TMI Tax Updates - e-Newsletter
March 20, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
GST
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Validity of order issued u/s 73(9) with DRC-07 - The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences. We also find the authorities not to have adjudicated the matter on the attending facts and circumstances. - The impugned order as also Summary of the order in Form GST DRC-07 is set aside - HC
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Classification of goods - rate of GST - supply of PVC floor mats (Cars) - Exclusions from CTH 8708 - As is evident, PVC floor mats, for four wheel motor vehicles, does not fall in the exclusion - Again it is evident that the floor mats for four wheel vehicles [cars] made of poly vinyl chloride [PVC] supplied by the applicant does not fall within the exclusion. - the impugned goods i.e. PVC floor mats for use in cars supplied by the applicant is classifiable under CTH 8708 & applicable rate of GST would be 28% - AAR
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Rate of GST in case of sale/supply of coated tobacco broken leaves in gunny bag - the product is classifiable under CTH 2401 as ''unmanufactured raw tobacco leaves'. - the applicant is liable to pay GST at 28% [14 % CGST and 14 % SGST] - in case of supply of the said coated tobacco to the customers in gunny bag with their name being printed/mentioned on the gunny bags so as to identify the lot, then rate of GST will be 28% with 71% compensation cess - AAR
Income Tax
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Assessment u/s 153A - Approval for assessment - the ITAT has correctly set out the legal position while holding that the requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. - HC
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Income deemed to accrue or arise in India - existence of Agency PE/ Fixed Place PE - Indian-Singapore Tax Treaty - applying the legal principle to the facts emerging on record, we hold that the assessee does not have any PE in India. Therefore, in absence of PE, the business profits of the assessee cannot be taxed in India. Accordingly, the additions made by way of attribution of profit to the PE in India deserve to be deleted. - AT
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Addition u/s 68 - accommodation entry - issue of shares for consideration other than 'cash' - "Adjustment by way of book entry" can only be in the case where there is already some liability/asset/entry in books of account's which is to be adjusted. However, in the instant case that was not the case. There was no entry subsisting in the books of account's which was adjusted.This was a fresh issue of equity shares for consideration other than cash, and was not issued against any of liability in the books of accounts. - additions confirmed - AT
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Revision u/s 263 by CIT - Addition u/s 68 r.w.s 115BE - Nothing stated in the pre-amended or post amended provisions of section 115BBE that where the assessee surrenders undisclosed income during search action for the relevant year, the tax rate has to be charged as per provisions of section 115BBE - the applicability of the amended provisions which prompted the PCIT to assume jurisdiction under section 263 is highly debatable issue - Revision order quashed - AT
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Unexplained cash credit u/s 68 - submission of assessee that he used to collect commission for sending the cash through his account to the relatives of various persons in Bihar - No such verification of fact if the amount deposited in the bank account of the assessee was withdrawn locally or such withdrawal was really made in Bihar or Eastern UP, as claimed by the appellant. Such facts of withdrawal could be cross verified from the banker of assessee. - Matter restored back - AT
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Addition u/s 56(2)(viib) - premium on issue of equity share - determination of FMV - The legal fiction has been created for definite purpose and its application need not be extended beyond the purpose for which it has been created. Bringing the premium received from holding company to tax net under these deeming fictions would tantamount to stretching provision to an illogical length and will lead to some kind of absurdity in taxing own money of shareholders without any corresponding benefit. - AT
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Exemption of leave encashment u/s 10(10AA)(ii) - AO directed to allow 100% exemption of leave encashment received on account of employment with Department of telecommunication u/s 10(10AA)(i) of the Act whereas for remaining amount the AO is directed to calculate the exemption u/s 10(10AA)(ii) - AT
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Addition u/s. 43B of the VAT payable - where the assessee had not charged VAT to its profit and loss account, then, despite the fact that the liability may still be unpaid it could not have been added u/s.43B of the Act as the same was not claimed as a deduction in the books of accounts. - AT
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Exemption u/s. 11 - Belated filing of income tax return (ITR) and form 10B - once return of income has been filed within the time prescribed u/s 139(4) of the Act, benefit of section 11 and 12 cannot be denied to the assessee by invoking the provisions of clause (ba) to sub section (1) of section 12A. - AT
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Revision u/s 263 - Accumulation of income u/s 11(2) - Deemed income accumulation - debatable issue - As categorically explained that deemed income charged u/s. 11(3) is in excess of income shown in its account. Thus, from both these circulars it can be seen that the exemption u/s. 11(1) is not available for the deemed income u/s. 11(3). - the view taken by LD AO is debatable therefore, the powers u/s. 263 of the act of the Ld. PCIT are ousted - AT
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Addition u/s 68 - Credit balance pertaining to sundry creditors - by disallowing only balance outstanding of these parties as at the end of the year, the Revenue has both accepted purchases as genuine with respect to balance that are not outstanding, while at the same time holding them to be ingenuine or bogus in relation to purchases whose balances are outstanding at that end of the year. The department has therefore taken a contradictory stand on the issue by disallowing only outstanding balances of sundry creditors finding them to be bogus. - AT
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Revision u/s 263 - income surrendered during the survey - Levy of tax u/s 115BBE a higher rate of tax - the impugned order at best can be said to attempting to make out a case of a debatable view, however, even then the order cannot be upheld. Revenue has failed to point out the error in the order accepting the surrendered income under the stated heads and hence, no prejudice can be said to be caused in the absence of any error in the order pointed out.- AT
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Addition u/s 68 - cash deposits in the bank accounts during the demonetization period - As far as non-reliance on books of accounts and other documentation so submitted by the assessee, we are of the considered view that the action of the lower authorities cannot be sustained. - Assessee has not just provided a reasonable explanation to explain the source of cash deposits but the said explanation has been adequately supported by adequate documentation - Additions deleted - AT
Customs
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Refund - duty was paid under protest or not - When he had found that the appellant was directed by the original authority to take steps for assessing the goods under Notification No.49/2008-CE(NT) dated 24.12.2008, he should also have examined whether there was a written acceptance of that direction by the appellant/ importer, in the absence of which the proper officer should have passed a speaking order within fifteen days of the date of assessment of the BE - AT
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Benefit of exemption of SAD - refund claims - the appellants have not challenged the order of assessment, as such, we have to hold that appellants are not eligible for the refund. The order of rejection of refund by the refund sanctioning authority is upheld. - AT
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Classification of goods - import of two seed processing lines for seed processing plant, each with an intake capacity of 10 tons per hour - partial shipment / part delivery - It is not in dispute that the order placed for supply would be complete only by including the goods imported vide both Bills of Entry. Merely because some parts were imported separately and cleared under a separate Bill of Entry, the department cannot contend that the goods cannot be classified under CTH 8437 - AT
Indian Laws
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Constitutional validity of the Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act, 2011 and Telangana Micro Finance Institutions (Regulation of Money Lending) Act, 2011 - NBFCs operating in the States of Telangana and Andhra Pradesh registered with the RBI would be excluded from the purview of the above two enactments. - HC
IBC
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Disciplinary Action against the Resolution Professional (RP) - Incorporation of partnership firm by the name ‘IBBI Insolvency Practitioners LLP’ - issuance of SCN on the ground that the RP had used the name ‘IBBI’ in the firm’s name - The Disciplinary Committee’s view does not deserve to be interfered with. The order has also already been given effect to by the MCA and the RP’s suspension period of three months as directed by the impugned order has already come to an end. - HC
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Approval of Resolution Plan - as the initiation of CIRP itself has been found to be tainted and faulty, and in addition, the subsequently constituted CoC is also found to include parties that are connected with each other and acting in concert with the corporate debtor and other parties, we are of the opinion that the interest of justice would be served if the admission order under section 7 passed by the Adjudicating Authority is quashed. - AT
PMLA
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Confiscation of property (on death of the accused) - The order of confiscation cannot be set aside merely on the ground that the accused had died before the trial could be held and the accused convicted of the charges. Whether there was merit in the plea for release of attached property is a question of fact which needs to be adjudicated by the Court concerned while hearing the petition under Sections 8(7) or 8(8). - HC
Service Tax
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SVLDRS - Benefit of the scheme Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - there are no material on record which could substantiate that the petitioner made effort to deposit the amount even on 22.06.2020, as alleged. - Petition dismissed - HC
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Refund of service tax paid - amount paid under mistake of law - Period of limitation - The tenor of the jurisprudence on the subject indicates that the limitation prescribed under Section 11B is not applicable to a refund claim in a situation where the concerned tax was never payable by the assessee. - AT
Central Excise
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Valuation of goods - freight charged separately in the sale invoices of excisable goods - The factory gate is the place of removal. Merely because the appellant is under obligation to deliver the goods at the buyer’s premises, the place of removal which is a factory gate cannot be extended and buyer’s premises cannot be made as place of removal. - the freight cannot be included in the assessable value - AT
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Refund of CENVAT credit post GST era - corresponding debit to the CENVAT credit account - impossibility compliance with the conditions of Notification No.27/2012 - The petitioner is entitled to and will receive the refund of the CENVAT credit in cash within a period of six weeks from date of receipt of a copy of this order. - HC
VAT
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Estimation of exempted turnover and taxable turnover - SAIL was unable to produce materials to show to what extent the canteen sales included sale of tax-free goods and first point tax paid goods - In the absence of SAIL producing records relevant to the issue, even in this Court, the estimation that 70% of the sales was of cooked food items and 30% of tea, coffee and snacks etc. cannot be said to be arbitrary. - HC
Articles
Notifications
News
Case Laws:
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GST
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2023 (3) TMI 790
Cancellation of GST registration of petitioner - case of the petitioner is that he has not been able to get the show cause notice issued by the respondent and, therefore, he could not submit the reply within the stipulated time - violation of principles of natural justice - HELD THAT:- The present petitioner is also entitled for the benefit of the order passed by this Court in (Technosum India Pvt. Ltd. Lucknow Vs. Union of India and others) [[ 2022 (9) TMI 1412 - ALLAHABAD HIGH COURT] ]. In the said judgment, the Court has held that the impugned order does not assign any reason whatsoever for cancelling registration of the petitioner and is passed only on the ground that reply to the show cause notice is not given. The non-submission of reply to the show cause cannot be a ground for cancellation of the registration. In view thereof, the present petitioner is also entitled for the same relief. The benefit of the order in Technosum India Pvt. Ltd. Lucknow shall also be made available to the present petitioner. The present petition is allowed.
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2023 (3) TMI 789
Validity of order issued u/s 73(9) with DRC-07 - Violation of principles of natural justice - opportunity of hearing not provided (audi alterem partem) - ex-parte order - Condonation of delay in filing appeal - appeal rejected on the ground of limitation after finding a delay of two month - rejection of Input Tax Credit Claim by the petitioner in Form GSTR3B - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, form an opinion that the order is bad in law. This we say so, for two reasons-(a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences; (c) Also the authorities not to have adjudicated the matter on the attending facts and circumstances. Petition disposed off.
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2023 (3) TMI 788
Validity of order issued u/s 73(9) with DRC-07 - Violation of principles of natural justice - allegation is that the impugned order is highly cryptic, misconceived, nonspeaking - ex-parte order - opportunity of hearing not granted - recovery of the amount of tax, interest and penalty - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, it is opined that the order is bad in law. This is for two reasons- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any reasons sufficient even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences. We also find the authorities not to have adjudicated the matter on the attending facts and circumstances. The impugned order as also Summary of the order in Form GST DRC-07 is set aside - petition disposed off.
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2023 (3) TMI 787
Classification of goods - rate of GST - supply of PVC floor mats (Cars) - whether the goods supplied by the applicant would merit classification under CTH 3918 or 8708? - HELD THAT:- Going by the tariff heading, section notes, chapter notes, HSN notes, already reproduced, it is opined that the goods merit classification under CTH 8708 - What is therefore excluded is similar goods as mentioned above of plastics falling under Chapter 39. As is evident, PVC floor mats, for four wheel motor vehicles, does not fall in the exclusion - Again it is evident that the floor mats for four wheel vehicles [cars] made of poly vinyl chloride [PVC] supplied by the applicant does not fall within the exclusion. The applicant's claim that his supply would fall under CTH 3918 by relying on the rulings of IN RE : M/S. SOFT TURF [ 2021 (7) TMI 752 - APPELLATE AUTHORITY FOR ADVANCE RULING, KERALA ] IN RE: NATIONAL PLASTIC INDUSTRIES LIMITED [ 2018 (8) TMI 1650 - APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA ] is not legally tenable. Thus, the impugned goods i.e. PVC floor mats for use in cars supplied by the applicant is classifiable under CTH 8708 applicable rate of GST would be 28%
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2023 (3) TMI 786
Reverse charge mechanism or not - purchase of raw tobacco from farmer (including naturally broken tobacco known as 'tobacco leaves or tobacco bhukko') - rate of tax in case of coating process is done on unmanufactured tobacco, if the applicant carried out the process of coating on the tobacco belonging to other person (job work basis) whether registered or otherwise. HELD THAT:- The entire process undertaken at the fanners end and at the applicant's end is discussed supra and is not being repeated for the sake of brevity. Of the two questions posed in Sr. No. 14, in Form GST ARA-01, we find that the first question is whether the applicant is liable to discharge GST under reverse charge mechanism [RCM], in case of purchase of raw tobacco [tobacco leaves or bhukko] from farmer. The applicant in his summary clearly states that according to them they are liable for GST under RCM @ 5% - in terms of Notification No. 4/2017-Central Tax (Rate), in case of intra state supply of tobacco leaves, falling under 2401 by an agriculturist to a registered person, GST is to be paid under RCM by the recipient. Now agriculturist is defined under section 2(7) of the CGST Act, 2017 to mean an individual or a Hindu Undivided Family, who undertakes cultivation of land by own labour, or by the labour of family, or by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family. Therefore, in case of purchase of tobacco leaves/bhukko from the agriculturist, the applicant is liable to pay GST on RCM basis at 5% [2.5% CGST and 2.5% SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 109 of Schedule 1. The applicant is liable to pay GST on forward charge basis at 5% [2.5% CGST and 2.5% SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 109 of Schedule I, subject to the condition that they are engaged in trading of tobacco leaves/bhukko, procured from agriculturist, on as such basis i.e. without undertaking any further process on the same. Rate of GST in case of sale/supply of coated tobacco broken leaves in gunny bag - HELD THAT:- The applicants case is that this coating of natural gum does not amount to manufacture as defined under Section 2(72) of the CGST Act, 2017. Under the CGST Act, 2017, it is found that manufacture is defined as processing of raw material/ inputs in any manner which results in emergence of a new product having a distinct name, character and use. The applicant has stated that no new product emerges post coating. The applicant has also relied upon case laws to substantiate his plea. Though the applicant has undertaken the above process of coating, consequent to the cleaning process, removal of unwanted substances thereafter cutting and grading of leaves procured from the agriculturist, in terms of the HSN notes, it still remains an unmanufactured tobacco. This is more so because even in terms of section 2(72) of the CGST Act, 2017, which defines manufacture, since no new product emerges post the coating process, we hold that the product is classifiable under CTH 2401 as ''unmanufactured raw tobacco leaves'. We further hold that the applicant is liable to pay GST at 28% [14 % CGST and 14 % SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 13 of Schedule IV. The applicant has also sought a ruling in respect of job work of coating done on the tobacco leaves by them in respect of tobacco leaves supplied by other registered persons. CBEC vide its circular No. 126/45/2019-GST has already clarified that entry at item (id) covers only job work services as defined in section 2 (68) of CGST Act, 2017, that is, services by way of treatment or processing undertaken by a person on goods belonging to another registered person. In terms of the said clarification we hold that the applicant is liable for payment of GST at the rate of 12 % (6% CGST and 6% SGST) in terms of notification No. 20/2019-C.T. (Rate), dated 30-9-2019 on the job work process of coating done in respect of tobacco leaves supplied by other registered persons.
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Income Tax
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2023 (3) TMI 785
Assessment u/s 153A - Valid Approval for assessment granted or not? - mandation of Approving Authority application of mind for giving approval u/s 153D - whether ITAT was correct in holding that the Approving Authority has not applied his mind for giving approval under Section 153D? - HELD THAT:- The mere repeating of the words of the statute, or mere rubber stamping of the letter seeking sanction by using similar words like see or approved will not satisfy the requirement of the law. This is where the Technical Manual of Office Procedure becomes important. Although, it was in the context of Section 158BG of the Act, it would equally apply to Section 153D - There are three or four requirements that are mandated therein, (i) the AO should submit the draft assessment order well in time . Here it was submitted just two days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind; (ii) the final approval must be in writing; (iii) The fact that approval has been obtained, should be mentioned in the body of the assessment order. In the present case, it is an admitted position that the assessment orders are totally silent about the AO having written to the Additional CIT seeking his approval or of the Additional CIT having granted such approval. Interestingly, the assessment orders were passed on 30th December 2010 without mentioning the above fact. These two orders were therefore not in compliance with the requirement spelt out in para 9 of the Manual of Official Procedure. The above manual is meant as a guideline to the AOs. Since it was issued by the CBDT, the powers for issuing such guidelines can be traced to Section 119 of the Act. It has been held in a series of judgments that the instructions under Section 119 of the Act are certainly binding on the Department. The Court finds that the ITAT has correctly set out the legal position while holding that the requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the ITAT that in the present cases such approval was granted mechanically without application of mind by the Additional CIT resulting in vitiating the assessment orders themselves. - Decided in favour of assessee.
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2023 (3) TMI 784
Transfer of case u/s 127 - transferring the Income Tax File of the petitioner from Kolkata to Lucknow - As argued order has been passed without providing any material to the petitioner on the basis of which such decision of transferring the file of the petitioner has been taken and without giving any opportunity of personal hearing in spite of his representation - HELD THAT:- Neither the materials as asked for by the petitioner nor opportunity of personal hearing was provided to the petitioner though in this case a show-cause- notice was issued to the petitioner to file objection to the impugned action of transfer of the petitioner s file but it is the case of the petitioner that he is not able to file any effective objection in view of non-providing of any materials for taking such action of transfer against the petitioner. As considering case of Nouvelle Advisory Services Private Limited [ 2023 (2) TMI 866 - CALCUTTA HIGH COURT ] this writ petition is disposed of by directing the respondent authority concerned to provide relevant documents to the petitioner indicating the basis for taking such order of transfer of the petitioner s file and to provide opportunity to file further objection, if such material is supplied and also to give opportunity of personal hearing to the petitioner, within eight weeks from the date of communication of this order.
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2023 (3) TMI 783
Reopening of assessment u/s 147 - as pointed out that the bank certificates relied upon by the Petitioner in the present proceedings had not bee annexed in the replies to the show cause notices issued under Section 148A(b) - HELD THAT:- This Court sets aside the orders passed u/s 148A(d) of the Act for the Assessment Years 2018-19 2015-16, the notices issued under Section 148 and directs the Petitioner to file supplementary replies before the Assessing Officer clearly stating that the transactions referred to in the notices issued under Section 148A(b) of the Act have been duly accounted for in the account of the sole proprietorship firm and have been offered to tax. Petitioner shall enclose all the relevant documents including certificates issued by the Canara Bank, income tax returns, bank statements as well as the assessment orders passed in the name of a sole proprietorship for the said assessment years, within two weeks.
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2023 (3) TMI 782
Income deemed to accrue or arise in India - existence of Agency PE/ Fixed Place PE - HELD THAT:- Issue decided in favour of assessee in the case of the assessee for the AY 2017-18 [ 2022 (5) TMI 674 - ITAT DELHI] wherein held no material has been brought by the departmental authorities to demonstrate that the Indian entity habitually exercises its authority to conclude contract etc. in terms of Article 5(8) or its activities are wholly devoted on behalf of the assessee. Thus, there cannot be any PE under Article 5(8) and 5(9) of the Indian Singapore Tax Treaty. Thus, applying the legal principle to the facts emerging on record, we hold that the assessee does not have any PE in India. Therefore, in absence of PE, the business profits of the assessee cannot be taxed in India. Accordingly, the additions made by way of attribution of profit to the PE in India deserve to be deleted. Decided in favour of assessee.
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2023 (3) TMI 781
Addition u/s 68 - accommodation entry - issue of shares for consideration other than 'cash' - assessee has not discharged his primary onus to prove that the sum credited in the books of accounts were related to F.Y. 2007-08 - HELD THAT:- As decided by CIT-A correctly onus to prove the three factum i.e. identity, creditworthiness and genuineness is on the assessee as the facts are within the assessee's knowledge. Mere production of copies of agreement with a number of persons without giving their PAN, source of income, IT details, bank statement is totally insufficient to prove the identity, creditworthiness and genuineness of transactions. Further, facts like non-maintenance of bank accounts, reliance only on self serving documents, Inability to produce the primary share allottees and present directors share holders, filing of forms and returns of earlier many years with ROC in FY 2015-16 gives conviction to uphold the findings of Ao. Adjustment by way of book entry can only be in the case where there is already some liability/asset/entry in books of account's which is to be adjusted. However, in the instant case that was not the case. There was no entry subsisting in the books of account's which was adjusted.This was a fresh issue of equity shares for consideration other than cash, and was not issued against any of liability in the books of accounts. We find that CIT(A) by well reasoned and detailed order and after considering the submissions of the assessee and for the reasons which have been reproduced hereinabove dismissed the appeal of the assessee. Before us assessee has not placed any material on record to point out any fallacy in the findings of AO and CIT(A). In such a situation we find no reason to interfere with the order of CIT(A) and thus the grounds of assessee are dismissed.
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2023 (3) TMI 780
Revision u/s 263 by CIT - Addition u/s 68 r.w.s 115BE - debatable issue - surrendered amount by the assessee during the survey proceedings is credited and the source of such credit is not explained - whether the amount surrendered during survey operation which has been shown in the return of income as business income be taxed as per the provisions of section 115BE - HELD THAT:- A perusal of section 115BBE shows that where the total income of the assessee includes any income referred to in sections 68, 69, 69A, 69B, 69C or 69D, the income tax payable shall be @ 30% on income so referred to in the said sections. Amended provisions of section 115BBE of the Act by Taxation Laws, Second Amendment Act 2016 provides that any income referred to in sections 68, 69, 69A, 69B, 69C, or 69D if such income is not reflected in the return of income furnished under section 139 of the Act, income tax payable shall be @ 60% on income so referred in the said section. Change which has been brought about in the provisions relates to income so referred to in the afore-stated sections so defined which is either not reflected in the return of income or determined by the assessing officer and in both the cases it will be covered by the provisions of section 115BBE and the rate of taxation has been increased from 30% to 60% on such specified income. Nothing stated in the pre-amended or post amended provisions of section 115BBE that where the assessee surrenders undisclosed income during search action for the relevant year, the tax rate has to be charged as per provisions of section 115BBE - Therefore, the applicability of the amended provisions which prompted the PCIT to assume jurisdiction under section 263 is highly debatable issue, and therefore, in our understanding of the law, the PCIT has wrongly assumed jurisdiction. Appeal of assessee allowed.
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2023 (3) TMI 779
Penalty u/s 271(1)(c) read with section 274 - defective notice - non specification of clear charge - whether it was issued to explain the charge of concealment of particulars of income or for furnishing inaccurate particulars of income? - HELD THAT:- In the instant case, AO in the assessment order initiated the penalty under section 271(1)(c) of the Act for concealing the particulars of income and furnishing inaccurate particulars of Income and thereafter issued the notices referred above u/s 274 read with 271(1)(c) of the Act without specifying any particular limb of the penalty and finally imposed the penalty for concealment of income only, on account of unsecured loan. The Hon'ble Apex Court in case of M/s. SSA's Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER] dismissed the Special Leave Petition filed by the Revenue against the judgment rendered by Hon'ble High Court of Karnataka whereby identical issue was decided in favour of the Assessee. In the case of Manjunatha Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court also held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clause would lead to an inference of non-application of mind by the Assessing Officer and levy of penalty would suffers from non-application of mind Thus in the present case AO has issued the notice referred to above under section 274 r.w.s. 271(1)(c) of the Act without specifying the limb under which the penalty proceeding has been initiated and proceeded with, apparently goes to prove that notice in this case has been issued in a stereotyped manner without applying mind which is bad in law, hence can not be considered valid notice sufficient to impose penalty u/s 271(1)(c) - Decided in favour of assessee.
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2023 (3) TMI 778
TP adjustment - payment of cost allocation charges towards Central Regional Support Services and Business Support Services - HELD THAT:- Once availing of various services from the associated enterprise is duly substantiated by the documentary evidence and the cost allocation among the group companies is also on the basis of a well-accepted allocation key method, we find no basis in upholding the transfer pricing adjustment made by the TPO/AO. Accordingly, the AO is directed to delete the transfer pricing adjustment on account of payment of cost allocation charges towards Central Regional Support Services and Business Support Services. As a result, grounds no.2 and 4 raised in assessee s appeal are allowed. TP Adjustment on account of payment of cost allocation charges towards Software Development and other IT services - HELD THAT:- As once availing of various services from the associated enterprise is duly substantiated by the documentary evidence and the cost allocation among the group companies is also on a cost-to-cost basis, we find no reason to uphold the transfer pricing adjustment made by the TPO/AO. Accordingly, the AO is directed to delete the transfer pricing adjustment on account of payment of cost allocation charges towards Software Development and other IT services. Ground no.3 raised in assessee s appeal are allowed. TP Adjustment on account of payment made for availing Investment Advisory Services - HELD THAT:- As it is evident that the assessee has not only proved the receipt of services from the associated enterprise but also provided the details of the benefit received by it from the Investment Advisory Services received from the associated enterprise. Therefore, in view of the above, we find no basis for upholding the transfer pricing adjustment made by the TPO/AO. Accordingly, the AO is directed to delete the transfer pricing adjustment on account of payment made for availing of Investment Advisory Services. As a result, ground no.5 raised in assessee s appeal is allowed.
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2023 (3) TMI 777
Estimation of income - profit on unaccounted sales - incriminating material against the assessee AOP - CIT-A estimating the income at 12.5% basing on the unaccounted sales arrived at by the AO - main contention of the assessee is there is no evidence in the seized material did not contain any evidence to show that the assessee AOP had received sale consideration over and above the amount mentioned in the books of accounts - HELD THAT:- It is an admitted fact that the impugned document does not contain the name of the assessee AOP and there is no evidence to establish that the AOP had received on money beyond the sale consideration mentioned in the documents. It is also an admitted fact that the AO has not specified the assessment year and the incriminating evidence related to the assessment year. During the course of search proceedings, the AOP premises were also searched, but they have not seized any incriminating material to establish that the assessee AOP has received sale consideration by way of on money beyond the sale consideration mentioned in the sale deed. In this case, admittedly the AO has not examined the purchasers, to establish whether the purchasers have paid any on money beyond the sale consideration mentioned in the sale deed - revenue failed to establish that the assessee AOP had received sale consideration over and above the sale consideration mentioned in the books of accounts. CIT(A) is also erred in estimating the profit at 12.5% on the addition made by the AO in the absence of any incriminating material against the assessee AOP - Decided in favour of assessee.
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2023 (3) TMI 776
Income taxable in India - Addition of salary income from Nepal - cash deposits in Andhra Bank of same amount - cash been deposited in high denominations of Rs. 500 and Rs. 1000 - AO invoked the provisions of Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 and has treated the amount of Rs. 2.16 Crs as income of the assessee - assessee argued same income cannot be taxed once again in India in the hands of the assessee it has already been taxed in Nepal - CIT-A deleted the addition - HELD THAT:- Considering the restrictions in bringing high denomination currency from Nepal has rightly concluded that these cash deposits are unexplained and has rightly added to the income of the assessee. The argument of the Ld. AR was that it was converted into low denomination currency at the boarders of India and Nepal could not be accepted in the absence of any valid evidence substantiating such conversion. CIT (A) deleted the addition stating that the assessee has already paid taxes in Nepal. The Ld. CIT(A) has failed to consider that Rs. 500/- and Rs. 1000/- (higher denomination notes) should not be brought from Nepal which is a violation under FEMA regulations. CIT(A) has erred in deleting the additions made by the Ld. AO. We are therefore of the considered view that the Ld. AO has rightly considered Rs. 2.16 Crs as income of the assessee under income from other sources and we therefore uphold the order of the Ld. AO on this Ground and set-aside the order passed by the Ld. CIT(A) on this issue.- Decided against assessee. Unexplained cheque deposits made in the bank account of the assessee - DR submitted that these cheque deposits were not explained before the Ld. AO and hence the Ld. AO has rightly treated the same as unexplained income of the assessee - AR has demonstrated before us regarding the cheque deposits made into the assessee s accounts from the joint account of the assessee along with his wife Smt. N. Sridevi - CIT-A deleted the addition - HELD THAT:- We find from the submissions made by the Ld. AR that these are cheque transfers either from the assessee s own account or from the joint account of the assessee along with his wife and we considered the sources being properly explained by the Ld. AR. No infirmity in the order of the Ld. CIT(A) on this issue as the Ld. CIT(A) has rightly allowed the same and therefore we do not wish to interfere with the order of the Ld. CIT(A) on this ground. Thus, this ground raised by the Revenue is dismissed. Unexplained income - difference amount received from the students on behalf of the Medical College in Nepal and the amount transferred to the Medical College in Nepal - HELD THAT:- Admittedly the assessee has collected an amount of by way of cheque and cash deposits including bank transfers during the impugned assessment year and has paid only partial amount to the Medical College, Nepal. AR also failed to submit the bank account of the assessee where the cash deposits was made by the assessee and linking the same with the account maintained for the purpose of collection from students for transferring it into Medical College, Nepal. In the absence of any valid substantiating evidence, the claim of the assessee, we are of the considered view that the Ld. AO has rightly treated the difference amount as the income of the assessee and the benefit of telescoping shall not be granted to the assessee - Decided against assessee. Complete scrutiny OR limited scrutiny - Validity of issuance of notice U/s. 143(2) of the Act for the purpose of making assessment U/s. 143(3) - HELD THAT:- From the plain reading of the above section we find that any return filed u/s. 139 or in response to a notice U/s. 142(1) of the Act can be selected for a scrutiny within six months from the end of the assessment year in which the return was filed by the assessee. Therefore, the issuance of notice U/s. 143(2) dated 24/1/2016 by the Ld. AO is well within the limits prescribed and hence the valid notice. It was also admitted by the Ld. AR that the assessee has participated in the assessment proceedings who has challenged only before the Ld. CIT(A) - CIT(A) has rightly dismissed the legal ground raised by the assessee. Unaccounted interest payment - AR submitted that the assessee has taken a secured over draft (SOD) from Andhra Bank, Tirupati and has paid interest on the same for the overdraft availed during the impugned assessment year - HELD THAT:- From the submissions of the AR we find that the assessee has taken a SOD facility from Andhra Bank, Tirupati for the purpose of construction of a house. SOD account is like a running current account of the assessee where the amounts credited into the SOD is adjusted against the interest in the overdraft account. We also find merit in the argument of the AR that whenever the amount exceeds the credit balance available in the account, it becomes an overdraft account for a short period until credits into the accounts are made by the assessee to regularize the overdraft facility - CIT(A) has rightly considered the interest payment and we do not find any infirmity in the order of the Ld. CIT(A) on this ground - Decided against revenue. Interest income treated as income from other sources - HELD THAT:- Interest earned by the assessee from the SB Account maintained by the assessee. This interest income was not disclosed while filing the return of income by the assessee for the impugned assessment year. CIT(A) has erred in considering the interest income as set off against the interest expenditure thereby giving benefit of double deduction to the assessee. We are therefore of the considered view that the AO has rightly considered the interest income as income from other sources and therefore we are inclined to uphold the order of the Ld. AO. Disposal of additional evidences by CIT-A - providing an opportunity to the Ld. AO as per Rule 46A of the IT Rules, 1962 for the additional evidence submitted - HELD THAT:- In the instant case, these bank transfers are either from the assessee s own account or from the joint account with her husband or from the assessee s husband s account. Therefore, it does not require any further enquiry by the AO and the Ld. CIT(A) has exercised his powers u/s. 250(4) of the Act and has rightly disposed off the additional evidence submitted before him. We therefore do not find any infirmity in the order of the CIT(A) on this issue also.
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2023 (3) TMI 775
Disallowance of depreciation claimed - adjustment made by the assessing authority s order u/s 143(1) - The main contention of the assessee is that the assessee has never claimed any exemption on cost of purchase of the asset - HELD THAT:- The assessment order is also silent on this aspect. Considering the above said fact, remit the matter back to the file of the AO to examine whether the assessee has claimed any exemption on cost of purchase of the asset, If the assessee has not claimed any exemption, then the assessee is entitled for depreciation. AO is directed to give opportunity of being heard to the assessee.
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2023 (3) TMI 774
Addition u/s 68 - Bogus investment in the share capital and share premium - CIT-A deleted the addition - HELD THAT:- Both the share applicants are duly assessed to tax and financial statements are audited, transactions have been carried out through banking channel and both share applicants have replied to the notices issued by ld. AO confirming the said transactions and also stated that they are part of the same group of companies, that for the transfer of shares of Shivalaya Ispat Power Pvt. Ltd., a Share Sale Agreement was entered into with Real Ispat and Power Ltd. and by carrying out the sale transactions the sale consideration received has been utilized for making the investment in the share capital and share premium of the assessee company. Reliance placed by the assessee on the various decisions and judgments referred in the paperbook extracted above also supports our view that under the given facts and circumstances, addition u/s 68 of the Act was uncalled for. We, therefore, under the given facts and circumstances of the case are satisfied that the assessee has properly explained the identity and creditworthiness of the share applicants and the genuineness of the alleged transactions and has also explained the source of source of the alleged sum received by the assessee. Thus, we do not find any reason to interfere in the finding of ld. CIT(A). Appeal filed by the Revenue is dismissed.
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2023 (3) TMI 773
Unexplained cash credit u/s 68 - submission of assessee that he used to collect commission for sending the cash through his account to the relatives of various persons in Bihar - As per CIT-A there was no exceptional situation in which the resident of India was unable to open a bank account specially for amounts like Rs. 10,000/- to Rs. 50,000/- as seen in this case - HELD THAT:- We find that the assessee has filed confirmation, bank statement and detailed written submissions to substantiate his contention. CIT(A) has not given any finding whether the additional evidence deserves to be admitted or required any consideration or not and straightway concluded that there was no exceptional situation in India for not opening a bank account. CIT(A) neither himself nor through AO made any verification of such facts or evidence produced by assessee. The primary contention of assessee is that the amount deposited in Surat was immediately or next day withdrawn in Bihar. No such verification of fact if the amount deposited in the bank account of the assessee was withdrawn locally or such withdrawal was really made in Bihar or Eastern UP, as claimed by the appellant. Such facts of withdrawal could be cross verified from the banker of assessee. Hence, additional evidence filed before ld CIT(A), was neither considered nor the application of the assessee under Rule-46A was rejected, therefore,admit the additional evidence filed by the assessee and restore the grounds of appeal to the file of assessing officer to decide the issue afresh - grounds of appeal raised by the assessee are allowed for statistical purpose. Validity of penalty levied u/s 271(1)(c) - Since we have restored the quantum appeal of the assessee to the file of Assessing Officer for deciding the issue afresh, therefore, order Of penalty under section 271(1)(c) will not survive.
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2023 (3) TMI 772
Addition u/s 68 - unexplained sundry creditors - sale of unquoted shares in the course of assessment in absence of identity, genuineness and creditworthiness of the purchaser/buyer companies - lack of genuineness and creditworthiness of the transactions in question - CIT-A deleted the addition - HELD THAT:- Nowhere in the course of assessment proceedings, any dispute has been raised about the transactions relating to purchase of equity shares made by the assessee during the preceding year. Neither the sale transaction has been disputed and only the consideration received against such sale of equity shares held as investment in current year has been disputed by the ld. AO. Since all the details necessary to prove the identity and creditworthiness of the sundry creditors and genuineness of the transactions for sale of equity shares stands filed, assessee has discharged the primary onus casted upon it and their correctness remains unrebutted by the ld. D/R. We fail to find any infirmity in the finding of fact given by the ld. CIT(A). Our view is further supported by the decision of this Tribunal in the case of Abdhut Vinimay Pvt. Ltd [ 2018 (10) TMI 1430 - ITAT KOLKATA] dealing with similar issue where investments were brought forward from the preceding year and were sold during the year and provisions of Section 68 was invoked by the Assessing Officer this Tribunal decided in favour of the assessee.
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2023 (3) TMI 771
Gross Profit addition - unaccounted sales - AO has applied Gross Profit on unaccounted sales at 3.36% - CIT-A deleted the addition - HELD THAT:- The Excise Authority had not concluded their proceeding pointing out the alleged unaccounted sales. It was just an investigation process, and out of which material was supplied to the Income Tax Authorities. What is the final outcome to such a material was not traced out by the ld. Assessing Officer. Even during the course of hearing before us, it was submitted by assessee that Excise Authorities have not made any addition. The assessee before the ld. 1st Appellate Authority put reliance upon the judgment of the Hon ble Gujarat High Court in the case of Principal CIT vs. Ganga Glazed Tiles Pvt. Limited [ 2019 (7) TMI 547 - GUJARAT HIGH COURT] as upheld the order of the ITAT, wherein additions have been deleted under identical circumstances. Thus a perusal of finding of the ld. 1st Appellate Authority extracted supra, we are satisfied that the ld. 1st Appellate Authority had made analysis in right perspective and there was no material possessed by the Revenue, which can demonstrate unaccounted sales made by the assessee in both the years. The additions have been rightly deleted by the ld. 1st Appellate Authority and we do not find any merit in these appeals, these are dismissed.
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2023 (3) TMI 770
Disallowance towards interest from the cost of acquisition of the capital asset - interest paid to the bank into consideration and computed indexed value on the same - C IT(A) has reversed the disallowance on account of interest on borrowed funds and held that such interest cost will form part of the cost of acquisition - HELD THAT:- We find that the reasons cited by the CIT(A) are sound and is in consonance with the judgment rendered by the Hon ble High Courts as well as the Co-ordinate Bench of Tribunal - See Mithlesh Kumari [ 1973 (2) TMI 11 - DELHI HIGH COURT] We thus see no reason to interfere. Significantly, the Finance Bill, 2023 has proposed certain amendment in this regard. On a reading of the Finance Bill, it appears that as per the existing position of law, some assessee claims deduction towards interest paid on borrowed capital utilized for acquisition of the property under Section 24(b) of the Act. The same amount of interest is also being claimed under Section 48 of the Act as part of cost of acquisition. The proposed amendment in Section 48 to prevent double taxation makes the existing position of law loud and clear. As a corollary, as per the existing position, the assessee is entitled to claim interest on borrowed capital used for acquisition of property as part of its cost of acquisition for the purposes of determination of capital gains. For this reason also, there appears to be no infirmity in the conclusion drawn by the CIT(A). Hence, we decline to interfere. Enhancement of cost of acquisition on account of loss of stamp paper - CIT(A) has allowed the cost of replacement of stamp paper since the stamp papers were purchased specifically for registration of flat and therefore, such amount was spent for acquisition of flat and hence forms part of the cost of acquisition. We find the reasoning given by the CIT(A) to be worthy of merit. CIT(A) has rightly found that the aforesaid cost is directly attributable to the cost of acquisition of flat proposed to be purchased jointly by the assessee and her husband which was later modified due to demise of the husband. We see no reason to interfere with the action of the CIT(A). Increase in the basic cost of flat - The cost of acquisition claimed by the assessee relates to the area eventually vested to the assessee. For the same reason, the Assessing Officer is also not justified to artificially reduce the cost of interest on delayed payment in proportion to the originally allotted area instead of increased area. We find ourselves in agreement with the observations made by the CIT(A) and hence see no merit in Grounds of the Revenue s Appeal.
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2023 (3) TMI 769
Addition u/s 56(2)(viib) - consideration received by the assessee towards premium on issue of equity share represents the fair market value or exceeds the fair market value - AO discarded the FMV method as per DCF method and replaced the same with the NAV method - addition with respect to change in the method of valuation - AO rejected the DCF methodology adopted by the appellant company for the purpose of arriving at the FMV of equity shares - Whether AO has rightly applied NAV methodology for determining the FMV of equity shares? - HELD THAT:- The legal fiction inserted by Section 56(2)(viib) seeks to deem premium received from subscribers being Indian entities in excess of Fair Market Value as the chargeable income in the hands closely held company issuing such share at premium in excess of its Fair Market Value. The assessee-company adopted DCF method for determination of Fair Market Value as per valuation report of the independent valuer filed to support and vindicate the share premium on issue of equity share. AO however found fallacy in the quantification of FMV so determined by DCF method and observed that the FMV determined as per DCF method is without any sound factual basis and the projected figures of the ensuing years widely vary with the actual figures reported and presently available at the time of assessment for Financial Years 2016-17 and 2017-18. The assessee company in the instant case has proceeded to issue equity shares at a premium to none other than its wholly owned holding company and that too on the basis of independent valuer report where FMV was determined as per DCF method which is one of the prescribed method for determination of valuation under Rule 11UA r.w. Section 56(2)(viib) - AO has disputed the DCF method on account of variation in the projected figures used by the valuer with the actual figures available subsequently at the time of assessment. The Assessing Officer discarded the FMV method as per DCF method and replaced the same with the NAV method which action runs totally contrary to the ratio laid down in Cinestaan Entertainment [ 2021 (3) TMI 239 - DELHI HIGH COURT] wherein the additions made under the deeming provisions of Section 56(2)(viib) made by the Assessing Officer were reversed. Section 56(2)(viib) creates a legal fiction whereby the scope and ambit of expression income has been enlarged to artificially tax a capital receipt earned by way of premium as taxable revenue receipt. Hence, such a deeming fiction ordinarily requires to be read to meet its purpose of taxing unaccounted money and thus needs to be seen in context of peculiar facts of present case. The legal fiction has been created for definite purpose and its application need not be extended beyond the purpose for which it has been created. Bringing the premium received from holding company to tax net under these deeming fictions would tantamount to stretching provision to an illogical length and will lead to some kind of absurdity in taxing own money of shareholders without any corresponding benefit. In totality, governed by the view taken by the Hon ble Delhi High Court as well as the Co-ordinate Bench in similar fact situation coupled with the fact of the issue of shares to its holding company, we are unable to see any infirmity in the first appellate order on the point under determination - Decided against revenue.
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2023 (3) TMI 768
Exemption of leave encashment u/s 10(10AA)(ii) - rectification order u/s 154 passed wherein exemption claimed on leave encashment was reduced to the extent of Rs. 3 lakh only - assessee had been in service under the Department of Telecommunication, Govt. of India and his stamps of appointment and pay-scale were governed by the Central Govt. Rules and assessee was absorbed in MTNL, a Govt. of India Undertaking, w.e.f 01.10.2000 vide order dated 19.01.2004 - HELD THAT:- Identical to the issue raised before coordinate bench of Mumbai ITAT in case of Shri Babul Patel vs. ITO [ 2019 (2) TMI 2069 - ITAT MUMBAI] where the issue was decided in favour of the assessee by observing as under: As per the provisions of section 10(10AA)(i) of the Act, the assessee is entitled for exemption on the amount of leave encashment of leave earned during the period before absorption in MTNL as per section 10(10AA)(i) of the Act as applicable to Central Govt. because before that date he was employee of Govt. of India that the Central Government. The amount of leave encashment in respect of leave accrued after absorption in MTNL will be governed by the exemption as per section 10(10AA)(ii) of the Act - facts are clearly in favour of assessee and for 263 days of leave as on the date of absorption was available to the assessee, which was earned and unutilized from Government service i.e. Central Government and will be governed by 10(10AA)(i) of the Act. The balance 37 days of leave earned is from MTNL and will be governed as per the provisions of section 10(10AA)(ii) of the Act. Accordingly, allow the appeal of the assessee and direct the AO to re-compute the exemption proportionately as directed above Before us, no material has been placed on record either by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside/stayed or overruled by the Higher Judicial Authorities. Before me, no material was placed on record to point out any distinguishing feature in the facts of the case of the assessee and case mentioned above. Thus, respectfully following the order the Mumbai Tribunal as mentioned/discussed above, we hereby directed the AO to allow 100% exemption of leave encashment received on account of employment with Department of telecommunication i.e. Rs. 6,85,115/- under the provision of section 10(10AA)(i) of the Act whereas for remaining amount the AO is directed to calculate the exemption as per the provision of section 10(10AA)(ii) of the Act. Thus, the ground of appeal raised by the Assessee is hereby partly allowed.
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2023 (3) TMI 767
Unexplained bank deposits - undisclosed income of assessee - non discharge of onus - HELD THAT:- Assessee has not proved that sum received from Shri Sunda Ram towards purchase of the property which was deposited in the bank account the source of cash deposit is not explained.CIT(A) has rightly dismissed the appeal of the assessee, that the assessee has failed to discharge the onus of proving in order to demonstrate the genuineness of the transactions As full facts and settled proposition of law, the assessee has failed to discharge the onus of cast earning with regard of creditworthiness of genuineness of transaction, hence we confirmed the order of the ld. CIT(A). Thus, the appeal of the assessee is dismissed.
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2023 (3) TMI 766
Addition u/s. 43B of the VAT payable - VAT tax liability was not paid on or before due date for furnishing of her return of income for the year under consideration u/s.139(1) - HELD THAT:- Hon ble High Court of Chhattisgarh in the case of Assistant Commissioner of Income Tax-1, Bhilai, Dist. Durg (C.G.) Vs. M/s. Ganapati Motors, Tax Case [ 2017 (4) TMI 1613 - CHHATTISGARH HIGH COURT] had held, that in a case where the assessee had not charged VAT to its profit and loss account, then, despite the fact that the liability may still be unpaid it could not have been added u/s.43B of the Act as the same was not claimed as a deduction in the books of accounts. No addition can be made of an assessee s unpaid VAT tax liability which was not charged to the profit and loss account, there is substance in the claim of the Ld. AR that there was no justification for the A.O to have disallowed u/s.43B VAT payable as the same was not charged to the latters profit and loss account. We say so, for the reason that as the aforesaid claim of the assessee was in conformity with the aforesaid judgment of the Hon ble Jurisdictional High Court in the case of M/s. Ganapati Motors [ 2017 (4) TMI 1613 - CHHATTISGARH HIGH COURT] therefore, the same by no means could have been dubbed as an incorrect claim and brought within the realm of the adjustments contemplated in clause (a) of Section 143(1) of the Act. Accordingly, the order of the CIT(Appeals) is set-aside and the addition made by the A.O of VAT payable is vacated. Appeal of assessee allowed.
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2023 (3) TMI 765
Exemption u/s. 11 - denied the claim of deduction on the ground that the assessee failed to furnish form 10B along with the return of income u/s. 139 as required under the Act - assessee contended that it is a charitable trust and cannot be taxed on gross basis simply on account of delay in filing of return of income since section 143 does not encompass within its scope to deny all expenses claimed by the assessee and tax income on gross basis only on account of delay in filing of return of income - HELD THAT:- As in SARVODAYA CHARITABLE TRUST case [ 2021 (1) TMI 214 - GUJARAT HIGH COURT] held that since assessee was a public charitable trust for past 30 years who substantially satisfied condition for availing benefit of exemption, assessee could not be denied exemption merely on bar of limitation to submit Form no. 10, especially, when legislature had conferred wide discretionary powers to condone such delay on authorities concerned. In the case of Jaya Educational Trust [ 2021 (7) TMI 773 - ITAT CHENNAI] ITAT held that where assessee had filed return of income within due date specified under section 139(4) and also filed Form No. 10 electronically before completion of assessment, assessee could not be denied exemption under section 11. Accordingly, in view of the above discussion, delay in filing Form 10-B would not have any impact on the assessee s claim of deduction u/s 11 and 12 of the Act. Whether delay in filing the return of income beyond the due prescribed date would impact the claim of exemption to the assessee under section 11 and 12 of the Act? - In the instant facts, the due date of filing of return of income u/s 139(1) of the Act was 15- 02-2021, while the assessee filed return of income on 18-03-2021. Accordingly, admittedly there is a delay in filing return of income on part of the assessee. However, the CBDT vide Circular CBDT F. No.173/193/2019 ITA I dated 23.04.2019 has clarified with regard to the time allowed for filing of the return of income subsequent to the insertion of clause (ba) in sub section (1) of section 12A of the IT Act which includes the IT return filed within the time allowed u/s. 139 of the Act. Notably, in the case of Conference of Religious India [ 2022 (10) TMI 1158 - ITAT DELHI] has held that benefit of exemption u/s. 11 of the Income Tax Act was available to the assessee as the income tax return was filed within the specified time limit of sub-section 139. Thus we are of the view that once return of income has been filed within the time prescribed u/s 139(4) of the Act, benefit of section 11 and 12 cannot be denied to the assessee by invoking the provisions of clause (ba) to sub section (1) of section 12A. Whether delay in filing return of income beyond time prescribed u/s 139(1) of the Act or delay on filing of Form 10-B, would disentitle the assessee to benefit of exemption u/s 11 of the Act in view of the language of section 13(9) - The impact of section 13(9) of the Act is restricted to sub-section (2) of section 11 of the Act, relating to amounts set aside for accumulation and scope of section 13(9) of the Act does not extend to whole of section 11 of the Act. Since, during the year under consideration, the assessee did not claim any benefit sub-section (2) of section 11 of the Act, in our considered view, section 13(9) of the Act would have no applicability to the facts of the instant case. Assessee appeal allowed.
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2023 (3) TMI 764
Addition u/s 68 - onus to prove - HELD THAT:- Hon'ble Supreme Court decisions in the case of Omar Salav Mohamed Sait .[ 1959 (3) TMI 2 - SUPREME COURT ] where it is held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull [ 1972 (9) TMI 9 - SUPREME COURT ] the Hon'ble Apex Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Hon'ble Supreme Court in the case of Umacharan Shah Bros. [ 1959 (5) TMI 11 - SUPREME COURT ] .held that suspicion however strong, cannot take the place of evidence. Respectfully following the above judgments of the Jurisdictional High Court and that of the Co-ordinate Benches of the Tribunal, we have no hesitation in confirming the order passed by ld. CIT(A) and deleting the additions made by the Assessing Officer u/s. 68 and u/s. 69C of the Act. Thus the grounds raised by the Revenue are devoid of merits and the same are liable to be rejected. Unexplained cash credit u/s. 68 - A.Y. 2012-13 - As addition made by the Assessing Officer invoking Section 68 does not hold it good, since the assessee has filed the confirmation letter from the lenders, Bank statements, Income Tax Return and statement of total income of the various lenders. Thus the assessee has discharged its initial onus namely identity of the creditors, genuineness of the transactions and creditworthiness of the creditors. Further the Assessing Officer has disbelieved the same, but has no occasion about the repayment of loans by the assessee in subsequent assessment years. Thus the creditworthiness of the lender is proved. It is not the case of the Assessing Officer that cash was deposited prior to giving loans to the assessee by the lender companies. It is a fact both the lender companies filed their respective Income Tax Return and assessed to tax, just because of the non-compliance of the notice and u/s. 133(6) does not make with the unsecured loans given by the creditors be treated as bogus. In fact both the creditors vide the respective letters dated 15.12.2017 replied to the Assessing Officer with the details namely loan confirmation accounts, bank statements, Income Tax Returns etc. Therefore the addition made by the Assessing Officer u/s. 68 of the Act is not sustainable in law. Revenue appeal dismissed.
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2023 (3) TMI 763
Penalty u/s. 271(1)(b) - assessee though not complied to the 142(1) notices - assessment order passed u/s.144 - reasonable cause for the said failure u/s 273B - HELD THAT:- As before completion of assessments, the assessee filed various details vide its letters dated 05.11.2018, 16.11.2018, 07.12.2018, 19.12.2018 and 20.12.2018. However submissions were not taken on record by the Assessing Officer and passed a best judgment assessment. Whereas when the assessee has filed so many details, AO ought not have passed the assessment order u/s. 144 of the Act, but ought to have passed the assessment order u/s. 143(3) of the Act. As stated by the assessee during the appellate proceedings, the entire additions made u/s. 144 assessment order is deleted by the CIT(A). Thus, the grievance made out by the assessee is found to be genuine and reasonable. In the above circumstances the levy of penalty under Section 271(1)(b) in our considered opinion is unwarranted. If the statutory provision shows that the word shall has been used in Section 271(1)(b), then the imposition of penalty would have been mandatory. Section 273B as noted further throws light on the legislative intent, as it specifically provides that no penalty shall be imposed, if the assessee proves that there was reasonable cause for the said failure . - Decided in favour of assessee.
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2023 (3) TMI 762
Addition of commission paid - Disallowing commission expenses - Transactions with Related Parties - HELD THAT:- AO was guided by the fact that since the payment have been made to related parties and the assessee has not furnished any satisfactory justification for payment to related parties, the same has been disallowed - AO was also guided by the fact that the initial agreement entered into by the assessee with M/s. UPL Ltd. does not allow any appointment of sub-agent by the assessee. On perusal of the order passed by the CIT(A), he has stated that the assessee has not filed any supporting evidence as to whether the commission has been paid through banking channel or whether any TDS has been deducted thereof and he therefore has gone ahead and confirmed the findings of the AO. Whether the initial agreement entered into between the assessee and M/s. UPL allows the appointment of sub agent or not? - In our view, irrespective of the terms of the said agreement which is a matter inter se between the two parties as to whether there is a breach of terms and condition of the agreement entered into, so long as the same is not considered as a breach of law of the land, what is relevant to consider is the factum of actual rendering of services by these three related entities and the corresponding payments made by the assessee and I find that there is no findings recorded by the lower authorities challenging the factum of rendering of services by these entities. All documentation are on record in terms of the copies of the agreement entered into, the invoices raised, the payments made through the banking channel, TDS done while making the payment, filing of the TDS returns and also the fact that the related entities have confirmed the same in their communication to the AO and have also the fact that they have offered the same in their respective tax returns. None of these documentation have been questioned by the lower authorities. Quantum of commission paid to these entities is concerned, the assessee has reasonably demonstrated before the lower authorities through third party data that these are comparable transaction and where the Revenue is to dispute the same, the evidence produced by the assessee needs to be rebutted by the bringing positive evidence on record and we find that there is no other comparable data which has been brought on record by the Revenue. Assessee has provided reasonable explanation alongwith supporting documentation to justify the incurrence of the commission expenses and therefore the addition so made by the AO and sustained by the Ld. CIT(A) is hereby directed to be deleted. Decided in favour of assessee.
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2023 (3) TMI 761
Penalty u/s. 271-D - sale proceeds of a specific flat were received in cash by the assessee on five different occasions - statutorily relief as specifically provided u/s. 273-B - HELD THAT:- The supporting argument for the justification in accepting cash on 5 different occasions canvassing that the assessee's action was prudent as she could not rely upon the purchaser to make payments by cheques which may or may not be honoured and as argued before FAA that getting the amount deposited by way of RTGS/Cheque in her Jagraon account and then travelling with cash withdrawn at Jagraon to Delhi to make purchases was considered to be unsafe/impractical and alternatively/simultaneously it is seen that as per record, it is also pleaded possibly that there was a limit of cash withdrawals from ATMs. These submissions on record even if canvassed by hind sight to justify that the assessee chose the simplest and surest way of accepting the sale proceeds in Delhi and used the same for making purchases in Delhi for the oncoming marriage of her daughter also in Delhi remain un-rebutted. Ignorance of law - As it is necessary to keep in mind the provisions of law invoked. The issue is not to be decided on the plea of ignorance of law and is to be considered under the umbrella provision of Section 273B of the Income Tax Act, 1961. Thus, the pleading that the assessee was in ignorance of law at best can be considered to be a submission so as to argue that it is not a case of willful and deliberate defiance of law on the part of the assessee. In this case admittedly the assessee has led sufficient explanations consistently on record with evidence which remains unrebutted to plead a reasonable cause. No doubt, what would constitute a reasonable cause cannot be specifically defined by any clear definition it is to be considered on the basis of all the possible factors which may come into play for the actions of the assessee. The very expression 'reasonable cause' itself cannot be satisfactorily defined for all purposes, times and situations. The simple dictionary meaning of 'reasonable' is fair, practical and sensible. Over a period of time, it has been seen that a reasonable cause is a standard of proof that is applied to a set of facts or actions to prove whether a reasonable person would have come to the same conclusion or acted in the same way given the totality of the circumstances. Thus, it can be fairly described as an exercise to determine whether a rationale basis for action taken is available on record or not. It may be necessary to also weigh judiciously whether the actions are excessive or moderate to address the situation. Applying these yardsticks, considering the consistent explanation available on record, we are satisfied that the assessee has successfully made out a case demonstrating that there was a reasonable cause for her to accept payments on the specific dates and thus, the bona fide explanation offered by the assessee in the peculiar facts of the present case - Decided in favour of assessee.
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2023 (3) TMI 760
Revision u/s 263 - Accumulation of income u/s 11(2) - Deemed income accumulation - debatable issue - whether income once accumulated u/s. 11(2) of the Act for capital expenditure was added to revenue u/s. 11(3) of the act can accumulate once again be claimed u/s. 11(2)? - HELD THAT:- The Hon'ble Calcutta High Court in the case of CIT vs. Natwarlal Chowdhury Trust [ 1989 (8) TMI 19 - CALCUTTA HIGH COURT] has held that the assessee is entitled to accumulate 15% of the total income which is inclusive of the deemed income specified under Section 11(3) of the Act. Thus, from the above judgment, it is transpired that the assessee can claim the benefit of accumulation even on the deemed income specified under the provisions of Section 11(3) of the Act. Assessee has already claimed the benefit of exemption under Section 11(2) of the Act with respect to the deemed income specified under Section 11(3) of the Act and if the same is allowed to accumulate again, then the assessee will be claiming the benefit twice and if the same continues, perennially. We find that the issue has been examined in Circular No. 29; R. No. 20/22/CS-IT(AI), dated 23.08.1360 and Circular 5P (LXX-6) of 1968 dated 19.06.1968. In the former Circular it is categorically mentioned that when the amounts are taxed u/s. 11(3) the benefit which would have been available to trust in respect of 25% of its income or Rs. 10,000/- u/s. 11(1) (a) would also be lost. In the later circular issue has been re-examined and legal position has been clarified stating that only the Income disclosed in the account will be eligible for exemption u/s. 11(1) and will be eligible for permitting accumulation of 25%. As categorically explained that deemed income charged u/s. 11(3) is in excess of income shown in its account. Thus, from both these circulars it can be seen that the exemption u/s. 11(1) is not available for the deemed income u/s. 11(3). The Bombay High Court in the case of Bajaj Auto Finance Ltd. [ 2018 (2) TMI 1716 - BOMBAY HIGH COURT] has also held that Once, reliance is placed upon a decision of a Court and/or Tribunal to make a claim, then even if the Assessing Officer has a different view and does not accept the view, yet the claim itself becomes debatable. As decided in MAX INDIA LTD. [ 2007 (11) TMI 12 - SUPREME COURT] where there are two views on an issue, if LD AO takes one of the views, it could not be said that order passed by him is erroneous and prejudicial to the interest of revenue. Therefore, the view taken by LD AO is debatable therefore, the powers u/s. 263 of the act of the Ld. PCIT are ousted - Decided in favour of assessee.
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2023 (3) TMI 759
Validity of reopening of assessment u/s 147 - non-serving of notice u/s. 148 - HELD THAT:- We find no merits in the arguments of the assessee for the simple reason that as per documents available with Assessing Officer, the notice u/s. 148 dated 31.03.2013 has been dispatched on the very same day and also served on the assessee within the reasonable time, which is evident from the Postal Department acknowledgment. Therefore, we reject the ground raised by the assessee on non-serving of notice within reasonable time. No fresh tangible material - We find that from the reasons recorded for re-opening of assessment, there is a live link to form reasonable belief of escapement of income and there is new material in the possession of the AO and thus, the arguments of the Ld. Counsel for the assessee that, there is no fresh tangible material is devoid of merits and thus, we reject argument of the assessee. Satisfaction from the Ld. CIT - We find that the Ld. CIT while granting approval for issue of notice u/s. 148 of the Act, categorically observed I am satisfied and it is a fit case for issue of notice u/s. 148 , on the basis of reasons submitted by the AO and in our considered view, said satisfaction constitute a valid satisfaction as required under law and thus, we reject argument of the assessee. Thus we reject arguments of the assessee on the issue of validity of assessment and thus, we uphold the findings recorded by the Ld. CIT(A) to uphold re-opening and consequent re-assessment order. Additions made on account of computation of capital gain by adopting full value consideration in terms of provisions of section 50C(1) - Although, the assessee has requested to refer the matter to DVO in terms of provisions of section 50C(2) of the Act, but the AO has proceeded with computation of capital gains and adopted full value of consideration in terms of provisions of section 50C(1) of the Act. In our considered view, once the assessee objects for adopting full value of consideration and requests for reference to DVO, it is the duty of the AO to refer the matter to the DVO and find out correct fair market value of the property as on the date of sale. Since, the AO has failed to comply with the requirements of law, we are of the considered view that the issue needs to go back to the file of the AO and thus, we set aside the issue to the file of the Assessing Officer and direct the AO to reconsider the issue of computation of capital gains and also refer the matter to the DVO to determine correct fair market value of the property as on the date of sale, and decide the issue in accordance with law. Appeal filed by the assessee is partly allowed for statistical purposes.
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2023 (3) TMI 758
Disallowance u/s. 40A(3) - unaccounted purchases - AR submitted that neither the Ld AO nor the CIT(A) have doubted the genuineness of the payment that it is for purchase of boulders but have invoked section 40A(3) only for the reason that the payments in cash under a single voucher were exceeding Rs.20,000/-. - As argue when the income declared during the course of search is based on estimation, then there cannot be a separate disallowance u/s. 40A(3) - HELD THAT:- Unaccounted purchases were the basis for estimation of the additional income and such unaccounted purchases were arrived at based on the purchase vouchers seized during the course of search We also notice that the same seized material has been used by the AO for analysing the payments made in excess of Rs.20,000 and accordingly to arrive at the disallowance u/s. 40A(3). The ratio laid down in the case of Banwarilal Bansidhar ( 1997 (5) TMI 37 - ALLAHABAD HIGH COURT] is that when the income of the assessee is computed applying the Gross Profit rate and when no deduction was allowed in regard to the purchases of the assessee, there was no need to look into the provisions of section 40A(3). From the table extracted in the earlier part of this order it is an undisputed fact that the additional income of the assessee is arrived at based on estimated profit rate without allowing any specific deduction towards purchases. Therefore, in our view, the ratio laid down by the Hon ble Allahabad High Court is applicable to assessee s case and respectfully following the same, we hold that no separate disallowance u/s. 40A(3) can be made in assessee s case. The disallowance made by the AO for all the assessment years is deleted.Appeals are allowed in favour of the assessee.
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2023 (3) TMI 757
Addition u/s 68 - Credit balance pertaining to sundry creditors - Whether credit balance pertaining to sundry creditors could not be added back under section 68 of the Act as unexplained credits.? - HELD THAT:- Assessee had filed names, addresses and copies of the bills,and also established the fact of payments made to these parties through banking channels. Revenue does not challenge the above except for the fact that the bills raised by these sundry creditors appear to be manipulated or bogus and the reason /basis for arriving at this finding by the AO is that the bills were found to be identical in pattern and in common hand writing. For this reason they were found by the AO to be not reliable piece of evidence for granting relief. Department s plea is also that no third party evidence confirming the advance outstanding was filed by the assessee. Admittedly all these sundry creditors pertain to purchases made by the assessee during the course of carrying on its business and that out of total purchase AO had disallowed approximately 50% of the purchases - there is no analysis before us as to whether this outstanding balance of sundry creditors pertained to purchases made during the year alone or reflected a part of the opening balance also. AO had disallowed balance outstanding of the sundry creditors relating to the business of the assessee for the reason that their bills appeared to be bogus, and there was no confirmation of their outstanding balance. AO has not specified the provision of law under which the addition has been made as noted by the Ld.CIT(A) - But having said so we find that on any count the addition was not sustainable as rightly held by the Ld.CIT(A) also. By disallowing only balance outstanding of these parties as at the end of the year, the Revenue has both accepted purchases as genuine with respect to balance that are not outstanding, while at the same time holding them to be ingenuine or bogus in relation to purchases whose balances are outstanding at that end of the year. The department has therefore taken a contradictory stand on the issue by disallowing only outstanding balances of sundry creditors finding them to be bogus. - Decided against the revenue. Treating the purchases as bogus , even otherwise can attract disallowance only of purchases made during the year. If the outstanding balances contain the balance relating to the preceding year, the addition of these opening balance cannot be made by treating the purchases of the current year to be bogus. The disallowance pertaining to opening outstanding balances can be made only in the year in which the purchases relating to them are booked by the assessee; On the invocation of section 68 of the Act for unexplained credit balances deemed to be income of the assessee, addition on this account in any case could have been made only of balances pertaining to the impugned year. Invocation of section 41(1) of the Act for cessation of liability could not have been possibly done on balances pertaining to the impugned year considering the very short period of the liability for treating it as ceasing to exist. AO has neither specified the section being invoked for making the disallowance nor isthere any analysis of the outstanding balances as relating to the current year and the preceding years. Therefore the addition is held not sustainable on these counts also. We agree with the ld.CIT(A) that the assessee had discharged its onus of establishing genuineness of these sundry creditors having furnished all details relating to the sundry creditors and also establishing the fact that the payment to all of them was made through banking channel,which fact has not been controverted by the Revenue. The Revenue s case for holding them as non-genuine rests only on account of bills of these parties appearing to be manipulated. No exercise however has been carried out by the Revenue to confirm this aspect from an expert. Therefore, on merit also considering specific finding of theld.CIT(A) regarding assessee s discharging its onus of establishing genuineness of these sundry creditors by furnishing relevant documents being undisturbed, we see no reason to interfere in the order of the ld.CIT(A) holding sundry creditors to be genuine. Even otherwise from the facts as noted by us, the Revenue has attempted to hold approximately 50% of the purchases made by the assessee as bogus, resulting in GP increasing by 50%, which is highly improbable figure in any line of business. Therefore, on all the above counts, we hold that the ld.CIT(A) is justified in treating the sundry creditors to the extent of Rs.1.19 crores as genuine.Ground No.1(a) to (c) raised by the Revenue are accordingly dismissed Addition pertaining to unsecured loans - CIT-A deleted the addition - HELD THAT:- CIT(A) has deleted the addition with respect to the aforesaid unsecured loans finding that all necessary details and confirmation of the parties was filed by the assessee and nothing adverse was found by the AO. CIT(A) has also, we have noted, dealt with the remand report of the AO wherein he had noted no information, details or confirmations being filed with respect to the said parties, stating that the AO had incorrectly noted the said facts. DR was unable to controvert this factual finding of the ld.CIT(A) that the assessee had furnished all necessary details and evidences to establish genuineness of the unsecured loans relating to the aforesaid three parties with evidences. In view of the above, we see no reason to interfere in the well reasoned order of the ld.CIT(A).Ground no.2 raised by the Revenue is dismissed. Discrepancy in totaling of opening balance - plea of the Revenue is that there is a calculation error with respect to the opening balance made by the ld.CIT(A) - HELD THAT:- Both the parties agreed that the issue may be restored back to the AO to verify the facts, and thereafter allow relief to the extent of correct opening balance. In view of the above, this issue is restored back to the AO with the direction to verify the total of the opening balance of the Annexure-C and grant relief to the assessee to the extent of the same only. Ground No.3 is allowed in above terms. Unsecured loans/advances for booking deposits from one Shri Amarsinh - HELD THAT:- As assessee has been unable to discharge its onus under section 68 of the Act with respect to the amount of advance of Rs.70,000/- received from Amarsinhbhai.The order of the ld.CIT(A), therefore, upholding the addition of Rs.70,000/- is,we hold,justified calling for no interference. The ground raised by the assessee in this regard is dismissed. Disallowance of building construction expenses - HELD THAT:- Assessee was unable to controvert the factual finding of the ld.CIT(A), though he vehemently argued before us that the expenses were genuine. In view of the same, we see no reason to interfere in the order of the Ld.CIT(A) upholding the disallowance of building construction expenses. Disallowance of motor car depreciation - allowable business expenditure - HELD THAT:- CIT(A) had confirmed the disallowance as assessee was unable to establish with evidence that motor vehicle was wholly and exclusively used for the purpose of business of the assessee and also for the reason that the assessee had claimed depreciation at a higher rate of 50% on Toyota car which rate of depreciation is allowable only on commercial vehicles and the assessee unable to establish that the said vehicle was commercial vehicle. The ld.AR was unable to controvert the factual finding of the ld.CIT(A) - ground raised by the assessee in this regard is dismissed.
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2023 (3) TMI 756
Revision u/s 263 - income surrendered during the survey - As per CIT why u/s 115BBE a higher rate of tax should not be imposed on the surrendered income? - HELD THAT:- In the facts of the present case, information from the assessee on the queries raised by the AO have both moved to and fro through the ITBA portal and thus, what enquiries were raised by the AO and what responses were made by the assessee is a fact not open to manipulation and is available. On going through the submissions and the facts on record, we find that these queries raised and replies made were always available to the ld. PCIT also. No case has been built referring to any material how the order can be said to be erroneous on facts. The Revisionary powers in the facts of the present case is clearly an attempt to re-look at the very same information. This action as per settled legal position is barred under the Revisionary powers. The view taken by the AO after carrying out due and relevant enquiries and considering the responses of the assessee is not shown to be an erroneous view. There are many orders of the Co-ordinate Benches supporting the view taken by the AO. At this stage, to argue that this was not the business income of the assessee and was amenable to tax under the deeming head and thus, Section 115BBE de-hors facts cannot be accepted. On facts, a conscious and reasonable possible view has been taken by the AO. Thus, merely because the view is not to the liking of the ld. PCIT by itself cannot make the order passed by the AO as an erroneous order. We find that the reliance placed upon by the ld. CIT-DR on the decision of the jurisdictional High Court in the case of Kim Pharma (P) Ltd. ( 2013 (1) TMI 495 - PUNJAB AND HARYANA HIGH COURT ] is misplaced. On a consideration of the peculiar facts, circumstances and position of law, we find that the impugned order at best can be said to attempting to make out a case of a debatable view, however, even then the order cannot be upheld. Revenue has failed to point out the error in the order accepting the surrendered income under the stated heads and hence, no prejudice can be said to be caused in the absence of any error in the order pointed out. We may refer here to the decision in the case of PARASHURAM POTTERY WORKS CO. LIMITED 1976 (11) TMI 1 - SUPREME COURT] - The Revisionary Authority cannot seek to re-look at the very same information in order to arrive at a different view. The error and the prejudice caused has to be set out in the order. A valid order after due enquiries has been passed. The power cannot be exercised arbitrarily. The argument that the assessee is still free to argue before the AO in case the impugned order is upheld, we find cannot be accepted. Accordingly, we direct that the impugned order be quashed. Appeal of the assessee is allowed.
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2023 (3) TMI 755
Addition u/s 68 - cash deposits in the bank accounts maintained by the assessee during the demonetization period - Test of reasonableness of the explanation - HELD THAT:- Test of reasonableness of the explanation has to be examined in the context of nature of business and other financial dealings of the assessee and how the assessee has maintained documentation in that regard. There cannot be a uniform test which can be applied in each and every situation. Where there is no statutory mandate to get the books of accounts audited, insisting that the books of accounts or for that matter, the cash book is not audited and consequent cash flow statement is not reliable, we find that it is a case where the authorities have not been reasonable in their expectation rather than the case where the assessee has not provided a reasonable explanation. Where the books of accounts, cash book and other documentation so exist and produced for verification, the authorities are well within their right and jurisdiction to examine the same and point out the defects and inaccuracies which may come to their notice. As far as non-reliance on books of accounts and other documentation so submitted by the assessee, we are of the considered view that the action of the lower authorities cannot be sustained. Assessee has submitted copies of balance sheet and profit/loss account of M/s G K Resorts as well as copy of capital account in name of the assessee which is maintained in the books of M/s G K Resorts and we find that the entries therein demonstrate withdrawal of capital by the assessee and the explanation regarding receipt of cash by way of withdrawal from his capital account therefore deserve to be accepted. Assessee has not just provided a reasonable explanation to explain the source of cash deposits but the said explanation has been adequately supported by adequate documentation and in the entirety of facts and circumstances of the case, the addition so sustained by the ld CIT(A) are hereby deleted - Decided in favour of assessee.
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2023 (3) TMI 729
Employee s contribution towards provident fund and ESIC which was paid beyond the period prescribed - disallowance in terms of section 143(1) - As argued auditors did not specifically mention in the audit report regarding inadmissibility of claim with respect to contributions received from the employees for various funds as referred to in section 36(1)(va) - HELD THAT:- Once the auditor has mentioned the actual dates of ESI/PF remittance and the due dates of ESI/PF remittance by the assessee u/s 36(1)(va) of the Act at serial number 20(b) of the audit report, then, in our considered view, the requirement of section 143(1) of the Act viz. disallowance of expenditure .indicated in the tax audit report stands satisfied and the Department is permitted to make disallowance in terms of section 143(1) of the Act. Debatable issue - As decided in Checkmate Services Private Ltd [ 2022 (10) TMI 617 - SUPREME COURT] non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was not part of assessee-employer's income, thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. As recently Pune ITAT in the case of Cemetile Industries [ 2022 (12) TMI 354 - ITAT PUNE] held that where assessee-employer deposited amount of employees contribution towards employees' provident fund and employees' state insurance corporation beyond due date stipulated in respective Acts, disallowance made under section 36(1)(va) was justified. ITAT further held that adjustment under section 143(1)(a) by means of disallowance made for late deposit of employees' share to relevant funds beyond date prescribed under respective Acts was proper. Respectfully following the decision of Checkmate Services Private Ltd [ 2022 (10) TMI 617 - SUPREME COURT] and Harrisons Malayalam Ltd [ 2023 (1) TMI 137 - SC ORDER] and in the light of our observations, we hereby dismiss the assessee s appeal.
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Customs
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2023 (3) TMI 754
Eligibility for benefit of exemption under Notification No.06/2006-CE (Sl. No.84) - imported goods (Tubular Tower) are parts of the Wind Operated Electricity Generator or not - HELD THAT:- As per list 5 wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller are eligible for exemption. The issue as to whether towers form part of WOEG was considered by the Tribunal in the case of HYUNDAI UNITECH ELECTRICAL TRANSMISSION LTD. VERSUS CCE., NAGPUR [ 2005 (7) TMI 129 - CESTAT, MUMBAI ] where it was held that When the exemption in respect of the excise duty is granted to the parts of the wind operated electricity generator at the time of clearance from their factory and the Tribunal having held that the tower is a part of wind operated electricity generator, ratio of the above decision of the Tribunal squarely applies t the facts of the present case. Undisputedly, the goods manufactured by the appellants and cleared by them were meant for wind operated electricity generator, being tower material and, as such, were entitled to the benefit of Notification 6/2000. Thus the appellant is eligible for the benefit of exemption as per the Notification No.6/2006-C.E. - appeal allowed.
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2023 (3) TMI 753
Levy of of additional duty - seeking a direction to the Assistant Commissioner to refund the excess duty collected - rejection of appeals on the ground that the duty was not paid under protest nor the Bills of Entry have been assessed provisionally - HELD THAT:- During the relevant time, after an importer files a Bill of Entry (BE) under section 46 of the Customs Act, 1962 (Act) for the goods imported by him, it shall as per section 17(1) be examined and tested by the proper officer. As per 17(2) after such examination and testing, the duty, if any, leviable on such goods shall, save as otherwise provided in section 85, be assessed by him. While as far as the description of the goods, quantity, value etc. are concerned, the importer is bound to state the truth in the BE, it is left to the proper officer to assess the goods to duty. Assessment means determination of the tax liability. While an importer can make a claim for exemption under any notification he feels is applicable to his goods, it is left to the proper officer to examine that claim, accept or reject it or to assess the goods to duty based on a provision not factored by the importer in the BE. In case the proper officer does not agree with the claim for exemption made by the importer or he seeks to impose duty not factored in the BE filed by the importer, he can resort to finalizing the assessment as provided for in section 17(5) of the Act. This being so it was for the Learned Commissioner ((Appeals) to examine whether the provisions of the said section had been satisfied. When he had found that the appellant was directed by the original authority to take steps for assessing the goods under Notification No.49/2008-CE(NT) dated 24.12.2008, he should also have examined whether there was a written acceptance of that direction by the appellant/ importer, in the absence of which the proper officer should have passed a speaking order within fifteen days of the date of assessment of the BE - Without a written acceptance it could not have been concluded by the Learned Commissioner (Appeals), that since the appellants have cleared the goods on payment of duty as suggested by the proper officer, they have accepted the assessment of the BE. Matters remanded back to the original authority to pass a speaking order as contemplated under section 17(5) of the Customs Act, 1962.
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2023 (3) TMI 752
Benefit of exemption of SAD - refund claims filed were rejected as premature by the Assistant Commissioner of Customs (Refunds) as there was no challenge of assessment done in terms of the Hon ble Apex Court decision in the case of PRIYA BLUE INDUSTRIES LTD. VERSUS COMMISSIONER OF CUSTOMS (PREVENTIVE) [ 2004 (9) TMI 105 - SUPREME COURT] - Applicability of N/N. 51/96-Cus dated 23.07.1996 for import of various scientific and technical instruments during June, 2011 to August 2011 - excess duties paid are refundable or not without challenging the self-assessment or order of the assessment of the bills of entry as found in this appeal. HELD THAT:- The issue is covered in the assessee s own case NATIONAL INSTITUTE OF OCEAN TECHNOLOGY VERSUS COMMISSIONER OF CUSTOMS (AIR) , CHENNAI [ 2015 (4) TMI 198 - CESTAT CHENNAI ] where it was held that In absence of any description and nomenclature of additional duty in the notification there cannot be any interpretation otherwise possible to deprive the appellant from exemption of additional duty of Customs. In view of the clear mandate of the notification to exempt additional duty of customs, the goods imported are eligible to the exemption from additional duty of customs thereon. Non-challenge to the order of assessment against the bills of entry - HELD THAT:- The Tribunal has held in the case of M/S. FRESENIUS MEDICAL CARE INDIA PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS - IV CHENNAI [ 2018 (7) TMI 103 - CESTAT CHENNAI] has held that the Court noticed that it was always not necessary to have an order of assessment for a person to claim refund of duty. The initial payment of duty in terms of Section 27(1)(i) of the Act could be pursuant to an order of assessment or in terms of Section 27(1)(ii) of the Act could be borne by him. However, it is noted that the Hon ble Apex Court in the case of ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT] has held that the assessment order including self-assessment needs to be challenged to become eligible for refund. In this case, the appellants when applied for refund, the refund sanctioning authority has communicated vide their letter F. No. S25A/ Gen/27/2010-Ref (Air) dated 16.09.2011, that the order of assessment cannot be reviewed or modified in terms of the Hon ble Apex Court decision in the case of M/s. Priya Blue Industries Vs. Commissioner of Customs. Refund would arise only if the order is reviewed, modified or revised. The decision of the Hon ble Apex Court in ITC Ltd. Vs. Commissioner of Central Excise, Kolkata-IV set aside the decisions in the case of AMAN MEDICAL PRODUCTS LTD. VERSUS COMMISSIONER OF CUSTOMS, DELHI [ 2009 (9) TMI 41 - DELHI HIGH COURT] and MICROMAX INFORMATICS LIMITED VERSUS UNION OF INDIA OTHERS [ 2016 (3) TMI 431 - DELHI HIGH COURT] . Thus, there is no need to decide about the eligibility of the appellant for SAD exemption under Notification No. 51/1996 was issued on 23.07.1996. Further, the facts in this appeal clearly indicate that the appellants have not challenged the order of assessment, as such, we have to hold that appellants are not eligible for the refund. The order of rejection of refund by the refund sanctioning authority is upheld. Appeal dismissed.
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2023 (3) TMI 751
Classification of goods - import of two seed processing lines for seed processing plant, each with an intake capacity of 10 tons per hour vide two Bills of Entry, among the Bills of Entry, the second Bill of Entry was for partial shipment / part delivery - respondent classified the goods under CTH 8437 as applicable to seed processing machine - adjudicating authority observed that the respondent has not complied with the procedure under Public Notice No.91/87 as applicable for such partial shipment - HELD THAT:- The department has denied the classification adopted by the respondent (CTH 8437), as rightly discussed by the Commissioner (Appeals), it is not stated either in the show cause notice or in the Order-in-Original as to what would be the correct classification if the goods are not to be classified under CTH 8437. The demand has been raised by denying the classification to under CTH 8437. The Commissioner (Appeals) has analyzed the said issue and held that Only, when the goods, which were other than the complete machinery, imported separately without accompanying the main machinery, there can be a doubt that it can be put to more than one use and cannot be considered to be classified under CTH 8437 and should be classified under the respective heading of its individual description, material of make etc. Last but not the least, the whole consignment imported vide two bills of entry put together formed two processing lines for processing seed can be confirmed from the jurisdictional Central Excise authorities. The other allegation raised by the department is that the respondent has not followed the procedure laid down in Public Notice No.91/87. The said issue has also been analyzed by the Commissioner (Appeals) holding that Probably for the reason that the consignment might have been received under two IGM numbers, the appellant filed two bills of entry for clearing the same. Further, that may be the probable reason, the appellant might have not followed the procedure laid down under PN No.91/87 as the consignment was cleared together though vide two bills of entry. There is a valid point in the contention of the appellant in this regard. It has to be seen that the proforma invoice shows the import of composite unit comprising of two seed processing lines. It is not in dispute that the order placed for supply would be complete only by including the goods imported vide both Bills of Entry. Merely because some parts were imported separately and cleared under a separate Bill of Entry, the department cannot contend that the goods cannot be classified under CTH 8437. There are no reasons to interfere with the decision arrived at by the Commissioner (Appeals) - appeal filed by Revenue dismissed.
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2023 (3) TMI 750
Refund of Special Additional Duty (SAD) - rejection of part amount observing that appellant has not satisfied the requirement as stipulated in para 2 (b) of the notification (endorsement as required under para 2(b) of the notification was not made, and in the invoices it was handwritten that credit is not admissible on SAD ). Whether the appellant is eligible for refund even though the requirement under condition 2(b) of the Notification No.102/2007-Cus. dated 14.09.2007 has not been complied? HELD THAT:- It is not disputed that the appellant-importer is a trader. In CHOWGULE COMPANY PVT LTD VERSUS COMMISSIONER OF CUSTOMS CENTRAL EXCISE [ 2014 (8) TMI 214 - CESTAT MUMBAI (LB)] , the Larger Bench has decided the issue holding that A trader-importer, who paid SAD on the imported .good and who discharged VAT/ST liability on subsequent sale, and who issued commercial invoices without indicating any details of the duty paid, would be entitled to the benefit of exemption under Notification 102/2007-Cus., notwithstanding the fact that he made no endorsement that credit of duty is not admissible on the commercial invoices, subject to the satisfaction of the other conditions stipulated therein. Thus, the rejection of refund cannot be justified - the appellant is eligible for refund - appeal allowed.
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Corporate Laws
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2023 (3) TMI 749
Oppression and Mismanagement - non-speaking order - misguided attempt to scuttle proceedings brought by the Respondent before the NCLT - HELD THAT:- Since this Tribunal in Company Appeal (AT) No. 99 of 2021 sets aside the impugned order dated 03.03.2021 passed by the NCLT, Ahmedabad Bench in C.P. No. 100 of 2018 whereby the NCLT allowed withdrawal of withdrawal pursis made in C.P. No. 100 of 2018, consequently, the C.P. No. 100 of 2018 and the withdrawal of withdrawal pursis has to be heard and decided by the NCLT afresh. Thereby this Tribunal is of the view that the C.P. No. 100 of 2018 and its continuum was suspended until the issue of withdrawal of withdrawal pursis is decided. That being so, the passing of interim order in such a situation may not be appropriate. The order of NCLT set aside - appeal allowed.
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Insolvency & Bankruptcy
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2023 (3) TMI 748
Disciplinary Action against the Resolution Professional (RP) - Incorporation of partnership firm by the name IBBI Insolvency Practitioners LLP - issuance of SCN on the ground that the RP had used the name IBBI in the firm s name - violation of Section 208 of the IBC read with Regulation 7(2)(a) and 7(2)(b) of the 2016 Regulations - HELD THAT:- This Court is of the opinion that the RP could not have used the name IBBI for his own private entity which would amount to misleading the trade and industry, as also the stakeholders who are involved in resolution and insolvency processes. The Disciplinary Committee s view does not deserve to be interfered with. The order has also already been given effect to by the MCA and the RP s suspension period of three months as directed by the impugned order has already come to an end. The writ petition is dismissed.
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2023 (3) TMI 747
Approval of Resolution Plan - illegal constitution of the CoC by including related parties - Appellant HIL has thus claimed that the Impugned Order was passed by the Adjudicating Authority without considering the information regarding the presence of related parties in the CoC and fraudulent initiation of CIRP placed by HIL on record, whereas the order approving the resolution plan should have been passed with complete satisfaction of the Adjudicating Authority as required under section 31, read with section 30(2) of the IBC. Was the financial loan claimed in default of payment in the application under section 7 of IBC filed by the financial creditor Nandakini Contractors Pvt. Ltd., a loan that could qualify as financial debt under IBC and appropriate for initiation of CIRP against the corporate debtor? - Was the admission of section 7 application and consequent initiation of CIRP against the corporate debtor in accordance with the legal requirements and provisions of the IBC? - HELD THAT:- While the financial creditor Nandakini has claimed a financial debt, evidently there is no document included in the Form 1 application in proof of any loan agreement and/or disbursement of the said loan. A purported proof of the disbursement of the said loan has been filed by the corporate debtor in the form of its balance sheet, but notably there is no balance sheet or ledger account of the financial creditor for the same financial year showing such a loan. We further find that no document or record regarding entries in the banker books in accordance with the Bankers Book Evidence Act, 1891, which are required to be furnished by the financial creditor along with Form 1 application under section 7 was filed by the Nandakini - The financial creditor did not either submit any document or record regarding the financial loan and/or its disbursement, but only relied on letters ostensibly sent by the financial creditor demanding repayment of the alleged loan and two letters dated 9.2.2019 and 22.2.2019 which was found convincing and worthy of satisfaction by the Adjudicating Authority. The letter dated 22.2.2019 has been considered as admission of loan and default of repayment by the Adjudicating Authority. In the absence of any document evidencing the loan agreement placed on record by the financial creditor, the only indirect proof of purported loan is contained in the letters dated 15.4.2018 and 9.2.2019 sent by the financial creditor to the corporate debtor, wherein no specific amount of dues either in principal or interest payable to the financial creditor is mentioned - the admission order under section 7 of IBC passed by the Adjudicating Authority stands on shaky foundation. The section 7 application was submitted by Nandakini Contractors fraudulently in collusion with the corporate debtor to seek an admission order for CIRP of the corporate debtor, and such an admission order was given by the Adjudicating Authority without proper and adequate scrutiny of the contents of the section 7 application and without examination of material therein. Was the constitution of CoC with the inclusion of a number of financial creditors vitiated as they were related parties closely connected with the CD, and were the approvals and resolutions passed in the meetings of CoC vitiated and bad in law? - HELD THAT:- An important issue that has been raised by the Appellants is about piercing the corporate veil to be able to understand the actions and role of various companies that have shown stake in the CIRP - as corporate debtor, applicant financial creditor, members of CoC and the successful resolution applicant. Their connections with each other and consequently their role in filing of the section 7 application and in the CIRP would then become apparent - Section 2(27) of The Companies Act, 2013 states that control shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner . The inter-connections between the corporate debtor, financial creditor Nandakini, members of the CoC and the holding companies of the Successful Resolution Applicant through common directors sitting on the board of more than one company, different levels of shareholdings and common registered addresses and working-email IDs thus adds strength to the argument that they belong to the same group of companies working towards common objective insofar as the CIRP in the instant case goes - looking at the events in this case from the lens of the nature, involvement and conduct of the companies, we find the inference inescapable that these companies were acting in concert and being guided and led by a controlling mind as part of a fraudulent project to defraud the creditors of the corporate debtor by misusing the instrumentality of the IBC, completely against its objectives and spirit and such actions, which are infringing the provisions of the IBC cannot be condoned or overlooked. The constitution of CoC with related parties of the corporate debtor participating in the CoC as a majority, is also vitiated. Consequently, we find force in the submission of the Appellants HIL and HIW Workers Union that the corporate debtor is influencing decisions in the CoC and through members of the CoC, who have shareholding and through the CoC. The decisions, therefore, that are taken in the CoC meetings are coloured and are infringement of second proviso of section 21(2). Was the Successful Resolution Applicant Regus Impex Private Limited disqualified to submit a resolution plan for the corporate debtor? - HELD THAT:- The Constitution of the Committee of Creditors violates the proviso to Section 21(2) of the I B Code 2016 read with 12(3) of CIRP Regulations. Therefore, the Constitution of the creditors' committee is a nullity in the eye of law that vitiates the entire CIRP. Liquidation is like a death knell for the corporate entity/corporate person. Liquidation based on the resolution of the CoC, which consists of related party Financial Creditors having 77.20% vote share, is a matter of grave concern - It is also pertinent to mention that when the Constitution of the Committee of Creditors itself is found to be tainted, then the decisions of that COC cannot be validated on any pretext even it is about exercise of commercial wisdom. In the present case, as the initiation of CIRP itself has been found to be tainted and faulty, and in addition, the subsequently constituted CoC is also found to include parties that are connected with each other and acting in concert with the corporate debtor and other parties, we are of the opinion that the interest of justice would be served if the admission order under section 7 passed by the Adjudicating Authority is quashed. We, therefore, set aside the said admission order which would lead to all the other actions including CIRP as non est and null and void - Thus, beginning with the initiation of CIRP to the constitution of CoC, its various decisions and resolutions and the denial of opportunities to the workers to submit their claims (although such a request was not made explicitly and also there was a delay when the HIW Workers Union contacted the RP for copies of Section 7 application and pleadings therein), we are of the view that all these proceedings are fraudulent and also reek of malice and are, therefore found to be bad in law. Appeal disposed off.
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PMLA
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2023 (3) TMI 746
Seeking grant of bail - Money laundering - bank fraud - allegations are that Shakti Bhog Foods Limited (SBFL), where the Applicant was one of the directors, promoter and guarantor and had availed of various loan facilities from a consortium of banks led by State Bank of India from 2006 onwards, and in order to acquire more loan funds from Banks, the company resorted to round tripping and money laundering using its various group companies as platforms - role ascribed to the Applicant in the prosecution complaint is that the Applicant was a director, guarantor and promoter of SBFL - bail urged with regards to the proviso to section 45(1) PMLA that the Applicant is sick and infirm. Whether the Applicant is sick or infirm in terms of the proviso under section 45(1) PMLA? HELD THAT:- A purposive interpretation of the proviso to section 45(1) shows that it has been incorporated as a lenient provision or to afford relaxation to a sick or infirm person as noted in the Statement of Objects and Reasons to PMLA - Proviso to Section 45(1) PMLA is analogous to the proviso to section 437 CrPC. What is that level of sickness or infirmity that brings an Accused within the parameters of sick or infirm as envisaged in the proviso to section 45(1) PMLA? - HELD THAT:- When the sickness or infirmity is of such a nature that it is life-threatening and requires medical assistance that cannot be provided in penitentiary hospitals, then the accused should be granted bail under the proviso to section 45(1) PMLA - The Hon ble Supreme Court in PAWAN @ TAMATAR VERSUS RAM PRAKASH PANDEY ANR. [ 2002 (5) TMI 890 - SUPREME COURT ] have noted that every sickness does not ipso facto entitle an accused to medical bail. In the present case, the Applicant is not sick to be granted bail under proviso to Section 45(1) PMLA. The ailments that the Applicant is suffering from are not grave or life threatening that entitle him to bail on medical grounds. Reliance placed upon the opinion of the medical board that has opined that the Applicant is stable and can be treated in Tihar Jail Hospital - granting bail on every sickness will render the proviso to section 45(1) PMLA otiose. The proviso should only be invoked in cases where the sickness suffered by the Applicant is so serious and life endangering that it cannot be treated in jail, or the specialized treatment as required cannot be provided from jail hospitals. In the instant case, it is evident from the medical board s report that the condition of the Applicant is stable, he is not suffering from lifethreatening ailments and can recuperate with the medical facilities available in jail - the Applicant cannot be termed to be sick to fall within the proviso to section 45(1) PMLA. Once the Applicant falls in the exception clause of section 45(1) proviso, as in the present case by virtue being infirm , the Applicant need not satisfy the twin test of section 45(1) PMLA - In the present case, the Applicant has been in custody for over 18 months. Investigation qua the Applicant is complete but no chargesheet has been filed yet. The Applicant was released on interim bail for a period of one month and after expiry of the same, he surrendered and there is no allegation of misuse of liberty by him while on bail. The Applicant is entitled to grant of bail, subject to conditions imposed.
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2023 (3) TMI 745
Grant of Anticipatory Bail - Money Laundering - scheduled offences - proceeds of crime - discharge of burden of prove - Hawala transactions - HELD THAT:- While rejecting the discharge application of the applicant, learned trial court has specifically observed that on the basis of prima facie investigation made by ED, it appears that the applicant is prima facie involved in Hawala ie., illegal transfer of money from nation to foreign countries. Prima facie there is sufficient material, which warrants this court to arrive at prima facie inferences that applicant is involved in such serious case wherein discretion is not required to be exercised. The learned trial court has further observed that as per Section 24 burden shifted upon the accused to show that proceeds of crime are untainted property and the applicant has prima facie miserably failed to discharge his burden under Section 24. It was further observed that there is serious allegations against the applicant so far as Hawala chapter is concerned wherein the Hawala entries via Dubai (UAE), crores of rupees have been credited in the accounts of wife of the applicant as well as his children in USA and the wife of the applicant was made partner in a firm to the extent of 30% by investment of only Rs. 1 lakh and getting crores of rupees from India as well as UAE. It appears from the record that at this stage, on the basis of the charge sheet and documents produced with it, court should have to take decision. The defence taken and evidences produced by the accused should not be considered at this stage. At the present stage, it is to see that whether prima facie offence is there against the accused or not and evaluation of evidence produced by the accused and evaluation of the evidence should not be considered at this stage. Considering the impugned order does not suffer from any illegality, irregularity or impropriety and present revision is liable to be dismissed and accordingly, stands rejected.
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2023 (3) TMI 744
Confiscation of property (on death of the accused) - accused had died before the trial could be held - Money Laundering - scheduled offences - criminal conspiracy - cheating - forgery of valuable security - forgery for the purpose of cheating - using as genuine, forged document - criminal misconduct - HELD THAT:- Prevention of Money Laundering Act, 2002 is a new Act and is in the process of growth and evolution by way of legislative amendments and Judicial pronouncements. The provision of attachment of crime proceeds in chapter III of the Act is many ways a leap forward in penal law to retrieve the loss caused to the victim, mostly public exchequer, by commission of the scheduled offence. Statement of objects and reasons of Money-Laundering (Amendment) Bill,2011 3 (d), provided to make provision for attachment and confiscation of proceeds of crime even if there was no conviction so long it was proved that money laundering had taken place and property in question was involved in money laundering. In cases involving large scale embezzlement of public fund, if after the death of the principal accused, crime proceeds are released in favour of his heirs and legal representatives, the very object of the Act will be defeated to a large extent. In view of the express provision of confiscation in the event of death of the accused, the argument that there is a general presumption of innocence in favour of the accused and therefore death should be deemed to be acquitted is not tenable in view of the special provisions of the Act. Further, there is a reverse burden of proof against a person accused of an offence under Section 3 and unless the contrary is proved it shall be presumed that such proceeds of crime were involved in money laundering. It has been held in Vijay Madan Lal Choudhary Vs. Union of India [[ 2022 (7) TMI 1316 - SUPREME COURT] ] that the legal presumption in the context of Section 24(b) of the 2002 Act is attracted once the foundational fact of existence of proceeds of crime and the link of such person therewith in the process or activity is established by the prosecution. The stated legal presumption can be invoked in the proceeding before the Adjudicating Authority or the Court, as the case may be. The legal presumption is about the fact that the proceeds of crime are involved in money-laundering which, however, can be rebutted by the person by producing evidence within his personal knowledge. Accused no.2 Dharamveer Bhadoria died on 2.5.2021 during the pendency of the trial before the special court for offences under PMLA Act. He was also an accused before the Special Court CBI, Ranchi in RC 20/2009. The learned court below has noted that sufficient opportunity was given by the adjudicating authority to discharge the burden of proof u/s 24 of PMLA which it failed to discharge. The present petitioner Naveen Singh S/o of B.P. Singh claiming to the Managing Director of M/s Nav Nirman Builders and Developers Pvt Ltd was a third party failed to provide legitimate source of income or the receipts derived by the company from various sources. Accused no.2 was the person principally dealing with and control of the affairs of the company - Admittedly the confiscated properties are not proceeds of crime but are in lieu of the value of crime proceeds. Main contention of the petitioner is that the property in question was not acquired by the proceeds of crime, but was acquired by independent sources of the company. With regard to the plea of the appeal being pending before appellate authority, this Court is in agreement with the position of law as enunciated in Deputy Director, Directorate of Enforcement Vs Axis Bank [[ 2019 (4) TMI 250 - DELHI HIGH COURT] ] wherein it has been held that the jurisdiction to entertain objections to attachment conferred on the appellate tribunal on the one hand and, on the special court on the other may be co-ordinate to an extent. The order of confiscation cannot be set aside merely on the ground that the accused had died before the trial could be held and the accused convicted of the charges. Whether there was merit in the plea for release of attached property is a question of fact which needs to be adjudicated by the Court concerned while hearing the petition under Sections 8(7) or 8(8). This court does not find any infirmity in the impugned order - petition stands dismissed.
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2023 (3) TMI 743
Seeking grant of bail - Money Laundering - mass loot of public money deposited by innocent prospective home buyers and have laundered the said money - discharge of burden of proof - HELD THAT:- In the present case, undoubtedly, the present applicant was taken into custody on 11.10.2018 for the same allegations for which the E.D. has filed ECIR in question. However, EOW of Delhi Police has taken custody of the present applicant on 26.10.2019 and the E.D. has taken custody on 03.12.2019. Therefore, for all practical purposes the present applicant is in judicial custody for more than four years and four months and if the period of judicial custody, so taken by the E.D. is considered, it is more than three years and three months. Undisputedly, the maximum punishment for the offence wherein the trial is going on is seven year. Therefore, in both the situations the present applicant has served half of the sentence. Since the learned counsel for the E.D. has been heard at good length and a some of Rs.28.95 crores have already been recovered from the applicant in furtherance of the proceed of crime and considering the statement that nothing remains to be recovered from him now, it is found appropriate that the present applicant may be enlarged on bail as rigour of Section 45 of PMLA are satisfied, particularly in view of the fact that the present applicant has already served more than half of the punishment, has not misused the liberty of interim bail granted by the Apex Court and there is no possibility or likelihood to conclude the trial with expedition inasmuch as there are total 150 prosecution witnesses and only two prosecution witnesses have been examined by now. Let the present applicant (Shiv Priya) be released on bail in the aforesaid case crime number on his furnishing a personal bond of Rs.2,00,000/- with two sureties each in the like amount to the satisfaction of the court concerned with the conditions imposed - application allowed.
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Service Tax
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2023 (3) TMI 742
Benefit of the scheme Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - contention of petitioner is that he made efforts to deposit the aforesaid amount within the time stipulated, but on account of technical glitches the amount was not accepted online - HELD THAT:- The petitioner on failure to deposit the amount online for any reason had not even made any application for accepting the payment in the physical form. A Division Bench of the Allahabad High Court in M/S. YASHI CONSTRUCTION VERSUS UNION OF INDIA AND 2 OTHERS [ 2022 (3) TMI 108 - ALLAHABAD HIGH COURT] , in an identical case, held that the petitioner who has not deposited the amount within the time granted, in the absence of any provision to extend the time, is not entitled for any further time to deposit the same - The aforesaid judgment and order of the Allahabad High Court has not been disturbed even by the Supreme Court in M/S. YASHI CONSTRUCTIONS VERSUS UNION OF INDIA ORS. [ 2022 (3) TMI 110 - SC ORDER] , against the same has been dismissed on 18.02.2022. It may be pertinent to mention here that though the petitioner could not deposit the amount within the time of 30 days stipulated in the SVLDRS-3, he could not even deposit the said amount within the extended period of scheme which was extended up to 30.06.2020 - there are no material on record which could substantiate that the petitioner made effort to deposit the amount even on 22.06.2020, as alleged. There are no good reason to exercise our discretionary jurisdiction in the matter and the petition is accordingly dismissed.
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2023 (3) TMI 741
Refund of Krishi Kalyan Cess paid on services received for manufacture of goods - transportation of goods - Manpower supply-recruitment - maintenance and repair service - technical testing analysis service - CENVAT Credit of input services received for manufacture of goods namely transportation of goods, man power supply recruitment, goods maintenance and repair service, etc. - HELD THAT:- The amount of refund for KKC Rs. 5,46,759/- rejected, following the ruling of larger bench in the case of Gauri Plastic Culture Pvt Ltd. [ 2019 (6) TMI 820 - BOMBAY HIGH COURT ] wherein it was held that a non-utilised portion of Cenvat credit cannot be claimed as refund in cash, distinguishing the ruling in Union of India vs. Slovok India Trading Company, as not a declaration of law under Article 141 of the Constitution. Credit have been admittedly taken after one year from the date of invoice/ bill of entry on Rs. 4,15,012/- - HELD THAT:- The rejection of the same is upheld as admittedly credit was taken beyond a period of 12 months from the date of invoice/bill of entry. So far the balance amount of refund is concerned, the appellant have rightly taken credit in view of Rule 2(l) of CCR which entitles a manufacturer to claim Cenvat credit on input services utilise in manufacture of dutiable taxable goods - there is no bar in cross utilisation of Cenvat credit once taken, either for payment of Central Excise duty or service tax, in view of the provisions of Rule 3 or 4 of CCR. The Adjudicating Authority is directed to grant refund of the balance amount of Rs. 15,37,886/- - appeal allowed in part.
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2023 (3) TMI 740
Refund of service tax paid - amount paid under mistake of law - applicability of time limitation and principles of natural justice - HELD THAT:- The present case is one where the service providers (i.e. NOMC and Haliburton) as also the service recipient (i.e. the Appellant) have discharged Service Tax on the same transaction and each party has deposited the said tax with the Department. The Department has received the amounts in question twice over and there is no inter-se reimbursement of the said tax between the parties. Though contractually it was the service providers who were to discharge the tax, since they had establishments in India, and then recover the same from the Appellant, the Appellant entertained a view that it was supposed to discharge Service Tax on reverse charge and directly paid the same to the Department. As is evident from the record,NOMC and Haliburton setup establishments in Jodhpur and Bombay respectively, obtained Service Tax registrations and discharged Service Tax. They did this correctly, in terms of the plain language of Explanation 4 to Section 65B(44). The record also indicates that communications were exchanged between the branch offices and the Appellant. Moreover, the labour force to carry out the concerned work was also sourced domestically - Tribunal in the case of M/S. NAGARJUNA OIL CORPORATION LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY [ 2016 (8) TMI 41 - CESTAT CHENNAI] has held that when branch offices of foreign service providers obtained registration and discharged Service Tax in India on the transaction in question, the service recipient located in India (the assessee in that case) was not required to discharge the same,on reverse charge. Both sides have relied on a plethora of judgments on the issue of the applicability of the limitation provided under Section 11B to amounts paid under mistake of law. The tenor of the jurisprudence on the subject indicates that the limitation prescribed under Section 11B is not applicable to a refund claim in a situation where the concerned tax was never payable by the assessee.In other words, had the Department raised a demand of such an amount, the assessee could have successfully challenged the constitutionality of the same - the statutory limitation period prescribed under Section 11B is not applicable to the refund claimed by the Appellant since the amount paid by the Appellant is not a tax. Unjust enrichment - HELD THAT:- The appellant in its ledger accounts first discharged the Service Tax and thereafter appended certain notings in front of the said amounts stating on hold . It is also clear that the amounts have not been expensed out as the appellant is awaiting the outcome of the litigation. Hence the amount of Service Tax paid cannot be said to have been passed on to anyone - Moreover, the Ministry of Petroleum vide clarifications dated 1.05.2009 and 25.03.2011 has held that the refineries are only liable to discharge Sales Tax and Pipeline TransportationCharges. There is no mention of Service Tax in the same. Moreover the Crude Offtake Sales Agreements between the Appellant and Indian Oil and Numaligarh Refinery Ltd., at the relevant clauses only provide for VAT to be paid by the Appellant s buyers. In view of the same, Service Tax paid by the Appellant never formed part of the crude oil sold by the Appellant. The judgment of Hon ble Supreme Court in STATE OF RAJASTHAN ORS VERSUS HINDUSTAN COPPER LTD. [ 1997 (11) TMI 516 - SUPREME COURT] is applicable to the present case where it was held that there is no question of any unjust enrichment of the respondent as a result of the refund of the excise duty paid on rectified spirit because the respondent has not passed on the duty to any consumer of the final product, viz., copper, manufactured by the respondent. The present appeal is allowed. The appellant shall be entitled to the refund amount along with interest.
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2023 (3) TMI 739
Levy of service tax on royalty paid to their foreign service provider under Reverse Charge Mechanism - intellectual property rights or not - M/s. Borelli Tea Holdings Ltd. granted to the Respondent non-exclusive, non-transferrable licence allowing use of its patents and trade marks for manufacture/production of tea and export thereof. HELD THAT:- As it is an admitted fact that the trade mark and patent rights were not registered in India, which have been obtained by the Respondent for use in India from their foreign principal therefore the said rights were not governed by any law for the time being in force. Therefore relying on the decision of M/S. MUNJAL SHOWA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, DELHI (GURGAON) AND (VICE-VERSA) [ 2017 (6) TMI 819 - CESTAT CHANDIGARH ] it is held that the amount paid by the Respondent as royalty or licence fee is not taxable in India. There are no infirmity in the impugned order. Therefore the same is upheld and Appeal filed by the Revenue is dismissed.
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2023 (3) TMI 738
Valuation of services - inclusion of value of the free supplies in the taxable value - Abatement claim - appellant had constructed 11 culverts at the premises of India Cements Limited and paid service tax for the work on 33 % of the value and claimed 67% abatement - Department was of the view that as the appellant has received free supply of materials, they are not eligible to claim abatement under Notification No. 1/2006-ST. HELD THAT:- The issue is no longer res integra and decided by the Hon ble Apex Court in the case of COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [ 2018 (2) TMI 1325 - SUPREME COURT] . The said judgment has taken into consideration the issue even after the amendment brought forth in Section 67 of the Finance Act, 1994 - It was held in the case that The value of the goods/materials cannot be added for the purpose of aforesaid notification dated September 10, 2004, as amended by notification dated March 01, 2005. Thus, the demand cannot sustain and requires to be set aside - appeal allowed.
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2023 (3) TMI 737
Refund of service tax - rejection on the ground of unjust enrichment - reverse charge mechanism - remanding the matter to the Adjudicating Authority for verification of the challans submitted by the respondent - HELD THAT:- It is not disputed that service tax was paid by the respondent on a reverse charge mechanism. In such a situation, it is difficult to comprehend as to how the burden of service tax could have been passed on to any other person. What is also important to note in the present case is that the Chartered Accountant had given a certificate dated 24.07.2015 after examining the books of accounts of the respondent and the relevant records maintained for service tax purpose, including the challans, GST returns maintained during the period from October 01, 2005 to February, 2011 - No good reason has been given by the Adjudicating Authority to reject the certificate of the Chartered Accountant. The Commissioner (Appeals) has relied upon the Certificate, as no evidence had been led by the department to substantiate that it was not correct. Thus, there is no error in the finding recorded by the Commissioner (Appeals) that the principal of unjust enrichment would not be applicable in the present case. Whether the Commissioner (Appeals) was justified in remanding the matter to the Adjudicating Authority for verification of the challans submitted by the respondent? - HELD THAT:- It is not disputed that the respondent had submitted the challans but as they had not been examined by the Adjudicating Authority for the reason that the refund application itself had been rejected, it would be appropriate that the Adjudicating Authority, in the first instance, examines the challans. The Commissioner (Appeals) was, therefore, justified in remanding the matter to the Adjudicating Authority for this specific purpose - As the matter is old and any delay may further burden the department with interest, the Adjudicating Authority shall make all endeavors to verify the challans at an early date, and preferably within a period of two months from the date a copy of the order passed today is produced before the Adjudicating Authority by either of the parties. The appeal filed by the department is dismissed.
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Central Excise
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2023 (3) TMI 736
Refund of CENVAT credit post GST era - corresponding debit to the CENVAT credit account - impossibility compliance with the conditions of Notification No.27/2012 - Export of goods - Excluding the period spent to pursue the claim at wrong forum - Section 142(3) of GST Act, 2017 - HELD THAT:- This order is patently erroneous on several grounds. Firstly, the eligibility of the petitioner to refund on a substantive basis has itself, never been questioned. The denial is based solely on a technical basis - That apart, the fact that Notification No.27/12 has been held to propound an incorrect condition by this Court as well as by the CESTAT ought to have merited consideration with the authority. Instead he does not advert to this aspect of the matter at all. The impugned order is wholly incorrect in law and is liable to be set aside - Petition allowed.
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2023 (3) TMI 735
Valuation of goods - freight charged separately in the sale invoices of excisable goods is includible in the assessable value of such excisable goods or not - goods are to be delivered at buyer s premises from the factory of the appellant on FOR destination basis - place of removal - HELD THAT:- There is no dispute in the fact that the appellant have cleared the goods from their factory and delivered at the buyer s premises. In the invoice the freight was charged separately when the sell invoice was issued from the factory at the time of clearances of goods. The factory gate is the place of removal. Merely because the appellant is under obligation to deliver the goods at the buyer s premises, the place of removal which is a factory gate cannot be extended and buyer s premises cannot be made as place of removal. This issue has been considered by this Tribunal in the case of SAVITA OIL TECHNOLOGIES LTD. VERSUS C.C.E. S.T. DAMAN [ 2022 (7) TMI 138 - CESTAT AHMEDABAD] , wherein the reliance was placed on the Hon ble Supreme Court judgment in the case of COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. [ 2015 (10) TMI 613 - SUPREME COURT] . The tribunal in Savita Oil Technologies held that buyer s premises cannot, in law, be a place of removal under Section 4. In this matrix of facts, the decision of Commissioner holding buyer s premises as place of removal cannot be upheld. Thus, the freight cannot be included in the assessable value in the facts of the present case. Consequently, no demand of duty on freight would sustain - appeal allowed.
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2023 (3) TMI 730
Valuation - inclusion in the assessable value or not - IDSC/ICNC debit note raised by Bhadrachalam Unit - component of cost of raw materials of the appellant or not - unabsorbed overheads due to idle capacity - HELD THAT:- The Larger Bench in M/S ITC LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI [ 2016 (4) TMI 280 - CESTAT CHENNAI ] answered the reference, holding that the decision of the Chennai Bench of the CESTAT rendered in Final Order No. 542/2010 dated 11.05.2010 in the Revenue s appeal against M/s. Eveready Industries Ltd. [ 2011 (4) TMI 141 - CESTAT, CHENNAI ] and the subsequent decision of the same Regional Bench as reported in CCE, CHENNAI VERSUS M/S. EVEREADY INDUSTRIES (I) LTD. [ 2011 (4) TMI 141 - CESTAT, CHENNAI ] represent the correct position in law. The findings of the Larger Bench are The percentage of loading on such cost of production, mandated by provisions of Rule 8 for remittance of excise duty by the Bhadrachalam unit cannot not however be considered as comprised in the cost of the raw material consumed for manufacture of packaging material and thus constituting the cost of production at the Chennai unit. Applying the dictum laid by the Larger Bench in M/S ITC LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI [ 2016 (4) TMI 280 - CESTAT CHENNAI ], it is held that the demand, interest and penalties cannot sustain and requires to be set aside - The issues are therefore answered in favour of the assessee. Appeal disposed off.
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CST, VAT & Sales Tax
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2023 (3) TMI 734
Non-deletion of Tax free and First Point Tax Paid goods turnover from the taxable turnover - receipts of hire charges recovered from contractors by appellant falls within ambit of deemed sales as contemplated u/s 2(g)(iv) of the Orissa Sales Tax Act or not - receipt of hire charges of machineries from inter-department of the assessee for account purpose is sale to self as contemplated u/s 2(g) (iv) of the Orissa Sales Tax Act or not. Whether the learned Tribunal is justified in not deleting the Tax free and First Point Tax Paid goods turnover from the taxable turnover and as such the order is illegal and arbitrary? - HELD THAT:- The Court is of the view that if indeed SAIL was unable to produce materials to show to what extent the canteen sales included sale of tax-free goods and first point tax paid goods, remanding the matter to the AO will be a futile exercise. In the absence of SAIL producing records relevant to the issue, even in this Court, the estimation that 70% of the sales was of cooked food items and 30% of tea, coffee and snacks etc. cannot be said to be arbitrary. Consequently, in this aspect the Court is not inclined to accept the plea of SAIL and remand the matter to the AO. In other words, the question is answered in the affirmative i.e. in favour of the Department and against the Assessee. Whether the learned Tribunal is justified in holding that the receipts of hire charges recovered from contractors by appellant falls within ambit of deemed sales as contemplated u/s 2(g)(iv) of the Orissa Sales Tax Act? - whether the receipt of hire charges of machineries from inter-department of the assessee for account purpose is sale to self as contemplated u/s 2(g) (iv) of the Orissa Sales Tax Act? - HELD THAT:- Whether in fact the Tribunal asked SAIL to produce the full contract is not clear from the impugned order of the Tribunal. On its part, with SAIL having offered to produce the entire contract, the Tribunal could have asked SAIL to produce it before deciding the issue - With SAIL offering to produce the entire contract and the matter any way being remanded to the AO as regards the other questions, the Court considers it appropriate to refer questions also to the AO for being considering afresh by examining the complete text to the contract to be produced by SAIL as undertaken by it - the Court while setting aside the orders of the AO, the ACCT and the Tribunal on both issues and remands them to the AO for a fresh determination. Petition allowed by way of remand.
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2023 (3) TMI 733
Rejection of request of the petitioner for rectification of assessment sought for under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - rejection of rectification request on the ground that there was no discussion about this in the order - difference of opinion between the parties was that the petitioners claim that one of their products, TANG was existable to taxes at the rate of 4% and thereafter 5%, whereas it is the stand of the respondents that the rates applicable would be 12.5% and thereafter 14%. HELD THAT:- The petitioner sought rectification under Section 84 that has come to be rejected by the officer on 15.11.2019 on the ground that there was no discussion in the order dated 03.05.2019 and hence no rectifiable error. This conclusion of the appellate authority is clearly contrary to law insofar as the very non-consideration of submissions dated 23.01.2019, would constitute an error apparent on record liable to be rectified under Section 84 of the Act. In light of this, the impugned orders need to be set aside. The petitioner will appear before the appellate authority on 24.03.2023 at 10.03 a.m. with materials in support of the request of rectification and without anticipating any notice afresh for the hearing scheduled as aforesaid. After hearing the petitioner, orders shall be passed on the Section 84 application within a period of four weeks from the date of personal hearing as fixed aforesaid. Petition allowed.
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2023 (3) TMI 732
Validity of assessment orders - rate of G.P. added was 10 11% on the purchases made - Enforcement Wing was of the opinion that this modus operandi is incorrect and required re-consideration by adding gross profit of the respective years as per Profit and Loss (P L) accounts and on the basis of the audited financials - opportunity of personal hearing to be provided, before such increase in the GP - principles of natural justice - HELD THAT:- The issue in this case relates to adoption of Gross Profit, whether at 10 11 % as put forth by the petitioner, or at the rate proposed by the Officers. There are any number of submissions that could have been put forth by the petitioner in support of the rate propounded by it, pursuade to the Assessing Officer, had only such opportunity been granted. The petitioner, in its wisdom and based on trade practice, has adopted a certain rate of GP and it is in my view, not appropriate for the Assessing Officer to have adopted a substantially higher rate, without affording the petitioner an opportunity to explain the rates adopted by it - In fact, the conclusion in the impugned orders, is that no materials were provided by the petitioner in support of the G.P. adopted by it. Such failure is a direct consequence of the failure of the authority to have granted an opportunity to the petitioner. That apart, it is a settled position that the reports of the officials of the Enforcement Wing cannot be adopted mutatis mutandis by the Assessing Officer who are expected to apply their minds, independently to the matter though having regard to the opinion of the Enforcement officials as well. In the present case, it is an admitted position that the authority has had nothing new to bring to the table but has merely adopted the rate as put forth by the Enforcement Officers. Petition allowed.
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Indian Laws
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2023 (3) TMI 731
Doctrine of Eclipse (any law which is inconsistent with fundamental rights is not invalid) - Constitutional validity of the Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act, 2011 and Telangana Micro Finance Institutions (Regulation of Money Lending) Act, 2011 - Challenge on the ground that it was beyond the legislative competence of the Andhra Pradesh Legislature - HELD THAT:- Though the initial challenge to the 2011 Act was on the ground of lack of legislative competence, during pendency of the writ petitions, Supreme Court in Nedumpalli Finance Company Limited v. State of Kerala [ 2022 (5) TMI 702 - SUPREME COURT ] , declared the Gujarat Money Lenders Act, 2011 (Gujarat Act) as unconstitutional. The aspect relating to protecting the interest of the borrowers which is sought to be achieved by the State enactments gets subsumed in the provisions of Chapter III-B of the RBI Act. Thereafter Supreme Court adverted to the doctrine of eclipse and observed that while the RBI Act is traceable only to the entries in List-I, the State enactments are traceable only to entries in List-II. Therefore, question of repugnancy under Article 254 of the Constitution would not arise. Nonetheless Supreme Court held that Section 45-Q of the RBI Act confers overriding effect upon Chapter III-B of the RBI Act over other laws. Besides, Chapter III-B is a complete Code in itself. Rejecting the contention of the States of Gujarat and Kerala that the laws enacted by them are in addition to the provisions of Chapter III-B, Supreme Court held that provisions of Chapter III-B would eclipse the provisions of the State enactments insofar NBFCs are concerned - Finally, Supreme Court held that the Kerala Act and the Gujarat Act would have no application to NBFCs registered under the RBI Act and regulated by the RBI Act. Consequently, all the appeals filed by NBFCs against the judgment of the Kerala High Court were allowed and all the appeals filed by the State of Gujarat against the judgment of the Gujarat High Court were dismissed. Following the decision of the Supreme Court in Nedumpalli Finance Company Limited it is held that NBFCs operating in the States of Telangana and Andhra Pradesh registered with the RBI would be excluded from the purview of the above two enactments. In other words, the two enactments will have no application to NBFCs operating in the two States of Telangana and Andhra Pradesh which are registered under the RBI Act and regulated by RBI. Petition disposed off.
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