TMI Tax Updates - e-Newsletter
May 15, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
GST
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Validity of assessment order - Best judgment assessment - Disregard to the regular GST returns filed - The High Court observed that the impugned assessment orders failed to take into account the returns, the reply dated 01.06.2023, and the documents annexed to it. The orders were based solely on the statement recorded during the inspection, which seemed to reflect the stock position on that date. - Consequently, the court quashed the impugned orders and remanded the matters for reconsideration.
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Validity of reduction of fine and penalty - Jurisdiction of appellate authority - Confiscation of Gold ornaments u/s 130 - Transportation of Gold without proper documents - The High Court upheld the legality of the confiscation order, agreeing that the respondent's (assessee) actions contravened Section 31 of the Act and relevant Rules (46, 55 & 55A). Confirmed the validity of the STO’s confiscation decision based on the respondent’s intent to evade tax by transporting gold without valid documents. - the High Court confirmed that the appellate authority has wide powers under Section 107(11) to modify, annul, or confirm decisions of the adjudicating officer. It ruled that the appellate authority’s reduction of the fine was within its jurisdiction and justified by considering the respondent’s status as a registered taxpayer with regular account maintenance.
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Levy of GST - Place of supply - Tax imposed on exhibition services received by the petitioner in non-taxable territory from the person located in non-taxable territory on RCM basis - The Court emphasized that u/s 13(5) of the IGST Act, the place of supply for services related to fairs and exhibitions is where the event is held. In this case, the services were received outside India. - The Court referenced the notification issued under u/s 5(3) of the IGST Act, which mandates that services supplied by a person in a non-taxable territory to a person in a taxable territory (other than a non-taxable online recipient) are taxable on a reverse charge basis. - The petitioner, being a registered person in the taxable territory (India), is liable to pay IGST on the services received outside India.
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Validity of assessment order - The court noted that the audit observations were indeed converted into the show cause notice and subsequently into the impugned order without substantial evaluation of the petitioner's responses. This approach violated the principles of natural justice as laid out in the ORYX Fisheries case, where meaningful opportunity to respond is imperative. - The court found that the identical language used in both the show cause notice and the impugned order substantiated the petitioner's claim of predetermination. This negated the objective adjudication process required by law. - The court ordered that the impugned order be treated as a show cause notice, allowing the petitioner a fresh opportunity to respond, and directed the authorities to issue a new order after a fair hearing.
Income Tax
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LTCG - exemption claimed u/s 54F - fractional ownership - Whether joint ownership of 16.67% in six flats constituted owning more than one residential house. - The ITAT concluded that joint ownership is distinct from absolute ownership. None of the co-owners, including the appellant, could claim full ownership of any single flat. The Tribunal referred to the Hon’ble Supreme Court's decision in Seth Banarsi Dass Gupta v. CIT, which stated that fractional ownership does not equate to full ownership for tax exemptions. It also considered various ITAT decisions supporting this view. The Tribunal ruled that the appellant's joint ownership did not disqualify him from the exemption u/s 54F. The Assessing Officer was directed to allow the claimed exemption.
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Validity of Faceless assessment of income escaping assessment u/s 151 - According to Petitioners, the notice could have been issued only by the Faceless Assessing Officer (“FAO”) not issued by the Jurisdictional Assessing Officer (“JAO”) - The court acknowledged that the issues in the present petitions were covered by the Hexaware Technologies judgment and consequently quashed the impugned notices. Any reassessment orders, demand notices, or penalties based on these invalid notices were also set aside. The court extended this benefit to petitioners who had raised the issue of notice validity orally and disposed of the petitions and any pending interim applications accordingly.
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Addition u/s 68 - burden of proof - share application money - The High Court, upon reviewing the submissions and evidence, concurred with the ITAT's findings. It emphasized that the Assessee had met the burden of proof required under Section 68, differentiating the case from previous judgments like CIT vs. Sadiq Shaikh. The High Court upheld the ITAT's decision, concluding that the Assessee had satisfactorily demonstrated the nature of the transaction with sufficient documentary evidence.
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Reopening of Assessment u/s 147 - investment in NCDs unexplained - difference between accrual of income and receipt of income - reopening after the expiry of four years - Petitioner is a tax resident of Cyprus - The Bombay High Court quashed the reopening notice dated 30th March 2021 and subsequent orders, holding that the reopening of the assessment was based on a mere change of opinion, which is not a valid ground for reassessment. The Court emphasized that all material facts were disclosed by the Petitioner during the original assessment proceedings, and any reassessment after four years is impermissible without a failure to disclose such facts. Furthermore, the Court upheld the Petitioner's argument that under the India-Cyprus DTAA, interest income is taxable only upon receipt, which was not adequately addressed by the Respondents.
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Addition made u/s. 40A(2)(b) for excess payment made to related party - The tribunal noted that the assessee provided substantial evidence of higher purchase rates from unrelated parties and that both entities were in a loss scenario, negating any tax advantage motive. Thus, the addition was deleted.
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Set off of loss against income referred to in section 68 r/w.s115BBE - The tribunal agreed with the arguments of the assessee, emphasizing that the amendments in section 115BBE are effective from AY 2017-18. Hence, for AYs 2011-12 and 2015-16, the assessee is entitled to claim the set-off of business loss against income u/s 68. The tribunal cited the CBDT Circular No. 11/2019 and the Kerala High Court’s decision, both supporting the assessee's position.
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Revision u/s 263 by CIT - disallowance of provision for nonperforming assets (NPA) in computing books profits u/s 115JB - The Tribunal, after considering detailed submissions and previous judicial precedents, ruled in favor of the assessee on all major issues. It concluded that the AO had conducted proper enquiries and made permissible views under the law, rendering the Pr. CIT’s invocation of section 263 invalid. Consequently, the Tribunal quashed the order passed u/s 263 and restored the original assessment order.
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Revision u/s 263 - Suo moto revisional proceeding initiated - The Gauhati High Court allowed the writ petition and set aside the Show Cause Notice and the ex-parte Order issued u/s 263 for the assessment year 2017-18. The Court concluded that the initiation of proceedings was illegal, arbitrary, and without jurisdiction. The assessment order, even if erroneous, was not prejudicial to the revenue, as the discrepancy in long-term capital gains was related to exempt income. The judgment reaffirmed the necessity of both conditions being met for the exercise of revisional jurisdiction and emphasized adherence to principles of natural justice.
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Income Taxable in India or not - Royalty/FTS income - Provision of background screening and investigation services - scope of India - USA DTAA - The Tribunal noted that the assessee's services are restricted to verifying information provided by candidates and supplying the findings to its clients. These services do not involve the transfer of any copyright, nor do they allow clients to commercially exploit any copyright. The Tribunal held that the background screening reports do not constitute 'Royalty' as they do not fit within the definition under Article 12. The reports are factual data and do not involve any copyrighted work or the transfer of any such right. The Tribunal also observed that the assessee does not have a PE in India, and therefore, the income cannot be taxed as business income under the DTAA.
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TDS u/s 194C - payment of freight charges w/o deducting TDS - tripartite agreement - payment made to the Truck Operator Union (through the assessee company) - The ITAT found that the primary liability to deduct TDS rested with M/s Pepsico India Holding Pvt. Ltd., as they were the principal party responsible for the transportation of their goods. The Tribunal observed that the assessee merely facilitated the payment process by routing the payments from M/s Pepsico India Holding Pvt. Ltd. to the truck operator union. - The Tribunal agreed with the assessee's contention that it acted as an intermediary. The ITAT noted that the assessee did not own any trucks and its primary business was providing logistical support, coordination, and raising invoices on behalf of the truck operator union. - The ITAT concluded that the provisions of Section 194C were not applicable to the assessee regarding the non-deduction of TDS on freight payments.
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Validity of special audit u/s 142(2A) - The Jharkhand High Court upheld the orders for a special audit of the petitioner’s accounts for the assessment years 2020-21 and 2022-23. The court found that the discrepancies in the petitioner’s accounts justified the special audit and that the statutory requirements for ordering such an audit were met. While the court acknowledged a procedural lapse in providing insufficient time for the petitioner to respond, it held that this did not cause significant prejudice to warrant interference. The petitioner’s writ petitions were dismissed, with the court providing additional time for the audit and specific directions to ensure a fair audit process.
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Addition u/s 69B r.w.s.115BBE - during the course of survey action discrepancies were found on account of physical verification of stock vis-a-vis regular books of account - The AO and CIT(A) classified this as unexplained investment, leading to a higher tax rate. However, the Tribunal, after considering the facts and various precedents, concluded that the excess stock was indeed related to the regular business operations and not an unexplained investment. Therefore, it directed the AO to assess the surrendered income as business income and apply the normal tax rate, ultimately allowing the assessee's appeal.
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Addition u/s 68/69A/69B and taxed the same u/s 115BBE - Surrendered income in survey - The Tribunal found that the income was directly linked to the assessee's regular business operations, negating the Revenue's claim of it being unexplained investment. The ITAT rectified the issue of double taxation by instructing the Assessing Officer to reassess the income appropriately and allowed the depreciation claim on the building costs, recognizing that the assessee had already paid taxes on the entire surrendered amount.
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Validity of the final assessment order due to non-implementation of the directions of learned DRP - Royalty/FTS receipts - The ITAT underscored the legal requirement u/s 144C(13) of the Income-tax Act, which obligates the AO to strictly adhere to the DRP's directions. Citing key judicial precedents, including the Bechtel Limited and ESPN Star Sports cases, the ITAT concluded that the AO's failure to implement the DRP's binding directions resulted in the final assessment order being declared void ab initio and without jurisdiction. Consequently, the Tribunal quashed the assessment order, thereby partly allowing the appeal in favor of the assessee.
Customs
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Classification of ‘PVC resin Impact Modifier ‘Kane ACE B 22’ - change of classification from 3902 to 3906 - Interpretation of sub-heading note - The Tribunal analyzed the relevant Chapter Notes, particularly Chapter Note 4, which states that copolymers are to be classified under the heading covering the comonomer unit that predominates by weight. The Tribunal noted that Butadiene content in the product is nearly 50%, significantly higher than the content of other comonomers such as Methyl Methylacrylate (15-20%). Subheading notes are applicable within a heading once the classification under the main heading is determined. The product should be classified under Chapter Heading 3902 based on the predominance of Butadiene by weight. Consequently, the impugned order was set aside, and the appeal was allowed.
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Levy of Social Welfare Surcharge (SWS) where basic Customs duty (BCD) is Nil - Revenue submitted that BCD is not nil or exempted but is payable and is debited in the MEIS scrip - The Tribunal extensively referred to previous cases, including the Emami Agro Tech Ltd. case, where it was held that SWS is not payable when the goods are cleared using MEIS scrips. The Tribunal reiterated that the debit of BCD to the scrip is not an actual payment but a notional collection of tax. The Tribunal set aside the impugned order and allowed the appeal, including recredit/refund of SWS paid along with interest as per law.
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Penalty u/s 114(i) on CHA - Export of "Carbon Black" - Obligation of CHA for the unauthorized loading of the container without LEO (Let Export Order) - The Tribunal emphasized that prior knowledge of the offending goods and mens rea is required for invoking section 114(iii). The case law cited by the department did not support their position in the absence of mens rea. - The Tribunal concluded that there was no act of omission or commission on the part of the Appellant that rendered the goods liable for confiscation under section 113(g). The penalty imposed was not justified.
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Valuation of Export of Iron Ore fines - The Appellate Tribunal held that the transaction value was not rejected or doubted, as evident from previous orders. Resorting to contemporaneous prices without considering quantity and providing adequate evidence was deemed inappropriate. The reliance on such data was found to be in contradiction with established legal precedents, leading to the setting aside of the impugned order. The Tribunal remanded the matter to the Original Adjudicating Authority, directing a reevaluation in accordance with law and relevant legal rulings.
Indian Laws
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Dishonour of Cheque - legal heir of deceased - substitution of the opposite party (deceased complainant) - It is the case of the petitioner that the opposite party is not the sole legal heir of deceased - The High Court affirms the decision of the Sessions Judge to allow the opposite party's substitution as the legal heir of the deceased complainant. It acknowledges the existence of other legal heirs but upholds the right of the opposite party to proceed with the case.
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Dishonour of Cheque - conviction of accused - The High Court upheld the conviction under Section 138 of the Negotiable Instruments Act based on the evidence presented, finding the accused guilty of dishonoring the cheques issued to discharge his financial liability. Regarding the defense of non-payment, the High Court found it unconvincing as the accused failed to provide sufficient evidence to support his claim, and the complainant's version was more credible. The High Court affirmed the lower court's judgment, stating that the evidence presented was considered in accordance with the law, and there was no reason to interfere with the conviction.
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Dishonour of Cheque - Continuation of proceedings during moratorium period - vicarious liability of director - proceedings under Section 138 or 141 of the NI Act - Section 32-A of the IBC stipulates that the liability of a corporate debtor for offenses committed prior to insolvency resolution ceases upon approval of the resolution plan, provided there is a change in management or control. However, this protection does not extend to natural persons associated with the corporate debtor, such as directors. Since there was no change in management in the resolution plan approved for the corporate debtor in this case, the protection under Section 32-A does not apply. Consequently, the criminal liability of both the corporate debtor and its directors persists.
IBC
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The primary contention revolves around the approval process of the resolution plan by the Committee of Creditors (CoC) and the subsequent judicial scrutiny by the NCLT and the National Company Law Appellate Tribunal (NCLAT). - The Appellate Tribunal (NCLAT) underscores the sanctity of the CoC’s commercial wisdom, establishing that judicial intervention is limited and specific to instances of procedural lapses, perversity, or discrimination in the decision-making process. By setting aside the NCLT’s order due to procedural irregularities and violation of natural justice, the Tribunal ensures that the resolution process remains robust, fair, and in line with the statutory framework of the IBC.
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Maintainability of section 7 application - Initiation of CIRP - existence of debt and default - date of default - On 14.02.2020 the account was declared NPA - The Appellate Tribunal emphasized that the date of default, being the date of declaration of the account as NPA, was valid for initiating insolvency proceedings under Section 7. The Tribunal ruled that the default date should be considered as the date of declaration of the account as NPA, rather than the date of renewal of the working capital limit. It clarified that the renewal of the limit did not affect the occurrence of default by the Corporate Debtor in fulfilling its financial obligations.
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Rejection of prayer of Operational Creditor to initiate the CIRP against the Corporate Debtor - The Appellate tribunal (NCLAT) found no breach of the contract terms by the respondent as the initial agreed terms were for the appellant to pick up the goods from the respondent's location. It was determined that the appellant attempted to shift the terms in the appellate documents, which were not presented at the Adjudicating Authority. The tribunal concluded that there was a pre-existing dispute regarding the delivery and payment terms, substantiated by the evidence of email exchanges and the non-collection of goods. - The tribunal upheld the decision of the Adjudicating Authority
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Rejection of Section 9 application - CIRP - cyber fraud committed against the Respondent - pre-existing disputes or not - While a cyber fraud occurred, the Tribunal noted that it did not necessarily constitute a pre-existing dispute between the parties. The fraud was committed by unknown third parties, as per the respondent's own admission in their police complaint. The Tribunal concluded that the fraud and subsequent police complaint did not establish a dispute between the appellant and respondent. - The Tribunal affirmed that the debt was undisputed and unpaid, satisfying the criteria for initiating proceedings under Section 9 of the IBC.
Service Tax
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Refund - Principle of unjust enrichment - validity of the chartered accountant (CA) certificate - The Tribunal acknowledged that while service provided to self may not automatically trigger unjust enrichment, the crucial factor is whether the incidence of service tax was passed on in any form. The Tribunal emphasized that the burden of proof lies on the appellant to demonstrate that the incidence of service tax was not passed on. - Regarding the validity of the chartered accountant certificate, the Tribunal recognized its importance but highlighted that it must be supported by the actual entries in the books of account. Without verification of the books, the certificate alone may not suffice to establish the claim.
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Service tax liability in respect of general insurance premium - The Tribunal agreed with the appellant that service tax should be calculated based on the rates effective at the time of risk assumption (receipt of premium), not the dates on which the payments were processed. They found the Commissioner’s method, which applied new rates retroactively, to be incorrect. - Regarding the Extended Period of Limitation: The Tribunal held that the show cause notice was time-barred as it did not specify grounds for invoking the extended period of limitation. They noted a lack of evidence for wilful misstatement or suppression of facts by the appellant.
Central Excise
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Demand of differential Central Excise Duty with interest and penalty - inflating freight charges through their dummy transport unit - The Tribunal affirmed the confirmation of the differential duty, penalties, and interest imposed by the Assistant Commissioner, based on the findings of undervaluation and evasion of excise duty. Regarding the determination of assessable value, the Tribunal analyzed the provisions of Rule 5 of the Central Excise Valuation Rules and Section 4(1)(a) of the Act. However, it found no merit in the appellant's argument and upheld the impugned orders.
VAT
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Classification of goods - rate of tax - Nylon Chips - plastic granules or not - The High Court examined the manufacturing process of Nylon Chips and concluded that they indeed fell under the classification of plastic granules as per Entry 83 of Schedule II (B) of the Act. It relied on technical evidence and certifications to support this determination. The court emphasized that the addition of fillers and additives did not change the fundamental nature of the product as plastic granules.
Articles
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (5) TMI 658
Non-payment of GST - Place of supply - non-taxable territory - Tax imposed on exhibition services received by the petitioner in non-taxable territory from the person located in non-taxable territory on RCM basis - interest and penalty - HELD THAT:- As per sub-section(3) of Section 5 of IGST Act, the Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. A notification dated 28.06.2017 has been issued in exercise of powers conferred under sub-section (3) of Section 5 of IGST Act, which is not under challenge. Sub-section (5) of Section 13 of the IGST Act, includes the places of supply of services. In the present case, the supply of services has taken place outside India and as per the notification the receiver of service is the person who is registered in the taxable territory. Petitioner is a registered person who is located in the taxable territory. There are no reason to entertain the writ petition as the services received outside India is already taxable at the hand of the receiver of services, who is a registered person in taxable territory i.e. India. The writ petition being devoid of merits is dismissed.
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2024 (5) TMI 657
Maintainability of petition - alternative remedy not availed - assessment order challenged on the sole ground that the statutory remedy of appeal against that order stood foreclosed by law of limitation - Levy of GST on royalty. The petitioner did not file any appeal either within the period of limitation as prescribed under Section 107 of the RGST Act, 2017/ the CGST Act, 2017 or within the maximum period thereafter which could be condoned under the power to condone the delay in filing of the appeal . HELD THAT:- Present is a case where the petitioner did not even file appeal and allowed the order passed in assessment proceedings to become final and thereafter approached this Court by filing writ petition seeking to challenge the determination of tax, interest and penalty by the competent authority vide order dated 22.03.2023. Present is not a case where the order under Section 74 of the RGST Act, 2017/ the CGST Act, 2017 levying tax along with interest and penalty was passed without giving any opportunity of hearing to the petitioner. Even according to the petitioner, he was issued show cause notice and thereafter, impugned order was passed. In the writ petition, no plausible explanation has been offered as to why the petitioner did not take recourse to the remedy of statutory appeal. It, therefore, appears that the petitioner consciously did not choose to take recourse to the remedy of appeal as provided under Section 107 of the RGST Act, 2017/the CGST Act, 2017, but waited for the expiry of the period of limitation for filing appeal as also the maximum period of delay which could be condoned in the exercise of powers conferred upon the appellate authority under the provisions of Section 107 of the RGST Act, 2017/ the CGST Act, 2017. In the case of ASSISTANT COMMISSIONER (CT) LTU, KAKINADA ORS. VERSUS M/S. GLAXO SMITH KLINE CONSUMER HEALTH CARE LIMITED [ 2020 (5) TMI 149 - SUPREME COURT] , the question which arose for consideration was whether the High Court in exercise of its writ jurisdiction under Article 226 of the Constitution of India, ought to entertain a challenge to the assessment order on the sole ground that the statutory remedy of appeal against that order stood foreclosed by law of limitation - the Hon'ble Supreme Court arrived at the conclusion that in such circumstances, the writ petition was not maintainable and was liable to be dismissed. Having not preferred an appeal, the petition in the present case, in view of the decision of Hon'ble Supreme Court in the case of Glaxo Smith Kline Consumer Health Care Limited is not maintainable - petition dismissed.
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2024 (5) TMI 656
Validity of assessment order - SCN was issued based on Audit observations - The contents of impugned order and are identical to the conclusions recorded in the show cause notice and in the earlier audit observations - Revenue submitted that petitioner did not enclose necessary documents while objecting to the audit objections or responding to the show cause notice - violation of principles of natural justice - HELD THAT:- The adjudication process would be robbed of meaning unless the authority undertaking adjudication acts in an objective manner without predetermining the issues arising for consideration. Since adjudication was not undertaken in such manner, the impugned order cannot be sustained. However, it shall be treated as a show cause notice and responded to. The impugned order be treated as a show cause notice. The petitioner is permitted to submit a reply thereto within 15 days from the date of receipt of a copy of this order. Upon receipt of such reply, the second respondent is directed to provide a reasonable opportunity, including a personal hearing, and thereafter issue a fresh order within three months from the date of receipt of the petitioner's reply after duly taking note of the observations set out in this order. Petition disposed off.
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2024 (5) TMI 655
Challenge to assessment order - non application of mind - violation of principles of natural justice - HELD THAT:- In the face of the chartered accountant's certificate dated 12.10.2023 and the petitioner's reply dated 13.10.2023, the findings in the impugned order are completely unsustainable and clearly indicate non application of mind. Even otherwise, the impugned order appears to be completely unreasoned. Hence, interference is warranted with the order. The impugned assessment order dated 22.12.2023 is quashed and the matter is remanded for reconsideration - Petition disposed off by way of remand.
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2024 (5) TMI 654
Cancellation of his GST registration - petitioner had not filed GST monthly returns for a continuous period of six months - HELD THAT:- In Suguna Cutpiece [ 2022 (2) TMI 933 - MADRAS HIGH COURT] , this Court directed restoration of GST registration subject to several terms and conditions. The said judgment was followed thereafter in many cases. In the over all facts and circumstances, the petitioner is entitled to an order on similar lines. The restoration of the GST registration is subject to and conditional upon fulfilling the conditions imposed - petition disposed off.
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2024 (5) TMI 653
Validity of assessment order - petitioner had filed returns periodically as mandated by applicable GST enactments, but that the impugned assessment orders were issued on best judgment basis - disregard of documents filed - HELD THAT:- The petitioner expressly asserted that returns were filed for each of the relevant assessment years. The assessment orders also record the statement of the petitioner that he filed GST returns on monthly basis without default. The said assessment orders also refer to the reply dated 01.06.2023 of the petitioner, and the petitioner has placed the said reply on record. On perusal thereof, it is clear that the petitioner has enclosed about seven documents. The tax demand and penalty were confirmed entirely on the basis of the statement recorded on 26.09.2022. Prima facie, such statement appears to be based on the stock position as on that date. Since the impugned assessment orders did not take into account the returns, the reply ad the documents annexed thereto, these orders are not sustainable. Thus, the orders impugned herein are quashed and these matters are remanded for re-consideration. The assessing officer is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh reasoned assessment order after taking into account all relevant materials - petition disposed off.
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2024 (5) TMI 652
Validity of reduction of fine and penalty - Jurisdiction of appellate authority - Confiscation of Gold ornaments u/s 130 - Transportation of Gold without proper documents - penalty - restriction on right to appeal - HELD THAT:- In Wootton v. Central Land Board it is said that the court / appellate authority may allow such appeal where the appeals lies only on the question of law, if it appears that the adjudicating authority s decision would produces manifest injustice, or is plainly wrong. Even otherwise if there is manifest, self misdirection and so on so forth or erroneous exercise of discretion, it would enable the appellate authority to interfere with the decision whether the discretion is vested in the adjudicating authority as such. Any erroneous exercise of discretion is always considered to be an error in point of law. Where the right of appeal is unrestricted, the appellate authority or the court should not interfere with the adjudicating authority decision as it is based on its own observance of the material / evidence before it. However, where the appellate authority is equally empowered to exercise the discretion under the appellate provision, the appellate authority is entitled to evaluate the material / evidence to come to a different conclusion or order than the adjudicating authority - In the judgment impugned in the present case, the appellate authority having considered the facts and circumstances of the case as well as the evidence as exercised the discretion under Section 107 (11) in modifying the order of penalty / fine to four times of the tax payable. Whether the discretion exercised by the appellate authority under Section 107 (11) of the CGST /SGST Act is arbitrary, unreasonable based on irrelevant consideration or there is some other legal error? - HELD THAT:- If the order of the appellate authority is based on relevant consideration and is not manifestly injust, improper or unreasonable, this court would have very little scope for interference in the discretion exercised by the appellate authority in modifying the order passed by the adjudicating authority - The judgment of the Supreme court in the case of Gunwant Lal Godawat [ 2009 (6) TMI 660 - RAJASTHAN HIGH COURT] was rendered on interpreting the provisions of Gold Control Act, 1968 and does not have any bearing on the facts of the present case where the question of the powers of the appellate authority under Section 107 (11) of the CGST / SGST Act. The confiscation of goods or vehicle is a coercive steps. It is an aggravated form of sanction to deter the persons from avoiding taxes. However, the provisions are to be strictly interpreted as it is interferes with the right to property as envisaged under Article 300 A, the Constitution of India - Section 130 is an independent provision empowering confiscation in cases of intention to avoid tax. In a given case, the same breach or contravention of the provision of the Act or Rules can lead to detention of seizure of the goods under Section 129 and confiscation under Section 130(1) of the Act. In Anandeshwar Traders [ 2021 (1) TMI 1091 - ALLAHABAD HIGH COURT] it has been held that the appellate authority cannot affirm order on fresh reasons outside the impugned order. The further enquiry cannot be made for this purpose. The appellate authority is empowered to make further enquiry after deciding that the impugned order is erroneous, such enquiry must be to decide the issue in appeal. From the reading of sub-section (11), it is evident that the appellate authority has ample power to decide the issue afresh and make enquiry to decide the issue in appeal - Section 107 (11) has wider amplitude than the normal appellate provisions against an order of Court/ Tribunal. Section 107 should be given liberal interpretation and not restricted one as it has been contended by Sri. Mohammed Rafiq. The impugned order passed by the appellate authority do not suffer from any unreasonableness, neither based on any irrelevant consideration nor there is any other legal infirmity which require this court to interfere with the orders impugned in the present writ petitions - petition dismissed.
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Income Tax
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2024 (5) TMI 651
Delay in filling SLP - Reopening of assessment - reason to believe - bogus sauda chitthi against the purchase of an immovable property situated at Surat wherein one person claimed to have paid an amount as advance to petitioner - as per High Court order [ 2022 (10) TMI 1243 - GUJARAT HIGH COURT] immovable property has not been sold by the petitioners and other co-owners and there is no income accrued on account of transfer of a capital asset either by way of sale deed or handing over possession pursuant to agreement to sell. HELD THAT:- There is delay of 466 days in filing the Special Leave Petition. There are no justifiable grounds for condoning the delay. SLP is dismissed on the ground of delay.
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2024 (5) TMI 650
Sale of business assets - gain on soft drink business assets sold - Slump sale or capital gain - ITAT held that the transaction in a slump sale sand not an itemised sale, thus deleted addition as not exigible to tax - as decided by High Court [ 2017 (4) TMI 1640 - RAJASTHAN HIGH COURT] Tribunal has not committed any error in allowing the appeal as individual valuation which has been put forth in pursuance to the letter of the AO on the basis of book value in the list of individual is not established but taking into consideration the agreement between the parties the second value which has been rightly pointed out was for the purchaser for the purpose of arriving at a price of assets. HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed.
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2024 (5) TMI 649
Addition u/s 68 - unexplained credit appearing in his books of account - share application money - Discharge of burden of proving the credit appearing in his books of account - transactions done by it with Smt. Sunitha, whereby funds were transferred to the Assessee Company and utilized by it - it is the Revenue s case that the burden was upon the assessee to prove the genuineness and creditworthiness of the transaction, which in the present case it has failed to discharge - ITAT concluded that there was no material with the Revenue to conclude that this money was received from Mrs. Sunita against rendering of service by the Company to treat this transaction as a revenue receipt in the hands of the assessee. HELD THAT:- ITAT has applied the settled principle that when a receipt is sought to be taxed as income, and in this case there was no evidence to show that this receipt was towards rendering of services by the Company, in the light of the various documents produced by the assessee as proof of the transaction of allotment of shares against the amount received, it set aside the assessment order, insofar as the addition of Rs. 4.99 crores to the income of the assessee. The reasoning adopted by the ITAT is based upon a sound legal principle and reflected from the documents placed by the assessee before the assessment officer. The documents, which consist of return of allotment of shares, resolutions of the company, and other documents filed in terms of the Companies Act before the Authorities to substantiate the transaction had not been doubted. In addition, the record of the company petition filed by Mrs. N. Sunita before the High Court, which was ultimately disposed by consent terms filed by the parties by which Sunita was made 25% shareholder in the Company was also produced, but not considered by the AO. CIT(A) considered these documents, including the copy of the company petition and though it records that according to the consent terms, shares were allotted to N. Sunita to the extent of 25% of shareholding of the Company, it holds that the amount advanced was towards some other purpose such as against execution of a contract and not meant to be returned, resulting in the litigation. ITAT, on considering all this material, has concluded that there is no evidence found on the record that the amount was paid for availing of any service from the Company to treat the transaction as a revenue receipt in the hands of the Company. We are unable to disagree with the findings arrived at by the ITAT which appears to be fully based upon the material on record, and cannot be termed as perverse. Case of CIT vs. Sadiq Shaikh [ 2020 (10) TMI 1028 - BOMBAY HIGH COURT] would not apply to the facts of the present case as in the present case, as held by the ITAT on the basis of documentary evidence on record, the genuineness of the transaction was proved by the assessee who had discharged the burden which rested on it. The view taken by the ITAT cannot be faulted and is accordingly upheld. The two substantial questions of law are therefore answered in favour of the Respondent, and against the Revenue.
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2024 (5) TMI 648
Revision u/s 263 - suo moto revisional proceeding initiated - Assessment Order said to be erroneous and prejudicial to the interest of the revenue for non-disclosure as long-term profit in the computation sheet though the same is shown in the capital account, warranting exercise of revisional jurisdiction u/s 263 - HELD THAT:- Suo moto revisional proceeding was initiated simply on the basis of a proposal u/s 263 of the Act and there was no independent application of mind by the PCIT. From a plain reading of section 263 of the Act, it is clear that proceeding u/s 263 can be initiated only when the Commissioner on the basis of materials available on record called for by him, comes to a conclusion that the order passed by the assessing authority is erroneous in so far as the same is prejudicial to the interest of Revenue. Thus, the order has to be firstly erroneous and by virtue of the order being erroneous prejudice has been caused to the interests of the revenue. Both the conditions has to be satisfied. The satisfaction must be on the material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present and that if the action of the authority is challenged before the Court it would be open to the Courts to examine whether the relevant objective factors were available from records called for and examined by such authority. In Baijnath Biswanath vs. State of Assam [ 1998 (7) TMI 678 - GAUHATI HIGH COURT ] this Hon'ble Court held that the suo moto power of revision conferred on the Commissioner cannot be exercised mechanically or at the behest of some other authority other than on the own discretion of the assigned Officer. Commissioner is authorized to take any decision as he deems fit and is free to draw any interference from the facts available. The Commissioner, however, is to act on factual material and not on conjectures, assumptions and presumptions, else the decision will suffer from the vice of perversity. In the present case the learned Principal Commissioner of Income Tax has initiated the proceedings simply on the basis of the proposal of the subordinate authority and has not applied his mind after perusal of the records called for by him and thereby the very initiation of the proceeding in the instant case is illegal, without jurisdiction and not tenable in law. By no stretch of imagination, non-disclosure of the said amount in the computation sheet can be said to be prejudicial to the interest of revenue and no loss of revenue. Pertinent that, upon a pointed query being put to the learned counsel appearing on behalf of the Income Tax Department, as how non-disclosure of the aforesaid amount, which is, admittedly, long-term capital gain has caused prejudice to the revenue, he was unable to show that the same has caused prejudice to the revenue. The submission of the learned counsel, appearing on behalf of the Income Tax Department that the order is erroneous in so far as it is prejudicial to the interest of revenue in as much as the order was passed without making enquiries or verification which should have been made is totally fallacious. Thus, in the absence of any prejudice being caused to the revenue, wherein, the impugned proceedings initiated u/s 263 of the said act is wholly without jurisdiction, illegal and erroneous. Therefore, the same is bad-in-law. Hence the impugned ex-parte Order is unsustainable in law.
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2024 (5) TMI 647
Validity of Faceless assessment of income escaping assessment u/s 151 - According to Petitioners, the notice could have been issued only by the Faceless Assessing Officer ( FAO ) not issued by the Jurisdictional Assessing Officer ( JAO ) - HELD THAT:- These petitions will be covered by the judgment passed in Hexaware Technologies Limited [ 2024 (5) TMI 302 - BOMBAY HIGH COURT ] Counsels for respective Respondent concur. In some of the petitions, the ground of notice being invalid since it was not in accordance with the scheme framed u/s 151A of the Income Tax Act, 1961 was raised orally. Since we have held in the judgment in Hexaware Technologies Limited [ 2024 (5) TMI 302 - BOMBAY HIGH COURT ] that such a notice will be invalid, certainly those Petitioners should also be given the benefit of decision taken by this Court. In the circumstances, the notices issued in these petitions by the JAO u/s 148 of the Act are hereby quashed and set aside. In case any reassessment orders are passed, the same also will stand quashed and set aside. So also, the consequential demand notices or penalty notices, if any, will also stand quashed and set aside.
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2024 (5) TMI 646
Reopening of Assessment u/s 147 - investment in NCDs unexplained - difference between accrual of income and receipt of income - reopening after the expiry of four years - Petitioner is a tax resident of Cyprus - Petitioner s objection to reopening that under the DTAA, interest income can be taxed only when the same was received by the payee under the provisions of Article 11, has not been controverted in the order rejecting the objections - HELD THAT:- During the course of original assessment proceedings, Petitioner was issued a notice u/s 142 (1) - Petitioner was called upon to give details of income from sources other than that of capital gain and also details of interest income accrued on security held during the last four financial years. By its Chartered Accountant s letter, Petitioner replied to the notice and stated that it had not received any income during AY 2015-2016. During the course of discussion that Petitioner s Chartered Accountant had with the AO, Petitioner was called upon to furnish details of the statement showing closing stock of NCDs - Petitioner furnished a statement showing closing stock of NCDs as also a statement giving details of investment in NCDs during the year. The opening stock and the closing stock were unchanged. Thereafter, the assessment order dated 30th August 2017 came to be passed. In the assessment order, it is accepted that Petitioner is the resident of Cyprus and its nature of business is to act as investment holding company. In our view, since Petitioner was called upon and Petitioner supplied the details of investment in NCDs during the year, the issue of holdings in the NCDs and the interest on the NCDs was certainly a subject of consideration of the AO. Discussion in the assessment order or not? - As decided in Aroni Commercials Limited [ 2014 (2) TMI 659 - BOMBAY HIGH COURT ] once a query is raised during the assessment proceedings and Assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is also not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. Therefore, the reopening of the assessment, in our view, is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment. AO must have certainly considered the aspects during the assessment proceedings because specific queries were raised regarding the NCDs and the details were made available which disclosed that there was no change in the opening and closing stock of the NCDs. Decided in favour of assessee.
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2024 (5) TMI 645
Validity of special audit u/s 142(2A) - entries/transactions in seized/impounded documents/digital documents/bank accounts are not matching with the financials shown by the assessee in its return of income for the different A.Ys. - whether AO wrongly recorded that the petitioner-Company did not submit its reply to the show-cause notice? - HELD THAT:- While forming an opinion for the special audit by a nominated Accountant, the AO is also required to have regard to the interests of the Revenue. In the milieu of such varied requirements as provided u/ss (2-A), this cannot be a requirement in law that the AO must refer to each of the aforementioned factors separately and narrate the supporting facts thereof while exercising the power under sub-section (2-A). In the notice u/s 142 (1) to the petitioner-Company, AO referred to huge discrepancies in sale descriptions in the seized documents that were verified with Tally data. During the searches, several documents and digital devices were seized and the information, retrieved from the mobile phone of the directors and employees of the petitioner-Company revealed suspected transactions. The unexplained transactions and the details of suspicious transactions are spread over fourteen pages in the notice. The satisfaction indicated under sub-section (2-A) for forming an opinion by the AO shall not be open to judicial scrutiny and wherever it is shown to the Court that there are materials for arriving at satisfaction for the special audit of the accounts of an assessee by an Accountant as defined in explanation to sub-section (2) of section 288, the writ Court shall be denuded of its power of judicial review under Article 226 of the Constitution of India. The submission that by passing an order under sub-section (2-A) the period of limitation which shall be expiring on 31st day of March 2024 would be extended by six months and thereby cause prejudice to the assessee cannot be countenanced in law. Unless it is demonstrated by producing materials to the satisfaction of the Court that the exercise of powers under sub-section (2-A) by the Assessing Officer is with mala fide intention, the writ Court shall not exercise its powers under Article 226 of the Constitution. In the opinion of this Court, the Assessing Officer for valid and justifiable reasons may exercise the powers under sub-section (2-A) till the last date of the financial year. Having regard to the initial stage of inquiry, we shall be careful to see that no prejudice is caused to the assessee and would therefore simply indicate that (i) there are certainly doubts about the correctness of the accounts (ii) multiplicity of transactions is apparent (iii) unexplained/unaccounted transactions are like specialized transactions and (iv) the accounts are complex and certainly voluminous. The order granting approval dated 20th March 2024 for special audit under section 142 (2-A) of the Income Tax Act takes note of every detail of the case. This would evince no doubt that at this stage, the statutory Authority is required to form a prima facie opinion and not to render a conclusive finding. The Latin word prima facie which means at first glance shall refer to materials based on which the statutory Authority shall form an opinion. To a limited extent, we may agree with the learned counsel for the petitioner-Company that five days to respond to the notice under section 142 (2-A) was not sufficient and the Assessing Officer passed the order without looking at the objections raised by the petitioner-Company. Even so, there is no law of universal application that every order passed in breach of natural justice must be interfered by the Court. The requirement in law that every order that ensues civil consequence must be passed following the rules of natural justice shall vary from case to case and no strait-jacket formula can be prescribed. We are not in agreement with the learned counsel for the petitioner-Company that serious prejudice has been caused to the petitioner-Company on account of violation of the rules of natural justice. For the foregoing reasons, we are not inclined to interfere with the orders. Only the time indicated in the order for submission of report by the nominated Auditor is extended by a further three months. The nominated Auditor shall confine the inquiry to the matters as indicated.
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2024 (5) TMI 644
Validity of the final assessment order due to non-implementation of the directions of learned DRP - Royalty/FTS receipts - amount received towards licence fee - whether the AO, while passing the final assessment order, was justified in holding the receipts in dispute as equipment royalty under section 9(1)(vi) of the Act read with Article 12 of India Czech DTAA? - HELD THAT:- Materials on record reveal that in course of assessment proceedings, AO issued a show-cause notice to the assessee to explain, as to why the receipts in dispute should not be treated as royalty/FTS, as, such receipts are ancillary to enjoyment of such services, for which, royalty income has been received. In response to the show-cause notice, assessee had furnished a detailed reply submitting that the amount received towards licence fee cannot be treated as royalty, as, it was for a non-exclusive right given to the Indian entity to use copyrighted software. As regards reimbursement of software licence fee and maintenance fee, the assessee had submitted that it had procured certain licences centrally for its group companies and has cross-charged the Indian affiliates the licence and maintenance fees in respect of the same on a cost-to-cost basis. While framing the draft assessment order, the Assessing Officer observed that the assessee maintains a global IT infrastructure, which consists of owned, leased, supported and hosted IT systems etc. According to him, IT infrastructure made of various hardware devices and software/applications is a scientific equipment and also in the nature of commercial equipment. He has further observed that the agreement between the assessee and Indian group entities provide for use or right to use of equipment. Thus, in these premises, he treated the receipts as royalty. However, before learned DRP, to counter the aforesaid finding of the Assessing Officer, the assessee made detailed submissions categorically denying the allegation that it had provided use or right to use of any IT infrastructure etc. to the Indian group entities. Though, learned DRP had specifically directed the Assessing Officer to demonstrate, how the IT infrastructure is maintained; how it is beneficial to AEs in terms of acquiring the right to use; what are the various hardware devices and matching software applications, which can constitute scientific or commercial equipment etc., the Assessing Officer has failed to demonstrate such fact in the assessment order. On a specific query from the Bench, as to what constitutes IT infrastructure and what are the hardware devices etc., which can be construed as scientific or commercial equipment, learned Departmental Representative fairly submitted that such facts are not forthcoming from the assessment order. The contention of the learned Departmental Representative that the Indian entity has been given right to use the server while accessing the software, is too specious an argument to be accepted. It would be preposterous to even assume that right of ownership over the server has been transferred by the assessee while selling software licences. More so, when the Revenue has failed to bring any material on record to even remotely establish such fact. Thus, in our view, it is a clear case of non-implementation of directions of learned DRP by the AO. In the facts of the present appeal, undisputedly, the Assessing Officer has failed to implement the directions of learned DRP, hence, has not acted as per the mandate of section 144C(13). We hold that the impugned assessment order is wholly without jurisdiction, hence, invalid. Accordingly, we quash it
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2024 (5) TMI 643
Condonation of delay - assessee s appeal/s before the ld. CIT(A), being delayed by 3 years (2 years) and 2 months (2 months) - HELD THAT:- The two ingredients necessary for condoning the delay, which could only be the result of a positive, affirmative action, i.e., (a) proof of absence of negligence, and (b) proof of satisfactory level of diligence, are found completely missing in the instant case. It is apparent that the assessee is merely raising multiple pleas, de hors the facts of the case and law in the matter, in the hope that any one may work . It is only a plea made per Form 35, supported by affidavits, i.e., where so required by the first appellate authority, that can be taken cognizance by us as the second appellate authority reviewing his decision qua non-condonation of delay in further appellate proceedings. The delay, which extends to 26 months and 36 months for the two years respectively, is wholly unexplained and is a clear case of gross negligence. We find no reason to interfere in the matter and, accordingly, confirm the impugned order on this aspect. As assessee not registered u/s. 12AA was in furnishing the return per a wrong Form, i.e., ITR-7, applicable, inter alia, to a person in receipt of income from property held under trust - True, the assessee has not invoked the appropriate proceedings under the Act or moved the Hon'ble High Court under it s extraordinary jurisdiction, seeking issue of writ of prohibition or any other, restraining processing it s deficit return at a huge income, or being acted upon by the Revenue. Nevertheless, having not done so, we do not think that it is left without any remedy in law, i.e., under the Act. Why, even as observed by the Bench during hearing, could not it s representation before the AO, stated to be in August/September, 2018, or if undocumented, it s return/s filed of 11/9/2018, be regarded as a petition u/s. 154 of the Act, and the assessee s grievance sought to be addressed on that basis? No tax can be levied except by the authority of law (Article 265 of the Constitution of India), which we find as having been seriously violated in the instant case, and which explains our reference earlier to the jurisdiction of the Hon'ble High Court. The law cannot be a one-way street, i.e., operating only for the benefit of the Revenue; rather, is a hand maiden of justice. Filing a return in a wrong form, or filing the form incorrectly, could not lead to a charge of tax u/s. 4 of the Act? The premise of the foregoing is that the assessee should get a fair deal and, two, only tax exigible under law is to be levied/collected. The assessee, in our view, has filed the return u/s. 139(4A) in the correct form, i.e., Form-7. It is a charitable trust, even if, prior to it s registration on 10.12.2019, a private discretionary trust. Being a charitable institution, it s income is to be computed in the manner applicable therefor, and it returning income in Form 5, which is for returning business income, is surely incorrect, unless, perhaps, it is a case of business undertaking itself being the property held under trust, and the business incidental to the attainment of it s objects. Could, in any case, as afore-questioned, returning income in a wrong Form, or incorrectly, result in converting a loss into income? Clearly not, inasmuch as the same can only be in terms of provisions of the Act. We only consider it fit and proper under the circumstances to direct the ld. CIT(A) to, taking cognizance of the assessee s claim in the appeal before him, direct the AO to consider the assessee s returns of income filed on 11.09.2018 for the relevant years as rectification petitions. The AO shall, for the purpose, exercising his power u/s. 154 r/w s. 139C, call for the assessee s audited final accounts, or any material he deems proper, which constitutes a part of a return. The assessee shall be heard before disposing it s applications, per a speaking order, and in accordance with law, and which shall be in a time bound manner. Assessee s appeals are allowed for statistical purposes.
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2024 (5) TMI 642
Reopening of assessment - notice u/s 148 issued beyond the period of four years - As per assessee AO has not recorded a belief that income escaped was more than Rs. 1,00,000/-, which was required u/s 149(1)(b) - HELD THAT:- Assessing officer was required to record that income escaped was more than Rs. one lakh but in copy of the reasons recorded provided to the assessee, the Assessing Officer has not complied with the mandatory condition of tax effect involved being more than Rs. 1,00,000/-. As in the case of Hindustan Unilever ltd in [ 2021 (10) TMI 466 - BOMBAY HIGH COURT] held the assessing officer has to specifically point out the failure on the part of the assessee in disclosing all the material facts and in absence therefore , reassessment proceedings is invalid in law. In instant case also in absence of any such satisfaction in the reasons recorded, the assessment proceedings are void ab-initio, therefore, same are quashed. The appeal of the assessee is accordingly allowed.
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2024 (5) TMI 641
Addition on account of cash deposits during the demonetization period - books of accounts have been accepted and not rejected u/s 145(3) - source of such cash deposits as explained by the assessee as out of its cash sales so undertaken and such cash sales are subject to VAT where VAT has been collected and deposited with the government treasury - HELD THAT:- Assessee has furnished the cash book containing the entries towards the cash sales, bank statement for the relevant period, VAT returns, copy of trading and profit/loss account and balance sheet which are duly audited. No defect has been pointed out by the AO in terms of availability of stock or in any of the documentation so submitted by the assessee or in the books of accounts Merely the fact that certain cash deposits have been made by the assessee during the period of demonization and such deposits are on a higher side considering the past year figures cannot be basis to hold the explanation so made by the assessee as unsustainable and treat the cash sales as bogus and bringing the cash deposits to tax u/s 68 of the Act. The comparative figures for past years can no doubt provides a starting point for further examination and verification but basis such comparative analysis alone and without any further examination which points out any defect or manipulation in the documentation so submitted or in terms of availability of requisite stock in the books of accounts, the sales so undertaken by the assessee which is duly recorded in the books of accounts cannot be rejected and treated as bogus. We agree with the contention of the AR that where the cash sales duly offered to tax have been accepted, bringing the realization of sale proceeds in cash to tax will amount to double taxation and the same is clearly unsustainable in law and cannot be upheld. Appeal of the assessee is allowed.
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2024 (5) TMI 640
Estimation of income - bogus purchases - CIT(A) in restricting the disallowance to 12.5% instead of Entire addition made by the ld. AO - HELD THAT:- We find that AO has made addition on account of entire purchases which is wholly unjustified, because once the source of purchases have been debited in the books of accounts and corresponding quantity of material purchased had been recorded in the books and corresponding quantity of sales has also been accepted then, it cannot be held that purchases are outside books. It could be the case of purchases made from hawala dealers for inflating the cost and suppressing GP rate. If parties have not confirmed the transaction then in such a case the principle laid down in the case of PCIT vs. Vishwashakti construction [ 2023 (5) TMI 278 - BOMBAY HIGH COURT] wherein GP rate of 12.5% has been held to be reasonable in such cases, is applied in the present case also, then CIT (A) is justified. Appeal of the Revenue is dismissed.
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2024 (5) TMI 639
Addition u/s 68/69A/69B and taxed the same u/s 115BBE - Surrendered income in survey action u/s 133A on account of excess stock, discrepancy in cost of building and expenditure in violation of Section 40A(3) - AO observed that the surrender relates to unexplained investment - HELD THAT:- In particular, for the deeming provisions of Section 69B to be attracted in the instant case, there has to be a finding that the assessee has made investments in the stock during the financial year and such investments are not fully recorded in the books of accounts so maintained by the assessee, and the assessee offers no explanation about the nature and source of the investments or the explanation so offered is not found satisfactory in the opinion of the AO, the latter can proceed and the value of the investment may be deemed as income of the assessee for such financial year. As we refer to the statement so recorded of the assessee during the course of survey, Revenue has not pointed out that the excess stock has any nexus with any other receipts other than the business being carried on by the assessee. There is thus a clear nexus of stock physically so found with the stock in which the assessee regularly deals in and recorded in the books of accounts and thus with the business of the assessee and the difference in value of the stock so found is clearly in nature of business income. Apparently, the AO has failed to appreciate the statement of the assessee recorded during the course of survey and other documents and findings of the survey team which are very much part of the records in correct perspective. We therefore find that the nature and source of such unaccounted stock is nothing but arising out of assessee s business operations. There is no physical distinction between the accounted stock and unaccounted stock. No such physical distinction was found by the Revenue either. We therefore find that the difference in stock so found out by the authorities has no independent identity and is in terms of value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as business income. Surrender on account of cost of building the fact that the assessee has honoured the surrender so made inspite of the fact that there is no corroborative material against the assessee, the same can t be held against the assessee and more so, cannot form the basis for invocation of deeming provisions as has been done in the instant case as the conditions stated therein are not satisfied. Merely the fact that survey has taken place and certain expenditure on estimated basis has been surrendered doesn t satisfy the requirements for invoking the deeming provisions as has been done in the instant case. Accordingly, the order of the ld CIT(A) is set-aside and the AO is directed to tax the surrendered income at normal rates as applicable to the business income. Disallowance of depreciation on such cost of construction , we find that there is no legal and justifiable basis to disallow the depreciation. Once the assessee has surrendered the amount on account of cost of extension, renovation and the same has been brought in the books of accounts, the same will form part of block of the building and the assessee will be eligible for claim of depreciation thereon. As we have noted earlier, no bills/vouchers have been found during the course of survey, therefore, there is no basis to invoke section 43(1) in the instant case and thus, the depreciation so claimed is directed to be allowed. Surrender on account of disallowance u/s 40A(3) there is no finding that cash expenditure has been found and which has not been accounted for and in such a situation, we fail to understand as to how the deeming provisions can be invoked in this regard. Where the expenditure has been held disallowable in terms of section 40A(3) of the Act which means that certain expenditure has been incurred, accounted for in books of accounts and has been found to be incurred in cash in violation of section 40A(3), the question of unexplained expenditure or unaccounted expenditure doesn t arise for consideration. Hence, the action of the AO in invoking the deeming provisions in this regard is set-aside. Thus the income so surrendered during the course of survey cannot be brought to tax under the deeming provisions and has to be assessed to tax under the head business income . In absence of deeming provisions, the question of application of section 115BBE doesn t arise and normal tax rate shall apply. The AO is thus directed to assess the income under the head Income from Business/profession and apply the normal rate of tax. Assessee appeal allowed.
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2024 (5) TMI 638
Set off of loss against income referred to in section 68 r/w.s115BBE - HELD THAT:- Issue is already held to be in favour of the assessee in the case of Vijaya Hospitality Resorts Ltd. ( 2019 (11) TMI 1106 - KERALA HIGH COURT] wherein the amendment brought in section 115BBE(2) are effective from 01.04.2017. We also note that CBDT in its circular referred above has categorically allowed to claim the set off of loss against the income determined u/s. 115BBE after AY 2016-17. In the present case before us, the year under consideration is AY 2011-12 and 2015-16 in which the claim of set off of loss is permissible. Accordingly, in terms of the CBDT Circular and respectfully following the decision of (supra) we allow ground taken by the assessee in this respect. Addition made u/s. 40A(2)(b) for excess payment made to related party - HELD THAT:- AO has considered the purchase transaction of only one unrelated party to compare it with the purchases made by the assessee from the related party and arrived at the conclusion to make the disallowance. Contrary to this, assessee has furnished details of purchase transactions from several other unrelated parties which demonstrates that purchases have been made at higher rates from them as compared to the one from the related party. Also, it is undisputed that there is a loss scenario both, in the hands of the assessee and the one from whom purchases have been made which is a related party. Thus, from a tax advantage objective, there seems to be no incentive to inflate the purchase - We delete the addition made u/s. 40A(2)(b) - Decided in favour of assessee. Disallowance made u/s. 14A - As per AO assessee has held investment in shares of bodies corporate which were capable of yielding exempt income - HELD THAT:- We find that this issue is settled as no addition can be made u/s. 14A where assessee has not earned any exempt income in the year - As decided in M/S. ERA INFRASTRUCTURE (INDIA) LTD. [ 2022 (7) TMI 1093 - DELHI HIGH COURT] no disallowance is required to be made in the case of the assessee because it has not earned any tax-free income and allowed the appeal of the assessee by deleting the addition so made. Considering this, the disallowance made in this respect is deleted. Decided in favour of assessee. Addition for advance outstanding during the year under consideration - assessee contended that the amount received were returned back and out of the three parties, accounts of two parties were squared off during the year itself - HELD THAT:- The presumption made by the Ld. AO that advances have been booked for purchase of material and production thereof is not justified when the money received has been returned back within a year for two parties out of the three parties and even for the 3rd party the details are on record which show that only Rs. 32,89,807/- is outstanding out of total of Rs. 81,63,076/-, balance has been received through banking channel. Considering all these facts, we delete the addition made by the Ld. AO and allow this ground raised by the assessee.
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2024 (5) TMI 637
Addition u/s 69B r.w.s.115BBE - during the course of survey action discrepancies were found on account of physical verification of stock vis-a-vis regular books of account - assessee surrendered an amount on account of excess stock over and above its normal business income in order to buy peace - HELD THAT:- We find that the difference in stock so found out by the authorities has no independent identity and is part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as undeclared business income. Following the said decision of Shri Ram Narayan Birla [ 2016 (9) TMI 1354 - ITAT JAIPUR] has taken a similar view holding that the excess stock so found during the course of survey was part of the stock and the Revenue has not pointed out the excess stock has any nexus with any other receipts other than the business being carried on by the assessee. There is no physical distinction between the accounted stock and unaccounted stock. No such physical distinction was found by the Revenue either. We therefore find that the difference in stock so found out by the authorities has no independent identity and is in terms of value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as business income. Thus the income so surrendered on account of investment in excess stock during the course of survey cannot be brought to tax under the deeming provisions of section 69B of the Act and the same has to be assessed to tax under the head business income . Thus question of application of section 115BBE doesn t arise and normal tax rate shall apply - Decided in favour of assessee.
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2024 (5) TMI 636
Revision u/s 263 by CIT - disallowance of provision for nonperforming assets (NPA) in computing books profits u/s 115JB - HELD THAT:- We find that the Tribunal in the assessee s own case for Assessment Year 2008-09 and 2011-12 [ 2020 (1) TMI 490 - ITAT KOLKATA] as held that provision for Non-performing assets cannot be said to be provision for diminution in value of assets to attract disallowance as per clause (i) of Explanation 1 to sec. 115JB(2) of the Act. In other words, by making a provision for NPA, there will be no reduction in NPA. Hence, clause (i) of Explanation to Sec. 115JB(2) does not apply since there is no reduction in value of asset. Accordingly, this ground of the assessee is allowed and Assessing Officer is directed to delete addition in computing book profit u/s 115JB - Thus Pr. CIT erred in holding the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue based on this issue raised in Ground No. 4. Additional depreciation on windmill capitalized in Assessment Year 2012-13 - As decided in M/s. Rittal India Pvt. Ltd [ 2016 (1) TMI 81 - KARNATAKA HIGH COURT] only 10 per cent can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10 per cent additional deduction can be availed in the subsequent assessment year, otherwise the very purpose of insertion of clause (iia) would be defeated because it provides for 20 per cent deduction which shall be allowed. Similar is the view taken in the case of Century Enka Ltd. vs. DCIT [ 2015 (5) TMI 647 - ITAT KOLKATA] . Thus Pr. CIT erred in holding the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue. Disallowance of short term capital loss claimed in the return for transfer of rights in land and building and in - exclusion of capital profits from computation of books profits u/s 115JB - need for referring the matter on account of short term capital loss to the file of the A.O. to verify the applicability of Sec. 50C - It is now settled law that if, while making the assessment, the AO examines the accounts and other details, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the ld. C.I.T., while exercising his power under sec. 263 of the Act, is not permitted to substitute his own view about the computation of income in place of the income assessed by the A.O., unless the order of the A.O. is patently unsustainable in law . The ld. D/R, could not controvert these submissions of assessee. CIT erred in holding the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue based on this issue raised - Assessee appeal allowed.
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2024 (5) TMI 635
Income Taxable in India or not - Royalty/FTS income - revenue received by the Appellant from provision of background screening and investigation services - scope of India - USA DTAA - HELD THAT:- As decided in HIRERIGHT LTD. [ 2023 (9) TMI 478 - ITAT DELHI] online access to background screening results cannot be construed as providing access to database maintained by the assessee. The consideration received by the assessee under the terms of its agreement with its client is purely towards provision of background screening services and does not include any consideration for use or right to use any copyright or a literary, artistic or scientific work, patent, trademark, design, model, plan, secret formula, or process or information. Thus, the impugned receipts of the assessee from its clients in India cannot be regarded as 'Royalties under the provisions of Article 13 of the India-UK DTAA What is delivered to the client is validation report assuring its clients about the authenticity of information contained in the report on the basis the information collated in the process of validation. Hence it cannot tantamount to imparting of commercial experience. The screening report which is issued does not involve any transfer of commercial experience to the client or getting the right to use the experience. There is also no transfer of any skill or knowledge of assessee to the customers in the issuance of screening reports, as the client is only given access to findings of the assessee in the form of a report which contains factual information but nowhere the assessee imparts its experience, skill of carrying out background screening services to its client. It is thus clear that there is no imparting of information concerning industrial, commercial or scientific experience by assessee when it issues the reports to its clients. 15. As regards the characterisation of impugned receipts as FTS, in our view, the services rendered by the assessee do not involve any technical skill/knowledge or consultancy or make available any technical knowledge, experience, skill, know-how or processes to the clients. Assessee's role is restricted to the verification of information provided by various candidates proposed to be hired by its clients. It involves seeking information from various sources that is accessible on specific requests and no advice/guidance on the credentials of the candidate is provided by the Assessee to its client. The role of the assessee is limited to validation of data provided by the candidate and provide relevant facts captured during the course of validation. The clients make an independent decision to hire the candidate. Hence, in our view the services should not be considered as FTS under Article 13(4) of the India-UK DTAA Hence, in the absence of any material change on the facts of the issue and the legal preposition, we hold that no addition on account Royalty is warranted in this case.
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2024 (5) TMI 634
LTCG - exemption claimed u/s 54F - fractional ownership - AO denied the benefit for the reason that the assessee is owning 16.67% of six flats in another house property and therefore does not fulfill the condition u/s 54F - whether the joint ownership of 16.67% in 6 flats amounts to owning more than one residential house in assessee's case and that the assessee is the owner of the 6 flats jointly? - HELD THAT:- It is an admitted fact that there is no clear demarcation with regard to the Flats jointly owned, though as per the submissions of the assessee each flat is occupied by each of the joint owners. Therefore it cannot be said that one of the joint owners i.e. the assessee in this case is the absolute owner of the 6 flats and no individual person on his own can sell the entire property of all 6 flats. At best the joint owner can sell his share of interest in the property but the property would still continue to be owned by the rest of the co-owners. Joint ownership is therefore different from absolute ownership and in the case of residential unit which is jointly owned none of the co-owners can claim that he is the owner of residential house. Accordingly where a house is jointly owned by two or more persons, none of them can be said to be the absolute owner of the house. So, the word own would not include a case where a residential house is partly owned by one person or partly owned by other person(s). As decided in Seth Banarsi Dass Gupta case [ 1987 (4) TMI 7 - SUPREME COURT ] wherein, it was held that a fractional ownership was not sufficient for claiming even fractional depreciation u/s 32 of the Act and as a consequence to this decision the Legislature had to amend the provisions of section 32 with effect from 1-4-1997 by using the expression owned wholly or partly . Since no such words are expressively mentioned in section 54F, in our considered view the word own in section 54F would include only the case where a residential house is fully and wholly owned by assessee and consequently would not include a residential house partly owned by the assessee along with other persons. Thus we hold that the assessee cannot be denied the benefit of exemption u/s. 54F on the ground that he is jointly owning 16.67% in 6 flats since joint ownership/part ownership cannot be treated as absolute ownership in the absence of any specific words to that effect in section 54F - Appeal filed by the assessee is allowed.
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2024 (5) TMI 633
TDS u/s 194C - Tripartite agreement - Payment of freight charges w/o deducting TDS on behalf of third party - payment made to the Truck Operator Union (through the assessee company) - Assessee in default u/s 201(1) r.w.s 201(1A) - As per AO information furnished by the Truck Operator Union reveals that the Truck Operator Union has done the business of plying, hiring or leasing goods carriage having 892 trucks of its members and has not shown freight receipts received from the assessee in its books of account as well as not offered the same to tax in its return of income - HELD THAT:- We are in agreement with the contention advanced by the ld AR that in the instant case, the understanding has been that the Truck Operator Union will provide the requisite trucks for transport of goods belonging to M/s Pepsico India Holding Pvt. Ltd. and the assessee company will facilitate and provide the necessary coordination and the logistical support as well as raise necessary invoices on behalf of the Truck Operator Union and collect freight payment and disburse the same subsequently to the Truck Operator Union. We are of the view that the person responsible for making the freight payment and the responsibility to deduct TDS u/s 194C for freight payment made to the Truck Operator Union (through the assessee company) is that of the M/s Pepsico India Holding Pvt. Ltd. and not that of the assessee company. The provisions of Section 194C are not attracted where the assessee subsequently raises the invoices on behalf of the Truck Operator Union and collects and disburse the freight payment received from M/s Pepsico India Holding Pvt. Ltd to the Truck Operator Union. Appeal of the Revenue is dismissed.
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Customs
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2024 (5) TMI 632
Levy of Social Welfare Surcharge (SWS) where basic Customs duty (BCD) is Nil - Exemption Notification No. 24/2015-Cus - appellants submitted that since EDI system was not allowing them to clear the goods without the payment of SWS they had to pay 10% of Basic Customs Duty as SWS to get their goods cleared - Revenue submitted that BCD is not nil or exempted but is payable and is debited in the MEIS scrip - HELD THAT:- We find that this issue was considered in very detailed manner in the case of Emami Agro Tech Ltd., Vs CC, Customs [ 2024 (3) TMI 86 - CESTAT HYDERABAD] The conditions 8 and 9 of Notification No. 24/2015 being cited, are also considered in this decision. Therefore, we find that the decisions in La Tim Metal Industries Ltd. [ 2022 (11) TMI 1099 - BOMBAY HIGH COURT] are squarely applicable to the facts of the present case. So far as the issued raised by the AR is concerned, the same have been addressed in detail vide this Bench s decision in the case of Emami Agro Tech Ltd [ 2024 (3) TMI 86 - CESTAT HYDERABAD] For the sake of brevity, they are not being repeated here. Accordingly, we set aside the impugned order and allow the appeal with consequential benefits, including recredit/refund of SWS paid along with the interest as per law.
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2024 (5) TMI 631
Classification of PVC resin Impact Modifier Kane ACE B 22 - change of classification from 3902 to 3906 - Interpretation of sub-heading note - exemption from basic custom duty under notification 46/2011-Cus - HELD THAT:- From the record, it is apparent that for choosing the heading within the chapter, the chapter note 4 is relevant and for choosing sub-heading within heading, has to be done in terms of sub-heading notes. From the composition of material mentioned in para 2 above, it is seen that the Butadiene content is almost 50% whereas Methyl Methylacrylate content is 15-20% only. Thus in terms of Chapter note 4, the goods will fall under the heading relevant to Butadiene which is heading 3902. Once the classification is decided under 3902, the sub heading notes becomes relevant for classification within the heading 3902. In these circumstances, question of change of classification from 3902 to 3906 on the strength of sub-heading note does not arise. Thus, we do not find any merit in the impugned order, the same is set aside and appeals are allowed.
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2024 (5) TMI 630
Penalty u/s 114(i) on CHA - Export of Carbon Black - Obligation of CHA for the unauthorized loading of the container without LEO (Let Export Order) - breach of prohibition laid down u/s 34, 40 read with 51 of the Customs Act, 1962 - HELD THAT:- Considered, it is well settled including by the decision of Hon ble Gujarat High Court in Anchor Logistics v/s. C.C.[ 2013 (6) TMI 589 - GUJARAT HIGH COURT] that invoking section 114 and its various clauses prior knowledge about the offending goods, as well as mensrea is required. Penalty, therefore cannot be imposed. Appeal is therefore liable to be accepted. Same is allowed with consequential relief.
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2024 (5) TMI 629
Valuation of Export of Iron Ore fines - payment of customs duty under protest - contemporaneous export - HELD THAT:- We find that the transaction value has not been rejected nor its correctness doubted, as is evident from the orders of the court below. We further find that resorting to the contemporaneous prices is vague and further, there is no consideration as to the quantity, etc. We also find that the copy of such material with regard to contemporaneous export prices was not made available to the assessee, which has been relied upon for making the final assessment. In this view of the matter, we find that reliance on such contemporaneous export data is hit by the ruling of Hon ble Supreme Court in the case of Dhakeswari Cotton Mills vs Commissioner of Income Tax [ 1954 (10) TMI 12 - SUPREME COURT] . Accordingly , we hold that such contemporaneous prices cannot be adopted for the purpose of finalisation of assessment. Accordingly , we set aside the impugned order and remand the matter to the Original Adjudicating Authority, who is directed to hear the appellant and pass a reasoned order in accordance with law. Accordingly , we allow this appeal by way of remand.
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Insolvency & Bankruptcy
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2024 (5) TMI 628
Violation of Principle of Natural Justice - denial of opportunity of hearing - grounds which were taken by the Adjudicating Authority were neither pleaded by the application filed by the Torrent Power Limited and Vantage Point Asset Management Pte. Ltd. nor they were addressed at the time of hearing of the application as pleaded by the RP and CoC - correctness of approved Resolution Plan - HELD THAT:- There are substance in the submission of the Counsel for the Appellant that process adopted by the Adjudicating Authority in proceeding to allow application has violated the Principles of Natural Justice. No notice was issued in the application, no reply was called on the applications and while allowing the said application the entire plan which was approved has been remitted for reconsideration - the impugned order deserves to be set aside on the ground of violation of Principles of Natural Justice. The Hon ble Supreme Court further in Ramkrishna Forgings Limited vs. Ravindra Loonkar, Resolution Profession of ACIL Limited Anr., [ 2023 (11) TMI 910 - SUPREME COURT ] again reiterated that Adjudicating Authority has jurisdiction only under Section 31(2) of the Code, which gives power not to approve the Plan, only when the Resolution Plan does not meet the requirements of the Code. The observation that in absence of any discrimination or perverse decision, it is not open to the Adjudicating Authority or this Appellate Tribunal to modify the Plan was in reference of the claim of Operational Creditor, which was under consideration in the said Appeal. The expression discrimination has to be understood in the context of the Operational Creditor, who as per the provisions of Section 30, sub-section (2) is entitled to an amount. In event the amount offered to the Operational Creditor is not in accordance with Section 30, sub-section (2), there may be a ground for interference. The concept of discrimination of payment to various creditors have been further explained and elaborated in by the Hon ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ], where it has been held that there can be different payment to various classes of creditors. Another expression used in paragraph-6 by this Tribunal is perversity. In the facts of the present case, there can be no allegation against the Appellant about the concealment of any fact from the Adjudicating Authority. The Appellant was only a Resolution Applicant, who has submitted a Resolution Plan, which after evaluation was placed before the CoC by the RP. The CoC being led by two leading Banks, i.e., Bank of Baroda and State Bank of India, having vote share of 92.77% and 7.23% respectively was well aware of the financial intricacies and there has to be intrinsic assumption that the Financial Creditors were well aware of all financials of each Resolution Plan. The findings of the Adjudicating Authority regarding incomplete financial data has been challenged in the Appeals both by Sarda as well as RP and CoC - the impugned order passed by Adjudicating Authority dated 06.10.2023 deserves to be set aside, on the violation of principles of natural justice, consequent to which order, the matter needs to go back to the Adjudicating Authority for fresh consideration. Appeal disposed off.
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2024 (5) TMI 627
Initiation of CIRP - NCLAT admitted the application u/s 7 - existence of debt and default - date of default was 14.02.2020, when the account was declared NPA - application barred by Section 10A of IBC or not - HELD THAT:- The Application under Section 7 clearly mentions that date of default was 14.02.2020, when the account was declared NPA. The Financial Creditor was fully entitled to file Section 7 Application, treating the date of default as 14.02.2020 - It is further relevant to notice that date of NPA mentioned was not for the first time mentioned in Section 7 Application. The Financial Creditor has initiated proceedings under the SARFAESI Act against the Corporate Debtor before the Debts Recovery Tribunal, referring to Notice under Section 13, sub-section (2) of SARFAESI Act and the date of NPA was mentioned as 14.02.2020. The sheet-anchor submission of learned Counsel for the Appellant is on renewal letter dated 26.07.2019 issued by the Syndicate Bank (now Canara Bank). Renewal of sanction for one year is the renewal of working capital limit, as noted in the letter. Renewal of working capital limit is not relatable to the default committed by the Corporate Debtor in fulfilling the obligations under the Sanctioned Facilities. When on 14.02.2020, accounts of the Corporate Debtor were declared as NPA, it clearly means that default was committed by the Corporate Debtor in carrying out his financial obligations. Renewal of sanction has nothing to do with the date of default committed by the Corporate Debtor in fulfilling its financial obligations. Thus, the very basis of the submission of learned Counsel for the Appellant that since renewal of working capital limit was renewed for one year upto 25.07.2020, hence, the date of default is 25.07.2020, has no basis and is to be rejected. The application under Section 7 filed by Canara Bank was not barred by Section 10A as contended by the Appellant. The Adjudicating Authority having found the debt and default, has rightly proceeded to admit Section 7 Application. In paragraph 16 of the order, the Adjudicating Authority has noted all relevant factors to be considered in Section 7 Application and has proceeded to answer the said issues in favour of the Financial Creditor. The are no error in the impugned order passed by the Adjudicating Authority admitting Section 7 Application. There is no merit in the Appeal - appeal dismissed.
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2024 (5) TMI 626
Rejection of prayer of Operational Creditor to initiate the CIRP against the Corporate Debtor/ Respondent - Respondent did not respond to the demand notice under Section 8 of the IBC - Operational Creditors or not - breach of terms and conditions of the contract leading to pre-existing dispute. Whether the appellant is an Operational Creditor as per IBC? - HELD THAT:- In the present case, the appellant had placed an advance with the respondent for supply of goods, it does not matter who is the supplier or the receiver of goods and services as laid down in the M/s Consolidated Construction Consortium Ltd. [ 2022 (2) TMI 254 - SUPREME COURT] - The present case is squarely covered by the said judgment, as there is a clear nexus between payment made and supply of goods and services. Accordingly, the appellant is to be treated as Operational Creditor in the instant case. Whether there has been a breach of terms and conditions of the contract leading to pre-existing dispute? - HELD THAT:- It is clear from all the documents on record that the delivery was to be made Ex-plant Rajkot and not at Hong Kong as submitted by the appellant before the Adjudicating Authority. The appellant had tried to mislead both the forums regarding the same - All the events reflect clearly that there was a pre-existing contractual dispute between both the parties, which the appellant is trying to settle through IBC mechanism. In this regard reliance placed on Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd. [ 2017 (9) TMI 1270 - SUPREME COURT] , where the Hon ble Supreme Court explained the process for an operational creditor initiating CIRP in respect of a corporate debtor. The Court held ' Within a period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of the operational creditor the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute [Section 8(2)(a)]. What is important is that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice, as the case may be.' In the instant case, there was a pre-existing dispute between the parties regarding contractual conditions relating to place of delivery and obligation of parties for transport of goods and therefore the application for CIRP against Corporate Debtor cannot be allowed. The matter has been correctly decided by the Adjudicating Authority in this regard. Appeal dismissed.
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2024 (5) TMI 625
Initiation of CIRP - Rejection of Section 9 application - cyber fraud committed against the Respondent - pre-existing disputes or not - HELD THAT:- Since the fraud was perpetrated by unknown third parties, dragging the Operational Creditor into the dispute was a simple and deliberate ploy on the part of the Corporate Debtor to evade payment of liabilities. The pre-existing dispute was a fictional dispute and more of an after-thought. Moreover, it has been contended that even after having become a victim of cyber fraud, the fact that the Respondent had willing paid further sums of money to the Appellant in their Nordea Bank account shows that there was no dispute between the two parties with respect to the operational debt being due and payable. When the Respondent in their police complaint had expressly admitted that the fraud was committed by an unknown third party and not by the Appellant and did not make the Appellant an accused party in their police complaint, the cyber fraud and the related police complaint cannot constitute evidence of a pre-existing dispute inter se between the Operational Creditor and Corporate Debtor - Since the matter is already under police investigations and there is no finality in the matter, attributing any culpability on the employees of the Operational Creditor based on surmise and conjecture of the Corporate Debtor would be pre-mature and highly presumptuous given the summary jurisdiction of the Adjudicating Authority and this Appellate Tribunal. It is not required to examine the above contention of the Respondent that the perpetrators of the cyber fraud were assisted by employees of the Operational Creditor. There is force in the contention of the Appellant that since the Corporate Debtor and the Operational Creditor were in a long-standing business relationship, had the Corporate Debtor shown professional diligence and due rigour, they would have been able to easily detect the suspicious emails and averted the ensuing cyber fraud. This clearly shows the negligence and carelessness on the part of the Respondent which led to the cyber fraud - the Adjudicating Authority wrongly dismissed the Section 9 application, in complete disregard of evidence on record, by treating the cyber-fraud as a preexisting dispute between the parties while being singularly oblivious of the role of unknown third-party perpetrators which cast serious doubts on the plausibility of dispute inter se between the Appellant and the Respondent. The very fact that much after the issue of the Demand Notice, an amount of Euro 49,664/- has been claimed to have been paid by the Corporate Debtor to the Appellant as stated in their Reply Affidavit as placed at pages 26-27 shows that they have acknowledged that outstanding operational debt qua the Appellant was payable by them. Furthermore, we find that in the said Reply affidavit of the Respondent, the Respondent has accepted and admitted that it owed the Appellant a sum of Euro 62,222/-. This acknowledgement in itself is sufficient to satisfy existence of undisputed operational debt exceeding the threshold level of Rs.1 lakh. The Adjudicating Authority has erroneously rejected the application under Section 9 of IBC - To meet the ends of justice, the Corporate Debtor is given the liberty to release payment of outstanding operational debt as per terms mutually agreed between the two parties - the payment shall be released by the Corporate Debtor by way of Demand Draft in favour of the Operational Creditor within 30 days from the date of uploading of this order failing which the Corporate Debtor would come under the rigours of CIRP on the expiry of said 30 days period. Appeal alowed.
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Service Tax
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2024 (5) TMI 624
Non-payment of service tax - C F agent service - appellant had received commission from their principals on account of sale of their products as a 'Commission agent' - Commission of 2% received by the appellant on the goods sold on High Sea Sales basis - Invocation of Extended period of Limitation - HELD THAT:- The appellant has considered this service as a taxable service under the category of business auxiliary service and paid Service Tax for the period 2008-09. No objection has been raised by the department when they paid service tax for the said service under the category of 'Business Auxiliary Service'. Having accepted service tax under the category of 'Business Auxiliary Service', the department cannot raise the demand for the period 2008 to 2011-12, by invoking extended period of limitation. In the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [ 2006 (4) TMI 127 - SUPREME COURT] , the Hon'ble Apex Court has held that extended period of limitation cannot be invoked when all the facts are already known to the Department - the demand confirmed in the impugned order by invoking extended period of limitation is not sustainable. The Show Cause Notice in this case has been issued on 16.04.2013, for the period from March 2008 to 2011-12. Thus, the demand for the period up to September 2011 is barred by limitation. The appellant submits that they have been paying service tax for the period from October 2011 to March 2012, under the category of 'Business Auxiliary Service'. If according to the Department the said service is liable to service tax under the category of 'Clearing and Forwarding Agency Service', then the service tax paid by them under the category of 'Business Auxiliary Service' may be appropriated/adjusted against the demand of service tax under the category of 'Clearing and Forwarding Agency Service' for the same period - it is found that the rate of service tax under both the categories are the same. Accordingly, the service tax paid by the appellant under 'Business Auxiliary Service' for the period October 2011 to March 2012 may be appropriated against the liability of service tax on the appellant for the same period under the category of 'Clearing and Forwarding Agency Service . Commission of 2% received by the appellant on the goods sold on High Sea Sales basis - HELD THAT:- The appellant purchases the goods from the overseas suppliers on their own account and thereafter, they sell these goods to the Indian customers by adding a mark-up. The commission/mark-up received by them has been included by the importers in the assessable value for the purpose of payment of Customs duty. Since the commission has already been included for the purpose of demanding customs duty, Service Tax cannot be demanded on the amount under the category of 'Business Auxiliary Service'. The demand confirmed in the impugned order on the commission received on high sea sales of the goods is not sustainable and accordingly, the same is set aside. Since the demand of service tax has not sustained in both the cases, the question of demanding interest and imposing penalty on the appellant does not arise. Appeal allowed.
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2024 (5) TMI 623
Refund claim - applicability of principle of unjust enrichment - CA has certified that amount of refund claim is not passed on to any third party, and that the said amount shown as receivable - refund on the ground of amalgamation of the appellant company with transferor company M/s. Intas Pharmaceuticals (a partnership firm) - service to self or not - HELD THAT:- The learned counsel is not completely agreed upon for the reason that as per the provision of Section 11 B, the incidence of the refund amount should not be passed on to any other person, therefore, even though the service is provided to self but if the incidence of service tax passed on in any form the same will be hit by unjust enrichment. However, in the present case it is not only the service provided to self but as per the chartered accountant certificate it was certified that the incidence of service tax has not been passed on and the same was shownreceivable in the books of account. However, on the query from the bench, the learned counsel was unable to show the books of account - the claim of the appellant that the amount is shown as receivable can be conclusively established only on the verification of books of account. Therefore, the appellant to produce the books of account before the adjudicating authority, the adjudicating authority on the basis of amount being shown as receivable must sanction the refund. The contention of the learned Commissioner (Appeals) that the amount of service tax might have been included in the cost of goods of Dehradun Unit and by that way the same might have been passed on, cannot be agreed upon. It is clear that once the payment is shown as receivable, it is impossible to book the same amount as expenditure. It will not be acceptable even under the Income Tax Act, therefore, only on the basis of the fact that the amount of service tax shown as receivable it is sufficient proof that the incidence of service tax has not been passed on and the refund can be concluded on this basis. The impugned order is set aside - appeal allowed by way of remand to the Adjudicating Authority to decide a fresh after verification of books of accounts and the entry of receivable shown therein.
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2024 (5) TMI 622
Invocation of Extended period of Limitation - suppression of facts or not - short payment of service tax along with interest and penalties - difference between the service tax payable and the service tax paid in the ST-3 Returns for the period 2003-04 to 2006-07 leading to a conclusion of short payment of service tax by the appellants - disputed period of the transactions is from 2003-04 to 2006-07 - HELD THAT:- The appellants in this case is registered with the Department, paying service tax and filing periodically ST-3 returns and other declarations. It is also a fact on record that all these records are available to the Department and more so to the Audit team of the department who verified the records. In such a situation and that there being no positive act on the part of the appellants to suppress any fact or information from the department, and that there being no evidence for such allegation in the SCN, it is not proper and legal to invoke extended period. Thus, the SCN dated 20.10.2008 issued to the appellants is time barred. The issue with respect to invocation of extended period in respect of fraud, collusion, willful mis-statement or suppression of facts under tax demands is no more open to dispute, as the Hon ble Supreme Court in the case of Uniworth Textiles [ 2013 (1) TMI 616 - SUPREME COURT] had held that the onus is on the Revenue to prove the presence of such specific grounds - In the absence of any specific grounds invoked for suppression of facts or willful mis-statement on the part of the appellants, the impugned order confirming the adjudged demands for extended period is patently illegal and therefore not sustainable, on the grounds of limitation. The impugned order relying on the judgement of the Hon ble Supreme Court in MADRAS PETRO-CHEM. LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, MADRAS [ 1999 (3) TMI 81 - SUPREME COURT ] for invocation of extended period is not relevant in the present set of facts, inasmuch as the elements of obligation on the part of manufacturer under self-removal procedure to maintain the records of production, gate passes, clearance documents, stock registers etc., are not prescribed in the case of appellants - the ratio of the above case is not applicable to the present case, as the facts of the present case are entirely different. It transpires that the effective date of increase in service tax at the rate of 8%, 10% and 12% is from 14.05.2003, 10.09.2004 and 18.04.2006, respectively with applicable cess. However, from the Annexure A and B to the SCN dated 20.10.2008, it is seen that the entire payments received during the whole month i.e., May, 2003 and April, 2006 have been applied with the service tax at the rate of 8% and 12.24%, without giving due recognition to the effective rate of service tax applicable prior to 14.05.2003 and after that day for the rest of the days in the month of May, 2003; and similarly the rate of service tax applicable prior to 18.04.2006 and after that day for the rest of the days in the month of April, 2006. Thus, it appears that the calculation of the short payment of service tax is improper on this count. On perusal of the sample Certificate cum Policy Schedule produced by the appellants it is seen the period of insurance is specifically mentioned along with the date of receipt of premium thereof, with breakup details of the amount of premium and the service tax applicable thereon. Accordingly, the appellants have paid applicable service tax from the date of assumption of risk of all such contracts entered into by them, in terms of the legal provisions of the Insurance Act, 1938. There is no correlation made out either in the audit records/report or in the SCN, to state that the actual amounts received by the appellants in a particular month were of entire premium amount on which the agreements were entered into in that particular month or risks assumed in that particular month, and respective service tax was not paid - the demand for short payment of service tax, without firstly determining the grounds on which such short payment was liable to be recovered, were made out without any legal basis in the impugned order and therefore, on this ground itself the impugned order is not sustainable. Service tax liability in respect of general insurance premium - HELD THAT:- The issue of service tax liability in respect of general insurance premium has already been dealt in elaborately by the Tribunal in the case of Bajaj Allianz General Insurance Co. Ltd. [ 2008 (10) TMI 72 - CESTAT MUMBAI] holding that the service tax liability is calculated on the basis of prevalent rate of service tax at the relevant period on the amount of premium received and that the enhanced rate of service tax is not applicable to the policies, which were issued prior to the enhancement of the rate. As regards the payment of service tax belatedly after the due date in respect of five months, the appellants have paid the entire amount of Rs.31,22,455/- vide TR challans No. 00359, No. 00364 both dated 11.06.2005 and No. 5758 dated 24.04.2007. Since, the appellants have accepted the liability for payment of interest for delay in payment of service tax and inasmuch as the entire amount was paid by them, the confirmation of the recovery of interest for delayed payment under Section 75 ibid in the impugned order is proper and accordingly, we uphold the same. The impugned order dated 31.08.2020 with regard to confirmation of adjudged service tax demands along with interest and penalties are not sustainable. The appeal is disposed off.
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2024 (5) TMI 621
Levy of service tax on mining royalty - mining royalty paid by the appellant for mining to Government of Odisha in the month of April 2016 for the quantity of Ore extracted in the month of March 2016 - N/N. 22/2016-ST dated 13.04.2016 read with CBEC Circular No.192/02/2016 dated 13.06.2016 - HELD THAT:- The said issue has been examined by this Tribunal in the case of S.R. Traders [ 2023 (5) TMI 766 - CESTAT NEW DELHI] , wherein this Tribunal has observed ' the appellant received services in relation to assignment of right to use natural resources from the State Government by virtue of the agreement dated 2-1-2016 and, therefore, the provisions of service tax, as were in force prior to 1-4-2016, would be applicable. Grant of natural resources was not excluded from the scope of negative list prior to 1-4-2016 and so no tax implication can be fastened on the appellant for such period.' - The said order has been affirmed by the Hon ble Apex Court. The appellant are not liable to pay service tax on the royalty paid for mining of Bauxite Ore in the month of March 2016, although the payment of royalty was made in the month of April 2016 - there are no merits in the impugned order and the same is set aside - appeal allowed.
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2024 (5) TMI 620
Short payment of service tax - exclusion of Ocean Freight, CWC charges/CONCOR charges and CFS charges from the gross amount charged for the purpose of discharging service tax liability - pure agent services or not - suppression of facts or not - penalties - HELD THAT:- The appellants have got both receipts in the freight account and also incurred expenditure under ocean freight as per their financial accounts. Claim of the appellant that they are trading in container space is found to be correct. Accordingly, on this ground alone demand of Rs. 60,56,570/- plus Rs. 21,12,773/- is set aside. It is further found that the demand of Rs. 20,32,859/- is vague in its nature as no head of service has been identified by the Revenue under which the tax is short paid. Revenue is required to identify the head of service under which tax to be demanded. As the period under dispute is prior to 01.07.2012, this demand is set aside, being vague and uncertain. There is no case of suppression, fraud or wilful mis-statement. Accordingly, penalties imposed under Section 77 and 78 are set aside. The impugned order is set aside - Appeal allowed.
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2024 (5) TMI 619
Non-payment of service tax - mobilisation advance received - reconciliation of values shown in books of accounts with that declared in ST3 returns (this includes supplies made to SEZ) - deferred and unbilled revenue (under erection, commissioning or installation service) - additional revenue (under works contract service) - short payment of service tax on GTA (as service recipient). Non-payment of service tax on mobilisation advance received - HELD THAT:- The Learned Commissioner have categorically recorded the finding that some of the invoices for mobilisation advance are towards material supplied only. Further recorded that from the sample invoices produced, evidently the assessee have deposited the service tax on the service portion. Further the Learned Commissioner took notice that the demand was only on the difference in the income received under the mobilisation advance and the ST3 returns and no investigation was made whether the said amounts pertains to material or services. Further took notice that the assessee have been able to segregated/identify the material portion and the service portion with respect to the receipts as mobilisation advance, and admittedly service tax is already discharged on the service portion, he was pleased to drop the demand - there are no error in the findings of the Learned Commissioner on this issue and accordingly this ground is rejected. Short payment of service tax on the alleged difference between trial balance and ST3 returns - HELD THAT:- In the impugned order the Learned Commissioner observed that the assessee have already furnished the details of services rendered to SEZs developer/units along with the purchase order and the relevant documents and that the same have been perused. Further observed that the assessee produced the relevant forms and there is no dispute regarding the provision of service to SEZs units/developer. Further that denial of benefit of exemption by relying upon procedural requirement of notification would be against the provisions laid down in the SEZs act. Exemption cannot be denied on the ground that form A 1 and A 2 have not been produced - reliance is placed on the ruling of the Hon ble High Court of Andhra Pradesh and Telangana in GMR AEROSPACE ENGINEERING LIMITED AND ANOTHER VERSUS UNION OF INDIA AND OTHERS [ 2019 (8) TMI 748 - TELANGANA AND ANDHRA PRADESH HIGH COURT ] wherein it has been held that denial of benefit of exemption by relying upon procedural requirement of notification would be against the provisions laid down in the SEZs Act. Non-payment of GTA service tax as the recipient of service - HELD THAT:- The learned Commissioner found no error in accounts maintained by the appellant and was pleased to drop the demand conforming a small amount of Rs.63,161/- for the year 2009 10 and Rs. 42,538/- of the year 2010 11 respectively - the Learned Commissioner have after examining the accounts and the vouchers in details have dropped the substantial part of the proposed demand. Further such finding of fact is not disputed in the grounds of appeal. Accordingly, this ground also against the Revenue is also rejected. Demand of service tax on deferred and unbilled revenue under ECIS and works contract service - HELD THAT:- The Learned Commissioner examined the issue in detail and observed that the respondent assessee is maintaining their books under SAP and as per AS 7 model/standard for construction activity-WCS as prescribed by ICAI. As per the accounting standard, respondent on the basis of percentage of work completed as per the agreement with the customer, have calculated the additional revenue. Thus basing on the volume of work done, as per terms of each individual contract, the assessee raised invoices and discharged service tax on the same. The difference in the bills raised to the volume of work done, was calculated as per the norms prescribed under the accounting standard prescribed. Learned Commissioner have categorically observed that the deferred revenue is recognised in the books of account as an accounting adjustment but there is no payment received against the same nor any invoice was raised on the customer. Hence no service tax was liable to be paid on such book adjustment - thus, no service tax was liable to be paid on such book adjustment - there is no error or impropriety in the findings recorded by the Learned Commissioner. Accordingly this ground raised by the Revenue is also rejected. There are no merits in this appeal by Revenue - appeal dismissed.
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Central Excise
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2024 (5) TMI 618
CENVAT Credit of service tax paid - services used for repairs and renovation of the factory - period from December, 2015 to June, 2017 - HELD THAT:- The Appellant had taken Cenvat credit on Civil Construction Work on account of maintenance repairs work of the factory which was done for smooth running of the plant. In view of the Board s Circular No.943/4/2011-CX dated 29.04.2011, it is found that the Cenvat credit involved in the dispute is related to the service tax paid on services used for repairs and renovation of the factory and as such is eligible as Cenvat credit. It is also found that the definition of input services as contained in Rule 2(l) specifically includes services used in relation to modernization, renovation or repairs of a factory. The said definition was amended w.e.f. 01.04.2011 wherein construction of the factory was excluded. As there is no exclusion in respect of the services relatable to renovation or repair, there are no reasons to hold that such services were not cenvatable. The impugned orders cannot be sustained are therefore set aside - Appeal allowed.
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2024 (5) TMI 617
Denial of CENVAT Credit - Corroborative evidences or not - entire proceedings have been initiated against the appellant solely on the basis of the allegations against M/s. V.K. Metal Works that they did not manufacture the goods and hence they could not have supplied the goods - interest and penalty - HELD THAT:- The Department has not brought in any evidence to substantiate the allegation that the appellant has received only invoices without actual receipt of the goods. The denial of credit only on the basis of the proceedings initiated against M/s. V.K. Metal Works, the supplier, is not sustainable without any corroborative evidence. Further it is found that the proceedings initiated against the supplier M/s. V. K. Metal Works has already concluded in VINOD KUMAR JAIN VERSUS C.C.E. S.T. -JAMMU KASHMIR AND OTHERS [ 2018 (5) TMI 1512 - CESTAT NEW DELHI] issued by the Principal Bench of this Tribunal, New Delhi, wherein proceedings initiated against the supplier has been dropped, holding that they had manufactured the goods and supplied to other manufacturers against proper invoices. Accordingly, the appellant has availed CENVAT Credit properly and the denial of CENVAT Credit availed by them in the impugned order is not sustainable. Interest and penalty - HELD THAT:- Since, credit has been availed properly, the demand of interest and imposition of penalty also not sustainable. Accordingly, the same is set aside. The impugned order is set aside - appeal allowed.
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2024 (5) TMI 616
Demand of differential Central Excise Duty with interest and penalty - inflating freight charges through their dummy transport unit - reduction in the assessable value within the average composite price paid by oil companies - contravention of proviso to Section 4(1)(b) of Central Excise Act, 1944 read with Rule 5 of Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000, Rules 4, 6, 8 and 11 of Central Excise Rules, 2002 - HELD THAT:- In view of the settled decision of law and the judgment of this Tribunal in MM Cylinders [ 2011 (9) TMI 779 - CESTAT, BANGALORE] being confirmed by Hon ble Supreme Court in MM Cylinders Vs C [ 2012 (1) TMI 368 - SUPREME COURT OF INDIA] , where it was held that ' The mere fact that the jurisdictional Superintendent of Central Excise might be aware that the SMT has been used for transport of goods and freight was claimed as abatement may not lead to any conclusion to say that the department was aware of intricate manipulation by the appellant-company'. The appeal is dismissed.
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CST, VAT & Sales Tax
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2024 (5) TMI 615
Classification of goods - rate of tax - Nylon Chips - plastic granules or not - absence of Form-C and F - to be classified under Section 29 (1) (c) of Uttarakhand Value Added Tax Act - re-assessment on the basis of change of opinion - Extended period of Limitation - HELD THAT:- In the present case, the department has taken a different view by changing the nature of the product, and not on account of wrong application of rates. Re- assessment, in such type of situation, is prohibited. The assessment order was a clear change of opinion, and was not under Section 29 (1) (c). The other ground taken by the respondent was that the impugned order was illegal, as Section 29 (4) of the Uttarakhand Value Added Tax Act does not apply to the present case. In the instant case, the assessment year ended on 31.03.2012, and the period of limitation is to be counted from 31.12.2012. Three years nine months from that date is 30.09.2016, and the authorization notice dated 27.02.2017, under Section 29 (4) of the Act, was issued beyond the period of limitation. The second notice was sent on 29.11.2016, and limitation had expired on 30.09.2016. Extended period of Limitation - HELD THAT:- For seeking the benefit of enlarged period of limitation, under Section 29 (4) of the Act, reasons in writing have to be given. Moreover, there is no suppression of facts, or evidence by the respondent, with the intention to evade the payment of VAT. There is no reason given in the authorisation order and the impugned order, justifying the applicability of Section 29 (4) of the Act, where the time period of assessment, under the regular Section 29(3), had already expired. In the present case, the Assessment Year is 2010-11, and before the end of six years, the reassessment order can be passed. The reassessment order has been passed on 25.03.2017, which is before the end of six years of the Assessment Year 2010-11, and hence the reassessment order passed under Section 29 (4) of the Act was done within limitation, and this aspect has been affirmed by the Tribunal, and the Appeals, qua this ground, has been rightly dismissed. Whether Nylon Chips manufactured by the appellant are covered by Entry 83 of Schedule-(II) (B) of the Act? - HELD THAT:- Nylon will come under the plastic group, i.e. Plastics. The polymer manufactured by the respondent-company has been accepted to be cut into small sizes of 2 to 4 millimeters and sold to the customers. This can be called granules, which was evident from the samples presented by the respondent-company before the Tribunal at the time of hearing. After going through the order passed by the Tribunal, the appellant-department have themselves accepted that, with respect to the Plastic Granules, when they are put into procedure by adding fillers and additives, the strength of the plastic becomes better. Further, as per the opinion given by the British Plastics Federation, and Central Institute of Plastics Engineering Technology (CIPET), Nylon refers to a group of Plastics known as Polyamide, and there is no change in the original material (raw material) in this manufacturing process of Nylon-6. Hence, the use of raw material, i.e. Plastic Granules to produce Nylon Chips will not alter the character of Nylon Chips, being a Plastic, and under the British Plastics Federation, Nylon is considered under the Plastics group. There is no substantial question of law, which requires to be considered in the present Revision. The Nylon Chips have been rightly held to be falling in Entry 83 of Schedule II (B) of the Act by the Tribunal. There is no merit in the present Revision, and the same is, accordingly, dismissed.
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Indian Laws
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2024 (5) TMI 614
Dishonour of Cheque - legal heir of deceased - substitution of the opposite party (deceased complainant) - It is the case of the petitioner that the opposite party is not the sole legal heir of deceased - HELD THAT:- The Supreme Court in Rashida Kamaluddin Syed Anr. v. Shaikh Saheblal Mardan (Dead) through LRs. Anr. [ 2007 (3) TMI 725 - SUPREME COURT ] held that ' it is clear that on the death of Shaikh Saheblal, the case did not abate. It was, therefore, open to the sons of complainant to apply for continuation of proceedings against accused persons.' The learned Sessions Judge has allowed the application for substitution of the opposite party herein as one of the legal heirs of deceased Swapan Guha. The learned Judge had rightly held that it is for the legal heirs who intend to continue the prosecution on the original complainant s death, who is to be permitted to prosecute the accused persons - Considering the said order under revision, this Court finds no irregularity in the said order, the same being in accordance with law thus requires no interference by this Court. This Court has observed that there are other legal heirs of deceased Swapan Guha. The learned Sessions Judge has also clearly held in his order under revision that there are other legal heirs. But as the opposite party being one of the legal heirs wishes to proceed with the case, the learned Trial Court has rightly allowed the same. The present revisional application is, thus, disposed of.
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2024 (5) TMI 613
Dishonour of Cheque - conviction of accused - discharge of existing legal liability - in spite of notice being duly served the cheque amount was not paid by the appellant - HELD THAT:- This Court finds that the cheque in question was issued by the appellant herein in discharge of his existing legal liability which he could not successfully rebut. The demand notice has been duly served upon the accused/appellant and proved before the Trial Court and in spite of notice being duly served the cheque amount was not paid by the appellant herein - From the evidence on record, this Court finds that the learned Trial Court has considered the materials and the evidence on record in accordance with law and, as such, the said order of conviction being in accordance with law requires no interference by this Court. In Tedhi Singh vs Narayan Dass Mahant [ 2022 (3) TMI 797 - SUPREME COURT] the Supreme Court held ' we would think that in the totality of facts of this case the appellant has not established a case for interference with the finding of the Courts below that the offence under Section 138 N. I. Act stands committed by the appellant. We have been told that the amount of compensation in a sum of Rs.7 Lakhs which is relatable to the cheque amount has been deposited already in the Trial Court.' The judgment and order dated 18.03.2017 passed by the learned Additional District Sessions Judge, (F.T.C. No. II) at Calcutta in Criminal Revision No. 01 of 2015 and the judgment and order of conviction and sentence passed by the learned Metropolitan Magistrate, 19th Court, Calcutta, dated 27.10.2014, in case no. C/16014/2011, convicting and sentencing the petitioner to suffer S.I. for one month and to pay Rs. 4,00,000/- to the complainant as compensation within three months in default to suffer simple imprisonment for a period of six months, is hereby modified - The substantive sentence to suffer S.I. for one month is set aside - Revision application disposed off.
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2024 (5) TMI 612
Dishonour of Cheque - Continuation of proceedings during moratorium period - vicarious liability of director - Despite moratorium, whether institution or continuation of proceedings under Section 138 or 141 of the NI Act against the erstwhile Directors or the persons in-charge of or responsible for conduct of the business of a corporate debtor could be continue? - after resolution plan under Section 31 of the IB Code by Adjudicating Authority and in the light of provisions of Section 32-A of the IB Code, such criminal proceedings will stand terminated against a corporate debtor or not. HELD THAT:- As per Section 14 of the IB Code, the adjudicating authority shall declare moratorium for prohibiting institution of suit or continuation of pending suit or proceedings against a corporate debtor including execution of any judgment, decree or order. The object of a moratorium provision such as Section 14 is to see that there is no depletion of a corporate debtor's assets during the insolvency resolution process so that it can be kept running as a going concern during this time, thus maximising value for all stakeholders - Notably, moratorium provision does not extinguish any liability, civil or criminal, but only casts a shadow on proceedings already initiated and on proceedings to be initiated. This moratorium shall remain into force till the date of approval of resolution plan or liquidation order under Section 31 of the IB Code. Then, Section 32-A of the IB Code comes into play. Section 32-A(1) operates only after the moratorium comes to an end. On approval and commencement of the corporate resolution plan, the liability of a corporate debtor for an offence committed prior to commencement of corporate insolvency shall cease and a corporate debtor shall not be prosecuted for an offence if in the resolution plan there is a change in management or control of the corporate debtor to a person other than a promoter and other person mentioned in Section 32A of the IB Code - Interestingly, per the second proviso of Section 32A(1) of IB Code, a natural person, who was in any manner in charge of or responsible to the corporate debtor for the conduct of its business or associated with a corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence shall continue to be liable to be prosecuted and punished for an offence committed by a corporate debtor. The applicant nos. 2 and 3 are the natural persons through whom the applicant no. 1-Company was managed, rather they are signatories to the cheques in question. The complaint specifically mentions that at the relevant time, the applicant nos. 2 and 3 were managing the day to day affairs and business of the applicant no. 1-Company - the protection of cessation of liability for prior offence under Section 32-A of the IB Code is applicable only to a corporate debtor i.e. a Company and that too only if the management of the Company is changed in the resolution approved by the adjudicating authority - there are substance in the argument of the learned counsel for the non-applicant that the applicant nos. 2 and 3 cannot be protected by Section 32-A of the IB Code. The protection provided to a corporate debtor under Section 32-A(1) of absolving from its liability for an offence committed prior to commencement of the corporate insolvency process will not be available to the applicant no. 1, a corporate debtor also. Therefore, the applicant no. 1-Company (corporate debtor) is also not absolved from its criminal liability for an offence committed prior to commencement of insolvency proceedings. There are no merit in the submission of the learned counsel for the applicants. The proceedings against the applicants, for the offence punishable under Section 138 of the NI Act, shall continue against the applicants, the company as well as its directors. Thus, the application is sans merits and fails. The application is dismissed.
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