TMI Tax Updates - e-Newsletter
August 10, 2023
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Validity of manual revised returns filed - scheme of demerger approved - scheme of arrangement approved by NCLT required Petitioner and Hind Lamps to file revised returns of income-tax, sales tax, value added tax, turnover tax, excise duty, service tax, customs and any other returns including revised returns to claim advance tax or withholding tax refunds and credits giving effect to the demerger - AO directed to accept and process the ITR so filed - HC
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Income Tax:
TP Adjustment - MAM for Royalty payment - Having accepted the TNMM method as the most appropriate, it was not open to the TPO to subject only one element, i.e, payment of royalty, to an entirely different CUP method. - The Tribunal (ITAT) was not justified in taking a different view for these three assessment orders. - HC
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Income Tax:
Rejection of Grant of registration u/s 12(A)(a) - genuineness of the objects of assessee-Trust - Tribunal has rightly come to the conclusion that while considering the application for registration, CIT was supposed to enquire into the nature of the Trust and since there was nothing substantive or serious to doubt the nature of the Trust being charitable, the learned CIT was not justified in rejecting the application for registration on the aforesaid basis. - HC
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Income Tax:
Unexplained cash credit - Gifts receipts from Mother - it would not be correct to conclude that the gift deed was an afterthought since the aforesaid transfers were made on dates much prior to the date when the search was carried out at the premises of the assessee and notice under section 153A of the Act was issued to the assessee. We observe that the gifted deed was on a stamp paper and the same was also duly supported by way of bank transfers. - AT
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Income Tax:
Bogus Short term capital loss - accommodation entry transactions - No ambiguity in the sale and purchase of shares through the SEBI brokers - Assessee had purchased the shares through contract note and sold all the shares through contract note. It is also noteworthy to mention that shares purchased by the assessee were credited in his D Mat account and they were transferred accordingly. - Additions deleted - AT
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Income Tax:
Penalty u/s 271(1)(b) - notice issued but not served - Simply penalty has been imposed by considering that the notices were issued. In our view, service of notice is only a formality and, therefore, no true or genuine efforts were made by the AO to serve the notices. Since there is no proof on the court file with regard to service of notice, therefore, in our view, no penalty is attracted. - AT
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Income Tax:
Addition u/s 68 - unsecured loans received from various parties - the amount was not credited during the year under consideration, as such the same was carried forward from earlier years. Therefore, the provision of section 68 of the Act cannot be made applicable on the same in the year under consideration. - AT
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Income Tax:
Addition on interest expenditure - principle of “consistency” - interest in the nature of penalty - when on identical facts, the Department has not made any disallowance in respect of interest payments, which the assessee has been consistently paying over a period of 10 years i.e. both in the past years as well as for the future assessment years, then the Department is precluded from making disallowance on the same set of facts in the impugned year under consideration. - AT
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Income Tax:
Addition of deposit into bank during demonetization period u/s 69A - The amount was kept by assessee-company for meeting the requirement of expenses and contingency as per policy of company as depict from above and allegation of AO for keeping cash over a long period is not correct as mention in the Assessment order. - AT
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Income Tax:
Addition u/s 69 - bogus LTCG - Penny Stock purchases - Overall facts on record and the nature of transaction clearly indicate that this transaction basically falls under the category of penny stock and assessee has not proved basic information why he has invested in the company which does not have any net-worth and no financial activities. - Additions confirmed - AT
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Customs:
Violation of principles of natural justice - Scope of the order of the Tribunal - The Tribunal has not considered paras 5 and 6 of the Commissioner Appeal’s order in proper perspective, and has merely got carried away by the remand, without realising that there was a finding on merits against the Appellant and which was challenged before the Tribunal - The Tribunal ought to have adjudicated the appeal of the Appellant on merits - HC
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Customs:
Seeking grant of Anticipatory Bail - evasion of Customs Duty - running dummy entities through untrained and random individuals - Unless the applicant appears before the DRI and offers himself for tendering voluntary statement or otherwise, there cannot be any question of any real time apprehension of being arrested - there is no merit in the application seeking anticipatory bail - HC
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Customs:
Maintainability of appeal - failure to make pre-deposit of duty amount in terms of section 129E - If the appellant wants to avail the remedy of filing the statutory appeal, it is mandatory to comply with the conditions specified under Section 129E of the Customs Act, i.e. to make pre-deposit of 7.5% of the duty and penalty in dispute. - AT
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Customs:
Confiscation - Determination of classification - It is the settled position of law that in cases where classification of goods is involved, confiscation by re-classifying the same is not possible, that too alleging mala fide intention, since, the same amounts to a different view adopted by the authorities. - AT
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Corporate Law:
Oppression and Mismanagement - seeking to grant waiver to the Petitioners in order to enable them to file application u/s 241 - The deemed waiver, which has been granted, is nowhere provided in Section 244 of the Act rather the Act says that the Tribunal has to take a decision in regard to the merit of the application as to whether the waiter has to be given in respect of clause (a) and (b) of Section 244(1) and that order should not be arbitrary or capricious but should be speaking and reasoned. - AT
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Indian Laws:
Professional Negligence - abetting in evasion of Central Excise and Customs duties - Removal of Chartered Accountant (CA) from the list of Members for a period of three months - It is observed that Respondent (CA) had taken adequate precaution before issuing Solvency Certificate. - CA cannot be held guilty of any professional negligence - HC
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Indian Laws:
Dishonour of Cheque - condonation of delay - It is well settled principle of law that the case should be decided on its merits rather than technicalities. As there is provision to condone the delay, the learned revisional Court has rightly condoned the delay of 90 days caused in filing of the complaint case under Section 138 of the Negotiable Instruments Act. - HC
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PMLA:
Remand in favour of the investigating agency - The learned Solicitor General is right in his submission that apart from the fact that the word “custody” is different from “detention”, it can only be physical. As pointed out by him even the High Court has observed that the appellant continues to be in judicial custody. Admittedly, physical custody has not been given to the respondents. Admission of the appellant to the hospital of his choice cannot be termed as a physical custody in favour of the respondents. - SC
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Central Excise:
Classification of goods - CMO (Crude Mineral Oil) Residue - It is on record that CMO residue is obtained as remnant on distillation of crude oil, which is specifically mentioned in the subheading 270900 and not under 27139000. As per General Rules of Interpretation of the Tariff, a specific heading must be always preferred over a general heading - Classifiable under the subheading 270900 as claimed by the Appellant. - AT
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VAT:
Refund claim - illegal deduction and recovery from the contractors - The Railways had made a deduction on the ground that it is a works contract; which are negatived. The Railways is bound to refund the illegal tax deduction made from the bills to the petitioner contractor. The Railways could definitely apply for refund from the Bihar Value Added Tax Department. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2023 (8) TMI 460
Validity of assessment u/s 144C - applicability of time limit prescribed u/s 153 - HELD THAT:- As the assessment has to be concluded within twelve months as provided in Section 153(3) of the Act when there has been remand to the AO by the ITAT u/s 254 of the Act. Within this twelve months prescribed, the AO has to ensure that the entire procedure prescribed u/s 144C is completed and pass a final assessment order. For this the AO has to be prompt in passing an order contemplated u/s 144C(1) of the Act and not wait to be reminded like in this case and still take almost two years to start the process. Sub-Section (13) of Section 144C provides that an assessment officer shall, upon receipt of the directions, issued under Sub-Section (5), in conformity with the directions complete, notwithstanding anything to the contrary contained in Section 153, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. What is contemplated u/s 144C (13) is the passing of the final assessment order. Twelve months as provided u/s 153(3) would start from the end of the financial year in which the Principal Commissioner received the order u/s 254 from the ITAT. The assessing officer should have taken steps to pass the final order under Sub-Section (13) of Section 144C within 12 months period. The exclusion of applicability of Section 153, in so far as non-obstante clause in Sub-Section (13) of Section 144C is concerned, it is for limited purpose to ensure that dehors larger time available, an order based on the directions of the DRP has to be passed within 30 days from the end of the receipt of such directions. The Section and Sub-Section have to be read as a whole with connected provisions to decipher the meaning and intentions. A similar non-obstante clause is also used in Section 144C(4) of the Act with the same limited purpose to imply, even though there might be a larger time limit under Section 153, once the matter is remanded to AO by the ITAT under Section 254, the process to pass final order under Section 144C has to be taken immediately. The object is to conclude the proceedings as expeditiously as possible. There is a limit prescribed under the statute for the AO and therefore, it is his duty to pass an order in time. After 30th September 2021, the AO will have no authority to pass any final assessment order in this Case. We cannot accept the submissions of Shri Suresh Kumar that passing of draft assessment order before 30th September 2021 would suffice. We find support for this view in Roca Bathroom (SB) [ 2021 (4) TMI 355 - MADRAS HIGH COURT] and Roca Bathroom (DB) [ 2022 (6) TMI 848 - MADRAS HIGH COURT] Since no final assessment order can be passed in the present case as the same is time barred, the Return of Income as filed by Petitioner be accepted.
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2023 (8) TMI 459
Validity of manual revised returns filed - scheme of demerger approved - scheme of arrangement approved by NCLT required Petitioner and Hind Lamps to file revised returns of income-tax, sales tax, value added tax, turnover tax, excise duty, service tax, customs and any other returns including revised returns to claim advance tax or withholding tax refunds and credits giving effect to the demerger - HELD THAT:- In the case of Dalmia Power Ltd. [ 2019 (12) TMI 991 - SUPREME COURT] wherein the issue was whether the Income Tax Department ought to have permitted the Assessee to file revised Income-tax returns for the Assessment Year 2016-17 after the expiry of the due date prescribed u/s 139(5) on account of the pendency of proceedings for amalgamation of the Assessee companies with other companies under section 230-232 of the Companies Act 2013 - Apex Court referred to section 139(5) of the Act that the said provision would not be applicable in a case where revised return could not be filed on account of the time taken to grant sanction of the Schemes of Arrangement and Amalgamation by NCLT and section 139(5) of the Act only deals with filing of revised return within a period of one year upon discovery of an omission or wrong statement made in the initial return of income. In the facts and circumstances of that case, Apex Court directed Income-tax department to receive the revised return of income for Assessment Year 2016-17 filed by appellants therein and to complete assessment for the said Assessment Year after taking into account scheme of amalgamation as sanctioned by NCLT. We are also of the view that the decision of the Apex Court in the case of Dalmia Power Ltd. (Supra) would be applicable to the facts and circumstances of the present case. In fact in the impugned order, Respondent no. 1 also accepts this but states that he is bound by CBDT Circular. In the circumstances, we set aside the impugned order dated 3rd June 2022 and direct Respondents to accept and process Petitioner s manual revised return of income for Assessment Year 2014-15 to Assessment Year 2021-22 and pass within 12 weeks an Assessment Order in accordance with law.
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2023 (8) TMI 458
TP Adjustment - MAM for Royalty payment - TPO has accepted the TNMM method as the most appropriate method to benchmark Assessee s international transactions under the manufacturing activity but decided to separately benchmark the royalty - HELD THAT:- TPO having accepted that TNMM method applied by Assessee was the most appropriate method in respect of all the international transactions including payment of royalty cannot dispute application of TNMM method as the most appropriate method for the payment of royalty only for which CUP method was sought to be applied. We would concur with Appellant that having accepted the TNMM method as the most appropriate, it was not open to the TPO to subject only one element, i.e, payment of royalty, to an entirely different CUP method. The adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international transaction. Each method is a package in itself, as it were, containing the necessary elements that are to be used as filters to judge the soundness of the international transaction in an ALP fixing exercise. If this were to be disturbed, the end result would be distorted and within one ALP determination for a year, two or even five methods can be adopted. This would spell chaos and be detrimental to the interests of both Assessee and the revenue. Tribunal was totally incorrect in saying that accepting aggregation of royalty payment with other international transactions under the manufacturing segment for the Assessment Year 2006-2007 was in the context of an earlier agreement under which the royalty was paid. TPO himself had accepted the benchmark of the international transaction of payment of royalty under the aggregation approach along with transactions of the manufacturing segment. Tribunal failed to recognize that the royalty agreement for the years under consideration was the same agreement. We have to notice that neither the TPO nor the DRP had even whispered or mentioned in their orders about any facts being different from the earlier orders. In such situation, the Tribunal was not justified in taking a different view for these three assessment orders. The Apex Court in [ 1991 (11) TMI 2 - SUPREME COURT] has held that in the absence of change in material facts, the department is bound by the previous decision. Once the Tribunal in its earlier orders has held that the transaction of payment of royalty for use of technology is inextricably linked with manufacturing activity and should be aggregated with other international transactions in the manufacturing segment for the purposes of benchmarking the same, and the TPO having accepted the aggregating of international transaction of payment of royalty with other international transactions in the manufacturing segment and not drawn any adverse inferences in respect of such aggregation of royalty payment under identical agreement, the Tribunal should have followed the order of the co-ordinate bench rendered under identical facts. - Decided in favour of assessee.
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2023 (8) TMI 457
Revision u/s 263 - Various grounds of revision - Stock compensation expense - HELD THAT:- ITAT has noticed that the assessee had not offered the tax on the stock compensation on the previous year and AY. 2014-15, the assessee has offered the same to tax. This aspect was misconstrued by the CIT(A) to the effect that the assessee was claiming expenditure. ITAT has rightly analyzed and held that there was no ground for revision u/s 263. Treatment of state taxes paid in USA - ITAT has noticed that the AO had applied his mind and taken a decision after due query in his notice issued u/s 142(1) to which the assessee had submitted its reply in detail. ITAT has rightly noticed that the CIT(A) s view is based on the observations contained in his order. It was argued that assessee had placed reliance on the authorities rendered by the Kolkata High Court and Delhi High Court. He pointed out that the CIT(A) has observed that the AO had not examined the issue vis-a-vis the law laid down by other High Courts and the other jurisdictional High Court. In our view, the ITAT has rightly held that such observations cannot be the basis on which revision can be made under Section 263. We are at one with the ITAT s order. Foreign remittance without deducting TDS - ITAT has recorded that the AO has taken a possible view on this aspect after due enquiry and application of mind . Similarly, with regard to the fourth issue namely, lease of Sasken brand to related parties free of cost, the AO has taken a possible view . In the authority relied upon by the Revenue, the Apex court [ 2016 (5) TMI 493 - SUPREME COURT] has held in para 21 that there can be no doubt that so long as the view taken by the AO is a possible view , the same ought not be interfered by the CIT under Section 263 of the Act merely on the ground that there could be another possible view in the matter. As noticed hereinabove, the ITAT has recorded that on the first issue, the CIT has misconstrued the facts. On issues No. 2, 3 and 4, the AO has taken possible views . As such, the authority cited by the Revenue inures to the benefit of the assessee. Decided against revenue.
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2023 (8) TMI 456
TDS u/s 194H - non-deduction of taxes on payments made to distributors towards price protection and special price clearance discounts - relationship between the assessee and the distributor is that of Principal to Principal OR Principal to Agent - HELD THAT:- CIT (A), in our opinion, has rightly recorded that distributors are required to place the purchase order as per clause 2.1 of the agreement and assessee reserves right to accept or reject any order. The inventory risk after acquiring the product is that of the distributor. Payment from the distributor to assessee has no link with the further sales made by the distributor. The commission or brokerage is described in explanation to Section 194H of the Income Tax Act, 1961 In view of the factual findings recorded by the CIT(A) that payment from the distributor to the assessee has no link with the further sale made by the distributor and same having been confirmed by the ITAT which is the last fact finding authority based on the decision of this Court in Bharti Airtel Ltd. Vs. DCIT [ 2014 (12) TMI 642 - KARNATAKA HIGH COURT ] we find no merit in these appeals. Decided against revenue.
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2023 (8) TMI 455
Rejection of Grant of registration u/s 12(A)(a) - genuineness of the objects of assessee-Trust - assessee not filing the application for the same within one year from the prescribed date nor had taken permission under Rule 14 of the Madhya Pradesh Lok Nyas Adhiniyam, 1951 for selling the property - HELD THAT:- ITAT was right in holding that at the time of granting registration, the Commissioner is not required to examine whether income derived by Trust spend for charitable purposes or the Trust is earning profit. ITAT has rightly come to the conclusion that the genuineness of the objects of assessee-Trust could not be doubted and the same shall be seen at the time of assessment and not at the time of grant of registration. For this contention, appellant's counsel has placed reliance on the judgment of Division Bench in the case of Commissioner of Income Tax Vs. Divine Shiksha Samiti [ 2020 (2) TMI 726 - MADHYA PRADESH HIGH COURT] . Tribunal has rightly come to the conclusion that while considering the application for registration, CIT was supposed to enquire into the nature of the Trust and since there was nothing substantive or serious to doubt the nature of the Trust being charitable, the learned CIT was not justified in rejecting the application for registration on the aforesaid basis. Thus, no substantial question of law arises for consideration in this appeal.
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2023 (8) TMI 454
Disallowance of expenses incurred on the earning of the commission income from West Coast Paper Mills - HELD THAT:- Admittedly, the assessee is in the business of organising supply of paper to the various government agencies. It is also an accepted fact that when supplying material expenditures relating to loading and unloading are incurred, consequently the expenses in respect of unloading of material is acceptable and the AO directed to allow the same. Local taxi expenses, it is an accepted fact that the assessee would have to travel to various locations where the supply of materials are made, consequently, the AO is directed to allow this expenditure. Also an admitted fact that there would be expenditure incurred in respect of food for the assessee as also the assessee s staff in relation to the various locations at which the material is being supplied. Consequently, the expenses in respect of meals and snacks, is also allowed. Issue of tips, admittedly, the same is not allowable expenditure as it is not expected from an assessee to incur the expenses. Thus, the expenditure claimed under this head stands disallowed. Expenditure claimed under the head miscellaneous expenses as the assessee has not been able to point out the nature of this expenditure, the disallowance of the same stands upheld. Appeal of the assessee is partly allowed.
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2023 (8) TMI 453
Validity of order u/s 92CA(3A) - period of limitation - eligible assessee in terms of the definition provided in sub-section (15) to section 144C - time limit for completing the assessment as per section 153 - HELD THAT:- We find that the coordinate bench of the Tribunal in Mondelez India Foods (P.) Ltd. [ 2022 (11) TMI 1339 - ITAT MUMBAI] held that once the order of the TPO is beyond the period of limitation and thus is not a valid order, there is no eligible assessee in terms of the definition provided in sub-section (15) to section 144C of the Act. Further, it was held that if there is no eligible assessee, no reference to DRP could have been made. In the present case, the assessee does not qualify to be an eligible assessee as per section 144C(15)(b) of the Act. AO erred in assuming the jurisdiction u/s 144C(1) of the Act for passing the draft assessment order on 30/12/2019. Accordingly, the time limit for completing the assessment in the present case, as per section 153 of the Act, expired on 31/12/2019, after including the extended time period provided under section 153(4) as well as section 92CD(5)(b) - in the present case, the impugned final assessment order was passed by the AO on 06/04/2021, and therefore the same is also barred by limitation and is void ab initio. Accordingly, the impugned final assessment order passed on 06/04/2021, is quashed and the additional grounds raised by the assessee are allowed.
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2023 (8) TMI 452
Assessment u/s 153A or 147 - provision under which the assessment can be initiated - penny stock purchases - assessee submitted that the AO has erred in initiating the assessment u/s 147 without appreciating that the assessment for the current year can be done only u/s 153A subject to the fulfilment of the conditions specified therein - HELD THAT:- If there is relevant material on the basis of which a reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings u/s 147 can be validly initiated. As evident from the record, in the present case, proceedings u/s 147 were not initiated on the basis of the search conducted in the case of the assessee but the same were initiated on the basis of the information received from the DDIT (Investigation) Unit-5(1), New Delhi that the assessee is a beneficiary of bogus long term capital gains from trading in penny stock scrips - This fact is further established from the copy of the reasons recorded by the AO while reopening the assessment, which was provided to the assessee vide letter dated 01/06/2021. Since in the present case, the assessment proceedings were initiated on the basis of information received by the AO, therefore, we are of the considered view that the learned CIT(A) completely erred in holding that the assessment proceedings for the year under consideration can only be initiated u/s 153A of the Act and the same cannot be initiated under section 147. Accordingly, we set aside the impugned order passed by the learned CIT(A). During the hearing, the learned AR made submissions regarding the validity of proceedings under section 147 of the Act. However, we find that the learned CIT(A) has not examined any other aspect and has also not adjudicated on other issues raised by the assessee on merits. Therefore, we deem it appropriate to restore the appeal to the file of the learned CIT(A) for de novo adjudication - Appeal by the Revenue is allowed for statistical purposes.
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2023 (8) TMI 451
Scope of limited scrutiny u/s 143(2) - Addition u/s 69A - cash deposits the source of which remained unexplained - - HELD THAT:- In the present case, the Ld. AO made the impugned addition u/s 69A of the Act not falling within the scope of limited scrutiny and admittedly is without converting the limited scrutiny into complete scrutiny. This outstepping action of Ld. AO being extra-territorial to the scope of limited scrutiny in judicial precedents rendered itself void, resultantly no legs to stands, therefore directed for deletion. Legal ground is adjudicated in favour of the assessee, all remaining meritare grounds rendered themselves academic.
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2023 (8) TMI 450
Condonation of delay - Appeal as time-barred by 246 days - Assessee explained delay was on account of incorrect advice of the earlier counsel appointed by the assessee - HELD THAT:- It is a settled principle of law that the Tribunal, u/s 253 of the Act, may admit an appeal, or cross-objection, after the expiry of prescribed period, if it is satisfied that there was sufficient cause for not presenting it within that period. As decided in the case of Smt. Samanthapudi Lavanya [ 2021 (5) TMI 26 - ITAT VISAKHAPATNAM ] held that where assessee was under bona fide impression that its appeal had been filed by accountant, but came to know fact of not having filed appeal when there was pressure from department for payment of demand, delay of 492 days in filing appeal was to be condoned, in the interests of justice. Thus in the interest of justice, the delay in filing of the present appeal is being condoned. Assessment order passed by ACIT, Circle 6(1) Ahmedabad u/s 153A - as argued according to CBDT Instruction it is mandatory that search cases shall be centralised in central charges but AO passed assessment order, who is not in charge of Central Range in violation of aforesaid Instruction of CBDT - HELD THAT:- It is a well settled law that no person can call in question the jurisdiction of the assessing officer after the expiry of time limit laid down in subsection (3) of section 124 of the Act which ensures that the objection is raised before the assessment is completed. The brief facts of the instant case are that the assessment was completed 31-12-2016 u/s 153A of the Act and the appeal was disposed of by Ld. CIT(Appeals) vide order dated 16-08-2018. However, the assessee now before us vide application dated 17-01-2022 is seeking to challenge the jurisdiction of the assessing officer on the ground that in view of the CBDT Instruction, the concerned officer did not have requisite authority to pass the assessment order Assessee did not object to the jurisdiction of the assessing officer during the course of assessment proceedings and nor any challenge was posed before CIT(Appeals) during the course of appellate proceedings. Therefore, now, after a period of substantial lapse of time of almost 6 years from completion of assessment, the appeal of jurisdiction cannot be raised at appellate stage before us. Accordingly, the additional ground raised by the assessee is dismissed. Additional ground raised by the assessee is dismissed. Unexplained cash credit - Gifts receipts - as per DR amount which was gifted to the assessee from his mother came from a joint account, in which the mother is the primary account holder and the assessee is the joint holder - gift deed was discarded by the assessing officer on the ground that genuineness of the said could gift deed was in doubt - HELD THAT:- As what also needs to be seen in the instant facts is that the aforesaid gift deed is also duly supported by bank transfer from the bank account in which the mother of the assessee is the primary holder to the account of the assessee during the year under consideration. Further, the aforesaid gift has not been transferred by way of a single transfer on a single date, but comprises of multiple transfers made to the account of the assessee on various dates though under Gift Deed gives a consolidated figure of these multiple transfers. Therefore, in our considered view, it would not be correct to conclude that the gift deed was an afterthought since the aforesaid transfers were made on dates much prior to the date when the search was carried out at the premises of the assessee and notice under section 153A of the Act was issued to the assessee. We observe that the gifted deed was on a stamp paper and the same was also duly supported by way of bank transfers. Therefore, in our view the assessee has been able to reasonably explain the source of gift from his mother. Decided in favour of assessee.
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2023 (8) TMI 449
TP Adjustment - comparable selection - TPO justification taking export filter of 50% and thereby including only one comparable i.e. GTN India to determine the Arm s Length Price of the assessee and holding that in the instant facts, only the GTN represents the industry standards - HELD THAT:- As we observe that proper comparability analysis has not been done by the Ld. TPO taking into consideration the directions of ITAT in the aforesaid order. We observe that the ITAT has specifically observed that the TPO has sought to compare the valves which is a consumer product with the industrial product of the tested party, which would not give a true picture of the profit. Despite the aforesaid directions of ITAT in [ 2015 (7) TMI 448 - ITAT AHMEDABAD ] the directions of ITAT ostensibly have not been followed and the same comparable was again used for conducting the comparability analysis, which was directed to be excluded. Matter is being again restored to the file of the Ld. TPO for carrying out a fresh benchmarking analysis in light of the observations made by Hon ble ITAT [supra]. In the result, the matter is being restored to the file of Ld. TPO with the above directions.
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2023 (8) TMI 448
Determining tax liability liable for making TCS - assessee failed to make either TCS or to file Form no. 27C to concerned CIT within prescribed time limit - interest u/s. 206C(7) levied on tax liability determined u/s. 206C(6) - assessee is engaged in the business of sale of scrap - HELD THAT:- In the instant case, the assessee has submitted that the scrap was sold to manufacturers and the sale was not for trading purposes but was made to manufacturers , from whom Form 27C / Form 27BA was duly obtained, though, there was delay in obtaining the same. In the case of Chandmal Sancheti v ITO [ 2016 (8) TMI 952 - ITAT JAIPUR] ITAT has held that no time limit has been prescribed for furnishing Form No.27C by the buyer to the seller, hence, delay in filing declaration shall not be a ground to deny benefit of declaration to assessee. In the case of K.P.G. Enterprise v. ITO [ 2014 (8) TMI 716 - ITAT AHMEDABAD] ITAT held that Assessee company could not be treated as assessee in default for not collecting TCS from its buyers from whom assessee had received declaration as per section 206C(1A) - where buyers had paid tax on their income and such income had been assessed after taking into consideration purchases made from assessee, tax could not be again collected from assessee on non-collection or short-collection of TCS. Thus in the instant facts it is noted that the Department has not analysed / verified the requisite forms/evidence to support the contention of the assessee that the sale was made to manufacturing concerns and there was no requirement to collect tax at source in respect of such sales, which constituted almost 95% of such sales. Accordingly, in the interest of justice, the matter is being restored to the file of the assessing officer to verify the request documents / Forms to see if the assessee has obtained the request Forms 27C and 27BA etc. and to allow credit for the same in case the same were available with assessee before the assessment got concluded. Appeal of the assessee is allowed for statistical purposes.
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2023 (8) TMI 447
Reopening of assessment - tangible material on record that there is escapement of income from assessment - reopening after four years - HELD THAT:- From the reasons recorded by the A.O., it clearly reflects that the same are based on the books of accounts and balance sheet filed by the assessee. Further the claim of additional depreciation which was considered by the AO while passing original assessment order u/s. 143(3) - Thus the reasons recorded by the AO does not show that any new tangible material available on record and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, when the same is reopened after four years period. As examined the applicability of case of CIT Vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT ] wherein it was categorically held that the AO has no power to review his assessment order, but has only the power to reassess, provided there is tangible material on record that there is escapement of income from assessment. Thus no hesitation in holding that in the absence of tangible material, reopening of assessment after four years period amounts to change of opinion only. Therefore the reopening of assessment is not valid as per the provisions of section 147 - Decided in favour of assessee.
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2023 (8) TMI 446
Estimation of income - Unexplained purchases - assessee had purchased the goods in question at a discounted value from some supplier/suppliers operating in open/grey market - quantification of the profit by procuring the goods in question at a discounted value from the open/grey market - unaccounted income for carrying the business outside his books of accounts on an estimate basis - HELD THAT:- Once the books of account of the assessee had been rejected by the A.O u/s.145(3) then, he could not have thereafter relied upon the said rejected books of accounts for making additions by separately disallowing any part of the ledger head expenses, but at the same time, are unable to persuade ourselves to subscribe to the part-rejection/rejection of the books of account of the assessee by the lower authorities for the standalone reason that the assessee could not verify/substantiate to the hilt the purchases of Rs. 31 lacs (out of total purchases of Rs. 58.13 crore made during the year) i.e. 0.53% of the total purchases and thus, set-aside the part-rejection/rejection of the books of account u/s.145(3) of the assessee by the lower authorities. As observed by us hereinabove, the A.O had made certain independent additions/disallowances, viz. addition of unaccounted railway rack booking charges, disallowance of unverifiable labour expenses, disallowance of unverifiable hamali expenses and disallowance out of office expenses, car and vehicles which thereafter, were telescoped by the CIT(Appeals) by applying the NP rate (average) of 1.45% to his total turnover for the year under consideration. As we have set-aside the aforesaid methodology adopted by the CIT(A) for computing the assessee s income, therefore, as a consequence thereto the aforesaid issue is also restored to the file of the A.O for fresh adjudication. Appeal of the assessee is partly allowed for statistical purposes
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2023 (8) TMI 445
Income taxable in India - payment received by the assessee towards TSIS services - Royalty receipts - HELD THAT:- It is noticed that the assessee has entered into an agreement with the Indian companies for rendering TSIS services and the terms of the agreement as per the submission of the ld AR are verbatim similar to the agreement which were in force for A.Ys. 2012-13 to 2015-16. It is also noticed that the DRP while upholding the treatment of TSIS fees as royalty, while following its own order for A.Y. 2015-16 did not bring out any contrary finding with regarding the nature of services rendered by the assessee or the terms as per the terms of agreement dated 30/11/2017. Therefore, in our considered view, the decision of the co-ordinate bench in assessee s own case for A.Ys. 2012-13 to 2015-16 [ 2023 (1) TMI 1207 - ITAT MUMBAI] is applicable to the year under consideration also. Therefore, we direct the Assessing Officer to delete the addition made towards TSIS services by treating the same as royalty. Management Fees taxed as fees for technical services (FTS) - HELD THAT:- Management fees received by the assessee from Indian group companies should not be treated as FTS and accordingly, not taxable in India. This ground is allowed in favour of the assessee. Claim made first time before DRP - Guarantee Fees - assessee claimed that the guarantee fees should not be taxed in India - claim could be made only through filing the revised return of income and since the assessee did not file any revised return the claim made through revised statement of income cannot be accepted - HELD THAT:- As decided in Pruthvi Brokers Shareholders (P.) Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] had held that any valid claim of assessee could be made for the first time either by way of filing a revised computation or before the appellate authorities. In assessee's case the claim is made for the first time before the DRP that the guarantee fees earned by the assessee is not taxable as per the DTAA. Thus if the assessee is entitled for a deduction, as per law and facts, same should not be denied merely because the claim was not made in the return of income. Since the lower authorities have not examined the issue on merits, we remit the issue back to the AO for a fresh examination.
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2023 (8) TMI 444
Deduction u/s. 54B - Denial of deduction holding that the assessee being HUF is not entitled to claim - reference to the amendment came into effect from 01-04-2013 - HELD THAT:- We note that the benefit of deduction u/s. 54B of the Act is available to HUF prior to the amendment by Finance Act, 2012 w.e.f. 01-04-2013, the assessment being A.Y. 2006-07 under consideration before us, the amendment w.e.f. 01-04-2013 is not applicable. Therefore, we find no infirmity in the order of CIT(A) allowing deduction u/s. 54B of the Act in favour of the assessee - Decided against revenue. Reopening of assessment u/s 147 - CIT(A) held the AO rightly formed an opinion that there was no detailed examination of the issue u/s. 54B of the Act in the intimation proceedings - HELD THAT:- Assessee challenged the issuance of notice u/s. 147 of the Act before the Hon ble High Court of Bombay at Nagpur Bench [ 2014 (3) TMI 1212 - BOMBAY HIGH COURT] wherein, as emanating from the record that the Hon ble High Court of Bombay at Nagpur Bench was pleased to allow the AO to complete the reassessment proceedings. CIT(A) also examined the reasons recorded by the AO as well as objections raised by the assessee regarding the reasons recorded and held that the AO is right in reopening the assessment made u/s. 143(a)(1) of the Act as it demonstrate that there was no occasion to AO to examine the claim made by the assessee in the intimation proceedings. Therefore, we find no infirmity in the reasons recorded by the CIT(A) of the impugned order in holding the reassessment is valid under law. Thus, grounds raised by the assessee fails and are dismissed.
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2023 (8) TMI 443
Penalty u/s 271(1)(c) - substantive addition made of unexplained investment in purchase of land in Kotali - HELD THAT:- On due consideration of the facts and circumstances, and the submissions of both the parties, and the order of the ITAT [ 2021 (11) TMI 1163 - ITAT AHMEDABAD] [having deleted the additions on which penalty was levied u/s 271(1)(c) of the Act for both the assessment years, there remains no basis for levy of penalty. Decided in favour of assessee.
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2023 (8) TMI 442
Penalty u/s 271(1)(c) - Best Judgement Assessment - addition to income made u/s 144 r.w.s. 147 - as contended that there is no tax liability as the tax deducted is higher than the tax due - HELD THAT:- As the assessment was made ex-parte/best judgement assessment under the provision of section 144 of the Act as the assessee was not provided sufficient opportunity. Moreover, it is the case of the assessee that the default was not deliberate as the tax deducted at source is more than the tax liability. Therefore, direct the AO to delete the impugned penalty. Grounds raised by the assessee are thus, allowed.
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2023 (8) TMI 441
Levy of penalty u/s 271(1)(c) - disallowance on account of order u/s 92CA(3) by TPO for undercharging interest on foreign currency loan to AE by assessee company - HELD THAT:- Since the quantum addition/ disallowance has been deleted the penalty to this extent does not survive and, therefore, the findings of the CIT(A) cannot be faulted with. Disallowance being excess claim u/s. 35 (2AB) - We find that during the course of the assessment proceedings itself the assessee has intimated the claim of expenditure approved by DSIR - On identical set of facts this Tribunal in [ 2016 (3) TMI 921 - ITAT DELHI ] has deleted the levy of penalty levied on similar excess claim u/s. 35 (2AB) of the Act. Claim of the assessee at the time of filing of the return was a bonafide claim supported by the relevant provisions of the law. As soon as a lesser claim was approved by the DSIR the assessee intimated the AO and because the return could not be revised accepted the disallowance made by the AO by not contesting the same in the appeal. Ratio laid down by the Hon ble Supreme Court in the case of Reliance Petro Products [ 2010 (3) TMI 80 - SUPREME COURT ] squarely apply. Decided against revenue.
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2023 (8) TMI 440
TP Adjustment - Upward adjustment for financial guarantee given by assessee to AE - HELD THAT:- Bombay High Court in the case of Siro Clinpharm [ 2021 (10) TMI 754 - ITAT MUMBAI] held that corporate guarantee constitutes international transaction u/s. 92B of the Act and further the ITAT directed the Assessing Officer to adopt 0.5% as an arms length consideration for the corporate guarantee issued by the assessee in favour of its AE. We are of the considered view that extending of corporate guarantee to AE constitutes an international transaction and the Assessing Officer is directed to adopt 0.5% as an arms length consideration for the corporate guarantee issued by the assessee in favour of its AE. Upward adjustment for software services by P C division of assessee to AE - HELD THAT:- Considering assessee as submitted that the facts and issues for consideration for assessment year 2010-11 are completely different and unconnected it was submitted before us, that in the instant case, it may be noted that order of ld. CIT(A) for assessment year 2010-11 [ 2019 (9) TMI 1702 - ITAT AHMEDABAD] on which reliance has been placed by CIT(A) while confirming the adjustment has been reversed by ITAT subsequently. However, in the instant facts, the matter needs to be set aside to see whether the comparables which have been taken are correct or not. In the instant facts, the TPO would need to examine the comparables in light of earlier years orders. Upward adjustment for giving comparables carrying out by assessee to the customers of associated enterprise - HELD THAT:- ITAT in assessee s own case on identical set of facts for assessment years 2008-09 [ 2018 (3) TMI 1881 - ITAT AHMEDABAD] and 2009-10 and 2010-11 [ 2019 (9) TMI 1702 - ITAT AHMEDABAD] has decided the issue in favour of the assessee. Upward adjustment of HRM services - assessee provides it s own employee on secondment basis to its associated enterprises - HELD THAT:- As decided in own case 2009-10 and 2010-11 [ 2019 (9) TMI 1702 - ITAT AHMEDABAD] the appellant's contentions find favour. Therefore, MUK's operations can be considered to be correctly characterized as a distributor and a return based on sales which incentives MUK to generate more revenue appears to be appropriate. Allowable business expenses - Disallowance of recruitment expense being 20% of the recruitment and training expense treating the same incurred for the purpose of business) - HELD THAT:- As decided in own case 2006-07 [ 2012 (5) TMI 206 - ITAT AHMEDABAD] in a situation where the requisite detail in respect of training of employees and the genuineness of the expenditure was very much before the AO and in respect of these two reasons, no disallowance was suggested, then it was unjustifiable on the part of the AO to say that a 20% recruitment and training expenses would be disallowed on mere presumption that it was not wholly beneficial to the assessee. There is no evidence in the possession of the AO to hold that a particular expenditure on training was not business related. In fact, the argument of the assessee appears to be logical that considering the nature of the services provided a training of the technical staff is always a business necessity and because of the trained staff the assessee's revenue has substantially gone up. In the absence of any adverse material, we are not inclined to approve such an adhocism. This disallowance is hereby deleted. TDS u/s 195 - non-deduction of tax u/s. 40(a)(ia) - payment on certain professional and consultancy services to U.K. resident companies - HELD THAT:- As decided in own case 2006-07 [ 2012 (5) TMI 206 - ITAT AHMEDABAD] since the services in question were neither availed nor rendered and even not utilized in India, therefore no tax was required to be deducted at source. Appeal of revenue dismissed.
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2023 (8) TMI 439
Reopening of assessment u/s 147 - reopening beyond 4 years - failure on the part of the assessee to disclose fully and truly all material facts or not? - HELD THAT:- From the reasons recorded, there is no iota of thinking or words in the reasons recorded that there is any failure on the part of the assessee to disclose fully and truly all material facts relating to the income for the relevant assessment year. Admittedly the reopening is beyond 4 years because relevant assessment year involved is 2013-14 and notice u/s. 148 of the Act is issued on 29.03.2019, which means admittedly it is beyond 4 years. There is no failure on the part of the assessee to disclose fully and truly all material facts necessary for framing of assessment and assessment was completed originally u/s. 143(3) of the Act and admittedly the reopening is beyond 4 years because notice u/s. 148 of the Act was issued on 29.03.2019, no re-opening is possible. Thus we are of the view that reopening is beyond 4 years and as the original assessment was framed u/s. 143(3) of the Act, the Revenue could not establish any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, the reopening in present case is bad in law. Decided in favour of assessee.
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2023 (8) TMI 438
Reopening of assessment u/s 148 - AO did not provide the copies of the reasons to the assessee inspite of prayer of the assessee - main emphasize of assessee was that a scrutiny assessment was passed on assessee and notice u/s 148 has been issued after expiry of four years from the end of the relevant assessment year - HELD THAT:- In the present case, the earlier assessment has been framed u/s 143(3) - AO sought to reopen this assessment order after five years, we have extracted the reasons but nowhere in the reasons the AO has alleged, which material was not truly and fully declared by the assessee, and such non-disclosure has led to escapement of income. Assessee has demonstrated that two-fold of reasoning assigned by AO namely that assessee has claimed carry forward of losses, i.e. the first-fold of reasoning and the second fold of reasoning is that a provision for NPA has been made which is not allowable in case loss is concern, the first one is factually incorrect and in the second observation, AO has not visualize the provision u/s 36(viia) - He has not pinpointed, which provision has been made illegally. Assessee being a non-scheduled Bank is entitled to make provision. If there were some error that has not been demonstrated in the reason. Therefore, AO failed to pinpoint the failure at the end of the assessee to disclose all material facts fully and truly, which led the escapement of income from taxation. Apart from the above, it is further observed that under the original assessment, loss was determined at Rs. 1,73,54,450/- In the re-assessment order, this loss has been reduced to Rs. 1,05,47,793/-. The only fact is that loss has been reduced. The loss has not claimed as a carry forward. There is no impact on taxation. It is just an academic exercise undertaken by the ld. Assessing Officer. Had the AO verified subsequent return, then, he would have dropped the proceedings. On going through all these aspects, we are of the view that reopening is not sustainable. Decided in favour of assessee.
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2023 (8) TMI 437
Revision u/s 263 - assessee has deposited cash during demonetization period - HELD THAT:- It is an admitted fact that the assessee has made cash deposit during the demonetization period which was accepted by him from various hospitals in demonetized currency in violation of the extant provisions regarding dealing in demonetized currency. AO in the instant case has failed to investigate this aspect and passed the order u/s 143(3) accepting the income returned. In our opinion, the order passed by the AO in the instant case without enquiring the huge cash deposit in demonetized currency in violation of the extant provisions regarding dealing in demonetized currency has rendered the order erroneous and prejudicial to the interest of the Revenue. Therefore, the learned PCIT, in our opinion, is fully justified in invoking the provisions of section 263 - Decided against assessee.
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2023 (8) TMI 436
Assessment u/s 153A - legality of search conducted u/s 132 and consequent assessment proceedings in light of jurisdiction of the assessing officer - Legality of Addl. CIT's approval u/s. 153D - HELD THAT:- The provisions of section 153D of the Act, deals with prior approval necessary for assessment in cases of search u/s 132 or requisition u/s 132A of the Act. As per said section, no order of assessment or reassessment shall be passed by the Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in section 153A(1)(b) of the Act without prior approval of Addl. CIT/Joint. CIT u/s 153D of the Act. In the present case, there is no dispute with regard to the fact that the assessment order has been passed with prior approval from the Range head in terms of section 153D of the Act From the arguments of the assessee itself, it appears that there was lot of deliberations on draft assessment order passed by the AO, in light of various incriminating material found during the course of search and appraisal report submitted by the DDIT-(Inv.) on various issues including additions to be made towards undisclosed income on account of difference in net profit as per seized tally and net profit as per ITR filed for relevant assessment year and also additions towards undisclosed income arising out of bogus bought note purchases and sales and undisclosed income arising from bogus purchases through dummy entities. In the note submitted to the AO, the Addl. CIT categorically observed that on verification of seized material with ITR filed by the assessee there is a difference in income reported for various assessment years. Likewise, the Addl. CIT had also discussed the issue and gave directions to the Assessing Officer to resubmit the draft assessment order. Therefore, it cannot be said that approval granted u/s. 153D of the Act, is mechanical and without application of mind Internal correspondence between the AO and the investigation officer is confidential and extended part of appraisal report, which cannot be shared with the assessee. CIT(A), after considering relevant facts and also taken note of provisions of section 153D came to the conclusions that in absence of availability of any documentary evidence, in respect of claim of the appellant with regard to deviation note, the arguments of the assessee can be said to be unsubstantiated. In our considered view, the findings of the facts recorded by the Ld. CIT(A) on appraisal of relevant facts is in accordance with law, because from the materials available on record, and also on the basis of arguments of the assessee, it is abundantly clear that there is enough proof to conclude that the Addl. CIT has given approval u/s. 153D of the Act after great deliberations with draft assessment order passed by the AO in light of seized material and appraisal report submitted by DDIT(Inv) and thus, in our considered view the arguments of the assessee on this issue for all assessment years is fails. Thus, we reject grounds of appeal of the assessee on this issue for all the assessment years. Issuance of notice u/s 153C in violation of 4th proviso to section 153A(1) - The mandatory conditions that the seized material and other documents and evidences in the possession of the assessing officer should reveal that income, represented by an asset, has escaped the assessment for the relevant assessment year or years and such income escaping assessment should be in excess of Rs 50 lakhs have not been satisfied in the appellant's case. The discussion made in the preceding paragraphs has brought out the fact that no undisclosed asset has been found in the case of the appellant which represents the income escaping assessment for the relevant assessment years. It is interesting to note that no undisclosed asset has been brought to tax by the assessing officer even in the assessment order passed u/s 153C r.w.s 143(3) of the Act, for AY 2010-11. The CIT(A) after considering relevant facts rightly held that the reasons recorded by the AO in the satisfaction note do not bring out satisfaction of the mandatory conditions prescribed in the 4th proviso to sec 153A(1) which necessitate issue of notice for assessment years beyond six assessment years and thus, annulled the assessment orders passed by the Assessing Officer for AY 2010-11. Therefore, we are of the considered view that, there is no error in the reasons given by the ld. CIT(A) to annulled the assessment for Asst. years 2010-11 and thus, we reject grounds of appeal filed by the revenue and uphold the order of the CIT(A) for Asst. year 2010-11. Validity of notice u/s. 153C - In this case, if you go through satisfaction note recorded by the Assessing Officer in light of incriminating material referred to in the said satisfaction note, it is abundantly clear that the Assessing Officer does not verified the incriminating material to arrive at a satisfaction that there is undisclosed income for these assessment years. CIT(A) after considering relevant facts in their order clearly held that there is no incriminating material in the possession of the AO to arrive at a satisfaction that there is undisclosed income for these assessment years to issue notice u/s. 153C and thus, rightly held that notice u/s. 153C of the Act is invalid and consequent Assessment order passed u/s. 143(3) r.w.s. 153C of the Act are void ab initio and liable to be quashed. Thus, the order of the CIT(A) should be upheld. Validity of notice u/s. 153C and consequent assessment order on the ground that the seized electronic device has been imaged into the hard disk and from the above it is evident that working copies have been prepared from the imaged disk - The handing over of the seized electronic device ANN/VP/ED/S-2 by the assessing officer of the searched person to the assessing officer of the appellant has to be seen in the said context and such handing over has to be construed as handing over of the working copy of the imaged data of the original seized electronic device. We are not inclined to agree with the contention of the appellant that the assessing officer could not have examined and verified the seized electronic device ANN/VP/ED/S-2 as it was seized on 07.07.2018 and was opened subsequently only on 09.09.2020. It has to be construed that the assessing officer has examined and verified the contents of the said seized device by going through the contents of the working copy of the same. We, therefore, reject the contentions of the assessee. Under reporting of income - Assessing Officer has adopted incorrect figure to arrive at a conclusion that there is a under reporting of income for assessment year 2015-16 which necessitate issue of notice u/s. 153C of the Act. Since, there is no difference between net profit as per seized tally from electronic device ANN/VP/ED/S2 and income as per ITR, in our considered view the satisfaction recorded by the Assessing Officer for issue of notice u/s. 153C of the Act is not based on any evidences and thus, on the very count itself, it could be seen that notice u/s. 153C of the Act for assessment year 2015-16 is without jurisdiction and thus, we are of the considered view that notice u/s. 153C and consequent assessment order passed by the Assessing Officer is invalid in law and liable to be quashed. Hence, we quash notice u/s. 153C of the Act and consequent assessment order for assessment year 2015-16. For assessment year 2015-16 - As the satisfaction note recorded by the Assessing Officer does not have any reference to incriminating materials found during search and thus, in our considered view there is no valid satisfaction as required u/s 153C to issue notice. Thus, the findings of the ld. CIT(A) in as much as annulling the assessments for AY 2016-17 to 2018-19 is on sound footing and does not call for any interference from us. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss grounds taken by the revenue for Asst. years 2016-17 to 2018-19. Similarly, we quash notice u/s. 153C of the Act for assessment year 2015-16 and annulled consequent assessment order passed by the Assessing Officer for assessment year 2015-16. Accordingly, we allow the grounds of the assessee. Additions towards under reporting of income being difference between net profit as per seized tally data and ITR filed - There is no difference between net profit as per seized electronic device and net profit in ITR filed for the assessment year 2010-11. The CIT(A) after considering relevant facts has rightly deleted additions made by the Assessing Officer and thus, we are inclined to uphold the findings of the ld. CIT(A) and direct the Assessing Officer to delete additions towards under reporting of income. Difference between income as per ITR and income as per seized electronic device is due to the depreciation provided as per section 32 of the Act, for assessment year 2015-16 to 2017-18 and for assessment year 2018-19 it was due to disallowance of interest on TDS, EPF and GST - We find that the difference noticed by the Assessing Officer is on account of providing depreciation and disallowance of certain inadmissible expenses and thus, we are of the considered view that the assessee has explained difference noticed by the Assessing Officer with necessary evidences. CIT(A) after considering relevant facts rightly deleted additions made by AO. Therefore, we are of the considered view that there is no error in the reasons given by the CIT(A) to delete additions towards difference between net profit as per tally and income as per ITR for assessment year 2010-11, 2015-16 to 2018- 19. Thus, we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the revenue. Addition towards undisclosed income arising from bogus bought note purchases and sales - As on analysis of the purchase procedures of the appellant, the special auditor stated that documents such as weighment slip, purchase order, test report etc., that are present for the purchases from a dealer are not of any use in the case of purchases made from farmers/agents through bought notes in view of the different characteristics associated with such purchases. Therefore, it is very clear that unaccounted income computed by the AO on the basis of non existent bought notes is nothing but additions made on the basis of statement of employees alone. As we have already noted in earlier paragraphs of this order, the statements given by various employees are not based on any evidences found during the course of search but purely on mistaken of facts. The CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer towards unaccounted income arising from bogus bought note purchases and sales for assessment year 2015-16 2016-17. Undisclosed income arrived by AO on account of purchase inflation through dummy entities - HELD THAT:- We are of the considered view that the finding of the assessing officer that the appellant indulged in bogus purchases through dummy entities and corresponding bogus sales to suppress its income is unsustainable on facts. The CIT(A) after considering relevant facts has rightly deleted additions made by the Assessing Officer and thus, we are inclined to uphold the findings of the ld. CIT(A) and direct the assessing officer to delete the additions. Addition u/s 69C towards unexplained expenditure quantified by the special auditor in their second audit report submitted u/s 142(2A) - Whether apportionment based on estimation for arriving at unexplained expenditure u/s 69C in the hands of the appellant by the CIT(A) is not permissible in a search assessment u/s 153C without bringing proper evidence on record as to the identity of the persons who incurred the expenditure ? - HELD THAT:- The entries in Erandamthall are not identified to any person or entity. There is no finding as to which financial year said expenditure relates to. In absence of any finding as to nature of expenditure and person to whom such expenditure belongs to, no addition can be made u/s 69C of the Act on suspicious and surmise manner. Further, it is a matter on record that the Assessing Officer has totally ignored second special audit report submitted by the auditor in terms of section 142(2A) of the Act, in respect of Erandam Thall and its contents. If the Assessing Officer had taken into cognizance of second audit report and verified the observations of the auditor with reference to Erandam Thall, in our considered view probably the Assessing Officer would have verified unidentified entries as quantified by the special auditor to quantify unexplained expenditure. Since, the Assessing Officer ignored the special audit report in total and made additions on the basis of statements of employees towards unexplained expenditure u/s. 69C of the Act, in our considered view, the Assessing Officer has miserably failed and missed an opportunity to determine the true and correct undisclosed income of the assessee in respect of unexplained expenditure. From the findings of the special auditor itself, it is very clear that the source for Erandamthall is from withdrawal from bank, receipt of sale proceeds which has been already recorded in the regular books of accounts maintained by appellant and other three entities. Therefore, on this count also there cannot be any addition u/s. 69C - Since, the unidentified entries are not conclusively established by any evidence or material on record to prove that said entries represents unexplained expenditure of the assessee, and further to any particular financial year, in our considered view enhancement of assessment and consequent additions u/s. 69C of the Act made by the CIT(A) cannot be sustained. In our considered view, the CIT(A) is completely erred in making addition towards unexplained expenditure on the basis of Erandamthall. Therefore, we are of the considered view that the additions made u/s 69C and further apportioned to appellant for the assessment years 2015-16 to 2018-19 cannot be sustained. Validity of Special audit reports u/s 142(2A) of the Act and its rejection by the Assessing Officer - If you see the intention and purpose behind the introduction of special audit in the statue, the purpose is to assist the Assessing Officer to determine correct taxable income of an assessee from the books of accounts and other documents found during the course of search. Therefore, in our considered view, the Assessing Officer having appointed special auditor, cannot ignore the audit report unless he makes out a case with reasons that the special audit report is incomplete or the auditor has not carried out the audit as per the standard auditing procedures. In this case, if we go through the reasons given by the Assessing Officer to reject special audit report for all assessment years, we find that the Assessing Officer has rejected said audit report on flimsy grounds without any finding as to how observation of the special auditor is incorrect. Further, it is nowhere provided that special audit report is binding or the assessment shall be made in conformity with special audit report. However, if there is no adverse material or adverse circumstances or the findings of the Assessing Officer during assessment proceedings is contrary to the special audit report, then such report has to be considered and relied upon. In our considered view, the Assessing Officer is completely erred in rejecting/discarding the special audit report without any valid reason. The CIT(A) after considering relevant facts, has rightly accepted special audit reports submitted u/s 142(2A) of the Act, and thus, we reject grounds taken by the revenue.
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2023 (8) TMI 435
Deduction/ exemption u/s 54 of the capital gain earned denied - year of assessment - HELD THAT:- Since the capital gain has been held to be not taxable in the impugned year, the eligibility to claim of exemption of the same, we hold, is to be examined in the year to which the capital gain pertains. Therefore, in the eventuality that the departments subjects the capital gains to tax in the preceding assessment year i.e. Asst. Year 2012-13, the assessee s claim of exemption under section 54 is to be examined afresh in the said year.
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2023 (8) TMI 434
Bogus Short term capital loss - accommodation entry transactions - HELD THAT:- We note that one prudent men will indulge in the purchase and sale of securities where the ulterior motive is not to earn the capital gain. Thus, the blame of the lower authorities considering the assessee as Coterie of the person calming the exempt capital gain is not correct based on the facts. It is also noted from the available record that the assessee had purchased shares through SEBI registered broker namely Hem Securities Ltd and the same were not physical form as it would be in the case of the penny stock companies and also there is not split corporate action. Thus, we note that the assessee had purchased the shares through contract note and sold all the shares through contract note. It is also noteworthy to mention that shares purchased by the assessee were credited in his D Mat account and they were transferred accordingly. As also noted from the available records that all the transactions for purchase and sale of shares through the broker Hem Securities were settled only via banking channel. There appears no ambiguity in the sale and purchase of shares through the SEBI brokers Hem Securities and all the transactions took place through banking channel and on the transactions of purchase and sale of Shares, STT had been paid having time and date stamp. Hence, taking into consideration of the above facts and circumstances of the case, we do not concur with the findings of the ld. CIT(A) on the issue in question. Ground No. 1 of the assessee is allowed. Also as purchase and sale of shares as bogus transactions not confirmed there is no question arises as to making addition by the AO on account of commission paid by the assessee. Hence, the Ground No. 2 of the assessee is allowed.
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2023 (8) TMI 433
Disallowance u/s 14A r.w.r. 8D - Disallowance of expenditure incurred on earning exempt income - AO has recorded a finding that assessee has no exempt income during this year, but he disallowed the expenditure on the ground that on the investment in business, in future the assessee will earn tax-free income, thus expenditure attributable to tax-free anticipated income deserves to be disallowed u/s 14A r.w.r. 8D - HELD THAT:- We are of the view that this view of the AO is contrary to the judgment of M/s. Era Infrastructure Limited [ 2022 (7) TMI 1093 - DELHI HIGH COURT] . The Hon ble Delhi High Court has considered the latest amendment brought in section 14A by way of Finance Act, 2022 and thereafter held that if an assessee has no tax-free income, then no expenditure would be disallowed to it. We allow this ground of appeal for the assessment year and delete the disallowance. Appeal of the assessee is allowed.
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2023 (8) TMI 432
Income taxable in India - Treating fabrication charges received as 'fees for technical services - India and Singapore DTAA - HELD THAT:- We find the facts in the present case, are similar and identical as discussed in in OWENS-CORNING (SINGAPORE) PTE. LTD. [ 2022 (12) TMI 1397 - ITAT MUMBAI ] and the fabrication charges received by the assessee from its AE does not fall under the purview of fees for technical services and accordingly follow the judicial precedence and direct the Assessing officer to delete the addition and we allow the grounds of appeal in favour of the assessee.
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2023 (8) TMI 431
Assessment u/s 153A - Addition towards the cost of construction of the building - Reference made to ld. DVO u/s 142A - HELD THAT:- Admittedly, no incriminating material has been found during the course of search qua this addition towards cost of construction. This fact is evident from the perusal of the orders of the lower authorities. Sole basis of the addition is only the valuation report furnished by the DVO which has been obtained by the ld. AO during the course of search assessment proceedings . Then, the said report cannot constitute incriminating material found during the course of search. Hence, we have no hesitation to hold that no addition could be made by placing reliance on the said valuation report while framing the assessment u/s 153A of the Act in the hands of the assessee. This issue is now well settled by the recent decision of Sargam Cinema vs. [ 2009 (10) TMI 569 - SC ORDER] and in the case of CIT vs. Nirmal Kumar Aggarwal [ 2018 (10) TMI 2002 - SC ORDER] as referred to supra in the contentions of the ld. AR. We find that the provisions of section 142A(6) of the Act categorically state that the valuation report has to be furnished by the ld. DVO within six months from the end of the month in which reference is made by the ld. AO. Admittedly, the valuation report is dated 28.10.2016 which is beyond the prescribed time of 30.09.2016. Hence, it is clearly evident that the said valuation report of ld. DVO is barred by limitation and, hence, cannot be relied upon by any party in the eyes of law. Consequentially no addition per se can be made by the Revenue by placing reliance on an invalid valuation report.- Decided in favour of assessee. Addition u/s 68 - unsecured loan - HELD THAT:- The transactions have been routed through regular banking channels details of which were already submitted hereinabove and, hence, the genuineness of the transaction is also proved. Merely because the bank statement of the lender company (which is the personal property of the lender company) is not furnished by the assessee, that would not automatically disprove the creditworthiness of the lender. Nothing prevented the ld. AO by either issuing notice u/s 133(6) of the Act to the lender company to ascertain the said details. Admittedly, no examination whatsoever was carried out by the ld. AO in the instant case after the receipt of documents from the assessee. The assessee cannot be fastened with a tax liability for non-furnishing of a particular document which is not even expected to be in possession of the assessee. Hence, we hold that the assessee in the instant case had duly proved all the three ingredients of section 68 of the Act viz., identify of the creditor, creditworthiness of the creditor and genuineness of the transaction. Hence, there cannot be any addition u/s 68 - Decided in favour of assessee.
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2023 (8) TMI 430
Penalty u/s 271(1)(b) - notice issued but not served - providing opportunity to the assessee - assessee is a lady aged 63 years, housewife and has no source of earning - HELD THAT:- There is no evidence on record put on by the AO as to what efforts have been carried out by the AO to serve the said notices and there is no specific finding in the assessment order whether the assessee refused to accept the notice or was not found at the place or was not residing at that place. Simply penalty has been imposed by considering that the notices were issued. In our view, service of notice is only a formality and, therefore, no true or genuine efforts were made by the AO to serve the notices. Since there is no proof on the court file with regard to service of notice, therefore, in our view, no penalty is attracted. Decided in favour of assessee.
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2023 (8) TMI 429
Revision u/s 263 by CIT - original assessment came to be passed u/s. 143(3) in the limited scrutiny - HELD THAT:- The issues raised by the Pr. CIT in his revisionary order u/s. 263 admittedly have no relationship to the issues on which limited scrutiny had been initiated. As in the case of Shark Mines and Minerals Pvt Ltd.[ 2023 (3) TMI 324 - ORISSA HIGH COURT ] has categorically upheld the findings that unconnected issues to the assessment order which is the subject matter of limited scrutiny could not be used to treat the limited scrutiny assessment order as erroneous and prejudicial to the interest of the revenue. Thus as the issues raised by the Pr. CIT in the revision order is unconnected to the issues in the limited scrutiny assessment the revisionary order passed by the Pr. CIT is found to be unsustainable and consequently, same stands quashed. Appeal of assessee allowed.
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2023 (8) TMI 428
Addition u/s 68 - unsecured loans received from various parties - HELD THAT:- The provision of section 68 of the Act fastens the liability on the assessee to make proper and reasonable explanation to the AO with regard to sum credited in the books of account. The assessee is liable to provide proof of the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the credit entries u/s 68 in the case of CIT Vs. Precision finance (P) Ltd [ 1993 (6) TMI 17 - CALCUTTA HIGH COURT] AO on the basis of material supplied by the assessee made independent inquiry with banks and brought evidences that the repayment shown to the loan party actually has gone to someone else and accordingly raised the question with regard to the genuineness of loan. But the assessee failed to rebut the finding of the AO before the lower authorities as well as before us. Therefore, in the absence of any justification from the assessee about the repayment of the loan to the 3rd party including the bearer cheque, we do not find any infirmity in the order of the learned CIT(A) to the extent of his finding with regard to credit of loan from the party namely Ashmi Marketing Pvt. Ltd. The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques. Thus we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him with regard to loan credit from the party namely Shri Harish Ambika Prasad. Also the amount was received through banking channel and the same was repaid through banking channel within the period of a month or so. There is no finding of the lower authorities that the amount was not received from the impugned party or repayment of the amount gone to any third party. Therefore, applying the ratio laid down in case of CIT Vs. Rohini Builders [ 2001 (3) TMI 9 - GUJARAT HIGH COURT] the action of the authorities below are not justified. Hence, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made on account of loan credit from the party namely Smt. Kaushalya Ben. Also we note that the amount was not credited during the year under consideration, as such the same was carried forward from earlier years. Therefore, the provision of section 68 of the Act cannot be made applicable on the same in the year under consideration. We hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him on account of outstanding loan liabilities from the parties namely M/s Pooja Garments P Ltd and M/s Parkash Fortan Softech Ltd respectively. Finding of the CIT(A) that liability of the assessee to pay such loan came to be ceased and the same is liable to be taxed u/s 41(1) - As there should be two conditions required to be satisfied before any amount could be brought to tax u/s 41(1) - These conditions are that that amount in question has been allowed as deduction in any past assessment year and there has been a receipt of any amount or benefit by way of a cessation or remission with regard to the above allowance in any subsequent year. The scheme of provision of section 41(1) are that if an expenditure or loss or trading liability is allowed for any assessment year and subsequently if the assessee recoups the loss or expenditure or gets some benefit by way of remission or cessation of the trading liability, then such amount or benefit is to be taxed in the year in which such liability came to be ceased. Thus there is no material and finding on record by the revenue authorities that the assessee has been allowed any deduction in any past assessment year on account of credit of such loans liabilities. Therefore, in our considered opinion, the provision of section 41(1) cannot be invoked in the given facts and circumstances. We draw support and guidance from the judgment of Mahindra and Mahindra Ltd [ 2003 (1) TMI 71 - BOMBAY HIGH COURT]
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2023 (8) TMI 427
Disallowance of expenses pertaining to earning of exempt income as per section 14A - scope of sufficiency of own funds - HELD THAT:- CIT(A) correctly deleted the disallowance of interest u/s 14A noting the fact that own interest free funds of the assessee by way of share capital and Reserves which was far in excess of investments made and in earlier years identical disallowance was deleted finding sufficiency of own funds for making investment. Disallowance of interest expenses not incurred for business purpose as per section 36(1)(iii) - Also the disallowance of interest u/s 36(1)(iii) on account of capital advances was deleted by the Ld.CIT(A) following the same reasoning of availability of sufficient own funds for making the advances. This finding of fact by the Ld.CIT(A) of availability of sufficient own funds for making investments/advances has not been controverted by the Revenue before us. Also, it is settled law that where sufficient own funds are available, presumption is that own funds have been used for the purpose of making the advances/investments, calling for no disallowance of interest whether u/s 14A or under section 36(1)(iii) of the Act. See Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT ] Assessee appeal allowed.
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2023 (8) TMI 426
Addition on interest expenditure - interest paid @ 9% is not allowable in view of the provisions contained in the Explanation (1) to Sec. 37(1) of the Act - scope of principle of consistency - CIT(A) deleted the addition as interest paid pursuant to Court decree was not towards penalty for infraction of any law, but was a purely commercial arrangement under a civil suit, which was filed in order to protect the business interests of the assessee - Whether the same was penal in nature and hence not allowable u/s 37? - HELD THAT:- The assessee had entered into compromise agreement with Nakoda developers towards re-purchase of land sold to the said party and this compromise agreement was done purely to protect the business interests of the assessee. The flow of transactions was on account of the business exigencies of the assessee company and the aforesaid arrangements and the consequential compromise agreement were done pursuant to the business exigencies of the assessee s business. We are of the considered view that CIT(Appeals) has correctly observed that the payment of interest was not made towards any infraction of law and therefore, the same is allowable u/s 37 of the Act. Though the principal of Res Judicata is not applicable in income tax proceedings, but, looking into the instant facts, when on identical facts similar disallowance has not been made in any of the earlier or later years by the Department, following the principle of consistency as laid down in the case of Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT ] the Department should not disallow interest payment for this year as well. We are in agreement with the contentions put forth by assessee that when on identical facts, the Department has not made any disallowance in respect of interest payments, which the assessee has been consistently paying over a period of 10 years i.e. both in the past years as well as for the future assessment years, then the Department is precluded from making disallowance on the same set of facts in the impugned year under consideration. Appeal of the Department is dismissed.
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2023 (8) TMI 419
Addition of deposit into bank during demonetization period u/s 69A - as per assessee transaction has recorded in books of accounts with proper source of deposit and the amount has been deposited out of cash withdrawn from bank and available as cash in hand - HELD THAT:- The cash in hand is available with the company after wages and salary for the month of October and therefore we note that addition made by AO is not correct. We note that assessee s books of account were not rejected by the AO and hence books result are genuine, therefore once the AO has accepted the books of accounts as genuine, the cash balance shown in the cash book should not be treated wrong (not genuine), as the cash book is a part of audited books of accounts. We note that amount was kept by assessee-company for meeting the requirement of expenses and contingency as per policy of company as depict from above and allegation of AO for keeping cash over a long period is not correct as mention in the Assessment order. AO had not able to brought any evidences on record which prove that cash in hand was not available with the company on the date of deposit of said amount into bank and moreover cash book having been accepted as genuine by assessing officer, it is proved that cash was available with the assessee-company on the fact of the case and hence the addition cannot be made arbitrary. See ATUL GUPTA V/S ITO [ 2004 (6) TMI 641 - ITAT DELHI ] wherein held that where assessee had explained source of availability of cash with him to deposited into bank accounts, there was no reason to doubt correctness of the claim and no addition on that account could be made to assessee`s income. Thus we note that cash in hand recorded in books of accounts and on the basis of which assessee has been filing the Income tax return, hence in such cases addition should not be made. - Decided in favour of assessee.
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2023 (8) TMI 418
Addition u/s 69 - bogus LTCG - Penny Stock purchases - long term capital gain exemption u/s. 10(38) on the scrip denied - HELD THAT:- We observe that this scrip and the manner it has behaved in the market clearly indicate that this is peculiar case of penny stock and there is no doubt that in the present case assessee has bought the shares and sold the shares through the operators who are under the scanners of the department as entry and exit operators. Even though there is no direct link was established by the tax authorities, however, the action of the assessee is clearly indicate that he has purchased those shares off-market and offloaded the same in the BSE. This transaction has contained all the ingredients of penny stock and based on the nature of the transactions, AO has treated the same as penny stock and made the addition u/s. 69 - The only issue raised by the assessee before appellate authority is that no cross examination opportunity was granted to the assessee. Since the Assessing Officer has relied heavily on the statement recorded from the exit operators. Decided in favour of assessee. Thus overall facts on record and the nature of transaction clearly indicate that this transaction basically falls under the category of penny stock and assessee has not proved basic information why he has invested in the company which does not have any net-worth and no financial activities. Without actually satisfying the onus for such investment, merely relying on non-availing of the opportunity for cross examination which is subsequent development, the assessee cannot claim benefit. Decided against assessee. Deemed Dividend addition u/s 2(22)(e) - Inter-corporate deposit - HELD THAT:- It is clear the MMPL has given Inter-corporate deposit to MIDL in which assessee is a common share holder along with his wife and from the record it is very clear that the ICD was given to another sister concern and the tax authorities has not brought on record how this transaction will benefit the assessee. As decided in Jateen Madanlal Gupta [ 2021 (2) TMI 177 - ITAT AHMEDABAD] loans and advances were made as inter corporate deposits in ordinary course of its business which are not subject to the provisions of deemed dividend as provided u/s 2 (22) of the Act. Decided in favour of assessee.
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Customs
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2023 (8) TMI 425
Violation of principles of natural justice - Scope of the order of the Tribunal - appeal filed by the Appellant dismissed without hearing the case on merits on the ground that the Commissioner (Appeals) had remanded back to the original authority for re-adjudication, when in fact the remand was only for a limited purpose of re-quantification of customs duty - refusing to correct the error apparent on record in its final order on the ground that the order was dictated in the presence of the counsel. HELD THAT:- The Appellant is correct in contending that the Commissioner (Appeal) had given a finding on merits against the Appellant by observing that royalty under the Technical Assistance Agreement is required to be added under Rule 10(c) of the Customs Valuation Rules, 2007 rejecting the contention of the Appellant that same cannot be added under the Customs Valuation Rules, 2007. The Commissioner (Appeal) after having given a finding on merits against the Appellant remanded the matter to the Original Authority for ascertaining the quantum of the amount to be added for arriving at the transaction value. The Appellant in its appeal before the Tribunal has challenged the said finding of the Commissioner (Appeal) on merits that no addition could be made on payments made under the Technical Assistance Agreement for under the Customs Valuation Rules, 2007. If the Appellant succeeds on the merits, then the question of quantification would not arise. The Tribunal has not considered paras 5 and 6 of the Commissioner Appeal s order in proper perspective, and has merely got carried away by the remand, without realising that there was a finding on merits against the Appellant and which was challenged before the Tribunal - The Tribunal ought to have adjudicated the appeal of the Appellant on merits and was not justified in observing that no adjudication on merit is warranted because of the matter having remanded to the original authority. The order of Tribunal set aside - appeal restored back to the fle of the Tribunal with a direction to decide the said appeal on merits - The question of law is answered in favour of the Appellant and against the revenue.
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2023 (8) TMI 424
Seeking grant of Anticipatory Bail - evasion of Customs Duty - reasons to believe - non-appearance, even once, inspite summons were issued many time - HELD THAT:- Despite issuance of at least five previous summons, the applicant did not attend even on one occasion. That apart, despite having assured the DRI that he would appear on 12.07.2023 without fail, the applicant did not do so. Having regard to the fact that the applicant had never appeared before the SIO, even once, to give his voluntary statement, as contemplated under Section 108 of the Act, it is not within the authority of the applicant to contend that there is any real apprehension that the applicant would be arrested. The non appearance of the applicant even once before the DRI, disentitles the applicant from urging any such apprehension, which apparently, is without any basis. Moreover, this Court has also considered the contents of the summons just to satisfy itself, however, the word investigation is pre qualified with the words inquiry which should be sufficient to come to a conclusion that as on those dates, it was a mere summon issued by the DRI and nothing more. Thus, this submission of the learned senior counsel is untenable in law. Apprehension, arising from the contents of the reply filed by the DRI and supported by an officer of the rank of Deputy Director - HELD THAT:- The contents of the reply, at best, could be what one can plainly construe as what the inquiry uptill that date have revealed. The applicant not having participated in the inquiry as contemplated under Section 108 of the Act cannot be heard to say that on the one hand he will not appear, and on the other use the same to his advantage to say that the inquiry uptil that date prejudices his stand and therefore, is a clear pointer to the apprehension of arrest. The apprehension or reasons to believe are believed by the fact that the DRI, as of now, has neither any proposal nor has applied for sanction for the arrest of the applicant. That apart, this Court is also of the considered opinion that unless the applicant appears before the DRI and offers himself for tendering voluntary statement or otherwise, there cannot be any question of any real time apprehension of being arrested. This Court is of the considered opinion that there is no merit in the application seeking anticipatory bail - the bail application stands dismissed.
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2023 (8) TMI 423
Maintainability of appeal - failure to make pre-deposit of duty amount in terms of section 129E of the Customs Act, 1962 - liability to pay the duty amount and penalty, fastened by the adjudicating authority 'jointly and severally' on eight noticees can be divided into individual liability for the purpose of making the pre-deposit or not - HELD THAT:- It is found from the impugned order that the learned Commissioner has fixed the liability towards customs duty and the penalty under Section 114A of the Customs Act jointly and severally, which in simple and plain words imply that the liability to pay the duty and penalty is imposed on all the noticees jointly and in the event anyone of the noticees chooses to avail the remedy of appeal he has to comply with the condition imposed under Section 129E of the Customs Act. The duty to be paid cannot be bifurcated or apportioned on individual basis, for the simple reason that the learned Commissioner was conscious of the factual position and has consciously levied the liability as jointly and severally. From the impugned conclusion, it can be seen that the Commissioner while imposing penalty under section 114AA of the Customs Act has imposed the same individually on each of the parties in the tabulated form. In imposing the liability jointly and severally the intention is manifest that all the parties are equally responsible for paying the full duty and penalty. In the event anyone of them fails to pay off, the others become responsible for the share of that person. The ultimate intention in holding the parties jointly and severally liable is to protect the interest of the Revenue, particularly in view of the peculiar facts. If the appellant wants to avail the remedy of filing the statutory appeal, it is mandatory to comply with the conditions specified under Section 129E of the Customs Act, i.e. to make pre-deposit of 7.5% of the duty and penalty in dispute. It is a settled principle of law as held in catena of decisions, a right of appeal is a statutory right and if the party wants to avail the remedy by way of appeal under the statute, it is incumbent upon him to comply with the conditions specified therein. The appellant cannot take shelter that the pre-deposit amount should be calculated on the basis of his individual liability to pay the duty and penalty under the impugned order. The concept of joint and several liability extends to the payment of entire duty and penalty amount on all the parties. The appellant is directed to make the pre-deposit in terms of Section 129E of the Customs Act, within six weeks from the date of this order - Decided against appellant.
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2023 (8) TMI 417
Classification of goods - Eye One Basic Pro EOBAS (spectrophotometer) Equipment for use in ceramic industry - Twin vision scanner spectral dedicated for color management for digital printing support - Analyzer mastersizer (for use in ceramic industry). Spectrophotometer - HELD THAT:- From the function of the Spectrophotometer described in the Chartered Engineer certificate, it is seen that the same is used to exactly measure property of colors. It is common knowledge that the radiation imitated by the Colors is in the optical range and therefore the objection raised by the revenue that Commissioner (Appeals) should have first verified if the instrument analyses optical radiation is totally misplaced. The appeal filed by the revenue on this ground is dismissed. Twin vision scanner - appellant had sought to classify this item under Heading 84716050 but revenue has sought classification under Heading 84439990 - HELD THAT:- Chartered Engineer has clearly stated these goods measure the intensity of the color distribution at different wave lengthy for every measured point. It is not in dispute that this data is obtained in digital form. As the equipment converts color data into digital data. The very function of converting color data to digital data in itself is a data processing function. In this background, there are no merit in the appeal filed by the revenue on the ground that no processing is done by the machine. The appeal filed by revenue on this count is rejected. Analyser Mastersizer - HELD THAT:- The Commissioner (Appeals) has held that this machine essentially measures the size of the particles but redundantly gives analysis report of the size of the particle along with the percentage data . He argued that there is no analysis happening and therefore he has held that the goods are not classification under Heading 9027. The belief of Commissioner (Appeals) that the data analysis of particles size is a redundant process is without any basis - there are no merit in the argument of the Commissioner (Appeals) also because his observations contradict Chartered Engineer certificate without any ground. Thus, the order of Commissioner (Appeals) on this count is set aside and cross objections of respondents are allowed. The appeal filed by revenue is dismissed.
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2023 (8) TMI 416
Confiscation of Vehicle - redemption fine - penalty - Smuggling - Betel Nuts - Foreign Origin goods - goods notified under Section 123 of the Customs Act - place of origin of betel nuts can be determined through test in laboratory or not - HELD THAT:- On going through the impugned order of Commissioner (Appeals), it is noted that he has primarily gone by the fact that betel nuts are not notified under Section 123 of the Customs Act and the onus to prove that the same are smuggled is on the Revenue as held by the Tribunal in the case of BABOO BANIK VERSUS COMMISSIONER OF C. EX. CUS., LUCKNOW [ 2004 (7) TMI 482 - CESTAT, KOLKATA] . Further, the Tribunal in the case of BIJOY KUMAR LOHIA VERSUS COMMISSIONER OF CUSTOMS (PREV.), PATNA [ 2005 (11) TMI 306 - CESTAT, KOLKATA ] has held that the local trade opinion cannot take the place of the legal evidence. The reliance on the opinion of Arecanut Research Development Foundation (ARDF), Mangalore as regards the country of origin by the Original Adjudicating Authority was not proper inasmuch as the said organization in reply to an RTI query has stated that it is not possible to determine the place of origin of betel nuts through test in laboratory. As such, the Appellate Authority agreed upon that the said report can only be treated as an opinion and not as scientific test report regarding the country of origin. Further, even if the betel nuts are held to be of foreign origin, the same can be confiscated only when it is proved that betel nuts have been illegally smuggled into the country. Revenue has not produced any evidence to show that the betel nuts in question were smuggled into India. The respondent had also brought on record a survey report on the cultivation of areca nuts in India issued by the Directorate of Arecanut and Spices Development, Ministry of Agriculture, Government of India which shows substantial production of betel nuts in West Bengal, Assam and North Eastern State. In the absence of any positive evidence to establish the foreign origin of the goods and their illegal smuggling into the country, their confiscation is neither warranted nor justified. There are no infirmity in the impugned order of the Commissioner (Appeals) - Appeal of Revenue dismissed.
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2023 (8) TMI 415
Levy of Safeguard Duty - Classification of imported goods - various capital goods from overseas, to be used in the manufacture of Solar Cells, from Diffused / Undiffused Silicon Wafers / Blue Wafers. Diffused / Undiffused Silicon Wafer / Blue Wafer is claimed to be the basic input / raw material required for the manufacture of Solar Cells - to be classifiable under Customs Tariff Item No. 8541 4011 as solar cells or under CTH 3818? - product under import and the Product Under Consideration (PUC) are one and the same - Confiscation - Enforcement of bank guarantee - levy of penalty and fine. HELD THAT:- Admittedly, the description of the product specified in the Notification has to be understood based on the text of the Notification vis- -vis the findings of the competent / Designated Authority - Reference made to the order of CESTAT, Mumbai in the case of PHILIPS INDIA LTD. VERSUS COMMISSIONER OF CUSTOMS, MUMBAI [ 2004 (1) TMI 127 - CESTAT, MUMBAI ] wherein the levy of Anti-Dumping Duty was involved, on the imported Compact Fluorescent Lamp (CFL) with choke or without choke. At the time of import, the product under import was in a semi-finished form and post importation, a few items were procured from the domestic market and subsequently, CFL was manufactured in India. It was the contention of the Revenue that the imported item had attained the essential characteristics of a Compact Fluorescent Lamp and hence, had sought to collect Anti-Dumping Duty in terms of Notification No. 128/2001 dated 21.12.2001. It was inter alia held Since the notification imposes ADD only on CFL, one will have to see whether what is imported is CFL at all. It has been brought out that the importers in addition to the imported parts procured local components up to a certain value to manufacture CFLs. The proposition, therefore, which emerges from the above is that a semi-finished or intermediate product could not be subjected to Anti-Dumping Duty or safeguard duty in a case where a specific complete / finished product is the subject matter of investigation by the Designated Authority and the same is defined as the Product Under Consideration - the appellant has established its factory in India, installed capital goods and is undertaking substantial manufacturing process and on this fact, there are no disputes by either of the parties. In the case on hand, admittedly, what is imported is Diffused Silicon Wafer / Blue Wafer, which is claimed to be a semi-finished / intermediate processed product and not a finished product. If it is to be assumed to be the final product, then it has to be sold as such in the open market. The burden is on the person who claims that it is a solar cell, to discharge the same by establishing that fact. But the revenue having alleged that what was imported was solar cell, has not discharged their initial burden to establish that the same could be sold as such in the open market and could be used as such, by the end user. The question now is whether that Blue Silicon Wafer, which according to the Commissioner, exhibits photovoltaic effect, and therefore, is a Solar Cell, is sufficient to be called a Solar Cell in the market parlance - it is needed to see the practical uses in the sense whether the same is sufficient to be marketed as it is / the market recognizes as such and could it be used as it is. This is most relevant since the application before the authority was by the manufacturers of the product named solar cells . On consideration of definition of Product Under Consideration (PUC) as defined at various places like the Notice of Initiation of Safeguard Investigation dated 19.12.2017 and the review order of the competent authority, what emerges is that the photovoltaic cells which converts sunlight into electricity are connected so that purported object could be achieved. That means to say the Solar Cell, which has achieved or exhibited the photovoltaic effect, alone is not sufficient, the same should be able to give the desired result for which electrical connections are made. So, it should not just be exhibiting photovoltaic effect, but the same should be capable of carrying into electrical connections with transmitting the electricity so produced in order to achieve the desired object - thus, it could be understood that the PUC, which was the subject matter of investigation by the competent authority, was finished Solar Cell in all respects and known and recognized in the market parlance as such. Whether the product which was imported by the assessee is a Solar Cell in all respects, and hence, the product is the same as under investigation before the competent authority? - HELD THAT:- The silicon in the form of diffused wafers, discs or chips, with or without molybdenum discs, classifiable under Chapter 38/85 are always permitted for import and clearance with concessional rate of duty for the purpose of manufacture of the finished product namely, hybrid micro-circuits or semiconductor devices. Solar Cells, which are otherwise called photovoltaic cells, are one of the semiconductor devices and for the manufacturing of semiconductor devices, silicon in the form of Diffused Wafers/Undiffused Wafers has been recognized by the Government as one of the inputs. The clarity available in the form of notifications continued until the last of such notifications by the Government, dated 30.06.2017 - It is now equally relevant to analyse reports of experts in the field which are placed on record. Admittedly, report of IIT, Madras has alone been considered by the Commissioner in the impugned order whereas, the appellant has relied on the report of NISE. A harmonious reading of the available test reports and the standards adopted by each of the experts while testing the samples, clearly indicate that Blue Silicon Wafer is just an input and an intermediate product, which could not be compared with or called as Solar Cells . The Solar Cells in market parlance would emerge only after the formation of busbars and fingers through the process of screen printing and sintering. Hence, the Diffused Silicon Wafer and the Solar Cells are different products altogether. In the context of the above, we are tempted to understand that in scientific parameters and so also in terms of marketability / market parlance, the imported Diffused Silicon Wafer is an incomplete, intermediate product which cannot be sold as a Solar Cell in the market and as such, it has no use. The Revenue is trying to put the cart before the horse, in the sense that they are trying to fit in the case of the present importer into the Notification, whereas, they should have analysed in detail the case of the importer and the product imported, and then check if the product satisfies the definition as per the said Notification. Determination of classification - HELD THAT:- There is no doubt that the imported item is a Diffused Silicon Wafer / Blue Wafer and will fall outside the ambit of CTH 3818. Those items which are more extensively worked by way of selective diffusion will fall in Heading 8541 as semi-conductors, and as per the facts available on record, through the diffusion process and doping which have taken place on the Wafer, the imported item is appropriately classifiable under CTH 8541. It is also noteworthy here that CTH 8541 9000 deals with Parts of Semi-conductor devices. As per the scheme of arrangement of various Headings and Sub-Headings of CTH 8541, it is found that CTH 8541 deals with finished goods and also parts of semiconductor devices and covered under CTH 8541 90. There is no specific entry for an incomplete or an intermediate product. Though in a conventional sense, the imported Diffused Silicon Wafer is not a part of Solar Cell, for the purpose of classification, it has to be dealt as a product other than a finished Solar Cell. The imported item cannot be equated with a finished Solar Cell. A Solar Cell is manufactured from diffused Silicon Wafer and hence, the imported item is only a raw material or a base material or can be considered as a part or intermediate product for manufacture of Solar Cell. Considering the arrangement of Tariff, intermediate / semi-finished product is equated as parts of semi-conductor devices and thus, the contention of the appellant that the same is classifiable under CTH 8541 9000 is acceptable. Thus, the product imported was clearly different and distinct from the Product Under Consideration and therefore, the same did not attract safeguard duty. Hence, the demand of safeguard duty as confirmed in the impugned order and the reclassification of the product imported is unsustainable, for which reason the impugned order is set aside. On the date of import, admittedly, the classification was sought under CTH 3818 and the appellant also availed the benefit of exemption from payment of Basic Customs Duty in terms of Sl. No. 1 of Notification No. 24/2005 (Customs) dated 01.03.2005, as amended. It is also significant to note that the said Notification, as amended, vide Sl. No. 23, also grants exemption from Basic Customs Duty to goods classifiable under CTH 8541. Therefore, on the date of import, the goods classifiable under both CTH 3818 and CTH 8541 were exempt from payment of Basic Customs Duty and as such, no motive is found on the part of the appellant to avail any undue benefit or to cause any revenue loss. Moreover, it is also ascertained that as on the date of import, the goods classifiable under CTH 3818 attracted 12% I.G.S.T. whereas, the goods classifiable under CTH 8541 attracted 5% I.G.S.T. It is the settled position of law that in cases where classification of goods is involved, confiscation by re-classifying the same is not possible, that too alleging mala fide intention, since, the same amounts to a different view adopted by the authorities. Hence, it becomes necessary for the Revenue to establish mala fide intention on the part of an importer for classifying the goods under import and in the absence of any proof, there will be no scope to suspect the bona fides of an importer - Support found from the decision of the Hon ble Supreme Court in the case of UNION OF INDIA VERSUS GARWARE NYLONS LTD. [ 1996 (9) TMI 123 - SUPREME COURT ] wherein, at paragraph 15, it has been categorically held When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause. The imposition of penalty under Section 112 and/or fine, as confirmed in the impugned order, does not stand and consequently, the same is set aside. Appeal allowed.
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Corporate Laws
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2023 (8) TMI 414
Oppression and Mismanagement - seeking to grant waiver to the Petitioners in order to enable them to file application under Section 241 of the Companies Act, 2013 - HELD THAT:- A reading of the provision of Section 399 of Companies Act, 1956, much less Section 399(4) would show that for the purpose of maintaining the petition under Section 399(1)(a)(b) of the Act, 1956, the Central Government was given the power to form an opinion in this regard as to whether it is just and equitable to do so. It is categorically provided in Section 244 proviso that the Tribunal can waive all or any of the requirements specified in clause (a) or clause (b) of Section 244 to enable the members to apply under Section 241. Meaning thereby, if the conditions in Clause 244(a) and 244 (b) are not waived and the Applicant is not qualified so far as condition enumerated in Section 244(1)(a)(b) are concerned then the application itself would not be maintainable and the Tribunal cannot proceed with it for the purpose of taking it to any conclusion. It appears that original applicants sensed that it would be in their interest to seek waiver under Section 244 of the Act, therefore, application bearing 533 of 2020 was filed during the pendency of the main application. In the said application, the applicants of application bearing 272 of 2016, who have raised the issue regarding the maintainability of the application even under Section 399 of the Act, 1956. The deemed waiver, which has been granted, is nowhere provided in Section 244 of the Act rather the Act says that the Tribunal has to take a decision in regard to the merit of the application as to whether the waiter has to be given in respect of clause (a) and (b) of Section 244(1) and that order should not be arbitrary or capricious but should be speaking and reasoned. Since, the reasons are conspicuous by its absence in the order which has been passed in Para 8 of the impugned order, which goes to the root of the case because until and unless waiver is granted the petition shall not be considered as maintainable and no further order can be passed in it. There is serious error on the part of the Tribunal in recording its finding by which waiver has been granted and the petition has been held to be maintainable which deserves to be set aside - the impugned order is set aside. The matter is remanded back to the Tribunal - Appeal allowed.
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Insolvency & Bankruptcy
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2023 (8) TMI 413
Admitted as resolution professional in the third meeting of the Committee of Creditors and until the seventeenth meeting - National Company Law Appellate Tribunal rendered adverse findings in regard to the conduct of the appellant and imposed costs of Rs 1,00,000. HELD THAT:- Issue notice, returnable in three weeks.
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2023 (8) TMI 412
Erroneous proceeding under the provisions of Section 138 of the Negotiable Instruments Act, 1881 - CIRP initiated and IRP appointed - HELD THAT:- The counsel would contend that the proceedings initiated against the present petitioners was not maintainable and should have been interdicted by the High Court in the impugned judgment. Issue notice.
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2023 (8) TMI 411
Condonation of delay of 85 days in filing claim - Claim filed belatedly - liquidation process has been disposed of and third party rights have been created - HELD THAT:- During the intervening period, the subject matter involved in the liquidation process has been disposed of and third party rights have been created. Therefore, the NCLT observed that the appellant herein may pursue other remedies available in law. The said order has been affirmed by the National Company Law Appellate Tribunal (NCLAT). The contention of learned counsel for the appellant that the delay could be condoned and his claim must be taken on record, cannot be accepted - Appeal disposed off.
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PMLA
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2023 (8) TMI 410
Remand in favour of the investigating agency, without seeking any specific prayer challenging the remand orders. Challenge to Orders passed by the majority of the Judges when a reference was made on a difference of opinion by the Division Bench of the Madras High Court, while dealing with a Writ Petition filed seeking a writ of Habeas Corpus in pursuance of an arrest made, followed by a remand to the judicial custody, and then to the authority concerned. Maintainability of Writ petition - HELD THAT:- A writ of Habeas Corpus was moved questioning the arrest made. When it was taken up for hearing on a mentioning, the next day by the Court, the appellant was duly produced before the learned Principal Sessions Judge in compliance with Section 19 of the PMLA, 2002. The custody thus becomes judicial as he was duly forwarded by the respondents. Therefore, even on the date of hearing before the High Court there was no cause for filing the Writ Petition being HCP No. 1021 of 2023. Added to that, an order of remand was passed on 14.06.2023 itself. The two remand orders passed by the Court, as recorded in the preceding paragraphs, depict a clear application of mind. Despite additional grounds having been raised, they being an afterthought, there are no hesitation in holding that the only remedy open to the appellant is to approach the appropriate Court under the Statute. This was obviously not done. It is also noted that the appellant was very conscious about his rights and that is the reason why, by way of an application he even opposed the remand. Despite a conclusion that the writ petition is not maintainable, it is important to go further in view of the extensive arguments made by the learned Senior Advocates appearing for the appellant. As rightly contended by the learned Solicitor General the scheme and object of the PMLA, 2002 being a sui generis legislation is distinct. Though it is not wished to elaborate any further, it is found that there are adequate compliance of Section 19 of the PMLA, 2002 which contemplates a rigorous procedure before making an arrest. The learned Principal Sessions Judge did take note of the said fact by passing a reasoned order. The appellant was accordingly produced before the Court and while he was in its custody, a judicial remand was made. As it is a reasoned and speaking order, the appellant ought to have questioned it before the appropriate forum. We are only concerned with the remand in favour of the respondents. Therefore, even on that ground, it is held that a writ of Habeas Corpus is not maintainable as the arrest and custody have already been upheld by way of rejection of the bail application. The arguments of the learned Senior Advocates on the interpretation of Section 167(2) of the CrPC, 1973 cannot be accepted as the law has been quite settled by this Court in Deepak Mahajan [ 1994 (1) TMI 87 - SUPREME COURT] . One cannot say that while all other safeguards as extended under Section 167(2) of the CrPC, 1973 would be available to a person accused but nonetheless, the provision regarding remand cannot be applied. Section 167(2) of the CrPC, 1973 merely complements and supplements Section 19 of the PMLA, 2002 - there are no inherent contradiction between these two statutes. Obviously, an arrest under Section 19 of the PMLA, 2002 can only be made after the compliance of much more stringent conditions than the one available under Section 41 of the CrPC, 1973. The interplay between an investigation and inquiry conferring the same meaning is only for the usage of common materials arising therefrom. Such materials are to be utilized for both the purposes. This is the basis upon which they are read together, giving the same meaning at a particular stage. In Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT] it was in the context of a challenge to the enactment, particularly in the light of Section 25 of the Evidence Act, 1872. One shall not confuse such powers conferred under the statute with the police power, however, when it comes to application of Section 167(2) of the CrPC, 1973 such an authority has to be brought under the expression such custody especially when the words police custody are consciously omitted. Much arguments have been made on the basis of Anupam J. Kulkarni [ 1992 (5) TMI 191 - SUPREME COURT ]. As rightly submitted by the learned Solicitor General, the facts are different and therefore distinguishable - In the case on hand, there is no custody in favour of the respondents, a fact even acknowledged by the appellant earlier through the arguments of his advocates. The learned Solicitor General is right in his submission that apart from the fact that the word custody is different from detention , it can only be physical. As pointed out by him even the High Court has observed that the appellant continues to be in judicial custody. Admittedly, physical custody has not been given to the respondents. Admission of the appellant to the hospital of his choice cannot be termed as a physical custody in favour of the respondents. Custody could not be taken on the basis of the interim order passed by the High Court which certainly shall not come in the way of calculating the period of 15 days. An investigating agency is expected to be given a reasonable freedom to do it s part. To say that the respondents ought to have examined the appellant in the hospital, and that too with the permission of the doctors, can never be termed as an adequate compliance. Any order of the Court is not meant to affect a person adversely despite its ultimate conclusion in his favour. The doctrine actus curiae neminem gravabit would certainly apply in calculating the period of 15 days. Appeals dismissed. Custody of the appellant - HELD THAT:- The learned Solicitor General submitted that the period of 15 days expires by 12.08.2023. Even the learned Principal Sessions Judge has granted 8 days of custody, though could not be given effect to. Conscious of the time constraint, the respondents are permitted to have custody of the appellant till 12.08.2023. The Registry is directed to place the matter before Hon ble the Chief Justice of India for appropriate orders to decide the larger issue of the actual import of Section 167(2) of the CrPC, 1973 as to whether the 15 days period of custody in favour of the police should be only within the first 15 days of remand or spanning over the entire period of investigation 60 or 90 days, as the case may be, as a whole.
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Service Tax
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2023 (8) TMI 409
Classification of services - Repairs to Vehicle service or Works Contract - extended warranty plans - HELD THAT:- A contract which has both the elements of goods and service is a works contract - Hon ble Apex Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT ] held that Works Contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such and has to be taxed separately as such. Hence the impugned service has to be examined as a works contract with respect to its taxability. After the insertion of section 65B(54) in the Finance Act 1994, from 01.07.2012 onwards, the definition of works contract was expanded to include repair and maintenance services of movable properties also. Hence, the composite contracts for repair and maintenance of motor vehicles are leviable to service tax from 01.07.2012 onwards. VAT and Service tax are mutually exclusive levies. The present demand has sought to subject the entire value to service tax, despite the fact that the spare parts were subjected to VAT - Without prejudice, the Appellant is entitled to claim deduction on the value of goods and materials in terms of Notification No. 12/2003 ST dated 20.06.2003 - Cum-tax benefit ought to be extended to the Appellant. - There can be no interest liability and penalty fastened on the Appellant. Appeal allowed.
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2023 (8) TMI 408
Classification of services - service rendered during the warranty period will be liable to tax under Repairs to Vehicle service as per Section 106(65)(zo) which was introduced from 16/07/2001 or as a Works Contract - period from April 2011 to March 2012 - violation of provisions of section 67 and 68 of the Finance Act, 1994 r/w Rule 7 of Service Tax Rules, 1994 - HELD THAT:- The demand of service tax is on the amount claimed by the appellant towards reimbursement of parts from the manufacturer which are replaced during repair and for servicing. A contract which has both the elements of goods and service is a works contract. Hon ble Apex Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT ], held that Works Contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such and has to be taxed separately as such. Hence the impugned service has to be examined as a works contract with respect to its taxability. After the insertion of section 65B(54) in the Finance Act 1994, from 01.07.2012 onwards, the definition of works contract was expanded to include repair and maintenance services of movable properties also. Hence, the composite contracts for repair and maintenance of motor vehicles are leviable to service tax from 01.07.2012 onwards. The demand in the impugned order pertains to the period from April 2011 to March 2012. Since it is held that the composite contracts for repair and maintenance of motor vehicles are leviable to service tax from 01.07.2012 onwards, the demand does not sustain. Appeal allowed.
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2023 (8) TMI 407
Levy of Service Tax - Business Auxiliary services - services rendered by the appellant to the multi level marketing company - commission received in the multi-level marketing - commission received as proprietor of Vision Network - out of India commission - incentives and commission in respect of Omega Global - time limitation - non-specific SCN - HELD THAT:- The Tribunal in the case of Kalpataru Power Transmission Ltd. [ 2022 (6) TMI 1042 - CESTAT AHMEDABAD] held that In the present matter we find that department has not disputed the facts that the payment to overseas consultant/agents/service providers was made from the overseas projects site branch/office of the Appellant and said Foreign Service providers have charged local VAT/GST/Service tax as applicable in the respective foreign countries in invoices issued by them to foreign site/project office/Branch office of Appellant. The said facts clearly established that the services have been provided by the foreign agents to the foreign site office/branch office of Appellant and thus, the service cannot be said to be received in India when the same is provided outside India, used outside India and paid outside India. Therefore, demand of service tax in the impugned matter legally not correct on this ground also. The impugned order cannot be sustained as there is no specific allegation in the show-cause notice on the category of the Business Auxiliary Service - the impugned order is not sustainable on limitation - Even though the demand is restricted to normal period, the total value of taxable services is within the small-scale exemption - Either way, the impugned order is not sustainable - Appeal allowed.
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2023 (8) TMI 406
Demand of service tax - erection, commissioning or installation service - transportation of goods service - benefit of N/N. 01/2006-ST denied - exclusion of cost of the goods as reflected under the profit and loss account from the total contract value to arrive at the taxable value - HELD THAT:- Both sides agree that all the contracts which the appellant assessee entered into were composite contracts which involved both supply of goods and rendering services. It has been held by the Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT ] that contracts involving both supply of goods and rendering services are works contracts which are a separate species of contract known to the trade distinct from the contracts of sale of goods or contracts for providing services. These contracts are chargeable to service tax only from 01.06.2007 under the head of works contract service under Section 65 (105) (zzzz) and not under any other head. It also needs to be noted that not all works contract are covered under this head but only certain types of contracts are covered. Therefore, the demand on composite works contracts under the head of erection, commissioning and installation service under Section 65 (105) (zzb) and on transportation of goods by service under Section 65 (105) (zzb) in the impugned order cannot be sustained. The impugned order is, accordingly, set aside - Appeal of assessee allowed.
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Central Excise
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2023 (8) TMI 422
Compounded Levy Scheme - Claim of abatement in the form of refund - closure of factory or not - non-production of notified goods i.e. branded and unmanufactured without lime tube for the continues period for 17 days - whether for the purpose of availing abatement under Rule 10 of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010, the appellant statutorily need to stop manufacturing from both the machines which are installed in his factory? - CBEC Circular No. 980/04/2014-CE dated 24 Jan 2014. HELD THAT:- The provisions of the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 makes it very clear that the manufacturer of Chewing Tobacco and Unmanufactured Tobacco, as per the said Rules, 2010, require to pay compounded Central Excise duty for the period from which the machines are in operation in a particular month. Abatement of Central Excise duty is restricted to the situation where the provisions of the notified goods does not take place for the period 15 days or more - it is found that in this case, since the one of the machines of the manufacturer was not engaged in the manufacture of notified goods for more than 15 days and therefore, they are entitled for abatement of the duty which has been deposited by them in advance in the beginning of the month. CBEC Circular No. 980/04/2014-CE dated 24 Jan 2014 - HELD THAT:- It is clear from the reading of the Circular that the assessee need to pay duty on deemed production in respect of per operating machine working in factory during the month taking other factors into consideration like retail sale price of the pouch etc. Therefore, since one machine of the appellant has not worked for 17 days in the month of May 2010, they are legally entitled for refund of the amount deposited by them in advance. The order-in-appeal is without any merit - appeal allowed.
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2023 (8) TMI 421
Violation of principles of natural justice - non-speaking order - finalization of provisional assessment - refund of differential duty - HELD THAT:- It is deemed fit and proper to allow the appeal by way of remand to the Original Adjudicating Authority keeping all issues open. The Adjudicating Authority is directed to consider all the issues which have been taken notice by this Tribunal herein above and after hearing the appellant to pass a reasoned order in accordance with the law. Appeal allowed by way of remand.
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2023 (8) TMI 420
Excisability - marketability - pre-laminated boards - Classification of the goods - intermediate goods - captive consumption - - benefit of N/N. 67/1995-CE dated 16th March 1995 denied - extended period of limitation - penalties - HELD THAT:- Pre-laminated boards are a convenience to customers substituting for buying board and laminate separately and labouring over the fusing of the two. The shelf life of a store-bought laminate needs necessarily to be more than that intended for consumption in the factory. The threshold of excisability is enumeration in the Schedule to Central Excise Tariff Act, 1985. The description corresponding to tariff item 4811 5900 is paper and paperboard, coated, impregnated or covered with plastics (excluding adhesives) other than bleached, weighing, weighing more than 150mg/m2 and no reason has been adduced by appellant-assessee to suggest that this is not a description of the impugned goods or that a more accurate heading exists. Neither is there a suggestion that it is only adhesive that coats the base paper supplied by appellant to M/s Shri Shankar Vijay Saw Mills. Indeed, the primary claim of the appellant is that the laminate lacks the shelf-life for marketability and hence is not excisable. However, it is on record that the product in question is stored, even if in controlled condition, and is also sent to M/s Pragati Plywood India Pvt Ltd for affixing the laminate on the board. The length of shelf-life is not relevant in these circumstances. The impugned goods are marketable and, hence, excisable. On record are intimations of movement for job work dated 9th April 2003 as prescribed in notification no. 214/86-CE dated 25th March 1986. All the materials are supplied by appellant to the jobworker. The appellant is, thus, the principal manufacturer and they have assumed the liability to pay duty - The claim that the job-worker is liable does not hold. The appellant is no stranger to disputes on leviability of duty on pre-laminated boards. In DARSHAN BOARDLAM LTD. VERSUS UNION OF INDIA [ 2013 (4) TMI 326 - GUJARAT HIGH COURT ], the Hon ble High Court of Gujarat took note of the dropping of proceedings in adjudication held It is declared that the goods manufactured by the petitioner, namely, Bagasse Board, is chargeable to nil rate of duty under Serial No. 82(vi) of Table to Notification No. 6/2006-C.E. Extended period of limitation - HELD THAT:- It cannot be a credible claim that appellant was unaware that duty was not leviable on the final product and, thus, rendered intermediate product, entrusted to the job-worker owing to their known capability to produce the laminate, liable to duties of central excise. The plea of bar of limitation also fails. Appeal of Revenue on disposal without pre-deposit - HELD THAT:- Any relief for the reasons stated in grounds of appeal would have the effect of nullifying the order to recover duty. Accordingly, that appeal is dismissed as infructuous. Penalty under rule 25 of Central Excise Rules, 2000 - HELD THAT:- The other appeal, pertaining to setting aside of penalty under rule 25 of Central Excise Rules, 2000, is misdirected as the Rules cannot enable imposition of penalty for non-payment of duties which transcends the penalties specified in section 11AC of Central Excise Act, 1944. That rule cannot be invoked de hors the action taken under section 11A of Central Excise Act, 1944 and, therefore, all penalties imposed under section 25 of Central Excise Rules, 2000 in the several orders impugned are set aside. Appeal allowed in part.
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2023 (8) TMI 405
Penalty u/r 26(2)(ii) of Central Excise Rules, 2002 - penalty was imposed under rule 26(2)(ii) of Central Excise Rules, 2002, which came into effect only on 01.04.2007, whereas the period in the present case is 2005-06 - HELD THAT:- Even though in the operating portion of the order, the penalty was imposed under Rule 26, but in the concluding finding in respect of all the appellants, it is clearly stated that they are liable for penalty under rule 26(2)(ii) of Central Excise Rules, 2002. Therefore, there is no doubt that the penalty was imposed under Rule 26(2)(ii) of Central Excise Rules, 2002. In the present case the period involved is 2005-06 Rule 26(2)(ii) was inserted vide Notification No.8/2007-CE(NT) dated 01.03.2007 (effective from 01.04.2007), therefore, the provision of Rule 26(2)(ii) cannot be made applicable retrospectively for the period prior to 01.04.2007. For this reason alone the penalties imposed on the appellants are not sustainable. From the reading of the Rule, it can be seen that a person can be penalized under this rule, only if he is involved in various activities of handling of goods, which are liable for confiscation. In the present case the entire case of the department is that there is no movement of goods but it is a paper transaction and the M/s Nitin Global Ltd, who has taken Cenvat credit, has not received the goods. When this is the case of the department as no goods is involved, consequently, none of the appellants are engaged in handling the goods which is liable for confiscation. As regard the appellant, Shri Rakesh Kumar Gupta, who is the director of the importer company, they have sold the goods on the high sea sale basis, therefore, they are not involved in facilitating the fraudulent Cenvat credit to M/s Nitin Alloys India ltd and even he cannot be implicated as he is not involved in any goods which is liable for confiscation. As regard the Delight Cargo Carries, they are the transporter and as per the charge of the department they have not transported the goods. Even for this reason also when the transporter has not handled the goods, there is no goods liable for confiscation. As regard the appellant Qumaruzzama Khan, he is the owner of the CHA Agency, whose job is only to clear the customs goods and for this role it cannot be said that the appellant is involved in any fraudulent passing of the Cenvat credit. On the various counts, the appellant are not liable for penalty under Rule 26 of Central Excise Rules, 2002. The penalties are set aside and appeals are allowed.
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2023 (8) TMI 404
Classification of goods - CMO (Crude Mineral Oil) Residue - classifiable under the Chapter Heading 27090000 as contended by the Appellant or under 27139000 as contended by the department - HELD THAT:- Regarding the Test conducted by National Testing Laboratory, Kolkata, we observe that the Test was not conducted by following the procedure. No sample (sealed and signed) was ever made available to the Appellant so that they could get the same tested from a reputed and recognized laboratory. Their request for re-test from a reputed laboratory was not considered by the department. Since the Test was not conducted by following the procedure, it is held that the classification of the goods cannot be determined on the basis of the Test Report. Sub Heading 27139000 is a residual entry covering 'other residue of petroleum oils or oils obtained from bituminous minerals , Whereas 270900 is a specific entry which covers petroleum oils obtained from mineral oils' as well as from 'crude oil'. It is on record that CMO residue is obtained as remnant on distillation of crude oil, which is specifically mentioned in the subheading 270900 and not under 27139000. As per General Rules of Interpretation of the Tariff, a specific heading must be always preferred over a general heading while classifying the goods. Accordingly, it is held that CMO Residue is rightly classifiable under the subheading 270900 as claimed by the Appellant. This view has been supported by the decision of the Tribunal in the case of Bajrang Petrochemicals Pvt. Ltd. [ 2017 (11) TMI 596 - CESTAT ALLAHABAD ] where it was held that Residual Crude Oil is classifiable under Tariff Item No. 2709.00.00. The goods CMO Residue is rightly classifiable under the Chapter heading 270900. Accordingly, the demand of duty in the impugned order is not sustainable - Appeal allowed.
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CST, VAT & Sales Tax
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2023 (8) TMI 403
Refund claim - illegal deduction and recovery from the bills of the petitioner as advance Value Added Tax - manufacture and supply of the goods by the petitioner to the Railways was an inter-state sale - not exigible to sales tax within the State of Bihar either as a sale of goods or as a works contract - Section 40 and 41 of the Bihar Value Added Tax Act, 2005 - HELD THAT:- A Division Bench of the Hon ble Supreme Court also examined the very same position in HYDERABAD ENGINEERING INDUSTRIES VERSUS STATE OF ANDHRA PRADESH [ 2011 (3) TMI 1427 - SUPREME COURT ] . Therein the appellant, a registered dealer within the State of Andhra Pradesh was engaged in the manufacture and sale of electrical and other consumer items and they entered into an agreement with another company for marketing and sale of their products. The appellant, pursuant to orders of sale issued by the other company, the agent, transported the products to the various depots belonging to themselves from where the agent collected the goods and delivered it to the ultimate purchaser. The assesse-appellant claimed it as a branch transfer. The Hon ble Supreme Court found favour with the order of the Assessing Officer, which found it to be an inter-state sale exigible to tax under the CST Act. In the present case also the contract is one for manufacture and transportation of pre-stressed concrete slabs and RCC Ballast Retainers of precise and particular specification. There is no works contract involved and it is only a sale pure and simple of goods manufactured by the petitioner, who has been awarded the contract; which is only for manufacture and sale - The transaction is purely of an inter-state sale of goods and is not a works contract nor a sale of goods exigible to tax within the State of Bihar. The sale of goods as per Annexure-2 and Annexure-5 agreements constitute an inter-state sale not exigible to tax within the State of Bihar. The Railways had made a deduction on the ground that it is a works contract; which are negatived. The Railways is bound to refund the illegal tax deduction made from the bills to the petitioner contractor. The Railways could definitely apply for refund from the Bihar Value Added Tax Department. The refund granted, but, confined to the deductions made three years prior to the date of registration of the above writ petition which is on 14.05.2012; giving effect to the limitation as prescribed for recovery of money under the Limitation Act. The Railways shall refund the amounts with 6% interest within a period of 4 months from the date of receipt of the certified copy of this judgment. If the refund is not granted within that time then the interest shall run at the rate of 12% from the date of expiry of the 4 month period. Petition allowed.
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Indian Laws
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2023 (8) TMI 402
Criminal Conspiracy - mutation of excess land - allegations against the petitioners are of mutating more land than the area of the plot which has also been admitted - HELD THAT:- The Court has gone through the contents of the discharge petitions as well as the impugned order and finds that the allegations against the petitioners who happened to be Circle Officers are there of mutating more lands of the plots in question. A large number of innocent public have been cheated by M/s Sanjeevani Buildcon Pvt. Ltd. in conspiring with the others including the petitioners which has been revealed in the charge sheet. In the charge sheet the action of the petitioners have been discussed elaborately in all the cases and the learned counsel for the petitioners have also admitted in their argument that they have done excess mutation of the plot in question. The question remains that as to whether in absence of their connivance along with M/s Sanjeevani Buildcon Pvt. Ltd. the said mutation can be done or not? It appears that Circle Inspectors have also been charge sheeted which suggest that all were in connivance of such excess mutation of the plot in question. The discharge petition was the subject matter before the Hon ble Supreme Court in the case of STATE OF T. NADU TR. INSP. OF POLICE AND STATE REP. BY DEPUTY SUPDT. OF POLICE VIGILANCE AND ANTI-CORRUPTION VERSUS N. SURESH RAJAN ORS. AND K. PONMUDI ORS. [ 2014 (1) TMI 553 - SUPREME COURT ], wherein it was held that if the court thinks that the accused might have committed the offence on the basis of the materials on record on its probative value, it can frame the charge; though for conviction, the court has to come to the conclusion that the accused has committed the offence. The law does not permit a mini trial at this stage. The settled law does not permit a mini trial at the stage of discharge and facts are there that can be only subject matter of trial. The purpose of framing charge is to intimate the accused about clear unambiguous and precise nature of acquisition and the accused is called upon to meet the course of trial. The High Court is not required to scrutinize the evidence and advancing elaborate arguments in that count as the High Court is not exercising its power at the appellate stage and only the said argument is being heard in a criminal revision petition - under section 13(1)(d)(i) of the P.C.Act obtaining any valuable thing or pecuniary advantage by corrupt or illegal means by a public servant itself would amount to criminal misconduct. On the same reasoning under section 13(1)(d)(ii) of the P.C.Act obtaining a valuable thing or pecuniary advantage by abusing his official position as a public servant either for him. In a criminal conspiracy the intention to do a criminal act is itself a crime unlike other offences which require not only the intention to do a criminal act but also in addition something committed in execution of the intention. The essence of conspiracy being bare agreement between the conspirators, the same has to be proved in the manner allowed by law. While accepting the proof of conspiracy reality of the situation has to be taken into account. Conspiracy as a whole is brought about in secrecy and the proof of the same, by adduction of evidence direct, is really an impossible feat in most of the cases, though in the rarest of rare occasion, the possibility of obtaining such evidence is there and in view of that the conspiracy may be proved in most of the cases, by process of inference or induction from relevant proved facts and circumstances which can be only by way of trial and not at the time of framing of charge and in that view of the matter, the discharge petitions cannot be allowed. he Court finds that there are allegations against the petitioners of mutating more land than the area of the plot which has also been admitted in the argument of the learned counsel for the petitioners which cannot be ruled out at this stage that the petitioners were not in connivance with the said M/s Sanjeevani Buildcon Pvt. Ltd. The poor people have been cheated by the said M/s Sanjeevani Buildcon Pvt. Ltd. and the connivance of these petitioners cannot be ruled out considering that in two of the cases one of the petitioner has refused the mutation on the ground that the land is excess meaning thereby that they were knowing about the area of the land and inspite of that they have mutated the excess land. Revision dismissed.
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2023 (8) TMI 401
Professional Negligence - abetting in evasion of Central Excise and Customs duties - Removal of Chartered Accountant (CA) from the list of Members for a period of three months - if Solvency Certificate did not contain the details of the property, how did the Excise Department accept said Solvency Certificate and in two months allowed exports to such extent where duty involved was about Rs. 86 lakhs? HELD THAT:- Respondent has also stated that there was no statutory requirement that the name and addresses of the properties or investments should have been mentioned in the Certificate and it seemed to be a deep rooted conspiracy by the excise duty evaders and the officers concerned and that they are now ganging up to pass on the blame to an innocent Chartered Accountant. Respondent has also denied that he was careless in his duties. We also wonder, if the Solvency Certificate was acceptable when it was filed, certainly it cannot become unacceptable during the course of carrying out investigation. Even as per the statement of Respondent recorded by Complainant, Respondent has categorically stated that he relied on certain documents produced by Shri Dhanraj Sodhi before issuing a Solvency Certificate It is observed that Respondent had taken adequate precaution before issuing Solvency Certificate. On the basis of this complaint, Respondent cannot be held guilty of any professional negligence - This Reference disposed off by issuing a reprimand to Respondent.
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2023 (8) TMI 400
Dishonour of Cheque - condonation of delay in filing application - delay not explained - HELD THAT:- It is not in dispute that the complaint was filed by the complainant under Section 138 of the Negotiable Instruments Act and on the ground of delay alone the aforesaid was rejected. An application was filed by the complainant under Section 142 of the Negotiable Instruments Act along with the complaint case, in which he has stated that the postal receipt could not be received though the notice was issued on 28.02.2018 and later on he enquired from the postal department and obtained the postal receipt which is a necessary document to establish the fact that mandatory notice was issued to the accused. It is well settled principle of law that the case should be decided on its merits rather than technicalities. As there is provision to condone the delay, the learned revisional Court has rightly condoned the delay of 90 days caused in filing of the complaint case under Section 138 of the Negotiable Instruments Act. The Hon'ble Supreme Court while dealing with similar issue in the case of Pawan Kumar Ralli [ 2014 (8) TMI 608 - SUPREME COURT] has held that In the peculiar facts and circumstances of the case, while keeping in mind the legislative intent and the specific plea of the appellant raised in the grounds for the Special Leave Petition that he should have been allowed to move an application for condonation of delay before the Trial Court as the respondent has not suffered any prejudice by reason of 25 days delay, we strongly feel that the appellant should not have been deprived of the remedy provided by the Legislature. In fact, the remedy so provided was to enable a genuine litigant to pursue his case against a defaulter by overcoming the technical difficulty of limitation. Hence, the High Court has committed an error by not considering the issue of limitation on merits. High Court ought to have remanded the matter to the Trial Court for deciding the issue of limitation. In view of the judgment rendered by Hon'ble Supreme Court in the case of Pawan Kumar Ralli, there are no reason to interfere with the order passed by the learned revisional Court - petition dismissed.
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