TMI Tax Updates - e-Newsletter
June 15, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Addition on account of cash deposited in bank - AO cannot on one hand take all the deposits as income of the assessee without giving the benefit of withdrawal. The turnover shown by assessee is exceeding the total amount of deposit made in his bank account - no additions - AT
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Income Tax:
Reopening of assessment - AO was having with him findings of the Investigating Team based on the material recovered during the search conducted of Shri Pravin Kumar Jain Group. Under the circumstances, it cannot be said that there was no tangible material available with the AO to prima facie form an opinion / belief that the income chargeable to tax has escaped assessment - HC
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Income Tax:
Capital gain computation - The very purpose of the Legislature behind the provisions u/s 50C(2) is that a valuation officer is an expert of the subject for such valuation and is certainly in a better position than the AO to determine the valuation. Thus, non-compliance of the provisions by the AO cannot be held valid and justified - AT
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Income Tax:
Tds u/s. 194H - payment of referral fee to the doctors - The payment made by the assessee as referral fees is directly proportionate or percentage of an amount received by the assessee for providing CT scan and MRI scan and such payment comes within the term ‘Commission or Brokerage’ - TDS is required - AT
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Income Tax:
Penalty u/s. 271C - short deduction of TDS - Only demurrage charges were paid without any deduction of tax - the said payment was made for delay in lifting the goods and the same was of penal in nature which can be safely accepted as a reasonable case for non-deduction of tax at source - AT
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Income Tax:
MAT application - scope of rectification of mistake - AO is not empower to take contrary view to review entire assessment order already framed. It is against the spirit of provision of section 154 of the Act.- AT
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Customs:
Refund of SAD - N/N. 102/2007-Cus. - if the appropriate rate of sales tax/VAT was NIL then the appropriate sales tax/VAT paid will also be NIL - refund allowed - AT
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Central Excise:
Valuation - Job work - Undervaluation of assessable value by the appellant by not adopting CAS-4 valuation for as many as 22 months is nothing but a deliberate undervaluation with the intention of evading full duty liability required to be discharged under law - demand with penalty confirmed - AT
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Central Excise:
Refund claim - manufacture and export of pan masala and pan masala containing tobacco - The fact that there was no provision for grant of rebate of excise duty on export of goods covered by the compounded levy scheme cannot be cited as a reason for not grant of rebate. - AT
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VAT:
Penalty u/s 34(7) of VAT Act - The legislature having set out an upper limit for imposition of penlaty without providing for any minimum mandatory tax, has left a wide discretion on the competent authority which discretion must be exercised taking into account relevant factors - penalty set aside - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (6) TMI 562
Disallowance on account of short reporting of income - Reimbursement of expenses - Held that:- The reimbursement of expense has been shown by the assessee in its income as reimbursement of expenses for ₹11,03,562/- as evident from the profit and loss account. Therefore, we find that the observation of Authorities Below that assessee has not shown reimbursement of expense in the income is factually incorrect. Therefore we reverse the order of Ld. CIT(A) in this regard and direct the AO to delete the addition. Addition on account of service tax - Held that:- We find that Cipla Ltd. has duly furnished its confirmation by stating that TDS was deducted on the amount of service tax. Besides the above the Authorities Below have not brought any defect in the books of account of assessee. Had there been undisclosed income of the assessee then same could have been ascertained from the ledger copies of Cipla Ltd. As such, we find that the addition has been made by Authorities Below on surmise and conjecture. In rejoinder Ld. DR has also not brought anything on record contrary to the arguments placed by Ld. AR. In this view of this matter we reverse the order of Ld. CIT(A) and directed the AO to delete the addition. Hence, this ground of assessee is allowed.
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2017 (6) TMI 561
N.P. estimation - rejection of books of accounts - Held that:- We are not in agreement with the arguments of the ld AR that the books of accounts were never rejected by the department in the year under appeal. We find that both the ld AO as well as ld CITA had brought on record several defects in the books and details produced by the assessee and had resorted to ignore the book results and resorted to estimate of profits in different ways. In the instant case, the only way for determining the total income of the assessee is by resorting to estimation of net profits. In these peculiar facts and circumstances, we hold that the net profits should be estimated as a percentage of total turnover taking into account all the defects in the books during pre-survey and post –survey period. We feel that the estimation of net profits (before partners remuneration) at 8% of total turnover would meet the ends of justice in the facts and circumstances of the instant case. The ld AO is directed the allow deduction of partners remuneration of ₹ 31.40 lacs from the net profit so determined above at 8% on total turnover of ₹ 1058.91 lacs. Accordingly the grounds raised by the assessee are partly allowed.
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2017 (6) TMI 560
Undisclosed income as per TDS certificate - Held that:- AR had not furnished any reconciliation for the difference in interest income even before us as rightly pointed out by the ld DR. AR had made merely made bald oral submissions without corroborating the same with material evidences. We find no additional evidence is also filed before us either in the form of proper explanation / reconciliation of the difference, so as to afford one opportunity to the ld AO for verification. Interest on income tax refund also has not been offered to tax by the assessee in the return of income. We find from the assessment order that the assessee is following mercantile system of accounting wherein interest income on deposits with banks are to be offered on accrual basis. Hence we are not inclined to agree to the argument of the ld AR that the said interest income on deposits were to be offered on receipt basis and hence the difference. In fact no evidence was furnished before us to prove the fact of those interest income being offered on receipt basis in the subsequent years. - Decided against assessee. Accrual of income - income from property development - Held that:- Since no evidence has been produced before the lower authorities to prove the same, the addition was sustained by the ld CITA. The ld AR merely stated that in the appeal for the Asst Year 2004-05, the ld CIT-A had directed the ld AO to consider the revised return filed for the Asst Year 2004-05 wherein the entire income from property sale development have been claimed to be offered to tax on accrual basis. The said statement of the ld AR is reckoned as a statement given across the bar and accordingly, we deem it fit and appropriate, in the interest of justice and fair play, to avoid double taxation, to set aside this issue to the file of the ld AO to verify whether the said consideration has been offered to tax by the assessee in Asst Year 2004-05 and if found to be correct, then the same is to be deleted in the hands of the assessee in Asst Year 2005-06. Accordingly, the Grounds raised by the assessee are allowed for statistical purposes. Gains on sale of assets - Short term capital gain OR business income - Held that:- We are not able to fully appreciate the various contentions raised by the assessee that the BIFR had passed an order directing the income tax department to treat the gains on sale of assets as business receipts so as to give the benefit of set off of the same with the brought forward business loss, in view of the fact that the copy of the BIFR order and its directions are not placed on record before us. Hence we are not in a position to appreciate the contentions of the ld AR in this regard. However, the same would be understood only from the language used by the BIFR in its directions and thereafter we need go into the binding nature of those directions. In the absence of the said order before us, it would be premature to get into those line of arguments advanced by the ld AR. However we find lot of force in the argument of the ld AR that the property at Deonar TDR Mumbai has been the subject matter of dispute in Ground No. 4 and we have already set aside the Ground No.4 to the file of the ld AO.
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2017 (6) TMI 559
Addition on account of cash deposited in bank - mismatch between the amounts of gross receipt shown by assessee vis-a-vis total deposits made by assessee during the year - Held that:- Admittedly, the assessee has filed his return of income declaring total gross receipt of ₹20,45,960/- u/s. 44AF of the Act. This fact has not been disputed by Authorities Below. Once the turnover has been accepted then no further addition can be made on account of money deposited in the bank account of assessee. Once the turnover has been accepted then no further addition can be made on account of money deposited in the bank account of assessee. On perusal of bank account we find that there are regular deposits and withdrawn of money. Even assuming that all the deposits are income of assessee then the benefit of withdrawal should be given by the Authorities Below. AO cannot on one hand take all the deposits as income of the assessee without giving the benefit of withdrawal. The turnover shown by assessee is exceeding the total amount of deposit made in his bank account. - Decided in favour of assessee.
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2017 (6) TMI 558
Disallowance of interest on the borrowed fund utilized for the purpose of investment in property - Held that:- AR placed that assessee is engaged in the business of property. However, on perusal of records, we find that Ld. AR failed to substantiate its claim on the basis of documentary evidence that assessee is engaged in the business of property. Therefore, we are not inclined to hold that assessee is engaged in property business and thus the advance in impugned property is representing investment. In earlier year, the Revenue has not disallowed any interest on account of utilization of borrowed fund in the impugned property and there was an investment in the impugned property to the tune of ₹6,06,10,665/- which was enhanced in the year under consideration by ₹1,36,95,000/-. At the same time, we find that investment in the property was enhanced whereas the loan liability of the assessee was reduced from 38.89 crores to 27.98 crores as evident from the audited balance-sheet of the assessee. Therefore, the possibility of making such investment in the impugned property in the current year out of borrowed fund is ruled out. Admittedly, no disallowance was made by the Revenue on account of interest in the immediate preceding year. Loan liability of the assessee has reduced in the year under consideration. Therefore, we hold that no borrowed fund has been utilized in the impugned property. For the aforesaid reasons, we reverse the order of Ld. CIT(A) in this regard and direct the AO to delete the addition. - Decided in favour of assessee.
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2017 (6) TMI 557
Reopening of assessment - proceedings initiated by the AO on the basis of material provided by the Principal Director of Income Tax (Investigation), Ahmedabad - Shri Pravin Kumar Jain is engaged in providing accommodation entries and the present assessee is also one of the beneficiary of such accommodation entry - Held that:- AO received the information from the Principal Director of Income Tax (Investigation), Ahmedabad vide its Confidential Letter stating that a search under Section 132 was conducted in the case of one Shri Pravin Kumar Jain and the search action resulted in collection of the evidence and other findings which conclusively proved that the said Shri Pravin Kumar Jain was engaged in providing accommodation entries and the assessee is one of the beneficiaries of bogus share application from various bogus companies operated by the said Shri Pravin Kumar Jain. Thus, the information received from the Office of Principal Director of Income Tax (Investigation), Ahmedabad along with the evidence collected during the search action in case of said Shri Pravin Kumar Jain, the AO has reopened the assessments for AYs 201112 and 201213. Therefore, it cannot be said that there was no tangible material available with the AO to form an opinion that the income chargeable to tax has escaped assessment for the years under consideration. As on the basis of the information supplied by / from the office of Principal Director of Income Tax (Investigation), Ahmedabad, the AO has found that the petitioner – assessee is the beneficiary of accommodation entries provided by one Shri Pravin Kumar Jain. The AO was having with him findings of the Investigating Team based on the material recovered during the search conducted of Shri Pravin Kumar Jain Group. Under the circumstances, it cannot be said that there was no tangible material available with the AO to prima facie form an opinion / belief that the income chargeable to tax has escaped assessment. In the facts and circumstances of the case, it cannot be said that the reopening of the assessment is on change of opinion by the subsequent AO. - Decided against assessee.
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2017 (6) TMI 556
Cancellation of registration of the assessee trust under section 12AA - bogus earthquake relief donation to sister concerns - Held that:- Director had discussed in detail the evidence before me to come to the conclusion about the financial improprieties of the Trust in a particular year. If the Tribunal was of the opinion that these findings are factually incorrect, the Tribunal ought to have recorded such opinion and it was thereafter certainly open for the Tribunal to interfere with the order of the Director. However, having not disapproved the findings of the Director, in facts of the present case, it is simply not open for the Tribunal to require re-consideration of the issue merely on the basis that the withdrawal of registration was based on the financial improprieties of one particular financial year whereas by the time the Director passes his order, one more order had passed by. The Tribunal in fact suggested that the Director ought to have looked into the affairs of the Trust for the subsequent year and without doing so, could not have withdrawn the registration. It is not the case where by the time the Director passed the order, many years had rolled by and the Tribunal thought that the initial misdeeds themselves were not very serious and therefore required the Director to take a fresh look considering the record of the Trust for the long period that may have passed in between. - Decided in favour of the Revenue
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2017 (6) TMI 555
Reopening of assessment - excess deduction by the Assessing Officer during the original assessment and non disallowance of expenditure paid to a foreign company without deducting tax at source - Held that:- With respect to the first ground, the Assessing Officer himself in the reasons had recorded that it was on verification of records that the said ground that they imparted, clearly eliminating any possibility of the assessee having not disclosed true facts. Perusal of the reasons would further show that if at all it was an error of the Assessing Officer to have granted larger relief than what was available to the assessee. On the second ground of payment without deducting tax at source, there is nothing to suggest that there was any failure on the part of the assessee to disclose truly and fully all material facts. - Decided in favour of assessee.
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2017 (6) TMI 554
Can deduction under section 35AB be claimed for acquiring knowhow even if manufacturing activity had not commenced - Held that:- The assessee was engaged already in the business of manufacturing soap - In order to set up soda ash manufacturing plant, the assessee acquired technical knowhow by making lumpsum payment - thus setting up of the manufacturing facility of soda ash was by way of an extension of the existing business of the assessee of manufacturing soap - hence deduction under section 35AB cannot be denied - exemption to the extent of 1/6th of the expenditure incurred by the assessee by way of lumpsum payment towards consideration for acquiring technical knowhow for the use for business is granted - Decided in favor of revenue
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2017 (6) TMI 553
Transferring the case from DCIT,Cor.Cir.1(1), Chennai to DCIT, Central Circle 3 (4), Mumbai u/s 127 - Held that:- A perusal of the said communication does not anywhere indicate the intention of Department to transfer the petitioner's own case from Chennai to Mumbai. On the other hand, a careful perusal of the said notice would only show that the respondent Department sought to centralize the Radford Group case with Mumbai, for which, they sought a reply from the petitioner under Section 127 (2). No doubt, the petitioner has stated in their reply dated 02.03.2016 that they have no objection for centralization of the above cases with Mumbai. As rightly pointed out by the learned counsel for the petitioner, a thorough perusal of the reply dated 02.03.2016 would undoubtedly indicate that the petitioner has given their no objection for centralization of the Radford case with Mumbai, also by specifically stating that they have no client registered under the name and style RADFORD/RADFORD GROUP. The very notice issued under section 127 (2) to the petitioner dated 23.02.2016 is bereft of material particulars indicating specifically that the petitioner case is sought to be transferred from Chennai to Mumbai to be tagged along with the Radford Group cases. In the absence of such material particulars, we do not think that the No Objection given by the petitioner, that too, for centralization of the Radford Group cases can have any barring or relevance on the impugned transfer order. Apart from the above said fact, it is curious to note that the 1st respondent, while passing the order on 04.04.2016 has not at all referred to the reply given by the petitioner on 02.03.2016. Hence, it is the bounden duty of the 1st respondent to record the reasons for transfer, especially, when section 127(2) contemplates the recording of such reasons. In this case, it has not been done so. The matter has to go back to the 1st respondent for passing fresh order after issuing notice to the petitioner with material particulars and after hearing their objections
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2017 (6) TMI 552
Accrual of income - unexplained deposits - Held that:- Carry forward deposits of the previous year could not be included in the income. - Decided in favour of the assessee
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2017 (6) TMI 551
Penalty proceedings u/s 271(1)(c) - estimation of income @ 12.5% of gross receipts - right of the assessee to challenge the order of the assessment - Held that:- Assessing Officer accepted only one part of the consent of the assessee being adhoc estimation of income but has not accepted the request for not initiating the penalty proceedings. There is no dispute that the Assessing Officer is not bound by the said request made by the assessee for not initiating the penalty proceedings and therefore it was well within the jurisdiction of the Assessing Officer to initiate the penalty proceedings. However the levy of penalty is always subject to the explanation and all other relevant factors and circumstances under which the addition was made by the Assessing Officer. Once the Assessing Officer is not bound by the consent of the assessee then on the similar analogy the assessee is also not bound by one part of the consent when the other part of the consent was not accepted by the Assessing Officer. Thus when the Assessing Officer has not accepted the consent of the assessee in toto then the said consent cannot be applied as a Doctrine of estoppels against the assessee and the assessee has a legal right to challenge the assessment order before the appellate authority.Therefore the right of the assessee to challenge the order of the assessment is a material legal right, which cannot be denied by applying the Doctrine of Estoppel. The percentage as provided under Section 44AD is certainly has a guidance and persuation value while estimating the income of the assessee which are not falling under the category of small assessees as per the provisions of Section 44AD of the Act. Hence in this case, when the business of the assessee is not in dispute and the turnover of the assessee was also not found to be incorrect or inconsistent with the other record, then the estimation of income has to be made by applying the rate of 8% of the turnover/gross receipt as provided under Section 44AD of the Act. Consequently, the impugned order of the CIT (Appeals) is set aside and the Assessing Officer is directed to compute the income of the assessee @ 8% of the turnover / gross receipts. - Decided partly in favour of assessee.
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2017 (6) TMI 550
Revision u/s 263 - Held that:- If there is an order on 31.12.2008, certainly the DR would have brought it to the notice of the Tribunal on 1.10.09 when the assessee submitted that there was no such order and by efflux of time the appeal had become infructuous. We, therefore, find that there is nothing on record to suggest that, as a matter of fact, there was an order passed by the AO on 31.12.2008 u/s 144 r.w.s. 263 and that there was an error that had crept in the proceedings of the Tribunal, while accepting the plea of the Counsel on either side that there was no order pursuant to the revisionary order of the CIT (A) in this matter. Not only that the evidence placed on record indicates that the notice dated 19.12.2008 was not issued immediately to the assessee and it was received only on 2.2.2009, much later to the so called date of order. Even the order does not indicate that an opportunity has been issued on 19.12.2008 and the order indicates only those dates on which the assessee appears before the AO in the first assessment proceedings. Service of the impugned order as late as 17.04.2010 also indicates that the order could not have been passed before the order of the ITAT allowing the withdrawal of the appeal. The order of the ITAT was served on the assessee with the address at “Begum Bazar”, but the revised assessment order placed indicates the address as “LIC Colony, Secunderabad”. It is also noticed that the order was not sent by post as is the practice in the Department, but through process server which is unusual. Only his report was relied that assessee was not available in the given address. For these reasons, we are of the considered opinion that the submissions of the assessee that there was no order passed within the due date, pursuant to the revisionary order u/s 263 of the Act, go unchallenged and unimpeachable, and the observations CIT (A) in the impugned order are unsubstantiated. Appeal of the assessee is allowed.
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2017 (6) TMI 549
Set-off of carry forward depreciation of earlier years - Held that:- As in the case of General Motors India P. Ltd., Vs. Dy. Commissioner of Income Tax [2012 (8) TMI 714 - GUJARAT HIGH COURT ] held any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001, thus once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever - Decided in favour of assessee.
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2017 (6) TMI 548
Income from house property - Addition of ALV under section 23(1)(a) - Held that:- It cannot be denied that there is no relationship whatsoever between the Licensor and the Licensee, viz. the Induslnd Bank in the present case, nor is there any finding that there are any suspicious circumstances or any fraud or collusion surrounding the Leave & License arrangement entered into by the assess. That being so, the case of Tip Top Typographics [2014 (8) TMI 1002 - BOMBAY HIGH COURT] as well as of Moni Kumar [2011 (3) TMI 497 - DELHI HIGH COURT] and the ratio thereof cited approvingly by the Hon’ble High Court in the assessee's own case, covers the facts of the assessee's case. On the facts of the present case, the conditions precedent to resort to enquiry or adoption of the prevailing rateable value are absent. In view of the same, and considered opinion, the rent actually received by the appellant shall be taken to be the actual rent for tax purposes. Respectfully following the Hon'ble Bombay High Court in appellant one's case order the estimation of rent done by the AO is not justifiable one. Accordingly, direct the AO delete the addition - Decided against revenue.
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2017 (6) TMI 547
Assessment u/s 153A - deemed dividend u/s 2(22)(e) - Held that:- Search was taken place on 24.7.2008. As on the date of search, the assessments for the assessment years 2004-05 & 2005-06 are already concluded and there is no pending proceeding for those assessment years. The time limit for issue of notice u/s 143(2) for the assessment years 2004-05 & 2005-06 has been expired. The A.O. made additions towards deemed dividend u/s 2(22)(e) of the Act without any incriminating materials and also based on the books of accounts and financial statements, which were already part of regular return of income filed by the assessee u/s 139(1) for those assessment years. Therefore, respectfully following the decision of coordinate bench of ITAT, Visakhapatnam in the case of Sri Hari Prasad Bhararia Vs. DCIT (2016 (11) TMI 1296 - ITAT VISAKHAPATNAM), we are of the view that the A.O. has no jurisdiction to make additions in respect of concluded assessments in the absence of any incriminating materials found during the course of search. - Decided in favour of assessee.
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2017 (6) TMI 546
Disallowance u/s 43B(b) - whether the gratuity disallowed had accrued to the assessee at all during the relevant previous year and whether the assessee has made any claim of the gratuity payment - Held that:- If there is no claim of gratuity for the relevant A.Y, then the question of disallowance also would not arise. For determination of this aspect, we are of the opinion that verification of fresh facts is not needed as the assessee’s books of account would clearly reflect whether there is any claim of deduction for the relevant previous year. In view of the same, we are inclined to admit the additional grounds of appeal filed by the assessee and remit the issue to the file of the AO with a direction to verify the claim of the assessee and to adjudicate the same in accordance with law. Addition u/s 14A - Addition to towards the proportionate interest debited to the P&L A/c - Held that:- It is seen that M/s. Mayuri India Cusine Inc. is a foreign company and the dividend income earned from such a nonresident company is not exempt from tax but is taxable under the category ‘Income from other sources’. Therefore, the provisions of section 14A would not come into play. The AO has clearly erred in observing that the intention of the assessee is to make the investment to earn the dividend income which is exempt from tax. In view of the same, we direct the AO to delete the disallowance of ₹ 17,52,000 made by the AO towards the proportionate interest debited to the P&L A/c. Addition on difference in the payment of insurance and the claim - Held that:- It is not clear as to how the AO has arrived at the figure of ₹ 1,62,300 as being the difference between the amount claimed and the amount paid by the assessee. As seen from Page No.9 of the Paper Book filed before us, the total of the insurance paid by the assessee is ₹ 28,88,890 whereas the AO mentioned that the claim of the assessee is ₹ 30,76,827. We find that even the CIT (A) has not verified the assessee’s claim and has mentioned payment as ₹ 27,26,590 without any basis. In view of the same, we set aside the issue to the file of the AO to verify the claim of the assessee and if there is no difference in the payment of insurance and the claim, then no addition shall be made.
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2017 (6) TMI 545
Rectification of mistake - not allowing the TDS credit - Held that:- The assessee duly fulfills all the conditions as laid down in section 198 r.ws. 199 r.w. Rule 378A of the Act. As find that TDS had been deducted and paid to the Central Government by the deductee and Payment/ Credit of Rent Income has been included in the accounts of the assessee. The deductor had duly filed requisite TDS returns as per Rules and also issued TDS certificate to the assessee and the same was furnished to the AO. Amount of TDS claimed, corresponding to claim of unrealized rent, is duly offered to tax as income of the assessee, in view of section 198 of the Act and also assessed by the AO. As assessee's action is in accordance with provisions of section 199 of the Act and the assessee is eligible for seeking credit of the TDS amount. Hence, set aside the order of the authorities below and decide the issue in favour of the assessee. However, this issue is highly debatable and cannot be acted upon by the revenue - Decided in favour of assessee.
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2017 (6) TMI 544
Tds u/s. 194H - whether payments made to the doctors were in the nature of commission ? - nature of payment - Held that:- In the instant case, it is admitted by the assessee that the payments are made to the doctors as reference fees. These are admittedly cash payments and not through banking channels. The assessee does not have a case that the doctors have disclosed these payments made by the assessee in their returns of income and paid due taxes to Government. Admittedly, the payments made by the assessee to the doctors are taxable in the hands of the doctors. The payments are actually in the form of secret commission and the assessee as well as the doctors who received it never wanted this information to be revealed to the Income Tax Department or to the general public. Had the assessee effected TDS on these payments, the doctors would have been compelled to disclose this income in their returns of income. The assessee by not deducting tax at source, had aided the doctors to evade income tax which was due to the Central Government. The explanation given for ‘Commission or Brokerage’ in Section 194H of the Act being an inclusive definition, does not exclude the ordinary meaning of ‘Commission’ or ‘Brokerage’. The payment made by the assessee as referral fees is directly proportionate or percentage of an amount received by the assessee for providing CT scan and MRI scan and such payment comes within the term ‘Commission or Brokerage’. In the light of the above said reasoning and ordinary dictionary meaning of ‘Commission’, the order passed by the Assessing Officer u/s. 201(1) and 201(1A) of the Act and which was sustained by the CIT(A) is correct and in accordance with law. - Decided against assessee.
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2017 (6) TMI 543
Penalty u/s 271(1)(c) - addition made u/s 35DDA - Held that:- On perusal of the order of the coordinate bench it is apparent that the claim of the assessee was based on several decisions including the decision of Hon'ble Delhi High Court in CIT Vs. KJS India Pvt. Ltd (2011 (9) TMI 667 - Delhi High Court) and coordinate bench has also discussed the claim of the assessee thoroughly. Merely because the claim of the assessee was not accepted by the concurrent authority despite there being plausible judicial precedents in favour of the assessee, the claim of the assessee cannot be said to be false. It is also an established principle that penalty u/s 271(1)(c) of the Act cannot be levied on debatable issues. Hon'ble Supreme Court in case of CIT Vs. Reliance Petro Products Pvt. Ltd [2010 (3) TMI 80 - SUPREME COURT ] has held that merely on the ground that the claim of the assessee is incorrect cannot tantamount to furnishing of incorrect claims. - Decided in favour of assessee.
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2017 (6) TMI 542
Capital gain computation - revenue treating the fair market value as consideration received on the transfer of the property - applicability of provisions of 50C - Held that:- When the assessee in the present case had claimed before Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub section (1) exceeds the fair market value of the property as on the date of transfer, the Assessing Officer should have referred the valuation of the capital asset to a valuation officer instead of adopting the value taken by the state authority for the purpose of stamp duty. The very purpose of the Legislature behind the provisions laid down under sub section (2) to section 50C of the Act is that a valuation officer is an expert of the subject for such valuation and is certainly in a better position than the Assessing Officer to determine the valuation. Thus, non-compliance of the provisions laid down under sub section (2) by the Assessing Officer cannot be held valid and justified. As in the case of Shashi Kant Garg (2005 (8) TMI 81 - ALLAHABAD High Court) has been pleased to hold that it is well settled that if under the provisions of the Act an authority is required to exercise powers or to do an act in a particular manner, then that power has to be exercised and the act has to be performed in that manner alone and not in any other manner. - Decided against revenue.
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2017 (6) TMI 541
Addition on account of low gross profit - Held that:- The books of account in this case have not been rejected. The orders of the authorities below do not cogently speak as to what they were considering the low gross profit. One of the reasons attributed by the AO himself is excessive claim of expenditure. The AO has, himself, made separate additions. Furthermore, as find that fall in gross profit can be a reason for further examination, but it cannot be a sole reason for making adhoc addition. In these circumstances, this addition made is based upon surmises without rejection of books of account and hence, not sustainable. - Decided in favour of assessee Disallowance under the head interest account - Held that:- It is none of the business of the revenue to decide as to how the assessee shall conduct his business. Whether the assessee should take loan or utilize internal resources is the sole prerogative of the assessee. It is not the case that the assessee has not paid the interest. As held in CIT vs Walchand & Co (P) Ltd (1967 (3) TMI 2 - SUPREME Court) hold that in applying the test of commercial expediency for determining whether the expense was wholly and exclusively laid out for purpose, reasonablenesss of the expense has to be judged from the point of view of businessman and not revenue. Hence, this disallowance is directed to be deleted.- Decided in favour of assessee Addition on account of excessive stock found - Held that:- The excess stock has been said to have been arrived at partly on the basis by applying the gross profit rate, which in the earlier part of this order, have been deleted. Moreover, it is the contention of the assessee that the stock found on survey was taken at the MRP which has also resulted in increase in the value of the stock. Upon careful consideration, remit this issue to the file of the AO. The AO shall consider this issue afresh. Addition on account of loss on fire - Held that:- It is not clear as to how this loss has arisen, whether it is a case of stock loss or a claim of bad debt. This aspect needs factual verification at the level of AO. Hence, remit the issue to the file of the AO to examine as to how the loss has been arrived at. Disallowance out of telephone expenses, can expense, mobile expense and motor car expense - AO made adhoc disallowance of 25% restricted to 10% by CIT-A - Held that:- CIT(A) has reasonably restricted the disallowance. Admittedly, all the vouchers under dispute have not been claimed to be backed by proper external vouchers. In such situation, a small disallowance sustained by the Ld.CIT(A) is reasonable. Hence, there is no need of any interference in the order of Ld.CIT(A).
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2017 (6) TMI 540
Penalty u/s. 271C - short deduction of TDS - Held that:- Assessee has made deduction in the light of the provisions of section 194C. The revenue authorities were of the opinion that Section 194I/194J was applicable on the impugned payments. In our considered opinion, the A.O. should not have levied the penalty mechanically without going into the merits of the case. On the given facts, it cannot be said that the assessee has willfully defaulted in deducting tax at source. From the above chart, we find that only demurrage charges of ₹ 2,96,820/- were paid without any deduction of tax. We further find that the said payment was made for delay in lifting the goods and the same was of penal in nature which can be safely accepted as a reasonable case for non-deduction of tax at source. As prior to the passing of the order u/s. 200(1) of the Act, the assessee has paid the differential amount of tax in the case of Padhiyar Hi-tech Engineering. This itself shows that there was no mala fide on the part of the assessee to willfully evade the provisions of the law. Section 273B of the Act provides that no penalty shall be imposable on the assessee for any failure referred to in the said provisions if he proves that there was a reasonable cause for the said failure. - Decided in favour of assessee.
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2017 (6) TMI 539
MAT application - scope of rectification of mistake - Held that:- The assessee explained before the AO that there is dispute with regard to the explanation sought from the assessee in the rectification notice and actual calculation made by the assessee as per law. Therefore, the AO, on long drawn process of reasoning should not have passed the order under section 154. The issue raised by the AO in proceeding under section 154 is highly debatable and requires the issue to be reconsidered by the AO about applicability of provision of section 115JB which was not raised by the AO in the original assessment proceeding. Therefore AO has no power to review his entire assessment order and to make certain additions in the order under section 154. The assessee has declared all particulars regarding computation and assessment to be framed under section 115JB. When the AO has consciously taken the view to frame regular assessment and made certain additions, AO is not empower to take contrary view to review entire assessment order already framed. It is against the spirit of provision of section 154 of the Act. The AO cannot be allowed to pass impugned order under section 154 on debatable issue. No justification for the AO to pass rectification order under section 154 of the Act to disturb the calculation under section 115JB of the Act, already considered. Appeal of the assessee is allowed.
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2017 (6) TMI 538
Revision u/s 263 - Held that:- CIT-A has passed impugned order u/s. 263 by holding the order of AO as erroneous in so far as prejudicial to the interest of revenue on account of inadequate enquiry made by AO while passing order u/s. 143(3) of the Act. However, we find that proper and sufficient enquiries were conducted by the AO at the time of assessment as evident from the order of AO. Therefore it cannot be concluded that no proper enquiry has been conducted by the AO at the time of assessment proceedings. The AO has taken conscious view after considering the facts and circumstances of the case and giving proper opportunity to the assessee. Thus, the view expressed by AO in the form in his assessment order cannot be replaced with the view of Ld. CIT u/s 263 of the Act. Assessee’s appeal stands allowed.
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Customs
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2017 (6) TMI 570
Diversion of goods for domestic sale - N/N. 53/1997-Cus. Dated 3.06.1997 - Held that: - the appellant illicitly diverted the goods in local market, as re-warehousing certificates for such goods were not received by the Revenue; thus the appellant failed to fulfill the conditions of the N/N. 53/1997 making them liable for payment of duties of Customs on such raw material. In case of liability of duty of Customs the impugned order has observed that goods did not reach destination of the consignee and appeared to have been diverted illicitly for domestic sale - the appellant did not fulfill the conditions 4 and 7 of N/N. 53/97-Cus dated 03.06.1997 and therefore, is liable for payment of Customs duty - appeal dismissed - decided against appellant.
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2017 (6) TMI 566
Jurisdiction of Directorate of Revenue Intelligence (DRI) - power to issue SCN - Held that: - w.e.f. July 6, 2011, the Additional Director General, DRI was prospectively appointed as 'proper officer’ for the purpose of Section 28 of the Customs Acts. Hence, from 06.07.2011 ADG-DRI has been empowered to issue demand notice under Section 28 - Later on, i.e. for the period subsequent to the amendment, the matter i.e. the DRI officers having the proper jurisdiction to issue the SCN or not had come up before the Hon’ble Delhi High Court in the case of Mangali Impex vs. Union of India [2016 (5) TMI 225 - DELHI HIGH COURT], and the High Court inter alia, held that even the new inserted section 28(11) does not empower either the officers of DRI or the DGCEI to issue the SCN for the period prior to 8.4.11. Matter remanded to the original adjudicating authority to first decide the issue of jurisdiction after the availability of Hon’ble Supreme Court decision in the case of Mangli Impex and then on merits of the case but by providing an opportunity to the assessee of being heard - appeal allowed by way of remand.
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2017 (6) TMI 565
Refund of SAD - N/N. 102/2007-Cus. dated 14.9.2007 - denial on the ground of of non-payment of sales tax / VAT - whether for the purpose of 2(d) of the above Notification, whether such Nil rate of sales tax / VAT/CST can be considered as appropriate duty? - Held that: - what is required in terms of the said notification is payment of appropriate sales tax/VAT regardless of the rate thereof. It logically follows that if the appropriate rate of sales tax/VAT was NIL then the appropriate sales tax/VAT paid will also be NIL - When goods imported are otherwise, not fully exempted from VAT/sales tax, non-refund of 4% SAD paid on the concerned importers at the stage of import of these goods would amount to unintended taxation and uncalled for discrimination against the importer for no fault of theirs. Decision in the case of Vazir Sultan Tobacco Co. Ltd. [1996 (2) TMI 138 - SUPREME COURT OF INDIA], where it was held that nil rate is also an appropriate duty. Refund allowed - appeal allowed - decided in favor of assessee.
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2017 (6) TMI 564
Violations of conditions for import - DEEC Scheme - the respondents had diverted the imported raw materials and also had violated the conditions for import for duty free materials - benefit of N/N. 43/2002-Cus. dated 19.4.2002 - whether the raw materials imported duty-free has been diverted by the respondents and whether there is violation to fulfill the export obligation? - Held that: - when there is shortage of duty-free materials, it is for the respondents to explain as to the reason for such shortage - From the records, it is clear that respondent has not been able to offer any explanation. Therefore, the respondent has not been able to fulfill the export obligation and also has violated the conditions of the advance licenses. The seized 335.293 MTs of stainless steel coils / sheets are very much liable for confiscation as proposed in the notice - only for the limited purpose of considering for extending the option for redeeming the goods with imposition of redemption fine under section 125 of Customs Act, 1962 and the quantum thereof, the matter is remanded to the adjudicating authority. Appeal allowed by way of remand.
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Service Tax
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2017 (6) TMI 579
Technical Inspection and Certification Services - levy of service tax - activities of testing of gas cylinders - N/N. 12/2003-ST dt. 20.06.2003 - Held that: - Applying the Hon'ble Supreme Court judgment in Harshita Handling [2011 (1) TMI 1323 - SUPREME COURT], wit can be concluded that the services of technical inspection and certification services of gas cylinders does not attract levy of service tax, we have no hesitation to conclude that the services rendered by the appellant are not taxable - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 578
CENVAT credit - L.N. Tower - denial on the ground that these towers are neither input nor capital goods - Held that: - The matter was decided by the Larger Bench of this Tribunal in the year 2016 itself wherein the Larger Bench of this Tribunal decided that on LN Towers, the assessee is not entitle to take Cenvat Credit. Extended period of limitation - Held that: - As the issue itself is in dispute whether the assessee is entitle to take CENVAT Credit on Towers. In that circumstances, the extended period of limitation is not invokable. Appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (6) TMI 577
Penalty u/r 26 of the CER and Rule 15 of CCR, 2004 - Held that: - the appellants namely, Shri Vijay Soni, Joint Managing Director and Shri M S Rana, Manager (Excise) are not responsible for evasion of duty of Excise including fraudulent availment of Cenvat Credit by the company M/s.MIL - these appellants were working merely as employees with the manufacturer assessee M/s. MIL - reliance placed in the case of O.P. Agarwal V/s CC, Kandla [2005 (4) TMI 326 - CESTAT, NEW DELHI] wherein it was observed that employees carrying out orders given to them are not liable to penalty - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 576
Valuation - components of speedometer manufactured through job work - moulds and dyes were cleared on payment of duty based on assessable value as determined by the appellants - department issued a SCN for demanding differential duty on the goods based on CAS-4 value, with interest thereon, and for imposing penalty - whether the duty liability was short paid before issue of the show cause notice on 05.01.2006, whether penalty is imposable on the appellants under Section 11AC of the Central Excise Act and whether there was deliberate undervaluation of goods for the material period, without following CAS-4? Held that: - The Jurisdictional High Court of Madras in the case of Arun Vyapar Udyog Pvt. Ltd. Vs CESTAT Chennai [2013 (12) TMI 817 - MADRAS HIGH COURT] has held that discharge of duty liability before issuance of SCN is immaterial for application of Section 11AC. Undervaluation of assessable value by the appellant by not adopting CAS-4 valuation for as many as 22 months is nothing but a deliberate undervaluation with the intention of evading full duty liability required to be discharged under law. The acts and omissions of the appellant in this case are very much acts of fraud with intent to evade payment of duty. A continued hiatus of "twenty two" months can in no way explain the conduct of the appellant. Discernably therefore, the appellants knowingly and willfully adopted lesser assessable/transaction value in contravention of Rules 4 & 8 of Central Excise (Valuation) Rules, 2000 read with Rule 8 of Central Excise (Valuation)Rules, 2000. Such undervaluation over a period of one and half years resulting in evasion of duty of ₹ 60,18,344/- calls for levy of penalty. All the provisions of Section 11AC ibid will apply to this case, hence there cannot be any discretion in the imposition of penalty equal to the differential duty determined. Appeal dismissed - decided against appellant.
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2017 (6) TMI 575
Rebate claim - rejection of the rebate claim of the petitioners on the ground that the same is directly opposed to the judgment of this court in the case of Zenith Spinners v. Union of India, [2005 (11) TMI 440 - GUJARAT HIGH COURT], where it was held that The CBEC cannot exercise power under Rule 19 of the Rules to negate a notification issued by the Central Government under Rule 18 of the Rules - Held that: - the decision of this court in the case of Zenith Spinners, is applicable to the period prior to the issuance of the N/N. 10/2004 dated 02.06.2004, whereas in the facts of the present case, the rebate claims are after the applicability of the N/N. 10/2004 dated 02.06.2004 and hence, the same is not applicable to the present case. Since the rebate claims have been disallowed solely on the basis of N/N. 10/2004- CE(NT) dated 3rd June, 2004, no useful purpose would be served by remanding the matter to the adjudicating authority and the rebate claims deserve to be allowed. Petition allowed - decided in favor of petitioner.
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2017 (6) TMI 574
CENVAT credit - welding electrodes - whether CENVAT credit on welding electrodes, which were used in repairs and maintenance of machinery, and were used in manufacture of the final product, that is, paper, would be available to the Assessee? - Held that: - the said issue is covered by the judgment of the Division Bench of this Court in the matter of National Co-operative Sugar Mills Ltd., V. Commissioner of Central Excise, Madurai [2016 (7) TMI 1073 - MADRAS HIGH COURT], where it was held that Judicial pronouncements makes it abundantly clear that welding electrodes used for repair and maintenance of machineries, in relation to manufacture of the final product, namely sugar, is eligible for CENVAT credit - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 573
Benefit of N/N. 287/1986, as amended by N/N. 8/1992 dated 01.03.1992, N/N. 120/1984, and N/N. 94/1989-CE dated 01.03.1989 - It appears that the Department, upon verification, came to a prima facie conclusion that IOCL had misclassified certain products and consequently, wrongly, availed the benefit of the 1989 Notification - whether the subject products fell in the category of "lubricating oil/grease" or "lubricating preparations". Held that: - It is well settled that the issues pertaining to jurisdiction can be raised at any stage and even in collateral proceedings. The instant proceedings are the proceedings, which, in fact, emanate from the SCN issued in December 1992 - there was no reason for the Tribunal not to entertain the objection and decide the matter, accordingly, since, the very basis and the foundation of the entire proceedings initiated by the Revenue was in jeopardy. It is, in these circumstances, that the Tribunal did not proceed to adjudicate upon the merits of the matter and, in our opinion, quite correctly so, as on jurisdiction, it came to a conclusion that the SCN, based on which proceeding against IOCL had been triggered, was not viable in law. There could be no acquiescence, where, the issue involved pertains to jurisdiction. Appeal dismissed - decided against appellant.
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2017 (6) TMI 572
Refund claim - benefit of N/N. 175/86 - Held that: - the observation that the appellants are entitled to exemption under the N/N. 175/86 in Order-in-Original No. 27/2001 dated 29.11.2001 has to be treated as obiter dictum, which has no binding value. The appellants have filed the second mentioned refund claim as an aftermath of the said Order-in-Original. Therefore, consequential relief claimed by the appellants on the basis of such Order-in-Original No. 27/2001 dated 29.11.2001 (for the period from 1.4.86 to 29.2.86) is not sustainable in law are flawed and not supported by law - refund withheld - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 571
CENVAT credit - input services - manufacture of Made-up Textile articles - benefit of N/N. 30/2004-CE - Held that: - No doubt, the Dept., in communicating its decision recorded that the appellant would not be eligible to avail credit in view of the Rule 6(i) of CCR, 2004, but there has no elaborate narration/discussion of the facts of the case and its implication on the eligibility of the benefit of CENVAT Credit on the Input Services - it is necessary to remand the matter to the Adjudicating Authority to decide the case afresh after discussing the facts of the case - appeal allowed by way of remand.
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2017 (6) TMI 569
Valuation - Liability of interest - duty sustained due to extra charges collected from the customers by the appellant - Held that: - the liability of duty against the appellant has rightly been confirmed on account of extra charges collected from the customers by the appellant. - As the present facts are covered by the Tribunal order in the case of CCE, Bangalore vs Scorpio Engg Pvt Ltd [2011 (9) TMI 977 - KARNATAKA HIGH COURT], the liability of interest on delayed payment of duty, which is due before the enactment of Finance Act bill 2001 is not chargeable since the interest has been demanded for the liability of duty of the period of 1996-97, 1997-98 ie., for the period prior to 11.5.2001 ie., which is, thus, before enactment of Finance Bill 2001. The matter is remanded to the Original Adjudicating Authority for requantification of liability of duty against the appellant - appeal allowed by way of remand.
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2017 (6) TMI 568
Refund claim - manufacture of pan masala and pan masala containing tobacco - the entire goods manufactured during the above period were exported - denial of refund on the ground that the exported goods were manufactured from duty-free material under N/N. 43/2001-CE(NT) dated 26.01.2001 and duty paid goods cannot be exported under Rule 19 of the CER, 2002 - Held that: - When goods are manufactured in a factory and these are exported, Central Excise duty paid on such goods will be eligible as a rebate - Since the entire production of goods in the appellant’s factory during the disputed period has been exported, there is no justification for non payment of refund of such duty paid - The fact that there was no provision for grant of rebate of excise duty on export of goods covered by the compounded levy scheme cannot be cited as a reason for not grant of rebate. Refund of duty paid under the compounded levy scheme is allowed - appeal allowed - decided in favor of assessee.
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2017 (6) TMI 567
Principles of Natural justice - it was found that M/s OM Corporation was not in existence and the goods though claimed to have been exported but in fact, not exported - denial of cross-examination - Held that: - to establish involvement of the manufacturer and others, no doubt, reliance has been placed on documentary evidences but also the statements of witnesses collected during the course of investigation, which had been relied upon by the adjudicating authority in confirming the allegation - Keeping in view the principles laid down in allowing cross-examination of witnesses whose statements were relied in various judicial pronouncements, the appellants be given a fair opportunity to examine these witnesses whose statements have been relied - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2017 (6) TMI 563
Penalty u/s 34(7) of the VAT Act as well as u/s 34(12) of the VAT Act - The dispute pertains to the period between 10.08.2006 to 31.03.2007 during which the assessee did not pay the Value Added Tax at the relevant time - Held that: - Sub-section 7 of Section 34 of the Act provides for a penalty in a case where the dealer in order to evade or avoid payment of tax commits certain defaults such as fails to furnish returns or furnishes incomplete or incorrect returns or avails of tax credit which he is not eligible to. Thus, the element of mens rea is of importance - Sub-section 12 of Section 34 though provides for penalty where the tax liability ultimately assessed exceeds a certain percentage of the tax paid by the assessee, it still gives discretion to the authority to impose penalty not exceeding one and one-half times the difference between the tax paid and the tax assessed. The legislature having set out an upper limit for imposition of tax without providing for any minimum mandatory tax, has left a wide discretion on the competent authority which discretion must be exercised taking into account relevant factors. The authority committed an error in imposing penalty on the assessee under sub-sections 7 and 12 of Section 34 and the Tribunal committed an error in confirming part of such penalty - appeal allowed - decided in favor of appellant.
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