TMI Tax Updates - e-Newsletter
August 2, 2023
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Recovery of input tax credit - Transfer of unutilized ITC from one entity to another - Demand confirmed on the ground that the transfer of the said ITC has been accepted and availed by the petitioner through Form GST-33 instead of GST ITC-02 - Orde of rejection cannot be justified - Matter restored back for reconsideration - HC
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GST:
Validity of warrant of arrest - processes have been issued post-cognizance and it has been rightly contended on behalf of petitioners that once the summons had been issued, the Court could issue warrant only after receipt of the service report. Had such a warrant been issued in the pre-cognizance stage during the investigation things would have been different - The impugned order of issuing the warrant of arrest is set aside - HC
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Income Tax:
Condonation of delay - Delay in filing of refilling of appeal - the delay of 707 days has occurred in refiling and not in filing of the appeals. - the High Court ought to have condoned the said delay in refiling and heard the appeals on merits rather than dismissing the same without hearing on merits. - SC
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Income Tax:
Penalty u/s 271-I - Assessee has not furnished / provided information fully related to section 195 before the AO - The amendment though came into effect from 16th December 2015, but it is a settled law that if a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended. - AT
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Income Tax:
Exemption u/s 10(5) denied - reimbursement of Leave Travel concession - The appellant cannot claim ignorance about the travel plans of its employees as during settlement of LTC Bills the complete facts are available before the assessee about the details of their employees” travels. Therefore, it cannot be a case of bonafide mistake - AT
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Income Tax:
Agricultural income - sale of poplar trees - Admittedly, the assessee did not have substantial agricultural income in earlier assessment years but without any adverse material being brought on record, the claim of the assessee cannot be simply discarded. - AT
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Income Tax:
Exemption u/s. 10(23C)(vi) - Assessee Trust having multiple objects cannot be said to be existing “solely for the purpose of education”. It is open to the trust to pursue all or any of the objects of the trust under the garb of education. Therefore in our considered view, the condition of section 10(23C)(vi) i.e the applicant existing “solely for educational purposes” is not fulfilled in the present case. - AT
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Income Tax:
Collection of tax at source (TCS) u/s. 206C - compounding fees received from persons involved in illegal mining and transportation of minerals - The assessee failed to collect TCS on the amounts received from illegal miners/transporters, having failed to do so, was to be treated as ‘assessee-in-default’ u/s. 206C(6) - AT
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Income Tax:
Income deemed to accrue or arise in India - royalty income - permanent establishment (PE) in India - Each project site did not exceed threshold limit of 183 days. - The project sites at Bangaluru and Gurugram cannot be considered to be either installation or supervisory PE of the assessee in India. - The assessee in the year under consideration did not have any PE in India. - AT
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Income Tax:
Revision u/s 263 - undisclosed income accepted / acknowledged by the assessee during the course of survey proceedings - There is a marked difference between “money/ cash” being “found” at the premises of the assessee and the assessee being “found” to be the “owner” of money /cash”. Section 69A of the Act only contemplates of the latter situation. - AT
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Income Tax:
Penalty u/s 271(1)(c) OR 271AAA - Addition of undisclosed income found during search proceedings - No infirmity in the order of the ld.CIT(A) holding that the correct section for levy of penalty in the present case was under section 271AAA and not section 271(1)(c) which was invoked by the AO. - AT
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Income Tax:
Addition u/s 56(1) - shares received by the assessee company at the time of amalgamation - the Revenue is not precluded from ascertaining as to whether the scheme of amalgamation was in compliance with the provisions of the Act so as to avail the benefit of Section 47(vi) of the Act. - the scheme of amalgamation of EBPL with the assessee company cannot be disregarded nor can it be held to be a ‘colourable device’. - AT
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Income Tax:
Reopening of assessment u/s 147 - AO did not rebut the appellant’s contention that nothing over and above the amount recorded in the registered sale deeds was received by bringing necessary details. The unsubstantiated material found in the diary in possession of Third Party cannot be considered in the hands of the assessee as a conclusive evidence so as to reopen the assessment and make additions towards long term capital gain in sale of the plot of land. - AT
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Customs:
Renewal of warehouse license - Private Bonded Ware House License - Settlement Commission granted immunity from prosecution and penalty - The immunity granted against prosecution under the Customs Act, 1962 will include, the above proceedings initiated u/s 58(3) also which has culminated in the order revoking the license issued to the appellant. Therefore the settlement of the dispute cannot be a ground for not renewing/revoking the license. - AT
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Indian Laws:
Dishonour of Cheque - discharge of legally enforceable debt or not - the mere acceptance of the signature on the part of the accused on the check implies that it is legally enforceable debt and hence the debt is admitted. There is no sufficient evidence in favour of the accused person to deny version of the complainant. - HC
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Indian Laws:
Dishonour of Cheque - false and fabricated cheque - The capacity to advance loans to the accused persons has not been established by the complainant and the alleged loans was not reflected in the ITR by the complainant. The defence of the accused persons that they had not taken any loan from the complainant and signing the blank cheque as security for loans of lesser amount has been subsequently filled up for an inflated amount and misused in filing the present complaint seems quite probable. - HC
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IBC:
Removal of appellant from Committee of Creditors - Financial Creditors or not - the appellant was a collaborator in the development agreement and not a financial creditor. There was no disbursement for time value of money by the appellant within meaning of Section 5(8) of the IBC. - AT
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Service Tax:
Levy of penalty u/s penalty u/s 77 and Section 78 - the appellant has paid the entire service tax before issue of show cause notice. Therefore, intention to evade service tax is absent in the present case. Therefore, there was no case for issue of show cause notice and, therefore, there would not have been occasion to propose imposition of penalty. - AT
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Central Excise:
Clandestine removal - cigarettes - The onus to establish such clandestine activities, resulting in confirmation of demand is placed heavily on the Revenue and is required to be discharged by production of sufficient, cogent and tangible evidences. The said allegation has to be proved by bringing on record evidences procurement of all the raw materials clandestinely in proportionate quantity and it must be proved to whom the goods have been sold. - AT
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Central Excise:
Clandestine manufacture and removal - only base on which the demand has been confirmed, is on account of the electricity consumption without any corroborative evidence whatsoever in any form. - Demand set aside - AT
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Central Excise:
Valuation - inclusion of value of bought out items - it is found that the bought out items have not been attached with the weigh bridge. Even after installation of the weighbridge, they perform their functions independently. Thus these items are not essential part of the weigh bridge and the value of these bought out items are not includable in the assessable value. - AT
Articles
Notifications
Central Excise-
25/2023 - dated
31-7-2023
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CE
Prescribe rates of SAED for exports of petrol and diesel - High speed diesel oil -Rate made @ Rs. 1 per litre - Notification No. 04/2022-Central Excise, dated the 30th June, 2022 amended.
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24/2023 - dated
31-7-2023
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CE
SAED on production of Petroleum Crude - Rate increased for “Rs. 4,250 per tonne” - Notification No. 18/2022-Central Excise, dated the 19th July, 2022 amended.
Customs-
56/2023 - dated
31-7-2023
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Cus (NT)
Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver
GST-
35/2023 - dated
31-7-2023
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CGST
Appointment of Adjudicating Authorities u/n CGST Act and IGST Act.
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34/2023 - dated
31-7-2023
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CGST
Persons exempted from obtaining registration under CGST Act - Persons making supplies of goods through an electronic commerce operator who is required to collect tax at source u/s 52 of the CGST Act specified.
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33/2023 - dated
31-7-2023
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CGST
“Account Aggregator” notified as the systems with which information may be shared by the common portal based on consent u/s 158A of CGST Act, 2017
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32/2023 - dated
31-7-2023
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CGST
Exemption from filing annual return for the said financial year to registered person whose aggregate turnover in the financial year 2022-23 is up to two crore rupees.
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31/2023 - dated
31-7-2023
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CGST
Biometric-based Aadhaar authentication u/r 8(4A) mandated for the State of Puducherry - Seeks to amend Notification No. 27/2022-Central Tax, dated the 26th December, 2022
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30/2023 - dated
31-7-2023
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CGST
Special procedure to be followed by a registered person engaged in manufacturing of the goods - Additional records to be maintained by the registered persons manufacturing the goods mentioned in the Schedule
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29/2023 - dated
31-7-2023
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CGST
Special procedure to be followed by a registered person or an officer u/s 107(2) of CGST Act who intends to file an appeal against the order passed by the proper officer
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28/2023 - dated
31-7-2023
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CGST
Seeks to bring in force various sections of Finance Act, 2023
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27/2023 - dated
31-7-2023
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CGST
Bring in force provisions of section 123 of the Finance Act, 2021 - Appointed date 1st day of October, 2023
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01/2023 - dated
31-7-2023
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IGST
Goods or services may be exported or supplied to SEZ on payment of integrated tax (IGST) and refund may be claimed thereafter - This facility of payment of IGST first and claim of refund later is not available for certain goods as specified
Income Tax-
56/2023 - dated
1-8-2023
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IT
Zero Coupon Bond - Specified bond notified u/s 2(48) of the Income-tax Act, 1961.
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55/2023 - dated
1-8-2023
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IT
Incomes not included in total income - Joint Electricity Regulatory Commission (for the State of Goa and Union Territories except Delhi), Gurugram notified for Exemption from specified income U/s 10(46)
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04/2023 - G.S.R. 571 (E). - dated
31-7-2023
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IT
Allocation of areas of jurisdiction among the Competent Authorities authorized u/s 5(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act - Supersession Notification No. 02 of 2021 G.S.R, 499(E), dated the 19th July, 2021
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2023 (8) TMI 46
Recovery of input tax credit - Transfer of unutilized ITC from one entity to another - Demand confirmed on the ground that the transfer of the said ITC has been accepted and availed by the petitioner through Form GST-33 instead of GST ITC-02 - period September, 2017 to November, 2017. It is the case of the petitioner that functionality for filing Form IT-02 was not available on the common portal. HELD THAT:- The objections filed by the petitioner has not been considered by the respondent No. 2 and the order has been passed on technicalities. Shri Ankur Agarwal, learned counsel appearing for the Respondent No.2 has vehemently argued in support of the impugned order. He submits that the averment of the petitioner to the effect that the objections have not been considered is ill founded inasmuch as the impugned order records that the objections have been filed and despite opportunity having been afforded to the petitioner for personal hearing, the same was not availed by the petitioner. No irregularity or illegality can be attributable to the impugned order and the same is liable to be sustained. The petitioner has been non suited on the ground that Form ITC-02 for transfer of input tax credit was not available on the GST Portal which was in nascent stage during the initial months after its implementation on 01.07.2017 and it was incumbent upon the petitioner to have raised a proper grievance on the GST portal help-desk and ought to have waited for the relevant Form to go live on the GST portal instead of making illegal adjustment by use of the Form GSTR-3B of the transferor and the transferee company and mere shortage of working capital cannot be an excuse to bypass the legal procedure laid down under the law. The stand of the Respondent No.2, for rejecting the claim of the petitioner in the wake of the admitted fact that the GST common portal was not online cannot be justified - Petition disposed off.
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2023 (8) TMI 45
Validity of bailable and non-bailable warrants issued - GST evasion - Allegation of cretionof fake entities - avoiding the summoning orders - HELD THAT:- There is no quarrel with the legal position that in a warrant triable case, after cognizance, the Court has power to issue warrant of arrest under Section 204 of the Cr.P.C. The Court has power to issue summon even in a warrant case, but there is no mandate of law that in all circumstance, even in warrant cases, the Court is bound to issue summons. What has been stated in the case of Santender Kumar Antil [ 2022 (8) TMI 152 - SUPREME COURT ] by Hon ble Supreme Court that the Court need to record special reason while issuing warrant in such cases. In the present case, processes have been issued post-cognizance and it has been rightly contended on behalf of petitioners that once the summons had been issued, the Court could issue warrant only after receipt of the service report. Had such a warrant been issued in the pre-cognizance stage during the investigation things would have been different, as the petitioners had been served summons several times, but they deliberately avoided appearance before the investigating agency, despite the direction of this Court to appear before the said agency. The impugned order of issuing the warrant of arrest is set aside - Petition allowed.
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2023 (8) TMI 44
Profiteering - project Migsun Wynn - benefit of ITC in respect all the other Projects to the buyers, passed on or not - contravention of section 171 of CGST Act - HELD THAT:- This Commission has carefully considered the DGAP's Report dated 30.08.2022 and the documents/information placed on record and it has been revealed that the Respondent is executing a single project namely Migsun Wynn under GSTIN 09AALCS8695P1ZZ and this has also been verified by the DGAP from the website of Uttar Pradesh Real Estate Regulatory Authority (UPRERA) - Further, the Respondent is also executing one more project Migsun Janpath registered in UPRERA under RERA Registration No. UPRERAPRJ986676 which belongs to other GSTIN 09AALCS8695P2ZY. The above project was approved by Lucknow Development Authority vide Sanction Letter No. MAP20190715201831787 dated 11-12-2019 after introduction of GST. The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017 as the Respondent is not executing any project other than the project Migsun Wynn which has already been investigated and profiteered amount determined by the NAA [ 2022 (8) TMI 271 - THE NATIONAL ANTI-PROFITEERING AUTHORITY ]. The present proceedings being conducted against the Respondent are dropped.
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Income Tax
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2023 (8) TMI 43
Condonation of delay - Delay in filing of refilling of appeal - Delhi High Court dismissing the appeals [ 2017 (2) TMI 1538 - DELHI HIGH COURT] on the ground of delay of 707 days in refiling - appellant(s) submitted that there was no delay in the filing of the appeals before the High Court but there was delay in refiling and High Court could have condoned the said delay in refiling but has instead dismissed the appeals - HELD THAT:- We find that the delay of 707 days has occurred in refiling and not in filing of the appeals. Therefore, in our view, the High Court ought to have condoned the said delay in refiling and heard the appeals on merits rather than dismissing the same without hearing on merits. In order to give an opportunity to the appellant(s) herein as well as the respondent(s) to seek hearing of the appeals on merits, the impugned order is set aside, the matter is remanded to the High Court while condoning the said delay of 707 days in refiling the appeals.
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2023 (8) TMI 42
TDS u/s 194N - Seeking exemption for all those Primary Cooperative Credit Societies functioning in the State of Tamil Nadu on cash withdrawals exceeding Rs.1 and from their accounts from District Cooperative Banks - HELD THAT:- In view of the stand taken by the learned Senior Counsel appearing for the Income Tax Department, Government of India and by taking note of the earlier directions given by this Court as stated supra by the order [ 2023 (3) TMI 1387 - MADRAS HIGH COURT] to the said authorities to consider and pass orders on the request made by the Government of Tamil Nadu through their letter dated 27.09.2022 of the Chief Secretary to Government, this Court is inclined to dispose of all these writ petitions with the following orders. That already a direction has been given by the order dated 03.03.2023 to decide on merits, the request made by the Government of Tamil Nadu through the Chief Secretary to the Government dated 27.09.2022 and since the learned Standing Counsel requested further time to decide the same on merits, I feel that further time of six weeks can be granted, within which the Ministry of Finance, Government of India and the CBDT, New Delhi would decide the request made by the Government of Tamil Nadu through the letter of the Chief Secretary to Government of Tamil Nadu dated 27.09.2022, seeking exemption for all those Primary Cooperative Credit Societies functioning in the State of Tamil Nadu from the purview of Section 194N of the Income Tax Act and accordingly pass orders thereon and communicate the same to the State of Tamil Nadu.
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2023 (8) TMI 41
Penalty u/s 271(1)(c) - unexplained cash credit - peak credit theory applied - assessee has contended that by applying peak credit theory, the ld. CIT(A) has granted relief on estimated basis based on the details furnished by the assessee and therefore, there was no concealment of income or furnishing of inaccurate particulars - HELD THAT:- We find force in the argument of the ld. Counsel. Against the quantum addition, once the ld. CIT(A) has determined the unexplained cash credit by considering the peak credit amount deposited, which is nothing but an estimated credit, the Assessing Officer was not legally and factually correct to levy penalty under section 271(1)(c) of the Act. Accordingly, the penalty levied under section 271(1)(c) of the Act stands deleted. Appeal of assessee allowed.
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2023 (8) TMI 40
Addition of unaccounted cash u/s. 69 - deposits of Specified Bank Notes (SBNs) during demonetization period - As argued unaccounted cash has wrongly been assessed u/s. 69 whereas if at all assessment is to be made, it should be made u/s. 69A - HELD THAT:- DR,could not answer what is the quantum of demonetized currency in this cash deposits and what is the quantum of new currency. Further, he could not controvert the sale effected by assessee of Nestle products to various vendors and traders because the entire cash receipts is attributable to sales only, which has been deposited by the assessee in to its bank account. Admittedly, this cash deposit in OD bank account by the assessee is not clearly established by the Revenue whether it is in demonetized currency or in the new notes but it is an explained source and out of sale proceeds. At best, some profit element can be added in this cash sales of Rs. 31,21,000/- because the assessee also could not back the sales by evidences that the entire cash deposits are on account of sale proceeds or sale receipts. Hence, estimate a reasonable disallowance of 10% on this and direct the AO to tax the same under normal rates because being business income this is not to be assessed u/s. 115BBE of the Act. Appeal of the assessee is partly allowed.
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2023 (8) TMI 39
Penalty u/s 271-I - Assessee has not furnished / provided information fully related to section 195 before the AO - assessee could not submit the necessary certificate i.e. Form No.15CA in respect of the all remittance made before the AO during the scrutiny proceedings - HELD THAT:- We note that the assessees issue is squarely covered by the judgment of this Tribunal in the case of ACIT vs. Vinay Diamonds [ 2023 (7) TMI 1262 - ITAT SURAT] since, the remittances which were made, were against the import of goods and does not attract the provision of withholding tax and the requirement to furnish the details u/s 195(6) r.w. Rule 37BB is not mandatory. CIT(A) held that there is lack of clarification of words expressively in the provisions, and only during this assessment year and no express specification have been made for penalty for each default. The Income Tax Rules were amended w.e.f. from 16/12/215, in which the list of payments of specified nature mentioned in Rule 37BB, which do not require submission of Forms 15CA and 15CB, has been expanded from 28 to 33. The amendment though came into effect from 16th December 2015, but it is a settled law that if a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended. Therefore, ld CIT(A) held that the penalty provisions u/s 271-I of the Act will not be applicable in the case and therefore ld CIT(A) deleted the same - there is no infirmity in the conclusion reached by ld CIT(A). Thus we delete the penalty imposed by the Assessing Officer - Decided in favour of assessee.
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2023 (8) TMI 38
Exemption u/s 10(5) denied - reimbursement of Leave Travel concession Involving foreign leg through circuitous route as long as the employees designated place is in India for his leave travel concession and he actually visits the place as designated - HELD THAT:- On respectful perusal of the judgment of the Hon'ble Supreme Court [ 2022 (11) TMI 426 - SUPREME COURT ] in assessee s own case in Civil Appeal (supra) we find that the identical issue under identical facts and circumstances for AY 2013-14 has been decided in favour of the revenue and against assessee as held provision for LTC was introduced to motivate employees and encourage its employees towards tourism in India and it is for this reason that reimbursement of LTC was exempted. There was no intention of legislature to allow the employees to travel abroad in the garb of LTC available by virtue of Section 10(5) of the Act. Therefore, the Revenue has a valid objection (apart from other objections which are clearly violative of the Statute), that the intention and purpose of the scheme is also violated in the garb of tour within India, foreign travel is being availed. The appellant cannot claim ignorance about the travel plans of its employees as during settlement of LTC Bills the complete facts are available before the assessee about the details of their employees travels. Therefore, it cannot be a case of bonafide mistake, as all the relevant facts were before the Assessee employer and he was therefore fully in a position to calculate the estimated income of its employees. The contention of assessee that there may be a bonafide mistake by the assessee-employer in calculating the estimated income cannot be accepted since all the relevant documents and material were before the assessee- employer at the relevant time and the assessee employer therefore ought to have applied his mind and deducted tax at source as it was his statutory duty, under Section 192(1) of the Act. Decided against assessee.
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2023 (8) TMI 37
Disallowance u/s 14A r.w.r. 8D - assessee submitted that the disallowance be restricted to the total exempt income - CIT(A), restricted the disallowance u/s 14A to the exempt income earned by the assessee and upheld the addition partly - HELD THAT:- CIT(A) accepting the contention of the assessee, which was in line with the prevailing jurisprudence, restricted the disallowance under section 14A to the quantum of exempt income earned by the assessee. We find that in Nirved Traders (P.) Ltd [ 2019 (4) TMI 1738 - BOMBAY HIGH COURT] has held that disallowance under section 14A of the Act cannot be more than exempt income. No infirmity in the impugned order passed by the learned CIT(A). Accordingly, the grounds raised by the Revenue are dismissed.
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2023 (8) TMI 36
Unexplained investment - Purchase of shares at premium - as per DR whole transaction is a pre-structured transaction and a colourable device used by the assessee only for the purpose of introducing a huge amount of undisclosed income of the assessee in the form of investments - HELD THAT:- We find that the lower authorities have found the assessee to be not doing any business activity at its premises and have found the assessee to be showing no sales/receipts and only a meagre taxable income of Rs. 8000. AO found the assessee to be having very weak financials, which cannot lead to investment to an extent of Rs. 7,93,50,000 by any prudent businessman. Accordingly, the AO treated the assessee to be a shell company, which is used to launder money as reflected in the books of account. Assessee failed to substantiate the huge investment by purchasing shares at a premium of Rs. 10,000 per share having a face value of Rs. 100 of a loss-making company. Therefore, in the absence of any contradictory material being available on record to controvert the aforesaid findings recorded by the lower authorities, grounds raised in assessee s appeal are dismissed. Ex-parte order u/s 250 - non affording any opportunity of being heard in the matter which is against the principles of natural justice and hence the order passed be quashed - HELD THAT:- As no material has been brought on record to justify non-compliance with the various notices of hearing issued by the CIT(A). Accordingly, we find no infirmity in the impugned order whereby the appeal filed by the assessee was decided on the basis of material available on record. As a result, ground no.1 raised in assessee s appeal is dismissed.
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2023 (8) TMI 35
Agricultural income - Addition made as no documentary evidence was furnished in support of sale of poplar trees - HELD THAT:- We are unable to agree to the addition made on account of agricultural income because the assessee had duly filed the invoices pertaining to sale of poplar trees and had also produced the copy of Kisan Bahi before the AO. Therefore, AO without pointing out specific defects in these invoices or pointing out any reason for which these invoices are not to be taken as genuine could not have made the impugned addition. There is no valid reason for simply ignoring these invoices and rejecting the assessee s claim of agricultural income. Admittedly, the assessee did not have substantial agricultural income in earlier assessment years but without any adverse material being brought on record, the claim of the assessee cannot be simply discarded. Accordingly, set aside the order of the NFAC on the issue and direct the Assessing Officer to delete the addition pertaining to agricultural income. Cash deposited out of past savings - Admittedly and undisputedly, assessee s wife is not a tax payer and, therefore, whatever cash is accumulated out of past savings is out of the earnings of the assessee (her husband) only and, therefore, only the husband i.e. the assessee should get the benefit of this instruction. Accordingly, direct the AO to given benefit of cash deposits of Rs. 2.50 lacs out of total cash deposits of Rs. 3.25 lacs on this account. Accordingly, the difference of Rs. 75,000/- is sustained. The assessee is directed to pass the consequential order giving effect to my directions as aforestated. Appeal of the assessee stands partly allowed.
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2023 (8) TMI 34
Deduction u/s 80P(2) - AO denied the deduction applying the provisions of section 80P(4) since the assessee is providing credit facilities to its members - HELD THAT:- As hon‟ble Supreme Court in a recent decision in PCIT v/s Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. [ 2023 (5) TMI 372 - SC ORDER] held that a taxpayer who is merely giving credit to its members cannot be said to be the Co-operative Banks/Banks under the Banking Regulation Act and the banking activities under the Banking Regulation Act are altogether different. Therefore, the Hon‟ble Supreme Court held that the assessee, a co-operative credit society, could not be termed a Bank/Co-operative Bank and that being a credit society, it was entitled to exemption under section 80(P)(2) of the Act. We find that the issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee in the preceding assessment years. The Revenue could not show us any reason to deviate from the aforesaid decision rendered in assessee s own case and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the orders passed by the Co ordinate Bench of the Tribunal in assessee s own case [ 2023 (5) TMI 1238 - ITAT MUMBAI] we are of the considered view that the assessee is entitled to claim deduction under section 80P(2) of the Act. Accordingly, the grounds no. 2-6 raised in assessee s appeal are allowed.
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2023 (8) TMI 33
Penalty u/s 270A for mis-reporting of income - misrepresentation or suppression of facts - property under consideration was purchased by late husband of the assessee who expired intestate, and entire investment was made by the husband, however, the property was registered in the name of wife assessee - AO disputed the deduction claimed by the assessee for each of the son and daughter - HELD THAT:- Assessee s husband purchased a property from his own funds. However, the property was purchased in the name of the assessee who do not have any independent sources of income. The husband died intestate leaving behind the assessee, a son and a daughter. The assessee has sold the said property and declared full sale consideration in the computation of income. Apparently, the assessee has paid a sum of Rs. 5 Lacs each to son and a daughter to settle the respective claim in the said property. The sum so paid was claimed as deduction which was denied by Ld. AO. The assessee accepted the same and paid due taxes thereupon. AO imposed impugned penalty by holding that there was misrepresentation or suppression of facts. It could not be said that the assessee misrepresented or suppressed any material facts, All the computations were disclosed in the return of income and the same was furnished to Ld. AO also during the course of assessment proceedings. The assessee s claim that the amount so paid was to be considered as sum paid towards perfecting the title could not be said to be without any basis. Merely because the claim so made by the assessee was not accepted would not lead to automatic levy of penalty. It is settled law that levy of penalty is not automatic. To fall under, 270A(9)(a), essentially there has to be misrepresentation of suppression of facts. The same, in our considered opinion, was not a case here and it was not a fit case for imposition of penalty. Therefore, we delete the impugned penalty. Assessee appeal stand allowed.
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2023 (8) TMI 32
Exemption u/s. 10(23C)(vi) - denial of exemption as assessee not carrying out the activities solely for the purpose of education - HELD THAT:- Education connotes the process of training and developing the knowledge, etc., of students by normal schooling. The assessee Trust though submitted clarification regarding its medical object but conveniently remained silent on its object of scholarship. The assessee Trust also remain silent regarding its other non-educational objects such to organize Family Planning Centers, undertake activities for upbringing and training for self-reliance to orphan and deserted women and children, etc. Thus it clearly proves that the assessee is not existing solely for the purpose of education . The assessee trust has not submitted documentary evidence, which could establish its contention that such scholarships are in fact been used by those students for the purpose of education. Thus the contention of the assessee that the activities of the Trust are only for education is also not correct. The Hon. Supreme Court in the case of Dharamposhanam [ 1978 (7) TMI 2 - SUPREME COURT] has held that whether a Trust is for charitable purpose or not is to be determined by reference to all the objects for which the trust has been brought into existence and for considering the claim of exemption, the activities under the provisions of its memorandum of association are relevant and not the activity actually conducted by the assessee. Assessee Trust having multiple objects cannot be said to be existing solely for the purpose of education . It is open to the trust to pursue all or any of the objects of the trust under the garb of education. Therefore in our considered view, the condition of section 10(23C)(vi) i.e the applicant existing solely for educational purposes is not fulfilled in the present case. The case laws relied by the assessee are all from Lower Forums and clearly distinguishable, however we hereby dealt with the judgments of the Hon ble Apex Court only to arrive our conclusion. Thus we have no hesitation in confirming the denial of exemption u/s. 10(23C)(vi) of the Act to the assessee. Decided against assessee.
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2023 (8) TMI 31
Collection of tax at source (TCS) u/s. 206C - whether or not the assessee was liable for collection of tax at source (TCS) u/s. 206C on the amount of compounding fees received from persons involved in illegal mining and transportation of minerals and whether or not any obligation was cast upon the assessee to have collected tax at source (TCS) on the amount of contributions made by the lease holders i.e. lessees towards DMF and NMET? - HELD THAT:- We are of the considered view that the assessee by receiving the aforesaid amount i.e. 10 times of royalty from the illegal miners/transporters of minerals had, in turn, clearly vested/parted with the interest and right in the mine in their favour, which the latter had undeniably used for the purpose of her business. Considering the fact that the orders w.r.t amounts collected by the assessee i.e. DMO from illegal miners/transporters of minerals in itself states that an amount i.e. 10 times of the royalty amount is to be recovered from the illegal miners/transporters, therefore, we are unable to comprehend that as to on what basis it is averred by the AR that the said amounts so received by the assessee would not fall within the realm of Section 206C(1C) - As the assessee in the case before us had not only received royalty from the illegal miners/transporters of minerals as it would have in the normal course received in case of a regular lease or license, but in fact was in receipt of 10 times of royalty amount from them, therefore, the contention of the Ld. AR that the assessee was not exigible for collection of tax at source (TCS) on the amounts received from the illegal miners/transporters of minerals being devoid and bereft of any substance is liable to be rejected. We, thus, in terms of our aforesaid observations, finding no infirmity in the view taken by the lower authorities that the assessee who was liable to collect tax at source (TCS) on the amounts received from illegal miners/transporters, having failed to do so, was to be treated as assessee-in-default u/s. 206C(6) of the Act, uphold the same. Thus, the Ground of appeal No.1 raised by the assessee is dismissed in terms of our aforesaid observations. TCS on the amounts deposited by the lease holders towards DMF - We find that in the accounts of the assessee i.e. DMO for the immediately succeeding year i.e. F.Y.2017-18 the payments made by the lease holders towards Contribution funds are reflected. As the accounts of the assessee prima-facie militates against the aforesaid observations arrived at by us by looking into the provisions of Section 9B of the Mines and Minerals (Development and Regulation) Act, 1957, therefore, in our considered view the matter in all fairness requires to be revisited by the A.O. A.O is directed to verify as to whether the assessee was in receipt of contributions towards DMF from the leaseholders; or as claimed by the assessee the amounts were paid by the respective lease holders directly to the DMF. In case the claim of the assessee i.e. the lease holders were directly making payments to DMF is found to be in order, then as observed by us hereinabove no obligation would be cast upon the assessee to collect tax at source (TCS) on the contributions made by the lease holders to DMF. Needless to say, the A.O shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee. TCS on the contributions made by the lease holders towards NMET - Now when the assessee i.e. DMO had neither debited the amount of lessee s contribution towards NMET to the account of the lease holders; nor at any stage received any amount of contribution towards NMET from the lease holders, therefore, on the said count itself it could not have been saddled with any obligation for collecting any tax at source on the said amount. Admittedly, a pit-pass would be issued by the assessee to the lease holder only after he produced evidence of having paid the amount of royalty a/w. payments towards DMF/NMET, but on the said standalone fact de-hors satisfaction of the requisite conditions contemplated in sub-section (1C) of Section 206C no obligation could have been saddled upon the assessee to collect tax at source (TCS) on the amount of NMET paid by the lease holders. As the accounts of the assessee prim-facie militates against the aforesaid observations arrived at by us by looking into the provisions of Section 9C of the Mines and Minerals (Development and Regulation) Act, 1957, therefore, in our considered view the matter in all fairness requires to be restored to the file of the A.O. The A.O is directed to verify as to whether the assessee was in receipt of contributions towards NMET from the lease holders; or as claimed by the assessee the amounts were paid by the respective lease holders directly to NMET. In case the claim of the assessee, that the lease holders were directly making payments to NMET is found to be in order, then as observed by us hereinabove, no obligation would be cast upon the assessee to collect tax at source (TCS) on the amounts paid by the lease holders to NMET. Needless to say, the A.O shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee.
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2023 (8) TMI 30
Income deemed to accrue or arise in India - royalty income - taxability of receipts from provision of disaster recovery up-linking services, disaster recovery play-out services, down-linking and distribution services, space segment capacity services and digital satellite news gathering services - addition u/s 9(1)(vi) as well as under Article 12(3) of India- Singapore Double Taxation Avoidance Agreement (DTAA) - DRP have treated the disputed receipts as FTS - HELD THAT:- As relying on assessee s appeal for assessment year 2017-18, we hold that the receipts in dispute are not in the nature of FTS, hence, not taxable in India. Accordingly, the Assessing Officer is directed to delete the addition. Grounds are allowed. Addition being business profits of the assessee attributable to the alleged permanent establishment (PE) in India - Assessee through sub-contractors had carried out installation and commissioning of such equipments - AO has referred to India-Italy, India-Australia and India- USA DTAAs, where, treaty provisions explicitly provide that for determination of existence of PE, all projects in one contracting State have to be construed as single project, and in absence of such express provision like India-Netherlands DTAA in India-Singapore DTAA, all project sites have to be treated as one - HELD THAT:- In our considered opinion, provisions contained in Article 5(3) and 5(4) of India- Singapore DTAA cannot at all be compared with similar provisions contained in India-Australia, India-Italy and India-USA DTAAs. Thus, strictly going by the language used in Article 5(3) and 5(4) of India- Singapore DTAA, each project site has to be construed as a separate project for constituting an installation or supervisory PE in terms of Article 5(3) and 5(4) of the treaty. Viewed in the aforesaid perspective, undisputedly, each project site did not exceed threshold limit of 183 days. In that view of the matter, the project sites of Accenture Solutions Pvt. Ltd. at Bangaluru and Gurugram cannot be considered to be either installation or supervisory PE of the assessee in India. That being the factual position emerging on record, in our view, the assessee in the year under consideration did not have any PE in India. Therefore, no profits out of sale of equipments as well as installation and commissioning services can be taxed in India. The addition made is, therefore, directed to be deleted. Taxability of receipts from internet bandwidth charges as royalty income - HELD THAT:- In absence of any such amendment widening the scope of expression royalty under the treaty provisions, the amendment made to section 9(1)(vi) of the Act cannot be automatically brought or imported to Article 12(3) of India-Singapore DTAA, as the treaty provisions have to be construed strictly in accordance with the language used in the provision. While coming to such view, we have found support from the ratio laid down in the decisions cited by learned Sr. Counsel for the assessee. Thus, we hold that the receipts from internet bandwidth charges cannot be treated as royalty income under Article 12(3) of India-Singapore DTAA. Accordingly, we direct the Assessing Officer to delete the addition. Taxability of receipts from reimbursement of licence fee as royalty income - HELD THAT:- From the assessment order, it is discernible that the receipts are in the nature of cost to cost reimbursement of payments made to Singapore government. Hence, the receipts did not have any profit element embedded therein. In fact, the Assessing Officer has not disputed the aforesaid factual position. In case of DIT vs. A.P. Moller Maersk AS ( 2017 (2) TMI 993 - SUPREME COURT ) Hon ble Supreme Court has observed that once the character of the payment is found to be in the nature of reimbursement of expenses without having any profit element embedded therein, it cannot be held to be chargeable to tax.Thus we hold that reimbursement of expenses cannot be treated as royalty income. The Assessing Officer is directed to delete the addition.
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2023 (8) TMI 29
Addition u/s 68 - assessee company failed to prove the genuineness and creditworthiness of the investor company - HELD THAT:- As in terms of our observations we set-aside the order of the CIT(Appeals) only to the limited extent he had accepted the claim of the assessee company of having received share application money from M/s. Kush Trading Commerce Pvt. Ltd., i.e to the extent the same was sourced from the share application money received by the latter investor company from the aforementioned two concerns, viz. (i). Lectrodryer Marketing Pvt. Ltd; and (ii). Balsasaria Holdings Pvt. Ltd., with a direction to him to re- adjudicate the same after confronting the requisite material and affording a reasonable opportunity of being heard to the assessee company.
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2023 (8) TMI 28
Revision u/s 263 - revise scrutiny assessment u/s 143(3) of the Act holding it as erroneous and prejudicial to interest of revenue - undisclosed income accepted / acknowledged by the assessee during the course of survey proceedings - AO Taxed it at normal rate of tax of 30% as against the higher rate as provided under section 115BBE of the Act of 60% - HELD THAT:- All that is required for invoking provisions of section 69A of the Act is that the assessee is found to be the owner of money during the course of survey. There is a marked difference between money/ cash being found at the premises of the assessee and the assessee being found to be the owner of money /cash . Section 69A of the Act only contemplates of the latter situation. An assessee can be found to be the owner of money/cash on the basis of seized documents/ diary/ the statement of the assessee or working partner of an assessee firm made during the course of search. In the instant facts, admittedly certain diary noting was found and further the working partner of the assessee firm admitted to certain undisclosed income in cash outside the books of accounts. Therefore, there is no restriction in invoking the provisions of section 69A read with section 115BBE in the instant facts. Restriction on cash transactions - In the instant facts, admittedly, a sum of 1,01,00,000/-was received by the assessee firm in cash, which was admittedly not reflected in the books of accounts. Therefore, in our considered view, the AO should have made requisite enquiries with regards to applicability of provisions of section 269ST read with section 271DA of the Act, while framing the assessment. In the instant case, evidently, no enquiries with regards to applicability of section 269ST read with section 271DA of the Act, were made by the AO during the course of assessment proceedings, when evidently it was within the knowledge of the AO that the aforesaid amount was received by the assessee firm in cash, outside the books of accounts. We are unable to accept the argument of assessee that simply if the assessee declared the undisclosed income discovered during the course of survey proceedings, as its business income (though in the instant facts, the aforesaid amount was declared as other income in the return of income), then, this itself would take the case outside the purview of section 269ST read with section 271DA of the Act. Thus we are of the considered view that Principal CIT has not erred in facts and in law in holding that the order passed by the assessing officer was erroneous and prejudicial to the interests of the Revenue. Decided against assessee.
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2023 (8) TMI 27
Addition u/s 56(2)(vii)(b)(ii) - higher valuation of land by Sub-Registrar - reckoning of stamp duty valuation - reverse calculation for arriving at the stamp duty valuation by applying stamp duty rate @ 4.9% - AR submitted that the provisions of Section 56(2)(vii)(b)(ii) inserted by Finance Act 2013-14 and was given assent by the Parliament on 10.05.2013 whereas registration formalities of the property were completed on or before 10.05.2013 and AO as well as the CIT(A) was not right in making reverse calculation for arriving at the stamp duty valuation by applying stamp duty rate @ 4.9% as the provisions of Section 50C does not empower AO to work out stamp duty valuation by making reverse calculation - HELD THAT:- The registered banakhat agreement with M/s. Durga Ricol Industries Pvt. Ltd. dated 24.09.2010 and the order passed by the Deputy Collector, Dholka and Mamlatdar, Sanand dated 24.02.2011 and 17.02.2011 clearly set out the position of the assessee and its co-owners in respect of the Survey No. 139, 140, 141 and 142. Clearance from GIIC and PF Department entry also highlights that the agreement for purchase of property in question was actually entered into with the seller on 10.06.2010 and the stamp duty value has to be reckoned from the date of agreement for purchase of property and not from the date of registration as provided in the law. The submission of AR appears to be justifiable and in fact the Revenue, in one of the co-owners case i.e. Shri Ashok Natvarlal Patel (CIT(A) s order dated 14.03.2019) has taken a view that the stamp duty valuation of the property mentioned hereinabove prevailing on 23.06.2010 should be adopted. Thus, the Assessing Officer as well as CIT(A) was not correct in making the addition. Thus, Ground Nos. 1 to 3 are allowed.
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2023 (8) TMI 26
Penalty u/s 271(1)(c) OR 271AAA - Addition of undisclosed income found during search proceedings - correct section for levy of penalty - HELD THAT:- As the requirements for levy of penalty under section 271AAA of the Act were (i) search action should have been initiated after 1stJune, 2007, (ii) there is undisclosed income and (iii) the undisclosed income relates to a specified previous year . CIT(A) correctly noted that the assessee fulfilled first condition since search in the present case was conducted in February, 2011. He noted fulfillment of the second condition of there being undisclosed income noting that all income found in the case of the assessee represented by entries in books of accounts or other documents found during the search, unexplained jewellery and unexplained marriage expenses were included in the definition of undisclosed income as per the Explanation to the section. Fulfillment of the other condition, that the impugned assessment year qualified as specified previous year since as per the definition of specified previous year it included the year in which search was concluded, which he found was the fact in the present case. DR was unable to controvert the above findings of the Ld.CIT(A) - No infirmity in the order of the ld.CIT(A) holding that the correct section for levy of penalty in the present case was under section 271AAA and not section 271(1)(c) which was invoked by the AO. Decided against revenue. Whether mere invocation of incorrect section would not invalidate order? - AO had no power to levy penalty under section 271(1)(c) of the Act, which had been expressly denied by sub-section (3) of section 271AAA of the Act. Therefore, plea of the Revenue that the AO having power to levy penalty ,he could have exercised the same by levying either under section 271AAA or under section 271(1)(c) of the Act, we hold is wholly misplaced and contrary to law.
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2023 (8) TMI 25
Revision u/s 263 by CIT - Addition u/s 68 - exempted u/s 10(38) denied - long-term capital gain shown by the assessee as arising from the sale purchase of the script of a penny stock company - 2nd round of litigation - HELD THAT:- AO during the original assessment proceedings has taken one of the possible views while framing the assessment under the provisions of section 143(3) of the Act. It is the settled position of law that any plausible view taken by the AO during the assessment proceedings cannot render the assessment order as erroneous insofar judicial to the interest of revenue. In holding so we draw support and guidance from the judgement of Embassy Brindavan Developers [ 2022 (10) TMI 1120 - KARNATAKA HIGH COURT] . All the necessary documents in support of the transactions carried out by the assessee have been duly furnished by the assessee before the authorities below. Thus we are of the view that there is no infirmity in the assessment order requiring the revision under the provisions of section 263 - Decided in favour of assessee.
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2023 (8) TMI 24
TPA - comparable selection - Exclusion of Infosys BPO - HELD THAT:- Admittedly, in the present case, the TPO has applied the export turnover filter of 75% as seen from the record. However, the assessee before us demonstrated that this company fails in the export turnover. In our view, it would be appropriate, if the TPO examine afresh and find out whether this comparable fulfills the export turnover filter or not. Needless to say that the above said exercise shall be carried out by the Assessing Officer / TPO after granting the opportunity of hearing to the assessee. Capgemeni Business Services India Ltd - AO/TPO applied the RPT filter of 25% - HELD THAT:- Before the TPO no such objection was raised. However, this specific objection was raised by the assessee before the learned DRP, but for the reason best known to the DRP, it failed to adjudicate the ground raised by the assessee in so much so whereby it was submitted that comparable company fails on account of non fulfilment of RPT filter. As the case may be, since the facts has not been analysed by the DRP/TPO, it would not be possible for us to decide the issue of failure of RTP filter at the appellate stage. In the light of the above, we remand the issue back to the file of the Assessing Officer/TPO with a direction to examine the functional similarities / dissimilarity of Capgemeni Business Services India Ltd having regard to the application of RPT filters. Informed Technology India (P) Ltd is deriving revenue from ITES business and is not deriving income from software development - In our view, this is a factual finding which required examination of facts by the lower authorities and therefore, we deem it proper to remand this issue of inclusion of Informed Technologies to the file of TPO with a direction to find out from the record, whether Informed Technologies Ltd derives its revenue only from the BPO or not. Besides that, the learned TPO is also directed to examine the financial profile of the Informed Technologies Ltd and whether this company is functionally similar with the assessee company. Jindal Intellicom Ltd. - The lower authorities on examination has come to the conclusion that this company is not comparable with that of the assessee as it is into software development and is deriving revenue from call centre. However, the above said aspect has not been examined by the lower authorities. Therefore, we deem it appropriate to remand back this issue to the file of the TPO/Assessing Officer with a direction to examine the financials of the Jindal Intellicom Ltd and whether this comparable is with the assessee or not. TPO is directed to find out after using its power as available under the law whether this company is earning revenue from the software development services or not. TP ground raised by the assessee are decided. It is made it clear that the TPO shall include inclusion/exclusion after affording reasonable opportunity of being heard to the assessee and pass a speaking order considering the decisions of the Tribunal / Judicial High Courts in this regard. Interest delayed receivable - DRP had issued directions to the TPO that 'deferred receivables' would constitute international transaction and has to be benchmarked in regard to delay beyond the reasonable credit period and accordingly we reject the various pleas raised - Also examine the assessee's claim of credit period of 120 days, and if it is so, allow credit period of 120 days - HELD THAT:- The law is fairly settled with respect to the binding nature of the DRP u/s 144C(13)(10) whereby the TPO/AO are directed to give effect to the issues and directions given by the DRP. Despite specific directions issued by the DRP, the TPO/Assessing Officer are not complying with the same in letter and spirit. Therefore, we reiterate and repeat the directions issued by the DRP and direct the TPO to give effect to the directions given by the DRP forthwith.
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2023 (8) TMI 23
Addition u/s 68 - cash deposit in his savings bank account remains unexplained - Assessee explained to be agricultural income - HELD THAT:- As the agricultural income was not denied and he has explained source as he is the owner of agricultural land of 15 acres which was not controverted by AO in his assessment order or CIT(A) or now by the Senior DR before me, except creating some suspicion. We accept this credit as explained for the reason that the assessee has sources of earning i.e., agricultural income from 15 acres of land. Hence, addition of cash credit of Shri P. Karthikeyan is deleted hereby. Cash credit from Shri P. Sakthivel - Going by the ownership of land that Shri P. Sakthivel s grandfather and mother was the owner of 5 acres of land and Shri M. Muthukumar is owner of 3.2 acres of land, it is not possible to have accumulated Rs. 8,00,000/- each for advancing this amount for purchase of land. However going by the status and holding of land, I estimate that both might have saved a sum of Rs. 4,00,000/- each and advanced these for purchase of land to the assessee. I estimate the balance undisclosed income at Rs. 8,00,000/-. Accordingly, I estimate the explained money of these two cash credits namely Shri P. Sakthivel and Shri M. Muthukumar of Rs. 8,00,000/- and balance Rs. 8,00,000/- to be treated as unexplained. Appeal filed by the assessee is partly-allowed.
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2023 (8) TMI 22
Admission of additional evidence by CIT(A) - HELD THAT:- CIT(A) before admitting the additional evidences awarded an opportunity to the revenue by calling remand report on such additional evidences. Therefore, in such circumstances it cannot be said that the learned CIT(A) committed any error. CIT[A] committed no error nor the admission of additional evidence can be stated to be in breach of the requirement of Rule 46A of the Rules - See KAMLABEN SURESHCHANDRA BHATTI [ 2014 (3) TMI 151 - GUJARAT HIGH COURT] Coming to the case on hand, the assessee before the CIT(A) submitted that at the time of the assessment proceeding, its business was closed and the person who was looking after the accounting and taxation related work also had left. Therefore, the assessee was facing difficulties in locating the necessary details required by the AO. Accordingly, the same were not produced before the AO during the assessment proceedings. The CIT(A) in view of the above explanation furnished by the assessee accepted the additional evidences and before acting on such documents provided the AO an opportunity to verify the same. Thus, the learned CIT(A) safeguarded the interest of revenue while admitting the additional evidences furnished by the assessee. Addition u/s 68 - AO has treated the current liabilities shown by the assessee as unexplained cash credit - CIT(A) deleted the addition - HELD THAT:- CIT-A has given very reasoned findings which were not controverted by the learned DR at the time of hearing. It was pointed out by the learned CIT-A that there were various expenses incurred by the assessee during the year under consideration which were subject to disallowance on adhoc basis. AO has also disallowed the liabilities appearing as on the balance sheet date which was arising out of the expenses incurred by the assessee in the year under consideration which were also subject to disallowance on adhoc basis. Thus, if any other disallowance is made on account of the liabilities arising out of such expenses, would lead to the double addition which is not desirable under the provisions of law. Likewise, CIT-A found that the assessee has already made the suo-moto disallowance of the sales tax liability and likewise some of the sales tax liability was pertaining to the earlier year which can t be subject matter of disallowance in the under consideration. Also there was interest liability pertaining to the year under consideration which was disallowed in the year under consideration under the provisions of section 43B and some of the liability representing the outstanding interest was pertaining to the earlier year which cannot be made subject to disallowance in the year under consideration under the provisions of section 43B - CIT[A] has given very detailed finding which was not controverted by the learned DR at the time of hearing. Therefore no reason to interfere in the finding of the learned CIT-A. Ground of the Revenue are hereby dismissed. Nature of receipt - Receipt on account of termination of bottling license - capital receipt not taxable u/s 28 or u/s 45 of the Act - HELD THAT:- What is the substance in the present case is this that there was loss of source of income to the assessee on account of the main settlement agreement - the word cease to subsist has been used in the main settlement agreement. Perhaps, these words have been used in the main settlement agreement for the reason that the original contract entered between the assessee and the company was ended by efflux of time but still the same was continued. Thus, it appears that though the agreement has come to an end but it was subsisting as on the date of main settlement agreement on account of the conduct of the assessee and the company. Once the agreement has already been terminated but subsisting because of the conduct of the parties, maybe for this reason the word cease to subsist was used in the agreement. But we have to see the substance of the main settlement agreement instead of making reference to the relevant clause. It is beyond doubt that the source of income of the assessee as a result of main settlement agreement has come to end which can be verified from the financial statements filed by the assessee for the year ending 31 st March 2009 and 2010, placed on record. Thus, direct the AO to delete the addition made by him. Hence, the ground of appeal of the Revenue is hereby dismissed. Disallowances of total expenses to the extent of 15% and purchases to the extent 10% as against the disallowances made by the AO for 30% and 20% respectively - HELD THAT:- In the event the assessee fails to justify, the AO has to see the claim of the assessee based on the circumstantial evidence, history of the case, comparable cases so as to find out whether the claim of the assessee is genuine or excessive before making any disallowance. But we find that the AO has not done such exercise but made the ad-hoc disallowance in the absence of supporting documents. In our considered view, such ad-hoc disallowance is not permitted under the provisions of law unless it is based on scientific basis. Yet, the claim of the assessee cannot be allowed in to-to in the absence of documentary evidence. We find that the ld. CIT- A has upheld the order of the AO in part after giving partial relief to the assessee based on reasoning as discussed above which has not been controverted by the ld. DR of the Revenue. Hence, the ground of appeal of the Revenue is hereby dismissed. Late deposits of employee s contribution towards PF fund - HELD THAT:- As assessee before us conceded that the issue on hand has been covered against the assessee by the order of GSRTC [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] - Therefore, respectfully following the order of Hon ble Gujarat (supra), the ground of appeal of the Revenue is hereby allowed.
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2023 (8) TMI 21
Addition u/s 56(1) - shares received by the assessee company at the time of amalgamation - HELD THAT:- As decided in Priapus Developers (P.) Ltd. [ 2019 (4) TMI 1283 - ITAT DELHI] when amalgamation scheme has been approved by the Court, it is not open for the AO and CIT (A) to hold that amalgamation has been used by the assessee company as a tool for tax evasion. The amalgamation order passed by the High Court is a judicial order and has statutory force and in case, the department had any objection, then same should have been given before the Hon'ble High Court for which sufficient time was allowed. The department cannot clamour that such an amalgamation have been used by the assessee as a tool for tax evasion or as colourable device. Having held so, we, at the same time, agree that the Revenue is not precluded from ascertaining as to whether the scheme of amalgamation was in compliance with the provisions of the Act so as to avail the benefit of Section 47(vi) of the Act. In the present case valuation report exchange ratio, if so, could have a bearing only in the hands of the shareholders of both the transferor and transferee companies, as only these shareholders would have gained or lost having agreed to the same. We therefore do not find merit in the report of the AO challenging the correctness of the valuation report exchange ratio of shares between shareholders of the transferor and transferee companies to justify the addition u/s 56(1) of the Act. We find ourselves in agreement with the AR that, when qua these assets lower authorities did not disregard the scheme of amalgamation or hold it to a colourable device to evade tax, then it was incorrect on the Revenue s part to cherry pick only the receipt of shares of ZEEL and assess it as a taxable event, denying the benefit of exemption set out in Section 47(vi) of the Act. Thus we hold that the scheme of amalgamation of EBPL with the assessee company cannot be disregarded nor can it be held to be a colourable device . Consequent thereto, the transfer of shares of ZEEL pursuant to the scheme of amalgamation was entitled for benefit of exemption u/s 47(vi) of the Act and therefore the addition made u/s. 56(1) is not sustainable - Decided against revenue. Addition u/s 68 - share capital/premium received by the assessee as bogus - HELD THAT:- CIT(A) had noted that the assessee had furnished the details of EMEL including copy of certificate of incorporation in Mauritius, certificate regarding source of funds, copy of inward remittance proof along with assessee s bank statement evidencing both receipt of funds and refund of excess balance. Documents placed on record revealed that EMEL was incorporated on 3rd June 2011 and that the source of their investment in assessee was the contribution received from its shareholders, as certified by the local Chartered Accountant. CIT(A) had further observed that, the AO had referred the matter to FT TR Division to make independent enquiries in Mauritius and the AO had noted in the impugned order that part reply was also received from FT TR. CIT(A) rightly pointed out that the AO had not cited any adverse finding or remark of the FT TR with respect of the source of investment either in the assessment order or post completion of the assessment. Even before us the Revenue was unable to furnish any adverse finding or contrary report of FT TR doubting the genuineness of the investment made by EMEL in the assessee. We thus find merit in the submissions of the Ld. AR that, the proviso to Section 68 of the Act, introduced by the Finance Act, 2012, was applicable only from AY 2013-14 and onwards, and therefore the said proviso cannot be held applicable in AY 2012-13. Meaning thereby, the assessee was under no obligation to substantiate the source of funds of its shareholder, EMEL in AY 2012-13 and to that extent, the AO s reasoning justifying the addition u/s 68 of the Act in the relevant AY for want of explanation regarding source of source of funds is held to be erroneous. Justification of share premium charged by the assessee upon the issuance of shares - It is noted that the assessee has supported the valuation with a certificate issued by a chartered accountant using DCF method, which is one of approved methods prescribed by the RBI. The tax-payer while issuing shares to the non-resident investors creates a foreign obligation for India in favour of another country. Accordingly, in terms of the RBI/FEMA requirements, the tax-payers are required to issue shares for a consideration which has to necessarily be equal to or higher than the fair value, arrived at by an approved method. Reason being, the tax-payer should not create a foreign obligation for India in favour of another country at a consideration which is below fair value of shares. Thus, to plug this loss to India, FEMA/RBI have stipulated that the issue price of shares should be equal to or more than fair value arrived at by approved method viz. DCF. Hence, even going by the AO's analogy that the price at which shares were issued to foreign investors was higher than fair value of shares, according to us, such issuance of shares at a value higher than the intrinsic fair value was in compliance with the FEMA/RBI regulations. It is noted that, the RBI has not disputed the fair value of shares, which was supported by the CA Certificate using DCF method. Even the AO, apart from making certain remarks, was unable to point out any specific defect or inaccuracy in the valuation report issued by the Chartered Accountant. No reason to interfere with the order of the Ld. CIT(A) in deleting the addition made by the AO u/s 68. Disallowance u/s 14A read with Rule 8D - both under normal computational provisions and under MAT provisions u/s 115JB - HELD THAT:- CIT(A) noted that the investments only comprised of shares of ZEEL. He observed that, the erstwhile transferor company, EBPL originally received these shares by way of gift (at NIL consideration), as accordingly noted that the assessee did not pay any sum for acquisition of these shares and that, upon amalgamation, the assessee had only recorded these investments at its fair value by way of book entry. CIT(A) thus held that, as there was no utilization of borrowed funds for acquiring these shares, the disallowance made under Rule 8D(2)(ii) ought not to have been made - CIT, DR appearing before us was unable to countenance these facts. No reason to interfere with the order of Ld. CIT(A) deleting the interest disallowance made by the AO under Rule 8D(2)(ii). Disallowance which had suo moto been offered by the assessee in the return of income under Rule 8D(2)(iii) - As noted from the financial statements and computation of income that the assessee did not earn any exempt income during the relevant year, the AO is directed to delete the disallowance made under Section 14A read with Rule 8D(2)(iii). Now we come to the issue of disallowance u/s 14A r.w. Rule 8D made while computing book profit u/s 115JB of the Act. Since we have already held that no disallowance u/s 14A read with Rule 8D is warranted in the given facts of the case, consequentially no disallowance is sustainable in the MAT computation under section 115JB of the Act as well. Also, Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] has held that the computation mechanism provided under Rule 8D of the Rules cannot be applied for computing addition in terms of clause (f) of Explanation 1, for arriving at the book profit u/s 115JB of the Act. Hence, the impugned disallowance made by the AO while computing book profit u/s 115JB is held to be unsustainable in law. Denial of carry forward of losses brought forward upto AY 2011-12 on account of change in shareholding pattern u/s 79 - On appeal before the CIT(A), the assessee claimed that the provisions of Section 72A override the provisions of Section 79 of the Act and therefore argued that any change in shareholding pattern due to amalgamation cannot be subjected to rigors of Section 79 - HELD THAT:- As CIT(A) did not find any force in the argument put forth by the assessee and rejected the same. Before us also, the Ld. AR of the assessee was unable to counter the findings of the Ld. CIT(A). Accordingly, this ground of appeal is dismissed.
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2023 (8) TMI 20
Validity of Reopening of assessment u/s 147 - not in accordance with the provisions of section 151 - sale of agricultural land - notice u/s 148 issued after the expiry of 4 years - reasons to believe - as argued initial assessment was framed by the AO u/s 143(3) r.w.s. 153A, thus there should be failure on the part of the assessee to disclose fully and truly all the facts necessary for the assessment - HELD THAT:- As no tangible material is placed on record to support the action of the AO warranting reopening of the assessee s case. AO did not rebut the appellant s contention that nothing over and above the amount recorded in the registered sale deeds was paid by bringing necessary details. The unsubstantiated material found in the diary in possession of Shri Madan Mohan Gupta [third party] cannot be considered in the hands of the assessee as a conclusive evidence so as to reopen the assessment and make additions towards unexplained investment in purchase of land. Undisputedly, no other material suggesting payment of higher amounts was recovered during the search. It is trite law that burden is on the revenue to prove that the price had been under stated and no addition is possible without any inquiry. In this case, there is no cogent material to support the reopening of the assessment within the meaning of section 147 and that the appellant has actually paid higher amount than that recorded in the registered sale deed and the AO did not conduct any inquiry to bring some material to corroborate the notings found in the diary allegedly contained dealings in respect of certain properties purchased the assessee, except relying on the statement of Shri Madan Mohan Gupta. Therefore, following the earlier order of this Tribunal in the case of Shri Navrattan Kothari [ 2017 (12) TMI 860 - ITAT JAIPUR] wherein exactly same facts were involved and after considering the various judicial pronouncements on the issue held the issue of notice u/s 147 without jurisdiction, we hold that the reopening of the assessment after four years from the end of the assessment year under consideration and also with reference to the provisions of section 151 is not valid and the same is quashed. Decided in favour of assessee.
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2023 (8) TMI 19
Reopening of assessment u/s 147 - Validity of sanction given u/s 151 - sale proceeds of plot of land has escaped income - incriminating documents were found and seized from third party[Shri Madan Mohan Gupta] - reasons to believe - as argued sanctioning authority Pr. CIT-III has granted sanction in a mechanical manner without ascertaining whether any enquiry was conducted by AO before reaching to the conclusion that there was any escapement of income - HELD THAT:- The reasons recorded by the Assessing Officer in reopening the case of the assessee are identical to the case of Shri Navrattan Kothari [ 2017 (12) TMI 860 - ITAT JAIPUR] wherein under identical set of facts the entire reassessment proceedings were quashed by the Tribunal. AO has proceeded in the case of assessee on the premises that the assessee has sold the plot of land in question by receiving money over and above the consideration mentioned in the sale deed, as found recorded in the seized material, which was explained by Shri Madan Mohan Gupta. However, no tangible material is placed on record to support the action of the AO warranting reopening of the assessee s case. AO did not rebut the appellant s contention that nothing over and above the amount recorded in the registered sale deeds was received by bringing necessary details. The unsubstantiated material found in the diary in possession of Shri Madan Mohan Gupta cannot be considered in the hands of the assessee as a conclusive evidence so as to reopen the assessment and make additions towards long term capital gain in sale of the plot of land. Undisputedly, no other material suggesting receipt of higher amounts was recovered during the search. It is trite law that burden is on the revenue to prove that the price had been under stated and no addition is possible without any inquiry. In this case, there is no cogent material to support the reopening of the assessment within the meaning of section 147 and that the appellant has actually received higher amount than that recorded in the registered sale deed and the AO did not conduct any inquiry to bring some material to corroborate the notings found in the diary allegedly contained dealings in respect of certain properties sold by the assessee, except relying on the statement of Shri Madan Mohan Gupta. Thus validity of the reopening of the case of assessee quashed - Decided in favour of assessee.
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Benami Property
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2023 (8) TMI 2
Benami transaction - real owner of property - beneficial wight in suit property - property is the self acquired property of defendant no.2 - Defendant no.1 purchased the property before the act came into force - HELD THAT:- The Hon ble Supreme Court in the case of R. Rajagopal Reeddy, [ 1995 (1) TMI 67 - SUPREME COURT] has held that the plaint would not lie under section 4(1) of the Benami Transactions (Prohibition) Act for a claim to enforce any right in respect of any property held benami, against the person in whose name the property is held after coming into effect of the Act, even if the transactions were prior in point of time. Also under section 4(2) of the Act if a suit is filed by plaintiff who claims to be owner of the property on the basis of ownership document and claims ownership on the basis that the property is in his name, after the coming in force of the Act no defence would be permitted or allowed in any such suit, claim or action by or on behalf of the person claiming to be the real owner of such property held benami. Section 4(2) restricts the defence of a pre-existing right. Such a provision the Hon ble Supreme Court has held in the case of R. Rajagopal Reddy (supra), cannot be retrospective or retroactive by necessary implication. However, what is prohibited is the defence to be taken on that day when the act came into force. Thus, even if the transaction is prior in point of time, defence based by the owner of the property who holds the property benami in the name of some other person is not permissible under section 4(2) of the Benami Transactions (Prohibition) Act after the Act comes into force. In the instant case, the defence is taken much prior to the coming into force of the Benami Transactions (Prohibition) Act and the defence once allowed cannot be subsequently taken away. The defence was taken in the year 1982 much before the act came into force. In the instant case, the defence of benami transaction by defendant no.2 in favour of plaintiff is taken by the person (defendant no.1), who has purchased the property before the act came into force. On the date of the act coming into force there was no property in the name of the plaintiff, as such, whether a plea of declaration of ownership on the basis of sale deed in its favour prior to the coming into force of the Benami Transactions (Prohibition) Act can be maintained by the plaintiff against the purchaser of the property from the real owner who purchased the property benami in the name of the plaintiff, is itself doubtful. Defence was taken by defendant no.1 of benami transaction by defendant no.2 in favour of the plaintiff and that the defendant no.2 being the real owner of the property was entitled to sell the suit property to the defendant no.1 was taken much prior to the coming into force of the Benami Transactions (Prohibition) Act and in view of the judgment of the 3 Judges bench of R. Rajagopal Reddy (supra), the defence of benami transaction taken prior to the coming into the act is available and the Benami Transactions (Prohibition) Act is not retroactive to that extent. The Prohibition of Benami Property Transactions Act, 1988 is not applicable to the instant case. Next Question of Law raised for the appellant that the permission was required to be taken under section 8 of the Guardianship Act from the mother of the appellant is also not tenable in view of the fact that the property is the self acquired property of defendant no.2 and the appellant plaintiff had no right in the suit property, thus the question of taking permission from the district court under section 8 of the Guardianship Act does not arise.
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Customs
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2023 (8) TMI 18
Revocation of Customs Broker License - forfeiture of security deposit - penalty - export of 500 PP bags of goods declared as Organic Herbal Plinth Filing Termiticide - overvalued goods - declared specifications were at great deviance with respect to the specifications mentioned in the tax invoice available with the shipping bills - CHA not verified the premises of the exporter or made him cooperate with the investigation - HELD THAT:- There was no concrete proof of a blame worthy conduct by the appellant to impose penalties. Penalties should not be imposed merely because a legal provision provides for it. It is a discretion of the authority to be exercised judicially and in consideration of all the relevant circumstances, bound by the rules of reason and law. Such action cannot be taken on assumptions and presumptions devoid of concrete facts showing wrongdoing. The impugned order merits to be quashed and is ordered accordingly - Appeal allowed.
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2023 (8) TMI 17
Renewal of warehouse license - Private Bonded Ware House License - Settlement Commission granted immunity from prosecution and penalty - Clandestine removal of goods - shortage of goods - forged documents and false declarations was that the signature did not tally with the signature of the crew in the declaration with Department - maximum evasion of duty alleged was on the basis that signature of buyers did not tally with the signature available with the department - remission of duty - HELD THAT:- The Settlement Commission provides for an alternate dispute resolution mechanism for taxpayers who wish to resolve the tax disputes in a spirit of conciliation rather than litigation. It is a remedy (under Section 127A) provided under the Customs Act itself. It also expedites the payment of duty by not getting entangled in litigation. The Settlement Commission has power to grant immunity from prosecution and penalty. The immunity so granted can be withdrawn only by provisions of law. There is nothing to show that the immunity granted has been withdrawn by the Commission - in the present case, the proceedings have been initiated (Show Cause Notice issued) invoking Section 58(3) of Customs Act, 1962. The immunity granted against prosecution under the Customs Act, 1962 will include, the above proceedings initiated under Section 58(3) also which has culminated in the order revoking the license issued to the appellant. Therefore the settlement of the dispute cannot be a ground for not renewing/revoking the license. Remission of duty - Shortage of goods at DFS of International airport, Goa - HELD THAT:- This matter after adjudication reached the Tribunal and the demand has been set aside. It was held by Tribunal in the case of M/S. FLEMINGO DUTY FREE SHOP PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE ST, GOA [ 2018 (4) TMI 491 - CESTAT MUMBAI ] held that In the present case also, the appellant lost the entire value of the goods due to admitted theft. Therefore in such case duty cannot be demanded. Evasion of duty alleged at DFS, Vishakhapatnam - HELD THAT:- The same also reached Tribunal and vide order dated 06.11.2017 in the case of Flemingo (DFS) Pvt Ltd vs CC Vishakhapatnam the demand been set aside exonerating the appellant. From the facts placed, the allegations raised in the Show Cause Notice are no longer live or exist. In such circumstances from the discussions made above, the department cannot deny the request for renewing the license. So also the order for cancellation of the license cannot survive. The impugned order is set aside. The appeal is allowed.
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2023 (8) TMI 16
Undervaluation of imported goods - Car audio items viz. Car Speaker, CD Players, Amplifiers - manipulating the actual value of the imported consignments in collusion with the supplier firm and was declaring lower value before Indian Customs for assessment of duty thereby paying lesser amount of Customs duty - appellants are real importers or not - levy of penalties - HELD THAT:- The duty cannot be demanded from the appellants as it is the fact on record that the appellants, namely, Shri Rakesh Magoo Shri John Miranda are not the real importers. In fact, the Bills of Entry has been filed in the name of Surya Trading Company Creative Enterprises and these Bills of Entry were assessed and the goods were cleared to those importers - the demand of duty from the appellants is not sustainable. Levy of Penalty on Rakesh Magoo and Shri John Miranda - HELD THAT:- Shri Rakesh Magoo and Shri John Miranda were using IEC Code of various IEC holders for import of car electronic goods by under-valued the same and the differential amount has also been paid to the overseas suppliers through their office in India by illicit means - Shri Rakesh Magoo and Shri John Miranda were actively involved in import of the impugned goods and undervalued the same. Therefore, penalties imposed on the said Shri Rakesh Magoo and Shri John Miranda, are confirmed. Penalty imposed on M/s Sai Dutta Clearing Agency Private Limited - HELD THAT:- They are also involved in the illegal imports by undervaluation of imported goods as it was in their knowledge that Shri Rakesh Magoo and Shri John Miranda, imported the goods in the name of IEC holder using IEC code for their illegal import. Accordingly, penalty imposed on M/s Sai Dutta Clearing Agency Private Limited, is also confirmed. Thus, no duty is payable on Shri Rakesh Magoo and Shri John Miranda, but penalties imposed on Shri Rakesh Magoo and Shri John Miranda and M/s Sai Dutta Clearing Agency Private Limited , are confirmed - appeal disposed off.
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2023 (8) TMI 15
Valuation of imported goods - old and used worn clothing, completely fumigated - restricted goods or not - enhancement of value - Confiscation - redemption fine - penalty - HELD THAT:- This issue came up before this Tribunal in the case of VENUS TRADERS, RAINBOW INTERNATIONAL, AL-YASEEN ENTERPRISES, GLOBE INTERNATIONAL, KRISHNA EXPORT CORPORATION, PRECISION IMPEX, BMC SPINNERS PVT. LTD., SHIVAM TRADERS, LEELA WOOLEN MILLS, M.U. TEXTILES VERSUS COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI [ 2018 (11) TMI 625 - CESTAT MUMBAI] , wherein this Tribunal has observed that the failure of the original authority to comply with the direction in remand to disclose the margin of profit that prompted the fine and penalty, the matter would normally have to be remitted back by another remand order. However, the paucity of evidence and the negligible scope for ascertainment at this stage deters us from doing so. Thus, the redemption fine and penalty imposed on the respondent to the tune of 10% 5% respectively on the assessed value is sufficient. Therefore, the redemption fine and penalty confirmed by the ld. Commissioner (Appeals) are sufficient to meet the end of justice. There are no infirmity in the impugned order and the same is upheld - appeal of Revenue is dismissed.
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Corporate Laws
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2023 (8) TMI 14
Professional Misconduct - Incorrect reporting of outstanding liability arising out of Foreign Currency Loan - Incorrect accounting treatment of Assets given on Lease - Not reporting non-compliance with the format of Financial Statements - Other charges showing lack of duc diligence by EP - Violations of Standards on Auditing - penalties and sanctions. Incorrect reporting of outstanding liability arising out of Foreign Currency Loan - HELD THAT:- Since the foreign currency loan, which was material as per the balance sheet size, has not been correctly translated at the closing rate and there are no circumstances justifying use of any rate other than the closing rate, the charges that the FP did not report non- compliance by the Company with the requirements of AS 11 stands proven. Incorrect accounting treatment of Assets given on Lease - HELD THAT:- The explanation given by the FP cannot be accepted as Assets given on finance lease have to be presented by the Lessor as Receivables as per para 26 of AS 19. However, they have been presented under Tangible Assets in Balance Sheet as on 31.3.2016, following the format given in Schedule III to the Companies Act, 2013. It is misleading and erroneous to present unpaid finance lease receivables as fixed assets because definition, recognition and measurement and disclosure requirements for fixed assets and lease receivables are completely different. Hence, the charge of incorrect accounting of Assets given on lease stands proven. Not reporting non-compliance with the format of Financial Statements - HELD THAT:- In respect of Depreciation, the EP explained that it is an age-old practice to give the depreciation schedule as given by the Company and has attached the financial statements of a few companies to substantiate his explanation - The explanation given by the EP cannot be accepted as Schedule III of the Companies Act, 2013 clearly provides that the corresponding amounts for the previous reporting period need to be given for all items in the Financial Statements including notes. Further, a wrong practice does not become Iegitimate just because it is being followed by other companies and not being reported by other auditors. Other charges showing lack of due diligence by EP - HELD THAT:- The EP was charged with not reporting the omission of Note no. 2.3(ix), 2.3(x) and 2.3(xi) in the financial statements of the Company. In the Financial Statements for 2015-16, Note no. 2.3(viii) is followed by Note no. 2.3(xii) in both the printed and signed copy of the Financial Statements. In his first response letter dated 28.10.2022, the EP reiterated that the said Notes were available in their signed copy and were inadvertently missed later on. However, in the second response letter dated 05.12.2022, the EP accepted the error and submitted that it was a typographical error - while the charges in paras 30 to para 33 may not be material misstatement but signal lack of due diligence on the part of the EP. Lack of due diligence is a professional misconduct under Clause (7) of Part 1 of Second Schedule of Chartered Accountants Act, 1949. Violations of Standards on Auditing - HELD THAT:- As per para 10 of SA 320, when establishing the overall audit strategy, the auditor shall determine materiality for the financial statements as a whole. Further, as per para 11 of SA 320, the auditor shall determine performance materiality for purposes of assessing the risks of material misstatement and determining the nature, timing and extent of further audit procedures. There is no work paper in the audit file showing that the materiality benchmarked in the previous years audit has been kept the same in the year under review - A percentage is often applied to a chosen benchmark as a starting point in determining materiality for the financial statements as a whole (Para A2 of SA 320). Even though the fixed percentage and the underlying benchmark is kept the same across the years by the EP, the amount of Materiality and Performance Materiality will depend upon the balance sheet numbers and need to be documented accordingly in the Audit File. There is not a single work paper in the audit file which states the determination of Materiality and Performance Materiality for FY 2015-16. The explanation given by the auditor is not accepted and we conclude that the charge is proven. Penalty and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed, is evident from the fact that a minimum punishment is laid down by the law. Independent Auditors of Public Listed Companies serve a critical public function of enabling the users of Audited Financial Statements to take informed decisions. Absent a robust system of Auditing, Investors, Creditors and Other Users of Financial Statements would be handicapped and their work compromised - Thus, the auditor is duty bound to examine and ascertain the integrity of Financial Statements of such entities 10 in larger public interest. This is all the more important for a financial services entity, like Nicco that involve considerable public interest and public funds. The EP, in this case, has not carried out the audit as per the Standards on Auditing and failed to report several non-compliances by the Company with Accounting Standards in preparing its financial statements. All these show a collective lack of due diligence in the audit and gross negligence specifically relating to incorrect valuation of foreign currency loans and failure to report incorrect reporting of assets on Iease. Considering the fact that professional misconducts have been proved and considering the nature of violations and principles of proportionality, we, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, order imposition of a monetary penalty of Rupees One Lakh upon CA Gautam Guha.
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Insolvency & Bankruptcy
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2023 (8) TMI 13
Removal of appellant from Committee of Creditors - Financial Creditors or not - HELD THAT:- The judgement of this Tribunal in Namdeo Ramchandra Patil Ors. [ 2022 (9) TMI 906 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] fully covers the issues and Adjudicating Authority has rightly referred to the Judgement holding that Appellant is not a financial creditor - The terms and conditions of development agreement entered between the appellant and the corporate debtor, Annexure 6 makes it clear that the appellant was a collaborator in the development agreement and not a financial creditor. There was no disbursement for time value of money by the appellant within meaning of Section 5(8) of the IBC. There are no error in the order impugned. The Appeal is dismissed.
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2023 (8) TMI 1
Approval of Resolution Plan - seeking injunction be passed restraining the respondents either by himself and/or his men or agents or assigns or otherwise howsoever from taking any step or further steps - HELD THAT:- In the present case, primarily it is satisfying that conduct of the appellants in both the appeals is not transparent - It is also noticed that more than Rs.57 crores with interest was outstanding. The principal borrowers account was declared NPA on 10.03.2017. Charge in respect of entire land of the Corporate Debtor was created in favour of financial creditor i.e. Vijaya Bank. Even thereafter one of the directors of the appellant namely Mr. Harshvardhan Tantia of Company Appeal (AT)(Ins) No.861/2022 who was also having 6.22% shares holding in the Corporate Debtor company entered into lease agreement on 27.07.2014 with CD in respect of major portion of the land of the Corporate Debtor. The lease agreement was signed by Mr. Jaydeep Ghosh on behalf of the Corporate Debtor and Mr. Harshvardhan Tantia signed as one of the directors of T-RMC Pvt Ltd who is appellant in Company Appeal (AT)(Ins) No.861/2022. The lease agreement dated 27.07.2014 was for a period of five years which was to end on 26.7.2019. It is mandatory that if a tenancy is created on the basis of an agreement/lease agreement for one year or more then the said deed is required to be registered. The law is settled on the point that the suspended Board of Directors have got no locus to file an appeal against the approval of the plan by CoC and finally approved by the Adjudicating Authority and as such Company Appeal (AT)(Ins) No.839/2022 is liable to be rejected on this sole ground besides the facts relating to fraudulent lease rent agreement which we have noticed hereinabove. So far as plea taken on behalf of the appellant in Company appeal (AT)(Ins) No.861/2022 that change of business of the Corporate Debtor was not permissible. Section 5(26) of the IBC permits a resolution plan that entails restructuring. Similarly Regulation 37(ba) also permits restructuring, whereas Regulations 37(a)and (b) even permit for transfer of all or part of the assets and also sale of all or part of the assets of the CD. Only requirement is to see whether situation permits to do the same in the interest of the concerned creditors - In the present case it has been noticed that CD was not doing any business. Licence for running the factory had lapsed and not renewed for several years. There was no insurance of the factory premises since several years and even Insurance Company has refused to insure such factory/plant. It has also been noticed that for several years municipal tax were not paid by the CD. Even during CIRP the factory was non- operational. It is opined that it was commercial wisdom of the CoC to accept the plan which has been noticed by way of change of the business of the CD. It has already been held that an unsuccessful resolution plan applicant has got no vested right and also settled that acceptance of plan is commercial wisdom of the CoC. Accordingly, there is no reason to entertain both the appeals particularly in view of the fact that the plan has finally been approved by Adjudicating Authority. Thus, creation of aforesaid two doubtful and suspicious lease agreements which have been used in the court proceeding to defeat the objective of IBC, requires enquiry - appeal dismissed.
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Service Tax
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2023 (8) TMI 12
Levy of penalty u/s penalty u/s 77 and Section 78 of Finance Act, 1994 - service tax paid before issue of show cause notice - suppression of facts or not - applicability of provisions of subsection (3) of Section 73 of Finance Act, 1994 - HELD THAT:- The appellant had paid the entire service tax ascertained by them before issue of show cause notice. He had also paid interest of Rs. 23,39,370/- voluntarily before issue of show cause notice. It is found from the said sub-section (3) of Section 73 ibid that if the service provider, on the basis of its own ascertainment, pays service tax before issue of show cause notice, then Revenue cannot issue show cause notice. The said provision is not applicable only if the non-payment of service tax is on account of collusion, misstatement, suppression of fact with intention to evade payment of duty - in the present case, Revenue has invoked proviso to sub-section (1) of Section 73 of Finance Act, 1994 for raising demand for the larger period from 01.07.2010 to 31.03.2016 by issue of show cause notice on 27.04.2017. However, for invocation of extended period and for making inoperative the said provisions of subsection (3) of Section 74 ibid, there are dual criteria of collusion, misstatement, suppression of fact and intention to evade duty. In the present case, the appellant has paid the entire service tax before issue of show cause notice. Therefore, intention to evade service tax is absent in the present case. Therefore, there was no case for issue of show cause notice and, therefore, there would not have been occasion to propose imposition of penalty. Had there been no occasion to issue show cause notice, there could not have been occasion to impose penalty - the imposition of penalty under Section 77 and Section 78 of Finance Act, 1994 is not sustainable in the present case. The impugned order modified by setting aside penalties imposed on the appellant under Section 77 and Section 78 of Finance Act, 1994 - appeal allowed.
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Central Excise
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2023 (8) TMI 11
Wrongful availment of CENVAT Credit - input services - Erection and Commissioning of Spray Drying Plant - Rule 2(l) of CCR, 2004 - HELD THAT:- The exclusion clause (A) in sub-clause (b) talks about laying of foundation or making of structures and does not specifically cover the services of Erection and Commissioning. It is a settled principal that exclusion clause has to be construed strictly and narrowly and therefore logically exclusion has to be expressed and not implied. It is not the case of the revenue that while rendering the services of erection and commissioning they have to lay the foundation or has to raise structures - the exclusion clause does not apply to service of erection and commissioning and hence it would fall under the main clause of input service since it is directly related to the manufacturing activity of the appellant. Secondly, the demand in the show cause notice on this account also fails as nothing has been substantiated and as noticed by the adjudicating authority that the show cause notice has been issued in a very casual manner. The appellant has referred to few decisions by the Tribunal to say that exclusion clause (A) in Rule 2(l) of CCR,2004 does not cover the service in the nature of Erection, Commissioning and Installation Service , THERMAX LTD. VERSUS COMMISSIONER OF C. EX. S.T., VADODARA [ 2019 (2) TMI 1876 - CESTAT AHMEDABAD ], M/S ORIENT CEMENT LTD. VERSUS THE COMMISSIONER C. CE ST, HYDERABAD-I [ 2017 (1) TMI 1124 - CESTAT HYDERABAD ] - In HINDUSTAN COCA COLA BEVERAGES PVT. LTD. VERSUS C.C.E., CHENNAI-I [ 2016 (10) TMI 1092 - CESTAT CHENNAI ] , the view taken was that when erection and commissioning of water treatment plant was essential, there should not be denial of cenvat credit of service tax paid in respect of such service availed for recycling of the water for use in manufacture - The present case is squarely covered by the said observations and therefore the services of Erection of 2 TPH Detergent Spray Drying Plant received by the appellant are covered under the main clause of the definition of input service. Since the issue has been decided on merits in favour of the appellant, the issue of limitation does not survive and hence is not required to be considered any more. Appeal allowed.
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2023 (8) TMI 10
Clandestine removal - cigarettes - based on the statements of the third parties - cross-examination of such parties not allowed - corroborative evidences or not - Appellant is the actual manufacturer of the goods or not - demand alongwith penalty - HELD THAT:- There is no evidence brought on record by the investigation to establish that the Appellant has engaged his labour to manufacture cigarettes in the Fatuha Daniyava Road premises where two cigarette making machines were found. There was no evidence available on record to implicate the Appellant in the manufacture of cigarettes found in the Fatuha Daniyava Road premises or at the other godowns. The cigarettes found the said premises were bearing the brands owned by M/s ATPL. Obviously M/s ATPL should be questioned first regarding the ownership of the goods, since they were registered with the department for the manufacture and clearance of cigarettes under various brand names owned by them. Apparently, the investigation has not questioned any of the Directors of M/s ATPL. No demand was raised on them. There is no evidence available on record to establish clandestine manufacture and clearance of cigarettes by the Appellant. The investigation has not brought in any evidence to establish that the Appellant had procured raw material or sale of impugned cigarettes by him to any person or obtained any payments from the alleged buyers or any transportation of the impugned cigarettes. In the absence of any such evidence to establish that the Appellant was the actual manufacturer of the cigarettes found at the unregistered premises at Fatuha Daniyava Road and the other godowns, the tag of manufacturer cannot be fixed on the Appellant - the Appellant cannot be considered as the manufacturer of cigarettes in this case and duty cannot be demanded from them for the cigarettes said to have been manufactured at the unregistered premised at Fatuha Daniyava Road and the cigarettes found at other godowns. Clandestine manufacture and clearance of cigarettes cannot be made merely on the basis of assumptions and presumptions. There must be tangible, direct affirmative and incontrovertible evidence available to establish clandestine clearance. The issue involved in the present appeals is clandestine removal of goods without payment of Central Excise duty. The charge of clandestine removal is a very serious charge which entails serious consequences which are both civil and criminal in nature. Hence, before levelling such serious charge of clandestine removal of goods, there must be sufficient evidence on record leading to conclusive proof of production of goods, their removal from the factory by any mode of transportation and clandestine clearances to buyers. The onus to establish such clandestine activities, resulting in confirmation of demand is placed heavily on the Revenue and is required to be discharged by production of sufficient, cogent and tangible evidences. The said allegation has to be proved by bringing on record evidences procurement of all the raw materials clandestinely in proportionate quantity and it must be proved to whom the goods have been sold. The Revenue has not brought in any evidence to corroborate the allegation that the Appellant were the actual manufacturers of the cigarettes. In their submissions, the Appellant cited various loopholes in the investigation and argued that the demand of duty made and penalty imposed on him in the impugned order are not sustainable. Penalty - HELD THAT:- The demand of duty on the Appellant in the impugned order is not sustainable. Since, the evidence available on record does not indicate the involvement of the Appellant in the clandestine manufacturing and clearance of cigarettes, no penalty imposable on them. The demand of duty along with interest and penalty imposed on the Appellant in the impugned order is set aside - appeal allowed.
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2023 (8) TMI 9
Clandestine manufacture and removal - demand based on consumption of electricity - corroborative evidences or not - HELD THAT:- While the Department is not required to precisely bring the entire details on account of these issues, they are expected to bring in at least some corroborative evidence to support the allegation that the clandestine manufacture has taken place. Mere reliance on the electricity consumption without any corroborative evidence towards excess purchase of raw materials so as to convert the raw materials into finished goods, will not help the Revenue to prove the case. After going through these factual details it emerges that the only base on which the demand has been confirmed, is on account of the electricity consumption without any corroborative evidence whatsoever in any form. In the case of M/S UNION ENTERPRISES ANOTHER VERSUS UNION OF INDIA OTHERS [ 2014 (5) TMI 93 - CALCUTTA HIGH COURT] , the Hon ble Kolkata High Court has considered the Allahabad High Court s decision in the case of R. A. Casting on similar issue and held that mere excess consumption of electricity without any corroborative evidence relating to the purchase of the raw material, conversion of the raw material into a final products and clearance from the manufacturing unit to the respective buyers are produced does not raise presumption of evading the duty. Since the Department has relied on the Electricity consumption alone without any corroborative evidence whatsoever, the decision of the Hon ble High Courts are squarely applicable. Appeal allowed.
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2023 (8) TMI 8
Valuation - inclusion of value of bought out items in the assessable value (weigh bridge, as bought out ) - scope of transaction value - HELD THAT:- Appellant purchased items such as personal Computer, Printer, UPS, Stabilizer and Air-Conditioner' and supplied along with their finished goods namely ' Pitless Electronics In- Motion weigh Bridge'. A perusal of the functions performed by these goods, which were supplied along with the said finished products, reveal that they were not essential parts, as they were not required for performance of the main function ie, weighment of goods/railway wagons. The Weigh Bridge System supplied by the Appellant can run smoothly without these items, as controller DISOMAT-C is sufficient for taking weighment of the system. Transaction value as defined under Section 4(3) (d) of the Central Excise Act, 1944, means that the price actually paid or payable for the goods when sold and includes in addition to the amount charged as price any amount that the buyer is liable to pay, to or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or any time thereafter - the value of the bought out items are not payable or paid to the manufacturers of the weigh bridge. The prices of these goods have been paid to the dealers of those goods who sold it to the Appellant. Further the Appellant has not taken Cenvat Credit of the duty paid on these bought out items. Hence, the value of bought out items will not be part of the Transaction Value, in this case. In the instant case, it is found that the bought out items have not been attached with the weigh bridge. Even after installation of the weighbridge, they perform their functions independently. Thus these items are not essential part of the weigh bridge and the value of these bought out items are not includable in the assessable value. In the case of COMMMISSIONER OF CENTRAL EXCISE, TRICHY VERSUS M/S. NEYCER INDIA LTD. [ 2015 (5) TMI 494 - SC ORDER] it has been held that assessee supplied the same to those buyers only who asked for that and in such a situation the assessee buys the aforesaid components from the market and supply to the buyers at their option. In these circumstances, the Tribunal in NEYCER INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY [ 2005 (3) TMI 367 - CESTAT, CHENNAI] has rightly declined to add the value of the aforesaid components which are not the part of flushing cistern manufactured by the assessee. The demands made in the impugned order are not sustainable. Since the duty itself is not liable to be paid, the question of demanding interest and imposing penalty does not arise - Appeal allowed.
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CST, VAT & Sales Tax
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2023 (8) TMI 7
Classification of goods - toughened glass manufactured and sold by the appellant - to be classified as glass and glassware or as an unclassified item subjected to lower tax? - HELD THAT:- The nature and description of articles in Item No. 39 of the Tariff Notification, emphases the kind of goods which are covered and at the same indicate the class of goods which are not covered. In the opinion of this Court, the article manufactured by the appellant-assessee clearly falls within the description of Item No. 39. In TRUTUF SAFETY GLASS INDUSTRIES VERSUS COMMISSIONER OF SALES TAX, UP [ 2007 (8) TMI 21 - SUPREME COURT] this Court had observed pertinently in relation to the same legislation held that The High Court proceeded on the basis that while interpreting the words glass and glass wares in the entry, it should be interpreted as it is understood by the persons dealing in them. It held that the articles manufactured by the assessee cannot be described as glass or glass wares. The view of the High Court would have been correct had the expression in all forms not succeeded the expression glass and glass wares . The judgment of the High Court, therefore, does not call for interference. The appeals are dismissed.
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2023 (8) TMI 6
Lien on property on account of sales tax dues - dues of a secured debtor rank above the dues of the State Government or not - Seeking initiation of contempt action against the respondents for having committed a breach of the order passed by a Co-ordinate Bench of this Court - HELD THAT:- In so far as the petitioners case that a letter dated 16 March 2021 issued by the respondent to petitioner No. 3 would amount to breach of the order dated 10 January 2020 passed by the Division Bench, is totally untenable. This for the reason that such a communication did not in any manner obstruct the sale of the property by the petitioners to realise its dues by exercising its first charge as per the orders dated 10 January 2020 passed by the Division Bench. Secondly, the petitioners in alleging breach have totally overlooked that petitioner No. 3 taking the benefit of the order dated 10 January 2020 had already proceeded to issue an auction proclamation on 11 February 2021 under which petitioner Nos. 1 and 2 had submitted their bids which came to be considered by petitioner No. 3. Petitioner Nos.1 and 2 were declared to be successful bidders by issuance of a communication by petitioner No. 3 titled as Successful Bid Confirmation Letter . Thereafter, on 5 March 2020 petitioner Nos. 1 and 2 had made part payment/consideration in purchasing the auctioned property, from petitioner No. 3. All this has happened prior to the respondent issuing letter dated 16 March 2021. Thus, to infer any intentional disobedience to defeat an order dated 10 January 2020, is unacceptable. It may be observed that once the Court recognizes the first charge of petitioner No. 3 and in pursuance thereto actions were taken by petitioner No. 3 to auction the mortgaged property, it cannot be said that the issuance of the letter / Notice dated 16 March 2021 and 9 April 2021 respectively by the respondents alleged to be issued in breach of the orders, would even remotely amount to any intentional disobedience of the orders passed by this Court. The Court considering the position in law has held that apart from recognizing the first charge of petitioner No. 3, the charge of the Sales Tax Department on the mortgage property had continued to operate even on transfer of the said property in the hands of petitioner Nos. 1 and 2 as auction purchasers, as it was on the very terms and conditions of as is where is basis , as is what is basis and whatever is there is basis , the petitioner Nos. 1 and 2 had purchased the property. The present contempt petition appears to be not bonafide and is dismissed.
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2023 (8) TMI 5
Maintainability of petitioner's original appeal - time limitation - appeal was in prescribed format or not - HELD THAT:- The petitioner had instituted the appeal against the common assessment order (CST and VAT) dated 27.04.2017 and 12.07.2017. This was admittedly within the prescribed period of limitation. However, because of the confusion due to the filing of the consolidated appeal, the VAT appeal may not have been in the prescribed format. Therefore, the VAT appeal in the prescribed format was placed on record on 15.04.2019 for the convenience of the appellate authority. Such placement does not amount to originally instituting the appeal. Therefore, the approach of the first appellate authority was rather hyper-technical. The appeal should have been following the law rather than nonsuiting the petitioner based on such technicality. A valuable right of appeal on merits should not have been denied for such hyper-technical considerations. When technical and substantive concerns are pitted against one another, the latter must prevail over the former. The Administrative Tribunal also failed to appreciate the matter from this perspective, and therefore, these orders warrant interference. The impugned order set aside - petitioner's appeal restored - appeal disposed off.
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Indian Laws
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2023 (8) TMI 4
Dishonour of Cheque - discharge of legally enforceable debt or not - false and fabricated cheque - rebuttal of presumption under Sections 118 and 139 the NI Act - service of demand notice - HELD THAT:- With regard to the giving of notice and receipt of notice this court is of the view that it is amply clear from a bare reading of the sub-clause of Section 138 of the NI Act that on the part of the payee, he has to make a demand by giving a notice in writing. If that was the only requirement to complete the offence on the failure of the drawer to pat the cheque amount within 15 days from the date of such giving‟ the travails of the prosecution would have been very much lessened, but the legislature says that failure on the part of the drawer to pay the amount should be 15 days of the receipt of the said notice. It is therefore clear that giving notice‟ in the context is not the same as receipt of Notice. Giving is a process of which receipt is the accomplishment. It is an admitted fact that the wife of the respondent had duly received the Notice, and it was nowhere pleaded by the respondent that he and his wife were living separately during the relevant point of time, hence burden was upon the respondent to substantiate that he did not receive the Notice. It is submitted that just to evade the liability of Section 138 of the Negotiable Instruments Act, 1881, the respondent has taken such umbrage of non-receipt of the Notice. Hence, a reasonable presumption has to be drawn that the husband did have the knowledge regarding the receipt of notice as they were staying together. Thus, it cannot be said that notice served on the wife is not served on the husband under Section 138 of NI Act. It has also been established that the cheque in question got the signature of the accused. It can be ascertained from this act of the respondent that he, at some point of time, intended to repay the complainant. This court is of the view that the mere acceptance of the signature on the part of the accused on the check implies that it is legally enforceable debt and hence the debt is admitted. There is no sufficient evidence in favour of the accused person to deny version of the complainant. The impugned judgment order set aside - appeal allowed.
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2023 (8) TMI 3
Dishonour of Cheque - false and fabricated cheque - discharge of legally enforceable debt or not - source of income not proved - loans not reflected in ITR - HELD THAT:- This court is of the opinion that the complainant has failed to prove his source of income. It is evident from the record that during the cross-examination in the court below the complainant had stated that he had filed two numbers of NI case against the accused person namely Prakash Tripura for an amount of Rs. 4,60,000 and Rs. 2,00,000/-. The complainant also states that he is a businessman by profession and earning Rs. 10,000/- to Rs. 20,000/- per month approximately. He also lodged one number of NI case against Pranab Chowdhury for an amount of Rs. 3,00,000/-. He also admitted that he is not any income tax payee. This court finds it hard to believe if a person is earning barely Rs. 10,000 to Rs. 20,000/- per month what makes him able to advance a sum of Rs. 9,60,000/- in couple of days. Further, it is unreasonable to belief as to giving loan of huge sum to a person coming to have Xerox copy. No transaction is established to consider the cheque amount as legally enforceable debt. Moreover, the citations referred by Mr. D. Sarkar, learned counsel for the appellant is of no relevance to the present context of the case. This court feels that the capacity to advance loans to the accused persons has not been established by the complainant and the alleged loans was not reflected in the ITR by the complainant. The defence of the accused persons that they had not taken any loan from the complainant and signing the blank cheque as security for loans of lesser amount has been subsequently filled up for an inflated amount and misused in filing the present complaint seems quite probable. This Court is of the view that the appellant has failed to prove his projected case against the accused persons and consequently, the instant appeal preferred by the appellant stands dismissed.
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