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TMI Tax Updates - e-Newsletter March 5, 2024 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Highlights / Catch Notes GST: Principle of uberrima fides (utmost good faith) - Cancellation of GST registration of petitioner - Upon verification ordered by the High court, it was discovered that the factory was operational, and the petitioner had indeed obtained a new registration before filing the writ petition. The court observed that the failure to disclose this material fact resulted in the wastage of time for the authorities involved. - The court dismissed the writ petition on the grounds of suppression of material facts by the petitioner. Visit to Get Source GST: Cancellation of GST registration of the petitioner with retrospective effect - the notice does not even mention the name of the officer or designation of the authority that has issued the notice and as such is completely vague - The petition was disposed of with the restoration of the petitioner's GST registration, subject to compliance with rules and regulations. Visit to Get Source GST: Cancellation of GST registration of the petitioner with retrospective effect - The High court modifies the impugned order to address the petitioner's concerns. The court orders that the registration be treated as cancelled from the date of issuance of the Show Cause Notice, i.e., 19.05.2023, instead of the earlier retrospective date. However, the court clarifies that this modification does not preclude the respondent from taking further steps for the recovery of any outstanding tax, penalty, or interest in accordance with the law. Visit to Get Source GST: Violation of principles of natural justice - impugned order passed without considering reply to the show cause notice - The High court finds the respondent's stand of not granting a personal hearing to be untenable and in breach of natural justice. - The petition is allowed, quashing and setting aside the impugned order in Form GST MOV-11. - The matter is remanded back to respondent No. 2 for fresh adjudication, including a decision on the petitioner's application for provisional release, within one week from today. Visit to Get Source Income Tax: Assessment u/s 144 - estimation of income - Method of accounting - Non rejection of books of account - disallowance of expenses, addition of inflated purchases and protective addition of cash found and seized - The court dismissed the appeals of the Revenue, upholding the view taken by the ITAT. It concluded that the additions made by the AO without rejecting the books of account were not justified. This Visit to Get Source Income Tax: Validity of Reopening of assessment u/s 147 - entitlement to exemption u/s 54F - The High Court examines Section 54F of the Act and concludes that the reassessment is based on a mere change of opinion, as the same facts were considered in previous assessments without disallowing the exemption under Section 54F.- Referring to the decision in Calcutta Discount Company Ltd. vs. Income Tax Officer, the Court holds that the petitioner is entitled to relief under Article 226 of the Constitution due to lack of jurisdiction by the Assessing Officer. Visit to Get Source Income Tax: Order u/s 119(2)(b) of the Act rejecting the application for waiver of time limit for filing of the return - claim in the refund on account of the tax deducted at source from the income of late father - The Court noted that the PCIT's rejection was contrary to established legal principles. Referring to precedents, the Court emphasized the need for a liberal interpretation of "genuine hardship" and justice-oriented approach in such matters. The High Court held that the petition succeeds and is accordingly allowed. Visit to Get Source Income Tax: Estimation of income - bogus purchases - The ITAT found the CIT(A)'s decision to restrict the addition to a percentage of disputed purchases as a reasonable estimation. It was noted that without knowing the parties to whom the diamonds were sold, the onus of proving the genuineness of transactions was not fully discharged by the assessee. The ITAT upheld the CIT(A)'s approach as justified and dismissed the Revenue's appeal and the assessee's cross-objection. Visit to Get Source Income Tax: Exemption u/s 11 and 12 - charitable activity u/s 2(15) - total receipts from trade, commerce or business/service exceeded 20% of total receipts - The ITAT, referencing the Supreme Court's judgment in the case of CIT vs. AUDA & others, held that the assessee's activities were in the nature of advancement of general public utility and were not commercial. Thus, it was eligible for exemption under sections 11 & 12 of the Act. The Tribunal rejected the Revenue's appeal, emphasizing that activities carried out by statutory bodies for public utility, even if they generate income, do not constitute commercial activities if they are within the bounds of the specified statutory framework and aim. Visit to Get Source Income Tax: Validity of assessment order passed u/s 144C - period of limitation - The ITAT Delhi found the final assessment order dated 30.06.2022 to be barred by limitation. It was established that the directions from the DRP were uploaded to the ITBA portal on 07.04.2022, contrary to the claim of the AO that they were made known only on 02.05.2022. Accordingly, the AO was required to pass the final assessment order by 31.05.2022, making the actual order passed on 30.06.2022 out of time. Visit to Get Source Customs: Release of seized goods - Arecanuts - prohibited goods - reason to believe - The High court finds that the Revenue Authorities failed to present credible and objective material to support their belief that the Arecanuts were of foreign origin. - Despite relying on trade opinions and the ARDF report, the court determines that the evidence provided was insufficient to establish a valid "reason to believe" under the Customs Act. - Based on the findings, the court quashes the seizure order and directs the release of the goods, as the Revenue Authorities failed to meet the legal requirements for seizure. Visit to Get Source Customs: Classification - Import of Pump - The appellant classified the goods under CTH 84248990 as Pump for lotion dispenser, while the Shed Officer redirected the classification to CTH 9616. - Application of the general rules of interpretation to determine the appropriate classification of the goods under the relevant tariff headings. - The tribunal defines "pump" and "mechanical appliance" based on technical dictionaries and common understanding, emphasizing the distinction between displacement and dispersion of fluids. - The tribunal concludes that the correct classification is under CTH 84248990, as it covers pumps meant for both displacing and dispersing liquids. Visit to Get Source Customs: Valuation of imported goods - allegation of Fabricated invoices/ original invoices - The CESTAT Hyderabad dismissed the Revenue's appeal, supporting the OIO's findings that dropped the charges against M/s P.V. Enterprises for undervaluation and misdeclaration in their import of nutritional supplements. The court found the allegations unproven and the evidence insufficient to establish related party transactions or justify the rejection of declared transaction values. Visit to Get Source Customs: Classification of import of goods - Brush Cutters - The tribunal held that the imported goods ('brush cutters') are correctly classifiable under CTH 8467 8990 as they fall under the category of hand tools with self-contained motors, as per the relevant Tariff Entries and explanatory notes under CTH 8432/8433 and 8467. The use of the product for agricultural purposes does not determine its appropriate classification. Visit to Get Source Indian Laws: Appointment of an arbitrator for the adjudication of disputes - Applicability of time limitation - The Supreme Court held that the petition is timely and not hit by limitation, applying the extension of limitation period due to the COVID-19 pandemic as directed by the Court in its suo motu order. Thus, the petition for the appointment of an arbitrator is allowed. Visit to Get Source Indian Laws: Recovery of narcotics from a vehicle which was stopped during transit - Ganja - contraband item - procedure of search and seizure governed by Section 43 read with Section 49 of the NDPS Act - The defense raised several points highlighting failures and contradictions in the prosecution's evidence - The admissibility of confessions recorded by police officers was questioned, as it is in violation of Section 25 of the Evidence Act. - The Supreme Court acquitted the accused appellants of all charges, citing the prosecution's failure to prove the case beyond a reasonable doubt and highlighting the flaws in the evidence presented. Visit to Get Source Indian Laws: Declaration of Petitioner as a Wilful Defaulter under the Master Circular on Wilful Defaulters, 2015 - depriving the Petitioner from availing credit facilities for his present and prospective business enterprises - The High court found that the bank's reliance on a Forensic Audit Report, without independent verification or considering the petitioner's track record and the context of transactions, was inadequate to substantiate the declaration. - The court held that the bank failed to establish that the alleged acts of Wilful Default were "intentional, deliberate, and calculated," as required under the RBI's Master Circular. Visit to Get Source IBC: Immunity to corporate debtors and their assets, upon approval of a resolution plan - jurisdiction of NCLT to release the attached properties by invoking Section 32A of the IBC, 2016? - Teh High Court held that the NCLT was within its jurisdiction to direct the ED to release the attached properties, based on the provisions of Section 32A, as it aims to ensure that the approved resolution plan can be effectively implemented. - The court emphasized that once a resolution plan is approved under Section 31 of the IBC, 2016, and meets the criteria for immunity under Section 32A, the attached properties must be released to aid in the revival of the corporate debtor. Visit to Get Source IBC: Revival of company appeal by Financial Creditor - Order of setting aside of CIRP - The application by Akasa Finance Ltd. cites the dishonour of 12 post-dated cheques tendered by the Corporate Debtor as grounds for the recall of the order. - The NCLAT considers the sequence of events, including the dishonour of cheques and the attempts by the Corporate Debtor to delay proceedings. It finds that the Financial Creditor has a valid reason to revive the appeal and recalls the previous order accordingly. Visit to Get Source PMLA: Seeking grant of Bail - money Laundering - Scheduled offence - opening of bank account by forging documents in the name of fictitious persons - scope of section 45 of the PML Act 2002 - The High court dismissed the bail application, emphasizing the gravity of economic offenses and their detrimental impact on society and governance. The court found no reason to believe the petitioner was not involved in the laundering activities, highlighting the importance of treating corruption and related economic offenses with stringent measures. Visit to Get Source Service Tax: Taxability of Lease Rent and Capital Replacement Fund - The appellant argued that lease rent was to be transferred to NOIDA authority and not for providing any services - The Tribunal found no basis for classifying these amounts under 'Renting of Immovable Property Service' or 'Business Auxiliary Services' as done by the lower authorities, especially when the appellant had already paid service tax on these amounts under 'Construction of Residential Complex Service' category. Visit to Get Source Articles PARTIES TO REAL ESTATE INVESTMENT TRUST- TRUSTEE Writ Petition can be filed for interim protection when Appellate Tribunal is not constituted Cenvat credit is allowed if inputs are wheeled out to the sister company Notifications Income Tax 24/2024 - dated 1-3-2024 - IT Income-tax (Third Amendment) Rules, 2024 - New ITR form - Form ITR-7 SEBI S.O. 1003(E) - dated 1-3-2024 - SEBI The government declares that contracts for buying or selling future goods, specified under the Securities Contracts (Regulation) Act, 1956, are considered derivatives under the law. - Supersession Notification No. S.O. 3743(E), dated the 18th October, 2019 S.O. 1002 (E) - dated 1-3-2024 - SEBI The government has specified various goods, including cereals, pulses, oilseeds, spices, metals, precious metals, gems, forestry products, fibers, energy sources, chemicals, construction materials, sweeteners, plantation crops, dairy and poultry products, dry fruits, and various other items, for the purposes of the Securities Contracts (Regulation) Act, 1956. - Supersession Notification No. S.O. 3068(E) dated 27th September, 2016 News Union Finance Minister Smt. Nirmala Sitharaman will inaugurate one-day National Conference of Enforcement Chiefs of State and Central GST formations in New Delhi Address by Governor, Reserve Bank of India at the Digital Payments Awareness Week celebrations, March 4, 2024, RBI, Mumbai Case Laws: GST 2024 (3) TMI 169 Dismissing the appeal filed by the petitioner - error of address of the consignee in the E-Way Bill - existence of mens rea or not - HELD THAT:- Upon perusal of the record, it appears that apart from an error with regard to the address of the consignee in the E-Way Bill, there were no other issues with the said consignment. The invoice contained the address, the goods matched the description in the invoice and all other materials were intact. The imposition of tax is only on the basis of a technical error with regard to address of the consignee that was wrongly written in the E-Way Bill. The authorities have not been able to indicate any mens rea on the part of the petitioner for evasion of tax. In a catena of judgments, this Court has held that presence of mens rea for evasion of tax is a sine qua non for imposition of penalty and mere technical error would not lead to imposition of penalty reliance can be placed in the case of M/S MODERN TRADERS VERSUS STATE OF UP AND 2 OTHERS [ 2018 (5) TMI 1030 - ALLAHABAD HIGH COURT] and M/S. HINDUSTAN HERBAL COSMETICS VERSUS STATE OF U.P. AND 2 OTHERS [ 2024 (1) TMI 282 - ALLAHABAD HIGH COURT] . The orders dated September 23, 2023 and April 10, 2021 are quashed and set aside. The amount deposited by the petitioner be refunded to it within a period of one month from date - Petition allowed. 2024 (3) TMI 168 Seeking grant of bail - availment of credit without actual movement of goods on the basis of forged and fictitious documents of suppliers, procured from various non-existing firms - HELD THAT:- This Court finds that there is no dispute that prima facie , applicant is involved in availing excess input tax credit as well as cancellation of e-way bill of the huge value by the proprietorship of his firm without any reasonable reason. The department has already issued notice under Section 70 and 74 of the GST Act against the firm of the applicant. Further the record reveals that till date no adjudication order has been passed by the competent authority quantifying the excess availing the input tax credit. The record further reveals that neither any order has been passed by the competent authority cancelling the registration of selling dealer in question nor the registration of the applicant s firm has been cancelled. Section 69 read with section 132 of the Act provides for punishment of wrong availment of input tax credit with imprisonment for a term which may extend to five years and fine. It further provides that every second or thereof all the offense committed by the registered person shall be punishable. Further Section 138 of GST Act provides the compounding all the offence committed by the registered person being caused after payment of tax and interest to the amount of such wrong availment of input tax credit - the Commissioner is empowered to recover the due amount and propose for abating the proceedings and as the trial will take its own time to conclude, this Court finds this to be a fit case where discretion could be exercised in favour of the applicant. Keeping in view the nature of the offence, argument advanced on behalf of the parties, evidence on record regarding complicity of the accused, larger mandate of the Article 21 of the Constitution of India and the dictum of Apex Court in the case of DATARAM SINGH VERSUS STATE OF UTTAR PRADESH AND ANR. [ 2018 (2) TMI 410 - SUPREME COURT] and recent judgement of the Apex Court in the case of SATENDER KUMAR ANTIL VERSUS CENTRAL BUREAU OF INVESTIGATION ANR. [ 2022 (8) TMI 152 - SUPREME COURT] and without expressing any opinion on the merits of the case, the Court is of the view that the applicant has made out a case for bail. Let the applicant namely Qamar Ahmed Kazmi be released on bail on his furnishing a personal bond and two heavy sureties each in the like amount to the satisfaction of the court concerned subject to conditions imposed and further, before issuing the release order, the sureties be verified - The bail application is allowed. 2024 (3) TMI 167 Cancellation of GST registration of the petitioner with retrospective effect - the notice does not even mention the name of the officer or designation of the authority that has issued the notice and as such is completely vague - petitioner had no opportunity to even object to the retrospective cancellation of the registration - violation of principles of natural justice - HELD THAT:- The Show Cause Notice and the impugned order are also bereft of any details. Accordingly, the same cannot be sustained. Further, neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The order of cancellation dated 28.07.2021 is modified to the extent that the same shall be operative with effect from 30.06.2021, i.e., the period upto which the Petitioner has filed its GST returns. Petition shall comply with the provisions of Section 29 of the Act - petition disposed off. 2024 (3) TMI 166 Principle of uberrima fides (utmost good faith) - Cancellation of GST registration of petitioner - no business activity was being carried out at the said premises - suppression of material fact, as the petitioner has not revealed before this Court that a new registration was obtained by the petitioner subsequent to cancellation of the earlier registration - HELD THAT:- The Court having heard the learned counsel appearing on behalf of the petitioner had directed for verification of the premises without having knowledge of the fact that a new registration has been obtained by the petitioner. In the verification, which was done pursuant to the order of this Court dated February 22, 2024, it was found that the factory was operational and the proprietor informed the authorities that he had obtained a new registration prior to filing of the writ petition. Having obtained a new registration was a material fact that should have been brought into the knowledge of this Court. In fact, the Court was hoodwinked by the petitioner in passing an order for verification of the premises by the authorities. The fact that neither was there any averment in the writ petition nor the counsel for the petitioner informed the Court that a new registration has been obtained resulted in sheer wastage of time of the authorities in carrying out the second verification. Article 226 of the Constitution of India is a discretionary jurisdiction which is to be exercised for petitioners who are acting in a good faith. The principle of uberrima fides requires a party that comes to a Court to act in utmost good faith. The above principle is the genesis of the expectation of the Court to pass orders at the behest of the petitioner who has approached the Court with clean hands. The moment this trust is broken and it is discovered that there is suppression of material facts, the Court is bound to dismiss the said petition without granting any relief whatsoever to the petitioner. This writ petition is dismissed on the ground of suppression of material facts. The petitioner shall be at liberty to approach any other forum for appropriate relief. 2024 (3) TMI 165 Cancellation of GST registration of the petitioner with retrospective effect - the notice does not even mention the name of the officer or designation of the authority that has issued the notice and as such is completely vague - petitioner had no opportunity to even object to the retrospective cancellation of the registration - violation of principles of natural justice - HELD THAT:- Neither the Show Cause Notice nor the impugned order refers to the petitioner not being found at the registered address. The only reason given in the Show Cause Notice is Non-compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed and the order is completely bereft of any reasoning. Accordingly, the same cannot be sustained. Further, neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The order dated 27.05.2023 cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored - petition disposed off. 2024 (3) TMI 164 Cancellation of GST registration of the petitioner with retrospective effect - SCN does not give complete reasons for cancellation of registration - violation of principles of natural justice - HELD THAT:- The show cause notice and the impugned order are also bereft of any details accordingly the same cannot be sustained and neither the show cause notice, nor the order spell out the reasons for retrospective cancellation. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 22.02.2024 is modified to the limited extent that registration shall now be treated as cancelled with effect from 19.05.2023 i.e., the date when the Show Cause Notice was issued. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off. 2024 (3) TMI 163 Maintainability of petition - availability of statutory remedy of Appeal - absence of constitution of Appellate Tribunal - HELD THAT:- Subject to verification of the fact of deposit of a sum equal to 20 percent of the remaining amount of tax in dispute, or deposit of the same, if not already deposited, in addition to the amount deposited earlier under Sub Section (6) of Section 107 of the CGST/OGST Act, the petitioner must be extended the statutory benefit of stay under Sub-Section (9) of Section 112 of the CGST/OGST Act, for the petitioner cannot be deprived of the benefit, due to non - constitution of the Tribunal by the respondents themselves. The recovery of balance amount, and any steps that may have been taken in this regard will thus be deemed to be stayed. The statutory relief of stay on deposit of the statutory amount, in the opinion of this Court, cannot be open ended. For balancing the equities, therefore, the Court is of the opinion that since order is being passed due to non-constitution of the Tribunal by the respondent-Authorities, the petitioner would be required to present/file his appeal under Section 112 of the CGST/OGST Act, once the Tribunal is constituted and made functional and the President or the State President may enter office. Petition disposed off. 2024 (3) TMI 162 Levy of penalty u/s 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - e-way bill had expired nine hours before the time of interception - slight discrepancy in the weight, that is, the weight of the goods should have been 6,240 kilograms, but it was found to be 5,805 kilograms - HELD THAT:- It is noticed that the e-way bill had expired only nine hours before the interception of the goods and the expiry of the e-way bill by itself without an intention to evade tax, as has been held in several judgements of this Court, would not attract imposition of penalty. The authorities below have failed to consider the explanation of the petitioner. Furthermore, it is clear that the goods were traveling from the petitioner/supplier to the purchaser and the total quantity in two e-way bills and two invoices matched, and accordingly, there was no intention to evade tax in any manner whatsoever. The finding of the authorities with regard to intention to evade tax is not supported by the factual matrix of the present case, and accordingly, the impugned orders dated September 15, 2018 and the order dated September 11, 2019 are quashed and set aside - Petition allowed. 2024 (3) TMI 161 Violation of principles of natural justice - impugned order passed without considering reply to the show cause notice of the petitioner and without giving any personal hearing to the petitioner - HELD THAT:- It appears that the stand of the respondent authority in not granting the personal hearing to the petitioner is not tenable and is in complete breach of the principles of natural justice and as such, on that ground only, this petition is required to be allowed by quashing and setting aside the impugned order passed in Form GST MOV-11 and remand the matter back to the respondent No. 2 for fresh adjudication including to decide the application of the petitioner for provisional release within a period of one week from today. Petition disposed off. 2024 (3) TMI 160 Maintainability. - appeal dismissed on the ground of time limitation - Cancellation of GST registration - HELD THAT:- The appellate authority noticed that the appeal was filed on 30.08.2023, which was 132 days after the period for which delay could be condoned. The said finding is factually correct. Nonetheless, the admitted position is that the petitioner filed all its returns and that the last of such returns was filed on 31.08.2023. The petitioner has also categorically asserted that all tax dues, including interest and fees relating thereto, were duly discharged. By taking into account the overall facts and circumstances, this is an appropriate case to direct the appellate authority to consider the appeal on merits. The appellate order impugned herein is quashed and the matter is remanded for re-consideration - Petition disposed off. Income Tax 2024 (3) TMI 170 Revision u/s 263 - As per CIT assessee declared Net Profit from business profession which is more than 8% of the total turnover of the business as per Section 44AD and profit was earned from transactions of derivative and commodity transactions with MCX, NSE cash and NSE (F O) - HELD THAT:- PCIT, mainly based on his contention observed that the assessee has not disclosed its total turnover and has not claimed the profit as per the actual calculations but this is not correct observation of the PCIT. The assessee at the stage of assessment order has given all the details including total turnover which was summarised and put together and give the profit quantification of the total turnover as per Section 44AD of the Act and, therefore, invocation of Section 263 of the Act in the present case is not justifiable when the assessee has given all the details. The Assessment Order is not at all erroneous or prejudicial to the interest of Revenue and, therefore, the order passed under Section 263 of the Act is not justified - Decided in favour of assessee. 2024 (3) TMI 159 Power of the TPO to determine ALP transaction as sham - As decided by HC [ 2014 (7) TMI 1387 - TELANGANA AND THE STATE OF ANDHRA PRADESH HIGH COURT] Transfer Pricing Officer is not empowered to hold the transaction as sham transaction - HELD THAT:- We are not inclined to interfere with the impugned judgment of the High Court. However, the questions of law with respect to the powers and jurisdiction of the Transfer Pricing Officer are kept open for being considered in an appropriate case. In view of the above, the Special Leave Petition is dismissed. 2024 (3) TMI 158 Reopening notice against company not in existence - petitioner company, which came to be amalgamated by an order of the Company Court - as decided by HC [ 2022 (8) TMI 1488 - GUJARAT HIGH COURT] petitioner company even as on date of issuance of impugned notice was not in existence by virtue of same having been amalgamated with effect from 1.4.2015 - HELD THAT:- We are not inclined to interfere with the impugned judgment and hence, the special leave petition is dismissed. Pending applications, if any, shall stand disposed of. 2024 (3) TMI 157 Revision u/s 263 - Inadequate or no enquiry - ITAT quashing the order u/s 263 - HELD THAT:- Inadequacy of enquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Act. The Revenue in the instant case has not been able to make out a sufficient case that the CIT has exercised the power in accordance with law. Rather, in our considered opinion, the facts of the case do not indicate that the twin conditions contained in Section 263 of the Act are fulfilled in its letter and spirit. As discernible from the aforenoted findings of the ITAT that both the claims were duly examined during the original assessment proceedings itself and neither there was any error nor the same was prejudicial to the interests of the Revenue. Thus, the findings of fact arrived at by the ITAT do not warrant any interference of this Court. Decided against revenue. 2024 (3) TMI 156 Assessment u/s 144 - estimation of income - Method of accounting - Non rejection of books of account - disallowance of expenses, addition of inflated purchases and protective addition of cash found and seized - HELD THAT:- AO wields an authority to make additions on the basis of estimation of income upon fulfillment of the conditions mentioned in Section 145(3) of the Act. Once the AO is satisfied about the existence of irregularities in the books of account as per Section 145(3) of the Act, it shall proceed in the manner provided under Section 144. The Division Bench of the Karnataka High Court in. the case of CIT v. Anil Kumar Co. [ 2016 (3) TMI 184 - KARNATAKA HIGH COURT ] has held that in cases where the Revenue had failed to reject the books of account and proceeded to an estimation of income without framing the assessment under Section 144 of the Act, such an action is unsustainable as per law Thus as books of account have to be necessarily rejected before the AO proceeds to the best judgment assessment upon fulfilment of conditions mentioned in the Act. The underlying rationale behind such an action is to meet the standards of correct computation of accounts for the purpose of a more transparent and precise assessment of income. Therefore, any pick and choose method of rejecting certain entries from the books of account while accepting other, without an appropriate justification, is arbitrary and may lead to an incomplete, unreasonable and erroneous computation of income of an assessee. In the present case, the ITAT has made a categorical finding that despite the fact that the AO was provided with the requisite bills, vouchers and addresses of the transacting parties, it did not make any effort to confirm the veracity of the alleged bogus or inflated bills. Admittedly, the addition of income as discussed in questions (B), (C) and (D) on estimate basis has been done without rejecting the books of account. 2024 (3) TMI 155 Penalty u/s 271DA - amount remitted into the petitioner's accounts, for violation of Section 269 ST - attachment notices - HELD THAT:- As the petitioner has placed on record evidence that prima facie indicates that the receipt of Rs. 2.57 crore was under Cheque No.119160 issued by M/s.Golden Vats Private Limited. If the petitioner is able to satisfy the appellate authority that the said remittance was indeed made by a cheque, the order imposing penalty would be unsustainable. Meanwhile, on account of the impugned orders of attachment, the petitioner which operates two educational institutions is unable to discharge payment obligations. Therefore, it becomes necessary to balance the petitioner's interest, on the one hand, and safeguard revenue interest, on the other. Towards such end, the petitioner is directed to remit a sum of Rs. 12.5 lakhs as a condition for raising the attachment of its bank accounts. Subject to an immediately upon receipt of the said sum, all of the attachment orders impugned herein shall stand raised and the petitioner shall be free to operate its bank accounts. This order is, however, subject to the outcome of the appellate proceedings. 2024 (3) TMI 154 Validity of Reopening of assessment u/s 147 - condition precedent to exercise jurisdiction u/s 147 - entitlement to exemption u/s 54F - HELD THAT:- The assessee claimed the exemption u/s 54F of the Act for Assessment Year 2013-14 as well as purchased the residential plots furnishing the details for the same during the course of regular assessment for AY 2015-16 is in accordance with the above provisions. AO therefore cannot now again re-appreciate the same facts which was considered during the course of Assessment Year 2015-16 to disallow the exemption u/s 54F of the Act to assume the jurisdiction to reopen Assessment Year 2016- 17 on the ground that three years from the date of deposit in the capital gain deposit scheme would be over on 30.01.2016 which would fall in previous year relevant to the Assessment Year 2016-17. The Hon ble Apex Court in case of Calcutta Discount Company Ltd.[ 1960 (11) TMI 8 - SUPREME COURT ] has held that the alternative remedy available to the assessee would not affect right of the assessee to obtain relief under Article 226 of the Constitution of India as the condition precedent to exercise jurisdiction under Section 147 of the Act did not exist and therefore the AO has no jurisdiction to issue the impugned notice under Section 148 for the Assessment Year 2016-17. Thus there would be lack of jurisdiction to reopen the assessment on mere change of opinion. Therefore, the petition requires to be allowed by quashing and setting aside the impugned notice u/s 148 and the order rejecting the objection of the petitioner and all other sub-consequential action taken pursuant to the impugned notice by the respondents. Petition succeeds. 2024 (3) TMI 153 Assessment proceedings u/s 144C as barred by limitation - reckoning date of receipt of directions - HELD THAT:- Directions of the DRP were forwarded to the AO, i.e. National Faceless Assessment Centre, Delhi by uploading the same on 17.06.2022. Although learned senior standing counsel contends that the jurisdictional assessing officer received the directions only on 17.03.2023, for purposes of sub-section (13) of Section 144C, the date of receipt should be reckoned as the date of receipt by the National Faceless Assessment Centre on 17.06.2022. The internal arrangement by which the assessment proceedings relating to the petitioner were purportedly transferred so as to ensure that the proceedings are not barred by limitation is not material for this purpose. Indeed, as contended by petitioner, the communication dated 12.04.2022 from the PCCIT of the National Faceless Assessment Centre seeking approval for transfer so as to complete assessment within the period of limitation underscores the fact that the income tax authorities were mindful of the fact that assessment would be barred by limitation unless such assessment is proceeded with and completed expeditiously. Whether the assessment proceedings would be barred by limitation if computed from the end of June 2022 ? - If so computed, the period of one month expired on 31.07.2022, whereas the assessment order came to be issued on 25.03.2023. Hence, the assessment order was issued beyond the time limit specified in sub-section (13) of Section 144C. By taking into account not only statutory prescription but also the interpretation thereof by the Division Bench of this Court in Roca [ 2022 (6) TMI 848 - MADRAS HIGH COURT] and that of the Division Bench of the Delhi High Court in Louis Dreyfus [ 2024 (3) TMI 62 - DELHI HIGH COURT] we conclude that the assessment order cannot be sustained. Decided in favour of assessee. 2024 (3) TMI 152 Order u/s 119(2)(b) of the Act rejecting the application for waiver of time limit for filing of the return - claim in the refund on account of the tax deducted at source from the income of late father - entitlement of legal heir to file return of income only for Assessment Year of the previous year in which the assessee has expired - HELD THAT:- In view of the provisions of Section 119(2)(b) of the Act, which indicates that once the petitioner has filed the return for AY 2016-17, then he ought to have filed return for AY 2017-18 and without any genuine hardship or showing any reason for not filing the return for AY 2017-18 that the circumstances were beyond the control of the assessee, the respondent No. 1 has accordingly rejected the application. However, the approach of the respondent No. 1 is contrary to the settled legal position as held by this Court from time to time as well as by the Apex Court. This Court in case of Gujarat Electricity Company Limited [ 2001 (1) TMI 10 - GUJARAT HIGH COURT ] has held that the Board was not justified in rejecting the claim for refund on the ground that a case of genuine hardship was not made out by the petitioner and delay in claiming the refund was not satisfactorily explained, more particularly when the returns could not be filed in time due to the ill health of the Officer who was looking after the taxation matters of the petitioner. As it is not in dispute that the petitioner is entitled to the refund of the amount which represents the tax deducted at source from the income of his late father and in absence of any outstanding dues of the late father of the petitioner, the said amount is liable to be refunded by the respondent-Authority as per the provisions of the Income Tax Act. Denial on the part of the respondent No. 1 to condone the delay in filing the return of income by the petitioner either in name of his father or in his individual name ought to have been permitted and the respondent-Authority ought to have examined such claim on merits and if it is found to be genuine, the petitioner is entitled to the refund with statutory interest, if any, to be paid on such amount. The petition succeeds and is accordingly allowed. The impugned order passed by the respondent No. 1 u/s 119(2)(b) of the Act is hereby quashed and set aside and the petitioner is permitted to file the return of income claiming the refund which shall be considered by the proper AO in accordance with law. Rule is made absolute to the aforesaid extent. 2024 (3) TMI 151 Validity of reassessment proceedings - shorter period to reply to notice given to assessee - HELD THAT:- AO is required to grant time to the assessee to submit the reply to the notice issued under the said provision of not less than seven days. Admittedly, in the facts of the case, no time was granted to the assessee by the AO to file reply and therefore, the notice issued u/s 148A(b) of the Act is not as per the provisions of the Act. Moreover, it also appears on the record that the PCIT has granted the approval to the issuance of notice under Section 148 of the Act prior to even digitally signing of the notice under Section 148A(b) of the Act as well as to the date of passing of the order u/s 148A(d) of the Act on 26th March, 2022. Therefore, on both counts, the notice u/s 148 of the Act is issued admittedly without jurisdiction and contrary to the provisions of the Act. Thus the impugned order passed u/s 148A(d) of the Act as well as the notice issued u/s 148 of the Act are liable to be quashed. Decided in favour of assessee. 2024 (3) TMI 150 Application filed by the petitioner u/s 119(2)(b) - condonation of delay in filing the return for claiming refund rejected - rejection of revised return and the rejection of the claim of the petitioner for refund of tax deducted at source - AO jurisdiction over a case to entertain a refund claim and dispose of the same - HELD THAT:- A plain reading of the Circular dated 30.10.2003 would give a clear indication that the authorities concerned vide the said Circular had relaxed and modified the conditions stipulated in the previous Circular dated 12.10.1993 both in respect of the upper limit so far as claim of refund amount is concerned and also as regards the aspect whether it was in the form of a supplementary additional claim or not. In view of the fact that the Circular dated 30.10.2003 was already in force when the impugned order was passed, we find it difficult to accept the contention of respondent No.1. The claim of the petitioner for refund of TDS was for an amount of Rs. 1,89,283/- which is much less than Rs. 5,00,000/- upper limit that has been reflected in the Circular dated 30.10.2003. Therefore, we find no reason as to why the respondent authorities should not have considered the aforesaid Circular dated 30.10.2003 while deciding the claim of the petitioner, when his claim was for refund of tax deducted at source. As no dispute that the petitioner claims tax deduction at source from the income that has generated from the said assessment year only and the return which was submitted by him at the first instance was accepted and there is no additional income that he had made while submitting the revised return on the basis of the tax deducted at source is concerned. Impugned order passed by respondent No.1, is not sustainable and the same deserves to be and is accordingly held to be bad in law in view of the Instruction No.12 of 2003, dated 30.10.2003 is concerned. 2024 (3) TMI 149 Levy of fees u/s 234E - default in furnishing statement u/s 200(3) - assessment year 2013-14 to assessment 2014-15 - HELD THAT:- As the regular TDS statements for various quarters anent to assessment year 2013-14 to assessment 2014-15 i.e. from Sr. No. 01 to 17 were filed admittedly after the expiry of prescribed due date of filing but before aforestated deadline of 31st May 2015. Therefore, levy of late fees u/s 234E of the Act is impermissible in the absence of enabling provision of section 200A(1)(c) of the Act. In the absence of any contrary facts or judicial precedents brought to our notice by the Revenue, we therefore direct the Ld. AO to delete the fees levied u/s 234E of the Act in its entirety. For AY 2015-16 - only dispute in this bunch was computation of late filing fees from date falling outside the aforestated deadline i.e. 31/05/2015 - The fact in this bunch of seven cases remain undisputed that, portion of delay fell anterior to cut-off date 01/06/2015 where the enabling provision for levy of late fees was absent. This provision of section 200A(1)(c) enabling the levy of fees u/s 234E of the Act came into force without retrospective operation w.e.f. 01/06/2015, therefore in our considered view the levy of late fees by no means be permitted for the period of delay falling anterior thereto. However, the levy of late fees u/s 234E of the Act for the balance portion of delay commencing from 01/06/2015 till the filing of TDS statement since exterior to former cut-off date is well within the law. We accordingly direct the Ld. AO to re-compute the late fees leviable u/s 234E of the Act for the period of delay commencing from 01/06/2015 upto the date the TDS statement is filed belatedly. Ergo the grounds stands partly allowed. 2024 (3) TMI 148 Reopening of assessment - reason to believe - bogus purchases - information made available to him by the Investigation Wing from third person - HELD THAT:- We observe that based on information gathered in the course of search in the case of Jain and Choudary Group, a detailed and comprehensive information was supplied to the Assessing Officer herein. The Investigation Wing had relied upon the statement of various persons in the group search cases wherein it was categorically asserted that the supplier M/s. Kriya is not engaged in any real business and no physical goods were supplied by such entity to any party named in their books. The name of the assessee company figured in books of accounts and the assessee has shown to have obtained supply from such entity. These incriminating facts have emerged in the reasons recorded. Therefore, the reasons recorded are specific in nature and reliable in character. AO has applied his mind properly and has given his independent finding which fact is manifest from the bare reading of the reasons recorded. We thus see no substance in the arguments propped up on behalf of the assessee to assail the validity of assumption of jurisdiction. The challenge to assumption of jurisdiction thus fails. Estimation of income - bogus purchases - CIT(A) has erred in restricting the addition to the extent additional gross profit at 5% of addition made u/s 69C - Where the parties to whom the purchase of diamonds in question have been sold, is not known, one cannot say that the onus which lay upon the assessee has been fully discharged. The bona fides of the supplier Kriya Impex Pvt. Ltd. has been put under serious question by the Investigation Wing. The corresponding purchases of the so called supply made by Kriya Impex Pvt. Ltd. is also not known. Therefore, the action of the CIT(A) in resorting to some reasonable estimation based on the value of diamond stated to have been purchased from Kriya Impex Pvt. Ltd. is quite justified. Without reiteration of reasonings of CIT(A), we see no error in the action of the CIT(A). Hence, the appeal of the Revenue as well as Cross Objection of the assessee challenging the action of the CIT(A) towards estimated additions deserves to be dismissed. 2024 (3) TMI 147 Exemption u/s 11 and 12 - charitable activity u/s 2(15) - As alleged total receipts from trade, commerce or business/service rendition for the same which exceeded 20% of total receipts in the case of the appellant - As per AO assessee trust has not filed Form 10 and Form 10B electronically, before the due date of filing the Return of Income as per Rule 17(2) and 17(3) of the I.T. Rules. Further, it was not clear whether the assessee has invested its accumulated fund u/s. 11(2) of the Act in the manner prescribed u/s. 11(5) - AO held that the assessee trust is not eligible to claim exemption u/s. 11(2) of the Act r.w.r. 17(2) and 17(3) of the I.T. Rules for accumulation for specific purposes - CIT(A) allowed the appeal in favour of the assessee HELD THAT:- We do not find any infirmity in the order passed by Ld CIT[A], the claim of the Revenue that onus was on the assessee to prove that receipts were on cost basis and income of the assessee was on cost basis for which full details were not submitted by the assessee. But it is seen that the assessment was conducted u/s. 143(3) of the Act and the assessee furnished all details before the AO. Therefore, the Ld CIT[A] held that such requirement of huge supporting evidences in remand proceedings is not called for when no specific instances has been pointed out in assessment order to prove to the contrary. In fact, not only the Hon'ble Supreme Court has dismissed revenue's appeal in AUDA [ 2022 (10) TMI 948 - SUPREME COURT] but also that of many other Gujarat Urban Development Authorities viz. Surat, Gandhinagar, Rajkot Development Authorities, etc., all of which are subjected to the same Act of Gujarat State Government and work under the Control and Rules stated therein as has been discussed in detail by the Hon'ble Gujarat High Court. In fact, co-ordinate Bench of this Tribunal in the case of Surat Urban Development Authority [ 2020 (4) TMI 755 - ITAT AHMEDABAD] has also referred to the decision of the Hon'ble Gujarat High Court in AUDA [ 2017 (5) TMI 1468 - GUJARAT HIGH COURT] as well as the decision of Vadodara Urban Development Authority [ 2019 (2) TMI 543 - ITAT AHMEDABAD] to allow the appeal of SUDA. Thus the assessee is also governed by same Rules/Act and no further distinguishing facts have been highlighted by the AO in the remand proceedings further in the Grounds of Appeal raised before us with specific instances. The Revenue is also silent about the new Section 10(46A) proposes to exempt any income derived by a body or authority, board, trust, or commission, other than a company, established or constituted by or under a central or state act for one or more General Public Utility. Therefore in our considered opinion, the provision to section 2(15) of the IT Act is not applicable to the case of the assessee and therefore the Ground nos. 1 2 raised by the Revenue are devoid of merits and the same is liable to be dismissed. Addition made on account of fixed assets - CIT(A) not upholding the addition and directing to allow the same u/s. 11(1) of the Act after verification - HELD THAT:- CIT[A] has clearly observed that there is no specific discussion made with respect to this issue in the assessment order made by the AO. Since the AO has denied benefit u/s 11 and section 12 of the Act to the assessee, as a consequence the addition to fixed assets being a capital expenditure stands disallowed. However, since the claim of benefit of section 11 is now allowed in favour of the assessee, the AO was directed to allow the same after verification as per law u/s 11(1) of the I.T. Act. The Revenue could not demonstrate any infirmity in the order passed by the Ld CIT[A] Delay in filing Form 10 - CIT DR is correct in his argument that filing of Form 10 is mandatory under section 11[2] of the Act after the amendment made in Finance Act, 2015 - Hon ble Delhi High Court considered this issue post amendment of the Act in the case of BAR COUNCIL INDIA [ 2024 (1) TMI 317 - DELHI HIGH COURT] as held delay in filing Form 10 in the present case occurred because the amendments went unnoticed by the officials of the petitioner. The assessment year 2016-17 was the first occasion subsequent to those amendments. Therefore, we find no reason to disbelieve the explanation furnished by the petitioner to explain the delay in filing Form 10. Further, we are unable to fathom as to what benefit would accrue to the petitioner by delaying the filing of Form 10. In our opinion the discretion conferred for condoning the delay was not correctly exercised by the Commissioner Income Tax. Decided in favour of assessee. Disallowance of addition of fixed assets - CIT(A) partly confirming the disallowance and directing to allow the same u/s. 11(1) of the Act after verification - HELD THAT:- Since the claim of benefit of section 11 is now allowed in favour of the assessee, the AO was directed to allow the same after verification as per law u/s 11(1) of the I.T. Act. The assessee could not demonstrate any infirmity in the order passed by the Ld CIT[A] and therefore the same does not require any interference. 2024 (3) TMI 146 Unexplained cash credit u/s 68 - unsecured loan - HELD THAT:- It is not a case where there is any cash deposit in lender s bank a/c before giving loan to assessee. Thus, the source or creditworthiness of lender qua the giving of loan to assessee is proved. The A/c Confirmation, which is basically in the form of a certificate of lender, also makes a clear confirmation of giving loan to assessee as well as receipt of repayment subsequently from assessee. So far as the point raised by CIT(A) that the repayment has been made via cross- cheque and not a/c payee cheque, the assessee has filed complete bank statement showing debit entries of payments which have a clear mention of the repayment having gone to Reshma Qureshi , lender. Therefore, any doubtful apprehension by CIT(A) in this regard is dislodged. Thus, taking into account entire conspectus, we are of the view that the assessee has filed sufficient evidences to prove the creditworthiness of loan; therefore the addition made by AO should not stand. We, accordingly, delete the same and allow this ground of appeal. Unexplained cash credit u/s 68 - AO was not satisfied with creditworthiness of the lender and made addition - HELD THAT:- We find that Shri Ajay Gupta was having a pre-existing deposit with M/s Unitrade Service and by making recoveries therefrom, made loans to assessee. Thus, there should be any doubt so far the availability of funds with the lender Shri Ajay Gupta is concerned. Ld. CIT(A) has made an observation that the assessee has taken loan from M/s Unitrade Service but as can be seen the correct position is different. It is true that funds have originated from M/s Unitrade Service but Ld. AR has shown by reference to documents in Paper-Book that Shri Ajay Gupta made a recovery from M/s Unitrade Service for giving loans to assessee. We do not find any weakness in this explanation of assessee which is fully supported by documents. Consequently, we are satisfied that Shri Ajay Gupta has made loans to assessee from funds available with him and there is no reason to treat the loans taken by assessee as unexplained. Disallowance of Charity Donation Exp - assessee submitted that impugned donations are in the nature of contributions given to various organisations which helped in advertising business of assessee, therefore they are very much in the nature of business expenditure and must be allowed - HELD THAT:- On a careful consideration, we agree with the submissions of Ld. DR and do not find any weightage in the argument of Ld. AR which is just a submission for the sake of submission. There is no evidence to show that the impugned donations helped the assessee in advertising business. Therefore, we uphold the disallowance made by AO. This ground is accordingly dismissed. 2024 (3) TMI 145 Taxability of receipts on sale of software under the provisions of the Act r.w. applicable DTAA - Denial of relief from taxation on receipts arising from sale of software in the hands of non-resident assessee - assessee-company is incorporated in the United Kingdom and thus a non-resident assessee for the purposes of Indian Taxation - whether the AO was justified in assessing the receipts on sale of software as Royalty Income in the factual matrix merely because the assessee has offered such income as taxable income in its ITR? HELD THAT:- Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or not being properly instructed is over assessed, the authorities under the Act are required to ensure that only legitimate tax dues are collected. Mere admission on the part of the assessee with respect to an addition/disallowance in its original return or in revised return would not ipso facto bar an assessee from claiming an expense or disputing an addition if it is otherwise permissible under law. It is thus well settled that if a particular income is not taxable under the Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Revenue Authorities cannot enforce untenable actions of the assessee against it which led to declaration of income of higher amount incorrectly. It is thus open to assessee to show that it was over assessed under erroneous impression of law or facts even if it is attributable to the mistake of assessee. So viewed, we do see potency in the argument laid on behalf of the assessee that the AO committed error in denying the relief claimed. In our considered view, the action of the AO is in defiance of the judicial precedents on the issue and thus cannot be countenanced. In our view, the assessee can not be prevented from raising a claim that receipts from sale of software wrongly offered as royalty income and not chargeable to Indian Taxation merely because such income was wrongly offered in the ROI and which was not revised. The factual matrix towards the nature and character of sale proceeds qua the underlying evidences however does not appear to have been verified by the AO at any stage of the proceedings. Without any expression of opinion on merits on taxability of such receipts, in our view, it would be in fitness of things to remit the issue back to the file of AO.. It shall be open to the assessee to demonstrate that receipts from various customers in India arises on account of sale of software and does not give rise to any chargeable income in law. Ground No.1 to 4 of the appeal of the assessee is allowed for statistical purposes 2024 (3) TMI 144 Addition u/s. 40A(3) r.w.r 6DD - cash purchases of husk beyond the prescribed limit of Rs. 20,000/- per day - Payment by assessee to farmers - HELD THAT:- In the instant case, since the Ld. AO has not disputed the fact that the husk is an agricultural produce whereas the CIT(A)-NFAC has also by relying on the decision of CIT vs. Cynamid India Ltd ( 1999 (4) TMI 2 - SUPREME COURT] held that husk is an agricultural produce, in our opinion the provisions of section 40A(3) r.w.r 6DD of the Income Tax Rules, 1962 cannot be invoked in the instant case as it is covered under Clause-(e) of Rule 6DD of Income Tax Rules, 1962. - Decided in favour of assessee. 2024 (3) TMI 143 Addition on protective purposes - tax 20% of the withdrawals by the assessee from the firm - AR argued that the assessee has withdrawn these amounts from the capital account maintained with the firm - as in the case of the firm the income has been taxed based on the seized material and same amounts have been withdrawn by the assessee and the Ld. AO proposed to tax the assessee on protective basis - HELD THAT:- It is an admitted fact that 20% of the amount has been subjected to tax in the hands of the firm. It was also confirmed by the order of this Bench of the Tribunal in [ 2023 (8) TMI 1019 - ITAT VISAKHAPATNAM] . Therefore, the same amount cannot be taxed in the hands of the assessee on protective basis. It is a trite law that any income shall be subjected to tax only once in the hands of the assessee. We therefore find no merit in the argument of the Ld. Revenue Authorities and thereby direct the Ld. AO to delete the addition made on protective basis in the hands of the assessee. Decided in favour of assessee. 2024 (3) TMI 142 Condonation of delay - present appeal is delayed by 128 days - HELD THAT:- It is well established that rules of procedure are handmaid of justice. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. In the present case, the assessee did not stand to benefit from the late filing of the appeal. Thus having perused the application, we are of the considered view that there exists sufficient cause for not filing the present appeal within the limitation period and therefore, we condone the delay in filing the appeal by the assessee. Registration u/s 80G denied - assessee is neither registered under section 12AB read with section 12A(1)(ac)(i)/section 12A(1)(ac)(iii) of the Act nor approved under section 10(23C) read with clause (i)/(iii) of the first proviso to the said section and thus the case is not covered under the exclusion as provided vide proviso to clause (i) of section 80G(5) - HELD THAT:- As relying on assessee own case [ 2024 (3) TMI 61 - ITAT MUMBAI] We deem it appropriate to restore the assessee s application seeking approval under section 80G of the Act also to the file of the learned CIT(E) with a direction to consider the same afresh after the decision in respect of assessee s application for approval under section 12AB of the Act. Needless to mention no order shall be passed without affording reasonable opportunity of being heard to the assessee. 2024 (3) TMI 141 Validity of assessment order passed u/s 144C - period of limitation - whether the final assessment order dated 30.06.2022 passed by the ld AO is passed within the time limit prescribed u/s 144C(13) of the Act or not.? - HELD THAT:- Section 144B(5) of the Act clearly stipulates that all the communication shall be through National Faceless Assessment Centre. Further, section 144B(6)(v) clearly stipulates that the time and place of dispatch and receipt of electronic record shall be determined in accordance with the provision of section 13 of the Information Technology Act, 2000. On a cohesive reading of provision of section 130 and 144B of the Act read together with section 13 of the Information Technology Act, 2000, we hold that the moment document is uploaded by the originator (which in the present case ld DRP) on 07.04.2022 in ITBA portal that dispatch from the side of the ld DRP is complete and since the entire documents are uploaded through electronic mode, the same happens seamlessly and accordingly, the receipt of the said document also becomes instantaneously. Hence, the date of receipt of DRP direction also happened on 07.04.2022 itself and the due date in terms of section 144C(13) would start reckoning from that date. Merely, because the NeAC had retained the document receipt from ld DRP in the form of DRP directions for few months in its kitty and the later transfer the same to the assessment unit on 02.05.2022, the due date in terms of section 144C(13) of the Act for framing the final assessment order by the ld AO does not get automatically extended. Hence, we have no hesitation to hold that the final assessment order ought to have been passed by the ld AO on or before 31.05.2022 in the instant case. Since, the same was done on 30.06.2022 which is barred by limitation. Appeal of assessee allowed. Customs 2024 (3) TMI 140 Release of seized goods - Arecanuts - prohibited goods - test to ascertain the origin of goods - reason to believe - pre-existed objective/scientific test - HELD THAT:- Prima facie, the Tax Invoices issued by M/s Sri Karni Traders were evidence of valid purchase made by the petitioner within the country. In absence of a legal requirement, the absence of the purchase documents of Sri Karni Traders (during transportation by the petitioner), may never have led to formation of a reason to believe that goods were of foreign origin. At most, a suspicion may have arisen to the revenue authorities, at that stage. However, once the purchase documents of Sri Karni Traders were made available by the petitioner along with his reply dated 2.12.2023 and other reply (which the revenue does not dispute), the suspicion that may have existed stood resolved - to the benefit of the assessee. Before any reason to believe may have arisen, the revenue authorities were obligated to conduct an enquiry and/or verification if the goods had originated from outside the country. Here, no material existed to doubt the origin of Aeranuts from within the country. Thus, revenue has failed to discharge its burden. Thus, we find that the revenue authorities have hopelessly failed to bring out to record the objective material and have further failed to establish formation of any reason for the belief entertained by them that goods were of foreign region. In similar circumstances, the co-ordinate bench of this Court had allowed the writ petition for similar reasons in Jaymatajee Enterprise (Seller) and Another (Supra). Accordingly, the writ petition is allowed. The order (passed during pendency of the writ petition) and the detention-memo are quashed. Let goods be released forthwith. No order as to costs. 2024 (3) TMI 139 Classification - Goods declared as Pump-1.200-GS-THREAD-28/410-2N-192.0 (Pump for lotion dispenser) - importer has classified the Goods under CTH 84248990 and Commissioner (Appeals) has classified the same under CTH 84249090 - HELD THAT:- We hold that the product in question is a pump for displacing and dispersing the lotion/cream. Hence, it is definitely not a scent spray or toilet a spray (CTH 9616). It is a pump but not the one under 8413 where the pumps meant only for displacement of liquids are covered. The goods in question is held to be covered under CTH 84248990 being the pumps meant not only for displacing the liquid/lotion but for simultaneously dispersing the same. Hence we hold that classification made by the respondent-assessee in the Bill of Entry No. 7818002 is the correct classification i.e. the pumps imported by the appellant are classifiable under CTH 84248990. Hence, the Order-in-Appeal is hereby set aside which classified the impugned pump under CTH 84249090. However, the appeal filed by the department still stands dismissed as they have prayed for impugned pump to be classified under CTH 8413. 2024 (3) TMI 138 Valuation of imported goods - allegation of Fabricated invoices/ original invoices - transaction value of the imported goods - Jurisdiction Of Ld. Adjudicating Authority to appreciate the evidences on record in sustaining the allegations/ the issues raised in the SCN - Whether the issues raised under the said SCN can be considered as valid and legal notwithstanding the allegations of failure on the part of Ld. Adjudicating Authority in considering the evidences while passing the impugned OIO ? - HELD THAT:- We find that the Ld. AR, while assailing arguments reiterating the allegations as per the SCN has not made any submission on the aforesaid observations of the Adjudicating Authority. Thus, it is understood that the Adjudicating Authority has thoroughly examined the facts on record giving a categorical observation that Shri Sanjay Punjabi is the sole Director of M/s Rax Trading Limited, Hong Kong and that Shri Hitesh Nagwani is the sole proprietor of PV Enterprises. Nothing has been brought on record to contradict the aforesaid observations of the Adjudicating Authority. Hence, in the absence of any evidence to the contrary, we do not find any reason to interfere with the conclusion arrived at by the Ld. Adjudicating Authority. We observe that the case of M/s Rudras Overseas was pertaining to the period prior to the subject imports of M/s P.V Enterprises/ Respondent and therefore the allegations fabricated invoices is not a matter of relevance in the instant case. In this regard, the Ld. AR also agrees to the fact that though such fabricated invoices had been relied upon to allege under-valuation of the said goods but re-determination of value of imported goods has not been made on the basis of such invoices but based upon the contemporaneous imports. In fact, it is a now matter on record that no fabricated invoice or no invoice said to be original, has been relied upon in the instant case to support the elements of related person and consequent alleged undervaluation, as rightly observed by the Ld. Adjudicating Authority vide para 28.16 of his order, reproduced supra. In such a situation, we have no option but to accede to the submissions made by the Ld. Counsel for the Respondent since the valuation of the subject imported goods has not been done on the basis of the so-called fabricated invoices, hence, cognizance of the same cannot be taken to prove the allegations against the Respondent. The crux of the decision by Ld. Adjudicating Authority in the context is that the SCN failed to suggest that there is material on record that a proper exercise had been taken into consideration on the issues like, brand, ingredients, country of manufacturer, etc. The Ld. Adjudicating Authority had further exemplified his decision with reference to certain Bills of Entry, as detailed under para 29.8 of the subject OIO, as already reproduced above. We find that the issue of comparison is indeed not based on the issue of identical goods but is based on similar goods. However, the information contained in the SCN along with the referred annexures, as claimed by Ld. AR prima facie does not contain the comparison and the similarity thereof, with reference to the item description, as rightly observed by the Ld. Adjudicating Authority. Infact, the Annexures contained the details of item description, as if it is the same or similar in the subject Bills of Entry of the Respondent and that of the other importers. It was quintessential for the Appellant to have been specifically explain as how the description, if not identical, is similar in nature, description, contents, etc. Hence, by merely stating that the description is similar in the Bills of Entry under comparison, is to be considered as a bald statement sans evidence. However, having observed so, we do find that the observations of the Ld. Adjudicating Authority are not correct with reference to the country of manufacturer, as the same has been provided in the Annexures, as well as in the narrative part of the SCN. Nevertheless, this observation is not sufficient enough to compare the values in order to confirm the aspects of undervaluation. Hence, we are of the considered opinion that the Transaction Values of the other importers cannot be considered for the purposes of redetermination of Transaction Value in terms of Rule 5 of CVR, 2007. Moreover, we note that the seizure of cash at the residence of Shri Sanjay Punjabi vide Panchnama has been made out, as if it is the sale proceeds of food supplements, imported by M/s P.V Enterprises/ Respondent and therefore, apparently, it is the case of the Department that the sales of the imported goods by M/s P.V Enterprises had direct connection with the seized cash as well as to prove the transactions to be related . Hence, we do not find any infirmity in the discussions carried out by the Ld. Adjudicating Authority under para 28.17, as the same is the integral part of the SCN as well as of the defence submissions along with documentary evidences as detailed under para 26.7 of the subject OIO. Regarding confiscation of the goods of the live consignment , On perusal of the said Panchnama, we note that the comparable transaction values have not been substantiated based on any documentary evidences or by referring to the specific Bills of entry and the other details of description, brand name, quantity, etc. in the said Panchnama. Hence, the basis of seizure itself is improper, with reference to the alleged undervaluation on comparable prices. The issues related to minor infractions of descriptions and quantities with reference to products listed at Sr. No. 9 of the Bill of Entry, we note that the same does not have any impact on the allegations of the undervaluation, which was principally, basis for the seizure. SCN can be considered as valid and legal - We are of the considered opinion that the basis of the allegations pertaining to the comparable prices, as per the referred Bills of Entry of the other importers, as already stated above, do not sustain, as rightly observed by the Ld. Adjudicating Authority vide paras 29.7 to 29.10 of the subject OIO and therefore, the subject OIO is upheld in toto. Thus, having considered the rival contentions and grounds of the appeal and on perusal of records, we find that there is no error in the impugned Orderin- Original. Accordingly, we dismiss this appeal by Revenue. Appeal dismissed. 2024 (3) TMI 137 Classification of goods - Importer declared the Goods as Brush Cutters - classifiable under CTH 8467 8990 and not under CTH 8432 2990 as claimed in the respective Bill of Entry - Whether the extended period of limitation can be invoked for demanding duty pertaining to past clearance of the imported brush cutters for the period 18.11.2009 to 28.11.2013 - penalty - with proposal for confiscation - HELD THAT:- On a plain reading of the relevant Tariff Entry and said explanatory notes under CTH 8432/8433 and 8467, it is clear that the products mentioned under CTH 8432/8433 are referring to machineries ; hand tools fall outside the scope of said entries; whereas hand tools explained in the explanatory note under CTH 8467 at sr. no 18 19 includes brush cutters , hence the product in dispute would fall under CTH 8467. The use of the product for Agricultural purpose cannot be the criterion for determination of the appropriate classification. It is held by the Hon ble Supreme Court in the case of M/s O.K. Play (India) Ltd vs CCE [ 2005 (2) TMI 114 - SUPREME COURT] that use of an article as Toys by children would not place in classification under Toys . It has been held in a series of cases that the explanations for classification of particular product mentioned in the HSN cannot be brushed aside in determining the correct classification of a product. Thus, the impugned goods in question i.e. brush cutters is correctly classifiable under CTH 8467 8990 of CTA,1975. Past clearance of the imported goods - We find that the appellant declared the description of the goods correctly all along during the said period. Also, the goods were examined and assessed by the Department. Once the catalogue has been submitted by the appellant during the course of assessment, therefore, it is the responsibility of the Department to ascertain from the catalogue and description its classification under the appropriate heading. Also, it has been held in a series of cases that merely because the goods are not classified correctly under the appropriate heading by an assessee even though all facts are disclosed to the Department, the allegation of misdeclaration or suppression of fact cannot be invoked for recovery of duty for the past period. In our view, it is not necessary for the appellant to disclose on the relevant bills of entry that the goods are meant to be used as portable hand tools; the basis of classification as per explanatory notes of HSN. The stray cases of classification of the imported goods in five bills of entry under CTH 84678900 by the appellant, in our view, cannot lead to the conclusion that in other bills of entry, the goods were declared under wrong heading knowingly and to suppress the correct classification. The explanation furnished by the appellant that the mistake occurred when other goods of the same heading were imported along with the Brush cutters seems to be reasonable. Thus, invoking of extended period cannot be sustained and hence the demand is barred by limitation. Consequently, the penalties on the Appellants not sustainable. In the result, the impugned Order is modified to the extent of confirming classification of the impugned goods under CTH 84678990; confirming the demand and interest for the normal period and setting aside demand and interest for the extended period; also the penalty imposed on the Appellants is set aside. Appeals are disposed off accordingly. Insolvency & Bankruptcy 2024 (3) TMI 136 Immunity to corporate debtors and their assets, upon approval of a resolution plan - jurisdiction of NCLT to release the attached properties by invoking Section 32A of the IBC, 2016? - HELD THAT:- There are no hesitation in holding that there is no scope whatsoever for the attachment effected by the ED over the Attached Properties to continue once the Approval Order came to be passed. We are not opining on whether the attachment could have continued after commencement of the CIRP. The NCLT has simply answered the question of law arising in relation to the resolution of the corporate debtor and that too within the limits of the jurisdiction conferred on it. It is Section 32A of the IBC, 2016, on which the NCLT based its declaration that the Attached Properties must be released, and that is entirely correct. Whether the ED was right in continuing the attachment between the commencement of the CIRP and before the Approval Order, is also something that the April 2023 Order deals with, that issue has been overtaken, as explained earlier in this judgement. The Adjudicating Authority under Section 8 of the PMLA, 2002 has been given powers to conduct quasi-judicial proceedings before deciding to make any attachment. Towards this end, the Adjudicating Authority is obligated to issue a show-cause notice, provide an opportunity of being heard and pass a reasoned order. Evidently, orders passed by the Adjudicating Authority are appealable orders under Section 26 of the PMLA, 2002 - Section 11(3) of the PMLA, 2002 explicitly states that every proceeding under Section 11 would be deemed to be a judicial proceeding within the meaning of Section 193 and Section 228 of the Indian Penal Code, 1860. In the instant case, the NCLT has ruled on the import of Section 32A of the IBC, 2016 in the Approval Order. The NCLT has once again ruled in the April 2023 Order on the import of Section 32A. Both these orders, unexceptionable for the reasons stated above, have been ignored by the ED - The ED did not appeal the Approval Order either within the limitation period. Therefore, while one may raise technical grounds that alternate remedies may exist in the law, a constitutional court adjudicating the two competing writ petitions based on the same set of facts, is indeed an efficacious remedy. There is no requirement for any partial quashing of the instruments of enforcement under the PMLA, 2002. These instruments of enforcement would simply have no effect whatsoever against the corporate debtor to its detriment. The corporate debtor would indeed be obligated to cooperate in the investigation and prosecution that would continue against the other accused. The attachment by the ED over the Attached Properties, being the four bank accounts of the Corporate Debtor, (with aggregate balances to the tune of Rs. 3,55,298/- and any interest earned thereon) and the 14 flats constructed by the Corporate Debtor valued at Rs. 32,47,55,298/-, came to an end on 17th February, 2023. Such release has occurred by operation of Section 32A of the IBC, 2016. Petition disposed off. 2024 (3) TMI 135 Commencement for limitation of appeal - relevant date - date of uploading of the order or the date when order was passed? - HELD THAT:- In the Delay Condonation Application filed by the Appellant in paragraph 3 the Appellant states that the matter was listed before the Ld. NCLT on 07.11.2023 for purpose of For Seeking Appropriate Directions whereupon the impugned Order came to be passed . There are no averments in the application that no order was passed on 07.11.2023 by the Court. Appellant sought to rely on date of uploading of the order which may not help the Appellant in the present case. The order was passed in presence of both the parties whose presence are noted in the order. The limitation to file an appeal shall commence from 07.11.2023 and the Appeal having been filed beyond 15 days after expiry of the limitation, delay cannot be condoned. The jurisdiction to condone the delay is limited to only 15 days by Section 61(2) proviso. The Delay Condonation Application is dismissed. 2024 (3) TMI 134 Revival of company appeal by Financial Creditor - Order of setting aside of CIRP - HELD THAT:- The Financial Creditor is entitle to revive the Company Appeal in view of the liberty granted by this Tribunal itself in its order dated 11.02.2020. The cheques given by the Corporate Debtor having been dishonoured, Appeal deserve to be revived. It is noticed that the Appellant has been opposing the Application on untenable grounds and his only intent is to delay the proceedings. The sequence of the events indicate that the Corporate Debtor did not honour the settlement on basis of which Section 7 application was closed by the Adjudicating Authority by order dated 05.10.2020 and thereafter on one or other pretext has been delaying the proceedings. The Company Appeal is revived - appeal allowed. PMLA 2024 (3) TMI 133 Seeking grant of Bail - money Laundering - Scheduled offence - opening of bank account by forging documents in the name of fictitious persons - scope of section 45 of the PML Act 2002 - HELD THAT:- The present petitioner namely Tara Chand has created a fictitious person namely Sachin Gupta and also opened three bank accounts in the name of three proprietorship viz M/s Om Traders, M/s Shri Khatu Shyam Traders M/s Anil Kumar Govind Ram, of this fictitious person Sachin Gupta by forged documents. He also opened one bank account in his real name. Further Tara Chand provided these four bank accounts to Neeraj Mittal (Accused no 7) for the purpose of laundering of Proceeds of crime of Veerendra Kumar Ram. Same bank accounts were also used for routing of other funds. Thus from the investigation it appears that the present petitioner was engaged in the illegal business of money transfer and providing entry, in lieu of commission and on the instructions of Neeraj Mittal used to collect cash from Ram Parkash Bhatia, which was actually the proceeds of crime of Veerendra Kumar Ram. It has come on record that credit transaction of Rs 122 crores approximately have taken place from the said four bank accounts of Tara Chand and thus same amount was used for routing of funds - Thus, prima-facie, the involvement of the present petitioner in illegal routing of proceeds of crime cannot be denied as he played the vital role in this organized structure/process of illegal routing of proceeds of crime of accused Veerendra Kumar Ram. Scope of section 45 of the PML Act 2002 - HELD THAT:- Section 45 (ii) of the PMLA Act, 2002 provides twin test. First reason to believe is to be there for the purpose of reaching to the conclusion that there is no prima facie case and second condition is that the accused is not likely to commit any offence while on bail - It is, thus, evident by taking into consideration the provision of Section 19(1), 45(1), 45(2) of PML Act that the conditions provided therein are required to be considered while granting the benefit of regular bail in exercise of power conferred under Section 438 or 439 of Cr.P.C., apart from the twin conditions which has been provided under Section 45(1) of the Act, 2002. This Court, based upon the imputation as has been discovered in course of investigation, is of the view that what has been argued on behalf of the petitioner that proceeds cannot be said to be proceeds of crime but as would appear from the preceding paragraphs, money which has been obtained by the accused person Veerendra Kumar Ram has been routed by this petitioner and he has also withdrawn the money from different fake accounts and transferred it into the account of the accused persons. Now coming in to facts of the present case, it is evident from various paragraphs of the prosecution complaint dated 20.08.2023 that the petitioner is not only involved rather his involvement is direct. Further, it has come that part of the proceeds of crime acquired in the form of commission/bribe in lieu of allotment of tenders by the accused Veerendra Kumar Ram, a public servant and the said bribe money was getting routed by the help of present petitioner and Delhi based CA Mukesh Mittal to the bank accounts of family members of Veerendra Kumar Ram with the help of bank accounts of Mukesh Mittal's employees/ relatives. There is no reason to believe by this Court that the petitioner is not involved managing the money said to be proceeds of crime - This Court, in view of the aforesaid material available against the petitioner, is of the view, that in such a grave nature of offence, which is available on the face of the material, applying the principle of grant of bail wherein the principle of having prima facie case is to be followed, the nature of allegation since is grave and as such, it is not a fit case of grant of bail. The petitioner failed to make out a special case for exercise of power to grant bail and considering the facts and parameters, necessary to be considered for adjudication of bail, without commenting on the merits of the case, this Court does not find any exceptional ground to exercise its discretionary jurisdiction to grant bail - this Court is of the view that it is not a case where the prayer for bail is to be granted, as such the instant application stands dismissed. 2024 (3) TMI 132 Money Laundering - proceeds of crime - duping investors after having obtained licence to develop a housing project which also had been obtained on submission of forged and fabricated documents - about 3000 investors had been left high and dry and a wrongful loss of around one thousand crores had been caused - furnishing of fake bank guarantees, collaboration agreement, special power of attorney etc. - HELD THAT:- It is common knowledge that of late, economic offences, which strike at the very economy of a country have spiralled. Scams running into hundreds and thousands of crores of rupees no longer surprise the common citizen as they seem to have become a norm. Litigation pertaining to these disputes are consuming substantial time of the Courts. Where there is an illegality, the same has to be struck down. At the same time, frivolous and luxury litigation needs to be discouraged. It is for the Courts to separate the grain from the chaff with a view to ensure that whereas the rights of citizens are not harmed, litigation also does not flood the Courts. The first argument that once the operation of the impugned order dated 07.01.2021, passed by the Chief Judicial Magistrate, Gurugram and further proceedings in the consequential FIRs Nos. 10 11 dated 14.01.2021 respectively had been stayed, the ECIR could not have been recorded, is devoid of merit - It has been categorically held by the Hon ble Supreme Court of India in the case of MANIK BHATTACHARYA VERSUS. RAMESH MALIK AND ORS. [ 2022 (10) TMI 1196 - SUPREME COURT] that a restraint order passed in a criminal matter would not affect proceedings under the PMLA especially once the Enforcement Directorate was not a party to the same and also because the offence of money laundering is an independent offence wherein, an accused would have independent remedies in case of violation of the statutory provisions. The second argument that once, vide orders dated 05.07.2023, the Chief Judicial Magistrate, Gurugram had been directed to pass a fresh order on the complaint filed under Section 156 (3) Cr.P.C., the orders dated 07.01.2021 would be deemed to have been set aside and the consequential FIRs would become non-est and would be deemed to have been quashed or set aside is also devoid of merit. The 3rd argument that non-bailable warrants could not have been issued in aid of investigation is also devoid of merit. Firstly, it has come on record that the petitioners had not been cooperating with the respondents and that while they initially appeared in pursuance to the notices issued, they gave evasive answers and now they have not been appearing in pursuance to the summons/notices issued by the respondents. If this argument was to be accepted, an Investigating Agency, be it the jurisdictional police, the Enforcement Directorate, CBI or any other agency would have no remedy if an accused chose not to cooperate with the investigation. It cannot be accepted that an Investigating Agency would be rendered without any remedy. Even otherwise, it is now well settled that an accused can very well be summoned or his presence can be compelled by way of non-bailable warrants by the Court at the instance of the Investigating Agency. As regards the argument that petitioner Dharam Singh Chhoker had never been the director and, therefore, no proceedings could have been issued against them, the same is also devoid of merit. The argument that since Dharam Singh Chhoker was not arraigned as an accused in the complaints submitted by Neeraj Chaudhry, no proceedings could have been issued against him is also devoid of merit - All these issues have been dealt with by the Hon ble Apex Court in the case of PAVANA DIBBUR VERSUS THE DIRECTORATE OF ENFORCEMENT [ 2023 (12) TMI 49 - SUPREME COURT] wherein it was held In a given case, if the prosecution for the scheduled offence ends in the acquittal of all the accused or discharge of all the accused or the proceedings of the scheduled offence are quashed in its entirety, the scheduled offence will not exist, and therefore, no one can be prosecuted for the offence punishable under Section 3 of the PMLA as there will not be any proceeds of crime. A perusal of the aforesaid judgment shows that even if one of the petitioners was not shown to be an accused, he could be prosecuted under the PMLA so long as the scheduled offence exists. The scheduled offence, as already mentioned in the preceding paragraphs, is not only in FIR Nos. 10 11 dated 14.01.2021 but also in other FIRs referred to therein. It is also clear from a perusal of the aforesaid judgment that since there were other FIRs also, proceeds of crime cannot be ruled out and, therefore, it cannot be said that no offence of money laundering can be said to have been committed - The reality would emerge only once the concerned Investigating Agencies conclude the investigation/inquiry. The petitions are devoid of merit and accordingly, the same are dismissed. Service Tax 2024 (3) TMI 131 Levy of service tax - transfer of Intellectual Property Services - slump sale - transaction amounting to providing of service or not - service tax levied on the ground that it supplied their own invention and scientific discovery without clarification and bifurcation of the value in the sale and purchase agreement - HELD THAT:- After considering the facts of the case and referring to the statements recorded by the appellant during the course of investigation prior to issuance of the show-cause notice wherein it is made clear that the respondent has transferred the entire polymer division as a slump sale to SIPPL and accordingly the Tribunal has rightly observed after analysing the provisions of Section 65 pertaining to the definition of scientific or technical consultancy under Section 65(92) and intellectual property service as per Section 65(55b) of the Finance Act, 1994 read with the definition of slump sale as per Section 2(42C) of the Income Tax Act, 1961 has rightly held that in case of slump sale, there is no question of providing intellectual property service or scientific or technical consultancy as alleged by the appellant. The facts narrated in the impugned order of the Tribunal are not in dispute and in case of slump sale, there is no question of providing any service as per Section 65(92) as well as Section 65(55b) of the Finance Act, 1994 - the reasons assigned by the Tribunal and as such no question of law much-less any substantial question of law arises from the impugned order of the Tribunal. Appeal dismissed. 2024 (3) TMI 130 Levy of service tax - Interest Free maintenance Security (IFMS) - Lease Rent and Capital Replacement Fund - SCN issued only on the basis of audit objection without any further investigation in the matter - time limitation - HELD THAT:- The show cause notice has been issued only on the basis of audit objection without any further investigation or enquiry. Even the figure of amount received and the demand of service tax has been made on the basis of figures indicated in the audit objection. Revenue has not even cared to look and verify the correctness of these figures by examining the source documents. None of these documents are even relied upon by in the show cause notice. In case of SWASTIK TIN WORKS VERSUS COLLECTOR OF CENTRAL EXCISE, KANPUR [ 1986 (3) TMI 192 - CEGAT, NEW DELHI] , it was held that we find that there is no evidence whatsoever that the goods that were actually cleared by the appellants were metal containers in unassembled form and not, as claimed by the appellants and already approved by the Department, in the shape of cut-to-size sheets meant for bottoms and bodies of metal cans. Though the demand can be set aside on this preliminary observation, it is found that demand is also not sustainable on the merits. Interest Free maintenance Security (IFMS) - HELD THAT:- It was held in the case of M/S KDP INFRASTRUCTURE PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, GHAZIABAD [ 2018 (11) TMI 984 - CESTAT ALLAHABAD] that the security deposits collected by the Builder for providing maintenance to immovable property services would not be taxable under the category of Management Maintenance or Repairs Services . Lease Rent and Capital Replacement Fund - HELD THAT:- From the perusal of the extract of the audit report it is evident that in case of Lease Rent, appellant had taken categorical stand at the time of audit itself that this amount was to be transferred to NOIDA authority as such. This stand of the appellant has not been countered either in the show cause notice, order in original or order in appeal. This amount was not towards any service provided by the appellant. However without specifying the purpose of this amount both the lower authorities have concluded that this amount is towards, renting of immovable property service - Nothing has been stated in the above audit note in respect of the capital replacement fund. Even show cause notice do not specify anything in this respect. Assistant Commissioner have concluded that these services are classifiable are the category of Business Auxiliary Services and Commissioner (Appeal) do not specify under which taxable category he intends to classify the services provided by the appellant against this amount - Since impugned order upholds the order of the Assistant Commissioner, it is presumed that he agrees with the classification made by the original authority. However there are no basis in either of the order for classifying these services under this category. Appellant have already paid service tax on these amounts by classifying them under the category of Construction of Residential Complex Service after availing the abatement as provided by Notification No 29/2010-ST dated 22.06.2010. Time limitation - HELD THAT:- The audit of the unit was conducted on 04.12.2012, 05.12.2012 and 10.12.2012 and the audit report was issued on 05.04.2013. The show cause notice in this case has been issued to the appellant on 19.10.2016, without specifying any ground for invocation of extended period. When this show cause has been issued without any further investigation or enquiry then there can be no reason for invoking extended period of limitation from the date of audit. There are no merits in the impugned order - appeal allowed. 2024 (3) TMI 129 Non-payment of service tax - Cleaning Services - Manpower Recruitment or Supply Agency Services - Services provided by the respondent to the Government Hospitals, Medical Colleges, Primary Health Centres, Community Health centres, Arogya Parivar Kendra, Block health Centres, Panchayat Health Centres, Municipal Corporation, District Ayurved Office Bhavnagar etc. - exemption from payment of Service tax under Sr. No. 25(a) of the Notification No. 25/2012-ST dated 20.06.2012 - exemption denied on para medics and other staff provided by the respondent - services provided to the Education Institution i.e. Dr. Baba Saheb Ambedkar Open University, Government Medical College, Government college, Nursing College, University Granth Nirman Board, Sport Authority of Gujarat/ Sport Training Centers, IPR- Institute of Plasma Research, Gandhinagar etc. - time limitation - suppression of facts or not. Demand of Service tax of Rs. 50,02,195/- is dropped by merely relying the upon a CA certificate - HELD THAT:- The Ld. Commissioner after verifying the CA Certificate dated 09.07.2019, ledger of Service tax liability, ST-3 returns and other documents etc., found that the difference of Service tax collected and not paid is of Rs. 60,604/-. Ld. Commissioner has therefore held the demand of Rs. 60,604/- is sustainable and remaining amount of Rs. 52,02,195/- is not sustainable - It is found that as regard the said dropped demand revenue in the present appeals nowhere rely upon any details/ documents or any evidence by which it can be concluded that the demand dropped by the Ld. Adjudicating authority is not correct. Services provided by the respondent to the Government Hospitals, Medical Colleges, Primary Health Centres, Community Health centres, Arogya Parivar Kendra, Block health Centres, Panchayat Health Centres, Municipal Corporation, District Ayurved Office Bhavnagar etc. - HELD THAT:- On perusal of the entry of N/N. 25/2012-ST dated 20.06.2012 as amended vide Notification No. 6/2014-ST dated 11.07.2014, it would be seen that the above said exemption is available to services which are provided to Government, a local authority or a government authority by way of carrying out any activity in relation to any function ordinarily entrusted to a Municipality in relation to water supply, public health, sanitation conservancy, solid waste management upto 10.07.2014 and w.e.f. 11.07.2014 services by way of water supply, public health, sanitation conservancy, solid waste management of slum improvement and up-gradation - The words any activity and by way of employed by the legislature in above exemption entry of Notification No. 25//2012-ST would make it abundantly clear that all the activities involved in relation to public health are covered under the said entry - there are strength in the finding of Ld. Adjudicating authority that any services provided to government in relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement etc, is exempted from payment of service tax in terms of above mentioned Notification - the concept of categorization of services under Section 65 of the Finance Act, 1994 has been redundant after 01.07.2012. For the exemption of service tax under the disputed entry only two requirements has to be satisfied. First the service must be provided to Government, Local Authority or a Governmental authority and second is the services must be any activity in relation to public health. In the present disputed matter respondent fulfill both the requirements - there are no reason for interfering in the conclusion reached by the Ld. Commissioner in the impugned order - impugned order is correct, legal and does not suffer from any infirmity. Denial of exemption also take the ground that the para medics and other staff provided by the respondent do not have any direct contract with the patients and do not raise any invoices on the patients and also do not have any legal responsibility to provide public health services on his own account - HELD THAT:- A plain reading of the provisions of N/N. 25/2012-ST as amended makes it clear that there is no requirement of a contract between the para-medics, etc. and Patients. There is no requirement that such para-medics and personnel must issue invoices in the name of patients. In such circumstance, it is not permissible to insert such a requirement with a view to deny the exemption. The requirement of the said above exemption entry is only that services must be provided to Government in relation to public health. Once it is the requirements of exemption only, any further condition of contract or invoice between the service provider and patients that is nowhere specified in the above notification cannot be read into it. Demand dropped by the Ld. Commissioner on services provided to the Education Institution i.e. Dr. Baba Saheb Ambedkar Open University, Government Medical College, Government college, Nursing College, University Granth Nirman Board, Sport Authority of Gujarat/ Sport Training Centers, IPR- Institute of Plasma Research, Gandhinagar etc. - HELD THAT:- All the Services provided to education institution such as transport services, hostels, housekeeping, security, canteen services and any other type of services provided to education institution are exempted from payment of service tax and covered under the above entry of exemption notification. In the disputed matter it is on record that respondent supply the manpower to educational institutions by way of drivers/ administrative staff/ class 3 4 staff that are essential for the educational institutions for performing their works. Therefore respondent is eligible for exemption from payment of Service Tax for supply of manpower to above mentioned educational institutions under Sr. No. 9 of Notification No. 25/2012-ST dated 20.06.2012. Cleaning and housekeeping services provided by the respondent to Government offices, Courts, government undertakings - HELD THAT:- The cleaning and housekeeping services are essential parts of sanitation conservancy and waste management. On going through the sample work contract No. GFSU/Housekeeping/9/1/2016 dated 01.01.2016 wherein the scope of works includes cleaning toilets, wash basins, urinals, overhead water tanks, clearing drainages, sewers, manholes, pest control etc. The respondent are eligible for exemption under Sr. No. 25(a) of the Mega Notification No. 25/2012-ST dated 20.06.2012 for cleaning and Housekeeping service provided to Government Hospitals and other government entities. Time limitation - Suppression of facts or not - HELD THAT:- If a tax is chargeable, in order to recover the service tax not paid or short paid a notice has to be issued under Section 73 of the Act. This is the only remedy available to the Revenue. The notice can be issued within the normal period of limitation only unless the elements of fraud or collusion or willful statement or suppression of facts or contravention of any provisions of the Act or Rules with an intent to evade payment of service tax is established. If any of these elements are established in any case, the demand can be raised within an extended period of limitation of 5 years - there are no willful or deliberate suppression of the fact with intent to evade payment of service tax. We are of the opinion that whether the respondent is entitled for the benefit of the exemption notification or not depend on the interpretation of the exemption notification and on the contrary, to a very large extent, their interpretation is found correct. Thus, it is evident that there is not even an iota of evidence to even suggest that there was any willful misstatement or suppression of facts on the part of the Respondent. Consequently, extended period is not invokable in this case. The impugned order is upheld - Revenue's appeals are dismissed. 2024 (3) TMI 128 Refund of CENVAT Credit - rejection on the ground that the respondents were not eligible to avail the cenvat credit on the input services in view of the bar contained in Rule 6 of the CENVAT Credit Rules, 2004 - whether the respondent is eligible for the benefit of cenvat credit which is used for Port services which has resulted in refund? - HELD THAT:- There is no whisper on this issue of eligibility of cenvat credit on port services in their grounds filed and placed before me. Therefore, the appeal filed by the Revenue fails on this ground itself. The respondent has placed on record the judgment of this Tribunal in the respondent s own case COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, BELGAUM VERSUS BELLARY IRON ORE PVT LTD [ 2023 (9) TMI 1440 - CESTAT BANGALORE] , wherein it is held as The services rendered at the port has been consistently held as an input service within the definition of input service as per Rule 2(l) of Cenvat Credit Rules, 2004, port being the place of removal in case export of goods. In result, the order of the ld. Commissioner (Appeals) is upheld and the appeal filed by the Revenue is dismissed. There are no merit in the appeal filed by the Revenue - Hence, the Revenue s appeal is dismissed. Central Excise 2024 (3) TMI 127 Principles of Natural Justice - challenge on the short ground that he has not discussed the merits of the case and has gone by the earlier order - benefit under Notifications dated 07.05.1997 and 02.06.1998 - it was held by CESTAT that Apart from the fact that the earlier order of the Commissioner on the valuation aspect was accepted by the Revenue and no appeal was filed there-against, we also take into consideration the fact that the period involved in the present show cause notice stands already adjudicated by the Commissioner in the earlier order and as such he has rightly adopted the principles of res judicata, we find no merits to take a different view. HELD THAT:- There are no requirement to interfere with the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) as the decision applying the benefit under Notifications dated 07.05.1997 and 02.06.1998 are confined the facts and circumstances of the case. Appeal dismissed. 2024 (3) TMI 126 Adoption of hybrid option of post clearance availment of Ineligible CENVAT credit on inputs and payment of amount equal to 6% of the value of such exempted goods under rule 6(3) of the Credit Rules - violation of the condition prescribed in Notification No. 30/2004-C.E. - HELD THAT:- Once the assessee has reversed the 6% of the value of the goods treating such goods as exempted as per the Sub-rule (3D) of the Rule 6 of the Rules, the condition of the Notification No. 30 of 2004 can be said to have been met and in such circumstances, the Tribunal has rightly allowed the appeal of the respondent-Assessee by quashing and setting aside the demand raised by the appellant. No question of law, much less any substantial questions of law, arises from the impugned order passed by the Tribunal - appeal dismissed. 2024 (3) TMI 125 Rebate claim for the duty paid on export of goods - part rejection of rebate on the ground that this amount is not eligible as credit for the reason that the appellant has not maintained separate accounts for the common input services used for exempted and dutiable goods - suppression of facts or not - invocation of Extended period of limitation - HELD THAT:- The Show Cause Notice dated 01.03.2013 has been issued for the period September 2010 to April 2011 invoking the extended period. In Paragraph 14 of the Order-in-Original, the Adjudicating Authority has observed that the conduct of the assessee in maintaining separate accounts for inputs and not maintaining separate accounts for input services commonly used for dutiable and exempted goods is a pre-planned action for evasion of duty - this view cannot be agreed upon. Whatever be the reason given by the appellant for not maintaining separate accounts in regard to input services, it is to be seen that the Department was aware of this fact - The appellant has disclosed the availment of credit in ER-1 returns. When Department had issued Show Cause Notice dated 04.04.2012 on the same allegation of availing wrong credit, the subsequent Show Cause Notice invoking extended period is not sustainable. The Department ought not to have waited for the rebate proceedings to get finalized and ought to have issued Show Cause Notice within the normal period. There is absolutely no suppression of facts established against the appellant. The invocation of extended period is not sustainable. The Show Cause Notice is time barred. The appellant succeeds on limitation - Appeal allowed. 2024 (3) TMI 124 Principles of Res-judicata - Invocation of Extended period of Limitation - Recovery of illegally availed CENVAT Credit with interest and penalty - earlier SCN was withdrawn and second SCN issued for the recovery - HELD THAT:- There are no substance in the argument of the learned advocate for the appellant in as much as the first show-cause notice had not been decided confirming the allegations and the demand proposed therein and not resulted in an appealable order. During the pendency of the adjudication of the said show-cause notice, another show-cause notice was issued by the Commissioner correcting the computation error in the first show-cause notice and a higher demand has been proposed. However, there are substance in the argument of the learned advocate for the appellant that since in the first show-cause notice extended period of limitation has been invoked and stating the same set of facts which has been repeated in the second show-cause notice for invoking extended period of limitation, cannot be sustained in view of the judgment of the Hon ble Supreme Court in NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [ 2006 (4) TMI 127 - SUPREME COURT] . The matter is remanded to the Commissioner to restrict the adjudication of demand to normal period of limitation - Appeal allowed by way of remand. CST, VAT & Sales Tax 2024 (3) TMI 123 Availment of Input Tax Credit - appeal dismissed on the basis of invoices and bank transactions inasmuch as the transactions have not been proved as a bonafide and genuine transactions otherwise establishing the actual transportation of goods - finding of fact has been recorded against the dealer and the benefit has been allowed only on the basis of tax invoices and bank transactions - HELD THAT:- In the present case, counsel on behalf of the revisionist has submitted that the documents in relation to the transportation of goods were also provided to the authorities below. However, the same do not find reflection in the order passed by the first appellate authority and the Tribunal. It is also true that the Tribunal has recorded finding that the Department has not been able to show any adverse document against the revisionist. The ratio of the decision of the Tribunal is contrary to the judgment of the Apex Court in THE STATE OF KARNATAKA VERSUS M/S ECOM GILL COFFEE TRADING PRIVATE LIMITED [ 2023 (3) TMI 533 - SUPREME COURT] as the Tribunal has granted the I.T.C. merely on the basis of invoices and payment details. The order passed by the Tribunal is required to be quashed and set-aside with a direction to the Tribunal to hear the matter afresh allowing the revisionist to produce documents in relation to the transactions including transportation documents and any other relevant document which the petitioner wishes to place. The Department may also be allowed to adduce further evidence, if it so desires - The Tribunal to decide the matter afresh. The revision petition is, accordingly, allowed. 2024 (3) TMI 122 Violation of the principles of natural justice - impugned order is non-reasoned as the application for recall of the order was considered as application for rectification of mistake only - failure to consider the explanation of the Revisionist as sufficient cause for non- appearance on the date (07.12.2016) on which hearing was fixed - date of which certified copy of the Order dated 08.12.2016 is obtained, is to be considered as the date from which limitation period commences under the Uttar Pradesh Trade Tax Act, 1948 or Uttar Pradesh Value Added Tax Act, 2008 - affidavit of the Revisionist is enough to establish that the copy of order was not served upon the Revisionist - HELD THAT:- Absence of reasoning would render the judicial order liable to interference by the higher court. Reasons are the soul of the decision and its absence would render the order open to judicial scrutiny. The consistent judicial opinion is that every order determining rights of the parties in a Court of law ought not to be recorded without supportive reasons. Issuing reasoned order is not only beneficial to the higher courts but is even of great utility for providing public understanding of law and imposing self- discipline in the Judge as their discretion is controlled by well- established norms. Absence of reasoning is impermissible in judicial pronouncement. It is the duty cast upon the Appellate Authority that even if it is in agreement with the view taken by the first Appellate Authority, it should give its own reasons/findings which may indicate that there has been application of mind and also the consideration of grounds raised in the appeal by the revisionist. In absence of reasons it is difficult to come to a conclusion that there has been any application of mind by the Tribunal and such an order in the opinion of the Court cannot be sustained and deserves to be set aside. The question posed for consideration in the revisions is answered in favour of the assessee and it is held that the Tribunal has committed manifest error of law in not complying the provisions of Clause 5 of Section 63 of the Rules, 2008 - the impugned order dated 08.12.2016 is hereby set-aside - revision allowed. Indian Laws 2024 (3) TMI 121 Appointment of an arbitrator for the adjudication of disputes - Applicability of time limitation - Section 11(6) of the Arbitration and Conciliation Act, 1996 - agreement entered into between the parties for the AELA- failure of the respondent in nominating an arbitrator as per the mutually agreed upon procedure in response to notice for invocation of arbitration. Whether the Limitation Act, 1963 is applicable to an application for appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996? If yes, whether the present petition is barred by limitation? - HELD THAT:- There is no doubt as to the applicability of the Limitation Act, 1963 to arbitration proceedings in general and that of Article 137 of the Limitation Act, 1963 to a petition under Section 11(6) of the Act, 1996 in particular. Having held thus, the next question that falls for determination is whether the present petition seeking appointment of an arbitrator is barred by limitation. The determination of the aforesaid question is an exercise involving both law and facts. As is evident from Article 137 of the Limitation Act, 1963, the limitation period for making an application under Section 11(6) of the Act, 1996 is three years from the date when the right to apply accrues. Thus, to determine whether the present petition is barred by limitation, it is necessary to ascertain when the right to file the present petition under Section 11(6) of the Act, 1996 accrued in favour of the petitioner. When does the right to apply under Section 11(6) accrue? - HELD THAT:- The request for appointment of an arbitrator was first made by the petitioner vide notice dated 24.11.2022 and a time of one month from the date of receipt of notice was given to the respondent to comply with the said notice. The notice was delivered to the respondent on 29.11.2022. Hence, the said period of one month from the date of receipt came to an end on 28.12.2022. Thus, it is only from this day that the clock of limitation for filing the present petition would start to tick. The present petition was filed by the petitioner on 19.04.2023, which is well within the time period of 3 years provided by Article 137 of the Limitation Act, 1963. Thus, the present petition under Section 11(6) of the Act, 1996 cannot be said to be barred by limitation. Whether the court may refuse to make a reference under Section 11 of Act, 1996 where the claims are ex-facie and hopelessly time-barred? - HELD THAT:- The present petition filed by the petitioner is not barred by limitation. Whether the claims sought to be arbitrated by the petitioner are ex-facie barred by limitation, and if so, whether the court may refuse to refer them to arbitration? - Jurisdiction versus Admissibility - HELD THAT:- From the email communications placed on record, it appears that due to the pre-existing disputes between the parties in relation to the franchise agreements, the respondent sent a demand notice to the petitioner seeking payment of royalty and renewal fees from the petitioner. It appears that in reply to the said notice dated 23.03.2018, the petitioner raised the issue of payment of dues relating to the ICCR project. Some more emails were exchanged between the parties on the issue however it can be seen that vide email dated 28.03.2018, the respondent clearly showed unwillingness to continue further discussions regarding payments related to the ICCR project. Thus, it can be said that the rights of the petitioner to bring a claim against the respondent were crystallised on 28.03.2018 and hence the cause of action for invocation of arbitration can also said to have arisen on this date. When does the Cause of Action arise? - HELD THAT:- The balance limitation left on 15.03.2020 would become available w.e.f. 01.03.2022. The balance period of limitation remaining on 15.03.2020 can be calculated by computing the number of days between 15.03.2020 and 27.03.2021, which is the day when the limitation period would have come to an end under ordinary circumstances. The balance period thus comes to 1 year 13 days. This period of 1 year 13 days becomes available to the petitioner from 01.03.2022, thereby meaning that the limitation period available to the petitioner for invoking arbitration proceedings would have come to an end on 13.03.2023. When is Arbitration deemed to have commenced? - HELD THAT:- In the present case, the notice invoking arbitration was received by the respondent on 29.11.2022, which is within the three-year period from the date on which the cause of action for the claim had arisen. Thus, it cannot be said that the claims sought to be raised by the petitioner are ex-facie time-barred or dead claims on the date of the commencement of arbitration - from an exhaustive analysis of the position of law on the issues, while considering the issue of limitation in relation to a petition under Section 11(6) of the Act, 1996, the courts should satisfy themselves on two aspects by employing a two-pronged test first, whether the petition under Section 11(6) of the Act, 1996 is barred by limitation; and secondly, whether the claims sought to be arbitrated are ex-facie dead claims and are thus barred by limitation on the date of commencement of arbitration proceedings. If either of these issues are answered against the party seeking referral of disputes to arbitration, the court may refuse to appoint an arbitral tribunal. The present arbitration petition having been filed within a period of three years from the date when the respondent failed to comply with the notice of invocation of arbitration issued by the petitioner is not hit by limitation - The notice for invocation of arbitration having been issued by the petitioner within a period of three years from the date of accrual of cause of action, the claims cannot be said to be ex-facie dead or time-barred on the date of commencement of the arbitration proceedings. Shri Justice Sanjay Kishan Kaul, Former Judge of the Supreme Court of India, appointed to act as the sole arbitrator - petition allowed. 2024 (3) TMI 120 Recovery of narcotics from a vehicle which was stopped during transit - Ganja - contraband item - procedure of search and seizure governed by Section 43 read with Section 49 of the NDPS Act - HELD THAT:- Admittedly, no proceedings under Section 52A of the NDPS Act were undertaken by the Investigating Officer PW-5 for preparing an inventory and obtaining samples in presence of the jurisdictional Magistrate. In this view of the matter, the FSL report(Exhibit P-11) is nothing but a waste paper and cannot be read in evidence. The accused A-3 and A-4 were not arrested at the spot. The offence under Section 20(b)(ii)(c) deals with production, manufacture, possession, sale, purchase, transport, import or export of cannabis. It is not the case of the prosecution that the accused A-3 and A-4 were found in possession of ganja. The highest case of the prosecution which too is not substantiated by any admissible or tangible evidence is that these two accused had conspired sale/purchase of ganja with A-1 and A-2. The entire case of the prosecution as against these two accused is based on the interrogation notes of A-1 and A-2. It is trite that confession of an accused recorded by a Police Officer is not admissible in evidence as the same is hit by Section 25 of the Evidence Act. Neither the trial Court nor the High Court adverted to this fatal flaw in the prosecution case and proceeded to convict A-3 and A-4 in a sheerly mechanical manner without there being on iota of evidence on record of the case so as to hold them guilty. The prosecution has miserably failed to prove the charges against the accused. The evidence of the police witnesses is full of contradictions and is thoroughly unconvincing. The conviction of the accused appellants as recorded by the trial Court and affirmed by the High Court is illegal on the face of record and suffers from highest degree of perversity. The judgment dated 10th November, 2022 passed by the High Court affirming the judgment of the trial Court convicting and sentencing the accused appellants for the charge under Section 8(c) read with 20(b)(ii)(c) of the NDPS Act is hereby quashed and set aside. The appellants are acquitted of all the charges - Appeal allowed. 2024 (3) TMI 119 Declaration of Petitioner as a Wilful Defaulter under the Master Circular on Wilful Defaulters, 2015 - depriving the Petitioner from availing credit facilities for his present and prospective business enterprises - HELD THAT:- In the present case, the satisfaction to issue Show Cause Notice does not appear to have been recorded in accordance with the requirements of the Master Circular. Keeping the object of the Master Circular in mind and the consequences that it entails, both civil and penal, the lender banks have an obligation to comply with the inbuilt safeguards in the Master Circular. Lest, the line between persons who commit mere default in repayment of loan obligations and those who commit Wilful Default in terms of the Master Circular, would get obliterated. Whether the Petitioner committed acts of Wilful Default? - HELD THAT:- The Forensic Audit Report only observed that it is not in a position to comment on their nature of loans and advances made to M/s Value Solar Energy Ltd., as necessary documents were not available. Merely because necessary documents were unavailable to the Forensic Auditor, the Respondent Bank could not have drawn an inference of diversion of funds. In doing so, the Respondent Bank failed to adhere to the requirement of Clause 2.1.3 read with Clause 2.5 of the Master Circular to identify Wilful Default which is intentional, deliberate and calculated and based on objective facts and circumstances of the case . The Respondent Bank cannot merely quote an observation from the Forensic Audit Report, which itself is not conclusive, and conclude that the same amounts to the diversion of funds. The Petitioner did not furnish his personal guarantee for the CDR package nor did he participate in any of the deliberations for the approval of the CDR package. The lender banks still approved the CDR package and acted upon it without the presence and personal guarantee of the Petitioner. The lender banks, therefore, tacitly acquiesced to the Petitioner s exit from MBSL and approved the CDR package of MBSL without his presence in any capacity or personal guarantee - Further, the undertaking relied upon by the Respondent Bank was not given by the Petitioner but by MBSL. Hence, if there exists a breach of the said undertaking, the remedy, if any, lies against MBSL and elsewhere and not against the Petitioner - thus, resignation from a company per se is not an act of Wilful Default under the Master Circular. Effect of Forensic Audit Report - HELD THAT:- Even under the Indian Evidence Act, 1872, the opinion of an expert witness under Section 45 is not a conclusive proof. It is subject to cross-examination and the opinion and conclusions of an Expert are subject to challenge. In the present scheme of things, the Master Circular casts a specific obligation on the Respondent Bank to act independently and objectively under Clause 2.1.3 read with Clause 2.5 as discussed above. It would, therefore, be unsafe if lender banks start to declare borrowers as Wilful Defaulter merely on the basis of observations made in the Forensic Audit Report without there being an independent application of mind. The lender banks must follow the mandate of Clause 2.1.3 read with Clause 2.5 of the Master Circular and independently find acts of Wilful Default which are intentional, deliberate and calculated and the said conclusion should be based on objective facts and circumstances of the case . Any other view would lead to consequences where mere cases of default would be categorised as acts of Wilful Default under the Master Circular. The Master Circular is not to be invoked in every case of default but only when the default is Wilful Default as construed under the scheme of the Master Circular. Identification of Wilful Default has to be made keeping in view the track record of the borrower and not on the basis of isolated transactions/incidents - HELD THAT:- The FRS, does not show a consistent negative track record of MBSL. MBSL was seen as a global player in photovoltaic cells. It had presence in several countries. It had serviced its debt and largely repaid the principal dues. The Respondent Bank, under Clause 2.1.3 read with Clause 2.5, was obligated to reflect upon the entire track record of MBSL and then conclude whether there existed events of Wilful Default and not on the basis of isolated transactions/incidents. Consequences of admitting MBSL for CDR under the CDR Scheme - HELD THAT:- This Court is of the view that it is incumbent upon banks who are dealing with public funds and discharging a public duty to make appropriate enquiries as to whether a borrower is in genuine financial difficulty or whether there exist events of fraud and malfeasance. If the lender banks find fraud or malfeasance, the CDR-EG must either refuse CDR completely or impose such additional onerous conditions as provided in the CDR Scheme itself - In the present case, the lender banks were fully aware of all the transactions, which are now alleged to be acts of Wilful Default. This fact is part of the documents leading to the finalization of the CDR scheme. Despite noting all transactions, financial statements, balance sheets, TEV Report and Stock Audit Report, the lender banks placed MBSL in Class-B of CDR Master Circular which cannot be assigned if there is diversion of funds. They found no occasion to order a forensic audit of MBIL before finalization of CDR scheme. The lender banks, therefore, never treated the alleged acts of Wilful Default as an act of diversion or siphoning either during finalization of CDR scheme or after its failure. The lender banks may become aware of such acts subsequently, may be, on their own, or on the basis of subsequent Forensic Audit Report. Having considered such acts, which were known subsequently, the lender banks may take an objective decision under the Master Circular on whether such acts constitute Wilful Default or not. In such a situation, the mere fact that an earlier CDR Scheme was finalised and nothing negative was flagged at that stage, may not come in way of the lender banks in invoking jurisdiction under the Master Circular. However, it may not be open for lender banks to classify known acts as events of Wilful Default merely because subsequently, in respect of the same known acts, the Forensic Audit Report has made certain observations. To declare a person as a Wilful Defaulter, lender banks have to independently find that the Wilful Default is intentional, deliberate and calculated and the said conclusion is based on objective facts and circumstances of the case , as required under the Master Circular. The Forensic Audit Report, at best, can act as a piece of corroboration for the said exercise, but not the sole basis. The reasons assigned in the impugned order dated 20.04.2023 passed by the Review Committee confirming the Petitioner as Wilful Defaulter under the Master Circular are unsustainable and the impugned order is accordingly, quashed and set aside - Petition allowed.
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