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TMI Tax Updates - e-Newsletter July 22, 2021 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise Indian Laws Highlights / Catch Notes GST: Requirement of GST registration - medical store run by Charitable Trust - Medical store providing medicines at a lower rate - As per the definition of ‘Business’ means any trade or commerce any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit. From the bare reading of the said definition, it clearly emerges that any trade or commerce whether or not for a pecuniary benefit, would be included in the term ‘business’ as defined under Section 2(17) of the said Act - HC Visit to Get Source GST: Liability of tax - hostel facility to its students including food - hostel fees collected from outside students staying at the hostel for study purpose at a rate of ₹ 250/- per day per person including food - The clam of the appellant regarding benefit of exemption notification no. 12/2017-CT for hostel fees is devoid of merit in view of the fact that exemption is granted to the services falling under Sl. No. 14 – heading 9963 only and not for heading 9992 as is applicable in this case. - AAAR Visit to Get Source GST: Grant of Anticipatory Bail - fraudulent transfer of input tax credit - evasion of huge amount of GST by procuring invoices without actual supply of goods - allegations of tax evasion - Applicant is ready to deposit the tax amount as alleged and agreed to provide co-operation to the investigation /Intelligence Officers of the Department ongoing investigation against him. - Bail granted - DSC Visit to Get Source Income Tax: Estimation of income - sales have been made truck to truck not loose or petti as done in his own trading sales. It is also admitted facts that the fruits were sent to M/s. KOC Delhi in bulk i.e. in full truck and assessee had received Arat per Petti and in this business it is not possible to earn 16% Profit on such wholesale commission business on Arat. When in retail business the assessee had declared 7-8% N.P. rate. - AT Visit to Get Source Income Tax: Disallowance of purchase made from sister concerns - Making disallowance of purchase just because they are from sister concerns/ related parties, Memorandum of Undertaking not prepared and “why the job was entrusted to sister concerns” merely shows that the disallowance of purchase made by the Ld. A.O was on surmises and conjectures and without any support of any evidence. - AT Visit to Get Source Income Tax: Disallowance of keyman insurance policy of the director of the company paid - The premium paid for keyman insurance policy is allowable to the assessee u/s. 37(1) of the Act. Similarly insurance premium of the employee is also allowable to the assessee u/s. 37(1). - AT Visit to Get Source Income Tax: Disallowance of freight expenditure u/s 40A(3) paid in Cash - As enhanced limit of ₹ 35,000/- is applicable for the payment to the transport operators and in other cases the limit of payment remains at ₹ 20,000/-. Therefore, there is no ambiguity in the provision of Section 40A(3) and third proviso as well as the explanatory note issue by CBDT. Accordingly, in view of the third proviso to Section 40A(3), the payment made in cash to the transport operators which is less than ₹ 35,000/- would not attract this proviso of section 40A(3) - AT Visit to Get Source Income Tax: Disallowance of remuneration paid to the partners of the assessee firm - Once the remuneration paid to the partners is in accordance of the provisions of Section 40(b)(v) and the actual payment of the said amount being credited to the capital account of the partners and corresponding withdrawal of the partners is not in disputed then the mere mistake in the statement of the partners would not rendered the claim of the partners firm not disallowed. - AT Visit to Get Source Income Tax: Nature of expenditure - new dyes expenditure claims - The dies are made as per project wise or the product wise and keeps changing for the other project - such dyes come under revenue head of expenditure than capital only. - AT Visit to Get Source Income Tax: Deduction u/s 80IB(10) - business of development and construction of residential and commercial units - Since, in the instant case the housing project was admittedly approved before 01.04.2005, therefore, the first allegation of the Revenue that the aggregate built up commercial area far exceeds the prescribed limit is not applicable to the assessee - Merely because certain procedural formalities relating to collection of booking application forms and money from the buyers were delegated to SICCL, it would not render SICCL as the developer of the project since the money collected by SICCL was on behalf of the assessee only - AT Visit to Get Source Income Tax: Penalty levied u/s 221(1) - non-payment of tax - In the instant cases, as on today, the assessment orders have been quashed by the Tribunal, vide its order dated 03-02-2021 (referred above) in the hands of both the assessee by holding that reopening of assessment is invalid. Hence, as on today, the demand has become Nil. Accordingly, as per the provisions of sub. Sec. (2) of sec. 221, the penalty levied u/s 221(1) is liable to be cancelled, if the orders passed by the Tribunal becomes final order - AT Visit to Get Source Income Tax: Penalty imposed u/s 271AAB - In the light of the settled proposition of law that Section 271AAB of the Act cannot be invoked to impose penalty when search has not been conducted under Section 132 of the Act against the assessee and return of income is in response to notice under Section 156C of the Act which is a consequential or incidental proceeding, - HC Visit to Get Source Indian Laws: Dishonor of Cheque - Accused took a specific defence that the cheque in question was obtained by the complainant by exercising force and that the same was a blank cheque. The complainant misused the blank cheque and filed a false complaint. Even though a specific defence is taken by the accused, he has not probabilised the same. When the accused admits issuance of the cheque in favour of the complainant, the presumption under Section 139 of N.I. Act arises and unless the accused rebuts the presumption, he is liable for conviction.- HC Visit to Get Source Service Tax: Interest on delayed refund (of pre-deposit) - relevant time - to be granted from the date of communication of the final order of the Tribunal till the date of grant of refund, or from the date of pre-deposit? - The appellant is entitled for interest @12% p.a. from the date of deposit till the date of refund. - AT Visit to Get Source Central Excise: Extended period of limitation - CENVAT Credit - common input services on trading activity / traded goods - non-maintenance of separate accounts under Rule 6(2) of Cenvat Credit Rules - suppression of facts or not - the appellants had been reversing the credit availed on common input services and informed the department whenever the details were asked for. Thus the department was fully aware that the appellants were conducting trading activity - the demand raised invoking the extended period is without any factual or legal basis. - AT Visit to Get Source Articles DIVERGENT RULINGS ON INPUT TAX CREDIT ON DEMO CARS Notifications GST - States G.O.Ms.No.183 - dated 20-7-2021 - Andhra Pradesh SGST AMENDMENT TO NOTIFICATION ISSUED IN THE G.O.MS.NO.82, REVENUE (CT-II) DEPARTMENT, DATED: 31-01-2019 IN ORDER TO PROVIDE WAIVER OF LATE FEES FOR SPECIFIED TAXPAYERS AND SPECIFIED TAX PERIODS G.O.Ms.No.182 - dated 20-7-2021 - Andhra Pradesh SGST PROVIDING RELIEF BY LOWERING THE RATE OF INTEREST FOR THE MONTHS OF MARCH AND APRIL, 2021. G.O.Ms.No.180 - dated 19-7-2021 - Andhra Pradesh SGST Andhra Pradesh Goods and Services Tax (Third Amendment) Rules, 2021 G.O.Ms.No.179 - dated 19-7-2021 - Andhra Pradesh SGST Andhra Pradesh Goods and Services Tax (Second Amendment) Rules, 2021 40/2020–State Tax - dated 20-7-2021 - Delhi SGST Amendment in Notification No. 35/2020- State Tax, dated the 24th March, 2021 11/2021– State Tax - dated 20-7-2021 - Delhi SGST Seeks to extend the due date for furnishing of FORM ITC-04 for the period Jan-March, 2021 till 31st May, 2021. 06/2021– State Tax - dated 20-7-2021 - Delhi SGST Amendment in Notification No. 89/2020 – State Tax dated the 31st March, 2021 23/2021-State Tax - dated 9-6-2021 - Gujarat SGST Excluding Government Departments and Local Authorities from the issuance of e-invoice 22/2021-State Tax - dated 9-6-2021 - Gujarat SGST Rationalized late fee of GSTR-7 for TDS 651/XI-2-21-9(47)/17- U.P.Act-1-2017-Order- (192)-2021 - dated 13-7-2021 - Uttar Pradesh SGST Seeks to extend the due date for filing FORM GSTR-4 for financial yer 2020-21 to 31-07-2021 Income Tax G.S.R. 499(E) - dated 19-7-2021 - IT Central Government jurisdiction Competent Authorities Circulars / Instructions / Orders GST - States - 11/2021 - GST (State) - dated 29-6-2021 Clarification regarding GST rate on laterals/parts of Sprinklers or Drip Irrigation System GST - States - 10/2021 - GST (State) - dated 28-6-2021 GST on service supplied by State Govt. to their undertakings or PSUs by way of guaranteeing loans taken by them GST - 157/13/2021 - dated 20-7-2021 Clarification regarding extension of limitation under GST Law in terms of Hon’ble Supreme Court’s Order dated 27.04.2021 DGFT - 15/2015-2020 - dated 20-7-2021 Enlistment as designated port in Para 2.54(d)(iv) of Handbook of Procedure, 2015-2020 News Excise duty rates on petrol, diesel calibrated to generate resources for infra development: Fin Min Insolvency and Bankruptcy Board of India amends the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 Case Laws: GST 2021 (7) TMI 824 Provisional release of goods - petitioner states that after the last date of hearing, he has been supplied the Test Report - HELD THAT:- The present writ petition is disposed of as infructuous. However, the Commissioner (Appeals) is directed to decide the petitioner s appeal dated 01st July, 2021 by way of a reasoned order, preferably within four weeks. It is clarified that this Court has not dealt with the merit of the controversy. All the rights and contentions of the parties are left open. 2021 (7) TMI 823 Seeking opening common portal to enable him to file TRAN-1 and TRAN- 2 electronically - availment of ITC - HELD THAT:- Issue notice - Mr. Satish Kumar, Advocate accepts notice on behalf of Respondent nos. 2 to7 and Mr. T.P Singh, Advocate accepts notice on behalf of R-1/UOI. They pray for and are permitted to file their counter affidavits within four weeks. Rejoinder affidavits, if any, be filed before the next date of hearing. List on 31st August, 2021. 2021 (7) TMI 822 Requirement of GST registration - medical store run by Charitable Trust - Medical store providing medicines at a lower rate - amounts to supply of goods or otherwise? - scope of 'supply' and 'supplier' - activity of selling medicines to the patients for consideration, amounts to trade or commerce or not - HELD THAT:- There remains no doubt that every supplier who falls within ambit of Section 22(1) of the Act has to get himself registered under the Act. As per Section 7(1) of the Act, the expression supply includes all forms of supply of goods and services or both such as sale, transfer, barter etc. made or agreed to be made for consideration by a person in the course or furtherance of business. It is not disputed that the petitioners are selling the medicines, may be at a cheaper rate but for consideration in the course of their business. As per the definition of Business means any trade or commerce any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit. From the bare reading of the said definition, it clearly emerges that any trade or commerce whether or not for a pecuniary benefit, would be included in the term business as defined under Section 2(17) of the said Act - Mr. Joshi has failed to substantiate or justify his submission as to how such activity of selling medicines to the patients for consideration could not be said to a trade or commerce. Both the authorities have in detail considered the submissions and the issues raised by the petitioner Trust and held that the Medical Store run by the Charitable Trust would require GST Registration, and that the Medical Store providing medicines even if supplied at lower rate would amount to supply of goods - the Court does not find any illegality or infirmity in the said orders passed by the authorities. 2021 (7) TMI 809 Liability of tax - hostel facility to its students including food - hostel fees collected from outside students staying at the hostel for study purpose at a rate of ₹ 250/- per day per person including food - tax liability on the appellant for selling text books to its students - educational institution in Para 2(y) of the N/N. 12/2017 Central Tax (rate) dated 28-06-2017 - exemption from GST or not - education as per the curriculum recognized by law - SAC of the services - collection of fees to Government university or institute working on the basis of Act passed in the Parliament - exemption given to hostel students as per Entry 14 of Notification No. 12/2017 - fixing tax on exempted goods like books - non-taxability of the services rendered by the appellant. HELD THAT:- I n respect of exemption notification, and by applying the settled law of strict interpretation of taxing statute, which are plainly worded, as in the case in hand, the services rendered by the appellant are held to be not a service by way of education as a part of curriculum for obtaining a qualification recognized by any law for the time being in force as envisaged under no 66 of the said notification, for exemption from GST. Service accounting code of the services rendered by the appellant - HELD THAT:- As per the Scheme of classification of services under GST Law, SAC 999293 Specifies about commercial training and coaching services. This service code includes any training or coaching provided by any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the spots with or without issuance of a certificate and includes coaching or tutorial classes. Thereby the services rendered by the appellant can rightly be classified under the SAC. Whether there is any GST liability on the appellant for collecting and transferring examinations fees and other fees to the recognized institutes or universities on behalf of the students study at their institute? - HELD THAT:- As per the provisions of Section 15 of the CGST/SGST Act, 2017 the entire consideration received by the appellant from the recipient of services is taxable under GST. However, if the conditions prescribed in Rule 33 of the CGST Rules, 2017 are satisfied and the appellant acts as a pure agent on behalf of the students enrolled with them, there will be no tax liability for the amount collected as examination fees/other fees. Accordingly, such amount can be excluded from the value of taxable supply as expenditure incurred by the appellant as a pure agent of the recipient of services. Tax liability on Hostel Fees - appellant offers hostel facility to its students at a rate of less than ₹ 200/- per day per person including food and at a monthly rate of maximum ₹ 6000/- - HELD THAT:- The appellant is mainly and principally engaged in imparting training/coaching to their students and thereby providing educational services, which is classifiable under SAC 9992-999293. The student who opts to take coaching from them stays in their hostel and pay hostel fees @ less than ₹ 200 per day or maximum ₹ 6000/- per month, in addition to the course charges as a package. It is also undisputed that they are charging ₹ 250/- per day from outside students/residents staying at their hostel. It may be seen here that they are charging different rates from their students and outside persons possibly they differentiate between the two categories of residents. The students enrolled with them are presumably charged lesser amount of hostel fees as a part of the package with educational services. In such a situation, when the appellant are distinguishing the two types of residents for charging different hostel fees for the same lodging and food services, it is not difficult to infer that their students enjoy the concession only as a part of composite services of educational services and hostel facility - Having held that the hostel facility is being provided by the appellant to their enrolled students as a part of composite services along with educational service, the entire set of service shall be classified under SAC 9992-999293 Commercial training and coaching services, being principal service and shall be charged to GST accordingly. The clam of the appellant regarding benefit of exemption notification no. 12/2017-CT for hostel fees is also devoid of merit in view of the fact that exemption is granted to the services falling under Sl. No. 14 heading 9963 only and not for heading 9992 as is applicable in this case. Tax liability on the appellant for selling text books to its students - HELD THAT:- The supply of text book to students are again at different lower rate than that of outside persons, as is admitted by the appellant in their submissions. Hence, the supply of books or printed material relating to the course opted for them shall have to be treated as part of composite services along with educational services, being the principal service, as is held by us in case of hostel fees charged from the students. Consequently, the supply of books shall also be charged to rate of GST as applicable to educational service under SAC 9992-999293. 2021 (7) TMI 808 Refund claim - rejection on the ground of time limitation - refund has been filed after Two years from the date of supply of the goods to SEZ unit - sub-section (1) of Section 54 of CGST Act, 2017 - zero rated supply or not - violation of principles of natural justice or not - HELD THAT:- As per Section 16 of IGST Act, 2017, it is amply clear that the supply made to SEZ shall be treated as a zero rated supply accordingly, for filing of refund in this case the relevant date would be taken as per clause (a) of explanation 2 (2) of sub section (14) of Section 54 of CGST Act, 2017 - the relevant date in the instant case for calculating relevant date for filing of refund claim shall be 26.07.2017. The appellant's contention that the relevant date shall be taken from the date of payment of tax i.e. 19.10.2018 as specific provisions for relevant date in case of zero rated supply has been provided in the CGST Act, cannot be agreed upon. Violation of principles of natural justice - allegation is that adjudicating authority has failed to pass a speaking order as he did not bring on surface the sufficient basis for the rejection of the refund claim - HELD THAT:- The adjudicating authority/proper officer while issuing the SCN dated 29.10.2020 as well as in the order dated 17.11.2020 he has properly mentioned/elaborated the reason for rejection of refund claim. Therefore, it may not be justify to say that the adjudicating authority/proper officer has not been passed the speaking order - there are no force in the contention of the appellant in this regard also. Appeal dismissed - decided against appellant. 2021 (7) TMI 807 Grant of Anticipatory Bail - fraudulent transfer of input tax credit - evasion of huge amount of GST by procuring invoices without actual supply of goods - applicant is partner in M/s Martiz Cera against which allegations of tax evasion is framed - offence u/s 132 (1)(b) and 132(1)(c) of the Central Goods and Services Tax Act and Gujarat Goods and Services Tax Act - HELD THAT:- As per the case of prosecution, false Input Tax Credit to the tune of ₹ 18.04 crores has been availed by the firms of the applicant, his brother and father on the strength of invoices supplied by Virat Dhanjibhai Bhatiya under the bogus firms. All are made accused in the present case. However, so far as the present applicant is concerned, admittedly he is one of the partner in M/s Martiz Cera against which allegations of tax evasion are to the tune of ₹ 32 Lakhs. So, far as other firms namely M/s Himat Trading and M/s Action Industries are concerned, same are respectively of the proprietorship of father and brother of the applicant. It is not the case of the respondent that the father and brother of the applicant were not managing the affairs of those firms and were not aware of the transactions of those firms - applicant is ready and willing to deposit the amount of ₹ 32 Lakhs with the respondent within a period of four weeks from today so far as the liability respecting Martiz Cera is concerned. The applicant has further agreed to provide co-operation to the investigation /Intelligence Officers of the Department ongoing investigation against him. In ABHINAY ANIL AGRAWAL VERSUS STATE OF GUJARAT [ 2020 (2) TMI 1527 - GUJARAT HIGH COURT] , the Hon'ble High Court has grated bail to the applicant in similar type of case on deposit of amount of ₹ 1 Crore. It is deemed fit to exercise discretion in favour of the applicant for grant of bail under section 438 of Cr. P. C., subject to conditions imposed - application allowed. Income Tax 2021 (7) TMI 813 Addition u/s 36(1)(va) read with section 2(24)(x) -Employees' contribution to PF and ESI - failure to deposit before due date - assessee has deposited Employees Contribution to PF/ESI beyond the due date specified under the relevant Act - HELD THAT:- The issue on hand has already been decided against the assessee by the judgment of Hon ble Gujarat High Court in the case of CIT v/s GSRTC [ 2014 (1) TMI 502 - GUJARAT HIGH COURT ] There is no ambiguity to the fact that the assessee failed to deposit Employees Contribution to PF/ESI with in the due date specified under the relevant Act i.e. PF/Employees State Insurance. Thus the assessee is not entitled for the deduction for such amount of contribution to PF/ESI as discussed above in view of the judgment of Hon ble Gujarat High Court. In view of the above we do not find any merit in the ground of appeal raised by the assessee. Hence the ground of appeal of the assessee is hereby dismissed. Addition being the provision for bad and doubtful debts as provided under explanation 1 of clause (vii) to section 36(1) - HELD THAT:- Assessee has claimed deduction for the provision of doubtful debts which was adjusted against the trade receivables as evident from the relevant schedule of the Balance Sheet of the assessee. we hold that the assessee is entitled to claim the deduction with respect to the provisions made by it against the trade receivables in the given facts and circumstances. Accordingly, we are not convinced with the finding of the authorities below and therefore the same deserves to be reversed. - Decided in favour of assessee. 2021 (7) TMI 812 Condonation of 825 days in filing the present appeal - sufficient cause of delay - reason of late filing given was that as the deceased assessee was expired on 12/07/2014 i.e. after filling the appeal and the applicant is being Legal Heir of him was not having any knowledge of any proceedings against the deceased assessee - HELD THAT:- There was no default of the legal heir and there was no proper communication by the local counsel and no mala fide intention of the legal heir and there exists a sufficient and reasonable cause. If any person having knowledge that there has been passed an order, due to which a tax liability or penalty has been arose on him/her and in their view it is not correct, for that he is having option or platform to file the appeal to fight against that order with in time period allowed. Then after having knowledge he would not like to delay in filling the same until unless there is no compulsion or circumstances which prevent to him to do so. As also in the present case the legal heir was not having knowledge about the order passed by the CIT(A) being the above reasons and as she came to know she immediately all the exercised which she can do to file the appeal before us. In the case of Vedbai vs. Shantaram Baburam Patil Others [ 2001 (7) TMI 117 - SUPREME COURT ] has again reiterated that the expression sufficient cause should receive a liberal construction. The Hon'ble court has also held that advancing of substantial justice should be of prime importance. If we apply the settled principles as laid down by the Hon'ble Supreme Court as well as other courts on the facts of the present case we find that the assessee has explained cause of delay, therefore, in the facts and circumstances of the case, we condone the delay of 825 days in filing the present appeal and admit the appeal for hearing. Trading addition - whether the sales made or fruits or goods supplied to M/s. KOC fruit, New Delhi and other cities are assessee's own sales or Arat sales? - HELD THAT:- in the totality of the above facts, documents and material placed before us in the form of Trading, P L account of this and earlier years, diaries of transactions, confirmation of KOC Fruit Company, statements referred in assessment order etc. we are of the considered view that the sales made by the assessee's of farmers outside the cities or Arat sales not own sales and the assessee's has rightly shown commission thereon as no farmers has stated that no Arat sales has been made. Also sales have been made truck to truck not loose or petti as done in his own trading sales. It is also admitted facts that the fruits were sent to M/s. KOC Delhi in bulk i.e. in full truck and assessee had received Arat per Petti and in this business it is not possible to earn 16% Profit on such wholesale commission business on Arat. When in retail business the assessee had declared 7-8% N.P. rate. The Assessing officer has not proved that the assessee has firstly purchased the fruits from farmers, kept in his business place as stock, paid amount to them thereafter sold to M/s. KOC, Delhi. Rather the farmers have send the fruits directly to M/s. KOC Delhi through assessee. It is not the case of the Assessing Officer that the documents or diaries were made after the year or during the course of assessment proceedings. Hence only addition on account of commission is to be added. There may be some defects in the books of accounts but no highly G.P. rate can be applied on the Arat. Thus we hold that the sale made by assessee out of cities are commission As assessee has shown commission of ₹ 83,840/- on the Arat sale of ₹ 67,92,481/- which comes to 1.23%, which appears in odd figure and there may be round figure. Hence looking to the defects pointed by the AO, we apply 1.5% on the Arat sale. Further the AO has taken sales (which is Arat Sales) of out station at ₹ 84,92,858/-, which includes (₹ 72,29,018/- to M/s. KOC, ₹ 12,00,000/- sale in other cities, ₹ 83,840/- Arat). However for ₹ 12,00,000/- sales in other cities the Assessing Officer has brought on record only the evidence of ₹ 1,03,000/- as deposits of ₹ 50,000/-, 50,000/-, and ₹ 3,000/- from these cities and there was no basis to taking the estimated figure of ₹ 12,00,000/- without any evidence, further ₹ 83,840/- has already been taken in to P L account by the assessee. Thus after considering all these the Arat sales is calculated at ₹ 73,32,018/- (₹ 72,29,018/- to M/s. KOC + 1,03,000/- to other cities) on which commission @ 1.5% comes to ₹ 1,09,980/- against which the assessee has shown ₹ 83,840/-. Hence the trading addition is sustained at ₹ 26,140/- (109980-83840) and rest of addition of ₹ 13,19,302/- is hereby deleted. Disallowance of various expenses - issue not been raised before the ld. CIT(A) - HELD THAT:- As considering the fact that the issue under consideration has not been raised before the ld. CIT(A), therefore, we set aside this issue to the ld. CIT(A) for deciding the same in accordance with law. 2021 (7) TMI 810 Disallowance u/s 36(1)(iii) - addition of interest on the ground that the assessee has borrowed funds and paid interest AND assessee has given loans and advances on which no interest was received, thus, the assessee has advanced the money for non business purposes - HELD THAT:- We note that the Ld. A.O has made this addition observing that the assessee had provided interest free advance to its staff and on the other hand interest was paid on the borrowings. CIT(A) deleted this addition against which the revenue is in appeal. We however find that the assessee has taken loan for purchase of vehicle which is used for business purposes and interest is the interest paid on the car loan taken from Bank of India. Leger account of interest expenses and ledger account of bank loan account filed by the assessee on 21.5.2020. Thus it remains undisputed fact that the alleged amount has been paid for car loan taken from bank and is an eligible business expenditure. Thus addition of disallowance was rightly deleted by Ld. CIT(A). Disallowance of registration expenses - HELD THAT:- AO inadvertently considered the number of students as 41675 though there were 76931 students and therefore the appellant has rightly incurred the expenses of registration realisation of data processing. As regards the adhoc disallowance made by Ld. CIT(A) is concerned there is no evidence brought on record and the adhoc disallowance is purely based on the track record of assessment of the assessee in preceding years. All the records pertaining to collection of fees, its remittances of such collection to the university and receipts from the university acknowledging the receipt to the fees are on the record and have not been challenged or found to be incorrect at any stage. Thus such disallowance was uncalled for. Accordingly we are of the considered view that no addition was required to be made by the Ld. A.O. Disallowance of purchase made from sister concerns - HELD THAT:- A.O came across such payments made to related parties or sister concerns. He need to first examine the information that whether such expenditure is excessive or unreasonable having regard to the fair market value of the books, for which payment is made or the purchase are made or the legitimate needs of the business of profession. Perusal of records shows that no such activity have been undertaken by the Ld. A.O before concluding that purchases from sister concerns are not genuine or they are made at an inflated price. Therefore making disallowance of purchase just because they are from sister concerns/ related parties, Memorandum of Undertaking not prepared and why the job was entrusted to sister concerns merely shows that the disallowance of purchase made by the Ld. A.O was on surmises and conjectures and without any support of any evidence. The disallowance sustained by Ld. CIT(A) at ₹ 9,12,873/- is merely based on the addition made during assessments of preceding years. Had it been a legal issue this would have been different but being a factual matter such disallowance on adhoc basis should be avoided unless and until supported by evidence and proper finding. No disallowance of purchase from the sister concern was called for - Decided in favour of assessee. Addition of training expenses - HELD THAT:- The addition sustained by Ld. CIT(A) is again made on the basis of past assessments but no corroborative evidence is placed before us to show that any excessive expenditure was booked. We therefore held that the expenditure incurred towards training expenses are genuine and has been rightly incurred in the interest of business and thus no disallowance was called for.Thus the assessee has rightly claimed the deduction for training expenses. Bogus purchases - disallowance of purchase based on a statement given during the course of survey u/s 133A - HELD THAT:- AO was not able to pin point any irregularity in the purchase made by the assessee during the year, providing or laying hand on any contrary material to those filed by the assessee, no new information was gathered which could indicate that the alleged suppliers are non genuine. Even while making addition no reference is given to the purchases made from different suppliers and the additions is made only for the amount of surrender made during the course of survey which in view of the settled judicial precedents was uncalled for. A.O also failed to take note of the fact that when the sales have been accepted then there has to be corresponding purchases. Hon ble Gujarat High Court in the case of CIT V/s President Industries [ 1999 (4) TMI 8 - GUJARAT HIGH COURT ] has held that amount of sales itself cannot represent the income of the assessee who has not disclosed sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales . So when the Ld. A.O had accepted the sales then he ought to have given the benefit of purchase against the sales. Without rejecting the book results and without finding anything contrary to the claim of the assessee and not referring to any incriminating material found during the course of survey the addition for income offered to tax during the course of survey at ₹ 23 crores but retracted soon, was thus uncalled for. We therefore in the given facts and circumstances of the case and respectfully following the judgments/decisions stated herein above fail to find any inconsistency in the finding of Ld. CIT(A) deleting the addition made by the Ld. A.O made purely on the basis of statement given u/s 133A of the Act. Accordingly Ground No.1 of revenue stands dismissed. Disallowance of interest expenses - HELD THAT:- On perusal of records shows that this amount was paid on the car loan taken from Bank of India and is purely business expenses as the car is used for purpose of business. Giving of interest free loan/ advance to staff/sister concern needs to be examined on the facts of particular case and the commercial expediency of the transaction but it can no way lead to disallowance of genuine business expenditure. We thus find no infirmity in the finding of Ld. CIT(A) deleting the disallowance - Ground No.2 of the Revenue is dismissed. Adhoc disallowance of various expenses - HELD THAT:- We observe that this disallowance was made for want of verification of various expenses incurred under the head Exhibition expenses, Repair Maintenance, Meeting expenses, Miscellaneous expenses and General expenses. Though opportunity was granted to the assessee to get these expenses verified but during the verification it was noticed that some of the expenses debited under the head are not verifiable, most of the vouchers are self made and payments incurred in cash. We therefore looking to the totality of facts we are of the view that Ld. CIT(A) has rightly confirmed the disallowance - Ground No.1 raised by the assessee is dismissed. 2021 (7) TMI 806 Penalty imposed u/s 271AAB - undisclosed income had been found in the course of search conducted u/s 132 on different person - ITAT held that penalty cannot be invoked u/s.271AAB in a case where the partner of assessee firm admitted unaccounted income u/s.132(4) during the search, wherein the assessee firm was covered by survey operation u/s.133A as consequent to search operation? - HELD THAT:- No penalty under Section 271AAB of the Act may be imposed where search under Section 132 of the Act has not been conducted against the assessee. It is admitted no search under Section 132 of the Act had been conducted in the premises of the assessee-firm. On the other hand, in the course of search under Section 132A of the Act against M/s.N.S. Vaishno Devi Developers (India) Pvt. Ltd, statements of partners of the firm were recorded and pursuant thereto notice under Section 153C of the Act was issued upon the assessee-firm. When return of income is filed in response to notice under Section 153C of the Act by a person other than the penalty who has not been searched in execution of warrant under Section 132 of the Act penalty under Section 271AAB of the Act cannot be imposed. Notice under Section 153C of the Act is incidental the search proceedings under Section 132 thereof and cannot be a foundation to impose penalty on the assessee who has not been searched. The view has been consistently followed by various benches of the Tribunal, as aforesaid, and has become binding on the Department in those cases. No contrary view either of any High Court or the Apex Court has been placed before us. In the light of the settled proposition of law that Section 271AAB of the Act cannot be invoked to impose penalty when search has not been conducted under Section 132 of the Act against the assessee and return of income is in response to notice under Section 156C of the Act which is a consequential or incidental proceeding, we are of the opinion no question of law much less a substantial one is made out in the facts of the case. Decided in favour of assessee. 2021 (7) TMI 805 Penalty levied u/s 221(1) - non-payment of tax demanded in the assessment order - HELD THAT:- Penalty under sec.221(1), if the assessee is in default or is deemed to be in default in making a payment of tax. In the instant cases, the penalty proceedings u/s 221(1) has been initiated by the AO, since both the assessee have failed to pay the demand raised in the reassessment order and hence they have become assessee in default . Provisions of sub. Sec. (2) further state that the penalty levied shall be cancelled, where as a result of final order the amount of tax, with respect to the default in payment of which the penalty was levied, has been wholly reduced. In the instant cases, as on today, the assessment orders have been quashed by the Tribunal, vide its order dated 03-02-2021 (referred above) in the hands of both the assessee by holding that reopening of assessment is invalid. Hence, as on today, the demand has become Nil. Accordingly, as per the provisions of sub. Sec. (2) of sec. 221, the penalty levied u/s 221(1) is liable to be cancelled, if the orders passed by the Tribunal becomes final order, i.e., the operation of sub. Sec (2) would depend upon the question as to whether the orders passed by the Tribunal have become final or not? If the revenue has accepted the orders passed by the Tribunal in the hands of both the assessees, then the same will result in a final order, in which case, the impugned penalty levied u/s 221(1) of the Act shall be liable to be cancelled. We hold that the impugned penalty levied in the hands of both the assessee is liable to be quashed. We order accordingly. However, in the event of reversal of orders passed by the Tribunal in the quantum proceedings in the hands of both the assessee for AY 2007-08, the impugned penalty levied u/s 221(1) in the hands of both the assesses shall revive. - Appeals of the assessees are treated as allowed. 2021 (7) TMI 804 Penalty u/s 271(1)(c) - additions made by AO and upheld by CIT(A) - Defective notice - non specification of charge - HELD THAT:- . In the present case, the perusal of assessment order passed by the AO reveals that in the assessment order, no specific finding has been recorded by the AO as to whether it is a case of concealment of income or a case of furnishing of inaccurate particulars of income. Further in the notice dated 31.03.2004 issued u/s 274 r.w.s 271 of the Act, the inapplicable portion or limb of section 271(1)(c) of the Act has not been struck off. It is a settled law that the two limbs i.e. concealment of particulars of income and furnishing of inaccurate particulars of income carry different connotations. Various High Courts have held that AO must indicate in the notice for which of the two limbs he proposes to impose the penalty and for this the notice has to be appropriately marked. If in a printed format of the notice the inapplicable portion is not struck off thus not indicating for which limb the penalty is proposed to be imposed, it would lead to an inference as to non application of mind, thus vitiating imposition of penalty. See M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. [ 2019 (8) TMI 409 - DELHI HIGH COURT] - Decided in favour of assessee. 2021 (7) TMI 803 Rectification u/s 254(2) - HELD THAT:- We find that by means of present applications, the assessee seeks to get rectified/modified the order passed in application of the assessee under Section 254(2). To attract the applicability of section 254(2), the mistake which is sought to be rectified must be apparent from the record and the same must be in any order passed under sub-section (1) of section 254. An order rejecting an application for rectification under section 254(2) is not an order passed under section 254(1) and it cannot be rectified under section 254(2). Having regard to the facts and circumstances of the case and particularly the statutory provision under Section 254(2) it in found that the rectification application moved under Section 254(2) on M.A. is not permissible. Respectfully, following the decisions passed in the case of CIT vs. ITAT [ 1992 (1) TMI 88 - ORISSA HIGH COURT] AND Dr. S. Panneerselvam vs. ACIT others [ 2009 (10) TMI 113 - MADRAS HIGH COURT] we hold that the application of the assessee is not maintainable and as such same is dismissed. 2021 (7) TMI 802 Deduction u/s 80IB(10) - assessee is a cooperative society of Sahara India group and is engaged in the business of development and construction of residential and commercial units - CIT(A) allowed the claim of the assessee - built up area of shops and commercial establishments far exceeds the area prescribed under the statute - HELD THAT:- The issue stands settled in favour of the assessee by the decision in the case of Sarkar Builders [ 2015 (5) TMI 555 - SUPREME COURT] and CIT vs. Vatika Township Private Ltd.,[ 2014 (9) TMI 576 - SUPREME COURT] wherein it has been held that restriction on extent of commercial space in housing project imposed by way of amendment to section 80IB(10) w.e.f. 01.04.2005 does not apply to housing projects approved before 01.04.2005 even though completed after 01.04.2005. Since, in the instant case the housing project was admittedly approved before 01.04.2005, therefore, the first allegation of the Revenue that the aggregate built up commercial area far exceeds the prescribed limit is not applicable to the assessee Completion of the project on or before 31.03.2008 - it is the submission of the ld. Counsel that the project was completed before 31st March, 2008 in view of the additional evidences - Since these documents were never produced before the lower authorities and were filed before the tribunal for the first time in the shape of additional evidences, therefore, we admit the additional evidences filed in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963 and deem it proper to restore the issue relating to completion of the project prior to 31st March, 2008 to the file of the AO for adjudication of this issue i.e., completion of the project prior to 31st March, 2008. The AO shall examine the documents and any other details that he may require and decide the issue as per fact and law after giving due opportunity of being heard to the assessee. Assessee is not a developer - we find the condition of developer was decided and allowed in the initial years of claim, i.e., in the A.Y. 2003-04 and 2004-05 which is evident from the order of the CIT(A) for A.Y. 2005-06. Therefore, we find merit in the argument of the ld. Counsel that the same is not open for examination in subsequent year in absence of change in the factual position. In our opinion, without disturbing the assessment for the initial assessment year it is not open to the Revenue to make disallowance of such deduction in subsequent year by taking a contrary stand. Further, merely appointing SICCL as a contractor for development and construction of the project, in our opinion, cannot lead to the conclusion that the said activities were not carried on by the assessee society. Since the assessee is bearing the entire risks and responsibilities relating to the project and SICCL was appointed only to execute the project, therefore, in the light of the ratio of various decisions relied on by ld. Counsel for the assessee, the assessee ought to be considered as a developer and cannot be denied the benefit of deduction u/s 80IB(10). Merely because certain procedural formalities relating to collection of booking application forms and money from the buyers were delegated to SICCL, it would not render SICCL as the developer of the project since the money collected by SICCL was on behalf of the assessee only and on the authorization of the assessee and not in its independent capacity. Therefore, in our opinion, delegation of certain formalities regarding collection of booking application forms and money on behalf of the assessee would not cease the assessee company as being rendered as a developer of the project. 2021 (7) TMI 801 Nature of expenditure - new dyes expenditure claims - The dies are made as per project wise or the product wise and keeps changing for the other project - AO treated the impugned expenditure as a capital item eligible for depreciation than revenue expenditure as per assessee s stand adopted throughout - HELD THAT:- No merit in Revenue s preceding arguments. This is firstly for the reason that the above stated depreciation schedule only talks about the specified items than all kinds of dyes involving metal items. We make it clear that the assessee s dyes in issue are not made out either of rubber or plastic material. We thus adopt stricter constructions going by hon ble apex court s recent landmark judgement in CIT vs Dilip Kumar and Co [ 2018 (7) TMI 1826 - SUPREME COURT ] to decline Revenue s former argument and hold that assessees dyes are not covered under the foregoing items in the depreciation schedule. Coupled with this, it has come on record that hon ble Madras high court s decision in M/s TVS Motors Ltd. [ 2014 (2) TMI 522 - MADRAS HIGH COURT] has already held; after considering all relevant case laws, that such dyes come under revenue head of expenditure than capital only. We therefore see no reason to interfere with the CIT(A) s findings having correctly appreciated relevant facts / law. - Decided against revenue. 2021 (7) TMI 800 Unexplained source of the cash deposits - According to the assessee, he stated receipt in cash on sale of shop, furniture and closing stock of textile, whereas according to the AO, the assessee stated receipt on sale of the shop only and in the registered deed, sale of the shop is recorded only at ₹ 6 lakhs and therefore balance ₹ 24 lakh received falls under the head income from other sources being premium received on sale of shop - HELD THAT:- CIT(A) rejected the contention of the assessee mainly due to lack of evidence in support of the claim of the assessee. Before us, the learned counsel submitted that the assessee is willing to submit necessary documentary evidence in support of its claim of sale of closing stock of the textile and realisation of the debtors. We set aside the order of the Ld. CIT(A) and restore the matter back to the file of the Assessing officer for deciding afresh with the direction to the assessee to file all the necessary documentary evidences in support of his claim. Appeal of the assessee is allowed for statistical purposes. 2021 (7) TMI 799 Validity of the reopening of the assessment u/s 147 - validity of the assessment on the grounds of the service of notice u/s 148 - HELD THAT:- AO has stated in the assessment order that the notice u/s 148 of the Act issued on 08.08.2014 was received by assessee on 22.08.2014 - the assessee has not disputed the correctness of the address to which the notice was sent by AO as well as in the absence of any contrary fact or material to despite the fact recorded by Assessing Officer we do not find any merits or substance in the objection of the assessee raised in the ground nos. 1 to 3. The assessee has just raised the objection against reopening of the assessment without specifying as to how the reopening is invalid. Therefore, the objection of the assessee or devoid of any merits or substance and the same are dismissed. Addition on account of cash deposit made in the bank account by assessee as well as the estimation of income on the transactions carried out with the Multi Commodity Exchange (MCX) - HELD THAT:- The details of the cash deposit made on various dates has been given by Assessing Officer of the assessment order. The assessee has not disputed the dates and amount of deposits extracted in the table reproduced by AO in the assessment order. In the absence of any explanation regarding source of these deposits, the Assessing Officer has rightly made the addition of the said amount while completing exparte assessment. Even before the CIT(A) as well as before this Tribunal, the assessee has not furnished any details or explanation regarding the source of these deposits. Hence, no error or irregularity in the orders of the authorities below on the issue of addition made on account of cash deposit in the bank account. As regards the addition made by Assessing Officer on account of income from transactions carried out on Multi Commodity Exchange (MCX) it is noted that the CIT(A) has restricted the said addition by applying profit rate @ 1% as against 8% applied by Assessing Office. The CIT(A) has sustained the addition on this account only to the extent of ₹ 19,667/- as against ₹ 1,57,335/- estimated by Assessing Officer. The assessee has not filed any details or record to controvert the fact that he has carried out the transactions on Multi Commodity Exchange (MCX). The estimation of income by CIT(A) by applying net profit at 1% is just and proper. Accordingly, find no reason to interfere with the order of the CIT(A) on this issue. Appeal filed by the assessee is dismissed. 2021 (7) TMI 798 Disallowance of remuneration paid to the partners of the assessee firm - assessee is a partnership firm and filed its return of income u/s 139 declaring rental income from letting out of Theater to ADLABS Film Ltd. - HELD THAT:- AO has not disputed the books of account of assessee and corresponding withdrawal/drawing made by these two partners hence, any discrepancy in the statement of the partners is not going to change the condition prescribed u/s 40(b) (v) for allowing the claim of payment of remuneration to partners. AO has not disputed the fact that the payment has claimed by assessee to the partners on account of remuneration is not exceeding the limit provided u/s 40(b)(v) of the Act. Once the remuneration paid to the partners is in accordance of the provisions of Section 40(b)(v) and the actual payment of the said amount being credited to the capital account of the partners and corresponding withdrawal of the partners is not in disputed then the mere mistake in the statement of the partners would not rendered the claim of the partners firm not disallowed. Once the claim of payment of remuneration to partners is within the celling prescribed under Section 40(b) of the I. T. Act, 1961 the Assessing Officer cannot question the reasonableness of the remuneration when the genuineness of the payment is not in disputed.This issue is decided in favour of the assessee against the revenue. Disallowance of office expenses @ 20% - AO noted that the assessee has produced only ledger account of the expenses but no voucher has been produced - CIT(A) has deleted the said adhoc disallowance as held that the same is not proper - HELD THAT:- There is no dispute that the expenditure has been incurred for the purposes of business. It is also clear that the assessee had filed all the details of the expenses under various heads. AO has not pointed out any specific defects in these details filed. The AO has failed to bring any material on record to demonstrate that these expenses have not been incurred and are not verifiable. No disallowance can be made on mere suspicion. This addition is deleted. Since the CIT(A) has deleted the disallowance made by Assessing Officer, therefore, ground does not arise from the impugned order of the CIT(A) and accordingly the same are dismissed. Disallowance of advertisement expenses - AO has disallowed the claim of advertisement expenses on the ground that the assessee is not running the theatre in question but the same was the let out to Reliance Media Works Ltd. - HELD THAT:- There is no dispute that the assessee has let out the theatre in question to Reliance Media Works Ltd and not running the said theatre itself. Once the theatre is let out to third part for running then the claim of advertisement expenditure cannot be regarded as expenditure incurred wholly and exclusively for the purpose of the business assessee. Even otherwise, the assessee has not produced any supporting vouchers to prove that the expenditure was incurred for the purpose of the business of the assessee. Identical addition was confirmed by the CIT(A) for and A.Y.2012-13 the assessee has not challenged the said decision for the A.Y.2012-13. Even otherwise, once the assessee has let out the theatre to Reliance Media Works Ltd then the claim of the assessee cannot be accepted being incurred wholly and exclusively for the purpose of business of the assessee 2021 (7) TMI 797 Addition on account of low G.P. declared by assessee - HELD THAT:- AO cannot question the rate of profit declared by assessee until and unless he detects some defects in the books of account. Once the books of account are found to be the representing true and correct affairs of business the Assessing Officer cannot tinker with the actual profit declared by the assessee. In the case in hand, AO has duly recorded in the assessment order that books of account along with bills and vouchers were produced for examination and the AO has examined the same as test check. Once the books of account and other supporting evidence were examined by AO and no defect was found by him then low profit outcome of the business activity cannot be a reason for addition. AO can very well conduct an enquiry to find out the reasons for low G.P. declared by assessee in comparison to the preceding year but low G.P declared by assessee cannot be a basis or ground for making the addition. Once the AO did not detect any mistake in the books of account the adoption of higher G.P. rate by Assessing Officer for the making addition is unjustified and not sustainable. Decided in favour of assessee. Adhoc disallowance of expenses by AO@ 25% - addition of expenses under the head of Shop Expenses, Travelling Expenses and Vehicle Running and Maintenance Expenses for want of voucher and verification - Addition restricted by CIT(A) of 12.5% - HELD THAT:- The reason for disallowance is cited by Assessing Officer as not fully vouched which remain unverifiable. The assessee has not produced any contrary material or record to contract this finding of the Assessing Officer that expenses are not fully vouched. However as in the case of Pr. CIT Vs. Rimjhim Ispat Ltd. [ 2016 (1) TMI 374 - ALLAHABAD HIGH COURT] the disallowance of 5% of the expenses for want of supporting vouchers was considered as reasonable, therefore, the disallowance confirmed by CIT(A) 12.5% is restricted to 5%. Disallowance of freight expenditure u/s 40A(3) - AO noted that the assessee has made payment in cash exceeding ₹ 20,000/- in a day on certain dates to a single party or person which is not allowable - HELD THAT:- Section 40A(3) contemplates certain expenditure incurred in cash are not deductible. Though, sub-section 3 of Section 40A as existed at the relevant point of time prescribes the limit not exceeding of ₹ 20,000/- meaning thereby if expenditure incurred in cash is less than ₹ 20,000/-or not exceeding ₹ 20,000/- then the provisions of Section 40A(3) are not applicable. However, in the case of the payment made by assessee to transport operators in respect of hiring or leasing goods carriages the same would fall in third proviso to Section 40A(3) and 40A(3A) of the I. T. Act. This proviso provides a higher limit of ₹ 35,000/- for payment in cash to the transport operators. As enhanced limit of ₹ 35,000/- is applicable for the payment to the transport operators and in other cases the limit of payment remains at ₹ 20,000/-. Therefore, there is no ambiguity in the provision of Section 40A(3) and third proviso as well as the explanatory note issue by CBDT. Accordingly, in view of the third proviso to Section 40A(3), the payment made in cash to the transport operators which is less than ₹ 35,000/- would not attract this proviso of section 40A(3) of the I. T. Act, 1961 and consequently no disallowance is called for. In the present case none of these payments are exceeding ₹ 35,000/-, therefore, the disallowance made by Assessing Officer is not sustainable and the same is deleted. 2021 (7) TMI 796 Rejection of books of accounts - Addition by applying net profit rate of 7% as against net profit declared by assessee at 6.5% - HELD THAT:- The rejection of books of account would not be ipso facto result in an addition to the income declared by assessee if G.P./N.P. declared by assessee is better than the past history of G.P./N.P. or any other reasonable criteria/guidance to be considered as basis for estimation of income. The assessee has declared net profit at 6.5% on turnover of 7.25 crores is higher than the N.P. declared by assessee in preceding year and in the absence of any reasonable basis, criteria or guidelines applied by AO the adoption of net profit at 7% is not justified. The decision relied upon by Ld. DR in the case of PCIT Vs. Rimjhim Ispat Ltd. [ 2016 (1) TMI 374 - ALLAHABAD HIGH COURT] is in respect of the disallowance of expenses which were made by Assessing Officer @ 10% which were sustained by appellate authorities at 5%, therefore, the said decision is only on the point of reasonable disallowance of expenses and not on the estimation of income after rejection of books of account. Hence, the said decision would not help the case of revenue. Similarly under similar the decision in the case of Goodyear India Ltd.[ 2000 (7) TMI 32 - DELHI HIGH COURT] was again on the issue of disallowance of the expenses and not regarding estimation of income after rejection of books of account. Hence in view of the facts and circumstances as discussed above the addition mde by Assessing Officer is not sustainable and the same is deleted. Appeal filed by the assessee is partly allowed. 2021 (7) TMI 795 Unexplained credits in the bank accounts - cash deposits found in these bank accounts on the basis of a cancelled sale agreement - HELD THAT:- AO has assessed the entire amount of deposits as unexplained income of the assessee for want of evidences - it is quite natural that the assessee may not be keeping records, since the transactions were carried out on behalf of others. Hence, we are of the view that the explanation of the assessee that the transactions in these two bank accounts relate to his real estate business cannot be rejected altogether. On the contrary, the observations made by the AO, the replies given by the assessee would suggest that the explanations given by the assessee may be accepted. In that case, entire deposits could not assessed as income of the assessee. Only the income element involved in the deposits requires to be assessed as income of the assessee. In these business transactions, the assessee should be earning commission and brokerage income. Assessee has not stated anything about his rate of commission/brokerage. Considering the fact that the income element in the case of liaison works is usually high, we are of the view that the income of the assessee may be estimated @ 20% of the addition made by the AO relating to unexplained deposits. In our considered view, the same would be reasonable in the facts and circumstances of the case and further the same would also meet the ends of justice. Since we have held that the transactions found in the bank accounts may relate to the real estate business carried on by the assessee, the alternative contention of addition of peak credit need not be considered. We set aside the order passed by Ld. CIT(A) and direct the AO to compute income of the assessee @ 20% of the addition made and assess the same in the place of the addition made by him. Appeal filed by the assessee is partly allowed. 2021 (7) TMI 794 Disallowance u/s.14A - CIT-A restricted the disallowances @50% of the interest on the amount so invested and confirmed the disallowances partly - HELD THAT:- Assessee categorically stated that it has not earned any tax free income during the year. We find that when the assessee has not earned any exempt income, the provision of section 14A cannot apply and no disallowance can be made. Such is the mandate of the Hon'ble Delhi High Court in Cheminvest Limited [ 2015 (9) TMI 238 - DELHI HIGH COURT ] Even otherwise the proportionate disallowance of 50% of the interest expenditure cannot be upheld when there is a specific formula provided, provided the assessee has any exempt income during the year. Accordingly, we reverse the orders of the lower authorities and direct the ld. AO to delete the disallowance u/s. 14A of the Act. Disallowance of keyman insurance policy of the director of the company paid - amount of payment of insurance premium under the employer/employee insurance scheme - HELD THAT:- We find that the identical issue has been decided by the Hon'ble Delhi High Court in case of CIT v. Mr. Rajan Nanda [ 2011 (12) TMI 392 - DELHI HIGH COURT] wherein, the keyman insurance premium paid by the company is allowed as deduction to the company u/s. 37(1) of the act. The issue is squarely covered in favour of the assessee In view of this we find that the disallowances made by the ld. AO and confirmed by the ld. CIT(A) is not sustainable. Accordingly, the premium paid for keyman insurance policy is allowable to the assessee u/s. 37(1) of the Act. Similarly insurance premium of the employee is also allowable to the assessee u/s. 37(1). Accordingly, we reverse the order of the lower authorities and directed the ld. AO to delete the disallowance on account of insurance premium. Disallowance commission expenditure to two persons - AO disallowed the commission paid to Ms. Sonu Goyal as she could not be produced for verification and further commission paid to Mrs. Ayushi Goyal was also disallowed because in her statement recorded on 18.09.2014 she was found to be housewife and she did not do any business as well as not aware whether her income tax return was filed and for what reasons - HELD THAT:- Commission paid to the commission agent for introducing potential customers to the assessee is allowable u/s. 37 of the Act. In the present case in case of Ms. Ayushi Goyal she has stated that she has introduced 25 to 26 people to the assessee in her statement and also named four to five peoples. Therefore, it is apparent that she has referred the customers to the assessee. Therefore, we direct the ld. AO to delete the disallowance in case of commission paid to Ayushi Goyal as allowable expenditure u/s. 37(1). However, in case of Ms. Sonu Goyal no such information is forthcoming before the lower authorities or before us and therefore, the disallowance deserved to be confirmed. Disallowance of interest expenditure - AO noted that the assessee has invested in in Essel Housing Project - assessee explained that the purpose of making the above investment is for booking of property at Gurgaon however, the deal could not mature and the recovery of the advance has been made on 05.05.2012 - HELD THAT:- We find that the assessee has interest free funds in the form of share capital and three reserve available with it of ₹ 2 crores approximately whereas the investment made is of ₹ 1.20 crores and therefore, the presumption would arise in favour of the assessee that there was sufficient interest free funds available with the assessee. In view of this disallowance of interest expenditure of ₹ 71,507 cannot be made. Hence we direct the ld. AO to delete the above disallowance. 2021 (7) TMI 793 Disallowance of Bad Debts - HELD THAT:- We find that granting of loan was assessee's business and interest income would be business income for the assessee. If the interest was offered to tax and the same could not be subsequently recovered then in such a case the assessee would be entitle for claim of bad-debts u/s. 36(1)(vii) provided the amount was written-off as irrecoverable in the books of account. Prima facie, the assessee has fulfilled the conditions laid down u/s. 36(1)(vii). Therefore, we direct Ld. CIT(A) to ascertain the fact that the interest was offered to tax by the assessee and write-off of the same was claimed as bad-debts in the books during the year. If so, the claim would be allowable u/s. 36(1)(vii) in terms of decision of Hon'ble Apex Court in TRF Ltd.[ 2010 (2) TMI 211 - SUPREME COURT ] . The ground stand allowed for statistical purposes. Disallowance of referral fee - it was concluded by Ld. AO that the assessee failed to produce evidences to support the referral fees paid by it - HELD THAT:- As submitted that the payment was as per Memorandum of Understanding dated 21/03/2011 which specify the terms of reference. The referral fee thus received by M/s. NSBL was offered to tax. The payment was after deduction of tax at source which is supported by TDS certificates. Keeping in view the submissions made before us, we deem it fit to restore this issue back to the file of Ld. CIT(A) for fresh adjudication. The Ld. CIT(A) is directed to appreciate all these evidences/documentary evidences and re-adjudicate the issue after providing reasonable opportunity of hearing to the assessee. The assessee, in turn, is directed to substantiate its claim. This ground stand allowed for statistical purposes. 2021 (7) TMI 792 Validity of reopening of assessment u/s 147 - assessee raised the contention that the reopening was done on mistaken identity - HELD THAT:- The name of the assessee is Shri Dholan Das and not Shri Dholu Mal. This issue has been discussed by the A.O. in detail and held that the assessee agreed and confirmed that both the names are of same person. Reopening was done on borrowed satisfaction and Shri K.K. Khilnani, on whose statement, they relied upon, never mentioned the name of the assessee - AO recorded the reasons for reopening and also provided the copy of the same to the assessee. The objections raised by the assessee were dealt by the A.O. in the assessment order. The assessee demanded the copy of the statement of Shri K.K. Khilnani which was also provided by the A.O. to him. The A.O. had also provided opportunity to the assessee to cross examine Shri K.K. Khilnani, but the assessee did not avail the opportunity of cross examination. In view of the above facts and circumstances, we are of the considered view that ld. CIT(A) has passed a well-reasoned speaking order discussing all the material facts. The ld. AR has not brought out any new material to controvert the findings recorded by the ld. CIT(A) qua violation reopening the assessment. Unexplained income - violation of the provisions of section 269SS of the Act warranting penalty proceedingsu/s 271D - HELD THAT:- Both the provisions of Act i.e. Section 68 69 are not applicable in the present case. As Section 68 of the Act comes into operation only when `no satisfactory explanation is coming forth in respect of the cash credit found recorded in the books. In the present case, however, no such credit entry is recorded as evident from the books. Thus this section is not applicable in this case. Again, Section 69 of the Act is not applicable in the present case as the assessee was never found in 'possession' of such sum at any stage in any manner. Thus both the provisions of law are not operative in the present case. Copies of the alleged 'Prints Outs' received from the Investigation Wing, Ahmedabad and forwarded to the assessee subsequently in the assessment proceedings were 'deaf and dumb document' for all the purposes and had carried no evidentiary value in absence of the 'corroborative evidences'. Number of vital details like 'Dates of Payments' 'Re-payments' of the funds under consideration, the 'Money Receipts' acknowledging the receipt and re-payment of these funds, 'Final Destination' of these funds and the Nature' of the transactions reflected in the printed sheets i.e. whether such transaction was a 'loan' or 'payment' in lieu of any other transaction etc. were missing. In absence of such vital details, no 'logical' conclusion could be arrived at. Lastly, the assessee was never confronted about all these missing details in the assessment proceedings. As assessee has discussed his case in detail and we find merit in his contention, therefore, we direct to delete the addition made qua this issue. Decided partly in favour of assessee. 2021 (7) TMI 791 Disallowance u/s 14A read with Rule 8D(2)(iii) - HELD THAT:- The Provisions of section 14A(2) makes it clear that the assessee shall compute the expenditure incurred by it for making investment which earns exempt income and only if the AO is not satisfied with the correctness of the claim of the assessee he is authorised to invoke the provisions of Rule 8D of the IT Rules, 1962. In the case of the assessee such exercise is lacking. Factually it is also obvious that the assessee would have definitely incurred some expenditure towards investments made, which earns exempt income. In the interest of justice, we hereby remit the entire matter back to the file of the Ld. AO thereby providing an opportunity to the assessee to compute the actual expenditure incurred by it for making investment which earns exempt income. Needless to mention that any income/loss derived from any commercial/investment activity is not directly proportional to the expenditure incurred on such commercial/investment activity. We have remitted the matter back to the file of Ld.AO, We also hereby directed the assessee to promptly co-operate before the Ld. Revenue Authorities by furnishing the above stated statement of actual expenditure incurred by it for making investment which earns exempt income in order to expedite the proceedings of the Ld. Revenue Authorities failing which the Ld. Revenue Authorities shall be at liberty to pass appropriate order in accordance with law and merits based on the materials on record. Appeal of the assessee is allowed for statistical purposes. 2021 (7) TMI 790 Accrual of income - profit of the project - Year of assessment - HELD THAT:- We noticed that AO has proceeded to make addition of whole expected profit in this AY based on the promised payment schedule since assessee is a company and expected to follow the mercantile system of accounting. The same view was expressed by the CIT(A) in his order. In our considered view, from the records submitted before us, it clearly indicate that the project was not completed in this assessment year and promised payments against this project is part of the total agreed sales proceeds when the project is completed. We do not agree with the AO in bringing the whole profit of the project in the first year of execution of the MOU. Since, the claim of the assessee was not verified by the Ld. CIT(A) and it needs proper verification. We deem it fit to remit this issue back to the file of AO to redo the assessment de novo and direct him to verify the status of the project and can be taxed only to the extent of income which accrues to the assessee during this assessment year and direct AO to give proper opportunity of being heard to the assessee. Accordingly, the grounds raised by the assessee are allowed for statistical purpose. Customs 2021 (7) TMI 820 Maintainability of petition - petitioner states that the representation made by the petitioner on 3.7.2020 to the Commissioner of Customs, Mundra i.e. respondent No.1 has remained undecided, though the same was received by the office of the respondent No.1 on 6.7.2020 - HELD THAT:- Without going into the merits of the case, it is directed that the respondent No.1 shall decide the representation of the petitioner dated 3.7.2020 (Annexure-J) received by the office of the respondent No.1 on 6.7.2020, in accordance with law and as expeditiously as possible, preferably within four weeks from the date of receipt of this order. It is clarified that the Court has not gone into the merits of the case. Petition dismissed. Corporate Laws 2021 (7) TMI 817 Condonation of delay in filing petition for third time - Extension of period of limitation - the scheme of amalgamation was approved way back but was not implemented yet - Hon ble Supreme Court extended the period of Limitation, whether condonable or not, with effect from 15.03.2020 which is continuing till the date of filing of the Appeal - first Appellant was infected with Covid and was admitted in the hospital from 01.09.2020 to 20.09.2020 - HELD THAT:- In the instant case, the Appellants are silent about the receipt of free copy. Be that as it may, they chose to apply for a certified copy only on 08.08.2020 and received it on 12.08.2020 and filed this Appeal on 06.11.2020 after 86 days. The ground that the MD was not available for 20 days as he was infected with Covid, though we consider genuine, does not prevent a Company comprising other Directors to prefer an Appeal. It is submitted that the Order dated 19.01.2020 was uploaded on 22.01.2020. 45 days from that date also expires on 06.03.2020, prior to the lockdown period - 45 days as contemplated under Section 421(3) of the Companies Act, 2013, is to be counted from 10.01.2020 and the period ends on 24.02.2020 and it is seen from the record that the Appellant herein filed this Appeal only on 06.11.2020. By virtue of the proviso to Section 421(3), this Tribunal is empowered to condone the delay up to a period of 45 days - the Limitation has expired prior to 15.03.2020 and therefore the question of applicability of the Orders relied upon by the Learned Counsel for the Appellants do not apply to the facts of this case. The Scheme of the Amalgamation was discussed and approved on 02.01.2018, had taken effect on 31.03.2018 and the said Scheme was approved by NCLT way back vide Impugned Order dated 05.11.2019 and that this Appeal was filed on 06.11.2020 - a perusal of the Minutes of the Meetings of the Board Meetings filed before us do not evidences any objections raised by the Appellants at that point of time i.e. when the Scheme of Amalgamation was approved - the period of Limitation prescribed under Section 421(3) of the Act has lapsed on 24.02.2020 much prior to the lockdown period/pandemic situation and hence having regard to the facts and circumstances of the attendant case, it is not a fit case, in the interest of Justice to exercise any discretion empowered under proviso of Section 421(3) and condone the delay in the absence of any sufficient cause and substantial reasons . Appeal dismissed. Insolvency & Bankruptcy 2021 (7) TMI 816 Validity of admission of application u/s 7 of IBC - entire loan transaction is based on the 'Term Loan Agreement' - inadequately stamped document - admissible in evidence or not - debt and default have been proved beyond doubt - HELD THAT:- Based on the documents filed by the Financial Creditor, it is clear that the Financial Creditor has proved that the Corporate Debtor has defaulted in making the payment is 6,39,13,042 due on the Corporate Debtor. Therefore, if it is considered that the Term Loan Agreement is insufficiently stamped for argument sake, then it is inadmissible in evidence. Furthermore, the claim of the Financial Creditor is fully corroborated by other evidence filed - Corporate Debtor committed default in repayment of the loan amount to the Financial Creditor. Hence its loan account was declared as NPA. In light of facts and circumstances, debt and default are reasonably established by the Financial Creditor - the Application filed by the Financial Creditor under Sub-section (4) of Section 7 of the Insolvency and Bankruptcy Code 2016 was complete in all respects. Therefore, the Adjudicating Authority admitted the petition filed under Section 7 of the Code. The objections raised by the Appellant/Corporate Debtor are unsustainable. First, the Appellant emphasised the alleged insufficiently stamped Term Loan Agreement. However, in addition to the Term Loan Agreement, the Financial Creditor relies on Demand Promissory Note, Hypothecation letter regarding depositing of title deed, a certified copy of the bank statement, and so many other documents filed along with the Application - Therefore, even if it is considered that the Term Loan Agreement is insufficiently stamped and it cannot be accepted in evidence, then also alleged debt and default are proved beyond doubt. Furthermore, the Application filed under Section 7 is complete. The Appeal is dismissed. 2021 (7) TMI 815 Liquidation process - duty of liquidator to determine claim as submitted in Form G by Other Stakeholder - counter claim being made by the Corporate Debtor was rejected - HELD THAT:- As per Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, the Liquidator was required to process the claims submitted in Form G by the Appellant as claim by Other Stakeholder . Regulation 20 provides for processing of claims by other stakeholders and the Appellant was required to prove its claim inter alia on the basis of relevant documents which adequately establish the claim. Under Regulation 23, the Liquidator has power and duty to call for such other evidence or clarification as he deems fit from a claimant for substantiating the whole or part of its claim - Regulation 28 even makes provisions for contingencies where debt is payable at future time and Regulation 29 provides for Mutual Credits and set-off. The Liquidator has avoided performing the duty as was required to be performed under the I B Code and the Regulations. We accept the submission of the Learned ASG that the Liquidator was required to look into the Award of Adjudicator and look into the documents and come to the best estimate and give the benefit to the Appellant. The Liquidator is directed to take steps as mentioned in this judgment and process claim of the Appellant as other creditor and arrive at best estimate of the amount of claim made by the Appellant and give the necessary benefit to the Appellant - appeal disposed off. Service Tax 2021 (7) TMI 814 Interest on delayed refund (of pre-deposit) - relevant time - to be granted from the date of communication of the final order of the Tribunal till the date of grant of refund, or from the date of pre-deposit? - HELD THAT:- The issue is no longer res integra and in the case of M/S J.K. CEMENT WORKS VERSUS COMMISSIONER, CENTRAL EXCISE, CENTRAL GOODS AND SERVICE TAX, UDAIPUR [ 2021 (3) TMI 123 - CESTAT NEW DELHI] , wherein under the similar facts and circumstances, this Tribunal following the ruling of the Hon ble Supreme Court in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] as well as of the Hon ble Allahabad High Court in the case of HELLO MINERALS WATER (P) LTD. VERSUS UNION OF INDIA [ 2004 (7) TMI 98 - ALLAHABAD HIGH COURT] held that interest is payable from the date of deposit till the date of grant of refund - Further, the Division Bench of this Tribunal in M/S PARLE AGRO PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA [ 2017 (2) TMI 984 - CESTAT ALLAHABAD] has held that interest is payable @12%, following the ruling of the Hon ble Supreme Court in the case of Sandvik Asia Ltd. The appellant is entitled for interest @12% p.a. from the date of deposit till the date of refund. The order-in-original is restored with the modification in the rate of interest - Appeal allowed - decided in favor of appellant. Central Excise 2021 (7) TMI 811 CENVAT Credit - common input services on trading activity / traded goods - non-maintenance of separate accounts under Rule 6(2) of Cenvat Credit Rules - non-filing of declaration as contemplated in Rule 6 (3A) - suppression of facts or not - extended period of limitation - HELD THAT:- The Tribunal in the case of Dalmia Bharat Sugar Industries Ltd., vs. CCE [ 2017 (10) TMI 1027 - CESTAT NEW DELHI ] has followed the decision in the case of Mercedes Benz India Pvt Ltd [ 2015 (8) TMI 24 - CESTAT MUMBAI ], wherein it was observed that the Commissioner is not justified in insisting that appellant reverse cenvat credit in terms of Rule 6(3)(i) of Cenvat Credit Rules. The claim of the appellant is that they have already reversed on proportionate basis, the cenvat credit along with interest amount payable in terms of Rule 6(3A). However, the Department is entitled to verify whether reversal of the amount already made by the appellant satisfies the requirement of Rule 6(3)(ii) notwithstanding the fact that the procedural formalities have not been satisfied. Time Limitation - suppression of facts or not - HELD THAT:- The appellants have been issued show cause notices for earlier periods on identical issue. The appellants have disclosed the credit availed in the returns filed by them. They had submitted all the documents called for by the department and I do not find any evidence to saddle the appellants with willful suppression of facts with intention to evade payment of duty - the appellants had been reversing the credit availed on common input services and informed the department whenever the details were asked for. Thus the department was fully aware that the appellants were conducting trading activity - the demand raised invoking the extended period is without any factual or legal basis. The appeal succeeds on limitation also. The impugned order is set aside both on merits as well as on limitation - Appeal allowed - decided in favor of appellant. Indian Laws 2021 (7) TMI 821 Dishonor of Cheque - service of notice - legally enforceable debt or not - rebuttal of presumption - complainant claims to have sent the legal notice to the accused, but the same was not served upon petitioner - complainant's main grievance is against the Trust - the accused alone was alleged to be the only active Trustee in the said Trust. Service of notice - HELD THAT:- The address of the accused shown in her vakalath in the Trial Court, the cause title in the complaint filed by the complainant before the said Court, and in the memorandum of the criminal appeal before the Sessions Judge's Court and also in the present Criminal Revision Petition before this Court are all the same address, as such, it is established that the complainant issued the notice to the correct address of the accused. The said notice was also tendered at the said address of the addressee. Therefore, the accused now cannot contend that there was no notice issued to her - As such, the contention of the learned counsel for the petitioner/accused that, no statutory notice was issued by the complainant to the accused, is not acceptable. Legally enforceable debt towards the complainant - rebuttal of presumption - HELD THAT:- Admittedly, the said cheque has been returned when presented for its realisation for the reason of insufficiency of funds, after which, a legal notice was issued by the complainant to the accused, demanding the payment of the cheque amount. Admittedly, the cheque amount has not been paid by the accused to the complainant till date. Thus, a presumption about the legally enforceable debt forms in favour of the complainant. However, the said presumption is rebuttable - when the cheque is issued from the personal account by the accused, drawn in favour of the complainant and when the complainant has denied that the accused was not liable to her under the said cheque and also denied the fact that the accused had left the Trust on 05-04-2011 itself, the burden of establishing that, there existed no legally enforceable debt towards the complainant would be upon the accused. However, it is sufficient for the accused to make out a case on preponderance of probabilities in her favour and that she need not have to prove the same beyond reasonable doubts. Even though the complainant's main grievance is against the Trust, but according to the complainant, the accused alone was the only active Trustee in the said Trust and that the cheque in question was also given to her by the accused herself, holding herself as the sole responsible person. The said statement made by PW-1 in her examination-in-chief has not been specifically denied or disputed from the accused's side - both the Trial Court as well the Sessions Judge's Court, analysing these aspects have held the accused guilty of the alleged offence punishable under Section 138 of the N.I. Act. Since both the Trial Court as well as the learned Session's Judge's Court, have after properly appreciating the evidence placed before them, rightly held the accused guilty for the alleged offence and have ordered sentence proportionate to the gravity of the proven guilt, there are no perversity or illegality in it, warranting interference at the hands of this Court. Criminal Revision Petition stands dismissed 2021 (7) TMI 819 Dishonor of Cheque - Complaint was dismissed hold that, complainant failed to prove the guilt of the accused beyond reasonable doubt - rebuttal of presumption - cheque got executed by exercising force - quantum of amount lent also in dispute - accused has not chosen to step into the witness box to depose regarding his contention - HELD THAT:- It is the settled proposition of law that when the complainant is successful in proving issuance of cheque and its dishonour, unless the accused repays the cheque amount, the offence under Section 138 of N.I. Act is complete and the presumption under Section 139 of N.I. Act arises. In Rangappa v. Sri. Mohan [ 2010 (5) TMI 391 - SUPREME COURT] , the Full Bench of the Hon'ble Apex Court considered its earlier verdict in Krishna Janardhan Bhat v. Dattatraya G. Hegde [ 2008 (1) TMI 827 - SUPREME COURT] and categorically held that the presumption under Section 139 of the N.I. Act does indeed include the existence of the legally enforceable debt or liability. Thus, it is clear that presumption under Section 139 of N.I. Act includes the existence of legally enforceable debt or liability and it is for the accused to rebut the same. In the present case, as the accused has categorically admitted issuance of the cheque-Ex. P.1. He took a specific defence that the cheque in question was obtained by the complainant by exercising force and that the same was a blank cheque. The complainant misused the blank cheque and filed a false complaint. Even though a specific defence is taken by the accused, he has not probabilised the same. When the accused admits issuance of the cheque in favour of the complainant, the presumption under Section 139 of N.I. Act arises and unless the accused rebuts the presumption, he is liable for conviction. The impugned judgment of acquittal passed by the trial Court deserves to be set aside - criminal appeal allowed. 2021 (7) TMI 818 Dishonor of Cheque - issuance of non-bailable warrant - validity of proceedings under Section 482 Cr.P.C. - HELD THAT:- After coming to know that the non-bailable warrant has been issued this is a clear device of challenging the entire proceedings under Section 482 Cr.P.C. It is not known if the police has already arrested the accused as the warrants were issued long back before one year. The summoning order is dated 29.04.2019 which means that for a period of two years the respondents have not appeared before the learned Magistrate. Prima facie ingredients of the offence are made out from the papers on record. On the touchstone of the decision of the Apex Court and in a recent decision of High Court of Gujarat in case of A. H. Patel vs. State of Gujarat reported in [ 2013 (3) TMI 861 - GUJARAT HIGH COURT] as the facts are similar to this case the said decision and the parameters fixed in the recent decision has holding that if the relevant aspects deserves to be investigated, the same cannot be circumvented under Section 482 of the Code - It is held that High Court should be loath in exercise of jurisdiction under Section 482 of Code to enter into the process of determining the veracity of complaint. The Apex Court in case of Rajiv Thapar vs. Madan Lal Kapoor [ 2013 (1) TMI 932 - SUPREME COURT] where it was held that the powers vested in the High Court under Section 482 of the Code, when exercised, have far reaching consequences, most important being the consequence that it would negate the prosecution's/ complainant's case without allowing the prosecution/ complainant to lead evidence and that, therefore, the exercise of the said powers should be with utmost caution, care and circumspection. This is a case which cannot be said to be one where extraordinary power require to be exercised as basic ingredients of the alleged offences are there - petition is devoid of merits and is dismissed.
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