TMI Tax Updates - e-Newsletter
February 10, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
PMLA
Service Tax
Central Excise
Highlights / Catch Notes
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GST:
Refund of amount paid upon wrongful reversal of the transitioned credit - rejection of refund merely on the ground that such refund claim does not fall within the specific categories enumerated in Circular No.125/44/2019-GST - The High Court found that the rejection of the refund claim solely based on the category was unjustified. It noted that Section 54(1) of the CGST Act appeared broad enough to encompass any claim for refund of tax or interest within a specified timeframe. - Matter restored back.
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GST:
Levy of penalty - Part B of E-Way Bills was not filled up - The High Court noted that, apart from the factual aspect that the Part B of E-Way Bills was not filled up, there is no material on record to show that the petitioner had any mens rea to evade tax. It is to be noted that the invoice, that was being carried, matched with the goods in the truck and the goods were not in variance with the invoice. - The HC held that, the reason of presumption of evasion of tax is without any basis in law, and accordingly, the order of detention and subsequent appellate order are illegal and required to be set aside.
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GST:
Cancellation of the registration of the petitioners - not providing an opportunity of hearing - As the Appellate Authority has dismissed the appeals of the petitioners, the respondent authorities will not be able to exercise the revisional power under section 108 of the GST Act. - The High court resorted the matter back to the Assessing Officer at show-cause notice stage and the registration number of the petitioners shall remain suspended till such show-cause notices are disposed of.
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GST:
Cancellation of registration passed by the respondent-authorities - The respondent GST authorities acknowledged instances of orders being issued without providing reasons for cancellation, and they committed to initiating suo-motu revision proceedings under Section 108 of the GST Act. They agreed to issue notices for revision proceedings within two weeks, giving the petitioners an opportunity to respond and providing detailed reasons for cancellation if not previously provided. - In view of assurance from GST department, writ petition disposed of.
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GST:
Wrong availment of IGST refund - Scope of the show cause notice - The Revenue contended that these notices are merely preliminary, and it is the petitioner's responsibility to file proper replies and substantiate their case. - The High Court opines that while the petitioner should initially appear before the officer and respond to the notices, they are entitled to the materials forming the basis of the notices. The court directs the petitioner to appear before the officer on the designated date and request the necessary documents. - The officer is instructed to consider the request and provide the documents within a reasonable time.
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Income Tax:
Revision u/s 263 - sale of preferential shares - PCIT noted a discrepancy between the value of shares sold as per the audited balance sheet and the value declared in the income computation sheet. - The tribunal noted that, the assessee had gone on to explain even this difference between sale consideration and cost of acquisition to have been duly considered and accounted for in the return of income. - Accordingly the ITAT held that, we completely agree with assessee that there was no error in the assessment order on account of non-inquiry/inadequate inquiry relating to the issue of preferential shares sold during the year.
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Income Tax:
CIT(A) power of enhancement u/s 250 and 251 - change of section - Addition u/s 68 v/s 69A - CIT(A) has applied and confirmed the impugned addition u/s 69A as against section 68 under which the Ld. AO - The Tribunal held that, CIT(A) exceeded his powers by changing the section for the addition without issuing a notice for enhancement.
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Income Tax:
Reopening of assessment - notice issued after the expiry of more than 4 years - Capitalization of interest income - The High Court observed that, the AO having raised a query and the petitioner having replied to it, it follows that the query raised was subject of consideration of the AO while passing the assessment order - In our view, the re-opening of assessment by the impugned notice is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.
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Income Tax:
Reopening of assessment - reason to believe - The High Court held that, even if petitioner has incurred any expenditure towards advertisement, sales promotion, product display posters, etc. on the direction of the DIPL and these expenditures might have benefited Diageo as well, does not entail right to deny deduction under Section 37(1) of the Act. It is unacceptable to even suggest that the expenses were not incurred for the purpose of business of petitioner. - The HC held that, it was impossible for any prudent person to form a reasonable belief that the income had escaped assessment.
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Income Tax:
Filling of Modified return after amalgamation - Effect of order of tribunal or court in respect of business reorganisation u/s 170A - The High Court observed that Section 170A of the Income Tax Act mandates that any assessment after a business reorganization should be based on the modified return. Since the scheme of amalgamation became effective from 01.04.2020, the petitioner's consolidated return after amalgamation should have been the basis for assessment. - Consequently, the matter remanded back to AO to make a reassessment on the basis of such consolidated return of income.
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Income Tax:
Additions u/s 69B - Validity of assessment order - Accepting the writ petition over alternative appellate remedy, the High Court held that, the proceedings leading up to the impugned order lacked clarity, as the appellant was led to believe that its explanations regarding the alleged excess stock had been accepted, except for a specific amount. Consequently, the appellant did not further explain the source of purchase of the excess stock, resulting in a violation of principles of natural justice. - Consequently, the matter restored back for re-adjudication.
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Income Tax:
Clubbing of income of wife u/s 64 - It Tribunal held that since the income of the Assessee's wife had been accepted in her hands by the Department in scrutiny assessments, the Department was precluded from taxing the same income in the hands of the Assessee under the clubbing provisions of Section 64(1)(ii) of the Act.
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Income Tax:
Levy late filing fees u/s 234E - Delay in filing the TDS returns - The Tribunal held that the Assessing Officer's jurisdiction to levy fees under section 234E started from 01.06.2015 and did not extend to periods before that date. Therefore, the fees imposed on the Assessee for late filing of TDS returns prior to 01.06.2015 were invalid.
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Income Tax:
Penalty levied u/s 271D - violation of the provisions of section 269SS - assessee sold an immovable property and received part consideration in cash - The Tribunal carefully reviewed the registered deed of sale, which clearly stated the receipt of cash as part of the consideration. The Tribunal found the assessee's contention regarding a wrong entry in the deed of sale unacceptable without material evidence. Therefore, the penalty under section 271D was upheld.
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Income Tax:
Revision u/s 263 - Additions towards provision for bad and doubtful debts which is not an allowable expenditure - The Tribunal considered the submissions and noted that the assessee had furnished all details during the limited scrutiny. It observed that even if the provision for bad debts was added, it would not affect the total income, which remained NIL after adjusting brought forward losses.
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Income Tax:
AO suo-moto framed the order u/s. 154 and rectified the order - AO framed order u/s. 154 of the Act without affording a reasonable and adequate opportunity of being heard to the assessee, also without being directed by CIT(A) - The Tribunal dismissed the appeal of the Revenue, stating that the AO assumed powers conferred upon him by section 154 of the Act without affording any opportunity of being heard to the assessee. Therefore, the Tribunal upheld the CIT(A)'s decision.
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Income Tax:
Assessment u/s 153A - unexplained cash credit u/s 68 - Abated assessment or not - The ITAT observed that, To recapitulate the facts of this case, original return was filed u/s 139(1) of the Act on 28.10.2009, this means that notice u/s 143(2) of the Act could be issued up to 30.09.2010 (i.e. six months from the end of the financial year in which return was filed i.e. 2009-10). The search in this case was conducted on 14.09.2010. - Accordingly, the Tribunal allowed the Revenue's appeal, stating that the assessment for the relevant year cannot be treated as abated or pending on the date of the search.
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Income Tax:
Penalty levied u/s 272(1)(d) - non-compliance of notice issued u/s 142(1) - internal problems in the organization - Tribunal found the appellant's explanation acceptable under section 273B, which allows for a reasonable cause for non-compliance. Consequently, the penalty of Rs. 30,000 was annulled.
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Income Tax:
Protective addition on account of unexplained credit entries appearing in the bank account - assessee company is a conduit - addition on account of unaccounted commission @ 0.25 % of total unexplained credit entries - The CIT(A) had deleted these additions, finding that the assessee acted as a conduit for accommodation entries, with identified beneficiaries, thus no further addition was warranted in the assessee's hands. The ITAT upheld the CIT(A)'s decision, noting that since the assessee operated as a conduit managed by certain individuals for providing accommodation entries, no addition for commission income was justified.
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Income Tax:
Income deemed to accrue or arise in India - revenue earned by the assessee from the provisions of transmission services of voice, data and programmes of space segment capacity on Satellites to customers - AO held it in the nature of “Royalty” u/s 9(1)(vi) of the Income Tax Act and Article 12(4) of the India-Netherland DTAA - The ITAT, while deleting the additions, held that, it is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(1)(vi) cannot result in a change.
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Income Tax:
The Tribunal upheld the CIT(A)'s decision on various issues, dismissing the appeal of the Revenue. The implications include the affirmation of the deductibility of ESOP compensation, the restriction of disallowance under section 14A to investments yielding exempt income, the allowance of expenses related to the increase in authorized share capital, the recognition of legal and professional expenses as revenue expenditure, and the treatment of stale cheques as liabilities until settled or adjusted.
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Income Tax:
Nature of receipt - compensation for displacement in terms of re-development agreement as “Hardship Compensation” - surrender of flats by members pursuant to the re-development agreement - The ITAT considered the facts and legal arguments. It agreed with the appellant, concluding that the "Hardship Compensation" was a capital receipt and not revenue in nature. It referenced previous Tribunal decisions supporting this view.
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Income Tax:
Accrual of income in India - taxability of administrative fee received by the assessee as royalty - AO made the addition on the ground that the IMEI number is the unique invention to track the mobile devices - the ITAT held that the amount received by the assessee did not fall within the definition of royalty under section 9(1)(vi) of the Act or under Article 12(3) of the India-USA DTAA. The ITAT noted that the assessee provided a database of unique numbers, which, when combined with other numbers provided by mobile manufacturers, were implanted in mobile devices for tracking purposes. The ITAT emphasized that there was no transfer of rights to use any copyright, patent, or intellectual property associated with the numbers provided by the assessee.
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Customs:
Levy of Anti-Dumping Duty - impact assessment - The High Court observed that, apart from return of finding of dumping, price undercutting and depression, there is a requirement of an impact assessment which has to be significant for the Adjudicating Authority to recommend levy of Anti-Dumping Duty on the imports. - The HC held that, the Adjudicating Authority shall consider the impact assessment of the injury arising out of the dumped import based on the data produced.
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Customs:
Requirement to submit the BIS certificate license for assessment of the Bill of Entries - goods being Hexane imported by the petitioners - In view of subsequent to a notification from the Directorate General of Foreign Trade (DGFT) removing the requirement for mandatory BIS certification, the High Court declared the petitions moot. The bonds furnished by the petitioners were ordered to be released, and the Bill of Entries was to be finally assessed without insisting on the BIS Certificate.
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Customs:
Permission of re-export - import of Unmanned Aircraft System (UAS) Unmanned Aerial Vehicle (UAVs)/ Remote Piloted Aircrafts (RPAs)/ drones - restricted goods - requirement of import license from DGFT and NOC from DGCA - After considering the arguments, the Tribunal permitted re-export of the goods due to the appellant's background and the purpose of import, while reducing the penalty to the amount already paid by the appellant, recognizing the irregularity but also the appellant's bona fide intention.
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Customs:
Sustainability of cess, when basic customs duty itself was Nil - contention of the department is barring the basic customs duty, other duties namely EC, SHEC and SWS ought not to have been debited in the duty credit scrips - The appellants argue that since the basic customs duty was nil, these additional duties (CESS) should also be considered nil. - The tribunal while agreeing with the arguments in principle, remanded back the matter for through examination.
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Customs:
ReClassification of imported goods - calcite powder (uncoated) - Tribunal concluded that since the Customs Laboratories did not have the facilities to test the specific product in question, the test report from those laboratories cannot be accepted. Therefore, the classification claimed by the appellant was upheld, and the appeal was allowed.
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Customs:
Imposition of detriment / penalty u/s 114 of Customs Act, 1962 - customs broker - Tribunal observed that, the fastening of penalty was on account of confiscation solely in the absence of defence. Moreover, there is no finding that the goods were not entitled to some drawback. There is also no finding on the mis-declaration of the earlier consignments which have been referred to as justification for magnitude of penalty. The gap between domestic value and declared value is not necessarily of such difference as to be beyond a commercial transaction, even if it to be outlier. The penalty imposed, therefore, appears to be unduly harsh and disproportionate. - Penalty reduced to Rs. 10,000 from Rs. 5,00,000.
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Customs:
Quantum of penalty - Absolute confiscation - Smuggling of Gold Bars - prohibited goods or not - The Tribunal, accepting the arguments of revenue, held that, since no proper documents were available for these gold bars, they are to be categorized as prohibited goods. Hence, the submission of the appellant that penalty should be either equivalent to 10% of the quantified duty amount or Rs. 5,000/- whichever is higher, is rejected.
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Corporate Law:
Seeking winding up of the respondent company - inability to pay debts - disobedience of the orders of the Court - The court found the winding-up proceedings to be premature and transferred them to the NCLT due to the existence of parallel insolvency proceedings and the absence of substantive orders.
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PMLA:
Seeking grant of regular bail - Money Laundering - Allegation of indulging in paper/bogus sales and purchase of goods, even though there was no actual movement of goods - The High Court dismisses the bail application, stating that the twin conditions under Section 45 of PMLA are not satisfied. The court finds prima facie evidence that the applicant was involved in money laundering through sham transactions.
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Service Tax:
Exemption from Service Tax - Advertisement Agency Service - Selling of Space - The Tribunal held that the appellant's activities did not constitute 'Advertising Agency' services but were correctly classified under 'selling of space for advertisement', which was not taxable during the specified period. Consequently, penalties under Section 78 on the firm and Section 78A on the partner were also set aside, granting relief to the appellant.
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Central Excise:
Clandestine removal - Tar Catcher - The tribunal found that the statements were relied upon as corroborative evidences and the cross-examination of witnesses who made such statements was denied without valid ground. It is found that, the admissibility of these evidences is legally not sustainable - The procedure, as prescribed under Section 9D, has to be followed scrupulously. - The tribunal set aside the demand.
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Central Excise:
SSI Exemption - Determination of turnover / value of first clarence - The Tribunal held that the value of clearances made by paying duty at the normal rate should not be included in computing the threshold value for concessional duty. Therefore, the demand of duty along with interest and penalty, as confirmed in the impugned order, is not sustainable.
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Central Excise:
Interest on delayed payment of oil cess - The tribunal concludes that interest cannot be charged on delayed payment of oil cess under Section 11AB of the Central Excise Act, 1944. This decision is based on the interpretation of Section 15(4) of the Oil Industry Development Act, 1974 (OID Act), which does not provide for the payment of interest.
Articles
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (2) TMI 488
Levy of Goods and Service Tax (GST) on Mining Lease / Royalty - Constitutional validity of Entry 17 (viii) of G.O.Ms.No.72 dated 29.06.2017 as amended by para 1 (e) of G.O.Ms.No.170 dated 31.12.2018 - validity of Circular No.164/20/2021-GST, CBIC 190354/207/2021 TO (TRU-II) CEBEC dated 06.10.2021. The primary ground for the levy of Goods and Service Tax on royalty / seigniorage fee is that Royalty is a 'tax' and does not represent 'services'. HELD THAT:- Levy of tax on royalty has been the subject of controversy even under the Finance Act, 1994. The authorities levied Service Tax on royalty which was upheld by the Rajasthan High Court. The matters were carried in appeal(s) to the Apex Court and an order of interim stay was granted by the Hon'ble Supreme Court in Udaipur Chamber of Commerce and Industry Vs. Union of India [ 2018 (8) TMI 287 - SC ORDER] vide order dated 11th January, 2018 on a challenge to the judgment of the High Court of Rajasthan. Subsequent thereto, with the introduction of GST, tax was levied on royalty. The same was challenged before the Apex Court. The Hon'ble Supreme Court has granted an interim order with regard to levy of Goods and Service Tax on royalty in Lakhwinder Singh Vs. Union of India Ors. [ 2021 (11) TMI 336 - SC ORDER] . Following directions have been issued: (i) In the cases, where the challenge is made to the show cause notices, the writ petitioners shall submit their objections / representations within a period of four weeks from the date of receipt of a copy of this order. (ii) Upon receipt of the objections / representations from the writ petitioners, the authority concerned shall proceed with the adjudication, on merits and in accordance with law, after affording reasonable opportunity of being heard to the petitioners. However, the orders of adjudication shall be kept in abeyance until the Nine Judge Constitution Bench decides the issue as to the nature of royalty. (iii) It is made clear that there shall be no recovery of GST on royalty until the Nine Judge Constitution Bench takes a decision. (iv) Needless to state that on the matters being decided, the writ petitioners if still aggrieved, shall redress their grievance(s), if any, before the appropriate forum, including by filing appeal(s). (v) Insofar as the challenge to the notification as well as the circular, it is open to the writ petitioners to act upon, after the outcome of the case pending before the Nine Judge Constitution Bench. (vi) It is also made clear that all the contentions are left open for the writ petitioners to raise in appropriate proceedings, after the outcome of the decision of the Nine Judge Constitution Bench. This batch of writ petitions are disposed of.
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2024 (2) TMI 484
Cancellation of petitioner's registration under the UPGST Act, 2017 - HELD THAT:- It does merit acceptance that the petitioner was not obligated to visit the GST portal to receive the show cause notices that may have been issued to the petitioner in September 2022, June 2023 and October 2023 through e-mode, preceding the adjudication order dated 17.10.2023 passed in pursuance thereto - It is also not the case of the revenue that any physical/offline notice was issued to or served on the petitioner before the impugned order came to be passed. In view of peculiar facts noted, no useful purpose may be served in keeping the petition pending or calling counter affidavit at this stage or to relegate the present petitioner to the forum of alternative remedy - Since essential requirement of rules of natural justice has remained to be fulfilled, the order dated 17.10.2023 is set aside. Writ petition is accordingly disposed of.
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2024 (2) TMI 483
Refund of amount paid upon wrongful reversal of the transitioned credit - rejection of refund merely on the ground that such refund claim does not fall within the specific categories enumerated in Circular No.125/44/2019-GST dated 18.11.2019 - HELD THAT:- On examining the impugned order, it is evident that the refund claim was rejected on the ground that the application was filed under the category Any Others . As pointed out by learned counsel for the petitioner, a refund claim cannot be rejected merely on the ground that such refund claim does not fall within the specific categories enumerated in Circular No.125/44/2019-GST dated 18.11.2019. It should also be noticed, in this regard, that sub-section (1) of Section 54 of the CGST Act appears to be wide enough to embrace any claim for refund of tax or interest provided such claim is made within a period of two years reckoned from the relevant date. Since the order impugned was issued without providing adequate reasons for rejection of the refund claim, the said order calls for interference. The order impugned is quashed and the matter is remanded for reconsideration. The respondent is directed to reconsider the application in accordance with law by also taking into account the judgment of this Court in M/S. DMR CONSTRUCTIONS VERSUS THE ASSISTANT COMMISSIONER, COMMERCIAL TAX DEPARTMENT, RASIPURAM, NAMAKKAL DISTRICT. [ 2021 (4) TMI 261 - MADRAS HIGH COURT ] and any other precedents - Petition disposed off by way of remand.
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2024 (2) TMI 482
Levy of penalty u/s 129(3) of the Uttar Pradesh Goods and Service Tax Act, 2017 - Part B of the E-Way Bill was filled up by the petitioner immediately after the interception, that is, much before the order of detention was passed - HELD THAT:- In the present factual matrix, it is crystal clear that IGST had already been paid and there was no involvement whatsoever of any mens rea for evasion of tax. Furthermore, the only technical fault was with regard to non filling up of Part B of the E-Way Bill. The impugned orders are not sustainable and the same are required to be set aside - petition allowed.
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2024 (2) TMI 481
Levy of penalty - Part B of E-Way Bills was not filled up - presumption for evasion of tax or not - existence of mens rea or not - HELD THAT:- The crux of the issue herein is that the petitioner explained the reason of non filling up of Part B of the E-Way Bills to the authorities. However, the authorities have not considered the explanation and rejected the same on the basis of only the factual aspect that the distance between Delhi and Meerut is about 75 kilometers. The presumption that has been made by the authorities that there was intention to evade tax is based only on the factual matrix that the distance between Delhi and Meerut is only about 75 kilometers, which could have allowed the petitioner to carry out multiple trips. In my view, no other material has been brought on record by the authorities to indicate that there was any mens rea on the part of the petitioner to evade tax. The reason of presumption of evasion of tax is without any basis in law, and accordingly, the order of detention and subsequent appellate order are illegal and required to be set aside. The order levying penalty and order dated May 18, 2019 are quashed and set-aside - The writ petition is allowed.
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2024 (2) TMI 480
Validity of the Notification No. 09/2023 dated 31.3.2023 and Notification No. 515/SI-2-23-9(47)/17-T.C215-U.P. Act- 1-2017-Order-(273/2023) dated 24.4.2023 - no valid reason to grant second extension of time to issue show cause notice under Section 73(10) of the U.P. GST Act, 2020 - parallel notification - HELD THAT:- The matter requires consideration. All respondents are represented. They pray for and are granted six weeks' time to file counter affidavit. Petitioner shall have two weeks, thereafter, to file rejoinder affidavit. List thereafter.
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2024 (2) TMI 479
Cancellation of GST registration of the petitioner - wrongful availment or utilization of input tax credit or refund of tax - issuance of invoice or bill without supply of goods and/or services - HELD THAT:- In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. The registration cannot be cancelled with retrospective effect mechanically - Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The impugned order set aside - petition allowed.
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2024 (2) TMI 478
Cancellation of registration of the firm with retrospective effect - Returns 3 B not filed - GTO more than 5 crore - HELD THAT:- In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. There is nothing on record to show that the deceased was not making the requisite compliances under the Act. As such the retrospective cancellation is not warranted. In view of the fact that petitioner does not seek to continue the registration, the impugned order dated 30.12.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 13.04.2021 i.e., date of demise of late Mr. Rajendra Kumar Bothra. The Petitioners i.e., legal heir of the deceased proprietor shall file the requisite returns of any transactions of the business done and shall also place the details of stock left at the time of his death. Petition disposed off.
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2024 (2) TMI 477
Condonation of delay in filing appeal - appeals were rejected on the main ground that the pre-deposit was made through wrong format - HELD THAT:- In the impugned Orders, nothing is mentioned about the filing of the delay condoning petitions and the non satisfaction over the reasons submitted for such delay. Be that as it may, as rightly submitted by the learned counsel for the petitioners, the appeals were rejected on the main ground that the pre-deposit was made through wrong format i.e., Form GST DRC-03 instead of Form APL-01. The submission of the learned counsel for the petitioners is that due to technical glitch, they had to make the pre-deposit through Form GST DRC-03 instead of APL-01 and it is not a willful act. Whether the petitioners were forced to make payment of pre-deposit through Form GST DRC-03 instead of APL-01 is a question of fact, which has to be considered in the light of other surrounding facts - the respondent No. 2 is the proper authority to consider the above factual aspects and to decide the fate of delay condoning petitions in right perspective. Therefore, the impugned Rejection Orders are set aside and the matters are remanded back to the respondent No. 2 with a direction to consider the reasons in the delay condoning petitions submitted by the petitioners and after affording an opportunity of hearing to them pass any appropriate orders in accordance with governing law and rules expeditiously. Petition disposed off by way of remand.
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2024 (2) TMI 476
Cancellation of the registration of the petitioners - not providing an opportunity of hearing as well as such orders were passed without assigning any reason - violation of principles of natural justice - HELD THAT:- As the Appellate Authority has dismissed the appeals of the petitioners, the respondent authorities will not be able to exercise the revisional power under section 108 of the GST Act. Therefore, the impugned orders passed by the Appellate Authority as well as the order of cancellation of registration are required to be quashed and set aside. Accordingly, the matters are remanded back to the Assessing Officer at the show-cause notice stage. However, the registration of the petitioners shall remain suspended till the show-cause notice is decided by the Assessing Officer as per the directions issued. The matters remanded back to the Assessing Officer at show-cause notice stage and the registration number of the petitioners shall remain suspended till such show-cause notices are disposed of - petition allowed in part and part matter on remand.
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2024 (2) TMI 475
Cancellation of registration passed by the respondent-authorities - no detailed reasons for cancellation of registration number of the petitioners except one line reason - opportunity to file reply as well as hearing - Violation of Principles of natural justice - HELD THAT:- After receipt of the reply from the petitioners, the respondent-authorities shall pass appropriate order in accordance with law in exercise of powers under section 108 of the GST Act after giving opportunity of hearing to the petitioners and considering the reply to be filed by the petitioners within a period of four weeks from the date of hearing. Without entering into the merits of the matter, these petitions stand disposed of at this stage with a liberty to revive in case of difficulty with a hope that the aforesaid schedule proposed by the respondent authorities shall be adhered to.
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2024 (2) TMI 474
Detention of goods alongwith conveyance - details of the supplier of the confiscated goods were not provided to the petitioner in the show cause notice - violation of principles of natural justice - HELD THAT:- The respondents are ready and willing to give a fresh opportunity of hearing to the petitioner by providing all the details so as to comply with the principles of natural justice. This petition is disposed of by quashing and setting aside the impugned order dated 11th December 2023 passed by the respondent No. 2 under Section 130 of the GST Act so as to provide an opportunity of hearing to the petitioner and the petitioner shall be entitled to raise all the contentions which are raised in this petition before the respondent authorities along with an application to release the goods and conveyance on appropriate conditions, which may be imposed by the respondents authorities in accordance with law. The impugned order dated 11th December 2023 passed in Form GST MOV 11 set aside only on the ground of breach of principles of natural justice in absence of not providing an opportunity of hearing to the petitioner and the matter is remanded back to the respondent No. 2 to grant such opportunity in accordance with law - petition allowed by way of remand.
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2024 (2) TMI 473
Wrong availment of IGST refund - Scope of the show cause notice - It is the case of the petitioner that the petitioner is not able to ascertain with certainty the basis for the issuance of the show cause notices - HELD THAT:- It is opined that since Exts. P3 and P4 are only show cause notices, the petitioner must, at least at the first instance, appear before the officer and show cause against the proposals in Exts. P3 and P4. However, the learned counsel for the petitioner is right in contending that the petitioner is entitled to the materials on the basis of which the show cause notices have been issued to the petitioner and without such materials, it may not be possible for the petitioner to file a proper reply to the show cause notices. This writ petition will stand disposed of directing that, the petitioner or an authorized representative of the petitioner shall appear before the officer, who issued Exts. P3 and P4 show cause notices at the designated time on 30-01-2024.
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2024 (2) TMI 472
Detention of goods alongwith vehicle - order passed without there being any breach on the part of the petitioners - HELD THAT:- The respondents authorities are directed to consider such representation dated 15th December 2023 and decide the same within a period of two weeks from today. This petition is disposed of.
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Income Tax
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2024 (2) TMI 490
Validity of Proceedings u/s 153C - manadation of satisfaction note of the AO before proceeding u/s 153C - HELD THAT:- We are not in a position to accept the contention of the learned counsel for the petitioner that there was no satisfaction note of the Assessing Officer before proceeding under Section 153C of the Act 1961. It may be noted that the petitioner has filed return in compliance of the notice under Section 142(1) dated 11.12.2023. The notice u/s 153C for the A.Y.2014-15 under challenge is dated 09.06.2022. As the petitioner has approached this Court, in the instant petition, only after issuance of the notice under Section 142(1) dated 11.12.2023 after filing of the return, we do not find it a fit case to interfere at this stage, on the sole ground that the satisfaction note was not provided to the petitioner along with the notice dated 09.06.2022 issued under Section 153C for A.Y. 2014-15 and, as such, the entire proceedings leading to issuance of notice under Section 142(1) dated 11.12.2023 stands vitiated. The points raised by assessee on the plea of lack of jurisdiction of the AO in issuing notice under Section 153C of the Act, can not be appreciated by us, as it could not be demonstrated that no satisfaction note was recorded by the Assessing Officer prior to issuance of the notice under Section 153C of the Act 1961 on 09.06.2022. No merit in the challenge made in the bunch of writ petitions to the notice under Section 153C. The request for stay of the order for a period of four weeks to enable the petitioner to approach the Apex Court is hereby rejected.
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2024 (2) TMI 489
Deduction u/s 80HHC as arriving on the book profit u/s 115JA of the Act after allowing the carry forward loss and unabsorbed depreciation - HELD THAT:- We respectfully follow the direction of the Hon ble Apex Court in the case of Bhari Information Technology Systems Pvt. Ltd. [ 2011 (10) TMI 19 - SUPREME COURT] and Syncome Formations (I) Ltd.[ 2007 (3) TMI 288 - ITAT BOMBAY-H] The assessee is in appeal, against the order of the CIT(A), before the Tribunal which, following the judgment of the Special Bench of the Tribunal in the case of Syncome Formulations (I) Ltd . took the view that the MAT scheme which includes Section 115JA did not take away the benefits given under s. 80HHC. The entire issue related to additional ground are remitted back to the file of Ld. AO for the computation u/s 80HHC after considering the judgment of Hon ble Apex Court (supra) and Special Bench of Mumbai Tribunal (supra). Needless to say, the assessee should get a reasonable opportunity of hearing in the set aside proceedings.
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2024 (2) TMI 487
Revision u/s 263 - sale of preferential shares - as per CIT AO had failed to make proper inquires with respect to assessee s claim of loss on sale of preferential shares as the records revealed an anomaly/difference in the value of shares sold by the assessee as reflected in the balance sheet/profit loss account as opposed to that reflected in the computation of income HELD THAT:- As from all the aspects of the matter, it is noted that the assessee had clearly demonstrated that there was no variance in the figure of unlisted preference shares sold during the year as reflected in the balance sheet and that reflected in the computation of income, CIT had noted the difference making improper comparison, comparing the cost of acquisition of these shares reflected in the balance sheet to the sale consideration of these shares reflected in the computation of income and the assessee had gone on to explain even this difference between sale consideration and cost of acquisition to have been duly considered and accounted for in the return of income. We completely agree with assessee that there was no error in the assessment order on account of non-inquiry/inadequate inquiry relating to the issue of preferential shares sold during the year. CIT s found the assessment order erroneous for the reason that the assessee did not furnish evidence regarding sale of shares, whether they were sold to the related parties or not, and whether intimation was made to the ROC for the sale of such shares. This was not the anomaly which was noted by him, while exercising jurisdiction under section 263 of the Act, nor do we find, that was ever confronted to the assessee during the revisionary proceedings. Even otherwise no reasoning in CIT s order, as to how the inquiry on the aspect of the shares being sold to the related parties, and/or the intimation of the shares having sent to ROC, would have in any way resulted in the assessment order being erroneous causing prejudice to the Revenue. There is nothing in the ld.Pr.CIT s order pointing out the adverse impact of non-explanation of these two aspects of the sale of unlisted preferential shares on the computation of income of the assessee. Therefore, we hold that there is no error as such in the assessment order on the issue of the sale of preferential shares as found by the Ld.PCIT, and the ld.Pr.CIT s order on this issue is set aside. Dividend received from foreign company though taxable under the Act but apparently not returned to tax by the assessee and claimed as exempt - When the assessee had returned the dividend earned from foreign company to tax, there can be no question of any error in the assessment for non-examining or inadequate inquiry on this issue. CIT appears to have casually stated that the assessee failed to produce with supportive evidence before him during the hearing. But we fail to understand what supportive evidence is required in this case, when these facts were coming out clearly from the computation of income itself, which was part of the assessment record before the ld.Pr.CIT and could have been cross-checked himself. We hold that the assessment order is not erroneous, even on the aspect of non-examination of the issue of taxability of dividend income earned from foreign company. Assessee appeal allowed.
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2024 (2) TMI 486
CIT(A) power of enhancement u/s 250 and 251 - change of section - Addition u/s 68 v/s 69A - CIT(A) has applied and confirmed the impugned addition u/s 69A as against section 68 under which the Ld. AO - assessee received money in the form of loan through cheque with the addendum after giving cash for which there is no evidence at all - objection raised by the assessee that the creditors have not been examined in this regard has been over ruled by the Ld. CIT(A) by stating it to be baseless - HELD THAT:- It is revealed from the appellate order that the Ld. CIT(A) has placed reliance on the decision of Kanpur Coal Syndicate [ 1964 (4) TMI 18 - SUPREME COURT] wherein no doubt held that the powers of Ld. CIT(A) are wide being coterminus with those of the Ld. AO, but the Ld. CIT(A) failed to notice that it was so that he [Ld. CIT(A)] could entertain issues which had not been examined by the Ld. AO. In the case before us, Ld. AO examined the issue thoroughly and thereafter applied the provisions of section 68 of the Act for making the impugned addition. In our humble opinion, the Ld. CIT(A) misdirected himself in relying on the decision (supra) of the Hon ble Supreme Court. The same issue namely whether the first appellate authority has power to take into account a new source of income came up for consideration again for fresh adjudication before the full bench in CIT vs. Sardari Lal Co. [ 2001 (9) TMI 1130 - DELHI HIGH COURT] wherein Hon ble Delhi High Court gave its verdict in favour of the assessee observing that it is unconceivable that in the presence of specific provision u/s 147/148 and 263 of the Act, a similar power is available to the first appellate authority. Decided in favour of assessee.
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2024 (2) TMI 485
TP Adjustment - international transactions carried out by the assessee with its AE - DRP has considered the entire transactions with AE as well as non-AEs - HELD THAT:- This issue has been settled by the various Hon ble High Courts observing that as per the Transfer Pricing provisions and judicial precedents, the TP adjustment should be restricted only to AE related transactions of the assessee. The ld. AR has relied on the judgment of CIT 1, Mumbai vs Hindustan Unilever Ltd. [ 2016 (7) TMI 1245 - BOMBAY HIGH COURT] and the Hon ble Apex Court dismissed the SLP filed by the revenue[ 2018 (10) TMI 1611 - SC ORDER] therefore this this is no more res integra Respectfully following the above judgment, we hold that the application of arm s length price should be restricted only to AEs transactions and not to all transactions. Accordingly, this ground is allowed. Comparability - inclusion of Telecommunication Consultants India Ltd. [TCIL] as comparable company - HELD THAT:- From the financial statements of TCIL it is observed that it is engaged in various types of activities. Hence we accept the alternative submission of the ld. DR that the PLI/profitability should be considered only from the Trading activity of the comparable company as business activity carried out by the assessee company and the ld. AR had also calculated PLI in which the company has profit in one year as observed above. FAR analysis of comparable has to be considered for each year separately irrespective of other years. Accordingly we remit this issue to the ld. TPO/AO for de novo consideration considering the decision of Yazaki India P. Ltd. [ 2019 (7) TMI 1566 - ITAT PUNE] in which it has been observed that if the comparable company is continuously not making loss for any of the three years, it is not persistent loss making company. If the TPO/AO finds that the comparable company is persistent loss making company in trading segment for all the three years, then it should not be considered as a comparable company. Zicom Electronics Security Systems Pvt. Ltd. is offering security products as a cloud based technology driven electronic security service provider and it installs, manages and performs the maintenance on a regular basis. The company is in trading activity of the security products and the function of the traded goods are similar with the assessee company as analysed by the TPO. Further we note that the company is not engaged in manufacturing activity as contested by assessee As noted from the financial statements, clearly shows that the company has not purchased raw material for its consumption for manufacturing activity during the year under consideration. The service income earned by the comparable company are from the maintenance of product sales, therefore it cannot be said that the company is engaged in separate service segment. The ratio of safety products of purchase and sales are minimal with the main security products purchased and sold. Therefore, no segmental reportings are required as submitted by the ld. DR. Therefore this company is functionally comparable. Adtech Systems Ltd. company primarily operates in single segment viz Supply and integration of Electronic Security Systems and its functions are broadly same in both segments. The company is in trading activity of the security products and the function of the traded goods are similar with the assessee company as analysed by the TPO. The ratio of sale of service and maintenance income to traded goods is only 5.51%. The company is in trading segment only. On perusal of the financial statements we did not find any expenses under the Research and development account head. Therefore considering the entire facts, the company is comparable. Accordingly, we reject the contention of the ld. AR. Computation of operating margin - During the course of hearing, the Bench specifically asked the ld. AR regarding the nature of services rendered by the assessee for the sales from AE to third party customers, but the ld. AR could not show the nature of services rendered by the assessee. Therefore, we hold that that commission received by the assessee cannot be considered as part of trading segment and therefore, dismiss this ground of the assessee. We further note that in segmental operating results of the TP order, the assessee has given details of trading segments in which the assessee has included provision no longer required returned of Rs. 4.26 lakhs. However, the lower authorities have not considered it as part of operating revenue. It is not clear whether this provision was allowed in earlier years as operating expenditure in trading segment. We therefore remit this issue to AO examine the same. If the provision no longer required back in trading segment is allowed as operating expenditure in the earlier year, the same should be treated as operating revenue in the trading segment. The assessee is directed to produce necessary evidence. Arbitrary adjustment towards GSMAF and MF - TPO has questioned the necessity of the expenditure out of payment made by the assessee towards Management Fees and proceeded to determine the ALP by applying the benefit test - TPO treated the payments towards GSMAF and proceeded to benchmark the same by using the bright line test - HELD THAT:- This issue has been considered by the coordinate Bench of this Tribunal in assessee s own case for AY 2017-18 [ 2023 (5) TMI 1295 - ITAT BANGALORE] we are of the view that the expenditure incurred by assessee towards global sales and marketing activity has to be treated as operating cost and has to be allotted in the ratio of the turnover of the other international transaction for determining the ALP under TNMM analysis. Disallowance u/s. 14A - AO computed the adhoc disallowance by considering 0.25% of certain expenditure - DRP directed the AO to recompute the disallowance as per formula prescribed in Rule 8D - HELD THAT:- Considering the rival submissions, we note that there is no opening and closing balance of the investments made by the assessee. However the AO has applied Rule 8D(2)(i) and Rule 8D(2)(ii) for calculation of disallowance and calculated total disallowance - We note that similar issue has been decided in M/S. YOKOGAWA INDIA LIMITED [ 2021 (11) TMI 1178 - ITAT BANGALORE] - Thus we also restrict disallowance u/s. 14A of the Act to 10% of exempt dividend income. Accordingly, the AO shall work out the disallowance. DDT paid to non- resident - AR submitted that the Special Bench of the Mumbai Tribunal deals with the some of the contentions of the assessee on this issue in the case of Total Oil India Pvt. Ltd. [ 2023 (4) TMI 988 - ITAT MUMBAI (SB)] and prayed that the assessee reserves its right to contest the same before the appropriate forum and subject to the same, this issue may be left open. Accordingly, this issue is left open. Allowability u/s. 37(1) towards education cess paid - AR submitted that the retrospective amendment to section 40(a)(ii) of the Act where it is clarified that education cess cannot be claimed as business expenditure and the Hon ble Supreme Court has allowed the appeal of the revenue against the decision of the Rajasthan High Court in the case of Chambal Fertilizers Chemicals Ltd [ 2017 (5) TMI 1500 - RAJASTHAN HIGH COURT] Accordingly this ground is dismissed.
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2024 (2) TMI 471
Revision u/s 263 - as per CIT AO has allowed setoff of brought forward loss in the said year without application of mind - Assessee entitlement to carry forward unabsorbed deprecation pertaining to the period 1974-75 to 1996-97 for more than eight years that is beyond assessment year 2004-05 - As decided by HC 2018 (4) TMI 140 - BOMBAY HIGH COURT] he questions as proposed have become academic in view of the decision of Hindustan Unilever Ltd. ( 2016 (7) TMI 1245 - BOMBAY HIGH COURT ) which has approved and the decision of General Motors India Pvt.Ltd. [ 2012 (8) TMI 714 - GUJARAT HIGH COURT ] on this very issue HELD THAT:- It is not in dispute that the decision in the case of Hindustan Unilever Limited was challenged by the present petitioner by filing Special Leave Petition [ 2018 (10) TMI 1611 - SC ORDER] and this Court by the order has dismissed the said Special Leave Petition and connected matters. Hence, in view of what is recorded no case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India. The Special Leave Petition is accordingly dismissed.
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2024 (2) TMI 470
Penalty u/s 271(1)(c) - income is computed u/s 115JB by not considering the provisions of Sections 115JB(5) - As decided by HC [ 2017 (5) TMI 1606 - RAJASTHAN HIGH COURT] penalty cannot not be imposed on the assessee since, the original appeal was decided in favour of the assessee - HELD THAT:- We are not inclined to interfere with the judgment(s) and order(s) passed by the High Court. The special leave petition is dismissed.
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2024 (2) TMI 469
Validity of Reopening of assessment - reasons for reopening were examined at the time of original assessment - notice issued after expiry of more than four years - HELD THAT:- A bare perusal of the reasons recorded would show that there has been no failure on the part of Petitioner to truly and fully disclose material facts. Though the words failure on the part of assessee to disclose fully and truly all material facts necessary for assessment' have been used in the reasons recorded, those have been used only to get over the fetters placed by the proviso to Section 147 of the Act. Therefore, it is absolutely clear that the entire basis for forming a reason to believe there was escapement of income is from the records filed by Petitioner with return of income. It is a clear case of change of opinion which does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. After admitting that the issues involved as noted in the reasons for reopening were examined at the time of original assessment proceedings, it is stated that the factual error came to the notice of the AO subsequently, on the basis of which belief was formed that income chargeable to tax has escaped assessment. Apex Court in Gemini Leather Stores [ 1975 (5) TMI 1 - SUPREME COURT] held that the assessment cannot be reopened by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts as the Income Tax Officer had material facts before him when he made the original assessment. The Court held that the Assessing Officer cannot take recourse to open to remedy the error resulting from his oversight in the assessment proceeding. As held by the Apex Court in Calcutta Discount Co. Ltd. v. ITO [ 1960 (11) TMI 8 - SUPREME COURT] the duty of assessee does not extend beyond the full and truthful disclosure of all primary facts. Once all the primary facts are before him, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. Explanation to the sub-section has nothing to do with inferences and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose inferences to draw the proper inferences being the duty imposed on the Income-tax Officer. The Court held that the duty of the assessee is to disclose fully and truly all primary relevant facts and it does extend beyond that. We are satisfied that there has been no failure on the part of assessee to truly and fully disclose primary facts. Therefore, Rule made absolute
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2024 (2) TMI 468
Reopening of assessment u/s 147 - change of opinion - notice issued after the expiry of more than 4 years - unaccounted sale of immovable properties - It is assessee s case that they never owned these two properties and, therefore, question of it being accounted in books of account does not arise. It is also assessee s case that assessee was only a developer and, therefore, was a confirming party for the agreement for sale entered into between original tenants, who were shown as vendors and the purchasers of the flat. HELD THAT:- In the assessment order, there is a discussion with regard to work in progress of assessee. In the letter dated 8th December 2016, assessee has given examples of certain transactions and also copies of those agreements for sale to convince the AO that assessee s role was only that of confirming party and assessee had no right in the sale consideration. Copies of the agreements for sale with regard to the two flats mentioned in the reasons for reopening the assessment are also annexed to the petition. In the affidavit in reply, there is no denial of the facts mentioned in the petition. In the reasons recorded, a statement which is not entirely correct has been made, in as much as, it is stated that copies of the agreements for flat no. 1201 and 2002 has not been provided to the AO to examine. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. The only requirement is that the AO ought to have considered, the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. In the case at hand, the AO having raised a query and the petitioner having replied to it, it follows that the query raised was subject of consideration of the AO while passing the assessment order dated 23rd December 2016. In our view, the re-opening of assessment by the impugned notice is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Decided in favour of assessee.
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2024 (2) TMI 467
Reopening of assessment - notice issued after the expiry of more than 4 years - reasons to believe - allegation of details picked up from the assessment records - claim of interest income being capitalised to work in progress - HELD THAT:- As bare perusal of the reasons recorded indicates that all details mentioned therein have been picked up from the assessment records. There can be no failure on the part of petitioner to truly and fully disclose all material facts. The reasons recorded also alleged that the claim of interest income being capitalised to work in progress or claim of provision made for income tax was not considered during the course of assessment proceedings and hence no opinion was formed by the assessing officer in this respect. To the petition is annexed a copy which shows that during the year under consideration petitioner has incurred interest expenditure of Rs. 33,06,72,763/- and earned interest income of Rs. 5,61,89,376/- and the treatment of those figures in the accounts of petitioner were subject matter of consideration. It is true that these issues have not been specifically discussed in the original assessment order dated 29th February 2016. But in the assessment order, the assessing officer has reworked the work in progress, which indicates that these issues were certainly subject matter of consideration during the assessment proceedings. As held by the Division Bench of this Court in Aroni Commercials Ltd. [ 2014 (2) TMI 659 - BOMBAY HIGH COURT] the settled law is once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. The only requirement is that the AO ought to have considered, the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. In the case at hand, the AO having raised a query and the petitioner having replied to it, it follows that the query raised was subject of consideration of the AO while passing the assessment order - In our view, the re-opening of assessment by the impugned notice is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Decided in favour of assessee.
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2024 (2) TMI 466
Reopening of assessment - reason to believe - disallowance of expenditure on account of advertisement, sales promotion, product display posters, etc. as it did not pertain to the business of assessee and, therefore, not allowable u/s 37 - HELD THAT:- The only basis to disallow expenditure for the three years on account of advertisement, sales promotion, product display posters, etc. was it was not pertaining to the business of assessee and, therefore, not allowable under Section 37 of the Act. It is evident that there was absolutely no basis to respondent no. 1 to form a belief that any income chargeable to tax has escaped assessment within the meaning of substantive provisions of Section 147 of the Act. As held by this Court in Prashant S. Joshi [ 2010 (2) TMI 271 - BOMBAY HIGH COURT] , Explanation 2 to Section 147 creates a deeming fiction of cases where income chargeable to tax has escaped assessment. Clause (b) deals with a situation where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return. For the purpose of Clause (b) to Explanation 2, AO must notice that the assessee has understated his income or has claimed excessive loss, deduction, allowance or relief in the return and taking of such notice must be consistent with the provisions of the applicable law. It cannot be at the arbitrary whim or caprice of the Assessing Officer and must be based on a reasonable foundation. Though the sufficiency of the evidence or material is not open to scrutiny by the court but the existence of the belief is the sine qua non for a valid exercise of power. Apex Court in Sassoon J. David and Co. P. Ltd. [ 1979 (5) TMI 3 - SUPREME COURT] held that ordinarily it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business. Such expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction under the Act even though there was no compelling necessity to incur such expenditure. The fact that somebody other than the assessee is also benefited by the expenditure should not come in the way of an expenditure being allowed by way of deduction under the Act if it satisfies otherwise the tests laid down by law. Therefore, even if petitioner has incurred any expenditure towards advertisement, sales promotion, product display posters, etc. on the direction of the DIPL and these expenditures might have benefited Diageo as well, does not entail right to deny deduction under Section 37(1) of the Act. It is unacceptable to even suggest that the expenses were not incurred for the purpose of business of petitioner. It is common knowledge that advertising and sales promotion will ensure higher sales and higher sales will ensure higher profitability to petitioner. There is no doubt that there is a direct nexus between the expenditure incurred and the business of petitioner. Thus when we apply the touchstone as to whether there was reason to believe that income had escaped assessment, in our view, it was impossible for any prudent person to form a reasonable belief that the income had escaped assessment. The reasons, which have been recorded, could never have led a prudent person to form an opinion that income had escaped assessment within the meaning of Section 147 of the Act. Decided in favour of assessee.
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2024 (2) TMI 465
Filling of Modified return after amalgamation - Effect of order of tribunal or court in respect of business reorganisation u/s 170A - assessment order came to be issued within 2 days - Under the said scheme of amalgamation, the petitioner states that Cheran Synthetics was merged with the petitioner and dissolved without being wound up - petitioner states that the modified return was filed manually since the portal was not enabled for filing such return electronically - petitioner assails the assessment order primarily on the ground that the consolidated / modified return of the petitioner, after the amalgamation, should have been the sole basis of scrutiny assessment - as argued assessment order refers to the pre-amalgamation standalone financial statement of the petitioner at certain places and also refers to the consolidated return of income at others - whether the impugned assessment order calls for interference because the assessment was not entirely based on the modified return after amalgamation? HELD THAT:- A successor of a business reorganization is required to furnish the modified return within six months from the end of the month in which the order of the court or tribunal sanctioning such business reorganization is issued. The order of the NCLT Chennai in [ 2022 (4) TMI 1591 - NATIONAL COMPANY LAW TRIBUNAL CHENNAI] is on record. This order was issued on 18.04.2022. Since the order of the NCLT Chennai was issued on 18.04.2022, the petitioner had six months from 30.04.2022 to file the modified return. The petitioner has placed on record an email dated 22.06.2022 which indicates that the option to file the modified return under Section 170A of the Income Tax Act had not been enabled in the portal. In those circumstances, it appears that the petitioner submitted a physical copy of such modified return on 24.08.2022. Since the last date for filing the return was expiring earlier, the petitioner previously submitted the return of the company on standalone basis on 14.03.2022. From the list of dates and events, it is clear that the first notice to the petitioner under Section 143(2) of the Income Tax Act was issued on 28.06.2022, which is subsequent to the effective date of merger. All other notices culminating in the impugned assessment order were issued later. In view of the scheme of amalgamation having become effective and thereby operational from 01.04.2020, the petitioner's consolidated return of income, after its amalgamation, should have been the basis for assessment based on the scrutiny. Respondents contended that the assessment order discloses that the consolidated returns were also taken into consideration - On examining the impugned assessment order, it is noticeable that the Assessing Officer has taken into account the standalone returns of the petitioner, the standalone returns of Cheran Synthetics[ company merged] and the consolidated returns of the merged entity for different purposes. Such approach cannot be countenanced. Even without going into any of the other contentions, in my view, the impugned assessment order calls for interference on this sole ground. From the list of dates and events, it is also conspicuous that the show cause notice dated 27.12.2022 was followed by the assessment order in a matter of about 5 or 6 days. Discrepancies in the assessment order were also pointed out. The issuance of an assessment order within about two days from the receipt of the reply to the show cause, in a matter relating to about 59 additions to income, constitutes a further reason to interfere with the impugned order. Therefore, the impugned assessment order is quashed and the matter is remanded.
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2024 (2) TMI 464
Validity of order of assessment as made in violation of the principles of natural justice - excess value of stock liable to be treated as unexplained investment, while adding the same to the total income invoking Section 69B - HELD THAT:- We find merit in the submission of appellant that the proceedings leading up to the passing of the impugned order lacks clarity and has resulted in the appellant being led to believe that their response/ explanation in respect of the proposal to treat a sum as excess stock, except to the extent as accepted inasmuch as the Respondent had vide notice dated 16.08.2022 called for explanation only in respect of a sum of Rs. 29,36,013/-. This in turn has resulted in the appellant not putting forth any further explanation in respect of the alleged excess stock over and above Rs. 29,36,013/-, thereby resulting in violation of principles of natural justice. Rejection of the writ petition on the ground of availing of alternative remedy, it is trite law that Courts would be loathe to entertain a writ petition if alternate remedy is available. However, the rule of alternate remedy is a self-imposed restriction, to which the Courts have carved out exceptions some of them being violation of principles of natural justice, lack of jurisdiction and error apparent on the face of record inasmuch as we have already find that the impugned order suffers from violation of principles of natural justice and the same warrants interference under Article 226 of the Constitution of India. We are inclined to remand the matter back to the assessing authority, who shall grant one more opportunity to the appellant to put forth its explanation / objection in respect of excess stock, which has been treated as unexplained investment under Section 69B of the Act. Accordingly, the orders impugned in this appeal as well as in the writ petition, are set aside and the Respondent is directed to grant an opportunity of hearing to the appellant and to pass orders afresh, within a period of 12 weeks from the date of receipt of a copy of this judgment.
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2024 (2) TMI 463
Clubbing of income of wife u/s 64 - income as belongs to the assessee s wife accepted in scrutiny assessment, but taxing it in the hands of the assessee again on the ground that his wife was not actually carrying out any business - HELD THAT:- Since the income of the wife of the assessee stands accepted in her hands by the Department in scrutiny assessment vide order passed u/s 143(3) of the Act, on returns filed in consequence to the search action conducted on her u/s 153A of the Act, we find that there is no case with the Revenue now to tax the same income in the hands of the assessee also in terms of the clubbing provisions of Section 64(1)(ii) of the Act. Having accepted the said income as belongs to the assessee s wife in scrutiny assessment, the Department is now debarred from taking a contrary view and taxing it in the hands of the assessee on the ground that his wife was not actually carrying out any business. In view of the above, all the appeals of the assessee are allowed.
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2024 (2) TMI 462
Levy late filing fees u/s 234E - Delay in filing the TDS returns - time of the filing of the TDS returns - whether it is a case of continued default even after the period starting 1.6.2015 empowering the Assessing officer to levy the fees under section 234E? - HELD THAT:- TDS return (Form 24Q) for the 2nd quarter of financial year 2013-14 was filed by the assessee on 3.01.2015 and the same was processed and intimation under section 200A was issued on 01/01/2017. Similarly, in the second case, the TDS return (Form 24Q) for the 4th quarter of financial year 2013-14 was filed by the assessee on 02.01.2015 and the same was processed and intimation under section 200A was issued on 01/01/2017. We therefore find that though there has been a delay in filing these two TDS returns, however, in all these cases, the TDS return has been filed much before 1.6.2015 and none of the three cases involved a case of continuing default where the assessee has defaulted in furnishing the TDS statement even after 01.06.2015. Therefore, even though the AO assume jurisdiction to levy fee u/s 234E with effect from 1.6.2015 and has the necessary jurisdiction to levy fee u/s 234E in the instant case while processing the TDS returns on 1/01/2017, at the same time, such jurisdiction has been held prospective in nature and the period prior to 1/6/2015 has to be excluded. No basis for levy of fees under section 234E and the same is hereby directed to be deleted. Assessee appeal allowed.
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2024 (2) TMI 461
Penalty levied u/s 271D - violation of the provisions of section 269SS - assessee sold an immovable property and received part consideration in cash - HELD THAT:- As per registered deed of sale, it is clear that the assessee has received part of sale consideration of ₹.1,60,00,000/- in cash. However, the contention of the assessee is that the consideration clause of the deed of sale had wrongly entered the transaction in mode of cash while in reality it was an adjustment of an existing debt through a journal entry. The above contention of the assessee is not acceptable by any Court of Law, claiming to have wrong entry has been made in a document, which was duly signed by both the vendor and purchaser and registered by the Sub- Registrar of the State Revenue Department in the absence of any material evidence. The assessee should have approached the Appellate Authority of the Tamil Nadu State Revenue Department for any modification/addition/deletion, etc., which was not done in this case - we are of the opinion that the ld. CIT(A) has rightly confirmed the penalty levied under section 271D of the Act and thus, the appeal filed by the assessee is dismissed.
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2024 (2) TMI 460
Revision u/s 263 - PCIT enlarging the scope of limited scrutiny - PCIT has observed that while computing the profit before tax assessee had debited to profit and loss account a sum towards provision for bad and doubtful debts which is not an allowable expenditure and the same was not added back while computing the total income under normal provisions of the Act - return filed by the assessee was selected for limited scrutiny for verification of duty drawback, unsecured loans disallowance u/s. 40A(7) (Gratuity Provision) - HELD THAT:- As in this case, the AO has examined the case of the assessee for which it was selected under Limited Scrutiny . Under the above facts and circumstances, we are of the considered opinion that it is not a fit case to invoke the provisions of section 263 and pass revision order, where the case of the assessee was picked up for limited scrutiny in view of the decision of Smt. Padmavathi [ 2020 (10) TMI 425 - MADRAS HIGH COURT] as the ld. PCIT cannot enlarge the scope of limited scrutiny. Thus, the revision order under section 263 of the Act stands quashed. Appeal filed by the assessee is allowed.
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2024 (2) TMI 459
AO suo-moto framed the order u/s. 154 and rectified the order - AO framed order u/s. 154 of the Act without affording a reasonable and adequate opportunity of being heard to the assessee, also without being directed by CIT(A) - HELD THAT:- CIT(A) has never given direction for reopening / rectifying the error for A.Y. 2009-10. The assessment for A.Y. 2009-10 was completed by the order dated 30.12.2011 framed u/s. 153A r.w.s. 143 (3) of the Act wherein the returned income of Rs. 10952781/- was assessed at Rs. 12328957/-. After receiving the order of the CIT(A) for A.Y. 2010-11 the AO suo-moto framed the order dated 21.07.2015 u/s. 154/250/ 153A/143 (3) of the Act and made the addition of Rs. 42382000/-. This was challenged before the CIT(A) on the ground that the AO could not have framed any order u/s. 154 of the Act without affording a reasonable and adequate opportunity of being heard to the assessee more so when the CIT(A) in A.Y.2010-11 did not give any direction for reopening / rectification of order for A.Y. 2010-11. After considering the facts and the submissions the CIT(A) was convinced and held that the impugned rectification order is not sustainable. Before us the DR could not point out any factual/ legal error or infirmity in the findings of the CIT(A). . The AO has assumed the powers conferred upon him by the provisions of section 154 of the Act and rectified the order suo-moto without affording any opportunity of being heard to the assessee. Decided against revenue.
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2024 (2) TMI 458
Assessment u/s 153A - unexplained cash credit u/s 68 - abated assessment or not - Addition to be restricted to seized material found during the course search - in case of CIT (A) deleted the addition - HELD THAT:- As per the ratio emanating from the said decision in case of Chintels India ltd.[ 2017 (7) TMI 746 - DELHI HIGH COURT] is that if the period for issuance of notice is still available then the case will not be considered as completed assessment To recapitulate the facts of this case, original return was filed u/s 139(1) of the Act on 28.10.2009, this means that notice u/s 143(2) of the Act could be issued up to 30.09.2010 (i.e. six months from the end of the financial year in which return was filed i.e. 2009-10). The search in this case was conducted on 14.09.2010 before the end of the stipulated time period for issuance of notice u/s 143(2) of the Act. Hence, the assessment for AY 2009-10 cannot be treated as abated or pending on the date of initiation of search. In this view of the matter, the addition is not restricted to seized material found during the course search in case of abated assessment. Assessing Officer can very rely upon his own enquiry. In the present case AO s enquiry has clearly revealed that the unsecured loan is unexplained cash credit in the books of the assessee and he has rightly added u/s 68 of the Act. We set-aside the order of the Ld. CIT(A) and restore that of the AO. Revenue s appeal stands allowed.
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2024 (2) TMI 457
Validity of Assessment u/s 153A - share application money received by the assessee company - Whether any material found and seized during the search seizure operations? - HELD THAT:- Decisions of Meeta Gutgutia [ 2017 (5) TMI 1224 - DELHI HIGH COURT] and KABUL CHAWLA [ 2015 (9) TMI 80 - DELHI HIGH COURT] are squarely applicable to the facts and circumstances of the case as no assessment was pending on the date of search and the addition has been made merely on the basis of the book entries already disclosed to the department. Further, reliance is also placed on the decision of the Hon ble Jurisdictional High Court in the case of PCIT Vs. Subhash Khattar [ 2017 (7) TMI 1091 - DELHI HIGH COURT] The entire issue stands settled by the judgment of Hon ble Apex Court in the case of M/s. Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] wherein the Hon ble Apex Court held that in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Thus no addition can be made in the case of the assessee sans seized material. Decided in favour of assessee.
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2024 (2) TMI 456
Penalty levied u/s 272(1)(d) - non-compliance of notice issued u/s 142(1) - assessee mentioned that due to some internal problems in the organization between October and November, 2019, no reply could be filed during the assessment proceedings and thereafter, once the issue got resolved in the organization, the replies were filed on 09.12.2019 before the AO for completing the assessment proceedings - HELD THAT:- As notice u/s. 272(1)(d) issued for the default in the responding to the notices issued during assessment proceedings u/s. 142(1) dated 23.10.2013 for 30.10.2019, u/s. 142(1) dated 5.11.2019 for 8.11.2019 and u/s. 142(1) dated 20.11.2019 for 22.11.2019, reply to the penalty notice filed on 10.12.2019 Stating that as no responsible person was available to file thee reply so reply could not be filed , but the same is not accepted by AO and penalty of Rs. 30000 imposed vide order dated 29.06.2021. As per the provisions of u/s. 273B it can be considered as a reasonable cause. Hence, penalty is hereby obliterated. Decided in favour of assessee.
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2024 (2) TMI 455
Unexplained cash credit u/s. 68 - CIT(A) confirmed part addition - CIT(Appeals) was of the view that as the assessee company had failed to substantiate the authenticity of its claim of having received genuine share application money from two share applicants, thus partly made addition - HELD THAT:- Though the assessee company had duly discharged the primary onus that was cast upon it as regards proving the identity and creditworthiness of the share applicants and genuineness of the transaction of having received share application money from the aforementioned persons, but the A.O could not rebut the same based on any cogent evidence. As the A.O had not cared to discharge the onus that was cast upon him, therefore, as observed in the case Commissioner of Income Tax Vs. Kamdhenu Steel and Alloys Ltd. [ 2011 (12) TMI 394 - DELHI HIGH COURT] for this negligence on the part of the A.O, he could not be provided with fresh innings . We, thus, in terms of our aforesaid observation finding no infirmity in the view taken by the CIT(Appeals) to the extent he had vacated the aforementioned additions made by the A.O by treating the money received from the said persons as unexplained cash credits u/s. 68 of the Act, and uphold the same. Sustainability of the addition with respect to two share applicants viz. Shri Ramesh Bind and Shri Dalla Nisad - The fact that Shri Ramesh Bind had returned his income of Rs. 1,78,100/- undeniably raises serious doubts about the veracity of his unsubstantiated claim of having made an investment of Rs. 18 lacs with the assessee company. Also, the financial statement of Shri Ramesh Bind, viz. balance sheet and capital account does not inspire any confidence for the reason that the nature of his business/sources of income cannot be gathered therefrom. Apart from that, the fact that the cash aggregating to Rs. 8 lacs was deposited in the aforesaid persons bank account in two tranches of Rs. 4 lacs each on the same date on which the amount was transferred to the assessee company read a/w. the fact that the said person had no substantial sources of income, thus, raises no confidence as regards the genuineness of the investment claimed by him to have been made with the assessee company. Also, the source out of which an amount of Rs. 10 lacs was transferred by the aforementioned person to the assessee company is not discernible from the record. At this stage, we may also herein observe that though Shri Ramesh Bind (supra) had filed an affidavit wherein he had accepted the fact of having made an investment of Rs. 18 lacs with the assessee company, but despite specific direction by the A.O, the aforesaid company had failed to produce him for necessary examination in the course of the assessment proceedings before the A.O. Shri Dallu Nisad - As nothing is discernible from the records, which would substantiate the creditworthiness of the aforementioned person who has stated to have made an investment of Rs. 1.08 crore (approx.) with the assessee company, we find no infirmity in the view taken by the A.O who had rightly dubbed the same as unexplained cash credit u/s. 68. We concur with the view taken by the CIT(Appeals) who had rightly observed that the assessee company had failed to establish the genuineness of the assessee s claim of having received share application money from the aforementioned person by placing on record supporting documentary evidence, which would reveal his annual income and availability of funds a/w. sources of the same, therefore, we uphold the same. Both the appeal of the assessee and appeal of the revenue are dismissed in terms of our aforesaid observations.
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2024 (2) TMI 454
Protective addition on account of unexplained credit entries appearing in the bank account - assessee company is a conduit - addition on account of unaccounted commission @ 0.25 % of total unexplained credit entries HELD THAT:- As credits received by the appellant cannot be treated as unexplained credit in its hands since, the said transactions are mere arrangement of funds/routing of unaccounted income of the beneficiaries to whom the said funds were transferred through the bank of the appellant company in lieu of commission. In this regard, on perusal of the bank statement and ledger of the appellant company it is evident that the funds have flown, as the appellant company has received funds from various concerns as mentioned above and thereafter amounts were transferred to the above mentioned companies/ concerns immediately, the appellant company is not beneficiary company. The above arrangement of funds is nothing but part of modus operandi of the accommodation entry provider to introduce the unaccounted funds of the beneficiaries in their respective bank accounts. AO also in the assessment order has observed that the appellant company was a conduit company operated by Sh. Naresh Jain and Anand Jain to provide accommodation entries to various beneficiaries and said beneficiaries have already been identified. Accordingly, when the beneficiaries were identified, the addition in such cases can at best be that of commission earned on such accommodation entries. As far as charging of commission is concerned, it has been held in the case of Sh. Anand Jain and Sh. Naresh Jain that they were entry operators who were managing and controlling various shell concerns including the appellant for providing accommodation entries in lieu of commission. Hence, no addition on account commission is called for in this case. Since the assessee company is a conduit, the substantive addition has to be made in the name of the parties mentioned above as per the list given by the ld. AR. Hence, we hold that the ld. CIT(A) has rightly deleted the addition made on protective basis in the case of the assessee. Appeal of revenue dismissed.
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2024 (2) TMI 453
Income deemed to accrue or arise in India - revenue earned by the assessee from the provisions of transmission services of voice, data and programmes of space segment capacity on Satellites to customers - AO held it in the nature of Royalty u/s 9(1)(vi) of the Income Tax Act and Article 12(4) of the India-Netherland DTAA - Alternatively, he held that the revenue earned by the assessee is Fee for Technical Services u/s 9(1)(vii) of the Act r.w. Article 12(5) of the India- Netherlands DTAA. HELD THAT:- As in earlier years, Hon ble Delhi High Court [ 2016 (2) TMI 415 - DELHI HIGH COURT] answered the questions in favour of the assessee held that India's change in position to the OECD Commentary cannot be a fact that influences the interpretation of the words defining royalty as they stand today. The only manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into a treaty concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(1)(vi) cannot result in a change. Consequently, since we have held that the Finance Act, 2012 will not affect Article 12 of the DTAAs, it would follow that the first determinative interpretation given to the word royalty in Asia Satellite [ 2011 (1) TMI 47 - DELHI HIGH COURT] when the definitions were in fact pari materia (in the absence of any contouring explanations), will continue to hold the field for the purpose of assessment years preceding the Finance Act, 2012 and in all cases which involve a Double Tax Avoidance Agreement, unless the said DTAAs are amended jointly by both parties to incorporate income from data transmission services as partaking of the nature of royalty, or amend the definition in a manner so that such income automatically becomes royalty. The Revenue has not pointed any change into facts and circumstances of the present case. We therefore, respectfully following binding precedent (supra), hereby direct the AO to delete the impugned addition. Non granting credit of taxes as deducted at source - As assessee submitted that appropriate direction may be given to the assessing authority for granting credit of the tax already deducted and CIT DR has no objection in this regard - HELD THAT:- Considering the submissions made at bar, we direct the AO to verify the correctness of the claim of the assessee and give credit of the tax deducted at source in accordance with law. If the taxes have been deducted and deposited in government account as per provision of law, the AO would grant credit of same. This Ground of assessee s appeal is allowed.
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2024 (2) TMI 452
Nature of expenses - Employee Stock Option Scheme compensation - AO disallowed the compensation by holding that ESOP compensation is not a revenue expenditure, amount of expenditure is not an actual expenditure, and SEBI guideline are not prerogative for determining the allowability of expense - whether expenditure is eligible for deduction u/s 37 (1) being revenue in nature? - HELD THAT:- Since the matter stand adjudicated in the case of the assessee for the AY 2007-08 to 2009-10 [ 2015 (8) TMI 319 - ITAT DELHI ] AY 2011-12 [ 2019 (1) TMI 1401 - ITAT DELHI ] AY 2012-13 [ 2020 (1) TMI 1668 - ITAT DELHI] by the coordinate bench of the Tribunal relying on the judgment of M/s. Biocon Ltd. [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT ] and Bangalore ITAT (special bench) [ 2014 (12) TMI 838 - ITAT BANGALORE ] wherein it was that ESOP compensation is revenue in nature and hence, allowable as a deduction. Since the matter stands adjudicated in the case of the assessee from the earlier years, in the absence of any change in the factual matrix and legal preposition, we affirm the order of the ld. CIT(A) on this issue. Disallowance u/s 14A r.w.r. 8D - assessee had made investments in mutual funds - HELD THAT:- The coordinate bench ITAT Delhi in assesse s own case for AY 2012-13 [ 2020 (1) TMI 1668 - ITAT DELHI] held that the disallowance u/s 14A is to be restricted to only those investments which have actually yielded tax exempt income during the year. Since the matter stands adjudicated in the case of the assessee from the earlier years, in the absence of any change in the factual matrix and legal preposition, we affirm the order of the ld. CIT(A) on this issue. Nature of expenses - ROC Fee - expenditure incurred for increase in authorized share capital by issuing bonus shares - AO had disallowed the aforesaid ROC fee expenditure by considering that it this expenditure directly related to expansion of capital base is capital expenditure - HELD THAT:- The assessee submitted that expenditure incurred for issue of bonus shares should be allowable expense since there was no flow of fresh funds or increase in the capital employed. It could not, therefore, be said that the company had acquired benefit or advantage of enduring nature. Hon ble Supreme Court in the case of CIT vs General Insurance Corporation [ 2006 (9) TMI 116 - SUPREME COURT ] held that the expenditure incurred in connection with issuance of bonus shares is revenue expenditure. Hence, we direct the AO to re-compute the allowable expenditure. Appeal of the Revenue on this ground is dismissed. Legal professional expenses - allowable business expenses or not? - as argued expenses have not resulted in benefit of any enduring nature to the Respondent therefore it is revenue in nature expenditure and fully allowable to the Respondent - CIT(A) deleted the addition holding that from the invoices, it is clear that such expenses have been incurred as professional and legal charges on matters relating to trademark advertisement, reporting and reviewing of registration of trademark and preparation of report, documentation. Such expenditure does not create an asset or an advantage which makes it capital in nature - HELD THAT:- In the case of DCIT vs USV Ltd. [ 2010 (3) TMI 1131 - ITAT MUMBAI ] wherein, in similar facts and circumstances as in the case of the assessee, it was held that the expenses paid to trademark attorney is a revenue expenditure. Thus the fee paid to legal professionals in relation to trademark matters is revenue in nature expenditure and allowable as business expenditure. Additions against Creditors - stale cheques - payments made through cheques to the various parties but not credited to the account reasons known to the payee - AO held that liability shown under stale cheques is no more payable and hence added back to the total income for the year under consideration - CIT(A) appreciated the policy of company to recognise the income three years deleted such addition - HELD THAT:- The assessee has produced the subsequent utilization details of stale cheques before the AO owing that the assessee has already been settled / adjusted a sum partly - We find that the assessee is following a regular method of recognition of revenue on accounts of stale cheques/un-claimed liabilities after the period of three years. Assessee has also credited an amount of Rs 2,43,397/- in his books of accounts during the year, thus it is premature of the Assessing Officer to make an addition on account sundry creditors. Hence, we decline to interfere with the order of the ld. CIT(A). Appeal of the Revenue on this ground is dismissed.
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2024 (2) TMI 451
Nature of receipt - compensation for displacement in terms of re-development agreement as Hardship Compensation - surrender of flats by members pursuant to the re-development agreement of the society - as per AO action of the housing society handing over payment from builder to the individual member/assessee was not in accordance with the Principle of Mutuality since the same was received from the developer (a third party) - Treating the Hardship Compensation Fund as Dividend Income received from the residential society - According to the assessee, the amount received was in the nature of capital receipt and not as such taxable in the hands of the assessee it is nothing but rehabilitation allowance and constitutes capital receipt as the property has gone into re-development HELD THAT:- We find that Co-ordinate Bench of this Tribunal in the case of Kushal K. Bangia [ 2012 (2) TMI 29 - ITAT MUMBAI] have answered the question in favour of the assessee by holding it to be capital receipt not liable to tax. Hardship Compensation given to the assessee pursuant to the re-development agreement is a capital receipt and cannot be treated as revenue receipt as held by the AO/Ld. CIT(A). The reliance placed by AO/Ld. CIT(A) on the case law of the Hon ble Supreme Court in the case of M/s. Bangalore Club v CIT [ 2006 (7) TMI 146 - KARNATAKA HIGH COURT] is not relevant on the issue in hand. Therefore, the AO/Ld. CIT(A) erred in law holding that hardship compensation received by the assessee from the builder was in nature of the dividend in the hands of the assessee/member of the housing society - the impugned receipt ends up reducing the cost of acquisition of the asset, i.e. flat, and, therefore, the same will be taken into account when occasion arises for computing capital gains in respect of the said asset. Appeal of assessee is allowed.
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2024 (2) TMI 450
Accrual of income in India - taxability of administrative fee received by the assessee as royalty u/s 9(1)(vi) as well as under Article 12(3) of India-USA DTAA - assessee is a non-resident corporate entity incorporated in United States of America (USA) - HELD THAT:- What the assessee provides is a database containing unique numbers, which has to be provided to the mobile equipment manufacturers for implanting in the mobile devices so that the devices can be tracked and put in the black list in case of theft or misuse so as to prevent crime. As per article 12(3) of India-USA DTAA, the amount received cannot fall within the ambit of royalty, as the consideration received cannot be construed to be for use or right to use any copyright of literary, artistic or scientific work including motion picture films and works on film or video tape for use in connection with television. Neither it can be a consideration for any patent, trade mark, design or model, plan, secret formula or process. It also cannot be for information concerning industrial, commercial or scientific experience. It also cannot be considered to be payment for use of or the right to use industrial, commercial or scientific equipment. Though, the AO has observed that IMEI number is a unique invention to track the mobile equipment and information concerning industrial, commercial or scientific experience, however, we are not convinced. The fact of the matter is, the assessee, as a global administrator has created a database of unique numbers, which in combination with other numbers to be provided by mobile manufacturers can be implanted in the mobile devices to identify and keep track of the device. It is further to be noted that a particular IMEI number can be provided to only one mobile equipment manufacturer and has to be implanted in a single mobile equipment. This fact also proves that there is no transfer of use or right to use of any copyright of literary artistic or scientific work or use or right to use of any commercial or scientific experience or equipment. The database of IMEI number can be compared with the registration numbers granted to identify a particular vehicle, which is nothing but a number allocated by the registering authority from a database of numbers available with them. That does not amount to transfer of any right to use of any copyright etc. Thus, we are of the view that the amount received by the assessee will not fall within the definition of royalty both under section 9(1)(vi) of the Act as well as under Article 12(3) of India-USA DTAA. Accordingly, we direct the AO to delete the additions in both the assessment years under dispute. Short credit of TDS - We direct the Assessing Officer to factually verify assessee s claim and grant credit of TDS as per law.
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Customs
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2024 (2) TMI 449
Levy of Anti-Dumping Duty - impact assessment - HELD THAT:- It is noted that apart from return of finding of dumping, price undercutting and depression, there is a requirement of an impact assessment which has to be significant for the Adjudicating Authority to recommend levy of Anti-Dumping Duty on the imports. Dumping and price undercutting - HELD THAT:- A positive finding was returned by the Adjudicating Authority in its final finding dated 27.10.2022, which were not in issue before the Appellate Tribunal - Respondent No. 3, Domestic Industry had impugned the order before Appellate Tribunal primarily on the ground that the Adjudicating Authority had returned a finding that dumping did not lead to any price depression or that the same did not have any significant impact on the Domestic Industry warranting any levy of Anti-Dumping Duty. The Tribunal has remitted the matter to the Adjudicating Authority to re-consider the issue - the Adjudicating Authority shall consider the impact assessment of the injury arising out of the dumped import based on the data produced before the Adjudicating Authority in support of para (ii) of Annexure II of 1995 Rules and in terms of para 40 of the Tribunal s order dated 29.09.2023 by treating the observations in the order of the Tribunal as prima facie - appeal disposed off.
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2024 (2) TMI 448
Requirement to submit the BIS certificate license for assessment of the Bill of Entries - goods being Hexane imported by the petitioners - Hexane, Food Grade had to meet BIS 3470 when employed in extraction of oleaginous material or not? - HELD THAT:- In view of the Notification dated 04.08.2022 issued by the DGFT, requirement of providing mandatory BIS certificate is now no longer exist and accordingly, the cause for this petition would not survive. As the grievance raised in these petitions for submission of the mandatory BIS certificate is no longer survived in view of the Notification No. 24/2015-2020 dated 04.08.2022 issued by the DGFT, the petitions have become infrucutous. The bonds furnished by the petitioners pursuant to the interim order passed by this Court on 05.05.2022 are therefore required to be released. Accordingly, the bonds furnished by the petitioners are ordered to be released by the respondent authority and finally assess the Bill of Entries without insisting for mandatory BIS Certificate as per the Notification dated 04.08.2022 issued by the DGFT. Petition disposed off.
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2024 (2) TMI 447
Permission of re-export of the imported goods - personal penalty - import of Unmanned Aircraft System (UAS) Unmanned Aerial Vehicle (UAVs)/ Remote Piloted Aircrafts (RPAs)/ drones - restricted goods or not - requirement of import license from DGFT and NOC from DGCA - HELD THAT:- Reliance placed in the decision of this Tribunal in the matter of M/S. GLOBAL ENTERPRISES VERSUS COMMISSIONER OF CUSTOMS (NS-V) [ 2019 (4) TMI 1050 - CESTAT MUMBAI] in which although the imported goods were termed as prohibited goods but despite that the same was permitted to be re-exported - Admittedly the imported goods involved herein is restricted. The prior clearance of import and also the license to import have not been taken from the authorities concern, which was incumbent upon the appellant to take beforehand i.e. before the import took place. Re-export of goods - HELD THAT:- Although there is some irregularity on the part of the appellant but looking at the facts of this case and background of the appellant herein who has imported the goods involved herein not for any commercial purpose but only for the purpose of static display in his clinic, the re-export of aforesaid good is permitted as held in M/S. GLOBAL ENTERPRISES VERSUS COMMISSIONER OF CUSTOMS (NS-V) [ 2019 (4) TMI 1050 - CESTAT MUMBAI] . Personal penalty on the appellant u/s. 112 ibid - HELD THAT:- Any improper import of goods which has rendered such goods to confiscate, is sufficient to attract penalty u/s. 112 ibid. Considering the facts and circumstance of this case and the bonafide of the appellant the same is reduced to the amount already paid by him. The impugned order is modified - Appeal disposed off.
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2024 (2) TMI 446
Sustainability of cess, when basic customs duty itself was Nil - contention of the department is barring the basic customs duty, other duties namely EC, SHEC and SWS ought not to have been debited in the duty credit scrips - HELD THAT:- The decision of M/S. UNICORN INDUSTRIES VERSUS UNION OF INDIA OTHERS [ 2019 (12) TMI 286 - SUPREME COURT] dealt with the learned adjudicating authority stand referred to a Larger Bench of the Apex Court in SRD NUTRIENTS PVT. LTD. VERSUS COMMR. OF CENTRAL EXCISE, GUWAHATI [ 2022 (1) TMI 615 - SUPREME COURT] . The period involved in this case is from June-2017 to January-2018. The decision of UNICORN INDUSTRIES Vs. UNION OF INDIA was clearly distinguishable as in that case the duty as an NCCD was being levied as a separate ad valorem duty under different legislation and was not required to be worked out on the basis of a Nil Excise Duty which in that case was specifically exempted for Area Based Exemption Notification. However, in the instant case as has been upheld in the matter in their own case LOUIS DREFUS COMPANY INDIA P LTD VERSUS COMMISSIONER OF CUSTOMS (IMPORT II) , MUMBAI [ 2023 (11) TMI 972 - CESTAT MUMBAI] which followed decision of LA TIM METAL INDUSTRIES LIMITED VERSUS THE UNION OF INDIA AND ORS. [ 2022 (11) TMI 1099 - BOMBAY HIGH COURT] , it has been held that when cess as in this case was collected as percentage of duty liability and which is exempted under any notification the cess could not be computed in the face of Zero duty liability. We have agreed with the proposition that the Cess based on Nil total duty has to be Nil if machinery provision are clothed in such language and do not make levy an independent ad velorem duty. But same needs to be examined in detail to the specifics of the case including for C.V.D/ I.G.S.T component, if any during impugned period and language of the statutory provision relied upon by the appellant. Same therefore is remanded back. Other question relating to limitation and penalty shall be decided accordingly, considering quantum, legality of issues and malicious intention objectively - appeal allowed by way of remand.
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2024 (2) TMI 445
ReClassification of imported goods - calcite powder (uncoated) - to be classified under Chapter 26 or not - reliance on the test report of the laboratory without having facilities of testing the goods - HELD THAT:- The identical case has been decided in the case of ACME MICRONISED MINERALS VERSUS C.C. -MUNDRA [ 2024 (1) TMI 965 - CESTAT AHMEDABAD] wherein it was held that it is admitted that at the relevant time when the CRCL, Kandla has under taken the testing of imported goods in question i.e. Calcite Powder the said laboratory did not have the facilities to test such product. This Tribunal considering the very same fact came to conclusion that, when a particular laboratory does not have the testing facilities, the test report of the said laboratory without having facilities of testing the goods cannot be relied upon to decide the classification of the goods. There are no merit in the impugned order - The same is set aside and appeal is allowed.
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2024 (2) TMI 444
Imposition of detriment / penalty u/s 114 of Customs Act, 1962 - customs broker - alleged mis-declaration of description and value in exports of M/s Pearl Enterprises intended for Malaysia - HELD THAT:- Nothing has been brought on record to indicate that the appellant was concerned with any aspect of procurement prior to entering of goods for export to be cognizant of the fabric used or the purchase value. It is only owing to absence of any defence on the part of the exporter that the facts came to be unchallengeable qua the appellant also. It is to be noted that the appellant did admit to export documents having been received through an unconnected person. While that, of itself, may not lead to the conclusion of being aware of the fabric used or the value of purchase, it, nevertheless, should have been sufficient cause for caution as to satisfy himself about the veracity of the declarations being made. The role of the appellant in filing the declarations in the shipping bill, and responsibility thereof, is not in dispute. Consequently, recourse to section 114 of Customs Act, 1962 is not inappropriate. The fastening of penalty was on account of confiscation solely in the absence of defence. Moreover, there is no finding that the goods were not entitled to some drawback. There is also no finding on the mis-declaration of the earlier consignments which have been referred to as justification for magnitude of penalty. The gap between domestic value and declared value is not necessarily of such difference as to be beyond a commercial transaction, even if it to be outlier. The penalty imposed, therefore, appears to be unduly harsh and disproportionate. The ends of justice will be met by reducing the penalty to ₹10,000 - Appeal allowed in part.
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2024 (2) TMI 443
Quantum of penalty - Absolute confiscation - Smuggling of Gold Bars - prohibited goods or not - HELD THAT:- It is seen that in many cases, the Appellants were seen to be repeated offenders. Each of them has carried more than 30 pieces of gold bars with them without proper documents knowing fully well that these gold bars are liable to be confiscated. Further we see force in the arguments of the Learned AR that since no proper documents were available for these gold bars, they are to be categorized as prohibited goods. Hence, the submission of the Learned Counsel that penalty should be either equivalent to 10% of the quantified duty amount or Rs. 5,000/- whichever is higher, is rejected. Quantum of penalties imposed - HELD THAT:- It is seen that two other Noticees have approached the Hon ble Calcutta High Court, which after going through the factual details has remanded the matter back the Tribunal to re-quantify the penalties imposed on them - it is noted that the present Appellants are not the main noticees, since they were neither the buyers nor sellers of these gold bars but were mere carriers probably getting a few thousand rupees for carrying these gold bars from one place to another - it is also taken into account that they may not be financially strong and hence take a more humane approach in quantifying the penalties on them. Appeal disposed off by way of remand.
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Corporate Laws
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2024 (2) TMI 442
Seeking winding up of the respondent company - disobedience of the orders of the Court - Sections 433(e) (f), 434 and 439 of the Companies Act, 1956, read with Rules 6 and 9 of the Companies (Court) Rules, 1959 - HELD THAT:- The proposition of law is established that disobedience of the orders of the Court have to be shown to be wilful , such that there lies a certain mental element, and that such inaction or disobedience is done knowingly, intentionally, consciously and in a calculated and deliberate manner, with full knowledge of the consequences that may be flowing therefrom. Hence, it flows that even when there is disobedience of an order, in such cases where the disobedience is a result of compelling circumstances, outside the control of the contemnor, the contemnor cannot be punished. The plea canvassed on behalf of the respondent is sound in so far that it has been urged that the disobedience was not wilful or intentional and this court finds the same to be sustainable in law. There has never been any wilful disobedience to violate the directions of this Court. It is but evident that efforts have been made to repay the outstanding amount as also towards revival of the company through infusion of funds. The fact that winding up proceedings were underway and thereafter proceedings under the IBC have been initiated in the interim, affords a valid and sustainable defence to the contemnor in these proceedings. The present contempt petition is dismissed.
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PMLA
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2024 (2) TMI 441
Seeking grant of regular bail - Money Laundering - proceeds of crime - paper/bogus sale and purchase for projecting paper/bogus revenue and paper/bogus profit of Bankey Behari Group of Companies - HELD THAT:- Having perused the prosecution complaint filed in the present case and statements of applicant recorded under Section 50 of PMLA as well as other material on record, it appears prima facie that the applicant herein, through his companies namely M/s Jindal Agro International, M/s Fagir Chand Dalip Kumar and M/s Jindal Green Crop International Pvt. Ltd., had indulged in paper/bogus sales and purchase of goods, even though there was no actual movement of goods. As per prosecution complaint, the applicant was asked during his examination to provide transportation bills, kanta parchi or any other supporting documents in order to prove the movement of goods from his entity to Bankey Behari Group of Companies or vice -versa. However, he had failed to provide any documents to prove his transactions with Bankey Behari Group of companies as genuine. Further, he had accepted in his statement that he had shown paper purchase and paper sales with Bankey Behari Group of Companies. It is prima facie reflected from the records that the applicant herein, through his entities, had sold goods of about Rs. 314.57 crore and purchased goods of Rs. 200.83 crore, between the period 2013- 14 to 2016-17. However, on account of such false sale and purchase, the applicant had settled these transactions by passing journal voucher entries to the tune of Rs. 201.32 crore between the period 2013-14 to 2016-17, and a sum of Rs. 113.25 crore had been diverted to the bank accounts of the applicant. Though the learned Senior Counsel for the applicant took this Court through the entries and other documents so as to point out as to how the same will not lead to conclusion of money laundering, however, while dealing with the present bail application, this Court is of the opinion that it cannot go through the entire list of entries of accounts for the purpose of appreciating their genuineness or authenticity. The cognizance of prosecution complaint has already been taken by the learned Trial Court vide order dated 24.02.2023. This Court is of the opinion that twin conditions under Section 45 of PMLA are not satisfied since the material on record at this stage points out that the applicant herein was involved in the process of acquisition, possession, concealment of proceeds of crime obtained by way of cheating and forgery and projecting the same as untainted, thereby committing an offence of money-laundering under Section 3 of PMLA. This Court is not inclined to grant bail to the present accused/applicant, at this stage - the present application stands dismissed.
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Service Tax
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2024 (2) TMI 440
Withdrawal of form SVLDRS-3 (exhibit-K) - direction to the respondents to refund the amount collected from the petitioner - HELD THAT:- There are no reason to interfere with the impugned judgment and order passed by the High Court in the facts and circumstances of the case. The Special Leave Petition is dismissed.
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2024 (2) TMI 439
Classification of services - port services or not - barge activity carried out by the Appellant - wrongful availment of Cenvat Credit by the Appellant or otherwise - It was held by CESTAT that the respective services in question rendered during the relevant period by the present appellant within the port area cannot be charged service tax under the category of port service and it was also held that appellant is entitled for Cenvat credit on such inputs utilized for repairing and manufacture of barges - HELD THAT:- It is found that no case for interference has been made out - appeal dismissed.
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2024 (2) TMI 438
Exemption from Service Tax - Advertisement Agency Service - Selling of Space - covered under the Negative List or not - burden to prove on Department, whether service provided by the appellant was selling of space for advertisement or not - burden can be shifted on the Appellant or not (onus to prove) - interest and penalty - HELD THAT:- The Appellant is providing service of displaying the advertisement through various mode such as hoarding, kiosk, etc. However, he is not providing the services like basic planning of advertising, preparing the detail exhibition program for advertisement. On the basis of planning, printing of the material for display or exhibition the service of selling of space or time slots for advertisements falls under negative list of Services specified under Section 66D (g). The words selling of space or time slots for advertisement are not defined in the act therefore, the meaning of these words is to be understood in commercial parlance which means providing space for displaying advertisement. At the time of introduction of new service, the Joint Secretary, Ministry of Finance, Department of Revenue, Government of India issued a clarification on this service vide D.O.F. 334/4/2006-TRU dated 28.02.2006 which shows that advertisement on building covers under the scope of sale of advertising spaces. The customer or client approaches the appellant with advertisement material and the appellant displayed the same on a space for a particular period and charge the customer on monthly basis. After expiry of the period the advertisement is removed. Such activities of providing space for displaying advertisement was covered in the Negative list and as such not taxable. It is evident from the details given in above invoices that the Appellant was not engaged in designing and conceptualising advertisement. The Tribunal has observed in the case of Zodiac Advertisers [ 2006 (3) TMI 138 - CESTAT, BANGALORE ] that a service is covered under Advertising Agency service when all activities as mentioned in the definition are done by a person - The ratio of the above decision are squarely applicable in this case also and demand of service tax for that period is not sustainable. Interest and penalty - HELD THAT:- The issue is no more resintegra. Once demand is not sustainable, penalty imposed under Section 78 of the Finance Act, 1994 would not be imposable. The penalty imposed on the partner, Shri Sanjay Adhlakha is also set aside. The Late Fee is restricted to Rs.1,00,000/-. The demand of Service Tax alongwith applicable interest set aside - The penalty imposed under Section 78 on the Appellant firm and under Section 78A on the partner Shri Sanjay Adhlakha are set aside - appeal allowed in part.
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2024 (2) TMI 437
Levy of service tax - Business Auxiliary Service - imposition of penalty under Section 78 of the Finance Act, 1994 - Transportation, Bundling and Feeding of Bamboo - Unloading of Bamboo from Railway Wagons and shifting from Railway Siding to Bamboo Yard - Coal Ash Transportation, unloading/shifting of SSP/Ind. Salt from Railway Wagons to go-down - invocation of extended period of limitation - HELD THAT:- The facts are not in dispute that for the period 1st October, 2008 to 30th September, 2013, the demand has been raised against the appellant under the category of Business Auxiliary Service by invoking extended period of limitation through show-cause notice dated 22.10.2013. It is also a fact on record that for the similar activity, another show-cause notice was issued to the sister concern of the appellant, namely, M/s Subham Syndicate to demand service tax under the category of Cargo Handling Service, which shows that the respondent was under confusion whether the activity undertaken by the appellant falls under the category of Cargo Handling Service or Business Auxiliary Service. In that circumstances, when the Revenue itself is not definite under which category the activity undertaken falls, the extended period of limitation is not invokable. Moreover, the activity undertaken by the appellant was known to the Department much prior to issuance of show-cause notice i.e. 20.06.2010, when Revenue issued a letter to the appellant - But no proceedings were initiated against the appellant - the extended period of limitation is not invokable. Further, the demand of service tax has been raised against the appellant under the category of Business Auxiliary Service and no particular clause of Business Auxiliary Service has been charged against the appellant. Therefore, the show-cause notice is defective - Further, post 01.07.2012, the negative list regime came into force and all the negative regime, the appellant is liable to pay service tax on the activity undertaken by them, but no demand has been made from the appellant under the negative list regime - for the period post 01.07.2012, the demand is not sustainable. The demand prior to 01.07.2012 is barred by limitation and post 01.07.2012 is not maintainable as no demand has been made under negative list regime - the impugned order is set aside - Appeal allowed.
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Central Excise
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2024 (2) TMI 436
Condonation of gross delay of 334 days in filing this appeal - Sufficient reason for delay or not - Appeal against the order of CESTAT in M/S. KAY BOUVET ENGINEERING PVT. LTD. AND NIRAJ CHANDRA VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-II [ 2022 (11) TMI 1444 - CESTAT MUMBAI] setting aside the demand raised on the ground of Undervaluation, Clandestine removal etc. - HELD THAT:- The reasons cited for condonation of delay are not sufficient in law so as to condone the delay - In the circumstances, the application seeking condonation of delay is dismissed.
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2024 (2) TMI 435
Valuation - inclusion of value of free material supplied by the principal manufacturer for the purpose of job work by the respondent on behalf of the supplier of the material or not - HELD THAT:- On the close scrutiny of the order it is found that the learned Adjudicating Authority has assumed that the principal manufacturer has discharged the duty on the total value of the finished product cleared by the principal manufacturer. However, no verification in this regard was made by the Adjudicating Authority. Since the INTERNATIONAL AUTO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BIHAR [ 2005 (3) TMI 132 - SUPREME COURT] case is solely based on the fact that the principal manufacturer has adjusted the duty while clearing the final product but in absence of said fact on record in the present case, reliance placed on International Auto Ltd only would not be proper. Accordingly, for applying the ratio of International Auto Ltd the fact needs to be verified that whether the principal manufacturer has paid the duty on the total value of the final product including the value of the material supplied by the principal manufacturer to the job worker in the present case. Therefore, the matter needs to be remanded back to the Adjudicating Authority for passing a fresh order. Appeal is allowed by way of remand to the Adjudicating Authority.
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2024 (2) TMI 434
Refund of excess central excise duty than due - order crediting the sum to Consumer Welfare Fund not passed - HELD THAT:- It is found from the provisions of sub-section (2) of Section 11B of CEA that there are only two options with the Assistant/Deputy Commissioner if he/she finds that the refund is due, then either to credit the said sum to Consumer Welfare Fund or pay it to the assessee, i.e. the claimant. It is noted that the learned Assistant/Deputy Commissioner has not passed an order crediting the said sum to Consumer Welfare Fund. Therefore, the only option left under the said provision of the Act is to pay the same to the claimant. Since Revenue has rejected refund claim after finding that the said sum was paid in excess of due, it is noted that there is no such provision in Section 11B to reject the claim of refund when it is found that the duty paid is in excess of due duty and, therefore, the impugned order is erroneous - in the present case, since the sum was not credited to the Consumer Welfare Fund, under the said provisions of Section 11B ibid, the only other option is to pay the same to the claimant who is presently the appellant in this case. The Assistant/Deputy Commissioner of Central Excise, Chandrapur Division, is directed to pay refund of the claimed amount to the appellant within a period of 30 days from the date of submission of a certified copy of this order by the appellant to the said Assistant/Deputy Commissioner - appeal allowed.
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2024 (2) TMI 433
Levy of penalty u/r 26 of the Central Excise Rules, 2002 - clandestine removal - allegation based on certain printouts and private records seized from the premises of the company for the period 01.04.2006 to 07.06.2007 - No corroborative evidences - HELD THAT:- It is a fact that investigation has been done after resigning of the Directors from the company. No corroborative evidence has been produced by Revenue showing that the appellants were actively involved in the clandestine removal of the goods and without specifically assigning the reasons that the appellants were involved in the clandestine removal of the goods, penalty cannot be imposed, as held by this Tribunal in the case of COMMISSIONER OF C. EX., MEERUT VERSUS RAKESH SINGHAL [ 2006 (6) TMI 407 - CESTAT, NEW DELHI] . Thus, penalty under Rule 26 cannot be imposed on the appellants. Accordingly, the impugned order qua imposing Rs.10.00 Lakhs each on both the appellants is set aside - appeal allowed.
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2024 (2) TMI 432
Clandestine clearance - imposition of penalty - demand raised against the appellants on the basis of alleged three parallel invoices and some rough papers seized during the course of investigation and statements of the employees of the appellants - opportunity of cross-examination not granted - violation of principles of natural justice - HELD THAT:- In this case, the case has been made out on the basis of rough papers seized during the course of investigation, which were in the possession of the employees of the appellants, who made inculpatory statement at the time of seizure of the documents. But, the Managing Director has controverted the statement made by the employees. Moreover, three parallel invoices on the basis of which demand has been confirmed against the appellants were not examined. Neither an investigation was made with the buyers mentioned in those parallel invoices nor any investigation was made with the transporters. No effort was made to find out, who is the author of those invoices. In the absence of any corroboration to that effect, the demand is not sustainable. Moreover, the cross-examination of the employees were not granted to the appellants which is in gross violation of the principles of natural justice in terms of Section 9D of the Central Excise Act. Same view was taken by the Hon ble Apex Court in the case of ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II [ 2015 (10) TMI 442 - SUPREME COURT] , wherein it has been held that denial of cross-examination is in violation of principles of natural justice when the statement of that person has been relied upon to allege against the assessee. Further, without corroboration of the corroborative evidence, the demand cannot be raised against the appellant when appellant has denied the said charge during the course of investigation - this Tribunal in the case of SKV. CHEMICALS VERSUS COMMISSIONER OF CENTRAL EXCISE, PONDICHERRY [ 2005 (5) TMI 221 - CESTAT, CHENNAI] held that mere factum of two set of invoices is not sufficient to prove the charge of clandestine removal in the absence of positive evidence with regard to the same. Admittedly in the case at hand no investigation was conducted at the end of the buyers mentioned in the invoices and transporter of the goods. In the absence of the same, the demand cannot be raised against the appellants - the impugned demand raised against the main appellant and penalty imposed on both the appellants set aside. Appeal allowed.
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2024 (2) TMI 431
Clandestine removal - Tar Catcher - demand on the basis statements of parties/buyers, one supplier of raw material, and one director of the appellant - admissible evidence or not - HELD THAT:- The allegation of clandestine production and removal are required to be arrived at on the basis of positive and tangible evidences including the evidences relating to procurement of raw-materials, conversion of the same to final products, clearances of the same and identification of the buyers and receipt of unaccounted cash etc. It has been the ratio of various decisions of the higher courts that mere entries in the private records, do not, ipso facto, lead to the allegation of clandestine removal unless there is corroborative evidence to that effect from independent sources - It is well settled that the charges of clandestine removal are required to be made on the basis of positive and tangible evidence, the same being quasi-criminal in nature. The Revenue has miserably failed to produce corroborative evidence on records so as to substantiate the charges of clandestine removal. In the absence of corroborative evidence, in the present case the charge of clandestine clearance cannot be levelled against the appellant. The adjudicating authority has not followed the procedure as prescribed under Section 9D of the Central Excise Act for placing reliance on the statements of said witnesses - The provisions of Section 9D of the Central Excise Act, 1944 is very clear and by now, it is well-settled legal position that the Adjudicating Authority, if he intends to rely on the contents of any statement recorded under the Central Excise Act, 1944, then the procedure, as prescribed under Section 9D, has to be followed scrupulously. In the present case, it is found that the statements were relied upon as corroborative evidences and the cross-examination of witnesses who made such statements was denied without valid ground. It is found that, the admissibility of these evidences is legally not sustainable, and the same cannot be the basis for confirmation of duty on the goods allegedly manufactured and cleared by the appellant. It is observed that in the present case also the goods were lying within the appellant s factory. There was no evidence on record to show that there was any attempt to remove those goods clandestinely without payment of duty - the goods in question were not liable to confiscation. Accordingly, the confiscation of the goods set aside - the impugned orders cannot be sustained - appeal allowed.
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2024 (2) TMI 430
SSI Exemption - Determination of turnover / value of first clarence - Eligibility for concessional rate of duty as provided in the Notification 9/2000 - whether the value of clearances made by paying duty at the normal rate is to be included or not for the purpose of computing the first value of clearances of 100 lakhs while allowing the benefit of concessional rate of duty as per Notification 9/2000, during a financial year? - HELD THAT:- The Appellant is a SSI unit availed the benefit of the Notification 9/2000, which prescribes concessional rate of duty based on a slab rate basis upto the first clearances value of Rs.100 lakhs, with Cenvat facility. This Notification is not automatic for a SSI Unit and the SSI Unit has to exercise the option to avail this exemption. Once exercised at any time during a financial year, the option could not be withdrawn during the remaining part of the financial year. It is observed that during the Financial Year 2000-01, the Appellant has opted for the benefit of this Notification and never opted out of the Notification during the Financial Year 2000-01. Thus, they would be entitled for the benefit of concessional rate of duty till they cross the value of clearances upto Rs.100 lakhs, during the Financial Year 2000-01. This value is to be computed by taking into account only the value of goods wherein the benefit of concessional rate has been availed. The demand of duty along with interest confirmed in the impugned order is not sustainable. Since the demand of duty is not sustainable, the question of imposing penalty does not arise - the impugned order set aside - appeal allowed.
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2024 (2) TMI 429
Interest on delayed payment of oil cess under Section 11AB of the Central Excise Act, 1944 - HELD THAT:- The issue is no longer res integra as the liability of interest on belated payment of Oil Cess has already been decided by this Tribunal in the case of C.C.E. S.T., DIBRUGARH VERSUS OIL AND NATURAL GAS CORPORATION LTD. [ 2017 (3) TMI 1620 - CESTAT KOLKATA] which was affirmed by the Hon ble Gauhati High Court in COMMISSIONER OF CENTRAL EXCISE VERSUS OIL AND NATURAL GAS CORPORATION [ 2018 (6) TMI 1485 - GAUHATI HIGH COURT ]. In this case, this Tribunal has held that Section 15(4) of the OID Act does not provide for payment of interest and accordingly decided the issue against the department. It is held that no interest payable on delayed payment of oil cess under Section 11AB of the Central Excise Act, 1944, as Section 15(4) of the OID Act does not provide for payment of interest - there are no infirmity in the impugned order passed by the Commissioner (Appeals) - appeal filed by revenue is dismissed.
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