TMI Tax Updates - e-Newsletter
February 27, 2023

Case Laws in this Newsletter:

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

Articles

1. Allowability of write off of CWIP expenses

   By: Vivek Jalan

2. INTERPRETATION OF COMMERCIAL CONCERN

   By: Dr. Sanjiv Agarwal

3. Application of mind should be there on the part of the Revenue Department while cancelling the GST registration

   By: Bimal jain

4. INSOLVENCY PROFESSIONAL ENTITY

   By: DR.MARIAPPAN GOVINDARAJAN

5. Fees received by the cricket players from IPL team owners is not ‘Business Support Service’

   By: Bimal jain

News

1. Advisory on New e-Invoice Portal

2. Advisory on Geocoding of Address of Principal Place of Business

3. Advisory on opting for payment of tax under the forward charge mechanism by a Goods Transport Agency (GTA)

4. Panel discussion on “Policy Perspective: Debating the road to policy consensus on crypto assets” under G20 India Presidency

Notifications

SEZ

1. S.O. 871(E) - dated 23-2-2023 - SEZ

Sector specific Special Economic Zone for IT/ITES Sector at Ananthasagar Village, Hasanparthy Mandal, Warangal District in the State of Telangana (Andhra Pradesh) - Proposed to de-notify the entire area of 10.12 hectares of the above Special Economic Zone - Seeks to rescinds the Notification No. S.O. 1560(E) dated 17th September, 2007

2. G.S.R. 125 (E) - dated 23-2-2023 - SEZ

Special Economic Zones (Amendment) Rules, 2023

Highlights / Catch Notes

GST

• GST Tribunal Unavailability: Revenue's Right to Claim Relief and Appeal Filing Within Six Months Discussed.

  Case-Laws - HC : Right of revenue to claim relief when GST tribunal has not constituted - whenever parties have found the need of urgent orders, the parties have filed petitions before this Court seeking such orders on the ground that since the tribunal is not constituted, the remedy of appeal is not available. The respondent (revenue) has not sought any such relief - The appeal is required to be filed within a period of six months from the date of the order; however, we are not required to examine the question whether an appeal, if so filed, would be maintainable or not. - HC
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• Ready-to-eat and ready-to-cook food products taxed at 18% GST under tariff heading 2106, per explanation 5(b).

  Case-Laws - AAR : Classification of goods - supply of frozen food - Since the applicant is into manufacture of ready to eat and ready to cook food products, the same are covered under explanation 5(b) which is preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption. Thus the food products manufactured by the applicant are covered under tariff heading 2106 and hence exigible to GST at 18% - AAR
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Income Tax

• Clarification on Penalty Imposition: Use Section 271AAB Instead of 271(1)(c) for Undisclosed Income Cases.

  Case-Laws - HC : Penalty u/s 271 AAB or u/s 271 (1)(c) - concealment on income - as per clause (2) of section 271AAB, no penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1) of Sub Section (1A) of section 271AAB. Accordingly, the AO should have initiated and levied penalty under section 271AAB(1)(c) instead of section 271(1)(c). - HC
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• PCIT Must Serve Notice via Jail Superintendent if Assessee is in Custody: Section 263 Compliance Reminder.

  Case-Laws - HC : Revision u/s 263 - non service of notice to assessee who was in jail - Any officer of the Government including a PCIT should be conscious that once information was received that a person to whom notice has to be served is in judicial custody, then an appropriate order should be passed requiring service of notice on such person through the Superintendent of the concerned jail. This is the bare minimum requirement in law. - HC
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• Assessee's Non-Compliance Leads to Ex-Parte Order, Case Remanded for Reconsideration Prioritizing Natural Justice.

  Case-Laws - AT : Ex-parte order - Non compliance of notice issued by the Authorities and non appearance before the Authorities inspite of repeated notices/summons is dis-regard towards the Authorities. Be that as it may, without going into merits, considering the interest of natural justice, one more opportunity is granted to the assessee, and the file is restored back to the ld. CIT (A) for consideration afresh - AT
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• Tax Deduction u/s 80P Not Denied for Late Filing Beyond Section 139(1) Deadline.

  Case-Laws - AT : Deduction u/s 80P - return of income was not filed within the due date prescribed u/s 139(1) - looking into the totality of facts, we are of the view that claim of deduction u/s 80P of the Act cannot be denied to the assessee only on the basis that the assessee did not file return of income its return of income within due date u/s 139(1) - AT
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• Taxpayer Qualifies for 10% Reduced Tax Rate on Capital Gains Even Without Claiming It in Their Tax Return.

  Case-Laws - AT : Taxation of capital gain - claim of reduced rate of tax @10% was not made in the return of income - the assessee is eligible to be taxed at the reduced rate of 10% in respect of the aforesaid capital gains, even if such claim was not made in the return of income - AT
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• Court Quashes Revision of Exemption u/s 54F; Assessing Officer's Income Determination Upheld, Revision Order Dismissed.

  Case-Laws - AT : Revision u/s 263 - exemption u/s 54F - the exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi-judicial functions, hence order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue, therefore, we quash the order under section 263 passed by ld PCIT. - AT
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• GAAR and Rule 10U: Treaty Benefits Upheld for Short-Term Capital Gains Below Threshold, Shares Acquired Before Cut-Off Date.

  Case-Laws - AT : Supremacy of law - GAAR - in the case in hand the short term capital gain the tax on which is below the threshold set out in Rule 10 U (1) (a) (supra) further the impugned shares were acquired by the assessee on 22.08.2016 which is prior to the cut off date set out in Rule 10 U (1)(d) - Assuming domestic GAAR provision are applicable but for the aforestated facts the treaty benefit cannot be denied to the assessee. - AT
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• Assessing Officer Rejects Unexplained Cash Credits Claim u/s 68 Without Evidence to Dispute Assessee's Documents.

  Case-Laws - AT : Addition u/s 68 - unexplained cash credit - receipt of cash from 5 different parties as advance towards sale of shops - when the assessee while discharging the initial onus that was cast upon it as regards proving the nature and source of the cash deposits in its books of accounts, had in support of his claim filed with the A.O copies of agreements, viz. sale agreement/cancellation agreement, therefore, there was no justification for the A.O in rejecting the same without placing on record any material disproving the authenticity of the aforesaid claim. - AT
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• Section 153C Assessments Valid Without Section 143(2) Notice, Similar to Section 153A Procedures in Income Tax Act.

  Case-Laws - AT : Validity of assessment framed by the AO u/s 153C without issuing notice u/s 143(2) - when no notice under section 143(2) is required for framing the assessment under section 153A then on the similar analogy, the same is not required even for framing the assessment under section 153C of the Income Tax Act as both are in pursuant to search and seizure action under section 132 of the Income Tax Act. - AT
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• Tax Reassessment: Write-Back of Excessive Bad Debt Deductions u/s 263 Must Be Taxed to Reflect Real Income.

  Case-Laws - AT : Revision u/s 263 - reduction from provision created for bad and doubtful debts for rural advances - real income theory - This provision for bad and doubtful debts relating to the rural advance, having been allowed as claim for deduction in earlier years, any write back from the same, logically needed to be subjected to tax, since clearly the claim allowed in earlier years was excessive to the extent of the write back done by the assessee. - AT
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• Assessing Officer Mistakenly Shifts Responsibility to Taxpayer for Explaining Form 26AS Receipts Without Payer Details.

  Case-Laws - AT : Unexplained Receipts shown in Form No. 26AS - By putting the onus on the assessee, the AO has grossly erred as the assessee is not responsible to explain the recipients of the receipts shown in Form No. 26AS. AO should have asked the payer, details of the payee to whom payments have been made by the payer on which it could deduct tax at source . - AT
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• Software Development Write-Off: Revenue Expenditure Initially Capitalized, Later Abandoned, Eligible for Deduction.

  Case-Laws - AT : Writing off towards software capital work-in-progress - It is not a case where the assessee purchased certain plant and machinery or incurred certain capital costs which were capitalised earlier to work-in-progress account, and later on, on abandoning the same, it was claimed as deduction. Rather it is a case of incurring revenue expenditure, which was initially capitalized and now written off because of abandoning the modules, that were no more required in the software development business. In our considered opinion, is eligible for deduction. - AT
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• Clarification on Section 263: Revision Notice Doesn't Expand Its Scope; No Need for Detailed Explanation Once Invoked.

  Case-Laws - AT : Revision u/s 263 - Scope of the notice issued - the Explanation did not expand the scope of section but only explained the scope of section, and therefore, once the specific section has been invoked, it is not necessary to mention any specific Explanation thereto which has been invoked. - AT
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Customs

• Penalty Imposed u/s 114 of Customs Act for Over-Valued Goods; Key Issue: January 31, 2017 Letter's Significance.

  Case-Laws - HC : Levy of penalty u/s 114 of the Customs Act, 1962 - Over-valuation of goods to avail a higher duty drawback - There is no dispute that the goods were over-valued. Therefore, the questions involved in the present appeals, essentially, are whether the letter dated 31.01.2017 was, in fact, sent and, if so, what is the import of the said letter. - Appellant failed to prove its case - HC
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• High Court Orders Refund of Coerced Demand Drafts by DRI Due to Lack of Formal Order or Liability Determination.

  Case-Laws - HC : Seeking return of Demand Drafts - amount paid voluntarily or not during investigation by DRI - According to the petitioner, the said amount was recovered by coercion, without any order determining the said liability or raising any demand - Refund granted - HC
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• Customs Duty Exemption Upheld: Invoice Number Absence Not Enough to Deny Preferential Trade Benefits Under Notification No. 46/2011-Cus.

  Case-Laws - AT : Exemption from customs duty - preferential Trade Agreement with Asian Countries - Mere non-mention of the invoice number in the certificate of Origin is not sufficient reason to deny the benefit of Notification No. 46/2011-Cus - The purpose of the Notification is to grant exemption under the preferential Trade Agreement with Asian Countries and from the certificate of country of origin produced by the appellant. It is sufficiently established that the goods have indeed originated in Indonesia and were wholly obtained in Indonesia. - AT
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Corporate Law

• Petition Valid if Debtor's Defense in Company Winding-Up is Unfounded or Fake, Indicating Evasion of Debt Repayment.

  Case-Laws - HC : Winding up of the appellant company - Undeniably, in cases where the defence against the claim of debt is found to be moonshine or a sham, the petition for winding up would be maintainable on account of inability to pay the debt. However, the facts of the case must clearly establish that there is no plausible defence available to the debtor company. The defence so raised has been solely for the purposes of avoiding repayment of admitted debt and in most cases, to camouflage the inability to do so. - HC
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Service Tax

• Court Rules Trade Discounts in Vehicle Sales Not Subject to Service Tax; Incentives Part of Sale Price.

  Case-Laws - AT : Levy of service tax - receipt of incentive / discounts - the activity undertaken by the appellant is for the sale and purchase of the vehicle and the incentives are in the nature of trade discounts. The incentives, therefore form part of the sale price of the vehicles and have no correlation with the services to be rendered by the appellant. - AT
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Case Laws:

• GST

• 2023 (2) TMI 1026
  Violation of principles of natural justice - ex-parte assessment cum demand Order - It is contended that petitioner was denied opportunity to file reply in respect of intimation under Section 73 given in Form GST DRC-01A, inasmuch as, the intimation in Form GST DRC-01A was uploaded simultaneously with the show cause notice issued under Section 73(1) of the State/Central Goods and Services Tax Act - HELD THAT:- In the present case, the notice under Section 73(1) of GST Act and the intimation in form GST DRC-01A was uploaded together on 10.05.2022. In form GST DRC-01A, it was mentioned that petitioner may file his submission by 25.05.2022, while by the notice issued under Section 73(1), petitioner was required to file his reply within 30 days. Thus, petitioner was denied a valuable right of filing his submission in response to the intimation in Form GST DRC-01A. Thus, a limited interference is called for in the matter. The impugned order dated 28.06.2022 is quashed. The writ petition is allowed and the matter is remanded back to the Competent Authority. Petitioner may file his reply to the intimation in Form GST DRC-01A, within two weeks from today. The Competent Authority shall consider the reply, if filed within stipulated time, within two weeks thereafter.

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• 2023 (2) TMI 1025
  Refund on account of inverted duty structure in terms of Section 54(3)(ii) of the Central Goods and Services Tax Act, 2017 - petitioner claims that the Input Tax Credit in respect of various inputs exceeds the output liability in respect of the supplies - Rejection on the ground that the periods for which refund was claimed did not correspond to the periods for which returns were filed - HELD THAT:- The time period for filing the appeal has long elapsed. However, Mr. Joshi, learned Counsel appearing for the respondent, states that the respondent could not file an appeal as a tribunal has not been constituted as yet. He submits that as and when the appellate tribunal is constituted, the respondent would file an appeal. It is also material to note that whenever parties have found the need of urgent orders, the parties have filed petitions before this Court seeking such orders on the ground that since the tribunal is not constituted, the remedy of appeal is not available. The respondent has not sought any such relief - The appeal is required to be filed within a period of six months from the date of the order; however, we are not required to examine the question whether an appeal, if so filed, would be maintainable or not. The present petition is allowed and the respondents are directed to forthwith process the petitioner s claim for refund.

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• 2023 (2) TMI 1024
  Classification of goods - business of manufacture/production and supply of frozen food in institutional packs to companies in Aviation Industries, quick service restaurants, Hotels etc., across Ready To Eat (RTE)/ Ready To Cook (RTC)/ Processed and Semi Processed categories - classifiable either under HSN Code 2007 or under HSN Code 2106 90 99- other food preparation not elsewhere specified or included and is liable to GST at the rate of 12% or at the rate of 18% of Schedule II and Schedule III of Notification No.01/2017-Central Tax (Rate) dated 28-06-2017? HELD THAT:- The Applicant is into manufacture of ready to eat (RTE) food, which are processed food products that are pre-cleaned, precooked, packaged but not ready for consumption without thawing, heating, reportioning, and repacking. The Applicant is also into manufacture of ready to cook (RTC) food, which are processed food products which need post manufacturing preparation like thawing, cooking, and addition of vegetables / protein at institutional buyer s end. Since the applicant is into manufacture of ready to eat and ready to cook food products, the same are covered under explanation 5(b) which is preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption. Thus the food products manufactured by the applicant are covered under tariff heading 2106 and hence exigible to GST at 18% (CGST 9% and SGST 9%) as per entry No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28.06.2017.

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• Income Tax

• 2023 (2) TMI 1023
  Penalty u/s 271 AAB or u/s 271 (1)(c) - concealment of the particulars of income and/or inaccurate particulars of income - Assessee revised its return of income from loss to income after issuance of notice u/s 143 (2) - search and seizure action u/s132 (1) was carried out at the business and residential premises of Jagdamba Group of cases - The appellant is one of the members of the said group - HELD THAT:- From the plain reading of Section 271AAB, it is clear that where a search u/s.132(1) was initiated on or after the 1st day of July, 2012, penalty is leviable on the undisclosed income at the rate and conditions specified under section 271AAB(1) for the specified previous year. Further, the section also defines the term undisclosed income and specified previous year . Moreover, the section starts with non abstante clause and excludes the applicability of section 271(1)(c), if the undisclosed income pertains to the specified previous year. Viewed from the above, the facts of the case of the Assessee is squarely covered by section 271AAB as the search was conducted on 03.09.2014 i.e., after 01/07/2012. On the date of search the due date to furnish the return for A.Y.2014-15 has not expired and the respondent has furnished the return on 30.11.2014 - respondent has not admitted any income in a statement recorded under section 132(4) nor paid any taxes on the admitted income - case of the respondent is not governed by Section 271AAB (1)(a) and Section 271AAB(1)(b). The respondent s case clearly falls under section 271AAB(1)(c) where the minimum penalty prescribed is 30% and maximum penalty is 90% of undisclosed income. Thus, as per clause (2) of section 271AAB, no penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1) of Sub Section (1A) of section 271AAB. Accordingly, the AO should have initiated and levied penalty under section 271AAB(1)(c) instead of section 271(1)(c). We do not find any infirmity in the order as stated hereinabove. At the cost of repetition, a case where a search has been initiated under section 132 (1) of the Act on or after 1st day of July, 2012, the penalty, if any, should be levied under section 271 AAB and not under section 271 (1)(c) of the Act as the case falls under specified previous year. The argument of learned counsel for the revenue does not stand in the eye of law because the penalty proceeding was initiated pursuant to a search conducted on 03.09.2014 i.e., after the amendment made in the Act; as such whether incriminating document was found or not is immaterial because the law mandates that the penalty if any should have been taken under section 271 AAB of the Act where search has been initiated on or after first day of July 2012. Decided against revenue.

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• 2023 (2) TMI 1022
  Revision u/s 263 - non service of notice to assessee who was in jail - appearance of a staff of such person in judicial custody before the PCIT - staff of the Assessee appeared and informed the PCIT that the Assessee was in judicial custody and instead of directing notice to be issued to the Assessee through the Superintendent of Jail, the PCIT treated the appearance staff person as sufficient service of notice on the Assessee in terms of Section 292BB - HELD THAT:- Staff person Shri Uttam Kumar was not an authorized representative of the Assessee. He was simply the staff who appeared to inform the PCIT where the Assessee could be located. This was the jail. Despite being informed that the Assessee was in judicial custody, the PCIT did not make the effort of having the notice served upon the Assessee through the Superintendent of the concerned jail. This Court concurs with the observation of the ITAT in the impugned order that a person in judicial custody is deprived of many of the constitutional rights which he could otherwise exercise. Any officer of the Government including a PCIT should be conscious that once information was received that a person to whom notice has to be served is in judicial custody, then an appropriate order should be passed requiring service of notice on such person through the Superintendent of the concerned jail. This is the bare minimum requirement in law. With the PCIT having failed to do so, it was not open to the Department to contend the mere appearance of a staff of such person in judicial custody before the PCIT should be taken to be the appearance by the Noticee/Assessee himself. Decided against revenue.

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• 2023 (2) TMI 1021
  Validity of reopening of assessment - violation of principle of natural justice - non considering the objection filed by the petitioner against the notice under Section 148A(b) and also said order is in violation of principle of natural justice by not affording any opportunity of hearing to the petitioner in spite of specific request - HELD THAT:- Income Tax Authority is not in a position to contradict the aforesaid allegations of the petitioner. We set aside the aforesaid impugned order and all subsequent notices only on the ground of violation of principle of natural justice and the matter is remanded back to the Assessing Officer concerned to pass a fresh speaking order in accordance with law after giving an opportunity of hearing to the petitioner or his authorised representative within eight weeks from the date of communication of this order.

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• 2023 (2) TMI 1020
  Deduction u/s 80-IA(4)(iii) - Violation of conditions laid down in Industrial Park Scheme, 2002 - AO disallowed the same on the ground that the assessee had rented out more than 50 per cent. of the allocable Industrial area which is in contravention of the Industrial Park Scheme, 2002 - HELD THAT:- Revenue contention that assessee had leased out more than 50 per cent. of the total allocable area in favour of one of the lessees (M/s. IBM Daksh) has been found to be incorrect based on the remand report submitted by the Assessing Officer. Although that aspect was before the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax (Appeals) had dismissed the appeal for the assessment year 2007-08 on a different ground. The Income-tax Appellate Tribunal has recorded cogent reasons while allowing the appeal for the assessment year 2007-08.The questions of law are answered in favour of the assessee.

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• 2023 (2) TMI 1019
  Reopening of assessment u/s 147 - claim u/s 11(2) which was only made during proceedings initiated u/s 148 - whether the Form-10 could be furnished by the assessee for the purposes of Section 11 of the said Act during the re- assessment proceedings? - As per CIT-A income was offered and Form No. 10 was filed during the re-assessment proceedings and there is no finding of the Assessing Officer that the conditions subject to which accumulation is allowed under section 11(2) were not fulfilled - HELD THAT:- We find that CIT(A) while deciding the issue has relied on the decision rendered by Hon ble Apex Court in the case of Nagpur Hotels Associations [ 2000 (12) TMI 99 - SUPREME COURT ] and other decisions. Before us, Revenue has not pointed out as to how the ratio of the aforesaid decision is not applicable to the facts of the present case. We further find that CIT(A) while deciding the issue has given a finding that there is no findings of the AO about that the conditions subject to which the accumulation was allowed u/s 11(2) of the Act was not fulfilled by the assessee. Considering the totality of the facts, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed.

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• 2023 (2) TMI 1018
  Deduction u/s 80P(2(d)) - interest income from co-operative bank - HELD THAT:- Hon ble High Court of Karnataka in case of Pr. CIT Anr. Vs. Totgar s Co-operative Sale Society Ltd. [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] and State Bank of India [ 2016 (7) TMI 516 - GUJARAT HIGH COURT] had held that interest income earned by a co-operative society on its investment held with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act. Thus we are of the considered view that assessee society who has earned an amount from its investment of surplus fund with co-operative banks is entitled for deduction under section 80P(2)(d) of the Act. Resultantly, the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) of the Act. Appeal filed by the assessee is allowed.

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• 2023 (2) TMI 1017
  Deduction u/s.80P(2)(d) - assessee society earned interest income - HELD THAT:- Hon ble High Court of Karnataka in case of Pr. CIT Anr. Vs. Totgar s Co-operative Sale Society Ltd. [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] and State Bank of India [ 2016 (7) TMI 516 - GUJARAT HIGH COURT] had held that interest income earned by a co-operative society on its investment held with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act. Thus we are of the considered view that assessee society who has earned an amount from its investment of surplus fund with co-operative banks is entitled for deduction under section 80P(2)(d) of the Act. Resultantly, the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) of the Act. Appeal filed by the assessee is allowed.

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• 2023 (2) TMI 1016
  Ex-parte order - LTCG - application of section 50C - Non appearance by assessee on various occasions/notices issued - adopting the valuation done by the ld. DVO as sale consideration of the agricultural land sold by assessee on one side and also reducing the cost of acquisition claimed by the appellant resulting into an addition - HELD THAT:- CIT (A) has confirmed the order of the AO in absence of any submissions from the side of the assessee and also non appearance of the assessee before the ld. CIT (A). From the entire sequence of events and the conduct of the assessee in non compliance of the repeated notices, it appears gross negligence on the part of the assessee and wastage of precious time. In our considered view, non compliance of notice issued by the Authorities and non appearance before the Authorities inspite of repeated notices/summons is dis-regard towards the Authorities. Be that as it may, without going into merits, considering the interest of natural justice, one more opportunity is granted to the assessee, and the file is restored back to the ld. CIT (A) for consideration afresh, subject to cost of Rs. 2,000/- for negligent attitude during income tax proceedings, to be deposited in the Prime Minister s Care Fund - Appeal of the assessee is partly allowed for statistical purposes.

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• 2023 (2) TMI 1015
  Intimation u/s 143(1) was not received by the assessee - CIT-A dismissed the appeal of the assessee on the ground of delay in filing the appeal by more than four years - assessee had also moved an application u/s 154 of the Act, seeking rectification of the intimation issued u/s 143(1) - HELD THAT:- Assessee submitted that the assessee did not receive intimation. It was only obtained through e-mail on 10.11.2020 from CPC - vide letters dated 26.06.2018, 01.03.2019 and 23.12.2020, the assessee had requested assessing authority for rectification of mistake. Then again on 30.11.2021 and 22.02.2022, similar requests have been made by the assessee. Therefore, it cannot be inferred that the assessee had not received the intimation issued by the Department. We hereby set aside the impugned order and restore the issue to the file of Ld.CIT(A) to re-consider the issue related to delay in filing the appeal. Considering the fact that the assessee itself has been pursuing rectification u/s 154 of the Act. The assessee would be at liberty to file a proper application seeking condonation of delay. CIT(A) would decide the issue in accordance with law. The grounds raised by the assessee are allowed for statistical purposes.

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• 2023 (2) TMI 1014
  CIT(A) passed an ex-parte appellate order - Non providing any opportunity to the assessee to explain its case - Denial of natural justice - Deduction u/s 11 to 13 denied - assessee has filed audit report late - HELD THAT:- We understand that the appeal was decided under faceless scheme, but adherence to Principles of natural justice is one of the most important pillar of the effective judicial delivery system, as no person should be condemned unheard. Thus, the ld. CIT(A) ought to have given an opportunity to the assessee so that the assessee may put forward his claim/contentions before ld. CIT(A) as per the scheme/guidelines of faceless proceedings, and in any case the submissions/contentions of the assessee are to be evaluated/verified by ld. CIT(A) on merits in accordance with law. Thus, in the instant case, there is clearly breach of principles of natural justice, as the assessee was condemned by ld. CIT(A) without providing proper opportunity to the assessee to explain its case. Thus,we are setting aside the appellate order passed by ld. CIT(A) and restoring the matter back to the file of ld. CIT(A) for fresh adjudication on merit in accordance with law - Appeal of the assessee is allowed for statistical purposes.

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• 2023 (2) TMI 1013
  Income deemed to accrue or arise in India - Taxability of offshore supply of equipment - India-Singapore Double Taxation Avoidance Agreement [DTAA] - to what extent the Force of Attraction Rule apply in the case of off shore supply/sales of goods/merchandise? - assessee company is incorporated under the laws of Singapore and is a tax resident of Singapore, within the meaning of Article 4 of the DTAA between India and Singapore - HELD THAT:- Turnkey project or composite contract having different severable parts are concerned, the Hon ble Supreme Court addressed the issue in the case of Ishikawajima Harima Heavy Industries Limited [ 2007 (1) TMI 91 - SUPREME COURT ] Turnkey project was split into two parts as per break-up given and payments have also been made by AAI and CIAL separately for off shore supply and installation and commissioning. Therefore, the allegation of ht ld. DR that the assessee suo moto bifurcated the contract does not hold any water as other parties also concurred at the beginning itself and therefore, made separate payments. Considering all we do not find any justification in attribution of profit on off shore sale of equipment and direct the Assessing Officer to delete the impugned addition. This grievance alongwith with all its sub grounds is allowed. Addition of interest on fixed deposits - Assessee vehemently stated that the assessee misplaced the fixed deposits and being capital assets, have written off the same, therefore there is no question of earning any interest income - HELD THAT:- We are of the considered view that this contention of assessee is not only illogical, but also unacceptable. The Canara Bank in Form No. 26AS has acknowledged the Fixed Deposits with it and has credited interest by deducting tax at source. Even if the Fixed Deposits are misplaced, the assessee can approach the Canara Bank and ask for duplicate Fixed Deposits. We do not find any error or infirmity in the addition made by the Assessing Officer and the same is upheld. Appeal of the assessee is partly allowed.

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• 2023 (2) TMI 1012
  Deduction u/s 80P - return of income was not filed within the due date prescribed under section 139(1) - assessee received intimation u/s 143(1)(a) - Applicability of adjustment u/s 143(1)(a)(v) for current AY - whether once the return of income is filed beyond the prescribed date u/s 139(1) of the Act, can the deduction under section 80P of the Act be denied to the assessee, by way of adjustment under section 143(1)? - HELD THAT:- Claim of deduction u/s 80P of the Act cannot be allowed the assessee, if the assessee does not file its return of income within the due date stipulated under section 139(1) of the Act w.e.f. assessment year 2018-19 onwards - we also note that amendment has been introduced in section 143(1)(a)(v) of the Act to provide that the claim of deduction under section 80P of the Act can be denied to the assessee, in case the assessee does not file its return of income within the time prescribed under section 139(1) of the Act with effect from 01-04-2021 and does not apply to the impugned assessment year i.e. assessment year 2019-20 relevant to financial year 2018-19. Accordingly, in our considered view, denial of claim under section 80P of the Act would not come within the purview of prima facie adjustment under section 143(1)(a)(v) of the Act, for the simple reason that the section was not in force during the period under consideration i.e. assessment year 2019-20. Whether the case of the assessee would fall within the purview of prima facie adjustment under section 143(1)(a)(ii) (an incorrect claim, if such incorrect claim is apparent from any information in the return)? - The scope of the adjustments that can be made under the said provision has been elaborated in the Explanation to the aforesaid section, which does not include denial of deduction claimed by the assessee in case the assessee does not furnish its return of income within the date stipulated under section 139(1) of the Act. The Explanation to the said section specifically provides for cases/instances when the claim made by the assessee could be said to be incorrect . Therefore, in our considered view, the case of the assessee would also not fall within the purview of prima facie adjustment u/s 143(1)(a)(ii) (an incorrect claim, if such incorrect claim is apparent from any information in the return). In the case of Lanjani Co-Operative Agri Service Society Ltd. [ 2022 (9) TMI 345 - ITAT CHANDIGARH ] ITAT held that the enabling provisions of subclause (v) of section 143(1) providing for disallowance of deduction under section 80P due to late filing of return having been introduced by Finance Act, 2021 effective from 1-4-2021, disallowance of deduction claimed under section 80P during relevant years 2018-19 and 2019-20 on grounds of late filing of return was unjustified In the instant case, there was a delay in filing the return of income by the assessee for the assessment year 2019-20 and return of income was filed within due date permissible u/s 139(4) of the Act, in which the claim for deduction u/s 80P of the Act was made. Therefore, looking into the totality of facts, we are of the view that claim of deduction u/s 80P of the Act cannot be denied to the assessee only on the basis that the assessee did not file return of income its return of income within due date u/s 139(1) - Appeal of assessee allowed.

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• 2023 (2) TMI 1011
  Addition u/s 68 - disbelieving agricultural receipts - allowability of agricultural expenses incurred by the assessee - CIT-A deleted the addition - HELD THAT:- CIT(A) had recorded a categorical finding that the ld. AO in the remand report had conceded that five agriculturists agreed that their lands were given to the assessee company on rent basis. Considering the remand report of the ld. AO, considering the various details furnished by the assessee, as detailed supra, considering 7/12 extracts from the said Revenue authorities furnished by the assessee and considering the independent reports from Superintendent of Agriculture department of Taluk Akkalkot in Solapur District and District Superintendent, Agriculture Officer, Pune, the ld. CIT(A) held that the net agricultural income shown by the assessee at Rs.1,17,31,323/- to be genuine and deleted the addition made by the ld. AO in respect of gross receipts in the sum of Rs.3,65,09,908/- as unexplained cash credit u/s.68 of the Act. By this process, the sale proceeds received by the assessee from agricultural activities in the sum of Rs.3,65,09,908 was accepted as genuine and agricultural expenses debited by the assessee in its profit and loss account were also accepted as genuine. We do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee in the facts and circumstances of the instant case. Accordingly, the ground Nos. 1 2 raised by the Revenue are dismissed. Addition on account of share premium u/s.56(2)(viib) treating the same as income from other sources - shares issued by the assessee company to its holding company @Rs.125/- per share using DCF method - CIT-A deleted addition - HELD THAT:- We find that assessee company admittedly had used the share premium amounts for the purpose of its business, which fact has been admitted by the ld. AO in his assessment order. Hence, the observations made by the ld. AO in this regard are totally baseless, devoid of merits and deserves to be dismissed in limine. CIT(A) had rightly placed reliance on the decision of Vodafone India Services Pvt. Ltd [ 2014 (10) TMI 278 - BOMBAY HIGH COURT ] wherein it has been held that receipt of share capital and share premium is capital in nature and cannot be brought to tax. Pursuant to the amendment made in proviso to Section 56(2)(viib) which has been introduced from 01/04/2013, (hence, applicable from A.Y.2013-14 onwards), the assessee is bound to justify the receipt of share premium by way of valuation report. In the instant case, the assessee had duly justified the charging of premium on its holding company by way of an independent valuation report using discounted cash flow method which is one of the recognised valuation method prescribed under Rule 11UA of the Income Tax Rules. This decision of the Hon ble Jurisdictional High Court has been accepted by the department and no further appeal to Hon ble Supreme Court has been preferred. In fact there is also a Board Instruction No.2/2015 in FNo.500/15/2014-APA-I dated 29/01/2015, wherein the Central Board of Direct Taxes (CBDT) had categorically stated that the aforesaid decision of the Hon ble Bombay High Court has been accepted by the Board - we do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee in respect of this issue. Accordingly, the ground Nos. 3,4 5 raised by the Revenue are dismissed. Addition u/s.68 - loan received by the assessee company from its holding company - CIT-A deleted addition - HELD THAT:- On perusal of the financial statements of the lender company, we find that it has own funds of Rs.59.97 Crores and Rs.59.66 Crores as on 31/03/2012 and 31/03/2013 respectively. Confirmation for receipt of loan was also placed on record by the assessee before the ld. AO from the lender company. The lender company is duly assessed to Income Tax and the Income Tax assessment particulars were also furnished before the ld. AO. The monies invested by the lender company in the assessee company is duly reflected in the books of accounts of the lender company and the same has been paid out of accounted sources of the lender company. Sufficient creditworthiness is proved for advancing loan by the lender company to the assessee company as is evident from the bank statements of the lender company. All the three ingredients of Section 68 of the Act viz. identity, creditworthiness of the lender and genuineness of the transactions are proved beyond doubt in the instant case. Hence, we hold that the ld. CIT(A) was justified in deleting the addition made u/s.68 - Ground No.6 raised by the Revenue is dismissed.

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• 2023 (2) TMI 1010
  Taxation of capital gain - claim was not made in the return of income - eligibility of being taxed @10% on such sale of capital gains or 20% - eligibility of the assessee of being taxed at the lower rate of 10% in absence of the assessee filing the claim by way of revised return of income - AO rejecting claim of appellant on ground that appellant has opted to pay tax as per provisions of section 112(l)(c)(ii) in return and such change of claim is admissible only by filing revised return of income - HELD THAT:- As in Circular Number 14 (XL-35) of 1955 dated 11-04-1955 Department has taken a view that the officers of the department must not take advantage of ignorance of the assessee about his rights and it is their duty to assist the tax payer in every reasonable way particularly in the matter of claiming and securing reliefs. Further, in the case of B. G. Shirke Construction Technology (P.) Ltd. [ 2017 (3) TMI 879 - BOMBAY HIGH COURT] the High Court has held that an assessee is entitled to make a claim before Tribunal which was not raised before Assessing Officer at time of filing return of income or by filing a revised return of income. Again, in the case of Karnataka State Co-operative Federation Ltd [ 2021 (3) TMI 694 - KARNATAKA HIGH COURT] the Karnataka High Court held that assessee s fresh claim before appellate authority is entertainable even when same is not claimed in original return of income nor assessee has filed revised return of income to make such claim. In the case of Abhinitha Foundation (P.) Ltd [ 2017 (6) TMI 604 - MADRAS HIGH COURT] the Madras High Court held that even if a claim made by assessee-company does not form part of original return or even revised return, it can still be considered by Assessing Officer as well as appellate authorities in case relevant material is available on record. In the case of Sesa Goa Ltd [ 2020 (3) TMI 793 - BOMBAY HIGH COURT] held that where assessee inadvertently omitted to make claim for deduction under section 10B in respect of two 100 per cent Export Oriented Undertakings, however, all necessary facts for claiming deduction under section 10B were already on record, Commissioner (Appeals) in exercise of his plenary/co-terminus powers, as well as Tribunal, ought to have entertained claim. Accordingly, in our considered view, the assessee is eligible to be taxed at the reduced rate of 10% in respect of the aforesaid capital gains, even if such claim was not made in the return of income. Appeal of the assessee is allowed.

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• 2023 (2) TMI 1009
  Revision u/s 263 - exemption u/s 54F - As per CIT assessee was having more than two residential properties during the year and hence exemption u/s 54 was required to be disallowed - HELD THAT:- It was wholly erroneous on the part of the ld PCIT to exercise the jurisdiction u/s 263 of the Act despite of the fact that assessing officer has examined the issue raised by ld PCIT during the assessment stage. As pointed out that AO has raised the relevant question and assessee has replied during the assessment stage vide letter dated 19.12.2016. The show cause notice issued by the AO during the assessment proceedings wherein the AO has raised the query in respect of deduction u/s 54F and in response to said show cause notice the assessee submitted his reply in respect of exemption u/s 54F. The assessee has demonstrated that asset is part of investment activities. The stock-in-trade shown in the Balance-Sheet are getting reflected on page 49 of the paper book on which assessee has not claimed deduction under section 54F of the Act. It is pertinent to mention here that there was as such no allegation of no enquiry or lack of enquiry or verification, because the Ld. Pr. C.I.T. himself found all the details/evidences in the assessment record, i.e. well within the A.O. s possession and what he alleged was about the plausible view taken by the A.O. as against his perception and understanding on the same set of facts and documents. It is the domain of the assessing officer to decide, whether further inquiry is needed or not in a particular case. After getting the documents and information from the assessee, during the assessment proceedings, the assessing officer has examined the documents and evidences and applied his mind. We note that the Ld. Pr. C.I.T. by invoking his jurisdiction u/s 263 of the Act is giving another opportunity to the Assessing Officer to re-examine and to verify again the same documents and evidences, which is not permissible. Hon ble Bombay High Court in the case of Ranka Jewellers vs. Addl. CIT [ 2010 (3) TMI 544 - BOMBAY HIGH COURT ] relying on the decisions of Hon ble Supreme Court in the cases of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT ] and CIT vs. Max India Ltd. [ 2007 (11) TMI 12 - SUPREME COURT ] has held that once the issue was considered by the A.O., the remedy of the revenue could not lie in invoking of the jurisdiction u/s. 263 of the Act. Therefore, the order of the Ld PCIT was definitely outside the purview of section 263 of the Act. As noted above, the exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi-judicial functions, hence order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue, therefore, we quash the order under section 263 passed by ld PCIT. Appeal of the assessee is allowed.

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• 2023 (2) TMI 1008
  Income chargeable to tax in India - benefits of India-Singapore DTAA - Supremacy of law - GAAR Applicability - AO/ DRP denying the benefit of Article 13 (4A) of the DTAA to the Appellant qua capital gains earned by the Appellant on transfer of shares - Article 3 (1) of the 2005 protocol to the India- Singapore DTAA was invoked - As per AO/ DRP assessee had no economic substance or commercial substance and that it was a shell or a conduit company - whether the revenue can go behind the tax residency certificate issued by the other tax jurisdiction ? - HELD THAT:- Supremacy of law made by the Parliament is beyond any doubt. However, one of the recognised exceptions to the said rule is section 90 (2) of the Act which can be termed as treaty override provision as held by the Hon ble Supreme Court in the case of Azadi Bachao Andolan [ 2003 (10) TMI 5 - SUPREME COURT ] and, therefore, this provision allows the provisions of a DTAA to supersede the provisions of the income tax Act in case their application is more beneficial. There is no dispute that GAAR is applicable to the assessment year under consideration which empowered the revenue to declare the subject transaction to be an impressible arrangement. As per section 101 of the ITA, domestic GAAR cannot be pressed into operation for denial of a tax benefit, where the case of an assessee falls within one of the conditions prescribed under Rule 10U of the IT Rules 1962. Thus in the case in hand the short term capital gain the tax on which is below the threshold set out in Rule 10 U (1) (a) (supra) further the impugned shares were acquired by the assessee on 22.08.2016 which is prior to the cut off date set out in Rule 10 U (1)(d) Assuming domestic GAAR provision are applicable but for the aforestated facts the treaty benefit cannot be denied to the assessee. AO / DRP have also invoked the doctrine substance over form to deny the benefit of Article 13 (4A). In our considered opinion the said doctrine is prior to the codification of domestic GAAR and the legislators were conscious enough when they were providing exemptions under Chapter X-A of the Act. Even the treatment of the assessee company as Shell or conduit also do not hold any water in as much as the veracity of the expenditure incurred by the assessee in Singapore was a subject matter of tax scrutiny in Singapore and the same has been accepted to be genuine by the Singapore tax authorities as per tax assessment orders mentioned elsewhere. To conclude it is not in dispute that the assessee has furnished a valid tax residency certificate issued by Inland Authority of Singapore, audited financial statements and return of income filed alongwith tax assessment orders by Singapore Tax Authority, therefore, in the light of the binding decision of Black Stone Capital Partners [ 2023 (2) TMI 35 - DELHI HIGH COURT ] we direct the AO to delete the impugned disallowance and allow the treaty benefit to the assessee as per the relevant provisions of the law/treaty. Decided in favour of assessee.

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• 2023 (2) TMI 1007
  Assessment u/s 153A - Unexplained cash credit u/s.68 - Identity, creditworthiness and genuineness of the transactions could not be proved by the assessee - incriminating material relating to the year under consideration was found and seized during the course of the search proceedings conducted u/s.132 or not? - CIT-A deleted addition - A.Y. 2012-13 - HELD THAT:- We concur with the view taken by the CIT(Appeals) that now when the assessee company on the basis of clinching documentary evidence which had not been dislodged or disproved by the A.O by placing on record any document/material proving to the contrary, therein, established the identity and creditworthiness of the investor companies a/w. genuineness of the transactions of receipt of share capital/premium from them, therefore, there was no justification on the part of the A.O in summarily brushing aside the duly substantiated explanation of the assessee company and treating the amount as an unexplained cash credit u/s.68 of the Act. Also, the Ld. D.R in the course of the proceedings before us had neither placed on record any such material/evidence which would disprove or dislodge the aforesaid observation of the CIT(Appeals), nor has brought to our notice any perversity in the view so arrived at by him. We, thus, finding no justifiable reason to dislodge the well-reasoned observations of the CIT(Appeals), approve the same. Thus, the Grounds of appeal No.(s) 1, 2 and 8 raised by the revenue being devoid and bereft of any merit are dismissed. Addition u/s.41(1)(a) - CIT-A deleted addition - HELD THAT:- We are unable to persuade ourselves to concur with the view taken by the A.O that the aforesaid liability in question was to be held as having ceased u/s.41(1)(a) of the Act. As the assessee had discharged the majority of its outstanding liability towards the aforesaid contractor, viz. M/s. Pragmatic Builders Pvt. Ltd. during F.Y.2012-13 to F.Y.2015-16 and an amount only was outstanding as payable in the running account of the aforesaid party on 18.05.2016, therefore, in our considered view the CIT(Appeals) had rightly observed that there was no justification for the A.O to have dubbed the liability in question as a ceased liability u/s.41(1) of the Act. Accordingly, finding no infirmity in the view taken by the CIT(Appeals), we uphold his order to the extent he had vacated the addition. Thus, the Grounds of appeal No.(s) 9 and 10 raised by the revenue are dismissed. Assessment u/s 153A - Addition u/s 68 - A.Y.2013-14 - HELD THAT:- The assessee company had filed its original return of income u/s.139(1) of the Act on 29.09.2013, declaring an income . Search and seizure operations u/s.132 of the Act were conducted on the assessee company on 19.09.2016. On the date of the aforesaid search proceedings i.e. on 19.09.2016 as no assessment or reassessment proceedings were pending in the case of the assessee company, and also, the time limit for issuance of notice u/s. 143(2) of the Act for the year under consideration i.e. A.Y.2013- 14 had expired way back on 30.09.2014, therefore, as observed by the CIT(Appeals), and, rightly so, it was a case of an unabated assessment. We, thus, in light of the aforesaid facts concur with the view taken by the CIT(Appeals), that as per the 2nd proviso to Sec. 153A of the Act, in a case where no assessment or reassessment is pending on the date of search u/s. 132 of the Act, then, in absence of any incriminating material found and seized during the course of said proceedings relating to the year under consideration i.e A.Y 2013-14, no addition could have been made in the hands of the assessee company. No infirmity in the view taken by the CIT(Appeals) uphold the same to the said extent. Thus, the Grounds of appeal No.(s) 3 4 raised by the revenue are dismissed in terms of our aforesaid observations. Addition u/s 68 - unexplained cash credit - identity and creditworthiness of the investor company not proved - HELD THAT:- we concur with the view taken by the CIT(Appeals) that now when the assessee had on the basis of clinching documentary evidence duly discharged the onus as was cast upon it as regards proving the identity and creditworthiness of the investor company, as well as the genuineness of the transaction of having received share capital/premium from the investor company, therefore, the same could not have been summarily dislodged by the A.O without placing on record any material proving to the contrary. We, thus, in terms of our aforesaid observation uphold the order of the CIT(Appeals) who in our considered view had rightly vacated the addition. Addition u/s 68 - assessee company had claimed to have received cash from 5 different parties as advance towards sale of shops - claim of the assessee that as the aforesaid sale agreement was cancelled, therefore, the cash advance was returned back to the aforementioned parties - aforesaid claim of the assessee did not find favor with the A.O for the reason that both the agreements i.e sale agreement and the cancellation agreement were executed on plain paper - CIT-A deleted addition - HELD THAT:- As observed by the CIT(Appeals), and, rightly so, now when the assessee while discharging the initial onus that was cast upon it as regards proving the nature and source of the cash deposits in its books of accounts, had in support of his claim filed with the A.O copies of agreements, viz. sale agreement/cancellation agreement, therefore, there was no justification for the A.O in rejecting the same without placing on record any material disproving the authenticity of the aforesaid claim. Our aforesaid view is supported by the judgment of the Hon ble High Court of Chhattisgarh in the case of Pawan Kumar Agrawal, [ 2017 (4) TMI 1602 - CHHATTISGARH HIGH COURT] In fact, we are in agreement with the CIT(Appeals) that the A.O had even failed to do the bare minimum that was required on his part, i.e, making verifications or calling for the necessary details from the aforesaid five parties with whom the assessee had claimed to have carried out the transaction in question. Ad-hoc disallowances @10% out of labour expenses, disallowance @20% out of telephone expenses, travelling expenses and conveyance car expenses - HELD THAT:- Admittedly, as the A.O while working out the disallowance had proceeded with in a whimsical manner and neither pointed out the very basis for working out the disallowance, nor referred to any such expenditure which was not supported by vouchers/bills, therefore, as observed by the CIT(Appeals), and, rightly so, no part of assessee s claim for deduction of such expenditure could have been disallowed in absence of any specific defect having been pointed out by the A.O. We, thus, in terms of our aforesaid observations uphold the order of the CIT(Appeals) to the extent that he had vacated the respective ad-hoc disallowances that were made by the A.O while framing of the original assessment u/s.143(3) dated 28.03.2016, which, thereafter was repeated by him while framing the assessment vide his order passed u/s 153A r.w.s 143(3) of the Act, dated 26.12.2018. Thus, the Ground of appeal raised by the revenue is dismissed. Addition u/s 69A - unaccounted money in the garb of the said loan transaction - HELD THAT:- There have been a realization of investments/loans and cash and bank balance of Rs.2.03 crore by the aforesaid investor company, viz. M/s. Extent Vinimay Pvt. Ltd. during the period relevant to the year under consideration i.e. A.Y.2015-16. On the basis of the aforesaid facts, we concur with the view taken by the CIT(Appeals) that now when the loan of Rs.2.03 crore (supra) received by the assessee company from the aforesaid lender, viz. M/s Extent Vinimay Pvt.Ltd. was made out of the realization of investments/loans which had been held by the department to be genuine in the hands of the investor company i.e M/s. Extent Vinimay Pvt. Ltd. for A.Y.2011-12, then the same by no means could have been held as the assessee s unexplained money u/s.69A.

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• 2023 (2) TMI 1006
  Validity of assessment framed by the AO u/s 153C without issuing notice u/s 143(2) - HELD THAT:- When the AO has clearly mentioned in the assessment order that the notice under section 143(2) was issued on 16.11.2015 and the assessee did not raise any objection either before the AO or before the CIT(A) then merely because this fact was not recorded in the ordersheet by the AO would not lead to the conclusion that the fact recorded in the assessment order is false / incorrect. Merely because the AO has not mentioned in the order-sheet entries about the issuance of notice under section 143(2) would not change the fact that the notice was issued under section 143(2) of the Income Tax Act. Hence, once the notice was issued by the AO under section 143(2) then the validity of assessment for want of the notice cannot be questioned. Even otherwise the notice under section 143(2) is not a mandatory requirement for framing the assessment under section 153A or section 153C of the Income Tax Act. Though the judgments relied upon by the learned CIT DR are in relation to the assessment framed under section 153A but even when the assessment is framed under section 153C the procedure is provided only under section 153A of the Income Tax. Therefore, when no notice under section 143(2) is required for framing the assessment under section 153A then on the similar analogy, the same is not required even for framing the assessment under section 153C of the Income Tax Act as both are in pursuant to search and seizure action under section 132 of the Income Tax Act. ground no. 1 and 2 of the assessee s appeal, the same are dismissed. Validity of assessment order for want of satisfaction recorded by the AO - HELD THAT:- It is pertinent to note that once the AO has specifically mentioned in the assessment order about the recording of satisfaction before the notice issued under section 153C of the Act and the assessee did not raise any objection either during the assessment proceedings or before the CIT(A) then merely because this was not mentioned in the ordersheet would not change the fact duly recorded by the AO in the absence of any contrary fact or material brought before us. Hence, the mere verbal contention of the assessee disputing the recording of the satisfaction, which find place in the assessment order itself, would not negate the fact of recording the satisfaction. Accordingly, we do not find any merit or substance in ground no. 3 and 4 of the assessment order and the same are dismissed. Unexplained income allegedly received by the assessee for vacating the premises - compensation for vacating the tenanted premises - AO noted that during the search in the case of Dinesh Kumar Pahuja at Lotus Apartment a document was seized which is a ledger account of land purchase in the books of M/s H.K. Infraventure Private Limited showing that Rs. 2.10 Crore has been paid to assessee and his brother - HELD THAT:- When two documentary evidence are giving different version of a transaction then the document which is signed by the parties and not disputed by its signatories cannot be ignored while considering the issue of addition based on the entries recorded in the seized document which is neither signed by any party nor accepted by the parties and particularly by the assessee. AO has made no efforts to examine the person from whose possession the said document was found or to whom the document belongs being the ledger account of M/s H.K. Infraventures Pvt. Ltd - The assessee has made the request to the AO that Sh. Dinesh Kumar Pahuja is the person who can explain the seized document but the AO has not taken any step to examine those persons. Therefore, in the facts and circumstances of the case, when the assessee has denied the receipt of any payment other than Rs. 60 lac through cheques towards the compensation for vacating the tenanted premises and the said claim of the assessee is also supported by the memorandum of understanding between the parties which is executed and signed by all the three parties and also attested by the witnesses as well as notary then before making any addition of the alleged receipt of compensation in cash on the basis of the seized document, the AO ought to have examined the person from whose possession the said document was found and also the party whom the document belongs to. Therefore, Shri. Dinesh Kumar Pahuja as Secretary, Sindhu Sehkari Avas Samiti and Shri. Hemant Kumar Singh, Director, M/s H.K. Infraventures Pvt. Ltd., were required to be examined by the AO and the assessee would have been given an opportunity to cross examine before making the addition. Accordingly, we set aside the impugned order and remand the matter to the record of the Assessing Officer for fresh adjudication after examination of Shri. D.K. Pahuja and Shri. Hemant Kumar Sindhi qua the seized document and opportunity to cross examination be afforded to the assessee. Concurring Order - ACCOUNTANT MEMBER - Unexplained income allegedly received by the assessee for vacating the premises - Keeping in view the matter is to be restored to the file of the AO for denovo assessment on this issue of additions to the tune of Rs. 45 lacs as was made by the AO and later confirmed by CIT(A). The seized document, Assessee was confronted by Revenue with the aforesaid seized document, but the assessee asked for summoning of the said Mr. Dinesh Kumar Pahuja from whose possession this document was found and seized by Revenue during searches conducted u/s 132 on 05.12.2013, as is emanating from the appellate order passed by ld. CIT(A), but the department did not produce Mr. Dinesh Kumar Pahuja before the assessee for examination/cross examination . The assessee has denied to have known Mr.Dinesh Kumar Pahuja and also denied to have any dealings with M/s. Sindhu Sahkari Awas Samiti. It is also true that the assessee was tenant of the premises/property 17, Stanley Road, Allahabad and M/s Sindhu Sahkari Awas Samiti was earlier owner/landlord of the said property , which property was sold by M/s Sindhu Sahkari Awas Samiti to M/s H K Infraventures Private Limited vide registered sale deed dated 04.11.2011. Mr. Dinesh Kumar Pahuja was the President of M/s Sindhu Sahkari Awas Samiti, while his brother Mr. Dilip Kumar Pahuja was the Secretary of M/s Sindhu Sahkari Awas Samiti. Under these circumstances, it becomes important that all the relevant extracts of the statements recorded by Department during the course of search proceedings as well post search enquiries of Mr. Hemant Kumar Sindhi Director of M/s H K Infraventures Private Limited, Mr Dinesh Kumar Pahuja (President of Sindhu Sahkari Awas Samiti- and from whose possession this seized document was found and seized by Revenue during searches conducted u/s 132 on 05.12.2013) , Mr Dilip Kumar Pahuja(Secretary of Sindhu Sahkari Awas Samiti), or of any other relevant person, having bearing with the aforesaid alleged transactions of the assessee , be made available to the assessee for rebuttal , and the assessee be allowed to examine/Cross examination the said persons, keeping in view principles of natural justice. The factum of proving onmoney has to be based on considering the entire facts and circumstances of the case which may vary from case to case, and preponderance of human probabilities is to be considered before fastening any tax-liability. Contents of the part of the seized document LP-5/Page 124 and back page of 124 is admitted by M/s H K Infraventures Private Limited. The name of the assessee is recorded in the said seized document. It is for the assessee to rebut the said presumption. It is also true that this document was not seized from possession of the assessee. It is also true that the assessee has during the impugned assessment year, transactions with M/s. H K Infraventures Private Limited w.r.t. vacating of tenanted property situated at 17, Stanley Road, Allahabad, U.P.. Thus, with these remarks and reasons as enumerated above in my concurring order, set aside the impugned order and remand the matter to the record of the AO for fresh/denovo assessment , as enumerated in detail as above in this separate concurring order.

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• 2023 (2) TMI 1005
  Provision for Standard Asset qua deduction u/s 36(1)(viia) - AO noted that assessee bank has claimed deduction for provisions under section 36(1)(viia) of the Act in respect of bad and doubtful debts, though is available in respect of 7.5% of the total income and 10% of the rural branches - HELD THAT:- As relying on STATE BANK OF INDIA case [ 2020 (2) TMI 1350 - ITAT MUMBAI] the issue in appeal in the case of the assessee is squarely covered by the said decision. Therefore, following the decision of the co-ordinate bench, we direct the Assessing Officer to allow the claim of deduction of the assessee under section 36(1)(viia) in respect of standard assets. This ground of appeal of the assessee is allowed. Disallowance of bad debt from credit card business u/s 36(1)(vii) - HED THAT:- As relying on ICICI Bank Ltd [ 2022 (12) TMI 1373 - ITAT MUMBAI] case we direct the Assessing Officer to allow the claim of deduction under section 36(1)(vii) read with section 36(2) in respect of bad debts claimed on credit cards. Addition u/s 43D - interest in respect of NPAs on receipt basis - AO observed that as per guidelines of RBI, non performing assets are recognized for a default of 3 months or more, however, as per the I.T. Rules, the period of 3 months has not been recognized anywhere - HELD THAT:- As relying on ICICI Bank Limits vs ACIT [ 2022 (8) TMI 1346 - ITAT MUMBAI] we direct the Assessing Officer to allow the claim of deduction under under section 43D r.w.r. 6EA of I.T. Rules in respect of interest on NPAs. Disallowance of Administrative expenses u/s 14A r.w.r. 8D(2)(iii) - HELD THAT:- We direct the Assessing Officer to disallow 0.5% of the average value of investment excluding strategic investments for the making of disallowance as directed in the decision of ITAT in assessee s own case 2019 (11) TMI 853 - ITAT MUMBAI for A.Y.2013-14 2014-15. This ground of the assessee is partly allowed. Disallowance under rule 8D(2)(ii) of Interest expenses - HELD THAT:- Assessee had share capital and reserves which was far in excess of the investments made by the assessee in the instruments yielding exempt income. Therefore, following the decision of HDFC Bank Ltd [ 2016 (3) TMI 755 - BOMBAY HIGH COURT ] and decision in the case of Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT ] a presumption would come into play that the investment in the instruments yielding exempt income has been made out of own funds. Therefore, disallowance under rule 8D(2)(ii) cannot be made and on following the decision of the co-ordinate bench in assessee s own case. Therefore, we do not find any infirmity in the decision of the Ld.CIT(A). Therefore, this ground of appeal of the Revenue stands dismissed. Nature of expenditure - broken period interest on HTM (held to maturity) - revenue or capital expenditure -HELD THAT:- As decided in 2019 (11) TMI 853 - ITAT MUMBAI the closing balance has been shown in the balance sheet. The interest income on Government securities and the profit / loss has been offered in the return of income for the current year. Similar treatment is consistently offered by the assessee in earlier years. The assessee also relied on the CBDT Circular No.18/2015 dated 02.11.2015. The Ld CIT(A) accepted the contention of the assessee granted relied to the assessee by relying on the CBDT circular and on the decision of Citi Bank NA [ 2008 (8) TMI 766 - SUPREME COURT ] and American Express International Banking Corporation [ 2002 (9) TMI 96 - BOMBAY HIGH COURT ] We have noted that this issue is also covered in favour of the assessee . Expenditure incurred on ESOP - AO noticed that assessee has claimed an amount on the ground that the liability on account of ESOP has been crystallized in the year when the ESOP have been exercised during the year under assessment - AO was of the view that it cannot be claimed as an expenditure wholly and exclusively laid out or expended for the purpose of trade - HELD THAT:- As decided in assessee own case 2019 (11) TMI 853 - ITAT MUMBAI we dismiss the ground of the Revenue.

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• 2023 (2) TMI 1004
  Revision u/s 263 - reduction from provision created for bad and doubtful debts for rural advances - real income theory - as per CIT Provision created for bad and doubtful debts for rural advances to its general reserves, which was liable to be taxed as income of the assessee since the provision created had been allowed a deduction earlier, the AO had not considered this matter and had made no verification or necessary inquiries in relation to the same while finalizing the assessment - As per assessee invocation of Explanation-2 to section 263 by the ld.Pr.CIT without confronting the same to the assessee causing the order passed to be against principle of natural justice and hence invalid - HELD THAT:- We are not impressed nor convinced with the contention of the Ld.counsel for the assessee on the merits of the case that the write back of provision for bad and doubtful debts on rural advances was not taxable as income. Considered from all, any and every aspect, as per law read alongwith accounting principles in this regard, the write back, we hold, is to be treated as income and subjected to tax ,as rightly held by the Ld.PCIT. Even as per accepted accounting principles, this write back needed to be treated as income and routed through the P L account, as rightly held by the Ld.PCIT. Thus going by law, supported by accounting principles, the write back of provisions for bad and doubtful debts of rural advances was required to be routed through the Profit and Loss account and treated as income for taxation purposes. Even going by the real income theory the Ld.PCIT, we hold, has rightly found the write back taxable,noting that the write back of the provision to the general reserve indicated no NPA and hence realization of income. Meaning thereby that the provision created earlier, for cushioning against bad debts on account of rural advances turning NPA , being created out of profits , and when not required as written back, it resulted in income to the assessee. This provision for bad and doubtful debts relating to the rural advance, having been allowed as claim for deduction in earlier years, any write back from the same, logically needed to be subjected to tax, since clearly the claim allowed in earlier years was excessive to the extent of the write back done by the assessee. Even on the accounting principles as prescribed by the ICAI the write back from the provision needed to be routed through profit loss account. Therefore, for all purposes, we find that there is no merit in the claim made by the ld.counsel for the assessee that this write back could not be subjected to tax. No merit in the contention of the ld.counsel for the assessee that the order u/s 263 of the Act needs to be set aside for not having confronted the assessee with invocation of Explanation 2 to the said section. Decided against assessee.

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• 2023 (2) TMI 1003
  Transfer pricing - Adjustment made to software development segment - modified return filled - Appellant has signed an Advance Pricing Agreement (APA) with the Central Board of Direct Taxes ( CBDT ) - additional income offered in the Modified Return of Income filed within statutory timeline revising its income - HELD THAT:- Unfortunately in this case, the A.O has retained original transfer pricing adjustment without considering the modified return filed as per the mandate of section 92CD(4) - modified return was filed on 17-03-2022 and the ld. D.R.P has given their findings on 25-04-2022. Thereafter, the final assessment order was completed by the A.O on 30-05- 2022 which means that already the modified return was before the A.O., but he has not considered the same violating the provisions of section 92CD(4) - assessee submitted before us, at the time of hearing that this ground may be remanded back to the file of the A.O for giving appropriate consideration to the modified return filed by the assessee. D.R did not raise any objection if the ground is remanded back to the file of the A.O - thus in the interest of justice, therefore, this ground should be remanded back to the file of the A.O for re-adjudication. Addition u/s 37 - lease rental paid which was held as inadmissible expenses - office of the assessee has not started functionin g - Counsel submitted that the assessee was unable to submit evidences regarding merits of this issue before the A.O and also before the ld. D.R.P. due to covid pandemic prevailing at that point of time - HELD THAT:- The contentions raised by the ld. Counsel for the assessee are valid and true. The evidences on the issue of lease rental paid could not be submitted by the assessee due to the circumstances prevailing at that point of time viz. covid pandemic. In the interest of justice, therefore, we admit the evidences as additional evidences and remand this ground to the file of the A.O for readjudication as per law complying with the principles of natural justice while considering the evidences furnished by the assessee. Ground No. 2 is allowed for statistical purposes. Disallowance of Primary Rate Interface (PRI) line charges paid to telecom companies - HELD THAT:- This ground is covered in favour of the assessee in assessee s own case for A.Y. 2016-17 [ 2022 (11) TMI 444 - ITAT PUNE ] relied on the decision of Lee Murihead (P) Ltd. [ 2019 (4) TMI 1871 - BOMBAY HIGH COURT ] and Kotak Securities Ltd. [ 2016 (3) TMI 1026 - SUPREME COURT ] while providing relief to the assessee - Ground allowed in favour of the assessee.

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• 2023 (2) TMI 1002
  Draft assessment order u/s 144C(1) - assessee is an LLP - Whether Appellant is a foreign company? - HELD THAT:- AO has framed draft assessment order when the provisions were not applicable to the assessee. Eligible Assessee means, any person in whose case variation referred to in sub-section arises as a consequence of an order passed by the TPO u/ss (3) of section 92CA of the Act. Facts of the case in hand show that no order has been passed by the TPO, therefore, there is no question of any variation arising as a consequence of the order of the TPO and since the assessee is an LLP, therefore, it cannot be termed as a foreign company, which means that provisions of section 144C of the Act with all its sub section do not apply to the assessee, which means that the impugned assessment order is void ab initio. As relying on [ 2019 (4) TMI 2098 - ITAT MUMBAI] and provisions of section 144C of the Act, we have no hesitation in holding that the assessment order is void ab initio. - Decided in favour of assessee. Unexplained Receipts shown in Form No. 26AS - Findings given by AO is totally based upon the findings given in earlier Assessment Years. Even the directions of the DRP are based upon the directions given in earlier Assessment Years and both the authorities grossly erred in not realizing that the assessee has discontinued its business after Assessment Year 2010-11. Therefore, drawing support from earlier year s order would do no good to the Revenue as the facts are not similar. In fact, the Assessing Officer has put the entire burden on the assessee to show in whose hands the receipts shown in Form 26AS has been declared. By putting the onus on the assessee, the AO has grossly erred as the assessee is not responsible to explain the recipients of the receipts shown in Form No. 26AS. AO should have asked the payer, details of the payee to whom payments have been made by the payer on which it could deduct tax at source . Therefore, on merit also, addition cannot survive as facts are not identical to the facts of earlier Assessment Years - Appeal of assessee allowed.

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• 2023 (2) TMI 1001
  Deduction written off by the assessee as security deposit not recovered - AO did not allow the deduction on the ground that the security deposit was given for acquiring a capital asset and hence its part non-recovery could not be allowed as deduction - CIT(A) countenanced the assessment order on this point - HELD THAT:- An admitted fact that the assessee paid a sum of Rs.15.00 lakh as security deposit to the licensor. As during the assessment year 2012-13 that the premises was prematurely got vacated by the licensor and the assessee used the premises for 3 months without paying any rent. Though it is claimed that some agreement was entered into with the licensor for allowing user of the premises for three more months free of rent, but no such agreement has seen the light of the day. This shows that the assessee used the premises for three months in the preceding assessment year without paying rent and the licensor deducted the equivalent amount of such rent from the security deposit at the time of its refund in the year under consideration. Thus, it is not a case of security deposit ceasing to be refundable and becoming loss, rather adjustment of security deposit against the period for which the assessee used the premises without paying any rent. Assessee cannot claim deduction in respect of non-refunded security deposit during the year under consideration as a business loss. Since the deduction by the licensor was in lieu of the rent for three months of the A.Y. 2012-13 for which the assessee used the premises without paying any rent, we direct to grant deduction to the assessee in the assessment for the preceding A.Y. 2012-13. Writing off towards software capital work-in-progress - assessee submitted that it was in the business of software development and was in the process of developing inhouse software modules named Axis QA Automation Framework /Axis ERP/ IntelX platform used for various applications - HELD THAT:- On discontinuing the work on such modules, the amount capitalized towards salary of developer and computer rent allocated to developer, was claimed as deduction by writing off Rs.5.33 lakh. The detail of expenses written off has not been disputed by the AO. This shows that the assessee had capitalized certain revenue costs in respect of certain modules which it was trying to use in the software development business, but abandoned them during the year under consideration. Costs incurred earlier on such modules, which are otherwise of revenue nature, cannot be treated as capital expenditure, incapable of deduction on their write off. It is not a case where the assessee purchased certain plant and machinery or incurred certain capital costs which were capitalised earlier to work-in-progress account, and later on, on abandoning the same, it was claimed as deduction. Rather it is a case of incurring revenue expenditure, which was initially capitalized and now written off because of abandoning the modules, that were no more required in the software development business. In our considered opinion, is eligible for deduction. The ground is allowed. Disallowance on account of interest on late payment of TDS - assessee claimed deduction of this sum on late payment of TDS, which was disallowed by the AO. The same was approved in the first appeal - HELD THAT:- As it is seen that the sum in question is interest paid to the Income-tax Department on late payment of TDS. Obviously, such an amount cannot be considered as allowable in terms of 40(a)(ii) in the hue of the judgment of Hon ble Madras High Court in CIT Vs. Chennai Properties and Investment Limited [ 1998 (4) TMI 89 - MADRAS HIGH COURT] . Almost similar view has been taken by the Hon ble Jurisdictional High Court in CIT Vs. Ghatkopar Estate and Finance Corporation (P) Ltd. [ 1988 (11) TMI 74 - BOMBAY HIGH COURT] - In view of the above judgments, we uphold the action of the authorities below in making and sustaining the disallowance.

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• 2023 (2) TMI 1000
  TP Adjustment - comparing the Appellant s margin at entity level with that of the comparable companies - whether TPO erred in comparing the Appellant s margin at entity level with that of the comparable companies margin - HELD THAT:- It emerges during the course of hearing that it s sole endeavour is to get impugned arm s length price re-computed at transaction than entity level as per the provisions in Chapter X of the Act. Assessee submitted during the course of hearing that the issue as to whether the impugned arm s length price ought to be computed at transaction level or at entity level is not more res-integra in light of hon ble jurisdictional high court s decision in CIT vs. Alstom Projects India Ltd. [ 2016 (12) TMI 1408 - BOMBAY HIGH COURT] rejecting the Revenue s arguments to this effect. We direct the TPO to ensure computation of assessee s arm s length price in issue involving sales in manufacturing segment at transactions level. Necessary computation at the TPO s level shall follow as per law. Certain items as non-operating in nature while computing the margin of the Appellant - DRP/Ld. TPO erred in considering foreign exchange earning/loss and provision for doubtful, debt/provisions written back as non-operating in nature - HELD THAT:- Assessee sought to invite our attention to the assessee s segmental details in its audited books of accounts that the learned lower authorities have erred in law and on facts in computing the impugned arms length price in foregoing terms. Be that as it may, we are of the view that the TPO herein also needs to recalculate the assessee s arm s length price after taking into consideration the assessee s audited book results in its transfer pricing study report so as ensure that non-operating items are not included in its consequential computation. Ordered accordingly. Exclude income from provision of management services from AE sales in issue for computing arm s length price - HELD THAT:- We primafacie find merit in the assessee s instant substantive ground subject to final computation since its sales involving Associated Enterprise AE and provision of management support services prime-facie form different segments. We have not expressed our opinion on merits since the issue is being restored back to the learned TPO for his final computation as per law.

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• 2023 (2) TMI 986
  Revision u/s 263 - Scope of the notice issued - Unexplained investment made in the excess stock found during survey proceedings - violation of Sec. 69B of the Act attracting provision of Sec. 115BBE to charge tax at 60% of the income - disclosure made by the assessee on account of excess stock and cash found during survey as business income - HELD THAT:- More notably in DECCAN JEWELLERA (P) LTD. [ 2021 (9) TMI 424 - ANDHRA PRADESH HIGH COURT] has in identical background of facts held the disclosure of excess stock of gold ,diamond silver jewellery by an assessee dealing in such stock to be in the nature of business income and not income from undisclosed sources and in response to queries raised by the AO seeking explanation as to why the surrender should not be treated as unexplained investment in the said case, the assessee had merely submitted that excess stock was part of its mixed lot of stock both declared and undeclared, invested out of its undisclosed business income of earlier years and further the assessee had disclosed the same as its business income in its Profit and Loss account. This explanation was found to be correctly accepted by the AO, by the Hon ble High Court. In the present case before us the assessee had admitted to the same explanation in statement of partners recorded during survey, reproduced above admitting to the excess stock of gold, silver etc as out of its unaccounted business income and had also reflected the surrendered stock as part of stock of its business and shown the same as its business income. There is in fact no factual distinction between the said case and that before us. Therefore the proposition laid down by the Hon ble High Court will apply to the present case also. It is very much clear, therefore and we agree with the ld.counsel for the assessee, that facts relating to the disclosure in excess stock of the business of the assessee were there before the AO, and he had taken a plausible view on the same by treating it as business income of the assessee. Therefore, we hold, that there was no error in the order of the AO. Pr.CIT had invoked Explanation 2 to section 263 without first confronting the assessee with the same - non-mentioning of Explanation 2 to section 263 in the show cause notice - As section 263 empowers Commissioners/ Pr.Commissioners to exercise revisionary power where they find any order passed by the AO to be erroneous so as to cause prejudice to the interest of the Revenue. Explanation 2 to the section lists circumstances in which the assessment order passed will be deemed to be erroneous, which amongst other, includes an order passed without making inquiries or verification which should have been made as per clause (a) of the Explanation, which clause has been invoked by the ld.Pr.CIT in the present case. Once the ld.Pr.CIT brings to the notice of the assessee the reason why he finds the assessment order to be erroneous, which in the present case was inadequate inquiries conducted by the AO on the nature of disclosure made by the assessee during the survey in excess stock found, he need not specifically point out that he has invoked Explanation-2 to sub-clause (a) to the section which is to the same effect of inadequate inquiries conducted qualifying as error in assessment order. The fact that he clearly brings out the reason why he found assessment order erroneous, is sufficient in itself and self-explanatory. It need not to be technically qualified by pointing out the specific clause in respect to which the reason pertained. The entire objectives of confronting anything to the assessee in the process of rendering justice is to offer an opportunity to other party to come up with his/her arguments or contentions in defense. In the present case, it is not disputed that the assessee had been specifically pointed out the error in the order of the AO of nonconducting inquiry relating to the particular issue. The assessee was required to respond to the same, which he did by pointing out that due inquiry was conducted. As we mentioned above, the Explanation did not expand the scope of section but only explained the scope of section, and therefore, once the specific section has been invoked, it is not necessary to mention any specific Explanation thereto which has been invoked. Therefore, this contention of the ld.counsel for the assessee is rejected outrightly that the order needs to be set aside for the reason that ld.Pr.CIT did not confront the assessee before invoking Explanation 2 to sub-clause (a) to section 263 of the Act. As for the decision of the jurisdictional High Court in the case of Shreeji Prints [ 2020 (2) TMI 1021 - GUJARAT HIGH COURT] , relied upon by the ld.counsel for the assessee in support of this contention, the assessee, we hold, cannot derive any benefit from the same. We hold that the assessee cannot derive any benefit from the judgment of Hon ble High Court in the case of Shreeji Prints P. Ld. (supra), to the effect that non-mentioning of Explanation 2 to section 263 in the show cause notice will render entire revisionary order as non-est in the eyes of law. This contention raised by the ld.counsel for the assessee, is therefore, rejected. Appeal of the assessee is allowed on merits, and the legal contention raised by the assessee is dismissed.

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• Customs

• 2023 (2) TMI 999
  Levy of penalty u/s 114 of the Customs Act, 1962 - Over-valuation of goods to avail a higher duty drawback - HELD THAT:- The reasons provided by the appellant for withdrawal of the export shipments was that the buyer had cancelled both the shipments / cargo due to late delivery. This did not conform with the explanation that the appellants had sought permission to withdraw the shipments on becoming aware that the goods being dispatched were old and over-valued. There is no dispute that the goods were over-valued. Therefore, the questions involved in the present appeals, essentially, are whether the letter dated 31.01.2017 was, in fact, sent and, if so, what is the import of the said letter. The question whether the said letter has been received by the concerned authorities is solely a question of fact. There is no dispute that the said letter was not produced before the adjudicating authority. The Commissioner (Appeals) had found that the delivery of the letter to the department is itself doubtful apart from the fact that the letter did not corroborate the explanation as provided by the appellant. This being a finding of fact, no substantial question of law arises in the present appeals. Appeal dismissed.

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• 2023 (2) TMI 998
  Seeking return of Demand Drafts - amount paid voluntarily or not during investigation by DRI - According to the petitioner, the said amount was recovered by coercion, without any order determining the said liability or raising any demand - HELD THAT:- Considering the controversy involved in the present case, the learned ASG, on instructions, states that there would be no difficulty in returning the amounts collected while reserving the rights of the respondents to take any further action in accordance with law, including for protection of revenue and for recovery of any amounts that may be determined as due from the petitioner. The respondent shall refund the amount of Rs.79,00,000/- collected from Mr. Gautam R. Barmecha, by remitting it into his personal savings bank account, from where the amounts were drawn - It is clarified that the respondents are not precluded from taking any other action in accordance with law for preservation of revenue or for recovery of any amount that may be found due from the petitioner. Petition disposed off.

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• 2023 (2) TMI 997
  Right to receive documents - Petitioner s request for supplying certain documents was denied - HELD THAT:- The procedure is now governed by the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, wherein a detailed methodology is laid down. If the Petitioner files a reply including submissions made in the writ petition, it is expected that the Respondents-authorities will proceed as per the mandate of the Rules of 2007. If there is deviation therefrom to the prejudice of the Petitioner, the Petitioner would have its right open to filing an appeal. The learned Counsel for the Petitioner states that adjudication of the show cause notice should be by a reasoned order. It is not found that apprehension is warranted as the authority is expected to pass a reasoned order. Petition disposed off.

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• 2023 (2) TMI 996
  Exemption from customs duty - preferential Trade Agreement with Asian Countries - Whether the defect of non mention of invoice number in the Certificate of Origin can be enough to reject the certificate of origin and debar the appellant from benefit of Notification No. 46/2011-Cus dated 01.06.2011? - HELD THAT:- It is not in dispute that the consignment was imported by MV Intrepid which sailed on 04.11.2011 from Indonesia carrying 51,397,979 MT of steal coal (non-coking). It is also not in dispute that the consignment imported by the appellant is part of the same cargo. The appellant have sought to rely on the country of origin certificate which contains these details relating to date of sailing and name of ship and the quantity of cargo. The said certificate does not contain the invoice number of either the original purchaser or of the appellant. Mere non-mention of the invoice number in the certificate of Origin is not sufficient reason to deny the benefit of Notification No. 46/2011-Cus dated 01.06.2011. The purpose of the Notification is to grant exemption under the preferential Trade Agreement with Asian Countries and from the certificate of country of origin produced by the appellant. It is sufficiently established that the goods have indeed originated in Indonesia and were wholly obtained in Indonesia. Appeal allowed.

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• Corporate Laws

• 2023 (2) TMI 995
  Seeking winding up of the appellant company - Section 433(e) and 433(f) of the Companies Act, 1956 - HELD THAT:- It is well settled that proceedings for winding up of the company are not recovery proceedings. A company is liable to be wound up under Section 433(e) of the Companies Act, 1956 if it is unable to pay the debt. In terms of Section 434 of the Companies Act, if a company fails to pay an admitted debt after receipt of the notice under the said Section, it would be deemed to be unable to pay the debt. We are unable to accept that in the given facts, the appellant has failed to repay an admitted debt. Admittedly, only a sum of Rs.30,00,000/- was received by the appellant and the respondent had paid the remaining amount as claimed by it to PCI Middle East FZE. The learned Company Court had also noted that PCI Middle East FZE was a subsidiary of the appellant. Although, PCI Middle East FZE may be a subsidiary of the appellant, it is a separate entity. Undeniably, in cases where the defence against the claim of debt is found to be moonshine or a sham, the petition for winding up would be maintainable on account of inability to pay the debt. However, the facts of the case must clearly establish that there is no plausible defence available to the debtor company. The defence so raised has been solely for the purposes of avoiding repayment of admitted debt and in most cases, to camouflage the inability to do so. Appeal allowed.

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• 2023 (2) TMI 994
  Maintainability of application for recall of order - order passed by the Tribunal attained finality by the order of the Hon ble Supreme Court - fraud and concealment of facts by Respondents before entire course of litigation - Section 421 of the Companies Act, 2013 - HELD THAT:- It is admitted that the Appellant has committed fraud with the Respondent No.1 company and was under jail for about two months and the Hon ble High Court has given conditional bail to the Appellant. In this Order (at page 894 to 896, Vol.-VI of the Appeal) the conditions of this bail order is not to try to tamper with or pressurize the prosecution witnesses or complainant in any manner (Respondent No. 1 company was complainant and such false litigations are nothing but contempt of Hon ble High Court order). Considering the high headed attitude of the Appellants and creating hurdles by initiating false and unwanted litigations against the Respondent No.1 company, its shareholders and also against the buyers of plot of land from the Respondent No. 1 company and its statutory auditors as well, all the shareholders have unanimously passed a resolution to buy out the Appellant s 8% shares under section 236 of the Companies Act, at appropriate value as may be determined by an independent valuer to be appointed by the NCLT. The CP No. 36 of 2018 was filed by the Respondents on 07.03.2018 and further 05.09.2018 in this matter also filed counter petition in the form of an IA against this petition unmbered MA 1 in CP 36 of 2018 on 19.10.2019 and similar voluminous records of 2000 plus pages are placed in MA 1 in CP 36 of 2018. After couple of hearings, the Appellant felt that his exit from the company as shareholder of the company is final with outcome of CP 36 of 2018 and that is why with the sole intention to delay justice in CP 36 of 2018. All these false and frivolous multiple litigations are being created and on the ground of pending this matter, the Appellant keep taking adjournment in CP 36 of 2018. The order dated 23.11.2017 which was passed by the Tribunal attained finality by the order of the Hon ble Supreme Court and thereafter, recall application for recalling the order dated 23.11.2017 was filed by the Appellants is not tenable in the eye of law. Also the Appellants are trying to reagitate the matter afresh. Keeping in view the aforenoted facts, there are no merit to interfere with the order impugned passed by the NCLT. The impugned order dated 26.04.2021 passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad in IA 608 of 2019 in C.P. No. 68/NCLT/AHM/2017 is hereby affirmed - Appeal dismissed.

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• PMLA

• 2023 (2) TMI 993
  Seeking grant of bail - money laundering - proceeds of crime - it is alleged that petitioner was involved in dealing with the proceeds of crime and in transferring of funds of M/s. PACL through various companies and making transactions of purchasing of properties etc. - HELD THAT:- Admittedly the petitioner was a downstream investor of funds hence his submission he did not knowingly became a party to money laundering cannot be brushed aside lightly. Even otherwise he allegedly was a nominee non-executive director since 11.09.2012 in M/s. DDPL and M/s. Unicorn and prior to 11.09.2012 had nothing to do with these companies; further substantial amount received in the companies of petitioner was returned in the manner alleged above and even Gurmeet Singh s statement would show the petitioner represented the 25 companies were not associated with M/s. PACL. What weigh the statements under Section 50 of PMLA would carry at the end of trial cannot be tested at the stage of bail, more importantly when the intermediary companies were never made an accused in the present ECIR. The ultimate effect of their non-inclusion would be seen at the conclusion of trial. Further considering the order dated 03.09.2020 wherein all remaining co-accused in this ECIR were admitted to bail, this Court has every reason to say the petitioner has passed the test of broad probabilities. Admittedly twin conditions of Section 45 does not put an absolute restraint on grant of bail or require a positive finding qua guilt. The petitioner herein is admitted on bail on his executing a personal bond of Rs.25.00 lacs with one surety of like amount to the satisfaction of the learned Trial Court and subject t conditions imposed - bail application allowed.

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• 2023 (2) TMI 992
  Maintainability of petition - appropriate Jurisdiction (Appellate Tribunal) - Validity of Provisional Attachment Order - grievance of the Petitioner is that both the orders have been passed under Section 8(3) of the PMLA, in respect of the same property which was earlier retained and has again been attached - HELD THAT:- Upon a query from the Court it is submitted by Mr. Manish, ld. Counsel that since there is a jurisdictional issue for the orders passed by the Adjudicating Authority, the Petitioner did not approach the Appellate Tribunal constituted under PMLA and has preferred to file the present writ petition. In the opinion of this Court, in view of the order dated 8th December, 2022, the present writ petition would not be maintainable as the said order clearly dealt with the same impugned orders which are now sought to be impugned in the present writ petition. Petition dismissed.

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• Service Tax

• 2023 (2) TMI 991
  Scope of definition of taxable services - expansion with effect from 1.7.2010 - HELD THAT:- The Revenue, which is the appellant in this case, did not dispute that the order in VELJI P. SONS (AGENCIES) P. LTD. VERSUS COMMISSIONER OF C. EX., BHAVNAGAR [ 2007 (8) TMI 35 - CESTAT, AHMEDABAD ] was carried in appeal informing this Court [ 2008 (3) TMI 664 - SC ORDER ] had dismissed the appeal and confirmed the order of the CESTAT. One of the grounds which persuaded the CESTAT to hold what it did was that the period of demand was prior to the amendment to the definition. The present appeal has to suffer the same fate; it is accordingly dismissed.

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• 2023 (2) TMI 990
  Levy of service tax - payments received as incentive / discounts reimbursements which were in the nature of consideration for service (extended by MSIL to the appellant) - appellant argued that incentives are attributable to the activity of sale and not for rendering any services by the appellant and therefore are not chargeable to service tax - time limitation. HELD THAT:- The issue is no longer res integra and as referred to by the Learned Counsel for the appellant the same has been considered and decided in favour of the assessee in the various cases - reliance can be placed in the case of M/S. T.V. SUNDRAM IYENGAR SONS PVT. LTD. VERSUS THE COMMISSIONER OF CGST CENTRAL EXCISE, MADURAI [ 2021 (5) TMI 159 - MADRAS HIGH COURT] where it was held that where the sale transaction is on principal to principal basis, merely because a discount was passed by the manufacturer to the assessee, that may not be construed as commission and therefore, it cannot be the subject matter of levy of service tax. The Larger Bench of this Tribunal in the case of KAFILA HOSPITALITY TRAVELS PVT. LTD. VERSUS COMMISSIONER, SERVICE TAX, DELHI [ 2021 (3) TMI 773 - CESTAT NEW DELHI] dealt with the issue whether service tax can be levied under the category of Business Auxiliary Service on target based incentives paid to the travel agents by the Airlines as they were promoting and marketing the business of the Airlines. The Tribunal took the view that it is not a case where the air travel agent is promoting the service of the Airlines rather by sale of airlines ticket he was ensuring the promotion of its own business even though this may lead to incidental promotion of the business of the Airlines. Thus, the activity undertaken by the appellant is for the sale and purchase of the vehicle and the incentives are in the nature of trade discounts. The incentives, therefore form part of the sale price of the vehicles and have no correlation with the services to be rendered by the appellant. That in terms of the dealership agreement, the appellant purchases the vehicles from MSIL and sells the same to its end customers. The activity of promoting the sale is with respect to the vehicles owned by the appellant which incidentally is in interest of both the parties - the appellant is engaged in the onward sale of vehicles which involves merely transfer of property in goods which is excluded from the definition of service . That section 66D of the Finance Act, 1994 contains the negative list of services under various clauses and clause (e) provides for trading of goods . On this ground also, it is found that incentives which are part of sale activity are not exigible to service tax. Thus, the amount of incentives and discounts cannot be treated as consideration for any service and therefore no Service Tax is leviable thereon. Having decided the issue on merits in favour of the assessee, it is no longer required to go into the question of limitation raised by the appellant. Appeal allowed.

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• 2023 (2) TMI 989
  CENVAT Credit - inputs/input services/capital goods - towers, shelter and parts thereof - demand confirmed on the ground that the subject goods were used for fabrication/erection of towers and shelters, which being attached to earth, were immovable in nature and thus, not used for providing output services in terms of the Circular dated 26.02.2008 - extended period of limitation. Whether towers are movable property or immovable property? - HELD THAT:- This issue was examined at length by a Division Bench of the Tribunal in M/S. RELIANCE JIO INFOCOMM LTD. VERSUS ASSISTANT COMMISSIONER, CGST CENTRAL EXCISE, BELAPUR-IV DIVISION [ 2022 (4) TMI 1361 - CESTAT MUMBAI] and it was held that towers and shelters would not be immovable property. The Delhi High Court in VODAFONE MOBILE SERVICES LIMITED, INDUS TOWERS LIMITED, TOWER VISION INDIA PRIVATE LIMITED, BHARTI INFRATEL LIMITED, VERSUS COMMISSIONER OF SERVICE TAX, DELHI [ 2018 (11) TMI 713 - DELHI HIGH COURT] had also examined this issue and held that the Tribunal clearly erred in concluding that the towers and parts thereof and the prefabricated shelters are not capital goods with the meaning of Rule 2(a) of the Credit Rules. The appellant was also entitled to take CENVAT credit since the items in dispute are capital goods . The order dated 30.09.2016 in so far as it confirms the demand for the normal period of limitation is, accordingly, set aside - as the demand has been set aside on merits, the issue of extended period of limitation also dismissed. Appeal allowed.

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• Central Excise

• 2023 (2) TMI 988
  CENVAT Credit - intermediate goods - aluminum dross/skimmings (arising as waste/refuse) - requirement of payment of 6% of the value of the exempted or non-excisable goods when they are also manufactured along with dutiable goods apply to dross and skimmings, or not? - applicability of CBIC circular No. 1084/05/2022-CX dated 7.7.2022 - HELD THAT:- The submission of the learned authorised representative that CBIC s circular should not be applied in this case even though it squarely covers the case because the Rule has not been amended cannot be accepted. The circular was issued considering the Rule. The purpose of the CBIC s circulars is to ensure that Revenue applies the same Rule in the same manner in all cases. While the assessee might dispute the interpretation of the Rule by the Revenue, learned authorised representative cannot take a different stand from the CBIC s circular. He is representing the Revenue and if the Rule is to be applied in a particular manner according to the Revenue in all cases as per the Circular, the respondent, who is placed in identical situation cannot be treated differently even if the learned authorised representative is of the opinion that the Circular is not correct. The impugned order is upheld and Revenue s appeal is dismissed.

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• CST, VAT & Sales Tax

• 2023 (2) TMI 987
  Validity of assessment order - case of petitioner is that despite seeking three weeks time to send a detailed reply by its communication dated 10.05.2022, the respondent has not considered the said request and has also not considered the C and F Declaration Forms submitted by the petitioner in the impugned assessment orders - violation of principles of natural justice - HELD THAT:- This Court having noticed from the communication dated 20.01.2023 that the said acknowledgment has been duly acknowledged by the Deputy State Tax Officer - 2, Annur Circle, Coimbatore by name P.Vasagi, is of the considered view that the said communication was duly received by the respondent. However, to avoid any doubt, the petitioner will have to re-submit C and F Declaration Forms once again with the respondent. This Court is in agreement with the view taken by the learned Single Judge of this Court in M/s.Arvind Remedies Ltd., Vs. The Assistant Commissioner (CT), Vepery Assessment Circle, Chennai - 600 006 [ 2016 (11) TMI 260 - MADRAS HIGH COURT ] . However, the petitioner will have to re-submit the C and F Declaration Forms with the respondent once again, within a time frame to be fixed by this Court and appear for personal hearing on the fixed date. In so far as the impugned assessment orders are concerned, since there is no violation of principles of natural justice till the date of the assessment orders, this Court is not interfering with the impugned assessment orders. However, in view of the fact that the petitioner has submitted the C and F Declaration Forms with the respondent on 20.01.2023, after passing of the impugned assessment orders, the petitioner is directed to file a fresh application under Section 84 of the TNVAT Act, 2006, seeking for rectification of the impugned assessment orders, enclosing the C and F Declaration Forms and all other required documents, within a period of one week from the date of receipt of a copy of this order. Petition disposed off.

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