TMI Tax Updates - e-Newsletter
January 25, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax CST, VAT & Sales Tax Indian Laws

Articles

1. FACELESS PENALTY SCHEME, 2021

   By: DR.MARIAPPAN GOVINDARAJAN

Notifications

GST - States

1. 02/GST-2 - dated 22-1-2021 - Haryana SGST

Notification to bring into force provisions of HGST (Amendment) Act, 2020 (25 of 2020) under the HGST Act, 2017

2. 73/2020 – State Tax - dated 11-1-2021 - Jharkhand SGST

Special procedure for taxpayers for issuance of e-Invoices in the period 01.10.2020 - 31.10.2020

3. G.O. Ms. No. 77 - dated 31-12-2020 - Puducherry SGST

Puducherry Goods and Services Tax (Fourteenth Amendment) Rules, 2020.

4. G.O. Ms. No. 76 - dated 31-12-2020 - Puducherry SGST

Seeks to bring into force various sections of Puducherry Goods and Services Tax (Second Amendment) Act, 2020

5. G.O. Ms. No. 75 - dated 31-12-2020 - Puducherry SGST

Seeks to amend Notification No. G.O. Ms. No. 13/A1/CT/2017, dated the 29th June, 2017

6. G.O. Ms. No. 74 - dated 31-12-2020 - Puducherry SGST

Amendment in Notification No. vide G.O. Ms. No. 44, dated the 7th September, 2020

Highlights / Catch Notes

GST

• Metal Nuts and Spring Nuts Classified as Motor Vehicle Parts Under Tariff Item 8708 99 00 by AAAR Decision.

  Case-Laws - AAAR : Classification of goods - threaded metal nuts which function same as standard nuts - The impugned goods, i.e., Metal Nuts with metrical threading, Metal Nuts without metrical threading, and Metal Spring Nuts, will be considered as parts of motor vehicles falling under Chapter Heading from 87.01 to 87.05, and accordingly will merit classification under the Tariff Item 8708 99 00, as purported by the Appellant Department- AAAR
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• AAAR Confirms Shatamrut Chyavan as Cattle Feed, Classified Under Chapter Heading 2309, Attracting Nil GST Rate.

  Case-Laws - AAAR : Classification of goods - Shatamrut Chyavan - The impugned product is also advertised, marketed, and sold, as cattle feed, which when fed in certain doses with other fodder to the cattle, like cows, buffaloes, goat, etc., is purported to increase the production of milk from such cattle along with increasing their immunity against the diseases. Thus, it is evident that the impugned product is perceived as cattle food having the aforementioned specific uses. - the impugned product would aptly be classified under the Chapter Heading 2309 - Rate of GST is Nil - AAAR
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Income Tax

• High Court Upholds CIT(A)'s Decision: No Merit in Revenue's Appeal on Section 68 Addition Deletion.

  Case-Laws - HC : Addition u/s 68 - CIT(A) assessed under the head "income from other sources" - the ld. CIT(A) has made a lucid analysis of the record available before her, and appreciated the controversy in right perspective. We do not find any merit in the ground of appeal raised by the Revenue challenging deletion of addition - HC
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• Investment in Hospital Construction Accurately Reported; Section 271(1)(c) Charge Invalid Against Assessee Company.

  Case-Laws - AT : Penalty u/s 271(1)(c) - The assessee company also disclosed the investment in construction in hospital as non current investment in balance-sheet. Thus, the assessee fully and truly disclosed the return of income and, therefore, the charge of furnishing inaccurate particulars of income by the Assessing Officer is not valid. - AT
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• Telecom Firm Challenges Tax Deduction on Roaming Charges u/s 194J, Citing Automated Services Without Human Intervention.

  Case-Laws - AT : TDS u/s 194J - non-deduction of tax at source on domestic roaming charges paid to other telecom operators - CIT(A) have erred in ignoring the statement of technical experts recorded by the income-tax authorities in case of Vodafone Cellular Limited (now merged with Appellant itself), in the context of roaming services, wherein it has been clearly observed that roaming services are automated services requiring no human intervention. - AT
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• Income Tax Revision Denied: Pr. CIT's Section 263 Attempt Fails Due to Lack of Specific Error Identification in WIP.

  Case-Laws - AT : Revision u/s 263 - wrong working of WIP - Pr. CIT has not pointed out as to where the error has occurred. He had a suspicion that income is not accounted for correctly. Mere suspicion is no ground for exercise of power u/s. 263 of the Act. No verification or examination of the audited accounts is done by the Pr. CIT. As he has suspicion, he simply set aside the matter to the file of the AO for fresh adjudication. This is not permitted in law. - AT
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• Trust's 12A Registration Canceled; PCIT Fails to Specify Deviations from Objectives or Past Activities.

  Case-Laws - AT : Exemption u/s 11 - cancelling the registration of the assessee Trust U/s 12A - CIT(C) has stated that the activities of the assessee associations are not genuine and are not being carried out in accordance with the stated objects of the assessee. However, the allegation of the ld. Pr. CIT(C) are incorrect. Because there was no change in the activities of the assessee since starting to till date. The ld. PCIT(C) has failed to state that which activities have been done by the assessee in these years which were apart to earlier years and what activities are not according to the aims and objects of the Associations or have not been followed or done. - AT
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• Taxpayer Wins: CIT(A) Allows Write-Off of Principal Loan as Bad Debt Despite Pending Appeal in High Court.

  Case-Laws - AT : Write off of irrecoverable principal amount of loan - AO had allowed the claim of bad debts in respect of the unrealized interest but had disallowed the claim in respect of write off of principal amount of loan on the reason that the department has preferred an appeal before the Hon’ble High Court against the decision of Tribunal in AY 2002-03 wherein decided the issue in favour of assessee and allowed the write off of bad debts. - CIT(A) rightly allowed the claim - AT
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Customs

• Petitioner's Bank Account Attachment Unjustified Post-May 2020; Finance Act 2019 Applied Prospectively from August 1, 2019.

  Case-Laws - HC : Provisional attachment - There are no justification to continue with the provisional attachment of the bank accounts of the petitioner - The initial period of six months had expired in November, 2019. Even assuming and giving benefit of further six months to the respondents, the outer limit of one year expired in May, 2020. That apart, Finance (No.2) Act, 2019 was given prospective application with effect from 01.08.2019. The provisional attachment was made on 08.05.2019 when the said provision was not available in the statute book. - HC
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Indian Laws

• Section 147 of the Negotiable Instruments Act allows cheque dishonor offences to be settled mutually with a 15% cost payment.

  Case-Laws - HC : Dishonor of Cheque - Section 147 of N.I. Act has made every offence punishable under the N.I. Act as compoundable. As such, there is no bar for the parties in the proceeding to compound the offence - such compounding is permitted to be allowed on the common condition that the accused pays 15% of the cheque amount by way of cost. - HC
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Case Laws:

• GST

• 2021 (1) TMI 895
  Classification of goods - threaded metal nuts which function same as standard nuts - whether merit classification under the Tariff item 7318 16 00 and not under Tariff item 8708 99 00? - Challenge to AAR decision - HELD THAT:- The impugned goods can clearly be construed as the parts and accessories of the vehicles falling under the Chapter Headings from 8701 to 8705 and will merit classification under the Chapter Heading 8708, which covers the parts and accessories of the vehicles. Our observation is primarily attributed to the fact that the impugned products are manufactured by the Respondent as per the specifications/requirements approved by the automobile manufacturer, which is illustrated by the descriptions contained in the sample Purchase Order, placed by M/s. Tata Motors Ltd. to the Respondent, which amongst other things, mentions the drawing document number and materials, approved by M/s. Tata Motors Ltd. The said drawing document, designed and made by the Respondent, also contains the part number of the automobile manufacturer, i.e., M/s. Tata Motors Ltd., rendering the said impugned product unique, in terms of its specifications, and materials used in the manufacture of the impugned goods which are identified by the material code of the impugned goods, and thereby lending support to our observation that the impugned goods have been manufactured at the behest of the automobile manufacturer as per the materials and design specifications of the motor vehicles to be manufactured by the automobile manufacturer, and the same is supplied solely or primarily to the said automobile manufacturer, which is also corroborated by the condition laid in the said sample Purchase Order placed by M/s. Tata Motors Ltd., which stipulates that Sale of goods mentioned in the Purchase Order to Spare Market is strictly prohibited. Thus, it has been established beyond doubt that the impugned goods are suitable for use solely or primarily with articles of Chapter Heading Nos. 87.01 to 87.05, and therefore, applying the principle laid down by the Hon ble Supreme Court in the case of G.S. AUTO INTERNATIONAL LTD. VERSUS COLLECTOR OF C. EX., CHANDIGARH [ 2003 (1) TMI 700 - SUPREME COURT] , it is manifest that the impugned products will be construed as parts of motor vehicles falling under Chapter Heading 87.01 to 87.05, and will merit consideration under the Tariff Item 8708 9900. The commercial identity of the impugned goods would he the parts of the motor vehicles as discussed above. Further, though there may be some ambiguities as far as the functions of these impugned goods are concerned, which are in the nature of fastening, thereby fomenting the temptation to classify these goods under Chapter Heading 73.18 by considering them as parts of general use, it is to be stated that doing so would not be legal as per the ratio laid down by Hon ble Supreme Court in M/S CAST METAL INDUSTRIES (P) LTD. VERSUS COMMR. OF CENTRAL EXCISE-IV, KOLKATA [ 2015 (11) TMI 833 - SUPREME COURT] , wherein it has been held by the Hon ble Apex Court that the functional test for the classification of the goods is not the relevant test. Hence, the impugned goods will not be construed as parts of general use , and accordingly will not merit consideration under the Chapter Heading 73.18 - further, the impugned goods are customized and tailor made for the automobile customers as per the specification approved by the automobile customers. Thus, the contention of the Respondent that the impugned goods are supplied to the customers across various sectors, and thereby, the impugned goods are to be construed as parts of general use, and therefore, warranting classification of the impugned goods under the Chapter Heading 73.18, is devoid of any merit, and hence not tenable. The Respondent have heavily relied on the Hon ble Supreme Court Judgement in the case of COMMISSIONER OF CENTRAL EXCISE, DELHI-III VERSUS M/S. UNI PRODUCTS INDIA LTD [ 2020 (5) TMI 63 - SUPREME COURT] . In this regard, it is observed that the issue involved in the above- mentioned case was classification of Car Mats made of textile material , and the said decision in the said case was based on the facts that the Car Mats made of textile material were specifically excluded from Chapter 87. Hence, in this regard, it is opined that the facts and circumstances of the case referred to by the Respondent is entirely different from those of the case at hand, which involves the classification of Metal Nuts and Metal Nuts are not categorically excluded under any HSN explanatory notes, the Section Notes or the Chapter Notes either, and therefore is clearly distinguishable. The impugned goods, i.e., Metal Nuts with metrical threading, Metal Nuts without metrical threading, and Metal Spring Nuts, will be considered as parts of motor vehicles falling under Chapter Heading from 87.01 to 87.05, and accordingly will merit classification under the Tariff Item 8708 99 00, as purported by the Appellant - Advance Ruling decision set aside.

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• 2021 (1) TMI 894
  Classification of goods - Shatamrut Chyavan - falling under TSH 2309 90 10 of Customs Tariff Act, 1975 as adopted to GST attracting NIL rate as per Sr. No. 102 of Notification No. 02/2017 - Central Tax (Rate), dated 28.06.2017 or can be treated as waste of sugar manufacture, whether or not in the form of pellets under heading 2303 attracting 5% of IGST as per Schedule I (Sr. No. 104) of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017 or not? - chalenge to AAR decision. Whether the classification of the impugned product, falling under TSH 2309 90 10 of the Customs Tariff Act, 1975, as adopted to the CGST Act, 2017, attracting NIL as per the List of Exempted Goods in terms of SI. No 102 of Notification No. 02/2017 - Central Tax (Rate), dated 28.06.2017, is correct or not? - HELD THAT:- The impugned product is also advertised, marketed, and sold, as cattle feed, which when fed in certain doses with other fodder to the cattle, like cows, buffaloes, goat, etc., is purported to increase the production of milk from such cattle along with increasing their immunity against the diseases. Thus, it is evident that the impugned product is perceived as cattle food having the aforementioned specific uses - The explanatory notes clearly say that molasses is not covered under heading 2303 but under 1703. A larger part of the Appellant s product consists of molasses and molasses itself are covered under heading 1703. Moreover, it is also made clear that molasses prepared as animal food fall in heading 2309. Therefore, it is clear that the product of the Appellant does not fall under Heading 2303 but falls under Heading 2309. The Appellant has, neither in the written submissions nor during the hearing, given any concrete reasons or grounds to support his contention that the product does not fall under Heading 2309 but under Heading 2303. As regards the Appellant s contention that the impugned product is not fed to the cattle in isolation but the same is fed by mixing with the other fodders in fixed prescribed dosage, and thereby, not deserving to be qualified as cattle feed, it is opined that the said fact about the impugned product would not have any bearing, whatsoever, on the status of the said impugned product which remains the compounded animal feed having specific use in animal feeding. CBIC Circular No. 80/54/2018- GST, dated 31.12.2018, issued on the subject of the clarification of the GST rates and classification of goods, which stipulates that while deciding the classification of product claimed as animal feed supplements, it may be necessary to ensure that the said animal feed supplements are ordinarily or commonly known to the trade as products for a specific use in animal feeding. HS Code 2309 would cover only such products, which in the form supplied, are capable of specific use as food supplement for animal and not capable of any general use. As it has been established that the impugned product is an animal feed having specific use, viz.- increasing the milk production of the cattle and increasing the immunity of the cattle to fight diseases, and the said impugned product is also known in the market as the cattle feed supplement only, therefore, the said impugned product would be classified as animal feed supplement, and accordingly would merit classification under the Chapter Heading 2309 and under the Tariff Item 2309 90 10, and would not attract any GST in terms of Si. No. 102 of the Notification No. 2/2017-C.T. (Rate), dated 28.06.2017. Whether the impugned product can be considered as waste of sugar manufacturing as being purported by the Appellant, and accordingly be classified under the Chapter Heading 2303 - HELD THAT:- The question does not fall within the purview of Section 97 (2) of the CGST Act. 2017. The question is not in relation to supply of goods or services or both, being undertaken or proposed to be undertaken by the Appellant. The MAAR cannot decide whether a specific product can be said to be a waste of sugar manufacture as the said question is not within the scope of Section 97 of the CGST Act. 2017. Also, the Appellant has not given any rebuttal of the finding of the MAAR that the said question does not fall under Section 97 of the CGST Act, 2017. The ruling of AAR upheld.

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• 2021 (1) TMI 893
  Fraudulent CENVAT credit - section 174 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Direction that that till the next date Shri. Ashok G. Rajani and Shri. Amrit Rajani shall not be taken into custody on the basis of the show cause-cum-demand notice dated 30.12.2020 as well as in connection with the ongoing investigation under the CGST Act subject to compliance with the above condition. Status-quo order passed yesterday would stand modified accordingly - Stand over to 04.02.2021.

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• 2021 (1) TMI 892
  Maintainability of petition - alternative remedy of appeal - Direction to the Respondents to grant refund - petitioner submits that though there is a remedy for filing further appeal under the CGST Act, however, since the Goods and Services Tax Appellate Tribunal is presently not constituted, he has no other option but to approach this Court - HELD THAT:- It is noticed that the prayer sought in the present petition does not seek any relief in respect of the order passed by the first Appellate Authority and in absence of any such challenge, we are unable to understand as to how the present petition would be maintainable. At this stage, learned counsel for the Petitioner states that though he has urged grounds to challenge the order passed by the first Appellate Authority, however, since there is no specific relief sought to set aside the afore-noted order, he would like to amend the present petition by adding an appropriate relief in that regard. He requests for an adjournment to do the needful. At his request, re-notify on 9th March, 2021.

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• 2021 (1) TMI 891
  Service of summons - calling upon to personally remain present before the concerned authority on 19th January 2021 - Section 70 of the C.G.S.T. Act, 2017 - HELD THAT:- The Form DRC-03 may be filled up provided the assessee decides to voluntarily make any payment. Even if there is any lapse on the part of the assessee and the department wants to recover a particular amount, it cannot exert pressure or administer threats for the purpose of filling up of the Form DRC-03. Let Notice be issued to the respondents, returnable on 25th January 2021. The writ applicant No.2 shall appear in person before the authority concerned in response to the summons received by him under Section 70 of the Act. However, we make it clear that no coercive measures or steps shall be taken by the concerned authority against the writ applicant No.2. As serious allegations of threats, duress and pressure have been levelled against the team of officers that visited the premises of the writ applicants, we direct the respondents to file their reply by the next date of hearing without fail. On the returnable date, notify this matter on top of the Board.

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• Income Tax

• 2021 (1) TMI 890
  Income tax on the compensation payable to the claimants - As submitted that in spite of deduction of income tax from source as the deceased was salaried person, the law mandates further deduction of income tax on the total amount of compensation also - HELD THAT:- It is well established principle of law that while awarding compensation, amount of income tax, if payable, has to be deducted while assessing the loss of dependency. In case the income of the victim is only from salary , the presumption would be that the employer under Section 192(1) has deducted the tax at source from the employee s salary. In case if an objection is raised by any party, the objector is required to prove by producing evidence such as LPC to suggest that the employer failed to deduct the TDS from the salary of the employee. There can be cases where the victim is not a salaried person i.e. his income is from sources other than salary, and the annual income falls within taxable range, in such cases, if any objection as to deduction of tax is made by a party then the claimant is required to prove that the victim has already paid income tax and no further tax has to be deducted from the income. In the present case, the learned counsel for the appellant did not dispute that there was no evidence on record to show that no income tax was deducted at source while paying salary to the deceased; but, her contention was that the amount of income tax was required to be deducted again from the total amount of compensation payable. This is wholly misconceived plea inasmuch as once the income tax is deducted at source while making payment of the salary to the deceased employee, no law requires deduction of the income tax again on the amount of compensation.

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• 2021 (1) TMI 889
  Disallowance on account of advances written off - Tribunal confirming the decision of CIT(A) deleting the disallowance - HELD THAT:- Addition on account of advances written off indisputably an amount of advance was given in the ordinary course of business to persons like fishermen etc. for the procurement of raw material and labour work. No error in the decision of ld. CIT(A) in allowing the claim of advances written off to the which were given in the ordinary course of business by the assessee. Accordingly, we do not find any merit in the appeal of the revenue Disallowance on account of claim loss of stock by obsolescence - no quantitative details in respect of obsolescent stock was available with the assessee - Tribunal confirming the decision of CIT(A) deleting the disallowance - HELD THAT:- It is brought to our notice that assessee has been consistently followed accounting Standard 2 for valuation of closing of stock at cost or net realizable value whichever is lower in accordance with the accounting standard referred in section 211(3E) of the Company Act, 1956. The detail of absolescene of stock along with detailed working were submitted before the assessing officer and CIT(A) at the time of hearing. The company has valued the stock at net realizable value on the basis of evidence available on the date of signing of the accounts and the actual price was taken for computing the net realizable sale value - In view of the aforesaid findings of fact recorded by the Tribunal, we see no good reason to entertain this appeal.

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• 2021 (1) TMI 888
  Addition u/s 68 - Tribunal upholding the order of the CIT(A) deleting the addition - HELD THAT:- CIT(A) has recorded a finding of fact that nothing has been retained by the assessee, which has been considered as unexplained cash credit. The assessee has explained fund flow i.e. demonstrating transactions were back to back, and were in the nature of accommodation entries. CIT(A) has held that alleged Rs. 1,57,10,000/ was not earned from any business activity but from other sources of income. This was to be assessed under the head income from other sources . Contrary to the above factual finding of the ld. CIT(A), neither Revenue has filed any evidence, nor assessee has filed any paper book. It has not been brought to our notice, as to how these analysis are contrary to the record. Therefore, we are of the view that the ld. CIT(A) has made a lucid analysis of the record available before her, and appreciated the controversy in right perspective. We do not find any merit in the ground of appeal raised by the Revenue challenging deletion of addition - Decided against revenue.

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• 2021 (1) TMI 887
  Addition u/s 69 - unexplained investment - contention of the ld. AR is that the assessee s property situated in Ranasinghpet, BVK Iyengar Road, Bangalore was acquired by the Special Land Acquisition Officer [SLAO] for Bengaluru Metro and the assessee received a sum as a compensation from the authorities and assessee disclosed this amount as a sale consideration while declaring long term capital gain from the said acquisition of the property and offered the same for taxation - HELD THAT:- The source of payment of Rs. 34.50 lakhs is out of compensation received towards acquisition of property by BMRCL and this was duly disclosed by the assessee. These receipts and payments were duly reflected in the ICICI Bank s Current A/c No.6251050390981, OTC Road, Bangalore 560 002. As such, it cannot be considered as unexplained investment by the assessee. Accordingly, we delete the addition made by the AO and sustained by the CIT(Appeals) u/s. 69 of the Act. This ground of the assessee is allowed. Addition of capital gain ignoring the fact that the compensation was received by Metro Railway authorities - When the name of BMRCL was mentioned in Form 26AS showing the details of TDS on payment for acquisition of said property, it cannot be doubted that BMRCL has not acquired the said property. In our opinion, the compensation received by the assessee from BMRCL is exempt from tax in view of CBDT Circular No.36/2016 dated 25.10.2016. Accordingly, the compensation received by the assessee on acquisition of the property by BMRCL is not liable for capital gain. This ground of the assessee is allowed.

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• 2021 (1) TMI 886
  Exemption u/s 11 - Non filing of Form No. 10B - HELD THAT:- The assessee has filed revised audit report in Form NO. 10B as well as the Resolution dated 22/5/2017 during the assessment proceedings itself. Merely filing Form No. 10 cannot be held as afterthought. CIT(A) though saying that the assessee is entitled for exemption u/s 11 with all the consequential benefits, thereafter cannot restricted the claim of the assessee which the assessee is entitled u/s 11 on the ground that filing of Form No. 10 was an afterthought. Therefore, we direct the Assessing Officer to take cognizance of the revised audit report in Form No. 10B as well as the Resolution dated 22/05/2017 and allow the consequential benefits to the assessee as enshrined in Section 11 of the Act. The appeal of the assessee is partly allowed.

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• 2021 (1) TMI 885
  Validity of the notice under Section 153A - Proof of incriminating material found in search - HELD THAT:- As in CIT Vs. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT ] has held that completed assessments can be interfered with by the Assessing Officer, while making the assessment under Section 153A of the Act, only on the basis of some incriminating material un-earthed during the course of search or recovery of documents or undisclosed income or property discovered in the course of search, which were not produced or not already disclosed or made known in the course of original assessment. Addition of advertisement expenses - There is only reference to some post-search investigation and assessee was asked to furnish the details of advertisement expenses, which was furnished. However, the address and PAN of the parties were not provided and, therefore, these expenses were held to be bogus and disallowed by the ld. Assessing Officer. We do not find any reference to any material, which is incriminating in nature found during the course of search, which has been used by the ld. AO for making this disallowance. Disallowance under Section 14A - As noted that assessee has made an investment of Rs. 119 crores during the year and, therefore, he made the disallowance under that section. In that case, also we do not find any reference to any incriminating material found during the course of search. In view of this, we find that both the disallowances in appeal before us are made by the ld. Assessing Officer without any incriminating material found during the course of search.DR could not show that any of these additions/disallowances are made on the basis of incriminating material found during the course of search. - Decided in favour of assessee.

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• 2021 (1) TMI 884
  Penalty u/s 271(1)(c) - Addition towards interest paid on TDS and sales tax as well as addition relating to rental income treated as income from other sources - HELD THAT:- It is an undisputed fact that the assessee company furnished rent agreement during the assessment proceedings and TDS was deducted by the tenant u/s 194I - The assessee also disclosed the fact that the land belong to third party and the agreement with Dr. Sarita Kalra and after construction, the assessee company can give the constructed hospital to third party. The assessee company also disclosed the investment in construction in hospital as non current investment in balance-sheet. Thus, the assessee fully and truly disclosed the return of income and, therefore, the charge of furnishing inaccurate particulars of income by the Assessing Officer is not valid. The reliance of decision in case of CIT Vs. Amit Jain [ 2013 (1) TMI 340 - DELHI HIGH COURT ] is very apt in the present case. Therefore, the CIT(A) was not right in dismissing the contentions of the assessee and confirming the partial penalty. Thus, the appeal of the assessee is allowed.

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• 2021 (1) TMI 883
  Reopening of assessment - Addition on misuse of client code - statemet of third party relied upon - Whether there is document or material which could established that the client code modification was made which allegedly resulted in shifting of profit.? - HELD THAT:- Where the assessee so desires, an opportunity to cross examine the persons whose statements are recorded be provided to the assessee. However, in the instant case, we find that the AO has not shared such information/statements and an opportunity to cross-examine these persons was also not provided and therefore, the principle of natural justice is clearly violated in the instant case which renders the order so passed by the AO as invalid in the eyes of law. Even during the appellate proceedings, the assessee was not made available any such statements and even the right of cross examination was denied by the ld CIT(A) who exercises the co-terminus powers as that of the AO. Thus, in view of the decision in case of CCE vs. Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] the assessment based on statement of third party without giving an opportunity to the assessee is not sustainable in law. The statement of a third party cannot be sole basis of the assessment without given an opportunity of cross examination and consequently it is a serious flaw which renders the order a nullity. In light of the same, we don t deem necessary to examine other contentions raised by the ld AR. The order so passed by the AO is hereby set-aside. The appeal of the assessee is thus allowed.

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• 2021 (1) TMI 882
  Reopening of assessment u/s 147 - Bogus purchases - HELD THAT:- Issue decided in favour of assessee as relying on case [ 2015 (12) TMI 1538 - ITAT DELHI ] herein the Tribunal has quashed the reassessment proceedings initiated by the Assessing Officer and has also deleted the addition made by the Assessing Officer and sustained by Ld.CIT(A) on merit - Decided in favour of assessee.

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• 2021 (1) TMI 881
  TDS u/s 194H - discount extended to its pre-paid distributors on distribution of pre-paid services - as per CIT- A relationship between the Appellant and the pre-paid distributors is not that of Principal to Principal and the discount allowed to them is in nature of commission liable for tax deduction at source as envisaged under section 194H - HELD THAT:- CIT (A)/TDS Officer have erred in not appreciating that the discount allowed by the Appellant is not income in the hands of its distributors and that income, if any, arises only when the pre-paid services are further distributed by the distributors. On the facts and circumstances of the case and in law, the learned CIT (A)/TDS Officer have erred in not appreciating the fact that there is no flow of monies from the Appellant to the distributor of pre-paid services but rather from the distributor to the Appellant, and hence, the provisions of section 194H of the Act fail to apply. On the facts and circumstances of the case and in law, the learned CIT (A)/TDS Officer has erred in placing reliance on the decision of Delhi High Court in the case of Idea Cellular [ 2010 (2) TMI 24 - DELHI HIGH COURT] and Kolkata Tribunal in the case of Bharti Cellular Limited [ 2006 (4) TMI 50 - ITAT, KOLKATA] without appreciating that the facts in those cases were different from the facts of the Appellant s case. TDS demand raised under section 201(1) - HELD THAT:- The order of the learned TDS Officer, as upheld by learned CIT(A), is bad in law in so far as it seeks to recover tax demand under section 201 of the Act in contradiction to the settled principle that the payer cannot be held liable for payment of the tax demand in cases involving non-deduction of tax at source and only interest liability under section 201(1A) of the Act, if any, can be levied in such cases. TDS u/s 194J - non-deduction of tax at source on domestic roaming charges paid to other telecom operators - HELD THAT:- CIT(A)/TDS Officer have erred in not appreciating the fact that roaming services are standard automated services requiring no human intervention which is sine qua non for a service to qualify as a technical service for the purposes of section 194J of the Act. CIT(A) have erred in not appreciating that even as per the statement of technical experts, the carriage of calls is an automatic activity and human intervention, if any, is required only at the stage of inter-connect set-up, capacity enhancement, monitoring, maintenance, fault identification, repair, etc. CIT(A) have erred in ignoring the statement of technical experts recorded by the income-tax authorities in case of Vodafone Cellular Limited (now merged with Appellant itself), in the context of roaming services, wherein it has been clearly observed that roaming services are automated services requiring no human intervention. CIT(A)/TDS Officer has erred in not holding that characterization of a payment must be done having regard to the dominant purpose/intention of the payment. CIT(A) has erred in not following the principles laid down in judicial precedents cited by the Appellant and also ignoring the binding Apex Court judgment in the case of CIT vs. Delhi Transco Limited [ 2016 (4) TMI 1005 - SC ORDER] and CIT vs. Kotak Securities Limited [ 2016 (3) TMI 1026 - SUPREME COURT]

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• 2021 (1) TMI 880
  Disallowance u/s 14A r.w.r 8D - CIT(A) restricting the disallowance u/s 14A to the extent of exempt income earned by the assessee which was computed as per Rule 8D of I.T Rules 1962 on the basis of CBDT Circular No.5/2014 dated 11.02.2014 which clearly states that it is not necessary to earn exempt income in a particular year in which the disallowance is made - HELD THAT:- We noted that the CIT(A) has restricted the disallowance to the extent of exempt income at Rs. 3,000/- only by following the decision of Hon ble Supreme Court in the case of Maxopp Investment Ltd [ 2018 (3) TMI 805 - SUPREME COURT ] and hence we find no infirmity in the order of CIT(A). Hence, the order of CIT(A) is confirmed and this issue of revenue is dismissed Adjustment made to the book profit under section 115JB on account of expenses relatable to exempt income claimed by assessee under section 14A - HELD THAT:- As relying on case of Vireet Investment Pvt. Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] wherein it is held that disallowance u/s. 14A is not to be considered for computing book profit u/s. 115JB of the Act. Therefore, this ground of appeal of the assessee is allowed. Disallowance of additional depreciation claimed by assessee u/s 32(1)(iia) - Asset put to use - HELD THAT:- We find that as per second proviso to Sec. 32(1) the entitlement of an assessee towards claim of depreciation in a case where a new machinery or plant acquired during the previous year is put to use for a period of less than 180 days in that previous year shall be restricted to 50% for the percentage prescribed for the said asset under clause (iia) of Sec. 32(1) of the I.T. Act. However, there is nothing available in the statute from where it can be gathered that the assessee would be disentitled for claiming the balance 50% of the additional depreciation i.e.10% in the succeeding year - there is no restriction made avai1able on the statute as per which the assessee who had put to use the new machinery for a period of less than 180 days during a year, would be divested of its entitlement to claim the balance 10% of the additional depreciation in the succeeding assessment year. Our aforesaid views is fortified by the judgment of the Hon ble High Court of Hon ble Madras High Court in the case of CIT, Madurai, Vs. T.P. Textiles (P) Ltd.[ 2017 (3) TMI 739 - MADRAS HIGH COURT] - no infirmity arises from the order of the CIT(A) who had rightly deleted the disallowance of additional depreciation. Disallowance of expenditure on account of sales and services under section 37(1) - HELD THAT:- We noted that the CIT(A) has already restored the matter back to the file of Assessing Officer for fresh consideration. Hence, we find no infirmity in the order of CIT(A). But we direct the Assessing Officer to verify the nature of expenditure first and then decide as per law whether the expenses are allowable under section 37(1) or not? Hence, this issue of revenue s appeal has been set-aside.

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• 2021 (1) TMI 879
  Rectification of mistake - Penalty levied u/s.271(1)(c) - Defective notice - error which had occurred in the order of the Tribunal in respect of the action of the Tribunal deleting the penalty levied u/s.271(1)(c) of the Act on the ground that the penalty show-cause notice had not struck off the irrelevant portion and the Assessing Officer had not specifically mentioned the offence committed by the assessee as to whether it had concealed the particulars of income or had furnished inaccurate particulars of income - HELD THAT:- Show-cause notice issued u/s.274 r.w.s. 271(1)(c) of the Act clearly stipulates that the Assessing Officer is supposed to strike off the irrelevant portion and specify Whether the assessee has concealed the particulars of income or Whether the assessee has furnished inaccurate particulars of income or Whether the assessee has concealed particulars of income and furnished inaccurate particulars of income. Merely because the show-cause notice had mentioned that assessee had concealed its particulars in bold letters that alone would not suffice the requirements. The assessee cannot be expected to know or understand the mind of the Assessing Officer that the Assessing Officer is expecting reply from the assessee only on the aspect of assessee concealing particulars of income. Assessee on the safe side had given his entire submissions dated 31/08/2013 defending that it had neither concealed particulars of income nor furnished inaccurate particulars of income. This does not tantamount to mere participation in the penalty proceedings by accepting to the mistake committed by the Assessing Officer and the said mistake does not get cured u/s 292B of the Act. Miscellaneous Application of the Revenue is dismissed.

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• 2021 (1) TMI 878
  Disallowance of the carry forward of loss pertaining to the demerged unit - restricting the losses at 84.5% on account of assets being retained by assessee i.e. proportionate allowance of losses by invoking the provisions of section 72A(4)(b) - HELD THAT:- The entire loss set off of by assessee pertains only to the Sinner Unit of EEPL that was demerged with the assessee. The effective date of demerger is 01.4.2013 by the order of Hon ble High Court dated 01.08.2014. Accordingly, the expenses continued to be incurred by EEPL towards Sinner Unit after 31.03.2013 - since these expenses were not to be taken over by assessee, the same were charged to the continuing company and accordingly the Investment Division of EEPL incurred these expenses. Since these expenses do not pertain to the Investment Division in the computation of income of EEPL, the same has not been claimed as deduction. This fact is explained by assessee s counsel by drawing our attention to the computation of income filed in assessee s Paper Book. Computation of income of EEPL for AY 2013- 14 states that it had earned taxable income of Rs. 14,18,473/- and therefore, the loss finally available for set off in the hands of the assessee is Rs. 1,81,26,485/-. Even year-wise details of losses including the final loss available for set of in the hands of assessee after reducing the income for AY 2013-14 is available in assessee s Paper Book in the shape of computation of income. Accordingly, we are of the view that the losses finally available to assessee of Rs. 1,81,26,485/- pertains only to Sinner Unit and not for EEPL Investment Division. Hence, we are of the view that the assessee is entitled for carry forward of the entire loss and we allowed the same. - Decided in favour of assessee.

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• 2021 (1) TMI 877
  Revision u/s 263 - wrong working of WIP - AO had in fact collected information on the issue of work-in-progress etc. and had just placed them in the file but has not applied his mind to the information so collected - HELD THAT:- The assessee in this case has been following percentage completion method of accounting for its construction contracts. The assessee is engaged in the business of construction engineering, encompassing mechanical and electrical installation, instrumentation and civil, architectural and/or structural works. The assessee has given detailed replies during the course of assessment proceedings to the queries of the ld. AO. Before the Pr. CIT the assessee had made elaborate submissions CIT has not pointed out any specific error in the order of the AO. He states that there was inadequate enquiry. It is well settled that inadequate enquiry is no ground to set aside an assessment order as erroneous and prejudicial to the interest of the Revenue. The Pr. CIT had a suspicion that income liable to tax has escaped assessment as in his view the AO should have conducted more enquiries. What is the nature of further enquiries or what the AO missed to examine and what would have been the income that has escaped is not made clear by the Pr. CIT. The assessee is following percentage completion method of accounting. In this method, at best the dispute can be the year of taxation of a particular receipt as income but not the total escapement of income. The Pr. CIT is wrong in his understanding of accounting of opening work-in-progress and closing work-in-progress. The assessee maintains project-wise accounts. The assessee is determining the turnover to be disclosed in a year by following AS-7. The revenues are recognised proportionately. Order-wise, Project-wise, Year-wise details are given in a scientific manner. Pr. CIT has not pointed out as to where the error has occurred. He had a suspicion that income is not accounted for correctly. Mere suspicion is no ground for exercise of power u/s. 263 of the Act. No verification or examination of the audited accounts is done by the Pr. CIT. As he has suspicion, he simply set aside the matter to the file of the AO for fresh adjudication. This is not permitted in law. CIT should have conducted enquiries and should have verified the accounts and other documents and details himself and pointed out specifically as to where an error has occurred which is prejudicial to the interest of the Revenue and which in his opinion would result in the assessee being not assessed at the correct amount of income and only after such enquiries, examination and verification he can come to a conclusion that there is an error insofar as it is prejudicial to the interest of the Revenue. The Pr. CIT is not authorized to simply set aside an assessment order by making certain general observations based on suspicion and wrong working out of the WIP - Decided in favour of assessee.

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• 2021 (1) TMI 876
  Exemption u/s 11 - cancelling the registration of the assessee Trust U/s 12A - PCIT jurisdiction in cancelling registration - transfer of the cases u/s 127 sent to the assessee for the purpose of Co-ordinate assessment - non-filing of I.T. return and audit report or on account of misdeeds of ex-president - HELD THAT:- Sec. 127 of the Act empower to transfer cases among Assessing Officers but not to Commissioners of Income Tax as CIT is not an Assessing Officer. In our view, to pass an order u/s 12A for registration or cancellation is not within the jurisdiction or power of an Assessing Officer. Hence registration u/s. 12A can be withdrawn only by the Prescribed Authority who has been empowered to grant the same and by the Notification dated 22.10.2014 the ld.CIT(Exmp.) has empowered for the same, hence the Pr.CIT (Central) cannot cancelled the same. In assessee s case, the case u/s 127 was transferred to the Central Circle for limited purpose of Co-Ordinate assessment admittedly which do not mean that the Section 12A proceeding has been transferred to the Pr. CIT(Central) Automatically, when both the proceedings are separately or independent and also has to be done or conducted by the different rank Authorities. More particularly when for the purpose of Exemption cases or 12A registration a Separate Commissioner of Income Tax has been Authorized for whole of Rajasthan by the CBDT by its Notification dated 22.10.2014. PCIT had no jurisdiction to pass order U/s 12AA(3) 12AA(4) of the Act and the same is not sustainable in the eyes of law and accordingly stands quashed In the instant case, the ld. Assessing Officer ld. Pr. Commissioner of Income-tax without any independent verification have alleged misappropriation of funds. The assessment of the assessee appellant trust and its ex-president Shri Tejendra Pal Singh was done by the same Assessing Officer and in the assessment orders passed u/s. 153A of the Act dated 20-21.12.2018 for the A.Y. 2014- 2015 to 2016-2017 in the case of Shri Tejendra Pal Singh, no addition has been proposed for so called misappropriated income. Thus, without carrying out any independent verification and on account of mere suspicion, without any proof the said allegation has been levelled against the assessee appellant Trust. Assessee had file the ROI and Audit report in response to the notice u/s 148 of the Act also much prior to issuance of show cause notice for cancellation and therefore, at the time of issuance of Show cause notice u/s 12AA(3)/12AA(4) no return or Audit report were pending - Assessee is trust registered u/s 12A and not a businessman and not doing the business. In our view, Tax Audit u/s 44AB is not applicable in this case. Hence the allegation of the ld. Pr. CIT is wrong and invalid. The Audit of the trust comes u/s 12A(b) in form 10B. Because of the misdeeds of ex-president, the whole trust cannot be allowed to suffer, which is otherwise against the principles of natural justice. Further nowhere it has been proved that the Act of the President was in the knowledge of the assessee and the other members were involved knowingly and were part of that fraud. And if any fraud has been done behind the assessee, then the same cannot be treated as done by the assessee. Therefore, keeping in view our above discussion and observation, we are of the view that registration of the assessee could not be cancelled because of non-filing of I.T. return and audit report or on account of misdeeds of ex-president. Pr.CIT (Central) cancelled such approval from A. Y. 2014-15, though the assessee has already assessed from A.Y. 2014-15 under section 143(3)/148 of the Act. It is also settled legal position of law that Registration cannot be cancelled from retrospective effects. CIT(C) has found or made allegation or objection of diversion or mis appropriations of funds and not filling the Audit report and ITR, if any only in A.Y. 2014-15 to 2016-17 not in other years either prior years or later years, then the cancellation of Registration u/s 12A cannot be made for other years. Even otherwise we are also of the view that no retrospective cancellation could be made as neither in the Sec. 12AA(3) nor in Sec. 12AA(4) it has been provided or is seen to have explicitly provided to have a retrospective character or intend. Therefore, without a specific mention of the amended provisions to operate retrospectively no cancellation for the past years could be ordered. cancellation of registration with retrospective effect is invalid in the present case. See M/S. AURO LAB VERSUS INCOME TAX OFFICER [ 2019 (1) TMI 1478 - MADRAS HIGH COURT] CIT(C) has stated that the activities of the assessee associations are not genuine and are not being carried out in accordance with the stated objects of the assessee. However, the allegation of the ld. Pr. CIT(C) are incorrect. Because there was no change in the activities of the assessee since starting to till date. The ld. PCIT(C) has failed to state that which activities have been done by the assessee in these years which were apart to earlier years and what activities are not according to the aims and objects of the Associations or have not been followed or done. The assessee has not violated any provision of Sec. 12AA(3)/12AA(4) of the Act. Therefore, in view of the above facts and circumstances, case laws discussed and the material placed on record, we found merit in the contention of the ld. AR. The ld. CIT-DR has not filed any contrary material against the assessee Trust, therefore, we set aside the order of the ld. Pr.CIT(Central) and allow the grounds taken by the assessee.

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• 2021 (1) TMI 875
  Estimation of Income - bogus purchases - CIT(A) sustaining the disallowance made @12.5% - HELD THAT:- Since the revenue had not doubted the corresponding consumption / sales made out of such disputed purchases in the peculiar facts of the instant case, it would be just and reasonable to estimate only the profit element embedded in such disputed purchases and bring to tax the same. In the case of Simit P Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] had estimated the profit percentage to be at 12.5%. We also find that in series of decisions rendered by this Tribunal the very same profit percentage of 12.5% has been considered for the similar line of industry in which assessee is engaged in. Hence, we hold that the ld. CIT(A) had rightly estimated the profit percentage at 12.5% on value of alleged disputed purchases - Decided against assessee.

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• 2021 (1) TMI 874
  Disallowance u/s 40A(2)(b) - diversion of income by the appellant to CCCPL and from CCCPL to CCCPL s directors - HELD THAT:- As the documents placed by the Ld. AR reveals the receipt of professional fees of CCCPL to the doctors for carrying out research work and non-research work to particularly being part of the annual accounts which was somehow missed out by the Hon ble Bench while deciding the issue which is an error apparent on the face of the records and thus further consideration on this issue is required. It was obviously not open to disregard a Co-ordinate Bench decision said to be directly on the issue particularly when Bench s attention was specifically drawn to the same. We, thus, find substance in the argument advance by the Ld. Senior Counsel appearing for the assessee and the miscellaneous application is, therefore, allowed to that extent. Ground therefore, have to be adjudicated afresh.

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• 2021 (1) TMI 873
  Bogus purchases - Determination of GP rate at 56.6% - assessee argued when the AO accepted the corresponding sales of the bogus purchases, it is not practicable not to believe the purchases in the event of which the situation gives rise to abnormal GP and NP - HELD THAT:- Record speaks that it was made basing on the report of the Income Tax Inspector who reported that when he contacted one Sh. Rakesh Kumar Aggarwal one of the sellers to the assessee in the showroom, it was reported that the assessee was not carrying on any business activities of Pooja articles of brass and so on and so forth. There is no dispute that when the assessee filed voluminous record in support of his contentions, the same were forwarded to the learned Assessing Officer seeking remand report offering his remarks on the documents filed on behalf of the assessee, it goes undisputed that the learned Assessing Officer did not offer any adverse comments on the detailed submissions on facts by the assessee. AO neither rejected the books of accounts nor invoked the provisions of section 145 of the Act before disturbing the trading results. The submission of the assessee that the learned Assessing Officer did not bring any documentary evidence on record to show that the assessee did not purchase any goods as alleged in the assessment order goes undisputed. The prime factor which convinced the Ld. CIT(A) is that the learned Assessing Officer examined the books of accounts and documents punished by the assessee, both at the time of the assessment as well as during the first plate stage, but notice it was pointed out in them. Sales were accepted, but the purchases were suspected, leading to the rumours situation of producing the abnormal GP rate at 56.6%, which is not common in the business conducted by the assessee. Learned Assessing Officer failed to notice this factor also. For these reasons, taking a comprehensive review, we are of the considered opinion that the view taken by the learned Assessing Officer does not appear to be sound and the Ld. CIT(A) deleted the addition by taking a pragmatic view. We, therefore, do not think it necessary to interfere with the same. Unexplained deposits in the savings bank account - HELD THAT:- It is not the case of the revenue before us also that the documents produced by the assessee or their books of accounts are untrustworthy or suffer any legal infirmity. It is only on examination of these documents in the books of accounts, Ld. CIT(A) found that all the deposits are properly explained and are supported by relevant documents, which were available before the learned Assessing Officer, but the learned Assessing Officer failed to verify the same properly to reach a just conclusion. In the circumstances, we find it difficult to reject the factual findings of the Ld. CIT(A), which are formally based on the books of accounts and the other documents submitted by the assessee. Thus addition cannot be sustained and the Ld. CIT(A) rightly deleted the same. Revenue appeal dismissed.

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• 2021 (1) TMI 872
  Accrual of income - Addition of notional interest on the loans given to certain companies / persons by the assessee - income from other sources - HELD THAT:- CIT(A) has rightly taken note of the decision of Goyal MG Gases P Ltd. ( 2007 (7) TMI 241 - DELHI HIGH COURT) wherein it was held that what has to be seen is whether income can be said to have really accrued to the assessee. When there was no real accrual of interest and the assessee has also not recorded interest in its books of account, no notional interest can be levied on such loans - CIT(A) has given finding of fact that the assessee in its books of accounts has not charged any interest against the loans of these two companies. This findings of fact has not been assailed before us. - CIT(A) has rightly deleted the notional interest. Therefore, the ground raised by the revenue is dismissed. Write off of irrecoverable principal amount of loan which was claimed u/s 36(1)(vii) read with Section 36(2) - HELD THAT:- CIT(A) noted that in this assessment year the assessee in addition to its business of manufacturing of tea, fertilizer etc, had also carried on the business of granting of loans and ICDs. The ld. CIT(A) noted that the interest on loans was held assessable under the head profits and gains of business and the assessee had written off the principal amount of loans as also the unrealized amount of interest as bad debts - AO had allowed the claim of bad debts in respect of the unrealized interest but had disallowed the claim in respect of write off of principal amount of loan on the reason that the department has preferred an appeal before the Hon ble High Court against the decision of Tribunal in AY 2002-03 wherein decided the issue in favour of assessee and allowed the write off of bad debts. Decided in favour of assessee.

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• Customs

• 2021 (1) TMI 871
  Seeking debit-freeze of one account of the petitioners - time limitation - whether a provisional attachment of bank account can be continued beyond the period of one year? - HELD THAT:- Section 110 of the Customs Act deals with seizure of goods, documents and things. Sub-section (5) was inserted in the said provision by Finance (No.2) Act, 2019 with effect from 01.08.2019 - Sub-section (5) of section 110 states that provisional attachment of bank account can be for a period of six months but the said period can be extended for a further period not exceeding six months for reasons to be recorded in writing and communicated to the affected person before expiry of the initial period of six months. There are no justification to continue with the provisional attachment of the bank accounts of the petitioner - The initial period of six months had expired in November, 2019. Even assuming and giving benefit of further six months to the respondents, the outer limit of one year expired in May, 2020. That apart, Finance (No.2) Act, 2019 was given prospective application with effect from 01.08.2019. The provisional attachment was made on 08.05.2019 when the said provision was not available in the statute book. The petitioner s accounts are allowed to be released/unfrozen - petition allowed.

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• 2021 (1) TMI 870
  Non-fulfilment of export obligation in case of import of goods under EPCG License - HELD THAT:- However, now as per the submission of the learned counsel the EODC issued by DGFT was obtained only after passing of the impugned order. In these circumstances, the entire matter should be reconsidered by the adjudicating authority in the light of the EODC issued by the DGFT. The appeal is allowed by way of remand to the adjudicating authority.

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• Corporate Laws

• 2021 (1) TMI 869
  Jurisdiction - power to entertain the present suit - approval of dependent cards and Green Cards to the children of UCPs as also upgrading of Green Cards to UCP - interpretation of Article 13 (3) (b) of the Articles of Association - petitioners claim that the way the said article is interpreted gives rise to inequitable classification - HELD THAT:- The suit at the instance of an individual shareholder, alleging the infringement of a right for an action and the majority shareholders being opposed to the memorandum and article of association, cannot be said to be an imperfect suit liable to fail on the parameters of Order 7 Rule 11 of the Code. Mere reference of more than 3100 members does not, ipso facto, raise a presumption that the suit is not maintainable in absence of any leave under Order 1 Rule 8 of the Code. Section 9 of the Code of Civil Procedure postulates that the Civil Courts have jurisdiction to try all suits of civil nature unless there is an express or implied bar. It is no longer res integra that such exclusion should not be readily inferred and the rule of construction being that every presumption should be made in favour of his existence rather than exclusion of the jurisdiction of the Civil Court - Section 397 398 of the Companies Act provides a remedy which is of preventive in nature so as to bring an end to oppression and mismanagement on the part of the controlling shareholders but does not in express terms take away the power of the Civil Court to declare a resolution to be ultra vires to the memorandum and article of association. The subsequent events can be taken note of if the original proceeding has become infructuous as it would be a futile exercise to allow such suit to continue. It is based on the legal maxim ex debito justitiae i.e. it is a duty of the Court to take such action which is necessary in the interest of Justice. Every facts germinated after the litigation having a substantial nexus and/or bearing on the relief claimed in the suit may be taken into consideration for ends of Justice. Section 242 of the Companies Act which provides for the power of the Tribunal contemplates an action relating to the affairs of the company which is being conducted in a manner prejudicial or oppressive to any member or members and that to wind up the company would unfairly prejudice such member or members, but the facts justify the makings of a winding up order, the power of the NCLT can be invoked. However, in the present suit the plaintiffs do not claim winding up of the defendant No.1 Club which is a company by guarantee - the cause of action pleaded by the plaintiff in this suit is the manner in which Article 13(3)(b) of the Articles of Association of the defendant company is being interpreted thereby creating irrational and illegal classification. NCLT not being empowered to determine the said cause of action, this Court is of the opinion that the plea of the defendant that the present suit is not maintainable and only a petition before the NCLT is maintainable, is liable to be rejected. The plea of defendant is to be rejected - issue decided in favour of the plaintiffs and against the defendant No.1.

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• 2021 (1) TMI 868
  Seeking restoration of the name of the struck off company in the Register of Companies maintained by the ROC - Section 252(3) of the Companies Act, 2013 - HELD THAT:- It is noted that company has failed to file returns since 2010 which prompted ROC, Gwalior, Madhya Pradesh to strike off the name of such company from its Register of Companies. However, from the records produced before us it is noted that Company has filed the Income Tax Returns for A. Y. 2010-11 to 2019-20, which indicate that the Company was in operation. It is further noted that company is neither a shell company nor it has engaged itself into any other illegal activities. It is considered just and proper to restore the name of the company in the Register of Companies, from date of its striking off subject to payment of cost for non-compliance of rules relating to filing the Statutory Returns and Audited Financial Statements. The name is ordered to be restored - application allowed.

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• 2021 (1) TMI 867
  Restoration of name of the company in the Register maintained by the Registrar of Companies - Section 252 (1) of the Companies Act, 2013 - HELD THAT:- The bench has directed RoC to submit his report in spite of that RoC has not submitted his report. As per Section 252(1) of the Companies Act, 2013, an opportunity was provided to RoC to submit his report, however RoC failed to submit the same.In the interest of Justice and Equity, to help Employees, Members, Shareholders, Creditors and Other stakeholders and also to improve ease of doing business, the name of Petitioner Company be restored. The prayer sought by the Petitioner company deserves to be allowed because it is now well settled legal position that during the pendency of litigation/Court proceedings by or against the company its name can not to be removed by the RoC - Appeal allowed.

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• 2021 (1) TMI 866
  Restoration of name of the company in the Register maintained by the Registrar of Companies, Mumbai - Section 252 (1) of the Companies Act, 2013 - HELD THAT:- The Bench is satisfied that the Company has Revenue from operations is Rs. 7,64,000/-, Fixed assets of Rs. 52,07,691/-, Cash and Cash equivalent is Rs. 15,452/-, Sundry Debtors is Rs. 2,45,654/-, Other Current Assets is Rs. 1,75,258/- and Long-Term borrowings is Rs. 54,40,124/-, and Profit of Rs. 14,206/- for year ended 31.03.2019 and Revenue from operations is Rs. 1,70,440/-, Fixed assets of Rs. 52,07,691/-, Cash and Cash equivalent is Rs. 26,343/-, Sundry Debtors is Rs. 3,42,158/-, Other Current Assets is Rs. 2,58,349/- and LongTerm borrowings is Rs. 55,77,416/-, and Profit of Rs. 32,160/- for year ended 31.03.2018. As observed above, the books of the Petitioner Company reflect that Members intend to continue its business operations of the company. Therefore, in the interest of justice the name of the company deserves to be restored in the Register of Companies maintained by the Respondent Registrar of Companies. The Respondent is directed to restore the name of the Petitioner company in the Register of Companies subject to payment of a sum of Rs. 50,000/- as cost payable in the account of PM-CARES fund within thirty days from the date of receipt of copy of this order - Application allowed.

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• 2021 (1) TMI 865
  Seeking restoration of its name in the Register of Companies - Section 252 (3) of the Companies Act, 2013 - HELD THAT:- The material available on record indicates that the failure of the Company to furnish the statutory returns with the RoC was not intentional. Apparently the Company has been carrying on its operations as the financial statements would indicate. Unless the Company s name is restored it will prejudicially affect its prospects and adversely influence the Directors in their future endeavours. The promoters of the Company as well as the Appellants are keen to carry on and perform the objects of the Company in right earnest. There have been substantial investments in the project. The Company is continuing its business. Unless the name of the Company is restored in the Register of Companies it would suffer financially and pay go out of business. The directors of the company would also face disqualification. The name of the Company should be restored in the Register of Companies - Application allowed.

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• 2021 (1) TMI 864
  Restoration of the Company s name in the Register of Companies maintained by Registrar of Companies - Section 252 of the Companies Act, 2013 - HELD THAT:- The Appellant has filed documents and records in support of its stand that the company was in operation and pursuing activities during the period of striking off the name of the company and has brought forward the following facts about it being in operation and functional during the period of striking off: i) The copies of Balance Sheet of the company for the financial years from 31.03.2017 to 31.03.2020. The Balance Sheet as on 31.03.2020 reflects Inventories of Rs. 9,83,7,666.00/-, Cash and Cash Equivalent of Rs. 2,76,092.16/- P L account shows loss of Rs. 11,500.00/- ii) The copy of Bank Statements of the Company for the period 01.04.2019 to 27.11.2020 showing various transaction details of the Company and reflecting closing balance of Rs. 1,94,496.66/- as on 27.11.2020. iii) The Copy of Income Tax Return for Assessment Year 2019-20. The tax paid for Assessment Year 2019-20 is Rs. 1,000/- iv) The copy of sale deed executed on 14.06.2008 between M/s Salasar Balaji Builder and Colonisers Private Limited as seller and the Company as purchaser of property namely Shop No. G-59, G-60, F-48D, F-49D which is situated at Commercial Block Plot No. 3, Sector No. 5, near Soni Hospital, Vidyadhar Nagar, Sikar Road, Jaipur at a sale consideration of Rs. 46,43,934/-. The RoC has filed report and has not stated any objections but has directed that the Company should file the returns as required under the provisions of the Companies Act, 2013 - this Bench is of the view that it is a fit case for restoration of the name of the company. The restoration of the Appellant Company s name, i.e. Shri Balaji Superme Propcon Private Limited, in the Register of Companies maintained by the RoC, is hereby ordered - Appeal allowed - application restored.

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• Insolvency & Bankruptcy

• 2021 (1) TMI 863
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute - HELD THAT:- It is noticed that the Petitioner Corporate Applicant has submitted all relevant particulars and information, supported by document, to meet the requirement of the I B Code. Hence the present Petition is found complete and its filing is found in order in all respect. Application admitted.

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• 2021 (1) TMI 862
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor - no information regarding Financial Creditor who has classified the account of the Corporate Debtor as NPA - existence of debt and dispute or not - HELD THAT:- It is noted that Corporate Debtor has not participated in this proceeding and, therefore, we proceed to decide this application after hearing the learned counsel Mr. Tirth Nayak for the Operational Creditor and material on record. From the perusal of MCA data, it is noted that there are open charges on the assets of the Corporate Debtor which are of significant value. Thus, non participation of Corporate Debtor leads to an inference that Corporate Debtor in fact wishes to be admitted into CIRP. We, as Adjudicating Authority, have got limited options in such situations. The Corporate Debtor is not MSME; hence, any attempt by the management/ owners of the Corporate Debtor to complete in a hidden manner needs to be prevented. No data has been provided to us as to whether there is any Financial Creditor who has classified the account of the Corporate Debtor as NPA and, if so, then from which date? This is particularly important from the aspect that management of the Corporate Debtor should not come back indirectly. The role of COC would be clearly important to prevent the misuse of provisions of Section 29A of the CODE. The application is liable to be admitted as there is a debt which is due and payable i.e. not barred by limitation and there is no pre-existing dispute. The application is otherwise complete and defect free and complies with the all requirements of provisions of IBC, 2016 r. w. relevant Regulations - application admitted - moratorium declared.

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• Service Tax

• 2021 (1) TMI 861
  Maintainability of petition - availability of alternative and most efficacious remedy of filing an appeal - appealable order and statutory appeal - Section 86(1) of the Finance Act, 1994 - Violation of principles of natural justice - HELD THAT:- There cannot be any doubt that the impugned order is an appealable order and statutory appeal under Section 86(1) of the Finance Act, 1994 lies before the Customs Excise and Service Tax Appellate Tribunal, Bangalore. In the wake of availability of alternate remedy, this Court can entertain the writ petition in a very limited arena. For entertaining writ petition in the wake of alternate remedy, the petitioner has to demonstrate that the order impugned in the writ petition was passed in defiance of the fundamental principles of judicial procedure or in utter violation of principles of judicial justice. Perusal of the impugned order shows that the assessing authority has considered the contentions regarding lack of jurisdiction and has recorded a finding against the petitioner. It is also seen from the impugned order that the judgments cited by the petitioner were taken note of while passing the impugned order. Therefore, it cannot be said that the impugned order is passed violating the principles of natural justice or that the same is contrary to the fundamental principles of judicial procedure, warranting entertainment thereof despite availability of alternate statutory remedy. It cannot be said that despite availability of alternate remedy in filing the appeal, the writ petition needs to be entertained - The writ petition as such is disposed of with liberty to the petitioner to avail alternate remedy.

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• 2021 (1) TMI 860
  Violation of principles of natural justice - impugned order has been challenged primarily on the ground that no opportunity of personal hearing was given to the petitioner before the impugned order was passed - HELD THAT:- Since the dispute pertains to the years 2009 to 2014, the respondent Commissioner of Central Excise is requested to dispose the proceedings within a period of three months from the date of receipt of a copy of this order. Petition disposed off.

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• CST, VAT & Sales Tax

• 2021 (1) TMI 859
  Refund-set off - allegation of false claim for set-off (refund of sales tax) admissible to dealers, engaged in the business of extracting oil from power oil ghanas, whose sales were exempted under Entry No.39, Schedule A appended to the Bombay Sales Tax Act - offences punishable under Sections 120-B, 409, 420, 468, 471, 477-A read with Section 109 of the Indian Penal Code and under Sections 5(2) read with Section 5(1) (d) and 5(1)(c)of the Prevention of Corruption Act, 1947 - HELD THAT:- The prosecution had examined the officers of the Sales Tax Department. The tenor of the evidence of Assistant Commissioner is not suggesting that the assessment orders passed by Mr. Kagane, which resulted in refund-set-off, were illmotivated; but were incorrect and illegal orders due to procedural irregularity committed by him. Therefore, it is to be said that the conviction recorded by the learned trial Court was to a great extent, based on the evidence of the approver. Upon excluding approver s evidence, the remaining evidence was not sufficient to establish beyond reasonable doubt that the deceased had committed the offences for which he was charged and tried - Appeal allowed - decided in favor of appellant.

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• 2021 (1) TMI 858
  Direction to the Respondent No.1 to issue Form C - Central Sales Tax Act, 1956 - year 2016-17 - Respondent contends that this Court has recently in similar matters been either adjourning matters or is allowing the petition but suspending the relief till the civil appeals pending in the Supreme Court are decided - HELD THAT:- This Court is of the view that no useful purpose would be served by keeping the petition pending. Consequently, it directs Respondent No. 1 to allow the Petitioner to amend in its return of Third Quarter for the Financial Year 2016-17 (01.10.2016 to 31.12.2016) and issue segregated and separate Form C in terms of the prayer Clause-(i) to the writ petition (subject to verification of entitlement on merits and not on the ground of limitation). However, this direction shall remain suspended till the Civil Appeals pending before the Supreme Court, taken note of hereinabove, are decided and this direction shall abide by the decision that the Supreme Court renders. Petition disposed off.

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• 2021 (1) TMI 857
  Concessional benefit of tax - purchase of High Speed Diesel from suppliers in other States - difficulty in obtaining C-Form - respondent fairly submits that the issue involved in this Writ Petition is squarely covered by a decision of this Court in the case of M/s. Dhandapani Cement Private Limited Vs. The State of Tamil Nadu, [2019 (2) TMI 1850 - MADRAS HIGH COURT] wherein on identical issue it was held that Petitioner in these Writ Petitions has stated on affidavit that it is unable to download the C forms from the websites as the same stand blocked from use. Upon enquiry with the Assessing Authorities, they have been informed that the benefit of the decision in M/S. THE RAMCO CEMENTS LTD. VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE ADDITIONAL COMMISSIONER (CT) [ 2018 (10) TMI 1529 - MADRAS HIGH COURT] Ltd can be extended only to those dealers in that are party to the decision. This stand is unacceptable in so far as the decision of this Court as well as other High Courts, one of which has been confirmed by the Supreme Court, are decisions in rem, applicable to all dealers that seek benefit thereunder, of course, in accordance with law. HELD THAT:- The State has, after the date of the above order, filed a Writ Appeal challenging the decision in the case of Ramco Cements that has been considered and dismissed by a Division Bench of this Court in THE COMMISSIONER OF COMMERCIAL TAXES, CHEPAUK, CHENNAI, THE ADDITIONAL COMMISSIONER (CT) VERSUS THE RAMCO CEMENTS LTD. AND THE STATE TAX OFFICER, THE JOINT COMMISSIONER (CS) (SYSTEMS) VERSUS SUNDARAM FASTENERS LIMITED [ 2020 (3) TMI 450 - MADRAS HIGH COURT ] and it was held that Appellant State and the Revenue Authorities are directed not to restrict the use of C Forms for the inter-State purchases of six commodities by the Respondent/Assessees and other registered Dealers at concessional rate of tax and they are further directed to permit Online downloading of such Declaration in C Forms to such Dealers. Petition allowed.

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• Indian Laws

• 2021 (1) TMI 856
  Benefit of grant of regularization and other service benefits - non-fulfilment of conditions as per the Recruitment Rules of MTS that is with regard to the age - HELD THAT:- In order to attract the contempt of the courts, the order should be very specific and clear in terms as we have noted above, the CAT has not directed the regularization of the respondent herein, but only directed for consideration of the representation of respondent herein. The said direction has been strictly complied and the application of the respondent has been considered and a considered order has been passed as noted supra. Therefore, if at all the respondent is aggrieved by the order passed by the petitioner No.1 herein dated 31.08.2018 as per Annexure-G, he ought to have challenged the said order and in that context the Tribunal may get an opportunity to examine whether that particular order is in accordance with law or not, then only it would have passed an appropriate order in that regard, instead of that contempt proceedings has been initiated which is not in our opinion justified. Hence, the order impugned deserves to be quashed. Petition allowed.

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• 2021 (1) TMI 855
  Dishonor of cheque - pre-trial before the actual trial begins - rebuttal of presumption - Sections 118, 138 and 139 of the Negotiable Instrument Act - HELD THAT:- It is manifestly clear that a dishonour would constitute an offence only if the cheque is returned by the bank unpaid either because the amount of money standing to the credit of the drawer s account is insufficient to honour the cheque or that the amount exceeds the amount arranged to be paid from that account by an agreement with that bank. Now, for an offence under Section 138 NI Act, it is essential that the cheque must have been issued in discharge of legal debt or liability by accused on an account maintained by him with a bank and on presentation of such cheque for encashment within its period of validity, the cheque must have been returned unpaid. The payee of the cheque must have issued legal notice of demand within 30 days from the receipt of the information by him from the bank regarding such dishonor and where the drawer of the cheque fails to make the payment within 15 days of the receipt of the aforesaid legal demand notice, cause of action under Section 138 NI Act arises. This Court does not deem it proper, and therefore cannot be persuaded to have a pre-trial before the actual trial begins. A threadbare discussion of various facts and circumstances, as they emerge from the allegations made against the accused-applicant, is being purposely avoided by the Court for the reason, lest the same might cause any prejudice to either side during trial. But it shall suffice to observe that the perusal of the complaint case filed by opposite party no.2 and the statements of the complainant and her witnesses under Sections 200 and 202 Cr.P.C. makes out a prima facie case against the accused at this stage and there appear to be sufficient ground for proceeding against the accused. The prayer for quashing the impugned summoning order dated 13th March, 2019 as well as the entire proceedings of the Complaint Case No. 14 of 2019 under Section 138 of Negotiable Instrument Act, Police Station-Aurai, District-Bhadohi, pending in the Court of Additional Chief Judicial Magistrate, Bhadohi, Gyanpur, are refused.

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• 2021 (1) TMI 854
  Scope of the bar of cognizance imposed under Section 439(2) of the Act of 2013 - Section 439(2) of Act of 2013 and Section 19(1) of Prevention of Corruption Act are in pari materia with each other or not - proceedings against the directors of a company and/or the company under Section 439(2) of the Act of 2013. Whether the application in IA No.2/2020 under Order VI Rule 16 of CPC is required to be allowed? - HELD THAT:- The averments made and the documents produced therein cannot be said to prejudice or delay the matter inasmuch as the above petition having been filed on 4.08.2020, the respondent having entered appearance and filed its objections on 3.10.2020, the above matter was taken up on 20.11.2020, 2.12.2020, 14.12.2020, 17.12.2020, 18.12.2020, when it did not reach on account of paucity of time, it was however taken up for hearing on 22.12.2020 at the request of both the counsels. Thus, there cannot be said to be any delay on account of the rejoinder the matter was taken up for final disposal at the request of both the counsels on 22.12.2020, the rejoinder having been filed on 11.12.2020 - the filing of the rejoinder and production of documents would not cause any abuse of process of the court. Whether Section 439(2) of Act of 2013 and Section 19(1) of Prevention of Corruption Act are in pari materia with each other? - HELD THAT:- The requirement of prior sanction under the Prevention of Corruption Act is to protect an officer against unnecessary prosecution during the time that he was discharging his function as an officer of the State, in such situation it is mandated that prior sanction from the concerned authority has to be obtained which authority would apply its mind to the facts and come to a conclusion as to whether the proceedings are to be initiated or not - the same cannot be equated to authorised person under Section 439. There is a specific prohibition to the Court to take cognizance except upon a complaint in writing by the registrar, a shareholder of the company or a person authorised by the Central Government in that behalf. Admittedly, the respondent is neither the Registrar nor a shareholder nor has he obtained any authorisation from the Central Government. Therefore, the respondent would not in my considered opinion have any locus to initiate penal proceedings under Section 439 of the Act of 2013 or even if he initiates any action, the court dealing with such a matter cannot take cognizance of such a complaint - the Act of 2013 being a Special enactment containing a specific embargo, the embargo is required to be given complete effect to by this Court. This Court cannot travel beyond the intention of the legislature and water down the requirements of Section 439 - the finding of the Special Economic Court in its order dated 3.7.2017 was proper and correct. Section 19 of the Prevention of Corruption Act and Section 439 of Act of 2013 are not pari materia with each other. Whether any person can file a proceedings against the directors of a company and/or the company under Section 439(2) of the Act of 2013? - HELD THAT:- Apart from the named persons a complaint can also be filed by a person authorised by Securities and Exchange Board of India in terms of the proviso (1) of Section 439(2) or the Official Liquidator in terms of Section 439(4), no other person can initiate any criminal proceeding against a company for the offence committed under the Act of 2013. Whether the order of Revisional court dated 3.07.2020 requires any interference? - HELD THAT:- It is reiterated that it is not the qualification of the accused or the designation of the accused or status of the accused which is of relevance under Section 439(2) of the Act of 2013. Therefore, it is not relevant to consider whether the accused were directors or continue to be the directors as on the date of filing of the complaint. The Rivisional Court completely misdirected itself in this regard by adverting to the qualification of the accused rather than the qualification of the complainant. Petition allowed.

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• 2021 (1) TMI 853
  Dishonor of Cheque - error apparent on the face of record or not - offence punishable under Section 138 of the N.I. Act - HELD THAT:- This Court did not notice any error apparent on record with the well reasoned orders of the learned Magistrate and the learned First Appellate Court. Suffice to say that, though under Section 138 of the N.I. Act, the Court is entitled to order for double the cheque amount as fine and imprisonment for two years, having regard to the facts and circumstances of the case on hand, the learned Magistrate awarded fine of Rs. 39,000/-, out of which, Rs. 37,000/- was ordered to be paid as compensation to the complainant along with imprisonment of six months. In the considered opinion of the Court, awarding simple imprisonment for a period of six months is not supported by valid reasons. Therefore, to that extent, this Court is of the opinion that the simple imprisonment of six months is excessive and the same needs to be set aside. However, having regard to the facts and circumstances of the case, especially in the pandemic COVID-19, granting three months with fine of Rs. 39,000/- less the amount deposited before the First Appellate Court would meet the ends of justice - Revision petition allowed in part.

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• 2021 (1) TMI 852
  Dishonor of Cheque - seeking permission to compound the offence under Section 147 of the N.I Act and also reporting the settlement of the matter between the parties - HELD THAT:- The parties have settled the matter out of their own volition with free consent and keeping their mutual interest under consideration, as such, they may be permitted to compound the offence under Section 147 of the N.I. Act. Section 147 of N.I. Act has made every offence punishable under the N.I. Act as compoundable. As such, there is no bar for the parties in the proceeding to compound the offence - However, at the same time the guidelines laid down by Hon ble Apex Court in Damodar S. Prabhu v. Sayed Babalal H [ 2010 (5) TMI 380 - SUPREME COURT ] regarding imposing graded cost on litigant also to be borne in mind - According to the said Judgment in Damodar S. Prabhu s Case, if the application for compounding is made before the Sessions Court or High Court in revision or appeal, such compounding is permitted to be allowed on the common condition that the accused pays 15% of the cheque amount by way of cost. Application allowed.

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• 2021 (1) TMI 851
  Dishonor of Cheque - defence taken by the accused is that while he was proceeding in a Car, he met with an accident, wherein he lost the cheques and one of those cheques have been mis-used by the complainant - Section 138 of the Negotiable Instruments Act. Whether the finding recorded by the learned Magistrate that accused has committed an offence under Section 138 of the Negotiable Instruments Act confirmed by the first Appellate Court is erroneous? - HELD THAT:- It is the accused who has taken the contention that there is a material alteration in Ex.P-1. It was required for the accused to make an application seeking necessary orders to refer the Ex.P-1 for hand-writing expert. No such application is filed by the accused before the learned Magistrate or atleast before the first Appellate Court. All along, the accused tried to impress upon the Court that a cheque has been mis-used by the complainant. But, no complaint is filed by the accused as against the complainant even after he came to know about the filing of the criminal complaint against him in CC No.35/2010. Why accused did not take any action against the complainant about the mis-use of Ex.P1 is not explained by the accused. PW-2 who is the Manager of the Indian Overseas Bank, Tumkur has specifically deposed before the Court that the signatures found in Ex.P1 tallies with the specimen signatures maintained by the Bank - These aspects of the matter has been properly appreciated by the learned Magistrate as well as the first Appellate Court in the impugned judgment. This court in the revisional jurisdiction with the limited scope of revision, cannot re-visit to the minute details in the case especially when there is a concurrent finding of facts of both the courts. Suffice to say when the materials available on record and the reasonings recorded by both the courts in the impugned judgments, do not suffer from legal infirmity so as to interfere with the same in this Revision Petition there cannot be any dispute as to the principles of law enunciated in the judgments cited by the learned counsel for the Revision Petitioner. But the facts in the said case and the facts of the case on hand are altogether different and in the absence of any positive evidence placed by the accused, the finding recorded and the alteration found in Ex.P1 signed by accused is not a material alteration and therefore, the said decision, principles cited in the said case is not of much avail to the revision to seek an order of interference by this court. Whether the sentence passed by the learned Magistrate in CC No.35/2010 and confirmed in Criminal Appeal is erroneous? - HELD THAT:- The Trial Court while passing the impugned judgment has passed conviction order sentencing the accused to undergo simple imprisonment for a period of one year for the offence punishable under Section 138 of the Negotiable Instruments Act - It is pertinent to note that the operative portion of the order do not contain a sentence of fine ordered as against the accused but only compensation of Rs. 2 lakhs is ordered. In paragraph 28 of the judgment, there is a discussion as to why the learned Magistrate is imposing fine of Rs. 2,00,000/-. The learned Magistrate has rightly observed that accused has set up all possible evidence that are available to the accused to failed to substantiate the said defence and therefore, he has caused mandatory loss to the complainant and hence ordered for compensation of a sum of Rs. 2,00,000/-. Whenever a compensation is awarded in a matter of this nature, it is needless to emphasize that the accused must be sentenced to pay a fine of Rs. 5,000/- and out of the fine amount, but the Trial Court has not fined the accused and passed an order of imprisonment for one year. Though there is a serious legal flaw in such an evidence, the first Appellate Court unfortunately did not bestow its attention to correct the same. The Trial Court did not assign any reasons for ordering the imprisonment of one year - It is well settled principle of law and requires no emphasis that assigning the reasons to reach a conclusion is a cine qua non. In fact, the reasons are heart beat of any judgment. This aspect of the matter is ignored by the first Appellate Court while confirming the order passed by the learned Magistrate. Having regard to the fact that the accused failed to prove his defence that he lost the cheques and the same has been mis-used by the complainant, awarding a sum of Rs. 2,00,000/- as the compensation payable to the complainant as against the cheque amount of Rs. 1,25,000/- is reasonable. However, since the accused has not lodged any complaint or stated the same before the learned Magistrate, it is necessary for this court to pass an appropriate sentence - Revision allowed in part.

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