TMI Tax Updates - e-Newsletter
January 21, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. ALCOHOLIC LIQUOR – GST LIABILITY

   By: DR.MARIAPPAN GOVINDARAJAN

2. Directed investigating officer to issue advance notice of 72 hours to effect the arrest after investigation

   By: Bimal jain

3. GST @12% leviable on contract w.r.t. construction of new railway sidings

   By: Bimal jain

News

1. DFS Secretary chairs review meeting with LDMs and SLBC convenors

2. India participates in the First Movers Coalition (FMC) Leadership Meeting of the World Economic Forum

Notifications

Customs

1. 05/2023 - dated 19-1-2023 - Cus (NT)

Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Supersession Notification No. 02/2023-Customs(N.T.), dated 5th January, 2023

GST - States

2. 15/2022-State Tax (Rate) - dated 16-1-2023 - Mizoram SGST

Amendment in Notification No. 12/2017-State Tax (Rate), dated the 7th July, 2017

3. 14/2022-State Tax (Rate) - dated 16-1-2023 - Mizoram SGST

Amendment in Notification No. 4/2017- State Tax (Rate), dated the 7th July, 2017

4. 13/2022-State Tax (Rate) - dated 16-1-2023 - Mizoram SGST

Amendment in Notification No. 2/2017-State Tax (Rate), dated the 7th July, 2017

5. 12/2022-State Tax (Rate) - dated 16-1-2023 - Mizoram SGST

Seeks to amend Notification No. 1/2017-State Tax (Rate), dated the 7th July, 2017

6. 24/2022-State Tax - dated 1-12-2022 - Mizoram SGST

Mizoram Goods and Services Tax (Fourth Amendment) Rules, 2022

7. 22/2022-State Tax - dated 28-11-2022 - Mizoram SGST

Mizoram Goods and Services Tax (Third Amendment) Rules, 2022

SEZ

8. S.O. 6190 (E) - dated 30-12-2022 - SEZ

Central Government notified and de-notified some areas at Special Economic Zone in the State of Andhra Pradesh.

Circulars / Instructions / Orders

DGFT

1. 53/2015-2020 - dated 20-1-2023

Amendments in Chapter 5 of the Handbook of Procedures, 2015-20-One time relaxation from maintenance of Average Export Obligation and extension in Export obligation period for specified EPCG Authorisations

Highlights / Catch Notes

GST

• Supreme Court Upholds High Court's Decision to Release Detained Goods and Vehicle Despite Error in Writ Petition.

  Case-Laws - SC : Vailidity of order of HC setting aside the SCN - Detention of goods alongwith the vehicle - The High Court has materially erred in entertaining the writ petition against the show cause notice and quashing and setting aside the same. However, at the same time, the order passed by the High Court releasing the goods in question is not to be interfered with - SC
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• Court Rules IGST and CGST Refund Rejection Unlawful Due to Lack of Initial Hearing Opportunity; Breach of Natural Justice.

  Case-Laws - HC : Refund of IGST and CGST - rejection of refund without providing opportunity of hearing - It is well settled that a failure of natural justice in the authority of first instance cannot be cured by sufficiency of natural justice in the appellate body, else the same would encourage the tendency of the authorities to give a short shrift to the proceedings before them. - HC
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• Petitioner demands release of attached bank account; valid merchant funds should not be withheld.

  Case-Laws - HC : Seeking release of Attached Bank Account of petitioner - There is a serious apprehension that the merchants are not genuine. However, he concedes that as far as monies belonging to genuine merchants are concerned; the disbursement cannot be interdicted. - HC
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• Court Allows Petitioner to Amend GSTR 3-B Returns for July 2017 and March 2018 Without Prejudicing Revenue.

  Case-Laws - HC : Seeking permission to rectify the GST returns - The petitioner is entitled for the limited relief of being permitted to make the necessary changes to its GSTR 3-B returns for the months of July 2017 and March 2018, particularly, since doing so would not cause any prejudice to the respondents-Revenue nor would it upset the chain of credit under the GST scheme - HC
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• Court Allows Reconsideration of GST Revocation Due to Covid-19 Delay u/s 30 of CGST Act.

  Case-Laws - HC : Cancellation of GST registration of petitioner - it was not possible for him to seek revocation of the cancellation order on account of the Covid-19 pandemic and till disposal of the appeal by the respondent-Appellate Authority, the said explanation offered by the petitioner in not seeking revocation of the cancellation within a stipulated period of 30 days under Section 30 of the CGST Act is to be held as valid and proper and respondents are to be directed to reconsider the claim of the petitioner for revocation of the cancellation order in accordance with law - HC
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• Forest Department's Permit Charges Taxable; Not Exempt Under Notification 12/2017 for Social or Farm Forestry.

  Case-Laws - AAAR : Exemption from GST - forest permit fee - The permit charges collected by forest department is used by the forest officials keep a watch on the mining activity and also to assess the quantity and type of mineral being quarried to carry out survey and also keep constant watch on the movement of the produce , and is not related to Social forestry or farm forestry. Hence, the contention of the applicant that the service provided is in relation to Farm Forestry and social forestry and is exempted from tax as per notification no 12/2017 is untenable. - AAAR
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Income Tax

• Capital Gains Deduction u/s 54F Upheld; Investment from Sale Consideration Valid Despite Later Sale Deed Execution.

  Case-Laws - AT : Computation of capital gains - deduction u/s 54F - Undisputedly the investment has been made out of part of sale consideration. Simply because the sale deed has been executed subsequently, the deduction of Rs.45 Lacs could not be denied to the assessee. - AT
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• Transfer Pricing Adjustment: Arm's Length Price Set to Nil Due to Lack of Evidence for Services Rendered.

  Case-Laws - AT : TP Adjustment - reimbursement of expenses - Determining the arms length price as NIL - the assessee has not been able to prove the actual rendering of services/expenditure in respect of the assessee’s business by its oversees associated enterprise - the TPO was justified in determining the arms length price at “nil” - AT
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• Assessee Society Wins Deduction for Interest Income from Cooperative Banks u/s 80P(2)(d) of Income Tax Act.

  Case-Laws - AT : Deduction u/s 80P(2)(d) - interest income - assessee society who has earned an amount from its investment of surplus fund deposited with co-operative banks is entitled for deduction under section 80P(2)(d) of the Act. Resultantly, the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d). - AT
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• Cash Payment Disallowance to MSEDCL Franchise Contested; Rule 6DD(b) Supports Reversal of CPC and Tax Commissioner's Decision.

  Case-Laws - AT : addition on the basis of information displayed on the website of the sale tax department. - MSEDCL is a State under Article 12 of the Constitution and the cash payments made to its franchise/agent is covered under Rule 6DD(b) of the Rules. Therefore, the disallowance made by the CPC and as confirmed by the CIT(A) is not justified. - AT
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• Court Rules Bogus Purchase Additions Unjustified Due to Work in Progress Classification, Not Trading Account Entries.

  Case-Laws - AT : Bogus purchases - addition on the basis of information displayed on the website of the sale tax department. - Since the expenses were shown by the assessee under the head work in progress and has not been reflected in the trading account, therefore, no addition can be made. - AT
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• Deduction Claim Allowed for Assessee u/s 11(1)(a) Despite Late Audit Report Submission in AY 2015-16.

  Case-Laws - AT : Deduction claimed u/s 11(1)(a) - audit report was filed belatedly - in the assessment year under consideration, viz., AY 2015-16, the requirement under the Act was to file audit report along with the return of income. Accordingly, in our view, the assessee has complied with the conditions prescribed in sec. 12(1)(b) by furnishing audit report along with the return of income - Claim allowed - AT
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• Section 56(2)(vii)(b) of Income Tax Act: Sale Deed Cancellation Nullifies Stamp Duty Valuation Discrepancy Concerns.

  Case-Laws - AT : Additions u/s 56(2)(vii)(b) - purchase of immovable property - difference in value as per stamp duty valuation - since the Sale Deed itself got cancelled vide Cancellation Deed dated 26.02.2013 and the entire sale consideration was repaid to the assessee. Thus the question of invoking Section 56(2)(vii)(b) does not arise - AT
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Customs

• High Seas Sales of Urea by STC, MMTC, or Indian Potash Deemed Legal; No Penalties for Compliant Transactions.

  Case-Laws - AT : Violation of import conditions - Import through specified agencies - High seas sale - import of Urea - so long as the purchase of the Urea from the foreign supplier is effected by STC, MMTC or Indian Potash and payment to foreign supplier is made by STC, MMTC or Indian Potash, who in turn sell the same to a party in India whether on High Seas or otherwise, the import is clearly through STC, MMTC or Indian Potash. - No penalty - AT
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Indian Laws

• Supreme Court Clarifies Use of Affidavits in Ex-Parte Arbitration Challenges u/s 34(2)(a) for Missing Records.

  Case-Laws - SC : Validity of arbitration proceedings/constitution of the arbitral tribunal - ex-parte proceedings - seeking permission to adduce evidence - an application for setting aside the arbitral award will not ordinarily require anything beyond the record that was before the arbitrator, however, if there are matters not containing such records and the relevant determination to the issues arising under section 34(2)(a), they may be brought to the notice of the Court by way of affidavits filed by both the parties’ - SC
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• High Court Confirms Complainant's Financial Ability to Lend Rs. 3 Lakh in Cheque Dishonor Case; Evidence Sufficiently Proved.

  Case-Laws - SC : Dishonor of Cheque - declared income was sufficient to prove loan or not - while in the criminal proceedings the complainant had failed to produce the promissory notes, in the civil proceedings, the complainant had proved the promissory notes - The High Court, on the basis of the evidence placed on record, relying on the preponderance of probability, came to a conclusion that the plaintiff had the financial ability to lend the sum of Rs.3 lakh - Order of HC sustained - SC
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IBC

• CoC Voting on Resolution Plans Interrupted by Order; Urged to Resume and Conclude Voting Process Promptly from August 3, 2022 Decision.

  Case-Laws - AT : Seeking consideration of Revised Resolution Plan - CoC having already resolved to vote on all the Resolution Plans including the Resolution Plan submitted by the Appellant and the Respondent No.2 which voting process having commenced and was disrupted due to impugned order, the voting process in pursuance of the CoC decision dated 03.08.2022 may commence afresh and be completed in a time bound manner. - AT
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PMLA

• Supreme Court: Money laundering charges must end if related scheduled offences are acquitted, dismissed, or quashed.

  Case-Laws - HC : Money Laundering - schedule offence - proceeds of crime - With the above ratio laid down by the Supreme Court [2022 (7) TMI 1316 - SUPREME COURT], it has to be held that proceedings of money laundering are liable to be terminated with the underlined scheduled offences ending in acquittal, dismissal or being quashed. - HC
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Service Tax

• Appeal Delay Condoned; Case Remanded to Commissioner (Appeals) for Decision on Merits Without Limitation Reassessment.

  Case-Laws - AT : Condonation of delay in filing appeal - The correct date of communication of the Order-in-Original is on record i.e. 07.05.2019, it is clear that the Appeal though filed beyond the statutory period, but was field within the condonable period. Accordingly, the delay is condoned in filing the Appeals before the First Appellate Authority and find it appropriate to remand the matter to the Ld.Commissioner(Appeals) to decide the Appeals on merits without further visiting the aspect of limitation. - AT
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• Service Tax Demand on Commercial Property Rent Overturned After Audit Error Misinterprets Records, Court Rules in Favor of Appellant.

  Case-Laws - AT : Levy of service tax - Renting of Immovable Property Service - audit team found that the appellant had let out its premises for commercial purposes - The entire case is built on a mistaken reading of the ledgers by the audit team and continued in the SCN. Even after the correct facts were presented, the demand was confirmed in the impugned order without giving any reasons - Demand set aside - AT
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Central Excise

• Re-credit Cenvat Account after cash duty payment; Revenue cannot object without eligible document. Demand set aside.

  Case-Laws - AT : Refund of Cenvat Credit vs Re-Credit of Cenvat Credit - Once the duty has been paid in cash, earlier payments made through Cenvat Account are liable to be re-credited in the said Account and no objection that such recredit was not on the basis of any eligible document can be adopted by the Revenue. - demand set aside - AT
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VAT

• Court Rules on Validity of Assessment Order Regarding Lump-Sum Contract for Goods and Works Without Separation.

  Case-Laws - HC : Validity of assessment order - division of contract into two parts i.e. supply of goods and works contract - the agreement, which was arrived between the parties, did not segregate between works contract and the material to be supplied. The agreement specifically provided for the payment of lump-sum money to the contractor for the material as well as the works contract. The interpretation given by the Assessing Authority and Tribunal cannot be sustained in view of the agreement arrived between the parties. - HC
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• Court Rules Transactions as Branch Transfers, Not Interstate Sales; Assessee Wins VAT Dispute Over Sales Tax Classification.

  Case-Laws - HC : Time bound supply scheme - branch transfers - interstate sales - While the Assessee has discharged its initial burden of showing that the transaction was only a branch transfer, the Department has been unable to discharge its burden of showing that in fact the transaction was not merely a branch transfer but was a movement of goods by way of interstate sale occasioned by a concluded contract - the questions framed are answered in favour of the Assessee - HC
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Case Laws:

• GST

• 2023 (1) TMI 842
  Vailidity of order of HC setting aside the SCN - Detention of goods alongwith the vehicle - allegation with respect to evasion of duty - levy of tax, penalty and other charges - Section 130 of the Punjab GST Act, 2017 and IGST Act, 2017 and CGST Act, 2017 - HELD THAT:- From the notice dated 14.09.2021, it can be seen that the original writ petitioner was called upon to show cause within 14 days from the receipt of the said notice, as to why the goods in question and the conveyance used to transport such goods shall not be confiscated under the provisions of Section 130 of the Punjab GST Act, 2017 and IGST Act, 2017 and CGST Act, 2017 and why the tax, penalty and other charges payable in respect of such goods and the conveyance shall not be payable. The High Court has materially erred in entertaining the writ petition against the show cause notice and quashing and setting aside the same. However, at the same time, the order passed by the High Court releasing the goods in question is not to be interfered with as it is reported that the goods have been released by the appropriate authority. The impugned judgment and order passed by the High Court is set aside to the extent quashing and setting aside the notice dated 14.09.2021, issued under Section 130 of the CGST Act and the matter remanded to the appropriate authority, who issued the notice.

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• 2023 (1) TMI 841
  Refund of IGST and CGST - rejection of refund without providing opportunity of hearing - violation of principles of natural justice (audi alterem partem) - HELD THAT:- The authority conclusively found that the natural justice had not been followed by the adjudicating authority, however, on the basis that natural justice was duly followed during appeal proceedings, did not interfere with the order on account of the said aspect of violation of principle of natural justice. It is well settled that a failure of natural justice in the authority of first instance cannot be cured by sufficiency of natural justice in the appellate body, else the same would encourage the tendency of the authorities to give a short shrift to the proceedings before them. The Hon ble Supreme Court in 63 Moon Technologies Ltd. v. Union of India [ 2019 (5) TMI 522 - SUPREME COURT] , pointed out that breach or defect in observing Rules of natural justice in the trial administrative body cannot generally be cured by observing natural justice at the appellate stage, particularly when a clear statutory right has given at the trial stage of an assessment of compensation first by the prescribed authority and then a right of appeal to the appellate Tribunal. In view of the above fact situation, wherein admittedly the principles of natural justice have been violated by the adjudicating authority and the appellate authority only on account of the fact that it had provided opportunity of hearing, did not interfere with the order of the adjudicating authority, both the orders cannot be sustained. The matter is remanded back to the adjudicating authority to follow the provisions of Rule 92(3) of the CGST Rules and thereafter pass an appropriate order in accordance with law - Petition allowed by way of remand.

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• 2023 (1) TMI 840
  Seeking release of Attached Bank Account of petitioner - petitioner submits that there is a grave urgency because if the order freezing the bank accounts continues, there would be no possibility of the petitioner reviving its business - HELD THAT:- There is a serious apprehension that the merchants are not genuine. However, he concedes that as far as monies belonging to genuine merchants are concerned; the disbursement cannot be interdicted. The present petition is disposed of with liberty to the petitioner to apply afresh in case the petitioner is aggrieved by the order that may be passed in respect of its objections.

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• 2023 (1) TMI 839
  Seeking restoration of GST registration - non-speaking order/ cryptic notice - in the notice only effective date of cancellation of registration was provided and no reasons were given - HELD THAT:- The only ground raised is the cryptic notice, which is of 26.09.2018. Cancellation of registration dated 28.09.2018 is on the ground that there is no reasoning and nothing has been stated - The show cause notice has been submitted and hence the tax effect shown is also zero. This Court in the case of Aggarwal Dyeing and Printing Works vs. State of Gujarat, [ 2022 (4) TMI 864 - GUJARAT HIGH COURT] , held and observed that assignment of reasons is imperative in nature and the speaking order doctrine mandates assigning the reasons which is the heart and soul of the decision and said reasons must be the result of independent reappreciation of evidence adduced and documents produced in the case. It would serve the ends of justice in the event the petitioner is provided a fresh opportunity to respond to the fresh show cause notice. Resultantly, the writ petition deserves to be allowed and is accordingly allowed. The order dated 28.09.2018 of cancellation of registration of the petitioner passed by Commercial Tax Officer, Ghathak 17, Ahmedabad is hereby quashed and set aside. The registration of the petitioner is restored forthwith. Petition disposed off.

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• 2023 (1) TMI 838
  Seeking permission to rectify the GST returns filed for the months of July, 2017 and March, 2018 - HELD THAT:- In the instant case, the petitioner appears to have entered certain figures in the wrong column of his GSTR 3-B returns for the months of July 2017 and March 2018 i.e,, during the very first financial year after the introduction of GST. The copies of the returns submitted / filed by the petitioner clearly demonstrate and evidence the innocuousness of the errors committed by the petitioner. In the impugned show cause notice, the Revenue has proposed to deny the ITC claimed by the petitioner, which will undoubtedly lead to a serious revenue loss, unlike in the case of UNION OF INDIA VERSUS BHARTI AIRTEL LTD. ORS. [ 2021 (11) TMI 109 - SUPREME COURT] , where ITC availment was merely postponed as a result of the judgment. It is therefore clear that no reliance can be placed upon the said judgment by the respondents as sought to be contended by them. In the instant case, the respondents have, in the absence of a prescribed GSTR 2-A for the relevant tax periods referred to the IGST import figures reflected in the ICE GATE portal of the Customs Department for all the months except those in which the errors have been committed. This clearly indicates that the respondents are aware of the actual figures and also that there is an error committed by the petitioner, but has chosen to selectively ignore the IGST import amounts reflected in the ICE GATE portal for the tax periods in dispute, which is yet another circumstance to uphold the claim of the petitioner. The petitioner is entitled for the limited relief of being permitted to make the necessary changes to its GSTR 3-B returns for the months of July 2017 and March 2018, particularly, since doing so would not cause any prejudice to the respondents-Revenue nor would it upset the chain of credit under the GST scheme and liberty is to be reserved in favour of the revenue to proceed with the impugned show cause notice - petition allowed in part.

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• 2023 (1) TMI 837
  Cancellation of GST registration of petitioner - appealable order or not - application for revocation of the cancellation was not filed within stipulated period - HELD THAT:- Perusal of the material on record and Section 107 of the CGST Act, 2017 will indicate that as against an order passed by respondent No.1 canceling the registration of GST, the petitioner has a remedy by way of appeal under Section 107 before the respondent No.1-Appellate Authority. In this context, it is relevant to state that merely because that the petitioner has an option of seeking revocation of the cancellation under Section 30 of the CGST Act, it cannot be said that independent of the said remedy of seeking revocation of cancellation, an appeal would not be maintainable and as such, the impugned order passed by respondent No.1 summarily dismissing the appeal on the ground that it is not maintainable in view of availability of the remedy of seeking revocation of the cancellation is clearly contrary to Section 107 and Section 30 of the CGST Act and same deserves to be set aside. Having regard to the material on record and specific assertion on the part of the petitioner that it was not possible for him to seek revocation of the cancellation order on account of the Covid-19 pandemic and till disposal of the appeal by the respondent-Appellate Authority, the said explanation offered by the petitioner in not seeking revocation of the cancellation within a stipulated period of 30 days under Section 30 of the CGST Act is to be held as valid and proper and respondents are to be directed to reconsider the claim of the petitioner for revocation of the cancellation order in accordance with law, subject to payment of outstanding due taxes by the petitioner in accordance with law. Petition allowed.

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• 2023 (1) TMI 836
  Exemption from GST - forest permit fee - reverse charge mechanism - classifiable under heading 9973 of Notification No. 11/2017 Central Tax (Rate) dated 28th June, 2017 - applicability for lower rate of tax for the period prior to 01-01-2019 - HELD THAT:- The permit charges are charged by forest department to supply permits, these permits are essential for the applicant to move coal mined by them to other places - The forest department collects permit charges and issues permits. This permit enables the applicant to move their mined produce, i.e., coal to other places. Therefore the charges collected are nothing but amount collected by forest department to issue permission to transport the coal. The supply of permits by forest department is taxable @ 9% SGST and CGST each under SAC code 9991 (Public administration and other services provided to the community as a whole; compulsory social security services) falling under Entry 29 to Notification No: 11/2017 -CT(R), Dt: 28-06-217. More specifically, the said services fall under SAC 999113 (Public administrative services related to the more efficient operation of business). Hence, if the supplier i.e., Forest department is not registered under provisions of GST, the applicant shall pay tax on reverse charge basis as per Entry 5 of Notification No. 13/2017- central Tax (Rate) dated 28-06-2017. Social forestry is the management of forests for the benefit of local communities. Social forestry includes a range of activities associated with forest management, protection, and afforestation with the objective of rural, environmental, and social well-being - The permit charges collected by forest department is used by the forest officials keep a watch on the mining activity and also to assess the quantity and type of mineral being quarried to carry out survey and also keep constant watch on the movement of the produce , and is not related to Social forestry or farm forestry. Hence, the contention of the applicant that the service provided is in relation to Farm Forestry and social forestry and is exempted from tax as per notification no 12/2017 is untenable.

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• 2023 (1) TMI 793
  Seeking Grant of Regular Bail - availment of fraudulent Input Tax Credit - it was held by High Court that Considering the facts and circumstances of the case, the allegations made against the applicant, the evidence collected by the prosecution, seriousness of the offence the applicant cannot be released on bail. HELD THAT:- There are no reason to interfere with the order impugned in this petition at this stage. SLP dismissed.

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• Income Tax

• 2023 (1) TMI 835
  Estimation of income - Bogus purchases - CIT (Appeals) restricted the addition to 12.5% of the disputed purchases - ITAT partly allowed the appeal of the assessee restricting the addition to 6% of the disputed purchases - HELD THAT:- Having found that the AO has chosen not to reject the books of accounts of the assessee and had made the estimated additions of the pieces of the purchases. Both, the CIT (Appeals) and the Tribunal, have concurrently and rightly held to make the additions, which the CIT (Appeals) had done @ 12.5% of the impugned purchases, which have been reduced and restricted to 6%. It will not be out of place to make a mention that the Assessing Officer s inquiry was based on the report of the Investigation Wing, Mumbai, the copy of the statement of Shri Bhanwarlal Jain and others had been asked for by the assessee, which also had not been provided nor was he allowed a cross-examination. This, of course, could have been a reason for the Authority concerned to restore the matter back to the AO, however, noticing the elaborate evidence consisting the details of purchase, PAN, etc., coupled with the AO and the CIT (Appeals) dealing with the case of Shri Bhanwarlal Jain and others involved therein, if addition directed of 6% of the disputed purchases by noting that the profit margin in the said industry is 5% to 7% without even going by the estimation of the possible profit margin in the industry, suffice to note that in all cases relating to Shri Bhanwarlal Jain, both, the AO and the CIT (Appeals), Mumbai, have chosen to make addition @ 3% to 5% of the bogus purchases. That view of the matter, no purpose is going to be served in interference. This Court in case of Mayank Diamonds Pvt. Ltd [ 2014 (11) TMI 812 - GUJARAT HIGH COURT] was required to decide the estimation of the gross profit @ 12.5% against the gross profit of 1.03% shown by the assessee. The Court allowed the gross profit rate of 5% holding that 12.5% is drastically higher. In N.K. Industries Pvt. Ltd [ 2016 (6) TMI 1139 - GUJARAT HIGH COURT] where the Court had considered the addition of entire amount on the ground that the fictitious purchases is a factually different than what was already held at M/s. Mayank Diamonds Pvt. Ltd [ 2014 (11) TMI 812 - GUJARAT HIGH COURT] In the other cases of Shri Bhanwarlal Jain also, addition rates are 3% to 5% where no further challenge possibly is there or it has not been processed further. This Court finds that no question of law, much less any substantial question of law arises for consideration of this Court.

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• 2023 (1) TMI 834
  Reopening of assessment u/s 147 - No reply to Show Cause Notice issued under clause (b) of Section 148A - As the husband of the petitioner had expired necessary notices were issued to the petitioner herein, who is his wife - as contended by the petitioner that the said notices have not been served on her physically as the notices were sent on e- mail and the petitioner being not computer literate was not in a position to open the same and see it and she did not realize about the mails at all. Consequently, she was not in a position to reply to the Show Cause Notice issued under clause (b) of Section 148A - HELD THAT:- Admittedly, petitioner has not been heard. It is contended that she could not access the notice sent by the authorities. Learned counsel for the respondent is not in a position to dispute the said fact. Under the peculiar facts and circumstances, without making it a precedent, interest of justice would be served if petitioner would be given an opportunity to reply to the show cause notice issued by the respondents. The impugned order under clause (d) of Section 148A is hereby set aside.Consequently, the notice issued under Section 148 is set aside. Petitioner is granted 15 days time from today to file necessary reply to the notice issued under clause (b) of Section 148A to the writ petition.

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• 2023 (1) TMI 833
  Reopening of assessment u/s 147 - non supply of reasons by the AO - As argued Tangible material for reopening of the case and the reasons for reopening of assessment was not supplied - case was reopened on the basis of the information relating to purchase of DDA flat at Dwarka in auction conducted by the learned Receiver appointed by the Hon ble High Court during the financial year 2010-11 - HELD THAT:- We find merit into the contention of the assessee that AO was required to supply reasons of reopening of assessment. The assessee has a legal right to file objections against the re-opening of assessment. Non supply of reasons deprived the assessee from this valuable legal right to raise objection against the reasons for reopening of assessment. The issue relates to the assessment year 2011-12 and it would be too late to restore the matter for supply of reasons to the assessee. Assessing Officer ought to have supplied the reasons. Reopening of assessment is not justified in the facts and circumstances of the present case. Since the action of AO is contrary to ratio laid down in the case of GKN Driveshafts (India) Ltd. [ 2002 (11) TMI 7 - SUPREME COURT ] wherein it was clarified that when a notice under section 148 of the Income Tax Act is issued, the proper course for the noticee is to file return and if so desires, to seek reason for issuing notices. AO is bound to furnish reasons within a reasonable time. On receipt of reasons the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose the same by passing a speaking order. Undisputedly, in the present case the reasons were not furnished to the assessee. Therefore, he could not file any objection. Under these facts, hereby set aside the impugned order. The grounds raised by the assessee are allowed.

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• 2023 (1) TMI 832
  Penalty u/s 271(1)(c) - concealing the particulars of income received by the assessee from M/s Chandan Carrier (a business which was effectively owned by the assessee) - HELD THAT:- We observe that in the case of Patel Chemical Works [ 2008 (9) TMI 175 - GUJARAT HIGH COURT] held that in penalty proceedings, factum of very same income having been offered to tax by different entity and having been taxed substantially in hands of other entity becomes a relevant factor for determining whether assessee has concealed said income or furnished inaccurate particulars regarding said income which has already been taxed after being shown in hands of different entity, namely, other than assessee. Now coming to the instant facts, we observe that the income which was sought to be taxed in the hands of the assessee has already been offered to tax as income in the hands of Shri Nilesh Shah for the impugned assessment year and the assessment proceedings have also been completed by the AO in respect of such income. Primary reason for levy of penalty is that the firm M/s Chandan Carrier is effectively held by the assessee, however, it is also a fact that the said income which is sought to be taxed by the AO in the hands of the assessee has already been offered to income by Shri Nilesh Shah (proprietor M/s Chandan Carrier). Therefore, respectfully following the decision of Gujarat High Court in the case of Patel Chemical Works [ 2008 (9) TMI 175 - GUJARAT HIGH COURT] we hold that this is not a fit case for levy of penalty u/s 271(1)(c) of the Act and we hereby direct that the penalty may be deleted. Appeals of the assessee are allowed.

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• 2023 (1) TMI 831
  Disallowance u/s. 43B - whether the expenses made by the assessee were made on actual basis? - HELD THAT:- AO without full reference to figures reported at clause 26(i)(A) 26(I)(B) of TAR carried out the rectification on the basis of figures reported in clause 26(i)(B)(b) alone and whereas the Ld. FAA holistically considered the figure of TAR and allowed the appeal for statistical purpose but without reference to expenditure charged to Profit Loss Account, hence for the reasons the matter requested for remand back to the file of AO for a limited purpose of verification of qualifying expense u/s 43 of the Act. Assessee adverting to adjudication laid by the Ld. NFAC, concurred with the request of department in remanding the matter back to the file of jurisdictional AO with a limited purpose to examine the issue of deductibility of expense reported in clause 26(i)(A) (B) of TAR in the light of section 43B of the Act, and we order accordingly. Appeal of the appellant revenue is Allowed for statistical purposes.

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• 2023 (1) TMI 830
  Reopening of assessment u/s 147 - bank deposits made into saving bank account - unexplained investment u/s 69 - HELD THAT:- The reasons recorded in present case at best can be treated to be reason to suspect which is not sufficient for reopening the case u/s 148 - While recording the reasons to believe merely relying upon financial information cannot be treated as good enough to reopen the case. There can be multiple capital sources of cash deposits available to the assessee and unless and until it is brought out in the reasons to believe as to how the cash deposits represent income or investment from undisclosed sources same cannot give justification to reopen the case u/s 148 and for the reason we see that the requirement of application of mind is missing in the present case on the face of reasons recorded, thus the cardinal principle of taxation that all receipts are not income and all income are not taxable income applies squarely to present facts. It is a well settled law that, the reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of the belief. Whereas in the absence of nexus between the prima facie inference arrived in the reasons recorded and information vis-a-vis material much less tangible, credible, cogent and relevant to form a reason to believe could not be made a basis to assume jurisdiction, hence cannot be relied upon; thus the proceedings initiated are purely based on surmises, conjectures and suspicion and therefore, the same are without jurisdiction; that the reasons recorded are highly vague, far-fetched and cannot by any stretch of imagination lead to conclusion of escapement of income which deserve to be quashed in the light of judgement of ITO Vs Lakhmani Mewal Das [ 1976 (3) TMI 1 - SUPREME COURT] - Appeal of assessee allowed.

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• 2023 (1) TMI 829
  Computation of capital gains - deduction u/s 54F - assessee has purchased adjacent land and constructed residential property - CIT(A) upheld disallowance and also upheld the restriction of deduction on the ground that unutilized gains were not deposited in Capital Gains Account Scheme - HELD THAT:- Assessee has entered into sale agreement dated 15.05.2013 for sale of property for Rs.283 Lacs. The terms of the sale agreement has been honored and the intended purchaser has paid sale consideration from time to time. The full sale consideration has been paid on 16.12.2013 whereas sale deed has been executed on 23.02.2015. The possession is stated to be handed over on 15.10.2014. As against installments so received, the assessee has purchased land on 29.11.2013 which falls within one year from receipt of full sale consideration as well as handing over of the possession. Undisputedly the investment has been made out of part of sale consideration. Simply because the sale deed has been executed subsequently, the deduction of Rs.45 Lacs could not be denied to the assessee. Investment in subsequent property is concerned, we find that the assessee has purchased adjacent land and constructed residential property on the same. The assessee made investment in land for Rs.57.10 Lacs as well as incurred substantial construction expenditure to the extent of Rs.130.56 Lacs Only small amount of Rs.30.56 Lacs was spent thereafter. The provisions of Sec.54F are beneficial provisions and therefore, the substantial compliance of the same by the assessee, in our considered opinion, would entitle the assessee to claim full deduction. Therefore, Ld. AO is directed to allow remaining deduction of Rs.30.56 Lacs also

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• 2023 (1) TMI 828
  Addition on account of margin @ 11% on the transaction of reimbursement of expenses - addition of delayed recovery on the transaction as per order of TPO - assessee has contended that no services were rendered in lieu of these expenses incurred by the assessee on behalf of the AE being payment of statutory dues etc. which involved no services to be rendered by the assessee at all - CIT-A deleted additions - HELD THAT:- Revenue has been unable to controvert before us the fact that all the expenses made by the assessee on behalf of the AE involved no services to be rendered by the assessee but was merely meeting the expenses of statutory dues/fees/charges of the AE. Revenue has also not disputed the fact that all the expenses were made out of advances given by the AE to the assessee. CIT(A), has given detailed finding with respect to both the aspects ,noting that all the payments made by the assessee on behalf of its AE were majorly on account of fees/duty to be paid to the government for the project which clearly did not involve any rendering of services by the assessee. DR was unable to clarify the nature of services which the AO/TPO found the assessee to have rendered while making these payments on behalf of the assessee. We agree with the Ld.CIT(A) therefore that in such circumstances there arises no question at all of making any adjustment to the reimbursements of any operational profit element therein. Even with respect to the findings of the Ld.CIT(A) that all expenses of the AE were met out of advances given by the AE to it, we find that the findings of the Ld.CIT(A) are exhaustive and detailed, pointing out the fact that the AE has throughout the year maintained sufficient advances with the assessee to the tune of Rs. 12 Crs odd and even when the assessee has made any payments on its behalf during the year the same were immediately reimbursed. CIT(A) has noted that details to this effect were before the AO/TPO also who had made no adverse observations with respect to the same. Even before us no infirmity was pointed out by the Ld. DR on the factual findings of the Ld.CIT(A) as above. We find no infirmity in the order of the CIT(A) holding that in the light of the fact where there is no finding of nature of the services rendered by the assessee to the AE while meeting the expenses of the AE and further on account of the fact that all these expenses were made out of advances given by the AE to the assessee, there was no reason to make any adjustment to the ALP of the international transactions of reimbursement of expenses either on account of profit element or the interest element. In view of above, the grounds of appeal Nos. (a) and (b) raised by the Revenue are dismissed. Preliminary expenses written off as per the provisions of Section 35D - assessee had claimed deduction to the extent of 1/5th as per Section 35D relating to expenses incurred on incorporation of the company and 1/5th of the expenditure incurred during the impugned year on increase in share capital of the company - AO had denied the entire claim to the effect that expenditure incurred on increase in share capital was a capital expenditure not entitled to deduction - HELD THAT:- DR was unable to controvert the factual finding of the learned CIT(A) to the effect that the amount claimed by the assessee under Section 35D pertained to preliminary expenses incurred on the incorporation of the company; 1/5th of which the assessee had been claiming consistently in the preceding years. We see no reason to disagree with the learned CIT(A) that the said claim of the assessee was allowable as per law. The decision of the Hon ble Apex Court in the case of Brooke Bond India [ 1997 (2) TMI 11 - SUPREME COURT] relates only to expenditure incurred on increase in share capital which not being the fact pertaining to the impugned expense before us, the said decision has been rightly held as not applicable to the same by the CIT(A). We uphold the order of the learned CIT(A) allowing the claim of expenses under Section 35D of the Act. The ground of appeal No. (c) is accordingly dismissed. Rate of depreciation applicable on certain assets which as per the Revenue quality as office equipments entitled to rate of depreciation @ 10% while as per the assessee they quality as plant and machinery entitled for rate of depreciation @ 15% - CIT(A), after considering the nature of assets, held that they qualify as plant and machinery entitled for depreciation @ 15% - HELD THAT:- DR was unable to controvert the factual finding with respect to the nature of assets on which the issue of rate of depreciation applied that they were in the nature of machineries being vacuum cleaner, water dispenser, EPBAX installation etc. Clearly, the same are not in the nature of furniture and fittings to which 10% rate of depreciation is applicable. CIT(A) has taken note of the provisions of Section 32A of the Act relating to investment allowance as well as to the provisions of Section 32(iia) of the Act relating to the additional deprecation on plant and machinery which rule out the allowance or additional depreciation on old plant and machinery and while doing so provide an exemption to office appliances. CIT(A) has derived that office appliances qualify as plant and machinery for depreciation @ 15%. DR has been unable to point out any infirmity in this finding of the learned CIT(A). CIT(A) has relied on the decision of Park Devis (India) Limited [ 1994 (12) TMI 46 - BOMBAY HIGH COURT] which has laid down the proposition that even office appliances qualify as plant and machinery for depreciation @ 15%. DR has been unable to distinguish the said case before us. In view of the above, we do not find any infirmity in the order of the learned CIT(A) holding the assessee entitled to depreciation @ 15% on office equipments. This ground of appeal of the Revenue is accordingly dismissed.

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• 2023 (1) TMI 827
  TP Adjustment - Determining the arms length price of the international transaction pertaining to reimbursement of expenses by the assessee to Yanfeng China as nil and thereby made a downward adjustment to the transaction value of reimbursement of expenses to the AE - TPO noted that the assessee has not submitted any supporting documents in support of its contention - Whether TPO is justified in determination of arms length price act nil when the assessee is not able to demonstrate that the expenses so incurred have a live nexus with India? HELD THAT:- Several instances have come where the assessee has not been able to demonstrate with supporting agreement or evidences to prove that the expenses made to AE are being supported by actual rendition of services or whether these expenses are in relation to services which have any co-relation with the business of the assessee in India. We are in agreement with the Revenue that though the TPO cannot determine arms length price at nil by questioning the necessity of the expenses or questioning the benefits of expenditure incurred, however, at the same time, the onus is on the assessee to prove that there was actual rendition of services by the AE. In a situation the assessee is unable to prove any rendition of services or that the services had any connection with the business of the assessee in India, in our considered view, on such facts, the ld. TPO can determine the arms length price at nil . The onus of proving the actual rendition of services primarily lies on the assessee in respect of an international transaction. In the case of Akzonobel India Pvt. Ltd. [ 2022 (10) TMI 1056 - DELHI HIGH COURT] the High Court held that where assessee has failed to furnish evidence to demonstrate that administrative services were actually rendered by AE and assessee has received such services, the TPO righty determined ALP to service fee at nil . Since in the instant set of facts, the assessee has not been able to prove the actual rendering of services/expenditure in respect of the assessee s business by its oversees associated enterprise either by way of producing the necessary agreement in respect of rendering of services or in the form of any other communication which could convincingly/conclusively establish such rendering of services/incurring of expenditure, we are of the view that the TPO was justified in determining the arms length price at nil . Accordingly, we find no infirmity in the order of ld. TPO/DRP. Appeal of the assessee is dismissed

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• 2023 (1) TMI 826
  Disallowance of deduction u/s 80P (2)(d) - interest received from deposits kept in co-operative bank - HELD THAT:- Allowability of the deduction claimed by the Assessee u/s. 80P (2)(d) of the Act, is no longer Res-Integra having being decided by the co-ordinate Bench of the Tribunal in case of Palm Court M Premises Co-operative Society Ltd [ 2022 (9) TMI 650 - ITAT MUMBAI] by settling the issue in favour of the assessee by distinguishing the judgment rendered by Hon ble Supreme Court in case of Totgar s Co-operative Sale Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT] and by discussing the decision rendered by Hon ble Bombay High and Hon ble Gujarat High Court wherein it is held that interest income earned by the Co-operative Society on its investment made with co-operative bank would be eligible for claim of deduction under section 80P(2)(d). CIT(A) has erred in upholding the denial of deduction claimed by the Assessee Society u/s. 80P (2)(d) of the Act, hence Assessing Officer is directed allowed the same. Appeals filed by the Assessee are allowed.

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• 2023 (1) TMI 825
  Deduction u/s 80P(2)(d) - interest income earned by the Co-operative Society on its investment made with co-operative bank - HELD THAT:- The co-ordinate Bench of the Tribunal in case of Palm Court M Premises Co-operative Society Ltd. [ 2022 (9) TMI 650 - ITAT MUMBAI] decided the issue in favour of the assessee by distinguishing the judgment rendered by Hon ble Supreme Court in case of Totgar s Co-operative Sale Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT] wherein it is held that interest income earned by the Co-operative Society on its investment made with co-operative bank would be eligible for claim of deduction under section 80P(2)(d). Hon ble High Court of Karnataka in case of Pr. CIT Anr.Vs. Totgar s Co-operative Sale Society Ltd. [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] and State Bank of India [ 2016 (7) TMI 516 - GUJARAT HIGH COURT] had held that interest income earned by a co-operative society on its investment held with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act. Thus assessee society who has earned an amount from its investment of surplus fund deposited with co-operative banks is entitled for deduction under section 80P(2)(d) of the Act. Resultantly, the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d). Deduction u/s. 80P (2)(a)(i) - Claim disallowed on the ground that since the Assessee is not undertaken banking business activities it s not entitle for the deduction and also on the ground that section 80P(4) is applicable only to Co-Operative Banks and not to the credit Co-Operative Societies - HELD THAT:- This issue is also no longer Res-Integra having been decided by the Co-Ordinate Bench of Tribunal in case of The KEM Hospital Sheth GSM College Employees Co-Operative Credit Society Ltd. [ 2018 (6) TMI 1746 - ITAT MUMBAI] . Assessee Co-Operative Credit Society being not a primary Co-operative Bank is not hit by the provision of section 80P(4), made available on the statute vide Finance Act at 2006 with effect from 01.04.2007. More over it is also Mandatory for a Co-Operative Society to seek license from the Reserve Bank of India to form and operate as Co-Operative Bank. Since the Assessee Society has only provided Financial Assistance/Credit to its Member it cannot be treated as a Co-Operative Bank, hence entitled for deduction u/s. 80P (2)(a)(i). See QUEPEM URBAN CO-OPERATIVE CREDIT SOCIETY LTD [ 2015 (6) TMI 573 - BOMBAY HIGH COURT] Assessee appeal allowed.

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• 2023 (1) TMI 824
  Interest received on enhanced compensation u/s 28 of the Land Acquisition Act, 1894 - whether it partakes nature of enhanced compensation and is exempt from tax under Section 10 (37) ? - AO taking into consideration the provision of sub-section (1) of Section 145B of the Act read with section 56(2)(viii) was of the view that interest part of the enhanced compensation was taxable and further extending the benefit of Section 54(4) of the Act of deduction of 50% proposed additions - HELD THAT:- In the case where there is conflict of views between different High Courts, ITO must follow the decision of the High Court within whose jurisdiction he is functioning - Hon ble Rajasthan High Court in the case of CIT -vs.- Sunil Kumar [ 1994 (7) TMI 42 - RAJASTHAN HIGH COURT] held that the decision of the Jurisdictional High Court is binding on the Income tax Authorities and the Tribunal within the jurisdiction of the Court and the contrary decision of another High Court is not relevant, and that a point decided by the Jurisdictional High Court can no longer be considered to be a debatable issue. Then in the case of CIT -vs.- Smt. Aruna Luthra [ 2001 (8) TMI 84 - PUNJAB AND HARYANA HIGH COURT] the Full bench of the Hon ble Punjab Haryana High Court has held that once the jurisdictional High Court or Supreme Court decides a particular issue, the judgment of jurisdictional High Court/Supreme Court would relate back to the date when particular section was inserted in the Act. Coming to the claim of assessee based on the basis of judgment of Hon ble Supreme Court of India in CIT Vs. Ghanshyam (HUF) [ 2009 (7) TMI 12 - SUPREME COURT] it is pertinent to mention that the same was of 16.07.2009 however, subsequent amendments in the Act have been taken note by Hon ble Punjab and Haryana High Court in the judgment of Mehendra Pal Narang V. CBDT [ 2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT] and which has been thoroughly relied by the Ld. Tax authorities below. CIT(A) has also taken into consideration the aforesaid observations of Hon ble P H High Court and specifically observed that the Hon ble High Court had considered the decision of the Hon ble Apex Court in the case Ghanshyam (HUF) 2009 (7) TMI 12 - SUPREME COURT] - The SLP filed by the assessee had been dismissed by Hon ble Apex Court in [ 2021 (3) TMI 1399 - SC ORDER] - The decision of Hon ble Jurisdictional High Court on similar issue is wholly binding on me. Hence, it is held that interest received on enhanced compensation is taxable u/s 56(2)(viii) of the Act. The bench is of considered opinion that the ld Tax Authorities Below have not fallen in any error in following the judgment of jurisdictional High Court. That being so, there is no merit in the grounds of appeal, therefore, appeal stands dismissed.

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• 2023 (1) TMI 823
  Addition u/s. 41(1) - outstanding balance in the account of a party - HELD THAT:- We are of the considered view that in the present case before us, in the absence of any evidence to conclude that there was a final remission or cessation of the trading liabilities or any part of it the provisions of Sec. 41(1) could not have been invoked by the A.O. Also, support is drawn from the order in the case of Satpal Sons [ 2017 (9) TMI 41 - ITAT DELHI] wherein it was, inter alia, observed by the Tribunal that the obtaining by the assessee of a benefit by virtue of remission or cessation is the sine-qua-non for the application of Section 41(1) of the Act. We not being able to persuade ourselves to subscribe to the view taken by the lower authorities, who without satisfying the pre-conditions set out in Section 41(1) had dubbed the outstanding liabilities of the assessee company as ceased liabilities, thus, set-aside the order of the CIT(Appeals) and vacate the addition made by the A.O. u/s. 41(1) of the Act. Decided in favour of assessee.

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• 2023 (1) TMI 822
  Disallowance of Interest - interest attributable to interest free advance made out of interest bearing funds of the company - AO interpreted that these amounts have been diverted by the company out of interest bearing funds for non business purposes - HELD THAT:- As brought to our notice that the issue has been decided in favour of the assessee for the AYs. 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 [ 2016 (7) TMI 1669 - ITAT DELHI] 2011-12 [ 2019 (4) TMI 200 - ITAT DELHI] , 2012-13 [ 2017 (10) TMI 1622 - ITAT DELHI] , 2013-14 , 2014-15 [ 2020 (11) TMI 138 - ITAT DLEHI] and 2015-16 by the ld. CIT (Appeals), Rohtak and also upheld by the Co-ordinate Bench of ITAT for AYs. 2006-07, 2007-08, 2008-09, 200910, 2010-11, 2011-12 and 2012-13. Hence, we decline to interfere with the order of the ld. CIT(A) on this issue. Disallowance of Marriage Gift Expenses, Subscription Expenses, Advertisement Expenses in newspaper expenses under the head Advertisement and Sales Promotion Head, staff welfare Expenses under the head workers welfare, Foreign Travel Expenses - Issue decided in favour of assessee for the AY 2006-07, 2007-08, 2008-09, 2009- 10, 2010-11, 2011-12, 2012-13, 2013-14, 2014-15 and 2015-16 by the ld. CIT (Appeal), Rohtak and also upheld by the Co-ordinate Bench of ITAT for AY 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 [ 2016 (7) TMI 1669 - ITAT DELHI] , 2011-12 [ 2019 (4) TMI 200 - ITAT DELHI] and 2012-13 [ 2017 (10) TMI 1622 - ITAT DELHI] Excess Depreciation - AO disallowed a sum being excess Depreciation claimed in original Return however the assessee has already revised its return and added back the same suo moto. Hence, we decline to interfere with the order of the ld. CIT(A) on this issue. Sales Promotion Expenses - Assessee company has over 4000 dealers nationwide along with various other worldwide buyers and company executives need to visit, entertain these dealers from time to time to keep them happy since companies products can only be sold through network of these dealers. It is essential need for the growth of the company and its survival through competition to be in constant touch with them so as to motivate them to achieve the desired sales. These gifts are distributed among dealers who are selling the product of the company and are its lifeline. A reasonable amount spent on distribution of some gifts to them certainly promotes goodwill and enhances business interests. The above payments are made as gifts to dealers and shagun on the marriage of dealers and staff which is an effective tool for Business promotion as well as staff welfare. The A.O has made this addition on ad-hoc and Lump sum basis. Thus the issue has been decided in favour of the assessee by the Coordinate Bench of ITAT for A.Y. 2012-13[ 2017 (10) TMI 1622 - ITAT DELHI] Nature of expenses - Glow Sign Board Expenses - This issue stands squarely covered by the order of the Tribunal in the previous year wherein it was treated that since the glow sign boards are not owned by the assessee they cannot be treated as capital expenditure. Hence, we decline to interfere with the order of the ld. CIT(A) on this issue. Wine Beer Expenses - These expenses are not required for conducting of business and it can be held that failure to offer wine beer would in any way impede the business operations of the assessee and they cannot be treated as allowable expenses u/s 37(1) of the I.T. Act. Appeals of the revenue are dismissed.

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• 2023 (1) TMI 821
  Disallowance u/s. 40A(3) - cash payment towards electricity bill paid to Maharashtra State Electricity Distribution Company Limited (MSEDCL) - HELD THAT:- A similar issue based on same identical facts, this Tribunal decided the issue in favour of the assessee in the case of Aakash Petroleum [ 2022 (12) TMI 1351 - ITAT NAGPUR] by holding that the provisions u/s. 40A(3) of the Act are not attracted to the cash payment made to MSEDCL. Thus hold that, MSEDCL is a State under Article 12 of the Constitution and the cash payments made to its franchise/agent is covered under Rule 6DD(b) of the Rules. Therefore, the disallowance made by the CPC and as confirmed by the CIT(A) is not justified. Order of CIT(A) is set aside and the addition confirmed thereon is deleted and the grounds raised by the assessee are allowed.

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• 2023 (1) TMI 820
  Revision u/s 263 by CIT - deemed rent on unsold units - HELD THAT:- DR did not dispute the treatment of unsold flats as stock-in- trade by the assessee and also offering as same as business income in the subsequent years. Therefore, following the same the assessment year being 2015-16 [ 2022 (1) TMI 1041 - ITAT PUNE ], we, by holding the amendment brought in by Finance Act, 2017 w.e.f. 01-04-2018 is not applicable and no addition is maintainable on account of deemed rent on unsold flats which is treated as stock-intrade by the assessee. Thus, the order of CIT(A) is not justified and it is set aside. Accordingly, ground Nos. 2, 3 and 4 raised by the assessee are allowed. Provision made for pending work is not an allowable deduction - It is not the case of PCIT that the AO had not enquired into this issue during the course of scrutiny assessment proceedings and no enquiry was made by the AO. The ld. AR argued that the facts and circumstances of the present case are similar to the facts and circumstances in the case of M/s. Rohan Developers [ 2021 (1) TMI 990 - ITAT PUNE ] and vehemently argued that the PCIT had no jurisdiction to exercise power of revision u/s. 263 - DR relied on the order of PCIT. We note that as rightly pointed by the ld. AR that the AO in scrutiny assessment proceedings asked the assessee to submit all the details which is evident from assessment order and it is also not the case of PCIT that the AO did not enquire into the issues relating to the subject of show cause notice to 263 proceedings. On perusal of the impugned order in respect of the issue of provision made for expenses to be incurred in the case of un-finished works which were claimed through profit and loss account is allowable which were made on adhc basis. There was no material placed on record by the PCIT suggesting the provision made for future expenses is disallowable. We find no evidence brought on record by the PCIT that the contingent liability in respect of provision for future expenses is not based on any material. - Decided in favour of assessee.

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• 2023 (1) TMI 819
  Reopening of assessment u/s 147 - best judgment basis on account of non-cooperation on the part of the assessee - A.O. estimated the income at 8% of the total cash deposits amounting to Rs.1,47,44,500 and other credits by cheque / RTGS - HELD THAT:- The assessment in this case has been completed u/s 144 r.w.s. 147 of the I.T.Act on a best judgment basis on account of non-cooperation on the part of the assessee. Before the first appellate authority, the case was fixed for online submission on four occasions. Since the written submissions were not furnished, the CIT(A) dismissed the appeal of the assessee ex parte. We strongly deprecated the non-cooperation on the part of the assessee and non-furnishing the submissions before the first appellate authority. However, in the interest of justice and equity, we are of the view that one more opportunity should be granted to the assessee to furnish the necessary details in support of his case. Accordingly, we restore the matter to the files of the A.O. for de novo consideration of the issues raised on merits. Assessee is directed to cooperate with the A.O. and shall furnish the necessary evidences in support of his case. The A.O. shall afford a reasonable opportunity of hearing to the assessee before a decision is taken in the matter. Appeal filed by the assessee is partly allowed.

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• 2023 (1) TMI 818
  Bogus purchases - A.O stated that as per the information received from Sale Tax Department the assessee has made purchases from the following bogus dealers listed by the Sale Tax Department - assessee submitted that payment for the purchase material and payment has been made through cheques/RTGS and he submitted a copy of certificate issue by Greater Bank and all the payments were made by account payee cheques only - HELD THAT:- The assessee has submitted the copies of ledger account of the 5 parties, copy of bank statement showing payment made by account payee cheques certificate from civil engineer and site engineer etc. and submitted that without disproving these material the A.O has made the addition on the basis of information displayed on the website of the sale tax department. After taking into consideration the above facts and material on record, it is observed that assessee has not claimed such expenses as revenue expenses during the year under consideration but same were capitalized as work in progress. Therefore, any disallowance it is made its amount to reduce work in progress, since, the expenses were capitalized in the work in progress. Since the expenses were shown by the assessee under the head work in progress and has not been reflected in the trading account, therefore, no addition can be made.We consider that decision of ld. CIT(A) in sustaining the impugned disallowance of expenditure made by the A.O is not justified. Accordingly, the ground of the appeal of the assessee is allowed.

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• 2023 (1) TMI 817
  Characterisation of receipts - sales tax subsidy - capital receipt - CIT-A concluded subsidies received pertaining to development of industries is of the nature of capital receipt - HELD THAT:- CIT(A) has considered the decision of Ponni Sugar Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT ] wherein held that if the purpose of incentive or subsidy was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of subsidy was of the capital in nature. The ld. CIT(A) has also discussed the other decision of ITAT, Chennai in the case of Eastman Export Global Clothing Pvt. Ltd. [ 2016 (7) TMI 951 - ITAT CHENNAI ] wherein it is held that if the object of assistance was to enable the assessee to set up a new unit or expand the existing unit then the receipt is of the capital account. Similarly the ld. CIT(A) has also discussed the various other decision in his finding on identical issue that subsidies received pertaining to development of industries is of the nature of capital receipt. During the course of appellate proceedings before us the ld. counsel also submitted that in subsequent year assessment year 2013-14 the ld. CIT(A) has allowed the appeal of the assessee treating sale tax subsidy as capital receipt and department has not raised any ground before the ITAT. It is also submitted that in assessment year 2015-16 the assessee has treated the sale tax subsidy received as capital receipt and same has been accepted by the A.O in the assessment order. In the light of the above facts and finding we don t find any force in the ground of appeal of the revenue, therefore, this ground of appeal stand dismissed. Claim of education cess as deduction - HELD THAT:- Since surcharge or cess is a part of Income Tax and not deductible u/s 40(a)(ii) w.e.f 01.04.2005 as per Finance Act 2022. Therefore, we consider that assessee is not eligible for claiming deduction of education cess while computing total income. Therefore, this ground of appeal of the revenue is allowed. TDS u/s 195 - non deduction of TDS on payment to non-resident to ICIC prising U.K. and to Platts USA - Disallowance u/s 40(a)(i) - HELD THAT:- During the course of appellate proceedings before us the ld. Counsel could not controvert the fact that impugned payment made to the non-resident was not attracted by the provision of Sec. 195 of the Act, therefore, we don t find any merit in this ground of appeal of the assessee, therefore, the same stand dismissed. Claim of deduction u/s 80IA on account of generation of power - HELD THAT:- The assessee claimed that it has coal based boiler which generate powers in the form of steam. It was also submitted for power in the form of steam was generated by the captive power plant and consumed in the manufacturing of chemicals. The assessee claimed that deduction u/s 80IA on the said unit was allowed by the A.O in the subsequent assessment year 2016-17. Since, this issue of claim of deduction u/s 80IA was not made before the lower authorities, therefore, we restore this issue to the file of the assessing officer for deciding de novo after verification of the relevant details and material to be submitted by the assessee during the course of set aside proceedings. Therefore, this ground of appeal of the assessee is allowed for statistical purposes.

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• 2023 (1) TMI 816
  Deduction claimed u/s 11(1)(a) - audit report was filed belatedly beyond the due date prescribed u/s 139(1) of the Act, the AO rejected the claim for deduction u/s 11 - HELD THAT:- Provisions of section 12A(1)(b) requiring the assessee to furnish audit report has been amended w.e.f. 1.4.2020. Prior to the amendment, the audit report has to be filed alongwith the return of income. Requirement of furnishing audit report before the due date prescribed in section 44AB has been made mandatory w.e.f. 1.4.2020 only. In the instant case, we noticed earlier that the assessee has filed audit report in Form No. 10B alongwith the return of income filed on 30.3.2017. We noticed that the requirement of filing audit report before the date prescribed in sec.44AB has been brought into the statute only w.e.f 1.4.2020, i.e., from AY 2020-21. Accordingly, in the assessment year under consideration, viz., AY 2015-16, the requirement under the Act was to file audit report along with the return of income. Accordingly, in our view, the assessee has complied with the conditions prescribed in sec. 12(1)(b) by furnishing audit report along with the return of income. In our view, both the Assessing Officer and Ld CIT(A) were not justified in rejecting the claim for deduction under section 11(1)(a) - Accordingly, we set aside the order passed by learned CIT(A) and direct the Assessing Officer to allow deduction under section 11(1)(a) - Appeal filed by the assessee is allowed.

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• 2023 (1) TMI 815
  Revision u/s 263 by CIT - Additions u/s 56(2)(vii)(b) - purchase of immovable property - difference in value as per stamp duty valuation - as per CIT reassessment order passed by AO is neither erroneous nor pre judicial to the interest of Revenue - HELD THAT:- The order is not an erroneous order, since the Sale Deed itself got cancelled vide Cancellation Deed dated 26.02.2013 and the entire sale consideration was repaid to the assessee. Thus the question of invoking Section 56(2)(vii)(b) does not arise in the facts of the present case of the assessee. PCIT has not pointed out what is the error in the reassessment order passed by the A.O. and how it is prejudicial to the Interest of Revenue whereas the Ld. PCIT in his conclusion, accepts the submission of the assessee, cancellation of Sale Deed, etc., but require further examination and verification. This cannot be a ground to invoke Revision proceedings u/s. 263 of the Act. As relying on Malabar Industrial Co. Ltd [ 2000 (2) TMI 10 - SUPREME COURT ] reassessment order passed by the AO is neither erroneous nor pre judicial to the interest of Revenue for invoking Section 56(2)(vii)(b) for the reason that the sale deed was cancelled vide Cancellation Deed dated 26.02.2013. Therefore the invocation of Revision proceedings by the PCIT is unjustifiable and the same is hereby quashed. Appeal filed by the Assessee is hereby allowed.

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• Customs

• 2023 (1) TMI 814
  Levy of penalty u/s 112(a)(i) of CA - Violation of import conditions - Import through specified agencies - High seas sale - import of Urea purchased by the appellants on High Seas Sale from State Trading Enterprises (STEs) - whether the import is in accordance with the ITC (HS) Policy? HELD THAT:- It emerges that the purchase from the foreign suppliers was made by STE viz. MMTC and Indian Potash Ltd and the goods were shipped by the foreign suppliers to MMTC/ Indian Potash Ltd and the Appellants have purchased the said goods on High Seas from the MMTC/Indian Potash Ltd. It can be seen that Heading No.3102 1000 of the ITC (HS) Policy 2009-2015, does not stipulate that Urea was allowed to be imported only by State Trading Enterprises; the said Heading allows import of Urea through STC, MMTC and Indian Potash Limited. Clearly, the word used in the said Heading 3102 1000 is through and not by STC, MMTC and Indian Potash - thus, when the import is allowed through STC, MMTC and Indian Potash, it means that so long as the purchase of the Urea from the foreign supplier is effected by STC, MMTC or Indian Potash and payment to foreign supplier is made by STC, MMTC or Indian Potash, who in turn sell the same to a party in India whether on High Seas or otherwise, the import is clearly through STC, MMTC or Indian Potash. Since the import was made through MMTC/Indian Potash Ltd and was in accordance with Heading No.3102 1000 of the ITC (HS) Policy and the letters of the Government of India, Ministry of Chemical and Fertilizers, the import was in accordance with law and therefore the goods cannot be held to be liable to confiscation under Section 111(d) of the Customs Act 1962. Consequently, no penalty is imposable on the Appellants under Section 112 of the said Act. The authorities below have mis-read the Conditions Nos. (v) and (xiv) of the Permission letter dated 15th May 2013 of the Government of India, Ministry of Chemical and Fertilizers and in inferring therefrom that High Seas purchase by Appellant from STE was not permitted as per the said conditions. The said conditions are not related to the Appellant s purchase from STE but are related to the purchases by the end users/ distributors from the Appellant. The meaning of the word through used in Heading No.3102 1000 of the ITC (HS) Policy, itself show that when the ITC Policy talks of import through STE, it means import using the help of STE and not import by STE. Further, as per the regular practice accepted by customs for over several decades in case of imports which are canalized through STEs, the STEs place the order on the foreign supplier and thereafter effect High Seas sale of the same to the Indian Buyers. The judgment in the case of MARICO INDUSTRIES LTD. VERSUS COMMISSIONER OF CUSTOMS (EP), MUMBAI [ 2006 (11) TMI 420 - CESTAT, MUMBAI ] relied upon by the Commissioner (Appeals) has no application to the facts of the present case. In that case the importer had directly established the Letter of Credit on the foreign supplier as result of which the import could not even be said to be through STE. Further, the import in that case was against Advance Release Order which is issued for sourcing inputs indigenously instead of importing against Advance License. The provisions relating to procurement of inputs against Advance Release Order which applied in that case did not provide for import through STE. The impugned Orders vide which penalty under section 112(a)(i) of the Act on the appellants was upheld cannot be sustained - appeal allowed.

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• Insolvency & Bankruptcy

• 2023 (1) TMI 813
  Seeking consideration of Revised Resolution Plan after receipt of Resolution Plan - whether after closure of Challenge Process on 15.07.2022 and consequent receipt of Resolution Plan by 18.07.2022, the Adjudicating Authority could have directed for consideration of the revised plan submitted by the Respondent No.2 thereafter? - HELD THAT:- Clause 7 of the Challenge Process clearly contemplates that after conclusion of the Challenge Process, the eligible Resolution Applicants shall not revise their bid/commercial offer. It is relevant to notice that Challenge Process also reserves the unconditional right of the CoC to cancel/ modify/ withdraw/ abandon/ amend the process of the Challenge Process at any stage. The approval of the plan submitted in CIRP is in the domain of the CoC. Under Regulation 39 of the CIRP Regulations, the Committee is entitled to record its deliberation and vote on such Resolution Plan simultaneously. Challenge Process also reserves the unconditional right of the CoC to cancel/ modify/ withdraw/ abandon/ amend the process of the Challenge Process. After revised offer was received from Respondent No.2, the said factum was brought into the notice of the CoC in its 15th CoC meeting held on 25.07.2022. In 15th and 16th CoC meeting, CoC deliberated how to proceed further. Suggestions were also received that NCLT be approached for permitting modification. The present is a case where CoC did not finally took any decision to permit the Respondent No.2 to revise its bid after close of Challenge Process. CoC ultimately in the 17th CoC meeting held on 03.08.2022 in spite of earlier suggestions received in the earlier CoC meeting proposing different course of action decided to vote all the Resolution Plans received in the process. It is well settled that the timeline in the IBC has its salutary value and it was the wisdom of the CoC which decided to vote on the Resolution Plan after completion of Challenge Process and not to proceed to take any further negotiation or further modification of the plan, that decision ought not to have been interfered with. The Application was filed by the Respondent No.2 on 07.08.2022 by which date CoC has already decided to resolve the vote on all the plans and voting has also commenced w.e.f. 07.08.2022. On going through the whole Application filed by the Respondent No.2, it is found that there is not even mention of the fact that voting has already commenced w.e.f. 07.08.2022. The Adjudicating Authority without there being any valid reason ought not to have been interfered with the voting on the Resolution Plans which had already commenced w.e.f. 07.08.2022. As result of the order of the Adjudicating Authority the process of voting which had commenced on 07.08.2022 was abandoned by the Resolution Professional - the order passed by the Adjudicating Authority dated 11.08.2022 is unsustainable and deserves to be set aside. CoC having already resolved to vote on all the Resolution Plans including the Resolution Plan submitted by the Appellant and the Respondent No.2 which voting process having commenced and was disrupted due to impugned order, the voting process in pursuance of the CoC decision dated 03.08.2022 may commence afresh and be completed in a time bound manner. Appeal allowed.

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• 2023 (1) TMI 812
  Maintainability of application - initiation of CIRP with a malicious intent or not - grievance of the Appellant is that, the 1st Respondent / Bank had declared the account of the 2nd Respondent / Corporate Debtor as Fraud, without any cogent proof and later, lodged a complaint with the Enforcement Agencies, which was a violation of the Corporate Debtor s basic rights, guaranteed under the Constitution of India - case making out for insolvency or not - HELD THAT:- It cannot be forgotten that an Application for initiation of Corporate Insolvency Resolution Process, was made on 19.08.2021, by the 1st Respondent / Bank, and the Date of Default, was 31.10.2018. As such, the Application, filed under Section 7 of the Code, by the 1st Respondent / Bank, before the Adjudicating Authority, is well within time and its Ex-facie, is maintainable in Law, as held by this Tribunal. In the instant case, the Corporate Debtor, had admitted the Debt and not disputed the same. Even the Appellant s offer of Rs. 6 Crores, in respect of the dues of Rs.24 Crores, was not acceptable to the 1st Respondent / Bank, and the last letter for One Time Settlement, was made on 25.05.2021. It is not out of place for this Tribunal, to make a pertinent mention that the ability / inability of the Appellant, to settle his account(s), is not germane, in regard to the commencement of the Corporate Insolvency and Resolution Process proceedings. Because of the latent and patent fact, that the I B Code, 2016, is for Resolution, and not a Recovery Mechanism, in the earnest opinion of this Tribunal - It cannot be gainsaid that Classification of an Account as Fraud, by the 1st Respondent / Financial Creditor / Bank, does not hinder the Bank, from considering the OTS Proposal, and the Offer of Rs.6 Crores, as against the due of Rs.24 Crores, was not acceptable to the 1st Respondent / Financial Creditor / Bank. Although, a Notice, was issued to the Appellant, to improve his Offer, the Appellant, had not availed the same. As for as the present case is concerned, the Corporate Debtor, had not disputed the Debt, but admitted the same. There is no Dispute, in regard to the grant of Term Loan Facilities or about the Corporate Debtor, being in Default - The amount of Debt, given to the Corporate Debtor was Rs.23,21,89,000/- and that a Sum of Rs.31,17,20,210.16 was the amount in Default, as on 19.08.2021. - The Default occurred when the Account of the Corporate Debtor, was classified as Non Performing Asset, on 31.10.2018. Keeping in mind of the fact that the Financial Debt and Default of the Corporate Debtor, were established by the 1st Respondent / Financial Creditor / Bank, based on the facts and circumstances of the instant case which float on the surface, on going through the the impugned order dated 09.06.2022, passed by the Adjudicating Authority, (National Company Law Tribunal, Division Bench I, Chennai) in CP(IB)/203(CHE)/2021 (Filed by the 1st Respondent / Petitioner / Financial Creditor), under Section 7 of the I B Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, comes to a consequent conclusion that the Adjudicating Authority (Tribunal), had rightly exercised its subjective discretion in a right thinking and sound manner, in admitting the Application in CP(IB)/203(CHE)/2021, which is free from any Legal Errors. Accordingly, the instant Appeal fails. Appeal dismissed.

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• 2023 (1) TMI 811
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - application rejected by the Adjudicating Authority on the ground that the Corporate Debtor discharged the obligation as per the terms of the guarantee and therefore there was no debt due from the Corporate Debtor - HELD THAT:- On perusing the valuable opinions of Hon ble Justice Bansi Lal Bhat, Member (Judicial) and Hon ble Mr. Balvinder Singh, Member (Technical) dated 25th September, 2019, I respectfully agree with the reason given by Hon ble Justice Bansi Lal Bhat, Member (Judicial) in his opinion. It was held that it can be safely stated that the Respondent Corporate Guarantor, in the face of provision in the approved scheme of amalgamation and consequent merger, justifiably pleaded that there was no debt payable in law or in fact as the condition of additional equity of Rs. 125 Crores had been fulfilled and the obligation stood discharged. There being no debt payable in law or in fact, question of default does not at all arise. The conclusions drawn by the Adjudicating Authority leading to rejection of the application under Section 7 of the I B Code cannot be termed erroneous. On consideration of the material on record we find no sufficient reasons to adopt a view different than the one taken by the Adjudicating Authority as such view and finding based on appreciation of the relevant material placed before it is the only probable view warranted in the circumstances of the case. Since, I agree with reason assigned by Hon ble Justice Bansi Lal Bhat, Member (Judicial) in his opinion dated 25th September, 2019 at paragraphs 10, 11 and 12 which are quoted above, no fresh reason is required to be assigned by me. The instant Appeal is devoid of merit - Appeal dismissed.

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• 2023 (1) TMI 810
  Seeking to withdraw from e-auction process - refund of EMD and first installment deposited - whether even after attachment of the assets of the corporate debtor under PMLA Act on 02.12.2021, the auction purchaser was required to deposit the entire sale amount? - HELD THAT:- Before the Order of attachment was passed on 02.12.2021, no default can be said to have committed by Auction Purchaser in depositing the amount since first installment was deposited within time and the successful purchaser had 90 days time to deposit the balance amount and before expiry of 90 days the assets of the corporate debtor were attached. In view of the attachment of the assets of the corporate debtor on 02.12.2021, Liquidator can neither complete the sale, can issue sale certificate nor can hand over the assets of the corporate Debtor to the Successful Auction Purchaser and due to aforesaid event the Application was filed by the Successful Auction Purchaser to withdraw from auction and for refund of the EMD. The Successful Auction Purchaser has genuine case for not proceeding with the deposit of the balance bid amount due to attachment of the assets of the corporate debtor on 02.12.2021 as noted above. The 90 days period had not even come to an end on 02.12.2021 so as to impute any violation of the term and conditions by the Successful Auction Purchaser. The Adjudicating Authority after considering the submissions of parties has taken the views that as on today the liquidator is not in a position to hand over the custody of the units of the corporate debtor for which e-auction was held and the Division Bench of the High Court on 24.12.2021 has directed parties to maintain status quo. The Adjudicating Authority has rightly passed an order permitting the Successful Bidder to withdraw from the auction and directed to refund of the amount of the EMD Rs. 5 Crores and First Installment of Rs. 30 Crores. Even in a case where Successful Auction Bid as going concern is not approved, Successful Auction Bidder is not entitled for any Interest on the EMD and 1st Installment. We are of the view that the Successful Auction Bidder is not entitled for interest on the amount of EMD and First Installment and the Adjudicating Authority without adverting to clause 15.4 has issued direction for refund of the EMD and 1st Installment along with interest. The Adjudicating Authority has rightly permitted the Successful Auction Purchaser to withdraw from e-auction and directed for refund of the EMD of Rs. 5 Crores and 1st Installment of Rs. 30 Crores - the direction to refund the amount of Rs. 5 Crores and 30 Crores along with interest is unsustainable - Appeal allowed in part.

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• PMLA

• 2023 (1) TMI 809
  Money Laundering - schedule offence - proceeds of crime - non-existent or non-functional or fake functional MSMEs - offences under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 besides Sections 420, 468, 471 and 120-B IPC - HELD THAT:- The PMLA is a law linked with the scheduled offence. The same is evident from a sincere reading of Sections 5 and 8 of PMLA as it stood prior to 2009 and 2013 Amendments. In Section 5 of the PMLA (as it was originally enacted), a condition prerequisite for an order of provisional attachment of property was that the accused has been charged of having committed a scheduled offence. The said requirement was diluted to the effect that notwithstanding the above, provisional attachment could be ensured under Section 5 of PMLA when the concerned officer expressed his view in writing that the failure to immediately attach property would likely frustrate or defeat the action against money laundering. Section 8 of the PMLA prior to its 2013 Amendment), any attachment or retention of property under the PMLA would cease to exist once the person charged with a scheduled offence stood acquitted for the said offence. However, the amendment of 2013 was done away with the unamended Section 8 of PMLA. Having discussed so far, it is clear and apparent that while the continuance of the proceeding under the PMLA was intricately linked to the scheduled offence proceeding, the Legislature attempted to erase the said distinction by introducing amendments which led to incongruent interpretations resorted to by the various High Courts. With the above ratio laid down by the Supreme Court [ 2022 (7) TMI 1316 - SUPREME COURT] , it has to be held that proceedings of money laundering are liable to be terminated with the underlined scheduled offences ending in acquittal, dismissal or being quashed. All the aforesaid decisions relief upon by the ED have been neutralized by the decision of the Apex Court in Vijay Madanlal Choudhury [ 2022 (7) TMI 1316 - SUPREME COURT] . In the plain language, if the foundation does not exist, how the edifice can survive. In other words, when the predicate offence fails, the foundation having been demolished, the superstructure is to fall and crumbl Application allowed.

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• 2023 (1) TMI 808
  Money Laundering - proceeds of crime - when a juristic person has been arrayed as an accused in a prosecution, who should have to represent such a legal persona? - HELD THAT:- A12 has volunteered to represent the juristic person A13. In view of the same, the juristic entity has nominated a person to represent it in the prosecution and as a result, the petitioner can be discharged from the complaint. This Criminal Revision Case stands allowed.

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• Service Tax

• 2023 (1) TMI 807
  Exemption from Service Tax - works contract service other than commercial nature to the Government, local bodies, statutory authorities, etc. - contention of the petitioner is that the service tax was exempted for the service rendered to the Government for public utility by notification No.25 of 2012 by the Central Government - HELD THAT:- The Honourable Division Bench, in M/S. RAJU CONSTRUCTION, [ 2022 (12) TMI 1336 - MADRAS HIGH COURT] , dismissed the said batch of writ petitions with certain observations - it was held that Services provided by these petitioners were declared services . Thus, the services provided by these petitioners would have been liable tax at 12% on the taxable value and later at 14% vide Notification No.14/2015-ST, dated 19.05.2015 with effect from 01.06.2015 but for the exemption vide Entry 12(a), (c) (f) to Mega Exemption Notification No.25/2012-ST, dated 20.06.2012 - services provided by these petitioners were exempted from payment of service tax vide Entry 12(a), (c) (f) to the Mega Exemption Notification No.25/2012-ST dated 20.06.2012. Writ petition is dismissed.

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• 2023 (1) TMI 806
  CENVAT Credit - demand raised on the difference of Cenvat credit balance shown as of June, 2017, in their ST-3 returns and the actual closing balance - claim of the appellant is that certain Cenvat credit was left to be shown in ST-3 returns for the month of June, 2017 - whether the credit claimed by the appellant for Rs. 31,67,294/- is correct or otherwise? - HELD THAT:- On perusal of the original order as well as other documents, it is found that appellant have submitted statement, wherein complete details was given about the Cenvatable documents. It is also observed that the balance of Cenvat Credit considering the credit of Rs. 31,67,294/- was also declared in the books of accounts by the appellant. This evidence cannot be brushed aside on the presumption that the appellant might have taken the credit earlier unless it is proved by the revenue. Therefore, the detail submitted by the appellant along with copies of invoices no doubt can be raised that the appellant were entitled for the Cenvat credit of Rs. 31,67,294/- on consideration of this credit the balance remains is only Rs. 37,321/- which has been paid along with interest, with this payment there is no demand exist. The appellant are entitled for the Cenvat credit of Rs. 31,67,294/- - the demand raised in the impugned order except the demand of Rs. 37,321/- , does not sustain - appeal allowed - decided in favor of appellant.

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• 2023 (1) TMI 805
  Condonation of delay in filing appeal - whether the Appeal was field beyond the statutory period of 60(sixty) days, but within the condonable period of 30(thirty) days? - HELD THAT:- The Order-in-Original dated 24.04.2019 was communicated to the Appellants on 07.05.2019 and the Appeal before the First Appellate Authority was required to be filed on or before 07.07.2019. But the Appeal was filed on 02.08.2019. Accordingly the Appeal was field beyond the statutory period of 60(sixty) days, but within the condonable period of 30(thirty) days. The Appellant inadvertently mentioned the date of communication of the Order-in- Original in the Appeal Memo as 26.04.2019 instead of the actual date of receipt of the Order-in-Original. Accordingly, the Ld.Commissioner(Appeals) considering the date as 26.04.2019, dismissed the Appeal before him. The correct date of communication of the Order-in-Original is on record i.e. 07.05.2019, it is clear that the Appeal though filed beyond the statutory period, but was field within the condonable period. Accordingly, the delay is condoned in filing the Appeals before the First Appellate Authority and find it appropriate to remand the matter to the Ld.Commissioner(Appeals) to decide the Appeals on merits without further visiting the aspect of limitation. The Ld.Advocate for the Appellant has submitted some documents which shows that the Department had taken coercive steps for realization of demand. However, subsequent to the order of the Tribunal dated 11.01.2023, a letter was issued on 13.01.2023 to all the banks of the Appellant that the order for freeze may be treated as withdrawn w.e.f. 13.01.2023 onwards. It cannot be apprehended what developments took place over the weekend that again on Monday itself i.e. on 16.01.2023 there was a fresh letter to all the banks requesting to put the letter of defreeze on hold and not to disburse any amount from the accounts until another confirmation is issued to them. These actions are beyond comprehension and cannot be appreciated since the Appeals were pending before the Tribunal and it is observed from the Order-in-Original that substantial amount has already been paid by the assessee and also appropriated in the Order-in-Original. The impugned orders are set aside and the Appeals filed by the Appellants are allowed by way of remand to Ld.Commissioner(Appeals).

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• 2023 (1) TMI 804
  Adjustment of service tax paid earlier - advance tax vs excess tax - procedure prescribed in Rule 6 - denial of credit on the ground that same does not appear to be advance tax rather is excess payment of tax - Difference of opinion HELD THAT:- The registry is directed to place the matter before Hon ble President to consider the difference of opinion to a third Member for resolution. There being difference of opinion between the Members, the following questions are framed for consideration by the ld. Third Member:- Q.1. Under the fact that service tax was payable on receipt basis during the period under dispute and admittedly, the assessee paid service tax at the time of raising of the invoice. Such payment has been held to be tax paid in advance by Member (Judicial), qualifying as advance tax under Rule 6(1A) of the Service Tax Rules. OR As held by the Member (Technical) that such payment of tax prior to due date is not advance tax but excess payment of tax qualifying for adjustment under Rule 6(4A) 6(4B). Q.2. As held by the Member (Judicial) that adjustment of advance tax paid has to be allowed in the subsequent period under Rule 6(1A) and the disclosure of tax paid in ST-3 Return, amounts to compliance of the condition in Rule 6(1A) proviso. OR The payment in this case is excess payment of tax and thus, falls under the provisions of Rule 6(4A) and the same cannot be adjusted for failure to comply with the requirements of Rule 6(4B), as held by Member (Technical). Q.3. Whether as held by the Member (Judicial) that the Adjudicating Authority have wrongly applied Rule 6(4A)/6(4B) of the Service Tax Rules, which is applicable in case of provisional assessment and the applicable Rule in the facts of the case is Rule 6(1A)? OR As held by the Member (Technical), Rule 6(1A) (advance payment of tax), Rule 6(4) (provisional assessment of tax) and Rule 6(4A) (excess payment of tax) are different and the applicable Rule is Rule 6(4A) read with Rule 6(4B). Q.4. The Hon ble High Court have remanded the matter to the Tribunal to examine the entitlement of adjustment of tax, as prayed by the Revenue, and the same is not confined to the entitlement under the provisions of Rule 6(4A) and Rule 6(4B). As the provisions of Finance Act, 1994 read with Article 265 of the Constitution of India, does not provide for collection and retention of tax not authorized by law. The Advance/excess tax, admittedly paid should be adjusted for determining the net tax liability, as held by the Member (Judicial). OR In terms of the question framed and answered by the Hon ble High Court, the Tribunal has been directed to examine the eligibility of the adjustment only in terms of Rule 6(4A) and Rule 6(4B), as held by the Member (Technical). Q.5. The application of Rule 6(4A) and Rule 6(4B) are subject to option made by the assessee for payment of tax on provisional basis under Rule 6(4), and are not applicable to service tax paid in advance in terms of Rule 6(1A), as held by the Member (Judicial). OR Rule 6 (1A), Rule 6(4) and Rule 6(4A) read with Rule 6(4B) deal with different situations and in the present case the provision of Rule 6(1A) is not applicable but Rule 6(4A) 6(4B) are applicable as held by the Member (Technical). The Registry is directed to place the appeal records before the Hon ble President for appointment of the ld. Third Member for determining the questions framed herein regarding the difference of opinion.

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• 2023 (1) TMI 803
  Levy of service tax - Renting of Immovable Property Service - audit team found that the appellant had let out its premises in Gurgaon for commercial purposes to M/s. Usha Fabs Private Ltd. and was not collecting any rent for it - renting of residential flat in Mussorie for residential purpose - HELD THAT:- The entire case of the department is built by wrongly understanding the amounts advanced by the appellant to M/s. Usha Fabs Pvt. Ltd. as amounts received as advances by the appellant. A bare perusal of the documents presented before us including the ledgers brings out the correct facts. Audit team appears to have been confused between what is a credit and what is a debit and came to a conclusion that the amounts advanced by the appellant were amounts received by it. The correct facts were presented by the appellant in reply to the SCN and also during the personal hearing as recorded in the impugned order. However, while giving her findings, the Commissioner has recorded just the opposite as facts. The entire case is built on a mistaken reading of the ledgers by the audit team and continued in the SCN. Even after the correct facts were presented, the demand was confirmed in the impugned order without giving any reasons. Once it is found as a fact that the appellant had given advances and not received them from M/s. Usha Fabs Pvt. Ltd., nothing survives in the impugned order. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2023 (1) TMI 802
  Refund of Cenvat Credit vs Re-Credit of Cenvat Credit - Scope of SCN - Show-cause notice sought to question the suo motu reversal entry dated 31.03.2010 inasmuch as the Appellant should have sought for refund thereof under Section 11B of the Act - It is case of the Appellant that the Order-in- Original has travelled all the way beyond the Show-cause notice - HELD THAT:- The Appellant had discharged the duty burden from their PLA Account and as such, there is no dispute about the same. With such payment of duty out of PLA, they have reversed the debit entry made by them in their Credit Account which was used for payment of duty earlier. Though there was no proposal in the Showcause notice to deny such re-credit, the original Adjudicating Authority went ahead and even after accepting that the duty was paid subsequently in cash, disallowed the re-credit and confirmed the duty to that extent. Once the duty has been paid in cash, earlier payments made through Cenvat Account are liable to be re-credited in the said Account and no objection that such recredit was not on the basis of any eligible document can be adopted by the Revenue. Admittedly, it is not a case of availment of credit in the ordinary course, but such re-credit was to neutralize the subsequent payment of duty in cash. Reliance placed in the case of ICMC Corporation Limited vs. CESTAT, Chennai [ 2014 (1) TMI 1473 - MADRAS HIGH COURT ] , whereby the Hon ble High Court held that the suo motu credit of Cenvat reversed earlier involved only an account entry reversal and in the process, no outflow of funds from the assesse and accordingly, filing of refund claim under Section 11B of the Central Excise Act, 1944, is not required. The impugned orders cannot be sustained and the same are set aside - Appeal allowed.

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• 2023 (1) TMI 801
  Availment and utilization of CENVAT Credit - registration of premises - allegation is that the CENVAT Credit pertained to a period prior to registration and there is no scope for accepting Cenvatable documents which do not bear the name of their factory premises - HELD THAT:- The Ld.Adjudicating authority has observed in the Adjudication order where it was held that The noticee pleaded for their invoices with earlier Office address for consideration with judicial decisions. In the said show cause notice it was alleged that invoices were not been consigned to the address (registered address) of the assessee and CENVAT is not admissible in this grounds also. Here I cross-checked their payments and found they have paid amount for the inputs in question. It has been held by the Tribunal, High Courts and Supreme Court that substantial benefit should not be denied on the ground of procedural lapses. Further, Hon ble High Court of Karnataka in the case of MPORTAL INDIA WIRELESS SOLUTIONS (P.) LTD. VERSUS COMMISSIONER OF SERVICE TAX [ 2011 (9) TMI 450 - KARNATAKA HIGH COURT ] where it was held that In the absence of a statutory provision which prescribes that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, the three authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law. Appeal allowed - decided in favor of appellant.

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• 2023 (1) TMI 800
  Violation of principles of natural justice - appellant have been asking consistently the copy of show cause notice, inspite of which there were failure to provide copy of SCN to noticee - HELD THAT:- It is found that right from adjudication stage the appellant has taken a stand that they have not received the show cause notice and they have been pursuing the same with the adjudicating authority. From the correspondence of the appellant it is clear that the appellant have been asking consistently the copy of show cause notice. We fail to understand that why the copy of show cause notice cannot be given to the noticee which is the foremost requirement as per principle of natural justice. Accordingly, the adjudicating authority has gravely violated the principle of natural justice by not providing the copy of show cause notice to the appellant - the matter needs to be remanded to the adjudicating authority for passing a fresh order. After providing a copy of show cause notice and opportunity for making a defense reply by the noticee and also after granting the personal hearing. The impugned order is set aside. The appeals are allowed by way of remand to the adjudicating authority for passing a fresh order preferably within 2 months from the date of this order, since the matter is very old of 2013.

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• CST, VAT & Sales Tax

• 2023 (1) TMI 799
  Validity of assessment order - whether the works contract awarded to assessee for the year 1989-1990 could be divided into two parts i.e. supply of goods and works contract? - HELD THAT:- It is not in dispute that a written agreement was executed between the assessee - revisionist and Auraiya Gas Power Project. Clause 2.4 categorically provided that the cost included the material and the labour for laying pipeline, the work was to be executed by the assessee. Clause 3 read with Clause 3.1 of the Contract mentioned the total value of the contract as Rs.10,67,517/-. The Tribunal had noted the relevant clauses of the agreement in its judgment but relying upon specification of work/tender had segregated the contract awarded to the assessee between the work done by the assessee and the material supplied/purchased for the execution of work contract. Further, the notification dated 27.4.1987 has provided for levying of tax where the works contract has been executed over Rs.1 lakh and the description has been mentioned in the schedule of the notification. In the instant case, the agreement, which was arrived between the parties, did not segregate between works contract and the material to be supplied. The agreement specifically provided for the payment of lump-sum money to the contractor for the material as well as the works contract. The interpretation given by the Assessing Authority and Tribunal cannot be sustained in view of the agreement arrived between the parties. The notification dated 27.4.1987 is not applicable in the case of assessee - revisionist. The finding recorded by the Tribunal as to the segregation of the work done by the assessee, pursuant to the agreement entered between the assessee and the Auraiya Gas Power Project, the order passed by the Tribunal is unsustainable in the eyes of law and the same is hereby set aside - revision allowed.

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• 2023 (1) TMI 798
  Seeking restoration of assessment order - appellate order is non speaking order or not - validity of seeking restoration when the Tribunal ought to have remanded the case to appellate authority for passing fresh order - HELD THAT:- It is a case where a survey was made on 26.09.2015 which is not disputed to both the parties. At the time of survey, 16 persons were having food in the dhaba at around 12.40 p.m. in the afternoon which is also not disputed. As no book of accounts was produced before the survey team by the Assessee, the Assessing Authority calculated the sale made by the Assessee relying upon the survey report. The first appellate authority has reduced the quantum of tax, which the Tribunal had restored back and upheld the order passed by the Assessing Authority after giving the elaborate reasoning to arrive at the finding. The Tribunal is the last fact finding Court and has recorded a categorical finding that as per the admitted rent and the salary being paid to the employees and the electricity charges, the total expenses incurred by the Assessee was arrived at by Tribunal, which this Court cannot interfere and re-appreciate exercising revisional jurisdiction. The finding so recorded is finding of fact and the Assessee could not bring on record any thing so as to demonstrate that the Assessing Authority or the Tribunal exceeded its jurisdiction vested in it and passed the order without any material on record. The finding of fact recorded by the Tribunal needs no interference by this Court exercising revisional jurisdiction - Revision dismissed.

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• 2023 (1) TMI 797
  Time bound supply scheme - branch transfers - interstate sales - Section 3(a) of the Central Sales Tax Act, 1956 - Whether in the facts and in the circumstances of the case, the Tribunal has ignored the fact of absence of any conceivable links with the customers and the despatch of the goods to the Branch? - HELD THAT:- There can be no manner of doubt that an AO is required to examine each transaction forming the subject matter of the assessment proceedings to determine whether it amounts to a branch transfer as contended by the Assessee or an interstate sale as contended by the Department. Therefore, the decision in any particular year, even involving the same Assessee and the same scheme, need not necessarily form a precedent for a subsequent year since the transaction in each subsequent year will have to in any event be examined on a case by case basis. Therefore, there need not be any apprehension entertained by the Department that if the Court for the present year i.e. 1988-89 decides that the transactions in question do not amount to interstate sales then in all subsequent years ipso facto, without anything more, all the transactions for those years will also be termed only as branch transfers and not interstate sales. While the Assessee has discharged its initial burden of showing that the transaction was only a branch transfer, the Department has been unable to discharge its burden of showing that in fact the transaction was not merely a branch transfer but was a movement of goods by way of interstate sale occasioned by a concluded contract - the Court is not persuaded that the matter pertaining to 1988-89 should again be sent to the Tribunal for verification of each transaction to determine whether it is an interstate sale as contended by the Department. The Court notes that nearly 35 years have already elapsed since the year 1988-89 and these proceedings cannot interminably carry on. The impugned order of the Tribunal and the corresponding orders of the First Appellate Authority and the AO are hereby set aside - issue answered in favour of the Assessee and against the Department.

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• 2023 (1) TMI 796
  Reversal of Input Tax Credit - interstate sale of goods - applicability of proviso to Section 19 (2) (v) of the TNVAT Act to manufacturers also or not - HELD THAT:- The issue decided in the case of THE STATE OF TAMIL NADU REPRESENTED BY ITS SECRETARY COMMERCIAL TAXES DEPARTMENT, THE DEPUTY COMMISSIONER (CT) (FAC) VERSUS M/S. EVEREST INDUSTRIES LIMITED [ 2022 (4) TMI 1204 - MADRAS HIGH COURT ] where it was held that When the power to the statutory authority is granted upto five years to modify the order, it cannot be said that the constitutional authorities would not have power to review the action. Therefore, concurring with the Division Bench, we do not concur with the decision of the Learned Judge to dismiss the writ petitions on the technicality of limitation, that too, when the batch was pending. Appeal disposed off.

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• Indian Laws

• 2023 (1) TMI 795
  Validity of arbitration proceedings/constitution of the arbitral tribunal - ex-parte proceedings - seeking permission to adduce evidence - whether the applicant can be permitted to adduce evidence to support the ground relating to Public Policy in an application filed under Section 34 of the Arbitration Conciliation Act, 1996? HELD THAT:- In the present case the arbitration proceedings commenced and even the award was declared/passed by the arbitral tribunal in the year 1998, i.e., prior to section 34(2)(a) came to be amended vide Act 33/2019. Apart from the fact that it was conceded by the learned counsel appearing on behalf of the appellant before the High Court that the law prevailing prior to the amendment of Section 34(2)(a) by Act 33/2019 shall be applicable, even otherwise, we are of the opinion that the arbitration proceedings commenced and even the award was declared prior to the amendment of Section 34(2)(a) by Act 33/2019, Section 34(2)(a) pre-amendment shall be applicable - subsequent to the amendment of section 34(2)(a), the words furnishes proof have been substituted by the words establishes on the basis of the record of the arbitral tribunal . In that view of the matter, we hold that in case of arbitration proceedings commenced and concluded prior to the amendment of section 34(2)(a) by Act 33/2019, pre-amendment of section 34(2)(a) shall be applicable. Whether in an application filed under section 34(2)(a) pre-amendment where the requirement is that the party making an application has to furnish proof , whether such an applicant can be permitted to adduce evidence by way of affidavit or otherwise? - HELD THAT:- The applications under sections 34 of the Act are summary proceedings; an award can be set aside only on the grounds set out in section 34(2)(a) and section 34(2) (b); speedy resolution of the arbitral disputes has been the reason for enactment of 1996 Act and continues to be a reason for adding amendments to the said Act to strengthen the aforesaid object; therefore in the proceedings under section 34 of the Arbitration Act, the issues are not required to be framed, otherwise if the issues are to be framed and oral evidence is taken in a summary proceedings, the said object will be defeated; an application for setting aside the arbitral award will not ordinarily require anything beyond the record that was before the arbitrator, however, if there are matters not containing such records and the relevant determination to the issues arising under section 34(2)(a), they may be brought to the notice of the Court by way of affidavits filed by both the parties the cross-examination of the persons swearing in to the affidavits should not be allowed unless absolutely necessary as the truth will emerge on the reading of the affidavits filed by both the parties. Whether the present case is such an exceptional case that it is necessary to grant opportunity to the respondents to file affidavits and adduce evidence and whether any case is made out for the same? - HELD THAT:- The event of refusal to amalgamate the plots is subsequent to the passing of the award and therefore naturally the same shall not be forming part of the record of the arbitral tribunal. Even otherwise, it is required to be noted that the award of the arbitral tribunal was an exparte award and no evidence was before the arbitral tribunal on behalf of the respondents. We are not opining on whether the arbitral tribunal was justified in proceeding with the further proceedings ex-parte or not. Suffice it to record that before the arbitral tribunal, such evidence was not there and nothing was on record on the amalgamation of the plots - a strong exceptional case is made out by the respondents to permit them to file affidavits/adduce additional evidence. However, at the same time, the appellant also can be permitted to cross-examine and/or produce contrary evidence. The High Court has not committed any error in permitting the respondents to file affidavits/additional evidence in the proceedings under section 34 of the Arbitration Act. Appeal dismissed.

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• 2023 (1) TMI 794
  Dishonor of Cheque - declared income was sufficient to prove loan or not - requirement of presumption once and execution of cheque is admitted - rebuttal of presumption - preponderance of probabilities - HELD THAT:- The learned Trial Court found that the Income Tax Returns of the complainant did not disclose that he lent amount to the accused, and that the declared income was not sufficient to give loan of Rs.3 lakh. Therefore, the case of the complainant that he had given a loan to the accused from his agricultural income was found to be unbelievable by the learned Trial Court. The learned Trial Court found that it was highly doubtful as to whether the complainant had lent an amount of Rs.3 lakh to the accused. The learned Trial Court also found that the complaint had failed to produce the promissory note alleged to have been executed by the accused on 25th October 1998. The learned Trial Court had found that the accused had rebutted the presumption on the basis of the evidence of the defence witnesses and attending circumstances. In the case of M/S. KALAMANI TEX ANR VERSUS P. BALASUBRAMANIAN [ 2021 (2) TMI 505 - SUPREME COURT] , the learned Trial Court had dismissed the complaint. In appeal, at the behest of the complainant, the same was allowed and the accused were convicted for the offence punishable under Section 138 of the N.I. Act - It is seen that in the facts of the said case, this Court found that the defence raised by the appellants/accused did not inspire confidence or meet the standard of preponderance of probability. In the present case, the defence raised by the appellant satisfies the standard of preponderance of probability . A distinguishing fact between the criminal proceedings and the civil proceedings in the present case is that, while in the criminal proceedings the complainant had failed to produce the promissory notes, in the civil proceedings, the complainant had proved the promissory notes. The High Court found that the Civil Appeals were required to be decided on the basis of the preponderance of probabilities. The High Court found that the complainant had established that he was working as a LIC Agent, that his father was owning extensive agricultural properties and that he was deriving agricultural income. The High Court, on the basis of the evidence placed on record, relying on the preponderance of probability, came to a conclusion that the plaintiff had the financial ability to lend the sum of Rs.3 lakh as on 20th October 1998 - Though it was sought to be argued before the High Court that in view of the judgment in the criminal proceedings, the suit(s) was also liable to be dismissed, the High Court rightly observed that the adjudication in civil matters is based on preponderance of probabilities whereas adjudication in criminal cases is based on the principle that the accused is presumed to be innocent and the guilt of the accused should be proved to the hilt and the proof should be beyond all reasonable doubt. There are no reason to interfere with the judgments and orders passed by the High Court - the decrees of the High Court are modified, thereby restricting them to the amount already deposited by the appellants in this Court in the civil and criminal proceedings, along with interest accrued thereon. The respondents in both the Civil Appeals would be entitled to withdraw 50% of the amount each from the amount deposited in this Court with interest accrued upto date. Application disposed off.

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