TMI Tax Updates - e-Newsletter
April 16, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise

Highlights / Catch Notes

• GST:

  Provisional attachment of Bank Accounts - section 83 of CGST - It appears that the officers of the concerned department think that they are above the law. - order stayed.
  Visit to Get Source

  ---

• Income Tax:

  LTCG - claim of the assessee denied - the astronomical growth of the value of company’s shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange.
  Visit to Get Source

  ---

• Income Tax:

  Disallowance u/s 40(a)(ia) - default u/s 201(1) - scope of amendment - second proviso to Section 40(a)(ia) of I.T. Act is curative in nature and has retrospectively.
  Visit to Get Source

  ---

• Income Tax:

  Reopening of assessment - AO after receiving the return of the appellant filed in pursuance to notice u/s 148 of the Income Tax Act, 1961 did not issue notice u/s 143(2) of the Act which is sine qua non - re-assessment order set aside.
  Visit to Get Source

  ---

• Income Tax:

  Search and seizure u/s 132 - sufficiency and insufficiency of reasons to belief for warrant of authorization - Even if it is presumed for a moment that warrant relating to search and seizure was not proper and there was some defect in it, the material collected during the search and seizure cannot be brushed aside on this count alone - writ dismissed
  Visit to Get Source

  ---

• Income Tax:

  Taxability of capital gain - Diversion of income - mortgage by deposit of title deeds, the mortgagee, Bank does not acquire title, much less overriding title to the property - assessee continued to have title over the property along with her co-owners - No diversion of income - capital gain is taxable
  Visit to Get Source

  ---

• Income Tax:

  Commencement of business - allowability of expense u/s 37(1) - activity which are preliminary steps towards the fulfillment of the purpose as per MoU and if these steps were for the ultimate fulfillment of its purposes i.e preparation of development plans leading to the projects - it had set up its business - Expenses duly allowable
  Visit to Get Source

  ---

• Corporate Law:

  Compounding of Offences - non-filing of the cost audit report - section 233B of the Companies Act, 1956 - this Tribunal has the power to compound the offence as brought forth in this application. - Offense compounded.
  Visit to Get Source

  ---

• Service Tax:

  Rejection of VCES application - false declaration - The Commissioner committed an error in holding that any person who decides to declare tax dues under the scheme has to declare “all” service tax dues and there is no option to include some service and leave out some services
  Visit to Get Source

  ---

• Service Tax:

  Classification of services - appellant was not retaining the right of possession and effective control of leased articles except for such loss which were beyond the control of lessee - the transferred articles cannot be held to be ‘Supply of Tangible goods’
  Visit to Get Source

  ---

• Service Tax:

  Classification of services - Loading and unloading are ancillary / intermediate service provided in relation to transportation of goods, and such service would be Goods and Transport Agency Service. It cannot be ‘Cargo Handling service’.
  Visit to Get Source

  ---

Articles

• GIST OF RECENT PRONOUNCEMENTS ON GST (PART-XXI)

Notifications

• GST - States

• 11266 – FIN-CT1-TAX-0043/2017/FIN - S.R.O. No.127/2019 - dated 30-3-2019 - Orissa SGST
  Amendment in Notification No. 19869-FIN-CT1-TAX-0022/2017, dated the 29th June,2017

  ---

• 11262 – FIN-CT1-TAX-0043/2017/FIN - S.R.O. No.126/2019 - dated 30-3-2019 - Orissa SGST
  Amendment in Notification No. 40942-FIN-CT1-TAX-0043/2017 dated the 31st December,2018

  ---

• 11258 – FIN-CT1-TAX-0043/2017/FIN - S.R.O. No.125/2019 - dated 30-3-2019 - Orissa SGST
  Odisha Goods and Services Tax (Second Amendment) Rules, 2019

  ---

• 11254 – FIN-CT1-TAX-0043/2017/FIN - S.R.O. No.124/2019 - dated 30-3-2019 - Orissa SGST
  Odisha Goods and Services Tax (Fourth Removal of Difficulties) Order, 2019

  ---

• 11250 – FIN-CT1-TAX-0043/2017/FIN - S.R.O. No.123/2019 - dated 30-3-2019 - Orissa SGST
  Amendment in Notification No. 19873-FIN-CT1-TAX-0022/2017, dated the 29th June,2017

  ---

• 11246 – FIN-CT1-TAX-0043/2017/FIN - S.R.O. No.122/2019 - dated 30-3-2019 - Orissa SGST
  Seeks to amend Notification No. 19877- FIN-CT1-TAX-0022/2017, dated the 29th June,2017

  ---

• 11242 – FIN-CT1-TAX-0043/2017/FIN - S.R.O. No.121/2019 - dated 30-3-2019 - Orissa SGST
  Amendment in Notification No. 8229-FIN-CT1-TAX-0043/2017 dated the 7th March,2019

  ---

• 11238 – FIN-CT1-TAX-0043/2017/FIN - S.R.O. No.120/2019 - dated 30-3-2019 - Orissa SGST
  Notify certain class of registered persons under OGST Act, 2017

  ---

• 11234 – FIN-CT1-TAX-0043/2017/FIN - S.R.O. No.119/2019 - dated 30-3-2019 - Orissa SGST
  Notify certain services to be taxed under RCM under Section 9(4) of the OGST Act

  ---

• G.O.Ms.No. 16 - dated 29-1-2019 - Tamil Nadu SGST
  Seeks to amend Notification No. II(2)/CTR/935(b-3)/2017 dated 15th November, 2017

  ---

• G.O.Ms.No. 15 - dated 29-1-2019 - Tamil Nadu SGST
  Seeks to amend Notification No. II(2)/CTR/532(d-1)/2017 dated 29/06/2017

  ---

• G.O.Ms.No. 14 - dated 29-1-2019 - Tamil Nadu SGST
  Tamil Nadu Goods and Services Tax (Amendment) Rules, 2019

  ---

• G.O.Ms.No. 13 - dated 29-1-2019 - Tamil Nadu SGST
  Governor of Tamil Nadu appoints the 1st day of February, 2019, as the date on which the provisions of the Tamil Nadu Goods and Services Tax (Amendment) Act, 2019, except clause (2) of Section 8, Section 17, Section 18, clause (1) of Section 20, shall come into force

  ---

• G.O.Ms. No. 12 - dated 29-1-2019 - Tamil Nadu SGST
  Rescinds Notification No.II(2)/CTR/532(d-11)/2017, dated 29th June, 2017

  ---

• G.O. Ms. No. 6 - dated 18-1-2019 - Tamil Nadu SGST
  Seeks to amend Notification No. II(2)/CTR/868(f-2)/2017, dated 18th January, 2019

  ---

• SEZ

• S.O. 1585(E) - dated 9-4-2019 - SEZ
  Central Government notifies an additional area of 0.769 hectares, thereby making total area of the Special Economic Zone as 2.429 hectares, at Kokapet Village, Gandipet Mandal, Ranga Reddy District, in the State of Telangana

  ---

News

• Presentation to the Fifteenth Finance Commission by NITI Ayog on Performance Based Grants

  ---

• Government E Marketplace (GeM) Closes FY 2018-19 on a High Note

  ---

• India’s Foreign Trade: March 2019

  ---

• Cabinet approves creation of one post of Deputy Comptroller and Auditor General in the office of Comptroller and Auditor General of India

  ---

Case Laws:

• GST

• 2019 (4) TMI 848
  Principles of natural justice - ex-parte order - the petitioners were told that the hearing would take place on 8.4.2019, however, the impugned order has been passed on 5.4.2019 - Held that:- Issue Notice and Notice as to interim relief, returnable on 15th April, 2019 - On the returnable date, the respondents shall state as to on what date, an opportunity of hearing in connection with the notice under section 130 of the CGST Act was granted to the petitioners.

  ---

• 2019 (4) TMI 847
  Validity of SCN - the concerned officer has once again passed an order in identical terms only by changing the date of the order - Provisional attachment of Bank Accounts - section 83 of the Central Goods and Services Tax Act, 2017 - Held that:- It appears that the officers of the concerned department think that they are above the law. This court however, would like to peruse the files pertaining to the impugned order. Hence, the matter is adjourned to 15.4.2019. In the meanwhile, by way of ad interim relief, the impugned order dated 8.3.2019 passed by the respondent provisionally attaching the property of the petitioner under section 83 of the Central Goods and Services Tax Act, 2017 /Gujarat Goods and Services Tax Act, 2017 is hereby stayed.

  ---

• 2019 (4) TMI 846
  Permission for withdrawal of petition - Constitutional validity of Section 174 of the Central Goods and Service Tax Act, 2017 - Held that:- Writ petition is dismissed as withdrawn, with liberty as prayed for. No Costs.

  ---

• 2019 (4) TMI 845
  Extension of date for filing of FORM GST TRAN-1 - transitional credit - transition to GST Regime - Held that:- The petitioner may apply to the Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner's uploading FORM GST TRAN-1, without reference to the timeframe - petition disposed off.

  ---

• Income Tax

• 2019 (4) TMI 844
  TP adjustment - Disallowance of weighted deduction u/s.35(2AB) - addition u/s 14A - Admission of additional questions - HELD THAT:- A perusal of the order of the High Court indicates that the High Court has considered only the two additional questions as noticed in para 3 of the impugned judgment. The petitioner submits that the other issues have not been touched. Learned counsel appearing for the assessee submits that the other issues are still under consideration before the High Court. In view of the above, we see no reason to entertain the special leave petition.

  ---

• 2019 (4) TMI 843
  Charitable activity - exemption u/s 11 - mandation to specify the object/purpose in Form No.10 for claiming accumulation u/s. 11(2) - High court held that the statement of purpose for which the income is being accumulated or set apart is one of the requirements which must be satisfied before the assessee can avail the benefit u/s 11(2). However, that by itself would not mean that any inaccuracy or lack of full declaration in the prescribed format by itself would be fatal to the claimant - SLP Dismissed

  ---

• 2019 (4) TMI 842
  Disallowance u/s 14A - High court upheld the holding of tribunal that disallwance is not permissible if the assessee had offered amounts as disallowance claiming them to be expenditure for tax exempt income and AO applied Rule 8D without adducing any reasons - held no substantial question of law arises. HELD THAT:- The special leave petition is dismissed on the ground of delay as well as on merits.

  ---

• 2019 (4) TMI 841
  Disallowance u/s. 40A(2)(b) - excess remuneration to directors - disallowance u/s. 14A - valuation of closing stock - Addition on account of notional interest on delayed refund of security deposits - Held that:- The Special Leave Petition is accordingly dismissed.

  ---

• 2019 (4) TMI 840
  Computing deduction under sections 80HHC and 80-I - whether deductions u/s 35(1)(iv) are not to be deducted ? - Allowable deduction on redemption premium payable on debenture - Disallowance of interest expenditure - Disallowance of interest on funds utilized for non-business advances - Deduction under section 80HHC computation - whether for computation of deduction under section 80HHC only net interest receipts should be excluded? - HELD THAT:- The special leave petition is dismissed on the ground of low tax effect.

  ---

• 2019 (4) TMI 839
  Allowability of software expenditure - to be treated as a revenue expenditure OR capital expenditure - nature of the advantage in a commercial sense - HELD THAT:- SLP dismissed.

  ---

• 2019 (4) TMI 838
  Penalty u/s 271(1)(c) - excessive deduction claimed under Section 10B - Additions made in the income on account of alleged excess stock - HELD THAT:- SLP dismissed.

  ---

• 2019 (4) TMI 837
  Monetary limits for filing appeals or seeking a reference - Low tax effect - maintainability of revenue appeal before High Court - HELD THAT:- Latest set of instructions are contained in CBDT Circular dated 11.7.2018 which lays down the monetary limit at ₹ 50 Lakhs of tax effect to enable the Revenue to file appeal before the High Court against the judgment of the Income Tax Appellate Tribunal. All the Authorities of the Department are bound by these instructions and cannot prefer the appeal in disregard of such limits or directives. As per this provision, in case of a composite order of the Tribunal involving more than one assessment year and common issues, it would be open for the Revenue to prefer appeals in relation to all assessment years provided tax effect in one of the assessment year is higher than the monetary limit prescribed and the Revenue decides to carry the issue in appeal in such assessment years. In the present case, such facts are not involved. Revenue, however, argued that the order passed by the Appellate Commissioner gave rise to two separate appeals at the hands of the Revenue as well as the assessee. These appeals were decided separately by the Tribunal. The Revenue has decided to file appeal in both the cases. Such an instance, however, would not be covered by exception clause noted above contained in the CBDT Circular. This appeal is, therefore, dismissed on the ground of low tax effect.

  ---

• 2019 (4) TMI 836
  Reopening of assessment u/s 147 - original assessment u/s 143(3) - failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment - wrong facts in reasons recorded - Assessee received Share premium from Shri Dalal - addition of pre-operative expenses - HELD THAT:- At the time of scrutiny assessment, details of both the issues on which reopening is sought to be made, have been considered by the Assessing Officer at the time of passing the assessment order under section 143(3) and therefore, there is no failure on the part of the assessee to furnish fully and truly all material facts necessary for assessment before the AO. From the records, it also appears that Shri Dalal is issued only 15,75,000 shares and not 10,00,000 shares as recorded in the reasons recorded by the Assessing Officer. Therefore, the reasons recorded by the Assessing Officer are not on the basis of any further materials or details which have come to the knowledge of the Assessing Officer after passing the assessment order, and it is only a guess work on part of the Assessing Officer while recording the reasons amounting to a fishing inquiry. Impugned notice cannot be sustained as the same is issued after expiry of four years from the end of relevant assessment year as proviso to section 147 of the Act would be applicable in absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment year 2011-12.

  ---

• 2019 (4) TMI 835
  Plan formulated by the Central Board of Direct Taxes - document contains Chapter 3 pertaining to litigation management - Petitioners have challenged the directions issued by the CBDT for disposal of certain number of Appeals of specified categories within specified time. According to the Petitioners, these time limits are artificially applied, are contrary to the statutory provisions and also have the effect of making hurried orders by the Appellate Commissioner - HELD THAT:- The target set by the CBDT for disposal of the Appeals within the time frame provided, are directory and not mandatory. Primafacie, we also feel that it may not be impermissible for the CBDT to prioritize the disposal of the Appeals and to set the goals for disposal of certain number of such Appeals by the Appellate Commissioner. With respect to the Petitioners’ second part of the challenge, we are of the opinion that the CBDT should reconsider the same. From the action plan, it is not clear as to the utility of the norms set which the Commissioner has to achieve. If the purpose of setting of norms is to evaluate the performance of the Commissioner, there would be all the more reason why the abovequoted portion of the action plan be reconsidered by the CBDT. On the next date of hearing, the Respondent would apprise us about the utility of the norms that the Commissioner would need to achieve and the outcome of the CBDT’s deliberations on our recommendation for reconsideration.

  ---

• 2019 (4) TMI 834
  Denial of natural justice - assessee not granted fair opportunity - LTCG claim denied - cross-examination of the two individuals whose statements led to the inquiry and ultimate disallowance of the long term capital gain claim in the returns which are the subject matter of the present appeal - HELD THAT:- This court has considered the submissions of the parties. Aside from the fact that the findings in this case are entirely concurrent – A.O., CIT(A) and the ITAT have all consistently rendered adverse findings – what is intriguing is that the company (M/s Kappac Pharma Ltd.) had meagre resources and in fact reported consistent losses. In these circumstances, the astronomical growth of the value of company’s shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. Having regard to these circumstances and principally on the ground that the findings are entirely of fact, this court is of the opinion that no substantial question of law arises in the present appeal.

  ---

• 2019 (4) TMI 833
  Grant of recognition u/s 80G - grant of registration u/s 12AA - rejection of recognition as the trust has not provided details regarding future projects of renovation / improvement of the campus or any other related object of the Trust that are intended to be undertaken. Hence the necessity for donation does not arise - HELD THAT:- Reasons cited by the CIT(E) for rejection of recognition; not being the requirements mandated by the provisions of the Act, cannot be the basis for rejection of the assessee’s application. It is for the assessee to determine when which of its activities in furtherance of its objects are to be taken up and when there is a requirement for donations in this regard. Grant of approval / recognition under section 80G of the Act can act as a catalyst to encourage prospective donors to look at the intended activities / objects and possibly provide financial support through donations / contributions. Strangely, in the case on hand, on the very next day i.e., 30.01.2018, the CIT(E) has granted the assessee-trust registration under section 12AA of the Act vide order dated 30.01.2018; ostensibly, after examination of the assessee’s objects, etc., which the CIT has categorized as “Advancement of any other object of general public utility”. Following the decision of Indic Science Research Trust [2018 (7) TMI 1902 - ITAT BANGALORE] we accordingly set aside the impugned order of the CIT(E) dated 29.01.2018 passed under section 80G(5)(iv) of the Act and restore the matter to the file of the CIT(E) to examine the matter afresh in the light of his order granting the assessee registration under section 12AA of the Act and our observations hereinabove - Decided in favour of assessee for statistical purposes.

  ---

• 2019 (4) TMI 832
  Levy of penalty u/s 271(1)(c) - addition on account of surrender of sale amount of the assessee in place of returned income - HELD THAT:- As decided in DEEPTY AGARWAL AND CHARU AGARWAL VERSUS ITO, WARD 1 (2) , MEERUT [2018 (9) TMI 709 - ITAT DELHI] in the computation of income the assessee has duly disclosed all the particulars of her income and under the head “Income with full exemption” the assessee has claimed dividend income as exempt and also long term capital gain on which STT is paid which is also exempt from tax. As find that during the course of scrutiny assessment proceedings the AO has proceeded by the assumption that the shares purchased and sold by the assessee comes into the category of penny stock companies. AO has drawn support from outside information. The surrender of exemption by the assessee on repetitive queries would not amount to furnishing of inaccurate particulars of income. The assessee has claimed exemption as per the provisions of law, though surrendered during the course of assessment proceedings. No penalty is leviable u/s 271(1)(c) - Decided in favour of assessee.

  ---

• 2019 (4) TMI 831
  Penalty u/s 271(1)(c) - non specification of charge - defective notice - income from unexplained sources - HELD THAT:- Bare perusal of the notice issued u/s 27I(1)(c) apparently goes to prove that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s 274/271(1)(c) of the Act without specifying whether the assessee has concealed ''particulars of income" or assessee has furnished "inaccurate particulars of income", so as to provide adequate opportunity to the assessee to explain the show cause notice. Rather notice in this case has been issued in a stereotyped manner without applying any mind which is bad in law, hence is not a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act. Also as imperative for the Assessing Officer to strike- off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed that the levy of penalty has to be clear as to the limb under which it is being levied - where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. Where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. According to the Hon'ble Supreme Court, in such a situation, levy of penalty suffers from non- application of mind. See DILIP N. SHROFF VERSUS JOINT COMMISSIONER OF INCOME-TAX AND ANOTHER [2007 (5) TMI 198 - SUPREME COURT] - Decided in favour of assessee

  ---

• 2019 (4) TMI 830
  Disallowance u/s 40(a)(ia) - default u/s 201(1) - scope of amendment - whether second proviso to Section 40(a)(ia) is prospective in application or is to be applied retrospectively? - HELD THAT:- We have the benefit of guidance from the order of Hon’ble Delhi High Court, in the case of CIT vs. Ansal Land Mark Township (P.) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] in which held that second proviso to Section 40(a)(ia) of I.T. Act is declaratory and curative and it has retrospective effect from 01.04.2005. Revenue’s Special Leave Petition against this order of Hon’ble Delhi High Court has been dismissed by Hon’ble Supreme Court in CIT vs. Ansal Landmark Township (P.) Ltd. [2016 (8) TMI 1281 - SUPREME COURT OF INDIA] The view that second proviso of Section 40(a)(ia) of I.T. Act is declaratory and curative in nature and has retrospective effect from 01.04.2005 was also taken in Rajeev Kumar Agarwal vs. Addl. CIT [2014 (6) TMI 79 - ITAT AGRA] and and Hindustan Plywood Company vs. ITO [2016 (3) TMI 1062 - ITAT DELHI]. The issue in question is squarely covered in favour of the assessee, in view of these precedents. Thus second proviso to Section 40(a)(ia) of I.T. Act is curative in nature and has retrospectively. Accordingly, in the fitness of things, and also as both sides agree, the disputed addition U/s 40(a)(ia) of I.T. Act is remanded to the Assessing Officer for fresh order on this limited issue after necessary verification, having regard to Section 40(a)(ia) of I.T. Act, read with first proviso to Section 201(1) of I.T. Act and also read with Rule 31 ACB of Income Tax Rules, 1961 (“I.T. Rules”, for short). - Appeal of the assessee is allowed for statistical purposes.

  ---

• 2019 (4) TMI 829
  Levy of penalty u/s 271(1)(c) - defective notice - non specification of charge - non application of mind by AO - Disallowance of claim of depreciation on building as against returned income of the assessee at Nil - HELD THAT:- Bare perusal of the notice issued u/s 27I(1)(c) apparently goes to prove that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s 274/271(1)(c) of the Act without specifying whether the assessee has concealed ''particulars of income" or assessee has furnished "inaccurate particulars of income", so as to provide adequate opportunity to the assessee to explain the show cause notice. Rather notice in this case has been issued in a stereotyped manner without applying any mind which is bad in law, hence is not a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act. Also as imperative for the Assessing Officer to strike- off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed that the levy of penalty has to be clear as to the limb under which it is being levied - where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. Where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. According to the Hon'ble Supreme Court, in such a situation, levy of penalty suffers from non- application of mind. See DILIP N. SHROFF VERSUS JOINT COMMISSIONER OF INCOME-TAX AND ANOTHER [2007 (5) TMI 198 - SUPREME COURT] - Decided in favour of assessee

  ---

• 2019 (4) TMI 828
  Monetary limit - Low tax effect - disallowance u/s 40A(3) - HELD THAT:- As per Circular No.21/2015 dated 10.12.2015, no appeal required to be filed before the ITAT, if the tax effect is below ₹ 10 lakhs. In the instant case, both the parties had agreed that the tax effect was less than ₹ 10 lakhs. Accordingly, the appeal was disposed off as not maintainable. Against the order of this Tribunal, the AO filed Miscellaneous Application u/s 254(2) of the Income Tax Act, 1961 requesting to decide the case on merits on the issue of disallowance u/s 40A(3) of the Act. The department did not make out a case of exception as provided in the Circular 21/2015 dated 10.12.2015. Therefore, we hold that there is no mistake in the order of the ITAT which needs modification or rectification. Hence, the miscellaneous Application filed by the revenue is dismissed.

  ---

• 2019 (4) TMI 827
  Rectifiable mistake u/s 254(2) - HELD THAT:- The assessee raised the issue with regard to the addition in ground No. 2 to 5 of the assessee’s appeal which was discussed in detail and decided against the assessee. The Tribunal in its order dated 25.04.2018 discussed the issue in detail, creditor-wise, confirmed the order of the CIT(A) and dismissed the appeal of the assessee as well as the revenue. The issue raised by the AR with regard to the relief was not out of the CIT(A)’s order and there was no such ground raised by the assessee for relief. There is no mistake in the order of the ITAT which require modification, hence the assessee’s M.A. on this issue is rejected. The alternate submission with regard to the addition to be made in the hands of the individual partners was not argued during the hearing of M.A. However it is found that the Tribunal has considered entire arguments and material placed before us and confirmed the addition in the hands of the firm, hence it is considered that no separate adjudication is necessary on this issue. From the ITAT’s order, it is found that there was no mistake in the order of the ITAT and if at all any mistake is crept i.e. in the orders of the lower authorities and the assessee may approach the lower authorities for appropriate action, if time limit permits. Since there is no mistake in the order of the Tribunal which require modification / rectification in the order of this Tribunal, the M.A. filed by the assessee is dismissed. Miscellaneous Application filed by the assessee is dismissed.

  ---

• 2019 (4) TMI 826
  Penalty u/s 271(1)(c) - non-striking of irrelevant portion of the notice under section 274 i.e. Concealment of income or furnished inaccurate particulars of income - notice invalid or not? - HELD THAT:- Non-striking of the irrelevant column renders the notice issued u/s 271 as invalid. See ONCHADA SREERAM VERSUS INCOME TAX OFFICER, WARD-1 (1) , VISAKHAPATNAM [2017 (11) TMI 1164 - ITAT VISAKHAPATNAM] and SMT. BAISETTY REVATHI [2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT] - Decided in favour of assessee.

  ---

• 2019 (4) TMI 825
  Reopening of assessment - unexplained bank deposits - CIT-A deleted addition admitting additional evidence - as alleged non satisfaction of conditions mentioned in Rule 46A of the IT Rules, 1962 - HELD THAT:- We found that after calling a remand report and the rejoinder from the assessee, the ld. CIT(A) has recorded a detailed finding to the effect that the sale deed dated 19/5/2007 was executed by the assessee alongwith his three brothers in favour of M/s Megha colonizers and payment was received through cheuqe No. 9685599 dated 14/3/2007 amount to ₹ 55.00 lacs. This amount was credited in the bank account of the assessee maintaining in Bank of Baroda on 15/3/2007. The confirmation from M/s Megha colonizers was also filed, which is placed on record. We do not find any contravention of Rule 46A of the IT Rules in so far as the ld. CIT(A) has already given opportunity to the A.O. by calling a remand report and after seeing all the documents filed before him to the A.O. for his remand report and after considering the same, the ld. CIT(A) has deleted the addition of ₹ 55.00 lacs. Accordingly, we do not find any error or illegality in the impugned order of the ld. CIT(A). Moreover, the tax effect in the appeal filed by the revenue is less than ₹ 20.00 lacs, therefore, in view of the CBDT Circular No. 3/2018 dated 11th July, 2018 (F No. 279/Misc. 142/2007-ITJ(Pt) instructing the authorities below that departmental appeal should not be filed before ITAT where the demand/tax effect does not exceed ₹ 20 lacs, therefore, in view of the above CBDT circular, the appeal of the revenue is not maintainable and deserves to be dismissed. Validity of reopening of assessment - no sanction by the JCIT of the Range U/s 151(2) - assessment without issue of notice U/s 143(2) - curable defect u/s 292BB - HELD THAT:- Specific query was raised by the Bench on 16/10/2017, 19/09/2018 and 15/11/2018 giving time to the department for producing the case record to substantiate proper sanction by the JCIT of the Range U/s 151(2) of the Act. However, even after expiry of more than seventeen months when the case was again fixed on 25/3/2019, the department could not produce the evidence of sanction having been issued U/s 151(2) of the Act. Accordingly, considering the judicial pronouncements referred above and applying to the facts of the case, we do not find any merit in the notice issued U/s 148 of the Act without obtaining sanction by the JCIT of the Range U/s 151(2) of the Act. No issue of notice U/s 143(2) - The assessee filed its return of income in response to the notice u/s 148 of the Act on 13.03.2015. The AO had concluded the assessment without issuing notice under section 143(2) of the Act after the return was filed by the assessee in response to notice under section 148 of the Act. The AO after receiving the return of the appellant filed in pursuance to notice u/s 148 of the Income Tax Act, 1961 did not issue notice u/s 143(2) of the Act which is sine qua non for assuming jurisdiction to assess the case. This is a grave error which is even not rectifiable u/s 292BB of the Act and hence order so passed lacks proper authority with the AO and hence the order so passed deserves to be declared void ab initio. No merit in the assessment so framed U/s 143(3) without issue of notice U/s 143(2) of the Act. Main ground of reassessment being null and void in absence of issue of notice U/s 143(2) of the Act and also issue of notice U/s 148 without proper sanction U/s 151(2) - Decided in favour of assessee.

  ---

• 2019 (4) TMI 824
  Accrual of income - Addition towards accrued interest on NPAs - recognized accounting practice - real income or actual receipts - HELD THAT:- Appellant is co-op bank registered under the Gujarat Co-Op Society Act and carrying on banking business as per Reserve Bank of India guidelines. The appellant has furnished the complete list of Non Performing Assets as per RBI Guidelines and also furnished the details of interest accrued on such NPAs during the Financial Year 2010-11 which aggregated to ₹ 25,00,752/- and same was not charged as mandatorily stipulated under income recognition and Assets classification norms of Reserve Bank of India. As we can see, the assessee case is covered by Jurisdictional High Court in the matter of Pr.CIT vs. Shri Mahila Sewa Sahakari Bank Ltd. [2016 (8) TMI 377 - GUJARAT HIGH COURT] wherein it has been held that “ Non Performing Asssets – CANNOT BE RECOGNISED ON ACCRUAL BASIS – ASSESSEE BOUND BY RESERVE BANK OF INDIA GUIDELINES” and income from Non Performing Asset is not recognized on accrual basis but is booked as income only when it is actually received. Therefore bank should not take to income account, interest on Non Performing Assets on accrual basis. Respectfully following the above said judgment, we allow this ground of appeal. Disallowance of Investment Depreciation Reserve - HELD THAT:- As relying on M/S. GAJANAN NAGARI SAHAKARI BANK LTD. [2015 (6) TMI 551 - BOMBAY HIGH COURT] securities were stock in trade and so depreciation would amount to loss and not income-Authorities below held that this aspect was well settled through judgment of High Court in the case of Commissioner of Income Tax vs. Bank of Baroda [2003 (3) TMI 80 - BOMBAY HIGH COURT], as well as UCO Bank vs. the Commissioner of Income Tax- Supreme Court [1999 (9) TMI 4 - SUPREME COURT] held that merely because securities were kept under head by bank till maturity, said security could not be treated as purely investment.-Security held by bank was in nature of stock in trade - decided in favour of assessee.

  ---

• 2019 (4) TMI 819
  Notice u/s 148 - notice issued to the dead person - despite information, ITO issued notice u/s 142(1) - Held that:- The facts are not seriously in dispute. The Petitioner had produced the death certificate of Shri Shyamsundar Dhumatkar before the Income Tax authorities, indicating that he died on 14/10/2016. Thus, the impugned notice of reopening of assessment was issued on a dead person. There are several judgments of different High Courts holding that the notice or reopening of assessment is invalid in law. A reference in this respect can be made to a decision of Gujarat High Court in the case of CHANDRESHBHAI JAYANTIBHAI PATEL VERSUS THE INCOME TAX OFFICER [2019 (1) TMI 353 - GUJARAT HIGH COURT], decided on 10/12/2018). As also the decision of Madras High Court in the case of ALAMELU VEERAPPAN VERSUS THE INCOME TAX OFFICER, NON CORPORATE WARD 2 (2) , CHENNAI [2018 (6) TMI 760 - MADRAS HIGH COURT]. It is not necessary to refer to all the judgments on the point. Suffice it to say, as per the settled law, notice for reopening of assessment against a dead person is invalid. - Decided against revenue

  ---

• 2019 (4) TMI 818
  Search and seizure u/s 132 - sufficiency and insufficiency of reasons to belief for warrant of authorization for search and seizure - HELD THAT:- The scope of interference at this stage is very limited and the Income Tax Act, 1961 provides a complete mechanism, which has been followed after the search and seizure operation has been carried out. Even if it is presumed for a moment that warrant relating to search and seizure was not proper and there was some defect in it, the material collected during the search and seizure cannot be brushed aside on this count alone. The Income Tax Act, 1961 provides for a detailed procedure that has to be followed and this Court, in the present writ petition, does not find any reason to quash the entire search and seizure operation as prayed by the petitioners in the relief clause - writ petition is dismissed.

  ---

• 2019 (4) TMI 817
  Taxability of capital gain - Diversion of income - non receipt of sales consideration in hand of assessee - Directly paid to bank as property was mortgage - mortgage deed was never registered and Bank did not have a right to bring the property to sale - whether on creation of mortgage, the bank had acquired overriding title to the property? - claim that amount paid to bank towards clearing the cloud over the title should be deducted as provided u/s 48 as expenditure incurred wholly and exclusively in connection with such transfer? HELD THAT:- Mortgage was by deposit of title deeds. In a mortgage by deposit of title deeds, the mortgagee, in this case, the State Bank of India, Pondicherry, does not acquire title, much less overriding title to the property. The charge created over the property was to the extent of the mortgage amount or not to the extent of value of the property. Since the mortgage had been created voluntarily, the balance sale consideration paid to discharge the mortgage would also be the total value of the property and capital gains is to be computed on the full value of consideration received or agreed as a result of transfer of the capital assets. The entire sale consideration which was the full value of the capital assets was paid directly to the bank. This was not paid to clear a cloud over the title. This was paid to clear the interest or charge over the property which had been offered as collateral security. In the present case, mortgage deed was never registered and State Bank of India, Pondicherry did not have a right to bring the property to sale. The assessee in the present case, continued to have title over the property along with her co-owners. They brought the property to sale through Bank. In Thressiamma Abraham's [1996 (9) TMI 60 - KERALA HIGH COURT] case, the mortgagee/financier namely, Kerala Financial Corporation sold the property in auction and realized the sale consideration. Thressiamma Abraham (supra) did not voluntarily sell the property. In view of the above reasonings, we hold that in the present case, there was no diversion of sale proceeds by virtue of overriding title, but on the contrary, there was only a mere application by the owners themselves of the profits realized on the sale of land towards the discharge of loan obligations of same firm. We also hold that the assessee cannot claim any part of such application as cost of acquisition for the purpose of computing capital gains as per the provisions of Section 48. We hold that the ratio laid down in the Hon ble Supreme Court in the case of V.S.M.R. Jagadishchandran (Decd.) [1997 (7) TMI 6 - SUPREME COURT] and of the Madras High Court in N.Vajrapani Naidu [1998 (10) TMI 39 - MADRAS HIGH COURT] and in Sri Kanniah Photo Studio [2015 (8) TMI 270 - MADRAS HIGH COURT] which followed the ratio in the judgment of R.M.Arunachalam [1997 (7) TMI 5 - SUPREME COURT] laid down the correct position of law. - decided in favour of the Revenue

  ---

• 2019 (4) TMI 816
  Revision u/s 264 - commencement of business - allowability of expense u/s 37(1) - established by the government for specific purpose of developing old stations - entire major services are outsourced to consultants - during the assessment year the assessee engaged all key personnel. CEO took charge sometime in the beginning of November, 2012. It finalised a tender for obtaining financial bid and tender advisory service on 17.12. 2013 and the first consultant was appointed on 01.02.2013 - AO disallowed three items of expenditure claimed as deduction, i.e., depreciation, preliminary expenses, and employees’ remuneration - HELD THAT:- There is no bright line that can be determinative as to when business commences. In case of the service sector, where the entity has involved itself in various kinds of steps, some of which are preliminary to setting up the main substantial commercial venture, the linkage between these preliminary steps and nature of the ultimate activity may be a relevant factor to be taken into account. Therefore, Carefour [2014 (9) TMI 793 - DELHI HIGH COURT] dealt with this trading related aspect and stated that even certain kinds of preliminary steps, such as engaging in negotiation or employment of personnel, could be relevant even though actual activity might not be involved. Keeping this principle in mind, this Court is of the opinion that the petitioner’s activity, which it claims to be preliminary steps towards the fulfillment of the purpose, which is embodied in the MoU and extracts of which have been reproduced above, clearly indicates that it had set up its business and that these steps were for the ultimate fulfillment of its purposes, which was the preparation of development plans leading to the projects. The Principal Commissioner of Income Tax, in the impugned order, was plainly wrong in holding otherwise. For the aforesaid reasons, we are of the opinion that this writ petition is to succeed. The impugned order of the CIT, as well as the AO are set aside.he matter is remitted to the AO to give tax effect and to ensure that the deduction claims are appropriately granted.

  ---

• 2019 (4) TMI 809
  Reopening of assessment - nature of land sold - Addition under the head Long Term Capital Gains as the agricultural land sold by the appellant is not a capital asset u/s 2(14) of the I.T. Act, 1961 being beyond the notified limits - HELD THAT:- In the facts of the present case, the evidence of exact location of the land and the value thereof based on a Valuation Report admittedly was relevant and crucial for deciding the issue and knowing its relevance, the assessee ideally should have been advised to come by way of a proper application. The fact that the assessee was a farmer agriculturist and thus, may not have had the benefit of a proper legal advice at the assessment stage cannot be ruled out. In a fair exercise of power, the said opportunity should have been given by the CIT(A). In the eventuality the value based on the Valuation Report was to be upset, the matter should have been referred to the DVO and not arbitrarily decided. Accordingly, the evidence is directed to be admitted and in case it is found to be insufficient or incomplete, the CIT(A), it is directed shall call for further evidences if so deemed necessary and confront these to the assessee before passing an order in accordance with law. With the above directions/observations, the impugned order is set aside on the issues agitated in ground Nos. 3 to 5 back to the file of the ld. CIT(A) directing him to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. Said order was pronounced in the Open Court at the time of hearing itself.- Appeal of the assessee is allowed for statistical purposes.

  ---

• Customs

• 2019 (4) TMI 823
  Misdeclaration of export goods - export of man-made fabrics under rebate/DEPB scheme - Confiscation - rejection of declared value - penalty u/s 114 of CA, 1962 - Held that:- Issue notice on the civil appeal(s) as also on the application(s) for stay, returnable in three weeks.

  ---

• Corporate Laws

• 2019 (4) TMI 822
  Conversion of status of the Company from “Public Limited Company” to “Private Limited Company” - alteration of Articles of Association - Section 14 of the Companies Act, 2013 - Held that:- Since all the requisite statutory compliance has been fulfilled, the conversion of the status of the company from “Public Limited” to “Private Limited” as per Special Resolution passed at the EOGM held on 08.02.2018 is hereby approved in the interest of the company and such change of status of the company shall not cause any prejudice either to the members or the creditors of the petitioner company - The Petitioner shall, however, remain bound to comply with the statutory requirements in accordance with law.

  ---

• 2019 (4) TMI 821
  Compounding of Offences - non-filing of the cost audit report - section 233B of the Companies Act, 1956 - offence related to the year 2013-14 - section 233B(11) of the Companies Act, 1956 - Held that:- Since the offence is said to have been committed under the erst-while provisions of the Companies Act, 1956 whereunder it has been held by the hon'ble Supreme Court that this Tribunal has the power to compound such like offences attendant with such like punishment as in the present one and even if prosecution is pending before the criminal court and also taking into consideration the change in law on and from February 9, 2018 to section 441(1) as brought forth by the Companies (Amendment) Act, 2017 (1 of 2018) this Tribunal has the power to compound the offence as brought forth in this application. In relation to the provision above it is seen that the defaulter has made good the default. The offence shall stand compounded - petition disposed off.

  ---

• Insolvency & Bankruptcy

• 2019 (4) TMI 820
  Initiation of Corporate Insolvency Resolution Process - Corporate Debtor - Section 7 of the Insolvency and Bankruptcy Code, 2016 - Held that:- In the present proceeding under Section 7(5)(a) of the Code, application of the financial creditor has to be admitted on satisfaction that default has occurred, the application is complete, and that no disciplinary proceeding against the proposed IRP is pending. Respondent corporate debtor has not disputed that the loan was availed and that loan and security documents were executed. Applicant financial creditor has placed on record renewal of working capital facility letter aggregating to ₹ 420 million dated 21.12.2012, which was confirmed and accepted by the respondent company by affixing its seal and also duly supported by its Board Resolution dated 20th December, 2012. The applicant 'financial creditor' has placed on record voluminous and overwhelming evidence in support of the claim as well as to prove the default. Respondent corporate debtor has failed to show that there is no debt or default. In the present case the bank had sanctioned and disbursed the loan amount recoverable with applicable interest by entering into loan agreements with the corporate debtor. The corporate debtor had borrowed the credit facility against payment of interest as agreed between the parties. The loan was disbursed against the consideration for time value of money with a clear commercial effect of borrowing. Moreover, the debt claimed in the present application includes both the component of outstanding principal and interest. In that view of the matter not only the present claim comes within the purview of 'Financial Debt' but also the applicant can clearly be termed as 'Financial Creditor' so as to prefer the present application under Section 7 of the Code. In the facts, it is seen that the applicant bank clearly comes within the definition of Financial Creditor. The material placed on record further confirms that applicant financial creditor had disbursed various loan facilities to the respondent corporate debtor and the respondent has availed the loan and committed default in repayment of the outstanding financial debt. In terms of Section 7(5)(a) of the Code, the present application is admitted - moratorium in terms of Section 14 of the Code also declared.

  ---

• Service Tax

• 2019 (4) TMI 815
  Voluntary Compliance Encouragement Scheme - rejection on the ground that false declaration under Chapter VI relating to Service Tax Voluntary Compliance Encouragement Scheme, 2013 made - appellant claims that it had submitted the declaration under Section 107(1) of the 2013 Scheme under a mistaken belief of law that reimbursement of expenses are liable to service tax under Business Support Services. Held that:- In the present case, the appellant had declared the service tax on reimbursement of expenses under Business Support Service even though in law, the appellant may not have been required to pay service tax in view of the decision of the Supreme Court in Union of India Vs. Intercontinental Consultants and Technocrats Private Limited [2018 (3) TMI 357 - SUPREME COURT OF INDIA] - It is also not in dispute that the Department has not found anything false much less substantially false, in the declaration made by the appellant on 30 December 2013 in regard to Business Support Service . The Show cause notice, however, proceeds on the footing that the appellant failed to disclose the services in regard to Banking and Financial Services. . The form requires a declarant to furnish a calculation sheet separately if service tax dues is in respect of more than one service. It is in such a situation, that the declarant has to furnish separate calculation sheets. It does not mean, under any circumstances, that a declarant must necessarily disclose all the taxes dues to take the benefit of 2013 Scheme. The Commissioner committed an error in holding that any person who decides to declare tax dues under the scheme has to declare all service tax dues and there is no option to include some service and leave out some services - appeal allowed - decided in favor of appellant.

  ---

• 2019 (4) TMI 814
  Classification of services - supply of tangible goods services or not - whether the fitting and furniture in a residential premises which was leased out for residential purposes will amount to supply of tangible goods? - Held that:- While transferring the impugned articles by way of lease the appellant was not retaining the right of possession and effective control of leased articles except for such loss which were beyond the control of lessee - the transferred articles cannot be held to be Supply of Tangible goods - appeal allowed - decided in favor of appellant.

  ---

• 2019 (4) TMI 813
  Taxability - commitment charges - whether commitment charges are part of Interest or not - Held that:- This Tribunal in the case of CCE, Bombay vs. Ram Decorative & Industries Ltd. [1998 (2) TMI 402 - CEGAT, NEW DELHI] has held that the commitment charges being in the nature of liquidated damages for the breach of contract are not includible in the assessable value in terms of Section 4 of Central Excise Act - demand not sustainable. Extended period of Limitation - Held that:- For invoking the extended period of 5 years, it was for the Department to prove the malafide in terms of suppression of facts or the mis-representation on part of the appellant, that too, with an intend to evade the duty but there is no such evidence on record which may prove beyond sufficient doubt the willful default on part of the appellant - In absence of any such evidence, the extended period would not have been invoked. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (4) TMI 812
  Classification of services - Cargo Handling Services or Goods Transport Agency Services? - Hiring of Pay Loader and Tippers for Loading and transporting of coal - Held that:- The work of loading and unloading is incidental to “transportation’, which has also been clarified by Circular dated 6 August, 2008 issued by Government of India, Ministry of Finance, Department of Revenue in regard to Service tax levy on goods transport by road services. Composite service may include various intermediary and ancillary services such as loading/ unloading, packing / unpacking etc. provided in the course of transportation of goods by road. These services are not provided as independent activity but as means of successful implementation of the principal service, namely the transportation of goods by road. It has, therefore, been clarified that a composite service even if it consists of more than one service, should be treated as a single service based on the main or principal service. It has, therefore, been held that any ancillary / intermediate service provided in relation to transportation of goods, and the charges, if any, for such services are included in the invoice issued by the Goods and Transport Agency and not by any other person. Such service would form part of Goods and Transport Agency Service and , therefore, the abatement of 75% would be available on it. Whether in the present case transportation is the main service and loading / unloading is ancillary service provided for successful completion of the main service? - Held that:- The cost of transportation charge is ₹ 41.65 per ton of limestone quantity delivered at a distance of 10.5 km. It is apparent that the essential feature of the service is transportation. Loading and unloading are ancillary / intermediate service provided in relation to transportation of goods, and such service would be Goods and Transport Agency Service. It cannot be ‘Cargo Handling service’ as was found by the Commissioner. It has been held by the Supreme Court in COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR VERSUS SINGH TRANSPORTERS [2017 (7) TMI 494 - SUPREME COURT] that transportation of coal from the pit-heads to the railway sidings within the mining area is more appropriately classified under the heading ‘Transportation of Goods by road service’. Appeal allowed - decided in favor of appellant.

  ---

• Central Excise

• 2019 (4) TMI 811
  Maintainability of appeal before High Court - Valuation - Business Auxiliary Service - inclusion of receipt of Airlines incentive for booking in assessable value - Held that:- Both these issues namely valuation of services as well as the exemption from Service Tax i.e. rate of duty would be a subject matter of appeal before the Supreme Court in view of Section 83 of the Finance Act, 1994 read with Section 35G(1) and 35L(1)(b) of the Act - Therefore, this appeal in respect of valuation and rate of duty is subject to appeal before the Supreme Court and not this Court. Appeal dismissed as not maintainable.

  ---

• 2019 (4) TMI 810
  Rectification of Mistake - in the case title framed in the miscellaneous order dated 03/08/2018, the respondent is shown as “Commissioner of Central Excise, Jaipur – I”. It is submitted that the correct respondent is to be shown as “Central Excise & CGST Commissionerate, Alwar”. Held that:- The appeal was filed by M/s KEI Industries and at the relevant time, the jurisdiction of the appellant was within the Commissionerate of Central Excise, Jaipur – I. The miscellaneous order dated 03/08/2018 has also reflected the respondent as “Commissioner of Central Excise, Jaipur – I”. During the period of dispute, the jurisdiction was that of Commissioner of Central Excise, Jaipur. The CGST Commissionerate was formed on a subsequent dated in 2017. There is no mistake in the miscellaneous order dated 03/08/2018 - ROM application dismissed.

  ---