Jurisprudentiol– Monday’s cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Central Excise

Mandatory Penalty only when ingredients of Section 11AC are satisfied: Bombay HC

THIS is yet another case of the wise Revenue going in appeal and losing what little it had before the appeal. Adjudicating Authority imposed a penalty of Rs. 1.3 Lakhs – CESTAT reduced it to Rs. 25,000/-. On appeal by Revenue, High Court set aside even that penalty! The Commissioner (Appeals) has also not addressed the issue as to whether the penalty is imposable on account of fraud, wilful misstatement, collusion or suppression of facts or contravention of any other provisions of the Act or Rules made thereunder with an intent to evade duty. It is clear that not only there has to be fraud or wilful misstatement or collusion or suppression of facts or contravention of any of the provisions of the Act or Rules, but that must be with an intent to evade the payment of duty: The only reason given has been that the assessee had not maintained proper accounts of raw materials and finished goods in statutory records. This would not meet or satisfy the predicates of Rule 57-I (4) of the Rules.

Income Tax

Once Revenue is accepting that profit arising on maturity of investment is business income, then it cannot take stand that it is not stock-in-trade: Bad debts recovered – when no deduction claimed for bad debts, recovery cannot be taxed: ITAT

If such bad debts exceed the reserve, the excess amount alone can be charged to P&L account as per 36(1)(vii) of the Act, in such event section 41(4) comes to play, when the excess amount so charged to P&L account u/s. 36(1)(vii) of the Act is subsequently recovered from bad debts.

See our columns Monday for the judgements