TMI Tax Updates - e-Newsletter
July 12, 2014
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:
Income from unexplained sources - AO has not made any investigation with regard to the verification of the documents submitted by the assessee before him - no addition can be sustained u/s 68 - AT
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Income Tax:
Premium for acquiring lease hold rights – payment made by the assessee to the CIDCO represent transfer price of the land on lease hold basis and it cannot be contemplated as rent within the meaning of section 194-I - AT
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Income Tax:
Determination of Fair market value of property – report given for the Wealth tax purposes need not be considered for the Income tax purposes, particularly for computation of capital gains - AT
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Income Tax:
Verification of the donation or verification of violation of Section 13(3) is not the relevant consideration for registration of trust u/s 12AA - AT
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Customs:
Clim of interest on delayed refund of interest - Section 27A of the Customs Act would not permit to grant interest on the interest too - AT
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Service Tax:
CENVAT Credit - Inability to produce original invoices - appellant has wrongly availed the CENVAT Credit without an invoice prescribed under Rule 9(1)(f) of the CENVAT Credit Rules, 2004 - AT
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Central Excise:
Refund - payment of duty initially on captive consumption of intermediate product which were exempt from duty - It is incidence of duty and not the duty as such which is required to be shown to have not being passed on - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (7) TMI 392
Deduction u/s 80IB of the Act – Manufacturing activity - Held that:- The decision in The Commissioner of Income Tax Central-II Versus Sunilbhai S. Kakad [2014 (7) TMI 261 - GUJARAT HIGH COURT] followed - the activity carried out by the assessee can be said to be manufacturing activity and not simple assembling as held by the AO – the activity is held to be manufacturing activity and the assessee is entitled to deduction u/s 80IB of the Act - there is specific finding given by the CIT(A) that as such the Unit had employed atleast ten persons – the finding is a question of fact, it cannot be said that the assessee was not entitled to the benefit of deduction under Section 80IB of the Act – Decided against Revenue.
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2014 (7) TMI 391
Reopening of assessment u/s 148 of the Act – Full disclosure of material facts not made - Held that:- The scrutiny of return of income filed for the AY 2006-07 was undertaken - It was also noted during such scrutiny that the assessee was engaged in the business of trading in shares, securities and future option - The assessee also showed income from other sources i.e. from dividend - In respect of unsecured loans, various queries were raised and they have been also answered - there was disclosure and the occasion would not arise to term this as the assessee not having disclosed fully and truly all the material facts necessary for assessment - the AO when forms his belief on the basis of subsequent new and specific information that the income chargeable to tax has escaped assessment on account of omission on the part of the assessee to make full and true disclosure of primary facts, he may start reassessment proceedings as fresh facts revealed the non-disclosure full and true - Such facts were not previously disclosed or it can be said that if previously disclosed, they expose untruthfulness of facts revealed. The Assessing Officer required jurisdiction to reopen u/s 147 r.w. section 148 of the Act, where the information must be specific and reliable – Relying upon Phool Chand Bajrang Lal And Another Versus Income-Tax Officer And Another [1993 (7) TMI 1 - SUPREME Court] - since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but is open to an assessee to establish that there exists no belief or that the belief is not at all a bona fide one or based on vague, irrelevant and non-specific information - To that limited extent, the Court may look at the view taken by the Income-tax Officer and can examine whether any material is available on record from which the requisite belief could be formed by the AO and whether that material has any rational connection or a live link with the formation of the requisite belief - It is also immaterial that at the time of making original assessment, the AO could have found by further inquiry or investigation as to whether the transactions were genuine or not - If on the basis of subsequent valid information, the AO forms a reason to believe on satisfying twin conditions prescribed u/s 147 of the Act that no full and true disclosure of facts was made by the assessee at the time of original assessment - the income chargeable to tax had escaped assessment, his belief and the notice of reassessment based on such belief/ opinion needs no interference. The information furnished at the time of original assessment, when by subsequent information received from the DCIT, Kolkata, itself found to be controverted, the objection to the notice of reassessment u/s 147 of the Act must fail - at the time of scrutiny assessment, a specific query was raised with regard to unsecured loans and advances received from the said company namely, Basant Marketing Pvt. Ltd. based at Kolkata - These being the transactions through the cheques and drafts, there would arise no question of the AO not accepting such version of the assessee and not treating them as genuine loans and advances - Furnishing the details of names, addresses, PANs, etc. also would lose its relevance if subsequently furnished information, which has been made basis for issuance of notice impugned, concludes that Basant Marketing Pvt. Ltd. is merely a dummy company of one Shri Arun Dalmia, which provided the accommodation entries to various beneficiaries. The Joint Director, CBI, Mumbai, intimated to the DIT (Investigation), Mumbai - From the analysis of details furnished and the beneficiaries reflected, which are spread across the country, the CIT, Koklata, suspected the accommodation entry related to the AY 2006-07 as well, this information has been provided to Director General of Income-tax, Kolkata, who in turn, communicated to the Chief Commissioner of Income-tax, Ahmedabad - revelation of investigation as could be noticed from the record examined (file) deserves no reflection in this petition - Insistence on the part of the petitioner to provide any further material forming the part of investigation carried out against Dalmias also needs to meet with negation, as the law requires supply of information on which AO recorded her satisfaction, without necessitating supply of any specific documents - The proceedings initiated u/s 147 of the Act would not be rendered void on non-supply of such document for which confidentiality is claimed at this stage – the decision in Acorus Unitech Wireless Private Limited Versus Assistant Commissioner of Income Tax [2014 (3) TMI 154 - DELHI HIGH COURT] followed - assumption of jurisdiction on the part of the AO is based on fresh information, specific and reliable and otherwise sustainable under the law, challenge to reassessment proceedings warrant no interference – Decided against Assessee.
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2014 (7) TMI 390
Penalty u/s 271(1)(c) of the Act – Ad hoc Payment of wages on estimation – Held that:- There is no evidence brought on record on behalf of the Revenue to prove that the assessee was indulging in making entries of bogus payments in its wage account - the assessee has submitted that signatures of some of the employees might not be tallied as the same employees might have signed differently in different style in different months, and also that it might be that the other employee might have put the signature on behalf of the employees concerned - the disallowance has been made by the department out of wage expenses by way of estimate only - The disallowance was considered at this second appellate stage by the Tribunal and some part relief out of this disallowance out of wages was allowed to the assessee in the quantum appeal of the assessee - it cannot be said that the assessee has admitted bogus payment claimed under the head “wage expenses” - since it is a case of disallowance made out of wage expenses for the reason that the assessee could not establish the same fully with documentary evidences, it is not a fit case for levy of penalty u/s 271(1)(c) – Decided in favour of Assessee.
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2014 (7) TMI 389
Income from unexplained sources - Creditworthiness and genuineness of the transaction - Share application money received – Commission paid – Held that:- The case was reopened u/s 148 of the Act on the basis of information from Investigation Wing that assessee is a beneficiary of accommodation entry providers - The assessee submitted the documents in respect of each of the share applicants like share application form, confirmation of share application, bank statement showing relevant transaction, copy of cheques/drafts of which payment was received, copy of income-tax return of the share applicant, PAN of each applicant and also affidavits and Board resolution – AO has not done any verification with regard to the documents to know veracity of the documents - AO has also not issued summons u/s 131 of the Act to the share applicants for their personal presence - Delhi High Court in the case of CIT vs. Gangeshwari Metal P. Ltd. [2013 (1) TMI 624 - DELHI HIGH COURT] has held that there are two types of cases, one in which the AO carries out the exercise which is required in law and the other in which the AO ‘sits back with folded hands’ till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The assessee’s case falls in the second category as the AO has not made any investigation with regard to the verification of the documents submitted by the assessee before him - there was a clear lack of enquiry on the part of the AO - no addition can be sustained u/s 68 of the Act - the assessee has adduced adequate evidence/material which are sufficient to discharge the prima facie burden casted upon it by section 68 of the Act – thus, the CIT (A) was not justified to sustain the addition – Decided in favour of assessee.
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2014 (7) TMI 388
Interest free advances to M/s. Nitya Laboratories Ltd. – Held that:- M/s. Nitya Laboratories Ltd. has entered into an exclusive arrangement with the assessee and has been carrying out job work of the assessee-company - the assessee has given interest free advanced from time to time to M/s. Nitya Laboratories Ltd. to take care of the working capital requirements since the entire manufacturing facility of M/s. Nitya Laboratories Ltd. is used by the assessee – Relying upon M/s. SA Builders Ltd. vs. CIT & Anr. [2006 (12) TMI 82 - SUPREME COURT] - in order to decide whether interest on funds borrowed by the assessee to give an interest free loan to a sister concern should be allowed as a deduction u/s 36(1)(iii) of the Act. The assessee's total sales during the year is ₹ 167.34 crores which consists of goods manufactured by the assessee-company and sales of ₹ 120.47 crores and goods manufactured by M/s. Nitya Laboratories Ltd. on job work basis, which in turn sold by the assessee at ₹ 46.87 crores - the assessee is having accumulated profits in "reserves and surplus" and at the opening of the year it is at ₹ 23.67 crores and at the year ending it is at ₹ 43.37 crores and the aggregate amount of equity and reserves at the year ending is ₹ 51.63 crores - The sale value of the products exclusively manufactured by M/s. Nitya Laboratories Ltd. for the assessee-company constitutes 38% of the total sales of the assessee company - for the sake of commercial expediency and out of business prudence the assessee has advanced these amounts to M/s. Nitya Laboratories Ltd. - Decided in favour of Assessee.
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2014 (7) TMI 387
Justification for the ex-parte order passed u/s CIT(A) - Held that:- Backward calculation in the absence of any allegation about non-maintenance of books, non-furnishing of vouchers, non-compliance of the notices, cannot be accepted as the provisions of the Act are very specific and clear - AO can only resort to estimate of income under section 145, if conditions specified there in are satisfied - Expenditure can be verified under section 37(1) and only AO finds out that expenditure is not wholly and exclusively for the purpose of business, he can disallow such expenditure - Assessee has justified the expenditure by explaining the change of business profile, Increase in Call Centre Income and also by furnishing necessary statements and vouchers before the authorities - AO and CIT(A) erred in resorting to mathematical jugglery so as to deny the expenditure claimed by the assessee. There is no basis for A.O. disallowance of the so called inflated expenditure and CIT(A) also did not apply his mind in restricting the amount on an adhoc basis - he should have examined the contentions of the assessee and proved that they are not correct - Without doing anything on record, this sort of disallowance of expenditure claimed by the assessee cannot be accepted or justified – thus, the so-called disallowance of expenditure resorted by the AO is cancelled – thus, the addition of ₹ 2,20,00,000 sustained by the CIT(A) is set aside – Decided in favour of Assesee.
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2014 (7) TMI 386
Premium for acquiring lease hold rights – Rent as defined u/s 194-I of the Act - Requirement to deduct TDS – Held that:- The decision in ITO (TDS) v/s Wadhwa & Associates Realtors Pvt. Ltd., [2013 (9) TMI 261 - ITAT MUMBAI] followed - the assessee has made payment in the financial year 2007-08 towards lease premium in respect of the plot of land - the premium is not paid under a lease but is paid as a price for obtaining the lease, hence it precedes the grant of lease - by any stretch of imagination, it cannot be equated with the rent which is paid periodically - A perusal of the records further show that the payment to MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent. The assessee has made payment to MMRD under Development Control for acquiring leasehold land and additional built up area - payment for acquiring leasehold land is a capital expenditure - definition of rent as provided under the provision, there is no reason to tamper or interfere with the findings of the CIT(A) - the payment on account of premium represents transfer price of the land on lease hold basis and no part thereof qualifies to fall within the meaning of “rent” as contemplated in section 194-I - no deduction of tax at source is required – thus, the payment made by the assessee to the CIDCO represent transfer price of the land on lease hold basis and it cannot be contemplated as rent within the meaning of section 194-I – thus, the order of the CIT(A) is upheld – Decided against Revenue.
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2014 (7) TMI 385
Disallowance of interest u/s 36(1)(iii) of the Act Applicability of section 43B(e) of the Act Held that:- The assessee company is engaged in business of manufacturing of polyester yarn and dealing in cotton yarn and waste - the assessee company debited an amount of ₹ 69,76,984/- to its profit and loss account on account of interest paid on loans taken from banks amounting to ₹ 4,47,24,765 - The assessee company had also given interest free advances to various persons amounting to ₹ 47,38,005 - the decision in assessee's own case for the earlier assessment year followed - the issue relating to the interest disallowance has already been restored by the Tribunal in the own case of the assessee for the preceding assessment years to the file of the AO thus, the matter is to be remitted back to the AO for fresh adjudication - The AO will also decide the alternative issue relating to the above interest disallowance u/s 43(B) of the Act Decided in favour of Assessee.
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2014 (7) TMI 384
Determination of Fair market value of property – Computation of capital gain -Sale consideration u/s 50C(2) - cost of acquisition as on 01.04.81 - value taken for wealth-tax purposes can be followed for capital gains purposes or not - Held that:- The decision in Mrs. Indira Bai. Versus Income-Tax Officer [1992 (5) TMI 77 - ITAT MADRAS-A] followed - There was an admission regarding the value of the property leading to an estoppel - an admission is a statement which suggest any inference as to fact in issue by a person having an interest in the subject matter - the determination of the value for the wealth-tax purposes was a matter of routine without reference to the complete data available - the wealth-tax is a repetitive tax, and the valuation need not be accurate - in the case of self-occupied house properties which do not earn any income, the value is generally kept low even by the department as can be seen from the provisions of rule 1BB - tax on capital gains is a one-time tax on the difference between the consideration received and the market value as on 1.1.1964 - the assessee was not estopped from contending that the value taken for wealth-tax purposes need not be followed for capital gains purposes, that value taken for wealth tax purposes could be considered to be the only one piece of evidence which could be contradicted by the assessee by producing further data for a more accurate determination of the market value. The report given for the Wealth tax purposes need not be considered for the Income tax purposes, particularly for computation of capital gains - this aspect was not before AO at the time of completing the assessment - the assessee filed additional evidence in the form of order in the case of Pankaj. P. Shah , accepting assessee valuation in the subsequent order passed after CIT(A) order and also two valuation reports of the department dated 19.04.90 valuing property as on 31.03.87 to 31.03.88 - These valuation reports of the department along with the Wealth tax report of Shri Umrigar are to be considered viz-a-viz the report of Shri Ganjawala - The assessee’s objection on adopting report of Shri Umrigar for the purpose of capital gains also required detailed examination of the AO, as CIT(A) took upon himself without giving opportunity to the AO. The issue of adoption of value u/s 50C was referred to the AO by the CIT(A), this issue also required to be set aside to the file of AO – thus, both issue of sale consideration u/s 50C(2) and cost of acquisition as on 01.04.81 for computing of capital gains should be examined by AO afresh – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Revenue.
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2014 (7) TMI 383
Computation of LTCG - Deduction from sale consideration - Brokerage fees paid to M/s Megha Developers (MD) – Held that:- The assessee had claimed expenditure with regard to the sale of a plot of a land, that she made payment to MD - though the AO mentions of local inquiry conducted about the property sold and the distance between the two properties i. e. Shiv Mahal and the plot of land, yet he has not disclosed the source of such inquires - the FAA has given a undisputable finding that only one property was sold during the year under appeal - he had access to a map of the land sold - a glance at the sale deed clearly show that the transaction was about a plot of land and about the property called Shiv Mahal - the stand taken by the AO about sale of two properties is totally baseless. The FAA has analysed the issue in proper prospective - Factors like assessee’s stay in Mumbai, on-going litigation about the property, rendering of services at Baroda by MD, were considered by him before allowing the appeal filed by the assessee - MD had rendered various services to the assessee from identifying customers to settling the deal and getting the documents registered - MD is not a related party to the assessee and the genuineness of the transaction - if the assessee had incurred expenditure @ 4% for paying fees to a professional entity, then there was no justification in partly disallowing it - FAA had rightly allowed the appeal of the assessee – Decided against Assessee.
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2014 (7) TMI 382
Order passed u/s 263 of the Act – NP rate already dealt - CIT was of the view that the AO has not properly verified the GP and NP rates of the assessee which were abnormally low - Held that:- The AO did notice that the profit disclosed by the assessee was much lower than the profit disclosed by M/s Milestone Fab which is engaged in the similar business - the assessee referred the matter u/s 144A to the ACIT - the assessee explained the reason for low net profit - The assessee also explained that the assessee’s case cannot be compared with M/s Milestone Fab because they are manufacturing and selling transformers apart from electrical poles whereas the assessee company is not manufacturing transformers - the assessee’s sales were mainly to the electricity board on the basis of tender and during the period, the tender was opened and material was supplied, there was a hike in the price of raw material - while passing the order u/s 263, the CIT cannot go beyond the reasons given in the notice issued u/s 263 - The only ground given in the notice under Section 263 was lack of enquiry into the low profit rate disclosed by the assessee - This reason is found to be factually incorrect - Adequate enquiry into the low profit rate was made by the AO as well as ACIT - the order passed by the CIT u/s 263 is not valid and is liable to set aside – Decided in favour of Assessee.
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2014 (7) TMI 381
Treatment of profit on sale of shares – Capital gain or business income – Held that:- Long term capital gain arose only from sale of two shares which were purchased during the FY 2004- 05 - the allegation of the AO that the assessee was frequently dealing in shares is factually incorrect – there was long term capital loss as well as short term capital loss and, in the order passed under Section 143(3) - Revenue cannot be permitted to accept the loss from sale of shares as short term/long term capital gain but, in the year in which there was an income, treat the same as business income - In AY 2006-07, there was a short term capital gain which was claimed to be set off by the assessee against the brought forward short term capital loss and remaining short term capital gain was offered to tax - The same was accepted in the order passed under Section 143(3) - Revenue has not been able to show how the facts of the year under consideration are different than the preceding two years so as to justify the different view taken in this year - on the ground of consistency itself, the Revenue’s appeal is liable to be dismissed apart from the facts of the case as discussed by the CIT(A), which clearly show that the assessee was investor in shares and not trader – thus, there was no justification to interfere with the order of learned CIT(A) – Decided against Revenue.
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2014 (7) TMI 380
Addition of stock – Held that:- The total stock found was of ₹ 1,80,517 - When the assessee is carrying on the business, some stock is bound to be there - AO has estimated the income at ₹ 4 lakhs - the stock of ₹ 1,80,517/- cannot be said to be excessive or unreasonable even if the assessee has not maintained any details of such stock in the books of account – thus, the addition of ₹ 1,80,517/- as unexplained stock is to be set aside. Unexplained cash – Held that:- The AO has recorded the finding that during the course of survey, cash of ₹ 1,12,957/- was found as against the cash in hand in the books of account at ₹ 23,417 - there was an excess cash found amounting to ₹ 89,540 - in principle, the addition for the same is justified – the AO has estimated the income of the current year at ₹ 4 lakhs as against the income at ₹ 2,00,740/- in AY 2005-06 - the estimate of income at ₹ 4 lakhs is excessive, so it is to be reduced to ₹ 3 lakhs - the total income of the assessee is determined at ₹ 3,89,540/- as against ₹ 6,70,060/- assessed by the AO – Decided partly in favour of Assessee.
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2014 (7) TMI 379
Rejection of application u/s 12A of the Act - Genuineness and creditworthiness of donors not shown – No evidence for not deriving any benefit covered u/s 13(3) of the Act – Held that:- For the purpose of registration u/s 12A, the CIT has to satisfy himself about the object of the trust or the institution and the genuineness of its activities - the object of the assessee is the running of educational institution - the trust or institution which is carrying on educational activities will fall within the ambit of charitable purpose under Section 2(15) even if it incidentally involves the carrying on of commercial activities. The allegation of the Revenue that the assessee is charging heavy fees or the fees is similar to being charged by commercial colleges, has neither been factually proved to be correct nor can be a basis legally in view of the Board’s Circular for denying the registration of trust u/s 12A - the object of the trust is education and the assessee is running two educational institutions - one, for engineering courses and another, for B.Ed courses - the object of the trust is education which is charitable and the assessee is genuinely pursuing the same - it has duly fulfilled the conditions necessary for registration u/s 12AA - the verification of the donation or verification of violation of Section 13(3) is not the relevant consideration for registration of trust u/s 12AA – thus, the order of the CIT is set aside – Decided in favour of Assessee.
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2014 (7) TMI 378
Validity of reopening of u/s 147 of the Act – Change of opinion – Reassessment initiated on the basis of audit objection - Held that:- The decision in CIT Vs. SPL’s Siddhartha Ltd. [2011 (9) TMI 640 - DELHI HIGH COURT] followed – u/s 151 of the Act, it was only the JCIT who could grant the approval for issue of notice u/s 148 - The approval was not granted by the Joint Commissioner - the legislature has provided that where the AO is of the rank of AC or DC and original assessment was completed under Section 143(3), the notice for reopening of assessment cannot be issued unless the JCIT is satisfied on the reasons recorded by the AO - as per Section 151(1), the approval of JC was required while the AO has taken the approval of CIT which cannot be said to be valid in view of the specific provisions of Section 151(1) – thus, reopening of assessment u/s 148 was invalid and the order of the CIT(A) is upheld – Decided against Revenue.
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2014 (7) TMI 377
Notice of hearing not received - Held that:- The principles of natural justice are not complied with by the CIT(Appeals)-IV, New Delhi - revenue could not demonstrate that the notices were served on the assessee - the appeal should be set aside to the file of the CIT(Appeals) for fresh adjudication in accordance with law, after affording adequate opportunity of hearing to the assessee – thus, the matter is remitted back to the CIT(A) for fresh adjudication – Decided in favour of Assessee.
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2014 (7) TMI 376
Purchases made outside the books – Held that:- AO has estimated the negative stock, by first assuming a particular percentage as gross profit - The calculation adopted by the AO is to first add purchases to the opening stock and thereafter estimate a particular percentage of the sales/turnover as gross profit - The balance figure is taken as closing stock - closing stock cannot be estimated by assuming a particular Gross Profit Percentage when the books of accounts are not rejected – Relying upon Income Tax Officer Versus Shri Anand Prakash Gupta, Prop. of M/s Anand Prakash Ankit [2013 (5) TMI 578 - ITAT DELHI] - assessee had maintained proper books of accounts, no defect had been pointed out in books of accounts, quantitative details of stock were duly certified by auditors – thus, the order of the FAA is upheld – Decided against Revenue. Ad-hoc disallowance – Held that:- FAA was of the view that the assessee has explained in detail that the employees are villagers doing hand jobs who come from far flung areas and then go back to their villages or some other business concerns - Salary register has been maintained and primary details are available regarding the employees to whom salary was paid - there are also certain flaws in the assessee’s explanation which cannot be brushed aside - on salary register, signatures of the employees have not been taken - some amount of disallowance is justified – revenue was not able to contradict the findings of the CIT(Appeals) – Decided against Revenue.
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2014 (7) TMI 375
Acceptance of additional evidences as per Rule 46A(3) of the Act - No relevant books of accounts produced – Held that:- The additional evidences filed along with the application go to the root of the matter in explaining the genuineness of transaction of loan received from M/s. Piyush Buildwell India Ltd. and M/s. Piyush Colonizer Ltd. to the extent of ₹ 1,95,50,000 - CIT(A) was of the view that he had examined the additional evidences submitted in the appeal proceedings which were also subjected to AO’s examination under Rue 46A (3) - the AO had not been able to find anything adverse or any anomalies on the basis of which he could establish that the deposits of ₹ 1,95,50,000/- were bogus or in-genuine – the order of the FAA is upheld that the requirement provided under Rule 46A of the Rules while allowing the application seeking admission of additional evidence filed by the assessee before him – Decided against Revenue. Unexplained bogus unsecured loans – Failure to discharge genuineness of loans – Held that:- FAA was rightly of the view that the assessee has been able to establish the genuineness of the claimed loan of ₹ 1,95,50,000/- from M/s. Piyush Colonisers Ltd. and M/s. Piyush Buildwell Ltd. by furnishing sufficient evidence in support - The evidences were confirmations from both the parties , their bank statements as well as the bank statement of the assessee - By way of additional evidence the assessee has furnished some more documents before the CIT(A) - These documents were cash book, ledger and trial balance sheet with vouchers filed in two volumes of the proprietary firm M/s. Infra Developers which were admitted by the CIT(A) after calling reaction of the AO on the application - These documents also supported the claim of the assessee discussed by the CIT(A) – thus, there was no infirmity in the order of the FAA – Decided against Revenue.
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2014 (7) TMI 374
Penalty u/s 271(1)(c) of the Act – Addition u/s 68 of the Act - Unexplained credit entries in bank account - Held that:- The only ground for levying the penalty is that the CIT(A) has also upheld the addition made by the AO - This reason alone cannot be held to be the basis for levy of penalty - the findings given in the assessment proceedings alone, may not justify imposition of penalty, as the consideration that arise in the penalty proceedings are different from those in the assessment proceeding - The findings in the quantum proceedings, though have a probative value, but in the penalty proceedings the explanation and the materials have to be reappraise afresh to examine, whether the assessee is guilty of concealment of income or furnishing of inaccurate particulars. CIT(A) has also not tried to deal with the assessee’s explanation in proper perspective and without considering the assessee’s explanation in the objective manner - both the authorities have failed to consider the assessee’s explanation - as regards the amount of income surrendered during the course of search, the assessee’s explanation has been that, he has been carrying on the business of catering which he wanted to discontinue and was in the process of handing over his business to his brother, Mr. Vinod Sangoi - the assessee was under bonafide presumption that the said account has also been handed over to his brother, therefore, he did not examine the cash deposits made in the various assessment years - assessee has further submitted that the provisions of Explanation 5 to section 271(1)(c) is not applicable qua this addition on account of surrender, as he has satisfied the necessary conditions for getting the benefit under Explanation 5 - similar explanation given by the assessee in the subsequent years, wherein similar kind of deposits were found and were surrendered at the time of search, the Tribunal has dealt the assessee’s explanation in detail and has confirmed the penalty - Since similar facts are permeating in this year also, the said finding will apply mutatis mutandis in this year also qua the amount of surrender – thus, the levy of penalty on the addition of ₹ 3,04,500, which was declared during the course of search u/s 132(4) is upheld. Once the assessee has given the explanation, which on the facts of the case is probable explanation and also substantiates prima-facie from material on record and other attendant facts, then the onus shifts upon the AO to show that such an explanation is false or not bonafide and then only the AO can proceed to levy the penalty - after the assessee’s explanation, neither the AO nor the CIT(A) has been able to rebut the assessee’s explanation as false - the penalty levied is unwarranted - levy of penalty on addition made on account of credit appearing in the bank account, penalty u/s 271(1)(c) cannot be confirmed – thus, the order of the CIT(A) is set aside - Thus, the penalty u/s 271(1)(c) is confirmed on the addition of ₹ 3,04,500 and penalty is deleted on the addition of ₹ 7,58,234 – Decided partly in favour of Assessee.
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2014 (7) TMI 373
Jurisdiction u/s 263 of the Act – Sale of property – STCG or LTCG – Held that:- The assessee’s explanations could not convince the CIT – CIT was of the opinion that there is difference in the rate of tax between the two capital gains i.e. 30% and 20% respectively - assessment framed was erroneous and prejudicial to the interest of the Revenue - the assessee had declared ‘long term’ capital gains and their reinvestment as per Section 54F – there was no discussion at all about this factual position – not the assessee has placed proof of any enquiry conducted by the AO - lack of enquiry in a ‘regular’ assessment itself is erroneous and prejudicial to interest of the Revenue - neither there was any enquiry nor a view much less a possible one taken by the AO. The assessee has failed to place on record copies of the transactions and agreements to prove that Sh. ‘CP’ had acquired ownership and possession in the year 1991 or in any case before 11.08.2006 u/s 2(47)(v) of the Act – there was no fault with observations of the CIT that holding period of the capital asset is only from 11.08.2006 to 01.08.2008 i.e; less than 36 months which gives rise to ‘short term’ capital gains - assessee has not placed on record any evidence to prove his father’s ownership and possession before 11.08.2006 - ‘CP’ had acquired title and possession of the asset only on 11.08.2006 - the consequential capital gains are ‘short term’ only - on all counts i.e; treatment of capital gains as well as non-conducting of enquiry and no view formed by the AO in framing ‘regular’ assessment, the CIT has rightly assumed /exercised his jurisdiction u/s 263 of the Act – Decided against Assessee.
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2014 (7) TMI 372
Rejection of books of accounts – Rate of NP @ 15% in place of 11.39% - Held that:- After pinpointing incompleteness of books and certain defects in the books of accounts and also making observation with regard to the deposit and withdrawal of cash in the account of Director Hardeep Singh Chaddha and also pointing out absence of supporting evidence in respect of cash expenditure incurred by the assessee and factum of cash loan of ₹ 2.00 lacs from Director Ravikaran Singh Chaddha, the AO has rejected the book results and applied the net profit rate of 15% in place of net profit rate of 11.39% shown by assessee. In the earlier five assessment years, the assessee had shown net profit rate of 5.28% to 11.63% - during the year under consideration the assessee had shown net profit rate of 11.39% - there is no justification for applying the net profit rate of 15% - there was no justification in the AO’s order for applying net profit rate of 15% on gross receipts - the cash expenditure incurred by the assessee for which the AO observed that assessee did not furnish evidence to substantiate the expenditure is certainly going to effect the net profit disclosed by the assessee in the books of accounts - there is adverse observation made by the AO with regard to the genuineness of job work undertaken from M/s Unique Enterprises - the observation made by the AO vis-à-vis the findings recorded by the CIT(A) with regard to the rejection of books of account and sustaining the trading addition to ₹ 17,00,000/- shown by assessee is modified – thus, the issue with regard to the incurring of cash expenditure which is not supported by bills and genuineness of job work undertaken from M/s Unique Enterprises and issue of cash loan of ₹ 2.00 lacs from Ravi Karan Singh Chaddha is remitted back to the AO for fresh examination – Decided partly in favour of Assessee.
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Customs
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2014 (7) TMI 393
Clim of interest on delayed refund of interest - interest paid on warehoused goods - Following decision of Madras High Court in the case of VBC Industries Ltd. [2011 (4) TMI 142 - MADRAS HIGH COURT] - Section 27A of the Customs Act would not permit to grant interest on the interest too - Decided against assessee.
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Service Tax
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2014 (7) TMI 412
Demand of service tax - Repair and maintenance service - Held that:- As regards the service tax demand based on the repair and maintenance service alleged to have been provided by the respondent, we find that during the period of dispute, the repair and maintenance service which was taxable was that activity of repair and maintenance which was in terms of some contract or agreement, while according to the findings of the Commissioner (Appeals), no evidence has been produced by the Department that the repair and maintenance jobs of the respondent were in terms of some contracts or agreements. Therefore, we do not find any infirmity in the finding of the Commissioner (Appeals) that the respondents activity did not attract any service tax As regards, the allegation that the respondent have provided the Business Auxiliary Service, - the activity which has been treated by the Department as Business Auxiliary Service, as described in the grounds of appeal, is fabrication of steel storage tanks, dozers and settlers, steel structures, steel platforms, railing, foundation frames etc. and their erection and installation in the factory. While fabrication of tanks and steel structures being manufactured is not production or processing not amounts to manufacture, the erection and installation of tanks, dozers, settlers, and steel structures is certainly not covered by any clause of Section 65 (19). Therefore, we agree with the findings of the Commissioner (Appeals) that this activity of the respondent is not covered by the definition of Business Auxiliary Service and hence the same is not taxable - Decided against Revenue.
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2014 (7) TMI 411
CENVAT Credit - Inability to produce original invoices - Penalty - Held that:- As per Rule 9(1)(f) of the CENVAT Credit Rules, 2004, CENVAT Credit of input service can be taken only on the basis of invoice issued by provider of input service which means Original invoices and not copies of invoices. The appellant has admitted that it did not receive original invoices from the input service provider. Therefore, the appellant has wrongly availed the CENVAT Credit without an invoice prescribed under Rule 9(1)(f) of the CENVAT Credit Rules, 2004, and the same has been correctly held recoverable along with interest from them by the lower authorities under Rule 14 of the CENVAT Credit Rules, 2004. However, as the issue involved is availment of irregular CENVAT Credit by the appellant which were duly reflected in the statutory records hence penalty under Section 76 of the Finance Act, 1994 is not called for and the same is set aside. I reduce the penalty imposed on the appellant under Rule 15(3) of the CENVAT Credit Rules, 2004, as it existed during material time, from two thousand rupees to two hundred rupees. - Decided partly in favour of assessee.
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2014 (7) TMI 410
Business Support service - amount received from M/s GECAS, Ireland in convertible foreign exchange - whether these services are to be treated as export of service in terms of Export of Service Rules, 2005 and, hence, not liable to service tax in India or whether the same are to be treated as services provided by the appellant to the service recipient in India and hence taxable in India – Held that:- From the nature of services, it is absolutely clear that the services provided by the appellant are meant for use by their holding company M/s GECAS, Ireland in its business and it is M/s GECAS, Ireland who have paid for these services - following the judgment of the Tribunal in the case of GAP International Sourcing (India) Pvt. Ltd. vs. CST, Delhi (2009 (1) TMI 221 - CESTAT, NEW DELHI) and also Paul Merchants Ltd. vs. CCE, Chandigarh (2012 (12) TMI 424 - CESTAT, DELHI (LB)) it is GECAS, Ireland who have to be treated as recipient of these services and hence the services provided by the appellant have to be treated as export of services and, accordingly, the same would not be liable to service tax in India - it is GECAS, Ireland who have to be treated as recipient of these services and hence the services provided by the appellant have to be treated as export of services and, accordingly, the same would not be liable to service tax in India - service tax demand not sustainable. Valuation - associated enterprises - payment of service tax on the basis of debit / credit entries in the accounts - Demand of Interest - delayed payment of ST - manpower supply service - Debit entries made in books of accounts – Held that:- debit entries, in question, had been made during period prior to 10/05/08, the same cannot be treated as payments made by the appellant to M/s GECAS, Ireland and the appellant would be treated as having made payments to M/s GECAS, Ireland only in August 2009 when the payments had actually been made. Accordingly, the demand for the interest for alleged delay in discharging service tax liability by the due date is not sustainable - demand of interest for alleged delay in discharging service tax liability by the due date is not sustainable – Decided in favour of assessee.
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2014 (7) TMI 409
Demand of service tax - Whether the appellant is liable to pay the amount demanded under Rule 6(3) of Cenvat Credit Rules, 2004 (CCR) in respect of services provided to SEZ unit along with interest and pay penalty equal to the amount - Held that:- there is no dispute and both sides agree that the services have been provided to SEZ Unit / SEZ developer. In these circumstances, the impugned order has no merit and, accordingly, the impugned order is set aside - Decided in favour of assessee.
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2014 (7) TMI 408
Demand of service tax - Commercial Training or Coaching Services and Manpower Recruitment or Supply Agency Services - Held that:- Case was not at all defended at the original adjudication level and the appellants themselves represented their case. They did not reply to the show-cause notice at all and finally the Managing Director had appeared before the Commissioner and he could not give sufficient details to support the case that there were several aspects of the matter where service tax was not leviable and appellant had given only few bills which obviously were not sufficient for the Commissioner to decide the issue - case was not defended effectively and properly before the Commissioner and therefore, the matter may be remanded at this stage itself instead of keeping the issue pending after depositing the amount - stay granted partly - matter remanded back.
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2014 (7) TMI 407
Demand of service tax - GTA Services - Exemption under Notification No. 18/09 - assessee submitted that services have been received from individual transporters and the transportation charges per consignment per trip does not exceed ₹ 750/- further it is submitted that where the amount exceeds ₹ 750/-, such transportation related to exports and the appellant in any case was eligible for refund in terms of Notification No. 18/09. - Held that:- Appellant would be eligible for the exemption claimed by them and apparently there seems to be something wrong with the quantification of demand, we find that this is a case where it cannot be said that appellant has made out a prima facie case entirely in their favour. - stay granted partly - on the condition of deposit the amount to be pre-deposited, matter remanded back for re-adjudication.
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2014 (7) TMI 406
Condonation of delay - Non receipt of order - Held that:- In this case by sending the order under RPAD to the last known address of the assessee, the Department has fulfilled the obligation cast on the Revenue to serve the order because the law requires only sending of the order or any decision by RPAD. In this case, the Department has gone extra mile to make efforts to deliver the order to the residence of the appellant and thereafter having failed to find him there, they have delivered it in the fathers residence. Under these circumstances, we cannot find fault with the order treating the appeal was filed beyond the condonable period. Appeal has been filed nearly one year after - Following decision of Singh Enterprises Vs. CCE, Jamshedpur [2007 (12) TMI 11 - SUPREME COURT OF INDIA] - Condonation denied.
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Central Excise
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2014 (7) TMI 402
Imposition of penalty - benefit of reduced penalty upto 25% - Held that:- demand of duty of ₹ 14,00,100/- as not contested. Joint Commissioner, while adjudicating the show cause notice has, in clear terms, extended the option to pay the entire duty amount along with interest and 25% of the penalty within a period of 30 days from the passing of the order-in-original to the appellant, who have chosen not to avail the same. Once such option was given to the assessee, who have failed to exercise the same, the reduction of penalty at the second appellate stage would neither be justified nor in accordance with the provisions of law. The entire idea of depositing the dues alongwith 25% of penalty within a period of 30 days from the passing of the order by the original Adjudicating Authority gets defeated if the appellant who has chosen to ignore such an option on that particular point of time is extended the same after a gap of period, at the appeal stage. As such, I find no merits in the prayer of the learned advocate to reduce the penalty to 25%. - Decided against assessee. As regards penalty of ₹ 50,000/- on Shri R.P. Sharma, the Manger of the company. I find that there is no direct evidence on record indicating his involvement in the clandestine activities. He was only an employee of the company and in the absence of any evidence to implicate him, I, by extending the benefit of doubt to him set aside the penalty of ₹ 50,000/- imposed upon on him. - Decided in favour of assessee.
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2014 (7) TMI 401
Refund - unjust enrichment - payment of duty initially on captive consumption of intermediate product which were exempt from duty - Held that:- refund is claimed consequent to availment of benefit under Notification 67/95. The said Notification provided that the benefit of exemption would be available when goods are captively consumed in the manufacture of exempted final products only when no CENVAT credit of the duty paid on the inputs used in the manufacture of intermediate products arising in the manufacture of final products is taken. In the present case, CENVAT credit has been availed by the respondent in respect of synthetic waste and polyester tops. From these raw materials, the respondent has made the yarn of waste wool was captively consumed in the manufacture of blankets, shawls, etc. which were exempt from payment of duty. Except for the costing statement of the product which indicates that they have sold the final products below cost, there is no evidence to indicate that the incidence of duty has been borne by the respondent. In the statutory books of accounts and the balance sheets maintained by the respondent, the amount claimed as refund is not shown as ‘claims receivable' from the department. The respondent has clearly admitted to the fact that the said amount of refund claimed was treated as ‘expenditure' and taken to the profit & loss account. If the amount is taken to the profit and loss account, it signifies that the respondent has adjusted the amount in their income while arriving at the net profits thereby implying that the incidence has been passed on to the third parties. Chartered Accountant's certificate is not a conclusive proof of having not passed on duty of incidence to the customers. It is incidence of duty and not the duty as such which is required to be shown to have not being passed on from the sale records, balance sheets and other related documents - Following decision of Crompton Greaves Ltd. (2009 (4) TMI 490 - CESTAT, MUMBAI) and Union of India vs. Solar Pesticide Pvt. Ltd. [2000 (2) TMI 237 - SUPREME COURT OF INDIA] - Decided in favour of Revenue.
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2014 (7) TMI 400
Refund claim - Power of commissioner - Reduction in refund claim - Held that:- It is an admitted fact that against the order dated 25.10.2005 of the learned Commissioner (Appeals), no stay has been obtained by the Revenue from this Tribunal. In the meantime the Asst. Commissioner has no power to reduce the refund claim to ₹ 17,17,011/-. In these circumstances, no infirmity in the impugned order is found and the same is upheld - Decided against Revenue.
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2014 (7) TMI 399
Demand of interest and penalty - availment of ineligible Cenvat credit - Held that:- Appellant utilised the ineligible credit and, therefore, they are liable to pay the interest under Section 11AB of the Act, 1944 read with Cenvat Credit Rules, 2002. The decision of the Larger Bench of the Tribunal in the case of Machino Montel (I) Ltd. [2004 (4) TMI 101 - CESTAT, NEW DELHI] was overruled by the Hon'ble Punjab and Haryana High Court [2006 (7) TMI 23 - HIGH COURT OF PUNIAB & HARYANA (CHANDIGARH)]. Hence, the demand of interest is justified. Regarding the penalty - Held that:- It is seen that the appellant had availed ineligible credit on three occasions, which was detected by the audit party. The imposition of the penalty is justified - However, penalty is reduced - Decided partly in favour of assessee.
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2014 (7) TMI 398
Mandatory penalty - benefit of SSI exemption - Penalty u/s 11AC - Held that:- there is a decision of the Tribunal in the case of Commissioner of Central Excise, Vishakhapatnam-I Vs M/s. Andhra Pradesh Industrial Gases Ltd. reported in [2006 (11) TMI 618 - CESTAT BANGALORE], held in favour of the assessee as contended by the learned Counsel for the Respondent. In my considered view, the matter is required to be examined by Commissioner (Appeals) in the light of the decision of the Tribunal and the Board's Circular. Hence, I set aside both the orders passed by Commissioner (Appeals) and the matters are remanded to Commissioner (Appeals) to decide afresh after considering the case laws, Board's Circular and any other submissions - Decided in favour of Revenue.
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2014 (7) TMI 397
CENVAT Credit - Repair and maintenance service - Service rendered as residential premises - Nexus with manufacturing activity - Held that:- following the decision of the Hon'ble Bombay High Court in the case of Mani-garh Cement (2010 (10) TMI 10 - BOMBAY HIGH COURT) and the Hon'ble Gujarat High Court in the case of Gujarat Heavy Chemicals Ltd. (2011 (5) TMI 132 - GUJARAT HIGH COURT), the input service credit on repair and maintenance of the residential colony of the staff is not admissible. Accordingly, I do not find any infirmity in the order passed by the Commissioner (Appeals) - Decided against assessee.
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2014 (7) TMI 396
CENVAT Credit - Fraudulent invoices - Penalty - Held that:- the description of the goods in invoice and actual goods received are tallied and, therefore, the case law Amex Alloys Pvt. Ltd. (2013 (8) TMI 129 - CESTAT CHENNAI) would not apply herein. In view of that, the demand of duty along with interest and penalty on the appellant assessee is not sustainable. Penalty on registered dealer - Held that:- They have admitted that they have issued invoices without accompanying with the goods. These facts were supported by the statement of first stage dealer. Therefore, they are liable to penalty. - Tribunal in the case of Amex Alloys Pvt. Ltd. & Another (2013 (8) TMI 129 - CESTAT CHENNAI) following the decision of the Hon'ble High Court upheld the penalty on the registered dealer. However, penalty reduced ₹ 1,62,500.
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2014 (7) TMI 395
Marketability of sugar syrup - capability of the product being sold in the market or known in the market - Exemption from payment of duty by Notification NO. 3/2006-CE - Held that:- The issue of marketability of sugar syrup has not been taken into consideration by the adjudicating authority. The adjudicating authority has to decide the issue of marketability of the sugar syrup in question in view of the observation made by the Tribunal in the case of Ambaji Foods (2010 (8) TMI 714 - CESTAT, NEW DELHI). The impugned order is set aside and the matter is remanded to the adjudicating authority for de novo adjudication after affording an opportunity of personal hearing to the appellant. - Decided in favour of assessee.
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2014 (7) TMI 394
Waiver of pre-deposit - Demand of differential duty - penalty under Rule 17 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Change in product price from higher value Retails Sale Price (RSP) to lower value RSP - Held that:- On perusal of the records and taking specific example in the manufacture of January 2012, we find that the appellant has specifically informed the Deputy Commissioner as to intend of manufacturing ‘gutkha’ on all three machines at retail price of ₹ 1.50 per pouch for the first 8 days and subsequently on 2 machines at retail sale price of Re. 1/- and other retail sale price of ₹ 2/-. As per the provisions of PMPM Rules read with Notification No. 42/2008-C.E., dated 1-7-2008 and read with Section 3A of the Central Excise Act, Central Excise duty liable to be paid by assessee is on the goods manufactured - duty liability discharged by the appellant for January, 2012 based on their calculation of manufacturing seems to be correct and same findings can also be applied for the demand for month of April, 2012. Prima facie, we are of the view that the demand of duty as confirmed by adjudicating authority does not have any stand - Stay granted.
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CST, VAT & Sales Tax
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2014 (7) TMI 405
Validity of re assessment order - Various amendments done in applicable Acts - Bar of limitation - whether assessment made by Assessing Authority is within the period of limitation or not - Held that:- Statute has not extended period of limitation but separate period has been prescribed in respect of Assessments Years specified in the proviso. In other words, specifically Assessing Authorities have been empowered to make assessment in certain cases till a particular date which is longer than the general period of limitation prescribed under Section 21(2). Limitation only deprives the remedy and not the right. When a limitation expires in the matter of assessment etc. it would deprive Assessing Authority to pass an order in respect of a particular period, though cause to pass an order exists and continues. Due to applicability and availability of a provision providing limitation, Authority concerned cannot pass an order of assessment or re-assessment, but as soon as that disability is lifted, either by amendment in the Statute or otherwise, the Authority can always proceed to exercise its statutory function. There is a general exposition of law that limitation once expired will not revive, but that will have no application to the present case inasmuch it is not a case of revival of limitation, but prescription of limitation in a different manner. It has the effect of providing a longer period of limitation by amendment in the Statute. Since the validity of U.P. Act No. 11 of 1997 is not under challenge, in my view, the question of limitation in the case in hand in respect of Assessment Years in dispute has to be examined by simply going through Section 21 (2) as has been substituted in the Statute by U.P. Act, No. 11 of 1997 and if it is considered from the said angle, it is difficult to hold that the order of assessment passed on 30.03.1998 are barred by time. - Decided against assessee.
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2014 (7) TMI 404
Claiming exemption from sales tax / CST on the basis of duplicate portion of C form - requirement of C-Form towards tax paid material - original C forms are with the Department and the same were filed in the case of marketing division of the assessee and this fact is admitted by the Department in their return - Concesstional rate of tax - Held that:- Assessee had filed the original part of the declaration in C form in assessment case of manufacturing division and the duplicate parts thereof were filed along with the appeal filed by the trading division of the assessee-company and in view of the law laid down by the Division Bench in the case of Manganese Ore (India) Ltd. v. Commissioner of Sales Tax, Madhya Pradesh [1989 (1) TMI 351 - MADHYA PRADESH HIGH COURT], the assessee was entitled to concessional rate of tax - In return it has been admitted by the Revenue that the form C was available with the Department in the matter of manufacturing division, the benefit of the same can be extended in respect of another division (trading division). She submitted that the apex court has held the requirement of submitting the original C form and, therefore, the order passed by the revisional authority is legal and proper and prayed for dismissal of the writ petition. - Decided in favor of assessee.
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2014 (7) TMI 403
Levy of interest - assessee contended that difference in the tax liability on return filed and as assessed on reassessment was less than five per cent hence no interest can be levied - Held that:- The mistake of filing of incorrect turnover was detected and corrected only by reassessment order and not by the assessee having undertaken voluntary correction of the return within three months period - even understanding a situation within section 20 36(1) of the Act with reference to section 72(2) of the Act cannot be under stood as one importing the requirement of difference being more than five per cent for levy of penalty as an essential condition for levy of interest under section 36(1) of the Act also, then it is a fortiori so for the purpose of section 36(2)(c) of the Act. We say so for the reason that the two provisions are independent and in fact levy of interest is not made subject to levy of penalty and therefore it cannot be contended that it is only when penalty is levied, interest under section 36 can be levied. In our understanding and as submitted by learned Additional Government Advocate, the word "subject to" under section 36(1) of the Act can only be to say that levy of interest is in terms of section 36 of the Act notwithstanding levy of penalty under section 72 of the Act. In situation where revised return has been filed within the margin period of three months and the tax also paid, the levy of interest under section 36(1) of the Act being not attracted is in no way affected because of the situation where levy of penalty under section 72 of the Act is attracted - revision petitions dismissed - Decided against assessee.
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