‘Reason to Believe’ must be based on Acceptable Materials: Allahabad HC quashes Seizure of Areca Nuts [Read Order]

A Division Bench of the Allahabad High Court, allowing the writ petition by Jaymatajee Enterprise (Seller) And Another against the seizure order issued by the Customs Department, allegedly, without sufficient reasons to believe that the Areca Nuts in question are imported illegally, held that the reasons to believe must be based on acceptable materials. The…

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Pre-Notice Consultation and Statutory Timeframe not followed: Delhi HC sets aside Order issued on the basis of flawed SCN [Read Order]

In a recent ruling of the Delhi High Court, the Division Bench comprising Justice Manmohan and Justice Manmeet Pritam Singh Arora set aside an order issued on the basis of a flawed Show Cause Notice (SCN) to the assessee, M/s Victory Electric Vehicles International.

On behalf of the petitioner, it was contended that the impugned order was issued to the petitioner after an SCN that was issued within 15 days of the date of communication of the pre-notice consultation notice. It was put forward by the assessee that the obligation given under Section 28(1)(a) of the Customs Act, 1962 and Regulation 3, Manner of conducting pre-notice consultation was of mandatory nature.

It was observed by the court that “Such consultation is mandatory; an aspect which is driven home by use of the expression “the proper officer shall hold pre-notice consultation with the person chargeable with duty or interest …”. “ and it was held that the obligation to hold pre notice consultation in the manner prescribed, while observing the time frame is not optional but mandatory.

The bench also observed that the manner in which the pre-notice consultation was to be conducted, according to the Regulation 3 of the Pre-Notice Consultation Regulations, 2018, was not adhered to by the revenue.

The expiry of 15 days, as prescribed by the regulation, in the present case where the pre-notice consultation notice is issued 14-12-2021, would be on 29-12-2021. Here, the petitioner was denied the right to make his submission, in writing, concerning the ground(s) communicated to him in the pre-consultation notice; which, as indicated above, is required to be served prior to issuance of the SCN.

Additionally, the court observed that such provisions exist in law for the purpose of preventing the litigations from continuing and increasing, causing a burden to the already overburdened judiciary and it must be observed mandatorily.

For the reasons above mentioned, the Delhi High Court set aside the original order and disposed of the writ petition, saving the liberty of the revenue to reinitiate the proceedings afresh, in accordance with law.

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CESTAT Weekly Round-Up

This weekly round-up analytically summarizes the key stories related to the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) reported at Taxscan.in during the previous week from October 1 to October 7, 2022. Star India Pvt Limited vs Commissioner of Service Tax -2022 TAXSCAN (CESTAT) 508 In a significant case of Star India, the Mumbai…

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Right to get Adequate Time to Reply to Show Cause Notice allowed u/s 148A(b): Delhi HC [Read Order]

A division bench of the Delhi High Court has held that the assessee has the right to get adequate time to respond to the show-cause notice under section 148A(b) of the Income Tax Act, 1961. The assessee, M/s Bird World Wide Flight Services (I) Pvt Ltd, received the initial notice under 148A(b) of the Act…

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GST Portal Releases Module-wise New Functionalities deployed on the Portal for Taxpayers

The Goods and Services Tax Network (GSTN) has released a module-wise new functionalities deployed on the GST Portal for taxpayers.

“Various new functionalities are implemented on the GST Portal, from time to time, for GST stakeholders. These functionalities pertain to different modules such as Registration, Returns, Advance Ruling, Payment, Refund and other miscellaneous topics. Various webinars are also conducted as well informational videos prepared on these functionalities and posted on GSTNs dedicated YouTube channel for the benefit of the stakeholders,” the GST portal said in a statement.

The module for the month of September can be accessed through  https://tutorial.gst.gov.in/downloads/news/new_functionalities_compilation_september_2022.pdf.

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Addition to Unexplained Credit will sustain in the Absence of Evidence to prove Enhanced amounts payable: ITAT [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the addition to unexplained credit will sustain in the absence of evidence to prove enhanced amounts payable.

The assessee, M/s. Mahamaya Exports Pvt. Ltd. challenged the Commissioner of Income Tax (Appeals)-31 [CIT (Appeals)] New Delhi, dated 20.12.2017 for the assessment year    2013-14.     

The assessee engaged in the business of developing residential and commercial projects at various places in Haryana State.  The Assessing Officer noticed that the assessee has shown a balance of Rs.148,93,34,700/- on account of sundry creditors as of 31st March 2013. 

The assessee was required to furnish the details of such sundry creditors along with a copy of accounts of the creditors and confirmations from the respective creditors with the nature of the transaction.

It was stated by the assessee that out of Rs.148,93,34,700/- a sum of Rs.8.40 crores was received in advance against the sale of property and the balance of Rs.140,53,34,700/- has arisen as a liability due to cancellation of the agreement to sell the property. 

The modus operandi adopted by the assessee concluded that the assessee has substantially evaded the tax liability by reducing the profit, and treated the outstanding balance in the sundry creditors amounting to Rs.148,93,34,700/- as unexplained cash credit of the assessee. On appeal, the CIT (Appeals) sustained the addition to the extent of Rs.146,48,34,700/- as the assessee received only Rs.2.45 crores in the earlier years which the CIT (Appeals) deleted from the outstanding sundry creditors of the current assessment year.  

A Coram of Shri Shamim Yahya, accountant member and Shri Challa Nagendra Prasad, Judicial Member observed that as per section 68, the onus was on the assessee to prove not only the source but also the nature of the credits. From the details submitted the Tribunal observed that the enhanced amounts payable for land do not have any credible basis and the nature of such enhanced credits remains unexplained.

The Tribunal upheld the order of the CIT (Appeals) and rejected the appeal by the assessee. Ms Rinku Singh appeared for the department while none appeared for the assessee. 

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Reopening of Assessment not to be made on Mere Change of Opinion: ITAT [Read Order]

The Income Tax Appellate Tribunal ‘A’ Bench, Chennai, has recently , in an appeal filed before it, held that reopening of assessment is not to be made on  mere change of an opinion. The aforesaid observation was made by the Tribunal when the Revenue had filed an appeal before it, against the order dated 05.09.2019.,…

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ICAI New Education Scheme and Training would develop Global Chartered Accountants with High Level of Professional Skills, says ICAI President

The Institute of Chartered Accountants of India ( ICAI ) President CA (Dr.) Debashish Mitra said that,  ICAI New Education Scheme and Training would develop Global Chartered Accountants with High Level of Professional Skills.

The Council, after deliberating at length on the suggestions received from stakeholders, approved the Proposed Scheme of Education and Training with certain modifications. The Scheme so approved by the Council has been submitted to the Ministry of Corporate Affairs, along with the corresponding amendments in Regulations for final approval.

With active participation of a range of stakeholders and deliberations at meetings of Board of Studies and the Council, we are sure that the resultant outcome, namely, the New Scheme of Education and Training with its value added features, would develop global Chartered Accountants with high level of professional skills and ethical values.

He also said that, The O/o C&AG is in the process of revising the empanelment norms of CA Firms and Criteria for Allotment of Audit. The proposed norms as received from the O/o CAG were discussed threadbare and a series of meetings were held at the Institute.

Based on the deliberations, ICAI submitted its suggestions to C&AG at a meeting of “Audit Board for Central Public Sector Undertakings’’ organized by the O/o C&AG on 6th September 2022 wherein the various regulatory counterparts were present. Shri Girish Chandra Murmu addressed the inaugural session. Various issues related to Revision of Policy for empanelment of Chartered Accountant firms by Office of the C&AG for allotment of audit and need for enhancement of Audit fee/ remuneration of statutory auditors were discussed. It was proposed by the O/o C&AG that additional qualitative parameters should be introduced as part of Allotment Criteria.

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Re-Assessment can’t be initiated against Dead Person is Invalid: Bombay HC [Read Order]

A division bench of the Bombay High Court has held that the re-assessment under section 148 of the Income Tax Act, 1961 cannot be initiated against a dead person unless the legal representatives submit to the jurisdiction of the Assessing Officer without raising any objection.

A bench of Justices Dhiraj Singh Thakur & Valmiki Sa Menezes has observed that where the legal representatives do not waive their right to a notice under Section 148 of the Income Tax Act, it cannot be said that the notice issued against the dead person is in conformity with the intent and purpose of the Income Tax Act.

The petitioner, Mr. Shailesh Shah received a notice under Section 148 of the Income Tax Act, 1961, dated 30 March 2021, for the relevant assessment year 2014–15, which came to be issued against his deceased father, Ramniklal Harilal Shah. The petitioner contended that the assessee had since passed away on February 3, 2016. A copy of the death certificate was also submitted to the officer.

“This Court in the case of Dipak Tanna Vs. Income Tax Officer, has held that the notice issued to a dead person is not valid. Reliance in this regard can also be placed in the case of Income Tax Officer Ward 1(3)(7), Surat Vs. Durlabhbhai Kanubhai Rajpara.2 In this case, it was held that a notice issued under Section 148 of the Act against a dead person would be invalid unless the legal representatives submit to the jurisdiction of the Assessing Officer without raising any objection. Consequently, where the legal representatives do not waive their right to a notice under Section 148 of the Act, it cannot be said that the notice issued against the dead person is in conformity with and with intent and purpose of the Act,” the Court said.

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Technologically ahead is essential for CA Profession in the digital paradigm, says ICAI President

The Institute of Chartered Accountants of India ( ICAI ) President CA. (Dr.) Debashis Mitra

has said that, Being technologically ahead is essential for the profession in the digital paradigm not only to realise the potential of technology for value creation but also mitigate its risk and perils. Therefore, it’s our constant endeavour as an Institute to keep our members ahead of the learning curve to enjoy the trust of the stakeholders and be the trustee of public interest.

He also said that, the Digital era is very dynamic and to uphold the elements of credence and assurance in financial reporting, we must adopt new ideologies, technology and practices to augment the quality of our services.

The ICAI President also added that, Enhancing our global footprints and to position the ‘Indian Accountancy Profession’ as a ‘Brand’ worldwide, ICAI launched 6 Representative Offices in the United States of America at Arizona, Austin, Los Angeles, Michigan, North Carolina, and Ohio at an event “Unite in America” organized by our San Francisco Chapter. The grand launch was held on 5th September, 2022 at San Francisco in the august presence of Chief Guest CA. Piyush Goyal, Hon’ble Union Minister, Guest of Honour Mr. Taranjit Singh Sandhu, Hon’ble Ambassador of India to the United States of America, Special Guest Dr. T V Nagendra Prasad, Hon’ble Consul General of India. I and CA. Aniket Sunil Talati, Vice President ICAI attended the event virtually. The Overseas Representative Offices now number 33 in addition to 44 Overseas Chapters.

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ITAT Weekly Round-Up

This weekly round-up analytically summarizes the key stories related to the Income Tax Appellate Tribunal (ITAT) reported at Taxscan.in during the previous week from September 24 to September 30, 2022

M/s. Patel Brass Works P. Ltd vs ACIT – 2022 TAXSCAN (ITAT) 1296

The Income Tax Appellate Tribunal (ITAT), Rajkot bench disallowed the claim under Section 801 A of the Income Tax Act, 1961 on the ground that there was a failure to file valid Income Tax Returns or revised Income Tax returns. The Bench consisting of Waseem Ahmed, Accountant Member, and Siddhartha Nautiyal, Judicial Member observed that “It is an undisputed fact, that the assessee did not make a claim for deduction under section 80-IA of the Act in its return of income. The said claim was made by way of filing revised computation during the course of assessment proceedings In view of the plain language of the Statute, and respectfully following the decision of the Gujarat High Court in the case of Rachna Infrastructure (P.) Ltd., we are of the view that Ld. CIT(Appeals) has not erred in facts and in law in confirming the order of the assessing officer. In the result, the appeal of the assessee is dismissed.”

The ACIT vs M/s. Voith Paper Fabrics India Ltd – 2022 TAXSCAN (ITAT) 955

Expenditure on technical know-how fees is revenue expenditure, Income Tax Appellate Tribunal (ITAT), Delhi bench consisting of Anil Chaturvedi, Accountant Member and N K Choudhary, Judicial Member deleted disallowance made by Assessing Officer (AO). The Tribunal observed that “We find that AO had disallowed the expenditure considering it to be a capital expenditure and following the decision of his predecessor for earlier assessment years. Before us, no fallacy in the findings of the CIT(A) has been pointed-out by Revenue nor has Revenue placed on record any material to demonstrate that the order of Tribunal in assessee’s own case for earlier years has been set aside, overruled or modified by higher judicial forum.’’

NCR Business Park Pvt. Ltd vs DCIT– 2022 TAXSCAN (ITAT) 823

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that, no disallowance of expenses on basis of lack of business activity or non-reporting income under Profit and gains of business or profession (PGBP). The Coram of Mr G.S. Pannu, President, and Mr Anubhav Sharma, Judicial Member has held that “there is no matter on record to suggest that the expenses were examined based on actual expenditure corroborated by evidence. Therefore, the issue regarding the disallowance of expenses is restored to the files of the AO with a direction to evaluate the genuineness of the expenses on an actual expenditure basis and then pass fresh assessment order”.

M/s. Arcot Textiles Mills Ltd vs The Assistant Commissioner of Income Tax– 2022 TAXSCAN (ITAT) 824

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that remission of liability by order of the Board for Industrial and Financial Reconstruction (BIFR) is a capital liability, and cannot be brought to tax as business income. The Coram of Mr. G. Manjunatha, Accountant Member, and Mr. Anikesh Banerjee, Judicial Member has observed that the amount credited to profit & loss account towards remission of liability by the order of BIFR is a capital liability and thus, remission of such liability cannot be brought to tax u/s.41(1) of the Income Tax Act, 1961.

M/s. India Safari and Tours Ltd – 2022 TAXSCAN (ITAT) 820

The Income Tax Appellate Tribunal (ITAT) Delhi Bench has held that interior design, electrification charges, furniture charges, wallpaper, toughened glass, etc. are purely temporary structures; ITAT allows 100% depreciation. The Coram of Mr. Shamim Yahya, Accountant Member, and Ms. Astha Chandra, Judicial Member by relying on the decision of Allahabad High Court in the matter of Girdhari Dass & Sons vs. CIT has held that “we set aside the orders of authorities below on this issue and decide the issue in favour of the assessee”.

Pankaj Sharma vs ITO – 2022 TAXSCAN (ITAT) 1308

The Income Tax Appellate Tribunal (ITAT), New Delhi Bench dismissed an appeal filed by the assessee as there was a failure to pay Court Fees despite ample opportunities. A Coram consisting of Kul Bharat, Judicial Member observed that “I find that the present appeal is defective for want of payment of proper Court fee and the assessee has not removed the defect despite having given ample opportunities. I, therefore, dismiss the appeal in limine on account of an appeal being defective.”

M/s.P.S.K. Engineering –Construction & Co vs Asst. Director of Income Tax – 2022 TAXSCAN (ITAT) 1306

The Income Tax Appellate Tribunal (ITAT) Chennai Bench has held that the order by the AIDT will not sustain as it was rejecting the claim under section 80I A of the Income Tax Act,1961 without giving a reasonable opportunity. A Coram comprising Shri Mahavir Singh, vice president and Dr Dipak P Ripote, accountant member observed that the reasons mentioned in the impugned order are cryptic and set aside the impugned order u/s.143(1) of the Act, to the AO with a direction to pass the order afresh after allowing the assessee as per law. The appeals filed by the assessee are allowed.

Gaurav Kumar Goenka, Vs The Deputy Commissioner of Income Tax – 2022 TAXSCAN (ITAT) 1310

The Chennai Bench Income Tax Appellate Tribunal (ITAT) held that completion of assessment in the hand of the company is enough to prove the expense incurred for business and section 2(22) e cannot be invoked. A Coram consisting of Shri G Manjunatha, Accountant Member, and Shri Sonjoy Sarma, Judicial Member found that the alleged credit card transaction had happened due to an inadvertent allotment of the PAN Number which he never used for filing the return of income but the same was reflected in his credit card expenses and the alleged transaction of Rs.30,75,430/- was treated by the Assessing Officer as unexplained expenses u/s.69C of the Income Tax Act, 1961.

Kantilal Jain Vs ITO Ward-3(3)(1) Bangalore – 2022 TAXSCAN (ITAT) 1309

The Bangalore Bench Income Tax Appellate Tribunal (ITAT) ruled that the insurance premium paid which wasn’t claimed deduction under section 80C of the Income Tax Act,1961 cannot be taxed. The Single member bench consists of Shri Chandra Poojari, Accountant member observed that the error has happened because the tax has been deducted on the entire amount contemplated u/s 194DA of the Act which was noticed while increasing the TDS rate from 1% to 5% albeit, in the financial bill 2019.

ACIT, Vs Rohit Bal Designs Pvt. Ltd2022 TAXSCAN (ITAT) 1311

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the assessment order based on a standalone basis despite the fact of amalgamation is not sustainable and upheld the order of the CIT(A). The Tribunal held that the CIT (A) has rightly allowed the Appeal filed by the Assessee by setting aside the Assessment Order and dismissed the Appeal filed by the Revenue. The assessee was represented by Shri Kamal Bansal, C. A and the department was represented by Shri Girish Kumar Kohli.

Shri Pradip Mullick vs Assistant Commissioner of Income-tax – 2022 TAXSCAN (ITAT) 1297

The Income Tax Appellate Tribunal (ITAT), Kolkata Bench deleted addition of Rupees one crore as addition was made on personal belief and imagination by Assessing Officer (AO). The Bench consisting of Rajpal Yadav, Vice President and Girish Agarwal, Accountant Member observed that “From the documents placed on record, it emanates that these are all small vendors supplying perishable items viz. fruits, vegetables, milk, cheese etc. Considering the nature of expenses, trading results, sales, purchases and the gross profit, more particularly owing to the nature of business of assessee comprising of manufacturing and sale of sweets and confectionery, we do not find any reason to interfere with the decision and the findings given by the ld. CIT(A). Accordingly, the ground of appeal of the revenue is dismissed.”

Smt. Nilamben Sandipbhai Parikh vs The Addl. C.I.T – 2022 TAXSCAN (ITAT) 1133

The Income Tax Appellate Tribunal (ITAT), Ahmedabad held that business loss cannot be disallowed as Assessing Officer has not rejected books of accounts. The Tribunal held that “The CIT(A) has directed the Assessing Officer to compute the taxable income of the assessee but has not directed the business loss quantified by the assessee to be taken into cognizance. The books were never rejected by the Assessing Officer and thus business loss cannot be disallowed without taking cognizance of all the relevant aspects of the matter. Therefore, we direct the Assessing Officer to compute the taxable income thereby granting the business loss after verifying the quantification of the loss claimed by the assessee. Needless to say, the assessee is given the opportunity of hearing by following the principles of natural justice.”

Hamilton Industries Pvt. Ltd. vs ITO 2022 TAXSCAN (ITAT) 1293

The Mumbai bench of the Income Tax Appellant Tribunal (ITAT) has held that failure in payment of advance tax towards unexpected income doesn’t attract interest under section 234C(1) of the Income Tax Act,1961 and deleted the demand of interest. Shri Aby T Varkey, judicial member and Shri Gagan Goyal, accountant member while allowing the appeal filed by the assessee, deleted the interest charged amounting to Rs. 12, 31,304/- u/s. 234C and allowed the ground of appeal raised by the appellant.

Asha Devi vs Principal Commissioner of Income Tax – 2022 TAXSCAN (ITAT) 1313

The Income Tax Appellate Tribunal (ITAT), Bangalore upheld the revision order by Principal Commissioner of Income Tax (PCIT) as there was acceptance of information by assessee on source of cash deposits by Assessing Officer (AO) without enquiry. The Bench consisting of George George K, Judicial Member and Padmavathy S, Accountant Member observed that “In the present case, limited scrutiny was to be done for verification of cash deposits and the source of cash deposits from the safe custody account is not examined by the AO by calling for relevant details from the assessee. The AO ought to have examined the same to go into the root of these deposits whereas in the instant case, the AO has not questioned the information supplied by the assessee with regard to the source of cash deposits into the safe custody account and has simply accepted those details without further enquiry. In such circumstances, it cannot be said that the AO has made any enquiry or taken a particular view by application of mind on the issue.”

M/s. Sundaram Finance Holdings Limited vs Asst. Commissioner of Income Tax – 2022 TAXSCAN (ITAT) 1314

The Income Tax Appellate Tribunal (ITAT), Chennai held that No disallowance of expenses can be made for exempt income u/s 14A of The Income Tax Act, 1961 and Rule 8D of Income Tax Rules,1962 while computing book profit under Section 115JB of the Income Tax Act,1961. The Bench consisting of Mahavir Singh, Vice President, and Dipak P Ripote, Accountant Member held that” We have considered the facts and circumstances of the case and gone through the entire case laws and we are of the view that the issue is covered in favor of the assessee and against Revenue that no disallowance of expenses can be made in respect of exempt income by invoking the provisions of s. 14A of the Act r/w Rule 8D of the Rules while computing book profit u/s. 115JB of the Act.”

Palla Simhachalam (HUF) vs Assistant Commissioner of Income Tax – 2022 TAXSCAN (ITAT) 1316

The Income Tax Appellate Tribunal ( ITAT ), Visakhapatnam Bench, has recently in the appeals filed before it by an Assessee, held that satisfaction is to be recorded by the Assessing Officer (AO), before the issue of a notice under section 153C of the Income Tax Act, 1961. “In the instant case, no such material has been brought before us by the ld. DR. In view of the above discussions, since the satisfaction was not recorded by the Assessing Officer before issuing of notice U/s. 153C of the Act, we are of the considered view that the order passed by the Ld. CIT(A) U/s. 153C of the Act deserves to be set aside for all the impugned assessment years. It is ordered accordingly.”

Adinath Leasing And Finance P. Ltd vs Income Tax Officer– 2022 TAXSCAN (ITAT) 1318

The Income Tax Appellate Tribunal, Ahmedabad, has in a recent appeal filed before it by the assessee, held that no addition can be made when a notice is issued by the Assessing Officer (AO) based solely on borrowed satisfaction.

M/s. Pabal Housing Pvt. Ltd vs DCIT – 2022 TAXSCAN (ITAT) 1317

The Income Tax Appellate Tribunal “SMC” Bench, Mumbai, has, in a recent appeal filed by the revenue, held that the information received from the Directorate of Income tax (investigation), cannot be considered to be an information received from an external source.  “I notice that the division bench has categorically held that the information received from Directorate of Income tax (investigation) cannot be considered to be an information received from an external source. In the instant case also, the addition has been made by the AO on the basis of information received from investigation wing, meaning thereby, it cannot be said that the facts of the present case would be covered by the exception mentioned in clause (e) of paragraph 10 of the Circular issued by CBDT, referred above. Accordingly, I hold that the present appeal of the assessee is hit by the monetary limits and hence the revenue is precluded from pursuing this appeal. Accordingly, I reject the appeal of the revenue holding that the tax effect involved in the issues contested by the revenue is less than the monetary limits prescribed by the CBDT.”

N.V. Developers Pvt. Ltd. vs DCIT-1 – 2022 TAXSCAN (ITAT) 1321

The Income Tax Appellate Tribunal (ITAT) Mumbai Bench, ruled that Rental income from Information Technology Park is Income from Business.The Bench consisting of Vikas Aswathy, Judicial Member and M Balaganesh, Accountant Member observed that “An undertaking which develops and operates, or maintain and operate an industrial park/SEZ notified in accordance with scheme framed and notified by the Government, the income from letting out of the premises/developing space along with other facilities in an industrial park, SEZ is to be charged to tax under the head ‘profits and gains of business’. The Hon’ble Jurisdictional High Court in the case of CIT vs. Magarpatta Township & Development Construction Co. Ltd., after considering the aforesaid circular has reiterated this position.”

AVA landmark LLP vs ACIT – 2022 TAXSCAN (ITAT) 1319

The Income Tax Appellate Tribunal (ITAT) New Delhi has held that the capital asset of a company transferred as a Limited Liability Partnership (LLP) not amounts to transfer and addition to non-compliance with section 47 (xiiib)  of the Income Tax Act,1961 is not sustainable. A Coram comprising of Sh. N K Billaiya, accountant member and Sh. Anubhav Sharma, judicial member observed that “AO had erred in expanding the definition of turnover to extent of including capital gains in the turnover for ascertaining that the threshold limit of Rs. 60 lakhs, is maintained by the assessee to get the benefit of Section 47(xiiib) of the Act.”

Shri Abdul Hakeem vs ITO – 2022 TAXSCAN (ITAT) 1322

The Income Tax Appellate Tribunal (ITAT), Delhi bench refused to condone the delay of appeal filed in the absence of evidence or reason to justify the delay. A Coram of Shri Chandra Mohan Garg, judicial member &Shri Pradip Kumar Kedia, accountant member observed that the assessee has not appeared before the Tribunal to prove its case and declined to entertain the request of the assessee for condonation of delay. The appeal of the assessee is dismissed ex-parte.

Udayan Bhaskaran Nair vs ITO – 2022 TAXSCAN (ITAT) 1323

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench held that appeal can be filed only after intimation against which assessee is aggrieved. A Coram consisting of BR Baskaran, Accountant Member observed that “Without examining the intimation issued for AY 2010-11, it would not be possible for any authority to ascertain the reason for raising demand. As rightly pointed out by Ld CIT(A), an appeal for AY 2010-11 can be filed only on the basis of order/intimation, against which the assessee is aggrieved. In the absence of any such document, it will not be possible for any appellate authority to address the grievance of the assessee.”

Gupta Synthetics Ltd vs DCIT – 2022 TAXSCAN (ITAT) 1320

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench held that offering Long Term Capital Gain (LTCG) on sale of land by fresh cheques, not acceptable on pretext that there is no cancellation of registered sale deed. The Bench consisting of Prashant Maharshi, Accountant Member and Kavitha Rajagopal, Judicial Member observed that “The assessee’s claim that it had offered long term capital gain on sale of the land in A.Y. 2015-16 since it received the consideration of Rs.70 lakhs in F.Y. 2014-15 by way of fresh cheques is not acceptable on the pretext that there is no cancellation of registered sale deed.”

The Deputy Commissioner of Income Tax vs M/s. Visakhapatnam Urban Development Authority 2022 TAXSCAN (ITAT) 1325

The Income Tax Appellate Tribunal ( ITAT ), Visakhapatnam Bench, has recently in an appeal filed before it by the revenue, held that restoration of section 12 A registration, will entitle the assessee to get a tax exception under section 11 of the Income Tax Act, 1961.

M/s. Sri Raghavendra Lorry Services vs Deputy Commissioner of Income Tax – 2022 TAXSCAN (ITAT) 1324

 The Income Tax Appellate Tribunal (ITAT), Visakhapatnam Bench, has recently in an appeal filed before it, held that in cases of divergent views, the which is more beneficial to the assessee is to be adopted. Therefore, we are of the considered view that since the assessee has not proved the ownership of assets to claim the depreciation and also that the facts of the present case are similar to the facts of the case considered by the ITAT in ITA No.1799/Hyd/2013 dated 29/04/2014, we deem it appropriate to direct the AO to estimate net profit of 3% on gross receipts net of all deductions including depreciation.

ITO vs Sports Good Export Promotion Council – 2022 TAXSCAN (ITAT) 1326

The Income Tax Appellate Tribunal ( ITAT ) Delhi Bench, has, on Friday, held that grants do not form the corpus of the assessee nor is it income of the assessee under Section 11 of the Act.

Tilak Proficient Nidhi Limited vs Income Tax Officer– 2022 TAXSCAN (ITAT) 1126

Acceptance of additional evidences filed by assessee without complying Rule 46A of the 1962 Rules is invalid, so was held by Income Tax Appellate Tribunal (ITAT), Allahabad. The Bench consisting of Vijay Pal Rao, Judicial Member and Ramit Kochar, Accountant Member held that “The CIT simply accepted all the contentions /additional evidences filed by the assessee, without complying with Rule 46A of the 1962 Rules, as it was incumbent on CIT to have forwarded all these additional evidences/explanations filed by assessee to the AO for its remand report/comments/rebuttal. Thus, there is clearly a breach of Rule 46A of the 1962 Rule, which had made appellate order passed by CIT unsustainable in the eyes of law.

M/s.Ujjivan Small Finance Bank Limited vs Assistant Director of Income-tax – 2022 TAXSCAN (ITAT) 1327

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has held that the revised return filed not amounts to the non-filing of the return and deny of a lower tax rate under section 115BAA of the Income Tax Act,1961 is not valid. A Coram of Shri George George K, JM & Ms Padmavathy S, AM noticed that the assessee has filed the return within the due date specified u/s 139(1) of the act. Further observed that the assessee has filed a revised return subsequently cannot deny the fact that the assessee has not filed the return u/s 139(1) of the Act.

Smt. Bhanuben Dhanji Shah vs Dy. Commissioner of Income Tax– 2022 TAXSCAN (ITAT) 1328

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench Addition directs de novo adjudication for non-consideration of report by Department Valuation Officer (DVO) in respect of addition made under Long Term Capital Gain (LTCG). The Bench consisting of Om Prakash Kant, Accountant Member and Sandeep Singh Karhail, Judicial Member observed that “Since the impugned addition under the head “Long Term Capital Gain”, which was upheld by the CIT(A), has been made on the basis of value determined by the Registration Authority without taking into consideration the report of the Department Valuation Officer, we deem it fit and proper to restore this issue to the file of the Assessing Officer for de novo adjudication.”

Shri. Ramzanali Asgar Khan vs DCIT – 2022 TAXSCAN (ITAT) 1329

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has held that addiction under section 68 of the Income Tax Act,1961on scrap sale will invalidate the corresponding sales and relevant expenditure charged to the profit and loss account. It was observed that the assessee was not able to produce any details of the buyers to whom the scrap was sold and has not produced any stock records for the generation of the scraps from year to year.

M/s Springer Verlag GmbH vs D.C.I.T – 2022 TAXSCAN (ITAT) 1332

The Income Tax Appellate Tribunal (ITAT), New Delhi Bench granted full credit of TDS on the ground that Commission Income is not ‘managerial service’ under India Germany Double Taxation Avoidance Agreement (DTAA). The Bench consisting of N K Billaiya, Accountant Member and N K Choudhry, Judicial Member held that “Managerial services entail the element of management of the business of the service recipient in a substantial manner. In our view, mere provision of support services cannot be labelled as managerial services. Hiring of outside parties to receive support in respect of the operational aspects of a business cannot qualify as managerial services unless the service provider lays down policies or executes such policies by managing the personnel of the service recipient. We do not find any merit in the findings of the CIT(A) by treating the commission as ‘managerial service’ under the India Germany DTAA.”

M/s Shimas Network Pvt. Ltd vs The CIT(A) – 2022 TAXSCAN (ITAT) 1334

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has held that the demand for late fees under section 234 E of the Income Tax Act,1961 on TDS default before 01/06/2015 is not sustainable. In light of the case of Shri Fatheraj Singhvi, the Tribunal allowed the appeals of the assessee and held that the fee u/s. 234E cannot be levied without machinery provision of sec. 200A prior to 01/06/2015.

Mr. Nitin Parkash vs Dy. Commissioner of Income Tax – 2022 TAXSCAN (ITAT) 1335

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench set aside penalty order on existence of ambiguity in the mind of Assessing Officer on charge under Section 271(1)(c) of the Income Tax Act, 1961. The Bench consisting of Vikas Aswathy, Judicial Member and M Balaganesh, Accountant Member observed that “In the assessment order the Assessing Officer has recorded satisfaction for levy of penalty u/s. 271(1)(c) of the Act on the charge of ‘furnishing inaccurate particulars of income’. However, while levying penalty vide order dated 31/03/2016, the Assessing Officer has time and again mentioned both the limbs/charge of section 271(1)(c) of the Act i.e. “inaccurate particulars of income” and “concealment of income”. This expression has been used in the penalty order repeatedly in varied forms. Thus, there was ambiguity in the mind of Assessing Officer about the exact charge under section 271(1)(c) of the Act for which penalty is to be levied.”

M/s. Hebe Infrastructure Pvt. Ltd vs Assessing Officer – 2022 TAXSCAN (ITAT) 1331

The Income Tax Appellate Tribunal (ITAT), New Delhi Bench directs to delete disallowance of employees’ contribution to EPF and ESI as contribution was made before due date for filing return of income. The Bench consisting of Challa Nagendra Prasad, Judicial Member and Pradip Kumar Kedia, Accountant Member observed that “We observe that recently this Tribunal in a batch of appeals in the cases of Raj Kumar Vs. ITO CPC Bangaluru and other appeals and by considering various decisions rendered by various High Courts and the Tribunals held that the amendment brought in by Finance Act, 2021 is effective from 1.04.2021 and no disallowance is called for, on belated payment of employees’ contribution to ESI and PF in case the assessee deposited the said contribution before due date for filing of return of income under Income Tax Act.”

H. Omkarappa vs Deputy Commissioner of Income Tax – 2022 TAXSCAN (ITAT) 1333

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) restores the matter to AO as the addition of unexplained investment deleted without verifying books of account. A Coram of the Shri George George K, Judicial Member and Ms Padmavathy S, Accountant Member observed that the CIT(Appeals) has not verified whether the balance was correctly reflected in the assessee’s books of accounts. Further viewed that this issue needs to be examined based on facts and evidence to verify whether the amount offered income or turnover of the assessee.

Uttar Gujarat Vij Company Ltd vs Asstt. Commissioner of Income Tax – 2022 TAXSCAN (ITAT) 1337

The Income Tax Appellate Tribunal ( ITAT ) Ahmedabad Bench, while deciding a group of appeals filed by both the assessee and the revenue, held that interest income from staff loans and advances as well as fixed deposits and advances, are to be treated as business income.

M/s. Karthik Estate vs Principal Commissioner of Income – 2022 TAXSCAN (ITAT) 1342

The Income Tax Appellate Tribunal Bangalore (ITAT), has quashed the revisional order of Principal Commissioner of Income Tax (PCIT) as acceptance of returned income was done by Assessing Officer (AO) after proper inquiry. The Division Bench consisting of NV Vasudevan, Vice President and Padmavathy S, Accountant Member observed that “On perusal of the above facts, it is evident that the assessee has no other source of income other than business income which fact has been repeatedly submitted by the assessee before the lower authorities. The AO has conducted enquiry and perused the details submitted and has taken a decision to accept the explanation provided by the assessee after proper application of mind.”

Manibhadra Securities Services P. Ltd. vs ITO – 2022 TAXSCAN (ITAT) 1341

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench deleted addition of Rupees One Crore as Loan received represents unexplained cash loan credit books of accounts. The Bench consisting of Suchitra Kamble, Judicial Member and Waseem Ahmed, Accountant Member observed that “After considering the facts in totality we hold that the amount of loan received by the assessee represents the unexplained cash credit in its books of accounts. Accordingly, we set aside the finding of the CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed.”

ICICI Bank Limited vs ACIT – 2022 TAXSCAN (ITAT) 1343

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench ruled that Interest expenses on perpetual bonds, allowable as deduction under Section 36(1)(iii) of the Income Tax Act, 1961 thereby granting relief to ICICI Bank. The Bench consisting of Amarjit Singh, Accountant Member and Kavitha Rajagopal, Judicial Member observed that “The A.O has failed to controvert the undisputed fact that assessee has issued innovative perpetual debt instruments (IPDI) which carry a fixed rate of interest. The holder of these instruments had no right in management of the assessee bank.”

Integra Engineering India Ltd vs A.C.I.T – 2022 TAXSCAN (ITAT) 1339

The Income Tax Appellate Tribunal ( ITAT ) Ahmedabad Bench, has, in a recent appeal filed before it, held that advance given to a subsidiary company for the purpose of business is to be allowed as business loss incidental to the business.

ACIT vs M/s. Precision Realtors P –  2022 TAXSCAN (ITAT) 1340

The Income Tax Appellate Tribunal (ITAT) New Delhi held that the claim of deduction based on compensation paid for settlement of encroachment on the property is not allowable as business expenditure in the absence of evidence. A Coram comprising Sh. N K Billaiya, Accountant Member and Ms Astha Chandra, Judicial Member viewed that if there were no encroachments, no encumbrances on the impugned property.  The Tribunal restores the matter to the CIT(A) file to examine every sale deed and verify whether the impugned property was encroached/ encumbered by the occupants to whom the assessee paid compensation.

MRF Limited vs The DCIT – 2022 TAXSCAN (ITAT) 1345

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) directed to reconsider the warranty claim by MRF Tyres in the appeal which challenges the order of Commissioner of Income Tax (Appeals)-12, Chennai in ITAT dated 31.07.2019 which confirmed the action of AO in disallowing the provision for warranty amounting to Rs.5.66 Crores in AY 2011-12, Rs.4.65 Crores in AY 2012-13 and Rs.10.14 Crores in AY 2012-13. A Coram of Shri Mahavir Singh, Vice President and Shri Manoj Kumar Aggarwal, Accountant Member observed that the details submitted by the assessee can’t be verified by the Tribunal and therefore remitted the matter to the file of the AO. The appeals filed by the assessee are allowed for statistical purposes.

Anand And Anand vs ACIT – 2022 TAXSCAN (ITAT) 1344

The Income Tax Appellate Tribunal (ITAT) New Delhi has held that disallowance on account of TDS payable is not sustained when the assessee has shown the expenditure in his account. A Coram comprising of Sh. N K Billaiya, accountant member and Sh. Anubhav Sharma, a judicial member observed that the amount of TDS is to be considered as the sum paid by the assessee on behalf of the recipient of the income and directed that the impugned amount of TDS be granted as a deduction. The appeal was allowed.

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Limitation Period for Appeal cannot Start since GST Registration Cancellation Order was Unsigned: Bombay HC [Read Order]

The Bombay High Court, in a significant ruling, held that where an Order of Cancellation of Registration under GST Act was uploaded on the GST Portal without signature, the limitation for filing appeal cannot start at all until the signature is affixed on such an order.

A division bench of Justice K.R. Shriram and Justice A.S. Doctor was considering the matter, Ramani Malushte v Union of India and Ors, wherein an Order of Cancellation of GST registration was passed on 14 November 2019. This order was neither digitally nor manually signed but was merely uploaded on the GST Portal. The assessee got “attestation” on this order only after 1.5 years, that is on 19 May 2021 when an attested copy was required to be filed before First Appeal officer. The appeal was dismissed as time barred by the First Appeal stating that since the limitation and condonation period was over before the Supreme Court COVID order was passed, the appeal was not maintainable. The first appeal officer counted limitation from 14 November 2019.

“In the affidavit in reply it is not denied that the order in original dated 14th November 2019 was not digitally signed. In the affidavit in reply it is specifically stated that the show cause notice was digitally signed by the issuing authority but when it refers to the order in original dated 14th November 2019 there is total silence about any digital signature being put by the issuing authority. Conveniently, respondent stated that petitioner cannot take stand of not receiving the signed copy because the unsigned order was admittedly received by petitioner electronically. However, if this stand of respondent has to be accepted, then the Rules which prescribe specifically that digital signature has to be put will be rendered redundant. In our view, unless digital signature is put by the issuing authority that order will have no effect in the eyes of law,” the Court said.

The High Court has held that the appeal was within time. Since the order was not signed as required by Rule 26(3) of the CGST Rules, the limitation could not begin from 14 November 2019. When the assessee went to take a physical signature at the time of filing of the appeal, that is on 19 May 2021, the limitation started running only from 19 May 2021.

Petitioner was represented by Adv. Ishaan Patkar instructed by Mr. Lilesh Sawant.

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Form-16A is Proof for TDS Deduction, do not Imply Employer-Employee Relationship with Freelancer: Delhi HC [Read Order]

The Delhi High Court has held that the employer-employee relationship cannot be construed between the Company and a freelancer merely on the basis of the emails and form-16A.

Justice Dinesh Kumar Sharma was considering a writ petition moved by the petitioner workman, Mr. Kaushal Kishor Singh impugning and seeking to set aside the order dated 07.06.2018 passed by Sh. Lokesh Kumar Sharma, Presiding Officer, Labour Court XIX, Dwarka Courts whereby the Labour Court held that the workman has failed to establish the existence of an employer-employee relationship and therefore the question of illegal or unjustifiable termination did not arise and dismissed the statement of claim of the workman for being devoid of any merits.

The Court held that “Freelancer or freelancing thus are terms currently used to mean a person who is self-employed or an independent contractor in the business of selling their services and skills to different employers for a specified time period. Etymologically, freelance has derived from the words – “Free” a Germanic word that means to “love,” and “lance” which is akin to the French word meaning to “launch”, or discharge with force.”

Dismissing the petition, the Court held that “a bare perusal of the documents filed as evidence on behalf of the petitioner workman, which includes the various emails and the forms under 16A, do not, in any way, prove that there existed any relationship of employer-employee between the parties. The emails show mere correspondence and the Form 16A categorically reflects that TDS was deducted by the Management in respect of payments made to the petitioner under the „head of payments made to contractors and sub-contractors‟, thereby disqualifying the petitioner to fall within the definition of workman as enumerated under Section 2(s) of ID Act.”

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GST on Royalty: Rajasthan HC dismisses Petitions as Matter Sub-judice before Nine-Judge Bench of Supreme Court [Read Order]

The Rajasthan High Court has dismissed a bulk of petitions challenging the levy of GST on ‘royalty’ considering the fact that the matter is pending before a nine-judge bench of the Supreme Court.

writ petitions have been filed by the petitioners assailing the legality and validity of imposition of service tax/goods and service tax (‘GST’) on royalty. Some petitions further urged for an interim relief as the Court has not quashed the earlier High Court orders favouring the assesses.

A bench comprising Acting Chief Justice Mr. Manindra Mohan Shrivastava and Justice Shubha Mehta observed that “though the orders passed by this Court in the cases referred to above repelling challenge to leviability of GST on royalty have been assailed by filing SLPs before the Hon’ble Supreme Court, learned counsel appearing on behalf of all the parties do not dispute that the issue has not been decided by the Hon’ble Supreme Court and learned counsel for the parties have also brought to our notice that the issue as to whether royalty is in the nature of tax has been referred by the Hon’ble Supreme Court for consideration by the Bench of nine-Judge in the case of Mineral Area Development Authority etc. & Others Vs. M/s. Steel Authority of India and Others.”

Concluding the order, the Court added that “Insofar as D.B. Civil Writ Petition No. 5199/2022 is concerned, the petitioners have challenged imposition of GST on royalty as also prayed for some other reliefs. The relief, insofar as challenge to leviability of GST on royalty is concerned, has already been rejected. As ordered earlier, this petition will survive adjudication only in respect of other reliefs.”

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Ceiling on Tax Audits by Chartered Accountants in a Year: Supreme Court to hear Petitions Challenging ICAI Rule

In a recent development, a division bench of the Supreme Court will be hearing the challenge against a rule issued by the Institute of Chartered Accountants of India (ICAI) barring members from accepting more than the “specified number of tax audit assignments”. Currently, the upper limit is set at 60 in a financial year. This…

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Authorization u/s 71(1) of the GST Act authorizing Assistant Commissioner (ST) to conduct Inspection / Search is Valid: Andhra Pradesh HC [Read Order]

A division bench of the Andhra Pradesh High Court has held that the proceeding issued by Joint Commissioner authorizing the Assistant Commissioner (ST) to conduct inspection/search etc. of the premises of the petitioner is valid under section 71(1) of the Andhra Pradesh GST Act, 2017.

The petitioner, M/s.Bommineni Ramanjaneyulu was engaged in the business of works contracts and specialized in laying pipelines for water supply projects. The case of the petitioner was selected for Audit in accordance with Section 65 of CGST Act, by the Central GST Audit Circle, Nellore, covering the period July-2017 to March-2019 vide proceedings dated 17.08.2020. Pursuant to the same, the records were submitted with the authorities for finalization of the Audit proceedings.

The petitioner challenged the impugned authorization issued under Section 71(1) of the APGST Act to inspect the business premises of the petitioner, verify and check the transactions to safeguard the interest of the Revenue. The petitioners contended that the said impugned proceedings came to be issued basing on an information furnished by the second respondent.

After considering the arguments from both sides, Justice C. Praveen Kumar and Justice A.V. Ravindra Babu held that “A reading of Section 71(1) of the APGST Act, clearly demonstrate that any Officer under this Act, authorized by a Proper Officer not below the rank of Joint Commissioner shall have access to place of any business of registered person to inspect the books of accounts, documents ……… The Proper Officer referred to in Section 71(1) of the Act would mean the Chief Commissioner or the Officer of the State who is assigned that function by the Chief Commissioner as defined in Section 2(91) of APGST Act.”

“Serial 21 of the list, refers to Section 71(1), (2) & (2)(i) of the Act. In the column ‘Function’, it is shown as “to access business premises, inspect books of accounts, documents, etc for Audit, Scrutiny, Verification”. While in the column ‘Designation of Officer authorised’, it is mentioned as “JCST working in the divisions/Addl. CST/Commissioner ST working in the office of CCST entrusted with the enforcement activities”,” the Court observed.

Based on the above finding, the Court held that “From the above, it is very much evident that the Proper Officer for the functions referred to Section 71(1) of the Act, would be the three officers referred to in the column designation of officer authorized and one such Officer being Joint Commissioner (ST) working in the Division. In the instant case, as seen from the impugned proceedings, the authorization for access to business purpose under Section 71(1) of APGST Act was issued by Joint Commissioner (ST). Hence, the argument though appeared to be impressive at the first stage, but on a close perusal of the Notification issued, proved to be incorrect.”

“Therefore, the authorization given by the Joint Commissioner pursuant to the Gazette Notification issued by the Chief Commissioner authorizing certain categories of persons cannot be found fault with. It is also to be noted here that the authorization by the Chief Commissioner came to be issued in terms of Section 2(91) of the Act which categorically states that the “Proper Officer” would mean not only the Chief Commissioner but also Officer of the State Tax, who is assigned that function by the Chief Commissioner,” the Court said.

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No Reopening of Assessment based on Audit Party’s Legal Interpretation: Calcutta High Court [Read Order]

The Calcutta High court has on Friday, while allowing appeal filed before it, held that there cannot be a reopening of assessment based on the audit party’s legal interpretation.

The above said observation was made by the court when an appeal by the assesse, was filed before it as per the provisions of Section 260A of the Income Tax Act, 1961, against an order passed by the Income Tax Appellate Tribunal, `B’ Bench in ITA No.548/Kol/2003, for the assessment year 1994-95.

The substantial question of law involved in the appeal being the correctness of the tribunal’s finding in initiating the reassessment proceedings, altering the Assessing Officer’s relief granted under Section 80HHC of the Act, and further the legality in its jurisdictional limits in doing the same, the High Court relying upon the Apex Court decision in Commissioner of Income Tax vs. Kelvinator of India Ltd, and subsequently allowing the assessee’s appeal thus observed:

“We find that the learned Tribunal has written an elaborate order. However, we are surprised to find that the learned Tribunal has held that the assesse suppressed the material facts which was never the allegation in the reasons recorded for reopening. It is not clear as to on what basis the learned Tribunal came to such a conclusion.

In fact, the learned Tribunal has accepted the legal position that the assessment cannot be done on a mere change of opinion. However, it sought to justify the reassessment order on the ground that the certificate furnished by the Chartered Accountant, the figure of loss was not shown, though the figure of the sale proceeds of the trading goods and the direct and indirect costs were shown. That apart, we find that the finding of the learned Tribunal that the assessing officer had no occasion to or did not examine the claim for deduction under Section 80HHC of the Act is thoroughly flawed and equally is the finding of the learned Tribunal that there was suppression of facts made by the assesse.

Thus, we find that the learned Tribunal erroneously reversed the order passed by the CIT(A) who has considered the facts and circumstances and rightly applied the legal position. In the result, we find that the order of the learned Tribunal calls for interference.

Accordingly, the appeal filed by the assesse is allowed and consequently, the substantial questions of law are answered in favour of the assesse.”

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Andhra Pradesh HC Allows Interim Relief to Exporters of Non-Basmati Rice

The Andhra Pradesh high court has allowed the export of non-basmati rice from Visakhapatnam port without customs duty but backed by a bank guarantee, in response to a plea filed by the exporters.

The interim relief to the rice exporters gains special significance as an estimated 700,000 to 1 million tonnes of rice got stuck at various ports such as Kandla, Jawaharlal Nehru Port Trust (JNPT), and Visakhapatnam after the government banned exports of broken rice and imposed 20% duty on certain varieties of rice.

The High Court has refused to pass an immediate order on whether the export duty levy is applicable on consignments on which shipping bills were issued before the duty imposition was notified. The court also said it would next hear the case on 15 November.

“We do not intend to go into the question of whether the petitioners (exporters) are liable to payment of export duty, at this stage,” the court said in its order issued on Tuesday.

The court, however, asked the exporters to furnish a bank guarantee for 40% of the export duty within a week. Customs had argued that there should be some security for the goods exported without paying 20% export duty.

Queries sent to the ministries of commerce and finance on Friday remained unanswered till press time.

The sudden policy change had caught the exporters, shippers, and shipowners by surprise, and the cost of consignments went up sharply overnight. The government allowed exports of the rice consignment that were in transit till 30 September, but exporters said that they were struggling to pay the duty on a low-margin commodity.

The petitioners including PJS Overseas Ltd, AVI India International LLP, and MFG Overseas Pvt Ltd had challenged in the Andhra Pradesh high court the 20% duty on rice exports that was imposed on 9 September.

The counsel for the exporters argued that the rice to be exported reached Visakhapatnam port much before the date of (duty) notification and the process of loading had also commenced. Shipping bills and letter of export orders were issued much before the date on which the notification came, the counsel said.

The counsel also argued that, if no interim order is passed, there is every possibility of the ship leaving the port, which will put irreparable loss on the petitioners.

The ministry of consumer affairs, food and public distribution on Friday said that the decision to regulate rice exports was taken to lower prices and keeping in mind the food security of the country. Earlier, India had banned wheat exports after severe heat waves in March.

The government said it has not made any change in the policy relating to par-boiled rice so that farmers continue to get good remunerative prices. Further, dependent and vulnerable countries will have adequate availability of par-boiled rice as India has a significant share in the global rice export, it said.

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CESTAT Weekly Round-Up

This weekly round-up analytically summarizes the key stories related to the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) reported at Taxscan.in during the previous week from September 17 to September 23, 2022.

Hindustan Petroleum Corporation Limited vs Commissioner of Central Excise –  2022 TAXSCAN (CESTAT) 480

The Hyderabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the condonation of losses up to 1% is permissible without scrutiny and quashed the duty demanded on Hindustan Petroleum. The Tribunal while allowing the appeal held that “the appellant is entitled to remission of the losses as claimed and consequently the demand of duty on the appellant cannot be sustained.”

Hira Ferro Alloys Limited vs Principal Commissioner – 2022 TAXSCAN (CESTAT) 481

The New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) allowed CENVAT Credit on the inputs used in the production of electricity supplied free of cost. The Tribunal observed that the inputs or input services qualify for Cenvat when they are being used for the manufacture of the final product. Since part of the electricity is transferred to the sister unit, the inputs used in generating it to that extent are an input for the sister unit and not for the respondent.

The Andhra Sugars Limited vs Commissioner of Customs2022 TAXSCAN (CESTAT) 482

The single-member bench of the Hyderabad Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the duty remission under section is applicable only on imported goods and since the appellants are not proven as imported goods lost or destroyed the claim of refund is not sustainable. Mr. P Venkata Subba Rao, member (technical) viewed that self-assessment of duty by the appellant has attained finality and a refund cannot be sanctioned to modify the assessment by reducing the number of goods as claimed.

Steel Strips Wheels Ltd. vs Commissioner of GST & Central Excise – 2022 TAXSCAN (CESTAT) 483

The Customs, Excise& Service Tax Appellate Tribunal (CESTAT), Chennai, has on Friday ruled that CENVAT credit is to be allowed on structural items in the nature of MS sheets, angles, etc. “There is no dispute that the MS items were used for fabricating and installing the paint plant within the premises of the appellant, and that the said paint plant is also integral to the appellant’s manufacturing activity. After appreciating the facts and applying the decision in the case of India Cements Ltd., I hold that the credit availed on MS items has to be allowed to the appellant and that the impugned order disallowing the credit be set aside” – Ms Sulekha Beevi C.S., Member (Judicial) CESTAT, observed, allowing the appellant’s appeal with consequential relief.

HLPL Global Logistics Pvt. Ltd. vs Commissioner of Customs – 2022 TAXSCAN (CESTAT) 484

The Principal Bench of New Delhi Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the Customs broker license revocation proceedings based on an invalidated earlier offense report are not sustainable. The Tribunal observed that the appellant had filed only one Shipping Bill No. 5199084 dated 25.09.2014 in respect of M/s. Dwarka Trading Company and this Shipping Bill were considered in the earlier show cause notice dated 02.02.2016, which had been quashed by the Delhi High Court and thereby set aside the impugned order dated 30.09.2022 passed by the Commissioner. The appeal was allowed.

LALIT JAIN vs C.C.-AHMEDABAD – 2022 TAXSCAN (CESTAT) 487

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench set aside a penalty of 50 lakhs imposed under Section 112(b)(i) of the Customs Act, 1962. The Bench consisting of Ramesh Nair, Judicial Member, and Raju, Technical Member held that “We find that role of the Appellant in the whole episode has been derived only from oral statements of Ms. Divya Kishore Bhundia and Shri Jignesh Savalia. Statements of above said persons remain uncorroborated during the investigation. The statement of co-accused cannot be relied upon, particularly when the appellant has denied his involvement in respect of the goods in question.”

Satya Power & Ispat Ltd. vs Commissioner of Central Excise – 2022 TAXSCAN (CESTAT) 488

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi disallowed the demand of CENVAT Credit on contents of coal fines and held that contents of coal fines are not inputs under Rule 3(5) of Cenvat Credit Rules, 2004. A Single Bench consisting of Ajay Sharma, Judicial Member held that “It can safely be concluded that the fines, etc are a by-product or incidental product which cannot be said to be input as such which by any stretch of imagination cannot be said to attract the provisions of Rule 3(5).”

Miraj Products Pvt. Ltd. vs Commissioner – 2022 TAXSCAN (CESTAT) 485

The Customs Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi set aside a demand of Rs. 163,06,00,000/- under Rule 19 of the Chewing Tobacco Rules read with Section 11A of the Central Excise Act, 1944 holding that demand cannot be made based on assumptions and presumption. A Coram consisting of Anil Choudhary, Judicial Member, and P V Subba Rao, Technical Member observed that “The Income Tax Department has not drawn any adverse conclusion with regard to the receipt of defective packing material from M/s Uma Polymers, which is one of the basis for drawing adverse assumption and the presumption against the appellant. We further find that the appellant has given a cogent explanation with regard to the sheet/ survey report found from the premises of Sh. Purohit, which have been arbitrarily rejected by the Adjudicating Authority.”

M/s. Oceanic Enterprises India Pvt. Ltd. vs Commissioner of Customs –  2022 TAXSCAN (CESTAT) 486

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has recently in an appeal filed before it, ruled that the penalty imposed on a customs broker under section 112(a) of the Customs Act, should not be so exemplary that it fails to meet the ends of justice. “From the discussions made above, I am of the view that there are no grounds to set aside the penalty imposed under sec. 112(a) of the Customs Act, 1962 on the appellant. I do note that penalty of Rs.50,000/- has been imposed on the appellant as per Order in Original dated 8.9.2020 under CBLR, 2018, and taking this into consideration, I am of the view that the penalty of Rs. 5,00,000/- imposed under section 112(a) of the Customs Act, 1962 is high, and requires to be reduced. I hold that reducing the penalty to Rs.1,50,000/- (Rupees one lakh fifty thousand only) would meet the ends of justice, and hence, the impugned order is modified to the extent of reducing the penalty to Rs.1,50,000/- (Rupees one lakh fifty thousand only)” –Ms. Sulekha Beevi C.S., the Judicial member of CESTAT, Chennai, commented, allowing the appeal in part.

M/s. KEC International Ltd vs Commissioner of CGST –  2022 TAXSCAN (CESTAT) 491

The Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal has held that the tax exemption is available on services rendered for transmission of electricity and quashed the demand for service tax. A Coram comprising Justice Dilip Gupta, president Mr. P Anjani Kumar, member (technical) held that the appellant is entitled to the benefit of both the notifications dated 20.07.2010 and 27.02.2010 and set aside the impugned orders dated 31.01.2013 and 10.09.2013 passed by the Commissioner.

Ms. Shree FlavourLlp vs C.C.E. & S.T –   2022 TAXSCAN (CESTAT) 489

The Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal has held that compounded levy scheme is not applicable on Tin packing machine pouches that are manually packed. A Coram consisting of Mr. Raju, member (technical), and Mr. Ajay Sharma member (judicial), observed that the tin packing was packed manually with the help of hand-operated fillers or similar manually operated device and sealed with heat sealers/band sealers/candles/hot iron and the like.

Ingersoll-Rand Technologies and Services Private Limited vs Commissioner– 2022 TAXSCAN (CESTAT) 490

The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal has held that trading is not an exempted service before 01.04.2011 and the demand for tax on the credit of input services used in trading activity is not sustainable. A Coram comprising Mr. Justice Dilip Gupta, president, and Mr. P Anjani Kumar, member (technical) observed that trading was not an exempted service and set aside the demand confirmed in the impugned order being not sustainable.

Shri Rahul Chauhan vs Commissioner– 2022 TAXSCAN (CESTAT) 492

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) of the Allahabad bench has ruled that Rule 26 of the Central Excise Rules does not apply to non-functional directors and held that the penalty is not sustained. A Coram comprising Mr. Anil Choudhary, member (judicial), and Mr. P V  Subba Rao, member (technical) held that the appellant is also not liable to penalty under Rule 26 of Central Excise Rules as he has not done nor has been concerned in transporting, removing, depositing, keeping, concealing, etc., of excisable goods and set aside the penalty imposed on this appellant.

M/s Micky Metals Limited vs Commissioner of CGST & Excise –  2022 TAXSCAN (CESTAT) 494

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench authority cannot mechanically impose a penalty for short levy or non-levy of duty u/s 11AC of Central Excise Act, 1994. A Coram consisting of P K Choudhary, Judicial Member observed that” Thus, in the absence of any such specific allegation in the show cause notice, the authority cannot mechanically impose a penalty under Section 11AC of the Act. The provisions of Section 11AC of the Act are attracted in the event of establishing fraud, collusion, or suppression of facts or making any wilful misstatement with an intent to evade payment of duty. This has not been done in the present case. Moreover, the duty itself has been remitted on 26.03.2015 even prior to issuance of show-cause notice.”

M/s. Van Shah Fragrance Pvt. Ltd vs Commissioner of Central Excise – 2022 TAXSCAN (CESTAT) 495

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench disallowed the benefit of Small Scale Industries (SSI) Exemption. The Bench consisting of Sanjiv Srivastava, Technical Member, and P Dinesha, Judicial Member observed that “Without any evidence to show how the appellants claim bonafide belief in the matter to the effect the goods manufactured by them do not attract any excise duty, the argument made in this regard cannot be accepted. Thus, in absence of any such bonafide belief, the appellants’ reliance on the decision of the Apex Court in the case of Continental Foundation and Nirlon Ltd. is farfetched.”

M/s. Krishna Construction Co vs The Commissioner of Central Goods and Service Tax – 2022 TAXSCAN (CESTAT) 496

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad Bench held that question of unjust enrichment would not arise when a refund claim is time-barred. The Bench consisting of Justice Dilip Gupta, President, and P Anjani Kumar, Technical Member observed that “The contention of the Counsel for the appellant that since the limitation period of one year contemplated under section 11B of the Central Excise Act 1944 provides for filing of the claim within one year from the date of payment of tax, the refund claim filed by the appellant should be treated to have been filed within time as it was filed within one year cannot also be accepted for the reason that section 102 (1) of the Finance Act itself provides for a limitation period of six months for filing a refund claim.’’

M/s Som Flavour Masala Pvt Limited vs C.G. & S.T-C.C.E. &S.T –   2022 TAXSCAN (CESTAT) 497

Changing the classification of goods without proper evidence is not valid, the Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the demand for excise duty is not sustainable. A Coram comprising Mr. P V Subba Rao, member (technical) Mr. Ajay Sharma, member (judicial) held that the Revenue has not produced any material evidence on record to support the change of classification by them from „Chewing Tobacco‟ under heading 24039910 to „Jarda Scented Tobacco‟ under heading 24039930 and set aside the impugned order. The appeals filed by the appellants were allowed.

M/s BenQ India Pvt. Ltd vs Additional Director General– 2022 TAXSCAN (CESTAT) 498

The Customs, Excise & Service Tax Appellate Tribunal, New Delhi, has, by its order in an appeal filed by the appellant, held that no penalty under section 114A can be imposed when there is no mis-declaration of import by the assessee. “when there is no mis-declaration, penalty under section 114A of the Customs Act could also not have been imposed. The Department has filed appeals as penalties under section 114AA of the Customs Act have not been imposed. As the appellant has correctly availed the benefit of the exemption notification, the appeals filed by the Department deserve to be dismissed”.

M/s. Emaar MGF Construction Pvt. Ltd vs Principal Commissioner of Central Goods & Service Tax – 2022 TAXSCAN (CESTAT) 499

In a Setback to Emaar MGF Constructions, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi Bench disallowed interest on refund of amount towards pre-deposit. The Bench consisting of Justice Dilip Gupta, President, and PV Subba Rao, Technical Member held that “In the present case, as noticed above, the amount was deposited by the respondent pursuant to the directions issued under the unamended provisions of the 35F. Such being the position, interest on delayed refund of the amount would continue to be governed by the unamended provisions of section 35FF. The Cross Objections filed by the respondent seeking a higher rate of interest would have to be rejected since interest itself is not payable to the appellant.”

M/s.Karaikal Chlorates vs Commissioner of GST & Central Excise 2022 TAXSCAN (CESTAT) 500

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench held that denial of credit alleging that invoices mention the name of the original importer is too technical and cannot be accepted. A Coram consisting of Sulekha Beevi CS, Judicial Member observed that “The original importer had engaged various service providers for import of the goods and clearance of the goods. After the purchase of the goods by the appellant, these service providers provided services to the appellant for clearances of the goods. However, the invoices were issued in the name of the original importer M/s.Mitsubishi Corporation India Pvt. Ltd. It is clear from the records that the appellant had paid service tax for the services availed. I find that denial of credit alleging that invoices mention the name of the original importer is too technical and cannot be accepted.”

Shree Hari Sponge Private Limited vs Commissioner of Central Excise & Service Tax 2022 TAXSCAN (CESTAT) 493

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench held that reports from external agencies cannot be the sole basis to allege clandestine manufacture and removal of excisable goods. The Bench consisting of P K Choudhary, Judicial Member, and Raju, Technical Member observed that “We find that the entire basis of the instant demand is the reports of external agencies. No efforts have at all been made to find out whether there was any unaccounted production and clearance of goods. In the present case, we do not find any evidence, much less any corroborative evidence, to show that there is production and clearance of the quantity of final products which have been arrived at in the notice by comparing the external reports and the quantity of production disclosed by the Appellant in their excise returns.”

M/s Reliance Commercial Dealers Ltd vs Commissioner of Customs  – 2022 TAXSCAN (CESTAT) 501

As a relief to Reliance Commercial Dealers, the Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has allowed the duty exemption on the use of aircraft for non-scheduled (passenger) services. The Tribunal while allowing the appeal, held that the use of the aircraft was within the scope of non-scheduled (passenger) services and there is no violation of the undertaking to use the aircraft for non-scheduled (passenger) services and set aside the impugned order dated 31.08.2010.

PEGASUS PHARMACO INDIA PVT LTD vs COMMISSIONER, CENTRAL GOODS & SERVICE TAX, DEHRADUN2022 TAXSCAN (CESTAT) 502

The New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that duty exemption can’t be allowable when a slum sale agreement is made only to transfer the benefits exemption beyond 10 years. A Coram consisting of Justice Dilip Gupta, president, and Mr. P V Subba Rao, member (technical) held that the order passed by the Commissioner is correct in denying the benefit of exemption under notification No. 49/2003 and confirming the demand of duty under section 11A along with interest from the assessee under section 11AA of the Central Excise Act, 1944.  The Tribunal observed that the benefit of exemption did not apply to the assessee as the only thing which changed with the slump sale agreement is the claim of the benefit of the exemption by Balaji and its transfer to the assessee to extend the benefit of the exemption to the pharmaceuticals manufactured by it beyond 10 years.

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Income Tax Dept urges Taxpayers to Update Profile to avoid Errors in Income Tax Return / Forms

In a significant move, the income tax department has urged the taxpayers to update their profile in order to avoid any errors in the return/forms.

“Update your profile details before submitting any Return/Forms to avoid errors,” the department instructed through its e-filing portal.

In order to update the profile, taxpayers shall log in to the e-Filing portal using your user ID and password. Step 2: On the Welcome page, on the top right corner of your dashboard, click on your name and click My Profile. Alternatively, you can click Update profile. Click Authorized Signatory for Income Tax Returns / Forms.

In case the PAN is valid but the details – such as name and date of birth – entered by the user do not match with the given PAN, the Income Tax Department’s portal confirms the same by displaying the message: “PAN is Active but the details are not matching with PAN database.”

Currently, 10,62,10,187 registrants are there with the e-filing portal out of which, 6,22,18,553 have filed the return.

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‘Investigation under Process’ not a Ground to Deny Bail for GST Offences unless Dept Proves that Custody of Accused is necessary: Gujarat HC [Read Order]

The Gujarat High Court has held that the reason that the investigation is “under process” is not a reason to extend the custody of an accused arrested under the GST Act, 2017 unless the department proves that the custody of the accused is necessary.

The applicant, Munavver Ismail Memon, a proprietor of M/s. N R Beauty World and doing his business of cosmetic items at Surat, was arrested in March 2022 for the offense of GST evasion worth Rs. 10 crore rupees. The applicant approached the Court seeking bail.

Justice Ilesh J. Vora relied on the decision in the case of P. Chidambaram Vs. Directorate of Enforcement wherein it was held that “even allegations of grave economic offence, it is not a rule that bail should be denied in every case and whether bail is granted or not, will have to be on the case to case basis of the facts involved therein and securing the presence of the accused to stand trial.”

Granting bail to the applicant, the Court held that “the department objected the bail application mainly on the ground that investigation is still under way. This Court is of considered view that, merely raising the contention that investigation is still going on is not enough, but, department should have point out that the further custody of the applicant is necessary. It is on record that, no liability is fixed or determined as per the statutory provisions of the Act. It is the right of the assessee to file an appeal against the assessment subject to deposit of the 10% disputed liability which may not exceed Rs.2 crore. In the facts of the present case, Rs.39,88,318/-, has been recovered during the course of investigation from the applicant. In such circumstances, when trial of the case would not likely to conclude in a reasonable time and the applicant is in custody since 24.03.2022 and considering the bonafide shown by the applicant to deposit the amount, I am inclined to release the applicant on bail subject to deposit of Rs.60 lakhs, before the Office of Chief Commissioner of State Tax, Ashram Road, Ahmedabad within a period of six months in six equal installments from the date of his release.”

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