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2021 (10) TMI 1461
Competence of the Joint Director, Directorate of Revenue Intelligence, Bangalore, to issue the SCN u/s 124 of the Customs Act, 1962 - HELD THAT:- The moot question whether the officer of the DRI namely the Joint Director who had triggered the subject Show Cause Notice had power & competence, need not detain the court even for a furlong, the same being no longer res integra; the Apex Court in a very recent case ie., M/S CANON INDIA PVT. LTD Vs. COMMISSIONER OF CUSTOMS [2021 (3) TMI 384 - SUPREME COURT], having discussed the same inter alia in the light of sections 2(34), 6, 28, of the Act, has observed that the Addl. Director General of the DRI who had issued the Show Cause Notice of the kind, lacked competence.
Conclusion - The entire proceeding in the present case initiated by the Additional Director General of the DRI by issuing show cause notices in all the matters are invalid, without any authority of law and liable to be set-aside and the ensuing demands are also set-aside.
Petition allowed.
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2021 (10) TMI 1460
Jurisdiction of Arbitral Tribunal to convert a Section 9 petition into a Section 17 application - absence of a Statement of Claim affects the maintainability of a Section 17 application or not - Whether the finding of the learned Arbitral Tribunal, regarding prima facie liability, on the part of the appellant, to continue to pay the EMIs into the loan account of RBT, was, or was not, sustainable in law?
HELD THAT:- This Court has already opined, in Dinesh Gupta v. Anand Gupta [2020 (9) TMI 1322 - DELHI HIGH COURT] and [2021 (9) TMI 1572 - DELHI HIGH COURT] that the considerations guiding exercise of appellate jurisdiction under Section 37(2)(b) are, fundamentally, not really different from those which govern exercise of jurisdiction under Section 34 of the 1996 Act.
Objection to the Arbitral Tribunal having permitted OMP to be treated as an application under Section 17 - HELD THAT:- If the learned Arbitral Tribunal agreed to treat the Section 9 petition as an application under Section 17, it is not convinced that the decision suffers from any such error as may be regarded as fatal to the impugned order. It is also observed, in this context, that the appellant has not referred, in its appeal, to any provision of the 1996 Act which prohibits the learned Arbitral Tribunal from doing so; nor has any such provision come to my notice - The objection, of the appellant, to the learned Arbitral Tribunal having treated the Section 9 petition as an application under Section 17 is, therefore, rejected.
Objection regarding maintainability of Section 17 application in absence of Statement of Claim - HELD THAT:- The arbitral protocol, under the 1996 Act is, however, somewhat peculiar in its dispensation. Section 9 itself envisages grant of interim protection, by a Court, before institution of arbitral proceedings and can be invoked, in an appropriate case, even before the notice of arbitration, under Section 21, is issued. The reason is that, while considering the prayer for interim protection under the 1996 Act, whether under Section 9 or under Section 17, apart from the troika of a prima facie case, balance of convenienceand irreparable loss, the Court, or Arbitral Tribunal, is also required to preserve the sanctity of the arbitral process, which is the very raison d'etre of the 1996 Act. All efforts to foster and promote the arbitral process, and prevent its interception or interdiction have, therefore, to be made. The Court under Section 9, or the Arbitral Tribunal under Section 17 is also, therefore, empowered to grant interim protection where any possibility of the arbitral proceedings being frustrated is found to exist, whether such frustration be before the arbitral process is initiated, during the arbitral process or even after the passing of the Award. If, therefore, before a Statement of Claim is filed, the situation that presents itself is such that interim protection has to be granted, to ensure the preservation of the arbitral process, the Court under Section 9, and the Arbitral Tribunal under Section 17, is empowered to grant such protection.
Read conjointly, Sections 21 and 17, therefore, empower the Arbitral Tribunal to pass orders in terms of Section 17 at any point of time. The arbitral proceedings have commenced even before the Arbitral Tribunal is constituted, as the notice invoking arbitration would necessarily be prior in point of time. From its very inception, therefore, the Arbitral Tribunal is empowered to pass orders on any application filed, before it, under Section 17, by any of the parties. The requirement of filing of a statement of claim, prior to moving the Arbitral Tribunal under Section 17, can no longer be regarded as a mandatory requirement, after the amendment of Section 17 with effect from 23rd October, 2015.
The objection, of the appellant, to the Arbitral Tribunal having condescended to entertain the Section 17 application of the Chadhas, even before a statement of claim was filed by it, is also, therefore, rejected.
This Court has noted that, as a matter of routine, appeals are preferred against interlocutory orders passed by the Arbitral Tribunal, even if they do not result in irreparable prejudice to the appellant and are always capable of being modified when the final arbitral award is passed. Unlike the course of action, which it follows while dealing with petition under Section 9, the Court, when seized with an appeal against an interlocutory order of the learned Arbitral Tribunal under Section 17 of the Act, is constrained to return findings on merits, on the issues in controversy, as the Court is effectively sitting in judicial review over the findings of the learned Arbitral Tribunal. These findings have the potentiality of effecting, to some extent, the future course of the arbitral proceedings, as well as the final award that may come to be passed, even if the Court enters the usual cautionary caveat, that the findings are intended only to dispose of the appeal against the Section 17 order.
Conclusion - i) It is established that Section 17 application could be maintained without a prior Statement of Claim, emphasizing the need to preserve the arbitral process and the Tribunal's power to grant interim measures during proceedings. ii) The appellant is directed to continue paying EMIs into RBT's loan account during the pendency of arbitral proceedings.
Appeal dismissed.
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2021 (10) TMI 1459
Maninatinability of application - initiation of CIRP - pre-existing dispute between the parties or not - issuance of the Demand Notice' Under Section 8 of the Code - no Arbitration proceeding pending - HELD THAT:- This Court has consistently made it clear that an operational creditor cannot use the Code for extraneous considerations or as a substitute for debt enforcement procedures; and the object of the Code is to allow the insolvency process against the corporate debtor to be taken up at the instance of an operational creditor only in the clear case, where a real dispute between the parties as to the alleged debt does not exist.
The entire scheme of the Code in relation to the insolvency resolution by an operational creditor initially came up for exposition by this Court in the case of Mobilox Innovations [2017 (9) TMI 1270 - SUPREME COURT] - In that case, the Appellant had sub-contracted certain work to the Respondent and entered into a non-disclosure agreement. The Appellant withheld certain payments against invoices raised by the Respondent while alleging that certain actions of the Respondent were in breach of the nondisclosure agreement. A demand notice was sent by the Respondent Under Section 8 of the Code and in response thereto, the Appellant maintained that there existed serious and bona fide disputes and the notice was issued as a pressure tactic - the Appellate Tribunal allowed the appeal preferred by the operational creditor and remitted the matter to the Adjudicating Authority to consider admission of the application if it was otherwise complete. The order so passed by the Appellate Tribunal was challenged in appeal before this Court.
On the date when the Appellant chose to serve the notices Under Section 8 of the Code (i.e., on 14.02.2020), the arbitral awards in the present case had not attained finality and rejection of petitions Under Section 34 of the Act of 1996 had been in challenge in appeals Under Section 37 thereof. Even if the said appeals were dismissed in default, the Respondent company had moved for restoration with advance notice to the Appellant. It had not been a clear case of the corporate debtor being in default with no preexisting dispute.
On the factual aspect, it remains rather indisputable that even if the appeals were dismissed in default on 22.11.2019, the Respondent company indeed moved the applications for restoration on 17.12.2019 with advance notice to the Appellant. Thus, on the date of issuance of the notices (i.e., 14.02.2020), the Appellant was aware of the fact that the appeals Under Section 37 of the Act of 1996 had not been decided on merits and the applications for restoration had been moved within 30 days of such default dismissal - there are no hesitation in saying that in such a case, without a final decision on the prayer for restoration, the insolvency process at the instance of an operational creditor cannot be put into operation.
The applications moved by the Appellant for initiation of CIRP were required to be rejected in terms of Section 9(5)(ii)(d) of the Code which mandates such rejection if a notice of dispute had been received by the operational creditor or there is record of dispute in the information utility. Both the features are present in this case. The Respondent company had unambiguously responded to the notices sent by the Appellant within 10 days with the assertions that the applications for restoration of appeals were pending in the High Court, which were filed much before the receipt of demand notices and with advance notice to the Appellant.
Conclusion - The existence of a pre-existing dispute, including pending appeals, precludes the initiation of CIRP. The IBC is not intended for debt recovery but for resolving genuine insolvency issues.
Appeal dismissed.
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2021 (10) TMI 1458
Seeking necessary directions under Section 19(2) of Insolvency and Bankruptcy Code, 2016 against the suspended directors of Corporate Debtor for having violated the provisions of Section 14(1)(b) of the IBC in relation to 3 debits during the moratorium period and for imposition of penalty on the Respondents under Section 74(1) read with Section 235(A) of the IBC for violating the provision of Sec 14(1)(b) - HELD THAT:- It is noted that directors have co-operated with the IRP and RP. Though, there is infusion of funds which is on records but Rs. 1,60,000/- which is self-withdrawn and claimed to be utilised towards diesel consumption no proof is furnished in regards of the same. It is also noted that RP has sought exclusion of period of 25 days from the admission till communication of the order, there can not be vacuum in management of the Company. Directors were very well in charge of the corporate debtor and its affairs till the IRP taken over charge. Considering the facts of the case it is not inclined to impose any punishment. Directors are directed to deposit Rs. 1,60,000/- self withdrawn money plus Rs. 1,00,000/- as fine in the account of the Corporate Debtor.
Dated the 5th day of October, 2021.
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2021 (10) TMI 1457
Challenge to ex-parte ad-interim order passed by the learned Sole Arbitrator on a Section 17 application - whether in the facts of the case, was it appropriate for the learned Arbitrator to pass an ex-parte ad-interim order on the Respondent's Section 17 application? - HELD THAT:- The Act postulates that in conduct of the arbitral proceedings the fundamental requirement would be that the parties are not only treated with equality but each party 'shall be' given a full opportunity to present his case. This would be more imperative when the parties are already before the arbitral tribunal. Sub-section (2) of Section 19 recognizes the role of the parties when it provides that the parties are free to agree on the procedure to be followed by the tribunal in conducting its proceedings, which places an arbitral tribunal in a different position from that of a Court, when it confers such choice on the parties. The crucial provision however, is of Section 24. Sub-Section (2) of Section 24 inter alia mandates that the parties 'shall be' given sufficient advance notice of 'any hearing',. The provisions of Section 18, 19 and 24 would be required to be read in conjunction, as there is a common thread passing through these provisions in relation to the conduct of the arbitral proceedings, which is to the effect that the parties need to be fairly treated at all stages of the arbitral proceedings, and an adequate/sufficient opportunity is made available to them to present their case on any proceedings before the arbitral tribunal, which would also include before any order ad-interim, interim or final is to be passed by the arbitral tribunal.
It would be unknown to law and quite peculiar for an arbitral tribunal to pass an ex-parte ad-interim order, on the mere filing of a Section 17 application, without hearing even the party making the application, much less the contesting respondent, who would certainly be affected and/or prejudiced by an ex-parte order. It may be that the arbitral tribunal is of a firm opinion in the facts of a given case, that some urgent orders are required to be passed to protect the arbitral interest of the parties, however, fairness of the procedure and more particularly as reflected by the provisions, as discussed above, would not permit an arbitral tribunal to pass an ex parte order on a section 17 application and moreso when the parties are sufficiently before the arbitral tribunal.
Appellant's submission relying on the provisions of Rule 3 of Order 39 of the CPC that an arbitral tribunal before granting an injunction ought to have issued a notice, in my opinion, stand recognized by the provisions of sub-section (2) of Section 24 of the Act. However, in view of the observations made above, the proviso which deals with the power conferred on the Court to pass ex parte orders, cannot be applied to arbitral proceedings, in view of the clear provisions of sub-section (2) of Section 24 read with Section 18 of the Act. Thus, even if the arbitral tribunal is recognized to have the same power for making orders as that of the Court, for the purposes of and in relation to any proceedings before it, due meaning to the provisions of sub-section (2) of Section 24 read with Section 18 would be required to be given when it prescribes that a party shall be given sufficient advance notice of any hearing and further qualified with an obligation of the tribunal to treat all the parties equally and that each party shall be given a full opportunity to present its case, which is required to be recognized to be applicable at all stages of the proceedings before the arbitral tribunal.
It appears that even the respondent was not heard before passing the ex parte ad-interim orders and only on perusal of the averments in the application, such an order has been passed by the arbitral tribunal. This could have been certainly avoided by placing the respondent's application for hearing even urgently, with notice to both the parties.
Conclusion - The ex-parte order dated 8 October 2021 set aside, allowing the respondent to move the arbitral tribunal on its second Section 17 application with notice to the appellant.
The impugned order dated 8 October 2021 is set aside - appeal disposed off.
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2021 (10) TMI 1456
Challenge to Order of the National Consumer Disputes Redressal Commission (National Commission), dismissing their consumer complaint on the ground that there was no deficiency in service on the part of the licensee (electricity distribution company) - Interpretation of Section 56 of the Electricity Act, 2003, particularly the meaning of "first due" and the applicability of the limitation period for recovering dues.
Demand for additional payment by the electricity distribution company constitutes a "deficiency in service" under the Consumer Protection Act, 1986? - HELD THAT:- Despite holding that electricity charges would become first due only after the bill is issued to the consumer (para 6.9 of the SCC Report) and despite holding that Section 56(2) does not preclude the licensee from raising an additional or supplementary demand after the expiry of the period of limitation prescribed therein in the case of a mistake or bonafide error (Para 9.1 of the SCC Report), this Court came to the conclusion that what is barred Under Section 56(2) is only the disconnection of supply of electricity. In other words, it was held by this Court in the penultimate paragraph that the licensee may take recourse to any remedy available in law for the recovery of the additional demand, but is barred from taking recourse to disconnection of supply Under Section 56(2).
The bar actually operates on two distinct rights of the licensee, namely, (i) the right to recover; and (ii) the right to disconnect. The bar with reference to the enforcement of the right to disconnect, is actually an exception to the law of limitation. Under the law of limitation, what is extinguished is the remedy and not the right. To be precise, what is extinguished by the law of limitation, is the remedy through a court of law and not a remedy available, if any, de hors through a court of law. However, Section 56(2) bars not merely the normal remedy of recovery but also bars the remedy of disconnection. This is why the second part of Section 56(2) is an exception to the law of limitation.
It appears from the narration of facts in paragraph 2 of Rahamatullah Khan that this Court was persuaded to take the view that it did, on account of certain peculiar facts. The consumer in that case was billed under a particular tariff code for the period from July-2009 to September-2011. But after audit, it was discovered that a different tariff code should have been applied. Therefore, a show cause notice was issued on 18.03.2014 raising an additional demand for the period from July-2009 to September-2011. Then a bill was raised on 25.05.2015 for the aforesaid period. Therefore, the consumer successfully challenged the demand before the District Consumer Forum, but the Order of the District Forum was reversed by the State Commission on an appeal by the licensee. The National Commission on a revision filed by the consumer, set aside the order of the State Commission and restored the order of the District Forum. It was this Order of the National Commission that was under challenge before this Court in Rahamatullah Khan.
Interpretation of Section 56 of the Electricity Act, 2003, particularly the meaning of "first due" and the applicability of the limitation period for recovering dues - HELD THAT:- The bottom line of Sub-section (1) is the negligence of any person to pay any charge for electricity. Sub-section (1) starts with the words "where any person neglects to pay any charge for electricity or any some other than a charge for electricity due from him" - Sub-section (2) uses the words "no sum due from any consumer under this Section". Therefore, the bar Under Sub-section (2) is relatable to the sum due Under Section 56. This naturally takes us to Sub-section (1) which deals specifically with the negligence on the part of a person to pay any charge for electricity or any sum other than a charge for electricity. What is covered by Section 56, Under Sub-section (1), is the negligence on the part of a person to pay for electricity and not anything else nor any negligence on the part of the licensee.
The matter can be examined from another angle as well. Sub-section (1) of Section 56 as discussed above, deals with the disconnection of electric supply if any person "neglects to pay any charge for electricity". The question of neglect to pay would arise only after a demand is raised by the licensee. If the demand is not raised, there is no occasion for a consumer to neglect to pay any charge for electricity. Sub-section (2) of Section 56 has a non-obstante Clause with respect to what is contained in any other law, regarding the right to recover including the right to disconnect. Therefore, if the licensee has not raised any bill, there can be no negligence on the part of the consumer to pay the bill and consequently the period of limitation prescribed Under Sub-section (2) will not start running. So long as limitation has not started running, the bar for recovery and disconnection will not come into effect. Hence the decision in Rahamatullah Khan and Section 56(2) will not go to the rescue of the Appellant.
Conclusion - i) The raising of an additional demand due to a billing error does not constitute a deficiency in service under the Consumer Protection Act, 1986. ii) Section 56(2) of the Electricity Act, 2003, bars both the recovery of dues and the disconnection of supply after the limitation period, but the period starts from the issuance of the bill. iii) The decision in Rahamatullah Khan is factually distinguishable and does not apply to the present case concerning deficiency in service.
Appeal dismissed.
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2021 (10) TMI 1455
Disallowance u/s 14A on account of interest expenditure - HELD THAT:- Hon’ble Supreme Court in the latest judgment in the case of South Indian Bank [2021 (9) TMI 566 - SUPREME COURT] has reiterated the proposition that if the assessee is having mixed fund comprising of interest bearing and interest free funds then the investment in the shares and securities yielding tax free income will be considered out of interest free funds if the same are sufficient for making such investment.
Even otherwise, the assessee has given the details of the secured and unsecured loan which were taken for the specific purpose and acquiring assets as well as business purposes of the assessee and therefore, the expenditure on account of interest cannot be held to be attributable for earning the dividend income.
Accordingly, when the assessee is having sufficient interest free own funds in the shape of reserve and surplus then no disallowance u/s 14A is called for on account of interest expenditure particularly when the assessee has not made any new investment except meager amount during the year under consideration that too in the subsidiary company which has not yielded any dividend income. Hence, the disallowance made by the AO on account of interest expenditure u/s 14A is deleted.
Disallowance of deduction u/s 10B - Tribunal has noted that the Revenue has accepted the miscellaneous income of compensation as part of eligible profit for the purpose of computing the deduction u/s 10B - the matter was set-aside to the record of the Assessing Officer for verification of the nature of income and then allow the claim. To maintain the rule of consistency, we follow the earlier order of the Tribunal and set-aside the issue to the record of the Assessing Officer for computing the deduction u/s 10B of the Act in terms of directions as given by the Tribunal for AY 2007-08.
Reduction of the export turnover on account of the amount have not received in foreign currency - We find that if any sum is reduced from export turnover then the same is also required to be reduced from total turnover because the total turnover comprises of export turnover and non-export turnover. Therefore, following the decision of Genpact India [2011 (11) TMI 119 - DELHI HIGH COURT] we direct the A.O. to recomputed the deduction u/s 10B of the Act by reducing the said amount from total turnover also.
TDS u/s 195 - Disallowance made u/s 40(a)(i) towards payment made in foreign currency - HELD THAT:- CIT (A) has granted part relief to the assessee in respect of expenditure incurred for bank charges, spares parts and general charges. The rest of the disallowance was confirmed by the Ld. CIT (A) on the ground that the assessee has not able to substantiate its claim of nontaxability of these amounts in the hands of the recipient by producing supporting relevant details as to the residential status of the payee and the relevant provisions of DTAA. We find even before the Tribunal, the assessee has not produced the relevant details of the residential status as well as the respective DTAA between India-UK and India-USA. Though, it is contended by the assessee that in view of the Article-7 of the DTAA, the income is not taxable in India in the hands of the recipient however, nothing has been brought on record to point out how the income in the hand of the recipient is not taxable in India. Accordingly, in the facts and circumstances of the case, we do not find any reason to interfere with the impugned order of the Ld. CIT (A) qua this issue and the same is upheld.
Disallowance towards proportionate interest on capital working in progress - HELD THAT:- It is a matter of fact to be verified whether any unsecured loan is taken by the assessee for specific purpose being part of the capital working in progress. As regards the unsecured loans, it is primary onus of the assessee to prove that the unsecured loan is not utilized for the expenditure incurred towards capital work in progress. In the absence of these specific details, this issue cannot be decided conclusively - we set-aside the issue to the record of the Assessing Officer for verification of the facts.
Disallowance of leave encashment - HELD THAT:- There is no dispute that this expenditure on account of leave encashment has not been actually paid by the assessee to the employees during the year under consideration therefore, in view of the judgment of Exide Industries Ltd. [2020 (4) TMI 792 - SUPREME COURT] the same is allowable as deduction in the year of actually payment and not in the year when the provisions is made. Therefore, this ground of the assessee’s appeal stand dismissed.
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2021 (10) TMI 1454
Prior approval granted by the Commissioner of Police, Bengaluru City, to invoke Section 3 of the Karnataka Control of Organised Crimes Act, 2000 - whether prior approval accorded by the competent authority Under Section 24(1)(a) is valid? - HELD THAT:- Concededly, the original FIR registered in the present case was for an ordinary crime of murder against unknown persons. At the relevant time, the material regarding offence having been committed by an organized crime syndicate was not known. That information came to the fore only after investigation of the offence by the SIT, as has been mentioned in the report submitted to the Commissioner of Police, Bengaluru City for seeking his prior approval to invoke Section 3 of the 2000 Act. Once again, at this stage, the Commissioner of Police had focussed only on the factum of information regarding the commission of organized crime by an organized crime syndicate and on being prima facie satisfied about the presence of material on record in that regard, rightly proceeded to accord prior approval for invoking Section 3 of the 2000 Act - the specific role of the concerned Accused is not required to be and is not so mentioned in the stated prior approval. That aspect would be unravelled during the investigation, after registration of offence of organized crime. The High Court, thus, examined the matter by applying erroneous scale. The observations made by the High Court in the impugned judgment clearly reveal that it has glossed over the core and tangible facts.
The High Court, without analysing the material presented along with chargesheet on the basis of which cognizance has been taken by the competent Court including against the writ Petitioner-Mohan Nayak N., concerning commission of organized crime by the organized crime syndicate of which he is allegedly a member, committed manifest error and exceeded its jurisdiction in quashing the chargesheet filed before the competent Court qua the writ Petitioner-Mohan Nayak N.
As regards offences punishable Under Section 3(2), 3(3), 3(4) or 3(5), it can proceed against any person sans such previous offence registered against him, if there is material to indicate that he happens to be a member of the organized crime syndicate who had committed the offences in question and it can be established that there is material about his nexus with the Accused who is a member of the organized crime syndicate.
A priori, the conclusion reached by the High Court in partly allowing the writ petition filed by the writ Petitioner-Mohan Nayak N., is manifestly wrong and cannot be countenanced. In any case, the High Court has completely glossed over the crucial fact that the writ petition was filed only after the sanction was accorded by the competent authority Under Section 24(2) and more so cognizance was also taken by the competent Court of the offence of organized crime committed by the members of organized crime syndicate including the writ Petitioner - to which there was no challenge. The High Court has not analysed the efficacy of these developments as disentitling the writ Petitioner belated relief claimed in respect of prior approval Under Section 24(1)(a) of the 2000 Act. Further, the High Court has clearly exceeded its jurisdiction in quashing the chargesheet filed against the writ Petitioner-Mohan Nayak N. for offences punishable Under Section 3(2), 3(3) and 3(4) of the 2000 Act at this stage.
Conclusion - The prior approval was not for registering crime against individual offenders as such, but for recording of information regarding commission of an offence of organized crime under the 2000 Act. The prior approval and chargesheet were found to be valid, and the High Court erred in its interpretation and application of the 2000 Act.
The impugned judgment and order of the High Court needs to be set aside - Appeal allowed.
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2021 (10) TMI 1453
TP Adjustment - adjustments on the basis of “aggregation” of international transactions - HELD THAT:- The appellant filed the submission before the Ld. CIT(A) annexing the copy of the said APA, working of possible adjustment in the event the APA is applied by the appellant for the year under consideration along with the additional ground by and under the letter dated 25.06.2018.
The appellant relied upon the order passed by Ranbaxy Laboratories Ltd. [2016 (5) TMI 157 - ITAT DELHI] and M/s. Abicor Binzel Production (India) Pvt. Ltd. [2016 (8) TMI 1394 - ITAT PUNE] where such proposition of the appellant was accepted and therefore, the APA entered into by the appellant with CBDT has been prayed to be applied for in the year under consideration. The Hon’ble ITAT has also pleased to dismiss the departmental appeal for A.Y. 2010-11 which was finalized on the basis of the said Advancing Price Agreement dated 13.10.2015. Decided against revenue.
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2021 (10) TMI 1452
Revision u/s 263 - PCIT alleged that the AO has failed to verify the genuineness and creditworthiness of the lenders who have given loans to the assessee during the year - HELD THAT:- Limited scrutiny was not strictly meant for verification of loans which is inherently different from capital of the assessee.
AO was expected to verify increase in capital and not on procurement of loans. Assessee has presented the relevant data before the AO in support of loans obtained. The interest was paid on the loans and repayment was also made as claimed - view taken by the AO towards bonafides of loans appears quite reasonable and plausible.
This being as a rational view taken by the AO cannot be brushed aside in exercise of revisional powers. Observations made by the PCIT appear to be in the realm of suspicion and surmises.
PCIT has ignored the fact of deduction of TDS and consequent taxability of such interest in the hands of lender. The fact of repayment of loan has not been taken into account despite such facts having been brought to his notice in the revisional proceedings.
Apparently, the exercise of power by the PCIT on items unconnected to limited scrutiny is apparently unjustified and nonetheless, the assessee has placed reasonable evidences to support the factum of receipt of loan. The scope of Section 263 of the Act does not permit the PCIT to substitute his view with that of AO in the garb of directions towards enquiry on facts already on record - Decided in favour of assessee.
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2021 (10) TMI 1451
Challenge to impugned order - violation of principles of natural Justice - respondent has proceeded to pass the impugned orders without considering the replies submitted by the petitioner - HELD THAT:- As rightly contended by the petitioner and on perusal of the impugned orders at Annexures-A and A1 will indicate that though the respondent has referred to the objections filed by the petitioner, has not referred or adverted to the replies submitted by the petitioner. Except referring to the said objections, the various contentions urged by the petitioner in the replies dated 29.03.2021 and 30.03.2021 are never been considered or appreciated by the respondent prior to passing the impugned orders. Hence, the said orders are passed without application of mind and without considering the replies submitted by the petitioner and consequently, the impugned orders at Annexures-A and A1 are violation of principles of natural justice and the same deserves to be quashed.
Petition allowed by way of remand.
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2021 (10) TMI 1450
Quashing of FIR under Section 482 of the Code of Criminal Procedure - abetment of suicide u/s 306 of the Indian Penal Code - HELD THAT:- The High Court has the power Under Section 482 to issue such orders as are necessary to prevent the abuse of legal process or otherwise, to secure the ends of justice. The law on the exercise of power Under Section 482 to quash an FIR is well settled.
In Bhajan Lal [1990 (11) TMI 386 - SUPREME COURT], this Court laid down the principles for the exercise of the jurisdiction by the High Court in exercise of its powers Under Section 482 of the Code of Criminal Procedure to quash an FIR - the High Court while exercising its power Under Section 482 of the Code of Criminal Procedure to quash the FIR instituted against the second Respondent-Accused should have applied the following two tests: i) whether the allegations made in the complaint, prima facie constitute an offence; and ii) whether the allegations are so improbable that a prudent man would not arrive at the conclusion that there is sufficient ground to proceed with the complaint. Before proceeding further, it is imperative to briefly discuss the law on the abetment of suicide to determine if a prima facie case Under Section 306 of the Indian Penal Code has been made against the Respondent-Accused.
The alleged suicide is of a person who was working as a driver of a Special Land Acquisition Officer, who is a public servant and against whom serious and grave allegations of amassing wealth disproportionate to the known sources of income were made by the deceased. The suicide note contains a detailed account of the role of the Accused in the events which led to the deceased committing suicide. These are matters of investigation and possibly trial. The High Court stalled the investigation by granting an interim order of stay. If the investigation had been allowed to proceed, there would have been a revelation of material facts which would aid in the trial, for the alleged offence against the second Respondent.
The impugned judgment and order of the Single Judge of the High Court of Karnataka dated 29 May 2020 set aside - appeal allowed.
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2021 (10) TMI 1449
Assessment u/s 153C or 147 - documents seized and impounded in search proceedings u/s 132 carried out at the premise of third party which allegedly belongs to the present assessees - assessments on the basis of loose documents - HELD THAT:- Provisions of section 153C of the Act supersede the applicability of provisions of sections 147 and 148 of the Act. We find that certain documents were seized during the search u/s 132 of the Act and the Revenue came to conclusion that such documents belongs to assessees. Thus, in our view, only the provisions in which any assessment could be made against the assessees in the Income tax Act were of section 153C read with section 153 of the Act. Hence, notices issued under section 148 of the Act and proceedings under section 147 of the Act by the Assessing Officer are illegal and void ab initio in view of the provisions of section 153C of the Act.
Thus, the procedure of assessment in search cases clearly shows that these are separate provisions, independent of other provisions relating to reassessment, because of the non abstante clause begins with the said sections. We are of the view that when a search is carried out u/s. 132 of the IT Act, various assets and documents may be found and seized or requisition is made u/s. 132A and many of these "assets/documents" may not actually belong to the "person searched" but may belong to such "other person" and then Section 153C clearly provides that proceedings as prescribed u/s. 153A can be initiated against such "other person" if conditions laid down in that section are satisfied. Thus the proceeding in such case where any document is seized “belong to” other person can only be initiated under Section 153C of the Act. Section 153C is a provision specifically provided “assessment of income any other person"
Thus re-assessment pursuant to “material /document found” during search at third party where satisfaction recorded that material/document so found “belong to” to other person (other than the searched person) than assessments can only be done through recourse of Section 153C and not by invoking the Provision of Section 147/148 of the Act as the provisions of Section 153C are overriding in nature and contend non obstante Clause for Section 139, 147, 149,151 & 132 of the Act. Assessee appeal allowed.
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2021 (10) TMI 1448
Invalid approval given by the JCIT u/s 153D to the order passed u/s 153A - HELD THAT:- We find that it is undisputed fact that the approval u/s 153D has been sought on 31/12/2017 and on the same day, approval has been granted in 38 cases which included cases of other groups also.
We find that the issue involved in this appeal is duly covered in favour of the assessee by the order of this Tribunal in the case of Shri Navin Jain and Others [2021 (9) TMI 1068 - ITAT LUCKNOW] wherein held approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. Also see Naresh Kumar Jain & Others [2021 (9) TMI 1080 - ITAT LUCKNOW].
Thus granting of a mechanical approval u/s 153D of the Act vitiates the entire proceedings. It is on this basis that the issue was decided in favour of the assessee in both these cases, under facts and circumstances exactly similar to those present herein.
Thus we allow additional ground of appeal and quash the assessment order. Assessee appeal allowed.
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2021 (10) TMI 1447
Vesting of land under the U.P. Zamindari Abolition and Land Reforms Act, 1950 - it is contended that in terms of Section 4 of the Abolition Act, all rights, title and interest of all intermediaries including the forest had vested in the State of Uttar Pradesh - HELD THAT:- The notification dated 11.10.1952 published in terms of Section 4 of the Abolition Act was to the effect that all estates situated in Uttar Pradesh shall vest in the State. The extent to which uncultivated land which not vests in Gaon Samaj was mentioned in Column 5 stating that 162 acres of Village Kasmandi Khurd would not vest in Gaon Samaj. Such notification has the effect that all rights, title and interest, shall be deemed to be vested in the State of Uttar Pradesh. In terms of Section 117 of the Abolition Act, the State can transfer the lands by a general or special order as prescribed therein including forests to Gaon Sabha and to other local authorities. It is not the case of any of the parties that the land, which was the subject matter of notification dated 11.10.1952, was subject to any general or special orders by the State to transfer the same in favor of Gaon Sabha and/or any other local authority. Therefore, the land comprising in notification dated 11.10.1952 unequivocally vests with the State.
It is thereafter that a notification dated 23.11.1955 was published in respect of 162 acres of land situated in Kasmandi Khurd. Such notification describes the land with boundaries mentioned in the notification. Thereafter, another proclamation was published under Section 6 of the Forest Act in respect of 162 acres of land including 20 bighas 13 biswas and 10 biswansi of Khasra No. 1576 of Village Kasmandi Khurd. The notification under Section 4 of the Forest Act to declare any land as reserved forest could be issued if the State has proprietary rights over such land or if it is entitled to the produce thereof.
The notification dated 23.11.1955 satisfies the three conditions mentioned in sub-section 4 i.e., (i) decision to constitute such land as reserved forest, (ii) situation and limits of such land, and (iii) appointing an officer to inquire into and determine the existence, nature and extent of any rights alleged to exist in favour of any person in or over any land comprised within such limits. The lessees were not in possession of any part of the land at the time of issuance of such notification under Section 4 on 23.11.1955. Therefore, they have rightly not claimed any right over the property nor the Gaon Sabha has claimed any right in the land measuring 162 acres notified under Section 4 of the Act.
In the notification published on 23.11.1955, there was a declaration that land measuring 162 acres shall constitute forest land. Explanation (1) to Section 4 of the Forest Act clarifies that it would be sufficient to describe the limits of the forest by roads, rivers, ridges or other well-known or readily intelligible boundaries. The notification dated 23.11.1955 has the boundaries on all four sides mentioned therein. There is no other requirement under Section 4 of the Forest Act. It is only Section 6 of the Forest Act which needs to specify the situation and limits of the proposed forest. In terms of such clause (a) of Section 6 of the Forest Act, the details of khasra numbers which were part of 162 acres find mention in the proclamation so published. Therefore, the statutory procedural requirements stand satisfied.
In a judgment reported as STATE OF UTTARAKHAND AND ORS. VERSUS KUMAON STONE CRUSHER AND ORS. [2017 (9) TMI 1901 - SUPREME COURT], an argument was raised that since notification under Section 20 of the Forest Act has not been published therefore, land covered by notification issued under Section 4 cannot be regarded as forest. This Court negated the argument relying upon Section 5 of the Forest Act as amended in State of Uttar Pradesh by U.P. Act No. 23 of 1965. It was held that regulation by the State comes into operation after the issue of notification under Section 4 of the Forest Act and that absence of notification under Section 20 of the Forest Act cannot be accepted.
The High Court had referred to the objections filed by the lessees under the Consolidation Act and also objections by the Forest Department. It was held by the High Court that since no objections were filed by the Forest Department earlier, therefore, the objections would be barred by Section 49 of the Consolidation Act - It was the lessee who had to assert the title on the forest land by virtue of an agreement in writing by a competent authority but no such agreement in writing has been produced. Therefore, the lessee would not be entitled to any right only on the basis of an entry in the revenue record.
The order of the High Court cannot be sustained in law. The same is hereby set aside. The appeal is allowed.
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2021 (10) TMI 1446
Directions regarding jail petitions - Pre-mature release of life convicts - HELD THAT:- What emerges from the chart is that in 232 such cases fixed term sentences have been imposed ranging from 3 years to 20 years while the remaining 129 cases are life sentence cases. In fixed term sentences, the accused in some cases has undergone more than half the sentence, if not more, similarly in some life sentence cases, the accused has undergone custody for more than 10 years.
The other High Court where this aspect has been explored is the Chhattisgarh High Court, more so, in the context of the reliance placed on rule 149 of the High Court of Chhattisgarh as recorded in the Order dated 07.07.2021. It is in view thereof certain suggestions have been made. These suggestions are agreed and it is sought to expand on the same.
A similar exercise be undertaken by the High Court Legal Services Committee of different High Courts so that convicts represented by legal aid Advocates do not suffer due to delay in hearing of the appeals. NALSA will circulate this order to the concerned authority and monitor the exercise to be carried on - The Delhi High Court Legal Services Committee would take up the cases of those convicts who have undergone more than half the sentence in case of fixed term sentences and examine the feasibility of filing bail applications before the High Court, while in case of ‘life sentence’ cases, such an exercise may be undertaken where eight years of actual custody has been undergone.
List on a non-miscellaneous Tuesday in the month of January, 2022.
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2021 (10) TMI 1445
Grant of bail - requisite access to legal advice for moving the bail application - HELD THAT:- It is incumbent on the High Court to place on record as to how they propose to see that the cases mentioned are taken up for consideration for grant of bail - it is noted that there may be even convicts in custody in cases other than life sentence cases and in those cases again the broad parameter of 50 per cent of the actual sentence undergone can be the basis for grant of bail.
Four weeks' time granted to the High Court to place their policy strategy in this behalf - The Registry to register the Suo Moto proceeding and place it before Court on 16th November, 2021 - List after four weeks.
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2021 (10) TMI 1444
Seeking reduction of amount of deposit with regard to the stay granted by the DRAT by impugned order - HELD THAT:- The DRAT applied the second proviso of section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and has directed the petitioners to deposit the amount claimed by the secured creditor on 19th June, 2021 i.e. Rs. 11,46,43,271.91.
In facts of the case, it is an admitted fact that the debt claimed by the secured creditor is Rs. 11,46,43,271.91, therefore, it cannot be said that the DRAT has committed any error in directing the petitioners to deposit 25% of the said amount so as to entertain the appeal and to grant status-quo order, if any, on deposit of such amount.
On analysis of provisions of section 2(ha) of the SARFAESI Act read with section 2(g) of the RDB Act as well as the provisions of section 18 of the SARFAESI Act, it would be necessary to refer to the decision of the Supreme Court in case of Parsn Medicinal Plants Private Limited and others v. Indian Bank and others [2011 (2) TMI 1632 - SUPREME COURT] which is also considered by the Chhattisgarh High Court wherein the Apex Court on concession being given by the bank, permitted the Appellate Tribunal to hear the matter on merits on all the questions of law after giving credit of the amount realised by the bank on sale of the assets from the total outstanding dues.
In the facts of the case, therefore, it would be in the interest of the petitioners to consider the amount outstanding as on the date when the petitioners filed the appeal before the DRAT, as only dispute is with regard to the debit of unapplied interest to the tune of Rs. 6,57,94,643.25 by the respondent bank after giving credit of the amount realised on sale proceeds of more than Rs. 12 crores from the outstanding dues payable by the petitioners. The debts due as claimed by the bank or financial institutions would be the amount outstanding to be paid by the borrower at the time of filing of the appeal before DRAT.
On perusal of the provisions of section 18 of SARFAESI Act, more particularly, second proviso which provides that the appeal can be entertained only when borrower has deposited with the Tribunal, 50% of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal whichever is less, the debts due from the borrower means the debt as per section 2(g) of the RDB Act which means liability inclusive of interest which is claimed by the secured creditors which means liability of the borrower to be recovered by the secured creditor - it cannot be the amount referred to in the notice under section 13(2) of the SARFAESI Act because the amount which is referred to in notice under section 13(2) of the Act is the amount which is outstanding as on date when such notice was issued when the account has become Non Performing Asset (NPA) account which is not the debt as defined under section 2(g) of the RDB Act. The debt which is defined under section 2(g) of the RDB Act is the liability inclusive of interest which is claimed by the bank. The claim of the bank would be the debt which the petitioners are required to pay means the outstanding dues as per the accounts with the bank and not as per the notice issued by the bank under section 13(2) of the SARFAESI Act.
Thus, the amount which is outstanding as per the accounts of the bank would be material which can be claimed by the bank against the petitioners and therefore, the Tribunal has rightly directed the petitioners to deposit 25% of the amount of the outstanding shown in the bank account amounting to Rs. 11,46,43,271.91.
The petition is required to be rejected and is accordingly rejected.
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2021 (10) TMI 1443
Seeking enlargement on bail - application for cancellation of bail before the High Court was moved principally on the ground that no notice was issued to the appellant under sub-section (3) of Section 15A of the SC/ST Act, resultingly no opportunity to be heard was provided under sub-section (5) of Section 15A - violation of principles of natural justice - HELD THAT:- Before the High Court granted bail by its order dated 7 November 2019, the final report had been submitted on 6 September 2018. The final report under Section 173 CrPC contains a detailed analysis of the call data records of the accused who were in continuous contact with each other, as well as of their location in close proximity to the date and time of the incident. The bail order does not make any mention of factors that are relevant for the grant of bail, which are (i) the seriousness and gravity of the offence; and (ii) the role attributed to the first respondent in the commission of the crime. In this backdrop, the order of the High Court in granting bail cannot pass muster. Aggrieved by the order, the appellant had filed an application S.B. Criminal Miscellaneous Bail Cancellation Application No. 21/2020 seeking its recall. The Single Judge of the High Court by the impugned order dated 8 June 2021 simply reiterated that the bail was granted on the basis of the statement of the wife of the deceased, PW.2, once again failing to show any engagement with the considerations that govern the grant of bail.
The impugned order of the Single Judge of the High Court of Judicature at Rajasthan dated 8 June 2021 in S.B. Crl Bail Cancellation Application No. 21/2020 is set aside - Appeal allowed.
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2021 (10) TMI 1442
Seeking transfer of the records and proceedings in the trial from the ASJ, Nanded to the NIA Special Court, Mumbai - interpretation of Section 6 of the NIA Act - scheduled offences - HELD THAT:- What emerges is that upon the issuance of a direction under subSections (4) and (5) of Section 6, the State government and a police officer of the State government investigating the offence are not to proceed with the investigation and have to forthwith transmit the documents and records to the NIA (Section 6(6)) but equally, it is the duty of the officer in-charge of the police station to continue the investigation till the NIA actually takes up the investigation of the case (Section 6(7)). In other words, the power of the officer in-charge of the police station to continue with the investigation is denuded upon the issuance of a direction under subSections (4) or (5) of Section 6 and the NIA actually taking up the investigation of the case. Thus, both the issuance of directions under sub-Sections (4) and (5) of Section 6 and the NIA actually taking up the investigation of the case would result in the power of the officer in-charge of the police station being denuded. Until then, the power of the State government to investigate and prosecute any scheduled offence, by virtue of the provisions of Section 10, is preserved.
The exclusive jurisdiction which is conferred on the Special Court to try a scheduled offence investigated by the NIA is amplified by the non-obstante provision which overrides the provisions contained in the CrPC. Section 22(1) empowers the State government to constitute Special Courts for the trial of offences under the enactments which have been specified in the Schedule to the NIA Act, and which have been investigated by the State Investigative Agency.
The contention of the ATS Nanded is that the investigation by them until the NIA Mumbai took up the investigation of the case was in terms of the mandate of sub-Section (7) of Section 6 since the provision states that “till the [NIA] takes up the investigation of the case, it shall be the duty of the officer in-charge of the Police Station to continue the investigation”. In the present case, the NIA Mumbai intimated the ATS Nanded to transfer the case papers on 23 November 2016, following which the ATS Nanded sent the papers on 8 December 2016 - the investigation conducted by the ATS Nanded prior to this was within the mandate of sub-Section (7) of Section 6 of the NIA Act. The said provision is clarificatory in nature so as to remove any doubt about the duty of the officer in-charge of the police station to continue the investigation till the ‘Agency’, i.e., the NIA Mumbai in the instant case, took up the investigation on receipt of the case papers. Therefore, the continuation of the investigation, and the filing of the charge-sheet upon its conclusion, by the ATS Nanded was in terms of the statutory mandate under Section 6(7) of the NIA Act.
The continuance of the investigation by the ATS Nanded in terms of Section 6(7) of the NIA Act, till the investigation had been taken up by the NIA Mumbai, was legitimate. A reading of Section 10 of the NIA Act indicates that there is no embargo on the State Investigating Agency to investigate a scheduled offence, which would include offences under the UAPA. Consequently, till the investigation was taken up by the NIA Mumbai, the ATS Nanded was acting within jurisdiction in investigating the offence and filing the charge-sheet in the present case - In the present case, the NIA Mumbai took up the investigation only on 8 December 2016 after receiving the records from the ATS Nanded, and thereupon it filed an application for transfer of the case from the ASJ, Nanded to the NIA Special Court, Mumbai constituted under Section 11 of the NIA Act.
The Government of Maharashtra in exercise of powers conferred by Section 11 read with Section 185 of the CrPC issued a notification dated 26 August 2016 designating the CJM, Nanded as the remand court and the ASJ, Nanded as a Special Court for the trial of cases filed by the ATS Nanded. There is no challenge to the notification dated 26 August 2016. In this backdrop, the CJM, Nanded has been designated as a Court of remand and the ASJ, Nanded as a Special Court under the CrPC for the trial of cases filed by the ATS Nanded. Hence, they both had the jurisdiction to entertain the present case under the UAPA till the NIA Mumbai took over the investigation on 8 December 2016, and sought a transfer of the case to the NIA Special Court at Mumbai constituted under Section 11 of the NIA Act.
In accordance with Section 6(7), the ATS Nanded was not barred from continuing with its investigation till the NIA Mumbai actually took up the investigation - Appeal dismissed.
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