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2023 (1) TMI 1359 - ITAT MUMBAI
TP Assessment order passed in the name of non-existing amalgamating company - assessment order passed in the name of company that ceased to exist from the date of amalgamation - HELD THAT:- As fact of amalgamation was brought to the notice of the AO, TPO, CIT and further the Assessee also mentioned before the learned CIT (A) in the form no.35 as well as in the statement of facts. Despite this, the assessment order, transfer pricing order and notice under Section 156 of the Act was passed in the name of non-existing company.
Thus we hold that Assessment order passed in the name of non existing amalgamating entity, instead of amalgamated company, despite due notice to all the authorities in time , is invalid and hence, quashed.
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2023 (1) TMI 1358 - ORISSA HIGH COURT
Rejection of bail - alleged commission of offences under Section 20(b)(ii)(C) of NDPS Act - HELD THAT:- Taking into account that the co-accused, who has since been released on bail has not surrendered, this Court is constrained not to entertain the bail application of the petitioner.
It is stated that the petitioner is in custody since 16.06.2020 and considering that his father undergone surgery, as stated, learned Court in seisin is called upon to expedite the trial in respect of the present accused, who is in custody without waiting for the other coaccused, who has failed to surrender.
Application disposed off.
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2023 (1) TMI 1357 - PATNA HIGH COURT
Seeking grant of Regular bail - murder - allegation of killing the daughter of the informant on account of nonfulfillment of the demand for dowry by hanging her from a fan - HELD THAT:- Considering the fact that a general and omnibus allegation has been levelled against the accused persons, but the main accused person appears to be the husband of the deceased victim lady whereas, the petitioner is the elder brother-in-law of the deceased victim lady, it is deemed fit and proper to direct for release of the petitioner on bail, immediately upon surrender by the husband of the deceased victim lady before the learned trial court, subject to such conditions as may be deemed fit and proper to be imposed by the learned court of Judicial Magistrate-1st Class, Buxar in connection with Koran Sarai P.S. Case No. 18 of 2021.
Petition disposed off.
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2023 (1) TMI 1356 - ITAT BANGALORE
TP Adjustment - re-computing the margin by treating ESOP expenses as operating in nature - HELD THAT:- We note that the Ld. AO/TPO has not considered the ESOP agreement between the employees and the AE. Unless the expenditure has been incurred by the assessee, it cannot form part of margin computation. What we understand from the submission of the assessee is that the assessee before us has only played the role of deducting the TDS on the discount the employees have received in the ESOP scheme of the AE. However this needs verification of the ESOP agreement. We therefore remand this issue back to the Ld. AO to verify the agreement and the ESOP scheme having regards to the financials of the assessee. The Ld. AO/TPO is directed to consider the issue in accordance with the view taken by this Tribunal in case of Radysis India [2023 (3) TMI 598 - ITAT BANGALORE]
Comparable selection - HELD THAT:- Assessee is a captive service provider that renders technical assistance services in the areas of software development and application to its AEs, thus selection of comparables should match with functional profile of assessee.
We therefore deem it appropriate to remit them to the Ld. AO/TPO. The Ld. AO/TPO shall look into the functional profile of the comparables and verify the same with that of the assessee. If they are functionally found to be similar with that of assessee, the same may be considered in accordance with law, considering the turnover limit of Rs. 1 to 200 Crores.
Exclude Exilant Technologies Pvt. Ltd., Tech Mahindra Ltd., Larsen & Toubro Infotech Ltd., Mindtree Ltd., Nihilent Ltd., Persistent Systems Ltd., Wipro Ltd., Tata Elxsi Ltd., for exceeding turnover limit of Rs. 200 crores.
Thirdware Solutions Ltd., to be excluded from the final list as present assessee before us is a captive service provider catering to the needs and at the direction its AE under the SWD segment. As there is no segmental details available, we cannot consider this company to be a good comparable as the entire revenue is catagorised under one head i.e., ‘Revenue from Operation’. Even on RPT filter we note that this company has RPT of more that 25% which does fails the filter applied by the Ld.TPO.
Exilant Technologies Pvt. Ltd - We are not able to appreciate the arguments of the Ld.AR regarding no segmental details available. It is also not possible to ascertain the expenditure incurred by this comparable on research and development as the schedules to the account is not there. We therefore remand this company back to the Ld.TPO to verify the above details. Admittedly this comparable has not been considered during A.Y 2017-18. In the event, there are any new materials obtained by the Ld.TPO, the same must be shared with the assessee. After considering the objections and scrutinising the functional similarities, the Ld.TPO shall then consider this comparable if at all it fits into all the necessary criteria.
We also note that, merely because this company is into software development, cannot be a reason to consider its inclusion. Needless to say that proper opportunity of being heard must be granted to assessee.
B. Tech Mahindra Ltd. - Admittedly, the turnover of this comparable is more than 200 crores. We have already considered and excluded comparables for failing the turnover filter by following the observations of Coordinate Bench of this Tribunal in assessee’s own case. Following same principles, we direct the exclusion of Tech Mahindra Ltd. from the final list.
Elveego Circuits Pvt. Ltd. company is in the business of Chip and semiconductor design services where as the assessee before us is into basic SWD services of coding an documentation, Testing and quality assurance, software patches and maintenance. There is no similarity between the functions performed by the assessee vis-à-vis that of this company. We therefore at the threshold reject this company being functionally not similar with that of the assessee.
ThreeSixty Logica Testing Services Pvt.Ltd and Black Pepper Technologies Pvt.Ltd - AR submitted that these companies earns revenue for Information technology services and Software development services for which segmental details not available - We remand this company to the Ld.AO/TPO to consider the objections raised by the assessee against its inclusion and to consider the same in accordance with law.
Aptus Software Labs Pvt.Ltd and Great Software Laboratory Pvt.Ltd. - AR submitted that these companies earns revenue for Information technology services - We remand this company to the Ld.AO/TPO to consider the objections raised by the assessee against its inclusion and to consider the same in accordance with law.
Non granting of WCA and risk adjustment to the assessee - As relying on HUAWEI TECHNOLOGIES INDIA (P.) LTD. [2018 (10) TMI 1796 - ITAT BANGALORE] AO was not justified in denying adjustment on account of working capital adjustment. In the light of the decision referred to above, the assessee is entitled to working capital adjustment. The assessee is directed to provide the working capital adjustment for year under consideration The TPO is accordingly directed to allow the same as per law.
Risk adjustment, sought by the assessee, the details will have to be furnished before the Ld.AO/TPO by the assessee itself establishing the differences in the risk. Only then the same could be computed. We are therefore of the view that in the event the assessee is able to file documents/evidences to establish the differences in the risk, the Ld.TPO may consider it and compute is accordance with law.
Appeal filed by the assessee stands partly allowed.
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2023 (1) TMI 1355 - CALCUTTA HIGH COURT
Seeking to invoke the inherent powers of this Court under Section 401 read with Section 482 Cr.P.C. for recalling, quashing of the proceedings pending before the learned Metropolitan Magistrate, 9th Court, Calcutta - defective products and their replacements - HELD THAT:- The Magistrate was wrong in his findings/reasons that as the accuseds had not entered their appearance (meaning personal appearance) before the court, the application under Section 205 Cr.P.C. be dismissed - the said powers of a Magistrate can be exercised at any stage of proceedings or throughout the said proceedings and as such the said prayer can be considered right from the stage of commencement of the proceedings even at the stage of issuing summons and the accused need not appear personally.
Admittedly the Arbitration clause has not been invoked by the parties. The opposite party has chosen to put the criminal law into motion by initiating the proceedings in this case, alleging breach of contract/trust by the petitioners. The parties to the agreement still have the option to use the Arbitration clause or may seek relief from the appropriate forum, the dispute being civil in nature and also a commercial dispute being given a criminal colour to pressurize the petitioners.
In the present case there is no case against the petitioners that they dishonestly induced the complainant to deliver any property. There was neither any inducement nor any delivery of property as required. As such an essential ingredient required to constitute an offence under Section 420 IPC being prima facie not present, the offence alleged cannot be held to be proved against the petitioners/accused.
From the petition of complaint, no such materials has been produced to prima facie show that the petitioners intentionally with knowledge cheated the complaint. The dispute between the parties is regarding defective products and their replacements (within time). As such the ingredient required to constitute the said offence under Section 418 IPC is also absent against the petitioners - The Supreme Court in Mitesh Kumar J. Sha vs. The State of Karnataka & Ors. [2021 (10) TMI 1423 - SUPREME COURT] while considering an appeal against an judgment and order of the High Court of Karnataka in an application under Section 482 of the Cr.P.C. wherein the prayer of the petitioners for quashing of proceedings of offence punishable under Section 406, 419, 420 read with Section 34 of the IPC was dismissed, held existence of dishonest or fraudulent intention has not been made out against the Appellants. Though the instant dispute certainly involves determination of issues which are of civil nature, pursuant to which Respondent No. 2 has even instituted multiple civil suits, one can by no means stretch the dispute to an extent, so as to impart it a criminal colour.
In the instant case, cognizance has been taken and process has been issued (including attachment and warrant of arrest) by the Magistrate concerned - The materials in the present case including the written complaint clearly shows that there was no dispute from the year 2012 to 2017 (initial period). The ingredients of 'entrustment', dishonest intention leading to delivery of property and cheating with knowledge to cause wrongful loss are not on record. The dispute is clearly civil in nature, may be even a commercial dispute but the ingredients required to constitute the criminal offences alleged are totally absent.
In the Present case there is no substance in the allegations and no material exists to prima facie make out the complicity of the applicants in cognizable offences. As such the proceedings in this case should be quashed by exercising its inherent powers for ends of justice and to prevent the abuse of process of the court.
The criminal revisional application stand allowed.
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2023 (1) TMI 1354 - SUPREME COURT
Challenge to summon order - vague summon order - Neither does the summoning order name the Manager or the Chief Manager, JIPL, who have been summoned to stand trial Under Section 406 of the Indian Penal Code, 1860 - HELD THAT:- Criminal breach of trust would, inter alia, mean using or disposing of the property by a person who is entrusted with or otherwise has dominion. Such an act must not only be done dishonestly, but also in violation of any direction of law or any contract express or implied relating to carrying out the trust.
However, in the instant case, materials on record fail to satisfy the ingredients of Section 405 of the Indian Penal Code. The complaint does not directly refer to the ingredients of Section 405 of the Indian Penal Code and does not state how and in what manner, on facts, the requirements are satisfied. Pre-summoning evidence is also lacking and suffers on this account. On these aspects, the summoning order is equally quiet, albeit, it states that "a forged demand of Rs. 6,37,252.16p had been raised by JIPL, which demand is not due in terms of statements by Shubhankar P. Tomar and Sakshi Tilak Chand". A mere wrong demand or claim would not meet the conditions specified by Section 405 of the Indian Penal Code in the absence of evidence to establish entrustment, dishonest misappropriation, conversion, use or disposal, which action should be in violation of any direction of law, or legal contract touching the discharge of trust.
In the present case, the ingredients to constitute an offence Under Section 420 read with Section 415 of the Indian Penal Code are absent. The pre-summoning evidence does not disclose and establish the essential ingredients of Section 415 of the Indian Penal Code. There is no assertion, much less legal evidence, to submit that JIPL had engaged in dishonesty, fraud, or intentional inducement to deliver a property. It is not the case of Respondent No. 2 - complainant that JIPL had tried to deceive them, either by making a false or misleading representation, or by any other action or omission; nor is it their case that JIPL had offered any fraudulent or dishonest inducement to deliver a property. As such, given that the ingredients of Section 415 of the Indian Penal Code are not satisfied, the offence Under Section 420 of the Indian Penal Code is not made out.
The assertions made in the complaint and the pre-summoning evidence led by Respondent No. 2 - complainant fail to establish the conditions and incidence of the penal liability set out Under Sections 405, 420, and 471 of the Indian Penal Code, as the allegations pertain to alleged breach of contractual obligations. Pertinently, this Court, in a number of cases, has noticed attempts made by parties to invoke jurisdiction of criminal courts, by filing vexatious criminal complaints by camouflaging allegations which were ex facie outrageous or pure civil claims - The requirement of Section 204 of the Code is that the Magistrate should carefully scrutinize the evidence brought on record. He/she may even put questions to complainant and his/her witnesses when examined Under Section 200 of the Code to elicit answers to find out the truth about the allegations. Only upon being satisfied that there is sufficient ground for summoning the Accused to stand the trial, summons should be issued.
The High Court, while dismissing the petition filed Under Section 482 of the Code, failed to take due notice that criminal proceedings should not be allowed to be initiated when it is manifest that these proceedings have been initiated with ulterior motive of wreaking vengeance and with a view to spite the opposite side due to private or personal grudge - The inherent powers of the court can and should be exercised in such circumstances. When the allegations in the complaint are so absurd or inherently improbable, on the basis of which no prudent person can ever reach a just conclusion that there is sufficient wrong for proceeding against the Accused, summons should not be issued.
The order of the High Court, the summoning order and the order issuing non-bailable warran passed by the Additional Chief Judicial Magistrate, Court No. 8, Ghaziabad, Uttar Pradesh are set aside and quashed - Appeal allowed.
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2023 (1) TMI 1353 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI
Approval of Resolution Plan - plan has not been allocated any amount - no consideration in the plan about the claim of the Appellant – Operational Creditor - HELD THAT:- The Para 30(ii) extracts Form H submitted by the Resolution Professional which clearly indicate that the Liquidation value of the Appellant is Nil. Even the Operational Creditors that is Government whose verified claim is Rs.295.18 Crores ware paid Nil. We do not find any error in the order by which no amount was allocated to the Appellant. The requirement for the obligation for payment of amount to the Operational Creditor is under Section 30(2)(b). It is not shown that there is any breach of provisions of the Section 30(2)(b).
As per the law as exist today, the Operational Creditors are only entitled for minimum of the liquidation value and there being no breach of any of the provisions of the Code - There are no reason to interfere with the impugned order - appeal dismissed.
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2023 (1) TMI 1352 - DELHI HIGH COURT
Appointment of Arbitrators - Section 11 of the Arbitration and Conciliation Act, 1996 - HELD THAT:- In the present case, this Court need not devolve into this aspect any further since the petitioner itself has made an alternate prayer that though one petition under Section 11 of the Act has been filed, the Arbitrator may be appointed separately for the four Agreements.
In the present case as well, though there is one Notice of Invocation given, but it clearly states about the four Agreements and about the disputes between the parties. The Notice of Invocation dated 18th July, 2018 may not have been artistically drafted but so long as it fulfills the objective, this technical ground cannot be considered as a ground for disallowing the present petition.
The respondents have made a reference to VIDYA DROLIA AND OTHERS VERSUS DURGA TRADING CORPORATION [2020 (12) TMI 1227 - SUPREME COURT] to state that there are no arbitrable disputes under the Dealership Agreement as the petitioner has failed to follow the procedure as envisaged in Clause 13.4 of the Agreement which stipulates the parties to undergo a consultation before invoking arbitration. This argument also does not hold water for the simple reason that there is no specific procedure for consultation and so long as the parties were corresponding with each other about their disputes and a Notice was given for invoking arbitration, the pre-requisite of consultation is essentially met.
It may be observed that it is not a case where there are no arbitrable disputes. The parties may have approached NCLT or other Forums but the scope of adjudication before each of these Fora is independent and merely because the petitioner had approached Competition Commission of India or is a corporate debtor in the proceedings before the NCLT, cannot be held to be a bar to raise the disputes for adjudication by way of arbitration.
Considering that there is a valid Arbitration Agreement between the parties and in the light of the facts and discussions, Hon'ble Mr. Justice Manmohan Sarin, Retired Chief Justice (Jammu & Kashmir High Court), Mobile No. 9818000210, is hereby appointed as the Sole Arbitrator to adjudicate the disputes between the parties.
Petition disposed off.
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2023 (1) TMI 1351 - MADRAS HIGH COURT
Transition of CENVAT credit under the new regime in terms of Section 140 of CGST Act, 2017 - amount involved was more than Rs. 50 lakhs - whether the petitioner is entitled to settle the dispute under SVLDR Scheme, 2019 under the aforesaid category viz., “Investigation, enquiry or audit Category”? - HELD THAT:- The petitioner was barred from filing the application / declaration under the SVLDRS Scheme, 2019 in view of Section 125(1)(e) of The Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. as there was no quantified. If indeed there was a quantification, a Show Cause Notice No.4/2020-(ADC) dated 19.02.2020 would have been issued to the petitioner within the period of 35 days from 14.01.2020 the date of the declaration filed by the petitioner in Form SVLDRS-1. On the date of hearing when the case was reserved for orders on 10.07.2023, the respondent has filed a copy of Order in Original No.24/2023-GST(ADC) dated 31.03.2023. wherein the demand proposed in SCN No.4/2020(ADC) dated 19.02.2020 has confined the demand.
The petitioner was not entitled to settle the dispute under the aforesaid scheme, although the Designated Committee of the 1st respondent has concluded that the Committee examined the case and found that an amount of Rs. 8,36,913/- was paid towards interest and the SVLDRS scheme does not allow the set off of interest against duty liability. Accordingly the Committee decided to accept only the pre deposit of duty of Rs. 20,76,274/- towards pre deposit.
The Division Bench of this Court in M/s.Win Power Engineering (P) Ltd., Represented by its Director T.K.Kumar Vs. The Designated Committee Sabka Vishwas Legacy Disputes Resolution Scheme, 2019 [2022 (12) TMI 603 - MADRAS HIGH COURT] has held The question of issuing statement by the Committee under Section 127 read with Rule 6 of the SVLDRS Rules, 2019 would arise only where the application filed itself falls within the four corners of Section 124(1)(d) as extracted above. Only where there was quantification of tax or duty in arrears, the scheme was applicable.
There is no merits in this writ petition. The Writ Petition has to therefore fail and is liable to be dismissed. The Writ Petition accordingly, stands dismissed.
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2023 (1) TMI 1350 - ORISSA HIGH COURT
Requirement to make pre-deposit - bank account of petitioner is frozen - HELD THAT:- The Court directs that limited to the amount required for making the predeposit, one of the bank accounts of the Petitioner i.e. its account with State Bank of India (SBI) which stands attached in form of a letter dated 15th July, 2022 addressed to the Bank by the Additional CT and GST Officer, Keonjhar (Annexure-2) shall remain lifted.
In other words, the SBI will permit the Petitioner to operate the said bank account only for the purposes of withdrawing the pre-deposit amount and for nothing else. Once that withdrawal is done, the attachment of the said account will continue and will be subject to the further orders that may be passed by the Appellate Authority in accordance with law.
In explaining the delay in filing the appeal, it will be open to the Petitioner to cite the pendency of the present petition as the reason and that will be considered in accordance with law by the Appellate Authority. The Court clarifies that it has not expressed any view in the matter.
Petition disposed off.
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2023 (1) TMI 1349 - MADHYA PRADESH HIGH COURT
Seeking grant of bail - money laundering - while working as a public servant in the capacity of AG-1, Divisional Office, FCI Bhopal, during the check period from 02.12.2016 to 29.05.2021, amassed property 900% disproportionate to his known sources of income - HELD THAT:- Citing several earlier judgments in P. CHIDAMBARAM VERSUS DIRECTORATE OF ENFORCEMENT [2019 (9) TMI 286 - SUPREME COURT], the Supreme Court observed that power under Section 438 of CrPC is an extraordinary power and the same has to be exercised sparingly. The privilege of the pre-arrest bail should be granted only in exceptional cases. The judicial discretion conferred upon the court has to be properly exercised after application of mind. Repelling the submission that anticipatory bail is a facet of Article 21 of the Constitution of India and its denial would amount to denial of the right conferred upon under the said Article, the Apex Court stated that "We are conscious of the fact that the legislative intent behind the introduction of Section 438 CrPC is to safeguard the individual's personal liberty and to protect him from the possibility of being humiliated and from being subjected to unnecessary police custody.
Coming back to the present case, it is observed that conduct of the petitioner shows that he has deliberately disobeyed the order of the Court and intentionally, willfully and purposely avoided his appearance before the trial Court. The reason assigned by him for his non-appearance lacks bona fide. His conduct speaks loudly and clearly that he is avoiding his presence and is not cooperating with the trial. He is trying to make the straight path crooked to achieve his object to somehow get bail under the cover of a petition under Section 482 of CrPC by avoiding the jurisdictional Bench which refused to accede to his similar prayer. Such practices malign the noble image of the great institution and spread an impression that by twisting and turning the law, a desired lousy and atrocious result can be obtained.
It is further observed that even lenient view taken by the trial Court to facilitate the petitioner to appear before it by keeping the arrest warrant issued against him at abeyance could not mend him to honour the process of the Court.
Taking into consideration the fact that despite ample opportunities being given, the petitioner has not bothered to appear before the trial Court. He defied the direction of the Court knowingly and willfully. No reason has been demonstrated to show that the findings of the trial Court are perverse or contrary to the record or suffers from any illegality, irregularity or impropriety so as to invite our interference in the orders impugned. Thus, there are no error being committed by the trial Court in rejecting the petitioner’s application under Section 70(2) of CrPC.
Petition dismissed.
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2023 (1) TMI 1348 - SC ORDER
Maintainability of appeal - low tax effect - Classification of the imported goods - Aluminium Composite Plates of various thickness - to be classified under heading 76061190 or under Heading 76109090? - rejection of declared value - enhancement of declared value based on NIDB data - it was held by CESTAT that Ld. Commissioner (Appeals) in the present matter correctly held that the imported goods cannot be considered as ‘prepared for use in structures’ and therefore falls out of the scope of heading 7610 and the value declared by the respondent has to be accepted.
HELD THAT:- In view of the statement of the learned ASG that the appeal involves low tax effect, the appeal is dismissed.
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2023 (1) TMI 1347 - ITAT MUMBAI
Scope of ‘limited scrutiny’ - conversion of the case from limited scrutiny to complete scrutiny - whether assessment order can’t be revised other than the reason(s) of ‘limited scrutiny’ assessment? - sale of penny stock - whether the reasons (issues) other than reasons for selection of the case under ‘Limited Scrutiny’ were so glaring that the Assessing Officer should have considered the matter for converting limited scrutiny to comprehensive scrutiny?
HELD THAT:- We are of the opinion that an AO having entrusted of the duty of scrutinizing the assessment, his investigative skill would have ignited him to believe that those matters prima facia have potential scope of escapement of income, and correspondingly, in view of instructions reproduced above he should have acted upon for converting the case of limited scrutiny to complete scrutiny. These instructions have been issued by the CBDT for guidance of the AO and are binding on the Income-tax Authorities concerned. We are of the opinion that there is a clear fault on the part of the AO in not referring the matter of converting the limited scrutiny case into complete or comprehensive scrutiny and this inaction is without application of the mind which bring the assessment order under the category of “order erroneous insofar as it is prejudicial to the interest of the Revenue” without enquiring and accepting the claims blindly, which resulted in loss to Revenue.
Taxation of ‘whole of the sale consideration’ on sale of shares as against ‘long term capital gain’ on such sale of shares or penny stock considered by the AO - We have already held in preceding paragraphs that the issue of sale of penny stock is germane to the issue of limited scrutinty of examining increase in capital of the assesee during the year. PCIT has held that the Assessing Officer has given erroneous finding on this issue of limited scrutiny.
In the case in hand before us, the assessing Officer has treated the amount of long-term capital gain arising from sale of penny stock only as unexplained cash credit for section 68 of the Act, which was computed by way of reducing cost of acquisition of penny stock out of sale consideration of those penny stock. In our opinion, when entire credit from whole of sale consideration of Penny stock was received during the year under consideration, the Assessing Officer is not justified in making addition for only a part of the same and not to make addition for the remaining part.
There are no two views on this issue. Either the entire credit is liable for addition or not, there is no middle path. Therefore, the Assessing Officer has committed an error on the issue in dispute.
Counsel has not pointed out any decision where a part of the credit has been added by the Assessing Officer and part has been left over or not considered for addition without any justifiable reasons. In such circumstances, we uphold the finding of the PCIT on the issue in dispute that whole of the sale consideration was required to be assessed by the AO Instead of only long term capital gain - order of the AO is erroneous to this extent. The Ground Nos. 3,5 &6 of the appeal of the assessee are accordingly dismissed.
Whether PCIT was not justified in revising the assessment order on the issue which was already pending available before the Ld.CIT(A) for consideration? - We find that the Ld.PCIT has held that the particular issue will be out of the jurisdiction of the Ld.PCIT if the Ld.CIT(A) has considered and decided the matter by giving his finding. PCIT has relied on the decision of Ranka Jewellers [2008 (1) TMI 497 - ITAT PUNE-A] wherein the Tribunal has held that in view of Explanation (c) of section 263, the assessment considered and decided are conjoined with a conjunction and therefore, both the conditions have to be fulfilled.
PCIT has also referred to the judgement of Panna Knitting Industries [2000 (12) TMI 23 - GUJARAT HIGH COURT] wherein it is held that if part of the claim was considered by the Ld.CIT(A) and rest of the part undecided, then portion of the claim cannot be said to be merged with the order of the Ld.CIT(A) and order of the revision in respect of the part which remained undecided was held to be valid. In view of above, we do not find any infirmity in the findings of the Ld.PCIT.
Taxation of entry operator charges - assessee submitted that this issue was not raised in the show cause notice issued by the Ld.PCIT and, therefore, in the final part of the order he cannot hold the order erroneous insofar as it is prejudicial to the interest of the Revenue on this issue without providing opportunity of being heard - HELD THAT:- In our opinion, the submission of the Ld. Counsel of the assessee are justified. Before holding the order of the Assessing Officer as erroneous insofar as it is prejudicial to the interest of the Revenue on any particular issue, it is sine qua non to issue notice to the assessee and the action of the Ld.PCIT is in violation of the principles of natural justice. To this extent, we are of the opinion that the order of the Ld.PCIT cannot be sustained.
Issues which were not covered under limited scrutiny - We are of the opinion that under the mandate of ‘Limited Scrutiny’, the Assessing Officer was not authorised to enquire on the issues other than the reasons for which it was taken for scrutiny purpose unless approved so by higher authorities. Since no approval was taken for converting the case from ‘Limited Scrutiny’ to ‘comprehensive or complete scrutiny’, the Assessing Officer was not authorised for enquiry on the issues challenged by the assessee in ground Nos. 8 to 15. The Ld. PCIT can find fault for not referring the matter of converting ‘Limited Scrutiny’ case to ‘Comprehensive Scrutiny’ case, but no such approval has been taken by the Assessing Officer and hence the Assessing is barred from examining those issues under the mandate of limited scrutiny. Thus, the assessment order cannot be held erroneous insofar as prejudicial to the interest of Revenue for not making enquiry on those issues. The relevant grounds of the appeal of the assessee are accordingly allowed.
Finding of PCIT that Assessing Officer has failed to examine the issue properly and applied his mind - As the finding of AO on the issue of increase in capital (i.e. the one of the reasons of limit scrutiny) is erroneous and due to consequential revenue loss, the assessment order is erroneous in so far as prejudicial to the interest of revenue to that extent.
As far as other issues on which the Ld. PCIT has held the order as erroneous in so far as prejudicial to the interest of revenue are concerned, we have rejected the finding of the Ld PCIT and held that the assessment order is erroneous to the extent that the AO has not followed the instruction of the CBDT. Therefore, it is open for the Assessing Officer during consequential proceedings to seek approval from the higher authoritiesin compliance to the instructions of the CBDT (supra) for converting the limited scrutiny case to complete scrutiny.
Appeal of the assessee is accordingly partly allowed.
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2023 (1) TMI 1346 - ITAT MUMBAI
Benefit of exemption u/s 11 and 12 - exemption denied on income from exhibition - assessee has been registered for the charitable purpose of advancement of any other object of general utility for promotion of export of gems and Jewellery, therefore, the activity of conducting exhibitions being in the nature of trade, commerce or business, the assessee is not entitled for exemption - whether the activity of conducting exhibitions & trade fair by the assessee amounts to trade, commerce or business or activity of rendering services in relation to trade, commerce or business? - HELD THAT:- The proviso to section 2(15) is attracted in case charitable activity in the nature of ‘general public utility’. The issues adjudicated by the Hon’ble Supreme Court in Ahmedabad Urban development authority [2022 (11) TMI 255 - SUPREME COURT] are related to determining the scope of the phrase “general public utility” (GPU) in the definition of “charitable purposes” primarily on the grounds that the institutions were carrying on trade, commerce or business for consideration, which does not qualify as GPU under the provisions of the Act as amended by Finance Act (FA), 2008 read with subsequent amendments.
Before the Hon’ble supreme court (supra), in the cases of most of the entities, there is no dispute as to the activities involved in the appeal qualified as GPUs within the meaning of the term “charitable purposes”, but the dispute was in respect of the meaning of “fee, cess or other consideration” and its impact on construing whether the activity falls under to the description of “trade, commerce or business”.
Hon’ble Supreme Court held that where “fee, cess or other consideration” is statutorily fixed or where it represents recoupment of cost or cost with nominal mark up, the activity may not be construed as “trade, commerce or business” and will be excluded from the mischief of commercial activity under the amended provision. If, however, “fee, cess or other consideration” charged is substantially higher over cost, it is tainted with “trade, commerce or business” and will qualify for tax exemption only if receipts are within the quantitative limit prescribed by the amended provision.
As in the instant case it is evident that assessee has charged fee or consideration for conducting exhibitions or trade fair is slightly below the cost. The Hon’ble Supreme Court has held that activity of renting space to individual exhibitors or exporters in the exhibition or trade fair is a service in relation to trade commerce or business, but in the instant case, there being no markup on consideration charged from the exporter, therefore, in the broad principles laid down by the Hon’ble Supreme Court, the activity is beyond the purview of either trade, commerce and business or activity of rendering services in relation to trade, commerce or business.
Counsel also referred to the annual report for the year under consideration having discussion regarding promoting ‘brand India’ by way of holding of exhibitions and participation in exhibitions held by overseas trade promotion bodies.
We are of the opinion that assessee is not hit by the proviso to section 2(15) of the Act as far as activity of conducting or participating in exhibitions within India or overseas and therefore the disallowance of exemption claimed by the assessee made by the Assessing Officer and the finding of the Ld. CIT(A) on the issue in dispute are set aside and matter restore back to grant benefit of section 11 and 12 as per provisions of law. The ground No. 1 to 4 of the appeal of the assessee are accordingly allowed for statistical purposes.
Also as the claim of exemption under section 11 has been allowed to the assessee by us, therefore, the Assessing Officer is directed to allow the claim of the assessee of carryforward of the deficit.
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2023 (1) TMI 1345 - ITAT MUMBAI
Revision u/s 263 - ALV determination of property under the head income from house property - CIT has discussed on the Provisions of Sec. 22 r.w.s 23(1)(a) of the Act and is of the opinion that the assessee was owner of flats which constitute property within the meaning of Sec. 22 of the Act and therefore the annual value of the flats owned by the assessee is form part of the closing stock and is taxable under the head income from house property in the A.Y 2017-18 and the AO has not considered these facts and excluded
Contentions of the Ld. AR that when the charging of income under income from house property applying the deemed provisions is applicable from A.Y.2018-19 is a debatable and therefore revision proceedings shall not sustained
HELD THAT:- AO in the assessment proceedings having satisfied with the claim has not made any comment on the issue. Further the contentions of the Ld. AR that the ALV of the house property held as stock in trade has to be considered on deeming provisions as per finance Act 2017 from the A.Y 2018-19 and whereas the current A. 2017-18. Further if any query is raised in the assessement proceedings and it was responded by the assessee, mere fact that it is not dealt with by the A.O. in the order cannot implied that there is no application of mind.
Therefore observations of the Pr.CIT cannot be acceptable as the order passed by the A.O. does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. Appeal of assessee allowed.
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2023 (1) TMI 1344 - DELHI HIGH COURT
Seeking grant of pre-arrest bail - forgery - proceedings under Section 82 of CrPC have already been initiated - applicant had not been cooperating with the investigation - HELD THAT:- In the present case, the accused persons are not only found to have committed the offence of cheating but also committed the offence of forgery. The applicant, at this stage, cannot be said to be only an accomplice. The allegations and the investigation carried out till this stage points out towards the active role of the applicant in the commission of the offence - The applicant has not cooperated at all in the investigation, which led to the issuance of non-bailable warrants by the concerned Trial Court. The proceedings under Section 82 of CrPC have already been initiated.
Pre-arrest bail is to be granted only when the court is convinced that circumstances exist to resort to that extraordinary remedy and cannot be a matter of routine. Custodial interrogation is a recognized mode of investigation which is not only permitted but is held to be more effective - Even though the accused Bhuvan Chand is in custody, the forged documents as well as the cheated amount is yet to be recovered. The offence cannot be held to be of minor nature. The applicant has been named by not only the complainant but also other public witnesses to be actively involved with the accused ‘Bhuvan Chand’. It cannot be said that the custodial interrogation of the Applicant is not required at this stage.
The order of bail in anticipation of arrest cannot be granted for it to be used as a shield. In the facts of the present case, it cannot be said, at this stage, that the allegations made against the applicant are frivolous or have been made to falsely implicate the applicant - Keeping in mind the nature of allegations, and the fact that the applicant has not joined and cooperated in investigation which has also led to initiation of proceedings under Section 82 of CrPC, this Court feels that it is not a fit case for exercise of discretion under Section 438 of CrPC.
Application dismissed.
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2023 (1) TMI 1343 - SUPREME COURT
Permission for withdrawal of appeal - HELD THAT:- It is pointed out before us that Civil Appeal Diary No.21189/2021 already stands dismissed as withdrawn on 27.09.2021.
Out of two connected matters, one of them is not on Board before us today which is mentioned in the Office Report i.e. Civil Appeal Diary No.21188/2021 - Civil Appeal Diary No.21188/2021 is taken on Board.
The appeals are dismissed as withdrawn accordingly.
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2023 (1) TMI 1342 - ITAT INDORE
Disallowance u/s 14A r.w.r. 8D - assessee has made investments yielding exempt income and hence section 14A read with Rule 8D requires disallowance - CIT(A) deleted addition - HELD THAT:- We observe that the Ld. CIT(A) has made a detailed discussion of the entire gamut of issue by considering factual and legal aspects and came to conclude that the disallowance u/s 14A / Rule 8D was not warranted in the present case. Clearly, therefore, there is no infirmity in the findings made by Ld. CIT(A). Before us, the Revenue has not rebutted the findings by placing any contrary material on record.
Unaccounted interest payment on cash-loans - addition made as during the course of search, the authorities seized a laptop from the premise of assessee wherein a company named “XYZ 08092” was found in tally-data and also seized loose papers marked as “LPS-1 to 8” from the premises of Shri G.C. Patidar, an employee of assessee - HELD THAT:- The laptop is seized from the office of assessee. Hence by virtue of section 292C, the laptop is presumed to be owned by assessee. Although the assessee claimed that the laptop belonged to Shri Nilesh Tawtech who had expired on 21.12.2010, it was for the assessee to bring some evidence to rebut the presumption of section 292C which had not been done. If the laptop belonged to Shri Nilesh Tawtech, how could it be retained by assessee till the date of search on 27.08.2014 and not handed over to the heirs of Shri Nilesh Tawtech?
Laptop was containing Tally-data in the name of “XYZ 0809 2” company. On verification of tally-data, the authorities have found that it contained accounted-transactions of assessee besides unaccounted transactions. Ld. AO is, therefore, correct in concluding that the tally data, which contained the accounted-data of assessee as well, certainly belonged to the assessee.
AO has analysed the nature of transactions found in tally-data; corroborated the same with the loose-papers found at the premise of Shri G.C. Patidar, another employee of assessee. To illustrate, the Ld. AO has mentioned working of interest-calculations in Point No. 6/Page No. 80 of the assessment-order. The loose-papers seized from Shri G.C. Patidar are also natural documents, for example the excel-sheeof the assessment-order clearly reveals, the original cash-transactions done by assessee, subsequent modifications done therein, the names of parties, dates, amounts; captions such as “paid” “PAID” “to be returned” etc. which are not fictional entries. On Page No. 84 of the assessment-order, the Ld. AO has also made a corroboration of the data recorded in tally-system with the papers seized from Shri G.C. Patidar.
AO has stated that the BS-4 seized by authorities contained a diary which shows a social relationship of assessee with the lenders. But, however, Ld. CIT(A) has rejected the AO’s finding by saying that the names of those persons do not match with the names of lenders. The observation, whether the names of persons matched or not and hence the assessee had social relationship with those persons or not, is at the best an ancillary point only and cannot be taken as a tool to dislodge the cash-loans taken by assessee, which are very much recorded in the tally-data / loose-papers seized.On going through these statements, we observe that Shri G.C. Patidar has not only admitted the cash-loans taken by assessee but also explained the modus operandi adopted in that regard. These statements, which are recorded during the proceeding of section 132(4) have an evidentiary value and cannot be taken lightly.
Thus there is a clear admission by Shri G.C. Patidar of three vital points, viz (i) he made loose papers; (ii) the loose papers were under the instructions of Shri Puneet Agarwal (Shri Puneet Agarwal was director of assessee-company); and (iii) those loose papers were entered by Shri Nilesh Tavrech in the tally-data in laptop. AO has rightly concluded that the assessee has taken cash-loans from various lenders and paid interest thereon from undisclosed sources. Being so, we reverse the action of Ld. CIT(A) and uphold the addition made by Ld. AO. Decided against assessee.
Unaccounted interest payment on cash-loans - seized document which is the basis of making addition seized from third party - HELD THAT:- We agree with the observations made by Ld. CIT(A) that the impugned seized document which is the basis of making addition in the hands of assessee, was in fact seized from the premise of AIDPL and not from assessee, hence no presumption u/s 292C can be drawn against assessee; (ii) no addition can be made on the assessee u/s 153A on the basis of document found during search conducted upon someone else, particularly because the AY 2009-10 under consideration is a non-abated assessment-year; and (iii) the Ld. AO has not provided any opportunity of cross-examination of AIDPL to the assessee before relying upon the document found in possession of AIDPL. Thus, keeping in view these serious infirmities, the Ld. AO is not justified in using the impugned document against assessee.
Bogus payment to petrol pumps - authorities seized certain excel sheets from DGM of assessee, which contained details of unaccounted cash-receipts by the assessee from certain petrol pumps - HELD THAT:- We observe that the Ld. CIT(A) has rightly observed that the addition was warranted to the extent of unaccounted cash-receipt only. We further observe that the excel-sheet reproduced by Ld. AO in assessment-order demonstrates that there was no cash-receipt at least during the previous year 2010-11 relevant to AY 2011- 12 under consideration. Being so, the Ld. CIT(A) is very much correct in concluding that no addition was warranted in AY 2011-12. We countenance the conclusion taken by Ld. CIT(A) whereby he has deleted the addition.
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2023 (1) TMI 1341 - ITAT DELHI
Disallowance u/s 14A r.w.r. 8D - case of the assessee that the own interest free reserves are far more than the amount of investment, therefore, no disallowance u/s 14A r.w.r 8D(2)(ii) of the Rules should have been made with regard to the interest element - HELD THAT:- The said issue has been decided in Assessee’s own case for A.Y.2011- 12, 2012-13 [2023 (7) TMI 1357 - ITAT DELHI] By respectfully following the order in assessee’s own case, we are of the opinion that disallowance under Rule-8D(2)(ii) of the IT Rules should not have made by the AO, thus, the disallowance made by the AO is hereby deleted. Further, we direct the AO to compute the disallowance u/s 14A r.w.Rule-8D(2)(iii) of the Rules by considering only investment from each exempt income is earned. Accordingly, ground No.1 of the Revenue and the assessee are disposed off.
Unexplained investment - search was conducted on the assessee wherein an estimated working was seized from the Laptop of the employee of the assessee containing details of certain land which was registered in the name of the assessee - HELD THAT:- It is well settled law that the dumb documents having no evidentiary value cannot be taken as sole basis for determination of undisclosed income of the assessee. If the Department of Revenue wants to make use of dumb documents, then the onus on the Revenue Department to collect cogent corroborative evidences. As decided in the case of Mumar Trading Co. 2007 (9) TMI 284 - HIGH COURT OF JUDICATURE AT ALLAHABAD] held that, it is settled principle of law that if the Revenue wants to rely upon the entries of the document, seized from the premises of third party, the burden lies upon the Revenue Authorities to prove the genuineness and authenticity of the said entries to connect the said entry with the dealer.
As found that the person from who’s possession the seized document is recovered, was not subject to the cross examination of the assessee and no opportunity of cross examination has been given to the assessee. Therefore, for the detailed discussion made above, in our considered opinion, AO as well as the CIT(A) have committed error in making the addition u/s 69 of the Act which deserves to be deleted. Accordingly, the ground No.2 of the assessee is allowed and the subject addition sustained by the Ld. CIT(A) is deleted.
Allowability of claim of education Cess - HELD THAT:- In view of the above settled position of law, we hold that the education Cess can’t be allowed as an allowable expense, accordingly, we find no merit in Ground of the assessee and the Ground assessee is dismissed.
Nature of receipt - FPS/FMS receipt - capital receipt received as per foreign trade policy in computing the total income of the assessee - HELD THAT:- The issue of claim of FPS/FMS as capital receipt received as per foreign trade policy in computing total income has been dealt and decided by the Co-ordinate Bench of the Tribunal in Assessee’s own case for Assessment Year 2013-14 in favour of the assessee [2023 (7) TMI 1357 - ITAT DELHI] Apart from the same, the Hon'ble High Court of Rajasthan in the case of Principal Commissioner of Income Tax, Ajmer Vs. Nitin Spinners Ltd [2019 (9) TMI 1154 - RAJASTHAN HIGH COURT] held Focus Marketing Scheme was concerned, apparently the Central Government gave the subsidy to enhance Indian export potential in the international market. It was not granted to meet the cost of expenditure to meet the competition of the Indian textile market. The ITAT took note of judgment in Ponni Sugars & Chemicals Ltd. [2008 (9) TMI 14 - SUPREME COURT] and held that the amount was not an export incentive, but rather capital receipt and therefore, not taxable. This Court is of the opinion that there is no infirmity with the reason. Judgment of the Hon'ble High Court of Rajasthan has also been affirmed by the Hon'ble Supreme Court wherein the SLP filed by the Department has been dismissed which is reported [2021 (9) TMI 430 - SC ORDER]
Interest subsidy under TUFFS - capital or revenue receipt - HELD THAT:- The allowability of claim of interest subsidy under TUFFS and RIPS have been decided by the Hon'ble High Court of Rajasthan in the case of PCIT vs. Nitin Spinners Ltd. [2019 (9) TMI 1154 - RAJASTHAN HIGH COURT] the amount was received as capital stream and therefore, not taxable.
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2023 (1) TMI 1340 - ITAT KOLKATA
Assessment of income as per the original return or revised return - case was picked up for limited scrutiny - AO has taken up the returned income as per the original return of income only on the ground that the case was selected for scrutiny of the original return of income - HELD THAT:- Action of the Assessing Officer taking returned income as per the original return of income only is not justified at all. The original return of income of the assessee was substituted by the revised return of income which was filed within the prescribed time period.
The case was selected for scrutiny on two issues, which the assessee successfully explained before the AO, therefore, as supposed to assess the income as per the revised return of income. If the AO wanted to scrutinise any other issue also including the withdrawal of interest income, which the assessee claimed to be erroneously offered, the AO could have got converted the limited scrutiny assessment into full assessment by getting permission from the competent authority.
Even otherwise, AO has merely taken the returned income as per original return of income without making any disallowance in respect of above issue in the revised return of income. Therefore, the action of the lower authorities in taking the returned income as per original return of income is not justified as the assessee had already filed a valid revised return within the statutory period and has also explained the issues satisfactorily to the AO for which the return was selected for limited scrutiny. In view of this, the impugned order of the CIT(A) is set aside and the AO is directed to accept the income of the assessee as per the revised return of income. Appeal of the assessee stands allowed.
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