countenanced in law. The appellate order of the CIT(A) is thus set aside and matter is restored back to the file of the CIT(A) for fresh determination of the issue in accordance with law after making enquiries or causing enquiry through the AO in this regard. Appeal of the Revenue is allowed for statistical purposes
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2023 (12) TMI 804
Validity of notices issued u/s 153C - No valid approval as per mandate of sec 153D as alleged on absence of application of mind by the ACIT - addition u/s 68 - HELD THAT:- Since the copy of the letter of DCIT Central Circle Noida to JCIT Central Range Meerut and approval order issued by JCIT Meerut includes names of present assessee Smt. Ruchi Garg at serial no. 6 and M/s M.G Metalloy Pvt. Ltd. at serial no. 10, therefore, we have no hesitation to hold that the legal contention of assessee envisaged in ground of cross objection one is squarely covered in favour of the assessee leading to inevitable invalidation of assessment orders as the formal and cosmic approval accorded u/s. 153D of the Act issued without application of mind to the relevant assessment orders and records has to be rendered un-enforceable in law and hence the same is quashed. It is pertinent to mention that the said conclusion also gets strong support from the judgement of Anuj Bansal [ 2023 (7) TMI 1214 - DELHI HIGH COURT ] as relied by the ld. AR. Our conclusion drawn for AY 2011-12 would also apply mutatis mutandis to other three appeals pertaining to AY 2012-13, 2013-14 2015-16 and consequently impugned reassessment orders in other three appeals are also quashed - Cross objection no. 1 is allowed
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2023 (12) TMI 803
Assessment u/s 153A - addition based purely upon the report of the DVO - whether the report of the DVO obtained after search action can be based for making the impugned additions in this case in the absence of any incriminating material during the course of search action? - HELD THAT:- The peculiar fact to be noted in this case is that no incriminating material was found during the course of search action at the premises of the assessee. The time period for initiating original scrutiny assessment u/s 143(3), by issue of notice u/s 143(2) of the Act, in this case has already lapsed on the date of search action, which means that the original assessment in this case stood completed and not abated on the date of search. The Hon ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] has settled the proposition of law that in case of no incriminating material is found during the course of search action and the assessment stood completed and not abated for that assessment year, then no addition can be made in the absence of any incriminating material found during the course of search action. Validity of reference to the DVO - We note that as per the relevant provisions of the Act, if the department wanted to act on the said document, the proceedings could have been initiated u/s 153C of the Act against the assessee by recording satisfaction by the Assessing Officer of the searched person. Thereafter, after receipt of the documents from the Assessing Officer of the searched person, the Assessing Officer of the assessee could have initiated the proceedings u/s 153C of the Act. However, the department did not act on the said documents. Even otherwise, the said slip was a third party document, which was never confronted to the assessee. The difference of the amount mentioned in the said slip was also meager as compared to the additions made by the Assessing Officer. Thirdly, since the said document was not sufficient enough to base additions in this case, the said document at the most could have been a trigger point to initiate search action in the case of the assessee. As per the facts on the file, the matter was referred to the DVO after the search action at the premises of the assessee and admittedly, no incriminating material whatsoever was found during the search action, however no incriminating material was found, which could have been stated to be a trigger point to refer the matter to the DVO. Report of the DVO is based on pure estimation of investment. The DVO has taken the CPWD rates and as noted above, the CPWD rates are on more than 25% higher side as compared to the state-PWD. there is force in the contention of the ld. AR that a very high profit rate of the contractor is embedded in the departmental rates and further a lot of difference in expenditure occurs between a work got done through government contractor and the work got done under self-supervision and self-purchasing of the material. As per the settled law, neither reference to the DVO in this case was valid in view of the various decisions of the Hon ble High Courts as noted above nor the addition in this case was justified based purely upon the report of the DVO which was a work of pure estimation of cost based on government rates. Since the assessee company s business has not commenced and that the construction of the building was done out of the capital invested by the shareholders and hence, there was no case of earning of any income, what to say of any income from undisclosed sources, therefore, the substantive addition in the hands of the assessee company was not justified. The issue is squarely covered by the various decisions including the decision of Bharat Engineering Construction Co. [ 1971 (9) TMI 14 - SUPREME COURT] referred by the assessee in the written submissions. The action of the CIT(A) in reversing the view point of the Assessing Officer on this issue, therefore, cannot be held to be justified. In view of this, the additions made in the case of the assessee cannot be held to be justified and the same are accordingly ordered to be deleted. Assessee appeal allowed.
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2023 (12) TMI 802
Income taxable India - taxability of receipts from consultancy services and reimbursement of expenses - characterizing receipts as Fee for Included Services ( FIS ) under Article 12(4)(b) of India USA Double Taxation Avoidance Agreement ( DTAA ) as well as section 9(1)(vii) - assessee is a non-resident corporate entity and a tax resident of Unites States of America ( USA ) - Receipts were not offered to tax on the ground that they are in the nature of business profit, hence, in terms with the treaty provisions, are not taxable in India in absence of a Permanent Establishment (PE) - HELD THAT:- As decided in own case [ 2023 (9) TMI 106 - ITAT DELHI] Tribunal having analyzed the nature and character of the services rendered and the provisions contained under Article 12(4)(b) of the tax treaty, has concluded that the receipts cannot be treated as FIS/FTS, either under the treaty provisions or under the provisions of the Act. T axability of receipts from business consultancy services , we observe, as per Example 7 of the Memorandum of Understanding to India-USA DTAA, a receipt cannot be treated as FTS merely because the service provider while providing consultancy services has used substantial technical skill and expertise. Because, while providing such services, the American Company is not making available to the Indian Company, any technical expertise, knowledge or skill etc. but is merely transferring commercial information to the Indian Company by utilizing technical skill. Thus, no hesitation in holding that the receipts in dispute are not in the nature of FIS under Article 12(4)(b) of India-USA DTAA. Taxability of reimbursement of expenses payment cannot be treated either as FIS under Article 12(4)(b) of the Tax Treaty or royalty. Addition being receipts from provision of support services as FIS - As per AO not only the services are in the nature of technical/consultancy services, but while rendering such services, the assessee had made available technical knowledge, know-how, skill etc. as the services rendered include training of personnel, thus receipts would qualify as FIS under Article 12(4)(b) of the tax treaty -whether the receipts from provision of support services would qualify as FIS under Article 12(4)(b) of India USA DTAA? - HELD THAT:- To qualify as FIS under Article 12(4)(b) of India USA DTAA, two conditions have to be satisfied. Firstly, the nature of services must be technical or consultancy and, secondly, in course of rendition of such services, there must be transfer of technology from the service provider to the service recipient, through which, the service provider makes available technical knowledge, know- how, skill etc. to the service recipient. In the present case as noted it is patent and obvious that from the year 2010 onwards, the assessee is providing support services to Bain India on regular basis. Had it been a case of transfer of technology from the assessee to Bain India by making available technical knowledge, know-how, skill etc. qua the services performed, it would certainly have enabled Bain India to employ such technical knowledge, know-how, skill etc. in performing such services independently without seeking aid and assistance of the assessee. There would have been no necessity for Bain India to continuously avail such services from the assessee since the year 2010 till the current assessment year. Had it been a case of transfer of technology in such a long duration Bain India certainly would have acquired the technical knowledge, know-how, skill etc. to perform such services on its own, without requiring the assessee to provide them. The very fact that Bain India is still dependent upon the assessee for the support services, establishes the fact that the assessee has not made available technical, know-how, skill etc. relating to such services to Bain India, the service recipient. At the time of hearing, assessee has made a statement at bar that prior to the impugned assessment year, in no other assessment year the AO has treated the receipts from support services as FIS and brought it to tax. Thus, on overall consideration of facts and materials on record, we are of the view that the Revenue has not brought on record any materials to establish the fulfillment of make available condition of Article 12(4)(b) of India USA DTAA. Thus services rendered are not in relation to any manufacturing activity. In this view of the matter, the receipts cannot be treated as FIS under Article 12(4)(b) of the tax treaty. The Assessing Officer is directed to delete the addition. As per AO assessee had settled the dispute under the Vivad Se Vishwas Scheme, 2020, thereby tacitly accepting the additions - This observations of the Assessing Officer is not, at all, relevant for deciding the issue, as, settlement of dispute under the Vivad Se Vishwas Scheme, 2020 cannot be construed to mean a tacit acceptability of the additions, in fact, the aforesaid position stands clarified by the CBDT Circular no. 09/2020, dated 22 nd April, 2020. Assessee appeal allowed.
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2023 (12) TMI 801
Disallowance u/s 14A r.w.r. 8D - Calculation by taking into consideration only the investments which have yielded exempt income - as argued CIT(A), instead of adopting the average value of investment of which income is not part of the total income i.e., the value of tax- exempt investment, chose to factor in the total investment itself - Assessee argued investments which are not capable of yielding the dividend income need to be excluded while calculating the exact disallowance under section 14A - HELD THAT:- As it is an admitted fact that assessee has earned exempt income of Rs. 3.90 crores. As such, as rightly pointed out by the ld. D.R., the ld. AO has to apply Rule 8D(2)(iii) of the I.T. Rules to compute the disallowance u/s 14A of the Act. However, the investment yielding non-taxable income has to be considered and not all the investment. This proposition has been held correct in the case of ACB India Ltd [ 2015 (4) TMI 224 - DELHI HIGH COURT] had held that for the purpose of section 14A, instead of taking into account total investment, the investment attributable to dividend (exempt income) was only required to be adopted and thereafter the disallowance was to be arrived. Thus we hold that while calculating disallowance under section 14A of the Act, only investment that have generated exempt income should be taken into consideration. Accordingly, we remit the issue to the file of ld. AO for limited purpose of re- computation of disallowance u/s 14A of the Act r.w. Rule 8D(2)(iii) of the I.T. Rules. It is needless to make it clear that while applying Rule 8D(2)(iii), an amount equal to one half percent of the average of the value of the investment that have generated exempted income should be taken into consideration and not the total investment. Appeal of the assessee is partly allowed for statistical purposes.
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2023 (12) TMI 800
Assessment u/s 153A/153C - addition on account of income from undisclosed sources, disallowance made u/s 37(1) of additional payment and disallowance u/s 40A(3) - HELD THAT:- Since the addition made by the AO is based on the incriminating documents seized during the course of search carried out on BPTP on 15.11.2007 and the documents seized relates to the assessee company, the AO has rightly invoked the provisions of Section 153C. Thus, the judgments relied upon by the assessee in the case of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT and others judgment are not applicable to the facts of the case. Also found in the order of the coordinate Bench in respect of other related companies relied by the Ld. AR, the Tribunal has specifically observed the finding of CIT(A) that the assessment order also nowhere records any finding that any of the documents seized belong to the assessee . However, in the present case, CIT(A) has given a categorical finding that the seized material belonged to the assessee company which is incriminating nature, in the case in hand the additions have been made based on the incriminating materials found during the search, therefore, the orders relied by the assessee are not applicable and we find no merit in Ground No. 1 of the Assessee, accordingly, Ground No. 1 of the Assessee is dismissed. Interest paid on post dated cheques - AO made addition regarding the interest paid on post dated cheques outside the books of accounts in cash - CIT(A) partly confirming the addition - HELD THAT:- Since, we have already upheld action of the A.O. in invoking the provisions of Section 153C of the Act, we find no merit in the submission of the Assessee. Further, considering the fact that the Ld. CIT(A) has elaborately considered the seized material and gave a factual finding which has not been controverted by the assessee even on merits, we find no error or infirmity in the order of CIT(A). Disallowance of additional payment - AO disallowed u/s 37 on account of additional payment for purchase of land - CIT(A) gave a direction to quantify the disallowance made by the A.O. and as per the directions while giving appeal effect, confirmed part addition - HELD THAT:-Jurisdictional High Court in the case of Group Company of the Assessee i.e. M/s Vasundrha Promoters Pvt. Ltd. [ 2018 (6) TMI 74 - DELHI HIGH COURT] as opined broad interpretation of the Explanation to Section 37(1) given by the Revenue is in the circumstances of this case not well founded. The other submission is that the such amount has to be taken as falling within the mischief of the said provision, in our opinion, is an incorrect premise. It is not every alleged violation of law, but such violation as results in a penal consequence, determined by that law, which is attracted by Section 37(1). The other interpretation would confer jurisdiction on matters beyond the Income Tax Act. The revenue authorities do not have such powers. Revenue Authority argued that this is to decide what constitutes infraction of other provisions of law. Disallowance u/s 40A(3) - cash payment made for purchase of land - assessee had received imbursement of all amounts paid related to transaction of purchase of land - It is the case of the Assessee that the amount paid on account of purchase of land was neither debited to profit and loss account nor claimed through computation of taxable income - HELD THAT:- By respectfully following the ratio laid down by the Co-ordinate Bench in the case of M/s. Westland Developers Pvt. Ltd. [ 2014 (12) TMI 254 - ITAT DELHI] and considering the fact that the Assessee has neither debited the amount of cost of land in P L account nor claimed any deduction in respect of cost of land through computation and finding the parity, we allow the Ground by deleting the disallowance.
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Customs
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2023 (12) TMI 799
Maintainability of appeal - low tax effect - appellant submitted that in view of Customs Notification dated 02.11.2023, issued by the Ministry of Finance, Government of India, these appeals may not survive for consideration, owing to low tax effect - Attachment and Recovery of Customs duties - Scope of the Definition Defaulter - HELD THAT:- The Civil Appeals are dismissed owing to low tax effect keeping the questions of law, if any, open, to be advanced in any other appropriate case.
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2023 (12) TMI 798
Levy of penalty u/s 114AA of the Customs Act, 1962 on the firm as well as on Director - appellants sold the stock of duty-free gold in the open market (domestic) which was procured under the condition to be used for the export of the jewellery - HELD THAT:- The very fact that the customs authorities acted on the export obligation papers, as submitted by the appellant, is evident that export of jewellery by the appellant has taken place. Consequently, the conditions of the exemption notification read with the relevant circular and FTP stands fulfilled. Once the appellant had exported the jewellery and submitted all the proof of exports to the bank / importer and relying on those documents of export the customs authorities had not even doubted on the genuineness, the appellant cannot be held responsible for any violation so as to be charged with any kind of penalty under the Act. The reasoning adopted by the revenue is that as per the tally sheets on certain days, the appellants were having stock of only duty-free gold and they did not have any stock of duty-paid gold and therefore the inference would be that they have diverted the duty-free gold in the market. The submissions of the revenue deserves to be rejected in view of the Circular No. 23/2018 dated 23.07.2018 issued by the CBIC, clarifying that there can be no one-to-one correlation between the consignment of imported precious metal and the export of jewellery due to the homogeneous nature of precious metal. The said circular is binding on the department and resolve the doubt raised by them in this case. Once it is held by the adjudicating authority that the demand of duty would arise only if the condition of export of jewellery is violated, the necessary implication is that the exporter has fulfilled its obligation of exporting the gold jewellery of equivalent quantity of gold procured by them from the nominated agency. It is not a case where the appellant has submitted any false or incorrect undertaking so as to attract the provisions of section 114AA of the Act - The adjudicating authority while imposing the penalty on the appellant under section 114AA had proceeded on assumptions and presumptions that the jewellery has been made from the gold purchased from the domestic market on the basis of VAT invoice and depending on price fluctuation, they sold the gold in the domestic market and therefore they have not complied with the undertaking, resulting in giving a false and incorrect declaration. The said reasoning is not sustainable as it is not based on any evidence. There is no ground for imposing penalty under section 114AA of the Act - impugned order imposing penalty of Rs.5 lakhs on M/s Derewala Industries Ltd., and Rs. 1 lakh on Shri Yogendra Garg, Director of M/s. Derewala Industries Ltd., under section 114AA of the Customs Act, 1962 is, therefore set aside - Appeal allowed.
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2023 (12) TMI 797
Classification of imported goods - Automotive Diesel Fuel misdeclared as Mixed Glycol or Base Oil - restricted goods or not - validity of the test reports on the ground that the samples have not been tested on all the 21 parameters specified in IS:1460:2005 (BIS standard for Automotive Diesel Fuel) - undervaluation of imported consignments - misdeclaring the net weight of the consignments to evade proper payment of customs duty - Penalty under section 112(a) and section 114AA. Classification of imported goods - HELD THAT:- According to the appellant, the two reports have given different findings for same parameters and since there is no other corroborative evidence, the impugned order is unsustainable. There are no merit in the submissions made by the learned Counsel for the simple reason that test have been conducted by highly specialized government laboratories, i.e., CRCL and SFPL and no fault can be found on the test reports submitted by them. From the two reports, it is clear that the impugned goods are Automotive Diesel Fuel and conform to the standards of IS:1460:2017 and therefore the challenge that the samples have not been tested on all the 21 parameters is baseless and does not establish that the goods are not Automotive Diesel Fuel. The controversy that the goods have not been tested on all 21 parameters would not really make any difference and even on the basis of limited parameters the identity of the goods stands established in view of cogent and substantive evidence in the form of test reports by the two independent government laboratories. These test reports cannot be said to be incomplete or inconclusive. Consequently, the goods in question imported by the appellant were mis-declared as they were not Mixed Glycol and Base Oil but were Automotive Diesel Fuel, the import whereof is restricted only by State Trading Enterprises in terms of the Import Policy, 2017. Therefore, the impugned goods being Automotive Diesel Fuel was covered under CTH 2710 1944 and not under CTH 2710 1971 as per the declaration made by the appellant. The veracity of these test reports given by highly technical experts is not open to challenge on frivolous grounds of cross examination sought to be raised by the appellant and as rightly noted by the adjudicating authority that it is only an attempt by the appellant to delay the proceedings. The statement of the proprietor has been recorded under Section 108 which is admissible in evidence, wherein he accepted the test reports and refused to comment thereon and in that view no fruitful purpose would have been served by allowing cross examination. Moreover, the said statement has never been retracted by him. Valuation of the impugned goods - HELD THAT:- In the present case, on the basis of the intelligence, the data of live import of subject goods were examined in respect of four individual importers, namely, M/s Mangli Enterprises, M/s Vishal Oil and Lubricants Co., M/s. Shobhag International Private Ltd and M/s Petro Lubes India Ltd. - the value declared by the appellant of Rs.66,31,08,429/- was rejected and the same was redetermined at Rs. 79,57,301/- under Rule 4 and 5 of the Customs Valuation Rules, 2007, read with Section 14 and Section 17(4) of the Customs Act. I, therefore, uphold the demand on account of value difference as calculated by the Authority. Mis-declaration of goods - HELD THAT:- The appellant had mis-declared the goods, and therefore mis-classified them, which resulted in misdeclaration of the value of the goods, the authorities below rightly held that the goods were liable to confiscation under section 111(d)(f) and (m) of the Customs Act. The said goods are restricted goods as only State Trading Enterprises could import them and the appellant had no authorization to import the restricted goods. Since the import is contrary to the restrictions placed on such imports by the Government of India, hence, the seized goods have become prohibited goods in terms of section 2 (33) of the Customs Act and therefore order of absolute confiscation in the present case is justified - Also, considering the fact that the impugned goods are highly inflammable and require expertise to handle them, requiring special storage facilities, the adjudicating authority rightly rejected the redemption of these goods and ordered absolute confiscation. Penalty under section 112(a) and section 114AA - HELD THAT:- The Adjudicating Authority had imposed penalty of Rs. 35 lakhs under Section 112 (a) and Rs. 20 lakhs under Section 114AA of the Customs Act, however, the Appellate Authority reduced the same to Rs. 15 lakhs and Rs 10 lakhs under section 112(a) and 114AA respectively, considering that the section prescribes only the upper limit of penalty that can be imposed and since the goods have been absolutely confiscated, the penalty needs to be moderate - the impugned order agreed upon that the penalty as imposed by the adjudicating authority was excessive. Appeal dismissed.
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2023 (12) TMI 796
Classification of imported goods - Rubber Processing Oil (RPO) - classifiable under CTH 27101990 as claimed by the appellant or under CTH 2707 99 00 as per final assessment ordered by the department? - country of origin - Singapore or UAE where the appellant has not claimed any preferential rate of duty? - penalty - Enhancement of declared value twice. HELD THAT:- The submission of the appellant is that test report of Customs laboratory, Kandla does not mention, the method adopted by customs laboratory for testing the sample. Therefore, the said test report cannot be qualified as evidence to decide the classification - as against the above test report dated 26.09.2012. The Quality Certificate No. TOP 2012/COQ-148 dated 02.08.2012 provided by the supplier M/s. The Oceanic Petroleum Source Pvt Ltd., Singapore shows aromatic content as 35.8 measured by adopting ASTM D2140 method. Moreover, accredited laboratory namely Geo Chem also vide report dated 06.10.2012 reported aromatic content is 35% and since 50% shown by the custom laboratory test report which does not mention method of testing sample, preference has to be given to the Geo Chem test report dated 06.10.2012 coupled with Supplier's quality certificate according to which the aromatic content being 33.08% - 35% is less than the non-aromatic content - the Rubber Processing Oil (RPO) is correctly classified under CTH 27101990. Country of Origin - HELD THAT:- The appellant had placed order with Oceanic Petroleum Source Pvt. Ltd, Singapore, who had shipped the goods from Malasiya. The Country of origin was shown in the invoice as UAE. The same was held as Malasiya by the lower authority, by relying on statement of Shri Hemant Shah, Director of appellant - it is found that, it is submitted that the appellant has not claimed any preferential rate of duty on the basis of declaration regarding country of origin. Penalty - HELD THAT:- Without going into the fact that, which is the correct county of origin, since the appellant has not claimed any concession on the basis of country of origin the issue is only of aromatic content and having no revenue implication. Therefore no consequential penalty is sustainable. Enhancement of the value of the imported goods twice, from USD 500 PMT(C F Kandla) to USD 531.500 PMT(C F Kandla) - further enhancement to USD 585 on the basis of the copy of invoice received from shipping agent - HELD THAT:- Once the value was enhanced from USD 500 PMT to USD 515 PMT , which was accepted by the appellant. However, the value was further enhanced to USD 585 only on the basis of one invoice bearing No. TOP SPL /CP/34 dated 09.07.2012 produced by the shipping agent - the assessable value is determined by adding freight @20 % and insurance @ 1.125%. We find that the appellant tendered copy of Bill of Lading No. MYPKGINIXY517631 dated 12.07.2012 for the subject goods confirming that freight was pre-paid. Therefore, when the freight is pre-paid and inclusive in the price, there is no requirement to add element of freight @20% for USD 585. It is also observed that about the invoice produced by the shipping line, the appellant had no knowledge and it is not also known when such invoice was produced before custom authority at the port of export - enhancement of the value from USD 531 to UD 585 is without any basis and the same is not sustainable. The impugned order so far it is against the appellant is set aside and consequential penalty imposed on Shri Hemant Shah, Director is also set aside. Accordingly, the appeals are allowed
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2023 (12) TMI 795
Classification of imported goods - TMR Mixer Wagon for KFL Densified Fodder Plant - to be classified under Chapter 8436 99 00 or under CTH 8716 20 00? - appellant had accepted the assessment order without Any dissent in writing it had attained finality in terms of section 17 of CA - HELD THAT:- The issue is no more res integra as the Hon ble Supreme Court in the case of ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT] has observed as that There is a specific provision made in Section 17 to pass a reasoned/speaking order in the situation in case on verification, self-assessment is not found to be satisfactory, an order of re-assessment has to be passed under Section 17(4). In the present case, the assessment is made against the declaration made by the appellant and inspite of recording the protest made by the appellants against such assessment, no speaking order was issued. As observed by the Hon ble Supreme Court, even if there is no lis, speaking order is mandatory once the assessment was challenged under protest. The matter is remanded to the Adjudicating Authority to decide the issue on merits - Appeal allowed by way of remand.
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2023 (12) TMI 794
Confiscation - redemption fine - penalty - import of musk melon dried seeds - restricted goods or not - precondition for resumption of title to the goods for re-export - HELD THAT:- The goods, being agricultural products, are subject to conditions of import which, if diluted, may cause outcomes that may not be particularly palatable to the agricultural interests of the country. Accordingly, there are no reason to entertain the plea that the restriction should be ignored. The absence of authorization to import musk melon dried seeds draws the consequence of confiscation under section 111(d) of Customs Act, 1962. Instead of regularization, which is the aftermath of such confiscation and consequential fiscal restitution, the imported goods had been deemed as not fit for home consumption and, therefore, ordered to be re-exported. There are no reason to interfere with barring the entry of goods into the territory of India. It was on record that the amendment of the erstwhile policy on free import of the impugned goods was effected in April 2021 and the impugned goods had been shipped in the same year. It is quite possible that the appellant was in the dark about the changes in the policy and, considering that the goods have not been permitted for clearance for home consumption, it would be unjust to burden the goods with the detriments of redemption fine and imposition of penalty. While holding the goods liable for confiscation under section 111(d) of Customs Act, 1962 and, as the same are directed to be re-exported but for which the central government would be saddled with possession of such prohibited goods with no evidence of deliberate contravention of restriction, it is deemed appropriate to set aside the redemption fine. Likewise, the penalty is also set aside - appeal disposed off.
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2023 (12) TMI 793
Classification of imported goods - insoluble Sulphur with trade name Crystex HS OT 20 - to be classified under CTH 2503.00.90 of Customs Tariff Act, 1975 or under CTH 3812.30.30? - appeals rejected without deciding the issue on merits taking the recourse of Section 17(5) of the Customs Act, 1962 - HELD THAT:- In the present case, it is found that after rejection of the classification of the appellant declared in their Bills of Entry, they paid the duty under protest and preferred appeal before the learned Commissioner(Appeals). Therefore, the learned Commissioner(Appeals) ought to have decided the appeals on merits instead of rejecting the same by observing that the appellant has accepted the re-assessment. Further, the Hon ble Supreme Court in the case of ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT] has held that Revenue as well as appellant can prefer an appeal against the order of the assessment. The impugned orders are set aside and the case is remanded to the learned Commissioner(Appeals) to decide the issue of classification on merit, after affording an opportunity of hearing to the appellant - Appeals are allowed by way of remand.
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2023 (12) TMI 792
Levy of penalty on appellant u/s 114 (i) and 114 AA of the Customs Act, 1962 - export of Bentonite Powder - exporter mis declared the goods - assisting / abetment of export of Muriate of Potash - HELD THAT:- The allegation by the department is that appellant assisted the main accused in illicit export of goods. Moreover after filing shipping bill, routine examination of the goods was done and Let Export order was also issued. There is no evidence available on record to establish that the appellant had knowledge regarding export of Muriate of Potash in the guise of Bentonite Powder. Based on the fact that the Appellant had prepared the documents without the signature of the exporter, no conclusion can be drawn that Appellant was aware about the presence of prohibited goods. While considering the very same issue, this Tribunal set-aside the penalty on the ground that it is not the case of the department that driver or agent or person in-charge of the vehicle had knowledge nor such ground has been taken in the show-cause notice . There is no concrete admissible evidence to prove that the appellant had facilitated the mis-declaration of the goods so as warrant penalty on the Appellant. Considering the same, penalty imposed on the Appellant both under section 114 (i) and 114 AA of the Customs act, 1962 are set aside - Appeal allowed.
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2023 (12) TMI 791
EPCG Scheme - fulfillment of export obligation partly - evasion of customs duty - denial of benefit of Notification No. 160/1992-Cus dated 20.04.1992 - Scope of the order passed in remand back proceedings - HELD THAT:- There is no provision in the notification for giving any such benefit. Notification 160/92 dated 20.04.92 stipulates that the importer undertaking an export obligation equivalent to 4 times the CIF value of the capital goods over a period of five years shall import the goods at concessional rate of 15% . The Tribunal in Ajawat Industries Ltd. Versus Commissioner Of Customs, Bangalore [ 2006 (6) TMI 448 - CESTAT, BANGALORE ] on appeal against this order had clearly observed that the extent of export obligation fulfilled should be taken into consideration towards the duty liability in view of the amendment to the notification No.160/92 dated 20.04.92 with retrospective effect by section 115 of the Finance act read with entry No.2 of the eighth schedule . When the respondents filed an appeal against this order of the Tribunal, the Hon'ble High Court of Karnataka held that if the revenue is aggrieved by the order of the Tribunal, the revenue has to file an appeal before the Hon'ble Supreme Court since the dispute is in relation to the rate of duty leviable on the assessee in view of two different notifications . The Tribunal in its final order had categorically observed that there is no justification for holding the goods liable for confiscation as there was no willful non-compliance of the notification, the order of confiscation by the Commissioner is not justifiable when the remand order was purely for re-quantification of demand of duty. Therefore, confiscation of the goods along with the redemption fine set aside. Further regarding interest and penalty, this Tribunal had taken a clear view and held that there is no provision for interest at that relevant time and set aside the demand for interest. The adjudication authority ought to have followed the findings given by this Tribunal by quantifying the extent of duty without ordering confiscation of goods, imposing interest and penalty. Hence the Adjudication Authority violated the terms of the remand order. Regarding non-consideration of the extent of export obligation, once the Tribunal has given a finding that the appellant complied with the export obligation, Adjudication authority ought to have quantified the duty liability of 40% against goods imported under License No. 3031914 dated 04.07.1994 as the appellant fulfilled export obligation to the extent of 60% and quantify the duty liability of 85% against goods imported under license No. 2183783 dated 04.01.1994 as the appellant completed export obligation of 15%. The appeal is allowed so far it exceeds the re-quantification of duty liability with consequential relief if any as per law. Confiscation and redemption fine along with interest and penalty also set aside.
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Corporate Laws
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2023 (12) TMI 790
Seeking permanent prohibitory injunctions restraining the defendant (including his attorneys, assigns, successors-in-interest, agents, authorized persons or anyone acting for and/or on his behalf) from alienating, transferring, selling, creating any encumbrance, third-party rights or any other interest of any kind - Order XXXIX Rule 1 and 2 of the Code of Civil Procedure, 1908. Documentation issued in respect of the transfer of shares to the Defendant - delivery of the shares and the subsequent conduct of the parties - HELD THAT:- Any entry in the register of shareholders of a company is statutorily required to be authenticated in the manner prescribed in the aforesaid rule. There is a statutory presumption that such authentication was carried out in the present case, during which process, there is no plea of any doubt being expressed or any objection being raised by the plaintiff or any other person as to the inclusion of the defendant in the register of members of the concerned company - the transfer of shares in favour of the defendant and the subsequent inclusion of the defendant in the register of members of the plaintiff was pursuant to a statutorily recognised process. For the purpose of the present application, there can be no presumption against the validity of the transfer in favour of the defendant pursuant to a statutorily mandated process, especially when the execution of Form SH-4 by the plaintiff is admitted and it is not the case of the either of the parties that the concerned company has not adhered to the provisions of under the Companies (Management and Administration) Rules, 2014 and the Companies (Share Capital and Debentures) Rules, 2014. In MANECKJI PESTONJI BHARUCHA AND OTHERS VERSUS WADILAL SARABHAI AND COMPANY AND OTHERS [ 1926 (3) TMI 1 - MADRAS HIGH COURT] , the Privy Council was concerned with a situation where blank transfer Forms had been executed by the registered holders of shares of a company. Admittedly, in all these agreements, to which both the plaintiff and the defendant were parties, the defendant was represented to be as a shareholder of the concerned company. It is completely untenable for the plaintiff to suggest that the defendant was wrongly portrayed as a shareholder in all these agreements or that the plaintiff was induced to sign these agreements. There is no merit in the contention of the plaintiff that the contract for sale of shares did not fructify in the sense contemplated under the Sale of Goods Act, 1930, and/or that title therein did not pass to the defendant. This Court is not inclined to grant an interim injunction in favour of the plaintiff/applicant, as prayed for. However, considering that the shares of the defendant in question are subject matter of the present suit and considering that the plaintiff has also made an alternative prayer seeking damages, it is directed that in case, the defendant proposes to transfer/deal with/alienate the shares in question, prior intimation with regard to any such proposed transaction(s) together with details thereof, shall be provided to the Court. Application disposed off.
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2023 (12) TMI 789
Execution of mutual will revoking earlier mutual wills - refusal to grant injunction against BCL as being the third party to the testamentary suit - The core of the dispute is the will executed by PDB which has given rise to a spate of litigation before this court and even after the lapse of more than 18 years after the demise of PDB, the litigation has not seen the end of the day. Powers of Probate Court under Section 247, Succession Act - Question of title - HELD THAT:- It is well-settled that a Probate Court or a Letters of Administration Court cannot finally adjudicate issues of title. It is purely within the domain of a competent Civil Courts to decide such issues. However, in order to decide an application under Section 247, Succession Act, the Probate Court may very well decide, prima facie, the extent of the Estate of the deceased. For such purpose, the Probate Court can definitely decide, although tentatively, as to the extent of the property of the deceased. Such adjudication on the Estate of the deceased, however, does not tantamount to a final adjudication of the title over the property. In KANWARJIT SINGH DHILLON VERSUS HARDYAL SINGH DHILLON AND ORS. [ 2007 (10) TMI 675 - SUPREME COURT ] the Hon ble Supreme Court held that it is well settled law that the functions of a probate court are to see that the will executed by the testator was actually executed by him in a sound disposing state of mind without cohersion or undue influence and the same was duly attested. It was therefore not competent for the probate court to determine whether the person had or had not the authority to dispose of the suit properties which he purported to have bequeathed by his will. The probate court is also not competent to determine the question of title to the suit properties nor will it go into the question whether the suit properties bequeathed by the will were joint ancestor s properties or acquired properties of the testator. Powers of Probate Court under Section 247, Succession Act - Third party injunction - HELD THAT:- This sub issue relates to third party injunctions which can be further sub-divided and the power of the court to grant injunction is also required to be considered. In Nirod Barani Debi Versus Chamatkarini Debi [ 1914 (1) TMI 1 - CALCUTTA HIGH COURT] , the Hon ble Division Bench held that it is essential for application of Order 39 Rule 1 CPC that the property dispute in the suit is in danger of being wasted, damaged or alienated by a party of wrongfully suit in execution of a decree. Consequently, the application for injunction must satisfy the court that the proceedings is a suit in which there is property in dispute and the property is in danger of being wasted, damaged or alienated. It was further held that the question, consequently, arises whether the proceedings for the probate of a will or for letters of administration may rightly be held to be a suit in which property is in dispute. In the opinion of the court, the answer was in the negative. While considering whether the companies can be joined as the party defendant, the court held that the noticee companies can neither be joined as a party defendant nor can any order of restrain be passed against such companies who is not a party to the proceedings. Further the court held that it cannot extend its jurisdiction to a person who is not a party to the present proceedings. Further the probate court cannot extend the jurisdiction over a person or entity who is not a party to the proceedings. Further it was held that since the noticee company being not the party to the proceedings no order can be passed against it. Extent of PDB Estate - Only shares or controlling interest - HELD THAT:- To decide the extent of the Estate of the deceased, the court has to ascertain the powers which could be exercised by the deceased testatrix herself. The powers of the probate court while appointing an administrator pendent lite (APL) are co-extensive with the powers of the testator/testatrix. As a necessary corollary, the powers of an APL formed by the probate court cannot exceed such limits - With regard to the shares in several companies, PDB s powers were restricted to her ownership of the particular shares in different companies as mentioned in the affidavit-of-assets. In such context, the expression controlling interest should not be confused with personal influence of the testatrix. Whatever might have been the personal influence of the deceased testatrix, the same was intangible and restricted to herself. The charisma or personal influence of the deceased might have helped her in carrying out her will in the affairs of the companies, but do not comprise of tangible incidents of her property or Estate - it cannot be said that her personal influence is, in any manner, a part of the Estate. The Probate Court can direct the APL, personally or through its appointees, to register itself or its agents as members of the companies in the capacity of owners of the shares actually owned by PDB in such companies. Upon such registration, the APL and/or its nominees would function as shareholders in such companies and have all the incidental rights and controlling power which PDB would have had by virtue of such shareholdings, including voting rights, participation rights in decision-making processes and meetings, etc. However, the Probate Court cannot go an inch further than that in interfering with the business of the companies. If the promoter hold majority shares then they are several remedies prescribed under the Companies Act to enforce the decision which by not approving the decision of the Board of Directors and they may also initiate process of removal of the Directors and appointment of the Directors of their choice in the place of the main directors. But no such step can be taken without following provisions of the Companies Act. That the court in a probate proceeding cannot pass any directions encroaching upon the jurisdiction of the Board of Directors or taking over of the manufacturing units by purchasing its shares. Further the court categorically held that the APL should be made agree so that the APL can exercise its power of control over the management of BCL by following provisions prescribed under the Companies Act and in case APL fails to discharge its duties, probate court can pass necessary directions upon APL for taking steps in accordance with law. Further the probate court at best can pass necessary directions upon APL to initiate appropriate proceedings before the appropriate forum for seeking appropriate reliefs and in accordance with law and it is only that appropriate forum which can pass appropriate order after adjudicating the rights of the parties including that of a stranger. Thus, it is clear that it is extent of the shareholding which enables the shareholders to control the company and any other interpretation will fall foul of the definition of control as defined under Section 2(27) of the Act. Extent of PDB Estate - Controlling interest meaning - HELD THAT:- Controlling interest in the present context, can only mean the incidental rights, including voting rights, rights of participation in shareholders meetings and other decision-making processes which PDB would have had by virtue of her shareholdings in the respective companies. Extent of PDB Estate - Whether the issue of extent of Estate barred by res judicata and/or barred by estoppel against HVL - HELD THAT:- An adjudication in a probate proceeding or a letters of administration proceeding cannot be viewed through the myopic lens of res judicata between the parties. Even if an issue is decided finally between HVL and Birla faction, the same does not operate against a Probate Court while adjudicating issues, since the final judgment of a Probate Court would not be restricted to the parties but would operate against the world at large - Hence, the Probate Court s decisions cannot be decided from the limited perspective of res judicata or estoppel between the parties. Thus, the Probate/Letters of Administration Court has an additional responsibility to independently weigh evidence and adjudicate carefully on all issues before it, prima facie or final. Viewing from such perspective, the question of res judicata or estoppel between the parties cannot restrain the Probate Court from independently assessing the question of extent of Estate of the deceased testatrix. None of the previous adjudications pertained to a final decision on the application under Section 247 of the Succession Act. Since this Court is sitting in appeal over a final decision by the learned Single Judge on the application under Section 247 of the Succession Act, by operation of the principles of Order XLI of the Code of Civil Procedure, the Appellate Court has equivalent powers of finally deciding the said application, co-equal with the learned Single Judge which was deciding the same. Hence, while finally deciding the application for appointment of Administrator Pendente Lite, this Court is not fettered by previous observations by different interlocutory courts at different points of time. APL (Administrator Pendente Lite) powers - How far APL can interfere in Company affairs - HELD THAT:- The charter of the APL under Section 247 of the Indian Succession Act is to protect and preserve the interest of the estate and can deal with the same, short of distributing the same - the testamentary court, in the present case, can and should clothe the APL with the powers to enlist themselves as members of the companies where the testatrix PDB held shares, in the capacity of shareholder, and also exercise each and every power, including voting rights, associated with shareholding. APL (Administrator Pendente Lite) powers - Whether APL decisions have to be unanimous or majority view prevails - HELD THAT:- The theory of referring to the court each and every day-to-day decision in the functioning of the APL as a shareholder/member of the companies is not workable. Conflict is a foregone conclusion in the present composition of the APL, since there has not been a single meeting of the APL in recent past where there has been unanimity among all three members. Of course, major decisions (to be decided by the third member) are to be referred to the testamentary court for formal orders/decisions - In any event, since the APL is not an adjudicatory authority and cannot act so, there does not arise any question of the testamentary court delegating its powers to it. The APL shall strictly act in accordance with the observations above, limited to its role as shareholder with ancillary functions including voting rights, which are to be used judiciously to protect and preserve the interest of the estate during pendency of the Letters of Administration suit. The order of the learned Single Judge is modified to the above extent. Liberty is given to the APL and the parties to approach the testamentary court taking up the letters of administration suit if need be and where there are serious doubts - Application disposed off.
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2023 (12) TMI 788
Oppression mismanagement - removal of Petitioner No. 1 from the directorship of the Respondent No. 1 Company - Section 241 242 of the Companies Act, 2013 - HELD THAT:- The Impugned Order was passed by the Tribunal on 13.10.2020, whereas later in 2021 the landmark Judgment on oppression mismanagement covering several issues including quasi-partnership aspects was passed by the Hon ble Supreme Court of India in case of Tata Consultancy [ 2021 (3) TMI 1181 - SUPREME COURT] and obviously the Tribunal did not have the benefit of clear rulings given in the Tata Consultancy. It was held in the said case that The architecture of Sections 241 and 242 does not permit the Tribunal to read into the sections, a power to make an order (for reinstatement) which is barred by law vide Section 14 of the Specific Relief Act, 1963 with or without the amendment in 2018. Tribunal cannot make an order enforcing a contract which is dependent on personal qualifications such as those mentioned in Section 149(6) of the Companies Act, 2013 - Tata Consultancy Judgement has given clear rulings which are required to be followed by all the Courts/ Tribunals. It is already noted that the judgment of Tata Consultancy came after passing the Impugned Order by the Tribunal as such the Tribunal interpreted the facts and law in the original application without wisdom of Tata Consultancy judgment. The Tribunal will have to re-examine the original petition in light of the judgement of Hon ble Supreme Court of India in case of Tata Consultancy as prima-facie, the Tribunal has taken stand not in accordance with the Tata Consultancy judgments which dealt with various issues as in present case like what are instance of oppression mismanagement, removal and subsequent reinstatement of Director, quasi-partnership character of the Company etc. The Impugned Order is set aside and case remanded back to the Tribunal to have a fresh look on the merit after hearing both the Parties in view of the judgment of the Hon ble Supreme Court of India given in Tata Consultancy - matter on remand.
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FEMA
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2023 (12) TMI 787
Offence under FEMA - petitioner had made foreign remittances to different foreign companies under the guise of payments against the bogus import of services and that these amounts are held outside India by the related foreign companies of the petitioner - petitioner is engaged in the business of providing unsecured short-term loans to its customers/borrowers in India via its Digital Application based platform called the CashBean - As contended that the petitioner had engaged a Hong Kong based Company, for procurement of an IP licence and had entered into a Software Licence Agreement with it for providing IP and Digital Lending Software Licence, that is, the CashBean App to the petitioner for the Indian digital micro-lending market. As alleged petitioner had made foreign remittances to different foreign companies under the guise of payments against the bogus import of services and that these amounts are held outside India by the related foreign companies of the petitioner HELD THAT:- Section 37A(1) of the Act states that if the Authorised Officer prescribed by the Central Government has reason to believe that any Foreign Exchange, Foreign Security, or any Immovable Property, situated outside India, is suspected to have been held in contravention of Section 4 of the Act, he may, after recording the reasons in writing, by an order, seize value equivalent thereto situated within India. It need not be emphasised that the power of seizure is of far-reaching consequences and, therefore, the pre-conditions stipulated in Section 37A(1) of the Act must be scrupulously complied with. The reason to believe must be based on tangible material, and as held by the Supreme Court in Radha Krishan Industries [ 2021 (4) TMI 837 - SUPREME COURT] should not be based on the imaginary grounds, wishful thinking, howsoever laudable that may be The foreign exchange transactions can be bifurcated into Current Account Transactions and Capital Account Transactions , as defined in Section 2(j) and 2(e) of the Act respectively. The transactions in question, which have been made the basis of the seizure order, can be categorised as Current Account Transactions . As alleged petitioner has contravened the provisions of Section 4 of the Act, inasmuch as it holds foreign exchange outside India through its group entities and such foreign exchange has been transferred to such accounts by way of bogus transactions with its group companies - Violation of Section 10(6) of the Act cannot be alleged merely because, according to the respondents, the commercial arrangement entered into by the declarant under Section 10(5) of the Act does not appear to be commercially prudent to the respondents, but at the same time, the respondents in the present case are using the above assertions in support of their conclusion that the amount of foreign currency has been clandestinely transferred by the petitioner in the name of licence fees and other charges to the foreign entities and are, in fact, being held by the petitioner itself in the bank accounts of such foreign companies which are related to the Opera Group. In this manner, the respondents alleged violation of Section 4 r.w.s.10(6) of the Act and claim to satisfy the condition set out in Section 37A of the Act, which requires the foreign exchange to be held outside India and which is suspected to have been so held in contravention of Section 4 of the Act. The Impugned Order is to be based merely on reason to believe that any foreign exchange situated outside India is suspected to have been held in contravention of Section 4 of the Act by the person against whom the order under Section 37A of the Act is being passed. At the stage of passing the order under Section 37A(3) of the Act, the Competent Authority is not to arrive at a conclusive finding on the above. Though it may be true that the reason to believe must also be based on certain tangible material and should be reasonable and not be arbitrary or whimsical, at the same time, the Court in the exercise of its powers under Article 226 of the Constitution of India cannot act as an appellate authority and substitute its own opinion for that of the Competent Authority. In the present case petitioner has been unable to make out such a case which would warrant an interference of this Court with the Impugned Order. The allegations of the respondents and the defence of the petitioner would need to be tested by the Adjudicatory Authority. On facts, it cannot be said that the action of the respondents is ultra vires the Act or so whimsical as to warrant an interference of this Court at this stage, when the proceedings are pending before the Adjudicatory Authority. This Court is also cognizant of the fact that pursuant to the Impugned Order, the respondents have also filed a complaint before the Adjudicating Authority. This Court has been informed that substantial hearings have already taken place before the Adjudicating Authority on such complaint, and the same is likely to be disposed of in near future. This adds as a further reason for this Court not to exercise its discretionary powers under Article 226 of the Constitution of India. Petition dismissed.
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2023 (12) TMI 786
Offence under FEMA - bidding process for the IPL franchise organised by the BCCI - arrangement of the flow of funds by Respondents was made to route the investments through Mauritius as the funds flowing into India from UK was not permissible - maximum penalty imposed - Special Director indicates that although satisfaction in respect of contravention of the provisions of the FEMA has been recorded, there is no explanation or any discussion in respect of the basis on which maximum penalty has been imposed - Tribunal has recorded a that an exorbitant penalty has been imposed upon the individuals arrayed without recording any findings on the specific roles of said individuals - Whether interference by the Tribunal in the order of the Special Director is justified on the touchstone of the doctrine of proportionality? HELD THAT:- Overall, the Tribunal has found that firstly, no loss has been caused to exchequer; secondly, the remittances have come into India and remained in India. This is not a case where any foreign exchange has gone out of India; thirdly, the remittances were utilised for the purposes for which they were intended and there is not even an allegation of utilization of the money for extraneous purposes; fourthly the entities have not gained any benefit whatsoever and in fact suffered considerable financial detriment as shares having beneficial transferable interest have not been issued against remittances to the said entities for the past 11 years; and fifthly, 'Rajasthan Royals' franchise has participated in the IPL since 2008 with no other allegation of contravening any FEMA provisions or regulations made thereunder. Thus, the Tribunal found no justification in the order passed by the Special Director for imposing maximum penalty on Respondents and contraventions are categorized at best as technical and venial. In the instant case, there is a finding of fact by the Tribunal and all the relevant facts have been considered in a proper light. The Tribunal has arrived at its conclusion on the basis of evidence to support and after analysing the said evidence. The findings are far from being perverse. Thus, no question of law arises in the case. The question raised by Appellant relating to justification of the reduction of penalty imposed by the Special Director is purely based on facts and no question of law even remotely, arises from the same. We find that in fact no justification has been recorded by the Special Director to impose maximum penalty as opposed to the Tribunal having considered relevant material has interfered and reduced the penalty. We do not find it proper to transgress the limits of this Court's jurisdiction, preferring the view of the Tribunal or that of the Special Director, one way or the other, in regard to factual appreciation of the finding of facts in the matter. We find that the Special Director has completely failed to apply the doctrine of proportionality as interpreted and elucidated by the Apex Court in its various decisions, while choosing to impose maximum penalty on Respondents. Having gone through the impugned order, this Court does not find anything perverse in the findings, reasoning and conclusion of the Tribunal. We are in agreement with the finding of the Tribunal that in the absence of any discussion or justification pertaining to the basis for imposing the maximum penalty and juxtaposing this with the alleged acts attributed to each individual, the order of the Special Director is unsustainable. No error in the impugned judgment of the Tribunal.
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PMLA
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2023 (12) TMI 785
Legality of arrest - whether the action of the respondent ED in handing over the document containing the grounds of the arrest to arrestee and taking it back after obtaining the endorsement and his signature thereon, as a token of he having read the same, and in not furnishing a copy thereof to the arrestee at the time of arrest would render the arrest illegal under Section 19 of the PMLA 2002? HELD THAT:- The validity of the various provisions including Section 19 of the PMLA was examined by the Three-Judge Bench in Vijay Madanlal Choudhary case [ 2022 (7) TMI 1316 - SUPREME COURT] in which the Bench while upholding the validity of Section 19 of the PMLA held that the said provision has reasonable nexus with the purposes and objects sought to be achieved by the PMLA. It hardly needs to be emphasized that as well settled, it is in order to guard against the possibility of inconsistent decisions on the points of law by different Division Benches that the Rule of precedent has been evolved. It is in order to promote the consistency and certainty in the development of law and its contemporary status that the statement of law by a Division Bench is considered binding on a Division Bench of the same or lesser number of Judges. There remains no shadow of doubt that the law laid down by the Three-Judge bench in Vijay Madanlal Choudhary case that Section 19(1) of the PMLA has a reasonable nexus with the purposes and objects sought to be achieved by the PML Act and that the said provision is also compliant with the mandate of Article 21(1) of the Constitution of India, any observation made or any finding recorded by the Division Bench of lesser number of Judges contrary to the said ratio laid down in Vijay Madanlal Choudhary would be not in consonance with the jurisprudential wisdom expounded by the Constitution Benches - The Three-Judge Bench in Vijay Madanlal Choudhary case having already examined in detail the constitutional validity of Section 19 of PMLA on the touchstone of Article 22(1) and upheld the same, it holds the field as on the date. In so far as the facts of the present case are concerned, it is not disputed that the appellant was handed over the document containing grounds of arrest when he was arrested, and he also put his signature below the said grounds of arrest, after making an endorsement that I have been informed and have also read the above-mentioned grounds of arrest. The appellant in the rejoinder filed by him has neither disputed the said endorsement nor his signature below the said endorsement. The only contention raised by the learned Senior Counsel is that he was not furnished a copy of the document containing the grounds of arrest at the time of arrest. Since the appellant was indisputably informed about the grounds of arrest and he having also put his signature and the endorsement on the said document of having been informed, it is held that there was due compliance of the provisions contained in Section 19 of PMLA and his arrest could neither be said to be violative of the said provision nor of Article 22(1) of the Constitution of India. The Appeal being devoid of merits is dismissed.
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Service Tax
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2023 (12) TMI 784
Liability of service tax - works contract service - eligible for benefit of Notification No. 30/2012-ST dated June 20, 2012 or not - filing of incorrect service tax returns - Whether the payment of 50% tax by the appellant and remaining 50% by recipient of its service resulted into short payment of duty, as alleged? - Extended period of limitation - HELD THAT:- The admitted fact is that 100% tax liability towards the amount of consideration received by the appellant (the service provider) for providing services of Packaging activity to M/s HEG (service recipient) stands discharged by the provider as well as the recipient to the extent of 50% each. There is also no denial to the fact that appellant itself is the manufacturer of the wooden crates i.e. the packing material used while providing the said service to M/s HEG is also manufactured by appellant the service provider and that the service is provided in M/s HEG premises itself. It is observed that 100% tax has already been paid w.r.t. the impugned taxable service of packaging in terms of the Notification No. 30/2012. Then notification applies to WCS and apparently the activity rendered by appellant is WCS. Hence payment of 50% of tax by appellant, the service provider is wrongly alleged as short payment when admittedly remaining 50% of the liability stands discharged by the recipient of the service (M/s HEG) - demand has wrongly been confirmed by the department. Extended period of limitation - HELD THAT:- Present is not the case of tax evasion, the returns were regularly been filed by the appellants, we are of the opinion that the extended period should not have been invoked - the charging of service tax again from the appellant the service provider when the liability has been discharged by him under forward mechanism and by the service recipient under the reverse charge mechanism to the extent of 50% each in terms of relevant notification, will amount to the double taxation on the same service, question of alleging an intent to evade payment of service is absolutely in irrelevant. The department is held to have wrongly invoked the extended period of limitation. Appeal allowed.
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2023 (12) TMI 783
Short payment of service tax - Commercial or Industrial Construction Services - mis-classification of services as Work Contract Services - benefit of the Work Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 - availment of CENVAT Credit - benefit of N/N. 1/2006-ST dated 01.03.2006 denied - HELD THAT:- Reliance placed upon the decision of Delhi Bench in case of MEHTA PLAST CORPORATION VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR [ 2014 (5) TMI 1131 - CESTAT NEW DELHI ] where it was held that I find that the payment of service tax @ 4.12% itself shows that they have opted composition scheme for all the contracts. Further the noticees have not paid any service tax in respect of any contract in any other services. The entire payment after calculation of service tax @ 4.12% has been made under composition scheme of Works Contract Services. In view of above, I allow the benefit of composition scheme as the noticees fulfil the condition as mentioned in the notification No. 32/2007-S.T., dated 22-5-2007. Reliance also placed in HARSH CONSTRUCTIONS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NASHIK [ 2019 (3) TMI 1679 - CESTAT MUMBAI ] where it was held that though the appellant had availed the cenvat credit of service tax paid on the input services, but the same was reversed and the reversal particulars were duly reflected in the period ST-3 returns. Hence, we are of the considered view that the adjudged demands confirmed on the appellant cannot be sustained. Further impugned order also concludes that respondent has not received any consideration from his clients in respect of the two debit notes dated 31.03.2012 and 31.03.2013 against which this demand, but has included the value of these services in his ST-3 return as per the Point of Taxation Rules, 2011 and has paid service tax on these services provided. This finding recorded in the impugned order has not been challenged. Further for the debit note dated 31.03.2011, it is observed that this debit note is for the period prior to introduction of the POT, 2011 and the service tax was to be paid only on realization of the service consideration. Commissioner (Appeal) has in the impugned order consideration of the bank statements and the ledgers of the respondent have concluded that the respondent have not received the service consideration. There are no merits in the appeal filed by the revenue - appeal dismissed.
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2023 (12) TMI 782
Refund of Service tax - Commissioner (Appeals) committed an error while interpreting Entry No. 14 of the exemption notification - HELD THAT:- A perusal of Entry No. 14 of the exemption notification leaves no manner of doubt that services by way of construction, erectioning, commissioning or installation of original works pertaining to Metro are exempted. Thus, even if the appellant was not providing such services directly to Delhi Metro, but to its foreign entity, it would not mean that the appellant had not provided services to Delhi Metro. The Commissioner (Appeals) also proceeded to hold that machining of rails cannot be treated as providing service by way of commissioning or installation of original works pertaining to metro. It is not possible to accept this finding. The Project Office of V.V.S. had imported rail, rail fittings, crossing and other material which were supplied to the appellant for machining and grinding after which they were sent to the Delhi Metro for laying of railway tracks. Such services would clearly fall under commissioning or installation of original works. Commissioning would means to bring something newly produced such as a factory or machine into working condition. This is what was carried out by the appellant. The work carried out by the appellant was also necessary without which the railway tracks could not have been supplied as per the technical specifications. The appellant was clearly exempted from payment of service tax under Entry No. 14 of the exemption notification. The adjudicating authority was justified in granting refund - Appeal allowed.
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Central Excise
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2023 (12) TMI 781
Maintainability of appeal - low tax effect - Valuation - Deduction towards discounts and additional taxes paid - HELD THAT:- The appellant submitted that the appeal could be disposed of as the appeal envisages a low tax effect, having regard to the Notification dated 08.08.2019. The appeal does not survive for further consideration and is, accordingly, dismissed.
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2023 (12) TMI 780
Valuation of goods - inclusion of value of the bought-out-items supplied directly to the customer's place, in the assessable value of the Industrial Furnaces - HELD THAT:- It is observed that the agreement entered by the Appellant in this case was a composite contract for supply and installation and commissioning of the industrial furnace at the customer's premises. The Appellant has duly discharged duty on the supply of components manufactured by them. They have supplied the bought out items directly to the customer's premises where the furnace was erected by utilizing both the bought out items and the goods manufactured by them. The bought out items used in erection of the furnace makes it a part of the immovable property, after erection of the furnace. Hence, no excise duty can be charged on the supply of such bought out items - no excise duty can be charged on the supply of such bought out items. It is observed that after erection of the furnace, the bought-out items are part of the immovable property - the value of bought out items, which are traded goods of the Appellant, are not includable in the assessable value for the purpose of charging central excise duty. Accordingly, the demand confirmed in the impugned order is not sustainable and is set aside. Since the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise. Appeal allowed.
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2023 (12) TMI 779
Recovery of CENVAT Credit alongwith interest and penalty - pro-rata adjustment, undertaken by the appellant, is in conformity with rule 6 of CENVAT Credit Rules, 2004 or not - adjustment for reversal done on annual basis - conformity with the prescription in rule 6(3) of CENVAT Credit Rules, 2004 pertaining to consequence of non-maintenance of separate records. HELD THAT:- The Tribunal, in M/S STAR AGRIWAREHOUSING COLLATERAL MANAGEMENT LTD. VERSUS COMMISSIONER, CENTRAL EXCISE SERVICE TAX, JAIPUR (RAJASTHAN). [ 2020 (10) TMI 198 - CESTAT NEW DELHI] has held that The procedure prescribed in Rule 6(3A) of the [Cenvat] Credit Rules is only to make the provisions of Rule 3 workable. By means of proportionate reversal the requirement of Rule 6(3) has been substantially satisfied. This is also provided in Rule 6(3D) of the Cenvat Credit Rules which was introduced at a later date. Thus, the provisions of rule 6, offering alternatives, are subject to preference on the prioritization of options. The claim of the appellant that they had apportioned input services between excisable goods and exempted service and followed up with reversal of credit to the extent attributable to the latter does not appear to have been examined in the order of the adjudicating authority. The impugned order set aside - matter remanded back to the original authority for a fresh decision after taking note of the submissions of appellant herein - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2023 (12) TMI 778
Levy of penalty u/s 60(4) of Bihar Value Added Tax Act, 2005 - presence of mens rea or not - invoice number not tallied - human/clerical error - detention of a truck carrying goods at the integrated checkpost, Dhobi, Gaya - HELD THAT:- In the present case, there was a mistake in the invoice number as indicated in the declaration form which was accompanying the transport. A reasonable ground of attempt to carry out multiple transport arise, since if there was no checking at the check-post then there could have been a further transport made under the same invoice, thus, enabling an inter-State sale of the goods transported by the subject invoice and SUVIDHA Form, which could go unnoticed by the Department. Section 60(4) enables a seizure of goods along with the carrier if the authority suspects the transport to be in contravention of the provisions of Section 60(2). Section 60(4) (b) makes Section 56 applicable mutatis mutandis. Penalty is imposable under Section 56(4) (b) if the person in charge of the goods fails to satisfy the officer regarding the proper accounting of goods. The ingredients of Section 60(4) (b) read with Section 56(4) (b) are available in the instant case. There are absolutely no reason to interfere with the penalty imposed - petition dismissed.
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