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TMI Tax Updates - e-Newsletter August 3, 2023 Case Laws in this Newsletter: GST Income Tax Benami Property Customs Corporate Laws Insolvency & Bankruptcy FEMA PMLA Service Tax Central Excise CST, VAT & Sales Tax Highlights / Catch Notes GST: Rectification of the assessment order - While passing the rectification order, the respondent has not followed the proviso stated under Section 161. Therefore, this Court is also of the considered opinion that before passing the order under Section 161, the respondent should have followed the proviso and granted personal hearing to the petitioner - HC Visit to Get Source GST: Provisional attachment of current account of petitioner - Period of one year has passed - partially the petitioner herself is to be blamed - Since the bank account of the petitioner has remained attached since April 2022, it is deemed appropriate to direct the petitioner to approach the respondent no. 1 within two weeks from today, under Rule 159 (5) by filing objections the respondent no. 1 shall make all endeavour to take a decision thereupon as per law expeditiously preferably within three weeks of filing such objection under Rule 159 (5) of the CGST rules, 2017. - HC Visit to Get Source GST: 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 - Notification Visit to Get Source GST: Profiteering - sales prices of the products to all franchises, disproportionate to the loss of ITC or not - Since, there had been no reduction in the rate of tax in respect of the services i.e. Royalty Service and Advertisement Services provided by the Respondent, the provisions of Section 171 of the Act were not applicable with respect to these services - CCI Visit to Get Source Income Tax: Return of the money / cash which was seized - ITAT accepted observed that the cash seized from Petitioner is the professional income and therefore cannot be treated as unexplained income - The contention of the revenue that the ITAT erred and the Court should not consider the order of the ITAT is highly objectionable. If the Officers of the Income Tax Department are allowed to continue this way, it will result only in undue harassment to assessees and chaos in administration of tax laws. - HC Visit to Get Source Income Tax: Validity of Reopening of assessment - period of limitation - Although the notice dated 30.06.2021 u/s 148 bears an endorsement at the foot of the page that it has been digitally signed, it is inchoate, in the sense that it is not accompanied by a date. - Admittedly, the said notice was never physically delivered to the assessee. As such, the fact remains that service of the said notice u/s 148 was affected on the petitioner only on 16.07.2021 through email, though the limitation period had already expired on 30.06.2021. - HC Visit to Get Source Income Tax: Reopening of assessment - In the assessment order dated 19th May 2023, petitioner’s detailed submissions have been recorded and the assessing officer has point by point rebutted petitioner’s contention. We would say it is one of the well detailed order though, we would not certify the contents as correct. - Writ Petition dismissed - HC Visit to Get Source Income Tax: Proceedings u/s 276CC and 276C(2) - Non furnishing the return and paying the tax on time - Presumption as to culpable mental state - In the facts of the case, the offences have been prima facie made out - The statutory presumption u/s 278E comes into operation. - High Court refused to interfere with the prosecution proceedings - HC Visit to Get Source Income Tax: Capital gains for taxation on sale of property - Date of Transfer u/s 2(47) - Developer happens to be the signatory of the sale deed, therefore, the Developer cannot issue a document contrary to the contents of the registered document to which he is a signatory. Undoubtedly, the possession has been given only on 11.12.2008 and therefore, it was taken place only on 11.12.2008 and hence we do not find any merit in the appeal of the assessee. - AT Visit to Get Source Income Tax: Maintainability of Appeal against an intimation/processing of return u/s. 143(1) - Merger of intimation order u/s 143(1) with scrutiny order u/s 143(3) - Once the appeal is provided under the statute and the assessee has not availed of the right to appeal, now he cannot appeal the same while challenging the assessment order u/s. 143(3) of the Act. - AT Visit to Get Source Income Tax: Unexplained cash credits - Addition u/s 68 - Merely not filing the income tax return cannot debar the genuine transactions of the assessee in respect of this loans which have been repeated and in subsequent year the Revenue has accepted the same. The creditworthiness depends upon the act of both the parties and therefore, on merit as well the addition does not sustain - AT Visit to Get Source Income Tax: Exemption u/s. 11 denied - Validity of intimation issued u/s. 143(1)(a) - there are two aspects which emerges on this issue as to whether the disallowance made is a permissible adjustment contained in sec. 143(1)(a) and whether this adjustment, if permissible, has been made in compliance to 1st proviso to sec. 143(1)(a) of the Act. - As perusal of the provisions contained in sec. 143(1)(a) of the Act, we find that on both the aspects, the revenue fails. - AT Visit to Get Source Income Tax: Rectification u/s 154 - period of limitation - original order passed by the AO dated 05/04/2011 - AO has already passed a suo-moto rectification order u/s 154 dated 18/03/2014 - Even though the surcharge was levied in terms of the first order, the order so sought to be rectified by the assessee is the rectified order dated 18/03/2014 wherein the surcharge continued to be levied on the assessee besides additional interest. Therefore, the rectification application dated 01/07/2016 is well within the limitation period as so prescribed and is not barred by limitation. - AT Visit to Get Source Income Tax: Disallowance of interest expenditure - the borrowed fund has been utilized by the assessee to procure the shares of such known and related companies and most of them are unquoted shares, therefore, the interest expenditure as claimed by the assessee as business expenditure is not established - Additions confirmed - AT Visit to Get Source Customs: Valuation of imported goods - the onus of proving charge of undervaluation lies on the Revenue which needs to be proved by way of producing necessary evidence - the revenue erred in rejecting the invoice price - revenue is unable to provide any clinching evidence to prove undervaluation by the importer so as to reject the transaction value given in the invoice. - Revenue appeal dismissed - AT Visit to Get Source Customs: Levy of penalty u/s 114 and 114AA of the Customs Act, 1962 - Personal penalty on General Manger of the Customs Broker - not verifying genuineness of the exporter and his place of functioning - Penalties should not be imposed merely because a legal provision provides for it. It is a discretion of the authority to be exercised judicially - No penalty - AT Visit to Get Source Customs: Maintainability of appeal - Jurisdiction of Tribunal - there is a clear understanding that the confiscated goods were in the category of “baggage” and therefore under Section 129A proviso, this matter cannot be decided by the Tribunal. - AT Visit to Get Source FEMA: Receiving foreign exchange in lieu of issuance of equity shares/share warrants - whether no approval has been granted by FIPB? - When FIPB, the authority, who is vested with power to grant approval has held that no post facto approval is required, interpreting the order in any other fashion, that too by an authority, who is not empowered to decide on the manner in which the said order has been passed, it does not lie in the mouth of the 1st respondent to claim that approval has not been obtained and such a finding is not only perverse, but arbitrary, illegal and unreasonable - HC Visit to Get Source IBC: Rejection of application filed u/s 9 of IBC - existence of dispute - When Demand Notice issued under Section 8 is replied by the Corporate Debtor, which is notice of dispute raising the dispute regarding claim of the Appellant, the Adjudicating Authority has rightly not proceeded to admit the Section 9 application - AT Visit to Get Source Service Tax: SVLDRS - Levy of interest for part payment - If the respondents are allowed to levy interest for the entire tax liability, when the portion of the tax is paid, then the same is without any authority of law - In the present case, the petitioner has paid 90% of the tax liability, but failed to pay the balance amount, then the petitioner is liable to pay interest for the balance amount alone. - HC Visit to Get Source Service Tax: Extended period of limitation - There was no independent enquiry conducted to ascertain the correctness of the alleged short payment. The impugned order also has not given any finding regarding the invocation of extended period of limitation in this case - Demand set aside - AT Visit to Get Source Service Tax: Levy of penalty u/s 77 and 78 of the Finance Act, 1994 - Penalties need not be imposed merely because a legal provision provides for it. It is the discretion of the authority to examine whether the law requires the provision to be enforced. - AT Visit to Get Source Service Tax: Demand of Service Tax - The present show cause notice is totally presumptive. Further, the difference in turnover in ST-3 return and income tax return could be on account of non-taxable businesses. So, unless Revenue examines the reasons for the difference, it cannot demand service tax blindly on the basis of difference in the turnover reflected in the two statutory returns. - AT Visit to Get Source Central Excise: Clandestine removal of goods - pre-judged SCN - Recovery of chit and records during search - the demand has been raised on the basis of documents recovered from the third party premises whose Author is not known and from the person to whom the documents have been recovered have retracted the statements in cross-examination as stated, these documents do not belong to the appellant - Demand set aside - AT Visit to Get Source Articles EV Vehicles charging stations to provide ‘battery charging service’ and not supply or distribution of ‘electricity’ – liable to GST @ 18% Department cannot file appeal on a ground not existing in Show Cause Notice – Limitation of appeal under Section 107(2) of GST Act GST: RECENT RELAXATIONS FOR HEALTH CARE Solar home lighting systems attracts GST @ 12% Notifications GST - States 38/1/2017-Fin(R&C)(10/2023-Rate)/3707 - dated 26-7-2023 - Goa SGST Amendment in Notification No. 38/1/2017-Fin(R&C)(26/2018-Rate), dated the 31st December, 2018 38/1/2017-Fin(R&C)(09/2023-Rate)/3708 - dated 26-7-2023 - Goa SGST Amendment in Notification No. 38/1/2017- -Fin(R&C)(1/2017-Rate) dated the 30th June, 2017 38/1/2017-Fin(R&C)(08/2023-Rate)/3709 - dated 26-7-2023 - Goa SGST Amendment in Notification No. 38/ 1/2017-Fin(R&C)(13/2017-Rate) dated the 28th June, 2017 38/1/2017-Fin(R&C)(07/2023-Rate)/3710 - dated 26-7-2023 - Goa SGST Amendment in Notification No. 38/1/ 2017-Fin(R&C)(12/2017-Rate) dated the 30th June, 2017 38/1/2017-Fin(R&C)(06/2023-Rate)/3711 - dated 26-7-2023 - Goa SGST Amendment in Notification No. 38/1/2017- Fin(R&C)(11/2017-Rate), dated the 30th June, 2017 10/2023 – State Tax (Rate) - dated 24-7-2023 - Jharkhand SGST Amendment in Notification No. 13/2020 – State Tax, dated the 25th June, 2020 05/2023 – State Tax (Rate) - dated 24-7-2023 - Jharkhand SGST Amendment in Notification No. 11/2017-State Tax (Rate), dated the 29th June, 2017 Income Tax 57/2023 - dated 1-8-2023 - IT No TDS u/s 194I on payment in the nature of lease rent or supplemental lease rent to aunit of IFSC for lease of a ship. 54/2023 - dated 1-8-2023 - IT Income-tax (Fourteenth Amendment) Rules, 2023. Circulars / Instructions / Orders SEBI - SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/133 - dated 2-8-2023 Audit of firm-level performance data of Portfolio Managers SEBI - SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/132 - dated 1-8-2023 Trading Preferences by Clients – Applicability for commodity derivatives Customs - 19/2023 - dated 2-8-2023 Expansion of automatic LEO facility in ECCS News Production Linked Incentive Schemes for 14 key sectors aim to enhance India’s manufacturing capabilities and exports Government e-Marketplace registers highest ever Gross Merchandise Value of more than ₹ 2 lakh crore in FY 2022-23 IICA organises colloquium on "Cross-Sectoral Collaboration: The Imperative for Regulatory Convergence" for FOIR Central sector regulators Government launches a one-time settlement Scheme Vivad se Vishwas – II (Contractual Disputes) to effectively settle pending contractual disputes, as announced in the Union Budget 2023-24 DPIIT notifies Quality Control Orders for ‘Smart Meters’ and ‘Welding Rods and Electrodes’ New record of over 6.77 crore Income Tax Returns (ITRs) filed till 31st July, 2023; record growth of 16.1% Year-on-Year Case Laws: GST 2023 (8) TMI 106 Principles of natural justice - seeking opportunity of hearing before passing the order under Section 73 of the Odisha Goods Services Tax Act, 2017 - HELD THAT:- It appears that when the petitioner was called upon to give his reply, he sought for time vide his application dated 29.04.2023 under Annexure-3 seeking for a period of 30 days, so that he will produce relevant document and submit his reply against GST DRC-01 for the tax period July, 2017 to March, 2018 vide Reference No. ZD210323019782S dated 31.03.2023. In the said request for grant of time, at Sl. No. 7, in the option for personal hearing , though the petitioner put tick mark in the No column, but that is meant for that time petition itself. Therefore, once the petitioner is asking for time, there is no need for mentioning of any personal hearing in the petition under Annexure-3. However, the same should have been acted upon by the authority by giving opportunity of hearing as per the statute. The statute requires that at least three opportunities should be given to the assessee. The same has not been complied with. This Court has no hesitation to hold that the opposite parties have shown haste in passing the order dated 24.05.2023 under Annexure-4, though the adjudicating authority had to give opportunity of hearing to the petitioner in conformity with the provisions of law. In absence of compliance of such provision, the order so passed on 24.05.2023 under Annexure-4 cannot be sustained in the eye of law and liable to be quashed and is hereby quashed. The matter is remitted back to the adjudicating authority to pass appropriate order under Section 73 of the Act by affording opportunity of hearing to the petitioner - Petition disposed off. 2023 (8) TMI 105 Rectification of the assessment order - It is alleged that the petitioner under the guise of submitting rectification is seeking to re-do the entire assessment order which is not admissible - violation of principles of natural justice - HELD THAT:- It is seen the petitioner filed a rectification petition under Section 161. Before filing the rectification petition, the petitioner collected all the records and filed the rectification petition along with the records. This would indicate that the petitioner was bonafide in seeking time to furnish all the records. If the petitioner has filed the rectification petition without any records, the claim of the respondent ought to be accepted, but in the present case it is for the genuine reason the petitioner has sought for adjournment. Therefore, this Court is of the considered opinion that the petitioner is entitled to one more opportunity. In the present case, the petitioner has submitted a rectification petition along with the records as well as pointed out several discrepancies such as the respondent has not granted ITC claim wherever it is applicable and imposed tax on the certain expenses. The petitioner has relied on the proviso to section 161 and submitted that before passing any orders under the section 161 then opportunity should be granted to the assessee - In the present case, while passing the rectification order, the respondent has not followed the proviso stated under Section 161. Therefore, this Court is also of the considered opinion that before passing the order under Section 161, the respondent should have followed the proviso and granted personal hearing to the petitioner. Therefore, while passing the rectification order there is violation of principles of natural justice. Since the tax liability is huge, the State cannot be made to suffer by the attitude of the petitioner as well. Therefore, in the interest of justice, the petitioner is directed to pay Rs. 1,00,000/- for each year. On such deposit, the respondent shall re-do the assessment - the impugned orders are set aside - Petition allowed. 2023 (8) TMI 104 Provisional attachment of current account of petitioner - impugned order proceeds on the premise that proceedings under Section 122 of CGST Act have been launched against the petitioner through no show cause notice in form DRC-01 under Rule 142 has been issued so for - HELD THAT:- It is found that Rule 159 of the CGST Rules, 2017 sets out the procedure to be followed for issuing a provisional attachment order. Under Rule 159 (5) a person whose property is attached may within 7 days of such attachment, file an objection to the effect that the property attached was or is not liable to attachment. After such objection is filed, the Commissioner is required to offer the person objecting an opportunity of being heard and thereafter pass appropriate order in Form GST DRC-23, if he is of the view that property is required to be released from attachment. Clearly the petitioner has approached this Court without availing the aforementioned remedy available under the law - it is noted that the Bank account of the petitioner has remained under attachment since long once under order dated 02.04.2022 and thereafter under the order dated 21.04.2023 but partially the petitioner herself is to be blamed for not taking recourse to Rule 159 (5) of the Rules early - Since the bank account of the petitioner has remained attached since April 2022, it is deemed appropriate to direct the petitioner to approach the respondent no. 1 within two weeks from today, under Rule 159 (5) by filing objections the respondent no. 1 shall make all endeavour to take a decision thereupon as per law expeditiously preferably within three weeks of filing such objection under Rule 159 (5) of the CGST rules, 2017. Petition disposed off. 2023 (8) TMI 103 Maintainability of petition - availability of alternative remedy - opportunity of personal hearing not provided - Classification of goods - rate of tax - trading in Gloriosa Superba Seed - comes under entry 88 in the Notification No.2 dated 28.06.2017 or under entry 73 in the Notification No.1 dated 28.06.2017 - HELD THAT:- The Learned Counsel appearing for the respondents submitted that the petitioner is having alternative remedy of filing statutory appeal. But the Learned Senior Counsel appearing for the petitioner submitted that the respondents have not granted sufficient opportunity and relied on the impugned order wherein it is stated that personal hearing opportunities was granted on 06.09.2022, 08.09.2022 and 09.09.2022 vide letter dated 29.08.2022, 06.12.2022 vide letter dated 29.12.2022 and 12.12.2022 vide letter dated 29.11.2022. It is impossible to attend the hearing on 06.12.2022 when the notice dated 29.12.2022 was issued. However the Learned Counsel appearing for the respondents strongly opposed this plea and produced the hearing sheet to substantiate that opportunity was granted and the petitioner attended the hearing on 06.09.2022. Even according to the petitioner he had attended the PH on 06.09.2022 and sought time to file written submission. It is seen that the date of the order is 27.12.2022, which means the order is passed even prior to the hearing notice dated 29.12.2022. Therefore this Court is of the considered opinion that the petitioner deserves opportunity, since effective opportunity was not granted to the petitioner. Therefore, the impugned order is liable to be quashed and hence, the impugned order is quashed. Since the petitioner had already paid the GST liability, the impugned order is passed for interest and penalty coupled with the fact that the question of applicability of exemption is raised, this Court decline the plea of the respondents. Petition allowed. 2023 (8) TMI 102 Profiteering - sales prices of the products to all franchises, disproportionate to the loss of ITC or not - charging Royalty and Advertisement charges on such increased net taxable sales value from his franchisees - reduction in the rate of GST not passed on - contravention of provisions of Section 171 of the CGST Act, 2017 - HELD THAT:- On examination of submissions made by the Respondent and as seen from the copy of Agreement between the Franchisee and Franchisor, it had been observed that there was no clause that indicated that the Franchisor was fixing prices or that the Franchisor had been supplying the material and had been retaining the ITC. The Franchisee was only supposed to pay the Royalty Charges at 8% and Advertisement Charges at 4.5% as the case might be on the net sales. Upon perusal of the Report of the DGAP, we observe that the Respondent was working on a Franchisee-Franchisor agreement and was providing its business model to various operators and he was only collecting Royalty and Advertisement Charges from his Franchisees for selling proprietary products of Subway, on the net sales declared by individual Franchisees. The rate of Royalty and Advertisement Charges were mutually agreed with the Franchisee and the Respondent had nothing to do with the individual products sold to the customers. The Franchisee was only supposed to pay the Royalty Charges @ 8% and Advertisement Charges @ 4.5% as the case might be on the net sales. The Respondent did not have any control on the base price offered by his Franchisees to their customers and the amount of Input Tax Credit availed by his Franchisees - Further, the consideration for sale of products was not received by the Respondent from his Franchisee and it was retained by the individual Franchisees and accounted for as revenue in their individual books of accounts. It is clear that the Franchisees were free to operate their business and were also liable to pay the taxes and obtain necessary permissions. Since, there had been no reduction in the rate of tax in respect of the services i.e. Royalty Service and Advertisement Services provided by the Respondent, the provisions of Section 171 of the Act were not applicable with respect to these services - the instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017 as there had been no reduction in the rate of tax in respect of the services provided by the Respondent nor he was supplying the various products to the customers. The present proceedings being conducted against the Respondent are dropped. Income Tax 2023 (8) TMI 101 Assessment u/s 153A - incriminating documents/materials found and seized at the time of search or not? - HELD THAT:- Special leave petition is covered by the judgment of this Court in Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] - In the circumstances, the special leave petition stands disposed of in terms of the said judgment. 2023 (8) TMI 100 Liability of directors of private company in liquidation - steps taken against the delinquent Company - lack of jurisdiction of the AO to proceed with the show cause notices issued by it u/s 179 - According to the petitioner, as he was not the Director of the Company, he was not liable to receive any notice u/s 179 which provision can be invoked only against a Director of a private Company - as per HC impugned show cause notices and the impugned order issued u/s 179 are unsustainable - HELD THAT:- SLP dismissed. 2023 (8) TMI 99 Inordinate delay of 1110, 1117 and 991 days respectively in refiling the said appeals - High Court has observed that the explanation offered for the condonation of delay sought for by the appellant herein could not be accepted, as, for a long time the appeals were lying in defect and therefore could not be listed before the Court - HELD THAT:- As we find that the High Court has not dealt with the appeals on merits and if the substantial questions of law are of significance then the High Court, in our view, ought to have condoned the delay in refiling the appeals and considered the cases on merits. We note that initially the appeals were filed in time. However, it is also an aspect to be noted that the delay of 1110, 1117 and 991 days respectively in refiling the respective appeals is considerable. Hence, we set aside the impugned orders and allow these appeals and restore the appeals before the High Court with cost of Rs. 50,000/- (Rupees fifty thousand only) to be paid by the appellant to the respondents in each of these appeals within a period of four weeks from today. 2023 (8) TMI 98 Income accrued / taxable in India - Royalty u/s 9(1)(vi) r.w.a.12 of the Indo US DTAA - licensing of software products of Microsoft in the Territory of India by the Respondent - As issues raised have been answered by a judgment by Three Judge Bench of this Court in Engineering Analysis Centre of Excellence Private Limited [ 2021 (3) TMI 138 - SUPREME COURT] - Learned ASG appearing for the petitioner submitted that a review petition as against the aforesaid judgment is pending before this Court and that the matter is to be heard in open Court. HELD THAT:- In our view, as on today, Engineering Analysis Centre of Excellence Private Limited (supra) is holding the field. In the event, the aforesaid decision is overruled, that cannot have a bearing on the present case, as it will have an impact only on the judgment passed in Engineering Analysis Centre of Excellence Private Limited (supra) and the cases to be decided thereafter. In other words, if once a judgment is passed by a Court following another judgment and subsequently the latter judgment is overruled on a question of law, it cannot have an effect of reopening or reviving the former judgment passed following the over ruled judgment nor can the same be reviewed. In view of the above, we hold that as on today the judgment of a Three Judge Bench of this Court in Engineering Analysis Centre of Excellence Private Limited vs. Commissioner of Income Tax and Another (supra) is holding the field and therefore the said judgment would have to be followed in the instant case. SLP dismissed. 2023 (8) TMI 97 Validity of reopening of assessment u/s 147 - reliance on audit objection - tangible material to trigger reassessment - Tribunal ruled in favour of the assessee as AO had not recorded his satisfaction that income chargeable to tax had escaped assessment. HELD THAT:- The respondent/assessee had made full disclosure relating to why it had debited the expenses incurred by it, i.e., on software development for business purposes, in the note appended to the computation of income in the return of income filed qua the relevant AY. There is no dispute about the fact that the original assessment was completed under Section 143(3) of the Act, via order dated 24.04.2005. Given this factual position, we are in agreement with the view taken by the Tribunal, that this was a case of change of opinion and, therefore, the reassessment proceeding could not have been triggered merely on the basis of audit objection, without any fresh tangible material. No substantial question of law arises for our consideration. 2023 (8) TMI 96 Assessment Order communicated without quoting DIN - CBDT has permitted that in exceptional circumstances, communication may be issued manually but only after recording reasons in writing and with the prior written approval of the Chief Commissioner/ Director General of Income Tax concerned - HELD THAT:- Assessment Order was passed manually due to the technical difficulty that was being faced on the Income Tax Business Application (ITBA) system and that the approval was accorded by the Chief Commissioner of Income Tax. He does not explain why the endorsement as per the format provided in Circular No. 19 of 2019 is not made in the Assessment order. He does not explain why the date of the alleged approval obtained is also not mentioned therein. He has also not enclosed the directions passed on which the letter dated 31st March 2023 was issued by the Office of the Chief Commissioner of Income Tax. Therefore, in our view, since the Assessment Order does not contain the DIN and the AO having been issued without complying with the conditions laid down in the Circular No. 19 of 2019, we hereby quash and set aside the Assessment Order dated 31st March 2023 and the consequent demand notices etc. issued. We remand matter to the J. A. O. for de-novo consideration and the Assessment shall be completed and order to be passed by 30th September 2023. Petitioner shall by 5th August 2023 address a communication to the J.A.O. mentioning therein the documents, copies whereof are required for Petitioner to submit its further objections and these documents shall be provided by 11th August 2023. By 31st August 2023, Petitioner shall submit further submissions to effectively deal with all documents. The final Assessment Order shall be passed after giving a personal hearing to Petitioner, notice whereof shall be communicated atleast five working days in advance. 2023 (8) TMI 95 Unexplained money u/s 69-A - Petition sought return of the amount which was seized under Panchnama - ITAT accepted observed that the cash seized from Petitioner is the professional income and therefore cannot be treated as unexplained income - HELD THAT:- It is of utmost importance that Revenue Officers are bound by the decisions of the Appellate Authority. Order of the Appellate Commissioner is binding on the Assistant Commissioner and the order of the Tribunal is binding upon the Additional Commissioner and below. The principal of juridical discipline requires that orders of the higher appellate authority should be followed by the subordinate authorities. For the affiant Ambernath B. Khule to state that the ITAT erred and the Court should not consider the order of the ITAT is highly objectionable. If the Officers of the Income Tax Department are allowed to continue this way, it will result only in undue harassment to assessees and chaos in administration of tax laws. Thus Hon ble Court be pleased to issue a Writ of Mandamus and/or any other Writ, Order or Direction in the nature of Mandamus directing the Respondents to return amount of Rs. 16 lakhs seized from the Petitioner on 17.7.2018. The amount shall be returned on or before 31st August 2023. If this amount is not returned to Petitioner by the department on or before 31st August 2023, Petitioner shall be paid interest on this amount from 12th May 2023, the date of pronouncement of the order by ITAT until payment/realization. 2023 (8) TMI 94 Acquisition proceedings - recovery of the income tax dues from the compensation amount payable to the petitioner company - Lands belonging to petitioner company as acquired for the purpose of constructing a residential school - communication from the Deputy Collector (Revenue)/Land Acquisition Officer, Puducherry stating that the property has been attached and steps have been taken to recover the income tax dues from the compensation amount payable to the petitioner company in respect of the acquired land - HELD THAT:- Once lands are acquired, there is no second opinion with regard to vesting of the same with the State, free of all encumbrances. The original land owner cannot impose his views or dictate terms to the State, as to how the lands should be utilised. It is the discretion of the State to use the lands for any other purpose also. The only entitlement of the land owner is to get compensation and there is no inherent right for the land owner to seek to quash the land acquisition proceedings and consequently reclaim his property. In the present case, we notice that Sec.4(1) notification was dated 17.11.2009 subsequently Sec.6 declaration was also made on 14.12.2009 and the award also came to be passed within one year viz., on 16.06.2010. It is also the specific case of respondents that possession was also taken on 25.02.2010. Writ Petition came to be filed only in April 2011, contending that petitioner company had no notice of the acquisition proceedings. It is also contended by the counsel for the appellant that the name of the petitioner company is reflected in the encumbrance certificate and they are the rightful owners of the subject lands even before the acquisition proceedings commenced and therefore they are entitled to notice as a matter of right. Though this argument may sound attractive, unfortunately in the light of the fact that the revenue records were only in the name of erstwhile owner on the date of acquisition proceedings, such a contention that the petitioner's company name is reflected in the encumbrance certificate cannot be countenanced. It is the duty of the petitioner company to have the revenue records transferred/mutated in its name subsequent to purchase of the property in question. The respondents cannot be blamed for the lethargy and inaction of the appellant and equally it is not for the Court or the land acquisition authorities to make roving enquiries to find out as to who is the present owner on the relevant date for consideration. It is well settled law that the authorities are entitled to go with the revenue records for the purpose of issuing notices in land acquisition proceedings. As seen that 80% of the total compensation has been paid to the income tax department towards tax arrears of the petitioner company, pursuant to the notice issued by the income tax department. In so far as the allegation of post notification delay, it would not be a ground to quash the acquisition proceedings per se. Once the award has been passed pursuant to Sec.6 declaration, the property vests with the State and the State has discretion to put the said lands to use for any public purpose that it may deem fit and proper. Therefore, the contentions raised in the Writ Appeal do not merit any consideration. The single Judge has addressed all issues that arose in the Writ Petition including the invocation of the urgency clause as well as the issue regarding non issuance of notice to the petitioner company by the land acquisition authority. We do not deem it fit to interfere with the well reasoned order of the learned single Judge. Considering the fact that there have been subsequent developments with regard to the income tax proceedings and this Court allowing tax appeals filed by the petitioner company and remitting the matter to the AO for re-computation, the liability towards the income tax arrears may undergo modification, subject to final orders being passed by the AO. We also noticed that pending the Writ Petition, the Income Tax authorities have been impleaded as respondents and they are also parties before us. In the event of the assessment proceedings concluding in favour of the appellant, wholly or partly, then the compensation amount or whichever sum is in excess shall be refunded by the respondents 4 and 5, together with interest at 9% per annum. 2023 (8) TMI 93 Validity of Reopening of assessment - period of limitation - As argued notice u/s 148A(b) was dispatched on 16.07.2021 while the limitation period already stood expired on 30.06.2021 itself - HELD THAT:- The documents annexed as Annexure A to the petition are the notice dated 30.06.2021 u/s 148 addressed to the petitioner; email communication dated 16.07.2021 regarding delivery of the notice u/s 148; and a screenshot of the e-filing portal of the Income Tax Department reflecting uploading of the notice 16.07.2021. It would be significant to observe that although the notice dated 30.06.2021 u/s 148 bears an endorsement at the foot of the page that it has been digitally signed, it is inchoate, in the sense that it is not accompanied by a date. The date would have revealed when the digital signatures were appended on the notice. Admittedly, the said notice was never physically delivered to the petitioner/assessee. As such, the fact remains that service of the said notice u/s 148 of the Act was affected on the petitioner only on 16.07.2021 through email, though the limitation period had already expired on 30.06.2021. In the cases titled M/s Vinayak Services Pvt. Ltd . [ 2022 (12) TMI 1424 - DELHI HIGH COURT] ; Pawan Kumar Gupta[ 2023 (2) TMI 1172 - DELHI HIGH COURT] and Usha Gupta [ 2023 (2) TMI 1171 - DELHI HIGH COURT] under similar circumstances, allowed the writ petitions and quashed the notices u/s148A(b) as well as orders u/s148A(d) of the Act, impugned therein. The impugned notice under Section 148A(b) and the impugned order under Section 148A(d) of the Act are quashed - Decided in favour of assessee. 2023 (8) TMI 92 Deduction qua bad debts u/s 36(1)(vii) denied- Assessee submits that since the appellant/assessee had not created any provision for bad debts in the AY in issue i.e., AY 2003-04, it could straightaway claim, in law, the entire irrecoverable bad debt crystallized for the AY in issue - HELD THAT:- As expounded by the Supreme Court in Catholic Syrian Bank Ltd [ 2012 (2) TMI 262 - SUPREME COURT] in our opinion, the appellant/assessee is entitled to straightaway claim deduction towards irrecoverable bad debts u/s 36(1)(vii) - There is no dispute that the conditions prescribed u/s 36(2) of the Act stand fulfilled. Section 36(1)(vii) and Section 36(1)(viia) of the Act are distinct and independent provisions. In this case, the first proviso appended to Section 36(1)(vii) has no applicability, as there was no provision made for bad and doubtful debts. As is well recognised, ordinarily, the Act does not allow for deduction on account of a mere provision for bad and doubtful debts in computation of taxable profits. Notably, Sub-section 2(v) states that where a debt or part of debt relates to advances made by an assessee to which clause (viia) of Section 36(1) applies, no such deduction would be allowed unless the assessee has debited the amount of such debt or part of the debt in the previous year in issue, to the provision made for bad and doubtful debts in the accounts of the assessee. Thus, as would be evident, the scheme of the aforementioned provisions would exclude the applicability of the first proviso appended to Section 36(1)(vii) of the Act, as there was no provision for bad debts available in the AY in issue i.e., AY 2003-04. The roundabout manner which the Tribunal has followed, appears to be predicated on the fundamental errors of fact. As noticed above, the Tribunal wrongly noted that in AY 2002-03, the profit determined qua the AY amounted to Rs. 215,62,49,368/-. Based on this, it calculated that a provision for bad debts could be created at the rate of 5%, which was Rs. 10,78,12,465/-[sic. Rs. 10,78,12,469/-]. Having regard to this supposed credit balance, the Tribunal allowed a deduction of Rs. 1,88,87,531/- [i.e., the difference between Rs 12,67,00,000 and Rs 10,78,12,469] and thus, disallowed deduction claimed qua the remaining amount, which was Rs. 10,78,12,469/-. It must be emphasized that the flawed formula adopted by the AO would run into rough weather if the appellant/assessee s appeal for AY 2002-03 were to be allowed; which would result in its loss return being accepted. According to us, this roundabout manner of arriving at the addition was flawed, both on facts and in law. Question of law answered in favour of the appellant/assessee. 2023 (8) TMI 91 Reopening of assessment - petitioner received notice under Section 148 - as argued order u/s148A(d) not having been passed - As submitted circular relied upon by petitioner itself provided that within 15 days of the communication being issued manually, it has to be uploaded in the system thereby compulsorily generating the DIN on the system and the same has to be communicated to the assessee as per electronically generated proforma available on the system - HELD THAT:- As all factual situations which we are not inclined to go into in our jurisdiction under Article 226 of the Constitution of India. At the same time, we should also note that in the affidavit filed by the said Neha Desai, it is stated that in none of the replies sent in response to the notice under Section 148, petitioner had even raised this ground of order u/s 148A(d) not having been passed. It is also recorded that petitioner had responded to three notices under Section 142(1) issued on 12th January 2023, 23rd February 2023 and 16th March 2023. Before that petitioner had also responded in detail to the original notice also. But never was this ground raised. We should also note that a personal hearing was also granted vide impugned communication dated 12th May 2023. In response to the notice dated 4th May 2023, petitioner has submitted its reply on 11th May 2023 thereby seeking extension, which was granted upto 14th May 2023. The assessing officer has proceeded to pass the order dated 19th May 2023 since time to complete the assessment was expiring on 31st May 2023. In the assessment order dated 19th May 2023, petitioner s detailed submissions have been recorded and the assessing officer has point by point rebutted petitioner s contention. We would say it is one of the well detailed order though, we would not certify the contents as correct. We have not gone into those details or merits. That, we leave for petitioner to challenge in the appeal that it may want to file against the assessment order dated 19th May 2023. We would reject this petition with a direction to petitioner to adopt the alternate remedy available by way of filing an appeal. Petitioner may file the appeal within four weeks from today. 2023 (8) TMI 90 Exemption u/s 10 (10C) - Settlement of dues receipt in terms of voluntary retirement - second respondent made application under the voluntary retirement scheme opting to leave the service of the petitioner Company, as accepted, after deducting TDS he was paid a sum as full and final settlement of his dues - as argued petitioner company illegally deducted the wages of the second respondent in terms of income tax as wages due to the period of work done by the employees would be in an ambit of Section 33 (c ) (2) of ID Act and under VRS the amount payable to the workman will be exempted Rs. 5,00,000/- from the income tax as per Income Tax Act, So the management have illegally deducted a sum from his retirement benefits. HELD THAT:- As on perusal of clause 10(C) of Section 10 of Income Tax Act, revealed that payments on account of voluntary retirement are to be exempted from income tax only if the schemes governing the said payments are in accordance with the guidelines prescribed in this behalf - As petitioner would submit that the scheme floated by the petitioner Company is not by any law. Since it was only contract between the petitioner and the second respondent and he was allowed to retire on voluntary retirement scheme. Therefore, Section 10(C) of the said Act is not at all applicable to the second respondent. However, the petitioner failed to produce any receipt or challan in respect of the payment as deducted from terminal benefits of the second respondent before the Income Tax Department. Admittedly, the second respondent was voluntarily retired from his service. Therefore, as per Income Tax Act, the person who had retired from service on voluntary retirement scheme, his income upto Rs. 5,00,000/- on retirement have to be exempted from income tax. Therefore, the first respondent rightly directed the petitioner to pay a sum to the second respondent. Hence, this Court finds no infirmity or illegality in the order passed by the first respondent. Accordingly, this writ petition is dismissed. It is made clear that the petitioner is directed to pay the remaining amount after deducting the amount which was already deposited on the file of the first respondent within a period of four weeks from today. 2023 (8) TMI 89 Exemption u/s 11 denied - delay in filing of the returns and the relevant Form under Section 12(1)(b) in Form 10B to avail the exemption available to a Charitable Trust - HELD THAT:- Relevant financial years coincides with the period when the country was under the first and second wave of Covid 19 pandemic. Thus, the delay in filing the Returns was not willful as is evident from the facts that has been narrated above. The petitioner Trustee died on 19.03.2021 and the other Trustee also admitted in hospital on 04.03.2021 one day after the Managing Trustee was admitted in the hospital. There are several factors which are contributed to the delay in filing of the returns. The benefit which has been enjoyed by the petitioner during the previous assessment years has been denied only because the Petitioners' Trust was unable to access the Income Tax Portal, where the assessment order and notices were being communicated. The other compounding factor was that the auditor was also admitted in the hospital and that the parents of the auditor were also admitted who later died. Court is inclined to interfere with the Impugned Order by setting aside the Impugned Order and remits the case back to the respondents to pass a fresh order on merits and in accordance with law within a period of sixty (60) days from the date of receipt of a copy of this order. 2023 (8) TMI 88 Prosecution Proceedings u/s 276CC and 276C(2) - non furnishing the return and paying the tax on time - Presumption as to culpable mental state - petitioner, even at the time of filing the return with delay u/s 139(4) of the Act, did not pay the self assessment tax along with the return and rather, it was paid only on 14.3.2016 after receipt of the notice from the AO - HELD THAT:- Section 139(4) of the Act cannot, by any stretch, control the operation of Section 139(1) of the Act, which actually fixes the period for furnishing the returns. The term 'wilfully fails to furnish in due time' as contained in Section 276CC of the Act takes within its fold the due time that has been fixed under Section 139(1) of the Act and not the extended time provided under Section 139(4) of the Act. Therefore, the mere filing of return during the extended time will not come to the aid of the petitioner to escape from the criminal prosecution. Whether there is wilfulness on the part of the petitioner in filing the returns with delay ? - The issue as to whether there was wilfulness in not filing the returns on time and not paying the tax on time, is only a matter of fact, which can be ascertained only through appreciation of evidence. In the light of this provision, this Court, exercising its jurisdiction under Section 482 of the Code, cannot presume innocence or absence of wilfulness on the part of the petitioner. On the other hand, what can be presumed is only culpable mental status and the onus is upon the petitioner to prove the contrary and that can be done only at the time of trial. On the facts alleged in the complaint, the offences have been prima facie made out. In view of the same, the statutory presumption under Section 278E of the Act comes into operation. Under such circumstances, this Court, in exercise of its jurisdiction under Section 482 of the Code, cannot disregard the statutory presumption. This Court also cannot go into the facts of the case nor the defence taken by the petitioner to discharge the onus since it will be beyond the jurisdiction under Section 482 of the Code. This exercise can be carried out only in the course of trial since the determination of culpable state of mind is primarily a determination of fact, which requires appreciation of evidence. This Court does not find any ground to interfere with the proceedings pending before the Court below. It is made clear that it will be left open to the petitioner to raise all the grounds before the Court below and the same will be considered on their own merits and in accordance with law. Any observations made in this order will not have a bearing on the Court below while deciding the case on merits.. 2023 (8) TMI 87 Reopening of assessment u/s 147 - Reason to believe - as argued reasons assigned by AO does not contain a whisper as regards the failure to disclose fully and truly all material facts - HELD THAT:- In light of the contention made on behalf of the petitioner that the material facts towards the sub-contract charges being a part of the record, it cannot be stated that there is failure of disclosure of material facts fully and truly, such factual assertion made is not controverted to by the other side. Accordingly, on the sole ground that there is absence of finding that there is failure on the part of the assessee to disclose fully and truly all material facts, which is a jurisdictional requirement, the notice issued u/s 148 of the Act is set aside. 2023 (8) TMI 86 Reopening of assessment u/s 147 - wrong mention of assessment year and financial year - invalid approval granted by the additional commissioner u/s 151 - HELD THAT:- It is quite apparent from the perusal of reasons recorded that there has been no application of mind by the AO while recording the reasons as the assessment year and financial year have been mentioned wrongly in para (a) of the reasons recorded. The Ld. AO has stated the financial year as 2011-12 whereas the correct financial year should have been 2010-11. Similarly in the concluding para, Ld. AO has stated that Assessment year involved was 2012-13 instead of 2011-12. In our considered opinion the said mistakes on the part of the AO while recording reasons are fatal and cannot be allowed to be cured even by setting aside the assessment. Even the competent authority u/s. 151 of the Act which is in the present case has accorded the approval in a mechanical manner as he has failed to notice these mistakes while granting approval. In our opinion, the said casual reopening of assessment can not be allowed as by resorting to the reopening of assessment the revenue unsettles the already settled assessment. Appeal of the assessee is allowed. 2023 (8) TMI 85 Revision u/s 263 - deduction u/s 80P - claim made by the appellant against the interest income received from deposit with Delhi Cooperative Bank and also exemption against agricultural income and other income - HELD THAT:- PCIT has not disputed the fact that the appellant is group housing society having status of AOP and was incorporated under the Multi-State Cooperative Act, 2002 on 27.02.2009 with the object to construct residential flats for its members. The assessee collected money from its members and deposited the same in Delhi State Cooperative Bank, New Delhi and HDFC Bank. The appellant society earned interest income from surplus of deposit lying with the said banks and interest earned was to be utilized for meeting the sole object of the assessee i.e. to construct the residential flat. These facts have not been controverted or disputed by the ld PCIT in any manner. Therefore, the assessee is a housing cooperative society and not cooperative bank. In the case of PCIT Vs. Totagars Co-operative Sale Society [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] held that for the purpose of section 80P(2)(d) a co-operative bank should be considered by a cooperative society and interest earned by cooperative society from cooperative bank would necessarily be deductible u/s 80P(1) of the Act. AO was right in allowing claim of assessee u/s 80P(2)(d) and therefore, the assessment order cannot be alleged as erroneous and prejudicial to the interest of revenue on merits. PCIT was not correct and justified in invoking revisionary provision of section 263 of the Act at the issue of allowance of exemption u/s 80P(2)(d) to the assessee on the interest earned from Delhi State Cooperative Bank. Decided in favour of assessee. 2023 (8) TMI 84 Validity of Assessment u/s 153A - deemed dividend u/s. 2(22)(e) in view of the assessee, a partner (with 40% share) in firm stands extended sums by a company in which public is not substantially interested, and of which the assessee is an Executive Director with 97% shareholding - HELD THAT:- The Revenue s case, it s merits apart, survives no longer in view of the decision in Abhisar Buildwell Pvt. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] inasmuch as no proceedings were pending for the years under reference as on the date of search and, two, the addition/s made in the impugned assessments does not owe its origin, or is relatable, to the material found during search. Decided against revenue. 2023 (8) TMI 83 Computation of income from transport business on the basis of the gross transport charges in Form No.26AS - appellant admitted sum in the return towards income from transport business u/s 44AE of the Act and the gross receipts were wrongly reported as agricultural income in the return of income but it is contract charges as per Form 26AS - HELD THAT:- Assessee is not having any agricultural income, but, the assessee is having transport business and thereby earned income of Rs. 4,96,177/- and also deducted TDS u/s 194C of the Act. The assessee is having only one lorry, therefore, the provision of section 44AE is applicable. Considering the TDS deduction, no hesitation to come to the conclusion, that the assessee earned this income only from his transport business, therefore, section 44AE is applicable and the assessee has already admitted Rs. 90,000/- as income from transport business, therefore, the AO is not justified to ignore the statutory provision of section 44AE and treat this income as business income of the assessee, just based on the mistake committed by the assessee, i.e. showing the receipt as agricultural income. Hence direct the AO to treat the income of the assessee u/s 44AE of the Act. Appeal of assessee allowed. 2023 (8) TMI 82 Capital gains for taxation on sale of property - Date of Transfer u/s 2(47) - HELD THAT:- As if the transfer of immovable property is taken place in exchange of money coupled with possession, then it will be termed as sale in the eyes of law. From the above, it is crystal clear that the possession of the property was handed over by the vendor to the vendees at the time of execution of the sale deed. The above said sale deed not only signed by the assessee but was also signed by the agreement holder and developer. Both of them had not raised any objection that the possession of the property has been handed over by the assessee along with others to the vendee on 11.12.2008. In the light of the above, we do not have any confusion that the possession of the property was handed over to the vendee on 11.12.2008 after receiving the consideration. In our view the transfer within the meaning of section 2(47) took place if the property is transferred either by exchange or sale or by relinquishment. In the instant case, the sale has taken place within the meaning of transfer of property on 11.12.2018, therefore, the transfer took place only on 11.12.2018. The contention of the learned Counsel for the assessee that the possession of the property was handed over by the assessee to the Developer on 4.2.2008 is without any basis as the contents of the registered document cannot be denied or disbelieved based on a specific undated document given by the Developer. Developer happens to be the signatory of the sale deed, therefore, the Developer cannot issue a document contrary to the contents of the registered document to which he is a signatory. Undoubtedly, the possession has been given only on 11.12.2008 and therefore, it was taken place only on 11.12.2008 and hence we do not find any merit in the appeal of the assessee. Accordingly, the same is dismissed. 2023 (8) TMI 81 Disallowance of interest expenses 40A(2)(b) - CIT(A) restricting the rate at 14% as against claimed by assessee at 16% - HELD THAT:- As the assessee s payment of interest to Shriram Properties Ltd., on unsecured loan @ 16% is quite reasonable in view of the fact that the benchmark prime lending rate by SBI as on 01.04.2017 was at 13.85% and that also for secured loans i.e., the assessee has to mortgage certain assets. This loan taken by assessee of Shriram Properties Ltd., @ 16% is unsecured and this is for regular business commitment and completion of projects. The charging of interest @ 16% is quite reasonable and hence, we reverse the finding of CIT(A) on this issue and allow the appeal of assessee. Maintainability of Appeal against an intimation/processing of return u/s. 143(1) - Counsel stated that the order of CPC processing the return u/s. 143(1) of the Act has merged into the order passed by AO u/s. 143(3) of the Act and hence, it can be challenged at this stage only - HELD THAT:- Appeal against an intimation u/s. 143(1) of the Act is provided and the second limb clearly provides that section 246A(1)(a) of the Act enables an assessee to prefer an appeal before Commissioner (Appeals) against intimation / processing done by CPC u/s 143(1) of the Act, where the assessee objects to making of an adjustment. It means that in the present case before us the assessee has not challenged the intimation/processing of return by CPC, Bangalore passed u/s. 143(1) of the Act dated 01.10.2019 and that has attained finality in the absence of any appeal or other remedy available with the assessee. Once the appeal is provided under the statute and the assessee has not availed of the right to appeal, now he cannot appeal the same while challenging the assessment order u/s. 143(3) of the Act. In term of the above, we confirm the order of CIT(A) on this issue and dismiss the appeal of assessee. 2023 (8) TMI 80 Addition u/s 56(2)(x) - difference in stamp duty value and the consideration paid by the assessee as the highest bidder - assessee is a firm with three partners and purchased a property in the auction - CIT(A) deleted the addition - HELD THAT:- We find that the coordinate bench of the Tribunal in Krishi Utpanna Bazar Samittee [ 2014 (3) TMI 1114 - ITAT PUNE] after considering the aforesaid circular issued by the Government of Maharashtra held that the consideration stated in the sale deed pursuant to the public auction is to be accepted as the fair market value. Thus the consideration paid by the assessee, being the higher/successful bidder, of the e-tender floated by the aforesaid bank is the fair market value of the property in the facts and circumstances of the present case. Thus, we find no infirmity in the impugned order passed by the learned CIT(A), and accordingly, the same is upheld. Decided in favour of assessee. 2023 (8) TMI 79 TP Adjustment - selection of MAM - rejecting the RPM as the most appropriate method - HELD THAT:- On a perusal of the order [ 2023 (4) TMI 1233 - ITAT HYDERABAD] for the assessment year 2011-12 in assessee s own case (supra), a Co-ordinate Bench of the Tribunal dealt with this issue in detail and restored the issue to the file of the AO/TPO to consider the RPM as the MAM and take a view on the necessity of any adjustment towards ALP for distribution function, after hearing the assessee. The issue needs to be re-considered in view of the request of the learned AR. To maintain consistency, we deem it just and proper to follow the decision of the Co-ordinate Bench of the Tribunal and restore the issue to the file of AO/TPO to consider the RPM as the MAM and take a view on the necessity of any adjustment towards ALP for distribution function, after hearing the assessee Appeal of assessee is treated as allowed for statistical purposes. 2023 (8) TMI 78 Revision u/s 263 by CIT - no or inadequate enquiry - assessee had revised its return of income for claiming Employee Stock Compensation Expenses (ESOP expenses) which was not claimed in the original return of income - Principal CIT held that the assessee had claimed expenses which were not included in the current year s expenses and booked in the books of accounts through profit and loss account and AO ought to have verified/investigated the issue and ought to have disallowed the same - HELD THAT:- As from the records we observe that during the course of assessment, the AO called for details with respect to the claim of ESOP expenses and the assessee filed various replies to the queries raised by the assessing officer, during the course of assessment proceedings. We observe that this is not a case where there was an omission on part of the AO to examine this aspect of ESOP expenses at all. AO had put a specific queries before the assessee during the course of assessment by way of issuance of various notices and had taken assessee s replies on record. As in the instant facts, there is no specific finding that the aforesaid expenses are not genuine or that there was any irregularity with respect to the aforesaid claim of ESOP expenses. So, in our view, this is not a case where no enquiry has been made by the assessee officer during the course of assessment proceedings. As held by various Courts, Principal CIT cannot in 263 proceedings set aside an assessment order merely because he has a different opinion in the matter. Sec 263 of the Act does not visualise a case of substitution of the judgment of the Principal CIT for that of the AO, who passed the order unless the decision is held to be wholly erroneous. Principal CIT, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-visit the entire assessment and determine the income himself at a higher figure. We thus find no error in the order of Ld. AO so as to justify initiation of 263 proceedings in the instant case. The Grounds of appeal raised by the assessee are thus allowed. 2023 (8) TMI 77 Unexplained cash credits u/s 68 - assessee is not maintaining the books of accounts - HELD THAT:- As noted in case of Smt. Shanta Devi [ 1987 (10) TMI 26 - PUNJAB AND HARYANA HIGH COURT] has categorically mentioned that the assessee when does not maintain any books of accounts the same cannot be considered and cannot be taken into account as unexplained cash credits u/s 68. In the present assessee s case the assessee is not maintaining the books of accounts as this is an admitted position. Thus, merely on the bank statement cannot attract provision of Section 68 - Thus, additional ground taken by the assessee is justifiable and is allowed. Besides this on merit as well the treatment given by the assessee has been clearly set out in respect of loans and the payments of the interest to the depositors. Assessee has given confirmations as well as the genuineness of the transaction. Merely not filing the income tax return cannot debar the genuine transactions of the assessee in respect of this loans which have been repeated and in subsequent year the Revenue has accepted the same. The creditworthiness depends upon the act of both the parties and therefore, on merit as well the addition does not sustain - Appeal of the assessee is allowed. 2023 (8) TMI 76 Exemption u/s. 11 denied - Validity of intimation issued u/s. 143(1)(a) - delay in completing the books of account - assessee has filed its return of income and Form 10B without compliance of Section 139(4A) i.e. after the due date of filing the return - HELD THAT:- Assessee in the present case has filed a belated return u/s. 139(4) of the Act which the department has not held it to be a defective return u/s. 139(9) and has processed it by accepting the revenue and capital expenditure though denying the exemption claimed u/s. 11 and computed the total income equal to the total receipts of the assessee for the year. Once a return has been processed as a valid return, there are restrictions within section 143(1)(a) which lists down six specific adjustments which can be made in the processing of return. In respect of any adjustment which is proposed to be made, a prior intimation is required to be served on the assessee, either in writing or electronically, as contained in 1st proviso to section 143(1)(a) of the Act. Ld. Counsel has evidently demonstrated before us, the failure on the part of CPC to issue such prior intimation to the assessee before making an adjustment by way of disallowing the claim of exemption u/s. 11 of the Act. Thus, there are two aspects which emerges on this issue as to whether the disallowance made is a permissible adjustment contained in sec. 143(1)(a) and whether this adjustment, if permissible, has been made in compliance to 1st proviso to sec. 143(1)(a) of the Act. As perusal of the provisions contained in sec. 143(1)(a) of the Act, we find that on both the aspects, the revenue fails. This position has not been controverted by Ld. Sr. DR also In case, where there is no response received from the assessee then, within thirty days of the issue of such intimation, department is free to make such adjustment or disallowance. The documentary evidence placed on record and the e-proceedings downloaded from the Income Tax portal, no where suggests that such a process has been followed. Thus, we find that the impugned intimation issued u/s. 143(1)(a) of the Act, dated 30.11.2021 is not in compliance with the 1st proviso to section 143(1)(a) of the Act and thus, the impugned intimation is invalid under the Act. Decided against revenue. 2023 (8) TMI 75 Rectification u/s 154 - period of limitation - whether the period of four years provided in sub-section (7) of Section 154 shall start from the date of the original order or from the date of the amended order? - HELD THAT:- As in case of Hind Wire Industries Ltd. [ 1995 (1) TMI 2 - SUPREME COURT] the matter relating to interpretation of provisions of Section 154(7) came up for consideration before the Hon'ble Supreme Court and it was held that the word order has not been qualified in any way and it doesn t necessarily mean the original order and it can be any order including the amended or rectified order and the relevant findings In the instant case, as we have noted above, the assessee first moved the rectification application on 01/07/2016 and at that point in time, the AO has already passed a suo-moto rectification order u/s 154 dated 18/03/2014 and therefore, the earlier order passed by the AO dated 05/04/2011 merged into the rectification order dated 18/03/2014. In view of the same, even though the surcharge was levied in terms of the first order, the order so sought to be rectified by the assessee is the rectified order dated 18/03/2014 wherein the surcharge continued to be levied on the assessee besides additional interest. Therefore, the rectification application dated 01/07/2016 is well within the limitation period as so prescribed and is not barred by limitation. The surcharge is hereby directed to be deleted and the AO is directed to provide the necessary relief to the assessee. 2023 (8) TMI 74 Addition on account of cash credits on loss of sale (LTCL) u/s 68 and unexplained deposits u/s 68 - Categoric case of the AO is that the assessee is one of the persons who had provided accommodation entries to M/s. Navjeevan Charitable Trust through various parties - CUT(A) computing Commission @ 3% by considering single layer for commission - HELD THAT:- When we examine the entries of credit recorded in the account of the assessee there is clear round tripping of the amount deposited in his account which cannot be considered as loan by any stretch of imagination because credited amount is repaid to the other parties within days, the assessee being an accommodation entry providers. Otherwise in case of a loan the amount is ordinarily not returned to the creditor within few days. These facts got duly proved from the assessment order passed in case of Shri Rashmikant K. Jhaveri wherein he has admitted that he has paid commission @ 0.25% to the assessee. These findings have been recorded in the assessment order of Shri Rashmikant K. Jhaveri available and the AO has accepted this contention. We are of the considered view that when it is proved on record that as per entries recorded in the bank account of the assessee maintained with Jammu Kashmir Bank and Axis Bank the assessee retained 3% which fact is also admitted by trustee of M/s. Navjeevan Charitable Trust there is no question of accepting the contention of the assessee that commission should be reduced to 0.25%. Assessee failed to prove on record that it has retained only 0.25% and transferred the remaining amount to other persons. There is not an iota of this fact on record. It is nowhere case of the assessee that he has paid the balance amount in cash or otherwise to the other three persons involved in the business of providing accommodation entries. We are unable to agree with the contentions raised by the Ld. D.R. for the Revenue that the addition @ 100% be made and at the same time we are also unable to agree with the contentions raised by the assessee that addition on account of commission qua accommodation entries on the amount be reduced from 3% to 0.25%. CIT(A) has passed a well reasoned order based on the facts proved on record, so finding no illegality or perversity in the impugned order passed by the Ld. CIT(A) there is no reason to interfere into the impugned findings returned by the Ld. CIT(A). So ground No. 3 of assessee s appeal is hereby dismissed and at the same time grounds No. 1 2 of Revenue s appeal are also dismissed. 2023 (8) TMI 73 Reopening of assessment - Addition of Share Capital made u/s 68 - creditworthiness of the shareholders had remained unexplained because assessee had failed to substantiate its claim that money had come from the coffers of the shareholders - HELD THAT:- We find that CIT(A) after considering the submissions of the assessee, remand report of the AO, assessee s reply to the remand report and after considering the various decisions cited in his order has upheld the reopening and also on merits has upheld the addition. Before us, no material has been placed by the Assessee to point out any fallacy in the finding of lower authorities. In such a situation, we find no reason to interfere with the order of CIT(A). Thus the grounds of assessee are dismissed. 2023 (8) TMI 72 Deduction u/s 35(2AB) - claim denied as assessee had not submitted the application on form 3CK - R D expenditure incurred by the assessee recognized R D Centre duly approved by DSIR HELD THAT:- As during the appellate proceedings the assessee has sought time for filing Form 3CM from DSIR but the same has not been filed. We deem it fit to restore the issue involved in the Appeal to the file of CIT(A) with a direction to the assessee to file Form 3CM issued by DSIR within the reasonable time and once the assessee produces the requisite documents of granting necessary approval to the assessee, the CIT(A) shall decide the matter afresh in respect of entitlement of the assessee for claiming deduction u/s 35(2AB) of the Act in accordance with law. Assessee appeal allowed for statistical purpose. 2023 (8) TMI 71 Deduction u/s. 80IB(10) on proportionate basis - AO noted that the partial completion certificate makes it clear the 22 bungalows part of Bloomfield project have not been completed before 30-01-2012 as mandated by section 80IB(10) - HELD THAT:- When, there is no satisfaction with regard to fulfillment of conditions as required u/s. 80IB(10) assessee is not entitled to claim deduction even on proportionate basis as held in the case of Vijay Tukaram Raundal [ 2022 (9) TMI 80 - ITAT PUNE] by following the decision of M/s. Dilip Kumar and Company others [ 2018 (7) TMI 1826 - SUPREME COURT] . CIT(A) granted pro-rata deduction on eligible units even when the entire project have not been completed. Further, there is a clear recording of finding by the CIT(A) about 22 bungalows forming part of Bloomfield project which is a subject matter of this appeal were not completed by the stipulated date. Thus, the CIT(A) committed error in granting proportionate deduction even though the project has not been completed within stipulated time. Thus, the order of CIT(A) is not justified and it is set aside. Grounds raised by the Revenue are allowed. 2023 (8) TMI 70 Disallowance of weighted deduction claimed u/s. 35(2AB) - excess expenditure over and above what was certified by the competent authority DSIR has been disallowed and added back to the total income - HELD THAT:- As per prescribed rules, the assessee should submit the details of expenditure to the Competent Authority i.e., DSIR and said authority will certify whether expenditure incurred by the assessee is eligible for weighted deduction u/s. 35(2AB). In this case, the assessee has submitted details of expenditure to DSIR and the DSIR has certified a sum as eligible expenditure for the purpose of section 35(2AB) - AO, after considering Form 3CL issued by the DSIR dated 27.07.2015, has disallowed excess expenditure over and above what was certified by the Competent Authority and added back to the total income. In our considered view, there is no error in the reasons given by the AO to disallow uncertified expenditure u/s. 35(2AB) of the Act, and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the assessee for both assessment years. Disallowance of interest on borrowed capital u/s. 36(1)(iii) - AO has disallowed interest paid on borrowed capital u/s. 36(1)(iii) as the assessee has borrowed capital for the purpose of acquisition of capital asset and thus, interest paid on said borrowed capital should be capitalized to the asset till such asset is put to use - HELD THAT:- As per provisions of section 36(1)(iii) of the Act, proviso provided thereto, any amount of interest paid in respect of capital borrowed for acquisition of asset shall not be allowed as deduction till the date of such asset first put to use. Therefore, we are of the considered view that, there is no error in the reasons given by the AO to disallow interest paid on borrowed capital u/s. 36(1)(iii) of the Act and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the assessee for both assessment years. Alternate plea of the assessee for depreciation - As we find that when interest paid on borrowed capital is added to the cost of the asset, then the assessee is eligible for depreciation on value of asset including interest paid on borrowed capital, if any capitalized to said asset account. Therefore, we direct the AO to verify the claim of the assessee and allow depreciation as per the law. Nature of receipt - treatment of focus marketing subsidy received from Government - revenue or capital receipt - HELD THAT:- We find that an identical issue has been considered by the Tribunal in the case of M/s. Hyundai Motors India Ltd [ 2021 (9) TMI 1013 - ITAT CHENNAI] where the Tribunal after considering relevant facts held that, focus market scheme subsidy received by the assessee from Government of India is revenue in nature and the same was given to offset higher cost of freight and other disabilities of exporters to be more competitive in exports to certain regions. Therefore, same cannot at any stretch of imagination be considered as capital in nature, as claimed by the assessee. Focus market scheme subsidy received by the assessee from Government of India is revenue in nature, which cannot be considered as capital receipt. Additional depreciation u/s. 32(1)(iia) - claim denied as additional depreciation is allowable u/s. 32(1)(iia) of the Act, in the year in which said asset is purchased, but not in the subsequent assessment year - HELD THAT:- This issue has been considered in the case of Brakes India ltd [ 2017 (4) TMI 511 - MADRAS HIGH COURT] where as considered the issue in light of provisions of section 32(1)(iia) of the Act and held that balance additional depreciation in the year following the previous year in which the said asset is installed and put to use is allowable. CIT(A), after considering relevant facts and also by following the decision of Brakes India Ltd vs DCIT (supra), and TP Textiles Private Limited [ 2017 (3) TMI 739 - MADRAS HIGH COURT] deleted additions made by the AO and thus, we are inclined to uphold the findings of the Ld.CIT(A) and reject ground taken by the revenue for both assessment years. Depreciation on UPS - @ 60% OR 15% - Whether UPS is an integral part of computer and computer software? - HELD THAT:- We find that this issue is covered in favour of the assessee by the decision of ITAT, Chennai Benches in the assessee s own case for assessment year 2013- 14 where the Tribunal held that UPS, Printer and Scanner are integral part of computer and computer software and eligible for higher depreciation of 60% as applicable to computer software. Disallowance u/s. 14A r.w.r. 8D - As per assessee he has not received any dividend income and hence, there can be no disallowance u/s. 14A - HELD THAT:- It is a well settled principle of law by the decisions of various courts including the case of Redington India Ltd [ 2017 (1) TMI 318 - MADRAS HIGH COURT] where it has been clearly held that in absence of any dividend income, disallowance contemplated u/s. 14A cannot be made. In this case, there is no dispute with regard to the fact that the assessee has not received any dividend income and hence, there can be no disallowance u/s. 14A. Decided in favour of assessee. 2023 (8) TMI 69 Disallowance of interest expenditure as against the interest income earned during the year - HELD THAT:- We noticed that the assessee at the time of hearing before CIT(A) could not able to controvert the fact to substantiate its claim by filing any documents or papers and similarly even before us by the assessee nor its representative appeared to controvert the fact. Therefore, it is clearly established that the borrowed fund has been utilized by the assessee to procure the shares of such known and related companies and most of them are unquoted shares, therefore, the interest expenditure as claimed by the assessee as business expenditure is not established and on this ground CIT(A) sustained the order passed by the AO. Therefore, the net interest expenditure in the case of assessee remained as expenditure but the assessee failed to use entire loan fund in business. CIT(A) correctly affirmed the addition made by the AO in the hands of assessee. We examined all the facts from the findings of the authorities below and viewed that there is no infirmity in the order passed by the ld. CIT(A). Accordingly, grounds taken by the assessee are rejected.Decided against assessee. Benami Property 2023 (8) TMI 68 Benami transactions - property is joint hindu family - real owner - trial Court held that the plaintiff was not able to prove that there was any nucleus of the joint family property from which they have purchased the suit property - HELD THAT:- The suit land has been purchased in the name of the plaintiff and defendant No.2 jointly. However, the finding of both the Courts is that at the relevant time the plaintiff was a minor and that there was no nucleus or ancestral joint family property from which the amount was received to purchase the suit property. There was no evidence whatsoever that the family owned ancestral property, as such, the Court held that the property is not the ancestral property. The suit property is held to be purchased by the defendant No.2. Since both the Courts below have held that the suit property is individual property of the defendant No.2 and not a joint family property, the issue of sale of the suit property for legal necessity does not survive. In view of the judgment of the 3 Judges Bench of R.Rajagopal Reddy [ 1995 (1) TMI 67 - SUPREME COURT] and in the case of Dattaram Govindrao Kale . [ 2023 (8) TMI 2 - BOMBAY HIGH COURT] the defence of benami transaction taken prior to the Act coming into force is available and the Benami Transactions [Prohibition] Act is not retroactive to that extent. 2023 (8) TMI 67 Benami transaction - parallel proceedings under Income-tax - cash which is said to belong to the petitioner and was seized from the hands of the petitioner's friend, was taxed in the hands of the petitioner for the Assessment Year 2021-2022 - writ filled seeking adjustment of cash that was seized from the hands of the petitioner's friend - meanwhile fourth respondent has initiated proceeding under Section 263 - HELD THAT:- The prayer of the petitioner for a Mandamus cannot be countenanced without an application by the petitioner under first proviso to Section 132 of the Income Tax Act, 1961, although there could be a corresponding duty on the part of the respondents to appropriate the amount that was seized on 20.06.2020, if an application is made. If the aforesaid seized amount is to be treated as an asset of the petitioner and adjusted u/s 132 of the Income Tax Act, 1961, the petitioner has to first file an application as is contemplated under the aforesaid provision. Considering the fact that a parallel proceedings is also pending before the fifth respondent under the Prohibition of the Benami Property Transactions Act, 1988, pursuant to the order passed by this Court in W.P.No.9868 of 2023, direct the petitioner to file appropriate application before the third respondent in accordance with the provisions of Sections 132B of the Income Tax Act within a period of 7 days from the date of receipt of a copy of this order. The third respondent shall dispose the same within a period of 8 days thereafter. Considering the fact that the parallel proceedings is also likely to be heard and disposed by the fifth respondent on 01.08.2023 under the Prohibition of the Benami Property Transactions Act, 1988, the third respondent shall endeavour to pass orders as expeditiously taking note of the order to be passed by the fifth respondent. Customs 2023 (8) TMI 66 Valuation of imported goods - Zinc Scrap, Saves/Scope - rejection of declared value - declared value of the goods lower than the contemporaneous import of similar goods - sale involved an abnormal discount and abnormal rejection from ordinary competitive prices - whether the Revenue has discharged his obligation to prove undervaluation? - HELD THAT:- From the records of the case and the findings recorded by the adjudicating authority, it clearly appears that there is no evidence that the bill of entries relied on by the revenue as contemporaneous imports were of similar goods at same commercial level and in substantially the same quantity and had their origin from the same country. If undervaluation is alleged by the revenue then it is incumbent upon them to conduct detailed enquiries so as to collect substantive material and evidence to prove undervaluation. The next step is to determine the nature of the goods which are the subject matter of the contemporaneous imports as to whether they are identical goods or similar goods as defined under Rule 2(d) 2(f) respectively - The provisions of rule 2(d) and rule 2(f) have been considered in a recent decision of the Tribunal in the case of HARIPRIYA TRADERS, FIRDOUSE INTERNATIONAL TRADING COMPANY, SHABEER ENTERPRISES, MOHAMMED FARIZ AND CO., PK TRADERS, KEVEEYAM COMPANY SUPARIWALA PVT LTD VERSUS C.C. COCHIN-CUS [ 2022 (7) TMI 1126 - CESTAT BANGALORE] , where the test of quality assessment was referred for ascertaining the nature of goods under comparison - Applying the ratio of the aforesaid decision, it is found that no such case have been pleaded by the revenue and hence no reliance can be placed on contemporaneous imports by merely providing the copies of some bill of entries. The adjudicating authority noted in its order that as per NIDB import data, there are no identical goods available for determination of value as per Rule 4 of CVR, 2007. In view of such findings, it is opined that the transaction value has to be adopted as the correct value and rejection thereof is contradictory and unsustainable. The Commissioner (Appeals) has referred to the decision of the Apex Court in CENTURY METAL RECYCLING PVT. LTD. AND ANOTHER VERSUS UNION OF INDIA AND OTHERS [ 2019 (5) TMI 1152 - SUPREME COURT] - Applying the analogy as laid down in the aforesaid judgement, the learned Counsel referred that scrap is not a homogenous commodity and it is difficult to find any identical/ similar goods imported in India which will have same chemical and physical composition. The Tribunal is bound by the observations of the Apex Court in Century Metal Recycling (supra), and therefore in terms of para 26 which mandates to examine the matter on a case to case basis, the evidence and the material placed on record and the enquiries conducted, I find that the rejection of the transaction value is erroneous in the present factual matrix. The concept of transaction value has been provided under Rule 4 of CVR, 2007 which makes it mandatory for the authorities to accept the transaction value as provided by the importer, however the same can be rejected subject to the conditions/ exceptions as specified therein. Here it is not the case of the revenue that the transaction under consideration is covered under any of the exceptions and therefore the transaction value declared by the importer is not acceptable. No allegation has been made that the transaction was tainted or was not at arms length. No evidence has been led by the Revenue that undervaluation was on account of the circumstances mentioned in the Rules - since the present case does not fall under the exceptions provided in the Rules there is no scope to reject the transaction value. It is a settled principle of law that the onus of proving charge of undervaluation lies on the Revenue which needs to be proved by way of producing necessary evidence - Instances given by the revenue cannot be considered to be import of identical goods and in absence thereof it is not possible to sustain the charge of undervaluation. In the light of the statutory provisions under Section 14 of the Customs Act, 1962, Rule 3 and 4 of CVR, 2007 and the observations made in the various case law, it can be safely concluded that the revenue erred in rejecting the invoice price - The arguments made by the learned Counsel for the respondent, agreed upon that revenue is unable to provide any clinching evidence to prove undervaluation by the importer so as to reject the transaction value given in the invoice. The impugned order, is therefore affirmed and the present appeal filed by the Department is dismissed and the consequential relief, if any in favour of the respondent is allowed. 2023 (8) TMI 65 Levy of penalty u/s 114 and 114AA of the Customs Act, 1962 - Personal penalty on General Manger of the Customs Broker - not verifying genuineness of the exporter and his place of functioning - attempt to smuggle out red sanders in the guise of General Merchant (Idly Rice, Atta in bags) (by exporter) - HELD THAT:- The Hon ble Tribunal in the case of THAWERDAS WADHOOMAL VERSUS COMMR. OF CUS. (GENERAL), MUMBAI [ 2007 (9) TMI 102 - CESTAT, MUMBAI] has held that the CHA is not supposed to look into details of genuineness of the importer when IEC is produced by the importer. It is seen that documents required as per the KYC are basically issued by government authorities and agencies and the presumption is that the details like name, address etc shown there in are true. The department has not alleged that these documents submitted by the appellant were fake. Nor is there any concrete allegation of connivance with the exporter. This being so, it is found that there was no concrete proof of a blame worthy conduct by the appellant to impose penalties or for any other action as per the Act or Rules to merit a remand. 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 upheld - Appeal dismissed. 2023 (8) TMI 64 Maintainability of appeal - Jurisdiction of Tribunal to decide any appeal in respect of any order passed by Commissioner(Appeals) - proviso to Section 129A of CA - HELD THAT:- It is not disputed that Ms. Ayesha Begum, who arrived from Jeddah to Hyderabad by Flight No. AI 966 dated 09.02.2020 was intercepted after passing through the Green Channel. Further investigation at the Air Port itself revealed that the passenger was carrying dutiable goods, which were not declared to the Customs Officer. The Officers also asked the passenger to produce Indian Customs Declaration Form supposed to be filed by her, for which she replied negative. Finally, the Customs seized one yellow metal chain, two cut yellow metal bars and two bangles found concealed of her body, totally weighing 788.510 gms and valued at Rs.32,09,118/-. Subsequently, a show cause notice was confirmed and the entire gold was absolutely confiscated. The Commissioner (Appeals) after hearing the matter and the arguments and submissions upheld the order-in-original but reduced the penalty from Rs. 6,41,000/- to Rs. 3,41,000/-. From the facts of the case, it is clear that the golds were found on person of the appellant, when she arrived from abroad and only on interception by the Customs at the time of exiting through the Green Channel. A holistic reading of Baggage Rules 2016 and the relevant legal provisions under Customs Act would make it ample clear that under the Customs Act, specially Section 111(l) and 111(m), Section 77, 78 and 79 etc., all goods would be covered within definition of Baggage - there is a clear understanding that the confiscated goods were in the category of baggage and therefore under Section 129A proviso, this matter cannot be decided by the Tribunal. Hon ble Madras High Court Judgment and specifically SHRI PAYANGADI MOIDU MOHAMMED ALI VERSUS COMMISSIONER OF CUSTOMS, CHENNAI [ 2016 (8) TMI 393 - CESTAT CHENNAI] , it is found that the Tribunals have taken a consistent view that in the matter of Baggage, the Tribunal has no jurisdiction. The reliance by the Learned Advocate on the case of M/S AHAMED GANI NATCHIAR VERSUS COMMISSIONER OF CUSTOMS CHENNAI [ 2020 (9) TMI 267 - CESTAT CHENNAI] would also not help in as much as the Tribunal was deciding the matter on the direction of the Hon ble High Court and it was also noted that the Revenue had not raised this issue of jurisdiction before the Hon ble High Court. However, the Learned DR points out that on appeal by the Revenue against this order of the Tribunal entertaining the appeal filed by the appellant, the Hon ble High Court disposed off the petition by making an observation that in terms of the proviso to Section 129A of the Customs, Act and appeal lies only before Revisionary Authority and therefore set aside the order of the Tribunal as bad in law. There are no hesitation in holding that in this case the gold were imported by passenger in the nature of baggage, and therefore the appeal is not maintainable before the Tribunal. The appeal is dismissed as not being maintainable. Corporate Laws 2023 (8) TMI 63 Seeking restoration of the name of the Appellant Company in the register maintained by the Registrar of Companies - HELD THAT:- In view of the fact that the Audited Balance Sheet as on 31st March, 2018 and Bank Account Statement for the Financial Years 2017-18 and especially for the month of June, 2017 show that the Appellant No. 1 Company was actively involved in business transactions at the time of Striking off the name of the Appellant No. 1 Company by the Respondent vide its Circular dated 30.06.2017. Therefore, it cannot be said that the Appellant No. 1 Company is not carrying on any business or operations. Hence, the order passed by the National Company Law Tribunal, New Delhi Bench (Court- II) as well as Registrar of Companies, NCT of Delhi Haryana is not sustainable in law. The name of the Appellant Company directed to be restored to the Register of Companies subject to the following compliances - application allowed. 2023 (8) TMI 62 Professional Misconduct - Failure to obtain audit evidence regarding the existence and condition of inventory - Failure to identify the related party and related party transactions - Failure to obtain external confirmations for the Trade Receivables Trade Payables - Failure to Plan the audit and failure to understand the entity and its environment - Failure to identify the TCWG and failure to communicate with TCWG - Failure to report Non-Compliance with laws regulations - Failure to determine the materiality and performance materiality - Failure to document the sampling methodology adopted for substantive testing - Failure to appoint the Engagement Quality Control Reviewer (EQCR) - Penalty Sanctions. Failure to obtain audit evidence regarding the existence and condition of inventory - HELD THAT:- The Audit File does not contain any evidence of the sampling methodology used in audit. Paragraph 7 of SA 501 requires that if attendance at physical inventory counting is impracticable, the auditor shall perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory - The EP has displayed gross negligence in his audit of the inventories. In view of this, it is clear that the EP did not comply with the requirements of SA 501 in so far as it relates to his obligations in respect of inventory. Hence, the charge relating to EP s failure to comply with SA 501 stands proven - Failure to identify the related party and related party transactions - HELD THAT:- The EP s submission in the present case makes it clear that the EP has not exercised any professional judgement and scepticism in relation to identification of the related parties even when 100% sales were being made to a single customer who had been already identified as a Related Party earlier in the financial year 2013-14 - It is thus concluded that the charge relating to EP s failure to identify the Related Party and Related Party transactions stands proven. Failure to obtain external confirmations for the Trade Receivables Trade Payables - HELD THAT:- The EP has acknowledged that no external confirmations from debtors creditors were carried out. The reply of the EP makes it clear that the management had imposed a limitation on the scope of the auditor. Limitations imposed by management may have other implications for the audit, such as for the auditor s assessment of fraud risks and consideration of engagement continuance as per Para A9 of SA 705 . However, no assessment of fraud risk having been done by the EP is evident from the audit file, nor has he furnished evidence of the additional procedures being performed in the absence of external confirmation procedures - Denial of contact details of debtors creditors to EP should have aroused the suspicion of the auditor for further procedures which evidently did not happen, and the EP failed to verify balances in violation of SA 505 - It is concluded that the charge regarding failure to obtain balance confirmation from creditors and debtors stands proven. Failure to Plan the audit and failure to understand the entity and its environment - HELD THAT:- The replies of the EP are irrelevant to the charges, since as per para 11 of SA 300 the Audit Plan has to be documented which has not been done. In addition to para 11, detailed procedures regarding documentation are given in paras Al7 to A19 of SA 300 which are referred to in Para 11 of SA 300 and are required to be followed, which was not done. The reply also makes it clear that the EP has a serious lack of knowledge regarding the basic requirements of an audit. In view of the above, it is concluded that the charge regarding the failure on the part of the auditor to plan the audit and failure to understand the entity and its environment, stands proven. Failure to identify the TCWG and failure to communicate with TCWG - HELD THAT:- In the Audit File there is no documentation of identification, determination and communication with TCWG. Communication with TCWG needed to be formalized in some manner for its evidentiary value and also to ensure compliance with SA 260. In view of this, it is concluded that the EP s failure to identify and communicate with TCWG is established. Failure to report Non-Compliance with laws regulations - HELD THAT:- The EP in his submission has nowhere commented on the documentation in relation to the consideration of laws and regulations in the audit of WNLL for FY 2016- 17, as required under para 29 of SA 250, which says that the auditor shall document identified or suspected non-compliance with laws and regulations and the results of discussion with management and, where applicable, those charged with governance and other parties outside the entity. Though the EP has stated that defaults were not material to qualify the report, we find that materiality has not been defined in the Audit File. Therefore, the charge regarding the failure to report the non-compliance with laws regulations stands proven. Failure to determine the materiality and performance materiality - HELD THAT:- The EP was charged with the failure to determine the materiality, as required under Para 10 of SA 320, for the financial statements as a whole; and performance materiality for purposes of assessing the risks of material misstatement and determining the nature, timing, and extent of further audit procedures as required under para 11 of SA 320 - The EP in his reply has nowhere commented on the observation on materiality. In absence of any proper reply or evidence submitted by the EP, it is concluded that the charge relating to his failure to determine the materiality and performance materiality stands proven. Failure to document the sampling methodology adopted for substantive testing - HELD THAT:- In the absence of any reference being made to audit documentation in the reply to the SCN, the charge relating to failure to document the audit sampling methodology adopted (extent of verification of sales purchases transaction) during the course of audit stands proven. Failure to appoint the Engagement Quality Control Reviewer (EQCR) - HELD THAT:- The EP was charged with failure to determine the appointment of EQCR of WNLL for FY 2016-17. This was in violation of SA 220, as WNLL is a listed company, and the auditor was required to determine that EQCR had been appointed in terms of Para 19(a) of SA 220 - In his reply to SCN, the EP has stated that a team of four persons was deputed for carrying out the audit of the Company and the same was led by a Chartered Accountant having experience of around 5 years. It is evident from the reply of the EP and the Audit File that no EQCR was appointed. In the absence of any documentation about the EQCR and no reference about the EQCR by the EP in his written and oral submissions, it is concluded that the charge regarding failure to determine the appointment of EQCR stands proven. Penalty Sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties 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 - The EP in the present case was required to ensure compliance with SAs to achieve the necessary audit quality and lend credibility to financial statements to facilitate its users. As detailed in the foregoing paragraphs of this Order, substantial deficiencies in audit on the part of CA Hemant Khator establish his professional misconduct. Despite being a qualified professional, CA Hemant Khator has not adhered to the SAs and has thus not discharged the duty cast upon him. Under the circumstances, we proceed to impose sanctions keeping in mind the deterrence, proportionality, and the signalling value of sanctions. Considering 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: a) Imposition of a monetary penalty of Rs. Two Lakhs upon CA Hemant Khator; b) In addition, CA Hemant Khator is debarred for two years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. Insolvency & Bankruptcy 2023 (8) TMI 61 Rejection of application filed u/s 9 of IBC - existence of dispute - relevancy of settlement entered into between the parties on 19.03.2018 - all dues prior to that stood paid and there were only two invoices after the said date and dispute has been raised regarding them - Operational Creditors - HELD THAT:- The Demand Notice was issued on 19.05.2019 was received by the Corporate Debtor on 23.05.2019 and reply to the Demand Notice was sent on 27.05.2019, which is part of the Section 9 application of the Appellant, appearing at page no.298 of the paper book. The Corporate Debtor in the reply to the Demand Notice has refuted the claim of the Appellant as frivolous and baseless. The Corporate Debtor in the reply has given details of the work and the minutes dated 02.02.2018 and agreement which was entered on 10.02.2018 and signed on 19.03.2018. With regard to invoices which were issued subsequent to agreement between the parties details have been given by the Corporate Debtor. It was pleaded that the Operational Creditor was obliged to issue Credit Notes with regard to amount of Rs.12,58,782/-, which was never issued. With regard to settlement which was forwarded by the Corporate Debtor it has been pleaded in the reply that settlement was withdrawn subsequently by Corporate Debtor and the Operational Creditor owes an amount to the Corporate Debtor. When Demand Notice issued under Section 8 is replied by the Corporate Debtor, which is notice of dispute raising the dispute regarding claim of the Appellant, the Adjudicating Authority has rightly not proceeded to admit the Section 9 application - Details which were reflected in the reply to notice of demand clearly indicate that there was genuine dispute regarding the claim of the Appellant, which cannot be decided in a Section 9 proceeding. There are no fault with the order of the Adjudicating Authority rejecting Section 9 application - appeal dismissed. FEMA 2023 (8) TMI 60 Proceedings under FEMA - receiving foreign exchange in lieu of issuance of equity shares/share warrants - whether no approval has been granted by FIPB? - HELD THAT:- As clearly transpires without any semblance of doubt that the custodian general of foreign exchange is the Reserve Bank of India and any permission with regard to inflow of foreign exchange would definitely have to have the permission of the Reserve Bank of India. In the case on hand, the permission is for receiving foreign exchange in lieu of issuance of equity shares and for the said purpose, the appropriate authority to grant permission is FIPB. Newbridge, the foreign investor, intended to invest in equity shares in the petitioner-company, with further downstream investment in the sister concern of the petitioner company for which necessary approval was granted by FIPB. In fact, the 1st respondent is also not disputing the approval granted to the petitioners for issuance of equity shares. However, the show cause notice was issued only on account of the petitioner company issuing share warrants, which was later converted into equity shares. The sequence of events for obtaining approval have already been extracted above. In this regard, the initial approval was granted by FIPB on 27.12.2005. Thereafter, as there was certain errors in the number of equity shares, further approval was solicited, which was also granted by FIPB on 31.01.2006. There is no quarrel that equity shares were issued by the petitioner company in favour of Newbridge. However, for an amount of about Rs.243 Crores, share warrants were issued, which was subsequently converted into equity shares. It has been the ratio of the Supreme Court even in LIC case [ 1985 (12) TMI 289 - SUPREME COURT] that RBI is the custodian general of foreign exchange. In the present case, the foreign investment was approved by FIPB. Communication reveals that FIPB had nowhere said that the issuance of warrants at the point of time when it was issued by the petitioner company required permission. In fact, the order clearly spells out that there was no explicit policy at the material point of time with regard to issuance of warrants. The above stand of FIPB unequivocally speaks to the effect that there was no explicit policy with regard to warrants, which effectively could only mean that there was no prohibition on issuance of warrants. The further stand of FIPB that no post facto approval is required as the warrants have since been converted into equity shares should not be read in isolation and it should be read in conjunction with the earlier part of the order, where FIPB has intimated that there was no explicit policy with regard to issuance of warrants at the relevant point of time. Omission to spell out warrants to be included in the term security as defined u/s 2 (za) of FEMA cannot be taken mean that issuance of warrants is prohibited. Prohibition should be clearly spelt out either explicitly or even impliedly. There is neither an implicit nor an explicit prohibition. The mere omission of warrants, therefore, cannot be construed that it is a prohibited instrument and, therefore, it is a contravention of Section 6 (3) (b) of FEMA, 1999. As on the relevant date when the share warrants were issued, there was no regulations bny the 2nd respondent prohibiting the issue of share warrants, which was the only reason the 2nd respondent had directed the petitioners to approach FIPB to obtain post facto approval. If really there were any regulations, or even implied prohibition in the issuance of share warrants, RBI being the custodian general of foreign exchange, would definitely have called upon the explanation of the petitioners. When the 2nd respondent itself has accepted that there was no contravention of Section 6 (3) (b) of FEMA, 1999, the show cause notice issued by the 1st respondent to the petitioners alleging that there is no permission for issuance of share warrants is not only uncalled for, but is also an act usurping the powers of the 2nd respondent. When FIPB, the authority, who is vested with power to grant approval has held that no post facto approval is required, interpreting the order in any other fashion, that too by an authority, who is not empowered to decide on the manner in which the said order has been passed, it does not lie in the mouth of the 1st respondent to claim that approval has not been obtained and such a finding is not only perverse, but arbitrary, illegal and unreasonable and, therefore, the impugned order passed as a consequence of the said finding deserves to be interfered with. This Court is of the considered view that the writ petitions deserve to be allowed by setting aside the orders impugned herein. Accordingly, the impugned order passed by the 1st respondent is set aside and all the writ petitions are allowed. Consequently, connected miscellaneous petitions are closed. PMLA 2023 (8) TMI 59 Money Laundering - Seeking permission to enter into the jail premises along with the Laptop and other documents to interrogate and record statements - HELD THAT:- The petition No. 363/2022 was filed on 10.03.2022. This case was initiated against the respondents in the year 2018, when the FIRs No. RC 0172015A0007 and RC 0172015A0008 was registered on 22.08.2018. The case was thereafter, registered as Special PMLA case No. 18/2018. The scanned copies of the LCR reveals that charge was framed on 29.12.2021. On 17.08.2022, the evidence of PW-1 Shri Kishore Kumar Nath was recorded - The so called proceeds of the crime alleged to have been amassed by the respondents came to the notice of the petitioner at a later stage. Trial has already commenced. It is true that, if there are any proceeds of the crime, the same may have to be attached, but at this stage, no order can be passed for further investigation as evidence of PW-1 has already been recorded. It has been held by the Hon ble Supreme Court in Vinubhai Haribhai s case [ 2019 (10) TMI 1428 - SUPREME COURT ] that What is not given any importance at all in the recent judgments of this Court is Article 21 of the Constitution and the fact that the Article demands no less than a fair and just investigation. To say that a fair and just investigation would lead to the conclusion that the police retain the power, subject, of course, to the Magistrate s nod under Section 173(8) to further investigate an offence till charges are framed, but that the supervisory jurisdiction of the Magistrate suddenly ceases mid- way through the pre-trial proceedings, would amount to a travesty of justice, as certain cases may cry out for further investigation so that an innocent person is not wrongly arraigned as an accused or that a prima facie guilty person is not so left out. There is no warrant for such a narrow and restrictive view of the powers of the Magistrate, particularly when such powers are traceable to Section 156(3) read with Section 156(1), Section 2(h), and Section 173(8) of the CrPC Reverting back to this case, it is apt to reiterate that the so called proceeds of the crime was not specifically described by the petitioner. The procedure of investigation, framing of charge and recording of evidence cannot be encompassed into the category of inquiry . Other measures may be adopted by the petitioner at the stage of trial, and if, any such evidence surfaces, the charges can also be altered. However, at this juncture recording the statements of the respondents in furtherance of investigation cannot be allowed. The present application under Sections 397/401 stands rejected. Service Tax 2023 (8) TMI 58 SVLDRS - Levy of interest for part payment - Seeking to review the case in terms of section 110 of the Finance Act 2013 - benefit of Service Tax Voluntary Compliance Encouragement Scheme availed - recovery of interest for the entire tax liability of Rs. 57,89,270/-, whereas the belated payment was only 13,89,270/- - contention of the respondents is that once the declarant violated the conditions of the scheme he is not entitled to the benefits of the scheme - HELD THAT:- Section 110 states fails to pay tax dues, either fully or in part, such dues along interest shall be recovered . The respondents interpret it fully tax liability . This Court is of the considered opinion that on the comprehensive reading of the section would clearly indicate the phrase such dues would definitely mean the unpaid portion only. Since only the unpaid portion alone can be considered as dues . The respondents are adding words which is not found in the section. If the interpretation of the respondents is taken, then the same would attract the principle of Casus Omissus . Therefore, the section states interest in leviable for the unpaid portion alone. Moreover in tax laws if two interpretations are possible then the one which is advantageous to the assessee ought to be applied as held by the Hon ble Three Judges Bench of Supreme Court vide its judgment dated 27.05.1997 in the case of Commissioner of Income Tax Bombay etc. Vs. Podar Cement Pvt. Ltd. etc. [ 1997 (5) TMI 2 - SUPREME COURT ] held that Assuming that there are two possible interpretations on Section 22 of the Act, which is akin to a charging Section, it is well settled, that the one which is favourable to the assessee has to be preferred. Even on that principle the view taken by the High Courts of Patna, Punjab and Haryana, etc. has to be preferred rather than the contrary view taken by the High Courts of Delhi and Andhra Pradesh. In the present case, even if two interpretations are possible then the one which is favourable to the assessee has to be preferred. Therefore, on this ground also the petitioner is entitled to relief. Generally, the respondents levy interest for the unpaid portion of the tax liability. Even as per tax laws, when the portion of the tax liability is paid the respondents cannot levy interest for the entire tax liability. If the respondents are allowed to levy interest for the entire tax liability, when the portion of the tax is paid, then the same is without any authority of law - In the present case, the petitioner has paid 90% of the tax liability, but failed to pay the balance amount, then the petitioner is liable to pay interest for the balance amount alone. This Court is of the considered opinion that the interest cannot be levied for the entire amount of Rs. 57,89,270/-. This impugned order, dated 23.08.2022 is hereby quashed. Consequently, the respondents shall recalculate the interest portion for the amount of Rs. 13,89,270/- and recover the same. Once the petitioner has paid the interest for the balance amount of Rs. 13,89,270/-, the respondents shall release the attachment of bank account - Petition allowed. 2023 (8) TMI 57 Demand of Service tax - Cleaning Service - Management, Maintenance or Repair Service - Construction of Complex Service - claim of construction of the households for personal use, exemption applicable or not - C onstruction of Fire Hydrant System at the Bathinda unit of M/s Ambuja Cements - Extended period of limitation. Cleaning Service - HELD THAT:- The appellants have simply transported the ash from one premises of the factory and dumped the same in other premises designated for the same - A plain reading of the definition of Cleaning services gives to understand that the activity covered by the above definition is not transportation as is done by the appellant; understandably, all types of cleaning are not covered by this definition. Kolkata Bench of Tribunal in the case of Calcutta Industrial Supply Corporation [ 2017 (11) TMI 158 - CESTAT KOLKATA] held that it is seen from the letter dated 03.02.2004 of DVC that the appellant was awarded tender for excavation of ash from different fields of ash ponds of DTPS, DVC, Waria. Nuisance free transportation and disposal of ash in abandoned mines of ECL. It appears that the purpose of the tender is for disposal of ash in the abandoned mines of ECL. The appellant is engaged for transportation and disposal of ash, in the abandoned mines. The letter does not show that the appellant was engaged for cleaning of the premises. Therefore, the demand of service tax under the category of Cleaning Service is not justified - In the instant case too, the activity undertaken by the appellants is of transportation and disposal of ash rather than cleaning of the premises as envisaged under the definition cited above. Therefore, the contentions of the appellant are acceptable and therefore, the demand of service tax on this count is liable to be set aside. Management, Maintenance or Repair Service - HELD THAT:- As per provision of Section 65A, specific description is to be preferred to a generic description. Moreover, the appellants have undertaken mostly the repair of roads which is exempted by Section 97 as well as by Notification No.24/2009. If the activity of the appellant is considered as repair of roads and buildings, it gets categorized under Commercial or Industrial Construction and therefore, a show-cause notice issued under the Management, Maintenance or Repair Service cannot be sustained. On the other hand, if the activity is considered as repair of road, the same stands exempted. Either way the demand under this Head is liable to be set aside. Construction of Complex Service - HELD THAT:- The Department had made no efforts whatsoever to find out whether the said complexes constructed by the appellants fulfilled the criteria of Residential Complex by having 12 or more units, a common area and anyone or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system - allegation of construction of residential complex by the appellant has no force of law or facts thereof. For this purpose alone, the show-cause notice and the impugned order are not sustainable as far as the demand on Construction of Complex Service is concerned. Claim of construction of the households for personal use - Exempt or not - HELD THAT:- Hon ble High Court of Karnataka in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX CUSTOMS, BANGALORE-II VERSUS NITHESH ESTATES LTD. [ 2018 (7) TMI 1135 - KARNATAKA HIGH COURT ] held that The Residential Complex in question was undertaken to be constructed by the Respondent Assessee M/s. Nithesh Estates Limited for ITC Limited under the Contract dated 01/04/2006. It is equally undisputed before us that the construction activity in question was in its entirety sub-contracted by M/s. Nithesh Estates Limited to M/s.Larsen and Toubro Limited. There is no material on record or evidence to indicate that any part of construction activity in question was undertaken by the Respondent Assessee M/s. Nithesh Estates Limited itself - Exemption allowed. Industrial or Commercial Construction - Construction of Fire Hydrant System at the Bathinda unit of M/s Ambuja Cements - HELD THAT:- The appellant s claim that it is the requirement of the Factories Act, it is found that the appellants have not shown any provision in the law to the extent that the activity undertaken by them is for performance of a statutory duty and to the effect that the same is exempted. Therefore, the appellant s claim is not acceptable on this count. However, their claim on small-scale exemption is acceptable as, in view of the above, the demands under other Heads have been held not maintainable. Extended period of limitation - HELD THAT:- As no part of the demand is sustainable. The issue of limitation is inconsequential. Appeal allowed. 2023 (8) TMI 56 Classification of service - works contract - It is the contention of the appellant that they have rendered services relating to roads, bridges, railways, dams etc. which are not taxable services, but it is alleged that appellants were engaged in the Commercial Industrial Construction Services - HELD THAT:- It is found that all the agreements under which the works has been executed by the appellant are relating to roads, bridges, railways, dams etc. and appellant was also registered as works contractor with Bihar Government w.e.f. 31.07.1991. In that circumstances, if registered as works contractor and as per the tenor of the agreements, the appellant is paying State Tax on the supply part of the contract amount, in that circumstances, the correct classification of the services in question is Works Contract Services . During the impugned period, i.e. September 2003 to December 2007 and there is no proposal to demand Service Tax from the appellant under Works Contract Services . Particularly prior to 01.06.2007, the Works Contract Services was not a taxable services, therefore, as held by the Hon ble Apex Court in the case ofCOMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] , it is held by the Hon ble Apex Court that prior to 01.06.2007, the Works Contract Services was not into the statute book, therefore, no service tax is payable on the Works Contract Service prior to 01.06.2007. Further, post 01.06.2007, there is no proposal to demand Service Tax form the appellant under Works Contract Services therefore, no service tax is payable by the appellant under Commercial Industrial Construction Services . Thus, whole of the demand is not sustainable in the eyes of law and the same are classifiable under Works Contract Services . Appeal allowed. 2023 (8) TMI 50 Extended period of limitation - Management Consultancy service - Consulting fee (other than Management consulting) - Reimbursable expenses - Sub-contract - Software development - demand alongwith interest and penalty - HELD THAT:- For the Financial Years 2001-02 to 2004-05, the demand is clearly barred by limitation in as much as no allegation of willful suppression, mis-statement, fraud or collusion has been made in the Notice, and hence the impugned order traversed beyond the Notice. It is a settled position of law that in the absence of any such allegation in the Notice, extended period of limitation cannot be invoked. The Appellant has regularly filed ST-3 returns consequent upon obtaining Service tax registration on 17.08.2001. The demand was raised and confirmed solely on the basis of the audit objection raised by the AG (Orissa) during verification of Income Tax Returns, filed by them for the aforesaid period. There was no independent enquiry conducted to ascertain the correctness of the alleged short payment. The impugned order also has not given any finding regarding the invocation of extended period of limitation in this case - In this case the Appellant has filed returns regularly and disclosed all information to the department. Thus, the extended period of limitation is not invocable in this case. Consulting fee (other than Management consulting) - HELD THAT:- To levy of Service tax under Management Consultancy service as defined in Section 65(105)(r) read with Section 65(65) of the Act , the following conditions must be satisfied:- (i) Any service either directly or indirectly in connection with the management of any organization in any manner would be a management consultancy service; (ii) It includes rendering of any advice, consultancy, or technical assistance relating to conceptualizing, devising, development, modification, rectification or up gradation of any working system of any organization; (iii) Such service has to be provided by the service provider to a client. In the present case, none of the above criteria are satisfied in either of the activities undertaken by the Appellant during the period of dispute. The impugned order also has not given any finding as to how the Appellant are liable to pay service tax for the above said services under the category Management Consultancy . Accordingly, the demand on this account confirmed in the impugned order is liable to be set aside. Reimbursable expenses - HELD THAT:- The impugned order has not brought in any evidence to substantiate the allegation that the reimbursements received were towards rendering of any taxable service rendered by the Appellants to their clients. In the absence of any such evidence, it is held that the demand on this count is not sustainable. Sub-contract - HELD THAT:- The service rendered by the Appellant to the main contractor was not liable to service tax during the material period. Presently it has been specified that service provided by any person to any other person are liable to service tax, which was not the case during the relevant period. Hence, the contention of the Appellant is agreed upon that the services rendered by the sub contractor to the main contractor was not liable to service tax during the material period. Accordingly, the demand on this count is liable to be set aside. Software development - HELD THAT:- Services rendered in the nature of software development provided by the Appellant was exempted from payment of Service tax in terms of Notification No. 16/2004-ST dated September 10, 2004. Accordingly, no service tax was payable on the amount received towards software development. The demands confirmed in the impugned order are not sustainable on merit as well as on limitation. Since, the demand itself is not sustainable, the demand of interest and imposition of penalty is also not sustainable. Appeal allowed. 2023 (8) TMI 49 Levy of penalty u/s 77 and 78 of the Finance Act, 1994 - appellant before issue of Show Cause Notice, had voluntarily paid the service tax - HELD THAT:- Service tax on Support Services of Business or Commerce came into force from May 2006. In the initial period there was some confusion on the nature of services covered by the said declared service. Of the service tax amount paid, Rs 6,41,376/- was paid for the period 2006-07 and only Rs 35,300/- pertained to 2007-08. With the appellant accepting and paying tax with interest before issue of SCN, the matter should have been closed and allowed to rest in terms of section 73 (3) of the Finance Act, 1994. The action would have been seen in the spirit of the department being facilitators of trade. While there is no discretion in the imposition of mandatory penalties, the adjudicating authority has to examine whether the situation calls for such a penal provision to be invoked once duties along with interest were also seen to be safeguarded as per the voluntary action of the appellant. Penalties need not be imposed merely because a legal provision provides for it. It is the discretion of the authority to examine whether the law requires the provision to be enforced. The penalty imposed and upheld under sections 77 and 78 of the Finance Act 1994, by the impugned order, merits to be quashed and is so ordered. The impugned order is modified accordingly. 2023 (8) TMI 48 Demand of Service Tax alongwith interest and penalty - commission income - difference in ST-3 return and 26AS statement - HELD THAT:- The show cause notice dated 16.04.2019 states that the same is enclosed with two annexures. Annexure- I is work sheet. The work sheet states the turnover of the respondent for the year 2013-14 as reflected in income tax return and turnover reflected in ST-3 return as nil and the difference between the two turnovers and service tax @ 12.36% on the said difference. Annexure-II is a letter dated 25.10.2018 issued by Superintendent (Data Cell) presuming that the respondent has shorted reported turnover in their ST-3 return to the extent of difference stated in Annexure-I. The entire show cause notice nowhere examines as to on what account the turnover has taken place. The said show cause notice was issued without examining the activity of the respondent and without examining the reason for difference in turnover reported in income tax return and ST-3 return. It was presumed in the show cause notice that the entire turnover reported in income tax return was on account of provision of taxable service and by calculating 12.36% of that turnover, service tax demand was raised. The fundamentals of prosecution such as framing charges on the basis of admissible evidence is absent in issue of show cause notice. The present show cause notice is totally presumptive. Further, the difference in turnover in ST-3 return and income tax return could be on account of non-taxable businesses. So, unless Revenue examines the reasons for the difference, it cannot demand service tax blindly on the basis of difference in the turnover reflected in the two statutory returns. In the case of M/S LORD KRISHNA REAL INFRA PRIVATE LTD. VERSUS COMMISSIONER OF CUSTOMS, C.E. S.T., NOIDA [ 2019 (2) TMI 1563 - CESTAT ALLAHABAD] , it was held that on the basis of form 26AS return filed under Income Tax Act without examining any other records of the appellant, charges of short payment of service tax to the tune of 8 crores were made against the appellant. It was possible for Revenue to know the transactions between other parties appellant from form 26AS. Revenue could have investigated into the nature of such transactions should have established that the said transactions were in respect of provision of said service. Then alone the charges of short payment of Service Tax would have sustained. The present show cause notice is totally presumptive. Therefore, there are no infirmity in the order-in-original to the extent that the demand of service tax of Rs.292,86,63,640/- is dropped by the original authority. Insofar as the confirmation of demand of service tax of Rs.87,676/- and its equal penalty are concerned and interests on the same are concerned, the same are set aside for the reason that the show cause notice is not sustainable - dropping of the demand of service tax of Rs.292,86,63,640/- by the Commissioner upheld, while setting aside the remaining part of the impugned order. Appeal of Revenue dismissed. Central Excise 2023 (8) TMI 55 Principles of Natural Justice - demand confirmed merely on the basis of statements of witnesses without the same being corroborated with documentary evidence - opportunity for cross-examination not provided - levy of penalty u/r 209A of Central Excise Rules, 1944 and Rule 173Q of Central Excise Rules, 1944 - HELD THAT:- Admittedly it is second round of litigation before this Tribunal and in the first round of litigation vide order dated 11.08.1998 matter was remanded back to the original authority with a direction to provide copies of all the documents relied upon and seized by the Department and also to pass the order on merit but only few documents could be supplied to the Appellant and complete attendance of only one witness could be procured. However, learned Commissioner (Appeals) had passed his order only on the basis of the documents supplied and the statement of the witness who was cross examined. On close scrutiny of the above observation made by the Commissioner, it goes without saying that (i) some of the duty demand were mistakenly made on the goods traded by the Appellant; (ii) duty was also demanded on Monitors, Key-Boards, other peripherals and data security packages; (iii) alongwith the computer system, duty was also charged on the printers though those where accessories; (iv) his ultimate observation is that confirmation of demand would require necessary scrutinisation of each invoices mentioned in the show-cause notice; (v) confirming demand solely on the basis of statement of witnesses would be inconsistent with the principle of natural justice. Going by the evidentiary value of the statement of witnesses concerning their silence during evidence, if could amount to admission, the settled position of law is that such silence can be treated as acceptance in favour of a defence primarily made under the Laws of Contract but not against a third person and can never be taken as admission of proof of guilty of another person. Furthermore, as could be observed from the Order-in-Original, denial of witness Amit Patel concerning any second sale being made by the Appellant, it can be said that the Order-in-Original is silent about his rebutting back from his statements. On the other hand, discarding the description made in the invoice as second sale on the ground that primary sale or first sale invoices were not available cannot be said to be logical in view of the fact that only scanty documents were available at the time of second adjudication and not the wholly relied upon documents referred in the show-cause notice. Therefore, it would also be erroneous to accept the argument of the learned AR that at some point of time, those documents were available for which their existence and evidentiary value could not be discarded in unacceptable proposition. The proposition available in the findings of Commissioner in absolving M/s Compac Computers from its liability would squarely made applied to the present Appellants for the reason that from the invoices copy supplied to the Appellant, that form part of the record, no sale of new computers are noticeable, to justify taxability against them. Further, it would not be out of place to record that even if taxability would have been justified, direction for payment of interest on the duty demand that was made much prior to the introduction of Section 11AB in 1996 is hit by its sub-Section 2, as was available then and also the same would be contrary to the judicial precedent set by the Tribunal and by various High Courts including in the case of SHRI UKAI PRADESH SAHKARI KHAND UDYOG MANDLI LTD. VERSUS CCE., SURAT [ 2009 (6) TMI 800 - CESTAT, AHMEDABAD ]. The order passed by the Commissioner of Central Excise, Central Excise Bhawan, 115, Maharishi Karve Marg, Mumbai-I vide Order-in-Original No. 25/MI/ 2008 dated 31.12.2008 is hereby set aside - appeal allowed. 2023 (8) TMI 47 Clandestine removal of goods - pre-judged SCN - Recovery of chit and clearance of the goods mentioned established or not - major demand is based on the entries in the private record recovered from the third party - authenticity of documents could be proved by adducing evidence or not - corroboration of statements - penalties on appellant - HELD THAT:- On going through the Chit, it is found that if the said Chit has been recovered during the investigation from Shri Partha Banerjee, there is no authentication of the said Chit as neither it bears any signature of punchas nor any name of the officer who has seized the above said documents. Therefore, the said Chit is deemed to be a fictitious one as Shri Partha Banerjee has joined the services with the appellant in the month of August, 2009 whereas this Chit is bearing entries from June, 2009 to December, 2009 and it is also fact on record that he was not allowed to make any statement in his own handwriting, therefore the allegation that the Chit shows clandestine clearance of goods is not established as per the said Chit - the demand on the basis of Chit is not sustainable. It is found that the goods were received from Railway Authorities, which has been properly accounted for by the appellant - it is further noted that it is alleged that the appellant has removed 27653.657 MT of sponge iron on the basis of the loose slips recovered from the premises of M/s Sen Brothers Enterprises - on going through the said documents, but the Revenue has failed to establish that who is the author of the said documents and entries therein. Only the Author of the documents can say about the contents of the documents. Those documents were not recovered from the premises of the appellant. The documents recovered from the premises of the third party cannot be the basis to allege the clandestine removal of the goods. The Revenue has not come up with any conclusive evidence to establish the clandestine clearance of goods in question - the demand has been raised on the basis of documents recovered from the third party premises whose Author is not known and from the person to whom the documents have been recovered have retracted the statements in cross-examination as stated, these documents do not belong to the appellant . Moreover, there is nothing on record for procurement of excess raw materials, electricity consumption, transportation of goods of such huge quantity of goods from whom the goods were sold out. The allegation of clandestine removal of goods is not sustainable against the appellants. Therefore, no demand is sustainable - the said demand confirmed against the appellant is set aside. Penalties - HELD THAT:- As the demand against M/s Sen Ferro Alloys Private Limited is not sustainable, penalties on the appellants are not sustainable. The impugned order and the demand of duty and imposition of penalties on the appellants are set aside - Appeal allowed. CST, VAT & Sales Tax 2023 (8) TMI 54 Levy of penalty on applicant (Government Institution) under Section 8(D)(6) of the U.P. Trade Tax Act, 1948 - it was held by Allahabad High Court that Initiation of penalty proceedings under Section 8(D)(6) against a Government Institution has not helped the revenue, but such exercise has led to financial loss to the Government by unnecessary expenditure on litigation which, at any cost, should be avoided. HELD THAT:- There are no merit in the Special Leave Petition - SLP dismissed. 2023 (8) TMI 53 Refusing to condone the delay in filing appeal under section 35 of the Goa Value Added Tax, 2005 - HELD THAT:- A reading of section 35 would go to show that in ordinary course the petitioner should have preferred the appeal within one year from the date of receipt of the order i.e. one year from 11.06.2020 if there is a reasonable cause. The appeal therefore ought to have been filed in ordinary course, on or before 11.06.2021. This period of one year expired during the period prescribed i.e. 11.06.2020 to 28.02.2022. A reference to the various orders passed by the Supreme Court regarding the extension of limitation during the Covid-19 pandemic period is necessary. A reading of the order passed by the Supreme Court in the case of Cognizance for Extension of Limitation passed on March 2020 [ 2020 (5) TMI 418 - SC ORDER] , reveals that the Supreme Court took Suo Motu cognizance of the difficulties that might be faced by the litigants in filing petitions/applications/ suits/appeals/all other quasi proceedings within the period of limitation prescribed under the general law of limitation or under any special laws (both Central and/or State) due to the outbreak of the COVID-19 pandemic. On 23.03.2020, the Supreme Court directed extension of the period of limitation in all proceedings before Courts/Tribunals including the Supreme Court w.e.f. 15.03.2020 till further orders. On 08.03.2021, the order dated 23.03.2020 was brought to an end, permitting the relaxation of period of limitation between 15.03.2020 and 14.03.2021. While doing so, it was made clear that the period of limitation would start from 15.03.2021. Thereafter, due to a second surge in COVID-19 cases, the Supreme Court Advocates on Record Association (SCAORA) [ 2022 (1) TMI 385 - SC ORDER] intervened in the Suo Motu proceedings by filing Miscellaneous Application No. 665 of 2021 seeking restoration of the order dated 23.03.2020 relaxing limitation. The Supreme Court extended the period of limitation in all proceedings before the Courts/Tribunals w.e.f 15.03.2020 till 02.10.2021. In the present case, the respondent no. 2 was of the opinion that as the appeal was filed on 17.08.2022, the same is beyond the period of 90 days as per the order dated 10.01.2022 passed by the Hon'ble Supreme Court. It pertinent to note that the Supreme Court restored the order dated 23.03.2020 and directed that in continuation of the subsequent orders dated 23.03.2020, 27.04.2021 and 23.09.2021, the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purpose of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings - The assessment order dated 04.06.2020 impugned in appeal before the respondent no. 2, was passed during the period 15.03.2020 till 28.02.2022. The said period will have to be excluded for the purpose of limitation - there are no hesitation in coming to the conclusion that the starting point of limitation for the purpose of filing an appeal under section 35 of the VAT Act against the assessment order dated 04.06.2020, which was passed during the period between 15.03.2020 till 28.02.2022 will have to be computed from 01.03.2022. The period from 15.03.2020 till 28.02.2022 shall stand excluded for the purpose of limitation. The respondent no. 2 was not justified in proceeding on the footing that the appeal should have been filed within a period of 90 days from 01.03.2022. The appeal filed by the petitioner before the respondent no. 2 was accompanied with the proof of payment of the amount as required under section 35 of the VAT Act. Hence, the writ petition is allowed. The impugned order is set aside. The matter is remitted to the Tribunal. The application for condonation of delay be considered afresh by the Tribunal in the light of the provisions of subsection (2) of section 35 of the VAT Act on its own merits and in accordance with law. 2023 (8) TMI 52 Disallowance of F forms - disallowance for the reason that the Commissioner of Sales Tax, Rajasthan had issued a notification declaring these F forms obsolete and invalid under Rule 17(10) of the Central Sales Tax (Rajasthan) Rules - HELD THAT:- The Tribunal after considering the law as laid down by the Apex court in State of Maharashtra Vs. Suresh Trading Company [ 1996 (2) TMI 451 - SUPREME COURT] held that the dealer was entitled to rely upon the certificate of registration of the other dealer and to act upon it. Whatever might be the effect of the retrospective cancellation of the other dealer, it could have no effect upon any person who had acted upon the strength of a registration certificate when the registration was effective. The Tribunal also observed that Hon ble Apex Court had held that it was not the duty of persons dealing with registered dealers to find out whether a state of facts existed which would justify the cancellation of their registration. The judgment of the Apex Court in State of Karnataka Vs. Ecom Gill Coffee Trading Private Limited [ 2023 (3) TMI 533 - SUPREME COURT] , relied upon by Ms Chavan, will be of no assistance to appellant since in that case the court held that the the ITC can be claimed only on the genuine transaction of the sale and purchase and if a dealer knowingly issues or produces a false tax invoice, credit or debit note, declaration, certificate or other document, such a dealer is liable to pay the penalty. In that case, the assessing officer had doubted the genuineness of the transactions and given cogent reasons on the basis of evidence and material on record. But in the case at hand, the assessing officer had himself found the F forms in order and issued the intimation in Form No. 604 on 9th July 2013 allowing the claim of transfer of goods to agent (movement of goods to the State of Rajasthan occasioned not by the reason of sale). There are no substantial question of law - appeal dismissed. 2023 (8) TMI 51 Set off on the purchase of HSD - authorities disputed the admissibility of set off on the purchases of HSD on the ground that under Rule 54(b) of Maharashtra Value Added Rules 2005, the set off was barred - HELD THAT:- The Hon ble Apex Court in ASSISTANT COMMISSIONER, INCOME TAX, RAJKOT VERSUS SAURASHTRA KUTCH STOCK EXCHANGE LTD [ 2008 (9) TMI 11 - SUPREME COURT ] has held that a judicial decision acts retrospectively. The Judges do not make law, they only discover or find the correct law. The law has always been the same and if a subsequent decision alters the earlier one, the later decision does not make a new law. It only discovers the correct principle of law which has to be applied retrospectively. The Hon ble Apex Court held that even when an earlier decision of the court operated for quite sometime, the decision rendered later on would have retrospective effect, clarifying the legal position which was earlier not correctly understood. The Tribunal was justified in rejecting the claim because the High Court has clarified in Gupta Metallics [ 2012 (8) TMI 818 - BOMBAY HIGH COURT] that the provisions of Section 54(b) of the Act did not allow the set off to be granted on purchase of HSD. Certainly, the Commissioner in an application under Section 56 of the Act cannot say it will have prospective effect. There are no reason to interfere. Appeal dismissed.
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