TMI Tax Updates - e-Newsletter
September 14, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
TDS on interest on deposits made under the Capital Gains Accounts Scheme, 1988 where the depositor has deceased - CBDT Specified the manner for deduction of TDS in such cases
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Income Tax:
Interest liability was raised on the assessee by the credit card company which was settled by the assessee in the instant year and, therefore, the interest liability in question crystallized during the year itself. The impugned expenditure could not be treated as a prior period expenditure.
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Income Tax:
Additions u/s 68 and 69 - The assessee cannot call upon its investors to disclose all such business transactions thay carried on in the immediate past and as to how much they made from their respective business enterprises. The assessee cannot also call upon its investors to prove their good business sense in investing in the assessee company, as such investors cannot gain any controlling stake - HC
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Income Tax:
Levy of penalty - even voluntary surrender of income will not always necessarily rescue the assessee from the penalty provisions which are in the nature of remedy for loss of possible revenue.
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Income Tax:
Short deduction of TDS - demand u/s 201(1) and interest chargeable u/s 201(1A) - CIT (A) expressed his inability to accord any relief, beyond the relief accorded in the form of recalculation of the penalty as well as the interest payable u/s 201(1) and 201(1A) - Order of CIT(A) confirmed.
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Customs:
Anti-dumping duty imposed on imports of "Ammonium Nitrate" originating in exported from Russia, Indonesia, Georgia and Iran - Notification
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Customs:
Jurisdiction of Customs Department - recovery of the money, may be un-accounted money, primarily, is the subject matter of Income Tax Department and certainly, not of the Customs Department as no imported item was recovered during search.
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Service Tax:
Export of services - place of supply - The position becomes learer in the post July 2012 period during which the POPS Rules 2012 apply. - Provision of telecommunication services does not have a specific rule and so Rule 3 of the POPS Rules, which is the default option, applies. In terms thereof, the place of provision of telecommunication service shall be the location of the recipient of service - HC
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Service Tax:
Reversal of CENVAT credit - Rule 6 - providing taxable and exempted services - the asssessee cannot choose to maintain separate account in respect of common input services under sub-rule (2) and, at the same time, follow sub-rule (3) in respect of a few of the common input services so that the bar of 20% utilisation of credit on final tax liability can be avoided. - It would be against the basic principle of CCR.
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Service Tax:
Refund of unutilised CENVAT credit - denial on the ground that the appellant has not submitted the Softex and the services are not exported by them - there is no question for the Adjudicating Authority to reject the refund claims without issuance of SCN
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Central Excise:
100% EOU - Deemed export - sale in DTA against foreign exchange would be covered under para. 9.10(b) and would count against Net Foreign Exchange Target required under the policy- HC
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Central Excise:
CENVAT credit - credit availed as per SION norms in respect of export made - Cenvat Credit Rules permits availment of credit only in specific circumstances. It is not open to the appellant to take credit on estimated basis - The exporter cannot, on his own devise a new method to avail credit which not prescribed under the law.
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VAT:
Lifting of Corporate veil - the conclusion arrived at by the respondent to state that the petitioner was incorporated only for the purpose of avoiding additional sales tax / VAT is of little avail and the formation of new company could have no impact on the levy and payment of additional sales tax, as this liability is on the seller/principal - HC
Articles
Notifications
Customs-
44/2017 - dated
12-9-2017
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ADD
Seeks to impose anti-dumping duty concerning imports of "Ammonium Nitrate"originating in exported from Russia, Indonesia, Georgia and Iran
GST - States-
38/1/2017-Fin(R&C)(22/2017-Rate) - dated
28-8-2017
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Goa SGST
Amendment in Notification No. 38/1/2017-Fin(R&C)(11/2017- Rate) dated 30th June, 2017
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12802/CT/POL-41/1/2017 - dated
22-8-2017
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Orissa SGST
Amendments in the Notification No. 12520 dated 17th August, 2017,
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GO.Ms. No. 30/CT/2017-18 - dated
11-9-2017
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Puducherry SGST
Constitution of State-level Screening Committee on Anti-profiteering for the Union territory of Puducherry.
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G.O.Ms. No. 29/CT/2017-18 - dated
2-9-2017
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Puducherry SGST
The Puducherry Goods and Services Tax (Sixth Amendment) Rules, 2017.
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F. No. 3240/CTD/GST/2017/3 - dated
22-8-2017
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Puducherry SGST
Amendments in the notification issued vide F.No.3240/CTD/GST/2017/2 dated 18th August, 2017.
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S.O.044/P.A.5/2017/S.9/2017 - dated
28-8-2017
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Punjab SGST
Amendment in the Notification No. S.O.16/P.A.5/2017/S.9/2017, dated the 30th June, 2017, - Notification regarding Tractor Parts.
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F.No.16(21)Tax/Juris(GST)/CCT/2017/3697 - dated
12-9-2017
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Rajasthan SGST
Amendment in the order number F.16 (21) Tax/Juris(GST)/CCT/2017/3261 dated 11.07.2017,
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F.No.12(72)FD/Tax/2017-82 - dated
6-9-2017
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Rajasthan SGST
Notification regarding constitution of State Level Screening Committee on Anti-Profiteering.
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F.No.12(56)FD/Tax/2017-83 - dated
6-9-2017
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Rajasthan SGST
Notification regarding waiver of the late fee for late filing of FORM GSTR-3B, for the month of July, 2017.
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15/2017-State Tax - dated
1-7-2017
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Sikkim SGST
The Sikkim Goods and Services Tax (Third Amendment) Rules, 2017.
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13/2017-State Tax (Rate) - dated
30-6-2017
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Sikkim SGST
Tax on Services on reverse charge basis
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17/CTD/2017 - dated
22-6-2017
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Sikkim SGST
The Sikkim Goods and Services Tax Rules, 2017.
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G.O. Ms. No. 100 - dated
30-8-2017
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Tamil Nadu SGST
The Tamil Nadu Goods and Services Tax (Third Amendment) Rules, 2017.
Income Tax-
08/2017 - dated
13-9-2017
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IT
TDS on interest on deposits made under the Capital Gains Accounts Scheme, 1988 where the depositor has deceased — reg.
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (9) TMI 673
Failure to pass a draft assessment order under Section 144C - whether, after the remand proceedings, the AO could have, without issuing a draft assessment order under Section 144 C of the Act, straightway issued the final assessment order - Held that:- The Court finds no difficulty in holding that the impugned final assessment orders dated 30th March 2016 passed by the AO for AYs 2006-07, 2007-08 and 2008 -09 are without jurisdiction on account of the failure, by the AO, to first pass a draft assessment order and thereafter, subject to the objections filed before the DRP and the orders of the DRP, to pass the final assessment order. The Court also sets aside the orders of the TPO dated 30th March 2016 issued pursuant to the remand by the ITAT.
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2017 (9) TMI 672
Addition u/s 69A - unexplained source of cash - assessee had sent a cash to one Riyaz Lokhandwala through Angadia firm namely M/s. Rameshkumar Ambalal and Company which was allegedly misappropriated by the employee of the Angadia - Held that:- Learned counsel for the appellant may be correct in contending that the statement of a person recorded by the police authority under section 161 of Cr.P.C would have limited utility. Had this statement been the sole basis for making the addition, we would certainly have examined the issue further. However, the Assessing Officer had other independent and reliable material linking the amount to the appellant. The statement of the partner of the Angadia firm was recorded on oath in which he had stated that the amount was handed over by the assessee to the firm's Bilimora office for delivery at Mumbai. He had in fact produced one out of the two receipts stated to have been issued. There was absolutely no reason for the partner of the firm to make out a false case of the ownership of the amount. In fact the entire issue came to light only when the amount was allegedly misappropriated by the employee of the Angadia which forced the Angadia to file a police complaint. The fact that the FIR was filed at a police station in Mumbai would further suggest that the amount was actually in transit as per the instruction of the sender and would have been misappropriated after it reached Mumbai. - Decided against assessee.
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2017 (9) TMI 671
Reopening of assessment - set off brought forward losses - eligible reasons to believe - Held that:- In the reasons for reopening of the assessment in the present case, the AO recorded that the Assessee was allowed to set off brought forward losses of ₹ 5,32,18,761/- whereas, according to the AO, as per the assessment records of the AY 2007-08, “no loss was available for set off in subsequent year” as the Assessee-company was assessed at an income of ₹ 19,73,01,700/- in AY 2007-08. Without indicating the manner in which there was failure on the part of the Assessee to disclose fully and truly, material facts necessary for the assessment, the AO has simply reproduced the words to that effect as occurring in the first proviso to Section 147 (1) of the Act. This, therefore, does not fulfil the mandatory requirement of the law. The fact of the matter is that for three AYs earlier to the AY in question, the assessments, after scrutiny under Section 143 (3) of the Act, were completed at a loss, although at a figure lower than that claimed by the Assessee. The assessment for AY 2005-06 was completed only on 25th November, 2008 whereas the Assessee filed its return for the AY in question on 30th September, 2008 and a revised return on 14th October, 2008. Consequently, the Assessee did not have benefit of the assessment order passed for AY 2005-06 at the time of filing its return for the AY in question. There was therefore no failure by the Assessee to make a full and true disclosure of the material facts relevant for the assessment.- Decided in favour of assessee.
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2017 (9) TMI 670
Annulling the block assessment order - validity of proceedings under Section 153C - Held that:- Supreme Court in Commissioner of Income Tax, Pune v. Sinhgad Technical Education Society [2017 (8) TMI 1298 - SUPREME COURT OF INDIA] settles the legal position in favour of the Assessee held that a document seized ‘should belong to a person other than the person referred to in Section 153A of the Act’. It has been categorically observed by the Supreme Court that the above position of law laid down by the Gujarat High Court in Kamleshbhai Dharamshibhai Patel v. Commissioner of Income Tax-III [2015 (8) TMI 966 - GUJARAT HIGH COURT] is correct. Consequently, this Court rejects the contention of the learned counsel for the Revenue that even prior to 1st June 2015 at the stage of initiation of proceedings under Section 153C of the Act, it is sufficient if the seized document ‘pertained to’ the other person and it is not necessary to show that the seized material ‘belonged to’ the other person. - Decided in favour of Assessee
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2017 (9) TMI 669
Reopening of assessment - without prior approval of the higher authority - return to certificate holders - Held that:- Such ground was considered by the assessing officer in his order of assessment. In fact, he had required further evidence and documents from the assessee prior to the order of assessment to which the petitioner had replied furnishing the same. The assessing officer had taken a particular view on the subject. Although no appeal is pending against the portion of the order with regard to return to certificate holders, in my view, the reasons, not specifying the tangible new materials available with the department to allege that the petitioner is guilty of not making a true and proper disclosure, is not sufficient to reopen the assessment. In absence of such material, the authorities have incorrectly applied the principles laid down in Calcutta Discount Pvt. Ltd. (1960 (11) TMI 8 - SUPREME Court) and followed subsequently for the purpose of reopening the assessment order on that ground. Reopening the assessment is commission, incentive and other payment made to the field officers. The petitioner had claimed the same as an expenditure in its return. Such claim was disallowed by the assessing officer in the order of assessment. An appeal is pending against such portion of the order of assessment. The appeal is yet to be disposed of. Therefore, on the parity of reasoning for the first ground as noted above, and in addition thereto, in view of the fact that, if Section 148 is allowed to continue, it may result in conflict in decision between the assessing officer and the appellate authority on the same head, it would be appropriate to hold that the invocation of Section 148 for the same is improper. Therefore the reasons for invocation of Section 148 of the act of 1961 on the second ground also fails. Treatment of the suspense account - Held that:- The claim made on this head was disallowed by the assessing officer to the extent of 50%. Again the assessing officer before passing the order of assessment had called upon the petitioner to furnish information with regard thereto. The petitioner had furnished such information in its reply. In addition, the petitioner had written a letter dated January 17, 2002 to the assessing officer. In such factual matrix it cannot be said that, the department has any new tangible material to hold that the petitioner did not make a true and faithful disclosure in its account before the assessing officer. The fourth ground for reopening as given in the reasons is deferred obligation. Claim as an expenditure made on this account before the assessing officer was disallowed in its entirety. Therefore again on the parity of reasoning as noted in respect of the earlier grounds, the reason fails. The contention of the department that, the order of assessment being made subsequent to the invocation of Section 148 and that in respect of such order of assessment, the petitioner having a statutory alternative remedy available, the writ petition should be dismissed. This is the view expressed in Chhabil Dass Agarwal (2013 (8) TMI 458 - SUPREME COURT). However the fact scenario in the present case is different than that in obtaining Chhabil Dass Agarwal (supra). In that case, the Supreme Court notices that two notices under Section 148 of the Act of 1961 for two different assessment years went unrepresented and unreplied to by the assessee. Notices under Section 143(2) in respect of those assessment years were also not attended to by the assessee. It is after receipt of the orders of assessment that, the assessee sought to approach the Writ Court under Article 226 questioning the validity and legality of the notices under Section 148 as also the order of assessment. In such context, the Supreme Court is of the view that, once an order of assessment is passed and the assessee has a statutory alternative remedy, the Writ Court need not interfere therein, unless it is established that, there is a breach of fundamental right of the petitioner or that authorities have acted wholly without jurisdiction. In the present case, the writ petitioner approached the Writ Court immediately upon receipt of the order dated September 22, 2006. The order of assessment is much later. It is dated December 29, 2006. The department claims that, the interim order passed in the writ petition permitted the department to pass an order of assessment and so it has done so. The writ petitioner claims that, the writ petitioner was not served with the notice under Section 143(2) of the Act of 1961. The department contends that the appropriate notice was served upon the assessee. The fact remains that, the writ petition was filed immediately after the order dated September 22, 2006. The writ petition is pending since then. As noted above, the department did not have necessary material before it to invoke Section 148 of the Act of 1961 in respect of the assessment year concerned.
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2017 (9) TMI 668
Rectification of mistake - ITAT passed separate orders for the different AYs despite the facts that all the four AYs, i.e. 2006-07, 2007-08, 2008-09 and 2009-10 being the same - Held that:- The Court is of the view that the Petitioner has been able to make out a case to show that the ITAT contradicted itself by passing separate orders in respect of the Assessee’s appeals for the aforementioned AYs on different dates. It is not understood as to how the factual matrix for AYs 2007-08, 2008-09 and 2009-10 could be different from that of AY 2006-07 such that it would necessitate contradictory orders being passed in each of the AYs. The ITAT’s order dated 31st December 2012 allowing the Assessee’s appeal for AY 2006-07 has been sustained by this Court by dismissing the Revenue’s appeal on 3rd April 2014. Yet, the ITAT did not follow the said order for AY 2006-07 when it came to the Assessee’s appeals for the subsequent years, i.e. 2007-08, 2008-09 and 2009-10. In the considered view of the Court, this was a good enough ground for the Assessee to seek rectification of the order under Section 254 (2) of the Act. Accordingly, the impugned order dated 27th April 2016 passed by the ITAT is hereby set aside.
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2017 (9) TMI 667
Registration of a trust under Section 12AA denied - satisfaction recorded by the registering authority - Held that:- Section 12AA of the Act provides that the Registering Authority after satisfying himself about the objects of the Trust and genuineness of its activities shall pass an order in writing for registration of the Trust or to refuse the registration. Therefore, satisfaction of the Registering Authority is mandatory before any Trust is registered under Section 12AA of the Act. The aforesaid satisfaction has not to be recorded by any other authority. In the present case, the registration was refused simply for the reason that the objects and activities of the Trust were not charitable in nature. The said order having been set aside by the tribunal leaves no material which could reflect that any satisfaction as required exists. Thus, in the absence of any satisfaction of the Registering Authority, the direction to register the Trust is without jurisdiction. The Tribunal could have ordered for setting aside the order of Registering Authority refusing registration but it could not have directed for registration straight away inasmuch as there has to be satisfaction recorded by the Registering Authority which was lacking. Answer the question in favour of the Department and against the respondent and it is held that the Tribunal has no jurisdiction in law to direct for registration of the Trust without there being satisfaction recorded by the Registering Authority as contemplated by Section 12 AA of the Act.
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2017 (9) TMI 666
Application for condonation of delay in payment of instalment under the Income Declaration Scheme of 2016 (IDS) beyond the prescribed due date or relaxation/extension of due date - Held that:- The concerned Principal Commissioner of Income Tax/Commissioner of Income Tax is authorised to deal with the application on a case to case basis, after verifying the claim of the declarant through the relevant Bank statements/certificates, etc., and consider on merits the condonation in appropriate cases provided the amount payable as per the first instalment as well as the second instalment is paid on 3132017 by the concerned declarant. The petitioner in the writ petition has placed reliance on such exceptions carved out by even the Board's circular. In the circumstances, we direct that the application seeking condonation of delay, be considered in accordance with law and particularly in the light of the Board's circular/clarification which we have referred above. The application be considered in accordance with law on its own merits as expeditiously as possible and within a period of six weeks from the date of receipt of a copy of this order.
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2017 (9) TMI 665
Assessment of share capital contributions as unexplained credit/ investment - addition u/s 68/69 - proof of discharging of initial burden/onus - Held that:- So long as the proof and identity of the investor and the payment received from him is through a doubtless channel like that of a banking channel, the receipt in the hands of the assessee towards share capital or share premium does not change its colour. The money so invested in the assessee company would still be the money available and belonging to the investors. The consistent principle followed is that the investors sources and credit worthiness cannot be explained by the assessee. If the Department has a doubt about the genuineness of the investors capacity, it is open to it to proceed against those investors. Without taking such a course of action, the Assessing Officer and the Tribunal are proceeding on conjectures that the assessee has, in fact, ploughed back the money. The very approach of the Assessing Officer and the Tribunal are completely opposed to settled legal principles enunciated and they have arrived at conclusions contrary to the legal principles on the subject. Further, they are finding fault with the assessee for the alleged failure of it's investors in proving beyond doubt that they have the capacity to invest at the moment they did in the assessee company. That is clearly a perverse view, as the assessing officer is not expected to perform a near impossibility. The assessee cannot call upon its investors to disclose all such business transactions thay carried on in the immediate past and as to how much they made from their respective business enterprises. The assessee cannot also call upon its investors to prove their good business sense in investing in the assessee company, as such investors cannot gain any controlling stake. - Decided in favour of the assessee and against the Revenue
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2017 (9) TMI 664
Grant refund of the amount determined under Section 143(1) along with interest under Section 244 A(1)(aa) - refund sanctioned in the name of petitioner's husband Late P.Krishnamurthy - Held that:- Considering the fact that refund has already been granted in favour of the petitioner, one part of the relief sought for by the petitioner has become infructuous. With regard to the claim for interest, I find that representation has been given only on 15.07.2017. Therefore, the second respondent should be granted reasonable time to consider the said representation for payment of interest. Accordingly, while recording that the petitioner has already been granted refund by Demand Draft dated 24.07.2017, there will be a direction to the second respondent to consider the representation of the petitioner, dated 15.07.2017, as expeditiously as possible, preferably, within a period of eight weeks from the date of receipt of a copy of this order.
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2017 (9) TMI 663
Reopening of assessment - Addition u/s. 68 - Investigation made by the Investigation Wing of the Department to conclude that nothing but a sham transaction of accommodation entry - Held that:- As the assessee remain non-cooperative before the AO and did not file requisite documents before the AO, thus the entry remains unexplained in the hands of the assessee and also no independent inquiry has been undertaken by the AO in the instant case and AO has mainly relied upon the Investigation Wing Report. Therefore, in the interest of justice, we think it proper to set aside the issue in dispute to the file of the AO to decide the same afresh, after making independent inquiry and verification, as deem fit. However, the Assessee is also directed to submit all the necessary documents, as asked by the AO during the assessment proceedings and fully cooperate with the AO and did not take any unnecessary adjournment. Accordingly, the issue in dispute is set aside to the file of the AO with the aforesaid directions. Appeal filed by the Revenue stands allowed for statistical purposes.
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2017 (9) TMI 662
Rectification of mistake - Allowability of deduction u/s 80IA - determination of quantum thereon with regard to captive consumption of electricity - Held that:- We find that this Tribunal had passed an order by placing proper reliance on the decision of the Hon’ble Jurisdictional High Court on the issue of allowability of deduction u/s 80IA of the Act and determination of quantum thereon with regard to captive consumption of electricity. We do not find any error in the said order passed by this Tribunal warranting any rectification in terms of Section 254(2) of the Act. Failure of the Tribunal to consider the argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment. It has been further held that the Tribunal cannot in exercise of its power of rectification look into some other circumstances which would support or not support its conclusion. The present application of the assessee u/s 254(2) of the Act is devoid of merits and deserves to be dismissed
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2017 (9) TMI 661
Penalty u/s 271(1)(c) - unexplained investment under section 69 - assessee during the survey u/s 133A voluntarily accepted that discrepancy in stock - AO's non surety about the charge as concealment of particulars of income or for furnishing of inaccurate particulars of income - Held that:- As referred to Para of penalty order and Para of assessment order whereby the penalty initiated and levied by the AO we are of the view that concealment is initiated and penalty is levied and the AO is not sure about the charge of levy of penalty under section 271(1)(c) of the Act. See CIT vs. Samson Perinchery [2017 (1) TMI 1292 - BOMBAY HIGH COURT ] As decided in the case of CIT vs. Baroda Tin Works [1995 (9) TMI 18 - GUJARAT High Court] is relevant wherein it was held that the fiction created under sections 68, 69,69A,69B and 69C by itself, cannot be extended to penalty proceedings to raise a presumption about concealment of such income. The Hon’ble High court has also held that once the presumption of concealment or concealed income is rebutted, it is for the department to establish that the income which the assessee is alleged to have concealed is, in fact, his income as distinguished from deemed income of the assessee which he failed to disclose in his return. In the present case of the appellant, find that effectively the penalty has been levied on the deemed income under section 69, which is not sustainable relying upon the aforesaid case laws. Hence, the penalty levied under section 271(1)(c) on this issue is deleted, and therefore, the ground of appeal is allowed. - Decided in favour of assessee.
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2017 (9) TMI 660
Disallowance of interest expenses - inclusion of the interest expenditure in the cost of acquisition - whether the cost of acquisition of capital assets under Section 48(2) would include interest amount qua borrowed funds used for acquiring such assets ? - Held that:- We are satisfied that the assessee has demonstrated the availability of funds. She has taken the funds from Riddhi Trade Services Pvt. Ltd. and Navkar Broking Services Pvt. Ltd. These funds were deposited in Centurion Bank. Out of these funds, payments were made to five individuals viz. (1) Govindbhai Shankerbhai, (2) Patel Kantaben Govindbhai, (3) Patel Mukeshbhai Govindbhai, (4) Patel Anandiben Mukeshbhai and (5) Divesh G. Patel. Payments to these persons were made from Centurion Bank account. Bank statements of this bank were submitted before the ld. CIT(A). After receiving the funds from Rupen M. Modi, the amounts were repaid to Riddhi Trade Services Pvt. Ltd. and Navkar Broking Services Pvt. Ltd. The assessee has submitted the details as to how the funds have been received by her from Shri Rupen M. Modi and how these funds have been travelled to Riddhi Trade Services Pvt. Ltd. and Navkar Broking Services Pvt. Ltd. Thus, the assessee has demonstrated her stand of acquiring funds as well as its uses. If these details are looked into in the light of proposition propounded then it would reveal that the assessee is entitled for inclusion of the interest expenditure in the cost of acquisition. The same cost is to be set off against the short term capital gain arose to the assessee. It is pertinent to observe that on page No.84 of the paper-book the assessee has placed a working of interest expenditure incurred by her for purchase of land at Jodhpur. She has worked out a sum of ₹ 23,29,085/-. This interest expenditure deserves to be set off against the short term capital gain. We direct the Assessing Officer to allow the set off of this expenditure against the short term capital gain. In this way, the appeal of the assessee is partly allowed.
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2017 (9) TMI 659
Estimation of income - disallowance of expenses - addition in respect of inadequate personal expenses - Held that:- Assessee neither appeared before the A.O. nor filed any books of accounts or any details in respect of the business carried out by the assessee and also various expenses claimed by him. The A.O. on the basis of material available as per the return filed by the assessee, assessment is completed u/s 144 of the Act. Even the Ld. CIT(A) has given as many as opportunities to the assessee, however, the assessee has appeared on 22.11.2011 and filed a written submission requesting him to dispose of the appeal on merits. The Ld. CIT(A) in his order, categorically observed that the assessee has not filed any evidence except producing some ledger extracts in respect of the expenses claimed by the assessee. He has also observed that only basing on ledger extracts, no expenditure can be allowed and therefore confirmed the order of the A.O. Thus in the interest of justice, the entire issues has to go back to the A.O. to decide the case based on the books of accounts and relevant evidences. Therefore, we set aside the order passed by the Ld. CIT(A) and send it back to the A.O. to adjudicate this issue de-novo in accordance with law. In so far addition made by the A.O. the A.O. has observed that, it is seen from the assessee’s balance sheet that the assessee is showing liability to the extent of ₹ 21,00,383/- as cash creditors in the name of assessee’s relatives and his accountant, etc. In the absence of any evidence to prove that these liabilities are genuine, the same are treated as assessee’s income and accordingly addition was made. On appeal, Ld. CIT(A) sustained ₹ 9,20,383/- by considering the written submissions filed by the assessee. Before us, the Ld. Counsel for the assessee has submitted that before the A.O., no details are filed. Even before the CIT(A), only written submissions are filed. No correct facts are coming out and submitted that the issue may be remitted back to the A.O. for de-novo consideration.
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2017 (9) TMI 658
Penalty u/s 271(1)(c) - addition u/s 68 - voluntary surrender of income - Held that:- The case of the assessee is squarely covered by the observations of the Hon’ble Supreme Court in MAK data Pvt.Ltd. (2013 (11) TMI 14 - SUPREME COURT) wherein observed that the statute does not recognize defences like ‘voluntary disclosure’, ‘buy peace’, ‘avoid litigation’, ‘amicable settlement’ etc. Thus, even voluntary surrender of income will not always necessarily rescue the assessee from the penalty provisions which are in the nature of remedy for loss of possible revenue. In the instant case, the surrender has been made later during the course of assessment proceedings after detection of untruthfulness of the version of the assessee. In these circumstances, the view adopted by the CIT(A) of favourable treatment to such assessee cannot be endorsed. We also notice that the penalty has been imposed for concealment of particulars of income which is consistent with the facts of the case. The assessee has not expressed its handicap anywhere before the lower authorities on the alleged vagueness of notice issued under s.274 r.w.s.271(1)(c) which prevented him in his response in any manner. The onus which lays upon the assessee to rebut the presumption of concealment under Explanation - 1 to s.271(1)(c) has not been discharged. Under the circumstances, the order of the CIT(A) is requires to be reversed and the penalty order of the AO requires to be upheld. - Decided in favour of revenue
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2017 (9) TMI 657
Reopening of assessment - non applying the provisions of section 147 r.w.s.151 - non approval from competent authority - Held that:- In the absence of approval of the competent authority designated under s.151 of the Act, the notice issued under s.148 of the Act for assumption of jurisdiction under s.147 is vitiated and non-est. The entire reassessment proceedings is accordingly a non-starter. Consequently, the orders of the AO & CIT(A) are required to be quashed - Decided in favour of assessee.
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2017 (9) TMI 656
Whether Business Activity taken place during the PY by assessee - business of development of ship building and ship repairing yard - Business set up in January 2008 - AO disallowed all the expenses u/37 in view that the business had not commenced during the year - Held That:- No doubt, the assessee has commenced commercial operation on 01.04.2009, but that is not the date when the business has been set up. Setting up business and commencement of business are two different things. Expenses prior to setting up of business are not allowable. If the facts of Saurashtra Cement & Chemical Industries Ltd (supra), is applied to the facts of the assessee, we are of the view that business activities of the assessee can be divided in to various activities such as the receipt of the confirmed orders, designing of the ship, procurement of raw materials, erection and building of ship, elaborate and comprehensive testing analysis and inspection and delivery of the ship. - No illegality or infirmity in order of CIT(A) - Appeal of revenue is dismissed. Claim of administrative expenses u/s 37 - chargeability of the interest income under the head ‘Income from business’ - Held That:- While disposing off ground no.1, we confirmed the order of the CIT(A) that the business was set up during the year in January 2008. Therefore the expenses incurred after the set up of the business are revenue expenses - CIT(A) is correct in allowing all these expenses. Similarly, the interest income,the interest earned on Fixed Deposit be assessed as business income out the total interest earned by the assessee - Thus, this ground is also dismissed. Deletion of disallowance u/14A - interest expenses - interest corelated to acquisition of fixed assets and capital work-in-progress and is capitalized - Held That:- For the purpose of disallowance u/s. 14A read with Rule 8D(2)(ii) interest which is directly attributable to acquisition of fixed assets or capital work-in-progress,cannot be disallowed as the same cannot to attributable to any particular income or receipt. No illegality in order of CIT(A) - Appeal by revenue dismissed
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2017 (9) TMI 655
Addition u/s 14A - suo moto disallowance by assessee - Held that:- On a perusal of the Assessment Order we find that Assessing Officer has clearly stated as to why the working of the assessee is not acceptable for him. Assessing Officer has given reasons for not accepting the working of the assessee. Therefore, it cannot be said that there is no satisfaction recorded by the Assessing Officer. The alternative submission of the assessee that only those investments which have yielded dividend income during the year should be considered has been accepted by the Ld.CIT(A). In the circumstances we do not see any valid reason to interfere with the decision of the Ld. CIT(A). Ground No.1 of the grounds of appeal of the assessee for the Assessment Years 2009-10 and 2010-11 are rejected. MAT computation - Disallowance u./s 14A while computing the book profits u/s 115JB - Held that:- On hearing both the parties we are of the view that the issue of disallowance u/s 14A r.w. Rule 8D while computing the book profits is now settled by the Special Bench Delhi in the case of ACIT v. Vireet Investments Private Limited (2017 (6) TMI 1124 - ITAT DELHI ) wherein it has been held that computation under Clause (f) of explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w. Rule 8D of I.T. Rules. Therefore, respectfully following the said decision we hold that there should not be any disallowance u/s 14A read with Rule 8D while computing the book profits u/s 115JB of the Act. Thus, we direct the Assessing Officer to compute the book profits u/s 115JB keeping in view the decision of the Hon’ble Special Bench (supra). This ground of appeal is allowed for statistical purpose. Addition u/s 14A - Assessment Years 2009-10 and 2010-11 - Held that:- Disallowance computed u/s 14A r.w. Rule 8D by the Assessing Officer is not correct. Thus we restore this issue to the file of the Assessing Officer with a direction to re-compute the disallowance under Rule 8D(2)(iii) in view the decision of the Delhi Bench in the case of ACIT v. Vireet Investments Private Limited [2017 (6) TMI 1124 - ITAT DELHI] by considering only those investments which yielded dividend income during the Assessment Years 2009-10 and 2010-11
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2017 (9) TMI 654
Disallowance of business expenses u/s 37 - Denial of set-off of business loss incurred against Income from Other Sources for year consideration - Company not doing any business activity - Disallowance u/s 14A - Held That:- the assessee company may not carry on business but is in existence. The name of the company was not struck off by the registrar of companies. The company has not been dissolved. Therefore the assessee is allowed to claim such expenses in the P&L A/c in view of the law settled in [1991 (5) TMI 6 - CALCUTTA High Court] title as CIT(A) karanpura Collieries Ltd. & [1989 (5) TMI 10 - CALCUTTA High Court], CIT Vs. Ganga Properties Ltd.- Decided in favor of assessee. Disallowance of expenses incurred to earn the exempt income - Held That:- Strategic investment is not liable to be included to assess the expenses to earn the dividend income in view of the provision under section 14A read with rule 8D.- Therefore matter remanded back to AO to assess the expenses incurred to earn the exempt income by excluding the strategic investment. - Decided in favor of assessee. Confirmation of disallowance of interest - Held That:- The assessee has shown the interest income on FDs. The assessee produced the TDS certificates in which he has received the interest to aggregated to the tune of ₹ 2,60,165/-. The difference to the tune of ₹ 8,245/- was added to the income. Nothing in support is produced before us. The plea of the assessee’s that the income was offered in the earlier year but there is no evidence in this regard therefore we uphold the finding of the CIT(A) on this issue.- Decided against the assessee.
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2017 (9) TMI 653
Disallowance u/s 14A - Dividend Income exempt u/s 10(34) - assessee already disallowed interest on loan on a/c of exempt income - Further disallowance by AO under Rule 8D r.w.s.14A - mix of own funds and interest borrowed capital - investments earning the exempt income out of mix fund - Held That:- There should not be any further disallowance u/s 14A under Rule 8D of the I.T. Rules, since the disallowance cannot exceed exempt income. This view of our is fortified by the decision of the Madras High Court in the case of Redington India limited v. ACIT [2017 (1) TMI 318 - MADRAS HIGH COURT]. Hence the same is deleted. - Decided in favor of assessee. Disallowance u/s 14A while computing the book profits u/s 115JB - Held That:- Computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w Rule 8D of the Act. Therefore we direct the AO to compute the book profits u/s 115 JB in accordance with the directions of the Hon’ble Special Bench in the case of ACIT v. Vireet Investments Private Limited (2017 (6) TMI 1124 - ITAT DELHI) - Appeal is allowed for statistical purposes.
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2017 (9) TMI 652
Short deduction of TDS - demand u/s 201(1) and interest chargeable u/s 201(1A) - Seeking relief on the ground that No revenue loss to the government - TDS deducted applying the rate u/s 194C instead of Section 194LA - TDS deducted on the original compensation / enhanced compensation paid to the land owners - bona fide error - Held that:- Admittedly the LAO has not deducted appropriate tax at source on the amounts paid to the agriculturists and the only argument advanced before the tax authorities was that there is no revenue loss to the Government and hence the DDO should not be treated as an assessee in default. No further material was brought before us to contradict the findings and conclusions of the Ld CIT (A) with regard to the application of provisions of section 201(1) and 201(1A) of the Act. In fact the case of the assessee is that it was a bona fide error on the part of the LAO. Equity and taxation are strangers and there cannot be any laxity even if it is on account of a bonafide errors. Under these circumstances, the Ld CIT (A) expressed his inability to accord any relief, beyond the relief accorded in the form of recalculation of the penalty as well as the interest payable u/s 201(1) and 201(1A) of the Act. We are therefore of the opinion that the orders passed by the Ld CIT (A) do not call for any interference. Appeals by the asssessee / LAO are dismissed.
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2017 (9) TMI 651
Suppressed profit on account of bogus transaction - bogus purchases - lorry receipts were not produced - best judgment assessment - Held that:- The restriction of disallowance to 12.5% of the bogus purchases as was done by learned CIT(A) towards embedded profits in obtaining inflated bills from these alleged bogus dealers while actual material was sourced from some other sources is a fair and reasonable estimate which is a plausible view taken by learned CIT(A) and we are not inclined to interfere with the same. Under these circumstances, some estimates has to be made but the same has to be fair and honest. In our view, the view taken by learned CIT(A) in its appellate order is a plausible view and estimates made by the learned CIT(A) could not be said to be not an honest or fair estimate. The assessee has also not filed any appeal against the appellate order of the ld. CIT(A) which is accepted by the assessee and the same has attained finality so far as the assessee is concerned . Based on our above discussions and reasoning, we are not inclined to interfere with the appellate order of learned CIT(A) which we confirm/affirm. Revenue fails in this appeal. We order accordingly.
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2017 (9) TMI 650
Deduction u/s 80IA(4)(iv) - initial assessment year - Business of manufacture of transformer oils, lubricating oils and other petroleum products besides generation of electricity from wind mills - Profits from 6 Wind Mill Units not correctly worked out as per AO, losses in the years prior to the ‘initial year’ had been otherwise set-off against the other incomes of the assessee in those respective years - Interpretation of Sec. 80IA(5) - AO assessed loss in 4 units out of six - Held that:- as per the assessee, it is only the losses starting from the initial year, i.e. the first year of claim of deduction and thereafter, which are required to be taken into consideration for arriving at profits eligible for deduction. Factually speaking, there is no dispute that so far as losses considered by the Assessing Officer are concerned, they have otherwise been absorbed against other incomes of the assessee in the respective years. CBDT clarified ‘initial assessment year’ used in Sec. 80IA(5) of the Act is to be understood to mean the first year opted by the assessee for claiming deduction u/s 80IA of the Act. Considered in this light also, we find no error on the part of the CIT(A) in allowing the claim of the assessee. - Revenue appeal is dismissed Nature and taxability of Income earned on account of transfer of Carbon Credit - Revenue Income or capital receipts - Held That:- the receipt on account of Carbon Credit was a capital receipt not chargeable to tax.Therefore Tribunal affirm the order of CIT (A) - Appeal of revenue is dismissed. Disallowance interest expenditure u/s 14A -Held That:- Own funds comprising of Share Capital and Reserves & Surplus were much more than the investments in the exempt instruments and, therefore, CIT(A) made no mistake in deleting the disallowance of interest expenditure made u/s 14A of the Act. - Decided against Revenue
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2017 (9) TMI 649
Allowability of Prior Period Expenses - PSU carrying on business of transmission,distribution and supply of electricity - Held that:- Though the principle of res judicata doesn’t apply in the income tax proceedings but where the same “fundamental aspect” permeates in different AY's and the assessee is consistent in its accounting policy,of accounting for the liabilities in the year in which it is crystallised, the Courts have held that the settled position should not be disturbed unless there are glaring changes in the facts and circumstances of the case or there are change in law which call for a fresh examination. - no additions - Decided in favor of assessee. Disallowance of depreciation on non-existing assets worth 115.21 Cr - Physical Verification of assets could not be done - Held that:- CIT(A) confirmed the disallowance done by AO of depreciation on the nonexisting assets of ₹ 115.21 Crore on grounds that assessee does not prepare the list of fixed assets on physical verification and if the assessee himself cannot find where the assets are located, then the question of putting them to use for business purposes doesn’t arise. - But as per the submissions of Ld. AR for earlier AY 2003-04, the same case with same facts was decided by Tribunal in favor of assessee, therefore following the decision of the Co-ordinate Bench [2016 (9) TMI 399 - ITAT JAIPUR] there is no change in the facts and circumstances in the present case same is allowed in favor of assessee. Disallowance of depreciation u/s 32 r/w sec 43(1) - Contribution, grants and subsidies towards cost of capital assets - AO has disallowed the amount of ₹ 22,05,23,697/- as excess depreciation claimed by assessee on the grounds that as per section 32(1)(iii) read with section 43(1) and Explanation 10 contribution, grants and subsidies received for Capital Assets are to be reduced from the cost of capital assets and therefore AO recalculated the depreciation allowable to the assessee. - Held that:- the same issue has been decided against the assessee by Co-ordinate Bench [supra] therefore, following the decision of the Coordinate Bench referred supra,there is no change in the facts and circumstances of the case - Decided against assessee. Applicability of MAT provisions u/s 115JB - Held That:- following the favorable decision of the Coordinate Bench,in assessee’s own case the provisions of section 115JB are held not applicable to the assessee in present case also and there is no change in the facts and circumstances of the present case nor in the legal position. - Decided in favor of assessee. Disallowance of provision for doubtful debts - Held That:- Unless and until, the accounting treatment in the books of accounts is clear and through which it can be demonstrated that the assessee company has actually write off the bad debts in its books of accounts, merely contending that the intention is to write off the bad debts would not be sufficient enough to claim a deduction under the provisions of the Act. - The provisions of section 36(1)(vii) read with explanation 1 are clearly attracted and the assessee has not able to demonstrate how the said provisions are not applicable in the instant case. - Decided against assessee.
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2017 (9) TMI 648
Bogus Purchases - profit estimation with respect to the alleged unproved purchases - Held that:- Though the CIT(A) has referred to the estimation of profit ranging from 12.50% to 25%, so however, he has not given any particular reason as to why he has resorted to the estimation @17.50%. On the contrary, in similar situations, the Mumbai benches of the Tribunal have estimated the profit @ 12.50% in the case of similarly placed asessees engaged in the business of trading in ferrous and non-ferrous metals. Therefore, in my view, in the fitness of things, the estimation of 17.50% adopted by the CIT(A) deserves to be reduced to 12.50%. Accordingly, the Assessing Officer is directed to recompute the addition considering the estimation of profit at 12.50% on the purchases made from the impugned parties, of course, after reducing the 5% G.P, as directed by the CIT(A). Thus, on this aspect, assessee partly succeeds.
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2017 (9) TMI 647
Addition u/s 14A - provisions of Rule 8D2(iii) applicability in respect of shares held as stock in trade - Held that:- We note that the Ld. CIT(A) by following the order of this Tribunal has held that ½ percentage of the average value of investment prescribed under Rule 8D(2)(iii) of the Rules shall be computed on the dividend bearing scrips. The Hon’ble Calcutta High Court in CIT Vs. M/s. G K K Capital Markets (P) Ltd. [2017 (2) TMI 628 - CALCUTTA HIGH COURT] wherein their Lordships upheld the Tribunal decision that once the assessee has kept the shares as stock in trade, the Rule 8D of the Rules will not apply. Therefore, we reiterate the view taken by the coordinate bench in REI Agro Industries Ltd. Vs. DCIT [2013 (9) TMI 156 - ITAT KOLKATA] and so, we do not find any merit in the ground of appeal raised by the revenue and hence, it stands dismissed. Addition u/s. 41(1) - remission of liability - Held that:- In the present case, there is nothing on record to suggest that there was remission or cessation of liability in the AY 2010-11. On the contrary, as per the statement of the Director of M/s. MCL recorded by AO on that u/s. 131 of the Act suggests that when he joined as a Director only in 2003 the same balance was lying with no movement which suggests that the remission of ₹ 33,98,930/- has taken place between 01.04.2002 and 31.03.2003 and not in this assessment year. In such a scenario, section 41(1) of the Act has no application in this assessment year and, therefore, we direct deletion and allow assessee’s appeal.
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2017 (9) TMI 646
TPA - selection of comparable - MAM - Held that:- Purpose of the transfer pricing provision is first select the most appropriate comparable/ tested party and thereafter, by applying the most appropriate method to determine arm’s length price(ALP). Considering, the fact that assessee has not raised the issue related with the selection of comparable as AE’s either before the transfer pricing officer or before first appellate authority, and has raised the issue for the first time before the Tribunal by way of additional ground of appeal. Considering the material available on record and the factual and legal discussion as referred above, we admit the additional ground of appeal raised by assessee, and are inclined to restore this issue raised in the additional ground to the file of assessing officer/transfer pricing officer for examining issue afresh. The AO/TPO shall decide the issue after considering all the material available on record in accordance with the law. The assessing officer/transfer pricing officer shall decide the issue by calling the information and documents from the assessee as well as by making his own inquiry in the data base or otherwise. Needless to say that assessing officer/transfer pricing officer shall afford reasonable opportunity to the assessee before deciding the issue. The assessee is also directed to cooperate with the assessing officer/transfer pricing officer in providing all necessary information and documents and not to seek adjournment without any proper and valid reasons. With these observations the additional ground of appeal raised by assessee is allowed.
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2017 (9) TMI 645
Penalty u/s 271(1)(c) - validity of notice - issuing notice U/s 274 without mentioning the limb of section 271 under which penalty is proposed to be levied - Non-striking of one of the limbs in the notice - non specific charge mentioned by the Assessing Officer for imposing of penalty - Held that:- As perused the penalty notice issued u/s 274 r/w 271(1)(c) and also the Assessment Order passed u/s 143(3) of the Act. It is abundantly clear from these that the Assessing Officer failed to strike of the relevant limb in initiating the penalty proceedings, charge is not made clear. Similar situation was considered by the Coordinate Bench in the case of Meherjee Cassinath Holdings Private Limited v. ACIT (2017 (5) TMI 904 - ITAT MUMBAI ) and the implication of non-striking of the relevant portion of the notice and not specifying the charge while imposing the penalty u/s 271(1)(c). It was held that if there is no specific charge mentioned by the Assessing Officer for imposing of penalty, the penalty cannot be sustained. Non-striking of one of the limbs in the notice suffers from vice of non-application of the mind having regard to the ratio of the decision in the case of the Dilip N. Shroff (2007 (5) TMI 198 - SUPREME Court) and Bombay High Court in the case of Samson Perinchery (2017 (1) TMI 1292 - BOMBAY HIGH COURT ). Thus we delete the penalty levied u/s. 271(1)(c) of the Act on the preliminary point. - Decided in favour of assessee.
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2017 (9) TMI 644
Sale of residential property - Long Term Capital Gain OR Short Term Capital Gain - period of holding - deduction claimed under section 54EC and 54F - Held that:- The date of execution of agreement to sale of flat (16.11.2006) should be treated as date of acquisition of capital asset. The assessee sold the capital asset by agreement dated 18.11.2009, to Mr & Mrs Soni. The objection of the revenue that the assessee intentionally waited for mechanical lapse of 36 months and deliberately put the date on agreement as 18.11.2009 to avoid the payment of tax is not tenable. Every individual has a right to deal his asset as per his own choice and convenience and the revenue cannot dictate any particular way unless otherwise the transaction is prohibited by law. Thus, in our considered view the assessee acquired the capital asset on 16.11.2006 and transferred it on 18.11.2009. Hence, qualified for Longterm Capital Gain (LTCG). We may make it clear that the assessee would be entitled for the benefit of indexation from 16.11.2006 only for the purpose of calculation the LTCG. The assessing officer is further directed to allow the deduction/benefit of ₹ 50,00,000/- under Section 54EC and 54F after verification of facts. Thus the grounds of appeal raised by assessee are allowed.
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2017 (9) TMI 643
Eligibility for the benefits of section 80 IA - assessee is in business of developing infrastructure facility - whether assessee can be said to be carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility as envisaged in section 80IA(4)(i)? - Held that:- CIT(A) has misdirected himself in inferring that assessee was merely executing a works contract as a contractor and not as a ‘developer’. At this stage, we may also make a reference to clause 3.7 of the Part – III of contract for supply of DFA unit dealing with Post Warranty Maintenance Contract. The said clause prescribes that assessee was obligated to make a separate offer to IOC for post-warranty maintenance of the system supplied by the assessee. The said clause itself indicates that assessee not only designed, engineered, got it fabricated and supplied the contract as a developer and was also providing warranty; and, in the post-warranty period, a separate offer was to be made. Therefore, factually speaking, we are unable to concur with the lower authorities that assessee was merely a ‘contractor’ and not a ‘developer’ so far as it relates to the water treatment systems supplied to the IOC. In this view of the matter, in our view, assessee qualifies for the benefits of section 80 IA of the Act. Assessee has not claimed the deduction in the earlier years therefore, it is ineligible for the said deduction in the instant year - Held that:- On this aspect, the Ld. Representative for the assessee has pointed out that in the earlier years assessee was supplying the water treatment equipment to concerns, such as Thermax, L&T, etc. and that it was only for the first time in assessment year 2008-09 that it was awarded the tender by IOC. It was, therefore, in this context, the claim has been made in the instant year. The Ld. Representative for the assessee also pointed out that the time period prescribed for the deduction under section 80 IA(4) of the Act is 20 years and in that context it is eligible for the claim of deduction in assessment year 2009-10, since the first year was assessment year 1992-93; inasmuch as, assessee was incorporated on 09/10/1991. In our considered opinion, the aforesaid assertions made out by the assessee clearly belie the observations made by the CIT(A) and on this ground also we find no reason to uphold the stand of the CIT(A). Therefore, in conclusion we set-aside the order of the CIT(A) and direct the Assessing Officer to allow the claim of the assessee for deduction under section 80 IA(4) of the Act. Thus, on this aspect assessee succeeds. Disallowance being interest for delay in making payment due for the credit card facility - addition u/s 37 - Held that:- So far as the use of the credit card is concerned, there is no dispute that the same has been done in the course of assessee’s business. At the time of hearing, the Ld. Representative for the assessee pointed out that interest liability was raised on the assessee by the credit card company which was settled by the assessee in the instant year and, therefore, the interest liability in question crystallized during the year itself. The impugned expenditure could not be treated as a prior period expenditure, rather the said expenditure has clearly crystallized during the year under consideration and, therefore, deserves to be allowed in computing the business income. Thus, assessee succeeds on this aspect also.
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2017 (9) TMI 642
Penalty u/s.271(1)(c) - provision created for impairment in value of investment in security receipts - willfully furnished inaccurate particulars as such provision is not allowable as detection - revised return withdrawing provision created - bonafideness in the claim - Held that:- In the present case on hand, on perusal of the facts available on record, we find that the assessee has created provisions in respect of value in investment in security receipts as per the statutory requirement of RBI guidelines. The assessee being an asset reconstruction company registered with RBI is required to value its security receipts. Accordingly, it has made a provision in its books of accounts towards NAV of security receipts at the end of the financial year as per the rating given by the rating agency. The assessee has filed a revised return withdrawing provision created in respect of impairment in value of investment in security receipts before completion of assessment by the Assessing Officer. Though the assessee has filed revised return withdrawing provision created for impairment in value of investment in security receipts, AO was of the opinion that the assessee has filed revised return after a specific question was asked to justify the expenditure debited in the profit and loss account. We do not find merit in the findings of the AO for the reason that the assessee has filed revised return although after issue of notice u/s.142(1), but much before the date of completion of assessment, therefore, the AO cannot hold that the assessee has filed revised return only after issue of notice u/s.142(1) of the IT Act 1961. Mere making a claim in respect of certain expenditure and disallowance of such expenditure by the AO during the course of assessment proceedings cannot be called as furnishing of inaccurate particulars of income in respect of such income. More so, when assessee has filed revised return voluntarily before completion of assessment withdrawing such provision created / expenditure debited in the profit and loss account. Therefore, we are of the considered view that the AO was incorrect in coming to the conclusion that the assessee has furnished inaccurate particulars of its income which warrants levy of penalty u/s. 271(1)(c) of the Act. - Decided in favour of assessee.
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2017 (9) TMI 641
Reopening of assessment - assessee was beneficiary of hawala accommodation entries from entry providers by way of bogus purchase - reasons to believe - non independent application of mind by AO - borrowed satisfaction - Held that:- Tangible and cogent incriminating material were received by the AO which clearly showed that the assessee was beneficiary of bogus purchase entries from bogus entry providers which formed the reason to believe by the AO that income has escaped assessment. The information so received by the AO has live link with reason to believe that income has escaped assessment. On these incriminating tangible material information, assessment was reopened. At this stage there has to be prima facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to the hilt. See CIT(A) Vs. Rajesh Jhaveri Stock Brokers P. ltd [2007 (5) TMI 197 - SUPREME Court] In this case the sales have not been doubted it is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. This proposition is supported from honourable jurisdictional High Court decision in the case of Nikunj Eximp Enterprises [2013 (1) TMI 88 - BOMBAY HIGH COURT]. However the facts of the present case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expenses of the exchequer. In such circumstances of the case a 12.5% disallowance out of the bogus purchases would meet the end of justice, following the Hon’ble Gujarat High Court’s decision in the case of Simit P. Seth [2013 (10) TMI 1028 - GUJARAT HIGH COURT]. Accordingly, direct that the disallowance in this case should be restricted to 12.5% of the bogus purchases. - Decided partly in favour of assessee.
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2017 (9) TMI 640
Reopening of assessment - assessee was beneficiary of hawala accommodation entries from entry providers by way of bogus purchase - reasons to believe - non independent application of mind by AO - borrowed satisfaction - Held that:- Tangible and cogent incriminating material were received by the AO which clearly showed that the assessee was beneficiary of bogus purchase entries from bogus entry providers which formed the reason to believe by the AO that income has escaped assessment. The information so received by the AO has live link with reason to believe that income has escaped assessment. On these incriminating tangible material information, assessment was reopened. At this stage there has to be prima facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to the hilt. See CIT(A) Vs. Rajesh Jhaveri Stock Brokers P. ltd [2007 (5) TMI 197 - SUPREME Court] Overwhelming evidence have been referred by the authorities below that the impugned purchases are bogus. That documents submitted regarding actual movement of the goods have been found to be dubious. In this case the sales have not been doubted it is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. This proposition is supported from honourable jurisdictional High Court decision in the case of Nikunj Eximp Enterprises [2013 (1) TMI 88 - BOMBAY HIGH COURT]. However the facts of the present case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expenses of the exchequer. In such circumstances of the case a 12.5% disallowance out of the bogus purchases would meet the end of justice, following the Hon’ble Gujarat High Court’s decision in the case of Simit P. Seth [2013 (10) TMI 1028 - GUJARAT HIGH COURT]. Accordingly, direct that the disallowance in this case should be restricted to 12.5% of the bogus purchases. - Decided partly in favour of assessee.
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2017 (9) TMI 639
Repairs and maintenance expenses - nature of expenditure - revenue or capital - Held that:- We are inclined to set aside and restore this issue back to the file of the AO for denovo determination of the issue on merits in accordance with law keeping in view ratio of decision in the case of RPG Enterprises Limited v. DCIT (2016 (7) TMI 71 - BOMBAY HIGH COURT) as is applicable to the nature of the expenditure incurred by the assessee keeping also in view that the assessee is holding the premises under JV agreement with MMTC for a period of 15 years for running a business centre and also earlier decisions in assessee’s own case shall also be duly kept in view while adjudicating in de-novo proceedings. The assessee is directed to produce all relevant evidences/ explanations before the AO in its defense, which shall be admitted by the AO in the interest of justice. Proper and adequate opportunity of being heard shall be provided by the AO to the assessee in accordance with principles of natural justice in accordance with law.
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2017 (9) TMI 638
Legality of the order passed under section 153A - No incriminating document found in search - Held that:- The assessment made under section 153A read with section 143(3) of the Act without having any incriminating document, is untenable and bad in law. No concluded assessment can be disturbed without any material found during the course of search . See CIT vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT]. - Decided in favour of assessee.
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2017 (9) TMI 637
Penalty u/s 271D - loans received from directors and their close relatives in cash - proof of taking cash loans in urgent and extreme situation and without proving mens rea - Held that:- From perusal of the record, it transpires that the assessee is a private limited company engaged in the business of builders. It is not in dispute that during the year under consideration, the assessee had taken loan of ₹ 5,76,000/- from five persons. All these persons are either director of the company or close relatives of the director of the company. They are filing their income tax return regularly and assessed to tax. It is very pertinent to note that the Assessing Officer has invoked the provisions of Section 269SS of the Act treating the amount as cash loans received from many persons. The loans were taken in cash in extreme and urgent situation. It was due to accounts were used to fund shortage of part payment to honour the cheques issued to Rajasthan Financial Corporation’s installments. Therefore, considering the various case laws on this issue, no penalty should be imposed on the assessee for contravention of Section 271D of the Act - Decided in favour of assessee.
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2017 (9) TMI 636
Capital gain computation - acceptance of FMV of property - shops constructed on the land inherited from father - taxation on co-sharer of property - Held that:- It is a true fact that the assessee alongwith his three brothers constructed ten shops on the land inherited from his father, which is situated in the main area of Sangwada. The assessee had specifically informed the fact of fair market value of the property, which was accepted by the revenue. No any instance was available on records showing the fair market value of the said property as on 01/4/1981. Once the department accepted the FMV with regard to the asset then there is no any reason to deviate from the accepted working of the capital gain as per Rule of consistency. The ld AR relied on the decision of Hon’ble Punjab & Haryana High Court in the case of Jaswant Raj Vs CIT (1977 (2) TMI 22 - PUNJAB AND HARYANA High Court) wherein held that if during the same assessment year the same quantity of wealth in possession of one co-sharer is subjected to a lower rate of taxation, it would be highly improper to burden a similarly situated co-sharer with a higher rate of tax. If such an action on the part of the assessing authorities is sanctioned, it would militate against the principles of equality of law enshrined in Art. 14 of the Constitution. The assessee, who is also a co-owner of the property, is entitled to the benefit enjoyed by the other co-owner, whose valuation of the same property, at the same rate as that of assessee was accepted by the CIT. Allow the appeal of the assessee.
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2017 (9) TMI 635
Interest income treated as business profit - Held that:- As decided in CIT vs. Bhawal Synthetics [2017 (5) TMI 540 - RAJASTHAN HIGH COURT] it is not in dispute that the assessee had income of interest through FDRs and while setting off that the Assessing Officer as well as the ITAT did not examine the aspect as to under which provision the assessee claimed deduction or set off of his income from other sources against interest payable on the borrowed fund. The reason given is that the amount pertaining to FDR was not surplus amount but part of amount that was kept to obtain letter of credit for purchase of machinery. While accepting the fact that the FDR was for obtaining letter of credit to purchase machinery but so far as interest earned thereon is concerned, that is nothing but income through other sources, as such, the Commissioner of Income Tax rightly treated the same as income taxable. Discount from the cost of material instead of treating the same as part of the income - Held that:- The assessee received discount from the various suppliers against the purchases made by it. He submitted that the AO wrongly treated the same as income other sources ignoring that when such discount is received from the suppliers, it needs to be reduced from the cost of the raw material consumed in contract work. We find merit in the contention of the assessee as the discount is nothing but reduction in the value of the material so supplied. Therefore, same was required to be reduced from the cost of raw material consumed in contract work. Therefore, we do not see any infirmity in the order of ld. CIT (A), the same is affirmed. This ground of the revenue is rejected.
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2017 (9) TMI 634
Addition u/s 68 - advance against equity capital received - proof of creditworthiness and genuineness of the source - Held that:- The contention of the assessee is that the bank statement etc. not made available at the stage of first appellate authority. After considering the totality of facts, we deem it proper to restore the matter to the file of AO to verify the claim of the assessee and decide this issue de novo. The Cross Objection is partly allowed for statistical purposes.
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2017 (9) TMI 633
Assessment u/s 153C - proof of satisfaction recorded by the AO of the searched person u/s 132 - Held that:- The proceedings u/s 153C taken by the AO in absence of any satisfaction recorded by the AO of the searched person u/s 132 of the Act were illegal and void ab-initio and so is the order passed by the AO consequent to such proceedings. Accordingly, ground taken by the assessee is allowed on legal issue without going into the merit of the case. Appeal of the assessee is allowed
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Customs
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2017 (9) TMI 603
Penalty u/s 112(a) of the Customs Act, 1962 - mens rea - Whether the penalty on the appellant u/s 112(a) of the CA, 1962 is justified when the appellant was an employee working as executive director and he had no reason to believe that goods were liable for confiscation? - Held that: - It appears quite undisputable that the appellant had signed the necessary documents for import of goods, the goods upon import though were required to be utilized for manufacture of export product at the factory of the company, never reached the factory premises but were diverted in the local market and that the appellant was incharge of the day to day functioning of the company. Such being the facts, the involvement and knowledge of the appellant in diversion of the goods in local market is writ large on the face of the record - No perversity is pointed out in such factual conclusions. Clause(a) of section 112 of the Customs Act, provides for penalty against the person who in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act. In such a case, the penalty that could be imposed would be an amount not exceeding the value of goods or ₹ 5000/whichever is greater. Even if therefore, invoking this provision would require mens rea on the part of the noticee, the same was duly established on record. Penalty upheld - appeal dismissed - decided against appellant.
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2017 (9) TMI 602
Jurisdiction - penalty u/s 114 and 114AA of the CA, 1962 - natural justice - Held that: - The impugned order deals with details as to the manner of assumption of jurisdiction and why the adjudicating authority is arriving at the conclusions returned. Reasons are the link between the factual position and the conclusions drawn with regard thereto. The conclusions drawn are supported by reasoning given in the body of the impugned order. On a reading of the impugned order as aforesaid it cannot be said that the adjudicating authority had acted without jurisdiction in imposing penalty under Section 114 and 114AA of the Customs Act, 1962 - petition dismissed - decided against petitioner.
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2017 (9) TMI 601
Jurisdiction of impugned order - Section 28-AAA of the Customs Act, 1962 - The case of the petitioner is that the second respondent has arbitrarily impleaded the petitioner as a party to the proceedings without any investigation or enquiry and therefore, continuance of the proceedings under the impugned notice will result in oppression and harassment to the petitioner - Held that: - The question as to whether there has been any allegation against the petitioner made by the exporters or not and whether the petitioner has acted bonafidely in having purchased scrips from the exporters are all questions of fact which can be agitated only before the adjudicating authority and not before this Court under Article 226 of the Constitution of India. The question as to whether Section 28 or Section 28-AAA would stand attracted, is also not a pure question of law, but involves adjudication into facts. Therefore, at this juncture, this Court does not propose to interfere with the impugned show-cause notice as if it is done, it would be doing so at the very threshold, which is impermissible - The petitioner has been granted sufficient opportunity to place all the materials and it is well open to the petitioner to raise the legal issues which according to them, are wholly in their favour, and also contest the jurisdictional point before the adjudicating authority by submitting a reply. Hence, this Court is not inclined to entertain the writ petition and quash the show-cause notice at the very threshold. Petition dismissed being not maintainable.
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2017 (9) TMI 600
Penalty - smuggling of cultured pearls, consumer goods and cellphone accessories of foreign origin - unaccompanied baggage - The only allegation against the petitioner is that he had given his passport to one Mr.Durai Srinivasan for clearing the consignments and therefore, the respondent would state that the petitioner would have had the knowledge of the contents of the baggage - Held that: - What is important to note is that the original authority while imposing penalty on the petitioner vide its order dated 29.09.2003 did not specifically render a finding as to how he connects the petitioner with the tainted consignments. This is required because charge against the petitioner is criminal in nature (i.e.,) charge of smuggling when admittedly it was an unaccompanied baggage. There should be a clear finding to show that the petitioner, with full knowledge, had filed baggage declaration and used his passport for clearing the goods. It cannot be conclusively held that the petitioner had knowledge that the baggage contained tainted goods. Admittedly, there is no statement recorded from Durai Srinivasan, who was evading summons. Thus, the finding against the petitioner is based on presumption, as admittedly there was no direct evidence to show that the petitioner had knowledge of the contents of the baggage and goods were being smuggled into India. Therefore, the imposition of penalty on the petitioner alone and allowing the other person viz., Durai Srinivasan to go scot-free is not sustainable. Petition allowed - decided in favor of petitioner.
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2017 (9) TMI 599
Jurisdiction - revisional authority - Held that: - the entire interpretation based on which, the petitioner has founded his case has totally lost its efficacy and the only conclusion that has arrived at, that the petitioner has not made out a case for interference with the impugned orders. As pointed out earlier, this Court cannot substitute all the findings recorded by the two fact finding authorities and affirmed by a revisional authority - petition dismissed.
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2017 (9) TMI 598
High Seas Sale - Valuation - it was observed that there is undervaluation of the consignments leading to short levy of customs duty - payment of tax with interest before issuance of SCN - penalty - Held that: - it is the KOEL who was the importer and who filed the Bill of Entry on behalf of the appellant, as the appellant was not aware of the procedures. Further, there was no role played by the appellant in the alleged undervaluation committed by the supplier KOEL. Further, the appellant paid the entire duty along with interest before the issue of SCN voluntarily and therefore, he is not liable to pay penalty as there was no intention to evade duty - penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 597
Smuggling - Gold Bar of Foreign origin - whether the said gold bar seized by the Customs officers is of smuggled nature? - Held that: - There is no dispute that the seized gold bar is of foreign origin - the ownership of the gold is not the mitigating factor for confiscation under the Customs Act. Section 111 of the Customs Act, 1962 provides confiscation of improperly imported goods etc.. In the present case, the documents would show that the seized gold is not improperly imported goods and therefore, the Commissioner (Appeals) rightly set aside the confiscation of the seized gold. There is no allegation of fake documents placed by the respondents. There is no allegation that the foreign markings bearing on the seized gold are not genuine. It is established from the record that the marking bearing the seized gold are tallied with the documents. There is no material available on record that the other gold bar is available, bearing the same number. Appeal dismissed - decided against Revenue.
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2017 (9) TMI 596
Jurisdiction of Customs Department - Recovery and seizure of Cash currency - Held that: - when the matter is pending before the Enforcement of Directorate (E.D.) and Income Tax Department, then the matter cannot be considered by the Customs Department, as no imported item has been seized/recovered - the Government of India functions on the basis of Business Conduct Rules , where the work has been distributed to various Department - In the instant case, recovery of the money, may be un-accounted money, primarily, is the subject matter of Income Tax Department and certainly, not of the Customs Department as no imported item was recovered during search. It is also the allegation of the Department that another Company known as M/s Kalpena Industries Ltd. had imported plastic granules without paying proper duty, but sold the same in the open market at a higher price with the help of the assessee-company and it is the sale consideration of plastic granules - Held that: - action may be taken against M/s Kalpena Industries Ltd., who had imported the plastic granules. M/s Kalpena Industries Ltd. is an independent legal identity. The assessee company cannot be penalized, especially, when the appellant is engaged in an independent business of Real Estate. There is no justification to detain the cash amount and the same is directed to be released of course, provisionally by the Customs Department as per C.B.E & V Circular No.686/2/2003-CX dated 02.01.2003 as amended from time to time - decided partly in favor of appellant.
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2017 (9) TMI 595
Jurisdiction - power of CC(P) to issue SCN - Held that: - the notice issued by the CC(P) who was not a competent authority as per the ratio laid down in the case of Mangali Impex Ltd. Vs. UOI [2016 (5) TMI 225 - DELHI HIGH COURT] - In this connection, we note that similar issues have been dealt with in various cases by the Tribunal recently. It is held that the matters have to be remanded back to the original authority for a decision - appeal allowed by way of remand.
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2017 (9) TMI 594
Misdeclaration of value as well as description of goods - confiscation - Held that: - The declaration of goods made in the relevant Bill of Entry by the importer was not substantiated by the examination report when the goods were taken up for 100% examination. Significant differences were noticed in respect of description as declared in the Bill of Entry as well as actual value. The quantities declared were also found to be not correct - the charge of mis-declaration stands established against the importer, confiscation upheld. Levy of ADD - import of calculators in SKD condition - case of appellant is that appellant has imported parts and accessories of calculators in SKD condition. Since the imported goods were not complete calculators, levy of anti dumping duty is not justified - Held that: - it is not in dispute that the calculators will become functional only by addition of a few more components such as Diode and connecting wire, etc. Even if the imported parts and accessories make up 98% of the calculator we are of the view that the imported goods cannot be considered as calculators imported from China. Consequently, the non functional calculators cannot be levied to anti dumping duty in terms of the notification - levy of ADD set aside. Valuation - Enhancement of value of the imported goods - case of appellant is that market enquiry has been conducted by the customs authorities behind the back of the importer since relevant documents were not supplied to them - Held that: - It is settled position of law that once the importer has admitted the re-determination of value on record and has accepted the method of such valuation, he cannot subsequently challenge the same on the same ground. Consequently, we uphold the re-determination of value carried out by the customs authorities. Appeal allowed - decided partly in favor of appellant.
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Service Tax
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2017 (9) TMI 632
Refund of unutilised CENVAT credit - export of services - place of supply - telecommunication services or business support services - denial on the ground that the services provided by Verizon India do not qualify as 'export of services' as they are provided within India - arrangement between related persons - rejection also on the ground of time limitation. Held that: - When the Master Supply Agreement between Verizon India and Verizon US is examined, it is plain that the recipient of the service is Verizon US and it is Verizon US that is obliged to pay for the services provided by Verizon India. The position does not change merely because the subscribers to the telephone services of Verizon US or its US based customers 'use' the services provided by Verizon India. Indeed in the telecom sector, operators have network sharing and roaming arrangements with other telecom service providers whose services they engage to provide service to the former's subscribers. Yet, the 'recipient' of the service is determined by the contract between the parties and by reference to (a) who has the contractual right to receive the services; and (b) who is responsible for the payment for the services provided (i.e., the service recipient). This essential difference has been lost sight of by the Department. In the present case there is no privity of contract between Verizon India and the customers of Verizon US. Such customers may be the 'users' of the services provided by Verizon India but are not its recipients. Circular No. 141/10/2011 dated 13th May, 2011 also throws light on this aspect - It was clarified that the words ‘accrual of benefit’ was not restricted to mere impact on the bottom-line of the person who pays for the service. It had to be given a harmonious interpretation in the context where the effective use and enjoyment of the service has been obtained. The position becomes even clearer in the post July 2012 period during which the POPS Rules 2012 apply. As already noted provision of telecommunication services does not have a specific rule and so Rule 3 of the POPS Rules, which is the default option, applies. In terms thereof, the place of provision of telecommunication service shall be the location of the recipient of service. Decision in the case of Paul Merchants Ltd v. CCE, Chandigarh [2012 (12) TMI 424 - CESTAT, DELHI (LB)] followed. The Department was also not justified in characterising the arrangement of provision of services as one between related persons viz., Verizon India and Verizon US. In doing so the Department was applying a criteria that was not stipulated either under the ESR or Rule 6A of the ST Rules. The denial of the refund of the Cenvat credit to Verizon India and the raising of a demand of service tax on the consideration received by it for export of telecommunication services to Verizon US are not sustainable in law - petition allowed - decided in favor of petitioner.
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2017 (9) TMI 631
Reversal of CENVAT credit - Rule 6 - providing taxable and exempted services - The appellants were earlier availing credit on input services which were used by them for taxable as well as exempted services and were utilizing such credits only to the extent of 20% of the output tax liability in terms of Rule 6 (3) (c) of CCR 2004 during the material time. However, from August 2005, they switched over to the present system of availing full credit on such common input services, for which no separate accounts were maintained, and utilized the full amount of such credits. The appellant claimed that since the full amount of credit available on such common input services (used both in taxable and exempted services) are below the 20% restriction of total service liability of output services, they need not restrict utilization in any manner - Rule 6 (3) (c) of CCR Held that: - Admittedly, the appellants were using inputs / input services which are common for exempted as well as taxable output services. In respect of certain services, they have maintained separate accounts in terms of Rule 6(2) which was found to be correct and proper by the original authority. However, the dispute is in respect of certain other common input services they have followed the scheme under Rule 6 (3) - It is clear that Rule 6 (1) is a substantive plenary provision - Hon'ble Supreme Court in CCE Vs Gujarat Narmada Fertilizers Co. Ltd. [2009 (8) TMI 15 - SUPREME COURT] held that sub rule (1) of Rule 6 is plenary. It restates a principle, namely, that cenvat credit of duty paid on inputs used in the manufacture of exempted final product is not allowable. This principle is inbuilt in the very structure of the cenvat scheme. Sub-rule (1), therefore, merely highlights that principle. Sub-rule (1) covers all inputs, including fuel, whereas sub-rule (2) refers to non-fuel inputs. Sub-rule (2) covers a situation where common cenvated inputs are used in or in relation to manufacture of dutiable final product and exempted final product. The mechanism adopted by the appellant for following both sub-rule (2) and sub-rule (3) in respect of different common input services defeats the very restrictions placed under different conditions of sub-rule (3). As seen in the present case itself that appellant invoked clause (c) of sub-rule (3) and submitted that they were not hit by restriction of 20% in utilizing credit on tax liability of final output services, on the ground that total credit availed under sub-rule (3) falls short of the same. We note this claim is misleading and ignoring the fact that they have maintained separate accounts and availed full credit in respect of common input services attributable to taxable output services in terms of sub-rule (2). In other words, it would lead to a situation where the asssessee can choose to maintain separate account in respect of common input services under sub-rule (2) and, at the same time, follow sub-rule (3) in respect of a few of the common input services so that the bar of 20% utilisation of credit on final tax liability can be avoided. We find the present situation is against the basic principle of CCR. The appellants should follow legal provision as per Rule 6. Having not followed, they cannot take a plea that there is no provision to deny credit already availed. When the appellants maintained separate accounts for common input services and availed credits under sub-rule (2) of Rule 6, then there is no question of another option for common input services under sub-rule (3) of Rule 6. Scope of present order - Held that: - the Tribunal made an open remand of the case for a de novo adjudication. As such, original authority examined the issue and passed the order. In the present appeal, we have examined the grounds agitated by the appellant and we are in agreement with the final finding of the original authority. Proportionate credit - Held that: - during the relevant time, there is no such provision available to the appellant. Extended period of limitation - penalty - Held that: - the appellants were actually following Rule 6 (3) with restrictions of utilisation upto 20% in terms of Rule 6 (3) (c) upto August 2005. Admittedly, they have now knowingly switched over to the present system of selectively following Rule 6 (2) as well as Rule 6 (3) which resulted in the present dispute and proceedings - extended period and penalty upheld. Appeal dismissed - decided against appellant.
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2017 (9) TMI 630
CENVAT credit - service tax paid on certain services received in the registered office of the company that are common to more than one manufacturing unit on the ground of non-distribution of the said credit to different units under the provisions of Rule 7 of CENVAT Credit Rules, 2004 by not obtaining ISD registration - Held that: - the issue in the present case is covered by the decisions of the Tribunal in the case of Doshion Ltd. vs. CCE, Ahmedabad [2012 (10) TMI 952 - CESTAT AHMEDABAD], where it was held that The omission to take registration as an Input Service Distributor can at best be considered as procedural irregularity. There is no irregularity in taking the credit by the appellant because the said input services are related to all the units and it is not possible to segregate the said services in relation to a particular unit - also, distribution of credit by the ISD as per Rule 7 came to be added by way of Clause (d) to Rule 7 much after the period in dispute. Appeal allowed - decided in favor of appellant.
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2017 (9) TMI 629
Refund claim - claim was on the ground that the services rendered by them as registrar to issues and stock transfer agent were liable to tax only w.e.f. 1.5.2006 - appellant case is that the amount was paid due to bonafide mistake and is not governed by provisions of Section 11B - time limitation - Held that: - The admitted facts are that the appellants discharged the amount to the government under the category of service tax and remitted the same during the relevant time in terms of provisions of Finance Act, 1994. The amount has been paid as service tax and appropriated as part of Consolidated Fund of India by the Government. Any return of such amount should be governed by the legal provision which governs collection of such amount - In the present case, Section 11B of Central Excise Act, 1994 made applicable to the provisions of services tax is correctly invocable to determine the limitation - refund not allowed - appeal dismissed - decided against appellant.
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2017 (9) TMI 628
Refund of unutilised CENVAT credit - denial on the ground that the appellant has not submitted the Softex and the services are not exported by them - On 15/02/2010, a deficiencies memo was issued to the appellant to file all original documents and supporting documents, which when submitted were verified and were found on order - Held that: - As the deficiencies has been raised to the appellant has been replied by the appellant and found in order, therefore, there is no question for the Adjudicating Authority to reject the refund claims without issuance of SCN - Moreover, when the refund claims sought to be entertained and relevant papers has been filed by the appellant which were found in order, therefore, authorities below are duty bound to entertain the refund claim which they failed to do so - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 627
Cargo Handling Service - appellant argued that Order-in-Original was passed without benefit of reply of the appellant and without personal hearing - natural justice - Held that: - it has not been denied that appellant were given sufficient opportunity to file defense reply and to appear for personal hearing. They could not cause a defense reply to be filed or personal hearing to be attended - there is apparent error in the impugned order in so far as it imposes penalty under Section 78 in respect of all show cause notice whereas the said provision was not invoked in atleast two of them. It is apparent that on account of the conduct of the consultant they have failed to put up a proper representation and defense. It is reasonable to remand the matter to the Original Adjudicating authority for a fresh adjudication after considering all the defense of the appellant - appeal allowed by way of remand.
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2017 (9) TMI 626
Natural Justice - ex-parte order - Held that: - Examination of the credit requires testing of material facts and evidence and admissibility thereof requires examination of legal provision for application to the tested facts and evidence. Therefore, re-adjudication is considered to be proper recourse to do justice to both sides recording the pleadings of the parties, allegation in the SCN, evidence adduced and the law applicable for passing a reasoned and speaking order - the matter is remanded to the learned adjudicating authority who shall re-adjudicate the matter - appeal allowed by way of remand.
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2017 (9) TMI 625
Valuation - service of transportation of the passengers by air - includibility - passenger service fee - airport taxes - The claim of the appellant is that the amount collected, as PSF and airport taxes are not towards considerations of air travel and hence are not liable to be taxed - Held that: - the persons availing the facilities in airports are the passengers, who are in the process of either inward or outward air travel. The appellants are issuing tickets for such air travel, which in any case, cannot be performed unless the passengers enter and passes through the airports - The Airport Authority fixed certain charges as passenger service fee. This is apparently for the services rendered to the passengers in the airport. The passenger pay such charges as part of the ticket. Admittedly, service tax on such passenger service fee has been claimed to have been duly remitted by the Airport Authority, which was collected from the passengers by the appellant. Verification of these details can be made by the jurisdictional officers - addition of PSF in the taxable value at the hands of the appellant may result in double taxation. Admittedly, the PSF is forming part of airport service in terms of Section 65(105)(zzm). The very same PSF cannot be subjected to service tax under transport of passenger service. Appeal allowed - decided in favor of appellant.
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2017 (9) TMI 624
Valuation - inclusion of reimbursable expenses in the assessable value - Rule 5(1) of the service tax (Determination of Value) Rules, 2006 - Held that: - since the period of dispute is prior to April 2006, the provisions of Rule 5(1) of the service tax (Determination of Value) Rules, 2006 will not be applicable for inclusion of reimbursable expenses in the assessable value for the purpose of payment of service tax, for the reason that the said rule was inserted in the statue book w.e.f 18.04.2006 - In absence of any statutory provisions, authorizing levy and collecting of tax on the reimbursable expenses, the service tax demand cannot be fastened against the service provider - appeal dismissed - decided against Revenue.
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2017 (9) TMI 623
Liability of service tax - work relating to photostudio - whether the liability of service tax is on gross value collected for the services of photography and photography studio/ agency provided by the appellant? - Held that: - the appellant is liable to pay service tax for the gross amount received on account of services of photography & Photostudio agency - there cannot be two opinions that the liability of service tax payable by the appellant is for the gross value collected for the service of photography and photography studio/agency rendered to the customers. It is an undisputed fact that the appellant has already paid the demand of service tax confirmed by the impugned order - demand of tax with interest sustained. Penalty u/s 78 - Held that: - when there is no willful suppression or misstatement of facts, fraud, and collusion with intent to evade payment of Service Tax on the part of the appellant, penalty on appellant is set aside. Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 622
Valuation - includibility - study materials, journals had been invoiced separately - commercial training and coaching services - Revenue’s contention is that such study material cannot be considered as study material which are sold, but are part of the consideration received for the services of coaching. The claim of the appellant on the other hand is that they will be entitled to exemption under notification no.12/2003-ST - Held that: - The value of study material is nothing but a part of the consideration for rendering of services - appellant will be entitled to the benefit of N/N. 12/03-ST dated 20.06.2003 which grants exemption to the value of goods and material sold by the service provider to the recipient of the services - The issue has been settled in the case of Cerebral Learning Solutions Pvt. Ltd. Vs. CCE Indore [2013 (4) TMI 527 - CESTAT NEW DELHI] - Appeal allowed - decided in favor of appellant.
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2017 (9) TMI 621
Rectification of Mistake - Jurisdiction of Tribunal - power of review - Held that: - the Tribunal being statutory body and not being vested with the power of review, it has no power to recall its order to substitute that by a new order. It has limited jurisdiction to rectify a mistake apparent from record, without making an extensive examination thereof. Accordingly, Tribunal having limited jurisdiction, the application for ROM is liable to be dismissed - ROM application dismissed.
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Central Excise
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2017 (9) TMI 620
Evasion of duty - CENVAT credit - omission of Rule 56A - Held that: - The ingredient of the offence is the evasion. The omission of a procedural rule for availing the credit cannot in any manner affect the said charge. The prosecution cannot be deprived of opportunity to prove evasion which by itself is an offence. In this view of the matter, there was no justification for the High Court to quash the charge merely on the ground of Rule 56A having been omitted - appeal allowed.
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2017 (9) TMI 619
Condonation of delay - Refund claim - the decision in the case of Commissioner, Service Tax Commissionerate, Noida Versus M/s Samsung India Electronics Pvt. Ltd. [2017 (9) TMI 590 - ALLAHABAD HIGH COURT] contested - Held that: - Delay condoned - Leave granted.
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2017 (9) TMI 618
SSI Exemption - Clubbing of clearances - Clandestine removal of goods - the decision in the case of M/s. Nova Industries (P) Ltd. Versus CCE- Chandigarh [2015 (5) TMI 99 - CESTAT NEW DELHI] contested - Held that: - Application for exemption from filing certified copy of the impugned order is allowed - Issue notice on the application for condonation of delay as well as in appeal.
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2017 (9) TMI 617
100% EOU - Deemed export - whether the CESTAT was right in reversing the judgment of the adjudicating authority by holding that respondent assessee who was 100% EOU unit was not required to pay duty on its domestic clearance against foreign exchange remittance? - Held that: - In case of Maruti Cottex Limited [2004 (12) TMI 215 - CESTAT, BANGALORE], the Tribunal held that the clearances to DFRC holders and also to supplies against foreign exchange cannot be treated in par with clearances permitted by the department for sale to DTA. It was found that sale in DTA against foreign exchange would be covered under para. 9.10(b) and would count against Net Foreign Exchange Target required under the policy - appeal dismissed - decided against Revenue.
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2017 (9) TMI 616
Benefit of N/N. 214/86 and N/N. 208/83 - denial on the ground that the procedure required to avail the benefit of notification not followed - Whether the CESTAT, Mumbai was correct in holding that the applicant is not eligible for the benefit of N/N. 208/83 and/or 214/86 as the case may be and the duty as confirmed is payable though the documentary evidence to prove the eligibility of exemption are available with the department? - Held that: - the assessee failed to establish that the procedure required to be followed for availing the benefit of notifications was actually followed - appeal dismissed - decided against appellant.
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2017 (9) TMI 615
CENVAT credit - rejected goods - Rule 16 (1) of Central Excise Rules, 2002 - Held that: - similar issue decided in the appellant own case M/s. Tirupati Structurals Ltd. Versus Commissioner of Central Excise & Customs, Ghaziabad [2015 (4) TMI 1032 - CESTAT NEW DELHI], where it was held that goods returned by the appellant are not waste and scrap/ash and they are rejected goods and credit remains allowed - appellant has correctly taken the Cenvat credit - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 614
Demand of interest - credit reversed by the appellant - The appellants have argued that in terms of Section 11B clause 11 (ce) of the explanation, the appellants are required to pay interest only from the date of the order of JS (RA) and not from the date when they had taken the credit - Held that: - Section 11AB (1) of the Act mandates to pay interest in addition to the duty erro0neously refunded from the date of sanction of such erroneous refund till the date of payment of such duty. The unambiguous wordings of the aforementioned Section 11AB (1) leave no scope for interpretation - interest upheld - appeal dismissed. CENVAT credit - credit availed as per SION norms in respect of export made - Held that: - The Cenvat Credit Rules permits availment of credit only in specific circumstances. It is not open to the appellant to take credit on estimated basis. Moreover, in the instant case, there is no basis for the appellant to avail the Cenvat Credit. The appellant had sought to take credit solely on the ground that the final goods manufactured out of the same were exported - The exporter cannot, on his own devise a new method to avail credit which not prescribed under the law - appeal dismissed. Appeal dismissed - decided against appellant.
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2017 (9) TMI 613
CENVAT credit - fake invoices - issuance of invoices without issue of goods - issuance of second SCN by invoking extended period of limitation - Held that: - in this case, investigation was conducted at the end of M/s. Mahabir Prasad & Co. and it was alleged that M/s. Mahabir Prasad & Co. were indulged in manipulating their accounts. On the basis of that investigation, a SCN was issued to the appellant for imposition of penalty on the basis of allegations made against M/s. Mahabir Prasad & Co. In the circumstances, subsequent SCN cannot be issued to the appellant by invoking the extended period of limitation to deny the cenvat credit - similar issue decided in the case of NATIONAL STEELS Versus COMMISSIONER OF C. EX., DELHI [2005 (10) TMI 194 - CESTAT, NEW DELHI] - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 612
CENVAT credit - sub Rule (3A) of Rule 6 of the Cenvat Credit Rules - validity of SCN - Held that: - had appellant availed Cenvat credit attributable to both excisable goods as well as exempted goods then the question of examination for invocation of Sub-rule 2, 3 & 3A of said Rule 6 could have arisen. Since the appellant had availed such Cenvat credit which was attributable to excisable goods, the situation is covered by the Sub-rule (1) of Rule 6 of the CCR, 2004 - SCN's not valid - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 611
CENVAT credit - input services - denial on account of nexus - Held that: - the CENVAT credit with respect to freight outwards of ₹ 32,482/- have been remanded to the adjudicating authority for reconsideration, CENVAT credit relating to canteen services, labour charges on civil work, telecommunication services are confirmed as not contested. So far the other services are concerned, all have been allowed - appeal is allowed and is remanded only with respect to freight outwards. Penalty - Held that: - the issue is wholly of interpretation in nature and that there is no suppression of any facts from the Revenue as all the transactions are properly recorded in the books of accounts ordinarily maintained in the course of business. Accordingly, the penalty retained by the learned Commissioner (Appeals) is set aside. Interest - Held that: - So far as interest is concerned, on amount of CENVAT credit on inputs services reversed, appellant is directed to pay the same in accordance with the law. Appeal allowed in part and part matter on remand.
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2017 (9) TMI 610
Unjust enrichment - Refund claim of excess duty paid - rejection on the ground that the appellant has not opted for provisional assessment during the impugned period - Whether the appellant has been able to discharge their burden of unjust enrichment or not? - Held that: - Revenue has not produced any contrary evidence to show that the buying unit has taken cenvat credit of excess duty paid by the appellant. The allegation of the Revenue is only based on presumptions and assumptions which is not sustainable in law - benefit of doubt goes in favor of the appellant as per the undertaking filed by buying unit - the appellant has been able to discharge their burden of unjust enrichment and is entitled to refund claim in question. Whether the appellant was required to opt for provisional assessment or not? - Held that: - the appellant has approached for a permission for provisional assessment under Rule 7 of Central Excise Rules, 2002 for the financial year 2005-06, the said request was rejected. In that circumstances, it cannot be said that the appellant has not applied for provisional assessment. The appellant is entitled for refund claim - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 609
Demand of interest - penalty - credit reversed without utilising the same - Held that: - in a situation where credit is reversed prior to utilisation thereof interest cannot be demanded - the assessee has not utilised the said credit, the demand of interest on the credit reversed before utilising the same is set aside. Penalty - Held that: - It is not understood as how an error can occur where credit is taken without any documents. This can only happen when there is an intention to evade duty and default revenue. The ingredients necessary for imposing penalty under Rule 15(2) of Cenvat Credit Rules and Section 11AC of the Act are clearly available - penalty upheld. Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 608
Jurisdiction - CENVAT credit - input - sulphur powder received on payment of duty - Held that: - It is not open to the revenue officers having jurisdiction over the purchaser to question the assessment made by the officers having jurisdiction over the suppliers - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 607
MODVAT/CENVAT credit - furnace oil - Revenue sought to deny the credit essentially on the ground that the said goods were not brought in the factory of the appellant but were sent to the premises of the adjacent unit where boiler and furnace was installed - Rule 57I of the Central Excise Rules 1944 - Held that: - Its apparent from this Rule 57B(1) of Central Excise Rules 1944 that credit of inputs used for generation of steam would be allowed provided the steam manufactured is used within the factory of production - it is apparent that the Commissioner (Appeals) recognised that the credit is admissible provided specified procedure are followed - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 606
CENVAT credit - ingots purchased from a dealer - duty paying documents - Held that: - In the ordinary course of circumstances, where a proper invoice is produced and proof of payment along with gate register and Form 4 is presented the receipt of the goods is not challenged by the revenue - In the instant case, The appellant have not produced any document whatsoever like gate register, LR, Transport document or any other regarding in terms of Rule 9(5) to establish that the goods were indeed receipt in the factory and used in the manufacture of finished goods. In such circumstances, revenue has every right to question the actual receipt of goods and in terms of Rule 9(5) of CCR, the burden of proof regarding admissibility lies on the manufacturer - appeal dismissed - decided against appellant.
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2017 (9) TMI 605
CENVAT credit - pipes, tubes and items falling under Chapter-85 - capital goods - Held that: - the Cenvat credit on pipes, tubes and items falling under Chapter-85 which are admissible within the definition of capital goods and therefore show cause notice does not sustain in respect of them. The demand of Cenvat credit beyond the period of one year without invoking extended period in the SCN - Held that: - as extended period not invoked, demand not sustainable. Penalty - Held that: - there are no allegations for any malafiedy on the part of appellant. Therefore, penalty also set aside. We allow this appeal in respect of demand except for ₹ 68,459/- - decided partly in favor of appellant.
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2017 (9) TMI 604
CENVAT credit - loss of finished goods and semi-finished goods destroyed by fire - Held that: - Following the principles of law in the case of Union of India Vs. Martin Lottery Agencies Ltd. [2009 (5) TMI 1 - SUPREME COURT OF INDIA], it can be concluded that the provision which imposes a burden is always considered declaratory and cannot be applied retrospectively. Therefore, the provision introduced in 2007 requiring reversal of CENVAT Credit at the time of granting of remission of duty being obligatory in nature, will apply prospectively. Appellant's prayer on levy of interest calls for remand for re-adjudication as the appellant says that they are not liable to the same on liability relating to the raw materials destroyed in flood - appeal allowed - decided partly in favor of appellant, part matter on remand.
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CST, VAT & Sales Tax
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2017 (9) TMI 593
Sales tax - services of civil aviation including the running of aircraft, ferrying of passengers and goods through air routes in both the domestic and international sectors - As part of running its business, it sells scrap, depleted parts and sometimes even out-dated or unused aircraft - whether petitioner is liable to pay sales tax on such sales, under the Delhi Sales Tax Act, 1975? - Held that: - matter referred to Larger Bench to decide the issue Whether the sale of unserviceable (rejected) aircraft and unserviceable stores, scrap and spare parts by the Petitioner are amenable to Sales Tax under the provisions of the Delhi Sales Tax Act, 1975? - matter referred to Larger Bench.
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2017 (9) TMI 592
Lifting of Corporate veil - Separate registration under TNGST and CST Act - according to Revenue, separate registration has been taken solely for the purpose of avoiding payment of additional sales tax - Held that: - the conclusion arrived at by the respondent to state that the petitioner was incorporated only for the purpose of avoiding additional sales tax is of little avail and the formation of new company could have no impact on the levy and payment of additional sales tax, as this liability is on the seller/principal with effect from 01.01.2007, when the TNVAT Act, 2006 came into force - A sample bill raised by the grower/seller of Tea was produced before this Court, which shows that the seller is Tea Estates India Limited, the buyer is A.V.Thomas & Company Limited, and the agent is the petitioner herein - impugned proceedings are totally flawed and therefore, liable to be set aside - petition allowed - decided in favor of petitioner.
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2017 (9) TMI 591
Reversal of ITC - Form-W was filed belatedly - Held that: - The issue, as to whether belated filing of the Form-W, would be a bar for considering the request of the petitioner has already been considered and decided by this court by holding such delay, cannot stand in the way of considering the request for refund - the respondent shall have to consider the request of the petitioner for refund without reference to the belated filing of Form W - petition allowed - decided in favor of petitioner.
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