Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 19, 2022
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Unblocking of Electronic Credit Ledger - Once the statutory period comes to an end, the authority has no further discretion in the matter, unless a fresh order is passed. In the case on hand, it is very unfortunate to note that despite the fact that the period of one year elapsed, the authority did not permit the writ-applicant to avail the credit available in his ledger. Even representation was filed in this regard but the authority thought fit not to pay heed to such representation. - HC
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Bail application - claim and availment of bogus ITC on the basis of fake invoices by creating and operating 13 fictitious firms - Having regard to the nature of involvement and the specific role which is claimed being a Chartered Accountant and his period of detention of four months and the fact that sufficient materials have already been collected and as the prosecution now primarily depends on documentation and related evidence and for that, tampering with the evidence seems to be remotely possible, the Court, being aware of the settled position of law applying to the subject matter, is inclined to release the petitioner on bail subject, however, to stringent conditions stipulated. - HC
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Lifting of provisional attachment - It is held that under sub-section (2) of Section 83, a provisional attachment ceases to have effect upon the expiry of the period of one year of the order being passed under sub-section (1). The power to levy a provisional attachment has been entrusted to the Commissioner during the pendencdy of proceedings under Sections 62, 63, 64, 67, 73 or as the case may be, Section 74. - HC
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Maintainability of appeal to present petition - uploading of appeal on the appropriate portal or not - It appears from the record that the appellant was unaware that it had uploaded its appeal before the Central Portal instead of State Portal of the GST. - The petitioner shall file a fresh appeal and upload the said appeal before the appropriate authority i.e. the State Portal of the GST - Since the matter had been filed before a wrong forum, the delay in filing the appeal shall be condoned. - HC
Income Tax
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Reopening of assessment - Validity of approval granted by the CIT - earlier Revision u/s 263 dropped - Notwithstanding this order passed by the Principal Commissioner of Income Tax - 14, a notice is issued under Section 148 of the said Act and one of the ground is the same point which was directed to be dropped by the Principal Commissioner of Income Tax - 14 and the same Principal Commissioner of Income Tax - 14 has accorded the approval under Section 151 of the said Act on 30th March 2019. Therefore, this only shows that there has been total non application of mind by the Principal Commissioner of Income Tax - 14 while according the approval. - HC
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Revision u/s 263 by CIT - Eligibility of benefit of exemption to assessee Trust on its income being charitable Trust - The Jurisdiction of the Commissioner u/s 263 is restricted and cannot be equated with the appellate jurisdiction. The Commissioner does not sit in appeal. The Tribunal also correctly noticed that the registration of the Trust under Section 12 AA of the Act has not been disturbed - HC
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Validity of Reopening of assessment u/s 147 - Existence of reason to believe - The issue squarely falls in the realm “change of opinion”. In our view, the only reason that in the succeeding assessment years, the Assessing Officer has come to a different opinion, by itself, may not be a ground to reopen the assessment for an earlier year, wherein a view was conclusively recorded by the concerned Assessing Officer. - HC
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Revision u/s 263 by CIT- Taxability of shares received by way of Gift - The order of ld AO is not erroneous as Gift of shares of the Wockhardt Limited are not chargeable to tax in the hands of the assessee firm u/s 56 (2) (viia) of the Act , as assessee has received gift of shares of a company in which public are substantially interested which could not have been taxed under section 56(2)(viia) of the Act, - AT
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TP Adjustment - benefit test - authorities below have fatally erred in applying the benefit test as rightly contended by the Ld. Counsel of the assessee. Furthermore, it has been submitted that after applying the benefit test authorities below have brushed aside the details submitted by the assessee. - authorities below have erred in holding the ALP at nil on the ground that relevant documents have not been submitted. In our considered opinion, the assessee has discharged the onus caste upon it. - AT
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Adjustment made u/s.143(1) - incorrect computation of allowable MAT credit u/s 115JAA - there cannot be any debate as to the exclusion of surcharge and cess - this issue is not amenable to any prima-facie adjustment as provided in section 143(1). Though, assessee has not raised this aspect, before Ld.CIT(A), there is no estoppel as to law. Hence, we hold that this adjustment was not liable to be made u/s. 143(1). - AT
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Use of materials seized and the statement furnished by the third parties against the assessee - the opportunity for the rebuttal to the assessee for the seized documents and the statements recorded under section 132(4) of the Act are sine qua non in order to meet the principles of natural justice. This requirement has to be complied with by the revenue even in a situation where the assessee does not demand for the seized materials/statements recorded under section 132(4) of the Act if revenue seeks to make the addition on the basis of such material and statement. - AT
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Addition on account of client code modification done by the broker to shift the profit - As such there is no whisper in the order of the authorities below that there was the cash transfer between the parties for transferring the income of the assessee to the other party or shifting in the losses. Furthermore, in majority of the cases, the client code medication was carried out by the broker with the relative of the assessee and thus it is very unlikely that the assessee shall manipulate the income/loss with them for the reason that there would be consequential effect on their income too. - Additions deleted - AT
IBC
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Validity of resolution passed at the 12th COC Meeting - Additionally, the Appellant had not chosen to exercise their choice of participating in the open bidding process and chose to exit the Meeting and even accepted the refund of the EMD amount. - Appeal dismissed. - AT
Service Tax
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Excisable goods or not - Superior Kerosene Oil - Even issue of interpretation whether the Superior Kerosene Oil was an excisable product or not and whether the Superior Kerosene Oil falls under Fourth Schedule or not would have bearing on the aspect of eligibility of the Petitioner to file such declaration under the said Scheme or not and thus warrant personal hearing to the Petitioner before deciding the issue of eligibility - the order of rejection is in violation of principal of natural justice and thus, it deserves to be quashed and set aside. - HC
Case Laws:
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GST
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2022 (1) TMI 704
Refund of IGST - refund has been declined for the reason that the writ applicant had availed drawback at the rate of 1.10% - HELD THAT:- The Special Leave Petitions are accordingly dismissed.
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2022 (1) TMI 703
Rejection of refund application - Validity of Rule 90(3) of Central Goods and Services Tax Rules, 2017 and paragraph 12 of the impugned Circular dated 18th November, 2019 - ultra-vires of Section 54 of the CGST Act or not - seeking a direction to consider the application for refund filed by the petitioner - rejection of refund solely on the ground that the refund application filed after removal of deficiencies was beyond the prescribed period of two years - HELD THAT:- Mr. Sahid Hanief, learned counsel accepts notice on behalf of the respondents No.2 to 4. Mr. Satish Kumar, learned counsel accepts notice on behalf of the respondent No.5. List on 17th January, 2022.
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2022 (1) TMI 702
Maintainability of petition - availability of alternative remedy of appeal - It is submitted that the petitioner has already deposited the tax and by not accepting the submissions and explanations, it amounts to double taxation which is not permissible - HELD THAT:- The petitioner has a remedy of filing an appeal before the GST Tribunal in terms of Section 112 of the U.P. GST Act, however, till date the Tribunal has yet not been constituted in the State of Uttar Pradesh and in this view of the matter, the petitioner is constrained to file the present writ petition before this Court. The matter requires consideration - the instant petition is admitted. List this matter on 28.02.2022.
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2022 (1) TMI 701
Unblocking of Electronic Credit Ledger - period of one year as prescribed under sub-rule 3 of Rule 86A of the CGST/GGST Rules has elapsed from the date of order of blocking of the Electronic Credit Ledger - HELD THAT:- Sub-rule 3 of Rule 86A of the CGST Rules, 2017 and GGST Rules, 2017 itself has provided that the Electronic Credit Ledger can be blocked for a period of one year. On expiry of a period of one year, it would automatically get unblocked. In fact, it was the duty of the authority concerned to permit the assessee, i.e. the writ-applicant, to avail the input credit available in his ledger. Once the statutory period comes to an end, the authority has no further discretion in the matter, unless a fresh order is passed. In the case on hand, it is very unfortunate to note that despite the fact that the period of one year elapsed, the authority did not permit the writ-applicant to avail the credit available in his ledger. Even representation was filed in this regard but the authority thought fit not to pay heed to such representation. The authority did not permit the writ-applicant to avail the input credit available in his ledger for about more than two and a half months after the statutory life of the order came to an end - this writ-application is disposed of.
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2022 (1) TMI 700
Input tax credit - claim and availment of bogus ITC on the basis of fake invoices by creating and operating 13 fictitious firms - offences under Sections 132(1)(b),(c) (l) of the OGST Act - HELD THAT:- As per the materials on record, the petitioner allegedly obtained GST registration vis- -vis the fake business concerns in collusion with other accused persons by utilizing and forging the personal identity documents of the so called proprietors. The nature and extent of involvement of the petitioner with regard to the alleged transactions is clearly evident and figured out from the materials on record. In so far as the offence under Section 132 OGST Act is concerned, it is in relation to GST fraud alleged to be for an amount of ₹ 319.64 crore, wherein, the petitioner is said to be involved by creating and operating fictitious business entities in the names of persons having no means. As a consequence, bogus ITC was availed by the business establishment for whom he worked as a Chartered Accountant with the allegation of joint liability. Whether, it is a case of petitioner facilitating the bogus ITC being availed is to be dealt with and adjudicated upon during and in course of trial. The GST authorities have managed to find out the alleged fraud being perpetrated towards availing fake ITC by creating bogus business entities and it appears to be an act which apparently makes all the accused persons jointly and severally liable - Having regard to the nature of involvement and the specific role which is claimed being a Chartered Accountant and his period of detention of four months and the fact that sufficient materials have already been collected and as the prosecution now primarily depends on documentation and related evidence and for that, tampering with the evidence seems to be remotely possible, the Court, being aware of the settled position of law applying to the subject matter, is inclined to release the petitioner on bail subject, however, to stringent conditions stipulated. The petitioner is directed to be released on bail on fulfilment of conditions imposed - bail application allowed.
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2022 (1) TMI 699
Validity of Show cause notice - jurisdiction - Inadmissible transitional credit - Education Cess (E Cess) - Secondary Higher Education Cess (SHE Cess) - Krishi Kalyan Cess (KK Cess) - HELD THAT:- Division Bench decision of the Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. Vs. Union of India Ors., [ 2021 (11) TMI 157 - BOMBAY HIGH COURT ] to contend that the issue raised herein is no more res integra and, therefore, approaching the appellate authority under the statute would be an exercise in futility. Learned counsel for the Revenue is directed to seek instructions as to whether the Bombay High Court decision continues to hold the field or has been challenged further by the Revenue so that this Court may decide the question of alternative statutory remedy available under the Act. Let the case be taken up on 25.01.2022.
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2022 (1) TMI 698
Lifting of provisional attachment levied by the Respondents on 11 October 2019 under Section 83(2) of the CGST Act - Period beyond one year - HELD THAT:- The Hon ble Supreme Court in case of M/S RADHA KRISHAN INDUSTRIES VERSUS STATE OF HIMACHAL PRADESH ORS. [ 2021 (4) TMI 837 - SUPREME COURT] has dealt with this issue in detail and has approved the decision taken by Gujarat High Court in case of VALERIUS INDUSTRIES VERSUS UNION OF INDIA [ 2019 (9) TMI 618 - GUJARAT HIGH COURT] . It is held by the Hon ble Supreme Court that the power to order a provisional attachment is entrusted during pendency of the proceedings under any of the specified provisions under Sections 63, 64, 67, 73 or 74. It is when a proceeding under any of these provisions is pending that a provisional attachment can be ordered. It is held that under sub-section (2) of Section 83, a provisional attachment ceases to have effect upon the expiry of the period of one year of the order being passed under sub-section (1). The power to levy a provisional attachment has been entrusted to the Commissioner during the pendencdy of proceedings under Sections 62, 63, 64, 67, 73 or as the case may be, Section 74. The principles laid down in the case of Radha Krishan Industries apply to the facts of this court - the provisional attachment levied by the Respondents on 11 October 2019 under Section 83(2) of the said Act ceased to have effect on expiry of one year. Petition allowed.
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2022 (1) TMI 697
Maintainability of appeal to present petition - uploading of appeal on the appropriate portal or not - HELD THAT:- It appears that the petitioner also filed a hard copy before the respondent Appellate authority but the Appellate authority under Annexure-7 refused to accept the same as an appeal purportedly since on verification of the portal of the State GST no such appeal was found thereon. This Court need not enter into the niceties of law in this respect. Factually, the petitioner had uploaded an appeal may be before the wrong portal but it is obligatory on the part of the authorities concerned in such an event to bring it to the notice of the appellant that the appeal has been filed before the wrong authority so that the appellant can take necessary action in the said regard. It appears from the record that the appellant was unaware that it had uploaded its appeal before the Central Portal instead of State Portal of the GST. The petitioner shall file a fresh appeal and upload the said appeal before the appropriate authority i.e. the State Portal of the GST - Since the matter had been filed before a wrong forum, the delay in filing the appeal shall be condoned. Petition disposed off.
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2022 (1) TMI 696
Seeking condonation of delay in filing Refund claim - both appeals filed on 14-12-2020, being delay of 18 days and 20 days from the normal period prescribed under Section 107(1) of the CGST Act, 2017 - HELD THAT:- On going through the Appeal Memo, it has been observed that the said orders were communicated to the appellant on 26-8-2020 and 24-8-2020 and appeal filed in the instant matter to this office on 14-12-2020 which is delayed by 18 days and 20 days from the prescribed time limit as provided under Section 107(1) of the CGST Act. However, considering the unavoidable circumstances, the delay is condoned in accordance with Section 107(4) of the CGST Act, 2017 - appeal is now proceeded on merits of the case. Whether amount for which refund was filed, is in the nature of Pre-deposit or Tax? - HELD THAT:- In the instant case rather contesting the issue to the department, the appellant had opted to reverse the credit which shows that the appellant was satisfied with his own determination of credit. Therefore, question of wrongly or mistakenly reversed of the credit does not arise. Further, there is no doubt that the Input Tax Credit is nothing but it is tax only as per the provisions of the GST Act. Eligible Input Tax Credit lying in the Credit Ledger are utilized for payment of tax liabilities only. In the instant case transitional credit were availed as valid/eligible credit and some part of the credit were reversed by the appellant as a tax only. Therefore, the appellant s contention that the reversal of credit is in nature of pre-deposit, is not acceptable at this stage and I find it is an afterthought of the appellant to avail the benefit of refund. Whether limitation period for filing of refund provided under Section 54 of CGST Act is applicable or not? - HELD THAT:- As it is already held that the reversal of ITC is a tax only it may not be termed as deposit/pre-deposit. These said amount were admittedly reversed by the appellant themselves by treating the same as tax only. Further, it is found that the appellant had applied for refund by adopting the procedure as prescribed under Section 54 of CGST Act read with Rule 89 of CGST Rules, 2017 therefore, there are no force in the appellant s contention that the limitation clause of Section 54 of CGST Act, 2017 will not be applied. Whether date of reversal/payment of credit will be the relevant date for the purpose of limitation clause or not? - HELD THAT:- The date of reversal of ITC were on 1-2-2018 and 2-2-2018 whereas, the said refund claims was filed on 29-7-2020 which is explicitly/clearly beyond the expiry of two years from the relevant date - The appellant also mentioned in the statement of facts as well as on application of refund that original refund claim filed on 7-12-2019 in Form PMT-04 as manually. In this regard, it is found that the PMT-04 is nowhere considered as application of refund in the provisions of GST Laws. The fact is that the PMT-04 is merely an application under Rules 85(7), 86(6) 87(12) of CGST Rules, 2017 for intimation of discrepancy in Electronic Credit or Cash Ledger hence date of intimation of PMT-04 cannot be taken for relevant date under Section 54 of CGST Act, 2017. Appeal rejected.
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2022 (1) TMI 695
Refund of input used in exported goods by Sea - rejection of refund claim mainly on the ground of being time barred - Section 54(1) of CGST Act, 2017 - N/N. 35/2020-C.T., dated 3-4-2020 as amended vide N/N. 55/2020-C.T., dated 27-6-2020 - HELD THAT:- Initially the appellant has filed the refund application on 27-8-2020 for the period April, 2018 to August, 2018 in category of Rule 89[4(4B)] of CGST Rules, 2017 of inputs used in exported goods. In the instant matter the EGMs have been filed for the said export consignments are on or before 31-8-2018 the meaning thereby the export goods leaves India on or before 31-8-2018. As per customs procedure EGM means (Export Goods Manifest) a document which are filed by the carrier of the export consignment before the departure of the carrier (shipments, airlines, etc.,) and it is considered as proof of shipment. From the conjoint reading of Section 54(14)(2) of the CGST Act, 2017 read with Notification No. 35/2020-C.T., dated 3-4-2020 as amended vide Notification No. 55/2020-C.T., dated 27-6-2020 and Rule 90(3) of CGST Rules, 2017 - as per relevant date the refund application should have been filed on or before 31-8-2020, whereas in the instant matter the fresh refund applications have been filed after issuance of deficiency memo by the appellant on 8-9-2020. Thus, the appellant has filed refund applications in the instant matter beyond the period of 2 years from the relevant date. The adjudicating authority has rightly and properly rejected all the refund applications on the ground of time barred - Appeal dismissed - decided against appellant.
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Income Tax
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2022 (1) TMI 694
Reopening of assessment - Validity of approval granted by the CIT - earlier Revision u/s 263 dropped - Subsequently Reopening of assessment u/s 147 initiated on two grounds, first fair value of land/transferable development rights relating to 24,872.83 sq. mtrs. of land and the second one is the diminution in the value of investment in a subsidiary and debit by petitioner from the profit and loss account - HELD THAT:- The second point in the reasons for reopening has already been considered by the Principal Commissioner of Income Tax - 14 when he wished to review the assessment order under Section 263 of the said Act and the Principal Commissioner of Income Tax - 14 has also passed an order directing the proceedings initiated under Section 263 of the said Act to be dropped and the Revenue Audit to be accordingly informed that the objection raised was not accepted. Notwithstanding this order passed by the Principal Commissioner of Income Tax - 14, a notice is issued under Section 148 of the said Act and one of the ground is the same point which was directed to be dropped by the Principal Commissioner of Income Tax - 14 and the same Principal Commissioner of Income Tax - 14 has accorded the approval under Section 151 of the said Act on 30th March 2019. Therefore, this only shows that there has been total non application of mind by the Principal Commissioner of Income Tax - 14 while according the approval. If the Principal Commissioner of Income Tax - 14 had only applied his mind and considered all documents including his own order passed on 18th August 2016, he would not have granted the approval for the reasons as recorded. Mr. Suresh Kumar submitted that there are two reasons for reopening which are distinct. One is regarding the fair market value of land/transferable development rights and the other regarding diminution in the value of investment in a subsidiary and both can be segregated. It is true that both are totally different points but the fact, which is indisputable, is how could the Principal Commissioner of Income Tax - 14 grant approval for reopening relying on the reasons one of which is on an issue which the Principal Commissioner of Income Tax - 14 himself has passed an order saying that the objection raised was not correct. We have to note that in the affidavit in reply also respondents admit that the PCIT is required to accord approval on reasons recorded by the Assessing Officer after having satisfied himself that such reasons were on the basis of the technical information in possession. As held in German Remedies Ltd. [ 2005 (10) TMI 76 - BOMBAY HIGH COURT] to grant or not to grant approval under Section 151 of the said Act to re-open an assessment is coupled with a duty and the Commissioner was duty bound to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. Such power cannot be exercised casually, in a routine and perfunctory manner. We have to observe that if only the PCIT had read the file, he would not have been satisfied with the reasons. Petition allowed.
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2022 (1) TMI 693
Revision u/s 263 by CIT - Eligibility of benefit of exemption to assessee Trust on its income being charitable Trust - As per CIT no verification or enquiry was made by the AO even on reasons for scrutiny selection and exemption was allowed without verification of charitable nature of activities of trust? - HELD THAT:- The respondent Trust is a registered charitable trust. AO for the assessment year 2016-17 accepted the return filed by the trust and granted exemption as applicable under law - CIT took the said order in revision u/s 263 and held that the activities of the trust were not charitable in nature but were commercial activities and therefore denied the exemption. This order was carried in appeal and Tribunal by the impugned judgment reversed the judgment of the Commissioner primarily on the ground that the registration of the Trust u/s 12AA of the Act still continues. Meaning thereby, that the revenue does not dispute the nature of the charitable activities. Secondly, that the commercial activities are not primary activities of the trust and predominant activity of the trust is charitable. The generation of reasonable surplus would not indicate that the trust is not engaged in charitable activities. The Tribunal was also of the opinion that the assessing officer having made proper inquiry and having taken plausible view, the Commissioner in exercise of revisional powers could not have reversed the assessment order. We are broadly in agreement with the view of the Tribunal. It is well settled through a series of judgments that power u/s 263 of the Act can be exercised only when twin conditions of the order of assessing officer being erroneous and prejudicial to the interest of revenue are satisfied. The Jurisdiction of the Commissioner u/s 263 is restricted and cannot be equated with the appellate jurisdiction. The Commissioner does not sit in appeal. The Tribunal also correctly noticed that the registration of the Trust under Section 12 AA of the Act has not been disturbed - no question of law arises.
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2022 (1) TMI 692
Reopening of assessment u/s 147 - eligibility of reasons to believe - valuation of shares of petitioner which was issued to its parent company Zoetis Pharmaceutical Research P. Ltd. and expenses as cost of samples under the head Advertisement and Business Promotion - HELD THAT:- Valuation of shares as per discounted cash flow method and addition under Section 56(2)(viib) of the Act, in our view it is nothing but change of opinion Petitioner has annexed to the petition a letter dated 23rd December, 2016 and another letter dated 26th December, 2016 where petitioner has given details of the shares issued by the company, provided valuation report issued by Deloitte Haskins Sells and also explained why the provisions of Section 56(2)(viib) of the Act was not applicable. After considering these points the assessment order dated 28th December, 2016 has been passed. Of course, this point has not been discussed in the assessment order but it is settled law that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. It is also settled law that change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment - See ARONI COMMERCIALS LIMITED [ 2014 (2) TMI 659 - BOMBAY HIGH COURT] Cost of samples - We say this has also been discussed during the assessment proceeding as could be seen from letter dated 22nd December, 2016 and 23rd December, 2016 submitted by petitioner to Assistant Commissioner of Income Tax 11(3)(3). In the letter dated 22nd December, 2016 petitioner has also discussed as to why the circular of CBDT dated 1st August, 2012 relied upon by the JAO is not applicable. Therefore, it is quite obvious that the Assessing Officer has decided to reopen relying on the same set of facts. When primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of opinion to commence proceedings for reassessment. On consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not open to reopen the assessment passed on the very same material with a view to take another view. Moreover, either in the reasons for re-opening or in the order rejecting the objections, the Assessing Officer has not disclosed as to what were the material facts that were not disclosed truly and fully by petitioner during the assessment. - Decided in favour of assessee.
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2022 (1) TMI 691
Validity of Reopening of assessment u/s 147 - Existence of reason to believe - eligibility of reasons to believe - allowability of expenses under the head Employee Cost - HELD THAT:- There can be no duality of opinion that it is the assessee s duty to disclose all primary facts. Once the assessee discloses all the primary facts, the inferences to be drawn thereon is a matter within the exclusive province of authority of the Assessing Officer. This duty of assessee does not extend beyond disclosure of primary facts. The assessee is not expected to suggest an inference on those facts, correct or otherwise. In a given case, the fact that the assessee had suggested a particular inference, which upon reconsideration, does not find favour with the Assessing Officer subsequently, may not furnish a justifable ground to hold that there was non-disclosure of primary facts. Undoubtedly, as pointed out by Shri Sharma, the issue has not been specifically dealt with in the assessment order. However, the said consideration is not decisive. As laid down in the case of Aroni Commercials Ltd. [ 2014 (2) TMI 659 - BOMBAY HIGH COURT] once a query is raised during the assessment proceedings and the assessee has furnished a reply thereto, it implies that the query so raised was a subject matter of consideration of the Assessing Authority. It is not an immutable rule that an assessment order should contain reference and/or discussion on such query. For the foregoing reasons, we are satisfied that, in the peculiar facts of the case, the impugned notice under section 148, of the Act, 1961 can be said to be based on a mere change of opinion. In view of the settled legal position that mere change of opinion does not furnish a justification for formation of reason to believe that income chargeable to tax has escaped assessment, we find the impugned action legally unsustainable. Respondent attempted to salvage the position by canvassing a submission that for the assessment year 2015-16, the Assessing Officer has rejected the petitioner s contention as regards the employee cost and that constitutes a tangible material for reopening the assessment. We are afraid to accede to this submission - aforesaid submission overlooks the fact that the Assessing Officer who passed the original assessment order for assessment year 2014-15 can be said to have been satisfied with the explanation furnished by the petitioner. Looking at the issue from a slightly different perspective, it can be said that the Assessing Officer could have called for the material and information, sought by the Assessing Officer who carried out the assessment for the year 2015-16, and yet would have formed the same opinion, different from the one formed by the Assessing Officer for the assessment year 2015-16. The issue, thus, squarely falls in the realm change of opinion . In our view, the only reason that in the succeeding assessment years, the Assessing Officer has come to a different opinion, by itself, may not be a ground to reopen the assessment for an earlier year, wherein a view was conclusively recorded by the concerned Assessing Officer. - Decided in favour of assessee.
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2022 (1) TMI 690
Disallowance of interest u/s 36(1)(iii) - interest paid on loans borrowed for the purpose of acquisition of fixed assets were not put to use - Assessee failed to produce the proofs of the machinery put to use - onus was on the assessee to prove that the borrowed capital was actually put to use and there is commencement of a business from the installed machineries and asset as well as the working capital is also poured into the business - CIT-A deleted the addition - HELD THAT:- It is an admitted fact that the assessee company had commenced operation, worked at 20% of its capacity which clearly denotes that the assets were put to use and the fact that there is no outstanding capital in working progress as on 31.03.2012 also goes to prove this fact. Thus, there is no evidence on record to say that the assets were not put to use. The mere fact that the assessee company had worked at 20% of the capacity does not imply that the assets were not put to use. In-fact, it clearly indicates that the assets were put to use and the assessee is entitled to depreciation. In the light of the above factual position, the provisions of section 36(1)(iii) have no application and we do not find any illegality in the order of the ld. CIT(A). Thus, we do not find any merit in the first ground raised by the Revenue. Hence, the first ground of appeal stands dismissed. Addition of depreciation and the additional depreciation - HELD THAT:- As clearly held that the assets were put to use and, therefore, the assessee is entitled to claim the depreciation and the additional depreciation. Therefore, we do not find any error in the findings of the ld. CIT(A) allowing the depreciation and the additional depreciation - Appeal filed by the Revenue stands dismissed.
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2022 (1) TMI 689
Income from house property - assessability of notional income from the unsold flats held as stock in trade in the case of the assessee whose business is construction and sale of residential properties - Addition u/s 22 r.w.s. 23(4) on account of deemed rent in respect of unsold units held as stock in trade by the appellant company - as argued the appellant company had held these unsold units as stock in trade and hence, as these units were occupied by the assessee for its business purpose, there was no reason to tax the annual value of such unsold units u/s 22 - HELD THAT:- No change in facts and law subsequent to the decision of Kumar Properties and Real Estate [ 2021 (4) TMI 1163 - ITAT PUNE] was brought to our notice. Hence, we have no reason to take a different view from the view taken by the Coordinate Bench of this Tribunal in the case of Kumar Properties and Real Estate (P.) Ltd. (supra). Therefore, we are of considered opinion that the Assessing Officer was not justified to assess the annual value of unsold flats for the year under consideration. Accordingly, we direct the Assessing Officer to delete the addition as made by him in the assessment order. Thus, the issue raised in the grounds of appeal stands allowed.
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2022 (1) TMI 688
Penalty u/s. 271(1)(c) - bogus purchases - as during the survey assessee had admitted to disclose additional income on account of bogus purchases - survey was included in the return of income filed by the assessee in response to notice u/s 148 - HELD THAT:- As decided in own case [ 2019 (8) TMI 991 - ITAT PUNE] perusal of statement recorded during the course of survey also reveals that it was stated that assessee firm had made actual purchases from the market for which it had received the bills from the parties and had also made payments through account payee cheques but since assessee was unable to prove the genuineness of the purchases to the extent required by the Revenue, and in order to avoid litigation and buy peace of mind, the income was offered by the assessee. It is a fact that the income declared during the course of survey was included in the return of income filed by the assessee in response to notice u/s 148 of the Act. Thereafter in the assessment order passed u/s 143(3) r.w.s. 147 of the Act the AO had accepted the return of income filed by the assessee and no addition was made therein. There is no question of levying penalty on account of concealment on the assessee. Hence, we direct to delete the penalty levied by the AO and which was confirmed by Ld.CIT(A). Thus, the grounds of assessee are allowed - Decided in favour of assessee.
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2022 (1) TMI 687
Exemption u/s 11 - rejecting the application filed under Form No. 10A seeking registration u/s. 12AA - HELD THAT:- This Tribunal in the case of Sant Zolebaba Sansthan Chikhali [ 2021 (1) TMI 999 - ITAT PUNE] held the issue of grant of registration and the assessment of income of trust are distinct and separate, by placing reliance in the case of Ananda Social and Educational Trust [ 2020 (2) TMI 1293 - SUPREME COURT] which held the mandate of the provisions u/s. 12AA of the Act is to examine whether objects of the trust are charitable in nature or not and the activities of the trust are genuine. In the present case as discussed above the CIT(Exemption) did not point out anything against the objects and genuineness of the activities of the trust but however rejected the registration on the basis of incorrect finding that no returns of income filed and no taxes were paid. We find that it is a settled principle that the grant of registration and the assessment proceedings or exemption u/s. 11 of the Act is separate and distinct. The process of registration is not on occasion to give a finding whether the assessee filed returns of income and paid taxes or not. These issues cannot be examined during the process of registration u/s. 12AA of the Act. Therefore, in our opinion, the order of CIT(Exemption) in denying the registration u/s. 12AA of the Act cannot be sustained and the impugned order is set aside. Appeal of assessee is allowed.
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2022 (1) TMI 686
Reopening of assessment u/s 147 - Addition u/s 68 - AO not accepting the agricultural income shown by the assessee - HELD THAT:- Since Assessing Officer failed to provide the reasons for reopening of assessment to the assessee, respectfully following the above decision in the case of CIT v. Videsh Sanchar Nigam Ltd., [ 2011 (7) TMI 715 - BOMBAY HIGH COURT] to hold that reassessment is bad in law and accordingly the re-assessment order passed u/s. 143(3) r.w.s. 147 of the Act is quashed as bad in law. The additional ground raised by the assessee is allowed. Borrowed satisfaction - A.Y. 2010-11 - Reasons recorded are based on borrowed satisfaction and not on any satisfaction of the Assessing Officer. This is clear from the fact that the Assessing Officer has in the reasons recorded stated that the agricultural land is transferred in the name of the assessee only on 04.01.2016 which on the basis of facts and documents available on record is not correct as is also held by the Ld.CIT(A) - If this reason is not considered in the reasons recorded, then the only basis of the Assessing Officer that the cash deposit in the bank account is not out of agricultural income of the assessee is that, the assessee only produced some hand written cash receipts which do not inspire confidence. This also, the Ld counsel stated, is the conclusion of the ADIT (Inv) and not of the Assessing Officer. The decisions relied upon by the Ld. Counsel also fortify the view that reasons recorded should be based on the satisfaction of the Assessing Officer and not on borrowed satisfaction - satisfaction recorded in the reasons recorded by the Assessing Officer are borrowed and not his own. Thus, the order made under section 143(3) r.w.s 147 for assessment year 2010-11 is quashed as bad in law. The additional ground raised by the assessee is allowed. Estimating the agricultural income at 40% - Estimation of the agricultural income by the Ld.CIT(A) is entirely on assumptions and presumptions. The facts being the same in all the years, and the Revenue accepting agricultural income for the A.Ys. 2011-12 and 2012-13 and the lower authorities not bringing any evidence on record to hold otherwise, taxing the agricultural income shown by the assessee, as cash credit u/s. 68 of the Act is not correct. Therefore, the Assessing Officer is directed to exclude the income from sale of goats and goat mindvi from the agricultural income shown by the assessee and treat only the balance as agricultural income and recompute the income accordingly. Sale of goats and goats mindvi - HELD THAT:- We hold that the same is not an agricultural income, however, as fairly submitted by the Ld.counsel for the assessee that a reasonable sum may be estimated as net income, suggesting to be estimated at 5%, I find that the same is on the lower side. Accordingly, in the interest of justice, the income from the sale of goat and goat mindvi should be estimated at the rate of 10% of the sale. This ground of appeal of the assessee gets part relief. Ad hoc disallowance of 10 per cent of total purchases and other expenses debited to the profit and loss account in each of these three years - HELD THAT:- It is observed from the Assessment Order that the Assessing Officer has not given any basis for disallowing the other expenses other than the purchases made by the assessee. It appears that the reports of the field enquiries were also not confronted with the assessee for its rebuttal. Therefore, taking the totality of facts and circumstances into consideration, hold that if the disallowance is restricted to 5% it would meet the ends of justice.
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2022 (1) TMI 685
Exemption u/s 11 - rejecting approval u/s 12AA - assessee trust while filing the online application for grant of registration u/s 12A had on account of a bonafide mistake, inadvertently stated at Column 5a of its application in Form No. 10A that its case was that of registration under clause (ab) of sub-section (1) of Sec. 12A - HELD THAT:- We concur with the ld. A.R that the assessee trust which had filed an application seeking grant of registration u/s 12A of the Act, had inadvertently, on account of a bonafide mistake stated in its application in Form No. 10A that the same was filed under clause (ab) of sub-section (1) to Sec. 12A of the Act. Backed by the aforesaid facts, we are of the considered view, that in all fairness the matter requires to be restored to the file of the ld. CIT(Exemption) for de novo consideration of the assessee s application i.e, after allowing an opportunity to the assessee to rectify the mistakes in the same. We, thus, in terms of our aforesaid observations restore the matter to the file of the CIT(Exemption).. The Ground of appeal No.1 is allowed for statistical purposes.
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2022 (1) TMI 684
Revision u/s 263 by CIT- Taxability of shares received by way of Gift - Assessee claims that it is not chargeable to tax under section 56(2) (viia) - PCIT held that there is a lack of enquiry by the assessing officer - HELD THAT:- Provisions of section 56 (2) (viia) itself provides about taxability of receipts of assets without consideration or with inadequate consideration in the hands of certain companies. Therefore, the finding of the ld PCIT that a company cannot make gift is devoid of any merit and we are not shown that it is supported with any provisions of law. In view of overwhelming judicial precedents cited before us, we are of the view that there is no bar against the company giving its properties as Gift. The provisions of section 56(2)(viia) specifically deals with receipt by a firm or a private company of any property being shares of a company in which the public are not substantially interested . No doubt, in case the recipient is a partnership firm of the property, but the property involved is a share of Wokhardt Ltd, which is a listed company in which the public are substantially interested. We find that the provisions of section 263 gives power to the revisionary authority to revise the order after giving the assessee an opportunity of being heard and after making or causing to be made such enquiries as he deems necessary. Therefore, the law clearly mandates that the issue of revision could only be decided after the assessee is heard on the matter. In the present case, we do not find that the issue of taxability of above gift u/s 68 of the act was at any time put to the notice of the assessee - provisions of section 68 applies where any sum is found credited in the books of the assessee. In the present case, these are the shares, which are received by the assessee - PCIT in whole of his order did not mention and deal with the applicability of section 68, but in the finding mentioned merely a line without giving assessee an opportunity for putting its case before him, directed the assessing officer to apply the provisions of section 68 of the Act. Ld PCIT has also not held that how the provision of section 68 applies in the facts of the case. This is not correct in view of several judicial precedents cited before us. Argument of the learned DR that letter dated 07th December, 2017 could not have been examined by the assessing officer as he has already passed the order on 06/12/2017 - On careful examination of that letter, it shows that assessee submitted by that letter details of the partners of the assessee firm and the details of the dividend received. The content of the letter as such do not make any difference with respect to the examination of taxability of gift of shares in the hands of the assessee. Order:- a) the learned assessing officer has passed the order under section 143(3) of the Act after carrying out necessary and relevant enquiries as warranted by the facts of the case and b) the learned PCIT could not show that what further enquiry should have been made, c) Order of the learned assessing officer cannot be deemed erroneous as well as prejudicial to the interest of the revenue with respect to Explanation 2 to section 263 of the Act. d) The order of ld AO is not erroneous as Gift of shares of the Wockhardt Limited are not chargeable to tax in the hands of the assessee firm u/s 56 (2) (viia) of the Act , as assessee has received gift of shares of a company in which public are substantially interested which could not have been taxed under section 56(2)(viia) of the Act, We allow grounds against revisionary order passed u/s 263 - Decided in favour of assessee.
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2022 (1) TMI 683
Unexplained investment u/s 69 - stock was not recorded in the books of account of the assessee and acquired out of unaccounted income - admission of undisclosed income - whether the provision of section 115BBE of the Act are applicable on the surrendered income? - HELD THAT:- CIT(A) on examination of the fact, settled judicial precedence, also appreciating that the alleged income is business income earned by the assessee during the normal course of its business and was part of the total business stock available at the business premises and also observing that provisions of section 115BBE of the Act are applicable from 01.04.2017 and are thus not applicable on the case of assessee as the search was carried out on 15.12.2016 CIT(A) find that the alleged excess stock was not kept separately at any other place and was part of the total business Stock found at the assessee s business premises are sufficient enough to indicate that the alleged investment in excess stock is part of the business income we also find that alleged excess stock was duly accepted by assessee as part of unaccounted business and source thereof stated during the course of search itself and no other incriminating material was found during search proceedings and therefore is not an undisclosed income as held by the ld. AO. We, therefore, find no infirmity in the finding of Ld. CIT(A) rightly holding that the provision of section 115BBE of the Act are not applicable on the surrendered income on account of excess stock valuing found during the course of search - Decided in favour of assessee.
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2022 (1) TMI 682
Revision u/s 263 - As per CIT action of the A.O. in granting depreciation and interest expenditure as deduction is not in accordance with provisions of section 44AD(2) - PCIT has also expressed the view that the dropping of penalty u/s 271A of the Act was clearly on a wrong appreciation - HELD THAT:- Assessee furnished a reply dated 27.8.2018 contending that the CBDT has not prescribed books of accounts required to be maintained for the purpose of section 44AA read with Rule 6F(1) for civil contract works. The assessee also placed reliance on case of Sammurai Techno Trading Company Pvt. Ltd.[ 2009 (11) TMI 938 - KERALA HIGH COURT] wherein it was held that even where books of accounts are not maintained, section 44AD percentage of 8 can be guideline for estimation of income from civil works though the section 44AD is not applicable A.O. again issued another notice dated 10.9.2018 u/s 142(1) of the Act, wherein he proposed to estimate income before interest and depreciation @ 10% of the turnover. Thereafter, the A.O. has completed the assessment estimating the gross income @ 10% of the turnover and allowed deduction of depreciation and interest. From the foregoing discussions, it can be noticed that the A.O. has applied his mind on the impugned issue and has taken a conscious decision to allow deduction of depreciation and interest after estimating gross income @ 10% of the gross receipts. We find merit in the contentions of the assessee that the AO has taken a plausible view in this matter and hence it cannot be considered to be prejudicial to the interest of the revenue. In the instant case, there are two views possible with regard to estimation of income from civil contract works and the assessing officer has taken a plausible view. Accordingly, we are of the view that the revision order passed by Ld. PCIT on this issue cannot be sustained. Accordingly, we set aside his order in directing the A.O. to do de-novo assessment. Dropping of penalty u/s 271A of the Act was on wrong appreciation of the judgement of the High Court - A.R. contended that the Ld. PCIT should have passed separate order on this issue. However, the Ld. A.R. did not cite any authority in support of his contentions. In any case we notice that the Ld. PCIT has given opportunity to the assessee in this regard. Accordingly, we do not find it necessary to interfere with observations made by Ld. PCIT on the second issue. Appeal of assessee partly allowed.
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2022 (1) TMI 681
Suppressed production of pan masala (containing tobacco) - HELD THAT:- Lower authorities had rightly worked out the suppressed production of the assessee company at 3,44,85,310 pouches by adopting the deemed production on the basis of which excise duty was charged on it. In fact, as observed by us hereinabove, in case the assessee had any reason with him as to why the suppressed production was not to be determined on the aforesaid basis, as was specifically brought to his notice by the A.O, then, it was open for him to have come forth with an explanation as regards the same, which we are afraid he had not done. On the basis of the aforesaid facts, we are of a strong conviction that the CIT(A) had rightly upheld the suppressed production as had been determined by the A.O. We, uphold the order of the CIT(A) who in our considered view had rightly had confirmed the addition of ₹ 3,44,85,310/- i.e 3,44,85,310 pouches @ Re.1/- per pouch as made by the A.O towards suppressed production of pan masala (containing tobacco) - Ground of appeal No. 1 raised by the assessee is dismissed. Disallowance u/s 2(24)(x) r.w sec. 36(1)(va) - disallowance of the delayed deposit of the employee s contributions towards provident fund - amount was deposited before the due date of filing of its return of income as provided in Sec. 139(1) - HELD THAT:- We are of the considered view that the issue as to whether or not the employees contribution to welfare funds would fall within the scope and domain of Sec. 43B of the Act, is covered by the judgment of the Hon ble High Court of Bombay in the case of CIT Vs. Hindustan Organic Chemicals Ltd [ 2014 (7) TMI 477 - BOMBAY HIGH COURT] We are of the considered view that no distinction is to be drawn between the employers as well as employees contribution to PF and ESI as both are covered u/s 43B - We, thus, in terms of our aforesaid observations vacate the disallowance made by the A.O qua the delayed deposit of the employees contributions towards Provident Fund by the assessee company. The additional ground of appeal raised by the assessee is allowed in terms of our aforesaid observations.
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2022 (1) TMI 680
Disallowance u/s 14A r.w Rule 8D - suo moto disallowance made by assessee - Whether disallowance u/s 14A be restricted to the extent of the exempt dividend income? - HELD THAT:- We are principally in agreement with the claim of the ld. A.R that the amount of disallowance u/s 14A cannot exceed the amount of the exempt income - the disallowance u/s 14A be restricted to the amount of the exempt dividend income that was received by the assessee during the year, therein, direct the A.O accordingly. Amount paid by an assessee towards Education Cess or any Other cess viz. the Secondary and Higher Education Cess - Whether disallowable expenditure u/s 40(a)(ii) ? - HELD THAT:- We find that the said issue is squarely covered by the recent order of the Hon ble High Court of Bombay in the case of Sesa Goa Limited [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] had concluded that now when the legislature had not provided for any prohibition on the deduction of any amount paid towards cess in clause (ii) of Sec. 40(a), therefore, holding to the contrary would amount to reading something which is not to be found in the text of the provision of Sec. 40(a)(ii). Accordingly, the Hon ble High Court had concluded that there was no prohibition on the deduction of any amount paid towards cess in Sec. 40(a)(ii), while computing the income chargeable under the head profits and gains of business or profession . We therein conclude that as Education Cess and Secondary and Higher Education Cess is not disallowable as a deduction u/s 40(a)(ii) of the Act, therefore, the claim of the assessee seeking deduction of the same while computing its income for the year under consideration merits acceptance. The additional ground of appeal no. 3 raised by the assessee is allowed.
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2022 (1) TMI 679
TP Adjustment - TPO has applied benefit test in dealing with the issue of ALP of payment for SAP license - HELD THAT:- Discussions by the TPO are not at all sustainable in the context of determination of ALP in Transfer Pricing Adjustment. This has been held by Hon ble jurisdictional High Court in several case laws as referred by the Ld. Counsel of the assesse in the submissions as above. Furthermore, determination of ALP as nil by applying the benefit test without resorting to the methodology of determining ALP as per the methodology set out in Chapter X of the Act and the relevant Rules has also been held to unsustainable. In these circumstances, the determination of ALP as nil has been held to be not sustainable in the case laws from Hon ble Bombay High Court as above including CIT vs.Lever India Exports Ltd. [ 2017 (2) TMI 120 - BOMBAY HIGH COURT] and CIT vs Johnson Johnson Ltd. [ 2017 (3) TMI 1520 - BOMBAY HIGH COURT] In these case laws, it was expounded that TPO is mandated by law to determine the ALP by following one of the methods prescribed u/s. 92C read with rule 10B. When No such exercises is carried out by the TPO, the determination at Nil of the ALP was held to be not sustainable. The above said case laws are fully applicable on the fact of the case. Thus we hold that authorities below have fatally erred in applying the benefit test as rightly contended by the Ld. Counsel of the assessee. Furthermore, it has been submitted that after applying the benefit test authorities below have brushed aside the details submitted by the assessee. We are in agreement that authorities below have erred in holding the ALP at nil on the ground that relevant documents have not been submitted. In our considered opinion, the assessee has discharged the onus caste upon it. The case laws as referred above are duly applicable on this issue also. The determination of ALP at nil in this regard also is not sustainable on the touchstone of the aforesaid case laws as the determination of ALP at nil without following one of the methods prescribed u/s. 92C r.w.Rule 10B has been held to be non sustainable. Accordingly, we set aside the orders of the authorities below, and decide the issue in favour of the assessee.
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2022 (1) TMI 678
Addition u/s 14A r.w.r 8D - disallowance made by invoking Rule 8D(2)(iii) of the I.T. Rules is for administrative and common expenses when the assessee derives exempted income - HELD THAT:- In the instant case, in each of the assessment year s huge investments are made which is given rise to exempted dividend income. Investment decisions are very complex and strategic which requires administrative support. Assessee would have incurred administrative expenses such as salary, wages, general expenses, stationery etc. Therefore, it cannot be said that no expenditure was incurred for making the said investments. Hence, we confirm the disallowance made by the AO by invoking provisions of section 14A of the I.T. Act r.w. Rule 8D(2)(iii) of the I.T. Rules. Disallowance of indirect interest expenditure by invoking the provisions of section 14A of the I.T. Ac r.w. Rule 8D(2(ii) - Admittedly, interest on borrowed funds used for business purposes cannot be computed for disallowance u/s. 14A of the I.T. Act r.w. Rule 8D(2)(ii) of the I.T. Rules. It is the duty of the assessee to prove that interest was incurred on borrowings are used for the specific business purpose and non-interest bearing funds were utilized for making investments which has given rise to exempted income. The assessee to prove that it is having its own funds to make investment which had yielded exempted income, necessarily has to furnish cash flow statement. The cash flow statement would disclose as on the date of making investments, which had given rise to the exempted income, that the assessee had interest free funds available with it. In the interest of justice and equity, we deed it fit to remand the case to the Assessing Officer for fresh consideration. Grounds raised by assessee stands allowed for statistical purposes.
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2022 (1) TMI 677
Adjustment made u/s.143(1) - incorrect computation of allowable MAT credit u/s 115JAA - set off of MAT credit inclusive of surcharge and education cess and recompute the tax payable by the assessee for the year under consideration - HELD THAT:- Format ITR-6 was amended from A.Y. 2012-13 wherein the tax liability in Part-B -TTI both under normal provisions and under MAT provisions computed including surcharge and cess. MAT credit is computed automatically using the prescribed algorithm which is nothing but the balancing figure i.e. different between tax liability and MAT liability including surcharge and cess. Therefore, post A.Y. 2012-13 as the format of ITR-6 is so designed to compute MAT credit automatically using the prescribed algorithm i.e. difference between tax liability and MAT liability including surcharge and cess is a balancing figure. In our view there cannot be any debate as to the exclusion of surcharge and cess. Therefore, the observation of the Ld.CIT(A) that the issue is debatable one is not sustainable. Further, we observe that majority of the decisions including the decisions of the Hon'ble Calcutta High Court and Hon'ble Madras High Court are in favour of the assessee and therefore it cannot be said that it is a debatable issue. In the circumstances, respectfully following the above said decisions allowing the grounds of appeal of the assessee, we direct the Assessing Officer to allow set off of MAT credit inclusive of surcharge and education cess and recompute the tax payable by the assessee for the year under consideration.See Tata Motors Ltd. [ 2021 (7) TMI 207 - ITAT MUMBAI ] We note that the above case law fully applies here. We further note that the present case of the assessee is even on a better footing. The Ld.CIT(A) has dismissed the assessee s appeal without referring to any case law. The case law referred on the subject in favour of the assesee were duly referred before Ld.CIT(A) which are ignored. Hence, this bring us to a legal issue as to whether this adjustment u/s. 143(1) by the CPC, Bengaluru is legally sustainable. As apparent from the case law mentioned above, this issue is not amenable to any prima-facie adjustment as provided in section 143(1). Though, assessee has not raised this aspect, before Ld.CIT(A), there is no estoppel as to law. Hence, we hold that this adjustment was not liable to be made u/s. 143(1). Hence, the order is quashed on that account. On merits also, the issues stands covered. - Decided in favour of assessee.
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2022 (1) TMI 676
Disallowance of interest expenses under the provisions of section 36(1)(iii) - Whether the land acquired by the assessee on deferred payment basis and interest paid on the outstanding amount of purchase consideration, does the outstanding amount represent the borrowed fund? - HELD THAT:- A perusal of the above provisions reveals that the entire interest cost has to be capitalized if it was incurred in connection with the capital asset. Thus, without going into the provisions whether it relates to the expansion/extension of the business, interest cost cannot be allowed as revenue expenses in the given facts and circumstances. Accordingly, we do not find any infirmity in the order of the authorities below. Thus we uphold the same. Hence the ground of appeal of the assessee is dismissed. Rectification of mistake u/s 154 - Accrual of income - treating the unutilized MODVAT credit as income of the assessee - AO rejected the contention of the assessee by observing that the issue of MODVAT credit has been decided right up to the tribunal against the assessee and therefore there remains no mistake apparent from record - HELD THAT:- Admittedly, non-consideration of the judgment of the jurisdictional High Court amounts to a mistake apparent from record as held in the case of ACIT vs. Saurashtra Kutch Stock Exchange Ltd [ 2008 (9) TMI 11 - SUPREME COURT] . We are conscious to the fact that the appeal was decided by the ITAT in the case of the assessee [ 2010 (8) TMI 1155 - ITAT AHMEDABAD] rejecting the same in limine on the reasoning that nobody from the side of the assessee presented the case. The issue was decided by the ITAT without going into merit of the facts of the case. Whether there is a mistake apparent from record in the light of the judgment of Hon ble Supreme Court as discussed above, it is pertinent to note that the order of the AO and the learned CIT (A) got merged with the order of the ITAT. Therefore, if any rectification is required of a mistake being apparent from record that can only be effected in the order of the tribunal and not in the order of the AO or the learned CIT (A). However the assessee, has not challenge the order of the ITAT on the reasoning that there is a mistake in the order of the ITAT. To our understanding, the order of the ITAT has reached to its finality. Accordingly we do not find reason to interfere in the order of the learned CIT (A). Hence the ground of appeal of the assessee is dismissed.
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2022 (1) TMI 675
Reopening of assessment u/s 147 - unaccounted investment in the land was based on the documents seized from the premises of 3rd party - Use of materials seized and the statement furnished by the third parties against the assessee - HELD THAT:- The answer stands in affirmative. It is for the reason that the opportunity for the rebuttal to the assessee for the seized documents and the statements recorded under section 132(4) of the Act are sine qua non in order to meet the principles of natural justice. This requirement has to be complied with by the revenue even in a situation where the assessee does not demand for the seized materials/statements recorded under section 132(4) of the Act if revenue seeks to make the addition on the basis of such material and statement. It is for the simple reason that the documents which have been relied upon by the revenue for making the addition to the income of the assessee has to be provided to the assessee for the rebuttal - See VARSHABEN BHARATBHAI SHAH [ 1996 (2) TMI 107 - GUJARAT HIGH COURT] . Since, the due process of providing the opportunity for the rebuttal of the assessee has not been done, the additions made in the assessment under section 143(3) read with section 147 of the Act are not sustainable. Assessment in the case of co-owners - Also there was the search proceedings with respect to the co-owner namely Kanchanbhai Baldevbhai under the provisions of section 132 of the Act. As a result of search proceedings, assessment order was framed under section 153A of the Act where addition was made on account of unaccounted investment in the land as discussed above which was subsequently deleted by the learned CIT (A) - we find that the issue on merit was not decided rather the appeal was decided on technical reason that there cannot be any addition with respect to the unabated assessment years until and unless there was found some document of incriminating nature. Admittedly, there was no document found from the premises of the co-owner in the course of search with respect to the impugned unaccounted investments. Further, the order of the learned CIT (A) was not maintainable before the ITAT for the simple reason that the tax effect in the dispute was less than ₹ 50 lacs. Issue in respect of the co-owner has reached to the finality that there was no addition made in his hand despite he was the co-owner in the deal of purchase of the land as discussed above. Thus to our understanding, there cannot be any addition in the hands of the assessee being the co-owner of the property purchased from the party namely Smt. Pareshben D Modi. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made - Decided in favour of assessee.
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2022 (1) TMI 674
Late payments towards EPF and ESI u/s 36(1)(va) - Payment before furnishing the return of income under section 139(1) - HELD THAT:- Since the facts involved in the present case are identical to the facts involved in the case of Mohangarh Engineers and Construction Company Vs. DCIT [ 2021 (9) TMI 1319 - ITAT JODHPUR] and in the case of Bikaner Ceramics Private Limited, Bikaner [ 2021 (9) TMI 1319 - ITAT JODHPUR ] - So respectfully following the aforesaid referred to order, the disallowances sustained by the Ld. CIT(A) are deleted - Decided in favour of assessee.
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2022 (1) TMI 673
Addition on account of client code modification done by the broker to shift the profit - whether such client codes were modified at the instance of the assessee or there was some punching error at the end of the share broker? - HELD THAT:- Admittedly client codes were modified of the assessee as per the information received from the investigation wing - It is because the stock exchange permits the share broker to rectify the mistakes occurred while punching the data. If that be so, then there cannot be any fault which can be attributed to the assessee for the mistakes committed by the share broker. The client code modifications give rise to the doubt/ suspicion which requires detailed investigations from the parties concerned to reveal the truth. Merely, there were client codes modifications carried out by the broker cannot the basis to draw an inference against the assessee. In fact, in the case of client code modification the code of the other party is entered at the place of the assessee. Thus, the other party also required to be investigated whether the other party was involved in such transaction. Besides this other corroborative evidence has to be brought on record suggesting that there was the exchange of cash among the parties involved in such client code modification transaction. But we note that no such exercise has been carried out by the authorities below. As such there is no whisper in the order of the authorities below that there was the cash transfer between the parties for transferring the income of the assessee to the other party or shifting in the losses. Furthermore, in majority of the cases, the client code medication was carried out by the broker with the relative of the assessee and thus it is very unlikely that the assessee shall manipulate the income/loss with them for the reason that there would be consequential effect on their income too. Meaning thereby, as a whole, there would not any effect on the income of the assessee and her associates unless some contrary evidence are brought on record. Thus in the absence of such verification/examination carried out by the authorities below, we are not inclined to uphold their findings. We are not inclined to uphold the findings of the authorities below. Accordingly we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
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Corporate Laws
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2022 (1) TMI 672
Sanction of Scheme of Amalgamation - Section 230-232 of Companies Act, 2013 - HELD THAT:- Various directions with regard to holding, convening and dispensing with various meetings issued - directions with reagrd to issuance of various notices also issued. The scheme is approved - application allowed.
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2022 (1) TMI 671
Seeking restoration of name of company in Registrar of Companies - Section 252 of the Companies Act, 2013 - HELD THAT:- The Company has been active for the period of two years preceding the date of strike off and carrying on its business for the purpose of which it was incorporated. Taking into consideration the provisions of Section 252(3) of the Companies Act, 2013 which vests this Tribunal with a discretion where the Company whose name has been struck off and such Company is able to demonstrate that there is a running business as on the date when the name was struck off and also keeping in consideration that it is just to do so can restore the name of the Company in the register. The Registrar of Companies, Chennai is ordered to restore the original status of the Petitioner Company viz. M/s. Ezhil Blue Metals Pvt. Ltd. as if the name of the Company has not been struck off from the Register of Companies with resultant and consequential actions like changing the status of Company from strike off to Active - application allowed.
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Insolvency & Bankruptcy
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2022 (1) TMI 670
Validity of resolution passed at the 12th COC Meeting - CoC had rejected the Applicant s request for extension of time to submit the Resolution Plan - HELD THAT:- The Minutes of the 12th COC Meeting established that the CoC offered to the Appellant to continue to be a part of the ongoing process so that it may have an opportunity at any later stage. The Appellant had sought 15 minutes time for discussion and thereafter decided not to participate in the open bidding process and exited the Meeting. Thereafter the CoC went on to approve the Resolution Plan submitted by M/s. Om Logistics Ltd./R-8. We find force in the contention of the Learned Counsels for the Respondent that if one of the Directors of the Appellant Company Mr. Naresh Agarwal had tested Covid positive, there are no substantial reasons given for any of the other five Directors not to have represented their matter. In a catena of Judgements, the Hon ble Apex Court has laid down that the provisions investing jurisdiction and authority in the NCLT has not made the commercial decision exercised by the CoC of not approving the Resolution Plan or rejecting the same, justiciable. So, in the instant case, if CoC has approved with 66% majority as provided under Section 12(2) of the Code and has decided not to extend the time to the Appellant herein on the ground that several extensions have already been given, the RP cannot take any contrary decision. Therefore the contention of the Learned Counsel for the Appellant that the RP has not given sufficient advance time for the meeting and has acted contrary to provisions of IBC, is untenable. Additionally, the Appellant had not chosen to exercise their choice of participating in the open bidding process and chose to exit the Meeting and even accepted the refund of the EMD amount. Appeal dismissed.
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2022 (1) TMI 669
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- Since the application filed by the Applicant fulfilled all the conditions required under Section 7 of the Code, this Tribunal ordered issue of notice to the Respondent by all modes. No one has represented on behalf of the Respondent. Despite service of notice by all modes, none appeared on behalf of the Respondent and as a result the Respondent was proceeded ex-parte by order dated 12.10.2021. The Applicant has established the existence of debt and default on the part of the Respondent and the Respondent has not availed the opportunities provided by this Tribunal to defend the arguments made by the Applicant. In view of the above situation, this Tribunal admits this petition and initiates CIRP on the Respondent with immediate effect. Application admitted - moratorium declared.
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2022 (1) TMI 668
Seeking a permission for conducting the Private Sale of the Assets of the Corporate Debtor - Regulation 33(2) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - HELD THAT:- Since, the Applicant is in the process of selling the said property under private sale to a related party of the Corporate Debtor, not barred under Section 29A of the IBC, 2016. Where is no objection and multiple attempts of public auction by the Liquidator, this bench is of the view that this is a fit case for granting the permission for private sale of said property as the proposed buyer is related party as under Regulation 33(2) of the Regulations - the present Application is allowed by permitting private sale of said property as under Regulation 33(2) of the Regulations.
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2022 (1) TMI 667
Seeking approval of Resolution Plan - Seeking consideration of its application on priority before approval of resolution plan - resolution professional has failed to discharge his obligation to assess the applicability of section 29A of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- For secured financial creditors, unsecured financial creditors and employees, 100 per cent. payment is given whereas to operational creditors, only 2 per cent. of the admitted amount is given. The fair value and liquidation value of the corporate debtor are ₹ 5,643.26 lakhs and ₹ 4,561.66 lakhs respectively. The amount given to the operational creditor is more than liquidation value. In form H in column No. 2 of clause 7, payment to unsecured financial creditors who voted in favour of the resolution plan has been mentioned as ₹ 4,17,70,701 whereas in the same column amount of unsecured financial creditors stands at ₹ 10,02,28,812 and in percentage terms has also been mentioned as 100 per cent. Thus the figure of ₹ 9,18,24,508 is inadvertently mentioned wrong - This factual position gets clarified from resolution plan itself wherein total payment to unsecured financial creditor stated as ₹ 10.02 crores which is the total of unsecured financial creditor not having a right to vote and who voted in favour of the resolution plan. There are no preferential undervalued or extortionate transaction. On perusal of contents of the resolution plan and it is found that the requirement of regulations 36 to 39 of the CIRP Regulations, 2016 have been complied with. Further it is noted that resolution applicant complies with the requirement under section 30(2)(b) of the IBC, 2016. Also, the resolution plan addresses the cause for failure and also contains measures to run the corporate debtor in future. The resolution plan is both feasible and viable as held by the CoC and it also contains provision for its effective implementation. The Resolution plan is approved.
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Service Tax
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2022 (1) TMI 666
Excisable goods or not - Superior Kerosene Oil - falls under Fourth schedule or not - seeking restoration of SVLDRS-1 declaration filed by the Petitioner - opportunity of personal hearing not provided - gross violation of principles of natural justice - HELD THAT:- The principles laid down in THOUGHT BLURB VERSUS UNION OF INDIA AND ORS. [ 2020 (10) TMI 1135 - BOMBAY HIGH COURT] are to be considered by the Respondents while deciding the Petitioner s case, as to, whether Superior Kerosene Oil which was the subject matter of the said declaration under the SVLDRS scheme, falls under Fourth schedule or not and whether the said product is at all excisable or not. The Petitioner had also relied upon the communication dated 26/11/2019 from Shri Navraj Goyal, OSD (CX) clarifying that only the Petroleum Crude, high speed diesel, motor spirit, natural gas, aviation turbine fuel and tobacco and tobacco products are under Central Excise. Based on this communication, the learned counsel for the Petitioner vehemently contended that the Superior Kerosene Oil is not an excisable product and would not fall under Fourth Schedule to the Central Excise Act, 1944 - If the Respondents would have given an opportunity to the Petitioner to produce the said communication dated 26/11/2019 and to explain as to how the Superior Kerosene Oil is not an excisable goods and as to why the Superior Kerosene Oil would not fall under the Fourth schedule, then the scenario would have been different. Even issue of interpretation whether the Superior Kerosene Oil was an excisable product or not and whether the Superior Kerosene Oil falls under Fourth Schedule or not would have bearing on the aspect of eligibility of the Petitioner to file such declaration under the said Scheme or not and thus warrant personal hearing to the Petitioner before deciding the issue of eligibility - the order of rejection is in violation of principal of natural justice and thus, it deserves to be quashed and set aside.
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Central Excise
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2022 (1) TMI 665
MODVAT Credit - credit on goods used in erection of Captive Power Plant by two other Divisions of respondent No.1 s group - Rule 57Q(6) of the erstwhile Central Excise Rules, 1944 - non-filing the declaration under Rule 57G - procedures required under rule 57(T)(7) not followed - registration certificate as required under Rule 174 (4) of the erstwhile Central Excise Rules, 1944 not obtained - HELD THAT:- The respondent No.1-M/s. Larsen Toubro Ltd. is a legal entity. The respondent No.1 has single Central Excise Registration for the entire factory and for manufacture of excisable goods. The registered ground plan of the respondent No.1 s factory covers the area where the captive power plant has been erected. It is undisputed that the power plant is within the approved ground plan of the factory. It is further pertinent to note that the entire electricity generated is used captively within the factory for the manufacture of dutiable cement - The perusal of record would show that the Divisions of the respondent No.1 namely Group-II and LTCG have no independent existence. They are not separate legal entity. They are the Divisions of respondent No.1. These Divisions are functioning as a part of respondent No.1 itself. The respondent No.1, therefore, availed the Modvat Credit being duty paid on the capital goods used for the erection of the captive power plant. It is further pertinent to note that there is hardly any dispute by the appellants that the goods are not falling under Rule 57-Q of the Rules 1944, being capital goods. The CESTAT was right in rejecting the appeal filed by the Revenue and uphelding the order passed by the Commissioner (Appeals). Modvat Credit on duty paid inputs or any goods used in the manufacture of Captive Power Plant without filing the declaration under Rule 57G and without following the procedures required under rule 57(T)(7) and without obtaining registration certificate as required under Rule 174 (4) of the erstwhile Central Excise Rules, 1944 - HELD THAT:- The issue has become purely academic. Besides, the Commissioner (Appeals) has recorded a concrete finding that the procedural lapse on the part of the respondent No.1 would not be a ground to deny the Modvat credit, which the respondent No.1 is otherwise entitled. The CESTAT Mumbai has confirmed this order of the Commissioner. The reliance has been placed on Board circular No. 441/7/99-CX dt. 23.02.1999 - this question is also required to be answered in favour of the respondent No.1. There is no substance in the appeal filed by the Revenue - appeal deserves to be dismissed.
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CST, VAT & Sales Tax
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2022 (1) TMI 664
Principles of natural justice - petitioner was not given reasonable opportunity to show cause before the impugned orders were made - alleged mismatch qua ITC (Input Tax Credit) - non-verification of dealer at the other end by Assessing Officer-respondent - HELD THAT:- This Court having set out the reasons for not acceding to the prayer of the writ petitioner now sets out infra the conclusion and that is the captioned writ petition fails. It is made clear that if the writ petitioner chooses to file statutory appeal under Section 51 of TNVAT Act, it will be open to the Appellate Authority to consider the same (subject to limitation and subject to pre-deposit condition, if any) on its own merits and in accordance with law uninfluenced by any observation made in this order. Petition dismissed.
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2022 (1) TMI 663
Recovery of dues - Attachment of Bank Accounts - petitioner neither charged Value Added Tax nor remitted the tax on the sales effected under the provisions of the Tamil Nadu Value Added Tax Act, 2006 - Section 22(6) of the TNVAT Act, 2006 - HELD THAT:- Though the petitioner has been both negligent in neither filing the returns nor by filing reply to the notices which preceded passing of the first mentioned impugned order dated 28.10.2016 of the first respondent and failed to answer the subsequent notices issued by the first respondent asking the petitioner to pay the arrears of tax, the facts on record also indicates that the petitioner had filed a petition under Section 22(6) of the TNVAT Act, 2006 for revision of the order dated 28.09.2016 in time. Since the petition has not been disposed, the impugned recovery cannot be proceeded immediately, as the aforesaid petition of the petitioner for revision of the Assessment Order has not been disposed in accordance with law. This Writ Petition is disposed by directing the second respondent to pass appropriate orders on the petition dated 26.10.2016 of the petitioner filed under Section 22(6) of the TNVAT Act, 2006, within a period of thirty days from the date of receipt of a copy of this order.
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Indian Laws
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2022 (1) TMI 662
Dishonor of Cheque - insufficient funds - rebuttal of presumption - legally enforceable debt or liability or not - complainant has failed to establish the transaction and outstanding and inspite of the same, both the courts have not appreciated the said material on record - exercise of revisional jurisdiction - HELD THAT:- The petitioner cannot find fault with the continuation of the transactions of the accused even for the month of September-2008 also. It is also important to note that the ledger extract is also marked as Ex. P.8 and counsel referring this Ex. P.8 certified copy which is produced before him also submits that even subsequent to the issuance of cheque also transactions have taken place in the month of August and September-2008 and hence, it is clear that Ex. P.7 corroborates that the transactions were continued till September-2008. When such being the fact material available on record, the counsel cannot contend that the bills have not been counter signed by the petitioner herein. Apart from that, when the cheque was issued there is a presumption under Section 118 and 139 of NI Act that the same is given towards debt or legal liability and the revision petitioner has not disputed issuance of cheque and only his defence is that during the course of transactions blank cheque was collected and in order to prove the said fact, even he did not choose to enter into the witness box and not adduced any rebuttal evidence. During the course of cross-examination of P.W. I also there is no effective cross-examination to rebut the evidence of the complainant. It is settled law that accused can rebut the evidence of complainant by effective cross-examination and also adducing the rebuttal evidence and it is already pointed out that there is no any rebuttal evidence given by the accused and also in the cross-examination of P.W. I, there is no effective cross-examination to rebut the evidence of the complainant. The principles laid down in the judgment of Rangappa's case [ 2010 (5) TMI 391 - SUPREME COURT ] is not applicable to the facts on hand. Since first of all there is no any rebuttal evidence and accused is unable to raise the probable defence which creates doubt about the legally enforceable debt or liability and apart from that, in the very same judgment the Hon'ble Apex Court held that not raising a probable defence, the appellant/accused was not able to contest the existence of a legally enforceable debt or liability and the legal notice was issued to the revisional petitioner and acknowledging the legal notice, he has not given any rebuttal reply and when such being the circumstances, it is further observed that when the accused not denied signature on the cheque belongs to him the statutory presumption come into play and the same has not been rebutted even with regard to the material submitted by the complainant and hence, this judgment is helping either side i.e., complainant in the case on hand also cheque was admitted and issue of legal notice was admitted and transaction between the revisional petitioner and the respondent is admitted and the revisional petitioner has not led any rebuttal evidence and there is no any effective cross-examination rebutting the evidence of the complainant and these are the facts considered by the trial Court as well as the appellate Court while re-appreciating the material on record. No error committed by the respective courts in appreciating the evidence and also no illegality committed by both the courts giving finding based on the material on record and hence, this Court cannot exercise the revisional powers to disturb the finding of both the courts as the same is not suffering from any illegality and correctness of the finding. The petitioner has not made out any ground to exercise the revisional power - revision petition is dismissed.
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